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UK Economy Emerges From Six-Year Downturn

Written By iwan Jundaedi on Sabtu, 26 Juli 2014 | 11.46

Official figures show the UK economy has emerged from six years of lost growth to return to its pre-crisis peak.

The Office for National Statistics (ONS) said Britain's economy was now bigger than it was before the financial crisis as gross domestic product (GDP) expanded by 0.8% in the second quarter of the year.

The performance matched that of the previous quarter, although today's figure is only a first estimate and subject to revision.

It meant that on an annual basis, growth was 3.1% higher than was measured in the same period last year, leaving total output 0.2% higher than in the first quarter of 2008 - its previous peak.

High streets boosted by warm weather Consumer spending is still driving growth

The measure of GDP per head - taking account of a growing population and weaker productivity - remains below the peak.

In its April to June calculations, the ONS charted 1% quarter-on-quarter growth in the service sector - which accounts for 75% of total UK GDP - while industrial production rose 0.4%.

However both construction and agriculture made negative contributions of 0.5% and 0.2% respectively. Both were hit by the effects of a very wet winter and spring.

Construction Industry Boosts Economy Despite Cap On Affordable Housing The construction sector was damaged by a weak May

The ONS said only the service industry was now bigger than it was before the crisis, with industrial output and construction still 10% smaller.

Chancellor George Osborne said: "Thanks to the hard work of the British people, today we reach a major milestone in our long-term economic plan."

He tweeted: "We owe it to hardworking taxpayers not to repeat the mistakes of the past.

"Economy bigger than previous peak in 2008 but long way to go - the Great Recession was one of deepest of any major economy & cost UK 6 years."

However many people reacted to the news with scepticism. Posts of Sky News' Facebook page suggested not everyone feels Britain is out of the economic doldrums.

Shadow chancellor Ed Balls Ed Balls accuses ministers of creating a cost of living crisis

:: Robert Futsal Brassett: "They may declare it. But it don't feel like it."

:: Dorothy Dougan "Just in time for the General Election how fortuitous. So do we all get pay rise now?"

:: Jax Bell - "So NOW can we all get a decent pay rise,MPs 11% everyone who is on benefits/pension 2.5% Working people in North East 1%. Worst Government Leaders in British History"

:: Josephine Hargreaves - "Really? Come out into the real world & talk to the ordinary people to see if its over!"

:: Kerry Livesey - "Good news but let's hope the low paid workers benefit"

The pace of the recovery will feed into expectations about the timing of an interest rate rise by the Bank of England though its governor Mark Carney recently suggested it would be tied to improved data on wage growth.

While employment has soared in recent months, salary growth has fallen to 0.3% year-on-year and continues to lag inflation - last measured at 1.9%.

The scenario that has left the Bank fearing the impact of any rate rise on consumers, whose spending remains the biggest driver of economic growth.

Labour's shadow chancellor, Ed Balls, said of the latest GDP figures: "At long last our economy is back to the size it was before the global banking crisis - three years after the US reached the same point.

"But with GDP per head not set to recover for three more years and most people still seeing their living standards squeezed, this is no time for complacent claims that the economy is fixed.

"Wages after inflation are down over £1,600 a year since 2010, housebuilding under this government is at its lowest level since the 1920s and business investment is lagging behind our competitors.

"Labour's economic plan will make Britain better off and fairer for the future."

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Housing Shortage Sees More Tenants Evicted

By Mark White, Home Affairs Correspondent

Increasing numbers of private tenants are being evicted or exploited by landlords cashing in on the increase in house prices and the shortage of rented accommodation, according to latest figures.

Citizens Advice (CAB) saw a 38% rise in the number of people turning to the charity for help with eviction notices served on them, despite being up to date with their rent.

CAB recorded 5,000 cases across the country in 2013/2014 where tenants complained about being forced from their homes, even though they were not in arrears. That figure is up from 3,750 the previous year.

Problems in London and the South East are particularly acute, the charity said, where many house prices are the highest in the country.

