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AN EMOTIONAL Andy Murray insisted he is getting closer to winning a Grand Slam

tournament after losing the Wimbledon mens singles final in four sets to Roger Federeryesterday. Murray was widely deemed to have won over some previously sceptical fans, whohave found him dour, with a gracious and tearful speech following his defeat.

TEARFUL MURRAY LOSES FINAL BU

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Date: 14 July 2012Time: 10.15 15.30

BRITAIN will fall behind the rest of the world unless a bold, brave stance onairline growth is adopted by the gov-ernment, Virgin founder Sir RichardBranson warned yesterday.

Speaking at the launch of new Virgin Atlantic routes to Cancun andMoscow, Branson hit out at leaders

who stand in the way of expansion atclose-to-capacity Heathrow and imposesteep taxes on air travel.

What we ought to be talkingabout is wholesale expansion to

Asia, to Africa, to South America, and options onroutes that are not current-ly serviced, he toldreporters.

But its impossible, and its been impossible for the last 15 years. Britain came to a fullstop 15 years ago.

Millions of travellersacross the world aregoing to other Europeancities rather than com-ing to the UK and thataffects every single

aspect of the UK. In timeit will turn into a third world country its that serious.

www.cityam.com FREEISSUE 1,669 MONDAY 9 JULY 2012

BY MARION DAKERS IN CANCUN

BRANSON: UKISATRISKOF

JOINING THETHIRD WORLD

Certified Distribution

30/04/12 till 27/05/12 is 132,076

TOP BANKS grip on the market would be broken if consumerscould change banks as easily asthey change mobile phonenetworks, Labour leader EdMiliband will say today.

He will also call for the big fivehigh street banks to sell off up to

1,000 branches, allowing twosmaller institutions to join the bigplayers, in a speech that accusesthe coalition of failing to restore

BY TIM WALLACE competition to the sector in the wake of successive crises.

However, the government believes it is already takingsufficient steps as Lloyds is sellinghundreds of branches to the Co-Op.Furthermore, new rules will createa new account switching service by September 2013.

Meanwhile reports yesterday

claimed Barclays is looking atspinning off its investment bank inthe wake of the Libor scandal.Virgin founder Richard Branson says the UK must

adopt a brave stance on aviation policy

Branson said that Virgin will partici-pate in the coalitions ongoing avia-tion review, but only if it reverses itsfarcical blanket ban on consideringa third runway at Heathrow.

If by some miracle they think Heathrow isnt the answer, then we

will go along with it. But all theexperts think Heathrow is the answer,so I think it will be very surprising if its not, he said.

Branson was speaking as Virgin Atlantic unveiled its latest bid to mus-cle in on BAs dominance at Britains

biggest airport, pledging to launcha new route to Moscow next year but only if it can take oversome of BAs landing slots atthe hub.

BA has been forced to sell 12landing slots at Heathrow

following competitionconcerns surround-

ing its takeover of BMI earlier in

th e

year. Virgin said it will bid for all 12slot pairs and use some of them tostart flights to Moscow using new

A330 planes from 2013.We will know by Christmas what

routes we can fly, Virgin Atlantic Airways chief executive Steve Ridgway told reporters. The competition that

we have provided to BA on the long-haul destinations, we can now do thaton short haul. Virgin Atlantics head of North

America, Chris Rossi, said the firm had been looking to fly to Moscow for 15 years, but had until now struggled togain a toehold in the market.

In a separate development a group of influential backbench ConservativeMPs will today make a stand againsttheir party and call for two new run-

ways to be built at Heathrow. The report by the Free Enterprise

Group says a third runway wouldonly provide a stopgap solution.

One solution is to grant plan-ning permission for both a third

and fourth runway at the sametime, allowing Heathrow to

upgrade itself to a truly world classhub, the report says.

FTSE 100 5,662.63 -0.53 DOW 12,772.47 -124.20 NASDAQ 2,937.33 -38.79 /$ 1.55 -0.01 / 1.26 +0.01 /$ 1.23 -0.01

SEE SP ORT: Pages 22-23

ALLIST ER HE ATH: Page 2

Labour: changing banks shobe as easy as switching pho

LONDON2012

days to go18BUSINESS WITH PERSONALITY

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allister.heath@cityam.comFollow me on Twitter: @allisterheath

IN BRIEFGreek government wins approvn Greeces new conservative-led

government today won parliamentaryapproval, but faced the much toughertask of convincing European partnersand the IMF to give it more time tomeet the terms of its bailout. There hadbeen little doubt the governmentwould sail through the confidence voteafter a heated three-day debate inwhich it pledged to win back the trustof foreign lenders. All 179 rulingcoalition deputies backed the motionin the 300-seat parliament. Afterdemanding a long list of changes toGreece's latest rescue package when ittook power last month, the three-partycoalition has struck a more conciliatorytone in recent days as it faces theprospect of running out of cashwithout more aid.

Egypt to reconvene parliamentn Egypts new president yesterdayordered a parliament dominated by hisIslamist party to reconvene,challenging the authority of thegenerals who had dissolved theassembly in line with a court order.President Mohammed Mursi's decreeappeared to catch off guard thegenerals who handed power to him on30 June. State media said the army'ssupreme council held an emergencymeeting and a council member,declining to be named said thegenerals were not given prior warning.Before the handover, the army putsome curbs on the presidency and gaveitself legislative powers. Mursisdecision hands those powers back to aparliament that was led by his allies inthe Muslim Brotherhood.

Bank of England deputyfaces Libor quiz from MPsPARLIAMENT will today questionPaul Tucker, the deputy governor of the Bank of England, over his role inthe Libor-fixing scandal that

brought down top executives atBarclays bank and threatens tocause lasting damage to the reputa-tion of the financial system. Tucker made the unusual decision

to request an appearance in front of the influential Treasury select com-mittee at the earliest opportunity after Barclays released an accountof a telephone conversation he had

with Bob Diamond, then head of Barclays investment banking divi-sion, in October 2008. According to Diamonds memo,

Tucker said senior figures in Whitehall were asking questionsabout Barclays high Libor rate sub-missions and may have implied thatthe bank should lower its estimates. Yesterday the official who dis-

cussed Libor submissions with Tucker was widely named as cabi-net secretary Sir Jeremy Heywood. Tucker will be asked about the

minutes of a November 2007 meet-ing he chaired where concerns wereraised about incorrect Libor rates.

Before the Bank of England wasdragged into the scandal Tucker

was widely considered to be thefavourite to take over as governor

Call for French business boostFrench business urgently requires shocktreatment to cut labour costs and boostits flagging ability to compete oninternational markets, top economists andbusiness leaders have warned FrancoisHollande.

ArcelorMittal refuses to rule out EUsteel closures as demand fallsArcelorMittal has refused to rule outfurther site closures in Europe as theglobal steel industry enters what some

observers fear could be a five-year spellof overcapacity linked to signs of a severeslowdown in demand and consumption inChina.

FTSE 100 total pension deficits soarThe total pension deficit at the UKslargest companies has more than doubledover the past year, hit by falling bondyields and volatile markets. The combineddeficit rose from 19bn at the end of Junelast year to 41bn at the end of May in theannual analysis of 83 FTSE 100 companiesby actuarial consultants Lane, Clark &Peacock, to be published tomorrow.

Asda joins race to replacebattered high street banksThe plunging popularity of banks hasprompted Asda to follow its closest rivalsin taking an aggressive step into theworld of personal finance.

Oil explorers get tax breaks to helpquit North SeaOffshore oil explorers are to be givendeeds by the Treasury guaranteeing taxrelief to offset the multibillion-pound costof dismantling North Sea equipment.

BP is dragged into SFO briberyinvestigationBP is facing a Serious Fraud Officeinvestigation relating to work thecompany has been involved with inAzerbaijan.

German president tells Merkel tocome clean on EU debt dealGerman president Joachim Gauck hasordered Chancellor Angela Merkel toclarify exactly what she agreed at the EUcrisis summit.

Boeing to expand lead in ordersover AirbusBoeing looks set to start Europes big airshow with orders from at least twoleasing companies deals that shouldhelp the US plane maker consolidate itslead in orders over Airbus this year.

Thousands could lose internetThousands of people whose computerswere infected with malicious softwaremore than a year ago faced the possibilityof not being able to get online today.

SMALLER banks and building soci-eties are benefiting from increasedcurrent account business as con-sumers become disillusioned with

big banks.Metro Bank saw a 30 per cent

increase in new account enquirieslast week, and has increased call cen-tre manpower by 13 per cent to cope

with demand. It typically opens 1,500-2,000 new accounts each week.

New figures from the Co-operativeBank show a 48 per cent increase inthe number of online customersrequesting to switch their currentaccount in the last two weeks.

