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LINKEDIN, the social network forprofessionals, yesterday admittedit was looking into claims thatmillions of its users passwordshad been leaked online.

What seemed to be almost6.5m encrypted LinkedInpasswords were posted in aRussian forum without thecorresponding usernames bysomeone claiming to havehacked into the website.

LinkedIn took to fellow socialnetwork Twitter to say: Ourteam is currently looking intoreports of stolen passwords.

In a blog post last night, thecompany confirmed that someof the passwords correspondedto LinkedIn accounts butdeclined to specify numbers.

The New York-listed businessnetworking website said itsincerely apologises for theinconvenience to its 160m-plusmembers.

The news came just hours afterresearchers accused LinkedIns

iOS app of breaching usersprivacy by accessing theircalendar information withoutexpress permission.

LeakedIn: sixmillion loginsposted online

BY LAUREN DAVIDSON

BUSINESS WITH PERSONALITY

As ECB boss says he wont do politicians work for them on the euro, its...

EUROPES political leaders must actnow to restore confidence and stoptheir ravaged economies from collaps-ing any further, European CentralBank (ECB) boss Mario Draghi insistedyesterday as he again refused to cutinterest rates.

Draghi stressed the Eurozones prob-lems could not be solved by monetarypolicy, and that politicians must stophesitating and take necessary action toclean up troubled banks and restorecompetitiveness to failing economies.

It would not be right for monetarypolicy to fill in for other institutionslack of action, he said, as heannounced most policymakers haddecided against cutting interest rates.

Markets had high hopes for moresupport from the ECB, but rose despitethe disappointment thanks to hints offurther QE from the Federal Reserve.Atlanta Fed boss Dennis Lockhart

said more stimulus would be requiredif the economy slowed much further.

Should it become clear that some-thing resembling my baseline scenarioof continued, though modest, growthis no longer realistic, further mone-tary actions to support the recoverywill certainly need to be considered,he said, just a week after first quarterGDP growth was revised down.

European stocks rose strongly, withthe Euro Stoxx 50 up 2.42 per cent andthe FTSE 100 up 2.36 per cent. In theUS the Dow closed up 2.37 per cent ina second day of gains and the S&P500 enjoyed its best day of the year.

Draghi used his speech yesterday to

explain that the ECB will continue tosupply banks with unlimited liquidityuntil at least January next year, butquestioned the benefits of another

www.cityam.com FREE

ing a summit later this month toagain try to end the crisis decisively.

Spanish PM Mariano Rajoy has beenparticularly vocal in explaining thedepth of the crisis, pushing for jointlyguaranteed eurobonds after his treas-ury minister warned the country washaving difficulty borrowing on thebond markets. That will be put to the

test today as the government tries toraise 1bn (811m) to 2bn in 10-yearbonds. German Chancellor AngelaMerkel has been firmly refusing to

back the joint bonds that would cutborrowing costs for troubled govern-ments like Spain, arguing that eco-nomic reforms should address theunderlying problems, rather than relyon support from German taxpayers.

The Feds Beige Book summary ofeconomic conditions, meanwhile,reported moderate growth across

the country, with construction pick-ing up, demand for loans rising andhiring slightly rising.

DIAGEO INVESTS 1BN TO KEEP UP WITH DEMAND

FTSE 100 5,384.11 +123.92 DOW 12,414.79 +286.84 NASDAQ 2,844.72 +66.61 /$ 1.55 +0.01 /M1.23 -0.01 /$ 1.26 +0.02

BY TIM WALLACE

SCOTCH SALES SURGEISSUE 1,647 THURSDAY 7 JUNE 2012

AUSSIE-STERITY:WHY IT WORKSSee Page 18, Forum 27See Page 8

EUROZONE: Pages 6 and 7

three-year long-term refinancing oper-ation (LTRO). The last LTRO relievedpressure on government bonds, butwas only meant to offer breathingspace, not to solve the crisis alone.

Pointing to increased downsiderisks from weak growth and low con-fidence, Draghi said: It is of crucialimportance to continue with the

efforts to restore sound fiscal positionsand to regain competitiveness.That places the ball firmly in the

court of political leaders, who are hold-

Certified Distribution

02/04/2012 till 29/04/2012 is 100,668

ECB boss Mario Draghi told leaders including Angela Merkel that it was down to them not the ECB to reform weak economies and end the crisis

OVERTOYOU,MERKEL

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[email protected]

Follow me on Twitter: @allisterheath

IN BRIEFFrance cuts retirement age to 60n French President Francois Hollande

fulfilled a key election promise to cutthe state retirement age for someworkers from 62 to 60 yesterday,despite warnings that the indebtedgovernment cannot afford extraspending on benefits. The changeaffects those who have spent at least41 years in labour-intensive jobs. Thegovernment believes it will cost1.1bn (892m) per year until 2017and 3bn per year thereafter 5bnbelow previous estimates. Criticsbelieve that the move will bedisastrous with opposition claimingthe real cost of the move couldactually be as much as 6bn a year.

Clegg keen to cut pension perksn The coalition is set for furtherdivision after reports Liberal Democratleader Nick Clegg is backing calls for

cuts in pension benefits such as winterfuel payments and free bus passes.David Cameron is said to be adamantthat the Tories should keep to apledge made before the generalelection that the payments remain.But Clegg is understood to have toldcolleagues he wants the winterpayments and free TV licences cut forall but the poorest pensioners in a bidto cut government spending. Thedeputy Prime Ministers opinionfollows calls for cuts yesterday fromwork and pensions secretary IainDuncan Smith. He wants to reduce the5bn bill for elderly benefits, whichincludes the likes of free TV licencesand prescriptions, free bus and Tubetravel and NHS eye tests.

BlackRock City offices setfor major redevelopmentPLANS to redevelop BlackRocksCity headquarters into a new319,000 square feet office blockwere recommended for approvalyesterday, as the latest office blockin the Square Mile takes a step clos-er to construction.The island site at 33 King William

Street on the north side of LondonBridge is owned by Topland, theproperty vehicle of multimillion-aire brothers Eddie and Sol Zakay.The company last year appointed

Greycoat CORE, a joint venturebetween Chris Stricklands COREand Peter Thorntons Greycoat, towork up the plans, which it wantsto carry out when the US fundmanager vacates in 2013.

BlackRock is to move to its head-quarter to Evans Randalls 292,500sq ft Drapers Gardens buildingonce its lease expires.John Robertson Architects was

brought on last year to design theten-storey scheme. Jones LangLaSalle was appointed as the let-ting agent for the new develop-ment.Yesterday, the City of Londons

chief planning officer Peter Reesrecommended the scheme before itgoes in front of a committee meet-ing next week. Rees said the planssupported the strategic objective

Mittal reduces China steel ambitionsLakshmi Mittal has signalled a dramaticscaling back of ArcelorMittals ambitionsto expand in Chinas steel industrythrough an agreement to cut thecompanys stake in one of the countrystop metals producers. The chairman, chiefexecutive and main owner of the worldsbiggest steelmaker had hoped to build upArcelorMittals 30 per cent stake in HunanValin into a controlling shareholding buthas been frustrated by Beijings refusal toloosen constraints over foreign ownershipin the steel business.

Canadian PM urges closer Asia linksStephen Harper, prime minister ofCanada, has said Washingtons decisionto delay construction of a controversial oilpipeline was the wake-up call thatCanada needed to reduce its dependenceon its neighbour and strengthen links withAsia. Mr Harper said the postponement ofthe Keystone XL pipeline was a baddecision for both of our countries.

S Korean spree boosts Brent priceThe price of the worlds most importantoil benchmark is being boosted by SouthKorean refiners buying on the back of atax loophole involving North Sea oil.

Catwalk king prefers private modelKenneth Cole is to take his eponymousclothing and accessories company privatein a deal that values the business at about$280m. The fashion designer is buyingthe 54 per cent of the companys shareshe does not already own.

Temples of money no moreChinese officials have decided that localgovernment plans to list ancient sites onthe stock market are incompatible withtheir religious purpose.

Afren shareholders revolt over payOil explorer Afren has suffered a majorshareholder revolt over remuneration forthe third year in a row, after its chiefexecutives pay more than doubled to$3.4m (2.2m) thanks to a one-off bonus.

Ladbrokes sacks betting-odds bossLadbrokes has sacked one of its mostsenior managers, head of liabilities JonThompson, on charges of internalmisconduct, raising questions in the Cityover the bookmakers structure.

Google ups ante as map war loomsGoogle unveiled an expansion of itsGoogle Maps and Google Earth services,ahead of an anticipated new mappingservice from rival Apple. Google said itwould start showing 3D images for entiremetropolitan areas in Google Earth.

Stockton readies bankruptcy planDebt-laden Stockton, California, steppedcloser to filing for bankruptcy protection,illustrating the pressures some localgovernments face even as the stateseconomy is recovering.

WHAT THE OTHER PAPERS SAY THIS MORNING

THE collective pension funddeficit of FTSE 350 companies hasrisen threefold to 120bn in just a

year as historic final salaryschemes continue to take theirtoll.

The research, from BarnettWaddingham, showed that morethan 220 companies in the indexsponsor a defined benefit scheme.

