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Gordon Brown has promised the economy will return to growth by the
turn of the year, in his first reaction to news that the UK is still
in recession. His podcast was released on the Number 10 website a day
after official figures showed the economy was still shrinking. The
prime minister accepted times were tough but said the battle to stop
"a second Great Depression" was being won. But the Tories said the
recovery was set to be "feeble" and the UK was lagging behind other
leading countries. In his message, Mr Brown pledged to take action
against excessive bank bonuses and end "sharp practices" by credit
card operators. The prime minister said they should stop raising
interest rates on existing debts without explanation and issuing
unsolicited credit card cheques. BBC political correspondent Gary
O'Donoghue said there were no details of how the issue would be
tackled ahead of an expected announcement on Tuesday. Previously
ministers have suggested banning credit card cheques. Wall Street
Crash Mr Brown said: "We are announcing measures to make the credit
and store card companies clean up their act to get you a fairer deal.
"Sharp practices by lenders - such as hiking interest rates on
existing debts without explanation, sending out unsolicited credit
card cheques and raising credit card limits without being asked -
these sharp practices should end." " It would be suicidal to put
recovery at risk by suddenly cutting off the funding and investment
that is supporting young people, families and businesses " Gordon
Brown The podcast was released on the 80 th anniversary of the Wall
Street Crash and came after news that the UK economy shrank by 0.4 %
in the third quarter of 2009 - making the recession the longest since
records began. "My pledge to you is to make reform of the financial
sector a reality and to see Britain's economy return to growth by the
turn of the year," Mr Brown said. He said it would be "suicidal" to
start cutting spending, as the Conservatives have suggested.
"Although there are signs that confidence is beginning to return in
some areas, we need to be cautious," he said. "Now, more than ever,
is the time for steady and clear policies. That is why it would be
suicidal to put recovery at risk by suddenly cutting off the funding
and investment that is supporting young people, families and
businesses through the most challenging times in a generation." He
also insisted the fight to prevent "a second Great Depression" was
being won as a result of international co-operation. 'Feeble
recovery' Shadow Business Secretary Ken Clarke said he could not say
when the UK would come out of recession but that the prospects for
growth in 2010 were not encouraging. "Sooner or later we are going
to start getting a very feeble recovery but it is going to be feeble
and fragile," he told Sky News. "We are worse affected than pretty
well anybody else in the Western world, for some perfectly practical
reasons, part of which is the colossal scale of the public debt."
Substantial measures were needed to get banks lending again and to
help young people find work, Mr Clarke added, but he said he feared
nothing would happen before the next election as the government was
"inactive" and Mr Brown "burnt-out".
US home sales unexpectedly higher
Sales of previously-owned US homes unexpectedly surged last month to
the highest level in more than two years. The National Association of
Realtors said sales rose 9.4 % to an annual rate of 5.57 million
last month, up from a rate of 5.09 million in August. Analysts had
been expecting a rise in the seasonally adjusted annual rate to 5.35
million in September. The average sale price dropped 8.5 % from a
year ago to $174 , 900 (£106 ,937) , the smallest annual drop in 13
months. 'Temporary dip' Some will see the data as more evidence of a
US housing recovery. However, much of the gain was attributed to a
tax credit that is due to expire on 1 December. "Much of the momentum
is from people responding to the first-time buyer tax credit, which
is freeing many sellers to make a trade and buy another home," said
the association's chief economist Lawrence Yun. "We are hopeful the
tax credit will be extended and possibly expanded to more buyers, at
least through the middle of next year." If the tax credit is not
extended, then house sales may fall, analysts said. "If the credit is
allowed to expire, home sales will probably dip temporarily in the
following months," said Brian Wesbury at First Trust Portfolios.
