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BUSINESS WITH PERSONALITY

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Knowledge is power

www.cassmba.com

Come and find out more about the Cass MBA programmes on 14 May 2011

Register at www.cassmba.com

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FTSE 100 5976.77 +56.79 DOW 12,638.74 +54.57 NASDAQ 2,827.56 +12.84 /$ 1.64 unc / 1.14+0.01 /$ 1.43 -0.02

Fears thatGreece setfor bailout

THE UK will strive to avoid paying forany second Greek bailout throughEuropean channels, chancellorGeorge Osborne said yesterday, asspeculation about another Greek eco-nomic crisis intensified.

We certainly dont want to be partof any bailout of Greece, a second

bailout of Greece, he said.However, business secretary Vince

Cable seemed to take a different linewhen asked the same question, mere-ly pointing out that the UK is obligedto pay for international rescue pro-grammes through the InternationalMonetary Fund (IMF) and the EU.

Speculation that Athens mightneed a second cash injection hasmounted as yields on its two-yeardebt have soared to well over 25 percent despite its 110bn (96.6bn) res-cue last year.

If Greece does need another bailoutto avoid defaulting, the UK is on thehook for 4.5 per cent of the coststhrough its shareholding in the IMF, acontribution that Osborne is not pro-posing to fight.

But the chancellor does intend totake an aggressive position againstthe use of the 60bn EuropeanFinancial Stability Mechanism (EFSM)for any new bailout, which the UK

would have to guarantee to the tuneof 13.5 per cent.

Instead, the UKs position will bethat the Eurozone-backed 440bnEuropean Financial Stability Facility(EFSF) should pick up the tab.

However, voting on the matter by27 EU states takes place under quali-fied majority, meaning London doesnot have a veto. And the 15 states thatalready contribute to the EFSF arelikely to want the 12 non-Eurozonecountries help with any further

bailout costs. There are reports thatinstead of taking another rescue,Greece could call on the EFSF to buyits debt next year if it is still unable to

borrow privately.

There were rumours Friday thatGreece planned an exit from theEurozone.

BUSINESS FEATURE: P22

BY JULIET SAMUEL

EUROZONE CRISIS

SCOTTISH independence would begood for the British economy, accord-

ing to members of our Voice of theCity panel.

Fifty one per cent of the panel,which has been specially recruited torepresent a cross-section of Londons

business and financial community,said an independent Scotland would

be either very good or somewhatgood for the economy in the rest ofBritain. Nineteen per cent of thepanel said that Scottish independ-ence wouldnt make much of a differ-ence either way.

Just thirty-per cent said independ-ence would be either somewhat bador very bad for the economy, aresult that will fuel fears amongunionists and supporters of the UKthat Londons business and financialcommunity is turning its back onScotland.

The findings come after the pro-independence SNP won a stunning

victory in the elections to the ScottishParliament on Thursday.

The Scottish Nationalists won 69seats, giving them a comfortable over-all majority, even though the elec-toral system was specifically designedso that one party could not win over-all control.

Labour, which lost seven seats, andthe Liberal Democrats, which losttwelve, suffered a crushing defeat.

The Tories also lost five seats.SNP leader Alex Salmond used his

victory speech on Friday to announcethat he would hold a referendum onScottish independence within five

years. Yesterday, the coalition govern-

ment at Westminster said it wouldnot move to block the referendum,although Prime Minister DavidCameron has vowed to fight it if one

is called.The majority of our panellists feltthe UK economy would be better off

without Scotland, which has a bloat-

CITY: SCOTS EXITGOOD FOR UK PLC

BY DAVID CROWPOLITICS

www.cityam.comIssue 1,377 Monday 9 May 2011 FREEBUSINESS WITH PERSONALITY

Certified Distribution

28/02/11 - 03/04/11 is 105,180

27%

26%

25%19%

20%

%

11%Very

bad

Very good

Neithe

rgood

orbad

Somewhat good

Somewhatbad

A happy AlexSalmond enjoysthe poll results

Picture: REUTERS

ANALYSIS: How the Panel voted

ed public sector that accounts for amuch higher percentage of GDP thanis the case in London and the homecounties.

Scotland should leave UK and jointhe Eurozone they are made foreach other, said one panellist.

However, there was concern

among some panellists that an inde-pendent Scotland would be economi-cally unstable, and would eventually

be bailed out by Westminster.

One panellist said: If Scotland is tobe independent, we must ensure thatit is not eligible for any UK hand-outs they cannot have their short-cake and eat it.

The views of the panel are surpris-ing because most panellists (53 percent) describe themselves as

Conservatives, a staunchly pro-unionparty, while many other members ofour panel describe themselves asindependent but are also generally

Tory voters.Meanwhile, an overwhelming

majority of panellists (75 per cent)believe it would be wrong for DavidCameron to pull the plug on thecoalition despite divisions within thegovernment.

If you wish to apply to join our panel of

business and finance professionals, andtake our weekly, 30-second email survey,please go to www.cityam.com/panel

DAVID CROW: P10

In association withPoliticsHome.com

Apply to join today atwww.cityam.com/panel PoliticsHome.comPoliticsHome.com

Sport:

MAN UTDBEGIN TITLEPARTY p32

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News2 CITYA.M. 9 MAY 2011

Apple brandtops the tableAPPLE has become the most valuablebrand in the world, at the expense ofits increasingly bitter rival Google.

Steve Jobs firm has an estimatedbrand value of $153bn (93bn) accord-ing to WPP subsidiary BrandZ.

Apple knocked Google off its perchfollowing a run of four years with thesearch giant at the top of the table.

US technology giants dominatedthe rankings, with Apple, Google,IBM, Microsoft and AT&T all rankingin the top 10.

The results are similar to last yearspoll, in which Google came top, fol-lowed by IBM, Apple and Microsoft.However, Apples brand growth hasbeen meteoric, rising in value from$83bn last year and from just $16bnin 2006. In this time Apple led by

talismanic boss Steve Jobs has seenunprecedented success in its iPhone,iPod and iPad ranges and has flownpast iconic brands inclusding Cokeand McDonalds.

BrandZ says it uses a number of fac-tors to determine the list, includingthe contribution of the brand to thecompanys earnings and what peoplethink about the firms branding.

Last year Vodafone was the soleBritish company to make the top 10, with its branding estimated to beworth around $44bn a decrease of17 per cent on 2009.

BY STEVE DINNEEN

TECHNOLOGY

WHAT THE OTHER PAPERS SAY THIS MORNING

Public sector pay still needs reform

TIMES are becoming tougher for thepublic sector, which started sheddingjobs last year and whose members arenow facing a two-year pay freeze andan increase in pension contributions.But while the pain will be very real,austerity in the public sector needs tobe put into context.

Research from Policy Exchangereveals that pay in the public sectorcontinued to pull away from that inthe private sector last year. Public sec-tor workers are now paid more thanprivate sector workers on every meas-ure one chooses: the mean (or average)

salary in the public sector worker is 4per cent higher, the median (or typi-cal) pay packet is 16 per cent higherand median hourly pay is 35 per centhigher (because public sector workers

work fewer hours on average).The reports own measure suggeststhat the annual pay premium in thepublic sector is 24 per cent and a mas-sive 43 per cent once pensions areincluded. For the second year in a row,mean pay was higher in 2010 in thestate sector than in the private sector.It is a remarkable, epoch-definingshift and it comes even though pub-lic sector productivity dropped by 0.3per cent per year between 1998 and2007, while it increased in the privatesector by 2.3 per cent per year. Onlythe best paid private sector workersstill earn more than their public sec-tor counterparts.

These figures do not adjust for skillsor experience. But controlling for fac-tors such as education, age and quali-fications (all of which are higher inthe public sector) can be misleading,

as Ed Holmes and Matt Oakley, thereports authors, argue cogently. Thepublic sectors overemphasis on for-mal training, propensity to value qual-ifications judged as unproductive in

the private sector and tendency toexaggerate the importance of seniori-ty, could all contribute to the appear-ance of a more skilled, sophisticatedand experienced workforce than is infact the case. Putting these caveats toone side, after taking into account dif-ferences like age, experience and qual-ifications, but ignoring productivityand the like, the hourly pay premiumfor a public sector worker hit 8.8 percent as of December. Such figures areclearly an under-estimate of the size ofthe gulf and pay is only one factordetermining a workers rewards.

