Inflation Low Brings Shoppers Christmas Cheer

Plunging fuel and food costs left the core measure of inflation at a 12-year low last month, official figures have shown.

The Office for National Statistics (ONS) calculated the consumer prices index (CPI) at an annual rate of 1% in November - showing costs were rising at a weaker pace than wages overall as the Christmas shopping season got under way.

The ONS credited a 5.9% fall in fuel prices compared to November 2013 and a 1.7% drop in food costs over the same period as supermarkets battled for market share amid the continuing price war.

In addition to the lower grocery costs, it has been supermarkets which have led the way in cuts to fuel costs, with both unleaded and diesel falling by 3p-per-litre in November alone as the chains use cheaper fuel prices to bolster their wider offering.

Separate industry figures, released by Kantar WorldPanel, suggested cheaper groceries had meant savings for shoppers of £182m over the past 12 weeks.

Video: Inflation Reaches 12 Year Low

Chancellor George Osborne hailed the low inflation rate as "good news".

"We've got low inflation, rising pay cheques and we've got economic growth at a time when the world economy is increasingly unstable," he said.

November's inflation figure marked a surprise easing in the rate, given that economists were expecting a flat picture after CPI was measured at 1.3% in October.

But the strength of sterling in recent months, combined with dramatic declines in oil prices, have also helped push down inflation by cutting import costs.

The ONS said computer game costs contributed to the decline in the inflation rate, too.

It means Bank of England governor Mark Carney only just avoids having to write to the Chancellor George Osborne to explain why inflation is more than 1% off the bank's 2% target.

Mr Carney has already acknowledged that he is likely to have to write to Mr Osborne in the coming months as oil costs continue to decline.

Video: Some Cheer For Big Supermarkets

CPI has not been as low since September 2002 and was last lower in June 2002.

The fall in inflation adds to hopes of a rise in real-terms wages which have lagged behind the increasing cost of living for six years.

Additional figures from the ONS, due on Wednesday, are tipped to show wages growing at an annual rate of 1.5% - suggesting that the squeeze on earnings is easing in the short term.

However, there are fears that an inflation rate below 1% could move the UK uncomfortably closer to the scenario playing out in the eurozone where there are concerns about a damaging deflationary spiral.

Mr Carney warned that the falling oil price might present some risks to financial stability.

"Geopolitical risks could intensify. Inflation expectations could be further depressed in economies, such as the euro area, where core inflation is

already weak, slowing nominal income growth and increasing the burdens of debts," he said.

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Google Shuts Down Spanish News Service

Google has gone ahead with its threat to shut down its news service, Google News in Spain, before a Spanish intellectual property law comes into effect in January.

The service, which provided aggregated news content, has been replaced by a message from Google saying it is 'incredibly sad' to announce the removal of Spanish publishers from the site, as well as the closure of Google News in Spain. 

The new law, dubbed the Google Tax, will require Spanish publications to charge services such as Google News to feature their content, even if they are prepared to give it away for free. This content includes headlines as well as snippets of articles. 

However, Google said this approach was unsustainable because it makes no money from its news service. 

It said: "This legislation requires every Spanish publication to charge services like Google News for showing even the smallest snippet from their publications, whether they want to or not. As Google News itself makes no money (we do not show any advertising on the site) this new approach was not sustainable."

The new law has been backed by AEDE, the Spanish Newspaper Publishers' Association, which represents large news organisations.

However, the AEDE is now calling on Spanish government authorities to intervene amid fears that all Spanish news publications will be also dropped from Google's main search engine. 

AEDE's Irene Lanzaco told The Spain Report: "We're not asking Google to take a step backwards, we've always been open to negotiations with Google". However, she added, "Google has not taken a neutral stance".

"Of course they are free to close their business, but one thing is the closure of Google News and quite another the positioning in the general index". 

Those who use Google's standard search in Spain will still be able to carry out their own search outside of Google News to find articles from Spanish publications.

However, as the law applies to news aggregators, users will not have the top stories sorted for them. Spanish publications can also anticipate a large decline in internet traffic. 

The Google News service, a dominant news aggregator, accounts for 80% of the European search market. It is available in over 70 international editions and in 35 languages.

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Rouble Woes: Six Stages Of A Currency Crisis

If you've never witnessed a currency crisis, here's how they usually go, in six simple steps:

1. Your currency gradually creeps downwards. This can happen over a matter of months as your current account deficit - the country's ledger with the rest of the world - deteriorates.

2. Suddenly, overnight, investors panic. Their withdrawals of money from your country, until now a steady stream, become a flood.

