The UK economy is “frightening”

Business leaders have today suggested that there is a bleak picture with them suggesting that there was a “frightening deterioration” towards the end of 2008. The British Chamber of Commerce (BCC) who carried out the survey said that the results were the worst since it began in 1989. On the 23rd January official figures are set to confirm that the UK is in a recession. The recent closure of many large firms like Woolworths is a clear indication that the credit crunch is certainly taken grip and some of the UKs biggest firms are being affected.

People appear to becoming more concerned as the risk of redundancies and job loss emerge. However, although people are worried at this time figures have shown that Christmas spending was not down on last year. Let us know how recent events have affected you.

Tories suggest that VAT cuts have not worked

David Cameron, head of the Tories, has today suggested that the government’s attempt to boost the economy by cutting VAT has not worked and has been an unbelievable and expensive failure. In a BBC interview Mr Cameron highlighted that shopper numbers in December fell according to figures. The holiday on stamp duty when purchasing houses under £175,000 has also not worked according to the leader.

Further comments suggest that the government have spent £12.5bn of our money and have wasted it. The term “Empty Promises” has also entered the equation with the government being accused of promising to deliver but without success. Everyone is hoping that 2009 sees an improvement in the economy and that initiatives implemented by the government begin to have some effect.

Rate cuts leading to weakening pound against euro

After signs from the Bank of England that they are set to make further cuts to rates and the poor jobless figures the pound has once again fallen in value against the euro. The pound once again hit an all time low of 1.0756 euro’s before recovering again to 1.0772. The US have also shown that there currency is struggling with a 13.5 year low against the yen. This comes after a further cut in interest rates in the US with them now having the lowest interest rate amongst developed countries. The past few weeks have seen the pound slowly slipping against the euro and it is making exporting goods a lot cheaper. Let us know how the change in interest rates is affecting your business.

Unemployment rose by 137,000 in last 3 months

In the three months to October there was a rise in unemployment by 137,000 to 1.86 million which is the highest level since 1997. This indicates the effect that the credit crunch is beggining to have on companies. Companies are looking at ways of cutting costs to ensure they survive during these difficult times. However, companies must remember that they should keep there most skilled staff as although they cost the most they are the people that will help them recover after the economy has recovered. The Office of National Statistics has said that unemployment is now up to 6%.

The number of people claiming jobseekers allowance in November also rose by 75,700 to a total of 1.07 million which is the largest rise since March 1991. Many companies have made big job cuts as the grip on the economy tightens. As christmas approaches people are becoming more nervous as to whether they will still have there jobs when they come back after there holidays.

Inflation in the UK declines once again

Figures have today shown that inflation has fallen to 4.1% in November which is less of a decrease than was expected. Some economists suggested that they thought inflation would drop to 3.9% in November and were therefore surprised as to what figures showed. Inflation is continuing to fall on the back of a drop in oil and energy prices. However, the CPI is still more than the government’s target of 2%. More economists have voiced concerns that inflation will continue to fall throughout the New Year and some are worried that deflation could be possible.

In terms of the economy this is not good as consumers will hold off purchasing in anticipation that prices will decrease in the future. This will not help the economy as spending is vital to ensure that the economy improves.

Less spare cash for households

A survey released by the Bank of England today has revealed that households have less money to spend because of an abrupt change in peoples circumstances. Household budgets and spending has fallen due to an increase in utility bills, higher food prices and the fall in house prices and the tighter strain on the availability of credit. The survey interviewed 2,500 people and people suggested they now have less money to spend or save.

Only a small number of households claimed that they had fallen behind on their repayments. A further third of the people that were questioned expressed that they struggled at times to make some of their repayments highlighting the great pressures people are becoming under. People suggested that the main reason for this was because of the increase in household bills being higher than expected.

Pound weakens against euro for fifth day

The pound has fallen for a fifth consecutive day against the euro today. It came amid fears that the UK economy could be one of the worst hit by the recession. Interest rates are also at their lowest since 1951 and are lower than those in the eurozone. The pound fell to just 1.1191 euros whilst the euro also rose against the dollar. As the pound slides down against the value of the euro talks have emerged about the UK adopting the single European currency.

Has your business been effected by the decline in the pound? If it has let us know your story. We are always interested in finding out how other people are coping with the current economical climate.

Recession now imminent

The UK economy is now certain to fall into recession according to Chancellor Alistair Darling. The majority of people have expected the UK economy to fall into recession so the news by the government does not really come as a big surprise. However, he did say that he believed that growth was expected in the second half of the year in 2009.
He suggested that the economical situation was difficult but suggested that the reduction in interest rates would help improve things. However, there have been questions over these plans that have been implemented from other countries. There is great uncertainty as to what the economy holds but as bigger organisations struggle people are becoming ever more cautious about spending.

