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REX

BUSINESS WITH PERSONALITY

China closerto free floatfor renminbi

CHINA will today take a major steptowards integrating its currency intothe world economy, allowing therenminbi to fluctuate more directlyin line with supply and demand.

From today, the renminbi is freeto move up or down by up to oneper cent per day double the 0.5per cent band formerly allowed.

Previously, the country has beenaccused of deliberately holdingdown the value of its currency toartificially give its exporters acompetitive boost against rivals inother nations.

When a country has high exportsand a large trade surplus, marketpressures should strengthen itscurrency, and the one per centband will allow this to happenmore rapidly.

The currency has risen gradually,appreciating by around 30 per centagainst the dollar in the last sevenyears.

However, by waiting until theeconomy slowed down, China mayhave avoided a sudden appreciation demand for the renminbi isslackening, reducing pressure foran abrupt strengthening.

International Monetary Fundboss Christine Lagarde welcomedthe change of policy, saying thisunderlines Chinas commitment torebalance its economy towarddomestic consumption and allowsmarket forces to play a greater rolein determining the level of theexchange rate.

Official Chinese news agencyXinhua noted: The move could alsohelp China deflect criticism of its

currency policy ahead of the annualspring meeting of the IMF inWashington next week.

Even when graduates can get jobs, they face frozen salaries while the cost of living keeps on rising

AFTER being battered by high tuitionfees and soaring youth unemploy-ment, new figures out today showyoung people are set to suffer furtheras real graduate pay falls to its lowestlevel in almost a decade.

Starting salaries for universityleavers are unchanged this year at anaverage of 25,000, a significant fallonce rising prices are taken intoaccount, according to Incomes DataServices (IDS)

Using inflation-adjusted figuressince the year 2000, starting salariesare at their lowest since 2003 whenthey stood at 18,524, and are evenbelow the 18,839 average paid tonew recruits in 2000.

On this inf lation-adjusted measure,this years starting salaries are theequivalent of 18,705, down two percent on last year.And rising oil prices threaten to

hold up inflation, dashing econo-mists hopes that price pressures willease, and cutting the value of frozengraduate salaries still further.

Graduate positions remain in highdemand, with 43 applications foreach graduate vacancy last year, up 12per cent from 41 in 2010.Yet there are some signs of life in

the market. IDS expects a 9.1 per centrise in graduate hiring this year assome firms re-open or expand

schemes that had closed through theworst of the economic downturn.Nonetheless, nine in 10 firms still

plan on freezing graduate starting

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salaries this year.It remains a buyers market for

graduate recruiters this year, withstarting salaries set to stagnate for afurther year, said IDS researcherNasreen Rahman.

High rates of price inflation overthe last few years have been eating

away at the purchasing power ofstarting salaries for new graduates.Even though the demand for grad-

uate recruits is showing signs of

revival, the competition for placesmeans that employers are under littlepressure to increase current ratesdespite high inflation.

Even the highest paying sectorshave been subject to a pay freeze. Newlawyers salaries remain unchangedat 36,000 while starting pay in bank-

ing and finance will also stay put at31,250.The figures provide further evi-

dence of the squeeze on earnings

and consumer spending, whichErnst and Youngs Item Club says isdelaying prospects of a consumerrecovery.

Indeed, strong consumer spendingis supporting a healthy economicrecovery in countries like the US,while it fell for four consecutive quar-

ters in the UK last year, and spendingis only expected to rise meaningfullyinto 2013.

BY TIM WALLACE

FTSE 100 5,651.79 -58.67 DOW 12,849.59 -136.99 NASDAQ3,011.33 -44.22 /$ 1.59 unc / 1.21 unc /$ 1.31 unc

BY TIM WALLACE

GRADUATES FACE

EARNINGS SLUMP

ISSUE 1,612 MONDAY 16 APRIL 2012

BORIS GETSCITY VOTE

See Page 8

Q&A: Page 3CONOMICS:Page 16Certified Distribution

27.02.2012 till 01.04.2012 is 99,462

HOW I MADE A FORTUNERICHARDFARLEIGHFROM NET A PORTER SeePage 23

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[email protected]

Follow me on Twitter: @allisterheath

IN BRIEFDrought could last until year endn A drought affecting parts of

England could last until afterChristmas, Britain's environmentagency warned today, as rain over thespring and summer is unlikely toreplenish low water levels. In acountry more usually associated withdamp and drizzle, drought has beendeclared in seventeen counties inEnglands southeast and centralregions, after two dry winters leftrivers and ground waters depleted.Although public water supplies inthese areas are unlikely to be affected,the lack of rain is taking its toll on theenvironment and farmers, causingproblems for wildlife, wetlands andcrop production, the agency said in astatement.

Tata Steel to invest 800m in Walesn Hundreds of millions of pounds is to

be invested in the Welsh steel industryover the next five years. The firstminister of Wales returned from atrade mission to India and announcedthat steel giant Tata plans to invest800m in Wales. Carwyn Jones metthe vice chairman of Tata Steel, Mr BMuthuraman, in Mumbai, as part ofthe Welsh governments trademission. They discussed thecompanys forward investmentstrategy for Wales as well as theWelsh government's continuingpartnership with Tata, which hasplants across Wales, including PortTalbot and Shotton. Mr Jones said: "Iwas delighted to meet Mr Muthuramanand to reaffirm personally the Welshgovernment's continuing commitmentto partnership with Tata Steel.

Concessions loom as Finkjoins revolt on charity tax

WILLIAM Hague has paved the wayfor government concessions on thecapping of tax relief on charitabledonations after a group of leadingphilanthropists, including StanleyFink, said it would deter people fromgiving to good causes.

Hague, the foreign secretary,appeared to hint at a compromise.

Finding a solution that takesaccount of the concerns that havebeen expressed is something thePrime Minister and the chancellorare open to, he said.The Tories faced embarrassment

after party treasurer Lord Fink spokeout, saying: By definition, if the gov-ernment change the tax rules, itwould change the gross [charitiesget]. If you have to pay out of yourcapital the tax on your income yougive, it will put people off.The former Man Group chief execu-

tive was one of 46 philanthropists orfoundations, including three mem-bers of the Sainsbury supermarketfamily and Gordon Roddick, widow-er of Body Shop founder AnitaRoddick, to warn in a SundayTelegraph letter that the plannedcapping of tax relief at 50,000 ayear, or 25 per cent of an individualsincome, will discourage giving.The chorus of opposition swelled

over the weekend. Senior Tory back-

Barclays tax deals face US scrutinyBarclays controversial tax planning businesswill come under fresh scrutiny in a US courtthis week over whether a transactiondesigned by the bank cost the USgovernment more than $1bn in lost taxreceipts. The US Internal Revenue Serviceclaims that complex, cross-border dealsBarclays structured for several mid-tierbanks in the last decade were an abusive taxshelter that exploited loopholes between USand UK tax laws. The IRS will square off withBank of New York Mellon in US Tax Court inNew York today in the first of several

lawsuits over the deals to come to trial.

US probes Cobalts links in AngolaThree of the most powerful officials inAngola have held concealed interests in anoil venture with Cobalt International Energy,the Goldman Sachs-backed explorer whoseoperations in one of the worlds mostpromising energy frontiers are underinvestigation by US authorities, the FinancialTimes has learned. The recently departedhead of the national oil company and aninfluential general confirmed to the FT lastweek that they and another general haveheld shares in Nazaki Oil and Gz, the localpartner in a Cobalt-led deepwater venture.

Excuses echo from glass ceilingMore than a hundred of Britains leadingpublic companies have no women on theirboards, research has revealed. The newsthat more than 40 per cent of the FTSE 250have no female boardroom representationwas condemned as shocking bycampaigners.

Questions over Heywoods deathWilliam Hague was under pressure last nightto explain the response of the FCO to thedeath of a British businessman in China afterit emerged that junior minister JeremyBrowne was visiting the country at the time.

British Peer suspended for offering10m bounty on Obama and BushControversial British peer Lord Nazir Ahmedhas been suspended from the Labour Partyamid reports that he offered a 10m bountyfor the capture of President Barack Obamaand his predecessor President George WBush.

Royal Mail: We'll beat stamp hoardersRoyal Mail has vowed to maximise profitsfrom the sharp increase in stamp pricescoming into force next month by clampingdown on hoarders.

Top Euro banker calls for boost to IMFTop European Central Bank official JrgAsmussen called on the rest of the world topledge more money to the InternationalMonetary Fund's anticrisis war chestaview expected to put Europe at odds withother regions at talks in Washington laterthis week. Europe has done its part tohelp protect the global economy againstfinancial turbulence, Mr. Asmussen said in aninterview, pointing to European leaderspledges to boost the euro zone's bailoutresources to around $1 trillion and tocontribute an extra $200bn to the IMF.

WHAT THE OTHER PAPERS SAY THIS MORNING

A GROWING number of wealthyBritons are weighing up a moveabroad, with a possible exodus ofmore than half a million peopleover the next two years.

