I don't want to be foreboding...but....

Centrica have had cold feet over UK nuclear power, another firm that's decided  nuclear is too expensive to develop - do you think they maybe have a point? - See Centrica pulls out of new UK nuclear projects

And as we know Cumbria have had cold feet over burial of nuclear waste, and it seems we could have a bit of a problem...if we don't find somewhere we can keep the radioactive waste safe for a very long time. See: No nuclear storage = no Wylfa B?

So I think there's a possibility that Wylfa B might not be built, you know the thing that was going to transform the island...put us on a firmer footing, all them jobs etc etc

I hope therefore someone is actually thinking of a Plan B.. C.. D ....E just in case Wylfa B never happens... if Hitachi cant find the investors, or anyone in fact to run Horizon after they have built the power station - 'cause they've already said they don't want to run it in the long term.

 You know if Wylfa B doesn't get built what happens then?

A fall in household finance

I suppose we all know it, the Markit Household Finance Index™ on Monday said that [a]round 31% of respondents noted a deterioration in their financial situation, compared to 6% that saw an improvement.

Though when compared to last year those asked were shall we say less pessimistic at the start of this year - The headline Markit Household Finance Index (HFI) picked up to 37.7 in January, from December’s seven-month low of 36.8 - with neutral threshold being 50.

The key points of the Markit Household Finance Index™ for January are:

• Squeeze on household finances weakens in January…
• …and respondents are the least pessimistic about year-ahead outlook since September 2012
• Sentiment regarding ease of access to unsecured credit is least downbeat in four-year survey history
• Appetite for major purchases falls at slowest pace since October 2010
• Least marked drop in job security since the start of the survey in early 2009…
• …but activity at work stagnates and income from employment declines at fastest pace for six months

See also: Reuters - Households slightly less gloomy on finances in January -survey

Are we heading for a 3rd recession?

Things are not looking good for the UK economy.

The latest Markit/CIPS UK Services PMI® says the UK service sector activity fell in the final month of 2012.

The key points are:

• First reduction in service sector output since December 2010 
• New business volumes post second successive monthly reduction 
• Confidence unmoved on November’s 11-month low

Chris Williamson, Chief Economist at survey compilers Markit said: “The first fall in service sector activity for two years raises the likelihood that the UK economy is sliding back into recession. The services PMI follows an equally disappointing construction survey for December, leaving manufacturing – which accounts for just 10% of the economy – as the only bright spot. Taken together, composite data from the three surveys posted its worst quarterly performance for three-and-a-half years, and are consistent with the economy contracting by approximately 0.2% in Q4.

“Bad weather is likely to have played a role in dampening service sector activity in December, but the fact that incoming new business dropped for a second successive month suggests that underlying demand remains very weak and that activity may continue to fall in the New Year.

“The service sector is also cutting employment in the face of weak demand and an uncertain outlook suggesting unemployment may soon start to rise again as private sector lay-offs add to public sector job cuts.”

See also:  Reuters -Surprise fall in UK services activity raises recession risk

Wylfa B - we been here before

So Hitachi have won the bidding to buy Horizon Nuclear and the rights to build two nuclear facilities...predictably politicians are jumping up and down with joy.

The Daily Post also today got a bit carried away....green light to build Wylfa B, up to 6000 jobs will be created during construction..a further 1000 permanent jobs....could be built by 2020...etc etc..

Of course had New Labour not delayed making a decision about nuclear power, then most probably construction work might have already started.

Now not wishing to piss on anybody's parade, there a lot hurdles to jump even before the first brick is laid. Hitachi will need approval of their reactor design, and prove that it meets new standards following the nuclear disaster at Fukushima Daiichi, a process that Hitachi said could take three to four years. Then planning permission will be required, and that ain't going to be easy nor quick even with the Infrastructure Planning Commission.

And then there is what Hitachi have said themselves, as reported by  Reuters yesterday. Hitachi said it expected to have the first 1,300 megawatt (MW) nuclear power plant in the UK operational by the mid-2020s.

