April 22 - 28, 2002
BUDGET PUSHES UP BUSINESS COSTS
UK business has reacted with dismay to the 1%
increase in employers' National Insurance (NI) contributions announced
by Chancellor Gordon Brown in his Budget.
"The last thing manufacturers needed from the
Budget was a major hit to their cost base," said Martin Temple,
director general of the Engineering Employers' Federation.
More positive measures such as a research and
development (R&D) tax credit for large companies at 25% and tax
cuts for smaller businesses were overshadowed by the increase in NI
"Whilst we welcome the R&D tax credit and
the measures for small firms, these will provide minimal benefit
compared to additional costs," added Mr Temple.
The 1% increase for employers is expected to add up
to more than £3bn.
The Confederation of British Industry has described
the increase as a tax on jobs because it will make employers more
reluctant to make hires.
Manufacturing will particularly hit because the
industry is very labour intensive, says Brian Yeomans, head of UK
corporate tax at accountancy firm Andersen.
The pharmaceutical company, AstraZeneca, is also
anticipating a large tax bill because it employs 12,000 people in the
"It will probably have a bigger effect than a
1% increase in corporation tax because we are such a big employer in
the UK," Jon Symonds, chief financial officer, told BBC News
He added that AstraZeneca is more fortunate than
most businesses because the NI contributions increase will be offset
to some extent by the R&D tax credit.
The UK's small businesses will also see an offset
to the NI contributions increase with cuts in corporation tax.
US ECONOMY 'TO KEEP GROWING'
The US economy is set to keep growing in the months
ahead, but at a lower than expected rate, according to a
The Index of Leading Indicators — a 'survey of
surveys' gauging current economic activity and expectations for the
next six months — edged just 0.1% higher in March, compared with
analysts' forecasts of a 0.3% increase.
The moderate increase reinforces the view that the
US economy's recovery from recession will be slow.
"Since the recession was short and shallow, it
will not provide the thrust delivered by earlier recessions,"
said Ken Goldstein, economist at the Conference Board, the research
firm which compiled the index.
Previous US recoveries have been marked by
spectacular surges in economic growth, fuelled by pent-up demand.
The Conference Board index began to rise in October
last year, but was unchanged in February.
The US economy is thought to have slipped into
recession in March last year as companies, unnerved by a plunge in
internet share prices a few months earlier, slashed their spending
The 11 September attacks, which sapped consumers'
already depleted confidence and paralysed the travel and tourism
sectors, exacerbated the downturn.
However, aggressive interest rate cuts by the US
Federal Reserve, which slashed the cost of borrowing to a 40-year low
of 1.75% last year, are credited with staving off a more protracted
With consumer demand remaining relatively buoyant,
the US economy grew at an annual rate of 1.4% during the last three
months of 2001, far outstripping most analysts' forecasts.
Although rates are now forecast to start rising in
line with stronger growth, Fed Chairman Alan Greenspan earlier this
week hinted during talks with a Congressional Committee that an
imminent increase is unlikely.
IMF SEES GROWTH SLIP IN AFRICA
Economic growth in Africa is set to continue to
slow to 3.5% this year from 3.7% last year, an International Monetary
Fund report has warned.
Aids continued to take "a staggering toll on
young and working age people in many southern African countries",
the IMF said.
But the continent's economic expansion should
nevertheless remain "respectable" in the face of a global
economic slowdown, the Fund said in its World Economic Outlook report.
A fall in the number of African countries ravaged
by war had contributed to "a pronounced improvement in growth
prospects", the report said.
The African countries remained very exposed to
changes in the global commodity markets where the prices for their
exports are determined, the IMF noted.
Low coffee prices hit Kenya, Ethiopia and Uganda.
Low cotton prices hit Benin, Burkina Faso, Cameroon, Chad, Ivory Coast
and Mali. Low metal prices hit South Africa, Ghana and Zambia.
CHARITIES LUKEWARM ON BUDGET
Chancellor Gordon Brown's latest budget measures,
but increases in National Insurance will cost charities an extra £50m
Charities welcomed a move to allow donors to offset
donations against a previous year's income tax liability through the
Another scheme announced by the Chancellor will
mean that taxpayers can nominate a charity to receive all or part of a
tax rebate from 2004.
Charities will also benefit from new rules which
will exempt donations of land or buildings to charity from corporation
and income tax.
Simon Hebditch of the Charities Aid Foundation,
said: "The idea that a donor can offset their Gift Aid donation
against a previous year's income tax liability opens up exciting new
opportunities for giving."
IMF CHIEF UPBEAT ON ECONOMIC GROWTH
The International Monetary Fund (IMF) has revised
its expectations for global economic growth upward in part due to the
resurgent US economy.
Speaking on Wednesday, IMF Managing Director Horst
Koehler said he now expects the world's economy to expand by 2.8% in
2002, a 0.2% rise from previous estimates.
He also said the IMF predicts the US economy to
grow by a revised 2.3% — significantly higher than previous IMF
forecasts of less than 1%.
The upward revision is a source of good-natured
ribbing between Mr Koehler and US Treasury Secretary Paul O'Neill.
Speaking last autumn, Mr Koehler predicted the US
economy would grow by just 0.7%. Mr O'Neill vehemently disagreed and
bet Mr Koehler a dinner "that he's off by a lot".
said net profits for the three months to March rose to $2.74bn, 12% up
on the same period one year ago.
For the first three months of this year Samsung Electronics
made a net income of 1.9 trillion won ($ bn; £ bn), up 53% from the
1.24 trillion recorded in the same period of 2001.
company reported net profits of 65m euros (£40m; $57.9m) during the
first quarter, compared to 109m the previous year.
