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Euro bank

debt issuesdrying up

EUROPEAN bank debt markets are dry-ing up, according to data compiled forCity A.M., in a development that is exac-erbating funding concerns and couldsee the European Central Bank (ECB)re-enter the market for bank bonds.

Data supplied by Dealogic showsthat the value of bonds issued byEuropean banks has dropped off dra-matically so far this quarter. Whilethey sold285.3bn (248bn) in the firstquarter and 168.3bn in the second,lenders have so far sold just 64.5bnthis quarter, which ends in one week.

The vast majority of that issuancehas been in covered bonds, which areconsidered safer by investors butrequire banks to tie up a pool of assetsin order to generate interest on thebonds. Last week, the regions lenderssold just 2bn in non-covered bonds.

The scarcity of buyers for bankpaper has seen European leaders sig-nal they could step into the breach.ECB board member Lorenzo BiniSmaghi said with regard to banks: Forliquidity, we are there we are ready todo what is needed. EUROZONE: P4

BY JULIET SAMUEL

BANKING

(Left to right) Bosses Ian Powell of PwC, David Sproul of Deloitte, Mark Otty of Ernst & Young and John Griffith-Jones of KPMG could face increased competition under new audit plans

RADICAL plans to force the UKsbiggest auditing firms to hive off theirhuge consultancy arms or ban themfrom cross-selling services to theirclients have been tabled by Europeanauthorities, it emerged yesterday.

The European Commission has setout new draft regulations to drastical-ly curb the UKs Big Four accountantsErnst & Young, PwC, Deloitte andKPMG, potentially depriving each ofup to 1bn in annual revenue fromtheir consulting businesses.

The shock heavy-handed proposalsgo much further than industryobservers had expected and are nowset to trigger a fierce battle. Countries

BRUSSELS WAGESWAR ON BIG FOUR

BY ALISON LOCKPROFESSIONAL SERVICES

www.cityam.comIssue 1,476 Tuesday 27 September 2011 FREE

CANNONPLACE OPENNEW LANDMARK

AWAITS CITY

BUSINESS P18

WHEN CHIMPS MAKETHE BEST FORECASTS

WHY EXPERTS OFTEN FAIL P22

BUSINESS WITH PERSONALITY

such as the UK may decide to block ordilute the proposals.

The consultation document, frominternal markets commissionerMichel Barnier, said Europes auditorsindependence was neither assurednor demonstrable.

The harshest option proposedwould outlaw all sales of advisory andconsultancy services, from tax adviso-ry to risk management, to the firmsclients even those it does not audit.

Such a law could cause massivefinancial damage and disruption toprofessional services firms, as they would have to pull their business

model apart and service clients fromtwo separate entities. A watered-downalternative would bar firms fromcross-selling to audit clients only.

The draft plans also propose forcingcompanies to change auditor at leastonce every nine years, a move theCommission believes would improveaudit quality and competition bydestroying the cosy relationshipsbetween partners and their clients.

It said the low rate of rotation FTSE 100 companies change their audi-tor only on average once every 48 years had deprived audit of its key ethos:professional scepticism, according tothe draft document seen by trade pub-lication Accountancy Age.

Further costly changes include mak-ing large, economically important

companies employ two separate audi-tors, including at least one non-BigFour firm, to jointly audit theiraccounts.

Audit industry sources told City A.M.the bid to split audit and consultancyfunctions wouldnt make sense andwould be a massive jolt.

Unwinding their client serviceswould be a costly and complex processthat would raise the cost of providingservices and could have wide-rangingtax implications.

They could also potentially spark aregulatory mismatch across the EU asdifferent states adopted different lev-els of change, the sources said.

The vast majority of the more than700 responses to the EC had alreadyoverwhelmingly opposed such a plan,

they added.Smaller auditors such as BDO andGrant Thornton would gain fromparts of the proposed shake-up.

Certified Distribution

01/08/11 till 28/08/11 is 92,745

ANALYSIS l European bank debt markets haveground to a halt

Debtissuance(m)

2 6 10 14 18 2 2 26 3 0 34 3 8

45,000

35,000

25,000

15,000

5,000

Total

Covered

Bonds

weeks

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News2 CITYA.M. 27 SEPTEMBER 2011

Stelios startseasyJet rivalEASYJET founder Sir Stelios Haji-Ioannou has told the airline he is plan-ning to launch a rival airline calledFastjet, in the latest twist in a series of bitter disputes between the tycoonand the firm he set up 16 years ago.

The shock move comes just a weekafter easyJets management promisedto pay out a special dividend of 190mto shareholders, including Sir Steliosand his family, who own a 38 per centstake in the budget airline.

In turn, Sir Stelios backed down ondemands for an extraordinary share-holder meeting to force non-executiveProfessor Rigas Doganis off the board.

In a statement yesterday easyJet saidits founder had already set up a web-site, which currently reads only:Fastjet.com by Stelios. Coming soon!

The bold red background echoeseasyJets own orange branding. Aspokesperson for Sir Stelios declined tocomment further on the launch.

EasyJet vowed to take necessaryaction if Fastjet infringes on therights of the airline and its investors.

Sir Stelios also alleges that the com-pany breached the terms of a comfortletter dated October last year mak-ing it void, a claim which easyJet saysit emphatically rejects.

The letter which prevents himfrom setting up a rival airline includ-ed a mutual respect clause that prevents Sir Stelios and easyJet fromspeaking negatively of each other.

In a statement yesterday, Sir Steliossaid he strongly believes that thedirectors of easyJet, via a smear cam-paign conducted by off the recordbriefings to journalists, have repeated-ly breached the clause.

Analysts have derided Sir Steliosslatest actions, warning that it coulddamage shareholder confidence ineasyJet if the airline became furtherembroiled in disputes with Sir Stelios.

One analyst said the world hasmoved on since the time since helaunched easyJet when there was agreater gap between low budget air-

lines and legacy carriers.Carolyn McCall took over the reins

at easyJet a year ago with the chal-lenge of finding some middle groundin the battle with Sir SteliosseasyGroup. A two-year row over thelicensing of the brand was resolvedlast October, when easyJet increasedannual royalty payouts to easyGroup.

Keynesians failing their own theory

LET us assume for a moment thattodays self-styled Keynesians are rightand that what the UK and the Westneed is not austerity but even greaterpublic spending. To me, given that theUK government could borrow 130bnthis year, that the OECD puts publicspending at 50.1 per cent of UK GDP,and that countries are going bankruptas a result of spending and borrowingtoo much, this is a nonsensicalassumption. But it is worth exploring,if only better to point out the flaws inthe reasoning of many so-calledKeynesians, including those in the

Labour party (they have distorted JohnMaynard Keynes theories beyondrecognition, but that is a moot point).

A proper Keynesian stimulus does-nt mean an extra couple of billion or

a slight slowdown in the pace ofdeficit reduction. What would reallybe required is shock and awe. The UKeconomy is expected to be worth1.539 trillion this year; so a properKeynesian-style boost to demandworth a semi-decent 3 per cent of GDP would be worth around 46bn. Arguably, it would need to be evenlarger, say 4 or 5 per cent of GDP. Yettaken at face value and excluding anydamage they would cause to confi-dence and incentives, Ed Balls seriesof proposals probably amount to adebt-financed boost to demand of18bn, roughly 1.2 per cent of GDP.

This includes his proposal to cutVAT back to 17.5 per cent, and his bidto move forward infrastructure proj-ects, partly compensated for by yetanother crippling 2bn-3bn tax on banks (additional to Osbornes own

new tax). From a Keynesian perspec-tive, it would make only a small differ-ence. Even on its own terms, it is onlyjust better than a gimmick. It certain-ly wouldnt mark a major intellectual

shift. Even if it did trigger more con-sumption, quite a lot of this would beon imported goods, which reduceGDP. A lot of the construction spend-ing would be conducted via importedlabour, thus failing to dent domesticunemployment by much.

So even if one were to believeKeynesian models in an open-econo-my context, and pretend that the mar-kets wouldnt panic, the boost to GDP would be marginal, probably half aper cent or so in the first year and lessin subsequent years. In the longer run,taxes would have to be hiked; giventhat Balls is obsessed with cuttingtaxes on consumption, that wouldmean even higher incentive-destroy-ing taxes on income and capital. It wasinteresting that Balls said yesterdaythat the issue of land taxation is onewhich we should actively look at in

other words, he is moving closer to thekinds of crippling wealth taxesbeloved of Vince Cable. It is strangethat Balls appears to think that whatthe UK needs more of today is debt-

financed consumption; in reality itneeds to rebalance towards invest-ment, savings and exports.