Nearly one in five well-off Brits(19 per cent) are consideringemigrating, sharply up from 14per cent one year ago.

The figures, compiled by LloydsTSB, say that 544,000 people withinvestments of more than aquarter of a million pounds excluding property may leave inthe next two years.

This is not restricted to thesmall number of internationallymobile, ultra-high net worthindividuals, the report said. Thisincludes the large number ofsuccessful, affluent individuals

who play an important role inpowering the UK economy.

Potential emigrants cited betterinfrastructure (61 per cent), lessred tape (49 per cent) and lowertaxes (45 per cent) as ways ofmaking the UK more attractive.

Yet some off-putting factors arenot the fault of government. Overhalf (55 per cent) of those surveyed

who might leave the countryblamed the weather.

And despite a growing numberof possible emigrants, 62 per centof the wealthy are currently happy

with the UK as a place to live.

Half a million

wealthy Britseye UK exit

Lord Finks donations in recent years come to more than 33m

2 NEWS

BY JULIAN HARRIS

BY PETER EDWARDS

The new jobs website for London professionals

To contact the newsdesk email [email protected]

CITYAMCAREERS.com

PRIVATE firms are increasinglyflush with cash. Profit marginsglobally are at record highs, andUK firms have been busy paying

down debts and building financialreserves. So why are we not seeing aninvestment boom? As the Ernst andYoung Item Club said this weekend,

business investment rose by amiserable 1.2 per cent last year, eventhough UK Plc is sitting on acorporate cash pile now worth754bn, equivalent to half of GDP.

So what is going on? In the case ofbanks, of course, retained earningsare being ploughed into extra capital.But the situation in the rest of the pri-vate sector is ominous: the money isbeing used to invest abroad, includingin emerging markets, rather than inthe UK. And given that the Britisheconomy is hardly becoming anymore competitive, that is unlikely to

EDITORSLETTER

ALLISTER HEATH

UK firms are spending but their money is going abroad

MONDAY 16 APRIL 2012

change any time soon.First, the facts. The corporate sector

has indeed been generating vastamounts of cash though this startedin 2002. Over the past four years, thefinancial surpluses of non-financialfirms the corporate equivalent ofthe savings rate have averaged ahefty 3.1 per cent of GDP. As researchfrom Citigroups Michael Saundersreveals, there used to be a close rela-tionship between the size of the sur-pluses generated by UK firms and

how much cash they would hold insterling bank accounts. Quite simply,the better they did, the more moneythey put in UK bank accounts, ready-ing themselves to spend it on newoffices and factories in Britain. Theworse they did, the more they duginto their reserves and borrowed.

Eventually, large corporate surpluseswere reflected in a sharp improve-ment in companies sterling balancesheets a rapid drop in debts andbuild-up of cash holdings and even-tually an investment boom in the UK.

Sadly for Britains feeble economy the Item Club says it will grow just 0.4per cent this year this relationshipno longer holds. Over 2002-11, the UKcorporate sectors financial surplushit 367bn. But during the sametime, UK companies sterling depositsat UK banks went up by just 98bn.Their net sterling assets at UK banks

firms will soon start to spend theircash are too late. They have alreadybeen spending, just not on UK assets.

Relative rates of return are too lowand risk too high in the UK. That iswhy it is so urgent to make the UKattractive again for investment: thechancellor is right to be cutting cor-

poration tax but he has failed todeliver elsewhere, including on plan-ning reforms. Our only hope is tomake the UK a more attractive placefor global firms to invest in, a placewhere the risk-adjusted return ontheir capital becomes worthwhileagain. The sorry truth is that until weget a real supply-side revolution, pri-vate investment and hence economicgrowth and job creation will remainone long, bitter disappointment.

actually went down by 95bn as theyalso borrowed an extra 193bn. Sowhat happened to the money? It allwent abroad: foreign companies weretaken over and huge direct invest-ments made. The result was net pur-chases of foreign equities worth443bn over 2002-11. UK firms also

increasingly keep their money in for-eign currencies: their net assets at for-eign banks surged (deposits up314bn, debts up 119bn, hence a194bn net rise in financial assets).

So firms are spending and distribut-ing less than they are making in theUK; and the billions generated arebeing pumped abroad, either directlyinto companies or as a stepping stoneinto foreign bank accounts. Saundersdescribes the UK corporate sector asmerely a cash cow to fund the over-seas expansion of global multination-als. Hes right: those hoping that UK

bencher David Davis told the BBC theproposal seems like an assault on theBig Society idea and former LiberalDemocrat leader Sir Menzies Campbellcomplained of a lack of consultationover the reforms.Another ex-Lib Dem leader, Lord

Ashdown, said however that a sensi-ble balance should be struck. Justimagine everybody did this, that every-body said Im not going to pay mytaxes, Im going to donate to a charityof my choice, Ashdown said.Treasury sources pointed to HMRC

data which they claim shows that peo-

ple earning 20,000 pay a higher rateof tax than a few individuals who earnmillions of pounds but who make useof various reliefs. But the overwhelm-ing majority of high earners pay muchhigher tax than the poor, according toHMRC data, and the Treasury hasntreleased evidence backing up itsclaims. Last night a Treasuryspokesman said: It is right to capreliefs so wealthy individuals cannotuse them to reduce their tax bill topractically zero. Someone earning4m can still give 1m with reliefs,and more if they want to.

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GETTY

MONDAY 16 APRIL 20123NEWScityam.com

VIRGIN Atlantic president Sir RichardBranson yesterday vowed to appeal toEurope over British Airways ownerIAGs takeover of smaller carrier BMI.The 172m deal was given clearance

by the European Commission at theend of March, but Sir Richard has crit-icised the regulators for their swiftdecision, in the latest attack on hisrivals acquisition.

He said the deal will cause seriouscompetitive harm at close-to-capaci-ty Heathrow, where landing slots are

Sir Richard set

to appeal BMItakeover dealBY MARION DAKERS in high demand.

The European Commission hasseemingly ignored all of the strongcases made by politicians, businessgroups and airlines, to enable one bigcompany to become even more bloat-ed, Sir Richard said in a statement.While Virgin plans to bid for the 12

pairs of slots BA is selling as part of itsregulatory clearance deal, Sir Richardsaid this is a derisory and com-pletely inadequate way of wateringdown BAs dominance.Virgin lost out in the fight to buy

BMI from current owner Lufthansalast year.

British Airways hopes to use BMIsslots at Heathrow to launch new long-haul routes.The firm, which plans to close the

deal this week, has started talks withunions over 1,200 job cuts as it inte-grates BMIs staff and operations.A spokesperson for the firm said yes-

terday that the EC conducted a thor-ough and detailed review of the case,and listened to all stakeholdersinvolved.

ICAG PLC

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Sir Richard Branson has been a vocal critic of IAGs deal to buy smaller airline BMI

FRENCH president Nicolas Sarkozywants the European Central Bank(ECB) to add promoting growth toits mandate in order to counter

what he says is an inflexibleattitude at the Bank.

Speaking during a re-electioncampaign in which Sarkozy istrailing his socialist rival FranoisHollande in the polls, Sarkozy waskeen to play up French influencein Frankfurt.

As for the European CentralBanks role in supporting growth,

we, the French, are going to start adebate, he said at a rally.

If we do not change Europe, ifwe do not create a Europe of

production, of investment, wecannot have growth. If the ECB

Sarko calls for ECB mandate to

include promoting GDP growthBY JULIET SAMUEL does not support growth, we willnot have enough growth.

His attack on the ECB brings intothe open a debate that happened

behind closed doors last year, whenFrance urged the Bank to pumpmoney into the Eurozone to avoida collapse of the financial system.

Germany and the Bankshawkish French then-president

Jean-Claude Trichet resisted thecall for the ECB to take a biggerrole, arguing that its only mandateis to limit inflation and arguingthat doing more would makeEuropes financial system over-reliant on the Bank. But whenItalian Mario Draghi took the helmlast autumn, the ECBs positionchanged and it soon pumped 1

trillion into bank capital marketsto hold off a credit crunch.

QWhat has happened to Chinas currencyregime?

AThe Peoples Bank of China hasallowed its currency more

flexibility to rise and fall againstothers. Until today, the currencycould move 0.5 per cent against abasket of the currencies of the

countrys main trading partners largely made up of the dollar, yen,euro and South Korean won.

QWhat do currency controls do?

AOther major economies allowtheir currencies to float. When

those countries export more thanthey import, the demand for theircurrency rises and its price increases,

making imports cheaper and exportsmore expensive, dampening theexport-led economic boom. Withcurrency controls, that has onlybeen allowed to happen slowly despite the economy booming,currency controls kept it weak.

QWhy has this happened now?

