economic situation is dire

[snowychap]

Retailer Morgan in administration

French women's clothing store chain Morgan has gone into administration, the latest retailer to be hit by the sharp fall in consumer spending.

The company, which expects to report a 9% decline in 2008 sales, said it still hoped to be able to sell the business.

UK private equity group Apax Partners owns 40% of Morgan, while the firm's founding families - Bismuth and Barouch - own another 40% between them.

Morgan has 575 stores in 57 countries and directly employs 1,000 staff.

It has 33 shops across the UK and Republic of Ireland.

Morgan was established in 1968.

It had been looking for a buyer since the start of 2008.

...more on link

[snowychap]

Shopper levels 'fell in December'

Shopper numbers in December were down 3.1% from the same month in 2007, despite a rush to the shops over the last week, a study has found.

Visits to retail destinations were down 3.1% in December, according to the latest Retail Insight Report from the financial data provider Experian.

This fall came despite footfall rising 12.8% from a year earlier in the last week of December.

Experian now predicts 1,400 retailers will become insolvent next year.

'Unprecedented discounting'

"The last minute surge in shoppers came as a relief to retailers, but for most it was not nearly enough," said Jonathan de Mello, director of retail consultancy at Experian.

"The boost in numbers [in the last week of December] was driven by massive, unprecedented discounting all at the expense of retailer margins."

Across the nations and regions of the UK, Scotland saw the biggest fall in retail footfall in December - down 6.74% from a year earlier.

This was followed by the north-west of England, down 6.69%, and eastern England, which was 3.8% lower.

The smallest decline was recorded by Yorkshire and Humber, which was only 0.85% lower.

Experian found that the most searched for products by bargain hunters were televisions, iPod music players and laptop computers.

Empty shops

Looking ahead, Experian estimates that there will be about 1,400 retail insolvencies in 2009 - a 21% rise from 2008 - with an inevitable knock-on impact on jobs.

It further predicts that at least one in 10 stores will remain empty in 2009.

"There is no disguising the fact that 2008 has been an annus horribilis for the retail sector, and there is little prospect of improvement in 2009," added Mr de Mello.

The British Retail Consortium has already warned that a last minute surge in Christmas sales would not be enough to prevent a "poor" December.

...more on link

Blimey, I bet that took some kind of genius on megabucks to work that fecker out...

[snowychap]

Russia prepares to cut Ukraine's gas supply

Gas supplies to Europe were under threat last night as Russia said it would cut off the flow to Ukraine early this morning after the two sides failed to reach an agreement with Ukraine over non-payment of a debt said by Moscow to be worth more than $2bn (£1.4bn).

Gazprom, the Russian state-owned gas provider, had warned that it would cut off supplies to its neighbour from midnight if it could not reach agreement on money owed and higher prices for this year.

The last time exports were terminated - in January 2006 - there was an immediate impact on mainland Europe as Ukraine was believed to be siphoning off gas meant for onward transit.

But Gazprom CEO Alexei Miller said it would continue full shipments to the European Union, which gets about a quarter of its gas from the Russian company, most of it through pipelines that cross Ukraine.

The Ukrainian president's energy adviser, Bohdan Sokolovsky, also said Ukraine would guarantee the delivery of gas to Europe.

"Whatever Russia ships, we will deliver," he said. "This is what we have committed to."

Gazprom had warned it would cut supplies unless Ukraine paid off all of its debt and signed a deal for 2009 deliveries by midnight. Neither was done, Miller said. "Gazprom will cut off 100% of gas supplies to Ukrainian consumers at 10am (0700 GMT) on 1 January," Miller said. "All responsibility for the situation rests on the Ukrainian side."

Gazprom, which has its own troubles due to very high debt levels, has accused Ukraine of trying to hold Europe to ransom by saying there could be shortages if the taps were turned off again but Kiev has denied making such a threat.

There appeared to be progress when the Ukrainian state energy firm, Naftogaz, and Ukrainian politicians said they had agreed to transfer at least $1.5bn of the $2bn demanded by Russia. There were also suggestions that Ukraine's prime minister, Yulia Tymoshenko, would go to Moscow yesterday to attempt to unblock the dispute but the visit was cancelled.

