Economics
The economy: The UK economy is widely expected to have plunged into
recession in the second half of the year as the financial crisis has
tightened its grip. GDP stalled in the second quarter and plunged 0.6 per
cent between July and September. Economists forecast another sharp drop in
the final three months of the year when figures are published in January.
Interest rates: The Bank of England cut interest rates by three
percentage points between October and December, taking them to a 57-year low
of 2 per cent.
Letters from the Bank: Mervyn King, the Governor of the Bank of
England, had to write four letters to the Chancellor to explain why
inflation had risen more than a percentage point above the 2 per cent
target. Inflation spiked at a 16-year high of 5.2 per cent in September, as
oil prices surged, before it slid to 4.1 per cent in November.
Home loans: Mortgage lending for new house purchases slumped to a
record low as lenders continued to demand hefty deposits. Buyers were also
put off entering the property market by plunges in house prices, down by an
average of 15 per cent over the year.
Eurozone economy: The eurozone plunged into its first recession. Output
across the 15-nation bloc fell 0.2 per cent in the third quarter, after a
similar decline in the second quarter. The European Central Bank has cut its
key interest rate by 1.75 percentage points this year to 2.5 per cent.
American economy: The US is widely tipped to have entered recession in
the year’s second half. The Federal Reserve took increasingly aggressive
steps to ease credit markets and to offset a deepening downturn, slashing
interest rates to nearly zero in December.
Japanese economy: Japan entered recession as GDP fell in the second and
third quarters. The Bank of Japan this month cut its key interest rate to
just 0.1 per cent, from 0.3 per cent.
Banking
& finance
Royal Bank of Scotland: The bank found that a £15 billion capital
injection from its shareholders was insufficient and threw itself on the
mercy of the Government, which injected £20 billion in return for a 58 per
cent stake. The chief executive, Sir Fred Goodwin, agreed to leave without a
pay-off.
Lloyds TSB: The bank agreed a controversial merger with the beleaguered
HBOS after Gordon Brown intervened to waive competition rules. The combined
bank, in which the Government will have a minority stake, will control a
third of the UK personal finance market.
Barclays: The bank avoided a state bailout but infuriated its existing
shareholders by shunning them in favour of tapping Gulf investors for a £7
billion capital injection.
Bradford & Bingley: The mortgage lender was nationalised after
botched attempts at raising capital from its shareholders and private equity
groups. Its savings operation and branch network were sold to Santander of
Spain, owner of Abbey and Alliance & Leicester.
Northern Rock: The home-loans bank was nationalised in February after
attempts to find a private sector rescuer failed. It subsequently announced
a dramatic souring in the quality of its loanbook.
Financial stability: The Financial Services Authority admitted serious
failings in its supervision of Northern Rock while the Government announced
plans for a stronger role overseeing financial stability for the Bank of
England.
Standard Chartered: The Asia-focused bank escaped the worst of the
credit crunch in the West, but raised £1.8 billion in a rights issue to firm
up its balance sheet.
Icelandic banking: Iceland’s three biggest banks, Landsbanki, Kaupthing
and Glitner, were nationalised as its economy collapsed in October. Hundreds
of British councils and charities lost money.
Private equity: Private equity firms began to comply with Walker Report
guidelines on transparency in April.
Bear Stearns: JP Morgan agreed to buy Bear for $236 million, with the
backing of the US Federal Reserve, after the bank ran out of liquidity.
JPMorgan then raised its bid to $1.1 billion to appease Bear investors.
Completion was in May.
Fannie Mae: The US Government on September 7 took control of Fannie Mae
and Freddie Mac, the stricken companies underpinning America’s $12,000
billion mortgage market. The two had suffered combined losses of $14.9
billion on defaults. The Government promised to inject up to $200 billion to
keep them running.
Lehman Brothers: The US bank collapsed on September 15 under $613
billion of debt, to be the biggest corporate bankruptcy since Worldcom in
2002. The bank had assets of $639 billion when it went under. The surprise
bankruptcy caused panic in global markets, but rivals snapped up Lehman’s
assets cheaply. Barclays bought its US business, among other assets, for
$1.7 billion.
Merrill Lynch: Bank of America on September 15 bought Merrill Lynch in
a $50 billion all-share rescue deal. The deal, combining America’s biggest
deposit holder with the world’s largest brokerage, was done after Merrill
Lynch suffered from the market’s loss of confidence in investment banks.
