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All eyes on the fiscal cliff as conflicts lingerINVESTOR worries over the socalled US fiscal cliff are growingfollowing the re-election ofBarack Obama to the White Houseand continuing Republicancontrol of the House ofRepresentatives.

Republican House speaker JohnBoehner last night told Obamathat his colleagues were ready tobe led towards a fiscal so lution.

Democrat Obamas first termwas scarred by a failure to strike acompromise in the House over aplan to heal Americas potentiallycrippling level of government

debt and annual deficit.And if Congress cannot find an

BY JULIAN HARRIS agreement on a new fiscal plan byJanuary, the US faces anautomatic $600bn hit fromscheduled tax rises and spendingcuts which some economists saycould severely jolt its economy.

Mr President, this is yourmoment. Were ready to be led,not as Democrats or Republicans,but as Americans, Boehner said.

We want you to succeed. Letschallenge ourselves to find thecommon ground that has eludedus. Lets rise above thedysfunction and do the rightthing together for our country.

Yet ETX Capitals AndrewEdwards warned: Failure by the

US government to tackle the fiscalcliff is likely to see the worlds

biggest economy slip back into arecession, while the anaemicrecovery in the jobs market willcontinue to unnervemarkets in the shortterm until we see ameaningfulimprovement.

Todd Schoenbergerof BlackBay Group inNew York added:Traders on thefloor are thinking,before theelection Obamawasnt able toresolve thefiscal cliff

so whatmakes you

think hes going to be able to do itafter the election? Thats the bigissue right now.

Yet stock markets could bepropped up by the Feds ongoingquantitative easing programme.Presidential candidate MittRomney had been hostile towardsBernankes asset-buying scheme,with his defeat at t he hands of

Obama likely to see Bernankecontinue to promotemonetary easing at leastuntil the end of hiscurrent term in January

2014.

2 US ELECTION SPECIAL To contact the newsdesk email [email protected] 8 NOVEMBER 2012

EDITORS

LETTERALLISTER HEATH

Ten observations on a historicelection for the United States

[email protected]

Follow me on Twitter: @allisterheath

The popular vote was very close:50.4-48.1 per cent, and a gap of 2.8mvotes, against 52.9-45.7 per cent and

9.5m votes in 2008. Obamas lead wascut from 7.2 points to 2.3 points.However, Obama triumphed in all ofthe swing states.

Many factors destroyed Romney:he was a poor candidate with insuffi-cient charisma and too many nega-tives who should never have beenselected; most Ohioans backed carbailouts, helping deliver the state toObama; the storm helped thePresident; and the Democrats deliv-ered a more competent campaignwhich turned out even more youngpeople than in 2008, gaining the sup-port of two-thirds of 18-29 year olds.

Incumbent governments can wineven in the current climate. ButObama just had to defend most of hisvotes. David Camerons 36.1 per centmeans that he needs to substantiallyincrease his share to win in 2015.

US employment has performed

poorly and real wages are under pres-sure but the economy is growing.The numbers feeling worse off weresmall enough to save Obama.

Republicans kept their majority inthe House of Representatives andincreased their governorships to 30out of 50. But Democrats strength-ened their control of the Senate to 53against 45 (and two independents).

Most referenda opposed tax hikes.But voters in California voted to

increase taxes, including income tax,in a move which is likely going toaccelerate that states sad economicdecline and push jobs to other partsof the US. Californians also voted tokeep the death penalty. Some statesvoted to decriminalise marijuana andAmericans increasingly back gay mar-riage. One last intriguing fact: eightout of ten US counties with the high-est incomes voted for Obama.

The Republicans electoral strong-holds were unskilled white men andolder voters. The Democrats werebacked by single women and theyoung. US politics is also starkly divid-

ed along ethnic lines. The electoratewas 72 per cent white; this demo-graphic backed Romney 58-40 percent. Around 13 per cent of the voterswere African-American, 93 per cent ofwhich voted for the President; 10 percent of the electorate were hispanics,who backed Obama 71 percent to 27;and 3 per cent were Asian (breaking73-26 for Obama). America has beenchanging for years whites made up87 per cent of voters in 1992 and any

party that cannot capture the votes ofimmigrants and their children isdoomed, and deservedly so. The

Republicans used to grab a muchhigher share of hispanics underGeorge Bush. The partys current per-formance is pathetic: it desperatelyneeds to reach out to ethnic minori-ties and convince them that it is anopen party that opposes the evil thatis racism and supports a truly colour-blind, upwardly mobile society.

