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FTSE 100 5,668.70 -30.23 DOW 11,092.00 -95.28 NASDAQ 2,534.56 -8.56 /$ 1.56 -0.02 / 1.18 unc /$ 1.32 -0.01 Certified Distribution30/08/10 03/10/10 is 110,015

www.cityam.comIssue 1,273 Monday 29 November 2010 FREE

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BUSINESS WITH PERSONALITY

Irish protestors burn a picture of Prime Minister Brian Cowen Picture: GETTY

IRELAND last night agreed an 85bn(72.2bn) bailout package after acrunch meeting with Europeanfinance ministers.

It accepted a total of 67.5bn inexternal support as well as raiding itsstate pension scheme for 12.5bn. Afurther 5bn from Irelands cashreserves was also committed.

The beleaguered nation will imme-diately inject 10bn to recapitalise itsailing banks, with a further 25bnbeing placed in a contingency fund.

The central bank yesterday revealedBank of Ireland and Allied Irish Banks will require at least7.5bn in extrafunds to meet new capital require-ment rules.

The remaining50bn of the bailoutwill go towards the general runningof the country, including paying thewages of public sector workers.

The 67.5bn of external support ismade up of a 22.5bn loan from theInternational Monetary Fund (IMF);22.5bn from the European FinancialStability Mechanism (EFSM); 17.7bnfrom the European Financial StabilityFund (EFSF); and 4.8bn in bilateralloans from non-Eurozone nations.

The UK will contribute a total of7.9bn to the package. This consists of

a

3.8bn bilateral loan; 4.5 per cent ofthe 22.5bn IMF contribution,totalling just over 1bn; and 13.8 per

cent of the EFSM, coming to 3.1bn.The average rate of interest on the

loan will be 5.8 per cent over a seven year period. However, EU ministersdetermined to punish Ireland haveslapped a six per cent rate of intereston the European portion of the loan,compared to just three per cent, ris-ing to four per cent in 2013, on theIMF slice.

Interest payments on the loans willaccount for a staggering 20 per cent ofIrelands tax revenue by 2014.

The EU hinted that private bond-holders would need to take more ofthe pain when a replacement fund forthe ESFM is formed in 2013.

German chancellor Angela Merkelhas long argued for bondholders totake a so-called haircut when coun-tries are bailed out.

George Osborne announced the UKwill not be a part of the new fund, in amove seen as a concession for the UKscontribution to the bailout.

The UK currently provides 13.8 percent of the 60bn ESFM. It does notprovide funds for the566bn EFSF.

A dejected Prime Minister BrianCowen attempted to put a positivespin on the announcement, sayingIreland will be allowed to keep its12.5 per cent rate of corporation tax.

European nations led by Austriahad campaigned for Ireland to be

forced to increase the rate as punish-ment for accepting the rescue pack-age.

EUROPE AGREES 85BNBAILOUT FOR IRELAND

Cowen also confirmed he will call ageneral election in the New Year after

the bailout has been received.The possibility of contagion spread-ing to the other peripheral nations

such as Portugal and Spain appeared to grow at the end of last

week, with yields on Portuguese bonds soaring to seven per cent.Spains yields also shot up to five per

cent and Italys to four, sparking fearsthey could follow Greece, whose

yields are at nine per cent.ALLISTER HEATH: P2, MORE: P16-17BUSINESS FEATURE: P28

BY STEVE DINNEENEUROZONE CRISIS

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News2 CITYA.M. 29 NOVEMBER 201

Tube strikebegins... again A FOURTH pointless undergroundstrike began last night, leaving mil-lions struggling to get to work thismorning.

The strike, which began at 7pm yes-terday, will continue until 7pmtonight, with many services not fullyresuming until tomorrow morning.

London Underground (LU) officialshad hoped to strike an eleventh hourdeal with its workers but talksbetween the two collapsed on Friday.

Mike Brown, managing director ofLU, branded the strike pointless andunnecessary, adding it will achievenothing whatsoever.

An LU spokesman said: We willrun as many tube services as we canbut some lines may have a restrictedservice and some stations will beclosed. It is not possible to say exactlywhat services we will be able to runand the situation may changethroughout the day.

Unions claim job cuts at under-ground stations could have a knock-on effect on safety on the tubenetwork. RMT boss Bob Crow said: Itis incredible that LU managementwould not agree to a 12-week suspen-sion of the cuts to allow a thoroughsafety evaluation on the impact oneach station of their cuts plans.

Icy conditions on roads leadinginto London are expected to heap fur-

BY STEVE DINNEEN

TRANSPORT

Irelands bailout wont halt contagion

ONLY the nave will believe thatIrelands bailout will halt theEurozone crisis. It is too late for that;the best that the EU/IMF/UK plan willachieve is to slightly delay contagion.

The 6 per cent interest rate on theEU portion of the loans is far too high,especially given that Eires inflationrate is so low. There will be no haircutsfor senior bondholders, though hold-ers of subordinated debt will rightlybe hit a system will be introducedunder which private bondholderscould be made to share the burden ofany future Eurozone sovereign debt

restructuring, subject to a case-by-caseevaluation without any automatici-ty. A clear system whereby losses areshared is desperately needed. Its ascandal the bailout culture has still

not come to an end. One of the sur-prises was that Ireland will have to tapinto its National Pension ReserveFund, which has 24.5bn under man-agement. That is a good move.

It is galling the UK is being forced toput its hand in its pocket, even thoughit isnt part of the euro. But at leastnobody believes we are about to becontaminated by the crisis. The coali-tions relatively tough budget has seento that. But the respite may be onlytemporary. The UK faces unsustain-able commitments and an ageing pop-ulation. The Adam Smith Instituteidentifies three fiscal scenarios. Theworst, where present spending plansare followed to 2015-16 and all subse-quent proceeds of growth used tofund higher spending, would result inanother crisis by 2019. The second,where the proceeds of growth are split

50:50 between spending hikes anddebt cuts from 2015-16, would delaycalamity till 2031. The third, wherespending is held constant, would elim-inate the national debt by 2041.

The Institute argues that the best way to achieve spending restraint isfor the state to move away from beingthe insurer of first resort and becomeinstead a safety net. The majority ofpeople would provide for themselves,while the states focus will only be onthe most needy. Miles Saltiel, authorof the report, says the governmentshould mandate a minimum health-care package that everyone would beforced to buy, and would fund premi-ums for those unable to afford them.Service providers such as hospitals would be privatised, raising 236bnafter recapitalising PFI obligations of28.9bn. The report proposes a tax andregulatory regime to foster privateprovision of incapacity, income andmortgage insurance. State supportwould focus on the poor. Educationand pensions would also be reformed.

While fiscal consolidation has savedus from the Eurozones fate, we can-not be complacent. Public spendingwill explode again as soon as the aus-terity phase ends and we are already

taxed more than is sensible. The coali-tion has focused on belt-tightening,decimation and efficiency gains.What we really need is radical struc-tural change in the way services arefunded and operated. This will eventu-ally be forced upon us so we mightas well get thinking now.

WE NEED YOUR HELPCity A.M.s annual readership surveybegins today. This is a vital way for usto find out what you, our readers, real-ly want so that we can improve yourpaper further. So please help us.Everybody who fills in the survey willbe entered into a draw to win a trip fortwo to a Sandals luxury resort in StLucia and there will also be Bollingerto be won. Please turn to p9 andwww.cityamsurvey.com many, manythanks. [email protected]

NEWS | IN BRIEF

Blackstone eyes Southern CrossPrivate equity firm Blackstone is consid-ering a takeover bid of Southern Cross.The British care home operator said lastweek it was in early-stage talks withother potential buyers after privateequity firm Towerbrook Capitalannounced it was no longer interested in

making an offer. Blackstone ownedSouthern Cross before listing it in 2006and is reportedly now keen on launchinga takeover of the listed operating com-pany and its property company, with aview to combining them. Blackstone andSouthern Cross could not be reached forcomment yesterday.

Dubai considers state sell-offDubai may sell off stakes in state-ownedcompanies, top financial officials saidyesterday, as the Gulf Arab emirate triesto dig itself out of a $100bn-plus(64bn) debt pile. The emirate suffereda blow to its reputation a year ago whenstate-linked conglomerate Dubai Worldannounced it would ask creditors for astandstill agreement on almost $25bn indebt. "Dubai World is now on a soundfinancial footing," said finance chairmanSheikh Ahmed bin Saeed al-Maktoum.

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 David CrowNight Editor Katie HopeBusiness Features Editor Marc SidwellLifestyle Editor Zoe StrimpelArt Director Craig GaymerPictures 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]

RMT union boss BobCrow says job cuts inunderground officescould affect safety onthe tube network.