AControls have gradually beenloosened allowing the renminbi

to appreciate by around 30 per centsince 2005. However, it was alwayscarefully managed to prevent asharp appreciation hitting exporterscompetitiveness. Now the economyis growing more slowly, after years ofcontrolled appreciation, it seems the

authorities are lessworried by the risk ofa rapid rise that would hit economicgrowth. That also means Britishshoppers should not expect Chinesegoods to suddenly become moreexpensive.

QWhat do other countries think?

AThe US has long complained theChinese authorities manipulate

their currency unfairly, so thisshould dampen their opposition fornow. Indeed, the Chinas newsagency, Xinhua, said the move coulddeflect criticism at the IMFmeeting this week.

by Tim Wallace

QAandWhat does Chinas exchange rate change mean?

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US BUYOUT giant KKR has emerged asone of the frontrunners to snap upthe diamond businesses put up forsale by mining giants BHP Billitonand Rio Tinto.The listed private equity house

wants to create the worlds third-largest diamond miner to challengeDe Beers and Alrosa.

It is believed to be competing withCanadian firms Harry Winston, a jew-eller and miner, and Stornoway, a dia-mond exploration firm, in the race to

buy BHPs Ekati diamond mine, locat-ed near the Arctic Circle in Canada.

Any deal would not be done until thesecond half of the year, City A.M.understands.

Ekati could be sold for around$750m (473m). It is the cornerstoneof BHPs diamond business althoughlast year the company said it wasthinking of pulling out of the trade.

KKR, a $62bn asset manager thatowns Toys R Us and Pets at Home, hasreportedly appointed industry veter-

KKR enters the

race for Rio andBHP diamondsBY PETER EDWARDS an Brian Menell as an adviser. It wants

to combine Ekati with the diamondbusiness put up for sale by Rio Tinto,which wants to focus on expanding inmore profitable areas like iron ore,copper and uranium.

Rios diamond business, which couldgo for $2bn, is made up of the 100 percent-owned Argyle mine in Australia,famous for its pink diamonds, as wellas 60 per cent-owned Diavik mine inCanada and 78 per cent-ownedMurowa mine in Zimbabwe.

KKR and BHP declined to comment.Rio could not be reached.

Up to 5,000 jobs atCredit Suisse could goSWISS bank Credit Suisse couldannounce the loss of up to 5,000

jobs in its investment bankingbusiness at its forthco ming first -quarter results, a Swissnewspaper reported yesterday.

Citing an estimate from amember of senior management,the Sonntag newspaper said the

bank could cut around 5,000positions. The investment bank issimply completely oversized,the person was quoted as saying.

The bank is due to report first-quarter results on 25 April.

Credit Suisse ended 2011 with20,900 investment bankers, 200

BY HARRY BANKS more than at the beginning of theyear. Staff count at the wholebank was l argely stable even aftertwo rounds of cuts eliminatedseven per cent of the banksoverall workforce, or 3,500 jobs.

The Zurich-based bank has facedincreased shareholder criticismabout the size and the cost of itsinvestment bank, raising pressureon chief executive Brady Douganfor cutbacks.

A spokeswoman for t he bankdid not want to comment orconfirm the report.

The news comes on top of cutsannounced last autumn, when the

firm said it would be sheddingaround 1,500 roles globally.

MONDAY 16 APRIL 20124 NEWS cityam.com

TESCO: Page 9

BOTTOMLINE

DAVID CROW

American buyout giants gem plan could quickly lose sparkle

But it will be a distant third,accounting for around just 10 percent of production.

The top two players, AngloAmericans De Beers and RussiasAlrosa, account for around aquarter of production each. The

business being mooted by KKRwould be remarkably sub-scale incomparison.

The assets being put on the blockby BHP and Rio are hardly 20 carateither. Most of the low-hanging fruithas already been picked, while thecost of extracting the remainder isonly going up. Rio in particular has

been plagued by the cost ofexpanding its Argyle Mine in

Australia, which exploded from a

planned $500m to $2bn.It is highly unlikely that KKR willbe able to buy any new discoveriesto scale up. There have been justfour significant finds in the lastthirty years, most recently back in1997.

KKR could explore furtherconsolidation opportunities withother smaller players, such as Gem,

Petra, Lucara and Harry Winston,but there is no guarantee of success.

One thing is clear. Beyond Angloand Alrosa, the diamond market isfar too fragmented. Expect moreconsolidation ahead.

EXPRESS CHANGE AT TESCOI do hope that Tescos boss Philip

Clarke will do something to addressthe problems with Tesco Express,the supermarkets chain ofconvenience stores. As a regularshopper in these, I often find theexperience to be substandard.

The stores predominantly sellbranded products rather thancheaper own-brand goods, makingthem far too expensive. They also

seem to always stock larger sizes the 500g Lurpak butter rather thanthe 250g one, for instance. Thatmight be better for margins but it isridiculous for something stylingitself as a convenience store. Andsome of the staff, who were kept onafter Tescos acquisition of T&S in2002, dont seem up to the standard

you find in the bigger stores.Like many readers, my maininteraction with Tesco is via thesesmall stores. They do little toencourage me to choose the retailerfor my main weekly shop.

[email protected]

Follow me on Twitter: @davidcrow83

KKRs plan to merge thediamond operations of Rio

Tinto and BHP Billiton mightsound ambitious, but the deal

loses its sparkle upon closerinspection.

The market for the proverbialgirls best friend is hot, about thatthere is no doubt. Demand is

holding up even in mature marketswhile emerging countries arequickly falling in love with bling.Supply is tight, with prices expectedto rise by seven per cent a year until2015.

By adding together the assets ofRio and BHP, the American buyoutgiant will create the worldsNumber Three diamond producer.

KKR & CO. L.P.


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G E T T Y

MONDAY 16 APRIL 20126 NEWS

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Wall Street expectedto see revenues riseGOLDMAN Sachs is expected to see abounceback in revenues when itreports its f irst-quarter resultstomorrow, with analysts predictingthat the banks revenues will rise to$9.3bn (5.9bn) versus $6bn in thefourth quarter of 2011.

Analysts have been revising theirprice targets for Wall Street banksupwards ahead of a week of USresults, with several citing solidcapital markets activity in the firstquarter of this year as likely to driveup revenues.

US research firm Bernstein said:The first quarter performance ofthe brokerage firms was boosted byimproving credit marketsconditions, strong demand formortgage-backed investments andsolid debt capital markets.

Nomura analysts agreed that therecovery is likely to be led by a rise

BY JULIET SAMUEL in bond trading volumes and debtunderwriting.

The recovery is attributed to theEuropean Central Banks 1 trillionintervention, which pumpedliquidity into the European bankingsystem in December to forestall itscollapse.

Deutsche Bank analysts alsoexamined pay arrangements andconcluded that Goldman appears tobe in the best position because ithas deferred the smallest amount ofremuneration in the past, meaningit can adapt its cost base morereadily to changing circumstances.

By contrast, JP Morgan andMorgan Stanley have deferred morepay and therefore have less expenseflexibility, the Deutsche Bankresearch concludes.

Nonetheless, JP Morgan Chase beatexpectations when it reportedquarterly revenues of $6bn on Friday.

GOLDMAN SACHS GROUP PLC


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THE MANAGEMENT of Co-operativeFinancial Services (CFS) will discussthe pros and cons of overhauling thegroups legal structure in order tocontinue with its attempt to buy 632Lloyds branches this week.

Among the concerns expressed bythe FSA over the Co-ops bid is aquestion as to whether the groupslegal structure is robust enough tosegregate its bank capital from itsother businesses.

Demonstrating its robustnesscould involve moving to a fullsubsidiary model of the kind used byHSBC, which capitalises all of itsbusinesses separately.

Alternatively, the Co-op couldfulfill the capital requirement at

Co-op board meeting to mull

legal overhaul for Lloyds bidBY JULIET SAMUEL group level, but that would require it

to hold billions more in reserveagainst its non-banking businesses.

The board of CFS is under pressureto make a decision soon on whetherit can meet the regulators demands,because Lloyds believes that if itcannot sign a contract by June, thesale will not be able to meet an end-of-2013 deadline for completion.

Adding to the urgency is a rivalbidder waiting on the sidelines forthe Co-ops deal to collapse. NBNKInvestments, the buy-out vehicle puttogether by Lord Levene and defeatedin the bidding December, submitteda revised offer for the branches lastweek.

But for the time being, Lloyds is

still in exclusive talks with the Co-op.The Co-op declined to comment.

2011 brought a bonanza payday for Barclays chief Bob Diamond

A VOTING agent that works forBarclays second-biggest shareholderhas recommended a vote in favour ofBob Diamonds bumper pay package.

Institutional Shareholder Services(ISS) advised its clients last week thatBarclays remuneration package isconsistent with previous guidance toinvestors and recommends voting infavour of it.

ISS is one of the worlds biggestproxy voting services and, among oth-ers, counts BlackRock as one of itsclients, whose funds own about 11 percent of Barclays.

