It is said that Obama is rushing to make America a dead-end Nanny State and now with this latest true “labour” budget the UK is heading down the same “Nanny State” route!

The UK Government have truly lost the plot now – what a great idea – Tax the rich and give away £1,000 for people to buy a new car, which not only goes against the “Green Idea” but props up the car companies that are running inefficiently and don’t need a government hand-out! I note that they have committed Britain to cut carbon emissions by 34% by 2020, when the present Cabinet will be long-gone.

The Budget revealed Income Tax for those earning more than £150,000 to rise to 50% from April 2010 together with tax relief on pensions to be reduced for the same high earners from April 2011.

The Chancellor has gone against Labours original pledge of “Not to increase taxes” when they came to power, but Alistair Darling has said that “during these extraordinary times, extra ordinary action needs to be taken“. What he omitted to say with his comments was that he and the rest of the Labour Government have slaughtered the UK economy, with record debt and total mis-management! Also, I missed his apology, perhaps I was not listening properly! What he is failing to recognise is that due to their excessive over spending on the public sector, they have significantly added to the present problem and instead of simply pointing blame elsewhere, they should own up and give up No. 10!

Of course some will argue that the new cars are more CO2 friend, but quite frankly this is total rubbish when you factor in the damage done to the climate through the manufacturing process to build these new cars. I would have more sympathy for this idea if the £1,000 was to go towards the new fuel efficient low carbon-emmission cars.

Why don’t the government recognise that they have truly messed up the UK economy and resign gracefully!

This was a true Labour government budget – it has taken them a few years before they went back to their basics of borrow and spend and ”Tax the Rich to Give to the Poor“, but this time it’s not just to the poor it is also to the “Rich” car manufacturers, but more importantly to pay for their blunders and negligence.

The Government are to increase public sector borrowing by a further £175 billion this year, as confirmed by the Chancellor in his budget – this is a record borrowing figure.

Do the Chancellor and the Prime Minister not realise that the guys they are taxing to the hilt are the ones that go out of their way to set up businesses and create employment. Employment creation makes an economy and provides the resource to pay the taxes through Pay as You Earn (PAYE) and in turn keeps the economy going.

The nanny state moves not only include the car give-away noted above, but also Government support for the economy to protect 500,000 jobs and extra support for people who have been out of work for 12 months through the flexible new deal, plus from January all the under-25s out of work for a year will be offered a job or training place with extra money on top of benefits for those in training. Not to mention the extra £250m funding to help people get work experience in growth industries and extra funding to create 54,000 new places in sixth form education.

And that’s not all the new scheme to guarantee mortgage-backed securities to boost lending on property together with an extension of a year on the Stamp Duty holiday for homes up to £175,000. The Chancellor has also pledged and extra £80m for shared equity mortgage scheme to help boost the housing market and a further £500m to kick-start stalled housing projects, including £100m for local authorities to build energy efficient homes.

The end of this week has seen Japan announce a rescue package pf 1.5 trillion Yen (£11.4 billion) to help Asian Countries threw the economic slow down.

The Prime Minister of Japan Taro Aso has decided on this rescue package and will be spent on promoting trade within the region and on infrastructure over the next three years.

The Japanese Prime Minister has called upon other wealthy nations to help smaller countries in the same way and has warned against protectionism. We are already seeing signs of protectionism in the UK, with workforces showing their growing resentment or foreign workers.

Japan has been hit hard by the slowdown and only this week NEC has announced 20,000 job cuts over the next 14 months and Hitachi has announce 7,000 job losses due to a drop in sales and is predicting a 700 billion Yen (£5.3 billion) loss for the year.

In contrast to this bad news Subway announce that it intends to open 600 new stores across the UK creating around 7,000 new jobs. Also, good news for Amazon as they saw their profits increase by 9% for the final quarter to December 2008 making a final annual profit of $1 billion (£685 million), so there is good news around despite the gloom.

