Banks forced to write off £40m a day in family debt

By Becky BarrowLast updated at 1:27 AM on 1st September 2010

Money worries: Many face more hardship as the impact of the economic downturn hits hardest

Cash-strapped families are being overwhelmed by debts they can never afford to repay, figures revealed yesterday.
Between April and June banks and building societies were forced to ‘write off ‘ £3.5billion, around £40million every day, the largest amount since records began.
The alarming Bank of England figures highlight the nightmare facing millions who borrowed money before the credit crunch to fund a lifestyle they could not afford.
The largest chunk of write-offs - a record £2.1billion - was credit card debt, with many spending more on the High Street in a day than they earn in a month.
A further £1.2billion came from overdrafts, personal loans and hire purchase agreements. Just £184million was from ‘bad’ mortgages.
Before the credit crunch struck in 2007 the bill for write-offs, where lenders accept they will never be repayed, came to just £1.9billion
Yesterday debt experts insisted the figures prove that although the recession is over, its impact is only now emerging as unemployment rises and pay remains frozen.
Mark Sands, director of personal insolvency at the accountants RSM Tenon, said: ‘We are seeing the impact of the downturn really starting to hit now.
‘It is not necessarily that people have lost their job, but they have lost their overtime, an extra shift or have had a pay cut.
‘They can survive for a while, but suddenly they are tipped over the edge and they cannot cope with their debts.’
 

He predicted the number being plunged into insolvency would hit 140,000 this year, the highest ever.
Michael Saunders, an economist from the investment bank Citigroup, said: ‘The reason is simply - we borrowed too much money and people are losing their jobs.’
Over the past two years, nearly 800,000 have become unemployed, with many more set to follow as the Government’s austerity measures start to bite. To make matters worse banks and building societies have also been increasing the interest rates they charge on loans, credit cards and overdrafts.
This is despite the Bank of England keeping the base rate at 0.5 per cent, the lowest in history, since March last year.
Since then the average rate on a £5,000 personal loan has jumped from 12.15 per cent to 13.14 per cent. Average rates on credit cards are up from 15.7 to 16.7 per cent and overdrafts are up from 18.6 to 18.9 per cent.
Meanwhile, a report from online debt forum iva.co.uk has revealed the ’shocking depth of despair’ among many who have been plunged into debt.

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Airlines’ profits signal recovery

26 August 2010 Last updated at 10:43 ET

Air New Zealand has reported a fourfold increase in profits, leading signs of recovery in the airline industry.
The flag carrier said net profits for the year to the end of June totalled 82m New Zealand dollars ($58m; £37m), up from NZ$21m in the previous year.
In a busy day for company reporting, airlines elsewhere in the world also delivered positive news.
Both Air China and Australian budget carrier Virgin Blue also reported a recovery in profits.
Air China, one of China’s three major state-owned airlines, said its profits in the first half of the year were up 60% on last year, when the global economic downturn hit passenger numbers.
Virgin Blue also reported a return to profit in the last 12 months.
Net profits for the year were up to 21m Australian dollars ($19m; £12m), the carrier said, following the A$160m loss recorded a year ago.
Passenger demand rises
But despite the improvement in profits, the airlines remain cautious over the outlook for the industry.
Continue reading the main story

Further growth will be largely determined by consumer spending which remains weak”

End Quote Giovanni Bisignani Director general, IATA
“Conditions continue to be volatile [and] the soft growth seen at the end of the fiscal year is not sufficient to suggest a consistent across-the-board improvement in conditions,” warned Virgin Blue in a statement.
Air New Zealand’s chairman also admitted that continued uncertainty in the strength of the global economic recovery had suppressed demand for air travel.
Much of its profits came from cost cutting, which saw operating costs reduced by nearly NZ$600m over the year, and lower fuel bills.
But Air New Zealand insisted that there were “signs of recovery”, with demand for air travel expected to continue to gradually improve.
Earlier this week, figures from the International Air Transport Association (Iata) suggested that growth in demand for air travel was continuing to rise.
International passenger demand was 9.2% higher in July than a year earlier, while international scheduled freight traffic was up 22.7%.

