economic situation is dire

[drat01]

Apparently the "we are all in this together" only applies to the poor! - remember it was boardroom members that signed a letter only a few days back saying that the cuts were right and proper!

UK boardroom pay leaps 55% in a year

Britain's bosses have been accused of greed and ignoring economic reality after boardroom pay leapt by 55% over the last year.

FTSE 100 directors saw their total earnings soar in the 12 months to June, thanks to sharp rises in bonuses and performance-related pay. The average FTSE 100 chief executive now earns £4.9m a year, or almost 200 times the average wage.

Unions reacted angrily to the report today. "Don't they know that this is meant to be austerity Britain?" said TUC general secretary Brendan Barber.

"These mega-pay rises blow away any claim that we are all in this together. While the poor and those on middle incomes lose out from cuts and pay squeezes, top directors continue to take home telephone number salaries without being overly troubled by tax," Barber added.

He called on shareholders and the government to get a tighter grip on executive pay, at a time when ordinary workers have seen their pay kept in check by the economic downturn.

The report was welcomed by business secretary Vince Cable, who announced a review of corporate behaviour and pay earlier this week. He said it was time for executive pay to "come back down to earth".

"We have to question whether it is linked closely enough to company performance. I'm determined to take a really close look at these important issues and want to see a wide response from industry to my review," Cable said.

Incomes Data Services, who conducted the research, said bonuses paid to directors of FTSE 100 companies increased by 34%, while basic pay rose by 3.6%. The amount of money waiting to be disgorged from long-term incentive schemes soared by 73%, to a total of £259m, and share option gains leapt by 90%.

The FTSE 100 rose by less than a fifth over the same period.

Steve Tatton of IDS said the report suggested that companies returned to "business as usual" once the recession ended.

"It seems the days of earnings restraint were short-lived. It is as though the recession never happened," Tatton warned.

"This time last year a number of companies actually reduced their bonus ceilings. Twelve months later it appears as if these measures have been reversed, with around 40 companies reporting higher bonus scheme maxima," he added.

Bart Becht, who runs consumer goods giant Reckitt Benckiser, was the most highly paid FTSE 100 chief executive. He made £90m last year. IDS also calculated that Tony Pidgley of Berkeley Group enjoyed total earnings of £38.4m, followed by Mick Davis of Xstrata with £26.9m. All three benefited from share options granted in previous years. Paul Kenny, general secretary of the GMB union, said "boardroom greed is alive and well", adding that several FTSE CEOs have come out in support of the coalition government's deficit-reduction plans.

"Let us not forget that these are the same people urging the Government to make deep cuts in jobs and services and in the welfare on which the poorest in our society rely," Kenny said.

In calculating total earnings IDS includes a range of payments and benefits, including the notional and actual value of share option gains, and the total cash value of long-term incentive plans.

A year ago, IDS's report found that total earnings among FTSE 100 CEOs fell by 1.5% between June 2008 and 2009, in the teeth of the recession. However, a 7.4% rise in basic pay cushioned bosses from the impact of the downturn.

Several of Britain's biggest companies faced shareholder anger this year over their executive pay awards. Tesco suffered one of the biggest revolts in years when nearly half its investors failed to back its remuneration policy.

Marks & Spencer was criticised for giving its new chief executive a £15m deal, while J Sainsbury had to defend a 60% rise in CEO Justin King's total earnings, which jumped to £8m.

Some absolutely scandalous payments seemingly welcomed by this Gvmt

[Meath_Villan]

Anyone else think zee germans are getting a bit out of hand

[Awol]

Batten down the hatches, there's a storm coming...

The rest of the world goes West when America prints more money

Last Wednesday was a hinge point in history. The United States decided to drop all pretence of being interested in leading – or even being part of – a coordinated global policy response to the most serious economic crisis in more than 70 years

America is now isolated and the rest of the world is furious. The widespread use of capital controls and even a lurch into 1930s-style protectionism are both far more likely than just a few days ago.

