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BUSINESS WITH PERSONALITY

HIGHER taxes and an anti-businessattitude are driving French bankersand high-fliers out of Paris and intoLondon, City A.M. has learned fromrecruiters and estate agents.

Socialist President FrancoisHollandes planned 75p top tax ratewas the flagship policy in his elec-tion campaign but instead of rais-ing cash from the super-rich, it couldsimply drive them abroad.

Prime Minister David Cameron haspledged to capitalise on the Frenchleaders policies, this summer sayinghe would roll out the red carpet toFrench firms put off by Hollandesperceived anti-business stance.

London-based recruitment firmAstbury Marsden, which specialisesin the banking sector, has seen a 51per cent rise in French-languageapplicants in recent months, com-pared with the same period of 2011.

There is a definite spike in French-speaking candidates, said managingdirector Jonathan Nicholson.

We have not seen similar increasesin candidates from other countries,so it may well be connected to Mays

change in government in France.Surveys from TotalJobs.com havefound 42 per cent of French workersare willing to move to the UK.

www.cityam.com FREE

Similarly, only 32 per cent of theglobal workforce would be happy towork in France compared with 49 percent who are willing to work in theUK, while London is consistently seenas the most popular city amongworkers internationally.

International recruiter RobertWalters told City A.M. that some ofthe largest French firms are lobbying

fiercely against the tax, threateningto move abroad unless exemptionsare found for their top earners although families enthusiasm for

the move may be dampened by high-er living costs in London than inParis.

Meanwhile estate agency Savills hasreported rising numbers of Frenchbuyers in London since the electionof President Hollande and predictsthe trend will grow stronger nextyear.

There is no doubt that French buy-

ers have made up a significant pro-portion of our clients this year, saidSavills Lindsay Cuthill.

Whereas previously they were not

committed long-term, often rentingsmall houses or apartments, sincethe election they are buying largerhouses and looking to stay forlonger.And she expects more families to

move in the middle of 2013, ahead ofthe next school year.

I suspect that the election came atthe wrong time for many families,

who had already committed to theschool year. I predict a sharp rise inmoves next year in a second round ofrelocations.

MAN INVESTMENTS IS STILL EUROPES TOP HEDGE FUND

FTSE 100 5,776.60 CLOSED DOW M13,124.67 -33.30 NASDAQ 3,073.19 +3.40 /$ M1.58 -0.01 / 1.26 unc /$ M1.25 -0.01

CLARKE RULES THE ROOSTISSUE 1,704 TUESDAY 28 AUGUST 2012

EUROPE READYFOR RYDER CUPSee Sam Torrances golf column: Page 23See Page 12

EXCLUSIVEBY TIM WALLACE

Certified Distribution

02/07/12 til 29/07/12 is 131,194

FRENCH BANKERSESCAPE HOLLANDE

David Cameron upset President Hollandes allies when said he will welcome French firms who prefer the UKs more business-friendly tax regime

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IN BRIEFSpanish GDP revised downwardsn Revised data published yesterday

showed Spains economy contractedby more than previously estimated in2010, and grew by less than firstpublished in 2011, reigniting fearsabout the countrys ability to rein in itspublic deficit. The strugglingeconomy, which may require a fullbailout, shrank 0.3 per cent in 2010,more than the 0.1 per cent decline thathad been estimated. And thecountrys statistics institute INE saidthat growth last year was only 0.4 percent, instead of the 0.7 per cent risethat had previously been reported.

French unemployment worsensn The number of people out of workin France rose for the 15th month in arow in July to reach its highest level inmore than 13 years, in the latest grimnews for Frances stagnating

economy. Labour ministry datareleased yesterday showed that thenumber of registered jobseekers inmainland France rose by 41,300 lastmonth to 2.987m, in the biggestmonthly increase since the 2008-09financial crisis.

Troika visits bailed-out Portugaln The so called troika of lenders theEU, European Central Bank (ECB), andInternational Monetary Fund willreturn to Portugal today to conductthe fifth quarterly review of its 78bnrescue package. It is still possible thatPortugal could require another bailoutpackage, while its leaders mayrequest more time to meet the dealsconditional austerity targets.

ECB official: bond buyingwould be within mandate

A SENIOR official at the EuropeanCentral Bank (ECB) has reassuredGermany that any new bond buyingwill not amount to back-door fund-ing of struggling Eurozone states.Joerg Asmussens remarks, made

in Hamburg yesterday, will heightenexpectations that the ECB is set toact to bring down ailing govern-ments borrowing costs.

Under the framework of the newprogramme, the ECB will only buybonds with short maturities,Asmussen said.

The whole discussion will be ledby the requirement that any con-cerns about treaty-violating statefinancing are dispelled. We will onlyact within our mandate.The ECBs governing council is

meeting next Thursday and will dis-cuss measures to ease the debt crisis.Jens Weidmann, the chief of

Germanys central bank, warned onSunday that more ECB bond-pur-chases could become addictive likea drug.

Such a policy is for me close tostate financing via the printingpress, Weidmann told the Germanmagazine Der Spiegel.The euro edged slightly upwards

against the dollar yesterday as someinvestors decided that weak eco-nomic data has increased the

Ryanair seeks rivals help in bidRyanair is seeking regulatory approval forits proposed takeover of Aer Lingus byasking at least six airlines to operatealternative services on some of the Irishflag carriers routes. Ryanair hasapproached competitors, asking them toconsider providing competition on routesto and from Dublin.

Aviva activists say directors must goAn activist group of Aviva policyholdersand private shareholders is hoping to

reignite the row that prompted theinsurers chief executive to stand aside,calling on another four directors to leave.Almost four months after Andrew Mossstood aside following a shareholder revoltover pay and performance, the group thatled criticism of his tenure has turned itssights on other board members.

Statoil finds oil in North SeaStatoil has raised its production aspirationsin Norway after confirming the discovery ofa large field in the North Sea. TheNorwegian state-controlled oil group saidyesterday that it was seeking to producemore oil domestically in 2020 than now.

Still boys only at the topBritains biggest companies may haveheeded calls to end the male dominanceof boardrooms, but the glass ceilingremains firmly in place when it comes totheir top executive positions.

Travelodge rival knocks at the doorAs if losing control of 49 of its hotels wasnot bad enough, Travelodge may have togive some to a rival it has fought for thepast 25 years. Premier Inn is understood tobe examining up to half a dozen of them.

Greece settles with SiemensIt is not quite the bailout booster Greekswere hoping for, but Athens has extracted330m from Siemens, the Germanengineering group, in settlement ofcorruption charges.

Disney may buy out Paris parkThe Walt Disney Company is consideringbuying out the loss-making DisneylandParis theme park complex. Disneycurrently owns 39.8 per cent of the Frenchbusiness, which opened in 1992.

Regulators rethink pre-IPO chatterUS securities regulators are reviewingwhether to ease limits on what companiescan say ahead of initial public offerings,after lawmakers complained smallinvestors were kept in the dark during thisyear's botched stock sale by Facebook.

US c ar makers to face Canada strikesThe Canadian Auto Workers said workersat Chrysler, General Motors and Ford havevoted to go on strike if necessary to backup the unions bargaining committees.

THE FEDERAL Reserve gave a boostto the governments balance sheetin the first half of the year,according to accounts released

yesterday, whose unprecedentedpublication came after pressure toincrease transparency followingthe credit crunch.

The US central bank generated$47.5bn profit in the six months to

June, of which it gave $46.4bn tothe federal government.

This profit came overwhelminglyfrom $16.6bn of income onmortgage-backed securities, and$23.4bn of revenue from intereston federal government debt.

The Fed agreed to publish moreregular accounts last year afterheavy pressure from Republicansincluding Mitt Romney.

This release came as investorsand analysts looked forward to the

Jackson Hole symposium of UScentral bankers, and itscentrepoint: governor BenBernankes Friday speech.

Ahead of Jackson Hole, ChicagoFed president Charles Evansclaimed yesterday that the Fedmust expand the money supplyfurther to boost employment.

Meanwhile, the Fed said it isconsidering delaying untilSeptember 2013 the requirementthat medium-sized banks conductannual stress tests.

Fed gave $46bn

half-year profitto Washington

Joerg Asmussen appeared to pave the way for Mario Draghis ECB to resume purchases

2 NEWS

BY BEN SOUTHWOOD

BY JULIAN HARRIS

To contact the newsdesk email [email protected]

EVERYONE knows that Sweden is asocial-democratic paradise,where taxes are high, the welfarestate is big and everyone enjoys

the benefits. That doesnt mean itstrue. In recent years, research like thatcompiled in Richard Wilkinsons andKate Picketts The Spirit Level has

painted Sweden and its Scandinavianneighbours as political role models.The reality, as always, is morecomplicated. Thanks to a newpublication from the Institute ofEconomic Affairs, the other side of thestory is harder than ever to ignore.The Surprising Ingredients of

Swedish Success, written by NimaSanandaji, dissects the beneficialimpact of Swedens recent free marketreforms, such as its system of schoolvouchers, still, tragically, a step too farfor the UK. It also traces back Swedenscultural strengths its strong work

Sweden turns the page and Scandinavian noir explains why

TUESDAY 28 AUGUST 2012

ethic and high levels of interpersonaltrust to before its welfarist heyday.