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Interest rates ‘may reach 8% by 2012′ adding £900 to the average mortgage

By Karl West
Last updated at 9:43 AM on 23rd August 2010

Interest rates could increase 16-fold within two years to 8 per cent – adding £900 to the average monthly home loan bill, it was claimed last night.
An economist at an influential think tank has warned that the base rate may spiral ‘rapidly’ as the Bank of England will need to curb runaway inflation.
Andrew Lilico, of the Policy Exchange think tank, said: ‘To keep inflation (as measured by the retail prices index) down to only 10 per cent for one year, the economy will have to be able to tolerate interest rates of perhaps 8 per cent.’

An economist at an influential think-tank has warned that the base rate may spiral ‘rapidly’ as the Bank of England (pictured) will need to curb runaway inflation

His warning echoes that of former Bank of England deputy governor Sir John Gieve, who last month said he expects rates to start rising ‘faster than the market currently expects’.
Sir John believes the base rate will rise to 2.5 per cent within a year, from its current historic low of 0.5 per cent.
This would mean a huge rise in the monthly mortgage payments of most ordinary Britons, forcing many families into financial difficulties.
 

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Brussels wants to tax Britons directly with EU-wide levies on banks and air travel

By Jason GrovesLast updated at 11:54 AM on 10th August 2010

Brussels has launched an audacious bid for new powers to impose taxes in Britain.
EU budget commissioner Janusz Lewandowski said the economic downturn provided the perfect opportunity to introduce new taxes across Europe to help fund the Commission’s expanding empire.
Taxes on flights, bank transactions and energy use are all under consideration.
They could raise tens of billions a year from businesses and consumers to swell the EU’s coffers.
Tensions: The EU-wide tax could create further Coalition division’s between David Cameron’s Tories and Nick Clegg’s Lib Dems

The proposals have sparked a backlash in Britain, with critics accusing the EU of attempting to create a ‘country called Europe’.
But Mr Lewandowski, a 59-year-old Polish economist, insisted he was winning support for the idea in European capitals, including Berlin.
 

He will visit London in the coming weeks to try to persuade Chancellor George Osborne to sign up to the scheme.
Officials hope a deal on taxes could be agreed early in 2012, ahead of the next EU budget round the following year.
The Treasury said last night that it would examine the plans when they are published next month, but warned it would veto anything deemed unacceptable. 
Treasury Minister Lord Sassoon said: ‘The Government is opposed to direct taxes financing the EU budget. The UK believes that taxation is a matter for member states to determine at a national level and would have a veto over any plans for such taxes.’

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RBS half-year profits hit £1.1bn

6 August 2010 Last updated at 12:24 ET

Royal Bank of Scotland’s pre-tax profit has risen to £1.14bn in the first half of the year from £15m a year earlier.
The bank reported an operating profit of £1.6bn compared with an operating loss of £3.4bn in 2009.
RBS, which is 84%-owned by the taxpayer, has announced 23,000 job losses worldwide since October 2008, including 17,100 in the UK.
It also announced it had sold an 80% stake in its payments business GMS, in a deal which valued the unit at £2bn.
RBS’s results follow upbeat performances from Barclays, HSBC and Lloyds.
‘Good progress’
Chief executive Stephen Hester said the bank’s five-year restructuring plan was “on track”.

