Growth Budget
Growth in the UK economy is expected to slow from 3% in 2007 to 1.75%-2.25% in 2008 then pick up to 2.25%-2.75% in 2009 and 2.5%-3% in 2010, according to the estimates given in Alistair Darling’s Budget. Compared with the October pre-Budget Report, these figures are a quarter-point lower for 2008 and 2009. The Treasury’s forecast for 2010 is unchanged. CPI inflation is forecast to be 2.5% in 2008, half a point higher than the Bank of England’s target, before reverting to 2% in 2009 and 2010.
www.hm-treasury.gov.uk

Risky premium
There has been a sharp increase in the eurozone equity risk premium to 7.04% in mid-February, well above the historic 4.0%-4.5% average, according to Citigroup analysts. This implies that either stock markets are undervalued or that consensus estimates are too high. Consensus estimates suggest global earnings growth of 12%-13% in the coming year and 11% in Europe, but they say that “the downgrade cycle has only just begun”: they expect widespread downgrading of these figures.
accounting.valuation@citi.com

Going for growth
Around 80% of pension funds appointing equity investment managers in 2007 gave them “unconstrained” mandates, rather than demanding performance against an index, according to Hewitt Associates. Over the past three years, these managers have outperformed global and UK market indices by 5.2% pa. “Our clients want fund managers to have the ability to back their investment judgement and they are selecting managers who have the flexibility to do so,” says Lennox Hartman, head of manager research.
www.hewitt.com

In the bank
Analysis by KPMG of the five leading British banks reveals that they had, in aggregate, a 0.7% increase in profit before tax in 2007 to £38.6bn, thanks to the performance of RBS and HSBC, which reported increases of 7.8% and 9.6% respectively. Of the five banks, RBS had the lowest increase in its impairment charges on loans and advances (13%) and HSBC the highest (63%) as the effects of “market dislocation” hit.
www.kpmg.co.uk

At your service
The mood among the UK service sectors has turned more gloomy in the past three months, according to a regular CBI/Grant Thornton survey. Consumer service sales volumes fell sharply, while business services’ growth rate slowed to its lowest level since 2003. Record negative scores have been recorded in relation to future expansion plans, mostly because of the expected level of demand. Competition and the availability of professional staff were additional expansion constraints for business services companies.
www.grant-thornton.co.uk

Business buyers
UK companies made overseas acquisitions worth £25.8bn in 2007 Q4, up from £10.2bn in Q2, though the increase was distorted by the £18.5bn acquisition of Alcan Inc by Rio Tinto plc, says the ONS. UK acquisitions of UK companies fell, from £7.8bn to £2.7bn, as did overseas purchases of UK companies (£15.3bn down to £8.2bn).
www.statistics.gov.uk