Private tenant Ryan Herran told Sky News he was being forced from his Muswell Hill home of five years, because he complained about damp and mould in the property and demanded his landlord fix the problem.

After months of wrangling with the owner, he was eventually served with a section 21 eviction order.

"I was actually in shock for a couple of days because I've always been a good tenant and always paid my rent and never engaged in anti-social behaviour," he said.

"I did ring up the property management company and they told me they don't have to give a reason under the section 21 eviction notice. They said they felt they were doing me a favour by at least giving me two months notice."

Mr Herran believes his eviction is motivated by spite and certainty on the part of the landlord that he would easily be able to find another tenant.

Council houses The number of tenants seeking help over eviction has nearly doubled

Roger Harding from the homelessness charity Shelter said: "Sadly landlords can evict for no reason, even if you've been keeping up with the rent. 

"We've found many worrying examples where landlords have evicted people simply because they don't want to have to deal with repair issues and that's something we want to see outlawed."

During January to March 2014 house prices rose by 18% in London and 10% in the South East, compared to the same period the previous year.

CAB's figures reveal those rises were mirrored by an increase in private tenants reporting they had been served with eviction notices, despite being up to date with their rent .

The charity said the number of tenants in London and the South East seeking help over eviction notices between January and March 2014 was 900, compared with 400 over the first quarter of the year before.

Landlord Richard Blanco rents out properties across six London boroughs and is also a member of National Landlords Association. He said private landlords are often unfairly maligned.

"There's a small minority of rogue landlords who might try and increase rents but really the most sensible business model for landlords is to maintain the property well and to have a good relationship with tenants and to try to ensure tenants stay as long as possible," he said.

Mr Blanco said, contrary to widespread belief, more than three quarters of private tenants have not faced an increase in rents over the past 12 months.

The Government is in the process of introducing new legislation which it hopes will strengthen the rights of private tenants and help protect them from exploitation, or unjustified eviction.

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IMF Upgrade For UK As Russian Growth Shrinks

Written By iwan Jundaedi on Jumat, 25 Juli 2014 | 11.46

The International Monetary Fund (IMF) has revised upwards, for a fourth consecutive time, its forecast for UK economic growth while sharply lowering expectations for the US and sanctions-hit Russia.

In its latest World Economic Outlook (WEO), the IMF upgraded its estimate for UK growth by 0.4% to 3.2% this year.

It represented the biggest upwards revision among major economies and confirmed its earlier projection that the UK would grow this year by more than any other advanced economy.

The IMF's expectations for 2015 also rose - with GDP growth of 2.7% now forecast.

The Chancellor George Osborne, who was accused by the IMF 15 months ago of "playing with fire" over his austerity programme, responded: "Today the IMF has upgraded their 2014 forecast for the UK by more than any other major economy.

"The Government's long term economic plan is working but the job is not yet done and so we will go on making the assessment of what needs to be done to secure a brighter economic future".

The update was released just a day before official figures are due to give the first estimate of second quarter GDP growth - expected by economists to remain in line with that measured in the previous quarter, of 0.8%.

The UK's economic recovery has been helped by wider employment compared to previous recoveries, the housing market recovery, improved manufacturing output but also particularly strong consumer spending despite weak wage growth.

The IMF charted the effects of a harsh winter on the recovery in the US, citing first quarter weakness across the Atlantic as a component behind its decision to downgrade its global growth projection by 0.3% to 3.4%.

It said the move also reflected slowing growth in many emerging markets and softer domestic demand in China.

But it was its latest forecast for the effects of the crisis over Ukraine on Russia that caught the eye.

Its expectations for Russian GDP growth in 2014 were slashed by 1.1% to a paltry 0.2%, with the effects of western sanctions biting into activity.

The IMF said downside risks to global growth included the possibility of higher oil prices arising from global conflicts - with Russia a major supplier of gas and oil to mainland Europe.