A tough time for the air industry yet again, after getting through the high oil prices over the last several months we have now seen a huge fall in freight traffic and even more that the drop after 9/11. Freight traffic has falling by 22.6% in December of 2008 over the same month last year. The International Air Transport Association (Iata) is warning of a tough time for both passenger and freight airlines alike.

With the G20 summit coming up in April in the UK the UK’s Prime Minister Gordon Brown has urged a global confidence, saying that world leaders must have the “confidence to act” to tackle the global recession. Mr Brown was speaking at the Economic Forum in Davos where there were many world business entrepreneurs speaking and included Sir Stelios Haji-Ioannou the founder of Easyjet, who was trying to talk up the opportunities that exist in a down-turn.

Turning to commodities, gold has seen a further rise this week ending the week at $929 having risen 3.7% over the end of last week. The price of gold will remain high and might go even higher with the prospect of a continuation of a weak US dollar. Oil is still flirting around the $40 mark having dropped back again this week ending at $41.75, representing a drop of over 10%.

The first oil company to show signs over the affect of falling oil prices is the worlds largest oil giant Exxon Mobil. The company has reported a big 33% fall in profits for the last quarter of 2008 over the same quarter for 2007, falling to $7.8 billion (£5.3 billion).

End of the week saw:
Stock exchanges:
FTSE 100: 4,150
DOW: 8,001
S&P: 825.88
Nikkei: 7,994

Currencies
UK Sterling £ to US Dollar $ 1.45905
UK Sterling £ to Euro € 1.13592
UK Sterling £ to Japanese Yen 131.282
UK Sterling £ to Aus $ 2.28796
US Dollar $ to Euro € 0.778240
US Dollar $ to Japanese Yen 89.9350

Commodities
Nymex Crude oil – $41.75
Gold – $929.00

This week saw the Eurozone slip into recession for the first time since its inception back in 1999.

This week also saw Hong Kong go into recession, with the UK heading for a long and painful recession too. The Pound too a hammering this week against the Dollar falling to a low of just below $1.48 this week. The UK government needs to be careful about how it tackles the present situation and it is not careful, too much borrowing to afford tax cuts and more government spending will cause further falls in the Sterling/Dollar rate. The shadow chancellor, George Osborne, has been criticising the Government and in particular Gordon Brown over his handling of the present situation, which has lead to a warning from Gordon Brown Gordon warning that his actions could lead to a sterling collapse.

So what do we have to look forward to? We have already seen world-wide interest rate cuts and we are to see government spending and tax cuts to help stimulate world economies. This weeks G20 summit has seen world leaders speaking about working together to solve the world financial crisis. The Brazilian President, Luiz Inacio Lula da Silva has voiced his views on the validity of G8 and has said that G20 is much more relevant to the world.

The world leaders at the G20 summit held in Washington have pledged to work together to restore global growth.

We have seen that the G20 leaders have been agreeing on banking reforms to change the financial system to help get the world through this present crisis and to put safety measures in place to prevent the same thing happening again in the future. One way that will help prevent such a situation is to put incentives in place to prevent banks from taking excessive risk.

Mortgage deals low on the ground

The type of deal that used to help first time buyers and others to move home are disappearing fast. Mortgage deals offering a 5% deposit are almost gone altogether and 10% deals are falling fast to around 66 on the market right now, whereas back in February this year were close to 1,200 deals. The other problem that mortgagees face is not having the 1.5% cut being passed on, which is more down to LIBOR being a high rate than base rates.

Pension payment reductions on the cards

AXA have warned about the consequences of people stopping or reducing their pension payments in the face of economic problems, their press release on 15th of November highlights:

“Urgent action needed to prevent £35 billion pension hole”

There are around 1.5 million people planning to stop pension contributions as recession bites and that a two-year pension payment break would cost a 35 year-old man £28,700 from his retirement fund!

The press release comments – “Around half (53%) of those planning a pension break said they were doing so to offset the increased cost of living or to clear debts, with a further 13% blaming increased mortgage payments.”

To see the whole press release click here.

