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Think tank predicts the UK economy is in recession
The word ‘recession’ has been used a lot over the past months as politicians, economists and journalists all come to grips with the state of the UK economy. Yet the National Institute of Economic and Industrial Research (NIEIR) has pre-empted the release of official figures on whether the UK economy is in a recession, forecasting that the UK's economy has shrunk by 1.5% over the last quarter. If NIEIR’s predictions turn out to be correct these will be the worst figures seen in 28 years and the UK will officially be in recession. Official data has reported a 0.6% contraction of the UK economy between July and September 2008 and if, as expected, figures report a further contraction of the economy in the final quarter of 2008, the UK economy will officially be in a recession. It seems likely that this will be the case, but what is unclear is how deep the recession will be.
Let’s now review the other top money stories of the past week commencing the 12th January 2009.
Monday 12th January
Plans to help those who are out of work – There have been lots of announcements of job cuts recently with the number of unemployed people in the UK continuing to rise. This week the Prime Minister pledged to help 500,000 people get back into work or work-based training. The Department of Work and Pensions and the Department for Innovation, Universities and Skills will invest £500million into getting people back into work. The money will be invested into the JobCentre Plus so that they can provide more personalised help to help those people that have been out of work for over 6 months. It will also go towards ‘Employers' Golden Hellos' of up to £2500 - paid to employers to recruit and train those who have been unemployed.
Let’s now review the other top money stories of the past week commencing the 12th January 2009.
Monday 12th January
Plans to help those who are out of work – There have been lots of announcements of job cuts recently with the number of unemployed people in the UK continuing to rise. This week the Prime Minister pledged to help 500,000 people get back into work or work-based training. The Department of Work and Pensions and the Department for Innovation, Universities and Skills will invest £500million into getting people back into work. The money will be invested into the JobCentre Plus so that they can provide more personalised help to help those people that have been out of work for over 6 months. It will also go towards ‘Employers' Golden Hellos' of up to £2500 - paid to employers to recruit and train those who have been unemployed.
Wednesday 14th January
Small business loan scheme unveiled –The government have unveiled a loan guarantee scheme for small businesses. This scheme will involve the government guaranteeing £20billion of loans offered to small businesses by banks. This scheme has been offered by the government as many small businesses have experienced problems obtaining credit from their banks. Banks have been tightening up who they will lend to as they fear the loans not being repaid. This scheme announced by the government is designed to remedy this problem by encouraging banks to lend to viable small businesses as the government will be insuring the banks against the risk of companies defaulting on loans. Fears have been raised however that £20billion will not be enough to get the bank’s lending sufficient amounts of money to companies who are in need of loans. For more details of the scheme see the Department for Business Enterprise & Regulatory Reform website.
Fewer jobs for graduates –As unemployment has increased recently, so has competition for jobs, and one sector of the jobs’ market that has been reduced are graduate vacancies. There are now 17% less graduate jobs on offer when compared with the summer of 2008. The biggest drop in graduate vacancies has been seen in investment banking, with the number of jobs available being cut back by 47% over the last year. Retailing and accountancy firms have also reduced their graduate jobs on offer, reducing jobs by 26% and 15% respectively. There have however been large increases in graduate jobs available in the public sector, with an increase in jobs of 51% over the past two years. The armed services have also increased their graduate vacancies; increasing by 17%.
Small business loan scheme unveiled –The government have unveiled a loan guarantee scheme for small businesses. This scheme will involve the government guaranteeing £20billion of loans offered to small businesses by banks. This scheme has been offered by the government as many small businesses have experienced problems obtaining credit from their banks. Banks have been tightening up who they will lend to as they fear the loans not being repaid. This scheme announced by the government is designed to remedy this problem by encouraging banks to lend to viable small businesses as the government will be insuring the banks against the risk of companies defaulting on loans. Fears have been raised however that £20billion will not be enough to get the bank’s lending sufficient amounts of money to companies who are in need of loans. For more details of the scheme see the Department for Business Enterprise & Regulatory Reform website.