US bailout: Henry Paulson, the US Treasury Secretary, unveiled on
September 20 a $700 billion bailout plan to buy troubled mortgage assets
from US banks. The plan was amended to include foreign banks and to allow
the purchase of equity in the banks.
Goldman Sachs: The bank on December 16 reported its first quarterly
loss in ten years when it disclosed that it had slid $2.1 billion into the
red in the three months to November 28. The bank managed to make a profit
for the full year of $2.3 billion. It had converted to a deposit-taking
institution three months earlier to secure a more stable funding base and
get access to Government bailout cash.
Construction
& property
Homes: Britain’s housing market, buoyant for years, has fallen by an
average of 15 per cent over 2008.
Construction jobs: The decline in house prices led the big
housebuilders to shed workers, with nearly 20,000 job losses in 2008.
Shares: Share prices took a hammering as housebuilders and commercial
property companies were forced to make huge writedowns on the value of their
land and properties. The biggest UK housebuilders wrote off a total of £2.7
billion from their UK assets.
Financing: After writedowns of assets, worry grew about whether some
housebuilding companies would break banking covenants. Taylor Wimpey began
refinancing talks with its lenders and bondholders over its £1.8 billion
debt pile, which seems much more onerous as its sales decline.
Commercial property: Commercial property groups such as British Land
and Land Securities were hit as retailers failed and the value of shops
declined and as demand for office space eased. British Land delayed until
2012 building the “Cheesegrater” tower in the City.
Consumer
goods
Anheuser-Busch InBev: The new global brewing giant is tipped to
consider high-profile disposals to reduce its huge debt mountain. Analysts
believe that Beck’s, its German lager, and its 27 per cent stake in China’s
Tsingtao Brewery could be put on the block.
Foster’s: The embattled Australian brewer and winemaker is
expected to find itself at the centre of fresh bid speculation as it
completes a strategic review. Molson Coors and SABMiller are both monitoring
the situation carefully.
Engineering
The UK car industry: Britain’s carmakers made an unprecedented plea for
government help amid production cuts. UK carmakers, like competitors around
the world, have seen demand hit by the credit squeeze and a fall in consumer
confidence. Jaguar Land Rover alone sought access to £1 billion over two
years.
Health
Top jobs: There were big changes in two of the world’s three largest
pharmaceutical companies. Andrew Witty succeeded J.P. Garnier at the helm of
GlaxoSmithKline. One of his rivals for the GSK job, Chris Viehbacher, left
to take the top job in the rival Sanofi-Aventis.
Biotechnology: In the UK, smaller biotech companies struggled as the
credit crisis made it harder for them to raise money. Industry figures this
month wrote to Gordon Brown to plead for £500 million to save the sector.
US policy: In the US presidential election, Barack Obama declared in
favour of healthcare reform in America, the world’s biggest market for
pharmaceutical products. President-elect Obama this month named Tom Baschle,
the former Senate majority leader, to be Health Secretary and to oversee a
new Office of Health Reform.
Industrials
Steel: After decline in the automotive and construction markets, Corus,
the Anglo-Dutch steelmaker, announced production cuts of 30 per cent. Other
steelmakers around the world have also unveiled big production cuts.
Leisure
Clapham House Group: The Gourmet Burger Kitchen and Tootsies operator
could find itself on the end of a bid from Capricorn Ventures International,
the private equity firm behind the Nando’s chicken diners. Capricorn already
has a 25 per cent stake.
Media
Channel 4: The broadcaster fought to secure its future, after Ofcom
concluded that it needed £100 million a year in financing from the middle of
the next decade to survive. One option was that the BBC would be forced to
hand over some or all of its commercial arm, Worldwide.
EMI: The music company has lost £757 million — and the Rolling Stones —
in the past year, but the music major, after its first full year under Guy
Hands’s Terra Firma, did appoint a new chief executive for its recorded
music arm, choosing Elio Leoni-Sceti, and presided over two hits, Coldplay’s
Viva La Vida and Katy Perry, whose single I Kissed a Girl was No 1 in the US
for seven weeks.
Johnston Press: The press group was forced into a £212 million rights
issue as it battled with debt. Ananada Krishnan, a Malaysian billionaire,
became the company’s largest shareholder, with a 20 per cent stake, and the
stake of the Johnston family, who had been in control of newspapers since
1846, was cut 7.6 per cent.
Independent News & Media: the publisher of The Independent,
controlled by Sir Anthony O’Reilly, unveiled plans to sell off its
Australian and New Zealand titles and to cut costs of its London title
sharply. The Independent cut 20 per cent of its reporters, and agreed to
move in with the Daily Mail in West London.