Indeed, Sanandaji finds that thosedecades of the twentieth centurywhen Sweden aggressively expandedthe size of its state the late 1960s and1970s were followed by economicdecline. In 1975, Sweden was thefourth richest industrialised nationmeasured on GDP per capita. By 1993,it had fallen to 14th.

Perhaps commentators would findthis less surprising if they had paid

more attention to the undercurrentsin the countrys recent cultural out-put. Swedish authors like HenningMankell and Stieg Larsson havebecome household names in the UK,but few stop to consider the context oftheir stories: a universally corruptsocial underbelly, where crooked offi-

cials abuse their power and structuresbuilt with visions of centrally-man-aged harmony act only to concealmonstrous cruelty.

In The Girl With the Dragon Tattoo,Lisbeth Salander is raped by her state-appointed guardian. John AjvideLindqvists vampire novel Let TheRight One In turns a state-plannedhousing estate into a concrete maze ofhorrors. Mankells Kurt Wallanderinvestigates crimes only to uncoverragged holes in the social fabric.These books are fiction, and they

exaggerate Swedens shadows for

to Swedens more successful integra-tion record in the first half of the twen-tieth century. Easier to demonise thecorruption in an ageing family busi-ness than to consider how punitivetaxation has prevented new entrantsto the marketplace from shining lighton the darkness for half a century.

The Victorian art critic John Ruskinonce wrote that the only trustworthyautobiography of a great nation is itsart. Swedens novelists show there isfar more to its recent history than thetriumph of the big state, just as itspoliticians are now demonstrating thepower of free market reforms.Hopefully Swedens next chapter canuphold market liberalism without los-ing the bleak brilliance of its fiction.

effect. But they also reflect real con-cerns, and to the attentive reader offertheir own counterpoint to the idea ofSweden as a paradise of paternalism.The first book of Larssons Millenniumtrilogy, which in Swedish is literallytitled Men Who Hate Women, is pep-pered with statistics on the rate of vio-

lent crime against women in Sweden.Swedens failure to integrate its immi-grant population haunts Mankellsfirst Wallander book, Faceless Killers.

Ironically, despite peering into thedarkness, many of these authorswould resist the very solutions andexplanations that the IEAs newresearch report advocates. Seeing theSwedish dream in decay, it is temptingto try to shore up its failing timbers,rather than to confront, for example,the connection between a rigid labourmarket and the difficulty of integrat-ing recent immigrants, or the contrast

chance of more stimulus fromEuropean authorities. The euro hit asession high of $1.2535, after theGerman Ifo index of business moralesank for a fourth straight month inAugust to reach its lowest level sinceMarch 2010.

This clearly shows that Germanycannot escape unharmed if the rest ofthe Eurozone falls into a deep reces-sion, said Boris Schlossberg of BKAsset Management in New York.Policymakers may now temper theirinsistence on austerity and insteadpursue more stimulative policies.

Germanys Wolfgang Schaeuble saidyesterday that he and fellow Eurozonefinance ministers will form a workinggroup to discuss proposals such as anew fiscal and banking union.

Meanwhile Chancellor AngelaMerkel and her foreign ministerGuido Westerwelle both made pleasfor German politicians to restraintheir comments over Greece. Earlier,Christian Social Union leaderAlexander Dobrindt a political allyof Merkels said that he expectsGreece to leave the Eurozone as soonas next year.

The new jobs website for London professionalsCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

EDITORSLETTER

MARC SIDWELL

[email protected] me on twitter: @marcsidwell

n Allister Heath is away

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NOKIA shares hit their highest pointin more than four months yesterdayon suggestions the Finnish phonemanufacturer could be the biggestwinner from Apples court victoryover Samsung last week, while theKorean firms value plummeted.Analysts said that Nokia which

teamed up with Microsoft last year tolaunch a range of handsets runningthe Windows Phone software couldbenefit from being one of the fewcompanies to make phones not run-ning Googles Android operating sys-tem, with the ruling having widerimplications for the mobile phone

industry.Apple said yesterday it is seeking

bans on eight models of Samsungssmartphones, including its Galaxy Sdevices, and may take action againstother Android makers.A California court ordered Samsung

to pay over $1bn (630m) to Apple onFriday after the Korean firm wasfound to have infringed a number ofpatents for technology used in theiPhone.

Samsung shares fell 7.5 per cent intrading in Seoul yesterday, wiping

Samsungs lossis Nokias gain

after Apple winBY JAMES TITCOMB 7.6bn off the firms value.Google broke its silence on the rul-

ing yesterday in an attempt to reassurehandset makers. Most of [Applesclaims] dont relate to the coreAndroid operating system, and severalare being re-examined by the USPatent Office, the web giant said.

But with the prospect of US bans onsome products from Samsung Androids most successful partner and further lawsuits, Nokia, which hasseen its market share obliterated byApple and Samsung, could gain.

As Android and Apple tear eachother apart, Microsoft has been wait-ing in the wings and is in a very goodposition to move in and entice users to

switch from Android to Microsoft,said Nomuras Richard Windsor.

LONMIN MINE UNREST MOVES INTO THIRD WEEK AS VIOLENCE SPREADSCASH strappedplatinum minerLonmin reportedfurther unrest in itsMarikana miningdistrict yesterday,with reports offresh intimidationof workers in itsEastern mines.Violence, which

claimed the lives of34 people twelvedays ago, hadlargely beenconfined to itsKaree mine in theWest. Yesterday itsaid workers hadfacedintimidation inthe East.

Nokia

21 Aug 22 Aug 23 Aug 24 Aug 27 Aug

2.80

2.60

2.70

2.30

2.40

2.50

2.6627 Aug

IBM yesterday agreed a cash deal toacquire Kenexa, the humanresource software manager,marking its entry into the sector.

The deal will see the computingbehemoth pay $46 per share,valuing the smaller firm at $1.3bn(823m), and comes after recentforays into the HR managementmarket from other tech giants.

Kenexa reported a net loss of$1.7m in the last quarter.

SAP bought Kenexas competitorSuccessFactors for $3.4bnDecember last year, while Oracleacquired another rival, Taleo, in a

IBM pays $1.3bn cash to acquireHR software manager Kenexa

BY BEN SOUTHWOOD $1.9bn deal in February.Analysts predicted that the

scramble for the social enterprisemarket was heating up. This is a

big step, said Rebecca Wettemanat Nucleus Research. This bringsthe arms race up a notch.

Historically IBM has been seen asa relatively conservative technologyfirm, focusing on email, databases,operating systems andmiddleware but new boss GinniRometty is starting to make herimprint on the firm.

Nomura analysts suggested thatmoves by competitors into IBMsstrongholds have pushed it intomore adventurous expansion plans.

BEST BUY yesterday announced ithad reached an agreement withfounder Richard Schulze to allowhim to prepare a bid to buy thestruggling electronics retailer.

The US company, which said lastweek that talks between theparties had broken down afterSchulze claimed Best Buysproposals were completelyunacceptable, announced that ithad satisfied all of his requests.

Best Buy will give Schulze accessto the companys accounts, as wellas waiving Minnesota law to speedup a deal. The firms shares, which

fell after last weeks poor results,closed up 3.2 per cent.

Best Buy nearsdeal after talksJAMES TITCOMB

MAJOR swaps players will face newrisk management requirementsunder rules finalised by theCommodity Futures TradingCommission (CFTC) yesterday.

The rules, which the agencyapproved unanimously in a closed-door vote, will dictate the way majorswaps industry participantsdocument and reconcile their swapstrades. They also detail how swapswill be valued and netted.

Proper documentation of swapsis critical to reducing risk, the CFTCsaid. The CFTC was tasked by the2010 Dodd-Frank financial reform

with increasing transparency andlimiting risk in the swaps market.

US agrees riskrules for swapsBY CITY A.M. REPORTER

TUESDAY 28 AUGUST 20123NEWS

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IN BRIEFAOL to buy back $600m in stockn AOL said yesterday it will buy back$600m (390m) of stock and pay adividend of $5.15 per share as part ofits plan to return shareholders $1bnthat it received by selling patents toMicrosoft. The company has beenaggressively giving back to investorsin recent months. It won a bitter proxybattle against activist hedge fundStarboard Value and pledged to givethe entire $1bn patent sale proceedsto shareholders. The deal will see AOLpay Barclays $600m upfront toexecute the repurchase this year, withBarclays to deliver the first 4m sharesby 30 August.

HK regulator acts against E&Yn Hong Kongs securities regulatorsaid yesterday it had launched legalproceedings against Ernst & Young(E&Y) for failing to produceaccounting records related to aChinese company as specified, thelatest auditor to run into trouble overa Chinese client. Ernst & Youngclaimed it did not have the relevantrecords on Standard Water, whichwere held in China by its joint venturepartner, Ernst & Young Hua Ming, theSFC said in a statement, adding the

auditor then said the documents couldnot be produced due to restrictionsunder Chinese law. E&Y was notimmediately available to comment.

