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Thursday, 27 June 2013

UK avoided double-dip recession in 2011, revised official data shows

But initial collapse in output following financial crash was bigger than first thought, Office for National Statistics says

Britain never suffered a double-dip recession in 2012 but suffered a deeper collapse in output following the financial crash than previously thought, according to new data that show the economy is even further away from a full recovery.

The Office for National Statistics has reworked its quarterly growth figures for the beginning of last year to show a flat performance instead of previous estimates of a 0.1% decline. Without a fall in GDP in the first three months of 2012, Britain did not suffer two consecutive quarters of negative growth that would have resulted in its second recession in three years – otherwise known as a double-dip.

The ONS said, however, that the first post-crunch recession in 2008/2009 was deeper than first estimated, meaning that economic output is now 3.9% lower than its pre-crash peak, compared with a previous estimate of 2.6%.

David Tinsley, UK economist at investment bank BNP Paribas, said the figures revealed a weak economy in need of further stimulus from the Bank of England.

"The data highlights both the damage done to the economy following the crisis and the size of the challenge still facing it to rebalance. Unless it bounces considerably it raises serious concerns that after a solid second quarter, growth will at best be weak. These are good arguments for new Bank of England governor Mark Carney to consider a significant easing in policy as early as next week."

George Osborne will be cheered that the double dip has been erased from the economic history books

Carney takes over from Sir Mervyn King on Monday and is under pressure in some quarters to take a more active role than his predecessor. But the nine-strong monetary policy committee that he will head has shown little appetite in recent months to pump further central bank funds into the economy, under the £375bn quantitative easing programme. King and two other committee members have voted since February to increase the QE stock by £25bn, only to be blocked by the remaining six.

Jeremy Cook, the chief economist at the foreign exchange firm World First said Carney and the chancellor need to take further action to bring about a sustainable recovery.

"Whether the UK entered a double-dip or - as today's numbers show, it didn't - matters little to the man on the street who is seeing large falls in real-term wage growth as a result of the lack of business output. Sterling has fallen in the aftermath of this announcement, and although this data is three months old and could be considered stale, the lack of real improvement since leaves the government and the new Bank of England governor a lot to do."

Coming a day after George Osborne was forced to announce a further £11.5bn of cuts to government spending in 2015/16, the news that a double-dip recession has been written out of the economic history books will cheer the Treasury. Ministers have battled to show that the economy was healthier than official statistics showed during the turbulent years of 2011 and 2012, which were marred by the euro zone crisis and fears that the currency zone would break up.

Separate figures revealed the economy is further away from getting back to its early 2008 peak and disposable incomes are at levels last seen in 1987. The ONS said the downturn in 2008/09 saw GDP decline by 7.2%, from the previous estimate of 6.3%.

A deeper recession and a prolonged period of low growth leaves the government with a higher mountain to climb to restore the economy back to health, said analysts.

Figures showing a long-term fall in disposable incomes emphasised the difficult task facing the Treasury as it struggles to boost consumer confidence and high street spending, both of which remain weak. Household disposable income fell by 1.7% in the first three months of 2013 compared with the previous quarter, which left it down by 0.3% year on year.

Howard Archer, the chief UK economist at IHS Global Insight, said the fall "undoubtedly reflected higher inflation, very low wage growth and faltering employment at the start of the year".

Consumer spending continued to rise, however, which Archer said was partly financed by a drop in the household savings ratio to 4.2% from 5.9% in the fourth quarter of 2012 and 7.1% in the third quarter. "This highlights the fact that consumers do still face serious headwinds," he said.

Chris Leslie, Labour's shadow financial secretary to the Treasury, said the revised figures showed the economy has grown by 1.1% since 2010, compared to the 6% forecast at the time.

"That's why living standards are falling and the deficit is not coming down."

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

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Bank of England's Miles sees good reasons for low gilt yields

British government bond yields have good reason to remain low, despite a recent jump due to market expectations that the U.S. Federal Reserve may scale back its bond purchase programme, a senior Bank of England official said on Wednesday.
David Miles, an external member of the BoE's rate-setting Monetary Policy Committee, said the still-low current level of gilt yields appropriately reflected investors' risk aversion and market expectations that Bank of England rates will stay low.

