Tuesday, December 30, 2014
Cutting the deficit should be the government's priority in 2015, the CBI has said, as it also calls for major changes to preserve public services.
The CBI tells the next government it must cut the deficit if it is to maintain the UK's economic improvement
In its new year message, the business lobby group says reducing the deficit is a "must" for whichever government takes power next year.
It hails the UK's economic performance which has left it the strongest among the G7 leading nations.
It also suggests a radical education reform to scrap GCSEs at the age of 16.
John Cridland, the CBI's director general, said: "We must sustain the best launch pad for the UK economy and our young people. Cementing Britain's reputation in the world as one of the best places to do business has to be a top priority for 2015.
"Our economy is among those enjoying the fastest growth among the G7 nations, with 1.2 million jobs created this year and employment set to grow in every region of the UK in 2015."'Thousand cuts'
Mr Cridland continued: "For business leaders, deficit reduction is a must for the next government."
He said the easiest cuts to public services had already been made and the only way to bring down the gap between government spending and income was to take drastic steps to prevent public services suffering "decline through a thousand cuts".
The CBI suggests integrating health and social care, and a significant increase in services available online.
On education, Mr Cridland said the current system was leaving too many young people behind and he called for GCSEs to be replaced by a four-year learning plan between the ages of 14 and 18.
The BBC's economics correspondent Andy Verity says the CBI has long protested that its members have hundreds of thousands of unfilled vacancies for skilled jobs which it says young people could easily do if they were prepared at school.
Since 2012, the group has regarded the two years spent working towards GCSEs as an unwelcome distraction for 14 to 16-year-olds, especially those wanting to learn skills other than academic ones, our correspondent adds.
The CBI now says GCSEs should be abolished and replaced by tailored learning plans, with each pupil keeping up maths and English as well as a mix of either vocational or academic A levels, to be tested just once at 18.
On the future of Britain's place in the world, Mr Cridland said the majority of CBI members wanted the UK to remain within a reformed EU.
Wednesday, December 24, 2014
Tuesday, December 23, 2014
(Reuters) - Arab OPEC producers expect global oil prices to rebound to between $70 and $80 a barrel by the end of next year as a global economic recovery revives demand, OPEC delegates said this week in the first indication of where the group expects oil markets to stabilize in the medium term.
The delegates, some of which are from core Gulf OPEC producing countries, said they may not see - and some may not even welcome now - a return to $100 any time soon. Once deemed a “fair” price by many major producers, $100 a barrel crude is encouraging too much new production from high cost producers outside the exporting group, some sources say.
But they believe that once the breakneck growth of high cost producers such as U.S. shale patch slows and lower prices begin to stimulate demand, oil prices could begin finding a new equilibrium by the end of 2015 – even in the absence of any production cuts by OPEC, something that has been repeatedly ruled out.
"The general thinking is that prices can’t collapse, prices can touch $60 or a bit lower for some months then come back to an acceptable level which is $80 a barrel, but probably after eight months to a year," one Gulf oil source told Reuters.
A separate Gulf OPEC source said: "We have to wait and see. We don't see 100 dollars for next year, unless there is a sudden supply disruption. But average of 70-80 dollars for next year – yes.”
The comments are among the first to indicate how big producers see oil markets playing out next year, after the current slump that has almost halved prices since June. Global benchmark Brent closed at around $60 a barrel on Monday.
Their internal view on the market outlook will provide welcome insight to oil company executives, analysts and traders, who were caught out by what was seen by some as a shift in Saudi policy two months ago and have struggled since then to understand how and when the market will find its feet.
For the past several months, Saudi officials have been making clear that the Kingdom’s oft-repeated mantra that $100 a barrel crude is a “fair” price for crude had been set aside, at least for the foreseeable future. At the weekend, Saudi Oil Minister Ali al-Naimi was blunt when asked if the world would ever again see triple-digit oil prices: “We may not.”
Saudi Arabia, the world’s biggest exporter – and its close Gulf allies within the Organization of the Petroleum Exporting Countries (OPEC) – say it’s time for others, whether that is countries like major exporter Russia or U.S. shale drillers, to slow down; OPEC can no longer slash output, ceding market share, to spare them a downturn.
As Naimi told the Middle East Economic Survey (MEES) in an interview this weekend: “It is not in the interest of OPEC producers to cut their production, whatever the price is.”
Without OPEC to defend prices, oil entered a free-fall, but most of OPEC’s members are holding fast.
At this point, intervening in the market would simply invite new rivals to carry on pumping crude, eroding OPEC’s market share without any guarantee of a sustained price recovery, another Arab oil source told Reuters on the sidelines of a meeting in Abu Dhabi of the Organization of the Arab Petroleum Exporting Countries (OAPEC).
"Every time prices fall, we would be asked to cut," the source said.
The second Gulf OPEC source reiterated that OPEC would not cut alone. Non-OPEC producers such as Russia, Mexico, Kazakhstan and "anyone producing more than one million barrels per day" should also cut or at least freeze their output if they wanted a stable market and better prices, the Gulf OPEC source said.
