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HODGSONS MEN EARN A DRAW AGAINST FRANCE IN OPENING GAMESee Pages 30-31

WHY BRITAIN DOESNT HAVE ITS OWN MARK ZUCKERBERG See Forum Page 21 45www.cityam.com FREEISSUE 1,650 TUESDAY 12 JUNE 2012

BAILOUT BOMBSbrought home as the British arm ofSantander was cut from A+ to A.The bailout will see up to100bn

in bonds loaned from the EuropeanFinancial Stability Facility (EFSF) tothe Spanish government, whichwill in turn give it to weak banks.

This transfers banks bad debt totaxpayers, adding to the alreadyindebted governments burden.

But this is not the worst-case sce-nario. Analysts had feared thebonds would come from the perma-nent European StabilityMechanism (ESM), which onlyoffers loans that are senior to otherdebt. This could have scared off pri-vate investors even more.

Nonetheless, there are still risksfacing the plan. The EFSF is guaran-teed by Eurozone governments, andFinland says it will only consent tothe bailout if it receives collateralfrom Spain and if the governmentpromises to reform the banks.

Although the bailout will cer-tainly help the Spanish banking sys-tem, the fundamental situation inSpain is the same as it was a weekago, said economist Graeme Leachfrom the Institute of Directors.

We [saw] a predictable short-term

rally, but the future of the euro

remains in serious doubt. Thedomestic political situation inGreece and Spain is still likely toresult in some form of Eurozonebreakup.

Spains 10-year borrowing costs

rose 29.2 basis points (bps) to 6.508

per cent yesterday, while Italysjumped 26 bps to 6.032 per cent.

Italys stock market dropped 2.79per cent, while Spains Ibex slid 0.54per cent and the FTSE 100 fell 0.05per cent after a strong start.

BY TIM WALLACE

Traders saw an early rally disintegrate as fears over Spains debt burden grew

n Spanish borrowing costssoar despite 100bn loan

n Boost to equity marketsshort-lived as stocks fall

n Economists warn planwont stop euro breakup

SPAINS bank bailout comprehen-sively failed to gain market supportyesterday, as investors realised thedeal had done little to solve theunderlying problems facing theEurozones inefficient economies.

Prime Minister Mariano Rajoyclaimed on Sunday the 100bn(80.6bn) plan to recapitalise hiscountrys devastated banks hadresolved much of the cause of thecrisis.

But economists warned that aEurozone breakup remains a veryreal possibility, and after a briefspell of relief yesterday morning,Spanish and Italian governmentborrowing costs jumped sharply.

Stocks also rapidly lost early gains,with almost every major marketending the day below Fridays clos-ing level.The depth of the crisis was under-

lined further when Fitch down-graded leading Spanish banksSantander and BBVA last night, cut-ting their credit ratings from A toBBB+ following the states down-grade to BBB last week.And the international impact of

the countrys weakness was

Spanish 10-year yields soared

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[email protected]

Follow me on Twitter: @allisterheath

THE PRICE of oil tumbled three percent yesterday, with US crude at itslowest for the year, thanks to fearsthat the Eurozone debt crisis willengulf more countries and threatenpetroleum demand.

Also pressuring prices, topexporter Saudi Arabia said Opecmay need to raise oil output targetsat its Thursday meeting in Vienna.

Meanwhile, gold, normally a safehaven asset in economicallyuncertain times, only made gains of0.2 per cent to close below $1,600 anounce.

Oil tumbles on

downturn fearBY CITY A.M. REPORTER

GETTY

EU has contingency plansfor Greece currency exitEUROPEAN finance officials have dis-cussed limiting the size of with-drawals from ATM machines,imposing border checks and intro-ducing Eurozone capital controls asa worst-case scenario should Athensdecide to leave the euro.

EU officials have said the ideas arepart of a range of contingency plans.They emphasised that the discus-sions were merely about being pre-pared for any eventuality ratherthan planning for something theyexpect to happen none of thesources expects Greece to leave thesingle currency area.

But with increased political uncer-tainty in Greece after the inconclu-sive election on 6 May and ahead of asecond election on 17 June, there isan increased need to have contingen-cies in place, the EU sources said.The discussions have taken place in

conference calls over the past sixweeks, as concerns have grown thata radical-left coalition, Syriza, maywin the second election, increasingthe risk that Greece could renege onits EU/IMF bailout and move closer toabandoning the common currency.

No decisions have been taken onthe calls, but members of theEurogroup Working Group, whichconsists of Eurozone deputy financeministers and heads of treasury, have

Google deal with French publishersGoogle hailed what it called apioneering agreement in Franceyesterday over digitising out-of-printbooks, ending six years of litigationbetween the US search company andFrench publishers. The two sides said theyhad agreed a framework agreementunder which French publishers can striketheir own commercial arrangementsindividually with Google, which willexchange information with publishersinstead of scanning French books withoutconsent.

Primary schools face new curriculumMinisters have dropped plans for a lessprescriptive, slimmed-down nationalcurriculum for English primary schools,instead releasing detailed proposals thatdictate the fine detail of what should betaught in English, maths and science.

Cancer-hit Chvez set to run againPresident Hugo Chvez registered as acandidate for Venezuelas Octoberelection late yesterday dispelling doubtsover whether the cancer-strickenincumbents health would prevent hisrunning.

Airline chiefs attack Heathrow U-turnDavid Camerons decision to overturn plansfor a third runway at Heathrow isundermining Britains role as a leadinginternational gateway, bosses from theInternational Air Transport Associationclaimed yesterday.

Gay marriage plan could divorcechurch from stateThe Church of England faces its biggestrupture with the state in 500 years undergovernment plans to legalise gay marriage.

Cases of council tax arrears up 30pcRising rents, higher unemployment andthe financial squeeze have led to a sharpincrease in the number of people fallinginto arrears on their council tax, despitemost English councils freezing thishousing charge for the past two years.

Ex-Innospec CEO pleads guiltyThe former chief executive of chemicalsgroup Innospec, Paul Jennings, haspleaded guilty to paying bribes to officialsin Iraq and Indonesia.

Foreign purchases of US homes riseThe six-year slide in US home prices andthe dollar's weakness against somecurrencies are driving a property-buyingbinge by Asians, Canadians, Europeansand Latin Americans.

Headache for regulators at MF GlobalMost of the senior executives at MF Globalweren't registered with commoditiesregulators, meaning the executives can'tbe charged with supervision failuresrelated to the firm's collapse.

WHAT THE OTHER PAPERS SAY THIS MORNING

CYPRUS may become the fifthEurozone government to be bailedout because its banks are tooheavily exposed to the devastatedGreek economy, its financeminister warned yesterday.

The issue is urgent. We knowthe recapitalisation of the banksmust be completed by 30 June, andthere are a few days left, saidfinance minister Vassos Shiarly,

who said the application may haveto be made this month.

The government of the 18bn(14.5bn) economy has been unableto borrow on financial markets forthe past year, as private investorsdo not believe it can support its

battered banks.The Cypriot government would

need the equivalent of 10 per centof its GDP just to prop up Popular,its second largest bank, whichneeds an investor or the

government to come to its aid with1.8bn to enable it to meet itsregulatory requirements.

Shiarly said any bailout wouldfollow the Greek, Irish orPortuguese model of acomprehensive package, ratherthan the Spanish plan for a bank

bailout alone.Economists also fear that Italy

could follow Spain and Cyprus inneeding a bailout as its borrowingcosts are steadily rising.