He also raised the prospect that the BoE may hold some of the 375 billion pounds of gilts bought under its asset purchase programme indefinitely, even after monetary policy returns to normal - in contrast to the general assumption that almost all would be sold back to the market.

Miles's comments, in a speech to be delivered to a bond investors' conference, come less than a day after BoE Governor Mervyn King said that markets had "jumped the gun" by starting to price in tighter monetary policy.

Ten-year gilt yields hit a 20-month high of 2.597 percent on Monday, having risen almost 50 basis points since Federal Reserve Chairman Ben Bernanke said last week that the U.S. economy is growing fast enough for the central bank to slow its bond-buying stimulus later this year.

Miles dismissed the idea that this marked the beginning of the end for what central bank critics say is a bubble in government bond prices caused by too much quantitative easing.

"Yields on UK government debt - both in nominal and real terms - are unusually low," he said. "(But) there are good reasons why yields on safe government bonds should be low today. I think some people are far too quick to label this a "bubble"."

The good reasons for low British government bond yields included investors' substantially greater risk aversion than before the financial crisis, and expectations that the BoE would keep offical interest rates low, Miles added.

Miles, a finance professor, has consistently voted for more BoE bond purchases since November and effectively endorsed market expectations for more loose monetary policy.

"I do not think we should be in any hurry in the UK to move the monetary policy dials back to more normal settings - indeed it might well be right for the next move in the UK to push them even further to give more support to demand," he said.

When the time did come to tighten monetary policy and sell back gilts, more normal market conditions should limit the impact on gilt prices, he added.

Miles, whose non-renewable term on the MPC expires in May 2015, also floated the possibility that the BoE might want to hold on to some gilts as a counterweight to increased cash deposited by commercial banks.

"It is very far from clear that returning monetary policy to a normal setting means that the Bank of England balance sheet will shrink back to where it was before the crisis," he said.

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

Osborne plans 3 billion pound boost for affordable housing

Britain will invest an additional 3 billion pounds in affordable housing in 2015, Chancellor George Osborne said on Wednesday.

Rapid house price inflation over the past two decades has made it hard for young people to get on the housing ladder, and a lack of local authority homes has led to long waiting lists.

"We're committing over 3 billion pounds capital investment in affordable housing and we will extend the Troubled Families Programme to reach 400,000 more vulnerable families who need extra support," Osborne said.

Osborne was addressing parliament on his plans for a round of government spending cuts of 11.5 billion pounds in the 2015/16 fiscal year.

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

Queen scores record profit from booming London property

The Crown Estate - owned by the Queen - on Thursday said it made record profit in the year to March, thanks to the strong performance of its central London properties.

Crown Estate's 5.2 percent rise in profits to 252.6 million pounds gives the Queen a 38 million pounds 2014/15 payout, pegged at 15 percent of the total by a 2012 law designed to link her income to the UK's economic health.

The rest of the profits go to the Treasury. Chancellor George Osborne on Wednesday detailed 11.5 billion pounds of spending cuts.

Owner of wind farms and most of Britain's sea bed along with its Regent Street properties, the company has outperformed the wider economy due to strong overseas interest in London property and the UK's growing reliance on green energy.

"We are proud that another record Crown Estate performance will again make a strong contribution to the nation's finances," said Chairman Stuart Hampson. The company's property portfolio is now worth 8.1 billion pounds.

The Queen - whose payout rose 20 percent to 36 million this year - was previously paid by taxpayers through an allowance set by parliament and other government grants.

It is not allowed to borrow in capital markets and has formed joint ventures with overseas funds to finance its redevelopment plans. In May, it signed a 320 million pound deal with Oxford Properties, owned by one of Canada's largest pension funds, to redevelop London's upmarket St James's Market district.

The Queen, who celebrated the 60th anniversary of her coronation earlier this month, uses her salary mainly to pay the royal household's staff as well as items such as laundry, stationery and official functions.