NO PRICE TARGET
To be sure, there is no suggestion that OPEC is targeting a specific price, or would want to do so. The group hasn’t had a formal price goal in about a decade, and Saudi Arabia has long maintained that it is only seeking price stability, not a set level.
But it offers a convenient metric at a time when traders are struggling to figure out where and when markets will settle down.
Asked about market signals OPEC is looking for to decide on whether the market is stabilizing or not, irrespective of the price, Naimi said: "The signals need time, one year, two years, three years. There is not one signal that we look to and say that's it... but for sure those who are the most efficient producers are the one who would rule the market in the future."
Iraqi oil minister Adel Abdel Mehdi told Reuters in an interview on Monday he thought prices would stabilize now at about $60 a barrel but could rise to over $70 by mid-next year.
"I believe that market has started to stabilize itself now," Falah al-Amiri, head of Iraq state oil marketing SOMO told Reuters in Abu Dhabi.
"The future for next year, I don't think there would be much optimism in the market that the price would go to $80 or above. But I don't even think prices would reach $80," said Amiri, citing a resilient shale oil production to current prices.
BY RANIA EL GAMAL
Monday, December 22, 2014
A plan for a summit to look at the challenges facing the North Sea oil industry has been announced by Aberdeen City Council.
Council leader Jenny Laing said the UK and Scottish governments, trade unions and industry bodies needed "to get round the table as soon as possible".
The Labour councillor said a "strategic plan" was required to save jobs as the price of oil continued to fall.
Labour called on Nicola Sturgeon and David Cameron to attend the summit.
It comes after a warning that the UK's oil industry is in "crisis".
On Thursday, Robin Allan, chairman of the independent explorers' association Brindex, told the BBC that the industry was "close to collapse".
He claimed almost no new projects in the North Sea were profitable with oil below $60 a barrel.
However, Sir Ian Wood, another leading industry figure, said Mr Allan's warning was "well over-the-top and far too dramatic".
Sir Ian predicted conditions would begin to recover next year.'Undermine confidence'
Ms Laing said Aberdeen was the oil capital of Europe and as such it was her job, as leader of the city council, to work with the governments in Edinburgh and Westminster and the oil industry to ensure jobs in the city were protected and companies remained based there.
She said: "I have today instructed Angela Scott, our chief executive, to arrange a summit between senior politicians, government officials, industry representatives, trade unions, and local politicians.
"The aim will be to ensure an agreement to develop a strategic plan to ensure job losses are either avoided or kept to a minimum.
"It must concern us all that the price of oil has dropped so heavily in such a short space of time and we need to agree a strategy to deal with fluctuations that undermine confidence in the North Sea."
Ms Laing said the council chief executive would write to various politicians within both the UK and Scottish governments, as well as UK Oil and Gas, other industry leaders and trade unions to encourage them to take part in the summit.
Scottish Labour has pledged to send its new leader Jim Murphy.Fiscal changes
A Scottish government spokesman said it was continuing to do all that it can to support Scotland's oil and gas sector.
He added: "As we have long said, what the industry requires is a stable predictable fiscal regime, and that substantial tax incentives are needed to achieve the objective of maximising recovery.
"Unless the UK government acts to bring in further measures, the likelihood is some fields will cease production early."
The UK government's Department of Energy and Climate Change said it was important to highlight that there was "very little evidence of new projects being cancelled or deferred in reaction to lower oil prices".
A spokesman added: "The government recognises the challenges currently faced by the oil industry and that's why earlier this month the Treasury announced a package of fiscal changes and initiatives to stay on the front foot in dealing with them.
"We understand the particular concerns recent sharp reductions in oil prices have raised for companies active in the North Sea and will continue to engage with the Scottish government on this issue, including at this summit."
Friday, December 19, 2014
Thursday, December 18, 2014
Wednesday, December 17, 2014
Russia's rouble has regained ground from Tuesday's all-time low, although trading remains edgy and volatile.
It opened 4% lower on Wednesday, but then edged up. In early trading,one US dollar bought 66 roubles, far fewer than the record low of 79 on Tuesday.
The falls were sparked in part by fears of new Western sanctions against Russia for its stance on Ukraine.
Russia revealed it spent almost $2bn on Monday trying to intervene in the currency market.
The Russian Finance Ministry said on Wednesday it had begun selling off stocks of foreign currency in an attempt to stop a further slide in the value of the rouble.
It said the currency was "undervalued" but its words and actions have had little apparent impact.
A drastic 6.5 percentage point rise in Russian interest rates to 17% early on Tuesday also failed to halt the slide.
The rate rise, which was meant to strengthen the currency. helped it hit 58 to the dollar early on Tuesday. In later trading, however, the dollar at one stage bought as many as 79 roubles.
The rouble has lost more than half its value against the dollar this year, hit by cheaper oil and Western sanctions which have both weakened the Russian economy.
Monday, December 15, 2014
(Reuters) - Federal Reserve officials will decide this week whether to make a critical change to their policy statement that would widen the door for interest rate hikes next year and effectively bet the United States will continue to shine in a gloomy global economy.
