Azure Global : 11/06/13

Wednesday 6 November 2013

Eurozone unemployment stuck until 2015, warns European commission

Commission warns jobless total will remain at record 12.2% in 2014, as growth forecast drops to 1.1%

The European commission is warning that it is too early to claim victory in the euro area's fight against recession after its latest forecasts showed it would be 2015 before weak growth generated a fall in the jobless total.

Although the 17-nation single currency zone started to expand in the summer after a six-quarter double-dip recession, Brussels said there will be a lag before the pickup in activity leads to a fall in unemployment.

The commission trimmed its growth forecast for the euro area in 2014 from 1.2% to 1.1% and said unemployment will remain stuck at a record 12.2% next year. It added that there were encouraging signs that the recovery would continue but said the legacy of Europe's debt crisis would continue to act as a brake on growth.

Only in 2015, when growth is expected to increase to 1.7%, does the commission see a dent being made in the jobless total, with unemployment predicted to drop to 11.8%.

Olli Rehn, the commission's vice-president for economic and monetary affairs and the euro, said: "There are increasing signs that the European economy has reached a turning point. The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery.

"But it is too early to declare victory: unemployment remains at unacceptably high levels. That's why we must continue working to modernise the European economy, for sustainable growth and job creation."

The commission, publishing forecasts three times a year for the eurozone and the EU, stresses that the return to solid growth in the countries that belong to the monetary union is set to be gradual, with big differences in economic performance across member states. Financial markets believe the combination of sluggish growth, high unemployment and the threat of deflation will prompt the European Central Bank into fresh efforts to boost activity.

Of the bigger euro area countries, only Germany is forecast to grow by more than 1% in 2014. Spain is expected to expand by 0.5%, Italy by 0.7% and France by 0.9%.

By contrast, the commission said the outlook for the UK – which has exceeded expectations in 2013 – was "quite bright". Growth of 2.2% is pencilled in for 2014, rising to 2.4% in 2015.

Article Source : http://www.guardian.co.uk
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Somali remittances: Dahabshiil granted Barclays reprieve

Somali money transfer firm wins temporary injunction preventing Barclays from cutting its banking services

Dahabshiil, the remittances company, will be able to maintain an account at Barclays after winning a temporary injunction at the high court, keeping a financial lifeline open for millions of Somalis in the Horn of Africa.

The court's decision was welcomed by charities and the Somali prime minister, who called for a long-term solution. "As Somalia continues to recover from two decades of unrest, these remittances remain an essential source of income for more than half of all Somalis," Abdi Farah Shiridon said. "To many these remittances pay for a basic standard of living."

Barclays expressed its dismay at the unexpected verdict and said it would lodge an appeal. "We are very disappointed at today's decision and we will be appealing," said a spokesman. "Barclays made a legitimate decision to exit these businesses based upon the well-known risks of money-laundering and terrorist financing in the money service business sector. The risk of financial crime is an important regulatory concern and we take our responsibilities in relation to this very seriously."

The interim injunction has the effect of preserving Dahabshiil's banking arrangements with Barclays until the conclusion of a full trial. The Somali firm was also awarded the costs of seeking the injunction. It is unclear when the full trial will happen but Barclays is keen for it to take place as soon as possible.

Barclays, the last major bank providing remittance services to Somalia, announced in May that it planned to shut down the accounts to about 250 money-service businesses, initially setting a 10 July deadline, citing concern over falling foul of money-laundering regulations.

But after an outcry from Somali remitters, academics and some MPs, who claimed the bank's concerns were exaggerated, the deadline was pushed back. Dahabshiil, which sought an injunction to stop Barclays from shutting it down, claimed the British bank was abusing its dominant position by proposing to end the relationship without objective justification, and by treating Dahabshiil differently from other customers.

Somalis living in the UK send more than £100m a year for food, healthcare and education to relatives in the Horn. Somalia is particularly dependent on money-service businesses as it lacks a formal banking system after decades of war.

Annual remittances from the UK amount to more than £15bn worldwide, with up to 65% flowing to developing countries. The UK has one of the largest money-transfer markets in Europe and the largest number of money-transfer operators.

Oxfam's director of campaigns and policy, Ben Phillips, said: "The ruling provides a small window of opportunity for Somalis living in the UK to send money home to loved ones in one of the poorest countries in the world. However, this does not solve the problem – a long-term fix is needed to safeguard hundreds of thousands of people relying on the money for food, medicines and education."

