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IN BRIEFInvestors back Goldman payn Goldman Sachs shareholders

yesterday approved the firmscompensation plan for top executivesand backed all 10 directors up forelection at its annual meeting.Investors rejected three stockholderproposals, including a resolutionurging the board to require topexecutives to keep 75 per cent of thestock they receive from Goldman forthree years after they leave the firm.The bank, which recently embarked ona campaign to restore its publicimage, used Twitter to publiclyannounce the results of itsshareholder votes.

Facebook claims could top $100mn Claims by four of Wall Street's mainmarket makers against Nasdaq overFacebooks botched IPO are likely toexceed $100m, as they and other

traders continue to deal with thousandsof problems with customer orders. Theexchange operator is facing lawsuitsfrom investors and threats of legalaction from brokers.Four of the top market makers in theFacebook IPO Knight Capital, CitadelSecurities, UBS AG and Citi's automatedtrading desk co llectively haveprobably lost more than $100m fromproblems arising from the deal, said asenior executive at one of the firms.Knight and Citadel are each claiminglosses of $30m to $35m, potentiallyoverwhelming a $13m fund theexchange set up to deal with potentialclaims. Facebook shares ended tradingyesterday up 3.2 per cent at $33.03,about $5 short of their offering price.

DAVID Cameron faced fresh ques-tions over his judgment last nightafter it emerged he knew JeremyHunt was an enthusiastic backer ofNews Corps 8bn bid for BSkyBwhen he asked the culture secretaryto decide on the deal.The Prime Minister gave Hunt a

quasi-judicial role in December 2010after Vince Cable, the business secre-tary, was taped saying he haddeclared war on the Murdochs.

Hunt said Britains media wouldsuffer for years if the deal wasblocked, according to a memo readout at the Leveson inquiry yesterday.

Last night Labour deputy leaderHarriet Harman said Cameronknew only too well that Hunt wasactively supporting the bid.

The Prime Minister should neverhave given him the job, she added.

Details of the memo, dated 19November 2010, emerged on anotherdramatic day at the inquiry. In itHunt said James Murdoch was furi-ous about the behaviour of Cable.

We must be very careful that anyattempt to block it is done on gen-uine plurality grounds and not as aresult of lobbying by competitors,the memo said.

I think it would be totally wrongto cave in to the (BBC chief) MarkThompson, Channel 4, Guardian

EDF warns Hollande on nuclear plantHenri Proglio, chief executive of EDF, haswarned Frances new president that hewill need to discuss compensation withthe nuclear power group if he presses onwith plans to shut the countrys oldestatomic plant.

Dow Chemical wins Kuwait damagesDow Chemical of the US has beenawarded $2.16bn in damages from thePetrochemical Industries Co of Kuwait byan arbitration court over the breakdown

of a planned joint venture between thetwo companies in 2008. Dow said itwould put the money towards reducing itsnet debt, which was $16.2bn at the end oflast year, funding its capital spending andpaying dividends.

Air France to slash staff numbersAir France-KLM yesterday confirmed forthe first time it would be cutting staff atAir France as part of a restructuring planintended to restore profits. Its CEO briefedtrade unions on a proposed restructuringthat would involve splitting the airlineslossmaking short and medium-hauloperations into three new units.

RPI change could save treasury 3bnChanges to inflation calculations thatcould save the chancellor billions ofpounds a year while hurting giltsinvestors are being considered. Acommittee that advises the UK StatisticsAuthority may recommend an overhaulthat could permanently pare back gains inthe retail prices index. If the changes areadopted, they could lead to a reduction ininterest payments on government bondsthat are linked to the retail price index.This would save as much as 3bn a year ininterest paid on index-linked gilts.

Small businesses in Olympic battleOlympic authorities are facing a legalchallenge unless they withdrawdevastating plans for road closures andrestrictions which small companies claimcould put them out of business.

US cuts $33m in aid to PakistanThe US is to cut $33m from the aid it sendsPakistan over the jailing of the doctor whohelped the CIA hunt for Osama bin Laden,in a fresh blow to the battered relationsbetween the two states.

Airbus shelves production riseAirbus has shelved a plan to boost outputof its popular A320 single-aisle jetliner, asign that global uncertainties are startingto affect the otherwise resilientaeronautic industry.

Putin mixed on privatisationVladimir Putin has called for the sale ofstakes in OAO Rosneft and OAO Gazpromin 2013-2015, but also authorised anotherstate firm to buy shares in energy firmspreviously earmarked for private buyers.

WHAT THE OTHER PAPERS SAY THIS MORNING

SPAINS fourth-largest lenderBankia is expected to today begthe state for more than 15bn(12bn) to bail it out when its newmanagement team presents arestructuring plan

The help needed to clean upthe bank will be more than15bn, a source told Reuters lastnight.

The bill is almost double theestimation of Spains financeminister Luis De Guindos, who

just 24 hours earlier toldparliament that Bankia needed aninjection of at least 9bn.

The money will be used to coverthe banks writedowns on lossesconnected to real estate assetssuch as soured property loans.

The 15bn would come on top ofthe 4.5bn in state loans that the

government converted into equityin Bankias parent company BFAas part of the state takeover, givingthe government a majority stakein the lender.

The Bank of Spain, the countryscentral bank, has been trying toforce its banks to deal with theirlegacy of bad real estate loans formonths.

There are concerns thatexpensive bailouts of ailinglenders and regions could forcethe country into seekinginternational aid.

Bankia bailout

bill soars againto over 15bn

Jeremy Hunt faces calls to quit after details emerged of his aides contact with News Corp

2 NEWS

BY KATIE HOPE

To contact the newsdesk email [email protected]

AN ideas factory: that was the

best way to describe City A.M.sextraordinarily well-attendedinvestment conference, held

yesterday. The Eurozone was at thetop of everybodys agenda. Evenbefore the news last night that t heGreek far-left party Syriza had hit 30

per cent in the opinion polls, most ofthe speakers were only divided aboutwhen, not if, Greece would be leavingthe euro. For the first time since thesingle currency was launched, thenon-conformist, minority view is thatthe Eurozone will remain intact themainstream opinion is now that atleast two countries will leave Greeceand Cyprus.The exact timing of a Grexit remains

unclear Im convinced it will hap-pen much faster than most peoplerealise, other speakers yesterday dis-agreed but it all hinges on next

EDITORSLETTER

ALLISTER HEATH

Eurozone crisis moves ever closer as Greek left gains ground

FRIDAY 25 MAY 2012

months election. If the pro-austerityparties pull off a surprise victory,then the crisis could be delayed ifnot, it will come to a head very quick-ly. In an interview with Channel Fourlast night, Syrizas leader AlexisTsipras confirmed yet again that he isutterly deluded about Germanys bar-gaining position. He rejects austerityand even an internal devaluation; yethe believes that Angela Merkel isbluffing and that she will blink firstin a showdown with Greece because

she would have too much to lose froma Eurozone break-up and the risk ofcontagion. He even likened it to a coldwar and claimed that neither sidewill dare activate their nuclearweapons in other words, that he canreject austerity, stay in the euro,thumb his nose at the Eurozone and

yet continue to pocket free money.The problem for Tsipras is thatGermany and its allies are not bluff-ing. They cant afford to see Greeceget away with openly defying themand not suffering any consequences.His gamble is bound to fail and spec-tacularly so, unless of course he isplaying a double-game and actuallywants to leave the single currency. Hewill refuse to play ball and they willcut off the cash, which will run out inJuly. Tsipras, who believes that auster-ity cannot be implemented in Greece,will end up presiding over far more

It will also fuel the growing trendtowards distance learning, which isoften free and provided by top univer-sities, a development which couldhave huge implications over the nextfew decades. Another interestingchange is that the price of photo-voltaics, the panels that turn solar

radiation into electricity, is tumbling,partly because massive demand fromChina has created economies of scaleand breakthroughs in their produc-tion. Solar energy is thus becomingmuch more viable; the question, ofcourse, is how much electricity as ashare of total demand can viably begenerated in this way. The Eurozoneis in crisis but technology continuesto power ahead, the one ray of light inan otherwise bleak world.

austerity than anybody could havepossibly imagined immediatelyafter the uncontrolled default, bank-ing collapse, euro exit and socialchaos. Assuming he is then removedfrom office, and replaced by a rela-tively centrist government, Greecewould eventually bounce back, with

its new drachma making the countrycompetitive again for tourism.But not all of the ideas discussed yes-

terday were about the Eurozone. TimGuinness, the veteran City fund man-ager, rightly highlighted some of thegame changers that could have ahuge impact on business and theworld over the next few years. Onewas the spread of fibre-optics andultra-fast broadband, which will her-ald huge behavioural shifts, a revolu-tion in the availability ofdownloadable video content and afurther growth in videoconferencing.

line that this represents a substantialchange of control.... We all know Sky iscontrolled by News Corp anyway.Yesterday a Number 10 spokesman

said Hunts note was consistent withpublic comments he made at the time.

