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GEORGE Osborne yesterday unveileda handful of eye-catching tax cutsdesigned to help the motorist andboost economic growth.

Businesses welcomed the chancel-lors decision to reduce corporationtax by 2p next month while a 1p perlitre cut in fuel duty will help softenthe blow of soaring petrol prices.

But Osborne was accused of rob-bing Peter to pay Paul, after he raid-ed North Sea oil profits, hiked thebank levy and slapped a tax on car-bon that will add 17-a-year to ener-gy bills by 2015.

The chancellor said his secondBudget would boost growth, but hedelivered it against an increasinglyuncertain economic backdrop.

The Office for BudgetResponsibility (OBR) cut its growthforecast for this year from 2.1 percent to 1.7 per cent, citing higherinflation, and hiked governmentborrowing forecasts; the national

debt will be 44.5bn higher thanexpected by 2015-16. Employmentwill fall by 100,000 in 2011-12, theOBR said.

BUSINESS WITH PERSONALITYwww.cityam.comIssue 1,349 Thursday 24 March 2011 FREE

FTSE 100 s5,795.88 +33.17 DOW s12,086.02 +67.39 NASDAQ s2,698.30 +14.43 /$ t1.62 -0.02 / 1.15 unc /$ t1.41 -0.01 Certified Distribution31/01/11 - 27/02/11 is 107,265

EXTENDEDBUDGETSECTIONSTARTS P19

Osborne insisted he would notswitch course and stuck to his planto cut total public expenditure by 3.7per cent in real-terms over fouryears. Britain has a plan and we aresticking to it, he said.

The chancellors 2p cut in corpora-tion tax was twice the amountexpected and will lower the headlinerate to 26p from April, earning plau-

dits from business leaders.And British-based multinationals

cheered plans to reform the taxationof foreign profits, ensuring that thelions share of overseas earnings arenot taxed in the UK.

UBM, which quit the UK forIreland in 2008, said it was activelyconsidering returning to Britainwhile advertising giant WPP hinted

it would also consider a comeback.But Osborne hiked the bank levy

without warning for the secondtime in as many months to ensurethe industry does not benefit fromlower corporation tax.

And a 1p per litre cut in fuel dutywill have wrong-footed his oppo-nents in the Labour party, who haveput soaring petrol prices at the heart

of their economic argument.However, the 600 hike in the per-

sonal allowance will be at least par-tially offset by Osbornes decision toincrease direct tax thresholds andbands in line with the consumerprices index rather than the histori-cally higher retail prices index. Themove will net the exchequer 1bn ayear by 2015-16.

Meanwhile, the governmentsdecision to introduce a carbon floorprice will add 6 to the average con-sumers energy bill in 2013 and 17in 2015, Treasury aides said.Industry will bear two-thirds of the3bn cost.

And North Sea oil companies wereinfuriated by an entirely unexpectedwindfall tax on their profits, whichwill raise a staggering 16bn by 2015.The industry said the move wouldforce it to scale back North Sea oilexploration, making the UK morereliant on imports from the MiddleEast.

Elsewhere, the chancellor intro-duced a series of small supply-sidereforms designed to boost growth,

including a less stringent planningregime and cuts to red tape for busi-nesses with fewer than 10 employees.

MORE: P2, P3, P4, P5, P19-P27

Bank levy hikedwithout warning

3bn carbon levyto hit consumers

North Sea profitraid to raise 16bn

George Osborne said his second Budget would reform the British economy Picture: Micha Theiner

BUDGET 2011BYDAVID CROW

GEORGE GIVETHAND GEORGE TAKETH AWAY Surprise 2p cutin corporation tax

Fuel duty cut by1p to help motorists

Tax allowancesraised by 600

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News | Budget Special2 CITYA.M. 24 MARCH 2011

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THE ECONOMY/PUBLIC FINANCESl The Office for Budget Responsibility(OBR) has revised its growth forecast forthe economy, blaming higher-than-expected inflation as a result of recentglobal commodity price shocks and theweather-affected final quarter of 2010.

lGDP growth has been revised down to1.7 per cent in 2011. Growth is expectedto peak at 2.9 per cent in 2013 and toremain at 2.9 per cent in 2014 and thento fall to 2.8 per cent in 2015.

l The OBR says the projection for trendgrowth is unchanged from theirNovember 2010 figure, at 2.35 per cent

to the end of 2013, slowing to 2.10 percent from 2014. It adds that despite thisbeing billed a pro-growth Budget, Policymeasures announced in the Budget couldincrease the economys productive poten-tial, in time, but we do not believe thereis strong enough evidence to raise ourtrend growth assumption now. The out-put gap is estimated to have been -3 percent in the third quarter of 2010.

lHigher-than-expected CPI inflation ofbetween 4 and 5 per cent is expected in2011. It is expected to fall back toaround its 2 per cent target level in themedium term. The Bank of Englandsinflation target remains at 2 per cent.

l Public sector employment fell by132,000 in 2010, but private sectoremployment rose by 428,000.

l Public sector net borrowing will be145.9bn this year, 122bn in 2011-12,101bn in 2012-13, 70bn in 2013-14,46bn in 2014-15 and 29bn by 2015-16.

l Cyclically-adjusted public sector netborrowing will be reduced by 8.4 per-centage points, from 8.9 per cent of GDP

in 2009-10 to 0.5 per cent of GDP in2015-16.

lAs a share of GDP, borrowing will be10.1 per cent in 2010-11. It will fall to 7.5per cent in 2011-12, 5.5 per cent in 2012-13, 3.5 per cent in 2013-14, 2.1 per centin 2014-15 and 1.1 per cent in 2015-16.

l The cyclically-adjusted deficit on thecurrent budget will be 4.6 per cent thisyear, 3.2 per cent in 2011-12, 2.0 percent in 2012-13 and 0.6 per cent in2013-14. It will then return to a surplusof 0.4 per cent in 2014-15 and 0.8 percent in 2015-16.

l Public sector net debt as a share ofGDP is to be 60.3 per cent in 2010-11,rising to 66.1 per cent in 2011-12, 69.7per cent in 2012-13 and peaking at 70.9per cent in 2013-14. It will then startfalling to 70.5 per cent in 2014-15 and69.1 per cent in 2015-16.

l The OBRs judgement is that the poli-cies set out in the Budget are consistentwith a greater than 50 per cent chanceof achieving both the governments fiscalmandate and its target for debt in 2015-

16, and that both targets will beachieved a year early, in 2014-15.

PUBLIC SPENDINGl Public sector current expenditure willbe 632.8bn this year, rising to reach713.4bn by 2015-16. Capital annuallymanaged expenditure will be 11.5bn in2010-11, falling to 7.7bn by 2015-16.

l Total Managed Expenditure (TME) willrise from 694.4bn to 763.8bn over theforecast period in cash terms. It will fallby 3.7% in real terms.

l Spending is projected to fall from 47.5per cent of GDP in 2009-10 to around40 per cent by 2015-16 and tax receiptsare projected to rise from 36.5 to 38.5per cent.

l Public sector net investment is fore-cast to fall from 41.1bn this year to

24.5bn by 2015-16 compared with49.5bn in 2009-10.

l The government has welcomed theHutton Review of public sector pay as abasis for setting senior pay in the publicsector, and departments will bring for-ward implementation plans by July 2011.

l Planned gilt sales by the DebtManagement Office (DMO) in 2011-12are 169bn.

BANKSl To offset the benefits to banks froma cut in corporation tax, the rate of thebank levy will increase again to 0.078 percent from 1 January 2012.

l The government will consult on a pro-posal to extend pay disclosure arrange-ments to all large banks from 2012.