Cyprus says it is

heading towardits own bailout

There could be a rush to withdraw euros if Greece were to leave the single currency

2 EUROZONE IN CRISIS

BY TIM WALLACE

BY LUKE BAKER IN BRUSSELS

To contact the newsdesk email [email protected]

IT seems that100bn no longer buysvery much these days. Yesterdayspost-bailout rally fizzled out almostas soon as the markets opened, as

traders innate over-exuberance soonturned into jaded realism. Spain andthe Eurozone are still in deep trouble;these days, you can only fool the

markets for a few hours.There are many lessons to be learntfrom the Eurozones latest botchedbailout. For a start, Spains govern-ment bonds have largely been boughtby Spanish banks and other domesticinstitutions of late foreigners haveshunned recent sales or cut back theirholdings, very sensibly. So the Spanishstate has been shifting its risky debtinto the hands of risky domesticbanks, not exactly a recipe for finan-cial stability. Sensible governmentshave been severing their links to theirbanking systems; Spain has been

EDITORSLETTER

ALLISTER HEATH

Euro establishment isnt learning any lessons from the crisis

TUESDAY 12 JUNE 2012

strengthening it. The government hasgot closer to its second-tier banks andwill end up nationalising the bulk ofthem; the banks have got closer to thegovernment. So the government willend up owning institutions whichthemselves own government debt.The circularity of it all is enough togive one a headache.What is even more depressing, at a

time when it has become apparent toall with eyes to see that even largeWestern democracies can go bust, is

that the world is busy implementingnew financial rules including theBasel banking agreement but also sol-vency measures for insurers thatstill assume that government IOUsare risk-free. This intellectual error cynics would see it as a deliberatedevice for governments to offload

their debt cheaply is a ticking timebomb under the global economy.Nobody has learnt much from theevents of the past few years; onceagain, flawed rules are being imposedwhich will eventually help bringdown the system they are meant to bestrengthening.Another problem is that the bailout

funds remain deeply defective, evenon their own terms. The EuropeanStability Mechanism (ESM) theEurozones permanent bailout fund will not be ready on time to providethe loan as the treaty setting it up still

any additional bank bailout.Last but not least, those pundits

who thought that all of Italys woeswould go away after Silvio Berlusconiwas booted out and replaced by atechnocratic (in other words, non-elected) government have also beenproved wrong. Yields on Italian debt

are rocketing once again; slowly butsurely, the pressure is mounting onRome. We already know that Cypruswill also require a bailout but its econ-omy is tiny. So far the French haveescaped unscathed, despite FrancoisHollandes election and his decisionto hike taxes, re-regulate the labourmarket and cut the pension age. ButItaly now looks in serious trouble. If ittoo succumbs, then all bets wouldtruly be off.

needs to be ratified by many coun-tries. The money will therefore haveto come from the European FinancialStability Facility (EFSF), the temporaryfund. The good news for Spainsexisting bondholders is that this newloan will not therefore be senior totheir own claims, as would have been

the case had the ESM been used. Thebad news is that the 100bn loanwill meet far more political opposi-tion: the Finns will demand collateraland rows will break out in othercountries. The even worse news, as wereported yesterday, is that the dealwill increase Spains national debt byabout 10 per cent of GDP and push itever closer to the danger zone. That iswhy Spanish bond yields hit 6.5 percent yesterday a critical situationgiven that it needs to borrow exten-sively on the debt markets over thenext few years, even in the absence of

discussed the options in some detail,the sources said.As well as limiting cash withdrawals

and imposing capital controls, theyhave discussed the possibility of sus-pending the Schengen agreement,which allows for visa-free travel among26 countries, including most of the EU.

Contingency planning is underwayfor a scenario under which Greeceleaves, one of the sources said.Limited cash withdrawals from ATMsand limited movement of capital havebeen considered and analysed.

Another source confirmed the dis-

cussions, including that the suspen-sion of Schengen was among theoptions raised.

These are not political discussions,these are discussions among financeexperts who need to be prepared forany eventuality, the second sourcesaid. It is sensible planning, that is all,planning for the worst-case scenario.The first official said it was still being

examined whether there was a legalbasis for such extreme measures.

The Bank of Greece is not aware ofany such plans, a central bankspokesman in Athens said.

The new jobs website for London professionalsCITYAMCAREERS.com

SANTANDER suffered a two-notchcredit rating downgrade yesterdayin the wake of Spains bailoutplans.

Fitch cut Santanders long-termdebt rating from A- to BBB+ with anegative outlook. Spanish peerBBVA was also downgraded by twonotches to BBB+.

Santanders UK arm was also hitby a downgrade, from A+ to A, asFitch lowered its view of theSpanish banking sector in the wakeof Madrids bank rescue plansannounced over the weekend.

Santander isdowngradedBY CITY A.M. REPORTER

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THE OUTGOING chairman of profes-sional services firm KPMG was yester-day named as the first chairman ofone of the new City watchdogs.John Griffith-Jones will head up the

Financial Conduct Authority (FCA) one of two new regulatory bodiesthat will be created when theFinancial Services Authority isreplaced early next year.Ahead of the switchover, Griffith-

Jones will join the regulator fromSeptember as deputy chair, workingwith incoming FCA chief executiveMartin Wheatley to oversee the set-ting up of the new body.Announcing the appointment,

treasury secretary Mark Hoban saidGriffith-Jones new position would bea key role in the successful deliveryof the Governments plan for a newregulatory structure in the UK.

The FCAs remit will see it take onsupervision of market conduct for allretail and wholesale financial servic-

BY ELIZABETH FOURNIERes firms in the UK, as well as carryingout the existing powers of the UKListing Authority.

Having worked in the financialworld all my professional career, Iknow how important it is that con-sumers, investors and businesses havetrust in the integrity of the UKs finan-cial services industry and markets,Griffith-Jones said yesterday.

I see the future role of the FinancialConduct Authority as key to rebuild-ing that trust, in particular throughits increased focus on consumer pro-tection and choice.

Griffith-Jones appointment is thelatest sign of an increasing trend ofprivate sector bosses joining regula-tors and vice versa, after FSA enforce-ment chief Margaret Cole joinedfellow auditor PwC as general counsel.Though movements between the

private sector and regulators are com-mon in the US, where so-called revolv-ing door arrangements happenregularly, they have historically beenless popular in the UK.

KPMG veteran John Griffith-Jones is leav-ing behind a career spent at the big fourauditor to make a sideways leap into regu-lation where he could end up supervising

many of the financial clients he has workedwith during his 38 years at the firm.Griffith-Jones, who has twice sat on thejudging panel for the annualCity A.M.awards, started his career with KPMG in theaudit department in 1975.Eton-educated, he read economics atCambridge prior to joining the firm, wherehe spent 11 years as an auditor before mov-ing to the newly created corporate financeteam, making partner in 1987 and movinggradually up to head the UK team, eventu-ally becoming chair of the sectorsEuropean network.His management story began in 2002when he was made chief executiveof KPMGs UK operations a four-year term that ran until October2006, when he became senior part-ner and chairman of KPMG UK.As chief executive and thenchair Griffith-Jones has led

KPMG through two

global recessions as well as the increasedscrutiny on audit firms following the falloutfrom the Enron accounting scandal in 2001.In October 2007, his managerial responsi-

bilities extended beyond the UK for thefirst time when he became joint chairmanof KPMG Europe, and then again in 2008when he was made chairman of KPMGEMA, encompassing Europe, Middle East,Africa and India.When Griffith-Jones announced his deci-sion to retire from KPMG from Septemberthis year, it sparked a hotly contested racefor his job, with transactions and restruc-turing head Simon Collins eventuallyemerging victorious after a partnershipvote. His successor will take on the mantleof representing the firm as it faces an

ongoing investigation into marketdominance among the so-called bigfour, as well as dealing with EUplans to reform the audit marketacross its 27 member states the

outcome of which has been delayeduntil the UK Competition Commission

reports sometime in October.

By Elizabeth Fournier

Apple ousts Google from mapsapp as it unveils new platformAPPLE yesterday opened up a newfront in its competition with

Google as the Silicon Valley giantunveiled it would ditch GoogleMaps from its iPads and iPhonesthis autumn, as it also confirmedcloser ties with Facebook.

Speaking at the WorldwideDevelopers Conference (WWDC),chief executive Tim Cook and ScottForstall, Apples head of iOS,introduced a new version of itsmobile operating system foriPhones and iPads with an array of

BY KASMIRA JEFFORD new features, including its ownmapping system that lets userszoom over an image of a city inthree dimensions.

Apples mapping app will alsoinclude turn-by-turn navigation andvoice direction from Siri, Applesvirtual assistant app, to allowdrivers to get hands-freeinformation.

The move shows Apple furtherdistancing itself from Google, oncea close partner, which has providedApple with its mapping systemsince 2007.

It also signals challenges ahead

for global-positioning systemproviders such as Garmin andHarma, which saw shares plungelast night as Apples technology

threatens to sideline them.The iOS 6 software, to belaunched in the autumn, alsoincludes integration with Facebook,meaning users can send messages,links and photos to the socialnetwork without using an app.

The company also announcedrevamped models in its MacbookPro and Macbook Air ranges,including a new high-resolutionretina display.Apple boss Tim Cook said customers have downloaded more than 30bn apps this year

TUESDAY 12 JUNE 20123NEWScityam.com

PROFILE: JOHN GRIFFITH-JONES

Big four auditor

to head up newCity regulator

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Adam PosenwantsmoreQE

THE EUROZONE economy took a freshbeating yesterday, with Italy confirm-ing a sharp fall in GDP in the firstquarter and the OECDs leading indi-cators pointing to low growth persist-ing for the rest of the year.