It also makes clear that it would betotally wrong for the Government toget involved in a competition issuewhich has to be decided at armslength. The PM has made clearthroughout that he recused himselffrom decisions relating to BSkyB anddid not seek to influence the process.The revelations came as Hunts for-

mer aide Adam Smith, who resignedafter exchanging hundreds of texts,calls and emails with News Corp lobby-ist Fred Michel, said his role involvedmanaging relationships.

Smith said, however, he had no con-tacts with those who were againstMurdochs bid and told the inquiry hedid not believe this was a problem.When asked about the issue yester-

day Camerons spokesman repeatedlydodged questions on whether Huntcould have misled parliament during astatement he gave about his contactswith News Corp.

The new jobs website for London professionalsCITYAMCAREERS.com

Hunt backed BSkyB dealbefore he judged the bid

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phone calls

emails* between June 2010 and July 2011

BY PETER EDWARDS

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GETTY

THE ECONOMY contracted moresharply that first thought in the open-ing quarter of the year, official figuresshowed yesterday, increasing pressureon the government to change coursein an effort to boost growth.The updated GDP estimates revealed

the economy contracted 0.3 per centin the first quarter, not the 0.2 percent shown in the Office for NationalStatistics (ONS) initial estimate.That leaves the economy 0.1 per cent

smaller than it was in the first quarterof 2011.

Opposition leaders called for taxcuts and spending increases to stimu-late demand and raise employment.

However, economists warned thefigures showed government spendingincreased 1.6 per cent in the quarter,and said the recession is due to theprivate sector resolving long-termproblems. After more than a decadeof dependency on private borrowingand public spending, huge swathes of

the economy are incapable ofgrowth, said Tullett Prebons TimMorgan.

Construction output dropped 4.8per cent in the quarter, more than the

UK recession isworse than wasfirst thought

BY TIM WALLACE three per cent first published, while atrade deficit of 4.4bn shaved another0.1 per cent off total GDP.

Services growth remainedunchanged overall at 0.1 per cent,although finance and insurance activ-ity dropped 0.8 per cent.Manufacturing output was flat.The disappointing data did not dent

demand for UK bonds however. Theyield on benchmark 10-year UK bondsdipped as low as 1.738 per cent duringtrading yesterday, before rising to 1.77per cent as investors continued toshun debt from the troubledEurozone countries. Yields on 10-yearGerman gilts also fell to a record lowof 1.35 per cent, before rising to 1.39per cent.

Excessive regulation may havestunted credit, says Bank officialREGULATORS may have thwarted

the supply of credit to the economyby reacting too sharply in the wakeof the financial crisis, a senior Bankof England official said yesterday.

Alastair Clark, who sits on theBanks new super-regulator, theFinancial Policy Committee (FPC),said that there was a danger instrangling the sector with excessivecaution.

My own view is that, in ourinternational regulatory initiatives,

BY JULIAN HARRIS we may inadvertently have endedup front-loading the regulatoryresponse more than was intended,

Clark told a group of businesseconomists in London.He said that authorities are aware

of the risk of regulators erring onthe side of excessive caution.

Clark pointed out that the FPChas been tasked with acting in away that does not have asignificant adverse effect on thecapacity of the financial sector tocontribute to the growth of the UKeconomy.

The FPC is in the process ofdeciding which powers it should beable to impose on financial sector

companies; its recommendationswill need to be passed inWestminster, yet it will also be ableto issue instructions to other newregulators.

Clark warned that there isrelatively little empirical evidenceon the effect that many of thesuggested tools could have onfinancial stability, admitting thathe is sceptical of some quantitativeanalyses of how they might work.

Chancellor George Osborne had hoped the economy would be growing strongly by now

UK GDP fell again in the first quarter of 2012

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A SENIOR judge said yesterday theSerious Fraud Office had failed toset out a rather simple caseclearly during an investigation intothe Tchenguiz brothers and calledfor better funding for the agency.

Judge John Thomas, who has

already slated the agency for sheerincompetence in the case linked to

Tchenguiz judge says fraudagency needs more funding

BY CITY A.M. REPORTERthe collapse of Iceland's Kaupthing

bank in 2008, told the High Courtthe agency had no excuse for its

bungled investigation.There cant be any excuse for

that (not setting out facts clearly) ...This is the story of almost anyone

who gets themselves in a wrongposition in the markets, he said,

while also calling for the office tobe properly financed.

FRIDAY 25 MAY 20123NEWScityam.com

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THE EUROZONES downturn hasnow hit Germany, influential surveydata showed yesterday, leading econ-omists to forecast a fall in GDP thisquarter for the single currency area.

Services activity in the Eurozonedropped sharply according toMarkits purchasing managersindex (PMI) which came in at 46.5 inMay, a seven-month low and wellbelow the no change level of 50.

Manufacturing PMI slumped to a35-month low of 45, from 45.9 inApril, also showing a deep slump inactivity.Those combined to give a compos-

ite index of 45.9, also a 35-monthlow, down from 46.7 in April.

Germanys private sector returnedto contraction with a PMI of 49.6,down from Aprils 50.5, composed ofa manufacturing figure of 45 andsome services growth at 52.2.The countrys decline was also

recorded by the Ifos investor confi-dence survey which fell sharply from

Germany feelsthe squeeze asoutput declines

BY TIM WALLACE 109.9 in April to 106.9 this month.Meanwhile Frances private sector

output fell at its sharpest rate forover three years, with a headline PMIof 44.7, down from 45.9 in April.

After narrowly escaping a returnto recession in the first quarter, itnow appears very likely that theEurozone economy will experience arenewed contraction in the secondquarter, said Capital EconomicsJennifer McKeown.

It seems clear that policymakerslatest efforts to strengthen growth inthe region are too little too late.

BBVA signals retreat from LatinAmerican pensions businessesONE of Spains largest lenders,

BBVA, has announced plans tooffload its South Americanpensions business in the latestsign of European banks retreatfrom foreign markets.

BBVA said it has decided toinitiate strategic review of twobusinesses, one that operates inChile, Peru and Colombia andanother targeting just Mexico.

The bank said that it will beseeking buyers and if it does not

BY JULIET SAMUEL find any, will simply close thebusinesses.

Despite this being a highly

attractive business, its limitedrelationship with BBVAs corebusiness, the universal bankingactivity, advises the initiation ofthis process, the bank said.

It said the process would takeseveral quarters and will not becompleted by the end of this year.

BBVA also said that it willotherwise continue to expand ininsurance and banking in LatinAmerica.

The move highlights howwestern European lenders arebeing forced to ditch profitable

enterprises as t hey overhaul theirbusiness models.Rather than pursuing the

unbridled expansion seen beforethe 2008 crisis, banks are shuttingdown and selling dozens ofoperations outside their homemarkets often because newregulations make them non-viablebut also because they can make theoverall group too unwieldy andunfocused.

CREDIT rating agency Moodys lastnight downgraded the long-term

debt and deposit ratings for threeSwedish banks: Nordea, SvenskaHandelsbanken and Landshypotek.

Moodys blamed the banks highreliance on wholesale funding,modest profitability and risks toasset quality due to the EU export-oriented Swedish economy for themove.

However, Moodys emphasisedthat the Swedish banks creditratings remained at the higher endof the range in Western Europe.

This relative positioningreflects Moodys view that Swedish

banks are overall in a strongerposition than their European peersto manage the credit risksemanating from the challenging

Moodys cuts its ratingson three Swedish banks

BY KATIE HOPE European operating environment,limiting the extent and scope oftodays rating actions, the agencysaid.

The move follows Moodysdowngrade last week of 16 Spanishbanks.

There is concern the changescould raise the banks borrowingcosts although analysts believeSwedish banks will continue toperform better relative toEuropean peers.

Most banks in the Nordic regionhave little to no exposure to crisis-hit countries in southern Europe,and have had continuous access tofunding markets.

High capital buffers and movesto extend their funding durationhave made Nordic banks attractiveto investors seeking a haven fromthe debt storm.

THE EUROPEAN Central Bank (ECB)may slash interest rates and pumpmore cheap cash into banks inresponse to the economicslowdown, JP Morgan forecast

yesterday.As the ECB had previously hoped

the economy would be recoveredby now, analysts believe that it mayresort to another one-year long-term refinancing operation (LTRO)in July to maintain liquidity, or cutthe main refinancing rate byanother 25 basis points inSeptember.

Of course, should stresses buildin financial markets, the ECB

JP Morgan says ECB ready to actBY TIM WALLACE

FRIDAY 25 MAY 20124 NEWS cityam.com

Eurozone economic activity fell again in May

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would respond much moreaggressively, said the forecast.

In that case further 3-yearLTROs and a reactivation of thesecurities market programme

would come back into play, andfurther interest rate changes couldnot be ruled out either.

Meanwhile the ECB revealedbanks took almost 4bn (3.2bn) ofovernight loans from it yesterday,the highest since the Greek debtrestructuring fuelled a jump inmid-March and dovetailing withGreek banks being cut off frommainstream ECB funding.

Use of the emergency window

costs banks an extra 0.75 basispoints over normal facilities.

