Large orders included a share of the new Hong Kong airport terminal building.. NIC CICUTTI

Free car mortgages, heavily touted as the collective answer to the crisis facing both the car industry and the housing market, appear to have driven into the sand.
Two mortgage lenders offering either a “free” Renault Clio, a Mini or a Rover to those taking out a loan, admitted yesterday that the total take-up on their deal ran to barely 50 applications so far.They claimed to be “reasonably” satisfied with the scale of mortgage deals in the pipeline.But Ian Darby, marketing director at John Charcol, the UK’s largest mortgage broker, said: “It does look as if this particular mortgage vehicle has stalled It was a smart marketing move. Earlier this week, figures from the Department of Environment showed an 11 per cent decline in new construction orders in the past three months as the Private Finance Initiative failed to make up a shortfall in government spending.Balfour Beatty continued to push for overseas work to compensate for the weak UK market, pushing the foreign content of its pounds 1.7bn order book to 44 per cent, up from 28 per cent last year. In Australia, a downturn in the housing market was starting to affect trading.In construction, profits remained under pressure following further declines in the UK contracting industry.

Trading in Germany was hit by cheap imports from Poland and other former eastern bloc countries and the cost of laying off 400 workers in the six month period.Elsewhere, the North American cables operation is improving although Sir Robin admitted that its return on capital employed was still unacceptable. Earnings per share fell more sharply from 9p to 6.5p and the dividend was cut by a third from 6p to 4p. That was in line with market expectations following the decision to slash last year’s final payment by 35 per cent to 8.6p.The withdrawal from housing is the latest in a string of bad news for an industry struggling to reconcile falling selling prices with rising raw material costs and a speculative land price bubble last year which has squeezed already wafer-thin margins.BICC’s shares, which have underperformed the rest of the market by more than 20 per cent since the beginning of 1994, fell a further 5p to 320p as investors focused on a gloomy assessment of trading conditions in both cables and construction, persistent problems in Germany and rising raw material prices.Sir Robin warned that more job losses would be needed at KWO, the German operation which was acquired in 1993 and lost pounds 15m in the first half-year. Raising that much would make a marked reduction in group borrowings, which rose from pounds 299m at the end of last year to pounds 409m at the beginning of July.The planned disposal of the housebuilding operation came as BICC announced a 5 per cent fall in pre-tax profits for the first six months of the year from pounds 63m to pounds 60m. The division, which boasts a 3,000-plot land-bank, is understood to have net assets of about pounds 100m. The planned sale by BICC of its Clarke Homes subsidiary follows similar pull-outs by Tarmac, the UK’s second- biggest housebuilder, and several smaller operations.Sir Robin Biggam, chairman, said BICC had received a number of approaches from interested parties but denied he was close to a deal.

TOM STEVENSON

Deputy City Editor
The house-building industry was dealt another blow yesterday when BICC, one of the larger players in the market, admitted it was looking to dispose of its 700-homes-a year business. Foreign interest was particularly strong in export stocks which which will benefit from the fall in the yen.However, a further rise above 20,000 was seen as unlikely unless the government delivered the goods in the form of a package on bad debts and a fiscal boost to the economy.. A rise in the December short sterling future, used to speculate on short-term interest rates, showed that some of the alarm about higher rates aroused by the poor producer price figures at the beginning of the week had gone.The rise in the Tokyo stock market was fuelled by heavy foreign interest, which was expected by analysts to continue as foreign institutional investors rebalanced their portfolios. “The labour market’s performance in this cycle is set to be the least inflationary since the 1960s,” Kevin Darlington of ABN Amro, said.Together, this was sufficient to give a fillip to the gilts market The September gilt future ended the session half a point up. “The recent rise in sterling may well be enough for the bank of England to relax its view on base rates and agree with the Chancellor’s wait-and-see policy,” Adam Cole, economist at James Capel, said.The further evidence of subdued pay inflation also encouraged the City.

It closed at Y97.81 and DM1.4773 – still up by about a yen on Tuesday’s close and half a pfennig against the mark.Sterling ended the day virtually unchanged on the levels it reached on Tuesday.However, the strengthening of the pound has already taken it up nearly 2 per cent since the last week in July, when the bank of England’s Inflation Report was prepared.David Mackie, UK economist at JP Morgan, said: “Sterling has already appreciated enough to push the Bank of England’s inflation forecast back inside the target range.”Other City analysts shared this view. The Nikkei 225 index stormed ahead by 706 points to close at 18,159, its highest since 13 February and the second-biggest rise of the year.But the dollar, after reaching new highs of Y99 and DM1.4930 in early trading in Japan, came off the boil, first in Tokyo and later in London. PAUL WALLACE

Economics Editor
The rally of the dollar galvanised the Japanese stock market. By contrast, household goods sales were up by only 0.2 per cent on the month, reflecting the weakness of the housing market.The public sector borrowing requirement in July was pounds 700m, which was lower than the pounds 1bn that the market had been expecting.However, in the first four months of the current financial year, the underlying PSBR – which excludes the proceeds of privatisations – has been only pounds 1.7bn lower than it was in the equivalent period in 1994/5.This leaves the Government a long way off the reduction of pounds 15.7bn that it has to make if it is going to achieve the objective of pounds 23.6bn set out in the Treasury’s Summer Economic Forecast.”The PSBR looks set to overshoot the Treasury’s forecast by pounds 3-5bn, limiting the giveaway in November’s Budget,” said Michael Saunders, economist at Salomon Brothers, expressing a view which is shared by several other City analysts.Although the Treasury cautions that revenues are erratic, a picture is emerging of lower tax receipts than had been anticipated.Total receipts have risen by 8.6 per cent so far on the same period in 1994/5, compared with the Treasury’s expectation that they would rise over the year at 10.8 per cent.Corporation tax has risen at a particularly disappointing rate and VAT receipts have been considerably lower so far than anticipated over the full year.. Growth in manufacturing earnings fell from 4.75 per cent to 4.5 per cent.Service sector earnings increased in June at a rate of 2.75 per cent, and the figure for May was revised down to a similar level.With the overall figure for May also being revised down from 3.75 to 3.5 per cent, the modest rate of increase was seen by the markets as good for inflation.The brightest news of the day was that retail sales figures in July turned out to be stronger than had been expected.Following considerable revisions to the coverage and breakdown of the series, the volume of retail sales turned out to have been growing by more in recent months than had earlier been thought.The implication is that consumer spending has staged a recovery after its surprise fall in the first quarter of the year.Sales rose by 0.4 per cent in July, following a revised 0.4 per cent in June, which had previously been estimated to be flat.This took the three-month-on-three-month growth rate to 0.7 per cent and the annual growth rate to 1.4 per cent.However, the figures might have been affected by the warm weather, with clothing and footwear sales rising by 1.6 per cent on the month and 3.2 per cent on the year. But there was no reduction in vacancies, which continue to run at about 180,000 at Jobcentres.Earnings figures came in lower than had been expected at an annual rate of 3.5 per cent.