cityam 2011-11-29

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BUSINESS WITH PERSONALITY

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03/10/11 till 30/10/11 is 100,123

www.cityam.com FREEIssue 1,521 Tuesday 29 November 2011

CLOUDS GATHER AHEADOF OSBORNES BIG DAY

Unemployment is forecast to risefrom 8.1 per cent in 2011 to 9.1 percent in 2013.

And today The Office for BudgetResponsibility (OBR), Britains fiscalwatchdog, is expected to follow theOECD by downgrading its own fore-casts. Lower growth means the gov-ernment will have to spend more onbenefits while collecting lower taxrevenues hitting Osbornes plans toeliminate the structural budgetdeficit in five years time.

Osborne will announce an exten-sion of free nursery places to 260,000children. But he is expected to pre-

serve cash by announcing a thirdyear of pay restraint in the public sec-tor, City A.M. understands. Accordingto sources close to the CabinetOffice, any rise in public sector pay frozen for two years in 2010 maybe capped at around one per cent in2012-13.

Osborne is also expected toannounce a series of micro-measuresdesigned to boost flagging growth.Investors in start-up firms will be eli-gible for new tax reliefs; there will be

50m of government cash for fast-growing start-ups; and the rates holi-day for 500,000 small firms will be

extended by six months.As first revealed in City A.M. last

month, the chancellor is also set to

THE UK will fall victim to a secondrecession, a leading economic fore-caster warned yesterday, pushing upunemployment and further damag-ing George Osbornes hopes that hewill be able to meet his deficit reduc-tion target.

The figures will make for grimreading for the chancellor, who willtoday deliver his Autumn Statementjust hours before millions of publicsector workers walk out on strike,costing the economy around 500m.

Meanwhile, the debt crisis in theEurozone is still escalating, withEurogroup finance ministers due tohold an emergency meeting today tostop the contagion spreading fromperipheral countries like Greece andItaly to formerly safe states likeGermany and Belgium.

Forecasts from the Organisationfor Economic Cooperation andDevelopment (OECD), released yes-terday, predict the UK economy willcontract by 0.1 per cent in the lastquarter of 2011 and a further 0.6 percent in the first of 2012. These pro-jections entail a 50bn black hole inOsbornes books.

A sharper recession will come inthe Eurozone, which is forecast tocontract by 1.0 per cent and 0.4 percent in the same quarters.

Any recovery in the UK is not

expected to kick in until late nextyear, with growth of 0.5 per cent in2012 and 1.8 per cent in 2013.

BY DAVID CROWAND TIM WALLACEECONOMY

announce a 250m package of reliefsfor energy-intensive firms who havebeen hurt by new green policies.

Meanwhile, Europes finance min-isters will today hold crisis talks todiscuss options to save the Eurozone. Yesterday, Germanys ministersagain ruled out a jointly guaranteedEurobond to finance troublednations, and Angela Merkels govern-ment repeated calls for treatychanges to impose more central con-trol on member countries finances.

The Bank of Englands MervynKing said the solution was to trans-fer money from countries with goodfinances to those in trouble, as wellas long-term labour market reforms.

However, the Eurozone faces a rap-idly deteriorating economic situa-tion. Yesterday, Moodys warnedthe probability of multiple defaultsby Eurozone countries is no longernegligible. The longer the liquiditycrisis continues, the more rapidlythe probability of defaults will rise.

ALLISTER HEATH: P2;MORE: P2, 3, 4, 21, P30-31

l OBR expected to follow the OECD by slashing its growth forecasts

l Crippling strikes to paralyse Britain as millions walk out tomorrowl Euro finance ministers meet in last-ditch talks to save currencyChancellor Osbornemakes his AutumnStatement today, as theeconomy deteriorates.Picture: REUTERS

... but equity markets arestill hoping for a miracleStock markets worldwideshot up yesterday, defy-ing gloomy forecasts. The

FTSE jumped 2.87 per

cent; the DAX soared by4.6 per cent; the CACstormed up 5.46 per cent;

and the Dow Jones rose

2.59 per cent, as hopesbuilt that finance minis-ters or the IMF would

somehow save the euro.

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News2 CITYA.M. 29 NOVEMBER 2011

ICAP bracesfor euro failICAP, the worlds top broker for for-eign exchange and government

bonds, said yesterday that it had beentesting its trading systems in theevent of a possible break-up of theeuro.

ICAP has been prepping its spot for-eign exchange platform, EBS, overthe past six months to ensure it couldhandle trading the Greek drachmaafter growing fears over theEurozones mounting debt crisis.

We have contingency tested theGreek drachma in currency pairs ver-sus the euro and the US Dollar

because our customers haveexpressed concerns about how theEurozone situation will play out and

we have to be prepared for every even-tuality, a spokesman for ICAP said

yesterday.The London-based interdealer bro-

ker has only tested the drachma butsaid its tests ensured it was preparedto react quickly if one or more cur-rencies were to withdraw from theEurozone.

Europes top brokers andexchanges have been watching theregion closely in recent weeks forsigns a member may be forced to exit.

Currency settlement system CLSBank has also been running stresstests to prepare for a dissolution ofthe euro, sources reported last week.

BY KASMIRA JEFFORD

FINANCIAL SERVICES

LLOYDS SET TO EASE PRESSURE ONCHIEFLloyds Banking Group is exploring

ways to reduce the workload onAntnio Horta-Osrio, its chief execu-tive, as it attempts to convinceinvestors he will be able to make asuccessful comeback from a period ofmedical leave. The state-backed bankis considering fortifying the supportaround Mr Horta-Osrio to ease thepressures of the top job, according topeople familiar with its thinking.

SEAT PAGINE DISPUTE TRIGGERS TESTCASE FOR CORPORATE CDS MARKET

The effectiveness of derivatives toinsure against companies defaultingon debt is to be tested in a benchmarkcase involving the Italian directorycompany Seat Pagine Gialle. Theindustry body overseeing the multi-

trillion dollar market for creditdefault swaps has been forced to refer

a decision on whether the firm haddefaulted to external review after

heated complaints from hedge-fundinvestors.

WATCHDOG SUGGESTS PWC FINE OF UPTO 34M

The disciplinary arm of the UKsaccounting regulator has suggestedthat PwC should receive a fine of asmuch as 34m for auditing failuresrelating to JPMorgans securities busi-ness. At a disciplinary hearing yester-day, the lawyers representing the

Accountancy and Actuarial DisciplineBoard said that the penalty on PwCshould not be vastly disproportion-ate to the 33.3m fine imposed on

JPMorgan last year.

UNILEVER WORKERS VOTE FOR STRIKEACTION OVER PENSIONS

Workers at Unilever in the UK have voted overwhelmingly in favour ofstrike action over the closure of the

Anglo-Dutch multinationals finalsalary pension scheme.

POOR WILL PAY IF TESCO IS KEPT OUTOF INDIA, ECONOMIST CLAIMSHundreds of millions of Indias poor-est people will be forced to pay higherprices for basic food staples includingrice and vegetables if governmentproposals to allow foreign supermar-kets to open in India fail, KaushikBasu, the countrys chief economicadviser has told The Times.

COMPUTER ATTACKS SOAR WITH UKPLC UNPROTECTEDCyberattacks are fast replacing quick-fingered employees and crooked

beancounters as the biggest criminalthreats to British businesses, researchshows. More than a quarter of Britishcompanies were victims of some formof computer-related crime, such ashacking or intellectual propertytheft, in the past year, according to

the latest economic crime survey byPwC.

ICELAND COULD START SELLING TVSAND LINGERIEIceland could start selling TVs, lin-gerie, pots, pans and toys, accordingto an "alternative business plan" sentto potential buyers of the frozensupermarket chain. According tostrategy consultants OC&C, Iceland'snew owner could boost growth byexpanding into non-grocery sales.

This could include things such as elec-trical goods, homewares, clothing and

video games.

SMALL FIRMS WIN ONE IN THREEBANK APPEALSMore than one in three small busi-nesses using an appeals process set upfollowing the Project Merlin agree-ment have successfully challenged a

banks decision to reject a loan appli-cation, according to Russel Griggs,

who leads the appeals systems teamof independent reviewers.

KINDLE CATCHES FIREAfter more than a year of missteps by Apples tablet rivals, at least oneviable competitor appears to have sur-faced for the popular iPad.

Amazon.com yesterday trumpetedthe success of its recently launchedKindle Fire table, part of a family ofKindle products. The company said itsold more than four times as manyKindle products on Black Friday last

week as the same day in 2010.

YEN FORCES TOYOTA TO RETHINKJAPAN-BASED PRODUCTION

Toyota president Akio Toyoda said yes-terday the auto maker would consid-er shifting more of its compact-carproduction from Japan and shake upits supplier base to stay competitive ifthe yen remains at record highsagainst the US dollar. He said it

doesn't make sense at the currentyen rate to export compact cars.

