Tag: Banking & Finance

#CoronavirusNews – Britain will borrow £400bn to tackle recession, IMF Forecasts #UKNews

Britain will borrow £400bn to tackle recession, IMF forecasts

https://www.thetimes.co.uk/article/britain-will-borrow-400bn-to-tackle-recession-imf-forecasts-sn9skkvgf

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

Sunak working on a new budget to save 2 million jobs…

Emergency coronavirus budget to save 2 million jobs

https://www.thetimes.co.uk/article/emergency-coronavirus-budget-to-save-2-million-jobs-qsbrgbcq9

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

Business & Financial News – Fears r in de for 1.5m loan repayment breaks

Fears rise for 1.5m loan repayment breaks

https://www.thetimes.co.uk/article/fears-rise-for-1-5m-loan-repayment-breaks-7pq2vvrvq

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

UK Business, Financial and Economic News #BizNews

UK News - UKBiz

Furlough and income schemes pay 10m people as bill hits £21bn

https://www.thetimes.co.uk/article/treasury-bankrolls-10m-people-as-bill-hits-21bn-bz6r52rrg

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

£100 Million Development Bank of Wales Coronavirus Loan Scheme is already fully subscribed too …

The Covid-19 Wales Business Loan Scheme is fully subscribed after more than 1,500 applications were received in just over one week.

The £100 million scheme was launched by the First Minister on Monday 30 March as part of the Welsh Government’s £500 million Economic Resilience Fund to support businesses in dealing with coronavirusoutbreak. The first loans were approved within three days of the fund launch, with the first loans reaching applicants by the end of last week.

The Development Bank, which manages the scheme, will be ensuring approved funds reach businesses as quickly as possible so support can get to those businesses facing unprecedented cashflow challenges as a result of Covid-19.

Welsh Government is now calling on the Chancellor to “respond and learn” from the success of the scheme and to provide additional funding to support businesses across Wales.

Economy, Transport and North Wales Minister, Ken Skates said:

“We fully understand that this is an incredibly difficult time for the business community.

“The Development Bank’s loan scheme has been absolutely crucial in helping businesses facing financial difficulties as a result of the coronavirusoutbreak.

“The level of demand in just over one week is clear proof that this was the right product at the right time. Whilst DBW would normally expect to complete around 400 investments over the course of a year, in little over a week they have received a staggering 1500 applications. I will be writing to the Chancellor calling on him to respond and learn from the success of the scheme and to release more funding so that we can launch a second phase of DBW support.

“It’s also absolutely vital that the UK Government put more pressure on providers of the Business Interruption Loan Scheme to get money out of the door and into the pockets of businesses. It is taking far too long to reach many firms and deliver exactly what’s needed in a time of financial crisis.

“As a Welsh Government, we will be announcing further details shortly on the £400m emergency pot from the Economic Resilience Fund with the aim of being open to applications next week.

  • “I’d like to thank the Development Bank of Wales. The entire team are doing all that they can, as quickly as they can to process the unprecedented volume of applications for funding. Whilst this loan scheme is fully subscribed, the Development Bank continues to offer a range of funding opportunities to the business community.”

For more on this Article or other Welsh Business News follow the link to the Business News Wales Article.

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

£100 Million Development Bank of Wales Coronavirus Loan Scheme is already fully subscribed too …

The Covid-19 Wales Business Loan Scheme is fully subscribed after more than 1,500 applications were received in just over one week.

The £100 million scheme was launched by the First Minister on Monday 30 March as part of the Welsh Government’s £500 million Economic Resilience Fund to support businesses in dealing with coronavirusoutbreak. The first loans were approved within three days of the fund launch, with the first loans reaching applicants by the end of last week.

The Development Bank, which manages the scheme, will be ensuring approved funds reach businesses as quickly as possible so support can get to those businesses facing unprecedented cashflow challenges as a result of Covid-19.

Welsh Government is now calling on the Chancellor to “respond and learn” from the success of the scheme and to provide additional funding to support businesses across Wales.

Economy, Transport and North Wales Minister, Ken Skates said:

“We fully understand that this is an incredibly difficult time for the business community.

“The Development Bank’s loan scheme has been absolutely crucial in helping businesses facing financial difficulties as a result of the coronavirusoutbreak.

“The level of demand in just over one week is clear proof that this was the right product at the right time. Whilst DBW would normally expect to complete around 400 investments over the course of a year, in little over a week they have received a staggering 1500 applications. I will be writing to the Chancellor calling on him to respond and learn from the success of the scheme and to release more funding so that we can launch a second phase of DBW support.

“It’s also absolutely vital that the UK Government put more pressure on providers of the Business Interruption Loan Scheme to get money out of the door and into the pockets of businesses. It is taking far too long to reach many firms and deliver exactly what’s needed in a time of financial crisis.

“As a Welsh Government, we will be announcing further details shortly on the £400m emergency pot from the Economic Resilience Fund with the aim of being open to applications next week.

  • “I’d like to thank the Development Bank of Wales. The entire team are doing all that they can, as quickly as they can to process the unprecedented volume of applications for funding. Whilst this loan scheme is fully subscribed, the Development Bank continues to offer a range of funding opportunities to the business community.”

For more on this Article or other Welsh Business News follow the link to the Business News Wales Article.

