‘Bristol Pound’ currency to boost independent traders

By Dave Harvey

Feb 5 (BBC) — The Euro is in trouble, the world’s financial system is in turmoil. Is this the perfect time for cities to go it alone, and print their own money?

A group of independent traders in Bristol are launching their own currency, with the backing of the council and a credit union.

The “Bristol Pound” will be printed in notes, and also traded electronically.

There are other local currencies in the UK, but this is the first which can be used to pay local business taxes.

Ciaran Mundy, the director of the Bristol Pound, explained the concept behind the currency.

“Big companies just hoover up money from a local area,” he told me.

“Money goes into their financial system and typically out into London and into the offshore sector.”

Corporate challenge
But by definition, Bristol pounds must stay in the city. Spend a tenner in a Bristol bakery, and they must use it to pay their suppliers or staff. In turn, those companies will have to use the money within the local economy.

“We’ll be driving more business to independent traders, and ensuring the diversity of our city, which is one of the things people love about Bristol,” Mr Mundy said.

Already more than 100 firms are signed up. A family bakery, the Tobacco Factory Theatre, the Ferry company, dozens of small cafes – even Thatcher’s Cider will accept Bristol pounds.

So how will it work?

They will print notes in £1, £5, £10 and £20 denominations. A Bristol pound will be worth exactly £1 sterling.

People will open an account with the Bristol Credit Union, which is administering the scheme, and for every pound sterling they deposit, they will be credited one Bristol pound.

This money can then either be cashed, or used electronically to pay bills online or even with a mobile phone.

Since the money is held by the credit union, which has FSA backing, it will have the same protection as any other deposit account. The standard government scheme guarantees up to £85,000 per person.

Bristolians are being challenged to help design the new notes. The organisers have already created a logo, and produced security features to counter forgery.

There is a silver hologram design, a gold foil strip with serial numbers embedded, and other features which are impossible to reproduce.

But whose face should be on the notes? That is down to Bristolians.

Small change?
“Bristol’s own currency should reflect the values and the lives of people who live here,” explained the designer, Adele Graham.

“We’re open to any suggestions. It could be famous people, but it can be any design at all which Bristolians feel represents their city.”

Local people can submit their ideas on the Bristol Pound’s website. The competition will run until the end of February, and the notes will be launched in May.

But will the Bristol Pound really take off?

Most local currencies have remained small. The Totnes Pound was the first to launch, in Devon in 2006, and has 70 traders involved.

Eighteen months ago Stroud, in Gloucestershire, starting printing its own currency, but to date no more than 30 firms are taking the money.

Bristol’s organisers point to two key differences: online banking, and council support.

Since the scheme is run by a bona fide financial institution, the Bristol Credit Union, traders can pay each other large amounts of money at the click of a button.

Also unique is the ability to pay local business rates in local currency. The council leader, Councillor Barbara Janke, is fully behind the scheme.

She told me: “This is a chance to demonstrate the economic resilience of the city.

“We want to make it as easy as possible for people to use the Bristol Pound.”

‘No real boost’
Paying business rates in Bristol pounds means firms need not worry about being stuck with thousands of pounds they can’t spend, if their own suppliers refuse them.

Naturally, there are sceptics. Will people find it inconvenient to carry two kinds of notes in their pockets? Will it be more than a gimmick?

Interestingly, it is the prospect of success that worries some the most.

Ben Yearsley understands money. Big money. He is an investment strategist at Hargreaves Lansdown, the Bristol finance house which looks after £22bn of people’s savings.

He points out that the scheme will do nothing to help Britain’s economic recovery.

“This won’t boost spending,” he explained. “It will merely move money from one sector to another, from national firms to local ones.”

And if the Bristol Pound really works, Mr Yearsley worries that big national firms may be put off.

“A lot of people work for the national companies, and you may actually cause an increase in unemployment. Worse, there may be a brake on investment in the city.”

But the organisers think he worries too much.

Stephen Clarke, a local lawyer who is working for the new currency for nothing, said: “This is not an attack on national chains.

“We just want to preserve our local independents, and you can see how hard it is for them at the moment.”