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CONSUMER groups and politiciansyesterday joined the debate on bankfees following claims by a top Bank ofEngland official that free currentaccounts are a dangerous myth.Andrew Bailey, the Banks execu-

tive director and chief executive-electof the new banking regulator thePrudential Regulatory Authority,said the lack of clarity on currentaccount fees may have encouragedthe mis-selling of products such aspayment protection insurance andthat consumers would find it easierto compare products if monthlyfees were introduced.

The reform of retailbanking in this countrycannot move ahead unlesswe tackle the issue of freein-credit banking, andhave a much better senseof what we are paying forand how we are paying, headded.Andrew Tyrie MP, chair-

Debate rages

over call to endfree bankingBY JAMES WATERSON man of the Treasury Select

Committee, told City A.M. that wecannot carry on as we are and regu-lators must enable the banks to dealwith this on a collective basis.

It cannot be right that millions ofaccount holders have no idea howmuch their bank is really chargingthem, therefore we will be pressingthe regulators to make sure they turnwords into action, he said.

Richard Lloyd of consumer groupWhich said consumers already payover 9bn a year in fees and lostinterest on current accounts but theidea that if banks charged more, theywould stop trying to mis-sell other

financial products is completelyunfounded.

Chris Leslie, Labours shad-ow financial secretary to the

Treasury, said the reformscould punish ordinary savers:Hard working people will beextremely concerned at theprospect of having to pay

around 15 per month forbasic deposit, cheque

and transactionalservices.

Dexia sells its Turkishlender to SberbankBAILED-OUT Belgian lender Dexia

is close to selling its Turkishbusiness to Russias Sberbank, thebank said yesterday.

It is understood that Sberbank,which is being advised byRothschild, is likely to paysomewhere between $3bn (1.9bn)and $4bn for Denizbank, one ofTurkeys biggest banks.

Qatar National Bank had alsobeen in the running to buy thebusiness, which was also

BY JULIET SAMUEL examined by HSBC earlier this year,but Sberbank is now close tosealing the deal.

The acquisition would beSberbanks second major deal sincelast September, when it agreed tobuy the international operations ofAustrian lender Volksbank for505m, giving it a presence in nineEastern European countries.

Senior bankers say that theretrenchment of many westernEuropean lenders has left the fieldrelatively clear, with one calling ita buyers market for banks.

GREECES radical leftparty, led by AlexisTsipras (pictured), lastnight emerged as thefront-runner in the raceto win next monthselections. Syriza, whichopposes Greecesausterity measures, nowhas 30 per cent of thevote, outpacing

conservative rival NewDemocracy by 26 percent, according to thePublic Issue pollingcompany. Greece faces asecond round ofelections on 17 June,after an inconclusivevote earlier this monthleft the country withouta stable government.

ANTI-AUSTERITY PARTY IS GREEK FRONT-RUNNER

Andrew Bailey says freebanking is a myth

DEUTSCHE Bank has bid farewellto a second banker who led itsadvisory team on G4Ss ill-fatedattempt to buy rival ISS.

Anthony Parsons has left the

bank following his move to a vicechairman role last summer thatcame shortly before he led a teamadvising security giant G4S in a

botched takeover attempt of ISS.G4S ditched Deutsche as a brokerfollowing the deal.

Toby Clark, who led on the dealwith Parsons, had already leftDeutsche. It is believed thatParsons is going to US investment

bank Greenhill.

G4S bankerquits Deutsche

BY JULIET SAMUEL

DEBATE: Page 21


QHow many personal current accounts arethere in Britain?AThere are over 70m personalcurrent accounts serving around90 per cent of the population. Themajority of them are free to use.

QHow unusual is it to have easy access tofree current accounts?ABritain is almost unique in havingfree current accounts as standard.In most other countries consumersexpect to pay either a flat monthlyfee or costs according to the numberof transactions that they make.

QWhy do some people oppose theprovision of free current accounts?AThey claim it distorts the marketas banks seek to profit fromhidden fees and encourages mis-selling of other products. They also

say it makes it hardfor consumers tocompare services.

QHow much do banks makefrom private current accounts?AFor competition reasons fewbanks are willing to revealearnings from current accounts. Butin 2006 the Office of Fair Tradingsaid the sector had revenues of8.3bn 150pa per active account.

QHow do banks earn money from personalcurrent accounts at the moment?AMost current account revenuecomes from interest on balancesand overdraft fees. But the FSAestimates 14m Britons already pay amonthly fee for a current account

package, which may includebenefits such as insurance.

QAandHow does the British system work?

VISIT YOUR LOCAL STORE

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TIFFANY yesterday cut its full-year global net sales growth forecast to a range of seven toeight per cent from a prior outlook of 10 per cent. Earnings were $81.5m or 64 cents pershare, up from $81.1m, or 63 cents per share, a year earlier, but five cents below analystsexpectations. The chains weakest London store was the one in the citys financial district.

TIFFANY CUTS FORECAST AS SALES SLOW

ROYAL Bank of Canadas (RBC)quarterly profit fell seven per centas the company took a C$202m(125.4m) loss from its acquisition

of the 50 per cent of its jointventure with Franco-Belgian lenderDexia that it did not already own.

RBC, Canadas largest bank, saidnet income from continuingoperations was C$1.56bn, or C$1.01a share, in the second quarterended 30 April, compared withC$1.68bn, or C$1.10 a share, a year-earlier. That excluded results fromRBCs US retail bank, which itagreed to sell last year.

RBC profit slipson M&A loss

BY CITY A.M. REPORTER


MasterCard loses EUcard fees court caseMASTERCARD has said it will

appeal an EU court ruling thatupholds Brussels ban on extra feesfor cross-border card transactions.

MasterCards president inEurope Javier Perez said that theruling would hinder itsdevelopment of new paymenttechnologies.

Retailers, who benefit fromlower fees as a result of the EUban, welcomed the decision by theGeneral Court of Luxembourg

BY JULIET SAMUEL the EUs second highest court afterthe European Court of Justice (ECJ).

The British Retail Consortium

said that the UK, where regulatorsare currently looking into cardfees, should also cap fees that cardproviders charge for givingretailers the ability to accept cardpayment, claiming they are anunjustifiable tax on customers andretailers.

But MasterCard argues that if itcannot charge retailers what itwants, it will have to chargeconsumers more instead.

TAX-FREE shopping specialist GlobalBlue has been sold by its private equi-ty owner to buyout firms Silver Lakeand Partners Group for 1bn (802m).

Global Blue has trebled in valuesince Equistone Partners bought thefirm from management in 2007, andthe sale will help the current ownerreturn cash to its investors.

Partners Group and tech-focusedSilver Lake beat a handful of otherbuyout groups including BC Partners,EQT and TH Lee to buy the fast-grow-ing business.

Swiss-based Global Blue, whichhelps European shoppers claim backtax on overseas purchases, offers itsservices in more than 270,000 shopsworldwide.

Chief executive Per Setterberg yes-

BY MARION DAKERSterday thanked Equistone for itstremendous support and said heexpects to see further long-termgrowth as the firm expands into newregions.

Marcel Erni, chief investment officerof new co-owner Partners Group, saidof the deal in a statement: We willleverage our global industry networkto support Global Blue to further ben-efit from the fast growing travel activ-ity and demand for luxury goods fromemerging markets.

Equistone, which was spun out fromBarclays last year, said this latest dis-posal means it has now handed 60 percent of the cash in its Fund III back toinvestors.The2.4bn fund has made 38 acqui-

sitions and eight disposals since it wasput together in 2007, while still part ofBarclays Private Equity.

Equistones sale of Global Blue has beenbilled as one of the largest private equity-backed leveraged buyouts in Europe thisyear and a formidable team of bankers andlawyers were on board to ensure its success.The vendor took on JP Morgan and Evercoreto advise on the sale. JPMs team includeshead of the EMEA private equity exit busi-ness Eamon Brabazon, executive directorDavid Harvey-Evers and head of softwareAnil Rachwani.On Evercores side, European investmentbanking head Andrew Sibbald and MarkHennessy, managing director of Europeanfinancial institutions, led the team.

Long-standing legal adviser Clifford Chance

ADVISERS EQUISTONES SALE OF GLOBAL BLUE

DAVID WALKERCLIFFORD CHANCE

also lent a hand, led by head of private equi-ty David Walker (top left) alongside AndrewMills, Ross Dawson and Charlotte Clarke.Marlborough Partners, led by JonathanGuise, provided debt advice.Global Blues management, which werebought out of the firm in 2007, were advisedby Smith Square and Baker & McKenzie dur-ing the deal. Bakers team was led by DavidAllen (top right), a private equity partnerspecialising in cross-border restructuringsand buyouts. Acting for buyers Silver Lakeand Partners Group were RBC CapitalMarkets and law firm Weil Gotshal &Manges.

by Anaam Raza & Marion Dakers

DAVID ALLENBAKER & MCKENZIE

Equistone getsrid of GlobalBlue for 1bn

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Harriet Green has been appointed as the new chief executive of Thomas Cook

I think yes, but only if itgets the balance right. It

needs to follow the lead set by otherpeople, because it has a great brandname but the internet seems to pro-vide the more cheap and cheerfuloption. It can build on it by provid-ing the great quality that it alwaysdoes and offer competitive priceslike others.

