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THE COALITION announced a raft ofnew policies yesterday in a desperateattempt to get the economy andtheir poll ratings back on track.

But critics said ministers infightingand U-turns were making mattersworse, creating extra uncertainty forbusinesses while failing to come upwith any meaningful solutions to thedouble-dip recession.

Prime Minister David Cameronacknowledged he has failed to slashthe red tape holding back the econo-my, and pledged to try again toremove planning restrictions thathave stopped private sector construc-tion from really growing despiteopposition from within the govern-ing parties when this was tried a yearago.That is also expected to be accompa-

nied by the announcement of

schemes to help first-time buyersonto the property ladder, replacingthe stamp duty exemption thatexpired in March.

Meanwhile chancellor GeorgeOsborne announced plans for a state-backed business bank, and said thatlegislation will be introduced thisweek to put in place infrastructureguarantees to boost building.That could see the government give

firms a total of up to 40bn in guar-antees on projects like private roadbuilding and power generation. TheTreasury has been approached byover 30 firms already, looking for sup-port of up to 5bn for their projects.And the chancellor said a Heathrow

extension could be a possible solutionto Britains air-travel capacity prob-lem putting him at odds with trans-port secretary Justine Greening whoopposes any such plans.

Business secretary Vince Cable con-tinued to push for the wealth tax pro-posed last week by deputy primeminister Nick Clegg, in the hope thathe can keep momentum behind the

idea building in the run up to theAutumn Statement and the budget despite opposition fromConservatives and the City.

The Liberal Democrats believe theywere close to seeing the mansion taximplemented in the last budget, andhope an extra push while theConservatives are under pressurecould see the policy implemented.And the government is coming

under attack from prominent back-benchers, with David Davis tellingthe government it is time for a radicalsupply-side agenda to downsize thesize of the state and introduce f lattertaxes.The chaos in the coalition comes

ahead of a government reshuffle,expected as soon as tomorrow, whichis widely expected to see deficit hawkDavid Laws return to the front bench he resigned just days into the coali-tions rule after being caught up inthe expenses scandal.

Conservative party chairmanSayeeda Warsi could face the chop inthe front bench shakeup.

Brian Binley MP called for Osborneto take her role so he can focus onparty strategy and winning the nextelection, arguing Osbornes duel role

currently means he is failing in hismission to properly control the pub-lic finances.

Instead, Binley told the Mail onSunday that Philip Hammond shouldbecome the next chancellor, movingfrom his current role as defence secre-tary.

Labours shadow business secretaryChuka Umunna told City A.M. thenew policies and inter-party rows aredamaging the economy.

Businesses are calling for more cer-tainty an stability, but the situation ismore uncertain in the wake of minis-ters comments yesterday, he said.

A new planning framework wasintroduced in March which localauthorities have been busy preparingfor now they are shaking it up,amending the process further.

Justine Greening said a third run-way was firmly off the table, and nowGeorge Osborne says all options

should be considered all we see ismore uncertainty here.

FTSE 100 M5,711.48 -7.97 DOW n 13,090.84 +90.13 NASDAQn 3,066.96 +18.25 /$ n1.59 +0.01 / 1.26 unc /$ n 1.26 +0.01

BY TIM WALLACE

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AGOLDEN WEEKENDTEAM GB STORMS THE PARALYMPICS

BACK TO WORKStruggling coalition government battles to regain initiative on the economy ahead of imminent reshuffle

n A new business bank will be set up,backed by the state to tryandhelpfund small firms and entrepreneurs

n Infrastructure finance guarantees willbe put in place to transfer some ofthe risk of big projects fromcompanies to the government

n First-time buyers will get moresupport to buy a house, after the lastscheme exemption from stampduty expired in March

n An extra runway at Heathrow couldbe built to give the UK more aircapacity, but no decision has beentaken on what to do

n Firms may face fewer regulations toemploy people for just a few hours aweek, helping to cut unemployment inspired by German mini-jobs

n Planning laws will be loosened toallow private firms to increasebuilding, filling the gap left by fallinggovernment construction projects

All the action from day four of the Games: See Page 23

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AT least a dozen US private equityfirms have been subpoenaed by theNew York state attorney general aspart of a probe into whether a widelyused tax strategy that saved themhundreds of millions of dollars isproper, a source said at the weekend.

Among the firms that weresubpoenaed are Bain Capital, KKR,TPG Capital, Apollo Global and SilverLake Partners, the source said.

The subpoenas, which were sentout in July, seek documents relatedto the conversion of fees firmscharge for managing investors assetsinto fund investments. Other firmsthat received subpoenas include SunCapital Partners; Clayton, Dubilier &Rice; Crestview Partners; HIG.Capital; Vestar Capital Partners; andProvidence Equity Partners.

A spokeswoman for the New Yorkattorney general office declined tocomment. The firms were notimmediately available for comment.

Subpoenas forprivate equityfirms over fees

BY CITY A.M. REPORTER

2 NEWS To contact the newsdesk email [email protected] 3 SEPTEMBER 2012

FRENCH president Francois Hollandewas forced to nationalise Frances sec-ond biggest specialist mortgage lenderon Saturday night after a cash droughtleft it unable to pay its debts, meaningthe government could be on the hookfor up to20bn in guarantees.

Credit Immobilier de France (CIF),which has around four per cent of theFrench mortgage market, was handeda state guarantee by French financeminister Pierre Moscovici, in part tohelp it pay a 1.75bn (1.39bn) coveredbond debt, which is due to maturenext month.As part of the bailout, which is sub-

ject to European Commissionapproval, CIFs chief executive ClaudeSadoun has been forced to step downand will be replaced by governmentappointee Bernard Sevez.

Moscovici said: To allow the CIF

FOR those of us returning to workafter a summer break, it feels asif not very much has changed.The City is still subdued, reeling

from tough conditions and theregulatory onslaught; the Eurozoneremains in crisis, endlessly debatingthe latest variant of its latest plan to

delay its demise; and the Britishgovernment is unveiling, yet again, alacklustre and depressing growthplan which is likely to achieve thesquare root of nothing. The only rayof light comes from the Paralympics,a beacon of optimism, but the Gameswill be over in a weeks time, leavingbehind them the increasingly chillywinds of Autumnal reality.

It is not as if the coalitions growthplans perhaps better described asaspirations are all bad. A couple areeven pretty good. But most are singu-larly unambitious, a rehash of previ-ous announcements, and confirmthat the government regardless ofthe outcome of this weeks ministerialreshuffle is not serious about push-

EDITORSLETTER

ALLISTER HEATH

Coalitions new growth plan another damp squib

ing through a genuine supply-siderevolution to liberate the economy.

It would be great to see the housingmarket properly liberalised, makingit easier to build more of the rightkinds of homes in places where theyare most needed. The only problem isthat this was meant to have hap-pened already earlier this year but thelegislation that ended up beingadopted was a hopeless, useless com-promise that achieved little. If any-thing, matters are now worse thanthey used to be, with even privateindividuals seeking to build their ownhomes being hit with a viciousCommunity Investment Levy. The pre-

vious reform was captured anddestroyed by vested interests; it ishard to imagine why the next onewont be. A partial liberalisation ofthe labour market would be a greatthing, though the details a tax andred tape free class of jobs for somelow-income workers, and a capping of

unfair dismissal payouts are far lessradical than those discussed last yearduring the review led by AdrianBeecroft. Once again, this smacks ofcowardice and coalition infighting.

Even these good ideas are spoiled bythe bad ones: the creation of a statebank to lend to small businesses is aterrible policy, as is the proposal forthe government to guarantee yetmore mortgages and infrastructureprojects. The coalition has learntnothing from Americas errors overthe past decade, and cannot graspthat subsiding credit always ends intears. Governments are even worsejudges of risk than private banks are,and the last thing taxpayers need is tobe saddled with the liabilities for a

new generation of sub-prime projects.And what about airports? No decisionhas been taken on any of the alterna-tives; a solution is at least 15 yearsaway, a disgraceful state of affairs.

It is a shame that Osborne wont lis-ten to those in his party with freshideas. David Davis, Camerons former

rival, will today become the latest tooutline an alternative. Davis draws onthe experience of other countries,including Switzerland, which has abigger financial sector than Britain,and depends on exports to theEurozone, but is doing better than us.Among his policies are much flattertaxes and, over time, substantiallylower public spending, as well as amore rational energy policy that ceas-es to genuflect at the green altar. Itsthe kind of roadmap that could saveBritain yet tragically, it is nowherenear being on offer from a govern-ment that has forgotten how to think.

group to respect its overall commit-ments, the state decided to respondfavourably to its request to grant it aguarantee.The rescue deal also guarantees the

lenders assets up to a ceiling of more

than20bn, a source said, adding thatthe terms agreed prevent the CIF frommaking new loans.

Without a buyer, the bank lacks thesolid base which would allow it toaccess liquidity, the source said.

