Bank of Cyprus UK "no effect"

Bank of Cyprus UK, which has 50,000 depositors in the UK, says they will not lose out because of the deal between Eurozone finance ministers on a bailout for Cyprus.

It issued a statement, reading: "There is no effect on deposits with Bank of Cyprus UK Limited which is a UK bank".

The bank's customers in Cyprus are in danger of losing a portion of deposits above the 100,000 euros guaranteed by the government of Cyprus.

However, Bank of Cyprus UK emphasised that it was a separately capitalised UK incorporated bank, subject to UK financial regulation.

Flagging exports hurting our economy

What difference has the fall in exports by British industry made to the shrinkage of the economy? A big difference – and Europe is a major factor.

As reported by the ONS today, the economy shrank markedly in the 2^nd quarter of 2012, but by less than the stats people had thought before. UK GDP (everything we produce) was down 0.5% rather than the previous estimated fall of 0.7%.

There are various factors, for instance construction work is well down from last year and manufacturing has fallen back as well.

Construction contributed 0.3% to the shrinkage and manufacturing 0.1%.

But international trade has been a major influence too, both what we produce to sell to other countries and what we buy from them. Exports affect GDP, so does lower spending on imports by hard-up UK shoppers.

Exports did really badly in the 2^nd quarter. So how much did other countries’ problems affect our economic growth? And how much can we blame this on the havoc in the Eurozone?

Over the 3 months UK exports of goods to the EU were down £2.8bn on the previous quarter to £36.5bn. The biggest factor was oil, but exports of chemicals, cars, consumer goods, partly manufactured goods and industrial equipment were all down.

Exports to non-EU countries were down by £1bn to £36.9bn.

The ONS says that the drop in total exports depressed UK growth by 0.5%, which happens to be the same as the new figure for the overall shrinkage in GDP over the quarter. It’s just one component of the economy, out of many, but without the export drop there’s no GDP drop.

It’s worth pointing out that my £2.8bn figure for the export drop to the EU only includes visible goods (things you can see and touch), while the percentage figure for the impact on GDP includes intangibles, such as financial services and advertising.

Even so, you could argue that without the poor export performance, GDP would have been unchanged in the 2^nd quarter. Also, that the Eurozone has to take most of the blame.

Pound down 31%

UPDATE: pound now buys 1.2241 euros...

It's only three years since the pound sank to near parity with the euro. In other words, a pound and a euro were worth virtually the same amount.

In the wholesale market you could buy just 1.02 euros with each pound at the end of 2008.

So tourists heading for the Eurozone this week will feel a lot more comfortable about the current exchange rate of 1.2155 euros to the pound (update - now 1.2241) - up 19% from the depths of the financial crisis.

(You get a few cents less than that, of course, once money-changing charges are taken off.)

It's worth putting these numbers in a bit of historical context, though, because travellers face a much lower exchange rate than a decade ago - and businesses are still benefiting from a sizeable devaluation in comparison to their Eurozone competitors.

The euro was born as a notional currency in 1999. The pound bought 1.7510 euros at its peak in May, 2000.

Euro notes and coins were launched on New Year's Day in 2002. Even during during that year the pound reached 1.6404.

So sterling is still 26% lower than in 2002 and 31% down on the millennium year, 2000.

Between January 2007 and December 2008, the pound fell by 32%.

According to the ECB (European Central Bank), the average value of the the pound during this period has been 1.4084, substantially higher than the current rate.