State employees tend to receivesafer, index-linked pensions, enjoylower working hours, longer holidays,higher job security (the majority ofthe job cuts planned will be achieved by not replacing retiring staff orthrough early retirement, except in

sectors with low staff turnover such asthe police). Job satisfaction may alsobe higher in the public sector: if so,this ought to mean lower wages asjobs that workers enjoy doing are paid

less than those they hate.The two-year pay freeze will reducethe differential by just 3.4 per cent. Itwould have to last until 2018 to elimi-nate it altogether, including pensions.This would be unfair: good staff wouldquit, bad staff would stay and effortwould not be rewarded. Instead, thepay freeze on individual salariesshould be replaced by a freeze in thetotal pay bill for public sector organi-sations. This would allow the deficit tobe cut, good public sector workers tobe paid more and bad ones who areenjoying an easier, more comfortablelife than their hard-pressed privatesector counterparts to be paid less orremoved. There is nothing wrong withhigh pay but only when it isdeserved and affordable.

[email protected] me on Twitter: @allisterheath

ENERGY secretary Chris Huhne yester-day denied that he avoided a drivingban in 2003 by getting someone else totake the blame for his speeding.

The allegations, which have beencirculating for months, appeared to beconfirmed by Huhnes estranged wifeVicky Pryce of FTI Consulting.

Asked in an interview if it was truethat the Cabinet minister had con-vinced someone else to take the blame

for his driving violation when he wasan MEP, she said: Oh gosh. Yes, hedid. She added: There is such hugepressure on politicians to be every-where at once... and he does drive a bitlike a maniac.

Huhnes spokesman at first refusedto respond to the claims and then laterissued a denial, saying the allegationsare simply incorrect. Huhne was,however, banned from driving afterthe alleged incident took place for adifferent offence of driving while talk-ing on his mobile phone.

BY JULIET SAMUEL

POLITICS

Huhne in driving ban rowEnergy secretary Chris Huhne has denied getting someone else to take the blame.

NEWS | IN BRIEF

Silentnight bought by HIGBritish bedmaker Silentnight has beenrescued from collapse by HIG Europe,the European arm of global private equi-ty investment firm HIG Capital. TheLancashire-based firm, which has a100m hole in its pension fund, wentinto administration over the weekend

after failing to win the backing of credi-tors to cut its debts. But the company,and some 1,250 jobs, was saved by theHIG deal.

Citigroup to advise KazakhstanCitigroup has been named lead adviserto the Kazakhstan government for itsPeoples IPO programme, which willallow Kazakhstani people to invest instate-owned companies, as well as raisecountrys profile as an investment hub.UBS, JSC Visor Capital and JSCKazKom Securities will also advise thegovernment. PwC has been chosen as itsaccountant and Cleary Gottlieb Steen &Hamilton and GRATA Law Firm willoffer legal advice. Merlin will undertakePR duties. Several national assets will beavailable to citizens through the scheme,which will be formally considered inJuly.

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 StrimpelSports Editor Frank DalleresArt Director Craig GaymerPictures Alice HeppleCommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head 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]

Apple boss Steve Jobshas see his companysbrand value rocketfrom $16bn in 2006 to$153bn this year.

UBS FEARS MISSING AMBITIOUS TAR-GETSUBS bankers have privately concededthat the Swiss financial servicesgroup is unlikely to meet ambitiousperformance targets as it realigns itsbusiness in response to new rules oncapital. Oswald Grbel, chief execu-tive, surprised analysts last month bymaintaining his medium-term goalsof SFr20bn (14bn) in annual rev-enues and SFr6bn in pre-tax profitsfor the groups recovering investmentbank.

CLIMATE PANEL CALLS FOR TWO MOREREACTORS Two more nuclear reactors thanenvisaged initially might be neededwithin 20 years if carbon reductiontargets are to be met in a cost-effec-tive way, the governments

Committee on Climate change hasfound.

CEMENT DEAL SALES IN PIPELINE

Lafarge and Anglo American are lin-ing up asset disposals to pay downdebt and avoid anti-competitiveaction by regulators as the companieslook to combine their UK cement businesses. The potential join ven-ture, announced in February withexpected combined sales of 1.8bn, isplanning to sell about 600m ofcement plants, quarries and ready-mix concrete mills, according to peo-ple familiar with the situation.

ECI PARTNERS PAYS UP TO 50M FORCARTRAWLER STAKEECI Partners, the UK mid-market pri-vate equity firm, has paid about 40-50m (35-44m) for a 50 per centstake in CarTrawler, a Dublin-basedprovider of online car rental distribu-tion systems. The deal which valuesCarTrawler at 10 times this yearsearnings before interest, tax, depreci-

ation and amortisation,is ECIs fourthacquisition in seven months.

GARTMORE FOLLOWS NEW STAR INTOTHE HISTORY BOOKS The Gartmore name will disappearfrom the City next month, markingthe final demise of a 42-year-oldfinancial institution. The fund man-ager, founded in 1969 by the financialservices group British &Commonwealth, will be rebranded aspart of its new owner HendersonGroup. Analysts had thought thatHenderson might retain Gartmore asa brand.

BORDEAUX SET TO CASH IN ON CHI-NESE DEMANDThe price of a bottle of the very finestBordeaux is about to soar higher thanever, driven up by a second successiveexceptional vintage and by Chinasinsatiable thirst for an investment.The chteaux are saying: Wed like

to ask just a little bit more than lastyear, said broker Miguel Coumau.

SWITZERLAND THREATENS TO CLAMPDOWN ON TAX EXILESFinanciers who quit London to takeadvantage of Switzerlands low leviescould be hit with bigger bills amid abacklash against foreign tax exiles. Araft of Swiss cantons are holding pub-lic referendums to abolish the taxdeals for rich foreigners. On Sunday,Thurgau will vote on whether to scrapthe deals. Another five cantons are setto hold similar referendums over thenext few months.

JAGUAR LAND ROVER MEETS WITHGOVERNMENT OVER 750M ENGINEPLANT PLAN Jaguar Land Rover bosses have heldtalks with the Government about sup-port for bringing a new 750m engineplant to the UK as the luxury carmaker steps up its ambitious expan-

sion plans. It has identified threeareas to potentially base the plant.

GUIDANCE IS SOUGHT ON PRIVATETRADING OF CLOSELY HELDCOMPANIESSecondMarket Holdings, one of thebiggest players in the booming shad-ow market for trading shares ofclosely held companies such asFacebook and Twitter, is seeking USapproval for how it handles thosetransactions. The New York firm hasheld preliminary talks with theSecurities and Exchange Commissionabout a potential no-action letterthat would essentially guideSecondMarket on how to operate.

HOUSE RELEASES DO NOT TRACKBILL A draft House bill would prohibitcompanies from tracking children onthe Internet without parental con-sent, restrict online marketing to

minors and allow parents to elimi-nate kids personal information.

WHAT THE OTHER PAPERS SAY THIS MORNING

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BARCLAYS is to follow Lloyds in aban-doning an industry-wide appealagainst a high court ruling that willcost banks billions. The decision willleave other banks with little choicebut to drop the case against the FSA onpayment protection insurance (PPI).

But City A.M. has learned thatdespite the likelihood of the banks giv-ing up on the appeal, the industry isdiscussing plans to strongly condemnthe FSAs enforcement of what theysay is retrospective justice and todemand reassurance from the regula-tor that it will not act in the same wayon other issues.

The row concerns the FSAs insis-tence that banks apply guidanceissued in 2010 to complaints concern-

ing the sale of PPI that occurred beforethat date. The FSA says that the guide-lines merely clarified practices that

banks should have been following pre-2010, a stance that infuriates thebanks.

The 2010 guidelines imposed moreonerous requirements to, for example,make sure customers understand whether PPI is appropriate for them.But the British Bankers Association(BBA) argued unsuccessfully that theFSA was asking banks to apply newrules retrospectively.

In a sign of banks fury, it is likelythat the BBA will tomorrow take theunusual step of criticising the industryregulator and calling for the FSA toreconsider its approach.

The BBAs Angela Knight told CityA.M.: We need to have a discussionabout the whole principle irrespectiveof what we decide on the appeal.

The FSA is unlikely to take kindly tocriticism. A source close to the regula-

tor said: It was a challenge to our whole way of life because principlesare central to what we do.

