Posts Tagged ‘Ireland’

FPS’ Friday Fiver

posted by Edward Jones

Well, an eventful week to say the least. We in the FPS team have looked beyond the obvious to find five other things that have happened this week. Enjoy.

Moody clouds hover over USA ratings

Photograph: Ryan24

This week, Moody’s threatened to revise down the USA’s AAA credit rating. Back in April, Standard and Poor’s revised to negative the outlook on USA ratings, a monumental move given that this was the first time that the USA’s outlook was revised down since Pearl Harbour. As the USA’s Congress and President continue to grapple over debt negotiations, it is looking increasingly unlikely that they will be able to come to an agreement before the 2nd August, after which the USA would literally run out of money and not be able to match its debt commitments.

Elsewhere financial markets are getting increasingly jittery as this week Ireland became the third Eurozone country to be downgraded to junk status –Ba1 – alongside Greece and Portugal. This downward pressure continues to strengthen fears that Italy and Spain will soon follow suit. One wonders if any country will escape what feels like a tidal wave of downgrades.

Bonuses back in vogue?

Photograph: Sky

We read with interest this week Sports Direct’s average £44,000 payout to staff after hitting profit targets. Out of 18,000 employees, 2,200 staff qualify for the bonus. This is on the basis of their employment being permanent over the last 12 months, irrespective of their position. According to the Times (£) the scheme is the most generous in the retail sector.

The move offers an interesting parallel to bonuses paid in the banking sector and the justification offers hope to the City: “There is nothing more powerful… in terms of  getting everyone pulling together… we wanted them [the staff] to see everyone is going to benefit” said Sports Direct’s Chief Executive Dave Forsey. One wonders if the banks presented their bonus schemes with the same clarity and distributed the fruits of their labours more equitably, they might not receive so much stick. Does this move represent a shift in other sectors towards a model whereby staff are incentivised to deliver for their employer? We are all aware of the success of the John Lewis Partnership, Sports Direct’s scheme seems a very positive sign in a sector which has struggled of late and could offer a way forward in overcoming low staff morale.

The cost of living (longer)

How much does it cost to retire in the 21st century? If you’re talking purely about the level of income people should have, then the Joseph Rowntree Foundation reckon that around £15,000 should be sufficient. If however, you’re asking how much it costs the state for you to retire, that’s a very different question. The bad news is the cost is rising as we continue to live longer lives.

The OBR released its first Fiscal Sustainability Report this week which provides long-term projections on how much the government will have to spend on welfare and healthcare by 2060. The answer, in a nutshell, is a lot more. Spending on health is going to increase from 8.2% of GDP now, to nearly 10% in 2060 and the separate cost of long-term care is going to increase as well. At the same time, the amount spent on the state pension will increase by over 2% of GDP to 7.9%. Put the whole package together, and ‘age-related spending’ increases from 24.6% of our GDP to 27.3%.

So what can be done about the rising cost? One answer is to raise the retirement age and hence lessen the number of years people receive their state pension, though this is proving deeply unpopular. Another is to prepare the population better for old-age and try to keep them healthier in it, which is no easy thing. This still isn’t enough though – which is why the OBR suggested we will need to raise an additional £22bn in tax each year from 2016 onwards to stop national debt spiralling away. Not what consumers who believe their disposable incomes are already shrinking want to hear as The Economist notes today.

Baby Boom to Boomerang

Our parents were the baby boomers- tuition fee free, riding on the crest of 80’s affluence, buying up property and reproducing. Whilst we are the boomerangers saddled with the debt of our education and the country and forced to return to the nest that our parents bought.  Returning home post Uni would once have made you a failure or at least a social embarrassment for the parents having to hide a 30 year old console loving son in their annexe.  But now 1 in 4 graduates are returning home and frankly, who can blame them?

