Major UK Names Enter Administration
November 26, 2008
High Street old timer Woolworths with 815 stores UK wide has today gone into administration.
This will put thousands of people out of work with the board of directors meeting at 6pm to make a decision regarding Woolworth’s future.
Not only this, but MFI are also set to go into administration. Problems cited have been less demand, cash flow problems and credit terms being withdrawn. Though not all of the 110 stores are closing, only 24 will remain open.
Back to Woolworths, all 815 stores are in danger with 25,000 potential redundancies. Woolworths have continued to struggle with their £385 million debt, which has been made worse recently as they have had to pay cash to suppliers as they could no longer get trade insurance.
Though there have been great efforts to find buyers for their business, today they have had to accept their fate in administration. I think this goes to show that as much as the Labour Party would like us to believe that the recession will be over in 6 to 12 months, this is unlikely to be the case.
We should look to the long term and prepare for the worst. The recent budget plans seem to be a gamble with Britain’s future, this is the time to be careful and prepare for the next couple of years of doomy finances, not risk everything.
Global Economic Trauma
October 27, 2008
As share prices continue to fall, European markets have hit a five year low figures show this morning. This follows Japan’s Nikkei index which closed earlier at a 26 year low, causing investors to fret about global economic slowdown.
Market Strategist, Neil Parker from Royal Bank of Scotland said;
“There’s lots of volatility, not just in the equity market, but in the interest rate and currency markets too, we’re going to get further big swings as the markets watch for what the authorities are going to do.”
The economic crisis is literally a global problem, all markets are down and in many cases are in the worst shape in the last ten years.
The G7 are warning that the strength of the Yen is threatening economic stability and are currently trying to reduce the value of the currency. Though the Yen briefly weakened over the weekend it quickly climbed back to its 13 year high over the dollar. The strength of the Yen is attributed to the carry trade, where traders borrow the Yen in order to buy other currencies with higher interest rates.
As the difference between Japanese and other currency rates grow less and less carry trading has taken place. These traders are now using other currencies to buy Yen which is boosting the currency further.
General trauma in all financial markets and it’s not going to get any better any time soon. I think it’s best for Gordon Brown to let the market run its course… I can just see him scraping this £50 billion together and it going straight down the pan!
Britons are best preparing themselves for a rough ride; markets go through peaks and troughs as a natural economic occurrence. No amount of bail out money will change the current cycle we are in.
Brown £Billion Bailout
October 13, 2008
The £37 billion bailout for RBS, Lloyds TSB and HBOS has been hailed as essential for the whole of the economy by Gordon Brown.
The markets have welcomed the news as the FTSE 100 opened five percent higher today. The RBS chief executive is to stand down as the bank is now worth less than the extra capital that was already raised by its shareholders.
Lloyds TSB are revising the terms of its takeover of HBOS and is raising £5.5 billion of new capital.
Barclays is to raise £6.5 billion to strengthen its balance sheet with help from its investors. The Barclays group has said that it will not be paying dividends for the end of the 2008 financial year, due in at £2 billion.
The £37 billion bailout will leave only HSBC (a foreign owned bank) as a fully independent bank on the high street.
The Government has already had to bail out two major UK mortgage lenders and controls Northern Rock and Bradford & Bingley.
The intervention raised hopes that the suffering markets may begin to fight back in the midst of a turbulent economy. I think like many others that this is unlikely!
More Economic Trouble
September 30, 2008
Here in the UK; Brown, King and Darling have said they will:
“take whatever action is necessary to ensure the continued stability of the system.”
The American House of Representatives has voted against a $700 billion financial bailout. Gordon Brown has said that this news is very disappointing as the collapse of the US economy will impact on the UK’s. The failure of the plan that was to help the financial industry has pushed global markets significantly downwards.
On Monday this week the government nationalised Bradford & Bingley, which is now the second UK bank to be put under public ownership throughout the deepening financial crisis.
After the announcement regarding the bail out, the Stock Market fell by $3 Trillion, the biggest drop in four years.
It is not yet clear how the powers that be will sort the situation but a solution is needed to stabilise the global economy. The financial future is looking very grey indeed.
Hard Times
September 19, 2008
Times are hard and everybody is feeling the pinch. It seems that we cannot turn on the television or radio without hearing about companies in decline, jobs being cut and people having to curb their spending. 
I think by reflecting on my social circle I can see the affect that the credit crunch has had. This time last year my friends and I would go out every weekend; shopping and partying. Now, nobody is going out to bars and restaurants, even on payday the bars are not full. It was not long ago that there were queues to get into many bars.
It seems that our habits are changing and spending behaviour in general has taken a ‘u’ turn. A recent social with my friends included a night at Mecca Bingo. It was cheap and cheery, and frankly a good night out. This really is not something that I would have thought I would have found myself doing. In all fairness, it wasn’t too minging either. Since the smoking ban, the air in the hall was bearable. Granted, everything was a little bit brown from smoking years past. But I got involved and overall it was fun.
When the smoking ban came in Bingo halls lost 50% of their custom. This is now beginning to turn around, with people tightening their purse strings, many low cost businesses are flourishing amongst the economic turmoil. The likes of Aldi are seeing their profits soar, while Marks and Spenser continue to plummet.
I think we will see far more of this behaviour over the next year or two. However, it leaves me and many others wondering; how long the recession will last and how hard things will get until we finally get through the other side?!
Another US Bank Hit By Credit Crunch!
September 15, 2008
In the news today, American investment bank Lehman Brothers has filed for bankruptcy protection. The fourth largest investment bank has made the announcement amid their growing financial crisis.