The sharp rise in the deficit atthe end of May, just 12 monthsafter it hit 40bn, comes after aperiod of immense volatility in

global markets driven by theEuropean sovereign debt crisis.

Some groups in the FTSE 350,particularly the industrial sector,have been more exposed to falls inthe levels of pension schemefunding over the last year, saidactuary Barnett Waddingham.

At the same time pension fundshave been hit by the Bank ofEnglands 325bn programme ofquantitative easing (QE).

Government gilt yields havefallen in large part because ofquantitative easing. Companies arehaving to reassess the amount thatis being paid in, said Nick Griggs,head of corporate consulting atBarnett Waddingham.

You have to take a viewwhether a fall in bond yields is atemporary issue or whether it ispermanent.

FTSE pension

fund black holesoars to 120bn

Architect JRAs rendition of the proposed redevelopment at 33 King William Street

2 NEWS

BY PETER EDWARDS

BY KASMIRA JEFFORD

To contact the newsdesk email [email protected]

HERE are a few observations onthe latest developments in theEurozone crisis.

1) The markets are desperate, short-termist bailout junkies. Their bounceyesterday was all to do with the hopeof more QE or taxpayers cash to bail

out Spanish banks. The fact that thiswould mean well-managed countriespicking up bills incurred by poorlymanaged ones was irrelevant to them they were equally unbothered bythe lack of any real, substantialreform process to cure the cripplingdisease at the Eurozones heart,rather than merely treating its symp-toms. They just wanted share prices togo up, at any cost. In a real free-mar-ket, self-interest is a driver of progressbecause it is governed by profit andloss; but in a corporatist world, whereoutcomes depend on government

EDITORSLETTER

ALLISTER HEATH

Five lessons to be learnt from the accelerating Eurogeddon

THURSDAY 7 JUNE 2012

handouts, market signals are warped.There is nothing more tragic thancapitalisms finest clamouring forbailouts, free money and the sociali-sation of losses. I despair.

2) There will be no sustainable solu-tion to the Eurozone crisis withouteither a break-up or a dramatic accel-eration in integration. The latterwould require a new treaty; thiswould mean a referendum in the UKand elsewhere with likely No votes.

Any substantial integration by a sub-set of countries will take years. Short-term fixes of the kind being lobbiedfor by Spain back door bailouts withno strings attached wont work longterm. The day of reckoning for the EUis moving ever closer. British politicswill soon be entirely taken over by a

row over our future role in Europe.

3) As Open Europe points out, ifSpain faces huge difficulties inachieving more fiscal centralisation,due to its regions huge powers andprofligacy, how much more difficultwill it be for the single currency toachieve similar centralisation at thelevel of all 17 Eurozone members?

4) The link between sovereigns andbanks must be severed in otherwords, no more bailouts. That is theonly way to protect governments sol-

according to World Economics. TheEurozone is predicted to grow 2.7 percent a year in 2012-17 (this is over-opti-mistic); the Commonwealth (whichincludes booming India, Australiaand African countries) by 7.3 per cent.

Im entirely against imperialism.Nations should govern themselves.

But imagine what would have hap-pened had the UK chosen to maintainits trade links with independentCommonwealth nations upondecolonisation, and trade freely withthe rest of the world, rather than join-ing the EUs customs union, thus dis-criminating against its old tradingpartners and deliberately shifting itstrading patterns towards what was tobecome the lowest-growth, most stag-nant part of the world economy?

vency and to recreate a proper, value-creating banking system. Tragically,nobody is listening; Spain is bailingout even its non-systemic banks. Itshould instead have forcibly convert-ed their bonds into equity, imposing abail-in. For once, the EU is right: thebailout culture must end yesterdays

policy proposals for new, cross-borderbankruptcy (or resolution) proceduresto allow even the largest failed banksto be wound down in an orderly fash-ion, hitting shareholders, bondhold-ers and staff but protecting taxpayers,is excellent. This newspaper has longargued that such reforms are themost important change required tomake the financial system truly capi-talist once again. But Brussels propos-als will take too long to implement.

5) The Commonwealths GDP isabout to overtake the Eurozones,

of promoting the City as the leadinginternational financial and businesscentre and fitted with the charac-ter of the area.The existing building comprises

230,424 sq ft of office space, with apublic house on the ground floor.The proposed redevelopment would

see the current building demolishedand turned into a ten-storey buildingproviding 236,761 sq ft of office

space, with the City Walkway on thesouth side of the building closed tothe public.Topland has also applied for the

flexibility to provide retail units onKing William Street.The firm has also been heavily

investing in the hotel sector andrecently acquired the Royal Crescentin Bath from the collapsed Von EssenGroup.

The new jobs website for London professionalsCITYAMCAREERS.com

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HEDGE fund manager Man Groupdiscovered last night that it will loseits coveted spot in the FTSE 100, fol-lowing the indexs quarterly review.

It will be replaced by services firmBabcock, which owns a variety ofdefence interests, includingPlymouths Devonport Shipyard anda contract from the Ministry ofDefence to support the developmentof the next generation of Tridentnuclear submarine.

Man Group shares have nearlyhalved in value since the last reviewin March after clients withdrewmoney from the groups funds asmarkets were hit hard by theEurozone crisis.The index is based on company size

by market capitalisation and at theend of last week Man Group was in156th place, while Babcock wasplaced at 83rd.

Neither Man Group nor Babcockwould comment on the news.

Babcock risesto FTSE 100 asMan demoted

BY JAMES WATERSON Man Group will be demoted to theFTSE Midcap 250 index, along with anumber of other companies that havebeen promoted from below.

New arrivals include Bank ofGeorgia Holdings. Irakli Gilauri, thebanks chief executive, told City A.M.that he was delighted by the decision:Our inclusion means that we areunique among FTSE banks, not onlybecause of our emerging marketsfocus but also because of the strengthof our balance sheet. This is a majorstep forward for Bank of Georgia, fur-ther increasing the liquidity of ourshares and raising our profile.

Dechra Pharmaceuticals, Anite,John Menzies, NMC Health, RavenRussia, Ted Baker, and UtilicoEmerging Markets are also joiningthe FTSE 250.

Firms demoted to the third levelFTSE Small Caps index include AngloPacific Group, Exillon Energy,Lamprell, Northgate and Supergroup.The changes will be come into effect

on 18 June.

Nasdaq offers a $40m apologyafter Facebooks botched floatNASDAQ yesterday apologised for

botching Facebooks first day oftrading as its $40m (25.8m)compensation offering wasapproved by regulators.

Chief executive Robert Greifeldsaid the stock exchange owes theindustry an apology for thetechnical problems that plaguedFacebooks Nasdaq debut on 18May.

The tech-favourite bourse said itwill offer $13.7m in cash to affected

BY LAUREN DAVIDSON investors and the remainder intrading discounts to brokers.

But this figure is a drop in the

ocean compared to the $115m-pluslosses totted up by the top fourmarket makers in Facebooks IPO:UBS, Citigroup, Knight Capital andCitadel Securities.

Disappointed Knight Capitalsaid Nasdaqs efforts do not comeclose to covering reported lossesand the called the compensationplans simply unacceptable.

Nasdaqs rivals have alsoexpressed discontent at the plan,

with its main competitor NYSEEuronext saying: This istantamount to forcing the industry

to subsidise Nasdaqs missteps. Weintend to strongly press our viewsthat Nasdaqs proposal cannot beallowed to permit an unjust andanti-competitive situation.

Nasdaqs announcement cameduring an unusually strong day oftrading for Facebook, whose sharesclimbed 3.6 per cent to $26.81.

But the social networks stock isstill trading at just over two thirdsof its $38 IPO price.

AEROFLOT, the state-controlledRussian airline, is planning a sec-ondary listing on the London StockExchange followed by a placementof around 13 per cent of its stock in2012-2013, reports claimed yester-day.The company, in which the

Independent newspaper ownerAlexander Lebedev has a 15 per centstake, is on the list of companies theRussian government is keen to part-

privatise and has had a share place-ment on its agenda for some time.

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Aeroflot set tolist in London

A CONFIDENTIAL document at theheart of BPs disputes with its part-ners in Russian oil company TNK-BPmay become public under legalamendments agreed by Russias com-petition watchdog, its deputy direc-tor said yesterday.

BP and the AAR consortium of fourSoviet-born tycoons, who share con-trol of the Russian oil producer, havetraded accusations of breaching theirshareholder agreement in a dispute

that has ended with the British oilmajor putting the asset up for sale.

BY CITY A.M. REPORTER

Key BP papersmay come out

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GETTY

ADVERTISING giant WPP yesterdayclosed ranks around its chief execu-tive Sir Martin Sorrell, who is fend-ing off a shareholder rebellion overhis 30 per cent rise in basic pay and12.9m overall payout for last year.Writing in todays City A.M.Jeffrey

Rosen, chairman of WPPs compen-sation committee, said the firmbelieves in rewarding perform-ance and that Sorrells proposedpay package is wholly aligned withshareowners.

We have benchmarked primarilyagainst our international competi-

tors but also gone further in respectof ensuring as high a percentage ofthe package as possible is in theform of shares, he writes.

