Financial Favourites

From the BBC (http://newsvote.bbc.co.uk/1/hi/business/8365939.stm):

Festive sales will start early this year – including price cuts on Christmas Day – as VAT is set to rise, a retailing expert has said.

However, discounts will not be as generous as last Christmas, according to Don Williams, head of retail at accountancy firm BDO Stoy Hayward.

Debenhams started a £250m price cutting campaign with a four-day sale on Wednesday, six weeks before Christmas.

Many retailers are expected to promote cheaper prices before VAT rises.

The tax will revert to 17.5% on 1 January, having been cut to 15% in November 2008.

The buy-to-let mortgage market grew for the first time in two years during the third quarter, figures have showed.

A total of £2.1 billion was advanced to investment landlords during the three months to the end of September, 10% more than during the previous quarter, the Council of Mortgage Lenders said.

But despite the improvement, the figure was still the second lowest since records began in 2006 and well down on the peak of £12.4 billion which was lent during the third quarter of 2007.

There was also a 10% increase in the number of buy-to-let mortgages advanced during the three months, at 23,700, up from 21,600 during the previous quarter.

Source – Press Association – http://www.google.com/hostednews/ukpress/article/ALeqM5grnCX0gpcdRIO60b52B5zOAisOpQ

The UK economy has “only just started” along its road to economic recovery, according to Bank of England governor Mervyn King.

In its latest inflation report, the Bank indicated it would be late 2011 before the UK economy recovered to the level it was at before the recession.

Mr King also warned inflation may “rise sharply over the next few months”.

He also said the Bank was “open minded” about extending its programme of pumping money into the economy.

Last week, the Bank extended the programme – a policy of injecting money into the economy through buying bonds from banks and other companies called quantitative easing – by £25bn.

http://news.bbc.co.uk/1/hi/business/8353931.stm

Worrying news from the BBC:

Bad credit card debts may reach as much as 9% of all outstanding balances by the end of next year, an accountancy firm has said.

“Bad debts in the sector have reached historic highs,” according to PricewaterhouseCoopers (PwC). The figure stands at about 6% now.

This comes despite a “cooling passion” for credit cards, with borrowing down 3% to £64bn in the past year.

The number of credit cards in circulation has fallen by 8%, it said.

Full article: http://news.bbc.co.uk/1/hi/business/8349153.stm

News from the BBC:

A record number of people were declared insolvent in England and Wales in the third quarter of 2009, according to figures from the Insolvency Service.

There were 35,242 personal insolvencies, up 28% from the same period last year and an increase of 6.6% on the previous three months.

This extended the record number which was reported earlier this year.

But there was better news for business, with 4,716 company liquidations, down 4.7% quarter-on-quarter.

However, the number of businesses in England and Wales going bust in the third quarter of the year was still 14.6% higher than the same period a year ago.

http://news.bbc.co.uk/1/hi/business/8346170.stm

News from the BBC:

A big shake-up of UK banks with taxpayer support will be unveiled on Tuesday, the BBC understands.

Announcements on the future of Lloyds and Royal Bank of Scotland will be made jointly by the banks and the Treasury.

Lloyds is expected to say it will raise more than £20bn from investors in return for staying out of the state-run insurance scheme to cover toxic loans.

Both will also have to set up new banks out of their existing branch networks and sell them within four years.

The creation of the new banks is on the instruction of the European Competition Commissioner Neelie Kroes and is supposed to boost competition.

RBS is also expected to confirm that it will participate in the government’s toxic loan scheme, but on different terms.

The bank, which is 70% state-owned, would buy an insurance policy from the government to cover future losses from some of its more toxic investments.

The Bank of England’s rate-setters have decided to pump another £50bn of new money into the economy in their programme of quantitative easing.

It will take their total spending to £175bn, unexpectedly going over the £150bn set aside by the chancellor.

In a statement, they said that the UK recession “appears to have been deeper than previously thought”.

The rate-setters also decided to keep interest rates unchanged at their historic low of 0.5% for a fifth month.

http://news.bbc.co.uk/1/hi/business/8187360.stm

The BBC are reporting:

The pound and the FTSE 100 index of top UK-listed shares have hit their highest levels since October on growing hopes for an economic recovery.

Markets took heart after brighter UK economic data and a rally in financial stocks following profits from banking giants HSBC and Barclays.

Sterling rose as high as $1.6965 against the dollar and hit a one-month high against the euro of 84.63p.

The FTSE 100 index ended at its highest level since early October at 4,682.46.

The index rose 1.6%, or 74 points, and earlier hit intra-day trading high of 4,710.23.

Another report on the economy from BBC News:

A leading think-tank is predicting it may take another five years for income per head to return to the level it was before the recession hit in early 2008.

The National Institute of Economic and Social Research (NIESR) sees total UK GDP falling 4.3% in 2009 before growing 1% in 2010 and 1.8% in 2011.

This echoes earlier NIESR forecasts but suggests a slower rate of recovery.

NIESR expects government borrowing to hit £165.7bn this year, less than the £175bn the government predicts.

The research body sees income per head – GDP per capita – taking until March 2014 to return to the level it was in the first quarter of 2008, when the recession kicked in.

Full Story

BBC News reports:

UK public sector borrowing in June was almost twice as much as a year ago, after the downturn shrank tax receipts.

Borrowing reached £13bn – a record high for the month of June – compared with £7.5bn in June 2008, the Office for National Statistics (ONS) said.

Total outstanding government debt rose to £799bn, or 56.6% of UK GDP – the highest since records began in 1974.

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