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BUSINESS SURVIVALGUIDE TO THE GAMESEIGHT-PAGE SPECIAL P17-24

361 DAYS TO GO

COUNTDOWNTO THELONDON2012OLYMPICGAMES

BUSINESS WITH PERSONALITY

FTSE 100 t5,815.19 -58.02 DOW t12,143.24 -96.87 NASDAQ t2,756.38 -9.87 /$ 1.64 unc / 1.14 unc /$ 1.44+0.01

50p tax

rate causesfresh split

DANNY Alexander blindsided his Torycolleagues yesterday by dismissingcalls to abolish the 50p tax-rate as anidea from cloud cuckoo land.

Asked if the top-rate tax should becut, the chief secretary to the treasurysaid: Anyone who thinks were goingto shift our priority to reducing the tax

burden for the wealthiest has gotanother thing coming.

The strength of his position shockedhis coalition partners in the Treasuryand appears to be at odds with whatchancellor George Osborne has briefedhis Tory colleagues behind the scenes.

City A.M. understands that Tory MPshave received private assurances fromOsborne that the 50p tax rate is tempo-rary and will be abolished as soon as ispolitically feasible.

Theyve made the decision to abol-ish it but know they cant right now,said one MP. The treasury is currentlylooking into whether the 50p rate willultimately increase or decrease rev-enues by discouraging wealth creationand pushing the super-rich offshore.

Osborne is banking on the study tocome to the latter conclusion, makingit more palatable to bring the taxdown. But Alexanders rhetoric willmake it hard for him to support a shiftin policy in the next year, setting upthe coalition for an acrimonious bat-tle. It adds to a hardening of theLiberal Democrat stance, after busi-

ness secretary Vince Cable said onFriday that cutting taxes to kick-startthe economy amounts to voodoo eco-nomics.

BY JULIET SAMUEL

POLITICS

Senate majority leader Harry Reid said last night he had signed off on a debt ceiling deal, but the uncertainty is far from over Picture: Getty

US LEGISLATORS moved towards adeal with the White House last nightin a bid to tackle Americas $14.3 tril-lion (8.7 trillion) debt pile.

Though the final vote on a compro-mise plan was again pushed back, withthe US Senate expected to pass judge-ment today and Congress tomorrow,more details were emerging of howspending cuts could look.

According to officials from bothDemocrats and Republican parties, theplan would include around $2.4 tril-lion of cuts over the next decade, butno tax rises. An initial $900bn of deficitreductions would be followed by a sec-ond round of $1.5 trillion to be decided

by a nominated panel of lawmakersappointed by Congress and the Senate.

Key to the plan is a three-stage

process for raising the debt ceiling,allowing the US government to takethe limit off its debt this week to meetits obligations. The initial increase

DEBT DEAL NEEDS$2.4TRILLION CUTS

BY ELIZABETH FOURNIERUS CRISIS

www.cityam.comIssue 1,436 Monday 1 August 2011 FREE

would see $400bn added to the ceiling,with a further $500bn rise later thisyear, pending a vote of disapproval. The

final and biggest increase, of 1.5 tril-lion, will also be put to a vote.The controversial vote on a balanced

budget amendment also seems to have

made it into the compromise proposal.As the US approaches the final dead-

line for an increase to the debt ceiling

at 11.59pm tomorrow, Senate majorityleader Harry Reid said he had signedoff on a debt ceiling deal, pendingapproval in the Democrat-led Senate.

Oil prices advanced from a two-weeklow on optimism the deadline would

be met, and the dollar rallied as Asian

markets opened. The Nikkei alsogained almost one per cent in earlytrading, rising to 9,928.602.

MORE: P2, VOICE OF THE CITY: P4

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Three-stage planto up debt ceiling

Balanced budgetvote survives

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News2 CITYA.M. 1 AUGUST 2011

Bad taste leftby Tea Party WHILE the age-old war betweenRepublicans and Democrats wagesover the US debt crisis, conservativesplinter group the Tea Party hasthreatened to bring the talks crash-ing down altogether.

Tea Party cheerleader MicheleBachmann, an early front-runner inthe race to oust Barack Obama, hasshot to prominence with her persist-ent condemnation of the Presidentand his handling of the crisis.

Leader of sub-group Tea Party365,David Webb, has also grown his pub-lic image with his criticism of theObama administration and firebrandracial rhetoric.

The groups refusal to budge oncalls for extreme austerity has madethe already tortuous negotiation

process almost impossible.A potential compromise prepared

by Republican speaker of the Houseof Representatives John Boehner was blocked by the Tea Party, sparkingpanic when the possibility of defaultbecame incrementally more real.

As the clock continues to tick, bothsides of the political divide havebecome increasingly belligerent withthe group of fringe Republicans.

Former Presidential candidate John McCain branded them TeaParty Hobbits, who believe they canreturn to Middle Earth havingdefeated Mordor.

Martin Frost, a former Democraticcongressman, went further, likeningthem to the Taliban, intent on risk-ing destroying what American politi-cal leaders have constructed in morethan two centuries of hard, oftenpainful work.

BY STEVE DINNEEN

US DEBT CRISIS W

HETHER or not the deal being worked on inten-sively in Washington overthe past few hours avoids

a US downgrade, there is one mat-ter on which all observers agree:the whole debt wrangling sagahas dealt a lasting blow toAmericas financial credibility.

Credit ratings agencies mightyet be persuaded to hold off on adowngrade if the $3 trilliondeficit-cutting deal passessmoothly through the legislativeprocess, but there is no puttingthe genie back in the bottle.

Washingtons last-ditch squab-bling and grandstanding over thepast week has given the lie to oneof the building blocks of the worlds debt markets: that UStreasuries represent the worldsrisk-free rate.

This assumption is built intocalculations of overall balance

sheet strength (notably, the cur-rent Basel II rules), portfolio allo-cation and asset-backed securitieslike mortgages.

So any ratings downgrade or re-pricing of US debt will haveunknown knock-on effects, partic-ularly because in such scenariosthe markets normal reaction is toflee into safe havens, that is,assets like US treasuries

OK We cant call it the riskfree rate any more, saysNewedges Bill Blain. Doesntexist. Forget traditionalMarkowitz asset-allocation portfo-lio-theory.

Of course, there is one thingthat will keep many investors intreasuries: there is simplynowhere else to go.

Farewell to risk-free ratesas delays hit US credibility

NEWS | IN BRIEF

Syrians kill 80 in Hama attackSyrian tanks firing shells and machine-guns stormed the city of Hama yester-day, killing 80 civilians, rights activistssaid, in one of the bloodiest days in apopular revolt against President Basharal-Assad. Hama residents said tanks andsnipers fired into unarmed residential

areas where people had set upmakeshift roadblocks to try and stoptheir advance. The Syrian state newsagency said the military entered Hamato purge armed groups shooting inten-sively to terrorise citizens. A USembassy official in Damascus dismissedthis official account as "nonsense.European Union governments plan toextend sanctions against Assads gov-ernment today.

University place chaos forecastMore than 200,000 university appli-cants in Britain will fail to get places thisyear, the head of the admissions servicesaid in an interview published today.Chief executive of Ucas Mary CurnockCook told the Independent a carboncopy of last year's confusion, when210,000 youngsters did not get places,is inevitable.

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

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4th Floor, 33 Queen Street, London, EC4R 1BRTel: 020 3201 8900Email: [email protected] www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowActing Night Editor Marion DakersBusiness 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

US DEBT TALKS | THE KEY PLAYERS

HARRY REIDSenate majority leader On the talks: This is likely our last chanceto save this nation from default. On the Tea Party: We would be back inthe midst of partisan wrangling with oureconomy once again held prisoner byextremists.

MITCH MCCONNELLSenate Minority Leader On the talks: "In the category of gettingserious, I have spoken to both the presidentand the vice president in the last hour." On the future: "I have a much more posi-tive feeling than I did 24 hours ago... Ourcountry is not going to default for the firsttime in our history.

JOHN BOEHNERRepublican speaker of the House ofRepresentatives On the talks: In spite of our differences, Ithink we're dealing with reasonable, respon-sible people who want this crisis to end assoon as possible. On the Tea Partys impact on the negotia-tions: [They need to] get their ass in line.

BARACK OBAMAPresident On the talks: [Failure to come to anagreement would be] reckless and irre-sponsible. On political in-fighting: The Americanpeople may have voted for divided govern-ment, but they didn't vote for a dysfunc-tional government.

MICHELE BACHMANNRep member of House of Representatives On the talks: Throughout this debate overguaranteeing insane never-before-seen inthe history of this country levels of spending,President Obama has coolly stood on thesidelines, his arms crossed, very simply casti-gating Republicans for not giving him a $2.4trillion blank cheque.

DAVID WEBBTea Party365 leader On the left: According to the left, I haveStockholm Syndrome, Im the house N-word, Im the Uncle Tom. On the talks: Were the adults in theroom.