Laura Hammond, head of development studies at the School of Oriental and African Studies, also stressed the need for a long-term solution. "There is a need to push ahead with efforts that have recently been announced by the government to review regulations and procedures for ensuring compliance to better safeguard the remittance corridor in the medium to long term," she said.

"This crisis was brought about through a severe lack of trust, understanding, and information on the part of many involved in money transfer, and the review of procedures must stay on track in order to create a more transparent and accountable system."

After a meeting in September, chaired by senior officials from the Treasury and the Department for International Development (DfID), the government announced several steps to deal with the fallout from Barclays' move. The measures included a planned "safe corridor" for transferring money between the UK and Somalia.

The pilot scheme will be developed to test and establish audit mechanisms to track payments at the sending, clearing and receiving stages of the remittance process. DfID will work with the World Bank to support the development of the mechanism and train money-transfer operators in Somalia over the next 12 months.

House prices: 'south-east set to outpace London' for first time in a decade

Prices in the south-east will rise 32% over the next five years, with London making gains of 24.4%, according to Savills

House prices in the south-east are set to outpace those in London over the next five years for the first time in more than a decade, as buyers priced out of the capital turn increasingly to commuter-land.

Upmarket estate agent Savills said its research showed the era of rising home ownership is over and predicted that more than a million people will move into rented accommodation by 2018, with renters also facing higher prices.

But prices for house purchase are forecast to rise even faster, with Bournemouth, Brighton, Windsor among the towns across the south expected to see average prices soar by 32% in the next five years. Surging prices will also be seen in affluent parts of the south-west and the Midlands, such as Bristol, Bath and Solihull.

In contrast, house prices in London will rise more slowly, making gains of 24.4%, just behind the national average of 25%, with rises across the UK but more slowly in Scotland, Wales and the north of England.

This compares to 9% growth in UK house prices from 2008-13, although, adjusting for inflation, house prices remain below their pre-crash peak and will barely have recovered in real terms by 2018.

News of accelerating house prices beyond London is bad news for people struggling to get on the housing ladder and find affordable places to rent: in a recent Mori poll for Inside Housing, 57% of people did not believe rising house prices were good for the country.

Lucian Cook, head of UK residential research at Savills, said London prices were at an all-time high compared with the rest of the UK, but predicted they would grow more slowly after 2015 as "affordability constraints" in the capital begin to bite. "As confidence improves, buyers are likely to look to markets beyond London that offer better relative value, though it will be later in the cycle before the north feels this benefit."

If the London property market drops down a gear, this would be a significant shift in the UK housing economy, as the capital is the only part of the country where house prices have fully recovered since the crash. London prices are around 10% higher than their pre-crash value but prices remain 10% below their pre-crash peak in the south-east and almost 25% below in the north-east.

"It is not just about a north-south divide. The gap between London and the south-east is incredibly high at the moment," said Cook.

The housing recovery will be slowest in the north of England, with Barnsley, Hartlepool and Middles brough among the towns set to see the smallest price rises. The government has been trying to haul the housing market out of recession, creating the £130bn Help to Buy mortgage guarantee scheme, which critics have warned is in danger of inflating a bubble.

Dismissing talk of an overheating market, Savills said Help to Buy would play a minimal role, predicting it would increase transactions by 12% over the scheme's three-year life.

"Help to Buy will allow some trapped renters to access home ownership even though the costs of home ownership will exceed those of renting," said Cook, but he said the majority of beneficiaries were likely to those who already own a home, rather than first-time buyers.

By 2018, 5.8m households will be in rented accommodation, a million more than today, while the number of home owners will continue to decline. "The age of growing home ownership is well and truly over," said Cook.

Average rents are set to go up by 21% in the next five years and by 26% in London. Roger Harding at Shelter said the statistics highlighted "the dramatic and ongoing impact of our housing shortage on ordinary families. The current rental market is already unstable enough – families now make up a third of all renting households, with many forced to jump from one short tenancy to the next and cope with rising rents. The situation is only going to get worse if the number of private renters rises as steeply as this research predicts.

"This doesn't have to be the future, but unless the government commits to building the affordable homes that we desperately need, house prices will continue to rise and the already overheated private rental market will struggle to cope with the added pressure from a priced-out generation."

