The risk that some of the world's major economies may fall back into recession is foremost among executives' concerns for the second half of 2010, according to new research conducted by the Economist Intelligence Unit. When presented with a series of 11 potential risks to the economy over the next six months, almost a third of the 680 respondents to a global survey point to double-dip recession as the biggest, ahead of sovereign debt default (20%), market volatility (10%) and weak governance (9%).

North American and Asia-Pacific respondents are most concerned about the possibility that the economy will once again slip into recession – 43% and 40%, respectively, list it as their main concern, against 29% from Western Europe. The North American sentiment seems to echo US Federal Reserve chairman Ben Bernanke's warning of last week that the US economy faced "uncertain prospects".

With the nascent recovery so fragile, says the report, it is not surprising that weak demand is seen by executives as the foremost risk to their business over the next six months. More than a third (36%) of respondents cited this concern, ahead of worries about volatility in financial markets (19%), difficulty in raising finance (18%), and general market volatility (16%).

Respondents from the manufacturing, automotive, mining and related sectors also see other factors – including the volatile price of raw materials, exchange-rate fluctuations and instability in their major markets – as significant risks.

The survey of 680 executives, representing a range of industries around the world, forms part of a major new research programme on risk, which will culminate in the 2010 Risk Summit in London on 18 November.

For information on the Risk Summit, visit www.economistconferences.co.uk/event/risk-summit/1755

The Autumn 2010 issue of Re:locate will include a roundup of recent conferences and surveys.

Both European governments and employers are failing to educate their citizens and workforces sufficiently about the long-term value of their pensions, with less than a quarter of European workers saying they are interested in their pension, according to employee risk and benefits management firm Aon Consulting.

The research is part of the European Employee Benefits Benchmark, a survey of more than 7,500 workers from ten of Europe’s leading economies: Belgium, Denmark, France, Germany, Ireland, The Netherlands, Norway, Spain, Switzerland and the UK. The survey focuses on the views of workers across Europe on topics such as retirement, employee benefits and other pension-related issues.

Britain, France and the Netherlands are failing to foster a sufficient long-term retirement savings culture despite the financial turmoil brought about by the Credit Crunch, with only 12% of people taking an active interest in their pensions. This compares to 37% in Germany, the highest in Europe, Belgium (34%) and Switzerland (33%).

Despite the importance of financial planning for retirement, and the general trend of less state support in retirement, 16% of people say they do not have a pension plan in place because they can’t afford to save, 11% because they simply never got around to it, and 5% claim they have actively made the decision to rely on state benefits, leaving them at the whim of the government of the day. Perhaps not surprisingly, the trend across Europe sees fewer 18- to 35-years-olds with pension savings than people in higher age brackets.

Oliver Rowlands, head of retirement, EMEA, at Aon Consulting, said, “A lot of people will simply be walking blindly into retirement poverty unless they take more of an active interest in their pensions. Governments and some employers across Europe are looking at ways to reduce their pensions obligations, so it is imperative that people take more responsibility for their own retirement finances.

“Many employers continue to take the provision of appropriate pensions for their employees very seriously, and are spending a lot of money to provide for the long-term welfare of their workforce. Although workers do generally value employer-sponsored pensions, both defined benefit and defined contribution, they tend not to manage their affairs until close to retirement, when it is already too late. Employers need to effectively communicate the value and choices relating to this benefit through open, honest, clear and continuous communication to their employees in order to make it an effective weapon in their arsenal in the war for talent. At the same time, they need to ensure they are educating and helping their workforce take the necessary steps to take appropriate and necessary action around retirement savings.”

Abbey International has introduced new US dollar and euro deposit services with 12-month fixed contracts, easy access to funds via the Abbey International Gold account, and the benefits of a Visa Infinite card, plus preferential foreign exchange rates.

Commenting on the new range, Abbey’s head of Client Experience, Jane Matthews, said, “Our Gold account is designed to meet the multiple currency banking needs of international clients everywhere. Our Visa Infinite card enhances this banking offer with a comprehensive range of lifestyle, concierge and insurance benefits designed to exceed the most demanding clients’ expectations. With this new bundle of offers, which are all designed to work together, clients can benefit from enhanced interest rates on their fixed-term deposits and Gold account holdings, whilst gaining free access to the comprehensive range of benefits available with the Abbey International Visa Infinite deferred debit card.”

Further details are available from www.abbeynational.com

Banking giant Lloyds TSB International is introducing a new account for those living and working abroad. The Premier International Account offers customers international financial expertise and 24/7 access to their money. It can be in sterling, US dollars or euros, and comes with a globally-accepted Visa debit card and a range of services and money-saving benefits, from worldwide travel insurance to a phone-based concierge service that provides help with everything from travel bookings and destination information to car rental, worldwide.

For more information, go to www.lloydstsb-offshore.com

The latest Insolvency Index from global information services company Experian reveals a year-on-year fall in business insolvencies during February.

