cityam 2010-06-24

8/9/2019 cityam 2010-06-24

1/44

$#

!$"$

#$

"#

BUSINESS WITH PERSONALITY

www.cityindex.co.uk

www.cityam.comIssue 1,162 Thursday 24 June 2010 FREE

FTSE 100 5,178.52 -68.46 DOW 10,298.44 +4.92 NASDAQ 2,254.23 -7.57 /$ 1.50+0.02 / 1.21 .unc /$ 1.23unc Certified Distribution3/05/10 - 30/05/10 is 106,097

BP in crisis:

NY FUND SUES

AS HITCH HITS

CLEAN-UP p14

BILLIONAIRE investor George Sorosyesterday launched a blistering attackon German fiscal policy, warningthat its unwavering pursuit of auster-ity savings is putting the future of theEuropean Union and the single cur-rency at risk.

By insisting on pro-cyclical poli-

cies, Germany is endangering theEuropean Union. I realise that this isa grave accusation, but I am afraid itis justified, he said during a speech

at Berlins Humboldt University.By cutting its budget deficit and

resisting a rise in wages to compen-sate for the decline in the purchasingpower of the euro, Germany is actual-ly making it more difficult for theother countries to regain competitive-ness, he added.

German chancellor Angela Merkelearlier this month unveiled plans toslash the budget by80bn (65.8bn)

over the next four years.Soros slammed the programme,calling it a recipe for disaster

because it pushes the debtor coun-

tries into a deflation cycle and impos-es stagnation and, worse, and thatcreates resentment.

In an interview published yesterdayahead of the speech, Soros said hecould not rule out a collapse of theeuro.

Germany, which still runs a tradesurplus and is the Eurozones largestexporter, has come under fire recentlyfor implementing austerity measures

that will put already-faltering domes-tic demand and consumer confidenceat risk and for effectively imposing

wage cuts on Club Med countries.

Gabriel Stein at Lombard StreetResearch said George Soros was spoton that Germanys austerity meas-ures were endangering the euro.Stein said that the single currency isinherently flawed, adding that forthe euro to survive we will need fiscalintegration. But this will be ananathema to German taxpayers aslong as countries like Italy are in theunion, he said.

Economically, it would make a lotof sense for Germany to leave theEurozone, Stein said, but noted that aunilateral exit would probably break

the Franco-German alliance that has been the cornerstone of WesternEuropean policy for more than half acentury.

George Soros also warned yester-day that the cost of the Greek aidpackage and associated conditionali-ty could send the Greek economyinto a death circle as economiccontraction will see tax revenuesdecline and increase the budget

deficit again. Then it becomes avicious cycle. I would call it a deathcircle. Thats really the danger, Sorossaid. SOVEREIGN DEBT CRISIS: P18-19

ENGLAND booked themselves a World Cup showdown withGermany on Sunday after clinchinga nerve-jangling 1-0 victory overSlovenia in Port Elizabeth yesterday.

Jermain Defoe scored the only

goal of the game on 22 minutes asFabio Capellos Three Lions broughthope back to the nation with amuch-improved display.

But failure to top Group C meansEngland have stumbled across a last16 date with the Germans inBloemfontein, in a repeat of the1990 semi-final which they lost in aheart-breaking penalty shoot-out.

SEE SPORT: PAGE 41-43

SOROS: EURO IN CRISIS

ENGLANDS DREAM

LIVES ON

BY JESSICA MEADEUROPEAN ECONOMY

P i t

G E T T Y

BY JON COUCH

WORLD CUP2010

8/9/2019 cityam 2010-06-24

2/44

Budget News2 CITYA.M. 24 JUNE 2010

US base rateheld at zeroTHE US Federal Reserve said it wouldhold interest rates at a record low foran extended period yesterday, say-ing it aims to aid an economic climatethat has become less supportive.

The Federal Open MarketCommittee voted nine to one to keepthe rates at zero to 0.25 per cent afterits two-day meeting, maintaining thehistoric low that has stood sinceDecember 2008.

The committee said financial con-ditions have become less supportiveof economic growth, in part due tosovereign debt problems in Europe.

It also noted that bank lending hascontinued to contract, but predicteda gradual return to credit supply withthe pace of economic recovery likelyto be moderate for a time.

The Fed reported a rise US house-hold spending, but said it remainedconstrained by high unemployment,modest income growth and tightcredit.

Thomas Hoenig was the only com-mittee member who voted for a risein the base rate.

The long-time inflation hawk saidthe current rate could lead to a build-up of future imbalances andincrease risks to longer-run macro-economic and financial stability.

US gilt yields fell slightly followingthe announcement.

BYMARION DAKERS

WORLD ECONOMY

NISSANS GHOSN TOPS JAPAN PAYLEAGUENissans Carlos Ghosn has taken topspot on a list of Japans best-paid exec-utives after the carmaker revealed itpaid its Brazil-born chief executiveY890m ($9.9m) last year. Nissan andother quoted Japanese companies arebeing forced to report the compensa-tion of individual executives for thefirst time under rules introduced bythe Tokyo Stock Exchange. The disclo-sures have highlighted the gulfbetween Japanese managers whosecompensation is held down by thefact that they rarely switch employers and foreigners brought in to runlocal groups.

EASYJET ACCUSES ITS FOUNDER OFFISHINGSir Stelios Haji-Ioannou, who found-

ed EasyJet, is fishing around for atest to determine whether some

activities are non-core, lawyers repre-senting EasyJet told the High Court

on the final day of a trial betweenthe founder and the airline. SirStelios is suing EasyJet over theterms of a brand licence agreementthat restricts the amount it canmake from ancillary services to 25per cent of total income. He claimsEasyJet is overstepping that agree-ment.

GAP TRIES CHINA FOR SIZE WITHFOUR NEW STORESGap, the US clothing retailer, is toopen four stores and an e-commerceoperation in China late this year inits most significant overseas expan-sion in more than a decade. Theretailer said it would open two storesin Beijing, including one on the capi-tals main shopping street, and twoin Shanghai. They will sell clothing

from its adult, kids and baby Gapranges.

LUCOZADE FINDS THE ENERGY TO TAKEON POWERFUL AMERICAN RIVALSGlaxoSmithKline is taking on the bigguns of the soft drinks industry bylaunching Lucozade in the UnitedStates, challenging the might ofPepsiCos Gatorade and Coca-ColasPowerade sports drinks.

BELARUS GAS SUPPLIES CUT 60 PERCENT BY RUSSIARussia tightened the screw onBelarus today by cutting gas suppliesby 60 per cent in a payment disputethat threatens to affect customers inthe European Union. The state energygiant Gazprom said that it had cutgas flows to Belarus for a third succes-sive day after accusing the formerSoviet republic of doing nothing toclear a $192m debt. Alexei Miller, thechief executive, has threatened to

reduce supplies by 85 per cent unlessBelarus pays by Friday.

GOLDMAN SACHS CHIEF LLOYDBLANKFEIN ADVISED TO GO ON OPRAHLloyd Blankfein, chief executive ofGoldman Sachs, could have been fol-lowing in the footsteps of SarahFerguson, Duchess of York, in usingan appearance on the Oprah Winfreyshow to attempt to revitalise his andthe banks tarnished image. The idea which appears to have been just that has been mooted in the banks upperechelons of power.

JOHN VARLEY: BARCLAYS LEHMANPURCHASE RISKIEST WEEK OF MY LIFEJohn Varley described the seven days which led up to Barclays buyingLehman Brothers US brokerage asthe riskiest week of my life as hedefended the British bank againstcharges it made a secret $11.2bn(7.55bn) windfall on the purchase.

Varley, chief executive of Barclays, tolda US court the deal was risky.

EX-UNILEVER EXECUTIVE JOINSBUYOUT FIRM CD&RVindi Banga, the former Unilever topexecutive who announced his resig-nation from the consumer-goodsgiant in March, has been hired asoperating partner in the Londonoffice of private-equity firm Clayton,Dubilier & Rice.Banga, who worked at Unilever for 33years, most recently as president forglobal foods, home and personal care,resigned about a year after formerNestl and Procter & Gamble execu-tive Paul Polman took over asUnilevers CEO.

FIAT TO RESTART UNION TALKSFiat will resume talks with unionsafter failing to convince enough workers to accept its demands onworking conditions in exchange for

investing 700m (576m) in theirplant in southern Italy.

WHAT THE OTHER PAPERS SAY THIS MORNING

Budget wont cause a new recession

WE all know what Mark Twainthought of the extraordinary ability ofstatistics to make even the weakest ofarguments sound persuasive. In themain, this weeks emergency Budget was remarkably honest, especiallyafter years of debased Red Books fromthe previous Labour government.

But there has been some confusionabout the extent of the (much-needed)spending cuts being announced; somereaders have even written in question-ing whether City A.M. and others areright to describe George Osbornesplans as cuts. We are; and this is why.

Overall spending will fall substantially year after year after adjusting forinflation, will drop significantly as ashare of GDP and will be hacked backespecially severely in real terms in

many departments (it may have todrop by up to 33 per cent in some, theInstitute for Fiscal Studies said yester-day). It will also be substantially lowerthan originally planned by Labour and lower than Alistair Darling pro-posed at his Budget earlier this year.

However, in cash terms in otherwords, before adjusting for inflation spending will continue to go up everyyear. It is just that the money wontbuy as much and more of it will bespent on interest. Take 2009-10, thelast Labour year: spending then was669bn, rising to 697bn in the cur-rent financial year, 700bn in 2012-13,711bn in 2013-14, 722bn in 2014-15and 737bn in 2015-16. By then, thetotal cash increase will be worth68bn a year, or 10 per cent above thelast full Labour financial year.However, this will be worth less in real

terms and so it is fair to describe this areal terms cut.

The biggest problem for the Tories isthat departmental spending (whichexcludes debt interest and benefits)

will be cut and because foreign aidand the NHS are being entirely pro-tected, the spending reductions willbe severe. If one assumes that defenceand education will drop 10 per cent inreal terms, then other departmentswill have to suffer 33-34 per cent cutsin real terms. The only way to abatethis would be to make extra savingsfrom welfare or to renegotiate the set-tlement with Scotland and Wales, which gobble up disproportionateamounts of taxpayers money.