Europe depends on Russia for a quarter of its gas supplies with Germany's BASF and E.ON, which supplies UK consumers, plus Italy's ENI being among the biggest customers. Russian gas supplies to Britain are limited but any reduction in European supplies could cause shortages and force up prices.

Gazprom said it had received a letter from Naftogaz stating that if Russia turned off the gas, Ukraine could confiscate Russian fuel bound for western Europe. "We cannot describe this position from Ukraine as anything other than blackmail," said Alexander Medvedev, head of Gazprom's export arm. "And they are blackmailing Gazprom, Russia and western Europe."

In Kiev, Naftogaz declined to comment on the letter but President Viktor Yushchenko's first deputy chief of staff, Oleksander Shlapak, said Ukraine guaranteed uninterrupted transit of Russian gas to Europe through its territory.

Russia denies any political motive behind the row, saying it was purely a business dispute and it would do all it could to maintain smooth supplies to Europe.

Gazprom saw second-quarter profits almost triple on the back of high commodity prices in the middle of the year but its fortunes have waned since. Its declining stock price has taken it from being the world's third-largest company at the start of 2008 to the 47th and it must repay $10.6bn of debt by the end of June.

[Chindie]

The above is one hell of a worrying development, especially if things get much worse. Russia, it seems, will be quite quite happy to use any situiation it can to make in roads for itself. Considering their hand is hovering over a fair amount of our fuel supply... not fantastic really. And something that I guess we can expect to become more common, strong arm tactics from the nations possessing the strong hands.

[snowychap]

Jeremy Warner: Perils of sterling's devaluation

Outlook Nobody other than holiday-makers, second-home owners and retirees living overseas on a sterling pension seem much bothered about or even to have noticed the collapse in the value of the pound over the past year. This is not just because there have been more immediate matters to worry about, such as the near death of the banking system.

It is also because this very substantial devaluation has been positively welcomed by policymakers, who regard it as a reflationary tool just as important as lower interest rates. There are a number of ways in which a lower pound can boost the UK economy. First, it makes British exports cheaper and therefore more competitive while correspondingly making imports more expensive and therefore less competitive.

It also makes Britons less inclined to travel abroad to spend their hard- earned cash but may also attract more free-spending foreigners to our shores. In theory, the effect should be to help to rebalance the economy away from its over-reliance on debt-fuelled consumption towards a more productive profile. Unfortunately, in a world economy where there is no demand, these normally beneficial effects may be largely absent. There is little point in more competitive industries if there is no one willing to take advantage of them.

Equally unfortunately, there are a number of negative effects that spring from a weak currency. More expensive raw material costs are just one. But more importantly, a weak currency is only a symptom of capital exodus to more attractive or safer homes overseas. This matters because there is less money available to support economic activity back home.

Government ministers lambaste the banks for not lending enough, yet the reason credit is being squeezed is because it is no longer possible to borrow internationally as freely as we used to. In extremis, the flight of capital becomes a self-feeding phenomenon. The lower the pound falls, the more it frightens the money markets and the less inclined they are to lend in sterling.

Many international investors regard the outlook for the UK economy as truly dire. Its key strengths, the housing market and financial services, lie in ruins, and now there isn't even the attraction of high interest rates relative to Europe to keep the money flowing in. Like the banks, Britain as a country is being forced to deleverage, and most disagreeable it is likely to prove too.

The pound is now a good deal lower, both on a trade-weighted basis and against the euro and its precursor currencies, than it was even after Britain came out of the ERM. The diet of thin gruel we must now learn to live on may be entirely deserved after all those years of sponging off others, but a weak currency seems unlikely to deliver the more appetising fodder economic purists hope for.

Britain was a major beneficiary of the capital and trade imbalances of recent years. From a UK perspective, there's no particular reason to celebrate their demise. To the contrary, starved by a devaluing pound of previous infusions of foreign capital, it's actually quite hard to see where economic salvation might lie.

Oh and Gazprom have turned off the taps to the Ukraine (though European supplies are, apparently, unaffected).

[snowychap]

Six European countries hit by shortages as Russia-Ukraine gas row deepens

Ukraine and Russia’s acrimonious gas dispute was blamed today for disrupting supplies across Europe, with six countries reporting reductions, in the middle of a New Year’s cold snap.