AN OUSTED director at carpet makerVictoria has criticised the firms board,saying management is not acting inshareholders interests ahead of a cru-cial vote at Fridays annual meeting.Alexander Anton, a member of the

firms founding family who steppeddown recently over a disagreement onpay, told City A.M. that Victorias boardused every trick in the book toremove him and two other non-execu-tive directors on 8 August. He addedthat investors feel the company isbeing run for the benefit of manage-ment rather than shareholders.Anton and another ex-director

Geoffrey Wildes have the support ofVictorias biggest shareholder NewFortress Finance for a return to theboard just weeks after they left.Investors will vote on their appoint-

Victoria directorhits out as vital

meeting loomsBY JAMES TITCOMB ments in October. Anton says he hastwo-thirds of support for the motionthat would also remove interim direc-tors David Garman and Roger Hoyleand chairman Katherine Innes Ker.

Friday will test shareholder resolveahead of the later vote, with Garmanand Hoyles full appointments to bedecided, alongside re-elections of direc-tors Alan Bullock and Barry Poynter.Victoria, which made the carpet for

the royal wedding, saw Anton, Wildesand Innes Ker join in March along withformer CBI president Sir BryanNicholson. The three men were madeto resign after proposing a scheme toreward them for selling the firm.

Innes Ker said: We urge all share-

holders to ensure their voice is heardso that they are not subjugated to thewill of minority shareholders, addingAntons plan gave him extraordinaryrewards simply for being on the board.

CNBCCOMMENT

STEVE SEDGWICK

TIFFANY & Co, the New York-basedjeweller, cut its sales and profitforecasts for the secondconsecutive quarter yesterday afterits well-heeled customers trimmedspending in an uncertain economy.

The group lowered its full-year

profit outlook by around four percent, saying it expects sales growthduring the end-of-year holidayseason to be slower.

In the quarter, global sales rose

Tiffany lowers profit forecastbut pushes ahead with growth

BY KASMIRA JEFFORD 1.6 per cent to $886.6m (561.4m),while net income rose two per centto $91.8m, slightly shy of WallStreet forecasts. Sales at US storesopen more than a year fell five percent, including a nine per centdrop at its Fifth Avenue store.

Sales also declined five per centin the Asia Pacific region, as even

luxury shoppers in China cut back.Despite the cautious forecasts,

Tiffany is pushing ahead with itsexpansion and plans to open 28stores by the end of the year.

ITALIAN bank UniCreditbecame the latest bank toadmit it is under investigation

by the US authorities forbreaching Iranian sanctions,making public statements overthe weekend.

And French banks BNPParibas and Credit Agricole

both revealed they arecarrying out internal probesinto potential breaches of USregulations although they

would not say whether or notthis is related to sanctionsagainst Iran.

UniCredit is beinginvestigated by the USTreasurys office of foreignassets control, the JusticeDepartment and the New York

BNP and Credit Agricole startinternal law-breaking probes

BY TIM WALLACE County district attorneysoffice.

Its German unit HBV isaccused of breaking rules overtrade and transactions withIran.

The revelations come in thesame month as UK-baseddeveloping markets specialistStandard Chartered paid$340m (215.2m) to the New

York state department offinancial services to settlecharges over sanction-

breaking.Separately US authorities are

investigating RBS andGermanys Commerzbank,

while HSBC has been accusedof inadvertently enablingmoney laundering with its laxcontrols in countries includingMexico, Syria and Iran.

M&T BANK yesterday announcedits plan to buy Hudson CityBancorp in a $3.7bn (2.34bn)deal that could lead to furtherconsolidation among regionalbanks in the US.

The acquisition which hasyet to be approved byshareholders or regulators pushed shares in New Jersey-based Hudson up 15.7 per centand New York States M&T up4.76 per cent yesterday.

M&T plans to shrink HudsonCitys $43.6bn balance sheet byroughly one-third as itliquidates an investmentportfolio.

It expects to gain about $25bnin deposits and $28bn in loansfrom the merger.

M&T Bank tobuy Hudson

BY TIM WALLACE

Tiffany shares rose 7.8 per cent after it posted a better-than-expected 1.6 per cent sales rise


cityam.com

Something for everyone in

forecasting equity marketsF

OR such a highly paid groupof professionals the greatand the good of thefinancial markets have been

behaving in somewhat lemming-like fashion once again.

Rather than judgingimportant allocation decisionsbased on economic and stockfundamentals, its been moreabout will they or wont they.

There we were, for example, inthe early part of last weekmarching up to the top of thehill on the prospect of fairlysoon action from the Fed unlessthe data improved and by theend of the week, according to thelatest FOMC minutes, we had

traipsed back down again asJames Bullard told CNBC those

minutes were a bit stale.Leading the charge for the

bears are the Bob Janjuahs of theworld. To recap, Janjuah ofNomura thinks between now andNovember the S&P will movefrom its current level to 1,000-1,100 or between 300 and 400points lower. Theres lots ofreasons including weak global

growth, too much monetary andfiscal stimulus optimism, US

fiscal cliff ramifications beingbuilt into corporate earningsnumbers and the US drought,along with other weather-relatedshocks, creating food priceinflation. All very jolly stuff.

The good news for the longsthough is for every yin theres ayang, and number crunchingfrom Piper Jaffrays TechnicalResearch team makes them thinkthat conditions are now right fora new bull market to emerge andthe S&P to break 2000-2007 highs.

So for those of you who want aclear direction for equities afterover a decade of being stuck in arange theres something foreveryone. Enjoy the ride!

Steve Sedgwick, Anchor, SquawkBoxEurope, CNBC

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THE DEPARTMENT for transport plansto formally approve the handover ofthe West Coast Main Line as early astomorrow, brushing off pleas fromMPs and Virgin tycoon Sir RichardBranson to delay the move.

Sir Richard took to the airwaves yes-terday, calling on the government toallow time for politicians to re-exam-ine FirstGroups winning bid to runthe route from December.The founder of Virgin Group,

whose Virgin Trains joint ven-ture stands to lose its remain-ing rail franchise under thedecision, wants a brief stay

so the debate can takeplace and the facts canbe examined.

He also called on thePrime Minister to getsome sense into theDfT, adding thatVirgin would run theroute on a not-for-prof-it basis while the bidsare reconsidered.

We will fight untiltheres no longer a

No delays onthe West Coast

train handoverBY MARION DAKERS fight to be had, he told the BBC. Wemay not succeed, but this is the firsttime weve been really outspoken insaying something is wrong at thedepartment for transport.A spokesperson for the DfT acknowl-

edged the efforts, but insisted thatthe winning bidder was decided by afair and established process and noreason has been advanced to convinceDfT not to sign the agreement.

FirstGroup chief executive TimOToole said he was pleased by thefirm stance, adding yesterday that his

firm won the bid fair and square.But the departments refusal to

budge will disappoint the publicaccounts committee, which has

also asked for a delay in orderto probe the details of thefranchise bids, and the Labourparty, whose shadow trans-port secretary Maria Eaglesaid yesterday that MPsshould be given a chance toraise concerns over the deci-sion in parliament.

Virgin on furious: spurned railtycoon Sir Richard Branson

NY Times sellsoff About.com

LONDON-BASED business-to-business service firm Blur Groupis preparing a listing on Aim in the

next few months, with founderand chief executive Philip Letts setto make a small fortune.

Letts, who founded Blur in 2009,has appointed Singer CapitalMarkets to advise on the listing,

which could launch as early as thisyear. He currently owns around 70per cent of the firm, which teamstechnology companies up withadvisory firms. Blur expects toraise around 5m from the listing.

We are confident that we have

Blur chief to show tech firms canlist in UK as he prepares Aim IPO

BY JAMES TITCOMB the right foundations in place toensure that Blur Group becomesthe successful, UK headquartered,

global player that the UK techsector needs, Letts said. He has

said in the past that he isdetermined to prove that Britain isan appropriate environment fornurturing young tech firms.

Letts, 46, became the firstBritish CEO of a Silicon Valley firm

when he took the reins at Tradaqin 2000, and has headed fiveinternet businesses since 1991.

Other investors who stand toprofit include ITV chairman

Archie Norman and Odeon chiefexecutive Tim Schoonmaker.


cityam.com

Philip Letts owns about 70 per cent of Blur Group having founded the business in 2010

TORY MP Tim Yeo has added to agrowing chorus of disapproval overthe governments blanket ban on athird runway at Heathrow.

The former environment ministertold the BBC yesterday that while adecision is delayed, Britain isfalling behind in the race toincrease air travel capacity.

Former Labour chancellor AlistairDarling also criticised the coalitionsstance, adding that we cant keepputting this decision off.

BY MARION DAKERS

THE NEW York Times Company hassold its information website

About.com to online mediacompany IAC, in a $300m (190m)cash deal.

IAC, which also runs the AskJeeves website, beat rival bids fromAnswers.com and Demand Media.

NYT has made a loss on thewebsite after buying it for $410m in2005, with About.com seeingadvertising revenues drop afterGoogle changed the way its searchengine handled questions. A mergerof Ask.com and About.com wouldstill create the sixth-biggest website

globally, according to comScore.

BY JAMES TITCOMB

Yeo: We needa new runway

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UNITED BISCUITS enjoyed robust

profit and revenue growth in 2011,its annual accounts disclosed, aperformance that is sure to buoyits private equity owners hopes ofselling off parts of the firm.