BUSINESSl The supplementary charge on profitsfrom UK oil and gas production increased

from 20 per cent to 32 per cent at mid-night, in a windfall tax on the increasedprofits due to higher oil prices. Withrestriction on decommissioning relief, itwill raise some 2,000m of tax annually.

lAn additional 1 per cent cut in corpo-ration tax was announced. From April2011, the main rate of corporation taxwill now be reduced from 28 per cent to26 per cent as well as by one per centeach following year until it reaches 23per cent in 2014.

l In May 2011, further consultation onthe introduction of a patent box will bepublished, This will be followed by draftlegislation in autumn 2011. The patentbox will give a reduced corporation taxrate of 10 per cent on profits frompatents.

lAn opt-in exemption from corporation

tax on the profits of foreign branches ofUK companies will be added to the

Finance Bill 2011 when it is published on31 March.l In the Finance Bill 2012, newControlled Foreign Company (CFC) ruleswill be introduced. A consultation docu-ment will be published in May and draftlegislation in autumn 2011. The rules willinclude a finance company partialexemption, broadly resulting in an effec-tive UK tax rate of one quarter of themain rate on profits derived from over-seas group financing arrangements.There will be interim changes to CFCrules in the Finance Bill 2011.

lA consultation this year on mergingNational Insurance Contributions andincome tax was announced.

lA moratorium will exempt micro-busi-nesses and start-ups from new domesticregulation from 1 April 2011 for threeyears.

l Further deregulation was promised:the implementation of the Young healthand safety review, the dropping of someexisting regulatory proposals and a pub-lic review to reduce the stock of burden-some regulation.

l The location of ten urban enterprisezones sites were announced acrossEngland, and there will be a furtherenterprise zone in London. The Mayor ofLondon has chosen an area around theRoyal Docks in East London. There will bea competition for the sites of ten furtherzones. Businesses that move into anenterprise zone in the course of this par-liament will be eligible for a 100 per centbusiness rate discount worth up to275,000 over five years.

l The Enterprise Investment Scheme(EIS) and Venture Capital Trusts (VCT)will be reformed, if EU state aid approvalis granted. The rate of EIS income taxrelief will then rise from 20 per cent to30 per cent from April 2011. From April2012, the annual EIS investment limit forindividuals would double to 1m and forVCT and EIS the qualifying company lim-

its would increase to 250 employees andto 15m assets and the annual invest-

ment limit for qualifying companieswould go to 10m. The schemes will alsobe refocused.

l From 6 April, the lifetime limit on capi-tal gains that qualify for EntrepreneursRelief (CGT at 10 per cent) will be dou-bled to 10m.

l If state aid approval is granted, thesmall and medium-sized enterprise(SME) research and development taxcredit will increase to 200 per cent fromApril 2011 and 225 per cent from April2012.

l The small business rate relief holidaywill run for another year from 1 October.

PERSONAL TAXESl The 50 per cent higher rate of tax wasaffirmed as temporary, but no date wasset for its phasing out. All income taxrates for 2011-12 will remain at their2010-11 levels. National insurance rateswill increase by one per cent.

l In addition to increasing by 1,000

this year, the personal allowance forthose under 65 will increase by 630 to8,105 in 2012-13, and the basic ratelimit will then be reduced by 630, leav-ing the higher rate threshold unchanged.By the end of the parliament, the thresh-old for income tax will increase to10,000.

lDraft regulations for tax-free JuniorISAs will be published in the week of 28March alongside the Finance Bill 2011.

l The default indexation assumption forall direct taxes including ISAs will be theCPI inflation measure from April 2012.

l The government plans to reform therules on non-domiciled individuals fromApril 2012. Those who have been UK res-ident for twelve years or more will facean increase in their annual charge from30,000 to 50,000. There will be no

other substantive changes in this parlia-ment.

At a glance: All the crucial pointsfrom Osbornes Budget for Growth

Chancellor of the Exchequer George Osborne leaves 11 Downing Street for Parliament. Pictures: PA, Micha Theiner

A man watches Chancellor George Osborne deliver his BudgetStatement on television screens in an electrical store, Edinburgh

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News | Budget Special 5CITYA.M. 24 MARCH 2011

A political Budget in Gordon Browns mould

GEORGE Osborne added the twomost eye catching measures tohis Budget at the very lastminute. We know this because

the Office for Budget Responsibilitysaid it learned of the 2p cut in corpo-

ration tax and the 1p cut in fuel dutytoo late to consider their effects onits economic forecasts.

Always the master tactician,Osborne included the cut in fuelduty to close down the Labour partys

most potent line of attack. The corpo-ration tax cut was held up while hefound a remedy to deflect the dubi-ous but populist claim that he ishanding tax cuts to the banks.

Since becoming shadow chancel-lor, Ed Balls has used rising petrolprices to great effect. He forced a voteon cutting VAT on petrol and hasused every press appearance to com-plain about the price of fuel, all tooaware that prices at the pump are the

most obvious example of soaringinflation.

But Osbornes decision to cut fuelduty by 1p, which took effect at 6pmlast night, offered some immediaterespite to hard-pressed families. He

also cancelled the Labour govern-ments fuel duty escalator by raidingthe profits of North Sea oil compa-nies.

The upshot is that a litre of petrolnow costs 6p less than it would havedone. Allies of Osborne were yester-day pointing out that this will saveowners of a Ford Focus over 3 everytime they fill up the car (coinciden-tally or not, the Balls family happensto own a Focus). Much of the benefit

will be wiped out by the introductionof a price floor for carbon, a complexbut all too real tax hike that will add17 a year to the average consumersenergy bill by 2015-16, according toTreasury estimates.

Elsewhere, there were lots ofmicro measures headline grab-bing gimmicks that have beenpoorly thought through. A cut to redtape for businesses with less than 10employees? A sure fire way to stopfirms hiring that eleventh worker.

Osborne also knew that the Labourparty would try to portray any reduc-tion in the headline rate of corpora-tion tax as a tax cut for banks.

Thats why he jacked up the bank

levy without notice for the secondtime in as many months. Anotherline of attack was swiftly closeddown.

This kind of politicking is reminis-cent of Gordon Brown, especially

while he was chancellor. Who canforget the 2p cut in the main rate ofincome tax, designed to put theTories on the back foot but paid forby scrapping the 10p rate for the low-est paid.

Brown, a Scottish Labour chancel-lor, wrong-footed the Tories by raid-ing the poor. Osborne, a blue-bloodedConservative, wrong-footed Labourby raiding the banks. How times havechanged.

POLITICAL COMMENT

DAVID CROW

George Osborne

unties his hands

The chancellors hands aretied, we kept hearing lastweek. But like the digits of aprecocious contortionist,

Georges fingers fluttered free.They bounced iambically over not-

quite-iambic phrases to fix thebudget to fit the forecast pointedemphatically upwards as his nasaltones scraped the rafters andstretched themselves soothingly oversunny phrases and inconvenient facts.

Sliding gingerly into the delicatematter of downgraded growth fore-casts, George invoked the ghost ofGordon, and the House groaned. Ithas been known for chancellors inrecent years to rattle these [growthforecasts] off at great speed in thehope that no one will keep up, hesaid. I will not do that.

No, George chose an uncharacteris-

tically measured pace, as if afraid thata step off the scripted path might setoff a landmine.

His careful pace was testament tomonths spent grooming a tightropeact of which even Gordon might havebeen proud: tactical feints, mysterioussleights of tax bands, enterprise zonessent forth like winged monkeys.

Halfway through, notes began to bepassed with increasing urgency onthe opposition benches, all of themfunnelled through Ed Balls beforethey reached young Eds excitablegaze. A pile of typed Labour noteseven found their way around thepress gallery, deploring borrowingup by 44.5 (sic).

Balls heckled and blinked everytime a mildly technical piece of jar-gon came his way, a bull catchingsight of a red flag. Then Ed stood, pos-itively wired, ready to catapult him-self over the despatch box intoGeorges lap, as he unleashed the con-tents of a particularly useful crib-sheet from the back benches: Hesnot Nigel Lawson! Hes NormanLamont with an iPod.

Meanwhile, the Treasurys chiefspinner had ammunition ready forhacks as they trooped out: Theres animportant footnote on page 74!

Well, quite.

POLITICAL SKETCH

JULIET SAMUEL

The Budget: What did you think?

In association with

PoliticsHome.com

Apply to join today at

www.cityam.com/panel

AFTER yesterdays Budget, we ran asnap poll of 250 readers withPoliticsHome to gauge your thoughtson some of the key changes.First we asked about the decrease incorporation tax. More than 87 percent supported the change, with 9.7per cent against and 2.75 of no opin-ion. The average score out of ten was8.31.On the increase to the bank levy,58.66 per cent were against, 39.76per cent for, and 1.58 per cent unde-cided.