Oil prices down to a low

Oil prices dipped again this week with Brent Crude falling to just over $50 a barrel. Opec are looking to reduce production yet again as we see Iran calling for reduced output as the price of oil drops amid the world economic slowdown. The dramatic falls in the oil barrel price has have major effects on the Russian economy where their economy has become accustomed to high oil prices and with the reduced income has put pressure on their financial systems.

Government support for the car industry

This week also saw the US government in discussion and looking to vote on a bill to pledge $25 billion ($17 billion) to the three major car manufacturers, Ford, Chrysler and General Motors. I am not quite sure whether this is quite what represents a free capital market, but unions of the major car-makers have warned of the dire consequences if any one of the big three went bust.

End of the week saw:
Stock exchanges:
FTSE 100: 4,233
DOW: 8,497
S&P: 873
Nikkei: 8,462

Currencies
UK Sterling £ to US Dollar $ 1.4854
UK Sterling £ to Euro € 1.17167
UK Sterling £ to Aus $ 2.29331
US Dollar $ to Euro € 0.788795

Commodities
Nymex Crude oil – $56.43
Gold – $742.90

This week Alistair Darling is asking banks to support business customers in these difficult times and not just when times are good. The Chancellor has said that it is vital to support small businesses through the downturn and announcing an extra £4 billion of support.

As a part of the multi-billion pound bailout deal put forward to the UK’s leading banks by the government was a condition that they restore the level of funds available to small businesses to those of 2007 levels.

World interest rates

This week also saw the Chancellor Alistair Darling re-stating his support for the Bank of England, despite criticism that it had been focusing too much on inflation. The Chancellor confirmed that there is no reason to change the Bank’s main goal of keeping inflation to close to the 2% target. The change in words or in the way the message has been sent to the Bank of England is about the discretion over the horizon over which inflation is brought back to this target level.

We watch and wait to see what the Bank of England does next week with interest rates where we see countries around the world have again been cutting their rates. We saw the US Federal Reserve cut interest rates from 1.5% to 1% on Wednesday of this week and Japan cut their rates from 0.5% to 0.3%.

It is of no surprise that the US is cutting interest rates when it was confirmed by figures from the Commerce Department that the US economy shrank at an annualised rate of 0.3% between July and September. Consumer spending, which makes up two-thirds of the US economy, also shrank by 3.1%, which is the first contraction since 1991.

The chance of a interest rate cut in Europe is more likely where inflation for October across the 15 nations that share the euro fell to an annual rate of just 3.2%. The rates presently sit at 3.75% and are expected to be cut by a half-point to 3.25%.

The motor industry

It is good to recognise the good news out there with Volkswagen going against the economic slowdown and reported increased profits. VW’s net profit rose 28% to €1.2 billion ($1.6 billion; £950 million) in the period July to September. Their sales have been boosted by three out of the four BRIC emerging market economies, China, Russia and India, which has off-set lower demand in Europe and the US.

As a contrast to this Japanese carmaker Suzuki issued a profit warning this week and the company blamed the fall in sales down to India, which is one of their key market. The strong yen and higher material costs have not helped their figures where they have said that their net profits will probably fall 25% to 60 billion yen ($612 million; £379 million) in the year to the end of March.

Trouble for pension fund trustees

There is a double whammy for pension funds right now with falling stock markets reducing fund values. But pension scheme trustees are being warned that they should not be too quick to start demanding extra cash from companies at this time which might put too much pressure on those companies at a very difficult time. A longer term view is needed and when the economy is straining with a huge turn-down if pension trustees were to start asking for extra funds might be enough to tip some companies over the edge.

News on the banks front – Barclays bank has secured £7.3 billion of extra investment cash from the Middle East this week. The money is being raised on the whole from state investment funds and royal families of Qatar and Abu Dhabi and unlike some of the other top banks of the UK, Barclays will not be accepting a cash injection from the government. A bank that has been troubled by the world banking crisis HBOS has been approached by a mystery bidder at a time when the UK government has given the green-light for the takeover of the company by Lloyds TSB.

