By Russell Lynch, PA
Tuesday, 8 July 2008
The UK reeled under the latest blizzard of dire news from the housing market today as business leaders warned the country was on the brink of recession.
The British Chambers of Commerce's (BCC) warning came as housebuilder Persimmon cut 1,100 jobs amid plummeting sales and Government figures showed house price growth falling for the seventh month in a row.
The growing pessimism spread to the stock market to push London's FTSE 100 Index into "bear market" territory - with shares at one point trading more than 20 per cent below last June's peak.
Prime minister Gordon Brown insisted at the G8 summit in Japan he was determined to lead Britain through the current economic downturn, but acknowledged the "very difficult times" faced by the country.
The BCC said the UK was "at serious risk" of recession as falling orders and rising costs tighten the squeeze on business, after its latest quarterly survey showed "alarming" declines.
But inflation pressures caused by high oil, food and electricity prices means that Bank of England policymakers are unlikely to offer relief to homeowners and businesses with an interest rate cut this week.
Most economists predict borrowing costs will be held at 5 per cent for the third month in a row because inflation is currently more than 1 per cent above the Bank's 2 per cent target at 3.3 per cent.
The BCC found that confidence among services firms - which account for almost three-quarters of the economy - is at its lowest ebb since 1990.
The organisation's economic adviser David Kern said the survey of almost 5,000 firms showed a "menacing deterioration" in UK prospects.
York-based housebuilder Persimmon today said it had axed 1,100 staff after the "most challenging period in its recent history". Sales have fallen 31 per cent in the past six months as banks hit by the crunch tighten up on mortgage lending.
The cuts follow nearly 2,000 redundancies at rivals Taylor Wimpey and Barratt Developments, with the industry warning of the worst downturn in 30 years.
Upmarket property group Savills also reported a 45 per cent drop in London sales and said the market downturn had begun to impact on prime country properties.
Only the "very top end" of the property market, where values exceed £5 million, were proving "relatively immune" to the downturn, Savills said.
According to the Department for Communities and Local Government, the average cost of a home in the UK dropped by 0.3 per cent during May to hit a 26-month low.
All of the major house price indexes are showing price falls, with Nationwide Building Society last week saying prices fell for the eight month in a row during June, with homes costing 6.3 per cent less than they did a year ago.
Although the Council of Mortgage Lenders reported a slight rise in home loans for people buying a new property during the month, the number of people remortgaging fell steeply as borrowers were put off by high mortgage rates and more expensive arrangement fees.
The crisis in the housing market has hit shares in buy-to-let mortgage lender Bradford & Bingley, which fell to a record low of just 30p during the day.
The FTSE 250 firm is attempting to shore up a balance sheet hit by the credit crunch and rising mortgage arrears by raising £400 million from its shareholders, but some analysts said the shares were virtually worthless.
The wider FTSE 100 Index was also under pressure as the economic concerns mounted, with losses on stock markets in the US and Asia.
Capital Economics' chief European economist Jonathan Loynes said: "The falls have brought UK equities more closely into line with the latest dreadful news on the UK economy.
"If we are right in expecting the downturn in the economy to be deeper and longer than most forecasters anticipate, the worst could still be to come for the UK stockmarket."
One of the few exceptions to the gloom was struggling retailer Marks & Spencer, whose share recovered some of the ground lost since last week's shock profit warning as rumours of a possible takeover swept through the market.
The firm's sales have fallen in the consumer squeeze with executive chairman Sir Stuart Rose likely to face the wrath of shareholders at the firm's annual meeting tomorrow.
Tuesday, 8 July 2008
The UK reeled under the latest blizzard of dire news from the housing market today as business leaders warned the country was on the brink of recession.
The British Chambers of Commerce's (BCC) warning came as housebuilder Persimmon cut 1,100 jobs amid plummeting sales and Government figures showed house price growth falling for the seventh month in a row.
The growing pessimism spread to the stock market to push London's FTSE 100 Index into "bear market" territory - with shares at one point trading more than 20 per cent below last June's peak.
Prime minister Gordon Brown insisted at the G8 summit in Japan he was determined to lead Britain through the current economic downturn, but acknowledged the "very difficult times" faced by the country.
The BCC said the UK was "at serious risk" of recession as falling orders and rising costs tighten the squeeze on business, after its latest quarterly survey showed "alarming" declines.
But inflation pressures caused by high oil, food and electricity prices means that Bank of England policymakers are unlikely to offer relief to homeowners and businesses with an interest rate cut this week.
Most economists predict borrowing costs will be held at 5 per cent for the third month in a row because inflation is currently more than 1 per cent above the Bank's 2 per cent target at 3.3 per cent.
The BCC found that confidence among services firms - which account for almost three-quarters of the economy - is at its lowest ebb since 1990.
The organisation's economic adviser David Kern said the survey of almost 5,000 firms showed a "menacing deterioration" in UK prospects.
York-based housebuilder Persimmon today said it had axed 1,100 staff after the "most challenging period in its recent history". Sales have fallen 31 per cent in the past six months as banks hit by the crunch tighten up on mortgage lending.
The cuts follow nearly 2,000 redundancies at rivals Taylor Wimpey and Barratt Developments, with the industry warning of the worst downturn in 30 years.
Upmarket property group Savills also reported a 45 per cent drop in London sales and said the market downturn had begun to impact on prime country properties.
Only the "very top end" of the property market, where values exceed £5 million, were proving "relatively immune" to the downturn, Savills said.
According to the Department for Communities and Local Government, the average cost of a home in the UK dropped by 0.3 per cent during May to hit a 26-month low.
All of the major house price indexes are showing price falls, with Nationwide Building Society last week saying prices fell for the eight month in a row during June, with homes costing 6.3 per cent less than they did a year ago.
Although the Council of Mortgage Lenders reported a slight rise in home loans for people buying a new property during the month, the number of people remortgaging fell steeply as borrowers were put off by high mortgage rates and more expensive arrangement fees.
The crisis in the housing market has hit shares in buy-to-let mortgage lender Bradford & Bingley, which fell to a record low of just 30p during the day.
The FTSE 250 firm is attempting to shore up a balance sheet hit by the credit crunch and rising mortgage arrears by raising £400 million from its shareholders, but some analysts said the shares were virtually worthless.
The wider FTSE 100 Index was also under pressure as the economic concerns mounted, with losses on stock markets in the US and Asia.
Capital Economics' chief European economist Jonathan Loynes said: "The falls have brought UK equities more closely into line with the latest dreadful news on the UK economy.
"If we are right in expecting the downturn in the economy to be deeper and longer than most forecasters anticipate, the worst could still be to come for the UK stockmarket."
One of the few exceptions to the gloom was struggling retailer Marks & Spencer, whose share recovered some of the ground lost since last week's shock profit warning as rumours of a possible takeover swept through the market.
The firm's sales have fallen in the consumer squeeze with executive chairman Sir Stuart Rose likely to face the wrath of shareholders at the firm's annual meeting tomorrow.
No comments:
Post a Comment