“We are making good progress with disposals and overall business restructuring,” he said, but added that the rebuilding of RBS was “a marathon not a sprint”.
RBS said that it had provided £14.4bn of gross new loans to small businesses, but that net lending to such firms fell - as companies paid back more debt than they took on.
Banks have been criticised for not doing enough to support firms during the economic downturn.
Like its rivals, RBS insists that in the current climate it cannot lend faster than its customers want to repay their existing debts.
Continue reading the main story
“Start Quote

The semi-nationalised bank does appear to be on the mend - although it’s a long way from full strength”

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Private schools forced to offer free places to poor

By
Rachel Quigley
Last updated at 3:35 PM on 8th July 2010

Private schools have been forced to offer more free places to poor children amid fears of closure by the state, it has emerged today.It is feared the move, which forced two independent schools to increase money set aside for bursaries, will have serious implications for others, especially those suffering in the economic downturn.Private school leaders have warned that the rules could jeopardise the future of some fee-paying schools already threatened by falling income.
St.Anselm’s Preparatory School. in Bakewell, Derbyshire, and Highfield Priory in Lancashire, below, were both found to not be offering enough places to poorer children

The Independent Schools Council is seeking a judicial review of guidelines issued by the Charity Commission following claims that it is acting ‘illegally’.Under Labour’s 2006 Charities Act, fee-paying schools must provide ‘public benefit’ to retain charitable status in the form of bursaries for poorer children in the community.It is worth around £100million a year in tax breaks.The commission warned in the past that it had the power to intervene in schools who struggled to meet the quota of bursaries and could even transfer the school’s assets to other charities in extreme circumstances.The law has been criticised as a ‘politically motivated’ attack on independent schools by Labour, the impact of which is still being felt in the new coalition Government.The commission’s chief executive, Dame Suzi Leather, a Labour peer, faced criticism for implementing rules once described as the ‘politics of envy’ by one headmaster.Last year, five schools were assessed by the commission before the rules are extended to more than 2,000 across England.Two - St Anslem’s in Derbyshire and Highfield Priory in Lancashire - failed. The preparatory schools - which educate around 230 pupils - were both told they failed to provide enough free or subsidised places.It emerged that Highfield had no bursaries in order to keep fees low for all parents. St Anselm’s gave 90 per cent bursaries to only two pupils.Both have now increased bursary funds, or pledged to, and it will be announced today they have passed the commission test.
Headmaster of St Anselm’s Simon Northcott insisted that the school had already planned to increase the amount allocated to bursaries before it was assessed. But he admitted that it was only by offering the free places for the poor that they were able to satisfy the regulator.The Independent Schools Council claims the focus on free places represents a ‘gross’ misrepresentation of the rules and will petition the High Court later this month for a judicial review of the commission’s guidelines.ISC chief executive David Lyscom said the findings did ‘little to lift the uncertainty’ about what schools must do meet the requirements.He said: ‘The entire sector is at the whim of the commission’s prevailing and subjective view.’The Charity Commission refused to comment.Sue Fieldman, regional editor of the Good School’s Guide, said: ‘The problem arise with the very small schools that have not got the money.’

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Average annual salary drops £2,600 in just six months

By
Daily Mail Reporter
Last updated at 2:37 PM on 8th July 2010

Gloomy outlook: the average annual salary dropped by £2,664, figures show. (Posed by models)
The average annual salary has dropped by more than £2,600 in the last six months, it emerged today.New figures reveal employers are still exercising caution, with wages falling across the board from £28,207 to £25,543 -  a difference of £2,664.Salaries in the financial sector appear to have suffered the most  - those offered at the point of entry have dropped by almost £12,000.The figures show that where young bankers could have expected to start on £52,174.43 six months ago, they will probably earn closer to £30,127.60 now.Staff in the legal sector are also feeling the pinch with pay for new recruits averaging out at £42,583.27-a-year compared with £53,841.50 six months ago - a fall of £11,258.22.By contrast, the management sector has seen a healthy rise in wages
of £6,223.01, despite the current financial climate.
According to UKJobs.net, which published the figures, more companies
than ever before are taking on part-time or temporary staff while they
weigh up the long-term economic impact of the recession.
David Brown, of UKJobs, said: ‘The figures show the economic downturn
is still with us and continuing on its downward trend.
‘Companies still need staff to operate, but rather than saving money
by sacking their workforce they are looking to get more staff for their
money to remain competitive.
‘We are also seeing an increase in the number of part time vacancies
being offered as employers simply can’t afford to hire full time staff.
‘The better-than-expected unemployment figures over the past year
show that UK workers are pragmatic, preferring to be in a lower paid or
part time job than out of work entirely.’
Salaries going downBanking / Finance         - £22,046.83Legal                                - £11,258.22Administration                      - £8,419Distribution                      - £4,817.79Marketing                               - £4,450Automotive                       - £4,308.28Construction                    - £3,950.87Graduate                           - £2,863.95I.T.                                       - £2,076.73Sales                                 - £2,052.89
Salaries going upManagement                     + £6,223.01 Logistics                            + £5,266.69    Electronics                        + £3,110.75    Telecoms                          + £2,064.39 Customer Service           + £1,207.59Retail                                   + £1,197.07 Media                                  + £1,082.24 Accounting                        + £1,060.67 Travel / Tourism               + £1,027.40 Insurance                              + £683.77

