Economy On Mend As Higher Growth Is Forecast

By Poppy Trowbridge, Business and Economics Correspondent

The UK economy is expected to have picked up sharply in the second quarter of the year, when official figures are published later.

An expected rise of around 0.6% in gross domestic product (GDP) would double the previous increase of 0.3%.

The predicted rise would be the best performance, excluding special events, since the third quarter of 2011.

Kathleen Brooks, research director at Forex.com said: "Most people in the know expect growth to expand, but there's a question mark over how strong that growth will be."

Shadow chancellor Ed Balls says the growth is "long-overdue"

It was just three months ago that it was feared the UK could enter an unprecedented triple-dip recession, however the recovery is still fragile.

Unofficial surveys published since then have suggested continued improvement, while revisions to Office for National Statistics (ONS) data revealed that the double-dip recession from 2011 to 2012 never happened.

But the revisions turned out to be double-edged, confirming that the initial recession following the financial crisis was far worse than first feared.

It meant the economy was still 3.9% below its pre-crisis peak - with the gap previously thought to be 2.6%.

The US and German economies, by contrast, have recovered their per-crisis levels. France is also near that point.

Officials at the International Monetary Fund (IMF) have added to the ambivalence, raising their forecast for annual growth from 0.6% to 0.9%, but later issuing a gloomy analysis of the UK's prospects.

Meanwhile, the Bank of England's first significant intervention under new governor Mark Carney saw policymakers apparently taking a less rosy view of the outlook than some in the City.

In a rare note issued after this month's meeting of the Monetary Policy Committee, the Bank said: "There have been further signs that a recovery is in train, although it remains weak by historical standards and a degree of slack is expected to persist for some time."

Shadow chancellor Ed Balls said he expected the figures to show that the economy is showing "welcome and long-overdue" signs of growth.

But he warned that most ordinary families will not feel the benefit of the recovery in GDP, because of wages lagging behind inflation.

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Wonga War: Church Wants To End Payday Lenders

Payday lender Wonga is facing a fight for survival after the Archbishop of Canterbury insisted he wants to "compete" it out of existence.

The Most Rev Justin Welby wants to force it out of business by expanding the Church of England's credit union plans.

Mr Welby said he had delivered the message to Errol Damelin, chief executive of Wonga, one of Britain's best-known payday lenders, during a "very good conversation".

"I've met the head of Wonga and we had a very good conversation and I said to him quite bluntly 'we're not in the business of trying to legislate you out of existence, we're trying to compete you out of existence'," he told Total Politics magazine.

"He's a businessman, he took that well."

The Archbishop's remarks come after he launched a new credit union for clergy and church staff earlier this month at the General Synod in York.

Mr Welby is expanding credit union plans

Mr Welby, who has served on the parliamentary Banking Standards Commission, has said he plans to expand the reach of credit unions as part of a long-term campaign to boost competition in the banking sector.

There are also plans to encourage church members with relevant skills to volunteer at credit unions.

The Government announced an investment of £38m in credit unions in April to help them offer an alternative option to payday lenders.

The entire payday lending industry, worth £2bn, was referred last month for a full-blown investigation by the Competition Commission after the trading watchdog uncovered "deep-rooted" problems with the industry.

Wonga said in March that it welcomed any attempt to encourage responsible lending and that it has been "instrumental" in helping to raise industry standards.

Mr Damelin said: "The Archbishop is clearly an exceptional individual and someone who understands the power of innovation.

"There is mutual respect, some differing opinions and a meeting of minds on many big issues.

"On the competition point, we always welcome fresh approaches that give people a fuller set of alternatives to solve their financial challenges. I'm all for better consumer choice."

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China In Ban On 'Glitzy' Official Buildings

Chinese authorities have ordered a five-year suspension of the construction of new official buildings, state media reported.

It is the latest move by President Xi Jinping to crack down on extravagance and pervasive corruption that blights the world's most populous nation.

The decision was "made in accordance with the country's frugality campaign", official news agency Xinhua said.

Some structures built in violation of regulations had tainted the image of the Communist Party and stirred vehement public disapproval, the agency said.

"The directive called on all party and government bodies to be frugal and ensure that government spending goes toward developing the economy and boosting people's wellbeing," it added.