Contrary to reports elsewhere, CityA.M. understands that WPP has noplans to list the company outsideLondon, even though UK sharehold-er votes on executive pay are set tobecome binding as part of the gov-ernments Business and EnterpriseBill.The row over the decision to

WPP takes oncritics over Sir

Martins payBY JAMES WATERSON increase Sorrells base pay to 1.3m

has angered the board, which pointsto a 18.5 per cent increase in lastyears pre-tax profit to a record1bn.

It is the first increase to the chiefexecutives base salary since 2007and the board emphasises that thefirms shares have outperformedthe rest of the FTSE 100.

But advisory group ISS, which rep-resents around 20 per cent of share-holders, says it will continue tocampaign for the remunerationreport to be rejected.

The board of WPP has leapt to Sir Martin Sorrells defence over his pay deal.

WPP PLC


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ROSEN IN THE FORUM: Page 2 7

THURSDAY 7 JUNE 20124 NEWS cityam.com

QHow much does Martin Sorrell earn?

AWPPs chief exec was awarded atotal of 12.9m for 2011. This ismade up of: a basic salary of 1.3m(up 30 per cent compared to a year

ago), a 2m cash bonus, just over1m in pension contributions andother benefits, plus 8.6m fromvarious share awards and holdings.

QWhy are shareholders threatening to voteagainst last years pay report?AThe majority of opposition focuseson the decision to increaseSorrells base salary by 30 per cent.There is also disquiet at the decisionto increase his potential bonus from300 per cent to 500 per cent of salary.

QAre WPP investorslikely to vote no?AThey certainly haveform. Last year 40 percent voted against the remunerationreport, well before Sorrells pay rise

and anyone had uttered the phraseshareholder spring.

QHow does Sorrells pay compare to hisinternational rivals?AWPP maintains its executive paystructure should be judgedagainst other global media groups.US rival Omnicom paid its chiefexecutive $15.4m (9.96m) last yeareven though its shareholder returnfell.

QAandWhy does WPP want to hike Sorrells pay?

1975Martin Sorrell joins advertising agencySaatchi & Saatchi, rising to become groupfinance director.

1985Sorrell searches for a listed company

through which he can build a marketingfirm. He alights on Wire and PlasticProducts a British manufacturer of wirebaskets and buys 15 per cent of the firm.

1987The renamed WPP makes its first majoracquisition, a $556m hostile takeover of J.Walter Thompson.

1989WPP is listed on Nasdaq. Ogilvy Group isbought for $864m.

1993Founds in-house research division Kantar.

1998Joins FTSE 100 and forms alliance withJapanese agency Asatsu-DK.

2005Buys Grey Global Group for around $1.5bn.

2008Buys market research firm TNS for 1.6bnand relocates to Dublin for tax reasons.

2012Announces year-end profits of over 1bnbut faces rebellion over executive pay.

PROFILE: HOW TOBUILD AN AD GIANT

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MOODYS downgraded sevenGerman banks yesterday, includingthe countrys second-biggest lenderCommerzbank, saying that they areholding risky assets equal to threetimes their capital base.

The agency slashed credit ratingsmostly for regional banks due tolow earnings combined with largeholdings of vulnerable assets. Ithighlighted exposure to globalshipping, commercial real estate,structured products put together

during the property bubble andstruggling southern Europeancountries as risks.

Moodys estimates thataltogether, the downgraded bankshad combined exposures ofapproximately three times theirtier one capital in higher-risk assetclasses at year-end 2011 afterhedges and estimated write-downs.

But the downgrades weremitigated, it said, by the banksrelatively low wholesale fundingneeds and the benign domesticenvironment in Germany.

Deutsche, the countrys biggestbank, has avoided being hit for nowbecause Moodys review of globalbanks is not yet complete.

Meanwhile, the Bank of Cyprushas applied to the FSA to admit itsUK subsidiary into the FinancialServices Compensation Scheme

(FSCS) so that its depositors arecovered by industry insurance.

German bankshit by Moodysdowngrades

BY JULIET SAMUEL

G E T T Y

GERMANY and EU officials areurgently exploring ways to rescueSpains debt-stricken banksalthough Madrid has not yetrequested assistance and isresisting being placed underinternational supervision,European sources said yesterday.

Spain said on Tuesday it waseffectively losing access to creditmarkets due to prohibitive

borrowing costs and appealed toEuropean partners to help reviveits banks.

The ECB dashed investors hopesof an easing of monetary policy or

Europe plans for Spain rescue asprosecutor investigates BankiaBY CITY A.M. REPORTER another flood of cheap liquidity for

banks yesterday, leaving interestrates on hold at one per cent at itsmonthly meeting. The move raisedpressure on EU leaders to outline asolution to the blocs festering debtcrisis at a summit later this month.

Spanish economy minister Luisde Guindos said after talks at theEC there were no immediate plansto apply for a bailout.

Meanwhile Spains publicprosecutors office opened aninvestigation into nationalised

bank Bankia, potentiallyheightening a backlash against the

lenders bailout that has beenspearheaded by small shareholders.


With my newapp, ifyoushake me real lyhardI can buzzlike afly.

Spains economy minister Luis de Guindos said the country was not seeking a bailout

THE EUROPEAN Commission hasfinally unveiled a new set of regula-tions that are meant to ensure taxpay-ers will never again have to bail out a

failed bank.But critics said that EU commis-sioner Michel Barnier is also using thenew rules to establish a bankingunion and grab powers for the newEU regulator, the European BankingAuthority (EBA).

The directive, which has beendelayed for months for fear of spook-ing markets, establishes tools similarto those highlighted by UK and USregulators. A bust lender would besplit into a good and bad bank,but instead of being bailed out, seniorcreditors will be bailed-in forced toabsorb losses alongside shareholders.The idea is that if bond investorswont be rescued, they will superviseexcessive risk-taking more effectively.

But controversially, the EU propos-als include a requirement that bankshave a minimum percentage of theirtotal liabilities in the shape of instru-

ments eligible for bail-in.In effect, that means that banks

EU unveils toobig to fail rulesin power grab

BY JULIET SAMUELlike HSBC and Standard Charteredthat are funded by deposits usuallyseen as safer could be forced to issuebillions in expensive new bonds.

Economist Philip Booth at theInstitute of Economic Affairs wel-

comed the thrust of the rules butwarned: There is a huge danger inthese proposals that regulation willbecome more centralised, more bur-densome and more bureaucratic. TheCBI said: The rules need to be clearabout who will be in charge.

n The new rules aim to make sure thattaxpayers dont have to foot the bill when ahuge bank fails. But the rules will not be ineffect before 2016.

n A major tool will be bail-in bonds inserting a clause into all banks debt thatmeans even senior creditors will lose moneyif the bank fails.

n But in order to use the tools acrossborders, the measures could also give hugenew powers to Brussels to step in and take

over a shaky bank, restructure it andapportion the losses.

TOO BIG TO BAIL

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GERMANY

GERMANY

UK

UK

EUROZONE OVERALL

SPAIN

SPAIN

FRANCE

FRANCE

PORTUGAL

PORTUG

AL

NETHERLANDS

NETHERLANDS

ITALY

ITALY

-0.8%

-0.2%

-0.1%

0%

-0.3%

+0.5%

-0.3%

0%Quarter-on-quarter data unavailable for Greece. GDP down 6.2% comparedto the quarter one in 2011.

All figures bar Greece refer to quarter one 2012 compared to quarter four 2011

ECONOMIC PERFORMANCE FLUCTUATED AT THE START OF THE YEAR

CHARLES Dallara, managing

director of the Institute ofInternational Finance (IIF) and akey negotiator in the restructuringof Greeces debt this year, is to stepdown from the banking lobbygroup, a person familiar with thematter said.

Dallara has told the IIFs boardand plans to announce his plans atan IIF conference in Copenhagen,Denmark, this morning, the sourcesaid. He will not leave immediately,and plans to stay for severalmonths while a successor issought.

Dallara, 62, has been managingdirector of the IIF for 19 years andwas heavily involved in the

protracted talks on theGreek debt restructuring,where the IIF representedprivate sector creditors.

The IIF declined to

comment. Itsboard met hereyesterday andJosef Ackermann,

formerDeutsche Bankboss, stepsdown as IIFchairman this

week.

Private sectorrepresentativeto step down


THE EUROZONE economy has con-tracted over the past year, official fig-ures revealed yesterday, with industrydata showing even Germany has beenhit by the dire state of its weakerneighbours economies.

Eurozone GDP registered no growthin the first quarter of this year, afterfalling 0.3 per cent in the fourthquarter of 2011 narrowly avoid-ing a technical recession, butnonetheless leaving the economy0.1 per cent smaller than it wasin the first quarter of 2011.

Household consump-tion was unchanged in

the three-month peri-od, following a 0.5 percent fall in the previousquarter, while fixedcapital formation fell1.4 per cent, fasterthan the 0.4 per centprevious drop.

Exports jumped oneper cent, rebounding

Eurozone GDPshows no signs

of recoveringBY TIM WALLACE

from a 0.7 per cent fall in the finalquarter of 2011, while imports rose 0.1per cent after a 1.7 per cent fall earlier.

This is a recession in all but name,said economist Howard Archer fromIHS Global Insight. It took a strongnet trade performance to prevent theEurozone contracting in the first quar-ter, and the currency area cannot relyon this going forward given currentheightening global growth concerns.