What Keynesians should really bedemanding if they were serious advo-cates of their own ideology is a mas-sive cut in VAT to 12 per cent, or thebiggest government construction proj-ect in UK history, or something of thatmagnitude. The fact that they are notdoing so suggests a singular (andhealthy) lack of self-confidence in fis-cal demand management. Britaindoesnt need another artificial boostto demand. It needs a genuine boost tothe incentives of people and compa-nies to work and invest, together witha credible long-term commitment to balancing the governments books.Shame that Ed Balls cant see this.

[email protected] me on Twitter: @allisterheath

CREDIT rating agency Standard &Poors could be hit with legal actionfrom the US markets regulator formis-rating a risky package of sub-prime mortgage bonds in 2007, it dis-closed yesterday.

S&P said the Securities andExchange Commission was consider-ing recommending action against itfor violating securities laws in its rat-ing of a collaterised debt obligation(CDO) called Delphinus CDO 2007-1.

S&P rated almost $950m (614m) ofliabilities in the CDO in August 2007but by December it had downgradedthe packages top-rated bonds. By January the CDO was in technicaldefault and by the end of 2008 all itsAAA bonds were classed as junk.

S&P warned it might have to paycivil penalties in the case.

US may chargeS&P over subprime ratings

EasyJet founder Sir Stelios Haji-Ioannou has said he plans to take off with a rival airline

ENFORCEMENT

EDITORS LETTER

ALLISTER HEATH

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]

4th Floor, 33 Queen Street, London, EC4R 1BRTel: 020 3201 8900 Fax: 020 7283 5334Email: [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 Jo SimpsonPictures Alice HeppleCommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

BYKASMIRA JEFFORD

AVIATION

BP PROPOSES FOURTH PIPELINE ROUTETO BRING AZERBAIJAN GAS TOEUROPEBP is planning a pipeline stretching1,300 km across three countries tobring gas from Azerbaijan to Europe.The scheme is a new entrant in thehighly charged competition to con-struct a supply route to the Caspian basin and reduce Europes depend-ence on Russian gas.

FSA CONSIDERS MASHKEVICH BID TOJOIN ENRC BOARDThe UK Listing Authority is consider-ing an application by AlexanderMashkevich, the billionaire co-founder of Eurasian NaturalResources Corp, to join the ENRCboard, people close to the companysaid. A board seat for Mashkevich,who has publicly defended the FTSE

100 Kazakh mining company, couldprecede his drive for the chairman-

ship and would mark a new begin-ning for the embattled company.

CHINA THE REAL THING FOR BUSINESSRATHER THAN US, SAYS COKE CHIEFCoca-Cola now sees the US as a lessfriendly business environment thanChina, its chief executive hasrevealed, citing political gridlock andan antiquated tax structure as rea-sons its home market has become lesscompetitive. Its like a well managedcompany, China, Muhtar Kent,Cokes chief executive, told theFinancial Times.

BANKER TO STAND TRIAL ACCUSED OFF1 BRIBESA German banker is set to stand trialnext month over charges that hereceived $33m in bribes fromFormula One boss Bernie Ecclestoneand a family trust in connection withthe sale of a stake in the motor racingseries. Gerhard Gribkowsky, the for-

mer chief risk officer at BayernLB,will stand trial in Munich.

HALCROW STAFF SET FOR 124MWINDFALL AFTER ENGINEER FALLS TOAMERICAN RIVALOne of the grand names of Britishcivil engineering has fallen to anAmerican takeover. Halcrow, whichplayed a central part in the war effort between 1939 and 1945, is being bought by its Denver-based rivalCH2M Hill. The takeover could gener-ate windfalls of tens of thousands ofpounds each for the consultant engi-neers staff.

UK PLC FIRES THE STARTING GUN INTHE RACE TO REBUILD LIBYABritain is gearing up for a postwarreconstruction bonanza in Libya byorganising an invitation-only confer-ence today to outflank potentialrivals from France and Italy. UK Tradeand Investment aims to broker deals

between British investors and LibyasNational Transitional Council.

SERGEI MAGNITSKY'S MOTHERDEMANDS RUSSIAN MURDER PROBERussia has come under fresh pressureto investigate the high-profile prisondeath of Sergei Magnitsky, the lawyerwho uncovered the biggest tax fraudin Russian history.In a complaint lodged with prosecu-tors, the late mans mother hasalleged he was illegally arrested, tor-tured and murdered in a Moscowprison in November 2009. Magnitskywas working for UK-based investmentfund Hermitage at the time of hisdeath.

GULF KEYSTONE AND EXCALIBUR IRAQLEGAL BATTLE HOTS UPNew court documents have shed freshlight on Gulf Keystone Petroleumslinks with Excalibur, the obscure com-pany that claims it is owed 30 per cent

of the 1.2bn explorers Iraq oilwealth.

MOTOROLA SOLUTIONS INVESTIGATEDUS authorities are investigating whether Motorola Solutions paidbribes to win business in Europe, peo-ple familiar with the matter said. Justice Department and Securitiesand Exchange Commission officialshave asked the company whichmakes two-way radios and systems forpolice, fire and other public-safetyorganisations for information overthe past two years about transactionsin seven European countries,

DELOITTE & TOUCHE SUED OVERTAYLOR BEAN COLLAPSEThe trustee overseeing the bankrupt-cy of Taylor Bean & WhitakerMortgage Corp filed a lawsuit yester-day against Deloitte & Touche, sayingthe firms grossly negligent auditscontributed to the mortgage lenders

collapse. The trustees lawsuit seek atotal of at least $7.6bn in damages.

WHAT THE OTHER PAPERS SAY THIS MORNING

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2011 Rank City Change to score New score

1 London -1 774

2 New York +4 773

3 Hong Kong +11 770

4 Singapore +13 735

5 Shanghai +30 724

6 Tokyo +1 695

7 Chicago +19 692

8 Zurich +21 686

9 San Francisco +26 681

10 Toronto +22 680

Source: The Global Financial Centres Index, Long Finance

LONDON clung to the top place on alist of the most important globalfinancial centres yesterday but saw itslead over rivals slashed to almost zeroas its competitive edge vanished, anew report showed.

In a worrying sign that the City islosing its place as the worlds leadingfinance hub, Londons competitive-ness score fell one point in 2011, leav-ing it just one point ahead of its biggest rival New York, according tothe Global Financial Centres Index.

Hong Kong jumped 11 points to takethird place in the ranking, whichassesses factors such as business envi-ronment, market access and talent. Itnow sits just four points belowLondon, while Singapore andShanghai made double-digit gains.

The indexs publisher Long Financesaid the margin between London andits next two rivals was negligible.

There is no significant differencebetween London, New York and HongKong in the ratings, it said, warning:London in particular must not rest onits laurels.

The Vickers report recommendssome fairly fundamental reforms ofthe banking and many in the sectorbelieve that these might damage thecompetitiveness of London.Furthermore, tax levels in the UK areunpopular within the financial servic-es sector, it added.

London is still the clear leader with-in Europe, where its nearest competi-tor is Zurich, ranked eighth. Frankfurt,the nearest Eurozone rival, was ranked16th and the report said it does notappear that London will be overtakenany time soon.

But Long Finance said the surveyshowed demand for finance centres ineach time zone, with London, NewYork and Hong Kong filling the threemajor trading sessions worldwide.

If you are one of the big banks youneed a presence in New York, Londonand Hong Kong you cannot claim tobe global otherwise, one Hong Kong-based banker told the survey.

The popularity of offshore centresfell in the past year, but survey respon-dents believed South Koreas capitalSeoul, Shanghai and Singapore weremost likely to gain ground as financialcentres in future. MORE: PAGE 14

London clings

to top spot asfinance hub

ED Miliband, the Labour party leader,will use his conference speech today toattack businesses he labels asset strip-pers.

His speech shows Labour keen todraw a line between good businessesthat behave responsibly and badfirms that make profits recklessly.

Miliband places in the bad catego-

ry firms such as care home operatorSouthern Cross, which is to cease trad-ing after running up huge debts on itsrent obligations after selling and leas-ing back its care home real estate.

Let me tell you what the 21st-centu-ry choice is: are you on the side of thewealth creators or the asset strippers?he will tell delegates in Liverpool.

For years as a country we have beenneutral in that battle. Theyve beentaxed the same, regulated the same,

treated the same, celebrated the same.They wont be by me.But his stance is likely to be viewed

as an attack on private equity and itsstrategy of growing companies by load-ing them with debt a tactic thatbackfired in the financial crisis.

His approach also reverses the pro-private equity stance taken by the pre-vious Labour government.

LABOUR CONFERENCE: PAGE 7COMMENT: PAGE 25

Ed Miliband launches attackon the private equity industry

BYALISON LOCK

ECONOMY

Labour party leader Ed Miliband will today attack firms he has labelled asset strippers

BYALISON LOCKPOLITICS

News 3CITYA.M. 27 SEPTEMBER 2011

THE TOP GLOBAL FINANCIAL CENTRES IN 2011

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FRENCH banks will need a capitalinjection in the tens of billions,according to analysts.