Barclays nextto drop caseBY JULIET SAMUEL

BANKING

THE Office for National Statistics(ONS) will look into claims thatchanges to its data collection meth-ods may have skewed output figuresfor the building sector.

Construction executives say thechanges led companies to submitbusiness data from six weeks earlier,

rather than only during that month. The shift could mean GDP was

overestimated towards the end of2010 but underplayed in the firstquarter of this year.

Rather than the disappointing 0.5per cent GDP growth logged for thefirst quarter, the true figure is likelyto have been around 0.8 per cent.

The ONS has now launched aninquiry into the disputed figures andsays it will make the information

available to the public in July.SEE CBI ON THE ECONOMY: P16

Change in way ONS collects datacould have skewed GDP figures

UK ECONOMY

FORMULA One boss Bernie Ecclestonehas warned it would be suicidal forthe sport to accept a move onto Sky aspart of a potential News Corp takeover.

Ecclestone has fiercely opposed thefriendly approach to F1 owner CVCPartners by Rupert Murdoch andItalian investment firm Exor, whichhas a 30.5 per cent stake in Ferrari

owner Fiat SpA.CVC has maintained its stance thatits stake, which it snapped up for$1.8bn (1.1bn) in 2006, is not for sale.

News Corp will find it almost impos-sible to build up a holding in the sportwithout the blessing of CVC, whichowns 63.4 per cent of F1s Jersey-basedparent company Delta Topco.

News Corp has said it will approachminority shareholders, presumablywith a view to building a stake in the

sport. However, CVC has the right tofirst refusal on all shares in DeltaTopco and a right to veto a sale.

More than 14 per cent of the sport isowned by Ecclestone, either personallyor through his Bambino family trust,whose position on the sale could hard-ly be clearer.

News Corp is expected to offer7.5bn for the 61 per cent of BSkyB itdoes not already own after gainingprovisional approval for the bid.

Ecclestone says Sky deal wouldbe suicidal for Formula OneBY STEVE DINNEEN

BUSINESS OF SPORT

News 3CITYA.M. 9 MAY 2011

Barclays Bob Diamond will follow Lloyds on PPI Picture: Micha Theiner

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SONY endured another nightmare weekend as hackers heaped moremisery on the embattled firm.

It has suffered a series of setbackssince falling prey to a massive securi-ty breach that compromised theaccounts of more than 100m cus-tomers. It was forced to step in afterhackers posted personal details notincluding credit card information of around 2,500 Sony users on theinternet.

The information has since beenremoved but it was yet another starkreminder of the scale of the breach.Last week Sony was forced to admit25m more customers than firstthought had their personal informa-tion stolen when it revealed a second breach at the Sony OnlineEntertainment (SOE) division of thecompany.

It is understood both divisions weretargeted as part of the same sustainedattack but that Sony was unaware ofthis until much later. It was forced toshut down SOE in yet another blow toits sales. Sony has denied hackersattempted to sell it a list containing

details of its users. The electronics giant said it has

begun to restore parts of itsPlayStation Network after it becamevictim to one of the biggest ever cyberattacks last month.

However, customers are still unableto access the gaming and entertain-ment hub more than two weeks afterthe initial breach, with Sony desper-ate to ensure another attack wouldnot succeed. Sony initially pledged tohave the service up and running inabout a week.

Calls for boss Howard Stringer toquit have intensified, with gamersfurious about the ease with whichhackers were able to gain access tothe network and the subsequentclean-up operation. In response Sonyhas begun a PR-drive, including giv-ing users free access to its premiumcontent and paying credit cardrenewal fees in affected areas.

Hackers give

Sony anotherbad weekend

HSBC will report its first ever quarter-ly results today ahead of a strategicoverhaul to be presented to investorsby chief executive Stuart Gulliver onWednesday.

The bank has previously only provided a quarterly trading update with few figures, but it has nowdecided to publish full results every

quarter. The move comes as Gulliver isexpected to unveil a plan to ditchlarge parts of HSBCs business, which will involve selling off billions inassets, so as to streamline the bank.

He has also promised to givedetails of a crackdown on expenses,saying the banks 55 per cent cost-to-income ratio is totally unaccept-able and that it will be broughtdown to a maximum of 52 per cent.

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HSBC prepares forstrategic overhaul

BY STEVE DINNEEN

TECHNOLOGY

Sony executives bowin apology for themassive data theftthat has rocked thecompany.

Picture: GETTY

BY JULIET SAMUELBANKING


Welsh-born Sony bossHoward Stringer hasfaced calls to resignover the data breachat Sony.

THE number of aspiring first timebuyers is at its highest for a year aspeople increasingly expect houseprices to recover.

One in three respondents expecthouse prices to increase, accordingto a Rightmove survey.

At the beginning of the year, justover one in five prospective buyersexpected house prices to lift.

Yet many prospective buyers maystill be kept off the property ladder,with 44 per cent citing difficulties

in raising a deposit as their mainconcern.

Over one in ten (11 per cent) stillfear being unable to keep up month-ly mortgage repayments.

Demand from first time buyers isat a peak in the capital, where 42per cent of people expecting to buya property in the next year would bemaking their first purchase con-siderably above the national aver-age.

Encouragingly, our survey foundthat just under 40 per cent ofprospective first-time buyers statedthey would be more likely to buy anew build property as a result of thegovernments FirstBuy scheme,

said Rightmove director MilesShipside.

Aspiring first time buyers believehouse prices are back on the up

BY JULIAN HARRIS

HOUSING

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BRITISH gambling company RankGroup has urged shareholders to turndown an offer from majority share-holder Guoco, after the Hong Kong- based group made a mandatorytender after increasing its stake toalmost 41 per cent.

The offer is being presented by bothsides as a regulatory formality to com-ply with UK takeover rules, whichrequire an offer to be made once ashareholder crosses a 29.9 per centthreshold in a company.

Guoco, run by Malaysian billionaireQuek Leng Chan, has said that it is sup-portive of the incumbent Rank man-agement, and that it is not seekingboard representation or to increase itsstake further.

The investment company has alsosaid that its offer price of 150p pershare is final, valuing Rank at 585m just a 0.7 per cent premium to theGroups closing price on Friday.

A source close to Rank, which owns

Mecca Bingo and Grosvenor Casinos,said that there was no reason to believe Guocos intentions were any-thing other than stated, and that theoffer period was expected to pass with-out a change in the tender.

Rank has long been the subject oftakeover speculation, with expecta-tions of a sale raised after it issued aprofit warning in 2007, and again fol-lowing the sale of its pension fund toGoldman Sachs in early 2008.

But the Group has so far resistedsuitors, instead refocusing the busi-ness on its core gambling operations.

All bets off onbid for RankBY ELIZABETH FOURNIER

COMPANIES

THE SURPRISE tax raid on oil and gasfirms could prompt companies to cutcapital expenditure by 50bn over thelife of the North Sea reserves, a reportis set to claim this week.

Oil & Gas UK has overhauled itsannual forecasts following the shocktax rise announced in the Budget inMarch, and is due to report its find-

ings later this week. The industry group has already backed research by AberdeenUniversity, which found that 50bn incapital expenditure and 30bn ofinvestments would be shelved inresponse to the overnight rise in sup-plementary tax from 20 to 32 percent.

At the start of 2011, investment inthe UK-controlled parts of the NorthSea was rising sharply after f ive years

of decline, the firm said in a reportbefore the tax hike.Up to 24bn known barrels of oil

equivalent are still up for grabs in theremaining North Sea reserves, whichare expected to last until the 2040s.

The lobby group had forecast inexcess of 11bn going to the govern-ment coffers this year as a result ofdirect North Sea taxation but isexpected to reveal a lower estimateonce its report is signed off this week.

Oil and gas firms could scrap50bn of North Sea projectsBYMARION DAKERSENERGY


Quek Leng Chans Guoco Group has made a mandatory offer for Rank Picture: GETTY

A low-grade offer and stagnant cashcould be enough to spark interest THOUGH the offer from Guoco isseen as benign, the attention is like-ly to reignite interest in Rank as atakeover target particularly after2011 figures so far showed a two percent rise in revenues year on year.

The double whammy of the smok-ing ban and the introduction of newGambling Act provisions in summer2007 weighed heavily on the group,and a profit warning in Octoberthat year sent shares tumbling.

But though Rank has lost morethan half its market value since2007, fortunes seem to be on the up.

In particular, concentrating on itscore gambling businesses seems tohave paid off profit forecasts weretopped this year despite a poor per-

formance in Spain.