Whenever local shops close down, and supermarkets or chain stores open, there are complaints about “cloned high streets” and “chain store Britain”.

Well, now if people really want to support independents, they can quite literally put their money where their mouth is.

U.K. to Propose Work-for-Benefits Program, Sunday Times Reports

By Svenja O’Donnell

Jan 8 (Bloomberg) — The U.K. coalition government is planning a compulsory community work program for the long-term unemployed, the Sunday Times said, citing Employment Minister Chris Grayling.

The plan will include stopping benefits for as many as three years for those who refuse to sign up, the newspaper said.

Grayling has indicated his support for the plan, saying a “work for dole” program will help curb the U.K.’s expenditure on benefits for the jobless, the paper said.

People who have been unemployed for three years or more will be forced to work unpaid for six months under the terms of the program, the Sunday Times said.

It is not a sign of prosperty…

Resurgent self-employment soars to 75-year high

By Richard Tyler

Dec 26 (Telegraph) — Britain is witnessing a renaissance in self-employment on a scale not seen since the 1930s, the latest business figures show.

Barclays estimates that nearly 480,000 new businesses were created over the past year a record and said official statistics revealed that self-employment now stood at the highest level relative to the total working population for 75 years.

The UK is in the middle of a boom for start-ups. Our best guess is that in England and Wales we are up 4pc to 5pc in the year to November and thats on the back of two strong years, said Richard Roberts, small and medium enterprise analyst at Barclays.

He said more people were setting up their own ventures because being self-employed had become more socially accepted.

The enduring nature of the economic downturn was also a factor. Few people will voluntarily risk their savings during short, sharp recessions, Dr Roberts said, with any increase in entrepreneurial activity coming from people shifting from unemployment into self-employment.

As the economy has shown little sign of recovering for the past two years, people were taking the plunge, he said. Most new business owners would have spotted an opportunity to make money, but some will have been made redundant and had no choice.

France and Germany also announce agreement to target 0 deficits for all euro members which
takes the steam out of any relief rally as they solve the solvency issue.

Not much upside for the world economy when it all thinks and acts like this:

Osborne Vows More Austerity as Slump Hits U.K. Deficit Plan

By Gonzalo Vina

Nov 30 (Bloomberg) — Chancellor of the Exchequer George Osborne said Britain faces two extra years of austerity as he sought to shore up his deficit-reduction plans, intensifying a conflict with unions that are staging a mass walkout today.

Osborne used his end-of-year economic statement to Parliament yesterday to announce 23 billion pounds ($36 billion) of additional spending cuts after the Office for Budget Responsibility slashed its forecasts for economic growth. The fiscal watchdog predicted Osborne will need to borrow an extra 112 billion pounds by 2016 and said more than 700,000 public- sector workers will lose their jobs over the next six years.

“Osborne acknowledges that the consolidation program is behind schedule and aims to make up for lost ground with an even longer period of fiscal austerity,” Michael Saunders, chief European economist at Citigroup in London, said in an interview. “The government has no alternative. If they slide, the markets will put the U.K. from Category A to Category B.”

Unions say as many as 2 million public-sector workers will join today’s 24-hour strike over plans to make them contribute more toward their pensions and retire later. Osborne is extending his spending cuts beyond 2015, when they were due to end, risking a backlash from voters in the election due in May of that year.

*DJ UK Cameron: Economic Threat As Serious As It Was In 2008
*DJ UK Cameron: “We Need To Tell Truth About Econ Situation”
*DJ UK Cameron: This Was Debt Crisis, Not Normal Recession
*DJ UK Cameron: Crisis Caused By Too Much Borrowing
*DJ UK Cameron: More Govt Borrowing Would Make Crisis Worse

???

*DJ UK Cameron: More Borrowing Risks Higher Rates, Less Confidence

???

So much for his legacy

Cameron Says Nothing Is Taboo as U.K. Tries to Boost Economy

By Eddie Buckle

Sep 4 (Bloomberg) — Prime Minister David Cameron said “nothing should be taboo” as the government considers extra measures this fall to boost Britain’s flagging economic growth.