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

Cash and central banks: new research shows why fear could trigger the adoption of digital currencies

The Bank for International Settlements (BIS) has published a new report on liquidity and the future of payments. Research by the Swiss bank for …

Cash and central banks: new research shows why fear could trigger the adoption of digital currencies

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

Positive Financial News from the FT – Positive Coronavirus News #PositiveCoronavirisNews

We may have passed peak uncertainty and there is definitely a reason to start buying again — carefully

A food delivery courier passes a closed Louis Vuitton store, operated by LVMH Moet Hennessy Louis Vuitton SE, in central London, U.K., on Tuesday, March 24, 2020. The U.K. is in lockdown after Boris Johnson ordered sweeping measures to stop people leaving their homes

A Deliveroo rider during the lockdown in central London. The company is part-owned by Amazon which remains a good bet for equity investment © Simon Dawson/Bloomberg

The writer is editor-in-chief of MoneyWeek

Everyone in the global financial market wants the same thing. They want to find a bit of data they can absolutely believe to be accurate and they want to use it to cut the risk levels embedded in their portfolio. 

Too bad. They can’t have accuracy on anything and there are no low risk assets to buy. That everyone knows both these things explains the hysterical swings in indices this week. By Friday, nine trading days in March had made it on to analyst lists at Bianco Research as the biggest one-day gains and losses since the second world war. No other month comes close. 

All is not lost, however. It is possible that we are near — or have even passed — the peak uncertainty bit of this crisis.

We know for example that Covid-19 cases probably peaked in China in early February, and now look to be peaking in Italy. We also know that China is recovering fast: according to Macquarie, coal consumption is at 95 per cent of the normal level for this time of year, traffic congestion is normalising and car sales are even rising again (slightly). The consensus appears to be that China is 85 per cent back to normal. 

We also have a sense of just how bad things were at their worst in China: industrial profits fell by 38 per centin February. So we have a rough — very rough — guide as to what might happen elsewhere, leaving aside second round infections. Think: a month of complete lockdown, followed by a few slightly easier months and, barring any new horrors, a return to a new kind of normal by early June.

We know one other important thing too: governments and central banks are prepared to blow more than the doors off our current monetary and fiscal systems to get their economies to the other side (30 per cent of the world’s population is in some form of lockdown). 

They are prepared to blur the line completely between monetary and fiscal policy, with unlimited money creation and spending, to try and replace the parts of the economy they have shut down. The new package from the US comes in at nearly $2tn, which is a genuinely stunning 9.5 per cent of gross domestic product — or what GDP once was. Total global fiscal stimulus now comes to about 3 per cent of global GDP.

You might not like all of this. You might note that no amount of cash can make restaurant bookings rise from zero when the collapse in growth is due to physical restraint. And you might be terrified of the post-virus consequences of what amounts to helicopter money, as there will be no option but to monetise government debt from here on. But it does at least provide a clarity, of sorts.

Passing peak uncertainty is not the same at achieving certainty. But some forecasts are coming back into the market. US earnings are expected to fall by up to 60 per cent over the next couple of years, rather than rise this year by 10 per cent or so, as was expected in January. And the GDP of most economies is expected to fall by something like 35 per cent during the periods they are locked down: this, at least, is what Capital Economics suggests.

What about equity markets? We have some sense now of where we are going. We also know that markets tend to turn three months or so before economies do. So should we assume that this has been the fastest bull-to-bear-to-bull turn in history, where some of the worst short-term fundamentals ever have been overwhelmed by the greatest stimulus package in history? 

In-out-and-in-again in just a month would be too brave a call. If this crash works like most crashes, there is every chance that we will test the lows again. Just ask any technical analyst! But there is definitely reason to start buying. 

The first thing to note is that even after the bounces of this week, equities are no longer expensive. So-called Shiller price to earnings ratios, one of the better indicators of long-term value, show that equities, particularly outside the US, are at 20-year lows at least. 

It’s also worth noting, as Pictet’s Luca Paolini points out, that while you might think you have just lived through one of the greatest bull markets ever, if on Wednesday you had looked at the last 10 years only, some 90 per cent of global markets were showing negative returns. 

It’s also hard to see the alternative to stocks. The bond market is hardly a long-term safe haven. Cash isn’t either: in the short term, too many dominoes are falling in too many places to be sure of the financial system. In a world of limited crisis hitting unlimited stimulus, inflation is also a worry. 

So buy for the long term, but buy carefully. There is a good argument that in a time of unbounded quantitative easing, it doesn’t matter what you buy. All equities, all assets even, will move in tandem. But why take the risk? In most bear markets everything goes down. But not everything comes up again. 

So buy the things that probably will. Market leaders with little or no debt, experienced management, operating in sectors that offer some relief during lockdowns. And think about the Fangs: Facebook, Amazon, Netflix and Google. The giant tech stocks that led the US bull market for the last decade had become so stupidly expensive that many thought they would also trigger its end. Instead they are the companies providing the few services we now really need. You can’t put a price on that.

For more on this FT article or other financial news please follow the link.