Walk or cycleUnderground bosses are urging peoplewho live in central London to get on theirbikes in a bid to ease pressure on theservices they are able to maintain. Thoseliving further afield should bear in mindthe icy conditions and low temperaturesexpected throughout the day.

Go by riverExtra boat services will be laid on to givecommuters more options. Those comingto and from the City can get boat servic-es from piers including Putney. With theextra traffic expected on the roads, boatswill be among the quickest ways of tra-versing the city. Expect queues.

Avoid the Circle LineThe entire Circle Line is expected to beclosed all day, with bosses saying moststops are already covered by otherlines.

Take the Northern or District LinesAll Northern Line branches are expectedto remain open. District line trains willrun between Ealing Broadway andBarking, and between Wimbledon andBarking. There will also be some servicesto Upminster.

Be wary of the Central LineCentral line LU intends to initially operatea service on the outer sections betweenEaling Broadway/West Ruislip and WhiteCity and between Epping/Hainault andLiverpool Street.

Check airport transportThe Piccadilly line will not serve the cen-tral area but London Underground plansto run a service to Heathrow terminals 1,2 and 3 f rom Acton Town.

Avoid driving where possibleExtra traffic will cause jams all day.

FAST FACTS | HOW TO BEAT THE TUBE STRIKE

ther pressure on the already strainedtransport network.

Todays strike is the fourth this yearover job losses at ticket booths.Officials argue fewer staff are neededdue to the prevalence of self-serviceOyster cards.

Last strike London Underground

said it kept around 40 per cent of itsservices running and carried 50 percent of its usual passenger load.Overall it said 95 per cent of its usualOyster journeys were carried outacross the transport network, withextra busses and boats helping to easepressure.

AMAZON SEEKS TO EXPAND GLOBALLYAmazon says it plans to revamp itsinternational e-commerce platformto make it easier for the company toreach customers in new markets. Theonline retailer, the worlds largest bynumber of visitors, operates online businesses in six countries outsidethe US. It says it has set up a newteam that will create the architectur-al underpinnings to greatly simplifycountry expansions, by translatingcontent into different languages andadjusting taxes, prices and deliveryoptions to better suit customers loca-tions.

TNK-BP TO UNVEIL OIL TRADINGOPERATIONTNK-BP, the Russian oil and gas grouphalf-owned by BP, is setting up aninternational trading arm in the lat-

est sign of the companys ambitiousgrowth plans overseas.

PROPHOTONIX DELAYS AIM MOVEProPhotonix, a specialist in light-

emitting diode light engines, isexpected today to postpone its flota-tion on Aim for the third time since itbegan trying to raise up to 6m in thesummer. The company, which is nownot expected to come to market untilthe end of January, has also halved itstarget fundraising to 3m.

PORSCHE SEEKS BACKING FOR RIGHTSISSUEPorsche is hoping for shareholderapproval tomorrow for the launch ofa 5bn (4.2bn) rights issue aimed atcutting the German sports carmakers high debt ahead of a plannedmerger with Volkswagen next year.Industry insiders and some analystsexpect preference shareholders toapprove the rights issue, in spite of avoting threshold of 75 per cent andopposition from a number of smallerGerman institutional investors. This

month, Porsches preference shareprice enjoyed a rapid rise.

TRAIN BOSSES LINED UP TO OWNTRACK AND STATIONS AS WELLCommuters into London from Essexand East Anglia and train passengersin Liverpool could be the guinea pigsin a radical break-up and part-privati-sation of Network Rail. TheDepartment for Transport is set toconsider reforms that could promotethe vertical integration of parts ofthe network, allowing train operatorsto own the tracks and stations theyuse.

FANCY A HOME IN A PRETTY LITTLEMARKET TOWN? IT WILL COST YOU30,000 EXTRAPeople wanting to live in Englandssmaller market towns are having topay 29,319 extra to buy a home,despite nationwide falls in houseprices. Research published today by

Lloyds TSB shows that houses in mar-ket towns cost an average 231,163.

FASHION MOGUL KEVIN STANFORD ISHAUNTED BY GHOSTKevin Stanford, the owner of the AllSaints clothing chain, has been forcedto shell out 2.5m of his own fortune,after personally guaranteeing a bankloan to his failed fashion brand Ghost.He formerly owned 50 per cent ofGhost, which had 32 shops across theUK and went into administration two years ago, owing 5m to VBInvestment Bank.

FORMER CBS CHIEF JOINS PEEP SHOWMAKER ALL3MEDIANancy Tellem, who was head of theCBS Network TelevisionEntertainment Group for five yearsuntil 2009, has been appointed All3Media's US non-executive boardmember. She is All3Media's secondhigh-profile hiring to its burgeoning

international operation in recentmonths.

COTY NEARS DEAL TO ACQUIRENAIL-POLISH MAKER OPICoty Inc., one of the worlds largestfragrance companies, is close to anagreement to acquire nail-polishmaker OPI Products Inc. for about $1bn, people familiar with the mattersaid. Talks were continuing yesterday,and a deal could be announced asearly as today, these people said. Butthe negotiations could still fall apart,they added.

J&J SUFFERS ANOTHERMANUFACTURING BLOW The US Food and Dr Administration cited a Johnson & Johnson drug manufacturing plantin Puerto Rico for various deficien-cies. FDA officials found that J&Jfailed to follow quality-control proce-dures, and released into the market

drug products that should have beenrejected for quality violations.

WHAT THE OTHER PAPERS SAY THIS MORNING

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BP YESTERDAY said it had agreed tosell its stake in Argentina-based oiland gas group Pan American Energy(PAE) to Bridas Corp, half-owned byChinas CNOOC, for $7bn (4.5bn), asit raises cash to pay for the Gulf oilspill.

The planned sale of the 60 per centinterest, which sources previouslysaid was under discussion and which

was for a price in line with analystsestimates, brings to $2bn the amountthat BP has raised, or agreed sales on,in recent months.

BP has said it expects the costs ofthe Gulf of Mexico oil spill -- theUnited States worst ever -- to hit$40bn and said it would sell assets

worth $25-$30bn by the end of nextyear to pay for it.

Bridas already owns a 40 per centstake in Pan American Energy, whichBP said was Argentinas second-largest producer of oil and gas.

Bridas was owned entirely by thefamily of Argentine tycoon CarlosBulgheroni until CNOOC agreed to

buy a 50 per cent stake for $3.1bn in

March.The 60 per cent stake BP is selling

represents reserves of 917m barrels ofoil equivalent (boe) and production of143,000 boe per day.

US oil major Exxon Mobil Corp isseeking to sell its Argentine unit Esso,

which controls hundreds of servicestations and a refinery.

Todays agreement demonstratesboth the high quality and attractive-ness of the assets throughout BPsglobal portfolio and also the compa-nys ability to meet our significantfinancial commitments arising fromthe Gulf of Mexico tragedy, BobDudley, BPs chief executive, said.

BP sells stake

in Pan Am for$7bn to Bridas

WHISTLEBLOWER website WikiLeaks yesterday released a cache of classi-fied documents that left the US gov-ernment scrambling to limit thedamage.

The 250,000 US diplomatic cables,which have been sighted by newspa-pers around the world, provided can-did views of foreign leaders and

sensitive information on terrorismand nuclear proliferation.Reports say the documents show

Saudi donors remain chief financiersof militant groups like al Qaeda andthat Chinese government operativeshave waged a coordinated campaignof computer sabotage targeting theUnited States and its allies.

They also criticise UK military oper-ations in Afghanistan and DavidCameron before the general election.

Yesterday the White House con-demned WikiLeaks reckless anddangerous action, saying it couldendanger lives and risk hurting rela-tions with friendly countries.

When the substance of privateconversations is printed on the frontpages of newspapers across the world,it can deeply impact not only US for-eign policy interests, but those of ourallies and friends around the world,said spokesman Robert Gibbs

LONDONCITY TO

STOCKHOLMFROM 65ONE WAY

US government scrambles tolimit damage from WikiLeaks

GEORGE Osborne will today launch aconsultation on the much-malignedrules that govern the taxation of for-eign profits, which have been blamedfor the departure of several high-pro-file multinationals in recent years.

The Treasury is expected to proposea more territorial approach to the so-called controlled foreign companies(CFC) rules, which would restrict theRevenues right to impose tax on prof-its earned in low-tax jurisdictions.

An aide to the chancellor said hewanted to prove he was serious about

his pledge to make Britain the mostcompetitive corporate tax regime in

the G20 group of industrialisednations.

The Treasury must now perform adelicate balancing act, and reform therules without foregoing significantrevenues. In the past, Osborne has low-ered headline rates by scrapping reliefsand allowances, a method that aidessay he is keen to use again.