Nationwide saw an 85 per centincrease in the number of onlineaccounts opened last week, whileNorwich & Peterborough BuildingSociety saw applications double, witha high proportion of these comingfrom Barclays and NatWest, accord-ing to Ewan Edwards, head of currentaccounts at N&P, although an RBSspokeswoman said there is no signif-icant change in the current accountcustomers and that it was too earlyto see any real change. With politicians stressing that

banks must make the switchingprocess easier, Metro Bank spokes-

woman Beth Murray said a betterunderstanding of the switchingprocess would lead a number of cus-tomers to smaller banks and buildingsocieties.

Smaller rivals

pick up businessafter rates scam

Deputy governor of the Bank of England Paul Tucker asked to be heard by the committee

2 NEWS

BY JANE HAMMOND

BY JAMES WATERSON

To contact the newsdesk email news@citya

FOR once, Labour has got it half right. It will confirm today thatit wants to make it much easierfor current account holders to

change bank, in a bid to empowerconsumers and to drastically improvecompetition in retail banking. Theidea is to make switching bank as

easy as it is changing mobile phonecompany by giving consumersownership of their bank accountnumbers, in the same way that they now own their phone numbers. Bank account portability might sound likea technical change but it wouldrevolutionise the entire financialservices industry and allow new entrants such as Tesco to scoop upmarket share very quickly.

Signing up students when they opentheir first account, knowing that they are less likely to leave than to getdivorced, remains a central strategy

EDITORSLETTER

ALLISTER HEATH

Why it must be made much easier to switch bank a

MONDAY 9 JULY 2012

for many high street banks. In theory,it is not that hard to change bank andsome people do so already (see story

below) but most consumers are putoff by the paperwork and worry thatmoney will get lost. Red tape includ-ing anti-money laundering legislation also makes it harder to switch.

Unfortunately, Ed Milibands other views on banking reform are misguid-ed. He wants to carve out yet another1,000 branches from the existing BigFour Barclays, HSBC, Lloyds Banking

Group and RBS and hand them overto challenger banks to create a BigSeven. Some of this is already happen-ing, with Virgin snapping upNorthern Rock, and Co-op set to buy

branches from Lloyds. But there arethree problems with extending thistop-down approach any further.

Centrally planning competitiondoesnt work. Why seven banks? Why not nine, or 30? The truth is that thesupermarket industry is ultra compet-itive even though people often only have the choice of two or three stores.

The same holds in other industries.Market structure is not the issue. Thekey is to empower consumers to vote

with their feet and then allow thestructure of the market to adjust totheir free choices, in a bottom-upfashion, rather than to try and plan

what it should look like. Another problem with forcing more

version, any newly authorised bank would be able to buy a licence to usethe system, removing the advantageof the long established clearers.

Accounts could also be easily trans-ferred from failed institutions tosound ones during a crisis, reducingthe risk of a run.

This is the kind of policy the City needs to adopt to rebuild itself alongpro-market lines. Banks shouldembrace full account portability,rather than the adulterated, ersatz

version proposed by the coalition.Banks desperately need to improvetheir reputations. Enforced relation-ships never end well so treating con-sumers like grown-ups by givingthem an easier exit strategy wouldundoubtedly be a good first step.

branch disposals is that large num- bers of customers would have tochange bank against their wishes, cre-ating chaos and inconvenience. Last

but not least, it is complicated andcostly to carve out branches from anexisting bank. The current amputa-tions are taking years to execute, with

vast numbers of consultants involved.It would be better to spend the money bank account portability would beexpensive on building a new ultra-modern clearing system. It wouldhold all accounts with an identifyingcode to establish which bank holdsthe account, allowing near instanta-neous switching.

Intriguingly, this is one issue whereLabour and the Free Enterprise Groupof Tory MPs are now allies. The groupissued a pamphlet advocating full

bank account portability last year,penned by Andrea Leadsom. In her

when Mervyn King steps down in theautumn. His chances of winning thetop job may now depend on the qual-ity of the evidence he presents today.

Further committee hearings areexpected to be arranged before theparliamentary recess, with Barclayschairman Marcus Agius due to makean appearance tomorrow.

Meanwhile Deutsche Bank declinedto comment on reports that two of itstraders have been suspended after itused external auditors to examine

whether staff were involved in manip-ulating interbank lending rates.

n What was said during the call he hadwith Bob Diamond in October 2008?n Did he act on concerns raised aboutLibor at a 2007 meeting of the BanksSterling Money Markets Liaison Group?n Was he aware that Libor-fixing wastaking place at other banks?n Did he turn a blind eye to Libor abuse?n Was Sir Jeremy Heywood the Whitehallofficial worried by Barclays Libor rate?

QUESTIONS FOR TUCKER

The new jobs website for London profeCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

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Private equity house Permira is con-sidering a refinancing of frozen foodfirm Birds Eye, which would land thefirm a 500m (397m) windfall.

Under the terms of the refinancing,the level of Birds Eyes debt wouldexpand to almost 2bn from 1.4bn.

Permira, which bought the UK- based frozen food producer fromUnilever for 1.6bn in 2006, is under-stood to be considering the refinanc-ing in order to return value toshareholders. A source told City A.M. that Birds

Eyes strong growth throughout thepast few years, helped by strong per-formance of subsidiary Findus Italy,

which it bought from consumer giantUnilever in 2010 for 800m, meantthat refinancing the business couldreturn some of that value to investorsin the form of a dividend. Total net sales at Iglo Group, the par-

ent company of Birds Eye, grew 1.4 percent to 1.5bn for the year ended 31December 2011. Two of Permiras part-

Permira plans400m BirdsEye refinancing

BY JANE HAMMOND ners Cheryl Potter and MaximilianBiagosch sit on the Iglo board. The source also said that the refi-

nancing would put a better capitalstructure in place and allow Birds Eyeto back up its growth and innova-tion strategy over the next three tofour years. The source added that theacquisition of Findus Italy, the frozenItalian food producer, had significant-ly transformed the Birds Eye busi-ness, and the money raised from therefinancing could pave the way forfuture consolidation in the market.

Permira put Birds Eye up for sale ear-lier this year, but offers from rival pri-

vate equity houses BC Partners andBlackstone were both rejected. It isunderstood that Permira, whose port-folio includes names such as high-street chain New Look, JustRetirement and Hugo Boss, was look-ing for around 2.8bn, but offers fellshort at between 2.5 and 2.7bn.

Private equity house Permira ownsaround 20 companies globally, witharound 35 per cent in the consumersector and 33 per cent in TMT.

Firms more cautious on prof THE NUMBER of profit warningsissued by UK businesses fell 18 percent in the second quarter of 2012, according to figures out

yesterday from Ernst and Young

but only because f irms are morecautious in their initialpredictions, not because profitsare improving.

Sixty warnings were issued inthe quarter, down from 73 in theprevious three months. But any unexpected deepening of theEurozone crisis could push

warnings up again, th e report warned.

Part of the fall in warnings is

BY TIM WALLACE undoubtedly due to a slightimprovement in tradingconditions, alongside hopes for anOlympic boost, and, crucially,falling input prices, said Ernst &

Youngs restructuring head AlanHudson. However, many

companies have also batteneddown the hatches and cut costs tomeet targets, he added.

Though most FTSE sectors saw a year-on-year drop in profit warnings, the UKs construc tionand materials companies were the

worst hit during the quarter asseven firms issued alerts thehighest number since 2008.

The British high street ha s alsocontinued to feel the stretch, with

five profit warnings from firms inthe FTSEs general retailers list.

Though this number matchedthe previous quarter it was downfrom nine in the same period a

year ago, suggesting that pressureon the consumer purse has begunto ease.

Even if the UK economy moves back into the bl ack this summer,the recovery still lacks thetraction it needs to buildsustainable momentum, saidHudson.

There is only so much fat thatcompanies can trim and only solong they can tread water withlittle or no investment investment that both they and theUK economy desperately need.

Permira partner Cheryl Potter sits on the Iglo board

DEBENHAMS, Britains secondlargest department store group,revealed yesterday it is launchingits first foreign language website inGermany as part of its ambitions toexpand overseas.

The retailer, which runs 164stores in the UK and Ireland andthe Magasin du Nord chain inDenmark, also plans to expand itsinternational delivery service to anextra 34 countries, including

Argentina, Israel and Singapore,taking the overall number of

BY KASMIRA JEFFORD

Debenhams launches websitein German to lure shoppers

MONDAY 9 JULY 20123NEWScityam.com

countries to 41.Simon Forster, online director at

Debenhams, said: With the secondlargest e-commerce market inEurope after the UK, Germany hasconsistently been one of our topperforming countries online andnow German shoppers will benefitfrom their own bespoke website.

