UK Unemployment Total Drops By 49,000

Unemployment has fallen to its lowest total for over a year, although there has been an increase in the number of people claiming jobseeker's allowance, according to official figures.

The jobless total dropped by 49,000 in the quarter to September to 2.51 million, the lowest figure since last summer.

But the so-called claimant count jumped by 10,100 last month to 1.58 million, the highest since July, and the biggest monthly rise since last September.

The Office for National Statistics (ONS) said the number of people in work increased by 100,000 in the latest quarter to just under 30 million, a rise of more than half a million over the past year.

Other figures from the ONS showed that long-term unemployment - those out of work for over a year - increased by 12,000 in the quarter to September to 894,000, while 443,000 people have been jobless for over two years, up by 21,000.

A drop in London jobs was seen as a result of the Olympics winding down

Part-time employment increased by 49,000 to 8.1 million, close to a record high, while there were 51,000 more people in full-time jobs, at 21.4 million.

Employment minister Mark Hoban told Sky News he believed a portion of the higher number seeking jobseeker's allowance were those no longer claiming disability allowance.

"These figures suggest that our welfare reforms are working, with fewer people on long-term sickness benefits and more people either in or looking for work."

He added: "It's good news to see yet another increase in the number of people in work and to see unemployment fall again.

"The fall in youth unemployment is particularly welcome, although we're not complacent about the scale of the challenge still facing us."

Unemployment among women fell by 10,000 to 1.09 million, and by 39,000 among men to 1.43 million.

Meanwhile, unemployment among 16 to 24-year-olds fell by 49,000, which accounts for the total fall in today's jobless figures.

More young people are classed as economically inactive, most of whom were in full-time education.

Neil Carberry, the CBI's director for employment and skills, said: "It's encouraging that people are continuing to find jobs and that the unemployment rate is falling.

New incapacity benefit rules means more people are on jobseeker's allowance

"But progress on getting people into work is much slower than we saw earlier in the year, and last month there was a troubling rise in the number of people claiming jobseeker's allowance."

Average earnings have failed to match inflation. They increased by 1.8% in the year to August, up by 0.1% on the previous month, giving average weekly pay of £471, including bonuses.

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Bank Of England Downgrades UK Growth Forecast

The Bank of England has downgraded its growth forecast for the UK economy next year to around 1%, blaming a worse than predicted impact from the financial crisis.

The bank now believes output will remain below pre-financial crisis levels for the next three years and may even shrink in the final quarter of this year while inflation may not now come back to its 2% target until the second half of 2013.

Its governor, Sir Mervyn King, announced the figures at the release of the bank's quarterly inflation report.

He admitted the UK was facing an "unappealing" combination of inflation and growth in the short term.

Only on Tuesday was it confirmed that the Consumer Prices Index measure of inflation had risen sharply from 2.2% in September to an annual rate of 2.7% last month.

The factors behind the increase - such as bad weather hitting crops and rises in tuition fees - are outside the bank's control.

Because economic growth remains weak, the bank is unable to raise the base rate of interest to control inflation but Sir Mervyn confirmed that the bank's Monetary Policy Committee had not given up on Asset Purchases - also known as Quantitative Easing (QE) - to help boost money supply despite the inflationary pressures the policy adds.

At the MPC's last meeting it decided not to boost QE beyond its current total of £375bn as it had only just been confirmed that the UK economy had exited the longest double-dip recession since the Second World War.

Today, Sir Mervyn explained that the committee decided not to extend QE further in November because the Treasury was starting to take in the approximate total of £37bn in excess cash held by the Asset Purchase Facility at the bank.

The move was aimed at making the money - the interest earned from the gilt purchases - work for the country to keep its borrowing down.

The Chancellor has been struggling to meet his targets amid falling tax receipts - brought about by the weaker than expected growth.

Speaking about the reasons behind the more depressed future outlook for the UK economy, Sir Mervyn said: "Output grew strongly in the third quarter. Welcome as that is, it is not a reliable guide to the future.

"Just as growth in the second quarter was depressed by one-off factors and gave a misleadingly weak picture of the economy, so growth in the third quarter has been boosted by one-off factors and gives an overly optimistic impression of the underlying trend.

