Talk Money

Scottish football clubs can declare a result in the battle with the credit crunch after a report revealed their financial health was improving.

PricewaterhouseCoopers has said ”shrewd business acumen” has led to clubs clearing debt and becoming more efficient.

Eight out of 12 clubs are now recording positive earnings and the highest general profit in the last 10 years.

Just four years ago many of Scotland’s top clubs were technically insolvent and facing a total debt level of £186m.

But better use of assets like stadiums and improved financial management has seen the football fraternity transform its fortunes.

David Glen of PricewaterhouseCoopers said the improved financial performance will help many clubs “weather any financial storms”.

The season of 2006 to 2007 was seen as a turning point, with many clubs sorting out balance sheets and recording improved attendances.

During the year 28,000 extra supporters went to games and St Mirren saw an average attendance increase of 48 per cent.

The total football wage bill continues to climb however, up by seven per cent to £100m with the Old Firm making up more than 50 per cent of this.
Celtic’s finances are doing well in particular, posting a 31 per cent rise in turnover to a record £75m, helped in part by reaching the last 16 of the Champions League.

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New wireless technology could see people ditching cash and cards in favour of using mobile phones to pay for goods.

UK payments association Apacs said Near Field Communication (NFC) could ‘revolutionise’ the way consumers buy things.

NFC is a short-range wireless connectivity technology that allows secure transactions, undergoing development as people abandon cash in favour of cards, according to Apacs.

Apacs spokesman Jemma Smith said: “At some point the scales are going to tip to the point where people really do start using [mobile technology] and then it will potentially revolutionise the way that we pay for things.”

Apacs has reported people are now more likely to use cards to fund purchases, particularly for more expensive items.

However, this is contradicted by research from the British Retail Foundation, showing cash is used for 60 per cent of all transactions, up on a total of 54 per cent last year.

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With The Bank of England cutting the rate of interest on December the 6th, two further mortgages providers have reacted, lowering the rate of selected products.
From January 2008 Standard Life will decrease the rate of its Freestyle standard variable rate (SVR) by 0.25% to 7.21% and HSBC will reduce the rate of its variable mortgage by the same margin to 6.75% as of December 24th.  HSBC was one of the first lenders to act on the Bank of England’s decision, cutting the rate of its tracker mortgage shortly after the Bank’s announcement.
Financial comparisons website Moneyfacts.co.uk reported that 31 providers had cut their SVRs following the interest rate cut announcement with 6 providers reducing their SVRs by less than 0.25%.  Moneyfacts Analyst, Lisa Taylor, believe the pace of change was slow compared to the last time rates were lowered in August 2005. She said:
“The last time we saw rates fall back in August 2005, 46 lenders had made announcements. The rate of change now appears to be relatively slow.”

Christmas shoppers are using more cash this year, potentially at the expense of credit cards. Cash machine operator Link has reported that ATM withdrawals are up 7.1% for the first ten days of December compared to November. In the previous 4 years, this figure has been around 5%.
In November, the payments association APAC predicted a fall in cash spending of 5% over the Christmas period compared to 2006 and a predicted retail spend of £53billion. This predicted spending would be a rise of 4% compared to 2006 which APAC said would be fuelled by credit card spending.
However, it appears that worries about the ongoing credit crunch have led consumers to rein in credit card spending and use cash.  According to retail spending figures from credit card company MasterCard weak sales were reported in November, slowing the annual retail sales growth rate down to 4% from 4.5%.

Just 1% of Britons have complete control over their finances and the vast majority of people show irresponsible behaviour with regards to their credit cards, banking and shopping around for the best financial deal.
This is according to a survey by Abbey which sought to find out “financial fitness” on a percentage scale, with 0 being a “financially fit machine” and 100 being “financial obese”.  The survey showed that 46% of women and 41% of men were “financially overweight”. People in Wales and the South-West were the fittest financially (42% overweight) whereas people in the North of England were the most overweight financially (46% overweight).
Sue Hayes, Director at Abbey said:
“We would encourage people to review the financial products they hold and shop around to ensure that they are getting the most competitive deal available.  Like exercise, a financial workout can take a bit of effort but for most people the rewards are well worth the exertion.”