In one of the last major wild cards for financial markets in 2014, the U.S. central bank's policy-setting committee is to issue the statement and fresh economic forecasts on Wednesday at 2 p.m., following a two-day meeting. Fed Chair Janet Yellen will then hold a news conference at 2:30 p.m.
The U.S. economy has strengthened and jobs have been created at a faster-than-expected clip since the Fed's last meeting in October, when it repeated that benchmark rates were unlikely to rise for a "considerable time." Officials will have to decide whether to replace that phrase despite below-target U.S. inflation and economic weakness in Europe and Asia.
Top Fed officials have suggested mid-2015 is a reasonable time to start tightening monetary policy after six years of near-zero rates, and financial markets generally agree.
As investors search for clues on when and how aggressively the Fed might move, here are the key things to watch:
THE LIFT-OFF LANGUAGE
The Fed has been toying with dropping the "considerable time" phrase since at least September. In October, it restated the pledge but made clear that rates could rise sooner if economic data were strong, and later if they weren't.
If the phrase is dropped, as many Wall Street economists expect, the Fed could replace it with a pledge to be "patient" in an effort to prevent an abrupt market reaction that could throw off the economy's momentum.
If it is kept, as centrist Fed policymakers Dennis Lockhart and John Williams suggested last week, Yellen would have to explain the need for such caution in the face of falling unemployment and signs that wage growth is edging up.
HITTING THE INFLATION TARGET
There is no question the Fed is approaching its goal of full employment after years battling the recession and its aftermath, so it will need to somehow acknowledge that in the statement. Unemployment is at a six-year low of 5.8 percent and monthly job growth has averaged more than 250,000 over the last six months.
More troubling is the elusiveness of the Fed's other goal of 2 percent inflation. The Fed's preferred inflation measure stands at just 1.6 percent, and with global oil markets tanking, the dollar soaring, and the economies of Europe, Japan and China weakening, the threat is that it will slip further.
"To some at the Fed that's a chasm, to others it's a crack," said Carl Tannenbaum, chief economist at Northern Trust.
Many Fed officials expect any downward pressure on U.S. prices to prove temporary. The question is where Yellen stands.
FRESH FORECASTS FOR RATES, ECONOMY
The clearest hint of the Fed's plans could come in policymakers' fresh projections of how high rates should rise over the next few years. In September, they suggested the overnight federal funds rate could rise to about 1.25 percent by the end of 2015, and about 2.75 a year later.
Given U.S. economic growth in the last two quarters was the strongest in more than a decade, policymakers will also probably nudge up their GDP expectations for the next two years, and lower forecasts for inflation and unemployment.
(Reporting by Jonathan Spicer; Editing by Meredith Mazzilli)
Thursday, December 11, 2014
The US House of Representatives has passed a $1.1tn budget, hours before government was due to shut down at midnight on Thursday.
The House vote came hours before a midnight deadline
The Republican measure was passed by 219 votes to 206 after President Barack Obama had urged Democrats to support the budget.
It will fund most of the government until September 2015, but some areas will only receive short-term funding.
Republicans won control of both House and Senate in elections last month.
A relieved John Boehner, the Republicans' House leader, said: "Thank you and Merry Christmas."
Fifty-seven Democrats voted for the bill, but others were angry about the president's call for support of the Republican bill, with Democratic House leader Nancy Pelosi saying she was "enormously disappointed" at Mr Obama's position.Immigration issue
The Republicans strongly oppose President Obama's immigration reforms and so the bill only funds the Department of Homeland Security until February.
Republicans hope that when the new Congress meets at the start of next year, they can force changes to the president's immigration plans.
The budget bill must now be passed by the Senate and sent to the president to sign into law.
A two-day extension of government funding was approved by the Senate on Thursday to give it time to pass the main budget.
Senate Majority leader Harry Reid said that his chamber would begin looking at the legislation on Friday.
The bill funds the government at the same levels that were negotiated last December.
It also adds emergency funding requested by President Barack Obama, including funds to fight Ebola in West Africa and money for US air strikes against militant group Islamic State in Iraq and Syria.
As presented earlier in the week, the 1,600-page bill also includes a number of provisions intended to gain votes from both parties, including:
- increasing the amount an individual person can contribute to a national political party from $32,400 to $324,000
- blocking the District of Columbia from using its own funds to set up regulatory systems for marijuana legalisation
- measures that would significantly weaken financial regulations in the Dodd-Frank law, including restrictions on derivatives trading
- blocking certain Environmental Protection Agency (EPA) regulations
- cuts in the budgets of the EPA and the US tax agency
- increases in the budget for Wall Street regulation agencies, including the Securities and Exchange Commission.
A number of Democrats were unhappy at what they saw as unnecessary concessions made to Republicans in order to pass the bill.
"We don't like lobbying that is being done by the president or anybody else that allows us to... give a big gift to Wall Street," Democrat congresswoman Maxine Waters said.
For their part, several Republicans argued that the deal did not go far enough in putting curbs on President Obama's plan to grant work visas to millions of workers who had entered the US illegally.
The US government entered a partial shutdown during October 2013, after the two houses of Congress failed to agree a new budget.
That shutdown left more than 700,000 employees on unpaid leave and closed national parks, tourist sites and government websites.