That suggests that the lender is likelyto be wound down and that months-long efforts to find a buyer for it wouldbe abandoned.

The firm had originally put itself upfor sale in June, but failed to find abuyer, prompting the government tomove in. The move is the latest rescueof a financial institution by Frenchauthorities, following a bailout ofDexia between 2008 and 2011.

CIF, which provides loans to peoplewith low incomes, is the secondbiggest specialist mortgage player inFrance behind Credit Foncier deFrance and has a large exposure to theFrench real estate market which washit by a 10 per cent contraction intransaction volumes last year.

Its once healthier balance sheet hasalso been crippled by the evaporationof cheap credit and increasingly oner-ous banking regulations in the form ofBasel III requirements.

[email protected]

Follow me on Twitter: @allisterheath

Hollande is forced to nationalisemortgage lender on default fear

BY MICHAEL BOW

CIC sells bulk of its BlackRock stakeChina Investment Corp has sold most ofits stake in BlackRock, the worlds largestasset manager, as part of a wider strategyby the sovereign wealth to cut its holdingsin global financial institutions. CIC boughtjust under 3 per cent of BlackRocksshares, worth about $1bn, when the assetmanager agreed to buy Barclays GlobalInvestors in 2009.

Germans write off Greece, says pollOnly a quarter of Germans think Greece

should stay in the Eurozone or get morehelp from other countries in the currencyunion, a Financial Times/Harris poll hasfound. The overwhelming verdicthighlights Angela Merkels domesticdilemma as she comes under pressure inEurope to agree more time or money forGreece to get its 174bn second bailoutback on track.

Credit Suisse moving someSingapore jobsCredit Suisse is relocating dozens of back-office jobs from Singapore to India andPoland as part of efforts to cut costs andsupport the growth of front office jobs.

Misled investors line up to sueRBS for 3bn over rights issueBurnt shareholders in Royal Bank ofScotland are in talks with litigation fundswith a view to launching a formal 3.3bnlawsuit within weeks.

Axa puts 320m into Kings Crossoffices developmentAxa, one of Europes biggest insurers, isploughing nearly 320m into the KingsCross office market as Londons emergingbusiness district continues to grow.

Airlines under pressure to allowinternet access on aeroplanesAirlines are under pressure to allowpassengers to use the internet severalthousand feet in the air. Half of UK adultssaid they would like internet access onaeroplanes, compared to 13pc opposed tothe idea, a YouGov poll found.

Boris Island airport almost as quickA new airport in the Thames estuary could bebuilt within 14 years, only two years longerthan would be needed to build a thirdrunway at Heathrow, says new research.

Amazon heats up gadget warsAmazon.com is ratcheting up pricingpressure in the gadget wars with anadvertising-supported tablet that will bepriced lower than similar models,according to people involved in thediscussions.

Pirate Bay co-founder arrestedCambodian police yesterday said theyhave arrested Gottfrid Svartholm Warg,one of the masterminds behind notoriousfile-sharing website The Pirate Bay.

WHAT THE OTHER PAPERS SAY THIS MORNING

The new jobs website for London professionalsCITYAMCAREERS.com

French president Francois Hollande has promised to stand behind the failing lender

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A STATE-BACKED bank to lend specifi-cally to small firms and entrepre-neurs will be set up, chancellorGeorge Osborne said yesterday though critics worried the movewould just expose the government tomore financial risks.The chancellor said he is looking at

setting up a business bank to bringtogether the alphabet soup of existingschemes and potentially have addi-tional powers because small firms arethe innocent victims ofthe credit crunch.

However theTreasury does notexpect that any extramoney will be used tocreate this bank schemes like the enter-prise finance guaran-tee will ber o l l e dinto it.T h e

BY TIM WALLACEBritish Chamber of Commerce (BCC)praised the plan.

This institution would be a game-changer for long term growth, saiddirector-general John Longworth.

The Prime Minister should use hisupcoming reshuffle to appoint a min-ister to spearhead the banks creationby the end of this parliament, andinvolve the opposition in the process.

But Labours Chuka Umunna toldCity A.M. this plan simply shows thegovernments previous lendingschemes have failed.

This suggests the chancellor is notconfident credit easing or funding forlending will solve firms financialproblems in the way he promised.

And analysts at the Institute forEconomic Affairs fear the state wouldlend to risky firms.

The proposed bank would exposetaxpayers to huge financial risks

and further jeopardise alreadyprecarious public finances,said the think-tanks

Richard Wellings.

Government may cut back jobrules to help low-paid workersLOW-PAID workers could be exemptfrom taxes and regulations in an

attempt to encourage cautiousfirms to hire more staff, underproposals being considered by thegovernment.

Any workers covered by thescheme would have feweremployment rights, in exchangefor paying fewer taxes helpingemployers and making them morelikely to be hired in the first place.

The government is consideringthe scheme in light of the success

BY TIM WALLACEof so-called mini-jobs in Germany,where it is possible to earn up to400 (317) per month and pay notax, while employers pay a flat rate

levy. Workers can then hold severalof these mini-jobs at once.However the reforms are not

certain to happen, with a Treasurysource explaining this is verymuch up in the air, being discussedby ministers this week.

It is one of many proposals, andthere are lots of factors to consider.

In part that is due to thedifference between the German andBritish tax and labour regulation

systems which would need to beworked through.

Other proposals to deregulate thelabour market have made little

progress recently.For example the governmentcommissioned venture capitalistAdrian Beecroft to report on waysto boost employment.

But when he called for no-faultdismissal rules to make it easier tofire workers, an outcry from groupsincluding prominent LiberalDemocrats stopped the radicalderegulation from beingintroduced.

LAURALEAN/CITYA.M.

George Osborne is announcing a raft of new policies in an effort to stimulate the economy

GEORGE Osborne left the dooropen for a third runway atHeathrow yesterday, saying that the

government should examine allthe options for boosting capacity.

But he added in an interviewwith the BBC: If building a newrunway was simple, it would have

been done over the last 20 years. Ithasnt.

Foreign secretary William Haguecast doubt on the prospect of anaviation U-turn, however, tellingSky News we said very specifically

we would not be [building a third

runway] as part of the 2010coalition agreement.

Chancellor hints that Heathrowcould still get another runwayBY MARION DAKERS The government will this week

open a call for evidence on thevarious options for expanding airtraffic in the UK.

One such option, a new airportin the Thames Estuary, would take

just two years longer than a newHeathrow runway to build, itsproponents have claimed.

A report by law firm BirchamDyson Bell for Foster + Partners,

which has put forward designs forthe new airport, has pencilled in acompletion date of 2026.

And the Independent reportedthat an unnamed infrastructurecompany plans to pitch a new four-

runway airport in west London.

MONDAY 3 SEPTEMBER 20123NEWScityam.com

Chuka Umunnawants more lending

Osborne wants

to lend directlyto small firms

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MARKET watchers expecting plansfor bold monetary intervention fromthe European Central Bank (ECB) onThursday are likely to be disappoint-ed, analysts warn.

We expect the Bank to disappointmarkets by providing only detailsabout how it might buy bonds infuture, instead of a grand plan forimmediate and massive purchases,said Jennifer McKeown and Ben Mayat Capital Economics.

Eurozone stagnation and economicweakness, combined with the sover-eign debt crisis, have driven many toexpect bold and immediate mone-tary action from Eurozone policy-makers at the ECB, which is led byMario Draghi.

But analysts are sceptical their highhopes can be fulfilled. They warn

Analysts warn

Eurozone bankwill disappointBY BEN SOUTHWOOD that Bundesbank president Jens

Weidmanns claim he has consideredfollowing his predecessor by resigningmay sway ECB members against inter-vening in sovereign debt markets.

Commentators also say plans arelikely to stop short of setting explicitrate targets.

Officials will surely consider levelsbeyond which they will intervene,said Philip Shaw at Investec, Howeverpublicising these would potentiallyexpose the ECB to intervening inunlimited quantities.Though economic rot has spread

from the periphery to formerlyhealthy economies, analysts alsoexpect the ECB to hold fire on rates, asinflation is slightly above target.

Shaw said he did not think a rate cutwas impossible but that it wasunlikely at this point in the year.

Jenkins set to cut bad productsBARCLAYS could look to cutunprofitable business lines in itsinvestment banking and other armsunder a structural review plannedby new boss Antony Jenkins.

The incoming chief executive has

pledged to keep the investmentbank intact and said he values theuniversal banking model.

But his background incommercial and retail bankingmeans some analysts are concernedhe could reduce the focus on theprofitable investment banking unit.

Jenkins is launching a thoroughinternal review into each unit andproduct line in an effort to makethe bank more efficient at a time

BY TIM WALLACE when the increasing burden ofregulation risks squeezing profits.