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

JONATHAN WALTONDALTON WARNER DAVIS

CAN THOMAS COOK REINVENT ITSELF? Interviews by Anaam RazaCITYVIEWS

Thomas Cook Group PLC

24 May18 May 21 May 22 May 23 May

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PRIVATE equity firm CVC CapitalPartners will cut its ownershipstake in Formula One to about 30per cent following the companysinitial public offering (IPO), byselling shares on the publicmarket, sources said yesterday.

CVC currently holds about 42per cent of Formula One after itrecently sold a $1.6bn stake to a

group of investors, includinginvestment managers BlackRock.

And both Lehman and JPMorgan

are expected to sell most of theirstakes in the IPO, two sources said.

CVC to cut F1stake to 30pc


BT chief executive Ian Livingstontook home 7.9m last year, includinga 1.34m cash bonus and deferredshares worth 481,000.

The BT boss earnt 240,000towards his pension and expenses,and pocketed a 925,000 salary,which will not be raised next year.

Livingston will also get 4.7mfrom BTs 90m payout as part of itsthree year turnaround plan.

A BT spokesperson said, Seniorexecutives are being rewarded

appropriately given the strongperformance of [BT] this year.

BT boss earns7.9m packet

BY LAUREN DAVIDSON


THOMAS COOK has named PremierFarnell boss Harriet Green as its newchief executive, ending a nine-monthsearch for Manny Fontenla-Novoassuccessor after a string of profit warn-ings sparked his departure last year.

Green, who has been at the helm ofthe FTSE-250 electronic parts distribu-tor since 2006, will take over fromSam Weihagen, Thomas Cooks inter-im chief executive, on 30 July.Weihagen will stay on at the firm

until September before retiring, toensure a smooth transition.

Shares in the debt-laden tour opera-tor, which recently agreed a 1.4bnrefinancing package with its lenders,jumped almost 10 per cent yesterdayas investors welcomed the news.Whilst a newcomer to the travel

industry, analysts said yesterday thatGreens experience turning aroundPremier Farnells operations, whichhave also faced tough market condi-tions of late, will be invaluable.

It was important for Thomas Cookto get someone known to the City,and with experience of fixing a com-plex, underperforming group. And ithas managed to accomplish that,Douglas McNeill, an analyst withCharles Stanley, said.

Thomas Cook

names HarrietGreen as chiefBY KASMIRA JEFFORD

Frank Meysman, chairman, saidGreen is an extremely successful exec-utive with the right combination ofinternational, business transforma-tion and ecommerce experience thatwe need to take the group forward.

Green graduated with a degree inmedieval history and a masters in eco-nomics and political science beforeembarking on a career in engineering.

One of the FTSE-250s 10 female chiefexecutives, Green is also a non-execu-tive director at BAE systems and adirector at US firm Emerson Electric.In 2010, she was awarded an OBE forservices to the electronics industry.

Earlier this month, Thomas Cooksaid former Kwik-Fit finance bossMichael Healy will replace PaulHollingworth as finance chief in July.

Im not sure, because I usedto book my holidays through

Thomas Cook when I was youngerbut not anymore. I really dont knowanybody that books holidays in thetraditional way anymore not evenfamilies. I book my holidays onlinenow. Perhaps there would be achance to go back to it if it reinventeditself.

JOANNA BONOMINIBARCLAYS

It could reinvent itself if itmoved its entire business

online, because the younger genera-tion are savvy travellers. To be hon-est, I have never walked into any touroperators shop to book my holiday.The only people I know who booktheir holidays via travel agents aremy mum and dad, who live in Kenya.

VISHAL SHAHBELLIS JONES

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MOTHERCARE revealed the details ofan ambitious three-year plan aimedat reviving its struggling UK businessyesterday, as the baby products retail-er slumped to a 103m loss.

Shares rose more than 23 per centafter Simon Calver, who joined inApril from online movie rental firmLovefilm, pledged to be ruthless oncosts and bring its UK business backto acceptable levels of profit by2015.As well as scaling back its UK estate

from 311 to 200 stores, the groupplans to cut head-office payroll costsby 16 per cent and introduce a

greater range of products at differ-ent, more competitive, price points.

Calver conceded that the retailerwas being squeezed in the middlefrom high end specialist retailers onthe one side and supermarkets offer-ing cheaper prices on the other.

Pricing has been at the heart ofthe problem, he said. Customers

Mothercare toslash prices to

boost UK salesBY KASMIRA JEFFORD are telling us that we are a well trust-ed, well respected brandbut weneed to prove our value perception.

Clothing prices will be cut byaround 10 per cent from the autumn.

His comments came as the groupposted a six per cent fall in UK like-for-like sales to 560m in the year to 31March. After a one-off charge of104m, due in part to an EarlyLearning Centre writedown,Mothercares pre-tax losses came to103m from an 8.8m profit last year.

IN BRIEFEarly exit for Carrefour bossn France's Carrefour sped up itstransition to new managementyesterday, saying that Lars Olofssonhad retired at a board meeting, pavingthe way for Georges Plassat to takeover as chief executive immediately.The retail veteran, who joined

Carrefour on 2 April as chief operatingofficer, is tasked with reviving thestruggling retailer. He was due tobecome chief executive on 18 June.Analysts expect Plassat to wait at leastuntil June and more likely until first-half results in August before disclosinghis strategy for Carrefour.

Swiss Re insures against longevityn Dutch paint firm Akzo Nobel hassigned a 1.4bn deal with insurer Swiss

Re to cover the risk of increasedpension costs if its UK employees livelonger than expected. The agreementcovers 17,000 individuals in a definedbenefit pension plan that promises afixed sum for every year the holderremains alive.

Qinetiq warns of US election delaysn British defence technology companyQinetiq yesterday posted a three percent rise in full-year profit, helped bythe benefits of a restructuringprogramme, but said the current yearcould be hit by contract delays ca usedby the US Presidential elections. Thefirm posted an underlying pre-taxprofit of 118.3m for the year to the endof March, helped by a strongperformance from its UK servicesbusiness.

Mothercare PLC


160

170

180

190

200

210 p 203.2524 May

NICK Robertson, the co-founderand chief executive of Asos, has

been awarded almost 25m worthof shares after the online fashion

retailer reported a near doublingof profits and strong overseas

growth.Seven executives at the company

have pocketed 66m in sharesafter reaching all of the targets setout in a three-year incentive plan.

The internet shopping site fortwenty-somethings enjoyed a near-

Asos boss receives 25m sharesbonus as retailer profits double

BY KASMIRA JEFFORD ten per cent rise in sharesyesterday as it posted a 43 per centjump in profits to 40.9m in theyear to 31 March, benefitting fromthe launch of country specificsites in Australia, Spain and Italy

and the opening of new, largerwarehouse in Barnsley last year.

Robertson, however, was bearishon prospects for growth in the UK,reporting a seven per cent rise inretail sales compared with 103 percent in overseas sales, which nowaccount for 59 per cent of salesfrom 43 per cent last year.

BOOKER Group, Britains biggestcash and carry wholesaler, said itremains on course to meet itsexpectations for the year despite achallenging economy as it posted a

27 per cent rise in full-year profit.The company, which has over170 branches that supplyconvenience stores, restaurants,pubs, schools and prisons, saidpre-tax profits increased to 90.8min the 53 weeks to 30 March onsales up nine per cent to 3.93bn.

Booker bullishas beats slump

BY A CITY A.M REPORTER

MOSS BROS shares rose two per centyesterday after the menswear brandsaid revamped stores helped drivelike-for-likes sales up by 8.9 per cent.

The suits specialist said total salesfor the first 16 weeks to 19 May rose7.9 per cent compared to last year,despite tougher market conditions.

It recently reopened its RegentStreet and Bicester Village outletsafter refitting them and hasselected ten more stores that itwants to give a face-lift.

Revamp drivesMoss Bros lift

BY ANAAM RAZA


Nick Robertson, who co-founded Asos in 2000, will be awarded 24.4m in shares

7%52weeks

to31March2012

0.3%52weeksto31March 2012

12%15weeksto17Ma

y2012

53 weeks to31 March2012

8.9%16weeksto19 May2012

HOW THE HIGH STREET IS FARING SO FAR

1.8%19weeks to

12 May 2012

0.8%52weeksto31March

*all sales figures are like-for-like in the UK

REX

6.2%

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Traders put thefizz into greatCity A.M. event

L A U R A L E A N / C I T Y A M

Got A Story? [email protected]

11cityam.com

cityam.com/the-capitalist

FRIDAY 25 MAY 2012

ACTIVETRADER

CONFERENCEAT THE

CityA.M.seditorAllister Heathi

ntroduces the day

Masters of forex debate the future of the euro

LexvanDamlaysouthisfive tipsfortradingsuccess

THE mood was sparkling lastnight at the champagnereception rounding off ActiveTrader 2012 City A.M.s first

trading and investment conference.The one-day event saw 700 delegatesfill the rooms at the Grange HotelTower Bridge to hear from a unique

slate of speakers. City gurus GaryBaker of Bank of America MerrillLynch and Tim Guinness of

Guinness Asset Management rubbedshoulders with speakers from theUS and further afield. City A.M.seditor Allister Heath and starinvestor Richard Farleigh openedthe day, with Lex van Dam, host ofthe BBCs Million Dollar Traders,beginning the afternoon session.