The total number of insolvencies fell by 15.1% during February compared to the same month last year – from 2,160 in February 2009 to1,834 in February 2010 – bringing the rate of insolvencies down from 0.11 per cent to 0.10 per cent.

In comparison to the insolvency rate recorded in January (0.08%), this was an increase. However, Experian says, January has, in previous years, been a quiet month for insolvencies, and, despite the January to February increase, the overall trend has been downward.

The overall financial strength score of UK businesses continued to improve, from 79.76 in February 2009 to 81.18 in February this year. The score also saw a small month-on-month improvement from 81.16 in January.

Rolf Hickmann, managing director of pH, an Experian company, said, “Small businesses have far more flexibility than any other business type. It is easier for smaller businesses, with just one or two employees, to make adjustments to their operations and pull in the reins when times are difficult. For larger business, there is the security that comes with size and a well-established structure, so insolvency rates among these business types are also low.

“However, mid-sized businesses, which are seeing the highest rates of insolvencies, are too large to be flexible and too small to rely on a strong and established structure.”

The 2008 banking crisis, estimated by the International Monetary Fund to have cost $10trillion, could have been avoided, according to a new survey of global risk professionals. 99.5% of respondents disagree with Gordon Brown, who said the most important cause of the crisis was “global economic circumstances beyond anyone’s control.” The survey reveals that most risk professionals believe the banking crisis was caused not so much by technical failures as by failures in organisational culture and ethics.

The Causes and Implications of the 2008 Banking Crisis survey of risk managers was designed and conducted by Moore, Carter & Associates with Andrew Kakabadse, professor of International Management Development at Cranfield School of Management. The survey examines the causes of the banking crisis, and the extent to which failures of risk management and governance of risk and regulation, contributed to the crisis. It also looked at the nature of those failures and the need for internal and regulatory change.

Commenting on the results, Professor Kakabadse said, “Our survey proves we cannot trust banking executives to govern themselves, and that drastic action is still needed. The Walker Review on governance in financial institutions in the UK made interesting Reading, but it does not outline how strengthening of governance processes will be achieved. With major regulatory change happening in the US, the EU and throughout the world, this survey is intended to inform policy makers who are responsible for shaping future reforms. So far, we have seen very little change. We still have the same governing systems and political processes which are unlikely to bring about change to global financial structures.”

The survey has significant implications for improving the effectiveness of risk management and governance in financial services, and for the restructuring of the regulatory landscape that is underway. It concludes that nothing will really change without cultural change, because the effectiveness of risk management, governance and internal controls depends heavily on the climate in which they take place. The report recommends that, where they do not exist already, the tools and methodologies for assessing culture and ethics should be developed urgently.

Paul Moore, senior partner at Moore, Carter & Associates said, “This survey independently supports one of the most important points I made in my evidence to the Treasury Select Committee – that there is no doubt that you can have the best governance processes in the world but if they are carried out in a culture of greed, unethical behaviour and indisposition to challenge, they will fail. I would now propose mandatory ethics training for all senior managers and a system of monitoring the ethical considerations of key policy and strategy decisions within the supervised firms.

“In my view, the only way to prevent a re-occurrence of a similar crisis is to create a genuine separation and balance of powers in the boardroom. Secondly, companies and regulators now need to focus their attention much more strongly on culture, ethics and effective internal risk management rather than other processes. We also clearly need to have a proper investigation into who did and did not do what. Gordon Brown and other politicians were wrong – the crisis was not caused by global circumstances beyond anyone’s control and Sir David Walker’s review of governance is not radical enough to create the separation of power in the boardroom required to overcome the current natural conflicts of interest which exist.”

The report concludes that there should have been a detailed investigation into the crisis. 58% of respondents agreed that there should be an investigation to establish wrongdoing, and 68% agreed that there should be an investigation “on a truth and reconciliation basis”, to inform future practice and policy development.

Re:locate’s Spring 2010 issue includes a feature on integrity and ethics, which examines why ‘ethicability’ is a key ingredient for successful organisations.

Abbey International has launched a new limited-offer 18-month fixed-rate deposit contract paying 3.60% gross/3.57% AER. The new sterling-only account complements Abbey's 12- and nine-month fixed-rate sterling contract options. As it is a limited offer, the 18-month fixed-rate contract can be withdrawn at any time, so Abbey is urging savers to act quickly if they wish to take advantage of this rate.

The minimum opening balance is £100,000, with the account designed exclusively for funds that are new to Abbey International. Interest is paid upon maturity, at the end of the 18-month term.

Jane Matthews, head of Client Experience at Abbey International, said, "We are sensing a gradual return of confidence to the markets and an appetite for slightly longer-term commitments. With an attractive rate of return, together with the backing that comes from being a part of the Santander Group, we believe the account will offer a popular combination."

