Warmer weather helps boost retail sales

British Retail Consortium says retail sales for June were up 1.4% following a rise of 1.8% in May

A washout spring for retailers has given way to a sun-assisted summer revival, with an outbreak of hot weather leading to a second consecutive monthly sales increase.

The British Retail Consortium said total sales for June were up 1.4% on a like-for-like basis, following a rise of 1.8% in May. .

Helen Dickinson, the director general of the BRC, said: "Despite challenging economic conditions continuing, June saw another strong performance from the UK's retailers. At this halfway point in the year we are able to see that sales are well ahead of the previous six-month period."

Sales growth of 2.3% since the start of the year is ahead of last year's annual growth of 1.5%. The strong figures are a further boost for a UK economy that is heading for growth of around 0.5% in the second quarter and is dominated by service industries such as retail.

Clothing was the best-performing category, according to the BRC, although this was mainly due to poor spring weather leaving clothes rails packed with unsold summer outfits that were then sold at a discount in a bid to shift stock.

Better weather lifted sales of clothing and footwear in JuneDavid McCorquodale, head of retail for KPMG, which compiled the data, said: "It's difficult to say at this stage how much discounting went on, but we know that the cold weather meant retailers were forced to try and shift the extra stock they had."

Several clothing retailers have issued profit warnings or delivered lower-than-expected results this year because of the weather. On Tuesday Marks & Spencer is expected to blame the weather for a fall in clothes and general merchandise sales over the past three months.

McCorquodale added: "Periods of sunshine helped to lift the gloom on the high street and retailers celebrated another month of rising sales. These figures certainly underline the impact that weather can have on a retailer's performance."

DIY and gardening centres also got a well-needed boost in sales after suffering a washout over Easter, a period seen as more important to the chains such of B&Q and Homebase than Christmas. Food sales also rose by 1.4% in June, despite tough comparisons with the diamond jubilee last year, with sales of drinks and ice creams increasing as the weather improved. The earlier timing of Ramadan also helped stimulate sales, the BRC added.

Online sales were up 14.1% on a year earlier, strongly ahead of the 10.5% long-term average. However, house textiles and home accessories were the worst-performing categories as they struggled against last year's jubilee boost and shoppers spending more on fashion.

Article Source : http://www.guardian.co.uk

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Cold snap boosts profits at British Gas owner

Centrica says it will try to avoid more price rises for as long as possible as it faces protests at annual meeting on Monday

British Gas's owner, Centrica, enjoyed a huge boost from the cold snap as consumers turned up the heating, driving consumption up by almost a fifth compared with last year.

The company, which raised prices by 6% shortly before the harsh winter set in, said any benefit from the "exceptionally cold weather" would be used to prevent further price rises "for as long as possible".

The finance director, Nick Luff, said: "The fact is we make a margin selling gas. We will have made a higher margin because of the extra volume and we will use that to keep prices down during the rest of the year."

But he said the cost of implementing the government's energy efficiency scheme and higher transport costs would hit profits, while the gas price remains unpredictable – meaning there may be little extra to invest in keeping prices low.

The energy comparison and switching service uSwitch.com still welcomed the news at a time when consumers are struggling to pay bills. Ann Robinson, director of consumer policy at uSwitch.com, said: "British Gas has recognised the pressure facing customers and is using the financial gain from the extended cold weather to maintain its competitiveness. In plain English, this means that British Gas customers should expect no further increase in prices at least for the foreseeable future."

Gas consumption has surged during the cold snap

Centrica faces protests at its annual meeting in London on Monday afternoon as campaigners gather to challenge the company on price hikes, multimillion-pound payouts to British Gas bosses and plans for a new generation of gas power stations instead of cheaper, clean renewable energy.

Households' average gas consumption was 18% higher in the first four months of 2013, compared with the same period last year, while electricity consumption was 3% higher. Residential customers in the UK also rose by 28,000 in the first four months of the year, which Centrica put down to competitive pricing and good customer service.

The company said this "strong performance" put it on course to meet expectations and deliver full-year profits before tax of £602m, down 1% on last year.

As an oil and gas producer, Centrica also benefited from higher commodity prices, and the group's full-year earnings after tax are expected to be 2% higher at £1.4bn.