The group last week posted better-than-expected sales up 3.1per cent in the 16 weeks to 23

June after events including theDiamond Jubilee helped lure

shoppers through its doors. Onlinesales jumped by 34.9 per cent.

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RETAIL giant Marks & Spencer (M&S)is expected to announce weak first-quarter sales at its annual meetingtomorrow, after clothing sales werehit hard by the poor weather. A consensus forecast of 12 analysts

compiled by the company predicts a6.7 per cent drop in clothing andhomeware sales compared to thesame period last year. This is expected to translate into a

three per cent drop in overall sales, with 0.8 per cent sales growth in thefirms food division going some way to make up for falls elsewhere.

Such results would represent the worst quarterly figures in three years.

Unfavourable weather has clearly paid a part in the poor general mer-chandise performance, although

with John Lewis continuing to postgrowth and Debenhams reportingstrong UK trading, we think there isan element of poor execution atplay, said Richard Cathcart, an ana-lyst at Espirito Santo.

Investors will be keen to clarify thefuture of executive Kate Bostock at

M&S expectedto reveal weaknon-food salesBY JAMES WATERSON the AGM, with M&S declining to deny

press reports that the head of non-food products is set to leave the firm.

If Bostock leaves she will be follow-ing M&Ss head of menswear, RichardPrice, who quit last month to becomemanaging director of Bhs depart-ment stores.

Meanwhile chief executive MarcBolland will face questions over thesize of his pay deal after corporategovernance lobby group Pirc recom-mended investors abstain from vot-ing on the firms remunerationreport.

M&S has had a turbulent 2012, withshares in the firm dropping by 18 percent since mid March.

M ARKS & SPENCERs tradingupdate tomorrow is likely tosuggest that the high-streetstalwart has been

particularly weather-beaten in thefirst quarter of the year.

Not only in the face of the wettest spring on record which itis expected to blame for a 6.7 percent decline in non-food sales butalso metaphorically speaking, withan unnerving number of seniorstaff blown elsewhere by the windsof change.

Some analysts fear changes atthe top are beginning to trickledown to its trading performance;after all, a company needs a stablemanagement team to ensureconsistent results. But if its not the

changes in management chief executive Marc Bolland has in thepast argued that staff turnover isnormal for a business of M&Ss size then surely rain cant be the solecause of the retailers worst quarterly trading in three years?

Finance director Alan Stewart hasdone an admirable job reining incosts and keeping 2011 profits in line

with forecasts. But growing sales is

always the best formula for successand its here that Marks seems to bestruggling with its generalmerchandise in particular

womens fashion. At the companys full-year results

in April Bolland jumped from oneinitiative to the next reassuringthat work was well underway tomodernise stores, grow market sharein clothing, revamp its homeware,create a beauty department and

become a leading multi-channelretailer while expanding abroad.

The retail sector never stands stilland Bolland is clearly not short of ideas. But the key challenge he facesnow is to show that two years after

joining, he can turn those ideas intoconsistent positive sales growth.

BOTTOMLINE

KASMIRA JEFFORDMarks and Spencer Group PLC

6 Jul2 Jul 3 Jul 4 Jul 5 Jul

322.5325.0

317.5320.0

327.5330.0332.5335.0 p 318.00

6 Jul

MONDAY 9 JULY 20124 NEWS cityam.com

Marks & Spencer chief Marc Bolland is expected to address speculation of Kate Bostocks departure at the annual meeting tomorrow

Its not just any sales fall, its an M&S sa

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HAMLEYS may be sold to French retailgroup Groupe Ludendo, according toreports yesterday.

Britains most famous toyshop is cur-rently owned mainly by nationalisedIcelandic bank Landsbanki, famous forrunning the Icesavedeposit programme thatdefaulted in the financialcrisis of late 2008.

Landsbanki acquiredits stake from retailinvestment groupBaugur in a debt-for-equity swap after the investmentgroup went into administration in early 2009.

Baugur took control of 63.7 per centof Hamleys in 2003, in a bid worth254p a share, valuing the company at

roughly 59m. This was after a bidding war with rival

investor Tim Waterstone, who hadoffered 230p but judged bids of around254p a step too far.

Last year Landsbanki rejected a 60moffer for the retailer from Bahrainiinvestment bank Global Banking

Corporation. The second most important

stakeholder is Bracken, a pri- vate equity firm run by

David Spotty Rowland,the property develop-er who left school at16 and developed an

empire centred on a property empirehundreds of millions of pounds.Rowland, a tax exile living in Jersey,has been a major donor to the Tory party, giving close to 3m in the run upto the 2010 election.

French may buyiconic British toystore Hamleys

BY BEN SOUTHWOOD

FOOTFALL on Britains highstreets fell by 5.5 per cent in

June, hitting hopes that anincrease in consumer spendingcould boost the economic

recovery.Research released today by consumer monitoring firmSpringboard blamed rainthroughout the month, whichhas continued into July and isset to wipe out any potential

boost from the Queens Jubileecelebrations.

This was supposed to be theGreat British summer but itseems were abandoning our

towns because of the GreatBritish weather, said Diane

Werhle, research director atSpringboard. Were calling onpeople to get out and about inthe UKs weather-proof historicdestinations.

Historic town centressuffered the least, dropping 2.7per cent on a year-on-year basis.

But coastal towns were hithard by the poor conditions,

with footfall down 4.4 per cent.The government recently

awarded grants of 100,000each to rejuvenate the highstreets of 12 towns, under the

guidance of retail consultantMary Portas.

High Street footfall drops asweather hits retail recovery

BY JAMES WATERSON

MONDAY 9 JULY 20125NEWScityam.com

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THE EMIR of Qatar may buy Valentino from its private equity owners, Sky News said yesterday.

The private equity firm Permiracurrently owns Valentino, having

acquired the luxury Italian fashion brand near the top of the market,for 2.6bn (2.1bn). The deal couldsee a loss of some 2bn on thatinvestment, as the price suggestedis between 550m and 600m.

The acquisition would see notonly the eponymous Valentinolabel, but also Hugo Boss andMissoni changing owners.

No spokesman from Permira wasavailable to make a comment.

Valentino togo to Qatar

BY BEN SOUTHWOOD

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TRAVEL company Stagecoach is eye-ing a move into upmarket transportthrough its budget bus brandMegabus.

It has commissioned a 52ft double-decker bus, designed to carry passen-gers on inter-city journeys.

It is understood that the buses, which will operate under the firmsMegabus brand, will have luxury leather seats by day, and give way tomore than 40 fully-flat beds at night.

The buses will also include a hostessservice, where customers will beserved food and drink at their seat. A prototype bus, which will be one

of the longest in the world, is current-ly being tested in Scotland and costsaround 500,000.

Stagecoach will order an initial lotof 10 buses, taking the investment inthe new premium product to 5m. The service is expected to be fully-

operational by 2013, although it isnot known how many routes the

buses will be available on. Megabuscurrently runs an inter-city serviceacross much of England, Scotlandand Wales.

Stagecoach tolaunch luxurysleeper buses

BY JANE HAMMONDStagecoach declined to say how

much the luxury service will cost, andhow it will compare in price terms tofirst-class train travel. There is already a similar Megabus

Gold service that operates betweenGlasgow and Inverness and Glasgow and Dundee, which offers an at-seatfood service. It has been running foraround 18 months and has been very successful, according to Stagecoachspokesman Steven Stewart. As well as the Megabus brand,

Stagecoach Group, run by chief execu-tive Sir Brian Souter, owns the Oxford

Tube, a coach service that runs between London and Oxford, and theScottish Citylink brands, a provider of express coach services in the country.

Serious Fraud Office reopeningprobe into Weavering Capital THE Serious Fraud Office (SFO) hasreopened its criminal investigation

into the collapse of WeaveringCapital in 2009 10 months afterdropping the original probe.

New director David Green calledfor the U-turn after a high court

judge found Weavering Capitalsfounder Magnus Peterson liable fordeceit and breach of his fiduciary duties in a civil case in May.

Weavering Capital, one of Londons oldest hedge funds, wentinto administration in March 2009.

BY JENNY FORSYTH Last September the SFO droppedits investigation into the case, sayingit did not have a reasonableprospect of conviction. However

liquidators of Weavering,represented by law firm Jones Day,successfully launched a civil caseagainst Peterson and other

Weavering staff. The SFO announced its change of

heart on its company website, citingthe court judgment.

The company was advisor to aCayman Islands incorporated hedgefund called Weavering Macro FixedIncome Fund Ltd which had funds of

$639m [413m] under managementin 2008, said the SFO release. Theinvestigation concerns interest rateswap transactions between the fund

and a related Weavering company inthe British Virgin Islands which hadthe effect of inflating the net asset

value of the fund.It is not the f irst volte-face for

Green, who took the helm at the SFOin April. His predecessor, Richard

Alderman, backed out of a criminalinvestigation of Libor manipulation

because of lack of resources butGreen secured an extra 3m of

Treasury funding to carry it out.