But some firms are worried thatthey will get higher tax bills as a resultof the reforms.

One option under consideration isto abolish CFC rules but in turn limitdeduction of interest costs in respectof foreign profits a compromise that

would risk alienating overseasinvestors.

Treasury to launch consultationinto taxation of foreign profits

BYHARRY BANKS

OIL

POLITICS

Julian Assange is founder of WikiLeaks Picture: GE

BY JENNY FORSYTHWORLD AFFAIRS

News 3CITYA.M. 29 NOVEMBER 2010

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LUGGAGE maker Samsonite is con-sidering a $1bn (640bn) public of fer-ing in Hong Kong, a debt refinancingor a trade sale, people close to thecompany confirmed yesterday.

Samsonite has signed up GoldmanSachs to help examine its options,though the evaluation is at an earlystage and a decision is expected totake months rather than weeks, onesource said.

CVC acquired Samsonite from a

group of private equity owners inJuly 2007 for a total of $1.7bn, includ-ing debt, but handed a 40 per centstake in the firm to RBS last year when the lender agreed to reduceSamsonites debts from $800m to$240m.

The company has come close tobreaching its banking covenenants.

US-headquartered Samsonite washit hard by the downturn in travelduring the financial crisis but salesof its suitcases have since recovered

and it is on course to post a profit of128m this year.

The company sells luggage andaccessories under the Samsonite,Lacoste and Timberland brandnames, and pledged earlier in theyear to double its sales in emergingmarkets such as India every twoyears.

CVC, which manages $38bn infunds, owns 53 companies world-wide.

The firm owns stakes in FormulaOne Group, the AA and MadameTussauds owner Merlin.

Samsonite, CVC and GoldmanSachs declined to comment yester-day, while RBS did not return callsfor comment.

Samsonite toconsider $1bn

share issue AUSTRALIAN bank Macquarie hasacquired a 17.5 per cent stake in capi-tal and asset management groupBluestone for between 5 and 10m,it announced yesterday.

While no price tag has been put onthe all-cash deal, sources said theprice paid by Macquarie would bebased on an open market multiplierof between eight to 12 timesBluestones profits, which are expect-ed to be AS$6.4m (3.9m) for the yearending June.

Based on that figure, a conservative valuation for Bluestone would be31.6m (AS$51.2m) while at the upperend it be 47.5m (AS$76.8m). That would put Macquaries stake atbetween 5.5m and 8.3m

The proceeds of the capital raisedare to be used to support Bluestones

expansion into the UK, Ireland andmainland Europe, the company said.

Bluestones chairman, AlistairJeffery, said that he looked forward todeveloping the relationship withMacquarie in the coming years.

In our view there are a wide rangeof attractive investment opportuni-ties emerging in the wake of the glob-al financial crisis, and thisinvestment positions Bluestone tobenefit from the diverse opportuni-ties we are seeing, he added.

Macquariebuys into assetfirm Bluestone

HARRY Potter led the worldwide box office for a second weekend yesterday, but the boywizard had a close shave with a hairy princess Walt Disneys Rapunzel story Tangled -in North America. The seventh movie in the hit franchise, "Harry Potter and the DeathlyHallows Part 1," sold $163.5m (104.9m) worth of tickets globally, Warner Bros said.

BYMARION DAKERS

CONSUMER

M&A

Luggage manufacturer Samsonite wasfounded in 1910 in Denver, Colorado The company had a turnover of 802.5m in2008, although sales have declined since thefinancial crisis

FAST FACTS | SAMSONITE

News6 CITYA.M. 29 NNOVEMBER 2010

HARRY POTTER BATTLES HAIRY PRINCESS

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The Capitalist8 CITYA.M. 29 NOVEMBER 2010

EDITED BY

JEREMY HAZLEHURSTGOT A STORY? [email protected]

ALAN SUGARBECOMES A

CHRISTIANCOVER STAR

ALAN Sugar likes to boast that he was inthe Jewish Lads Brigade in Hackney, flew

Jewish comedian Jackie Mason over fromNew York for his 40th birthday party and

when a contestant on The Apprenticetold him Im Catholic and I give you my

word, he replied: Im Jewish and Icouldnt give a toss.

A funny choice to be the face of a cam-paign to convert people to Christianity,then. But the Scottish branch of the

Assemblies of God, a fundamentalistChristian group, has somewhat bizarrelyput Lord Alan on the front of its latest

magazine, as an example to its congrega-tion on how to evangelise.

The accompanying article saysChristians should be more like the for-mer Amstrad chief executive when try-

Lord Sugar, left: scari-er than God?

Below: an emu or ablack swan?

Pictures: GETTY, REX

ing to recruit to the church. In businessterms, it should be the easiest thing in

the world for us to promote faith inChrist because we believe 100 per cent inour product, it argues.

Lord Sugar has no involvement what-soever with this organisation and we

have had no approach for permission forhis name or likeness to be used in this

article, his spokesman told Scotland onSunday.

The Capitalistcant help thinking thatthey could have put the message acrossmore simply, with a picture of LordSugar wagging a finger and a dirty greatheadline reading Sinners: Youre Fried.

PLANE TASTESHE made his name flogging reasonablypriced clothes to the British people

when he was chief executive of M&S,and is still the companys chairman, butas he counts down to leaving the job he will stand down in 2011 it seemsthat Sir Stuart Roses tastes have becomea little more highfalutin.

Asked in a newspaper over the week-end what he wanted for Christmas,the high street supremo respond-ed that he hoped to receive aplane. More specifically, a

TBM 850 single-enginedhigh-performance turbo-prop, built by Socota,powered by an 850HPP&W PT6A-66D engine.

Tricky to fit in a stock-ing. I bet he gets pants,like the rest of us. FromM&S.

BLACK EMUS THEY probably arent laughing inDublin or Madrid, but maybe its bestto keep a sense of humour about theeuros latest disasters. Goldman Sachschief economist Jim ONeill the man

who coined the terms BRICs to describethe emerging economies of Brazil,Russia, India and China has been hold-ing forth on the future of the euro.

The picture he paints is not positive.But it seems he sees laughter in thedarkness. He said that very extremeoutcomes are possible for Eurozone

countries, if they dont come togetherand start some sort of fiscal union.There are elements of the black swanconcept that seem rather applicable tothe EMU story, he quipped.

Some economists are loath to speakout right now. Its good to see that someare prepared to say that the euro is aturkey.

ALL IN ON REDYOU might recall that a couple of weeksago a box of vintage Bordeaux was soldfor 43,000 at auction in Hong Kong.

Well, its been bettered. A casino inSingapore has gone, er, all in on red by

splurging 111,000 on a case ofBurgundy. Which, if your maths

isnt immediately up to it, comesin at 9,250 a bottle. The wine inquestion was a Romane Conti1971, which has been describedas having a perfumed mix of

spiced tea, smoked beef jerky andabundant earth. Gary Boom, MD

of wine auction expert BordeauxIndex, who has recently hired a rep-

resentative just to look after the grow-ing market is Singapore, said thatdemand is being driven there by gift-giving. Good times.

A Christianchurch inScotland is

using theJewish LordSugar as anexample ofhow toevangelise

To Stuart, hope its what you wanted.

Sometimes Pret just doesnt hit the spot for lunch, dont you find? Such wasthe case for two Russian gents, residents of Chelsea, who splurged the bestpart of two grand on their midday meal one day last week. Our epicuresstarted out with a 180 bottle of Dom Perignon to whet the appetite, whichthey followed with a burger each. Instead of the more traditional glass ofCoke, though, they plumped to wash it down with the far more classyaccompaniment of a bottle of Mouton Rothschild 86 something which setthem back a cool 1,300. Replenished, they settled their stomachs with adigestif consisting of a couple of shots of Royal Standard vodka. The grandtotal for their lunch, including a tip of 182.64? 1,704.64. And they paid up

at 2.49pm, no doubt just in time to get back to the office and put in a good,solid afternoon of work.

BILL OF THE WEEK

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IT is that time of the year again.Today, City A.M. begins our annual

readership survey. As a quality news-paper provided free of charge, it isimportant for us to understand whoour readers are and what you think ofus, and this survey is one of the mainvehicles we have to achieve this.

We know that many of our growingband of readers will be keen to help and spend just a few minutes filling inour very simple and straightforwardsurvey at www.cityamsurvey.com butas good capitalists here at City A.M. wealso believe in incentives. And in

todays somewhat depressed climate,we realise that the chance to win abrilliant holiday in the sun is just whatthe doctor ordered.

