Global inflation is rising, Mervyn King, governor of the Bank of England, warned last night, adding that threats and opportunities from abroad were now more important for UK inflation than domestic economic issues, reports the Financial Times.
The paper says the bank’s governor did not indicate which way he believed UK rates should go next, but he made it clear that higher import prices – and not just oil prices – were one of his main concerns.
It quotes him as saying: “Even in China, with its growing manufacturing base and large pool of labour, some indicators are showing upward pressures on export prices. And in turn that is raising our import prices, over and above the increases resulting from higher energy costs.”
Trade figures last Friday showed underlying import prices rising at their fastest rate for over a decade.
An ever louder chorus of central bankers and international organisations are now saying that the good times might be over.
Even though China’s domestic inflation rate was stable at 1.4% in May, the bank said the governor was referring to rising inflation in China’s export prices for goods passing through Hong Kong.
King’s tough message on imported inflation came as annual producer price inflation jumped 0.5 percentage points in May to stand at 3%, its highest level since September.
The governor commented on the recent volatility in financial markets as an important threat to the outlook, but indicated he thought the recent losses were a correction in price after assets had become too pricey.
UNITED UTLILITIES has hired investment bank Merrill Lynch to advise it after receiving several bid approaches for its business outsourcing division Vertex, the Daily Telegraph reports this morning.
The paper says there has been speculation that Vertex, which recently made an operating profit of £20.8m, could be worth between £400m and £500m. If United is impressed by the offers, a formal sale process could be underway by September.
Industry experts say one likely interested party will be Indian-based conglomerate Tata Group, which owns the outsourcing company Tata Consultancy Services.
However, people close to the company insisted Merrill had only been appointed to deal with the bid approaches and that there are no current plans for a formal strategic review of the division.
United manages and operates the regulated electricity distribution, water and wastewater networks in north-west England, a region with about seven million people.
It also owns two support services businesses, United Utilities Contract Solutions and Vertex, which some analysts perceive to be non-core.
Vertex provides other companies with back office functions in areas such as customer services, human resources, procurement, finance and accounting.
Vertex recently won a £40m contract from Deutsche Bank's mortgage division.
ROYAL BANK OF SCOTLAND (RBS), whose chief executive Sir Fred Goodwin ran into trouble when investors thought he might be poised for a buying spree, stressed today that internal growth is key to the £65bn bank's fortunes in the first half of this year, reports the Times.
It says Sir Fred, forced to halve a direct stake he wanted to buy in the Bank of China to 5%, said RBS has performed well in the first half of this year and results due out in August would be in line with expectations.
Goodwin said RBS would demonstrate good organic growth in income, disciplined expense control and a small improvement in the overall credit picture.
He spent months last year telling the market the bank has no plans for a large acquisition and he told reporters on a conference call yesterday that the bank’s position on acquisitions has not changed.
Sir Fred said the group continues to achieve good growth in income, with strong performances in corporate markets, particularly in its global banking and markets operation.
Income from the retail market reflects the continuing move by British customers away from unsecured lending and towards savings and investment products.
The bank said its wealth management division was performing particularly well and that the insurance operation has continued to increase income despite keen competition.IFAonline
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