This is the first really concrete piece of news we’ve had on the UK housing situation. George Wimpey Plc, Britain’s second-biggest homebuilder by revenue have just announced that full-year pretax profit probably fell for the first time in a decade:
U.K. sales slipped 1 percent to 12,100 homes, with the average selling price dropping 4 percent, more than analysts had expected. Pretax profit was as much as 22 percent below 2004’s record level and at the lower end of estimates, Chief Executive Officer Peter Johnson said in an interview today.
Prospective buyers shunned purchases as Britain’s benchmark interest rate reached 4.75 percent last year, making mortgage payments more expensive. A quarter-point cut by the Bank of England on Aug. 4 has yet to revive prices. Wimpey last reported a decline in annual pretax profit in 1995. The second-half figure also fell, Johnson said today.
I don’t know if he had Europe specifically in mind, but this is the message from Singapore’s finance minister Lee Kuan Yew in this interview in the latest issue of Yale Global Online. As he puts it:”If you’re not driven by profit, and do what the communists used to, which means price equals cost plus, then your economy will collapse.” Is this message being heard here in the EU? If the comments my posts on Indian outsourcing are anything to go by, it isn’t. And if the results of the survey mentioned in my last post are well founded, the consequences of this neglect may not be long in making themselves felt. To give a measure of where we may be on this one, France currently has China at number 16 on its list of trading partners, behind Peru. Turning your back on global supply chains won’t save your job, it will only completely finish it off. Continue reading →
Well, well, what do you know: Paramalat’s real debt is much bigger than was first thought. What a surprise. According to the Financial Times Parmalat’s gross debt now stands between ?14.5bn and ?14.8bn ($18.08bn-$18.46bn). At the same time its main Italian operations barely made a gross operating profit last year. Meantime Italy’s unions are threatening a strike iif the government reduces the regulatory role of the central bank. The dispute has arisen as a result of the Parmalat scandal, which the government blames partly on a failure of oversight at the central bank. As a solution the finance ministry wants to reform financial market regulation in Italy so that the central bank would no longer supervise corporate bond issuance and competition in Italy’s banking sector. The unions object to this.
Actually this was meant to be a quick post, but while writing it I cannot help reaching the conclusion that Italy may be begining to fall apart. Just wait till you read this. Continue reading →