However official data in Franceshowed a surprise rise in industrialproduction in April, defying expecta-tions of another monthly fall.

Italian GDP fell 0.8 per cent in thefirst quarter, and is now down 1.4 percent on the first quarter of 2011.

Private consumption fell one percent on the quarter while publicspending rose 0.4 per cent, leaving a0.6 per cent fall in domestic demand.

However, external demand alsodropped exports fell 0.6 per cent onthe quarter, hitting growth.

Meanwhile the OECDs leading indi-cators, which analyse forward-lookingdata such as consumer confidenceand job expectations to forecastgrowth in six months time, show lowgrowth will persist across Europe.

Its Eurozone index held steady at

99.6, Germanys stayed at 99.4 and

Eurozone set tostay weak allyear, says OECD

BY TIM WALLACE Frances held at 96.6, while Italys slidfrom 99.2 to 99.1.Any reading below 100 shows growth

below the long-run average.Frances industrial sector was a

bright spot, recording a 1.5 per centrise in production in April, rebound-ing from Marchs one per cent fall.

However, analysts warned thisshould not be taken as an indicationof a turning point in the crisis.

High unemployment in France, thereduced competitiveness of Frenchcompanies and fiscal tighteningacross Europe will continue to weighon production, warned Barclays.

GERMAN Chancellor Angela Merkel yesterday reassured opposition parties that she doeswant an EU-wide financial transactions tax. She needs their support to implement herfavoured Eurozone fiscal compact, which they will only give if she supports the tax.

MERKEL BACKS FINANCIAL TRANSACTIONS TAX

The OECD predicts low growth in the Eurozone

201220102008200620042002

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96

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100

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leading

index

BANK of England official AdamPosen yesterday said that he wasdisappointed by the weak impactof the 1 trillion (808bn) theEuropean Central Bank (ECB)

pumped into banks late last year,and argued that the time has comefor the Bank of England to buy upcorporate debt.

The ECB had hoped to stop anew credit crunch emerging andreduce the pressure on troubledEurozone governments.

But the positive impact onlylasted a few months, and MonetaryPolicy Committee (MPC) memberPosen said the Bank of England

Posen: After ECBs failure, the Bank of Englandshould purchase corporate debt anddefend QE

BY TIM WALLACEmust now print more money tohelp restore UK firms confidence.

Businesses are hoarding moneybecause they are afraid of theeconomys weakness, saidPosen but thathoarding itself

creates furtherweakness in theeconomy.

To rectify this,theBank of Englandshould extend its

VOICE OF THE CITY: Page 14

TUESDAY 12 JUNE 20125EUROZONE IN CRISIScityam.com

SOME countries are falling behind inthe implementation of the Basel IIIrules designed to strengthen thebanking system, the BaselCommittee warned yesterday.

The report said it is provingdifficult to monitor EUimplementation because of thewide range of draft directives thathave been published, and that theEU must ensure proposed capital

requirement deductions do notreduce overall levels of capital.

Basel confusedby directives

BY TIM WALLACE

quantitative easing (QE)programme to buy corporateassets, lowering borrowing costsfor firms and boosting theirconfidence, he said in a speech.

Such an extension could keepus from going further into a self-

fulfilling cycle of fear andcontraction, he argued.The arch-dove, who is stepping

down this summer, alsosaid opposition to

such a move shouldbe met with robustdefence by theBank of England,which should

explain QEsaims firmly.

EUROPEAN regulators warnedyesterday that insurers solvency isdeteriorating because of persistentlylow interest rates and marketturmoil triggered by the Eurozonedebt crisis.

Europes top 20 insurers are ingood overall financial health withaverage capital reserves at 200 percent of the required minimum, buttheir solvency ratios have started

slightly to decrease, EIOPA said inits twice-yearly stability report.

Solvency fearsfor EU insurers

BY CITY A.M. REPORTER

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THE BRITISH Bankers Association

(BBA) is expected this morning toannounce that Anthony Browne,former aide to London Mayor BorisJohnson, will be its new chiefexecutive.

Browne, who until recently wrotea weekly column in City A.M., willtake over the post from outgoinghead Angela Knight. This year he hashelped Morgan Stanley with itsgovernment relations department.

Since the financial crisis the BBAhas faced a stern task representingan industry that frequently comesunder fire and faces growingpolitical interference and regulation.

Knight, a former Tory MP, hasspent half a decade atthe helm of theBBA. She isleaving tobecome CEO ofanother trade

body Energy UK.

Banking tradebody to namenew chief exec

BY CITY A.M. REPORTERGETTY

TESCO reported its fourth consecu-tive quarter of falling sales yesterdayas the grocers 1bn recovery planfollowing its shock profit warning inJanuary struggled to gain pace.

Britains largest retailer said UKlike-for-like sales excluding VAT andfuel fell 1.5 per cent in the 13 weeksto 26 May, only slightly up on a 1.6per cent decline in the last quarter.

But chief executive Philip Clarkedefended the groups performanceand described it as steady andimproving relative to the market.

He said very little of the 1bn

planned investment had been spentbut added that shoppers are respond-ing well to changes made in stores.

Theyre telling us they like whatthey see, he said.

Tesco recoveryfails to ignite

growth in salesBY KASMIRA JEFFORD The firm saw its best week for sales

outside a Christmas period ahead ofthe Jubilee with over 1bn in sales.

It is not getting any worse, but itsnot getting any better. The great hopewould be that fuel prices are going tocome down, Clarke said, remainingbearish on the outlook.

Worlds airlines are poles apartas turbulence hits the EurozoneAIRLINES around the world arebraced for the Eurozones turmoil tothreaten profits and even claim thescalp of some firms.

The International Air TransportAssociation (IATA) left this yearsglobal airline profit forecastunchanged at $3bn (1.93bn), or 0.5per cent of industry revenues.

But this stable outlook fails toshow the widening gulf betweenrelatively prosperous regions suchas South America and thestruggling European carriers.

IATA almost doubled its forecastfor European airline industry losses

BY MARION DAKERS in 2012 to $1.1bn, from its previousforecast of a $600m loss released inMarch.

But it gave a hefty boost to itsforecast for North Americanindustry profits, to $1.4bn from aprevious estimate of $900m.

We see the market as being quitepolarised, said KPMG transportadvisory partner James Stamp.

Airlines that will struggle arelikely to be the smaller airlineslacking scale and network benefits.

Regional airline Flybe yesterdaybeat lowered forecasts for its fullyear results, posting an underlyingpre-tax loss of 7.1m.

It called the performance, which

was hit by a five per cent decline inits core UK market and 3.7m oflosses at its Flybe Europe division,disappointing, even as revenuesrose 3.3 per cent.

A domestic airline feels the pinch thanks to thechancellors double dipping Air Passenger Duty

THE UKs largest regional airlineFlybe used its distinctlyearthbound results to attackGeorge Osborne yesterday,

counting illogical hikes in stealthtaxation among the causes of its6.2m pre-tax loss. While Osbornegot deservedly upbraided thisweekend when he tried to make theEurozone crisis an excuse for theUKs stuttering recovery, Flybe has abetter case for passing the buck. Theeconomics of airlines are neverpretty, but regulatory weight doesnthelp a bad situation.

It wasnt always this way. Flybesshares soared on listing in late 2010,but a series of profit warnings hastaken its market cap down to around24 per cent of its listing value. Itremains popular with passengers,and has excellent punctuality scores,

but those arent enough in amarketplace where UK domestic air

travel has fallen by a fifth since 2007,and the airlines fuel costs rose 15per cent over the last year.

When coping with those kinds ofeconomic headwinds, its nothelpful to find the governmentholding you back. Yet by operatingfour times more domestic UK f lightsthan anyone else, Flybe finds itselfdoubly weighed down. First, it mustpay the Air Passenger Duty (APD) which rose by eight per cent in April

and is the highest aviation tax leviedin Europe. And as if that wasnt

enough, it must pay APD twice onmost of its flights. APD is levied onevery flight taking off from a UKairport, so domestic flights get hitcoming and going. Flybe has alreadypaid 119m, 11 per cent of its FlybeUK revenues, in APD.

With the government about tolaunch its UK aviation consultation,Flybe at least has the chance to makeits case. Its European expansionplans will have to contend with theunpredictable consequences of theEurozone crisis and a looming tit-for-tat air war between global carriersand the EUs Emissions TradingScheme. Meanwhile China isplanning to build 70 new airports by2015. Flybe cant pass all the blame,but politicians have certainly madethe UK and Europe cruel places to bea regional airline.