Fewer jobs for graduates –As unemployment has increased recently, so has competition for jobs, and one sector of the jobs’ market that has been reduced are graduate vacancies. There are now 17% less graduate jobs on offer when compared with the summer of 2008. The biggest drop in graduate vacancies has been seen in investment banking, with the number of jobs available being cut back by 47% over the last year. Retailing and accountancy firms have also reduced their graduate jobs on offer, reducing jobs by 26% and 15% respectively. There have however been large increases in graduate jobs available in the public sector, with an increase in jobs of 51% over the past two years. The armed services have also increased their graduate vacancies; increasing by 17%.
Thursday 15th January
Mortgage lending falls –New figures released by the Council of Mortgage Lenders (CML) have indicated that the number of new home loans issued in November last year was only 33,000, down 17% from the previous month. This marks a 59% drop from the number of new loans issued in November 2007. These figures support those issued earlier this week by The Royal Institute of Chartered Surveyors (RICS) that property sales continued to decline in December 2008. The number of sales per estate agency for the three months up to December fell to 10.1 sales per agency, down from 10.6 sales per agency in the previous month. RICS have warned that the lack of mortgages available will continue to depress property sales. Alongside the fact that the average deposit put down by a new homeowner has also increased to 18% of the property's value, it seems first-time buyers will still find it very hard to enter into the housing market.
Big retailers struggle –Some of the UK's big retailers have reported significant falls in like-for-like sales over the last few months. Argos, Homebase, PC World and Curry's have all reported significant drops in like-for-like sales. Some retailers are coping better during this very tough time, with stores such as Primark, Carphone Warehouse and Mothercare reporting improved like-for-like sales.
Mortgage lending falls –New figures released by the Council of Mortgage Lenders (CML) have indicated that the number of new home loans issued in November last year was only 33,000, down 17% from the previous month. This marks a 59% drop from the number of new loans issued in November 2007. These figures support those issued earlier this week by The Royal Institute of Chartered Surveyors (RICS) that property sales continued to decline in December 2008. The number of sales per estate agency for the three months up to December fell to 10.1 sales per agency, down from 10.6 sales per agency in the previous month. RICS have warned that the lack of mortgages available will continue to depress property sales. Alongside the fact that the average deposit put down by a new homeowner has also increased to 18% of the property's value, it seems first-time buyers will still find it very hard to enter into the housing market.
Big retailers struggle –Some of the UK's big retailers have reported significant falls in like-for-like sales over the last few months. Argos, Homebase, PC World and Curry's have all reported significant drops in like-for-like sales. Some retailers are coping better during this very tough time, with stores such as Primark, Carphone Warehouse and Mothercare reporting improved like-for-like sales.
Friday16th January
New mortgage help scheme unveiled - A new scheme designed by the National Housing Federation and the Council of Mortgage Lenders (CML) has been unveiled to help those facing repossession. The scheme is expected to costs £200million and is expected to help up to 6,000 households. The scheme entails that not-for-profit organisations will buy homes from people facing repossession but still allow those people to continue living there -either as a tenant on affordable rent or as the homeowner after taking a loan from the housing association. This scheme is specifically targeted at families with small children, households with a disabled member, pensioners or those who are deemed to be vulnerable. If you are interested in this scheme, please contact your local authority. If you are worried about repossession it is best to seek advice as soon as possible before making any big decisions regarding your home. Contact your local Citizen’s Advice Bureaux – their number can be found in your local address book or call the Consumer Credit Counselling Service on 0800 138 1111 who can also give you free and independent advice.
Prepared for moneybasics by Joanna Parsley, Advocacy Officer (Credit Action).
New mortgage help scheme unveiled - A new scheme designed by the National Housing Federation and the Council of Mortgage Lenders (CML) has been unveiled to help those facing repossession. The scheme is expected to costs £200million and is expected to help up to 6,000 households. The scheme entails that not-for-profit organisations will buy homes from people facing repossession but still allow those people to continue living there -either as a tenant on affordable rent or as the homeowner after taking a loan from the housing association. This scheme is specifically targeted at families with small children, households with a disabled member, pensioners or those who are deemed to be vulnerable. If you are interested in this scheme, please contact your local authority. If you are worried about repossession it is best to seek advice as soon as possible before making any big decisions regarding your home. Contact your local Citizen’s Advice Bureaux – their number can be found in your local address book or call the Consumer Credit Counselling Service on 0800 138 1111 who can also give you free and independent advice.
Prepared for moneybasics by Joanna Parsley, Advocacy Officer (Credit Action).