The ban also covered "glitzy structures" built as training centres, hotels or government motels, it said.

Numerous scandals in recent years have centred on extravagant expenditure on new government buildings by officials, often in poverty-struck inland regions.

A building belonging to the state-owned Harbin Pharmaceutical Group

Some local governments have embezzled poverty-alleviation and disaster-relief funds to build offices and other facilities for themselves that sometimes resemble high-end resorts.

Mr Xi, who took office in March, has made the fight on graft a key objective of his administration, and the party has already targeted everything from the use of government cars to liquor served at official banquets.

Corruption is so bad it could hurt the party's grip on power, Mr Xi has warned.

But so far few high-level officials have been caught in his dragnet and the party has shown no sign of wanting to set up an independent graft-fighting body.

Similar orders in the past to rein in construction of over-the-top government buildings have had little apparent effect.

Some international observers believe that an apparent crackdown on foreign pharmaceutical firms over kickbacks is an early phase of turning the heat up on domestic wrongdoers.

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Apple: Sales Slump Sees Profits Fall By $2bn

Apple's profits have fallen by almost $2bn (£1.3bn) year-on-year as sales of iPads and Macs tailed-off.

The US technology firm sold 14.6 million iPads during the quarter, compared with 17 million in the same period last year.

It sold 3.8 million Macs, down from four million between April and June last year.

However it sold 31.2 million iPhones in the last financial quarter, a record for the three month period to June.

That beats 26 million sold in the same period last year but down on the 37.4 million sold between January and March this year.

Sales of the iPad and Mac range have fallen

Overall, the company's quarterly profit of £4.49bn ($6.9bn) was down from £5.73bn ($8.8bn) in the same three months last year.

Tim Cook, Apple's chief executive, said: "We are especially proud of our record June quarter iPhone sales of over 31 million and the strong growth in revenue from iTunes, Software and Services.

"We are really excited about the upcoming releases of iOS 7 and OS X Mavericks operating systems, and we are laser-focused and working hard on some amazing new products that we will introduce in the fall and across 2014."

The company is facing strong competition from Samsung, which is growing on the back of the popularity of its Galaxy S4 handset.

In April the Korean manufacturer posted a 41% leap in earnings in the first quarter of this year - in the same week Apple reported its first annual slide in a decade.

Samsung made a net profit of 7.15tn Korean won (around £4.2bn) for the period, up from 5.05tn won (around £2.9bn) a year ago, attributed largely to a surge in sales of its smartphones.

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GSK Admits China Execs Flouted Law Over Drugs

GlaxoSmithKline (GSK) has said that some of its executives in China appeared to have broken the law as part of a major bribery scandal that has ensnared the UK pharmaceutical firm.

The news comes as rival UK drugmaker AstraZeneca has confirmed to Sky News its Shanghai office has also been visited by Chinese investigators.

GSK said that new proposed changes to its operations would result in lower prices of its medicines in China - an original issue and complaint made by authorities.

"Certain senior executives of GSK China, who know our systems well, appear to have acted outside of our processes and controls which breaches Chinese law," the firm's head of emerging markets, Abbas Hussain, said in a statement.

Mr Hussain, who was sent to China last week to lead GSK's response to the crisis, held a meeting with the Ministry of Public Security at which he also promised to review GSK's business model.

"Savings made as a result of proposed changes to our operational model will be passed on in the form of price reductions, ensuring our medicines are more affordable to Chinese patients," Mr Hussain added.

Meanwhile, AstraZeneca (AZ) believes the Shanghai investigation police launched relates to enquiries on a single employee.

GSK boss Sir Andrew Witty

In a statement given to Sky News, it said: "AstraZeneca can confirm that it was visited by the Shanghai Public Security Bureau ... regarding a local police matter focused on a sales representative.

"We believe that this investigation relates to an individual case and while we have not yet received and update from the Public Security Bureau, we have no reason to believe it's related to any other investigations."

In mid-afternoon trades on the FTSE 100 GSK shares were down 1.37% while AZ shares were down 0.47%. Both eased slightly before the close.

GSK initially denied any wrongdoing when police first announced an investigation into the company's Chinese operation.