“We haven’t gone far enough,” Cameron wrote in an article for today’s Mail on Sunday newspaper. “My order to Whitehall this autumn is to think even more boldly about what we can do to put the turbo-boosters on Britain’s economy.”

The government will if necessary tackle lobby groups “that are defending every last bit of the regulation that crushes business,” Cameron wrote. “And yes, if it means putting even more pressure on the banks so they lend more to small businesses, then we’ll do that too.”

U.K. economic growth slowed to 0.2 percent in the second quarter and the Bank of England cut its growth projections last month to about 1.5 percent this year and 2.2 percent in 2012. Banks have warned that implementation of any proposals to be made next week by the government-appointed Independent Commission on Banking to strengthen lenders’ financial positions should be postponed because of the faltering recovery.

HIGHLIGHTS:

U.K. Manufacturing Contracts Most in More Than Two Years
Fisher Says Bank Capital Levels Should Reflect Tail Risks
U.K. House Prices Decline the Most in 10 Months, Nationwide Says
Quantitative Easing Prospects Rise as UK Growth Forecast Cut
BCC Lowers U.K. Outlook, Pushes Back BOE Rate-Increase Forecast
Continued Stimulus Is Not Called for, Sentance Writes in the WSJ

Moody’s Analyst: Weak Growth, Fiscal Slips Could Lose UK ‘AAA’

Jun 8 (MNI) — The UK could lose its prized ‘Aaa’ credit rating if growth remains weak and the coalition government fails to meet its fiscal consolidation targets, a senior analyst at ratings agency Moody’s has told Market News International.

Sarah Carlson, VP-Senior Analyst at Moody’s, told MNI that weak growth and fiscal slippage could see the country’s ‘debt metrics’ deteriorate to a point that would trigger a downgrade.

“Although the weaker economic growth prospects in 2011 and 2012 do not directly cast doubt on the UK’s sovereign rating level, we believe that slower growth combined with weaker-than-expected fiscal consolidation efforts could cause the UK’s debt metrics to deteriorate to a point that would be inconsistent with a Aaa rating,” she said.

Carlson also said that due to their sheer size the UK’s austerity plans have a degree of ‘implementation risk’.

“As is true of any large fiscal consolidation effort, the government’s austerity plans entail some implementation risk. Moreover, a multi-year austerity programme of this magnitude is a political challenge,” she said.

Carlson’s comments come in a week of frenzied debate as to whether UK Chancellor of the Exchequer George Osborne’s fiscal consolidation plans are working.

At present, the government aims to close Britain’s structural deficit will by the end of 2014-15, slashing departmental budgets by almost stg100 billion over four years.

But a weaker-than-expected Q1 GDP outturn and a slew of disappointing economic data since then, has led several economists to question the wisdom of such a rapid deficit-reduction plan while others have said there is no other choice.

On Sunday, a group of leading economists led by Prof. Tony Atkinson of Oxford and centre-left pressure group Compass wrote a letter to the Observer newspaper questioning the wisdom of the current plan.

Carlson said that the government’s creation of a cross-departmental committee to monitor progress in public spending cuts could be useful in reinforcing commitment to consolidation.

“The creation of the Public Expenditure Cabinet Committee (PEX) – a cross-government spending committee that will monitor the progress of individual departments against their budget plans – has the potential to be a promising institutional change that could further bolster confidence in the government’s ability to follow through with its ambitious austerity programme.”

On Monday, a group of centre-right economists wrote a letter to the Telegraph newspaper which argued against relaxing austerity measures.

In its Article IV Consultation Report on the UK released Monday, the IMF said that there had been unexpected weaknesses in UK economy over the past few months but labelled the troubles temporary and advised the government to keep to its current deficit-reduction plan.