Pre-tax profit for the maker ofMcVities digestives and Penguinbiscuits rose 4.7 per cent to156.6m in 2011, based on revenuewhich grew 5.5 per cent to 1.12bn.

This positive news will provide afillip for owner Blackstone, whichhas been trying to sell the fir m forsome two years, with suitors overthe years including Chinese giantsBright Foods and Wahaha.

Recently the US private equitybehemoth has been lining up adeal which involves hiving off thesmaller salty snacks business, afterfailing to complete a deal sellingthe group as a whole.

Analysts expect Kellogg and

Intersnack, the German maker ofPom Bear crisps, to bid for thesnacks branch, which is valued atroughly 500m.

Blackrock acquired UnitedBiscuits for 1.6bn in 2006.

United Biscuitsimpresses with2011 upswing

BY BEN SOUTHWOOD

HERTZ Global Holdings yesterdayannounced it has struck a deal to buyDollar Thrifty for $2.3bn (1.45bn),ending a protracted battle to take con-trol of the rival car rental firm.The merger will see Hertz pay $87.50

per share in cash for Dollar Thrifty,representing an eight per cent premi-um to its closing price of $81 onFriday.This is more than double what

Hertz first offered for the firm in 2010before Thrifty shareholders rejectedthe $1.2bn offer.The group tried again last year with

a raised offer of $2.2bn but withdrew

in October after it struggled to winantitrust clearance from regulators.

We are pleased to have finallyreached an agreement with DollarThrifty after a lengthy but worth-while pursuit, Hertz chairman

Dollar Thriftyaccepts $2.3bn

Hertz mergerBY KASMIRA JEFFORD Mark Frissora said.Well be a stronger global competi-

tive player with a full range of rentaloptions not only in the US but inEurope and other markets givenDollar Thriftys strong internationalpresence.As part of the deal, Hertz said it will

sell its Advantage Rent a Car discountunit to Franchise Services of NorthAmerica and Macquarie Capital.

Lazard was brought on board last year tolead Hertzs renewed efforts to buy DollarThrifty, working alongside Bank of AmericaMerrill Lynch and Deutsche Bank.Mark McMaster, vice chairman of US invest-

ment banking and Antonio Weiss, globalhead of investment banking, were the pri n-ciple financial advisors on the deal togetherwith director Navin Bhargava.McMaster has worked at Lazard for more

than two decades and oversees industrials,consumer, retail and financial sponsors.Over the past year, he has been advising theboard of Tyco, the US industrial conglomer-ate, on its ongoing strategy to break up intothree companies. Meanwhile Weiz, a Yaleand Harvard graduate who joined Lazard in1993, has worked on a string of heavy-weight deals including Krafts 12bn acqui-sition of Cadbury in 2010 and US brewerInBevs 26bn takeover of BelgiumsAnheuser Busch in 2008. The pair alsoworked together in advising 3G Capital, the

New-York based investment firm backed byBrazilian billionaire Jorge Paulo Lemann,on its $4bn buyout of Burger King in 2010.JP Morgan and Goldman are acting asfinancial advisers to Dollar Thrifty.

ADVISERS

MARK MCMASTERLAZARD

Hertz, led by Mark Frissora (left), is buying Dollar Thrifty, headed by Scott L Thompson

DAVID LLOYD LAUNCHES HIGH STREET GYM CHAIN

David Lloyd Leisure, thetennis-based healthand fitness club group,said yesterday it plansto launch a chain ofsmaller studios onBritish high streets totarget busy workerslooking for moreflexible workoutregimes. The group,

controlled by London &Regional and CairdCapital, said it willinvest 500,000 inopening three trialsites, with the first sitedue to open in Putneynext month.The DL Studios will benon-membershipbased and offerpersonal trainingsessions as well asgroup exercise classes.

Hertz Global Holdings


15.0

14.0

14.5

12.5

13.0

13.5

$14.21

27 Aug

BILLABONG, the strugglingAustralian surfwear chain,yesterday unveiled a turnaroundplan in an attempt to fend off a

A$694m (456m) private equitybid, even as it reported it hadswung to a full-year loss.

Chief executive Lorna Inmanlaid out a four-year strategy tosimplify the business, focus oncore brands and expand its onlinepresence in order to return topositive sales growth.

However, she warned thattrading conditions would remainchallenging in the coming year.

Billabong reported a full-yearnet loss of A$276m compared witha profit of A$119.1m a year earlier.

Private equity firm TPG

BY KASMIRA JEFFORD International made an offer in Julyto buy the company for A$695m,five months after Billabongrebuffed a previous, higher offerthat valued the company at

A$841m.Inman said talks with TPG were

ongoing. The group has previouslysaid the latest offer is too low.

Shares in the company havefallen more than 75 per cent in thepast 18 months, as sales havefallen in US and Europe afterconsumers cut back on spendingand brands lost some of theirappeal with young shoppers.

Its business also suffered after itmade an ill-timed global expansion

just before the financial crisis in2008 that left it with a heavy debtload.

TUESDAY 28 AUGUST 20128 NEWS

cityam.com

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ITS just two days before entries tothe Square Miles first ferret racingcontest close, so youd better getyour entry in quick if youre interest-ed.

The lack of your own ferret is noexcuse. The Hants and Berks Ferret

club, which promotes the welfareand protection of working andrescued ferrets, will provide anyonewho signs up with their very ownfurry creature for the day.

The event scheduled forlunchtime on 14 September willpit the ferrets against each other ina series of obstacle courses.

And there are exacting rules inplace to ensure the winner will beundisputed. The fastest

On your marks:City gets readyfor ferret racing

ferret must clear the line with allfour paws to be deemed worthy ofthe Square Mile championshiptitle just one paw past the postwont do it.

The rules may be tough, but itsall in aid of a good cause.

Money raised from the ferretracing will go towards host lawfirm DAC Beachcrofts goal ofraising 25,000 for The PrincesTrust charity.

Companies are being invited tosponsor either a ferret or a race,with a Ferret Trophy up for grabsfor the sponsor of the winningferret.

Companies sponsoring a ferretand/or race will be invited to attendon the day, have a drink and watchthe racing unfold. Flat caps andtweed optional.

For more information, or to signup visit:www.dacbeachcroft250.com/

whats-on/event/city-ferret-racing-london/

A QUIET summer day in the City was last week livened up by the presence of rugby starsincluding England captain Chris Robshaw (top right). Seven Investment Management hostedthe one-day work experience, which emphasised the importance of planning life after rugby.Fighting your way out of a scrum is a useful skill in these banker-bashing times.

RUGBY STARS DESCEND ON THE CITY

Got A Story? [email protected]

10 cityam.com

cityam.com/the-capitalistTHECAPITALISTWith the Paralympics set to opentomorrow The Capitalistis looking

forward to falling into the grip of sportsobsession once again. But if youre stillreminiscing about Team GBs Olympicglories, and want to give some money

to a good cause, have a look at theMayors Fund for London auction. ForCity types, its no surprise that thebowler hat and pinstriped suit-wearingCity Wenlock statue is proving a topdraw, with the latest bids at over16,730. But if youre feeling a tad lessconservative you could alwayscelebrate Londons punk roots withPunk Mandeville a snip at just over

5,100. Both are signed by the charityspatron, Mayor of London Boris Johnson,and at 2m tall would be sure to put anyneighbourhood gnome collection in theshade. To bid, go to:http://memorabilia.london2012.com

Facebooks massive drop in shareprice - from an IPO launch at $38

to a close of $19.27 on Friday clearlyhasnt dented the social networkinggiants confidence. While other firmsmight have retreated to lick theirwounds, Facebook has unveiled plansfor a massive 420,000 square footcampus annex, roughly the area of

eight football fields. Space-age, high-tech buildings have become the normfor web giants, however. Apple hasproposed a massive spaceshipcampus in Cupertino, California, whileGoogle recently opened new offices in

Venice, California, at the renownedBinoculars Building designed byarchitect Frank Gehry. Facebooks newdesign also comes from Gehry, famousfor the Guggenheim Museum in Bilbao,Spain. Plans for the new headquartersin Menlo Park were due to be sent tolocal city officials for a pprovalyesterday. No doubt Facebook will behoping they like them.


A ferret must clear the line with allfour paws to be declared champion

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IN BRIEFRussias Rusal cuts its capacityn Russian group Rusal, the worldslargest aluminium producer, saidyesterday that it would cut capacitythree per cent by the year-end andwas taking a charge on its investmentin Africa, as it grapples with weakprices and rising power costs. Rusal,which produces nine per cent of theworlds primary aluminium, has beenhurt by persistently weak prices forthe metal used in drink cans, car parts,aircraft and iPads. Slack demand andoverproduction have pushed pricesclose to two-year lows. It reported anet second-quarter loss of $37m(23.4m) yesterday, including a$167m impairment related to itsFriguia alumina refinery in Guinea.

Sinopec eyes injection of assetsn Sinopec Group, parent company ofAsias largest refiner, Sinopec, isworking on a plan to inject itsoverseas assets into its listed unit, itschairman said yesterday, a moveaimed at cutting the units exposure tounprofitable refining at home. Weare evaluating our upstream assets.Once it is done, we will inject theminto the listed company as soon aspossible, Sinopec chairman Fu

Chengyu said. Fu said Sinopecscurrent cash flow was not enough tofund the purchase of all upstreamassets from the group.