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To add further spice to the survey,we will also be entering survey par-

ticipants into a daily draw to win abottle of Bollinger.We reached our highest ever audit-

ed circulation in October 2010 andhave very ambitious plans for thefuture. We are by no means finishedimproving the paper and we are verykeen to hear any thoughts or sugges-tions you may have.

Thanks for reading City A.M., thankyou for your loyalty and we look for-ward to receiving your feedback atwww.cityamsurvey.com

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EDITORS LETTER

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RESORTS IN BEAUTIFUL SAINT LUCIA

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HSBC reshuffled a number of seniormanagers over the weekend with newgroup chief executive Stuart Gulliverpointing to an increased focus onemerging markets when he takesover.

Gulliver, who becomes boss ofHSBC in January, said: With the mas-sive wealth creation we see in emerg-ing markets today, the logic for HSBCto build a world-class global wealth

business for our customers isabsolutely compelling.

After the financial crisis... config-uring HSBC to realise its full potentialin retail banking was always going to

be my first priority, he added.He announced that Paul Thurston,

the current head of the banks UKretail business, will become chiefexecutive of global retail banking and

wealth management from 1 March2011.

Thurston will move from London

to Hong Kong, following Gulliver,who is also moving there himself inrecognition of the growing impor-tance of the Asian market.

He will have responsibility fordirecting the banks retail banking

business globally and lead the devel-opment of HSBCs retail wealth man-agement business.

Brian Robertson, currently groupchief risk officer, will replace

Thurston as head of UK retail opera-tions at the bank on 3 December.

Joe Garner will be appointed

deputy chief executive underRobertson and will head up the per-sonal financial services and commer-cial banking businesses in the UK.

Replacing Robertson as group chiefrisk officer will be Marc Moses, who

will also be appointed as group man-aging director and sit on the boardfor risk and compliance issues.

A recent survey by Merrill Lynchand Capgemini showed that the com-

bined wealth of Asian millionaireshas overtaken that of Europeans.

HSBC shufflesmanagers tofocus on AsiaBYMATTHEWWEST

BANKING

Paul Thurston (left) becomeshead of global retail. Brian

Robertson (right) replaceshim in the UK.

Joe Garner (right) will workunder Robertson while Marc

Moses (left) takes over risk.

METRO Bank, set up in July to rival thehigh street banks, has hit its annualtargets in the first three months of

business, chairman and co-founderAnthony Thomson said yesterday.

Metro, which has four branches inLondon, will now accelerate its expan-sion with eight additional outlets inthe next year including banks inKensington, Uxbridge and Croydon.

Thomson, who founded the bankwith American entrepreneur VernonHill with 75m initial funding, said itstargets were agreed with watchdogs

but will not be made public yet.Nobody has any terms of reference

for us, Thomson told City A.M.yester-day. We are the first new bank inmore than 100 years and no-oneknows what a good number of cus-tomers would be for us. But we agreed

a number of annual targets with theFSA as part of our business plan, which

we have now surpassed.The bank is gearing up to raise extra

money from investors, including thebillionaire Reuben brothers, to rampup expansion. Thomson said Metro

was on course to go public withinthree years of opening.

The bank remains focused onexpanding within the M25, he added,

with plans for 200 to 250 branches inGreater London in the next decade.

Metro Bankbeats its owngrowth targets

BYMARION DAKERS

BANKING

8/8/2019 Cityam 2010-11-29

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THE Bank of England (BoE) shouldembark on a gradual rise in interestrates to avoid the need for a damagingsharp increase later on, policymaker

Andrew Sentance said yesterday.Sentance, the most hawkish mem-

ber of the nine-strong Monetary PolicyCommittee (MPC), said the BoEs infla-tion forecasts had consistently under-estimated the upside impact fromrising global energy and commodityprices.

Writing in a Sunday newspaper,Sentance said the BoEs forecasts had

also persistently overstated the down-ward pressure on inflation from sparecapacity in the British economy.

Annual consumer price inflationrose unexpectedly to a four-monthhigh of 3.2 per cent in October, forcingBoE Governor Mervyn King to writeanother letter to government explain-ing why inflation remains so far aboveits two per cent target.

It is now time for monetary policyin the UK to get back to business andfor interest rates to rise graduallytowards normal levels, said Sentance,

who has been arguing for an interestrise since June.

DEMAND for homes fell at the fastestrate for nearly two years last monthas buyer confidence dipped, industryfigures showed.

The number of new buyers register-ing with agents fell by 4.3 per cent inNovember, according to the monthlynational housing survey from proper-ty website Hometrack.

The monthly fall was the fifth in arow and the biggest since January2009, the survey of more than 5,100agents and surveyors showed.

Hometrack said the figures meantthe normal seasonal slowdown in thehousing market in the run-up toChristmas had kicked in a month ear-lier than usual.

It said near-term prices wouldremain under pressure and were like-ly to fall two per cent by the end of2011.

Hometracks research director

Richard Donnell said economic con-cerns amid recent spending cuts,together with expectations of a peri-od of retrenchment in house prices,

were driving the weakness.It is inevitable this trend will con-

tinue as we move into the New Year,he said.

The group said prices had comeunder greatest pressure in southernEngland, where they recovered moststrongly in 2009 and earlier this year,

while prices did not firm up as muchin the Midlands and north.

The number of properties for salefell by 0.4 per cent in November, thefirst time in nine months that thesurvey had shown a fall in supply.

A continued reduction in the sup-ply of homes for sale seems inevitablein the coming months as vendorseither reduce asking prices or with-draw property from the market, thegroup said. We expect this to act as asupport to pricing in the second partof 2011.

Demand forhomes falling,finds survey

you

gives

If

lemons

life

Sentance repeats call forBank to lift interest rates

BY PHILIPWALLER

PROPERTY

FINANCIAL SERVICES

Demand for homes has plummeted Picture: Micha Theiner/City A.M

News12

8/8/2019 Cityam 2010-11-29

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BETTER than predicted growth hasbeen recorded in the UK this year, thegovernments spending watchdog isexpected to announce today.

The economy was forecast to grow by 1.2 per cent in Junes emergencyBudget, but the prediction couldincrease to 1.8 per cent in light of sur-prisingly high growth.

In the three months to September,the economy expanded by 0.8 percent, leaving GDP 2.8 per cent higherthan the same time in 2009.

The Office for BudgetResponsibility (OBR) will release itslatest outlook on the economy atlunchtime today.

In the afternoon chancellor GeorgeOsborne will give his autumn state-ment to parliament, outlining theprospects for the governments fiscalsituation.

The deficit for this year could evenundershoot the governments targetof 149bn.

If current trends are replicatedover the whole fiscal year, the publicsector net borrowing requirement

would come in around 145bn, saidHoward Archer of IHS Global Insight.

Government borrowing increasedin October 10.3bn, up from10.1bn in October 2009 yet overall

borrowing tightened in the secondand third quarters of the year, as taxrevenues increased.

However, the OBRs figures will notinclude contingent liabilities, such asthe7.5bn (6.37bn) bailout to Ireland.

While the OBR may revise upgrowth figures for this year, its fore-casts for following years remain opti-mistic, say economists. For 2011 theOBR has predicted a 2.3 per centincrease in GDP, and expects growthin subsequent years to reach close tothree per cent.

We think the OBRs forecast for2011 is likely to prove optimistic. Weforecast 1.7 per cent, said Archer.

However, growth in excess of two percent is certainly not out of the ques-tion, he added.

OBR expectedto upgradeits forecastsBY JULIAN HARRIS

UK ECONOMY

GOVERNMENT sector job losses havebeen overstated, according to a reportout today.

The Ernst and Young Item Club(Item) expects job cuts of 400,000across this parliament, below currentestimates of 490,000.

The revision is due to greater sav-

ings from welfare reform, leavingmore funds for Whitehall budgets.

Departmental spending will be11bn higher than set out in Junesemergency Budget, the report says.

The Item report expects the govern-ment to better its deficit target for2010 by 10bn, largely due to increas-es in revenue from corporation tax,

VAT and income tax.It adds business investment is at

least two per cent higher than expect-

ed this year, despite government pro-jections of a half per cent fall.

Less government sector job lossesthan expected, says Item report

UK ECONOMY


ECONOMIST VIEWS: WILL THE OBR REVISE ITS FORECASTS? Interviews by Julian Harris

MICHAEL SAUNDERS | CITIGROUP

Growth is exceeding predictions despite Irish troubles, and business investment is strong. TheOBR can revise down this years deficit forecast by 10bn, and next years by around 25bn.

GEORGE BUCKLEY | DEUTSCHE BANK

The OBR may revise up its growth forecasts this year, yet forecasts for following years seemtoo optimistic. Going forward, there is a risk that the deficit does not fall as quickly as is hoped.

