UK economy ’still growing weakly’

The UK economy is still growing weakly, a study has said, expanding by 0.3% in the December to February period.The economic expansion came despite the impact of the heavy snow in January, said the National Institute of Economic and Social Research (NIESR). Its latest economic growth data comes a month after official figures were revised up to show the economy expanded 0.3% in the final quarter of 2009. The Office for National Statistics had earlier reported growth of 0.1%. The NIESR growth figure for the three months to February is in comparison with the September to November period. The research body said it did not expect UK economic output to return to the peak seen at the start of 2008 until 2012. Earlier on Wednesday, the Office for National Statistics said that UK industrial production had fallen by 0.4% in January because of the impact of the bad weather. This was the biggest monthly decline since August last year.

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50% rate will make London the tax capital of the world

By
Lucy Farndon
Last updated at 12:05 AM on 09th March 2010

London will become the most highly taxed financial centre in the world when the new 50 per cent income tax rate for those earning £150,000 or more comes into force next month. Taxes will be higher than for financial workers living in the other key centres of New York, Paris, Frankfurt, Geneva, Zurich, Dubai and Hong Kong, KPMG calculated. The findings will raise fears that Labour’s levies are driving businesses and bankers overseas and threatening Britain’s competitiveness.
Exodus: There are fears that Labour’s new 50 per cent income tax rate for those earning £150,000 or more, will drive businesses and bankers overseas
Warning: Tullett Prebon chief executive Terry Smith says slapping further taxes on workers will only hinder the economyTerry Smith, chief executive of broker Tullett Prebon, warned yesterday that increasing taxes on workers and companies would only hinder the economic recovery.

He also accused Labour of ‘criminal negligence‘ by racking up a budget deficit in the boom times rather than saving money for a rainy day. ‘The UK economy is an utter disaster on any number of fronts,’ Mr Smith said. Tullett announced last December that it will help employees move abroad if they want to avoid the top rate of tax, and Mr Smith said workers are already looking at relocating. Graeme Leach of the Institute of Directors said: ‘The 50 per cent rate is a policy that should never have been announced. The indirect impact on entrepreneurial aspiration, business confidence and foreign investment is likely to be significant. ‘We suspect that little or no money will be raised and we urge the next government to reverse the increase as soon as possible.’ Labour’s windfall tax on city bonuses has also led to anger in the City. That imposes a 50 per cent one-off charge on the banks themselves for any bonus that they pay out in excess of £25,000. However the banks have not changed their behaviour. They are still handing out multi-million pound packages, but are forcing shareholders to pay for the levy, rather than risk annoying their top traders by taking it out of the bonus pool. Tax minister Stephen Timms denied last week that the higher rate would harm the UK. He said: ‘It affects one per cent of the population. It is right that those with the broadest shoulders bear their share of responsibility during the consolidation.’ London today ranks sixth out of the eight key financial centres, in terms of the tax burden for high earners. But when the new rate comes into force the UK jumps to the top of the list with the most onerous tax burden for any worker earning £500,000 or more.

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London to become most highly-taxed finance centre in world as business is driven overseas

By
Lucy Farndon
Last updated at 10:23 PM on 08th March 2010

London will become the most highly taxed financial centre in the world when the new 50 per cent income tax rate for those earning £150,000 or more comes into force next month.The findings will raise fears that Labour’s levies are driving businesses and bankers overseas and threatening our competitiveness.From next month onwards, financial workers will pay more in personal tax and social security than they would if they were located in any other major financial centre.
Exodus: There are fears that Labour’s new 50 per cent income tax rate for those earning £150,000 or more, will drive businesses and bankers overseas
Taxes will be higher than for workers living in New York, Paris, Frankfurt, Geneva, Zurich, Dubai and Hong Kong, KPMG calculated.It gives further ammunition to City firms, who have been moaning for months about the rising tax burden.Today, Terry Smith chief executive of broker Tullett Prebon, warned that slapping further taxes on workers and companies will only hinder the economic recovery.He accused Labour of ‘criminal negligence‘ by racking up a budget deficit in the boom times rather than saving money for a rainy day.
Warning: Tullett Prebon chief executive Terry Smith says slapping further taxes on workers will only hinder the economy
And he said he fears that there is a ‘reasonable chance of a further financial crisis’, pointing to concerns about the level of debt among some European nations and the UK.’The UK economy is a disaster, an utter disaster on any number of fronts,’ Mr Smith said. ‘The government went into a downturn with a big deficit - that is criminal negligence.’Mr Smith added: ‘Additional taxes won’t work - you have got to cut the spending.’ Tullett announced last December that it will help employees move abroad if they want to avoid the top rate of tax. Mr Smith, who employs 700 brokers in London and has offices Hong Kong, Singapore and other centres said workers are already looking at relocating.’Certainly two or three of our significant desks expressed a lot of interest in relocating and have done quite a lot of work on” the practicalities of a move, he said.KPMG’s analysis shows that the 50 per cent income tax rate will sharply tilt the balance between living in London and other financial centres.London today ranks sixth out of the eight key financial centres, in terms of the tax burden for high earners.Professionals based in Geneva with a total salary and bonus package of around £1 million would pay about £60,000 more in tax than those in London. High earners in Frankfurt would pay around £80,000 more in tax on a £1 million package.But when the new rate comes into force the UK jumps to the top of the list of eight financial centres with the most onerous tax burden for any worker earning £500,000 or more in pay and bonus. Ian Hopkinson, of KPMG, said: ‘You can see from the calculations that for those earning significant bonuses, London has moved from being highly competitive to being the most expensive location.’