As Russia’s state gas company Gazprom hardened its position by threatening to increase the gas price to Ukraine, the Czech Republic and Turkey today reported falls in their supplies in addition to Poland, Hungary, Romania and Bulgaria.

The Czech Republic said its supplies had dropped by 5 per cent. Romania said its supplies from Russia were down 30 per cent, while Poland recorded a fall of 11 per cent. Bulgaria said deliveries were down by between 10 per cent and 15 per cent.

The customers are all casualties of the dispute triggered on New Year’s Day when Gazprom cut Ukraine’s gas supply after their existing contract expired and the two sides failed to reach agreement on a new deal.

Ukraine is the main transit route for Russian gas pipelines to the European Union, which relies on Russia for about a quarter of its gas needs. It has been accused siphoning off gas destined for other European customers.

Although big consumers such as Germany have yet to be affected by the row, if the dispute continues it threatens to cause energy cuts across Europe in the middle of winter.

After a similar row caused an energy crisis in 2006, European countries built up reserves of gas. There is no immediate threat of a complete cut-off, leading to people shivering in their homes. But the longer the present disagreement drags on, the greater the risk of an emergency.

Last Friday, a Ukrainian delegation visited Prague and other European capitals to explain Kiev’s point of view in the conflict. The Czech Republic, which has just taken over the presidency of the EU, made clear it was not interested in being dragged into what it said was a purely bilateral trade issue, unless of course Europe started to feel the effects.

EU ambassadors will meet on Monday in Brussels to discuss the crisis. The international arbitration court in Stockholm may also be called in to resolve whether Kiev owes Moscow fines for failing to pay its bills on time.

While both sides – which have been increasingly hostile since Ukraine’s Orange Revolution in 2004 – accuse each other of causing problems for Europe and engaging in “energy blackmail”, there are growing calls in Europe to find alternative supplies.

Urmas Paet, Foreign Minister of Estonia, which has had numerous disputes with Russia before, said today the EU should find alternatives to reduce dependence on the Russian gas giant, Gazprom.

Acknowledging that there were few alternatives for the time being, however, he said that the EU should think about how to influence Russia and Ukraine.

“It is abnormal when presidents negotiate a gas price,” he said.

He was referring to Russia’s President Dmitry Medvedev and powerful Prime Minister Vladimir Putin who found themselves spending New Year’s Eve stuck in the Kremlin talking about household bills. Ukraine’s President Viktor Yushchenko kept more of a distance from the argument, saying cheerfully he expected it all to be solved by Orthodox Christmas on 7 January.

But that may be wishful thinking. Moscow’s 2009 price offer of $250 per 1,000 cubic metres of gas, which Mr Putin said was “humanitarian” and offered to Ukraine for “fraternal” reasons, has now been withdrawn. Kiev was first asked to pay the “market” price of $418 per 1,000 cubic meters. Alexei Miller, Gasprom’s CEO, today threatened to raise the price to $450.

...more on link

[Gringo]

UK short-selling ban to be lifted

The ban on short-selling of financial shares in the UK is to be lifted, according to Britain's City watchdog, the Financial Services Authority (FSA).

The FSA said the ban would expire as planned on 16 January, despite calls from MPs to keep it in place.

But rules requiring the disclosure of "short" trading positions will be kept for an extra six months, the FSA said.

Short-selling is when investors borrow shares which they sell, hoping to buy them back later at a lower price.

The regulator said it would reinstate the ban if it saw fit.

A temporary ban on short-selling was introduced for 34 financial stocks in September last year due to the financial turmoil in the markets.

Announcing the ban's end, Sally Dewar of the FSA, said: "We believe that these proposals are the right measures for maintaining orderly markets.

"Continuing the disclosure obligations as we propose will reduce the potential for abusive behaviour and disorderly markets," she said.

Rules changes

The financial watchdog has already scrapped rules which required automatic daily disclosure of short trading positions by investors, regardless of whether there had been a change in the position.

The regulator had been urged to maintain the ban on short-selling, given the continuing problems in the stock market and as bank shares continue to slide.