ALAN CLARKE | BNP PARIBAS

The UK remains ahead of schedule, and growth should be revised up to around 1.7 or 1.8 percent. But real incomes will continue to fall in 2011, and fiscal consolidation could bite harder.

OBR head Robert Chote will unveil his first forecast tomorrow

8/8/2019 Cityam 2010-11-29

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ONLINE sales of 3,000 per sec-ond will be made on Visa cardstoday, totalling 265m, accord-ing to the company.

Visa has coined today MegaMonday, as internet shoppersclick through their Christmasshopping lists.

Many will have received theirNovember pay packages and belooking for cheap deals online.

Sales are expected to peak atlunchtime and in the earlyevening as workers returnhome.

Visa cards account for 1 in

every 4 spent in the UK,reflecting an overall increase in

internet sales. Research byDeloitte suggests 23 per cent ofDecember purchases will bemade online, totalling 8bn.

And government data forOctober showed an increase innon-store sales (mostly inter-net or mail-order purchases) of12 per cent on the previousyear. Visa expects todays onlinesales to be 5.5 per cent up onthe equivalent Monday lastyear.

Internet sales are far fromtheir peak, according to IanGeddes, UK Head of Retail atDeloitte. Online sales couldaccount for close to 20 per centof total retail spend by the end

of the next decade, he said.UK consumers are keener on

internet shopping than theircounterparts in mainlandEurope, the research showed. Arecent survey showed over half(54 per cent) of British respon-dents willing to buy Christmasgifts online, compared to only athird (33 per cent) elsewhere inEurope.

A phenomenon sparked bythe growth in online sales isChristmas Day shopping,which has become one of thebusiest days of the year as peo-ple seek out early bargains.

People can now sit on thesofa enjoying Christmas withthe family whilst surfing thesales on their iPad. We expect

Christmas Day spending to con-tinue to increase, said Geddes.

Shopping on web

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RETAIL

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SNOWSTORMS could not stop theboom in John Lewis sales, the depart-ment store announced yesterday.

Sales last week were just short of100m, up 8.7 per cent on the sametime last year.

And the Oxford Street branchrecorded its best ever November week.

Childrens toys are predictably sell-ing well in the run up to Christmas, but Nat Wakely, director of sellingoperations for John Lewis, also report-ed a rush for big kids toys such asiPads and Kindles.

Consumers may be making big pur-chases before the new year when VAT

increases to 20 per cent, said HowardArcher of IHS Global Insight.

John Lewisstores defy

cold snapBY JULIAN HARRIS

RETAIL

AMERICAN retail sales haveedged up slightly from the sametime last year, it was revealedover the weekend.

Consumers spent $10.69bn(6.9bn) on Black Friday, the dayafter Thanksgiving whenAmericans traditionally kick offtheir festive shopping.

Last year Black Friday salestotalled $10.66bn. The 0.3 percent rise this year is lower thanthe 0.5 per cent rise experiencedbetween 2008 and 2009.

However, early promotionaloffers may have warped the salesfigures, according to researchersat ShopperTrak who compile thedata.

The first two weeks of

November saw sales increasingby over six per cent compared tothe same time in 2009.

We have a deal driven con-sumer in 2010 and that con-sumer responded to some of theearliest deep discounts weveeven seen for the holidays, saidShopperTrak founder Bill Martin.

Americans are still shoppingin large numbers, but may beallowing for difficult economiccircumstances, he added.

Last week the governmentrevised up its forecast for USunemployment to 8.99.1 percent for 2011.

This means the Americanshopper has adapted to the eco-nomic climate over the last cou-ple of years and is possiblyspending more wisely as the holi-day season begins, said Martin.

BY JULIAN HARRIS

US RETAIL

US Black Friday retailsales show small rise


CONSUMER service businessessuch as bars and restaurants aresuffering from sluggish demand,according to a survey releasedtoday.

Optimism plummeted 22 per-centage points among consumerservice executives, who have seenthe value and volume of theirbusinesses hit.

Employers organisation theCBI surveyed 169 service sectorfirms, covering both consumerservices and professional servicessuch as accountancy.

Thirty per cent of consumer-sector respondents said the valueof their business had risen thisquarter, yet 38 per cent reporteda fall. And the same balance (-8

per cent) expect a decline in value of trade over the nextthree months.

The poor results were a sur-prise, after modest growth hadbeen expected.

The outlook is a little rosier forprofessional services. While senti-ment is still negative (at -4 percent), it has recovered from itsAugust low of -17 per cent.

Volume of business in profes-sional services is narrowly up,increasing by a percentage pointto three per cent.

Yet Ian McCafferty of the CBIsaid uncertainty over consumerdemand is causing a fall in busi-ness optimism.

Consumers are cutting backon leisure spending, leading to asurprise fall in business volumesand flat prof its, he said.

Service sector moralehit by consumer slump

OVER 250m was spent in WestEnd shops this weekend, as con-sumers took advantage of thesixth annual traffic-free VIPDay in Oxford Street andRegent Street.

And retailers are delightedwith a reported boom in sales ofbig ticket items, after recentdata pointed to a slump in peo-ples willingness to splash out onmajor purchases.

Many stores have reportedover a 10 per cent rise in sales of big ticket items, said RichardDickinson of New West EndCompany, a collaboration oflarge West End stores.

Shoppers spent an average of200 each, a huge jump from

last years average of 120.Cutting edge consumer electron-

ics led the way, with large salesin 3D televisions and 4G smartphones.

VIP Day (Very ImportantPedestrians) saw 1,000 buses re-routed. Benefiting from thesurge of on-foot shoppers wasStarlight, a charity for seriouslyand terminally ill children. American Express pledged todonate 1 every time a card wasused over the weekend.

And the day is a boon for thelocal economy, according tocouncillor Brian Connell of Westminster Council.

More than 350,000 jobs aredependent on the West Endsongoing success, he said. VIPday is a great way for shoppers tostock up before Christmas."

BY JULIAN HARRIS

RETAIL

Traffic free day earnsLondon shops 250m

Pedestrians claim the traffic free streets to pick up bargains Picture: GETTY

BY JULIAN HARRIS

UK ECONOMY

8/8/2019 Cityam 2010-11-29

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LARRY Fink, the founder ofBlackRock, has warned the euro willdepreciate considerably against thedollar, to $1.25 or $1.20, as a result ofthe Eurozone crisis.

Fink said the dollar would havebeen even stronger were it not for theUS Federal Reserves decision to beginanother round of quantitative easing.

He said the euro would continue totake a battering because of the fun-damental problem that the bankingsector owns the bulk of European sov-ereign credit. Fink added Eurozone

banks and nations should reducetheir reliance on short-term funding.

Larry Fink says

euro will dropto $1.20 level

SENIOR bondholders in Irish banksescaped the bailout without taking ahit yesterday.

Finance minister Brian Lenihansaid the government needs to imposebig haircuts on junior bondholders

but said there was no appetite forforcing losses onto senior holders.European finance ministers decided,as expected, that imposing haircuts

would have a detrimental effect onmarkets.

German Chancellor Angela Merkelhas been pushing for investors whogain from exposure to banks to take ashare in the risk if they run into trou-

ble.Irish Prime Minister Brian Cowen

said: In relation to the question ofsenior bondholders, there is no agree-ment from the European Union for[shifting losses] because of the impact

we believe it would have in relationthe stability of the entire financialsystem itself and the impact it wouldhave across European banking gener-ally.

Ireland said two years ago seniorbondholders would not take a hit ifbanks ran into trouble.

No haircuts for senior

bondholders at banksEUROZONE CRISIS

THE EU and the IMF could extend theperiod in which Greece must repay its

bailout loans by five years, to make iteasier for it to service its debt, an IMFofficial has said.

We have the possibility to extendthe repayment period... from aboutsix years to around 11, Poul

Thomsen, the IMF official in chargeof the Greek bailout, said.

Greek, EU and IMF officials haverepeatedly mooted the possibility ofextending the period in which Greecemust repay its 110bn (93.43bn)

bailout loans.But the IMF official was more spe-

cific on how the repayment periodcould be stretched after Greece

receives its last instalment in 2013.Most critical are the first two years,

when the bulk of the debt to the EUand IMF falls due. Under currentrepayment schedules, Greeces gross

borrowing needs will balloon above70bn a year in 2014-15 from around55bn a year in 2011-2013.

(As things stand now) Greece mustrepay the bulk of its 110bn loans inthe first two years after the pro-gramme expires, Thomsen said.

This (the extension) would givemarkets the signal: Dont worryabout the repayment of the 110bn,this is not going to affect yourclaims'," he added.

Greece in May became the first

Eurozone member to turn to its part-ners and to the IMF for help.