The Federal Reserve's words may have been anodyne. "We will adjust the programme as needed to best foster maximum employment and price stability," said the US central bank's Open Market Committee. But by announcing another round of "quantitative easing", America is rightfully incurring the wrath not only of the emerging giants of the East, but the eurozone too.

The US had hoped China would use the forthcoming G20 summit in Seoul to accept America's proposal that net exporters should limit their current account surpluses to 4pc of GDP. Any prospect of that is now gone.

In the aftermath of the Fed's QE2 announcement, rather than agreeing to measures that would ease pressure on the US economy, China gave the States a public tongue-lashing. Measures to cap trade surpluses would "hark back to the days of planned economies", said Cui Tiankai, who will be one of China's lead negotiators in Seoul.

"We believe a discussion about a current account target misses the whole point, not least because if you look at the global economy, there are many issues that merit more attention – such as quantitative easing".

Germany also waded in, using industrial-strength language to describe the Fed's latest move. "With all due respect, US policy is clueless," remarked the finance minister, Wolfgang Schäuble.

"It's not that the Americans haven't pumped enough liquidity into the market … for them now to pump even more is not going to solve their problems."

The Fed's plan to expand QE by $600bn (£370bn), on top of the $1,700bn already implemented, caused the diplomatic fur to fly – from Thailand to Australia. An official statement from South Africa, a key member of the G20's powerful emerging market bloc, said America had "undermined the spirit of multilateral co-operation that G20 leaders have fought so hard to maintain".

Up until now, the rest of the world has been willing to tolerate unprecedented money-printing by the US – and the UK for that matter. QE has been used to help various financial institutions avoid facing up to their losses, while covertly recapitalising Western banks that are, to all intents and purposes, insolvent. Money-printing has also pumped up equity prices. After the latest Fed-induced "sugar rush", the FTSE global all-share index hit a two-year high.

With QE money having been used to purchase Treasury bills and gilts, as well as dodgy mortgage-backed securities, it has also allowed certain governments to keep spending.

Who cares if yields on sovereign IOUs have been artificially depressed (for now) by the weight of freshly-created money. Implementing spending cuts is a far, far harder proposition than announcing yet another "Keynesian" fiscal boost.

So, in other words, QE has benefited some pretty formidable interest groups – insolvent banks, public sector unions and cowardly politicians. No wonder us long-standing critics of the policy have been dismissed as "inflation nutters" and "cranks".

But, in recent weeks, something has changed. Big players such as China, Brazil – and Germany too – think the US has gone far too far and are now saying so.

Their patience has snapped, given the far-reaching negative impact of QE beyond America's shores. "While everybody wants the US economy to recover," said Guido Mantega, Brazil's highly-respected finance minister, "it does no good at all to just throw dollars from a helicopter."

In a newspaper article, Xia Bin, a long-standing adviser to China's Central Bank, last week referred to the unbridled printing of dollars as "the biggest risk" to the global economy. "As long as the world exercises no restraint in issuing dollars then the occurrence of another crisis is inevitable, as some wise Westerners have lamented," he wrote.

Along with fears that the Fed is blowing yet another asset-price bubble, that will lead to a damaging collapse, America stands accused (rightly) of using QE to artificially depress the dollar, so unfairly boosting US exports at the expense of those from elsewhere, including the eurozone. At the same time, a lower US currency also reduces the real value of the huge debts that America owes the rest of the world – not least the Chinese.

In the here and now, the big emerging markets are particularly worried that dollar debasement means their own currencies are taking on "safe haven" status, pushing them up even more, so further undermining their exports. Brazil has already imposed capital controls, of course. And in response to QE2, a string of east Asian central banks said that they were preparing measures to defend their economies against large capital inflows.

This is not the way liberal capitalism and free trade is supposed to work. And, while it pains me to say it, the main cause of this new rash of economic dirigisme, and the conflicts, distortions and injustices it will inevitably produce, is America. Rather than facing up to its problems and dealing with them, US policy makers are imposing such problems on the rest of the world.

Now President Obama has taken a mauling in the US mid-terms, he may become even more desperate, meaning QE could extend yet again, beyond this additional $600bn.