U.K. CIPS May Manufacturing Index Falls to 20-Month Low (Bloomberg)

A U.K. manufacturing index, based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply, declined to 52.1 in May from a downwardly revised 54.4 in April. “Domestic market weakness was the main drag on order books and output,” Rob Dobson, senior economist at Markit, said in the statement. “This was exacerbated by the additional bank holidays in late April, which fell during the early part of the latest survey period, and ongoing supply-chain disruption following the Japanese earthquake.” Producers of consumers goods and small-scale manufacturers were hit hardest last month as output and new orders fell for the first time since the middle of 2009, CIPS said.

U.K. April Mortgage Approvals Fall to Lowest in Four Months (Bloomberg)

Lenders granted 45,166 loans to buy homes, compared with a revised 47,145 the previous month, the Bank of England said. The April figure is the lowest since December. The Bank of England figures show net mortgage lending rose 739 million pounds ($1.22 billion) in April and gross lending amounted to 11.2 billion pounds. Consumer credit rose a net 504 million pounds in April. Credit-card lending increased 347 million pounds, the most since February 2010, while personal loans and overdrafts rose 157 million pounds. A measure of M4 money-supply growth that the central bank uses to assess the effectiveness of its asset purchases fell 2 percent in the three months through April on an annualized basis.

U.K. Inflation May Be Hurting Economic Growth, Sentance Says (Bloomberg)

Former Bank of England policy maker Andrew Sentance said U.K. inflation at more than twice the central bank’s 2 percent goal may be hurting economic expansion.
“The fact that inflation is high is not necessarily associated with strong growth,” he said in an interview with Sky News late yesterday, marking his final day as a member of the Monetary Policy Committee. “In some ways inflation is squeezing out the growth of the economy because it is squeezing people’s disposable incomes.”

Sentance, who will today be replaced by former Goldman Sachs Group Inc. economist Ben Broadbent, said interest rates need to start going up “gradually” now to curb consumer price growth and prevent “much sharper” rate increases in the future.

He also said the central bank’s view of inflation didn’t put enough weight on the influence of the international economy, commodity costs and the decline of the pound.

“I think we should revisit our thinking on the economy,” he said. “We went through a period where there seemed to be a very predictable relationship between growth and inflation. Now we’re in a much more complex situation.”

Sentance said it was difficult to judge how long the impact of the pound’s weakness on inflation would last, as it hadn’t been offset by the impact of the recession holding down prices and wages.

“The issue with the fall in the value of the pound is how big its effect will be and how long it will continue,” he said. “We’re an economy very open to international trade and the value of the pound affects the amount of competition on the markets, the way in which companies price in markets so I think we do have to take the value of the pound very seriously.”

U.K. Housing Transactions to Fall 5.2% This Year, CML Forecasts (Bloomberg)

U.K. housing transactions will probably fall 5.2 percent this year before rising in 2012 as the economy experiences a “weak and patchy recovery,” the Council of Mortgage Lenders said.

Transactions will fall to 840,000 this year from 886,000 in 2010, the London-based group said in a report on its website today. They will rise to 900,000 in 2012, matching the level in 2008. Gross mortgage advances will amount to 140 billion pounds this year and 150 billion pounds in 2012, which compares with
253 billion pounds in 2008.

The CML sees the Bank of England keeping its key interest rate at 0.5 percent for “most” of this year before starting a “modest” tightening cycle that will continue through 2012.

“The prospect of a gentler upward profile for interest rates significantly mitigates the adverse impact on household budgets of weak growth in incomes, and this will help borrowers keep up with their mortgage payments,” it said.

U.K. Consumer Spending Rebound Likely to Be Very Slow, FT Says (Bloomberg)

U.K. consumer spending is likely to recover more slowly than in any post-recession period since 1830, the Financial Times reported, citing its own analysis of forecasts from the Office for Budget Responsibility.

Households are forecast to spend 5.4 percent more in 2015 than they did before the 2008 financial crisis; at the equivalent stages of the 1980s and 1990s recessions, spending was 20 percent and 15 percent higher, respectively, the newspaper said.
In the 18 significant U.K. recessions that have occurred since records began in 1830, consumer spending rose 12 percent above its previous peak within seven years, the FT said, citing Bank of England figures.

Conclusion: they’re understating the general weakness they’re sensing.

From Karim, my partner at Valance:

Karim writes: