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Sir Mervyn King will print50bn more

CENTRAL banks desperately tried topush the world economy out of itsdownward spiral yesterday, with theBank of England turning on the print-ing presses yet again, and theEuropean Central Bank (ECB) and thePeoples Bank of China (PBoC) cuttinginterest rates further.

Denmarks central bank even cut onekey interest rate to minus 0.2 per cent.

But markets were unconvinced,falling across much of the globe, andeconomists doubted whether the loos-ening would have a significant impacton economic growth.The Bank of England announced

another 50bn of quantitative eas-ing (QE) to try to combat continu-ing tight credit conditions andthe increased drag from theheightened tensions within theEurozone, taking the total printedso far to 375bn.

In a very downbeat note,the Monetary PolicyCommittee (MPC) warnedthat UK output hasbarely grown for a yearand a half and is esti-mated to have fallen in

both of the past two quarters, and isunlikely to start growing soon becauseof slowing growth in key export mar-kets and falling business confidence.The extra QE comes after governor Sir

Mervyn King announced an emergencylending scheme with the Treasury togive cheap loans to firms and house-holds, in another last-ditch push to getcredit flowing.

But analysts warned so much moneyhad been printed already that the extra50bn will be less and less effective.

It may well be that further easingwill be required, said BNP ParibasDavid Tinsley.

But this could come throughthe funding for lendingscheme if it is being effec-tive, rather than gilt pur-chases, where with yieldsalready so low diminishing

marginal returns may be set-ting in.

ECB boss MarioDraghi cut thebase rate by 25basis points (bp)

to 0.75 per cent,as he expectsthe economyto start con-

t r a c t i n gagain.Indicators

point to a

renewed weakening of economicgrowth and heightened uncertainty,he said. The risks surrounding the eco-nomic outlook relate to a renewedincrease in the tensions in severalEurozone financial markets and theirpotential spillover to the euro area realeconomy.The ECB also cut the rate on its

deposit facility by 25bp to zero.Both central banks hope inflation has

dropped back far enough to allow thelooser policies to take effect withoutbreeching the rules the Bank ofEngland has a terrible recent record ofpredicting inflation, yet seems confi-dent that falling commodities prices,low pay growth and slack in the econo-my will keep inflation falling towardsthe two per cent target.

Meanwhile Chinas central bank cutinterest rates for the second time in amatter of weeks, chopping the bench-mark one-year lending rate by 31 basispoints to six per cent and looseningbanks lending constraints.

But markets were unimpressed by theefforts to stop the slowdown.The Euro Stoxx 50 fell 1.19 per cent,

the French CAC40 dropped 1.17 percent; the FTSE 100 was barely changed,rising just 0.14 per cent. Japans Nikkei

fell 0.27 per cent and Hong Kings HangSeng rose 0.5 per cent.

MORE: Page 10 ALLISTER HEATH: Page 2

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GROUNDHOG DAYAT CENTRAL BANKS

BY TIM WALLACE

Yet another round of rate cuts and money printing from policymakers LASERS AND LIGHT SHOWAS SHARD IS OPENED

CROWDS gathered acrossLondon last night to get apeek of a lit-up shard, tocelebrate the officialinauguration of Europestallest building.

The developer behind theShard described the toweras a compass pointingtowards a new financialera as he opened the1,016ft-tall skyscraper.

Irvine Sellar, whose firmSellar Property Group

built the skyscraper inpartnership with thestate of Qatar, said the

building served as anelegant and powerfulsymbol of hope andprosperity.

It was opened by theDuke of York Prince

Andrew, London mayorBoris Johnson and theprime minister ofQatar, Sheikh Hamad

bid Jassim bin Jabor AlThani.

BY KASMIRA JEFFORD

THE QUESTIONS MPSMUSTASK PAUL TUCKER

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[email protected]

Follow me on Twitter: @allisterheath

ROGER BOOTLE and his CapitalEconomics team won the worldssecond biggest economics prizeyesterday, giving a guide to an ailingEurozone nation considering exit.

He and his team pocketed250,000, after coming top of a fieldof 422 submissions, including onefrom an eleven-year-old schoolboyfrom the Netherlands.

Bootle described his scheme as,detailed and thorough, but notnovel, and gave a run through ofthe main elements of the plan.

The most important element wasthe devaluation effected by foreignexchange markets, expected to makethe initially-at-parity new currencyat least 30 per cent cheaper andthus restore competitiveness.

The difficult sticking point wasseen to be the question of debtdenomination.

European lenders would be deeplyresistant to a switch to a nationaldebt in the newcurrency, but in eurosthe post-devaluationdebt burden wouldbe effectivelyinsurmountable.

Bootles team

wins 250,000for Grexit planBY BEN SOUTHWOOD

Aviva trashes Moss as itsells off weak businessesINSURANCE giant Aviva yesterdayunveiled radical plans to dispose of aquarter of its business units in adamning indictment of the strategypursued by former chief executiveAndrew Moss.

Aviva said it will sell or close down16 underperforming divisions,including its South Korean businessand several of its Italian partner-ships. Although it declined to nameall of the underperforming units,Aviva confirmed after the marketsclosed that it will sell a third of itsstake in Delta Lloyd, currently val-ued at290m (231m).Analysts say the firms American

business is also likely to be on themarket.

Shareholders find our businessdifficult to understand and feel wehave expanded the internationalscope of our business too far, execu-tive chairman John McFarlaneexplained in a lengthy mea culpa onbehalf of the firm.

We have had 1.3bn of below-the-line restructuring charges over thepast five years and yet are perceivedto be bureaucratic and inefficient.

Instead he will seek to produce aleaner group, cutting middle-man-agement positions as part of a driveto reduce costs by 400m.

In a sly reference to Moss pledge to

Metro losses widen in first full yearMetro Bank, which launched in 2010 withthe aim of providing a customer-friendlybanking expeirence, increased its lossesby 40 per cent to 33.1m for the last year.The bank has spent about 2m on each ofits 12 branches double the cost of atypical bank branch to woo customerswith the promise of better service.

Cameron eyes 13bn Olympics gainDavid Cameron yesterday claimed theOlympics would provide a 13bn boost tothe country over four years, amid wider

uncertainty about the true impact thegames will have on the UK economy. Theprime minister said on Thursday that theOlympics should not be seen as somesort of expensive luxury in tough times,but rather as a chance to sell Britain tothe world.

Cupid points arrow at US datingCupid, the Edinburgh-based online datingcompany, plans to expand its presence inthe US, where it hopes to target nichemarkets such as Christians, ethnicminorities and older single people. TheAim-quoted firm is to invest an initial 1min setting up an office on US West Coast.

Regulator warned BarclaysDirectors of Barclays were warned fivemonths ago by a regulator to address thebanks aggressive culture. Andrew B ailey,the highest-ranking bank supervisor,attended a board meeting in February tosay that the companys sometimesbuccaneering culture was unacceptable.

Oligarchs pay for wrecking oil dealThe Kremlin has taken revenge on theoligarchs who wrecked BPs Arcticalliance with Russian oil group Rosneft,potentially leading to nationalisations.

France Telecom boss in suicides probeDidier Lombard, the former boss of FranceTelecom, is under investigation forworkplace harassment as authoritiesscrutinise a wave of suicides while he wasat the helm of the company. Yesterday hewas bailed following claims managementpractices during his tenure underminedemployees physical and mental health.

Grammar test for 11-year-oldsAll 11 year-olds will be face a grammar testfrom next year under government plans toraise literacy levels in primary schools.

Yahoo targets Hulu chief executiveYahoo is considering Jason Kilar, the chiefof video streaming website Hulu, for itspermanent chief executive position.Interim boss Ross Levinsohn and anumber of other unnamed candidatesremain in the running for the job.

Germanys Merck is set back on drugGermany firm Merck suffered another set-back for its cancer drug Erbitux, which in atrial failed to significantly increase the timeadvanced gastric cancer patients live with-out their condition worsening.

LAW firms Freshfields andLinklaters will fail to set the City onfire this morning as they releasetheir full-year results, with bothfirms performances subdued inrelation to their competitors.

Revenues at Linklaters nudgedup by 0.6 per cent year on year to1.2bn, while pre-tax profits rose

by 1.2 per cent to 520.8m.Managing partner Simon Davies

said the firm continued to facevolatile and challenging conditionsamid wider economic strains,adding that practice areasincluding litigation, competitionand regulation and organic growthin developing markets such as Asiahad helped Linklaters revenues toremain stable.

Meanwhile Freshfields turnoverfor 2011-12 was flat at 1.14bn,

while profits per equity partnerdipped by one per cent to 1.3m though that translated to a fourper cent rise once currencyfluctuations are stripped out.

Managing partner Ted Burke saidthe firm had seen a good year,especially when you consider theimpact of the sovereign debt criseson transactional activity.

Earlier this week fellow magiccircle firm Allen & Overy reporteda six per cent rise in turnover,

while revenues at Clifford Chancegrew by seven per cent.