Although the negative impact of QE outside the US has so far been felt largely in terms of export competitiveness and currency appreciation, the policy is now beginning to impose far more visible "collateral damage".

Some of us have been warning for a long time that mass money printing would cause global investors to seek refuge in tangible assets – not least commodities.

Well such events are now coming to pass.

In New York, oil prices just hit $87/barrel – a two-year high – even though the US economy, the world's biggest crude consumer, remains sluggish.

During the past week, the inevitability of more QE – and perhaps yet more QE – has caused the entire oil futures curve to shunt upwards, as investors have bet on more inflation and further falls in the dollar.

The OPEC oil-exporters' cartel fanned the flames, but this crude price rise has been a long time coming and derives from the Fed's virtual printing press.

Gold has just broken yet another all-time record – hitting $1,394 an ounce.

Silver rose 6pc last week, and is now at a 30-year high.

Aside from precious metals, the nightmare scenario is that QE causes a surge in the price of commodities and other inputs needed to keep the Western world running – as investors use such assets as an "anti-debasement hedge".

There are signs this is starting to happen, beyond the crude markets.

Since August, when the prospect of more Fed QE became real, cotton prices are up 68pc, sugar prices have risen 66pc and rice is up by a third.

That's why QE will be blamed for so much more than "unfair" currency devaluations and for imposing a "soft default" on America's creditors.

This crazy money-printing is going to be seen as the primary cause of Western inflation, food riots and a commodity price spike.

This policy, in my view, is nothing less than America's "economic Suez".

Some unusually strong language in there from right around the world. Is the US really going to derail the global recovery via the printing press?

[snowychap]

Prepare for a global currency war as G20 leaders pledge to avoid currency war

World leaders have pledged to fight protectionism and vowed not to engage in a damaging currency war, at the end of the G20 Summit in Seoul.

The Group of 20 nations also pledged to address the trade imbalances that are destabilising the world economy, but rejected Barack Obama's demand for fixed targets on national trade deficits and surpluses.

And with few hard measures announced this morning, leaders were forced to deny that the summit had achieved little.

The commitment to move towards more "market determined" exchange rates and to fight volatility in the foreign exchange markets may address fears that countries are driving down the value of their currencies to boost exports.

Overall, the measures announced in the official communique released this morning received a muted response from the financial markets, with some analysts disappointed that more progress had not been made. But the UK government insisted that the gathering was a success.

"By acting together we can maximise world growth and we can cut world unemployment. This is not some obscure economic issue – in the end, it is about jobs," prime minister David Cameron said.

The chancellor, George Osborne, insisted that the summit had made progress.

"I think … people are going to see some concrete steps taken both in Britain's interests and the world's interests to secure a global recovery," he told the BBC.

The G20 leaders agreed a new programme for the world economy, called the "Seoul action plan". It included a promise to "strengthen multilateral co-operation to promote external sustainability and pursue the full range of policies conducive to reducing excessive imbalances and maintaining current account imbalances at sustainable levels".

There was also agreement that the International Monetary Fund should be restructured.

At present, many western developed nations are running very large trade gaps, with imports much higher than exports. In fast-growing eastern nations such as China, though, the picture is reversed. This imbalance, leading to huge current account deficits in some countries – most notably the US – and massive surpluses in others, is a key obstacle to recovery from the financial crisis.

Obama had argued that his fellow G20 leaders should agree to fixed caps on trade surpluses and deficits. This was rejected by other nations, notably Germany, which argued that the move would hit competitiveness.

...more on link

[kidlewis]

british gas upping their prices by 7%, which means currently EDF will be slightly cheaper. If you want to save money go through quidco and you get £125 back in cashback and credit on your account.

I only know this because I recently did the sums and on british gas web saver 6 (their best elec only rate) if their prices went up by anything at all the EDF online plan was cheaper by about £250 a year for me (with the credit you get).

Can save yourself a pretty penny if you have duel fuel, you get a lot more cashback and credit.

