Weekly Financial News Roundup
Figures from the Bank of England published on Monday suggested that new, unsecured borrowing – on overdrafts, credit cards and personal loans – rose by £52 million in December and exceeded the amount repaid for the fist time since June. By contrast, the number of mortgage loans approved slipped slightly to just over 59,000 in December compared with November, although this was still higher than the monthly average for the second half of 2009.
Elsewhere, budget airline Ryanair posted a loss of €10.9 million, or £9.5 million, for the last three months of 2009, but this was substantially lower than the loss of €101.5 million reported in the same period in 2008 and the carrier was optimistic about its full-year profits. Ryanair said that it expects full-year profits to be in the region of €275 million, rather than "the lower end of the range of €200 million to €300 million previously guided", according to the BBC website. The airline added that it had cut some loss-making routes and a 12% fall in fares had been offset by a 37% fall in the cost of fuel, helping its bottom line.
There was more aviation news on Tuesday, with the Unite union, which represents members of British Airways' cabin crew, expected to go the High Court in an effort to reverse the changes to pay and working conditions imposed by the beleaguered airline. British Airways suffered a loss of £292 million for the six months to the end of September and was expected to report further heavy losses for the final quarter of 2009 later in the week. Unite members are already voting in a strike ballot, which closes on 22nd February, so British Airways could face further strike action as early as 1st March.
The Unite union also represents workers at Cadbury, the British confectioner due to be taken over by US food giant Kraft, after a takeover bid was approved by European Union regulators and accepted by 72% of shareholders. Unite had already urged Kraft to make its intentions clear as far as the workforce was concerned but, on Tuesday, Cadbury staff from across the country gathered in central London, seeking support from ministers.
Elsewhere, oil giant BP reported increased profits in the fourth quarter of 2009, up 33% to $3.45 billion compared with $2.59 billion a year ago, but a 45% fall in annual profit, down to $13.96 billion from $25.59 billion in 2008. The firm said that oil and gas production increased by 4% in 2009, but that lower oil and gas prices and the fact that it only just broke even its refining business contributed to the losses.
There was some worrying news for consumers on Wednesday with the Office of Gas and Electricity Markets (OfGEM) – the government regulator for electricity and gas – stating that there was "reasonable doubt" that the energy market in the U.K. was capable of delivering secure, sustainable energy supplies in the next 10 years, according to the BBC website. The regulator suggested that investment of £200 billion was needed to avoid the possibility of power shortages in the next 10 years, but warned that this level of funding was unlikely to materialise without further incentives for energy companies and, in any case, might result in a significant increase in the cost of energy to the consumer.
Continuing energy-related news, on Thursday British Gas announced that it was cutting domestic gas prices by 7% with immediate effect. British Gas was keen to point out that this was the third time it had cut prices in the last 12 months and that the cut would benefit 8 million customers, each of whom would save £55 a year on average. The cut came after energy suppliers, including British Gas, had been criticised for not passing on the dramatic falls in the prices of wholesale gas and oil which have occurred since the start of last year to customers.
In other news, the Bank of England's Monetary Policy Committee (MPC) was widely expected to announce the end of its programme of quantitative easing which, so far, has bought £200 billion of government bonds, by way of encouraging lending by commercial banks. The MPC was also expected to hold the Bank Rate at 0.5% for the eleventh month in a row, despite inflation – as measured by the Consumer Price Index (CPI) – rising to 2.9% in December, well above the target of 2%.
On Friday, British Airways did, as widely expected, report a substantial loss of £50 million in the last three months of 2009, but this was significantly less than the loss of £122 million the company reported in the same period in 2008 and less than analysts had anticipated. There was less heartening news overall, however, with the pre-tax loss in the first three quarters of 2009 growing to £342 million compared with £70 million in the same period the year before.
There was more gloomy news to finish the week too, figures from the Insolvency Service suggesting that the number of personal insolvencies in England and Wales hit a record high for the last three months of 2009 and for the year as a whole. A total of nearly 36,000 people were declared insolvent between October and December, a rise of 25% compared with the same period in 2008 according to the official figures. However, the figures were influenced by the introduction of the Debt Relief Order (DRO) in 2009; a DRO is a form of insolvency for people who have debts of £15,000 or less, few assets and little disposable income and can eliminate debt without formal bankruptcy proceedings. The idea is that straightforward debt discharge cases can be "fast tracked" through the courts with no personal appearance required, but at the end of a 12-month period the debt is discharged, in the same way as with formal bankruptcy proceedings.