Other major sectors shown to have suffered include administration and marketing.Where admin workers formerly started on  £25,978.79, they can now expect to earn about £8,400 less - drawing a yearly wage of only £17,559.79, according to the figures.And marketing experts currently out of work will be looking at a salary of £27,717.09 - £4,450 less than before.But the findings showed certain workers could benefit from pay rises, with those looking for work in logistics, electronics and telecommunications drawing more favourable salaries than they might have done previously.

Those applying for jobs in logistics can now earn £21,233.81 - an upturn of £5,266.69 - while people working in electronics can expect to be paid on average £30,376.99 - an increase of £3,110.75 from that offered before.Similarly, people working in telecoms could find themselves better off. Jobs in the industry are now advertised with an average annual salary of £34,383.05 -  an increase of £2,000 in the last six months.UKJobs analysed 70,000 posts advertised over the past six months for the study.

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Queen cutting back as maintenance grant is slashed by £3.3m

By
Rebecca English
Last updated at 7:33 AM on 6th July 2010

The Queen has embraced the economic downturn with dramatic cuts to her spending, forcing her to take the axe to staff costs and royal travel, it was revealed last night.
And with maintenance bills also hit, staff at Buckingham Palace have even been spotted using buckets to catch the rainwater from leaks.
A package of austerity measures has seen the cost of the monarchy to taxpayers drop by 7 per cent to £38.2million in 2009-10 - the equivalent of 62p per subject.

Thrifty: The Queen, pictured with the Duke of Edinburgh in Canada, has cut back on Royal spendingThe single biggest fall in spending was on planes, trains and
helicopters - cut by 40 per cent to £3.9million. Prince Charles and
Prince Andrew still managed to run up more than £1.2million on private
jets and other flights, however. The Queen receives £7.9million a year from the Civil List,
which pays for the running of the Royal Household, including staff
salaries. The figure has been unchanged for 20 years, forcing the
monarch to dip into her savings. Last year alone, this amounted to
£6.5million.
Aides admit they have enough spare cash to last only another
12 months - meaning the Queen could effectively be bankrupt by the time
of her Diamond Jubilee in 2012. Officials insist this would never be
allowed to happen.
Aides say the Queen is acutely conscious of the current
economic climate and wants to ‘lead by example’ in tightening her belt.
But they also warn that some savings may not prove cost effective in
the long term. Currently there is a £40million ‘black hole’ in the budget for essential royal maintenance and, with a £500,000 cut in funding next year, dozens of essential projects are being put off.
Rainwater has been seen dripping through ceilings in the
Ballroom and Queen’s Gallery, home to Old Masters worth millions of
pounds. Last night Sir Alan Reid, Keeper of the Privy Purse and the
Queen’s chief ‘bean counter’, promised that the cost-cutting measures
would continue indefinitely and could include a recruitment freeze. He said: ‘The Royal Household is acutely aware of the
difficult economic climate and took early action to reduce its Civil
List expenditure. It is acknowledged that the necessary cuts in public expenditure will have an impact on the backlog of essential maintenance.’

