UK Roundup: Average Salaries Drop; IMF Downgrades Forecast; Pension Plans Forced to Address Liabilities; Home Prices Drop
Courtesy of Mish
Things look pretty grim for the UK judging from a series of articles by the Daily Mail. Let’s take a look.
Average Salaries Drop
Workers pay the penalty for recession as average annual salary drops £2,600 in just SIX months
The average annual salary has dropped by more than £2,600 in the last six months, it emerged today.
New figures reveal employers are still exercising caution, with wages falling across the board from £28,207 to £25,543 – a difference of £2,664.
Salaries in the financial sector appear to have suffered the most – those offered at the point of entry have dropped by almost £12,000.
The figures show that where young bankers could have expected to start on £52,174.43 six months ago, they will probably earn closer to £30,127.60 now.
Will wage deflation morph into outright deflation? Why not?
Property Prices Drop
House prices fall for third month in a row – but Bank keeps rates on hold… again
Property prices fell for the third month in a row during June as the housing market recovery showed further signs of faltering.
The average cost of a home dropped by 0.6 per cent during the month, following a 0.5 per cent slide in May and a 0.1 per cent decline in April, according to Halifax.
The figures, which follow a raft of recent gloomy data on the housing market, will further stoke speculation that the house price recovery is running out of steam.
This is not even a start of what is going to happen. Canada, Australia, the UK, and China all have property bubbles that are about to burst wide open.
New Pension Rules
Brussels threatens final salary pension as EU plans to force firms to cover liabilities
Final salary pension schemes in the private sector could be wiped out by controversial rules drawn up by Europe.
Under new proposals published yesterday, firms will be forced to plough even more money into schemes to cover future liabilities.
They will also have to invest more in the ultra-safe bonds and gilts markets, rather than shares and equities, which carry a greater risk but can give a better return.
The collapse of final salary pension schemes in the last decade has been partly due to the British Government ordering private firms to plough more assets into their occupational schemes.
Around 2.6 million workers in Britain have these gold-plated benefits, formally known as ‘defined benefit’ pensions.
Marc Hommel, a pensions partner at accountants Pricewaterhouse Coopers, said the number ‘will quickly diminish to zero’.
The controversy surrounds the European Commission’s green paper which it claims is about creating ‘adequate, sustainable and safe European pension systems’.
But it is proposing tough new ‘solvency’ rules which would cripple many company pension schemes, if they were introduced in the UK.
In a two-pronged attack, they would force firms to plough more cash into their pension funds, and place tough restrictions on how they can invest their money.
In particular, they would have to invest more money in bonds and gilts, and less in shares, which could cut the investment return, placing them under even more pressure.
At present, around 50 per cent of UK pension funds’ money is invested in equities, more than any other European country. The so-called ‘ Solvency II’ rules currently apply to insurers, but the green paper says it could be ‘a good starting point’ for pension funds as well.
IMF Downgrades Britain
British economy dealt fresh blow as IMF downgrades UK growth forecast
Chancellor George Osborne has been dealt a fresh blow today after a respected international economic thinktank downgraded its forecasts for the British economy.
In one of the biggest downgrades it has made to any developed economy, the International Monetary Fund lowered its 2011 growth forecast for Britain from 2.5 per cent to 2.1 per cent.
The prediction is also below forecasts for the Treasury from the Office of Budget Responsibility (OBR) of 2.3 per cent growth next year.
In contrast to the gloomy outlook for the UK economy, the IMF said the global economy is recovering faster than expected.
The IMF raised its 2010 world growth forecast to 4.6 per cent from 4.1 per cent in April and boosted estimates for the United States and China.
In spite of the downgrades, the IMF is likely too optimistic when it comes to UK GDP.
In regards to the rest of the world the IMF is insanely optimistic. People are going to be shocked by the severity of the pending global slowdown.
Expect to see a series of downgrades as the year wears on.