But is it really demographics thatexplains Obamas victory? As a bril-liant analysis on p22 by StephanShakespeare demonstrates, attitudeswere the best predictor of voting: 81per cent of those who said they wanta bigger government voted Obama.

The Republican core vote strategyfailed but only just. Dont listen tocommentators who expound toomany meta-theories about the US orany other country. Every time a partyloses an election, pundits write it offand talk of grand, historic realign-

ments. They are always wrong. Loserseventually fight back, as theDemocrats did after Reagan.

Dodd-Frank, the financial regula-tory bill, will go ahead and so willthe UK and EU regulatory agenda.Monetary policy will continueunchanged. The big issue now is thefiscal cliff. Good luck, Mr President.

IDAHO

UTAH

CALIFORNIA

ALASKA

NEVADA

WASHINGTON 12

OREGON7

55

3

ARIZONA11

33BARACK OBAMAJOE BIDENDEMOCRAT

270 ELECTO

6

4

6

WYOMING3

MONTANA3

NORTH DA3

SOUTH DA3

NEBRA5

COLORADO9

NEW MEXICO5

TE3

HAWAII4

K

OK

(incl. projected Flo

HOUSE OF REPRESENTATIVES

SENATE

DEMOCRATS 55

REPUBLICANS 45 50

DEMOCRATS 191

REPUBLICANS 232218 REPUBLICANS retained their holdon the House of Representativesyesterday, while Democrats heldonto the Senate, maintaining thepartisan status quo of the past twoyears.

Republicans guaranteedthemselves a majority in the 435-member lower chamber, evenbefore the last results came inthrough the night. But Democratsincreased their majority in theupper chamber to 10, gaining inMassachusetts and Indiana.

Republican chances of gainingfour seats and taking over theSenate initially evens, accordingto the party were dented bycontroversial comments on rape

Republicans retain House butDemocrats tighten Senate grip

BY BEN SOUTHWOOD and abortion by the extreme socialconservative wing of their party.

Both Todd Akin, whonotoriously said that women had ameans of shutting downpregnancies in cases of legitimaterape and Richard Mourdock, whosaid pregnancies were a gift fromGod even in cases of rape, losttheir races for Senate seats.

Democratic candidate TammyBaldwin won her Wisconsin raceto become not only the firstfemale senator from the state, butalso the first openly gay senator inthe US, as part of a race that saw arecord number of women electedto Congress. Another of thesewomen was law professorElizabeth Warren, who unseatedScott Brown in Massachussets.

The US market rallyappears to have been one ofthose act in haste and repentat leisure types of marketreaction which investors inhindsight wish theyd thoughtbetter of. Yesterday mornings news from Europe hasseen US markets plunge on the open as investorsquickly realised that for all the noise, and relief thesame old problems remain with the sameset of protagonists looking for a solution.

ANALYST VIEWS

WILL US MARKETS RECOVER?

Interviews by Ben Southwood

MICHAEL HEWSON CMC

The fiscal cliff mayturn out to be just a distrac-

tion. If just a short-termsolution is found to theproblem, markets shouldrecover fairly quickly. Iftough negotiations lead to a drop in equity mar-kets that should be viewed as a buying opportu-nity; US equities are still fundamentally attractivebut valuations are not as good as theywere a year ago.

DAN MORRIS JP MORGAN

We will see somevery intense negoti-

ations pre-Christmas aroundthe budget deficit and thenegotiating stance of the twoparties will start off polesapart... After a lot of wailingand gnashing of teeth, we are hopeful of a budgetagreement along the lines of the Bowles-Simpson

proposal which is based on a ratio of 3-1 spendingcuts versus tax increases.