This could be a particularchallenge as Jenkins told City A.M. hewants to implement potentiallycostly changes like the ring-fencingof the retail and investmentoperations, and rising capital ratios

ahead of regulators targets.The review will run in parallelwith the Salz review into thebehaviour and culture of staff at thebank, and will report in the firstquarter of next year. Antony Salzsreview will report by the time of theannual general meeting in April.

It is not yet known who willreplace Jenkins as head of retail andbusiness banking, or whether Jerrydel Missier will be replaced as chief

operating officer, having resignedover the Libor scandal.

The COO post was resurrected byBob Diamond earlier this year afterstanding vacant for several years,only for del Missier to resign withinweeks.

One more month of reckoningfor a still crisis-riven Europe

W

ESTMINSTER is in the

spotlight, as MPs return andreshuffle scuttlebutt fillsthe air. But the Eurozone

crisis too, after a summer lull, isready to leap up and bite. AfterMario Draghi pulled out of lastweeks Jackson Hole conference,speculation mounted that he wasbusy preparing for a bigannouncement this week. That nowseems less likely.

If this Thursdays ECB meetingdisappoints, the market optimismthat followed Draghis promise atthe end of July to do whatever ittakes to save the euro will be onshakier ground, especially with theGerman constitutional courtscritical ruling on theconstitutionality of the EuropeanStability Mechanism (ESM), thegiant Eurozone rescue funddesigned to replace the EFSF, due

on 12 September.While the chance of the court

ruling against the ESM is small, itspossibility creates uncertainty andprovides one more sign of just howeasily the worst of the crisis couldreassert itself. Reconciliationbetween leaders fearful of theconsequences of allowing any partof the Eurozone project to fail andrestive electorates increasinglyunwilling to write blank cheques topay other countries bills remainselusive. That means can-kicking,half-measures and sudden panicsare all set to continue.

Marc Sidwell is City A.M.s managingeditor.

BOTTOMLINE

MARC SIDWELL

European Central Bank boss Mario Draghi will make a policy announcement on Thursday

Barclays PLC

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THE SALE of JJB Sports has already

attracted a string of potentialbidders, giving the firm a chanceto stave off administration.

Better Capital, led by JonMoulton, and retail investmentspecialist OpCapita are thought tobe among the firms circling JJB asthe sale process gets underway.

The sportswear retailer put itselfon the block last Thursday, havingfailed to secure much-neededfunds from its backers includingUS-based Dicks Sporting Goods.

JJB warned that its debt levelsmean it could change hands for apittance, wiping out shareholders.

Analysts expect the firm to beput into administration beforeparts of the business are bought ata rock-bottom price.

The firm has debts of around36m, giving it a debt to equityratio of 0.51.

It had a market cap of 3m onFriday down from 500m twoyears ago.

JJB, which issued a profitwarning in July, said sales in thesix weeks to 26 August slipped 3.3per cent, dashing hopes of anorganic turnaround aided by asummer of sporting events.

KPMG, which is managing thesale process, declined to comment,while JJB and Better could not bereached for comment yesterday.

Bidders circleJJB Sports assale kicks off

BY MARION DAKERS

FIRSTGROUP has been told to carryon with its preparations to takeover the West Coast Main Line,despite a looming court battlelaunched by losing bidder VirginTrains.

The Department for Transporthas assured FirstGroup that thehandover contract will be signedoff soon, and that it should presson with plans to take control ofoperations on the intercity railroute from December, as expected.

Meanwhile, Virgin Trains willfind out this week whether its

application for a judicial reviewinto the franchise decision can pro-ceed.The company has argued that the

governments decision making didnot properly consider the risks ofeach bidder.

It also maintains thatFirstGroups bid to run the route,which came in at 1bn more thanVirgins, is structured in a way thatcould make it lucrative for First toabandon the contract before the

First pushes onas Virgin chases

judicial reviewBY MARION DAKERS 13-year franchise is complete.

Virgin Trains yesterday hit out atclaims by First and the departmentfor transport that it was only com-plaining because it lost the auction.

Chief executive Tony Collins saidin a statement: We have had sever-al meetings over the last two orthree years where we haveexpressed our concerns over the bidprocess, how it evaluates the bidsand how it leads to the sorts of fail-ures we have seen on East Coastwith National Express and GNER.

We certainly have dates of meet-ings, follow-up letters and obviouslyour notes of what was discussed.

Former Merrill Lynch banker Bob Wigley is chairman of Hibu

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DEBT-laden Yellow Pages publisher

Hibu is set to step up ownershiptalks with a six-strong consortiumof creditors after winning areprieve on its loan conditions.

Hibu, which has 2.2bn of debts,won a reprieve from its lenders onFriday to waive some debtconditions helping smooth plansput forward in July for a capitalrestructure.

A credit committee, includingRoyal Bank of Scotland, Alcentra,Blackstones credit business GSO

Yellow Pages owner Hibu set formore crunch ownership talks

BY MICHAEL BOWand Gruss Asset Management, arehatching a plan with managementfor a possible debt-for-equity swap,

altering the ownership of the firm.

Hibu PLC


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MERGERS & acquisitions activity inthe Eurozone has fallen to its lowestlevel in two years despite companiesgetting cheaper to buy, research fig-ures published yesterday show.

Data compiled by US valuationcompany American Appraisal showsthere were just 2,037 deals across theEurozone in the first six months ofthis year, a 27 per cent drop on vol-umes compared to 2011.

However, the average price to snapup a firm in Europe calculated as amultiple of a firms income dropped from 8.1x company earn-ings to 7.6x, according to an averagetaken on deals the researcheradvised on.The collective value of all Eurozone

deals, some $333.3bn (210bn), alsodropped 21 per cent compared to thefirst half of 2011.This is in sharp contrast to both

America and Asia, which saw anupswing in multiples for the sameperiod.

Euro M&A deals

slump despitebargain pricesBY MICHAEL BOW American Appraisals UK managing

director Mike Weaver said: In theabsence of a lasting solution to theEurozones debt troubles, legislativeuncertainty and financial marketvolatility are bringing additionalstresses to the process of acquiring orselling a business.

Despite the slowdown in volumeand valuation levels in Europe, therewere brighter spots in sector terms,with the technology sector remainingresilient to the downbeat environ-ment.Average technology earning multi-

ples nearly doubled between 2010and 2011, surging from 7.7x to 14.1x.Consumer M&A deal multiples alsoincreased, from 4.7x to 8.9x.

We have seen the highest acquisi-tion multiple growth in the technolo-gy space, where there is fiercecompetitive tension between buyersas higher levels of risk are offset bypotentially large payoffs.

Cloud technology has seen thestrongest growth projection. Weaveradded.

Morrisons faces fresh woe ashalf-year sales set for declineMORRISONS is this week expected to

show it has come under furtherpressure in the first half of the yearas a result of gloomy weatherconditions and fiercer competitionfrom rival Asda after the rivalsmerger with discounter Netto.

Analysts are forecasting that like-for-like sales at the supermarketcould be down by 0.7 per cent or asmuch as 1.5 per cent. Pre-tax profitsare expected to have fallen by two tothree per cent to 434m-427m.

BY KASMIRA JEFFORD Recent Kantar data saw theretailers sales trailing behind rivals,which analysts attributed to tougher

trading conditions and Asdas recentacquisition of Nettos stores locatedclose to Morrisons home territory inthe north of England.

Worries that Morrisons has beenslow in rolling out conveniencestores and its online platform havealso overshadowed the group.

Chief executive Dalton Philips isexpected to counter criticism bymapping out further plans for thegroups online arm, its M Local

stores and plans to convert moreshops to its new fresh-food format.

South Africa withdraws murder

charges over 34 Lonmin deaths

Morrisons chief Dalton Philips is expected to map out plans for further M Local stores

WM Morrison Supermarkets PLC


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SOUTH African prosecutorsyesterday decided to provisionallywithdraw murder charges against270 miners who had been accusedof killing 34 striking colleagues

gunned down by police last month.Public anger had been mounting

at the charges, made under anapartheid-era law under which theminers were deemed to havecollaborated with commonpurpose in the murder of their co-

workers.The killing of the strikers at the

Marikana mine, run by the London-listed platinum producer Lonmin,

was the worst case of police

brutality in South Africas 18 yearsof democracy.

BY KASMIRA JEFFORDNomgcobo Jiba, the acting

national director of prosecutions,said in a televised news conference

yesterday that the charges hadbeen withdrawn but they couldreceive final charges once allinvestigations have beencompleted.

The miners will be released fromprison starting this week. In all, 44people were killed in the wave of

violence stemming from an illegalstrike and a dispute between tworival unions, the National Union ofMineworkers and the moremilitant Association ofMineworkers and ConstructionUnion.

Talks to end the strike are set to

resume today after a weekend offunerals for the slain workers.


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RETAILERS hopes of an Olympic-

boost were dashed last month, a lead-ing survey shows today, afterOlympic-inspired purchases failed tomake up for depressed sales in fash-ion and homeware.

