Current Account Deficit Cut By £1.6bn

The seasonally adjusted current account deficit for Q4 2009 was £1.7bn equivalent to -0.5% GDP, compared with Q3 revised £5.9bn (-1.7%). The deficit on trade in goods and services was -£8.6bn or -2.5% of GDP, and -2.2% in previous quarter. The surplus on income is 2.9% of GDP compared with 1.5% in Q3.

In Q4 there was a deficit of £8.2bn with EU compared with £3.9bn Q3. The decrease in deficit was mainly due to higher surpluses on income and trade in services with a lower deficit on current transfers partly offset by an increase in deficit on trade in goods. The current account with non-EU countries shows a surplus of £6.5bn compared with £2.1bn in the previous quarter. The change is due to a surplus on income increase of £5bn to £10.3bn, the surplus on trade in services increased by £0.3bn to £12.4bn and the deficit on current transfers decreased by £0.2bn to £3.3bn due to a fall in debits from UK payments to EU institutions, though these statistics can be erratic. The annual deficit on current transfers was £14.6bn in 2009 an increase of £0.6bn. The deficit on trade in goods increased by £1.2bn to £21bn.

The capital account recorded a surplus of £1bn in Q4, up £0.1bn on Q3. The surplus on the capital account rose from £3.2bn in 2008 to £3.6bn in 2009. The financial account showed a net inflow of £6.1bn in Q4 compared with a net outflow of £1.4bn in Q3. There was a net disinvestment abroad of £15.3bn and a net disinvestment in the UK of £9.6bn after £16.7bn in Q3 2009. Direct investment abroad fell to £2.8bn from £4.9bn and direct investment in the UK increased by £15.1bn to £21.1bn due mainly to higher investment in equity capital. Portfolio investment abroad amounted to a net investment of £22.9bn in Q4 after £53.6bn in Q3. Total portfolio investment in the UK amounted to a net investment of £14.5bn in Q4 2009 following a net investment of £32.2bn in Q3. Financial derivatives had net settlements of £5.3bn. The capital balance was £973bn.

In 2009 current account in deficit by £18.4bn compared with £22bn in 2008. The deficit amounts to -1.3% of GDP compared with -1.5% in 2008. The deficit of trade in goods and services for 2009 is -2.3% GDP compared with -2.6% in 2008. In 2009 the UK recorded a deficit of £19.5bn with the EU, compared with £5.6bn in 2008 and there was a surplus of £1.1bn with non-EU countries after a deficit of £16.4bn in 2008.

Direct investment abroad in 2009 amounted to £11.9bn compared to £87.6bn in 2008. Direct investment in the UK in 2009 amounted to £29.3bn compared with £49.8bn in 2008. Portfolio investment abroad in 2009 was £154.4bn following a net disinvestment of £123.5bn in 2008. Investment in the UK increased to £188.3bn in 2009 from £185.8bn in 2008. Financial derivatives in 2009 reported net settlements of £14.5bn compared with £35.5bn in 2008.

Non-seasonally adjusted figures for Q4 2009 show a current balance of -£1.8bn, a capital balance of £972bn, net financial transactions of £6.15bn and net errors and omissions of -£5.32bn to balance the three accounts.

Supply And Demand Combine To Increase Farm Prices

Farmland prices increased in H2 2009 after a slight fall in H1. The changes were due to a decrease in supply in both commercial and residential farmland sectors, stable demand in the residential sector and increased demand in the commercial sector according the the RICS Rural Land Market Survey for H2 2009. Price expectations increased but more so in commercial.

RICS publishes two different measures of farmland prices, the opinion based and the transaction based measures. The RICS opinion based measure of farmland prices increased by 4% to £12,715/hectare in H2 from £12,172/hectare in H1 2009. Arable land increased by 5% to £13,713/hectare in H2 from £13,085. Pasture land increased by 4%. In H1 it was £11,260/hectare and in H2 it increased in £11,718. The transaction based measure increased by 7.5% in H2 from £15,199 to £16,381/hectare.

Demand for farmland in the residential sector stabilised during H2 2009. Demand for commercial farmland increased. Some surveyors suggest commercial farmers are still interested in expanding their operations. Surveyors also suggest that low interest rates are making commercial farmland more attractive to non-commercial buyers. Supply however is falling in both residential and commercial farmland sectors. These conditions are expected to continue which will help increase prices further during 2010.