One argument that many havemade is that we are all worse off as aresult of this Budgets spending cuts.In the aggregate, this is nonsense: gov-ernment debt is not some sort of afree lunch, a way of not paying forspending. Public spending must befinanced in one of three ways: by mak-ing the public pay straight away via

taxes, by borrowing from the marketsand then a few years down the line by forcing the public to pay the debtback; or by printing money and inflat-ing the debt away. The fact that we are

cutting back on option two and pro-moting option one is a good thing.Nobody wants to lend forever toimprudent countries; and it cannot beright to send todays children andbabies the bill for the cosseted lifestyleof their parents. Racking up massiveliabilities goes against any notion ofintergenerational equity.

Now for one prediction: consumerspending will be squeezed by theregrettable (and avoidable) hike in Vatand from the (necessary) cuts inspending. But reduced debt-financedspending will go hand in hand withgrowth in private investment andexports, partly thanks to strong globaldemand, thus cushioning most of theimpact. The years ahead will be verytough but there will be no doubledip recession made in Downing [email protected]

LONDON Underground maintenance workers began a 48-hour strike at7pm last night, after last-ditch legalaction by employer Tube Lines failed.

A High Court judge denied TubeLines an injunction to stop the strike,despite arguments that the strike bal-lot was invalid.

We urge the RMT to pull backfrom taking this needless actionwhich would unnecessarily inconven-

ience the travelling public, said TubeLines acting chief executive AndrewCleaves.

Transport for London has insistedthat train services will not be affected by the walkout on the Northern,Victoria and Piccadilly lines.

However Bob Crow, general secre-tary of rail union RMT, called the rul-ing a massive victory and predictedmajor disruption across the LondonUnderground network.

Another strike against proposedjob changes is set for 14 to 16 July.

BYMARION DAKERS

TRANSPORT

Two-day Tube strike startsActing Tube Lines chief Andrew Cleaves urged RMT to pull back

NEWS | IN BRIEF

Kerviel asked to pay 5bnSociete Generale called for a court orderyesterday that would force rogue traderJerome Kerviel to pay back the near5bn he lost through unauthorisedtrades. Jean Veil, the French bankslawyer, demanded compensation thateffectively would leave Kerviel in debt

for the rest of his life.

Facebook looks east for growthFacebook plans to expand into China,Russia and Japan in order to becomethe first social network to reach 1bnusers, founder Mark Zuckerberg saidyesterday. He told a conference the com-pany would start to make strategicmoves after years of relying on organicgrowth.

Nike posts profit but shares dipSportswear retailer Nike posted quar-terly profits that jumped 53 per centyesterday, but shares dipped two percent after revenue missed analysts' goal.The retailer said net profit rose to$521.9m (349m), for the three monthsto 31 May. Revenue rose almost eightper cent to $5.08bn, thanks to anupswing in orders for sports footwear.

Inflation hawk ThomasHoenig was the onlyFed committee mem-ber to vote for a rise inthe base rate

EDITORS LETTER

ALLISTER HEATH

7th Floor, Centurion House,24 Monument Street,London, EC3R 8AJTel: 020 7015 1200 Fax: 020 7283 5334Email: [email protected] www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor Ben GriffithsNight Editor Katie HopeAssociate Editor David CrowLifestyle Editor Zoe StrimpelArt Director Darren SoulsbyPictures Alex Ridley

CommercialSales Director Jeremy SlatteryCommercial Director Harry OwenHead of Distribution Nick Owen

Editorial StatementThis newspaper adheres to the system of

self-regulation overseen by the Press ComplaintsCommission. The PCC takes complaints about theeditorial content of publications under the EditorsCode of Practice, a copy of which can be found atwww.pcc.org.uk

Printed by Newsfax International,Beam Reach 5 Business Park,Marsh Way, Rainham, Essex, RM13 8RS

Distribution helplineIf you have any comments about the distributionof City A.M. Please ring 0207 015 1230, or [email protected]

8/9/2019 cityam 2010-06-24

3/44

Budget News 3CITYA.M. 24 JUNE 2010

US lawmakers came closer to hammer-ing out legislation to regulate thefinancial industry yesterday, droppingseveral proposals in an effort tofinalise the new rules by tomorrowevening.

A House-Senate panel continuednegotiations to merge two majorbank reform bills, which aim to over-haul Wall Street and beyond in thewake of the financial crisis.

Democrats agreed to drop rulesthat would have required large banksto ring-fence a total of $150bn(100bn) to cover the cost of liquidat-ing troubled financial firms.

A proposal that would restrict banks trading activities appearedlikely to remain in the bill as negotia-tors from the Senate and the Houseof Representatives said it wouldencourage them to focus on lending.

They cannot continue to do busi-ness as they were doing, saidRepresentative Barney Frank, theDemocrat who is overseeing theprocess. They have to get back in thebusiness of accumulating capital andmaking loans to private parties.

Members of the Senate negotiatingteam still hope to block non-US banksfrom expanding into the Americanfinancial industry if they threatenstability, reports said last night.

Senate Democrats also offered a

tightened version of the Volker Rule,modelled on the repealed Glass-Steagall Act, which would limit banksusing customers money to trade fortheir own profit.

The panel is set to look at deriva-tives in todays sitting. The currentform of the bill would force banks tospin off their credit default swapsoperations to ensure that taxpayer-backed deposits are not put at risk.

Democrats have suggested broaden-ing exemptions for non-financialcompanies that use derivatives to off-set risks, such as utilities and airlines.

Participants in the House-Senatepanel face several other outstandingissues if they are to complete theirwork by their self-imposed deadline.

Financial reform billclose to completionBYMARIONDAKERS

WORLD ECONOMY

AUSTRALIAN Prime Minister KevinRudd stood down this morning aftercalling a surprise leadership ballot,throwing negotiations on a new min-ing supertax in the country into jeop-ardy.

Rudds deputy, Julia Gillard, willbecome Australias first female PrimeMinister after Rudd resigned beforethe ballot of Labor party MPs at 9amlocal time (midnight BST).

Gillard commands strong supportfrom left-wing members of the party,

and has not been squeamish aboutconfronting the mining industry inher role as employment minister.

The government has sufferedfalling approval ratings in recentmonths, and must call a general elec-tion before the end of the year.

UK mining shares pared earlierlosses following Rudds unexpectedcall for a vote yesterday afternoon, inthe hope that Rudds controversial 40per cent resources super-profit taxwould be scrapped or altered follow-ing the ballot.

Rio Tinto fell 1.6 per cent to 33.90,having earlier slumped 2.8 per cent.

BHP Billiton, the worlds biggest min-ing firm, dropped 1.9 per cent to19.51, after falling 2.5 per cent earli-er in the day.

Whilst it's too early to predict aprecise outcome, it has becomeincreasingly clear that there is mate-rial opposition to the tax from withinRudds own party, said MichaelRawlinson at Liberum Capital.

The super tax will apply from 2012if adopted. Mining firms have lobbiedferociously for the levy to bescrapped, with Xstrata going as far as

halting operations in the countryuntil negotiations are concluded.

BYMARIONDAKERS

MINING

WWW.GANTUK.COM

BROMPTON ROAD, BOND STREET, REGENT STREET,

WESTFIELD, BLUEWATER, CANARY WHARF,

RICHMOND, CAMBRIDGE, BRISTOL, SOLIHULL,MANCHESTER, EDINBURGH, GLASGOW

A LONE dissenting voice in the Bank ofEnglands Monetary Policy Committee(MPC) this month urged for a hike inrates, the first time since August 2008that such a call has been made.

External MPC member AndrewSentance, who has recently expresseddisquiet about stubbornly high infla-tion in both MPC meetings and in thepress, voted for an increase in rates of0.25 per cent. The other seven mem-bers of the committee voted to keeprates on hold at the historic low of 0.5per cent.

The minutes said that for one mem-

ber, inflation had been resilient in theaftermath of the recession, castingdoubt on the future dampeningimpact of spare capacity on inflation.

While it was not surprising that it

was Sentance who dissented, the tim-ing was a shock. Given his generallyhawkish voting record, it did seem asthough he would be in favour of rais-ing rates reasonably soon. Howeverwe did not expect dissent at this junc-ture, especially ahead of the Budget,said Investecs Philip Shaw.

Hendersons Simon Ward said: It would be understandable if someMPC members felt wary about theOsborne-King deal, under which thechancellor believes he has bought offinterest rate rises by acceding to thegovernors demands for acceleratedfiscal tightening while transferringsupervisory powers to the Bank.

The minutes suggested little sup-

port for Sentance, said Ward, with aminority claiming that downsideinflation risks have increased. Thegovernor, it seems, exerts an irongrip, he added.

Sentance shattersconsensus with

call for rate riseBY JESSICAMEAD

UK ECONOMY

Australian mining tax couldbe axed after PM is ousted

MORE NEWSONLINE

www.cityam.com

IT WAS no surprise that AndrewSentance was the first member of

the Bank of Englands MonetaryPolicy Committee (MPC) to call for ahike in interest rates.

Sentance had already proved veryhawkish in an interview with theSunday Times, pointing to theresilience of inflation in the after-math of the recession, which hadcast doubt on the future dampeningimpact of spare capacity on inflation.

He has repeatedly highlighted hisconcerns about upward price pres-sures for more than a year. Last Junehe gave a speech, stressing theimportance of the MPCs responsibil-ity for low and stable inflation.

Educated at Cambridge and theLSE, Sentance has sat on the MPCsince 2006. He is also a professor ofsustainable business at WarwickBusiness School and advises the gov-ernment on transport policy issues.He was chief economist and head of

environmental affairs at BritishAirways. He has also held positionsat London Business School and theCBI.

