The UK’s Yorkshire and Chelsea building societies are said to be in “advanced talks” over a potential merger.

The Chelsea is the fifth and the Yorkshire is the second largest building society in the UK.

If a deal is reached, it would rival the Nationwide as big mutually owned mortgage and savings institution.

In August, Chelsea revealed a half-year loss of £26m after it had assigned £41m to cover to mortgage frauds.

The Chelsea has 35 branches and 700,000 members, while the Yorkshire has almost t three times as many members at 2 million and over four times as many branches, with 143.

The Chelsea building society announced, “the board of Chelsea has been undertaking a detailed review of the society’s activities, operations, financial position and corporate structure”.

“As part of this, Chelsea has considered the potential benefits to members and other stakeholders of a merger and this has culminated in discussions with the Yorkshire.”

The talks of a deal are being seen as a rescue package for Chelsea. New chairman Stuart Bernau has been analysing the business and viability over its independence.

In 2008, it reported a loss of £39m which was the highest recorded loss by a building society. £44m was written off due to huge investments in two failed Icelandic banks.

Another £15m was written off by the Chelsea after buying a mortgage broker in 2007 whose business collapsed during the credit crunch.

Building societies differ from banks and stock-market companies, as they are owned by their members, and struggle to regain reserves if they suffer heavy losses.

The Chelsea went on to reveal that “for a merger to proceed, the boards of both societies would need to be satisfied that it will be in the benefit of each society’s members”.

“The merger would also be subject to approval by each society’s members and the FSA.”

It has yet to be revealed if a merger would provide a windfall to the members of both societies. A spokeswoman for the Chelsea said that such details were yet to be discussed.

Several takeovers of building societies have been made since autumn 2008 in an attempt to save them from problems brought on by the global financial crisis.

In September last year, the Nationwide began its takeover process of both the Cheshire and the Derbyshire, then the Yorkshire made a move for the Barnsley building society, with the Skipton taking control of the Scarborough.

The US economy saw its first growth in over a year, rising to an annual rate of 3.5% between July and September.

Experts believe that a major spending plan by the US government which featured a scrappage scheme to encourage the car sales market has been the main cause of the upturn.

Some economists believe that there could be more setbacks lurking ahead, despite the official statistics showing that the recession is over.

A spokesman at the White House announced that recent economic progression was “a welcome milestone” but it would take more time for a full recovery to be recognised.

The US economy had risen 0.9% in relation to the previous three months, whereas the UK economy remained in recession, unexpectedly dropping 0.4%.

Hugh Pym, the chief economics correspondent for the BBC, revealed that the growth rate of 3.5% was greater than the 3.3% predicted by most experts.

He continued:”The sheer scale of the stimulus in the US has made a big difference, it was much bigger in percentage terms than that in the UK.”

“That the US, the powerhouse of the world economy is growing once again, is good news for the global economy has a whole.”

The last time the US economy grew was in the second quarter of 2008, by an annual rate of 2,4%.

The National Bureau of Economic Research will reveal the full extent of the US economic climb from recession when it analyses all the factors.

Some factors were significantly responsible for helping US economy during the third quarter, according to the Commerce Department.

The spending on durable manufactured products rocketed up at an annual rate of 22.3% which was the highest quarterly figure since 2001 and was spearheaded by the ‘Cash for Clunkers’ scheme helping new car sales.

Consumer spending increased on housing products by 23.4%, the greatest quarterly surge in 23 years, and came as a result of an improving housing market.

The big increase is considered by many to be due to the government’s $8,000 tax credit provided to first-time house buyers.

Government spending increased by 7.9% as stimulus spending spread and exports saw their biggest rise since 1996, rising by 21.4%.

Brian Bethune, an economist for HIS Global Insight stated that “it’s good to have the economy growing again.”

“But we don’t think that rate of growth is sustainable because it is distorted by all the government stimulus.”

“The challenge here is to get organic growth - growth that isn’t helped by fiscal steroids.”

However, unemployment is at a rate of 9.8% and a sharp fall came in September in the car sales industry as a result of the popular car scrappage scheme coming to an end in August.

Dean Baker, co-director of the Centre of Economic Policy Research believes that “you can say that the recession is over, but it sure won’t feel like that.”

