Latest figures confirm the Great British Recession

July 2, 2009

LONDON: The recession is now on a par with the very worst year of the Great Depression. Revised figures on Tuesday uncovered the full extent of Britain's economic contraction.

The economy shrank by 4.9 per cent in the year to the first quarter of 2009, the Office for National Statistics said. The fall in gross domestic product was far greater than previously calculated, as the government statistician realised the full scale of the fall in company activity.

"Clearly this is now the worst peacetime recession since the 1930s," said economist Michael Saunders of Citigroup. The worst contraction then was a year of about -5 per cent and "this year will not be hugely different".

The contraction in GDP during the first quarter alone was 2.4 per cent - the previous estimate was 1.9 per cent. This was the biggest one-quarter fall in 35 years.

read full article at  The Sydney morning herald

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Ten US banks fail recession test

May 8 2009

US banks would need a total of £50 billion in additional funds to survive if the recession deepens, the results of government "stress tests" showed.

An assessment of the robustness of the sector found that 10 of the 19 largest banks would need to find extra capital to see them through the bad times.

Bank of America faces the largest potential shortfall of £23 billion.

It joined a list of institutions that also includes Citigroup and Wells Fargo.

The stress tests were designed to gauge whether America's 19 largest banks have enough capital to see them through a deepening of the recession.

After Bank of America, Wells Fargo was found to have the second largest shortfall of £9.1 billion, followed by GMAC with a potential £7.6 billion black hole.

Citigroup is being asked to raise an additional £3.3 billion to make it secure. Goldman Sachs, JP Morgan Chase and American Express were among the nine banks deemed not to need to raise additional funds.

The stress tests were designed to help regulators assess the ongoing financial stability of US banks.

They look at two models of the economy going forward - one in which unemployment reaches 8.8% next year and house prices drop a further 14%. In the second scenario, joblessness rises to 10.3% and property slips another 22%.

Banks facing a shortfall under the model will have to come up with a plan to raise additional capital by mid June.

 If they cannot do so independently, they may have to turn to the government's £466 billion financial bailout fund.

sourced from Runcorn and Widnes Weekly News

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UK economy shrinking at fastest rate in more than 50 years

Downward revisions to official statistics show output fell 2.4% in the first three months of the year and the recession started three months earlier than thought

The recession facing Britain is even deeper than had been thought and started more than a year ago, it was revealed today.

National income fell in the first quarter of this year by 2.4%, the biggest drop since 1958, as the Office for National Statistics revised its initial estimate of 1.9%.

The figures are much worse than expected. Extended to the whole year, the drop in output in the January to March period is now equal to 4.9% – the worst since records began in 1948.

"We hope the recovery comes as soon as possible but sadly we now know this recession has been longer and deeper than we had thought," said shadow chancellor George Osborne.

"This also means that in the future unemployment will be higher and Labour's debt crisis will be even worse."

Although GDP fell 2.4% in the third quarter of 1979 and first quarter of 1974, statisticians said these were rounded from 2.36% or 2.37%. The figure for this year was exactly 2.4%.

The revision is one of the biggest ever made by the ONS and it said the reasons were changes to its estimate of the construction and services sectors.

The ONS also revised down its figure for the second quarter of last year to -0.1% from zero, meaning the recession started earlier than previously thought. And the fourth quarter of 2008 figure was revised down to a fall of 1.8%.

"The recession, which now begins in the second quarter of 2008 rather than the third, is now thought to be quite a bit deeper than previously thought, and is looking ominously like the early 1980s vintage," said Danny Gabay of Fathom Consulting.

Critics of the Bank of England who called for big interest rate cuts in the first half of last year, will feel justified by the data, since the Bank's monetary policy committee argued into last autumn that there was little likelihood of a recession occurring and delayed rate cuts until October. In fact, the economy had entered one last spring.

Separately, the Trades Union Congress said that while there were signs of "green shoots" in the economy, this was more to do with an easing of the pace of the fall in output rather than that a big recovery was under way.

"This recession is already worse than the 1990s one and is likely to be worse than that of the 1980s," said Richard Excel, TUC labour market expert. "It has been very severe and we are probably only half way through. It will be quite some time until employment and growth return to pre-recession levels."

Paul Gregg, labour market expert from Bristol University, noted that unemployment had started rising earlier in this recession than in previous ones and was "encouraged" that monthly rises in the claimant count appeared to be slowing down.

sourced from The Guardian

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British jobs for British workers

Deal hope in foreign workers row

Workers say the action is not racist, but about discrimination against Britons

A possible deal to end the row over the use of foreign labour at Lincolnshire's Lindsey Oil Refinery will be put to local union leaders and workers later.

