Fears Of Double-Dip Recession as UK’s Economy Declines

Data released today has revealed a shocking 0.5 percent decline in UK’s economic growth in the last quarter of 2010, sparking fears of a double-dip recession.

Following four straight quarters of economic growth, today’s figures have come as a huge surprise to economists who had forecast a growth rate of up to 0.6 percent.

The government has highlighted the severe weather during October and December as the reason for the contraction, citing extensive weather related losses in the retail, transport and construction industries.

However, experts have stated that whilst the weather can be considered a factor, the coalition’s spending cuts may also have proved too much for the UK’s increasingly fragile economy.

The UK has seen a 0.5 percent drop in the key services sector as a result of spending cuts, which contributes to more than 75 percent for the economy.

Howard Archer, European and UK economist for IHS Global Insight branded the data as, “a performance far worse than even the most pessimistic of forecasts.”

“This weakness cannot be put down only to the weather,” he claimed,  “It reinforces already serious concern over the economy's ability to grow significantly in the face of the spending cuts and tax hikes that will increasingly bite as 2011 progresses.'

The poor growth rate will now prevent an imminent rate rise, according to analysts, despite the need to offset rising levels of inflation.

Fears of ‘Jobless Generation’ As Youth Unemployment Reaches Record High

The latest employment figures released on Wednesday reveal that the number of young people suffering from the UK’s dwindling job market has reached a record high.

The official figures reveal that almost a million young people between the ages of 16 and 24 are now unemployed, sparking fears of a ‘jobless generation’.

Since 1992 when records began, the youth unemployment rate has risen 20.3 percent, with a particularly sharp rise in the number of 16 and 17 year olds classified as out of work rather than in education or employment.

The slowing economy has been blamed for the lack in job opportunities as well as reluctance by employers to recruit younger workers.  In addition, recent changes to retirement laws are enabling older people to work for longer, leaving fewer vacancies for the younger generation.

Graduates are also finding it increasingly difficult to find work and are being encouraged to undertake voluntary internships alongside their studies.  However, the rising cost of student fees mean than most students cannot afford to work unpaid.

This is compelling evidence of the way in which the last Labour government completely failed a generation of young people,” says Employment minister Chris Grayling.

Ministers claim that the figures have been skewed by the numbers of youth in full-time education seeking part time work.

Interest Rate Hikes Could Cost Households £1800 Per Year

UK Households could find themselves having to pay an extra 1800 per year interest on their debts if interest rates are hiked as predicted.
A study published on Monday by Pricewaterhouse Coopers forecast that the current central bank base rate of 0.5 percent will rise to 5 percent over the next four years, possibly starting as early as June this year.

The news is worrying for UK households who are already struggling from the recent VAT rise, wage cuts and rising costs of petrol, food, clothing and energy.

However, many City analysts believe that a rate rise is necessary in order to curb the escalating levels of inflation as retailers will be forced to lower prices if consumers have less to spend.

Philip Shaw, economist at Investec said that the Bank of England is under pressure to address the inflation issue with both the Consumer Price Index and Retail Price Index way over the government target of 2 percent.

'We were originally forecasting that interest rates wouldn't rise until the back end of 2011 but there is a real risk the Bank of England's monetary policy committee will have to raise rates sooner rather than later to protect its credibility,' Mr Shaw said.

Yet some members of the Coalition and other in the City believe that a sudden hike in interest rates could be extremely damaging to the UK’s economic recovery and put the country as risk of a double-dip recession.

They believe that inflation will automatically drop over the next two years without the Bank of England having to take action.

End To Enforced Retirement As Government Scraps DRA

The end of the UK’s Default Retirement Age will be announced in the House of Commons today, preventing employers from forcing their employers to retire at the age of 65.

The phasing out of the DRA, which currently forces people to stop working at 65, will be revealed in a ministerial statement by Business Minister Ed Davey and will not require legislation.

From the 6 April this year, employers will no longer be able issue compulsory retirement and only those due to retire before 1 October will be forced do so under the DRA.

The new rules mean that by October there should be an additional one million employees aged 65 or over in the nation’s work force.

Whilst the Department of Business claims that the changes will benefit both individuals and the economy, employers fear a greater risk of legal issues such as unfair dismissal claims.

John Cridland, the deputy director general of The Confederation of British Industry told the BBC last month that the scrapping of the DRA could open up a ‘legislative void’.

"In certain jobs, especially physically demanding ones, working beyond 65 is not going to be possible for everyone," Mr Cridland said.

There are also fears that an ageing workforce will result in less job opportunities for the young.

The government will also be outlining a new Pensions Bill today which will see the state pension age raise to 66 by 2020 for both men and women.

Cameron under pressure to curb fuel prices as protest fears mount

David Cameron came under increasing pressure over the weekend to curb the UK’s mounting fuel prices ahead of threats of protests around the country.

Following a double rise from last week’s VAT increase and hikes in fuel duty, the cost of petrol has soared to almost £1.30 per litre angering motorists across and sparking fears of protests at the pumps.

Petrol station bosses also fear that the increase of 3.5 pence per litre will result in more criminal behaviour as motorists fail to pay after filling up their tanks.

Shortly before the General Election last year, Mr Cameron promised to introduce a ‘fair fuel price stabiliser’ which would see fuel duty drop in response to a rise in oil prices. At this time petrol prices were at a record £1.20 a litre.

Over the weekend Mr Cameron spoke about his pledged stabiliser policy stating, ‘We’re looking at that. It’s not an easy thing to put in place, but I would like to try and find some way of sharing the risk of higher fuel prices with the consumer.’

However, he later seemed to back track on his promise when he told the BBC, ‘I don’t want to raise people’s hopes too far because it is a difficult issue.’

John Redwood, former Tory Cabinet minister has publically implored the Prime Minister to introduce the policy immediately and to cut the price of duty to help struggling households and businesses.

It is thought that the Treasury will commission an independent assessment of the stabiliser proposal before any decision is made.

Protect Yourselves!

“Spear Phishing” is the new term being used to describe the poaching of information from us, with sophisticated criminals targeting your computer, hacking into your personal information by using new kinds of corrupt software.

It is described by analysts as an “ingenious” and “malicious” method of identity theftand it effectively allows criminals to take complete control of your computer. One of the method’s use is a kind of email development that attacks your inbox to provide the intruder with vital pieces of your personal information.

Government employees and contractors have fallen victim to the ruse which only kicked in over the past holidays season, reeking havoc as naive innocents were conned into downloading the self-strengthening programme.

Let this be a lesson to us all. With identity theft becoming more and more sophisticated, we really must do all we can to protect ourselves. Obtaining identity theft protection is a way to create a virtual alarm bell for any unusual activity.

VAT Rate Rise

The VAT rate has risen from 17.5% to 20%. The increase has been catalysed by the government who are aiming to cut its deficit by boosting tax revenues.

At the beginning of the summer, George Osborne (chancellor) commented that the hike should, if all goes to plan, raise £13 billion a year by the end of parliament-an amount which would help patch up the deficit.

Those things that are excluded from the rate hike are food, children’s clothing, newspapers and magazines.

Criticisms of the move are aimed at Osborne and the government and they focus on the fact that shops and retail will be severely affected by the changes. Along with this, they comment that those families with the least money are likely to be hit the hardest.

Among those who criticise the plans are labour leader Ed Miliband who believes that now is not the right time to introduce rate hikes-seeing as there are many other government spending cuts which families are trying to cope with. He described the decision as “wrong tax at the wrong time.”