Positivity:

Business News Coronavirus News Positive Coronavirus News and Sports News from Mike Armstrong – See https://mikearmstrong.me/news

For Business Advice follow the link or visit one of our Blogs: Entrepreneur Zone | King of Marketing | The Voice of Social Media | Networking Grapevine | British Business News |

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European shares take U-turn on rising virus death toll

European stocks turned choppy again on Wednesday with bourses across the region wiping off most of their early morning gains as a sharp rise in the …

European shares take U-turn on rising virus death toll

Business News and Sports News from Mike Armstrong – For other Business Advice & News see http://mikearmstrong.me & http://mikearmstrong.me/news/

More details on the Coronavirus Business Interruption Loan Scheme (CBILS)…

Further details have emerged for the Coronavirus Business Interruption Loan Scheme (CBILS) which is designed to assist qualifying businesses during these unprecedented times.

The Scheme aims to support long-term viable businesses who may need to respond to cash-flow pressures by seeking additional finance.  The loan will be provided by the British Business Bank through participating providers during the Covid-19 outbreak.

Full details of the CBILS scheme can be found here – but the main criteria are:

  • Loan facilities of up to £5m
  • 80% of the lenders risk is covered
  • Repayment terms up to 6 years for term loans and asset finance, but overdraft and invoice facilities will be up to 3 years.
  • No upfront fees and interest is covered by Government for up to 12 months
  • Companies remain 100% liable for the debt repayments. Total unsecured lending of up to £250,000.
  • Application for loans from the scheme is administered by over 40 approved lenders including main banks, challenger banks and asset finance etc. Businesses need to apply directly to the lenders and present their case for the finance needed.

Further details on all available business support schemes in response to Covid-19 can be seen at this Government website page: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19

To be eligible for support in the Coronavirus Business Interruption Loan Scheme (CBILS), the small business must:

  • Be a UK-based SME
  • Operate within an eligible sector
  • Comply with relevant state aid rules
  • Have a sound borrowing proposal but insufficient security to meet the lender’s requirements

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

Office for National Statistics Release The Shopping Basket Report for Measuring Inflation…

Reusable bottles and gluten-free cereals are in, as ONS updates the inflation basket…

Commenting on this year’s basket of goods, ONS senior statistician Philip Gooding said:

“This year we have added reusable bottles and mugs to the inflation basket, as there has been a rise in popularity with many consumers looking to decrease their environmental impacts.

“It is important to remember that these annual changes are only a small percentage of the overall basket. This year we’ve added 16 items, removed 14 and modified 4, while leaving 702 unchanged.

“Decisions on changes to the basket depend, among other issues, on the amounts spent on products and their availability for pricing in shops. In addition to updating the goods and services that are included, the ONS also updates the weighting of each item within the basket to ensure the overall inflation rate reflects household’s spending habits as closely as possible.”

Reusable bottles and mugs, self-tanning products, gluten-free cereals and ‘cocktails in a can’ have all been added to the inflation basket of goods this year.

New food and drink items added to the 2020 list include vegetable crisps, crumpets and minced turkey. Items which have dropped out of the basket this year include frozen imported legs of lamb, individual fruit pies and frozen chicken breasts.

Go to the ONS Full Report release here or Read On:

1.Introduction

The “shopping baskets” of items used in compiling the various measures of consumer price inflation are reviewed each year. Some items are taken out of the baskets and some are brought in to make sure the measures are up-to-date and representative of consumer spending patterns.

In 2020, 16 items have been added to the UK Consumer Prices Index including owner occupiers’ housing costs (CPIH) and Consumer Prices Index (CPI) baskets and 14 items have been removed.

This article describes the review process and explains how and why the various items in the consumer price inflation baskets are chosen. The contents of the baskets for 2020 are summarised in Annexes A and B, and the main changes from the 2019 price collection are discussed in this article. Similar articles have been published in previous years.

The following are the measures of consumer price inflation covered in the article.

CPIH

The most comprehensive measure of consumer price inflation, which extends the CPI to include owner occupiers’ housing costs (OOH) and Council Tax. Aside from these two components, CPIH is identical to CPI.

CPI

A measure produced to international standards and in line with European regulations. First published in 1997 as the Harmonised Index of Consumer Prices (HICP), the CPI is the inflation measure used for the Bank of England’s inflation target.

As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.

After the transition period, we will continue to produce our consumer price statistics in line with the UK Statistics Authority’s Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards. For the CPI, these currently include the rules underlying the construction of the HICP, developed by Eurostat in conjunction with EU member states and European Economic Area countries.

Retail Prices Index (RPI)

A legacy measure that we continue to publish in accordance with the Statistics and Registration Service Act 2007, and because of its use in long-term contracts and index-linked gilts. The Retail Prices Index and its derivatives were assessed against the Code of Practice for Statistics in 2013 and found not to meet the required standard for designation as a National Statistic. Shortcomings of the Retail Prices Index as a measure of inflationdescribes the issues.

The Authority recommended in 2019 that the publication of the RPI should be stopped at a point in the future and that in the interim, the shortcomings of the RPI should be addressed by introducing CPIH data sources and methods into its production. The Authority and HM Treasury have launched a consultation on the Authority’s proposal to address the shortcomings of the RPI. HM Treasury is consulting on the appropriate timing for the proposed changes to the RPI to take place. The Authority is consulting on how to make its proposed methodological changes to the RPI in a way that follows best statistical practice. The consultation will run from 11th March to 22nd April 2020.