BlackRock has recused itself from

Investor group gives nod to Barclays payBY JULIET SAMUEL

voting directly on the banks pay dueto a conflict of interest (Barclays chiefexecutive Bob Diamond sits on itsboard) and uses ISS as its main proxyservice, but said last night that the

Barclays vote will be decided by anoth-er agent.

ISSs view will be heavily relied uponby non-UK shareholders, however,which make up most of Barclays topshareholders. By contrast, British

investors have expressed concerns overthe remuneration issue.Some of Barclays biggest UK

investors, including Standard Life andScottish Widows are said to be plan-ning to vote against Diamonds paydue to the bank awarding him a 5.7mtax equalisation payment.

It is understood that the bank isnow revising the way it communicateswith shareholders about pay to avoid arepeat of the tax payment row.

BARCLAYS PLC


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n Today, Citigroup reports earnings. It isfollowed by Goldman, US Bancorp,Northern Trust tomorrow, BNY Mellon onWednesday, Bank of America and MorganStanley on Thursday and independentadvisory Greenhill on Friday.

n Revenues are expected to be better dueto extra liquidity in the Eurozone, but thepicture on profits could be more mixed.

BANK RUN OF RESULTS

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KEN Livingstone has today promisedto extend the Croydon Tramlink ifelected mayor of London on 3 May.

Labours Livingstone, who hasmade cutting travel costs acornerstone of his manifesto, saidthe sheer size of the surpluses atTransport for London will make theextension possible if he returns toCity Hall. He claimed TfL had asurplus of 727m in the lastfinancial year, though the transportbody has said a large part of this wasdue to deferred investments in newPiccadilly line trains and delays toNorthern and Jubilee line upgrades.

Former transport secretary LordAdonis, who is campaigning forLivingstone, said the pledge isdemonstrating once more his

life-long commitment to cheaperfares and investment in thetransport network.

Croydon trams were reintroducedin 2000 and are run by TfL. A linkfrom Harrington to Crystal Palacehas been mooted for years, withCroydon Council holding a publicconsultation in 2006. Current mayorBoris Johnson funded six new tramslast month and has said he will aimto develop a Tramlink extension toCrystal Palace.

Ken makes apledge of newTramlink route


10%

Who will you vote for?

SiobhanBenita

(Indep.)

Firstchoicesecondchoice

CarlosCortiglia(BNP)

BorisJohnson(Tory)

JennyJones

(Green)

KenLivingstone

(Labour)

BrianPaddick

(LibDem)

LaurenceWebb(UKIP)

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notvote

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BORIS Johnson is highly likely to bere-elected Mayor of London nextmonth, according to our reader-ship panel, even if opinion pollsshow the race to occupy City Hall isremarkably close.

Ninety per cent of the Voice of

the City panel, run in conjunctionwith PoliticsHome, saidthey expectedJohnson to win,compared to justthree per cent whothought his Labouropponent KenL i v i n g s t o n ewould be thevictor.

T h e i rfaith in

the Tory incumbent is in stark con-trast to opinion polls. A recentComRes poll showed Johnson wasjust six points ahead on 53 percent in the second round of voting,compared with 47 per cent for hisLabour counterpart.Around three quarters of the

panel said they intended to cast

their first preference vote forJohnson, compared to just five per

cent for Livingstone and sixper cent for Brian Paddick,the Liberal Democrat can-didate. Almost a fifth ofpanellists said they wouldcast their second prefer-ence vote for the UK

Independence Party, likely demon-strating deep unease over Brusselsattitude to the City.The results will make for grim

reading for Livingstone. Eventhough five per cent of panellistssaid they would cast their firstvote for him, just three per centsaid he could win.

It also shows support for theLabour politician, who occupiedCity Hall between 2000 and2008, has ebbed away in the City.Although 95 per cent now say theywould cast their first preferencefor one of the other candidates,around 20 per cent say theyhave voted for him in the past.The Voice of the City panel has

been specially recruited torepresent a cross sectionof Londons business professionals.

City panel says Boris Johnson will beat Livingstone inMayoral contest even though polls point to close race

VOICE OF THE CITY

PoliticsHome.comPoliticsHome.comIn association with

BY DAVID CROW

Who will win?90%

Boris Johnson

3%

Ken Livingstone

2%

Other

5%

Dont Know

Our panel thinksBoris Johnson willbeat Ken Livingstone

Have you ever voted for Ken?

NoYes

20%

76%

4%

Dont Know/ Cant remember

BY MARIONDAKERS

MAYORALELECTION

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RETAILERS will struggle to refinancedebts of as much as $11.2bn (7bn)due for maturity at the end of thisyear, leaving some firms at themercy of their lenders and puttingothers in danger of insolvency, anindustry report has warned.

Some 46 UK based retailers holdbank debt totalling $50bn due formaturity between now and 2018while 21 retailers face $22bn of retailbonds maturing over the sameperiod, with $6.2bn due this yearalone, according to law firmFreshfields Bruckhaus Deringer.

Just seven retailers account formore than 63 per cent of the debt.

The UK retail sector continues tobe affected by weak consumerconfidence, tight credit, ofteninflexible lease terms, fiercecompetition and relatively highcommodity prices, Adam Gallagher,a partner at Freshfields said.

A number of retailers have been atloggerheads with landlords over theterms of their leases as toughtrading conditions and costly rentsput pressure on their cashflow.

Several major retailers, includingNew Look and Clinton Cards havebeen seeking to pay monthly ratherthan quarterly rents.

The evidence we are seeing isreaching such an outcome is oftenfraught with difficulties Gallaghersaid.

Retailers raceto refinance7bn of debt

BY KASMIRA JEFFORD

GETTY

TESCO is expected this week to revealfurther dismal trading in the fourthquarter of this year as Britains largestsupermarket unveils plans for itsstrategic overhaul of the business.

In its full-year results on Wednesday,the retailer is expected to reveal a one-1.7 per cent fall in UK like-for-like salesin the three months to the end ofMarch, a meagre improvement on the2.3 per cent decline it saw in the run-up to Christmas.Analysts have forecast pre-tax profits

of 3.62bn-3.7bn for the year to end

Tesco to unveilshake-up amiddismal figures

BY KASMIRA JEFFORD of March, compared with 3.54bn theprevious year, its lowest rate of profitgrowth in seven years.This is a crucial time for chief execu-

tive Philip Clarke, who has been underenormous pressure from investors toaddress problems in the grocershome market since it reported inJanuary its first profit warning in 20years.

In the keenly-awaited strategicreview, which will be unveiled along-side the groups annual results, Clarkeis expected to commit around 400mon revamping its existing stores, hir-ing staff, creating a warmer store lay-out and improving the quality ofproducts and pricing.The group has already announced

plans to hire up to 23,000 staff thisyear. It is also rebranding its TescoValue range to Everyday Value, ditch-ing the stark stripes in favour of softer,more colourful packaging.

Clarke is also expected to detail fur-ther changes to its website, includingthe opening up of the so-called mar-ket place to third party retailers forthe first time.

CREDIT Suisse, Morgan Stanley and JPMorgan Chase have been hired to manageManchester Uniteds initial public offering(IPO), which was originally expected to start

in mid-September of last year.If a fresh attempt at an IPO is launched inSingapore, the banks will have the task ofachieving the maximum valuation for theclub, whose worth varies wildly, dependingon who you talk to.The Glazer family are believed to value theircoveted asset at around 2bn, despite the

clubs valuation being close to 800m whenthe Americans completed their takeover

just seven years ago in May 2005.A group of potential bidders called the RedKnights valued the club at 1bn when theywanted to take over the club in 2010.Some analysts believe the true figure isaround 1.7bn.The Manchester United Supporters Trust, afan group opposed to the Glazers owner-ship of the club, has said the most recentIPO was scrapped partly because of the

owners high expectations for the fetchingprice of shares.An IPO in the Far East is hoped to takeadvantage of the teams vast popularityamong the regions football fans.In the event of a listing in Singapore, itremains possible that more banks could beadded to the advisory list.

ADVISERS

CREDIT SUISSEMORGAN STANLEY

JP MORGAN CHASE

Manchester United take secondshot at a listing in SingaporeMANCHESTER Uniteds proposed

share listing in Singapore could berevived in a bid to raise up to600m.

Members of the American Glazerfamily, who own the club, flew tothe UK last week, attending two ofUniteds games as well as visitingthe clubs London headquarters inMayfair.

BY JULIAN HARRIS The Glazers are believed to valueUnited at around 2bn. They hopeto raise over half a billion pounds

by selling 25 to 30 per cent of theclub via an initial public offering(IPO) in the Far East, it isunderstood.

More benign market conditionscould be tempting the Glazerstowards a fresh attempt at an IPO,after a similar attempt was shelvedlast summer.

Yet the Manchester UnitedSupporters Trust (MUST), anactivist group of the teams fans,

said that the Glazers would have tooffer better conditions to potentialshareholders this time around.