Linklaters and

Freshfields hitby weak market

Chairman John McFarlane is driving cost cuts worth 400m

2 NEWS

BY ELIZABETH FOURNIER

BY JAMES WATERSON

To contact the newsdesk email [email protected]

IVAN PAVLOV, the psychologist whofamously trained his dogs torespond to stimuli, would havebeen proud. Whenever the

economy grinds to a halt, regardless ofreason, well-conditioned policymakersfrom Beijing to Frankfurt alwaysrespond in the same way: they cut

interest rates and wheel out theprinting presses. It is the neworthodoxy: ever easier money is theanswer to every economic problem.True to form, most people in the Citybacked yesterdays news of 50bn inextra quantitative easing (QE).There are some dissenters, of course.

Only borrowers benefit from lowerrates: Ros Altmann of Saga points outthat annuity rates are down by 23 percent since July 2008 and that QE hashit over 1m pensioners via annuityand drawdown income falls.Economists such as Simon Ward (see

EDITORSLETTER

ALLISTER HEATH

Why QE is not the answer to Britains economic problems

FRIDAY 6 JULY 2012

page 19), Andrew Sentance, theInstitute of Economic Affairs shadowmonetary policy committee, variousAustrian-leaning analysts and someothers all opposed this latest round ofQE. But they were drowned out by thepro-QE voices.The tragedy is that the supposed

omnipotence of monetary policy is infact a misunderstanding of the workof economists such as MiltonFriedman. He rightly identified thatthe bursting of the bubble in 1929

only became a depression when themoney supply was allowed to collapseby the Federal Reserve. Because theresuddenly wasnt enough money leftin the economy, demand slumpedand prices were forced down butbecause the adjustment wasnt imme-diate, especially with wages, it caused

mass unemployment. Many firms andindividuals went bust as the realvalue of debt shot up.

Central bankers have since pledgednot to allow such deflationaryepisodes caused by monetary contrac-tion to happen again, and quite right-ly so. The point of QE is that it cancreate extra money. The Bank ofEngland was therefore right toengage in its original round shortlyafter the banking implosion. But sub-sequent interventions have beenincreasingly desperate and useless.The money supply is already increas-

Friedman ended up advocating thatthe money supply should follow avery simple, unvarying rule to pre-vent governments from trying tomanipulate the economy. Other econ-omists of the Austrian persuasionbelieve in even more radical mone-tary policy rules. The crucial common

ground is that manipulating moneyand interest rates can only work forshort periods of time and then onlywhen it fools people into thinkingthat there is more real demand fortheir services than actually exists.Britain needs a real growth strategy and that means incentivising compa-nies to invest and hire and to producemore. That is a job for a reforminggovernment, not an over-stretchedBank of England.

ing, albeit slowly, in the UK, not col-lapsing. In real terms, the broad,adjusted measure rose by 1.3 per cent(not annualised) in the six months toMay the largest increases since April2009. Given that the rate at whichmoney is being passed around theeconomy is also going up, the case for

more QE is non-existent.Monetary policy errors can destroythe economy but that doesnt meanclever monetary policy can create aboom. Bad monetary policy is disas-trous but good monetary policy isneutral. It doesnt mess things up. Itallows the private sector to do itsthing. QE is not like alchemy. It cantcure an economy which is sufferingfrom real ailments, such as excessivedebt, bad skills, too much regulation,bad incentives and the like. Theseproblems require real medicine, not abit more money printing.

grow Aviva into a global giantMcFarlane added: I do not intend tomake aspirational promises that wemay be unable to keep.Analyst Barrie Cornes of Panmure

Gordon said the measures were logi-cal and sensible and could well proveto be the turning point for long suffer-ing shareholders.

But Kevin Ryan of Investec pointedout that selling businesses in the cur-rent environment will be challeng-ing.Aviva currently owns 58 individual

businesses, with the top 15 which

include units in emerging marketsand the UK Life Protection arm pro-ducing a 650m operating profit aftertax on 3bn of capital.

By contrast the 16 units earmarkedfor disposal consume 6bn of capitalbut produce post-tax operating profitsof just 300m.

Meanwhile the search continues tofind a full-time successor to Moss, whoquit in May after investors rejected hispay deal. An appointment is expectedin early 2013. Avivas shares closed up1.1 per cent at 284.6p. Roger

BootleBOTTOM LINE: Page 5

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THE TAKEOVER Panel yesterdayproposed a series of rule changesaimed at protecting pension fundsin bid situations.

The proposals, which are open for

consultation until the end ofSeptember, would force a potentialbidder for a company to publiclystate what it would do with thepension scheme if it wins control.

The new rules would also extendthe same rights to pensioners asemployees of the firm to be notifiedof a bidders plans. The changes alsoaim to make it easier for schemetrustees to complain if they feel atakeover could hurt their members.

Takeover Paneleyes pensions

BY KATIE HOPE

GETTY

PARLIAMENT will hold its own investi-gation into rigging of the Libor inter-est rate after Labour MPs failed toforce a public inquiry into the scandalyesterday.

Following a bruising debatebetween chancellor George Osborneand Ed Balls, his opposite number, thegovernment pushed through amotion that will set up a parliamen-tary inquiry led by Conservative MPAndrew Tyrie.

It is expected to report back inDecember and its findings will beused to influence the forthcomingBanking Bill.

Labour had spent much of this weekdemanding a judge-led probe simi-lar to the ongoing Leveson Inquiryinto media ethics. But MPs voted 330to 226 in favour of a swift parliamen-tary investigation instead.

People will ask why we are not hav-ing the full independent publicinquiry that this country needs, EdBalls said after the vote, before givinghis backing to Tyries committee.

BY JAMES WATERSON Tyrie welcomed Balls support: I willdo whatever the House asks me to do,but I believe it is only worth trying tochair this committee if it has the fullsupport of all the major parties.The government will now seek to

agree the membership and remit ofthe investigation before parliamentrises for the summer recess at the endof this month.

Beforehand the debate centred onthe personal enmity between Ballsand Osborne, exacerbated by the chan-cellors claim that ministers in the pre-vious government had questions toanswer over Libor-fixing.

Osborne struggled as he was repeat-edly asked to provide evidence to back-up the claim, which was reported inyesterdays Spectator. The reason whywe advocate an open, public inquiry,judge-led, is to get precisely to the bot-tom of all these things, Balls replied.

*Meanwhile, it emerged yesterdaythat the Serious Fraud Office is toreceive a funding boost following therecord-breaking fines issued toBarclays, enabling it to pursue aninvestigation into Libor-fixing.

MAJOR global banks face taking a hitfrom tighter regulation as a result ofthe Libor scandal, ratings agency

Fitch warned yesterday, as well asreputation damage if any followBarclays into the firing line.

The grim announcement cameafter Moodys and Standard andPoors both put Barclays rating onnegative outlook thanks to thereputation damage caused by thebanks Libor manipulation, therecord 290m fine levied by theFinancial Services Authority (FSA),and the turmoil at the top of the

bank as the chairman, chief executiveand chief operating officer have allhanded in their resignations.

In particular, there is concern over

the future of Barclays powerfulinvestment banking arm.Moodys fear the shareholder and

political pressures on Barclays couldlead to broader pressure on the bankto shift its business model away frominvestment banking previously amajor driver of profits in the group.

S&P said it was concerned aboutpoor business practices and near-term strategic uncertainty caused bythe change in management.

FRIDAY 6 JULY 20123NEWScityam.com

Let him [Balls] explain what Labours involvement was,who were the ministers, who had the conversation, who

were the senior figures.

George Osborne

I have never seen the Labour party and theshadow chancellor so rattled about theirtime in office. George Osborne

The cheap and partisan and desperate way in whichyou and your aides have conducted yourselves in

recent days does you no good, it demeans the officeyou hold and most important it makes it harder to

achieve the lasting consensus we need.

Ed Balls

Ed Balls

Parliament to

hold inquiryinto Libor rate

Ed Balls accused George Osborne of launching a smear campaign against Labour.

Osborne and Balls battle it out

At no point, at any time when I was an adviser or aminister in the City, was any point put to me by the

Financial Services Authority, the Treasury, the Bank of Englandor anyone in this house that there was any reason todoubt the integrity of the Libor market.

Credit rating agenciesturn up heat on Barclays

BY TIM WALLACE

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RECRUITMENT group Robert Walters

saw its shares drop 6.9 per centyesterday after it cautioned that theslump in Asias banking sector wasdamaging its growth.

The groups gross profit fell threeper cent to 47.6m in the secondquarter of the year, dragged downby a five per cent dip in Asia Pacific,where the recruiter generatesaround half of its earnings.

Performance in the UK was flat,with profits of 12.1m, while Franceand Germany both produced net feeincome growth. But overallearnings in Europe fell five per centto 10m, due to the euros slide.

In the Americas and South Africaregion, where Robert Walters hasopened offices in Rio de Janeiro andSan Francisco in recent months,profits rose four per cent to 1.6m.