"Continuing the recent zig-zag pattern, output growth is likely to fall back sharply in the fourth quarter as the boost from the Olympics in the summer is reversed - indeed output may shrink a little this quarter."

Sir Mervyn said it remained the MPC's view that the biggest threat to the UK economy was from the eurozone debt crisis.

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Energy Firm SSE Defends 38% Profits Rise

The energy firm SSE has defended a 38% rise in half year profits at a time when its gas and electricity bills are rising by 9% on average.

The company, formerly known as Scottish & Southern Energy, made an adjusted profit before tax of £397.5m in the six months to September 30.

SSE's retail business, which supplies electricity and gas to homes and businesses, reported an operating profit of £75.7m for the first-half after posting an operating loss of £101.4m a year ago.

Lord Smith of Kelvin, the firm's chairman, said: "While some observers may choose to criticise SSE for making a profit and paying a dividend (of 25.2p per share - a rise of 5%) I believe that profit and dividend allow SSE to employ people, pay tax, provide services that customers need, make investments that keep the lights on and create jobs while providing an income return that shareholders like pension funds need."

In August SSE, which trades as Southern Electric, Swalec and Scottish Hydro and is the UK's second-largest generator of electricity, became the first of the so-called 'big six' energy firms to announce inflation-busting increases to household bills.

It blamed "sustained increases" in the cost of using the electricity and gas networks, costs associated with mandatory Government schemes and the price it had paid for energy in the wholesale markets for the 9% rise, which came into effect last month.

Wholesale gas charges had risen 14% year-on-year, the group said and its bill increase would add another £8.53 a month on to the typical monthly direct debit, dual fuel customer - taking the average annual bill to £1,274.

In its statement today SSE said that despite the rise its retail profit margin was just 1.5%.

"The prices achieved for generating electricity have been weak and higher gas and non-energy costs unfortunately had to be reflected in the increase in household energy prices."

Adam Scorer, Director of Policy and External Affairs at Consumer Focus, suggested energy firms only had themselves to blame for criticism of profits.

"The furore over wholesale costs, energy pricing and company profits has deepened consumer distrust in the energy industry.

"Energy companies need to make profit so they can invest in our energy infrastructure. But if confidence is to be rebuilt in this market, the information that all energy firms are required to provide must be fully transparent, comparable, and include profit and trading information from across the whole of their business."

SSE's share price opened up slightly when trading began on the FTSE 100.

At the same time, rival npower - another of the 'big six' confirmed an operating profit - a different measure to that of SSE - of £238m for its first nine months.

That represented a 2% fall on the same period last year, the company said.

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Gas Prices: Watchdogs Probe Fixing Claims

The Financial Services Authority (FSA) and Ofgem are investigating claims by a whistleblower that Britain's wholesale gas market has been frequently manipulated by energy companies.

The allegations, revealed by The Guardian, suggest the £300bn market has been fixed in a way similar to bank fiddling of the Libor interest rate.

The FSA, the City watchdog, said: "We can confirm that we have received information in relation to the physical gas market and will be analysing that material."

Ofgem, the energy regulator, said it had also received information relating to trading in the gas market and is looking into the issue.

The allegations come with the energy sector already under fire after major energy suppliers announced inflation-busting price rises.

It is understood the Treasury and the Department for Environment were alerted to the market manipulation claims by Ofgem and the FSA on Monday.

Energy Secretary Ed Davey said: "I am extremely concerned about these allegations and will be keeping in close touch with the regulators while they get to the bottom of this."

Ed Davey said he was "extremely concerned"

Mr Davey is expected to make a statement to MPs later today.

An Ofgem spokesman said: "In preparing for full implementation of new EU legislation (Remit) to tackle market abuse, we will consider carefully any evidence of market abuse that is brought to our attention as well as scope for action under all our other powers.

"Ofgem has already activated its established procedures to review the information we have received."

UK energy companies EDF Energy, NPower, SSE, ScottishPower, E.On and British Gas have all denied any involvement.

The whistleblower, Seth Freedman, works as a price reporter for ICIS Heren, a company responsible for setting so-called benchmark prices.