“There is a lot of downward momentum that isn’t going to go.”

Plans to split British bank Northen Rock in two which would allow for its partial sale has been granted by the European Union.

The divide would result in two separate banks forming and are already being described as the “good” and “bad” banks.

The “good” bank would offer new lending, retain some of the existing mortgages and hold its savers’ money.

The “bad” bank would be used to repay the existing government loans and hold the remaining loans.

 Decisions made by the EU to accept the move are seen by Northern Rock as “an important and positive step.”

Changes to the existing setup will be made towards the end of the year.

The EU revealed that the good portion of the bank would be expected to grow and then be sold to third party, with the bad bank allowing its assets to dissolve then becoming liquidated.

The good bank may be sold prior to the general election next year with potential buyers being speculated already, with Virgin and National Australia Bank, owner of Clydesdale and Yorkshire Bank, among the interested parties.

EU Competition Commissioner, Neelie Kroes, believes that the move would make the bank a good long-term option, revealing that “this decision demonstrates once again that the EU’s state aid rules provide an appropriate framework to allow state support for a sustainable restructuring of banks without giving individual banks an unfair competitive advantage.”

Whilst Jonathan Todd, European Commission spokesman, said caps would need to be applied for the duration that the good bank remains owned by the public.

Some of the caps include a balance sheet reduced to a quarter of its size prior to the crisis, not being the market leader for loan interest rates, a cap set to limit its lending to one-third of Northern Rock’s 2008 levels and also a cap on retail deposits to be slightly lower than the pre-crisis level.

An investigation was engaged by the EU into Northern Rock in April 2008, two months after its nationalisation.

The results from the investigation showed that the UK government was kept at a “necessary minimum”.

By 30 June, the bank had paid back approximately half the taxpayers’ £26.9bn loan and will gain a further £8bn from the government during the end of year restructuring.

The EU stated that the restructuring would reduce its market share to below half of its pre-crisis level and “correct the excessive expansion of Northern Rock pre-crisis.”

Northern Rock released a statement, saying “this approval is an essential requirement of the planned legal and capital restructure, which is central to the business plan for Northern Rock.”

“The restructure will strengthen the capital and liquidity position of Northern Rock significantly, and offers value for money to taxpayers” and it would be “business as usual” for its customers.

According to official figures, the UK experienced an unexpected contraction of 0.4% for the third quarter, showing that the UK is still stuck in the recession.

This quarterly contraction is the sixth consecutive contraction, the worst run of figures that UK gross domestic product (GDP) has experienced since records began 54 years ago.

The GDP of a country represents the value of goods and services produced by a country. The figures released may be altered at a later date, as this is just a first estimate.

The Office for National Statistics (ONS), had been expected to show quarterly growth of 0.2%. However, no growth in retail sales for September and a 2.5% fall in industrial output for August had dented people’s positive expectations.

Experts have revealed that one of the main causes of the contraction was an unexpected drop in the services sector, with distribution, catering and hotels generating some of the worst figures.

Nearby countries France and Germany exited the recession earlier this year, and it is generally considered that the UK’s reliance upon the services sector, and more specifically, the finances sector being the main reason.

The UK economy has now experienced a 5.9% contraction since its high point prior to the recession.

The Bank of England is set to re-think its quantitative easing plan after seeing such a poor result in GDP figures. Quantitative easing involves the Bank of England printing money to buy bonds from companies and banks in an effort to encourage positive activity in the economy.

HSBC’s Bronwyn Curtis spoke with the BBC, revealing that “back in August we had a worse-than-expected second-quarter GDP number and that is the reason that the Bank of England extended the quantitative easing programme,”

ING’s James Knightly felt that the data was “awful with no positive news” and “clearly suggests that the likelihood of an expansion in quantitative easing by £50bn or so over the next quarter is rising, although [it] is not a foregone conclusion.”

It is considered by many experts to be disturbing that measures taken by the government and the Bank of England have failed to make a positive impact. However, David Kern, the chief economist with the British Chamers of Commerce believes that “continued intervention - including help for businesses to access finance, and incentives to promote investment - is still needed.”

“Above all else, business confidence must be nurtured, to ensure that recovery is not further delayed.”

