In an hour or so, the Office for Budget Responsibility (OBR) will release its latest growth forecasts, which reports suggest are likely to be more upbeat than its last predictions in June. An upgrading from 1.2 per cent to 1.7 per cent is expected by those in the know.
Later this afternoon, Chancellor George Osborne will update MPs – and the rest of the nation – on the health of the economy as he delivers an autumn statement in response to the OBR forecasts.
It’s probably fair to say that we all want the OBR boffins to be there or thereabouts with their forecast and if the reports of what they will say are correct, their tone seems to be one of cautious optimism, taking into account factors such as last month’s initial estimates of a 0.8 per cent growth in the economy between July and September and tax revenues set to exceed expectations by £10 billion.
It’s also quite likely that Mr Osborne’s message will strike a similar note. With the full impact of the Spending Review cuts yet to take their toll, the old saying about many a slip between cup and lip might spring to Mr Osborne’s mind, although there do seem to be signs that the economy is slowly but surely making progress.
Whatever the OBR and Mr Osborne have in store for us, the nation will be hoping that after a lengthy journey through troubled seas, it will now be a case of steady as she goes for the good ship UK Economy.
For more information, please visit www.glazers.co.uk
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( 2.9 / 845 )At a time when many businesses in Britain are still having a difficult time of things, news that firms in one sector have seen a 38 per cent increase in profits in just two months would usually be cause for celebration. But since the firms concerned are the UK’s energy suppliers, these bumper figures have instead resulted in questions about whether consumers are being ripped off.
Energy regulator OFGEM is to review companies’ recent behaviour and has warned it will take action if it finds customers are being treated unfairly.
The companies do not seem to have done themselves any favours with three of the ‘big six’ suppliers announcing price rises in recent months, despite the increase in profits. Of equal concern to consumers is the apparent herd mentality of the industry, with the announcement of price rises by one firm often swiftly followed by similar increases elsewhere.
For businesses and householders, this apparent lack of competition can be frustrating, and the regulator will be under pressure to ensure the market is operating effectively.
When the British energy market was deregulated, there was briefly a period of frantic competition as a large number of new suppliers battled for a slice of the action, but subsequent takeovers and mergers have reduced competition. The regulator’s last major probe into the operation of the market in 2008 found no evidence of anti-competitive behaviour but the firms are likely to find their operations under scrutiny once again.
However, there is no relief for those struggling with high bills this winter. Any review is not likely to be concluded until next Spring, when OFGEM may either take action itself or refer the matter to the government or Competition Commission.
For more information, please visit www.glazers.co.uk
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( 3 / 847 )With interest rates having been stuck at record lows for over a year, many investors and homeowners may be wondering when a rise will come.
Andrew Sentence, a member of the Bank of England’s Monetary Policy Committee which sets interest rates has been the lone voice calling for an increase for several months, and he reiterated his stance again yesterday, arguing that a small rise now, to 0.75%, would help rein in inflation and prevent a sharper, and more damaging, rise further down the line.
So far, he has failed to win his fellow committee members round to his way of thinking. The counter-argument goes that, since inflation in the UK is largely due to higher commodity prices and the weak pound, increasing rates will not make any difference in this area, but they may damage the UK’s fragile economic recovery.
With a VAT rise and public spending cuts to come in 2011, it is likely the Bank will leave rates unchanged until the effects of those changes become clear. However, if inflation remains stubbornly high after that, more members may come round to Mr Sentence’s view.
While an increase in rates would be good news for savers, mortgage holders and other borrowers should be looking to prepare themselves for a rise now, possibly by saving more or making additional payments if their loan agreement allows it. Anyone who can act to prepare themselves now will be in a stronger position when the time comes.
For more information, please visit www.glazers.co.uk
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( 3 / 757 )‘Free banking’ is a longstanding and unusual feature of the British financial system, whereby holders of standard current accounts do not pay a monthly charge for the service, as is the case in most other countries.
However, the concept has appeared under threat in recent years, with a crackdown on the amount banks can charge in overdraft fees leading to warnings from some quarters that they will need to recoup the money made in that way through other means – possibly by charging for accounts.
And this week Lord Turner, chairman of the Financial Services Authority, added his weight to the argument, claiming free banking actually harmed customers by discouraging new entrants into the current account market and encouraging lenders to mis-sell other financial products.
Because standard current accounts are a loss-leader for banks, he told the Treasury Select Committee yesterday, they must try to cross-sell other, more profitable services to their customers instead.
The banks have attempted to move more customers to a charging structure with the growth of so-called ‘packaged’ current accounts, which offer additional services in return for a monthly fee. But such accounts have been criticised as offering poor value with the services either not used by many customers, or available more cheaply elsewhere.
While some customers would undoubtedly benefit from, for example, a modest monthly charge replacing the current high charges on overdrafts, those who consistently keep their current accounts in credit are likely to end up worse off – the same frugal customers who may already be suffering due to low interest rates.
If any one bank introduces such a charge, it may see a wholesale exit of its customers elsewhere, but if charges are introduced across the board, account holders may be left with no choice – and sensible account holders may be aggrieved that they are left paying more for no apparent reason.
For more information, please visit www.glazers.co.uk
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( 3 / 792 )The proposed level of the government’s proposed cap on immigration from outside the EU is set to be announced today, as it aims to bring the overall level down from the ‘hundreds of thousands’ to ‘tens of thousands’.
This follows a pledge to that effect in the Conservative Party manifesto but what may on the face of it seem to be a simple change has proved more difficult to implement as many businesses have expressed concern that it will prevent them from recruiting the skilled staff they need.
At a time of rising unemployment, this may seem an odd argument, but large firms in fields such as engineering or finance argue there are not the right number of staff in the UK with the appropriate skills and if they cannot recruit here, they will simply go elsewhere.
Universities and colleges are also likely to be affected, with the sector warning the government that a knock-on effect of the new rules is likely to be a reduction in the number of lucrative foreign students coming to the UK.
However, it appears now that some compromise is on the cards – the cap is likely to be at the higher end of what was expected and, crucially, intra-company transfers involving employees earning over £40,000 are set to be excluded, meaning multinational firms can move their own staff around without falling foul of the cap.
It is understandable that the government wants to ensure as many jobs as possible are available for British workers, but with businesses increasingly mobile, it could not afford to drive employers away. Hopefully the arrangements which are revealed today will be enough of a compromise to prevent any serious problems.
For more information, please visit www.glazers.co.uk
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