BOTTOMLINEAnalysis by Juliet Samuel

SUPER RICH TO GET NEW LONDONADDRESS A leading European hedge fund ispreparing to build one of Londonsmost expensive housing develop-ments as global investors scramble togain a foothold in the capitals resur-gent residential market. In a dealcompleted over the weekend, OrionCapital Managers acquired an acre ofprime residential land in Chelsea. The fund plans to build a 300mhousing complex which, it hopes, willvie with One Hyde Park for the title ofthe capitals priciest address.

QUANGO CHIEFS HIGH PAY PACKAGESVETOED The Treasury has vetoed the highsalaries of 23 quango chiefs and sen-ior civil servants since the coalitioncame to power last summer, the

Financial Times has learnt. ButGeorge Osborne has been criticised

for refusing to reveal which officialspay packages were rejected or by

how much as part of the govern-ments austerity drive.

CALL FOR NEW BANKPlans for a rebalanced economywith more emphasis on industry andinvestment will only work with thehelp of a new government-aided bankto boost manufacturing, according toLabour peer Lord Bhattacharyya.

LAGARDE PLEADS FOR EUROPEANUNITY OVER NEW GREEK RESCUE.European authorities should stoppublic bickering and speak with onevoice to make the second rescue pack-age for Greece work, warnedChristine Lagarde, new managingdirector of the InternationalMonetary Fund. Speaking to theFinancial Times, the former Frenchfinance minister said public discordbetween Eurozone ministers and the

European Central Bank created con-fusion in the markets.

REVIVING LOVE AFFAIR WITH LIFESLITTLE LUXURIESSales of luxury goods in Britain haverecovered from the ravages of thefinancial crisis, growing by 7 percent, or 600m (526m), in 2009-10,according to Bain & Company. Themarkets value has doubled in thepast 15 years and adds 8.8bn to thedomestic economy annually, outper-forming GDP and the pace of growthin Europe, the consultancysresearch, commissioned by the indus-try body Walpole, found.

TAXMAN TELLS BREWERS TO STOP THEBEER SMUGGLERSBritains brewers are fightingattempts by the taxman to introducean anti-smuggling system. They arebeing asked to share the burden ofthe 550m in tax lost on beer that is

exported duty-free but then finds itsway back into the UK illegally.

ESPN TO OFFER PREMIER LEAGUE FOOT-BALL HIGHLIGHTS FOR FREEPremier League football fans will beable to watch every Wayne Rooneygoal for free within minutes of it hap-pening this season, after ESPN decid-ed to stop charging for its Goals app.The Disney-owned sports news broad-caster launched ESPN Goals last year,after it beat BSkyB to exclusive mobilerights to all 380 Premier Leaguegames with a bid in the high single-digit millions. It has been charging2.99 a month for the app.

NEW BLACKS LEISURE CHIEF JULIAREYNOLDS STARTS AMID MIKE ASHLEYROW Julia Reynolds, the new chief execu-tive of Blacks Leisure, will begin herfirst day in the job amid a growingrow between the retailers chairman

David Bernstein and its largest share-holder, Sports Direct.

NORTEL PATENT PROBE PICKS UPThe Justice Department is intensify-ing an investigation into whethertech giants including Apple,Microsoft and Research in Motioncould use a recently acquired trove ofpatents to unfairly hobble competingsmartphones using Googles Androidsoftware, according to people famil-iar with the matter.

STATES BALK ON CIGARETTE PACT A proposed deal between big ciga-rette makers and US states to resolvea $7.1bn payments dispute has beenrejected by many state attorneys gen-eral, according to people familiarwith the matter. States have turneddown the proposal, which is designedto settle a long-running dispute overpayments that Altria Groups PhilipMorris USA and other cigarette giants

make to 46 states each year under thelandmark 1998 tobacco settlement.

WHAT THE OTHER PAPERS SAY THIS MORNING

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News 3CITYA.M. 1 AUGUST 2011

COOPER Industries was left frustratedin its two-month battle to buy Lairdafter the British electronic compo-nents firm refused to stand down onits 220p demand ahead of todaysdeadline.

The board of US-based Cooper, which has until 5pm today undertakeover rules to make a formal offer,flew into London last week in anattempt to rescue the deal and resolvea stand-off over bid price.

Talks reached a stalemate, however,after Lairds chairman Nigel Keen

wrote to Coopers chief executive KirkHachigian on Friday to say that its

board was not prepared to meet withCooper unless it increased its indica-tive offer to 220p a share.

Keen said the team was ready to dis-cuss value related points and listedareas he would be willing to discuss atthe proposed meeting that was due to

be held on Saturday.The letter came after Laird rebuffed

Coopers sweetened 533m takeoverapproach earlier in the week, sayingthe offer still undervalued the firm.

Sources familiar with the companysaid Laird had initially agreed to meet

with its suitor, only to change its mindat the last minute.

Hachigian, who sources say put inearly morning calls to his oppositenumber last week, rejected the invita-tion for Cooper to increase its offer.

We are frustrated...We think it is inLairds shareholders interests forCooper to review limited value drivinginformation and see if a compromisecan be reached between our positionand Lairds, he said in a statement.

The company said it would with-draw its interest by tomorrows 5pmdeadline if there was no change inLairds position.

Cooper left

frustrated byLaird defiance

EXPANDING US corporates such asKraft accounted for almost half of over-seas purchases of UK listed companieslast year, a leading City law firm saidtoday.

Groups based in the US acquired 22UK listed companies in the twelvemonths to the end of June, an increaseof 83 per cent on the number of US led

deals completed in the previous 12months, a study by Wedlake Bell hasfound.

US buyers have been better ablethan most to take advantage of the

buying opportunity presented by therecession, Tim Bird, partner and headof the f irms corporate team said.

M&A activity in the UK continued tobe subdued, the study found, with 86deals completed in the year to June,down 23 per cent on the previous year,

US buyers fuel UKM&A activity

BYKASMIRA JEFFORD

TECHNOLOGY

Laird, led by chiefexecutive Peter Hill,is refusing to backdown on its 220p- per-share demand,leaving potnetialbidder Cooper Industries until5pm today to makea formal offer.

BYKASMIRA JEFFORDM&A

ANALYSIS l Laird

p

25 Jul 26 Jul 27 Jul 28 Jul 29 Jul

195

185

175

187.7029 Jul

Charter investors pressboard over Melrose bid

LEADING shareholders in CharterInternational have called on the firmto open its books to Melrose, thetakeover specialist pursuing a 1.4bn

bid for the engineer. A number of investors including

Schroders the engineering groupssecond biggest shareholder haveurged the board to allow Melrose toconduct due diligence.

Charter has refused to open itsbooks despite the announcement ear-lier this week that Melrose would con-

sider increasing its indicative offer of

840p a share if it was allowed to dodue diligence.

Smaller shareholders, includingseveral hedge funds who represent

between 10-20 per cent of Charter,have also spoken out in favour ofCharter opening its books to Melrose,known for its success in turningaround troubled engineering firms.

Charters new chief executiveGareth Rhys Williams sought todefend against an approach at itsinterim results last week and sayingthe firm was capable of dramatic

improvement.

INDUSTRIALS

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REPUBLICAN members of the USHouse of Representatives are toblame for the difficulty in agreeing

a deal on raising the countrys debtceiling, according to members ofthe City A.M./PoliticsHome.comVoice of the City Panel.

Forty-one-and-a-half per cent ofrespondents said that Republicans

in Congress were most to blame forthe delay in reaching an agree-ment, with 38 per cent blamingPresident Barack Obama and theRepublicans equally.

An overwhelming 95 per cent of

PoliticsHome.comPoliticsHome.com

In association with PoliticsHome.com

BY ELIZABETH FOURNIER

POLITICS

In partnershipwith

City blames Republicans for delay on US debt

Apply to join today at www.cityam.com/panel

those surveyed also felt thatthe row had damaged the rep-utation of the US as a finan-cially responsible economy, with more than half (58 percent) saying that the damagehas been severe or quitesevere.

The threat to the world econ-omy was also seen as signifi-cant by our panel, with 95 percent of respondents seeing riskto global markets from the USdebt crisis and 72 per centseeing the threat as quitesevere or severe.

While Obama has vetoed anyproposals that include tax

increases in the US, 79.5 percent of our panel felt that taxhikes should form part of thecompromise.

Barack Obama and

Barack Obama

Republicans in Congress

equally

Dontknow

Republicans in Congress%

41.5%

37.75%

16.25%

4.5%

Who do you blame more for the difficultyin coming to an agreement during the USdebt talks in Washington DC?

Slightlydamaged

Severelydamaged

Quiteseverely damaged

Notatall damaged%

42.75%

37%

15.25%

4.75%

How much damage has the political rowaround US debt done to Americas internationalreputation as a financially responsible economy?

ANALYSIS l The Blame Game

ANALYSIS l Damage to Americas Reputation

Asmallthreat

Asevere threat

Aquiteseverethreat

Nothreat%

41.25%

21.5%34%

2.7%

How much of a threat does the USdebt crisis pose to the world economy?

