RECOVERY FORECAST "TOO OPTIMISTIC"

An annual survey of 67 leading economists by the Financial Times indicates a general belief that the Treasury's prediction of a recovery in the second half of 2009 is too optimistic, with unemployment thought likely to rise to around three million and house prices expected to fall throughout the year.

Two-thirds of those interviewed also did not believe that the government had a sound policy for restoring the public finances. "I expect the British economy to bump along the bottom, at best", commented Sir Howard Davies, Director of the London School of Economics.

MPS CALL FOR EXTENSION TO BAN ON SHORT-SELLING OF FINANCIAL

STOCKS

Senior political figures have urged the Financial Services Authority to extend the current ban on the short-selling of financial stocks, which finishes in a fortnight. Politicians including John McFall, chairman of the Treasury Select Committee, and Vince Cable, Liberal Democrat Treasury spokesman, have argued against the ban being lifted.

"They (the FSA) would have to have very good reasons for lifting it, but at the moment with the credit situation and the banks the way they are I don't think conditions have changed", stated Mr McFall.

However, the Conservative MP John Redwood has called for the ban to be lifted, arguing that the steady fall in bank stocks since the ban was introduced proves that the measure was unnecessary.

FIRST SHOTS FIRED IN RETAIL PRICE WAR

Three prominent British retailers - Asda, Tesco , and JD Wetherspoon - are all beginning 2009 with an array of price cuts.

Asda has announced that that it will cut prices on 1,000 lines across its stores, Tesco said that it would reduce petrol prices at the pump by three pence, while JD Wetherspoon will be pricing a pint of Greene King IPA at 99 pence in all its 713 UK pubs from Monday.

Retailers are making ever greater efforts to draw in consumers amidst the collapse of several weaker chains over a disappointing Christmas period.

CREDIT CRUNCH CASES SET TO STRAIN COURT

Desmond Browne QC, chairman of the Bar Council, has warned that the vast amount of legal action arising from the credit crunch could overload the facilities of the commercial court, resulting in competing centres of jurisdiction elsewhere in the world gaining the upper hand on English courts.

The opening of a new commercial court was recently postponed from 2010 to 2011. Mr. Browne remarked that lawyers would "just have to soldier on", under difficult conditions, adding that the courts were so overloaded that some lawyers were forced to talk to their clients in places which lacked confidentiality.

COUNCIL TAX RISES TO EXCEED INFLATION

Preliminary estimates by the Local Government Association point to an above-inflation rise in council tax bills in 2009. If so, this year will mark the twelfth consecutive year of "real" council tax rises.

The LGA stated that an average increase over the year of between 3.5 percent and the cap of five percent was likely, far beyond the rate of inflation, which is set to decrease, according to the RPI index.

The recession is severely hitting the revenues of council finances, as a reduced demand for services and a sharp drop in income from money held by councils on deposit with banks squeeze budgets.

HOUSING MARKET UNLIKELY TO PICK UP THIS YEAR

A new survey has found that six in ten of economists believe 2009 will be a year in which to avoid buying property, with prices expected to continue falling into 2010.

The overriding feeling among the economists questioned is that house prices are still too high when compared with incomes and credit conditions.

However, a considerable minority of economists still believe that prices will be close to their nadir towards the end of 2009 as the recession and credit constraints ease. Jonathan Loynes of Capital Economics urged caution, warning:

"The experience of previous housing downturns suggests that, even after prices stop falling, it could be some time before they start to rise again at any meaningful rate."

LOTUS PLANS ELECTRIC SPORTS CAR

Sports car manufacturer Lotus has announced that it is to produce an electric powered vehicle. The car could be shown for the first time, in concept form, at the Geneva motor show in March.

Lotus chief executive, Michael Kimberley told the Financial Times; "don't be surprised to see an electric Lotus shortly; we are working on the technology that will go behind it".

The move will pitch Lotus against existing electric vehicle manufacturers such as Tesla Motors, for which Lotus currently assembles bodies for its Roadster model, at its Norfolk factory.

BOLD MOVE TRANSFORMS ABERDEEN ONCE AGAIN

Aberdeen Asset Management is now the UK's largest listed fund manager, following its purchase of Credit Suisse's traditional fund management business. Aberdeen's purchase, valued at around 200 million pounds, is predominantly a share-based transaction and could see Credit Suisse owning as much as 25 per cent of Aberdeen.

The deal means that Aberdeen now has around 150 billion pounds under management, overtaking rivals such as Shroders. Aberdeen expects the marginal cost of running the new business to be around 35 to 40 per cent of its income, well below Aberdeen's own cost to income ratio, which was 77 per cent for the year to the end of September.

COLLINS STEWART MOVES UP INTO MID-CAP CLIENTS

Stockbroker Collins Stewart has recently secured 21 new brokerage clients in the investment company sector. The majority of the new business has come though Dresdner Kleinwort following the defection of its veteran team to Collins Stewart last summer.

The gains are in line with the strategy laid out by Collins chief executive, Mark Brown, to shift the stockbroker's client roster towards mid-cap clients. Ten of the newly signed clients are due to have market capitalisations of more than 100 million pounds.

Robbie Robertson, who heads the Collins team, comments; "The idea of investment companies is firmly established now, but they are dynamic. Even in the current market, initial public offerings are a possibility for the right company" he said.

Prepared for Reuters by Durrants

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