3. You raise interest rates - one point, two points, and then more.

4. But rather than being reassured, investors sense panic. The capital outflows accelerate and your currency collapse continues.

Video: What's Causing Falling Oil Prices?

5. Eventually, there is nothing for it. You yank up interest rates to eye-watering levels in the full knowledge that your country will be plunged into recession; that unemployment will skyrocket. You dig into your international reserves.

6. Finally, when those reserves run out, you call on your neighbours or the International Monetary Fund for a bailout.

That's the pattern that has repeated itself on countless occasions in economic history, whether in Britain in 1992, in Asia in the late 1990s or in much of the Western world in the 1930s.

But, if you'd rather see a currency crisis in the flesh, look no further than Russia.

The country is sitting at stage four in this depressing sequence.

It is reliant on oil for around two thirds of its exports, so the recent fall in crude prices has been disastrous for an economy still reeling from the sanctions associated with its Crimea exploits around Ukraine.

On Monday, the rouble collapsed by a tenth. Then, in the middle of the night (1am, to be precise), the central bank raised interest rates from 10.5% to 17% (they were below 6% at the start of the year).

Video: Rouble Trouble: Russia Takes Action

It was the biggest rate hike since 1998 (when rates were lifted to 150%) and it briefly stemmed the outflows.

But as the day went on the currency started to fall again, from 60 to the dollar to 70 to the dollar and, briefly, to almost 80 to the dollar.

It steadied up around lunchtime, though where it ends up the day is, frankly, anyone's guess.

That Russia is in big economic trouble is hardly news. It has been struggling for some months.

But as stage two above underlines, the shift from chronic underperformance to sudden crisis is usually very sudden and unpredictable. We are now past that.

Whether Russia can arrest things now or will succumb to stages five and six remains to be seen.

The country has sizeable foreign reserves thanks to many years of high oil prices.

Video: Putin Points Finger At The West

It has shown repeatedly (think the 1990s, think Stalingrad and Leningrad) that its people can withstand deep economic hardship. But such reserves of money and fortitude can only last so long.

If oil prices remain low and investors continue to flee the country, it is not inconceivable that it eventually calls on its allies for some sort of financial assistance.

The big question then is whether the IMF (largely controlled by the US) would actually help out.

After all, it generally prefers not to lend to countries which are under international sanctions.

Winters are always hard in Russia. This year's will be one of the hardest yet.

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Co-operative Bank Fails Annual Stress Tests

By Mark Kleinman, City Editor

Britain's eight biggest lenders would accumulate losses of £13bn during an 'Armageddon'-style recession in which the Co-operative Bank would see its capital reserves exhausted and the two state-backed banks severely tested.

The Bank of England (BoE) published on Tuesday the results of its inaugural annual stress tests, which concluded that Lloyds Banking Group and Royal Bank of Scotland (RBS) were among the worst performers six years after their huge taxpayer bailouts.

Lloyds and RBS, which is 80%-owned by taxpayers, were judged by the BoE to need to strengthen their capital based on their positions at the end of last year.

Under the test, which examined the banks' balance sheets during a hypothetical three-year period in which the UK slumped into its deepest recession for decades, RBS only just remained above a 4.5% capital 'hurdle rate' set by the BoE's Prudential Regulation Authority (PRA).

But both it and Lloyds were told by regulators that based on improvements made this year and future plans, neither would be required to submit revised blueprints for strengthening their balance sheets.

RBS announced on Tuesday the issuance of billions of pounds-worth of bonds which convert into shares in the event of its capital reserves falling below a specific level.

The BoE tested banks' resilience in the face of a situation under which interest rates rose to 4.2%, unemployment soared to 12%, house prices slumped by 35%, commercial real estate prices fell by 30%, and GDP crashed by 3.5%.

Those factors amounted to what would be a brutal UK recession, with approximately one-third of mortgage-owners projected to be in negative equity.

Data produced by the BoE showed that Lloyds would be projected to take £12bn of impairment charges on its UK mortgage lending during the hypothetical recession, well over half of the £21.9bn projected across the entire industry.

In total, the authorities forecast that between them, the banks would accumulate roughly £70bn of additional impairments under the stress scenario, approximately £46bn of which would relate to UK household and commercial real estate lending.

Regulators said the tests highlighted a positive overall picture of the British banking system, adding that it would "have the capacity to maintain its core functions" despite the huge losses forecast.

They said the Financial Policy Committee, which has powers to rein in mortgage lending and impose other restrictions on the industry, "judged that no system-wide, macroprudential actions were needed in response to the stress test".

The only lender to effectively fail the test and be ordered to submit a revised capital plan was the Co-operative Bank, which was saved from collapse last year after a rescue led by US hedge funds.