IN BRIEFPraetorian Resources lists on Aimn Natural resources investment companyPraetorian Resources today lists on Aimwith an initial market capitalisation of24m. Established by Richard Lockwoodand Malcolm Burne, the geographicallyunconstrained portfolio will invest inequities and debt securities in theprecious and base metals, energy,industrial minerals, soft commodities,diamonds and other gemstones sectors.Of the initial market cap, the company hasraised 10m through a placing, with 14mfrom leading institutional investors.

France eyes changes to auto sectorn France will not let its auto industrycollapse and plans to unveil structuralmeasures to help the struggling sector

stay afloat, French finance minister PierreMoscovici said yesterday, as the threat ofclosure looms over a major productioncentre. Moscovici said a plan to save theauto sector would be unveiled in the nextmonth, including job-saving solutions fora Peugeot PSA factory near Paris.

Bombardier gets $1.02bn ordern Canadas Bombardier Aerospace saidyesterday a new customer, which hasrequested to remain unidentified, hasplaced a conditional order for five CS100and 10 CS300 jetliners. Based on the listprices of the aircraft, the contract is valuedat about US $1.02bn. Earlier it said it wasin talks with AirAsia about a more denselypacked 160-seat version of its CSeries jetin a bid to compete with Airbus.

Sir Brian Souter founded Stagecoach in 1980 with two second-hand buses

Stagecoach Group PLC

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SPANISH and Greek banks have had

to borrow hundreds of billions of euros from central banks to shore uptheir balance sheets as depositorshave fled from the risky institutions,a top economist has warned.

Banks borrowed an additional 81.1bn (64.3bn) from theEurosystem in June, an increase of 5.9 per cent. Over the same periodthe Bank of Spain increased lending

by 62.3bn.Assuming that system-wide loans

were unchanged between 31 May and 1 June, Spanish banks accountedfor 77 per cent of the total lendingrise last month, said Simon Wardfrom Henderson. The size of theincrease suggests funding was usedto finance the government as well ascover deposit outf lows.

That means banks have increased borrowing from the Bank of Spain by 288.7bn since the end of November2011, while its Target2 liabilities rose by 271.2bn to 408.4bn. Meanwhilefigures from the Bank of Italy show its loans at 8.5bn in June.

The Spanish and Italian figuresimply that lending to banks by otherEurosystem members rose by only about 10bn in June, said Ward.

This is a net result so couldconceal higher borrowing by Greek

banks; the suggestion, however, isthat Greek deposit outflows weresmaller than feared last month.

Euro banksseek officialsector loans

BY TIM WALLACE

SPAIN is on the right path to over-come recession and regain investorconfidence, and its public accountscan handle the extra weight of European aid designated for banks,Germanys finance minister said in aninterview published yesterday. Wolfgang Shaeuble praised the

Spanish governments tough steps tostabilise public finances, and said thestate can cope with the extra burdenof taking on European debt to bail outits troubled banks.

However, he would not be drawn onthe possibility of a banking union.

To talk of what will happen whenthe future banking supervisoris functioning is to buildcastles in the sky. Rightnow we must work with

what we have, he toldSpanish newspaper ElPais.

The fundamentalfigures and theintention toreduce thedeficit shows

Spain praisedfor pushing onwith reforms

BY HARRY BANKSthat we should not exaggerate the costof the bailout on public accounts.Spain is on the right path.

Spains government has applied forup to 100bn (79.3bn) from theEurozone to recapitalise its weaker

banks, hit by a burst property bubble, which would add around 10 percent-age points to the countrys debt levelsif taken in full.

Madrid expects Spains debt ratio asa percentage of gross domestic prod-uct to be around 80 per cent, exclud-ing the bank bailout, by the year-end,in line with the European average.

But Schauble praised Spanish effortsto bring down its borrowing and main-tain access to debt markets.

Spain is doing a great deal to break the vicious circle and strengthen mar-ket confidence, he said.

Meanwhile Italian prime ministerMario Monti hit out at opponents of his labour market reforms, arguingthat complaints about government

policy undermine his efforts andpush up borrowing costs.

Schaeuble said Spain cancope with the bank bailout

THE SWISS National Bank (SNB)must defend the cap it has set onthe franc as the upward pressureon the safe-haven currency is only set to rise, the countrys economy minister said in an interview

yesterday.The latest data show the SNBs

foreign exchange reserves jumped19 per cent in June as a flood of cash into Switzerland forced theBank to sell francs to defend thecap, set at SwFr1.20 to the eurolast September.

The pressure on the SNB willincrease. That is why it is all the

Pressure set to rise on franc ascapital escapes single currency

BY CITY A.M. REPORTER more important to defend thisminimum exchange rate withoutcompromise, Johann Schneider-

Ammann told SonntagsZeitung.The minister confirmed the

government has contingency plansin case of the horror story of aEurozone collapse, but added thathe does not expect that to happenas Europe could not afford to letthe single currency break apart.

However, he said capitalcontrols would not be among any tools used, including imposingnegative interest rates onforeigners Swiss franc deposits inSwiss bank accounts, pointing tothe failure of previous such moves.

MONDAY 9 JULY 20128 NEWS cityam.com

Swiss economics ministerJohann Schneider-Ammann said the cap on the franc must be kept

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BRITISH defence giant BAE Systemssaid yesterday that it is the fron-trunner in the race to win a $11bn(7.1bn) to provide trainer jets tothe United States Air Force (USAF).

The USAF has a requirement toreplace their aging training air-craft and we believe Hawk, as

worlds most successful and afford-able jet trainer, is best placed tomeet their needs, a spokesman forthe company told City A.M. Although the contract would ben-

efit British-based staff it is under-stood that political constraintsmean that the majority of manu-facturing work would be undertak-en in the US. The fir m is confident that it can

face down opposition from American rival Lockheed Martin toprovide 350 trainer aircraft, in part

because the USAF is seeking a tried-and-tested replacement for its age-ing fleet of T-38 airplanes. Over 900Hawks have been sold since themodel first entered services withthe in 1976. The USAF is expected to make a

decision by 2014, with the first air-craft due for delivery in 2020.

BAE is facing a difficult period asdomestic defence cuts bite and it becomes increasingly reliant onoverseas orders. It appears to have

BAE in the lead

for 7bn US AirForce jet dealBY JAMES WATERSON

missed out on a 7bn contract toprovide fight jets to India but ishoping to conclude a $2bn deal

with Oman for 12 Typhoon aircraft.In late May the firm sealed a

1.6bn deal to supply Saudi Arabia with Hawk jets, including 22 new Hawk advanced jet trainer aircraft,

which will be made in UK, and 55Swiss made Pilatus turboprop air-craft as well as training equipmentand other support services.

Meanwhile yesterdays Sunday Times reported that the firm isplanning to close Glasgows historicGovan shipyard and its Portsmouthdockyard after a drop in navalorders.

We continue to work closely withthe Ministry of Defence to exploreall possible options to determinehow best to sustain the capability todeliver complex warships in the UK in the future, the firm said inresponse.

Regulators dominate top lisEuropes finance power playEUROPEAN Central Bank (ECB)president Mario Draghi has been

ranked as the most important figurein European financial markets for asecond year running, according to alist published today.

The table of the 100 mostinfluential people in Europeanfinancial markets, released today by Financial News, comes as Eurozoneleaders put plans in place to give theECB supervisory powers over its

biggest banks, adding to Draghisresponsibilities.

BY KASMIRA JEFFORD He leads a quartet of regulators tomake it into the top 10 includingStefan Ingves, the chairman of theBasel Committee on Banking

Supervision; Mervyn King, the Bank of England governor who ispreparing for its new role overseeingUK financial institutions; and MichelBarnier, European commissioner forinternal markets and services under

whose watch a slew of new rules hascome into effect.

For the first time since the survey was first published in 2005, a woman has broken into the male-dominated list of top 10 influential

people. Elizabeth Corley, chief executive of Allianz Global Investorsis ranked in sixth place, largely forthe part she has played as a leading

spokesperson for the assetmanagement industry. Overall, thenumber of women on the FN100 hasedged up to seven from the averagein previous years of five.

