British unemployment holds near 41-year low: data

Britain’s unemployment rate remains close to a 41-year low. (AFP)
Updated 13 April 2017

British unemployment holds near 41-year low: data

London: Britain’s unemployment rate remains close to a 41-year low, official data showed Wednesday, as the labor market continued to show resilience following the Brexit vote.
Unemployment for the three months to the end of February was about 4.7 percent, the same rate as in the three months to the end of January, the Office for National Statistics (ONS) said in a statement.
That left the rate at its lowest point since 2004, and a whisker away from the record level hit summer of 1975.
There were 31.84 million people in work, 39,000 more than for September to November 2016, although analysts had predicted a larger increase of 76,000.
“The labor market has been helped by the economy’s extended resilience since June’s Brexit vote,” noted IHS Markit economist Howard Archer.
Over the same period, 1.56 million people were unemployed, 45,000 fewer than the previous three months, according to the ONS.
The proportion of people aged from 16 to 64 in work stood at 74.6 percent. That was the joint highest since records began in 1971.
The figures also showed that wage growth including bonuses held steady at 2.3 percent.
That means that real wage growth stood at zero, once the effect of inflation was taken into account.
That could spell trouble for Britain’s consumer-reliant economy, according to Hargreaves Lansdown economist Ben Brettell.
“With inflation forecast to carry on rising — the Bank of England predicts a peak around 2.8 percent early next year — real wages are likely to start falling soon, squeezing household budgets,” Brettell warned.
“The UK economy is heavily reliant on consumer spending and this could prove a headwind for economic growth as we move through the year.”
British annual inflation stood at 2.3 percent in March, holding at a 3.5-year high, official data had showed Tuesday.
However, economists overwhelmingly believe that inflation rate will surge close to 3 percent by the end of the year, faster than the predicted rise in household incomes.
Rising oil prices and a weaker pound following the Brexit vote have sent inflation above the Bank of England’s 2.0-percent target.
“We’re beginning to see evidence that this is hitting spending growth,” added James Smith from ING, pointing to a recent fall in retail sales reported by the British Retail Consortium.
“Throw in the slowdown in jobs growth today — increasing by 39,000 in the three months to February, from 92,000 previously — and it looks like the squeeze on household is intensifying.”
All eyes will be on the next release of key data — official retail sales figures for March — on April 21.


HSBC profit slump adds to bank sector coronavirus woes

Updated 04 August 2020

HSBC profit slump adds to bank sector coronavirus woes

  • London-based bank reports massive slump in net profit, plans to slash 35,000 jobs

LONDON: HSBC on Monday reported a 69-percent slump in net profit, joining a number of major banks whose earnings have been slammed by the coronavirus fallout.

HSBC announced earnings of $3.1 billion compared with almost $10 billion in the first 6 months of 2019, as spiraling China-US tensions also hurt the British-based but Asia-focused lender.

Alongside HSBC results, top French bank Societe Generale on Monday announced a second quarter loss of more than €1 billion as the pandemic forced it to set aside more provisions against bad loans. UK banks Barclays, Lloyds and NatWest all last week reported huge financial hits linked to the pandemic’s fallout.

But there have been some bright spots, with French bank BNP Paribas weathering the coronavirus storm in the second quarter with only a small dip in net profits thanks to a surge in investment banking.

Credit Suisse meanwhile saw net profit jump almost a quarter in the April-June period, also on investment banking gains.

HIGHLIGHT

$1 BILLION - Alongside HSBC results, top French bank Societe Generale on Monday announced a second-quarter loss of more than €1 billion as the pandemic forced it to set aside more provisions against bad loans.

“HSBC has done little to lift investors’ spirits as it brings the curtain down on what has been a costly half-year reporting season for banks in general,” noted Richard Hunter, head of markets at Interactive Investor.

Even though banks “are much better prepared for this economic onslaught than during the financial crisis of over a decade ago ... the immediate outlook is bleak,” he added.

HSBC said that its pre-tax profit slid 64 percent to $4.3 billion in the first half while revenue was down 9 percent at $26.7 billion.

The figures missed analyst forecasts and the bank also raised its estimate for 2020 loan losses to $13 billion from $8 billion.

CEO Noel Quinn described the first 6 months of the year as “some of the most challenging in living memory.” He added: “Our first-half performance was impacted by the COVID-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility.”

Even by the standards of the current economic maelstrom engulfing global banks, HSBC has had a torrid time.

Before the coronavirus crisis it was beset by disappointing profit growth, ground down by US-China trade war uncertainties and Britain’s departure from the European Union.

The London-headquartered bank embarked on a huge cost-cutting initiative at the start of the year, including plans to slash about 35,000 jobs as well as trimming fat from less profitable divisions, primarily in the United States and Europe.

The coronavirus upended some of that cost-cutting drive with banks hammered by market volatility and the economic slowdown caused by the pandemic.

But HSBC has a further headache — geopolitical tensions via its status as a major business conduit between China and the West.

HSBC makes 90 percent of its profit in Asia, with China and Hong Kong being the major drivers of growth.

As a result it has found itself more vulnerable than most to the crossfire caused by the increasingly bellicose relationship between Beijing and Washington.

The bank has tried to stay in Beijing’s good graces. It vocally backed a draconian national security law that Beijing imposed on Hong Kong in June to end a year of unrest and pro-democracy protests. The move sparked criticism in Washington and London but analysts saw it as an attempt to protect its access to China, which has a track record of punishing businesses that do not toe Beijing’s line.

But that has not shielded it from Beijing’s wrath. Quinn referenced the bank’s growing political vulnerability in Monday’s results statement.

“Current tensions between China and the US inevitably create challenging situations for an organization with HSBC’s footprint,” he said.

“However, the need for a bank capable of bridging the economies of East and West is acute, and we are well placed to fulfil this role,” he added.