Economics
The trade gap in goods stayed at a record level during August, as
exports failed to receive a boost from the cheaper pound. July’s trade in
goods gap was revised up from £7.6 billion to £8.2 billion, and the deficit
remained at this level in August, the largest monthly deficit since records
began in 1697. The overall trade gap, including the contribution from
services, narrowed slightly to £4.7 billion in August, from £4.8 billion in
July.
House prices fell for the eighth month in September, wiping more than
£2,000 from the value of the average home, according to figures from the
Halifax. The average property price is now £172,108, down from about
£200,000 in September last year. This 13.4 per cent annual fall is the
largest decline since Halifax’s records began in 1983.
German exports fell by 2.5 per cent year-on-year during August, the
biggest drop in five years. Exports also fell on the month, but Germany’s
adjusted trade surplus widened by more than expected to €13.1 billion (£10.3
billion), from a downwardly revised €11.6 billion in July.
Swedish inflation climbed to a near-15-year high during September. The
consumer prices index rose by 4.4 per cent from a year earlier, after
climbing by 4.3 per cent during August. Economists had forecast an annual
rate of 4.1 per cent in September.
US inventories at wholesalers rose by 0.8 per cent during August, while
sales suffered their largest drop in more than 18 months. The rise in
inventories during July was revised to 1.5 per cent, up from 1.4 per cent.
Sales fell by 1 per cent after dropping by 0.8 per cent during July,
originally reported as a decline of 0.3 per cent.
US unemployment The number of people signing on for jobless benefits in
the United States dropped from a seven-year high last week. Initial jobless
claims fell by 20,000 to 478,000. However, the four-week average, which
smooths out any fluctuations, rose to 482,500, the highest since October
2001.
International Monetary Fund An emergency funding scheme for countries
plunged into economic and financial distress by the increasing global credit
crisis has been activated by the International Monetary Fund. The activation
of the emergency facility, the first time since it was last used in the
1990s Asian crisis, was ordered by Dominique Strauss-Kahn, the managing
director of the IMF. Since the Washington-based lender of last resort for
governments had made few loans during the past five years, it had a large
stock of financial ammunition that it could deploy to help nations to cope
with the present upheavals.
Banking
& finance
Mortgage payments The number of homeowners seeking help after falling
behind with their mortgage payments has surged by more than 50 per cent over
the past year, according to Citizens Advice, the leading debt charity.
Citizens Advice said that more than 77,300 people had contacted it for help
with problems in meeting their mortgage payments or secured loan payments in
the year to October, which was 35 per cent more than in the previous 12
months. However, there was a sharp rise in the number of inquiries between
July and September, with 51 per cent more people seeking help than in the
same period last year. The Council of Mortgage Lenders predicts that the
number of people losing their home will increase by 50 per cent to 45,000
this year.
Alliance & Leicester The takeover of Alliance & Leicester (A&L)
by Santander, the Spanish bank, was completed when the High Court, the
Financial Services Authority and the Bank of Spain sanctioned the deal. A&L
agreed to the £1.4 billion takeover, saying that the deteriorating economy
would make it difficult to pursue an independent future. Trading in A&L’s
shares will finish today.
Knowlden Titlow Financial Services The Financial Services Authority has
fined Knowlden Titlow Financial Services, based in Norwich, £35,000 and
Derrick Hales Financial Planning, based in Halifax, £10,500 for mis-selling
geared traded endowment policies. The FSA also withdrew its permission for
Derrick Hales and Kathleen Hales to work as regulated individuals.
Dexia France, Belgium and Luxembourg have pledged to guarantee
borrowing by Dexia, the crisis-hit Franco-Belgian local government lender.
After injecting €6.4 billion (£5.04 billion) into a partial nationalisation
of the group last week, the three governments said that they would cover its
borrowing on the interbank market and the issue of short-term bonds for a
year.
Landsbanki Guernsey British savers with Landsbanki Guernsey may not get
their money back. The bank, a subsidiary of Landsbanki, offered some of the
best offshore savings rates, but savers in the UK and the Channel Islands
are now unable to access their money. The administrators said that there
were significant funds available to the bank and they were doing everything
they could to enable part-payment to depositors and creditors. There is no
deposit protection scheme in Guernsey. retiring now being disadvantaged for
life by the current financial crisis.
Deutsche Bank British savers seeking to take advantage of the blanket
guarantee on deposits offered by the German Government may be disappointed.
Deutsche Bank said that there was some uncertainty about the precise terms
of the guarantee being offered by Angela Merkel, the Chancellor. It said:
“The position is unclear for savers from other countries who either have, or
want to open, a German savings account.”
Pensions The Government has promised to consider calls led by David
Cameron for a suspension of pension rules to prevent people retiring now
being disadvantaged for life by the current financial crisis.
Aviva, the insurance group, moved to reassure over its capital strength
amid the stock market turmoil. The owner of Norwich Union said that it had
protected itself against recent share price declines, which have the
potential to affect the group’s surplus regulatory capital. Its capital
excess stood at about £1.9 billion, up from £1.8 billion at the end of June,
according to Aviva.
Britain’s banking system is less financially sound than banks in
Botswana – or even Iceland – according to a survey of business opinion
carried out for the World Economic Forum. Business leaders in Britain rated
UK banks a mere 44th in the world for solvency, well behind countries in
Africa and Latin America – and even behind Iceland, whose three main banks
have been taken into national ownership.