Marc Sidwell is City A.M.s managingeditor.

BOTTOMLINE

MARC SIDWELL

Tesco boss Philip Clarke shrugged off Marks a nd Spencers move into the banking sector

Tesco PLC

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TUESDAY 12 JUNE 20126 NEWS cityam.com

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We see this as a steady statement suggesting stabilisation is comingthrough in the UK, which we find encouraging after sustained underperfor-mance. For the uber bears there is no warning, which is an importantfoundation to the rebuilding of Tescos investment credentials.

ANALYST VIEWS

We continue to believe that Tesco is still a strong business with an unas-sailable market leading position in the UK that has temporarily come off therails. Nevertheless it is hard to see anything other than pedestrian earn-ings growth from the company over the next three years.

The sales numbers do not provide significant support for our view that

Tesco is fixable. Investors dont have to look very deeply into the numbers to seesome disappointing sales growth despite accelerating investment. But webelieve that UK profits will (eventually) improve, as will group returns.

DO TESCOS RESULTSSUGGEST A FINANCIALTURNING POINT?Interviews by Lauren Davidson

CLIVE BLACK SHORE CAPITAL

FREDDIE GEORGE SEYMOUR PIERCE

PHILIP DORGAN PANMURE GORDON

Anthony Browne isbelieved to be theBBAs new head

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GORDON Brown vehemently deniedto the Leveson inquiry yesterday thathe had threatened to make war onRupert Murdoch after The Sunswitched its support to theConservative Party in 2009.

This conversation never tookplace... I am shocked and surprisedthat it should be suggested, the for-mer Labour Prime Minister saidunder oath.This directly contradicts the evi-

dence given to the media inquiry also under oath by News Corp bossRupert Murdoch last month.

At no point in the three years I wasPrime Minister did I feel I had the sup-port of The Sun, Brown said, adding:I have never asked a newspaper fortheir support directly and insistingthat his meetings with the mediamogul were few and far between.

He continued to deny that he or hiswife gave the red-top permission torun the story about his sons illness.

George Osborne took to the Levesonhot seat after Brown yesterday.

The chancellor was quizzed on his

Brown denieshe threatenedwar on Murdoch

BY LAUREN DAVIDSONinvolvement in News Corps bid forBSkyB, which has thrown a shadowover Jeremy Hunts time in office.

Osborne called the bid a politicalinconvenience, saying he did nothave a strong view about its meritsbecause I felt it was going to cause ustrouble one way or the other, refer-ring to the Tory-backing newspapersboth for and against the bid.

He added: I think that judgmenthas been borne out by events.Asked whether reassigning Vince

Cables responsibility for the takeoverbid to Jeremy Hunt once it emergedCable was not in favour of the deal resulted in an equal and oppositeproblem, the Tory MP said that wasnot considered, saying he did notknow what the culture secretarysviews on the matter were.

Osborne told the inquiry the pres-sure was enormous to respond quick-ly to the political problem that hadbeen unleashed on the government,which is why the decision to appointHunt was made hastily but said itwas complete nonsense that therewas a vast conspiracy between News

Corp and the Conservative party.

Financial Services Bill attackedfor reliance on Bank of EnglandLABOUR peers yesterday called the

Financial Services Bill a dogsbreakfast that fails the four tests ofaccountability, clarity, efficiencyand transparency.

The legislation, which will revampthe existing regulatory system andhand new powers to the Bank ofEngland, was receiving its secondreading in the House of Lords.

Opposition spokesman LordEatwell said that instead ofdrafting a new template for the

BY JAMES WATERSON financial services industry thegovernment had constructed adogs breakfast of amendments to

earlier legislation.Treasury minister Lord Sassoondefended the Bill, saying that the cur-rent system had failed because noone had the single responsibility tomonitor the financial system.

Instead of dividing responsibilityfor financial stability, we are puttingthe Bank of England clearly incharge, he added.

But former City minister LordMyners claimed Bank chief Mervyn

King spent more time in board meet-ings talking about tennis than aboutissues of financial stability.

Former cabinet secretary LordODonnell used his maiden speech inthe Lords yesterday to warn that theTreasury is in danger of beingswamped by the pressures placedupon it. He said the turnover rate isfar too high and its pay levels toolow, and suggested that theTreasury offices overseeing finan-cial services could be fundedthrough payments from the banksand other firms they police.

Gordon Brown told Leveson he did not give The Sun permission for its story about his son


GEORGE Osborne is expected togive ground over regulation ofcertain areas of small businessbanking this week, but banks arestill angry about his plans for a so-called depositor preference.

The chancellor is set to indicatea willingness to allow banks tooffer some simpler hedging toolswithin their ring-fenced retail

arms, when he outlines his plansto implement the reforms set out

Banks still angry over Vickersdespite small firms concession

BY PETER EDWARDS by the Vickers commission duringThursdays Mansion House speech.

Banks are concerned thatdepositor preference rules willpush up the costs of wholesalefunding and do little to stabilisethe economy in the event ofanother crisis.

The Treasury, which declined tocomment, will press ahead withthe depositor preference and plansto introduce draft legislation

based on the commission by theautumn.

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MORE THAN 48,000 staff at the RoyalBank of Scotland will have to workup to five years longer to qualify fortheir full pension unless theycontribute five per cent of theirsavings, it emerged yesterday.

The taxpayer-owned bank toldstaff it wants to raise the retirementage from 60 to 65 to ensure that thegroup can afford to sustain the finalsalary pension scheme a movestaff union Unite argued wouldmake it unaffordable for many staff.

RBS changespension terms

BY KASMIRA JEFFORD

THE GLOOM around private equitywas lifted yesterday when Londonbuyout firm Montagu closed the auc-tion of German bandages firm BSNMedical with a sale for around1.8bn (1.45bn).

Swedens EQT has agreed to buy the665m turnover firm in one ofEuropes largest deals this year. BSNhad attracted interest from personalcare group Kimberly Clark and buy-out firms including BC Partners andCVC, who made a joint bid.The sale will come as a relief for

Montagu, which bought BSN for1.03bn in December 2005 and hasmade three times its money on theequity.

Montagu, the owner of waste man-agement firm Biffa and hair straight-ener GHD, was successful in its thirdattempt to exit BSN. In 2008 it wasforced to abandon a sale because ofthe financial crisis and two yearslater it failed with a f lotation valuing

Montagu wraps

up deal to sellbandage firmBY PETER EDWARDS

the company at as much as 2bn.Yesterdays deal, which is subject to

statutory regulatory clearances, givesEQT control of a relatively recession-proof business.

We view BSN as a highly attractivegrowth case with strong resilienceacross the business cycle, saidMarcus Brennecke, partner at EQTPartners in Germany.

While continuing to strengthenthe position in key markets and inkey product segments, there istremendous potential in enteringnew geographic markets, especiallyin Asia and Latin America, he added.

BSN Medical markets its wound andfracture care products international-ly under a range of brand namesincluding Gypsona, Actimove andCutimed.

It posted 2011 earnings before inter-est, taxes, depreciation and amortisa-tion of roughly175m.

Goldman Sachs and HSBC workedas sell side advisers. Morgan Stanleyand Deutsche Bank advised EQT.

Paradigm shift as Apax leads$1bn deal for oil tech businessPRIVATE equity house ApaxPartners has taken a bet on the

continuing global thirst for oilexploration in leading a deal wortharound $1bn (643m) for Paradigm.

Apax and JMI Equity have agreedto buy the software group, whichsells its technology to oil and gasexplorers and producers, from USinvestment group Fox Paine.

Paradigm, which has more than700 customers and operations inthe US, Europe and Asia, helpsengineers to make drilling and

BY PETER EDWARDSproduction decisions by analysingseismic data.

The deal will allow Apax to tapinto the potentially lucrative oil and

gas markets as energy companiescontinue to drill in morechallenging locations.

Paradigm... is well-placed tobenefit from strong tailwinds in thecoming years as energy companieslook to drill in more challenginglocations, said Ian Jones, a seniorpartner at Apax, which is based inLondon.

The software it provides is thebest in the market, leading to

strong, established relationshipswith its customers andunderpinning an attractive businessmodel.

Bank of America Merrill Lynchand Simmons & Co advised Apax,with UBS and Royal Bank of Canadaproviding debt financing. Jefferiesadvised Paradigm.

It is the latest tech deal for Apax,whose previous IT and softwareinvestments have includedAutonomy, which it came out of in2001. Mike Lynchs firm went on tobe bought by Hewlett-Packard for6.2bn in August last year.