Economy could be at risk warns Cameron

I read an extremely interesting article today whereby opposition leader David Cameron has attacked the government suggesting that the economy could be at risk because of the £20 billion borrowing binge that is going on. He commented on how he thought the country would be in a dreadful situation because of all of the borrowing that is going on. He went on to say that the strength of the pound was also at risk. Although the government have made cuts in VAT and have invested lots of money into organisations to help them with current economic downturn. However, what the government is not keen to voice is that VAT will go back up after a year and by 2011 national insurance contributions will have to increase as well as a reduction in government spending. We would like to hear what your opinions are on this matter so please leave your comments and thoughts.

Repossessions expected to reach 75,000

The Council of Mortgage Lenders (CML) has estimated that there will be a sharp rise in the number of house repossessions next year as it is expected to reach 75,000. That would be as many as there was during the peak of the recession in 1991. It is believed that the steady rise this year will see the number of repossessions reach 45,000.

The nationalised bank, Northern Rock, has said that they will give their customers who are in arrears a six month period before they will repossess their home. This should give them time to ensure that they can get enough money to start paying their mortgage again every month. This would seem a far more logical approach to take as repossessing a home would mean having to find accommodation i.e. council houses for all those that have went into arrears. In the long run this approach would in fact cost more money to initiate.

As rates are cut banks face pressure

After the latest cuts in interest rates banks are coming under further pressure to pass these cuts onto their mortgage customers. Some of the major lenders passed on these 1% cuts in interest rates immediately to those customers with variable-rate mortgages. The UK’s biggest lender HBOS has said that they will only pass on 0.25 of a percentage point onto their customers. Nationwide, the UK’s biggest building society, was also only going to offer a cut of 0.25 but late on Thursday evening decided that they would pass on the full 1% to existing tracker customers.

After the recent bailout to banks from the government it is shocking to think that they are not going to pass these savings on to their customers. Taxpayers money has been pumped into these organisations yet the taxpayers who would expect to gain from the cut in interest rates have not. Let us know your views on this matter.

The pound slumps to new low against the euro

It is expected that the Bank of England will cut the interest rate further today by a further 1% in an attempt to help revive the economy. This news comes as the Pound has fallen to its lowest ever against the euro. The pound has dropped to 1.15 euro which is the lowest since the currency was introduced in 1999.

It is expected that the economy is going to be worse than was first thought and the decrease in the pound will not help the situation. The Bank of England is extremely keen to increase consumer confidence to encourage people to start spending again. However, only time will tell to see if a further cut in interest rates will help the economic situation, and many experts don’t believe it will have a big impact.

Some companies to be hit with VAT changes

As the new VAT rate of 15% comes into power today it has emerged that some smaller companies may actually find themselves worse off because of the cut that has been made. Firms that take advantage of the government’s flat rate tax will now keep a lower proportion of the tax that they take from their customers. This information strongly contradicts the information that was given out on the pre-budget report that said that all companies would benefit. HMRC have said that companies will benefit from paying a lower VAT rate on any expenses that they.

So although some companies will actually pay less on their expenses they will in fact take a lower proportion of tax that they get from their customers. There is a growing debate from many parties as to whether the cut in taxes is actually a benefit to smaller organisations or if it is in fact going to make them worse off.

Consumer confidence in Eurozone at a 15 year low

Confidence among consumers and businesses has fallen to an all time low in 15 years within the eurozone. The economic sentiment indicator has dropped from 80.0 in October to 74.9 in November. This is a big fall and most analysts are expecting the ECB to cut interest rates next week to try and encourage consumer spending. A spokesman from Commerzbank has expressed how he thinks the eurozone is in a deep recession. This is supported by the fact that the economy has contracted for the two previous quarters and is therefore technically considered to be in a recession.

The European Commission has this week announced a package of 200bn euros to try and help the economy turn itself around by encouraging consumer spending. The end of Decemeber will see as to whether the UK economy is officially in a recession. It is expected by most analysts that this will in fact be the case.

200bn euro plan announced by Europe

The European commission has announced a European economic plan worth 200bn euro’s to try and help save jobs in Europe as the credit crunch kicks in. The commission expects the European member states to contribute 170bn euro’s while the European union will contribute the further 30bn euro’s.