This article also summarises one other change relating to a new data source for producing “shop-type weights” used in compiling the indices. This is described in Section 6, Other change, with a link to a more detailed article on the subject.

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2.The shopping basket

Consumer price inflation is the rate at which the prices of goods and services bought by households rise or fall. A convenient way of thinking about this is to imagine a very large “shopping basket” containing those goods and services bought by households. As the prices of the various items in the basket change over time, so does the total cost of the basket. Movements in consumer price inflation indices represent the changing cost of the shopping basket.

In principle, the basket should contain all consumer goods and services purchased by households and the prices measured in every shop or outlet that supplies them. In practice, the consumer price indices are calculated by collecting a sample of prices for a selection of representative goods and services in a range of UK retail locations including the internet.

Currently, around 180,000 separate price quotations are collected every month in compiling the indices, covering around 720 representative consumer goods and services. These prices are collected in around 140 locations across the UK, from the internet and over the phone. In addition, around 300,000 quotes are used in measuring owner occupiers’ housing costs each month. This measure is based principally on data from administrative sources.

Within each year, the consumer price indices represent the changing cost of a basket of goods and services of fixed composition, quantity and quality. In practice, this is achieved by:

  • keeping the sample of representative goods and services constant
  • applying a fixed set of weights to price changes for each of the items such that their influence on the overall index reflects their importance in the typical household budget
  • taking care to ensure that replacements for brands that are no longer stocked in an individual shop are of comparable quality

In this way, changes in the consumer price indices from month to month reflect only changes in prices and not ongoing variations in the quality and quantity of items purchased by consumers.

Although kept constant within year, the contents of the consumer price inflation basket of goods and services, and their associated expenditure weights, are updated annually. This is important in helping to avoid potential biases that might otherwise develop over time. This could be due to the development of entirely new goods and services, or the tendency for consumers to move away from buying goods and services whose prices have risen relatively rapidly to goods and services whose prices have fallen. For example, if the price of tea rose dramatically during one year, consumers might switch their spending towards coffee, making it necessary to adjust the expenditure weights accordingly in the following year.

These procedures also help to ensure that the indices reflect longer-term trends in consumer spending patterns. For example, the proportion of household expenditure devoted to services has broadly risen overall over the last 25 years. This is reflected both in an increasing weight for this component in the consumer price indices and the addition of new items in the basket to improve measurement of price changes in this area: examples include playgroup and nanny fees.

Changes to the items and their associated item weights are introduced in the February index each year, but prices are collected for both old and new items in January. This means that the figures for each year can be “chain-linked” together to form a long-run price index spanning many years. In other words, price changes between December and January are based on the old basket, while price changes between January and February, and beyond, are based on the new basket. This procedure ensures that the annual changes to the basket do not introduce a discontinuity in prices as measured by the indices.

Consumer price indices, a brief guide: 2017 provides a helpful introduction to the concepts and procedures underpinning the compilation of the consumer price indices. These are described in much greater detail in Consumer Price Indices – Technical Manual and CPIH Compendium.

In reality, the Consumer Prices Index including owner occupiers’ housing costs (CPIH) and Consumer Prices Index (CPI) inflation baskets differ because CPIH includes a measure of owner occupiers’ housing costs and Council Tax that are excluded from CPI. Both the CPIH and CPI baskets contain some items excluded from the Retail Prices Index (RPI) basket such as university accommodation fees and unit trust commissions. Similarly, the RPI basket contains some items (for example, estate agent fees) that are excluded from the CPIH and CPI baskets. The precise weights attached to the individual items also differ. The differences between the inflation measures are discussed in Users and uses of consumer price inflation statistics.

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3.Representative items

There are some individual goods and services where typical household spending is so large that they merit inclusion in the baskets in their own right: examples include petrol and electricity supply. However, it would be impractical to measure price changes of every item bought by every household in compiling the consumer price indices.

More commonly, a sample of specific goods and services has to be selected that gives a reliable measure of price movements for a broader range of similar items. For example, price changes for garden spades might be considered representative of price changes for other garden tools. The selection of these representative items is judgmental because of the significant difficulties involved in defining an adequate sampling frame, that is, a list of all the individual goods and services bought by households. This restricts the use of traditional random sampling methods when choosing representative items. Instead, selection is based on research into the various possible items that could be used, both using market research data and through investigation in outlets across the country.

For each product grouping, a number of items are selected whose price movements, when taken together, provide a good estimate of the overall change in prices for the group. For example, there are around 20 representative items in the Consumer Prices Index including owner occupiers’ housing costs (CPIH) “furniture and furnishings” class whose prices are used to calculate an overall estimate of price change for all furniture products. These range from beds to kitchen units.

The prices collected for each product group are then combined to produce the overall consumer price indices, with weights proportional to total expenditure on the entire product group. So, the weight given to “furniture and furnishings” in the CPIH shopping basket reflects average household spending on all furniture products as opposed to spending on the basket items only. Similarly, the weight of garden spades would be derived from spending on all garden tools.