Rank is also building up reserves. After a tax rebate of 154m inMarch, the company has the fire-power to expand, but is likely towait for the outcome of an appeal in2012 before spending any cash.

Despite a recovery in its shareprice over the past 12 months, Rankis still underperforming the leisureindustry. Add that to an increasingcashpile, and the company is becom-ing an attractive prospect for suit-ors.

Investors would be wise to com-mit now before speculation drivesprices higher.

BOTTOMLINEAnalysis by Elizabeth Fournier

ANALYSIS l Rank Group

p

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THE DIRECTORS who ran British car-maker MG Rover at the time of its col-lapse have been banned frommanaging companies for up to six

years. The so-called Phoenix four of

John Towers (pictured), Peter Beale,Nick Stephenson and John Edwards

voluntarily agreed to the ban aftera lengthy government investiga-tion. They will each serve varyingdisqualification periods of

between three and six years. The group bought

Birmingham-basedMG Rover, Britainslast volume car-maker, for 10in 2000t h r o u g ht h e i rinvestment

v e h i c l eP h o e n i x

V e n t u r eHoldings.

Led by Phoenixchairman JohnEdwards, the group

went on to paythemselves lavish

salaries and pen-sions before themanufacturer col-

lapsed in 2005, owing 1.3bn to credi-tors and at the cost of 6,500 jobs.

Along with MG Rover chief execu-tive Kevin Howe, the Phoenix fourpaid themselves a total of 42m bythe time of the failure.

Beale receives a six-year disqualifi-cation, whilst Towers and Stephensonhave been banned for five years.

Edwards has been disqualifiedfor three years, whilst Howe

did not receive a ban. The disqualificatio

come on the back of alengthy and complexinvestigation by the depart-

ment of business, innova-tion and skills intothe failure thatfound the directorsunfit to run a busi-ness.

Ed Davey, the gov-ernment ministerresponsible for cor-porate governance,said: The out-come of this caseserves as an impor-tant reminderthat unaccept-able conduct bycompany direc-tors can result in

lengthy periodsof disqualifica-tion.

Phoenix four

banned fromrunning firmsBYRICHARD PARTINGTON

MANUFACTURING


European Central Bank set for a bumpy ride

JEAN-CLAUDE Trichet says theEuropean Central Bank (ECB)over which he presides wants toremain flexible. Let us hope his

flock of hawks and doves means this

because the next few months aregoing to be a bumpy.

What is becoming increasinglyclear is that the global manufactur-ing rebound is slowing down. This is

showing up in the numbers fromEurope, the United States and evenAsia. For the markets this realisationhas already generated a massive movein commodity prices. For central

bankers in Frankfurt the volatilitywill create multiple headaches.

The first problem for the ECB isthat Germany is a high beta play onglobal manufacturing. Its recentgrowth has been truly fantastic but as

we learnt in 2008 and 2009, when the

world slows Germany slows evenfaster. I am not suggesting that itseconomy is going to fall off a cliff butthe brakes are being applied and thedata will increasingly reflect this.

Then there is a transatlantic issueto deal with. While the economicdeceleration probably wont promptBen Bernanke to launch QE3, it willfurther delay any tightening of

American monetary policy. If the Fedis on hold then the ECB can only go sofar. If it races ahead then the yieldspread will generate a Euro/Dollarrate (say 1.60 or higher) that willchoke off growth even faster.

The third problem is more of a

reputational one. If the slowdowndoes become sticky we are likely tosee commodity prices settle out at amuch lower level. Red-faced policymakers, who wanted to sound hawk-

ish to prevent a wage-price spiral, mayhave to change their tune rapidly asthe inflation rate is checked.

Then there is the issue of Greece. Itis now clear that Athens will have torestructure before 2013. Theunknowns in this scenario arealready making the ECB sweat. Whena decision is taken, the Central Bankis going to have to be phenomenallynimble to navigate the Eurozonethrough what is likely to be its most

difficult period to date.The central dilemma for the ECB is

that it could soon face an inflationrate that undershoots rather thanovershoots its target. It will also face a

potentially explosive peripheral prob-lem. Will it be willing to cut in thisscenario? I would suggest not. It wont

want to give back what it has alreadytaken. However, hiking in this envi-ronment will be difficult to justify.

The market may be making a mistakein pricing in multiple rates rises.

Watch CNBC today for more on thisstory as we launch our new London studio(see diary, page 12). Guy Johnson presentsCNBCs European Closing Bell.

CNBC COMMENT

GUY JOHNSON

TIME LINE | MG ROVER AND THE PHOENIX FOUR

May 2000Phoenix Venture Holdings, a consortium ledby former Rover chief executive John Towers,buys MG Rover from BMW for just 10.November 2002The firm posts a loss of 95m, missing amanagement target to break even.February 2004It emerges that four men from Phoenix John Towers, Nick Stephenson, Peter Bealeand John Edwards and chief executiveKevin Howe have been paid 31m, despitefalling sales. An outcry leads to the fourbeing grilled by MPs later in the year.7 April 2005MG Rover goes into administration after sup-pliers refuse to deliver to the firms

Birmingham plant.15 April 2005MG Rover collapses, leaving 5,000 workersand a further 15,000 in the supply chain fac-ing redundancy.19 April 2005Scrutiny of MG Rovers accounts shows cashblack holes and accountancy errors thatleave millions of pounds unaccounted for.31 May 2005Then trade secretary Alan Johnson orders afull independent inquiry into the collapse.11 September 2009The report finds the four paid themselves atotal of 75m from a BMW dowry payment

after the group bought the firm from theGerman carmaker.

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Salmonds momentum setscourse for independence

SO Scotland is on the road to inde-pendence. There are many who say it

will never happen, but they are thesame people who said the SNP wouldnever be the largest party in theScottish Parliament, let alone win anoutright majority. They are the people

who said that devolution would kill offsupport for independence, and thatthe pro-union Labour party wouldalways reign supreme.

Polls show that only a minority ofScots 30 per cent or so supportindependence, but political momen-tum is a strange thing and SNP leader

Alex Salmond has it in spades.Where did it all go wrong? It would

be easy to blame Ed Miliband, butScottish Labours problems predate hisleadership of the UK Labour party bymany years. The Labour-led adminis-tration at Holyrood, in power from thestart of devolution in 1999 to 2007, wastruly awful. It was a puppet govern-

ment for New Labour, East Germany to Tony Blair and Gordon BrownsMoscow. Like East Germany, it col-lapsed shortly before the motherregime; it was ridiculous to think it

would ascend once Labour was bootedout of Westminster.

With the exception of the lateDonald Dewar, the inaugural FirstMinister, all Scottish Labour leadershave been uninspiring. Most people

would struggle to pick Dewars succes-sors Henry McLeish, Jack McConnell,

Wendy Alexander or Iain Gray out ofa lineup of one. Scotland loves a char-acter and Labour doesnt have one.

Scotlands institutions are in crisis.Life expectancy is lower in parts ofGlasgow than in the Gaza strip.Scotlands banks RBS, the old HBOS

were the two primary recipients of tax-payer bailout cash, though are fortu-nately now on the mend under fresh

management. Its newspapers, onceable to give Fleet Street a run for itsmoney, are in such precipitous declinethat ailing English publications lookhealthy in comparison. Scottish uni-

versities once the envy of the rest ofthe UK dont charge tuition fees andare starting to suffer as a result.

Although few Scots are willing toface up to the scale of the problem,there is an undercurrent of malaisethat is hard to shake off. Thats whySalmonds bright, confident, presiden-

tial campaign made such a hugeimpact; Scots need a glimmer of hope,no matter how false, and the SNP wasthe only party offering that.

The paradox is that Scottish inde-pendence would make the countrysproblems much worse. Although theSNPs roster of populist policiesincludes a reduction in corporationtax, Scotlands economic problemsrun deeper than that. In east Glasgow,a staggering 11.6 per cent of the popu-lation claim Jobseekers Allowance and17.7 per cent are on incapacity benefit.

A generation of workless households,kept sweet by government handouts,have little appeal for businesses think-ing of moving north of the border.