If the club offers non-votingshares then they should expectthe same negative response fromthe market as last time, MUSTsaid, describing a 2bn valuation asinflated.

MARKS & SPENCER is expected topost a modest rise in fourthquarter sales tomorrow, as strongfood sales help to offset moresubdued growth at its generalmerchandising division.

Analysts predict Britains biggestclothing retailer, whose clothes aremodelled by the 60s supermodelTwiggy, to reveal a 1.6 per cent liftin like-for-like food sales in thefirst three months of 2012.

Growth in sales of generalmerchandise which includes itsimportant womenswear division are likely to remain flat at 0.2 per

Food will help Marks & Spencerpost fourth quarter sales rise

BY KASMIRA JEFFORDcent, an improvement on the 1.8per cent fall in the last quarter.

The retail bellwether suffered a13.3 per cent decline inHomewares sales in the run-up toChristmas after the company

withdrew from the electricalsmarket.M&S will report its full-

year results in May, with aconsensus of analysts predictingpre-tax profits of 697m, down 2.5per cent on the previous year.

Chief executive Marc Bolland,who will also give guidance for2013 in tomorrows update, islikely to point to higher profits for2013 as it carries out a 600mrevamp of its stores.

MONDAY 16 APRIL 20129NEWS

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n Tesco is expected to invest 400m onrevamping stores and hiring more staff.

n Stores to become warmer and lessindustrial with better, friendlier service.

n Shake-up of online offering andexpansion of click and collect service.

n Tesco could detail a new advertisingcampaign after recently switching agencies.

STRATEGIC REVIEW

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INSURERS face a new threat to theirprofits after Which launched a cam-paign against the fees charged on carand home policies.The industry, parts of which paid

out large sums last year following astring of natural disasters around theworld, stands accused of chargingexorbitant fees for simple changesto policies.

Consumer group Which said Axaand subsidiary Swiftcover charge aflat 30 fee for policyholders tochange their address, surname orvehicle.

Customers also face charges forrenewal and up to 75 to cancel a carinsurance policy, according to thestudy of 39 car insurers and 34 homeinsurers.

Its a disgrace that insurers chargeexorbitant fees to make basic changesto a policy. These charges shouldreflect the real cost to the companyand not a way of making easy moneyfrom consumers who are alreadystruggling with high and rising insur-ance premiums, said Peter Vicary-Smith, chief executive of Which.

'We want insurance companies tobe clearer about the fees that they

charge and stop hiding the detailsaway in pages of terms and condi-

Insurers under

fire over cost ofpolicy changes

BY PETER EDWARDStions. The new regulator, the FinancialConduct Authority, must ensure thatany charges reflect the actual costincurred by the insurance provider.The report also said customers face

excessive interest charges when pay-ing by instalments, reaching between29.3 per cent and 32.3 per cent.A spokesman for Axa said Which had

got it wrong over Swiftcover.Swiftcover.com has always been an

online-only insurer, allowing cus-tomers to change their policy onlinewhenever they wish, and as often asthey need to without charge. If, how-ever, a policyholder chooses to updatetheir policy by speaking to the helpdesk, there is an admin charge of 30,like with many other insurers.

The annual percentage rate for eachcustomer is calculated on risk there-fore a flat rate indicated by Which issimply incorrect.A spokesman for the Association of

British Insurers, said: Paying by instal-ments reflects the increased financialrisk to the insurer as there is evidenceto suggest that those customers choos-ing not to pay in full for their policyupfront are more likely to make aclaim.

Insurers are committed to keepingadministration costs as low as possi-ble, but where they do incur costs that

they cannot absorb then these mayhave to be passed on to customers.

SMALL COMPANIES are becomingincreasingly frustrated at thestrings attached to their loans andoverdrafts, claims new research.

The number of small firmslodging complaints with theFinancial Ombudsman Serviceabout their finances jumped 10 percent in the last year from 394 to435, figures from Syscap claim.

This is a big jump from the 136

Small businesses are lodgingmore complaints about loans

BY MARION DAKERS complaints seen in 2007-08. Thefigures are based on firms withfewer than 10 employees andturnover of less than 2m (1.8m).

Whilst some lenders aretreating small businesses veryresponsibly there have been toomany incidences of banks using theshortage of credit as an excuse toimpose the highest possible feesthat they can get away with ontheir customers, said Syscap chief

executive Philip White.

Politicians must be more open about their tax affairs

POLITICIANS have begun liningup to declare their willingnessto publicly reveal theirpersonal tax details.

The practice will never result intrue financial transparency, and

the word shouldnt even be usedwhen talking about politicalleaders tax statements. Still, its astep in the right direction.

Both established office holdersand candidates for office have longheld that taxes are a personalmatter. Many are changing theirrhetoric now, saying they have noproblem with public disclosure inprinciple.

Why the new openness? Part ofthe reason is that when one leader

says he or she is willing to makepersonal finances public, it becomesvery hard for others to continue tomaintain that they wont.

Disclosure takes on a momentumof its own. Nobody who wants thepublics trust can risk appearing asif they have something to hide, andthat certainly extends to details onhow much one earns and where

that money comes from.Another part of the reason,

however, may be that taxstatements often dont revealindividuals real income. If youwant to avoid taxes, the first thingyou do is hide income or make it

someone elses. Wealthy people including, one must assume,wealthy political leaders learn toget good at this.

Spouses who fall into lower taxbrackets get assets put into theirname. Income is moved to othercountries or put in trusts. Propertiesare put into joint ownership.

Still, public disclosure of taxstatements is a good start. Some inthe UK have protested thatdisclosure practices in the United

States, where its routine forpoliticians to make their taxstatements public, haventaccomplished anything positive. Idargue otherwise.

It may be true that US politicianssee little or no benefit by revealing

personal financial details, butpoliticians arent the ones who aresupposed to benefit. People who voteare supposed to benefit.

Politicians make decisions thataffect industries and market sectors,and sometimes politicians have astake in those same sectors.

Disclosure is sometimes a matterof, if nothing else, making it clearwhether leaders stand to personallygain from their own politicalpositions. Nowhere is this more true

than in the matter of tax policyitself. Take the cut in the UKs toptax rate, from 50 per cent to 45 percent. Many politicians obviously fallinto that top bracket, as DavidCameron has already said he does.

Does taking a political stance that

benefits oneself always indicate aconflict of interest?No, it doesnt. Wealthy politicians

who support trimming the top taxrate may very well have taken thatstance because they genuinelybelieve its the best policy forspurring the economy.

They may even be right. But whenthat top tax rate happens to be theirown, wouldnt you rather know it?

Ted Kemp is senior news editor forCNBC.com

TEDKEMP

CNBC COMMENT

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G E T T Y

GLENCORE yesterday defended itselfagainst allegations it profited fromchild labour at a copper-cobalt minein the Democratic Republic of Congo.The firm was responding to a BBC

Panorama programme, due to airtonight, which claims children areworking at the Tilwezembe open-pitmine.The Tilwezembe concession is

owned by Toronto-listed Katanga, inwhich Glencore has a 75.15 per centstake.

London-listed Glencore said in astatement that it stopped operationsin 2008, and that any child workersseen at the mine are independentartisanal miners that unlawfullymoved onto the site in 2010.

We definitely do not profit fromchild labour in any part of the world.

Glencore chief

denies Congomine claims

BY MARION DAKERSThis is adhered to strictly, chief exec-utive Ivan Glasenberg told the pro-gramme. We are pleading with thegovernment to remove the artisanalminers from our concession.The firm said Katanga plans to

resume mining operations at the siteat some point in the future.

Glencore also denied that it indi-rectly buys copper produced at themine. It said it has not been shownany evidence that this is takingplace.

Panorama also contends thatGlencores operations in the Congohave made significant environmen-tal damage including releasing acidinto a river near its Luilu refinery,turning it brown.

Glasenberg responded: I have beento that river. That is what people havedumped into the river for 50 years.Not correct. Terrible. Thats whyGlencore has spent vast amounts ofmoney to get rid of this problem, toensure clean water in two weeks timewill be discharged into that river.

He added that the Congolese gov-ernment insists that his firm keep therefinery open, making it impossibleto remedy faster.

Glencore, which last week pushedback the expected completion of itsXstrata merger to July, said it invited

the BBC to visit its operations in theDRC, but was turned down.

Shops hit out at plans to forcecigarettes into plain packagingBRITISH retailers have reacted

angrily to a government plan toforce tobacco products to be sold inplain packaging, labeling itcrazy.

The legislation would make therecent costly ban on tobaccodisplay redundant, the BritishRetail Consortium (BRC) has said.

The BRCs Andrew Opie hit out:Having just forced large retailersto spend almost 16m refittingstores to hide tobacco products thegovernment is now confirming its

BY CAOLAN COSGROVE considering legislation onpackaging thats crazy.

The Department of Health

estimates the tobacco display banapplies to 6,834 large stores. Takingthe average cost of refitting a storefrom a sample of BRC members(2,285), installation costs for largeretailers are therefore estimated at15.6m.