The event was sponsored by IGIndex, with FXCM sponsoring theevening reception.

Gary Baker giveshis insightinto European equities

Tim Guinness explores globalinvestment trends

David Jones, chief market strategistforIG Index, talks CFDsAllister Heath, David Kuo, Paul Staines (Guido Fawkes) and Steve Sedgwick of CNBCEmilio Tomasini reveals the power of algo trading

THECAPITALIST

Delegates celebrate after a long and instructive day Richard Farleigh, former hedge fund trader and TV Dragon, shares his trading secrets

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SABMiller PLC

24May18May 21May 22May 23May

2,380

2,400

2,420

2,440

2,460

2,480 p

2,391.0024 May

BRITISH soft drinks maker anddistributor Britvics half-year profitfell more than 10 per cent, hurt by adrop in sales and average realisedprice in Ireland.

Pre-tax profit for the 28 weeks to15 April fell to 24.8m from 27.7m ayear ago.

Revenues climbed 1.7 per cent to641.1m, but sales in Ireland fell 10per cent to 72.7m, with averagerevenue per litre sold declining 7.5per cent to 53.4p.

Britvic owns Robinsons and Tango.

Ireland drivesdown Britvic



A STRONG performance from DairyCrests cheese and spread brandsCathedral City and St Hubert helpedsmooth out a rough year for thecompanys milk business.

Dairy Crest reported its firstannual loss as a listed company,taking an impairment charge of81.7m for the writedown of thevalue of its dairies business and theclosure of two bottling factories.

Its loss before tax for the yearended 31 March was 10.1m

Milk chargespull Dairy Crestinto the red


KEEN drinkers in emerging marketshave boosted the worlds second-largest brewer SABMillers profits by75 per cent to $4.2bn (2.68bn).The annual results, which include a

one-off gain from the sale ofSABMillers Russian and Ukrainianoperations, saw revenues grow by 11per cent to $31.38bn and pre-tax prof-its climb 55 per cent to $5.6bn.The financial results were driven by

strong trading in the emerging mar-kets as conditions in Europe contin-ued to decline.

Lower volumes and higher raw

material costs dragged earnings inEurope down by nine per cent to$836m.Asia Pacific and Africa saw the

biggest growth, increasing income by30 per cent and 16 per cent respective-ly to $321m and 743m.

But Latin America remainedSABMillers largest income driver,growing sales by 14 per cent to$1.86bn.The drinks company said this

reflected a combination of higher vol-

Asian demandfor beer boosts

SABMiller profitBY LAUREN DAVIDSON umes, selective price increases and

manufacturing efficiencies.But amid difficult conditions in

Europe, the UK held its head high.Miller Brands, its UK subsidiary, sawan eight per cent lager growth com-pared to a 2.8 per cent market decline.

Miller Brands managing directorGary Haigh told City A.M., Our bestperforming beers were Peroni, PilsnerUrquell and Kozel, which all grew bydouble digits during the year.

World Beers and Specialities aredoing particularly well, which reflectslife in general weve become morediscerning about our wine, our fash-ion, our food and also our beers.

PUB chain Youngs yesterdayposted revenue growth of 25 percent following the integration of

Geronimo, the inns group it boughtin late 2010.

Revenues surged to 179m,boosting adjusted operating profitby a fifth to 26.2m and drivingadjusted pre-tax profits up by 17.4per cent to 21.3m.

But Youngs fell to a 7.5m pre-tax loss due to a 29.1mexceptional charge relating to the

groups revaluation procedure,which resulted in a 174m netuplift to the value of its estate.

Geronimo acquisition helpsrevenue growth at Youngs

BY LAUREN DAVIDSON Its been a landmark year forus, Youngs chief executive SteveGoodyear told City A.M. Wevecompleted our transformation to apure pub company after leaving

our brewing venture.After a rocky start to the new

year, which has seen like-for-likesales drop due to dismal weather,the British pub company has highhopes for the summer ahead.

With 14 pubs along the Thames,were certainly looking forward toJubilee weekend, Goodyear said.

Youngs is also set to benefitfrom its new pub The Cow, thenearest pub to the entrance of theOlympic site.

Chief executive Steve Goodyear led Youngs to a 17 per cent profit hike

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OIL and gas explorer Cove Energy

yesterday said that its losses werenarrowing while bidder for thecompany Shell said it wasconsidering its options.

The company reported a net lossfor the year to the end of March of$4.09m (2.6m) compared with$5.01m the previous year.

Meanwhile oil major Shell issueda statement saying it was weighingup its next move after Coverecommended the acceptance of abid from Thai energy giant PTT forthe company.

Shells offer for Cove has beenextended until 1pm on 13 June,leaving the door open for the FTSE100 company to put in a higher bidto stay in the race.

The 1.22bn bid from PTTtrumped the one made by Shell,leaving the Dutch firm mullingwhether it wants to try to outgun

PTT. Cove attracted the suitorsbecause of its gas interests inMozambique. It had previouslysupported Shells offer, whichfollowed a PTT bid that beat Shellsopening salvo in February. Cove willalso be forced to pay Shell a 11.1mbreak fee under the terms of thedeal agreed with Shell in April.

Cove narrowslosses as suitorShell re-thinks

BY JOHN DUNNE

UNITED Utilities yesterday reportedprofits which narrowly beat expecta-tions and raised its final dividend.

Britains largest listed water utility,said underlying pre-tax profit fellabout one per cent to 327m but stillbeat analysts estimates of 317.7m.

Price increases helped push salesup three per cent to 1.57bn, thecompany said in its figures coveringthe year until the end of March.

United Utilities hiked its final divi-dend to 21.34p, a rise of 6.7 per cent.That is in line with the companys

policy of a rise two per cent above thelevel of retail price index inflation.

Meanwhile the companys capitalexpenditure was 680m up 12 percent on the previous year.The firm said 154 of that was

spent on improvements to its infra-structure, including stopping leaks.

Chief executive Steve Mogford said:We have delivered another good setof results, despite the tough econom-

United Utilitiesprofits trump

expectationsBY JOHN DUNNE

ic climate. We are pleased with therecent progress we have made andbelieve there is plenty of opportunityto deliver further improvements.The company also pointed out that

it had met regulatory targets for theamount of water that it leaks.

It ended the year with 5.1bn worthof net debt.

United provides services to sevenmillion customers in the north westof England.

It also serves 700,000 businesseswith water and sewerage.

Co-op hires 3,000 toexpand legal service

BY ELIZABETH FOURNIER of the new roles would be legalstaff, with the rest going tosupport roles.

Over the next five years wewant to fundamentally change theface of legal services and makeaccess far easier todaysannouncement underlines t hatambition, said Co-ops chiefexecutive Peter Marks.

Co-operative Legal Servicescurrently runs out of Bristol andemploys just 450 staff. The firmsambition is to roll out legalservices across all of its 330 high-street branches.

United Utilities, headed by Steve Mogford (above), reported a solid performance

United Utilities Group PLC


620

625

630

635640

645 p 637.0024 May

United has broadly reassured investors. It remains on track to meet itsregulatory targets, whilst adjusted profits have materialised at the high-er end of expectations. We say the stock is a strong hold.

ANALYST VIEWS

IS UNITED UTILITIESADOPTING THE CORRECTPATH FOR GROWTH?Interviews by John Dunne

KEITH BOWMAN HARGREAVES LANSDOWN

SHARES in Cable & WirelessCommunications soared by 19 percent yesterday after the companysaid it will halve its dividend tofour cents.

CWC boss Tony Rice told CityA.M., We wanted to set thedividend at a sustainable level,capable for growth. It waspreviously set at too high a levelfor the world we are entering.

The announcement came asCWC posted an 18 per cent rise inrevenue to $2.9bn (1.85bn) asearnings grew five per cent to$901m, although profits fell bythree per cent to $326m.

CWC dividendcut to four cents

BY LAUREN DAVIDSON


The company said it is funded through to 2014 and it retains acomfortable balance sheet and funding position in our view. We

continue to see an attractive outlook for the UK water sector. Buy.

JAMES BRAND DEUTSCHE BANK

The financial position remains robust with headroom to cover projected

financing needs to 2014. United has delivered a good set of fullyear results that are broadly in line with expectations.

TINA COOK CHARLES STANLEY

With its commitment to hire3,000 staff to expand itslegal business, Co-op hascome out fighting in the

race to shake up the UKs stagnatinglegal market.