[Awol]

The article linked below is too long to reproduce in full here so I've edited heavily but it's well worth reading the rest, especially if you're among the Irish VT contingent.

Apparently the author has correctly called every step of the crisis in Ireland so far and his latest installment isn't good news at all. I hadn't realised things across the water were quite so bad...

If you thought the bank bailout was bad, wait until the mortgage defaults hit home

WHEN I wrote in The Irish Times last May showing how the bank guarantee would lead to national insolvency, I did not expect the financial collapse to be anywhere near as swift or as deep as has now occurred. During September, the Irish Republic quietly ceased to exist as an autonomous fiscal entity, and became a ward of the European Central Bank.

It is a testament to the cool and resolute handling of the crisis over the last six months by the Government and Central Bank that markets now put Irish sovereign debt in the same risk group as Ukraine and Pakistan, two notches above the junk level of Argentina, Greece and Venezuela.

September marked Ireland’s point of no return in the banking crisis. During that month, €55 billion of bank bonds (held mainly by UK, German, and French banks) matured and were repaid, mostly by borrowing from the European Central Bank.

..........

This €70 billion bill for the banks dwarfs the €15 billion in spending cuts now agonised over, and reduces the necessary cuts in Government spending to an exercise in futility. What is the point of rearranging the spending deckchairs, when the iceberg of bank losses is going to sink us anyway?

What is driving our bond yields to record levels is not the Government deficit, but the bank bailout. Without the banks, our national debt could be stabilised in four years at a level not much worse than where France, with its triple A rating in the bond markets, is now.

...........

The next act of the crisis will rehearse the same themes of bad loans and foreign debt, only this time as tragedy rather than farce. This time the bad loans will be mortgages, and the foreign creditor who cannot be repaid is the ECB. In consequence, the second act promises to be a good deal more traumatic than the first.

Where the first round of the banking crisis centred on a few dozen large developers, the next round will involve hundreds of thousands of families with mortgages. Between negotiated repayment reductions and defaults, at least 100,000 mortgages (one in eight) are already under water, and things have barely started.

........

The gathering mortgage crisis puts Ireland on the cusp of a social conflict on the scale of the Land War[!!!!!!], but with one crucial difference. Whereas the Land War faced tenant farmers against a relative handful of mostly foreign landlords, the looming Mortgage War will pit recent house buyers against the majority of families who feel they worked hard and made sacrifices to pay off their mortgages, or else decided not to buy during the bubble, and who think those with mortgages should be made to pay them off. Any relief to struggling mortgage-holders will come not out of bank profits – there is no longer any such thing – but from the pockets of other taxpayers.

..........

By next year Ireland will have run out of cash, and the terms of a formal bailout will have to be agreed. Our bill will be totted up and presented to us, along with terms for repayment. On these terms hangs our future as a nation. We can only hope that, in return for being such good sports about the whole bondholder business and repaying European banks whose idea of a sound investment was lending billions to Gleeson, Fitzpatrick and Fingleton, the Government can negotiate a low rate of interest.

..........

As ordinary people start to realise that this thing is not only happening, it is happening to them, we can see anxiety giving way to the first upwellings of an inchoate rage and despair that will transform Irish politics along the lines of the Tea Party in America. Within five years, both Civil War parties are likely to have been brushed aside by a hard right, anti-Europe, anti-Traveller party that, inconceivable as it now seems, will leave us nostalgic for the, usually, harmless buffoonery of Biffo, Inda, and their chums.

...........

Does this ring true to our Western neighbours?

[tonyh29]

The President of the European Union, Herman Van Rompuy, has warned that the eurozone will not survive if it does not overcome the current debt crisis.

A lot of Vt'ers appeared to be pro Euro , so I wonder how they feel about this .. Has it changed their opinion ? or do they still feel the UK should have been in it ?

Would it have made any difference to us either way ?

[Corcaigh]

The article linked below is too long to reproduce in full here so I've edited heavily but it's well worth reading the rest, especially if you're among the Irish VT contingent.

Apparently the author has correctly called every step of the crisis in Ireland so far and his latest installment isn't good news at all. I hadn't realised things across the water were quite so bad...