RICHARD LEWIS FIDELITY

Ben Bernanke has thesupport of Barack Obama

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HOW THE RESULT MIGHT AFFECT UK COMPANIESAs the dust settled on PresidentObamas second-term victory, shareprices were quick to react yesterday tothe impact of another four years of hisreign.Financial shares lost ground as anyhopes the Volcker rule, part of theDodd-Frank reforms, curbingproprietary trading by Wall Street banksin securities and derivatives, would be

repealed by Republican challenger MittRomney, died. Barclays shares fell 2.8per cent, Royal Bank of Scotland 2.7 percent and HSBC 2.2 per cent.However, PwC financial services leaderKevin Burrowes says the result at leastprovided certainty for financial firms.They can now get on withimplementing EU and US reforms on anintegrated basis, knowing they have a

clear direction from global regulators,he said.Aerospace and defence firms alsosuffered, with BAE Systems down 1.3 percent, hurt by the expectation thatdefense budgets would continue to driftdownwards.Romney had pledged to increase thefunding for military budgets, butanalysts yesterday estimated Obamas

second four years in office could see asmuch as $20bn slashed from defensespending.But there were also winners fromObamas victory.Mining shares rose in relief that Romney,who had said he would remove BenBernanke as Federal Reserve chief, lost;gold investors also gained on fears ofmore QE. Bernanke, made clear in

September that under his leadership theFed would maintain low interest rates,and continue with quantitative easinguntil the economy is back on track,helping to ensure continuing highdemand for metals.Education-orientated firms alsobenefited, with UK-listed publisherPearson which closed flat yesterday,beating the 1.6 per cent drop in the FTSE

100, as investors assumed its NorthAmerican education business wouldbenefit from continued federal fundingfor school textbooks.However, Liberum analyst Ian Whittakerreiterated his sell rating yesterday,warning that the Republicans continuedhold on the House of Representativesmeant significant extra funding wasunlikely to be signed off.

THURSDAY 8 NOVEMBER 20123US ELECTION SPECIALcityam.com

MINNESOTA

VERMONT (3)

MASSACHUSETTS (11)

NEW HAMPSHIRE (4)

CONNECTICUT (7)

NEW JERSEY (14)

RHODE ISLAND (4)

MARYLAND (10)

DISTRICT OF COLUMBIA (3)

DELAWARE (3)

206 MITT ROMNEYPAUL RYANREPUBLICAN

OTES TO WIN

(10)

WISCONSIN10

WA6

SSOURI10

KANSAS6

UISIANA8

ILLINOIS20

MISSISSIPPI6

ALABAMA9

TENNESSEE11

GEORGIA16

SOUTH CAROLINA9

KENTUCKY8

INDIANA11

MICHIGAN16

OHIO18

NORTH CAROLINA15

VIRGINIA13

W VIRGINIA5

PENNSYLVANIA20

NEW YORK29

FLORIDA29

MAINE4

FEARS a split Congress could hamperaction on the US economy saw initialmarket euphoria that the electionshad delivered a decisive result rapid-ly switch to fear on world markets.The Dow plunged 312.95 points in

its worst one-day fall for the year,with the FTSE 100 losing 1.6 per centand the benchmark Eurofirst drop-

ping 1.4 per cent.The price of oil mirrored the fall inequities, with US crude down 57cents at $88.14 per barrel.

Meanwhile, gold surged to its high-est level in two weeks, hitting $1,729an ounce, its strongest level since 23October, before slipping back to$1,726.31 as investors rushed intosafe-haven investments.The dramatic movements came as

analysts warned the result of the

Markets plunge

as re-electionjitters emergeBY KATIE HOPE congressional elections with the

Republicans retaining the House ofRepresentatives and the Democratsholding their majority in the Senate meant little had actually changed.

The split Congress will not make iteasier to deal with the fiscal chal-lenges of the next few years, saidBernd Weidensteiner ofCommerzbank.

Unless the two sides of government

can agree a new plan to deal withAmericas debt, more than $600bn(375bn) of tax increases and spend-ing cuts will be automatically enact-ed at the end of this year, a resultwhich ultimately could tip the USback into recession, the IMF haswarned.

The persistent uncertainty willremain a drag on confidence, includ-ing in the equity market, said JulianJessop from Capital Economics.