We have delivered a stableperformance against a backdrop of

deteriorating conditions in theglobal financial markets, saidfounder Robert Walters.

We will continue to maintainour presence in the territorieswhere market conditions arechallenging, whilst also investing inthe business for the long term totake advantage of growthopportunities in new and emergingmarkets.

Asia slump hitsRobert Waltersprofit growth

BY MARION DAKERS

THE FOUNDERS of prestigiousLondon-based advertising agencyBartle Bogle Hegarty (BBH) yesterdayannounced they will sell the companythey created 30 years ago.

French ad giant Publicis, whichbought 49 per cent of BBHs shares adecade ago, will buy the remainingstock in a deal that will boost the for-tunes of co-founders Sir John Hegartyand Nigel Bogle.The company is behind some of the

best-known adverts of the last fewdecades. BBHs brand-defining campaigns

include the famousLevis launderettescene, the Lynx effectadvert and Audis V o r s p r u n gdurch Technikslogan.

BBH, whiche m p l o y saround 1,000staff in seven

Publicis to buycelebrated UK

ad agency BBHBY LAUREN DAVIDSON offices across the globe including 400

in London, generated revenues of112.2m (90m) last year.

Publicis, owner of Saatchi & Saatchi,also bought out Brazil-basedNeogama/BBH previously 66 per centowned by founder Alexandre Gama and34 per cent owned by BBH which made42.2m (33.7m) in revenues last year.

Publicis boss Maurice Levy said leg-endary BBH would continue to bemanaged independently.

Co-founders Nigel Bogle and Sir JohnHegarty will remain active but willhand over executive duties, with

Gama assuming Hegartysrole of chief creative offi-

cer. Gwyn Jones will takeover as chief executive,

replacing SimonSherwood who will become

chairman. Co-founderJohn Bartle left BBH

in 1999.

BOTTOM

LINEMARC SIDWELL

We regard this stability as a strong performance given the deterioratingmarket conditions, but note that the statement (as we anticipated) refers to AsiaPacific being impacted by the banking sector slowdown and Europebeing impacted by ongoing financial and political uncertainty. Sell.

ANALYST VIEWS

It was disappointing in our view, with net fee income declining 3.3 per

cent year-on-year, albeit continuing the trend of sequential growth... The resulthighlights the ongoing challenges within the banking and financialsectors, particularly in Asia and across the Eurozone. Sell.

Following the strong performance in the first quarter, during which net

fee income increased by 10 per cent, we suspect the magnitude of the declinewill be a surprise, but it is consistent with our full year expectations for atwo per cent increase. Hold.

HOW WERE ROBERTWALTERS RESULTS?

By Marion Dakers

HENRY CARVER PEEL HUNT

DAVID O'BRIEN SHORE CAPITAL

KEVIN LAPWOOD SEYMOUR PIERCE

Nigel Bogle (left) andSir John Hegarty willstay involved at BBH

Founder and chief executive Robert Walters aims to continue expansion

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Shareholder spring flowers into a cultural revolution

CYNICS say no matter who youvote for the governmentalways gets in. Not so at Aviva.Yesterdays announcements

proved the shareholder spring is notjust a season of discontent itsbecoming a revolutionarymovement.

The repudiation of the FTSE 100insurers remuneration report inMay was quickly followed by theresignation of chief executiveAndrew Moss, an admission thatthe vote was less about fat paypackets and more directed at the 58per cent collapse in Avivas shareprice under his stewardship. Thecompany has now accepted the

rebels cause as its own. Yesterdaysletter from new executive chairmanJohn McFarlane promised a bravenew dawn, with a fresh strategybuilt around narrowing focus,boosting capital strength,improving financial performance and listening very much morecarefully to the legitimate

concerns of shareholders.There were few fond words in his

plans for the running dogs of theold administration: We have hadtoo many changes of strategy; Ourfinancial statements arecumbersome; Shareholders findour business difficult tounderstand; we aim to implementa leaner and more agile operatingculture, a higher performanceethic, and a less layered andbureaucratic management style.Ouch.

Caught up in its revolutionaryfervour, the group isnt hangingaround. Announcing that it wouldbe purging 16 non-core business

segments involving 6bn in capitalyesterday morning, by theafternoon it was announcing itsintention to sell up to 25m shares inDutch insurer Delta Lloyd, adivestment that could be worth288m at current share prices.

A cultural revolution is also inthe works, with four layers ofmanagement marked forliquidation and a re-educationprocess for the survivors set to bespearheaded by David McMillan,former chief executive of generalinsurance for the UK and Ireland,under the grand-sounding title ofdirector group transformation. Itpromises a group-wide cultural

and values change programme toachieve a high-performance ethic,employing stretch goals and morerigorous performancemanagement. Apparently theregime will not be placingcorporate newspeak under housearrest.

This current reforming flurry ishowever only groundwork for theappointment of a new chiefexecutive, promised for early 2013.Meet the new boss, same as the oldboss? Not now the shareholdersflag is waving over the democraticrepublic of Aviva.

Marc Sidwell is City A.M.s managingeditor.

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IN BRIEFPinsent Masons grows turnoverRevenues at law firm Pinsent Masonsrose by four per cent to 221m in theyear to 30 April, it said yesterday.Including turnover from Scottish firmMcGrigors, which merged withPinsents on 1 May, that figureincreases to 295m, a rise of almost39 per cent on the previous yearsrevenues of 212m. Managing partnerDavid Ryan said the combined firmwas well placed for growth in thecoming years, and had performedwell in a difficult market.

Begbies falls to a full-year lossn Business rescue group BegbiesTraynor swung to a loss in the year toApril as its own restructuringexpenses ate into its earnings.Revenues at the firm fell just underfive per cent to 57.7m and a 5.5mpre-tax profit was more than wipedout by costs from the disposal of itsoverseas and tax businesses. The firmsaid it will now focus on its UKinsolvency and restructuringoperations.

Xstrata delays merger meetingnMining group Xstrata yesterday

called off a shareholder meeting on 12July intended to approve its 56.5bnmerger with Glencore, in order to givethe firms more time to smooth rela-tions with irate shareholders. Qatar,which holds an 11 per cent stake inXstrata, has in recent weeks beenpushing management for 3.25 newshares for every Xstrata share, com-pared to the current plan to hand over2.8 shares.

ENGINEERING group GKN yesterdayagreed the 633m purchase of Volvoaerospace division, expanding itspresence in the fast-growing civil air-craft sector.The FTSE 100 company said that it

has been eyeing growth in a sectorthat is forecast to almost double insize over the next 20 years.The company also issued a trading

update which showed underlyingsales up nine per cent.

GKN chief executive Nigel Steinsaid: It [the deal] will propel GKNinto the top 10 independent aero-

space ... suppliers.We are already a market leader in

aero structures, this makes us aleader in engine components too, alarge and growing segment of theaerospace industry.The aerospace industry will now

account for around 40 per cent of thecompanys revenues.

Oriel Securities said in a note thatGKN had made the deal at a goodprice.

The deal has happened a fraction

BY JOHN DUNNEearlier than we anticipated, but at acracking price.The deal will be funded by new debt

and a share placing to raise 140m.GKN said it had been pursuing VolvoAero for a number of years and hadbecome closely engaged when Volvosaid it was considering selling thebusiness in November.

Stein said that the company wouldnow take a break from the acquisi-tion trail.

We will be looking to generatecash and pay down debt, he added.

For Volvo, the worlds second-largest truck maker, the sale com-pletes an exit from an activity nolonger seen as core to its operations.

TIMOTHY Shacklock is leading the team atGleacher Shacklock that advised GKN,alongside joint adviser and joint bookrunnerUBS.Shacklock, the former deputy chairman ofDresdner Kleinwort Wasserstein, foundedGleacher Shacklock in 2003. He has advisedon a number of Europes most prominentcorporate finance transactions, including thereorganisation of British Aerospace in the1990s, culminating in the 7.7bn acquisition

of GECs defence business.He also worked on the 19bn sale of Orangeto Mannesmann and its subsequent 27bnonward sale to France Telecom, and thedefence of NatWest against the offers fromboth Bank of Scotland and the Royal Bankof Scotland. At Gleacher Shacklock, he hasadvised BAE Systems on the $4.2bn acqui-sition of United Defense Industries, themanufacturer of the Bradley combat vehi-cle, and on the 2.75bn sale of its 20 percent shareholding in Airbus.He also worked with Cable & Wireless on its700m acquisition of Energis. He qualifiedas a chartered accountant and became apartner in Pannell Kerr Forster in Londonprior to joining Kleinwort Benson, the pred-ecessor firm to Dresdner KleinwortWasserstein, in 1988.