In several notes yesterday, analystsbegan to lay out how a new bailout ofthe countrys lenders could happen,

with some suggesting that it is thebest risk-reward medicine.

Following comments by Banquede France governor Christian Noyerthat Europes bailout fund couldstep in the rescue the banks, ana-lysts have said that any capitalinjection will have to be on a largerscale than the action taken in 2009.

Nomuras Jon Peace wrote that ina recessionary scenario, theycould need as much as 60bn(52bn) to meet capital require-ments. That dwarves the 8.5bnthey received in the last financialcrisis.

JP Morgans Kian Abouhosseinsays that bailing out the banks is a

better option than socialising bank risk in other ways such asthe European Central Banks deci-sion to extend access to its liquidity

facility or governments underwrit-ing bank debt.

Abouhossein estimates that a15-20bn bailout is likely forFrench banks but that across theregion, his top 28 lenders wouldrequire 45bn in extra capital. Aregional bailout, meanwhile,

would cost 150bn, he calculates.French banks rallied yesterday on

the prospect of a bailout beingorganised by European authorities.

Credit Agricole closed up 3.66per cent, Socit Gnrale rose 5.44per cent and BNP Paribas gained3.99 per cent, despite the possibili-ty that current shareholders could

be wiped out in the event of a res-cue. THE FORUM: P24

French bailout

would dwarf2009 rescueBY JULIET SAMUEL

BANKING

RETURNS on US Treasuries haveboomed in recent months, as investorshave turned to long-term Americandebt.

Hopes of political action over theEurozone crisis saw Treasuries slip yes-terday, yet 2011 as a whole is on courseto be one the most successful ever

years for bond-buyers.

Despite losing around one and ahalf points in yesterdays trading, 30-year Treasuries remain elevated. Yieldsrose yesterday, following an upturn atthe very end of last week, yet stayed

below three per cent mark. And 10-year Treasuries are set to

return over 30 per cent this year, ana-lysts expect, smashing the returnsgained from government bonds inrecent years.

The bonds have steadily increased

since earlier in the summer, and arenow outperforming gold (see chart onpage 5).

Long-term Treasuries have perkedup since last week, when the FederalReserve announced its latest attemptto stimulate the struggling US econo-my Operation Twist.

Some analysts had feared that theFeds asset purchases would stokeinflation and weigh down on the USdollar.


Returns on US Treasuries setto pass 30 per cent this year

Germany denies imminentplans for trillion-euro fund

THE Eurozone descended into confu-sion yesterday, with officials givingcontradictory signals on the prospectsfor a capital increase for the regions

bailout fund.German finance minister Wolfgang

Schuble denied that the Eurozone isconsidering plans to boost the firepow-er of the European Financial StabilityFacility (EFSF) by a factor of five so thatit could deploy2-3 trillion.

Asked if an increase could be

pushed through on Thursday whenthe German parliament votes on the

smaller increase to the EFSF agreed inJuly, he said: No, that is clear... We donot intend to increase it.

But markets are still awash withrumours that a plan to create a bailoutfacility in the trillions is afoot.

Some economists, however, say thatit wouldnt save the region anyway.Capital Economics analysts said:Overall, the reported proposals areperhaps the minimum required to buysome time in the event of a Greekdefault. But, just like the many previ-

ous bailout packages, they would notbe a permanent solution.

EUROZONE

Fed chief Ben Bernankes easing policies have not yet harmed bond-buyers

ANALYSIS l BNP Paribas SA

21 Sept20 Sept 22 Sept 23 Sept 26 Sept

26

25

28

27

24

23

26.3326 Sept

BY JULIAN HARRISMARKETS

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PRECIOUS metals plunged again yes-terday morning as investors continueto be spooked by the unexpecteddownturn in supposed safe havens.

Gold and silver both pared losseslater in the day, yet have taken a hugehit since earlier in the month.

Spot gold tumbled as much as 7.4per cent to a low of $1,534.49 yester-

day, its weakest since early July, beforecautious buying repaired some of thedamage.

Gold has fallen by nearly nine percent in its largest three-day slide sinceOctober 2008 and implied volatilityhas risen to a two and a half year high.

Spot silver dropped as much as 16per cent to $26.04, a level not seensince November 2010, and platinumslid as much as nine per cent beforeparing losses.

It shows you that at times ofextreme stress, there is not a suitablesubstitute to liquidity, said CreditSuisse analyst Tom Kendall.

Other highly-traded commoditiesalso took a knock yesterday, with cop-per -- often a bellwether for thestrength of the global economy -- suf-fering its sharpest fall since October2008, before trimming losses.Aluminium fell to its lowest level for ayear before recovering to trade higher.

Golds safe haven statusquestioned by investors

ANALYSIS l Asset performance since July 2011

Rebasedto 100

EUemergency

summit

USstrippedof AAA

JacktonHole

speechOperation

Twist

Coordinatedliquidy

measure

Swissfrancpeg

130

120

110

100

90

0

4 11 18 25 1 8 15 22 29 5 12 19

CRB IndexUS 10Y TreasuryS&P 500GoldDollar Index

Source: Reuters Datastream

Jul 2011 Aug 2011 Sep 2011

BY JULIAN HARRISMARKETS

MORE NEWSONLINE

www.cityam.com

GOLD - ITS NOT INDESTRUCTIBLE

Q.DOESNT GOLD RALLY DURINGECONOMIC TURMOIL?A.Not always. Investors often fleefrom all their positions, and inthis case have largely turned to the USdollar as the most liquid option.

Q.BUT WHY HAS IT BEEN HIT SOHARD?A.There are several possible factors,with gold likely being affected bya combination. Losses on equities has

seen some profit-tak-ing on the metal. TheChicago exchange (CME)has hiked its margin requirements.

Q.SO IS IT GAME OVER FOR THEGOLD RALLY?A.Not at all. Uber-loose monetarypolicy appears to be here to stay,while economic uncertainty stillmakes it more attractive than mostalternative investments.

Q A&

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ED Balls yesterday unveiled an 18bnplan to stimulate the economy,including slashing VAT on homeimprovements to five per cent andgiving small firms a national insur-ance holiday if they take on new

workers.Balls repeated calls for the govern-

ment to reintroduce Labours bonus

tax; to lower the headline rate of VATfrom 20 per cent to 17.5per cent; and to

bring forward capi-tal projects such as

building schoolsand roads.

He said: The gov-ernment must adopta steadier, more bal-anced plan to get ourdeficit down and takeimmediate action nowto support the economyand create jobs here inBritain.

Balls measures would cost theexchequer around21bn while his

bonus tax would raise between 2bnand 3bn, bringing the net cost of hisfive point package to around 18bn.

Justine Greening, economic secre-tary to the Treasury, said: Thisspeech failed the credibility test.Everyone can now see that Ed Balls isdangerously addicted to debt.

The director general of employersorganisation the CBI, John Cridland,said some of the proposals for stimu-lating growth were worth consider-ing but that the headline VAT cut

which would cost the exchequer12.1bn in 2011-12 was not afford-

able.Balls used his first conference

speech as shadow chancellor tosound a more measured note onthe deficit, responding to fearsthat Labour has lost its credibilityon the economy by failing to

acknowledge the parlous state ofthe public finances.

He promised to introducetough fiscal rules that Labour

would need to adhere toshould it win the next

election, althoughhe failed to setthem out, merelysaying they wouldput the nationaldebt on a down-

ward path.

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Balls unveils18bn plan toaid economy


CITY VIEWS: DO YOU BELIEVE LABOUR WILL INTRODUCE TOUGH FISCAL RULES TO CUTTHE DEFICIT? Interviews by Claire Farrell

Just look at the Labour partys trackrecord. I don't believe Ed Balls. We builtup this deficit when he was in power. Idon't believe his party has changed at

all. Labour wont be any different nexttime round.

TROY SOP | DEUTSCHE BANK

It's easy for Balls to say he will be tough onthe deficit, but I don't believe him. The mainreason the UK has such a large deficit isbecause Labour was in power. If they were

to win the next election, I dont thinktheyd be any different to Gordon Brown.

MARC TAYLOR | CNS

I don't believe Balls. He is just giving the typical response you always get from parties in opposition. If Labourwere in power, David Cameron would be saying something similar, and I wouldn't believe him either. Politiciansonly say what people want to hear.

ROGER INGLES | ELYSIAN

Talk about damning some-one with faint praise. Ballspretends he is cutting the

Prime Minister and chancellorsome slack by saying they arententirely to blame for Britains eco-nomic woes. Of course, very fewpeople blame the Tories for thestate of the British economy letalone the 2008 financial crisis they were in opposition.