Smokers groups have also lashedout at the plans. The consultationon plain packaging threatens to bea farce, said Forests Simon Clark.Andrew Lansley says he is openminded yet he clearly supports

plain packaging even before theconsultation has begun

Health secretary Andrew Lansleyhas even faced criticism from

within his own party regarding thenew plans. Conservative MP MarkField warned that enforcingtobacco products to be sold underplain packaging would create adangerous precedent for the futureof commercial free speech.

It will result in the increasedhealth threat posed by counterfeittobacco, the encouragement ofsmuggled products and damagingcompetition, he said, writing onthe Conservative Home website. Glencore chief executive Ivan Glasenberg has denied his firm profits from child labour

ORACLE is set to go to trial todayagainst Google in a high-stakesdispute over smartphonetechnology, the biggest case in

what is shaping up to be anintense year in court for theenterprise software giant.

Jury selection is set for thismorning in San Francisco federalcourt. Oracle claims Googles

Android operating systemtramples on its intellectual

Oracle legal trial against Googlekicks off in San Francisco court

BY HARRY BANKS property rights to the Javaprogramming language. Googlesays it doesnt violate Oraclespatents, and that Oracle cannotcopyright certain parts of Java.

Oracle is seeking roughly $1bn(631m) in copyright damages. Onthe two patents, it rejectedGoogles $2.8m settlement offer,plus 0.5 per cent of Androidrevenue on one patent until itexpires this December and 0.015

per cent on a second patent untilit expires in April 2018.

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ED MILIBAND yesterday called for a5,000 cap on donations to politicalparties and tougher limits on elec-tion spending as he sought to seizethe initiative in negotiations over thefuture of party funding.The Labour leader said the cap,

which is significantly lower than the50,000 limit being proposed by thePrime Minister, would also apply todirect donations from the tradeunions, costing his party millions ofpounds.The Tories were quick to dismiss the

proposals as a complete wheezebecause Labour gets a significantamount of its union funding from so-called affiliates trade union mem-bers who automatically pay 3 amonth unless they opt out. Thesedonations would be unaffected by

the cap.Grant Shapps, the housing minis-

ter, accused Miliband of being disin-genuous, arguing that Labouraccepted 10m of trade union fundslast year and would only have lostaround 100,000 of this if the pro-posed cap had been in place.

However, if the cap had been in

Labour calls for5k donor cap

BY DAVID CROW place in 2010 the most recent elec-tion year then Labour would havemissed out on the vast majority of the9m or so it accepted in large dona-tions, 4m of which came from thetrade unions.

Most large donations are given topolitical parties in election years,meaning they are a better yard stickfor comparing party funding.The Tories are highly unlikely to

support a 5,000 cap unless Labouragrees for its trade union members toopt in rather than opt out of payingtheir 3 charge.

Last year, an analysis by SirChristopher Kelly, the commissioneron standards in public life, showedthe Tory party would lose 70 per centof its income even if a 10,000 capwere introduced.

Miliband also said the limit on howmuch political parties spend fighting

elections should be substantiallyless than the current cap of around20m.

Political funding has returned tothe political agenda following thecash-for-Cameron scandal, which sawex-Tory treasurer Peter Cruddas offer-ing big donors the chance to influ-ence government policy.

Demand for banks to give earlywarning of interest rate risesBANKS will this week come underfresh political pressure to givecustomers greater notice of hikesin interest rates.

Labour will tomorrow table anamendment to the FinancialServices Bill after customers ofHalifax were given a minimum ofonly 14 days notice of an increasein the standard variable rate,despite the record low Bank ofEngland base rate.

Halifax, Britains largest

BY PETER EDWARDSmortgage lender and part oftaxpayer-backed Lloyds BankingGroup, is one of several banks toraise rates at short notice.

These typically add at least 200to mortgage bills, depending onthe size of the loan, shadowbusiness secretary and StreathamMP Chuka Umunna told City A.M.

It is not acceptable for banks togive, in some cases, just 14 daysnotice of substantial rate hikes andexpect consumers who arealready facing rising living costs to simply put up with it.

Labour has not called for aspecific timescale for informingcustomers of rises and yesterdayUmunna said it would be for theTreasury to work with the industryto decide how much of a noticeperiod.

Britains leading banks have saidthat recent rises in the cost ofborrowing money on the wholesalemarkets have left them with littlechoice but to pass on costs tocustomers, despite the BoEs baserate being kept at a record low of0.5 per cent since March 2009.


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IN ASSOCIATION with Repskan.com,City A.M. is measuring the relative Olympicmedia buzz around the London 2012Olympic and Paralympic Games partners,week by week. The leaderboard, right,

reflects their ranking over the past week, inthis case from Wednesday 4 March toWednesday 11 April.

McDonalds has leaptup the rankings thisweek, with many onTwitter talking aboutits Olympicsponsorship. Somementions have beennegative, but there has also been significantdiscussion about the McDonalds GamesMaker training and other aspects ofMcDonalds Olympic sponsorship. In othernews, BP has been the victim of a publicitystunt. A campaign group created its ownversion of the London 2012 site and posted astory stating that BP had been dropped as asustainability partner. This news waswidely reported and discussed. Many peoplewere still seemingly under the impression

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THE US Treasur y Department hassaid that the many programs thatit, the Federal Reserve and bankingauthorities implemented duringthe darkest hours of the 2007-2009financial crisis will likely end upmaking a profit for taxpayers.

At a background presentationfor reporters, a senior Treasuryofficial who spoke on condition ofanonymity said the department

wanted to get word out about the

success of the financial bailoutbefore myths developed about it.The senior off icial emphasised

that rescue of the totteringfinancial system, which was on the

verge of collapse in 2008, had beena bipartisan effort undertakeninitially by the Bushadministration and continued

when President Barack Obamatook office in 2009.

There were various pieces to therescue that caused the Treasury tomake investments in some big

banks in return for bailout money,and they now are turning out to beprofitable. The Fed is alsoremitting excess earnings fromprograms it ran to the Treasury.

Earlier this week, the Treasuryscaled back the ultimate estimatedcost of the centrepiece program,the Troubled Asset Relief Program,

or TARP, to around $60bn (38bn)from a previous estimate of $68bn.

US Treasuryexpects profitfrom bailouts

BY HARRY BANKS

GETTY

CLIMATE change minister GregBarker has moved to placate Tory

backbenchers by insisting the coun-try will not be carpeted in wind

farms.The renewables industry, however,insists that it still has the full backingof the government.

Barker said he was happy to reas-sure colleagues that Britain does notneed any more onshore wind farmsin addition to those already in theplanning system or being built.This stance contrasts with former

energy secretary Chris Huhnes callfor up to 10,000 new onshore wind-mills just five months ago.

We inherited from the Labourparty a policy that was absolutely

biased towards onshore wind. Wewant a much more balanced, diverserenewable energy mix, Barker toldLBC Radio yesterday.

In February, in the wake of Huhnesresignation, more than 100Conservative MPs wrote to the PrimeMinister calling on him to cut subsi-

dies and toughen up planning rulesfor wind turbines.

Governmentrethinks windpower stance

BY MARION DAKERSWindmills have already been built

in insensitive or suitable locations,Barker said.

But RenewableUK, which representsmore than 600 wind and marinepower companies, said it has recently

had really strong statements of sup-port for wind farms from the very topof government, despite an expectedcut to subsidies in the governmentselectricity market reform due in May.A spokesperson told City A.M: The

Prime Minister, chancellor andDeputy Prime Minister have demon-strated their commitment to renew-ables and wind farms. Its somethingthat is taken very seriously at Number10.The UK currently has more than

3,000 onshore turbines and a further500 at offshore sites such as Thanet.As part of the coalitions pledge to

generate 15 per cent of Englands elec-tricity through renewable sources by2020, the number of onshore wind-mills could more than double, accord-ing to industry figures.

Under these targets, the number ofpeople with jobs linked to UK green

energy will rise from 12,000 to 88,300by 2020, RenewableUK estimates. Conservative MPs have previously lobbied the government to crack down on turbines


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PRIVATE equity veteran and former

Permira partner Martin Clarke couldbe about to join an advisoryboutique set up by a formercolleague.

Clarke, the ex-head of Permirasconsumer team, is believed to haveheld talks with Philippe Robertabout joining OceanBridge Partners.

Clarke is currently a non-executive director at New Look, theretailer controlled by Permira andApax.

Harvard-educated Robert is the co-founder of New York-basedOceanBridge and also a director ofFrench broadcaster Canal+.

Clarke, who holds a doctorate inhistory from Cambridge Universityand is a trustee of the Globe Theatreon the South Bank, spentthe early part of hiscareer at Cinven inthe 1980s. He

could not becontactedyesterday.

