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.