Among the largest economiesItalys GDP fell 0.8 per cent, its thirdconsecutive quarterly drop, whileSpain saw a 0.3 per cent drop andFrance saw no growth. Germany saw

0.5 per cent growth.However, that German

strength may not continue industrial production fell 2.2per cent on the month toApril, and 0.7 per cent onthe year, official datashowed yesterday.

Leaders including ECpresident Manuel Barrosohave called for growthenhancing measures, butthe debt crisis means astate-funded stimulus is not

an option.EC president Barrosowants pro-growth reforms

Charles Dallara isleaving the IIF soon

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WHENEVER Scottish nationalists areselling the case for independence,they peddle the myth that someclapped-out oil fields in the North

Sea will bring decades of guaranteedprosperity. They would be better pinningtheir flimsy economic arguments on aliquid that is being exported in evergreater quantities: Scotch whisky.

Diageos decision to invest 1bn in its

own Scotch production facilitiesunderlines growing demand for the drink.The growth isnt being driven by recession-weary consumers in the west, but ratherthe burgeoning middle classes in emergingmarkets.

In 2011, 93.3m nine-litre cases wereconsumed worldwide, according toInternational Wine and Spirits Research, afour per cent increase on the year earlier.Volume growth in the BRICs was muchfaster, at 24 per cent: 18.2 per cent in

GET

TY

DRINKS giant Diageo said yesterdayit would pour 1bn into its Scotchwhisky business to cater for risingdemand from middle class drinkersin emerging markets.The company said that 100 jobs

would be created in Scotland underthe five-year plan.A new distillery will be built in

Speyside or the Highlands whileextra warehousing capacity will alsobe constructed, Diageo said.

There is also potential for a secondnew distillery, depending on thedevelopment of the market.

Chief executive Paul Walsh hailedthe strength of Scotch whisky brandsincluding Johnnie Walker. He saidthat annual sales were approaching3.6bn and that new markets across

the globe were opening up.He said: There are an increasing

Diageo in 1bnplan to boostsales of Scotch

BY JOHN DUNNE number of middle class people inemerging markets with the where-withal to buy our products.

Diageo derives a third of its profitfrom Scotch whisky and Walshadded: This investment underpinsour confidence in Scotch whisky.

He said East Asia, Africa and LatinAmerican markets were developingrapidly, while in Europe, France wasstill strong.

Diageo PLC


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Chief executive Paul Walsh wants to build sales in emerging markets

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Producers of whisky look to middle classes in the BRICs

Brazil; 47.2 per cent in Russia; 27.5 per centin India; and 3.9 per cent in China.

This is from a relatively low base. TheBRICs consumed around 11m nine-litrecases in 2011, accounting for just 12 percent of global consumption. But withcompound annual volume growth of 18per cent between 2006-2011, that wont bethe case for much longer.

The Chinese market might lag behindthe other BRICs, but it is also seen by the

and others are betting that the growingmiddle class will swap Baiju for aprestigious western tipple such as Scotch.

You might think that the Chinesegovernment would prefer home-growncompanies to reap the spoils, but a crucialSino-UK agreement brokered last year hasgiven Scottish producers some cause forcomfort. Scotch whisky now hasGeographical Indication of Origin Status, a

kind of legal protection akin to that givento Champagne.Sadly for those nats, it wont be enough

to prop up an independent Scottisheconomy any time soon, what with itsageing population and dependency onwelfare. According to HMRC, Scotch whiskyexports to China were worth just 3.4mlast year.

industry as the most fertileplace for future growth. Itsalcohol market is wortharound 42bn, with Baiju a white liquor that has beenproduced for 5,000 years accounting for about threefifths of that. Internationalspirits mainly Scotch andCognac account for justtwo per cent, but Diageo

Growth of scotch category across key emerging markets

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TurkeyPoland

VietnamRomania

ColumbiaIndia

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S.AfricaThailandBrazil

2010

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AUSTRALIAN firm Fort Street Advisers ledthe deal to offload Lloyds property assetsto a consortium of mostly Americaninvestors.

The team was led by Richard Hunt, oneof seven principals at Fort Street, which isan independent financial advice firm cov-ering deals in Australasia and based inSydney.

Hunt was one of the original foundersof Fort Street in 2010, having previously

worked in Australia for 16 years at UBS.During his time at the Swiss bank, he

was co-head of investment banking forAustralasia, head of real estate for theregion and had a place on the board ofUBSs global investment bank board.

He worked on both equity and debtdeals as well as mergers and acquisitions.Fort Street has also advised LloydsInternational, the division selling the realestate loans, on several other transactionsin the last year or so.

Those deals include the restructuringand subsequent sale of Orchard, a bundleof loans, and the sale of two other portfo-lios of loans, one in Australia sold toMorgan Stanley and another in NewZealand that Lloyds sold to GoldmanSachs and Brookfield.

ADVISERS FORT STREET

RICHARD HUNTFORT STREET ADVISERS

LAURALEAN/CITYA.M.

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THURSDAY 7 JUNE 2012 cityam.com10 NEWS

LLOYDS has offloaded a portfolio ofAustralian loans in a cut-price salethat brought in less than half oftheir face value.

As part of the banks drive to cutits balance sheet down to size, Lloydssold real estate assets valued at809m for 388m in cash, which itwill use to reduce its debt burden.

The buyer, AET SPV Management,is a joint venture whose backersinclude Morgan Stanley Real EstateInvesting and Blackstone, continuinga trend that has seen US firms keento snap up bargains from deleverag-

ing European lenders.The bank said that it has already

set aside provisions to absorb thelosses from the sale. The assets, clas-sified as non-core by the bank, arecurrently loss-making, costing Lloyds183m last year.

The bank acquired its Australianbusiness in 2009 as part of its ill-fatedmerger with HBOS, which it hasspent most of the last three yearsunwinding. It plans to maintain apresence in the country, however.

Lloyds offloadsAussie assets in

cut-price dealBY JULIET SAMUEL Dave Smith, the head of Lloyds

International, said: This transactionfurther de-risks the Australian busi-ness, and results in a cumulative 92per cent reduction of our real estatenon-performing loan portfolio.

Lloyds group chief executiveAntnio Horta-Osrio has taken anaxe to the banks balance sheet sincehe took the helm early last year inorder to cut its reliance on wholesalefunding and ditch billions in badloans, many of them in property.

This year Lloyds plans to offload30bn in assets, 5bn more than itsoriginal target. That is a slowdowncompared to last years 53bn.

Antnio Horta-Osrio has been an aggressive balance sheet slasher since he took over

MF GLOBAL Holdings could havemore than $3bn (1.94bn) in claims

against its former affiliates,according to Louis Freeh, the trusteeoverseeing the wind-down of thecollapsed brokers parent company.

Such claims would be the mainsource of recovery for creditors ofthe bankrupt MF Global parent,Freeh said in a 119-page reportsubmitted to the US BankruptcyCourt in Manhattan. The reportserved as a status update on Freehsefforts to recover money belongingto the parent companys estate.

Broker claimscould hit $3bn

BY HARRY BANKS

BARCLAYS is set to snap up theprivate label store card portfolio ofa major African retailer.

Absa, based in South Africa and55.5 per cent owned by Barclays,

will pay 10bn rand (775m) to buythe portfolio from clothing andfootwear firm Edcon.

The Edcon store card businessoperates mainly in South Africa,

with smaller operations in nearbynations. Absa also plans to buyEdcon's portfolios in theneighbouring countries but it isnot a condition of the deal.

Barclays Absabuys card firm

BY PETER EDWARDS

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DELOITTES PARTNERSHIP: IN NUMBERS

991n Total number of partnersin the firm as of 1 June 2012

63 n The number of employeespromoted to partner in yesterdays

announcement

32 n The number of new partnerswho will become full equity partners in

the firm

43 n Partners hired fromcompetitors and industry in the past year

n Audit: Sonya Butters, Matt Cheetham,Stuart Diack, Damian Hales, Ian Joslin, TomMillar, Jamie Partridge, Tom Spellman, JudeTacon, Sylvia Chai, Jacques De Hillerin, MattHall, Myriam Meissner, Julian Rae, RichardThornhill, Andy Wright

n Consulting: David Anderson, Jenny Boon,James Gregson, Christian Hagman, Dan Ison,Mike Meehan, Fabrizio Napolitano, SaraSiegel, Phil Symonds, Nick Turner, AaronAlburey, Karyn Daud, Mark Fakkel, OliHemming, Bruce Laing, James Taylor

n Corporate finance: Clare Boardman,Gurminder Dhillon, Rob Harding, DanielSmith, Chris Woolley, Richard Clarke, MichaelEckett, Chris Goodgame, Stuart Sparkes, MarkUnderwood, Nico Van Der Beken

n Enterprise risk services: Chris Gaines, JulianHunt, Ronan Langford, James Russell

n Swiss corporate finance: Andrew Busby

n Tax: Liz Ballinger, James Bland, AndrewCoticelli, Lars Crowley, Darren Graves, JulietHalfhead, Gemma Harris, Simon Clarke, PhilipCrossman, Paul Gravett, Richard Insole, HelenKaye, Andy Martyn, Joanne Pleasant, StuartSavage


INVESTORS in troubled exchange

owner Plus Markets yesterday calledfor leading directors to step downafter they accepted a controversialtakeover bid from ICAP.