Alistair Darling has announced that the government must borrow its way to recovery and believes that it’s the best avenue for the UK economy in the long run.

The Chancellor of the Exchequer confessed that further national borrowing “may feel counter-intuitive,” but “will mean the bills we face as a country are lower” in the long run.

However, many believe that the levels of government debt are already too high, with cuts in public spending and tax rises required. The government has already raised borrowing during the recession by high amounts.

Following Mr Darling’s speech, a question-and-answer session was held, with the chancellor finding agreement with Mervyn King, the Bank of England Governor, stating that there were “no simple answers” when it came to the reform of big banks.

According to Mervyn King, their core business may need to be divided into other practices to prevent them from becoming so big that they aren’t allowed to fail.

Mr Darling was concerned that “we cannot have a regulatory regime that excludes the possibility of failure.”

He went on to state that the banking sector needed more competition, and when the government came to selling its bank stakes that were bought during the financial crisis, it would be hoping to develop greater competition.

Many are calling for a reduction to the borrowing and spending that has caused so much debt, but Mr Darling believes that withdrawing government support would be “wrong and dangerous,” and the country would have to make a big decision.

At a speech in London, Mr Darling declared that “we can resign ourselves to a decade of austerity, low growth and low employment, or we can embrace change, turn it to our advantage and seize the huge opportunities a global recovery will bring.”

He continued by warning that withdrawing government support to the economy “would put the recovery at risk and abandon people facing unemployment.”

In a bid to encourage demand during the recession, the government has pushed billions of pounds into the economy through its £175bn quantitative easing plan, cut the VAT rate and helping ailing banks.

According to Mr Darling, a great deal of work was still required to steer the country out of the recession, including three big steps.

“First, we must support the economy until we’re sure the recession is over. Some are tempted to think the crisis is over. It’s not. Banks all over the world are still dependent on government support.”

The second step would involve raising taxes to regain financial strength and taking “tough choices on public spending for the years ahead”.

He added, that it “will mean cutting costs, cutting waste and cutting lower priority budgets, while continuing to invest in our priorities and our future.”

His third step would involve a government plan of growth.

“We need growth, because when we grow, the economy becomes bigger, we all become richer as a country, and it gets easier to pay back debt.”

Whilst the general financial atmosphere is improving and optimism growing, it is too soon to announce that we are in the process of recovery, according to experts at Ernst and Young Item Club.

The influential professional services firm expects some growth towards the end of 2009, but this growth should begin to struggle, with 1% expected growth for 2010.

They also predicted that customers repaying debt will grow slower than first anticipated and impending tax rises will follow the election.

BT Business research predicted a more optimistic outlook, declaring that small businesses are positive about the forthcoming year.

In September, BT Business conducted a survey of over 7000 small businesses and found that 75% believed their business would see an upturn in 2010, with 61% confident about their business’ prospects.

Professor Peter Spencer, Chief Economist from the Item Club, issued a wake-up-call to all those getting carried away with the optimism of recovery.

He warned, “there could still be substantial pain to come for corporates and consumers.”

“For a sustainable recovery the UK economy needs world trade to pick up and there is still not much sign of that happening.”

One of the factors holding back growth is that the VAT rate will return to 17.5% from its current level of 15% on 1 January, a change which may see consumers making purchases before the New Year.

Several other factors which will hold back growth lie on the horizon. An increase in national insurance contributions, the new 50p tax rate, the termination of the car scrappage scheme, tighter government spending and the return of stamp duty on housing are all due to hit the country.

Judging whether the recovery is happening, on the way or unlikely is difficult to forcast.

Professor Spencer went on to tell the BBC that the recent economic data has been “very mixed,” adding, “the stock market is absolutely rampant, industrial surveys all back in positive territory, but it’s yet to show through in hard data for output and things like that.”

“And when it comes to lagging indicators like unemployment, I’m afraid it’s going to be ‘feel bad’ for quite some time to come.”

On Friday, the official statistics for the Gross Domestic Product (GDP) are released, with many expecting no economic growth at all.

GDP is a measurement of the services and goods produced in a country, and since the first quarter of 2008, the UK GDP has been in negative figures.