Mr Freedman raised the alarm after identifying what he believed to be attempts to distort the prices reported by the company.

ICIS said in a statement that it had "detected some unusual trading activity" on the British wholesale gas market on September 28, which it reported to Ofgem in October.

"The cause of the trading pattern, which involved a series of deals done below the prevailing market trend, has not yet been established," an ICIS spokesman said.

"ICIS welcomes the seriousness with which the regulator has so far responded to this information and we have provided all the evidence at our disposal to help the regulator determine what happened."

It is believed that on September 28 prices went down by about 0.4%.

Experts suggested that alleged manipulation may have been an attempt to maximise profit on an earlier trade position.

Shadow energy secretary Caroline Flint said: "These are very concerning reports which, if true, suggest shocking behaviour in the energy market that should be dealt with strongly."

The UK's biggest energy supply company, Centrica which is the parent firm to British Gas, said in a statement: "Centrica's traders are prohibited from providing price information to price reporting agencies.

"It's important to stress that the wholesale gas market has more than 50 participants, not just energy supply companies, handling hundreds of trades every day.

"It is in everyone's interests that there is a well-functioning and orderly wholesale energy market."

RWE npower also commented: "We were not involved in any of the trades which we understand are under investigation ...We would be happy to support any  regulatory investigation.

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Inflation Increases Blamed On Tuition Fees

The headline rate of inflation has hit a five-month high, driven up by the trebling of university tuition fees in England and rising food bills.

The Office for National Statistics (ONS) confirmed the Consumer Prices Index (CPI) measure rose from an annual rate of 2.2% in September to 2.7% last month.

The figure surprised economists who had largely predicted a small increase and it makes it more likely that the Bank of England will have to raise its own forecast.

The main driver behind the increase, according to the ONS, was the Government's increase in maximum university tuition fees in England to £9,000 from just over £3,000 which added 0.3% to the CPI rate.

The ONS said education costs jumped 19.1% in total last month - the largest increase since records began.

Higher potato and carrot costs - caused by the soggy summer - and rising second hand car prices also contributed, the body added.

Potatoes form part of many basic foodstuffs

Planned rises in gas and electricity bills, which are starting to take effect, are predicted to drive inflation higher in the coming months.

Last month's SSE bill increase - which saw tariffs rise by around 9% - were not taken into account for the October figures.

Economics Editor Ed Conway said the increase means there are some "worrying points for the future".

He added: "We saw inflation start to fall and lots of people were reassured by that because it's been responsible for much of the squeeze on people's incomes.

"If you look beyond those university fees, the fact there are some things in the pipeline - higher utility prices - that may continue to push it up will be of some concern."

The latest figures also showed that the Retail Prices Index (RPI), which includes housing costs, rose to 3.2% in October from 2.6% in September as mortgage rates also increased.

The RPI rise between September and October was the largest monthly increase for two and a half years.

It raises the prospect of rising costs ahead of the crucial Christmas season for retailers - many of which are already launching Christmas sales to attract shoppers in what is expected to be a vicious scrap for business.

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Fear Of 'Zombie Firm' Collapse As Rates Rise

More than 100,000 so-called zombie firms – debt-laden companies surviving only because of ultra-low interest rates – are at risk of failure, a think tank has warned.

According to the Institute for Turnaround (IFT), a 'zombie collapse' is threatening to hit the country once interest rates return to more traditional levels.

"The number of businesses only able to pay off the interest on their debt, has escalated to somewhere between 100,000 to 150,000," the IFT said.

"If those organisations employ on average 10 people each, consigning them to oblivion overnight would have a profoundly undesirable effect on unemployment."

"Zombies are a problem that can and should be responsibly managed - these are real businesses that carry the fate of people's livelihoods and wellbeing with them."

The IFT even published spoof videos of football manager Arsene Wenger leaving Arsenal for "Limbo Town FC", to show what happens when quality assets are sold off.

The Bank of England base rate has been at a historic low of 0.5% since March 2009.

Once the base rate climbs again, indebted firms are at risk of seeing their debt burden increase too.

However the IFT also warns that some sectors that exist with oversupply, such as retail, will need to shed more jobs and firms before recovery can be achieved.