BEHIND THE LINES | BALLS SPEECH

Itsnotrighttoblame

DavidCameronand

GeorgeOsborneforeverything

thatswrongwithourecono-

my.Theydidntcausethe

globalfinancialcrisis.

Thatcrisiswasabodyblow

tooureconomyandour

publicfinances.

Classic Balls. The 2008public debt was only loweras a share of GDP com-

pared to 1997. And while Br itainsdebt was lower than these coun-tries, he has picked nations withuniquely high debt piles amassedwell before the crisis. The UKsdeficit as a share of GDP in 2008was higher than all these coun-tries with the exception of the US.

Don'tletanyonetellyouthatLabouringov-

ernmentwasprofligatewith

publicmoneywhenwewent

intothecrisiswithlower

nationaldebtthanweinher-

itedin1997andlowerthan

America,France,

GermanyandJapan.

Balls identifies a handful ofmistakes made by Labourwhen in government. But

the first two are things that actu-ally generated revenue for theexchequer. On the principalcharge that Labour was profli-gate he offers no examples ofoverspending, merely observingthe government didnt spend everypound well. By David Crow

Whentheysaywemademistakesingovernment,

they'reright...wemustadmit

themandshowwe'velearned

fromthem.The75ppensionrise

thatwasamistake.Sowas

abolishingthe10ptaxrate.We

didn'tspendeverypound

ofpublicmoneywell.

* These views are those of the individuals above and not necessarily those of their company.

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A GROUP of shareholders yesterdayled the calls for Alex Weber to joinUBS early as more contendersemerged for the chief executives role.

Swiss campaigning group Ethossaid UBS could use an EGM, within amonth, to install Weber, amid claimsthe former Bundesbank chief hasbeen has been involved in all strategic

decisions since the $2.3bn (1.5bn)rogue trade emerged.Weber is set to join the UBS board

next year and replace Kaspar Villigeras chairman in 2013. Last night thebank declined to comment on sugges-tions this could be accelerated butpointed to an interview in whichVilliger said the board saw no rea-son to change the plan.

The Bundesbank would need toagree to Weber joining UBS early but

said no request had been received.It came as several other candidatesemerged to replace Oswald Gruebel,who resigned despite winning a voteof confidence from the board.Interim head Sergio Ermotti and Bill Winters, the former co-chief execu-tive at JPMorgan Investment Bank,are seen as contenders alongsideWeber, Lukas Ghwiler, head of UBSSwitzerland and Hugo Banziger, chiefrisk officer at Deutsche Bank.

Shareholders calling forWeber to join UBS now

Interim head Sergio Ermotti is tipped to win the top job at UBS Picture: REUTERS

BY PETER EDWARDSBANKING

LCH.Clearnetmulls offers

THE BIDDERS for Europes sought-after clearing house LCH.Clearnetwere waiting for the outcome of a crit-ical board meeting yesterday to decidewhich of the offers will be accepted.

The decision is crucial for theLondon Stock Exchange, which is oneof two main bidders for a controllingstake in LCH, Europes last independ-ent clearing house.

The LSE is competing against post-trade services group Markit, which iskeen to buy LCH in entirety, while USexchange the Nasdaq OMX Group hasalso put in a bid for a minority stake.

One industry source told City A.M. both sides would gain from the LSEwinning the bid.

BYALISON LOCK

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Ashurst setfor merger

CITY law f irm Ashurst is set to mergeoperations with Australian groupBlake Dawson to create a legal firmwith turnover approaching 500m.

The pair hopes to rebrand asAshurst in early 2012, having tied uptheir Asian businesses, with a fullmerger expected in 2014.

The tie-up was sealed by a vote byboth partnerships late last week.

Ashurst already has operations inAsia, including offices in Hong Kong,Singapore and Tokyo, but hopes thetie-in with Blakes will give it greateraccess to markets in the region.

The silver circle currently hasmore than 200 partners in 12 coun-tries.

BYHARRY BANKS

LEGAL

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SOMETHING to look forward to forUBS alleged fraudster Kweku Adoboli,once he has emerged from the trau-ma of the courts: following in thefootsteps of the original rogue traderNick Leeson by entertaining drunkenclients at corporate events.

Leeson has been quietly raking it inon the after-dinner speaking circuitfor years, says celebrity booker Stanley

Jackson, who first took a gamble onthe man who broke Barings by hiringhim as the entertainment at a din-ner organised by Caspian Publishingfounder Mike Bokaie.

Just about every sector of tradeand commerce was represented,recalled Jackson. Including several

firms of accountants and lawyers whowere at that very moment appearingin court to defend themselves fromtheir part in Barings collapse.

Jackson was speaking at last nightslaunch of his book Get Me ACelebrity!, where guests including for-mer CBI director general Digby, Lord

Jones of Birmingham and Luke Johnson, chairman of Risk CapitalPartners, heard about the highs andlows of working with celebrities.

Despite the Murdoch meltdown, Iremain optimistic about the businessof celebrity hire 20 years after stum-

bling across it, he said. People withtalent continue to need audiences.

Although whether rogue trading is atalent is, of course, debatable

MODEL BEHAVIOURCNBC has already delved into the pastof media baron Richard Desmondand Jimmy Choo founder TamaraMellon, and tomorrow night it is theturn of supermodel Naomi Campbell.

In the 30-minute CNBC Meets inter-view with Tania Bryer, Campbell (bot-tom) revisits her childhood home inStreatham for the first time in 27

years, where its new owners have keptmany things the same thedoor handles, the mirrorsand the plant in the gar-den named after thefamously volatile model.

Dark and fiery Imflattered, she tells Bryer,

before pointing outthe grave ofher firstdog. Wed r e s s e dhim in

c l o t h e sf r o mMothercare andhes under there. Imade the whole fam-ily come to the funeral.

SENIOR MOMENTAGE IS no barrier to 69-year-old AlanHarris, manager of Charles StanleysBrighton branch, who was the mostsenior candidate to pass this sum-mers Private Client Investment

Advice & Management exams.It wasa relief to pass and amusing to hearthat I was the senior statesman of thegroup, he told The Capitalist.

In fact, Charles Stanley is prettysure Harris is the oldest candidateto pass the PCIAM diploma fullstop although rumours persist ofa 70-year-old currently workingtowards taking that record.

Not that Harris is bothered he

and his wife have just returnedfrom a canoeing holiday along the

wilderness of the Yukon River inCanada, arriving 200 miles andeight days of paddling later at theGold Rush town of Dawson City.

COLLECTORS ITEMSCLIFFORD Chance takes its art veryseriously the 1,200 original prints inthe firms expanding collection aredesigned to make the day go better.

The art is not only asked to act asan antidote to the daily task of lawyer-ing but also to provide stimulation andinspiration, said Clifford Chances artcurator Nigel Frank. Challenging itcan be, insipid it cannot.

So look out for the latest additionsto the collection, which will hang inthe law firms Canary Wharf office: aprize-winning set of prints fromPolish artist Marta Lech (below) wherethe light causes the illusory impres-sion of measured, finite structure.

LEARNING CURVETHE CITY has a responsibility to pro-vide opportunities for bright youngpeople to ensure they reach theirfull potential, said Lord Mayor

Michael Bear at last nights City ofLondon Business TraineeshipAwards at Deutsche Bank.

Top of the leaderboard at theawards, which marked the end of

the City of London Business Traineeship scheme, was

Socit Gnrale, which won

Employer ofthe Year forgiving 12

paid sum-mer intern-ships to young

people from some ofLondons most deprived

boroughs.

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9EDITED BY

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

The CapitalistCITYA.M. 27 SEPTEMBER 2011

Left: UBSrogue traderKweku Adoboli

Right: Baringsrogue trader Nick Leeson,

now a publicspeaker and former CEO ofGalway UnitedFC

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UBS has little scope to outflank Joe Lewis

THE spotlight, when it comesto UBS, is currently on wherethe investment bank goesfrom here, but elsewhere

there are teams of bankers getting

on with their day jobs.In London, Nick Reid and his team

are trying to do the impossible;advise the pubs group Mitchells &Butler on how it might get a higher

bid for the group from the currencydealer and investor Joe Lewis.Lewis has offered just 230p a share

for the group and does so from hav-ing a shareholding of more than 20per cent.

What worries shareholders, andUBS, is that Lewis might also havethe support of the Irish tycoons JPMcManus and John Magnier, not tomention another of the Sandy Laneset, Derrick Smith, who has a 3.4 percent stake and was yesterday deemed

to be acting in concert with the Irishinvestors.

Whilst the two main shareholderswere recently deemed not to be act-ing in concert, many feel they know

each other well enough to negotiatea deal that will give the Irish tycoonsa stake in a new Joe Lewis-controlledcompany, leaving other shareholders

with no option but to accept the230p a share offer.