If you thought the bank bailout was bad, wait until the mortgage defaults hit home

Morgan Kelly says were all doomed, doomed i say!

...........

Does this ring true to our Western neighbours?

That joker Kelly is probably right, but sadly like many of the talking heads that make up the Irish commentariat who cheered on the excesses of the past decade, suddenly everyone is wise after the event. They can all **** off.

Off with their heads.

[Meath_Villan]

As Pat Kenny said last night The E.U bail out is just another credit card to pay off a credit card

[Corcaigh]

As Pat Kenny said last night The E.U bail out is just another credit card to pay off a credit card

Off with Pats head too MV, that clearing in the woods is on nearly half a million a year. What a **** joke.

[Meath_Villan]

Ah yeah but at least hes asking the questions ...no one else in the country wants to stand up and ask them. I like watching the frontline ....But you are right he is a word removed

[tonyh29]

Thought I read somewhere over the weekend that the Government bailed out the banks who promptly invested all the money given to them in government bonds i.e The banks received billions to shore up their capital reserves but then spent billions on shoring up the Government’s balance sheet

:confused:

[Corcaigh]

If Ireland is to take the EU & the Euro down, then so be it. The Germans pushed the Euro and low interest rates on Ireland, now they want us to take all the pain, they are as liable for the financial collapse as our incompetent government are. Merkel can go **** herself.

[Meath_Villan]

ITs happened before and its going to happen again

[tonyh29]

The entire European Project is now at risk of disintegration, with strategic and economic consequences that are very hard to predict.

In a speech this morning, EU President Herman Van Rompuy (poet, and writer of Japanese and Latin verse) warned that if Europe’s leaders mishandle the current crisis and allow the eurozone to break up, they will destroy the European Union itself.

“We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union,” he said.

Well, well. This theme is all too familiar to readers of The Daily Telegraph, but it comes as something of a shock to hear such a confession after all these years from Europe’s president.

He is admitting that the gamble of launching a premature and dysfunctional currency without a central treasury, or debt union, or economic government, to back it up – and before the economies, legal systems, wage bargaining practices, productivity growth, and interest rate sensitivity, of North and South Europe had come anywhere near sustainable convergence – may now backfire horribly.

Jacques Delors and fellow fathers of EMU were told by Commission economists in the early 1990s that this reckless adventure could not work as constructed, and would lead to a traumatic crisis. They shrugged off the warnings.

They were told too that currency unions do not eliminate risk: they merely switch it from currency risk to default risk. For that reason it was all the more important to have a workable mechanism for sovereign defaults and bondholder haircuts in place from the beginning, with clear rules to establish the proper pricing of that risk.

But no, the EU masters would hear none of it. There could be no defaults, and no preparations were made or even permitted for such an entirely predictable outcome. Political faith alone was enough. Investors who should have known better walked straight into the trap, buying Greek, Portuguese, and Irish debt at 25-35 basis points over Bunds. At the top of boom funds were buying Spanish bonds at a spread of 4 basis points. Now we are seeing what happens when you build such moral hazard into the system, and shut down the warning thermostat.

Mr Delors told colleagues that any crisis would be a “beneficial crisis”, allowing the EU to break down resistance to fiscal federalism, and to accumulate fresh power. The purpose of EMU was political, not economic, so the objections of economists could happily be disregarded. Once the currency was in existence, EU states would have give up national sovereignty to make it work over time. It would lead ineluctably to the Monnet dream of a fully-fledged EU state. Bring the crisis on.

Behind this gamble, of course, was the assumption that any crisis could be contained at a tolerable cost once the imbalances of EMU’s one-size-fits-none monetary system had already reached catastrophic levels, and once the credit bubbles of Club Med and Ireland had collapsed. It assumed too that Germany, The Netherlands, and Finland would ultimately – under much protest – agree to foot the bill for a ‘Transferunion’.

