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Thursday, 12 September 2013

UK unemployment rate falls to 7.7%

Closely watched indicator takes tentative step towards 7% that could trigger rise in interest rates from Bank of England

Britain's unemployment rate has fallen to 7.7%, in the first tentative step towards the 7% target Bank of England governor Mark Carney says may signal an economy strong enough to withstand a rise ininterest rates.

The jobless rate has become a closely watched indicator in the City since the Bank's monetary policy committee introduced its policy of forward guidance, promising to leave borrowing costs on hold at their record low of 0.5% at least until unemployment falls to 7%.

Unemployment on the broad International Labour Organisation measure tracked by the Bank stood at 2.49 million from May to July, down by 24,000 from three months earlier, according to the Office for National Statistics (ONS).

That took the unemployment rate to 7.7%, from 7.8% over the previous three-month period, driven by a larger-than-expected 80,000 increase in employment.

On the more timely claimant count measure, which just includes people receiving out-of-work benefits, unemployment also fell, by 32,600 in August to 1.4m.

Sterling surged to a seven-month high against both the euro and the dollar after the news, as investors continued to bet on a stronger recovery than the MPC expects. "Markets are clearly ignoring Carney's 'low rates for longer' pledge and driving sterling higher in currency markets," said Nawaz Ali, market analyst at Western Union.

Carney used his first set-piece speech as governor to set out the reasons why he doesn't expect unemployment to fall sharply over the next two years; and stress that the 7% threshold was a "staging post", which need not trigger an automatic rate rise.

Chris Williamson, chief economist at data provider Markit, said: "The upturn in the labour market bodes well for the sustainability of the wider recovery, as more people in employment and rising wages should help boost economic growth further. The improvement also increases the possibility that unemployment could fall faster than the Bank of England expects, meaning an earlier hike in interest rates than 2016, as currently envisaged under the Bank's 'forward guidance'."

There were 334,000 new jobs created in the economy between June and a year earlier, the ONS said – the latest period for which figures are available – with the largest increase, of 117,000, coming in health and social work, within the private sector. With the housing market starting to show signs of life, there was a 77,000 rise in the number of people employed in "real estate activities".

Despite the improving picture, there was also evidence in the detail of the figures that conditions in the labour market remain tough for many.

Average pay rose at an annual rate of just 1%, or 1.1% including bonuses – well below the 2.8% rate of inflation – suggesting that living standards are still being squeezed.

The ONS also highlighted the fact that much of the increase in employment – almost all of it, for women – has been in part-time work, in many cases taken up by employees who would prefer a full-time job if they could find one.

Almost a third of men, and 13.5% of women, in part-time work or self-employment would prefer to be in a full-time role, according to the ONS.

Long-term unemployment has also remained stubbornly high: while overall unemployment has fallen by 105,000 over the past 12 months, the number of people unemployed for more than a year is little changed, at just below 900,000.

Young people are also failing to feel the benefit of the upturn, with youth unemployment 9,000 higher in May to July than three months earlier, at 960,000.

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

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Wednesday, 11 September 2013

HS2 rail project will provide £15bn boost, transport minister claims

Patrick McLoughlin to make speech in Birmingham where there has been a mixed reaction to the high-speed link

Patrick McLoughlin, the transport secretary, will on Wednesday make the economic case for the HS2 rail project by insisting that the high-speed link will give an annual £15bn boost to the economy, with the north and Midlands gaining at least double the benefit gained by the south.

In a speech in Birmingham, McLoughlin is planning to depict HS2 as a "heart bypass" for congested train lines and roads, claiming that speed will be a secondary concern, though the link will reportedly reduce the train journey between London and Birmingham to just 45 minutes.

"Speed is not the main reason for building the new railway. The main reason we need HS2 is as a heart bypass for the clogged arteries of our transport system," McLoughlin will say.

There was mixed reaction in Birmingham, one of the cities most affected, to the government's insistence that it would ease busy train lines.

While the city council, business leaders, big companies and local transport chiefs are campaigning strongly for the multibillion-pound scheme, it is clear that smaller business owners, commuters and many of the general public remain to be convinced about the project.

Steve Brittan, president of the Birmingham chamber of commerce, and managing director of BSA Machine Tools in the city, said it was vital for the region that more effective transport links were created.

"We're at the centre of the country and we're surrounded by transport difficulties," Brittan said. "The roads are full, the trains packed. We don't have the capacity to get people around effectively. On the roads we're stuck between lorries and white vans while our railway system is more than 100 years old and too small to work."

