NEWS
NATIONAL NEWS NATIONAL LIVING WAGE Employers have responded to the new National Living Wage (NLW) by raising prices or reducing profits rather than cutting jobs, according to a survey from the Resolution Foundation. The wage, which requires employers to pay staff aged 25 and over at least £7.20 an hour, was introduced in April. This report is the first snapshot of how firms have reacted to the NLW. It comes after the Office for Budget Responsibility predicted it would lead to 60,000 job losses by 2020. Five hundred companies, covering a range of UK businesses, were questioned just before the referendum on Britain’s membership of the EU, of which 215 said that the new NLW had impacted their wage bill. Some 36% of those affected by the NLW said they had put up their prices to compensate for the higher wage cost, while 29% said they had reduced their profits. Despite reports of some employers cutting back on staff terms and conditions, the survey found that only 8% had cut paid breaks, overtime or bank holiday pay.
TANKING BANKING There was mention during the referendum build-up of a huge black hole in the Euro banks balance sheets but many cast it aside as part of the ‘project fear’ campaign - but perhaps not. Deutsche Bank shares hit a new record low. Its value has halved since the beginning of the year. So is it now the most dangerous bank in the world? According to the International Monetary Fund - yes. Last week, the IMF said that, of the banks big enough to bring the financial system crashing down, Deutsche Bank was the riskiest. Not only that, Deutsche Bank’s US unit was one of only two of 33 big banks to fail tests of financial strength set by the US central bank earlier this year. The other was Santander. It’s not hard to get scared when you look at a few numbers. In simple terms any bank is worth the difference between what it’s owed and what it owes. In the case of Deutsche Bank that means the difference between assets of 1.64 trillion euros (yes, trillion) and liabilities of 1.58 trillion euros. Its net value is 60 billion euros. Sounds like a lot. But the value of what its owed doesn’t need to move by much to wipe out its value completely. Italy’s banks are the latest trouble spot for the eurozone. They are struggling with a burden of bad debt, loans that are unlikely ever to be repaid fully. They are a potential flashpoint in an economy that has for some time been seen as posing wider risks to the EU’s currency area. Meanwhile, the Italian government is considering a banking sector bailout which could breach European Union rules. It’s the size of the Italian economy and its government debt that makes the country a smouldering financial volcano. The risks are aggravated by the political situation. It’s the third-largest economy in the eurozone. The government debt burden, depending on which figures you look at, is certainly one of the largest in the eurozone, indeed the largest by one measure. One of the roots of the problem is Italy’s two decades of dismal economic performance. Measured by total economic activity (gross domestic product or GDP), the economy remains about 8% smaller than it was at the onset of the international financial crisis. It is roughly the same size as it was at the turn of the century. That has made it harder to generate the tax revenue needed to keep the debt burden down. It has also increased the chances of businesses getting into difficulty and being unable to maintain their loan payments. The result: Italian banks are weighed down with a massive problem of bad debts, or non-performing loans (NPLs), worth €360bn (£307bn), equivalent to about a fifth of the country’s annual economic activity.
“If Monday had a face... I would punch it.” 20