WHAT THE OTHER PAPERS SAY THIS MORNING

Stagnation looms for Western world

PRODUCING detailed, quantitativeeconomic forecasts is the closest thingthe modern world does to sorcery. Itsa fools game; the results will only beright by chance. There are too many

variables. What economists and com-mentators can more successfullyachieve, however, are broad patternpredictions and it is clear that theUK, US and European economies arefacing a major turning point.

I will make just five predictions:first, that the Eurozone and EuropeanUnion will look very different to todayin one years time, triggering a series

of political crises, including in the UK;second, that the credibility of fiat,paper currencies will be put undermaximum pressure as central banksroll out the printing presses, eventual-

ly rattling investors and the public;three, that massive deficit financing(the UK is borrowing 122bn this fiscal

year) and quantitative easing (the bank of England is adding an extra75bn at present) will not have anydiscernible impact on demand; four,that George Osbornes growth plan

will only modestly help the economy;and five, that quasi-stagnation will bethe best the UK, Eurozone and US will

be able to hope for next year. It is hardto be any more precise than that. Ienvy the OECD, which is brave enoughto predict that the UK and Eurozoneare set for a double-dip recession.

Todays Autumn statement fromGeorge Osborne to be delivered atlunchtime will be interesting but

will have less of an impact on Britainsperformance over the next few yearsthan the fate of the Eurozone. The lat-

est policies to emerge are an extensionof taxpayer-funded childcare for260,000 children (a policy reminiscentof one mulled but never deliveredthree years ago by Gordon Brown); a

(welcome) extension of the businessrate holiday on tiny firms; a seedenterprise incentive scheme; and alikely extension of pay restraint on thepublic sector for at least an extra year(see page 1 for our story).

The infrastructure and deregula-tion plans are good news but insuffi-ciently ambitious; a few billion inextra private sector capex spending

will make little difference to an econo-my the size of Britains.

There will be much boasting aboutthe safe haven dividend from lowergilt yields, reducing the UKs intereston recently-issued national debt even though it could all vanish if thecrisis intensifies and from now on,

whenever yields go up, even momen-tarily, Ed Balls will be able to claimthat the dividend has just been cut.

The OECD thinks the UKs structur-

al (cyclically adjusted) deficit is 7.5 percent of GDP in 2011, worse than anyrich country apart from the US. TheOffice for Budget Responsibilitys ver-dict this afternoon is likely to be pret-

ty grim too: it last projected thestructural fiscal deficit at just 3.7 percent of GDP in 2012 and 2.0 per cent ofGDP in 2013, which sounds naivelyover-optimistic today. Citigroup calcu-lates that the OECDs own estimate is2.8 per cent of GDP (44bn) worse for2012, and 3.2 per cent of GDP (52bn)

worse for 2013. These projections put a50bn hole in the UKs fiscal outlook.

The UKs structural problems areentirely self-inflicted; but its cyclicalones are not. As Sir Mervyn King right-ly put it yesterday, the bulk of thereduction in growth is being caused

by the Eurozones woes. America too israttling the world: last night, Fitch putthe US on negative watch. It is going to

be grim, not just today or tomorrow,but for a long time to come.

[email protected] me on Twitter: @allisterheath

ITALY and Spain have not asked theInternational Monetary Fund for anyfunding despite fears they will needhelp beyond a European rescuescheme, its boss Christine Lagardesaid last night.

She called for a swift solution tothe crisis and said the IMF can makeloans only when governments ask forthem, as happened with Portugal,Ireland and Greece.

The IMF has not received anyrequest for assistance from, nor are

we negotiating with, either Italy orSpain, she said after a meeting withPeruvian President Ollanta Humala.

We have offered our assistance forfiscal monitoring in Italy, she said.

Lagarde spoke out after reports theIMF is planning a 600bn (515bn)package to help Italy and a credit dealfor Spain. A handout from the IMF

would expose British taxpayers tolosses if the recipients could not pay

back their loans.

BY PETER EDWARDS

WORLD ECONOMY

No pleas from Italy: IMFOmerta: Christine Lagarde said neither Italy nor Spain have asked for help Pic: REUTERS

NEWS | IN BRIEF

Greek banks hit by debt haircutsGreek lenders Alpha and Eurobank yes-terday reported nine-month losses dueto impairments from a bond swapagreed in July and said they wouldadjust their capital raising plans after anew debt exchange plan is finalised. Thetwo lenders have agreed to merge to

form one of the largest banks in south-east Europe. Greek banks are trying tocope with rising bad debt provisions anda shrinking deposit base as the austeri-ty-hit country struggles through itsfourth straight year of economic con-traction.

Lehman Europe claims $1.4bnThe European arm of Lehman Brothersyesterday sued a unit of bond insurerAssured Guaranty, claiming more than$1bn for a series of credit derivativetransactions. In a lawsuit filed in the US,Lehman Brothers International (Europe)said the unit, AG Financial Products,miscalculated termination paymentsunder the deals, using an incorrect andapproach to conclude it was owed near-ly $25m. The lawsuit claimed a propercalculation resulted in AGFP owing theLondon-based unit about $1.4bn.

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

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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 Hepple

CommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

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ITALY and Belgium saw their debtcosts rocket to new records in bondauctions yesterday in an ominous pre-cursor to Romes much larger long-dated debt sale this morning.

Despite an early market rally due toreports of a bailout plan for Italy,Rome was forced to pay over 7.3 percent plus inflation to borrow just567m (487m) yesterday, a drop inthe ocean compared to its 8bn debtauction set for this morning.

If Rome sees similarly muteddemand this morning, the EuropeanCentral Bank (ECB) will almost certain-ly have to ramp up its bond purchases,which came to8.58bn last week.

The ECB now holds more than203bn of mostly junk sovereignbonds, having stepped up its purchas-es in recent weeks in response to rising yields for Europes biggest seller ofdebt, Italy, which is widely regarded astoo big to bail.

Belgium saw a reasonable level

demand for its 2bn sale but paid anaverage yield of 5.7 per cent, signifi-cantly above the 4.4 per cent it wasforced to stump up at the last equiva-lent auction less than a month ago.

Market hopes that Europes elitescould be putting together yet another bailout package or preparing tounleash the ECBs full firepower weredashed later in the day by Germanfinance minister Wolfgang Schuble,who talked down the idea of using theECB as a lender of last resort and againrejected the idea of issuing joint eurobonds.

Soaring yieldspush ECB debtover 200bn MONEY is flooding out of peripheralEurozone countries and into the corein a worrying sign for the regionseconomies, Hendersons Simon Ward

warned yesterday.Examining official statistics

released by European authorities, Ward highlighted a widenincore/periphery divergence, with capi-tal fleeing Greece, Portugal, Ireland,Spain and Italy.

M1 money supply meaning cashin circulation and in bank accounts is declining at an accelerating rate inthe periphery, the numbers show.

Although M1 money supply is littlechanged over the last six months on aregional basis (down 0.3 per cent), indi-viduals have been pulling their moneyout of the edges of the Eurozone anddepositing it in the regions less

indebted countries.M1 deposits have dropped by 4.2 per

cent over the last six months in theperiphery, with the capital flight worstin Greece (20.7 per cent), Portugal (16.3per cent) and Ireland (11.8 per cent).

By contrast, Germany, France andsurrounding countries have seen M1money supply rise by 2.1 per cent overthe same period.

The periphery economies remainlocked on course for a depression bar-ring radical ECB action, says Ward.

Capital flightfrom peripheryaccelerating

BY JULIET SAMUEL

EUROZONE

News 3CITYA.M. 29 NOVEMBER 2011

FITCH Ratings has cut its outlook onUS sovereign debt to negative, afterthe congressional super-committeefailed last week to agree on at least$1.2 trillion in spending cuts.

Fitch said yesterday that it willkeep its rating for long-term US debtat the top AAA level, but said thenegative watch reflected its declin-ing confidence that timely fiscalmeasures necessary to place US pub-

lic finances on a sustainable

pathwill be forthcoming. The move came as President

Barack Obama told European offi-cials yesterday that the US adminis-tration was ready to do [its] part tohelp Europe resolve the debt crisis,which is also weighing on the US.

Obama was speaking at the WhiteHouse after a meeting withEuropean Council president,Herman Van Rompuy, and EuropeanCommission president, Jose ManuelBarroso.

BYKASMIRA JEFFORD

WORLD ECONOMY

BY JULIET SAMUEL

EUROZONE

Fitch Ratings revises UScredit outlook to negative

Obama hosts the annual White House summit with European leaders Picture: REUTERS

ANALYSIS l Yield on Italian 10-yeardebt yesterday%

09:00 15:0013:00 18:00

7.30

7.25

7.20

7.15

7.10

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GEORGE Osborne, the chancellor, willtoday claim to have saved the taxpayersome 21.5bn in debt interest pay-ments, arguing his deficit reductionplan has kept yields on governmentbonds at record lows.