Irish banking guarantee The Irish Republic has extended its depositor
guarantee to the customers of British-owned banks in the republic. Brian
Lenihan, the Finance Minister, said that he would extend the €400 billion
(£316 billion) guarantee scheme to foreign-owned banks that have significant
operations in Ireland. Customers of Royal Bank of Scotland’s Ulster Bank
operation and HBOS’s Irish branches are covered by the widened depositor
promise.
Henderson, the manager of £52 billion in funds, saw its shares fall by
more than 18 per cent after it abandoned its declared aim to meet or beat
the full-year pretax group profits target of £90 million that it had set in
August.
HSBC raised the stakes surrounding the Government’s £500 billion banks
recapitalisation programme by announcing that it had injected £750 million
into its UK business. Its speedy compliance with the Government’s demand
that all banks bolster their Tier 1 capital – a measure of financial strength
– heightens the pressure on its rivals to respond. HSBC said that it had
funded the injection, which represents 1 per cent of the group’s shareholder
equity, from internal resources.
Kaupthing, the biggest bank in Iceland, has been nationalised and all
trading has been suspended on the country’s stock exchange. The OMX Nordic
Exchange Iceland said that it would not reopen until Monday because of the
“unusual market conditions”. The Icelandic Government has now taken control
of three of the country’s banks – Kaupthing, Landsbanki and Glitnir.
Consumer
goods
C&C Group, the Irish drinks group which makes Magners cider, said
that Maurice Pratt, chief executive for the past seven years, had decided to
offer his resignation after the latest in a series of profit warnings over
the past two years. The Dublin-based company reported a 12 per cent fall in
cider sales in the six months to August 31.
Health
Southern Cross, the care homes provider, said that it would resolve its
debt issues by the end of the month. It also said that Ray Miles, its
chairman, would take over the duties of Bill Colvin, the departing chief
executive, until a replacement is found.
Leisure
Premium Bars and Restaurants, operator of the Living Room and
Prohibition venues, reported a 7.4 per cent decline in like-for-like sales
since the end of June and announced that Mark Jones, the executive chairman,
had given 12 months’ notice of his intention to leave.
Peel Hotels, the regional hotel operator, reported a 26 per cent
decline in its half-year like-for-like hotel operating profits after a 2.6
per cent fall in comparable sales and a 2.7 per cent increase in operating
costs.
Bluebookonline, the hotel bed bank, has become the latest travel sector
casualty, blaming its demise on the slowing economy and the move away from
so-called “dynamic packaging” in the wake of the collapse of XL Leisure.
Media
Emap The syndication of the £835 million loan backing Apax and Guardian
Media’s buyout of the B2B unit of Emap, the media group, has been put on
hold because of the difficult market conditions, according to reports. GE
Capital, HSBC, Lloyds TSB and Royal Bank of Scotland, the arranging banks,
will reassess the situation on an continuing basis.
Natural
resources
Fresnillo, the world’s largest silver producer and Mexico’s
second-largest goldminer, which is listed in London, said that output had
risen by 1.5 per cent in the first nine months of the year, compared with
last time, as ore grades improved.
Timan Oil & Gas, the production company, said that it has managed
to secure a five-year loan of $100 million (£58 million) from Timur
Kuanyshev, a Kazakh investor. Its shares will be readmitted soon to London’s
junior Alternative Investment Market, alongside its interim results.
Retailing
Greggs, the bakery chain, gave warning that its full-year profits will
be at least £3 million lower than forecast, largely because of higher energy
and ingredient costs. It added that it had not passed on these rising costs
to its customers.
WH Smith A strong performance at its motorway, airport and railway
station stores helped WH Smith, the books and stationery chain, to report a
15 per cent rise in its full-year underlying pretax profits to £76 million.
It forecast a competitive Christmas for retailers and said that it plans to
discount the top 20 bestselling hardbacks to attract customers.
Support
services
Hays, the recruitment consultancy, said its UK and Irish business had
shrunk in the past three months. The group, which places temporary and
permanent employees in jobs across the economy, said it had achieved 4 per
cent like-for-like net fee growth, but added that it had taken 8 per cent
fewer fees in its UK business than at the same time last year.
Telecoms
Vodafone, the mobile phone group, has moved closer to securing control
of Vodacom, South Africa’s leading mobile phone operator, in a deal that
will cost the British group 22.5 billion rand (£1.4 billion) to complete.
Telkom, the country’s fixed-line operator, indicated that it was willing to
sell 15 per cent of Vodacom, which would take Vodafone’s holding to 65 per
cent in a business with 34.6 million subscribers.
Transport
European Regional Airlines, the industry body, said that airline
bankruptcies around the world are set to double over the winter to at least
70 for the year.
EasyJet, the budget airline, said that it expects the industry to face
a “very tough” consumer environment next year. Carriers will face higher
fuel costs as the dollar strengthens against the euro and airlines that do
not hold enough cash “will not survive”.
Transport for London, which has £40 million in Kaupthing, the latest
Icelandic banking casualty, said that the amount “is a significant figure,
but needs to be set in context against TfL’s total annual budget of £7
billion”.
Utilities
Scottish & Southern Energy, the utility group, saw its share price
fall as a Dresdner Kleinwort analyst cut his rating to “sell”, saying that
wholesale UK gas prices, which at present are 30 per cent above global
commodity gas prices, were set to fall next year as more gas is delivered
from Norway and elsewhere.
