The UK’s annual rate of inflation has risen to 4.7% in August, up from 4.4% in July.

Bank of England Governor Mervyn King will now have to write a letter to the chancellor explaining why inflation is higher than the government’s 2% target.

Higher energy and food bills sent the Consumer Price Index (CPI) higher, the Office for National Statistics said.

Inflation as measured by the Retail Prices Index (RPI) – often used in pay negotiations – fell to 4.8% from 5%.

The Bank of England’s Monetary Policy Committee has not been able to consider a cut in interest rates to boost the flagging UK economy while inflation keeps rising.

But with the sharp fall in oil prices over the past month from their high of close to $150 a barrel, some analysts are optimistic that inflation could be near its peak.

“This latest inflation figure, coupled with the recent moves in energy prices, could be an indication of inflation nearing its peak,” said Richard Hunter, an analyst at stockbrokers Hargreaves Lansdown.

He added: “This in turn could lead to a loosening of monetary policy by way of an interest rate cut in the UK, at a time when the markets are eagerly seeking signs of recovery.”

News reported by The BBC

UK house prices have seen an annual double-digit fall for the first time since 1990, according to the latest survey from the Nationwide.

Prices were 10.5% lower in August than they were a year ago. Prices fell by 1.9% compared with July.

The average home now costs £164,654, which is more than £19,000 cheaper than the average price one year ago.

Gloomy forecasts from house builders mean the market is likely to remain subdued, Nationwide says.

The Nationwide survey found that house prices have fallen for 10 months in a row and are at their lowest level since early 2006.

Fixed-rate favour

Data from estate agents suggested “there may be some glimmers of interest returning to the market” as some buyers were taking the opportunity to secure large discounts, said Nationwide’s chief economist Fionnuala Earley.

“The extent to which [an interest rate fall] will revive the mortgage and housing market is likely to be limited while overall confidence in economic and housing market conditions is low” Fionnuala Earley, Nationwide

Gloom over house price figures

But she said that an increased supply of properties on agents’ books would continue to act as a dampener to house price growth in the short term.

House builders were pointing to a loss of consumer confidence for the continued slowdown, the report said.

And Ms Earley added that the lack of availability of mortgages was still pushing down house purchase activity.

“There is clearly less mortgage borrowing taking place in the current market, but those borrowers choosing a new loan are tending to opt for fixed rate loans, even though they have been more expensive than trackers,” Ms Earley said.

First-time buyers

Earlier this month, figures from the Council of Mortgage Lenders (CML) suggested that the slump in mortgage lending continued in July.

Total lending stood at £24.8bn, up by 5% from June, but still 27% lower than a year ago.

First-time buyers, who would normally benefit from falling prices, have struggled to obtain cheap mortgage deals without a large deposit.

However, the cost of fixed-rate mortgages has been falling in recent weeks with a series of lenders cutting their interest rates.

Ms Earley said the “gloomier feel” of the economy in general, as well as rising food and fuel prices and a lack of confidence with jobs made people more prudent with their borrowing.

She said that prices, that were still higher than five years ago, were likely to keep falling this year as there remained a lot of uncertainty in the market.

She added that the situation would not turn around very rapidly unless there was a significant change in consumer sentiment.

Rate cuts

The door was open for interest rate cuts by the Bank of England, she added, but this in itself would not turn things around.

“We expect the next move in the bank rate to be down, but the extent to which this will revive the mortgage and housing market is likely to be limited while overall confidence in economic and housing market conditions is low,” she said.

The picture is not completely the same across the UK. Although the Nationwide figures take an average from across the country, Ms Earley said the Scottish market was proving more resilient than most areas.

Northern Ireland, in contrast, was experiencing higher than average falls.

Henry Pryor, who runs property website primemove.com, said that markets were affected by local factors.

News reported by The BBC

Savers putting their money in funds investing in UK stocks and shares would have made more money since 2000 by putting it in savings accounts instead.

If £1,000 was invested at the start of the decade, it would now be worth £1,094 in an average UK unit trust but £1,358 in a typical savings account.

The research by Thomson-Reuters Lipper, commissioned by the BBC, questions the returns from long-term investments.

But industry experts say that timing was key to how much money can be made.

The same calculations, but up to July 2007, would have seen shares perform comfortably ahead of cash, according to Jane Lowe, director of markets at the Investment Management Association (IMA).