Daniel Pinto, JP Morgans head of Europe the Middle East and Africa isthe highest placed banker, in fourthplace, followed by Goldman Sachsco-chief executives Richard Gnoddeand Michael Sherwood in fifth andeighth places respectively.Elizabeth Corley is chief executive of Allianz Global Investors

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HUNGRY investors in search of aninvestment in a falafel wrap may findsolace in fast-food chain Leons new retail bond. Nicknamed the Leon

bond, the three-year fixed-term cor-porate bond pays an annual couponof between 10 to 15 per cent in eonPounds, depending on the amountinvested, which can be redeemed atthe restaurants chains. Investorsneed to subscribe for a minimum of 1,500. The chain, with six branches in theCity, hopes to raise 1.5m from the

bond issue, which will support thechains expansion as well as settingup the not-for-profit Leon founda-tion, whose first initiative is to set upa cookery school for young renal ill-ness sufferers. Leon is giving away

1,000 in eon Pounds at one of itsrestaurants nationwide each

Thursday until applications for the bond close on 31 July.

Leon is not the first SME to turn toits customers for funding. HotelChocolat raised 3.7m through itsretail bond in 2010, offering a grossannual return of 6.72 per cent for a2,000 investment, payable in choco-late. And online travel group Mr &Mrs Smith sought 5m from a retail bond paying 7.5 per cent, or 9.5 percent in loyalty money.

Henry Dimbleby, co-founder of Leon, said consumers are keen toinvest in favourite brands rather than

banks. It remains to be seen how many will put their money wheretheir mouth is.

Henry Dimbleby & John Vincent co-founded Leon in 2004

BUSINESS HAS SUFFERED A SERIOUS BLOW.JOIN THE RECOVERY TEAM.

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of the solution, take the first step by earning your FRM certification. Visit theGlobal Association of Risk Professionals (GARP) at garp.org/frm.

Got A Story? Emathecapitalist@cityam.com

10 cityam.com

cityam.com/the-capitalistTHECAPITALISTMONDAY 9 JULY 2012

Brought to you by

IN ASSOCIATION with Repskan.com,City A.M.is measuring the relative Olympicmedia buzz around the London 2012Olympic and Paralympic Games partners,week by week. The leaderboard, right,reflects their ranking over the past week, inthis case from Wednesday 27 June toWednesday 4 July.

Coca-Cola has maintained its high positionin the rankings, and has recently launchedits largest Olympic-themed marketing effortin its 84-year history of supporting theGames. But along with McDonalds, Coca-Cola has also received attention for lesspositive reasons. The International OlympicCommittee has come under pressure fromthe London Assembly to ban sponsors thatproduce high calorie food and drinks.

OLYMPIC MEDIA BLONDON 2012 PARTNERS

Brand Position change

McDonalds -

Samsung 2

Coca-Cola 1

Visa -3

Adidas -

BP 4

Bri ti sh Ai rways -1

Lloyds TSB 3

BMW -1

BT -1

TOP TEN PARTNERS BY MENTION

%

10

62

101

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Blogs

Regionals

National NewsTopicals

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COCA-COLAMENTIONS BY

CATEGORY

ANYONE making an unwelcomeweekend trip into the office

yesterday will have been greeted bybusier-than-usual City streets, as morethan 25,000 runners took to thepavements around London for the

annual British 10k.Among those braving the rain to jogthe iconic route past landmarksincluding Big Ben, St Pauls Cathedraland even the City A.M.offices was a57-strong team raising money onbehalf of the London Legal SupportTrust, which provides funding tosupport law centres and legal adviceagencies across London and the SouthEast.

Leon bankingon appetite ofhungry savers

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THE EUROZONE crisis has batteredBritish business confidence again,influential surveys from bothDeloitte and BDO show today, leav-ing firms unwilling to borrow andinvest, and too uncertain to boosthiring.

Deloittes survey of chief financeofficers (CFOs) shows its third majordip in confidence in the last five

years, and its sharpest decline since2007.

Ninety-five per cent of CFOs ratedcurrent financial and economicuncertainties as above normal inthe second quarter, with a major neg-ative impact on spending plans. A net balance of 32 per cent expect

hiring spending to fall, 34 per centsee capital expenditure falling, and a

balance of 67 per cent predict a fallin discretionary spending. After a rally in the first quarter,

CFOs now see an almost 50 per centchance of the recession continuing

UK confidendevastated byEurozone cris

BY TIM WALLACE until the end of the year, or for theeconomy to hit a triple dip reces-sion in the next two years.

Economic uncertainty remainsthe big constraint on corporateexpansion, said Deloitte chief econ-omist Ian Stewart.

Uncertainty has had a corrosiveeffect on risk appetite and 80 percent of CFOs say this is not a goodtime to take risk onto their balancesheets.

Meanwhile BDOs business trendsreport reveals confidence fell to itslowest point of the year so far in

June, with the manufacturing sectortaking a particularly hard knock. The optimism index, which pre-dicts business performance two

quarters ahead, fell for the fourthconsecutive month to 93.5 in June,from 95.5 in May below the key 95level that indicates growth. The manufacturing sector led the

fall with a drop from 96.5 in May to83.8 in June the lowest readingsince March 2009.

THE UK must cut red tape forsmall businesses to help transformthe UKs economy, a group of Tory MPs will say in a paper releasedtoday.

Seven MPs have voiced a raft of ideas on how Britain can get itseconomy back on track includingfairer taxes, a reduced regulatory

burden, and the creation of adedicated Ministry of Infrastructure.

The so-called Free EnterpriseGroup suggests that micro

businesses those with three or

Tory MP group calls for cutred tape and tax to help grow

BY BEN SOUTHWOOD fewer employees and less than75,000 annual turnover should

be exempt from employmentregulation.

They also call for the Treasury to focus more on the supply-side,implying that lower taxes might

be supported.Member Kwasi Kwarteng MP

said: We need to take bolddecisions to create jobs and

growth and restore credibility tothe UKs financial sector. Its timefor the government to stophindering businesses and tocreate the space to allowentrepreneurs to thrive.

12 GLOBAL ECONOMICS cityam.com

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Bankers and graduates hit withcrashing wages and less hiring WORKERS are taking a hammeringas appointments collapse and

wages stagnate, according torecruitment industry researchpublished today.

Permanent placements slumpedin June the first fall in six monthsand the quickest drop for three

years, the Recruitment andEmployment Confederation (REC)and KPMG report on jobs showed.

The index crashed from 51 inMay, to 46.8 in June. A score of 50indicates no change.

The real worry is that the

acceleration in the pace of declinesuggests this isnt a mere blip, said

BY BEN SOUTHWOOD Bernard Brown, head of businessservices at KPMG, after temporary staff billings fell for the seventhmonth running, accelerating to thefastest pace of contraction sincemid 2009.

Chief executive of REC KevinGreen said: A decrease in hiringactivity means we could see aperiod of increased unemployment,especially as a new wave of schoolleavers and graduates enter thelabour market over the summer.

Separate research published by the Association of ProfessionalStaffing Companies showedgraduate salaries were down 20.5

per cent on last year, while bankingand insurance performed

consistently poorly across nearly allregions and job types.

Although the results show permanent placements rising 17 percent in June compared to May, thelevel of placements was still downstrongly on the year.

The latest data are animprovement on the bad news fromearly spring, but its not clear thatthis is the beginning of a long-termpositive trend, said chief executive

Ann Swain.Its not been a good time to be a

banker recently, and fears aboutnew regulation, whether fromEurope or the UK, in the wake of

the recent scandals could put adampener on recruitment.

EUROPES listed firms are sittingon 110bn, a new study revealstoday, but are afraid to spend it inthe uncertain economicenvironment.

German firms hold the most, with liquid assets and cashtotalling 25.88bn an average of 195m for each of the 133 firmscovered in the study fromCompany Watch.

British hoards came in next with a total of 18.92bn, or 90mfor each of the 211 firms,followed by 61 Swiss firms thatare sitting on a total of 14.6bn,averaging 239m.

Despite the countries problemsoverall, large listed Spanish firms

Companies hoard cash againgrowing market uncertaint

BY TIM WALLACE hold an average of 285m in cash,and Italian firms 143m.

All European economies areaffected to some degree by theEurozone crisis and it looks as if the headlong growth of the BRICeconomies is faltering, so its

hardly surprising that the bossesof our largest businesses viewdebt as dangerous and cash ascomforting, said Nick Hood fromCompany Watch.

Investors in these publiccompanies have a clear choice

between companies which have torely on a risk-averse bankingsector with limited liquidity andtheir better endowed brethren,

who hold plenty of cash, butarent currently willing to risktoo much of it on expansion.

INVESTORS have been pullinghundreds of millions of dollars outof stock funds that invest mainly incompanies associated with the bigfour emerging market nations of Brazil, Russia, India and China.

But its China that is causing mostof the worry for investors, amid signsthat the worlds second-largesteconomy is slowing more sharply than expected.

Even emerging market bull JimONeill, chairman of Goldman Sachs

Asset Management, who coined theBRIC acronym, said hes been a bitsurprised by the slowdown in China.But ONeill remains convincedChinas economy will be more thanenough to make-up for any weaknessin the other BRIC nations.

