Quarterly results from Barclays and Royal Bank of Scotland will provide focus this week while economic growth figures for the third quarter will provide a highly-anticipated insight into the health of the UK recovery.
Official figures are expected to reveal the pace of the recovery accelerated slightly in the third quarter of 2011 - but economists have warned the UK remains in the sick bay.
The Office for National Statistics (ONS) is forecast to reveal on Tuesday that gross domestic product (GDP) grew by 0.3 per cent between July and September, which would represent an increase on the 0.1 per cent in the previous quarter.
The UK’s economy has been flatlining over the past year, amid falling consumer spending as wages fail to keep up with inflation, which has created the biggest squeeze on living standards since the 1920s.
Third quarter figures are expected to be boosted as the economy plays catch-up from a series of one-off hits in the previous quarter.
The low growth in the second quarter was partly the result of an extra bank holiday for the royal wedding, the warm spring, which caused households to turn off their heating early, disruption to the supply chain after the Japanese tsunami.
The manufacturing sector has been in decline for much of the third quarter as demand from overseas stalled amid the eurozone debt crisis.
But this has been partly offset by the powerhouse services sector, which makes up some three-quarters of the economy, and has proved surprisingly resilient, boosted by demand from business.
Victoria Cadman, an economist at Investec, expects growth of 0.4 per cent.
She said: “Although not a surge in the recovery pace, a 0.4 per cent outturn would clearly be welcome given growth has effectively been at a standstill across the previous three quarters.
“Given the ‘special factors’ likely to aid the third quarter outturn, coupled with the headwinds of slower euro area growth and the broader risks of the euro area crisis, we would warn against taking such an outturn to imply the UK recovery is gaining pace. Rather, we expect the recovery to creep ahead slowly.”
The Bank of England recently launched a second round of quantitative easing to boost the UK’s flagging economy. It will pump £75 billion into the economy on top of the £200 billion in 2009.
The ONS recently amended its historical figures for GDP to show that the recession was deeper than previously thought.
Barclays and Royal Bank of Scotland will underline the downturn in performance in Britain’s banking sector in the last three months when they reveal mixed quarterly revenues and profits.
The banks in the last few days may have taken heart from the long-awaited eurozone rescue plan, but the picture over the third quarter has been quite different.
Increasing global recession fears - driven by fears over the eurozone debt crisis and the size of US debt - hit the banking sector hard with Barclays and RBS shares both losing around 40 per cent of their share value between July and September.
US banks, including Goldman Sachs, Citigroup and JP Morgan, earlier this month reported a plunge in revenues amid the stock market turmoil.
Meanwhile, banks have flagged increasing cost pressures as rules put in place to protect against future financial crises which is making it harder for them to generate the high returns investors demand.
Elsewhere, the City will be looking for guidance on how both banks plan to accommodate the recommendations put forward by the Government-appointed Independent Commission on Banking (ICB).
The far-reaching shake-up of the sector includes ring-fencing banks’ high street divisions to protect them from riskier investment arms and setting aside more cash to cushion the blow of potential losses or future financial crises.
Barclays is expected to show revenues at its investment arm Barclays Capital, which contributes to more than half the group’s profit, fell quarter-on-quarter to £2.2 billion from £2.8 billion in its update on Monday.
But the bank is expected to deliver pre-tax profits of between £1.2 billion to £1.7 billion, up from £989 million the previous quarter, despite the plunge in business at BarCap.
However, an improvement in Barclays’ retail and business banking division and its credit card arm Barclaycard is expected as the previous quarter’s hefty payment protection insurance compensation drops out of the numbers.
Ian Gordon, analyst at Evolution Securities, said: “The third quarter will not be pretty, although we expect BarCap to yet again outperform peers in a weak quarter, and the group should still remain solidly profitable.”
Barclays has said it can work with the ICB’s ring fencing proposal but analysts said the bank has hinted towards a narrow definition of the concept.
Taxpayer-backed RBS is expected to post pre-tax profits of £466 million in the third quarter in its update on Friday, up from a loss of £657 million the previous three months, which was triggered by the bank’s PPI hit.
Carla Antunes-Silva expects revenues at its investment banking arm Global Banking and Markets (GBM) to have slumped 49 per cent quarter-on-quarter to £785 million.
Ms Antunes-Silva expects RBS, which is 83 per cent state-owned, to reveal more details of a potential restructuring of GBM, which reportedly could put up to 5,000 jobs at risk.
Chief executive Stephen Hester is understood to have launched a review into GBM amid falling revenues and mounting regulatory pressure.
Draft proposals, which will be ICB proposals, could see European outposts cut out and focus placed on its British and US operations.
Next has been one of the best performing stocks in the FTSE 100 Index in the past year despite the abysmal conditions on the high street.
The chain, which will provide a third quarter trading update on Wednesday, has seen smaller sales declines than most of its competitors despite its policy of not discounting.
Next, which operates 520 stores, has also increased profits through cost cutting measures to help it offset the soaring price of commodities such as cotton.