Graeme Leach, chief economist and director of policy at the Institute of Directors said: ‘The 50 per cent rate is a policy that should never have been announced. The indirect impact on entrepreneurial aspiration, business confidence and foreign direct investment is likely to be significant.’We suspect that little or no money will be raised and we urge the next government to reverse the increase as soon as possible.’The government’s windfall tax on city bonuses has also led to anger in the City. That imposes a 50 per cent one-off charge on the banks themselves for any bonus that they pay out in excess of £25,000. But it has not changed behaviour in the banks, who are still handing out multi-million pound packages to thousands of workers.Banks have been stomaching the cost themselves and forcing shareholders to pay for the levy, rather than risk annoying their top traders by taking it out of the bonus pool.The Treasury points out that people take many factors into account, not just tax, when deciding where to live or base their businesses.Tax minister Stephen Timms last week denied that the higher rate would harm the UK. He said: ‘Don’t agree that the new 50p rate of income tax will harm UK competitiveness, particularly if you look at what others will have to do. ‘It effects one per cent of the population. It is right that those with the broadest shoulders bear their share of responsibility during the consolidation. In these circumstances, and for the time being, it is fair and justified.’

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Bank to announce interest rates

The Bank of England will announce later whether it will raise interest rates, but is expected to keep the cost of borrowing at a record low of 0.5%.The Bank is also expected to say it will not pump any more money into the economy under its quantitative easing (QE) programme, for now at least. Last month the Bank said it was halting the programme, having spent £200bn to boost the economy. It added the programme may be extended in the future, if needed. Record lowsThe Bank is unlikely to change interest rates, as any rise in the cost of borrowing could jeopardise the fragile economic recovery, economists believe. Figures released last week showed that the UK economy grew by 0.3% in the final three months of last year, compared with an initial estimate of 0.1% growth. But although the 0.3% growth in the final quarter of 2009 was stronger than previously thought, the Bank believes that continued economic growth is not yet guaranteed. The October to December period was the first quarter of growth following six consecutive quarters of economic decline - the longest period since comparable figures were first recorded in 1955. Interest rates were cut to stimulate growth and have now been at a record low of 0.5% for 11 consecutive months. Inflationary pressureThe Bank is also unlikely to pump more money into the economy this month. Under QE, the Bank has bought assets in order to boost lending to businesses and individuals by commercial banks. But the Bank has said that the full effects of QE will take more time to filter through to the economy. Many analysts argue that banks have not in fact increased lending as the economy begins to recover. Banks in turn argue that businesses are looking to pay down debt rather than take out new loans. Another reason why the Bank is unlikely to increase QE now is rising inflation. The latest figures, released last month, showed prices rising by 3.5% in January, the fastest annual pace for 14 months. This compares with 2.9% the previous month. As a result, the Bank‘s governor Mervyn King had to write a letter to the chancellor explaining why prices were rising so quickly. A letter from the governor is required if inflation is more than one percentage point above or below the government’s 2% target. However, Mr King said that the rise in inflation was temporary, and was largely the result of the rise in VAT to 17.5% in January. The government had reduced VAT to 15% to try and boost consumer spending.