One investor told City A.M. that hehasnt spoken to anyone who isgoing to vote in favour of the bidand that he believes the board isvery, very worried.

Shareholders owning 20 per centof the firm have now tabled AGMmotions calling for the CEO andchairman to leave the board.

Plus originally said it would shutdown its flagship stock exchangeafter failing to find a buyer.

But on 18 May the boardannounced an exclusivity deal withbroker ICAP to dispose of the unitfor 1, angering shareholders whoclaim they were left in the dark.

The ICAP deal will see the twoexecutive directors share 423,000,

while advisers take home 960,000.Private investor Simon Chapman,

who owns three per cent of thefirm, said: The directors are doingrather well out of this derisoryoffer. ICAP are doing well becausetheyre getting something valuablefor a pittance. I cant quite seewhere the shareholders interesthas come into this.

In the best case scenario therewill be residual cash of around640,000, or 0.25p a share.

Investors rebelagainst PlusMarkets sale

BY JAMES WATERSON

GETTY

BUSINESS services firm Deloitte yes-terday announced its latest roundof promotions, with 63 new part-ners taking up roles from the begin-ning of this month.The bumper crop of partners

matches the number that were pro-moted last summer, and includes32 who will become full equity part-ners.The majority of the promotions

were made in the firms Londonoffices, where 39 new partnerswere named across Deloittes audit,consulting, tax, corporate finance

and enterprise risk service arms.It also named four new partners

across the firms Swiss offices inZurich and Geneva, and one inDubai promoting Richard Clarkein its corporate finance team.

I am delighted to welcome 63new partners to the senior leader-ship of our firm in the UK andSwitzerland. They represent animportant investment in futuresuccess, said Deloittes chief execu-tive and senior partner David

Deloitte adds63 in bumper

partner roundBY ELIZABETH FOURNIER Sproul in a statement.

As business leaders look to theirown role in rebuilding economicprosperity across the country,investing in new talent is a signal ofconfidence, and critical to findingnew opportunity in an uncertaineconomic environment, he added.As well as its internal advance-

ments, Deloitte has hired 41 newpartners from its competitors andindustry roles over the past 12months.The number was significantly up

on last year, when it recruited just30 direct entry partners.

Last month Deloitte officially over-

took rival PwC as adviser to thelargest number of FTSE 250 firms,according to data fromMorningstars professional servicesrankings.The firm now acts as auditor for 69

of the FTSE 250, up from 66 in theprevious quarter, while PwCsclients remained static at 67.

In the FTSE 100 ranking it stayedin third position, but added oneaudit client to bring its total num-ber to 21.

Deloitte chief exec and senior partner David Sproul has promoted 63 to the partnership

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GETTY

African Barrick Gold PLC


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IN BRIEFChemring sells to Drew Marinen British military equipment makerChemring said it plans to sell itsmarine interests to Drew Marine for32m to help it cut debt, buy backshares and fund pension liabilities. Itsaid it no longer considers ChemringMarine, which supplies marine distresssignals to the commercial and leisuremarkets, core to its operations.

GetTaxi hails $20m fundingn GetTaxi, which has developed amobile app for calling the nearest cab,has raised $20m (13m) before itsNew York launch. Len Blavatnik ledthe round through Access Industries,and was joined by GetTaxis founders,chief executive Shahar Waiser and RoyMore.

Nokia fights back in phone racen Struggling mobile phone makerNokia has unveiled its first fulltouchscreen phones aimed at thebudget end of the market, looking tofill a gap in its product range andcatch up with rivals, particularly inemerging markets. Nokia hopes thethree new models will help claw backlost ground at its basic phone arm.

Manchester Airport fuel runs outn Delays are possible at ManchesterAirport today after supply problemsmeant it briefly ran out of aviationfuel. Problems at Essar EnergysStanlow refinery meant up to 150flights were at risk of delay orcancellation yesterday, thoughsupplies resumed shortly after theairport ran dry of fuel at 6pm and noflight disruption had been reported.

BARRICK Gold has ousted its chiefexecutive Aaron Regent and promot-ed chief financial officer JamieSokalsky to the top job, as itsfounder admitted that its recent per-formance had been disappointing.

Shares in Barricks London-listedsubsidiary, African Barrick Gold,shot up 14.5 per cent yesterday onthe news, but Barricks Toronto-list-ed shares slid almost five per cent.ABG, which is 74 per cent-owned

by Barrick, said its parent wouldnominate a replacement to its boardafter Aaron Regents departure.

Regent was non-executive chairmanof ABG.

We are fully committed to max-imising shareholder value, but havebeen disappointed with our shareprice performance, said founderPeter Munk.

Our board has every confidencein Jamies experience and commit-ment to take our company forward.

Barricks shares have been hit hardin the aftermath of its C$7.3bn(4.6bn) takeover of Equinox

African Barricksoars as parent

firms CEO goesBY HARRY BANKS Minerals in April 2011.

The deal boosted the companysexposure to the cyclical copper mar-ket without adding gold assets. Someshareholders saw that as a misstep.

It could be that theyre looking fora fall guy after the disastrousEquinox acquisition, which webelieve they overpaid for by about 50per cent, said George Topping, amining analyst at Stifel Nicolaus, aninvestment banking and brokeragefirm in Toronto.The Lumwana copper mine in

Zambia, acquired as part of theEquinox takeover, has struggled withhigh costs and operational hiccups.

RUPERT Murdochs News Corp hastaken full control of its Asian joint

venture ESPN STAR Sports (ESS),

buying out Walt Disneys 50 percent share to end a 16-yearpartnership in the region.

ESS has rights to this yearsOlympics in London and alsoscreens Formula One motor races,another of the top attractions in

global sport. News Corp has a longhistory of using sports rights todrive growth of its TV operations.

News Corporations acquisitionof the interest of ESS that we didnot already own ... furthers our

News Corp buys Disney stake inAsian sports joint venture ESS

BY CITY A.M. REPORTER commitment to deliveringincredible sports programming toconsumers across the globe, andparticularly enhancing ourposition in sports programming in

emerging markets, said JamesMurdoch, News Corps deputychief operating officer.

Financial details of the dealwere not disclosed.

Peter Hutton, senior vicepresident of sports for NewsCorps FOX InternationalChannels, will take over asmanaging director of ESS. ESSoperates 28 broadcast networks in24 Asian countries, including anumber focused on cricket.

James Murdoch said the acquisition would further News Corps sports programming

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RSA, Britains biggest commercialinsurer, has agreed to buy CanadasLUnion Canadienne for 94m, morethan doubling its share of the lucra-tive Quebec market.

Our group strategy is to drive con-tinued growth and strong profitabili-ty in our overseas markets, RSA chiefexecutive Simon Lee said in a state-ment.

RSA, Canadas third-largest generalinsurer after its $425m (274m)takeover of GCAN in 2010, is lookingfor small acquisitions to drive growthoutside its home market but is notinterested in big deals that wouldrequire external fundraising, Lee saidin April.The insurer, best known in Britain

for its More Than home and motorinsurance brand, has a track record ofsmall-scale takeovers, completing 50acquisitions between 2005 and theend of 2011.

To us, this is a classic RSA bolt-onacquisition, one Shore Capital ana-lyst said of the LUnion Canadiennedeal.

Small enough to be paid for in cash,big enough to make a difference, weenvisage LUnion Canadienne becom-ing a valuable element of RSAs pres-

ence in Canada.RSA shares closed 2.25 per cent high-er yesterday at 99.85p, in line with a2.36 per cent rise in the FTSE 100

RSA expands in

Canada with a94m purchase

BY HARRY BANKSshare index.

LUnion Canadienne, part ofCanadas Co-operators GeneralInsurance Company, had net writtenpremiums of 169m last year.

Earlier this month, RSA said it wasoff to a good start to the year as newermarkets offset a slump at its car insur-ance business, More Than.

Net written premiums rose five percent to 2.2bn in the first quarter ofthe year, thanks to a rate hike coupledwith a one per cent uptick in volumes.

Overall UK premiums rose four percent to 725m, but its investmentportfolio shrank slightly to total14.4bn at the end of March, whichwas due to a 33m foreign exchangehit and other movements causing a47m dent.At the time, the firm maintained its

outlook for the full year and said itexpects good premium growth andaround 500m of investment incomefor the year.

Buffett bullish overAmerican economyTHE RISK of a double diprecession in the US is very low,

according to billionaire investorWarren Buffett, unless events inEurope develop in some way thatspill over here big time.

The so-called Sage of Omahahailed Americas secret sauce,

yet warned that the Eurozonecrisis remains the biggest threatto the global recovery.

Buffett urged Europe to form aunited fiscal strategy as well as amore coherent approach to

BY JULIAN HARRISlabour policy. The single currencyarea currently looks like a housedivided, the chairman ofBerkshire Hathaway said.

Addressing economic questionson his own side of the pond,Buffett called for a plan to reduce

Americas mammoth deficit thatinvolves both tax hikes andspending cuts from entitlementprogrammes.