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Article source : http://www.guardian.co.uk

UK house prices rise by 1.1%, the Halifax says

UK house prices rose by 1.1% in April compared with the previous month but activity in the market remained subdued, according to the Halifax.

The lender, part of Lloyds Banking Group, said that property values were 2% higher than a year earlier.This meant the average UK home was valued at £166,094.

A dip in the number of mortgage approvals at the start of the year suggested that sales activity would not take off, the lender said.

"Weak income growth and continuing below-trend economic growth are likely to remain significant constraints on housing demand during the remainder of 2013," said Halifax's housing economist Martin Ellis.

Prices were 1.3% higher in the three months to the end of April than the previous three months, the survey found.

The annual change of 2% is higher than the figure recorded by the Nationwide Building Society. Its survey reported a 0.9% year-on-year increase and a 0.1% rise from March to April. Both surveys are based on the lenders' own mortgage data.

'Polarised'

However, the year-on-year comparison is calculated slightly differently by the two lenders. The Halifax compares the previous three months with the same three months a year earlier to give a smoother comparison, rather than a direct comparison of the equivalent months as calculated by the Nationwide.

 Various surveys have suggested that price rises have been driven by increases in London, with some other areas of the country seeing house price falls.

"Some regions of the UK remain under pressure. The market is still deeply polarised, with the increasing national average masking the huge divergence between London's surging prices and those in the North of England that are stuck in reverse," said Jonathan Hopper, managing director of property search consultants Garrington.

"Despite the improved market, buyers are still looking for value, and committed sellers need to be willing to negotiate on price if they want to secure a quick sale."

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Article source : http://www.bbc.co.uk

UK industrial output beats forecasts, official figures show

UK industrial production was stronger than forecast in March, official figures show, boosted by manufacturing and a recovery in oil and gas output.

The Office for National Statistics said industrial output rose 0.7% in March from February, above the 0.2% expected by economic forecasts.

Manufacturing output, a sub-sector of industrial production, rose 1.1%, boosted by electronics, metals and machinery.

But annual output was still 1.4% lower.

The extended period of cold weather help the electricity, gas steam and air conditioning sectors achieve 2.4% growth in March.

Lee Hopley, chief economist at the EEF manufacturers' organisation, said: "Manufacturing looks to have had another good month in March with the data pointing to encouraging gains across the board, with almost all sectors posting some growth and on-going strength in transport and electrical equipment sectors."

 But she warned that "a smooth recovery path is not assured" while uncertainties remained over likely levels of demand.

Howard Archer, chief UK economist at IHS Global Insight, said the "much stronger-than-expected" output figures add to "the recent improved news on the UK economy and boosts hopes that activity is gaining a firmer footing.

"The services sector remains key to the economy's performance but any help from the manufacturing sector would go down nicely," he said.

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Article source : http://www.bbc.co.uk

Solid earnings, ECB rate cut prospects lift FTSE

The benchmark share index rose on Tuesday, inching back towards its 2013 highs after upbeat earnings reports from BP and Lloyds bank and on expectations for a European Central Bank (ECB) rate cut this week.

"We're looking forward to a possible ECB rate cut later this week. That stimulus has kept everyone upbeat," said Darren Easton, director of trading at Logic Investments.

Expectations of fresh stimulus measures and rate cuts from world central banks, such as the ECB and U.S. Federal Reserve, have boosted equity markets. The lower rates and injections of liquidity should help companies export more overseas and have also led investors to shift money out of bonds and into equities for better returns.

Easton said he had taken out "long" positions to bet on further gains for the FTSE this week.

"We wouldn't want to bet against this market going higher in the near term."

Solid results from leading UK companies supported sentiment.

According to Thomson Reuters Starmine data, 80 percent of companies who have reported first-quarter results in the broader FTSE 350 index, which comprises the FTSE 100 and the FTSE 250 mid-cap sector, have beaten or met expectations.

 Oil major BP continued that trend on Tuesday with forecast-beating first-quarter profits, sending BP shares up 2.