Photograph: Paul Barton/Corbis available at Guardian.co.uk

New findings from Endsleigh show that most rental prices in the UK have increased steadily in the last two years with the average rent now standing at £688 per month, rising to almost £1,372 in London where most grads head in search of that increasingly elusive goal ‘employment.’ Demand is also increasing in the rental market as more and more first-time buyers are finding themselves frozen out of the mortgage market due to tighter lending criteria and a lack of finance.  And this would probably account for why 41% of the three million adults living with their parents returned home to save money whilst three in ten cited that they were unable to pay mortgages.

The introduction of tuition fees of up to £9,000 a year from 2012 will increase the pressure on graduates even further, with the number returning to the family home likely to rise.

Hungry for Growth

Photograph: Reuters

This week, the GE Capital (client) team were hitting the phones to secure coverage of the first ever ‘SME Capex Barometer’, a survey of 1,000 small and medium sized businesses across Europe looking at how much they plan to invest in replacing equipment ranging from plant machinery to IT hardware to photocopiers.

In the UK, 92% of SMEs are planning to spend a staggering £74.9 billion in the coming year, although businesses in Germany and France were looking to invest even more.  Reflecting the challenges involved with pulling out of recession, businesses reported missing out on over £8bn of new businesses as a result of out-dated equipment.

As John Jenkins, CEO of GE Capital put it: “Despite popular belief, the appetite for investing in growth amongst UK SMEs is actually very strong, with many businesses having reached a tipping point where putting off investment is no longer possible without compromising their ability to create revenue”.

Friday Fiver

This week the FPS team has been pondering a heady mix of succession, bribery, banking black holes and a Miliband. Of course, it is April 1st and no blog post would be complete without a nod to Fools’ Day. You’ll find a summary of the media’s best efforts to trick us all in today’s Fiver…

Heirs apparent

Many of the most successful and iconic businesses are led by big personalities. Over time these individuals can become synonymous with business and its performance. When the time comes for these leaders to step down, markets and commentators start to speculate about who will replace them.

We saw two examples of this speculation in action this week. There was discussion of the succession plan for both Rupert Murdoch’s News Corp and Warren Buffett’s Berkshire Hathaway.

[Rupert - putting a successor in place?]

In the case of News Corp, James Murdoch the 38 year old son of Rupert was appointed deputy chief operating officer and head of international operations. James’ move from London to New York is seen by many as a stepping stone to ultimately taking his father’s role at the helm.

In the case of Berkshire Hathaway, the resignation this week of David Sokol a chairman of several Berkshire subsidiaries, has raised questions about who will take the reins from the “Sage of Omaha.” Sokol had been widely tipped as the next Chief Executive of Berkshire Hathaway, but his resignation following an investment in Lubrizol throws the door open for other contenders.

Both men will be hard to replace and whoever ends up at leading these companies will have big shoes to fill.

Does Ed Miliband need a game changer?

Last weekend, he was seen making a speech on one side of the TV screen whilst on the other violence erupted at the largely peaceful anti-cuts march in central London, mid-week he announced his engagement to long term partner Christine (congratulations Ed) and it seems everyone wants to put in their two penneth worth, including us. Yes, he had has a bit of a week, but there are two fascinating articles published today on Ed Miliband, the man everyone it seems is keen to discuss, both absolutely worth reading and on two opposite sides of the fence.

[Congratulations Ed and Christine]

Johan Harri on the plan to save Ed Miliband in today’s Independent, calls for Ed Miliband to simplify the way he communicates an argument, champion the real middle class and shift Labour’s economic message back to one of stimulus, as espoused by celebrated economists Joseph Stiglitz and Paul Krugman. A compelling argument and one that could well propel him to electoral success. Peter Oborne, in today’s Daily Telegraph, argues however that Miliband’s plan for power is putting his party back on course in any case. 

Some might argue, that having the Telegraph talk up your talents and the Independent calling for you to champion the real middle class is just about perfection for a Labour leader. We say the game changer may be coming whether he needs it or not in the form of local elections and an AV referendum in May and all bets are on hold ‘til then.