The plan is aimed at boosting customer confidence and at encouraging spending within the market once again. Some of the money that is being pumped in will be used for job training, less polluting cars, and improving energy links and broadband access.

Aid to small and medium enterprises over the next two years would be increased from 10 to 30bn euro’s.

Data confirms that economy is shrinking

Figures have today suggested that the economy shrank between the periods of July and September by 0.5% it has been revealed by the Office for National Statistics. This is the first time since 1992 that the economy has reduced in size. If the economy shrinks between October and December the country will officially be in a recession.

The figures also revealed that household spending in the third quarter fell by 0.2% which is the biggest drop since 1995. It appears that people’s money belts are tightening as the effects of the economy are starting to hit home.

The government are trying to revive the economy with plans to reduce VAT and to help those people in most need of support during these difficult times. However, to achieve this the government are lending exceptional amounts of money. Therefore when the economy turns around the government will have to try and recoup this money through increasing taxes and such like. What are your views on this issue?

An increase repossessions as they rise by 12%

The third quarter of the year has seen a considerable rise in the number of repossessions. The figures show that this quarter alone has seen a rise by 12% taken the amount of homes repossessed during this period, 11,300.

The number of borrowers who have gone into arrears has also risen in this quarter and now stands at 168,000, a rise of 8%. The figures show that many people are likely to lose their homes as the economy falls into recession. As the economical future looks bleak no-one will know how many people will fall into arrears or the chances of their homes being repossessed. It has been predicted that the next year will see times getting tougher and people will have to cut their costs by as much as possible to ensure that they avoid having their homes repossessed.

It is also proving tough for landlords with buy-to-let mortgages as they are struggling to rent out their properties.

Stock Markets affected by Recession fears

As it is feared the world economy is entering a downturn where European and Asian markets have seen dramatic falls today. By midday the London FTSE was 1.7% down and mining shares were hit the hardest. French and German markets also seen a fall. In Japan there market fell by 6.8% and Hong Kings main index fell by 4%.

If markets are fallen so dramatically this is going to have a knock on effect to consumers who will become worried about the future. This will then have a knock on effect to businesses. Therefore, it is more important than ever for businesses to ensure they collect any unpaid bills and collect any debts that are still owed to them. BACK inContact can help you with your debt recovery so why not contact us today.

9 – 0 votes to cut interest rates to 3%

It has been revealed today that the setters of the interest rate all voted unanimously for a cut in interest rates which saw them fall to 3%. The minutes of the meeting show that the Bank of England setters all agreed that interest rates should be cut and most of them agreed that it should actually be dropped by more than it was. However, it was decided that this would shock the markets too much and therefore only dropped the rate by 1.5%. The minutes show that a 2.5% drop was considered. There were suggestions that in the upcoming months there would be further cuts to the interest rate. The rate is intended to stop inflation fallen too far below the Bank of England’s target for next year.

The next few months should indicate as to whether the fall in interest rate has helped the economy and we will also see if there will be any further cuts.

Unemployment expected to reach 3m by 2010

The business group CBI has today said that it believes the recession faced by the UK will be tougher and longer than first thought. That isn’t the kind of news that people wanted to hear especially as Christmas is around the corner. They believe that in 2009 the economy will shrink by 1.7% which is a dramatic rise to what they predicted in September suggesting that the economy would only shrink by 0.3%.

The group has also said that they believe unemployment will increase to 2.9 million by 2010 compared to the current figure of 1.8 million. The government have defended their actions of increasing borrowing to try and boost the economy. The government has said that although they didn’t create the recession they will take every step to try and make it as short and painless as possible.

Eurozone falls into recession

The eurozone has officially fallen into recession it has been announced today as the third quarter has seen the economy shrink by 0.2%. This follows a fall in the previous month of 0.2% between April and June.

Two months of negative growth defines a technical recession. The news announced today was widely anticipated as two of the eurozones biggest economies, Italy and Germany, had already announced that they had fallen into a recession.

On Thursday Germany had announced that there economy had shrunk by 0.5% in the third quarter and with Germany’s economy being one of the biggest in the world the news was half expected. It is also believed that Spains economy will fall into recession in the next quarter because of the slump in household spending and the property crisis.

Sharp decrease in interest rates

There was a shock move today as the Bank of England cut interest rates by an unexpected 1.5%. Interest rates now stand at 3% and is an attempt by the government to try and help rebuild the economy. The cut comes after recent weak data about the economy was released. It is the first time since the Bank has cut rates by more than 0.5% since its independence in 1997. It is also the biggest cut since March 1987 when interest rates were cut by 2%.