Last week, Liberal Democrat Treasury spokesman Vince Cable joined some MPs in asking for an extension to the ban, or at least for it to be maintained for banking stocks.

When the ban was introduced, FSA chief executive Hector Sants said that while short-selling was a legitimate investment technique in normal market conditions, the "current extreme circumstances" had given rise to "disorderly markets".

Short-selling was also blamed for steep falls in HBOS shares and trading in the stock was subject to an FSA investigation last year.

Yet the regulator found no evidence that rumours were spread about the bank in a bid to manipulate its share price.

The industry body for the hedge fund industry, Aima, welcomed the proposals to lift the ban.

Chief executive Andrew Baker said: "Although we naturally support efforts by policymakers and regulators to achieve stability in markets, particularly during emergency conditions, we do not feel that this ban achieved its stated aims."

Learning from Mistakes: The Short Sale Ban

The verdict is in. There is growing recognition that last September's ban on short selling in certain financial stocks was a mistake.

Most of the professional trading and investment community do not see short selling, per se, as a problem. There are several debatable issues: the uptick rule, credit default swaps, and mark-to-market accounting for assets intended as long-term holdings. Short sales were not controversial among professionals.

The Academic Verdict

There is some fast work from the academic community. A team led by Columbia Professor Charles Jones, Chairman of the Economics and Finance Division, has a strong data-based analysis of the short-selling ban. They note that despite the initial pop in these stocks, they actually did worse during the market decline over the period of the ban. More importantly, they note that liquidity in these issues got much worse. The average trader faced wider bid-ask spreads leading to more costly trades. Short sales add liquidity and even fuel rebounds when fundamentals change. As many noted at the time, there were various ways to avoid the ban, including purchases of put options and inverse ETF's.

The SEC Verdict

SEC Chairman Christopher Cox acknowledges this error. In a just-released interview in the Washington Post, he is quoted as follows:

Cox said the biggest mistake of his tenure was agreeing in September to an extraordinary three-week ban on short selling of financial company stocks. But in publicly acknowledging for the first time that this ban was not productive, Cox said he had been under intense pressure from Treasury Secretary Henry M. Paulson Jr. and Fed Chairman Ben S. Bernanke to take this action and did so reluctantly. They "were of the view that if we did not act and act at that instant, these financial institutions could fail as a result and there would be nothing left to save," Cox said.

Our Take

We should note first with applause the rapid data-based effort by unbiased academic investigators. We can all enjoy the effect of the Internet. Instead of waiting more than a year for academic publication in a peer-reviewed journal, results are now available more quickly. If there is criticism, that is also available to all. It is a major improvement in the way academic research becomes relevant.

We find more difficulty in the Cox "go slow" concept. It is clear that events were moving more rapidly than policy. Paulson and Bernanke were correct in identifying a problem, but the focus was wrong.

Eventually we will see an academic study that pulls together the key elements:

* The unregulated credit default swap market, easily manipulated with modest amounts of capital;

* The widespread publicity surrounding the CDS trading, implying insolvency of the institutions in question;

* The speculative put buying by those profiting from this pattern;

* The mark-to-market implications for institutions not involved at all;

* The possible manipulation of widely used ABX indices, affecting the entire market.

This all needs investigation. Will it be on the agenda for the new Obama team? We hope so. Learning from this lesson is absolutely essential.

[RichardCanning]

Think M&S movements this week show how bad it is out there. Interesting to see they cut the redundancy terms 3 months ago which is a bit cheeky

[bickster]

Think M&S movements this week show how bad it is out there. Interesting to see they cut the redundancy terms 3 months ago which is a bit cheeky

Which also makes me think this was planned to a degree before any economic situation developed. Food is doing OK so M&S say but today they announce that they are closing a number of simply food outlets, they wouldn't be the ones they located badly in the first place would they? Where I live they actually moved the Simply Food to a bigger store last year, which came as a bit of a suprise as the original store was purpose built for them (by someone else), it did so well they needed to increase the size of the shop. I also noticed some of their stores in lower rent areas have been Rebranded M&S outlet stores and basically sell off the remains of old lines in them. I remember when M&S used to sell this stuff cheap in job lots to other stores, you know the "major label discopunt stores" type shops

[snowychap]

Interesting to see they cut the redundancy terms 3 months ago which is a bit cheeky

Remember the whistleblower who got the boot?

