Arms race off?
Deal in doubt
One of the two remaining consortia bidding for the multi-billion Ministry of Defence procurement outsourcing contract has withdrawn its candidature, throwing the entire process into doubt. The UK was leading the way on the outsourcing of all defence procurement but the consortium led by US engineering group CH2M, and including troubled UK outsourcing giant Serco, pulled out citing the fact that its original bid was "not as commercially viable for the consortium as we would have required". The only bid on the table is that of a rival consortium led by US corporation Bechtel but whether the government can credibly continue now is unclear.
Global growth downgrade
UK excepted
The Organisation for Economic Co-operation and Development (OECD) this week downgraded its forecasts for global growth for this year and next by 0.4 per cent to 2.7 per cent and 3.6 per cent respectively citing continued worries about the tapering of quantitative easing in the US and the effect it could have on the global economy, the wider slowdown in emerging markets and further concerns surrounding the US budget and debt ceiling. But the UK was one of the shining exceptions to the wider rule as the OECD upgraded its forecast for UK growth this year from 0.8 per cent to 1.4 per cent and for 2014 by almost 1 per cent to 2.4 per cent. The eurozone is forecast to expand by 1.1 per cent in 2014 and the US by 2.9 per cent.
Bank freeze
No rate rise
The latest minutes of the Bank of England’s Monetary Policy Committee suggested that it will still be a considerable time before any increase in interest rates is even contemplated. While hinting at a possible change to the forward guidance already published by the Bank, the minutes showed that even meeting the criteria in the recent guidance, such as a fall in unemployment below 7 per cent, would only trigger consideration of a rate rise and not an automatic move. Meanwhile the Bank also expressed concerns over the durability of the recovery into 2014.
Boardroom blitzed
Co-op clearout
The troubled Co-operative Group this week saw the chairman of its embattled Co-op Bank subsidiary, Paul Flowers, resign after press stories concerning his use of hard drugs, prompting the chairman of the wider Co-operative Group, Len Wardle, to also fall on his sword. Following on from the near collapse of the Co-op bank and its recent debt-for-equity swap with US hedge funds, the mutual group is reeling from the latest high level departures. Mr Wardle took responsibility for the appointment of Mr Flowers three years ago and felt compelled to resign, he is being replaced in the interim by his deputy Ursula Lidbetter.
Chinese growth
One child policy relaxed
As is often the case, the details of the outcome from the recent meeting of the Chinese Communist Party leadership have begun to become clearer and include the potential for China’s One Child policy to be relaxed in future years. The news immediately boosted Chinese equities, particularly those linked to baby products. The government has indicated that in urban areas if both parents are only children then they can have two children and in rural areas couples can have two children if the first born is a girl. The 22,000-word document which was produced some days after the meeting concluded also proposed the abolition of work camps or ‘re-education through labour’ camps.
Mortgage rise
Five-year high
Mortgage lending rose to its highest level in five years in October when funds lent against property hit £17.6bn, up by 37 per cent on the same month last year and the highest single month of mortgage lending since 2008. With the government’s Help to Buy scheme only starting during the month, there could be an even more pronounced rise in the coming months. The mortgage market has seen a surge in higher loan-to-value mortgages offered by banks which are both within and outside the government’s loan guarantee scheme.