But there are now fears that some of the shine could come off Next in its third quarter update because the warm September weather is expected to have hit sales of its autumn and winter ranges.
Charlie Muir-Sands, an analyst at Deutsche Bank, now thinks like-for-like sales will be down 6.5 per cent in the three months to October, whereas previously he expected a 3 per cent fall.
He believes there is a real risk of retailers ramping up the levels of discounts in the run-up to Christmas, although he still expects Next’s final quarter sales to increase.
Next has outperformed the retail sector at a time when competitors such as Jane Norman have gone into administration.
It has successfully passed on price rises and expects to push through hikes of about 8 per cent in its second half.
Analysts say this is partly due to the strength of its ranges and the recent rebound in the performance of womenswear which has been boosted by a range of swimwear designed by former Spice Girl Geri Halliwell.
A 1.5 per cent fall in like-for-like sales in its first half was more than offset by a 15 per cent rise in its Next Directory business, which includes internet and phone orders and promises to deliver by 9pm the next day.
However, sales of homewares have struggled as shoppers cut back on big ticket items.
It recently signalled that the “perfect storm” of higher commodity costs and the higher rate of VAT may be over, and expects little to no inflation in its 2012 prices.
Online fashion retailer ASOS has staged a recovery as growth overseas is more than compensating for a sharp slowdown in the UK.
Shares have rallied by 20 per cent since its last update though still remain more than a third lower than the highs seen in August.
Concern about the impact of tough economic conditions on its core 16 to 34-years-old customer base caused the shares to tumble while the company confirmed UK sales showed almost no growth over the three months to September.
The UK, which accounts for 40 per cent of ASOS’s business, generated revenues of £44 million in the three months to September, up 1% from a year ago, but rapid expansion overseas enabled the firm to report revenues grew overall by 49 per cent.
International revenues jumped 141 per cent, with new websites opened in Australia, Spain and Italy to take the number of sites to seven and lift revenues overall in the second quarter to £109.9 million from £73.9 million. ASOS said margins also increased as it did not have a summer sale this year,
Brokers expects first half figures, to be published Thursday, to benefit from both this and the strong overseas growth.
Fraser Ramzan, an analyst at broker Nomura, expects interim profits to jump by 63 per cent to £11.4 million.
Ailing retailer JJB Sports, which narrowly avoided collapse earlier this year, will reveal on Monday whether its rescue plans have borne any fruit.
JJB has been brought to its knees in recent months as it struggled against tough competition from buoyant rivals JD Sports and Newcastle United owner Mike Ashley’s Sports Direct.
Sales have slumped despite the retailer putting on discounts, which have hammered its margins.
The Wigan-based firm earlier this year struck a company voluntary arrangement with its landlords in which they agreed to allow it to close up to 89 of its 250 stores as an alternative to administration.
It also raised £96.5 million from shareholders, including a foundation set up by Microsoft founder Bill Gates and his wife Melinda, to fund its turnaround plans.
The cash will help it revamp 150 stores this year, buy fresh online ranges and retrain store staff.
The turnaround plan is still being developed and it recently warned it could take between three and five years for a full transformation.
In its last trading update, JJB reported a 14 per cent fall in like-for-like sales between March 14 and April 3.
Analysts say JJB needs to start growing its underlying sales again if its turnaround plans are to have any chance of success. But there has been no sign of a let-up in the squeeze in consumer spending and its core market of 16 to 24 year olds, continues to be hit by high levels of youth unemployment.
Meanwhile, the strong performance of its two biggest rivals continues. Sports Direct recently announced better than expected growth in store sales, boosted by a staff incentive scheme, while JD has seen a rise in like-for-like sales although profit margins at its fashion stores have come under pressure as it puts on promotions to attract cash-strapped consumers.
Earlier in the year, takeover talks with JD were abandoned as its rival claimed it had not been given enough information to progress.
Freddie George, an analyst at Seymour Pierce, expects the company to make a full-year losses of £40 million, against losses of £74.6 million the previous year.
Its shares which were trading at more than £22 in 2007 are currently worth about 15p.
A strong performance in broadband has enabled telecoms giant BT to edge back into investors’ favour over the past 12 months.
In the first three months of the current year, the proportion of customers signing up to its own service hit an all-time high at 59% out of a total of 251,000 customers signed up including rival providers using its network.
Broadband helped the retail arm grow profits by 4 per cent to £344 million, despite a 4 per cent drop in revenues as result of the ongoing decline in calls and line revenue.
Average revenues per customer also increased due to the increasing penetration of broadband, where BT is a rolling out a superfast network across the country.
Pre-tax profits rose by 20 per cent to £533 million in the quarter to June and consensus forecasts are for an increase to £549 million before one -off charges in the three months to September.
That would represent a 7 per cent rise on a year ago, when BT made £496 million, though revenues are forecast to fall to £4.79 billion from £4.98 billion this time last year as traditional line rental and telephony income continues to reduce.
BT’s half-year and second quarter figures are due out on Thursday.