 A Black Rock and a Red Isle….

Thursday was a tale of contrasting fortunes for two of those who have most keenly felt the impact of the financial crisis. On the one hand, Northern Rock’s “bad” bank celebrated a return to profit, albeit a small one, which allowed it to begin paying back the £22bn loan it took from the Government to stay alive back in 2007.

On the other though, Ireland’s government revealed it will have to pour another €24bn into its ailing banks to keep them afloat. The total now stands at €70bn, which as Robert Peston noted is equivalent to half the value of the total Irish economy. Whatever the impact of the cuts (and accompanying protests) in the UK as we trim our budget deficit, some of the figures from Ireland blow them out of the water. For example, unemployment is set to peak at 15.8% and house prices to fall  17% this year and 19% next – figures which as The Times noted are actually far better than originally feared.  

Perhaps the Rock’s outlook isn’t as good as its result imply either. At the same time the results were announced, the man in charge of the Rock’s (and Bradford & Bingley’s) bad loans book issued a warning that customers’ mortgage arrears are likely to rise over the next year as incomes are squeezed. Four years on, and the crisis is still biting.

Calm before the storm – Silence on the Bribery Act comes to an end…

On Wednesday we saw the official guidance of the much awaited (re-written) Bribery Act released by the Ministry of Justice. However, some questions around clarity remain to be answered;  has the fog cleared about what the legislation actually means for business leaders? What do they need to do in the next three months in order to make sure they stay on the right side of the law before it comes into force?

According to the Justice Secretary, Ken Clarke, ‘the ultimate aim of this legislation is to make life difficult for the minority of organisations responsible for corruption, not to burden the vast majority of decent and law-abiding businesses.’ But it seems that in one way or another, companies have been “scaremongered “and have been more burdened than not. According to Clarke’s ‘honest opinion’ millions of pounds need not be spent on new procedures but only time will tell whether companies will reap the benefits or feel the pain.

Fooling around…

As per usual, April Fools’ Day brings out the creative side of the media industry and the Guardian has stolen a march on its competitors today with its announcement that it was dropping standard hostility to the Royals to ‘pledge full-throated support for the British monarchy.’  The outlet has (jokingly) pledged to start a 24-hour wedding blog and ‘recall correspondents from some less newsworthy parts of the globe, such as north Africa’. Following on the Guardian’s lead, we wanted to share with you our top five weird and wonderful favourites from the day:

As if Royal wedding fever wasn’t already high enough, the Daily Mail played a convincing spoof of Kate Middleton shopping for baby clothes… as well as plotting a somewhat unlikely hen do in a local pub.

The Metro  announced the launch of its very own edible newspaper made of corn starch, vegetable oil, gum arabic, water and citric acid followed by a light vanilla scent. Charles Bouquet of the Edible Paper Company commented: ‘We hope it adds flavour to the stories and presents readers with a colourful menu of current affairs.’  These guys look to be enjoying it…

The Sun went pun-tastic with “Planet of the apps”, an exclusive story about animal behaviour experts handing out iPads to five apes in an experiment to keep them alert and happy. Apparently only one of the devices has been broken so far with the zoo expert commenting “We thought they would bang them on rocks but they carry them round as if they were babies.”

And finally, the Daily Express launched the new micro-zimmer for OAPs wanting to get a bit more active on their daily walks. With a top speed of 10 mph the new micro zimmer is ‘lightweight enough for the more agile OAPs to perform bunny hops and mild stunts’, according to its makers. The paper reports retired legal secretary Delia Hargrave, was one of the first to give the new craze a go and reports that it makes a ‘great conversation starter’.

The Daily Mirror reports the latest government tax, ‘the gasp bill’ as a tax we all have to pay on the air we breathe. The air traffic control system will decide different charging rates with those accessing the clean and fresh air of the countryside in areas such as the Lake District paying a much higher price for their clean air than those in built up cities. A Labour backbencher has apparently been quoted as saying “This has literally taken my breath away.”