Greece could get 11 years

to repay its 110bn debtsEUROZONE CRISIS

EUROZONE CRISIS

THE bailout of Ireland will cost theUK a total of7.9bn (6.37bn) afterthe beleaguered nation agreed an85bn rescue package yesterday.

George Osborne agreed to stumpup a bilateral loan of3.8bn on top ofthe UKs committment to theInternational Monetary Fund (IMF)and the European Financial StabilityMechanism (EFSM).

The UK will pay 4.5 per cent of the22.5bn IMF contribution, totalling just over 1bn and 13.8 per cent ofthe EFSM, coming to 3.1bn.

Altogether Ireland will accept67.5bn of external support. It willalso raid its own reserves to the tuneof17.5bn. Of this, it will take 12.5bn

from its state pension fund, with theremaining 5bn coming from cashreserves.

Ireland will make 10bn immedi-

ately available to recapitalise itsstricken banks, with a further 25bn

being set aside in a euro contingencyfund to be allocated if they requiremore money in the future.

The remaining50bn will gotowards general running of the coun-try, including paying the civil service.

Interest payments on the loans willaccount for a staggering 20 per centof Irelands tax revenue by 2014.

The average rate of interest on theloan will be a relatively large 5.8 percent. However, reflecting the increas-ingly hardline approach Germanyhas been lobbying for, the Eurozoneportion of the loan will come with apunative six per cent rate of interest.

The IMF portion of the loan willcome with a three per cent rate ofinterest, rising to four per cent in

2013. The average duration of theloans is seven years.

The deal was thrashed out during acrunch meeting of European finance

ministers in Brussels yesterday.Ireland will be bracing for an anti-

European backlash when news of thepunative interest rate hits home.

Anger in the country is already boiling over into sporadic bursts of violence and masked protestors yes-terday burned pictures of Cowen onthe streets of Dublin.

A defeated looking Prime MinisterBrian Cowen welcomed the deal yes-terday. He said: This agreement isnecessary for our country and ourpeople. The final agreed programmerepresents the best available deal forIreland.

The significant loans being provided to Ireland are necessary toallow us to fund our budgets over thecoming years.

Cowen added the loans will pro-

vide money Ireland had alreadyplanned to borrow on the interna-tional markets and that the rate ofinterest was comparatively low.

UK to pay 7.9bn for85bn Ireland rescueBY STEVE DINNEEN

EUROZONE CRISIS

German ChancellorAngela Merkel had urgedpolicymakers to sharethe risk of bailouts with

bondholders

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IRELANDS bailout will not require itto raise its corporation tax rate, PrimeMinister Brian Cowen said yesterday.

Eurozone nations had heaped pres-sure on Ireland to slash its much-envied 12.5 per cent rate.

Austria had led calls for the belea-guered nation to be forced to hike therate as punishment for its financialfailures.

The rate has allowed it to competeas a major business hub. Firms includ-ing Google and Microsoft have theirEuropean domicile there and soon-to-merge Greencore and Northern Foods

say they plan to move to Ireland fortax purposes.

Emerald Isle to

keep 12.5pc ratefor corporate tax

IRISH banks require an additional8bn to be injected in order to meettough new capital requirements, thecountrys central bank indicated yester-day night.

Allied Irish Bank, 19 per cent ownedby the state, will need almost5.3bn(4.5bn) before March in order toachieve a core Tier 1 capital ratio of 14per cent.

Bank of Ireland, 36 per cent govern-ment owned, will require 2.2bn ofcapital to be injected to hit its target of12 per cent.

The Irish central bank has raised itscore Tier 1 capital ratio targets, a meas-

ure of financial strength, from eightper cent. If the banks capital ratios dip

below 10.5 per cent the governmentsays it will inject more cash.

Irish Prime Minister Brian Cowen yesterday announced 35bn of the85bn bailout package will be used torecapitalise the stricken banks.

Around10m of this will be injectedimmediately.

A Bank of Ireland spokesman said:The bank intends to seek to generatethe required capital through a combi-nation of internal capital managementinitiatives, support from existing share-holders and other capital marketssources.

The bank is 36 per cent owned byIrish taxpayers.

Around 3bn of the 7.9bn total UK

contribution will go directly to prop upthe Irish banking system.

Irish banks require extra

8bn to boost capital levelsEUROZONE CRISIS

THE UK will not take part in new res-cue fund for troubled Eurozonenations.

Chancellor George Osborne won animportant concession from the EU inreturn for pledging a bi-lateral loan of3.8bn (3.23bn) to Ireland.

The UK will not contribute to the anew fund, due to replace theEuropean Financial Stability

Mechanism (EFSM) in 2013. It current-ly has a share in the 60bn fund but isnot a part of the 566bn EuropeanFinancial Stability Fund (EFSF), alsodue to be replaced.

The move means the UK will be lessexposed to Eurozone crises movingforward and is likely to please Toryeurosceptics.

Germany and France have champi-oned the proposals for the new mech-anism and are supported by theEuropean Commission.

Key changes to the fund will meanvastly increased private sector involve-ment in the resolution of futureEurozone debt crises. The new ruleswill also differentiate between liquid-

ity and solvency crises in the 16Eurozone countries.

UK will not take part in

new bailout mechanismEUROZONE CRISIS

MINING

ANALYSIS l How the 85bn bailout is made up

BAILOUT

85bn

EXTERNAL

SUPPORT

67.5bn EUROPE

45bn

EFSF*

22.5bn

EFSM

22.5bn

IMF

22.5bn

EUROZONE

17.7bn

* Including bilateral loans

IRISH

CONTRIBUTION

17.5bn PENSION

FUND

12.5bn

CASH RESERVES

5bn

UK

BILATERAL

LOAN

3.8bn

UK

CONTRIBUTION

3.1bn

UK

CONTRIBUTION

1.0125bn

SWEDEN

0.6bn

DENMARK

0.4bn

A red-eyed Irish finance ministerBrian Lenihan atthe crunch meetingin Brussels yester-day (left); chancel-lor George Osbornetalking to French finance ministerChristine Lagarde(inset top) and adejected PrimeMinister Brian

Cowen in Dublin.

Picture: GETTY,REUTERS

Tory eurosceptic JohnRedwood will be pleasedthe UK will not be joiningthe replacement fund to

the EFSM in 2013

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LORD MYNERS will today be appoint-ed to the board of trustees for theinternational childrens charity ARK(Absolute Return for Kids).

Myners, who started his career as ateacher, described ARK as a tremen-dously innovative and dynamic chari-ty.

A former chairman of Marks &Spencer, Myners was headhunted by

ex-Prime Minister Gordon Brown to be City minister in 2008. Hebecame the centre of contro-versy after allegedly agreeingto a compromise deal overSir Fred Goodwins pension,allowing the former RBS bossto increase his pension pot by8m.

Myners said: ARK canclaim a genuinely catalyticimpact on public policy ina number of countries.

Absolute Return for Kids foundedby French hedge fund manager ArpadBusson runs academy schools inthe UK, including a Church ofEngland academy in West London.Next year, the charity is also plan-ning to open two London primaries

under the coalitions free schoolsprogramme.

ARK also raises contribu-tions for children who arevictims of abuse, illness,disability and poverty.

Myners to join board ofchildrens charity ARKBYMARTINWILLIAMSPHILANTHROPY


Arpad Busson with fiance Uma Thurman Pictures: Micha Theiner/City A.M

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QANTAS Airways chief executiveAlan Joyce has said an engine fail-ure on an A380 superjumbo should

be blamed on the engines designand had nothing to do with the air-lines operations.

A mid-flight failure of a Rolls-Royce Trent 900 engine on 4November forced Qantas to groundits six-plane A380 fleet. The airlineresumed some A380 operations onSaturday but four of the planesremain grounded.

Joyce told the AustralianBroadcasting Corporation (ABC)

yesterday that his airline per-formed exceptionally well overthe incident, which forced an

A380 with 459 on board to makean emergency landing inSingapore.

It was a new engine and it wasabsolutely clearly nothing to do

with anything Qantas was doing, Joyce said. It was an engine thatdidnt perform to the parametersthat we wouldve expected.

Although he admitted the billwas still mounting, he said thatQantass handling of the incidenthad probably enhanced its brandrather than damaged it.

In the research were doing,people are aware that this was aRolls-Royce problem, so that when

we survey the general populationthe vast majority of people knowthat theres a problem with thedesign of the engines, he said.

Safety remained Qantass top pri-ority, he said, adding that Qantas

was maintaining some restrictionson its A380s, and they would not

yet be operating across the Pacificto Los Angeles. Joyce said that deci-sion was taken in consultation

with Rolls-Royce and Airbus.

