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On September 4, the FTSE-100 index dropped
below 4,000 for the first time in a month, forced down by large losses on
Wall Street following a report that US manufacturing growth in August was
less than had been expected.
Subsequently, the build-up to a possible
war with Iraq and fears for the US economy were the principal factors in the
continued downward trend, culminating in a 68.3 point fall on 24 September
to close at 3,671.1, the lowest since December 1995.
Amid speculation that both the US Federal
Reserve and the Bank of England might cut interest rates, analysts claimed
that the market was being driven not by consideration of fundamentals but by
sentiment, which was now at rock bottom.
Tension between the USA and Iraq dominated
trading during September.
Prices per barrel slipped on September 12
following President Bush’s announcement to the United Nations that he would
work on a new resolution against Iraq, but Iraq’s rejection the next day of
US demands for weapons inspectors to be readmitted prompted a sharp rise.
An about-turn three days later, with Iraq now
agreeing to the return of UN weapons inspectors, brought a 5% fall but the
US’s declaration that Saddam Hussein could not be trusted caused prices to
pick up again.
A report from the American Petroleum
Institute showing a big fall in US oil stocks despite an increase in imports
fuelled another rise, as did Opec’s subsequent decision not to increase
supplies to meet winter demand and fears that a storm in the Gulf of Mexico
could disrupt oil supplies.
The weather worries receded, causing oil
prices to ease slightly, but storm clouds continued to gather as the USA
threatened to take unilateral action to overthrow Saddam Hussein.
Peaks of $29.88 per barrel, the highest for
Brent crude since September 11 last year, and $31.39, the highest for US
crude since February 2001, were reached on September 24, reflecting a 50%
increase in prices this year.
Iraq’s oil sales for September are expected
to be down to 650,000 barrels a day from 800,000 a day in August, compared
with export capacity of more than 2 million. Iraq was the world’s
eighth-largest exporter of oil last year, but blames tight UN price controls
enforced by the USA and UK for this year’s decline.
North Sea drilling activity is at its lowest
level since the start of the UK offshore oil industry. Half the UK’s rigs,
each employing around 200 people, could be idle by the end of the year as
contracts come to an end, and with no new orders there are fears that
offshore operators have ceased exploration and drilling because of the tax
changes.
Royal Bank of Scotland’s oil and gas index
shows that production of both fell in July, with oil at a ten-month low and
gas reaching its lowest level for nearly two years.
A senior economist from RBS cited maintenance
work being hampered by bad weather in the oilfields as a factor, with the
year’s industry-wide price weakness affecting gas production.
With none of the three biggest eurozone
economies (Germany, France and Italy) on target to meet their obligations
under the euro’s stability and growth pact for a balanced budget, the
European Commission has proposed putting back the deadline by two years to
2006. Even then, France’s budget forecasts still anticipate a deficit.
The EC was accused of double standards by
smaller countries, particularly Austria, Belgium, Spain and the Netherlands
where unpopular measures have been introduced to meet the 2004 deadline, as
countries which have achieve a balanced budget have been warned that it is
expected to be maintained.
The Nikkei index fell to an 18-year low of
9,217.04 on September 3, with analysts predicting that it could go below
9,000. Industrial production fell for the second successive month,
unemployment remains at 5.4%, and consumer prices have fallen for the last
34 months despite attempts by the Bank of Japan to encourage spending by
keeping interest rates at just above zero and flooding the banking system
with money.
The Halifax reports that house prices rose by
only 0.2% in August, down from 1.8% for July. This represents the lowest
monthly rise since October 2001 and brings the annual rate down to 18.8%.
The Nationwide Building Society, however,
reports a 2.5% rise for the month and an annual rate of 22.7%, the highest
since 1989.
Edinburgh law firm Olivers say that house
prices in the city have risen by 13000% in the last 50 years, as indicated
by a Victorian villa similar to one which sold for £4,000 in 1956 having
just been put on the market at offers over £525,000.
Property prices north of the border could
continue to rise as London-based Scots working in IT and finance who are
made redundant return home, where house prices are the cheapest in the UK
relative to average earnings. According to brokers Dresdner Kleinwort
Wasserstein, the average house in Scotland costs three times the average
salary, compared with 6.4 times in London.
The British Bankers’ Association reported
that new home loans approved by the major banks during August totalled
£13.11 billion, down 15% on July, with the average falling for the second
successive month to £87,600 from £88,800 in July.