The bank has incurred billions of dollars in losses in the American mortgage market. This news will deliver a further blow to the global financial system as many other banks are involved with Lehman business.
It is unlikely that Lehman will receive help from the US Federal Reserve like Bear Stearns had been seen. This is because Lehman is an investment bank rather than a consumer institution with people owning checking accounts.
European and Asian stock markets have seen a sharp drop and the euro has grown in strength against the dollar. The fall of yet another financial institution has increased fears over the strength of the global financial system.
Both Barclays and the Bank of America were in talks to rescue the Lehman bank. Though, since both institutions pulled out over the weekend, Lehman Bros is looking even more likely to collapse.
Lehman Brothers employ around 25,000 staff around the world, including 5,000 in Britain. The file for bankruptcy protection will give the company time to reorganise and devise how they will pay off creditors.
This is now three of the top five American investment banks that have been struck hard by the credit crunch. It is not only financial institutions that are feeling the strain, AIG; the largest global insurer also has problems mounting. With exposure to the property market crisis, AIG have asked for 40 billion dollars from the US Federal Reserve to stay afloat.
So, it is not only the UK that is struggling financially. America was first hit by the credit crunch and it appears that the UK is following their trend. Our government keep trying to instil an opinion within voters that the UK economy will be OK. Looking at the market, I think that any simpleton can see that this is not the case. It looks more and more likely that the UK will sink far deeper into the financial crisis that we are currently seeing globally.
It is likely that the situation will get far worse before it gets better. I just hope that Britain is prepared for the financial turmoil on the horizon, rather than hiding in denial!
London Stock Exchange Suspended
September 8, 2008
Trading was suspended this week after a technical problem prevented the trading system operating at The London Stock Exchange. 
The problem was “connectivity issues” a spokesman said, so traders were not able to connect to the LSE trading platform. Though the problem is being rectified as quickly as possible, no share trading has been done today with no orders at all.
The American based Intercontinental Exchange (ICE) was also halted temporarily on Monday.
Though both markets were suspended, connectivity was resumed again after a few hours in both cases.
However, the LSE market is still not fully functioning, trades can be entered and deleted, but no trades can actually be implemented. This has meant because no trades have been finalised the trade prices are not accurate.
Continuous trading is where the buy and sell orders match on the system and this automatically executes the trades. It won’t be until the system is fully up and running that prices will be restored.
Food Prices Soar
September 5, 2008
In the news today an index compiled by the BBC showed that supermarket prices in the UK have risen by 8.3 percent since January.
The biggest price increase seen was in the meat and fish sector which went up by 22.9 percent and fruit and vegetables also increased by a massive 14.7 percent. Verdict Research, a retail analyst found that some food items had risen in price by 50 percent, such as pre-packed croissants.
We have all been feeling the pinch recently and these figures have been published, showing that food products have risen in cost far, far above the official level of inflation.
The BRC, British Retail Consortium said that inflation of food prices was 10 percent, that’s more than twice the official stated figure by the Consumer Price Index of 4.4 percent. The BRC also said that fresh food items had increased was even higher by 11.9 percent. 
The Bank of England’s Monetary Policy Committee (MPC) kept interest rates at 5 percent. Fears over the forthcoming recession in the UK economy has urged the MPC to cut interest rates, though this has not yet happened and is unlikely to in the immediate future.
The Pound Weakens
August 14, 2008
The pound has hit its lowest point in nearly two years, making fears worse of the pressing recession.
Having fallen further against the dollar it now stands at $1.8619 which is at a 22 month low.
It was Wednesday that the Bank of England gave its grave assessment of the UK’s economy and since then it has dropped sharply. 
With inflation steeply rising and the economies stunted growth it looks like British purses will be in trouble.
Though the dollar has been in real trouble against the pound and euro over the last few years it looks like the benefit of shopping abroad is no more. It is not after all just the UK that is in economic trouble, it is the fear of poor European growth that has aided the dollar in bouncing back from its troubles.
Though the American economy is still struggling with their own credit crisis, it does look like they are on their way back, if nothing else due to the deterioration of the rest of the World.
Last week saw the Euro at a six month low of €1.48, worsened by the Georgian military conflict.
So it not just the UK government that are struggling with its finances. The Bank of England said that it could be two years before we get out of the recession.
We should all brace ourselves for the gloom and look forward to better fiscal times!
Windfall Tax Considered by Government
August 1, 2008
In the news today it said that the government is considering implementing windfall tax. This comes after record increases in the cost of fuel. The revenue generated would be used to aid poorer families that are struggling to pay fuel bills.
The main energy companies targeted are BP, Shell and British Gas who have announced recently multi million pound profits. Richard Lambert of the CBI has said however that this could be bad for consumers. So, it rests on Alistair Darlings’ shoulders to weight up whether this will be positive for our flailing economy.
The problem is that the government does not want to discourage investment into our economy. Business Secretary John Hutton has said:
“We’ve got to have a fiscal and a regulatory climate that encourages all of that investment because, quite simply, it will go elsewhere if there’s not confidence in the UK market. But the chancellor has to make these calls - very difficult calls - and he has my full support in looking at all of these issues.”
Though ministers have to look at the full picture, it is difficult for consumers to feel anything but resent against these Global Conglomerates. From April to June, Shell announced a £4 billion profit, this is up by 4.6 percent on the same time last year. Centrica, the parent company for British Gas made over £900 million in the first half of the year.
Looking at the figures there was a 20 percent fall, but then the day after British Gas customers were given a 35 percent price increase. I could go on with figures from BP, but I think you get the idea…
Something must be done to prevent energy poverty, especially for when the winter kicks in. It is now in our government’s hands to decide what course of action to take and whether the windfall tax will be the best plan.