A total of 82.35 per cent supportedincreasing the tax allowance to8,075 in 2012-13, with 13.73 percent against, 3.92 per cent of no opin-ion. The score out of ten was 7.96.Fuel duty cuts got a positive reaction,with 73.44 per cent for, 21.88 percent against and 4.69 per cent of noopinion, with an average rating of 7.43for the reform.Finally, 52.75 per cent were in favourof the windfall tax on North Sea oilcompanies, with 43.36 against, and3.91 not expressing an opinion.

PoliticsHome.comPoliticsHome.com

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PORTUGUESE Prime Minister JoseSocrates resigned yesterday after hislatest austerity budget was thrown outby parliament.

The defeat leaves Portugal teeteringon the bring of an EU bailout, withouta government and without a credibleplan to address its debt problems.Socrates had threatened to resign ifthe cuts the fourth package ofreforms designed to help the countryavoid a rescue were rejected.

But all five opposition parties votedagainst the measures and the primaryopposition Social Democrat partycalled for an election.

This political crisis has very graveconsequences for the confidencePortugal needs from institutions andthe financial markets, Socrates said.

He presented his resignation twohours after the vote to PresidentAnibal Cavaco da Silva, who said hewould meet all political parties onFriday but the government would con-tinue to hold authority until then.

Socrates said he would remain inpower in a caretaker capacity but thecountry faces weeks of political uncer-tainty until an election can be held intwo months time.

The yield on Portuguese govern-ment bonds shot to euro lifetimehighs of 8.18 per cent preceeding thevote, a level the market views as unsus-tainable and that makes a bailoutalmost inevitable.

The collapse of the governmentleaves Portugal without permanentleadership for a crucial two-day sum-mit starting today in Brussels, wherethe EU will hammer out a solution tothe blocs debt problems.

Portugal PM

forced to quit

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BYALISON LOCK

EUROZONE CRISIS

THE man in charge of the fraud inves-tigation into the financial affairs ofthe Tchenguiz brothers and their con-nection to the collapsed KaupthingBank has resigned on a day whichalso saw dozens of documents beingreturned to the brothers lawyers.

The Serious Fraud Offices (SFO)Mick Randall is said to be taking up ajob in the private sector. But his deci-

sion to quit will raise eyebrows sinceit comes just two weeks after a mas-sively high profile raid at theTchenguiz Brothers Mayfair offices.

The brothers, who have stronglyprotested their innocence, yesterdayreceived dozens of documents viatheir lawyers Stephenson Harwood, itis understood, which had beenseized in error according to an SFOletter. The documents were returnedwithout warning.

Tchenguiz inquiryhits double setback

REGULATION

News6 CITYA.M. 24 MARCH 2011

BP GULF SPILL PROBE UNCOVERSVALVE BLOCKAGEBPs Macondo well continued to spilloil into the Gulf of Mexico after theDeep water Horizon rig explosionlast year because a piece of pipe waswedged in the valves that were sup-posed to shut it off, an investigationinto the accident has found. Theblow-out preventer, the stack ofvalves on the sea bed intended to pre-

vent escapes of oil and gas, failed toclose properly because a section ofdrill pipe had buckled inside thewell, obstructing the ramsdeployed to seal it, according to DetNorske Veritas, a consultancy hiredby the US interior department. Thefailure of the blow-out preventer wasa missing piece of the picture.

CONOCOPHILLIPS TO SELL UP TO$10BN IN ASSETSConocoPhillips, the third-biggest oiland gas company in the US, said itwould shed an additional $5bn-$10bn in assets during the next twoyears on top of $7bn sold last year.The companys shrink-to-grow strate-gy has been welcomed by investors,who pushed the companys shareprice up by more than 40 per centduring the past year. Yesterday, whenthe additional sales were announced,

Conoco shares rose 65 cents to $77.87the NYSE in late morning trading.

WHAT THE OTHER PAPERS SAY THIS MORNING

CARNAGE IN JERUSALEM

A BOMB planted in abag exploded near abus stop in a Jewishdistrict of Jerusalemyesterday, killing awoman and injuringat least 30 people, inan attack police

blamed onPalestinian militants.

Picture: Getty

GOLDMAN SACHS' LLOYD BLANKFEINTELLS COURT THAT FORMER BOARDMEMBER BROKE FIRMS RULESLloyd Blankfein, the chairman andchief executive of Goldman Sachs,told a New York court that a formerboard member broke the banks rulesby revealing discussions of its strategyreview to Raj Rajaratnam, a billion-aire hedge fund manager on trial forinsider trading. Blankfein was called

by government prosecutors as a wit-ness in the third week of the trial ofMr Rajaratnam, who is accused ofmaking $45m (27m) trading sharesbased on inside information. Some ofthat information, prosecutors allege,came from Rajat Gupta, who was adirector on Goldmans board between2006 and 2010.

PAY BONUSES WITH COCOS SAYSBANK OFFICIALA Bank of England official has saidthere is a strong case for bonuses tobe paid in the form of contingentconvertible capital securities thatconvert into loss-absorbing equitywhen a bank is in trouble. Executivedirector Andy Haldane suggested ifhalf of City bonuses and dividendssince 2000 had been paid in cocos

the bank bailout might have beenaverted.

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Economics8 CITYA.M. 24 MARCH 2011

STERLING dropped by over half a percent against the dollar yesterdaymorning, after the Bank of Englandrevealed that two thirds of its mone-tary policy committee members stilloppose a rise in rates.

However, there were further signsthat the committee may be movingtowards a gradual normalisation ofinterest rates.

Six members of the nine-man com-mittee voted against any rise in rates,yet the minutes, released yesterday,admitted to differences of viewbetween these members on upsiderisks to inflation.

Some of the six felt that the casefor an increase in Bank rate hadstrengthened in recent months.

The Bank rate has sat at the his-toric low of 0.5 per cent for overtwo years.

There is a significant risk ofconsumer price inflation shootingabove five per cent in the nearterm, the minutes revealed.

We agree, commented AlanClarke of BNP Paribas, we see thepeak at 5.2 per cent.

What is clear is the Bank will haveto revise up its inflation projection atthe May inflation report, Clarkeadded.

Inflation in the first threemonths of this year couldalready exceed the levelthat the Bank predictedin its February inflationreport.

The effect of JanuarysVAT rise on prices wasas yet unclear, thecommittee believed.

Yesterday the Bankalso revealed resultsfrom its latest agentssurvey, which con-tains more evidenceon inflationary pres-sures, accordingto Citigroups

chief economistMichael Saunders.

The agents report that labour costgrowth is back to about the 1998-2007norm, he said. With the weakpound and strong import prices, thiswould set the stage for a lasting infla-tion overshoot -- we still expect thecommittee to hike soon.

Andrew Sentance voted again for a0.5 per cent tightening of rates, and

stood out among the committeenotes for his ultra-hawkish com-ments. Bank chief economist SpencerDale, along with Martin Weale, bothagain voted for a milder 0.25 per centrise in Bank rate.

However, the Banks chief dove,American Adam

Posen (pic-tured), con-

tinued toargue fore v e n

m o r equanti-tativeeasing.

Banks dovesstick by lowrates despitenervous splitBY JULIAN HARRIS

UK ECONOMY

MORTGAGE approvals for house pur-chases remained near their lowestlevel for two years, the British BankersAssociation (BBA) reported yesterday.

The 29,923 mortgage approvals inFebruary were just a slight upgradefrom the 29,159 in January and the 23month low of 29,029 in December.

Mortgage approvals were down

about 11 per cent on the year.However, the annual growth of themain high street banks net mortgagelending was 2.5 per cent in February --substantially ahead of the 0.7 per centfor the whole mortgage market inJanuary, the BBA claimed.

Economist Howard Archer of IHSGlobal Insight, said: We believe hous-ing market activity and house priceswill remain under pressure for sometime to come from high and likely to

rise unemployment, negative realincome growth, the increasing fiscalsqueeze, very low consumer confi-dence, and ongoing difficulties in get-ting a mortgage (particularly for firsttime buyers).

Archer added that because of theweak housing market, he speculateshousing prices will fall by around fiveper cent in 2011 and end up losingabout 10 per cent from the peak levelsseen in the first half of 2010.

