The country’s beleaguered high street will not recover for another three years and will underperform for the rest of the decade, according to leading economic commentators. Retailers will have to weather a “tough trading environment” as householders’ hoarding of cash and debt repayment mean consumer spending will fail to return to pre-recession levels before at least 2015. The forecast from the Ernst & Young ITEM Club suggests the worst of the recession could be behind us but warns a recovery could be derailed by consumer habits and put under renewed pressure by rapidly increasing mortgage costs. The economists expect Bank of England interest rates, the foundation for mortage costs, to climb to 4-5 per cent by 2015, leading to a quadrupling in the percentage of household disposable income going towards debt interest payments to 3.2 per cent, The Telegraph reports.
The Government must boost the credit rating of infrastructure assets to attract the private funds it needs for its planned £250bn spend on transport, power, schools and hospital projects, the CBI will say today. Noting “little has happened on the ground” since Chancellor George Osborne trumpeted the spending blitz in November’s Autumn Statement, the employers’ lobby urges the Government to make “smarter use” of its balance sheet. Improving Britain’s infrastructure is a key plank of the Government’s much-criticised growth agenda but it is struggling to attract the necessary investment from the private sector, not least for riskier greenfield projects, according to The Telegraph.
One of the world’s biggest car parts suppliers has rejected overtures from Westminster to bring large-scale manufacturing into Britain. Robert Bosch, a key provider of components in engines and in car safety, has rejected the entreaties of ministers and will not set up a large operation in the UK because it is too expensive. The attraction of so-called Tier 1 automotive suppliers to Britain has been one of the single most important goals of Vince Cable, the Business Secretary, and Mark Prisk, the minister with responsibility for the car industry, says The Times.
Thomas Cook has cut the notice period of its chief executive from 12 to six months as its board tries to stamp out ‘pay for failure’ accusations at the company. Harriet Green, who was hired from electrical components maker Premier Farnell last week, has accepted a six-month notice period against the usual 12-month contract awarded to most FTSE 350 chiefs. Frank Meysman, the firm’s chairman, said: “We gave her a fair contract. The notice period is six months. I don’t think it’s fair, even at the top levels, that people obtain a 12-month notice period.” Mr Meysman refused to discuss other details of the contract but suggested it had been drawn up along simple principles: “I’m a strong believer that you pay for strong performance and you don’t pay for non-performance. That’s what the whole debate around the Shareholder Spring is about – why the heck do you pay for non-performance?”, The Telegraph reports.
A plan for the “industrial re-conquest” of France is being drawn up by President Hollande’s new Government, in a renewal of state interventionism against a backdrop of rising unemployment and restructuring at leading French companies. The plan comes as Air France, Carrefour, Peugeot-Citroën and a host of other French businesses are set for a showdown with Mr Hollande over wide-ranging job cuts. Arnaud Montebourg, the Minister for Industrial Renewal, fired the first shots in the campaign when he said that he would finalise his “industrial re-conquest plan” within weeks, The Times reports.
Lloyd’s of London has drawn up emergency plans to deal with the collapse of the euro.
Richard Ward, Chief Executive of the specialist insurance market, which is made up of 80 competing syndicates, admitted to the plans in a newspaper interview published over the weekend.
The news follows increased concerns over the financial well-being of the euro area ahead of another Greek election on 17 June, which is seen as a vote on whether the country sticks to its bailout obligations.
Failure to do so would likely mean Greece leaving the euro, a move which could have a knock on effect on other countries using the currency.
Ward told the Sunday Telegraph he was”quite worried about Europe” and the insurance market had reduced its exposure “as much as possible” to the euro zone.
“With all the concerns around the euro zone at the moment, we’ve got to be careful doing business in Europe and there are a lot of question marks over writing business in the future in euros,” Ward said.
“We’ve got multi-currency functionality and we would switch to multi-currency settlement if the Greeks abandoned the euro and started using the drachma again,” he added.
“I don’t think that if Greece exited the euro it would lead to the collapse of the eurozone, but what we need to do is prepare for that eventuality.”
Ward said a euro zone break up would mean Lloyd’s taking writedowns on its £58.9bn pound investment portfolio.
Lloyd’s announced a £516m loss for 2011 following the largest catastrophe claims year on record for the 324-year-old insurance market.
Lloyd’s incurred total net claims of £12.9bn during 2011, including £4.6bn of catastrophe claims.