U.K. Home Repossessions Surge, Manufacturers’ Confidence Slumps

By Svenja O’Donnell and Caroline Binham

Jan. 22 (Bloomberg) -- U.K. home repossessions almost doubled in the third quarter and manufacturers’ confidence plummeted to the lowest since 1980 as the recession deepened.

Banks took possession of 13,161 properties, 92 percent more than a year earlier, the Financial Services Authority said today. A gauge of business optimism among manufacturers for the three months through January fell to the lowest since 1980, a survey by the Confederation of British Industry showed.

Data tomorrow will show the economy shrank the most since 1990 in the fourth quarter as unemployment soared and banks curbed loans, economists predict. The pound fell to a 23-year low against the dollar this week on speculation the financial crisis will force Prime Minister Gordon Brown to seize control of the nation’s financial institutions.

“We’re going to see a severe consumer retrenchment, as there are powerful forces in play hitting households’ ability to pay,’” said Nick Kounis, chief European economist at Fortis in Amsterdam. “We’re looking at a deepening recession. The fourth quarter is going to be disastrous.”

An index of business optimism for the quarter through January fell to minus 64, the lowest since Margaret Thatcher was prime minister almost three decades ago, the CBI, Britain’s biggest business lobby said today. A monthly index of factory orders was at minus 48, the lowest since 1992. The survey was conducted between Dec. 11 and Jan. 7 among 527 manufacturers.

Recession Forecast

The economy probably contracted 1.2 percent in the fourth quarter after shrinking 0.6 percent in the previous three months, according to the median forecast of 33 economists in a Bloomberg News survey. The Office for National Statistics will release the figures at 9:30 a.m. tomorrow in London.

Bank of England Governor Mervyn King said on Jan. 20 that the pace of economic contraction is “likely to continue to be marked” in the first half of this year. U.K. house prices will drop a further 22 percent in the next 1 1/2 years as the recession deepens, the Ernst & Young Item Club forecasts.

The number of people receiving jobless benefits rose 77,900 to 1.16 million, the highest level since January 2000, the government’s statistics office said yesterday.

Falling house prices, rising unemployment and loan rationing are hurting people’s ability to pay back their debts. The number of repossessions was compounded by a 10 percent rise in the number of home-loan repayments that were late in the third quarter, the FSA said. Arrears for the period increased to 60,000 from 54,000.

The freeze in credit is also hurting companies. The index of firms with trouble finding finance is at highest since 1970s, during the secondary banking crisis, the CBI said. Both large and small companies are finding it more difficult to get credit, the lobby group said.

To contact the reporters on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net; Caroline Binham in London at cbinham@bloomberg.net