Figures released today byaccountancy firm BDO reveal thatlike-for-like sales at mid-tier retailersdipped by 0.5 per cent in August.

Fashion sales were down 1.3 percent year-on-year, stunted by volatileweather conditions that were eithertoo wet or too hot to encourageshoppers to spend.

BDO said hastily planned sales byretailers looking to get ahead ofrivals further confused shoppers.

Weak consumer confidence and astatic housing market took their tollon homewares sales, whichstruggled for a second monthrunning, falling 8.7 per cent.

But non-fashion bucked the

trend, with like-for-like sales up 3.1per cent last month, mainly becauseof demand for Olympic memorabilia.

BDO says noOlympic boostfor high street

BY KASMIRA JEFFORD

GLENCORES merger with Xstratalooks set to collapse this week afterseven months of wrangling unlessthe firms can reach a compromisewith Qatar and other large share-holders over the terms of the deal.

Xstrata investors are expected tovote against the 45bn tie-in at ameeting in the Swiss town of Zug onFriday morning. The revolt has beenspearheaded by state-controlledQatar Holdings, which is holding outfor an improvement on the offer of2.8 new shares for every Xstrata shareheld.

But Glencore has stuck to its gunson the terms since Qatar demandedat least 3.25 shares back in June,though the firms have watered downplans for handsome retention pack-ages for board members in the face of

investor agitation.Other prominent shareholders

including Knight Vinke and Norways

A week to saveGlenstrata deal

BY MARION DAKERS sovereign wealth fund are alsothought to be unhappy with the offer.The deal at 2.8 is dead in the water,

one source familiar with the transac-tion said last week. But the Qatariwording has been carefully chosen they like the merger idea.

Some investors have raised theprospect of departures from theXstrata board if the merger fallsthrough, with chairman Sir JohnBond and senior independent directorDavid Rough reportedly in the firingline.

THURSDAYS European CentralBank (ECB) meeting is widelyexpected to provide details on anew intervention programme.

While the ECBs head Mario Draghiannounced a bond-buyingprogramme in August, the marketmay be setting itself up for anotherdisappointment. Theres a very bigchance well have to wait longer tohear the real details of how it works.

Some press reports have suggestedthe ECB is looking at buying bonds ifyields move beyond a certain level.However, most economists I speak todont think the ECB would set a capwhere it would step into the market.

As markets arent falling off a cliff,perhaps the ECB need not providefull-blown support at this stage.

SPANISH BONDS BACK ON THE TABLESpain will resume its bond auctionsafter a quiet August. Since late Julywe have seen a significant rally inSpanish bonds, especially in theshorter dated paper, on the notionthat the ECB could step in andsupport the debt markets. Accordingto Reuters, analysts think Madridstill needs to issue around 25bn

(19.8bn) worth of bonds in 2012.This is despite Spain announcing lastweek that it had covered around 73per cent of the medium and long-term debt it wants to sell this year.

A SEMI-SUPPORTIVE ECBA more likely scenario for Thursdaymight be a relaxation of collateralrequirements. It is supportive, butnot too supportive, and could serveto buy policy makers more time.

But if the Bundesbank continuesobjecting to ECB efforts, then howmuch the ECB steps in will dependon Draghis stomach for going upagainst Europes paymasters.

Louisa Bojesen is anchor of CNBCsEuropean Closing Bell.

Twitter: @louisabojesen

IN BRIEFPay growing for oil & gas execsn Demand for interim oil & gasexecutives from the UK from post-ArabSpring governments is driving up paylevels, according to new research fromsearch firm Interim Partners. Demandfor experienced executives to helpboost energy production has pushed upthe average daily rate for interimproject engineering directors to 1,500,up from 1,000 a year ago, the surveyreveals.

Bertelsmann scraps float plansn The Mohn family, which controlsBertelsmann, Europes largest mediagroup, has decided not to take thecompany public, German newspaperHandelsblatt reported. The companylacks a growth strategy to make itattractive to investors, according tothe paper, which cited an unidentifiedperson close to the family. Aspokesman for the company declinedto comment.

Debt deal for Kuwaits Globaln Shareholders in Kuwaits GlobalInvestment House yesterday approved aplan for the companys $1.7bn debtrestructuring that will create specialpurpose vehicles to take on debts. Theinvestment company and asset managerwill create at least two SPVs one willhold company assets along with a debt of$1.3bn, while another will take part in acapital increase for the parent companyand carry a debt equivalent to $430m,managing director Maha al-Ghunaim said.

Etihad raises Virgin Australia staken Abu Dhabis flagship carrier EtihadAirways has raised its stake in VirginAustralia to 10 per cent through openmarket purchases, the state airline said ina statement yesterday. Etihad, foundedeight-years ago, received approval fromAustralias Foreign Investment ReviewBoard (FIRB) to increase its stake fromfive per cent to 10 per cent, it said in thestatement.

HOTELIER Accor is set to open four new properties across London in October, as well as

extending two hotels and refurbishing 12. The group, led by chairman Denis Hennequin(right) and chief financial officer Sophie Stabile (left) will open two hotels in Blackfriars,as well as one in Shepherds Bush and another in Greenwich, creating 170 jobs.

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newsletterat

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om

7/31/2019 Cityam 2012-09-03

12/23

THE LONDON housing market is in abooming recovery, defying globaldownturn and an unconvincing over-all climate for UK housing, accordingto a report released by Knight Franktoday.

Prime central London prices are 49per cent up since March 2009, whenthe market bottomed out followingthe financial crisis, and already 14 percent above their March 2008 peak.The rental market has been less

buoyant rents are down two percent since October last year, whenthey hit a ceiling driven by interna-tional buyers, with 59 per cent of allprime lets taken by foreign tenants.Across the worlds global cities, only

Miami, currently riding a wave ofSouth American cash, has seen a big-ger property boom in the year to June2012, the report claims.

Foreign buyersdrive boom forLondon houses

BY BEN SOUTHWOOD As with the rental boom, the priceboom has an important internationalcomponent: 41 per cent of buyershailed from outside the UK, with thebig contributions from Russia, India,Italy and the US.

Prices are not the only market met-ric to have surged, said Liam Bailey atKnight Frank, The nature of the mar-ket has shifted; in 2008 Knight Franksold prime London properties to 36nationalities while in 2011 the totalhit 62.

But this isnt to say there are no chal-lenges facing prime property inLondon. Chancellor George Osborneadded 40 per cent to stamp duty in his2012 budget, while the UK economyhas seen only sluggish and half-heart-ed recovery from the slump.

As a result, Knight Frank think pricesmay have hit a peak, and the firm doesnot expect last years growth in salesprices to be repeated.

IN BRIEFBusiness sentiment still going upn Business confidence in the UKseconomics prospects improved for athird month in a row, according toLloyds business barometer for Augustreleased today. The overall index wentup by 18 points, to +10, having been at-8 last month. But Lloyds warns thatthese rises come in the context of a Maycollapse, and are still low by historicalstandards

City continues to create new jobsn

The number of jobs created in the

City slipped very slightly in August,recruiter Astbury Marsden said today.Firms created 2,920 new jobs in August,two per cent down on the 2,985 createdin July.

Graduates winning race for housesn Graduates are coming out ahead inthe race to get a foot on the propertyladder, Rightmove said today. Of thoseintending to buy their first property inthe next 12 months, 30 per cent have adegree, and 39 per cent had apostgraduate qualification.

Chancellor George Osbornefaced flak over the economy

BUSINESS confidence in thegovernments economic policyhas plummeted over the last

year, a report from ECI, the

private equity firm,showed today.While businesses

understand the needfor fiscal consolidation,they have made anabout-turn in theirassessments ofchancellor GeorgeOsbornes economicpolicies.

While 42 per cent said

ECI says firms are losing faith ingovernments economic plans

BY BEN SOUTHWOOD coalition policy was having apositive impact in 2011, just 14 per

cent say so now and just one in50 say policy has been verypositive, versus one in 20 last year.

Firms complained about

mountains of red tape, with 19per cent saying regulatoryissues were the main barrier togrowth. Companies also slatedthe education system andtightening immigrationrestrictions 27 per cent saida lack of human capital wastheir biggest constraint.

MANUFACTURERS in the UK arebeing clobbered in the double-diprecession, a survey frommanufacturing organisation EEFand business advisers BDO

claimed today.Trading conditions were ratedthe worst for almost three years,driven by a sub-index for ordersthat dipped below zero for thefirst time in 10 quarters, thesurvey said.

Crisis-hit Eurozone economieshave been behind much of theshortfall, but lacklustre domesticdemand is failing to make up forthe downturn.

Factory tradeis worsening

BY BEN SOUTHWOOD

MONDAY 3 SEPTEMBER 201212 NEWS cityam.com

International buyers drive London property boom

Global City Performance

Who Is Buying?