EUROPES five biggest hedge fundsboosted their market share of man-aged assets to 40 per cent last year,further concentrating investorassets into a handful of hedge fundmanagers.The assets of this years top five

managers Man Investments,Brevan Howard, BlueCrest CapitalManagement, Winton CapitalManagement and Standard LifeInvestments increased to $165bn(104.4bn) at the end of June 2012,according to figures released yester-day.This equates to 40 per cent of total

hedge fund assets of those surveyedand an increase on the marketshare of 38 per cent posted last year.The total assets managed by t he

top five is a 53 per cent increase onthe $108bn of assets managed by

the then-top five when the annualsurvey was conducted in 2010.The survey found total assets

under management had increasedseven per cent from mid-2011 to hit

Top hedgies run40pc of market

BY MICHAEL BOW $414bn this year.

The study by The Hedge FundJournal, now in its seventh year, sur-veyed 50 hedge funds across Europe.

Topping the table again this yearwas Man Investments, which hasbeen beset by a spate of downgradesby equity analysts and rating agencyMoodys of its parent Man Groupover the past two weeks.

It increased its assets by 21 per centfrom $34.1bn to $41.4bn at the endof June.

British hedge fund Brevan Howardtook second place after increasingits assets by 14 per cent, whileBlueCrest Capital Management andWinton Capital Management bothwent up a spot to three and fourrespectively.The biggest riser in the top ten was

Standard Life Investments, leapingfrom ninth to fifth after growth inits Global Absolute Return Strategies

(GARS) fund.The data also showed UCITS funds

now account for 18 per cent of totalassets under management of thefunds surveyed, equal to $71.6bn.

Man Group chief executive Peter Clarke has helped boost fund assets by 21 per cent

AQUANTUM Group, aquantitative index provider led

by a group of former scientists,yesterday announced plans toroll out its own fundmanagement business.

The firm, which has a UKoffice in Oxford in addition to

bases in Munich, New York andLuxembourg, will start offeringmanaged futures funds for highnet worth individuals and otherinvestors later this year.

It follows on from its corebusiness offering of indexproducts following a soliduptake of them by third parties.

It had previously signed alicencing agreement with RoyalBank of Scotland boosting theamount of money run using

Aquantum launches its ownfund management business

BY MICHAEL BOW Aquantum indices to $1bn(633m).

The asset managementbusiness, to be calledAquantum AG, will have itsown management, supervisoryand advisory boards.

Its principals include formerWinton Capital Managementscientist Thomas Morrow,former nuclear energyresearcher Dr. Oliver Podobrinand former head of RBSs exoticequity structuring and pricingdesk Moritz Seibert.

Morrow said: Given thepopularity of our indices, theestablishment of a full-scaleasset management business todirectly harness Aquantumsunique quantitative tradingexpertise is a natural nextstep.

TUESDAY 28 AUGUST 201212 NEWS

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THE ALTERNATIVE InvestmentMarket is set to list its first knownKosovan marble miner afterquarrying firm Fox Marble Holdingstoday announced the completion ofa 9.65m fundraising round.

Fox, which quarries marble inKosovo, said it had completed thefundraising of 6.59m of ordinaryshares and 3.06m of convertibleloan notes and is set to start ordi-nary share dealing this Friday.

It is the first known company withoperations centred in Kosovo toachieve an Aim listing.

Chief executive Christopher Gilbertsaid: With the proceeds from thefund raising we can turn Fox Marbleinto a world leader in marble.The money will spent on a process-

ing plant and new equipment.

Fox Marble setto list on Aim

BY MICHAEL BOW

HEDGE FUND JOURNALS EUROPE 50 ASSETS UNDER MANAGEMENT

Rank 2012 Rank 2011 Manager Assets Under Management

1 Man Investments $41.4bn

2 Brevan Howard $36.7bn

3 BlueCrest Capital Management $31.1bn

4 Winton Capital Management $28.5bn

5 Standard Life Investments $27.3bn

6 Blackrock $26.9bn

7 GAM $15.4bn

8 Brummer & Partners $14.2bn9 Capula Global $13.0bn

10 Amundi $11.3bn (on 31 Mar)

1

2

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5

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5

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THE UKs services industry has suf-fered a hugely disappointing per-formance in the last three months,with shrinking business and tum-bling confidence, a survey of thecountrys biggest sector shows today.

Both consumer services and profes-sional services reported that businessshrank in terms of volume and value,the Confederation of British Industry(CBI) research reveals.

Back in May, the same CBI surveyshowed that firms expected businessto improve from June to August. A netbalance of seven per cent of respon-dents in business services (such aslegal and accountancy firms) predict-ed higher incomings, yet todays sur-

Survey reveals summersetback for UK services

BY JULIAN HARRIS vey reveals a devastating negative bal-

ance of 16 per cent reporting a fall inthe value of business over the period.Optimism among these firms has

collapsed from a positive reading ofplus eight per cent back in May tominus 11 per cent now.And the story is even gloomier

among consumer services firms suchas restaurants and bars. Companiesoptimism regarding their business sit-uation worsened from a negative bal-ance of two per cent in May, to minus23 per cent in August.

Conditions in the service sectorhave not improved as expected thisquarter, with firms now more nega-tive about the overall business situa-tion than they were three monthsago, said the CBIs Anna Leach.

Companies selling services to con-

sumers continue to face challengingtimes, with price-cost pressures and aweak business environment squeez-ing profits.

Last week the CBI also reported badconditions in the manufacturing andretail sectors. Orders dipped at UK fac-tories this month, the CBI found,while sales on the high street wereslightly down.The news will be worrying for chan-

cellor George Osborne, who hopes theeconomy can bounce back in thethird quarter of the year.At the end of last week the UKs GDP

level for the second quarter of theyear was revised to a fall of 0.5 percent, up from the initial estimate of a0.7 per cent drop.

INTERNATIONAL cash is f loodinginto the London property market,as foreign buyers capitalise on

weak sterling, a report releasedtoday by Cluttons claims.

The property consultantspredict a 3.2 per cent annualincrease in prime central Londonhouse prices, driven by cash

buyers in turn driven by theweak pound.

Compared to the 2007 peak,buyers from the Middle East nowface discounts of some 30 per centthanks to favourable currencyrates, while those from the FarEast find prime house prices asmuch as 60 per cent lower.

The prime central Londonproperty market continues to

buck the national trend, said SueFoxley, Cluttons head of research.Strong annual growth is forecastin spite of significant downward

International money bolsterscentral London property boom

BY BEN SOUTHWOOD pressure on prices.Foxley said that as well as

international demand, there wasupward pressure on the marketfrom both first-time buyers and

due to the Bank of Englandsfunding for lending scheme (FLS).

A growing mortgaged first-timebuyer market means that we arelikely to see increasedcompetition for properties at thelower end, which will have a farreaching effect on the whole ofthe supply chain, Foxley said.FLS also appears to be re-energising the debt financingmarket.

The report threw cold water onthe idea of an Olympic rental

boom, saying that the expectedboost from tenants simply did notmaterialise.

And Cluttons expect a one percent retrenchment from theunsustainable growth in therental market seen in 2012.

THE PROPORTION of factoriesreporting rising costs of credithas fallen to its lowest ratesince 2007, an industry grouphas revealed today.

The EEF hopes that its latestsurvey marks a turning point inthe cost of borrowing for

manufacturers in the UK.The balance of companies in

Fewest manufacturers since2007 find rising credit costs

BY JULIAN HARRIS the sector finding an increase inthe cost of credit has fallen to11.2 per cent from 21.2 per centin the second quarter, EEF says.

This balance has not beenlower since EEF began its creditsurvey in quarter three of 2007.

However, there are still morecompanies saying the cost offinance is going up rather than

down, complained the groupseconomist Lee Hopley.

SLOWER inflation may be behinda slight easing in private sectorwage increases, Incomes DataServices reported this morning.

The median pay award in thethree months to July slipped to2.5 per cent, down 0.5 per cent.

The retail price index fell from

5.6 per cent last September to 2.8per cent in June of this year.

Private wagehikes easing

BY CITY A.M. REPORTER


cityam.com

Cluttons says foreign buyers are benefiting from favourable exchange rates

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Foreign firms get no specialtax treatment, say lawyersFOREIGN-OWNED firms arelinked to almost half of HMRCsinvestigations into largecompanies tax bills, according tolawyers.

Pinsent Masons reckons thefigures rubbish claims thatrevenue-collecting authoritiesadopt a light touch approach tochasing inwardly investing

companies for their taxcontributions.HMRC investigates levels of tax

that the 770 largest businesses in

BY JULIAN HARRIS the UK may still have to pay, alongwith the risk to the Exchequerfrom companies litigating overamounts of tax they haveoverpaid.

From March last year HMRC hadidentified 25bn at risk, of which11bn concerned foreign-ownedcompanies, Pinsent Masonsclaims meaning that 44 per centof the total could involvenegotiations with inward

investors to the UK.HMRC actively targets foreign-owned companies within the UKto see if they owe any extra tax,

said the law firms head of taxJason Collins.

