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Tuesday, 31 December 2013

UK could be Europe's 'largest' economy by 2030

The UK will be in a position to overtake Germany as Europe's largest economy, according to the think tank the Centre for Economic and Business Research (CEBR).

The CEBR predicts that Germany will lose its current top spot in Europe by 2030.

It cites the UK's population growth as an aid to economic acceleration.

The report echoes the recent confidence of other business groups such as the British Chambers of Commerce (BCC).

Earlier this month, the BCC said that the UK economy would surpass its pre-recession peak in 2014.

In its annual World Economic League Table, where it ranks the ups and downs of global economies, and forecasts their future position, the CEBR said in addition that China will overtake the US in 2028, which is later than some analysts have suggested.

The UK will overall perform second best of all advanced economies, the CEBR said.

Yet, this performance will still lag behind growth in emerging countries such India and Brazil.

The CEBR in its report added that in addition to the UK's population growth boosting economic expansion, that "lesser dependence on other European economies" would also aid progress, as well as "relatively low taxes by European standards."

However, as far as Germany, the group said that should the euro "break up", that "Germany's outlook would be much better."

As for France, the CEBR said it will be one of the "worst performing" of the Western economies, and will be overtaken by the UK by 2018. This is because of slow growth due to "high taxation" in addition to the general issues of eurozone economies.

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Monday, 30 December 2013

Britons less inclined to pay down mortgage debt

Britons were less inclined to use savings to pay down mortgage debt in the third quarter, data showed on Monday, adding to signs of improving consumer confidence as house prices rise and the job market recovers.Homeowners put 10.4 billion pounds of equity into their homes in the quarter, the Bank of England figures showed - more than two billion pounds less than in the previous quarter and the lowest since the fourth quarter of 2009.Britons have paid down their mortgages on a net basis for the past four years, reversing the trend towards higher debt levels that dominated from late 1999 until the financial crisis.

Borrowing against the rising value of property was a key driver of the consumer boom of the last decade, and while the Bank of England may welcome a return of that "feelgood" factor, it will be wary of a recovery that is heavily reliant on household spending and cheap credit.

Data earlier this month showed households saved just 5.4 percent of their disposable income in the third quarter, down from 6.2 percent in the second. Household spending, meanwhile, rose an annual 2.5 percent, faster than growth in the economy overall.

Keeping property price gains in check without crimping growth in the rest of the economy is shaping up to be the biggest challenge facing the central bank in 2014.

While inflation in the broader economy has come within a whisker of the BoE's 2 percent target, house prices are rising six times as fast in the capital and almost four times as fast nationwide.

Sunday, 29 December 2013

UK government could sell off Lloyds bank stake in 2014 - Telegraph

The British government could sell off all of its 18.4 billion pound stake in the Lloyds banking group in 2014, the Daily Telegraph reported, citing unnamed sources.

The newspaper reported that the entire government holding could be sold off in the next 12 months in a combination of retail and institutional offerings.

"Post-results is when a further institutional offering would make most sense. After that, the thinking is an autumn sale, combining an institutional and a retail segment, is a realistic prospect," a source was quoted as saying by the newspaper.

The UK government has already sold off 6 percent of its stake in the partly nationalised bank, raising over 3.2 billion pounds in September this year.

The government currently holds around 33 percent of the bank, five years after Lloyds and rival Royal Bank of Scotland were bailed out by the government at the height of the credit crunch.

Shares in Lloyds closed at 78.84 pence on the London Stock Exchange on Friday, valuing the group at 56.5 billion pounds.

Thursday, 19 December 2013

Pay to perk up in 2014 as economy recovers-CBI

(Reuters) - More British firms expect wages to rise in line with inflation next year than at any time since the 2008-2009 recession, a survey conducted by a leading organisation of employers showed on Tuesday.The Confederation of British Industry CBI.L said 42 percent of firms believed salaries would grow in line with the Retail Price Index (RPI), the highest proportion since 2009.

Bank of England Governor Mark Carney said in November that wage increases in line with the Consumer Price Index (CPI.L) were likely to come between mid-2014 and the end of 2016.The RPI usually gives a higher inflation figure than CPI - it was at 2.6 percent in the 12 months to October - and is generally used as a basis for private-sector pay deals, although wages have lagged behind in recent years.

"Pay, as we see today, is returning with growth," said Neil Carberry, director for employment at the CBI. Employers remain cautious about pay increases: 39 percent of firms said they planned a pay increase below RPI and only seven percent would raise pay by more than the index.The CBI said companies expecting pay freezes next year fell to a four-year low of 8 percent, down from 16 percent in 2012. In 2009, more than half of firms planned pay freezes as they grappled with the recession.

The report showed 51 percent of companies expected to create jobs over the coming year and only 12 percent thought they would cut the size of their workforce. Jobs for permanent staff also grew more quickly, with a net increase of 18 percent against a rise of 14 percent in temporary positions.

(Reporting by Freya Berry; editing by William Schomberg, Larry King)

House prices in 2014 'to rise by 8%'

Rics says all areas of the country will see house prices increase, but transaction levels remain well below levels seen in 2006

The British housing market is ending the year strongly with mortgage lending rising by 30% in November, according to industry figures, with total borrowing for the year set to exceed expectations.