A Sharp Divide

LONDON

New York

Miami

UK

Russia

India

Italy

US

France

UAE

Australia

China (inc Hong Kong)

Greece

South Africa

Germany

Singapore

Ireland

Saudi Arabia

Lebanon

Spain

Egypt

Switzerland

Canada

Geneva

Dubai

Source:Knigh

tFrankresid

entialresearc

h

Moscow

Hong Kong

Beijing

Mumbai

Paris

Monaco

Singapore

Sydney

Shanghai

Annual percentage change-10 -5 0 5 10 15

150

145

140

135

130

125

120

115

110

105

100

Mar2009 Mar2010 Mar2011 Mar2012

Prime Central London

%

UK

7/31/2019 Cityam 2012-09-03

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THEYVE been training, raising spon-sorship funds, and getting increas-ingly more nervous for months, andtoday the day the intrepid Shardabseilers have been waiting for (ordreading) has finally arrived.

From first light this morning weather permitting a diverseselection of adventurers, City dare-devils, politicians wives and even amember of the Royal family willbegin the slow and steady descentdown the 310m building, raisinghundreds of thousands of pounds forThe Outward Bound Trust and theRoyal Marines Charitable Trust Fund.The abseilers, whove been dubbed

The Descendants, will set off fromthe 87th floor of Europes tallestbuilding and make their way all theway to the 20th floor.

The distance is so great that a pitstop to change ropes is even requiredalong the way, as the full lengthrequired would be too much for par-ticipants to carry.Among the crazy few whove volun-

teered for the once-in-a-lifetimeopportunity are the Duke of York,Prince Andrew, deputy chairman ofThe Outward Bound Trust (and wifeof William) Ffion Hague,Shearman & Sterling Londonmanaging partner Nick

Buckworth, PwC board mem-ber Richard Oldfield, and TedHood (pictured), chief execu-tive of Exchange TradedFunds provider Source.

It is not just because theShard is now there, explainedHood. I would not normal-ly consider wantingto jump off a1000ft buildingattached to arope, but I com-mute intoLondon Bridgefrom Kentevery day andhave seen it

rise majestically outof the ground, plusyou cant miss see-ing it from ouroffices near theBank of England.Todays challenge

is planned as aone-off, as oncetenants move intothe building itwill no longer beable to be usedfor abseiling even today theparticipants willbe wearing spe-cial soled shoesto avoid mark-ing the win-dows.

So make sureto look up andcheer them onduring yourmorning andevening com-mutes, as thedescents willbe takingp l a c e

through-o u tt h e

day.

The Mayor of London, watching but not participating in the zipwire performances

Sources TedHood will beabseilingdown theShard today

CENTRAL London played host to apop-up Big Top yesterday, as for oneday only the Piccadilly Circus Circusrolled into town.

Baffled shoppers were treated tohula-hoopers, acrobats and jugglersall afternoon, culminating in anaerial performance across Piccadillyat sunset.

The transformation from tourist

Piccadilly Circus Circus takesthe big top to the West End

trap to surrealist carnival was partof the London 2012 Festival.

Culture secretary Jeremy Huntwas spotted trying to forget thecoalitions troubles among therevellers, and Boris Johnson alsopopped along sadly stopping shortof playing the clown on thetightropes and zipwires streamingacross the West End streets.

Got A Story? [email protected]

13cityam.com

cityam.com/the-capitalistTHECAPITALISTA HUGE thank you to everyonewho bid for the City Wenlock

mascot thats been auctioned over thepast two weeks on behalf of theMayors Fund for London.Bidding officially closed on Friday at an

incredibly impressive 16,814, netproceeds of which will go to supportingprogrammes across the capital thathelp disadvantaged young people andtheir families discover routes into work.But if you missed out on the pinstripedgent, dont worry, as there are plentymore pieces of Olympic history waitingto be snapped up as part of theongoing auction. So make sure you visithttp://l2012.cm/O3r5hn

MONDAY 3 SEPTEMBER 2012

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7/31/2019 Cityam 2012-09-03

14/23

MONDAY 3 SEPTEMBER 201214

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

Post OfficeThe mail operator has

announced that Sue Barton is tojoin the executive committee asstrategy director. Bartonsexperience includes extensivetime within postal consultancyat Accenture, where she hasworked with many of theleading international postalorganisations providing supportand advice.

Laxfield CapitalThe debt origination and loan manager has announcedthat Daniel Smith has been appointed as head oforigination. Smith joins from Eurohypo where he wasmanaging director. Smith originated and executed anumber of high-profile transactions at the German realestate bank. Smith has been a ppointed to help drive the

expansion of the firm in the property debt market.

Riverview LawThe fixed-fee legal services business has appointedMatthew Banks as its director of legal advisoryoutsourcing. Having spent 11 years as a commercialproperty lawyer with Linklaters and Eversheds, Smithmoved to Mumbai in 2005 to set up a legal outsourcingbusiness. Having worked in the UK, Mumbai and NewYork, Smith will now be based in London.

TorotrakThe gearless traction drive developer has appointedJeremy Deering as chief executive. Deering was aninternal candidate and has previously held the positionof commercial director, as well as having responsibilityfor the strategy of the firm. The move follows thedeparture of Dick Elsy, who left the company to take upthe role of chief executive of Catapult, the government-supported programme to help transform UK engineering

innovation into economic value.

SberbankAlexander Pletnev has joined the department ofcorporate clients (part of CIB) of the Russian savingsbank as deputy head of the structured finance division.Pletnev has over 15 years of experience working in thefinancial industry and before joining the CIB team heworked at LUKOIL for nine years including four as headof corporate debt, financial institutions and ca pitalmarkets.

UBSKai Sotorp will be returning to global asset manager ashead of Asia Pacific. Sotorp was previously head of AsiaPacific between 2002 and 2004 and head of Americasbetween 2004 and 2010. Scott Keller, who has beenacting head of Asia Pacific since April this year, willcontinue in his role of head of Pan Asia and will report toSotorp.

WHOS SWITCHING JOBS Edited by Yogesh Chandarana

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

CITY MOVES in association with

LONDON REPORT

More volume islikely as a newmonth begins

MARKING the end of thesummer doldrums, WallStreet is likely to kick offSeptember with heavy

trading volume while it hopes thatthe European Central Bank will hintat further stimulus measures toboost the global economy.

On Friday, US Federal ReserveChairman Ben Bernanke said that the

central bank stands ready to bolsterthe economy if necessary, althoughhe stopped short of giving an explicitsignal of more monetary easing.

US stocks rallied after Bernankesspeech to an annual conference ofcentral bankers in Jackson Hole,Wyoming, with major indexes gain-ing more than 1 per cent in the latemorning session. At the end of theday the Dow Jones industrial averagewas up 0.7 per cent, while theStandard & Poors 500 Index was up0.5 per cent and the NasdaqComposite Index up 0.6 per cent.

This (Bernanke speech) was in linewith what we were expecting. He leftthe door open but didnt announceanything explicit. He doesnt intendto front-run his own FOMC(policy)meeting, said Liz AnnSonders, New York-based chief invest-ment strategist at Charles Schwab.

Investors are now awaiting com-ments from European Central BankPresident Mario Draghi after thebanks meeting on Thursday. Manyinvestors will look to the ECB meetingto glean strong clues on what toexpect from the Federal Open MarketCommittees own policy meeting nextweek on Sept 12-13.

Between now and mid-September,we'll be focusing on the ECB, thoughthe next FOMC meeting is alsoaround the time that the Germancourt meets, so well be getting newson both those fronts. Any news fromEurope will drive markets more thandomestic news, with the exception ofthe payroll report, Sonders said.The all-important US non-farm pay-

rolls report is due on Friday. WithBernanke citing poor improvement inthe labor market as part of the reason

the US economy faces dauntingchallenges, Fridays data could be agame changer, according to marketparticipants.

In the Eurozone, following theEuropean Central Bank policymeeting on 6 September, a GermanConstitutional Court will rule on theEurozones permanent bailout fundon 12 September, which may affectthe ECBs bond-buying plans.

But there was further uncertaintywithin the ECB over President MarioDraghis bond-buying plan on Fridayafter German central bank chief JensWeidmann reportedly threatened toresign, piling pressure on Draghi tomollify opposition.

For the week the Dow was down 0.5per cent, while the S&P 500 wasdown 0.3 per cent and the Nasdaqwas down 0.1 per cent. For themonth, the Dow rose 0.6 per cent,

the S&P 500 gained 2 per cent andthe Nasdaq climbed 4.3 per cent.

THURSDAY will be the highlight ofthe week for economists, with alleyes on results of the EuropeanCentral Bank policy meeting.

While the market waits to hear the latestplans to fix the Eurozones debt problem,the Bank of England will also be announc-ing its latest interest rate decision and assetpurchase plan.

However, no change is expected as theBank is currently in the middle of its latestround of asset purchases.Todays economic news includes PMI

manufacturing data and British RetailConsortium like-for-like sales information.