There is a popular myth thatHMRC and the Treasury are soeasily charmed by the presence offoreign companies in the UK thatthey are happy to accept any taxpayment that they get. That couldhardly be further from the truth.

The current regime can evendeter foreign companies frominvesting in the UK, Collins added.

The enquiries to which HMRCsubjects these companies can beincredibly tense, time consuming,and, at times, confrontational.

ECONOMYS BIGGEST SECTOR IS FACING A TOUGH TIME

CONSUMER SERVICES(Hotels, bars, restaurants etc)

BUSINESS SERVICES(Accountancy, legal and marketing firms)

Expected7%

Actual

-16%

In May, a net balance of 7% expected morebusiness (in terms of value) from June - August.Yet a net balance of 16% have now reported lowervalue of business from June - August.

Optimism has plummeted overthe last 3 months

MAY

+8%

AUGUST

-11%In May, a net balance of 22% expected morebusiness (in terms of value) from June - August.Yet a net balance of 12% have now reportedlower value of business from June - August.

Optimism has plummeted overthe last 3 months

MAY

-2%

AUGUST

-23%

Expected22%

Actual

-12%

SOURCE:CBISURVEY

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LONDON REPORT


US stocks were barely changedin light volume yesterday asinvestors waited for signs fromcentral banks about

stimulating the weak economy,though Apples shares hit a recordhigh after a major court victory.Apple rose two per cent to $676.56

after the iPad maker won a $1bnjudgment in a patent lawsuit againstSamsung Electronics. Samsung ofSouth Korea said it would contest theverdict. Earlier, Apple hit an all-timehigh of $680.87.

Investors are looking ahead toFederal Reserve Chairman BenBernankes speech to a meeting ofcentral bankers at Jackson Hole,

Wyoming, on Friday.Bernanke is likely to keep markets

guessing about the timing of anotherround of bond purchases, but he islikely to sustain expectations foraction of some kind next month.

Stocks have rallied in recent weekson growing expectations for a thirdround of quantitative easing from theFed, as well as possible action fromthe European Central Bank.The Dow Jones industrial average

was down 4.88 points, or 0.04 percent, at 13,153.09. The Standard &Poors 500 Index was up 2.45 points,or 0.17 per cent, at 1,413.58. TheNasdaq Composite Index was up 8.45points, or 0.28 per cent, at 3,078.24.

DASHBOARDCITY YOUR ONE-STOP SHOP FOR JOB MOVES,BROKER VIEWS AND MARKET REPORTScityam.com

British Retail ConsortiumThe BRC has appointed Ian

Cheshire as chairman, takingover the two-year post fromRob Templeman on 1 October.Cheshire has been chiefexecutive of Kingfisher sinceJanuary 2008 and an executivedirector since June 2000. Hehas also been a non-executive director of Whitbreadsince February 2011. He serves as a lead non-executive member at the Department for Work andPensions. He is a member of the Corporate Leaders

Group on Climate Change and a member of theEmployers Forum on Disability Presidents Group.To provide continuity, Templeman will stay on for ayear as deputy chairman while Helen Dickinson,who has more than 20 years of experience at KPMG,will take up the role of director general inDecember.

Standard Chartered BankThe bank has appointed Alex Manson as group headin its wholesale banking geographies of Asia, Africaand the Middle East. Manson, who will be based inLondon, joins from Deutsche Bank.

MarshThe insurance broker and risk adviser unit of Marsh &

McLennan has hired John Kunzler as head of its UKregulated professions practice for England andWales. He joins from Travelers Companies.

Vericrest FinancialThe Texas-based financial services company has hiredDavid Slear as senior vice president of defaultservices. Prior to joining Vericrest he spent nearly tenyears in the default operations of mortgage andconsumer lending at HSBC.

InterMuneInterMune, a San Francisco-based biopharmaceutical

company, has hired Jon S Becker as vice president,deputy general counsel and head of European legalaffairs, based at the companys European HQ inBasel, Switzerland. Becker worked for 15 years atAmgen, also based in Switzerland.

The Crown EstateThe Crown Estate has appointed two new portfoliomanagers, Robin Clarke and Malcolm Burns, for itsRural and Coastal Portfolio.

WHOS SWITCHING JOBS Edited by Tom Welsh

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

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RESTAURANT GROUPPanmure Gordon increases itstarget price to 375p from 327pand reiterates its buy ratingahead of Fridays first-halfresults. Expects strong growthin sales and earnings to lead toa 15 per cent dividend hike.

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MARKET watchers will belooking to tomorrowsNationwide house pricesreport and mortgage

approvals on Thursday to gaugewhether the UKs economy is pullingout of its double dip.

Recent data put the number ofmortgage approvals at a 15-year lowand last month house prices had fall-

en by 0.7 per cent and 2.6 per centyear on year.

Today sees corporate reports fromCairn Energyand G4S, while tomor-rows updates come from 888Holdings, Antofagasta and SercoGroup. On ThursdayAdmiral,WPP,Regus, Unite Group and Cape willupdate the market while RestaurantGroupwill report on Friday.

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EVEN though Im an Evertonfan, Im enjoying the start ofthe new Premier leagueseason. Part of the optimismis the latest round of

television money that offers alifeline to clubs that are financiallyperilous.

This season, the Premier Leaguemade 3bn selling the rights toscreen matches, a surprise 71 percent increase on last year. Each clubwill receive an extra 14m to playwith, and more than two thirds ofthat came from Sky. This windfallillustrates several importanteconomic concepts.

Firstly, you may hear journalistsrefer to transfer inflation, as clubs

spend some of the money on new

Spread betting, CFDs Trade today atwww.cityindex.co.uk

FACT OF

THE DAY

Of the last 10 UK bank holidays, the FTSE 100 has rallied the

next trading day on 7 occasions, netting average gains of 1.6

cityam.com/forumTHEFORUM

Twitter: @cityamforum on the web: cityam.com/forum or by email: [email protected]? Disagree? Got a sharp comment?

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

16TUESDAY 28 AUGUST 2012

players. However, as the economistMilton Friedman said: Inflation isalways and everywhere a monetaryphenomenon. Economists typicallyuse the term inflation to refereither to an increase in the moneysupply, or its consequence, anincrease in the general price level.Increasing prices in one particular

sector, such as football transfers, is

not inflation. In the same way,people often get confused aboutrising energy prices. What they aretypically observing is theconsequence of inflation, not thecause. Unless BSkyB gets control ofthe printing press, the companycannot generate inflation.

Another concept is Cantilloneffects, named after the classicaleconomist Richard Cantillon whowas an early pioneer of monetarytheory. He noted that increases inthe supply of money has localisedeffects, with prices moving in asequential order based on theirdistance from the initial injection.In a modern economy, new moneytends to enter the financial system

through the banking sector, hence

market participants clamber to getcloser to the source. You want yourincome to rise before the prices ofthe goods that you buy. Skystelevision money will increaseprices beyond the football club, butit will initially be concentrated inthe football sector.

Finally, we can think about thespeed at which these changes occur.Tottenham Hotspurs formerchairman, Alan Sugar, famouslycompared the business model offootball with drinking prune juice:all the money you put inimmediately gets passed on toplayers and agents. In 2009/10, onlythree Premier League clubs hadwage to turnover ratios of less than

50 per cent (Arsenal, Manchester

United and WolverhamptonWanderers), while eight clubs hadratios over 80 per cent). So we mightexpect players to capture themajority of this 3bn. But ifeveryone expects transfer fees andwages to go up, managers willincrease the bidding now.

The bottom line is that the peoplewho immediately benefit are thosewith the scarce talent. And thatsthe players. But the fans of thePremier League will also benefitfrom seeing some of the best playersin the world play in England. It is,after all, a global market.

Anthony J. Evans is associate professorof economics at ESCP Europe BusinessSchool. www.anthonyjevans.com

@anthonyjevans

FRONTLINEECONOMICS

ANTHONY J. EVANS

Its open season for footballs economic analogies and the skys the limit

THE Treasurys latestconsultation Ensuring theFair Taxation of UKResidential PropertyTransactions has just closed.

We responded to it, and disagreednot only with the substance of thepolicies, but also the way in whichthe consultation was framed aroundthe vaguest of concepts: fairness.The main proposal is for a graduat-

ed Annual Charge to be levied on UKresidential property valued at 2m

plus, which is owned by any non-nat-ural person. Also, capital gains tax(CGT) is to be extended to catch dis-posals of such property by a non-resi-dent.Aside from the disappointing

absence of any detail on the extensionto CGT, the most curious thing aboutthe consultation was the prevalenceof the word fair, which cropped upon 16 separate occasions. The wordfairness has a tenuous link to tax,yet it has become the mot du jourever since the chancellors incanta-tion on morality at the last budget.

Of course, tax legislation and case

It wont take long for

government to extendthe Annual Charge tocast a wider net

Taxation shouldnt be determinedby subjective opinions of fairness

law are littered with examples ofunfairness ranging from the doubleand triple taxation of the same eco-

nomic income, to the taxation of indi-viduals on income they dont receive.Recently, the tribunal in Rogge andothers versus HMRC found that a tax-payer should be taxed on income heeffectively paid to himself. The tribu-nal called it an absurd conclusion,but stated that it was bound by thewording of the statute.

