Virgin and BSkyB end channel row

After a year and 7 months you wouldn’t have thought it’d happen but it’s finally back…
Television providers BSkyB and Virgin Media have reached an agreement on a long-running row over channel charges.

The deal will see Sky's basic channels return to Virgin's cable service and Virgin's channels stay on Sky.

Virgin Media - which was formed from the merger of cable TV firm NTL and Virgin Mobile - accused BSkyB of "bullying" and "arrogance".

Virgin Media had warned it would drop the Sky Basics TV package, which also includes Sky News, Sky Travel and Sky Sports News, if agreement on a new contract to replace its current one could not be reached.

Sky One includes popular series such as 24 and Lost, as well as new episodes of The Simpsons.

In April last year Virgin Media launched a High Court action against BSkyB. Virgin said it was taking action to resolve the row, claiming Sky was abusing its dominant market position. The two firms were accused of "behaving like children" by the National Consumer Council

While this is the first highly public squabble since NTL: Telewest rebranded as Virgin Media, the two companies have clashed before.

Virgin Media's biggest shareholder, Sir Richard Branson, was infuriated by Sky's decision to buy more than £1bn worth of shares in ITV after NTL, as it was then known, had declared an interest in buying it.
The Sky shareholding effectively blocked Virgin Media's takeover plans.

Sky’s half year profits till November ’07 suffered a huge fall in pre-tax profits from the dispute, falling to £121m, down from £166m a year earlier.

Sky's basic channels - including Sky1, Sky News and Sky Sports News - will return to Virgin Media on November 13 under a contract running to June 2011.

How do Interest rates affect us?

Mortgage

In the UK more-so than most countries in Europe a house is the single biggest purchase we'll ever make. Most of us will have a mortgage and therefore be affected by Interest rates for most of our adult life.
A 0.25% change in Interest rates will add more than £16 a month to the bill of a family with a typical £100,000 home loan.
Fixed your rate low 3 years ago? Get ready to feel the shock of a 2% Interest rate increase.

In a much needed up for the economy last Wednesday the Bank of England stated the number of mortgages approved for house purchases in the UK has risen for the first time in a year.
This is put down to the recent Bank rate cuts and help for banks will ease the squeeze on mortgage lending.

Stocks

Many experts say shares are now at an undervalue, and so it could be a good time to acquire them via your pension fund.

Even if the market falls further, you will have enjoyed a huge tax relief on your contributions, meaning the market would have to fall a very long way before you make a loss in real terms.

The economic cycle has clearly shifted into a dramatic downturn, and so a different planning approach is called for.

Foreign Investment

Foreign Investment relies on various things, financial stability, social stability and most importantly Interest rates. “Hot Money”. Imagine a bank offers a new Interest rate far better than the competitors when you’re looking to save. Well, Investors do the same thing. They will search from country to country to look for the highest Interest rate.

Small Businesses

As a small business loans are the most common form of capital. Interest rates will therefore affect the amount you are paying back each month and can badly affect your working capital.
With larger companies however it makes less difference. Firstly, as they will have shareholders to raise capital, but secondly the huge companies such as Tesco will demand how much they are going to borrow and at what Interest rate.

Unexpected changes

If the market widely expects a different change from the one that happened it usually sends shocks to the stock markets. The normal change of Interest rates is 0.25%. However, in recent months cuts have been seen to be of over 1%. The reason these unexpected changes make such a difference is simple. Prudence. Markets get scared and demand drops. As of writing the Bank of England are expected to cut their rates from 4.5% to 4% in an effort to curb the economic downturn. Last month, the Bank cut its base rate from 5% to 4.5%.

"The Bank of England Monetary Policy Committee needs to cut interest rates progressively to 3% or lower in order to prepare the economy for the recovery we hope to see in 2010," said John Hawksworth, head of macroeconomics at PwC, adding that it needs to start by cutting to 4% on Thursday.

Economics

Economics is based on the assumption that an increase in Aggregate Demand will increase growth in an economy, and in most cases at the expense of Inflation rising.
Aggregate Demand is calculated by adding Consumption Expenditure, Investment Expenditure, Government Expenditure and Exports minus Imports.
AD = C + I + G + (X – M)

Monetary Policy is the manipulation of Interest rates. The main component of this equation is Consumption Expenditure, which is thought to account for around 70% of AD. It is theorised that a decrease in Interest rates will boost consumption as credit will be cheaper. Vis-à-vis an Interest rate rise will increase the amount spent on the mortgage and increase the cost of credit. Large purchases such as a car or white goods are less likely to be bought.

Conclusion

To finish, at the end of the day there are always winners and always losers. By knowing where you can take advantage of the situation, it is possible to make the downturn much less painful financially, and in some cases, it may even be possible to take advantage of it.
Any big British bank is an extremely good Investment currently, as the shares are so low and they’re being backed so heavily by the Government. Just remember, they’re a long term Investment.

References
BBC Business : Downturn points to cut in rates

BBC Business : Mortgage lending 'rises slightly'

BBC Business : A silver lining for the credit crunch?

The Independent : Homeowners hit by interest rate rise