Geoff Inskip, chief executive of the regional transport authority Centro, said that without HS2 the west coast main line, which links London to the Midlands, the north of England and central belt of Scotland, would be full by the early 2020s and services would face closure.

"We need more capacity or the system will become too crowded to function," he said.

The chamber and Centro are part of Go-HS2, a group in the city campaigning for the project.

Also signed up are the Labour-led city council, which believes the line will create up to 50,000 jobs in the West Midlands and boost its economy to the tune of £4bn a year, Birmingham airport, and the NEC exhibition centre.

A passionate HS2 backer is Deborah Smith, who runs a PR firm from Solihull and is behind the Hands up for High Speed 2 website. A relative newcomer to the West Midlands, she believes HS2 will help bolster the region and stop talented young people feeling they had to leave for London. "I feel that HS2 is a once-in-a-generation chance to do something bold to really invest in the regions outside London," she said.

Smith accepts her motive is to help her two sons, now aged three and five, to grow up in a prosperous and forward-thinking area of which they can be proud.

In Birmingham's jewellery quarter, most small-business owners were more cynical.

Eric Goodby, 54, who runs an engraving and jewellery design firm with his father, Ken, 81, claimed Birmingham would be turned into a glorified dormitory town for London commuters.

A few doors along, Carl Longshaw, a metal spinner who produces goods ranging from hubcaps to replica FA Cups, dismissed HS2 as a terrible idea. "It's a white elephant, too expensive and it goes too close to my home in Tamworth," he said.

Colin Ashford, who makes cufflinks, medals and regalia for Freemasons, in a Victorian workshop, doubted the government's figures on jobs and growth. "I'm not sure where they get them from," he said.

But Andy Williams, manager of the Creative Watch Company, was enthusiastic. "It would be good for the city and good for the region. Anything that has the potential to get more people here has to be welcomed."

Commuters on the 7.49am Wolverhampton to Birmingham New Street service on Tuesday morning were also divided. The London Midland train arrived 14 minutes late, partly because it was stuck behind a late-running Virgin train from Manchester to London.

Sally Gray, a shop worker, said she was fed up failing to get a seat on the train. "And you also have to factor in an extra 10 minutes every day because it can be late. I'd be all for the high-speed service if it frees up this line."

Simon Jones, an office worker, said he tended to believe not ministers but the public accounts committee. "All you hear is that it is going to be over-budget and won't really work. I'm deeply sceptical. I'm not sure we're good enough at delivering huge projects like this. I hope I'm proved wrong."

This week, the committee blasted the HS2 project, claiming it was beset by spiralling costs, lack of expertise and unrealistic delivery timetables.

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

Plastic banknotes: Bank of England plans to modernise from paper

Public consultations to begin on smaller, tougher notes, due for release starting in 2016

Plastic banknotes with a see-through image of Britannia are likely to replace traditional paper notes from 2016 under plans being drawn up by the Bank of England.

The Bank said the wipe-clean polymer notes will be less tatty, tougher to counterfeit and last up to six times longer than cotton-paper based notes. They will also be 15% smaller, bringing English notes into line with sizes in other countries, but will remain larger than existing euro notes.

The public will have the chance to look at and feel the new notes at shopping centres across the country in a consultation process that starts immediately, with the new governor of the Bank of England, Mark Carney, taking a final decision on the go-ahead in December. The Sir Winston Churchill £5 note will be the first to be made in polymer and launched in 2016, with the Jane Austen £10 note following in 2017. All the notes will continue to feature the Queen and use existing colours.

Plastic notes have been in circulation in Australia for more than two decades and are being rolled out in Canada, Carney's home country, but the Bank said its polymer project began long before the new governor was appointed.

Scotland and Northern Ireland, where seven banks have the right to issue notes, will be free to continue with paper notes, opening up the possibility that cash machines in Carlisle will issue in plastic but across the border in Gretna will continue to supply in paper.

The Bank of England said that in tests, the new plastic notes do not melt until at least 120C and survive washing machines much better than existing paper notes. Despite being made from polymer pellets, the Bank said the notes will be more environmentally friendly as the manufacturing process does not use the same intensity of water as cotton-paper manufacture.

The new notes will cost around 50% more to produce, but the Bank estimates it will save £100m as it will need to replace the notes far less frequently. But the Bank ruled out importing plastic money from China. The notes will continue to be produced at the Bank's ultra-secure plant in Debden, Essex, although subcontracted to a private company, likely to be either De La Rue, the existing maker, or Innovia, which manufactures most of the polymer notes currently in circulation across the world.

The deputy governor of the Bank of England, Charles Bean, said there was no question that the introduction of plastic notes was a "done deal" and promised to listen to feedback from the public before going ahead. "Polymer banknotes are cleaner, more secure and more durable than paper notes. They are also cheaper and more environmentally friendly.