Part-nationalised British bank Lloyds also posted higher first-quarter profits to send its shares up by 5.1 percent to the top of the FTSE 100's leaderboard.

The FTSE 100 has risen by nearly 10 percent since the start of 2013 but some traders expect the market to trade sideways or fall slightly in the next couple of months as some investors sell shares in order to book profits on the rally.

"I would still sell strong rallies on the FTSE," said Hartmann Capital trader Basil Petrides.

(Editing by Susan Fenton)

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Article source : http://uk.reuters.com

Axa plans to axe final salary pension scheme

Axa will move almost 2,500 staff on to a defined contribution scheme, with future payments dependent on the performance of the underlying fund

Financial services group Axa has announced plans to close its final salary pension to existing members, in a move one union claimed would result in employees having to work an extra five years to achieve the same retirement pay out.

The company told staff it planned to move 2,300 employees currently in the scheme to a defined contribution pension, where payments are not guaranteed and depend on the performance of the underlying fund. These schemes are cheaper to run as the investment risk is transferred from the employer to the employee.

Axa, which provides pensions and other financial products, will shift the risk on to its members.

 In common with many other firms Axa, whose business is providing pensions alongside other financial products, had already closed the final salary scheme to new members. Since 2003 they have been enrolled in a defined contribution scheme.

"We have worked hard to maintain our defined benefit (final salary) pension scheme over the past few years and have introduced a number of changes to try to keep the scheme sustainable," a spokesperson said. "Like many other companies before us, we are now proposing that the scheme be closed pending a further 60 days of consultation."

Benefits that have already been accrued in the scheme will be kept. The spokesperson added: "This allows us to harmonise pension arrangements in a fairer way across our employee base and ensure that all of our employees have access to long-term pension provision."

Unite, Britain's biggest union and the representative for Axa staff, expressed anger over the plans and said it could not rule out industrial action. It said it had put forward a range of alternatives including possible changes to members' contributions or accrual rates, but these had all been rejected by Axa.

Unite's national officer, Dominic Hook, said: "The move to end the defined benefit pension scheme at Axa is appalling and unjustified. Long-serving staff now face the prospect of having to work an extra five years to get the same level of pension and [the move] puts all the investment risk on to the staff."

He added: "The decision by Axa is unacceptable and industrial action will be among the options being discussed with members if Axa refuses to reconsider its proposals."

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Article source : http://www.guardian.co.uk

Item Club predicts rise in lending to UK businesses

Bank lending to UK businesses will rise in 2013, the first increase for four years, the Ernst & Young (E&Y) Item Club has predicted
The forecasting group's financial services outlook estimates that lending will rise by 3% to £440bn this year
The report says this year's increase is being led by the commercial banks having better access to wholesale funding, and a fall in bad debts.

This year's predicted rise follows after a fall of 5% in 2012.The report also said that the government's Funding for Lending Scheme was making a "material difference".

Lending to firms fell by 5% last year

'Encouraging lending'

Under the FLS scheme, the Bank of England allows the banks and building societies to lend more cheaply, on the condition that they pass on the funds to customers, both businesses and consumers, in the form of cheaper loans and mortgages.

Last week it was announced that FLS would be extended by another year to 2015. The Bank of England also confirmed that non-bank lenders would be able to participate.

Andy Baldwin, head of financial services in Europe at E&Y, said: "Behind the scenes, banking fundamentals have quietly been improving and banks are now in a better position to be able to provide funds to the wider economy.

"Our analysis suggests the main drivers of banks' return to lending will be better access to wholesale funding and a decrease in non-performing loans, rather than the Funding for Lending Scheme making a material difference.

"That said, the scheme is making a contribution in shifting emphasis and encouraging lending expansion across the sector while also helping to restore confidence and stimulate demand from consumers and SMEs [small and medium businesses] alike."

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Article Source : http://www.bbc.co.uk

Universal credit: Major benefits shake-up begins

A massive shake-up in the UK benefits system starts on Monday, with the first claims being made for a new universal credit payment.

Universal credit will merge several benefits and tax credits into one monthly payout.

It begins with a very small number of new claimants in Ashton-under-Lyne in Greater Manchester, but will eventually affect nearly six million people.