We may soon find out whether either assumption is correct. Far from binding Europe together, monetary union is leading to acrimony and mutual recriminations. We had the first eruption earlier this year when Greece’s deputy premier accused the Germans of stealing Greek gold from the vaults of the central bank and killing 300,000 people during the Nazi occupation.

Greece is now under an EU protectorate, or the “Memorandum” as they call it. This has prompted pin-prick terrorist attacks against anybody associated with EU rule. Ireland and Portugal are further behind on this road to serfdom, but they are already facing policy dictates from Brussels, but will soon be under formal protectorates as well in any case. Spain has more or less been forced to cut public wages by 5pc to comply with EU demands made in May. All are having to knuckle down to Europe’s agenda of austerity, without the offsetting relief of devaluation and looser monetary policy.

As this continues into next year, with unemployment stuck at depression levels or even creeping higher, it starts to matter who has political “ownership” over these policies. Is there full democratic consent, or is this suffering being imposed by foreign over-lords with an ideological aim? It does not take much imagination to see what this is going to do to concord in Europe.

My own view is that the EU became illegitimate when it refused to accept the rejection of the European Constitution by French and Dutch voters in 2005. There can be no justification for reviving the text as the Lisbon Treaty and ramming it through by parliamentary procedure without referenda, in what amounted to an authoritarian Putsch. (Yes, the national parliaments were themselves elected – so don’t write indignant comments pointing this out – but what was their motive for denying their own peoples a vote in this specific instance? Elected leaders can violate democracy as well. There was a corporal from Austria … but let’s not get into that).

Ireland was the one country forced to hold a vote by its constitutional court. When this lonely electorate also voted no, the EU again disregarded the result and intimidated Ireland into voting a second time to get it “right”.

This is the behaviour of a proto-Fascist organization, so if Ireland now – by historic irony, and in condign retribution – sets off the chain-reaction that destroys the eurozone and the European Union, it will be hard to resist the temptation of opening a bottle of Connemara whisky and enjoying the moment. But resist one must. The cataclysm will not be pretty.

My one thought for all those old friends still working for the EU institutions is what will happen to their euro pensions if Mr Van Rompuy is right?

Torygraph blog

[snowychap]

Cadbury's secret Swiss move will cost UK exchequer millions in tax

The new US owners of Cadbury's chocolate are working on a secret plan to shift key parts of the 186-year-old British business to Switzerland in a move likely to deprive the UK exchequer of millions of pounds of tax.

Kraft, which took control of Cadbury in an £11bn takeover this year, intends to turn the firm into a subsidiary of a new Swiss company. The new structure would slash its bill for UK corporation tax. Last year, Cadbury handed over £200m to Her Majesty's Revenue and Customs.

Kraft's plans, uncovered by the Guardian, are likely to fuel anger at the manoeuvres used by big corporations to avoid tax. A fast-growing group of activists, inspired by the UK Uncut group, plan to protest tomorrow in nine cities across the country against what they view as unfair tax avoidance by big companies on high streets.

The activists insist a clampdown on tax avoidance would reduce the government's £83bn of public spending cuts. The protests will target fashion stores such as Topshop, Burton and Miss Selfridge, all owned by Sir Philip Green. The billionaire made corporate history five years ago when his Arcadia retail empire paid a £1.2bn dividend to his wife, Tina, who lives in Monaco.

Green, who has claimed his personal tax affairs are "not relevant", has recently advised the coalition on efficiency savings. Other companies targeted include Boots, Barclays, Lloyds and HSBC.

Kraft uses a Swiss ownership structure for its existing UK business. A spokesman said it was "integrating Cadbury into this model". He said "Switzerland is a tax efficient location", but insisted the decision to change Cadbury's legal structure is "about growing the top line of the company".

The vast majority of the Cadbury workforce would be unaffected by the change.

UK Uncut's protests were prompted by reports that UK tax authorities had dropped a bid to recoup £6bn in taxes from Vodafone, which are said to have stemmed from the firm allegedly using a Luxembourg offshoot. Vodafone has described the claims as "urban myth".

