A round-up of the main news stories this week. (Transcript Below).
Recession Less Severe Than Expected
The recession is less severe than initially expected. Revised figures from the Office of National Statistics show that the economy shrank by 0.5% in the second quarter of 2012, rather than 0.7%. And it is thought that the additional Bank Holidays during the period may have contributed to the retraction as well. Experts say that this does not disguise a flat economy.
Pressure Mounts on Osborne
And the pressure is increasing on Chancellor George Osborne to reconsider his strategy of budget cuts in favour of tax cuts and investment for growth. Of the 20 influential economists who initially supported the Chancellor’s austerity drive, 17 now favour alternative action. Former MPC member Andrew Sentance, said that programmes such as transport infrastructure should be given higher priority to help improve the underlying competitiveness of the UK economy.
SSE Hikes Energy Prices by 9%
The UK’s second largest energy supplier, Scottish and Southern Electric has announced that it is to hike its prices by 9% in October. The company blamed the increase on the rising costs of wholesale units and distribution. The hike comes despite bumper profits across the industry that have seen higher dividends paid to shareholders. And Consumer Focus has warned that the disparity between prices and profits could disillusion a whole generation of consumers.
Savers Prefer Businesses to Savings Accounts
UK savers would prefer to invest in British businesses rather than in savings accounts, a survey has suggested. Savers are already discouraged by low rates on savings accounts, says peer-to-peer lender Funding Circle, and have been further put off by the recent scandals. The tendency for savings account rates to collapse after a year due to hefty bonuses has left many believing that traditional savings accounts are no longer the right investment option.
An End to Free Banking?
And finally, could we be seeing an end to free banking? Banks are expected to tell a parliamentary review into industry standards that providing free bank accounts left them no choice but to overstep the mark. This is despite high charges on credit cards, low interest rates on many current accounts and savings accounts, and heavy overdraft fees. This is hardly likely to placate customers, however, who are not waiting around for banks to justify their behaviour by seeking to extract more money. Instead, they are turning to so-called Challenger banks to reprise their faith in banking custom and service. Enough of a movement in market share might make it difficult for major banks to introduce charges and remain competitive.
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