"However, the Bank of England would print notes on polymer only if we were persuaded that the public would continue to have confidence in, and be comfortable with, our notes. The results of the consultation programme on which we are embarking will therefore form a vital part of our assessment of the merits of polymer banknotes."

In recognition of the need for groups such as the blind to handle the change, the Bank will continue to issue notes in size-ascending order, so the new fivers and tenners will continue to be slightly different in size. There is no switchover date yet proposed for when or if £20 notes – the most common note in circulation – will be changed to polymer.

In Canada, where high-value notes are already made of polymer and lower-denomination notes will be introduced later this year, there have been some complaints that the notes tend to stick to each other. But the Bank of England said it did not expect this to be an issue, although it did accept that brand new notes will have a more slippery texture than cotton-paper ones.

The extended time scale for the introduction of the notes has been put in place to allow the cash handling industry, retailers and ATM and vending machine operators time to mange the transition. ATMs will be able to hold, say paper £20 notes and plastic £10 notes, but will not able to issue plastic £10 notes alongside paper £10 notes as they will be different sizes. But because the polymer notes will be thinner, cash machines will be able to stock more, and operators say the machines will be less likely to jam.

But it is security and counterfeiting that the Bank of England places at the heart of the new notes. Evidence from Australia and other countries such as New Zealand, Singapore, Mexico and Nigeria, where polymer notes are common, is that after their introduction counterfeiting reduced substantially. Last year the Bank of England removed 719,000 counterfeit notes from circulation, a relatively high rate compared with other countries.

Shoppers in Northern Ireland will already be familiar with polymer notes, since a limited-edition note was circulated in 2000 by Northern Bank to mark the millennium.

If the new notes go ahead, removal of paper notes is expected to be relatively swift, taking no more than eight months.

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

Tesco pays out to rid itself of US chain Fresh & Easy

US billionaire Ron Burkle's Yucaipa investment vehicle agrees to take on 150 stores and 4,000 staff

Tesco has finally negotiated an exit from its failed expansion into the US by lending US billionaire Ron Burkle £80m to take away its loss-making Fresh & Easy chain.

After more than nine months searching for a buyer, Burkle's Yucaipa investment vehicle has agreed to take on 150 Fresh & Easy stores as well as 4,000 staff and a vast distribution centre and production facility east of Los Angeles.

The deal will cost Tesco £150m in total, including the loan, payoffs for about 400 permanent staff and the closure of about 50 stores not included in the deal – taking the total cost of the humiliating episode to nearly £2bn. The future for a further 600 staff is unclear, with some expats likely to return to Tesco in the UK while others are part-time staff and will be let go.

Philip Clarke, the UK supermarket's chief executive, said: "The decision we are announcing today represents the best outcome for Tesco shareholders and Fresh & Easy's stakeholders. It offers us an orderly and efficient exit from the US market, while protecting the jobs of more than 4,000 colleagues."

Tesco said that the deal would mean there was no ongoing financial exposure in the US. However, under the agreement, which is expected to be finalised by the end of the year, Tesco will hold warrants that entitle it to a 32.5% stake in the holding company that will run Fresh & Easy, should certain performance criteria be met. They could be exchanged for a cash sum in the future.

Ron Burkle, managing partner of Yucaipa, who founded the Ralphs and Food4Less supermarket chains in the US, indicated that he planned to continue to run Fresh & Easy as a standalone chain.

He said: "Fresh & Easy is a tremendous foundation. Tesco should be applauded for giving their customers an affordable, healthy, convenient shopping experience. Its dedicated employees and great base of customers give us a solid starting point to complete Tesco's vision with some changes that we think will make it even more relevant to today's consumer."

He said Yucaipa planned to build the chain into a "next-generation convenience retail experience". However, there has been speculation that Burkle wants to use the Fresh & Easy stores to relaunch his Wild Oats brand, which he sold to rival Whole Foods Market in 2007.

The deal is good news for Tesco after weeks of speculation that it would be unable to find a buyer for its US business. The trip over the Atlantic, begun in 2007 with ambitious plans for thousands of stores, has proved very costly for Tesco with trading losses and investment reaching some £1.8bn.

The failure has not only meant problems for Tesco but tarnished the reputation of former chief executive Sir Terry Leahy, who was previously held up as a shining example of British retail success.

It also reflected badly on Tim Mason, the Tesco marketing supremo who was relocated to the US to run Fresh & Easy and build it into a chain the same size as Tesco UK. He was made redundant earlier this year with more than £2m.

