Weekly Financial News Roundup
Figures published by the Financial Service Authority (FSA) on Monday suggested that the number of mortgages that fell into arrears during the first quarter of 2009 was just under 60,000, down 12% on the previous quarter. Conversely, repossessions increased by 13%, to more than 14,800 in the same period, despite the Bank of England's Monetary Policy Committee cutting interest rates for six months in succession, and increased pressure on lenders by the FSA to treat customers leniently. In fact, the FSA said, on Monday, that four firms are already under investigation for the way they have handled arrears and repossessions – charging unfair fees, starting the repossession process too quickly and several other cases already under consideration.
Elsewhere, figures released by Aon Consulting suggested that total defined contribution pension assets in the U.K. increased by 3%, to £430 billion in the last month. That was the third month in a row that they had increased, but, while recent gains offer hope for future pensioners, defined contribution pension funds have fallen dramatically since the start of the credit crunch and projected income remains below 2007 levels. In fact, the stock market needs to rise for a further nine months, until the first quarter of 2010, before pension assets return to 2007 levels, according to Aon Consulting.
Irish broadcaster Setanta entered administration on Tuesday, after failing to attract outside investment to pay sporting organisations, including the Scottish Football League and English Premier League, for television rights. Administrator Deloitte said that collection of subscriptions and broadcasting in Great Britain would cease, with the loss of 200 jobs, but that Setanta Ireland, which has not entered administration, would continue to broadcast in the Republic of Ireland and Northern Ireland. Chairman of Setanta, Sir Robin Miller, was quoted on the BBC website, saying, "This is a sad day for all concerned. Unfortunately, in a difficult and highly competitive market, and despite strenuous efforts by the board and management, it has not been possible to find sufficient additional funds in the time available to ensure its survival."
There was better news for food retailer Waitrose, however, with sales up 8.4%, and customer numbers up 250,000, year-on-year, for the four weeks to 13th June, according the market researcher Nielsen. Customer spending per visit was also up 5%, meaning that Waitrose is performing close to the best of its mass-market rivals, thanks to the launch of its "essentials" range of staple products.
On Wednesday, the Organisation for Economic Cooperation and Development (OECD), which represents the thirty most industrialised nations in the world, said that the global economy was near the bottom of the worst recession since World War II. It did, however, revise its forecast for the U.K. economy, which it said is in "sharp recession, forecasting a contraction of 4.3%, compared with 3.7% previously. Furthermore, the OECD predicted zero economic growth, and a budget deficit reaching 14%, in 2010, at odds with more optimistic estimates from Chancellor of the Exchequer, Alistair Darling.
Elsewhere, U.S. car giant Ford defended its decision to raise its prices in the U.K. for the third time in five months, blaming the weakness of the pound against the Euro for the rise. Prices rose 4.7% in February, 3.75% in April and are set to rise by another 4%, increasing the list price of Ford models by between £600 and £800. Managing Director of Ford in Britain, Nigel Sharp, said that the currency issue posed problems for the industry, as a whole, and that Ford had experienced losses running into nine figures. Mr. Sharp was quoted on the Telegraph website, conceding, "Raising prices in difficult times, and when a scrappage scheme has been introduced, may seem counter-intuitive but with so many of our costs priced in Euros, there is no choice if we are to maintain a viable business."
Beleaguered airline British Airways (BA) revealed, on Thursday, that it had received a response to its request to 40,000 employees to work for nothing, for up to a month. Nearly 7,000 members of staff agreed to a voluntary pay cut, including 800 who agreed to work for nothing at all, in a bid to cut costs. The airline was criticised by trade unions, who described the request to work for nothing as "unrealistic", and a spokesperson for the Unite union was quoted on the Finance Markets website, saying, "The fact that less than 2% of BA's workforce chose to take up this option demonstrates that there is no real support for this."
In other news, the results of a poll conducted by Tesco Compare revealed that almost 50% of credit cardholders in the U.K. have reduced their spending as the result of recession. The average balance of those questioned had been reduced by £386, to £2,333, with repaying debts, increasing savings and a desire to become less reliant amongst the reasons cited for doing so. Conversely, 33% of those questioned said that they had no intention of changing their credit card habits, and 10% said that they would be unable to manage their finances without a credit card.
The Bank of England published its latest Financial Stability Report on Friday, in which it said that although the banking system is in a healthier condition than it was six months ago, it is still fragile and vulnerable to "economic shock". The Bank downwardly revised its estimate of the total loss of assets attributable to the financial crisis from $25 trillion (£15 trillion) in March, to $15 trillion (£9 trillion), but also called for further powers to perform its duty of financial regulation. Statements by the Governor of the Bank of England, Mervyn King, also appeared to be at odds with the Chancellor and the Financial Services Authority, in regards to future regulation of financial institutions.
In other regulatory news, media regulator Ofcom ("Office of Communications") proposed that broadcaster BSkyB be forced to share its major sporting and film releases with rival broadcasters, in what it described as the "most appropriate way of ensuring fair and effective competition." BSkyB vehemently disagreed, however, saying that it would "use all available legal avenues" to prevent the move. Interested parties have until 18th August to respond to the proposal.