George Osborne to announce 30 percent budget cut later today
Chancellor George Osborne will announce a 30 percent cut to Britain’s day-to-day budget this afternoon, despite widespread opposition to further austerity measures.
Osborne is expected to say in a speech later that he will cut the budgets of the Treasury, Transport, Local Government and Environment by 8 percent each, as part of his overall 37 billion-pound austerity plan to turn Britain’s deficit into a surplus by 2020.
However, Paul Johnson, director of the Institute for Fiscal Studies, told the BBC that it will be “less tough than it looks. Across government he’s looking for cuts in day-to-day spending of between 25% and 30%, so really huge cuts for those unprotected departments.”
Osborne has consistently been unapologetic about his measures to curb the deficit. Extracts of his speech show that he will say:
“If our country doesn’t bring the deficit down, the deficit could bring our country down. That’s why, for the economic security of every family in Britain, the worst thing we could do now as a country is lose our nerve.”
Britain currently has one of the highest budget deficits amongst the advanced economies, at 4.9 percent of GDP in 2015. Osborne aims to cut this to 3.7 percent this year.
Recent economic figures look positive; on Friday, statistics showed that UK economic growth had risen 0.6 percent in the three months to October, and manufacturing growth grew to a one and a half year high in September.
British manufacturing output rises at fastest pace for six months
British manufacturing output rose in September and the country’s goods trade deficit narrowed, according to data from the Office for National Statistics.
Manufacturing output is rising at its fastest pace since April 2014, surging to 0.8 percent in September – double the pace of August.
Results for British manufacturing and trade have been poor over the past couple of years, but the fast increase is a good indication of economic recovery.
A strong strengthening of the pound and difficulties with Greece have hit manufacturers hard this year. However, according to figures released today, the trade goods deficit narrowed to £9.351 billion in September; a sign that the industry may start to find it easier.
AstraZeneca wins $2.7 billion bid for ZS Pharma
UK pharmaceutical company AstraZeneca (LON:AZN) have agreed to buy ZS Pharma for $2.7 billion in cash, after months of negotiations.
ZS Pharma holders will get $90 per share, a premium of 42 percent on yesterday’s close. The deal is based on AstraZeneca acquiring medicines from ZS Pharma to boost its sales as their own big sellers near the end of their patent protection.
AstraZeneca’s Chief Executive Pascal Soriot said in a statement:
“This acquisition complements our strategic focus on Cardiovascular and Metabolic Disease by adding a potential best-in-class treatment to our portfolio of innovative medicines.”
Rival Swiss firm Actelion also made a bid for ZS Pharma, but were pipped at the post during the last days of bidding.
AstraZeneca are currently trading down 0.73 percent on the news. (0931GMT)
Ontario follows US in legislating towards crowdfunding
Support for equity crowdfunding as an alternative means of business finance is growing in Canada, with Ontario becoming the latest province to pass changes allowing the public to invest in small businesses through crowdfunding.
The Ontario Securities Commission’s new rules will allow businesses to offer equity stakes through registered crowdfunding platforms, including those operating online.
In total, six Canadian provinces now allow equity crowdfunding including British Columbia, Quebec and Nova Scotia. The new laws will come into force on January 28th, 2016.
Websites like Kickstarter, Indiegogo and Patreon already operate in Canada, but investors cannot receive an interest in the business.
The new rules will also make using crowdfunding less complicated for businesses, allowing them to issue an 11-point disclosure document about their business rather than a 38-point prospectus detailing every aspect of the company. This move should make crowdfunding more appealing and attainable for both businesses and investors. Like in the UK, crowdfunding platforms will still be required to run background checks and other due diligence on companies and investors.
OSC chairwoman Monica Kowal said in a statement:
“It’s specifically geared toward helping small- and medium-sized enterprises … leverage the Internet and social media to connect with investors who have an appetite to invest in startups and other companies that are hungry for capital.”
Last Friday, the U.S. Securities and Exchange Commission (SEC) changed their rules to allow companies to offer securities through crowdfunding, deregulating the sector to a model similar to that in the UK. UK-based crowdfunding platform Seedrs has already announced plans to expand into the US on this news.
Prior to this many individual states passed legislation regulating crowdfunding however the impact of this was limited as funding could not be found across state lines.
With the US and Canada getting on board with crowdfunding, there is no doubt that the sector continue to expand as a viable source of business finance.
Miranda Wadham on 06/11/2015
Bank of England gives no sign of raising rates in near future
The Bank of England has given no sign that it will be raising interest rates before the end of the year, citing the continuing near-zero inflation as the reason for keeping a rate rise on hold.
This is in contrast with Janet Yellen’s comments yesterday, signalling that the US Federal Reserve are on track to raise rates in December.
Again, only one lone B of E policymaker voted to raise interest rates this month. In a press conference, the B of E also cut its forecast for economic growth for this year and 2016.
