Ash claims finally given go-ahead

1 February 2012 Last updated at 17:34 GMT The volcanic eruption in Iceland caused serious disruption for air travellers Some 300 travellers with insurance claims resulting from the ash cloud disruption in May 2010 will finally have their cases resolved.

The claims were put on hold pending a legal challenge by the insurance provider Europ Assistance against an ombudsman's ruling.

The financial ombudsman had found in favour of a consumer in that case.

Now the challenge is over, the remaining complaints are being dealt with on the basis of that ruling.

In the case that was challenged, the ombudsman concluded in March 2011 that the wind-borne cloud of volcanic ash could fairly be considered to be a "poor weather condition" when insurance claims were being considered.

The ombudsman stressed that this did not mean all 700 ash-related travel insurance complaints that it received would be upheld, only that this ruling was used as a guide to dealing with complaints.

But the case was challenged by Europ Assistance, leading to 300 pending claims being put on hold until the legal challenge was over.

Eurozone service sector growing

3 February 2012 Last updated at 09:47 GMT The Spanish service sector continues to contract The eurozone's service sector has grown for the first time in four months, although Spain and Italy have continued to post falls in business activity.

The Markit eurozone services purchasing managers' index (PMI) was 50.4 in January, up from 48.8 in December. Any score under 50 represents a contraction.

It follows a manufacturing survey of 48.8, up from 46.9 in December.

Markit said the survey suggested a recession could be kept at bay.

Chris Williamson, chief economist at Markit said: "The final eurozone PMI data indicates that business conditions stabilised following declines seen in the final four months of last year and that the region may avoid a slide back into recession."

The two surveys helped improve the composite index for January, which includes services, construction and manufacturing, increase to 50.4 from 48.3 in December.

'Slower decline'

The survey also found an increasing gap between the stronger eurozone economies, such as Germany, and weaker countries such as Spain.

The survey found growth hit a seven-month high in Germany and a five-month high in France, while ongoing downturns were seen in Italy, Spain and the Irish Republic. However, the rates of decline fell for Spain and Italy.

Mr Williamson added: "Confidence may have risen but remains very low by historical standards of the survey, linked to the fact that inflows of new business continued to fall and that lower prices often had to be offered to win sales, which will dent profit margins.

"The region's debt crisis is also by no means resolved, and any setbacks in current negotiations could easily cause confidence to slump again."

Service sector sees strong growth

3 February 2012 Last updated at 11:01 GMT The upturn in services suggests the economy is not headed for recession The UK's dominant service sector grew at its fastest rate since March 2011 in January, according to a key survey.

The Markit/CIPS services purchasing managers' index (PMI) rose from 54 to 56. Any figure above 50 indicates growth.

Markit also reported the biggest monthly rise in business optimism since the survey started 15 years ago.

The data will reduce fears of a new recession, following a contraction in the economy at the end of last year.

An increase in new business also drove employment in the sector to rise at its fastest pace since March 2008, the survey found.

The service sector accounts for more than 70% of the UK's economic output.

Recession 'unlikely'

"All [this] points to a resounding revival of UK economic growth in January," said Chris Williamson, chief economist at Markit.

"A slide back into recession is now looking increasingly unlikely. The economy could well expand at close to trend rate - around 2-2.5% per annum - in the first quarter if business conditions hold up in the next two months," he added.

The data follows a similar survey showing the UK's manufacturing sector returned to growth in January, with overall activity at its highest level for eight months.

The results will be closely analysed by the Bank of England when it meets next week.

Risks

The Bank had been expected to expand its quantitative easing programme to provide extra credit to the economy.

"The recent upturn in some of the key indicators should make for an interesting policy debate at next week's Bank of England meeting," said Philip Shaw from Investec.

"Our feeling is that there are still big downside risks out there. And the BoE's own inflation forecast is so low in the medium term, it would take a big shift to the upside to remove the case for more easing," he said.

However, the data contradicts the latest forecast from the National Institute of Economic and Social Research (NIESR).

The think tank predicted the UK economy would shrink by 0.1% in 2012.

China 'considering' eurozone help

2 February 2012 Last updated at 13:57 GMT Chinese and German fortunes are interwoven, say correspondents China is "considering" contributing to European rescue funds, Premier Wen Jiabao has told reporters.

But Mr Wen did not make any firm commitment to assist during his news briefing with visiting German Chancellor Angela Merkel.

European leaders view China - with $3.2 trillion (£2tn) in foreign reserves - as a possible sources of funds to bail out struggling eurozone economies.

Mrs Merkel will offer reassurance about the situation in Europe, watchers say.

Iran and Syria are also expected to be on the agenda during her two-day visit.

'Urgent' task

Resolving Europe's debt crisis was "urgent and important", Mr Wen told reporters.

"China is considering greater involvement in resolving Europe's debt crisis by participating in the European Financial Stability Fund and the European Stability Mechanism."

The EFSF is a temporary rescue fund expected to be replaced by the ESM - a 500bn-euro permanent bailout fund - in July.