The Co-op Bank, which would see its capital exhausted by the BoE stress scenario, has proposed slashing the size of its business in the wake of huge losses on its commercial real estate lending.

The BoE disallowed any effort by banks to shrink their loan-books as part of the exercise, insisting that their role supporting the real economy by continuing to lend to homeowners and businesses remained unimpaired.

However, banks' ability to pay dividends could be jeopardised.

While neither Lloyds, which is 25%-owned by taxpayers, nor RBS has paid a dividend since their bail-outs in 2008, the BoE was explicit that they could be prohibited from doing so under conditions similar to those modelled in the test.

Of the eight lenders examined by the BoE, Barclays, HSBC, Nationwide, Santander UK and Standard Chartered produced widely varying results in the test, but the trough of each of their capital positions remained well above the BoE's 4.5% minimum requirement.

Standard Chartered was excluded from the calculation of UK loan losses because it undertakes minimal lending in the UK.

The UK test followed a similar exercise conducted by European regulators earlier this year.

Mark Carney, the Bank of England Governor, said the exercise had been "demanding" but insisted it painted a positive picture of the rebuilding of Britain's banking sector.

"The results show that the core of the banking system is significantly more resilient, that it has the strength to continue to serve the real economy even in a severe stress, and that the growing confidence in the system is merited."

The Bank reiterated on Tuesday that the stress scenario was hypothetical and did not reflect a forecast for economic conditions in the UK.

Co-op Bank chief executive Niall Booker said it was "no surprise" the bank failed the stress test.

He added: "The bank is much stronger than a year ago. As the regulator notes today, we have achieved the target of building our capital base and the actions we have taken during the first year of our business plan have made the bank more secure for the benefit of all stakeholders."

Ewen Stevenson, RBS chief financial officer, said: "We have made good progress during 2014 in both strengthening our capital ratios and reducing higher risk exposures.

"However, we recognise that there is still much work to be done to improve the resilience of our balance sheet."

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Ex-JJB Sports CEO Jailed Over £1m Fraud

The former boss of JJB Sports has been jailed for four years, after pocketing around £1m in what was described as a "very greedy fraud".

A court heard that Chris Ronnie, 52, owed more than £10m to an Icelandic bank when he diverted funds from suppliers going to the sportswear firm.

Ronnie, who lived in Wilmslow, Cheshire, then used some of the funds to buy property in Florida.

He was found guilty last month of three separate fraudulent payments when he was in charge of the company in 2007 and 2008.

Each of the diverted payments was a six-figure sum and they were not disclosed to the company's board.

Judge Nicholas Loraine-Smith told London's Southwark Crown Court: "This was a flagrant and disgraceful breach of your duty as a CEO of a public limited company."

Ronnie did not give evidence in his defence during the trial and after nearly 35 hours of deliberations jurors delivered a unanimous guilty verdict.

The Serious Fraud Office began investigating the case after receiving a tip from a computer engineer who was asked to delete any trace of emails related to the Icelandic loans.

JJB Sports, which was founded in 1971 by footballer Dave Whelan, entered administration in 2012.

Two business partners of Ronnie were also convicted of perverting the coure of justice, as they helped him conceal the fraud.

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FCA Life Ban For Fare-Dodging Jonathan Burrows

The financial watchdog has banned a top fund manager from any role in the City after it was discovered he paid £43,000 to avoid prosecution for dodging train fares.

Jonathan Paul Burrows, who was a London-based managing director at US investment firm BlackRock, admitted his actions sullied the reputation of the City.

The Financial Conduct Authority (FCA) banned Mr Burrows for "not being a fit and proper" person.

It launched an investigation when it emerged an unnamed City worker had paid the money to Southeastern Railway to avoid prosecution for repeated fare-dodging.

In November 2013, a ticket inspector at Cannon Street station noticed an irregularity with the payment history of Mr Burrows' Oyster card.

Under caution he admitted regularly not paying for tickets from his home in Stonegate, East Sussex, where there were no ticket barriers.

It was claimed he only paid £7.20 for a Oyster card single ticket in London instead of the standard single fare of £21.50 from Stonegate.

Mr Burrows worked as a top fund manager for US firm BlackRock

It emerged he had stopped buying annual season tickets in 2008, despite continuing to work in the City for another five years.

"Burrows held a senior position within the financial services industry. His conduct fell short of the standards we expect," said FCA director of enforcement Tracey McDermott.

"Approved persons must act with honesty and integrity at all times, and where they do not we will take action."

According to the Daily Mail, father-of-one Mr Burrows owned two mortgage-free multimillion-pound mansions in East Sussex and drove a Porsche sports car.

