Growth Reported in Eurozone and US Economies

Confidence appears to be returning to the marketplace with both the Eurozone and the US moving out of recession in Q2 together with 2.5% growth reported in the US. Emerging markets (EM’s) on the other hand appear to be slowing down, largely due to reduced consumption in China which has had a corresponding effect on the EM counties who rely on providing natural resources to the Chinese economy.

Growth in the US economy is the most significant event with 2.5% growth reported in the second quarter. Growth in the US is often associated with a follow through effect to the rest of the world. The Federal Reserve indicated that it would taper its Quantitative easing programme as a result of this improvement in economic conditions. The Fed is expected to begin the winding down of its $85 billion bond purchase stimulus package towards the end of 2013.

The Eurozone on the other hand shows a different story. The economy grew at a rate of 0.3% in the second quarter. This was driven predominantly by growth in Germany (0.7%) and France (0.5%), whilst all the other major Eurozone economies shrunk slightly. This suggests that the Eurozone economy is still fragile and is being propped up by its stronger members in Germany and France. Weak economies such as Spain and Greece may well require a bail out later in the year which qould send the Eurozone spiralling back into recession.

The UK is also showing signs of economic recovery with the construction industry returning to growth in Q2. The UK economy is expected to grow by 1% in Q3 according to the Grant Thornton 2013 Business Confidence Monitor. However, this growth is fuelled by ultra low interest rates and the government’s new Home Buy Scheme which has propped up house prices. This could result in the UK being significantly exposed to a rise in interest rates and will forestall any real recovery for years to come. Nevertheless, over the short term we would expect the economy to continue to “recover” with Mark Carney’s promise of record low interest rates through to the next election in 2015.

Belsize Accountancy Launches Chinese Web Page

Belsize Accountancy launched a Chinese translation to its website following the rise in enquiries from Chinese clients in 2013. The website can be found on http://belsizeaccountancy.co.uk/chinese/ or via the languages section on the homepage.

We have also added a Chinese translator to our team. Belsize Accountancy specialises in working with contractors and small businesses in the UK. We can also assist with Visa and mortgage applications in the UK.  Feel free to contact us on 0207 043 0052 for more details.

Mark Carney Issues Forward Guidance Over Interest Rates

Last month Mark Carney issued “forward guidance” over interest rates in order to restore confidence in the UK housing market. Mark Carney’s forward guidance indicates that the Bank of England do not expect interest rates to increase till at least 2016. The Bank of England has indicated that it will keep interest rates at the current level of 0.5% until the UK unemployment rate falls below 7%. Unemployment currently stands at 7.8% and the fact that this not forecast to fall below 7% until 2016 is indicative of the weak economic conditions prevailing in the UK. The interest rates will also be dependent on some other factors including “financial stability” in the UK.

The principal behind the forward guidance is that if the market understands that interest rates will remain low for a few years, this will give the banks the confidence to lend and consumers the confidence to borrow.

So what can we take from the Bank of England’s Forward guidance? Firstly it is safe to assume that interest rates will remain low for a while. The Bank of England clearly intend to put all their efforts into maintaining interest rates at record lows in a bid to stimulate the housing market and Britain’s already flagging economy. Contractors and self-employed businesses can benefit from this as well run businesses will be able to secure cheap credit in order to develop and expand their businesses. Contractors with a strong earnings history will find it easier to obtain competitive mortgage rates and invest in property.