The proposal emerged after talks chaired by Acas.

A GMB union source told the BBC the deal could see half of the disputed 200 jobs offered to British workers, but the Unite leader has denied this.

Hope that new 'half-and-half' deal in foreign workers row could end wildcat strikes

A proposed deal that could end the bitter row over foreign workers at an oil refinery will be put to unions today.

Marathon talks aimed at ending a series of wildcat strikes at Lindsey plant in Lincolnshire ended last night with the outline of a possible deal.

Union sources said it involved offering half the jobs of the disputed recruitment contract to UK workers.

Downturn will bring big fall in migrant workers, says CBI

Companies facing decline in demand for goods and services will reduce their use of agency staff, MPs are told

The use of migrant labour in Britain will decline abruptly as companies face a sharp fall in demand for their goods and services, the Confederation of British Industry told MPs yesterday. John Cridland, the CBI's deputy director general, told the Commons home affairs committee that the first response of many firms to the downturn was to reduce their dependency on agency staff, many of whom are migrant workers.

He said that there was evidence that many nationals of new EU states were going home as unemployment rose in Britain and suggested that the flow of skilled migrants from outside Europe would also decline. He added: "I expect that, when we have the next report from the [Home Office's] migration advisory committee on the needs for skilled labour, we will not see the same need for non-EU labour in the same numbers because of the need to provide as many employment opportunities as possible for the unemployed. All I'm suggesting is that the market will correct itself, but what we cannot avoid is a significant increase in unemployment, which is a sad but inevitable consequence of recession."

read full articles Click here

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Updated: Should we help the banks

Click here to see video of Gordon Brown

Gordon Brown says the government will do 'everything it takes' to support the economy

Gordon Brown video

The Guardian's economics editor, Larry Elliott, assesses the government's latest banking bail-out



We I'm in two minds regarding this, I know that we really don't have any choice but I think the banks the should not only loan to business but also loan to the their customers.

Why should we keep or money in banks, their have wasted / loss billions of pounds in bad deals and investments - so why are we having to help out these private companies.

I don't fully understand but if we loss the banks to who economy would crash, but why use tax payers money. The issue I feel the most strongly about is what is the bank doing with this money, and who is it helping.  Is this securing peoples own investments, shares and pensions.

Now I privately rent my flat and I use public transport, so these actions taken by the Government - reducing vat and lowering interest rates has not benefited me at all. Transport cost have in increased by up to 10%, rent has not reduced like peoples mortgages. In the present economic situation you are not really able to ask for a pay rise, because if you have a job you are luck.

When the banks were offering 5 times and 100% mortgages, I was unsure because of the finical commitment. But what I feel is the people that over mortgages them self's either knowingly or accidental have been bald out by the government. But people like me who was not sure I could commit to the monthly re payments is know stuck, because the deposits are so high I can't afford to pay my rent, bills and save for a deposit.

I know that this money to the banks is intended to go towards business, but maybe reduce tax on people earning below £25,000 per years, because this will give people money in their pockets to spend in the high street.





Bank shares in free fall despite bail-out

Bank shares plummeted today amid concerns that the latest government package to stabilise banks and encourage lending would not solve the deepening economic crisis.

Royal Bank of Scotland was the biggest faller in the FTSE 100 share index, its price collapsing by more than 66%, to 11.6p, after it warned ofthe largest loss in British corporate history of up to £28bn and its chief executive, Stephen Hester, admitted that full-scale nationalisation of the bank had been considered.

The taxpayer already owns 58% of RBS but this will soon rise to 68% when £5bn of preference shares owned by the government are converted into ordinary shares.

The first day of dealing in shares of the newly created Lloyds Banking Group resulted in a 34% drop to 65p. The bank, which now has more branches than any of its rivals, issued a trading statement insisting that Lloyds TSB had been trading "satisfactorily", while HBOS, which it rescued in a deal brokered by Gordon Brown, had not suffered any "significant change" in its trading position.

Unlike RBS, Lloyds TSB is not asking the government to convert the preference shares it owns in the combined bank into ordinary shares, which means the taxpayers' stake is staying at 44%.

Eric Daniels, the chief executive of Lloyds, said the bank was "continuing its ongoing constructive dialogue" with the government about the wide range of measures announced today. Among them is a plan to sell insurance to banks to help them cap the losses on loans that have turned sour in the credit crunch.

HSBC, the only bank listed on the stockmarket not to have raised any fresh funds, insisted it would not need to use the government insurance scheme.

"HSBC has not sought capital support from the UK government and cannot envisage circumstances where such action would be necessary," the bank said. "HSBC has long been one of the world's most strongly capitalised banks and is committed to maintaining this position."