Europe is China's biggest export market, and Mr Wen reiterated that China supported a stable euro - saying it had a "great impact" on China.

But Mrs Merkel told reporters that Chinese leaders had stressed that European leaders needed to do more to resolve the eurozone crisis themselves before Beijing stepped in, Reuters news agency reported.

Accompanied by a 20-strong trade delegation, Mrs Merkel is scheduled to meet President Hu Jintao in the capital.

On Friday, she will visit Guangdong province with Mr Wen and executives from various industries.

Mutual dependence

This is Mrs Merkel's fifth visit to China. The BBC's Stephen Evans in Berlin says the two countries need each other.

Chinese purchases of German goods have kept the German economy growing much faster than that of other European countries, he adds, and Chinese imports of German technology has allowed the Chinese economy to improve.

Mrs Merkel is also likely to seek support from China for a UN Security Council resolution against Syria, and urge Beijing not to increase its imports of Iranian oil, following EU bans last month.

Also on the agenda is access to what are called "rare earth elements" used in the manufacture of many electronics components.

China mines 97% of the global supply and has been accused of limiting its supply to fetch higher prices.

Uganda signs oil production deal

3 February 2012 Last updated at 13:06 GMT Uganda holds oil reserves which could produce 200,000 barrels a day Uganda's government has signed production agreements with the London-based company Tullow oil.

The deals pave the way for a $10bn (£6bn) investment in a refinery and crude oil export pipeline.

Tullow will sell two-thirds of its interest in the Lake Albert Rift Basin to a Chinese company, CNOOC and the French firm, Total.

The deal is worth $2.9bn and ends a deadlock with the Ugandan government over future taxes.

Uganda's Oil Minister Irene Muloni said Tullow had accepted the government's revisions to "stabilisation clauses" which are included in the contracts to protect companies from future losses if the government alters tax laws.

Tullow spokesman George Cazenove said the company is happy with the clauses.

"It's important to remember that the Lake Albert Rift Basin development will be a long-term development for Uganda over many years - there's a lot of oil there," Mr Cazenove told the BBC.

"There will be a refinery in Uganda as well as a pipeline."

The oil deposits and refinery should be large enough to meet Uganda's needs, as well as those of some its neighbours, including eastern Democratic Republic of Congo.

'Sale and rent back' closed down

3 February 2012 Last updated at 12:54 GMT Jane and Richard Hudson told the BBC in 2008 how they lost their home in a sale and rent back deal The sale and rent back industry has been almost completely closed down, says the Financial Services Authority.

Nearly four years after regulators first responded to complaints, the remaining firms have stopped selling the controversial deals.

Distressed home owners would sell their homes at a discount to firms that then promised to let them stay as tenants.

The FSA said most deals "were either unaffordable or unsuitable and never should have been sold".

The Office of Fair Trading (OFT) investigated the industry in 2008 after tens of thousands of home owners sold their homes to companies offering them tenancies as an alternative to being repossessed.

The regulator estimated at the time that about 50,000 such deals had been struck, and concluded that the industry, which had more than 1,000 firms involved, should be regulated.

The OFT found that home owners who entered such deals might be cheated if they were misled into believing their tenancies might last for a long time, or if their rents were subsequently increased to levels they could not afford.

Proper regulation

The FSA took over formal regulation of these businesses in 2009 and has, in effect, scared most of them off.

Since then there have only been 61 such sale and rent back transactions.

Rules brought in by the FSA in 2010 laid down that any new deals had to offer a tenancy lasting at least five years.

Only 22 firms stayed in the market, but the FSA said that one way or another they had now all stopped doing business.

"The FSA has referred one firm to its enforcement division while others have either stopped taking on new business or cancelled their permissions," the FSA said.

"Effectively, this means the entire sale and rent back market is temporarily shut," it added.

Fraud

Despite new rules and formal regulation, a subsequent FSA investigation of the 22 authorised firms starting in March last year found a litany of failings and poor practice that had continued to put customers at risk.

Among the problems had been inappropriate and unaffordable deals, failure to discuss key facts with customers, incorrect information, breaches of the FSA's rules on financial promotions, and poor training, record keeping and levels of competence.

Nausicaa Delfas, of the FSA, said: "The resulting temporary closure of this market could have been avoided if sale and rent back firms had taken the time to fully understand their regulatory responsibilities and customers' needs."

"It seems most were more focussed on their own commercial success rather than the welfare of the customers, with one firm even resorting to fraud."

Redress?

Customers who took out a sale and rent back deal before the FSA started regulating the industry will not have the benefit of financial protection from the FSA and the Financial Services Compensation Scheme (FSCS) if things go wrong.

Peter Vicary-Smith, of the consumers association Which?, said: "It's welcome news that the FSA has taken action to stop people falling prey to shoddy advice from sale and rent back firms."

"Which? exposed the shortcomings of this market last year, after our own investigation uncovered woefully inadequate advice.

"We now want to see redress for those consumers who have been given poor advice by sale and rent back companies, and for this to happen quickly."