Taking stock of house prices
October 27, 2008
With signs of the financial crisis turning into a full-blown economic crisis coupled with falling household incomes and rising unemployment, we could witness house price drops starting to accelerate again, a BBC NEWS report states.
House prices are not likely to get back to the levels that they had peaked at last year until the year 2013, according to a prediction by CEBR (Centre for Economics and Business Research).
The centre has also predicted that prices would fall further in value (by 25%) from their peak level to a trough, at the end next year. It would mean about 2.5 million UK homeowners could be staring at negative equity. The group also made a few other forecasts. The predictions regarding house price falls are quite similar to those made by the Nationwide Building Society chief executive, Graham Beale, only last month.
The price fall has been welcomed by those who argue many priced out of the market when house prices rocketed would be in a position to buy. If proved right, the CEBR prediction would mean the average home value would have fallen to £157,058 by the 2009 end.
A tougher immigration policy
October 26, 2008
The immigration minister, Phil Woolas, has confirmed a clear toughening of Labour’s immigration policy by indicating that the government is to employ its new points-based system to restrict the Britain’s population growth. Woolas has signalled the shift in emphasis during a BBC Today show.
The new points-based immigration system has been phased in from April. It is being advocated as a flexible means of responding to the fast changing labour needs of the British economy. A migration advisory committee, comprising labour market economists, will draw a list of shortage occupations, apart from a forum to chalk out the effect of migration on communities as well as public services.
Woolas dismissed suggestions he backed the Tory proposal for putting a cap on economic migration to the country, but defended his promise that the government would not let the UK’s population to grow up to as high as 70 million.
He said: “We are introducing one of the biggest shake-ups in immigration policy (for 45 years) based on the points system that lets the government move the hurdles up and down, the criteria by which people can come into Britain to work.”
UK government may keep representatives at RBS and HBOS
October 13, 2008
The British Government is likely to announce plans to take a controlling stake of Royal Bank of Scotland (RBS) and Halifax Bank of Scotland (HBOS), two of the banks worst affected by the financial crisis, as reported by the Sunday Times.
The unprecedented move once made by the government, would make it the biggest shareholder in the said banks paving the way for government representatives installed on their boards. Possibly due to the aftereffects of the move, the scale of the operation could lead to trading in the banks on the London stock market being suspended to allow traders to digest the news. Acceptance of the bail out package of the government offer by the said four banks- RBS, HBOS, Lloyds TSB and Barclays- will probably be announced at the earliest.
British finance minister Alistair Darling told the BBC he had spent weekend locked in talks.
He stated, “We shall be making an announcement at the beginning of the week”.
Prime Minister Gordon Brown, in Paris for emergency talks with leaders of the 15 ‘eurozone’ countries, refused to comment on the takeover reports.
UK charities worried over the safety of their deposits
October 11, 2008
UK charities fear that they have lost well up to £120m invested in many of failed Icelandic banks. NCVO (National Council for Voluntary Organisations) stated that 60 of its 6,500 members so far have revealed that their funds may be at risk. Many others, providing services for councils, are worried over the fact that town halls might lose money in the crisis and that they will not be paid.
The NCVO is now seeking urgent meeting with Chancellor Alistair Darling to protect the charities’ money. Most of them have investments in Icelandic banks, making them increasingly worried. Those known to be affected are Naomi House children’s hospice near Winchester. It has £5.7 million invested with Kaupthing Singer and Friedlander (KSF). London’s Physiological Society has £523,000 of deposits with the same bank. Samaritans has links to KSF.
NCVO chief executive Stuart Etherington stated: “We have been speaking to members. They are increasingly worried about the financial climate. We are seeking a meeting with the Chancellor to seek assurances that charities’ money is protected.”
The Physiological Society’s Graham McGeown stated: “This is indeed a difficult time for our organisation. We have £523k in KSF and are not sure if we will get this money back”
The UK Government will spend £50 billion to rescue banks
October 8, 2008
The new bail-out, debt recovery plan will see the UK Government spend up to £50 billion. This is the equivalent of nearly £2,000 for every taxpayer. The plan will include buying priority shares in the leading banks to boost their capital base. Half of the amount is going to be available immediately, whereas a further £25 billion will be used if and when necessary in future.
The Government will also provide £250 billion to underwrite the medium-term debts of banks in an effort to prevent a funding gap in the coming few years. Meanwhile the Bank of England (BoE) will infuse a further £200 billion of capital into the money markets. This is being done under its ‘Special Liquidity Scheme’ that involves banks’ swapping risky mortgages for safer Treasury bonds. It was limited to £100 billion previously.
The potential liability of close to £500 billion amounts to over a third of the annual value of the overall British economy. It is being hoped that the additional liquidity would encourage the banks to again begin lending to and also borrowing from each other. Appearing alongside Mr Gordon Brown, Chancellor Alistair Darling said the move was in response to ‘extraordinary times.’
New package will result in the taxpayer taking large stake in major banks
October 8, 2008
Prime Minister Gordon Brown has hailed the package that will result in the taxpayer taking large stake in major banks in lieu for an injection of literally billions of pounds to shore up their balance sheets, as a ground-breaking, comprehensive solution to the impending economic crisis.
