Featured Posts

Chase Bank Limits Cash Withdrawals, Bans International... Before you read this report, remember to sign up to for 100% free stock alerts Chase Bank has moved to limit cash withdrawals while banning business customers from sending...

Read more

Richemont chairman Johann Rupert to take 'grey gap... Billionaire 62-year-old to take 12 months off from Cartier and Montblanc luxury goods groupRichemont's chairman and founder Johann Rupert is to take a year off from September, leaving management of the...

Read more

Cambodia: aftermath of fatal shoe factory collapse... Workers clear rubble following the collapse of a shoe factory in Kampong Speu, Cambodia, on Thursday

Read more

Spate of recent shock departures by 50-something CEOs While the rising financial rewards of running a modern multinational have been well publicised, executive recruiters say the pressures of the job have also been ratcheted upOn approaching his 60th birthday...

Read more

UK Uncut loses legal challenge over Goldman Sachs tax... While judge agreed the deal was 'not a glorious episode in the history of the Revenue', he ruled it was not unlawfulCampaign group UK Uncut Legal Action has lost its high court challenge over the legality...

Read more

UK unemployment rise adds to pressure on Osborne’s austerity strategy

Category : Business

Unemployment reaches 2.56 million as another 20,000 under-25s add their names to the register

Unemployment jumped by 70,000 in the three months to the end of February, amid the lowest growth in pay rises since 2001, as pressure mounts on George Osborne to adopt a more aggressive growth strategy.

The number of unemployed people reached 2.56 million, with 20,000 under 25-year-olds joining the jobless ranks, pushing the unemployment rate up from 7.8% to 7.9%. It was the third consecutive increase and the highest level since July. Britain’s working population is also suffering from an austerity squeeze, with the average pay rise slipping to 1%, the lowest since records began in 2001 and well short of the 2.8% inflation rate.

The figures, which reflect a reversal of last year’s trend of falling unemployment, come after the International Monetary Fund this week urged the chancellor to ease his austerity plans and deploy more aggressive measures to spur growth.

The Bank of England’s decision to freeze its policy of injecting funds into the economy, known as quantitative easing, is also adding to the pressure on Osborne to switch to a more active economic stance. Minutes of the central bank’s April monetary policy committee, released on Wednesday revealed a six-three majority in favour of maintaining interest rates at 0.5% and keeping the level of QE at £375bn.

The MPC has remained split for several months despite the governor, Sir Mervyn King, regularly voting for a £25bn boost to QE. King has lost the vote an unprecedented three times since February when he sided with Bank director, Paul Fisher, and external committee member David Miles, a former City economist, in calling for an injection of funds into the economy to boost lending and stagnant growth.

Consumer spending in the economy has picked up in recent months, but analysts worry that it will peter out if the gap between pay rises and inflation continues to erode disposable incomes – a trend underlined by the latest data.

The unemployment rate for 16 to 24-year-olds also remained a concern after it edged back towards 1 million. In the three months to February the number of young people out of work reached 979,000, pushing the youth unemployment rate to 21.1%, up 0.6 percentage points from September to November 2012. The number of people claiming jobseeker’s allowance fell by 7,000 to 1.53 million provided a semblance of a silver lining, indicating a fall in government costs.

However, a steep fall in manufacturing and construction output this year has undermined hopes of a strong resurgence in growth. Vicky Redwood, chief UK economist at the consultancy Capital Economics, said it was likely that further aggressive moves by the Bank of England would be delayed until after the new governor, Mark Carney, arrives in July.

The calls for further action are expected to grow when estimates for first quarter GDP are released next week, with the UK just one quarter of negative growth away from a triple-dip recession.

“More QE in May is still possible, especially if the Q1 GDP figure is worse than expected. But it may be that we have to wait until Carney arrives before the MPC will take more action. Note, though, that even those voting against QE this month still seem open to further action to boost bank lending, with the committee seeing merit in possible extensions to Funding for Lending.”

Howard Archer, chief UK economist at IHS Global Insight, said: “Despite a 7,000 drop in claimant count unemployment in March, the labour market data are clearly softer overall compared to a couple of months ago.