Mortgage approvals from UKhigh street banks remain lowBY ERICWILKENS

HOUSING

NEWS | IN BRIEF

Growth for Eurozones industryIndustrial new orders in the Eurozonewere up by 0.1 per cent in January,month by month. Excluding volatileitems, new orders were up 1.6 per cent.Compared with January 2010, industri-al new orders grew by 20.9 per cent ineuro area. Across the wider EuropeanUnion area, new orders were up 0.2 percent in January, compared toDecember an annual rise of 18.6 percent, and 1.9 per cent month on monthwhen excluding volatile items. Amongmember states, Denmark, Latvia, andBulgaria registered the highest increas-

es. Estonia, France and Finland regis-tered the largest falls in new orders.

Eurozone high street morale slipsConsumer confidence in the Eurozonesuffered a knock in February. TheEuropean Commissions flash indexslipped back to -10.6, having recoveredto -10 in February.

US home sales fall to record lowWall Street stocks fell in yesterdaysmorning trading, partly due to disap-pointing new home sales data. US newhome sales plummeted in February to arecord low and prices were the lowestsince December 2003, suggesting thehousing market slide was deepening.Sales in February dropped 16.9 per centto a seasonally adjusted 250,000 unitannual rate, the lowest since records

began in 1963, the CommerceDepartment revealed.

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A BRANDNEW BAG ON

GEORGESBIG DAYYESTERDAYS budget saw GeorgeOsborne depart from a 150-year-old tradi-tion, when he debuted a brand new reddispatch box for his journey fromDowning Street to the Treasury.

The battered briefcase touted byalmost every chancellor since 1860 wasmade for William Gladstone, and onlyJames Callaghan and Gordon Brownhave diversified since, the latter famous-ly carrying his speech in a bag made bylocal craftsmen from his constituency.

With Gladstones bag officially retiredby the National Archives, speculationahead of the budget was rife as to whatOsborne would deem a worthy replace-

ment. Would he plump for a trendy manbag or designer briefcase fromSamCams Smythson line?

But Osborne chose to stick with tradi-tion, flaunting an almost identical (ifconsiderably fresher looking) bag in thecustomary red.

The bag was commissioned by theNational Archive as an homage toGladstones original, and hand-madeusing traditional techniques and materi-als by a team of experts including car-penters, bookbinders, and engravers,

firm paying out to a large number ofhappy gamblers.

THE BIG SLEEPBOOKIES were also forking out on aslightly more embarrassing budget bet

yesterday, after Ladbrokes offeredodds of 16/1 on justice secretary

Ken Clarke falling asleep dur-ing the budget speech (above).

Though Clarkes officewas quick to issue a

denial of the claim,

Ladbrokes said thatthe fact that EdMiliband drew atten-

tion to Clarkes nap inhis budget response was enoughfor them.

However, punters that bet onOsborne wearing a purple tiecan expect a much lower pay-ment his indigo silk was aconservative choice with oddsof just 2/1.

Harriet Dennys is away.

according to the Archives press office.Eagle-eyed observers will spot one cru-

cial difference though the monogramhas been updated from VR to ERII toreflect the change in monarchy.

BETTING ON TAXESASIDE from the iconic red bag, Gladstoneleft another legacy following his time inParliament the record for the longestbudget speech ever, running to fourhours and 45 minutes in April 1853.

Luckily for todays MPs, Osborneseffort yesterday didnt come close hespoke for just 56.5 minutes before hand-ing the f loor to Ed Miliband.

The length of his speech was just one

of several light-hearted budgetpunts run by spread betting firmSporting Index yesterday, whichalso offered odds on the numberof times Osborne would utter the

word tax during his speech.Unlucky Sporting Index took

quite a hit on its moderatespread of 76-80 times, asOsborne dropped the T wordan impressive 95 times in lessthan an hour.

It was also stung by his needfor vocal lubrication despitean estimate that he would takejust three sips of water duringthe speech, Osbornes eightmouthfuls (right) will see the

The monogram on the new budget box has been updated for Elizabeth II Pictures: PA

The Capitalist10

EDITED BY

ELIZABETH FOURNIERGot A Story? Emailthecapitalist@cityam.comFollow The Capitaliston Twitter: @citycapitalist

CITYA.M. 24 MARCH 2011

The bag wascommissionedby the National

Archive as anhomage toGladstonesoriginal

8/7/2019 Cityam 2011-03-24

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2011 Citigroup Inc. All rights reserved. Citi is a trademark of Citigroup Inc. used and registered throughout the world.

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HSBC s proposal to pay its chief execu-tive up to 13.3m this year is likely tomeet shareholder opposition, investorrepresentatives said yesterday.

The banks compensation commit-tee has proposed paying StuartGulliver a base salary of 1.25m, abonus of up to three times that and along-term performance-based payoutsix times his base salary.

Sarah Wilson, chief executive ofproxy voting agency Manifest saidthere was a high level of concernamong shareholders and a great

deal of push back was expected.The proposed sum is still subject to

several rounds of shareholder consul-tation and a revised figure will be putto HSBCs annual general meeting inMay.

But the payout dwarfs RBS chiefexecutive Stephen Hesters 7.7m pay-out and Barclays head Bob Diamonds6.25m this year.

HSBCs return to pre-financial crisislevels of remuneration at a timewhen the economy is strugglingcould place banks on a collisioncourse with the public and govern-ment. But its negotiations may be asign that large banks are gearing upto reward their top staff far more,

which may cause more boardroombattles this year, Wilson warned.

SPAINS Inditex, the worlds largestfashion retailer and owner of thehigh street Zara chain, yesterdayreported a surge in profit and plansto continue its march into Asia.

The company posted a 33 per centincrease in overall net profit for theyear ending 31 January to 1.73bn(1.5bn).

Sales worldwide soared by 13 percent to 12.53bn, Inditex said in astatement, with the fastest growingrevenue source in Asia.

The clothing giant announcedthat it was looking to open between460 and 500 stores this year to add toits 3,044 stores in 77 countries.

Plans include at least 120 newstores in China, where it already owns143 outlets, around half of whichopened during 2010.

Asia saw one of the most rapidrates of expansion last year with the

groups retail presence there growingto 645 stores, accounting for 15 percent of sales.

The group, whose other brandsinclude youth label Bershka andupmarket Massimo Dutti, will alsomove into new markets such asAustralia and South Africa this yearas well as launching online Zarastores in both Japan and the UnitedStates.

Our priority remains to focus ourgrowth in Europe and Asia. 2011 willbe a year of strong acceleration inChina, said Inditex chief executivePablo Isa, who took over the post inJuly from Amancio Ortega, thegroups founder and Spains richestman.

Asia should continue gainingaround three percentage points peryear in terms of its contribution tosales.

Shares in the company rose by fiveper cent in Madrid after the annualfigures were released.

Inditex profitsoars thanksto Asia boom

HSBCs Gulliver faces oppositionover planned 13.3m package

BY JOHN DUNNE

RETAIL

BANKING

Inditex, which owns Zara, has seen sales surge Picture: PA

News12

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SAINSBURYS said yesterday that itssales growth was slowing with fearsover the economy draining consumerconfidence.

Chief executive Justin King saidthat the company was performingwell considering the challenges fac-ing retailers.

Like-for-like sales for the fourth-quarter were up by one per cent,below market expectations, and

against growth of 3.6 per cent in theprevious quarter.

Like-for-like sales in the full-year to19 March, excluding fuel, were up 2.3per cent.

King said that there had been analmost overnight change in the waypeople shopped, with customers typi-cally buying one item less on theirweekly visit to a supermarket.

He said that although that figureseemed insignificant it represented amassive change.

These changes usually take yearsbut this has happened overnight.

In an overview of the economy hewarned: I do not see that customersentiment will change in the nearfuture. King said that fuel rises hadtaken a heavy toll on customers whowere trying to rein in their spending.

Meanwhile sales of non-food itemsare still growing at three times therate of food, the UKs third-largestsupermarket chain said.

The sales slowdown follows astrong Christmas.

Slowdown insales growthat Sainsburys THE iPad 2 isnt released in the UKuntil tomorrow but rumours arealready circulating about its successor.

Sources yesterday claimed the iPad 3could be released as soon as Septemberthis year. This could spell disaster foriPad rivals such as HPs TouchPad,which is slated for release in the sum-mer. Its specifications already fallshort of the iPad 2 and a new genera-tion Apple tablet being released with-in weeks could kill it off.