ADVISERS GKNS PURCHASE OF VOLVO AERO

TIM SHACKLOCKFOUNDER GLEACHERSHACKLOCK

Nigel Stein said GKN will now take a break from the acquisition trail

GKN PLC

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GKN in 633mdeal for Volvo

aero business

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300 guests, including many of the Citys keyplayers, enjoyed the annual party of publicrelations group Pelham Bell Pottinger despite therain the other evening.Guests included one-time Vodafone chief executiveChris Gent (now chairman of GlaxoSmithKline),Centricas Sam Laidlaw, Paul Baker of MorganStanley, Andrew Osborne, formerly of Bank ofAmerica Merrill Lynch and former M&S chairmanStuart Rose. The party was held at Lancaster House,close to Buckingham Palace.

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The party goes on forPelham Bell Pottinger

LEAVING aside the intricacies of whoknew what when in the Libor inter-est rate rigging scandal, almosteverybody has agreed that formerBarclays chief executive BobDiamond made a crucial error whenaddressing members of the TreasurySelect Committee.

Diamond came over all familiar.First it was with Jesse Norman as heused his christian name, though ini-tially it seemed that tactic might bereserved for Norman as a formerBarclays employee.

But when Diamond continuedwith other MPs on the committee,apart from the chairman,some of the MPs feltangered, sure that hewouldnt have beenquite so matey and dis-respectful if he had beensitting in front of USlawmakers.

So what will bethe tactics used byPaul Tucker,

deputy chair of the Bank of England,when he comes before MPs nextMonday afternoon.

Needless to say, the Bank of Englandpress office became slightly f lusteredwhen asked the question, as if TheCapitalistwas trying to pin down theBanks views on whether it ever felt aslight massaging of Libor might be agood thing, perhaps even in thenational interest.

I refer you to previous occasionswhen Bank of England executiveshave sat before the committee, saidan official.

Eventually, when pushed, the offi-cial did come out with the piece ofinformation we have all been waitingfor as this scandal unfolds: You canbe pretty sure the deputy governorwill not address the MPs by their

christian names. Phew, what arelief. All is well onThreadneedle Street.

Former Marks & Spencer chairman Stuart Rose (above left) enjoyed the Lancaster House party

Got A Story? Email

[email protected]

9cityam.com

cityam.com/thecapitalistTHECAPITALIST

FRIDAY 6 JULY 2012

THE above picture, described as quite obviously a spoof by Barclays was the

subject of much mirth yesterday as it made its way by email and Twitter around theCity.

SPOOF AD MAKES ITS WAY ROUND THE CITY

Paul Tucker says no

to christian names

Paul Tucker will appearbefore MPs on Monday

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AFTER A 12-YEAR WAIT, Londoners were finallygiven a preview of the 360-degree panorama fromthe 72nd floor of the Shard yesterday, at a formalceremony marking its external completion.The 95-storey tower designed by Italian architect

Renzo Piano has had to overcome major planningbattles, fierce criticism and a fractious ownershipsince it was first conceived.

But yesterday, LondonMayor Boris Johnsonsaid the building stoodfor the global role andambition of Londonand dismissed critics ofthe scheme.

That was what Charles Dickens said in 1836about what? Big Ben. Nobody would tear downthe Houses of Parliament now, well not forarchitectural reasons, he said, addressingpoliticians, executives and reporters whoattended the event.At the wooden-pan-

nelled viewing gallery245 metres above theground, visitors will beable to take in views ofLondon stretching outfor 40 miles.Visitors can pre-book tickets at 25 a-go

from this morning although the buildingand its restaurants will not be open to thepublic until February next year.

The Shard, developed by Sellar PropertyGroup with financing from the State ofQatar, forms part of a wider regenerationproject around London Bridge station.The development cost of the building

and the neighbour-ing area is about1.5bn.

Qatar has invested20bn in the UKduring the down-turn. It is a majorinvestor in the UKs third largest super-market Sainsburys and also in crisis-hit Barclays.The building has so far only attract-

ed one tenant, the luxury Shangri Lahotel group.

But yesterday itsdeveloper Irvine Sellartold City A.Mhe was inno rush and insistedthat the tower will be

fully-leased by the endof 2014.


BY KASMIRA JEFFORD

Heart of Glass

Floors 53-65

10 luxury apartments

Floors 68-72

Viewing galleries*15,000 sq ft

*open in February 2013

62,000 sq ft

Floors 34-52Shangri La Hotel

192,000 sq ft

Floors 31-33

Restaurants29,000 sq ft

Floors 4-28

Offices & Winter Garden595,000 sq ft

Floor 2

Retail space5,000 sq ft

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11

Europes tallestskyscraper opens

NEWS

Its certainly putting London Bridge

on the map because south of the

Thames there are no real other markers. I think

it will revitalise the area without question.

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

DAVIDDOHERTYGUINNESSSOUTH

CITYVIEWSInterviews by Polly Young and Jamie Sutherland

DO YOU THINK THE SHARDIS A WELCOME ADDITIONTO THE LONDON SKYLINE?

Great Portland liftedby scarcity of spaceBY KASMIRA JEFFORD

GREAT PORTLAND ESTATES, the West End-focusedproperty developer yesterday hailed anotherexcellent year after both its net asset value andits portfolio valuation delivered strong growth,

benefitting from a limited supply of office spacein central London and overseas demand.

Net assets per share increased by 11.9 per centand the property portfolio delivered strong like-for-like valuation growth of 9.2 per cent over the12 months to 31 March, the company said at itsannual general meeting.

Wet weather aids DunelmBY KASMIRA JEFFORD

SHARES IN Dunelm Group rallied almost four percent yesterday after the homeware retailer forecastfull-year profit ahead of analysts expectations, as thewet spring weather lured shoppers to its stores.

The company, which runs 124 Dunelm Mill storesselling kitchenware and bedding, expects a pre-taxprofit of 96m, up from 83.6m a year earlier.

Like-for-like sales rose 10.4 per cent in the fourthquarter to 30 June, while total sales grew 21.2 per centto 149.7, helped by 12 stores launching in the quarter.

Rain mars Jubilee sales boostBY KASMIRA JEFFORD

UK supermarkets have suffered the weakest earlysummer trading period in seven years after the

wet June weather kept shoppers away, new figuresfrom Nielsen for the quarter to 23 June can reveal.

Despite 12.5 per cent year-on-year growth in the

week leading up to the Jubilee, sales at the UKsbiggest grocers were up just 3.8 per cent across thefour weeks ending 23 June.

I think it is very positive, it is another

iconic building and it improves the

skyline hugely. If you own a house nearby it has

probably upped the value of your property.

DAVIDKINGCBRE

Anything to do with developmentin the City is a good thing. I think it

will bring in a lot of tourism and business,especially combined with the Olympics.

ADAMDREWERYFUSION PEOPLETRAINING

Floors 79-95

Non-occupiable

Floor 78

Highest habitable floor and penthouse

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IN BRIEFGreece drops bailout demandsn Greece yesterday indicated that itwould drop plans to seek easier termsfor its bailout. Amid expectations that

international leaders would bulk atany softening of its loan conditions,Yannis Stournaras, the new coalitiongovernments finance minister, said hewould seek to accelerate cost-cuttingreforms first. The programme is off-track and we cant ask for anythingfrom our creditors before we get itback on course, Stournaras told theFinancial Times. There is light at theend of the tunnel but it is a longtunnel, he added.

Factory workers look abroadnWorkers in British factories aremore likely to look abroad for jobopportunities than employees in othersectors, according to a survey releasedthis morning by totaljobs.com. Acrossthe whole workforce, America remainsthe most popular destination for

potential emigrants, with Spainstaying strong in fourth place, despiteits economic and banking crisis, whichhas seen employment slump.

Skill gaps despite record gradesn Huge numbers of workers haveskills gaps, despite rising educationalqualifications, said the Office forNational Statistics yesterday. In 2011employers reported that roughly 1.5memployees had skills gaps, despitenearly 53 per cent achieving five ormore GCSEs at grades A* to C in theschool year 2009/10.

GETTY

HOUSE prices rose in June buckingthe overall downward trend, accord-ing to a closely-watched gauge.

Halifaxs house price index shotup one per cent in June compared toMay, although overall it dropped by0.5 per cent year-on-year. However,the annual change is a much lesssharp drop than the falls seen a yearago, according to the group.

Halifax housing economist MartinEllis said: There has been a markedimprovement in the annual rate ofchange over the past 12 months.

Ellis said that prices appeared tohave stabilised over the past threemonths with the annual ratebetween zero and minus 0.5 percent.

However, analysts yesterday sug-gested that the figures might not berepresentative.

Halifax looks only at its own cus-tomers, and Halifaxs results fly inthe face of earlier data fromNationwide, which showed a 0.6 per

Halifax reveals

a surprise Junehouse price rise

BY BEN SOUTHWOOD cent decline in June.Howard Archer at IHS Global

Insight said: We are surprised bythe rise in house prices in June.However it should be borne in mindthat theindex has been particular-ly volatile in recent months.Archer warned that he expected

house prices to fall by around threeper cent over the second half of 2012.He said the falls would come aboutas a result of; limited activity, lowand fragile consumer confidence,muted earnings growth and highunemployment.