ANALYSIS l Threat to the world economy

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BUSINESS confidence fell back in Julyafter rebounding in June to a 13-month high, according to the latestLloyds Bank Corporate MarketsBusiness Barometer.

Less than half (46 per cent) of com-panies were more optimistic regard-ing economic prospects, a reductionfrom 51 per cent in June.

The number who were less opti-mistic nearly doubled last month to27 per cent (from 15 per cent in June).and the number of firms feeling opti-mistic dropped 17 points to +19 in

July.

Confidence took a knock this

month, most likely because of theconcern that the sovereign debt crisisin our largest trading partner, theEurozone, was spreading to countriessuch as Italy and Spain, said Trevor

Williams, chief economist of LloydsBank corporate markets,

Sentiment has improved since thestart of the year. The three-monthmoving average net balance for eco-nomic prospects has risen from 13per cent in February and 15 per centin May to 23 per cent in July.

Sixty-four per cent of service sectorfirms expected trading prospects toimprove in the next twelve months,up eight points, while only four per

cent expected prospects to worsen.

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IN spite of the lacklustre backdropprovided by the UK economy this

year, the Confederation of BritishIndustry (CBI) has stuck to its fore-casts for growth in 2012, predictinga modest 2.2 per cent rise in GDP.

But the squeeze on householdincomes from higher commodityprices and an erosion of businessconfidence means that the industry

body has downgraded its predic-tions for 2011, revising its GDPgrowth forecast to 1.3 per cent, com-pared to the 1.7 per cent it expectedin May.

The boost to the UK economy nextyear is likely to come from positivetrade contributions, the CBI said,

with a competitive sterling drivingexport rates, while imports are hit

by reduced domestic demand.Consumer expenditure is set to

fall by around one per cent this year.Economic conditions will be very

tough for the rest of this year ashousehold budgets continue to besqueezed by a combination of infla-

tion and weak wage growth, saidIan McCafferty, the CBIs chief eco-nomic adviser.

But conditions will be a little brighter in 2012 as inflation easesback and take home pay improves.

Business investment is alsoexpected to bounce back next year,

with the four per cent growth fore-cast this year increasing to morethan nine per cent for 2012, match-ing historic levels.

But the investment figure is large-ly dependent on business confi-dence, on which both the CBI andLloyds Bank (see below) have beenless optimistic.

The business group citesEurozone instability, US debt issuesand the Japanese tsunami as eventsthat have dented business confi-dence, which could put paid tohopes that a substantial cash sur-plus in the corporate sector will fuelinvestments.

The CBI also expect inflation toease later in 2012, after predicting arise from autumn through to thenew year, mainly due to rising utili-ty prices.

CBI upbeat on

prospects for2012 growthBY ELIZABETH FOURNIER

UK ECONOMICS

SHADOW chancellor Ed Balls hasbranded the governments NationalInsurance holiday scheme a totalflop, saying it has cost more to runthan it has delivered in savings tonew businesses.

The scheme was launched withthe hope it would help create400,000 new companies over three

years.The government last night said itis taking steps to improve take up ofthe national insurance holiday,admitting that registrations to thescheme so far stand at just 5,600.

A spokesman added: Businessesare also benefiting from the govern-ments decision to reverse the

biggest impacts of the plannedincrease in national insurance thatit inherited.

Balls said: After a week when welearned the economy has flatlinedover the last nine months, these fig-ures are another embarrassing set-

back for the chancellor.George Osborne hailed this flag-

ship policy last year saying it couldcreate 800,000 private sector jobs.But its turned out to be a total f lop,

with just one per cent of the 400,000businesses he said would benefit tak-ing advantage.

Balls brands governments NIholiday scheme a washoutBY STEVE DINNEEN

POLITICS

George Osbornecame underattack over his NIholiday scheme.

Picture:Micha Theiner

/City AM

Business confidence down inJuly but up from start of yearUK ECONOMY

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HSBC is expected to announce a stag-nation in group profits this morningand a massive round of lay-offs thatcould see 10,000 jobs cuts globally.

Analysts expect the banks full-yearpre-tax profits to be around $11bn(6.7bn), versus $10.9bn last year.Investec predicts a 14 per cent drop innet profit from $4.4bn in the firstquarter to $3.8bn in the second.

But chief executive Stuart Gulliver isalso expected to provide more detailson the banks $2.5-$3.5bn cost-cuttingprogramme that could see 10,000 jobsgo, or up to 30,000 over the next three

years, out of some 300,000 employees.In its May strategic review to address

what Gulliver calls a cost problem,the bank warned that it would bestreamlining its operations to avoid

duplication. In addition to cuttingout layers of middle management,that is likely to include dispensing

with some of its five global IT hubs.It is also reviewing its presence in 39

countries and announced last weekthe closure of its Polish retail business,

with the likely loss of 263 jobs. The bank also confirmed yesterdaythat it had reached an agreement tosell 195 of its network of US retail

branches to First Niagara for around$1bn (608m) as part of a scaleback ofits US operations.

BANK RESULTS LOOK-AHEAD: P23

HSBC will cut10,000 jobsBY JULIET SAMUELBANKING

PRUDENTIAL is set to increase its half- year dividend to 7.95p when itannounces robust results later this

week. The firm will hope bumperprofits of around 970m will helpinvestors move on from its collapsed22bn bid for rival AIA last year.

The second quarter results will

build on a strong performance inPrus first quarter, in which it beat

market estimates following a sharpupturn in its key Asian markets.

Prudential has been focussing onfast-growing Asia to offset stagnantgrowth at home, and generated 43per cent of its sales in the region last

year. Prudential boss Tidjane Thiamsurvived calls for his head followingthe AIA debacle, in which Pruinvestors baulked at the sky-high val-

uation. The business was left with377m in costs.

Prudential hopes bumper profitwill help investors forget AIAINSURANCE

HEDGE fund Lansdowne Partners hassold its $850m (517m), stake inGoldman Sachs, amid fears thatincreased regulation in the US couldstunt the investment banks propri-etary trading arm.

Lansdowne has sold almost 5mshares in Goldman just under oneper cent of the banks total share capi-

tal having previously been one of itstop twenty investors. The stake isalmost 10 per cent of the $10bn fundsLansdowne has under management.

The last time Lansdowne sold sharesin Goldman Sachs was in the monthsleading up to the collapse of LehmanBrothers in 2008, which precipitatedthe global banking crisis.

The move was apparently attributedto fears about the implementation byUS regulators of the Volcker Rule,

according to reports in the Sunday Telegraph. The new legislation willrequire banks to spin off certain pro-prietary investment practices, whichcould hit Goldmans profits.

Last week, it was revealed that morethan a dozen traders had quitGoldmans US government bonds andderivatives trading desk in New Yorkin recent months, as the bank takesfewer risks, and big bonuses for ambi-tious traders dry up.

Lansdowne sells out of entire850m Goldman Sachs stakeBY ELIZABETH FOURNIERFUNDS


Founded by ex-Schroders and GoldmanSachs banker Paul Ruddock (above)with Steven Heinz in 1998, LansdownePartners emerged during the financialcrisis as an aggressive shortseller ofUK financial stocks, making 50m

shorting HBOS alone. The fund is alsobelieved to be the second biggestshareholder in Lloyds Banking Groupafter the UK government, with an esti-mated stake of around four per cent,or 1.1bn. But with shares in Lloyds

falling 30 per cent since the start ofthe year, the historically upbeat hedgefund has also suffered, with its UKfund down 12.2 per cent so far in2011. Run by star managers PeterDavies and Stuart Roden, the UK fund

is approaching its 10th anniversary.Lansdowne used to be a key investorin Manchester United, but sold its 4.6per cent stake to Malcolm Glazer for31m in 2003, paving the way for histakeover of the club.

SPOTLIGHT ON LANSDOWNE PARTNERS

ANALYSIS l HSBC

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The Capitalist8

brains at the industry body. They thenadd, helpfully: Make sure staff com-plete a proper handover and that staffuse their out-of-office email.

ICAEW even offers counsel on how toreintegrate colleagues into office life.Once people have returned from holiday,give them time to adjust, it advises.However, try to make sure that peopleregain their productivity quite quickly.

To apply for membership of the oracleof common sense, see www.icaew.com/en/join-us. Meanwhile, The Capitalistwill

be having a lie down

LEADING LADIES TOO often, talented business- women hold themselves back bydevaluing their own achieve-ments. Just ask Margaret

Mountford (left), a former adviser toLord Sugar on The Apprentice, who

moderated a conversation oncreative leadership atCambridge Universitysponsored by law firm Addleshaw Goddard and

Barclays Wealth.City headhunter Jan

Hall spoke on leader-ship skills for women, while Anji Hunter ofAnglo American theonly mining compa-ny with a female CEO debated why soft

issues relating to theworkforce are an essen-tial part of a responsible

business.

Completing the panel were McKinsey &Cos Tamara Rajah who was once firmlytold by a male colleague that her ten

years experience didnt qualify her to talk

on leadership for women and Royal Mailboss Moya Greene, who encouraged the 70female executives in the audience to out-source family responsibilities.