He said at a Downing Street news conference: “This is not a time for outdated dogma or conventional thinking but for the fresh, innovative intervention to get to the heart of the problem.”
The package includes:
- £250bn to underwrite debt
- £50bn to recapitalise banks
- £200bn infusion into the money markets
Conceding the fact that the Government borrowing would have to be increased drastically to fund the package, the PM insisted “the stability of the banking system matters, for every family in the country.” He stated taxpayers would ‘earn a proper return’, adding: “This support is on commercial terms. And we expect to be rewarded for the support we provide.”
The announcement caused volatile trading in the HBOS and Royal Bank of Scotland (RBS) shares. The banks have been hammered on the market in recent days.
Darling pledges fast action on economy
September 22, 2008
Chancellor Alastair Darling states the current financial crisis is rather ‘profound’. He has pledged fast action over weaknesses present in the financial system just ahead of his speech to the Labour Party meet in Manchester. He has promised to avoid ‘knee-jerk’ reactions, and take measured decisions for ensuring long-term stability. His assuring talk comes as experts think taxes will have to increase as borrowing soars.
When asked by the BBC if tax would go up Mr Darling declined to commit in ‘yes’ or ‘no’, instead stating “it is not really the time to take money out of the economy”. Mr Darling told the BBC that ‘the correct time to pay back debt was when the economy was doing better.’ He also stated rather than increasing taxes at the moment, basic rate taxpayers were paying less this month.
He rejected calls from union leaders as well as MPs on the left of the party for tax hikes for the wealthy and also demand for an energy windfall tax. “I do not want to destabilise the tax system,” he stated. Referring to the recent energy efficiency initiative from the government, he said: “We have got out of the energy firms rather more, I suspect, than we would have got out of a windfall tax.”
Crude prices rise again due to tropical storm Gustav
August 30, 2008
Oil prices on Friday rose amidst fears tropical storm Gustav will soon enter Gulf of Mexico area, which is home to a quarter of US crude supplies and 40 percent of its refining capacity. The price rise was also supported by the weakened Dollar.
On Thursday the price for crude in October rose by 93 cent almost shooting up to $120 a barrel, before finally settling at $115.59 a barrel, by the end of the day. In Europe, light sweet crude for October delivery was $116.72 at midday trading.
Britain’s Daily Telegraph, citing an unidentified business source, reported that Russia may cut oil supplies to Germany and Poland as early as this weekend in response to the threat of EU sanctions over Russia’s war with Georgia, which also provoked the Traders reaction.
According to Mr. Jonathan Komafel,
“Until this hurricane hits, the trend has to be higher towards the $120 level.”
As a precautionary measure, as the tropical storm called Gustav advanced, oil companies were pulling employees off installations in the Gulf of Mexico area.
Britain, a favourite business destination of Indian businesses
August 2, 2008
According to Grant Thornton’s newly launched India Watch research, which is engaged in monitoring the India-Britain business relationship through both cross-border M&A trends as well as performance of the Indian companies on the London Stock Exchange, Indian businessmen are spending more on buying business in Britain compared to offshore business acquisition in other countries.
The Indian acquisitions amounted to ₤930 million in the US, ₤561 in the Netherlands, whereas after acquiring Jaugar and Rover by Tata Motors, the total acquisition value was in the region of ₤1.52 billion in the UK in the first half of the year. However, if one goes by the number of companies acquired, US remained number one destination with 41 American business bought over compared to 20 British companies in the first half of 2008.
Stock broker firm Hichens Harrison & Co Pic was purchased by India’s Reliegare Capital Markets Ltd for ₤50 million, which demonstrates the diversity of British firms catching Indian interest. The other factor contributing towards Indian companies’ acquisition spree is the economic growth resulting in sufficient cash at hands to be used fruitfully.
Mr. Anuj Chande, head of Grant Thornton’s South Asia Group, said “The rising interest was owing to a combination of historical ties, strong cross-border business links and infrastructure and a very compatible business ethos. Indian businesses are looking to buy brands and established distribution networks.”
‘Urgent action is vital to prevent villages dying’, states a report
July 23, 2008
The Lib Dem MP, Matthew Taylor, whose report had been commissioned by the prime minister, stated many people find the countryside life very ‘challenging’, adding that ‘some urgent action is vital to prevent villages dying and also our market towns being wrecked by unsympathetic development.’
He noted: “If we fail in building the affordable homes to enable the people working in the countryside to live there we will risk turning our villages into gated communities of only wealthy commuters and the retired.”
He also touched upon the aspect of community ‘lifeblood’. Mr Taylor stated, in many cases, “only a handful of well designed homes – kept affordable in perpetuity for local people – will make all the key difference to the sustainability of a village and its services”.
It said the creation of small businesses and home-based working practices need to be encouraged in the countryside through the purposeful adoption of flexible planning policies – especially where work-based extensions to rural homes are concerned. It also concluded housing associations should consider ending bans on those setting up a home-based business unit in social and affordable homes.
