Weekly Financial News Roundup
Any thoughts of a recovery in the U.K. housing market were dealt a blow on Monday with figures from the British Bankers' Association revealing that the number of mortgages approved by major British banks fell by nearly 7% to just over 26,000 in March. Gross mortgage lending was also down slightly, at £8.9 billion, when compared with February, reaching its lowest level for 8 years, and down 47% year-on-year.
In other news, JJB Sports was reported to have negotiated a deal with its creditors to safeguard the future of the company and 12,000 jobs. The so-called "Company Voluntary Agreement" (CVA), which has been approved by landlords and creditors, could allow outstanding debts on 140 stores, already closed, to be settled, and rent to be paid monthly, rather than quarterly, on JJB's remaining 250 stores. Executive Chairman of JJB, Sir David Jones was quoted on the BBC website, saying, "We are delighted by the result of the meetings and the overwhelming support given to the company by our creditors, with every creditor present at the meeting supporting us."
On Tuesday, the Department of Health issued a warning that, in the event of a swine flu pandemic, businesses should expect 25% of their workforce to be off work in a repeating pattern. Stephen Alambritis of the Federation of Small Businesses said that this could be disastrous for the economy during recession. He was quoted on the Telegraph website, saying, "The absence of a quarter of the workforce could cost the British economy about £1.5 billion per day in lost business. If swine flu really takes hold, even people who don't catch it will want to stay at home and as a result you could get the wholesale shutdown of large areas of Britain."
Speaking of large areas of Britain, the results of research by price comparison website, uSwitch, which examined the effects of recession on the 98 largest areas of England and Wales were also released on Tuesday. The research revealed that despite major job losses in the City London, as a whole, has emerged relatively unscathed when compared with other perhaps less likely areas. Swindon, in Wiltshire, was the hardest hit of all according to the research, with house prices falling 16% in the last year, and the number of people claiming Jobseekers's Allowance up by a staggering 197%. York, Wigan and Milton Keynes were also amongst the areas to fare badly in terms of pay, job losses and housing prices.
More gloomy results were posted on Wednesday with Home Retail Group – which owns the Argos and Homebase chains – announcing a 24% fall in annual pre-tax profits from £433 million to £328 million. The group also warned of tough times ahead, particularly as the weakness of Sterling is likely to be passed on to customers, in the form of price rises. Oil major Royal Dutch Shell similarly announced a huge fall in profit for the first quarter of 2009, down 58% year-on-year and down 31% when compared with the final quarter of 2008 at £2.24 billion. The price of crude oil has, of course, plummeted to around $50 a barrel from a record high of $147 a barrel last summer. BP had already announced a 62% fall in first quarter profits earlier in the week.
Ironically, on Thursday – the day that the UK formally ended military operations in Iraq after six years – BAE Systems announced the closure of its factories in Telford, Leeds and Guildford with the loss of 500 jobs, as it cuts back its combat vehicles and weapons operations. A spokesman for the company was quoted on the Finance Markets website, saying, "Our forecast UK order intake has reduced and we have to match the size of our business appropriately to the projected nature and volume of workload."
There was more bad news for the U.K. housing market too if the figures released by the Nationwide Building Society were to be believed. The figures suggested that house prices fell again by 0.4% during April, leaving the price of the average British home at a little under £152,000 or down 15% year-on-year. Figures released by the Land Registry suggested a disparity between property prices across the country in March. Property prices in the North of England, for example, rose by nearly 2% in March when compared to February, whilst those in the West Midlands fell by a similar percentage.
There was, however, a shred of better news for Sport Media Group – publisher of the Daily Sport and Sunday Sport newspapers (sic) – which announced that it was no longer up for sale, having extended its existing banking facilities for another 18 months and taken out loans, from existing providers, for an additional £1.68 million. Chief Executive, Andrew Fickling was quoted on the MediaWeek website, saying, "We are pleased that we have been able to secure the financial position of the group and attract support and investment for our restructuring plans which we believe will allow us to take the group forward successfully in what are challenging economic circumstances."
It would be nice to end the week just once on a warm, positive note, but the only real cause for optimism on Friday was the support by the Treasury Select Committee for what it described as "innovative solutions" to the banking crisis provided by the Financial Services Compensation Scheme (FSCS). Even that though was tempered by scathing criticism of the banks themselves for their own reckless behaviour, and of the authorities for their failure to recognise the magnitude of the crisis in the first place and to manage it thereafter. Chairman of the Treasury Select Committee, John McFall, was quoted on the BBC website saying, "Bankers have made an astonishing mess of the financial system."
Elsewhere, the Insolvency Service published figures which revealed that individual bankruptcies had hit a new record in the first quarter of 2009 with just over 19,000 bankruptcies and nearly 11,000 IVAs or "Individual Voluntary Agreements". On a brighter note, the number of corporate bankruptcies fell in the same period although the figure was still up 54% year-on-year.