Qantas boss pointsfinger at Rolls-RoyceBYHARRY BANKS

AVIATION

TOUR operator Thomas Cook ishoping to forge a tie-up with aChinese travel company to expandinto tiger economies.

The holiday group is under-stood to want to move into theChinese market by 2012 as part ofits drive to cash in on growth inemerging markets.

The company last weekannounced a deal to buy just overhalf of Russian travel agent VAO

Intourist to help it expand inRussia and other former Soviet

republics.It is also present in India after

buying back a business in thecountry in 2008 that it sold to theDubai Financial Group a couple of

years beforehand.Chief executive Manny

Fontenla-Novoa said: The moveinto Russia is in line with ourestablished strategy of capturinggrowth in emerging markets.

Broker Numis Securities expects Thomas Cook to report annualearnings of 394.4m on

Wednesday, down from 414.9m ayear ago.

The broker said it preferredrival TUI Travel as an investment,citing a disappointing pre-closetrading update and worse-than-expected costs.

Subsequently, the companyhas announced the merger of itshigh street operations with Co-operative Travel; this deal has not

yet had merger clearance.High levels of exceptional

costs have been a recurrent fea-ture for the tour operators, result-ing in a questionable quality of

earnings.We prefer TUI Travel.

Thomas Cook plans Chinese tie-upas it moves in to emerging marketsLEISURE

THE launch customer for Boeings 787 Dreamliner has hit out at the US aircraft giantover delays to the aircraft. All Nippon Airways (ANA), which was due to have begun tak-ing deliveries in 2008, said the delays were disappointing. ANA chief executive Shinichiro Ito said he was unsure if there would be more delays. Picture: GETTY

SPANISH builder Ferrovial plans to begin the sale of a tenth of airportoperator BAA this week to cut its24.5bn (20.8bn) debt.

The group is understood to havehired investment banks GoldmanSachs and HSBC to sell a 10 per centstake in BAA, which owns LondonsHeathrow and Stansted airports as

well as Southampton, Edinburgh,Glasgow and Aberdeen airports.

Ferrovial owns 55.9 per cent of theparent of BAA, in which Britannia

Airport Partners, managed byCanadas Caisse de Depot et

Placement du Quebec, owns 26.5 percent and Singapore sovereign wealthfund GIC holds 17.6 per cent.

It unveiled the sale plan in Octoberand expects to complete it in 2011.

Analysts estimate the stake couldfetch up to 200m, which Ferrovial islikely to use to finance new infra-structure projects.

Ferrovial would be able to morethan halve its debt by removing BAAsdebt from its own balance sheet.

BAA sold Gatwick airport to theowner of London City airport, GlobalInfrastructure Partners, for 1.5bnfaced with watchdog concern over itsdominance of UK airports.

Last month, an appeal court over-turned BAAs successful challenge ofthe Competition Commissions orderin March 2009 for it to sell Stanstedand either Edinburgh or Glasgow.

BAA and Ferrovial declined to com-

ment. The financial crisis hit Ferrovialhard and forced it to sell assets after itheaded up a consortium to buy BAA ata time when funding for such acquisi-tions was relatively inexpensive.

Ferrovial to kickoff sale of BAA

stake this weekBY PHILIPWALLER

INFRASTRUCTURE

INVESTORS in British Airways andSpains Iberia are due to vote today ona 5.6bn merger to create a new giantof the skies.

Shareholders are due to vote inLondon and Madrid on whether toapprove the tie-up to create a holdingcompany known as InternationalAirlines Group (IAG).

It would mark another step in con-solidation that has led to ties betweenAir France and KLM and Lufthansa,Swiss and Austrian Airlines.

Traditional flag carriers are team-ing up to cut costs in the face oftheeconomic downturn and competitionfrom budget airlines.

In IAG, BA and Iberia would eachkeep their identities and operations,but would have access to each othersnetworks, including Iberias Latin

and South American routes.BA chief executive Willie Walsh

would become chief executive of thenew group and Iberia chairmanAntonio Vazquez would be chairman.

Tie-up betweenBA and Iberiato face the vote

AVIATION

620

600

580

560

540

640

660

14 Oct 3 Nov 23 Nov6 Sep 24 Sep

ANALYSIS l Rolls Roycep

616.5026 Nov

JAPANESE AIRLINE ATTACKS BOEING DELAYS

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The sweet sellers son who wantsto hold the chancellor to accountAndrew Tyrie, chairof the Treasuryselect committee,gives David Crow ahistory lesson

VISITING Andrew Tyries office islike being called to see the head-master in an old-fashioned board-ing school. The chairman of the

Treasury select committee occupies agrand corner office in WestminstersNorman Shaw North building, the formerScotland Yard HQ that now provides officespace for MPs. Appropriately enough,

Tyrie begins with a history lesson, havingcorrectly surmised that I am not oldenough to have lived through the Winterof Discontent. Peering over a pair of large,round glasses, he recounts how hestopped his grandmother from dying ofhypothermia.

We used to keep her warm by heatingup water on a Calor Gas stove, in the dark,

by candle-light. I kid you not, says Tyrie, a Tory MP who became the Treasury com-mittees first elected chairman in June.These Calor Gas things were like golddust. Wed cluster round the heat, andthen put the water into hot water bottles,and that would keep an octogenarian ladyalive. It was a very different world.

His point is that the very moral fabricof the country was at risk in the 1970s andearly 1980s, and there was very littleagreement over how to solve Britainsproblems; politics was dominated by hotdisputes about the fundamental tenets ofpolicy.

Conversely, Tyrie says the British politi-cal class now broadly agrees on how todeal with the parlous public finances,

which were ravaged by the latest financialcrisis. If you look in the Commons, under-neath all the clashing of cymbals thattakes place inevitably in partisan politics,theres quite a degree of consensus aboutthe need for fiscal retrenchment, aboutthe need to deal with the deficit and,

broadly speaking, even the pace, heexplains.

Labour wanted to halve the structuraldeficit over four years, which impliedeliminating it altogether over seven, says

Tyrie, whereas the coalition wants to elim-inate it over five. He concedes the differ-ences over timing, but insists the viewthat we have to take quite radical deci-sions on fiscal retrenchment is orthodoxyacross the whole of the political class.

Such a state of affairs suits Tyrie, whosays he has never been a particularly parti-san MP. Having run Ken Clarkes campaignto become leader of the Conservativeparty in 2001 and again in 2005, most

would place him on the more left-wingend of the Tory scale.

In a neat coincidence, Tyrie was anardent campaigner for a change in the

way select committee chairmen wereelected. Previously, the powerful posts

were doled out by the whips, ensuring thechosen few were amenable to party lead-ers (commons whispers have it that DavidCameron would have preferred MichaelFallon, Tyries opponent).

Armed with his mandate, Tyrie has setabout making the Treasury committeemore powerful than ever before. In anearly victory, he secured a so-called dou-

ble lock over the appointment of thehead of the Office of BudgetResponsibility, the body created by George

Osborne to bring independence to theTreasurys economic forecasts.

The committee can now stop the chan-cellor from hiring or firing the OBR head,ensuring they cant be pushed out intothe cold if their forecasts prove politicallyunpalatable. They cant appoint a stoogeand they cant dismiss someone whos

being awkward. Ive got a veto on both ofthose. Thats hugely helpful.

Tyrie breaks ranks with the chancellorover whether or not the OBR should beallowed to cost opposition policies, a possi-

bility that has been roundly dismissed byOsborne. I do think this would improvethe quality of debate, around electiontime particularly, says Tyrie. Theresalways this claim and counter claim about

what costs what. It would depoliticisesome of the work that officials maybe getcajoled into doing in Whitehall.

Elsewhere, Tyrie is proving particularly vocal over plans to replace GordonBrowns tripartite system of regulation

with a new twin peaks model. A longtime opponent of the tripartite model

which he dismisses as a complete disas-

ter that resulted in pass the parcelresponsibility he is adamant that anynew system should give supremacy to thechancellor. Ill be looking at whos incharge when theres a crisis: as soon astheres taxpayer money involved, or anychance of taxpayer money becominginvolved, it has got to be the chancellor,he says.

As chairman of the Treasury committeehearings, Tyrie is one of the few politi-cians who can haul publicity-shy figuresin for a rare dressing down, in the closestthing Britain has to public hearings. Hispredecessor, Labours John McFall, gainednotoriety for his fiery questioning ofhedge fund managers, but Tyrie has littletime for populist point scoring.

Im not one of natures banker bashers.I think weve done quite a bit of that.

Theyve made their share of blunders butso did almost everybody else, whether itsthe ratings agencies, the auditors, politi-

cians, senior ministers, the governor ofthe Bank of England, the FSA, do I need to

keep going? And then theres us: there arecorporations and individuals theyvealso made their mistakes, he says. Itsridiculous then to pillory only one groupand to put all the blame on them,although its convenient for the otherseven or eight.