Authorities alleged that more than £200m was funnelled to hundreds of travel agents in the country, which was then given to doctors, hospitals and health foundations as travel kickbacks.

Chinese police last week accused GSK of bribing officials and doctors to boost sales and raise the price of its medicines in China.

They said GSK transferred up to 3bn yuan (£232m) to 700 travel agencies and consultancies over six years.

Four senior Chinese executives from GSK have been detained and it said it was deeply concerned by the allegations, which it called "shameful".

In a statement, China's Ministry of Public Security said Mr Hussain apologised for the scandal during the meeting.

Mr Hussain was dispatched to China by chief executive Sir Andrew Witty, along with the group's global head of internal audit and a senior legal official on Friday, according to sources.

The CEO is expected to further detail what action the drugmaker is taking in response to the bribery allegations when he presents quarterly results on Wednesday.

The company has run into problems despite conducting up to 20 internal audits in China each year, resulting in the sacking of dozens of staff for misconduct.

In 2012, GSK dismissed 312 staff for policy violations worldwide, according to its annual corporate responsibility report, of which 56 were in China.

There has been widespread speculation that other multinational drug companies would be drawn into the corruption investigations.

The National Development and Reform Commission (NDRC) - China's powerful economic planning agency which sets and enforces drug prices - has announced the sector.

The NDRC said it would establish a web platform to monitor the pricing behaviour of drugs distributors, but has so far given few details.

Since 2000, the NDRC has made three rounds of adjustments on the maximum retail prices for medicines, the agency said in a statement posted on its website.

Those efforts were geared toward preventing a rise in prices.

"The next step is to establish an online platform for medicine factory price monitoring, and strengthen monitoring of distributors' pricing behaviour," the statement said, citing an unnamed official.

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McDonald's Results: Warning Over 'Tough Year'

Fast-food giant McDonald's has seen its second-quarter profit fall below forecasts amid a warning of a tough year ahead.

The world's biggest hamburger chain also said July sales are expected to be flat.

The company, based in Oak Brook, Illinois, said global sales edged up 1% at restaurants open at least a year in the quarter.

The figure rose by the same amount in the US, where the company has been introducing new menu items.

The new, healthier options include non-traditional burger fare such as chicken wraps and egg-white breakfast sandwiches

But the tepid growth in the latest quarter reflect the challenges facing McDonald's, which for years had been a standout in the fast-food industry.

Part of the problem is that economic conditions remain weak in many parts of the world.

But another factor is that dining habits are changing, particularly in the US, with people increasingly opting for foods they feel are fresher, healthier or higher-quality.

For the quarter ended June 30 the company earned $1.4bn (£913m).

The Q2 result was up from $1.35bn (£880m) a year ago.

Revenue for McDonald's rose to $7.08bn (£4.6bn) and was in line with analysts' expectations.

Chief executive Don Thompson, who took over last summer, has said that the chain has a bigger product pipeline than in the past.

Mr Thompson has noted that the company can capitalise on ideas from around the world and adapt them to other markets.

But for the first three months of the year, the company reported its first global quarterly sales decline at restaurants open at least 13 months.

For the Q2, the company said sales were down 0.1% in Europe as results in Germany and France dragged down results from the United Kingdom and Russia.

In Asia, the Middle East and Africa, sales also dipped 0.3%, primarily because of negative results in China, Australia and Japan.

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Economy Figures Set To Show 'Positive Growth'

By Tadhg Enright, Business Reporter

Economists are predicting good news when the first estimate of economic growth during April, May and June is revealed next week.

Analysts expect the Office for National Statistics to say that the economy grew by around 0.5% when it reveals its preliminary estimate for Q2 GDP on Thursday.

They point to several important economic indicators which have been positive in recent months.

Consumer confidence was at a 25 months high in June. Business confidence in Q2 was at its highest since 2007.

Retail sales volumes rose by 0.9% between Q1 and Q2. New car sales were 13.4% higher in June compared with the same month last year. 

Economist Vicky Pryce says consumers are more confident in spending money

Former government economic advisor Vicky Pryce told Sky News: "I think what's going on right now is that the consumer is very keen on spending. The consumer has reduced his savings ratio very substantially from about 7% a year ago to about 4% now so they are spending their way out of this recession. 

