The Economy Today

UK furniture retailer MFI has gone into administration - blaming falling demand for big ticket items, cash-flow problems and the withdrawal of credit.

MFI’s adminitsrators claim to have two expressions of interest from potential buyers, although it is likely that most of the stores will be closed.

MFI has seen sales fall in recent years as it has faced increased competition from businesses such as Ikea and the economic downturn has made trading even harder, as people stopped buying things such as new bathrooms and kitchens.

An even more established name is also on the verge of administration as High Street legend Woolworths has buckled under its debt.

Woolies has been in a desperate position for some time, with loss of market share and poor forward planning over the last few years and the downturn has shown up the stores weakness.

Shares were suspended on the stock exchange today as the firm continued talks aimed at rescuing the business.

As one of Britains oldest store groups, this is a sign that no company is safe in the current climate

World leaders came together this weekend to discuss the continuing global financial crisis and left with an even stronger resolve to work together in solving the current world recession - well, some of them did.

The meeting brought together not only major industrial powers, but also emerging market countries, such as Argentina and Brazil, fully representing around 85% of the total world economy.

China said that the meeting would help reform international financial institutions and hopes that all countries could continue to co-ordinate, substantially strengthen the financial regulation and take actions to prevent global economic recession.

Meanwhile, British Prime Minister Gordon Brown said the meeting reached important conclusions about trade, financial stability and economic expansion.

The trouble is that the meeting was big on promises, but offered little in the way of decisive action plans. This is little more than an expanded G7, designed to show unity, but afraid of coming up with any real action plans in case a member country is seen to disagree with it!

EU figures show that the Eurozone is now officially in recession, with the economy shrinking by 0.2% in the third quarter. This follows a similar drop of 0.2% in the previous quarter.

The news was expected, with Germany - Europes largest economy - already being in recession. Since Germany is the main driving force of the Eurozone, if they have problems it pretty much guarantees that the whole region will be dragged down with it.

The European Central Bank has dropped its interest rate to 3.25% this month to try and kick - start the failing economy, but I would expect more cuts in the rat to come over the next few months, with the rate eventually dropping as low as 1.5 - 2% before this current crisis starts to abate.

It isgenerally believed that the UK is already in recession, although official figures have yet to be posted.

In spite of the gloomy news, European stock markets ended the week in positive territory.

Sterling continues to be hit hard though, with the value against the Dollar continuing to fall.

This time last year, the Pound was worth over $2 and bargain hunters were dashing across the ‘pond’ to take advantage of cheap goods in New York.

The value has now dropped to only $1.47, with investors believing that the UK will be hit hardest by the recession.