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 5. TRADE  6. GULF



April 22 - 28, 2002


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 contributions.

"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 UK.

"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 Online.

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.


The US economy is set to keep growing in the months ahead, but at a lower than expected rate, according to a closely-watched survey.

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 plans.

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 recession.

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.


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.


Chancellor Gordon Brown's latest budget measures, but increases in National Insurance will cost charities an extra 50m a year.

Charities welcomed a move to allow donors to offset donations against a previous year's income tax liability through the Gift Aid.

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."


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".


Microsoft: Microsoft said net profits for the three months to March rose to $2.74bn, 12% up on the same period one year ago.

Samsung: 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.

SAP: The German company reported net profits of 65m euros (40m; $57.9m) during the first quarter, compared to 109m the previous year.

SBC: 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.

SMG: The Glasgow-based firm said it had made a pre-tax profit of 36m, down from 59m in the previous year.

JP Morgan Chase: JP 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 : Merrill Lynch reported a 26% fall in net profits to $647m.

Citigroup: Citigroup 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.

Motorola: The firm 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.

Profits: The 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 with expectations.

Delta Air Lines: The number-three US airline posted a net loss of $397m, almost exactly trebling its loss from a year earlier.

IBM: 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.

Boeing: Boeing, 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.


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 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 attacks.

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 equipment.


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.


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.


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 2005-6.


The number of people out of work and claiming unemployment benefit in the UK fell by 6,000 last month, according to official figures.

The number of claimants fell to 939,600, its lowest level since the mid-1970s, the Office for National Statistics (ONS) reported.


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 Commerce.

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.


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.


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.


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 insurance contributions.

This means that the total NHS budget will rise from 65.4bn in 2002-03 to 105.6bn in 2007-08.