PRESS DIGEST - Financial Times - May 6

The Financial Times

MANUFACTURING JOBS IN PERIL

A report from the CBI has warned that thousands of manufacturing jobs will be lost due to the worsening economic outlook. The study of 460 companies showed a mixed regional picture, with companies in Wales going against the national trend by expressing confidence in their prospects. The CBI estimates that around 18,000 jobs in the manufacturing sector, mainly in the southeast and London, will be lost in the second quarter of the year.

BROWN WARNED ABOUT CORPORATE EXODUS TO LOWER TAX REGIMES

The EEF manufacturers' body has warned Prime Minister Gordon Brown that he is in "very dangerous territory" on corporate taxation, with the UK facing an exodus of companies moving to lower tax regimes. EEF chairman Martin Temple said in an interview with the Financial Times that "there is a point whereby if you lose confidence in the system and it starts to become expensive, you start thinking about this (and) it becomes a boardroom agenda item. We are absolutely on the edge of that." Temple's warning of a new "boardroom fashion" for considering relocations follows decisions by Shire (SHP.L: Quote, Profile, Research, Stock Buzz) and United Business Media (UBM.L: Quote, Profile, Research, Stock Buzz) to move to Ireland for tax reasons.

HOUSE PRICES TO FALL FURTHER, SAY EXPERTS

The Financial Times has found most economists believe house prices will continue to fall this year, although they differ on the extent of likely declines. Simon Rubinsohn of the Royal Institution of Chartered Surveyors optimistically predicted a seven percent fall in prices, while Jonathan Loynes of Capital Economics predicted a 20 percent drop. Diana Choyleva of Lombard Street Research, who predicts a 10 percent fall from peak to trough, says the consensus has come about because house prices are definitely coming down.

WARNING ON CURRENT ACCOUNT DEFICIT

The economist Roger Bootle says Britain is heading for its biggest peace time current account deficit and both household and government spending will have to slow painfully to correct it. Bootle says the widening of the UK's current account deficit by 57 billion pounds, or four percent of GDP, over the last 10 years is mostly due to expansion in household spending. Bootle, writing in the latest Deloitte Economic Review, says: "The UK cannot continue to borrow the equivalent of four percent GDP from the rest of the world indefinitely. And it looks like we are getting close to payback time." Bootle forecasts that in 2008 and 2009 household spending growth will slow to levels not seen since the recession of the early 1990s.