ANDREWSENTANCE

EXTERNAL MPCMEMBER

HOW THE MPC VOTED ON RATES IN JUNE 2010

Mervyn King Andrew SentancePaul Tucker

Charles BeanSpencer Dale

Vacant

David Miles

Adam Posen Paul Fisher

Kate Barker ended her

term on the MPC on 30May 2010. A replacementhas yet to be found.

8/9/2019 cityam 2010-06-24

4/44

BANKING analysts at UBS yesterdaypredicted a surge in creative account-ing practices in the banking sector, asfirms look to manipulate their booksto minimise the impact of the govern-ments new balance sheet levy.

The team at UBS, led by respectedanalyst John-Paul Crutchley, hasalready begun to identify possibleopportunities for individual banks toreview their structures in light of thetax, which it expects to be replicatedacross banks entire balance sheets inthe fullness of time as other coun-tries follow suit.

The analysts singled out HSBC asan institution which could benefitfrom altering its accounting struc-ture, arguing that although the banktraditionally uses its UK bank as oneof the main trading counterparties

within the group, these trades couldbe booked on the Hong Kong balancesheet instead.

UBS also looked at ways of reduc-ing the cost of similar global levies,including in Germany, which has sig-nalled its commitment to introduc-ing a levy similar to the UKs.

The analysts cited as an exampleDeutsche Bank, which has been sub-

ject to speculation over a possibleacquisition of Postbank, in which italready owns a large stake. Currentestimates assume Deutsche will behit relatively hard by a German taxdue to the significant level of whole-sale funding within its retail bank.But that proportion would dropsharply if it bought Postbank, a bankheavy on the retail deposits which areoutside the scope of the UK tax.

Chancellor George Osborne usedthe Budget on Tuesday to announcethe 2bn annual levy. Banks will becharged at a rate of four basis pointson their liabilities from next year,after discounting for insured

deposits, tier one capital and longterm funding. The rate rises to sevenbasis points from January 2012.

Banks mullmeasures toavoid UK levy

www.koreanair.co

m

From departure to arrival, the world is my destination

Excellence in Reach Korean Air has one of the largest global networks in the

airline industry. With 861 connecting flights to 116 cities in over 39 different countries,

youre granted the luxury of flying anytime.

BYVICTORIA BATES

BANKING

THE massive 113bn fiscal tighteningunveiled by George Osborne earlierthis week should ensure Britainretains its AAA credit rating,Moodys said yesterday.

The comments, which follow simi-lar remarks from fellow ratingsagency Fitch, will boost the chancel-lor, who has staked his reputation onensuring Britain maintains the high-

est credit rating possible.The UK Budget is supportive ofthe countrys AAA rating and stableoutlook because it is a key steptowards reversing the significantdeterioration in the governmentsfinancial position that occurred overthe past two years, Moodys said.

Osborne unveiled the toughest fis-cal consolidation in Britains peace-time history on Tuesday, announcinga raft of sharp tax hikes and swinge-ing spending cuts.

The Budget confirmed the UKgovernments intention to eliminatethe structural current deficit by2015-16, said Kenneth Orchard,Moodys vice president. Successfulimplementation would return thegovernments finances to a more sus-tainable trend.

Standard & Poors, which cut theoutlook on Britains AAA rating tonegative in May 2009, has yet tomake a detailed response to theBudget.

Moodys joins Fitch and backsOsbornes austerity BudgetBYDAVID CROWPOLITICS


George Osborne has vowed to protect Britains AAA rating Picture: REUTERS

Counting the cost: The impact of the banking levy

Bank Cost of tax at Estimated 2011 Estimated 20127 basis points earnings downgrade earnings downgrade

RBS 328m 25% 6%Deutsche Bank 356m 8% 8%Societe Generale 290m 7% 5%BNP Paribas 553m 6% 5%Credit Suisse 215m 5% 5%Barclays 313m 5% 4%

Credit Agricole 213m 5% 4%Santander 220m 3% 2%Lloyds 171m 3% 2%HSBC 196m 1% 1%

Standard Chartered 16m 0% 0%Source: Estimates from UBS (note that estimates are calculated on the basis of each bank's global balance sheet)

8/9/2019 cityam 2010-06-24

5/44

8/9/2019 cityam 2010-06-24

6/44

WHITEHALL is bracing itself for thelongest, and deepest sustained periodof cuts to public service spendingsince at least the Second World War,which could see some departmentssee their budgets slashed by as muchas 33 per cent by 2014-15 in real terms.

Leading think-tank the Institute forFiscal Studies (IFS) yesterday con-firmed chancellor George Osbornesassertion that unprotected govern-ment departments would face cumu-

lative real cuts of 25 per cent by2014-15.

But it said that if spending onschools and defence was only cut by10 per cent, then other departmentalbudgets would need to be slashed byas much as a third.

Robert Chote, director of the IFS,said: The cut in central governmentpublic services spending as a share ofnational income now planned by theCoalition will more than reverse theentire increase we saw under Labour.

We are looking at the longest, deepestsustained period of cuts to publicservices spending at least since WorldWar Two.

We have never seen six years ofconsecutive cuts to public servicespending, said Rowena Crawford,research economist at the Institute.

And while expenditure on the NHS will be protected such that itaccounts for almost a third of totalpublic service spending, the health budget has never had to undergomore than two consecutive years of aspending freeze since 1948.

Crawfords analysis indicated thatif the government could reduceannually managed expenditure(AME) by 13bn in the autumnSpending Review, then departmentswould only face a 20 per cent cut totheir budgets.

However, these savings would haveto be found from a pool of just154bn if state pensions, council tax-financed spending and public corpo-ration spending were excluded fromthe expenditure able to be cut.

Worst cuts forthe UK since

World War II

Time is ticking for government departments to find savings Picture: GETTY

BY JESSICAMEAD

BUDGET


8/9/2019 cityam 2010-06-24

7/44

ANALYSIS l Distributional impact of tax and benefit measures to be in placeby 2012-13

2Poorest Richest2 4 5 6Incomedecile roup

Source: IFS

7 8 9

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

Changeinnetincome

Yesterday

Pre - announced

ANALYSIS l Public service spending set for a squeeze

1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010-11-10

Annualpercentagerealincrease

-5

0

5

10

15

Labour Con Lib Historic 6 year moving average

Source: IFS

Current policies imply longest, and deepest sustained, periodof cuts to public service spending since (at least) WW2

ANALYSIS l Fiscal tightening: additional measures

2010-11 2011-12 2012-12 2013-14 2014-15

Source: IFS

2015-16 2016-170

1

2

3

4

5

6

7

8

Percentageofnationalincome

85%80%

20% 15%

Additional spending cuts

Additional tax increases

Labour spending cuts

Labour tax increases

TRAVEL SEPTEMBER-OCTOBER

Book until midnight 24.06.10. Subject to availability. Terms and conditions apply, see Ryanair.com for

details. Fares exclude optional fees/charges.

SALE

10ONE WAY, FROM

FLIGHTS FROM LONDON (STANSTED)

THE Institute for Fiscal Studies (IFS)yesterday rejected chancellor GeorgeOsbornes confident claim on

Tuesday of a progressive Budget thatwould spread the pain across all sec-tions of society but that the richest

would contribute more than thepoorest.

James Browne at the IFS said yes-terday that the fiscal consolidationmeasures announced by the coali-tion government on Tuesday wereonly progressive because of reformsannounced by the previous govern-ment. His analysis split the distribu-tional impact of the measures intothe reforms in the June Budget andthose already announced.

He added: If you look at reformsdue to be introduced in 2013 and

2014 benefit cuts announced yester-day for those years and subsequent

years going forward they hit thepoorest hardest and indeed keep on

hitting them more and more everyyear.The Budget looks less progressive

indeed somewhat regressive when you take out the effect of meas-ures that were inherited from theprevious government, when you lookfurther into the future than 201213and when you include some othermeasures that the Treasury has cho-sen not to model, said Robert Chote,director of the IFS, in his openingremarks.

Browne noted that neither theTreasury nor the IFS account for cutsto housing benefit, Disability Living

Allowance and reforms to in-yearchanges to tax credit awards. Headded that these are all likely to hitthe poorest half more than the rich-est half. The capital gains taxreforms, also not included, would hithigher-rate taxpayers, but the impact

would be small.Browne concluded: So it is likely

that the overall impact of yesterdaysmeasures was regressive.

IFS rejects BudgetsprogressiveclaimsBY JESSICAMEADBUDGET

TWO major pitfalls threaten the cred-ibility of George Osbornes new fiscalmandate and debt target, theInstitute for Fiscal Studies said yester-day, although it gave both a cautious

welcome. While it applauded the forward-

looking nature of the mandate toachieve a balanced structural current

budget by the end of the forecast hori-zon, it warned that it was all too easy

for a chancellor to pencil in an extrayear of fiscal squeeze in the last year

to ensure the target was met.However, the IFS welcomed theBudgets announcement that theforecast horizon would shorten in thefuture. Nonetheless, it warned thatthe mandate should not become tooshort-term otherwise it would losecredibility.

Gemma Tetlow, senior researcheconomist at the think-tank, said thatthe debt target was not a sufficientlyconstraining fiscal rule in the longer

term and added that if the fiscal man-date is met then the debt target is

also likely to be achieved.But Osborne plans to announce adebt target once the exceptional risein debt has been addressed.

Osbornes fiscal mandate must focuson the long-term, warns think-tank

BY JESSICAMEAD

BUDGET

Budget News 7CITYA.M. 24 JUNE 2010

Robert Chote, directorof the IFS, yesterdaycongratulated thegovernment on theBudgets transparency

8/9/2019 cityam 2010-06-24

8/44

GEORGE Osbornes first Budgetdeserves a score of seven out of ten,our unique panel of Londons finan-ciers and business professionals said

yesterday.The City A.M./PoliticsHome.com

Panel, which has been speciallyrecruited to represent a cross sectionof Londons financial community, wasalso asked whether they thought thetoughest fiscal consolidation inBritains peacetime history wouldrepair the public finances.