It is making the trajectory that Ipredicted difficult to stick with,ONeill said about the slowdown. Buthe added, I find it hilarious thatpeople question the thesis on the

basis of two quarters. The second-quarter was not kind

to so-called BRIC-focused stock funds, with investors redeeming $787m(508m) during the period,according to fund tracking firmEPFR. Chinese-focused funds were hitparticularly hard, with investorredemptions totalling 88 per cent of the $1.6bn in new money thosefunds took in during the firstquarter.

BRIC troublscare market

BY CITY A.M. REPORTER

MONDAY 9 JULY 201213GLOBAL ECONOMICScityam.com

Global outlook takes a hit asGermany joins worsening slumpGLOBAL business confidence slumped

last month, led by declines acrossmuch of the Eurozone, according todata published today by Markit.

A net balance of 37 per cent of firms expect activity to increase inthe next year, indicating slowerexpansion than the 44 per centrecorded in February.

That slowdown also extended tothe jobs market, with a net

balance of 17 per cent expecting totake on more staff in the next 12months, down from 19 per cent inFebruary, with manufacturers

BY TIM WALLACEleading the decline.

Confidence fell sharply inGermany, where a net balance of just16 per cent expect to expand in the

year, down from 37 per cent fourmonths ago. Italy and Spain allrecorded similarly low optimismfigures, leading to negativeemployment expectations a net

balance of 10 per cent of Italianfirms and 16 per cent in Spainexpect to cut headcount.

Business confidence also slumpedin the UK and US, though net

balances of 38 and 57 per centremain above those in the Eurozone.

Meanwhile optimism slowed inChina and Brazil and dropped

sharply in Russia, dragging downcapital expenditure expectations inall three. However, India stood outamong the BRIC nations with rising

employment intentions.The recent deterioration of business optimism and employmentintentions is clearly centred on theEurozone and Germany inparticular, where confidence hasfallen to levels similar to thedownbeat moods evident in France,Spain and Italy, said Markits Chris

Williamson.However, the survey provided

some hope, because global businessoptimism remained higher than thepost-crisis low seen late last year.

FRAUD dropped massively in thefirst half of this year but

worryingly is mainly perpetrated by management, says researchreleased today by KPMG.

Fraud figures fell from 1.1bnduring the six months to June 2011to just 374m in the same periodthis year the lowest since thesecond half of 2006. Though thiscame from an increased number of prosecuted cases, up from 131 last

year to 136, there were a smallernumber of major cases.

Most cases tend to come from within organisations, according tothe study, with 55 per cent of thetotal perpetrated by management.

Employees, on the other handaccounted for under six per cent.

Fraud total down but compu

crime is the new battlegrounBY BEN SOUTHWOOD One key difference this year has

been the absence of so-calledmissing trader VAT fraud after a

government campaign no crimesof this type were prosecuted in thefirst half of 2012.

KPMG fears that streamliningoperations in a tough economicenvironment may lead to lessoversight of managers, giving themmore leeway to engage infraudulent activity. But thisoversight may not always give theresults intended one notable caseis that of the counter-fraud head ata bank who pocketed 2.4m inprocurement scams.

Cyber-crime has emerged as anew battleground in fraud onecase involved the sale of over

340,000 individuals details, andlosses to businesses of some 27m.

% net balanceBusiness Optimism,

50+

25 to 50

below 25

Top European rms are sitting on huge cash piles -but are unwilling to invest in the crisis

18.9bn

25.9bnGermany

UK

Switzerland

Italy3.4b

14.6bn

France11.1bn

Big rms' nancial prospects dropped sharply in Q2

Q4Q32007 2008

Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2-70%-50%-30%-10%

10%30%50%70%

2009 2010 2011 2012

NetbalanceofCFOswhoaremoreoptimisticthanthreemonthsago

Staf Appointments ell in June

1998 2002 2006 2012

354045

2530

5055606570 50 = no change on previous month

PermanentPlacements

Temp/ContractBillings

Globalbusiness optimism ell inJuneas thedebt crisisacross the Eurozone continued

SOURCES: MARKIT, KPMG/REC, DELOITTE, COMPANY WATCH

7/31/2019 Cityam 2012-07-09

14/23

14MONDAY 9 JULY 2012 cityam.com

Capita Insurance ServicesThe specialist provider of Lloydsservices has appointed JohnHolm as commercial director. He joins after five years at NationalAustralia Bank, where he wasinsurance sector head anddirector of corporate banking forits Clydesdale Bank business.Holm previously held a numberof senior roles at RBS, notably as director of origination forthe insurance sector.

WainbridgeJonathan Hardie has been appointed head of assetmanagement in the London team of the propertyinvestment firm. He has over 25 years experience in assetmanagement, and has previously held positions atWestbrook Partners, Haslemere Estates and MEPC.

Alliance MedicalThe healthcare diagnostic services provider has appointedNick Burley as group chief financial officer. He joins fromTianhe Chemicals Group, a Chinese chemicals firm, wherehe served as chief financial officer. Burley has also served inthe same role for The Vita Group and McCormick.

Katten Muchin RosenmanThe full service law firm has announced a triple hire into itsLondon real estate team. Stephen John and Ranjeev Kumar join from the London office of Fried Frank, and will serve asspecial counsel and partner respectively. Joe Payne will alsoarrive as a partner from Field Fisher Waterhouse. Theirappointments follow the recent hire of Peter Sugden as thelaw firms London managing partner.

Fox WilliamsThe law firm has appointed two partners to its financial andregulatory practices. James Carlton joins from Russell Jones

& Walkers business crime and regulatory investigationsgroup. Richard Honeybourne joins from AddleshawGoddard. He is a funds specialist and acts on complexheadline transactions.

OneSavings BankThe mutual bank has announced that Rodney Duke is joining its board as a non-executive director. He will alsochair its risk committee. Duke is an experienced FTSE 100non-executive director, and worked previously as groupgeneral manager at HSBC. He was also on the board ofAlliance & Leicester.

Otkritie CapitalThe investment arm of the Russian financial group hasappointed Pavel Dubovets as sales director for itsderivatives team. He joins from Troika Dialog, where he hasworked in equity sales for the past 11 years. Dubovets hasalso held senior roles at Surgutneftegaz, the gas firm.

WHOS SWITCHING JOBS Edited by Tom Welsh

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

Bank deputyand M&S takcentre stage

ALL eyes will be focused on the Treasury Select Committeehearing today, as deputy Bank of England governor Paul

Tucker presents his side of the story in the Barclays/ Libor scandal.

His appearance will be followedtomorrow by one from Marcus Agius,the former Barclays chairman. Today sees trading updates from

housebuilder Bovis expected to bepositive and recruitment groupMichael Page .

Companies updating the markettomorrow include ASOS andInterserve , while Big Yellow Group ,Intermediate Capital Group , Young &Cos Brewery, Blackberry maker RIMand retail giant Marks and Spencerare all holding annual general meet-ings.

Hundreds of Marks and Spencersshareholders are likely to turn up forthe ubiquitous free sandwich. But they are likely to also come away with badnews from chief executive MarcBolland, with analysts predicting a fallin trading of general merchandise,including clothing.

In economic news, the Office forNational Statistics (ONS) is expected toannounce a marginal increase ordecrease in Mays industrial produc-tion and manufacturing output as themarket remains stagnant. Wednesday will see trading updates

from Barratt Developments ,Bloomsbury Publishing , JD

Wetherspoon and luxury retailerBurberry .

Meanwhile BT Group , FlyBe , ICAP ,UK Mail Group and supermarket JSainsbury will hold their annualmeetings.

On Thursday, retailer SuperGroup isset to give full-year results, withinvestors keen to see if it can maintainthe massive growth it had as a privatecompany. Since floating, it has beenplagued by problems including arith-metical errors in its profit and lossforecasts which resulted in a profit

warning. Trading updates are due from

Associated British Foods , Centaur

Media and Premier Oil.Meanwhile, in economic news theOffice of Budget Responsibility (OBR) isset to publish its report on fiscal sus-tainability. The report is expected tocontain the OBRs long-term view of the UKs public finances, including taxand spending pressures.

On Friday both Dell and British Landare due to hold their AGMS.

W ALL Street has been running incircles for the past two months,and the pattern may continuedespite the upcoming start of theearnings season.

Quarterly report cards from blue-chips Alcoa and JPMorgan this week could fadeinto the background as traders jockey forposition before key data from China andmore central bank headlines. After three major central banks eased

monetary policy last week, investors willcomb through the minutes of the latestFederal Reserve policy meeting, which will

be released on Wednesday, to see what offi-cials said about a further round of assetpurchases.