Returns

The exclusive research for the BBC found that £1,000 invested in a UK equity income fund would also have made less than in an instant savings account – now being worth £1,302.

“It [stock market investment] is a longer term question of when you are putting your money in and when you are taking money out” Jane Lowe, IMA

But if anyone made the unusual decision at the time of investing in a commodities or natural resources fund eight years ago, their £1,000 would now be worth £3,260.

The fund management industry often suggested that over the long-term shares would outperform a typical savings account.

Ms Lowe said that stocks and shares were not an investment for those wanting to make a “quick buck”.

“It is a longer term question of when you are putting your money in and when you are taking money out,” she said.

She said it was difficult to predict the peaks and troughs of the market, but over the long-term this form of investment was still a better bet than savings accounts.

She suggested that people drip-feed their investments into funds to flatten out the cycle.

William Claxton Smith, of Insight Investments, also pointed out that over the last eight years interest rates have been relatively high in the UK, leading to better returns from savings accounts.

News reported by The BBC

Wholesale gas prices rose by more than 14 per cent yesterday after a leak on a North Sea pipeline prompted fears about supplies this winter.

The Norwegian oil and gas producer Statoil Hydro said it discovered the leak on a gas pipeline linking its Kvitebjoern field to an onshore processing plant.

The company closed the pipeline, which pumps an estimated 5 per cent of Norway’s total gas output, and warned that it could remain shut until next spring.

Norway is a significant source of gas supplies to Britain, which imports about 40 per of its gas owing to dwindling North Sea stocks.

The announcement sent the forward price of gas for delivery to Britain this winter rising to 104p per therm from 90.75p per therm at the start of the day.

This is above the record highs seen in June this year, when wholesale gas prices passed £1 a therm on the back of rising oil prices, and around double the price this time last year.

David Hunter, an analyst with the energy consultancy McKinnon & Clarke, said the rise was a sign of nervousness of the markets to supply problems. He said: “The impact on the energy market has been significant, as demonstrated by the momentous jump in gas and electricity prices. The amount of gas available to export from Norway to countries, including the UK, will be cut significantly.”

News reported by The Independent

The four companies in the race to run rail services in the South East have been announced.

The Department for Transport said National Express, Stagecoach, Govia and NedRailways would contest the new South Central franchise.

The eventual winner of the deal will run trains in south London, parts of Kent, Sussex, Surrey and Hampshire.

Rail minister Tom Harris promised less crowding on the franchise which is due to start in the summer of 2009.

‘Important franchise’

Mr Harris said: “We look forward to seeing strong bids from each of the competitors for this important franchise.

“We want passengers across the franchise area to see improvements – longer trains, safer stations and later running services.”

The franchise will consist of services currently run by Southern and will include the Gatwick Express.

It will also take in the Tonbridge to Redhill route now run by Southeastern.

Smartcards, including Oyster cards, will be used across the franchise area.

Major improvements such as the extended East London Line and the £5.5 billion Thameslink upgrades will also have to be supported by the successful bidder.

National Express currently runs the East Coast and East Anglia rail franchises and Stagecoach runs East Midlands and South West routes.

Dutch firm NedRailways runs MerseyRail and Northern services jointly with Serco, while Govia runs Southeastern and London Midland trains alongside the Southern franchise.

The invitation to tender will be issued in autumn 2008, with the successful bidder expected to be announced in the summer 2009.

News reported by The BBC

It might be tempting from a UK perspective to crow about the latest economic growth indicators.

British growth, at 0.2% for the second quarter (announced a few weeks ago) may have been paltry but it compares favourably with other leading European economies.

Spain registered growth at a snail’s pace of just 0.1% over the three month period. Germany’s economy contracted by 0.5%, while France and Italy chalked up a decline of 0.3%.

But any hubris is misplaced. Margins for error are small and there could be subsequent revisions of the figures. And few economists would predict that the UK is strongly placed to avoid negative growth at some stage over the next year.

Implications

Most alarming for British policymakers is the effect a eurozone slowdown will have on UK companies. Only yesterday, the Governor of the Bank of England, at his quarterly Inflation Report media conference, was citing export led growth as a positive factor for the economy next year.

Whatever happened to consumer demand in the wake of the housing market slowdown, he seemed to suggest, exporters could take up the strain.