If taxation is to be driven by a con-ception of fairness, it is hard to seehow it could be deemed fair for any-one caught by the Annual Charge. Itwould be retroactive and is designedto catch transactions that may havetaken place decades ago. Also, as a

wealth tax directed at property val-ues, rather than net wealth, it woulddisproportionately impact uponthose living in expensive areas, aswell as those who have chosen toinvest their wealth in property.

But irrespective of the inconsisten-cies in the consultation, in truth, tax-ation has little to do with fairness.Income tax was originally introducedas a short-term measure to fund thenational debt arising from theNapoleonic Wars. That was 200 years

ago. The tax system was not createdin any formalised or coherent man-ner based on an objective notion offairness. We have an arbitrary hodge-podge of rules, designed to extractfunds from the population to coverspending and win votes.There is no inherent fairness and no

inherent morality in the system. Itwasnt built with that in mind. Howcan fairness be said to be a centraltenet of a system that taxes income at50 per cent, but capital gains at 28 percent?

It has not gone unnoticed that theAnnual Charge looks suspiciously like

a Mansion Tax lite. The threshold of2m is the same as that championedby the Lib Dems in their proposedMansion Tax. It targets albeit indi-rectly broadly the same base of tax-payers: wealthy foreigners.

But it wont take long for a govern-ment to extend the terms of theAnnual Charge to cast a wider net.

The history of taxation shows thatonce a tax is introduced, it is only amatter of time before it is extended toinclude a greater portion of the popu-lation.

But in the short term we should beconcerned about how this MansionTax lite is perceived by the wealthy

foreigners it is targeting. Whether welike it or not, the UK needs these peo-ple to help drive our economic recov-ery. We need to attract wealthyforeigners to the UK, and we need toretain those who are already here.The government is happy and

rightly so to make the UKs corpora-tion tax regime more competitive toattract multinationals. The benefitsof attracting wealthy individuals intothe UK through the collection ofindirect taxation are similar to the

benefits of attracting multinationals.Yet we are openly pursuing tax poli-

cies that deter wealthy individualsfrom moving to the UK because of thecomplexity of the rules, the frequen-cy of changes and the uncertainty oftax treatment because of retrospec-tive taxation.

By allowing a woolly notion of fair-ness to creep into taxation, the politi-cal landscape is such that it hasbecome almost impossible for politi-cians with vision to tax us in thenations best interest.Mark Davies is director of Mark Davies

and Associates.

MARK DAVIES

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trading can result in losses greater than your initial deposit.

POINTSPREAD*TRADE FTSE

*1 point spreads available during market hours on daily funded trades and daily future spread bets and CFDs (excluding futures).

17

Unprepared youth[Re: Rigour in GCSEs is essential but we needstudents fit for business, Thursday]Our nations future depends upon ourwillingness to create new educationalpartnerships, raising academic expectationsof all children and providing them withskills. Our research on skills and future jobsshows that between 2007 and 2010 anaverage of almost 50 per cent of pupils incities left the education system without A*to C grades in GCSE Maths and English. Thisnot only has implications for young peoplesfutures, but also directly impacts on the UKeconomy because businesses do not haveaccess to the pool of skills they need.Gavin Aspden, director of qualifications, ICAEW

Building growth[Re: New infrastructure cannot dig us fromour economic hole, Friday]Eamonn Butler finally raises the elephant inthe room: when there is talk of huge infra-structure investment, someone has to pay.Constant, above-inflation increases in water,energy, transport costs and subsidies forgreen energy mean that the burden will fallon the user and the taxpayer. And guesswhat: it is, pretty much, the same person.Mike Bryan

Infrastructure spending might not work, butI have not heard many other concrete ideasfor getting the economy back on track.David Crooks

THE coalitions plans for thepublic finances seemdoomed to fail. Both partiescame into office pledging toeliminate the current

structural deficit in five years, andfor the debt-to-GDP ratio to be fallingby the end of the Parliament. Ineffect, this meant faster deficitreduction than the Labour party hadoutlined under Gordon Brown.

However, now the budget deficit isfalling almost as slowly as Labour

planned. Current spending contin-ues to increase in real terms, and the25 per cent deficit closure thatoccurred by the end of 2011/12 wasdriven by cuts to investment and eco-nomically damaging tax hikes. Thecurrent structural deficit, which thecoalition pledged to eliminate, hasonly been reduced by 13 per cent.Slower than expected growth meanspublic sector net debt is now official-ly forecast to be 1,365bn by the endof the Parliament, 81bn higher thanoriginally planned. And recent bor-rowing figures suggest it will bemuch higher still.

For these reasons, the publicfinances take centre stage in politicaldebate. But how tuned in are thepublic to what the coalition actuallyset out to achieve, and how success-ful the coalition has been so far?

Some polling weve done suggests:not very. In fact, worryingly, it sug-gests many in the public dont knowthe difference between debt anddeficit which could easily beexploited in future election cam-paigns. Just 10 per cent of those sur-veyed realise that, on officialforecasts, the coalition governmentis planning to increase the nationaldebt by around 600bn between2010 and 2015. In fact, 47 per cent ofthe public incorrectly thought itintended to reduce the national debtby the same amount, while 32 percent simply didnt know.

TOP TWEETSOsborne announces that he does now have aplan B. Its actually the old plan A but markeddown by Gove@davidschneider

The economy is still in longest double-diprecession since World War Two. We need achange of course and a plan for jobs andgrowth.@RachelReevesMP

As Marvin Gaye said: What's going on?According to GDP data: output is down, gov-ernment spending and wages are exploding.Is the ONS in a parallel universe?@asentance

Are new landmark skyscrapers destroyingthe City of Londons traditional character?

YESThe City of London has lost the intimacy of its streets and lanes.Planners have traded it away for the blank facades of hugemonoliths crashing into the pavement, apparently mitigated bywind-blown plazas. Towers and offices with large floor plates areseen as an essential for the City as a global trading centre. But itis not these, but the architecture of the modern monolith, thathas made the street a hostile place. As architects concentrate ondesigning huge facades, they falsely believe that it is essential tocarry their structural expression to the street. The City couldlearn from the pioneering tall buildings of New York andChicago, where the street was given its own intimate building,and the towers are plain, with landmark silhouettes. Plannersand architects need to learn from history and restore the humanscale to the streets.Professor Robert Adam is director of ADAM Architecture.

Robert Adam

NOEarle Arney

The Olympic Games has created an opportunity for the City ofLondon to regain its confidence a s a relevant global city. Despiteearly pessimism, the City can revel in its accomplishments and,as we look towards the legacy of the Games, it can now becomea truly sustainable commercial centre. To achieve this, theclassical building typology must be refreshed. We need new tallbuildings, particularly to the east of the City. By building higher,we can provide offices that are fit for purpose and withincreased natural light, therefore producing lower carbonemissions. More importantly, tall buildings can provide largerpublic spaces at ground floor level to delight workers andcontribute socially. By growing up, we can move beyond styleand ensure that we all have a happier and healthier City to liveand work in.Earle Arney is director of workplace at Woods Bagot.

RAPIDresponses

Of course, it was never the coali-tions ambition to reduce the debtthis Parliament in money terms, or

as a proportion of GDP. We keepadding to the debt all the while werun a deficit, which looks like it willbe well into the next Parliament. Itdoesnt help that many politiciansand commentators regularly confusethe debt and deficit. As such, itmakes sense for coalition ministersto simplify matters by saying we arepaying off the nations credit card.The public also seem unclear about

what the government has actuallyachieved. The coalition correctlystates that the deficit has fallen since2010, even if more slowly thanexpected. But just 39 per cent agreedwith the statement: The govern-ment has reduced its budget deficitsince 2010, compared to 28 per centwho disagreed and 33 per cent whodidnt know.

Ignorance of the public financesmakes changing course more diffi-cult, but unless we see a surpriseuplift in the economy in the next fewmonths, there seems little economicor political payoff to stick to statusquo policies.

I think actual spending cuts, along-side tax cuts and significant supply-side reforms are the best hope for theeconomy. If the chancellor agrees,then its clear winning the argumentwill require more clarity about thetrue state of the public finances, andthe aims of changing tack.Ryan Bourne is head of economic

research at the Centre for Policy Studies.


RYAN BOURNE

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The Developing City exhibition, exploring architecture in the City, continues at the WalbrookBuilding, Cannon Street, until 9 September. For more information, visit www.thedevelopingcity.com

Misinformed public

remain confused bythe debt and deficit

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THIS weekends economicsymposium at JacksonHole has the power tomonumentally shake

world markets, which is whatvoracious traders subdued bythe summers low tradingvolumes will want to see.With both Ben Bernanke,chairman of the FederalReserve, and Mario Draghi,president of the EuropeanCentral Bank (ECB), due to speakat this years event, thereshould be ample opportunityfor traders to catch pips on theback of their comments.