The overwhelming majority of pan-ellists (71 per cent) said they thought it

would be fairly successful in repair-ing the public finances while a further21 per cent thought it would be verysuccessful. Just a handful of respon-dents said they expected the fiscalrepair job to be very unsuccessful

while six per cent said it would befairly successful.

A hike in the higher rate of capitalgains tax from 18 per cent to 28 percent is unlikely to hurt enterprise,according to the vast majority of pan-ellists (62 per cent). Many were expect-ing the increase to be much higher.

However, a significant minority (38per cent) said the measure wouldeither hurt enterprise somewhat orgreatly, in a sign that the govern-ment has failed to win round everyonein Londons business and financialcommunity.

Tax rises are never productive. Itwould have been better to differentiatelong-term versus short-term capitalgains. Also, the retention of the 50 percent top tax rate with no mention thatit will ever go away was very disap-pointing for the aspiring classes, saidone panellist.

Another said: Some of the taxincreases were unfortunate but politi-cally unavoidable. I am encouragedthat the right steps are being taken torebuild the nations fortunes. PoliticsHome.com interviewed 358 panel-lists by email yesterday. Apply to join thepanel at www.cityam.com/panel

Budget score

is 7 out of 10,say our panel

BYDAVID CROW

POLITICS

EIGHTY per cent of company direc-tors support George Osbornes emer-gency Budget, according to a survey.

The Institute of Directors (IoD) saidfour out of five members backed thechancellors plan for the biggest fiscalconsolidation in Britains peacetimehistory.

Of the 640 directors surveyed, 83

per cent said the measures wouldhave a positive impact on the Britisheconomy, while 90 per cent said it

would be effective in reducing the fis-cal deficit.

The vast majority (82 per cent) saidthey were more positive about theUKs long-term economic outlook,although just 61 per cent said it

would have a beneficial effect in theshort-term.

Directors particularly welcomed

plans to trim the headline rate of cor-poration tax by one per cent a yearuntil it hits 24 per cent in 2014-15,

with 92 per cent backing the meas-ure.

IoD director-general Miles Templeman said support for theBudget had been emphatic largely

because of more competitive andsimpler taxation, although he saidsome measures would be painful for

businesses.

Eighty per cent of directorsgive Osborne the thumbs up

Miles Templeman said support for the Budget was emphatic Picture: REUTERS

0 10 20 30 40 50 60 70

ANALYSIS l How successful or unsuccessful do you think this budget will be inrepairing the public finances?

ANALYSIS l The Chancellor announced an increase in the top rate of capital gainstax from 18 per cent to 28 per cent, with exemptions for entrepreneurs.Overall, do you think this measure will benefit or hurt enterprise?

Very successful

It will benefitenterprise greatly

It will benefitenterprise somewhat

It will neither benefitnor hurt enterprise

It will hurt enterprisegreatly

It will hurtenterprise somewhat

Dont know

Fairly successful

Fairly unsuccessful

Very unsuccessful

Dont know

21%

71%

7%

2%

0%

3%

16%

43%

33%

6%

1%0 10 20 30 40


PoliticsHome.comPoliticsHome.com

BYDAVID CROWPOLITICS

8/9/2019 cityam 2010-06-24

9/44

8/9/2019 cityam 2010-06-24

10/44

THE PRIME Minister yesterday con-firmed the pensions of existing publicsector workers will be cut, as hedefended the coalition Budget in atetchy question and answer session

with voters.Cameron said the bill for public sec-

tor pensions was too high and thatschemes would become lessfavourable for existing members ofstaff as well as new ones.

Answering questions alongside

Deputy Prime Minister Nick Clegg,Cameron said some public sector fatcats retire on gold-plated pensions

worth 70,000 a year, costing taxpay-ers a huge amount of money.

He said the pensions of high-paidcivil servants would be reformed f irst,

but warned of changes across the spec-trum to bring them in line withrewards in the private sector, whichhave gone down dramatically recent-ly.

Whats happened in the private

sector is many peoples pensions havechanged. There are no longer finalsalary schemes or theyre having toput more money in... its those thingsto make sure theyre affordable, headded.

Cameron added that accrued rightswould be safe, but that public sectorworkers were likely to contribute moreand receive less in the future.

Meanwhile, the coalition leaderswere repeatedly lambasted for hiking VAT despite indicating they had noplans to do so in the run-up to the gen-eral election.

Clegg, who campaigned against aTory VAT bombshell in the run up tothe election, bore the brunt of angerover the decision to hike sales tax

Summing up the opinions of severalquestioners, host Nick Robinson said:People from the Lib Dem manifestogot the sense that you would raise bil-lions from the wealthy, many more bil-lions in a bank tax, a mansion tax,

billions in capital gains tax. Billionsmore than the government has actual-ly done.

PM confirmspublic sectorpensions cut NICK Clegg is convinced all his MPs will end up voting for the coalitionBudget, despite fears that some in theLib Dem party will balk at benefit

cuts and a thumping hike in VAT. An aide to the deputy Prime

Minister said the leadership was con-fident it could win round thedoubters including renegade MPBob Russell, who has repeatedlythreatened to vote against the Budget.

Bob is obviously concerned, andthats understandable. But he is listen-ing to our reasoning and we think he

will end up backing us, the aide said.The Budget has won the support of

left winger and recently-installeddeputy Lib Dem leader SimonHughes, who yesterday said the meas-ures can be sold to the parliamen-tary party.

Of course theres unease. Becausenone of us not one single party

wanted to put up VAT. But that hasbecome a choice that was inevitable. Anything that reduces benefits forthe vulnerable, or might reducethem, is difficult, Hughes said.

Meanwhile, business secretary Vince Cable yesterday insisted theBudget reflected Lib Dem concerns.The key elements that we fought forare in it, he told MPs in the com-mons.

Clegg confidenthe can avoidLib Dem revolt

BYDAVID CROW

POLITICS

Politics10 CITYA.M. 24 JUNE 2010

BYDAVID CROW

POLITICS

BORIS Johnson is preparing to standfor re-election as London Mayor,according to reports yesterday.

The former Tory MP is expected todeclare his intention to stand in the2012 mayoral election in the next few

weeks. The contest could see Johnsonand Ken Livingstone lock hornsagain, after the ex-mayor has puthimself forward to the Labour selec-

tion committee for consideration.Labour will announce its candidateshortlist today, which could includeformer MP Oona King, artistEmmanuel Okoro and Seton During,a chartered engineer.

A spokesman for the Mayor toldCity A.M. yesterday: The Mayor hasalways said that mid-way through histerm he would take stock and decide

whether to go to Londoners for anoth-er mandate. He thinks its the best jobin the world.

Boris Johnson to declarere-election bid in weeks

Mayor of London Boris Johnson plans to stand again Picture: Micha Theiner/CITY A.M

BYMARION DAKERSPOLITICS

8/9/2019 cityam 2010-06-24

11/44

8/9/2019 cityam 2010-06-24

12/44

the vagrant was known, had onceworked in the City of London and,upon learning that he was terminallyill, had resigned from his job and

withdrawn from society.The man was thought to be in his

50s when he died, and was describedas being very well-spoken, well-edu-cated and reserved. He also had a

very distinctive tattoo on his arm, fea-turing a womans head above a largeheart shape. The woman has darkcurly hair and the tattoo also includ-ed part of a name, which police

believe is only four or five letters inlength and ends in a Y.

At some point,this man musthave had friends,family, col-leagues, saysdetective chiefinspector SeanONeil.

We are askinganyone who has

worked in the City do you recognisethis man? Doesanyone recognisethe tattoo design?If you can help,please call thenon-emergencynumber 0845 33 00 222, quotingOperation Hermes. No matter howsmall or insignificant you mightthink the information is, get intouch.

DIARY CLASHOn to Englands World Cup victory

yesterday, and a spot of bad luck forPrime Minister David Cameron, who

only got to watch histeam for half of thematch. The reason?

An ill-timed meeting with the Irish primeminister.

DOGS LIFEOver to Harrys Bar yester-day for a World Cup partyhosted by Ken Brotherston,the chief executive of head-hunter Kinsey AllenInternational.

At half time, Brotherston was forced to stand on achair to boom his speech overthe room due to microphoneproblems, though the Scot didmanage to elicit throaty chuck-les from the England fans witha dig at much-maligned striker

Emile Heskey. Apparently, one of his

mates a dedicated football fan named his dog after Heskey, since thefootballer had just scored an Englandgoal when he first got him.

That was about three years ago,Brotherston quipped.

SPEAKING VOLUMESMany City traders were officiallyencouraged by their bosses not tostray away from their desks and tocarry on working, remembering thatnot all our clients support England.

However, it looks as if not everyonetook that sage advice from on high trading volumes were down substan-tially on the average at just 928m yes-terday...

SURPLUS STOCKOne ofThe Capitalists spies was pass-ing the household store Wilkinsonsearly yesterday when he spotted a sur-plus of St George flags and otherEngland memorabilia retailing onsale for just 10p a pop. Perhaps theyll

be snapped up now that the teamadded a victory to its World Cup scorecard?

POSITIVE SPIN A snippet from BPs in-house onlinemagazine BP Planet, which clearlyisnt taking as dim a view of the dev-astating Gulf of Mexico oil spill as oth-ers have.

Much of the regions businesses particularly the hotels have beenprospering because so many peoplehave come here from BP and other oilemergency response teams, onereport claims, optimistically.

PEDAL POWERCongratulations to the

bunch of 600 Deloitte part-ners, staff and clients whotook part in the firms chari-ty Ride Across Britain last

week, cycling 1,000 milesfrom John OGroats toLands End to raisemoney forParalympicsGB.

The riders, who were joined by Olympic goldmedallists JamesCracknell and RebeccaRomero and Paralympicgold medallists SarahStorey and Jody Cundy,have raised 316,000 sofar this year for the event,

which Deloitte is sponsoring

for four years between 2010and 2013.

ACTOR KEVIN SPACEYENJOYS A RETURN TO

THE TRADING FLOOR ACTOR and Old Vic artistic directorKevin Spacey is becoming quite thedab hand on the trading floor, ifreports from our Stateside friends areto be believed.