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Pound hit by fears of hung parliament

By
Adrian Lowery, This Is Money
Last updated at 1:59 PM on 01st March 2010

Sterling hit a new nine-month low against the dollar today as fears mount that the next parliament could have no single party in control. The pound fell sharply to as low as 1.478 against the dollar compared to $1.523 at the previous close.
It also fell to below 1.10 against the euro. The currency markets are selling off sterling after reports showed the Conservatives’ poll lead against Labour had narrowed.
The pound suffered its biggest one-day drop in more than a year
An indecisive general election result is interpreted as bad for the UK economy because firm action on public finances would be less likely.
Mark O’Sullivan, director of dealing at foreign exchange firm Currencies Direct, said: ‘Until the political situation in the UK becomes clearer, sterling will remain very, very vulnerable.’

The Bank of England’s trade-weighted sterling index fell to 76.5, down 1.8 per cent on the day to its lowest since late March 2009. The sudden drop is the pound’s biggest one-day fall since January last year, according to Chris Turner, head of FX Strategy at ING Commercial Banking.
He warned: ‘While UK policymakers may have quietly welcomed the pound’s recent weakness, they will not appreciate the kind of fast markets that can see a “sell UK” mentality developing.’
Sterling has lost nearly 10 cents against the dollar in little more than a week - hitting holidaymakers in the pocket, putting upward pressure on petrol pump prices and adding to import costs for businesses. The pound hit a 24-year low of $1.35 last year in the worst depths of the recession. Other factors weighing on sterling included Prudential’s $35.5billion (£23.5billion) mega-deal for AIG’s Asian business, which will entail heavy selling of pounds in exchange for dollars to finance the deal. Comments last week from members of the Bank of England’s rate-setting committee that more quantitative easing - creating electronic money - could be needed to shore up a fragile recovery have also put pressure on the pound. Mr O’Sullivan added: ‘The market has been running out of patience with sterling, and it has been brewing for a while. There is a very fine line between wanting a weak pound and people losing faith in our economy.’

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Reports ’show UK economy growing’

Surveys from two industry bodies suggest there is growing optimism about the recovery of the UK economy.The employers’ organisation the CBI said service sector firms saw business stabilise in the last three months. The manufacturers’ lobby group the EEF also said its members were seeing improved levels of business. Revised GDP figures released last week showed the UK economy grew by 0.3% in the last three months of 2009, having contracted for six quarters. The CBI’s findings were somewhat split, with an improvement in the consumer sector offset by a poorer picture from business services. In consumer services, which include hotels and travel, business was at its best level for more than two years. Both organisations, though, suggest there are still problem areas in the economy. Job prospectsIan McCafferty, the CBI’s chief economic adviser, said: “Overall, these figures are consistent with our view that the economy is recovering slowly, but that we will have to wait a while before growth picks up.” The CBI said the outlook for employment was weak. Both the professional services and consumer sectors cut staff numbers. That, though, was offset by the EEF report, which said employment in manufacturing was picking up. Electronics was one of the strongest performing sectors in recent months, while the motor industry - helped by the car scrappage scheme - also saw an increase in output. The EEF said all regions of the country saw better conditions, with the biggest swings in the East of England and Yorkshire and Humberside. It cautioned that a number of risks lay ahead, including uncertainty over public finances and continuing issues over access to finance.

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UK economy emerged from recession quicker than thought

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Published: 9:46AM GMT 26 Feb 2010

Britain’s gross domestic product grew 0.3pc in the final three months of the
year, the Office for National Statistics said today in its second estimate
of how the economy performed. That’s up from its first estimate of 0.1pc and
stronger than the 0.2pc revision that City economists had predicted.

The better performance was thanks to stronger showing by most parts of the
economy. The services sector, the biggest part of the economy, grew 0.5pc
instead of the 0.1pc initially estimated; manufacturing was also revised
upward, with industrial production growing 0.4pc instead of 0.1pc; and
Government spending increased 1.2pc.

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UK economy fears prompt property companies to invest abroad

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By Graham Ruddick


Published: 8:33PM GMT 25 Feb 2010





Segro

Segro, the industrial property group formerly known as Slough Estates,
indicated on Thursday that it believes the Continental Europe property
market could potentially offer more attractive pricing for acquisitions and
stronger demand from businesses to occupy space.

Ian Coull, chief executive, said that he was “cautious” about
occupier demand in the UK, and that the investment market is a year ahead of
Europe – therefore potentially offering smaller upturns.

“Europe is a stronger occupier market in the short-term but once
confidence returns the UK could power ahead,” he said. “Our
expectation is that we will deploy most of our capital over the Channel.”