The comparatives are hardlyscientific, but top firm CliffordChance employs 3,200 legal advisersworldwide, so the Co-ops goal wouldcertainly bring it alongside the bigboys in terms of headcount. Ofcourse theres no suggestion thatnew entrants are competing with thebig firms for corporate clients thesenew businesses are aimed firmly atthe consumer end of the market but bringing a trusted brand into atraditionally closed market is still a

significant step forward. Its alsointeresting that the Co-op will offertraining contracts as part of itsexpansion, as those in particularhave been thin on the ground foreager grads in recent years. With itsexpansion plans the Co-op isbecoming a pioneer for change, andits ambition should be applauded.

BOTTOM

LINEELIZABETH FOURNIER

THE CO-Operative Group will hire3,000 people to grow its legal arm,it said yesterday, as the firmcontinues its push to become theUKs biggest provider of consumerlegal services over the next decade.

The Co-op was the first non-lawfirm to be licensed to sell legalservices in the UK, after itsapplication to become analternative business structure (ABS)was approved by regulators at theend of March.

It said yesterday that 90 per cent

Banking groups pledge shouldmake law firms sit up and think

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L A U R A L E A N / C I T Y A M

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395

400

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LONDON 2012 IMAGE OF THE WEEK

THIS week, Lord Mayor of the City of London David Wootton posedwith the 1948 Olympic torch used when London last hosted theGames. Created by Ralph Lavers to represent the best of Britishcraftsmanship, and inspired by classical architecture, the design wassuccessful enough to be used again at the 1956 Melbourne Olympics.

Between now and the start of the Olympics, City A.M.is publishing its Olym pic Image of the Week. If youhave a shot you think our readers will l ike, please

email [email protected] with IOW2012 in thesubject line. Full details: cityam.com/london-2012

IN BRIEFPorvair upbeat on full yearnFiltration specialist Porvair saidyesterday that it had started 2012 welland expects to report interim profits wellahead of 2011. It said group revenue inthe first half of 2011 was up 10 per centon the previous year while its order bookwas strong. It spent 3.4m buying PulseInstrumentation, Pell Industries and theBlock Digester business of AimLaboratories over the year.

Electrocomponents strong in UKn British electronic parts supplierElectrocomponents said its UK businesshad helped offset declines across interna-tional markets at the start of its new fiscalyear, as it posted a seven per cent rise inprofit for 2011/12. For the first sevenweeks of the year it said internationaltrading was down two per cent, while theUK grew by four per cent. Pre-tax profitwas 122.3m for the year to 31 March.

BMW fined over Swiss importsn BMW, the world's biggest premiumcarmaker, was fined yesterday for pre-venting Swiss residents from buying itscars abroad in euros after the strongSwiss franc made prices up to a quarterhigher. The Swiss CompetitionCommission fined BMW SwFr156m(104m). BMW said it plans to appealagainst the fine within the legal deadlineof one month.

BRITISH newspaper group Daily Mail& General Trust (DMGT) said yester-day that it still expects full-year earn-ings to grow, helped by an improvedsecond-half performance, after thecost of disposals, restructuring andredundancies hit its first half.

Clearly the trading environmentdoes remain somewhat challenging,particularly for our consumer busi-nesses, but these results do illustratethe progress DMGT is making, chiefexecutive Martin Morgan toldreporters.The Daily Mail said the market

share of its daily and Sunday titles

was higher in March than a year ear-lier and early indications were thatthe launch of Rupert Murdochs Sunon Sunday had little impact on themid-market Mail on Sunday.

Daily Mail firmprofits hit by

one-off costsBY HARRY BANKS The group, which prints the DailyMail and a string of regional titles,said adjusted first half pre-tax profitfell 14 per cent to 105m on revenuedown two per cent to 973m, which itattributed to a string of one-off itemswhich hit the results on a reportedbasis.

Shares in DMGT dropped by 1.4 percent to 400.1p.

ADAM & Eve, thecommunications agency behindthe much-loved John Lewisadverts, was yesterday bought byDDB, a subsidiary of Omnicom.

The 60m deal will see thecompanys four founding

partners Jon Forsyth, Ben Priest,James Murphy and DavidGolding assume senior roles at

Adam & Eve / DDB.The five year old firm has risen

Omnicom acquires ad agencybehind John Lewis campaign

BY LAUREN DAVIDSON to prominence with campaignsincluding the Fosters good calladvert and clients such as Googleand Cadburys.

Forsyth told City A.M., Wereone of the most successful startups of the last few years. Thesecret to our success? We believein bringing people together. If

you bring different peopletogether, amazing things willhappen.

Corporate financiers Cognizantadvised on the deal.

Last years popular John Lewis Christmas advert was created by Adam & Eve

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IN BRIEFChinese manufacturing slowsn Chinese manufacturing activity fellin May according to survey datapublished yesterday, leadingeconomists to forecast additionalstimulus from the government. Thesectors purchasing managers indexfell to 48.7 in May from 49.3 in April,according to initial estimates fromMarkit. Any figure below 50 shows acontraction. The output index movedto a seven-month high of 50.5 torecord very slight growth. However,new orders dropped, as did exportorders and employment level.

OECD calls for inclusive growthn Countries should make more of aneffort to create lower-skilled jobs aspart of their growth policies, the OECDand World Bank argued yesterday.Their report said encouraging job cre-ation across regions and skill levels canstrengthen growth; it recommendedimproving access to capital and finan-cial services for firms in newer sectors.

UK still nervous about borrowingnNet mortgage lending rose 1.2 percent in the year to April, according tofigures from the British Bankers

Association, accelerating from 0.8 percent growth in March. However, grossmortgage lending was below the sixmonth average, and there were fewernew borrowers alongside fewer homeowners clearing existing mortgages.And unsecured lending fell 1.6 per centin the year to April, while last monthcautious consumers poured 7.5bn intotheir cash ISAs a rise of 50 per centon a year ago.

GETTY

PUSHING hard to cut inflation maydo more harm than good, the Bankof Englands David Miles said yester-day, claiming that tighter monetarypolicy would hit incomes in the longrun.Although the Monetary Policy

Committee (MPC) is officially meantto keep consumer price inflationclose to two per cent per year, Milesargued that reducingdemand to lower infla-tion risks inflicting fur-ther damage on theeconomys potential.

Miles was the onlymember of the MPC tocall for more QE in thismonths meeting, andpointed to the UKs ongo-ing economic weaknessas the reason, despiteinflation still stand-ing at three percent.

GDP remainsfour per centbelow its

Bank officialwarns against

tighter policyBY TIM WALLACE pre-crash peak and labour productiv-

ity has fallen since the financial cri-sis, which Miles fears making worsethrough tighter policies.

Faster GDP growth is likely toincrease the speed of the recovery oflabour productivity, he told the soci-ety of business economists.

Furthermore, stronger labour pro-ductivity would pull down unitlabour costs unless it is fully matchedby higher wages. This means thatstimulating GDP growth with mone-tary policy does not have to lead tostrong inflationary pressures.

In a note, Barclays Capital com-mented on the Bank officials

speech: The justification for Milespolicy decision is interesting in ourview, as for the first time an MPC

member is arguing this strong-ly about the welfare effects

of bringing inflationdown quickly, whenthe economy is weak,BarCap said.

THE US does not need morequantitative easing (QE), a topFederal Reserve policymaker said

yesterday, reversing his previouslydovish stance.

New York Fed boss Bill Dudleysaid the economy is steadilyimproving and using up slack,limiting the need for furthersupport.

I think its hard to argue thatwe absolutely must do somethingmore in terms of the monetarypolicy front, Dudley told CNBC.

However, if downside risksfrom, say, Europe or the US fiscal

Strong US economy needs nomore QE, says Feds chief dove

BY TIM WALLACE cliff were to really intensify, then Ithink youd absolutely have toconsider further monetary policymoves.

Meanwhile new figures from the

US Labor Department showedinitial jobless claims barelychanged last week at 370,000,down 2,000 on the week.

Manufacturing data outyesterday also showed a slowdownin economic improvements, withMarkits purchasing managersindex (PMI) coming in at 53.9 inMay, down from 56 in April.

Although it represents a slowingin activity, the PMI is still firmlyabove the no change level of 50.


New York Fed boss Bill Dudley hopes the US can grow without more monetary support

The Banks David Milesfears tighter policy

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FRIDAY 25 MAY 201216

LONDON REPORT

ING Investment ManagementMark den Hollander has beenpromoted to chief risk officer,effective 1 June. He has close to20 years of experience in theinvestment managementindustry and joined ING in 2009as managing director, head ofinvestment solutions. He waspreviously chief investmentofficer at Fortis Investments andhas held senior roles at ABN AMRO Asset Management.

Freshfields Bruckhaus DeringerBarbara Keil has been appointed co-head of the law firmsgeneral industries group. She succeeds Henning Oesterhausand takes up the position alongside dispute resolutionpartner Paul Lomas. Keil has been a partner at Freshfieldssince 2001, in the corporate practice group. She was officemanaging partner of its Munich office from 2004 to 2010.