High Street banks will be allowed to discriminate in their provision of credit, dependent on age.  Currently older people find it more difficult to obtain credit due to doubts that they will live long enough to pay off the loan.
Former Bank of England executive Mike Young reviewed the Banking Code in early 2007 and recommended an end to credit companies discriminating on the basis of age.  He said:
“The guidance should be amended to ban credit rejection simply on the grounds of reaching a certain age.”
However, The British Banking Association (BBA) decided not to take this recommendation on board. Director of Retail Banking at the BBA, Eric Leenders said:
“The banks feel they should be able to make commercial decisions and take account of factors they might feel are relevant – and one of the factors could be age.”
Young’s review recommended more transparency on loans and saving products, along with more diligence from banks when selling products to people who represent a credit risk.  Consumer groups criticised the review for not taking stronger measures against matters such as bank charges.

The Bank of England’s Monetary Policy Committee is under pressure to cut interest rates today. Interest rates rose five times since August 2006, but have been unchanged since July. However, analysts expect the cost of borrowing to drop to 5.5% from 5.75%. Global Insights Howard Archer said:
“[the December 2007 rate decision] is one of the tightest calls ever”.
A key factor in a rate cut is the growth in the Libor rate, the rate at which banks lend to one another. This has led to the “credit crunch” that consumers and banks alike have suffered in the second half of 2007.

High interest rates, rising prices and slowing wage growth will make this January’s debt hangover particularly difficult.
January is the most common time for Citizens Advice to receive enquiries for loan arrears, debt arrears, credit card bills and overdrafts.  Citizens Advice is now recommending Britons to plan their spending as it prepares for a surge in post-Christmas debt enquires. With Barclaycard, Citizens Advice has set out a guide to avoid debt problems in the New Year.
Teresa Perchard, Director of Policy at Citizens Advice said:
“With a little forward planning, Christmas panic buying can be avoided.  We hope these top tips will help people take control of their money as Christmas approaches so they do not start the New Year with a debt hangover.”
Below are the top tips outlined by Citizens Advice and Barclaycard to avoid a post- Christmas debt hangover:
•    Plan early for Christmas. Be realistic and budget.
•    Do not forget everyday bills.  Remember rent, mortgage and utility bills. The consequence of missing these bills can be severe.
•    Do not bank on an overdraft. Talk to your bank first, unauthorised overdrafts are expensive.
•    Avoid shop credit offers. Stay away from buy now; pay later unless it really does work out cheaper.  Interest free credit sounds attractive, but can be hard to budget for and expensive if you miss a payment.
•    Shop around.  Find the best deal. Price comparison websites make it easy.

According to a report from accountants PricewaterhouseCoopers (PWC) UK consumers are facing a cut in the credit available to them.
PWC’s Precious Plastic 2008 report states that credit card companies are suffering from falling profits due to customers defaulting on payments as well as an increasingly competitive environment.  Credit companies have lost around £4 billion due to customers not being able to me repayments, according to PWC his has led to “thousands” of credit card applications being rejected over the Christmas period.
Richard Thompson of PWC said:
“Banks are continuing to take action in response to the rise in consumer debt by tightening their credit acceptance policies. Many consumers will find it increasingly difficult to obtain credit this Christmas.”
PWC also show that UK consumer debt is increasing, with the average British adult having £33,000 of unsecured debt, double the 2000 figure.

Borrowing limits on credit cards are being cut following the global financial crisis. Even customers with good repayment records are finding that card companies are lowering their credit limits. Credit card provider Goldfish said that it had cut limits for a “small amount” of customers.
The global financial crisis began with the collapse of the US sub-prime mortgage as many sub-prime customers defaulted on their mortgage payments.  In turn, it materialised that many financial institutions had purchased these sub-prime debts on the money markets and were facing huge losses with the sector’s collapse.
This led to an increase in the Interbank rate, the rate at which banks lend to one another. The situation has been called a “credit crunch” and has now trickled down to High Street level. More credit problems are anticipated as big losses are predicted for global financial institutions exposed to the US sub-prime market.