UK Economy Contracts; Lloyds Annual Loss Widens

Arthi Gupta
24 Feb, 2012
New York City

The UK indexes edged higher after gross domestic product contracted 0.2% and business investment declined in the fourth quarter. The UK services index rose in December.

[R]3:00 PM London – The UK indexes edged higher after gross domestic product contracted 0.2% and business investment declined in the fourth quarter. The UK services index rose in December.[/R]

The UK indexes gained on mixed domestic economic data.

Lloyds reported net loss for the year widened to £2.8 billion leading to a decline in banking stocks.

The Greek Parliament approved the debt swap deal with its private creditors, a pre-requisite for receiving the second bailout package worth €130 billion from the European Union, International Monetary Fund, and the European Central Bank.

The final agreement increased the loss to private bond holders to 53.5% of face value or the equivalent to 75% of overall loss.

In London trading FTSE 100 Index dipped 1.57 or 0.1% to 5,936.14 and the pound edged higher to $1.5814.

For the week, the FTSE 100 Index rose 0.5%.

UK Economy Contracts

The UK gross domestic product contracted 0.2% sequentially in the fourth quarter, the second estimate released by the Office for National Statistics showed today.

Household spending rose 0.5% in the fourth quarter, following a 0.1% fall in the third quarter. Government spending advanced 1% in the fourth quarter after falling 0.3% a quarter ago.

From a year ago, GDP rose 0.7% in the fourth quarter, instead of 0.8% estimated in January.

In 2011 as a whole, GDP rose 0.8%.

Separately, the UK business investment declined a seasonally adjusted 5.6% or £1.7 billion to £28.7 billion in the fourth quarter compared to the prior quarter, the Office for National Statistics said.

Total manufacturing investment fell 2.4% or £0.1 billion to £3.5 billion and non-manufacturing investment decreased by 6% or £1.6 billion to £25.2 billion when compared with the previous quarter.

UK Services Index Rises

The UK's index of services, an indicator of service sector output, increased more than expected in December, data from the Office for National Statistics showed.

The seasonally adjusted index of services rose 0.2% from a month ago in December.

On an annual basis, the seasonally adjusted index rose 2.4%.

Gainers & Losers

Berendsen PLC soared 9% to 503.50 pence after the textile services firm reported revenue for the full year 2011 gained 1% to £992 million from £986.1 million the prior year. Profit before tax for the period soared 129% to £79.3 million from £34.6 million the previous year.

Hammerson plc climbed 3.7% to 400.10 pence after the real estate investment trust is to sell its offices investments to focus on its retail operations in the UK and France.

Lloyds Banking Group Plc fell 2% to 35.85 pence after the mortgage lender reported fiscal year 2011 pre-tax loss of £3.54 billion compared with a pretax profit of £281 million in 2010.

The company reported net loss for the year widened to £2.8 billion from £320 million a year earlier.

Reckitt Benckiser Group Plc, the consumer goods company declined 2.1% to 3,426 pence after a broker downgrade.

The Weir Group PLC gained 1.2% to 2,205 pence after the engineering company confirmed it has submitted a binding offer to acquire all of the shares of Ludowici at an offer price of A$10.00 per Ludowici share.