Galloping prices in the capital have turned the spotlight on wealthy foreign buyers, but the estate agent insisted they were not driving house price inflation. "Much more important than individual buyers is the state of the economy," said Yolande Barnes of Savills. "London's economy has behaved fundamentally differently to the rest of the UK, because of the strength of the financial services industry." She also said any Treasury plans for charging capital gains tax on foreign buyers were unlikely to dampen foreign demand in the long-term.

But Savills is predicting a temporary slowdown in demand in "the tiny rarified markets" of Kensington and Westminster, as buyers delay purchases ahead of the election, fearing a future government could introduce a mansion tax. Property prices in the most expensive central London zones are set to fall 1% in the 2015 election year, but could rebound 8% afterwards if a mansion tax is not introduced.

Article Source : http://www.guardian.co.uk
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Marks & Spencer sales continue to fall

Chief executive Marc Bolland says there is little evidence of improved consumer confidence boosting high street spending

Marks & Spencer has revealed a 9.1% fall in half-year profits as underlying sales of clothing and homewares slipped back for the ninth consecutive quarter.

The 1.3% drop in underlying general merchandise sales – mainly clothing – in the six months to September looked particularly poor when set against a roaring performance from the fast-fashion chain Primark, which revealed a 3-4% uplift in underlying sales for the same period. Primark is now snapping at M&S's heels with an expected £5bn in clothing sales in 2014: close to, if not above, the projected clothing turnover for its older rival this year.

A 1% fall in margins on sales of general merchandise at M&S, as well as higher costs because of investment in overseas stores, new IT systems and distribution centres counteracted a strong performance from M&S's food business and online store. While total sales rose to £4.9bn in the first half, up 4% on the same period a year before, pre-tax profit fell to £261.6m from £287.3m on an underlying basis.Meanwhile, profits from international stores also fell back as M&S spent nearly £25m on the closure of four stores in Ireland, where trading has been poor, and invested a similar amount in opening two new stores in France.

But shares in the retailer rose 4.5% to 509p, making it the biggest riser in the FTSE 100, as investors clung on to slight signs of improvement, led by promising early signs for M&S's all-important autumn/winter clothing collection.

Chief executive Marc Bolland promised that M&S would meet profit expectations for the year and that the company was "well set up for the key Christmas trading period with more innovation and choice than ever before."

The Dutchman insisted that M&S's latest clothing ranges, produced under a new team led by head of general merchandise John Dixon and former Debenhams boss Belinda Earl, had sold more items at full price. Bolland said 80% of the product items from its leading ladies' range had sold out within 6 weeks. He blamed the fall in clothing and homewares profit margins on moving the autumn sale period into the first half of the financial year and the need for heavier discounting in a tough market. Bolland added, however, that recent figures indicated that M&S had stopped losing market share.

Bolland admitted that sales might have been better if M&S had stocked more of its most sought after fashions, such as a pink coat, which sold out quickly. He said M&S had bought 40% more of the 72 general merchandise items featured in its Christmas ad campaign to stop the problem recurring but he refused to say when underlying general merchandise sales might return to growth.

He said: "What we've seen is a gradual improvement and what we are looking for is a gradual improvement, step by step." He said consumer confidence was improving, but there was little evidence, as yet, of this translating to increased spending in the retail sector so he was cautious about trading in the run up to ChristmasHe added: "Most important is that we are choosing the right direction and that is quality and style," he said.

Shareholders said Bolland had a lot of ground to make up in the second half of the financial year and still had some work to do to prove that general merchandise sales performance had turned around. But they backed his strategy and were optimistic that M&S would see an uplift in clothing sales this Christmas.

Richard Black at Legal & General said: "There are signs that things are getting better. Some people thought the company might miss its profit forecasts but the company has done what it promised. It appears they are no longer losing market share and if general merchandise were to turn a corner it would lead to a big switch in sentiment on the stock."

Richard Marwood, a fund manager at AXA Investment Management, said that shareholders were giving Bolland "the benefit of the doubt" on clothing perfomance. "We are watching with interest. Six months ago Bolland was definitely under a lot of pressure. The better view of the new clothing collection has given him breathing space. We were never going to see financial evidence of that improvement today but people will be looking more keenly in January for more positive signs," he said.

The new ranges, which were only in place for a few weeks of the last trading period, will get their real test in the critical Christmas quarter. Bolland's new store layout, with specific areas for coats, dresses and casual clothing, will be in all stores by March.