Women need to give up the guilt andexpend their energies on those areas

where they can best apply their talents,said the chief executive in charge of mod-ernising the Post Office.

PENNY PINCHINGDOMINOS Pizza set the trend lastNovember, and today restaurant chainZizzi and toy retailer The Entertainer havefollowed suit by introducing the electron-ic charity box Pennies to their shop tills.

Shoppers can donate as little as 1pthrough the micro-donation service

but, as The Entertainers owner GaryGrant (pictured above) will no doubt be

reminding his customers, those penniessoon turn into pounds.

About 150m, in fact the estimatedamount that would be raised for charityevery year if the UKs 43 million card hold-ers each donated a penny every day.

BETFAIRSIRON LADY

IS ON HERLAST LEGFOUR down and one to go. No, not thenumber of top-level scalps claimed by theNews Corp scandal, but the feats ofendurance completed by BetfairsSusannah Gill, the Iron Lady of the City, aspart of her five-part ultimate challenge

between April and September.Gill, who is making the original iron

woman Margaret Thatcher look lazy byrising at 5.45am three times a week totrain for her f inal instalment, yesterdayfinished the London Triathlon in threehours and 20 minutes, adding to theLondon Marathon, the South East pen-tathlon and an 100km trail-walk across

the South Downs.The running leg of yesterdays triathlon

required sheer mental determination, but the 8.45am swim in the Docklandsover one mile you could just about see

your hand in front of you was evenworse, said Gill, a public affairs managerat the gambling group, who is dreadingthe concluding 10km swim in the RiverDart on 3 September.

I am the worlds worst swim-mer, explained Gill, who is com-pleting the five-stage physicalchallenge in aid of Betfairsdesignated charity the ProstateCancer Charity, with everypound of the 1,250 and count-ing raised for the causematched by her employer. But Ihave been assured that if yougo with the tide, it willhelp you.

WISE WORDSA MASTERCLASS in stat-ing the obvious fromthe accountants atICAEW, in its ten-pointplan to help businessescope now the holidayseason is in full swing.

Try to anticipateemployee holidays how many staff can youafford to be away at thesame time? write the

Iron woman: BetfairsSusannah Gill aftercompleting theLondon Triathlon

Gary Grant, owner and MD of The Entertainer

SusannahGill, BetfairsIron Lady,

is one feat ofenduranceaway fromcompletingher ultimatechallenge

CITY EYE

PEDAL pushers: Cityworkers take a breakfrom the markets totake part in a groupspinning class inCanary WharfsMontgomery Squarein aid of armedforces charity HelpFor Heroes. Morethan 800 people tookpart in the outdoorclasses over the courseof the day, which wasorganised by health-care providerNuffield Health.There was nowhere tohide, as every partici-pants heart rate andeffort was trackedthrough electronicbelts and projectedonto a live screen.

CITYA.M. 1 AUGUST 2011EDITED BY

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

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Job cuts show bonus benefits

THE announcement that Credit Suisse isto cut 2,000 jobs follows an accelerat-ing trend of redundancies in the bank-ing industry, with some commentators

speculating the total job losses across thesector could total over 50,000 this year.

Many will arise as banks reassess businessmodels in the light of changes to the eco-nomic climate and the extra burdensimposed by regulators in the form of capitalrequirements.

But the brunt of cuts will be felt in the

investment banking divisions where opti-mism of an early recovery has diminished.

This sudden change in business condi-tions is characteristic of investment banking

and explains why remuneration in the sec-tor has tended to rely on large performance-related bonuses rather than fixing the baserate of pay at a higher level.

By imposing the strictest rules on bonusesin the world, European policy makers mayhave scored some easy political points butthey have seriously eroded flexibility, caus-ing banks to raise basic salaries to retain andattract top performing employees.

Given the pan-European desire for growth,it is perverse that we are enacting legislationthat fails to safeguard the economic contribution of Europes financial centres andcould put member states at a long term com-petitive disadvantage.

That is why, as part of a long-term researchprogramme, the City of London Corporationand TheCityUK commissioned EuropeEconomics to produce a report for theInternational Regulatory Strategy Group

(IRSG) The Value of Europes InternationalFinancial Centres to the EU economy detailing the benefits for individuals, busi-nesses and governments throughout the EU

of having international financial centresbased within the borders of the Union.It is often claimed that the UK adopts an

isolationist approach to European affairs. Byfocusing on eight major financial centres Amsterdam, Dublin, Frankfurt, London,Luxemburg, Madrid, Milan and Paris thisresearch positions London as one part of amuch larger network.

The statistics contained in this reportmake clear that the cluster of international-ly-facing financial centres based in the EU ishugely beneficial to the 27 individual mem-ber states and to the Union as a whole.

European policy-makers must bear thesebenefits in mind and ensure that all futureregulation is underpinned by a desire to sup-port and promote this vital industry and itsrole in the broader European economy.

Stuart Fraser is the Policy Chairman at the Cityof London Corporation

CITY COMMENT

STUART FRASER

THE proposed merger between DeutscheBorse and the NYSE Euronext could jeopar-dise Londons position as a global f inancehub, according to London Stock Exchange(LSE) boss Xavier Rolet (pictured).

Rolet told the Financial Times he fearsforeign financial centres could becomemore prominent in the investment deci-sion-making process. He warned that thethreat of power shifting abroad is not yetfully understood in the UK.

Rolets comments come after the LSE was last month forced to abandon its4.3bn bid to merge with Canadas TMXGroup, sparking speculation it may itself become a takeover target. Rolet said hewas clearly disappointed the thresholdwas not met.

The exchange scrapped the merger

when it became clear it hadfailed to win the critical two-thirds level of supportrequired by Canadian law.

Brussels is expected todecide this week whether it will launch a more thoroughprobe into the proposedDeutsche Borse/NYSE Euronextmerger. All eyes are on regulatorsafter investors from bothsides gave the deal thethumbs-up earlier thismonth.

A rival 6.7bn bid forNYSE Euronext fromNasdaq collapsed inMay.

Rolet also arguedthat the interests ofBritish finance are notadequately represented

in Europe, which could risk the UKbeing sidelined as plans are drawn up

for reform of the sector.He pointed to the Financial

Services Authoritys voting rights onthe new European industry regulator,

the European Securities MarketsAuthority, which grants it just eight

per cent of voting rights despitetwo thirds of financial

services being conduct-ed in London. Roletcalled this a clearmismatch and apossible risk.

Rolets com-ments comeagainst the back-drop of a scramblefor consolidationin the exchangemarket.

LSEs Rolet warns of shift inpower from UK to EuropeBY STEVE DINNEEN

FINANCIAL MARKETS

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PRIVATE sector workers are facing a bleakretirement under current UK schemes, withup to 14m private sector workers facing theprospect of receiving a pension much small-er than the generation above them, a reportinto the sector will say today.

The Workplace Retirement IncomeCommission (Wric) says that theresults of its call for evidence on theUK pension system raise particularconcerns about defined contribu-tion pension schemes, which are

becoming the norm in the privatesector given the decline in so-calledfinal salary packages.

According to the Commissionsresearch, almost three quarters of

workers will be unable to liveadequately when theyretire, with the UKs compli-cated pension system to

blame, alongside a lack ofsufficient savings.

People need to getmore bang for their buck,or theyre not going to

bother with a pension, said Lord McFall of Alcluith, the former Treasury SelectCommittee chair who led the Wric (pic-tured). The Commission said that the UKgovernment should plan for an increase tothe contribution floor, which is due forreview in 2017.

The Confederation of British Industry (CBI)welcomed the reports stance on encourag-ing savings for retirement, but advocated

sticking to measures already in place,instead of the increase to the minimumpension contribution that the Wricsreport suggested.

The commissions proposal to con-sider increasing the minimum com-pulsory pension contribution in 2017is not the right answer, said CBI direc-

tor for employment NeilCarberry.

The current plan tointroduce a floor ofeight per cent savingfrom next year

remains the best way to ensure

more peoplewho can affordto save do so.

Bleak outlook

for UK pensionsBY ELIZABETH FOURNIER

UK ECONOMY

DEMAND for new staff dropped in July, with banking jobs continuing their fivemonth decline from Februarys highpoint, according to todays Reed Job Index.

The index fell three points from Junesfigure of 125, with sectors includingaccountancy, financial services and cus-tomer service all contributing to the over-all decline.

Retail jobs, however, bucked the trend, with demand in the sector reaching itshighest point since the index began. Retail

vacancies were driven by a push for leisureand tourism staff.

UK ECONOMY

Staff demand fell in banking for the fifth month

MORE than a third of executives working inthe UKs financial services sector are worried

that the increase in regulation since thefinancial crisis is harming the countryscompetitiveness.

Thirty-six per cent of senior employeessaid that the Financial Services Authoritys(FSA) regulatory clampdown was a threat tothe UKs ability to compete on the global

business stage, according to a survey byrecruitment specialists Interim Partners.