Brent crude oil

110

109

111

112

108

107

$

Yesterdays trading

Spot Gold

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1,720

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1,740

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1,690

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The UK has made extremelyencouraging progress in securingan order from the United ArabEmirates for 60 Typhoon fighterjets made by BAE Systems, a British

defence source said yesterday.There is a political agreement.Clearly there are a lot of details tobe worked through, but it isextremely encouraging, thesource said, adding that a contractwas likely to be signed soonerrather than later.

The official was speaking afterPrime Minister David Camerontravelled to the UAE earlier thisweek on a two-day diplomacy andtrade visit.

UK closes in onTyphoon deal

BY CITY A.M. REPORTER

GREEK LAWMAKERS late last nightapproved the austerity bill neces-sary to secure the next tranche ofbailout funds from their creditors.

The two main governing partiesfaced down a rebellion from juniorcoalition partner Democratic Left,and seven of their own MPs, to passthe 500-odd page bill, containing13.5bn (10.8bn) worthof cuts 153 to 128.

But the successwas marred bythe rebellion ofseven repre-sentatives one fromPrime MinisterA n t o n i sSamarass NewDemocracyP ar t y and

Greek cuts bill

makes it pastparliament test

BY BEN SOUTHWOOD six from socialist coalition partnerPasok. All seven deputies werepromptly expelled from their par-ties.

Calling on the 300 representativesto the house to pass the bill,Samaras described the vote as amake or break situation. Today wevote on whether we will remain inthe Eurozone or return to interna-tional isolation, meet completelybankruptcy, and end up in theDrachma, he warned the chamber.

If the government can also passthe 2013 budget which isexpected to be brought to parlia-ment on Sunday then theystand to receive 31.5bn of aidfrom the International MonetaryFund and the European Union.Without the bailout, Greece

may be unable to pay creditors.

JUSTIN WELBY NEW ARCHBISHOP OF CANTERBURYJUSTIN Welby,Bishop of Durham,is expected to beunveiled as thenext Archbishop ofCanterbury,replacing currentChurch of Englandboss RowanWilliams, andpipping

Archbishop of YorkJohn Sentamu tothe post. Welby isa 56-year old OldEtonian andCambridgegraduate, whoopposes same-sexmarriage and wasenthroned as abishop just under ayear ago.

Prime MinisterAntonis Samarasfired one MP

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EADS offices raided over Austria salePolice have raided several officesbelonging to the European aerospaceand defence group EADS as part of aninquiry into whether bribes were paid tosmooth the sale of Eurofighter Typhoonjets to Austria.

Occidental Petroleum vying for YatesOccidental Petroleum is among thosevying for Yates Petroleum, one of thelargest closely held oil companies in theU.S., in a deal that could fetch as muchas $3 billion (1.88bn), according topeople familiar with the talks.

Europe fears US energy gapEuropes ability to compete against theUS as a manufacturing centre is beingdamaged by rising energy costs as NorthAmerica benefits from cheap naturalshale gas, Germanys biggest companiesare warning. The energy cost advantgefor US firms is rising, BDI said.

ING blow to small firm investmentHopes of small business driving the UKseconomic recovery have been dealt a blowafter a leading finance provider withdrew acrucial source of finance for entrepreneurs.ING is pulling out of the UK leasing industry,which thousands of small companies rely onto fund growth and investment.

The new jobs website for London professionalsCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

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A NEW industrial policy would help

the economy grow by boostingexports, a leading business groupclaims in a report out today.

The Confederation of BritishIndustry (CBI) said it does not wantthe government to return to a policyof picking winners but it doesthink some support for selectedindustries would help createeconomic growth.

Support for sectors includingaerospace, car manufacturing, greentechnologies, creative industries andpharmaceuticals could give theeconomy a 30bn boost throughexports and create a trade surplus.

It argues for a long-term drive tomake sure the government workswith big business to suit companiesneeds better for example ineducation and infrastructure.

The group complains that theliberalisations of the 1980s mean the

government no longer helps bigfirms. It stops short of asking thestate to invest directly in businessesor set up firms, warning this couldrepeat the failures of industrialpolicies of the 1960s and 1970s.