UBS will be talking to sharehold-ers to get their view of develop-ments. They will also be in touch

with the Citys Takeover Panel tokeep the Panel aware of concernsthat the two largest shareholdersmight be acting together (in which

case there might be an argument forLewis having to raise his bid slightlyto reflect the higher level the Irishtycoons bought shares at in April).

The strongest card might be in try-

ing to persuade Lewis that he shouldconsider a higher bid in order to geta recommendation from the board.But in this deal Lewis very much hasthe upper hand and it would be nosurprise if UBSs best defence strate-gy comes to nought.

FAILING IPOSFamously Lloyd Blankfein, theGoldman Sachs chief executive,turned up to the pitch for the IPO ofEvonik, the German chemicals

group, so keen were Goldman to winthe mandate. The US bank won the

job but on Friday lost the war asEvonik became the latest share issueto be pulled due to market condi-

tions.European IPO volumes are looking weak. At 42, the number of dealscompleted in the third quarter is thelowest for a couple of years, accord-ing to Dealogic.

Inevitably there will now be ques-tion marks over the success or other-

wise of the Spanish lottery, which isin its pre-marketing phase. The nine

banks involved in this one will dowell to get it away.

[email protected]

INSIDE TRACK

DAVID HELLIER

NEWS | IN BRIEF

Bunzl completes two dealsFTSE 100 distribution and outsourcinggroup Bunzl has completed two newacquisitions, the firm stated yesterday.

Bunzl has bought Ideal Global Sistemasde Higiene Ltda, a cleaning and hygieneproducts supplier in Brazil and D-CareBV, a medical products distributor in theNetherlands. Bunzl also recently boughtMajestic Products.

All Saints Stephen Craig quitsAll Saints chief executive Stephen Craighas quit after falling out with chairmanand co-founder Kevin Stanford over who

was in charge. Craig stated yesterday thecurrent leadership structure is unten-able given the lack of clarity of rolesbetween the chairman, Kevin Stanford,and me. He said he would seek othermore entrepreneurial opportunities.

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SHARES in Aberdeen AssetManagement climbed yesterdaydespite plunging markets and depart-ing clients pulling the value of itsfunds down by nearly 9bn.

The stock closed 0.89 per cent up at170p after it said full year profitswould be near the top of analysts pre-dictions of 262m to 297m.

Aberdeen said clients pulled a net800m from its funds in the twomonths to 31 August, as fears over theglobal economy hit demand for fixedincome and alternative products.

It also said its assets under manage-ment fell 8.1bn, or 4.79 per cent, to176.9bn. Chief executive MartinGilbert told City A.M. the loss is justthe market falling, which happens.We are still in good shape.

He also said he was not seriously

concerned by the prospect of a fur-ther fall in September, when equitieshave plummeted amid Eurozone tur-moil.

Aberdeen said clients added 300mto its equity fund range during theperiod, buying global emerging mar-ket and global equities strategies tooffset weaker European markets.

Gilbert said: The expectation is foranaemic economic growth in theWest for some time.

Aberdeen chief defiantdespite a slump in funds

Looking ahead: Martin Gilbert said Aberdeen wass in good shape Picture:PHOTOSHOT

BY PETER EDWARDSASSET MANAGEMENT

ANALYST VIEWS: HOW IS ABERDEEN DOINGIN A TROUBLED MARKET? Interviews by Peter Edwards

DAVID MCCANN | NUMIS SECURITIES

Recent flows have been strong and importantly in high margin areas

(global and emerging market equities) and we expect this trend to continue asinvestors continue to seek more international assets... the business is strongernow than in 2008-09.

KEITH BAIRD | ORIEL SECURITIES

Aberdeen is arguably better positioned than other asset managersbecause of its expertise in emerging markets as can be seen in the 11 monthinflows into higher margin equities... The assets under management total is likelyto have fallen further in September.

STUART DUNCAN | PEEL HUNT

In what were challenging conditions, this is a good result. Assets undermanagement fell by five per cent over the two month period, primarily reflectingnegative market movements in equities, with only modest net outflows showingthe groups resilience.

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TWITTER will establish an interna-tional office in Dublin, in a move thathas been seen as a snub to Londonsflagship Tech City project.

The microblogging site follows thelead of web giants including Google,Facebook, Microsoft and Intel in tak-ing advantage of Irelands generoustax system.

Its headline rate of corporation taxis just 12.5 per cent compared to 26per cent in the UK but companiesare also lured by rules allowing themto easily transfer funds to offshorelocations, provided they have a baseof operations there.

Analysts say Twitter could save theequivalent of 16 per cent on its corpo-ration tax bill by locating in Dublin,

rather than London. The tech indus-try has become a major Irish employ-er, with Google alone carrying a

workforce of some 2,200. The move was hailed by the Irish

inward investment agency as a fur-ther sign of the countrys status asthe internet capital of Europe.

A Twitter spokesman said: Theoffice in Dublin, our third locationoutside of the US, is a great next stepin the companys global expansion.

A UK department for businessspokesman declined to comment.

Twitter is one of the hottest of thenew breed of internet giants, with around of funding in the summer

valuing it at more than $8bn (5.2bn).Its advertising revenue is under-

stood to have risen to well over$100m, as the popularity of the sitecontinues to soar.

Tech City, which encompassedevelopments at Old Street andStratford, is home to promising start-

ups including Last FM, Huddle,Yammer and SoundCloud but is yet toattract a blockbuster name.

Twitter snubto Tech CityBY STEVE DINNEEN

TECHNOLOGY

ANALYSIS l How the UK's corporation tax rate stacks up

Japan 39.5%

39.25%US

34.4%France

34%Belgium

30.2%Germany

30%Australia

28.5%Luxembourg

26%UK

27.5%Italy

26.3%Sweden

21.2%Switzerland

12.5%Ireland

Tax rules mean UK lacks headline acts

WHEN David Cameronlaunched the Tech City ini-tiative last November, hesaid he wanted the UK to

rival Silicon Valley as a global hub ofinnovation. A year later and that

goal seems as far away as ever.Far from competing with Silicon Valley, Tech City is struggling tokeep pace with Ireland and other UKhubs such as Cambridge.

If the European tech market was afestival, Ireland would be the mainstage, attracting headline acts likeGoogle, Facebook and Microsoft.

Tech City more closely resemblesthe new bands stage. Its talent ispromising Last FM has been joined

by the likes of Huddle, Yammer,Mixcloud and SoundCloud butthey lack the international clout ofan Apple or an Intel. An anchorcompany of this ilk would attractsmaller firms, either by directly

spinning them off or by creatingdemand for support services. But tosnare a blue chip firm, the UK needsto provide a level playing field. Someanalysts say Google has saved 3.1bnover three years by filtering itsEuropean profits through Ireland.

Setting up the infrastructure for Tech City without laying down acompetitive tax system is like a din-ner party host cooking the food butfailing to send out any invitations.

The parallels with the UKs videogames industry are striking. In 2006

we ranked third in the world interms of turnover. Since then rivals notably Canada have introducedlucrative tax breaks, pushing the UK

into sixth place, according to indus-try body Tiga. The UK gaming work-force has dropped 10 per cent in thelast two years, while the Canadianequivalent has risen 35 per cent.

Tech City is an exciting project but one that will need more thanrousing speeches to make it work.

BOTTOMLINEAnalysis by Steve Dinneen

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MARK Byrne, the insurance entrepre-neur bidding to take control ofOmega Insurance, said yesterday hehoped there would be a quick resolu-tion to the three-way takeover contestthat has left the company in a state offlux.

Its difficult to hire people whentheres a for sale sign on the door,Byrne told City A.M. yesterday, justhours before his tender document isdue to be published.

Im not letting grass grow undermy feet, he said.

Byrne is tendering for up to 25 percent of the groups shares in an offerthat will be worth between 70p to 83pdepending on demand. He is upagainst a possible full offer frominsurance group Canopius and a rivaloffer from Barbican Insurance, whichis the form of a reverse takeover.

Byrne said he would manage thecompany from London, where he hasa home, and he ruled out suggestionsthat he would use a company jet ashe did at Flagstone Re, an earlier ven-ture of his.

Ive got no plans to increase thecost base, he said, and Ive no plansto change the senior management.

He defended Omega chief execu-tive Richard Pexton, who has over-seen a recent 25 per cent reduction inassets. I dont think it is fair to criti-cise him. Hes made good decisionson technology, for example.

Byrne said that he might considerinjecting some of his other businessinterests into Omega, such as hismicro-insurance business that heowns through another vehicleLeapfrog.

Its not a high priority on day onebut if we got the opportunity to dosomething at some point it might be worth looking at. There are higherpriorities right now.

Much depends now on the decisionof Neil Woodford whose InvescoPerpetual funds own around 27 percent of Omega. Up until now heappears to have decided with Byrne,indicating that he might tender astake of up to five per cent of Byrnesoffer.