PROSPECTS for Evoniks secondIPO attempt dimmed yesterday asinvestors made it clear thatproposed valuations for theGerman speciality chemicalcompany were too high, saying onlya big discount to listed peers mightdo the trick.

The market right now is notwilling to pay for projected long-term earnings, said oneinstitutional investor, whodescribed Evonik as a super

Investors call for a discount tosalvage Evonik attempt to float

BY CITY A.M. REPORTER company, a gold mine, jitterymarkets notwithstanding.

The market wants an extremediscount and if that discount is notthere, no one will take the risk,said the investor, adding market

volatility required an IPO discountof more than 20 per cent on themultiples of established groups.

Evoniks owners German state-controlled trust RAG and buyoutfirm CVC said on Sunday Evonik

was increasingly unlikely to fetchan appropriate price if it listedsoon as initially planned.

GERMAN residential propertyinvestor Deutsche Wohnen plans toraise up to 475m (383m) to helpfund its deal to buy a portfolio offlats in Germanys prosperousproperty market.

It will issue up to 43.8m newshares and offer investors threeshares for each of the seven theyalready own.

The capital raising comes justdays after Deutsche Wohnen agreedto buy the 1.24bn propertyportfolio, known as Baubecon, fromBarclays.

German real estate group GSWand its former owner WhitehallFunds were also thought to be inter-ested in the portfolio.

The deal is made up of about

23,500 apartments with a lowaverage vacancy rate of 2.7 per cent,

Deutsche Wohnen set to raise475m for Barclays flats deal

BY PETER EDWARDS most of which are located in or nearcities including Hanover, Berlin andMagdeburg. It boosts DeutscheWohnens stock of apartments byalmost half to 73,500.

Deutsche Wohnen said thesubscription price for the shareissue would be set after the close oftrading on June 19 at the latest.

Baubecon fell into Barclays handsat the end of 2011 when its formerowners were unable to pay backloans.

The sale is one of severaldivestments of large Germanproperty portfolios. Investors areflocking to the German propertymarket, attracted by a steady rise invalues in the last couple of years,which contrasts with the boom-and-bust of the Spanish and Irish realestate markets.

US CONGLOMERATE UnitedTechnologies has offered to sellassets to secure EU regulatoryapproval for its $16.5bn (10.6bn)takeover of US aircraft componentsmaker Goodrich, a person familiarwith the matter said yesterday.

The European Commission hasbeen examining the deal, UTCsbiggest in a decade and with whichit aims to build critical mass in newaircraft technology and planeservices as civil aviation demandrecovers.

UTC, whose products includePratt & Whitney engines andSikorsky helicopters and which is atop player in aircraft landing gear,has proposed divestments, said thesource, who declined to provide

detail because of the sensitivity ofthe matter.

UTC offers EUconcessions




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HEDGE fund manager Man Groupsaid assets at a key European fundhave reached $565m (364m).

Its GLG Europe Plus Sourceexchange-traded fund was launched

in January last year to track theMan GLG Europe Plus Index, createdby Man Systematic Strategies.

The index is a long-only totalreturn equity index, designed tocapture outperformance frombroker ideas provided specificallyfor Man GLG.

Pierre Lagrange, co-founder ofGLG, said: We started collectingtrade ideas in 2005 at GLG, initiallyto monitor brokers and then to

Assets boost for key GLG fundprovides a ray of light for Man

BY PETER EDWARDS create strategies using this uniqueset of broker relationships. Thehurdle rate for the brokers is to beatour internal stock pickers, who arevery successful, which raiseseveryones game.

The funds performance has

provided some counterbalance tothe disappointing returns of AHL,Mans computer driven fund. Fromlaunch of the index on 30December 2010 to 30 April this yearthe Man GLG Europe Plus Index hasoutperformed the MSCI Europe by2.1 per cent.

Man, the worlds largest listedhedge fund, has endured a difficultyear. Last week it learnt it wouldlose its place in the FTSE 100 index.

Evonik, led by Klaus Engel, has already pulled a previously planned listing

INSIDE TRACK: Page 12

THE FORMER managing partner ofbankrupt law firm Dewey & LeBoeufLondon was yesterday named as co-head of rival Morgan Lewis &Bockiuss London office.

John Sharp will become jointmanaging partner of the City firmsLondon base alongside ChristopherHarrison.

Sharp joined Morgan Lewisduring the mass exit of partnersfrom Deweys UK operations lastmonth.

Ex-Dewey bossjoins its rival


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CAMPAIGNING group FairPensions isthe latest critic to speak out againstSir Martin Sorrells contentious12.9m pay package, as tensionsmount ahead of WPPs annual meet-ing tomorrow.

Louise Rouse, director of engage-ment at FairPensions, said yesterday:Were urging shareholders to voteagainst WPPs remuneration packagebecause it contains a number ofexamples of unacceptable practiceincluding an excessive potentialbonus.

Equally worryingly, WPP has dis-played blatant disregard of sharehold-ers views on the companys paypolicies by awarding salaryrises.

In WPPs annual report,Jeffrey Rosen, the chair-man of its compensationcommittee, highlightedthat 2011 was a recordyear for the advertisinggiant and said the rise inSorrells compensa-tion is only thesecond time inthe last 10 yearshis pay hasbeen changed.

Pension group

joins row aheadof WPP meetingBY LAUREN DAVIDSON But Rouse told City A.M.: Those argu-

ments are not convincing. You cantrestrain pay in certain years and thengive it in one lump sum every fewyears. We think and its possible amajority of shareholders will agree that Sorrell is being paid too much forhis managerial role.The vote at tomorrows general meet-

ing is not binding, but reports over theweekend suggested a significantmajority vote against Sorrells paycould prompt the board to reconsiderthe chief executives compensation.

Sorrells pay last year included a1.3m salary, a 2m cash bonus, justover 1m in pension contributionsand benefits as well as 8.6m from var-ious share awards and holdings.

n In Fridays edition we incorrectlyreferred to WPPs financial restruc-turing as having taken place in2002. We are happy to confirm thatit was in fact in 1992 and that it isnow 20 years since Jeffrey Rosen,chairman of WPPs compensationcommittee, undertook any finan-

cial advisory work on behalfof WPP.

Its a tense time forSir Martin Sorrell

SAVERS are being urged to voteagainst executive pay deals atNationwide, the UKs biggest

building society.The Building Societies Members

Association (BSMA) has also calledfor savers in mutuals to be given a

binding vote on directors pay,according to ExaroNews.

BSMA says the Nationwideboard should consult more andkeep pay increases to levels closer

to those of the majority of thesocietys employees.

Nationwide hitby pay criticism

BY JAMES WATERSON

PROPERTY investor HansteenHoldings suffered a 30 per centprotest vote against its executivepay plans yesterday as institutionalinvestors showed concerns overpotentially unlimited share awards.

This is up from a 16.5 per centvote against the firmsremuneration report last year, aspart of a long-runningdisagreement over the FTSE 250firms uncapped long-term

incentive programme, set up forthe founders when the firm listed.

Hansteen shareaward attacked

BY MARION DAKERS


THERE was some positive newsfor Credit Suisse yesterday asthe investment bankannounced its role as joint lead

manager of one of the larger shareissues in Europe this year.Along with UBS, its arch rival,

Credit Suisse is joint global co-ordi-

nator and joint bookrunner forDeutsche Wohnens 475m (383m)rights issue to help fund the acquisi-tion of a property portfolio it recent-ly bought from Barclays Bank.The mandate is a welcome boost

for the investment bank, which hasbeen struggling to improve marketshare in the obsessively watchedThomson Reuters and Dealogicleague tables despite the large num-

ber of investment bankers it carrieswithin its ranks.

One of Credit Suisses characteris-tics is that it has a high cost base,which it is trying to trim. At the endof 2011, for example, it employed20,900 investment bankers, which is200 more than at the beginning ofthe year.

So despite being involved in the

gargantuan Glencore merger withXstrata Mark Echlin was one of theonly bankers that Ivan Glasenbergtook on the road with him duringlast years IPO and acting on themega UniCredit rights issue earlierthis year, the bank is simply not busyenough to justify its cost base.

Partly this is a reflection of the diremarket conditions all investmentbanks are currently facing, but part-ly there is a feeling that in many ofthe banks advisory functions, it issimply punching below its weight. Iwould argue that they have got alarge bench of non-performingmediocre bankers, said one rival.The word on the street is that we

are about to witness a large cull of

up to 30 per cent of the managingdirectors and directors involved ininvestment banking in Europe.