For those of us who are ardentunionists, the case for keepingScotland in the UK is increasingly hardto make. Without the huge cost ofScotlands welfare bill and its public

sector which accounts for around aquarter of employment the UK

would be a more prosperous country.Although a resurgence in Scottish

Labour is essential to keep separatismat bay, the Tories must also take theirshare of the blame. Salmonds coali-tion of voters included small businessowners and farmers, people withsocially conservative values who wantlower taxes. Even Margaret Thatcher,Scotlands favourite hate-figure, won21 seats in 1983; David Cameron got

POLITICAL COMMENT

DAVID CROW

just one in 2010.Salmond is too clever to call a refer-

endum any time soon. Instead, he willpush for the power to raise tax and

borrow on the bond markets. Westminster wont play ball, and

Salmond will use George Osbornesintransigence to explain awayScotlands ills. Then, after four years ofWestminster cuts, he will pose thequestion. I for one wouldnt betagainst him. [email protected]

SNP leader Alex Salmond has political momentum in spades Picture: GETTY

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Keeping London on the move

THE Liberal Democrats are gunningfor a run of concessions on the govern-ments NHS policy as consolation fortheir drubbing in local elections last week, with deputy prime ministerNick Clegg yesterday threatening toveto the bill.

No bill is better than a bad bill,Clegg said of the NHS policy that iscurrently being revised. I dont thinkthe bill can go on as it is.

His comments coincided withremarks by Liberal Democrat deputyleader Simon Hughes that the NHSpolicy as it stands was wasnt what weagreed in the coalition agreement.

Clegg also threw into doubt one ofthe flagship elements of the policy that GPs would have to take charge of a budget and commission healthcareservices. He said that GPs commission-ing could be voluntary a significant

shift in policy. Any sign that the Tories are pre-

pared to make a run of concessions toLiberal Democrats on policy willenrage backbench Conservatives, who

Lib Dems angling for anNHS bill consolation prize

There was little relief for Nick Clegg last week.

BY JULIET SAMUEL

POLITICS


believe that prime minister DavidCameron should take advantage of his

coalition allies weakness to pursue amore Tory agenda.There was little relief for the Liberal

Democrats in last weeks votes. Theylost 695 council seats and were humil-iated in a referendum on the AV votingsystem, which saw the Lib Dem-backedvoting reform rejected by 68 per centto 32 per cent.

The defeats leave Clegg badly inneed of a trophy to show for havingsigned up his party to the coalition.

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current portfolio of Benicassim in Spainand Kent festival The Hop Farm.

The planned shopping spree comes asPower prepares to float Music Festivals on

AIM in the next three weeks. But the IPO isnot a foregone conclusion, says Gelardi it is dependent on ideally raising 10m

before the float, which will be used to buyout minority shareholders and fund thecompanys ambitious growth plans. Basedon previous form, The Capitalists money ison Power meeting that deadline.

THE PRICE IS RIGHTTHEY say a picture tells a thousand words.So look very closely at this painting (topright) by Scottish artist Jack Vettriano, as itholds the secret to the only remaining

video of Kate Middleton modelling in theSt Andrews fashion show that won herPrince Williams heart.

The man sitting in the bath is a formerSt Andrews student who filmed

the video of Kate paradingdown the catwalk; the girl onthe left is a fellow student whoappeared alongside the futurequeen in the show.

Both were later painted byVettriano, who was the patron of

the infamous Dont Walkcharity fashion event in

March 2002 and a sourcetold The Capitalistthat the

girl in the painting isnow a client of SouthLanarkshire-based lawfirm Nicholas J

Scullion & Co.So where is the miss-

ing video? Not too far from Glasgow, saidthe source, who added that his client hasso far refused to sell at any price, eventhough the BBC has reportedly offered a

life-changing 20,000.Post-wedding, that figure is sure to have

rocketed to a six-figure sum, so expect tosee a BBC show based on the unseen

footage before the year is out. Everyonehas their price, after all

REAL-TIME MARKETSCNBC has this morning unveiled a video

wall incorporating a globe that provides alive update on every global market.

The wall is part of the upgraded studiofacilities at CNBCs European HQ inLondon, following the launch of its newstudio at the Singapore Stock Exchange,and it promises to cut through the noiseto deliver the most imperative analysis.

We have created a state-of-the-art envi-

ronment totally geared to telling com-pelling stories about business and theglobal economy in real time, says the

broadcasters John Casey.

POKER FACEBY BANKERS

AS RANK ISDEALT BID

TALK about raising the stakes. Just daysafter Rank Group held its annual pokertournament, the companys largestinvestor Guoco Group raised its holding to40.8 per cent, triggering a mandatoryoffer for the gaming business.

Strangely, Quek Leng Chan, theMalaysian billionaire who controls Guoco,

was nowhere to be seen as the cardsplayed out between more than 100 fundmanagers, analysts and Ranks seniormanagement, including chief executiveIan Burke, finance director PaddyGallaher and Phil Urban, head of Rankscasinos business.

So it was left to Nick Edelman, a gam-ing analyst at Ranks financial adviserGoldman Sachs, to bluff his way to raisingthe winners trophy after beating

Threadneedle Asset Managements AdamBarnes into second place.

However, Edelman could have had noidea the bid announcement was on thecards as he cashed in his charity chips,insists a spokesperson for Rank, because as is legally required at every investment

bank Goldmans analysts sit on theother side of the Chinese wall from theadvisory team. A Malaysian wall, surely?

MAXIMUM POWERVINCE Power (right) may have made a tidyprofit when he sold his controlling stakein music festivals empire Mean Fiddler for38m in 2005.

However, it seems the music mogul ismissing the limelight, as MichaelGelardi, a partner in Powers new ven-ture Music Festivals, reports the busi-nessman is gearing up to reclaim hiscrown as the king of music festivals

by snapping up a string of live eventsto make the company a 100m busi-ness within ten years.

Gelardi revealed Powersshopping list includes thenotorious Serbian eventExit, as well as a well-known UK festival,to add to MusicFest i v a l s

Clockwise from left: Adam Barnes ofThreadneedle, NickEdelman of Goldman,

Chetan Shah of RBS, Rosie Oddy of Financial Dynamicsand the House dealer

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The Capitalist12 CITYA.M. 9 MAY 2011

EDITED BY

HARRIET DENNYSGot A Story? [email protected] The Capitaliston Twitter: @citycapitalist

Water Babies: The key to Kates missing video

Goldmansanalyst kepta poker face

as RankGroupslargestinvestor laidits cards onthe table

IT HAS been a record week for Ilia on Draycott Avenue, helped byemployees at a West London wealth management firm, who enjoyed anopulent mid-week lunch for five. The financiers started with a Magnumof Deutz champagne before ordering Tuscan wines Tignanello, Sassicaiaand Ornellaia to complement their Italian dishes, followed by two bottlesof vintage Gaia e Rey Chardonnay. Lets hope they made less noise whenthey rolled out at half-past four than diners at the owners other venture1 Lombard Street, which last week issued slippers to customers afterthe Lord Mayor served a noise abatement order on the City business.

BILL OF THE WEEK

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THE BANK of England releases its lat-est Inflation Report on Wednesday,

with economists increasingly dividedover the outlook for price pressures inthe UK.

Consumer price inflation unexpect-edly slowed to four per cent in March,

yet official figures released next weekcould show a rebound for April.

Input costs for manufacturers accel-erated to 17.6 per cent last month, upfrom 14.8 per cent in March, showing

that more price pressures are in thepipeline.

I expect some extra inflationaryimpact from the low pound, as thesethings take a long time to comethrough, added Hendersons chiefeconomist Simon Ward.

And while Marchs figure was sur-prisingly dragged down by weak foodcomponents, food inflation has sincesped up, according to other surveys,

Ward said. The Bank expects the consumer

price index to drop to around its targetlevel (two per cent) at the beginning ofnext year, yet admits the timing andextent of that decline in inflation areuncertain.

Februarys report showed inflationforecasts above the level predicted lastNovember, and this weeks reportcould show another embarrassingupward revision.

Februarys forecast assumed quiteearly and significant interest rates, asexpected by markets at the time, said

Ward. But normalisation has appar-ently been set back, so the inflation

forecast may have moved higher.Yet many economists remain con-

vinced that inflation will fall back to,or below target in 2012.

Inflation should fall to three percent as the VAT effect drops out next

January, and continue falling through2012, said Nida Ali, an economicsadvisor to the Ernst and Young ItemClub.

The VAT rise added 0.76 per cent toprices, the Office for National Statisticsrecently calculated.