Osborne is expected to announcethe so-called safe haven dividend when he delivers his AutumnStatement to the House of Commonsthis afternoon. It is expected to con-tain a raft of so-called micro-measuresdesigned to boost flagging growthwithout the need for tax cuts or high-er government spending.

The chancellor has used forecastsfrom the Office for BudgetResponsibility, which predictedBritains interest payments before theBudget in March, when the yield on 10year gilts was 3.6 per cent.

At the end of last week, the rate on10 year gilts was 2.3 per cent 1.3 percent less equating to a implied sav-ing of 21.5bn by 2015-16. However,this number will change if the OBRadjusts its forecasts for growth or pub-lic finances, as is widely expected.

Osborne is also expected toannounce a package designed to boostsmaller firms, including a new

scheme to encourage investment insmall and medium-sized start-up com-panies. Individuals who invest inthese companies will receive 50 percent income tax relief up to an invest-ment limit of 100,000. Those whoreinvest their gains in the businesswill pay no capital gains tax in 2012-13.

He will also announce a 50m fundto invest alongside business angelsto help fund small, high-growth busi-nesses.

And he will extend rate relief forsmall businesses for six months untilApril 2013. Those with a rateable valueof less than 6,000 will pay no rateswhile those with a rateable value upto 12,000 will get some relief. In total,500,000 firms will benefit.

Osborne is also expected to unveilprompter payment of governmentcontractors, who currently have towait up to 100 days before being paid.

A Treasury source said: The overalltone is that the chancellor wants tocontinue to protect Britain from thegathering debt storm.

Meanwhile, the chancellor isexpected to announce an extention offree childcare for the most disadvan-taged two year olds. The number of eli-

gible children will be doubled from130,000 to 260,000, costing the gov-ernment an extra 650m by 2014-15.

Osborne: safe

haven statussaves 21.5bn


The chancellor will say he wants to protect the UK from a debt storm Picture:REUTERS

AUTUMN STATEMENT

BYDAVID CROW

EXPECTED ANNOUNCEMENTS

EXTENSION OF FREE CHILDCAREThe chancellor is expected to announce380m a year by 2014-15 to increase thenumber of two-year-olds eligible for freechildcare. Currently, 130,000 two-year-olds are entitled to 15 hours of free child-care a week, but this will increase to260,000 within four years, equivalent to60 per cent of two-year-olds from the

poorest families.

SEED ENTERPRISE SCHEME

The chancellor will also announce ascheme to encourage individuals to investin small-and medium sized start-ups.Those who invest in firms with fewer than25 employees and less than 200,000 ofgross assets will receive income tax reliefof 50 per cent. The amount any individualcan invest will be capped at 100,000,while firms will be able to accept up to

150,000 from one or more investors.Those investors who re-invest their gainsin the business in 2012-13 will pay no capi-tal gains tax.

PUBLIC SECTOR PAY RISE CAPAny rise in public sector pay which wasfrozen for two years in 2010 will becapped at around one per cent in 2012-13.

BUSINESS ANGEL FUNDThe government will invest 50m of pub-lic money in small high-growth companies,alongside private co-investors.

EXTENSION OF SME RATES HOLIDAYOsborne will extend the existing rate reliefschemes for small businesses for a furthersix months until April 2013, helping half amillion firms. Businesses with a rateablevalue of less than 6,000 will pay no busi-

ness rates, while those with a value of12,000 or less will get some help.

PROMPT PAYMENT

Government contractors, who currentlyhave to wait for 100 days before beingpaid, will receive payments more quickly.

EMISSIONS TRADING RELIEF

The government will spend 110m com-pensating energy-intensive firms losingout due to the emissions trading scheme.

CARBON PRICE FLOOR RELIEF

Energy intensive firms will receive 100min compensation to offset the impact ofthe carbon price floor.

CLIMATE CHANGE LEVY RELIEF

Green firms will receive 40m of compen-sation to offset the climate change levy.

THE government will today announcea package of reliefs worth 250m tohelp offset the crippling impact of itsgreen policies on energy intensivecompanies.

The package, which was firstrevealed in City A.M. last month, willhelp those firms who use large

amounts of energy such as steelmak-er Tata and chemicals specialist

Ineos.There will be 110m to compensate

firms hit by the EU emissions tradingscheme; 100m for those hurt by thegovernments carbon price f loor; and40m for firms who lose out becauseof the climate change levy.

The chancellor is also expected tosay he will examine how the govern-ment can reform the electricity mar-ket so it discourages the use of carbon

without hurting firms who need touse large amounts of it.

Chancellor to unveil 250m tohelp energy-intensive industry

BYDAVID CROW

AUTUMN STATEMENT

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EUROZONE banks must de-leverage tothe tune of2-3 trillion even if minis-ters get past the hurdles of arrangingeuro-bonds and liquidity support,UBS analysts said yesterday in a noteto investors.

If correct, the estimate means thatEurope faces a severe credit cruncheven if its political elites agree to issue

jointly guaranteed bonds and the ECBlaunches quantitative easing.

Assuming we get term fundingguarantees and stability bonds (bigifs), banks will still need to shrink to

meet onerous incremental regulatorydemands, the analysts write.

THE BANK of England will need torestart and extend its liquidity supportschemes for the UKs biggest domestic

banks as they face a wall of 76bn inmaturing debt next year, according toresearch by Credit Suisse.

Analysts led by Carla Antunes daSilva suggest that the UKs relativelysafe haven status could prompt thegovernment to fire up the Bank ofEnglands special liquidity scheme(SLS) and credit guarantee scheme(CGS) to avert a credit crunch.

Money supply figures out yesterdayshow that broad money or M3 most money in the economy alsocontracted 59bn to 9.78 trillion inOctober, which economists say is a sig-nal that a credit crunch has begun.

The UK is uniquely positioned inthis context given Eurozone sovereignconcerns, da Silva writes.

Doing so could jumpstart the mar-ket for bank debt, which has seized upin recent months due to the debt crisisand regulatory uncertainty.

Da Silva estimates that restartingthe CGS alone could bring down thecost of insuring bank debt by 135-245

basis points, with most of the benefitgoing to Lloyds and RBS.

RBS will see the largest share ofdebt, 31bn, mature and still benefitsfrom 14.3bn in CGS support, accord-ing to Credit Suisse estimates, whileLloyds will see 27bn of debt matureand still gets 10.9bn of support. As aresult, each of the state-owned banks

will need to refinance more than20bn next year.

And the debt cliff comes against abackdrop of regulatory change that isstoking nerves among banks, prompt-ing a huge lobbying operation. Asrevealed byCity A.M. last week, banksare fighting Vickers Commission plansfor the UK to force bondholders to takelosses when a bank fails.

Credit Suisse:

banks to getliquidity aid

SWEDEN plans to impose tough bankliquidity rules on its top four domes-tic lenders from 2012, three yearsahead of the anticipated global phase-in, a senior regulator said yesterday.

We hope to move forward with aliquidity coverage ratio (LCR) for the

big banks. We are working on it forthe four big ones, Lars Frisell, chiefeconomist at Swedens FSA regulator,said.

The move follows the news onSunday that Sweden will force its

banks to implement goldplated capi-

tal requirements ahead of the Basel IIIschedule.

Swedish plansliquidity rulesEuro banks needto deleverage

BY JULIET SAMUEL

BANKING

EUROZONE

EUROZONE

DAVID Mayhew, one of the Citys best-connected bankers, is to step down aschairman of JP Morgan Cazenoveafter 42 years with the blue-chip firm.

Mayhews name has become syn-onymous with the Queens stockbro-ker, which sold itself to US bankinggiant JP Morgan in 2009, and his res-ignation will draw the curtain on anera in British banking.

In an internal memo sent to staff yesterday, JP Morgan said Mayhewwill continue to work as a vice-chair-man of the investment bank but

without day-to-day responsibilities forCazenove.

The memo describes Mayhew asone of the architects of Cazenovessuccess as the UKs leading corporate

broker and one of the forces behindits merger with JP Morgan.

Mayhew will be succeeded by Tim

Wise, who has been with the firm forthe past 12 years and became head ofcorporate finance in 2001.

Mayhew has advised on block- buster deals including the biddefence of Marks and Spencer andthe demerger of Centrica and Latticefrom British Gas.

In 1992, he emerged unscathedfrom an investigation into sharemanipulation by Guinness during itstakeover of Distillers in 1986.

City veteran Mayhew to stepdown as chairman of CazenoveBANKING


ANALYSIS l Lloyds Banking Group PLC

p

22 Nov 23 Nov 24 Nov 25 Nov 28 Nov

26

24

22

20

18

16

14

23.6828 Nov

David Mayhew is stepping down as chairman of JP Morgan Cazenove

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BUSINESS clothing company TMLewins sales revenue hit the100m mark for the first timeever in the year ending 26February, due to its expandinginternational market.

The firms sales revenue jumped 20 per cent to100.4m, of which 87per cent came from UKstores and 13 per centfrom overseas.