Byrne still needs regulatoryapproval, which he expects to get byNovember.

Byrne aims to

revive moraleinside Omega

THE dotcom investment firm started by the son of Tory donor DavidSpotty Rowland made an operatingloss of more than 1m in its first fourmonths trading.

Jonathan Rowlands Jellybook saidthe losses were largely down to costsassociated with its incorporation inMarch and its listing on AIM in June.

In a gloomy reflection of the eco-nomic climate, the fund, which islooking to invest in a European socialnetwork, failed to identify a suitableacquisition target.

Rowland blamed the difficult andvolatile economic climate and saidhe is continuing to evaluate poten-tial investments.

The fund raised 11m in the stockmarket float, hoping to take advan-tage of the expanding tech bubble

that has seen valuation of dotcomgiants rocket.However, the market has cooled in

recent months, with Zynga, Grouponand Facebook all delaying theirupcoming multi-billion dollar IPOs.

Meanwhile a new study suggeststhe UK could face a technology skillsshortage, with less than three percent of graduates considering acareer in the sector, compared to 10per cent in finance.

Jellybook struggles to findnext Facebook as it loses 1m

BYDAVID HELLIER

INSURANCE

BY STEVE DINNEENTECHNOLOGY

Jellybook chairmanJonathan Rowlandsays he was dis-couraged frommaking an invest-ment by the volatileeconomic climate.

Picture: Rex

Europes M&A slumps toworst quarter since 2004

EUROPEAN mergers and acquisitionsactivity fell 32 per cent in the thirdquarter compared with a year ago asvolatile markets and plunging confi-dence put dealmaking on ice, newdata yesterday showed.

Targeted M&A deal value in Europefell to $146.6bn (94.8bn) in the threemonths to the end of September, thelowest quarterly value experiencedsince the second quarter of 2004,according to preliminary estimates

from Dealogic.That compares to $214.3bn seen in

the third quarter a year ago, andpoints to serious weakness in senti-ment among European chief execu-tives amid mounting fears over theEurozone debt crisis.

But European M&A value rose 11per cent to $614.4bn over the year todate, from $552.7bn in 2010.

The UK saw the most M&A deals ofall European countries as cross-borderdeals surged to a record high, but year-to-date deal value was nine per centdown on 2010, at $119.3bn.

Global M&A deals fell 23 per cent inthe third quarter, to $599bn.

M&A

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PUBLISHER Reed Elsevier is bolsteringits financial data business by buyingUS-based Accuity for 343m.

The firm says it will combine Accuity with its Bankers Almanacand LexisNexis Risk Solutions busi-nesses. It has agreed to acquire theonline subscription data providerfrom Bahrain-listed investment man-ager Investcorp.

Mark Kelsey, chief executive ofReeds business information unit,said Bankers Almanac and Accuity

were highly complementary.He said: The combination of the

two companies will enable us to offercustomers much more comprehen-sive products and services to meettheir developing needs.

Reed Elsevier said the cash deal, which was expected to close in thefourth quarter, would add to itsadjusted earnings from the outset.

The firm rose 2.2 per cent yesterday

despite a negative note from EspiritoSanto, which said the acquisitionseems to take Reed further awayfrom front office business and into amore crowded, less proprietary f ield.

It posted better than expected first-half results after seeing a revival insubscriptions to its scientific andhealth publications.

The LexisNexis Risk Solutions busi-ness intelligence arm saw six per centprofit growth. A spokesman for ReedElsevier said the firm did not use any

banks to oversee the deal.

Reed Elsevier

buys Accuityfor 343mBY STEVE DINNEEN

PUBLISHING

GOLDMAN Sachs has agreed to investup to 130m in an Indian renewableenergy start-up, as the US bank looksto cash in on the demand for energyin the world's second-fastest growingmajor economy.

It will be the single largest invest-ment into Indias renewable energysector, Goldman and ReNew Wind

Power said in a statement yesterday.ReNew, founded six months ago bySumant Sinha, a former chief operat-ing officer of Suzlon Energy, the

world's fifth-largest wind turbinemaker by capacity, currently has sever-al wind projects under development.

India is in desperate need for ener-gy for its economy to expand and hasturned increasingly to renewables tomake up for the shortfall from con-

ventional sources.

The sector currently accounts forsix per cent of the total power mix.ReNew plans to expand its wind

portfolio by 200-300 megawatts annu-ally and said it expects to reach capac-ity of one gigawatt by 2015.

Goldman has invested more than$1.5bn in clean energy-related compa-nies, including in Horizon WindEnergy, part of Portugal's utility firmEDP, and Germanys wind turbinemaker Nordex AG.

Goldman invests 130m inIndian renewables start-up

Goldman has agreed to plough money into renewable energy firm ReNew Pic: Reuters

ANALYSIS l Reed Elsevier

p

20 Sep 21 Sep 22 Sep 23 Sep 26 Sep

505

495

485

475

497.3026 Sept

Rio Tinto mulls spin-off

of Aussie aluminium unitMINING giant Rio Tinto is consider-ing spinning off part of its alumini-um assets in Australia.

The company is understood to beworking with Macquarie Group andPricewaterhouseCoopers on optionsfor its aluminium operations, whichcould come under pressure if the

Australia governments proposedcarbon tax comes into force.

The miner said it would not com-ment on market speculation yester-day.

However, Rio chief financial offi-cer Guy Elliott told investors last

week there were some assets in its

aluminium portfolio, which werenot aligned with its strategy.

These are assets that we wouldconsider divesting if it makes sense.Of course, we would want to achievegood value if we decided to sellthem, Elliott said.

Rios aluminium business inAustralia is made up of three refiner-ies, three smelters and two bauxitemines, the paper said, adding Rio

would hold onto the mines as theyoffer the highest margins.

Rio last week told investors itplans to achieve 40 per cent earnings

before interest, tax, depreciation andamortisation margin from the alu-minium business through the sale oftwo non-specified assets.

Shares in Rio Tinto closed down

41p at 2,943.29p to value the groupat around 56bn.

MINING

BYKASMIRA JEFFORDENERGY

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ALERE, the US medical diagnosticsfirm involved in a 230m hostiletakeover for UK firm Axis-Shield, yes-terday maintained its bid price butlowered its acceptance threshold, asit looked unlikely that the US firm

will win over enough shareholdersfor a full takeover.

Alere, which had set 90 per centacceptance as a condition for its bid,said it now required more than 50 percent of voting rights, leaving themthe option of becoming a majorityshareholder in Axis-Shield.

Axis-Shield, in response to Aleresstatement, termed the takeoverapproach as highly opportunisticand said it was disappointed thatthe US firm had not taken notice of

its previous rejections.Alere, which increased its stake in Axis-Shield to 11.09 per cent last

week, stood firm with its 460p offerfor Axis-Shield. Alere needs 75 percent acceptances to delist Axis-Shields London-listed shares.

We have maintained that wewould remain financially disciplinedand Alere is offering shareholders460p in cash despite significant eco-nomic uncertainty and turmoil,

Alere chief executive Ron Zwanziger. Axis-Shield shares dived nearly 11

per cent yesterday to 405p.

Alere holdsfirm on AxisBYHARRY BANKS

M&A

AROUND three-quarters of assetsunder the management of Asia-focused hedge funds are managed byfund managers based in the region,up from about 60 per cent three yearsago, according to a survey by industrytracker AsiaHedge released yesterday.

The growth is a big leap from the

year 2000, in the early years of theindustry, when half of the industrys

assets were managed by ex-Asia man-agers, mainly those in Britain and theUnited States, said Aradhna Dayal,editor of AsiaHedge.

The survey, which showed Asiahedge fund assets shrinking five per-cent in the first half to $145bn(94.5bn), said $109bn was managedfrom within Asia as global funds setup local offices and a growing realisa-

tion that Asian assets are best man-aged locally.

Shift in hedge fund managementto Asia Pacific gains more pace

HEDGE FUNDS

BLOGGING site Tumblr said yesterdayit has raised $85m (54.6m) to helpfund expansion, in an investmentdrive that values the firm at $800m.

Prominent tech investors such asSequoia Capital and Greylock Partners

were among those named as investorsin Tumblr, which provides a free,photo-focused blogging platform. Sir

Richard Branson is also thought to beamong those injecting fresh capitalinto the firm.

Founder David Karp said in a state-ment that the cash allows us to con-tinue to scale our business and givereal focus to the further developmentof Tumblr.

Tumblr, set up in 2007, reported13bn page views per month recently,though the firm is yet to deliver aproven revenue model.