Credit Suisse declined to commenton this. Sources close to the banksaid that if such a move wasannounced, it would all be part ofthe 1,500 headcount reductions that

are still to be implemented followingan announcement last year.Bankers say that Credit Suisses

management is frustrated by theconstant losses the bank makes inthe advisory side of investmentbanking. Having weathered thefinancial crisis towards the end ofthe last decade, the feeling is thebank then wasted an opportunity totake market share from weakened

competitors.However, its also clear that this is

not just a Credit Suisse problem.With so few IPOs and relatively littleM&A and capital raisings, all invest-ment banks are having to keep anever watchful eye on costs. Thankheavens for the likes of Deutsche

Wohnen.Meanwhile word reaches me of anexciting hire for UBS, which is busystrengthening some advisory teams.

David James, Citigroups chairmanof corporate broking, has quit thebank and is set to join UBS as jointhead of corporate broking inSeptember.

[email protected] me on Twitter @hellierd

INSIDETRACK

DAVID HELLIER

Credit Suisse braced for a further reduction in costs

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IN BRIEFRestaurant Group hires Savillsn The Restaurant Group, the owner ofthe Garfunkels and Frankie & Bennyschains, has hired property agentsSavills to help scour the Midlands, EastAnglia and South Wales for newrestaurant sites. The company plans toadd a further 35 sites in 2013,primarily in leisure parks andshopping centres.

Goals bid deadline extendednGoals Soccer Centres, which runsfive-a-side football centres in the UK,said yesterday it has extended for athird time the deadline for OntarioTeachers Pension Plan to make a bidfor the firm. The Canadian pensionfund, which also owns Camelot, theNational Lottery operator, made a bidfor the firm in April. The Takeover Panelhas now agreed to a further extensionto 9 July.

First Property posts rise in profitsn First Property Group, the Aim-listedfund manager, said it will continue tofocus on the UK and Poland, as it post-ed a 35 per cent rise in pre-tax profitsto 3.97m. Net assets under manage-ment fell slightly by 1m to 365m for

the year to 31 March.

Eurotunnel takes Sea France boatsn Eurotunnel is to buy the three shipsof bankrupt cross-Channel ferry opera-tor SeaFrance for 65m, the Channeltunnel operator said yesterday, dippingits toe into sea transport.

LONDON was yesterday named asthe worlds top visitor destination forthe second year running, accordingto the MasterCard Global Destination

Cities Index.The report shows that Britains cap-ital has retained its number one posi-tion in terms of visitor numbers,with 16.9m tourists expected thisyear. It is also expected to record thehighest international visitor spend,with tourists set to spend $21bn(13.6bn).

Second place for international visi-tor spend goes to New York, where7.6m tourists are expected to spend$19.4bn. Bangkok is a close thirdwith $19.3bn from 12.2m tourists.

This year weve seen a real distinc-tion between financial markets andconsumer markets. Modern finan-cial markets are truly interconnectedso a crisis in one region quicklyimpacts the rest of the world, saidMasterCards Dr Yuwa Hedrick-Wong, the author of the report.

Cities focused on consumers rise

and fall based on local conditions,such as employment and income,with conditions varying greatly fromone city to the next, irrespective ofthe global economic environment.The annual report is put together

using international flight capacitydata and spending estimates fromthe United Nations and InternationalMonetary Fund.

London is top tourist destinationBY JAMES WATERSON

LAURA Ashley, the British homeinteriors and fashion designer,has continued to buck the gloomon the high street, reporting astrong boost in sales yesterday.

The chain said total salesclimbed by 4.1 per cent in thefirst 18 weeks of the year to 2June, while like-for-like revenuesjumped by 5.4 per cent.

Strong sales were driven in partby improvement to the LauraAshley website, which has started

showcasing its full rangeof furniture for the firsttime.

Online sales in turnincreased by 18.8 per centcompared to the sameperiod last year.

It launched a fullmobile website in theperiod as well as an e-commerce website thatcan be used by its Frenchcustomers.

The company, best known forits floral prints, remainedbullish in its outlook for the

year saying in a statementthat its well-establishedbrand, high-quality productoffering and strong balancesheet will ensure the like-for-like sales growth trendcontinues across the retailbusiness for the rest of

2012.Shares in the firm

remained unchanged at23p yesterday.

TUESDAY 12 JUNE 201213NEWScityam.com

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A model dons Laura Ashley gear

Laura Ashley lends colour to thehigh street as trading flourishes

VIRGIN ACTIVE said yesterday itplans to invest 25m on revampingthe 53 Esporta clubs it bought last

year to bolster its presence in theUK, as the group unveiled a surgein full-year profits.

The fitness group, which runs259 sites in the UK, Europe,

Australia and South Africa saidthat underlying earnings rose nineper cent to 126.8m in the year to31 December 2011.

Membership jumped 25 per centto 1.21m customers with the helpof its 77.6m acquisition of theEsporta estate, bringing its total

BY KASMIRA JEFFORDnumber of clubs in the UK to 122.

The company, which is owned byRichard Bransons Virgin groupand CVC Capital, is also plottingits expansion in Asia to help offseta slowdown in Europe.

Last October, Virgin Activebought four clubs in Australiafrom Virgin Group and it said

yesterday it will use these as aspringboard for growth in AsiaPacific.

Chairman Richard Baker saidthe group secured a new deal withits lenders last month, providinga strong financial platform tocontinue its growth.

BY KASMIRA JEFFORD

Virgin Active invests in UK andeyes further expansion abroad

WHERE DO TOURISTS SPEND THEIR MONEY?

#1 LondonVISITOR SPEND: $21.1BN

#2 New YorkVISITOR SPEND: $19.4BN

#6 Los AngelesVISITOR SPEND: $12.5BN

#3 BangkokVISITOR SPEND: $19.3BN

#4 ParisVISITOR SPEND: $17.8BN

#5 SingaporeVISITOR SPEND: $12.7BN

#7 MadridVISITOR SPEND: $11.5BN

#8 SydneyVISITOR SPEND: $11BN

#9 FrankfurtVISITOR SPEND: $10.9BN

#10 SeoulVISITOR SPEND: $10.6BN

n TOP FIVE ORIGIN CITIES FOR TOURISTS IN LONDON:DUBLIN, NEWYORK, STOCKHOLM, AMSTERDAM AND FRANKFURT

n AMOUNT SPENT BY INTERNATIONAL VISITORS TO CARACAS EXPECTEDTO FALL BY 9.3 PER CENT

n PARIS VISITOR NUMBERS EXPECTED TO FALL BY 0.6 PER CENT BUTAVERAGE SPEND WILL BE UP 1.5 PER CENT

n RIO DE JANEIRO TO ENJOY BIGGEST JUMP IN VISITORS, UP 28.6 PERCENTn ABU DHABI VISITOR NUMBERS SET TO RISE BY 17.9 PER CENT

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BUSINESS secretary Vince Cablelast night sought to find a halfwayhouse in the row over proposals toallow some companies to dismissunderperforming staff, suggestinginstead the option of mutuallyagreed settlements.

The government-commissionedBeecroft report, which proposedcompensated no-fault dismissal asa way of liberalising the UKsemployment laws, had comeunder stinging criticism fromtrade unions and humanresources groups such as theChartered Institute of Personneland Development.

Cable himself slammed theproposal as complete nonsensein late May, and last nightoutlined an alternative designedto liberalise the UKs red tape andboost growth, while alsoprotecting workers rights.

Settlement agreements aresmart, fair and pro-business

reforms, Cable said. It empowersemployers by enabling them tokeep their workforce flexible andencouraging alternative ways ofsolving workplace problems ratherthan resorting to a tribunal.

Under the plan an employer willbe able to offer a settlement to amember of staff that they wish tomove on, without the offer beingheld against them at a subsequenttribunal, should the disputeescalate.

Employees will also continue toenjoy full protection of theiremployment rights, asthey can choose toreject the offer of asettlementagreement andproceed to atribunal, Cablesdepartment forbusiness,innovation andskills (BIS) said.

The governmenthopes to encourage

more cases to be resolved prior totribunal, arguing that a sensiblecompromise can be reached in themajority of cases.

Cables settlement agreementswere welcomed by business groupthe CBI last night yet some lawfirms specialising in the arearemained sceptical.

I cant see how the emphasison settlement agreements is goingto either de-regulate theemployment field or encouragegrowth in business, said EstherSmith, a partner at Thomas Eggar.It is commonly the prospect ofpaying out compensation to

underperforming employees,rather than the ability tobroker a discussion with them,that deters smaller employers

from instigating suchdiscussions.