In other words by 2025 Hitachi hope to have one nuclear plant operational, and at the moment as far as we know that could be at Oldbury.

Or this from Dawn.com: Advanced boiling water reactors will be installed at the plants on the Isle of Anglesey in Wales and at Oldbury in Gloucestershire, Hitachi said, adding that about 1,000 workers are expected to be employed at each site. Hitachi’s nuclear power systems chief executive Masaharu Hanyu told Japanese media that his company may sell Horizon shares to investors in the future.

“As it is deemed difficult for Hitachi alone to prepare funds for constructing the power stations, we want to solicit investors,” he said, according to the online version of the Nikkei newspaper.

“It will depend on whether Hitachi can develop it into an attractive company,” he said, adding his company would not itself get involved in power generation.

I think there's also a growing realisation that nuclear power might not be the answer we need, especially if we want to cut cost of electricity to consumers. Yes on Anglesey it will bring some local jobs and make the GDP figures look good, but if as a result electricity prices continue to raise and make us uncompetitive is it really a price worth paying?

Not forgetting that on the top of the island we may have a nuclear plant built by the company whose name is for ever associated with Fukushima Daiichi, and whilst they have a track record of delivering safe projects on time and on budget....you wonder whether tourist will take the same view, especially with a long snake of pylons cutting and hissing through the countryside.

And we should remember with  RWE and E.ON, and the confidence expressed then....we have been here before.

A fair tax system and Vodafone.

To delay the introduction of the 3p rise in fuel duty the Chancellor needs to find around £500,000,000 from somewhere. But where will this money come from? - we are told over and over by the Conservatives that there is no money left.

Maybe it would help if we had strong and clear tax laws, that clamped down on companies using tax havens or dubious tax avoidance schemes as a means of  reducing their tax liability. After all large companies go out of their way to show how green and ethical they are, but still think it's OK to employ tax avoidance schemes.

At the end of March 2012 BBC News reported - In his Budget speech, Chancellor George Osborne spoke of his disdain for tax evasion and aggressive tax avoidance, describing both as "morally repugnant".

And what sort of aggressive tax avoidance are we talking about?

An article on Reuters website by Tom Bergin -  Insight: Vodafone in new 1 billion pounds tax "scandal" , alleges that Vodafone has shaved at least 1 billion pounds off  UK taxes over the past decade.

You remember Vodafone whom back in 2010 denied they had a tax liability of £6bn to the UK. A spokesman for Vodafone speaking to  BBC News at the time denied the tax bill reports, adding: "We pay our taxes in the UK and all of the other countries in which we operate."

Although if Reuters is correct whilst Vodafone does pay it taxes in the UK, in 'other countries' such as Germany and Spain they pay more. And before you start saying how lower taxes makes a country more competitive, do read the above Reuters article and their comparison between Germany and  UK and Vodafone investment.

We wait to see details of the Chancellor Treasury's plans to introduce a General Anti-Avoidance Rule (GAAR), which aims to deter abusive tax avoidance schemes, by reducing legal uncertainty around what constitutes aggressive tax avoidance as opposed to legitimate tax planning. And whether in addition to stronger powers, HRMC will be given adequate resources to make a difference in clamping down on tax avoidance.

But seeing that David Cameron recently said at the G20 summit "If the French go ahead with a 75% top rate of tax we will roll out the red carpet and welcome more French businesses to Britain and they will pay taxes in Britain and that will pay for our health service, and our schools and everything else." I wouldn't put too much weight on the chances of it (GAAR) succeeding. See also the Guardian report  In wooing French tax exiles, Cameron makes a mockery of democracy by Richard Murphy.

The state we are in, and of the economy.

Puzzled why David Cameron was keen to engage us in a big discussion about welfare benefits? - even though he said no changes would happen now, but may be included in the Conservative manifesto for the next general election, most likely (unless the Coalition falls apart) in 2015. Surely you would think they'd be working hard on a plan to generate growth, that we need, to drive the economy out of recession.

