Confirmation of Bradford & Bingley to be nationalised

The credit crunch has taken its next victim, Bradford and Bingley (B&B). The government has today confirmed that the bank Bradford & Bingley has been nationalised. The government is to take control of the banks £50bn mortgages and loans. However, all of the branches and savings units will be bought by the Spanish owned Santander.

All savings account holders are protected under the move and taxpayers are supposedly being shielded from any losses. With B&B the latest bank to be effected so severely by the credit crunch it raises the question as to who could be the next bank to be effected by such turbulent times in the financial market. In a statement by the prime minister, Gordon Brown has said that the government will do anything it could to try and help the UK financial system. Lets help he can do something dramatic to turn things around. Let us know your views on the matter.

France appears to be weathering the credit storm

It has emerged today that France appears to be weathering the credit storm and in an interview with a once London banker who has moved to France he explains why he believes this is.

He explains how people in London are keen to use up all of the money that they have and explains how an ex colleague got a very nice bonus so he went out immediately to buy a new car. He goes onto explain how most people in France only spend what they make in a years income and therefore spending is not fuelled by credit as it is in USA and UK. Banking rules are also different in France and Credit Cards are more like debit cards. If someone went to purchase an expensive item but didn’t have the funds in their account than the bank would be alerted and wouldn’t allow the transaction to go through. This way it means that people do not spend money that they do not have.

It was also claimed that if you are wanting to purchase a house in France you will have to have a big deposit as people can only borrow one third of there annual income.

Irish economy falls into recession

After shrinking for a second quarter in succession the Irish Republics economy has fallen into a recession. As recession is measured by two negative quarters of growth and this is what has happened in Ireland according to the Central Statistics Office.

The economy had shrunk by 0.3% in the first quarter and shrunk by a further 0.5% in the three months to the end of June. This is the first time that Ireland has fallen into a recession since 1983. The economy is now facing its toughest challenges since the 1980’s when it was hit with high unemployment and emigration.

Economists have pointed the blame towards the collapse of a decade-long bonanza in the property market and to add to this a slump in the activity in the construction industry.

The global credit crunch has also been a major factor in the slow down in the Irish economy. This means that Ireland is the first country in the eurozone to fall into a recession.

FBI probe key finance firms

An investigation has begun by the FBI looking at four major US financial institutions which are caught up in the current financial crisis which is affecting the world.

They are investigating possible fraud by Fannie Mae and Freddie Mac, the failed bank Lehman Brothers and insurer AIG. Top managers at those firms are also being investigated the report today revealed.

In the past year the FBI have began an enquiry across the entire financial market after the US housing market slumped dramatically. It was initiated by the way high risk mortgages were being sold. It was looking at lenders that were selling home loans to buyers with low or unpredicted income and also the investment banks that packaged these loans and sold them on. Turbulent times have shattered the financial market across many countries and investigations like these will no doubt pop up in the future.

Government pledge action to help economy

The chancellor Alistair Darling has pledged to help the turbulence that currently exists within the financial market in a speech he made today at the labour conference. He admitted that the UK was going trough some difficult times with the economy but has said that he remains confident that the economy will recover from the downturn stronger than what is was before it went into it.

His speech was focused on his main priority to stabilise the banking system and with this would hope to see the economy start to rebuild itself. There was clear to see that the government had finally admitted that there was a crisis and that there were some big economic challenges ahead. However, he believed that with the party they could help the UK get out of the current troubles.

The government admitted that they would have to spend within there means but many people are worried that this could mean an increase in income tax although the chancellor would not comment on the issue. Therefore there is a strong likelihood that this will mean that there will be a rise in income tax.

HBOS and Llyods TSB to merge

Llyods TSB has today revealed its plan for an expected takeover of £12.2bn of HBOS and has labelled the takeover as a unique opportunity. It allows the financial firm to increase market share and cut costs as two of the UK’s biggest financial services comes together. The takeover could see Llyods TSB making savings of £1 billion a year. However, a consequence of this is that there will be a lot of job cuts as the merger will see many departments having many people doing the same role. Llyods TSB have rubbished claims that this could be 40,000 jobs which would be a disastrous move for the people of the UK as the credit crunch kicks in.