Irish state pays less than Spainin strong debt market re-entryTHE IRISH governments borrowingcosts dropped below Spains

yesterday, as the celtic nationcontinued its recovery from collapseand Spain continues to struggleclose to the brink.

Meanwhile Germanys industrialoutput kept rising in May despitethe weak state of its Eurozoneneighbours.

Despite much of the rest of thecurrency area being in recession,the powerhouse of Germanmanufacturing kept on expanding industrial output rose 0.6 per cent

BY TIM WALLACEin the month.

Export orders drove the rise, witha 7.7 per cent rise in demand fromother Eurozone countries, while

domestic demand slid 1.3 per centon the month.That weak domestic demand led

economists to warn the economymay not manage to avoidcontraction at some point this year,while the ongoing recessions inmuch of Europe mean exportdemand may also drop back incoming months.

Ireland borrowed 500m (399m)for three months at an average yieldof 1.8 per cent, in its first round of

debt issuance in almost two years,following its IMF and EU bailout.

That is below the 2.36 per centpaid by Spain at a similar auction

last week, where the governmentalso saw 10-year borrowing costs riseto 6.43 per cent as part of a largerbond auction totalling3bn.

The bidding was very scrappy,said rate strategist Marc Ostwald atMonument Securities.

Its indicative of the lack ofliquidity, it also is indicative thatneither the domestic investors noranybody else are confident that whathas been cobbled together so far isany solution for Spain.

Halifax house price index

200820031998199319881983

400

300

100

200

500

6001983=100

BRITAINS car industry continuedto grow rapidly in June, sector datashowed yesterday, with diesel

vehicle registrations surging asconsumers sought improved fuelefficiency.

Last month saw 189,512 carsregistered, up 3.5 per centcompared with the same month of2011, according to figures from theSociety of Motor Manufacturersand Traders (SMMT).

The rise takes the total for 2012

Fuel and tax worries drive UK

motorists to favour diesel carsBY TIM WALLACE so far to 1.057m also up 2.7 percent on the same period of 2011.Of those cars sold in June, 51.6

per cent were diesel and 47.1 percent petrol. Indeed, the absolutenumber of petrol car sales wasalmost 1,000 lower this June.

The month also saw 2,481alternative fuel vehicles sold, up47.8 per cent on the year.

Despite domestic andinternational economic concerns,UK motorists are respondingpositively to new products and thelatest fuel-efficient technology,said SMMT boss Paul Everitt.

MORE than 150 economists led bythe head of Germanys influentialIfo think-tank yesterday hit outat Europes plans for a bankingunion, as set out by Chancellor

Angela Merkel last week.In an open letter to a Germannewspaper, Hans-Werner Sinnand other experts said forcingEuropes biggest economy toextend its liabilities to weakerstates and banks in the currencyunion was not the answer to theregions debt woes.

The decisions which thechancellor saw herself forcedinto at the EU summit were

wrong, wrote the economists in

German economists hit back atMerkels banking union dreams

BY CITY A.M. REPORTERa letter addressed to fellowcitizens.

We are deeply concernedabout the step towards the

banking union, which meanscollective liability for the debts ofthe banks of the euro system,"

wrote the economists.Neither the euro nor theEuropean idea will be saved bythe extension of liabilities to

banks.A poll conducted for ARD

television released yesterdayshowed that while 58 per cent ofGermans believe Merkel has actedcorrectly and decisively duringthe Eurozone crisis, anoverwhelming 85 per cent thinkthe worst is yet to come.


59,570 Ford Fiestas have been sold in the UK so far this year, more than any other car

Positive US jobs figures marredby slowdown in services growthSTRONG jobs data provided aboost for the US yesterday,although separate economicfigures suggested that therecovery remains bumpy.

The American private sectorcreated 176,000 jobs in June, theADP national employment reportsaid, comfortably beatingeconomists forecasts.

In May US companies also added136,000 jobs a figure that wasrevised slightly upwards, from aprevious estimate of 133,000.

And the number of Americansfiling new claims for

BY JULIAN HARRIS unemployment benefits last weekfell by the most in two months,separate figures also showed.

Initial claims for unemploymentbenefits dropped 14,000 to aseasonally adjusted 374,000, theLabor Department said.

However, growth in t he crucialservices industry slowed to itslowest level since Januar y 2010,according to widely-regarded datafrom the Institute for SupplyManagement (ISM).

ISMs services index dipped to52.1 from 53.7 in May,disappointing economists.

Furthermore, the details revealeda worrying slowdown in the

growth of new orders.Meanwhile, applications for US

home mortgages tumbled for thesecond week in a row, theMortgage Bankers Association said.

The MBA said its seasonallyadjusted index of mortgageapplication activity, whichincludes both refinancing andhome purchase demand, fell 6.7per cent in the week ended 29 June.

Its index of refinancingapplications slumped 8.4 per cent,after a more than eight per centdrop the previous week. The gaugeof loan requests for home

purchases improved modestly, up0.6 per cent.

UK GDP was dragged down by aslump in net exports andsignificant running down ofinventories, despite thecounterweight made by growing

government consumption,according to OECD researchpublished yesterday.

GDPs fall of 0.3 per cent in thefirst quarter was driven mainly bycontributions of -0.5 per cent fromrunning down stocks of goods, and-0.4 per cent from increasedimports and decreased exports.

Positive contributions of 0.3 percent from gross fixed capital

formation investment and 0.4per cent from government deficit

UKs GDP dragged lower bysharp slump in net exports

BY BEN SOUTHWOODspending, were thus outweighed.

Though private consumption wasanother drag, even without it GDP

would have shrunk 0.2 per centover the quarter.

This comes in the context of agloomier previous quarter. In thefourth quarter of 2011 GDP shrunk0.4 per cent, with componentsmaking surprisingly differentcontributions. Then, de-stocking

was faster, contributing -1.2 percent, but was counteracted by apositive contribution by privateconsumption of 0.3 per cent. Netexports also made a contribution inthe positive direction, of 0.4 percent. However, GDP was 0.1 percent worse than it would have been

due to poor investment over theperiod.

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IN BRIEFRBS withdraws from Tibor panelnRBS yesterday said it had withdrawnfrom the panels that set Tibor theJapanese equivalent of Libor. RBS saidthe move was part of a strategic decisiontaken by chief executive Stephen Hester

to rationalise its markets business.Despite the move, RBS said that itremained committed to the Japanesemarket.

Ticket price rises boost CineworldnCineworld yesterday reported a 1.1 percent rise in first-half revenues, boosted bya 4.1 per cent growth in box office incomedue to ticket price increases despite lowersales. Other income fell 18.7 per cent dueto lower sales of 3D glasses, the bookingfee removal and reduced ad revenues.

McBride trading hitting forecastsnMcBride said yesterday it expects itsprofit for the year just ended to hit fore-casts. The provider of private label house-hold and personal care products forecastfull-year revenue growth of one per cent.

Net debt at the end of the year should bein line with the boards expectations ataround 82m, it said in its trading update.

Westfield Group raises 450mnWestfield Group, which ownsLondons Shepherds Bush andStratford shopping centres, yesterdayraised 450m with the issuance of a 10-year sterling bond. The Australian firmis expected to use part of the moneyraised to pay down some of its UKdebts, as well as fund new investments.

ENGINEERING support servicesgroup Babcock yesterday said it wastrading in line with expectations,helped by cost-cutting and clientsoutsourcing more work.

Babcock said that its order bookwas stable at around 13bn.

Meanwhile 80 per cent of revenueexpected in 2012/2013 is alreadycontracted, it said.

It added that it was pursuing newcontracts in marine technologywith the Ministry of Defence. Andit said that the increasing numberof companies outsourcingengineering work was boosting itsrevenues.

The firm, which specialises in thedefence industry, said it had

excellent visibility of futurerevenues.

Babcock sees

stable tradingBY JOHN DUNNE

GETTY

PLANS from Europe for further regu-lation in the oil and gas industrywould hit the UK, a report publishedyesterday warned.

The Oil and Gas UK 2012 economicreport claims that production will behampered by the proposed newmeasures which will put regulationin the hands of Brussels.

EU-wide rules on offshore drillingwill involve all 27 governments, eventhough 90 per cent of all suchdrilling takes place on the territoryof just four member states, includingthe UK.

Oil and Gas UK chief executiveMalcolm Webb said: We cannotstand back and simply let that hap-pen. So we have objected to and willcontinue to oppose this damagingproposal.

Meanwhile total capital investmenton developing UK oil and gas reservesrose by 40 per cent to 8.5bn in 2011,according to the report. Total operat-

UK oil industry

issues warningover regulationBY JOHN DUNNE ing expenditure remained similar to

2010 at 7bn.Production was also more costly

than in previous years, with operat-ing cost per barrel rising by a quarterfrom 2010 to $17 per barrel of oil.The UK oil and gas industry has the

potential to satisfy close to 50 percent of the UKs oil and gas demandin 2020 if the current rate of invest-ment is sustained, the report said.

