More than a million people may have lost their jobs unnecessarily because the Labour Government failed to act on warnings from the Bank of England which could have prevented the recession, Sir Mervyn King claims. The Bank governor claimed that action by Gordon Brown’s administration had been “too late” to prevent the banking crisis causing a recession, which led to the sharp increase in unemployment. Sir Mervyn said that he argued “from the beginning of 2008” that British banks required more than £100bn of extra funding to avert a crisis. Mr Brown and other senior ministers failed to bail out the banks until October 2008, which was “too late to prevent the financial crisis from spilling over into the world economy”, he claimed, according to The Telegraph.
Britain is falling behind other European economies in the export of high-end manufactured products, according to a study by the McKinsey Global Institute. With the exceptions of Greece, Portugal and Spain, Britain has Europe’s largest trade deficit when it comes to “knowledge-intensive” goods, such as pharmaceuticals and computer equipment. Britain exports only 70% as much computing and communication equipment as other mature economies. The McKinsey report argues that it is a myth that the world’s mature economies are losing out to emerging markets and are suffering bigger trade deficits as a result. Overall, their trade balances are stable and in 2009 mature economies as a group actually recorded a surplus in terms of knowledge-intensive manufacturing, The Times says.
Plans to make the world’s largest wind turbines in Britain, creating 2,000 jobs, have been put in jeopardy because of faltering demand and technical problems. Vestas said a year ago that it would build a factory in Kent to supply giant turbines the height of the “Gherkin” tower in the City of London for the extensive wind farms in the North Sea that are planned towards the end of the decade. But its chief executive said yesterday that the Danish company might decide not to go ahead with the proposal because of the “very challenging” market outlook for the next 18 months. Ditlev Engel told The Times: “The decision to go ahead with the new facility is dependent on orders for this new machine. It’s clear that the market outlook issues are a concern for us.”
Britain’s economy is likely to resume growth in the summer with the recovery gaining pace next year, the CBI today forecast. In its latest quarterly outlook, the business lobby group also sees interest rates remaining at their record low of 0.5% until the final quarter of 2013, when it expects a rise. Among its other predictions, the CBI anticipates that inflation will be “somewhat higher than previously thought” throughout 2012, household spending will remain “subdued” while there will be a “modest rise” in business investment. John Cridland, the CBI director-general, said: “Despite the disappointing GDP estimate for the first quarter from the Office for National Statistics, we still think the UK economy will grow in 2012, with faster growth next year, The Scotsman reports.
For a firm that prides itself on fattening companies up for a stock market listing, Carlyle Group has had a surprising struggle with its own flotation. The rivate equity group will begin trading on the Nasdaq exchange in New York today at a market valuation that is nearly $1bn (£620m) lower than it had hoped. The firm, which owns the RAC recovery service and Dunkin’ Donuts fast-food chain, had been aiming for a share range of $23 to $25 for its initial public offering, which would have valued the group at between $7bn and $7.6bn. However, investor apathy towards private equity floats has forced Carlyle to cut the price to the lower end of the range, with the flotation priced at $22 a share, valuing Carlyle at $6.7bn. The group has sold 30.5m shares in the flotation, roughly 10% of its total equity, and raised $671m, The Times says.
George Osborne has warned the European Union that Britain will refuse to sign up to “idiotic” proposals that would water down tough international rules on bank capital requirements. During angry exchanges, the Chancellor told a meeting of Europe’s finance ministers on Wednesday night that EU measures to implement “Basel III” bank rules would be ridiculed by financial markets and the banking sector because it so clearly failed to enforce clear and tough rules. “We are not implementing the Basel agreement as anyone who will look at this text will be able to tell you. I’m not prepared to go out there and say something that will make me an idiot five minutes later,” he said. After 10 hours of talks, a furious Mr Osborne said that since he had been forced to cancel a Downing Street dinner party he was ready to keep EU finance ministers at the negotiating table all night until they got it right, The Telegraph says.