“Overall, the data fuels concern that the labour market’s recent strength is fraying as the economy continues to struggle for even modest sustained growth. Meanwhile, earnings growth remained very weak in February. While weak earnings growth is clearly helping to keep unemployment down, the flip-side of this is that it continues to limit consumers’ purchasing power.

“Indeed, with total earnings growth limited to 0.8% in February itself, pressure on people’s purchasing power has intensified recently given that consumer price inflation has risen back up to 2.8% in March and could well hover around 3% for much of 2013.”

Letters: Financial lapdog

Category : Business

The chancellor is correct that the light-touch system of regulation overseen by the Financial Services Authority has been discredited (Report, 2 April). Last year we exposed the extent of corporate capture at the FSA and the way in which the supposed watchdog acted as a lobbying arm for the sector it was supposed to regulate. However, this week’s shift of powers to the Bank of England and new institutions is not the “fundamental change” in the regulation of the City that George Osborne claims. It is window dressing to disguise business as usual. In a meeting last week, officials at the new Financial Conduct Authority complained about a “burden of regulation” being brought in following the financial crisis, apparently oblivious to the contribution of years of self-regulation to the global financial meltdown. The repercussions of this approach are still being borne by citizens in the UK and globally. To ensure a genuinely secure financial system, we need a regulatory body that is entirely independent of the industry it is supposed to police. What we have is another lapdog.
Christine Haigh
World Development Movement

Eurozone crisis live: decision day for Bank of England and ECB

Category : Business

Markets await key decisions on interest rates and quantitative easing by the Bank of England and European Central Bank

Follow this link: Eurozone crisis live: decision day for Bank of England and ECB

Post to Twitter

Bank of England to become one of world’s most powerful central banks

Category : Business

Breakup of Financial Services Authorities puts Bank in charge of regulation and crisis avoidance in biggest shakeup since 1997

The Bank of England will become one of the most powerful central banks in the world on Monday after the biggest overhaul of financial regulation since 1997.

As part of sweeping changes that will undo the system set up by former chancellor Gordon Brown, the Financial Services Authority (FSA) has been replaced with three new bodies – the Financial Policy Committee (FPC), the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

Slammed for being “asleep at the wheel” during the financial crisis, the so-called tripartite structure – comprising the FSA, the Treasury and the Bank of England – has made way for a new system to regulate the financial sector and ward off future crises.

With the FPC and the PRA sitting within the Bank, it has taken on vast powers and responsibility not just for regulating lenders, but also spotting and preventing possible financial shocks. It marks a return of regulatory powers to the Bank, which were taken away when it was given independence in 1997. George Osborne is hoping the shakeup will plug the gap in the tripartite system that left no one taking responsibility to monitor risks to the financial system as a whole, such as in the pre-2007 lending boom.

He criticised the structure for being “incoherent” and “without clear lines of accountability”.

The lack of oversight led to the excessive lending that sparked a sub-prime mortgage crisis and in turn the credit crunch and banking meltdown. Regulators worldwide have now accepted the need to have macro responsibilities to avoid a repeat of the financial crisis.

There were also specific faults within Britain’s financial regulations that the new system aims to iron out. With its self-proclaimed “light touch” regulation, the FSA failed to rein in banks. It later admitted mistakes were made before the collapse of Northern Rock, while it appeared woefully inept in preventing the banking scandals that have emerged in recent years – such as the Libor interbank rate-rigging affair and mis-selling of payment protection insurance (PPI) and interest rate swaps to small businesses.

There are hopes the new system will have more teeth.

With the FPC acting as the pillar of the new regime, it will take the broadest overview of financial regulation. The PRA will ensure banks and insurers have enough capital and liquidity, while the FCA will protect consumers by promoting effective competition and regulating financial services companies.

PRA chief Andrew Bailey has already promised a more intrusive approach to regulation of the 1,700 financial institutions under his remit.

His counterpart at the FCA, Martin Wheatley, has also pledged to clean up the sector with new powers to suspend or ban products.