The eagerly anticipated annualevent has become a significantfixture in the economic calen-dar, even more so in the crisisera. The remarks will give key

insights on the future directionof US monetary policy, whichwill inevitably have global rami-fications.At the 2010 event, against the

background of a fragile economyand chronically high unemploy-ment, Bernanke outlined policyresponses that firmly pointed tofurther quantitative easing. Themarkets were buoyed by theadditional monetary accommo-dation at the Feds disposal.The 2011 event was more

oblique: details about the specif-ic tools available to the Fed werelight, initially leaving stimulus-hungry markets disappointed.However, markets breathed asigh of relief after digesting thefull implications of Bernankesspeech and were recompensedwith Operation Twist a fewweeks later.

The outgoing ECB president,

All eyes will be fixed on Mario Draghi and Ben Bernanke for the Jackson Hole economic symposium at the end of this week

TUESDAY 28 AUGUST 201218 cityam.com

TRADINGMANAGEMENTWEALTH

DAVID MORRISON

fx360.com

THE GLISTENING APPEAL OFPRECIOUS METALS RETURNS

twitter.com/fx360facebook.com/fx360

SENIOR MARKET STRATEGIST, GFT

The contents of t his column are provided for general information purposes only. One should consider the appropriateness

of the information in light of their own objectives, financial situation or needs before trading. CD11UK.074.010612

Jean-Claude Trichet, alsoappeared at last years event, butit was no swan song. Marketswere becoming nervous aboutthe escalating crisis bubblingaway in Greece and Trichet hadnothing game-changing to offerthem.

One could be forgiven for

thinking that this year will feellike dj vu: parallels can easilybe drawn.

TO EASE, OR NOT TO EASEThat is the question. Whether ornot Bernanke will pull the trig-ger on a third round of quantita-tive easing, QE3, is a coin-flip.The Feds recent meeting min-utes struck a dovish tone:Additional monetary accommo-dation would likely be warrant-ed fairly soon unless incominginformation pointed to a sub-stantial and sustainablestrengthening in the pace of theeconomic recovery.The prospect of further mone-

tary easing was quickly pricedinto global markets, but havethey been too quick off themark? David Morrison, marketstrategist at GFT Marketsbelieves so: Recent data,

released after the Feds meeting,has surprised to the upside.There is an awful lot of compla-cency in the market and there isroom for disappointment goldand silver look particularlyoverextended.With the better than expected

employment data, consumer

confidence reaching highs notseen since 2008, stronger retailfigures and equity market ral-lies, the US economy looks in aless perilous state than it wasgoing into last years JacksonHole. However, does this amountto a substantial and sustainablestrengthening of the US econo-my?The stimulus-hungry think not:

although employment hasimproved, it still remains stub-bornly above 8 per cent and has,in fact, slightly increased sinceAprils reading. Housing data,although favourable, is stillweak.

Europe still remains a big riskto global stability. Shavaz Dhalla,financial trader at Spreadex,expects some clarification fromDraghi [as to the ECBs approach]and probably an announcementof the capping of sovereign bond

There is a chance that the doves may get

their wings clipped at Jackson Hole, but

we should still see the return of market

turbulence, writes Yogesh Chandarana

Gold

$

perounce

2 5Jun 0 2J ul 0 9Jul 16J ul 23Jul 30 Ju l 0 6Aug 13Aug 2 0A ug 23Au g

1,6801,6601,6401,6201,6001,5801,5601,5401,520

NY Close London AM London PM

Central Bank elixir

UP UNTIL last week, gold and silver like a Parisian in August a ppearedto have shut up shop for thesummer. In contrast, equity markets

had pushed higher in a low volume melt-up that brought the Dow and S&P 500 upto levels last seen in December 2007. Even

more impressively, the Nasdaq 100 hit itshighest point since 2001, largely thanks toApple. Meanwhile, crude oil reversed themajority of its May-June pullback, as ageopolitical risk premium was re-established.

But last week, silver, then gold, broke outsharply to the upside in moves which tookmost traders by surprise. Silver flew above$28.30/oz a level which had acted asresistance from the beginning of June.

A day later, gold joined in on the action.It surged through $1,625/oz the 61.8 percent Fibonacci retracement of theDecember to February rally and went onto take out its 200-day moving average at$1,645.

No doubt the two metals are getting aboost as investors continue to factor in thelikelihood of further central bank stimulus.After all, both gold and silver notablyfailed to follow equities and oil higher over

the summer and could now be playingcatch-up. But this latest move feels morelike a technical breakout, backed bygenuine buying for other fundamentalreasons.

Two weeks ago, the World Gold Councilreported that overall gold consumption fell7 per cent in the three months to June,with second quarter gold demand falling toits lowest level in more than two years.Retail buying in India fell sharply thanks tothe weakness of the Indian rupee, togetherwith increased import duties. Chinese retaildemand also fell, as the economy slowedand the Shanghai Composite fell back tolevels last seen at the height of thefinancial crisis. However, with reports ofIndian demand picking up ahead of themarriage season and Diwali, it may be tooearly to write off the worlds two largestgold consumers.

Meanwhile, as foreign exchange andportfolio diversification continues, centralbanks, financial institutions and high net-worth individuals continue to accumulategold. News that George Soros and JohnPaulson had significantly increased theirgold holdings in their respective hedgefunds in the last quarter also piqued

investors interest. It is also worth notingthat LCH-Clearnet, the clearing house,joined CME Europe in allowing the use ofgold as collateral for margin coverpurposes. The obvious conclusion is thatfinancial institutions are happy to considergold as money, even if many of the worldsleading economists (and Ben Bernanke)continue to insist that it is nothing of thesort.

The question now is: can the upsidemomentum be maintained? With the priceconsolidation that took place over thesummer, gold and silver have built solidbases from which to head higher. The riskfor both metals is that the current rally isbased solely on the expectation of furthercentral bank stimulus from the FederalReserve, European Central Bank (ECB) andPeoples Bank of China. If this is the caseand such stimulus ultimately fails tomaterialise, or if a public argument buildsover bond purchases between the ECB andthe Bundesbank, then gold and silver couldpull back sharply.

The Fed could easily disappoint byholding off from further large scale a ssetpurchases until after the US presidentialelection in November. But the appetite forfurther stimulus is strong due to high levelsof unemployment, tepid growth and theneed to keep bond yields firmly anchored.In addition, the Eurozone debt crisis looksset to escalate further.

Geopolitical risk is also increasing: thehostilities in Syria, together with risingtensions between Iran, Israel and the US,could easily converge and then set off achain of events which have the potential tospread worldwide. Given this uncertainty, itis no wonder that precious metals are onceagain being sought out as safe havens.

Source: Kitco

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19

yields.Concrete news from Super

Mario would elate European stocksat the beginning of the followingweek. Brenda Kelly, senior marketstrategist at CMC Markets believesany QE will be bullish forEuropean indices particularly thebanking sector as well as euro-dol-lar. Any disappointing news willresult in a sharp equity market cor-rection.

However, traders will need to care-fully time their trade entry andexit. Draghi is speaking outside ofmarket hours, adding another levelof risk. Morrison cautions:Investors need to be very wary ofkeeping open positions over theweekend.

Over the course of the last year,traders will have learned to take

comments from Eurozone policy-makers with the utmost caution,since they have hardly been aparagon of reliability. Their dancehas been foreseeably macabre: asolution is put forward and mar-

kets rally; shortly afterwards, itbecomes clear that the solutiondoesnt actually address theEurozones long-term stability, or,will never be implemented (usuallybecause Angela Merkel says nein);markets recoil and the crisis bringsEurope a step closer to disaster;repeat ad nauseam.Whatever the outcome, Jackson

Hole is set to slam the door shut onthe summers lull in trading vol-umes. Kelly says that trends willstart to have more significancebecause the direction of the moveswill have much more conviction.

Morrison agrees: It looks like itwill be a busy September, with theEuropean finance ministers andECB due to meet after Jackson Hole;the Bank of England and the Fedwill meet again; and the Bundestag

will rule on the European StabilityMechanism. Dont forget the presi-dential elections and the loomingfiscal cliff in the US.

Lock and load, dear traders: hunt-ing season is about to begin.

The Vix index

JunAprMarFeb May Jul Aug

26

24

22

20

18

16

14

15.85


PIP HUNTING:Some trading ideas from theexperts:

n David Morrison, market strategist,GFT MarketsWith trading volumes set to pick up:The Vix index looks good. Volatility isunder-priced.

n Brenda Kelly, senior marketstrategist, CMC MarketsStay hedged: Any uncertainty fromMario Draghi will lead to a pop inGerman bunds.

n Shavaz Dhalla, financial trader,Spreadex

The self-described contrarian says:Im looking to short banks andminers, and take a long position ingold. September is going to be allabout volatility.

My pick: Short Aussie-dollarExpertise: Fundamental and technical analysisAverage time frame of trades: A few hours to a few days

Despite the rally that came after minutes of the FederalReserves latest meeting were released, the Aussie-dollar hasbroken down to fresh lows for the month of August. Giventhis intra-month reversal, it is likely that we will see furtherlosses going into the last week of the month. The downtrendthat began in the early part of August still remains intact. Adaily close below $1.0400 suggests further losses towardsthe $1.0310 mark.

ANALYST PICKS

STRATEGISTILYA SPIVAK

My pick: Stay short Aussie-Canadian dollarExpertise: Global macroAverage time frame of trades: 1 week to

cityam 2012-08-28

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