Or why George Osbourne rushed out on TuesdaIsy to announce a delay in the introduction of the proposed 3p rise in fuel tax.

Let's think, me thinks....a suggestion did it have anything to do with the dire state of the economy by any chance?

The Office for National Statitics today published details of the state of public sector finance for the month of May, 2012:

The main statistics show, that in May 2012, for measures excluding financial interventions:

• the public sector current budget was in deficit by £16.9 billion; this is a £2.7 billion higher deficit than in May 2011, when there was a deficit of £14.2 billion
• public sector net borrowing was £17.9 billion; this is £2.7 billion higher net borrowing than in May 2011, when net borrowing was £15.2 billion
• public sector net debt at the end of May 2012 was £1013.4 billion (65.0 per cent of GDP). This compares with £921.3 billion (61.3 per cent of GDP) at the end of May 2011
• The central government net cash requirement was £13.3 billion, a £2.5 billion higher net cash requirement than in May 2011, when there was a net cash requirement of £10.7 billion.

A report by Reuters - 'Public borrowing rises in May as income tax falls' by Fiona Shaikh and Matt Falloon says -  Tuesday's figures cast doubt over the government's ability to meet its deficit target of 92 billion pounds in the 2012/13 fiscal year - a total which includes the asset-transfer effect.

Even Mervyn King the Bank Governor can only see dark clouds on the horizon, "We are in the middle of a deep crisis, with enormous challenges to put our own banking system right and challenges for the rest of the world that they are struggling with," King told parliament's Treasury Committee. See Reuters - 'Gloomy BoE sees outlook darken'.

And finally for an alternative narrative on David Cameron recent attendance of the G20 summit read  'Cameron G20 missteps point to wider UK problems' an article by Peter Apps, Political Risk Correspondent of Reuters.

In a damaging rebuff to the Prime Minister former Clinton official Kupchan said to   Reuters -"London's relevance on the world stage seems to have declined since he became prime minister. Part of that might be inevitable given the circumstances ... but Cameron's statecraft is also leading to self-isolation."

Are we heading for a long recession?

For the last two quarters the UK has seen negative growth which means 'technically' we are in recession. We know there is a broad agreement that the UK's economy has in the past been over reliant on the service sector, and that re-balancing was required, with greater emphasis being placed on manufacturing.

I have argued before that with consumer debt still high, and consumer confidence low, it was unlikely that we would see consumer driven growth for the foreseeable future. And with the announcement that most banks are likely to increase interest rates on mortgages, disposable incomes are likely to fall further. (see Sky News.)

Therefore, a sustained growth in exports was seen as important if the UK's economy was to improve. However the Markit/CIPS UK Manufacturing PMI® published Tuesday says that whilst in April there was a slight growth in the manufacturing sector for the 5th consecutive month, the rate of increase has slowed, one factor being:

"Total new order books fell slightly for the first time in five months in April. This mainly reflected a sharp drop in new export business – the steepest since May 2009 – resulting from weaker demand from mainland Europe, the US and East Asia. There were also reports of tough market conditions and strong competition."

What is of concern is that whilst we know that growth in the Eurozone was likely to contract; with Spain the latest of the Southern EU countries facing a economic crisis, is the fact that growth in the USA and East Asia is also weaker than hoped.

Rob Dobson, Senior Economist at Markit and author of the Markit/CIPS Manufacturing PMI® said:

“The UK recovery was always likely to be bumpy and subdued. This is still very much the case at manufacturers, with the April PMI indicating that growth of the sector eased to its weakest in the year-to-date. Although the expansion in output is a positive in itself, as is a modest increase in employment, manufacturers are still sustaining growth through past demand, a circumstance that can not continue indefinitely.