The FCA, which will sit outside the Bank, will also be able to fine firms.

But there are concerns the Bank will become too powerful, given that it also has responsibility for monetary policy in the UK.

In a stark warning, the former head of Germany’s central bank said recently it risked impacting its independence.

Ex-Bundesbank boss Axel Weber, who currently chairs Swiss group UBS, said he “flatly refused” to take on a regulatory remit when he was head of the bank due to concerns over independence.

However, the new structure heralds a new era for UK financial regulation after the banking crisis.

There will also be a change at the top of the Bank, with Canadian Mark Carney taking over as governor from Sir Mervyn King in July.

Kipper Williams on the financial policy committee

Category : Business

Financial policy committee: ‘Now all we need is some financial stability to take control of’

Read more here: Kipper Williams on the financial policy committee

Post to Twitter

That’s rich: new Bank chief’s wife condemned for London rents moan

Category : Business

Critics attack remarks by Diana Carney, wife of Mark, who will enjoy a near-£5,000 a week housing allowance

London’s sky-high house prices have been the subject of dinner party laments for years. Now even the wife of the incoming governor of the Bank of England, who has a near-£5,000 a week housing allowance, has been fretting about finding a home in the capital’s overvalued market.

Diana Carney, married to Mark Carney, who will take up the reins at the Bank of England in July, sparked a flurry of criticism about her search for a home in the capital.

Passing on a news story about France scaling back wealth taxes, which is believed to have triggered an exodus of well-heeled Parisians to London, Diana Carney indicated that it might take the heat off the housing market. The British-born Oxford University graduate quipped: “Maybe I’ll be able to find a place to live in London after all.”

Mark Carney, currently governor of the Bank of Canada, will get an annual housing allowance of £250,000 a year, taking his total pay close to £1m, part of a generous package blessed by the chancellor, George Osborne, to lure the Canadian banker to London.

Carney defended his bumper pay deal last month, saying his package was equivalent to the pay and pension of the outgoing governor, Mervyn King.

“The housing allowance relates to the fact that I am moving from one of the cheapest capitals to one of the most expensive capitals,” he told MPs on the Treasury select committee.

The former Goldman Sachs banker will be leaving the affluent neighbourhood of Rockcliffe Park, Ottawa, where he has lived since 2003. In this upscale village, a stately mock Georgian townhouse with five bedrooms, landscaped garden, sauna and fitness rooms is going for $3m (£1.8m). In London’s overheated property market, this would get you a five-bedroom house in Acton, with easy access to the central line – handy for anyone going to Bank.

The Carney family’s weekly budget, about £4,800, would stretch to a two-bedroom flat in Mayfair with views over Green Park, but this is hardly suitable for their household of six. More appropriate might be a four-bedroom house in leafy St John’s Wood going for £19,500 a month.

Labour politicians in London condemned the remarks, which come just as the government is about to cut housing benefit for people deemed to have a spare room, the so-called bedroom tax.

“Even if she is being ironic, the fact is she and her husband are being paid a £5,000 a week subsidy when the very poorest are having £17 a week of public support taken away,” said Paul Dimoldenberg, leader of the Labour group on Westminster council, in the Evening Standard. “Presumably this public subsidy reflects the fact that housing costs in central London are very high. But if it is acceptable to subsidise the governor of the Bank of England how come the very poorest people who already live in central London are being demonised and run out of town?”

Diana Carney is an outspoken development economist, who is vice-president of research at left-leaning thinktank Canada 2020. Under her maiden name, Diana Fox, she runs an eco-products website, where she describes herself as “a multi-tasking mother of four”.

Having described herself as “British by birth and Canadian by choice”, Diana Carney has made it clear she does not intend the move to the UK to be permanent. “Canada is certainly a hard country to leave. But we will be back in 5,” she tweeted in November.

Both the Bank of England and the Bank of Canada declined to comment.

Financial crisis far from over, says outgoing Bank of England chief

Category : Business

Mervyn King and senior German banker warn of ‘unexpected twists and turns’ before worldwide economy stabilises again

Sir Mervyn King warned last night that the global financial crisis is “far from over” and that fundamental changes are needed to the international system before confidence can be regained.

