The CBI’s chief economic adviser, Ian McCafferty, pointed to “a harsh global slowdown and a squeeze on profits” as the factor “holding down pay awards against a backdrop of low inflation”. Service Sector awards fairing better reflected “the more buoyant consumer market” and the need to recruit and retain skilled staff.

Decline of Final Salary Pension Schemes

A recent survey has shown that the decline in pension schemes offering a pension based upon final salary is increasing. Not only are fewer of these type of schemes being set up but those already in existence are being closed to new entrants and in some cases even existing members are being transferred to defined contributions schemes.

The move to defined contributions schemes is clearly an attempt to control esculating pension costs, which makes commercial sense. However, the impact on employees who are likely to have to make greater contributions if their pension is going to achieve the level they expect, is not always widely appreciated.

Reduced costs for Broadband

The cost of Broadband access to internet service providers is set to fall following an announcement by British Telecom it is to dramatically lower its rates.

Rival companies are expected to respond to the move which should see the cost of broadband access fall to end users.

Retail Sales – January

The British Retail Consortium reported that retail sales for January were up 8.3% on the previous year.

The report provides further proof that the consumer side of the economy remains as strong as ever and will be a significant factor in preventing any further interest rates cuts.

Sir Eddie George’s comments that there was the potential to cut rates further if the consumer boom ran out of steam before the general economic recovery began, looks increasingly less likely to materialise.

Factory gate prices were down 0.5% on a year earlier indicating a lack of any strong inflationary pressures in the economy.

CBI Report on small, medium sized enterprises (“SME”)

A CBI report has indicated that SME decline in orders, output and optimism has slowed down from the sharp fall reported in the wake of the September 11^th tragedy.

The decline is expected to continue in the short term but the rate will slowdown even further.

The chair of the CBI’s SME Council commented “manufacturers, particularly smaller ones, continue to face tough times with orders and output still suffering but the rate of decline is slowing. It also seems the slump in confidence in the immediate aftermath of September 11^th was short lived. Firms are a little less gloomy about their export prospects but some sign of a pick up in global demand is desperately needed.

Bank of England Interest Rates

As widely anticipated interest rates have been held at the 38-year low of 4% for another month.

The Bank of England monetary policy committee ignored pleas from both the CBI and the Engineering Employers Federation, amongst others, to further cut rates.

The CBI pointed to the need to ensure consumer spending remains high until the global economy picks up as the overwhelming argument for further cuts.

However with consumer spending buoyant and increasing optimism for business along with an increase in construction in January it was no surprise that rates were maintained at 4%.

Indeed comments made by Sir Eddie George that there were tentative signs that a global recovery had begun and that the worst may “soon be over” are being interpreted as indicating that an increase in rates may not be very far away.

Small Business Council

The head of the Small Business Council, William Sargent, is to have access to the prime minister to discuss matters affecting small businesses and is to attend the ministerial panel on regulating accountability.

The Trade and Industry secretary, Patricia Hewitt commented, “Mr Sargent will provide advice and comment on government policy, as it concerns small businesses. But look particularly into regulations that impact significantly on small firms”.

Ms Hewitt also announced a new chief executive for the Small Business Service, Martin Wyn Griffith, who according to Ms Hewitt “will focus on improving the delivery of services to our small business customers”.

Oxford University Research into Patents

Oxford University research has revealed that UK firms are failing to use the opposition to patent filing procedures available through the European Patent Office.

Following the grant of a patent there is a limited period during which objections can be lodged, once this period has passed they can only be challenged on a national basis, which is lengthy and time consuming.

Fixed Term Work Directive

The DTI website now contains details of the European Commission’s Directive on Fixed Term work.

The aim of the Directive is to prevent employees under a fixed term contract from being disadvantaged when compared to similar employees on permanent contracts. It also seeks to limit the use of successive fixed term contracts.

The Fixed Term Directive is due to be transposed in the UK by 10 July 2002.

Information Commission – greater access to records for employees

A draft code, produced by the information commission, would give employees greater access, for a nominal fee, to records of them kept by employers.

Access would include documents such as sickness, disciplinary records and performance assessments.

Observers fear that this will only add yet another level of bureaucracy for businesses which will have now to ensure that all records are in a form suitable for disclosure to employees, for example checking that the disclosure of a record would not release information about other employees

European Economy

The French Economy shrank by 0.1% in the final quarter of 2001. The German economy is widely thought also to be in a mild recession.

European Central Bank (“ECB”) Interest Rates

The ECB left all key interest rates unchanged as was widely predicted by most economic commentators.

Recent more encouraging economic indicators now suggest a less pressing need for cuts as business sentiment continues to recover from the low seen in the wake of 11^th September.

Some economists now believe rates have gone as low as they are going to get and are predicting the next movement will be a rate increase although perhaps not until the end of this year or the beginning of 2003.

While there are early signs of revival, downside risks remain, and in particular unemployment continues to rise particularly in Germany. German unemployment now runs to an excess of 4 million.

Global Economy

Wim Duisenberg head of the European Central Bank believes that the global economic downturn may have run its course. He commented he felt “some relief” that the global economy had stood up to recent events. He pointed out that growth would depend upon the recovery of international trade from the lows in the second half of 2001.

The European Economic advisory group forecasts the Eurozone economy to grow by 1.3% this year. It believes that Europe as a whole will not experience a decline in growth, though individual countries will experience recession. The group believe that both Europe and the US will see a recovery in 2002.