These expenditure weights are updated each year so that the indices reflect current spending patterns. The weights for the CPIH and Consumer Prices Index (CPI) classes and higher-level aggregates are updated with effect from the January index and, since 2017, again with the February index. This improvement to the procedure in 2017 was the result of an independent report; it brings the procedure into line with best practice and helps to better meet EU regulations. Assessing the impact of methodological improvements on the Consumer Prices Index, published on 18 October 2016, describes this change in more detail and analyses the impact. The Retail Prices Index (RPI) section weights and the distribution of weights for the more detailed individual item indices within each class or section are also revised each February. A more detailed article on changes to the published consumer price indices weights for 2020 will be published on 19 March 2020.

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4.Selecting the representative items

A number of factors need to be taken into account when choosing representative items. Of course, the items must be easy to find by the team of people collecting the price quotes, so ensuring that estimates of price change are based on an adequate number of quotes collected throughout the UK.

Since the consumer price inflation statistics are based on the cost of fixed in-year baskets of goods and services, ideally, they should also be available for purchase throughout the year. However, availability of some clothing and garden items is clearly seasonal and so these goods require a slightly different treatment in the indices. For example, prices of patio furniture are only collected during the summer months when the item is mostly found in shops. In winter months, their index is constructed based on the prices of other items in the furniture section of the basket.

The number of items chosen to represent each product group within the indices depends both on the weight (that is, expenditure) of the group and also the variability of price changes between the various items that could be selected to represent the group (reflecting, for example, the diversity of products available). Intuitively, it makes sense to choose more items in product groups where spending is high. This helps to minimise sampling variability in the estimate of price change for high-weighted groups and therefore in the overall price index. However, if price movements of all possible items in the group are very similar, it is sufficient to collect prices for only a few.1 In contrast, if price movements of all the possible items are very different, prices will be needed for many representative items to get a reliable overall estimate of price change for the group.

Based on this, the allocation of items to broad commodity groups can be analysed, as shown for the 12 divisions of the Consumer Prices Index including owner occupiers’ housing costs (CPIH) in Table 1, and the balance used as a reference point for the annual review of the baskets. 

The significant allocation of items to the food division relative to its index weight, for example, is partly explained by the relatively high variation in observed price changes between the individual goods in this area. Conversely, a smaller proportion of items relative to index weight is allocated to the restaurants and hotels division, reflecting greater similarity in observed price changes.

In some cases, such as transport and housing, apparent low allocations of items are explained by the presence of some dominant individual items (for example, car purchase and motor fuels, and owner occupiers’ housing costs and housing rents respectively). Here, the case for adding further items to improve coverage of these divisions’ remaining index weights is much weaker. Instead, it is far more important to ensure that the sampling of prices for these heavily weighted items is as comprehensive as possible.

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The analysis also helps to highlight those areas of CPIH that might benefit most from improved coverage, for example, where the current allocation of items is broadly comparable with index weight but variation in price changes appears relatively high, possibly reflecting the diversity of goods and services covered. As discussed later in this article, this type of analysis has motivated some of the additions to the baskets in 2020.

Conversely, it also helps to highlight areas where there is scope to remove items from the baskets without any significant loss of precision in the indices. It is important that growth in the overall size of the baskets is limited each year so that production costs and processing times are contained.

Such analysis cannot tell us which items should be priced and so choosing a particular set of items to represent each area remains a matter of judgement. Consumer price inflation commodity groupings are regularly reviewed with the aim that all significant items or distinct markets where consumers’ expenditure exceeds around £400 million annually are explicitly represented in the baskets, except where those items are judged to be adequately represented by other items in the baskets.2

Conversely, where spending on items falls below the £100 million mark, there should be good reason for their continuing inclusion in the baskets. For example, while spending on acoustic guitars and power drills is relatively low, both are included in the baskets to represent wider markets (musical instruments and electrical tools respectively) that would otherwise not be covered explicitly. Trends in expenditure, as well as the latest available figures, help to inform the decisions in all cases.

This focus on expenditures in determining the contents of the baskets partly reflects the data that are available describing household spending patterns. One major source of information comes from the diaries and questionnaires filled in by people taking part in the Office for National Statistics (ONS) Living Costs and Food Survey, a continuous survey of around 5,000 households each year. This is supplemented by detailed analyses of trends presented by market research companies, trade journals and in press reports. Changes in the retail environment are also reported to the ONS by the price collectors. Together, these various sources of information help to ensure that the goods and services bought by the average household are appropriately represented in the inflation baskets.

It is very important to note that the contents of the baskets and, in particular, changes from one year to the next should not be given significance beyond their purpose as representative items used in estimating consumer price changes. Changes to the baskets will reflect evolving consumer tastes but only over a long run of years. In any particular year, changes to the baskets will reflect a range of considerations such as practical experience in collecting prices, the desire to improve coverage in high-spending areas, or analysis that suggests that estimated price changes could be improved by varying the number or type of representative items collected.

Indeed, within each product grouping there is usually a point at which the exact number and choice of items and the precise weights attached to them become a matter of relatively fine judgement. At this detailed level, it is unlikely that such choices would have any significant impact on the consumer price indices. For example, a selection of specific household appliances has been chosen to represent spending on small electrical goods, including irons and kettles. However, other representations would clearly be possible and equally valid.

It should also be noted that the vast majority of the around 700 representative items remain unchanged in 2020. In total, 16 items have been added to the CPIH basket and 14 items have been removed. Also, a small number of items have been modified in a total of 722 items. The modifications usually relate to the type of shop where items are priced.