King, the governor of the Bank of England, said there would be many twists and turns before the worldwide economy stabilises. Speaking at an event at the London School of Economics, he said: “Whichever crisis we are talking about, it is far from over … there will surely be many unexpected twists and turns before we can truly say that the crisis is indeed over.”

On the day after the Cypriot government put forward a rescue package to stabilise its economy, King’s comments will reinforce concerns that the eurozone has failed to put its house in order. The event was also attended by Ben Bernanke, chair of the US Federal Reserve, who voiced concerns about fundamental imbalances exposed by the financial crisis. He said that while the eurozone works for some countries, it was obvious that others were unable to keep up. “There is a basic question: what is the right size for a single monetary policy?” In a clear reference to Greece, Portugal and Cyprus, he said the crisis had exposed countries with weaker productivity and higher labour costs.

The former head of the German central bank, Axel Weber, also speaking at the event, added to the warnings that the crisis had yet to play out in full. “We are not out of the woods yet,” said Weber, now chairman of investment bank UBS. Weber emphasised that the colossal debts run up by western countries in the aftermath of the banking crisis remained a huge drag on economy growth and stability. “While there be more signs of stability, this may in fact be a period when problems that are still with us resurface. The underlying situation remains difficult and is not improving,” he said.

He said the soaring stock market had provided a false hope that the eurozone crisis has eased. Weber joined former US treasury secretary Larry Summers and IMF chief economist Olivier Blanchard on stage at the London School of Economics to mark the end of King’s 10-year term as Bank of England governor.

King will retire in the summer and will be succeeded by the head of Canada’s central bank, Mark Carney, who was in the audience along with many of the world’s top economists and central bank staff.

Weber said he was also concerned that governments had responded to the crisis by giving more powers to central banks. He recalled how he refused an offer from the German finance ministry to take on regulatory powers, fearing it would undermine the bank’s monetary policy role. “As central banks play a larger role, we need to see the potential downsides,” he said. “I’m concerned they are taking roles that distract them from their main task.”

Blanchard said the powers acquired by central banks created a “democratic deficit” that could eventually lead to social unrest. The situation in Europe was a cause for concern, especially when central banks were put in a position of making crucial decisions that affected millions of people’s lives, he said.

His comments echoed those of many politicians across Europe after the crisis in Cyprus was exacerbated by demands from the European Central Bank for a resolution. The ECB warned last week that it would refuse to lend to banks in Cyprus unless a deal was struck, pushing the government on the island, which is only four weeks old, to accept demands from Brussels for an initial €5.8bn (£5bn) cash payment to secure loans worth €10bn. Bernanke defended the policy shift that has seen central banks assume regulatory powers, arguing that it provided a unique view of the way that international money markets operated. “It is important for central banks to be regulators to understand the financial system and how it is developing,” he said.

Mervyn King warns return to high inflation could be ‘scary’

Category : Business

Bank of England governor gives rare TV interview, saying Treasury must not water down its commitment to low inflation

Bank of England governor Sir Mervyn King has warned the Treasury against watering down the commitment to low inflation in the budget next week, describing a return to high inflation as “scary”.

King, who leaves office in June, rejected calls for the central bank to put forward more aggressive policies to boost growth at the expense of its current focus on inflation. “I’m not sure there is any call for major change in the remit,” he told ITV News. “Most important is the commitment to the target of 2% [inflation].”

The inflation target, which was set by the Treasury in the 1990s, is under threat following months of criticism directed at Threadneedle Street for the weak pace of economic recovery.

King’s rare television interview came amid speculation that the chancellor will tell parliament next week in his budget that a review of the Bank of England’s mandate is needed to include a requirement to focus on economic growth.

The governor is thought to have lobbied against the move and told ITV: “What was scary when we had high inflation was businesses faced high interest rates … mortgage repayments doubled, there was pressure on household finances … people stopped looking at the long term and focused entirely on the short term.”