PICTURES:GETTY

TOKYO is the most expensive city inthe world for expatriates to live in,according to research released thismorning, regaining its top positionfrom Luanda, the capital of Angola.

London which has previouslybeen as high as second on the list is now in 25th place, behind the likesof So Paulo, Beijing and GabonsLibreville.

Karachi is ranked as the worldscheapest city for expatriates, lessthan one-third as expensive as Tokyo.The report, carried out by consul-

tancy firm Mercer, covers 214 inter-national cities and measures the cost

of over 200 items including trans-port, food, clothing, householdgoods and entertainment.

When compared to New York, ourbenchmark city, most European

BY JAMES WATERSON cities have witnessed a decline incost of living, said MercersNathalie Constantin-Mtral.

Exceptions exist where accom-modation prices have increased oradditional VAT taxes have pushedthe cost of living up.

In North America, most cities havegone up in the ranking, as the USdollar has strengthened against alarge proportion of the worldsother currencies.

BY JULIAN HARRIS

Cables proposalreceived amixed reaction


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JOBS 300K

LONDON

SHANGH

AI

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NEWYOR

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34.18

93.26

MOSCOW

103.88

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WHAT EXPATS PAYAROUND THE WORLD

LONDON SHANGHAI

12.00 8.05

NEW YORK TOKYO

8.39 14.54

MOSCOW

11.66ORDEMEPRO

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SAO PAULO

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LONDON SHANGHAI2800 2413

NEWYORK TOKYO2848 3068

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4.24ORDEME

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5.89

A PAIR OF BLUE JEANS

FAST FOOD HAMBURGER MEAL

A CINEMA SEAT

MONTHLY RENT OF LUXURY 2-BED FLAT

Cable seeks compromise inrow over no fault dismissal

n Tokyo, Japan

n Luanda, Angola

n Osaka, JapannMoscow, Russia

n Geneva,Switzerland

n Zurich,Switzerland

n Singaporen NDjamena, Chad

n Hong Kong

n Nagoya, Japan

TOP 10 MOST EXPENSIVE

WAS EUROPE RIGHT TO BAIL OUTSPAIN? Interviews by William Orr and Lisa Moravec

The bailout will help Spain in the long-run,but other countries in the Eurozone are

going to want the same bailout on the same terms,which could be extremely problematic.

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

CABOT LYMANCNBC

It was the least that was needed for theSpanish banking system. Its short term

good news, but longer-term there are still fundamen-tal problems that need to be fixed.

MICHAEL WRIGHTFRIENDS LIFEINVESTMENTS

I dont know whether it has stabilised thesituation we are going to have to see what

happens in the next few months. I think that Italy willneed a similar bailout soon though.

STEFANO FARAK&K COMPANY

CITYVIEWS

RENEWABLE energy sourcessupplied 16.7 per cent of globalenergy consumption in 2011, butthe $257bn of investment in thesector was still 15 per cent lowerthan into fossil power generation,two bodies reported yesterday.

The investments were a 17 percent increase on the previous yearand 94 per cent higher than in2007, according to reports fromthe UN Environment Programme

and the Renewable Energy PolicyNetwork for the 21st Century.

Renewableenergy grows


Tokyo tops costof living table

for expatriatesCHIEF executives in the FTSE 100

enjoyed a median pay rise of 10 percent last year, according to researchpublished today.

While bosses were granted anaverage rise in salary of just 2.5 percent, cash bonuses alongsidebenefits in kind and expected shareawards bumped up the total payoutsto a median figure of 3.7m.

According to a survey by Manifestand MM&K, the rise was mainly dueto an explosion in the use of deferredbonuses and long-term incentives,which have been encouraged byregulators in order to foster a longer-term views of performance amongexecutives.

The jump compares to a one percent rise for employees of FTSE 100firms. Manifest, a proxy votingagency, said the figures highlight theneed to empower non-executiveswhen setting pay policies. Chief exec

Sarah Wilson added: Remunerationcommittees need more support fromshareholders in order to controlmanagements requests for greaterand greater rewards.

BY MARION DAKERS

FTSE 100 chiefsget 10 per centjump in pay

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BACK for a fourth year,Hurlingham Park in Fulhamonce again thundered with thehooves of world class polo

players for MINT Polo in the Park.Over 30,000 people packed thestands at the three-day event, tocheer on the six internationalteams from all over the worldincluding Sydney (IG Index),Moscow, Buenos Aires, AbuDhabi, Delhi and London.Throughout the weekend, a

number of celebrities includingLeona Lewis, models David Gandyand Elen Rivas, mother of FrankLampards children, and some of theMade in Chelsea cast dropped by toenjoy the polo and soak up thebustling atmosphere.

Guests looking to embrace the ulti-mate polo experience also madethe most of the weekend thanks to

The Veuve Clicquot ChampagneBar and the Jubilee decoratedCrown and Corgi pub.

Fans of Harrods fine food werenot disappointed as the iconicstore opened its famous pop-up

food court, just metres awayfrom the action.

The tournament was wonby the MINT London teamwho fought off the challengeof Camino Real Buenos Aires.

A jubilant home crowd cheered asMINT won narrowly by eightgoals to seven.

City A.M.s team Delhi unfortu-nately went out in the firstround. Theres always next year

to put that right, though.IG Index MD Tim Hughes with son and team

MINT Londons team celebrates below at the end of the tournament

Got A Story? Email

[email protected]

15cityam.com

cityam.com/the-capitalistTHECAPITALISTTUESDAY 12 JUNE 2012

MINT carries offthe polo crown

7/31/2019 Cityam 2012-06-12

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IN BRIEFSamsung denies Nokia interestnSamsung Electronics deniedyesterday it was interested in acquiringNokia. Nokia shares rose six per cent lastFriday on speculation of a possiblebuyout offer. Such reports are purelyspeculative and are not true, thecompany said.

Technicolor rejects new offern French set-top box maker Technicoloryesterday rejected a revised offer from aJP Morgan Chase investment fund to buya 30 per cent stake for 179m (143m)and opted instead for an original, loweroffer which it said was better structured.Technicolor said it would now try to getshareholder approval for the earlier offerof 169m from JP Morgan's JesperCooperatief fund.

Serco pays 55m for Vertexn

Outsourcer Serco yesterday said ithad bought Vertex Data Sciencefor 55m. The deal will bring the firmmore government contracts includingadministering child maintenance grantsand running job centres.

BAA refinances airport loansn Airports operator BAA said yesterdayit had completed a 2.75bn refinancingof its loan facilities for Heathrow andStansted airports in London. BAA,owned by Spanish group Ferrovial, saidthe new deal was made up of 2bn incredit and 750m in standby facilities.The new credit facilities mature in June2017, and replace similar facilities thatwere due to mature in August 2013.

UBC MEDIA, the multimedia contentprovider, fell to a multi-millionpound loss last year after writingdown the goodwill value of its busi-ness by 3m.

In its annual results, posted yester-day, the Aim-listed company reporteda loss of 3.6m, compared to a59,000 profit last year, as revenuesdropped by five per cent to 4.2m.

But UBC Media pointed towards itsdigital business as a source of growth,where revenues from mobile appsjumped by 108 per cent and incomefrom its web streaming playersincreased by 61 per cent.

In a transition towards its growingdigital business, UBC Media upped itsstake in UK internet start-upAudioboo to 40.3 per cent after buy-ing Imagination Technologys stakein the audio social networking tool.As part of the deal, Imagination

now holds a 9.8 per cent stake in UBCMedia, and the two companies yester-day announced a partnership thatwill see them handle the global

UBC pins hopeson digital as itsinks into red

BY LAUREN DAVIDSONlicensing and sales of Radioplayer, theUK radio industrys online media play-er.

UBC Media chief executive SimonCole said: This last year saw us hav-ing to work much harder simply tomaintain our position.

He cited shrinking commissionbudgets from broadcasters every-where, meaning that effectively pro-duction needs to increase just tomaintain turnover.

But he added the explosive growthin media devices and the new partner-ships announced yesterday set thecompany up for exciting opportunityon an international scale.

Supermarkets cut fuel prices asbattle at the pumps intensifiesSAINSBURYS and Asda yesterday

fired the latest salvo in a fuel pricewar among supermarket giants.A fall in global oil prices has

triggered the price drops, whichhave seen the big foursupermarkets Tesco, Asda,Sainsburys and Morrisons fight itout to offer the best deal.

Asda said that from today it is cut-ting up to 3p a litre from the price ofboth unleaded and diesel, makingfuel prices the lowest they have beenin over a year.