Jones DayThe law firm has announced that Dan Coppel has joined itsLondon office as a partner in its mergers and acquisitionspractice. He joins from the London office of Dewey &LeBeouf. Coppel has significant experience in investmentsin emerging markets and a particular focus on transactionsinvolving Russia and the natural resources sector.

SVM Asset ManagementThe investment boutique has appointed Alasdair Birch as aEuropean equity analyst. He joins from BNP ParibasInvestment Partners UK, where he was a junior portfoliomanager within the European mid-cap team. In his newrole, Birch will provide support to SVMs European equityand global equity teams.

Bircham Dyson BellJesper Christensen has been elected for a four year term asthe law firms new managing partner, commencing 1 June.

He joined Bircham Dyson Bell in 1996 and has led itsemployment team since 2001. Christensen served on itspartnership board from 2007 to 2011 and headed its

business services department from February 2011 to May2012.

IHSThe Nigeria-focused telecommunications infrastructureprovider has appointed Romain de Villeneuve as businessdevelopment director. He joins from Orange-FranceTelecom, where he led its group efficiency transformationprogramme.

SavillsDirk Hoenig-Ohnsorg has jo ined the European investmentteam of the real estate advisory firm. He has over 14 yearsof experience in the industry, and was previously director inthe transaction team at Pramerica Real Estate Investors.Hoenig-Ohnsorg has also held roles at Commerz Real andJones Lang LaSalle.

WHOS SWITCHING JOBS Edited by Tom Welsh

+44 (0)20 7092 0053

morganmckinley.comSPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

Wall St edgeshigher in lastminute swing

US stocks ended slightly higherin a third session marked bylate day swings yesterday, butthe Nasdaq fell after NetApp

gave a weak revenue forecast, castingdoubt on the outlook for techspending.

Major indexes were lower formuch of the session, as investorsfound little reason to buy following

three days of gains. In addition,economic figures suggested slowingdemand in both Europe and theUnited States.

However, Wall Street reversedcourse late in the session and theS&P extended its gains to a fourthstraight day.

Underscoring the vulnerability ofUS companies to events in theEurozone, data storage companyNetApp forecast revenue belowexpectations, citing uncertainty inEurope. Its shares tumbled 12 percent to $28.82.

Dow component Hewlett-Packardrose 3.3 per cent to $21.77. Thecompany said on Wednesday itwould lay off about eight per cent ofits workforce in the next couple ofyears.

Greeces future in the Eurozoneremains a primary risk for stocks. Atleast half of Eurozone governments,as well as banks and largecompanies, are making contingencyplans in case Greece decides toleave.

The Dow Jones industrial averagewas up 33.60 points, or 0.27 percent, at 12,529.75. The Standard &Poors 500 Index was up 1.82 points,or 0.14 percent, at 1,320.68. TheNasdaq Composite Index was down10.74 points, or 0.38 per cent, at2,839.38.

The S&P is up two per cent on theweek, though the market has latelyundergone late-day shifts that haveerased both losses and gains, a signof the markets skittishness.

Demand for long-lasting USmanufactured goods rose less thanexpected in April while weeklyjobless claims dipped modestly for

the week ended 19 May, governmentdata showed.The transportation sector edged

up despite a rebound in oil prices.The rise was led by airlines afterJPMorgan raised its price target onseveral carriers.

US Airwaysjumped 10.5 per centto $12.16, its highest sinceNovember 2010, and an index ofairline stocks gained 3.3 per cent.US Airways shares have more thandoubled in 2012, rising about 140per cent.

After the closing bell onWednesday, electronic traderKnight Capital Group said itsuffered a pre-tax loss of $30m to$35m on the botched Nasdaqtrading debut of social media giantFacebook and is demanding theexchange compensate that amount.

Knight Capital Group shares fell

0.5 per cent at $12.38 and Facebookshares rose 2.3 per cent to $32.72.

BRITAINS benchmark share indexrecovered yesterday from stinginglosses during the previous sessionas bargain hunters snapped up

beaten-down financial and commoditiesstocks, although traders said any rallycould prove short-lived.

The blue-chip FTSE 100 index closedup 83.64 points, or 1.6 per cent, to5,350.05 points.

It fell 2.5 per cent on Wednesday to anew 2012 closing low of 5,266.41 due topersistent fears that Greece may have toleave the Eurozone, and its rallyyesterday still left it shy of the 5,400level seen as key to triggering furtherbuying.

I see a continuation of thismomentum going into tomorrow, inthe absence of any fresh negative news,but my general bias would still be tosell into strong rallies, said HartmannCapital equities and derivatives salestrader Basil Petrides.

Franklin Templeton fund managerColin Morton agreed that underlyingfears about the debt crisis in Greece,and the impact that a Greek exit from

the euro zone could have on the globaleconomy, would limit any gains madein the coming days.

Ive moved a little bit of money offexpensive, defensive stocks and towardsmore cyclical stocks that have had abad run, said Morton.

But for the market to makesignificant progress, there has to be adramatic change in how people feeland at the moment, there is still toomuch uncertainty, he added.

Mining companyRandgoldResources topped the FTSE 100leaderboard after its shares closed upeight per cent.

Traders cited several reasons for thestocks rise, such as the fact thatdirectors had bought the company'sshares earlier in the week and arecovery in the price of gold.

They added that Randgold, whoseshares are still down 21 per cent since

the start of 2012, was tracking gains inSouth African gold miners, such as

Harmony Gold, whose shares also roseafter investors bet that their prices hadfallen too far during a recent decline inthe gold price.

Hartmann Capitals Petrides said hehad considered buying oil major BP,which also rose 3.3 per cent, butinstead bought shares in financialcompanies, which have slumped thismonth on fears of their exposure toEurope's debt crisis.

Petrides bought UK bankBarclaysand insurers Prudential andAvivayesterday, whose shares also madeground, with Prudential rising 3.4 percent.

These stocks tend to outperformwhen the market goes up. Theirdividend yields are good and they havegood quality earnings, he added.

Others were more cautious, given theuncertain outlook for markets ahead ofa 17 June election in Greece, wherevoters have rejected austerity measuresimposed on it by the European Unionand International Monetary Fund in anearlier bailout deal.

Its still a risk-off market, said

Charlotte Square fund managerAmanda Forsyth, who has remainedunderweight on equities andoverweight in cash, with safe-havenasset classes such as the US dollar, USTreasury and German bund all havingrisen in recent weeks.

Outside the top flight, Mothercaresoared 24 per cent after it unveiledbetter than expected results a toughcost-cutting plan.

FTSE enjoys some breathing spaceas bargain-hunters prompt gains

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THE Olympic flame is makingits way around the length andbreadth of Britain, a vividsymbol of one of the key valuesof the ancient Games: freedom

of movement. Before the games atOlympia, a truce was declared so thatofficials and athletes could maketheir way to the Games withouthindrance or legal dispute. Its anapproach we still need today and itsa shame that one of the moretangible forms in which its spiritlives on doesnt get more attention:the legal relaxations that accompanythe modern Games.

In modern times, the anti-waraspect of the Olympic truce has beenemphasised instead. Its true there

was a restriction on military clashes

THERE is almost no economicproblem for which there is notat least one precedent.Examining precedents can helpguide policy makers and their

advisers if they are willing to look.But policy makers trying to deal withthe euro crisis have not takenadvantage of this opportunity.

Many currency unions have beenformed in the past. Some have sur-vived, while others have not. What dothe ones that survived including

those which collapsed not due to eco-nomic stress, but the stresses of war have in common?The best example to use in answer-

ing that question is at first glance asurprising one it is the internationalgold standard, which lasted from themid 1870s to the outbreak of the FirstWorld War, and resumed in a substan-tially modified form soon after theend of the War, finally crumbling inthe Great Depression.

That system was remarkably like theEurozone. Every country on the goldstandard linked its currency rigidly togold. No country had control over its

cityam.com/forum

A substantial

central budget iswhat the Eurozoneneeds to survive

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.

20FRIDAY 25 MAY 2012

FORREST CAPIE

money supply the basis for that wasdetermined by the world stock of gold.Most countries issued their own cur-

rency, but that was no more than thesame currency as that of any othergold standard country. Different onlyin name, for all currencies werelinked rigidly together. That prettywell describes the monetary arrange-ments of the Eurozone.

Most of the gold standard broke upunder the strains of the GreatDepression. But the US held togetheras a monetary union, as it had in pre-vious severe downturns in the 19thcentury. Its relevance may seem puz-zling as the US was a country; but inone important respect it was not quitea country. It did not have a nation-

wide banking system. There was rigidseparation of banking along stateboundaries. The only nationwidebank from 1914 until well after theSecond World War was the FederalReserve.

So why did the US hold together as amonetary zone? Of course, there wereno doubt several contributory factors.Labour mobility was probably greater,due in part to a common language.Legal systems, although differingsomewhat from state to state, had a

substantial and significant commoncore.