Earlier, chief economist Spencer Dale had given a speech where he too endorsed the Bank’s mandate and said the inflation target still allowed it to take an active approach to boosting growth.

In what appeared to be a co-ordinated attack on the chancellor’s plans, Dale described calls for policies to promote growth as “dangerous talk”.

“The target is not a sham, but a vital anchor,” he said. “We will hit the inflation target. And if we don’t hit the inflation target over time, the cost to our economy will be very severe.”

The Bank has pumped £375bn into the economy by quantitative easing, mainly through banks and building societies, in an effort to boost lending. A separate £80bn scheme subsidises loans to banks. Figures for last year show that much of the money was used by banks to bolster reserves rather than lent to households and small businesses. But King reiterated his view that there is a case for more electronic printing of money.

The Bank has failed to meet the 2% target for more than three years but blamed items such as the rise in university tuition fees.

Dale also argued against boosting the economy with more central bank loans, arguing that it would trigger inflation.

Markets responded by reversing a three-month decline in the value of the pound, which bounced back to $1.51.

Sterling has declined by more than 7% since the beginning of the year in response to speculation that the central bank will inject further funds into the economy to boost growth.

Constrained by his focus on debt repayments, Osborne has come to rely on King expanding the funds he puts into the economy to support bank lending to households and small businesses.

The governor will be replaced by Mark Carney in the summer and it is understood the Canadian central bank chief is keen to adopt a broader range of measures to kickstart the ailing economy.

Savills allows staff to defer bonuses to avoid 50% tax

Category : Business

Executives at the Mayfair estate agency could delay taking bonuses until lower 45p rate is in place

Savills, the Mayfair estate agency behind some of London’s most expensive property sales, has given its top staff the opportunity to defer bonuses until the start of the next tax year to avoid the soon-to-be-abolished 50% top rate of tax.

Executives at the firm, some of whom earn more than £1m a year, could delay taking bonuses until the lower 45p rate is in place.

The chancellor, George Osborne, announced in December that the top rate of income tax would be cut from 50% to 45% from 6 April. He said: “We’re going to have a top rate of tax that supports enterprise,” and promised that it would “raise more money from the rich”. The top rate is levied on incomes of more than £150,000.

The estate agency is not the first firm to allow high earners to defer bonuses for tax reasons. The Guardian reported in January that London-based insurer Aon was helping 250 of its best-paid staff avoid the 50% rate by deferring bonus payouts.

These are thought likely to be just two examples of a popular remuneration strategy among Britain’s biggest bonus-paying firms. Many large businesses are expected to be quietly pursuing a similar strategy in the hope of avoiding the ire that Goldman Sachs attracted from Bank of England governor Sir Mervyn King at the start of the year.

The US investment bank abandoned its plan to defer London bonuses after it was attacked by King. He told parliament’s Treasury select committee: “I find it a bit depressing that people who earn so much seem to think that it’s even more exciting to adjust the timing of it to get the benefit of the lower tax rate … which they will benefit from in the long run to a very great extent knowing this must have an impact on the rest of society, when even now it is the rest of society which is suffering most from the consequences of the financial crisis.”

Savills, which is listed on the London Stock Exchange, declined to answer questions from the Guardian on the timing of bonus payouts to directors and other top earners. However, one source close to the company denied that in previous years bonuses and profit-share rewards had been routinely paid in March. Savills offers flexible arrangements every year, with staff able to take payouts at any time between the company’s year-end in December and its annual shareholder meeting in May, the source said.

Among the senior staff at Savills who could benefit from receiving their cash bonus after 6 April include chief executive Jeremy Helsby and finance director Simon Shaw, who received £1.27m and £891,390 respectively in salary, bonuses and perks for 2011. Savills’ head of residential property, Rupert Sebag-Montefiore, is also thought to be among the top earners, though his earnings are not disclosed by the company as he is not a board director. Savills declined to say whether any of these three intended to delay taking their 2012 bonuses.