Under normal circumstances this deal would have not be allowed to go ahead by the competition commission as it would be seen as a clear monopoly in the market. However, because of the way the economy is Alistair Darling, chancellor, said that without the move the outlook was very bleak for the economy in the UK. However, there have been claims that this was a bit of a rushed deal because of the acceptance of two of the biggest financial organisations merging.

However, this has been denied by the chancellor who has said that he has known for several weeks and the deal wasn’t just done over night. The buyout deal is actually a rescue deal with HBOS getting into trouble with their share prices fallen heavily in the past few weeks. As the credit crunch kicks in who will be its next target?

Unemployment rises as Credit Crunch kicks in

Unemployment figures have risen again by 81,000 people between May and July. It is a clear sign that the credit crunch is effecting businesses which is leading to staff cuts.

The government’s official unemployment rate increased from 5.3% to 5.5% taking the total number of people unemployed to 1.72 million. The number of people who are claiming jobseekers allowance also rose by 32,500 during this time according to the Office of National Statistics.

The overall number of people in work and the available vacancies also fell. The figures show that unemployment is starting to accelerate and it is expected to reach 2 million people in 2009.

It has also been claimed that number of people out of work for a year or more in 2009 could double. There is an emphasis on the effect that deflation is having which should be of more concern than inflation and there are calls for interest rates to be cut to try and help the problem.

Inflation creeps to 4.7%

The annual rate of UK inflation has risen in the month of August from 4.4% to 4.7%, a jump which is higher than was expected by many industry experts.

A letter to the chancellor, the Bank of England governor Mervyn King has warned that inflation could ruse to 5%. Mr King has blamed the increase in food and energy prices as a reason as to why inflation is above the government target of 2%.

The largest contributor to the rise in inflation in August was higher gas and electricity prices, with a number of large energy firms raising prices during the month. This outweighed the reduction in oil and petrol which fell by 5.5 pence per litre between July and August.

Credit Crunch hits travel companies

I thought today I would discuss how the credit crunch is hitting travel companies. I am sure many of you have been on holiday this year and are currently thinking about where you might want to go to next year. Well with the rising fuel costs it is becoming evermore apparent that airline companies are struggling. In recent weeks there have been Zoom and XL who have both suffered from the current conditions and many of XL’s customers are stuck across the world as there flights have simply been cancelled.

Today it has been revealed that Alitalia is in desperate need of support with a statement revealing that they can only afford fuel for the next few weeks with the possibility of some flights having to be cancelled as the company simply can’t afford to purchase fuel. What effect will this have on people? Well for a start it is expected that flight prices are going to rise significantly so that airlines can continue to operate. Therefore does this mean more people will stay in there own country to holiday? Let me have your views.

What will be left after the credit crunch

As the city goes through some difficult times with the financial situation that is before us it is interesting to look beyond the crunch and see what will be left. Jeff Randall, the former business editor at the BBC, has argued that reinvention is the greatest attribute that will come from the credit crunch. Although being pessimistic in the short term in the long term he was very optimistic. In the past it has shown that the city has recovered from such events and will do once again.

However, it can be said that it was invention and reinvention that has gone wrong that may well have got us into the situation that we are in today. Many companies have came forward and admitted that they wrong and that there invention and reinvention has lead to this. They even say that it was greed, excess lending, doing things that they didn’t really understand that got them into this mess and we can now see the effects of these actions. A lesson to be learnt next time is that better research and analysis of there actions should take place before they carry anything out.

Britain slip closer to recession

The European commission has today announced that they believe the UK, Spain and Germany will all fall into recession in 2008. Brussels said that the three countries would see two negative quarters in a row and that is what is technically defined as a recession.

In the latest economic forecast the commission also downgraded its outlook for eurozone, which doesn’t include the UK, growth again. The 15 nation group will only grow by 1.3% this year compared to projections of 1.7%. The 15 nation group also saw its economy shrink by 0.2% between April and June for the first time ever since it started in 1999. That was blamed in a reduced number of exports and a reduction in customer spending.

There is a gloomy outlook for all of the countries and the UK is no different. With the slump in house prices and very volatile financial markets the European commission believe that the UK economy will decline by an annual rate of 0.2% in the next two financial quarters.

Credit Crunch to “last into 2010”

The UK’s largest mortgage provider has today said that they believe the credit crunch will last well into 2010.

Andy Hornby, HBOS Chief, said it would take 18 months before the US house prices started to rise again. That is what is needed for banks to gain confidence and start lending again. It was suggested that there was little the UK government could do to stimulate the markets and that it would be a waiting game for the market to turnaround.

