News Headlines – Thursday 12th December 2013

Business/Economic
Lloyds Banking Group and RBS have been fined a total of £90m –the former for serious failings in its sales practices, and the latter to settle accusations that it breached US sanctions. The FCA was particularly critical of the structure of targets and bonus arrangements that involved sales people being potentially demoted with a cut in salary of up to 50% if they failed to hit targets.

Property
The number of first time buyers has surged by three quarters over the past year as a surge of activity in the housing market pushes prices even higher. Haart revealed that the number of the first time buyer registrations had risen 78.4% in November 2013 compared to the same month last year. Both Haart and Zoopla say that average house prices in the UK have risen over £10,000 during the year, soaring way head of growth in typical wages.

The energy minister has indicated that the Government could defy an official recommendation that it must meet its green energy targets for the 2020s. Michael Fallon described the report as merely ‘advice.’

Personal Finance
Families are having to spend almost £500 more a year on housing and energy bills than a decade ago, forcing cutbacks in other areas to make ends meet. The ONS found that last year families spent an average £68 a week on rent, energy bills, and other housing costs such and maintenance and repairs, up from £59.20 in 2002.

Recruitment
The treasury has confirmed maternity pay will be protected after it was revealed by David Cameron that it would be lumped in with the welfare spending due to be capped in next Spring’s Budget. Francis Elliott, Times, p10; Shadow childcare minister Lucy Powell is expected to say that employers wrongly see mothers as ‘scatty and clock watching,’ as they fail to understand that they have already done a day’s work before they leave home. Powell is to call for a revolution to overcome prejudices faced by working parents.

Newspaper Headlines – Thursday 14th November

Main Economic/Business
Rate rise signalled for 2014 as UK recovery takes hold – The Bank of England has unexpectedly brought forward its forecast for when it predicts unemployment will fall below 7%, meaning it could raise interest rates as early as next year. Financial Times, p1; Independent, p18; Times, p1

Property

Britain’s housing crisis is the latest subject to be tackled by an annual competition founded by Lord Wolfson, chief executive of Next. Launched this morning, the prize is offering £250,000 to the author of the best plan to create a new garden city. City AM, p6

The developer of the capital’s ‘Cheesegrater’ British Land has reported a 6.6% rise in its underlying pre-tax profits to £146m in the six months to September. Much of the company’s success has been driven by the strength in its London portfolio which includes the Cheesegrater and the large Regent’s Place scheme near Euston station which has already secured lettings to Manchester City Football Club and Facebook. The Times, p51; City AM, p11

Recruitment

Unemployment in the UK has fallen to 7.6% of the workforce, its lowest since May 2009. Most of the jobs taken were full time, although 54,000 were temporary. FT, p2

A sharp rise in the number of jobs that require a degrees as a minimum entry requirement has led to a qualification inflation according to Vince Cable. He said that large number of students were being forced to gain university degrees even though they were superfluous to many careers. Graeme Paton, Telegraph, p6

Personal Finance
Research funded by the Joseph Rowntree foundation shows that a third of the 1.3m families with children in poverty are single breadwinner families. Guardian, p20

Paper Summary: Wednesday 13th November

Personal Finance

8.8m people would only be able to last a week on their savings according to research from HSBC. A third of people have less than £250 in accessible savings to act as a financial safety net should they lose their main source of income.

Economics

George Osborne said Britain is on the path to prosperity and is enjoying a recovery many countries would crave in his speech at yesterday’s Festival of Business. An unexpected fall in inflation to 2.2% appears to reinforce the chancellor’s words. However, the business editor counsels against getting too carried away by that, pointing out that the biggest contributing factor was the impact of higher university fees on CPI last year.

Property

Mortgage lending to home buyers has hit its highest level since the recession according to CML figures. £27bn of loans were approved in Q3 – the highest level since 2007. ONS figures revealed house prices continue to rise, especially in the capital where prices rose 9.3% in September alone. Peter Rollings of Marsh and Parsons said “The London market is singing from a different sheet” and pointed out that half the homes in prime London are now worth £1m or above.

Recruitment

Young people are experiencing a “jobless recovery” according to research from IPPR as the youth unemployment rate is now 3.74 times the adult rate. More than 950,000 young people are unemployed and almost a third have been looking for a job for more than a year. The research found evidence of this growing trend well before the recession started suggesting the problems are systemic as well as economic.

Daily Paper Summary: Thursday 7th November

Economics
The Financial Times reports that the Bank of England is keeping a careful watch on the property market, but a policy maker at the central bank said it’s not its job to micromanage fluctuations in asset prices. Donald Kohn, a member of the MPC said the BoE would ensure lending standards did not get too loose and that lenders are adequately capitalised to manage losses that might arise.
IN other economic news, UK manufacturing picked up in September, with factory output returning to growth after an unexpectedly poor August. ONS data showed manufacturing output rose 1.2% between August and September, against forecasts of a 1.1% rise. After the data were released, the National Institute of Economic and Social Research estimated the UK economy grew 0.7% in the three months to the end of October. While this would be less than the 0.8% recorded in the three months to the end of September, the estimate suggests the recent economic recovery remains fairly robust.

