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Interest rates
The
Bank of England and the European Central Bank both left interest rates
unchanged in August, at 4% and 3.25% respectively since November 2001.
Inflation
The
underlying rate of inflation rose in July from an annual rate of 1.5% to
2.0%, with the headline rate also up half a point at 1.5%, its highest level
since October 2001. The increases are seen as evidence that June’s figures
merely represented a temporary blip due to the impact of the World Cup and
golden jubilee, and expectations are that interest rates are likely to
continue to remain unchanged for the foreseeable future…
Wage rises
Partly
because wage inflation appears to be under control, according to Industrial
Relations Services who report that pay awards rose by an average of 2.7% in
the three months to July, only 0.2% up on the previous quarter, and the gap
between service sector pay deals, averaging 3%, and manufacturing at 2.8% is
narrower than in recent months…
Industrial output
…However, the Trades Union Congress called for interest rates to be cut,
following the announcement from the Office of National Statistics that a
worse-than-expected monthly fall of 5.3% in June brought manufacturing
output to its lowest level since 1979. Overall, industrial production
including North Sea oil and energy output fell by 4.3% for the month, with
the rolling twelve-month figure of 6.6% being the biggest fall since March
1981.
The
number of UK manufacturing jobs was down 174,000 (4.5%) in second quarter
compared to last year.
National Statistics claimed to have under-estimated the impact of the golden
jubilee. The latest economic growth figures from the National Institute of
Economic and Social Research were also lower than predicted, at 0.3% for the
three months to June.
Unemployment
According to the latest batch of unemployment statistics:
·
The number of UK benefits
claimants was down 3,100 in July to 949,600, the lowest since 1975, but…
·
Calculations using the
International Labour Organisation method give unemployment as being up 6,000
for the three months to June to 1.544 million;
·
The ILO calculation shows
unemployment in Scotland up 5,000 over the year, but…
·
… Down 6,000 for the three
months to June to 163,000, and…
·
The number claiming benefit in
Scotland was down 800 in July to 101,900;
·
The Scottish Office has
unemployment down 52,000, and benefit claimants down 57,000, since spring
1997, but…
·
25,000 manufacturing jobs were
lost in the year to March…
·
17,000 jobs were lost in the
service sector in the first quarter of 2002, and…
·
The number of temporary workers
in Scotland was down to 134,000 in second quarter, the lowest level for
three years.
Scottish recession
Scotland’s gross domestic product fell by 0.7% in the first three months of
the year, following a 0.3% drop in the last quarter of 2001, and the second
quarter’s figures are also expected to show a decline. A fall in GDP for
two consecutive quarters is regarded as marking a recession.
Iain
Gray, the enterprise minister, blamed the global economic downturn following
the September 11 terrorist attacks. Manufacturing output has declined by
10.6% in the last year, and construction by 4.1%, while inward investment
plummeted by 84% to £271 million from £1.7 billion in 2000/01.
GDP for
the UK as a whole grew by 0.2% in the first quarter.
Recession or not, low rates of interest and inflation, low unemployment and
rising house prices are keeping consumer confidence high. Real household
spending rose by 4.1% last year, wages and salaries by a similar amount, and
a survey by recruitment consultants TMP Worldwide reported that 40% of
Scottish businesses expected to take on more staff in the next three months.
Stock market
Exceptionally heavy trading in July’s volatile markets created a new record
as the London stock Exchange processed 3.89 million transactions, compared
with 2.79 million in June. The total represented a 56% increase on July
2001.
Last
month, reports of a slowdown in the USA’s economic recovery, and pessimistic
forecasts for stock market recovery in the short term, contributed to the
FTSE 100 index falling below 4,000 again, losing 2% of its value and
reversing the previous slight rally.
Property
The
Nationwide Building Society reports that house price inflation has reached
21%, the highest level since 1989 when the last boom ended. However,
figures from the Halifax show a slowing down in house price rises, with a
monthly increase for July of 1.9% compared to 2.4% in June and 4.3% in May.
The Royal Institute of Chartered Surveyors’ policy unit expects house prices
to rise by 19% over the whole year and by 7% next year.
According to Lloyds TSB, house prices in Scotland have risen 8.7% in the
last twelve months to an average of £73,940. Steepest increases were in
Glasgow, where the average property price is up 20.8% to £71,545. Edinburgh
prices were up 14.2% to an average of £113,005. Away from the big cities,
the effect was much less dramatic, with Dundee showing a 2.8% rise to
£56,398.
Projections from the Scottish Executive show the number of single-adult
households increasing by nearly a third by 2014, with the total rising to
2.46 million from 2.2 million in 2000. At the same time, the proportion
consisting of two adults with children is expected to diminish from 20% to
11%, as the private household population falls from 5.01 million to 4.91
million.
Meanwhile, the latest “moving and improving” survey from Alliance &
Leicester indicates that homebuyer confidence in Scotland has slumped to a
two-year low, with 10% planning on buying a home in the next two years
compared with 15% three months ago. The main reason given for buying is
saving on rent.
Emigration
The
Office of National Statistics figures show a 68% increase between 1999 and
2000 in the number of Scots leaving the UK for more than a year, to a total
of 20,400.
The
main reasons for leaving, according to emigration consultants OE Visas in
Edinburgh, are job opportunities, favourable exchange rates, property prices
and the weather.
Australia and New Zealand report an 18% increase in British immigrants to
15,180, while the US visas granted to UK citizens are down by a similar
percentage from 5,403 to 4,424 in the past year.
US economy
The US
commerce department announced that GDP growth was down 5% in the second
quarter to an annual rate of 1.1%.
A
greater-than-expected slowing in the rate of expansion in manufacturing, and
a fall in construction spending for the second consecutive month, are seen
as evidence of economic recovery faltering.
