Efficiency gains
£2.5bn cut
The chancellor used an eve-of-budget meeting of the cabinet to inform colleagues he was intending to squeeze a further £2.5bn from their departmental budgets in order to promote further investment in infrastructure. Due to the success of ministers in underspending in the past three years, Mr Osborne said he would shave a further 1 per cent from the budgets of all unprotected departments, equivalent to £1.2bn a year, over the next two years. This freed up some wriggle room for Wednesday's budget and also gave ministers more insight into the next spending review which will require even deeper cuts in 2015-16.
Cyprus chill
Bailout fallout
The spectre of eurozone indebtedness returned to haunt investors this week after several months when it has been kept under lock and key. Equity markets tumbled on Monday after the proposed bailout terms for the Cypriot banking sector were poorly received. In particular, a proposal to impose a tax on all savings accounts, no matter how small, caused consternation among the Cypriot population and caused its banks to remain shut after a bank holiday weekend to prevent a run on people's savings accounts to avoid the tax. Cypriot lawmakers rejected the proposals in a vote on Tuesday evening, leaving the country potentially looking to Russia for further bailout options.
London list
IPO's are back
London investors appear to be regaining their appetite for new issues. Next week will see the beginning of trading in insurer esure after a float which values the company at north of £1bn, and this week estate agency Countrywide confirmed that its issue price will be at the top end of the previously indicated range. Meanwhile, lower down the market, a trickle of new issues is beginning to flow with Sierra Leonean palm oil business, Dekeloil, floating this week and neuropsychological tests specialist Cambridge Cognition Holdings and investment business Healthcare Investment Opportunities announced their intention to float.
Inflation nation
Nine-month high
Inflation in the UK is creeping up again, fuelled primarily by rising energy bills. The latest reading of the Consumer Prices Index for February saw a rise in the inflation rate to 2.8 per cent - the first such rise in five months and the highest rate of inflation recorded for nine months. The primary drivers behind the renewed rise in inflation are energy bills and the cost of transport fuel. The rate of inflation has remained above the Bank of England's 2 per cent target for more than four years now, and forecasters expect it to breach 3 per cent later this year before subsiding back towards the target in 2014.
New nuclear
Hinkley OK
Energy secretary Ed Davey this week granted planning permission for the first new nuclear power station in the UK since 1995 at Hinkley Point in Somerset. Two nuclear reactors will be built at the site by French energy giant EDF at an estimated cost of around £14bn. The project is still not certain to go ahead until the government and EDF conclude negotiations over the 'strike price' of subsidies the operator will receive for running the plant which are vital to making it economically viable. The government believes the project could provide up to 25,000 jobs during construction and 900 permanent jobs once up and running, and will provide 7 per cent of the UK's electricity.
France flounders
Forecasts cut
The French economy is running into quicksand if the latest forecasts for 2013 growth prove to be accurate. The eurozone's second biggest economy is expecting to barely register any growth at all this year, with the Organisation for Economic Cooperation and Development predicting a 0.1 per cent expansion with the country's debts expected to stay above the 3 per cent European Union deficit ceiling until 2014 at the earliest. France continues to suffer from crippling unemployment levels above 10 per cent. Meanwhile, the feeble state of Europe's economy was illustrated by news of a 10.5 per cent fall in the number of new car sales in February.