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UK Economic Depression To Be Declared 'Over'

By Ed Conway, Economics Editor

The longest economic depression in British history will be declared over today, with the Office for National Statistics expected to confirm that the recovery is strengthening.

The ONS is expected to report that the economy grew by around 0.8% or 0.9% in the second quarter of the year.

Chancellor George Osborne George Osborne has been boosted by recent figures on growth

The increase in gross domestic product (GDP) will mean that the economy finally surpasses the size it was at the beginning of the recession in 2008.

The news will come as an added bonus for the Chancellor, who yesterday celebrated as the International Monetary Fund (IMF) upgraded Britain's growth forecast for this year and the next.

The IMF also said that UK growth this year will be stronger than in any other major economy.

However, this strong growth belies the fact that Britain's depression - the period for which GDP is below the pre-crisis peak - lasted longer than any other G7 economy.

But while there are concerns about the nature of recent economic growth in the UK and the possibility of a housing bubble in London, George Osborne is likely to emphasise the fact that all major sectors of the economy have been growing recently.

The Chancellor is currently on a tour of northern cities to underline the efforts the Government is taking to attempt to narrow Britain's regional economic divide.

Although overall GDP is back at pre-crisis levels, the natural increase in the population since 2008 means that GDP per capita remains around 6% lower than before the recession.

This, in turn, has contributed to lower wages and the squeeze on incomes felt in recent years.

Economists have also warned that while the services sector is bigger than before the crisis, the manufacturing and construction sectors are significantly smaller.

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Ryanair Told To Pay Back €9.6m In State Aid

Written By iwan Jundaedi on Kamis, 24 Juli 2014 | 11.46

Ryanair is facing a legal battle with the European Commission after it was ordered to repay almost €10m (£7.9m) in what was found to be illegal state aid.

The no-frills carrier said it had instructed its lawyers to challenge the Commission's findings in relation to three French regional airports.

Its operations at three German airports were cleared by the inquiry.

The Commission, the European Union's executive arm, said Ryanair would have to repay €868,000 (£686,310) related to rebates and marketing arrangements negotiated at Angouleme airport in central France, from where it had ceased operations in 2009.

It found Ryanair had enjoyed "an undue advantage" and should repay the money so as to "remove the distortion of competition".

Similar findings at Pau Pyrenees airport, which Ryanair stopped using in 2011, required a repayment of €2.4m (£1.9m), with €6.4m (£5.06m) repayable at Nimes airport.

An investigation into Austria's Klagenfurt airport, where airport service and market agreements "appeared to be excessively favourable to Ryanair and therefore could involve incompatible state aid", was continuing.

The airline responded with a statement welcoming the rulings concerning Germany.

Ryanair's director of legal and regulatory affairs, Juliusz Komorek said: "Today's decisions confirm that Ryanair's airport agreements at Niederrhein Airport comply with the EU state aid rules.

"Following the closure of this case and the earlier six positive decisions at Aarhus, Bratislava, Charleroi, Marseille, Berlin Schonefeld and Tampere airports, we will immediately appeal the decisions in (the) Pau, Angouleme and Nimes cases, where the EU Commission mistakenly suggested the airports' agreements with Ryanair did not fully comply with the EU state aid rules.

"Ryanair has to date carried 86.5 million passengers at the seven airports where our commercial arrangements have been confirmed by the EU Commission and the EU Court to comply with EU law, compared to just 3.4 million passengers at the airports where the Commission today suggested the agreements did not comply with state aid rules."

It is not the first time Ryanair has fallen foul of the authorities over the past 12 months.

In October, the operator was ordered to pay fines and damages totalling £6.7m by a French court, which accused it of violating the country's labour laws.

It denied registering workers employed in France as Irish employees, preventing workplace councils from functioning and preventing access to unions.

However, the airline has also prioritised a more customer-friendly approach after coming under fire on issues including charges, compensation and baggage fees.