Shares in HSBC closed down 6.5% at 501p amid persistent talk that it would need to raise funds, which has been widely predicted since analysts at Morgan Stanley said last week that the bank may need as a much as £20bn of extra funds.

Barclays shares – which lost a quarter of their value in a frenzied hour of trading on Friday – recovered many of their losses early on but closed down another 10%, at 88p.

To participate in the government's insurance scheme, Barclays would need to sell preference shares to the government or find cash to cover the cost of the guarantee. John Varley, the bank's chief executive, is thought to be determined not to sell such shares to the government, even though they would not appear on the bank's shareholder register.

The bank has yet to decide whether to participate in the insurance scheme. Varley said he welcomed the range of announcements today. "The government has worked hard to construct practical and extensive measures to help the UK economy," he said. "The programme is made up of a number of important initiatives in the areas of capital ratios, funding and asset protection."

He added that Barclays would work with the tripartite authorities – the Treasury, the Bank of England and the Financial Services Authority – over the coming days "to understand the detail of the programme and to determine how it can be used to best effect on behalf of customers, shareholders and the wider economy".

RBS expects to use the scheme and Hester admitted today that he expected the bank to be "guinea pig". He admitted total nationalisation of RBS had been discussed with the government. "It was discussed as something we all wish to avoid," he said.

Bruce Packard, banks analyst at the stockbroker Evolution, said: "These share price movements tell you that the government has gone around and said the bank bail-out in October hasn't worked and if they hadn't done that I don't think we'd be in this position.

"I'm a banks analyst and I don't want to criticise the government. They did the right thing in the second half of October but I'm not sure they're doing the right thing now." He has a price target for RBS shares of 18p

sourced from The Guardian

UK banking plan faces criticism

The government's latest plan to counter the economic downturn by encouraging lending has been criticised, and sent banks' shares tumbling.

Opposition MPs argued that the government's measures were inadequate and too many details remained unknown.

Meanwhile Prime Minister Gordon Brown said the move, which centres on state insurance for banks, was essential to help protect jobs.

Business leaders have raised concerns over how much the plan will cost.

The latest government package is the second major set of measures to encourage banks to lend to individuals and businesses, as credit remains scarce or expensive to obtain.

The news sent banking shares down sharply, with Royal Bank of Scotland closing down 67%.

The bank's warning that it could see record losses for 2008 compounded worries about the state of the finance sector.

'Turbulent times'

But the prime minister said that without the new schemes, jobs may have been "needlessly" lost at healthy firms struggling to gain access to necessary funding.

"Good businesses must have access to credit," said the prime minister.

"It is because of this that we are taking the action to expand lending."

Shadow chancellor George Osborne said the details of Monday's package remained a "mystery".

Mr Osborne added that the prime minister "hasn't saved this economy and he hasn't even saved the British banks yet".

Liberal Democrat treasury spokesman Vince Cable said the government's latest plans were inadequate, urging instead for the whole banking sector to be nationalised.

"The government must bite the bullet on the public ownership and control of the banks to ensure that lending is maintained to sound companies who can keep the economy ticking over in these turbulent times," he said.

What we've said is 'you've got to lend about £6bn more to businesses and to people' and the RBS Group have agreed to that Chancellor Alistair Darling

The long list of policies includes a scheme to offer insurance against banks losing more money from the bad debts that started the credit crunch.

Meanwhile, the Bank of England is to be able to buy assets direct from firms.

The government would not reveal how much the latest plan would cost the taxpayer.

Four key points

Here are the key points of the government's latest announcement:

• Banks will be able to take up government insurance against their expected bad debts

• The Bank of England will be able to buy up to £50bn worth of assets in companies in all sectors of the economy

• Northern Rock has been given extra time to repay its loans from the government

• The government is increasing its stake in RBS to nearly 70% from 58%. RBS also said it was set to report a huge loss for 2008, with asset write-downs of up to £20bn.

Insurance plans

Under the insurance scheme, banks will agree with the government the amount they expect to lose from particular debt.

The Treasury will then sell insurance against about 90% of the institutions' additional losses from the debt.

Chancellor Alistair Darling told the BBC that banks taking out the insurance would have to make "very specific legally binding agreements to lend more money".

Under the Bank of England's new role, it will be able to buy up to £50bn of high quality assets, such as bonds and loans, directly from companies

Northern Rock extension

There have also been changes to the terms of previous bank rescues.

The government has given Northern Rock longer to repay its loans from the government.

There was concern that the timetable for repaying the loans was forcing Northern Rock to reduce its mortgage lending too quickly.

