Osborne boost
Borrowing shrinks
Chancellor George Osborne was given a little respite this week with news that the UK's budget deficit shrank in the last financial year, but only by £300m. Public sector net borrowing for the 2012-13 financial year was £120.6bn, allowing Mr Osborne to prove a political point by sticking to his pledge to reduce borrowing each year. In reality, the reduction is marginal and forecasters are predicting little significant change in the current financial year either.
China concerns
Data down
The latest economic data out of China raised concerns that the recovery in Asia's engine room may be cooling. After first-quarter GDP growth figures undershot expectations last week, this week saw the HSBC flash Purchasing Managers' Index survey for China's manufacturing sector dip to a score of 50.5 in April, from 51.6 in March. Although a score of more than 50 indicates that the sector is still expanding, its pace of expansion appears to be slowing. The most pronounced weakness was in manufacturing for export, with external demand for Chinese goods appearing to fade during April.
See Industrials are vulnerable
Austerity limit
EU warning
European Commission president Jose Manuel Barroso this week warned that austerity alone will not solve the eurozone's economic malaise and that the region was almost at the limit of what it could absorb in terms of tightening. His remarks echoed IMF head Christine Legarde's recent calls for the UK to be more flexible in its austerity policy and came alongside news of continued weakening output, with Germany's service and manufacturing sectors both surprising commentators by contracting on the previous period. This raised hopes of a rate cut by the European Central Bank, giving equities a lift in response.
Governance concerns
Bumi & ENRC
The corporate governance of two of the largest overseas resources companies on the London market has been called into question. Indonesian coal mining giant Bumi has caused further consternation among its investors this week by requesting its shares be suspended due to ongoing problems quantifying the value of assets on the balance sheet at its PT Berau Energy subsidiary. This is the latest corporate governance concern from a company that has rarely been far from the headlines since the Bakrie family's coal business was reversed into Nat Rothschild's vehicle, a relationship that has since soured significantly. Meanwhile, Kazakh mining giant ENRC has seen its chairman resign as the latest boardroom change amidst rumours that key shareholders are looking at taking the company private again.
Government sell-off
Urenco first
The government is looking to kick-start another round of privatisations with the mooted sale of its 33 per cent stake in Urenco, the joint-venture uranium enrichment business. The business, thought to be valued at around €10bn (£8.5bn), is jointly owned by the UK and Dutch governments and German energy companies E.ON and RWE, and is said to produce almost one-third of the world's uranium nuclear fuel supply. The £3bn sale is expected to be the first of several this year by the UK government including the Student Loans Company, Plasma Resources UK, Companies House, the Met Office and, most controversially, the Royal Mail.
More funding for lending
Scheme extended
The government is extending its Funding for Lending (FLS) scheme in terms of its lifespan and also the scope for lending. The FLS scheme is to be extended by one year to January 2015 and banks are to be offered more funding specifically for lending to small businesses that are struggling to gain access to credit. While FLS has so far been credited with increasing the level of mortgage lending, there is some debate as to the effect it has had on lending to small- and medium-sized business. During 2014, for every £1 lent to small businesses, banks will be able to draw £5 of cheap funding from the scheme.