It was not clear on Tuesday night if Tesco would have to make further write downs after completing the deal.

Selling off the US business is good news for Clarke, who has been attempting to get rid of poorly performing overseas assets in order to concentrate on Tesco's problems at home.

In April, the supermarket reported its first fall in annual profits for 20 years as its chains both abroad and at home suffered during a global downturn.

The ongoing losses in the US were blamed for a squeeze on expenditure in the UK which meant that stores began to look tired and customer service suffered. Tesco has also suffered from a series of PR disasters including revelations that some of its burgers contained horse meat.

Tesco recently revealed it was in negotiations to put its Chinese business into a new joint venture with the state-owned Chain Resources Enterprise. The deal, which would cost Tesco an estimated £1.5bn, would merge its 131 stores into CRE's Vanguard chain, which has nearly 3,000 outlets.

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

Tuesday, 10 September 2013

Soaring house prices spread across UK as surveyors warn of another bubble

Poll shows fastest rise since late 2006 peak, with Rics saying Osborne schemes risk pushing prices to unaffordable levels

House prices are rising at their fastest pace for almost seven years, according to the latest survey to point to a property market on the rise.

Rising prices and growing demand have also driven a jump in the number of people putting their homes on the market, according to the Royal Institution of Chartered Surveyors (Rics).

Its survey echoed a report from Britain's largest mortgage lender, Halifax, last week that house prices were 5.4% higher than in the summer of 2012. Estate agents polled by Rics indicated the fastest rise in prices since their peak in late 2006 as government schemes such as Funding for Lending continued to improve access to mortgages.

Rics warned, however, of the risk of prices soaring to unaffordable levels, echoing commentators who have warned that George Osborne's property market schemes could spark another house price bubble.

The group said that although the market conditions were prompting more people to put their home on the market, demand still outstripped supply.

"During August, the number of would-be buyers increased yet again as increasingly accessible finance allowed more people to enter the market," the Rics report said.

Peter Bolton King, the Rics global residential director, added: "It's not surprising that more and more people are looking to sell their homes. Buyers are out there and prices are on the up so if you're looking to move it's a good time to do so. What we don't wish to see, however, is prices rise to such an extent that they become unaffordable.

"For the market to work properly, it's vital that property is both accessible and affordable, and we'll be monitoring the situation very carefully as the housing sector continues to recover."

Following government moves to improve access to mortgages, there have been reports of first-time buyers flocking into the housing market.

LSL Property Services, which owns estate agencies including Your Move, suggested last week that there were more than 26,000 first-time buyer transactions in July – an increase of 45% on the same month in 2012.

The Rics report said the Funding for Lending scheme and Help to Buy "appear to be part of the reason for the pick-up in activity".

The report's headline prices balance stood at 40, based on the proportion of respondents reporting a rise in prices minus those reporting a fall. That was the highest since November 2006 and compared with 36 a month earlier.

Rics said each region across the country saw supply increase in August as the recovery continued to spread from south-east England to other areas. The South West and the North East, in particular, saw the number of new homes coming onto the market rise significantly.

Rics added: "It seems that recent price rises are going to continue unabated."

The estate agents surveyed expect prices across Britain, on average, to increase by 2.2% over the coming year and by 4.4% in each of the next five years. At the start of this year, those respective figures were 0.6% and 3.4%.

The survey of 348 agents will intensify fears of unsustainable rises that will leave another generation saddled with huge debts.

Experts' concerns about another bubble centre on the Help to Buy scheme, which was introduced in April and provides equity loans for first-time buyers of up to 20% towards the cost of new-build properties worth up to £600,000.

The International Monetary Fund and others have criticised the scheme, which will be expanded in January to make the loans available to all buyers and all types of property up to the £600,000 limit.

Some of the estate agents surveyed by Rics predicted a boom as a result of the government schemes; others were more cautious about their impact.

"The second stage of the government's Help to Buy scheme in January 2014 could create a bubble," said Michael Brooker, an agent in Crowborough, East Sussex.

Others were less confident the price rises would last.

Julian Dyer in the Welsh town of Abergavenny, said: "The market has definitely perked up over the last 6 months, however the market seems very fragile, and I am not convinced that the upturn is sustainable. The government initiative to help builders does not seem to have worked in this area."

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

UK GDP growth limited to 1% in longer term, economists warn

IEA paper predicts a post-crisis era of sluggish growth, tempering recent good economic news stories

Britain's economic growth will be limited to just 1% in the longer term as higher government spending, dwindling North Sea oil stocks and an ageing population all take their toll on the country's potential output, a group of economists has warned.