Buffett, a friend of US PresidentBarack Obama, has previouslyendorsed increasing levels of taxon high earners such as himself.

Warren Buffett urged the Eurozone to solve its crisis

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IT SURELY wouldnt have happenedif hed beaten his brother in the

Labour leadership election.But yesterday David Miliband was

mistaken by a travelling traincompanion for Andy Burnham, theshadow health secretary.

Miliband, tweeting about theincident, described it as theultimate compliment. But TheCapitalist cant help but wonderwhether Labours lost leader anddirector of Sunderland FootballClub, wouldnt rather be slightlymore recognisable.

David Milibands

identity crisis

INSPIRED by the success of the Jubileecelebrations perhaps, The NationalTrust yesterday announced that thegarden of 10 Downing Street will beamong the 200 venues involved in theOpen Garden Squares Weekend tak-ing place this Saturday.The L-shaped plot, shared by both 10

and 11 Downing Street, will host 25lucky ticket holders who were select-ed by lot.The garden, which boasts extrava-

gant flowerbeds, was made available

for the annual event after theNational Trust sought approval fromDavid Cameron to use the area.The Prime Minister, after welcoming

the event into his back garden,expressed his excitement at theupcoming occasion and deemed thescheme a fantastic initiative.A press spokesman dismissed the

suggestion there could be a likelihoodof troublemaking within the gardenfrom possible opponents toCamerons government.

Open government

comes to the backyardof Number 10

Number 10 Downing Street has saidnormal safety measures will remain inplace for the day, but refused to dis-close further details.

The garden has previously been thebackdrop for other informal occasions,including the press launch announc-ing the coalition in May 2011 and abarbecue held by the Camerons andObamas the same month.

Camerons flowerbeds are becomingsomething of a fixture in mediaappearances the PM was on Sunday

interviewed in the back garden for theAndrew Marr show.

The backyard, dominated by a half-acre lawn, will join other high-profilecommunal gardens located within 25London boroughs in the Open GardenSquares Weekend, such as TheRegents Park Allotment Garden andThe Royal College of PhysiciansMedicinal Garden.

Lets hope the weather is a little bet-ter than last weekend, otherwise somemight be seeking a little shelter. David Cameron looks on as Barack Obama gets ready to serve up in May 2011

Got A Story? [email protected]

14 cityam.com

cityam.com/the-capitalistTHECAPITALISTFOOTBALL fans in the City willhave a busy summer as two major

events head towards their climax: thecrisis in the Eurozone and UEFAs Euro2012 tournament. The enterprisingfolks at Ladbrokes are offering a series

of bets on both events. With Spainfavourites to win the football, thebookmakers are offering a mere 3/1that the winning country will announceits withdrawal from the euro this year.Pessimists may prefer the 50/1 on offerfor the currency to be disbanded by thetime the tournament finishes on 1 July.Ladbrokes said: The odds suggestSpains footballers will reign supremewhile their banks crumble.

THURSDAY 7 JUNE 2012

meantimebrewing.com

Unilke most beers, Meantime matures for longer andremains unpasteurised to ensure the fullest possible flavour.

Raspberry Wheat Beer -BORNGreenwich.LIVESLondon.CRAFTBrewer Steve Schmidt uses malted barley, malted wheat and raspberries for Meantimes

most successful experimental brew.LOVESChocolate based sweets, soft cheeses & spiced curries.

Alessandro Santos -BORNRio de Janeiro, Brasil.LIVESLondon.CRAFTAlessandro fell in love with fashion whilst performing ballet. Now owner of, Mayfair Suits.LOVESPrimrose Hill, musical theatre, cooking, Bruno the dog & Raspberry Wheat Beer.

Photography:TomS

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VODAFONEs bid for Cable &Wireless Worldwide was bolsteredyesterday when the deal was recom-mended by Institutional ShareholderServices (ISS), which represents about10 per cent of CWWs shareholders.

But the news, published after mar-kets closed, did not come in time tostop the telco giants shares fromdropping 2.7 per cent to 169p yester-day.Traders were reacting to two con-

secutive days of Vodafone announce-ments. The mobile network operatoryesterday revealed it has increased itsshareholding in Invitation DigitalLimited (IDL) to a majority stake, justone day after admitting it is in talksto acquire Telstras New Zealand sub-sidiary.Vodafone bought 21 per cent of IDL,

the parent company of mobilecoupon provider Vouchercloud, lastMay and has now upped its stake to57 per cent.

BY LAUREN DAVIDSONFinancial details were not disclosed,

but it is understood the deal valuesIDL at around 20m.Vodafone also declined to discuss

the financials of its talks with Telstra,but analysts estimated the deal couldbe between A$300-A$400m (192m-256m).

However, Vodafone has been veryclear that its 1bn offer for CWW willnot be increased. CWWs biggestshareholder Orbis has suggested itcould vote against the deal, but theISSs support will take some of thepressure off the bidding telco.

US prosecutors urgeda judge yesterday tosend convictedfinancier AllenStanford to prison for230 years, callinghim a ruthlesspredator whose$7bn (4.5bn) Ponzischeme was amongthe most egregious

frauds everundertaken. Stanfordwas convicted on 6March on fraud,conspiracy andobstruction charges.Prosecutors said heran a 20-year bogusscheme from hisAntigua-based bank.

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DEMAND for British favourites suchas scotch eggs, sausage rolls andales to wash down street party fes-tivities helped Waitrose serve uprecord-breaking sales in the run-upto the Diamond Jubilee.

Sales surged 19.8 per cent in theweek to Saturday 2 June to a totalof 123m, Waitroses highest evertrading week with the exception ofChristmas and Easter.The upmarket supermarket

chain said the Jubilee celebra-tions were the main driver, but a25 per cent discount offer on

wine and champagne alsohelped buoy its performance.

Sales excluding wine wereup 18.1 per cent on last year.

Managing director MarkPrice said the prospect of along weekend had spurredshoppers into action.

Many people clearly wel-comed having a great reasonto step away from day-to-daybudgeting to stock up on fab-ulous food and drink for

Waitrose feastson record sales

in Jubilee weekBY KASMIRA JEFFORD Jubilee parties and entertaining.

Sales of Melton Mowbray porkpies, scotch eggs and sausage rollswere all up by 76 per cent while tri-fle, the quintessential Britishdessert, also proved popular, with

sales up by 28 per cent.Cider and British ale saw an

uplift of 70 per cent and 25 percent respectively while English

wine had its biggest week onrecord with sales up 96 per cent.

Meanwhile rival Sainburystweeted it had sold 670,000Union Jack flags enough tocover Wembley pitch 30 times and 550 miles of bunting.

The grocer said revellersalso snapped up 3.3mJubilee-themed napkins equivalent to one in 20 ofthe UK population and58,000 masks of PrincePhilip and the Queen.

Waitrose customers made themost of a promotion onchampagne over the extendedJubilee weekend

JESSOPS, the embattled cameraspecialist, said efforts to revamp itsstores and improve its online

presence had helped boost sales bythree per cent to 236.8m last year.

The retailer, which came close tocollapse three years ago, reportedthat sales rose by three per cent to236.8m in the year to 1 January,

with like for like sales growth of 1.3per cent.

It did not disclose its profits.Chief executive Trevor Moore said

2011 had been a challenging year,exacerbated by the tsunami in Japan

which impacted supplies.

Jessops turnaround plans helpretailer present a rosier picture

BY KASMIRA JEFFORD He said the group remained cau-tiously optimistic in its outlook for2012.

Since its rescue by its mainlender HSBC in 2009 Jessops has

made efforts to spruce up its storesand bolster its online presence aspart of efforts to turn the businessaround.

Some 20 stores were refittedduring the year with a new blackstore frontage, helping to deliveran uplift of over 20 per cent on pre-refurbishment sales.

Its online business grew by 79per cent in the year, down from 100per cent in 2010, and now accountsfor 32 per cent of total business.


Jessops chief executive Trevor Moore welcomed the three per cent sales lift

DO YOU THINK THE QUEENSDIAMOND JUBILEE WAS ASUCCESS FOR THE ECONOMY?Interviews by Alek Coben

It got people out and about but hav-ing said that, the two days off didnt

do any favours for businesses. Its good forshops and restaurants but probably bad forfinancial services in the City of London.

These views are those of the individuals above andnot necessarily those of their company

LUCY RHODESBATES WELLS &BRAITHWAITE

Its re-ignited the global interest inthis country - one of my colleagues

was in America when it was happening. Hesgot family who live there and they werewatching all of it. I think its been massivelysuccessful.

PAT MOONEYBANK OF IRELAND

I think it was beneficial because of thevolume of people in London and all

the shops that were open. Seeing the monarchyas a connected group again is really good and thevolume of people who turned up in the rain istestimony to the fact that they are still popular.

MATT SNUDOLENBUPA

CITYVIEWS

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THE AUSTRALIAN economy expanded

more strongly than expected in thefirst quarter, booming at its fastestpace in more than four years.

GDP rose 1.3 per cent in the firstthree months of 2012 more thandouble the 0.5 per cent that hadbeen forecast.

That growth spurt followed adownwardly revised 0.6 per centexpansion in the final quarter of2011, and means the economy is now4.3 per cent larger than a year ago.

