Oil
Air traffic
Domestic economy
Global economy
Interest rates
Exchange rates
Inflation
Housing market
Consumer spending
Public spending
Unemployment
Pensions
Workplace surveys
Money-laundering
| MPW Chartered Accountants |
| Services | Contact us | History | Financial News | Links |
|
Stock market A month of steady upward progress on the Stock Exchange saw the FTSE 100 rise from 4,031.2 at the end of June to close at a six-week high of 4,157.00 on 31 July, following better than expected economic data from the United States. Oil Oil prices fluctuated on conflicting reports of the level of oil stocks in the United States, either side of the arrival of Hurricane Claudette which forced oil and gas producers in the Gulf of Mexico to cut production by 15%. Opec agreed to hold world production levels unchanged at 25.4 million barrels per day while Iraq struggles to increase production, severely affected by war damage and sabotage of the country’s infrastructure, above 1 million bpd compared to 2.8 million before the war. Brent crude finished the month at $28.50 per barrel, having reached $29.17 during the hurricane threat. Air traffic The state-owned Highlands and Islands Airports Limited, which runs ten airports across Scotland, reported pre-tax losses of £1.3 million for the year to 31 March, compared to a £1.4 million deficit in 2002. Although scheduled passenger traffic was up 4% to 803,732, with Inverness recording an 8% increase, oil-related traffic revenues were down 30%, reflecting one of the lowest years on record for offshore oil exploration. Other factors contributing to the loss were increased security costs and insurance in the face of the global terrorism threat. Domestic economy Gross domestic product in Scotland fell by 0.3% in the first three months of the year, according to the Office for National Statistics. Individual sectors experiencing decline included communications, down 6.4%, retail and wholesale, with a 3.7% fall, and manufacturing, where the 1.4% decrease was the twelfth successive quarterly drop, extending the industry’s recession into its third year. For the year to the end of March there was zero growth in Scotland, compared to 1.7% growth in the UK as a whole. Figures from Royal Bank of Scotland show that the private sector north of the border is now in recession following two consecutive quarters of deteriorating GDP, although output in the dominant services sector was up for the first time this year. Elsewhere in the UK, only the East Midlands’ private sector is shrinking. Global economy A poll of 180 economists from the G7 countries reveals cuts in growth estimates for 2003 since March’s forecasts by between 0.2 and 0.6 percentage points, predictions now varying from Canada’s expected growth of 2.6% to Germany’s 0.1% (down from 2.8% and 0.7% respectively). With France and Germany both on course to exceed the EU’s budget deficit limits again this year and make it three in a row in 2004, French President Jacques Chirac has given his support to earlier German calls for temporary relaxation of the Stability and Growth pact, which requires the eurozone states to keep budget deficits below 3% of GDP. Interest rates The Bank of England surprised many commentators with an earlier than predicted interest rate cut of a further 0.25 percentage points to 3.5%. The repo rate had been 3.75% since February. The European Central Bank held its interest rates unchanged at 2%. Exchange rates Sterling reacted badly to the political uncertainty following the death of Dr David Kelly, the Ministry of Defence scientist at the centre of the controversy over the Government’s dossier on Iraq’s weapons of mass destruction. The pound fell to a three-month low of $1.5784 on 21 July and to 71.38p against the euro, but despite suspicions of further cuts in UK interest rates by the end of July had recovered to $1.6060 and a two-week high of 70.12p against the euro. Inflation According to the Office for National Statistics, the annual rate of core inflation, which measures consumer prices excluding housing costs, fell to 2.8% in June. The previous month’s 2.9% was down from the high of 3% reached between February and April. Housing market Figures from Bradford & Bingley show that house prices in Scotland rose by 6% in the first five months of the year. The average for the UK as a whole was a 2% increase, with London and the south-east of England recording price falls. Consumer spending The Office for National Statistics figures for June show an increase of 1.9% in retail sales on the previous month, but nevertheless economists are predicting that consumer spending will slow over the rest of the year. Public spending A poll compiled by the Treasury of more than 30 leading economists indicates that the Government will have to borrow £33.7 billion next year, compared to the Chancellor’s forecast of £24 billion, and raise taxes by the equivalent of 3p in the pound to plug the gap. A comparison of public sector productivity published by the Office for National Statistics shows that much of the Chancellor’s increased expenditure in the last 18 months has resulted in increased prices for the goods and services employed by the public sector, rather than increased output. When Labour came to power in 1997, following two years of increasing productivity, the output of goods and services amounted to £1.01 for every pound of taxpayers’ money spent; this was down to 97.5p per pound in 2001. Unemployment Unemployment benefit claimants in Scotland were up 600 to 101,100 in June. New claims in the UK as a whole rose by 1,700 to their highest level since June 2002. The International Labour Exchange index remained at its two-year low of 3.1% for the UK in the three months to May, the comparative figure for Scotland coming down to 5.6% from 5.9% in the quarter to April. Pensions Figures from the Department of Work and Pensions indicate a disappointing response to the introduction of stakeholder pensions to encourage the public to save for their retirement: • one in seven of the workforce has had a private pension at some time, but only one in five are currently maintaining one • 8% have never paid into a pension • more than half of the working population expects their weekly income following retirement to exceed their current earnings • there is a £27 billion savings gap Meanwhile, the Confederation of British Industry warned that UK businesses’ £160 billion pension funds deficit will force firms to double their pension contributions in the next four years, which will have the knock-on effects of reducing the level of reinvestment for growth and an estimated £2 billion reduction in corporation tax revenue in each of the next three years. Workplace surveys A survey of 5,000 workers by employment specialists Reed reveals that: • only 40% said that they would be taking their full holiday entitlement this year; • those who do take time off are under increasing pressure to finish workloads before going away, and putting in long hours to finish projects; • one in five said this was causing stress; • half said they worried about work when they were away. The Department of Trade and Industry’s work-life balance survey reports that: • 75% of employees work overtime, but only 36% receive extra pay or time off in lieu; • 16% of workers put in more that 60 hours per week, compared with 12% in 2000; • 25% would like a better balance with their life outside work but think that their career would suffer • 40% of those who were not stressed and 25% suffering from high stress levels play regular sport, which suggests either that sport is a factor in keeping stress down or that those putting in extra hours have less time for sport. A Bank of Scotland survey found that 24% of small businesses in the UK have reported cases of staff fraud in the past year, with 11% having lost up to £1,000 and 4% up to £5,000. Money-laundering Having commissioned an independent cost-benefit analysis by PricewaterhouseCoopers, the Financial Services Authority has decided against implementing a mandatory industry-wide requirement for anti-money laundering checks by more than 10,000 financial companies on the identity of millions of customers, since the potential cost of a structured risk-based review within a fixed deadline was estimated to be £174 million. |