In summary, selection of representative items is based on several factors, including:

  • ease of finding and pricing the product
  • availability throughout the year
  • amount spent on a particular item or the group of items
  • variability of prices within a class
  • analysis of balance across the basket

Notes for: Selecting the representative items

  1. At the extreme, if price changes for all the possible items that could be selected in a particular group were identical each month, it would be necessary to select only one of the items for inclusion in the basket. Price changes for this one item would be perfectly representative of price changes for the group as a whole.

  2. Under European regulations, items should be included in the Consumer Prices Index (CPI) where estimated consumers’ expenditure is one part per thousand or more of all expenditure covered by the CPI. Based on household final consumption data underpinning the calculation of the 2020 CPI weights, this is over £1,000 million.

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5.Changes to the baskets in 2020

Changes to the baskets of goods and services this year are being introduced with the February 2020 consumer price inflation statistics to be published on 25 March 2020. The baskets will be updated again at the same time next year.

Additions

New additions to the baskets in 2020 and those items removed are set out in Tables 2 and 3, together with a summary of the motivation for these changes. As the tables make clear, these motivations are diverse. As in previous years, changes to the baskets in 2020 certainly should not be viewed as a simple indicator of those products or services whose popularity has either grown or fallen significantly over the past year. All of the changes made this year affect all of the consumer price indices.

A number of new items have been introduced to represent specific markets where consumer spending is significant or growing and existing items in the baskets may not adequately represent price changes for such goods. For example, gluten-free cereal has been added to reflect increased shelf space and consumer spending on gluten-free foods. Its inclusion complements the existing non-dairy milk drink in the baskets and expands coverage of “free from” products. Similarly, a pre-mixed spirit drink has been introduced to represent a “cocktail in a can”, reflecting an increasing number of brands introducing this type of spirit mix to their ranges.

In addition to introducing items to represent distinct sectors or markets, some items have been added to diversify the range of products collected for already established groupings, usually where spending is significant. For example, a re-usable bottle or mug has been introduced highlighting a trend of consumers moving away from single-use bottles and mugs, possibly influenced by membership of fitness clubs and more recently environmental concerns surrounding single-use plastic. Vegetable crisps have been added to help aid interpretation of data in the crisps area where prices can be volatile because of promotional activity from retailers.

Whilst gin is already part of the baskets in the spirits “off sales” class, it has now been introduced as a new item in the “on sales” area to reflect its increasing popularity in bars and restaurants shown by the wide range of varieties and flavours available and the associated increase in expenditure.

Finally, airport parking is a further item that has been added to help diversify the range of products collected in its class, “other services in respect of personal transport equipment”. The existing car park item represents short-term parking typically used by shoppers or those working in the local area whereas the new item will capture charges incurred over a longer period of time.

Analysis of the broad balance of the existing sample of representative items across CPIH highlighted the scope to reduce the number of items in the audio-visual part of the baskets. This has been achieved by replacing separate DVD player and Blu-ray disc player items by one combined item. The decision to replace the two specific items was based on their low weight in the section but the change has been made principally as part of the rebalancing of the baskets to improve their representation of overall price change and not the spending on or product history of the two items.

This aim of rebalancing the baskets can also apply within specific categories and, this year, crumpets have replaced individual fruit pies in the bread and cereals class. Crumpets are not used as a dessert in the same way as fruit pies and their inclusion improves the balance of bakery products, with desserts still represented by a sponge and individual cakes.

In other cases, new items are direct replacements for similar products with the change made for a variety of reasons. Computer games exhibit one of the most volatile price series in the baskets, which can make interpretation difficult for users. To attempt to address this, the existing shop-bought item is being replaced by three game items defined by platform. This will result in more price quotes being collected for a wider range of games in total and will split the weight of the existing item. In turn, this should improve the reliability of the overall series and aid interpretation.

A further example is the replacement of an MP4 player by a portable digital music player. The rise of smartphones has reduced the popularity and availability of MP4 players on the market and replacing it with the more widely defined portable digital music player will increase the number of products that can be priced and hence the number of price quotes used in the index. The new item will continue to include MP4 players but also allow, for example, MP3 players to be priced.

A final type of replacement is where price collection difficulties suggest a change would improve the coverage and quality of price series in specific areas of the baskets. This year, a beef roasting joint has replaced a beef topside joint where the number of price quotes used each month has been falling as a result of unclear labelling and reduced availability in shops. Research has found that the new item would be easier for collectors to price, would result in more consistent pricing and have better coverage that the previous item. Similarly, fresh diced or minced turkey has been introduced as a direct replacement for turkey steaks, with research showing that diced or minced turkey is more readily available for pricing.

Removals

As noted earlier, it is important that growth in the overall size of the baskets is limited each year so that production costs and processing times may be contained. Also, that it retains its relevance by removing historic items that no longer attract much spending. A number of items therefore have been removed from the baskets in 2020 to make space for the new additions.

In some cases this reflects low or decreasing expenditure, and resulting falls in stock levels, such as with frozen imported legs of lamb. This item has been dropped because of falls in the number of price quotes being collected, with research suggesting stock levels have reduced over recent years. The removal of this item has a direct effect on the detailed breakdown published for the Retail Prices Index. Previously, indices have been published for home-killed lamb, imported lamb and lamb in total but this was the only imported lamb item in the basket so, from the publication of the February index in March 2020, only a total for lamb will be released.