Bank to facequestioningover inflationBY JULIAN HARRIS

UK ECONOMY


ECONOMISTS VIEWS: WILL CPIINFLATION FALL BY NEXT YEAR?

GEOFFREY WOOD, CASS BUSINESS

SCHOOLThere is real danger behind the grow-ing idea that inflation is going to risequite high and the Bank of England isnot taking the threat seriously. Thelow exchange rate has alreadycaused problems and will continue tocontribute to price pressures. Thus insimilarly open peer countries, infla-tion levels are lower. What concernsme is that people keep forgettinghow much living standards are beingheld down by inflation. We havealready seen asset price bubbles andcommodity price bubles this too is aserious risk from loose policy.

HAWKS DOVES

SIMON WARD, HENDERSONI see inflation coming down butremaining above target, at around2.5 per cent from the summer of2012 into early 2013. This is actually

in line with the Banks own meanforecast based on unchanged mone-tary policy, given the balance of risk. Iactually think wage pressures arealready starting to be felt, moving upby around one per cent from thistime last year. My guess is that pro-ductivity growth will be slow, 1.5 percent at best. This means that averageearnings growth of just 3.5 per centshould be seen as dangerous.

NIDA ALI, ERNST AND YOUNG ITEM

CLUBWe think consumer price inflationwill come back down at the begin-ning of next year, as the VAT effectfalls out and commodity prices ease.It should keep falling, down to 2.1 percent by the end of 2012. In the shortrun it will rise, although not hittingthe dreaded five per cent. We thinkCPI will peak at 4.6 per cent thisyear, as surging input costs still havesome feeding through to deliver. Thedownside risks to inflation from sparecapacity in the economy are stillmuch greater than upside risks.

DAVID KERN, BRITISH CHAMBERSOF COMMERCEI expect inflation will come down totarget, although not until the secondquarter of 2012. The problem is notpermanent, but neither is it short

term it will gradually resolve itself,but not quickly. But inflation is eitherat or near its peak; I dont think it willgo above 4.5 per cent. The UK needsthe policies it has at the moment fiscal tightening and monetary acco-modation. I hope they will postponeinterest rate increases for as long aspossible. In the last couple of monthsthe case for loose policy has actuallyimproved.

8/6/2019 Cityam 2011-05-09

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BRITAINS ultra-wealthy haveincreased their collective wealth by18 per cent on last year in a bumper

year for City billionaires, accordingto this years Sunday Times Rich List.

The top 1,000 multimillionaireshave increased their pot by morethan 60.2bn. Their total assets arenow worth an astounding 395.8bn,

just shy of the all-time pre-recessionhigh of 413bn, set in 2008.

The boom could be used by thegovernments political opponents, asit implements austerity measures toget Britains battered finances backinto shape but others would arguethat increased wealth among theelite is bound to boost spending, jobsand the tax take.

The number of sterling billion-aires jumped from 53 to 73. The

boom has meant this years bottomline for the top 1,000 is a 70m for-tune, an increase of 7m on last year.

Britains richest man is once againLakshmi Mittal, the Indian steelmagnate, despite his fortune havingdropped by 5bn since last year.

The man who is putting his nameto the ArcelorMittal Orbit, the 1,500ton steel tower by artist AnishKapoor that will form the centre-piece of the 2012 Olympics inLondon, is worth 17.54bn.

A bumper crop of foreign billion-aires has followed Mittal onto theRich List this year, as Russian oli-garchs and high-flying Chinese andIndian entrepreneurs make Britaintheir home.

Russian steel tycoon AlisherUsmanov, who is in the running to

buy Arsenal football club, appearsalongside fellow countrymenRoman Abramovich and LenBlavatnik, the media tycoon.

For the first time since the SundayTimes Rich List was launched, there

are more than 100 women in the top1,000. Self-made billionaire DameMary Perkins, who with her husbandhas built up the Specsavers opti-cians chain, is just one of the tally of105 top women.

London and the south east is stillthe most affluent area, with 53 percent of the top 1,000 residing inthese two regions.

The multimillionaires are pump-ing millions into the capitals econo-my, spending their cash onexpensive homes andBritish businesses.

Wealth is also grow-ing globally, with the

wealthiest 50 people inthe world being valuedat a combined843.7bn, up11 per cent onlast year.

Bumper yearfor Britainsultra wealthyBYRICHARD PARTINGTON

WEALTH

Focus: Rich List14 CITYA.M. 9 MAY 2011

LAKSHMI MITTAL

INDIAN-BORN steel tycoonLakshmi Mittal has topped theSunday Times rich list for the lastseven years in a row.

The 60-year-old made his moneythrough his familys stake in

ArcelorMittal, the firm he runs aschairman and chief executive

A slowdown in demand for steelfrom construction and manufac-turing firms worldwide has hitMittal, shown in his firms $780m(470m) loss the firm posted in thelast quarter of 2010.

Despite the hit, a full-year profitof $2.9bn for the firm meant Mittalcould take a dividend of $478m,

boostinghis wealth.

T h emultibillion-aire is themajority ownerof recently pro-moted westLondon footballclub Queens ParkRangers, who

will be playingPremier Leaguematches next sea-son thanks toMittals signifi-cant investment.

Old money and young blingThe oldest individual on the Rich List isSir Bernard Schreier, the 93-year-oldAustrian-born entrepreneur, who hasan estimated fortune of 365m. Theyoungest is India Rose James, 20, whoalong with her sister Fawn are valuedat 302m. The pair inherited their

wealth from father Paul Raymond, thelate Soho porn baron.

Women close the gender gapWomen are closing the gender gap onmen, with the number of females onthe Rich List topping 100 for the firsttime in its history. There is still a longway to go, however, with men stilldominating the compilation of Britainswealthiest individuals.

Self-made millionaires dominateThere are 762 self-made millionaires onthe Rich List out of 1,000 individuals,proving that you can be the master ofyour own fortune. There are 238 multi-millionaires, including the Queen andprinces William and Harry, who haveinherited their cash piles.

Philanthropic entrepreneursCharity donations are down 33 percent on last year. Yet the top 100 phi-lanthropists still managed to give awaya combined 1.67bn. The most gener-ous millionaire this year is AnuragDikshit, despite him not placing withinthe top 1,000 on the Rich List. TheIndian businessman has an estimatedwealth of 35m, yet recently gave

away 172.4m to the Kusuma Trust,the Gibraltan charity he runs with hiswife.

List-topping political animalsMillions have been handed to politicalparties by individuals on the Rich List.The highest donation was by Sir

Anthony Bamford, the chairman of dig-ger maker JCB, who gave 1.4m to theConservatives last year. The secondhighest contribution was to Labour byNigel Doughty, the private equitytycoon, who gave the party around1m.The biggest Liberal Democrat donorwas Lord Alliance, the Iranian-bornbusinessmen, who gave Nick Cleggsparty 308,000.

RICH LIST FACTS

1 Lakshmi Mittal & family 17.5bn

2 Alisher Usmanov 12.4bn

3 Roman Abramovich 10.3bn

4 The Duke of Westminster 7bn

5 Ernesto & Kirsty Bertarelli 6.8bn

6 Leonard Blavatnik 6.23bn

7 John Fredriksen & family 6.2bn

8 David & Simon Reuben 6.1bn

9= Gopi & Sri Hinduja 6bn

9= Galen & George Weston6bn

17.5BN

RICH LIST TOP 10

Made 7.7bn in one year toshoot from sixth to second.

Has lost 5bn on last yearyet still remains top.

The Chelsea owner has putabout 1bn into the club.

Property tycoon made395m in profit this year.

Top husband and wife teamin pharmaceuticals sector.

Russian-born media mogulhas shot up from 15th.

His twin daughters, Kathrineand Cecile, run UK firms.

The brothers are looking toIPO their firm Global Switch.

New entry industrialistshave had a bumper year.

Associated British Foodshas made their fortune

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Focus: Rich List 15CITYA.M. 9 MAY 2011

CITY high flyers feature prominently in thisyears Sunday Times rich list, as the driver ofBritains economy continues to grow the

wealth of the finance sectors super rich.There are now 180 financial multimillion-

aires in the list, up ten on last year.Banking dynasty heir Nat Rothschild has

usurped the wealth of his father Jacob, LordRothschild, having more than doubled hiscash pot to hit a cool 1bn.

His stake in commodities colossus Glencore,placed through a 25m bond purchase in2009, will convert into shares worth up to50m when the company lists in London laterthis year.