Property
The Telegraph’s lead story (and Daily Mail p.2) is focussed on the fact that British households pay the highest property taxes in the developed world with the amount of stamp duty paid on the average house almost doubling since the peak of the last housing boom. UK residents are now paying twice as much as the international average according to Policy Exchange. Property taxes in Britain cost the equivalent of 4.1% of GDP – around £70 billion – in 2011. The OECD average is 1.8%. The average amount paid on housing sales is on course to reach £6,700, up from less than £4,200 in 2007-08 according to the CML. Instead of using taxes to depress demand for housing, Policy Exchange suggests more houses should be built with an aim of hitting 1.5m new homes by the end of the decade. This would require double the current rate of construction. Telegraph, p.1,4 (James Kirkup). In the Times Jones Lang LaSalle is predicting a 5% rise in house prices by 2014, with London prices rising 8%.

Personal Finance
A little outside the box – but very relevant for equity release, care and pensions – according to the ONS the UK population is set to rise 9m (14%) to 73m in the next 25 years. The ONS forecasts an increasingly aged population with the number of state pensioners rising by a third between 2012 and 2037 to 16.1m people. The average age will rise from 39.7 years in 2012 to 40.6 years in mid-2022 and 42.8 by mid-2037. This means the elderly rather than the young will increasingly form the bulk of those dependent on the working age population. The number of working population for each person of state retirement age will fall to 2.7 from the current 3.2. 6.2m people are projected to be aged 80 or over by 2037.

Employment
Research from the OECD has cast doubt on the widespread belief that the British work longer hours than everyone else. The figures show that British workers put in an average of 1,625 hours a year, or a 31 hour working week, well below the OECD average of 1,776. That puts Britain 24th in the table of 34 developed countries. Experts say it is the preponderance and growth of part-time jobs that is responsible for the short working week. Mexicans work the longest hours – 42 hours per week – while workers in the Netherlands have the easiest life, working only 26 hours. The Times, p.6 (Rosemary Bennett)

Paper Summary for 8th October 2013

Property

The Treasury select committee has warned the Help to Buy scheme could raise prices rather than stimulate new supply. This warning of a new housing bubble comes as Virgin Money is announced as having signed up, alongside government owned bands Lloyds and RBS. David Cameron defended the scheme saying it will help buyers who haven’t got rich parents.

Personal Finance

Small investors who successfully apply for Royal Mail shares stand to make an instant profit of £250 according to City forecasts. Shares are expected to increase in value from £3 to £4 instantly when trading starts next week, offering a boon to investors who are allocated the minimum of £750 worth. Labour have accused the government of undervaluing the company for a quick sale. Reports suggest it may be worth £4.5bn, far higher than the current upper valuation of £3.3bn.

Recruitment

The FCA is examining whether plans to cancel the bonuses of executives working at bailed-out banks contravene European Human Rights Law. The proposal was made by the Parliamentary Commission on Banking Standards, but could trigger lawsuits over the cancelling of legally earned pay.

Hiring of temporary staff is at its highest level for 15 years according to REC/KPMG, while demand for new staff is at a six year high. This in turn is pushing up wages with the rise in starting salaries hitting a five and half year high. (Times, p. 35, Patrick Hosking)

Economics

A sharp increase in sales, orders and hiring intentions is adding weight to claims the economic recovery is rapidly taking hold according to Patrick Hosking in the Times. Domestic sales forecasts, and confidence in services and manufacturing are higher than pre-recession levels. While the figures may moderate, the British Chamber of Commerce said the recovery was gaining traction and it is therefore likely to raise growth forecasts for 2013 and 2014.

Paper Summary: 4th September 2013

Economy

The UK economy is showing strong signs of recovery as it is forecast to grow almost twice as fast as previously expected according to new predictions from the Organisation for Economic Co-operation and Development (OECD). The British economy GDP is thought to grow by 1.5% this year, which is up from the 0.8% it had previously predicted. In this report the UK was pulled out as one of the developed economies noted for showing encouraging rates of activity, alongside Japan and the US. On the other hand growth in emerging economics has been more restrained. Latest figures in the UK signal there is stable growth in the third quarter with positive readings in surveys for the manufacturing, construction and services sectors. Recent changes in governmental housing policy are also said to be having a good impact on growth expectations. The construction sector is crawling out of the bad lands, having grown at its fastest rate since September 2007 this August according to the purchasing managers’ index for construction by  the Chartered Institute of Purchasing and Supply. It is rising at its fastest rate since before the financial crisis threw the UK into recession and confidence is growing as signs suggest there will be a rise in business activity over the next year.