Mark Carney said: “The outlook for global growth has weakened since the August Inflation Report. There remain downside risks to this outlook, including that of a more abrupt slowdown in emerging economies.”
The interest rate will remain at its record low of 0.5 percent, where it has been since 2009.
Fed’s Yellen fuels speculation of December rate rise; Carney to announce B of E’s intentions today
Federal Reserve Chair Janet Yellen fuelled speculation that the US will raise rates at the end of this year in her first public comments since the Fed’s meeting last week, causing Asian shares to falter and sending short-term US bond yields up.
Yellen stated that the US could be looking at a December rate “liftoff”, but that rates would rise gradually. Asian shares broke a 2 day rising streak and her comments gave a much-needed boost to the dollar.
“What the committee has been expecting is that the economy will continue to grow at a pace that is sufficient to generate further improvements in the labour market and to return inflation to our 2 percent target over the medium term,” Yellen said at a House Financial Services Committee hearing.
She added that “if the incoming information supports that expectation then our statement indicates that December would be a live possibility.”
The Bank of England is also set to announce a timescale for a rate rise today, in what has again been dubbed ‘Super Thursday’. Governor Mark Carney will present the British central bank’s latest economic forecasts.
The Bank of England cut rates to a record low of 0.5 percent in 2009 after the financial crisis.
Morrisons sees a further fall in sales for the third quarter
Troubled supermarket chain Morrisons has reported another fall in sales, despite attempts to stabilise the brand.
In the third quarter, like-for-like sales excluding fuel fell by 2.6%, higher than analysts were expecting. The company cited a reduction in the number of promotional vouchers on offer as the reason for the poor performance, however chief executive David Potts said the retailer was “making good progress in many areas”. The chain has suffered a spate of bad results; in March, it reported a drop of 52 percent, its worst result in eight years. The company have recently sold off 140 of its ‘M’ brand convenience stores in a deal worth £25 million, in a further attempt to pull back its results. In his statement, Potts said that the company was continuing “to stabilise trading, reduce costs and further improve the capability of the leadership team”.Facebook beat expectations on strong advertising sales
Facebook (NASDAQ:FB) has reported third quarter results that have topped analysts’ expectations after strong advertising sales from Instagram and WhatsApp.
Net income rose to 11 percent $891 million for the period between July and September, up from $806 million last year.
Facebook bought photo-sharing app Instagram in 2011, but investors have been cautious as to its money-making potential. However, this set of results is the first indication that takeovers of Instagram and WhatsApp were a good move. In a statement, Facebook chief Mark Zuckerberg said that the company was “focused on innovating and investing for the long term”. The company also stated that Facebook and Instagram account for one in every five minutes Americans spend online, illustrating the potential for advertising reach and revenue in the future. Facebook is currently trading up 1.33 percent in after hours trading.Marks and Spencer shares rise after raising profit margin
British retailer Marks and Spencer (LON:MKS) have reported another fall in sales, despite extensive spending to modernise the brand, but have upped their annual profit margin forecast.
Sales of general merchandise, which includes clothing, were down by 1.2 percent for the six months to 26 September. Clothing accounts for around 40 percent of the store’s total sales. However, food sales increased by 0.2 percent as Marks and Spencer establishes themselves as an upmarket, ‘occasion’ supermarket. The company have raised their full-year guidance up to between 2 and 2.5 percent. The retailer has also beat beat forecasts for first-half profit and increased its dividend. This will come as good news to chief executive Marc Bolland, who has chosen to focus on gross margins and investment in stores, products, logistics and the company’s website. “We delivered good underlying profit growth in the first half and made strong progress against our key priorities,” Bolland said The 131-year-old retailer is currently trading up 2.69 percent at 534.50 pence per share. (1225GMT)VW hit by second scandal: CO2 emissions
German automaker Volkswagen (FRA:VOW3) has been hit by yet another scandal, as the company revealed that is has found “irregularities” in carbon dioxide emissions levels, which may affect around 800,000 cars in Europe.
Following on from September’s revelations that VW had used software that could cheat nitrogen emissions tests, an internal investigation by the company into diesel emissions has revealed that CO2 emissions and fuel consumption have also been understated. According to a spokesman, the VW, Skoda, Audi and Seat models are affected, with concerns mainly focusing on diesel cars – but some petrol ones as well. VW has already put aside €6.7 billion to meet the cost of recalling 11m diesel vehicles worldwide – although many suspect that this figure will not be enough – and the company now estimate that another €2 billion will be needed to cover this problem too. VW have fared fairly well since the last crisis, releasing third quarter results that were largely unaffected by the scandal. However today shares in VW dropped 8 percent in early trade, indicating that the public may be less forgiving of this further revelation. Investors wiped 3 billion euros off VW’s portfolio this morning, although some gains have been made; VW are currently trading down 5.11 percent at 101.19 pence per share.