Analysts are predicting the iPad 3will have an ultra-sharp retina displaysimilar to that on the iPhone 4 andhardware could include an NFC chipfor mobile payments. Other possibleadditions include a Thunderbolt port,which would appease those who havelobbied for a USB connection, and an

SD card reader.Also being dragged through the

rumour mill is the iPhone 5, which isexpected to be released in June.Sources in China have hinted it couldfeature a four inch screen movingcloser to the monster 4.3 inch screenon the Samsung Galaxy S II.

Apple boss Steve Jobs also insistedthat he has no plans to kill off the iPodClassic, which was not revampedwhen a new range of iPods werereleased in September last year.

Rumours of third

tablet before UK

launch of iPad2

Justin King said Sainsburys has been resilient in the downturn Picture: Micha Theiner

BY JOHN DUNNE

RETAIL

Consumer NewsCITYA.M. 24 MARCH 2011 13

ANALYSIS l Sainsbury

p

10 Jan 28 Jan 17 Feb 9 Mar

400

380

360

340

320

335.3023 Mar

ANALYST VIEWS: WHAT HAS CAUSED THESLOWDOWN AT SAINSBURYS? Interviews by John Dunne

NICK BUBB | ARDEN

Sainsbury's was very pleased with itself for delivering 3.6 per cent like-for-like growth in its third-quarter, but once higher VAT and the benefit of storeextensions were stripped out the performance wasnt so impressive. We maintaina weak Hold view. We would switch to Morrisons.

CLIVE BLACK | SHORE CAPITAL

The figures are indicative of how markedly and rapidly the UK con-

sumer economy has declined in the first quarter of 2011. The read-through to theother food retailers is cautionary. It is not good. To my mind the clamp on con-sumer expenditure is creeping its way up the income scale.

DAVE MCCARTHY | EVOLUTION SECURITIES

Consumers under pressure, rising inflation and excess capacity areresulting in poor like-for-like sales. With the consumer facing fallingdisposable income, sales are being spread more thinly hence the underlyingnegative like-for-like sales.

BY STEVE DINNEEN

TECHNOLOGY

8/7/2019 Cityam 2011-03-24

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PORTUGUESE investment bankEspirito Santo blamed the Eurozonedebt crisis and the new Basel III rulesfor a 22 per cent drop in net incometo 122.2m (106.3m) for the year yes-terday.

Espirito Santo, which boughtLondon stockbroker Execution Noblelast November, said pre-tax profit fell3.2 per cent to 678.6m.

Fees and capital market incomegrew 13.6 and 7.8 per cent respective-

ly, delivering more than 1bn to netincome, but a 10 per cent rise in oper-ating expenses dented gains.

The bank said an agreement withthe Portuguese government to lowerwages in 2011 would pare losses thisyear.

Overall recurrent incomeremained healthy despite a difficultoperating environment, it said.

The bank added: Increased inter-est costs relating to [our] commit-ment to maintaining a strong capitalposition, as required under Basel III,contributed to a fall in overallresults.

Espirito Santoprofits fall onBasel III cost

BRITISH technology firm SmithsGroup said it would look to grow full-year sales through a greater focus onemerging markets, after cost cutshelped it to a higher first-half profit.

To support growth opportunitiesin emerging markets, we establisheda direct sales presence in India forboth Smiths Detection and SmithsMedical, chief executive PhilipBowman said.

We remain confident of meetingexpectations for the full-year, headded.

Smiths Medical and SmithsDetection together accounted fornearly half of total company sales inthe first half.

The company did not give furtherdetails on any possible sale of its med-ical unit, for which it rejected a2.45bn bid approach in January.Analysts said the medical unit couldfetch a far higher price, but moreimportantly the spurned bid took theconglomerate closer to a possiblebreak-up.

On a conference call with analysts,Bowman said it was business at

usual at Smiths Medical, and it wasthe boards duty to consider anyoffers.

Earlier yesterday, Smiths reported apre-tax profit of 224m for the sixmonths to 29 January, slightly aboveanalysts estimate of 221m.

Sales at Smiths, whose productsrange from airport scanners andbomb detectors to medical devicesand fuel hoses, rose seven per cent to1.37bn, in line with market esti-mates of 1.36bn.

The company also increased its div-idend by seven per cent to 11.25p.

Smiths Group eyes emergingmarkets to increase its sales

BYMARION DAKERS

BANKING

TECHNOLOGY

News14 CITYA.M. 24 MARCH 2011

NEWS | IN BRIEF

Deutsche BankIn yesterday's paper, we reported thatDeutsche Bank had been asked to payout 541m in compensation to a papercompany as a result of selling it a deriv-atives deal without first adequatelydescribing the risks. This was incorrect.The amount should have been

541,000. We apologise for the error.

BoA forced to scale back dividendThe Federal Reserve told Bank ofAmerica (BoA) to rein in its plans for amodest dividend increase, in a sign thatregulators still view the lender as beingfinancially weaker than its rivals. Thelargest US bank by assets did not dis-close how much of a dividend increase itwas looking for, and did not give a rea-son for the rejection. The bank said itintends to submit a revised proposal tothe Fed and still hopes to increase itsdividend in the second half of the year.

Huntsworth profits surgePR firm Huntsworth saw its profitssurge 14 per cent last year after a stringof new business wins. It reported pre-tax profits of 26.7m on revenues up11.1 per cent to 173.6m.

Unilever washes hands of SanexUnilever has sold its shower gel anddeodorant business Sanex to US con-sumer goods group Colgate-Palmolive for672m (584m), the firm said. The saleis part of Unilevers deal with the EU tosell the brand for anti-trust reasons.

ANALYSIS l Espirito Santo

10 Jan2010 24 Jan 7 Feb 21 Feb 7 Mar

3.30

3.10

2.90

2.70

2.50

3.1223 Mar

PROPERTY developer Etalon yesterdaybecame the latest Russian firm toannounce a public float in London,

after the family-owned business saidit planned to sell off some of its stakelater this year.

Etalon, which builds residentialproperty in Moscow and StPetersburg, said it planned to issuearound $500m (307.8m) of new

shares and use the cash to buy newland plots.

Etalon plans to start a roadshow on4 April, one source said yesterday,though the firm has yet to name adate for the share sale. Credit Suisse,

Renaissance Capital and VTB Capitalare acting as joint global coordinatorsand joint bookrunners on the sale.

Credit Suisse and VTB are alsoworking with Russian bank Nomos,which is planning a $700m float inthe next three months.

Etalon joins the ranks ofthe Russian IPO hopefuls

BYMARION DAKERS

PROPERTY

Etalon chair Viacheslav Zarenkov (inset) and the firms estate in St.Petersburg Picture: PA

Divestments needed if the tech groupwants to meet price expectationsWITH operating margins up 17.4 percent and a confident outlook for theyear ahead, Smith Groups long-termoutlook now depends on its ability tonavigate through its restructuringand implement portfolio changesthat will bring value to shareholders.

Its been an unpredictable fewyears for the technology company,which launched a restructuring planin 2008 to deliver annual savings of47m.

The firms pension deficit forexample which prompted a precip-itous sell-off in March 2009 when itsvalue jumped more than 450m insix months is now looking moremanageable, having fallen from305m at end July 2010 to 119m by

January this year.But the market expects a disposal

and chief executive Philip Bowmanremained reticent today on whenthat could happen.

Shares in Smiths spiked as longago as April 2009 on rumours of thesale of its medical arm, but as recent-ly as January the group said it hadrejected a 2.4bn offer from ApaxPartners for the business.

Though target prices look good,investors should be wary a failureto demerge would lead to significantdownside.

BOTTOMLINEAnalysis by Elizabeth Fournier

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BP sells US plant for $575mBP has sold one of its US natural gasplants to Anadarko for $575.5m(354.3m) as part of its $30bn assetsale to fund reparations for last yearsGulf of Mexico spill. The WattenbergProcessing Plant in Colorado has thecapacity to process 195m cubic feetper day and 15,000 barrels of naturalgas liquids. Anadarko is the largestproducer in the Wattenberg field andis also drilling in the emergingNiobrara Shale.

Colliers halves its lossesCommercial real estate consultantColliers International halved its pre-tax losses last year to 8.4m, on rev-enues up 14 per cent to 65.9m. Thefirm said market conditions in the UKmarket are improving, though Colliersproperty management business saw aseven per cent decline in revenues asits clients sold their buildings. Collierschief executive Tony Horrell said busi-ness in 2011 has been significantlyhigher than last year.

