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Before the crash of 2007, the markets were booming and borrowing was at an all time high. The economy was healthy and people had the money to pay off the money owed from all the borrowing. As we now know, the worldwide market and economy suffered an incredible blow during 2007 and 2008. So what has been the worldwide consequence of the crash and how has it affected the world. We spoke with Wescot, a debt specialist, about the subject and here’s their overview of the global debt situation what’s caused the dramatic change in debt levels.
Global Debt Numbers
Since the crash of 2007, global debt has risen by $57 trillion. This means the global debt is now at an incredible $199 trillion. These are eye-watering numbers and one of the main reasons for such high figures is the world’s government simply increasing their own debts. In the seven years since the crash, worldwide governments debts have increased by $25 trillion. It’s amazing that for all the modern technology and information politicians, bankers and investors have, the world still finds itself in a very unhealthy financial position.
Who’s Reduced Their Debt?
When it seems that the whole world is only adding to the debt problem, there are a small handful of countries who are actively reducing their debt; Israel, Saudi Arabia, Romania, Egypt and Argentina. This is a massive achievement and amongst troubled financial times, this should be applauded. This is in stark contrast to countries like China who have managed to increase their debt by a whopping 83%.
What of the United Kingdom?
The UK has been dealing with the aftereffects of the crash much like the rest of the western world. Since 2007, the UK’s debt number has increased by an approximate 30%. Where has this come from? Well put simply, government debts have increased by 50% whilst household and corporate debts have decreased giving us the final number of an increase of 30%, which is still a significant rise in debt.
Looking to buy Sainsbury’s Shares? Tread carefully!
Sainsbury’s is a supermarket with a great history. Established in 1869, the company made a name for itself with its emphasis on quality. It became one of the biggest stores in the UK pretty quickly. And at the death of the founder in 1928, it had 128 stores.
The company revolutionised the UK shopping sector with its launch of self-service stores and larger supermarkets post 1956.
However, the company faced a difficult time in the 1990s. It was a period when they lost ground to other businesses in the sector like Tesco, as a result of their inability to home in on the emergence of loyalty cards as well as the growing importance of non-food retailing. It officially lost its leading position in the market to Tesco in 1996 and is yet to reclaim that position today.
Analysing financial figures
The latest figures from the supermarket showed a £290 million pre-tax loss. This follows experts warning that supermarket sales will fall in the UK over the coming years. The company also announced it will cut back on new store launches and close 40 sites among new ones opened last year.
Underlying pre-tax profit figures have dropped by 6% to £375 million. At the same time, like-for-like sales were down on 2.1%. Meanwhile, the company also announced possible new concessions in 25% of its stores which it believes have under-utilised space. This is in a bid to increase ROI and give new and existing customers more reasons to visit.
The interim dividend is at 5p per share presently, but it is unclear what it will be at the close of the company’s financial year (ending March 2015). However, the view of analysts at IG, a CFD and financial spread betting provider that recently launched an online stock broking service, is that the company will follow in the footsteps of other retail giants like Tesco by cutting back on dividends. This is reasonable course of action as cash needs to be freed up for use in other pressing areas.
Shares in the company hit 282p in the first half of last year. This is a sharp decline from the 420p posted in November 2013. The shares are expected to fall to 240p first and 220p over the next financial year.
Analysts at IG.com warn that the supermarket sector as a whole should be regarded as a highly risky proposition. Therefore, investors will be better served looking at other areas of the financial markets as there are companies that have steadier share prices and a better financial outlook.
The general mood in the supermarket sector should see a halt in bull action for the foreseeable future and so traders may be better off developing a bearish bias for the months ahead.
Hundreds of thousands of people will be able to breathe easier today after payday lender Wonga agreed to write off more than £200 million in loans as part of an overhaul of its lending practices.
The firm has developed a reputation for intimidating customers into repaying its high-cost loans which they can scarcely afford.
But new chairman, Andy Haste, who has been in post since July, said the firm needed “urgent” change after a thirst for profit give rise to some questionable business practices.
Mr Haste announced that the firm would now operate with revised affordability checks, which would result in far fewer loans being issued.
In a measure designed to show the firm’s determination to change, he said that 330,000 existing customers who would not have met these criteria will now have their loans written off. 45,000 more customers will not face any interest charges on their loans.
The measures will cost the firm a total of £220 million.
“I agreed with the concerns expressed by the FCA [City regulator, the Financial Conduct Authority] and as a consequence of our discussions we have committed to taking these actions,” he said.
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The chairman of the Treasury Select Committee, Andrew Tyrie, has condemned banks for sending letters from debt collection firms to frighten customers into making repayments.
The committee has published letters exchanged with banking bosses which addressed how the banks intimidated customers into thinking that they were being pursued by debt collectors.
Mr Tyrie wants banks to account for their actions, which, he said, were “designed to pull the wool over consumers’ eyes.”
“From these responses it seems that this practice was widespread,” he said.
RBS, Santander, HSBC and Barclays all confessed to having used similar ends in an attempt to make struggling customers pay up. The boss of HSBC, Alan Keir, said the practice dated back as far as the mid 1980s.
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The Government has convinced major banks to support the creation of a new tool that will direct people towards the best value current account for their needs.
Britain’s biggest current account providers will help to create a tool that can read data from a customer’s existing current account and identify which are the best value accounts for that customer.
Barclays, HSBC, Lloyds Banking Group, Nationwide, the Royal Bank of Scotland, and Santander have all agreed to participate in the new state-backed system.
How will it work?
Under the new system, customers will be able to export a year’s worth of transaction data from their account in a format that can be read by the comparison tool. Once the tool has analysed this data, it will then suggest the most suitable account from a wide range of providers.
So, a customer with high council tax or domestic bills might be recommended the Santander 123 account, which offers cashback on these categories of spending.
A customer with a high average in-credit balance is likely to be recommended an account that offers interest, such as TSB or Nationwide, which both offer 5% for at least the first 12 months.
On the other side of the coin, customers that dip into the red frequently should also be able to discover through the new tool whether there are accounts with cheaper overdraft facilities available.
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If there wasn’t enough concern already about MPs’ property interests, there should be now. Yesterday, members with interests in property closed ranks by rejecting a motion to improve conditions for tenants.
The motion concerning the private rental sector was submitted by Emma Reynolds, MP for Wolverhampton North East.
It asked members to ban letting agent fees, demand longer standard tenancies, and prevent landlords from making excessive rent rise during tenancies.
This House recognises the private rented sector’s growing role in meeting housing need; notes that there are nine million people, including more than one million families with more than two million children, now renting privately; notes with concern the lack of stability and certainty that the sector provides to those who rent privately; further notes the increasing cost of renting and the unreasonable letting agent fees levied on tenants; calls on the Government to bring forward legislative proposals to reform the sector by banning letting agent fees being charged to tenants and making three year tenancies the standard for those who rent their homes in the private sector; and further calls on the Government to act on unpredictable rent rises by prohibiting excessive rent rises during longer-term tenancies.
Parliamentary Debates, Wednesday 25th June 2014 (p. 13).
The vote was rejected by 276 votes to 226. As you might expect, the devil – or the conflict of interest – is in the detail.
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