Meanwhile, City of London InvestmentGroup and Cupid are expected to updatethe market.Tomorrows UK economic news includes

Halifaxs house prices report, plus PMI con-struction data, plus a raft of reports fromthe US, including construction spendingfigures and vehicle sales.

Reports are expected from Spirit Pub Co,Hydro, Dechra Pharmaceuticals, Genus,

Johnson Service Group, Monitise, DSSmith, McBride andCraneware.Wednesdays news includes PMI Services

while corporate reports are expected fromAdvanced Medical Solutions Group,Hargreaves Lansdown, Berkeley Group,

andSports Direct.

On Thursday the focus will be on anyannouncement from ECB president MarioDraghi.

Reports are due from Go-Ahead Group,Hydro International, Interior Services,

Whitbread andWM Morrison. SeymourPierce gives Morrisons a hold rating asfirst half results will show negligiblegrowth at best, reflecting the difficult andhighly promotional market place.At the end of the week, Fridays economic

news is set to include data on new car regis-trations, plus details on inflation, industri-al production, manufacturing andinformation from the Producer Price Index.

Corporate reports are also expected fromCircle Oil, JD Sports, Laura AshleyandPrezzo.

UK focus on ECB meeting outcome

BESTof the BROKERSBAE Systems PLC

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24 Aug 28 Aug 29 Aug 30 Aug 31 Aug

318.5031 Aug

BAE SYSTEMSMorgan Stanley rates the defence firm equalweight but has cut itstarget price from 330p to 320p. The uncertainty about governmentsdefence spending continues to weigh on BAEs earnings growth, and thebroker sees cash returns to shareholders as the key investment case at themoment. Morgan Stanley expects the firm to maintain a dividend ratio ofaround 50 per cent of free cash flow, but to stop short of share buybacks.

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HARGREAVES LANSDOWNSinger Capital Markers has downgraded the investment manager frombuy to fair value and maintains a target price of 570p ahead of

annual results on Wednesday. The broker expects Hargreaves to haveoutperformed the FTSE All Share with a five per cent rise in assets underadministration, driving revenue growth to 14 per cent. Singer forecastspre-tax profits of 147.9m, a rise of 15 per cent on the previous year.

SSE PLCp1,400

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1,368.0031 Aug

SSEUBS has upgraded the utility firm from neutral to buy with a raisedtarget price of 15.15 to reflect growing opportunities in the renewablesindustry. The broker expects to soon see the first earnings flow fromSSEs 1bn spending spree on renewables, and there is the prospect of

growth as the gas market recovers. UBS is also impressed by the firmsstrong 6.4 per cent dividend yield.

To appear in CITYMOVES please email your career updates and pictures to [email protected]

7/31/2019 Cityam 2012-09-03

15/23

IN THE ongoing debate onaviation capacity, we havebecome gridlocked in a game ofpolitical poker. Nobody isprepared to grasp the nettle,

despite the obvious benefitsincreased capacity would generatefor our economy. We needinternational trade to grow.

The default position at themoment is against the constructionof a third runway at Heathrow, butif an alternative is to be proposed, itmust be worked up and costedquickly. Any move to expand anexisting aviation hub, or develop anew one, would take a number ofyears to develop, fund andimplement and we cannot afford

to delay.

NO ONE should doubt theseriousness of the publicsector deficit and the needto reduce it but it cannot

be treated in isolation. Inmeeting its promise to explain theprinciples by which it would steerthe economy if it gets into power,the Labour party needs a newgolden rule; not only for the publicsector, but also the private sectortoo. George Osborne also needs totake note, if he is not to continue topreside over no growth Britain.

On conventional measures, feweconomists or commentators dis-sented from the view that the econ-omy was performing well before thecrash of 2007. The economy grew atthree per cent a year between 2003and 2007. Inflation averaged a shadeunder two per cent. Measured inrelation to GDP, public sector debtaveraged 35 per cent, while theannual public sector deficit wasunder three per cent. And yet, withthe benefit of hindsight, it is clearthat below the surface, somethingstrange and disturbing was happen-ing: from 2002, the business sector

cityam.com/forum

An economy with a

large and chroniccorporate surplus isn'tdynamic or productive

THEFORUM

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.

16MONDAY 3 SEPTEMBER 2012

Why we need a new golden rule forbusinesses a Labour perspective

started to run surpluses.In 2002, in the wake of a slow-

down of the world economy, such a

surplus was to be expected. Whatwas not expected was for this sur-plus to persist and grow into 2004and beyond. The private sector con-tinued to run an annual surplusthrough to 2007 after which it

jumped sharply to above five percent of GDP, where it has remainedever since.

Such a large and long-lasting cor-porate sector surplus is bad for tworeasons. So long as businesses andhouseholds are running surpluses(as they are), the public sector has torun a deficit. The public sectordeficit wont come down without

one or more of the surpluses com-ing down too. The coalition, bank-ing on a return of normal times,looked to rebalance exports andimports but a world economy inthe doldrums has dashed this hope.No one should want households tostop saving, so if the public deficit isto come down, the corporate sur-plus must come down.As the most innovative part of the

economy, business is the one thatshould be running a deficit, borrow-ing to invest, exploiting the prof-

itable opportunities it sees andraising productivity. An economy

with a large and chronic corporatesurplus, which is what we havetoday, is the opposite of one that isdynamic and productive.

By calling for a new golden rulethat takes both the public deficitand corporate surplus into account,

we are saying that reducing bothshould be the governments busi-ness. Put another way, economicpolicy has to be about more thanausterity. Public sector deficitreduction is needed, but this has to

be linked to the pace at which the

corporate surplus comes down.How might that happen? A Labour

government might get the priva-tised utilities to up their investmentspending on things like broadband,

water supply and distribution andgreen energy; or insist that firmspay the living wage; or use invest-ment allowances instead of corpora-tion tax cuts (which just increase

profits which are still not spent).In an important sense, however,

such specifics are up for debate. Theproblem we identify is a problemnow, not just in 2015. The policiesmay be different, but the need forgovernment to develop policiestowards the business sector is not.

This requires abandoning a doc-trine that has held sway for 25

years: that disturbances to the econ-omy arise in the private sector areself-correcting, provided only thatthe public sector does not desta-

bilise things.Mainstream opinion is reluctant

to embrace the implication of thefacts. Governments need once moreto develop active industrial policies.

After 2007, in Peter Mandelsons sec-ond spell as secretary of state,Labour started to do this. We think

Vince Cable would like to too ifonly the chancellor would let him.This is not a party political issue,

its about the balance of powerwithin government over economicpolicy between the Treasury andother departments. And changehere might be the hardest change ofall.Dan Corry is a former Downing Street

and Treasury adviser to the Labour gov-ernment. Dr Peter Kenway director of theindependent think tank the New PolicyInstitute.

A New Golden Rule is published by theFabian Society.

While we continue to consult,our competitors construct. Parisand Frankfurt both already havecapacity for 700,000 flights a year,compared to 480,000 at Heathrow.

To claim that Heathrow runsmore flights to businessdestinations than any other airportin Europe is to miss the point.

There is a reason for this: London is

Europes business gateway. Ouraviation infrastructure must reflectthat.

The fact that Heathrow is alreadyhitting capacity poses a whole hostof problems for London, rangingfrom overcrowding to inhibitingtrade with, and investment from,fast-growing markets. One of thefew certainties in an uncertainglobal economy is that patterns oftrade need to change. The winnerswill be the most agile.

This isnt just a case of attractingbusiness from these growingmarkets: we must also retain thetalent pool and business spectrumthat we have. Talented individualsand institutions based on expertise

are increasingly mobile. World-class

air links and aviationinfrastructure are key elements ofthe offering to attract them here and to retain them.

Opponents of expanding existingcapacity suggest that it is a short-term fix. Yes, perhaps but with noother plans currently being takenforward, it would be better than nofix at all. Increased air capacity,even if the will existed to go ahead,could take more than a decade toplan and implement. We shouldnot reject new thinking, but weneed to be mindful of timeconstraints.

Although technology has made iteasier for business to be conductedremotely, air services are still a key

factor when companies take

decisions about where to locate.The teleconference will neverentirely replace the meeting. Thehuman factor remains essential.

There are always going to beconcerns when new airportcapacity is planned, and theenvironmental impact of newproposals can never be ignored.However, this must be balancedagainst the economic benefits forthe UK.

We must plan now to ensure thatthe UK maintains and increases itshub capacity. This will serve asanother foundation for growth, as asignal to global investors thatBritain really is open for business.

Mark Boleat is policy chairman at the

City of London Corporation.