Hammerson snaps up mallsAnglo-French retail property ownerHammerson has bought six Britishretail assets for 208m, equivalent toa yield of seven per cent, from StMartins Property Investments. Thebiggest asset in the portfolio is theCentrale shopping centre in Croydon.Hammerson also bought up theremaining 75 per cent interest inCentral Retail Park in Falkirk for 69mfrom its partner, US pension fundTIAA-CREF.

Come and experience our Postgraduate and MBA

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News16 CITYA.M. 24 MARCH 2011

Matrix GroupDavid Wilson has joined the asset man-agement and banking firm as deputychief executive of investment banking.Wilson has over 25 years experience inthe city, most recently as chief executive

of Piper Jaffray where he also served asglobal chairman of healthcare and onthe leadership team of the group.

Matrix also appointed Rajeev Bahland Chris Wickham as co-heads ofresearch. Bahl previously worked for

Piper Jaffray as principal, seniorresearch analyst covering software andIT services. Wickham joined Matrix inNovember 2010.

Cushman & Wakefield

The real estate brokers has hired TonyEdwards, Simon Wild and Chris Parfittas partners in its Southern retailagency team.

Edwards and Wild both join the realestate firm from Jones Lang LaSalle, in

which Edwards was the head of theirSouthern retail agency. Parfitt was pre-viously head of leasing at Centros.

RSAMark Christer has been appointed man-

aging director of UK personal lines bythe global insurer. Previously Christerwas managing director of MORE TH>Nand group chief executive of renewableenergy. Christer will be responsible forRSAs personal lines business.

CITY MOVES | WHOS SWITCHING JOBS Edited by Elizabeth Fournier

Mayer BrownThe City law firm has boosted its asset financeteam with the hire of former Orrick Herrington& Sutcliffe European managing partner StuartMcAlpine.

McAlpine focuses on cross-border asset and

project finance transactions in the shipping, off-shore and energy sectors. At Orrick, he spenttime in the firms Singapore, London and Parisoffices. He was the firms European managingpartner between 2008 and 2009.

+44 (0)20 7557 7245morganmckinley.com

To appear in CITYMOVESplease email your careerupdates and pictures to citymoves@cityam.com SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

KAZAKH miner ENRC met forecastswith full-year underlying profit thatmore than doubled, on record pro-duction and demand recovery, andsaid the global economic outlookwas still improving.

We remain positive on thegroups prospects for 2011, althoughthe control of costs growth and thedevelopment of our assets in Africawill be important issues for manage-ment, as will be the continued near-term risk of commodity market

volatility, chief executive Felix Vulissaid yesterday.

Pre-tax profit for 2010 rose 106.9per cent to $2.97bn (1.83bn), on rev-enue up 72 per cent to $6.60bnthanks to record production levels.

ENRC would not comment onspeculation a publicly listedGlencore could make a bid.

ENRC said material prices andcosts were expected to show signifi-cant increases in 2011, as itembarks on a $11.1bn capital expen-diture programme.

Margin growth of 62 per cent off-set a 28 per cent rise in 2010 costs.

Shares in the FTSE 100-listedminer yesterday increased by 3.5 percent to 929.50.

ENRC profits double

on production risesBY HARRY BANKSMININGANALYSIS l ENRC

p

10 Jan 28 Jan 17 Feb 9 Mar

1,150

1,050

950

850

929.5023 Mar

8/7/2019 Cityam 2011-03-24

17/40

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News 17CITYA.M. 24 MARCH 2011

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ANALYSIS lDeutsche Telekom

11

10.6

10.2

9.8

27 Dec 17 Jan 4 Feb 24 Feb 16 Mar

10.8623 Mar

DEUTSCHE TELEKOMGoldman Sachs rates the telecoms group neutral, up from sell, with atarget price of 10.90 (9.47). The broker thinks the possible sale of T-Mobile USA will be positive for the firm even if it doesnt go ahead, given the$3bn cash and spectrum assets promised in the break clause. The salewould solve one of DTs biggest strategic challenges, the broker adds, butonly has a 50 per cent chance of successfully closing.

ANALYSIS lPunch Taverns

78

74

70

66

10 Jan 28 Jan 17 Feb 9 Mar

p69.9023 Mar

PUNCH TAVERNSDeutsche Bank (DB) rates the pub chain sell with a target price of 55p.The broker thinks Punchs strategic review yesterday chose the most sen-sible option, though the long process of splitting the company means astraightforward equity value for the business is still unclear. However, DBbelieves that there is some upside for investors who are prepared to bepatient over the longer term.

ANALYSIS lGrainger108

104

100

9610 Jan 28 Jan 17 Feb 9 Mar

p

103.6023 Mar

GRAINGERCollins Stewart rates the residential property group buy with a targetprice of 180p. The broker approves of Graingers increasing exposure toLondon following a recent acquisition, now at around 74 per cent of its resi-dential portfolio, and thinks new debt facilities should help shore up confi-dence in the firm. Based on net asset values, the broker thinks the firm istrading at a discount of 59 per cent.

BRITAINS top shares edged uphigher yesterday, on a budgetday that brought a mixed out-look for UK corporates.J Sainsbury fell sharply after a

downbeat trading update, while sec-tor peers firmed after the budget, asdid housebuilders which got a first-time property buyers boost, whileNorth Sea-focused oil firms were hitby a tax rise.

The FTSE 100 closed up 33.17points, or 0.6 per cent, at 5,795.88,having ended down 0.4 per cent onTuesday.

Pre-budget, the spotlight fell onSainsbury, the most traded stockacross Europe at 421 per cent of its 30-day average, with the FTSE Eurofirst300 trading only 84 per cent of its 30-day average.

The grocer topped the blue-chipfallers list, off 5.4 per cent, after itmissed fourth-quarter sales forecasts,stoking fears of a downturn in con-sumer spending.

But money managers saw opportu-nities among UK consumer stocks,

which have been poor performers inrecent months.

Jeremy Thomas, chief investmentofficer UK equities at fund managerRCM, who oversees about 2bn, hasbeen gradually adding new invest-ments in selected companies such asTesco, which is now trading on alower valuation than at any time inits history.

Thomas said that while profitexpectations for more cyclical retail-ers such as Next may continue to fall,if their share prices decline muchfurther, this will be a chance for longterm investors to buy good franchisesat terrific prices.

Shares in Tesco firmed 0.3 per cent,while Next advanced 1.5 per centahead of its full-year results onThursday, with traders optimisticabout its online sales.

FTSE inches up despiteSainsburys glum update

Wall St rises as investorsdismiss Middle East fears

US stocks advanced yesterday asmaterials shares rose, but risingcommodities prices due to tur-moil in the Middle East and

North Africa could keep rallies mod-est.

The markets favoured indicator ofanxiety, the Chicago Board OptionsExchange Volatility Index or VIX,shows investor worry over unsettledworld situations has been temperedfor the moment. But the lack of vol-

ume and moderate gains suggest opti-mism is limited in scope.

Nobody really wants to step infront, they are waiting to see, andobviously the selling was a little over-done on the Japan situation, saidPeter Jankovskis, co-chief investmentofficer at OakBrook Investments inLisle, Illinois.

There is nothing else out thereright now to kind of provide that kickup.

About 7.01bn shares traded on theNew York Stock Exchange, theAmerican Stock Exchange andNasdaq -- below the daily average of8.07bn. The Dow Jones industrialaverage gained 67.39 points, or 0.56per cent, to 12,086.02. The Standard &Poors 500 Index rose 3.77 points, or0.29 per cent, to 1,297.54. The Nasdaq

Composite Index climbed 14.43points, or 0.54 per cent, to 2,698.30.

p

10 Jan 28 Jan 17 Feb 9 Mar

6,100

5,800

5,700

5,500

5,600

5,900

6,000

ANALYSIS l FTSE5,795.88

23 Mar

THENEW YORKREPORT

THELONDONREPORT

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T

HE world of work can some-times feel like youre complete-ly outgunned. If everyonearound you seems better-quali-

fied, more experienced and more like-ly to succeed, fear not: youre in thesame boat as most companies arewhen they launch.

We live in a world where most of us either as businesses or individuals have to get up every morning andcompete against giants with moremoney, resources, experience andfriends in high places than well everhave.

