UK economy emerges from recession

The UK economy has come out of recession, after figures showed the economy had grown by 0.1% in the last three months of 2009.

The economy had previously contracted for six consecutive quarters – the longest period since quarterly figures were first recorded in 1955.

There have been recent recovery signs – last week UK unemployment fell for the first time in 18 months.

The UK’s had been one of the last major economies still in recession.

Europe’s two biggest economies – Germany and France – came out of recession last summer. Japan and the US also exited recession last year.

The UK recession began in the April-to-June quarter of 2008.

During 18 months of recession, public borrowing increased to an estimated £178bn, while output slumped by 6%.

First estimates of how the economy has performed are made with about 40% of the data available, and Investec economist David Page has warned there is “plenty of room for surprises” in the figures.

sourced from the BBC

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Surge in business confidence means UK recession 'at an end'

The news fuelled gains on the London stockmarket this morning, coupled with euphoria after England captured the Ashes

IT was the most optimistic sector, followed by banking, finance and insurance firms. Photograph: Sang Tan/AP

A record surge in confidence among business professionals indicates Britain’s recession is at an end, according to research.

Optimism among professionals in the third quarter hit its highest level since the start of the financial crisis two years ago, the Institute of Chartered Accountants in England and Wales (ICAEW) said.

The confidence measure jumped to 4.8 at the end of June from -28.2 in March – the biggest improvement since the survey began in 2003. The institute predicts that the economy will grow by 0.5% this quarter, breaking five quarters of falling output.

ICAEW chief executive Michael Izza said the findings suggest that “the UK recession is at an end”.

He added: “While there is no doubt that the UK economy is on its way to recovery, we shouldn’t underestimate the challenges ahead for businesses.”

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Bank of England to pump another £50bn into economy

Quantitative easing has mushroomed since March

The Bank of England is pumping another £50bn into the UK economy in a further attempt to lift it out of recession.

Britain’s central bank will raise the total amount of new money created under the quantitative easing (QE) programme to £175bn. The move is bigger than economists had expected, with the Bank admitting the recession had been “deeper than previously thought”. It also noted that the world economy is still in recession.

City economists broadly welcomed the decision, which sent the FTSE 100 index up to a new high for this year of 4729.58, but pushed sterling down against the dollar.

Stephen Boyle, head of RBS group economics, said: “We won’t know for another few quarters if the first £125bn of asset purchases by the Bank of England has managed to stop the rot, but the monetary policy committee has clearly decided that it’s better to be safe than sorry and will buy another £50bn of bonds.

“This tells us that the committee believes the UK economy remains in intensive care and that a bigger defibrillator is needed to help it emerge from the worst downturn for a generation.”

The Bank also kept interest rates at 0.5%, the lowest on record, as expected.

Alistair Darling, the chancellor, has given his approval for the Bank to extend the QE programme, which was previously capped at £150bn, with £125bn having been used so far.

Treasury minister Stephen Timms said the government and the Bank had been talking about extending the QE programme over the last few weeks. He added that “more encouraging data” in the last few days indicated that QE was starting to help the economy.

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Retail banking 'set for losses'

The retail arms of the UK’s High Street banks are likely to see losses in the second half of 2009, a survey suggests.

Retail banking is still struggling, despite big profits in investment banking

 

The KPMG UK Banks Performance Benchmarking Survey says that despite modest profits in the first half of the year, bad loans would lead to losses.

It says losses from bad loans will not peak “until 2010 or beyond.”

Three of the four major High Street banks reported profits in the first six months of the year, boosted by their investment banking operations.

“Retail banking is just profitable at lower levels, but with rising impairments. It seems probable that it will fall into loss making in the second half of the year,” says KPMG.

It adds that competition for savings accounts and the increased cost of lending between banks has impacted retail banking.

Looking ahead, KPMG says that continued uncertainty in the mortgage market will make life difficult for retail banks.

sourced from The BBC

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U.K. Recession Triggers Social Decay

Global Financial Crisis

Javier Espinoza, 08.12.09, 12:41 PM EDT

 As unemployment rises, the U.K. is facing a wave of increased domestic violence, homelessness, alcoholism and drug addiction.