"There will be business failures but the enlightened management and investors who move to tackle their challenges stand a much better chance of staying viable and sustainable long after the competition has faded away," it said.

Some companies have already been forced to sell off crucial assets to survive, further harming their future viability.

It said capital-flush firms have been engaged in a "corporate 'pick and mix' in each portfolio" amid a large-scale disposal of assets worth billions.

"To return to a productive and growing economy, we need good people working in business models that have a long term future," the IFT said.

"Companies stuck currently in limbo with unaffordable debt, having been starved of investment and lacking, after a punishing recession, the energy and the skills to break out of their inevitable decline, need some TLC - tough loving care."

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Fuel Duty: Chancellor Osborne Under Pressure

Chancellor George Osborne may bow to demands and delay a planned fuel duty hike amid fears it will hit struggling families.

Tory rebels had been planning to break ranks and vote with Labour in an Opposition debate on Monday calling for the 3p increase set for January to be delayed.

They believe the rise, first delayed in August, will ramp up anger because it is due to coincide with rail and bus fare increases and the changes to child benefit.

But now rebel leader Robert Halfon has said he will vote with the Government after all and wait to see what Mr Osborne does in his Autumn Statement next month.

He said: "The cost of fuel is the number one issue, that's why I am campaigning on it. I have had discussions with various people and it is my view that the Government is in strong listening mode.

"If I didn't believe that I would make a point and go in to the lobby with Labour."

Under pressure: George Osborne

In a further hint at a postponement, the Prime Minister's spokesman said on Monday: "What the Government has sought to do is to listen to the concerns of motorists and cancel and delay where it can."

Campaign group FairFuelUK claims the planned tax hike would only raise £800m, compared with Treasury projections of £1.5bn, and cost also cost up to 35,000 jobs.

The group's spokesman, broadcaster Quentin Willson, said: "The momentum building up behind FairFuelUK's call to see this damaging 3p rise scrapped is becoming unstoppable.

"The Treasury appears to be listening. We welcome Labour pushing on this issue. Consumers are currently paying an eye-watering 80p per litre in combined fuel duty and VAT.

"This is socially unjust and adding another 3p in tax doesn't make sense for economic recovery and deficit reduction."

Shadow chief secretary to the treasury Rachel Reeves added: "With our economy so fragile and prices still rising faster than wages, it would be wrong to go ahead with another tax rise on families and businesses.

"To boost our flatlining economy, Labour has already called for a temporary VAT cut which would take 3p off a litre of fuel. But if ministers won't do this, the very least they could do is axe January's fuel duty rise at least until April.

"And they could pay for this by clamping down on known tax avoidance loopholes, like the one used by some employment agencies to falsely inflate expenses."

Brian Madderson, chairman of the Petrol Retailers Association, called on the Government to cancel the hike entirely.

He said: "To defer would mean that it could combine with the planned duty rise on 1 April 2013 to push pump prices up by 7p per litre and that would really wreck any economic recovery, hammer inflation and hit household budgets very hard.

"Such a rise would be without parallel since fuel taxation commenced."

A Treasury spokesman said: "The Government recognises that the rising price of petrol is a significant part of households' day-to-day spending.

"Since coming to office, the Government has listened to the concerns of motorists about high pump prices and acted. Fuel is now 10p a litre lower than under the previous Government's plans."

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Japan Nears Recession Amid China Boycott

Japan is on course to enter recession as it battles against a tide of economic problems including a costly dispute with China.

The world's third-largest economy contracted by 0.9% between July and September from the previous three months - a fall which under-pressure Prime Minister Yoshihiko Noda described as "severe".

The latest predictions suggest a return to growth in the fourth quarter is very unlikely which would result in a technical recession.

A combination of the financial crisis in Europe, a strong yen and a Chinese boycott of Japanese goods are damaging recovery plans following the devastating earthquake and tsunami in March 2011.

The boycott was sparked by Japan's nationalisation in September of an East China Sea island chain claimed by both Tokyo and Beijing.

The islands dispute has raised tensions between China and Japan

It has particularly hurt Japan's car producers - already damaged by the end of an incentive purchase scheme.

