UK News
Insights from the UK and beyond
Was one point enough?
The Bank of England has cut interest rates by a whole point to 2 percent in response to increasing worries over discouraging data and a looming recession.
This week, the all-important services sector (which makes up three quarters of economic output) recorded its weakest headline index since 1996 and seventh straight month of contraction. Together with dismal news on unemployment and inflation, these surveys confirm that recession is spiralling as we reach the close of 2008.
So was the rate cut enough?
The consensus among economists polled by Reuters was indeed for a full point drop, bringing the base rate to the lowest in more than half a century after the big 1-1/2 point cut last month.
But several economists had pushed for a 1-1/2 point cut and some even thought the economic situation is dire enough to warrant zero percent.
Will Aldi and Lidl open up in posh areas now?
A report published today by Verdict Research predicts a surge in discount grocers in Britain. Verdict Research says discounters like privately owned German groups Aldi and Lidl should raise as much finance as possible to aggressively expand in markets where they are under-represented.
This could be good news for the thrifty, middle class shopper – no more need to venture outside one’s turf to areas one would not normally set foot into but which have become a weekly destination because they have a Lidl or Aldi.
from Global Investing:
To spend, or not to spend?
A day after Britain unveiled a multi-billion-pound fiscal stimulus package to spend its way out of recession, market analysts have been busy figuring out what it all means, in the context of a sharply slowing economy.
Nick Parsons, head of market strategy at nabCapital, has come to this conclusion:
Pre-budget report: what it means for personal taxes
Here is a guide on what the pre-budget report means for personal taxation by accountancy firm BDO Stoy Hayward. Income tax – changes to allowances and rates
The basic personal allowance for 2008/09 was increased above inflation from £5,225 to £6,035 as a one off measure to compensate for the loss of the 10 per cent starting tax rate.
Job crunch Britain: how have you been affected?
Net job creation in the UK has almost stopped as employers feel pessimistic about prospects for the economy, the latest quarterly Labour Market Outlook survey by KPMG and the Chartered Institute of Personnel and Development (CIPD) has found.
The balance between the proportion of employers looking to increase staff levels over the next three months and those expecting to cut has fallen from +41 in autumn 2007 to +2 in autumn 2008 – the lowest figure recorded since the survey began in spring 2004, according to the Payroll and Human Resources Newsletter. 
Of the 721 employers surveyed, 83 per cent anticipated that Britain’s economic condition would further deteriorate this autumn and only one percent said they thought there would be an improvement.Respondents felt more optimistic about their own organisation though, with only 25 per cent believing that things would get worse.
Spend and spend some more?
Recent headlines alarmed us with news of the country’s budget deficit having risen to its largest in six decades, while top economists ominously declared that we’ve moved beyond merely tipping into a recession, to hurtling towards one.
More crucially, both Chancellor Alistair Darling and Prime Minister Gordon Brown have sought inspiration from revered economist Maynard Keynes’ oft-cited advice – spend and spend some more to fight off the ill effects of an economic slump. Keynesian theory’s greatest principle is the fundamental concept of the circular flow of money. He opined that when individuals rein in money outflow, the government needs to be “priming the pump”.
Do we need a bank bail-out?
EU leaders went to Paris at the weekend and vowed solemnly to co-operate in their handling of the credit crisis. By Monday all bets were off as different countries either broke ranks or strained at the leash in their desire to protect their own private savers first by offering blanket guarantees.
That spectacle has raised all manner of questions — should there be a continental banking regulator for example, to fill the gap between the various central banks and the global regulators like the IMF?Â
Brown needs Darling in these troubled times
   One thing looks certain after Alistair Darling’s speech to***the Labour Party conference on Monday — he’ll be Chancellor of***the Exchequer for a while yet.******   Prime Minister Gordon Brown is expected to reshuffle his***ministerial team next week and there’s been a lot of speculation***that Darling could lose his job and be moved to another***department.******   The silver-haired finance minister has had a rough ride***lately. The economy is on the brink of recession and his***comments in a magazine interview saying the economic challenges***were the greatest in 60 years caused a furore and were blamed***for sinking the pound.******   But delegates at the Labour conference today just loved him.***They stood and clapped and then they clapped some more after***Darling hit out at unfettered capitalism and the huge payouts***given to bankers that he said helped cause the credit crunch.******   Darling looked genuinely embarrassed. He called for them to***stop but the delegates just went on. Besides modesty, the***finance minister had another reason for wanting them to stop.******   He had another type of conference call to attend to. A G7***one. The finance ministers and central bankers of the rich***nations club were having a hastily-arranged telephone chat at***1230 London time to discuss the latest bout of market turmoil.******   Given London’s position as one of the world’s top financial***centres, Darling could hardly miss out and he rushed off the***stage to get on with his G7 buddies.******   The crisis also looks to have cemented Darling’s position.***It would seem odd to remove the finance minister when the whole***world financial system is in the middle of the biggest upheaval***in a generation.******   With Brown making his economic experience a key selling***point, he needs Darling on side.
A bigger role for unions?
  *** For full politics coverage click here
The trade unions are getting tough and threatening a wave of strikes this Winter unless Gordon Brown takes action to ease the effect of the economic downturn on their members.
At Brighton this week, union leaders will attack the government’s policy of pegging public sector pay rises to the official 2 percent inflation target, when inflation is actually running at 4.4 percent and expected to jump towards 5 percent as food and fuel prices rise.
Is the rates decision a good move?
Bank of England policymakers have held rates steady at 5 percent for a fifth month running.
Inflation currently stands at more than double the central bank’s 2 percent target but any rise in rates to try to choke that off risks aggravating the overall economic slowdown caused by the credit crunch.
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The Wall
