Month: December 2010

The cost of clothes is rising

It appears that on comparison in clothing retailers the prices seem to have risen by around 50% on last year. 

This seems to ring true as retailers such as retailers Next, Primark and New Look have all warned of having to raise their prices (indeed this looks like it’s already happening).

But why? It’s partly because cotton prices have climbed by around 150% in the last two years, while transport costs are also rising. However, you can’t pin it all on these. Raw material prices have seen big moves in both directions in the past, yet the cost of clothes for UK consumers has been dropping steadily for ages. Indeed, the UK clothing consumer price sub-index has almost halved over the last decade.

No, the swing factor is what’s happening with wages in the countries that make the clothes sold by Britain’s retailers primarily China.

Those earlier rises in raw material and transport costs may in the past have been offset by lower labour costs. But the Chinese wage growth is now pushing these offsets.

This shouldn’t come as a great surprise. In the last seven years, China’s M2 money supply measure – how much cash is sloshing around the system – has increased more than threefold. In other words, there’s been a massive credit bubble. That has driven rapid economic growth – China is growing at around 10% a year just now. 

As always we recommend clients budget their finances on a long term basis allowing for all types of expenditure to ensure they are making best use of their money.

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Is your money really safe in Banks?

At the present moment many Banks have exposure to Ireland, Portugal, Greece and Spain which means that they could have problems building up for the future. If any Banks go bust – how safe is your money? 

An interesting fact for you: 

Approximately 2 million people in the UK have savings with the Post Office, but did you know that these deposits are not guaranteed by the UK Financial Services Compensation Scheme.  They are in fact guaranteed by the Irish government.  But don’t panic the good news is that the Bank of Ireland (who operates the Post Office accounts) has begun the process of transferring its Post Office depositor base to fully fall under the UK regulator and compensation scheme. 

This illustrated why savers like you need to be aware of the risks and make appropriate contingency plans. 

UK Savers Emergency Plan:

  • Ensure that you have at least 2 current accounts across different banking groups
  • That you have procedures in place to ensure that you can act fast to initiate transfer of funds from instant access savings accounts, especially if your total funds with a particular banking group exceeds £50k / £83k (1st Jan 2011).The best strategy is to limit exposure per banking group to the limit of £50k
  • Do not have ANY savings are fixed deposit exposure to banks that do not fall under the UK Financials Services Compensation Scheme
  • Limit exposure to PIIGS banks, that is Greece, Ireland, Spain, Portugal and Italy as these are at the most risk of going bust thus triggering a lengthy process of Savers having to wait for compensation. 

The following list represents Britians’ largest deposit taking banking groups and the banks that fall under each. 

Banking groups have multiple licences as a consequence of mergers and takeovers, and may be in the process of merging licences so for ultimate safety one should remain focused on banking groups.

 LLOYDS BANKING GROUP

Lloyds TSB Bank

AA Savings

Bank of Scotland / HBOS

Birmingham Midshires

Capital Bank

Cheltenham & Gloucester Savings

Halifax

Intelligent Finance

Saga

 SANTANDAR GROUP

Santandar bank

Abbey National

Asda Savings

Alliance and Leicester

Bradford and Bingley

Cahoot

Moneyback

Honycomb

NATIONWIDE BUILDING SOCIETY

Nationwide Building Society

Cheshire Building Society

Derbyshire Building Society

Dunfermline Building Society

 BARCLAYS GROUP

Barclays Bank

Standardlife Bank

 HSBC GROUP

HSBC Bank

First Direct

Marks and Spencer Financial

 ALLIED IRISH GROUP

Allied Irish Bank

First Trust

 CITI GROUP

Citibank

Egg

 CO-OPERATIVE GROUP

Co-operative Bank

Britannia

Smile

Unity Trust Bank

 RBS Group

Royal Bank of Scotland

Nat West Bank

Direct Line Savings

Lombard

The One Account

Drummonds

Ulster Bank

 Additional comments

Foreign Banks covered under the UK FSCS Scheme

ICICI (India),

First Save (Nigeria)

Small business are covered by the FSCS on the basis of 2 of following 3 conditions – up to a turnover of 6.5 million, less than 50 employees, balance sheet total not more than £3.26 million

 Banks not under the UK FSCS.

 Post Office (as detailed above)

ING Direct

Tridos – Dutch

Anglo Irish,

Bank of Ireland – Ireland

 Don’t delay! Act today to form a quick personal savings protection contingency plan, otherwise you may wake up one day to find yourselves locked out of your funds Iceland style!

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