Bankers at Citigroup in New York were astonished last week whenSpacey popped into their offices to doa spot of research for his new movie,Margin Call, which is set during thechaos of the financial crisis.

According to the New York TimesDealbook blog, Spacey spent quite afew hours in meetings at the bank,trying to work out what makes a trad-er tick how it feels to win or losemillions of dollars in the blink of aneye, how to deal with the moralissues associated with selling a securi-

ty you know is worthless, you knowthe drill.

Mind you, Spaceys no stranger tothe financial markets. He is a regularat the charity trading days of some of

the Citys largest firms. Just lastDecember, he showed off his skills onthe phones at inter-dealer brokerICAPs charity day, where he took tothe floor alongside fellow celebritiesincluding model Kelly Brook, ex-rugby international Matt Dawson,presenter Chris Tarrant and X Factorduo Jedward.

CITY SLEUTHS Theres nothingThe Capitalist likesmore than a good mystery, and heresa particularly juicy one for readers toget their teeth into.

The Bedfordshire andHertfordshire police is appealing forthe Citys help to solve a 13-year-old

cold case namely, of a man founddead in the woodlands ofBiggleswade. The man in question

was found in February 1997 by a cou-ple of young boys who were bunking

Spacey, pictured here at Icap, is no stranger to the trading floor Picture: Alex Ridley/ CITY A.M

Do your MBA where

the world does business

www.cassmba.com

From our home in the cityof London, we give our MBAstudents the best overview ofthe current thinking and practice.Whether you choose a 12 monthfull-time MBA or two yearExecutive MBA, you will gainboth the theory and practicalskills to do business at the

very highest level.

Join us on 3 July at our MBA

Experience day to find out moreabout our flexible study routes.Visit www.cassmba.com tobook your place or contacta Cass MBA advisor on+44 (0)20 7040 5277 for details.

The application deadline for theWomen in Business and DeansScholarships is 16 July 2010.

roweht

ruoyoD

om our home in the cityrF

ubseoddlr

ehwAMBr

om our home in the city

ssenisu

ere

el.vhest legery hivo do business at theskills t

both the theory and prou will gA, yBe MvecutiEx

A or twB-time MfullsoohcuyrehtehWgniknihttnerruceht

students the best ove our Mve giondon, wof L

o do business at theacticalboth the theory and pr

ainou will gearo yA or tw

htnom21ae.ecitcarpdnag

w oferviestudents the best ovABe our M

om our home in the city

7725040702)0(44+visor onA adBass Ma Ce or cour placbook y

cassmba..wwwisitVselbixeflruotuoba

otydecneirepxE

y at ouruloin us on 3 JJ

.sliatedrf7visor on

ontacte or cotomccassmba.

.setuorydutseromtuodnfi

ABMy at our

c

J61sispihsralohcSssenisuBninemWaednoitacilppaehT

a.assmbc.www

om

.0102luJsnaeDdnasehtrenilda

The Capitalist12 CITYA.M. 24 JUNE 2010

EDITED BY

VICTORIA BATESGOT A STORY? [email protected]

Above: The policephoto-fit of how themissing man mayhave looked whenhe was younger

off school, and had died from lungand brain cancer in the temporaryshelter in which he was living rough.

Rumour around the town at thetime had it that Old Ragbones, as

Spaceyspent quite afew hours in

meetings atCitis offices,trying towork outwhat makesa trader tick

8/9/2019 cityam 2010-06-24

13/44

8/9/2019 cityam 2010-06-24

14/44

US PRESIDENT Barack Obama islining up a legal team to fight forhis six-month ban on deepwaterdrilling in the Gulf of Mexico asthe US faces one of the worst envi-ronmental disasters in history.

On Tuesday, US district judgeMartin Feldman overturnedObamas moratorium on drillingdeeper than 500 feet in the Gulfafter a raft of drillers petitionedthe move.

Ken Salazar, the interior secre-

tary, said that he would seek a newcourt order explaining why theban was essential in the first place.

We see clear evidence every day,as oil spills from BPs well, of theneed for a pause on deepwaterdrilling, said Salazar.

Salazars pledge came as itemerged that Feldman has exten-sive investments in the oil and gasindustry, according to financial dis-closure reports.

Feldman reported holding near-ly 15,000 dollars in shares in Transocean, the company thatowned the Deepwater Horizondrilling rig responsible for the BP

oil spill disaster.Judge Feldmans 2008 financial

disclosure report the most recentavailable also showed invest-ments in Ocean Energy,Quicksilver Resources, ProspectEnergy, Peabody Energy,Halliburton, Pengrowth Energy Trust, Atlas Energy ResourcesParker Drilling and others.Halliburton was also involved inthe doomed Deepwater Horizonproject.Obama issued the ban ondeepwater drilling in May, onemonth after the explosion of theDeepwater Horizon rig, affectingmore than 30 oil rigs in the region.

Obama appeals drill ruling,as judge reveals oil shares3 0 T H J U N E / 1 S T J U L Y 2 0 1 0

R O YA L H O R T I C U LT U R A L H A L L S , L O N D O N

Everything you need toknow about investing & doing

business in the Gulf States

Free Exhibition Free Seminars Free Networking

Pre-Register for FREE entry at

www.gccbritainexpo.com

Supported by: Sponsored by:

BAHRA I N QATARKUWA I T SAUDI ARAB IAOMA N UA E

BP chief executive Tony Hayward yes-terday handed over the day-to-dayrunning of the firms clean up of theGulf of Mexico oil spill disaster tomanaging director Bob Dudley, BPsaid.

Dudley will become president andchief executive of BPs newly-formedGulf Coast Restoration Organisationeffective immediately.

But as Dudley took the reins oilgushed largely unchecked from BPsruptured Gulf of Mexico well after anundersea robot collided with a capintended to capture leaking crude.

BP could not confirm when itexpects to replace the cap its most

successful containment device to date.The oil companys shares, which havelost 33bn since the explosion, wereroughly flat in London at 333.5p andup one per cent in New York at $30.02.

Dudley to headGulf spill teamas accident seesoil flow increase

Focus on BP14 CITYA.M. 24 JUNE 2010

BPs Bob Dudley will take the reins in the Gulf Picture: REX

NEW York states pension fund plansto sue BP to recover losses from thedrop in the companys stock price fol-lowing the worst oil spill in US histo-ry, state comptroller ThomasDiNapoli said yesterday.

DiNapoli, the sole trustee of the$132.6bn (88.6bn) state pensionfund, has hired law firm CohenMilstein Sellers & Toll to represent thefund. BP misled investors about itssafety procedures and its ability torespond to events like the ongoing oilspill and were going to hold itaccountable, said the Democraticcomptroller, who will stand for elec-tion in November.

The fund has a history of acting aslead plaintiff in actions in whichinvestors club together to launchclaims against companies that canrun into billions of dollars.

DiNapoli said the fund owns morethan 19m shares in BP.

Dennis MacKee, spokesman for the$104bn Florida state pension system one the largest in the United States said: Were monitoring the lawsuitand all developments, adding, butwe have not come to any decision.

As of 11 June, the Florida pensionsystem that covers nearly one millionretirees and active workers had unre-alized losses of about $65m on its BPinvestments and $21m of realizedlosses since the April 20 oil-rig disas-ter, according to MacKee.

The Illinois State Board oInvestment, which manages publicpension funds, has 1,066,132m sharesof BP but the totality of ISBIs expo-sure to BP is through index accounts,said spokesman William Atwood.

With the exception of statutoryrequirements...the Boards practicehas been not to issue directions toequity managers regarding specificsecurities, he added.

BP faces suitfrom NY fund

CITY VIEWS: DO YOU THINK BP WILL SURVIVE THE SPILL?Interviews by Emma Sadowski

BP is one of the largest companies in the world. It will pull through this because it is wellknown and turns over a fortune every year. However, the share price will continue to take abeating because of the Gulf catastrophe.

NICKY MITCHELL | THB GROUP

The stock price has dropped so dramatically that it could become an investment opportu-nity for another oil company. On the flip side, BP is a massive company and I cant see it dis-appearing into the sunset. I do think the biggest concern is what will happen to theUK pension funds?

NIRAJ MISTRY | POLARISOFT

BP should have enough finances to get through this however, we dont know what kinds ofclaims itll face. BP will survive but it has to start standing up to the President and the

American government.

AARON HODSON | COVERSURE INSURANCE

BY EMMA SADOWSKI

BP IN CRISISBY EMMA SADOWSKI

BP IN CRISIS

BY EMMA SADOWSKI

BP IN CRISIS

ANALYSIS l BP

350

450

550

650

26 Apr 10 May 24 May 7 Jun 21 Jun

p

333.5023 June

8/9/2019 cityam 2010-06-24

15/44

8/9/2019 cityam 2010-06-24

16/44

8/9/2019 cityam 2010-06-24

17/44

Urban Kings is a brand new

state-of-the-art luxury mixed

martial arts gym. In our astounding

designer surroundings you can

finesse your physique or prepare

for competition with our specialized

classes and equipment. You and a

friend can experience the gym, or your

choice of class, for FREE. Call 020 7837 7774

or e-mail [email protected].

Terms and conditions available

on request.

Urban Kings, Bravingtons Walk,Regent Quarter, Kings Cross,

London N1 9GA.urbankingsgym.com

the art of

fighting

RETAILERS have suffered anotherdecline in sales in June as high streetspending flagged for the second

month in a row, according to the CBI.But the decline was slower thanexpected and firms are hopeful thatspending will pick up in July thanksto a boost from the World Cup.

A net five per cent of retailersreported a rise rather than a fall insales during the first two weeks of

June. This was better than the net -15per cent expected and an improve-

ment on theMay bal-

ance of -18 per cent, the CBI said. Salesare expected to recover slightly nextmonth with a net 11 per cent of retail-ers forecasting volumes to be highernext month than they were in 2009.

