Business to Business News

A leading economic group has reported that Government’s much maligned offer of temporary cut in VAT has proved successful in stimulating consumer spending.

The Centre for Economic and Business Research (CEBR) has acknowledged that official retail sales figures of last 3 months provide strong evidence that VAT reduction is working well.

The introduction of VAT cut on December 2008 has given immediate boost to retail sales, informed Douglas McWilliams, chief executive, CEBR.

Annual retail sales growth was up from 1.6% in November to 2.6% in December. It accelerated further in January and came down marginally to 2% in February.

According to Mc Williams, CEBR’s economic models point out that sales growth would have dropped to zero by February had VAT concessions not been introduced in December. Retailers’ turnover grew by £2.1 billion during 3 months of VAT cut, which will be in force only till January 2010.

PM Darling’s proposal for VAT reduction was opposed by the political rivals and bitterly criticised by leading retailers. Chief executive of Next, Simon Wolfson had repeatedly complained that VAT cut was not helping his business, but according to CEBR, it enabled retail sales to grow continuously even during worst economic conditions in the UK since 1980.

The biggest property companies of the UK and retail groups, including Land Securities, British Land, Topshop-owner Arcadia, have decided to call a truce on their battle over rent and service charges.

Landlords of over half of all shopping centres in the UK, including Westfield, Land Securities and Capital and Regional will draw a plan that will provide a lifeline to store groups, which are struggling for survival in the prevailing economic downturn.

The move is aimed at reducing retailers’ service charges by 20% that will save tens of millions of pounds in retailers’ bills. This will also save number of chains from going into administration.

In a fierce war of words, retailers had alleged landlords of demanding very high quarterly rents and charging unjustified service charges. But in a significant deviation from rigid stand, landlords are now ready to outline ten-point checklist to minimise retailers’ costs.

The truce was brought about by Francis Salway, president of the British Property Federation and chief executive of Land Securities, Liz Peace, chief executive of BPF and retailers including Arcadia owner, Sir Philip Green. Salway described this as a big step forward which showed what could be achieved through dialogue.

Under existing service charge system, extra costs incurred by the landlords can be effectively passed on to retailers. According to new system retailers will be able to save money in ten areas from waste management costs to security and procurement of third party services.

This is the second major relief for retailers in a week. The Treasury had backed down on 5% hike in Business Rates a few days ago.

The UK economy seems to be improving as the confidence of business is showing improvement, the pace of house price downturn is moderating and credit crunch is slowly easing.

The encouraging news led to sterling nearing $1.5 mark again. It was also most buoyant week for FTSE 100 in last many years, boosted by G20 summit and improvement signs in economy.

The CBI and the Chartered Institute of Purchasing and Supply (Cips) both stated that managers were anticipating improvements in credit and orders. Cips acknowledged that service sector was still shrinking, but the speed of decline was moderating for the fourth consecutive month after reaching the lowest in November.

Cips surveys in construction and manufacturing also found relatively brighter developments this week. This confidence build up is leading indicator of improvement in future economic activity.

Despite all these encouraging signs, employment outlook is still grim. The survey reveals strongest contraction of staff strength in 13 years of available data.

Based on feed back from its members, CBI has indicated that credit crunch is easing. According to chief economic adviser, McCafferty, even if companies are not stating that credit availability is improving, the severity of operations interruptions is not as bad as it was 3 months ago.

The Government’s extension of support to banking sector and easing of monetary policy has started impacting the situation positively.

Haws, reputed for their eye wash fountains and emergency equipment, have released what they claim is the worlds first hands-free water coolers.

Due to the appliance involving minimal interaction and physical contact it is said to be more hygienic in that way. To further ensure a high level of hygiene the dispenser itself is antimicrobially protected.

The water coolers feature special sensors that detect when a bottle, glass or cup have been placed in the cubicle and will automatically stop the water flow once the container is nearly full, preventing accidental overflows and spillages in the area.

The dispenser also includes advanced filtration technology and can be hooked up to a standard water flow to create pure drinking water.

It is hoped that creating easier and simpler water dispensers will help to dissuade more people from opting for sugar filled soft drinks and therefore help to better peoples diets.