US airlines
US
Airways, one of America’s largest airlines, has filed for Chapter 11
bankruptcy protection with debts of $7.83 billion, following eight
consecutive quarters in which it reported net losses. The carrier intends
to cut 13% of its flights by the end of the year, reduce its fleet from 311
aircraft to 280, and put an additional 250 pilots on leave.
The
airline industry as a whole in the United States lost $1.4 billion in the
last quarter, and $11 billion last year, and although US Airways is the
first big American carrier to take this action it had long been viewed as
one of the most likely casualties in the wake of September 11.
American Airlines, the world’s biggest air carrier, has also announced plans
to reduce staff numbers, cut flights, retire aircraft and defer or cancel
deliveries of new aircraft. Its parent company, AMR, lost $1.8 billion last
year and $1.1 billion in the first half of 2002.
UK airports
Strong
demand for domestic and holiday flights contributed to growth in passenger
traffic at Edinburgh and Glasgow airports of 15.4% and 6.5% respectively in
July compared with the same time last year, with the comparative
twelve-month totals showing similar increases at 13.3% and 6.4%.
Taking
all its UK airports, BAA reported a 0.4% month-for-month rise at 12.9
million passengers in total, with domestic traffic up 10% year-on-year.
However, the long-haul market has yet to recover from its post-September 11
downturn; north Atlantic traffic is down 9.1%, and other long-haul routes
5.1% down on the previous year.
Ireland under pressure
The
Irish government has been warned by the International Monetary Fund that a
stronger euro could undermine the Republic’s economic recovery in the wake
of a sharp deterioration in the country’s finances.
Inflation in Ireland fell by 0.4% in July to an annual rate of 4.2%, the
lowest this year, but remains more than twice the European Central Bank’s 2%
ceiling. The eurozone average is 1.9%.
Meanwhile, the Irish tourist board estimates that American visitor numbers
are down by 17% since September 11, although British visitors are up 10%.
With Americans staying for an average of 9.6 days and spending £793, more
than twice the average spend by Britons, tourism in Ireland is currently
experiencing its worst time since the Gulf War.
French inflation
Consumer prices in France, the eurozone’s second-largest economy, fell in
July to give an annual inflation rate of 1.5%, down 0.2%, and increase
expectations that the European Central Bank’s interest rates will remain
unchanged for several months more.
Beef in Japan
A fraud
inquiry in Japan could lead to criminal charges against the country’s
leading meat processor, Nippon Meat Packers, which is alleged to have
imported beef and labelled it as domestic in order to take advantage of the
government’s buy-back programme to dispose of potentially BSE-contaminated
beef.
Cashing in on September 11
Computer failure caused by the collapse of the World Trade Center allowed
unmonitored cashpoint withdrawals from New York’s Municipal Credit Union,
resulting in the theft of $15 million. 66 people who overdrew their
accounts by $7,500 or more have been charged with grand larceny, 35 more are
being sought for arrest, and in total nearly 4,000 people are being
investigated.
US accounting scandals: update
(1)
Andersen Worldwide, the network of accounting firms outside the USA, must
pay $40 million to Enron investors and employees and $20 million to its
creditors in the first settlement of lawsuits following the collapse of
Enron. Total losses are claimed to run to $29 billion.
US accounting scandals: update
(2)
Meanwhile, AOL Time Warner, already the subject of an inquiry by the US
Securities & Exchange Commission into alleged accounting irregularities, are
now also being investigated by federal prosecutors in Virginia on behalf of
the Justice Department, concentrating on certain advertising deals and the
reporting of advertising revenue in 2000 and 2001.
Mortgage regulation
The
Treasury has announced plans for legislation to be introduced by 2004 to
bring mortgage advice under the regulation of the Financial Services
Authority.
Online tax service
The
House of Commons public accounts committee reports that the Inland Revenue’s
online tax service is doomed to failure without big improvements in security
and reliability. The Revenue has a target of 50% take-up for its Internet
services, all of which are planned to be online by 2005, but so far has
managed to attract less than 1% of potential users.
Car sales record
New car
sales in July were a record 195,637, up 13.1% on the same time last year.
Rich get richer
A
report by Datamonitor shows that the number of “ultra-high net worth”
individuals with more than £5 million in liquid assets has more than doubled
since 1997 from 1,500 to 3,300, with self-made millionaires now outnumbering
those who have inherited their wealth.
Directors’ pay
A
survey by the Labour Research Department reports that top company directors
received pay rises averaging more than 16% in the last year. A record 487
executives earned over £500,000, with 123 being paid more than £1 million.
Employment discrimination
compensation
The IRS
Equal Opportunities Review reports that the total compensation figure
awarded by employment tribunals in discrimination cases more than doubled
last year to £3.8 million, from £3.5 million in 2000.
Average
award levels were up 10%, and for disability cases the increase was 85%.
Although payouts for race- and sex-discrimination were down, there were
higher awards for injury to feelings in sexual harassment cases, and a
number of cases against individual employees and against managers who failed
to stop discrimination in the workplace.
Scottish bosses working
longer hours
A poll
by employment law specialist Peninsula finds that company bosses in
Edinburgh work an average of 49 hours a week, five more than their Glasgow
counterparts and exceeded throughout the UK only in London, where the
average is 56 hours. 75% of those polled claimed to be putting in more
hours than ever, with additional red tape and paperwork being cited as the
main reason.
Rubbish in, rubbish out
According to the findings of an Internet survey by recruitment agency Reed,
office staff believe that image is increasingly important to their careers
and spend nearly 20% of their pay on how they look at work…
…While
80% of employees surveyed by Connect Support Services cited IT problems as
making their lives more stressful and hindering productivity. |