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Scottish Referendum: Banks Weigh New Warnings

By Mark Kleinman, City Editor

Britain's biggest banks are weighing up plans to outline further risks associated with Scottish independence when they unveil half-year results with less than 50 days to go before the crucial vote.

Sky News understands that some major lenders are deliberating over whether to highlight potentially politically explosive risk factors when the interim reporting season kicks off next week.

At least two banks are said to be discussing internally the prospect of warning over the implications for payments systems and infrastructure if Scotland secedes from the UK.

Some senior bank executives believe, however, there is little to be gained from providing additional detail so close to the referendum, given the politically charged nature of the campaign.

Britain's two state-backed banking giants are also stepping up talks with the Bank of England about contingency planning ahead of September's referendum.

Some executives at Lloyds Banking Group and Royal Bank of Scotland (RBS) are advocating a scenario under which the central bank would make a public statement ahead of September's vote guaranteeing deposits and liquidity.

Insiders said that Lloyds and RBS, which are 25% and 80%-owned by British taxpayers respectively, have told Bank of England officials at recent meetings that they are keen for it to do so.

Both banks are headquartered in Scotland and have previously cited the independence vote in risk factors in results announcements earlier this year.

Mark Carney, the Bank of England Governor, has said that an independent Scotland would present "clear risks" and that it would have to surrender some sovereignty to the UK because of the size of its financial sector.

One banker said the discussions reflected the extent to which a vote for independence was deemed to be credible, as well as the "reality that Lloyds and RBS are only notionally Scottish".

The Yes campaign is likely to consider discussions between commercial banks and the Bank of England as reflective of the degree to which a joint approach would be necessary in the mutual interest of Scotland and the rest of the UK.

Earlier this month, economists at UBS, the Swiss bank, said depositors would be likely to move their money south of the border if there was a Yes vote, reflecting that Scotland was "perceived to be the weaker part of the fragmenting monetary union".

However, any liquidity problem at RBS and Lloyds could also stem from customers withdrawing deposits in the rest of the UK, with the stability of both banks of critical importance to the British economy.

The two lenders received nearly £70bn of taxpayer support during the 2008 financial crisis to stave off outright collapse.

While the Bank of England would probably remain the lender of last resort to them during an 18-month transition period following a vote for independence, a row has been taking place for months between Edinburgh and Westminster about whether Scotland could continue to use the pound.

A further argument was ignited this week when MPs on the Scottish Affairs Committee warned that the idea of an independent Scotland retaining sterling was a "dead parrot".

Lloyds, RBS and the Bank of England all declined to comment.

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Banks Face £1.5bn Hit From PPI Claims Deluge

Written By iwan Jundaedi on Rabu, 23 Juli 2014 | 11.46

By Mark Kleinman, City Editor

Britain's largest high street banks will announce next week that they are setting aside more than £1bn in additional provisions to compensate customers who were mis-sold payment protection insurance (PPI).

Sky News can exclusively reveal that Barclays, Lloyds Banking Group and Royal Bank of Scotland (RBS) will use their half-year results statements to the City to disclose that the big four lenders' combined bill for the PPI scandal has soared to well over £20bn.

The new provisions are understood to be being driven by an acceleration in the number of claims which relate to PPI policies sold before 2005, and have prompted urgent talks among bank executives about the conduct of claims management companies (CMCs).

Insiders said that the new top-ups could reach close to £1.5bn between the biggest banks.

To date, the PPI scandal has seen Lloyds allocating £9.8bn for compensation; Barclays has set aside £3.95bn; RBS has provided £3.1bn; and HSBC's bill has reached £2.1bn.

The sizeable new top-ups may revive calls for a so-called time-barring exercise, which would involve imposing a cut-off point for consumers to submit compensation claims.

Banking sources said on Tuesday that Barclays would account for the largest percentage of the additional compensation bill but pointed out that that was largely because it had not taken a new provision since last July, whereas some of its rivals had done so earlier this year.

The total PPI bill for Lloyds, which is 25%-owned by taxpayers, is expected to pass £10bn as a result of its new provision.