The Bank of England has focused on quantitative easing, an act of pushing money into the economy. Professor Spencer feels that this has been of little success, with the little improvement on bank lending, going on to complain that “instead, the banks appear to have used much of the money to rebuild reserves and improve liquidity.”

Lloyds Banking Group announced on Friday that it has reached an agreement to sell its estate agency arm, Halifax Estate Agencies, to LSL Property Services for just £1.

The sale of Halifax Estate Agencies (HEA) will result in the closure of approximately 121 Halifax banking counters which are situated within the estate agency chain’s branches, potentially causing 460 people to lose their jobs as a result.

With 218 branches, HEA is the fourth biggest network of estate agencies in the UK. The lack of residential property sales saw a pre-tax loss of £2m, a dramatic drop from their £34m profit in 2007.

HBOS became acquired by Lloyds during a controversial deal made earlier this year.

Lloyds released a statement on Friday, stating that the decision to sell was made as a result of considered reviews by the bank and “concluded that an estate agency operation is no longer integral to its business model”.

The decision comes after measures were made in August by Lloyds announced it was to sell its Insight asset management business to Bank of New York Mellon for £235m.

In efforts to gain approval from the European Commission for aid from the UK government, Lloyds are expected to make big cuts.

LSL currently own a range of estate agencies, such as Your Move, Reeds Rains and InterCounty. The addition of HEA would result in 584 branches and increase their estate agency portfolio to become the second-largest estate agency network in the UK.

LSL considers HEA to have been run to primarily distribute financial services products and held great potential for their business.

“This is a significant opportunity for LSL to acquire a high-quality branch network, an established asset management business and pipeline of sales on favourable commercial terms at a low point in the economic cycle.”

Shares in LSL increased by 5% to 275p and Lloyds shares increased 3.4% to 94.52p during early Friday.

The deal is expected to be completed in January 2010, and include approximately 1050 HEA staff transferring to work for LSL as a part of the agreement.

On Friday, a statement was released by LSL suggested that the acquisition of HEA had been traded ahead of management expectations made in July, with turnover for the 8 months up to 31 August, down by 18%.

LSL revealed that they await the results of 2010 with caution, confessing that “any recovery is likely to be constrained by the availability of mortgage credit and general economic backdrop.”

Given the chance there is not one investor in the world who would pass up the chance to make a profit on a short term investment, but you ask how many would take that gamble with no guarantees and it is a totally different matter. In the heady days of the 1980s and early 1990s we saw the trend towards so called “day trading” take off, with more and more people chasing the fast buck in markets that seemed to rise and rise. The technology boom was the perfect market, until the bubble suddenly burst – BANG!

The bursting of the technology bubble in the early 1990s saw many people literally wiped out with the vast majority of so called “day traders” suffering horrendous losses - many were not able to return back to the market. One problem for the day traders was that when the good times rolled, margin (i.e. collateral held by a broker to cover the investment) was no problem, but once the bubble burst losses began to grow and grow and margin calls become greater and greater. Many decided to try and trade themselves out of the market, but this placed more and more investors in impossible situations.

While it would be wrong to say that all day traders lost their investments in the technology boom and burst period, it was only the clever ones, the ones who sold before the top who actually made and kept their money. As more and more people chased the markets, this pushed share prices higher and higher, further feeding the frenzy to get in and make a quick buck – many investors were making thousands within hours, but it could not last!

Short term investment is a high risk game unless you are very astute and actually know what is happening in the wider market place, sectors and individual companies. You could get the right share at the wrong time and lose, when in a better market the same share and situation would have made you a fortune. It was this fact that many people could not grasp, they became greedy and share price valuations shot into outer space – it just did not add up.

Any investment which you make into the stock market should be seen on a long term basis and money which you will not need for some time. If it is money that you cannot afford to lose then you really need to consider whether you should be investing at all. As we are seeing at the moment, economies move in cycles and there are clear times to buy and clear times to sell, although they only become clear after the event!

Long term investments have the potential to give you the best rewards, choose your stocks, your sector and monitor your investments carefully. Long term investment into a good long term company is great and should reward you, but on the other hand, if your investment shows signs of trouble then you should consider whether the investment can recover in the long term.

Stock market investment has proven to be very beneficial in the longer term (outperforming the vast majority of other asset classes over an extended period) and while there may be chances to make a short term profit, is it sensible to invest with a short term investment view?

