Is inflation a threat to the UK recovery?
This week sees a number of vital economic statistics in the UK with concerns that the rate of inflation is set to spike upwards in the early part of 2010. Recent figures have shown an increase in the cost of raw materials, much of which came from the upward movement in the price of oil, which will have an impact upon inflation. So what else do we need to monitor in the short term?
There is also concern that the government's refusal to maintain VAT at 15%, and instead return it to 17.5%, will also place further upward pressure on the cost of living in the UK. In what is becoming a more difficult scenario by the day, the Bank of England is also under pressure because of the strategy regarding UK base rates which have remained at 0.5% for some time. If inflation does begin to take off, and the Bank of England does not respond quickly enough, we could move towards a situation where the rate of inflation spirals out of control and we need to see a significant increase in base rates in a very short space of time.
The ability to increase base rates and make borrowing more expensive is a very basic tool in the economic UK government's toolbox but one which has proven very effective over the years.
Could we see a shock general election?
If the story regarding Gordon Brown's leadership of the Labour Party continues for a number of days, and indeed picks up strength, many are concerned that we could see a snap general election called as the government starts to fall apart. This would be tragic for the UK economy which needs nurturing 24 hours a day seven days a week at the moment. There are issues such as the budget deficit, which...Read More
Has the UK economy really turned the corner?
At this moment in time it feels as though the UK economy is now on the crest of a recovery with unemployment falling in the third quarter of 2009 and recent data pointing to a recovery in UK economic activity. However, sceptics believe that the recent figures which have given some investors hope for the future could soon turn about face and the UK economy could face further pressure in the first q...Read More
Is the recovery in the pound to be short lived?
As the pound this week posted its largest weekly gain since 1999 and its largest five day advance against the dollar since 1989 some experts are warning against undue short to medium-term optimism. While some may see this short-term bounce as the start of a recovery from a very oversold position, there are suggestions that the move is something of a technical adjustment after the Bank of England r...Read More
Investors back BSkyB directors
A number of prominent investors in BSkyB have stepped forward with their support for the BSkyB board of directors who recently turned down an indicative takeover offer from Rupert Murdoch's News Corporation. It is believed that a potential offer in the region of seven pound a share, valuing the company at £12.6 billion, was suggested although many in the city believe a minimum price should be in...Read More
International Air Transport Association fears for the future
The International Air Transport Association has today confirmed that the worldwide airline industry lost a staggering $6 billion in the first six months of 2009 which leaves the association's original forecast of a $9 billion loss for the year in tatters. A mixture of reduced business levels and increased costs has squeezed many airlines from both sides and cash flow is now a major problem in many...Read More