Clarke set totake step onOceanBridge

BY PETER EDWARDS

GETTY

POTENTIAL bidders for Cable &Wireless Worldwide (CWW) will haveto show their hand this week in thelatest chapter of the saga over the1bn-rated telecoms firm.Tata Communications and

Vodafone have until Thursday toeither announce a firm intention tomake a bid for CWW or walk awayafter the Takeover Panel grantedthem an extension on 29 March.

Sir John Buchanan is preparing tostep down from the board ofVodafone, after reaching the nineyear threshold, following sugges-

tions his scepticism over a deal puthim at odds with chief executiveVittorio Colao.

Vodafone said Buchanan had notexpressed an opinion on the dealand denied his departure is relatedto any disagreement with Colao.The mobile giant said in February it

was in the early stages of looking at abid for CWW.

Tata Communications, a unit ofIndian conglomerate Tata Group,said on 1 March that it too was evalu-

Deadline loomsin two-horse

race for CWWBY PETER EDWARDS ating a cash offer, in what could set

up a takeover battle for CWW.Cable & Wireless Worldwide has

had a turbulent time of late and iscurrently on its third chief executivein the last year. Former boss JohnPluthero was replaced by GavinDarby following a 433m half-yearloss.

But CWW is still attractive to buyersfor its fixed line network in the UK,the extra capacity it would provideand its large corporate client base.CWW is the communicationsprovider for 70 firms in the FTSE 100.Analysts suggest private equity firms

could also be eyeing CWW too.

Martin Clarkecould bepoised to joinOceanBridge

LLOYDS Banking Group has soldoff its stake in Sir Stelios Haji-Ioannous EasyCar business for an

undisclosed sum, it has emerged.The bank disposed of the last of

its holding at the end of last year aspart of its exit strategy forinvestments made by Bank ofScotland, which was taken over byLloyds in 2008.

The bank denied earlier reportsthat it had written off the holding.

Bank of Scotlands private equityarm Uberior invested in EasyCar

back in 2001, putting in a total of27m in conjunction with the

Lloyds gets rid of its final stakein Sir Stelioss EasyCar business

BY MARION DAKERS National Bank of Greece.EasyCar declined to comment

yesterday. The firm is set to launcha car-sharing service withlastminute.com backers

PROfounders Capital.Uberior delivered profits of

519m in 2007, but was forced towrite down swathes of itsinvestments amid the globalfinancial meltdown.

Lloyds sold off more than 123mworth of investments held byUberior in 2010, and wrote off afurther 17.4m. Uberior swung to apre-tax profit of 133m in that year,from a loss of 289m in 2009,according to its latest accounts.

MONDAY 16 APRIL 201215NEWScityam.com

Sir Stelios Haji-Ioannou is overhauling the EasyCar business to include a car-share club

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MILLIONS of workers risk putting

their money in poorly governedpension pots, with little oversightand unsustainable returns,according to research out today.

While trust-based pensionschemes have trustees to hold fundmanagers to account, FairPensionsclaims insurance firms contract-based pensions often fail to performthis role.

FairPensions studied the 10 largestcontract-based pension providers inthe UK and found only oneinsurance firm signed up to the UKStewardship Code a voluntaryarrangement designed to improvethe relationship between investorsand firms, boosting returns.

The code was issued in 2010 as aresponse to the financial crises andin acknowledgement that pensionproviders had paid insufficientattention to the governance failings

and financial risks being taken atbanks, most notably RBS, saidFairPensions Catherine Howarth.

The poor oversight of banks byasset managers cost savers billions.

Poor scrutinyrisks hurtingpension pots

BY TIM WALLACE

GETTY

AFFORDABILITY has improved considerably for key public sector workers since houseprices peaked in 2007, Halifax research shows today. The average house price in 41 percent of towns is now below four times average earnings up from three per cent, or 12towns, in September 2007. However, there are still considerable affordability issues forkey workers in London and the south east, said Halifaxs Martin Ellis.

KEY WORKER HOUSING AFFORDABILITY SOARS

Growth in private rents

2008 2009 2010 2011

-5%

-10%

-15%

%yoy

0%

5%

10%

15%

Q1

London

Q2 Q3 Q 4 Q 1 Q 2 Q3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q2 Q3 Q 4

GBexcluding

London

State borrowing is ofset by corporations

2010 2011

0

-50

-100

-150

bn

50

100

150

200Corporations Rest of the worldPublic sector Households

netborrowing(-)netleding(+)

LONDONs house prices hit arecord high in April while rentsare set to keep soaring through2012, two reports show today.

The average asking price of aproperty in the capital rose to464,944, up 2.1 per cent on themonth and 7.9 per cent on the431,013 seen last April,according to Rightmoves houseprice index. That brings the risein prices to 6.9 per cent through2012 so far.

A lack of supply is driving upprices, with the number ofproperties coming to marketdown five per cent on the month.

Low supply and high priceshave driven the rental market,too, where monthly prices rose9.6 per cent through 2011,Hometrack revealed today.

The increase slowed in thesecond half of the year simply

because squeezed tenants cannotafford many further rises, withHometrack predicting a more

moderate rise of two to three percent this year.

Nonetheless, it leaves rentswell above those in the rest ofthe country in London 22 per

Londons property prices keeprising on sustained low supply

BY TIM WALLACE cent of lettings for a typical two-bed property are over 2,000 permonth, while in the rest of thecountry just four per cent costmore than 1,000.

With no major improvements

in mortgage availability likely inthe near future, rental demand isset to remain strong, saidHometracks Richard Donnell.

There is however a limit as tohow high rents can go asaffordability constraintscontinue to squeeze household

budgets. Increased occupation ofrented housing through greatersharing is one solution toaffordability pressures especially in London.

PERSONAL FINANCE: Page 22

MONDAY 16 APRIL 201216 NEWS

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Business confidence points toslow recovery as oil prices riseRISING output forecasts from firmspoint to an increase in GDP in thisquarter, according to an influentialsurvey published today.

The BDO output index, whichpoints to business conditions onequarter ahead, rose above the 95mark which indicates growth forthe first time since the summer of

2011 but longer-term prospectshave been hit by oil price rises.

BY TIM WALLACE The index jumped from 93.5 inFebruary to 95.7 in March itshighest level in nine months,suggesting short-term growthprospects are improving.

However, looking further forward,growth towards the end of the yearis set to remain muted.

The BDO optimism index, whichlooks two quarters ahead, droppedback from 98 in February to 96.7 in

March still above the 95 growthlevel, but firmly below the 100 mark

that indicates trend growth.A return of the Eurozone crisis

and rising oil prices have hit themanufacturing sectors outlookparticularly hard, with its indicatormoving from 96.9 back into acontractionary 94.6 in March.

It is encouraging to see positivesigns in the short term, but it is twosteps forward followed by one stepback at the moment, as the overall

recovery is likely to be a slow one.,said BDOs Peter Hemington.

Economists say firmssavings hold back GDPBRITAINS companies are failing totake their responsibilities to the rest ofsociety seriously and must start spend-ing instead of saving if they want tosee the economy growing, accordingto a damning report out today fromErnst and Youngs Item Club.The extraordinary attack on firms

savings saw companies accused ofadding to the dole queue by makingstaff redundant at the same time asthe government, and called on busi-nesses to put back into the economywhat they take out, to help bringdown the government deficit.

Overall, the think-tank forecast GDPgrowth of just 0.4 per cent this yeardown from 0.7 per cent in 2011, due toa combination of cuts to governmentspending, weak consumer spendinggrowth and low business investment.

BY TIM WALLACE The report pointed to the contrastbetween corporate cash balances,which stand at over 750bn, and busi-ness investment, which rose just 1.2per cent in 2011.

Ernst and Young forecasts another1.2 per cent rise this year, leavinginvestment spending 12 per centbelow its 2008 level.

Until these companies stop stashingthe cash and start increasing levels ofinvestment and dividends, the econo-my will remain on the critical list,said chief economic adviser PeterSpencer.

It is high time that these individu-als began to take corporate socialresponsibility seriously.The report argues the government

has tried to help with three business-friendly budgets and more tax cuts inthe pipeline, and now it is down tocompanies to grasp this opportunity

quickly or face the consequences afterthe next general election.

In contrast, the report praised house-hold savings, arguing that consumershad lived beyond their means formany years and need to rebalance.

Nonetheless, a surplus of 21bncombined with high unemploymentand falling real wages will continue tohit consumer spending.

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DESCENDANTS of one of theoriginal families to adopt thetradition will be among thosecrowned as Pearly kings and queensnext month.

The new royalty of the City ofLondon, the City of Westminsterand the London boroughs will becrowned at the Carpenters Arms, aclassic East End pub, on 6 May.

The new Pearly kings, queens andprincesses will wear their iconichand-sewn button suits and raise

money for charity, following in thefootsteps of their founder HenryCroft who spent a l ifetime helpingthe poor and needy and was born150 years ago in St Pancras.