But export driven expansion will be hard to achieve if Britain’s biggest trading partner is in recession. Half of the UK’s overseas sales of goods and services go to the eurozone. So a slowdown there will have significant implications for order books and jobs.

Consultancy Capital Economics has already run a slide rule across the trade numbers. It believes that total goods and services exports in the UK could be cut by 5% as a result of the European downturn. This might reduce UK GDP growth by as much as 1.2%.

All this assumes that exporters wont get a boost from the weaker pound.

Stark conclusion

Even so there is a stark conclusion to be drawn here – that a stagnant British economy could be pushed into recession by a continued slide in the major economies across Europe.

British exporters are aware of these harsh headwinds from across the Channel.

The outdoor clothing manufacturer Barbour, for example, told the BBC they were having to work hard to hold sales levels in Germany and knew things would get harder.

They were concerned about the German economic downturn and knew they were in for a tough winter.

All in all the British economy is in for a rough enough ride as it is, without being dragged down further by the eurozone’s problems.

News reported by The BBC

Police are warning that a way has been found to hack into chip-and-pin readers to steal customers’ details.

Specialist police raided a counterfeit card factory in Birmingham on Tuesday and found equipment needed to steal details and make fake cards.

Chip-and-pin technology has regularly been hailed as a success in reducing card fraud on the UK High Street.

Two people have been charged with conspiracy to defraud after being arrested in connection with the raid.

Clone

Speaking in general, Det Ch Insp John Folan, of the Dedicated Cheque and Plastic Crime Unit, said that chip-and-pin terminals that have been hacked into have been found in 30 shops in the UK.

“Customers should be assured that UK retailers always take the protection of cardholder data seriously” Jane Milne, British Retail Consortium

He told the BBC that it was “a game of cat and mouse” between police and fraudsters, but one that was being tackled early by the authorities.

Thieves can steal the card readers and install a hidden device which logs information when a customer enters their pin number.

The reader is then put back in a shop, supermarket or petrol station, sometimes with the collusion of a member of staff.

Fraudsters can then use the information to create fake cards to withdraw cash in countries where chip-and-pin has yet to be introduced.

Apacs, the UK Payments Association, said that over the past three years losses on face-to-face transactions on the UK High Street fell from £218.8m in 2004 to £73m last year owing to the introduction of chip-and-pin.

But fraud overseas increased by 77% last year to £208m, 39% of total UK card fraud. Banks throughout Europe have agreed to bring in chip-and-pin cards by 2010.

Police want to hear from any retailer who has had chip-and-pin readers stolen or believe their machines have been tampered with.

Liability

“Customers should be assured that UK retailers always take the protection of cardholder data seriously and are continuing to invest millions of pounds to enhance existing security measures,” said Jane Milne of the British Retail Consortium.

Apacs says that chip-and-pin remains the safest method of payment for goods and services but was never claimed to be foolproof. The Banking Code should ensure that any victims are refunded for any losses.

Banks usually refund money stolen from a victim’s account by fraudsters, but there is a question of liability if customers have given away their pin number.

Security expert, Andrew Goodwill, from the Third Man group, said this was the first evidence of a breach of the chip-and-pin system, with the encryption of the chip having been broken.

An Apacs spokesman said that inquiries were ongoing to establish how the hidden devices logged pin numbers.

In the Birmingham raid, police discovered chip-and-pin terminals, card account numbers, a card writer and computer software.

Police said that these details could be used to create fake cards “on a massive scale”.

News reported by The BBC

A bogus e-mail offering recipients a cash grant is using the name of the authorities which tackle scams.

The message suggests that Trading Standards Central UK is giving out £1m in total a year in donations to 100 international recipients.

But the genuine Trading Standards Central, a one-stop shop website for consumer protection advice, has no connection with the e-mail.

Officers described the use of the name as “galling”.

Circular

The e-mail gives a series of serial, batch, reference and ticket numbers to claim the “prize”.

The genuine Trading Standards Central is run by the Trading Standards Institute (TSI).

“It is particularly galling to find that they are prepared to take in vain the name of an organisation which works to protect consumers and businesses from scams and unfair practice,” said TSI chief executive Ron Gainsford.

He added that they would be working with the police and the Office of Fair Trading to trace the source of the circular.

Other bogus e-mails have been used by fraudsters to gather bank details of recipients, or to encourage them to call premium-rate telephone lines.

News reported by The BBC