"However, the underlying trend will be upward over the next couple of
years as potential homebuyers no longer need to fear widespread deep
national home price declines. "
the highest level in more than two years. The National Association of
Realtors said sales rose 9.4 % to an annual rate of 5.57 million
last month, up from a rate of 5.09 million in August. Analysts had
been expecting a rise in the seasonally adjusted annual rate to 5.35
million in September. The average sale price dropped 8.5 % from a
year ago to $174 , 900 (£106 ,937) , the smallest annual drop in 13
months. 'Temporary dip' Some will see the data as more evidence of a
US housing recovery. However, much of the gain was attributed to a
tax credit that is due to expire on 1 December. "Much of the momentum
is from people responding to the first-time buyer tax credit, which
is freeing many sellers to make a trade and buy another home," said
the association's chief economist Lawrence Yun. "We are hopeful the
tax credit will be extended and possibly expanded to more buyers, at
least through the middle of next year." If the tax credit is not
extended, then house sales may fall, analysts said. "If the credit is
allowed to expire, home sales will probably dip temporarily in the
following months," said Brian Wesbury at First Trust Portfolios.
"However, the underlying trend will be upward over the next couple of
years as potential homebuyers no longer need to fear widespread deep
national home price declines. "
Oil price rises above $81 level
The price of oil has risen above $81 a barrel, a new high for the
year, as hopes rise that the global economic recovery is picking up
pace. US light crude rose to $81.43 a barrel, before slipping back
to $80.50. London Brent also climbed before dropping back to $78.82
a barrel. The price was boosted by figures released on Thursday
showing China's economic growth had accelerated. But a strengthening
dollar caused the price to fall in afternoon trading. The price of oil
has risen in recent weeks, largely on the back of strong company
results in the US which have fuelled optimism for the global economic
recovery. But there are concerns that sentiment, rather than
fundamentals, is driving the oil price, and that once these
fundamentals re- establish themselves, the price may fall. These
include spare capacity, stock piles of oil and weak demand among
industrialised nations.
year, as hopes rise that the global economic recovery is picking up
pace. US light crude rose to $81.43 a barrel, before slipping back
to $80.50. London Brent also climbed before dropping back to $78.82
a barrel. The price was boosted by figures released on Thursday
showing China's economic growth had accelerated. But a strengthening
dollar caused the price to fall in afternoon trading. The price of oil
has risen in recent weeks, largely on the back of strong company
results in the US which have fuelled optimism for the global economic
recovery. But there are concerns that sentiment, rather than
fundamentals, is driving the oil price, and that once these
fundamentals re- establish themselves, the price may fall. These
include spare capacity, stock piles of oil and weak demand among
industrialised nations.
Europe backs down on piracy plans
The European Parliament has given the green light for member states
to cut persistent file-sharers off from the net. It has dropped an
amendment to its Telcoms Package which would have made it hard for
countries to cut off pirates without court authority. It follows
pressure from countries keen to adopt tough anti-piracy laws. The
French government has just approved plans which could see pirates
removed from the net for up to a year. The UK's file-sharing policy
is also likely to include a clause about disconnecting persistent
offenders. An amendment to the European Parliament's forthcoming
telecoms legislation was designed to protect citizens against being
automatically cut off from the net. Amendment 138 read: "Any such
measures liable to restrict those fundamental rights or freedoms may
only be taken in exceptional circumstances...and shall be subject to
adequate procedural safeguards in conformity with the European
Convention for the Protection of Human Rights.. including effective
judicial protection and due process. " Dropping it effectively means
that individual countries would be able to ask internet service
providers to remove users deemed to be persistent pirates without
needing a prior court order. Persistent problem " Without compelling
services piracy will not be beaten " Mark Mulligan, Forrester
Research There has been much debate around Europe as to whether
internet access is a fundamental right. The European Parliament has
already adopted a provision stating that internet access is "
critical for the practical exercise of a wide array of fundamental
rights". UK prime minister Gordon Brown has said that people are as
entitled to internet access as to gas, water and electricity. At the
same time Business Secretary Peter Mandelson has moved to toughen up
anti- piracy legislation to include the ability to remove persistent
file-sharers from the net. According to figures from analyst firm
Forrester, 14 % of European internet users engage in illegal
file-sharing. Legislation may not be the answer, thinks Forrester
analyst Mark Mulligan. "Piracy will not be solved by legislation
alone. Without compelling services piracy will not be beaten," he
said. There have been a flurry of announcements about legitimate
services in recent months, including Sky's SkyTunes service and
tie-ups between the likes of internet service provider
CarphoneWarehouse and music service Napster. New methods Peer-to-peer
networks are likely to be the main targets of any anti-piracy
legislation. At network level, internet service providers are able,
if asked, to identify the particular machines from which music or
other content is being illegally downloaded. But non-network piracy
methods, including using instant messaging, e-mail, music blogs,
bluetooth and iPod ripping, are on the rise. It is likely that
legislation will be too slow to catch pirates, thinks Mr Mulligan.
