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UK inflation hit 3.5% in January up from 2.9% in December. Although this was not unexpected and was due in no small part to the rise in the standard rate of VAT, the adverse weather conditions also played a part, by hitting retail sales; sales volumes were down by 3.7% in Q4.
 
The Bank of England Governor reiterated the Bank’s view that the overshoot will be 'temporary', since there is a 'substantial' margin of spare capacity in the economy. Indeed, the Bank expects inflation to undershoot the target next year. 
By contrast, the UK labour market is showing some resilience. The unemployment rate held steady at 7.8% and the number of vacancies rose again. The substitution of part-time for full-time employment is continuing, whilst wage growth also remains extremely subdued - Average earnings rose by just 1.2% y/y well below the rate of inflation. 
The government had to borrow in January for the first time since records began in 1993. As a result, sterling lost some ground against the euro and the Dollar. This followed two months of better than expected fiscal results, so overall, borrowing remains broadly on course to meet the Treasury's 2009/10 £178bn forecast. 
Activity and interest in the area of M&A in the ECM sector remain higher than we have seen in the preceding 18 months.  A similar story is also been reported in other technology sectors.  It seems that companies regard the present situation as a good time to make a move towards acquiring.  In addition, sellers, having been frightened into inactivity by the forecasts of very low valuations, have seen that, on the whole, these have not come to fruition and consequently, the market has begun to move again. Contact Us