Domestic demand reboundedsharply, contributing 1.8 percentagepoints to growth, up from 0.2 in theprevious quarter. That was made upof household spending, which added0.9 percentage points up from 0.2previously, and private investmentwhich added 0.8 percentage points.

In the same quarter the Eurozonerecorded no GDP growth and the UKsaw output contract by 0.3 per cent.

The report is much stronger thanexpected and shows that, includingrevisions, growth was not as farbelow trend as perhaps the ReserveBank of Australia had thought, saidNomura economist Martin Whetton.

While the rise in privateinvestment was expected, thestrength in household spending wassurprising, partly driven by a strongincrease in expenditure on food.

GDP boom forOz as consumerspending rises

BY LISA MORAVEC

GETTY

SOURCE:MARKIT

CONSTRUCTION growth slowed inMay, influential survey data showedyesterday, with confidence drainingfrom firms operating in the sector.The construction purchasing man-

agers index (PMI) from Markit fellto a three-month low of 54.4 downfrom 55.8 in April, but still firmlyabove the no change level of 50.

Commercial activity was thestrongest component at 56.5, downfrom 57.7, while civil engineeringslowed sharply from 56.5 to 52.8.

Housing activity barely expandedat all, with an index reading of 50.9,

down from 60.4 in April.A major driver of the slowdown

was a marked fall in new businessgrowth, which dropped to its lowestpace in four months, while the rateof expansion in new work was alsowell down on the four-and-a-halfyear high seen in March.

But there were still strong areas,such as the employment outlookindex, which climbed from 51.7 to52.2 as output kept rising.

While still in positive territory,

Constructionsector growth

slows furtherBY TIM WALLACE the month-on-month fall in business

confidence was the greatest sinceJune 2010, which was when plans forthe autumn government spendingreview were first announced, saidMarkit economist Tim Moore.

This reassessment of the year-ahead outlook represents worrieswithin the construction sector thatweakening economic conditionscould leave firms running on emptyagain once existing projects havecome to completion.The sector, which accounts for

seven per cent of UK GDP, shrank by4.8 per cent in the first quarter of2012, according to latest estimates.

UK construction groth slowed in May

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BRITAIN is well behind itscompetitors in taking advantage ofChinas impressive growth over the

last decade, a top economist saidyesterday, and it will not be easyfor UK firms and the governmentto rectify that as Chinas import

growth begins to slow.Chinas growth has been largely

investment led in the past decade,benefiting exporters of rawmaterials and capital goods such as

Australia and South Korea andleaving the UK behind, according toanalysis from Legal & General AssetManagements Brian Coulton.

Western exporters threatenedby softening Chinese demand

BY TIM WALLACE However, the share of GDP madeup of consumption is starting torise a sector which uses fewerimports, meaning there are feweropportunities for western nations

to boost GDP by exporting to China.Furthermore, it also means

politicians like George Osbornewho have publicly called forincreased exports to the countrymust rapidly adapt their ideas of

what China will need from abroad.The shift to more consumer-

oriented growth will make itharder for foreign companies topenetrate the Chinese market and

will raise the premium on having apresence on the ground, he said.

THE FORUM: Page 2 7


Legal & General warned George Osborne it will not be easy to boost exports to China

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Derivatives regulators agree 15 new world-wide rules

GLOBAL regulators agreed onminimum rules yesterday toshed light on the $700 trillion(452 trillion) derivativesmarket, after being hamstrungby a dearth of information inthe credit crunch, and to deterfirms from moving trades to lessregulated countries.

The InternationalOrganisation of SecuritiesCommissions (IOSCO), a Madrid-based umbrella body for over

100 national market regulators,published 15 recommendations

which members are obliged toenforce.

These include the licensing orregistering of dealers;considering imposing capitalrequirements on dealers toreflect the risks they pose; andmaking dealers keep collateralon cleared traders belonging tocustomers separate from theirown assets.

Leaders of the worlds top 20economies (G20) agreed threeyears ago that from the end of2012 derivatives trades should

be recorded and centrallycleared and executed on

electronic platforms.They aimed to improve

regulation after little-understood, lightly regulatedderivatives products help bringdown Lehman Brothers.

They aim to crack down onmarket participants whereverthey are in the world, not just inthe European Union or UnitedStates where tougher rules arealready being adopted.

Such global minimumstandards are aimed atdeterring dealers from trying to

shift business such as toSwitzerland in the hope of

escaping the tough EU and USderivatives rules that are beingintroduced from January.

Historically, marketparticipants in the OTCderivatives market have, inmany cases, not been subject tothe same level of regulation asparticipants in the traditionalsecurities market, IOSCO saidin its report. This lack ofsufficient regulation allowedcertain participants to operatein a manner that created risksto the global economy that

manifested during the financialcrisis of 2008, IOSCO added.


THE SUN came out for the Britishhigh street in May, as warmer weath-er gave a boost to the struggling shop-ping sector.

Retail sales were up 1.3 per cent on alike-for-like annualised basis lastmonth, bouncing back from a miser-ably rainy April in which like-for-likeshad plummeted by 3.3 per cent com-pared to a year earlier.

On an overall basis, sales rose 3.4 percent in May compared to a year ago.

Its likely the prolonged wet period[in April] helped create pent-updemand, said Stephen Robertson ofthe British Retail Consortium (BRC),

which released the data this morn-ing.

People also felt more relaxed abouttheir spending as the sun created afeel-good boost.

Skirts, swimwear and gardeningequipment flew off the shelvestowards the end of May, the BRCreported. Womenswear had its bestgrowth this year, while garden cen-tres enjoyed a boom in the number ofpeople investing in new lawnmowersto tackle overgrown grass.Total sales, a measure that includes

Mays sunshineboosts sales on

the high streetBY JULIAN HARRIS

new shop floor space, rose by 3.4 percent in May compared to May 2011.The surprisingly upbeat figures

could help stave off a third quarter oftechnical economic contraction, saidHoward Archer of IHS Global Insight.

The economy may still have a fight-ing chance, he said. Although itfaces the significant handicap of theextra days public holiday resultingfrom the Queens Diamond Jubilee.

On a three-monthly measure,designed to iron out short-term fluc-tuations, retail sales were down 0.2per cent according to the latest figuresfor March to May. Total sales on thismeasure were up 2.1 per cent, yet thisremains below consumer price infla-

tion for the period.

Eurozone crisis pushes mergers

and acquisitions to record lowMERGER and acquisition (M&A)activity plummeted in the firstquarter, official figures showedyesterday, as nervous firms slashedspending in the UK and abroad.

UK firms spent just 0.7bn onacquisitions abroad in the firstquarter, according to data from theOffice for National Statistics (ONS) down 94 per cent from 12.6bn inthe final quarter of 2011 and thelowest quarterly level since recordsbegan in 1987.

Concerns relating to theEurozone sovereign debt crisis andconfidence in economic growth arelikely to have played their part, said

the ONS.

BY TIM WALLACE The value of acquisitions in the UKby foreign companies also collapsed,falling from 12.4bn in the finalthree months of 2011 to 3.9bn inthe first quarter of this year.

The rot also extended to thedomestic market the value ofacquisitions in the UK by otherBritish firms fell from 1.8bn to1.1bn in the same period.

Although the Eurozone crisis ispushing down transaction levels,analysts believe there may besomething of an improvementtowards the end of the year.

We are seeing activity levelsbegin to pick up now, which shouldtranslate to higher figures in thethird quarter, said Deloittes Tom

MacDonald. In part that is down to

banks divesting assets as thedeleverage or are forced to slimdown by regulators.

In the longer term, Basel IIIshigher capital requirements will alsopush banks to divest more non-coreassets, supporting M&A activity.

IN BRIEFPressures ease on new homeownersn Falling interest rates have eased thepressure on mortgage holding twenty-

somethings, according to a charity thathelps people who are struggling tokeep up with payments. The number offirst time homeowners fell from 4,489in 2009 to 3,008 in 2011, according tothe Consumer Credit CounsellingService. The number of homeownersin mortgage arrears in their twentieshas also almost halved over the pasttwo years, a survey from the groupfound.

Loose credit prompted volatilityn The loosening of credit conditionsfrom the early 1970s stoked volatility inthe housing market, research from PwCshowed yesterday. In the 50s and 60sdisposable incomes grew morestrongly than house prices. But from1970 onwards house prices rose morestrongly on average than incomes but

also became much more volatile, chiefeconomist John Hawksworth said.

Beecroft proposals hit by criticismn A leading human resources grouphas today hit out at the Beecroft report,which examined ways to cut jobregulations. By increasing jobinsecurity and reducing employeeengagement it would be more likely todamage growth, the CharteredInstitute of Personnel andDevelopment said.

Interest rates hit household savingsn The proportion of households savingeach month has fallen from 43 per centlast June to 41 per cent now as low inter-est rates make it less attractive, accord-ing to Legal &General a drop of around500,000 to 8m people. And those whodo save only put away an average of71 down 24 per cent from the 93seen in January.

Retail sales rebounded in May

May2012

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Sep2011

May2011

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2012

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2011

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0


ALLISTER HEATH | CITY A.M.No change in rates or QE. Economic woes are not being caused by tight monetary policy. Rather, supply side reforms are still desperately needed, while

on the demand side the restrictions on banks are holding back credit. The crisis cant be solved with increasingly ultra-loose monetary tactics.

