Having been more bullish a while ago, the Bank’s Governor, Sir Mervyn King has now said in his quarterly Inflation Report that the recovery will be “slow and protracted”.
He is also predicting that inflation will remain higher than the Government’s target of 2 percent for longer than originally thought, maybe only getting back on track in the second half of next year.
According to the bank’s latest report, the UK could be stuck in a "low-growth" environment, with economic problems in the Eurozone and the rest of world continuing to have an impact domestically.
The report says: “The weaker gross domestic product profile reflects the judgment that the broader causes and repercussions of the financial crisis may bear down more forcefully on demand and productivity than assumed” previously.”
Although growth in the third quarter was better than some had thought, it was boosted by one-off events, such as the celebrations for the Queen’s Diamond Jubilee and the Olympics; Sir Mervyn is now saying that economic output may shrink back in the last quarter of the year.
However, despite describing the world economy as bleak, the Governor is not all doom and gloom and believes that recovery in the UK will be “sustained”, but just more gradual than had been previously forecast.
Having recently announced that there would not be further quantitative easing in November due to the outlook for inflation, the Governor also said that there were limits to what monetary policy could do to boost an economy undergoing far-reaching adjustments after the financial crisis amid severe headwinds from the Eurozone debt crisis.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3.1 / 464 )According to the fourth evaluation report compiled for the Government on the economic and social legacy of the Olympic Games, the construction of the Olympic village and venues required for activities outside it generate an extra £7.3bn for the economy.
In addition, the £6.5bn spent by the Olympic Delivery Authority (ODA) created 158,600 jobs for a year between 2007 and the first three months of this year, most of them in construction.
Commissioned by the Department for Media, Culture and Sport, the study said that over 45,000 jobs had been created in construction alone. However, this figure does not take into account construction jobs that would have existed had London 2012 not gone ahead.
More than half of the ODA’s contracts went to companies in London, with a significant share of them to firms in the South East. In fact, these regions made more from the ODA’s spending between 2007 and the beginning of 2012 than the rest of the UK combined.
The added value to the economy of London from the ODA’s investment was £2.8bn, while the South East made an extra £1.05bn. The Eastern region gained £950m, while the rest of the UK made a combined total of £2.48bn.
The report said that the CompeteFor programme, which was intended to help small firms from around the country get Olympic contracts, had had “limited influence on the regional distribution of ODA contracts” although firms based in the West Midlands had been particularly successful in picking up contracts through its system.
The fifth and final evaluation report in the series, which is due to be published by summer next year, will assess the impact of activities during and immediately after the Games, as well as more accurate assumptions about the amount of work companies could not do because they were busy with Olympic contracts.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 662 )There were unprecedented scenes in Parliament yesterday, when MPs grilled senior figures from Amazon and Starbucks over their companies’ tax affairs, particularly over the tiny amounts of tax they have paid in the UK.
Starbucks is reported to have paid nothing in corporation tax to the UK over the past three years and MPs told Troy Alstead, Starbucks’ Chief Financial Officer last night that his claim that the coffee chain makes a loss in the UK “just doesn’t ring true”. Even the Government’s Chief Auditor, Amyas Morse said that he found the evidence “insulting”.
Chair of the Committee of Public Accounts, Margaret Hodge continually asked Mr Alstead how the company could have filed losses with Companies House for most of the years it has been in the UK and yet promoted the head of the UK operation, Cliff Burrows, to take over the running of Starbucks in the US.
The public accounts committee also questioned Matt Brittin, chief executive officer of Google UK and Andrew Cecil, public policy director at Amazon, which avoids UK taxes by reporting European sales through a Luxembourg-based unit.
None of the men being grilled fared very well with the Committee. Andrew Cecil denied that amazon.co.uk was a UK firm. Having said that, he didn't know what kind of firm it was, because he didn't know who owned it, and also didn't know what proportion of European sales were in the UK.
Matt Brittin was the only one who appeared to give a straight answer to a straight question and admitted that Google cuts its tax bill by channeling profits through Bermuda, which is, of course, perfectly legal. However, in response, Margaret Hodge said that the MPs understood the legality of the practice, they just questioned its morality.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 569 )With news from the Council of Mortgage Lenders that lending has seen a rise of 13 percent in the third quarter of the year, representatives of the construction sector are displaying cautious optimism for the future.
Representatives of homebuilders across the country say that despite challenging economic conditions, trading has remained steady this year and that conditions are showing signs of easing.
Previously published figures from HM Revenue and Customs have shown that the number of home sales in the UK has risen by 9 percent in the first nine months of the year, compared with the same period in 2011, while there is hope that lending could pick up further as the Funding for Lending Scheme (FLS), which was launched in August, gathers pace.
House builders also cite other helpful Government initiatives, such as the NewBuy and FirstBuy schemes, saying that industry numbers would be considerably lower without the these interventions.
NewBuy allows buyers to secure their new build home with a 5 percent deposit and since its launch in March, the number of builders and lenders registering for the scheme has steadily increased.
On the other hand, FirstBuy is an affordable housing Equity Loan product from the Homes and Communities Agency (HCA), working in partnership with house builders all over England.
The FirstBuy scheme has been designed for households who have found buying a property on the open market difficult due to the large deposits required for mortgages. First time buyers could now benefit from getting additional government help to buy a brand new house through the scheme.
According to the CBI Construction Council, the industry is vital to the economic growth of the UK. Any increase in the construction and sales of new builds must therefore be helpful to the economy.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 577 )The Bank of England’s Monetary Policy Committee (MPC) opted yesterday not to pump more cash into the economy, as it is relying on the Bank’s Funding for Lending Scheme (FLS) and the surprisingly strong third quarter GDP figures, which signalled the end of the recession.
After a two-day meeting, the MPC voted not to increase its quantitative easing (QE) programme, which involves buying Government bonds, having already bought £375bn’ worth since the beginning of the economic slump. It also kept its main interest rate at the record low of 0.5 percent, as predicted.
Until recently, forecasters had predicted that QE would be boosted by a further £50bn but the unexpected 1 percent growth in the economy measured over the three months to September largely precluded that.
However, the MPC will be closely scrutinising economic statistics over the next few weeks amid signs of a mixed economic landscape. A recent run of weak purchasing managers' surveys for the services, manufacturing and construction sectors in October suggest that the underlying picture is much bleaker than the GDP numbers suggest.
The Bank launched the FLS in July, which is aimed at encouraging banks and building societies to increase the size and frequency of loans they make to consumers and small businesses.
Under FLS, the Bank lends money to financial institutions at below market rates, and offers a better deal to those who make the most loans. However, as yet there is no published data showing how well the scheme is going.
The MPC decision preceded that of the European Central Bank (ECB), which also left the Eurozone's benchmark interest rate steady at 0.75 percent.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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