New car sales totalled 87,245 in August,
12.8% up on the same time last year. The total of 1,630,575 for the first
seven months was up 7.3% on the comparative period in 2001.
The latest quarterly review by the
Engineering Employers Federation shows output and orders across the UK
falling for the sixth successive quarter, reflecting the general weakness in
world trade, with engineering output down 16% and manufacturing down 8%
since the end of 2000. The Federation estimates that 70,000 manufacturing
jobs have been lost in the first five months of the year.
Unemployment as measured by the International
Labour Organisation method was up 7,000 in the three months to August at
1.56 million, but the number claiming benefit in August was down 6,400 to
943,300, the lowest total for nearly 27 years. In Scotland both statistics
were down, with unemployment down 8,000 for the quarter at 164,000, and
benefit claimants down 800 for the month (and 2,300 for the year) at
101,100.
A survey of union leaders and managers
predicts that strikes and industrial action are set to increase,
particularly in the public services sector where 35% of union leaders warned
of possible action.
A study of the Scottish labour market,
carried out by Futureskills Scotland, predicts that total workforce numbers
will remain at around 3 million for the next 20 years, but that the average
age of those in employment will rise. The report warns that a fall in the
size of this aging workforce could result in slower economic growth or
falling output.
According to a survey for Royal Liver, Scots
are more likely than most in the UK to be paying into a pension scheme. The
UK average is 70% of the population, but that rises to 77% north of the
border, a level exceeded only in the north-west of England.
25% of those questioned in Scotland are
topping up occupational or personal pensions by up to £100 a month, compared
with 8% of Londoners, and only 10% had no provision for their retirement, as
against 32% in London.
According to a study by International Survey
Research, fewer than 60% of British workers want to stay with their current
employer, making the workforce here less committed than those of most other
major economies. The highest level of commitment was revealed to be in
Brazil, with 79%.
Research by Scottish financial daily
Business a.m. indicates that only 11% of the 2000 members of the
Institute of Directors in Scotland, and a mere 3% of the Entrepreneurial
Exchange’s 392 members, are women. However, female membership of IoD
Scotland has risen by 9% in the last two years.
A survey of 100 delegates at the inaugural
Scottish Fraud Forum revealed that more than half of the businesses
represented had been victims of fraud in the last three years.
According to professional services firm Grant
Thornton, the number of companies moving up to full quoted status this year
from the Alternative Investment Market is outweighed by 24 to 3 by those
going in the opposite direction for AIM listing.
With 98 new admissions during the first seven
months of the year, compared with 177 for the whole of last year, the total
number of AIM companies has reached 679, with a market capitalisation of
just over £10 billion.
Businesses and residents in the EH13 and EH14
postcode areas of Edinburgh have complained that the postal delivery service
has deteriorated since the introduction of a pilot scheme to abolish the
second post in 14 areas of the UK.
More than 96% of mail arrives at delivery
offices in time for the first post, but some businesses have complained that
deliveries are now not arriving until late morning or even afternoon. None
of the 24,000 mail users in the area, including 400 businesses, opted to pay
a £520 annual charge to guarantee delivery before 9am.
Only 14% of British homes with Internet
access have faster connections than the standard 56 kilobits per second,
compared with between 41% and 45% in the Netherlands, Sweden and Germany,
according to market research firm Nielsen/NetRatings.
Access to high-speed phone services was
available in only 6.1% of Scottish households in July, compared to a UK
average of 8%. Twelve months ago the figures were 2.8% for Scotland and
4.8% for the UK as a whole. Poorer broadband coverage in parts of Scotland
was cited as a possible reason for the gap.
Fares on the Heathrow Express rail link
between the airport and London’s Paddington Station increase from 29
September, with an ordinary return up £2 to £25, a first-class return up by
the same amount to £42. The standard single fare is up from £12 to £13 for
the 15-mile, 15-minute journey.
This is the first increase for three years on
what was already Britain’s most expensive rail route.
A report from University College London’s
constitution unit claims that funding defence spending, a diplomatic service
and treasury would cost an independent Scottish government between £455
million and £1.42 billion a year, and that Scotland’s £3 billion share of
the UK’s national debt would have to be repaid before independence was
granted.
The Scottish Nationalist Party rejected these
findings. |