“What manufacturers really need to see is a marked improvement in new order inflows, so April’s sudden sharp drop in new export orders was a real disappointment. It seems that weaknesses in our major trading partner, the Eurozone, are starting to hit home, especially for consumer goods producers. This further highlights the impact of ongoing weakness in the European household sector already signalled by Markit’s UK Household Finance Index and the Eurozone Retail PMIs.”

See also: Reuters - UK at risk of longer slump as euro crisis hits factories.

Wylfa B - now far too costly to make commercial sense?

With hindsight maybe we should have foreseen the announcement; that RWE Npower and E.On, would not proceed with the building of nuclear plants in the UK.

After the tragic accident at the Fukushima nuclear power plant in Japan, Germany decided to abandon nuclear power, and their electricity companies faced massive decommissioning costs. See Reuters - Nuclear shutdown costs mount in Germany.

In the UK it was recently re-confirmed by the UK government that new nuclear operators will have to cover their waste and decommissioning costs - see DECC.

Then are the concerns about the new build costs of the third generation nuclear plants. In July 2011, Damian Carrington in his Guardian environmental blog said:

"Time is money, they say, and the new nuclear power plant being built by EDF at Flamanville in France is now at least four years behind time and €2.7bn over budget. EDF blamed the delay on two fatal construction accidents and dealing with safety analyses prompted by the Fukushima disaster."

Maybe some other investors will invest in Wylfa B, but with the world and the UK seeing very low growth; according to the OECD the UK is in recession (see BBC News) - the uncertain costs, the likely project overrun and problems raising the necessary finance what realistic chance is there of that happening?

As an aside, I'm sure there is no truth in the rumours, that the Conservative led Coalition Government talked up a possible strike by delivery drivers, to boost sales of fuel to boost the GDP and tax revenue?

But let me return to the islands problems - the plans of Leanne Wood, leader of Plaid Cymru for a clean energy revolution for Wales with Ynys Môn at it's heart; which was heavily criticised by the islands Tories, may now be worth looking at seriously?

After all with the prospect of a Wylfa B if not dead in the water, its delay will mean many years of waiting, in the meantime we need to find ways of stimulating growth on the island and hopefully some meaningful jobs.

UK growth nearly stalled

The UK economy barely grew in the final quarter of 2011, according to the National Institute of Economic and Social Research.

The institute estimates that the economy expanded by 0.1 percent in the three months to December, compared with growth of 0.3 percent in the three months to the end of November. According to the institute this implies the economy expanded by 1 per cent in 2011, half the rate of growth experienced in 2010 (2.1 per cent,).

The press release says The National Institute interprets the term “recession” to mean a period when output is falling or receding, while “depression” is a period when output is depressed below its previous peak. Thus, unless output turns down again, the recession is over, while the period of depression is likely to continue for some time.

Reuters reports that whilst George Osborne said there were "signs" the economy was turning a corner and there were reasons to be optimistic in a year when Britain will host the Olympic Games in London...

...Britain is teetering on the edge of recession as global growth slows, government spending cuts bite, and all-important consumers struggle with high inflation, tax hikes and slow wage rises.

You may recall at the beginning of December The Daily Telegraph reported The Office for Budget Responsibility (OBR) said that a bout of severe weather before the end of year could skew economic activity in such a way that Britain does not experience two quarters of negative growth....

Prof Nickell, a member of the OBR...said....“If you have a huge bout of heavy snow before Christmas that will probably rule out a double-dip recession because GDP will fall in the fourth quarter and bounce back in the first quarter",...but...he warned that disruption in the New Year would mean that the statistical masking of the slowdown could not take place. “It’s got to snow in the fourth quarter.”

Let's hope therefore we don't get a huge bout of heavy snow this month or in the following two months.

TATA to build factory by Wolverhampton - the Enterprise Zone wat did it?

If only the Welsh Government had got it act together and followed blindly the policies of the Conservative led Coalition Government on enterprise zones, the new engine factory could have been built in South Wales. Or that is what the Conservatives and some in the media want us to believe.