LONDON — The recession is painting a bleak picture of the future of the British society. Crime, mental health problems, domestic violence and drug addiction are set to rise as unemployment reached a 14-year high on Tuesday, a leading public sector watchdog warned on Wednesday.

“We are starting to see some of these things happening. We have also seen an increase in demand for debt advice, more people claiming benefits–and if unemployment keeps rising, we will see an increase in domestic violence and abuse,” said Diane Ridley, author of the report entitled “When it comes to the crunch” published by the Audit Commission.

Ridley also said local authorities were not ready for what she described as the “next wave of the recession”. According to the researcher, the recession will have three phases: The first one is defined by declining gross domestic product and rising unemployment. She said Britain is about to face the second phase in which output turns around but long-term unemployment triggers a whole range of social problems. And, finally, when growth returns some areas of British society will bounce back quickly but others will be left out and inequality will eventually rise.

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Turnaround 'will not be simple'

The world has begun to recover from recession but the process will not be simple, the International Monetary Fund (IMF) has warned.

Serbia has been particularly hard hit by the global recession

The recession had “left deep scars, which will affect both supply and demand for many years to come” said IMF chief economist, Olivier Blanchard.

His comments came after Japan this week followed France and Germany is seeing their economies return to growth.

The IMF said in July the economy was “starting to pull out of recession”.

‘New shape’

In this latest report, Mr Blanchard predicted that global output may also remain lower than it had been before the crisis.

Countries must rebalance their economies to make it sustainable, Mr Blanchard said.

Economies dominated by consumption – such as the US – would have to focus more on exports, while Asia turned more to imports, he said.

He also said that dysfunctional financial systems in many advanced countries would need “a long time to find their new shape”.

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'Fragile recovery' for UK economy

The Bank of England has warned that the UK economy still has some way to go before it recovers from the effects of the financial crisis.

In its latest quarterly Inflation Report, the Bank warns that any recovery in 2010 will be “fragile”.

The report will be bad news for the chancellor, who has predicted that the UK will rebound sharply in the future.

If it does not, then his record budget deficit of £175bn will be even bigger, with a greater need for spending cuts.

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“Any 2010 recovery will be fragile”

 

On the outlook for inflation, the Bank said it was “more likely than not” that the annual rate of growth in consumer prices would temporarily fall below 1% in the autumn and stay low until the end of its two-year forecast period.

This implies, unless something changes, that interest rates could stay at 0.5% until well into 2011, BBC economics reporter Steve Schifferes says.

‘Uncertain pace’

The Bank has recently added another £50bn of new money to the economy, as part of its programme of quantitative easing (QE) to spur economic growth.

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Should we pull the plug – Northern Rock makes hefty losses

“is it now time to let Northern Rock go, can we all continue to support the Bank with our own money. If this was a company then it would have gone into adminstration by know. Lets pull the plug on Northern Rock and let it close down – I know at lot of people will loss money but we can’t afford to support the bank / share holders any longer”

by N Blakeley – recession 2009

 

Northern Rock has reported a loss of £724.2m for the first six months of 2009, compared with a loss of £585.4m in the first half of last year.

The nationalised bank said that 3.92% of its mortgage loans were more than three months in arrears, well above the national average of 2.39%.

It currently owes the government £10.9bn, but is waiting for European regulatory clearance for more funding.

Northern Rock was nationalised in February 2008

It had to be bailed out by taxpayers in 2007, when its model of borrowing short-term funds from wholesale markets to lend to mortgage borrowers was hit by the credit crunch.

It reported impairment losses from loans and advances of £602.2m for the first six months of the year, compared with £191.6m for the same period the year before.

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Barclays profit up to almost £3bn

Profits at Barclays’ investment banking arm doubled Barclays has announced an 8% rise in first-half profits, boosted by its investment banking division.

Pre-tax profits for the first six months came in at £2.98bn ($5bn), although this was slightly below analysts’ forecasts.

Its investment bank Barclays Capital saw profits double to more than £1bn, having picked up some still-successful operations from Lehman Brothers.

But profits at Barclays’ UK retail banking arm more than halved.

Profits at Barclays’ investment banking arm doubled

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