Alitalia appears to be near to a rescue deal being agreed, but as with all the rescue deals posed so far the unions have been putting obstacles in the way. In this latest deal five out of the nine unions are still not backing this new deal, which does seem bizarre because unless the company can secure additional finance, should this deal not go through, the company will go bankrupt. Investment group Cai has said that the deal will still go ahead, despite the lack of agreement with the trade unions.

More on oil price volatile

Oil prices finished the week slightly higher on the week ending at $67.59, as we see results from the oil giants at record levels. For example, US oil group Chevron has seen its latest profits more than double when it reported its third-quarter results to September showing a net profit of $7.89 billion (£4.9 billion), which is up from $3.72 billion for the same period last year.

Exxon Mobil has also made record profits after reporting that it made a profit of $14.83 billion (£8.97 billion) between July and September, representing a rise of 58% on the same period last year. Oil firm Royal Dutch Shell has also reported excellent profits as a result of record oil prices with a jump of 71% in its third-quarter profits to $10.9 billion (£6.6 billion). BP reported earlier that its profits during this same period more than doubled to $10bn.

British Prime Minister Gordon Brown has called for oil price stability and has made a special trip to the Middle East in order to ask the Gulf states to help stabilise prices with the aim to help tackle the global economic crisis. The UK prime minister held talks with Saudi ruler King Abdhullah at the King’s Palace in Riyadh being joined by his Energy Secretary Ed Miliband.

On the jobs front we see more redundancies

American Express has revealed plans to reduce its workforce by around 7,000, representing a cut of about 10%. This together with a freeze on some salaries to reduce costs and a suspension to pay rises for management next year are part of a $1.8 billion (£1.1 billion) cost cutting exercise.

On the housing sector

There has been a slight change on the number of mortgages approvals for house purchases in the UK in September. According to the Bank of England 33,000 home loans were approved in September representing a small rise of 1,000 compared with the record low of the previous month. It is thought that this rise in mortgage approvals is partly due to the government raising the stamp duty threshold to £175,000 in early September.

However, despite the above improvement there is trouble on the repossession front with the number of people losing their homes climbing sharply. The number of repossessions in the second quarter of the year was 11,054, which is up by 71% over the same period last year.

End of the week saw:
Stock exchanges:
FTSE 100: 4,377
DOW: 9,325
S&P: 967
Nikkei: 8,577

Currencies
UK Sterling £ to US Dollar $ 1.61620
UK Sterling £ to Euro € 1.2727
UK Sterling £ to Aus $ 2.44394
US Dollar $ to Euro € 0.787465

Commodities
Crude oil – $67.59
Gold – $725

Rules to control speculative share trades known as short-selling could be introduced in the UK, Prime Minister Gordon Brown has said.

“When groups of people are exploiting a difficult economic situation, it is right to stop short-selling,” he said.

The Financial Services Authority placed a four-month ban on the short-selling of UK financial shares last week.

Short-sellers “borrow” shares and sell them, hoping to profit by buying the shares back later at a lower price.

Investors who carry out such short-selling have been accused of aggressively targeting banks such as HBOS.

“We’ll be reviewing over the next four months, and I think you’ll find new rules for the future” Gordon Brown

Last week HBOS agreed to be taken over by its rival Lloyds TSB following a dramatic fall in its share price.

List extended

The FSA introduced its temporary ban on 19 September because it was concerned short-selling was exacerbating falls in some share prices.

Initially 32 banks and other key financial institutions were included on the list, and since then this has been extended to include other financial stocks.

Speaking on BBC Radio 4′s Today programme, Mr Brown said it was wrong that “good companies” could be brought down by “speculative activities” in the financial markets.

“We’ll be reviewing over the next four months and I think you’ll find new rules for the future.”

Battered banks

This week, the British hedge fund manager, Man Group, asked for its shares to be included in the FSA’s list.

Its share price fell steeply on Tuesday, partly as a result of the company being left off the list of shares subject to the short-selling ban, said traders.

