It appears that the two sides are still split on the detail of a deal designed to increase lending while also taking some of the pressure off the banks over bonuses.
According to reports, the government wants the banks to agree to lend more to businesses – some sources indicate a figure of £200 billion – but it seems the banks may want to set the figure lower. There are also suggestions that the banks – Barclays, Lloyds, Royal Bank of Scotland and HSBC – are reluctant to give in to demands that they reveal the details of top pay and bonus packages.
Still, there are hopeful signs that a deal will be reached as both sides are likely to want to come to an agreement before the banks start to report results next month.
As BBC business editor Robert Peston says: “You'd think RBS, Barclays, HSBC and Lloyds would all be desperate to show that they're doing their bit to support small businesses and economic recovery – and take some of the sting out of the widespread criticism of the substantial bonuses they are set to pay.”
As we wait for the current impasse to be resolved, it is interesting to look back to February 2009 when then prime minister Gordon Brown, writing in the Observer, sketched out a future where bankers would be the "servants" rather than the masters of Britain's economy: some will be wondering what has happened to that vision and whether much has changed over the last two years.
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( 2.9 / 183 )At a time of decidedly mixed economic news, UK manufacturers have been providing a much-needed ray of light with production and employment levels up and exports putting a dent in the UK’s long-standing balance of payments deficit.
However, there is a cloud on the horizon – according to the Confederation of British Industry (CBI), manufacturers are finding it increasingly difficult to absorb the upward pressure on commodity prices. As a result, the organisation says domestic prices are set to rise ‘strongly’ over the coming months.
If so, that is likely to give the Bank of England a headache it could do without, by adding to the upward pressure on inflation. Despite inflation running consistently above target, the Bank has held back on increasing interest rates as it fears the effect that will have on the wider economy. And a rise in interest rates as a result of higher manufacturer prices could hit domestic demand which in turn would be likely to affect those same manufacturers, even if exports hold up.
The CBI survey found that 13 per cent of companies had already passed higher costs on to their customers during the previous three months, while 31 per cent expected to do so in the current quarter.
Once again, the key question will be whether any price rises are the result of more ‘temporary’ factors which are outside the UK’s control, but the Bank’s increasing use of this explanation is wearing thin in some quarters with increasing demands that a rate rise of some sort is needed soon.
Rising costs from manufacturers, while understandable, will not make that decision any easier.
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( 3 / 194 )It’s a funny old world, as they say and if anyone ever doubted it, this week has thrown up a variety of news to prove the point.
Yesterday, for example, saw the opening of One Hyde Park, said to be the world’s most expensive apartments. Located between Knightsbridge and Hyde Park, the development contains 86 luxury flats, with the one bedroom option starting at around £6 million.
Last summer, a penthouse reportedly sold for £140 million and it appears there is no shortage of takers, despite the high price tags – the development is believed to be 65 per cent sold.
Contrast that with the latest State of Trade Survey from the Federation of Master Builders, for the fourth quarter of 2010. Companies with declining workloads in the quarter rose to 38 per cent and when it comes to 2011, 47 per cent expect workloads to contract further. Almost a third of firms also expect employment levels to drop.
Over at investment bank Goldman Sachs, we hear today that around 35,700 staff worldwide, including 6,000 in the UK, shared a pay and bonus pot of £9.6 billion in 2010 – an average of £270,000 each. At the same time, the bank slashed its donations to charity, from $500 million in 2009 to $200 million last year.
That news came a day after unemployment figures showed that 951,000 16 to 24-year-olds are out of work, a record high. One in five in the age group is now jobless.
In the world of sport, Aston Villa this week set a different kind of record, this time for transfer fees paid by the club. Darren Bent’s move from Sunderland to Birmingham could end up costing Villa a cool £24 million
Meanwhile, the School Sports Partnership initiative, which supports work to increase sporting opportunities for children, will be axed by the government next summer as part of cost-cutting measures.
Yes, it really is a funny old world.
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( 3 / 173 )The latest unemployment figures are just out and they make pretty grim reading, particularly if you are aged 16 to 24.
Overall, the jobless total rose by 49,000 for the three months to November 2010, to stand at 2.5 million.
A particular concern will be that 16 to 24-year-olds accounted for 32,000 of the 49,000 newly unemployed. The overall unemployment rate is 7.9 per cent: for people in the 16-24 age group, it stands at a disturbing 20.3 per cent, the highest figure since comparable records began in 1992.
In total, 951,000 young people are now unemployed, also the highest figure since 1992. Overall, the only glimmer of good news appears to be that the number of people claiming Jobseeker’s Allowance fell by 4,100 between November and December.
The news came as the Institute of Public Policy Research (IPPR) think-tank warned that jobless levels could rise in 2011.
Tony Dolphin, IPPR chief economist, said there was a real risk that UK economic growth would not grow fast enough this year to bring down unemployment, which could reach “new highs” for this economic downturn.
If that is the case, another piece of news today may leave some of us questioning how well equipped the service that helps people to get back into work will be to assist them.
According to reports, Jobcentre Plus is to axe 9,300 jobs by March 2013 as part of budget cuts. The Department for Work and Pensions says the reductions will be aimed at making job centres "cost-effective", with the majority of posts going through what it hoped would be "natural turnover".
It also says the reductions will not affect frontline services: which probably comes as rather cold comfort to the Jobcentre Plus employees soon to be joining the ranks of their former customers.
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( 3 / 183 )The television and newspaper images of worried savers queuing outside branches of Northern Rock to withdraw their money in September 2007 are not easily forgotten.
The rush on the bank led to its nationalisation by the then Labour government and was a foretaste of global financial chaos to come, bringing with it the economic turmoil from which the world is still recovering.
So the news that the bank is to seek potential buyers in a return to private sector ownership is perhaps a hopeful sign – although it’s worth remembering that the business now being prepared for sale is Northern Rock plc, the "good bank” stripped of the taxpayer loan used to keep it going in 2007 and funded by retail deposits, which made a pre-tax loss of £142 million in the first six months of last year.
Meanwhile, the “bad bank” formed from Northern Rock’s toxic assets has returned to profit and paid back £1 billion of its £22 billion government loan.
UK Financial Investments (UKFI) which looks after the government’s stakes in bailed-out banks, is now seeking expressions of interest from corporate finance advisers in evaluating “strategic options” for Northern Rock plc, which might include a straightforward sale or a stock market flotation.
Those invited to tender will must respond by 31 January though UKFI says no timeframe has yet been set for the return of the company to private ownership and there is “no presumption at this stage” that any particular option will be pursued.
Reports suggest that with the starting point for bidders could be around £1.4 billion, also the figure that the taxpayer has invested in equity in the nationalised bank.
So it’s a case of watch this space and wait for developments, which also gives us the opportunity to wonder what the taxpayer might eventually get back from Northern Rock – and just how long it will take.
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