Ian McCafferty, chief economic

adviser to the CBI, said: Footwearand leather goods retailers were the

worst hit, but grocers and durablehousehold goods enjoyed solidgrowth. This may ref lect consumersgearing up for the World Cup bystocking up on food, drink and newtelevisions.

He added:Retailers arehopeful that

sales will strengthen next month. Asthe survey pre-dates the emergencyBudget, news that the feared rise in

VAT will not take effect until next January may well also encouragesome advance spending over the sec-

ond half of the year.But with the Budget announcing

other tax rises and spending cuts, theoverall outlook for consumer spend-ing still looks pretty weak, said VickyRedwood, senior UK economist atCapital Economics, who added thatincomes would be squeezed.

Shop sales fall againBY JESSICAMEAD

RETAIL

Economic News 17CITYA.M. 24 JUNE 2010

NEWS | IN BRIEF

D Bank equity co-head on leaveDeutsche Bank said yesterday thatRobert Karofsky, its co-head of equitysales and trading worldwide, is taking aleave of absence for personal reasonsfor an indefinite period of time.Garth Ritchie, the other co-head ofequity sales and trading, will overseethe group during Karofskys leave,Deutsche Bank spokesman Ted Meyersaid yesterday.Ritchie will be aided by Barry Bausano,Deutsche Banks co-head of its globalprime finance business.Bausano is taking on an additional roleas head of global markets equity forthe Americas, Meyer said.

He would not comment further on thereasons for Karofskys absence.

Tribune bankruptcy is delayedA court-appointed examiner has request-ed more time to investigate the TribuneCo leveraged buyout that some blamefor its bankruptcy, likely delaying itsstay in Chapter 11, according to courtdocuments filed yesterday.Kenneth Klee, a law professorand partner of the LosAngeles law firm of Klee,Tuchin, Bogdanoff & Stern,said he needs about twomore weeks to interview wit-nesses and review documentsto prepare his report. Therequest to extend the dead-line from 12 July to 27 July

must be approved by thebankruptcy court.

May mortgage lending rises

MORTGAGE approvals rose in May to36,709 to their highest level so far this

year but they were still far below the27-month high of 45,758 hit lastDecember, fresh monthly data fromthe British Bankers Association (BBA)revealed yesterday.

Net mortgage lending picked up to2.6bn in May from a nine-year low of

1.8bn in April but this was still lowon a historical basis.

Lending to non-financial compa-nies fell by 1.3bn in May following adecline of 1.2bn in April, slightly

below the average monthly fall of1.6bn over the previous six months. The BBA figures also showed that

net consumer credit fell by a further71m in May after a drop of 347m in

April, the fourteenth net repaymentin consumer credit. However, credit

card lending rose by 171m in May.IHS Global Insights Howard Archer

said: The further net repayment inconsumer credit in May is the conse-quence of an ongoing desire of con-

sumers to reduce their debt in a still very uncertain and somewhat trou-bling economic environment and thelooming major fiscal squeeze, as wellas low consumer appetite for new

borrowing and a limited availabilityof unsecured credit from banks.

BY JESSICAMEAD

BANKING

SALES of new US homes dropped arecord 32.7 per cent in May to the

lowest level in at least four decades asthe boost from a popular tax creditfaded, adding to worries over a slow-ing economic recovery.

Single-family home sales tumbledto a 300,000 unit annual Rate, thelowest level since the series started in

1963, the Commerce Department saidyesterday.

The gloomy report suggests theeconomys recovery from the worst

downturn since the 1930s might belosing strength. On top of May salesmissing market expectations for a410,000 unit-pace, figures for the priortwo months were revised down, imply-ing the impact of the homebuyers taxcredit was weaker than thought.

Demand for new US homes sinksto its lowest level in over 40 years

US ECONOMY

The High Street did not enjoy an expected World Cup bounce last month Picture: PA

Retailers will cheer England win butthings are about to get much worseEVERYONE will be thrilled thatEngland has managed to scrapethrough the knock-out stages of the

World Cup, but retailers are espe-cially relieved. The near-term boostfrom the tournament will continuea little while longer. Those fans

waiting to see if England couldcome up with the goods before buy-ing a widescreen TV will splash out;sales of snacks and beer will tick up.

As it stands, the picture for retail-ers is hardly rosy: high unemploy-ment; falling full timeemployment; subdued growth inearnings; high levels of householddebt; and expensive petrol. No won-der sales are taking a battering.

But todays climate will seem likehalcyon days when the big squeezehits with a vengeance. Cuts of up to

33 per cent in some departmentalbudgets mean there will be tens ofthousands of public sector job loss-es, while a much tougher welfarestate will depress the buying powerof the poorest.

But it is the thumping rise in VAT,from 17.5 per cent to 20 per cent,that poses the biggest risk to shops.It can only send sales down further

while pushing up inflation, possi-bly forcing the Bank to act by hikinginterest rates.

For now, retailers should bask inthe glory of an England win. This isas good as its going to get.

[email protected]

BOTTOMLINEAnalysis by David Crow

8/9/2019 cityam 2010-06-24

18/44

CONCERNS over a faltering Eurozonerecovery were stoked yesterday whenforward-looking surveys pointedtowards slower economic growth inthe second half of the year.

The flash composite purchasingmanagers index (PMI) for the region,a closely-watched weathervane forwealth-creating activity, fell from 56.4in May to 56 in June, its lowest levelfor three months. Although any read-ing above 50 indicates economicexpansion, the dip will fuel fears thatausterity measures enforced by a raftof European Union countries arebeginning to impact on growth.

The Eurozone manufacturing PMIdropped slightly from 55.8 to 55.6,

while the services PMI declined moredramatically from 56.2 to 55.4.

Despite the downwards move-ments, index provider Markit said thenumbers supported the idea GDP inthe region accelerated in the secondquarter at a robust pace of 0.6 per

cent to 0.7 per cent. Chris Williamson, chief economist aMarkit, said: Growth is led by manu-facturing and, in particular, exports.

Nick Kounis, chief economist atFortis Bank, said spending cuts bygovernments would not fully biteuntil next year. He added: The sec-ond quarters going to be prettystrong, but in the second half of the year well see a clear slowdown.Growth is going to be sluggish.

Elisabeth Afseth of EvolutionSecurities said the creep in yields ongovernment bonds for countries suchas Spain was more worrying than theprospect of weakening growth.Nations had to press on with forcefulfiscal squeezes despite the feed-through to private sectors, she said.

Eurozone seesweak growthBYOLIVER SHAH

ECONOMY

Sovereign Debt Crisis18

NO NEED FOR HAIRCUTS

GREECE will absolutely be able to get through its fiscal crisis without having to restruc-ture its debts, finance minister George Papaconstantinou said yesterday. The ministertold a German newspaper Athens still had a credibility problem, but insisted the coun-

try could survive without asking creditors to take a haircut to their positions. Greece istrying to cut its budget gap to 8.1 per cent of GDP this year. Picture: GETTY

HUNGARYS new government hopesto cut next years budget deficit belowthree per cent of GDP as agreed withlenders and will seek IMF/EU backingfor reforms to raise the countrysgrowth potential, the deputy primeminister said.

Tibor Navracsics reiterated that thecentre-right Fidesz government was

firmly committed to this years 3.8per cent of GDP deficit target and

wanted to negotiate an extension of a$25.1bn (16.8bn) financing deal withinternational lenders.

Obviously during the planning ofnext years budget we will have toreckon with whether we can meet[the three per cent goal], Navracsicssaid yesterday.

We hope we can meet this under-taking by the [previous] Bajnai govern-ment, which would bring the budget

deficit below three per cent, he saidyesterday.

Hungary to cut deficit below 3pcof GDP as part of financing dealECONOMY

Nick Kounis of Fortissaid the second half of2010 would bring amarked slowdown inEurozone growth

8/9/2019 cityam 2010-06-24

19/44

THE Group of 20 major economies will warn against complacency intackling the global economic crisisand say sickly public accounts couldhit long-term growth, according to adraft document.

The draft version of the summitcommuniqu, obtained ahead of aG20 leaders meeting this weekend inToronto, reflected the different views within the G20 on how to proceedwith economic policy.

The draft, dated 11 June, said therecovery was uneven and fragilewith unemployment at unacceptablelevels. There is no room for compla-cency, it said.

At the same time, it said fiscalchallenges in many states are creat-ing market volatility, and could seri-ously threaten the recovery and weaken prospects for long-termgrowth.

The United States has argued forcontinued stimulus spending by gov-ernments to ensure the global eco-nomic recovery does not fizzle out.

Other countries, such as Germany,intend to cut spending quickly inorder to bring down public debts anddeficits.

Further actions are still requiredto address the underlying causes ofthe global financial crisis and pro-mote more responsible and transpar-ent banking sectors, it said.

Reforms of banking around theworld, along with ways to ensure therecovery of the global economy, arehigh on the agenda of the summit.

The draft said the G20 would pushfor conclusion of a long-delayedworld trade deal and would pledge toextend a commitment not to raise barriers to investment or trade forthree more years, through 2013.

G20 nations converge on 26 to 27June as Europe fights a debt crisis andthe US battles high joblessness.

G20 leaderswarn againstcomplacencyBYHARRY BANKS

ECONOMY

This weekends summit comes amid continuing economic turbulence Picture: GETTY

Sovereign Debt Crisis 19

ICELANDS central bank furthereased monetary policy as expected yesterday, trimming its key rate toeight per cent, and said it could be ina position to further lift capital con-trols.

Iceland took a beating during thecrisis in 2008 and its top banks col-lapsed under a weight of debt.Investors fled, the crown slid and thecountry had to take a $10bn (6.7bn) bailout from the IMF and Nordic

states, including funds to repaydepositors in failed Icelandic banks in

Britain and the Netherlands.The central bank also took borrow-

ing costs to a record high of 18 percent and put in place strict capitalcontrols to protect its currency. Itstarted to ease those restrictions latelast year, but the crown is still farfrom fully tradable.

Norways central bank, meanwhile,held its main interest rate steady attwo per cent and signalled no upwardmove after its economic recovery stut-tered and Eurozone debt risks grew.