The FSA has also ordered hedge funds and other institutions to reveal if they are significant short-sellers in the UK’s battered banking sector.

As a result, New York-based hedge fund manager John Paulson has been revealed as one of the biggest short-sellers.

His firm, Paulson & Co, has made bets against almost all of Britain’s biggest banks – Barclays, Royal Bank of Scotland, Lloyds TSB and HBOS.

The firm defended its actions, saying that while it empathised with financial firms that might be in difficulties, its main aim was to make a profit for its investors whether stock markets were rising or falling.

Mr Paulson is said to have made a personal fortune of more than £1.6bn ($3bn) by betting against the American mortgage market last year.

News reported by The BBC

The UK is facing a serious risk of recession within months, the findings of a survey of almost 5,000 small, medium and large businesses suggest.

The British Chambers of Commerce’s (BCC) quarterly report found the credit crunch and rising costs had dented the most important sectors of the economy.

It came as the FTSE 100 stock index briefly dipped into a “bear market”.

Prime Minister Gordon Brown said he was the right man to steer the UK economy through “difficult times”.

Global stock indexes have also fallen amid concerns about the global economy.

WHAT IS A RECESSION?
There are a number of definitions of a recession.

The most commonly used one is when there are two quarters in a row of economic contraction, or negative growth.

But it is quite possible to have two quarters of negative growth and another couple of quarters of decent growth – so the economy actually grows year on year, despite going through a technical recession.

The gloom surrounding the UK economy has been amplified by a string of further developments including:

Housebuilder Persimmon revealing it had cut 2,000 jobs amid woes in the UK housing market. The building firm said that completions of house sales in the first six months of the year were down 30%, during what it described as the “most challenging period in our recent history”.
The Council of Mortgage Lenders saying that a recovery in the mortgage squeeze was still “some way away” – revealing that the number of loans for home purchases remained low in May at 52,700.

Shares in troubled lender Bradford & Bingley falling another 16% on Tuesday after Monday’s 18% drop as concerns lingered over its fundraising plans.
Grim outlook

Firms in the manufacturing and services sector said domestic sales and orders had slowed over the past three months, said the BCC, which added that firms were also experiencing serious cash-flow problems.

Its economic adviser, David Kern, said the survey showed a “menacing deterioration” in UK prospects.

“We are now facing serious risks of recession,” he said.

“The outlook is grim and we believe that the correction period is likely to be longer and nastier than expected.”

There are a number of definitions of a recession, but the most commonly used one is when there are two quarters in a row of economic contraction, or negative growth.

Services firms, which include restaurants, gyms and tour operators, have been particularly hard hit, the BCC reported.

Sales and orders, job expectations and confidence in this sector had hit their lowest levels since the recession of the early 1990s.

The BCC’s director general David Frost said the report was deeply worrying.

“I am sending Alistair Darling and Gordon Brown a strong message from the businesses I meet every day up and down the country,” he said.

“To put more pressure on business would not only restrict business growth and hit the consumer hard, it would crush further what our economy is based on – confidence.”

Mortgage drought

The report is likely to add to the wave of pessimism sweeping across the business world, from retailers to house builders.

Last week, the housing market suffered another blow when the Bank of England said mortgage approvals had plunged by 28% in May and were 64% lower than a year earlier.

House builders are cutting jobs and offices as the property slump continues. Before the news of the job cuts at Persimmon, rival builders Taylor Wimpey and Barratt Developments had announced 2,000 redundancies in the past week.

The mortgage drought has meant many people have been unable to secure the finance they need for a new home, while falling property prices have also put people off buying.

There was more bad news for the economy on Monday, when official figures showed that industrial output was falling at its fastest rate for more than a year.

Meanwhile, Marks and Spencer sent shivers across the retail sector last week when it reported a shock downturn in sales.

Some economists believe the chances of a recession in the UK are now 50:50.

They had hoped the slowdown in the economy would eventually reduce inflation, without turning into full-blown recession.

News reported by BBC