Drivers filling up at any of Asdas195 forecourts nationwide will pay

BY JOHN DUNNE no more than 129.7p per litre forunleaded and 134.7p per litre fordiesel.

Andy Peake, Asdas director ofpetrol trading, said: Motorists will bepleased to know fuel is now at thelowest price in over a year as priceshave fallen 11p since their peak inApril.

Unlike other retailers, our pricecuts benefit everyone across the coun-try, meaning that no-one filling up atAsda will be forced to pay a premiumfor their fuel.

At Sainsburys prices will be cut byup to 3p a litre from today dependingon the filling station, with regionaldifferences likely.

Unleaded prices will start from125.9p per litre and diesel prices willbe from 131.9p per litre.

A Sainsburys spokesman said:Sainsburys is committed to deliver-ing great value and helping cus-tomers cut down on cost whereverpossible.

Last month Tesco vowed to givemotorists a 10p discount at thepump if they bought 18 Andrextoilet rolls. Morrisons pledged a 12pcut if customers spend 60 in theirstores.

The price comes after the AA saidsupermarkets and petrol companieswere failing to pass on drops inglobal oil prices to their customers.

AN 18TH century warehouse built by the East India Company is to be relaunched as arestaurant and shopping complex. The Old Bengal Warehouse near Bishopsgate will housetwo restaurants, a cocktail bar and a wine shop when it opens in September, several monthslater than planned, under the ownership of Conran Restaurants owner D&D.

BISHOPSGATE SET FOR NEW RESTAURANTS

UBC Media Group PLC


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BMW said new models helped

boost its sales by 6.4 per cent

THAMES Water has come underfire for paying its top executivesclose to their maximum bonusesthis year in spite of hosepipe bans,

declining profits and complaintsabout its customer service.Boss Martin Baggs was paid

896,000 in the year, including a418,000 bonus or 87.7 per cent ofhis maximum payout. This figuredoes not include long-term shareawards that paid out in the year.

Baggs was paid six per cent lessthan in 2011.

Former chief operating officerStephen Shine was awarded709,000 for the year to March andchief financial officer StuartSiddall landed 369,000, having

Thames Water hands its execsbonuses despite profit slump

BY MARION DAKERS joined the firm in September.Shine can expect another payday

in July, when long-term shareawards worth 385,000 vest.

While the firm insisted that theremuneration reflected strong

company performance and deliveryof key strategic initiatives, theGMB said the payments were areward for failure.

The payouts were revealed as thefirm admitted that underlyingprofit before tax had fallen 12.6 percent to 182.2m in the year to 31March, while turnover rose 4.4 percent to 1.69bn.

Chairman Sir Peter Mason saidthe way the company handlesqueries and complaints is ratedpoorly when compared with therest of the sector.


BMW and Audi sales hit recordfor May on demand from ChinaBMW increased sales last monthby 6.4 per cent to 156,957 vehicles,a new record for the month ofMay, the company said yesterday.

Results were once again lifted bya surge in demand frommainland China, thegroups largest market,where sales jumped by

BY CITY A.M. REPORTER nearly a third.New products such as the BMW

6 Series Gran Coup, which welaunched on the 1st of June, as wellas the new BMW 7 Series, willcontinue to drive momentum,

said BMW brand sales chief IanRobertson in a statement.

We are well on our way toachieving a new all-time high forsales in the year 2012.

Meanwhile Volkswagens luxurydivision Audi said sales last monthrose by 13.7 per cent to 128,900cars and SUVs, a new record for

May.Audi said it now aims to

raise full-year deliveries to1.4m cars, up from 1.3m in

2011, exceed[ing] ourexpectations in all regions.

ECKOH, the Aim-listed speechrecognition business, will todayunveil a deal with a major globalfinancial services company,

believed to be American Express.City A.M. understands the

multi-million pound deal will seeAmerican Express employ adedicated platform from Eckohto handle its customers self-service enquiries across the

globe.The two companies have

worked together since 2008, but

the minimum 1.1m per annumrenewed arrangement will see

Voice recognition firm Eckohagrees American Express deal

BY LAUREN DAVIDSON American Express reach withEckoh extend beyond Europe.

Eckoh is today set to report onits full-year results, which areexpected to show strong demandat the British business followingthe rapid rise to prominence of

voice-enabled services such asApples Siri and Samsungs SVoice.

Eckoh which counts theLondon Stock Exchange,Transport for London and

William Hill among its clients isalso set to reveal a number of

contract wins or renewals fromthe current trading year so far.

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INFRASTRUCTURE expert Mouchelsaw its stock plummet yesterdayafter it warned that its restructur-ing options were limited and exist-ing shareholders would be all butwiped out under the plans.

The company has issued a string ofprofit warnings and has been seek-ing fresh funds to get it back ontrack.

All the options being consideredwill result in there being only limit-ed value for existing shareholders,said Mouchel.

Costs related to ongoing opera-tional restructuring and anticipatedfinancial restructuring will impactthe current year financial perform-ance.

Mouchel said it is now aiming tosave 21m, up from its previous18m cost savings target.The firm hopes to complete a bal-

ance sheet restructuring prior to itsyear end on 31 July.

Mouchel said it had won 165m ofwork in its current fiscal year,meaning an increase of 45m sinceits half year at 31 January.The company said its business in

Mouchel warns

its investors tobrace for losses

BY JOHN DUNNEthe Middle East was breaking evenafter costs were slashed.

Chief executive Grant Rumblessaid: Although the environmentremains challenging, the actions weare taking will create a platform forlong-term growth for Mouchel.

Mouchel has split its business intotwo divisions, MouchelInfrastructure Services (MIS) andMouchel Business Services (MBS).

Craig Apsey, a former BT executive,has been recruited as managingdirector of MBS.

Mouchel has three joint venturebids in for London Highways con-tracts. Mouchel also said that itsAustralian business was growingwith a bid for a contract in Perth.

Mouchel, led by chief executive Grant Rumbles, saw its shares fall 35 per cent yesterday

IN BRIEFGlencore completes zinc dealn Commodities trader Glencore saidyesterday it had completed its deal forzinc mining group Rosh Pinah. thecompanys operations are centred inNamibia. FTSE 100-listed Glencore nowhas an 80 per cent stake in thecompany, which produced 89,000tonnes of zinc concentrate and 16,000tons of lead concentrate in 2011.

Glencore said: Rosh Pinah will addfurther value to Glencore as part of ourgeographically diverse zincoperations.

Anadarko makes new gas discoveryn Anadarko yesterday reported that ithad found a significant gas accumula-tion off the coast of Mozambique, mark-ing the latest oil and gas find to be

made by Western companies in the EastAfrican waters. Anadarkos partners inthe latest find include London-listedCove Energy, which is the target of a bidwar between Royal Dutch Shell andThailand's PTT because of itsMozambique interests. Anadarko saidthe successful Atum exploration well lieswithin the Offshore Area 1 of theRovuma Basin. Coves share rose 1.9 percent yesterday.

Severfield-Rowen cautious on profitn Structural steelwork makerSeverfield-Rowen warned yesterdaythat its full-year profit might be lowerthan market estimates as it expects costoverruns on two projects in the UK,sending its shares down 17 per cent. Thecompany, which has worked on accessbridges at Arsenal's Emirates Stadium,

said last month it anticipated full-yearresults to show a marginal improvementover 2011. The company expects costoverruns of 1.6m and first-half pre-taxprofit of 1.5m. The company expectscost overruns of 1.6m and first-halfpre-tax profit of 1.5m. It posted a pre-tax profit of 3.4m for January-June ayear ago.

Coryton march disrupts fuel supplyn Workers from Coryton oil refinerystaged a protest outside the plant, dis-rupting the supply of fuel heading topetrol stations to voice their anger atthe plant's closure. Some 900 jobs areat risk at the plant, formerly owned bySwiss-based company Petroplus.Administrator PwC has indicated it isunlikely to find a buyer to keep Corytonrunning as a refinery.

Mouchel Group PLC


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WORK at a mine co-owned byAnglo American and AquariusPlatinum is to be suspended, afterlow platinum prices have madethe venture unviable.

Aquarius said it would suspendoperations at its Marikanaoperations in South Africa, andsaid trading conditions in theindustry were expected to remaindifficult in the short to mediumterm.

Aquarius Platinum, the worlds

fourth-largest primary platinumproducer, said it wanted to

Anglo American mine suspendswork as it becomes unviable

BY CITY A.M. REPORTERpreserve the ore reserves at themine until extraction waseconomically feasible.

The site will be placed on careand maintenance.

cityam 2012-06-12

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