The week began with more bad news for BP whose share price fell 5% on the London Stock Exchange at one point because of fears that oil was leaking, once again, into the Gulf of Mexico. National Incident Commander, Thad Allen, said that he had ordered the capped well to be reopened to allow oil, if it is leaking, to be funnelled to the surface. This process would take three days, according to BP. BP has already paid over $3.95 billion (£2.6 billion) in clean-up costs, including $200 million in settling 32,000 compensation claims, whilst there are another 78,000 under evaluation. The company was expected to be high on the agenda when British Prime Minister David Cameron met US President Barack Obama in Washington on Tuesday.
In other news, BDO, one of the largest accountancy firms in the world, reported that fraud increased to a record £1 billion in the first half of 2010, with mortgage fraud accounting for 20% and falsifying accounts for 16% of all reported cases. Head of fraud services at BDO, Simon Bevan, was quoted on the BBC website, saying, "Linked to this unethical activity is an increase in insider dealing where management don't directly defraud their own employer but their actions leave them open to stringent and often public, enforcement action by financial regulators." BDO publishes its figures every six months, but they only include cases that have been publicly reported to the authorities, so the real level of fraud could be higher still.
On Tuesday, figures from the Office for National Statistics (ONS) revealed that net public sector borrowing in the UK in June was £14.5 billion, down £0.2 billion year-on-year, but still significantly higher than the £13.1 billion forecast by analysts. Total government debt represented 63.9% of UK GDP ("Gross Domestic Product"), the ONS said, the highest level for 17 years. Chancellor of the Exchequer George Osborne was quoted on the BB website, saying, "The public finances numbers today remind us why we need to get on top of the budget deficit." Mr. Osborne was insistent that the time was right to start cutting the huge national debt, pointing to the strength of growth in the private sector.
Elsewhere, the result of a vote by 11,000 British Airways (BA) cabin crew on the latest pay offer from the airline – 2.9% in 2011 and 3% in 2012 – was expected later in the day. The dispute between British Airways and the Unite Union has dragged on since before Christmas and the proposed deal also includes the reinstatement, at least in part, of travel perks and a guarantee that staff involved in industrial action will not be victimised. Unite had not issued any guidance to its members, leaving them to decide whether to accept or reject the latest offer.
BA cabin crew did, in fact, reject the airline's "final" offer by 3,419 votes to 1,686, raising the prospect of further industrial action. The number of votes cast was low, however, causing BA to issue a statement, which read, "We are encouraged by the result of this ballot which shows that 73% of our cabin crew did not reject our offer." Joint General Secretary of Unite, Tony Woodley, also acknowledged that the turnout had been low and was quoted on the BBC website saying, "Let's get round the table – let's solve the problem. Now this offer has been rejected lets 'jaw jaw' and not 'war war' with Willie Walsh." Despite this rhetoric, Mr. Woodley refused to rule out further industrial action on top of the 22 days since March, which have cost BA an estimated £150 million or more.
Later in the week there were encouraging signs, at home and abroad, that global economic recovery was well under way. On Thursday, the latest Purchasing Managers' Index (PMI) from the Chartered Institute of Purchasing & Supply (CIPS) and Markit revealed a rise to 56.7 in July compared with 56 in June and bolstered the stock markets in London, Paris and Frankfurt. The FTSE 100, CAC 40 and DAX indices rose by 0.9%, 1.6% and 1.4% respectively on the news. Chief Economist at Markit, Chris Williamson, was quoted on the BBC website, saying, "We were very surprised, it's a good start to the second half of the year." The news was welcomed by investors after Ben Berbanke of the US Federal Reserve said on Wednesday that the economic outlook on the other side of the Atlantic remained "unusually uncertain" and low interest rates would still be needed for recovery to continue.
There was also some good news for investors who lost money in the Equitable Life pension company. An independent commission is currently examining the best way to allocate compensation payments and is due to report by January next year at the latest. Treasury Minister Mark Hoban said that the total amount of the compensation available would be revealed in October, when the government conducted its public spending review. He did, however, warn that public spending cuts may affect the amount of money available, saying, "The scheme will be a significant spending commitment for this government and cannot be considered in isolation from the other spending decisions that it will need to make over the coming months and what is affordable in that context".
More figures from the ONS, published on Friday, revealed that the UK economy grew by 1.1% in the second quarter of 2010. The figure was only a preliminary estimate, but was significantly higher than the 0.3% growth recorded in the first quarter of the year and the 0.6% forecast by analysts. It did, in fact, represent the fastest quarterly rate of growth for four years. The services and construction sectors were major contributors to overall growth and, indeed, the transport and communications sector was the only one to record a fall, mainly as a result of the eruption of the Eyjafjallajokull volcano in Iceland, which led to the temporary closure of European airspace in April and May.