But there was one big difference. Inthe Great Depression, while manybanks failed, there was no case inwhich the banking system of an entirestate teetered on the edge of insolven-cy. Thus, although the Federal Reserveacted somewhat hesitantly as a lenderof last resort to the banks, there wasnever a case where a whole statesbanking system was unable to offer tothe Fed the kind of collateral itrequired in return for liquidity assis-tance.The main reason for banks remain-

ing solvent was that there were trans-fers through the Federal govern-ments budget. These came largelyautomatically, but also through dis-cretionary payments from relativelyprosperous states. These fiscal trans-fers from a central budget kept statebanking systems afloat and the mone-tary union together.

There were no such transfers inEurope. It was a Europe of nationstates. That is the crucial differencebetween the US then and Europe now.

It needs to be asked whether thatwas a special case. Does it actually gen-eralise? Did a central budget withautomatic transfers play a part in

other monetary unions which heldtogether, and were such transfersabsent in unions which fell apart? Theanswer to both is yes. Every monetaryunion which survived all strains butwar had a substantial central budgetthat transferred resources betweenregions in times of stress.

However, not every monetary unionwhich had a f iscal union was a suc-cess. Where the provinces are strongerthan the centre, fiscal union is notenough. Argentina had strong

provinces relative to the centre; thisrepeatedly led to the sequence of debt,inflation, and default.A substantial central budget is what

the Eurozone needs to survive. Notjust to get through this episode, but tosurvive as a stable and prosperousmonetary entity. Whether there isconsent by the electorates to the set-ting up of such as system we do notknow. And whether there is sufficienttime we doubt.Forrest Capie is professor emeritus of eco-

nomic history at Cass Business School.Geoffrey Wood is professor emeritus of eco-nomics at Cass Business School.

for the duration: the historianThucydides records that after theLacedaemonians broke the trucethey were forbidden to compete andfined 200,000 drachmas. And sobefore every modern Olympic Gamesa symbolic truce resolution is agreedat the United Nations: in 2011,Londons resolution was co-

sponsored by the whole General

Assembly for the first time. However,as with many things connected tothe UN, this truce is strong on idealsand short on impact. North Koreaand Iran added their names to thelist, but their bellicosity proceededwithout apparent remorse.

The original truce was a practicalregime, not just a piece of one-worldposturing. And today it is the unsungchanges on tax and visas that reallymake the Olympics possible.

In 2010, the worlds fastest man,Usain Bolt, did not compete in theAviva London Grand Prix because ofBritains punitive tax laws. Toprevent the follies of local politiciansinterrupting the greatest show onearth, the International Olympic

Committee demands the host nation

waive income tax for all non-residents involved with the Olympicsfor the duration, from athletes toforeign journalists and performersin the opening and closingceremonies. Britains tax truce hasbeen in force since 30 March thisyear. It will last until 8 November,giving a select few a much happierexperience of the British taxman.

Onerous visa regulations are alsorelaxed in Olympic years. Sadly,Britain has failed to put in place ageneral Olympic visa waiver scheme,which wont help the passportqueues at Heathrow. Instead, we areissuing a special Olympic visa. Butthis summer Ireland wins the goldmedal for its Olympian attitude to

border control. Games Family

members (athletes, coaches, officialsand overseas media) can currentlyenjoy a visa truce if they fly toDublin or Shannon airports, againlasting until 8 November.

Freedom of movement, like thefreedoms of speech, of trade and ofworship, opens up new possibilitiesfor peace and human flourishing.Today we believe that if athletescross borders, soldiers wont. TheOlympic truces on tax and visa laware the real achievements that makethis movement possible, not grandUN resolutions. The lesson is clear: tobring the world together in peaceand harmony, first persuadegovernment to know its limits.

Marc Sidwell is City A.M.s business

features editor.

THE LONGVIEW

MARC SIDWELL

Celebrate the open power of the 2012 Olympic truces on tax and visas

GEOFFREY WOODAND

The gold standard gives pricelessinsights into how to save the euro

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21

Europes cash cows[Re: Europes shared currency shouldntentail Germany bankrolling a debt union,Wednesday]An interesting article by Jamie Whyte,though it misses one crucial point. Whytespremise that Germany shouldnt subsidiseother EU members, by principle, forgets onelong-standing policy the CommonAgricultural Policy. Germany has indirectlysubsidised French agriculture for years. Ofcourse, Germany benefited from other EUpolicies, notably open markets for itsindustry. Germany was happy with thissubsidy and corresponding benefit whenEurope was prosperous. Now things arentgoing so well, it can hardly oppose cross-border subsidies on a point of principle.

Jeremy Evans

Beecrofts burden[Re: Tinkering with Britains economy wontdrive the growth we need, yesterday]Simon Walker is right to condemn the publicattacks on Adrian Beecroft for his attemptsto find innovative solutions to Britainslagging competitiveness. We need morethinkers like him in government, particularlythose with business experience. Are attackson Beecroft because hes revealed a truththat no one else has dared uncover?

Eric Summers

[Re: Dont ignore the moral argumentsagainst high taxation, Wednesday]High taxation may be immoral, but is lowtaxation any more moral? Any extortion byforce is wrong in principle.

James Beard

THE governments draftEnergy Bill is an utterdisaster. It reverses thecourse of UK energyderegulation, which cut

prices, and will lead to confusionfor companies and added costs forconsumers.

Lord (Nigel) Lawson, who as energysecretary was the architect ofBritains energy market deregula-tion in the 1980s, has warned that

the Bill constitutes a disastrousmove towards a centrally plannedenergy economy, with a high level ofcontrol over which forms of energygeneration will be favoured andwhich will be stifled.

The government bases the case forlow-carbon and more expensive energy in large part on the assump-tion that gas prices will rise signifi-cantly in the future. This argumentis no longer credible in the light ofthe growing international abun-dance of shale gas, including inBritain.

North American gas prices havedropped from $15 per millionBritish thermal units to below $2 injust 7 years. This price collapse is anindication of things to come inEurope, once its own vast shaledeposits are allowed to be extracted.The government has declared that

the decarbonisation of the economyis its key priority. At a time whenmost other major economies aregradually returning to cheap andabundant fossil fuels, mainly inform of coal and natural gas, Britainalone seems prepared to sacrifice itseconomic competitiveness andrecovery by opting for the mostexpensive energy.

In any case, the complex andinconsistent measures of the draftEnergy Bill are unlikely to provideinvestors with the certainty theyrequire to make substantial invest-

TOP TWEETSI agree that abolishing stamp duty onequities would be wise. But why not alsostamp duty on investment property?@petercosmetatos

How can traders use social media to makemoney? Presumably not by buying shares inFacebook.@Lukebozeat

Lex Van Dam's slot at the CityAM ActiveTrader seminar: Sardonic. Cynical. Refreshing.And he shorted Apple all the way up.@lse_co_uk

Cameron is out of touch if he thinks makingfiring workers easier is in union interest.@wdjstraw

Should Britain consider regulation to endthe current model of no-charge banking?

YESBanks sell a very complicated set of products and clarity is vital so

that customers understand what they are paying for. It costs a bankhundreds of pounds a year to service an account for cards, securewebsites, statements, and anti-fraud systems, as well as complyingwith regulations. Banks currently make this money back throughother routes, like artificially low interest rates on current accounts,while charges and fees for additional products are often opaque.The Payment Protection Insurance scandal was a direct result ofbanks looking to generate profits by other means. Transparentcharges should also drive improvements in customer service. Thefact that so little has changed in recent years shows that the marketcant solve the problem itself. If one bank were to introduce charges,customers would desert it. This is what happened in the US last year.Regulation is needed so that all can move forward together.Alex McEvoy is head of financial services at Moorhouse.

Alex McEvoy

NOPhilip Booth

It is always tempting for regulators to complain that markets do not

conform to the undergraduate textbook and seek to reorganise aparticular market to make it do so. However, enforced changes inmarkets tend to have unforeseen consequences. We still suffertoday, for example, from the abolition of minimum commissions inthe life insurance market in the mid-1980s. Free banking is popularwith consumers even if regulators dont like it. Its true that freebanking is both a symptom and a cause of a lack of competition. Butwhat we need in banking is innovation and completely new models.Supermarkets providing savings products without current accounts,peer-to-peer lending and e-money may make the debate about freecurrent accounts irrelevant. Regulators must consider whetherexcessive regulation is impeding innovation in the financial sector.Professor Philip Booth is editorial and programme director at theInstitute for Economic Affairs.

RAPIDresponses Britains solitary

stance on energypolicy is foolish

ments.The proposed contracts for differ-

ence (CFDs) are extremely complex

and convoluted. They are designedto guarantee profits for nuclear andrenewable energy companies thatinvest in low-carbon power plantsthat would otherwise be unprof-itable. Yet neither the profit guaran-tees offered for differenttechnologies, nor the duration ofCFDs is known. The government hasnot provided any numbers and priceguarantees for its favoured greentechnologies. Investors are thereforethrown into limbo since they cantcalculate whether expensive renew-ables or nuclear reactors are viableand can compete with less expen-sive conventional power plants.This lack of clarity will inevitably

lead to constant governmentamendments and continual inter-vention, which will act as additionalbarriers to new entr

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