But in 2011 the UK produced 656mbarrels of oil marking a reduction of19.2 per cent from the 812m barrelsof oil produced in 2010.

Ofcom moves to cap

BTs wholesale pricesTELECOMS giant BT could see its rev-enues suffer following yesterdays pro-posal by Ofcom of price caps on itswholesale charges.

The telecoms regulator wants tocap the fees BT charges for the leaseof its telecom lines, which providehigh-speed links for businesses,broadband providers and mobileservices. The proposals follow areview by Ofcom, published lastmonth, which concluded thewholesale market for leased linesand fast data services needed tighterregulation due to BTs significantmarket power.

The caps mean that BTswholesale charges for its traditional

BY KATIE HOPE leased lines could be limited to up to6.5 per cent above inflation, while itsnewer Ethernet services would becapped at up to eight per cent belowinflation. London, where BT facesgreater competition, faces a lighterform of price control.

The caps could affect up to 700mof BTs revenues. At Espirito Santo,analysts said it is fairly safe toassume [revenues] will fall.

Ofcoms proposals are open forconsultation until the end of nextmonth.

BT said yesterday: We believeregulation should allow a fair returnon leased lines products in order toensure sustainable investment in the

future of the UKs telecomsinfrastructure.

VODAFONES pay package wasyesterday classed an inoffensiveblue top by the ABI, whichrecommended shareholders vote infavour of the remuneration report.

Vittorio Colao, chief executive ofVodafone, was paid 3m in salary,bonus and benefit payments in2011, a year in which Vodafonedished out a hefty 10.2bn to itsinvestors and became the topdividend payer in the FTSE 100.

Colao was also awarded a

Vodafone pay package backedby ABI with blue top approval

BY LAUREN DAVIDSON staggering 11m worth of shares aspart of a long-term incentive plan,

which paid out last week.The ABI report will come as a

relief to Vodafone after a seasonwhich has seen a string of majorcompanies proposed pay packetsdefeated by unimpressedshareholders.

Almost 60 per cent of WPPsshareholders failed to back chiefexecutive Sir Martin Sorrells 60 percent pay rise last month. The ABImarked his 12.9m remunerationpackage with a red top warning.

EASYJET carried almost a tenthmore passengers in Junecompared to a year ago, figuresout yesterday showed.

The low-cost airline said it took

5.43m passengers last month, up9.7 per cent on June 2011, whileits load factor, a measure of howfull its flights are, jumped 1.6percentage points to 89.9 percent.

In the year to the end of June,EasyJet carried 57.37m passengerson its budget flights aroundEurope, the Middle East andNorth Africa. This figure is up 7.5per cent on the previous year.

EasyJet and Aer Lingus enjoyrise in low-cost air customers

BY MARION DAKERSMeanwhile Irish carrier Aer

Lingus reported a two per centrise in passenger numbers in

June, with 918,000 customerstravelling on its flights lastmonth.

The firm, which is entangled in

a takeover bid from Ryanair, saidlong-haul traffic jumped 12.5 percent on a year ago, to 99,000,

while short-haul traffic ticked up0.1 per cent to 819,000.

Aer Lingus load factorincreased by 3.8 percentagepoints on a year ago to 82.6 percent.

The company has said an offerfrom Ryanair that values it at694m is not lucrative enough.

FRIDAY 6 JULY15NEWScityam.com

Vodafone chief executive Vittorio Colao was awarded 11m worth o f shares

LONDON 2012 IMAGE OF THE WEEK

THE Olympic canoe slalom course at the LeeValley White Water Centre was the focus ofattention this week, as athletes from 30national teams tested the venue. Built on a10,000 square metre lake, the slalom pumpsout 13 cubic metres of water each second.

Between now and the start of theOlympics, City A.M. is publishing itsOlympic Image of the Week. If you havea shot you think our readers wil l like,please email [email protected] withIOW2012 in the subject line.

Airlines agree to axe confusingcard fees after watchdog probeAIRLINES are to ditch hidden debitcard fees next month following an

investigation by the Office of FairTrading (OFT).Twelve companies including

Ryanair and Thomas Cook havepledged to declare any extra debitcard charges in the headline priceof a ticket, abolishing the practiceof imposing surprise fees at theend of online transactions.

And the OFT said the firms willmake surcharges for credit cardsmore transparent, after the

BY MARION DAKERS watchdog spent more than a yearinvestigating consumer complaintsabout such fees.

It is important that the cost

presented when they search for aflight is realistic and that they arenot surprised by extra charges,said new OFT chief executive CliveMaxwell.

We made it clear from the startthat we would use all of ourenforcement powers, includingcourt action if necessary, but arepleased to have reached agreementwith the airlines before courtproceedings were required.

He added that a number of firmsincluding EasyJet, Flybe andThomson have already madechanges to their online booking

systems, with others set to followfrom 1 August.Ryanair said yesterday it was

pleased to have resolved this issuewith the OFT and even with thisinclusion, well continue to offerthe lowest fares to our passengers.

The government has announcedplans to bring forward new lawsthat will ban excessive credit anddebit card fees across alltransactions.

Distribution of yet-to-be-found resources

%

Central North Sea

Northern North Sea

West of Scotland

West of Shetland

Southern North Sea,Irish Sea & Celtic Basin

50

138

21

8

*according to the Department of Energy and Climate change

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FRIDAY 6 JULY 201216

LONDON REPORT

OgierJulie Melia has joined the legal

and fiduciary services firm as apartner and co-head of itsproperty law group. She joinsfrom Walkers, where she was apartner and head of the Jerseyproperty team. Melia has over20 years experience as a senioradvocate and specialises in allaspects of Jersey property.

Cazenove CapitalThe investment firm has appointed Stephen Lucas ashead of European sales. He joins from GAM London,where served as client director and worked on strategiesacross the UK, Europe, Australasia and the US.Lucas was also previously business development directorat Augustus Asset Managers and Julius BaerInvestments.

Jones DayThe law firm has announced the appointment of two new

partners. Christopher Braithwaite joins from Simmons &Simmons as a finance litigation partner. He specialises inadvising financial institutions on litigation and arbitrationmatters. Baiju Vasani joins from Crowell & Moring andserves as a trial counsel in international arbitrationsinvolving the common and civil law legal systems.

BlackRockJustin Brown has been appointed managing directorwithin the investment management firms real estateteam. He will work a longside Marcus Sperber, head ofBlackRocks international real estate team. Brown joinsfrom UBS Global Asset Management, where he was anexecutive director in its global real estate team.

CitigroupJenny Grey has been appointed managing director,

regional head of public affairs for Europe, Middle East andAfrica at the banking group. She arrives in October fromthe Cabinet Office, which she joined in July 2008 asdirector of communications, before taking up her presentrole of executive director for government communication.

Cairn CapitalGerrit Van Gorp has been hired to lead the assetmanagement firms marketing in the Nordic andBenelux regions. He joins from Pictet AssetManagement, where he has worked since 2005, latterlyas chief marketing officer for Northern Europe. VanGorp previously served as head o f credit derivatives atDow Jones Indexes.

NYSE EuronextPatrick Birley has been appointed chief commercialofficer at the financial markets operators new full-service clearing house in London. He will report to MarkIbbotson, executive vice president of global clearing.

Wall St edgeslower ahead ofnon-farm data

US stocks edged lower yesterdayas economic stimulusmeasures by major centralbanks failed to excite investors

before a US jobs report expected toshow tepid growth.After the S&P 500 indexs strongest

three-day run this year, investorsstepped back, leaving the broad indexand the Dow modestly lower and the

Nasdaq essentially flat.Trading volume was light after the 4

July US market holiday and before thegovernments June non-farm payrollsreport today.The data is expected to show

Europes debt crisis is weighing heavilyon the US economy. Analysts expectthe economy added 90,000 jobs lastmonth, a level that wont make muchof a dent in the grim unemploymentsituation.

Financial stocks weighed on WallStreet, with Dow component

JPMorgan Chasefalling 4.2 per cent to$34.38 and Bank of America off 3 percent at $7.82.The S&P Financial index and the

KBW Banks index fell about 1.5 percent. Financial shares have often takenthe brunt of selling during theEuropean crisis, though they experi-enced a good run during the recentrally.Wall Street was little impressed by

the actions in China, Europe andBritain to loosen monetary policy,which sent the euro lower against theUS dollar.

Stocks also derived little benefit fromreports yesterday showing hopefulsigns about US hiring by privateemployers. Markets give more weightto the broader monthly report fromthe US Labor Department. .The Dow Jones industrial average

was down 47.15 points, or 0.36 percent, at 12,896.67. The Standard &Poors 500 Index was down 6.44 points,or 0.47 per cent, at 1,367.58. TheNasdaq Composite Index was up 0.04points at 2,976.12.

Losses in the Nasdaq were limited byApple, which rose 1.8 per cent to$609.94, and Google, up 1.4 per cent.

