Posts Tagged ‘Italy’

Friday Fiver

posted by Edward Jones

It’s been a big ol’ week in the land of FPS, what with the Autumn Statement, Public Sector strikes, another round of downgrades for Europe’s banks and the beginning of Yuletide. Here’s our take on the week that was.

The Autumn Statement

After declaring the Pre-Budget Report dead, the Government this week delivered their Pre-Budget Report Autumn Statement. It was depressing news, but we all knew it was going to be and it looks set to continue for the foreseeable future. The headlines are lower growth, increased borrowing, a squeezed public sector and more measures to help small businesses, a 0.088% increase in the bank levy and a promise to further reduce corporation tax.

Picture: Reuters UK

What really caught our eye(s) however, were the measures to help mid-size businesses; a theme championed by John Cridland at the CBI, the forgotten army of mid-size businesses have suddenly been remembered. In an attempt to create the UK equivalent of Germany’s Mittelstand, tucked away on page 64 of the Autumn Statement are a host of measures to help mid-size firms achieve their potential and export more proactively. After all, where else is growth going to come from?  

Going down, down, down…..

There’s been so much grim news on the economic front this week that it’s a little hard to pick out the ‘highlights’. To recap quickly – China’s domestic consumption appears to be slowing, as does its manufacturing production; the UK is going to grow very little in 2011, and even less in 2012; Italy continues to have to pay a fortune to borrow money; business confidence that the eurozone will survive is ebbing away; and several stars of The Only Way is Essex are about to be booted off.

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FPS’ Friday Fiver

Happy Friday afternoon everyone. The clocks have gone back, it’s dark outside, and the eurozone still doesn’t look any closer to salvation. Light relief does at least come however with the prospect of a good fireworks show this weekend. Before you get out the sparklers though, take a look at the Financial and Professional Services Friday Fiver below, which this week takes in a wide range of topics on everything from Bob Diamond to celebrity marriages. We hope you enjoy!

WE’RE GROWING!!! SORT OF…..Finally, some good news this week as the UK economy grew 0.5% in the third quarter of 2011. Compared to recent efforts, that’s practically a meteoric rise, and was ahead of City expectations.

But here’s the bad news though – the effect may not last for two reasons. Firstly, some of the rebound in growth is being attributed to the disruption in Q2 owing to that dress and the ensuing two week holiday that most people took to get over it. And secondly, the forecast ahead looks dire – the latest purchasing manager indices, released by our client, CIPS, nosedived this week, suggesting order books are drying up. Still, let’s enjoy a bit of growth while we can shall we?

SING SONG TO AN ATHENIAN RHAPSODY…..We’re viewing Europe’s sovereign debt issues through a musical prism this week. The debt odyssey has taken a number of twists and turns, the most unexpected of which was Greek Prime Minister George Papandreou’s call for a referendum on the latest bailout package. The brinksmanship proved a step too far and was quickly called off.

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FPS’ Friday Fiver

Another week and one in which unsurprisingly, UK media attention focused primarily on the England riots (Peter Oborne’s piece today captured the wider issue rather well I believe). That’s not to say things haven’t been happening elsewhere though, particularly in the financial world.

With that in mind, here’s a round-up of the key stories from all aspects of this week. Thanks to Jonathan, Ross, new writer Claire Scott, and also our MD, Ben – his article is second up and attempts to add some perspective to events.

Zut alors…..Another week, another country but the issue, namely financial stability, remains the same. Early in the week one of the world’s best known fund managers, Bill Miller, published a response to S&P’s downgrade of US government debt. The articleA precipitate, wrong and dangerous decision ran in the FT and is well worth a read.

There was a lot of this going on this week, as markets behaved in wild fashion

By Wednesday however, the bottle had stopped spinning yet again and this time it was the turn of France and its credit worthiness to come under scrutiny. With speculation about the health of some of the country’s largest banks and the ability of the nation to underwrite possible further bailouts in southern Europe giving investors sweaty palms.

Sovereign debt has become synonymous with Western governments but in today’s FT, Jamil Anderlini provides an alternative perspective arguing that the disparity between China’s official and actual debt levels deserve further scrutiny.

Putting perspective on this week…..The riots captured the UK media’s attention, and were clearly unacceptable. They raise all sorts of questions about society, as well as being highly damaging for London and the UK’s image with the Olympics round the corner. At the same time though, there are bigger and potentially more threatening global economic issues at play at the moment. While you can understand the rolling news channels’ focus on the riots, with all due respect they are a catastrophe on a much smaller scale than what is going on in Europe and the financial markets.

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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”.