The central bank said it saw its key

rate in a range of 1.5 to 2.5 per centuntil October.

Iceland eases bank ratewhile Norway holds firmECONOMY

8/9/2019 cityam 2010-06-24

20/44

BUS AND RAIL operator Stagecoach ispositive about the next year despiteposting a 18 per cent drop in full-yearpre-tax profits.

The transport groups profits fellto 161.3m from 196.4m after thegroup weathered a difficult year in itsrail and North American bus busi-nesses.

In the year ended 30 April,Stagecoach saw its rail profits drop by25.4 per cent to 41.6m, attributing

the decline to a drop off in passengerrevenue and a fall in payments to theDepartment for Transport (DfT).

The groups North American arm, where it operates its US Megabus business, also took a hit from adecline in the leisure market.

However, management atStagecoach remain positive about theoutlook for the year ahead.

These are a good set of results andwe met the challenges of a difficulttrading year. We are now in an excel-

lent position to benefit from theincreasing signs of economic recov-ery, said Brian Souter, the groupschief executive.

Souter said the company is lookingto further expand its Megabus busi-ness in the US and has already addednew routes.

Stagecoach, which paid out 77min dividends, saw a climb in revenueacross both its UK bus and rail busi-nesses, while passenger growthremained the highest at its VirginTrains business, of which it owns 49per cent.

Stagecoach isupbeat inspiteof profits fall

ANALYSIS l Stagecoach's full-year revenues

UK bus

875.4mUP 5.4%

UK rail

1bnUP 5%

Virgin Group(owns 49%)

355.5mUP 10.2%

NorthAmerica

490.4mDOWN 14.7%

CEO Brian Souter plans to expand Megabus US Picture: REX

BY EMMA SADOWSKI

TRANSPORT

News20 CITYA.M. 24 JUNE 2010

ANALYSIS l Stagecoach

170

180

190

200

21 Jun1 Jun11 May22 Apr29 Mar

p 190.8023 Jun

ANALYST VIEWS: WHAT DO YOUMAKE OF STAGECOACHS RESULTS?

Interviews by Emma Sadowski

MANOJ LADWA |ETX CAPITAL

Despite a series of one-off costs impacting

profitability, Stagecoach still managed topost a robust set of full-year numbers. Alongwith an increase in dividend and positivecomments from Fitch, shareholders will beencouraged by plans to expandabroad.

DOUGLAS MCNEILL |CHARLES STANLEY

The numbers are down but are broadly inline with what was expected. It has been adifficult year on the rail side of the businessand the US operations have suffered from adecline in the leisure market. However, thingsdo look to be improving.

AAMER NAWID |FAT PROPHETS

Given that Stagecoach operates in both theUK and the US, management should take agreat deal of credit for these results. It ishighly likely that austerity measures here inthe UK will negatively impact passengernumbers.

8/9/2019 cityam 2010-06-24

21/44

8/9/2019 cityam 2010-06-24

22/44

RISING oil supplies will mostly offsethigher demand over the next five years, the International EnergyAgency (IEA) said yesterday in a reportthat helped push prices lower.

IEA data showed the supply-demand picture would be virtuallyunchanged next year compared withthis year, although spare capacitywould begin to shrink by 2015.

Gas markets, which have been char-acterised by a glut, will stay very wellsupplied in the near term.

The agency raised its oil demandgrowth outlook to an average 1.4 percent, or 1.2m barrels per day (bpd),every year from 2009 to 2015 on theback of robust demand from emerg-ing markets, taking the total to 91.9mbpd in 2015.

The oil market is marked by morecomfortable spare capacity than

envisaged last year, the Paris-basedIEA said in its latest report.

Oil supplies aresufficient until2015, says IEA

IZAKI Group, the property firm runby Israeli businessman Ron Izaki, hastaken over London and Warsaw-listed Atlas Estates in a deal valuing thePolish investment trust at 265m.

Having floated Atlas on theAlternative Investment Market (Aim)in 2006 with co-investors ElranInvestments and RP Capital, Izakiupped its stake to 94 per cent thisweek with an offer at an 11 per centpremium to Atlas undisturbed price.

The move gives Izaki control of Atlas portfolio of commercial andresidential properties in easternEurope, including the Warsaw Hiltonhotel. It is understood Izaki becamefrustrated with the slide in Atlasshare price since its initial publicoffering and now plans to revitalise

the trust through a capital injectionor refinancing.

Izaki was advised on the deal byExcellion Capital, a boutique corpo-rate finance house launched three years ago by former JPMorganCazenove bankers Robert Stafler andRaffael Johnen.

Stafler said: Izaki will be gettingits hands dirty, rolling up its sleevesand doing some hands-on propertydevelopment. The plan is to propelthe company to the glory it aimed forbut never quite reached.

Izaki buys out Aimlisted Atlas Estates

ENERGY

AGRICULTURAL Bank of China(AgBank) is understood to have set afloor price for the Hong Kong por-tion of its $23bn (15.4bn) stockmarket listing with key investorsagreeing to buy $5.45bn of theshares.

AgBank vice-president PanGongsheng was quoted as saying theHong Kong offer will not be lowerthan HK$2.80 a share. That wouldrepresent a price-to-book multiple of1.7 times, the report said. A valua-tion at that level would be slightlyhigher than the 1.5-1.6 times book

the market was expecting.The HK$2.80 per share floor price

means AgBank plans to raise a min-imum of $9.14bn on the Hong KongStock Exchange.

Pans comments come as thebank and its underwriters are final-ising the price range for its HongKong and Shanghai offering.

Like any initial public offering(IPO) entrenched in an investorroadshow, the top executives pushfor the highest possible valuation,while investors decide at what levelthey are comfortable investing.

AgBank originally hoped to raiseup to $30bn through its IPO butscaled back expectations amid a 20

per cent drop in Chinas stock mar-ket in the past few months. Thenews on Chinas yuan policy, how-ever, has given a boost to Chinasstock market, helping sentimentaround AgBank.

AgBank, the last of Chinas fourbig state banks to go public, is sell-ing a 15 per cent stake in a dual list-ing in Hong Kong and Shanghai,excluding a greenshoe option, as itlooks to replenish its capital anddrive growth. As the IPO heads intoits final stretch, the banks abilityto raise the $23bn appears to be get-ting further from its reach. Justover half of the total offering willbe on the Hong Kong Exchange.

Chinas AgBank setsfloor price for listingBYHARRY BANKS

BANKING

BY OLIVERSHAHPROPERTY

Izaki now has control of Atlas portfolio of commercial

and residential properties in eastern Europe, includ-ing the Warsaw Hilton hotel


EXCELLION Capital is a young bank,but its founders have years of experi-ence in the natural resources space.

Robert Stafler and Raffael Johnenstarted Excellion in 2007 after longstints at JPMorgan Cazenove. Staflerworked in the Wall Street giants capi-tal markets, M&A and structured equi-ty teams, advising on transactions

such as mining group Xstratas $5.5bn

(3.7bn) rights issue in 2006. At thetime, the cash call was the largest-ever capital raising in the UK.

Izakis buyout of Atlas is Excellionsfifth deal this year. Stafler said theboutique had a strong pipeline ofwork, meaning it could pick andchoose contracts.

We are able to be very selectiveabout the transactions we work on,he said. Being selective is key, espe-cially in volatile times when complet-ing transactions, even goodtransactions, is not always straight-forward.

Excellion works for clients includ-ing Petropavlosk, the London-listedgold miner, Kazakhmys and state-

backed Royal Bank of Scotland.

EXCELLION

CAPITAL

ROBERT STAFLER

ANALYSIS l Atlas Estates

75

85

95

105

21 Jun1 Jun11 May22 Apr29 Mar

p 89.0023 Jun

8/9/2019 cityam 2010-06-24

23/44

News 23CITYA.M. 24 JUNE 2010

DEBT-LADEN property firm RealEstate Opportunities (REO) will pur-sue a de-merger of Londons deteri-orating Battersea power station, itsaid as it reported losses of almost1bn yesterday.

The landmark, Europes largestbrick building, has been derelict formore than a quarter of a centuryand is in need of financing for rede-velopment.

REO said it had agreed new lend-ing terms for Battersea with LloydsBanking Group and Nama Irelands bad bank scheme thereby extending the current facil-ity and waiving all outstandingbreaches.

It said it would launch a road-show to attract a long-term equity

partner into the project ahead ofthe expected receipt of planningpermission for redevelopment, andthat it hoped to list the projectbefore the end of the year.

Potential partners are thought toinclude sovereign wealth funds andlarge real estate investors.

Due to the quality of the devel-opment, the location and thestrengthening real estate invest-ment market in London, interesthas been very encouraging and wehope to announce significantprogress in this regard later in theyear, REO said in a statement.

Shares in REO fell 15 per cent yes-terday to 14p, valuing the companyat just 47m.

The company made an underly-ing pre-tax loss of 929m for the 14

months to 28 February, reflectingan 811m fall in valuation due to

the troubled property market inIreland, where REO has extensiveholdings.

It has been an exceptionallychallenging period for the compa-ny, said Real Estate Opportunitieschairman Ray Horney. However,the company has worked hard andis confident that it will be able tostrengthen the balance sheet.

Iconic Battersea siteprimed for flotationBY HARRY BANKS

PROPERTY

EUROPEAN RAIL NETWORK ON TRACK

LONDON and Continental Railways, the state-owned operator of the High Speed 1 rail-way, is in talks with Germanys Deutsche Bahn about granting access for train services,its chief executive said yesterday. We are discussing several options with them, MarkBayley said on the sidelines of the Transfin 2010 conference in Barcelona. Deutsche Bahncould run direct rail connections between London and the continent.

Collins StewartThe financial services group has hiredAlasdair Ogilvy-Stuart to its wealthmanagement division to join the inter-mediary sales team.

In his new role, Ogilvy-Stuart willparticularly focus on independentfinancial advisers, having previouslybeen responsible for introducing retire-ment income products to the IFA mar-ket at Sun Life of Canada. He has alsoworked for Zurich and AMP NPI.