A heated public debate developed over how a wealthy worker was able to pay a five-digit sum to avoid prosecution.

Following his banning, his former employer said: "Jonathan Burrows left BlackRock earlier this year. What he admitted to the FCA is totally contrary to our values and principles."

After being banned on 15 December, Mr Burrows released his own statement through a PR firm and said: "I have always recognised that what I did was foolish.

"I have apologised to all concerned and reiterate that apology publicly today."

"The settlement I made with Southeastern in March 2014 was for an amount significantly in excess of the value of the fares not paid by me on the small number of occasions that I failed to pay.

"Indeed the size of the settlement could be said to have led to a distorted perception of the scale of my wrongdoing."

Approached by Sky News, Southeastern Railway defended its decision not to prosecute Mr Burrows at the time.

In a statement it said: "We reached a £43,000 settlement with Mr Burrows regarding allegations of fare-dodging earlier this year.

"We believe that the actions that we took were in the best interests of our passengers (and taxpayers) by giving us the best opportunity to recover a substantial sum in respect of the allegation."

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BT Set To Buy EE Mobile Phone Network

BT has announced that it wants to buy phone firm EE as it makes a play to re-enter the mobile market.

The company has been in negotiations with EE and rival O2, but BT announced a decision on Monday to go with EE.

The deal is worth £12.5bn. 

In a statement BT said it had "entered into an exclusivity agreement with Deutsche Telekom and Orange in relation to BT's possible acquisition of all of their UK mobile business, EE".

"The period of exclusivity will last several weeks allowing BT to complete its due diligence and for negotiations on a definitive agreement to be concluded."

EE is the UK's largest mobile group which has 27 million customers.

It was formed in 2010 in a joint venture between French operator Orange and Germany's Deutsche Telekom.

BT is Britain's biggest broadband and landline provider and has been looking to expand into so-called "quad play", offering landline, broadband, pay TV and mobile services.

"They might spend more money buying EE (than O2) but EE offers more opportunities," James Allison, a senior analyst in telecommunications at HIS, told Sky's Ian King.

"It is a a bigger operator, but more importantly it has better radio spectrum so they'll be able to offer more mobile service to more customers."

The planned purchase comes more than a decade after BT was forced to sell its mobile operations to reduce a multi-billion pound debt pile.

The deal is now likely to face scrutiny by the regulator Ofcom.

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Black Friday Drives Huge Online Sales Spike

A report suggests online retailers are on target for record Christmas sales following the largest monthly spike for 14-years in November.

The IMRG Capgemini e-Retail Sales Index said Black Friday was behind the surge.

Online sales rose 37% month-on-month and 20% year-on-year in November, with consumers eager to bag a bargain spending an estimated £12.1bn.

Online sales rose 44% in the week beginning 23 November when Black Friday offers began, culminating in the day itself on 28 November.

The Black Friday shopping frenzy is a US-import and was introduced there on the day after the Thanksgiving holiday.

Those who ventured out to shops to cash in on the pre-Christmas offers encountered long queues and stampedes for items such as TVs and laptops.

Some retailers struggled to deal with the large volumes of web traffic

Website traffic was also delayed as online stores were swamped.

IMRG said the best performing sectors in November were gifts, up 154% month-on-month, health and beauty, up 99%, and electricals, up 71% month-on-month and 22% year-on-year.

Video: Retailers Hoping For Busy Weekend

Its chief information officer, Tina Spooner, said: "The unprecedented level of traffic to retail websites over Black Friday weekend resulted in a significant spike in online sales during the last week of November.

"In fact, sales on Black Friday alone surged 135% year-on-year as consumers flocked to retail websites on what turned out to be the busiest online shopping day of the year to date.

"Many retailers reported that Black Friday was their biggest ever day for online sales, however some reported a slowdown in sales in the days leading up to Black Friday as consumers waited for discounts and promotions before starting their Christmas shopping.

"Consequently, last month we saw the steepest October to November growth in the 14-year history of the index, with sales up 37% month-on-month.

"Although average spend per shopper was down about 9% from the previous month, overall estimated spend reached a staggering £12.1bn in November and it looks like we are on target for another record-breaking Christmas with estimated spend set to break the £100bn barrier by the end of this year."

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Companies May Have To Reveal Gender Pay Gap

By Anushka Asthana, Political Correspondent

Thousands of large companies could be forced to publish the pay gap between male and female employees following a vote in Parliament on Tuesday that will see a number of Lib Dems team up with Labour.