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BoE Governor warns stalling eurozone is a threat to Britain, sterling falls

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By By Angela Monaghan


Published: 1:15PM GMT 23 Feb 2010

Mr King suggested that while the recovery in the UK was likely to be fragile,
he was more concerned about the world economy.

In his final appearance in front of the Treasury Committee during this
Parliament, he added that a weaker pound had so far failed to lift exports
as desired.

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Barclays’ two top bosses give up bonuses (but there’s plenty more for everyone else)

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By
Daily Mail Reporter
Last updated at 9:32 AM on 16th February 2010

Barclays’ top two executives have decided to give up their bonus payouts, it was announced today.Chief executive John Varley and president Bob Diamond opted to forgo their bonuses in the light of the ‘intense public interest and concern’ over bankers’ pay, Barclays said.The decision comes as Barclays posted record annual profits of £11.6 billion for 2009 - up 92 per cent from the previous year.The pre-tax profits were buoyed by its investment banking arm and the sale of part of the business last year to raise funds.Barclays said other top directors would take all their bonuses in shares over a three-year period and the payments would be subject to clawback.Barclays bosses Bob Diamond, left, and John Varley, right, have opted to forgo their bonuses despite record profits
The Financial Services Authority (FSA) and G20 principles on pay have also been put in place across the group as the bank seeks to rebuild trust in the banking sector which has been ’significantly weakened by the events of the last three years’.At Barclays Capital, the investment banking business where profits surged 89 per cent last year, the proportion of revenues paid out in salary and bonuses fell from 44 per cent to 38 per cent.The bank said it had lent an extra £35 billion to the UK economy during 2009, far beyond its £11 billion pledge last April.
Chairman Marcus Agius said: ‘We believe that, when the behaviour of banks is assessed by their stakeholders to see whether we have genuinely learned from the experiences of the last years, we will be judged mostly by how we conduct our business and, in particular today, by how we lend and how we pay.’We know that the impact of the credit crunch and of the subsequent recession has made the lives of millions of citizens and thousands of businesses more difficult. ‘We know that it’s our obligation to provide support in ways that are responsible.’Although Barclays has not taken taxpayer cash to rebuild its finances,
raising funds from the Middle East instead, it has indirectly benefited
from taxpayer support to the struggling sector.Mr Varley last week told MPs banks had lost the trust of the public, but added that Barclays had lent far more than the £11billion extra to UK households and businesses it pledged at its annual meeting last April.BarCap - where business was boosted by the addition of parts of the failed US bank Lehman Brothers - saw a total pay and bonus pot of £4.5 billion, almost double the previous year.Across the group as a whole, Barclays paid out £2.7 billion in bonuses - £1.5 billion in cash bonuses and £1.2 billion in long-term awards vesting over three years. Almost three-quarters of these payouts were made in shares.Of this, around 80 per cent or £2.1 billion was paid out in bonuses to 23,000 investment bankers. The average compensation per employee in BarCap was £191,000.Barclays is paying £225 million to the Treasury as a result of the bonus tax introduced by Chancellor Alistair Darling at the end of last year.The results will be scanned for how much the bank has lent during the year, the level of bad debts racked up - expected to come in at around £9billion - and its view of the outlook for the UK over the coming year.Shares in Barclays - which raised funds from the Middle East instead of taking taxpayer cash at the height of the financial crisis - jumped 8 per cent as the markets reacted to the better-than- expected profit performance.Richard Hunter, head of equities at stockbroker Hargreaves Lansdown, said: ‘In all, today’s announcement reiterates Barclays’ position as a major global force, whilst also setting the standard in kicking off the UK banking reporting season.’The bank’s earnings were boosted by a £6.3 billion one-off gain from its sale of fund management arm Barclays Global Investors to US giant BlackRock, as well as a near-doubling of pre-tax profits at BarCap to £2.5 billion.This more than offset other parts of the business hit by recession. Its UK retail banking arm, which has almost 1,700 branches across the country, saw profits fall by more than half to £612 million in the tough economic conditions.Its UK commercial banking division also saw profits fall 41 per cent due to rising defaults and falling asset values, while Barclaycard profits edged 4 per cent lower to £761 million.But across the group Barclays’ bad debts were lower than expected at £8.1 billion, with impairment levels in the second half of 2009 23 per cent below the first six months of the year.The group is planning for a ‘moderate decline’ in bad debt charges during 2010 with the exception of certain areas such as commercial lending, and said it had enjoyed a ‘good start’ to the year so far.

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