Tumblrs new fundsvalue it at $800mBYMARION DAKERS

TECHNOLOGY

LONDON & STAMFORD BUYS FLATS IN OVAL

Property firm London & Stamford said it has completed the acquisition of a residentialblock near Oval, south London, for 24.4m. The company said it had exchanged contractswith Kilmorie Investments for the long leasehold interest of 74 private residential units onClapham Road, a month after it bought residential block in Islington for 50m.

ANALYSIS l Axis Shield PLC

p

21 Sept 22 Sept 23 Sept 26 Sept

440

430

460

450

420

410

405.0026 Sept

London primeproperty soars

INVESTORS fleeing from the Eurozoneturmoil are parking increasing

amounts of money in top Londonproperty, pushing the price of primehouses close to 4m in recent weeks.

Viewings are up by 25 per cent overthe three months to September.

The number of available propertieshas risen by 13 per cent, but notenough to keep pace with demand,leading to a 0.6 per cent rise in askingprices for London properties in themore desirable postcodes, accordingto research by Knight Frank.

PROPERTY

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Avivia. If you wish not to receive any further information please add No in your email . The winners, by accepting the prize, agree to publicity if required. The Editors decision is final.

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CANNON Place is set to officiallyopen today, marking an end to almostfour years and 200m of constructionwork though the building will belaunched without a tenant.

The 400,000 square foot, eightstorey building above Cannon Streettrain station is one of the only largeoffices to complete in 2011, ahead ofthe Shard tower in 2012 and severalyears in advance of other skyscrapers.

Our plan was always to specula-

tively build. We are talking to severalparties, Mark Swetman, projectdirector for Cannon Place developerHines, told City A.M.

The parties in talks about takingspace include one financial servicesfirm looking to expand, while anoth-er is a conglomerate looking to movefrom an outdated building.

Its likely to be multi-let, with upto 3,500 people in there in total,Swetman said.

The project head said the firm is

relaxed about the spectre of theWalbrook, Minervas office buildingacross the road that has stood emptysince completion in 2010.

Honestly, everyone who looks atour building will be looking at theWalbrook. But we have a letting voidbuilt into the development timetable,which we have not even come close tothe end of, he said.

We know that there is enoughdemand to fill both of these buildingsup. Its a matter of when the tenantspush the button.

The building contains no columns

jutting through the floor plates, in abid to attract firms in need of open-plan trading space.

The building is one of Hines firstin London, and is unlikely to be thelast Swetman says the firm viewsCannon Place as a springboard intothe capital, with more projectsalready on the horizon.

Hines and its partners have spentan additional 30m on improving therailway station directly beneath thenew building.

Cannon Placekicks off huntfor tenants

Cannon Place replaces two 1960s tower blocks over Cannon Street train station

BYMARION DAKERS

PROPERTY


LORD Mayor Michael Bear, who endshis 12-month tenure in November, isdue to open Cannon Place at a ceremo-ny today.Its designed as a suspension bridgeover the railway, which is such a feat ofengineering. It will really enhance thatcorner of the City, he told City A.M.yesterday. Cannon Place is the first

property he has formally opened duringhis time at Mansion House.The Lord Mayor said his 822 speeches,visits to 37 cities and 20 countries dur-ing his tenure have gone some way toimproving the image of the Square Mile though more so internationally.The further away from London youget, the easier it is to promote. Here,Ive moved from promoting the City topromoting a better understanding of itsvalue for the country.But despite recent grumblings, he sayshe has seen no evidence of banksgunning to move their operations awayfrom London.On life after theMayorship, Bearhinted that hewould considerreturning to

property. Imavailable. Havinghad the bestunpaid jobin theworld, Iwouldnow likethe bestpaid jobin theworld.

LORD MAYOR BEAR ON THE LAUNCH

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BILLIONAIRE US investor WarrenBuffett has nudged up his stake inretailer Tesco in what is being seen asa vote of confidence in new chiefexecutive Phil Clarke.

Buffetts Berkshire Hathaway lasthas bought around 34m Tesco sharesfor about 120m, lifting its stake inthe British supermarket group to 3.64per cent from 3.21 per cent.

Earlier this year, Buffett caused astir by saying he thought Tesco

should look hard at its loss-makingFresh & Easy chain in the UnitedStates. Clarke, who succeeded long-serving predecessor Sir Terry Leahy inMarch, has laid out a plan for thechain to significantly reduce its loss-es.

He has made changes such as intro-ducing fresh bakery products and cof-fee and testing a loyalty card as wellas triggering a price war by makingreductions on thousands of lines.

Buffett, the so-called Sage ofOmaha, has been supportive of Tescofor some time.

His holding went past three percent back in 2007. Last monthBerkshire Hathaway invested $5bn(3.2bn) in struggling Bank ofAmerica and its share price has fallen17.5 per cent since.

Separately the Berkshire Hathaway

board yesterday authorised the busi-ness to buy back an indefiniteamount of its stock. It would be thefirst buyback under Buffett and indi-cated that the conglomerate may notbe enjoying the returns on its invest-ments it had expected.

Buffett buysanother 34mTesco shares

STRUGGLING home shopping retailerFlying Brands, in which entrepreneurSir Tom Hunter owns a stake, yester-day confirmed the disposal of a build-ing on the island of Jersey, as itattempts to pay off its 1.7m bankingloan.

Jersey-based property developer JAJProperties has agreed to pay 2.1m incash and ten per cent in any eventualdevelopment profits for the RetreatFarm premises, which is currentlyunutilised office space.

Last week the Flying Brands admit-

ted that it could breach its bankingcovenants due to poor trading.

Despite only renegotiating theterms of its loan facility in April ofthis year, Hunter has seen his stake inFlying Brands fall by 97 per cent afterthe online retailer issued anotherprofit warning and said it mightbreach its banking covenants.

Flying Brands renegotiated theterms of its banking facilities in thefirst half of its financial year despitereporting a loss from its continuingoperations of 480,000 plus a 1.49mloss from its discontinued businesses.

Finsbury Foods earningsclimb despite downturn

FINSBURY Foods, the UKs secondlargest supermarket cake supplier,said yesterday it saw an increase inprofits despite the economicdownturn.

The group, whichmakes cakes for W e i g h t w a t c h e r s ,Thorntons and Disney,said its underlyingprofits rose by 8.3 percent to 5m for the yearto 2 July, after sales rose by 12.6 per cent to189.6m. Thorntons-brand-ed sales jumped by 17 per cent

and Weightwatchers products gainedmarket share.

Finsbury said it was focused onmaking its products more affordable

despite facing the rising cost ofingredients such as butter,

sugar and wheat, where itexpects high prices to

persist or evenincrease in thefuture.

The firms sharesrose more than five per

cent in trading onLondons Alternative

Investment Market yester-day to close at 25.75p.

Flying Brands sellsoff property assets

BY JOHN DUNNE

RETAIL

CONSUMER

CONSUMER

BRITISH testing firm Intertek hasannounced that outgoing Tesco chair-man David Reid will join the firm tofill the same role next January.

Intertek, which tests products fromtoys and clothes to oil and renewabletechnology, said Reid, also a formerchairman of Kwik-Fit Group, wouldreplace Vanni Treves, who will retireon 1 January after 10 years in the post.

Reid, 64, will join the Intertek board as a non-executive directorfrom December.

The FTSE-100 listed company, whichlast month posted a 14 per cent rise infirst-half profit.

Intertek used Spencer Stuart as itsheadhunter.

Shares in Intertek closed up 1.8 percent yesterday at 20.03.

Intertek namesnew charimanas David Reid

INDUSTRIAL

David Reid said he wasdelighted to be joiningIntertek and working tobuild the growth andsuccess of the business

ANALYSIS l TESCO Plc

p

20 Sept 21 Sept 22 Sept 23 Sept 26 Sept

370

365

360

355

371.4026 Sept

A SNAPSHOT OF HATHAWAYS PERFORMANCE IN SECOND QUARTER OF 2011

Company shareholding performanceof investment

Mastercard $122m (405,000 shares) 7.2%

General Electric $146.7m (7.8m shares) 20.8%

Procter & Gamble $4.9bn (76.8m shares) 3.9%

Kraft $3.5bn (99.5m shares) 4.9%

GSK $64.8m (1.5m shares) 5.4%

Tesco Has gained 34 pc since first investment

Bank of America Invested $5bn in Aug, shares have fallen

Sir Tom Hunter Picture: Reuters

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BUSINESS confidence in Germany forthe coming six months has sunk to itslowest level since June 2009, a leadingsurvey revealed yesterday.

The Ifo business climates expecta-tions sub-index fell for the seventhstraight month, measuring 98 pointsfor September -- down from 100 lastmonth.

Yet the headline Ifo index -- whichalso includes sentiment related to cur-rent business conditions -- fell lessthan expected, down to 107.5, from108.7 last month.

Many economists had expected theheadline measure to sink below the107 mark.