Earnings beforeinterest, tax, depre-ciation and amorti-sation rose five percent to 14.7m.

While the compa-nys gross margin decreased

slightly due to increases inVAT and cotton prices, thestrong financial perform-

ance continued into the first half ofthis year with overall sales up nine percent, of which 26 per cent was from

outside the UK.The retailer boasts 100 stores

in the UK and seven inSingapore and Malaysia. Itintends to open five more in

Australia and Czech Republic aspart of its international

expansion plan. TM Lewin aims to

double sales by focus-ing on overseas and

multi-channel salesexpansion, with theobjective of interna-tional sales reaching88m by 2016.Chief executive Geoff

Quinn (left) said: Ourgrowth strategy will

enable us to realise ourambition of establishingthe brand worldwide.

TM Lewinsglobal spreadlifts revenueBY LAUREN DAVIDSON

RETAIL

WOMENS fashion retailer JacquesVert yesterday warned that its pre-taxprofits are likely to be lower thanexpected due to the recent warm

weather. Although sales for the first 29

weeks of this financial year are 0.8 percent per cent higher than last year,

like-for-like sales have decreased by 0.3per cent. The group has pinpointed

feeble consumer confidence as thecause of weakened sales as well as theunseasonal weather which has hitcoat sales particularly hard.

Jacques Vert has responded by put-ting promotional discounts in place,in a bid to increase sales.

The company reported a creditableperformance overall, stating that its

balance sheet remains strong.

Its shares tanked 9.1 per cent to12.5p yesterday.

Jacques Vert says the warmerweather brings a chill to salesRETAIL


TM Lewin will continue its international expansion in Australia and Czech Republic

ANOTHER day, another tale of highstreet woe. Jacques Vert, the quin-tessentially British dressmaker,

warned on profits after sales werehit by poor consumer confidenceand the late onset of winter.

Although it has a stronger bal-ance sheet, we think it shares thesame basic problems as Alexon,

which fell into administration inSeptember: an ageing product thatis too old-fashioned for the alreadydepressed domestic market, along

with a failure to sufficiently buildits presence overseas.

As ever, we would adviseinvestors to avoid the mid-marketand focus on high-end retailers

who are well-diversified both interms of location and the internet.

One such retailer is privately-held TM Lewin, which specialisesin selling elite shirts, ties and suitsat affordable prices. It doesnt

break out like-for-like sales, but hasmanaged to notch up total rev-enues of more than 100m for thefirst time.

We reckon its sensible for thefirm to use stores in Malaysia andSingapore to offset lower takings

back at home.

BOTTOMLINEAnalysis by David Crow

NEWS | IN BRIEF

Clinton Cards facing tough timesStruggling British cards and gifts retail-er Clinton Cards has said sales are fallingat a worsening rate as it battles toughtrading conditions. The firm, also facingintense competition from supermarketsand the internet, said yesterday thatsales at stores open over a year fell 2.4

per cent in the 16 weeks to 20November. That compares with a declineof 1.5 per cent in the first 12 weeks ofits financial year, reported last month.During the last month we took the deci-sion to convert seasonal Halloweenstock to cash through a price led promo-tion strategy which was successfulalbeit at a reduced margin, said thefirm, which trades from 633 ClintonCards stores and 142 Birthdays outlets.Clinton said it planned to use the sameprice cutting tactic after Christmas.

A tale of two retailers

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RETAILERS are taking a beating asconsumers tighten their belts,according to the Confederation ofBritish Industrys (CBI) distributivetrades survey, published yesterday,and the GfK consumer productsstudy, out today.

Almost half of retailers saw salesfall in the year to November, com-pared with 29 per cent who experi-enced an increase a far weakerpicture than the CBIs economistsexpected.

A net balance of 39 per centreported below average sales forthe time of year the largest pro-portion since March 2009.

In terms of jobs, 40 per cent

reduced employment this monthwhile just 13 per cent increased it.

The relatively mild weather thisautumn has hit clothing stores par-

ticularly hard, and retail sales aredown year-on-year for the sixthmonth in a row, said the CBIschief economic adviser IanMcCafferty.

Retailers may be hoping thatshoppers will loosen their pursestrings in the run-up to Christmas,

but consumers are likely to remaincautious about spending, given theuncertain economic outlook.

However, that looks unlikely,according to shoppers polled abouttheir likely shopping habits overthe next month.

The GfK study, out today, showed36 per cent of consumers claimthey will be cutting back thisChristmas, up from 26 per cent last

year.

The outlook for next year is notpositive either 69 per cent fearthe Eurozone crisis impact on theUK economy, and 64 per cent

expect the economic situation toget worse before it gets better.

It is hard to be optimistic overthe prospects for consumer spend-ing, said Howard Archer, chiefEuropean and UK economist at IHSGlobal Insight.

Consumer confidence is at nearrecord low levels, with purchasingpower under severe pressure fromhigh inflation, muted wage growthand tight f iscal policy.

Shops cutting jobsas retail sales fallBY TIMWALLACE

RETAIL


ANALYSIS l Trend in numbers employed

%

2000 2002 2004 2006 2008 2010

30

20

10

0

-10

-20

-30

-40

-50

-60

Reported

Expected

Sainsburys stays neutralin supermarket price war

J SAINSBURY says it will not jointhe wave of discounting sweepingthe retail sector, believing shop-pers will splash out on Christmasdespite a gloomy economic back-drop.

Commercial director MikeCoupe made the vow as Britainsthird-biggest supermarket groupunveiled its biggest everChristmas range, includingaround 500 groceries and 700 non-

food items.The evidence would suggest

that when there is a family occa-sion, when theres a moment intime that people are bought into,

whether thats the royal wedding, whether its Halloween or whether its Bonfire Night, theywill spend and they will invest in agreat family occasion, he said ona store tour in north east London.

Many retailers are struggling asshoppers disposable incomes aresqueezed.

Several chains including majorrival Tesco are cutting prices in a

bid to lure shoppers, but Coupe

said: Youre far better holding your nerve and sticking to what

you have planned.He added that a trend towards

last-minute spending was likely to be exacerbated this year due toChristmas falling on a Sunday.

BYHARRY BANKS

RETAIL

J Sainsbury, led by chief executive Justin King, says it will not slash prices to lure Christmas shoppers

ANALYSIS l J Sainsbury PLC

p


294

292

290

288

286

284

282

293.6028 Nov

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10/40

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Womenswear | Menswear | Accessories

Cabot Place

020 3069 8790

AQUASCUTUM.CO.UK

Purchase online and collect in store.

ROLLS-ROYCE yesterday unveiled adeal with its pension trustees to off-set the cost of paying out to employ-ees who live longer than expected.

The longevity swap deal will seeDeutsche Bank taking on 3bn of therisk associated with the companyspension.

The worlds second-largest makerof aircraft engines said the agree-ment would give additional securityto all members of the companys finalsalary pension scheme whose contri-butions will not be affected.

An estimated 37,000 pensionerswill be covered by the deal.

Rolls-Royces finance directorAndrew Shilston said: The contractwith Deutsche Bank reduces the riskon approximately 3bn of the fundsliabilities.

The cost of this transaction will beborne by the pension fund and willhave no material effect on the fund-ing arrangements.

We have made sure that as ourpensioners live longer in retirement we have made proper provision forthem.

The agreement will see DeutscheBank take the risk in return forreceiving the pension contributions

beyond a certain age. The bank was provided with a

detailed analysis of the expectedlongevity of members of the Rolls-Royce pension scheme.

It will also pass some of its risk onthe deal to re-insurers.

Some companies have been leftwith the dilemma of keeping pensionschemes running which have becomemore and more expensive as the pop-ulation lives longer.

Paul Spencer, the chairman ofRolls-Royces pension fund trustees,said: We have been working closely with Rolls-Royce for some years toenhance the security of all our mem-bers benefits. This is another impor-tant step forward.

Earlier this month Rolls-Royce,which makes engines for planemak-ers Airbus and Boeing, also said ithad performed well in the third-quar-ter and expects to deliver stronggrowth in full-year profit, shruggingoff turmoil in financial markets.

Rolls-Royce

seals pensiontrust futureBY JOHN DUNNE

ENGINEERING

Finance chief Andrew Shilston (inset) said the deal reduces risk Pictures:GETTY/PA


NEWS | IN BRIEF

ANALYSIS l Rolls-Royce Holding PLC

p


690

680

670

660

698.5028 Nov

Olympus could face new probeJapans securities regulator theSecurities and Exchange SurveillanceCommission (SESC) has launched an on-site investigation of Olympus Corp touncover the details of the company'sloss cover-up scheme, the Nikkei said.Invoking the Financial Instruments and

Exchange Law, the SESC will askOlympus to submit in-house financialdocuments concerning past mergers andacquisitions, it reported. The SESC willalso examine the processes in whichinvestment losses were moved off thecompanys balance sheet, the Nikkei said.The financial watchdog will reportedlyretrace fund flows, including the heftyfees paid to a financial adviser forOlympus acquisition of UK medicaldevices maker Gyrus.

