Weekly Financial News Roundup
The week opened with the news that government ministers are to consult over a £7 billion plan to install so-called "smart" meters in every British home by the end of 2020 over the next three months. The meters will allow energy suppliers, as well as consumers, to keep track of the energy consumed, and will do away with the need for meters to be read periodically or meter readings to be estimated, as accurate, up-to-the-minute, data can be gathered remotely. The government hopes that the meters will help to reduce the amount of energy used, domestically, in turn reducing fuel bills and carbon dioxide (CO2) emissions. A spokesman for the independent watchdog, Consumer Focus, was quoted on the ITN website, saying, "Visiting every home in the UK is a once-in-a-lifetime opportunity and should also be used to help make peoples' homes more energy-efficient."
In other early news, HSBC, which wrote down a total of £16.4 billion in 2008, reported that its bad debt provision for the first quarter of 2009 had increased year-on-year, although its pre-tax profits for the same period increased. Group Chief Executive, Michael Geoghegan, was quoted on the BBC website, saying that the performance, "was encouraging, boosted by record results from our global banking and markets business," although he declined to offer any firm figures.
Elsewhere, it was announced that, in response to the difficulty faced by consumers in differentiating between established professional companies in the money transfer market and their less reputable counterparts, the FSA ("Financial Services Authority") is to become the regulator of the market from November 2009 onwards. All companies transferring money will be required to undergo a rigorous application process, which will include financial scrutiny of directors and owners, and any company transferring €3 million per month will be required to seek authorisation.
Figures released by the ONS ("Office of National Statistics") on Tuesday revealed that unemployment in the U.K. rose from 6.7% to 7.1% in the first quarter of 2009, leaving a total of 2.22 million people out of work. The figures, which represent the largest quarterly rise since the early Eighties, were actually supposed to be released on Wednesday morning, but were subject to a leak, or an "accidental early release", as the ONS described it, into which an inquiry was being held.
Elsewhere, on Tuesday insurance company Legal & General announced that it had commenced plans to cut 560 jobs in its savings business – 300 full-time employees and 260 contract and temporary staff – on top of 450 job losses amongst its support staff already announced in February. Legal & General employs roughly 8,500 people, with main offices in London, Cardiff, Brighton and Kingswood, Surrey.
On Wednesday the Bank of England said, in its quarterly Inflation Report, that economic recovery in the U.K. is likely to be slow and protracted, with a further contraction in GDP ("Gross Domestic Product") of 4.5% during 2009 before a return to growth by the middle of 2010. This is more pessimistic still than government predictions of a decline of 3.5% in GDP, but the report also said, "The prospects for economic growth remain unusually uncertain, reflecting the exceptional economic and financial factors affecting the outlook," according to the BBC website.
Figures published by the CML ("Council of Mortgage Lenders") on Thursday revealed that the number of mortgage loans approved in March increased sharply, by 29%, when compared with February but was still down 33% year-on-year.
Telecommunications giant, BT, also reported an annual loss of £134 million, largely due to a write-down of nearly £1.6 billion in its so-called Global Services Division. BT Chief Executive, Ian Livingstone, described 2009 as "a year for delivery", according to the eWeek Europe website, a year in which BT will cut a further 15,000 jobs, mainly in the U.K., on top of the 15,000 lost last year. BT cut its dividend from 15.8p to 6.5p, and said that it would nearly double its contributions to its pension fund, to £525 million per annum over the next three years, in an effort to reduce its pension deficit, which although not disclosed by BT on Thursday, is believed to be as high as £6 billion, or even £8 billion.
There was better news for Royal Mail, however, which reported profitability in all four parts of its business – including its main letter delivery and Post Office businesses – contributing to an operating profit of £321 million to the end of March, almost double the £162 million reported a year ago. This was the first time in 20 years that all four units of the Royal Mail Group recorded a profit, but Royal Mail has also seen its pension deficit more than double to £6.8 billion. Chief Executive, Adam Crozier, was quoted on the PrintWeek website, saying, "Our people have delivered strong financial results and high quality customer service across all our businesses in the face of extremely challenging trading conditions." The government is, nevertheless, continuing with its plans to privatise Royal Mail, at least in part, insisting that external funding is vital for its future.
The week finished with the less than heartening news, once again from the CML ("Council of Mortgage Lenders"), that the number of homes repossessed in the first quarter of 2009 was 12,800, up 23% when compared with the previous three months, and up fully 50% when compared with the same period last year. The CML had made what it described as a "pessimistic" prediction that the total number of repossessions during 2009 could be as high as 75,000 – nearly double the figure of 40,000 for last year – but may need to revise that prediction, downwards, as the year unfolds.
Not exactly heartening news from the eurozone, either – although perhaps a crumb of comfort that Britain is not alone in her economic woes – with the news that the German and French economies contracted by 3.8% and 1.2% respectively during the first three months of 2009, contributing to a 2.5% decline across the eurozone as a whole. The fall in German GDP – that is, the value of all goods and services produced in the country – was, in fact, the largest since reunification, in 1990.