Big Gordon Brown ‘had a word’ with the chiefs of Britain’s biggest banks yesterday. “Pass on the Bank of England interest rate cut, boys!” I imagine he menaced. Today we’re presented with clear evidence of Brown’s skills as a persuader.

HBOS has hiked mortgage rates by 0.5%. Ah. Oh dear. Looks like the banks are doing what’s good for the banks, not what’s good for Mr Brown.

You can’t really blame them. The big boys have all the business they want. And they don’t want much right now, because, like everyone else, they’re worried about the economy. They’re worried the people they lend to will lose their jobs and not be able to pay them back.

Here’s what I think will happen. Sooner or later, the government/Bank of England will use public money to buy up mortgage-backed securities. This is what the Fed did, and I reckon our banks are waiting for the UK to do it too. They’ve got a lot of dodgy assets no-one wants to buy, and if they can flog it to the government then that’s better than nothing.

It’s not an especially inspiring solution. But the longer the banks hold out, the more likely it is to happen, and they know it.

Britain’s finance industry has taken a hammering. Already around 2,500 jobs have gone in London. The industry would prefer to be hammered as little as possible from now on in. JP Morgan reckons as many as 40,000 City jobs — 5% of the total — could eventually fall victim to the credit pox. So expect the banks to try and wriggle out of it if they can.

Employment statistics published this morning give some cause for optimism. Employment rose in the first quarter, vacancies rose and unemployment fell. Of course, employment is a lagging indicator – it’ll be a while before the effects of the credit lurgy filter through to jobs, so let’s not get carried away.

It’s also worrying where these new jobs are coming from. For decades now British jobs have moved from manufacturing and other industries into the service sector. This trend shows no signs of abating. Between December 2006 and December 2007, 46,000 production industry jobs were shed, while 10,000 were lost in agriculture and construction.

The service sector, meanwhile, created 264,000 jobs. The British economy is now even more structurally dependent on services. We don’t really make anything here anymore.

One of my many recurring dreams takes place in a future dystopian Britain. Our economy has become completely service-based. But the pound has collapsed, so we can no longer afford to import anything. We have no goods to barter, only services, and many of us eke out a living offering backrubs to our fellow Britons, receiving in exchange nothing but a reciprocal backrub.

A disturbing vision, I’m sure you’ll agree.

Tax monster Darling scares off business

My weird dystopian vision may come true sooner than you think, too, if Alistair Darling has anything to do with it.

“Darling totally bungled the capital gains tax,” says Theo Casey, our research director. “It meant loads of directors dumped their shares — not really what we want in the current market.”

Now Darling looks like he wants to whack a big tax on companies’ foreign earnings — a move which is already seeing businesses in Britain move abroad. Pharmaceutical firm Shire this week announced it was moving its headquarters to Dublin.

The move will cost Shire around £3 million, but will immediately reduce its £4.2 million corporation tax bill.

Avoid refiners… here’s how you should play oil

“I’m starting to wonder whether the oil refining industry will ever be a good investment,” muses Garry White, my commodities wingman.

Garry points out that the crack spread — the difference between what refiners pay for crude oil and what they get for the refined product — is extremely tight right now. And he doesn’t see the situation getting better, meaning refiners don’t look a profitable bet.

But oil’s still a great sector to invest in — if you do it right. Garry sees no reason why the oil price — which hit a new record high yesterday — won’t keep climbing.

“There’s only one way you should play oil right now,” Garry tells me. “Just one way!”

Find out why Garry thinks this one oil investment is an absolute must for your portfolio…

China to overtake Germany as third largest economy?

“This is what I call white hot growth,” said Manraaj Singh this morning, clutching his latest report and fixing me with a gaze.

Manraaj had emerged from behind his computer to tell me about China’s growth, which has outstripped what even the bullish analysts were predicting. China’s GDP grew by 10.6% year-on-year in the first quarter of 2008.

“The most exciting part,” he continued, “is that China achieved this despite a fall in its trade surplus. This growth was internally generated! Pow!”

Manraaj reckons China could overtake Germany this year as the world’s third largest economy.

“The emerging markets are the place to be, and China’s mega growth proves it,” he says.

And Manraaj should know. He’s a man who has his fingers in many emerging market pies, hunting down profit opportunities around the globe.

Manraaj tells me China has huge reserves of cash that it’s preparing to unleash on the global markets.

Find out why Manraaj reckons Asia and Africa will be the two biggest winners of a $1.5 billion investment jackpot.

Until tomorrow,

Ben Traynor