Sky News has learnt Nick Clegg's backbenchers will be given a free vote on the proposals being put forward by the Labour MP for Rotherham, Sarah Champion.

She will warn an attempt to get companies to publish voluntarily has failed, with only five out of around 7,000 large companies actually producing the information.

Actress Gemma Arterton joined the rally at Westminster

Liberal Democrat ministers are likely to abstain, but sources say they expect backbenchers to support Labour as the policy is already a manifesto commitment for the party.

Ms Champion told Sky News: "Whilst I am delighted to bring this Bill to Parliament and stand up for equal pay for women, I am so frustrated that equal pay still doesn't happen automatically.

Video: Equal Pay Campaigner Jane Bruton

"Almost 50 years ago the women of Ford Dagenham went on strike for equal pay. The Equal Pay Act was passed in 1970.

"It is nonsensical that despite outward commitments by many governments and many companies, equal pay for men and women is still a goal rather than a reality."

If MPs back the plans then it will place on record that Parliament has voted for the legislation.

However, it will still need to go through a second reading in February if it is to become law.

It comes as Grazia magazine and the Unite union hold a rally outside Westminster - along with some of the original Ford Dagenham workers.

Gemma Arterton who starred in Made In Dagenham - the musical based on the true story - is also there.

She told Sky News she had experienced pay discrimination as an actress.

She said: "It's always quite tricky with acting because – especially in the movie industry – if you're very famous then obviously you're going to bring a lot of people to see the play or the film.

"However, it's not equal pay for equal work.

"I've definitely been in movies where I've been on set exactly the same amount of time as another actor and been paid an eighth of what they are being paid."

The rally will also see speeches from representatives of two of the companies that do publish the information - PwC and Genesis Housing.

One Tory source said the party supported transparency and was supportive of efforts to close the gender gap.

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Rouble 'Critical' After Hitting All-Time Low

The deputy chairman of Russia's central bank has conceded the rouble is in deep trouble but says it will take action to remedy the problem soon.

"The situation is critical. We could not imagine this in our worst nightmare a year ago," Sergei Shvetsov was quoted by the Russian news agency Interfax as saying.

He said the shock overnight hike in its key interest rate from 10.5% to 17% "will be followed by other measures to stabilise the situation".

Despite the increase the rouble continued to fall sharply throughout the day, hitting the 80 to the dollar mark and decreasing in value by 20% in a matter of hours.

"Trust me, the choice the central bank's board of directors made was one between bad and much, much worse," Mr Shvetsov added.

Video: Russian Economy In A Crisis

"In the coming days, the situation will be comparable with the toughest period of 2008. I think that the experience we accumulated over the past crises will help us find the right solution and survive this situation. I very much hope so."

The Bank of Russia's shock decision to up its core rate was a response to the rouble's value sinking by almost 50% over the course of the year - hit by Western sanctions imposed over the Ukraine conflict and plummeting oil prices.

It was also intended to settle nerves back home as fears grow that the extent of Russia's economic problems - largely unreported by state media - could spark panic among consumers as price rises become unmanageable.

By raising interest rates, the bank also hoped investors would find it more financially appealing to keep their money in Russia, whose economy relies heavily on oil revenues.

Central bank chairwoman Elvira Nabiullina said earlier the move should stem inflation, although she admitted it will take the rouble "some time" to find its correct value.

Russian stocks fell slightly on Tuesday morning with the MICEX benchmark 1.5% lower, reflecting the additional pressure on businesses.

Video: What's Causing Falling Oil Prices?

Falls of more than 50% in world oil prices are tipped to plunge Russia into recession next year.

On Tuesday the value of Brent crude slipped to new five-year low, falling below $60-per-barrel for the first time since July 2009.

The Bank Of Russia had raised the rate from 5.5% earlier this year to 10.5% just last Thursday.

It said then that it expected inflation to run at 10% this year and climb higher in the first quarter of 2015.

But the rouble has plunged further against the dollar this week, to 65 on Monday and then 80 on Tuesday, after dropping from 55 roubles last week.

Alexei Kudrin, Russia's finance minister from 2000-2011, said on Twitter: "The fall of the rouble is not just a reaction to low oil prices and the sanctions but also (a show of) distrust to economic policies of the government."

Video: Putin Points Finger At The West

He called on Russian president Vladimir Putin to take appropriate measures, although he did not specify what these should be.

Moscow's involvement in Ukraine has led to the US and the European Union imposing a range of sanctions which have added to Russia's economic woes.

These have included blocking Western financial markets to key Russian companies and limiting imports of some technologies.

Further sanctions are likely after the US Congress passed legislation on Monday that could see Washington providing weapons and other assistance to Ukraine. 

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