Senior executives were also sceptical as towhether the planned shake-up of the regula-tory system would help. Forty-one per centsaid that replacing the FSA will not lead to

better regulatory oversight.

Regulation is hittingUK competitiveness

REGULATION

NEWS | IN BRIEF

Switzerland and Germany in tax dealSwitzerland and Germany will sign a deal toregularise untaxed money stashed in secretSwiss bank accounts on 10 August. Swissbanks are likely to have to pay an up-frontadvance payment to the German government,which will only be reimbursed if their clientspay back-taxes they owe to the German author-

ities. In future, the Swiss banks will levy a with-holding tax on income earned by assetsbelonging to German customers.

Acromas to buy Allied HealthcareAcromas, co-owned by Charterhouse, CVC andPermira, has agreed to buy Nasdaq-listed AlliedHealthcare for $175m (107m), six months afterits 124m acquisition of Nestor Healthcare. Thedeal will bolster Acromas healthcare portfolio,and stoke rumours that the owner of the AAand Saga is plotting a listing. Last weekAcromas chief executive Andrew Goodselldenied a listing was being considered.

Pressure for Premier Foods listingPremier Foods chief executive-elect Mike Clakeis under pressure to consider a 300m rightsissue to repair the UKs largest food producersbalance sheet, according to a weekend report.The Observer reported a big investor saying arights issue should be under consideration asPremier is paying millions in interest despite

recent disposals. According to the report atleast one of Premiers three big investors Paulson & Co, Warburg Pincus and FranklinTempleton, which together account for 40 percent of the shares would back a move to raisecash. Clarke is set to take the reins from chiefexecutive Robert Schofield in September.

GMT buys Meeting Zone video firmGMT Communications Partners, a private equi-ty firm, has acquired the video-conferencingcompany, Meeting Zone, for about 38.5mfrom Nova Capital Management and thefounders, Tim Duffy and Steve Gandy.

Demand for newstaff down in July

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MAN Investments is Europes leadinghedge fund, topping the list of anindustry that has has bounced backas a whole in 2011.

Mans hedge fund arm had assetsunder management (AUM) of $34.1bn(20.9bn) as of 11 June, according tothe Europe50 survey by The HedgeFund Journal.

Mans figures were boosted by theacquisition of GLG Partners for $1.5bnin 2010. In second place in the table was BlackRock whose assets hit$34bn.

Meanwhile Brevan Howard whichlost the top spot which it held in 2009and 2010 was in third place with$32.1bn. BlueCrest Capital retainedfourth spot as its AUM soared by 31per cent to 26.8bn. The futures giant Winton Capital rose 64 per cent to$22.4bn to bag fifth after a stunning year, the survey, sponsored byNewedge Prime Brokerage, revealed.

The success among the top 50 firmsreflected an overall lift in 2011 withtotal assets under management up 26per cent compared with 2010, to$374bn.

That is a record figure for the sur-vey, topping the last bull market in2008 when the top 50 were managinga total of $360bn.

The gains of the top five firms in2011 took their combined AUM to$149.4bn, accounting for 40 per centof the total funds managed by the top50.

Author of the report Bill McIntoshsaid: If it is true that hedge funds as awhole are back in business, it is thecase that leading players are doingexceptionally well.

The surveys aggregate figuresshow the rude health of theEuropean hedge fund industry.Other companies in the Europe50include Standard Life, previouslyunranked, which went to numbernine in the table with AUM of$12.9bn. HSBC Global Asset manage-ment dropped from 17 to 28. with$4.1bn.

The report also concluded thathedge fund managers had takenfewer risks with investors money, andin doing so had served them well overthe past year.

Man tops listof 50 biggesthedge funds


Europes leading funds are up 26 percent, write John Dunne and Alison Lock

MANINVESTMENTS

THE $34.1bn (20.9bn) ManInvestments, part of theworlds biggest alternativemanager Man Group, led byPeter Clarke (right) datesback to 1983. Its five biggestfunds each manage at least

$1bn and cover strategiesfrom managed futures toarbitrage. Star fund managerTim Wong runs both its$2.5bn Man AHL Diversifiedfund and the newly-launched$2.3bn Nomura Global Trendfund, the hugely popular Asia-focused fund that has beencredited with reviving ManGroups profits since April.

BLACKROCK

BLACKROCKS hedge fund opera-tion, led by Laurence Fink (above)has moved up from third to secondplace this year as its fund managersgrew assets to $34bn (20.8bn)from $21.6bn in June 2010. Part ofthe worlds biggest money manager,its largest fund is the 1.34bn UKemerging companies hedge fund,while others invest in European equi-ties, all on a long-short basis.

BREVAN HOWARD

BREVAN has slipped to thirdplace from first last year, despiteraising funds under managementto $32.1bn (19.6bn) from$31.5bn last June. The flagshipfund is its $24.2bn Master Fund,a giant, multiple manager, macrofixed income and forex fund. Itsnewest addition is CreditCatalysts, now $1.8bn in size,which launched in 2009.

BLUECREST CAPITAL

THE dream team of Mike Platt(above) and Leda Braga has over-seen a leap in BlueCrests fundsfrom $20.5bn a year ago to$26.8bn today. Its headline fundsinclude the global macro BlueCrestCapital International, and managedfutures-focused BlueTrend, whicheach hold more than $8bn. Itsdiversified BlueCrest AllBlue fund

manages another $5.4bn.

WINTON CAPITALWINTON, run by David Harding(above), holds $22.4bn assets, a big

jump up from the $13.7bn held inJune 2010. Unlike many peers, itmakes most of its money from the$14.3bn it holds in managedaccounts, segregated for individualinvestors. Its Winton Futures fundholds an estimated $7.8bn, but othernotable funds Evolution and Octo are

far smaller at just over $100m each.

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WINEHOUSE DEATH SPARKS ALBUM SALES

AMY Winehouses critically

acclaimed second album,Back to Black, shot back tothe top of the UK albumchart yesterday, a weekafter the troubled singerdied at the age of 27.Winehouse, famous for herdistinctive soul songs andbeehive hairdo, struggledwith drinking and drug

problems throughout muchof her career. The cause ofher death has not yet beendetermined as officialsawait results of toxicologytests. Sales of the singersrecordings, released by theUniversal Music label, rock-eted following news thatshe had been found dead,

propelling Back to Black upfrom last weeks 59th posi-tion, the Official Charts

Company said.

Europe the biggest risk in trans-Atlantic gloom

THE financial markets dontknow which way to look. On

both sides of the Atlantic wehave a debt disaster that would

be a recipe for short fingernails.But despite todays headlines, it is

Europe that presents the far greaterrisk to the global economy. While

what is happening in Washington hasnow descended into political farce, itis the Eurozone that has moved into afar more critical phase.

The deal done in Brussels on 21 Julywas initially seen as having the poten-tial to put Greece on a more sustain-able path and to prevent contagion.

With the benefit of hindsight it isclear this assessment was wrong.

Peripheral bonds yields have widened against Germany and the

euro has started to fall again. One ofthe most obvious reasons for this isthat politicians themselves dontseem to understand the deal that

they produced or at can't communi-cate it to everybody else.The result is that Europe has taken

one step back. Its now clear that theday of reckoning for Greece has only

been delayed and a hard restructur-ing is still the most likely end game.

More worrying though is that bytaking Greece out of the limelight forthe time being the focus on Spain andItaly has become more laser like.

While the Spanish ten year is once

again yielding over six per cent, it isItaly that could provide the greatestshock and once again it is politicsthat will be causing ripples.

While the elections in Spain inNovember will likely put a more fis-cally responsible government inplace, the situation in Rome could

become could quickly become chaot-ic if finance minister Guilio Tremonti

were to resign and bring to end thereign of Silvio Berlusconi.

In such a scenario Italian BTP yieldswould rise rapidly and become unsus-tainable. Italys stock of debt dwarfsGermanys. Helping Italy in the way

that Greece, Ireland and Portugalhave been is not possible. If Italyneeds help its game over for the euro.

To make matters worse it is not

clear that the global economy is slow-ing rapidly. Central bankers inFrankfurt could have seriously mis-

judged the situation by raising ratestwice already. Fifty basis points doesnot represent a substantial increasein the cost of borrowing but it could

be significant for countries such asItaly. Jean Claude Trichet has a lot tothink about as he comes to the end ofhis time at the top of euro towers.Guy Johnson presents Closing Bell on CNBC

CNBC COMMENT

GUY JOHNSON

DATA centre provider Telecity is inearly-stage talks to buy an Irish rivalas it seeks to expand its capacity.

A deal for Dublin-based DataElectronics, which operates two datacentres in the Irish capital, could set

Telecity back around 100m. Talks are understood to be at a

very preliminary stage, with noguarantee a bid will be forthcoming.

A spokesman for Telecity declinedto comment on rumour and specula-tion.

The firm has seen a spike indemand for its services as cloud ITsolutions become increasingly popu-lar, meaning companies requiremore capacity for data storage.