Economical: The Queen is ‘acutely aware’ of the difficult economic climate, the Keeper of the Privy Purse said yesterdaySir Alan, who took a salary reduction of £14,000 last year to
£180,000, added: ‘In the meantime, the Household is continuing to
pursue opportunities to reduce costs and generate income from the
Estate’s assets, including commercial lettings and management charges.’The figures were revealed in the Royal Household’s annual report.

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Labour peer faces trouble at Caparo

By
Jon Rees
Last updated at 10:57 AM on 5th July 2010

The future of Caparo, the car components-to-hotels group owned by Labour peer Lord Paul and his family, is in doubt following the revelation that it has broken the terms of its bank loans. Its auditor has expressed fears about its ability to continue as a going concern. Caparo Group is one of Britain’s leading private companies and includes dozens of businesses in this country, the Continent, America, India and the Middle East, making everything from nuts and bolts to vehicle chassis and even supercars. It also owns hotels and restaurants and has a film distribution business. In Britain alone it employs 3,500 staff, with thousands more in dozens of subsidiaries overseas.

High life: Angad Paul, pictured with his wife, Michelle, is behind the TI supercar

However, it was badly hit by the economic downturn and in its latest
report and accounts, Lord Paul, Caparo’s chairman, admits that some of
the group’s companies have breached the terms of their bank loans,
blaming the severe decline in trading conditions. It reported a
turnover of £861 million but a pre-tax loss of £3 million.
Auditor BDO said the company’s prospects depended on securing bank
finance in the future and the adequacy of expected facilities. ‘These
conditions indicate the existence of a material uncertainty which may
cast significant doubt about the group’s ability to continue as a going
concern,’ it warned.
Caparo said it had broken the terms of its banking arrangements in
2009 - after the period covered by its latest accounts to the end of
December 2008. The company said it was working with its lenders to
restructure funding, but admitted that this was a protracted process.
Cash flow forecasts to the end of December 2010 indicated the group
would be able to trade within its existing ‘and expected’ loan
facilities, Caparo said, though it admitted there was little room for
manoeuvre.
The directors, who include Paul’s three sons, believe ‘that if
trading [in 2010] were to be adverse to the forecasts, the group would
be able to undertake further cost reduction and cash generative
initiatives’.
The company, which has its headquarters in the West Midlands but is
registered in the British Virgin Islands, owes £257 million due for
payment within a year. It said banking facilities were negotiated
country by country.
Despite repeated attempts by Financial Mail to contact Lord Paul, he did not return calls.
Caparo is wholly owned by Paul and his sons Akash, Ambar and Angad, who is chief executive.
Assuming executive control from his father, who is still
chairman, it is Angad who has led the company into a series of
diversifications, including setting up a television channel, Film24,
which is now up for sale.
Angad is credited with being an executive producer of hit film Lock,
Stock And Two Smoking Barrels. Angad is behind the creation of the
Caparo T1 supercar, described as being the closest thing to an F1 car
for the road. He has also teamed up with Alasdhair Willis, husband of
designer Stella McCartney, to form Established & Sons, an upmarket
furniture company.
Lord Paul was embroiled in controversy earlier this year over his
status as a non-domicile who therefore does not pay UK income tax on
overseas earnings. He has donated £400,000 to Labour and the revelation
that he was a nondom, while also a peer, caused outrage. Paul promised
to relinquish his non-dom status.

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£1bn deal for Ontex - Europe’s largest nappy maker

Candover chairman, Marek Gumienny, has led the deal, which stumbled when
Goldman’s first private equity partner withdrew from the process.

However, the 11th-hour addition of TPG has allowed the sale process to
complete.

Ontex, which is a major Tesco supplier, was bought by Candover for €1bn
(£919m) in 2003.

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