A worker at Marks & Spencer (M&S) who “blew the whistle” on the high street giant’s plans to slash redundancy terms for more than 60,000 staff has been suspended and faces a disciplinary hearing.

The Times revealed last week that M&S plans to cut redundancy pay by up to 25 per cent as part of proposals that have triggered a fierce backlash among staff, who fear a widespread round of job cuts.

...more on link

[snowychap]

Pound regains ground against euro

The pound has risen to its highest level against the euro for three weeks, ahead of the Bank of England's interest rates announcement on Thursday.

The euro fell 0.5% against the pound to close at 90.1 pence, well below its recent high of 98.04 pence.

"There's been a change in sentiment for sterling," said Neil Jones, at Mizuho Corporate Bank in London.

UK rates are expected to be cut by 0.5 percentage points to 1.5%, their lowest in the Bank of England's history.

Sterling gains

The pound has weakened steadily against the euro ever since last October.

This was because as the Bank of England cut UK interest rates to counter the effects of the economic slowdown, the pound - and sterling-denominated investments - became less attractive to foreign investors.

Just after Christmas the pound almost fell to parity the euro, but since then it has been gaining back some of its lost ground.

"The market is still cutting out short sterling positions and there's fresh corporate-style money from abroad coming into the UK," said Neil Jones.

At the same time, this week the euro itself has been falling against other currencies.

European economic figures have showed that the eurozone economy is weakening, and inflation is easing, which raised prospects that the European Central Bank may cut rates next week.

But with interest rates expected to fall sharply to their lowest in the Bank of England's 315-year history, many currency analysts say there is no feeling of an imminent recovery for the pound.

"It's very hard to love sterling given the continued news flow," said Paul Robson, at RBS.

However, he said that the euro has probably already seen its peak.

"You're seeing a lot of unwinding of a lot of excessive moves that we saw in December against a range of currencies."

"Going forward we don't like the euro much."

[snowychap]

Downturn 'fuels unpaid overtime'

The economic downturn is leading to workers putting in record levels of unpaid overtime, the TUC has said.

It estimates 5.24 million people put in extra work worth £26.9bn in 2008.

TUC general secretary Brendan Barber said while some of the rise was down to a "long-hours culture", workers' fears of losing their jobs was also a factor.

"Inevitably, people will be putting in extra hours if they think it can help protect against redundancy or keep their employer in business," he said.

Workers' health

According to the TUC the average amount of unpaid overtime was more than seven hours a week, and workers were missing out on an average of £5,000 of pay.

Mr Barber said: "After years of progress, the numbers doing unpaid overtime has increased for the second year in a row. This is disappointing.

"But while some of this is due to the long-hours culture that still dogs too many British workplaces, the recession will now be making many people scared of losing their job in the year ahead and joining the ever-growing dole queue."

The areas of the country that saw the biggest rises in unpaid overtime were London, the East Midlands and eastern England, said the TUC.

Mr Barber added: "Long hours are bad for people's health, and employers should never forget that each extra hour worked makes people less productive once they are over a sensible working week."

[snowychap]

Interest rates cut by 0.5%

The Bank of England has cut interest rates to 1.5%, the lowest level in its 315-year history, as it continues efforts to aid an economic recovery.

The half percentage point reduction brings interest rates below 2% for the first time since the Bank of England was founded in 1694.

Manufacturers' association EEF said the move was "too timid", and that the Bank should have cut rates further.

The Bank has now reduced rates four times from October's 5% level.

...more on link

And Dell set to cut 1,900 Irish jobs

Computer giant Dell is to cut 1,900 of the 3,000 jobs at its manufacturing site in Limerick in the Irish Republic.

Dell said the move - which will see production moved to a new factory in Poland - was part of a $3bn global cost-cutting effort.

The firm has seen global profits slip because consumers are buying fewer computers as they rein in spending.

Local business leaders predicted the decision would put a further 6,000 jobs in related industries at risk.

'Difficult decision'

Vice-president of Dell's operations in Europe, the Middle East and Africa, Sean Corkery, described the cuts as a "difficult decision but the right one for Dell to become even more competitive, and deliver greater value to customers in the region".