Tempering the recent spate of upbeat news on the UK and chancellorGeorge Osborne's assertion that the economy has "turned a corner", a new paper predicts a post-crisis era of sluggish growth.

The long-term, sustainable growth rate in the UK may be only 1%, compared with the 2.5% that the Treasury thought standard from the 1980s to the 2000s, according to a discussion paper for free-market thinktank the Institute of Economic Affairs (IEA). "Until 2008 the UK had got used to our economy doubling in size every 25 years: unless action is taken it will now only double in size every 70 years," says the group of economists, which includes former Treasury adviser and UK Independence Party candidate Tim Congdon, and Andrew Lilico, the managing director of Europe Economics, an economics consultancy.

They highlight the weakest recovery in "industrial history" and blame a lack of growth for the government's deficit reduction plan being off target.

Commenting on the analysis, the IEA's editorial director, Philip Booth, said: "People shouldn't get too excited about better growth figures and recent forecasts from groups such as the OECD [Organisation for Economic Co-operation and Development]. We still have a long way to go before we recover the loss of output from the 2008 crash. Furthermore, the medium-term prospects for growth do not look healthy unless the government determinedly reduces government spending and regulation."

Following a string of positive indicators on the fledgling UK recovery, the OECD has lifted its forecast for the country's economic growth in 2013. The upgrade to projected growth of 1.5% this year came after stronger-than-expected growth of 0.7% in the second quarter, falling unemployment, and survey evidence suggesting the strongest growth in manufacturing output for almost two decades.

But the economists writing in the IEA paper painted a gloomier current economic picture, noting that five years on from the start of the financial crisis in 2008, GDP is still 3% below its peak. "That is unprecedented in 170 years of shocks that have hit the UK economy since industrialisation," sais the paper, "Will flat-lining become normal?"

Predicting sluggish growth rates, the IEA authors blame higher government spending and tax as a proportion of GDP, more regulation of energy and financial services, the depletion of North Sea oil, higher debt levels for government, business and households relative to GDP. They also note demographic pressures from an ageing population as well as the effects of "low-productivity immigrant workers being added to the working population", though the IEA stressed this was an analysis of the impact of much of the UK's immigrant labour being relatively unskilled, not an argument against immigration.

The paper advocates "bold" reforms if the UK wants to get back to sustainable growth rates of around 2% or more over the long run, including: the rolling back of government activity and influence; the regeneration of affordable credit channels to unencumbered households and businesses; and the implementation of radical supply-side measures.

Booth added: "Britain's growth problem is a productivity problem and not a problem caused by insufficient government borrowing. The government should take note. The solutions lie in its hands."

The comments from the free-market thinktank contrast with remarks from the leader of the UK's trade union movement, Frances O'Grady, on Monday. In her first speech to the annual congress as TUC general secretary, O'Grady called for the implementation of a political action plan to stimulate growth, paid for by taxing the rich, whose wealth had increased dramatically in the past few years.

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

IT glitch hits Lloyds and TSB on morning of bank split

TSB spokeswoman blames 'unexpected volumes of traffic' for temporary crash as the promise of a seamless transition fails to materialise

TSB was hit by teething problems on its launch morning as technical issues caused the bank's website to crash, meaning customers were unable to access their accounts online.

A surge of traffic to the website and those of other banks in the Lloyds Group caused the problems, undermining the promise of the chief executive, António Horta-Osório, of a "seamless" transition as TSB was relaunched.

Customers at Lloyds and Halifax were also affected by the glitch, which left some unable to even load the websites and others unable to log in. Only the Bank of Scotland website was unaffected.

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A spokesperson for the group said: "We are experiencing an issue with our internet banking service this morning, which has affected the ability of some customers to log on successfully.

"We are working to resolve this as quickly as we can and we apologise to customers for the inconvenience this will have caused. Our branches, telephone banking and cashpoint facilities have not been affected in any way."

On Saturday night the websites were closed as final technical work was done ahead of Monday's official return to the high street of the TSB brand, which came with the opening of the first rebranded stores. Other branches will follow in the first three days of the week.

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

Azure Global

Thursday, 12 September 2013

UK unemployment rate falls to 7.7%

Wednesday, 11 September 2013

HS2 rail project will provide £15bn boost, transport minister claims

Plastic banknotes: Bank of England plans to modernise from paper

Tesco pays out to rid itself of US chain Fresh & Easy

Tuesday, 10 September 2013

Soaring house prices spread across UK as surveyors warn of another bubble

UK GDP growth limited to 1% in longer term, economists warn

IT glitch hits Lloyds and TSB on morning of bank split

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