SBC, the US'
second-biggest local phone company, said losses including one-off
costs for the first three months of the year came in at $81m , down
from a profit of $1.85bn during the same period one year ago.
Glasgow-based firm said it had made a pre-tax profit of £36m, down
from £59m in the previous year.
JP Morgan Chase:
Morgan Chase, the US' second largest bank, has reported an 18% drop in
net profits during the first three months of the year.
Merrill Lynch :
Lynch reported a 26% fall in net profits to $647m.
saw its net profits rise to $4.8bn in the first quarter of the year, a
rise of 25% over the same period of 2001.
lost $174m (£121m) in the first three months of the year, something
of an improvement on the $211m it lost in the same period of 2001.
company said that the three-month period produced a profit of $2.47bn,
or $1.14 a share, up from $2.34 bn a year earlier and broadly in line
Delta Air Lines:
number-three US airline posted a net loss of $397m, almost exactly
trebling its loss from a year earlier.
In its third
quarterly earnings decline in a row, IBM posted a profit of $1.2bn for
the first three months of the year, down from $1.75bn a year earlier.
announced a net loss of $1.25bn including a one-off charge related to
recent acquisitions - for the first three months of 2001, a far worse
figure than analysts had predicted.
VENEZUELA PICKS NEW FINANCE CHIEF
The Venezuelan government has appointed a new
finance minister as President Hugo Chavez rebuilds his government
after last week's failed military coup.
Jesus Bermudez, formerly a vice-minister for public
finances, replaces General Francisco Uson who quit when Mr Chavez was
temporarily ousted last week, El Universal newspaper reported.
INDIA SIGNS 'HISTORIC' US ARMS DEAL
India has signed its first arms deal with the US in
more than four decades, agreeing to buy eight Raytheon radar systems.
The Pentagon said the "historic" move
further signalled "improving relations between India and the
US", underlining improving bilateral ties since the 11 September
India, which has fought three border wars with
Pakistan since independence from Britain in 1947, and one with China
in 1962, has traditionally bought Russian and British military
HONG KONG UNEMPLOYMENT SOARS
Unemployment in Hong Kong has surged to its highest
level for at least 20 years, official figures have revealed.
The unemployment rate hit 7.0% in the
January-to-March period, up from 6.8% during the three months to
February, Hong Kong's Census and Statistics Department said.
GREENSPAN SOOTHES RATE HIKE FEARS
The US Federal Reserve is expected to leave
interest rates unchanged until an economic recovery in the US has
gained a strong foothold, analysts said after having listened to a key
speech by the Fed chairman Alan Greenspan.
"He certainly makes it sound like interest
rate rises are going to come later rather than sooner and that the
whole outcome of the recovery is still very much in question,"
said DA Davidson fixed income trader Mary Ann Hurley.
BROWN UPBEAT ON UK ECONOMY
Chancellor Gordon Brown has told Parliament that
his policies have allowed the economy "to steer a steady course
of stability" in a world facing uncertainty and recession.
In his Budget forecast, the chancellor said the
economy was expected to grow by between 2% and 2.5% this year — in
line with earlier forecasts — and a robust 3% to 3.5% next year,
higher than previously predicted.
And in a highly significant move, he said that the
long-term rate of economic growth in the economy was now 2.5% —
higher than the previous assumption of 2.25%.
That will allow spending to grow faster without
breaching fiscal rules, adding an extra £5bn to government coffers by
UK UNEMPLOYMENT FALLS
The number of people out of work and claiming
unemployment benefit in the UK fell by 6,000 last month, according to
The number of claimants fell to 939,600, its lowest
level since the mid-1970s, the Office for National Statistics (ONS)
US TRADE GAP WIDENS
The American people's growing appetite for imported
cars, televisions and other goods sent the US trade deficit soaring in
February, according to the latest figures from the Department of
Higher global oil prices also helped push the gap
11.6% wider to $31.5bn (£21.9bn), though when oil was excluded the
trade gap reached its widest level since records begun.
The growing deficit was seen as a clear sign that
the US is heading for an economic recovery.
Economists had predicted a $28.88bn gap, only
marginally wider than January's $28.2bn gap.
Imports rose 4% during February to $110.7bn, much
faster than the 1.2% growth in exports to $79.2bn.
WEST AFRICA PREDICTS 5% ECONOMIC GROWTH
One euro buys about 656 CFA. France has pledged to
uphold the euro peg to West Africa's CFA franc.
The CFA is a single currency used by 15 African
countries and has recently replaced its link to the French franc with
a link to the euro.
DEBT RELIEF PLAN OFF TRACK, IMF WARNS
A plan to cut the debts of the world's poorest
countries is off track and looks likely to face further problems, a
report by the World Bank and the IMF has found.
Eight to 10 countries in the highly indebted poor
countries (HIPC) programme will still be in debt by the time they
finish the programme, according to a copy of the report seen by the
Reuters news agency.
The scheme was set up in 1999 in an attempt to
crack down on world poverty by 2015 and cut $70bn off the $214bn debt
burden of the world's poorest nations.
BILLIONS FOR THE NHS
Spending on the NHS in England will top £100
billion in five years time, Chancellor Gordon Brown has announced.
Mr Brown has accepted the recommendations of the
Wanless Report into the future needs of the health service.
In his Budget speech, the Chancellor said spending
would increase by an average of 7.4% in real terms for each of the
next five years — in part funded by a 1% increase in national
This means that the total NHS budget will rise from £65.4bn in
2002-03 to £105.6bn in 2007-08.