SIMON WARD | HENDERSONHold rates and QE. The Bank of England should offer banks ECB-style longer-term funding linked to the Bank rate and against wide collateral to improve

credit availability and reduce borrowing costs. There is no obvious shortage of money in the economy warranting more gilt purchases.

GEORGE BUCKLEY | DEUTSCHE BANKId vote for 50bn of extra quantitative easing. The combination of weaker economic news in the UK and concerns about the possible impact of the euro

crisis on the economy highlight the need for further monetary support.

VICKY PRYCE | FTI CONSULTINGHold but consider further quantitative easing with wider scope as inflation fears ease. UK manufacturing data is disappointing and the global recovery

appears to be faltering with downbeat IMF and OECD forecasts and still no consensus on how to best tackle the Eurozone crisis.

VICKY REDWOOD | CAPITAL ECONOMICS50bn more QE. The Eurozone threat is intensifying, the economic outlook remains grim and inflationary pressures are abating. The Bank of Englands

Monetary Policy Committee should do more gilt purchases and think about what else it can do.

TREVOR WILLIAMS | LLOYDS TSBWith the UK economy in recession, money supply growth weak and Europe in turmoil, it seems imperative to me that there is more monetary stimulus.

At a minimum, there should be quantitative easing announced of 50bn, spent on a wider range of instruments.

HOLGER SCHMIEDING |BERENBERG BANK50bn more asset purchases, with a statement that fewer bonds would be bought if the economic outlook were to improve soon. The recent drop in

leading indicators such as the manufacturing PMI suggests that the UK economy will be hit as hard as the Eurozone by the current financial turbulences.

GRAEME LEACH | INSTITUTE OF DIRECTORSAt present there isnt enough money sloshing around or changing hands fast enough, but we need another set of monthly money supply figures before

making a decision for more quantitative easing. Hold for now.

ROSS WALKER | RBSA finely-balanced decision as clearer evidence emerges of contagion from the financial crisis to the real economy. But the case for additional quantitative

easing is not yet compelling some of the recent weakness may prove temporary and inflation remains above target.

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CHINA National Nuclear Power Co, the

countrys biggest nuclear power devel-oper, plans to raise money to helpfund projects worth 17.6bn via whatcould be one of Chinas biggest initialpublic offerings (IPOs).

It did not specify its fundraisingtarget or IPO timing in a statementon the Ministry of EnvironmentProtections website, but said the IPOproceeds would go towards fiveprojects with a total investment of173.5bn yuan (17.6bn).

The ministry said it had approvedthe IPO, which would also need thego-ahead from securities regulators.

China suspended approvals of newnuclear power plants in the wake ofJapans nuclear crisis in March 2011following a devastating tsunami, andordered nationwide safety checks onplants and construction sites.

State media have said China willlikely scale down its 2020 nuclear

power generation capacity target to60-70 gigawatts from earlierexpectations of around 80GW.

China National Nuclear wasformed last year as part of therestructuring of its parent ChinaNational Nuclear Corporation. If allor most of the projects are financedby share sale proceeds, its IPO couldbe mammoth, potentially surpassingAgricultural Bank of Chinas HongKong-Shanghai dual listing tobecome Chinas biggest.

China Nuclearplans float tofund projects


SHARES in Mecom plummeted yester-day after the publishing groupwarned that full-year core earningsare expected to be below market esti-mates due to weakness in its Dutchadvertising revenues.The European group, which has

1.2m subscribers and caters to theNetherlands, Denmark and Poland,said that it expects full-year earningsbefore interest, taxes, depreciationand amortisation (Ebitda) in therange of85m to95m.

Mecom, whose advertising revenuehas been sliding over the past few

years, is trying to streamline its busi-ness by selling units and cutting costs.

It is the speed and severity of thefall in the Dutch market which hastaken them by a little bit by surprise,analyst Patrick Yau of Peel Hunt said.He expects Mecoms Ebitda to be82.5m in 2012.

Advertising revenue from theNetherlands is expected to decline 17per cent in the first half, and the com-pany expects this pace to continue forthe rest of 2012.

Mecom plungesas it warns over

its profit againBY HARRY BANKS

Mecom expects first-half Ebitda to beabout 14m lower than a year ago. Itreported adjusted Ebitda of66.1m inthe same period last year, including acontribution from its Norwegian armEdda Media.The company sold Edda Media to

local group A-pressen for 1.73bnNorwegian crowns (184m) inDecember to cut debt and possiblyincrease investor returns.

Mecom also said it expects its per-formance in 2013 to be hurt by agreater-than-expected decline inadvertising.

Shares in the company closed down48 per cent yesterday at 76p.

Aggreko wins a $250m power

supply contract in South AfricaBRITAINS Aggreko and its localjoint-venture partner ShandukaGroup will supply 107 megawatts ofgas-fired power to Mozambique andSouth Africa, in a deal worth anestimated $250m (161.5m).

Countries in southern Africahave been struggling to meet fast-rising demand for power, with thenext two years seen as particularlytight until new power plants startcoming online.

South Africas national gridnearly collapsed in 2008, forcingmines and smelters to shut fordays.

The crisis cost Africas biggesteconomy billions of dollars in lost

output and hit its neighbours who

BY CITY A.M. REPORTERdepend on South Africa for power.

FTSE 100-listed Aggreko, theworlds biggest temporary powerprovider, has signed powerpurchase deals with South Africanpower utility Eskom andMozambiques Electricidade deMocambique (EDM) to supplyelectricity from the third quarter ofthis year until July 2014. Eskom willbuy 92MW and EDM the remaining15MW. City law firm Linklatersadvised Aggreko on the deal.

Rupert Soames, Aggrekos chiefexecutive, said he saw opportunitiesto replicate the project in theregion. Aggreko could sell power toutilities or directly to privatecustomers, including mines.

As part of the Eskom/EDM deal,

valued at $250m over two years,

Aggreko will build gasinterconnections, a substation anda 275 kV transmission line. Part ofthe infrastructure will go to EDM atthe end of the contract.

The gas used in the plant, to bebased at the Ressano Garcia borderbetween South Africa andMozambique, is part of gas given toMozambique as a royalty bypetrochemicals group Sasol, whichis operating the onshorePande/Temane gas fields.

Soames said the gas-fired powerwas more expensive than electricitygenerated by Eskoms own coal-firedpower plants, but declined to givedetails. Aggreko supplied power tothe 2008 Beijing Olympics, while itwon a contract to supply Japan after

its earthquake and tsunami.

Wow! Stuff, the UK toymaker that makes gadgets for Dr Who and the Science Museum, issuing 16 undisclosed high street names across the UK and Europe for selling counterfeits ofone of its best-selling toys. The company said it also sent over 500 letters to retailers andmanufacturers across the world to protect its Air Swimmers remote control flying fish.

COPYCATS UNDER SHARK ATTACK FROM TOYMAKER

Mecom Group PLC


160

140

120

100

80

p 76.006 Jun

PINEWOOD Shepperton yesterdayunveiled an arrangement which

would see the Isle of Mangovernment buy a fifth of theBritish film studio for 24m.

The British Crown island said itis seeking a stake of up to 19.9 percent in Pinewood, which would inturn become an adviser to the Isleof Mans Media DevelopmentFund.

For an initial term of five years,the film studio behind most of the

James Bond films will source andadvise the Isle of Man on filminvestment opportunities for its25m fund.

The island has been active infilm and TV since 1995 Me andOrson Welles, starring Zac Efronand Claire Danes, was filmed

there and has invested 170m in

Pinewood Studios to give 20pcstake and advice to Isle of Man

BY LAUREN DAVIDSON 97 productions.Eddie Teare, the Isle of Mans

Treasury Minister, said: Its clearthat the international filmindustry is undergoing significantchange particularly in financingand production.

Developing an investmentstrategy with an establishedpartner which has aninternational reputation in filmand television and in bringingproduction to the UK will help[the Isle of Man] to build furtherupon the success that it hasachieved in what is a growthsector for the world economy.

The islands film and TVinvestment has for the last five

years been managed byCinemaNX, from which a coreteam would join Pinewoodsadvisory group for continuity

reasons.

Photography: Simon ProcterMillinery: Stephen JonesAttire: Antonio Berardi

royalascothospitality.co.uk

0844 411 5081


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PREMIER Oil was yesterday buoyedby a new oil find in the North Sea.

The FTSE 250 explorer said thatits Carnaby exploration well hadfound oil.

Premier owns 50 per cent of theproject while Cairn has a 15 percent holding. Nautical Petroleumalso has a 15 per cent slice.The company said that it had

drilled to a depth of 4,695 feetwhen it discovered oil.

The British explorer said thatthe oil was good quality, compara-ble with that at its Catcher discov-ery.

Shares in Premier jumped bymore than seven per cent after theannouncement.

Cairn enjoyed a boost of morethan 3.5 per cent.

Chief executive Simon Lockettsaid: The discovery of good quali-ty oil in the western part of theblock is encouraging and theresults from the Carnaby well willbe used to calibrate the remainingexplo

cityam 2012-06-07

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