The final numbers are still being worked out with each lender's auditors, which are understood to be pushing board members to take a conservative approach to the issue by setting aside substantial sums.

The scale of the new bill will surprise many in the City, particularly after the Financial Ombudsman Service (FOS) said on Monday that new complaints fell by more than 50% during the last three months, prompting it to say that the worst of the scandal had passed.

The FOS said it had received just under 57,000 PPI-related complaints in the second quarter of the year, compared with just over 132,000 in the same period last year.

The latest wave of claims is understood to be particularly concerning to banks because many date back to before 2005, which was the reference point for an unsuccessful judicial review brought by the major banks three years ago.

Executives at major banks argue that the cost of administering even fraudulent or otherwise invalid claims can reach £1000 each, eroding their capital at a time when they are facing political demands to lend more money to small businesses.

Banks are obliged to keep customer records for seven years, meaning that many new claims relate to policies for which neither banks nor customers have an accurate record.

The British Bankers' Association (BBA) had been leading tentative discussions with the City regulator about a cut-off point for claims.

Martin Wheatley, the Financial Conduct Authority's chief executive, told MPs earlier this year that he was sceptical about the prospects of a time-barring exercise.

At the time, the BBA said: "We are working with our members on a number of aspects of PPI complaints. The ongoing work focuses on three issues as a priority: addressing backlogs, making sure that customers can be confident that the offers they receive are right and highlighting that there is no need for them to engage a claims management company.

In January last year, the FCA said it had agreed to talks with the industry about a time limit, but would insist that the banks funded a huge advertising campaign to ensure sufficient awareness of the PPI issue.

The hostility of consumer groups to a deadline appeared to kill any prospect of a deal, and it is unlikely that they would be any more enthusiastic about a deal, analysts suggested.

Barclays, Lloyds and RBS all declined to comment.

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UK Prepares For EU Ruling On Energy State Aid

By Mark Kleinman, City Editor

The Government is braced for a ruling from Brussels on Wednesday that will influence the fate of billions of pounds in investment in low-carbon energy policies.

Sky News understands that the European Commission (EC) is likely to announce its ruling after several months examining a form of subsidy guaranteeing long-term prices to companies for supplying renewable energy sources.

Known as contracts for difference (CFDs), these instruments are designed to reassure investors about the returns that such projects will generate, and have been an important element of the Coalition's energy policy.

The Government has developed a series of policies under the umbrella of Electricity Market Reform, which are intended to meet legally binding targets to reduce carbon emissions.

They also include the issue of the capacity market, which is designed to incentivise energy companies to commit to keeping the lights on, in exchange for penalties if they fail to do so.

The EU has previously signalled that projects which involve significant subsidies could be deemed to constitute unfair state support.

A senior energy sector source said an announcement was likely to be made on Wednesday but could be delayed.

A source close to the Department for Energy and Climate Change (DECC) said it was confident of securing Brussels' approval for UK policies on low-carbon energy.

They conceded that some material concessions or a more formal EU probe were possible, however.

"We have continued to engage [with Joaquin Almunia, the EU Competition Commissioner] on our EMR cases," a source said.

"These conversations remain constructive and we are making the strongest possible case for our policies, which we believe are consistent with the new energy and environmental state aid guidelines."

State aid for the UK nuclear sector will not be covered by Wednesday's announcement, according to insiders.

A separate ruling on that issue is expected later this year.

Launching its probe of the financial guarantees being provided to EDF, the French utility leading the construction of a new nuclear power plant at Hinkley Point, the Commission said last year that it had "doubts that the project suffers from a genuine market failure".

A Commission spokesman said on Tuesday that it "does not announce state aid decisions in advance, nor does it comment on possible future decisions".

A spokeswoman for DECC declined to comment.

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Tesco Chief Philip Clarke To Step Down

Written By iwan Jundaedi on Selasa, 22 Juli 2014 | 11.46

Tesco's chief executive Philip Clarke is to quit after a string of poor results for the supermarket giant.