Fortunately, winning isnt alwaysabout having a bigger budget or anMBA. While researching my book,Killing Giants, I interviewed seniorexecutives from great businesses likeAdobe and Bowers & Wilkins whovesucceeded by having a surplus of greatideas, passion and the desire to see itexecuted skillfully. I identified 10 ways

these giant-killing businesses succeed-ed against seemingly overwhelmingopposition. These same lessons applyto managing your career. If you feelout-muscled at work, here are threekey tools to help you kill the giants.

First, seize the microphone. Often,smaller businesses succeed by spend-ing their time talking to actual cus-tomers while their bigger competitorsworry about big media outlets andinvestors. If there is no dominantvoice in the market, they step up andbecome that voice. Even or especial-ly if theyre not the biggest player.The worlds number one domainname registrar, Go Daddy, was an also-ran until it seized the microphone,telling consumers that owning yourown website wasnt just for big com-panies and techies, but for everyone.

In your career, the same applieswhen it comes to success and promo-

tion: your customers just happen to beinternal. Never assume that your boss

and his/her bosses know what youknow. Step up and explain what yourteam is doing, how it connects to theirvision and what results youre getting.We all get caught up in our respectiveto-do lists and communicating can getlost in the noise. Step up and seize themicrophone.

Secondly, win in the last three feet.Smart companies love it when theirgiant competitors spend millions onsplashy marketing campaigns: itdrives potential consumers to storesor search engines like the yearly greatmigration. Companies like Adobehave applied this guerilla-styledapproach, competing in the last threefeet and converting their giants cus-tomers, one by one.

For you, focus on finishing well.Anyone can start brilliantly, but theending is where results and promo-tions are made. Nothing ever takescare of itself and youll set yourselfapart if youre the member of theteam who finishes solid plans bril-liantly time and time again.

And thirdly, polarise on purpose.When companies put meaningfulspace between themselves and largercompetitors, they force customers tomake a decision. They either chooseyou or they make the active decisionnot to choose you. For many, the Miniis an impossibly small car but forthose who tap into the brands ethosof fun, performance and responsibili-ty, its the perfect size. Its not for

everyone, and this sense of exclusivityis their strength. Applied to yourcareer, focus on being known forsomething. Whatever it is that yourevery good at doing, ensure that whenthe discussion comes up internallythat all eyes point to you. And a wordto the wise: developing and promot-ing this strength in an area that theCEO personally cares about is a smartmove. If the CEO is an engineer andyoure known for creativity, for exam-ple, find a way to bring your strengthto bear on new product design.

We all face giants in business and inlife, whether competitors looming onthe horizon or obstacles to be over-come in our own careers. Fortunatelyfor us, the game isnt just about scale.Its about who has the best ideas, themost passion and the greatest desireto win.

Killing Giants by Stephen Denny is pub-

lished on 31 March by Portfolio Penguin,priced 14.99

Three easy ways individuals who are feeling outgunned in theworkplace should fight back against giant-sized competitors

Small players can beat

even the biggest rivals

The larger they are, the harder they fall Picture: GETTY

STEPHEN DENNYAUTHOR AND CONSULTANT

Business Features | Careers18 CITYA.M. 24 MARCH 2011

Securitisation.Analysis.

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News | Budget Special19

financial spreadbetting provider*

The UKs No.

BUSINESSES welcomed GeorgeOsbornes decision to go further andfaster in lowering corporation tax inyesterdays Budget.

But banks didnt get the cut, withthe Treasury increasing its bank levyfor the second time in as many

months in order to offset the gainthey would have received from thecorporate tax measure.

Osborne announced that he wouldcut corporation tax by 2p a pennymore than expected to 26p fromApril. The headline rate is expected tofall by 1p a year until it hits 23p in2014-15.

But the chancellor was quick to sin-gle out banks: To ensure that this isnot a net tax cut for banks, I amadjusting the bank levy rate next yearto offset its effect, he declared.

Although banks will benefit fromthe tax cut this year, they will thenhave to pay out 780m more thanexpected over the following three

years due to a larger rise in the govern-ments bank balance sheet levy. It willrise to an 0.078 per cent charge ontheir global assets rather than theplanned 0.075 per cent.

The change marks the second sur-prise jump in the levy since the coun-trys five main banks signed up toproject Merlin, in which the govern-ment vowed to provide a stable tax

environment. The 780m increase isin addition to 800m extra raisedfrom the levy increase this year.

KPMG tax partner Tom Aston said:While the bank levy increase issmall, this is the second and somebanks will be alarmed by the direc-tion of travel. PwCs Matthew Barlingsaid: The tinkering with the levy hasresulted in four different rates beingin force during... this year and next,which is representative of the com-plexity of tax rules the sector nowfaces.

A spokesman for StandardChartered said: We just want to seeconsistency and agreement across theglobe on these levies.

Corporate tax

cut but notfor the banks

THE government has announcedmeasures intended to lure multina-tionals back to the UK and has prom-ised a review on the taxation of profitsmade outside the country.

The Chancellor said during hisBudget announcement yesterday: Iwant Britain to be the place interna-

tional businesses go to, not the placethey leave. He claimed that the meas-ure will give us a far more attractivesystem than France, America orGermany.

The headline change to ControlledForeign Company (CFC) tax rulesmeans that company units set upabroad in order to finance foreign ven-tures will see taxes on their earnings

decrease to a minimal rate of 5.75 percent by 2014, instead of being taxed aspart of a firms overall profits.

This is even lower than the previ-ously announced rate of eight percent, a change that PwCs Claire Evanscalled really exciting.

The government has also promisedto review the taxation of foreignbranches of UK companies so that

they are taxed like subsidiaries ofmultinational groups, which havemore generous tax terms under cur-rent laws.

A full review of CFC rules is due tobe published in May, with theTreasury currently consulting on themeasures. The key issue is how the UKtaxes profits that companies makeabroad. While the Budget sharply

reduced taxes on earnings made forfinancing foreign investment, it hasyet to declare its policy on generalearnings made overseas.

The consultation is part of an effortto tempt back companies like WPP,Google, Wolsely, UBM and Shire,which have all moved their Europeanheadquarters into more tax-friendlydomiciles.

Global firms welcome relief on foreign earnings

BY JULIET SAMUEL

BUDGET

BUDGET

The government hopes Martin Sorrell will bring WPP home Picture: Micha Theiner

MULTINATIONALS that have fledBritains punitive business taxregime gave a cautious welcome toyesterdays Budget, with UBM andWPP both saying that the country isgoing in the right direction of travel.

Communications group WPPmoved its headquarters to Dublin in2008, but chief executive Sir MartinSorrell said yesterday that theBudget was a positive move.

UBM went further, with chieffinancial officer Robert Gray saying:We welcome the chancellors pro-posals for reform of UK corporatetax regulation and in particular the

taxation of [foreign] income.In the light of the reform propos-

als, UBM is actively consideringwhether to relocate its corporate taxdomicile to the UK.

The most important issue formultinationals is the taxation oftheir profits made abroad, whichthe government has promised toreform.

Securing the return of either firmwould be a coup for George Osborne,who wants to give a tangible signthat his reforms are working.

UBMs pre-tax profit last year was156.4m and it paid 23.5m of tax,while WPP made 851.3m in pre-taxprofit and paid 190.3m in taxes.

Osborne callsbig businesses

home to UK plcBUDGET

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NORTH SEA oil firms were leftaghast by the chancellors surprisetax hike on offshore fuel explo-

rations yesterday, which has beenimposed immediately to fund thefuel duty cut.

North Sea-focused oil explorerssaw their shares hammered by thenews yesterday that an existing levyon profits from UK production willrise from 20 to 32 per cent fromtoday.

George Osborne said the duty is tocompensate for soaring oil costs, andthat it would be scaled back if oilprices dip below $75 a barrel.

While the Treasury will now con-sult with oil companies, industrybodies reacted furiously to the levy.

Oil companies make long-terminvestment decisions on a stable andpredictable tax regime. This is nothelpful, Steve Jenkins, chief execu-tive of Nautical and head of the Oiland Gas Independents Association,told City A.M. It goes against the idea

of growth, jobs and exports.Analysts at Numis Securities said

the unexpected tax jump could cutAim-listed Xcites net asset value byas much as 40 per cent to 370p.