Matt Wilmington of Aon Hewitts risksettlement team led sensitive negoti-ations between pension fund trustees,Rolls Royce management andDeutsche Bank.

Advising Rolls-Royce, the companydrew up a profile of those in the com-panys pension fund and their lifeexpectancy.

The detailed process took a year,

with ten staff in total involved indrawing up the complex settlement.

London-based Wilmington, whohas been with the company for tenyears, also worked on a similar dealbetween BMW and its pension fundtrustees.

This is a complex process andinvolves explaining exactly the impli-cations to the trustees.

Having a bank like Deutschehelped because it is well established.We carried out a lot of research onmembers of the pension fund toassess the risk.

He said that companies areincreasingly going down the route of

offsetting pension fund risk.

ADVISERS:AON HEWITT

MATTWILMINGTON

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Join thebetter offset


SHARES in Thomas Cook soared yes-terday after the announcement of anew 200m bank facility to helpsecure the troubled tour operatorssurvival.

The travel firms banking syndicate led by Barclays, HSBC, RBS andUniCredit has agreed to replace the100m short-term facility announcedlast Monday with this new provision,available until 30 April 2013.

Thomas Cook will pay f ive per cent

interest on the loan, rising 0.5 percent each quarter.

Last weeks announcement resultedin the firms shares plummeting by 75per cent, closing at 10p on Tuesday. Yesterday they jumped as high as28.5p before closing up 20 per cent at

21.73pThe group has postponed its full-

year results to the week commencing12 December.

This new deal will also relax theterms of the existing agreement,allowing the company more flexibili-ty when faced with unexpected eventsarising from economic uncertainty.

Thomas Cooksoars on newbanking deal

TRADER Media Group (TMG) yester-day reported solid sales for the sixmonths to 2 October, buoyed byonline growth.

Jointly owned by Guardian MediaGroup and Apax Partners, TMGshowed an underlying revenueincrease of four per cent to 135.4m,with total digital revenue up 15 percent to 96.4m.

Its underlying earnings increasedby 10 per cent to 70.6m. Free cashflow at the end of this period was up12 per cent to 42.2m.

The groups leading brand, Auto Trader, is the UKs number onemotoring website.

In August TMG launched the AutoTrader Index, a quarterly index thattracks the asking prices of used carsby type.

The group successfully raised anadditional 150m of debt from a newterm loan in June 2011, and in Augustwas able to pay a dividend of 115.5m.

TMG chief executive John King said:Despite the tough conditions, weremain confident that we will be ableto continue to grow the business.

Nomura cuts exposure toItalian government bonds

NOMURA Holdings, Japans largestinvestment bank, has cut its exposureto Italian government bonds andother Italian securities to $467m(301.6m) from $2.82bn in less thantwo months to reduce its risk in theregions debt crisis.

Nomura said the move was part ofa broader reduction of its holdings inEurope. The bank said in a statementit lowered its total exposure toGreece, Ireland, Italy, Portugal andSpain to $884m as of 24 Novemberfrom $3.55bn as of 30 September.

The bulk of Nomuras holdingswere in Italian government debt.

Nomura spokeswoman Joey Wusaid the reduction reflected both thematuring of securities and a sale ofothers in reaction to instability infinancial markets. The bank wouldcontinue to act as a market-maker inItalian government debt and had noplans to pull out, she said.

The debt crisis in Europe hasincreased pressure on Nomura to putthe brakes on its global expansion, which has included its purchase ofthe Asian and European businesses offailed Wall Street bank LehmanBrothers in 2008.

Earlier this month, Nomura postedits first quarterly loss in two and ahalf years.

Digital sales growfor Trader Media

BY LAUREN DAVIDSON

CONSUMER

BANKRUPT billionaire Sean Quinnwas yesterday ordered to repay1.7bn(1.5bn) to a state-owned bank in thelargest judgement ever against anindividual in Ireland.

Quinn, whose 4bn empire col-lapsed after a disastrous investmentin Anglo Irish Bank before its 2009nationalisation, was ordered to paythe lender 417m, bringing his totalliability to2.1bn.

Anglo Irish has recently beenrenamed the Irish Bank ResolutionCorporation.

Sean Quinn isordered to payback state bank

MEDIA

REGULATION

BANKING

NEWS | IN BRIEF

KKR in Capital Safety buyoutKKR, one of the worlds largest buyoutfirms, has bought safety equipmentmaker Capital Safety for $1.12bn(722m). KKR, which is acquiring thecompany from private equity firm ArleCapital Partners, said it sees attractiveprospects in the fall protection business

because of its ties to the energy andinfrastructure industries, with potentialfor growth as more safety regulationsare implemented worldwide.

German Dominos bids to go largeThe fledgling German operation ofDomino's Pizza UK & IRL could grow tobe twice as big as the UK business,incoming chief executive LanceBatchelor said yesterday. Domino's,which operates the British and Irishfranchises of the global delivery brandand opened its first stores in Germanythis year, believes the German marketcould have 2,000 and 3,000 shops.

AOL not planning to buy YahooAOL does not plan to buy any ofYahoo's assets, AOL's chief executivesaid yesterday. Tim Armstrong reiterat-ed the company's strategy of stayingindependent and growing its ailing

brand, known for its dial-up services,into a media powerhouse dependent onadvertising revenue. Meanwhile, theNew York Times reported last nightthat a constortium including Microsoftand Silver Lake Partners was biddingfor a minority stake in Yahoo.

CITY VIEWS: IS THE REFINANCING ENOUGHTO SAVE THOMAS COOK? By Lauren Davidson

WYN ELLIS | NUMIS

We believe thatthe Thomas Cook brand ishighly respected and, withthe support of the banksnow made clear, bookingsmay recover quickly. But we believe that thebrand has been damaged and this remains aconcern given the extensive use of the brandon the high street.

SIMON FRENCH | PANMURE GORDON

The refinancing doesnt address the structural issues in thecompany or the near term consumer issues, with UK bookings down 30per cent last week. With full-year results publication delayed until the week beginning 12December, profit forecasting is difficult for 2012. We reiterate our sell recommendation.

Thomas Cook haspostponed itsresults until 12DecemberPicture: REUTERS

JAMES HOLLINS | EVOLUTION

Longer-term, thecompany will have to funda-mentally adjust its businessmodel; savagely cut costs;hope for more benign eco-nomic conditions; and wish for negligibleexternal shocks such as the current events inEgypt. The required changes are a tall order ina structurally flawed industry.

ANALYSIS l Thomas Cook

p


30

25

20

15

10

21.7328 Nov

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Iknow its a clich, but people arethe same the world over. Everytime I visit Africa and meet our

clients, this universal truth hitshome theyve got the same fears,the same hopes, the same dreams asyou and I.

Take education. Those of us withfamilies will know how often thistheme crops up at social gatheringsand how making the right choicesfor our children can become some-thing of an obsession.

Its just the same for parents in

Malawi. Except there, state educa-tion is only available up to the age of11. After that its a fee-payingschool, or nothing. For many thatbrings it down to a simple choice ofeducating or feeding the child.

So many of the parents I talk tothere are anxious to help their chil-dren build a better life through edu-cation. Being able to put by a littleeach week into a savings accountthat earns interest makes that par-ticular dream more of a possibility.

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EDWARD FOX

Her ambitions have grown, too. Shenow plans to expand her business fur-ther, to supply all the local shopkeep-ers and bring far more of her beautyproducts into the area.

I would like to open a wholesalestore, and sell goods wholesale to thecommunity, Precious says.

With Opportunitys help, she hopesto turn her small enterprise into a valuable business tapping into agrowing demand in the area.

The money also means she can har- bour bigger dreams for her family.Her daughter is currently in schooland as the familys income grows,Precious can make plans to continuethe girls education.

I would like my daughter tobecome a doctor, she says.

With a little support to grow her business, she is now much betterequipped to help her daughter do so.

OFFERING people financial servicesas simple as a bank account or afford-able business loan for the first timecan be life-changing.

Take Precious Bambala, a small-time hairdresser based in the villageof Limbuli in southern Malawi, whereall the money raised in City A.M.sChristmas charity appeal will be used.

In her remote rural area, bankingservices that we consider universalare still hard to come by, leaving

entrepreneurs like herself dependenton day-to-day cash reserves to fundtheir businesses.

Precious sells hair products andextensions to boost her profits along-side cutting hair but until threeyears ago she could buy only a limitedamount of stock with the cash shegenerated.

Thats when OpportunityInternational stepped in to help. Ithas worked in southern Malawi since2006 and now has seven outlets and amobile banking van to reach clients.

Opportunity supplied Precious withher first loan of 20,000 Malawiankwacha, equivalent to about 75, tobuy more stock for the salon.

Three years later, Precious hasrepaid that loan and taken out severalmore to support the business. She hasreceived five loans in total, the mostrecent of which was 50,000 kwacha(187).