CITYMATTERS

MARK BOLEAT

The hub of the matter: Growing aviation capacity will stop firms taking flight

In association with

DAN CORRY& PETER KENWAY

7/31/2019 Cityam 2012-09-03

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17MONDAY 3 SEPTEMBER 2012

The Forum is open for you to take part. Got a sharp comment onone of todays columns? Do you have another subject you wantto share your opinion on? We want to hear your views.Email [email protected] or comment at cityam.com/forum

The inside man[RE: Barclays appoints Antony Jenkins aschief executive, Thursday]Antony Jenkins is a surprising choice, but itmay have been better if outside executiveswere appointed. Take nothing away fromthe validity of Jenkinss candidacy; it wasfirst class. He ticked all the boxes. He was aBarclays Man through to the core. He is aretail banking titan, not remotely scarred bythe vagaries of investment banking.Notwithstanding the fact that Jenkinsticked all the boxes and maintained conti-nuity, his appointment came as somethingof a surprise to market observers. There willhave been concern over the credibility andtrust gap, which will not have been nar-rowed by an internal appointment, since

chairman elect, Sir David Walker, cannot beconsidered as a long-term proposition. It isimperative that Jenkins makes further influ-ential executive appointments from outsidethe bank, which would endorse Barclayscommitment to change its culture andrekindle trust, which has recently dissipatedwith regulators and its high street cus-tomers.

David Buik, Cantor Index

Can you hear the death knell sounding oninvestment banking in the UK? Thisappointment, like everything else in bank-ing, was done to appease Joe Public. It is anabsolute outrage.Christopher Jenson

LIVING and working in China

where I teach urban design toeager architecture students is a constant adventure. Unlikethe UK, where we seem to

spend our time discussing what,how or even whether to build, it isexciting to be in a country that isactually doing it. China is building20 cities a year. Britain hasnt built acity in the last 50 years, insteadimbuing existing towns with the

magical label: city status.I recently returned to the UK to

chair a Bookshop Barnie at Foyles inCharing Cross Road. These events arealternative book launches, wherebyan author presents his or her work toan audience who are yet to be con-vinced. This time, it was the turn ofprofessor Robert Skidelsky (coinci-dentally born in China), who haswritten How Much is Enough?Another in a long line of similarbooks that question the merits ofgrowth and cast doubt on the pro-gressive nature of economic develop-ment. This was a shock in China,enough is never enough.

Over the last ten years, China hasemerged as the second largest econo-my in the world; its the worldslargest importer and largest exporter,and its the largest holder of foreignreserves. News of its imminentdemise is overstated. This year itsGDP growth slumped to a healthy7 per cent.When I visited Londons Olympic

stadium three years ago, the engi-neers told me that the central aimwas to use one-tenth the steel thatBeijing used. The fact that it lookedone-hundredth as impressive was notan issue. Chinas economic growthcoincides with its growth in confi-dence. It is a country in a hurry. It isnot content with enough, it wantsmore.

In 20 years, China has elevated

TOP TWEETSAmbramovich has won a 3bn court case.Messi to Chelsea? Ronaldo to Chelsea?Everyone to Chelsea?@AltFootballRoman

Bernanke stays on the right course by refusingto print more money which the speculatorswere calling for. Next to Mr Draghi.@SandipSabharwal

When this whole GCSE thing started, I saidthat it was deliberate and political. I wouldhave loved to be have been proved wrong.@OnlyGeek

I cant wait until Lord Ashdown bumps intoLord Oakshott.@LordNortonLouth

Was it a risky move by Barclays to appointAntony Jenkins as its new chief executive?

YESAll in all, were pleased with the appointment of Antony Jenkins

but note that it is not without risk. Together, Walker and Jenkinsproject a credible and much-needed change in Barclays corpo-rate culture. In our opinion, former chief executive BobDiamonds often brash demeanour exacerbated negative publicand political sentiment towards the bank. Jenkins, with his rootsin retail banking, is likely to scale back on investment bankingand refocus the group on its retail and corporate banking busi-nesses. It is likely that Jenkins will lean heavily on lieutenants andon Walkers experience in investment banking as he gets to knowthe business. Well watch for signs that he is having trouble man-aging the complex investment banking business, or for depar-tures of key people, which could indicate a lack of confidence inJenkinss leadership.Erin Davis is a banking analyst at Morningstar.

Erin Davis

NORalph Silva

Barclays is going through the most challenging period in its his-

tory due to challenges in the investment banking operations.Having a leader that has a retail background provides a strategicrealignment that will help Barclays. The bank needs its brandrepaired and, in a universal banking model, brand perceptions areestablished on a retail level. Having a retail expert in charge pro-vides Barclays with the quickest path to recovery. I dont believean external chief executive would have been a good idea.Barclays is a very old bank and has a unique, complex culture. Anexternal candidate would take too long to acclimatise and time isparamount as the bank remains under intense pressure. Jenkinsspriority must be to bring the litigation issues to an end and find abalance between retail and investment banking, which will be thestarting point in rebuilding the bank.Ralph Silva is a banking analyst at Silva Research Network.

RAPIDresponses

300m of its people out of poverty andurbanised half of its population.Admittedly, all Chinese statistics are

open to interpretation but it isunequivocal that Chinese growthand development has created theconditions for the greatest, swiftestimprovement in humanitys livingconditions in history.Admittedly, China is riddled with

contradictions. It is a country ofdynamism and restraint, of excitingurbanism but terrible urban design;of space stations and rickshaws; ofleadership elections, where theCommunist Party of China willappoint a new head of state. But atleast these contradictions are visibleand contested. In the West, we aregrowing increasingly glib. It is obvi-ously legitimate to point the fingerat the lack of democracy in China,but its not as though we haveenough of it over here (see, for exam-ple the rise of the Euro-technocrat).The question is not how much is

enough? It is how to improve thelives and lot of the millions whoneed and want more. Asking peo-ple to live with less in the middle of arecession clearly represents a crisis inconfidence about the capitalist proj-ect. It is richly ironic that it takes anotionally communist China toshow the West how to realise materi-al ambition and economicdynamism.Austin Williams chairs the Bookshop

Barnie at Foyles Bookshop. The next Barnieis with Martin Jacques on 26 Oct

www.futurecities.org.uk

AUSTIN WILLIAMS

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As China is getting

bolder the West islosing confidence

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I

F YOURE lucky enough to find thatyouve got money left at the end of

each month, the investmentdecisions you make now could

make a big difference to the quality ofthe rest of your life. However, decidinghow you invest isnt easy. At a time ofstock market volatility, negative realreturns from savings accounts and theprospect of having to save up to50,000 for a deposit to get on thehousing ladder as a first time buyer,

where should you start?If you are considering investing your

capital, it is important to pay off yourdebts first. There is no point earning 10per cent on your investments (in a verygood year), only to pay 20 per cent on

your credit card debts, says Ben Smaje,managing director at Kennedy Black

Wealth Management. Only once youvecleared your debts and built up anemergency fund of six months netincome should you think about invest-ing.

Once the debts are paid off, ScottGrant, director of lse.co.uk, advises thatthere are four key considerations tokeep in mind: (i) a cash buffer, (ii) aninvestment timeframe, (iii) your atti-tude to risk and tolerance of invest-ment loss, and (iv) the available(investment) tax wrappers. Appetite forrisk will vary from one person to thenext, so while some experts argue thatthe current economic climate favours arisk-embracing approach, how aggres-sive you chose to be hinges on your risktolerance, your capacity to absorb lossand your investment timeframe, says

Teresa Fritz, of MoneyVista. Youngerpeople have a longer time horizon,meaning they can take higher risks asthey have longer to ride out any nega-tive market fluctuations. And investingis a long-term game.

For as long as mortgage deposits stay

at minimum 10 per cent, someyounger people will see saving for aproperty deposit as unachievable, andmay invest their income in other mar-kets until this situation changes,

according to Oliver Barber, co-founderof Kingsbridge & Carter. Interest rates

are at record lows and show no sign ofrising. This outlook, combined withhigh inflation, means you may want toput your money into equities to try toengineer returns. However, if savingenough for a deposit is a possibility

within two to three years, investingmay not be the best approach. JasonHollands of Bestinvestsays if your planis to buy within the next three yearsthen shop around for a higher rate sav-ings account. Your first port-of-callshould be a cash Individual Savings

Account (Isa). But, if its retirementyoure planning for, the earlier youstart investing, the greater chance youhave of achieving your retirementincome goals.

WATCH OUT FOR CHARGESSome investors are shocked when theydiscover how much they are requiredto pay for product fees, fund managers,administrators, custodians, and theimpact this has on their investmentreturns. Barber says this problem can

be partially alleviated by buying directassets such as land, property and com-modities, as well as tracker funds andexchange traded funds (ETF).

Investment funds usually have anannual management charge (AMC), butmore important is the total expenseratio (TER) the annual rolling cost

which takes account of all extraneouscharges the fund bears. It could add inthe region of 0.25 per cent to the AMC,according to Grant. As such, paying toreceive expert advice to help guide youthrough the myriad of investmentoptions can be money well spent. Farpreferable, says Sarah Lord, managingdirector of Killik Chartered FinancialPlanners, than making expensive mis-takes through lack of knowledge.