While widespread attempts to exploit the timing of the tax changes have “depressed” King, the expected clustering of bonus payouts within the 2013/14 tax year may eventually be seized upon by Osborne as evidence of the apparent success of his controversial top-earner tax cut.

The chancellor has already suggested that Labour’s decision to raise the rate to 50% was “a con” because it had raised “almost no money”. A large part of the explanation for the seemingly disappointing tax take from the 50% was that many top earners timed their take-home income to minimise their tax bills.

David Cameron vows to press on with deficit reduction

Category : Business

‘We have to go further and faster,’ says prime minister as Bank of England officials disagree over best strategy

David Cameron pledged to go “further and faster” in reducing the deficit after the UK was stripped of its coveted AAA credit rating.

The prime minister insisted that the one notch cut to the debt rating was a reason to press ahead with balancing the public finances, despite claims by the Labour leader, Ed Miliband, that the UK now had a “downgraded government, a downgraded chancellor and a downgraded prime minister”.

Speaking at prime minister’s questions, Cameron said : “I’m the one saying this credit rating does matter, and it demonstrates that we have to go further and faster on reducing the deficit.”

The heated exchanges in parliament, where Miliband experienced one of his most awkward moments at PMQs when asked about the future of shadow chancellor Ed Balls, came after official figures reaffirmed that the economy had contracted by 0.3% in the final quarter of 2012.

Some economists pointed to upward revisions of previous quarters that showed that on some measures – excluding the impact of the volatile oil business – the economy escaped a double-dip recession following an uprating to 0% in the first quarter of 2012.

However, the economy only grew by 0.3% year-on-year, despite the boost from the Olympics.

Sluggish growth has sparked a debate about the role of monetary policy which resumed when Bank of England deputy governor Charlie Bean described negative interest rates as nothing more than “blue-sky thinking”.

Bean was speaking the day after his fellow deputy Paul Tucker had floated the idea of the rates, which effectively charge high street banks for depositing money with the central bank.

This led to complaints over the possible impact on savers but Bean said that such policies would prove difficult to implement and were unjustified at the moment despite the economy’s current woes.

This raised the prospect that Bank of England officials are at loggerheads over how to support the economy, demonstrated by the last meeting of the monetary policy committee meeting when three officials, including the governor Sir Mervyn King, voted to increase the level of quantitative easing (QE) by £25bn to £400bn. Other members, who have privately voiced concerns that QE has run out of steam, are known to back rival policies.

Across the Atlantic, US Federal Reserve chief Ben Bernanke also attacked the use of negative interest rates, which some countries have used to discourage high street banks keeping money on deposit with their central bank. He said: “It has significant negative side-effects which is why I do not support it.”

In the Commons, Cameron taunted Miliband by saying that he would never sit on the government side of the House unless he accepted the need to cut borrowing.

Miliband was faced with an extremely awkward moment when he dismissed the New Statesman magazine – one of the few publications to endorse his leadership campaign – after Cameron quoted a recent article calling for Ed Balls to be sacked.

Reading from the article on 20 February by Anthony Seldon, the author of Brown at 10, the prime minister said: “Let’s examine the fact that the New Statesman, the in-house magazine of the Labour party, says this: ‘His critique of the government strategy will never win back public trust, his proposals for the economy will never convince, his credibility problem will only become magnified as the general election approaches.’”

He added: “That’s not Conservative Central Office. That is the New Statesman.”

Miliband then managed to offend one of his few media supporters when he replied: “With the greatest of respect to the New Statesman, he is scraping the barrel really by quoting the New Statesman.”

Helen Lewis, the magazine’s deputy editor, immediately tweeted: “Better to be talked about than not talked about, eh? #silverlining.”

Sensing Miliband’s discomfort, George Osborne leaned over to the prime minister, apparently passing on a piece of intelligence. Cameron then said: “He says the New Statesman is scraping the barrel. It was the only newspaper that endorsed his leadership. I have to say in this Oscar week perhaps the best we can say is Daniel Day-Lewis was utterly convincing as Abraham Lincoln and [Ed Miliband] is utterly convincing as Gordon Brown – more borrowing, more spending, more debt.”