A not so happy New Year

For some anyway, Barratts priceless has announced that due lower than expected profits in the last quarter it has been forced to make 1,610 of its employees redundant (a third of its staff). The news comes at a time when Deloitte the administrative company are looking for a buyer for Barratts 173 high street stores and although some of the redundancies may get re-employed it will remain as a distant hope for many.

In other bad news for employees in the UK, Focus DIY has revealed that over the next year, 3,000 jobs will have to be cut, reducing their workforce by over 75%. Employees of Thorntons chocolates are also going to be hit with 180 stores planned to be closed over the next three years. This means job losses are going to be a certainty. Whilst, perhaps the most potentially damaging of all the company failures for employees going into 2012 is Blacks leisure being forced to appeal for a buyer. If the company fails to find a buyer then it will almost certainly be forced to close its 313 outlets and make all of its 3,885 employees redundant.

Heading into 2012 employment is predicted to rise as high 2.84million and with inflation at the rate it is, 2012 looks set to be a tougher year than could possibly be expected for most.

2011: The economic year in pictures (part 3)

September 2011: Apple are successful in their lawsuit against the Samsung Galaxy tab. At a hearing in Dusseldorf, the judge ordered the South Korean company to stop selling the tablet due to it being too similar in its design to its counterpart the IPad 2. The verdict came as a major success for Apple as they seek to rein in the growth of Google’s android phones and maintain their dominance in the market.

October 2011: On the 6^th October, Mervyn King, head of the Bank of England announces that it will inject a further £75billion into the economy. They did this through quantative easing, which is where Central banks increase the supply of money by printing more. On the same day the Bank also announced that they would hold interest rates at a record low of 0.5% to try and keep inflation back on track.

November 2011: In an attempt to create ‘a powerful new presence on the high street’ in the words of Chancellor George Osborne, Northern rock was sold by the Government to Virgin money for £747million. Northern Rock Plc has already been rebranded as Virgin money and a three year compulsory job cut ban has already been instated.

December 2011: UK unemployment continued to rise in 2011 with it peaking at 2.64million by the end of the year. This is the highest level in the UK since 1994 and is only expected to rise even further heading into the new year.

The good, the bad and the ugly

Luis Suarez, the Liverpool striker was recently handed an eight match ban pending an investigation, for his racist behaviour towards Manchester United defender Patrice Evra. To accompany this ban the FA also handed a £40,000 fine towards Suarez. Whilst, this fine may not come as a major economical blow to Liverpool and Suarez himself, Liverpool could potentially out on lose millions of pounds from this suspension.

Will his actions cost the 'pool'?

Suarez this year has comfortably been Liverpool’s best player, the cornerstone of their attack. So far he has scored or provided 14 of Liverpool’s 28 goals and has managed to add spark to an often blunt attack. With him Liverpool currently sitting pretty in sixth place, just three points of a champion’s league place and in the Carling cup semi finals. But, what could Liverpool expect to achieve without their key player?

No Champions league football for starters. Without their best player they will find it tough to hold pace with rivals such as Chelsea and Arsenal and are thus likely to fall back in the race for fourth place. If Liverpool do fail to get into the Champions league then they can expect a £65.6million loss in revenue (this is what they would receive if they reached the group stages) which would majorly upset their financial predictions.

Where will they end up?

Liverpool’s chances of winning the Carling cup would also recede as his ban includes the two legged semi final against Manchester City. This could potentially cost the club £10million through prize winnings and sponsorship deals as well as the chance to win a piece of silverware, something that has eluded them for over four years.

Whilst, all of these implications are based on ‘ifs’ I personally think that the likelihood of them occurring is quite high. This ban may not initially appear too economically strenuous on Liverpool, however, in the long run it could cost Liverpool over £75million. Or In other words the price of Andy Carroll, Jordan Henderson and Stewart Downing. This shows Luis Suarez actions were not only degrading but also potentially financially costly.

2011: The economic year in pictures (part 2)

May 2011: Sony online entertainment suffered a major hacking scandal in mid spring of 2011. Twenty-four million users of the Sony online entertainment company lost information to the hackers, whilst a further 12,700 people lost credit card numbers. The hacking led to the closure of the playstation network for a week (much to the glee of you xbox users) and sparked a number of hacking scandals.