There were concerns that the cut in interest rates would not be passed onto customers and this is something Gordon Brown wanted to address. Some banks have said that they would pass the full amount onto their customers whereas others have not yet commented on what they plan to do. It is also believed that the cut in interest rates will also help manufacturing companies who have been struggling in the past 7 months.

House prices driven down by low sales

The Nationwide have today claimed that house prices have continued to fall in October and are now 15% cheaper than a year ago. The latest survey that was carried out by building societies has found that house prices have fallen by 1.4% in the past month. This takes the annual rate of fall from 12.4% to 14.6%. The price of an average house is now nearly £30,000 cheaper than it was a year ago. This will lead to a lot of people being in negative equity as they will be paying more money than the house is worth.

Nationwide have claimed that the fall in house prices is due to the reduction in sales, which are now at there lowest for 34 years. With a recession looming and the instability within the financial market; they are both having a major effect on the housing market. House prices have now dropped for 12 consecutive months. It makes it a lot harder for first time buyers to get there foot on the property ladder. As the banks try and return stability to the financial marketing it is expected that there will be a sharp cut in interest rates which may help buyers.

£1.8 trillion lost in world credit

The Bank of England believes that financial firms have now lost around £1.8 trillion due to the continuing credit crunch. It is believed that central banks and governments have now spent £5 trillion trying to support banks and prevent them from going down.

The bank also warned that if the recent sharp fall in house prices continue 1.2 million homeowners will fall into negative equity. The Bank of England has said that banks could face a lot stricter measures to stop this from happening again. The estimate the bank made on global losses has now doubled since the original estimation in May.

As the economy slows a Recession looms

For the first time in 16 years the economy has shrank between July and September. This confirms that the UK is on the brink of a recession. The drop was bigger than expected with output falling by 0.5%. This saw a knock in UK shares and the strength of the pound fell. If the economy slows in the fourth quarter of the year the UK will be classed as being in a recession.

The chancellor has voiced his confidence in the UK and believes that they would be able to get through it. He commented that it would be a difficult period but was confident that the UK would be able to work through it. The chancellor believes that the UK has to work with other countries to ensure that the efforts are replicated throughout the world.

Consumer inflation reaches 5.2%

In September UK inflation hit 5.2% and this was blamed on the rise in energy bills. However, analysts have expressed that this should be the peak and inflation should begin to fall as a result in the lower price of oil and the fall in consumer demand as the economy tightens.

The Consumer price inflation rose from 4.7% in August. The key issue to be aware of now is to see how far inflation will drop as the food and energy effects slow down and in some cases go into reverse.

Septembers Retail Price Index (RPI) which is used to work out benefits and state pensions in the coming year reached 5% compared to 4.8% one month earlier. Pensions usually increase by 2.5% or by more than the RPI – whichever is higher. This means that the government faces paying billions of pounds more in benefits and pensions.

The recent economic downturn has seen a change from inflation to recession being the key risk to the UK economy. Lets hope we can battle through and face any challenges that are thrown at us.

Bail out of £37bn unveiled for UK banks

The government has announced that it will inject up to £37bn of taxpayers money into Royal Bank of Scotland (RBS) Lloyds TSB and HBOS. RBS is to raise £20bn with a further £17bn being put into the HBOS and Lloyds TSB. On the brighter side of things Barclays is to raise £6.5bn without any government help.

These bail out plans mean that they taxpayers will own around 60% of RBS and 40% of the newly merged Lloyds TSB and HBOS. Both of these banks chief executives and chairmen are to resign after they have asked for the bail-out money. This cash is part of the money that the government pledged last week in a rescue plan that aims to stabilise the financial market.

These announcements can be seen as some of the biggest days in banking and is a humiliation for the countries top banks. The government are putting more and more money into these banks in order to try and help the economy. What are your views on this? Let me know.

UK treasury in talks with Iceland

There is a party of officials who are visiting Iceland today to discuss the banking crisis and the impact that this is going to have on UK depositors. After some very heated discussions between the Icelandic and UK leaders; has lead to the meeting happening.

The UK government are very keen to ensure that the £1bn that has been invested in Icelandic banks is secure and that it can be recovered quickly. A lot of local councils and public bodies have used Icelandic banks to deposit there money.

Whilst over there they are also keen to find out what the situation is for UK individuals who are currently in the unknown. However, the turmoil that currently exists within the Icelandic market means that they are highly unlucky to give any reassurances about foreign deposits.

Time will tell to see if peoples deposits will be returned and let’s hope that the meetings that are taken place will lead to some positive results in such a difficult time.