In other cases, removal does not necessarily imply that the markets for these goods and services are very small or are declining significantly. Some items have been removed to make way for new additions to the baskets within the same product grouping. For example, this year, individual fruit pies have been replaced by crumpets. As already mentioned, the change rebalances the bakery products within the bread and cereals class and the individual fruit pies will continue to be represented by the individual cakes item.

In some cases, a product will remain represented in the baskets even if there is no longer an explicit item. For example, an MP4 player has been removed but some prices will continue to be collected as part of a more widely-defined portable digital music player item.

Elsewhere, analysis suggested that there was scope to remove items from certain product groupings without any significant loss of precision in estimates of price changes overall. Within these groupings, items are generally chosen that have relatively low index weights, that are variants of others or have a relatively low number of price quotes. This year, frozen chicken breasts have been removed because they have a lower weight than other uncooked chicken items and there is a degree of overlap with fresh chicken breasts; car batteries have been removed from the “spare parts and accessories” class because of the number of price quotes collected being generally lower than for other items in this part of the baskets; and softwood has been chosen for removal in preference to medium-density fibreboard (MDF) in the “materials for maintenance and repair” class because of MDF being more commonly used for do-it-yourself work around the home.

Collection issues can influence changes and, as already mentioned, a beef topside joint has been removed partly as a result of unclear labelling. A further example is bank overdraft charges. Most banks are in the process of dropping their fixed service charges and replacing them with a single interest rate on overdrafts. However, international regulations specify that interest payments are out of scope of consumer price indices, so the existing overdraft charge is being dropped in anticipation of the change, which most banks report to be introducing in March or April.

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6.Other change

One other change is being introduced with the publication of the February index on 25 March 2020. This relates to the source of data used to produce “shop-type weights”. These are used to weight together low-level stratum price indices for multiple and independent shop-types.

The Annual Business Survey conducted by the Office for National Statistics (ONS) is the new data source for the spending information needed. Impact of introducing a new data source for shop-type weights on consumer price indices describes the way in which these weights are used, the change being made and its effect on historical price indices.

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

European Business News / EuropeanBiz – Will European Banks be able to cope with this Global Pandemic – Interesting FT Article…

More than a decade on from the financial crisis, Europe’s banks are facing the first major test of their resilience.

This week growing fears about the coronavirus pandemic and an oil price war prompted a widespread market sell-off. Companies have spent a decade gorging on cheap debt in an ultra-low interest rate environment. A wave of defaults is now likely, and rising loan impairments will hit banks’ already anaemic earnings.

Since their recent peak almost a month ago, European banks indices have plunged 40 per cent in an indiscriminate sell off of financial stocks. This outpaces the 25 per cent fall over the whole of 2018  during the peak of the financial crisis. European bank shares now trade at the lowest level since the 1990s.

To read the FT Article for yourself please follow the link.

For more European Business News / EuropeanBiz or Coronavirus News’s please follow the relevant links.

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

The Lord Mayor of London calls on Welsh firms with international ambitions to join him on upcoming trade delegations

UK Business & Sports News

UK Business & Sports News

The Lord Mayor of London William Russell will today visit Cardiff, using the trip to call on Welsh firms with international ambitions to join him on upcoming trade delegations abroad to explore international business opportunities and expansion.

As an ambassador for the UK’s financial and professional services industry, the Lord Mayor will meet the Secretary of State for Wales, the Welsh Government Minister for International Relations, the Welsh Fintech Envoy and leading business and fintech figures that are at the heart of the city’s success.

During the visit the Lord Mayor will hear first-hand from those who have transformed and developed Cardiff’s burgeoning financial and professional services ecosystem, learning from them and sharing examples of best practice.

The meetings will be used to promote the City Corporation’s UK Partnerships strategy, which is helping to strengthen financial and professional services links across the whole of the UK. In particular, the strategy aims to increase inward investment into its partner cities and build awareness of how London can act as a springboard for local firms to export their products and services globally.

Cardiff is a key city in the strategy with good reason. Wales has the fastest growing digital economy outside of London, and the growth of the country’s financial and professional sector has led to a thriving fintech industry, especially in the Welsh capital.

The UK Partnerships Strategy has been particularly successful in Wales. Welsh firms Delio and Amplyfi joined previous overseas Lord Mayor delegations to take advantage of opportunities around the globe. After joining a delegation to Australia in 2018, Delio set up operations in Sydney.

The visit will also be used to champion creativity and culture as part of the Lord Mayor’s ‘Global UK’ agenda, which focuses on growing global trade and investment, encouraging innovation and promoting a rich and vibrant creative economy.

William Russell, the Lord Mayor of London, said:

“Cardiff has firmly established itself as one of the foremost UK innovation hubs with its booming startup sector. With such credentials, I’m here to learn more from those at the heart of this finance ecosystem, which has fast-developed over the past few years.

“In the City, we are determined to tap into the potential of the whole country. Financial services hubs up and down the country play a crucial role in driving prosperity nationwide. Wales and its 136,000-strong sector workforce is a big piece of that puzzle.