Data Electronics is understood tobe one of a number of operators in Telecitys sights.

The firm, whose customersinclude Walkers crisps, Facebook,

and Transport for London, is alsogrowing organically, with three newdata centres in the pipeline inLondon.

The company, which has a value ofmore than 1bn, has seen its sharesincrease in value by almost a third inthe last year.

In May the firm reiterated its posi-tive outlook for the rest of the year,

with analysts on average are expect-ing it to post a pre-tax profit of63.3m on revenue of 231.8m.

Telecity eyes

Irish rival asdemand liftsBY STEVE DINNEEN

TECHNOLOGY

ANALYSIS l Telecity

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580

570

560

550

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Hg CapitalThe private equity investor has promot-ed Alex King from sector head for TMT

to partner. In addition, Jonathan Boyes,Rob De Laszlo and Justin Leong, whospecialise in TMT, renewable energy

and TMT respectively, have been pro-moted to director. Sascha Kaumann,who specialises in industrials, has beenpromoted to associate director.

HurricaneThe oil and gas exploration firm has

appointed Sir Adrian Montague CBE asnon-executive chairman. Montague ischairman of 3i Group, non-executivechair of Michael Page International,CellMark AB and Anglian Water Group;and non-executive director of SkanskaAB. He is also on the advisory board ofthe Green Investment Bank.

+44 (0)20 7092 0053morganmckinley.com

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

SPECIALISTS IN GLOBALPROFESSIONAL RECRUITMENT

in association with

Age UK EnterprisesThe commercial services arm of Charity Age UKhas hired Ashley Smalley as strategy director,working alongside Gordon Morris, managingdirector of AGE UK Enterprises. Smalley will beresponsible for meeting the divisions growth

targets for profit and customer numbers. Hisprevious roles include head of strategy at AvivaEurope, head of strategic analysis at BUPA, andstrategy manager at Norwich Union.

headline sponsor champagne reception sponsor

official venue partner

sponsors

The Square Milesevent of the year.

Book your place for the City A.M. Awards

on Wednesday 21 September at the

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Visitwww.CityAMAwards.com

For more information, contact Jo Pead I 020 8267 4043 I [email protected]

BEST OF THE BROKERS

To appear in Best of the Brokers email your research to [email protected]

ANALYSIS lRockhopper Exploration300

250

May Jun Jul

p

230.5029 Jul

ROCKHOPPER EXPLORATIONGoldman Sachs reiterates its convictionbuy rating on the AIM listed oil and gasexploration company with a target price of728p. The broker believes the currentshare price significantly underestimatesvolumes at Sea Lion, seeing a 50 per cent

upside to its valuation. Goldman Sachssays significant exploration potential isalso being ignored.

ANALYSIS lInchcape420

380

May Jun Jul

p

389.4029 Jul

INCHCAPENomura rates the multinational car dealer asneutral with a target price of 390p followingits first-half results last week. The broker seesToyota supply issues as its core concern, withsome markets seeing one to three months lossof sales before a normalisation of supply in thefirst quarter of 2012. Inchcape has announcedcontract wins with VW and Porsche, suggest-ing an opportunity to grow its presence.

CITY MOVES | WHOS SWITCHING JOBSEdited by Harriet Dennys

Growth concernsand debt talks setto lower opening

I TS difficult to see any way butdown for shares this morning.

Theres always the potential forthe US debt impasse to be over-

come and an agreement on the debtceiling to be reached any minute, but

without that there is just too muchuncertainty around.

GFT quotes two-way prices on stockindices around the clock, even whenthe underlying markets are closed.

The FTSE 100 index is called to opendown 20 points at 5,795. The GermanDAX is forecast to open down 22points at 7,136, and the French CAC40 is quoted to down 12 points at3,659.

ECONOMIC GROWTH MAIN CONCERNAside from all the political sparringin the States, the main concern play-ing on traders minds is economicgrowth.

Last weeks GDP figures for the UKand US painted a bleak picture. USsecond quarter growth was disap-

pointing, coming in at 1.3 per cent onan annualised basis versus 1.8 percent forecasts.

Even more disconcerting was therevision to the first quarter number:down from 1.9 per cent to a stagger-ing 0.4 per cent.

In the UK, the economy grew byjust 0.2 per cent in the second quar-ter, down from 0.5 per cent.

NON FARM PAYROLLS DUE FRIDAYWith this backdrop, traders are alsounlikely to commit too much aheadof the non-farm payrolls out onFriday, which have the potential to beone of the biggest i.e. most volatile

jobs numbers we have seen for sometime. The previous data for Juneshowed only 18,000 jobs were created.For July the expectations are foraround 90,000.

The corporate earnings season has been largely overshadowed by theongoing events in Capitol Hill, butthis week a whole host of UK bluechips will release interim results,

beginning with HSBC this morning.

The headline grabber here willsurely be the rumoured job cutswhich are expected as part of a globalcost-cutting drive: between 10,000and 15,000 are expected to face thechop during the next year.

Barclays, Lloyds and RBS alsorelease their numbers later in the

week, and disappointing numbers areforecast for all.

Martin Slaney is head of global dealingoperations for GFT.

MARTINONTHE MARKETS

MARTIN SLANEY

p

9 May 27 May 17 Jun 7 Jul 27 Jul

6,100

5,700

5,800

5,900

6,000

ANALYSIS l FTSE5,815.19

29 Jul


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intact HSBC and Standard Chartered. Ofcourse, you can point to HSBCs globalexposure and Standard Chartered benefit-ing from doing relatively little business inthe UK, US or Europe. But they both alsoreported low return on equity numbers(RoE), which seems to contradict the ideathat banks which report a higher RoE willtrade at a higher premium to book value(see chart, below). We are beginning to

wonder if lower RoE targets are actually areason for optimism in this sector, saysBruce Packford, banking analyst forSeymour Pierce equity research. He asksif 15 per cent RoE is better than a 20 percent RoE why not 12 per cent or even 10per cent returns? Packford welcomeslower and more realistic RoE targetsamong UK banks, saying that these sug-gest that some of the lessons of the pasthave been learnt.

RINGFENCING WORRIESAlongside the worries of UK bank expo-sure to European debt, a threat couldcome from the Independent BankingCommission. which has recommendedseparating riskier bank activities from theretail businesses. Though the implicationsof ringfencing are hazy, analysts predictBarclays and RBS would be most impacted,followed by HSBC and Lloyds.

It is set to be an interesting week for UKbank equities and traders should be ontheir toes in case of any surprises.

Banking onsurprisingthe markets

THIS week sees the release of interim

figures from a number of UK banks,and few are holding out hope for par-ticularly strong results. A generally

weak UK economy that grew an anaemic0.2 per cent in the second quarter, coupledwith concerns about the risk of UK bankexposure to possible European default,have brought share prices tumbling overthe last quarter. Lloyds has fallen 30 percent, Barclays is down 24 per cent and RBShas dropped 19 per cent. HSBC andStandard Chartered have come out on topof this ugly dog fight, down only 8 per centand 4 per cent respectively. HSBC willannounce today, and it is expected that it will post relatively healthy figures. According to Angus Campbell, head ofsales for London Capital Group: HSBCremains a favourite among analysts and itsearnings are expected to show some decentvolume growth, despite a decline in trad-ing revenues, but this is down to seasonalfactors. Campbell adds: Like Lloyds andRBS, Barclays has also been a real underper-former due to concerns over its sovereignexposures. So with the Asian focusedbanks seeing less share price weakness inrecent weeks than the more European anddomestic focused banks we should expectthem to perform mildly better next week.

SUSTAINABLE STRATEGIESOf the banks reporting this week, twocame through the credit crisis largely

UK banks will be hoping to defyexpectations, writes Craig Drake

Banks have been

under pressure

Picture: REX

THE WEEK AHEAD in association with

COMPANY NEWS

l Its a busy week for results. Today, Hiscox, HSBC,

Intertek and Ultra Electronics Holdings announce.

lBarclays, Capital Shopping Centres, Cookson,Drax, Fresnillo, GKN, Meggitt, Millennium &Copthorne Hotels, Rotork, Weir and Xstrata allannounce tomorrow.

lAnnouncing on Wednesday are Capital &Counties Properties, Ferrexpo, Legal & General,Rexam, Rightmove, Standard Chartered and TaylorWimpey. The latter will hope to build on the recentnews that it has permission to construct on green-belt land near Bristol.

COMPANY NEWS

l On Thursday, Aviva, British Land, Catlin,

Cobham, Inmarsat, Ladbrokes and Lloyds,Randgold Resources, Rio Tinto announce.

l Also, RSA Insurance, Schroders and Unileveralso announce. Unilever was founded in 1930 byAntonius Jurgens, Samuel van den Bergh andWilliam Hulme Lever, 2nd Viscount Leverhulme.

l On Friday, Logica, Old Mutual, Prudential,Royal Bank of Scotland, Smith & Nephew andWilliam Hill announce. Investors have been tak-ing a punt that the FTSE 250 bookmakers revealsome good numbers.