TATA the Indian owned car manufacturer, had decided that rather than buying engines from Ford plants including Bridgend and Dagenham, they are to build their own engines. What affect this will have on the viability of the Ford plants is not known.

There was some speculation that TATA would build the new engine factory in India, were it already has a production plant for it's Freelander 2, but seeing the local difficulties they have had over there (see:Indian state to return Tata factory land to farmers) maybe the UK was a more appealing prospect.

As reported by Reuters:

Mike Wright, executive director at Jaguar Land Rover said they had considered building the facility in a number of locations within the UK and outside the UK.

"One obvious location would have been India," Wright told journalists.

"There are a whole host of factors that go into these decision ... but on the balance of all of those factors, we determined with the support of Tata Motors, in this instance, the UK was the best option," he said....

"Clearly, situating it almost equidistant between our Halewood, Solihull and Castle Bromwich plants does have efficiency benefits," said Wright.

As part of its growth strategy and investment, Jaguar Land Rover is targeting 40 new products over 5 years, as it eyes emerging market growth.

"(The site) will enable us to accelerate our new products to penetrate new markets," said Wright.

"Our latest investment decision follows a period of rising sales, rising demand and rising profitability," he said, adding that the business is performing in line with expectations...

...Jaguar Land Rover already employs more than 19,000 people in Britain and supports up to 140,000 jobs. It has been boosted by strong demand from emerging markets such as Russia and China for its cars.

"As we invest 1.5 billion pounds a year for the next five years on new product developments, expanding our engine range will help us realise the full global potential of the Jaguar and Land Rover brands," said Ralf Speth, JLR CEO.

In the last few years, TATA through growth in sales in Russia and China have managed to turn around a loss making company to one with growing profits year on year. In 2009 there was speculation that TATA would have to close one of it's plants in the UK. (see Jaguar Land Rover to close factory)

Sky News reports that Nick Clegg, Deputy Prime Minister of the Conservative led Coalition Government, said he was "delighted" by the decision.

He said: "Growing our economy has to be the number one priority for Britain, and the Government is not sitting on its hands. With initiatives like the Regional Growth Fund, putting up to £10m into this new plant and Enterprise Zones boosting growth across the country, we're making the UK a better place to invest and do business."

Enterprise zones will benefit from:

• A business rate discount worth up to £275,000 per business over a five year period


• All business rates growth within the zone for a period of at least 25 years will be retained by the local area, to support the Partnership’s economic priorities and ensure that Enterprise Zone growth is reinvested locally


• Government help to develop radically simplified planning approaches for the zone using, for example, existing Local Development Order powers


• Government support to ensure that superfast broadband is rolled out throughout the zone, achieved through guaranteeing the most supportive regulatory environment and, if necessary, public funding.

The Regional Growth Fund which is giving £10 million to TATA is a £1.4bn fund operating across England from 2011 to 2014. It supports projects and programmes that lever private sector investment creating economic growth and sustainable employment. It aims particularly to help those areas and communities currently dependent on the public sector to make the transition to sustainable private sector-led growth and prosperity.

The second round of bidding to the Regional Growth Fund ended on the 1 July 2011. 492 bids were received with a combined total value of £3.3 bn. The Government welcomed this positive response to the Fund.

And that fact is quite interesting, the bid for the £10 million for TATA had to have been made by 1 July 2011, before the Conservative led Coalition Government announced the 21 English enterprise zones on 17 August 2011.

There is no equivalent regional growth fund in Wales or Scotland.

To conclude TATA decided to open a new engine factory outside Wolverhampton, because it's a logical decision and the proposal was being discussed with local Councils and Government well before the new enterprise zones had been announced.

Also in order to match the offer, the Welsh Government would have needed to find more than £10 million pounds.

Welsh Business Minister Edwina Hart recently announced the five new welsh enterprise zones, and is initially making £10m available over the next five years.

Don't get me wrong, the decision by TATA to open a new factory by Wolverhampton is good news, but I have a feeling that enterprise zones, or lack of them, had little if anything to do with the ultimate decision.