A boom in commodity prices has also

helped to propel his Vallar Resources coal min-ing investment shell sky high since it listed onthe London Stock Exchange last year, helpingRothschild to net 670m in one year.

City hedge fund managers have also had a bumper year, with more than 50 top stockpickers among Britains richest 1,000 people.

Hedge fund manager Robert Miller joins NatRothschild, who alongside his commoditiestrading is chairman of hedge fund Attara, asthe richest stock picker.

Millers Sail Advisors has helped him to netan extra 50m for his cash pot last year, takinghis fortune to 1bn.

Hedge fund manager Alan Howard, whofounded asset management behemoth BrevanHoward, places third on the list with an esti-mated fortune of 975m.

The 55 hedge fund managers and commodi-

ties traders on the list have a collective wealthof 12.6bn, or 3.2 per cent of the total top1,000.

Bankers also saw their fortunes increase thisyear, with a number of top City names placinghigh on the list.

Barclays duo Roger Jenkins, the banker whoquit to set up his own advisory firm in 2009,and chief executive Bob Diamond are the rich-est bankers in the list.

Jenkins holds a fortune totalling some150m, whilst Diamond is worth 102m.

Banking dynasty heiress Ana Botin, thechief executive of high street lenderSantanders British division, also places highon the list. She is worth about 90m.

Botin is said to be the frontrunner to runthe whole group when her father Emilio, 76,steps aside.

BYRICHARD PARTINGTON

WEALTH

Sir Philip Green and Lady Green are one of therichest couples with a fortune of 4.2bn.

RomanAbramovich (top),with his girlfriendDasha Zhukova isthe 3rd richest manin Britain. KirstyBertarelli, the phar-maceuticals entre-preneur, is the

richest woman.

Glencore float helps NatRothschild climb the list

Financier NatRothschild (below)has shot up the list,growing his cashpile to 1bn.Pictures: REX,GETTY, MichaTheiner/City A.M.

New FTSE 100 firm Hargreaves Lansdownschairman Peter Hargreaves fortune is 1bn.

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CUTS to the governments deficitmust be seen through despite a slow-down in the outlook for growth, theConfederation of British Industry(CBI) will state today.

The message marks the launch ofthe CBIs latest economic forecast,

which envisages even stronger pricepressures on UK households.

Since Februarys forecast consumerprice inflation estimates have been

bolstered to 4.2 per cent for this year(from 3.9 per cent) and 2.3 per centfor next year (from two per cent).

Of particular concern are risingcommodity prices, said CBI econo-mist Ian McCafferty. By acting soon-er rather than later, the Bank ofEngland will be able to keep inflation

expectations under control.Its entirely possible that peoplehave factored in the effect high com-

modity and oil prices have ongrowth, FTI consulting economist

Vicky Pryce told City A.M. Theymight have to revise them slightlyupwards, if the impact of high pricesis temporary.

The British economy will expandby just 1.7 per cent this year, the CBIexpects, down from Februarys fore-cast of 1.8 per cent.

Yet fiscal consolidation remainsan essential part of the economicnarrative, and the balancing of theeconomy, the CBI has argued.

Asked how the economy would befaring if Labours final spending was

being implemented instead of chan-cellor Osbornes, McCafferty said: Itsmy strong belief that it would have

been weaker.Nonetheless, the UK economy will

only show patchy and slow growth

in the near future, with the CBIs2012 forecast also being reduced,from 2.3 per cent to 2.2 per cent.

CBI: prices up,growth down

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BY JULIAN HARRIS

UK ECONOMY

APRILS Bank holidays and warm weather have provided a welcomeboost to the UKs ailing high street, asurvey revealed today.

After a disappointing start to theyear, retail sales were up 3.7 per centlast month on a like-for-like basis, theBDO high street tracker suggests.

While there are tentative signsthat the underlying conditions are

starting to tilt in the right direction,retailers need to hold tight -- Werenot out of the woods yet, said theBDOs Don Williams. But the UK con-sumer is a resilient beast. Shopping ispart of our national psyche.

Meanwhile inflationary expecta-tions have reached a 29-month highaccording to the BDOs businesstrends research, which also predicted

just 1.4 per cent growth for the UKeconomy this year.

Extra national holidays and warmdays come to the aid of retailers

RETAIL

LARGE companies stayed put ratherthan risk signing up for new officespace in the last quarter, research seen

byCity A.M. suggests.Office take-up in central London

tumbled by almost half to 2.336msquare feet in the first three months of2011, after a strong end to 2010,according to real estate adviser Equipe.

Agreements for space in the City fell

to the lowest level in two years thanksto a dearth of deals for more than50,000 square feet.

However, deals for smaller officesslightly improved on levels seen at theend of 2010, Equipe said, and the over-all number of deals rose by 10 per cent.

Friends Provident, who took 48,000square feet at One New Change, signedthe largest City tenancy agreementduring the period.

The Docklands suffered its worstquarter for new office deals in the past

ten years, with just four deals for atotal of just over 18,000 square feet. The West End fared better, with

take-up rising 13 per cent during thequarter to 1.108m square feet.

Activity [away from large-scaledeals] is symptomatic of firms adapt-ing to a sluggish economy and tailor-ing their activities accordingly, theresearchers said in a note to clients.We therefore believe that it will taketime, but the market will recover, theresearchers concluded.

Wary companies shy awayfrom new office agreementsBYMARION DAKERS

PROPERTY


CITY WORKERS COME TO NEST IN THE HERON

Gerald Ronsons upscale housing project has found buyers for 60 per cent of its 285apartments, his company confirmed yesterday. The Heron development near theBarbican, a sister project to the Heron Tower (pictured), has attracted an even split ofCity workers and international business people, a spokesperson said, with the flats so farselling for between 490,000 and 3.5m. Picture: Micha Theiner/City A.M.

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NEWS | IN BRIEF

OPEC dramatic decision unlikelyQatar's oil minister said he does notexpect OPEC to make a dramatic deci-sion during the upcoming OPEC meetingin June, and that the market is still wellsupplied. Mohammed al-Sada said:Today the price of most commoditieshas dropped, not only oil. We think thatfundamentals are fine and we cannotsee any shortage of supply. He addedthat OPEC and non-OPEC countrieswere producing enough crude to keepstocks at a healthy level, and it is in theinterest of OPEC countries to reduceprice volatility.

ITV ad revenue decline forecastITV is expected to report its first declinein advertising revenues for 18 monthswhen it gives a trading update onWednesday. ITV chief Adam Crozier willannounce the broadcasters advertisingrevenues for May and June havedropped year-on-year by seven per centand 20 per cent respectively, accordingto weekend reports. The decline wouldbe the first since November 2009.

Japan to keep nuclear powerJapanese officials said yesterday theywere committed to nuclear power afterthe prime minister called for a plant toclose, but that the target of obtaininghalf of Japans electricity from nuclearpower by 2030 needed a rethink. PrimeMinister Naoto Kan has called for theclosure of a nuclear plant in centralJapan, citing the risk of another disas-trous quake after the Fukushima Daiichi

plant was destroyed by the March 11earthquake and tsunami.Pods Tim Hall hopes to open branches across the UK. Picture: Micha Theiner/City A.M.

HEALTHY fast-food chain Pod hassecured funding for an ambitiousexpansion throughout the City andacross central London, with a view torolling out the brand nationally.

Pod, which opened its first branchat London Wall in 2005, has 2.5m offresh funding from investor JGRCapital; 500,000 from some of Pods80-odd existing shareholders and500,000 from Nat West via the gov-ernment-backed Enterprise FinanceGuarantee scheme.

Founder Tim Hall told City A.M. thecash injection is a stamp of approvalfor Pods larger ambitions.

The first tranche of funding fromJGR will take us up to 25 stores, butthe deal which we have with themhas no real upper limit.

JGR has invested in Pod twicebefore, in the lower six figures, with a

view to finding out whether themodel we have can roll out on a

national basis. This has now beenproven and triggered the extra invest-

ment. JGR Capitals James Paget will be join the Pod board as part of theinvestment. Pods focus on nutrition-al and seasonal food has already wonthe backing of David Henderson, theformer chairman of KleinwortBenson, and Nick Payne, one-timeBurger King director and Pod chair-man.

Hall, who was a consultant for thecar industry before setting up thechain, said that Pod is by no meansabandoning our main market, withplans to open two new branches inthe City in June and two or threemore over the summer.