While Haws have created water fountains in their previous product lines, most of their focus has traditionally been towards industries that require emergency appliances like industrial showers.

The water coolers are currently being rolled out to a number of universities across the USA. Pending a successful hit they may make it to broader institutions in the futures

It has been alleged that the Stanford Financial Group has been involved in an $8billion fraud since company formation in the 1980s.

The owner of the investment group, Sir Allen Stanford, is currently being investigated by the US Government who consider him responsible for a fraud of ‘shocking magnitude’, which revolves around the company’s $8billion certificate of investment scheme, which reportedly offered improbable and unsubstantiated interest rates.

Stanford himself is a fifth generation Texan, most famous in the UK for funding the ‘20/20 for 20’ cricket match between England and a West Indies XI. The name referred to the Twenty20 format of the game and also the fact that the winning team picked up $20million in prize money – the biggest one-off prize for a single sporting event of all time.

Many in the world of cricket were offended by the explicitly financial nature of the contest and the event itself was widely derided in the UK and even considered a failure, despite the substantial media interest it generated.

Stanford had originally committed to putting on several of these 20/20 for 20 matches over subsequent years, but since the beginning of the fraud investigation, these plans have obviously been abandoned.

The mobile phone giant, Vodafone, will be posting about £12 billion profit for the year ending March, 2009. But it has decided to freeze pay rises for its 10,000 strong UK staff, stopped bonuses and asked sales representatives to curtail car travel. Vodafone is targeting savings of £1 billion from its costs.

Chief executive of Vodafone’s UK business, Guy Laurence, in his email last month had hinted at axing 500 jobs. The email was sent to all employees detailing freeze in pay and terming the decision as tough, but responsible one.

Laurence explained that had company decided to raise salaries, it would have been forced to cut number of jobs. He added that company was asking drivers to keep their cars for longer.
Vodafone is also changing bonus plans for next financial year; incorporating new profit shares based targets.

Employees feel totally shafted. Their morale is rock bottom. An insider accused that despite working like hell this year to register profit, company has stabbed them in the back. According to latest annual report for 2008, former chief executive Arun Sarin took home £2.13 million as bonus whiles his successor Vittorio Colao, pocketed £1.3 million. Chairman Sir John Bond received £560,000 and the entire non-executive directors took home £110,000 each.

According to a spokesman of Vodafone, there will be no pay rise for Vodafone UK staff as well as management for the coming year.

Tesco won its key appeal against Competition Commission over competition test which had put restrictions on its growth plan. But the victory could be short-lived since the Competition Commission is bent up on bringing new proposal to restrict growth. Read the rest of this entry »

Although slide in the Britain’s manufacturing sector continued, its pace has slowed down a bit in January 2009. Purchasing Manager Index (PMI) released by the Chartered Institute of Purchasing and Supply (Cips) rose to 35.8 in January up from 34.9 in December. PMI is a measure of orders and output and the level above 50 is the indicator of rise. Read the rest of this entry »

Standard Chartered not only bucked market turmoil but made record annual profits and announced increase in full-year dividend. Read the rest of this entry »

The Bank of England’s hope that export sales would pull the UK economy out of recession appear getting dashed with manufacturing downturn continuing unabated and export sales going from bad to worse.

The rate of fall in industrial output and employment is unprecedented, according to latest data from the Chartered Institute of Purchasing and Supply (Cips). Domestic orders as well as overseas sales are collapsing in spite of weak pound. The UK exports are finding it difficult to compete in the shrinking overseas markets.

According to Cips director, Roy Ayliffe, the UK manufacturing sector has started degenerating as the rate at which it is contracting is reminiscent of conditions that prevailed in 1980s.

The grim figures of survey would further add to pressure on the Bank of England to make cuts in interest rates again despite these being at an all-time low of 1%. Experts are predicting that Bank’s Monetary Committee may decide to cut down rate to 0.5% and inject more money into the economy.

The Bank has very few options before it. Despite allowing sharp fall in Sterling to boost exports and take economy out of recession, there is big stagnation particularly in the UK car industry which is heavily export-oriented.

The rate of production declined is 12% and the contraction in employment is 30,000 jobs per month, while manufacturing’s lobby group is forecasting 140,000 redundancies in 2009.