Hornby stated that British banks would struggle to offer bank loans until they could raise significant sums on wholesale financial markets. Around two – thirds of wholesale funding by British banks came from the US so until the problem gets better over there the UK will be in a rut.

Confidence is weak at the moment for UK banks and therefore there is a great concern for the lending of money.

House prices fall by double digits

UK house prices recorded an annual fall of 10.9% in August – the first double digit drop since 1983 says Halifax. The lender said that house prices dropped by 1.8% in August compared to July, leaving the cost of an average home in the UK at £174.178.

It said that market conditions would remain “challenging” in the coming months even after the support offered by the government. House prices on a whole dropped throughout the UK but some surveys indicated that Scotland was more resilient.

The figures show that the average price of a house in August 2008 is the same as it was in February 2006. It certainly looks like more government initiatives are needed to help stabilise the housing market within the UK.

UK to plunge into Recession this year

The Organisation for Economic Cooperation and Development (OECD) believes the UK will fall into a recession this year.

They believe that the UK economy will shrink at an annual rate of 0.3% in the third quarter and by 0.4% in the final quarter. According to the latest official figures the UK economy did not grow at all in the second quarter.

For the economy to be declared as in a recession there has to be two quarters worth of negative growth and the gloomy outlook for the UK economy has pushed the Sterling to its lowest levels for two years against the euro.

Chancellor Alistair Darling said many leading economies were suffering from slowing growth and that the UK could “get through” a difficult period with the right policies in place.

The OECD sees the still unfolding downturn in the housing market as one of the major problems for western countries. To add to this the reduced amount of credit supply is not helping things. Although news today has suggested that the government may be considering reducing interest rates to try and encourage spending which will hopefully help turn the market around.

Credit Union Boom

It has emerged today that credit unions are booming at the moment as people are being denied loans and mortgages at banks. People are being regularly turned down so have now turned to credit unions to help them out. Banks are simply tightening their lending rules which prevent people from gaining access to funds that they so desperately need.

Credit unions are a life line for some people. A couple of weeks ago a case arised where somebody was paying back a loan and had an annual rate of interest of 1430%. They went to the credit union and were helped out.

Credit Unions are also helping small businesses with their finances. A lot of new companies will not get the support of their banks during this time and are therefore turning to credit unions that are helping them finance ideas and their running.

Stamp duty axed on properties less than £175,000

In a bid to help the housing market the government has axed stamp duty on any property costing less than £175,000 for 1 year. The amount that the 1% purchase tax has to be paid is being increased from £125,000 from Wednesday morning.

Someone buying a house for £175,000 will save £1750 which helps ease the financial woes of buying a residential property at this time. The government estimate that over 50% of house buyers will now be exempt from this duty and is there way of trying to support the housing market.

The move by the government has been supported from some of the biggest lenders. With house prices falling at the fastest rate since 1996 it is important that the government have put in measures to help those people that are planning to move at such a financially uncertain time.

Stamp duty axed on properties less than £175,000

In a bid to help the housing market the government has axed stamp duty on any property costing less than £175,000 for 1 year. The amount that the 1% purchase tax has to be paid is being increased from £125,000 from Wednesday morning.

Someone buying a house for £175,000 will save £1750 which helps ease the financial woes of buying a residential property at this time. The government estimate that over 50% of house buyers will now be exempt from this duty and is there way of trying to support the housing market.

The move by the government has been supported from some of the biggest lenders. With house prices falling at the fastest rate since 1996 it is important that the government have put in measures to help those people that are planning to move at such a financially uncertain time.

Manufacturing Jobs now at “Risk”

The Engineering Employers Federation (EEF) has today said that the government must face the economic downturn head on if it is to reduce the impact of manufacturing jobs.

The EEF made the statement after carrying out a survey of over 800 companies who suggested that job losses were being predicted across the UK.

There has been a sharp decline in expectations over the months ahead which could lead to companies making staff redundant.

The government responded by suggesting that it understood the problems that manufacturing companies are facing and are looking at ways of supporting the companies through these difficult times.

The study revealed that only companies in London and the South East would actually recruit new staff in the coming months. The government is currently working with local companies and agencies to try and help combat the problem and to try and help companies in the difficult times ahead.