The Crown Estate belongs to the reigning king or queen but its properties cannot be sold by the monarch. King George III ceded its profits to the government in 1760.

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

RBS steps up small business lending after government calls

Royal Bank of Scotland said it had identified thousands of British companies it could offer 1.7 billion pounds of extra credit to, as it responds to government calls for banks to increase lending to small businesses.

Britain's government and central bank are concerned that poor access to finance, particularly for smaller firms, may thwart a sustainable recovery from the country's worst slump in decades.

RBS has come under pressure to increase lending because the government controls 81 percent of the bank after pumping 45.5 billion pounds in to keep it afloat during the 2008 financial crisis.

The bank said it and its subsidiary NatWest had contacted more than 20,000 small and medium-sized enterprises (SMEs) - existing customers - and told them they were eligible to borrow from the 1.7 billion pound credit pot, on top of what they were already borrowing from RBS.

It said the next stage of the programme would see the bank target a further 100,000 SME customers. More than one million SMEs bank with RBS.

Small business lobby group the Forum for Private Business said it welcomed the RBS initiative as long as the bank was evaluating lending opportunities properly.

"Experience tells us to be cautious here, with RBS's qualifying criteria stipulating the offer is only being made to 'credit worthy' businesses. We hope this doesn't mean they're adopting an ultra-hard line approach to risk, otherwise most of the cash available will stay in RBS's coffers," said spokesman Robert Downes.

Mike Cherry, national policy chairman of the Federation of Small Businesses, described the RBS initiative as "a step in the right direction", but reminded SMEs to make sure the terms and overall costs of finance were fair and competitive.

Banks should also offer less established businesses like start-ups the credit they need, he said.

Earlier this year, the government extended its Funding for Lending Scheme, which provides banks with cheap funding to encourage them to lend to households and businesses, but recent data showed business lending has actually fallen versus last year.

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

Wednesday, 26 June 2013

Supermarkets face fine of percentage of turnover for mistreating suppliers

Christine Tacon, the new groceries code adjudicator, will be able to arbitrate on contract disputes and investigate complaints

The UK's new supermarket watchdog wants to fine retailers a percentage of their turnover if they mistreat suppliers.

Christine Tacon, the groceries code adjudicator who started work on Tuesday, is able to impose fines and force supermarkets to apologise publicly with ads in national newspapers if they do not treat suppliers fairly. She is in charge of overseeing a legally binding code of practice, put in place more than three years ago, for supermarkets with a turnover of more than £1bn, such as Tesco, Sainsbury's and Asda.

The code does not govern the prices retailers agree with their suppliers, but aims to prevent changes part-way through the contracts. It covers groceries including food, drink and toiletries, but does not include clothing or tobacco.

Christine Tacon, new groceries code adjudicator, will oversee a code of practice governing relations between supermarkets and suppliersSpeaking on her first day in office, Tacon said her first job is to recommend the rules under which investigations would occur and the maximum fines that could be imposed.

Those recommendations are expected to be published in the next few weeks and will then undergo a 12-week consultation. The new system must be in place before Christmas Day, before which MPs will have to approve the maximum fine.

Tacon said she was inclined to base fines on supermarkets' turnover as this was a straightforward approach similar to that used by the Office of Fair Trading. She said: "Fines are there as the ultimate deterrent. I am prepared to use my powers but I hope we don't have to get to that stage."

She has spent several months talking to suppliers ahead of her official appointment this week but will only be able to look into complaints about breaches of the code that occur from her first day in office. She will be able to arbitrate on disputes and investigate complaints made anonymously or by third parties such as the National Farmers' Union.

She will be looking at issues such as supermarkets charging up to £1m to display suppliers' products, or the imposition of fines for customer complaints that have nothing to do with quality of the goods supplied. Tacon argues that such ruses add extra costs to the industry, forcing up prices for shoppers.