The sub-index that records the cur-rent business situation was barelydown in September, suggesting thatthe expected hit to the Eurozoneslargest economy is yet to come.

The current situation index came inat 117.9, down slightly on Augustsscore of 118.1.

The continuing favourable situa-tion of companies shows that theGerman economy has so far managedto decouple from political turbulence,the report said.

Yet the survey showed that business-es are preparing for the worst. TheGerman economy could fall into con-traction in the fourth quarter of the

year, the Organisation for EconomicCo-operation and Development(OECD) predicted earlier in the month.

And firms are expecting a hit fromeconomic slowdown throughout the

world. The index measuring exportmarket expectations for the next sixmonths declined again, said Ken

Wattret of BNP Paribas. High uncer-tainty and sharp declines in equityprices were cited by Ifo as impactingon companies expectations.

Nonetheless, any such downturnshould not turn into a double-dip,according to Wattret, as industrialfirms continue to hire. Companies inGermany still perceive that the declineshould be of a temporary nature andnot turn into a recession, he said.

German firms

downbeat onnext half year

Broadbent hints at fresh QE

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THE PROSPECT of a second phase ofquantitative easing was heightened

yesterday by a dovish speech by seniorBank of England official BenBroadbent (pictured right).

The pound edged lower afterBroadbent provided a downbeat out-look for the economy, stating: Mostimportantly for policy today, theinternational environment is clearlydisinflationary.

But sterling later recovered due to

rumours of a UK clearer needing toconvert dollars into sterling as partof its quarterly dividend pay-ment.

Yet traders are eyeing the

Bank of Englands movetowards even looser policy,with Broadbent telling journal-ists that he nearly voted formore asset purchases at theSeptember meeting of the mon-etary policy committee.

Broadbent took aloyal line on theBanks recent deci-

sions, closely echoing the sentimentof its governor Mervyn King.

The Bank could have kept con-sumer price index inflationcloser to its two per cent target,

Broadbent said, but defendedits loose stance. Doing so would have meant an unac-ceptably high cost in foregoneoutput and employment, he

said.The Banks remit lends it

flexibility to tackleinflation in the longrun, Broadbent said.

BY JULIAN HARRIS

GERMAN ECONOMY

BY JULIAN HARRIS

UK ECONOMY

NEW HOME sales fell to a six-monthlow in the US last month, accordingto figures released yesterday by theCommerce Department.

The number of sales fell 2.3 percent, from a seasonally adjusted302,000 in July to 295,000 in August.

That is the fourth consecutive month-ly drop, leaving sales 6.6 per cent

below Aprils level.

More evidence of a slowdown camefrom the Chicago Feds national activ-

ity index, also released yesterday. The index declined from +0.02 in July to -0.43 in August, indicatingbelow-trend growth.

Growth may remain muted evenwhen the recovery returns, the FedsJames Bullard said yesterday.

It is not reasonable to expect theeconomy to climb rapidly back to the2007 Q4 peak that was a bubble.

US home sales fall to a sixmonth low as activity dips

US ECONOMY

Chancellor Angela Merkel faces another headache from falling morale Pic: Reuters

NEWS | IN BRIEF

Cut red tape says business bodyUK firms are constrained by red tapeand held back from investing, which hasa damaging effect on the economy, theBritish Chambers of Commerce (BCC)announced yesterday. The business lob-bying group said the government should

take five steps immediately to boost theeconomy. Current regulations should beslashed and no new restrictions intro-duced, the body said, in line with thegovernments previous promises. Morequantitative easing is also needed,according to the BCC, which wants lend-ing for small companies and infrastruc-ture projects to be expanded.

Italian confidence hits new lowsConsumer confidence slid in Septemberon the back of widespread pessimismfocused on the economic situation,Italys official statistics agency Istatrevealed yesterday. The indicator fell to98.5, compared with 100.3 in Augustand 106.4 back in May. Sentiment withregard to the future declined from 87.5to 87.2, whilst the economic climatemeasure fell from 70 to 67.8. The onlymeasures showing any improvement insentiment were savings future possibili-ty, rising from -72 to -63 from lastmonth, and forecasts on unemploy-ment which increased from 86 to 88.

France cuts growth forecastsOfficial estimates for Frances GDPgrowth in the three years to 2015 havebeen cut. The government now antici-pates growth of two per cent, ratherthan 2.5 per year. Growth for 2011 and2012 is expected to come in at 1.75 percent. Analysts at Barclays Capitalbelieve the figures still remain on theoptimistic side.

ANALYSIS l German confidence is on the decline

IFO business climate index (right-scale)

94 96 98 2000 02 04 06 08 10

100

50

-50

-100

0

120

115

110

105

100

95

90

85

80

ZEW economic sentiment indicator

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ISAMRupert Douglas has joinedInternational Standard AssetManagement as head of European

sales, responsible for marketing ISAMSystematic to European institutions,distributors and consultants. Mostrecently, Douglas worked for RAB

Capital, where he focused solely onEuropean sales.

Thomson ReutersRalf Roth has been appointed as glob-al head of elektron transactions andstrategy for the Enterprise Solutions

business. Roth joins from DeutscheBank, where he was responsible forproduct innovation and delivery foralgorithmic and high frequency trad-ing, analytics, execution and ordermanagement.

Inflexion Private EquityThe private equity investor has hiredMark Williams and Florencia Kassai asinvestment director. Williams joins

from Sovereign Capital Partners,where he was an investment director,and Kassai joins from HgCapital, whereshe was an associate director.

Carbon TrustJames Smith, the former chairman of

Shell UK, has been appointed as chair-man of the Carbon Trust. Smithreplaces Sir Ian McAllister, who stepsdown after ten years as chairman.

Norton RoseThe law firm has appointed CatrinaSmith, formerly a partner in theEmployment and Incentives practice atLinklaters, as a partner in the Londonoffice. Smith, a specialist in employ-

ment law, acted on the insolvencies ofLehman Brothers and Woolworths.

Santander Corporate BankingJulian Alexander has been appointedas regional director for the South Westof England, based in Bristol. Alexander

joins from Barclays, where he was thehead of real estate in the Midlands.

Barclays WealthThe wealth manager has appointedTrevor Kelham as a director andinternational wealth advisor in itsWealth Advisory division, based inGuernsey. Kelham was most recentlymanaging director at RothschildTrust Guernsey Limited.

CITY MOVES | WHOS SWITCHING JOBS Edited by Harriet Dennys

+44 (0)20 7092 0053morganmckinley.com

To appear in CITYMOVESplease email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

Plans for Greecelift US sentiment

US stocks rose yesterday as senti-ment swung toward hopeEuropean officials would find a way to cut Greeces debt and

shore up European banks.Shares rallied to session highs in

the afternoon after a report said aplan to leverage money from theEuropean Financial Stability Facilitywas in the works.

Investors were reluctant to makelong-term commitments because ofconflicting reports about whether ornot European officials were prepar-ing to take bold new action to solvethe crisis.

Given how markets have behavedover the past two months, people areinterested in the vaguest of rumors because any kind of action beingtaken would be well-received, saidMichael Church, president of AddisonCapital in Yardley, Pennsylvania.

Markets have been highly sensitiveto European efforts to cauterise theEurozones credit crisis that hasGreece teetering near a default.

Last week, the Dow had its biggest weekly loss since the depths of the

financial crisis in October 2008 whilethe S&P 500 shed 6.6 per cent for the

week.Financial shares were among the

sessions best performers, with theKBW bank index up 5.2 percent. Dowcomponent JPMorgan Chase & Coadvanced 7 per cent to $31.65 whileCitigroup gained 7 per cent to $26.72.

However, gains on the Nasdaq werelimited after a report on Apple sug-gested the tech company was cuttingback on some key orders.

Talk of plans for a 50 per cent write-down in Greek debt and improve-ments in the Eurozone rescue fund

buoyed the market, althougEuropean officials called the talk pre-mature.

A CNBC report cited a top Europeanofficial who said the plans involvedusing leverage and the EuropeanInvestment Bank to buy sovereigndebt to save European banks.

The Dow Jones industrial averageended up 272.38 points, or 2.53 percent, at 11,043.86. The Standard &Poors 500 Index was up 26.52 points,or 2.33 per cent, at 1,162.95. TheNasdaq Composite Index was up33.46 points, or 1.35 per cent, at2,516.69.

The CBOE Market Volatility indexfell 4.8 per cent but remains up 24 percent for the month.Apple fell 0.3 per cent to $403.17after an analyst said the iPhonemaker was cutting orders from sup-pliers of parts for its iPad tablet. The

tech bellwether fell as much as 3.2 percent earlier in the session.

AFTER a tumultuous session,strong financials hauledBritains top shares into posi-tive territory yesterday as

investors, spurred by hopes for deci-sive action to deal with

cityam 2011-09-27

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