London-Business-Review.com

26 Jan 2009: Barclays has repeated that it would report a pretax profit of £5.3 billion, or $7.3 billion, but that it would write down another £8 billion.

“The profit is struck after all costs, impairment and market valuations,” the bank said.

Barclays had said on January 16 that profit would be well ahead of market expectations. The bank is to release full results February 9.

Barclays shares, which have fallen more than 50% this year, rose 36% in early London trading. The stock has been shaken by fears that the British government will eventually have to nationalize much of the country’s financial sector, a fear given substance last week by the news that the state was raising its stake in Royal Bank of Scotland to nearly 70% from just under 60%.

Investors were reassured by Barclays chairman, Marcus Agius, and the chief executive, John Varley, who wrote in an open letter that the bank would not seek further capital either from the private sector or from the UK government.

Barclays on October 31 raised more than £7 billion in new capital from investors, including Middle Eastern governments.

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Our Analysis is to take the Barclays statements with a pinch of salt. The health of the UK banking industry has been shaken to the core, and the investors should go with numbers, and not just assurances. The bank is to release full results Feb 9. Better to wait and watch.

600,000 people could lose their jobs in Britain in the year 2009, making 2009 the worst year for unemployment since 1991, personnel experts warned on Monday.

The Chartered Institute of Personnel and Development (CIPD) said the recession could push unemployment close to 3 million people before the economy can begin to recover. And that’s assuming any new major global business developments don’t happen in the next 4-6 quarters.

John Philpott, the CIPD’s chief economist, said in its annual Barometer Report:

By the end of 2009 the number of people unemployed and actively seeking work will have increased to 2.8 million, one million above the autumn 2008 figure. The first few months of the year are likely to be the worst for almost two decades. Our current expectation, based on available survey evidence and employer soundings, is that the number of redundancies will jump sharply in the early months of 2009, once employers take stock of the economic outlook. The period between New Year and Easter is likely to be the worst for redundancies since 1991.

UK’s retailers have been closing down or facing severe financial pressure. Retail business is a great indicator of the ground level health of an economy, and therefore it is a worrying sign.

• The CIPD’s warning came as another British retailer - children’s clothing shop Adams - fell into administration.
• The demise of Adams, which employs about 2,000 staff, follows that of other nationwide retailers including the chain store Woolworths, the music chain Zavvi, tea and coffee outlet Whittard, and menswear group The Officer’s Club.
• Woolworths collapsed into administration in November 2007 and all its stores would close by 5th Jan 2009, with the loss of 27,000 jobs.

The CIPD also conducted a survey of 2,600 workers and found that those employees who keep their jobs expect to have their pay frozen or even cut in 2009.

Some 28 per cent do not expect a pay rise in 2009, while 26 per cent think their pay rise will be lower than in 2008. Only 11 per cent are expecting a higher wage increase than last year and two per cent expect a pay cut.

Against this backdrop, employers will need to work hard to find new ways to motivate their employees to perform. Targeting pay increases to reward superior performance, making intelligent use of non-financial rewards, and targeted investment in training and development are all ways of making limited budgets go further.

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