News that the US service sectorslowed to a 2 1/2-year low in June wasin line with investor fears that theEurozone debt crisis was sapping glob-al growth. Traders booked gains fromthe strong run that began Friday andextended through Tuesday.

Meanwhile, Spains difficultiesincreased, with its 10-year borrowingcosts rising despite the Eurozones lat-est plan to help the regions troubledeconomies. Costco Wholesale,Macys, Kohls and Target wereamong the retail chains that reporteddisappointing June sales at stores openat least a year. Costco shares weredown 0.4 per cent at $94 and Targetfell 1.1 per cent to $57.15. Volume waslight, with about 5.19bn shares tradedon the New York Stock Exchange, theAmerican Stock Exchange and Nasdaq,below last year's daily average of7.84bn.

About 54 per cent of companies trad-ed on the New York Stock Exchange

BRITAINS top share index closed upbut off session highs yesterday asmarkets fretted over global growthprospects, despite moves by central

banks to boost flagging economies.Miners closed slightly higher after

China surprised the market by cuttinginterest rates for the second time in twomonths.

But in a sign of investor caution after arally that had seen the FTSE 100 rise 3.5per cent in three days, pharmaceuticals,telecoms and other defensives wereamong the top gainers as attentionturned back to weakening global growth.

Major central banks across the worldunveiled monetary easing measures yes-terdat to bolster their economies, some ofthem within market expectations, fur-ther confirming the downward pressureson the world economy.As expected, the Bank of England

launched a third round of monetarystimulus.The European Central Bank cut its main

interest rate to a record low of 0.75 percent and its deposit rate to zero, but thegloomy economic outlook presented by

ECB President Mario Draghi did little tobolster investor confidence.(Growth) is slowing all around the

world now. In a broader sense, Chinasinterest rate cut could provide worriesand shows the countrys central bank isfighting hard to combat it, ChrisBeauchamp, market analyst at IG Indexin London, said.

Focus now switches to the US, whoseservices sector expanded at the slowestpace in June since January 2012, datashowed yesterday, and whether theFederal Reserve will take action to boostgrowth at its meeting later this month.

Some economists had expected the Fedto launch a third round of outright bond-buying as soon as July to shore up theeconomy, but better-than-expected jobsdata, ahead of non-farm payrolls today,also fanned worries that the job marketperformance would not compel the Fedto provide more QE immediately.

I think the central banks are really run-ning out of options in the longer term

and I think you are getting diminishingreturns with these moves, Beauchampsaid.

Londons blue-chip index ended up 8.16points, or 0.1 per cent, at 5,692.63 points,with volume remaining relatively thin, at77.5 per cent of 90-day average.Among the stand out performers on the

FTSE 100 was British engineering groupGKN, which closed up 13.1 per cent.

GKN rose after it agreed to buy the aero-space division of the worlds number twotruck maker Volvos aerospace divisionfor 633mi, expanding its presence in thefast-growing civil aircraft sector.The deal will be funded by new debt

and a placing of 140m, representingaround five per cent of GKNs currentmarket capitalisation.

Meanwhile European shares slippedfrom two-month highs to end lower, andcharts suggested that a key Europeanstock index was likely to fall furtherbefore recovering after failing to clear astrong resistance level despite recentupward momentum.

Italian shares were also pressured bycomments from UniCredits chief execu-

tive Federico Ghizzoni that the economiccrisis was driving up bad loans at Italysbiggest lender, traders said.

The FTSEurofirst 300 index closed 0.1per cent lower at 1,044.47 points. Theindex had earlier hit 1,054.02, its highestsince early May, after Chinas centralbank surprised with a rate cut.

Eurozone banks bore the brunt of thesell-off, with the sector index down 3.3per cent.

FTSE ends higher but Europe closeslower as two-month high fades

BESTof the BROKERSCentrica PLC

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CENTRICAGoldman Sachs has bumped the utilities giant off its conviction buy

list and downgraded the stock to neutral, citing a weaker near-termearnings per share outlook due to lower commodity prices and greatershare price upside elsewhere in our coverage. Goldman has had Centricaon its buy list since 7 January 2010, in which time the gas and electricitycompanys shares have added 15.6 per cent compared to the 11.9 percent loss suffered by the FTSE World Europe index.

TATE & LYLEExane BNP Paribas has upgraded Tate & Lyle from neutral tooutperform, due to a rare bout of stability in the key bulk ingredientsbusiness and a more reasonable valuation. Exane raised the sugarmakers target price from 700p to 760p, saying it could up earnings by afifth over the next three years including a return to high single digitgrowth after a flat full year 2 013.

VODAFONELiberum Capital yesterday initiated coverage of the UK telecoms sector,recommending an overweight position for Vodafone in the belief thatthe Verizon Wireless dividend news will be a catalyst. Despite adisappointing revenue decline in the last year, a pressure whichVodafone has yet been unable to offset, the company offers compelling

overall shareholder returns. Liberum issued a buy rating and gavethe stock a target price of 210p.

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FOR Gods sake, let us sit uponthe ground, and tell sad storiesof the death of kings. Anyonewho caught the BBCsdramatisation of William

Shakespeares Richard II at theweekend will have seen not only oneof the Citys historic buildingsfeaturing prominently StBartholomew the Great inSmithfield but also a timelessanalysis of the tragedy of power, onethat seemed ever more relevant totodays leaders as the week wore on.

Richard II is the story of a rulerpuffed up with vanity, butovermatched by his responsibilities.Unable to manage disputes,capricious and highhanded in his

decisions, careless in his delegation

IT WILL be on strictly surname-terms that Paul Tucker, deputygovernor of the Bank of England,faces his interrogators on theTreasury Committee on Monday.

Tucker, unlike Bob Diamond, hasplenty of experience of dealing withthe Committees MPs and knowswhen to defer to them. But he cannotexpect an easy ride there will betough questions to answer on Libor,the Bank and who said what to whom.The stakes are high for Tucker. He

must give a full account of the Banksrole in the Libor-fixing scandal and,specifically, of his own part in the nownotorious conversation with Diamondin 2008 which supposedly warned ofunease in Whitehall at Barclays highLibor rates. If he can reassure theCommittee that the Bank was not try-ing to influence Barclays rate-setting,he will escape censure. If he cannot, hecan wave goodbye to the governors jobin June 2013.

How should Andrew Tyrie MP andhis fellow Committee membersapproach Tucker? Having been at theBank for over 30 years and at Sir

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

18FRIDAY 6 JULY 2012

DAN CONAGHAN

Questions the Treasury Committeeshould ask Paul Tucker on Monday

Mervyn Kings elbow for the pastthree, he knows all of the institutionsfoibles and its failings. He was theexecutive director of its Markets

Division from 2002 to 2009 the manto whom the banks turned when con-fidence evaporated and the capitalmarkets froze.The MPs could start by asking the

extent to which the Bank and specif-ically its dealing room, which resem-bles nothing so much as a investmentbanks trading floor itself sees mar-ket trades and other activity in micro-scopic detail. It is certainly intimatelyacquainted with the money markets,the gilts market and the ebb and flowof liquidity. It would be a surprise if itdid not have a similarly 360-degreeview of Libor submissions, both proper

and improper.The Committee might also quiz

Tucker about the Banks MoneyMarkets Liaison Group, whichincludes representatives of all thebanks, not to mention the BritishBankers Association (discreditedguardian of Libor) and of the Bankitself. One member I suggest the for-midable Andrea Leadsom MP mightcare to ask Tucker about theSeptember 2009 minutes of thatGroup, which noted errors in the

inputting of Libor submissions bybanks recently. Was that a cause forconcern? Did it prompt further calls toBarclays and other banks?

MPs will doubtless want to know ifTucker expressed concerns aboutLibor, not only to Diamond, but also tohis counterparts at the other banks.Was there a pattern of persuasion oradmonishment? Were the deputy gov-ernors eyebrows raised or lowered intime to unwelcome adjustments inthe numbers?

Finally, having covered the minutiaeof Libor, perhaps the Committee Isuggest the terrier-like David Ruffley

MP might bowl a googly at Tucker:what about the alleged manipulationof other markets? Gilt-edged MarketMakers (GEMMs), the arbiters of thegilts market, have claimed that artifi-cial price spikes were created in cer-tain gilts during the Banksquantitative easing 325bn buyingprogramme. The spikes were thenallegedly collapsed by unscrupulous

traders to create super-discount ratios,which it is claimed obliged the Bank topurchase them. Was any of this true?Does Tucker recall this spivving of thegilts market, which was the talk of theCity in the late spring of 2009? If so,did anybody try to stop it?

Finally, the MPs may want to knowwhether the Bank has resolved itshighly ambivalent relationship withmarket practitioners and, indeed,their regulators. I nominate the some-

what ponderous but no-nonsenseGeorge Mudie MP for these questions:Did the Bank perhaps ignore Libor-rig-ging, because to address it would haveraised the spectre of dabbling in regu-lation (anathema to Sir Mervyn)? Ordid it simply regard its delicate inter-ventions the call to Diamond ashelping to create an orderly marketout of a patently disorderly one?