The value of home loans advanced to borrowers reached £17bn last month, up nearly a third on last year and putting the total value of home loans on track to hit £170bn in 2013, said the Council for Mortgage Lending.

The CML's chief economist, Bob Pannell, said coming restrictions on mortgage selling will keep a lid on lending next year, but estate agents were bullish about the prospects for 2014. The Royal Institution of Chartered Surveyors [Rics] said this week it expects demand to continue to outstrip supply, and the imbalance – driven by a lack of new housing – would lead to an 8% rise in prices next year.

Lending has been bolstered by the Bank of England's Funding for Lending scheme, which made more money available to banks and building societies to provide mortgages, and the second part of the government's Help to Buy programme, which offers a taxpayer-backed guarantee on 95% loans.

Pannell said gross lending, which does not take into account repayments, was set to reach £170bn in 2013 – higher than the group's forecast of £156bn but "a far cry" from the £363bn advanced in 2007 when the housing market was at its peak.

Retailers push up discounts in last-minute Christmas sales

High Street chains including M&S, Gap and Debenhams cut prices by up to 75% in battle for shoppers' wallets

Retailers have increased their discounts this week, with nearly three-quarters holding sales or promotions in a last-ditch attempt to attract shoppers.

The average discounts rose to 46% compared with 42% last week and 44% in the same week last year, according to the accountancy firm PwC. Of the 100 high-street retailers it monitors, 72% were advertising sales or promotions of some kind.

Marks & Spencer this week introduced 30% reductions on its knitwear as well as beauty items, nightwear and Per Una clothing. It has launched such pre-Christmas deals before, but this year's event will increase speculation that the retailer is failing to turn around it poor performance in its clothing division, a key part of chief executive Marc Bolland's plan.

Gap extended its discounts to up to 60% from 50% earlier in the week as the clothing chains do battle with hi-tech gadgets, such as tablet computers, for a share of shoppers' Christmas budgets.

Among others, Debenhams has a half-price sale on, Austin Reed is offering up to 60% off some clothing and House of Fraser has cut prices by as much as 75%. Argos has launched a half-price toy sale.

Mild winter weather and a general squeeze on disposable incomes is making trading particularly difficult for fashion stores despite more positive news on the economy.

Mark Hudson, head of the retail and consumer team at PwC, said: "As we all get ready for that frantic last weekend of shopping before the big day, it appears that despite much more positive economic news, the level of discounting seems broadly in line with last year, proving that promotions are still a key weapon to drive footfall."

He said he expected to see further sale activity this weekend. People are expected to spend £12bn on last-minute shopping from Friday to Monday night, but the late run into Christmas means that sales may well be lost. With quarterly rent day for retailers due on Christmas Eve, it is feared that at least some struggling retailers may not make it into the new year.

EU ministers seal banking agreement on eve of Brussels summit

Finance ministers say they have reached deal after lengthy negotiations on how to deal with failing banks in the eurozone

EU finance ministers announced late on Wednesday night that they had reached agreement on a new system for dealing with eurozone banks, under intense pressure to seal the accord on their new flagship policy in advance of a two-day Brussels summit opening on Thursday.

EU officials announced a "crucial breakthrough" on a fiscal backstop for rescuing or winding up failing banks in the Eurozone at 3am on Wednesday. But the details were inconclusive from the meeting of the Eurozone countries and were still being haggled over by all 28 EU finance ministers in Brussels 18 hours later.

All the signs were that Germany had prevailed in its reluctance to assent to any pooled liability for the eurozone banking sector under the new regime of eurozone supervision known as the banking union.

The key issues were: who pays to wind up or recapitalise a failing eurozone bank, and who decides when a bank should be closed down.

EU officials said the breakthrough meant a "common" or pooled eurozone backstop would be available for dealing with troubled banks. The common backstop would not be available until 2025 at the earliest and would consist of a €55bn (£46bn) pot of money raised by the banks themselves via a levy over the decade from 2015.

In the meantime, Germany conceded that the eurozone's €500bn bailout fund, the European stability mechanism, could be used as a last resort for rescuing failed banks if governments did not have enough money.

Earlier the agreement had looked fragile, hedged with conditions and caveats, and was attacked as inadequate by the European Central Bank, whose credibility is at stake as the new supervisor of most of the eurozone banking sector under the new regime.

EU leaders need to agree on the banking wind-up arrangements, known as the single resolution mechanism and the single resolution fund, at their summit on Thursday and Friday if the deadlines for getting the new system operational are to be met. Two weeks of late-night meetings in Brussels and Berlin have pushed issues to the brink.

There will be big problems with getting the deals agreed with the European parliament, and with national ratifications of a new treaty between participating governments on the funding of banking resolution.

The French-led group of southern countries, the European commission and the ECB opposed this.

"It's a choice between a banking union that's not perfect, or nothing," said a senior EU official.

In the transitional decade, from 2015, the issue is what happens in a banking crisis. On German insistence, there will be no European response except as a last resort; nor will there be any escape from adding to national debt burdens to fund a bailout.

The governments concerned would also be able to ask to tap the ESM in an emergency, but according to existing restrictive rules. This was the main German concession.