Tyrie is more concerned with counter-ing the special pleading that inevitablytakes place in a period of fiscal retrench-ment, with public sector groups and pri-

vate firms lining up to argue why certainareas of spending should be spared theaxe. We mustnt allow these people totake advantage of us, to entrench theirspecial interests. If we manage to get theirslice of the cake reduced, taxes could belower than they would otherwise be.

The son of a sweetshop owner who laterbranched into furniture stores, Tyrie sayshis early memories of his father are ofsomeone thinking about what the tak-ings are, about whats coming in andgoing out. Its a history that is more than

a little reminiscent of a certain grocersdaughter, and Tyrie credits it with his pas-sion for standing up for Britains wealthcreators, those who own or work for pri-

vate firms.Despite coming from the same political

party, Tyrie has been a rather effectivethorn in the side of the chancellor attimes more effective than the officialopposition. Tony Blair who also enjoyeda weak opposition used to decapitatepowerful Labour committee chairmen bygiving them junior jobs in government,

where they were forced to take the agreedline. In his memoirs, Chris Mullin, the for-mer MP, recalls how he swapped the chair-manship of the Home Affairs committeefor a lowly post working under JohnPrescott. Stymied and silenced, he eventu-ally resigned and returned to the commit-tee.

Tyrie assures me that he will avoid theallure of a government job. I have noplans to be a minister Ive just got myselfelected to a wonderful job and Im enjoy-

ing it a lot and learning a lot. I couldnt bedoing this job at a more interesting timeand it is tough and testing, but what do

you want to do in life?Ive never been one of these people who

spends his whole time thinking theressomething else he should be doing.

Age: 53Education:Felsted independent school in EssexTrinity College, Oxford, studying PPECollege of Europe, obtaining a postgraduateCertificate of Advanced European StudiesWolfson College, Cambridge, earning an MPhil.Before parliament:1981-1983: Worked at BPs group head office1983-1989: Advisor to advisor to Nigel Lawson and

John Major, then Chancellors of the Exchequer

1990-1991: Fellow at Nuffield College Oxford1992-1997: Se nior economist at the European Bankfor Reconstruction and DevelopmentIn parliament1997: Elected MP for Chichester2003-2004: Shadow Financial Secretary to Treasury2004-2005: Shadow Paymaster General2005-present : Founder and Chairman of the All-PartyParliamentary Group on Extraordinary Rendition2010-present: Chairman of the Treasury Select

Committee and the Joint Committee on Tax Law

CV | ANDREW TYRIE Compiled by Martin Williams

Andrew Tyrie in hisWestminster officelast week

Picture:Micha Theiner

/City A.M.

Im not one of natures banker bashers. Itsridiclulous to pillory only one group. Theyvemade blunders but so has everybody else

Interview22 CITYA.M. 29 NOVEMBER 2010

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Germany will say auf wiedersehen to euro

NEXT year will see the first mem-

ber of the single currency start-ing to talk seriously aboutleaving the Eurozone. That

country will be the nation with thestrongest and the most dynamic econ-

omy in Europe. That country will beGermany.

The survival of the euro is nolonger up for debate. If 2010 hasproved anything it is that the produc-

tivity divide between core and periph-ery is too great to be spanned by asingle currency. The only real ques-tion is how does the breakdown hap-pen and which countries Berlin isprepared to take with it?

Labelling countries winners andlosers in this process would though

be a mistake. Germany may initiallylook like a winner but there will beconsiderable pain for the countrysexporters as its new/old currencyappreciates rapidly. On the other

hand, a country like Ireland will feelmuch better about its prospects oncethe pain of separation has passed.

Though it must be admitted that theactual breakdown will not be an easy

process. Every country in the regionhas the bulk of its debts in euros.Consequently, for many nations there

will need to be a debt restructuring.This will not be a pleasant experiencefor debtors or creditors, though manyare increasingly aware that it is onthe horizon.

GERMAN DEPARTURE HAS BENEFITSOnce this episode is over, almosteverybody will be much happier. TheGermans will no longer have to grind

their teeth about bailing out the restof Europe and the rest of Europe willfind that growth is now possible witha more competitive currency. Indeed,many countries might be in for a peri-

od of strong growth and improvedemployment similar to that seen when the UK left the Europeanexchange rate mechanism.

It must be noted that its likely thatthe euro wont break down fully.

There will remain a group of coun-tries that are close enough economi-cally to remain linked. This is thegroup of nations, with Germany asthe hegemonic power, which fromthe outset should have pursued inte-gration but critically should also have

been brave enough to say no tothose that did not measure up. In theend they were doing nobody anyfavours by allowing countries to fudgetheir entry criteria.

The only problem that lies in theway of this rational outcome is thatmuch of Europe is currently burdened

by a political elite that cant admitthat it was wrong. There seems to beno desire amongst these politicians torecognise that a single currency was amistake for many nations and that itstime to find an exit strategy. The peo-ple of Europe need better leadershipand they need it now.Guy Johnson co-anchors European Closing

Bell weekdays on CNBC

MADAGASCAR Oil will become thelatest energy firm to list in London

when its shares begin trading on AIMtoday.

The firm has raised 50.5m by plac-ing a 27.65 per cent stake withinvestors ahead of the float thismorning, it said yesterday, translat-ing to a total market capitalisation ofaround 183m.

Madagascar Oil said it plans to use

the money to explore and develop its

five onshore oil blocks in WesternMadagascar, with a focus on the

Tsimiroro field, which the firmbelieves holds up to 965m barrels ofoil resources.

Chairman and chief executiveLaurie Hunter said: We are delight-ed that the AIM flotation of the com-pany has been completedsuccessfully and we now look for-

ward to working with our new insti-tutional shareholders and existingshareholders, whom we would like to

thank for their ongoing support of

the company as we continue togrow.

Madagascar, which is based inBermuda and has offices in the US,hopes to follow in the footsteps offirms such as Energy XXI, which last

week said it was planning a move tothe main market after five years onthe AIM.

It was joined on AIM last Wednesday by Jubilant Energy, anIndian power company that raisednearly 55m through its float.

Madagascar Oil joins AIMBYMARION DAKERS

ENERGY

CNBC COMMENT

GUY JOHNSON

Strand Hanson is acting as nominatedadviser for Madagascar during itsmove to AIM, while MirabaudSecurities is lead manager and jointbroker and GMP Securities is joint bro-ker.

Angela Peace, a director of corpo-rate finance at Strand Hanson, hasbeen with Strand since 2000. She hasworked with numerous AIM compa-

nies on M&A and equity transactions,and her client list includes North RiverResources, Asian Plantations andKalahari Minerals.

David Altberg, a manager at StrandHanson, qualified as a solicitor withBrechers and worked for Rosenblatt

Solicitors before joining the firm in2007.

Rory Scott, a partner at Swiss bro-ker Mirabaud, also has a wealth ofexperience of AIM-listed resourcescompanies, and counts FirestoneDiamonds, Chaarat Gold and AfricanMinerals among his clients.

Nick Morgan and Chris Beltgensboth joined the oil and gas team atGMP Securities in January fromTristone and Macquarie respectively.

ANGELA PEACE

STRAND HANSON

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Politics 25CITYA.M. 29 NOVEMBER 2010

SHADOW chancellor Alan Johnsonhas denied clashing with EdMiliband over the 50p tax rate,amid criticism that the LabourParty is divided.

Party leader Miliband has said heplans to keep the tax rate for high-er earners after the next generalelection.

But Johnson yesterday said that

the tax should be reviewed nearerthe election.

Speaking on The Andrew MarrShow, he said: What me and Edagree on is that we need a 50p taxrate now, well need it at the nextgeneral election, but well look at itcloser to the time.

Earlier this month Johnsonadmitted there were very big dif-ferences between him and theLabour leader.

He accused Miliband of commit-

ting to maintain the 50p tax inthe cut and thrust of a leadershipelection, and has suggested thatLabour could scrap the policy.

But a spokesman for MrMiliband has said the party wascommitted to the tax rate for theforseeable future.

Michael Fallon, deputy chair-man of the Conservative party,said: Until [Miliband] stops dither-ing... he wont get people to take aninterest in Labour.

Johnson contradictsMiliband on 50p taxBYMARTINWILLIAMS

POLITICS

BUSINESS leaders have reacted withdismay at proposals that will allow working mothers to bring theirbabies to work and expect employersto provide private breastfeedingrooms, to be put forward by the gov-ernment tomorrow.

Health secretary, Andrew Lansley,said over the weekend that heintended to introduce the proposalsearlie

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