“That’s why I’m calling on innovative Welsh firms with international ambitions to join me on my overseas delegations. I’ll be visiting over 20 countries throughout my term to help open the door to investment and global opportunities for the whole of the UK. Our support of Delio in setting up operations abroad is testament to that and we’re hoping to build on this success.”

The Lord Mayor will be tweeting from @CityLordMayor during his visit.

For more on this and other Welsh Business News follow the link to Business News Wales.

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

UK Property News – Property Advice From Kevin Green…

Property Advice from the UK’s Leading Property Entrepreneur, Kevin Green…

Who is Kevin Green?

You may know Welsh Entrepreneur, Kevin Green from the Channel 4 television programme, The Secret Millionaire.

Kevin, from Llanelli in Wales, is the UK’s largest buy to let landlord.

Having been homeless back in 1984 he has been on a professional and personal journey that has seen him rise to the very top of the property & business world.

Kevin’s passion now, is to educate and share his knowledge so that others can achieve success.

His speciality talks include motivation, empowerment and coaching and he enjoys giving businesses and organisations an insight into what it takes to become successful in the business world.

We have compiled the very best of Kevin Green’s tips for you.

Kevin Green Property Advice

Property Investment Tips No 1

Do you have capital adequacy? Why would you need capital adequacy?

Have you got a strategy for your property investment? I know we all want to build a portfolio but is there a certain way to go about it. In this short recording here, Kevin Green talks about a simple strategy he applied when building his portfolio.

 

Tip No 2 – Kevin Green shares his property investment strategies

Have other businesses alongside your property business. Listen here to how Kevin, a multi multi millionaire sets up his businesses and how he uses them to clear loans on his property business.

 

Tip No 3 – Download Kevin Green’s FREE APP to help with your figures!

Kevin does not want to hold a property with a buy to let mortgage on it for longer than ten years!? Interesting fact!

 

Tip No – 4 Kevin Green on Family houses v HMO’s?

What to buy – Family houses or HMO’s? Hear from Kevin the pros and cons of both in this audio tip

 

Kevin Green Tip No 5 – The Queen Mum & Inheritance Tax

Are you planning ahead for the future, it is important to be aware of IT and how you can mitigate it.

 

Kevin Green Tip No 6 – What makes a successful entrepreneur?

In Kevin’s opinion entrepreneurs must be extremely grounded. You must be very clear on what you want to achieve, have a listen here

 

Kevin Green Tip No 7 – Special tips from Robert Kiyosaki & Richard Branson

Listen now to some key tips from Kevin on how he achieves such success, hear quotes from none other than Rich Dad, Robert T. Kiyosaki and Richard Branson that Kevin has learned first hand.

 

Kevin Green Tip No 8 – Choose your networking wisely

Kevin advises us to choose our networking wisely and gives support to The Manchester Property Meet. 

 

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me

How Multibank Group evolved into one of the largest online financial derivatives -Global Financing & Banking…

UK Business & Sports News

Sophia Barnes, Director of Public Relations at one of the world’s leading forex and CFD brokers talks to Global Banking and Finance Review about their strong performance in 2019 and how their trading platforms differentiate them from others in the industr y. Since its inception, MultiBank has evolved into one of the largest online financial derivatives providers by combing prime liquidity, cutting edge technology and first-class customer ser vice. She also sheds some insight on how the company is ensuring the highest level of funds security and their future plans for development and growth.

  1. What are MultiBank’s key performance indicators and what products do you offer?

Our average daily trading volume is currently estimated at $7.1 billion. We also service 320,000 customers globally from over 90 countries. We achieve this by offering over 1,000 Forex and CFD products this includes FX, Metals, Shares, Indices, Commodities and Crypto CFDs.

  1. How do you ensure the highest level of funds security?

MultiBank started in 2005, so we have 15 years of proven success. This is evidenced by strong financials which are publicly available. We pride ourselves for sitting at the forefront of the forex industry and we are honoured to be recognised as a leader, particularly when it comes to client fund security. We take strict measures to ensure we are in compliance with the 7 global financial regulations that must adhere to including ASIC in Australia, BaFin in Germany, and CNMV in Spain, amongst others.

  1. How have your trading platforms been critical to your success?

Our main platforms are MetaTrader 4 and MetaTrader 5 and what differentiates us from others in the industry is that we offer 3 different account types including ECN pricing and execution. This allows us to offer very tight spreads from 0.1 pips. All of our platforms are connected to our full suite of advanced trading tools, which include indicators, technical and fundamental analysis, market analysis, VPS and MAM features. Our platforms are also available via browser (web trading), PC and mobile so clients can trade on the go 24/7. Another differentiating factor is that we offer customisable solutions for institutional customers. We have a separate institutional division called MultiBank Institutional which provides liquidity, execution, prime technology and white label solutions to our partners. This has been pivotal to our success.

  1. What are your future plans for development and growth?

In the upcoming year in 2020, we plan to focus on global expansion with a key focus on 3 particular regions: MENA (Middle East & North Africa), LATAM (Latin America) and Southeast Asia. This will heighten our position as the go-to financial services broker in each of the region. Concurrently, we will continue our investment into trading technologies and solutions to ensure that we are always providing the most cutting-edge trading experience for our customers.

For more on this or other financial articles please follow the link.

Business and Sports News from Mike Armstrong – See http://mikearmstrong.me