"Technology just moves quicker. Already we are seeing around 20
different alternatives to peer-to-peer piracy," he said. This week
France's constitutional court approved its revised anti-piracy plans.
The proposed legislation operates under a " three strikes" system. A
new state agency would first send illegal file-sharers a warning
e-mail, then a letter and finally cut off their connection if they
were caught a third time. Under the revised law, a judge must rule on
the issue of whether to disconnect users. The UK's policy on
file-sharing is due to be revealed next month.
to cut persistent file-sharers off from the net. It has dropped an
amendment to its Telcoms Package which would have made it hard for
countries to cut off pirates without court authority. It follows
pressure from countries keen to adopt tough anti-piracy laws. The
French government has just approved plans which could see pirates
removed from the net for up to a year. The UK's file-sharing policy
is also likely to include a clause about disconnecting persistent
offenders. An amendment to the European Parliament's forthcoming
telecoms legislation was designed to protect citizens against being
automatically cut off from the net. Amendment 138 read: "Any such
measures liable to restrict those fundamental rights or freedoms may
only be taken in exceptional circumstances...and shall be subject to
adequate procedural safeguards in conformity with the European
Convention for the Protection of Human Rights.. including effective
judicial protection and due process. " Dropping it effectively means
that individual countries would be able to ask internet service
providers to remove users deemed to be persistent pirates without
needing a prior court order. Persistent problem " Without compelling
services piracy will not be beaten " Mark Mulligan, Forrester
Research There has been much debate around Europe as to whether
internet access is a fundamental right. The European Parliament has
already adopted a provision stating that internet access is "
critical for the practical exercise of a wide array of fundamental
rights". UK prime minister Gordon Brown has said that people are as
entitled to internet access as to gas, water and electricity. At the
same time Business Secretary Peter Mandelson has moved to toughen up
anti- piracy legislation to include the ability to remove persistent
file-sharers from the net. According to figures from analyst firm
Forrester, 14 % of European internet users engage in illegal
file-sharing. Legislation may not be the answer, thinks Forrester
analyst Mark Mulligan. "Piracy will not be solved by legislation
alone. Without compelling services piracy will not be beaten," he
said. There have been a flurry of announcements about legitimate
services in recent months, including Sky's SkyTunes service and
tie-ups between the likes of internet service provider
CarphoneWarehouse and music service Napster. New methods Peer-to-peer
networks are likely to be the main targets of any anti-piracy
legislation. At network level, internet service providers are able,
if asked, to identify the particular machines from which music or
other content is being illegally downloaded. But non-network piracy
methods, including using instant messaging, e-mail, music blogs,
bluetooth and iPod ripping, are on the rise. It is likely that
legislation will be too slow to catch pirates, thinks Mr Mulligan.
"Technology just moves quicker. Already we are seeing around 20
different alternatives to peer-to-peer piracy," he said. This week
France's constitutional court approved its revised anti-piracy plans.
The proposed legislation operates under a " three strikes" system. A
new state agency would first send illegal file-sharers a warning
e-mail, then a letter and finally cut off their connection if they
were caught a third time. Under the revised law, a judge must rule on
the issue of whether to disconnect users. The UK's policy on
file-sharing is due to be revealed next month.
Record recession for UK economy
The UK economy unexpectedly contracted by 0.4 % between July and
September, according to official figures, meaning the country is still
in recession. It is the first time UK gross domestic product (GDP) has
contracted for six consecutive quarters, since quarterly figures were
first recorded in 1955. But the figures could still be revised up or
down at a later date, because this figure is only the first estimate.
GDP measures the total amount of goods and services produced by a
country. The pound fell sharply after the figures were released,
reflecting the fact that many observers had expected the UK to have
grown during the quarter. It was down 1.7 % against the dollar, at $1.