For further information, go to www.abbeyinternational.com

Global information services company Experian has released its latest mergers and acquisitions (M&A) and equity capital market (ECM – flotation, rights issue and placement) data for the UK, covering Q4 and year-end 2009. According to Experian's Corpfin business, which specialises in the provision of corporate and financial information, the figures reflect the trend of a traditionally slow Q4 and show the following:

UK

• The UK saw a 24.5% decrease in UK M&A and ECM transactions announced during 2009. There were 4,269 deals announced, compared with 5,656 in 2008
• £272.6bn worth of transactions were announced in the UK in the year, up by 0.22% on 2008
• There were 8.4% fewer deals announced during Q4 2009 compared with Q3 2009. Deal volumes decreased from 1,098 transactions in Q3 to 1,006 in Q4
• JP Morgan Chase & Co announced the most UK deals in 2009, advising on 82 transactions
• Credit Suisse was the best-performing financial adviser by value of deals (£100.5bn)
• Eversheds was the leading legal adviser by volume of deals (90), with Linklaters the leading adviser by value (£111.8bn)

The European picture

• Europe saw a 23.5% decrease in UK M&A and ECM transactions announced during 2009. There were only 10,905 deals announced, compared with 14,250 in 2008
• €811.4bn worth of transactions were announced in Europe in 2009, down by 30% on the €1.159bn recorded in 2008

Brian Rarity, strategic consultant for Experian's Corpfin business, commented, "The UK, like the overall European picture, has seen deal volumes continue to decline. Deal values in the UK have remained largely constant year-on-year, with some encouraging signs in Q4. The UK large-cap scene is relatively buoyant, and there are good signs in the mid-cap market."

For more information, visit www.experianplc.com

 

The following employee tax issues from the Pre Budget report are highlighted by CMS Cameron McKenna, who were quick off the mark to share this information with Re:locate readers.

Bankers’ Bonuses The Government will impose a temporary levy of 50% on any discretionary bonus paid by a bank or building society (including branches of foreign banks) in excess of £25,000 between now and April 2010. The £25,000 cap would appear to include all loans and share awards, other than those made under an approved Share Incentive Plan or options granted under an approved SAYE scheme.
In addition, any affected bonus will not be corporation tax deductible and will be subject to income tax and NICs in the normal way – in effect creating treble taxation.
Although draft legislation has been published, this will inevitably be supplemented by further anti-avoidance legislation.

National Insurance Contributions (NICs) Rates
Having previously announced at PBR 2008 that the NICs rate for the tax year 2011/12 was due to rise by 0.5%, the Chancellor has now announced that there will be a further 0.5% increase to those rates, making a 1% increase in total from 6 April 2011. The new rates will therefore be:

• 12% for employees' NICs up to approximately £44,000 with the additional rate for earnings above that amount increasing from 1% to 2%
• 13.8% for employers' NICs

Tax Bands For the tax year 2010/11, all tax allowances and thresholds will be the same as for the current year.


Pensions Contributions
The special rules which were introduced in the 2009 Budget, preventing people from making large additional contributions to their pensions before 6 April 2011 (the date from which the Governement is planning to restrict higher rate relief for payments into pensions) have been extended to those with incomes of £130,000 or over.

Employee Share Plans Despite the recent increase in employee share plans designed to produce capital gains in order to benefit from the current capital gains tax rate of 18% rather than an income tax rate of potentially 50%, no measures have been introduced to clamp down on such plans. Nor have there been any announcements or indications that the Government is considering alig ning the capital gains tax rate with the income tax rate. So for the next few months at least, it would at least appear to be full steam ahead with capital gains schemes.

This first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information, go to www.law-now.com

Liam Bailey, head of residential research at Knight Frank, shares his insights into the Pre Budget report, and how it may affect the housing market, with Re:locate readers.

Stamp Duty

The ending of the Stamp Duty holiday from 31 December will weaken demand at the entry level of the market.

Knight Frank calculates that approximately 25,000 house purchases in 2010 will be delayed or postponed as a direct result of the ending of the Stamp Duty holiday.

Bonus Tax

The impact of the new one-off Bonus Tax will be negligible in terms of the wider housing market. Prices are unlikely to fall – even in London – as current price levels have not been bid higher in recent months in anticipation of bonus money which is now not going to be paid out.

There will be an impact on housing transactions, which are likely to drop slightly, as some purchases in 2010 would have followed the receipt of a hefty bonus.

The real impact will be felt in the longer term. There is a risk in terms of the impact on the economy and the housing market of another seemingly ad hoc, politically-driven tax change. We have seen several in the past few years, and cumulatively they risk weakening the attractiveness of the UK and London as places to do business.

House-building sector

There was some interesting recognition of the negative impact caused by the increasing range of development costs (which have resulted from legislation formulated during the boom) are having on the house-building sector, at a time when the market is struggling into recovery mode. The list includes the Zero Carbon Homes policy, Lifetime Homes Standards, a scaled-back Section 106 regime to be phased in after the introduction of the Community Infrastructure Levy. Nothing has been spelt out yet, but there appears to be a willingness to concede that not all of these costs are sustainable.

In the Winter issue of Re:locate, Susan Bevan analyses the current state of the property market and the effect mortgage availability is having on relocating families.