"It's not because they're earning an awful lot more because of course average earnings have not really moved very much and there all sorts of restrictions in terms of public sector wages so they are suffering a little bit from that. But they are feeling a lot more confident so they're out there spending."

Even the International Monetary Fund, which recently encouraged the Government to ease public spending cuts, has revised upwards its forecast for UK economic growth in 2013 from 0.7% to 0.9%.

However, some of the economy's biggest problems remain with more Government cutbacks still on the horizon, banks still reluctant to lend and consumer prices rising at a faster rate than average wages.

There are also signs of a resurgence in the property market

Howard Archer, chief UK & European economist at IHS Global Insight, said: "There are still significant headwinds to growth which suggest that the upside for growth will be limited for some time to come and that the economy will likely remain prone to periodic losses of momentum.

"While we are encouraged by the recent extended and diverse good news on the UK economy, we currently remain cautious in markedly raising our GDP growth forecasts - especially given the many false dawns that there have been in recent times and the fact that events in the eurozone still pose a significant threat."

There is also mounting evidence of a resurgence in the property market with house prices rising in June and mortgage approvals at a 41 month high in May.

However critics of the Government's homebuying incentives such as Help to Buy have warned that it risks fuelling a property bubble.

Brunel University professor Moorad Choudhry told Sky News: "I'd like to ask why is the Government subsidising house purchases? That is something we got out of years back when we unwound tax relief on mortgages' interest.

"If I inject cheap money into the stock market and it rises, that's not genuine growth. It's conceptually similar to subsidising anything and it's a false growth."

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London Mayor Eyes Chinese Funds For Airport

By Mark Kleinman, City Editor

State funds from China and South Korea are preparing to deliver a major boost to Boris Johnson by committing billions of pounds to the construction of a new London hub airport.

Sky News can reveal that advisers to the Mayor of London have held initial talks with wealthy foreign institutions including China Investment Corporation (CIC) and officials in Seoul about the project.

The preliminary discussions represent a boost to Mr Johnson's hopes of promoting the Isle of Grain as the location for a new London hub airport, which in recent months has become his preferred choice for unlocking further capacity in London's skies.

Other institutional investors including City-based pension funds and infrastructure firms are also understood to have told the Mayor's advisers that they would consider putting long-term capital into the Isle of Grain scheme, which has been called the Thames Hub Airport.

Mr Johnson is understood to be determined to identify as much private sector funding as possible for a new airport, whereas his principal aviation adviser, Daniel Moylan, is said to be keener on the idea of government financing.

On Friday, the blueprint for the Isle of Grain airport in north Kent was published by Foster + Partners, the architectural partner for the scheme. It argues that the project would cost £24bn, less than analysts had expected.

A Government-established commission on the future of London's airports, chaired by Sir Howard Davies, will publish its interim findings in the coming months.

Rival companies are vying to promote the expansion of Heathrow and Gatwick alongside those who believe a wholly-new airport is essential to safeguard Britain's economic competitiveness for decades into the future.

London Mayor Boris Johnson is backing the Thames Hub Airport

Mr Johnson last week proposed the closure of Heathrow - which he said the Government should buy for £15bn and turn into a town housing 250,000 people.

In addition to the Isle of Grain site, the Mayor commissioned feasibility studies on a new artificial island in the Thames Estuary and on the expansion of Stansted. All of the options would require four runways, he said.

"Ambitious cities all over the world are already stealing a march on us and putting themselves in a position to eat London's breakfast, lunch and dinner by constructing mega-airports that plug them directly into the global supply chains that we need to be part of," he said last week.

The Mayor's press office declined to comment on the talks with potential investors in a new airport.

The discussions will, however, come as little surprise since powerful sovereign wealth funds have become crucial sources of finance for western infrastructure developments.

Chinese backers are being courted for a number of new UK projects, including a new 'super-sewer' under London and the next generation of nuclear power stations.

CIC is also a minority shareholder in Heathrow Airport Holdings and may have mixed views about the relative merits of the options for expanding British aviation capacity.