US stocks face headwinds from a slowingglobal economy. Europes debt crisis hasdrawn much of the attention, but littleclarity has emerged about how theEurozones debt and banking problems

will be fixed despite numerous meetings. The uncertainty has left the market in

the hands of traders, who look for opportu-nities for quick returns, while investors,

who are in the market for the long haul, watch from the sidelines.

The S&P 500 flirted with going negativefor the year shortly before posting its best week since December. The benchmark index is less than 0.1 per cent above whereit was two months ago.

Traders are happy going in and out of the market within a range, but for the aver-age investor its a market in which thepath is still unclear, said Quincy Krosby,market strategist at Prudential Financial inNewark, New Jersey.

On Friday, the S&P 500 closed down 0.55per cent for the week. The index has postedfour weeks of gains and four of losses inthe last eight. Weak US labour market data on Friday

raised the chances in favour of the Fedlaunching a new round of monetary stim-ulus to boost growth, according to aReuters poll. The Feds minutes midweek will be fol-

lowed Thursday by the Japanese central banks views on the health of its economy

after a two-day meeting.If we do see additional asset purchases

from the Bank of Japan that would depreci-ate the yen and would be a short-term pos-itive for global equities, said Brian

Jacobsen, chief portfolio strategist at WellsFargo Funds Management in MenomoneeFalls, Wisconsin. The recent central bank actions are seen

as precautionary moves as the global econ-omy stalls. This weeks gross domesticproduct data out of China will help givethe market important clues about the

worlds second-biggest economy.Some of the negative news is built in,

and Im anticipating a positive surprisecoming out of China, Jacobsen said.

Economists expect China to report year-on-year GDP growth of 7.6 per cent, com-pared to an 8.1 per cent yearly gain in thefirst quarter.

Other Chinese data next week includeinflation, loan growth, trade balance andretail sales.

Europe remains on traders mindsdespite an agreement last week that opensthe door for troubled banks to receive res-cue funds. However, Italian and Spanish

borrowing costs have resumed their rise ina bearish sign for markets.

Testimony by ECB President MarioDraghi to Europes parliament today will be followed by a meeting of Eurozonefinance ministers. Aluminum company Alcoa reports sec-

ond-quarter results today. Alcoa surprised Wall Street last quarter with a positive out-look, but the global slowdown could makeit harder for the aluminum maker to keepits bullish stance. JPMorgan Chase & Co will also report

earnings this week, with investors eager toknow how big the banks losses will be fol-lowing a botched trade. The initial estimat-ed loss at the bank was $2bn but laterreports indicated it could balloon to morethan four times that.

The idea is that analysts have beenmarking down not only earnings estimates

but revenue estimates, and the reason is because of weakness in Europe, which isspilling over to weakness in global opera-tions for many companies, said Brian

Gendreau, market strategist with CeteraFinancial Group in Gainesville, Florida.

Alcoa and JPMorgan start earningsseason as traders await more data

BESTof theBROKERSICAP PLC

2 Jul 3 Jul 4 Jul 5 Jul 6 Jul

p345

320

315

325

330

335

340

313.606 Jul

ICAPNumis has downgraded the interdealer broker from buy to hold andlowered its target price from 412p to 344p after a fall in electronicvolumes over June and potential knock-on effects of the ongoing Liborscandal. The broker has downgraded its forecasts by four per cent forthis year and five per cent next year, and continues to see negativerevenue pressure from regulation for several years.

FTSE

5,700

5,725

5,750

5,575

5,600

5,650

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assets posted as collateral by clients. The second is the failure of UK regula-tion and its impact on the Citys repu-tation as a safe place to do business.Re-hypothecation usually involves aright of brokers to transfer assets heldin custody. They can use collateral to

back their own trades and borrowing. This is largely a UK practice. In

Canada, re-hypothecation is banned.In the US, client protection rules existalongside a cap of 140 per cent on theamount a clients balance can be re-hypothecated. In the UK, there is nolimit unless specifically negotiated. This links us back to UK regulation.

Among the edicts of the FinancialServices Authority (FSA) is theConduct of Business Sourcebook,

which explains how institutions

OUR SUCCESS as a globalfinancial centre dependson trust. Recent eventshave shaken that trust,and we must restore it. It is

the responsibility of us all to makethe case for the importance of theCity to both the British economy and to other economies abroad,

both now and in the future. It is vital in creating jobs and growth. The services we provide are ourlivelihoods, but they also help tocreate and support the livelihoodsof our fellow citizens, up and downthe country.

But the City must be trusted if itis to help create jobs and growth. If

it is not, our ability to serve the

LESSONS have been learned istodays platitude of choice. It

was used to account for thefailings that led to the collapseof Lehman Brothers an event

that was meant to change everything.So it was with disbelief that I heardfrom a group of MF Global clients.

MF Global was a derivatives brokerthat filed for bankruptcy last October.It bet $6.3bn on the bonds of Europesmost indebted nations, contributingto an internal liquidity crisis. Before

bankruptcy, it seemed to dip into seg-regated US customer funds to covermargin calls through MFGUK, its UK operation. The UK was a convenientcover for such trades compared to theUS, where the reuse of client collater-al on this scale is forbidden.

Regulators from other jurisdictionsacted quickly to get client money

back. Canadians had their funds fully returned, Singaporeans got 90 percent and US clients 72 per cent. In theUK the figure is just 26 per cent. The case highlights two shortcom-

ings in British finance. The first is re-hypothecation, a process whereby

brokers use, for their own purposes,

FLIGHTS STRAIGHTFROM 63

ONEWAY*

cityam.com/foru

The FSAs bungled

handling of the MFGUKcase shows its inabilityto fulfil its duties

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Twitter: @cityamforum on the web: cityam.com/forum or by email: theforum@cityam.com Agree? Disagree? Got a sharp comment?The Forum wants you to join the debate. Top responses will be reprinted in The F

16MONDAY 9 JULY 2012

MARK FIELD

MF Globals bankruptcy highperilous faults in UK financeshould classify clients as retail, pro-fessional or eligible counterparty.Retail funds are held in segregatedaccounts. But the money of profes-sional or eligible counterparty clientscan be lent to the broker when theclient agrees to a title transfer. Clientshave little control over their classifica-tion and can be pressured to agree toa title transfer structure to obtainfinancing with huge implications if the broker goes bust. Non-retailclients are unsecured creditors andare left far down the pecking ordercome bankruptcy. This is the hapless fate of most

MFGUK clients, who thought thatclient money was client money.

They are now jostling with others fora share of the property. It will be along and expensive process.

It didnt need to be this way. The FSA put MFGUK into special administra-tion when it was technically solvent,

with sufficient resources to give regu-lators scope for a less disruptive strat-egy to clients and counterparties.

But theres more at stake than thereturn of client funds. Brokers haveexploited UK regulation to transfer an

unknown amount of client funds tothe UK to be re-hypothecated many times. This could compromise the sta-

bility of the entire UK f inancial sys-tem. While money does come into theUK, clients and taxpayers potentially

bear all the cost and none of the bene-fit in the event of systemic failure. There is a second shotcoming in

British finance. The speed at whichclients money is returned on bank-ruptcy is a litmus test of the attrac-tiveness of the City. Clients will haverealised that their money may not beas safe as assumed, and re-hypotheca-tion also makes sorting out who gets

what from an estate very messy. When the Citys competitor jurisdic-tions return funds quickly, it will be

no surprise if investors turn away from us. The FSAs remit is to protectclients and maintain confidence inour financial system. Its bungled han-dling of the MFGUK administrationhighlights the FSAs inability to fulfilits duties. To shore up Londons repu-tation before confidence drains away,the MFGUK case needs immediateattention from the wider UK financialestablishment. We must examine re-hypothecation.

The ability to manipulate collateral isa good way to promote liquidity. Butthis benefit must be balanced againstthe cost of investors overlooking theUK, and any taxpayer burden if thereis systemic failure. We must dispense

with re-hypothecation or limit thepercentage of client funds that can beused for this purpose. The FSAs awareness of client segre-

gation problems after Lehmansdebunks the myth that lessons have

been learned. This latest episode of regulatory incompetence risks dam-aging Londons international compet-itiveness as a financial centre. Mark Field is Conservative MP for the

Cities of London and Westminster.

wider economy will be restricted by overly burdensome regulation andlaw. My concern is that the way in

which the current debate is beingconducted omits the centralimportance of the City to the widereconomy and also the fact that only a tiny number of people have not

met the standards the City and the

wider community expect of them.Over 300,000 people work in theCity, and nearly all of us go aboutour work with the right values andthe right ethos. We deserve thetrust our clients put in us. We mustalso convince others that we are to

be trusted.On Wednesday, when I entertain

Her Majestys Judges to dinner atthe Mansion House, I will as LordMayor and as a lawyer reaffirmthe importance we attach to therule of law.