Separately, RBS said it had agreed with the Treasury to swap the £5bn of preference shares the government holds for new ordinary shares, increasing the government's stake from 58% to nearly 70%.

The swap will reduce RBS's annual payments to the government as preference shares have a higher guaranteed rate of return than ordinary shares.

sourced from The BBC

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UK recession set to be confirmed

The UK is set to go into recession on Friday 23rd January 2009

The Press  Association

The UK's slide into recession is due to be confirmed on Friday when output figures for the fourth quarter of 2008 are released.

The contraction in Britain's economy for the final three months of the year follows a 0.6% decline in GDP for the third quarter - a 'technical' recession as defined by two successive quarters of negative output.

Experts, including the deputy Governor of the Bank of England Sir John Gieve, have warned that the contraction will be sharp.

Most economists are forecasting that the economy shrank at double the pace seen the previous quarter.

A 1.2% decline in GDP would be the worst performance since the third quarter of 1990, at the height of the last recession, when GDP also fell 1.2%.

However, some experts are warning that the decline could be as much as 1.3%, which would be the biggest fall in more than 28 years.

GDP would last have fallen by more in the second quarter of 1980, when it plunged by 1.8%. The annual rate of output in 2008 is also set to make for grim reading in what will be a far cry from the 3% seen in 2007.

It will also make the Treasury's initial forecasts for growth of between 2% and 2.5% look woefully optimistic.

This year is predicted to be far worse, with the economy forecast by some to shrink by 2% or even closer to 3% in what could be the biggest decline since the Second World War.

In a week dominated by economic news, inflation figures are also due out on Tuesday and minutes of this month's Bank of England interest rates meeting will follow on Wednesday.

The reduction in VAT together with the recession's impact on demand and firms' pricing power is set to have pulled inflation down again sharply, to 2.6% in December.

The predicted drop in the Consumer Prices Index (CPI) marks an exceptionally steep decline on the 4.1% seen in November and will likely lead to further fears over deflation.

article sourced from The Press Association

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Sales slide at Currys and Argos

When I read this article, it really does real like the downturn is having a major effect. You would expect a lot of small retail shops to close and the odd big one like Woolworth, but here we are facing the end of Argos, Currys and PC world - so all those out of town retail parks will soon be very empty.

The article

Sales at several of Britain's top retail chains have fallen markedly as a result of the economic slowdown.

DSG International, which owns Currys and PC World, said like-for-like sales - which ignore new stores - had dropped 10% in the three months to 10 January.

Home Retail Group said like-for-like sales at its Argos chain had fallen 7.5% in the 18 weeks to 3 January.

DIY chain Homebase, which is also owned by Home Retail Group, saw like-for-like sales in the same period drop 10.2%.

Many retailers are struggling as consumers cut back on spending amid rising jobless figures, falling house prices and recession worries.

read more sourced from the BBC

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Recession and the housing market

As the housing market starts falling is this going to most difficult year for many home owners. As the prices fall by up to £3,000 per month, this is not the time move.

But as I’m sure you will have noticed a lot of houses that were for sale late last year are now for rent, people who have let their property will not find it an easy marked. If your house is on the market you would be very lucky to sell it, the biggest problem is agreeing a sale price and then all the people in the chain being able to to get the mortgages and financial security.

Almost 3,000 home owners are falling into negative equity every, negative equity is bad if you are planing or need to move. Negative equity means you are paying more for your mortgage then the value of your property.

But over a period of time house prices will increase after the low. I am not surprised this has happened to the housing market, the prices were getting so high and out of control. I know a lot of people hold the banks responsible for the housing situation, but we had a lot to do with it, people over estimated their salary with self certification and people mortgages them self’s up to the hilt.

read full article

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HMV to snap up some Zavvi stores

Entertainment retailer HMV has said it is to buy 14 stores from troubled chain Zavvi, funded by selling new shares.

Proceeds will also be used to fund a move into the live music market, taking a joint stake in a firm running 11 venues such as Hammersmith Apollo.

It will also get naming rights to some of the venues.

HMV also said that sales in the five weeks to 3 January - which includes the Christmas period - were up by 2.9%, or by 0.5% not including new stores.

Rebranding

The Zavvi stores it is buying are all profitable, HMV said, primarily in locations where it does not currently have a store.

It expects the cost of the purchase to be about £2m - including fitting out and rebranding the stores. Nine of them are in the UK and five in the Irish Republic.

read full article at The BBC

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What are you giving up in the downturn?

It has been a tough December for retailers, and grocers have not been spared in the downturn.

But it is not just that overall sales are falling.