The group, which is seeing its worst sales performance in four decades, announced Mr Clarke's departure as it issued a fresh warning on profits.

He will stand down on October 1 and will be replaced by Dave Lewis from Unilever, who is a non-executive director of BSkyB, owner of Sky News.

Tesco sign The retailer is battling to stop a decline in sales figures

Tesco's sales fell by 3.7% in the three months to May 24 on a like-for-like basis, an acceleration of the 3% slide in the previous quarter.

Mr Lewis will receive a basic salary of £1.25m, plus "standard" benefits. He will also receive £525,000 in lieu of his current year cash bonus from Unilever

Mr Clarke, who earned £1.14m in the role, will get a payoff worth 12 months salary.

When Mr Clarke took over from Sir Terry Leahy in March 2011, the Tesco share price stood at 400p, but are now trading at 291p - equating to a shareholder loss of £8.8bn.

New Tesco boss Dave Lewis Dave Lewis is to bag a salary of £1.25m in his new role

Tesco chairman Sir Richard Broadbent said: "Having guided Tesco through a substantial re-positioning in challenging markets, Philip Clarke agreed with the Board that this is the appropriate moment to hand over to a new leader with fresh perspectives and a new profile."

He added: "Dave Lewis brings a wealth of international consumer experience and expertise in change management, business strategy, brand management and customer development."

Mr Clarke said: "Having taken the business through the huge challenges of the last few years, I think this is the right moment to hand over responsibility and I am delighted that Dave Lewis has agreed to join us.

"Dave has worked with Tesco directly or indirectly over many years and is well-known within the business. I will do everything in my power to support him in taking the company forward through the next stage of its journey."

Tesco market share Tesco's market share has fallen by more than two percentage points

But Sky's City Editor Mark Kleinman said the appointment of Mr Clarke's successor represents a gamble.

He said: "Dave Lewis, a 25-year veteran of Unilever, the consumer goods giant behind Dove, Lynx and Marmite, is the first outsider to take the helm of Tesco in its 95-year history."

Mr Clarke, who had worked his way up from the shop floor to head Tesco, admitted last month the chain's sales figures were the worst he had known in 40 years.

But a trading update said conditions were more "challenging" than predicted.

The group said: "The overall market is weaker and, combined with increasing investments we are making to improve the customer offer and to build long-term loyalty, this means that sales and trading profit in the first half of the year are somewhat below expectations."

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Fraud Probe Into Foreign Exchange Market

The Serious Fraud Office has opened a criminal investigation into allegations of fraud in the foreign exchange market.

Britain's financial watchdog Financial Conduct Authority (FCA) in October joined other regulators around the world in investigating whether traders at some of the world's biggest banks rigged the £3trn-a-day market in Britain.

Some 40% of world's foreign exchange trading is done in London.

The SFO has refused to confirm which City institutions may be under investigation, but has told Sky News a range of individuals and banks will be subject to the inquiry.

Earlier this year, Martin Wheatley, the FCA head, said the allegations were "every bit as bad as they have been with Libor".

Only last week, the boss of Royal Bank of Scotland said an investigation into alleged manipulation of foreign exchange markets could pose a bigger problem for the industry than the Libor interest rate-rigging scandal.

RBS paid out £358m last year to settle claims it manipulated Libor rates.

It was one of several banks hit with large fines for rigging financial benchmarks.

Asked if the foreign exchange probe could be a bigger problem than Libor, RBS chief Ross McEwan said: "Unfortunately, it has then hallmarks."

He added: "We're still doing a lot of investigation.

"We're going through just millions and millions of emails, chatrooms, conversations to see what actually went wrong.

"Unfortunately, I have the feeling that this is a sort of Libor case again.

"The difference this time is that we haven't sat back and denied it. We've gone into it and are doing the investigation hand-in-hand with the authorities."

He said it was another problem from the past that banks had to deal with in order to move on.

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