At the age of 13 Croft beganworking around the marketssurrounded by apple sellers - knownas Costermongers and becamefascinated by their flash boy suitsdecorated with penny-sized pearlbuttons which soon formed thebasis for the legendary Pearly suits.

A right royal coronation for thenext generation of Pearly kings

REUTERS

Got A Story? Email

[email protected] The Capitalist

on Twitter: @citycapitalist

17cityam.com

cityam.com/the-capitalistTHECAPITALIST

NORTHERN LINE: be on the look outfor mysterious bugs mounting

sustained attacks on Tube drivers.The RMT has complained in its latest

newsletter of as yet unidentified insectsplaguing Northern Line drivers based mainly

at Morden. Fumigation has done nothing tosoothe the drivers itches, thunders theunion, and a total of 12 incident reports havebeen made since last August.

While London Undergrounds operationsdirector Nigel Holness said the Tube is takingthese bugs seriously, no-one has managed tocatch these elusive creatures in the act. Acrunch meeting is being held next month tofind a permanent resolution.

The Capitalistwonders if anyone in theCity has come across these commutingcreepy crawlies (but is sure that nasty itch onyour left arm is probably nothing).


!!

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UBS rates the fashion brandneutral with a target priceof 15.80. The brokerexpects constant currencysales growth of 16.5 per centfor the quarter when thefirm reports tomorrow,down from 23.7 per cent inthe rest of the financial yearthanks to toughercomparatives.

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Irwin Mitchell

The UK solicitor firm has appointedDenny Payton as partner in itsmotor team. Payton has been asolicitor for over nineteen years andhas extensive experience workingfor major insurers, corporate fleetsand brokers. Her focus is ondelivering outsourcing services to international clients.

DLA Piper

Prakash Paran has joined the law firms London office aspartner in the corporate group and member of theglobal insurance and reinsurance sector group. Paran

trained and qualified at Simmons & Simmons, and hasalso worked at Dewey & LeBeouf.

Stadia TrusteesThe pensions company, which specialises in theadministration of self-invested pension plans, hasexpanded its team with three new hires. Claire Wilkinshas been appointed general manager, having previouslyworked with the firm as an external HR consultant. JackKetley and Jamie Simpson are joining as pensionsadministrators.

SkyBridge Capital

The alternative investment firm has added five new

members to its sales team. Justin Arasin and JohnLangston will become directors of global distribution,along with two additional support staff. Henrik Molin has

joined SkyBridge as director of marketing.

Aquila Capital

Aquila, the alternative investment company, hasappointed Armin Gudat as senior fund manager. He willbe responsible for the firms quantitative funds. Gudatjoins from AXA Rosenberg, and he has previously heldroles at Dresdner Bank and Westfalenbank.

RICS

The Royal Institution of Chartered Surveyors has

appointed Peter King, former chief executive of theNational Federation of Property Professionals (NFOPP),as global residential director. King is replacing the out-

going group director David Dalby, who is retiring in July.Prior to joining the NFOPP, King was senior area directorat Bradford and Bingley and area director at Black HorseAgencies.

Ashurst

Alessandro Giovannelli has been appointed head ofcorporate in the law firms Italian practice. Formerly apartner with Pavia e Ansaldo, Giovannelli previouslyspent seven years at Allen & Overy. His hire followspartner Fabio Pizzoccheris move from Ashursts Londonoffice to its base in Milan.

WHOS SWITCHING JOBS Edited by Tom Welsh

+44 (0)20 7092 0053morganmckinley.comSPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

CITY MOVES

To appear in CITYMOVES please email your career updates and pictures to [email protected]

in association with

News from retailersand job figures willmake the week ahead

W

HILE the firstcouple of daysindicate a quietstart for the UK

market, activity is likelyto increase by the middleof the week.

All eyes wil l be onconsumer price indexdata tomorrow for anysigns of inflationmoving one way oranother. Tesco reportsfull year numbers onWednesday.

The supermarket lostmarket share in Januaryand its shares slumped25 per cent. If there isno marked improvementin trading, the foodretailer could sufferfurther falls.

On Wednesday we also

have a raft of numberson the job market,giving insight into thestate of UK employment.

The end of t he week isdominated by mid-tier

MANOJ onthe MARKETS

MANOJ LADWA

retailers.Despite their size, their

numbers will be watched closelyfor indications of recovery in theUKretail sector.

TODAYUK economic figures: RightMoveHouse PricesUK corporates reporting: FalklandOil and Gas and Tanfield.

TUESDAYUK economic figures: CorporatePrice Index and Retail Price

Index.UK corporates reporting: XtractEnergyand UK Coal.

WEDNESDAYUK economic figures: Bank of

England minutes, weekly earn-ings, ILO unemployment, joblessclaims changeUK corporates reporting: Tesco.Ex-dividends:Aggreko, BAESystems, Capita, InternationalPower, Kazakhmys, Legal &General, Old Mutual, Petrofac,Resolution, Smith & Nephew, andTullow Oil.

THURSDAYUK corporates reporting:WHSmith and Debenhams.

FRIDAYUK economic figures: Retail salesThis will be my final Week Ahead. Tolook back at my trading journey moreclosely please go to:www.etxcapital.co.uk/manoj

Deutsche Bank has a holdrating on the department storewith a target price of 85p.

Debenhams should confirm itsstrong performance for its firsthalf when it reports onThursday, the broker reckons,in spite of consumerheadwinds. It is forecastingbroadly flat headline pre-taxprofits of 132.9m.

Investec rates the mediagroup buy and has a targetprice of 578p. The brokerthinks DMGTs shares lookattractive ahead of a pre-close update due onWednesday, with some lag inits share price compared toits peers. However, a re-rating is unlikely unless thefirm shakes up its portfolio.

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THIS Sundays Virgin LondonMarathon will signal thepush off the starting blockfor many of us in the City inthe sprint towards the 2012

Olympics.With little over one hundred

days to go until the Games begin,many in the City will already findthemselves wondering how theirbusinesses are going to cope withthe extra demands placed on ourinfrastructure over the summer.

Already, government-ledinitiatives such as Get Ahead of theGames have been helpingemployers to develop theirstrategies, but even with suchmeasures in place, many would like

to know how their contingency

WHEN the European Unionlaunched its plans toreform the audit marketacross 27 countries, theproposals referenced the

word quality no less than 113 times.Robust audits were held to be the keyto re-establishing trust and marketconfidence following the 2008financial crisis.

It seemed a laudable objective toensure that auditors (alongsidebankers, ratings agencies, central

banks and regulators) learn the lessonsfrom what went wrong. We supportnew policies and ideas to improveaudit relevance, scepticism and qualityin the context of wider reform.

But five months on, there appears tobe a gulf between the stated intentionof driving a higher quality, dynamicand open audit market and theactuality of the debate.

Many of the proposals appear to stemfrom a view that market concentra-tion among the Big Four auditors hasled to poor audit quality. They havefocused almost entirely on structuralreform, including the forcible rotation

cityam.com/forum

It is a lot easier to

destroy quality inpeople businessesthan it is to create it

In association withTHEFORUM

Twitter: @cityamforum on the web: cityam.com/forum or by email: [email protected]? Disagree? Got a sharp comment?

The Forum wants you to join the debate. Top responses will be reprinted in The Forum.

20MONDAY 16 APRIL 2012

JOHN GRIFFITH-JONES

KPMG chairman: Four big ways wecould really improve audit quality

of auditors every six years, a ban onmany non-audit services to auditclients and possibly even the complete

separation of an audit firm from itsadvisory arm if certain revenue andmarket share thresholds are crossed.There is, however, no empirical evi-

dence to link either the existing con-centration with lower quality or thechanges proposed to any improve-ment.

Indeed, there are potentially damag-ing unintended consequences of thereforms currently proposed. Undermandatory firm rotation (MFR), thereis a real danger that quality will sufferas knowledge is lost through auditorchanges. And MFR has just as muchpotential to increase concentration in

the market as it has to broaden compe-tition. It will necessarily encourage anew breed of audit partners acting pri-marily as sales people. We are very con-cerned that this is likely to change theculture of our firm and to detractfrom rather than encourage a scepti-cal mindset in our auditors.

In addition, the creation of audit-only firms would ignore the combina-tion of experience, judgment andspecialist skills only found in a multi-disciplinary professional environ-

ment. The modern audit requiresspecialists in many areas, includingactuarial services, IT, tax, financialinstruments and valuation.There are, however, lessons to be

learned from the financial crisiswhich can be directly translated intoimprovements to audit quality with-out these potentially harmful sideeffects. I urge the EuropeanCommission to allow us to work withit, the European Parliament and ournational governments to design appro-priate measures under the followingfour headings:n Fully empowered audit committees

ensuring that the auditors are bothindependent and suitably sceptical.They should be expected to test thequality of service they are providedwith on a regular basis with formalfeedback and, if that is what theydeem appropriate, a tender, accompa-nied by clear

cityam 2012-04-16

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