This is not a legal abstraction. Itis about having the rightregulations and the right laws inplace, but it is about those who are

governed by regulation and law to

following them because they know them to be right. They should befollowed by choice, not by necessity.

It is no coincidence thatinternational business bases itself in London: English law and Britishpolitics provide the stability,predictability and clarity that itneeds and because international

business knows that we go about business in the right way. Ourcommitment to the rule of law is

valued right across the world. There is no doubt that the

reputation of London as a globalfinancial centre has been damaged

by the minority involved in theLibor scandal. That is why we need

to stress the importance of

upholding the highest standards of ethics when it comes to dealing

with clients, shareholders and thepublic. Only then can the City provethat we are once again worthy of the publics trust.

We should be firm with those who have let others including therest of the City down and we must

be seen to be firm. But we must alsomake it clear that we live the right

values in our work and are worthy of the trust of our clients,shareholders and country. These arethe standards that have madeLondon the worlds pre-eminentglobal financial centre.

David Wootton is Lord Mayor of the

City of London.

CITYMATTERS

DAVID WOOTTON

Trust in the City is central to its ability to create jobs and foste

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17

Cheapened money[Re:Why QE is not the answer to Britains economic problems , Friday]Quantitative easing is a disaster. MiltonFriedman wouldnt have supported thisfurther injection if he were still alive, andhed be right as he was about most things.He predicted the euro would have about a10 year lifespan. It seems he was pretty spoton about that too. Though I dont blame theeuro so much as its poor management, asgovernments have pandered to the whimsof their citizens. Steve Okare

This article is correct. Debasing our currencywill inevitably result in long-term damage toour economy. Hugh Harris

Financial painQE is like financial morphine. Imagine apatient post-operation: there is only so muchmorphine the body can take to dull the pain.If you have too much, it can harm or even killyou. It will only last for a while, and then you just have to get on with recovery and livewith the pain.Chris Staerck

[Re: The fall of Bob Diamond: How tragedy can stalk even the most powerful , Friday]Crowing at the resignation of Bob Diamond is just another instance of popular glee when-ever anyone successful falls from a greatheight. And Marc Sidwell is right to say its atragedy through their hard work, thesemen and women enrich all our lives.Tim Walker

PRESIDENT FranoisHollande is only justsettling into the Elyse, butripples of unrest towardshis tax policies are already

being felt, both in France andfurther afield. The headline figure is the pro-

posed 75 per cent rate of incometax, which will apply to income of over 1m (793,000) a year. This

will be a substantial increase forthose taxpayers albeit few innumber whose income falls with-in this bracket. Of wider impact arethe proposed changes announced

by the French government on 4 July. These involve not only increased rates of income tax, butalso wealth tax, capital gains taxand inheritance tax. Some of thechanges will affect a considerably larger proportion of the popula-tion, including non-resident own-ers of residential property inFrance. These significant increases in tax-

ation may result in less revenue being generated, partly becausesome who would be affected by thenew rules will simply move abroaduntil the tax climate improves.

This would have the wider conse-quence that France could lose thesort of people who are helpful tohave around in difficult economictimes entrepreneurs and high-achievers.

Prime Minister David Cameronrecently quipped that England

would be rolling out the red car-pet for French taxpayers seekingto escape the 75 per cent charge.

This remark was, for obvious rea-sons, not well received across theChannel. Economies in the devel-oped world all seek to attractorganisations and talented individ-uals who will stimulate economicgrowth. The UK is not alone in

TOP TWEETSThere is no such thing as cheap money.Everything has a value that must be paidsooner or later.@Parsonsivor

Blaming Ed Balls for Libor because he wasCity minister is like blaming the transportminister for every car crash.@campbellclaret

I cant understand the calls for a judge-ledinquiry into Barcays, considering the waste oftime and money Leveson has become.@ChillieHead_86

Hollande is more grounded in reality thanLabour. He admits that national debt is theenemy of the left.@David_RutleyMP

Have recent events shown that relationshipsbetween banks and regulators are too close?

YESWithout banking Britain is bust, a taxi driver recently told me. Heis right. A competitive, free, financial market is vital to our countryswell-being. Any regulation imposed should be applied equally to allmarket participants. What the Libor scandal has shown is that thetoo big to fail principle has created a regulatory advantage forbigger banks. Regulators and banks have a cosy relationship of softwords, nuances and nudges on how banks can conduct theirbusiness. This is dangerous and unfair. Smaller players in themarkets do not have the same relationships and consequently payfor it in higher trading costs or increased regulatory burden, whilecompliance officers face huge personal costs when their advice isignored. Our concern is that regulators have to be seen to be fair toall, not just the special few. Otherwise the financial markets willsmell and rat and desert the great ship, the City of London.Steven Woolfe is Ukip financial services spokesman.

Steven Woolfe

NOStephen Gilchrist

Pointing the finger at the FSA and shouting conspiracy! misses thepoint. Cock up is a more accurate battle cry. While individualswithin the regulator are assigned to individual banks to enable it tounderstand the banks business, it is not the regulators business tomanage the banks affairs. Resourcing and the quality of resources isthe issue. Missing warning signs about Libor problems is notnecessarily indicative of an unhealthy relationship with the banks. Itpoints much more towards the dichotomy of a relatively compactregulator being expected to monitor the behaviour of a globalfinancial giant, operating in an essentially amoral industry. Especiallywhen the tension between doing well for the bank, the economy orthe commission-earning individuals within it, is ever present. Trustalso plays a part. The banks must comply with FSA principles. It mustbe assumed as a default position that they are in fact doing so.Stephen Gilchrist is chairman and head of regulatory law at Saunders Law.

RAPIDrespo nses Hollande is at riof slaying Francgolden tax geese

doing so, and one of the balancingacts facing the new government inFrance will be to avoid frighteningoff those who fall within this cate-gory either currently based inFrance or looking where to invest. Where governments wish to

retain internationally mobileentrepreneurs and investors, the

way in which they introduce taxand the language they use about itcan be important. An example of how not to do it was seen in theunrest caused within the interna-tional community in the UK in2008 when, without warning, theprevious UK government proposedsweeping changes to the tax sys-tem affecting non UK domicil-iaries. The tipping point at which any

individual decides to move fromone country to another, or to ceaseinvesting in one economy in favourof another, will always depend on arange of circumstances by nomeans only to do with tax. But asgovernments the world over havelearned, there is a point at whichraising taxes can become counter-productive.

In the 1970s, when tax rates inthis country had reached 98 percent, some took the view thatFrance was a pleasanter place to beresident. It will be interesting tosee how many residents of Francedecide to reverse that trend. James Johnston is a private wealth

partner and head of the French group at Bircham Dyson Bell.

MONDAY 9 JULY 2012

JAMES JOHNSTON

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proposition with some slick tools. Alliance Trust Savings has a more basic website but takes a different

approach to pricing.Discount brokers offer fundsdirectly to the self-directedinvestor at a discount, by rebating

back some of the commission that would ordinarily be paid to an IFA.Some, like Cavendish Online, areundoubtedly cheap but limited intheir scope. At the other end of thespectrum, Hargreaves Lansdownoffers a very comprehensiveinvestmentproposition withhigh levels of customer service, butare not as highly discounted as some of their discount brokerpeers. It is, in our view,the market leader forself-directed investors,

with almost 400,000

clients and are at theforefront of assisting

ARE you ready for the retaildistribution review (RDR)? Aftermany years in the planning, theimplementation of the RDR isquickly approaching on 1 January 2013. While it will change the way financial advice is received, recentsurveys show there is little awarenessamongs investors of the review and

why it matters. An InvestSmart survey found 93 per

cent of investors have no awareness of the RDR, while another, carried out by Defaqto, found that 80 per cent of independent financial advisers (IFA)

believed the public knew nothing of the RDR. However, every investorshould be speaking to their advisersabout the RDR.

Sadly, when it comes to financialadvice many investors do not under-stand what they are paying for and

whether its a fair price. The RDR isdesigned to help solve this problem. Itrepresents a very important change inthe regulation of financial advice,designed to improve value for money.

Investors will be entitled to clear andsimple information about the feesthey are being asked to pay, andshould therefore in a better position todecide whether they represent fair

value. There are three main thingsinvestors should be asking their finan-cial adviser about:

Find out what kind of advice your adviser will be giving you.

Under the RDR, all advisers will haveto inform their clients whether they provide independent or restrictedadvice before the advice is given.Independent advice is based on a com-prehensive and fair analysis of the rel-evant market. It is free fromrestrictions that could impact on theadvisers ability to recommend what is

best for the client.If the advice is not independent, its

called restricted. It can translate intoadvice on a limited range of products

What to ask your finanadviser to avoid costly f

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