Those who are looking for work will receive the new universal credit

 The system relies on a complex computer system, with claims made online.

  Simplification

The benefit is for working age people looking for work, and will replace income-based jobseeker's allowance, income-related employment and support allowance, income support, child tax credit, working tax credit, and housing benefit.

It is the central plank of a benefits overhaul, championed by Work and Pensions Secretary Iain Duncan Smith, which the government says will mean people are always better off in work than on benefits.

It is also designed to simplify the welfare system by bringing a number of benefits together and reducing fraud and error.

However, some groups have raised concerns that the system is entirely dependent on a complex computer network which may not be ready or able to cope with millions of claims. They are also concerned that many potential claimants do not have access to the internet.

Online claims

The key features of universal credit include:

• A single, monthly payment which the government says mirrors the world of work, but charities say could create problems for personal money management
• The inclusion of financial help to pay rent, which is currently paid directly to landlords
• An online-only claiming process, with accounts also managed online
• The benefit paid to households, rather than individuals, and put straight into bank accounts
• Benefits automatically adjusted depending on earnings, which employers enter into a computer system called real-time information

This means that there will no longer be a ceiling of 16 hours of work a week, below which people can sign on and above which claims are cancelled.

This is set to benefit people like Darren Bailey, an agency worker, whose working hours fluctuate, meaning he has to keep making claims under the current system.

"I have five kids so I can't afford to mess about," he said. "Any system has got to be better than this system."

Budgeting

The government estimates 3.1 million households will be entitled to more benefits as a result of universal credit, while 2.8 million households will be entitled to less.

Across all households, ministers say there will be an average gain of £16 per month. The long-term cost to the government is £100m in current prices.

The only claimants to receive universal credit in the initial stages will be single, new claimants at a jobcentre in Ashton-under-Lyne.

Three other pilot projects - in Warrington, Oldham, and Wigan - have been delayed until July.

From October, newly unemployed people will make claims under the new system. Current benefits and tax credits will gradually be shifted to universal credit from spring 2014, with the whole process completed by 2017.

Iain Duncan Smith said at the weekend that universal credit was being introduced over a four-year period because "I want to get these things right".

He added: "We want to say to people, you're claiming unemployment benefit but you're actually in work paid for by the state: you're in work to find work. That's your job from now on: to find work."

All claims for universal credit will need to be made online

 Labour's Shadow Work and Pensions Secretary Laim Bryne said that universal credit was "a fine idea that builds on Labour's tax credits revolution".

Yet he added: "The truth is the scheme is late, over budget, the IT system appears to be falling apart and even DWP [Department of Work and Pensions] ministers admit they haven't got a clue what is going on."

Benefits and grants charity Turn2us said that 43% of people whose benefits would be replaced by universal credit were not aware of the change.

"Once you look at the nuts and bolts, budgeting is not going to be easy especially for those with a small amount of money," said Alban Hawksworth, welfare benefits specialist at the charity.

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Article Source : http://www.bbc.co.uk

MPs criticise accounting firms on tax avoidance

Corporate tax avoidance has risen to the top of the political agenda in Britain in the past year following reports which showed some major companies paid little or no tax in the country by shifting profits to tax havens.

While the four biggest accounting firms, KPMG , Deloitte , Ernst & Young and Price water house Coopers said they no longer advised on aggressive tax avoidance plans, the Public Accounts Committee said: "They are still devising complex schemes that look artificial".

It went on to say the accounting firms were still prepared to recommend tax arrangements which had as little as a 50 percent chance of being successful if challenged in court.

The report also questioned the way staff from the "Big Four" were seconded to the government to help draft tax rules.

"The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," Committee chair Margaret Hodge said.

But the firms said they behaved ethically and that the complexity of tax law was largely to blame for any appearance to the contrary. They welcomed the committee's calls for the rules to be simplified.

"We perform an essential function in the UK economy by helping our clients navigate this complexity," Bill Dodwell, Head of Tax Policy at Deloitte said.

The committee called on companies to disclose more information about their tax affairs. The government has also called for more disclosure but has said it wants this to be done on a voluntary, rather than a mandatory, basis.

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Article Source : http://uk.reuters.com