Employment / Recruitment

Masses of skilled workers are leaving the UK to work overseas as a result of falling job prospects and high prices, according to a recent poll. The poll of 5,600 Brit emigrants working overseas revealed that there is a large chunk (almost 40%) are working as skilled technicians and that another 23% can be categorised as self-employed entrepreneurs. Around 321,000 left Britain to live abroad last year according to recent data from the ONS. Australia was said to be at the top of the list of destinations for Brits leaving the country. Apparently 40% of the people polled admitted they left the UK mainly due to better job prospects overseas which does not bode well for the future as the UK labour market which is already seeing a serious skills shortage across a number of key sectors including the technology and healthcare professions.

Personal Finance

The cost of care has forced over one million families to have to sell their homes in just five years according to new figures, carried out by the polling company ICM for the insurer NFU Mutual. This comes as a major shock, and is far higher than the government estimates have suggested. Charities and pension experts have pointed out that it is evidence of one of the first real attempts to measure the scale of Britain’s funding crisis. Many people think it shows the Government’s long awaited over haul of the social care system in England including the introduction of a cap on bills did not make much progress in addressing the issues facing thousands of families. care minister, Norman Lamb suggested that Britain had become a “neglectful society” and that people are allowing the elderly to spend their years in isolation due to the way that families are dispersed. While the state must play a vital role in supporting people in old age, it was all said that people must step up and provide basic kindness and companionship. Jeremy Hunt’s reaction was also one of concern and he stressed that it highlighted the need for reforms. The Government’s ambitious cap on care costs is thought to be a step in the right direction and will make England one of the first countries where people do not end up having to sell their homes to pay for care.  The results come after a separate study which found that two million people or a quarter of retired home owners are planning to sell their homes to fund their old age.

Property

One in five families rents privately in the UK, which equates to 1.2 million households including single parents according to Shelter housing charity – that’s up from just one million two years ago. And the same time home ownership is at 64% – the lowest figure for nearly 30 years. (In 2001 it was 70%). Furthermore, the English Housing Survey shows the pace of renting is increasing at an alarming rate. People are concerned that new Government schemes such as Help to Buy will push prices up beyond so that they are out of reach for the vast proportion of potential buyers and that only those with the help from the Bank of Mum and Dad or from their grandparents will be able to get a foot on the property ladder. There are fears that creating taxpayer-subsidised hand outs to first time buyers will only boost prices which will result in a housing bubble, and that it will help a select few access the housing market but will make housing even more unaffordable for most people. It has been revealed that almost a third of property purchases would not have taken place without help from the buyers family. The underlying fact is that while house prices have risen dramatically, wages have not kept up at the same rate. Due to the financial crisis, due to pay freezes during this period wages are stagnant. And people are finding it impossible to save up for a huge deposit in order to get a mortgage.

LSL / Acadametrics Scotland HPI

Scottish house prices up £1,648 in 2013
• Sales in Q2 2013 are 7.7% higher than last year
• First-time buyers accounting for a larger percentage of sales

Alan Penman, of Walker Fraser Steele chartered surveyors, part of LSL Property Services, comments: “Scottish house prices have gently taken a tumble in the past three months – the latest figures show prices fell by £627 in June compared to May. But the housing market is bearing up well under a sea of adversity. Prices are down slightly month-on-month, yet they are higher than they were at the start of the year.

“There are some green shoots of recovery, with house sales 7.7% higher in Q2 this year than the equivalent period last year. The rise in sales is powered by increased sales to first-time buyers. But homeowners and prospective buyers are wise to be cautiously optimistic. Although the availability of mortgages is noticeably better, sales levels in the first half of 2013 are still low in contrast to 2007 (only 48% of the level). Sadly there’s still an unhealthy dependency on wealthier borrowers and landlords when looking closely at sales levels.
“Without doubt, the main barrier to a full recovery in the housing market is mortgage lending, which is still low compared to its pre-financial crisis levels. The high cost of rented accommodation is a drain on personal finances, but plenty of first-time buyers have decided to bite the bullet and start saving up for the large deposit needed for a mortgage. Now the economy has crawled out of the badlands, the banking sector is improving rapidly. Lending, particularly to buyers with small deposits, has been boosted thanks to the support of the Funding for Lending and Help to Buy initiatives.
“More first-time buyer activity is needed to ensure the housing market fully rehabilitates. There is volatility in Scottish house prices depending on the distribution of the majority of first time buyers, with cities such as Glasgow and Sterling seeing significant rising prices in June, and more remote parts, such as Orkney and Falkirk experiencing the largest monthly falls in prices. The government must continue to support first time buyers, if the market is to successfully inch its way towards a more sustained recovery. As the economy expands and employment improves, the property market too will perk up.”