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

Anglo Irish Bank tapes: executives mock Germans amid bailout

Latest leaked recordings compound outrage over behaviour of Anglo Irish bankers amid multibillion-euro state rescue

The Irish prime minister has pledged to open an investigation into the €30bn (£25.5bn) bailout of Anglo Irish Bank as it emerged that an executive sang "Deutschland, Deutschland, über alles" as colleagues joked about German money flowing into the country after a state guarantee of the institution's deposits.

A banker is heard on tape joking and singing the former first lines of the Deutschlandlied – not used since the Nazis made the first stanza their anthem – as the bank's then chief executive, David Drumm, urges his executives to "get the fucking money in". The recording was made in September 2008, when the Irish state stepped in to rescue a bank brought low by a property lending spree.

Enda Kenny, the taoiseach, paved the way for a parliamentary inquiry into an "axis of collusion", although he stopped short of a full, Leveson-style inquiry. Referring to the former taoiseach Brian Cowen, who ran the country during the Anglo Irish bailout, he said: "I assume that our predecessors here, people who served … in high office and in those governments, would have the opportunity and would have the willingness, I assume, to come to a parliamentary inquiry."

The latest recordings to be leaked from inside the bank will compound national outrage in Ireland over the behaviour of Anglo Irish bankers.

Anglo Irish Bank headquarters in St Stephen's Green, DublinDublin intervened in September 2008 with a guarantee of the bank's deposits to keep it afloat – a move that angered London and Berlin because it enticed money from British and German savers.

Cowen's blanket bank guarantee, much criticised as foolish by other European Union governments, was designed to prevent Anglo's immediate collapse but instead put Ireland on a slippery slope to bailing out all six Irish-owned retail banks. In one conversation, two days after the fateful bank guarantee, Drumm giggles while his colleague John Bowe, then director of capital markets, recites lines from the Deutschlandlied.

Drumm, who has since fled to the US, and Bowe are heard laughing about fears that the guarantee would drive a wedge between Ireland and its EU partners.

The former said he would give "two fingers" to UK concerns.

Bowe was recorded boasting that he had picked as the cost of the state rescuing them a random figure, of €7bn (£5.9bn), "out of my arse".

Ireland's deputy prime minister, Eamon Gilmore, admitted on Tuesday ministers had been unaware the recorded conversations existed, even though the state has owned the bank since it was nationalised in 2009.

He said the degree of arrogance and hubris of the bankers highlighted in the tapes was shocking, and made clear the need for a full parliamentary inquiry into the Irish banking collapse.

"That's why we have brought forward legislation to establish such an inquiry, and I hope that the legislation will be enacted before the summer and we can get on with it," Gilmore told RTÉ radio. Gilmore added that the revelations couldcompromise Irish attempts to win further debt relief from the European Union. "It makes it more difficult, of course it does, but we're going to continue to work to get the best possible outcome for the Irish taxpayer," he said.

Kenny later confirmedthat the country's that police had had the Anglo Irish Bank tapes for four years. He told the Dáil they had been originally handed over to the Gardai when they began their when criminal investigations into the bank.

His cabinet colleague, the finance minister, Michael Noonan, confirmed that he, too, was unaware of the tapes, even though it was standard procedure to record calls between senior banking personnel.

Recordings obtained by the Irish Independent of Drumm joking about the rescue plan on the tapes will intensify anger in Ireland towards the top bankers, given that he remains in exile in Boston, allegedly owing the state €8m.

Bowe has denied trying to mislead the state, adding that the reported remarks were "off-the-cuff comments".".

The secret tapes have compounded suspicions that Anglo Irish Bank's senior executives had lured the then Fianna Fáil-led il-led government into a costly financial trap in the autumn of 2008. The figure of €7bn cited by Bowe more than quadrupled, to €30bn.

During the Irish boom, Anglo Irish Bank became the preferred lender to property speculators and builders. Among its high-profile clients was Ireland's one-time richest man Seán Quinn, who borrowed hundreds of millions of euros from the bank to fund a global property portfolio stretching from the US to the Ukraine and Russia. When the world property market crashed, Quinn's empire crumbled, leading him to bankruptcy and prison.

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