June 2011: Greece’s sovereign debt rating was lowered to CCC by Standard and Poor on the 13^th June. This was the lowest sovereign debt rating in the world at that point and resulted in huge losses for major stock exchanges. Although, Prime Minister George Papandreou proposed a reshuffled cabinet the damage had already been done and the Eurozone crisis ensued. 

July 2011: Formula one in 2012 will for the first time, not be shown on free to air TV as a result of SKY securing a seven year deal to show the motorsport. The deal has sparked much controversy throughout the UK, with many bemoaning the ‘Beebs’ cost cutting measures and the amount of control that SKY now has over live sport shown in the UK.

August 2011: The London riots in August created much social disharmony amongst the nation. People began to doubt the mindset of the ‘youth’ along with peoples respect for others. To go along with this the government faced a huge financial problem with their estimated to have been over £100million worth of damage and over 14 companies filing for bankruptcy as a result of the riots.

2011: The economic year in pictures (part 1)

I will look at the major economic events of the year in pictures and give a quick explanation on why in their own way they shaped the world.

January 2011: The US and China sign an unprecedented $45billion export deal which included the transfer of 200 Boeing aeroplanes. The meetings between President Barack Obama and President Hu represented the beginning of a new diplomatic relationship between the two most economically powerful nations on Earth. Whilst, also helping Boeing catch up with its arch rivals airbus in the power battle of the plane makers.

February 2011: Honda, the Japanese car company was forced to recall 700,000 of its cars due to a defective spring which may cause its cars engines to stall. The problem affected its Fit, Freed and City compact cars and came as a major financial cost to Honda. The recalls in Japan meant that developments of its new concepts were pushed back for three months, and several plants were forced to close down.

March 2011: The Japan earthquake tore apart the country both socially and economically. 45, 700 buildings were completely destroyed whilst a further 144,300 were damaged. Production was also forced to halt in most factories forcing Japan's economic growth to practically halt for the last year. Despite this Japan's stock market did manage to carry on as normal throughout most of the natural disaster.

April 2011: The British royal wedding created a wave of euphoria in not only Britain but the whole world. 2.82million people flocked to the UK in May many to specifically watch the wedding itself. This is the highest figure ever for the UK and provided a welcome boost for the UK economy. People were also notably less frugal around the time of the royal wedding with spending in May roughly 15pc higher than in the prior three months.

Beaten by Brazil...

...No, not at football but at economics. Brazil today became the sixth-largest economy overtaking the UK in the process. Due to the banking crisis in 2008 and the inevitable recession which followed it the UK has slipped one place to seventh, whilst the top three all remained the same with the US at 1 followed by China and then Japan.  

In more positive news, the same economic league table produced by the centre for economics and business research (CEBR) also predicted that by 2016 the UK’s economy will be bigger than France’s. Despite this however, both countries’ economies are expected to be overtaken by those of Russia and India by 2012.

This economic change is of course all part of a growing change. Not only are countries in Asia and now more recently in South America (in Brazil’s case) overtaking those in the west. But, countries with vital commodities such as oil and food are also doing exceedingly well. This trend is only expected to continue with the oil rich Arab nations economies going from strength to strength.

The implications of these forecasts are unlikely to be too damming for the UK economy though. Brazil has a population of 200million three times the size of the UK’s, this means that proportionate for the UK’s population its economy is still strong. These forecasts are also unlikely to affect the UK’s credit rating which if it were to fall from its triple AAA status would spell disaster for the coalition government.

Overall, after having so recently suffering from the euro zone crisis and the recession I think we can just be thankful that the fall is only one place and not more.

The Boxing Day Economics Pub Quiz

In this special Christmas edition of the quiz, test yourself on the latest economical news as well as a few more 'Christmassy' based questions.