6323 , and down 1.9 % against the euro, at 1. 0859 euros. Quarterly
growth of 0.2 % had been expected in the figures from the Office for
National Statistics (ONS), although expectations had been tempered by
recent figures showing no growth in retail sales in September, and a
2. 5 % decline in industrial output in August. ANALYSIS Hugh Pym, BBC
chief economics correspondent There's no disguising how grim these
figures are. Almost every City analyst expected there to be positive
growth in the third quarter. Instead it was negative. That means the
recession in the UK is the longest since modern records began in the
1950 s. Germany, France and Japan have all come out of recession
technically and the UK hasn't. The decline has continued. And the
markets didn't really like the look of that. The foreign exchange
markets have been selling the pound. There's every indication that
it's going to be a long hard slog for quite some time to come as the
British economy tries to turn itself round. The unexpected decline in
the services sector was the key factor behind the drop, with the
distribution, catering and hotels sector performing particularly
badly. The UK economy's reliance on the service sector, and financial
services in particular, may be the reason why it is still in recession
when partners such as France and Germany exited in the second quarter
of this year. The economy contracted 5.2 % compared with the same
period last year, which was marginally better than the record figure
of 5. 5 % in the previous three months. It has now contracted 5.9 %
from its peak before the recession began. The worse-than-expected GDP
figures are likely to make the Bank of England consider extending its
policy of quantitative easing. Quantitative easing is the central
bank's policy of printing money and using it to buy bonds from banks
and other companies to help stimulate the economy. 'Awful' The £175 bn
already announced for the quantitative easing programme will have been
spent by next month, so the third quarter GDP number will be important
in deciding whether to extend it. Indeed, at the Bank's current rate
of spending, it is expected to have spent the whole £175 bn in the
next week. As the next Monetary Policy Committee ( MPC) meeting, at
which quantitative easing decisions are taken, is not until 4
November, that would leave it with a week with no extra cash to pump
into the economy. The figures were "awful with no positive news"
according to James Knightley at ING. "This clearly suggests that the
likelihood of an expansion in quantitative easing by £50 bn or so over
the next quarter is rising, although [it] is not a foregone
conclusion." Former MPC member Professor David Blanchflower said the
negative GDP figures should not have been a surprise. "There's been
very little sign among firms that things were very much better," he
told the BBC. "The public seems to have some more confidence - they
seem to have believed the talk about green shoots, but actually the
data haven't really looked that way at all." Intervention needed " The
bottom line is that we should take this as very much a first draft of
UK economic history - but clearly a disappointing one " Stephanie
Flanders, Economics editor Analysts said it is worrying that the
decline has continued despite the stimulus measures that the
government and the Bank of England have introduced. "Continued
intervention - including help for businesses to access finance, and
incentives to promote investment - is still needed," said David Kern,
chief economist at the British Chambers of Commerce. "Above all else,
business confidence must be nurtured to ensure that recovery is not
further delayed." 'Deeply disappointing' Chancellor Alistair Darling
said he had never expected to see growth before the end of 2009. "Our
job is to support the economy as we come through towards recovery," he
said. "[Growth] will come - I'm confident about that - and I'm
confident that businesses and people generally will begin to see a
difference, but it will take time." Shadow chancellor George Osborne
described the figures as "deeply, deeply disappointing". "There are
many millions of people who will be deeply concerned to see that
Britain is still in recession six months after France and Germany came
out of recession," he told the BBC. "It destroys the myth that Britain
was better prepared." Liberal Democrat Treasury spokesman Vince Cable
said the figures were "a cold blast of realism". "We've had a lot of
talk recently based on a booming stock exchange and prices of luxury
houses in London that somehow this problem was at an end, and it
isn't," he said. One of the measures expected to be a particular help
in the final quarter of the year is the change in VAT. The rate of VAT
is due to return to 17.5 % from 15 % at the beginning of January and
consumers are expected to step up their purchasing ahead of that
increase.
September, according to official figures, meaning the country is still
in recession. It is the first time UK gross domestic product (GDP) has
contracted for six consecutive quarters, since quarterly figures were
first recorded in 1955. But the figures could still be revised up or
down at a later date, because this figure is only the first estimate.