The effect on her business has beenremarkable. Profits have doubled to10,000 kwacha (37) per month,enough to allow her to help fund herfamilys food and clothes, which shewas not able to do in the past.

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A US FEDERAL judge angrily blockedCitigroups proposed $285m (184m)settlement over the sale of toxic mort-gage debt, rebuking the top US marketregulator over how it reaches corpo-rate fraud settlements.

District Judge Jed Rakoff said the USSecurities and Exchange Commissionappeared uninterested in actuallylearning what Citigroup did wrong,and erred by asking him to ignore theinterests of the public.

An application of judicial powerthat does not rest on facts is worsethan mindless, it is inherently danger-ous, Rakoff wrote in his ruling yester-day.

The judge added that it was difficultto discern from the limited informa-tion before the court what the SEC isgetting from this settlement otherthan a quick headline.

He said that the proposed settle-ment was neither reasonable, norfair, nor adequate, nor in the public

interest.In response, the SECs director of

enforcement, Robert Khuzami, said ina statement that $285m reasonablyreflects the scope of relief that wouldbe obtained after a successful trial but without the risks, delay andresources required at trial.

Citigroup declined to comment.In its complaint, the SEC accused

Citigroup of selling a $1bn mortgage-linked collateralised debt obligation,in 2007 as the housing market was beginning to collapse, and then bet-ting against the transaction.

Rakoff called the Citigroup accordtoo lenient, noting that the bank wascharged only with negligence, neitheradmitted nor denied wrongdoing, andcould avoid reimbursing investors formore than $700m of losses.

The settlement would have requiredthe US bank to give up $160m ofalleged ill-gotten profit, plus $30m ofinterest. It also would have imposed a$95m fine, which Rakoff called pock-et change for Citigroup and saidinvestors were being short-changed.

Judge blocksCitigroup-SECsettlement PROTESTERS who have taken over adisused UBS building in the Citycould cling on for several more weeksafter their case was adjourned in the

High Court. Yesterday the so-called Bank of

Ideas challenged the possession order,issued by UBS subsidiary Sun StreetProperties, at a preliminary hearing.Activists, who represented themselvesin court, believe they can exploit thefact that certain key items were miss-ing from the paperwork.

The case Sun Street Properties vPersons Unknown has been listedfor next Monday.

UBS is expected to win eventually,although any eviction is not guaran-teed to occur immediately, given thetime needed to bring in bailiffs. UBSdeclined to comment.

Up to 100 activists are using the for-mer office block each day and theOccupy group has offered local com-munity groups hit by governmentspending cuts the chance to use itsfacilities.

A separate City of London actionagainst the St Pauls protesters will beheard in the High Court on 19December. The Occupy LSX groupreceived a boost last week when play-wright Alan Bennett visited and car-ried out a reading amid the tents.

Squatters stayon at UBS amidlegal deadlock

Mayor of London Boris Johnson is ahead of Livingstone, a poll shows Picture: REUTERS

BYHARRY BANKS

FINANCIAL SERVICES

POLITICS

MAYOR of London Boris Johnson ison course to win re-election nextyear, according to a poll out yester-day.

Around 48 per cent of Londonersexpect to give their first preferencevote to Johnson, compared with 40per cent to Labours Ken Livingstoneand just six per cent for Lib Dem can-didate Brian Paddick.

And for second preferences,Paddick gets 36 per cent, Livingstone19 per cent and Johnson 15 per cent

enough for the incumbent Boris tomaintain his lead, according toresearch by ComRes.

Despite growing support for theLabour party nationally, Johnson hasextended his lead in London since asimilar poll in March.

The rise hints that Johnsons per-formance during the riots hasimproved his standing.

Boris and Ken supporters are bothequally likely to turn up to vote,according to the ComRes survey, witharound two-thirds of the capital say-ing they will definitely be at the bal-lot boxes in May.

BYMARION DAKERS

POLITICS

Boris extends mayor lead

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The Capitalist16EDITED BY HARRIET DENNYSGot A Story? Email [email protected] Follow The Capitalist on Twitter: @dennysharriet

MORE NEWSONLINE AT

www.cityam.com

LUKE JOHNSON ENDORSES LAUNCHFOR THE CITYS BEST-CONNECTED

ARE YOU fed up with receivingendless invitations to connect

with people you have never meton digitally promiscuous socialnetworking sites?

Then Ndoorse, the new network for high-quality profession-als founded by ex-Deloittestrategy consultant Jeremy Weiland JC Rathbone director KristianRathbone is perhaps for you.

The only problem is that theCity-meets-entrepreneurs network,

billed as an old boys club for thetwenty-first century, is so exclu-sive that you can only become amember through several endorse-ments from existing members hence the name.

People will be turned down,said a gatekeeper for the invitation-only site, which last night held thefirst of its real-life networking spin-offs at the Adam Street club, whereserial entrepreneur Luke Johnsonaddressed Ndoorses foundingambassadors from firms includingGoldman Sachs, Bain, Nomura andKPMG. LinkedIn beware.

COCKTAIL LISTEVERYONE in the restaurant ofthe Jumeirah Carlton Hotel ismarried. Just not to eachother, says the hotels generalmanager Derek Picot, who has

launched a Just Good Friends cock-tail menu in tribute to hispaparazzi-attracting clientele.

Christine Keeler, a former visi-tor to the Carlton hotel who firstcoined the just good friends get-out clause, inspired the tequila-

based The Keeler, while JohnPrescotts companion was themuse for The Tracey Temple. Thelatest addition, amusingly, is The

Werritty, after ex-defence secre-tary Liam Foxs good friend Adam.Make of that what you will.

POWER STRUGGLELAST year George Osborne toppedGQ magazines annual listings ofthe 100 most influ-ential men inBritain; this

year thechancellorhas slippedto a lowlyeight.

S o

how to explain the sudden fall fromgrace? Less to do with the stutteringeconomy, The Capitalistsuspects, andmore about Osborne calling GQreaders unprintable names at themagazines Men of the Year awardsin September. Even Daily Mailowner Viscount Rothermere is high-er up the pecking order.

MARKET FORCESTHE worshipful companies of laun-derers, feltmakers, scriveners andgardeners have set out their stallsat the Red Cross Christmas Marketat the Guildhall; now they justneed the City to come along andstart their Christmas shopping.

The market was declared openat last nights preview evening by the Lady Mayoress and

Downton Abbey creator Julian Fellowes (picturedwith his wife Emma), ahead

of the public day today,open from 10.30am

until 8pm. Entry is5 on the door, which includes

a glass of wineto help youspend morefreely for theRed Crossc h a r i t ycause.

Risk CapitalPartners chairmanLuke Johnson

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INVESCO Perpetuals Neil Woodfordwas last night left to rue his decisionto back insurance tycoon MarkByrnes move to take control ofOmega Insurance, the company in which Woodford has a near 30 percent shareholding.

Byrne has tendered for a 25 percent stake in the struggling group ata price of between 70p and 83p, with

many shareholders expecting a priceat the top of that range.But with just two days before the

closing deadline for the tender,Byrnes backers have been signallingthat there is every chance he mighttry to negotiate a new lower offer.

Omega announced disappointingthird quarter results at the end of lastweek and spooked the markets by say-ing it needed higher reserves for pastcatastrophes. The companys net tan-gible assets have since fallen from

84p to 75p a share, giving Byrneammunition to lower his offer price.Byrnes tender offer has always

been subject to certain regulatoryclearances, some of which have notbeen made, leaving him the option oflapsing his bid later this week.

He would then be free to come inagain with a lower offer or walk awayaltogether. Some shareholders, butnot Woodford, were always keener ona full bid from rival Canopius at 84p ashare.

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Woodford looking at lossas Omega offer stuttersBY DAVID HELLIERINSURANCE


MORE NEWSONLINE

www.cityam.com

DODD-FRANK ARCHITECT TO STEP DOWN

Barney Frank, the Democrat responsible for the Dodd-Frank Act on financial reform, is toretire from Congress next year. Frank, who was first elected in 1980, said new boundarychanges and his desire to write and teach more had led to his decision. He is one of theDemocrats biggest defenders of Wall Street regulation, at a time when manyRepublicans are pushing to relax financial laws.

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LONDONS house prices slid in themonth to the end of October, at last joining the falling trend across therest of England and Wales, figures out yesterday from the Land Registryrevealed.

Average prices in the capital fell 1.6per cent from 345,870 to 340,308 inthe month to October, up just 0.3 percent from 339,263 this time last year.

Nationally, the average house cost159,999, down 3.2 per cent from165,246 in October 2010. On amonthly basis, prices are down 0.9 percent on Septembers 161,461.

Meanwhile, nationwide figuresfrom Hometrack, also out yesterday,

put the annual decline at 2.3 per cent a slow and steady fall, as prices fellin each of the last 16 months.

While demand may have fallen forthe last four months in a row therehas been no significant accelerationin price falls, which is at odds withconsumer confidence, saidHometracks Richard Donnell.

