Government fails to sell all bonds

For the first time in almost seven years, the UK Treasury failed to sell all of government bonds to bidders. The failed auction sparked new fears over the state of government borrowings.

In order to ease the pressure off public finances, the government intended to sell £1.75bn of 40-year securities. But investors bid only for £1.63bn of the bonds. The 7% under-subscription illustrates the difficulty faced by government to raise money amid deteriorating financial conditions and also the rising supply of government bonds.

The last time, the government failed to attract enough investors to sell its 30-year bonds was in 2002. Prior to that, the government failed in 1995 and 1998, since the launch of bond auctions in 1986.

However, analysts say that the failure is “one-off” incident and that the bidders for bonds still remain “strong”.

Separately, the Bank of England has launched a quantitative easing programme and inject a total of £75bn of new money and get the economy going. The UK economy shrank 1.5% in the fourth quartet, its highest since 1980.

British Airways posts £70m loss

British Airways has reported a pre-tax loss of £70m in the nine months ending 31 December. The flag carrier announced to freeze pay rises of its 43000 staff following its poor financial results.  

 

BA blames the worsening economy and a weak pound for its losses and adds that it expects to make an operating loss of £150m in its annual results to be announced in March 2009. BA reported a pre-tax profit of £816m for the same period in the previous year.  

 

The airline’s passenger numbers were down 4% from January 2008, but there has been a rise of 1.4% in its “non-premium” traffic in January. BA chief executive Willie Walsh says that “the industry continues to face very difficult trading conditions on the back of a weak economic environment”.

 

In November last year, BA’s half yearly profits fell 91.6% to £52m from £616m a year earlier after it was hit badly by rising fuel prices and reducing passenger numbers. The airline, however, concludes that it is “well-placed” to benefit from the falling fuel prices in the next financial year. 

Scottish and Southern cuts energy prices

Scottish & Southern Energy (SSE) becomes the second energy supplier to slash gas and electricity prices after seeing sustained drop in wholesale energy prices since July last year. From 30 March, its nine million customers will see gas prices by 4% and electricity prices fall by 9% .

SSE’s price-cut follows British Gas’ announcement in January to slash gas prices by 10% from 19 February. The company says that its “dual fuel” customers buying both gas and electricity from it are likely to see their annual bill fall by £66 to £1,193.

Its new gas prices are still 51% higher that 2007 and the electricity prices are 46% higher than 2007. In August 2008,  SSE increased gas prices by an average of 29% and electricity prices by 19% .

Experts advise domestic customers to wait and watch before they switch their supplier because it is thought that other major energy providers such as npower, E.ON, Scottish Power and EDF — are set to cut prices too. The “big six” energy suppliers increased their energy prices twice last year that lead consumer groups to call for an energy windfall tax.

Scottish & Southern Energy supplies energy under the brand names such as Southern Electric, Swalec, Scottish Hydro Electric and Atlantic. Customers can compare the prices to choose the most suitable supplier at various comparison sites including uSwitch and moneysupermarket.

Retail investor Baugur enters into administration

The future of famous British high street names such as Iceland, Debenhams, House of Fraser, Hamleys, French Connection, Goldsmiths and Whistles remains uncertain as Icelandic investment group Baugur files for a moratorium process. This move follows the failure of Baugur’s talks with Landsbanki, the Icelandic bank, over a potential restructuring of its £1bn debts. 

The Icelandic retailer, today filed to the District Court in Reykjavik (Iceland) that will allow it to stop paying its creditors for three weeks.

The moratorium process in Iceland provides time for companies struggling with their debt and operates in a similar fashion to Chapter 11 in the US. Following the successful application, the Court will appoint an administrator or a moratorium assistant. Baugur says that the action is to “protect the group’s assets and the interests of creditors”.

Retail experts are reported to believe that there could be a major shake up on the UK’s high street if Baugur is forced to sell its UK assets. The group also owns a 49% stake in Mosaic Fashion that runs brands such as Karen Millen, Principles, Oasis, Warehouse, Coast and Shoe Studio.

In January, the company announced plans to shut its Reykjavik office and lay off its staff in London. it started talking to its bankers about restructuring its debts since two months after the global financial crisis affected Iceland very badly.

Baugur was formed in 1998 following the merger of two Icelandic supermarkets, Hagkaup and Bonus and employs around 55,000 people in the UK .

Woolworths returns as an online brand

The Woolworths brand is set to be relaunched as an online store this summer by its new owner Shop Direct Group. Britain’s online and home shopping retailer, Shop Direct bought Woolies for an undisclosed sum after it went into administration in November last year.

Shop Direct, owned by Sir David and Sir Frederick Barclay, will revive Woolies as an online business along with Woolworths’ children’s clothing brand Ladybird. The kids’ clothing range will be sold through some of Shop Direct’s existing catalogue and online channels, such as Kays and Littlewoods.

While the complete details of the product offering will be announced in the coming months, Shop Direct has already relaunched Woolworths.co.uk, asking consumers for their feedback on Woolworths, the heritage brand.

Woolworths, the much-loved high street retailer, was forced to close its 807 stores and cut 27,000 jobs by January, following its debts of £385m and deteriorating economic conditions. Its collapse also triggered the closure of Zavvi, a music retailer, that relied on  Woolworths’ distribution division EUK. 

Shop Direct’s chief executive chief executive Mark Newton-Jones says that Woolworths is an “iconic name” and he was confident about its future. It is thought that a small percentage of Woolies’ 30,000 staff could get their jobs back following the brand’s comeback.

Snow disrupts Britain

Heaviest snowfall in almost 20 years brings London and many other parts of the UK to a grinding halt today (February 2), costing UK economy about £1bn.

Scores of people are stranded as snow cripples public transport, schools, hospitals and made driving treacherous. London saw its heaviest snowfalls since 1991 as temperatures plummeted to as low as -2.4C.

Some parts of London have already recorded up to 8 inches (20 cm) of snow but as Met Office estimated “a further five or six inches” to come, there could be more trouble. Forecasters have issued an extreme weather warning for England, Wales and some parts of Scotland until Wednesday.

Affecting south-east England badly, the snowfall saw hundreds of schools closed and rail, road and air services disrupted. London buses are completely suspended while London Underground lines and Overground services are running with severe delays and in some cases supended. Roadwise, M25 clockwise is closed between Reigate (junction 8 ) and Leatherhead (junction 9) in Surrey.

All flights at Heathrow Airport have been cancelled until 1700 GMT. London City airport and Luton airport remain closed since morning while Gatwick and Stansted are running limited services.

Hospitals in London ran limited operations in the early hours of Monday but have put out an emergency call to NHS staff following an increase in 999 calls.

Prime Minister Gordon Brown says the authorities are doing “everything in our power” to resume transport services at the earliest.