Bank report to study pounds 36bn windfall effect

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The Independent Online
The Bank of England announced yesterday it is to commission a special report on the effect of windfall payments from converting building societies, as two more companies announced soaring sales boosted by de-mutualisation spending.

Mervyn King, deputy governor of the Bank of England, said the bank estimated the total windfalls to be worth pounds 36bn and that its report on the economic effects should be completed "in a month or so".

The comments came as Airtours, Britain's second largest tour operator, said a combination of the building society windfalls and increased buying power of sterling had boosted its summer bookings both for 1997 and 1998.

Separately, Rosebys, the furnishings group credited the windfall factor for soaring sales of beds. In the five weeks from 30 June sales at its Bensons Beds subsidiary were 40 per cent up on a like-for-like basis.

Tim Byrne, Airtours deputy finance director, said: "There can be no doubt that pounds 35bn-pounds 36bn of cash sloshing around the economy must have had an effect, although its very difficult to measure."

Harry Coe, Airtours deputy chief executive, expressed caution on the windfall factor, saying: "We would be disappointed if we didn't get some of that money but it is difficult for us to say how much of our increased bookings are being made for that reason."

Rosebys' chief executive, Mike Rosenblatt, said the dramatic increase in sales was not sustainable and that the recent spate of interest rate rises would start to dampen growth: "I think towards the end of the year those interest rate rises will start to make themselves felt and that it will take the edge off the boom that we are currently enjoying."

Airtours third-quarter results to the end of June showed a 24 per cent increase in profits to pounds 24m. Summer 1997 bookings within the UK tour operating business are 19 per cent ahead of the previous year, with sales of holidays to Turkey, the Western Mediterranean and Florida rising strongly at the expense of Greece. Spain is also proving popular due to the sharp rise in the value of the pound against the peseta. Strong demand for late bookings has led to a 15-20 per cent increase in prices for last-minute holidays.

Bookings for winter 1997-98 are 25 per cent up, with Mr Coe admitting that the windfall payments were probably a factor.

Airtours said the strength of sterling was lowering its costs, which it was passing on to consumers. This would be balanced against the impact of currency factors on overseas profits translation. Airtours shares closed 34p lower at 1195p.

Rosebys reported a 111 per cent increase in interim pre-tax profits to pounds 3.2m. Group like-for- like sales across its Benson Beds, Knightingales and Rexmore chains are 18 per cent up in current trading.