2008 Print winner
Connor is 15 years old and lives in Lancashire. He wrote about the credit crunch.
Profiteering from the credit crunch
As British consumers and their worldwide counterparts feel the reverberations from the credit crunch, Connor Sephton looks at those cashing in on difficult financial times.
The world woke up one morning last August with a difficult realisation: a credit crunch was looming. Financial experts watched as the unprecedented began to happen and warned of imminent implications.
Over a year on from the beginning of one of the worst mortgage crises known to civilisation, there has been liquidation, share depreciation and home repossession made rife in its wake.
As major transactions become major cancellations and the availability of loans and mortgages in the market dried up on the international stage, little respite could be seen in the future as both self employed and major employers struggled to make ends meet.
But have there been any winners in the recession? Are there any business people wishing the economic downturn to continue?
In this special financial report, we look at the winners cashing in on the losers in these troubling times.
The supermarket
Tesco are one of two companies in this report who profit from the dependency people have on their services, as they provide food, petrol and insurance to millions of people.
In their advertisements, saying ’every little helps’ they make light of the credit crunch and the inflation, saying that they are doing everything in their power to help people save money.
But is that the case? Or is the company lining their pockets? Tesco have a heavy influence on the market, with some putting Tesco as the receiver of one in every eight British pound spent.
With profits of £2.8bn, up £250m on the same period last year, it seems their profits are ’inflation busting’, and some experts have called for Tesco to do more to help families struggling to do their weekly shop. Tesco bounced back saying they are ’trading their hardest to help families with stretched budgets’.
It has been something of a challenging year for the chain, with expansion into the Americas and accusations of tax evasion from The Guardian newspaper.
The Gas Company
Based in America, the UK and Europe, Centrica provided gas services for 9 countries in their operations, and they are most recognised in Britain for the British Gas operations.
The British Gas Dividend of the company was embroiled in some controversy, after they raised gas prices for 16 million customers by 35%.
It seems Centrica make no qualms in declaring that they have profits of £992m, benefiting from the raise in fees levied to customers with British Gas. However, in a statement earlier in the year, it was said that British Gas are making little profit as they are trying to give the best deals they can to the 25% of Britons they serve.
Contrary to this, Unison deemed British Gas profits as ’obscene’, after they announced £251m of profits in February, up £95m from the previous year.
The shareholders
Even though it seems somewhat of a risk, buying shares in companies where the share price has depreciated dramatically is proving a popular choice.
In housing companies such as Barrat Homes and Taylor Wimpey, where both have seen share prices drop by 96% and 97% respectively, investing in a significant amount of shares is shown to be very profitable when stocks have recovered.
However, sometimes the practice can be risky, as some companies which could have been seen as fantastic investments have gone into liquidation or administration, and in these troubled times, such circumstances are not surprising anymore, particularly in the housing market.
Spain recently saw one of it’s biggest housing firms, Martinsa-Fadesa, go into administration due to the company’s outstanding debts. As you can see, housing is a very volatile trade.
Quote from the judging panel
A very good story to select - ’Profiteering from the Credit Crunch’ - with an interesting look at what’s happening with the supermarkets, energy companies and share speculators. Nice use of graphics and captions, and a good appreciation of lay-out.