Unsecured Loans - More Job Losses Throughout the Financial and Telecom Sectors.

Published: 17 November 2008

Weekly Financial News Roundup

The week began with news of preparations for a meeting of the "Group of 20" (G20) – a forum of finance ministers and governors of central banks from industrial, and developing nations, including Australia, China, India and South Korea, for example – in Washington on the 14th, and 15th, of November. The worst global financial crisis since World War I has, of course, shaved 33% off the value of stock markets, globally, in the past two months, and led to unprecedented action on the part of central banks, in cutting interest rates. The G20 summit was expected to explore the possibility of governments introducing measures – such as cuts in taxation, and other fiscal stimuli – to complement the actions of the central banks.

Closer to home, there were murmurings – and, indeed, a deal of anger – surrounding the government-sponsored merger of HBOS with Lloyds TSB. Sir Peter Burt, who previously ran Bank of Scotland, as part of the HBOS group, and Sir George Mathewson, former CEO, and chairman of Royal Bank of Scotland, announced their opposition to the merger, on the grounds that Bank of Scotland would effectively disappear despite Government intervention. They claimed that ten of thousands of jobs, many of them in Scotland, could be saved if HBOS retained its independence. The government retorted by pointing out that Lloyds TSB had already lent £10 billion (€11.6 billion) to HBOS, so that they were already effectively in partnership, while Lloyds TSB described the actions of Burt and Mathewson as "irresponsible and lacking in responsibility", according to the BBC website.

It would be fair to say that the financial news for the remainder of the week was bad, almost without exception, with announcements of falling profits, job losses, and general signs of recession in the United Kingdom and across Europe.

In midweek, for example, it was revealed that third quarter unemployment in the UK had increased to 5.8%, from 5.4% in the previous quarter, with a total of 1.82 million people out of work. This already represents the highest unemployment figure since 1997, and some predictions suggest that it could rise still further, up to 2 million, between now and the early part of 2009. The Bank of England also announced, in its quarterly inflation report, that Britain has actually been in recession since mid-2008, and the recession will continue throughout 2009. The Bank expects the economy to contract by a further 2%, by early 2009, depending upon government policy, but has changed its view on inflation, which is expected to decline to just 1%, by the end of 2009. With regard to maintaining inflation at, or below, its target rate of 2%, Governor of the Bank of England, Mervyn King, was quoted on the BBC website, saying,"We are certainly prepared to cut bank rate again if that becomes necessary."

More doom and gloom on Thursday, with telecommunications giant British Telecom (BT) announcing a total of 10,000 job losses, 7,000 of which are likely to be in the various BT businesses across the UK. 4,000 jobs have already been cut, with a further 6,000 anticipated before the end of the first quarter of 2009. BT CEO, Ian Livingston was quoted on the Sky News website, saying, "Three out of our four business units, BT Retail, BT Wholesale and Openreach are delivering on or ahead of target. But profits in BT Global Services are simply not good enough and we are taking decisive action to put matters right." BT profits fell by 11% in the second quarter of 2008, to £590 million (€686 million). Not that it should really make us feel any better, but the bad news was not restricted to the United Kingdom; on the same day, it was revealed that the German GDP ("Gross Domestic Product") fell by 0.5% in third quarter of 2008, following a 0.4% fall in the second quarter, officially placing the German economy in recession. This latest fall was double the 0.2% widely anticipated by economists, and the last time Germany experienced this level of contraction is its economy was in 1996.

The Royal Bank of Scotland (RBS) saga continued on Friday, when the Bank announced that it would be cutting 3,000 of the 170,000 jobs in its banking and markets workforce across the globe, including in the City of London. The Bank employs 100,000, or so, people in the United Kingdom, but the cuts are unlikely to affect the workforce – at least, not directly – in its high street branches, or those of its subsidiary National Westminster (NatWest). RBS predicts that it will make an operating loss, for the first time this year, and is in line for a "bail out" of up to £20 million (€ million) from the British government. RBS declined to comment, directly, on the job cuts, but a representative was quoted on the BBC website, saying "We constantly review our operating model to make sure it is appropriate to the market condition, and take action accordingly." Welcome news, no doubt, for those who find themselves unemployed in the middle of a recession.

Elsewhere in Europe is was revealed that the collective economy of the so-called "Eurozone" – that is, the 15 countries that use the Euro as their national currency – contracted by 0.2% in the third quarter of 2008, following a similar contraction in the second quarter, to place it, too, "officially" in recession. The announcement followed warnings from the IMF ("International Monetary Fund") and other fiscal bodies, in recent weeks, that the major economies of Europe, the United States and Japan are all likely to be in recession by the middle of 2009, and for the first time since World War II. From a European point of view, there is every indication that the fourth quarter of 2008 will see sharper falls in economic output than those seen in the second and third quarters.

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