ECONOMICS

l Tomorrow, the Reserve Bank of Australia will

announce its decision on interest rates while itwill deliver its monetary policy statement onFriday.

l On Thursday, the Bank of England willannounce on its asset purchase facility (quantita-tive easing) and deliver its interest rate decision.

l On Friday, the Bank of Japan releases its inter-est rate decision and will deliver its monetarypolicy statement. Also on Friday, the US unem-ployment rate for July and nonfarm payrolls willbe released by the US Department of Labor.

POLITICAL NEWS

l Republicans and Democrats have until tomor-

row to reach a deal on what to do about theUSs debt ceiling. The biggest economy in theworld is still staring down the barrel of a default.

l On the same day Brigadier General RostamQasemi will likely be sworn in as Irans new oilminister. Qasemi is subject to sanctions from theEuropean Union for alleged involvement in Iransnuclear programme.

l In the emerging world, Friday will see a sum-mit between Argentina and Brazil, in which theywill discuss greater coordination on trade.

THE TIPSTER

THE SILVER

BULLETS A

TASTY BITE

TRADERS are long on silver as theprecious metal looks like it might besetting up to test its highs from ear-lier in the year of around $50. The

precious metal has seen its fair share ofvolatility in the last week dipping backbelow the $40 mark so could be a buy.Capital Spreads quotes a price of $39.80-$39.83 for its silver September contract.

Silver miner Fresnillo has reaped thebenefits of the recent silver run, and hasseen its share price rally over the pastmonth from around 1,280p to its currentlevel 1,749p. With the global economy stilllooking shaky, we could see a further pushinto safe haven metals. It is also reportingfigures tomorrow, which should be takeninto account. Capital Spreads quotes

1,750.1p-1,752.9p.Millennium & Copthorne Hotels

releases earnings later in the week andthe share price has been tracking that ofits bigger peer IHG incredibly closely overthe last few years. With its selective geo-graphic exposure, ventures in the lucrativeChinese market and relatively conserva-tive P/E, many will be hoping for upbeatnews. IG Index quotes 509.7p-512.8p.

Brent crude has been trading near itshighs for a good month with the situationin the Middle East and north Africa slid-ing into the background. Although therecent report from the InternationalEnergy Association was taken with apinch of salt, the downside is starting tolook appealing to the bearish traders whohave been sitting on the sidelines of late.Capital Spreads quotes a price of$116.65-$116.70 for the SeptemberBrent contract.

Philip Salter

ANALYSIS l Lower return on equity banks had a better credit crisis

HSBA

10%

8%

6%

4%

2%

0%

Return on equity10% 12% 14% 16% 18% 20% 22% 24% 26% 28%

coretier1(%)

STAN

BB

HBOSAL

NRK

BARC

LLOY

SOURCE: Seymour Pierce

15Wealth Management | Spread Betting

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BUSINESS SURVIVAL GUIDE

to the OlympicsClear the hurdles

and make the most of

London 2012with our

8-page special

l Reshape your day

with flexible working P21

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20/32

IS 30 July in your firms diary? Londoncelebrated one year to the OlympicGames last Wednesday, but Day Three,on Monday 30 July 2012, is the critical

date for business, when crowds of sportsfans and the demands of a full workingday will intersect for the first time. Newresearch shows the banking and legal sec-tors are leading the way in Olympic pre-paredness, but every company needs to beready to help keep London, and their ownaffairs, running smoothly.

BANKERS TAKE THE LEADAccording to research from London 2012and Transport for London (TfL), sixty-five

firms in the banking and finance sectorshave already registered for Site-Specific

Advice (SSA). This free service providestravel advice to businesses located in areasaffected by the Games if they employ over200 staff. The free one-to-one sessionsinclude advice on planning staff businesstravel during busy periods, tips on main-taining service continuity and sharing

best practice from firms that already haveplans in place.

DONT FALL BEHIND With less than a year to go, now is thetime to plan. In the last six weeks, TfL hasseen a 100 per cent increase in sign-ups fortheir advice service, but while banking,law and management consultancy firmscollectively representing nearly a quarterof a million staff have signed up for SSAtraining, certain sectors, includingrecruitment and manufacturing, current-ly have only a single firm involved. Dontleave it too late, or your staff will risk

being the ones left at the back of thequeue come Day Three.

Free training to help manage the

Olympic crowds is getting firmsfull attention, saysWill Freeman

London 2012 and TfL are asking businessesto consider ways which will help reduce theiroverall need to travel including:

TOP TIPS | TRAVEL REDUCTION

Business Survival Guide to the Olympics18 CITYA.M. 1 AUGUST 2011

Get your company fit for Day Three

Help is here to plan for 2012

THE task of planning for LondonsOlympic influx might seem daunt-ing, but there are plenty of tools,courtesy of the experts, to make

getting your company in shape for the big event a walk in the Olympic Park.Here we list the key resources to make

your life easier.

WORKSHOPS

Free Site-Specific Advice is available fromTransport for London (TfL) for companiesin affected areas with more than 200employees (see above). From August, com-panies that employ 200+ workers acrossmultiple sites are also being offered thisadvice, and TfL are hoping to work withat least 100 multisite companies.

Firms with fewer than 200 employeesin areas that will be affected by the

Games can get help too. More than 50free workshops are being rolled out

across the country. These drop-insessions will take place once a

fortnight until the Gamesbegin, starting in early August,

and cover topics includinghow local roads will be man-

aged, how to optimisedeliveries and how to offerflexible working during

Games time, and are special-ly designed to help small and

medium-sized enterprises (SME).For businesses of all sizes, it is easy

to sign up simply email [email protected] or visit www.lon-don2012.com/traveladviceforbusiness formore information and advice.

ONLINE PLANNINGIf you want to start planning withoutleaving your desk, a brand new onlineplanning tool has been developed so thattailored advice is just a click away.

Designed for businesses of all sizes, thetool poses questions about staff, businesstravel, visitors, suppliers and deliveries. Itthen calculates specific suggestions for

your company to take action on, andpoints you will need to bear in mind. Youcan start planning now by visiting

www.london2012.com/traveladvicefor-business and selecting Make your Plan.

MAKE YOUR PLANMark Evers, director of Games transportfor TfL offers a few simple steps to keep

your firm running smoothly next sum-mer. First of all, check if your business isin a travel hotspot. TfL has created aseries of maps to make this clear (see ourfour examples on p22-23). These showexactly how local roads and public trans-port are likely to be affected. Secondly, if

you are in or near a hotspot, check thetiming of Olympic and Paralympic eventsto see when it is likely to be an issue

(www.london2012.com/olympic-sched-ule). Next, you will need to create an

action plan for your company. Begin bytalking with staff about their travelneeds, try and encourage them to reducenon-essential travel and make plans foressential journeys. You can download anaction plan template at www.lon-don2012.com/traveladviceforbusiness.Once you have your plan, dont forget thenext step is to test it and to tell your busi-ness all about it.

STAY IN TOUCHDont let your plan get out of date.Register at www.london2012.com/trave-ladviceforbusiness for regular emailupdates. Also keep in touch with othercompanies in your area to see if you cancoordinate, for instance on deliveries.Remember to stock up on office essen-tials and to get any pending maintenance

work done well in advance of the Games.Daniel Ritterband, the Mayor of

Londons Director of Marketing and 2012Communications, says: The 2012 Gamesare a massive opportunity for businessesin the capital and we expect internation-al visitors to spend more than 700mduring this time.

That is why we are offering firms thechance to take part in a range of pro-grammes that will help them managethe impact of the Games on their opera-tions and at the same time allow them to

make the most of this wonderful occa-sion.

42%of businesses have

planned for the Olympics;

53%intend to, but have

yet to start.

l Staggering thestart and finish timesof working days

l Providing the

facilities for staff towork from home

l Stocking up onnon-perishable itemswell before theGames

l Arranging earlieror later deliveries

lManaging annualleave

l Temporarilyrelocating employeesor altering their

working hours

l Helping staffre-plan their travel

l Using conference/video/web calls

l Encouraging andenablingstafftocycleandwalk

LONDON IS WAKING UP TO THE 2012 CHALLENGE

In 2010,56%of businesses said there was

no need to plan for theOlympics; just

5%believe that now.

Meticulousand early planning is

key to getting the mostout of the Games and Id urgeevery business, big and small,to act now and get ready for

London 2012.Boris Johnson,

Mayor of London

55%of businesses believethey are on track for

the Olympics, up from

33%last year

Source: Deloitte

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LEARNING from the past is the pathto progress and so Vancouversexperience of hosting the WinterOlympics in 2010 has a lot to teach

us. Despite the inevitable challenges, itwas warmly and roundly considered agreat success, with most businessesready and willing to adapt and benefitfrom the unique opportunities affordedby being caught up in this colossal event.