Pod is one of thousands of smallerfirms to get backing through theEnterprise Finance Guarantee, run bythe department of business, innova-tion and skills. The government plansto link up businesses with lenders for

loans totalling up to 2bn over thelife of the current parliament.

Pod cash injectionto fund fresh storesacross the capitalBYMARIONDAKERS

RETAIL

VINCENT Tchenguiz has put hisluxury French villa on the marketfor 30m (25m) after spendingone night there in five years ofownership.

The elder brother of the Iranian- born business partnership hasappointed the estate agents KnightFrank to sell the property, VillaSymphonie, in St Tropez

A spokesman for Tchenguizinsisted he was selling, not becausehe needed the money, but simply

because of market forces.Hes selling his house because

he has slept there one night in five years and there is significant

demand for high value propertiesin St Tropez.

The market is apparently beingdriven by Russians. Its incrediblyfirm.

The financial affairs of both Vincent and his younger brotherRobert have been in the spotlightsince they were arrested in Marchas part of investigation into the col-lapse of Kaupthing, the Icelandic

bank. After a dramatic dawn raid by

the Serious Fraud Office and theCity of London Police, the brothers

were released without charge. Theydeny any wrongdoing.

Robert Tchenguiz wasKaupthings biggest client, havingdrawn loans worth around 1.7bn.

The brothers have now won theright to have a damages claimagainst Kaupthing heard in the UKcourts, after a judge agreed theclaim was subject to English law.

Their damages claim will beheard in the English High Court,upholding a jurisdictional clausein the original loan agreement.

Kaupthing, which was takenunder state control in October2008, had tried to have the claimdismissed from the UK system,leaving a separate claim to be filedas part of administration proce-dures in Iceland.

The familys trust is also pursu-ing Kaupthing in a Reykjavik court,as part of the banks winding upprocedure.

Vincent Tchenguizselling in St TropezBY JENNY FORSYTH

PROPERTY

INVESTMENT banks should curtailtheir post financial crisis expansionand shrink their services to boostprofitability, according to a reportout today.

Almost 50 per cent of 170 interimmanagers working in the financialservices sector believe investment

banks need to cut poorly perform-ing product lines or services, thesurvey by consultancy firm InterimPartners finds.

Interim managers are senior con-

sultants hired by banks on a shortterm basis at board level or just

below.Only four per cent of those sur-

veyed said investment banks shouldexpand, with just two per cent call-ing for aggressive expansionthrough mergers and acquisitions.

Meanwhile, retail banks areadvised to grow, the report claims.

Retail and commercial lendersare the most likely to take on morestaff over the next year, according tothose surveyed.

Investment banks have bounced

back well from the credit crunchand are once again competing witheach other for staff. However, thereis a concern that their return onequity is not as high as it should be,said Andrew McIntee, director offinancial services at InterimPartners.

Interim managers say thatinvestment banks should be moreruthless with poorly performing

business units and cut them in a bidto recover the high profitabilitythey achieved before the financialcrisis, he added.

Banks urged to shrink to boost profitBANKING

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THE TOTAL value of US stock marketlistings undertaken by firms fromoutside of the country has hit itshighest level since 2006 so far thisyear, as companies worldwide look toraise cash on Wall Street.

US listed initial public offering(IPO) volume by non US issuers has hit$4bn (2.4bn) so far this year, nearlyfive times the $836m raised by thistime last year and up 17 per cent onthe previous record of $3.4bn at thispoint in 2006.

Chinese issuers account for the

most IPOs on US exchanges, withnine deals raising a total of $1.5bn.

THE cost of listing on the AlternativeInvestment Market (AIM) has droppedas banks and other advisers competeto win contracts, a survey out todayshows.

AIM listing costs have been surgingas companies have been saddled withmore regulations to comply with.

But the costs rose at the slowestrate in the last year and the total costis now 7.29 per cent of all fundsraised, according to the research byaccountants UHY Hacker Young. Overthe last five years the cost of listing onAIM as a percentage of funds raisedhas risen by a fifth from 6.1 per centin 2005 as due diligence costs havemounted. UHY Hacker said that theincrease in the cost of listing on AIM

has been slowed by more competi-tion. Laurence Sacker, senior partnerat UHY Hacker Young, said: With the AIM market activity increasinginvestment banks and broking firmsare once again competing for marketshare in AIM IPO work. So they arebeing slightly more f lexible on fees.

That is good news as AIM needs tokeep the cost of listing down in orderto keep well ahead of its internationalcompetitors.

Last year there was a jump in AIMlistings, up from 18 in 2009 to 65 in2010. Among the companies listingthis year is sports retailer JJB, which isundertaking a restructuring. BrokerNumis is handling the process.

Sacker added: The trend toincrease levels of due diligence workseems to have now levelled off in thelast year or so.

Rise in AIM costs

slows as advisersnegotiate fees

HEINEKEN, the worlds third-largest brewer by volume, is consideringmaking an offer for Brazilian brewerPrimo Schincariol Industria deCervejas e Refrigerantes, according toreports yesterday.

Heineken, whose chief brands areHeineken and Amstel, is thought tobe going through the books of closelyheld Schincariol, Brazils second-largest beer seller.

Heineken said last Thursday it hasclosed on a new2bn (1.7bn) revolv-ing credit facility, which it would use

for general corporate purposesincluding acquisitions.

Heineken eyesBrazilian beerGlobal firms tapUS IPO marketCAPITAL MARKETS

CONSUMER


EU firms need to tap global community for funds

EVERY six months the presidencyof the European Union changesso that each member state has itsturn at influencing the European

economic and political agenda.

At such intervals the Lord Mayor andthe Chairman of Policy carry out apre-Presidency visit to discuss withsenior politicians and civil servantsboth their priorities in what they are

looking to achieve and to try and influ-ence their thinking on issues of impor-tance to the City.

The Poles are strong supporters ofdeepening and widening the singlemarket and while their vision ofEurope is, understandably, more inte-grationist than ours, they tend tofavour the UKs growth-centredapproach to the financial services.

They will want to use their term todemonstrate that Poland is a signifi-

cant player in EU politics, while thePolish president will undoubtedly alsowant to use it as a platform for the par-liamentary elections in October 2011.

There are a number of important

issues on the table in the comingmonths, particularly with regards tofinancial instruments, over-the-count-er derivatives, European contract lawand trade finance. Perhaps most impor-tantly, there is also the subject offinancing growth in small and medi-um sized companies that are generallyperceived as the major area for generat-ing jobs and growth in future years.

The traditional suppliers of credit,the banks, are now very constrained by

the need to rebuild balance sheets,build more reserves and reduce risk.

We need therefore to look at alterna-tive funding channels and tap theresources of those countries that have

come through this crisis with littledamage to their financial strength. Inother words, the global community.

The City is Europes global financialcentre and although we support astrong regulatory framework it has tooperate globally. Over-regulationinspired by over-zealous regulators orpolitical motives should be resisted.

Part of our job is to drive this mes-sage home so that each Presidencyunderstands that issues on matters

such as regulation should be viewed ina wider context than purely domestic.

I am travelling to China next weekwhere I sit on the board of the City ofLondon Advisory Council for China as

well as the Shanghai InternationalFinancial Advisory Council.My message there will be the same

as in Poland we are working in a glob-alised world and though we competewe must continue to work towards adegree of global consensus in areassuch as regulation and standards of business conduct if we are to avoideven bigger crises in the future.

Stuart Fraser is the Policy Chairman at theCity of London Corporation.

CITY COMMENT

STUART FRASER

BY JOHN DUNNE

MARKETS

ANALYSIS l Fees as a percentage of funds raised

%

2005 2006 2007 2008 2009 2010

7.5

7.0

6.5

6.0

5.5

6.1% 6.2%

6.7%7.0%

7.24% 7.29%

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Fenchurch Advisory PartnersThe investment bank has appointed

Guy Miller to the firm as a managingdirector. Until recently, Miller was

head of European financial institu-tions M&A at Royal Bank ofScotland. Prior to joining RBS, Millerworked at Schroders and Citigroup.

Emerging Capital PartnersThe pan-African private equity spe-

cialist has appointed Andrew Brownto the newly created position of chiefinvestment officer in the firms Parisoffice. The hiring follows the close ofECPs Africa Fund III last June.

J O HambroThe

cityam 2011-05-09

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