Low Levels Of Interest In M & A

Foreign companies increased their interest in the UK from £4bn in Q3 2009 to £13.8bn in Q4. The number of transaction was more or less unchanged. Over 2009 as a whole however the value of acquisitions in UK by foreign companies was the lowest since 1993 at £30.8bn, a decrease of 41%. UK companies' interest in foreign companies decreased from £2.5bn in Q3 to £0.9bn in Q4, the lowest since records began in 1987. The total value of acquisitions by UK companies in foreign companies in 2009 as a whole was £9.9bn, the lowest since 2004. UK companies decreased their interest in UK companies from £1.9bn to 1.3bn between Q3 and Q4 2009. The total value for 2009 was £12.1bn, the lowest level since 1994.

The number of transactions in the UK by foreign companies in Q3 2009 for the £4bn was 27 and the £13.8bn in Q4 was from 26 transactions, the highest quarterly value since Q2 2008. Among the transactions taking place were the acquisition of Barclays Global Investors by Blackrock, Friends Provident by Resolution and the disposal and acquisition of Gatwick Airport. Foreign companies also disposed of 11 UK companies during the quarter. The total number of acquisitions in the UK by foreign companies in 2009 was 100 down from 252 in 2008, the lowest since 1988. A total of 78 of the 100 were direct transactions. Inward investment came mainly from Europe with 62% with 54% of the total came from EU countries, American companies accounted for 37% with the US accounting for 34% of the total and Africa, Asia and Oceania 1% each.

Transactions abroad by UK companies totalled £0.6bn in value in 2009 from £17bn in 2008. Another lowest figure since records began in 1987. Net transactions in the UK by foreign companies amounted to £24bn in 2009 from £47.4bn in 2008. Net cross-border acquisitions and disposals of UK companies totalled -£23.4bn in value.

The number of transactions abroad by UK companies was 26 in Q3 and 25 in Q4 2009 for a total value of £2.5bn and £0.9bn respectively. UK companies secured the disposal abroad of 6 companies worth £2bn in Q4 2009. Transactions taking place included the disposal of SPE S.A. by Centrica, of Aviva Australia Holdings by Aviva Plc and Balfour Beatty Plc's acquisition of Parsons Brinckerhoff Inc. The annual total of £9.9bn was from 99 transactions down from 298 in 2008, the lowest since 1987. Of the total of 99, 81 were direct transactions. The Americas were the primary destination for UK companies accounting for 50% of the total of overseas transactions, the EU accounted for 17%, Africa 16% and Asia 10%.

UK companies decreased their interest in UK companies in Q4 by 67% to £12.1bn but significant transactions included the acquisition of the Central African Mining and Exploration Company by the Eurasian Natural Resources Corporation and the acquisition of Avalon Acquisitions by Just Retirement (Holdings). There were a total of 59 transactions during Q4 2009 compared with 62 in Q3. They consisted of 39 acquisitions of independent companies and 20 by company groups that involved subsidiaries.

The total number of mergers and acquisitions in 2009 was 266 worth £12.1bn, 180 were mergers and acquisitions of indpendent companies and 86 were sales of subsidiaries between company groups.

Low Level Of M&A Activity Involving UK Companies

Foreign companies spent less on acquisitions in the UK in Q2 2009 in the lowest number of transactions since Q2 1987. There were 14 such transactions compared with 25 in Q1 2009. The fall from £12.3bn to £0.4bn is also the lowest since Q2 1987. UK companies also spent less on acquisitions abroad with expenditure decreasing from £3.7bn in 17 transactions in Q1 to £2.4bn in Q2 2009 in 25 transactions. UK to UK acquisition transactions decreased from 88 to 41 with a value of £0.7bn in Q2 2009 the lowest since Q3 1992. Included in these latest statistics from the ONS are the acquisition of a controlling stake in the Vodacom Group by Vodaphone Group for £1.6bn and the disposal of Cadbury by Schweppes Australia for a reported -£0.6bn. UK to UK transactions included the acquisition of Aricom Plc by Peter Hambro Mining Plc.