Growth in supply has been slow-ing over recent months and togetherwith low turnover this is supportingpricing levels.

However, demand is likely to con-tinue to fall in the run up toChristmas, keeping thesupply/demand balance in negativeterritory. As a result we expect to seean acceleration in price falls in themonths ahead, he added.

CONFIDENCE is plummeting amongbusinesses, leading to falling invest-ment and increasing the risk of aneconomic contraction, according tosurveys published yesterday byBarclays Corporate and by LloydsBank corporate markets.

Lloyds business barometer showeda net balance of 20 per cent feel pes-simistic about the future, up from 15

per cent in Octobers study.Meanwhile a separate study from

Barclays revealed 43 per cent of busi-ness leaders have shelved plans toinvest because of market turmoil.

Only one third believe the govern-ment can drive an economic recovery,whilst another third see the crisis astoo global for the government toresolve.

It is clear that UK corporatesbelieve the economic recovery is notgoing to be government led, saidBarclayss Ian Stuart.

Businesses accept they have tocompete their way to better times.

Firms doubt governmentcan boost low confidence

UK ECONOMY

THE BANK of Englands financial poli-cy committee (FPC) is examining theimpact of a European credit crunch onUK banks, governor Sir Mervyn Kingwarned yesterday.

King blamed much of the UKs cur-rent and expected economic woes onthe Eurozone crisis.

He told the Treasury SelectCommittee that only transfers fromfinancially sound governments tothose with debt problems could helpto solve the sovereign debt crisis in theshort term. Markets are looking forother governments to provide thetransfers, he said.

In the longer term, he believes thatonly structural changes can helpembattled economies.

The Bank of England governor alsostressed the importance of achievinglong-term growth in the UK.

This is not a time to fine-tune, hesaid, but to think about the next sixor seven years.

In his written submission to thecommittees, Sir Mervyn stressed theneed to continue the process of rebal-ancing and deleveraging.

However, he later conceded he hadno idea of the timescale on whichthis would take place.

The Bank of Englands Paul Fisherrestated the view that the quantitativeeasing programme may be extendedin February if economic conditionscontinue to deteriorate.

King warnsof a credit

crunch riskEUROZONE

London house

prices join fallin rest of UKBY TIMWALLACE

UK ECONOMY


Bank governor Sir Mervyn King warned of the risks to the UK Picture: PA

German insurer set to test new issues market

THERE is some positive newsfrom Hannover, where TalanxGroup, Germanys third largestinsurance entity, is considering

a flotation. According to sources, theres

already been a beauty parade ofpotential advisers and a timetable

should follow in short order. Theres one adviser in situ;Rothschild has been appointed toadvise Talanx on the sale.

The task for advisers such asRothschild often referred to as pri-vate equity advisers because they tryto get top dollar for private equity sell-ers has become ever more difficultin the past couple of years because ofa growing distrust amongst investorsabout their role after a series of

underwhelming new issues.Possibly the worst of these was

Pandora, the jewellery group, whoseshares sank months after floating on

the Danish stock market only to suf-fer the ignominy of later putting outa couple of profit warnings.

Like London, the German newissues market has been pretty dor-mant, hit by the Eurozone crisis, gen-eral stock market volatility anddepressed share prices.

Earlier this year a number of issueswere pushed back, including one thatGoldman Sachs had fought hard toattach itself to.

When Essen-based EvonikIndustries said it was interested infloating, none other than LloydBlankfein, the Goldman CEO, person-

ally turned up to the pitch to be cho-sen on the syndicate for what wouldhave been one of Germanys biggestlistings in recent years.

With Talanx having premiumincome of about 23bn in 2010, thecompany is the third-largest insur-ance group in Germany and theeleventh-largest in Europe. It employsaround 18,000 employees and alsoowns 47 per cent of Hannover Re, themajor insurance group.

Some investors might think thatshould they want to have exposure toHannover Re, they might do better tobuy shares in it directly.

Talanx will be looking to raisearound 1.5bn in new capital to pro-duce a valuation of4-5bn.

In short, the Talanx flotation couldbe a difficult sell, mainly because anynew issue is hard work in currentmarkets.

But that wont stop a stampedefrom investment banks wanting toget involved.

[email protected] me on Twitter @hellierd

INSIDE TRACK

DAVID HELLIER

ANALYSIS l London house prices have performed strongly - until now

%

Annualchangeinpropertyprices

England and Wales

10/2006 10/2007 10/2008 10/2009 10/2010 10/2011

20

15

10

5

0

-5

-10

-15

London

I dont think they should strike over pensions.They wont get a better deal anywhere else.Even if their pensions will be slightly less nowthan before, they are still good, and they arestate guaranteed.

ANDREW FIELD | TOM JAMES UK

The strikes present a bad image to other coun-tries. Just because we have a right to strike, itdoesnt make it right to strike. If everyone strikedabout every grievance, the world would-nt function.

ROXROY DUNKLEY | POOLIA UK

The strikes are a bit pre-emptive on the basis that they are still in negotiation with the government. But I dont think this willhave too negative an impact on how the UK is perceived. Other countries are in similar positions.

SIMON BROWN | NORTHLAND CAPITAL PARTNERS

www.RateSetter.com Customer Phoneline: 08442490115In association with RateSetter: A better way to Save and Borrow, Peer to Peer

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

CITY VIEWS: HOW DAMAGING WILL THE STRIKES BE? Interviews by Lauren Davidson

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Bookings have returned to normal after Qantas staff returned to work

MINER Randgold Resources has cutits 2011 production target for the sec-ond time this year after a perfectstorm of difficult mining condi-tions, work stoppages and a mill breakdown at its Tongon mine inIvory Coast.

The cut to 690,000-700,000 ouncesfor the year from previous, alreadytrimmed guidance of 740,000-760,000ounces sent the gold miners sharestumbling 7.9 per cent.

Analysts had previously beenexpecting an output boost in the lastmonths of the year after the West Africa-focused miner predicted arecord quarter.

The FTSE 100 gold miner blamedtough third-quarter conditions atTongon that persisted into the fourthquarter, including wet weather andmining through harder transitionalore.

Workers separately downed tools asthe firm negotiated an agreementwith a newly established union.

Randgold was also hit by a mill fail-ure as well as hurdles with its expect-ed connection to the power grid. ItsLoulo mine in Mali, meanwhile, has

experienced lower than forecast pro-duction, though the complex is mak-ing significant progress towardsgetting back in line with its fourth-quarter production forecast,Randgold said.

Looks to be a perfect storm at Tongon, Numis analysts said in amorning note, adding they nowexpected cost guidance, previously at$600 per ounce, to be hit significant-ly.

We had been sceptical on the pre-vious guidance, particularly on costs,and currently have full-year numbersof 733koz at $690/oz in our model ...Randgold had originally hoped tokeep its cash costs per ounce below$600 for the year, but are still above$700.

GLOBAL miner Rio Tinto yesterdaywarned on that further cracks may beemerging in global commodities mar-kets as the economies of Europe andthe United States waver, with its cus-tomers increasingly cautious on theoutlook.

Prices of iron ore, copper and alu-minium -- among Rios biggest

income earners -- have tumbled bymore than 20 per cent each since

August as stockpiles of unused metalswell in warehouses from Rotterdamto New Orleans to Shanghai.

Rio chief executive Tom Albanesesaid stresses in the Eurozone and aweaker outlook for the US economywere affecting customer sentiment,For the near term I am concernedabout the general softening of priceswhen we continue to see cost escala-tion he said.

Rios comments broadly matched

rival BHP Billiton, which warned thatsome buyers were facing tighter

access to credit.

Rio Tinto joins BHP Billiton in warningover weaker demand as economies dip

US oil company Anadarko Petroleumsaid yesterday its major gas finds inoffshore Mozambique were aroundtwice as large as it earlier thought,adding support to hopes that EastAfrica will become another major gasproduction centre.

Anadarko said yesterday that theresults of its Barquentine-3 appraisalwell showed its fields had recoverable

reserves of 15 to over 30 trillion cubicfeet (Tcf) of natural gas compared to

total UK gas reserves of 9 Tcf, accord-ing to the BP Statistical Review ofWorld Energy.

This could be one of the mostimportant natural gas fields discov-ered in the last 10 years, saidAnadarko chairman Jim Hackett.

Previously, Anadarko said thefields, in which Japans Mitsui & Coand Dublin-based Cove Energy havestakes, held at least 10Tcf of gas. Itsaid the results supported its plans to

build a liquefied natural gas exportfacility in Mozambique.

Anadarko doubles its gasforecasts in MozambiqueENERGY

AUSTRALIAS Qantas Airways yester-day flagged a fall in first half profits of

at least 50 per cent as a series ofstrikes, the grounding of the fleet andhigh fuel bills take their toll.

But the airline, which suspendedall flights for two days last month in adrastic attempt to force a resolution with unions, soothed investors byindicating the move had paid off,with international forward bookingsback to normal.