   
1)      Which Prime minister/President recently appointed an ex-Lehman executive as his economy minister?

a)      Mariano Rajoy           b)    Barack Obama           c)     Helle Thorning-Schmidt       

      2)      Which British lingerie company entered administration last week?

a)      Bella Lingerie             b)    Ultimo                        c)    La Senza

      3)      How much did British Airways pay to purchase BMI, the airline company?

a)      $134.6million             b)    £195million                c)    £172.5million

      4)      Roughly how many fake Christmas trees were sold in the UK this year?

a)      10million                    b)    5million                      c)    30million

      5)      How much higher are sales expected to be in December 2011 than any other month of this year?

a)      5%                            b)   30-40%                      c)    50%

How do you think you did? Well you can find out the answers are below.

Answers: 1-a, 2-c, 3-c, 4-b, 5-b

'The countdown' of reasons to be positive heading into 2012: Number 1

The queen’s diamond jubilee in June should lead to a huge surge in visitor numbers and trade rights across the UK. Not only this but along with the Olympics a month later it will combine to reinstate the patriotism and enthusiasm to spend money that has been absent for the most part of the recession.

The jubilee will also bring about an extensive street cleaning and management program throughout the whole of the UK. By improving the environmental quality of an area people will be more likely to spend money in this area, which in turn should help the UK avoid the ever looming double dip recession. With the vast number of major events occurring in the UK next summer including both the jubilee and the Olympics many hope that 2012 will mark the upturn in Britain’s economic fortunes.

This is my last blog before Christmas so a merry Christmas to you all and let’s hope 2012 is a good year for you rather than the year of ‘doom and gloom’ that has been predicted by so many.

'The countdown' of reasons to be positive heading into 2012: Number 2

Throughout 2011, German chancellor Angela Merkel has stood firm in not permitting the Eurozone central bank to pool and monetize the European debt. Although this has proved Merkel to have a strong backbone as well as be a good strategic leader it has done nothing to help the EU dept crisis. In 2012, this could change with many believing that Merkel may relax her policy.

Will she crack?

If Merkel were to relax her policy the European central bank would be able to flood the market with newly minted euro’s which would help to decrease the cost of the sovereign debt of all the Eurozone countries. This in turn should hopefully lead to a rally in equities and commodities and cause an upturn for both the European and UK economy.

Although, Merkel maintains her stance that she will not allow the European central bank to monetise the dept crisis, I personally believe that she will crack. If this happens the EU should find itself in a far stronger position by this time next year.

Fly me away...

...As long as it’s with BA it seems. The owner of British Airways today secured the £172.5million purchase of BMI in which they have managed to increase their landing slot share at Heathrow airport from 45% to 53%. It is a deal which many expect to bring about job losses, a notion supported by Willie Walsh, chief executive of IAG (the holding company of BA) who “is just unaware of the numbers yet”.

Have British airways gone too far?

Walsh expects the deal to be good news for the UK economically with BA intending to switch the majority of BMI’s short haul flights to longer haul destinations in emerging markets such as China and Indonesia. Whether this change in destination will actually have any effect is debatable. These destinations are already available on rival airlines such as Virgin Atlantic and of present Britain remains a relatively unpopular destination to visit.

An alternative view of this deal is that BA is simply attempting to monopolise the market.  By securing the deal BA have managed to reduce consumer choice and therefore be able to dictate prices. This could potentially price other airlines out of the market something Sir Richard Branson agrees with; “This deal simply cuts consumer choice and screws the travelling public”.

Whatever, the case though, IAG have secured an extremely competitive deal. Most people forecasted the value of BMI’s Heathrow slots alone at £382.6million let alone the whole company. The very fact that BA secured this deal for such a low price shows that within the UK the BA holds too much power in the airline market and today’s deal will only strengthen that position.

'The countdown' of reasons to be positive heading into 2012: Number 3

Do you have any gold stashed away? If, you do then 2012 has the potential to be a superb year for you. Gold prices are expected to rise to $2,400 an ounce by the second quarter of next year the highest price they have ever been. An ounce of gold is currently priced at $1,600; if the prices are set to climb by as much as they are predicted to then gold speculators could potentially be making a 50% profit next year.

This price rise isn’t expected to stop in 2012, however. Prices of gold are expected to grow exponentially rising as high $6,000 an ounce by the end of 2013. So whilst, 2012 may be too early to ‘cash’ in your gold it will nether less be an extremely good year for gold investment and a ‘quick buck’ could certainly be made in this market.