The remaining 1,100 Dell staff will primarily work in product development, engineering and logistics, focused on supporting overseas manufacturing.

The cuts are not set to affect the 1,300 marketing and sales staff at Dell's Cherrywood plant in south Dublin.

Dell opened its first operations in the Irish Republic in 1990, and employed more than 4,500 staff at its peak.

It is the country's biggest exporter and second-largest company, accounting for about 5% of Irish GDP.

[cheltenham_villa]

Downturn 'fuels unpaid overtime'

The economic downturn is leading to workers putting in record levels of unpaid overtime, the TUC has said.

It estimates 5.24 million people put in extra work worth £26.9bn in 2008.

TUC general secretary Brendan Barber said while some of the rise was down to a "long-hours culture", workers' fears of losing their jobs was also a factor.

"Inevitably, people will be putting in extra hours if they think it can help protect against redundancy or keep their employer in business," he said.

Workers' health

According to the TUC the average amount of unpaid overtime was more than seven hours a week, and workers were missing out on an average of £5,000 of pay.

Mr Barber said: "After years of progress, the numbers doing unpaid overtime has increased for the second year in a row. This is disappointing.

"But while some of this is due to the long-hours culture that still dogs too many British workplaces, the recession will now be making many people scared of losing their job in the year ahead and joining the ever-growing dole queue."

The areas of the country that saw the biggest rises in unpaid overtime were London, the East Midlands and eastern England, said the TUC.

Mr Barber added: "Long hours are bad for people's health, and employers should never forget that each extra hour worked makes people less productive once they are over a sensible working week."

does this reflect people on salaries. i probably average 5 - 10 hours of unpaid work a week. I always have done, it makes my working day a bit easier and is has always been well thought of by people senior to myself. Do others do it or am i alone in this?

[tonyh29]

Dell said the move - which will see production moved to a new factory in Poland - was part of a $3bn global cost-cutting effort.

Bloody Poles , not coming here and staying at home stealing all our jobs .... :-)

[tonyh29]

Think M&S movements this week show how bad it is out there. Interesting to see they cut the redundancy terms 3 months ago which is a bit cheeky

The peacocks centre in Woking near me , has all next to each other

Woolworth - gone

M&S - one of the stores being closed

Zavi - also closing down

that's almost one complete side of that floor empty .... I assume that will hit the revenues of the Company that owns the shopping centre putting them in trouble , so the circle kinda keeps going around and around

[snowychap]

Downturn 'fuels unpaid overtime'

does this reflect people on salaries. i probably average 5 - 10 hours of unpaid work a week. I always have done, it makes my working day a bit easier and is has always been well thought of by people senior to myself. Do others do it or am i alone in this?

I'm not sure how they are measuring it.

I certainly wouldn't say that it is restricted to salaried workers.

I'd hazard a guess that the hourly paid are also chucking in an extra 5 minutes here and ten minutes there.

It all adds up.

[chrissmith921]

Downturn 'fuels unpaid overtime'

does this reflect people on salaries. i probably average 5 - 10 hours of unpaid work a week. I always have done, it makes my working day a bit easier and is has always been well thought of by people senior to myself. Do others do it or am i alone in this?

I think most do it, its what just needs to be done and if it means you hit your job targets... must be a good thing?

[ianrobo1]

Think M&S movements this week show how bad it is out there. Interesting to see they cut the redundancy terms 3 months ago which is a bit cheeky

The peacocks centre in Woking near me , has all next to each other

Woolworth - gone

M&S - one of the stores being closed

Zavi - also closing down

that's almost one complete side of that floor empty .... I assume that will hit the revenues of the Company that owns the shopping centre putting them in trouble , so the circle kinda keeps going around and around

yes it does and do you think advocating making saving money more attractive is the right way to go in a recession ?

[snowychap]

I think most do it, its what just needs to be done and if it means you hit your job targets... must be a good thing?

If one is employed for a set number of hours a week and has job targets that require one to work more than that set number of hours, either the targets are too onerous or one is not up to the job.

On the other hand, if one is employed in order to do a job (rather than to work from a o'clock to b o'clock) then the time involved becomes immaterial to a degree.