Financial Review 5th June 2015

UK should not fear leaving the EU, believes JCB boss
The chairman of construction equipment firm JCB has said the UK should not fear an exit from the European Union. “We are the fifth or sixth largest economy in the world. We could exist on our own, peacefully and sensibly,” said Lord Bamford, speaking after his company delivered earnings of £303 million for 2014 – down marginally on the previous year in a still tough global construction market. He said an EU exit would enable the UK to negotiate as our country rather than being one of 28 nations.

JCB said the UK’s construction boom had helped offset weaker markets globally. The construction equipment markets in Brazil and China dropped 17% last year, with Russia down 27% and India by almost 15%. By contrast the market for plant machinery in the UK surged by 30%, while in the US it rose 13%. JCB sales in 2014 were £2.5 billion.

Use spending cuts to reduce the deficit, IOD urges Government
The Conservative Government should make bringing down the deficit a priority, members of the Institute of Directors (IoD) have said. A survey of IoD members showed that they believe deficit reduction should be achieved through spending cuts rather than tax rises. Infrastructure and education were other major policy areas the business body’s members would like to see addressed. IoD director, Simon Walker, said it was time for decisive action.

The research also found support for improving the UK’s broadband capability, investing in energy generation, and spending on railways. There was also overwhelming support for a crackdown on tax avoidance. “The election result was more decisive than most expected. Now is the time for the new Government to take decisive action,” stated Mr Walker.

Co-op group votes to continue support for the Labour party
The Cooperative Group has decided to continue financially supporting the Cooperative Party, which has strong ties to the Labour Party. Members of the group, the UK’s biggest mutual organisation, voted on the issue at its annual general meeting. By 55% to 44% they agreed to “political expenditures” of up to £1 million, which support the movement’s objectives.

The Cooperative Group is still recovering from a period of financial mismanagement and some members have recently expressed concerns about how members of the board are
chosen. The banking arm of the group came close to collapse in 2013, bringing the whole group to a £2.5 billion annual loss that year. The Co-op Party includes among its members a number of Labour MPs and the two political movements have strong historical ties. Allan Leighton, chairman of the Co-op Group, said after the meeting there was a clear remit from the members to continue to support the Labour Party.

Pensions cold call complaints top 1,000
The Information Commissioner’s Office says it is concerned about the number of people being cold called about pensions. It says it has received more than 1,000 complaints about calls and texts this year. In the past, fraudsters needed to set up fake pension schemes, before persuading victims to transfer their money, but since pension freedom changes in April, anyone over 55 has been able to withdraw their pension savings and put them where they like.

Steve Eckersley, head of enforcement at the Information Commissioner’s Office, says part of the problem is people giving permission to be contacted by third party companies. Their pension provider then sells their details to companies that offer to help invest their funds. “They’re saying that they will share information with affiliated members or third parties. We say they should be clear about the organisations with which they share information,” commented Mr Eckersley.

The attitude people should adopt was well summed up by Which? Money – any call about transferring a pension or an investment opportunity is not going to be from a genuine company. Which? estimates that over the past two years, one in three people over 55 has been contacted about their pension without having requested it.

PPI scandal rumbles on but claims fall 49%
Disputes over the misselling of payment protection insurance (PPI) have nearly halved in a year, but the scandal is expected to rumble on. The Financial Ombudsman Service, which rules on unresolved cases, said it received almost 205,000 complaints about PPI in the 12 months to the end of March, down 49% on the previous year, but the total still dwarfs complaints about other financial products.

The ombudsman service said PPI cases could still take years to work through. PPI was designed to cover loan repayments in the event of redundancy or ill-health, but was widely missold. A huge programme of compensation was set up, which has now paid out more than £24 billion. Although PPI complaints are falling, some other products have seen a rise in complaints, including packaged bank accounts, credit broking, and interest rate hedging products.

Divorce case court costs set to pass £1m
A Russian beauty queen and her financier husband have been told to stop dragging their “unedifying” divorce dispute through the courts by a senior judge, after running up bills of more than £1 million. Ekaterina Parfenova, who was voted Miss World University in 1990, and lawyer Richard Fields, married in 2002 and have two children, but divorced in March 2013. They did not get a decree absolute and have been battling over Mr Fields’ £6 million fortune ever since. His company manages a hedge fund for top law firms in America. Miss Parfenova, who has been married twice, and Mr Fields, who’s been married five times, have already racked up legal bills of more than £1m.

Mr Justice Holman, one of the more senior family court judges in England, said the trial would be like taking part in a “boxing match”. As they prepared for a 10-day trial, which would cost an extra £250,000, he issued a final plea for them to stop dragging their dispute through the courts.

Researchers reveal age gap in workers faking ‘sickies’
Workers aged over 50 are four times less likely to ‘pull a sickie’ than younger staff, a study shows. Older employees were half as likely to take a genuine sick day, and far less likely to fake an illness, researchers said. The survey revealed that over the past five years 44% aged 20-39 had lied to their boss about being ill to get time off, compared with just 12% of those over 50. Nearly a third of under 40s saw sick leave as an ‘additional holiday’ that they deserve. Only 4% in the older category agreed.

In the past year, only a quarter of over 50s took days off work due to a genuine illness, compared with almost half of those aged 20-39. Among those who had taken a sick day after falling ill, a third of under 40s said this was due to a common cold, compared with one in 10 older workers. The survey, by insurance company RIAS, found more than half of younger employees who had a sick day admitted taking off more time than necessary. Only a tenth of older employees said the same.

Emergency Budget scheduled for 8th July
George Osborne will unveil an emergency budget on 8th July – the second financial statement in four months. The Chancellor will use the budget to make the changes laid out in the Conservative Party’s manifesto, including spending cuts and reforms to welfare and pensions. Key measures are likely to include laws to prevent rises in income tax, VAT and National Insurance. The Tories have also pledged to raise the inheritance tax threshold on homes to £1 million by 2017.

Mr Osborne may give more details of how he plans to raise the tax-free personal allowance and increase the higher-rate tax threshold. He may also explain how he plans to meet a commitment to pay down Britain’s debts in a “fair and balanced way”.

Pensioner bonds are Britain’s best seller
A massive £13 billion of market-leading pensioner bonds were snapped up by more than a million elderly savers. That means the bonds, which were withdrawn on 15th May, were the biggest-selling financial product in Britain’s modern history, the Treasury said. The 65 plus Guaranteed Growth bonds from National Savings and Investments, that went on sale in January, have annual interest rates of 4% for the three-year bonds and 2.8% for the one-year bonds – far higher rates than anything currently offered by banks or building societies. The maximum deposit was £10,000, but from the Treasury’s figures it seems each saver put an average of £1,300 into the bonds.

The Government had originally allocated £10 billion, but a stampede when the bonds first went on sale meant the NS&I website initially struggled under the weight of demand.
In February the Chancellor announced they would be on sale for four months with no ceiling, to ensure that those aged 65 and over who wanted to benefit from their market-leading rates had time to do so.

Charities benefit as Barbour sales rise
Its waxed jackets are as at home on the farm as they are on celebrities from David Cameron to Daniel Craig’s James Bond, which is literally paying dividends for the company. Barbour has reported a 10% jump in sales to £167.4 million for 2014 and a £10m dividend to be shared out among the Barbour family.

Founded in 1894 to supply oilskins to fishermen, the company saw profits dip slightly to £29.3m due to increased distribution costs, but said there would be significant improvement in 2015. Chair, Dame Margaret Barbour, who turned the business into an international fashion label, set up The Barbour Foundation in 1988 to support charitable causes. To date it has donated over £13.1m.

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