Last month, the anti-poverty campaign group ActionAid accused the world's second biggest beer company, SABMiller, of avoiding millions of pounds in tax in India and Africa by routing profits through tax-haven subsidiaries. London-based SABMiller denied the allegations and said there were "sound commercial reasons for the location of its subsidiaries".

[legov]

Great, say hi to corn syrup in your chocolate.

[tonyh29]

British manufacturing output rose twice as fast as expected in October, taking the three-month growth to the highest level for 16 years, according to official figures

[tonyh29]

followed by more good news that seems to be ignored :

Hopes of an export-led recovery rose yesterday after overseas demand for British-made goods increased.

Exports jumped by 4.1 per cent to £23.1 billion in October as a surge in sales to Germany and France more than offset a decline in business with crisis-torn Ireland

[snowychap]

UK trade deficit unexpectedly worsens

Britain's trade deficit with other countries unexpectedly worsened in October, raising questions about the capacity of exports to lead the country's economic recovery.

Although exports rose 4.1% to £23.1bn, the highest since May 2006, they were outstripped by the growth of imports, which were driven higher by the demand for chemicals from Europe, the Office for National Statistics said.

The deficit on goods with the rest of the world rose to £8.5bn, up from £8.4bn, while the surplus on trade in services remained unchanged at £4.6bn. Britain tends to import goods such as machinery or clothes, while it exports services such law and finance, where professionals are often hired to manage deals abroad.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The widening of the trade deficit in October is an early blow to hopes that net trade can make another healthy positive contribution to GDP growth."

The disappointing figures will bolster the majority view on the Bank of England's monetary policy committee (MPC), which voted today to keep interest rates on hold at 0.5% for the 21st month running and also maintain its quantitative easing programme at £200bn.

Unexpectedly strong growth and an improving picture from the manufacturing sector had encouraged some experts to call on the MPC raise rates to head off the threat of inflation. But the trade figures underline the difficulties on the road to recovery over the next year.

In its latest forecast, the Office for Budget Responsibility projected 6.9% growth in exports in 2011 and 7.1% in 2012. However, Charles Davis, managing economist at the Centre for Economics and Business Research, said: "Our view is that the instability in the eurozone means that export growth will be weaker than this."

With high-deficit European countries such as Spain, Italy and Portugal at the centre of a financial storm, economists are urging British companies to export more to emerging markets such as China, Brazil and Russia. In 2009, Britain exported more to Ireland, which has 4.5 million people, than to China, Brazil, India and Russia (the so-called Bric countries) put together. The eurozone is Britain's biggest trading partner, followed by the US.

Davis said: "Domestic demand here will be under constraints because of the fiscal tightening – we have to look at foreign demand. The UK needs to tap into these emerging markets."

Germany, where the economy is booming, has significantly increased trade with China, which is set to become a bigger trading partner than France by next year, according to Goldman Sachs. China is only Britain's ninth-largest export market, with £644m worth of sales in October. On the other hand, Britons bought £2.6bn worth of Chinese goods in October, making it the second biggest source of imports.

Countries are rushing to sign trade deals with Beijing to secure multimillion-pound sales to China's increasingly affluent population. The country has already become Brazil's main trading partner. Forecasts of double-digit growth is expected to make the Bric countries take over the US as the world's No. 1 economic power by the end of the decade.

Brazil, a country of about 200 million people, which will be hosting the Olympic Games and the World Cup in the next six years, ranks 27th in Britain's export market list – the top post for a South American country. Latin America, meanwhile, is luring bankers and lawyers to financial centres such as São Paulo. The region's equity deals, including stock market flotations, have reached a record $51bn (£32bn) so far this year, according to Dealogic.

Instead, European economies are pressured by the EU and by bond investors to slash their budget deficits, hindering growth and challenging the sales of British companies in those countries. The European woes are also pressuring the euro, and strengthening the pound, making British sales more expensive abroad. Ireland, Belgium, Spain and Italy – the four countries most attacked by financial speculators in the sovereign debt crisis – were among the top eight British export markets last year. Spain, for instance, is a key market for companies such as Diageo, British Airways and Vodafone.