I wouldn't cash in your gold just yet

An early Christmas present? Perhaps not. But, gold should provide an good long term investment for those interested.

'The countdown' of reasons to be positive heading into 2012: Number 4

On the way up?

Heading into 2012 the British chambers of commerce (BCC) has released some enlightening figures revealing that the UK GDP growth shall strengthen to 2.1% next year. This is almost twice as much as the estimated growth of 2011 (1.1%) and represents a gradual improvement in the fortune of the British economy. Although economic growth is expected to be slow next year it will still be present, which can only be a positive.

The BCC’s quarterly forecast for 2012 also shows that interest rates will begin to rise by August at the latest next year. This should mean that 2012 will be a happier year for savers than 2011 has been. However, whilst positives can be drawn when heading into the New Year, realism must be at the forefront of people’s thinking. Unemployment figures are expected to rise to a peak of 2.62million next year and public sector borrowing will continue to spiral out of control. This has led to predictions of there being no short term economic improvement in 2012 a sentiment I don’t personally agree with.

I personally believe that with CPI inflation expected to fall in 2012 to 3.0%, economic growth should begin to match it and eventually surpass by the end of 2012/2013. This should enable the UK to avoid the double dip recession so many fear and make 2012 an important building block in the re-growth of the economy.

'The countdown' of reasons to be positive heading into 2012: Number 5

With there being only five days until Christmas day, 2012 is almost upon us. In this series of posts I will countdown five economic reasons to be positive when heading into the New Year.

The Olympics in London next year will hopefully bring a welcome lift to the economy in the UK. With over £6billion worth of construction contracts having been signed already unemployment figures in and around London should fall dramatically by next summer reducing the dependency ratio along with it.

The event of a lifetime...

The games should also provide a welcome boost to the tourist industry which has been flagging in recent years mainly due to the recession. It is estimated that on the back of the games there will be 29.4million overseas arrivals in the UK which would be a 4% rise on 2011. This will bring more income to both London where the games are being held and the rest of the UK, due to the fact that visiting nations will have their base camps dotted around the whole of the UK.

The 2012 Olympics should hopefully provide a welcome relief for both the British economy and the coalition government. Many hope that ‘Olympic fever’ will grip the nation and encourage people to open up the purse strings. Whether, this actually happens is to be seen, however, what the Olympics is guaranteed to provide is immense drama and something to look forward to in the upcoming year.

Bye, Bye HMV...

HMV, the music and electronic store today announced half-year losses of £45.7million putting significant doubts on its ability to continue. In a last ditch bid, Simon Fox, chief executive of HMV has decided to sell HMV Live (their live music business) in an attempt to reduce their borrowings. This is all despite ‘Live’ being the only profitable strand of the HMV group during the March to October period, only going to highlight the dire situation that HMV is facing.

HMV has already closed 34 stores and many project the 258 store network to diminish even further.  This will come as further bad news to the firm since it recently refitted over 100 of its stores in an expensive attempt to stabilise the rapid financial decline it is currently experiencing.

The main reason this is happening is of course the internet which has enabled smaller firms to take their place at the table and bigger companies such as Tesco to monopolise the market and undercut HMV’s prices. The other reason is the recession. People now have less to spend and due to what HMV sells (cds and movies) being luxury goods which means they are not essential, there is far less demand for the companies goods.

But, what impact will this have on you? If you receive a gift voucher for HMV for Christmas then you had better use it quickly seeing as it looks unlikely that they are going to be around for long. Whilst, the closure of HMV in 2012 would surely lead to a domino effect in which no retailer in the high street would be immune from facing the same fate.

The Monday Night Economics Pub Quiz

Every Monday I will produce a quiz based of the preceding week’s economic news. Test yourself on the latest economical news and see how up to date you are with the latest stats and figures.