Rumours are rife in the City that Royal Bank of Scotland will ask shareholders to stump up to £10 billion in order that they can restore their capital ratios near to those of their European counterparts. Despite commenting that no funding raising would be required only two months ago, it seems that the Bank has had a change of heart. But is it all bad news?

Despite the doom and gloom headlines which will no doubt hit the press tomorrow, there is actually a sense of relief that finally we have a major UK bank willing to stand up and say that help is required. There are also many people who believe that the expected call for cash, which has not officially been confirmed, will mark the bottom of the credit crunch crisis (although the situation is unlikely to actually improve for some time).

The possible reason the news has leaked into the market is the fact that prior to announcing the rights issue, they will have held urgent talks with major shareholders and advisers, some of whom may have inadvertently leaked the information to third parties. Now that the Royal Bank of Scotland seem set to show their hand there are rumours that Barclays Bank are also in talks about a possible rights issue next week – perhaps looking to take the shine of the Royal Bank of Scotland announcement and beat them to the punch.

However, while strangely enough this may mark the bottom of the downturn if, as expected, more UK banks use this break in silence to ask shareholders for more money, there may be competition for institutional funds. While no bank would want to “give away” new shares, they will have to be priced at a level which makes them attractive to large and small shareholders alike. It would take a brave investor to underwrite an issue in such difficult markets, so that traditional backdrop may not be there for some banks.

The UK banking sector is very much at a cross roads after years of expanding overseas with many now hit by the credit crunch and their over weight exposure to markets such as the US. While this will not stop further expansion in the future it is sure to make a number of high flying chief executives think a little longer and a little harder before spending shareholder billions in overseas ventures.

If this is the bottom of the UK banking crisis then the UK tax payer may actually see a swift return on the money used to bail out the Northern Rock. It is no secret that the business of the Northern Rock is being reduced in order to get their house back into order ahead of a trade sale some time over the next few years.

We may well look back on this day in the months ahead and realise that it was the turning point in the cycle, but then again who knows what shocks and surprises await us in the future!

It seems that every time the UK economy takes a dip many people start to question whether the stock market really is the place to invest your money in the long term. While the facts and figures speak for themselves, with the stock market out performing any other invest class over the long term, there are times when it might be best to stay out of the market, but in the long term where else would you invest your money?

The stock market is the barometer of the UK economy and whiles some asset classes will do better than others over different time spans, it is the mix of asset classes which offers investors comfort that the long term performance will mirror that of the UK economy. Many people seem to miss the bigger picture with the stock market, assuming that the main aim of the exchange is to allow investors to buy and sell shares, when in fact this is what is known as the secondary market. We hereby list some useful aspects of the stock market which often go unnoticed :-

Treasury Funding

The government use the GILTS market to raise funding to cover the peaks and troughs of government budget requirements. You will see that when the economy is doing well and public spending is under control, the government may actually redeem part of their GILTS portfolio which is held by fund managers and private investors alike. When the economy is under a little pressure as it is now, you will very often see the government selling off GILTS to investors in return for a fixed rate of return and money to fund public services.

GILTS are the most secure of any investment in the UK as they are backed by the government. If the government was ever to renege on repayment of a GILT then we would all be in deep trouble.

Primary Market

While we all see the headlines about new companies listing on the UK stock market, they can raise funds at this stage or it can be used as a way for a large investor to reduce or dispose of their holdings. More often than not the company coming to the market will sell new shares and raise extra capital but this is not always the case.

Secondary Market

The secondary market is probably one of the main attractions of the stock market to investors and companies alike, this is the time when companies will attempt to sell additional shares to investors for what could be a number of reasons, expansion plans, a take over bid or a desperate rescue rights issue to save a company.

A lot will depend upon the reason for the fund raising, how much they are trying to raise and the general state of the market. A company looking to raise funds at this moment in time, no matter how strong the argument, would probably struggle or need to price the new shares lower than a couple of years ago when the market was much stronger.

There is a lot more to the stock market than just buying and selling shares, it is the heart beat of the UK economy and assuming that you give yourself a good spread of investments it is possible to benefit from the long term economic growth which is expected in places such as the UK.