17 Jun 2015 09:26am

economia a.m.

An early morning round up of the day's news

Treasury braced as fears of Grexit soar

George Osborne warned yesterday that Britain should not underestimate the turmoil caused by Greece crashing out of the eurozone, as it emerged that Whitehall began a major contingency planning exercise this week. The chancellor said that there was a “very real risk” that Greece might fail to meet its obligations, and leave the eurozone. The statement is the most bleak assessment by a British minister and comes ahead of Thursday’s meeting of eurozone finance ministers to discuss the crisis. The chancellor also suggested that preparations inside government are in hand. There are fears that a Greek default could mean restrictions placed on money entering and leaving Greece, have ramifications for the financial services industries and cause problems for British tourists. A series of contingency planning meetings took place earlier this year. And as tensions continue, European Commission president Jean-Claude Juncker has accused the Greek government of misleading voters as Alexis Tsipras said its creditors were trying to "humiliate" the country.

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£1bn of pension savings cashed in following UK reforms

More than £1bn in pension savings have been cashed in by tens of thousands of savers since pensions reform came into force in April, the government has revealed. Chancellor George Osborne announced on Tuesday that 60,000 people had made use of changes, which allow them access to their pension savings from age 55. The chancellor, who announced the reforms in the 2014 Budget, said the figures showed the policy was “a real success”. “So far, in the few weeks since they came into effect, 60,000 people have made use of them. More than £1bn has been transferred out of people’s pension funds as a result. It is a sign that this is a real success,” the chancellor said during Treasury questions. Before the launch some industry figures had forecast that £5bn-£6bn could be cashed out in the first few months. However, some in the pensions industry say activity has been “inhibited” by the problems some providers have experienced in giving customers access to their money.

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Brussels to announce measures against corporations’ ‘sweetheart’ tax deals

Officials in Brussels will on Wednesday announce a series of measures designed to stamp out the toxic culture of secret, sweetheart tax deals for multinationals which prevails in a handful of EU member states and erodes tax receipts in other countries. Among the expected measures is an official blacklist of 30 tax havens, a register of the worst-offending jurisdictions identified by all member states. It is expected to include many frequently cited offshore jurisdictions as well as some surprise additions and omissions. Pierre Moscovici, the European commissioner for tax, will also announce a consultation on the extent to which big corporations’ most controversial tax arrangements should be made public — a key demand of many campaign groups. This move would include forcing country-by-country disclosures of business activities, as well as potentially insisting multinationals publish details of the bespoke rulings they have secured from individual tax authorities.

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Stores and staff survive cuts on the high street

High street retailers are showing signs of recovery after four years of collapses, cost-cutting and store closures, according to the latest “survival index”. Only three big retailers have been shunted into administration so far this year, compared with six in the same period in 2014, FRP Advisory, a restructuring firm, said. Of the 125 stores to be affected by the administrations of the fashion chains Bank, USC and Sphere & Turret since the beginning of January, about 70% survived as operating premises, mainly under new owners. That compares with 320 stores affected over the same period last year, where the “survival rate” of stores that stayed in operation stood at only 42%, FRP said.

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Savers face 10% hit to shares if Greece exits euro

British savers can expect at least 10% to be wiped off the value of pensions and Isas if Greece exits the euro, economists have warned as the crisis in southern Europe escalates. With Greece on the brink of bankruptcy, it has emerged that no talks to find a resolution have taken place since negotiations broke down on Sunday. The threat of Greek meltdown spreading through Europe is causing jitters among stock-market traders, with the FTSE 100 in London falling almost 6% in the two months since it reached a record high. The sell-off has hit people using this year's new freedoms to cash in pensions, some of whom have faced months of delays, and millions of savers who invested money in Isas at the beginning of the tax-year. Someone with £100,000 in the stock market in April has lost £5,800.

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Tokyo falls out of top 10 most expensive cities

Tokyo is on the wane. After holding the dubious title of the world’s most expensive city for expats for much of the past two decades, Japan’s biggest metropolis no longer even makes the top 10. At least those are the findings of the annual cost of living survey by consultants Mercer. The reason behind its demise — Tokyo slid from seventh to 11th spot after occupying third spot in 2013 rankings — was the weakness of the yen against the US dollar over the past year. Indeed, exchange rate fluctuations have played havoc with the 2015 rankings, which are now in their 21st year. Both the yen and the euro have weakened markedly against the US dollar and Chinese renminbi, while the Swiss franc has also strengthened after the surprise lifting of its currency cap at the start of the year. As a result, Zurich and Geneva have both moved up one place to occupy two of the five top spots in the rankings. Bern slid one place to ninth but only because of a strong showing from Shanghai, Beijing and Seoul.

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More than 130,000 Northern Rock mortgages owned by zombie bank

Around 130,000 customers of Northern Rock will find out in the coming months that the mortgage they have with the Newcastle-based lender, which was nationalised in 2008, is now owned by somebody else. The borrowers will receive notification from the zombie bank, which took over the parts of Northern Rock rescued by taxpayers, that their home loans have been sold off as part of an attempt to help repay a loan from the Treasury. It will be the moment that those 131,000 customers realise their mortgages were used to fund Granite, a complex financing vehicle that Northern Rock used to raise £50bn on the financial markets – to fund its mortgage lending before the credit crunch. At its peak, Granite was the biggest financing vehicle of its kind in Europe. Northern Rock sold mortgages to Granite, and Granite paid for them by selling bonds to investors. It should have been a virtuous circle but when investor appetite for those bonds evaporated, the bank had a very public funding crisis.

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Libor trial: Tom Hayes compares derivatives market to wild west

Tom Hayes, a former trader on trial for alleged interest-rate rigging, described the broking market he worked in as the wild west, a place with no rules and where relationships relied on lavish entertainment, a court has heard. The court was told on Tuesday that it was this high-pressure environment which took its toll on Hayes, prompting him to threaten brokers and pick fights with colleagues to move interest rates to aid his trading. Hayes denies eight counts of conspiracy to defraud between August 2006 and September 2010. Prosecutor Mukul Chawla, prosecuting, has said Hayes had initially made “complete confessions” to investigators during 82 hours of interviews after his arrest in December 2012. The trial heard on Tuesday how Hayes, a former UBS and Citigroup yen derivatives trader, threatened to drop brokers if he felt they failed to help persuade traders at other banks to move benchmark interest rates in directions that suited his trading book.

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Nestle cuts Africa workforce as middle class growth disappoints

Nestlé, the biggest food and drinks company, is cutting 15% of its workforce across 21 African countries because it says it overestimated the rise of the middle class. “We thought this would be the next Asia, but we have realised the middle class here in the region is extremely small and it is not really growing,” Cornel Krummenacher, chief executive for Nestlé’s equatorial Africa region, told the Financial Times in an interview at the regional headquarters in Nairobi. The region covers 21 countries including Kenya, DR Congo and Angola. The retrenchment is in contrast with Africa’s consumption-fuelled growth story, which has drawn investors in search of a new, fast-growing market. It underlines difficulties for foreign entrants into the sub-Saharan markets, which are dominated by family businesses broadly thriving on local know-how and the sale of cheap products tailored to individual countries.

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Helen Roxburgh