1)      How much money did the UK banks pull out of France last week?

a)      $41.7billion                 b)    $29.3billion                 c)     $12million

2)      Which woman compiled research on the high street at the beginning of last week for the government?

a)      Mary Portas               b)    Harriet Harman         c)    Stephanie Flanders

3)      How much did retail figures fall in November by?

a)      1.2%                              b)    0.2%                              c)    0.4%

4)      Which gaming company splashed out £23million to buy the online games developer Ash gaming?

a)      Atari                              b)    Sony                              c)    Playtech

5)      How much are passenger numbers going through Heathrow airport expected to rise to next year?

a)      71million                      b)    30million                      c)    60million

How do you think you did? Well you can find out the answers are below.

...Not really!

Answers: 1-b, 2-a, 3-c, 4-c, 5-a

Anglo-French relationship? Perhaps not

Fearful UK banks have today withdrawn billions of pounds out of the floundering French economy in a move which will surely bring into question any future Anglo-French relations. The total figure withdrawn was believed to be $29.3billion and prompted France’s central bank chief Christian Noyer to launch a scything attack on the British economy. During this attack he said, “The economic situation in Britain today is very worrying, and you’d rather be French rather than British in economic terms”. Noyer also called for the rating agencies to strip the UK of its triple-A credit rating in a move which would spell economic disaster for the coalition government.

Best of enemies

But, where has this money gone? The answer is of course the ultra conservative and safe governments of Germany and the Netherlands ($40.3billion and $21.1billion respectively). Along with the money from France a combined $20billion has also been pulled out of Spain and Italy signifying the UK’s intent to try and improve their financial situation as quickly as possible. Although likely to ease the financial pressure in the UK, the latest figures released by the Bank of England are unlikely to improve the already frosty relationship between France and Britain. This relationship, which is already tense due to David Cameron’s refusal to sign the European summit deal a week ago, will certainly come under some scrutiny over the next few months as the future of the EU is put into question.

Are you a high street snubber?

Alarm bells were today being sounded on the high street as official figures revealed that in November sales figures had fallen by 0.4%. Although, in fact if fuel sales were to be taken out of the equation the situation would be even bleaker with a 0.7% fall during the month. This depressing news comes amid fears that the UK is on the brink of a double dip recession, along with the fact that inflation at 4.8% (see previous blog) is still outstripping the 1.8% growth in wage packets. But, why is it now that consumers have decided to reject the high-street?

How many of these are you buying this Christmas?

Earlier this week Mary Portas criticised the high street for ‘lacking dynamism and mobility’. However, it has been revealed that prices had actually fallen by 0.8% since October representing a major promotional push by retailers. This price push is certainly not a symptom of un-dynamic retailers and would indicate that the problem lies with the consumer rather than the retailer. What the general feeling of the consumers to the high-street is of course anyone’s guess.

The fact that the sales figures were so low is all the more worrying seeing as the figures were expected to be stronger due to many people hoping the public sector strikes last month would lead to those affected heading to the shops. However, with the festive season now well and truly upon us the high street and the economy will hope that in a month’s time those figures will be looking up rather than down. In the meantime though, we can all do our bit by heading down to the high-street and buying those special Christmas presents for the loved ones.

Progress or Inconsequential?

It was revealed today by the office for natural statistics (ONS) that the consumer prices index (CPI) fell to 4.8% during November. This was a small decrease from the 5% from the month before. Despite this, however, the rate still remains higher than the Bank of England’s 2% target.

The consumer price index measures changes in the price level of a consumer goods and services purchased by households. On this occasion the fall in the inflation rate is mainly down to a slowdown in the in food and non-alcoholic drink prices. Cereal and vegetable prices also fell by 1% over the same time period contributing to the reduction in inflation rates.

What actual conclusions can be drawn from this fall in the CPI? It could be argued that we have seen the peak in inflation, however, with many leading economists such as Robert Peston believing that a ‘second recession’ is on the way inflation may be on the rise in the near future. That said the fall in the CPI will provide some welcome relief for families over the festive period. All be it minimal with the pay growth still below 2% people will still be in for a festive season of hardships.

Inflation has been a bugbear for savers for a number of years now. This is because high inflation has made it difficult for savers to keep up with rising prices. Despite, the fall in inflation rate today this trend is expected to continue with savers predicted to continue to lose out to inflation.

What are your thoughts on the fall in inflation? Will it have a positive effect on your day to day lives or will it be inconsequential?