The worst September trade figures for three decades were compounded by an export-denting strong yen.

Mr Noda, who is under pressure to call a general election, told parliament he would work "with a sense of crisis" to address the country's economic woes.

"I have also been instructing ministers concerned to draw up an economic package, possibly this month," Noda said, as he pointed to the first £3.1bn tranche of a previously-announced stimulus.

Last month, the Bank of Japan unveiled £87bn in fresh monetary easing after central banks in the United States and debt-hit Europe also announced further measures to fuel growth.

The central bank, which also said it would provide new loans to banks, had been under pressure from politicians calling for urgent action and is facing calls for further stimulus.

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Ofcom Sets 4G Spectrum Sale Reserve Price

Telecoms regulator Ofcom has set a reserve price of £1.3bn for the auction of 4G mobile phone licences to be sold at the start of next year.

It is expected to raise much more, albeit less than the 3G sale which brought in more than £22bn in 2000 when the reserve price was £500m.

The regulator has published a timetable for the auction which it claims will be the largest ever sale of mobile airwaves in the UK - offering the equivalent of three-quarters of the mobile spectrum currently in use.

That equates to around 80% more than released in the 3G sale, providing fast mobile broadband coverage to at least 98% of people across the UK.

Prospective bidders will be able to submit their applications with an initial deposit from December 11, before bidding begins in January and licences are granted in February and March.

Mobile operators are expected to launch the new 4G services, which allow much speedier downloads, in May and June.

It means smartphone and tablet users will have access to 4G - offering speeds up to five times faster than existing 3G networks - to surf the internet by the end of 2013.

The service will be available on a number of devices

Ofcom chief executive Ed Richards said: "Today marks an important shift from preparation to the delivery of the auction, which will see widespread 4G mobile services from a range of providers.

"The entire industry is now focused on the auction itself, with a shared goal of delivering new and improved mobile services for consumers."

Plans for the auction follow Ofcom's controversial decision in the summer to allow network EE, formally known as Everything Everywhere and which owns Orange and T-Mobile, to use its existing bandwidth to launch 4G services in 11 towns and cities in the UK.

Vodafone was among competitors which argued providers should have all been able to launch 4G at the same time.

The upcoming 4G sale has also sparked a political row over how the proceeds from the auction should be distributed.

The estimated return being floated by various experts is between £3bn and £4bn.

Shadow chancellor Ed Balls has called for the windfall to be used to "kick-start the economy" by building 100,000 affordable homes to boost the housing market and construction jobs, and funding a stamp duty holiday.

Chancellor George Osborne is yet to disclose how he intends to distribute the money from the sale.

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Treasury Gets £35bn Windfall From QE Interest

The Treasury is to receive a £35bn boost as part of a deal with the Bank of England that will effectively reduce public debt.

Chancellor George Osborne and Bank Governor Sir Mervyn King have agreed that the BoE will give the Treasury interest earned through its £375bn economy-boosting programme known as quantitative easing (QE).

The cash - currently on the BoE's books - will flatter the public accounts by reducing the budget deficit, while also acting as a "small loosening of monetary conditions" equivalent to taking more QE action, according to the Bank.

The announcement comes a day after it decided not to extend QE at its monthly policy-setting meeting.

The Treasury said the agreement was in line with similar practices surrounding QE in the United States and Japan.

In a letter to Mr Osborne, Sir Mervyn stressed the cash transferred to the Government would likely need to be paid back to the Bank in the future.

The move comes at an apt time for Mr Osborne as he faces pressure on his plans to cut borrowing.

But JP Morgan Chase economist Malcolm Barr said it was "still likely" that the Chancellor will need to push back debt reduction targets in his upcoming autumn statement.

Shadow chief secretary to the Treasury Rachel Reeves said it was a "smoke and mirrors" deal.

"Instead of changing course and taking action to create the jobs and growth we need to get the deficit down. The Chancellor seems to think he can just be bailed out in the short term by money from the Bank of England," she added.

Under the arrangement, £11bn is expected to be handed to the Treasury this year, with the remaining £24bn paid in four instalments over the next financial year.

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