How will Tucker, for so long thedependable deputy, take such agrilling? A few months ago I asked one

of his most senior colleagues to sum uphis character. They described Tucker ascomplex, demanding and ambi-tious. They also pointed the vagaries ofhis relationship with Sir Mervyn King.And what of his opinions as to how theBank of England conducts its business?The answer came: Paul Tucker hasspent thirty years biting his lip. Nextweek, perhaps for the first time, he hasthe opportunity to clear the air andspeak his mind.Dan Conaghan is author of The Bank

Inside the Bank of England (BitebackPublishing). He has worked in the City for thepast 15 years, latterly in the bond market.

and spendthrift in his habits, hisgodlike pride is slowly stripped away.A series of bad decisions ends incruel disillusionment, and thecoronation of a replacement.

The bloodletting at Barclays isntan exact mirror to Shakespearesplay. The deposition of Bob Diamondfrom his throne was a response tolower level wrongdoing more than

his vanity or weakness. But the fall of

Diamond, his right-hand man JerryDel Missier and the imminentdeparture of chairman Marcus Agiusfrom one of Britains oldest bankschimes with Shakespeares bleakwarning, within the hollow crownthat rounds the mortal temples of aking keeps death his court. Evenmasters of the universe will meettheir comeuppance.

Richard II is also a tragedy ofeconomic mismanagement, offeringa warning to todays debt-happypoliticians as well. John of Gauntsfamous speech celebrating Englandas a sceptred isle is really acomplaint that a once-great countryhas been bankrupted by its ruler.

The main grievance of Gaunts son

Henry Bolingbroke, who takes

Richards throne from him, isRichards unjust windfall tax seizing his inheritance after Gauntdies. We even learn of Richard thatthe commons hath he piled withgrievous taxes, and quite lost theirhearts.

But above all, the playunderstands that the disaster whichbefalls the king is also a disaster forhis disaffected kingdom. Groaningunder mismanagement, it must payan even heavier price to restoreEnglands glory. It is a time whenrich men look sad and ruffiansdance and leap, the one in fear tolose what they enjoy, the other toenjoy by rage and war.

There has been some dancing and

leaping over the losses of the rich

this week, but it is shortsighted. TheLibor scandal may yet prove atragedy for Londons global standing.For Barclays 147,000 employees andits shareholders, as the credit ratingagencies made clear yesterday, theloss of senior staff is a hard blow.

Wrongdoing, bad managementand economic incontinence all needto be killed off, but Richardsusurper ends the play by sayingthey love not poison that do poisonneed. With his once-great rival deadat his feet, he protests my soul isfull of woe, that blood shouldsprinkle me to make me grow. Thedeath of a king may be justified, butit remains a tragedy.

Marc Sidwell is managing editor of City

A.M.

THE LONGVIEW

MARC SIDWELL

The fall of Bob Diamond: How tragedy can stalk even the most powerful

Tucker might have

to wave goodbye tothe governors job

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Y!Fly to France for the weekendfrom just 79*one way.Bonne fin de semaine!

19

Political animals[Re: Pity Osborne isnt this passionate whentalking about growth, yesterday]George Osborne is treating this scandal as apolitical game, and most of the coalition isfollowing him. There may be evidence ofover-close contact between politicians andbankers, but that contact crosses thespectrum it is, in fact, structural.

Jamie Phillips

The panel questioning Bob Diamond wasweak, desperate to make political points. TheMP who asked about the number of timesethics was mentioned in Barclayss annualreport made a particularly cheap stunt. It wasright for Diamond to go, but these MPs onlymanaged to enhance his reputation.

Alan Fourie

Costs and benefitsThere may be good reasons to not hold ajudicial inquiry, but surely cost isnt one ofthem. Whether an inquiry amounts to 10mor 50m is neither here nor there if its theright thing to do.

Nick Reid

[Re: The Higgs boson discovery is only thefirst chapter, yesterday]Joel Goldsteins article is a useful tonic tothe unceasingly negative news coming outof the financial and political worlds.Whereas we must acknowledge the dailyscandals and sagas that our leaders forceupon us, its good to be reminded thathuman knowledge is still progressing, evenif its not immediately noticeable.

Harry Greener

THE simple fact is thatEurozone policymakers arestill not doing enough todeal with the root causes ofthe crisis. Peripheral

economies are fundamentallyuncompetitive inside the currencyunion and will be unable to returnto solid economic growth andfiscal health without exiting.Some form of Eurozone break-upremains likely.

As we, at Capital Economics,argue in our winning essay for theWolfson Prize, the most realisticscenario is still that one or more ofthe weaker countries, probably ledby Greece, leave the Eurozone,introduce a new currency whichthen falls sharply, and defaults ona large part of their governmentdebt.

Preparations for exit would needto take place in secret to prevent abanking collapse, and new notesand coins would therefore not beavailable straight away. Initially,then, small transactions could con-tinue to be paid for with euro notesand coins. To make life easier, thenew currency should be intro-duced at parity with the euro.The government should rede-

nominate its debt in the new cur-rency and negotiate a reduction inthe level of its debt to a sustainablelevel, perhaps 60 per cent of GDP.Once the new currency is intro-duced, it would fall perhaps by asmuch as 50 per cent, which shouldprovide exporters with a boost andkick-start economic growth. In theshort term, though, the deprecia-tion would also lead to a jump inconsumer prices, piling furtherpressure on struggling households.Nonetheless, international experi-ence suggests that fears of an exitprompting a long period of high,or even hyper inflation, with cata-

TOP TWEETSThe Bank of Englands further round of QE iswelcome but not sufficient to make up for thegovernments economic incompetence.@ChukaUmunna

Labour policy: print money and give it topeople. Coalition policy: print money andgive it to banks. Guess which wins?@DouglasCarswell

We have the biggest tax burden since WorldWar Two, and the smallest army sinceVictorian times. This isnt Conservatism.@TimMontgomerie

Hollandes 75 per cent tax on 1m earningsshoots French entrepreneurial growth dead.@declanganley

Is the Bank of England right to increasequantitative easing by a further 50bn?

YESThe UKs recovery continues to disappoint. So much so that we are

back in recession, with output having contracted since last autumn.Among the G7, only Italy has seen a weaker recovery. With that inmind, the Bank of England needed to act this month, and act it did its 50bn injection should help shore up the lacklustre economy andoffset some of the downside risks blowing in from across theChannel. Quantitative easing supports the economy in a number ofways, such as by lowering gilt yields directly or encouraginginvestors to buy corporate bonds and shares both helping cutborrowing costs for households and firms. The slowing worldeconomy prompted four central banks in the UK, euro area,Denmark and China into action yesterday. While the effect ofpolicy easing in such difficult circumstances is highly uncertain, itcan only be positive for flagging growth.George Buckley is chief UK economist at Deutsche Bank.

George Buckley

NOSimon Ward

QE is the right policy tool if there is a shortage of money in the

economy. There isnt now real M4 holdings of households andprivate non-financial companies rose by a solid annualised 2.6 percent in the six months to May, the fastest growth for three years.Current economic weakness is the lagged consequence of acontraction in real money last year, caused by an inflation spike forwhich the Monetary Policy Committee (MPC) bears partialresponsibility. With monetary trends consistent with a second-halfeconomic recovery, more QE risks creating excess liquidity thatwill sustain a medium-term inflation overshoot and propagate newasset price bubbles. The MPC, instead, should take stronger action toease credit constraints and lower banks funding costs and lendingrates, for example by postponing required increases in regulatorycapital and extending term repos from six months to three years.Simon Ward is chief economist at Henderson Global Investors.

RAPIDresponses The Wolfson Prize

winner sets out aplan for euro exit

strophic consequences are exagger-ated. Policymakers could furtherreduce the risk of this and improve

medium-term growth prospects byintroducing an inflation targetingregime, tough fiscal rules and con-tinuing to implement much-need-ed structural reforms.

Needless to say, the uncertaintycreated by a break-up would initial-ly damage business and consumerconfidence in the rest of theEurozone. And to minimise therisk of contagion, the northerncore may need to accept fasterprogress towards full fiscal andpolitical union. Once the dust set-tled, the euro would probablyappreciate, with damaging conse-quences for exporters. These fac-tors could result in the remainingEurozone economies falling deeperinto recession. But this would givethese economies the incentive toloosen monetary policy and imple-ment structural reforms to boostdomestic demand. A rebalancingof the economy away from areliance on net exports would be inthe interests of the whole of thecurrent membership of theEurozone, as well as countries out-side it.A Eurozone exit would present

enormous challenges for theeconomies that exited and the restof Europe. But all of these difficul-ties could be overcome.Roger Bootle is managing director of

Capital Economics, which won theWolfson Economics Prize yesterday.

FRIDAY 6 JULY 2012

ROGER BOOTLE

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