Businesses are still unwilling to bet on recovery after a worrying plunge in investment spending during the final quarter of last year, official figures showed today.
The Office for National Statistics' initial estimates of a 0.2% slide for the wider economy during the period were left unchanged but experts blamed debt turmoil in Europe for the 5.6% fall in business spending to £28.7 billion over the quarter.
Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said: "The climate of uncertainty has caused firms to sit on their cash and, even after this week's deal for Greece, it's difficult to envisage this situation changing significantly in the short-term."
There were some positives, however, as desperate price-cutting by retailers to open shoppers' wallets during the autumn helped household spending rise 0.5% - the first growth since early 2010. Rising exports combined with weakening imports - attributed to slower manufacturing growth in the second half of last year by the ONS - also saw a positive trade contribution adding 0.6 percentage points to growth. Despite gloom over the plunge in business spending, firms built up stockpiles at a far slower rate than in the previous quarter, dragging on overall growth. This is welcome because it raises the chances of avoiding a double-dip with higher production in the current quarter.
Samuel Tombs, UK economist at Capital Economics, warned that the difficult economic backdrop remained: "Households are unlikely to be able to keep increasing their spending as unemployment rises, credit constraints tighten and inflation continues to erode their real spending power."
Courtesy of Russell Lynch / 24th Feb 2012 / London Evening Standard
Monday, 27 February 2012
OFT launches probe into payday-loans industry
The payday-loans industry - which makes short-term loans to those unable to get credit from banks - is being investigated by the Office of Fair Trading.
It will examine 50 major payday lenders and accusations that these high-cost, short-term lenders are irresponsible, handing out loans without checking whether borrowers can afford to repay them.
It will also look into evidence that suggests payday loan firms target the vulnerable, such as the unemployed or those on benefits.
Finally it will focus on the practice of rolling over loans, so that those who don't repay on time quickly end up with unaffordable rising debt.
David Fisher, OFT director of consumer credit, said: "We are concerned that some payday lenders are taking advantage of people in financial difficulty."
Joanna Elson, chief executive of debt charity the Money Advice Trust, said: "Payday lenders are aggressive in how they collect debts, often refusing to listen to proposed repayment plans and demanding full and final settlements that represent huge profits for the payday lender based on the money originally given out."
Courtesy of:Simon Reid / 24th Feb 2012 / London Evening Standard
It will examine 50 major payday lenders and accusations that these high-cost, short-term lenders are irresponsible, handing out loans without checking whether borrowers can afford to repay them.
It will also look into evidence that suggests payday loan firms target the vulnerable, such as the unemployed or those on benefits.
Finally it will focus on the practice of rolling over loans, so that those who don't repay on time quickly end up with unaffordable rising debt.
David Fisher, OFT director of consumer credit, said: "We are concerned that some payday lenders are taking advantage of people in financial difficulty."
Joanna Elson, chief executive of debt charity the Money Advice Trust, said: "Payday lenders are aggressive in how they collect debts, often refusing to listen to proposed repayment plans and demanding full and final settlements that represent huge profits for the payday lender based on the money originally given out."
Courtesy of:Simon Reid / 24th Feb 2012 / London Evening Standard
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