BSkyB: The satellite broadcaster, 39.1 per cent owned by News
Corporation, parent company of The Times, was told by the Government in
January to cut its stake in ITV from 17.9 per cent to 7.5 per cent. The
broadcaster lost two appeals against the decision, but is still fighting in
the courts as it tries to avert a sale that would crystallise a substantial
loss.
Global Radio: Ashley Tabor’s Global Radio bought GCap Media in the
spring for £275 million. The deal added GCap to the former Chrysalis
business, and created Britain’s largest-ever commercial radio group just as
the advertising market collapsed. By the end of the year, radio advertising
was down by nearly 20 per cent.
Natural
resources
Commodities: Many commodity prices hit record highs in summer, but
fears of a global economic slowdown later led to a sell-off. Copper is down
70 per cent from its July peak of $8,940 a tonne. Aluminium has halved from
its peak of $3,380 in the summer.
Bids: BHP Billiton scrapped its £66 billion bid for Rio Tinto claiming
that it no longer made sense because of falling commodity prices. Xstrata
scrapped a £5 billion bid for Lonmin after the deal was rejected by Lonmin’s
board. A $90 billion bid by Vale, the Brazilian miner, for Xstrata also
failed.
Oil price: Oil touched a record high of $147 a barrel on July 11. On
December 18, it fell below $40 to its lowest in four and a half years.
Retailing
Marks & Spencer: Sir Stuart Rose stepped up to executive chairman
in June, provoking a dispute about corporate governance.
Tesco: the retailer remained the UK’s top supermarket chain, with
market share of 30.9 per cent in the 12 weeks to November 30 according to
TNS WorldPanel, with Asda next on 16.8 per cent and Sainsbury on 16 per
cent. Hard discounters such as Aldi and Lidl improved their market share.
Woolworths: the retailer began talks to sell its 814 stores to Hilco, a
distressed-assets specialist, for only £1 in October. By November, even £1
was too much and the stores, plus Woolworths’ previously profitable
distribution business, EUK, went into administration.
Sir Philip Green: the owner of Topshop and Bhs in November bought a 28
per cent stake in Moss Bros, the menswear retailer, prompting speculation
that he would bid for other assets of Baugur, the troubled Icelandic
company, which sold the stake. He soon sold the stake after deciding not to
bid for all of Moss Bros.
Failures: Several high street chains went bust, including MFI, The
Pier, Zavvi, Whittard and The Officers’ Club. Some retailers negotiated a
change from paying rent in advance every three months to paying monthly.
Support
Services
Law: Britain’s top 100 commercial law firms enjoyed a record year in
2007-08, with a 14 per cent rise in collective revenues to almost £14
billion. For the first time, the four largest UK firms — Allen &
Overy, Clifford Chance, Freshfields Bruckhaus Deringer and Linklaters — each
generated more than £1 billion in fee income, surpassing their US
counterparts as the world’s largest law firms. Individually, equity partners
in the top ten firms took home an average of £1.1 million in profits.
Technology
Microsoft: The software group bid for Yahoo! at $44.6 billion (£22
billion) and then $47.5 billion, but was unwilling to pay the $53 billion
Yahoo! wanted. The bid collapsed in May, as did Yahoo!’s shares, which fell
15 per cent. Jerry Yang, Yahoo!’s chief executive, had to step aside as the
company sought to restore its credibility on Wall Street.
Telecoms
Telecoms operators: Fixed-line and mobile operators have, so far,come
through the downturn relatively unscathed, broadly maintaining forecasts for
2009. However, Vodafone last month forecast that full-year revenue could
fall by as much as £1 billion. BT was forced to abandon profit targets for
its Global Services as it lost control of costs. The group also last month
announced 10,000 job cuts.
BT: Ben Verwaayen stood down as chief executive after six years,
handing over to Ian Livingston, then head of BT Retail.
Vodafone: Arun Sarin, the chief executive of Vodafone, passed the baton
to his deputy, Vittorio Colao, after five years in charge of the
Newbury-based group.
Transport
Lufthansa: The German flag carrier, bought a 50 per cent stake in bmi
for €400 million, taking its total holding to 80 per cent.
British Airways: The airline said it was facing unprecedented
difficulties because of falling passenger demand and continued high costs.
It has said it may only break even this financial year — after profits of
nearly £900 million last time.
Utilities
EDF: The French utility group bid £12.5 billion to buy British Energy,
the UK’s nuclear generator.