Premier Oil, which has nearly two-thirds of its assets away from theNorth Sea, could see net asset values

drop by 2.5 per cent, Numis said.This one size fits all approach toincreasing the tax rates will affectsome fields more than others,Alan McCrae, head of energy taxat PwC, told City A.M. Unfortunatelythere might be a number ofprojects where companies decidethat the risks of making furtherinvestments arent worth it anymore.

NON-DOMS escaped the budget with-out the crackdown some were expect-ing but Osborne says he will raise anextra 200m from them over the com-ing years.

A raft of new rules were applied tonon-doms people residing in the UK,but not domiciled here to avoid payingUK tax on their foreign earnings, the

most striking of which was an addi-

tional 20,000-a-year charge to thosewho have been in the UK for 12 yearsor more. This is on top of the existing30,000 charge for those residing inthe UK for seven years or more to total50,000.

However, Osborne also scrapped thetax charge for those bringing moneyinto the UK to invest in a British busi-ness. He also said there will be noother major charges for non-doms

over the course of the parliament a

move aimed at creating stability thatwill stop wealth generators from leav-ing the UK.

The rules will apply to the 120,000overseas taxpayers who are resident inBritain. There were fears a crackdowncould damage the competitive advan-tage enjoyed by many non-doms anddrive them out of the country, alongwith their lavish spending and the taxreceipts they provide the Treasury.

Non-doms escape crackdown but UKwill reap extra 200m, says Osborne

Oil explorersrage at 32pcNorth Sea taxBYMARION DAKERS

ENERGY

BY STEVE DINNEEN

TAX

News | Budget Special 21CITYA.M. 24 MARCH 2011

THE chancellor scrapped a plannedrise in air passenger duty yesterday,but admitted that legal difficultieshave shelved a change to aviation tax.

Air passenger duty will be frozenthis year, with a hike linked to theretail price index planned for April2012, George Osborne said.

The government said in the emer-gency June Budget it would look toswitch aviation tax from a per-pas-senger to a per-plane duty, to ensureplanes flying half-empty would be

charged the same as a full flight.Osborne also stopped short of

introducing a Learjet levy, or taxon business jets, trailed earlier thisweek to close a loophole exemptingcorporate jets from the air passengerduty.

Osborne instead delayed the planto 2012, after launching a consulta-tion on the structure of the tax.

Lord Sugar slammed this proposalas a PR stunt, claiming the revenueon private flights, based on the sameduties paid by holidaymakers, willnot add up to a row of beans.

Tourist tax rise scrapped

and Learjet raid delayedAVIATIONGEORGE Osborne slapped a mini-mum price on carbon emissions per-mits in yesterdays Budget, which isset to hammer energy producerswhich rely on fossil fuels and add upto 17 a year to home energy bills by2016.

The carbon price floor will forcepower generators to pay at least 16per tonne of carbon produced from2013 around 5 above the expected2013 price of an EU carbon permit.

The Treasury will pocket the differ-ence if the EU permit price sinksbelow the new UK minimum, earn-

ing it up to 1.4bn a year by 2016 afterthe price floor rises to 30 a tonne.

EU carbon permits for Marchclosed at 16.42 (14.25) per tonne onthe ICE Futures market yesterday,meaning 1.75 would go to theTreasury at the current price to makethe difference up to the 16 floor.

Energy stocks including Drax,Scottish & Southern and Centrica fellafter the speech.

EDF, which plans to expand itsnuclear presence in the UK, wel-comed the tax rise. It will supportthe economics of renewables and car-bon capture and storage and canreduce the need for specific measuresto support those technologies, said

chief executive Vincent de Rivaz.Consumer groups warned that the

price increases for business would bepassed on to consumers, althoughsome experts were sceptical of theTreasurys revenue forecasts.

The carbon price floor is in linewith current market expectations forcarbon prices, so there is a reasonableprospect of the floor providing cer-tainty to investors, without embed-ding a big extra cost to the powersector, said PwC sustainability part-ner Richard Gledhill.

Greenpeace complained that theprice floor handed a big subsidy tonuclear power plants, which emit lit-tle carbon.

Carbon floor hits power firmsBYMARION DAKERSENERGY

North Sea oil explorers will see their levies rise from 20 to 32 per cent Picture: GETTY

ANALYSIS l Premier Oil

p

10 Jan 28 Jan 17 Feb 9 Mar

2150

2000

1850

1,972.0423 Mar

FUEL DUTY CUT PAID FOR BY RAIDING NORTH SEA OIL PROFITS

GEORGE Osborne sweetened hisBudget for consumers with a surprise1p per litre fuel duty cut, effectivefrom 6pm yesterday.

The tax cut, announced at the endof Osbornes 56-minute Budgetspeech yesterday, will be funded by a12 percentage point tax hike onNorth Sea oil exploration.

A fuel stabiliser will also attemptto cushion motorists from some ofthe pain of higher oil prices.

Duty on petrol will not rise aboveinflation until the price of a barrel ofoil falls below $75, and after that thehike would be 1p above the retailprice index rate of inflation.

Fuel duty will rise in line with RPIfrom 1 January 2012, after Osbornedelayed the inflation-linked rise duenext week.

Labour lampooned Osborne forkeeping the VAT rise on fuel, whichthe opposition party had lobbied tooverturn.

Labour pledged in its 2010 budgetto raise fuel prices by 1p plus infla-tion each year between 2011 and2014, but oil prices have risen fromaround $80 a barrel last March tomore than $115.

The AA said the fuel tax cut

showed that the chancellor had lis-tened to the concerns of motorists.

Motorists win 1pfuel duty cut toease pain ofrising oil prices

CONSUMER

THE GOVERNMENT has asked regu-lators to investigate whether bankshelp to entrench the Big Four audit-ing firms dominance throughrestrictive lending agreements withcompanies.

The Budget included a call to theOffice of Fair Trading to probewhether bank covenants lock outsmaller auditors.

The Financial Reporting Council

had expressed concern to lawmak-ers last year that clauses in somecovenants force companies to useonly one of the Big Four accountingfirms PwC, Deloitte, KPMG andErnst & Young.

The Financial Reporting Councilsaid yesterday that the governmenthad listened to its concerns andhoped the OFT would push aheadwith a probe.

Banks face probe for theiruse of Big Four auditorsENFORCEMENT

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PwCs BUDGET TEAM SAYS:

Adam will be encouraged by theannouncement of further gov-ernment investment of 2bn inthe Green Investment Bank. Thiswill specialise in lending for envi-ronmental projects and shouldbe up and running by 2012.

He will also be buoyed by thetwo per cent reduction in corpo-ration tax from April 2011 andthe further one per cent falls ineach of the following three taxyears.

New pension rules dictatethat from 5 April 2011 Adamwill be able to make a gross con-tribution of up to 50,000 intohis SIPP plus bring forward anyunused relief from the three pre-vious tax years based on a50,000 annual limit.

The one per cent increase innational insurance will unfortu-nately hit Adams take homepay.

He should also prepare him-self for being unable to claimchild benefit given that he is ahigher rate tax payer. It is envis-aged that this will be taken

away in January 2013.

WHAT DOES THE CHANCELLORS BUDGET MEAN FOR YOU? by Phoebe Torrance

CATHERINE GANNON, 48MANAGING DIRECTOR OFCITY LAW FIRM GANNONSLAW LLPCatherine is single with twochildren, earns a grossincome of over 100,000 a

year and pays a mortgageon her family home. She hasa share portfolio and alsohas mortgages on variousinvestment properties. Shedoes not drink or smoke.She has not contributedmuch to her pension plans.

PwCs BUDGET TEAM SAYS:

Catherine was already resigned to the fact shewill be losing her entitlement to child benefitfrom 2013 and this has not changed followingthis budget.

She is unlikely to benefit much from theincreased personal allowance as her incomefalls into a band where this is eroded by 1 forevery 2 she earns over 100,000.

There was some good news for Catherine,with the capital gains tax annual exemptionincreased to 10,600 should she decide to sell

some of the investments in her share portfolio.

There is potential for her to diversify theseinvestments and invest in EnterpriseInvestment Schemes.

The government announced an extension ofthe tax advantages the highlight being a 10per cent increase of tax relief to 30 per cent.She may also wish to start paying into her pri-vate pension plans, with the gross annual limitsfrom 6 April 2011 increased from 30,000 to50,000.

Catherine's healthy lifestyle choice means sheis sheltered from the usual alco