TESTING TIMESThere can be no doubt t hat the OlympicGames are an interruption to the statusquo for most firms. Michael Davis ofReputations, a Vancouver-based publicrelations firm, found the two biggestchallenges for businesses were trans-portation and workforce management.He explains that for businesses close tothe key venues there were major disrup-tions in the delivery of goods, taxis, carsand transit for employees. He warns:Security requirements can shut youdown. Similarly, Paul Fletcher, manag-ing partner of Deloitte in Vancouver,points out supply chain disruptionswere also a reality during the Games. Heexplains: Leading up to, and during theGames, businesses had to reassess theirsupply chain inorder to gettheir prod-ucts to mar-ket or receivegoods, astransportationto and fromthe city, as wellas within it,operated underdifferent sce-narios. This sit-uation wascompounded bythe fact that sup-pliers were facingthe same challenges.

Employers need to be

aware that many of theirstaff will want to watchthe Olympics this wascertainly the case in Vancouver. Davis notessome companies simplyshut down, some gaveemployees vacation, while a number ofschools moved the breakto coincide with theGames further compli-cating some peopleslives. Fletcher says: Formany businesses, the Gamesmeant reassessing somelong-lived policies on waysof doing business and serv-ing customers. He saysbusinesses found that anumber of their employeesplanned on taking a holidayduring the Games resulting in

a lack of resources. Accordingto Fletcher some workers

found it difficult and time-consumingtravelling to the workplace, makingalternative work arrangements, such asworking from home, viable solutions to

maintain productivity for many compa-nies.

GREAT RESULTSDespite the tests, there are huge oppor-tunities for businesses in the Olympiccities to prosper. Fletcher says the 2010Games were an opportunity for business-es to transform themselves, as they wereforced to reassess their basic processesand look at them more critically. He saysthe Games provided long-term benefitsfor local businesses and the economy byestablishing Vancouver on the worldstage, helping to attract new jobs andinvestment to the area. Davis notes themost important lasting benefit for mostparticipating businesses was the net-working connections brought on by theGames. He notes his consulting compa-ny was able to work with a number ofinternational companies that theywould never have had the opportunity towork with without the Games. He says:

This was a commontheme: local business-

es getting the oppor-tunity to work on

the interna-tional stage.

Also, after theG a m e s ,Fletcher saysimprovementsin public trans-portation, roads,

bridges and air-ports benefited

businesses asthey and their

workforce aremajor users of this

infrastructure. So alittle temporary strain

can lead to longer-term

gains.Hosting an OlympicGames requires an effortof Herculean proportionsfor all involved notonly the athletes. Thecoordination required issupremely complex. Butthis is no reason toapproach the games with pessimism despite the challenges,the coming disruption

will also present opportu-nities for Londons busi-nesses to look inward attheir internal processesand outward at how theycan benefit from theattention of the rest ofthe world. As Davis advis-es: Get involved early,get as much information

as you can and enjoy theride.

UK employers can learn a lot from the trialsand tribulations of Canadas businesses inthe Winter Games of 2010, says Philip Salter

Pictures: GETTY

Business Survival Guide to the Olympics 19CITYA.M. 1 AUGUST 2011

Learning from

the Olympicsof Vancouver

73%saw the Olympics as anopportunity to gain business

86%in the media and leisuresectors saw an advantage

73%said their firms were continuingto enjoy higher sales

60%reported lasting benefitsfrom the Olympics

Olympic Opportunities in Canada

Source: BT

80%in the retail sector sawan advantage

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The man behind Londons new bullet trains

is making sure the 2012 Games run on timeThe Olympic Delivery Authoritys transport director says plan for a great summer, writes Marc Sidwell

AS YOU travel to work, did you noticehow roomy Stratford station is look-ing? Or that certain trains seemlonger than before? Or, if you use

the Jubilee Line, that more trains are run-ning every hour? Its all part of the way in

which Londons transport system is beingsteadily geared up ahead of next sum-mers Olympic Games.

The Olympic Delivery Authoritys trans-port mastermind, Hugh Sumner, is pas-sionate about what has been achieved.The great thing for London is that thosethings that might have dribbled out overmany years have been accelerated andtheyre here now, theyre in use, servingLondoners and serving Londoners proud.

The 6.5bn transport legacy of theGames is more or less all up and running,from high-speed bullet trains that, rebrand-

ed as the Javelin shuttle, will carrycrowds from St Pancras to StratfordInternational in seven minutes, toimprovements on the East London Line and50 per cent longer trains on the DocklandsLight Railway (DLR). At StratfordInternational, the stations capacity has

been trebled, with the rebuilt concoursecompleted in January. A DLR extension to

Woolwich Arsenal has been delivered, andone to Stratford International is due toopen in the next few weeks.

Still, Sumner isnt complacent that theseimprovements, which London will keep forthe long term, will make the extra traffic ofthe Games disappear. In simple terms,zone lets call it zone one-and-a-half isgoing to be very very busy during Gamestime. Similarly the road systems betweenEarls Court and the Blackwall tunnel. Thesheer scale is stupendous. Youre talkingabout 26 world championships all occur-ring at the same time in the same place,

with cultural events that could double that.Even though weve done all this work, the

reality is that London is going to be verybusy were hosting the world.

But he does see the inevitable congestionas manageable: By everyone doing thingsdifferently, were going to have a cracker-

jack summer. The challenge in the next 12months is to give spectators and businessesknowledge and understanding so they canhave a really good summer next year.

He points out that the advanced state ofplanning already means that those with

Olympic tickets (which include a nine-zonetravelcard for the day) can goonline, plan their journeys and

book their transport.And Sumner is delight-

ed with the responsefrom City firms to

Transport forLondons Site-Specific

Advice programme,although he acknowl-edges there is stillfurther to go. Thetrick for us is to work

with everybody toensure that its sporton the front page,not transport. Were

working a lot with thefreight industry onreplenishment issues its probably not agood idea to run out

of beer in the middleof a Games.

In the end, his advice is simple: Startthinking now, because your entire supplychain is going to have to be thoughtthrough. Whats your leave policy next

year? What are you going to do when yourpeople are all volunteers and they havent

bothered telling you? Government depart-ments, he says, are planning to reducetheir travel footprint by 50 per cent, andare carrying out practice runs in the nearfuture. Just as his task for the next six

months is to run load-testing on the trans-port infrastructure, firms need totake the initiative and test

their alternative travelplans well in advance.

Sumner seems sur-prisingly calm giventhe pressure that hewill be under if thingsgo wrong. He says, Irecognise the gravityand the magnitude ofwhat weve embarkedon. He smiles, butwe do big quite wellas a nation think ofthe Royal Wedding.

Sumners vision ofan Olympic Games

centred on public trans-port, walking andcycling looks well ontrack. But to enjoy it, be

sure to start your ownplanning now.

Age: 54Family: Married, with one teenage sonLives: Parsons GreenEducation: Bachelor of Civil Engineeringand MBA, Cranfield

Career: Hugh was previously managingdirector of an infrastructure company andbefore that led the team that operatedand maintained London Underground.

Hobby: SleepingFavourite sports: Rugby, tennis, cricketSporting heroes: Jonathan Edwards, theAthens 2004 4x100m Team GB relay team

CV | HUGH SUMNER

Confident, but notcomplacent, HughSumner has geared upLondons transport forthe Olympics

Picture:Micha Theiner

/CITY AM

Even thoughweve done allthis work, thereality is thatLondon isgoing to bevery busy were hosting

the world.

Business Survival Guide to the Olympics20 CITYA.M. 1 AUGUST 2011

The challenge over thenext 12 months is to givespectators and businessesthe knowledge they need

to have a great summer.

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Business Survival Guide to the Olympics 21CITYA.M. 1 AUGUST 2011

MAKING better use of flexible and homeworking is a key area of focus forDeloitte in the run up to 2012. Quite sim-ply, our people cannot do their jobs if

they are struggling to move around the city. Itwont help the Games organisers or Londonstransport authorities either, if unnecessary jour-neys clog up the network. Transport for Londonaims to reduce background traffic in parts ofthe capital by 30 per cent and has urged busi-nesses to reduce the number of commutes bytheir staff to help. The request appears to havehad a positive response. Deloitte research sug-gests that over a third of companies intend toallow greater use of flexible or home working dur-ing London 2012. Yet for many, there is muchwork still to be done.

I chair Deloittes own Games ReadinessSteering Group, which was created to assess the

potential impacts on our business and considerany actions required to ensure we deliver thebest possible client service during the Games.The group consists of representatives from anumber of areas, including human resources, ITand procurement.

FIRST STEPSBefore implementing or expanding flexible work-ing policies, businesses need a set of planningassumptions about the impact on their opera-tions. This summer, Deloitte will assess clientdemand and examine our resourcing patterns.We will then survey our people to understandtheir intentions around annual leave in the sum-mer of 2012. This will allow us to pinpoint whenwe might face pressure from staff unavailability,when flexible and home working is appropriateand when we are likely to need our people in theoffice or at client sites.

Flexible working will not work for every busi-ness and is hard to adopt in certain

cityam 2011-08-01

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