Qantas said the second half outlookremained volatile given global eco-

nomic uncertainty, fuel prices and for-eign exchange rates.

It also denied a media report that aplan to set up an Asian premium air-line, seen as key to turning around

the loss-making international opera-tions, was set to be dropped.For us investors, this year expecta-

tions are low. Our focus is entirely onhow the recovery is shaping up, plansfor the Asian hub. So far that lookspositive, said David Liu, head ofresearch at ATI Asset Management,which owns Qantas stock.

Qantas shares, which briefly fellafter the announcement, recovered toclose up 3.4 per cent at $1.50.

The airline said it expected anunderlying profit before tax ofbetween A$140m (89m) and A$190min the six months to December.

That compares with A$417m a year

ago and a A$250m average in a strawpoll of three analysts.Since the termination of industrial

action by industrial umpire Fair Work Australia we have seen customersreturn to Qantas, chief executiveAlan Joyce said in a statement.

With both Qantas and the threeunions involved submitting to theindustrial umpire for a forced settle-ment the threat of service disruptionhas vanished.

Walkouts dent Qantas profitsBYHARRY BANKS

AVIATION

Randgold hit

by output fallfrom strikesBY JOHN DUNNE

MINING

BYHARRY BANKS

MINING


NEWS | IN BRIEF

Experian buys fraud expertExperian, the credit checking business,yesterday said it had agreed to buy192business for an undisclosed amount.192business which provides services

such as personal data verification, fraudscreening, online document verificationand voice verification posted revenuefrom continuing operations of $11m(7.1m) in the year to 31 March and hasgross assets of $9m. The firm will beacquired from its founding shareholder,senior employees and private investorsusing funds from Experians existingcash resources. It will be subsumed intoExperians Decision Analytics businessline.

WS Atkins wins 65m road dealDesign and engineering firm WS Atkinssaid it has won a contract worth over65m to improve Dohas roads anddrainage systems, as Qatar steps upinfrastructure improvements ahead ofthe 2022 soccer World Cup. Atkins,which helped design the London 2012Olympic site and operates across Britain,Europe, North America, Asia and theMiddle East, said the deal was one offour packages of work awarded byAshghal, the Public Works Authority ofQatar. We have targeted investment inour Middle East business to build thebreadth and depth of our expertise inthe regions key growth markets. This isnow paying off, as we can see from oursuccess with Ashghal, Atkins chiefexecutive Uwe Krueger said.

ITE expands in UkraineExhibitions group ITE has snapped up araft of small Ukrainian exhibitions withthe acquisition of Autoexpo, it said yes-terday. ITEs chief executive officerRussell Taylor said: The addition of thisportfolio of exhibitions to ITEsUkrainian business is consistent with ourstrategy of building market leading posi-tions in core markets and sectors.

ANALYSIS l Rio Tinto PLC

p


3,200

3,150

3,100

3,050

3,000

3,164.0028 Nov

ANALYSIS l Randgold Resources Ltd

p


6,900

6,800

6,700

6,600

6,500

6,400

6,300

6,200

6,240.0028 Nov

BRITISH electronics group Laird saidyesterday its chief executive Peter Hillwould step down immediately due toill health, but it kept its outlook forthe full year.

Chairman Nigel Keen will take onthe role of executive chairman whilethe company searches for a new chiefexecutive.

The company also formed an exec-utive committee reporting to Keen,which it said would assume day-to-day operational responsibilities.

Laird also said it expected to meetits 2011 earnings outlook of 16p per

share, which was announced in July.The firm employs some 9,000 peo-

ple in operations in North America,Europe and across Asia. It is head-quartered in London.

Hill, who had been chief executivesince 2002, previously worked forInvensys and BTR. He also holds anon-executive directorship atCookson.

The firm said: Peter has given con-siderable service to Laird over a num-ber of years and has helped transformthe business into what it is today atechnology leader in diverse markets,supporting blue-chip customersworldwide.

Laird shares rose 6.5 per cent.

BY JOHN DUNNE

ELECTRONICS

Laird chief executive Hill

steps down over illness

Lairds chief executive Peter Hill is stepping down due to ill health

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Thursday1 December

WINTERSmostwanted

REISS,JUBILEEPLACE|REISSWOME

NSWEAR,CABOTPLACE

With discounts of up to 30%, Winters Most Wanted

provides the perfect opportunity to do your festive shopping.

Fashion shows in Canada Place and Jubilee Place will showcase

the seasons latest trends.

EXCLUSIVE OFFERS*30% OFF

Dorothy Perkins, Myla

25% OFFCecil Gee

20% OFFAquascutum, Aspinal of London, Austin Reed,

The Body Shop (on purchases of 25 or more), Charles Tyrwhitt,

Choice (exclusions apply), Crabtree & Evelyn (on purchases of 30 or more),David Clulow Opticians, Dune, Fiorelli, Gant, Hackett, Hobbs,

Jaeger London Menswear, Jaeger London Womenswear, Jones Bootmaker,

Karen Millen, Kurt Geiger, L.K.Bennett, Levis (excludes 501 range), Oasis,

Phase Eight, The Rejuvenation Clinic & MediSpa(services only),

Runners Need (on purchases of 60 or more), Scribbler, SeanHanna(services only),

Ted Baker, Tie Rack, T.M.Lewin, Toni & Guy(services only),

Warehouse, Whistles

15% OFFBrowns London, Gap, LOccitane (on purchases of 20 or more), Paperchase,

Sweaty Betty, Vision Express, The White Company

10% OFFArtisan Fine Art, Carat*, Charles Fish, Churchs English Shoes, Fat Face,

Goldsmiths (exclusions apply),The Gourmet Hotdog Company, Hotel Chocolat,

Reiss Womenswear, Sweet Couture (on purchases of 30 or more),

Yoomoo Frozen Yogurt

OTHER OFFERS AVAILABLE AT:David M Robinson, Frontispiece The Gallery, Jessops Photo, Montblanc,

The Neem Tree, The Parlour, Plateau, Reebok Sports Club, Reebok Sports Shop,

Smilepod, Thomas Pink, Tumi, Wallis, Wildwood

*Correct at time of print, terms and conditions apply to individual store offers.

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RETAIL investors were warned in thestrongest terms not to invest in highlyrisky death bonds by the finance

watchdog yesterday, in a bid to stop arepeat of the Keydata collapse in 2009in which 30,000 investors lost 450m.

The Financial Services Authority branded the so-called death bonds,otherwise known as traded life policyinvestments, toxic and completelyunsuitable for most UK retailinvestors because of their complexstructure and high risk of losses.

Death bonds are created by packag-ing up and selling on bundles of lifeinsurance policies sold in countriessuch as the US and bought off theiroriginal policyholders.

They pay out a return based on howsoon the policyholders die, but gener-ate very poor returns when the hold-ers live longer than expected.

We are issuing a strong warning tothe industry not to market these prod-ucts to UK retail investors. Ultimately

we aim to ban TLPIs from being mar-keted to UK retail investors, and weintend to consult on this next year tohelp erase the risks they pose, saidFSA managing director Margaret Cole.

The FSA likened some of the bondson offer to fraudulent investments.

In some models, yields are prom-ised to previous investors, which canonly be sustained by using newinvestors money, so the model ineffect borrows from itself and there-fore appears to share some of the char-acteristics of a Ponzi scheme, it said.

The market for death bonds is esti-mated at 1bn in the UK but the FSAhas warned repeatedly since February2010 that the instruments and thecompanies that sell them can bothput investors at risk.

The bonds fall into the area of struc-tured products, the same area that

brought down Keydata InvestmentServices, which invested in aLuxembourg-based company, SLS thatin turn invested in US life products.

City investment managersexpressed outrage after being hit witha 326m levy from the FinancialServices Compensation Scheme this

year after compensating its victims.There is unlikely to be much dis-

agreement with the proposed banfrom those firms still reeling from theextra FSCS costs arising from the keydata failure where these investments

were used, said Bruno Geiringer,insurance partner at Pinsent Masons.

IN RECENT years it has been seen asthe preserve of affluent Britons, Arabsheiks and Russian oligarchs.

Now, however, more top Londonproperty could be snapped up by FarEastern investors, including perhapsthe Chinese Communist Party.

Cordea Savills, the fund manage-ment arm of consultancy Savills, has

launched a 150m fund that will buyprime London homes, giving Asian

investors an alternative way to investin the sector. The fund is aimed atinstitutional investors and super richindividuals in the East and West butis expected to benefit from the strong

Asian interest in London.Indications of interest have been

strong so far, particularly fromChinese buyers, said Brian DArcyClark, Cordeas head of residentialacquisitions. The property slowdownin the Chinese property market is

forcing fund managers to look abroadfor stronger growth.

Theres very good evidence thatChinese investors want to invest inLondon and theres pent-up demandfrom high-net-worth individuals fromChina to come into London, Clarksaid.

The fund, which closes in January, will invest in London property byforming join

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