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OECD Warns Of 'Double-Tax Chaos' For Firms

By Ed Conway, Economics Editor

The OECD has raised the prospect of a global tax war, with companies caught having to pay double the levels of previous years, unless countries agree to a new international deal on corporate tax avoidance.

In a landmark report, the Organisation for Economic Co-operation and Development has warned that the international agreements set up in the 1920s to prevent companies paying double the tax on their profits in different countries could be abandoned, leaving "chaos" in their wake.

The warning came as it presented a 15-point action plan aimed at tackling tax avoidance by multinational companies such as Google and Starbucks.

It said that many companies - particularly those involved in the digital and internet sectors - were able to reduce their tax bills by shifting profits around the world to areas where rates are lowest, taking advantage of 90-year old rules aimed at preventing them being charged tax twice in different countries.

The perverse upshot of these League of Nation "double taxation" rules, it pointed out, was "double non-taxation".

However, it warned that unless Governments agreed an international scheme to police this, countries were likely to throw away the existing rules, resulting in "the replacement of the current consensus-based framework by unilateral measures, which could lead to global tax chaos marked by the massive re-emergence of double taxation".

The report added: "In fact, if the Action Plan fails to develop effective solutions in a timely manner, some countries may be persuaded to take unilateral action for protecting their tax base, resulting in avoidable uncertainty and unrelieved double taxation."

The report was delivered as finance ministers from the G20 group of nations met in Moscow for their annual meeting.

The OECD's hope is that the action plan is adopted either at this conference or at the heads-of-state meeting in St Petersburg next month.

However, some countries, including Russia and the United States, have expressed concern about the consequences of rewriting international corporate tax agreements that have been in place for almost a century.

The OECD plan suggests an investigation into measuring the creation of value in internet firms (in order to identify where taxes ought to be paid), as well as proposals to tackle complex structures which help companies avoid tax.

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Economy Figures To Show 'Positive Growth'

By Tadhg Enright, Business Reporter

Economists are predicting good news when the first estimate of economic growth during April, May and June is revealed next week.

Analysts expect the Office for National Statistics to say that the economy grew by around 0.5% when it reveals its preliminary estimate for Q2 GDP on Thursday.

They point to several important economic indicators which have been positive in recent months.

Consumer confidence was at a 25 months high in June. Business confidence in Q2 was at its highest since 2007.

Retail sales volumes rose by 0.9% between Q1 and Q2. New car sales were 13.4% higher in June compared with the same month last year. 

Economist Vicky Pryce says consumers are more confident in spending money

Former government economic advisor Vicky Pryce told Sky News: "I think what's going on right now is that the consumer is very keen on spending. The consumer has reduced his savings ratio very substantially from about 7% a year ago to about 4% now so they are spending their way out of this recession. 

"It's not because they're earning an awful lot more because of course average earnings have not really moved very much and there all sorts of restrictions in terms of public sector wages so they are suffering a little bit from that. But they are feeling a lot more confident so they're out there spending."

Even the International Monetary Fund, which recently encouraged the Government to ease public spending cuts, has revised upwards its forecast for UK economic growth in 2013 from 0.7% to 0.9%.

However, some of the economy's biggest problems remain with more Government cutbacks still on the horizon, banks still reluctant to lend and consumer prices rising at a faster rate than average wages.

There are also signs of a resurgence in the property market

Howard Archer, chief UK & European economist at IHS Global Insight, said: "There are still significant headwinds to growth which suggest that the upside for growth will be limited for some time to come and that the economy will likely remain prone to periodic losses of momentum.

"While we are encouraged by the recent extended and diverse good news on the UK economy, we currently remain cautious in markedly raising our GDP growth forecasts - especially given the many false dawns that there have been in recent times and the fact that events in the eurozone still pose a significant threat."

There is also mounting evidence of a resurgence in the property market with house prices rising in June and mortgage approvals at a 41 month high in May.

However critics of the Government's homebuying incentives such as Help to Buy have warned that it risks fuelling a property bubble.

Brunel University professor Moorad Choudhry told Sky News: "I'd like to ask why is the Government subsidising house purchases? That is something we got out of years back when we unwound tax relief on mortgages' interest.

"If I inject cheap money into the stock market and it rises, that's not genuine growth. It's conceptually similar to subsidising anything and it's a false growth."

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