Be selective, shop around, read thesmall print, and the value of a well-cho-sen investment fund will hopefully off-set their annual costs of 1.5-5 per centand the impact of inflation.

MONDAY 3 SEPTEMBER 201218 cityam.com

PERSONAL FINANCEMANAGEMENTWEALTH

Is it possible to get healthy

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What is more, the stocks are concentrated into afocused portfolio, so you have the prospect ofsome real capital growth as Europe recovers.

Please remember that past performance is not aguide to future performance. The value ofinvestments and the income from them may godown as well as up and you may not get backyour original investment. Not all of theinvestments in this portfolio are made in Sterling,so exchange rates could affect the value andincome from your investment. This portfolio mayhold only 40-60 stocks.

If one of these investments declines in value, thiscan reduce the portfolio's value more than if itheld a larger number of investments.

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Dont make apigs ear ofinvesting

There are pitfalls to avoid when losing yourinvestment virginity, writes Annabel Palmer

n Keep things simple and adopt a long-term buy-and-hold approach. Avoidspeculating, as this can be a costly mistress.Tempting and fun, but very expensive.Ben Smaje, Kennedy Black WealthManagement.n An investment trust that invests in

different asset classes (equities, bonds, andcommodities in different geographicregions) is a good choice. The holy grail ofa portfolio is to give equity like returns withbond like volatility.Simon Fentham-Fletcher, RenaissanceAsset Managers.

n Invest in well-diversified funds initially:this will give you balanced exposure and

dampen the risks associated withinvesting.Sarah Lord, Killik Chartered FinancialPlanners.n Cash Isas work well for those who want

the certainty of capital. But, interest ratesare at historical lows and over time the realvalue of cash is eroded by inflation: thesilent assassin of your wealth.Jason Hollands, of Bestinvest.n Asia and the emerging markets are

growing at 4-7 per cent per annum, so itwould make sense to have exposure tothese areas of the world.

Simon Fentham-Fletcher, RenaissanceAsset Managers.

EXPERTS ADVICE ON BUILDING AN IDEAL PORTFOLIO

Top tips forinvestmentfirst-timers

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19MONDAY 3 SEPTEMBER 2012cityam.com

THE villa, or riad, that Irented with friends andfamily in Morocco wasluxurious and expensive.Beautifully decorated with a

lovely garden. It came with staff,including a young guy, Yassim,

whose job was to take care of ourneeds. It was a perfect holiday except for him.

Eventually I decided we neededto chat. Yassim, youre a nice guy.

Youre always smiling and happy,but I have to say you dont seem tocare. You never seem to be around

when we need you, youve given usbad advice and youve messed uparrangements. I dontunderstand. He answeredhonestly: I know youre right. Its

just that the boss doesnt pay mevery much, so I think, why shouldI try too hard?

Yassim was missing a trick.What youre forgetting is the

fantastic opportunity you have.Youre meeting lots of well-offforeigners. Sooner or later one ofthem will do something here like

build their own riad, buy a hotelor start a business. If you haveimpressed them it wouldnt besurprising if they hired you fortheir new venture and you landeda dream job. Your friends wouldthink you were lucky, but I

wouldnt. I would think youvemade your own luck; youve

realised that foreign contacts hereare an asset and youve impressed,

even when you dont know wherethe reward will come from. Atleast I made him think, and forthe rest of our stay he was spot on.

Motivating staff can be tricky,but its obviously very importantfor all businesses. It is commonlysaid that two things drive thefinancial markets: fear and

greed. I learnt that kidsbasically respond to the sametwo influences: threats and

bribes. And employees aremuch the same. On thedownside, they are usuallyaware of the risk that ifthey dont do their jobreasonably well, theylllose it. On the upside,they get paid, which issimple enough. Butthere are many other

ways to reward them.

Providing goodworking conditions

such as flexible hours, the abilityto work from home, help withchildcare, transport and evenproviding lunch makes forhappier and harder working staff.

It can also help to make peoplefeel important. I noticed once that

a bank teller in the US had therather inflated title of

vice president, which Ithought was silly until Inoticed how happy my ownstaff were when given thetitle of manager. Simple,

just give their boss thetitle of seniormanager.

On thefinancial

side,

giving staff equity in the businesscan be very effective. The problem,however, especially with smallcompanies, is that there is oftenno market for the shares and theycant be cashed in. Or that theshares fall in value, as happenedin the tech-wreck.

For that reason, bonuses linkedto performance can work

wonderfully, provided of course,performance is measured properly(City of London, please take note).The simplest is to calculate

bonuses as a per cent of profits orsales, and pay them in cash yearly.

You dont want to under-rewardyour staff just ask Yassim.

Since the mid-1990s Richard Farleigh hasoperated as a business angel, backingmore early-stage companies than anyoneelse in the United Kingdom.

www.farleigh.com

Philip Salter meets the man behind Europes first private satellite communications company

O

N THE wall in the meetingroom of Avantis Londonoffices just off Shoreditch

high street hangs a pieceof A4 paper in a simpleframe. There, in plain text, Avantismission is set out: To be the worldleader in Ka band sitcoms, makelots of money and have some fun.Avanti Communications is a

wholesale telecoms service provider.Perhaps this doesnt sound as excit-ing as the Tech City start-ups thatneighbour this Aim-listed company,but this presumption would be amistake. While the timid kids ofSilicon roundabout have their feetfirmly on the ground, Avanti is bold-ly sending satellites up to space.

David Williams, alongside DavidBestwick, founded AvantiCommunications in 2002. Williamswanted to be a rock-and-roll star atuniversity, but when these dreamsdied he found himself needing ajob. From the back office of an

investment bank he rose throughthe ranks until he was helpingsecure capital for telecoms andmedia companies. In the 1990s,there were plenty of other compa-nies who were looking to do whatAvanti are now doing, but Williamsgot frustrated trying to developstrategies to fund these businesses.The big corporations chickenedout as they lacked the risk appetite.Williams thought: I believe in thismarket, Ill do it myself.

Bestwick is the real brains of thisoperation he is the astrophysicistwho came up with the technology.He had the foresight to know whywe need to remain flexible and whywe need to design the satellite theway we do, says Williams. He and Iare diametrically opposed in ourskill sets and our characteristics andour personalities. And we work per-fectly together.Avantis international telecoms

network currently consists of twosatellites and four ground stations,providing very high-speed two-waydata services in about 56 countriesacross Europe, the Middle East andAfrica. Differentiating your compa-ny from the competition is key forany business. For Avanti, this comesthrough the frequency at which itdeals with data. Williams explainsthat your iPhone runs on three giga-hertz, while BSkyB is using around17 gigahertz. Avantis satellites run

Avanti: Profitting froma giant leap in data useCompany name: AvantiCommunicationsFounded: 2002Company turnover: 17mNumber of staff: 175Job title: Chief executiveAge: 43Born: Cardiff

Lives: SussexStudied: Economics & PoliticsDrinking: Anything with diet in thetitle (sadly)Currently Reading: Slow Finance,Gervais WilliamsFavourite business book: The Art ofWarMotto: Always have a Plan BTalents: Playing guitarHeroes: Margaret Thatcher andRupert MurdochFirst ambition: To go to the moon

ENTREPRENEURS

Incentives matter: Motivating staff is a necessity not a luxury

DAVID WILLIAMS

on 30 gigahertz. When he set abouttrying to get funding for a Ka bandsatellite back in 2002 people thoughtwe were completely insane for oper-ating at this higher frequency band.There was only one guy in the USdoing it and they thought he wasmad too. He is one of one ofWilliamss best friends and soldHughes Communications last year forover $1bn.Williams thinks the worlds

demand for data will keep rising by25 per cent a year for the next 20years. But he doesnt affect any pre-tence of knowledge beyond this. Hesays we cannot accurately forecastwhat the data market will be doing infive years time, let alone 20 yearstime. And it takes four years to build asatellite and it then lasts 15 or 16years. He admits: I did not predict

the iPhone, the iPad, Twitter,YouTube I didnt predict any ofthose things and I was a technologyinvestment banker for 10 years beforeI did this. So we cannot predict thedirection and momentum of travel ofdata usage all we know is at themoment about half of the worldspopulation has absolutely no access tohigh-speed data; and we also knowthat with every year that passes, thosepeople that do have access to high-speed data experience an almost dou-bling of their throughput demand.

Because Williams doesnt knowwhich regions will experience highgrowth and which type of devices willcause this high growth to come from,he needs to be as flexible as possible so that wherever the business is to befound, he can respond to it. This iswhy he builds satellites where he has

the power to turn off all of ourEuropean beams and put all thecapacity into Africa. But when youput on components that offerbespoke services you have to takemass off. It typically means you getless capacity: We choose to havemore flexibility and the cost of lesscapacity and thats because we thinkdriving down the cost to the very low-est is not what makes your sharehold-ers a better return. Time will tell.Williams credits his staff with

Avants success. He is proud

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