In the financial deal that was agreed, private lenders, including the IMF and European banks, will contribute to the aid package of €109bn, which is designed to give Greece decades more to repay its debts.
The UK has around £9.1bn in total exposure to Greek debt, of which around a quarter of those claims is held directly by banks. More worrying, however, is the UK exposure in other eurozone countries.
UK banks are most at risk from those in the Republic of Ireland, with eight times more exposure to Irish debt and almost as much Spanish exposure.
A Greek default would put pressure on these countries to default as well, which would put further huge pressures on the UK's balance sheet.
However, the biggest victims of a Greek default would be German and French banks, which would be a disaster for the two biggest economies in Europe and lead to stunted growth, job losses and other economic shocks across the continent.
With the eurozone accounting for 40 per cent of UK exports, this is a British problem as well.
"If the whole of Europe is pushed down, well, our market is gone," the former trade minister Lord Digby Jones said, "so everyone in Britain should worry about this."
Economists have described the deal as a "significant step towards financial integration in Europe," which has led to some fears in the City that Britain could suffer from being excluded from tighter union in Europe. But Chancellor George Osborne said:
"I think we have to accept that greater eurozone integration is necessary to make the single currency work and that is very much in our national interest…We should be prepared to let that happen."
"For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 200 )From October 2012 employees will start to be automatically enrolled in the employer’s pension scheme and earlier this week the Department for Work and Pensions published draft regulations to cement workplace pension saving reforms.
However, a quarter of employers believe that more than half of their employees will opt out of auto-enrolment, casting further doubt over the effectiveness of the scheme.
According to research from the Institute of Directors, the main reason behind this opinion is employees’ inability to contribute up to four per cent into a pension scheme.
And despite the potential financial strain on lower paid employees of small businesses, many will not opt out through apathy or ignorance, despite the scheme not suiting their needs in many cases.
It has been calculated that contribution from employers to these ineffective pension plans could amount to over £2bn.
Various experts have their doubts about the efficacy of the new plan. For example, David Marlow, Development Manager at Creative Benefits, says:
"We have serious concerns about the cost of auto enrolment on British SMEs. There is no doubt that pension saving in the UK needs to increase, however lumping everyone into the same scheme regardless of a person’s age, existing debts and life plans is extremely dangerous. We believe that it wouldn’t be appropriate for around 20 per cent of today’s employees.”
While Malcolm McLean, Consultant at Barnett Waddingham, while understanding that the funding gap needs to be bridged, believes that the Government may need to rethink its current plan.
“Other possibilities might include much more extensive deregulation, extra tax incentives for employers, a merger of tax and National Insurance, and the introduction of a simplified citizen’s pension arrangement,” he said.
Given the discussions around the scheme, the DWP has announced that there will be a 12 week consultation period on auto-enrolment regulation ending on October 11th 2011.
"For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 158 )The Treasury is looking at a new bond alternative to small business financial lending from banks at a time when high street banks are rejecting entrepreneurs and small business owners at a record rate.
Research has shown that fast-growing, innovative businesses are responsible for the lion's share of economic growth but it is hard to expand a business without access to finance. And despite various government projects, the banks just don’t seem to want to lend to small business.
This new idea for accessing finance was suggested by MP Sam Gyimah, a former investment banker and recruitment entrepreneur, who is leading a joint initiative with business and innovation think tank NESTA, which he said will produce “evidence-based, thoroughly worked through proposals” to the Treasury to improve access to finance for growing companies.
Mr Gyimah said a retail bond market would create competition for small companies’ debt at a time when banks are adopting a “take it or leave it approach” to lending.
A small firms’ bond market would also produce a new asset class for both retail and institutional investors, he said. Individual firms’ bond issues would probably need to be 'rolled up’ with other companies of a similar profile so investors’ risk is diversified, Mr Gyimah added.
Mr Gyimah, Conservative MP for East Surrey, said the bond proposal was just one idea that would be examined and the consultation would consider “many possible solutions”, including lobbying for tax efficient EIS investments to be applicable for debt as well as equity.
“There was a time when we didn’t have 3i and widespread venture capital and AIM wasn’t started until 1995,” he said. “A new wave of financial innovation could come out of the financial crisis.”
Also as an alternative to the High Street, new banks are entering the UK market, such as Sweden's Handelsbanken and start ups such as Funding Circle, so options for small businesses appear to be widening.
For more information, please visit www.glazers.co.uk
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( 3 / 191 )According to research by Birmingham University for the official Workplace Employment Relations Survey, family-run businesses have happier and more loyal staff than their private and public sector counterparts, despite working longer hours.
The finding of the survey of 2,000 workplaces and 20,000 staff will be presented today at the leading labour economics forum, the Work Pensions and Labour Economics Study Group annual conference.
The research found that people valued the sense of job security that is associated with long-term ownership and responded positively when managers reinforced this impression. They also favoured benign leadership from a family figurehead and the more informal management practices seen in family firms, particularly around training.
In the UK, family-run businesses tend to be smaller than their professional managed peers and focus in sectors like manufacturing, construction and retail.
The research found that staff responded positively to companies that provided training, ranking employers that did so more highly in terms of their feelings of job security and loyalty.
Surprisingly, however, high wages relative to peers and “innovative” people management methods had the opposite effect. “Both these practices make workers feel stressed, even if they are working harder,” the report found.
Roger Pedder, chairman of the Unquoted Companies Group, which commissioned the research, said: “Family businesses think long term. Investment can be over generations and the owners are committed to the business rather than simply providing short-term risk capital.”
“The UK should encourage much longer term thinking, much more private investment and greater entrepreneurship if we are to avoid lurching from crisis to crisis. This not only has clear economic advantages, but the social benefits for workers’ wellbeing are indisputable too,” Mr Pedder added.
Stanley Siebert, professor of labour economics at Birmingham University, said: “Family businesses tend to treat employees much more transparently and consistently than other employers. The closer relationship between bosses and staff makes workers feel much more included.”
For more information, please visit www.glazers.co.uk
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( 3 / 168 )Interest rates may rise by a quarter of a point as early as November, according to predictions from the Ernst & Young ITEM club.
Going against popular opinion amongst analysts, Peter Spencer, ITEM's chief economic adviser, has said that, as long as European and US policymakers can allay sovereign debt concerns and calm the bond markets, "things should turn out OK".
The ITEM Club is the only non-governmental economic forecasting group to use the HM Treasury model of the UK economy and Mr Spencer used to be a Treasury adviser, so his prediction is a significant departure from recent thinking.
Until recently Mr Spencer has consistently argued that the Bank of England should "hold its nerve" and leave rates unchanged until there is compelling evidence that the country is coping with austerity.
His reasoning now is that inflation will start to fall in January and that there are signs of a stronger economic recovery. "The Bank has a window of opportunity to start to normalise rates in the New Year," he said.
"In January, VAT and last year's commodity price rises drop out. As inflation comes down, so does pressure on household budgets. So the Bank can raise rates without squeezing people too badly”, he added.
Inflation is currently running at 4.2 per cent but is expected to drop automatically to around 3 per cent at the start of 2012.
General opinion holds that the Bank needs to start "normalising" rates, which is generally interpreted as beginning the process of increasing them from the current historic low of 0.5 per cent back to around 5 per cent.
However, despite his surprise prediction, the ITEM club has concluded that the economy will grow by just 1.4 per cent this year, a lower revised estimate than the 1.8 per cent it predicted in April, as business confidence has been dented by Europe’s debt crisis.
For more information, please visit www.glazers.co.uk
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