GDP measures the total amount of goods and services produced by a
country. The pound fell sharply after the figures were released,
reflecting the fact that many observers had expected the UK to have
grown during the quarter. It was down 1.7 % against the dollar, at $1.
6323 , and down 1.9 % against the euro, at 1. 0859 euros. Quarterly
growth of 0.2 % had been expected in the figures from the Office for
National Statistics (ONS), although expectations had been tempered by
recent figures showing no growth in retail sales in September, and a
2. 5 % decline in industrial output in August. ANALYSIS Hugh Pym, BBC
chief economics correspondent There's no disguising how grim these
figures are. Almost every City analyst expected there to be positive
growth in the third quarter. Instead it was negative. That means the
recession in the UK is the longest since modern records began in the
1950 s. Germany, France and Japan have all come out of recession
technically and the UK hasn't. The decline has continued. And the
markets didn't really like the look of that. The foreign exchange
markets have been selling the pound. There's every indication that
it's going to be a long hard slog for quite some time to come as the
British economy tries to turn itself round. The unexpected decline in
the services sector was the key factor behind the drop, with the
distribution, catering and hotels sector performing particularly
badly. The UK economy's reliance on the service sector, and financial
services in particular, may be the reason why it is still in recession
when partners such as France and Germany exited in the second quarter
of this year. The economy contracted 5.2 % compared with the same
period last year, which was marginally better than the record figure
of 5. 5 % in the previous three months. It has now contracted 5.9 %
from its peak before the recession began. The worse-than-expected GDP
figures are likely to make the Bank of England consider extending its
policy of quantitative easing. Quantitative easing is the central
bank's policy of printing money and using it to buy bonds from banks
and other companies to help stimulate the economy. 'Awful' The £175 bn
already announced for the quantitative easing programme will have been
spent by next month, so the third quarter GDP number will be important
in deciding whether to extend it. Indeed, at the Bank's current rate
of spending, it is expected to have spent the whole £175 bn in the
next week. As the next Monetary Policy Committee ( MPC) meeting, at
which quantitative easing decisions are taken, is not until 4
November, that would leave it with a week with no extra cash to pump
into the economy. The figures were "awful with no positive news"
according to James Knightley at ING. "This clearly suggests that the
likelihood of an expansion in quantitative easing by £50 bn or so over
the next quarter is rising, although [it] is not a foregone
conclusion." Former MPC member Professor David Blanchflower said the
negative GDP figures should not have been a surprise. "There's been
very little sign among firms that things were very much better," he
told the BBC. "The public seems to have some more confidence - they
seem to have believed the talk about green shoots, but actually the
data haven't really looked that way at all." Intervention needed " The
bottom line is that we should take this as very much a first draft of
UK economic history - but clearly a disappointing one " Stephanie
Flanders, Economics editor Analysts said it is worrying that the
decline has continued despite the stimulus measures that the
government and the Bank of England have introduced. "Continued
intervention - including help for businesses to access finance, and
incentives to promote investment - is still needed," said David Kern,
chief economist at the British Chambers of Commerce. "Above all else,
business confidence must be nurtured to ensure that recovery is not
further delayed." 'Deeply disappointing' Chancellor Alistair Darling
said he had never expected to see growth before the end of 2009. "Our
job is to support the economy as we come through towards recovery," he
said. "[Growth] will come - I'm confident about that - and I'm
confident that businesses and people generally will begin to see a
difference, but it will take time." Shadow chancellor George Osborne
described the figures as "deeply, deeply disappointing". "There are
many millions of people who will be deeply concerned to see that
Britain is still in recession six months after France and Germany came
out of recession," he told the BBC. "It destroys the myth that Britain
was better prepared." Liberal Democrat Treasury spokesman Vince Cable
said the figures were "a cold blast of realism". "We've had a lot of
talk recently based on a booming stock exchange and prices of luxury
houses in London that somehow this problem was at an end, and it
isn't," he said. One of the measures expected to be a particular help
in the final quarter of the year is the change in VAT. The rate of VAT
is due to return to 17.5 % from 15 % at the beginning of January and
consumers are expected to step up their purchasing ahead of that
increase.
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