Canny consumers have been trying to make their money go further and that has meant changing the way they shop.

any of the lost sales suffered by retailers will not be from people who were considering buying something and then decided not to.

They are just as likely be from customers considering buying one product and then instead, buying a different one.

read full article scoured from the BBC

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Land of Leather latest UK retail collapse

LONDON -- Sofa retailer Land of Leather filed for bankruptcy protection on Monday, becoming the latest British retailer to succumb to a downturn in consumer spending amid the global economic slowdown.

Land of Leather, which operates 109 retail stores across Britain and Ireland, entered the administration process _ where a company is run independently with the priority of returning funds to creditors _ after failing to raise working capital or find a buyer.

Lee Manning, one of the appointed administrators at Deloitte said that the company's stores would continue to trade as normal "while the administrators continue to talk to interested parties with a view to concluding a sale of the business as a going concern."

Land of Leather said it had found itself in challenging market conditions "for some time" as a result of the credit crunch and a lack of household spending on big ticket retail items. sourced from The Washington Post read more

My comment

This is the first of these kind of shops to go, I think we will be seeing a lot more interior / furniture / house hold accessories - Now we have all bought cushions, rugs, lampshades and kitchen's, all these shops that have opened up on the strength of the ideal home / interior design period will all start suffering. Lets all start being individual, make cushions from old materials or clothes rather then buying new ones. Thing more creatively around our homes and their interiors.

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Q&A: What is a recession?

The dreaded R-word - recession - is in the air as every day seems to bring more gloomy economic news.

Many commentators are now openly talking about the current slowdown turning into a recession.

But how do economists define a recession and when will we know if the UK is going through one?

What is the definition of a recession?

This is a thorny question on which experts still disagree.

However, technically speaking, the UK economy would slide into recession when it experiences two successive quarters of what is known as "negative growth".

For this to happen, the total amount of goods and services produced by the UK - known as gross domestic product (GDP) - would have to contract on a quarter by quarter basis for a total period of six months.

read full article at The BBC

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Is all the high street for sale

[gallery order="DESC" columns="2"]

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Carrier bags and Re-usable bags

“Plastic shopping bags, or carrier bags or plastic grocery bags, are a common type of shopping bag in several countries. Most often these bags are intended for a single use to carry items from a store to a home: reuse for storage or trash is common. Heavier duty plastic shopping bags are suitable for multiple uses as shopping or storage bags.” sourced from Wikipedia

I use a re-usable bag for my shopping (onya bags), I looked in a couple of kitchen cupboards and found lots of carrier bags - we accumulate them without knowing it. In the last year Sainsbury’s has re-moved it carrier bags from the check outs (still available if you ask for one) and M & S are charging. I remember when we had to pay for carrier bags in all supermarkets.

• Every year, an estimated 13 billion plastic carrier bags are given away by Supermarkets; this is the equivalent to over 290 bags to every person in the UK.

• We produce and use 20 times more carrier bags then we did 50 years ago.

Read the full article . . . more

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Will economy create ghost towns?

News article from the BBC . . . watch here

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New Capitalism

Robert Peston has done a couple of short videos - relating to the current economic situation.

Part One [Broadcast Thursday December 18th]:

Watch here

Part Two [Broadcast Friday December 19th]:

Watch here

sourced from The BBC

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Changing High street

As we see some of the most well known high street stores closing - are we seeing a new high street emerging. Will small independent shops start opening or will the highstreet be full of boarded up shops and for sale signs. 

I am not that surprised that the high street is starting to showing of downturn. We have lived for best part of 10 years in a consumer fuel enviroment. As high streets up and the country were all starting to look the same. Do we need all these shops selling very simarly things and as we are all starting to do more amd more shopping on the internet, why do we need still high street outlets.

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Recession in the news

Videos from around the internet relating to recession

[youtube=http://uk.youtube.com/watch?v=3UUsi9I7YJc]

[youtube=http://uk.youtube.com/watch?v=ku2yxP9ceRI]

[youtube=http://uk.youtube.com/watch?v=NoBv1EfD37k]

[youtube=http://uk.youtube.com/watch?v=IRL8mwSSzMg]

[youtube=http://uk.youtube.com/watch?v=F4RofRmDi18]

[youtube=http://uk.youtube.com/watch?v=vglyHuh2un0]

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Manufacturing output falling at fastest rate since 1980s

read more  sourced from The Guardian

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The changing recession

Thank you for visiting my site. I am 31 years old and have been interested in this current downturn. I don't remember the previous recessions having much effect, but maybe it did.

The most noticeable element this time is the banking sector, house prices and the high street. The main difference is how fast paced everything is happening. Each day i watch the news something else has happened.  

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