MintThe agency broker has hired PaulCooper, ex-head of HSBCs emergingmarkets equity businesses in theEMEA region, as a non-executive direc-tor. Cooper started his career ataccountancy firm Price Waterhouse.Since then he has worked as a manag-ing director at UBS in the Europeanequities business, leaving in 2004 to

join HSBC.He left last year to become a princi-

pal in a small hedge fund and devotemore time to various real estate andprivate equity interests.

Mizuho Corporate BankThe Japanese bank has appointedJason Meyer as a director in the finan-cial solutions group.

Meyer joins from NM Rothschild inLondon, where he was a director in theinvestment banking division.

Prior to that, he held the position ofvice president in the global asset secu-ritisation team at Deutsche Bank.

Bishop InternationalThe corporate investigations companyhas appointed Jody Freshwater asdirector of strategic intelligence.Freshwater previously worked at theSerious Organised Crime Agency,where he was involved in investiga-tions into organised crime, includingfrauds, drug trafficking and peoplesmuggling.

CITY MOVES | WHOS SWITCHING JOBS Edited by Victoria Bates

To appear in CITYMOVESplease email your career updates and pictures to [email protected]

JP MorganIndia Gary-Martin has joined the investmentbank as global head of location strategy andperformance metrics.

Gary-Martin was previously at the RoyalBank of Scotland, where she led the implemen-tation of the governments asset protection

scheme for the banks global banking and mar-kets division. She is also president of the CityWomens Network and a recognised championof diversity in the City.

ANALYSIS l Real Estate Opportunities

8

12

18

10

14

16

1 Jun 21 Jun11 May22 Apr29 Mar

p 10.0023 Jun

8/9/2019 cityam 2010-06-24

24/44

COMET owner Kesa has posted an 18per cent rise in full-year profit asimproved gross margins offset adecline in underlying sales growth.

The electricals retailer, which alsoruns market leader Darty in France,made an underlying pre-tax profit of81.9m for the year to 30 April.

That was ahead of company guid-ance of 76m and up from 69.5mmade in 2008-09. The group, whichtrades in 11 countries, said revenue

rose 3.4 per cent to 5.1bn.Comet itself saw a rise in annual

profits of almost 14 per cent.The chain made 11.5m in the year

to the end of April, compared with10.1m a year earlier.

The firm is targeting internet sales

to match the level of market share ithas in its retail stores and plans toopen about 25 stores a year, half of

which will be in its developing busi-nesses in Italy, Turkey and Spain.

Kesas shares have fallen 23 percent over the last six months after

being hit by a weaker euro and com-petition from supermarkets.

Kesa back inblack despitetough market

CAPITAL Pub Company has seen arise in profit fuelled by real alesales during the World Cup.

The group which has 28 pubsand has plans to own up to 50 withinthree years yesterday reported a 32per cent profit jump to 2.7m.

Revenues rose by 11 per cent to22m in the year to the end of March,and the company said it was relievedthere had been no duty hike on alco-hol in the Budget.

Chief executive Clive Watson attrib-uted the strong figures to booming

sales of real ales, saying centralLondon pubs have been packed withfootball fans following teams fromaround the world.

He said: Real ales have been verypopular with our customers. Wethink the gastro-pub thing wasoverblown.

We are concentrating on provid-ing something a bit different for ourcustomers and the real ales providethat. The World Cup has been goodfor London pubs because it is so mul-ticultural. Its not just England games

where there is an interest.

Waitrose to acquire fivestores in Channel Islands

THE WORLD CUP

AT BOISDALE OFBISHOPSGATEEnjoy the World Cup in style witha 72 screen & air-conditioning inthe Champagne & Oyster Bar

BOISDALE OF BISHOPSGATE SWEDELAND COURT,202 BISHOPSGATE,EC2M 4NR 020 7283 1763

[email protected]

WAITROSE is buying five supermar-kets in the Channel Islands.

Local chain Sandpiper CI has soldthe stores to the UK supermarketgiant.

The deal is subject to the approvalof the Jersey Competition Regulatory

Authority.It is not expected to complete

before the end of October.It will include the three Checkers

supermarkets in Jersey and Admiraland two in Guernsey.

The stores will continue to be run by Sandpiper CI until the end of January next year and will then be

handed over to Waitrose over a six-week period.

Waitrose intends to offer employ-ment to all staff in the five stores.

Details on how much the deal hascost have not been disclosed.Sandpiper CI will continue to operateits 28 other food and drink storesunder its own Checkers Xpress/IslandShopper and Wine Warehouse

brands. Waitrose managing directorMark Price said: People in theChannel Islands have been telling usfor years that they want a Waitrose.Our supply relationship withSandpiper CI shows theres strongdemand for Waitrose quality food.

Capital Pubs toastsboost from real ale

BY JOHN DUNNE

RETAIL

BUDGET chain Wilkinson has hadanother strong year with profits morethan doubling in the year to 29

January.Pre-tax profits rose from 29.5m to

65m in the year. Like-for-like salesincreased by two per cent. Turnoverclimbed seven per cent to 1.6bn. Theretailer said it was particularlypleased with progress on profit.Operating profits grew from 31.6mto a new company record of 62.9m.

The retailer opened 17 new storeslast year but reined in spending.

Wilkinson seesits profit soar ascost cuts deliver

LEISURE

RETAIL

RETAIL

Consumer News24 CITYA.M. 24 JUNE 2010

18%Rise in full-yearprofit at Kesa

23%The fall in Kesa sharesover past six months

11.5mComet made in the year to the end of April

11Number of countries the group trades in

Comet has found the going tough with more competition Picture: NEWSCAST

NEWS | IN BRIEF

Rank puts cost on tax risesLeisure group Rank yesterday becamethe first major public company to put atotal on how much extra the emergencyBudget would cost it. The Mecca bingoand Grosvenor casinos operator said therise in the standard rate of VAT andchanges to the National Insurance

regime would result in a net costincrease of about 2.5m from 2011.Rank said it would try to minimise theimpact of the rise. Last month, the com-pany received 42.5m in overpaid VATback from Her Majestys Revenue andCustoms, although HMRC is still appeal-ing the case. The repayment relates to16.1m overpaid on games of bingobetween 2004 and 2009 and 26.4m toamusement machine revenues between2002 and 2005. If the HMRC appeal issuccessful Rank will be forced to returnthe payment plus interest.

Sainsburys school uniform pushSainsburys has launched its biggest everBack to School range in a bid to boostprofit giving mums 500 uniforms toroad test. The latest range offers 12Back Tu School products. Sainsburys isthe eighth largest schoolwear retailer byvolume, and has the fastest growing

range on the high street with a 3.1 percent share, according to Kantar data.Meanwhile 500 mums from the onlinecampaign group mumsnet were givenfree uniforms to try out to make surethey were tough enough for their chil-dren.

ANALYSIS lKesa Electricals

100

110

120

130

9 Apr 29 Apr 20 May 10 Jun

p119.00

23 June

8/9/2019 cityam 2010-06-24

25/44

8/9/2019 cityam 2010-06-24

26/44

CHANNEL 4 survived the worstadvertising downturn in its historyto record a modest profit last year.

The broadcaster offset a loss ofmore than 60m on its terrestrialstation with swingeing cost cutsand strong advertising perform-ance in its digital offerings to fin-ish the year 300,000 in the black.

The firms profit was significant-ly down on 2008s 1.8m but thestation believes it has now passedthe worst of the downturn.Revenue at the broadcaster wasdown eight per cent year-on-year to830m.

But the broadcaster saw recordperformances in its digital stations,

with E4, More4, Film4 and 4Musicseeing revenues jump four per centto 181.3m and pushing profits upan astonishing 43 per cent to53.4m.

Advertising through its video-on-demand service 4oD was up, driven

by a 60 per cent rise in the numberof full programme views over the

year.Overall advertising revenue on

its eponymous terrestrial channeldropped 14 per cent year-on-year

from 668.7m to 575.1m, plung-ing it in to a 61.6m loss.

The broadcasters total viewingshare dipped three per cent toclaim 11.5 of the total TV audience.

Chief executive David Abrahamsaid: We have created a stablefinancial base that allows us tocommit to a fresh round of creativeand commercial innovation, andposition ourselves to take advan-tage of the ongoing convergence oftelevision and other media.

Meanwhile the broadcaster hasbeen forced to defend its executivepay structure after outgoing chiefexecutive Andy Duncan was award-ed 731,000, taking total boardroompay to nearly 4m last year.Chairman Lord Burns said the com-mitments dated back several years.

C4 scrapes a profitdespite downturn

One more late meeting?One more decision to make?

Who is taking you home tonight?

Trust Atlas, the name The City depends on...

We have been offering transport solutions in

The City of London for over 2 decades and takegreat pride in our strong and committed team

Come and join us on:0207 247 7000

Or pre-book your car onlinewww.atlascarsonline.co.uk

Whether it is a Corporate, Departmental or a Personal account, our

executive will be happy to design a package to suit your needs.

10% discount on your first journey, just quote City AM

all major credit cards accepted

Travel in LuxurySave Time, Money & Stress

GR APHICS chip designerImagination Technologies morethan tripled its full-year pretax prof-it to 10.2m after it shipped 126mchips in smartphones, netbooks andset-top boxes.

The company, whose designs areused by Apple and Intel both share-holders said yesterday its pipeline oflicensing prospects, growth in design

wins and momentum in chip vol-umes gave it confidence about the

year ahead.It also predicted the number of

devices sold using its chips wouldquadruple over the next five years.

Imagination, which also deploys itsown technology in its loss-making

PURE-branded digital radio business,reported a 26 per cent rise in grouprevenue to 80.9m in the year to theend of April and a 55 per cent rise inadjusted earnings per share to 7.3p.

Chip makerImaginationmore thantriples profits

TECHNOLOGY


iPHONE 4 ARRIVES IN THE UK

APPLE ran out of whi

cityam 2010-06-24

Documents