But it calls for more indirectaction to increase growth in certainsectors for example by usingregulation to force households andfirms to buy from green energysuppliers, or giving grants to thosewho adopt new technologies early.

CBI demandsmore state aidfor businesses

BY TIM WALLACE

THE EUROZONES economy will bare-ly grow at all next year, the EuropeanCommission warned yesterday, slash-ing its previously upbeat growthprojections.

Official forecasts now put 2013sgrowth at just 0.1 per cent, well shortof the one per cent predicted in May.That gloomy outlook means gov-

ernment debts will keep rising morequickly than expected debt is nowexpected to keep growing fast, to hit94.5 per cent of GDP next year ratherthan the 92.6 per cent previouslypredicted.

And the currency areas army ofunemployed will keep growing to11.8 per cent, rather than hold steadyat 11 per cent as forecasts six monthsago expected.

For the EU as a whole, the growthoutlook has been cut from 1.3 percent to 0.4 per cent, while govern-ment debt is set to come in at 88.5per cent of GDP, not 87.2 per cent,and unemployment is forecast to riseto 10.9 per cent, not 10.3 per cent.

The ongoing post-financial crisis

Unemploymentto rise again in

Europe in 2013BY TIM WALLACE correction continues to weigh heavily

on economic activity and employ-ment in the EU, yet compared withthe situation before the summer,financial tensions have somewhatabated, the forecast said.

The full implementation of far-reaching policy measures announcedover recent months and progresswith the correction of imbalancesshould reduce financial stress in vul-nerable member states further andlead to a gradual restoration of confi-dence across the EU, which is neces-sary for investment and privateconsumption to return.

Germany and France both saw their

GDP forecasts cut by 0.9 percentagepoints to 0.8 per cent and 0.3 per centrespectively, while Spain and Italyswere both cut 1.1 percentage pointsto falls of 1.4 per cent and 0.5 percent.

Greece saw the biggest downgrade,from an earlier forecast of flat GDP in2013 to a fall of 4.2 per cent.The UK also saw its forecast chopped

back, with growth now predicted tocome in at 0.9 per cent in 2013, notthe 1.7 per cent previously expected.

DUTCH financial group ING willcut more than 2,000 jobs over thenext two years as it prepares to

separate its banking and insuranceoperations.

The job losses are made up of1,350 of its 12,000 staff in Europeaninsurance operations, and 1,000 ofits 10,500 commercial bankingemployees worldwide.

That is thought to include 300roles in its UK leasing business.

The cuts should save the bank atotal of 460m (367.3m) per yearfrom the end of 2015.

Chairman Jan Hommen praised

ING announces 2,350 job lossesas it trims insurance operations

BY TIM WALLACE the dedication of the departingstaff: It is painful to announcesuch steps because throughoutthese challenging times employeesat all levels have worked tirelessly

to prepare businesses fordivestment and secure strongstand-alone futures for the bankand insurance [units].

The announcement comes afterSwiss bank UBS revealed it will cut10,000 jobs as it scales back parts ofits investment bank, while GermanDeutsche Bank is cutting 1,900positions.

The group reported third-quarter profits of 609m, down 64per cent on the year.

THURSDAY 8 NOVEMBER 20126 NEWS cityam.com

ING chairman Jan Hommen said the cuts were painful when staff had worked so hard

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FRENCH banking giant BNP Paribasdefied the Eurozone crisis to doubleearnings in the third quarter, accordingto financial results published yesterday.The bank reported net profits of

1.32bn (1.05bn) in the three-monthperiod up 144 per cent on the 541mrecorded in the third quarter of 2012.That is in part a rebound from a multi-

billion euro hit from the falling value ofthe banks Greek debt last year.

But the recovery is also due to boom-ing investment bank revenues, largelyon the back of improved bond-tradingincomes. Corporate and investment

banking (CIB) revenues jumped from1.79bn in the third quarter of 2011 to2.38bn in the last three months.

The investment solutions arm also sawrevenues edge up 4.1 per cent from

Earnings doubleas BNP recovers

from Greek woeBY TIM WALLACE 1.46bn to1.52bn, while the retail bank

recorded a 2.15 per cent rise to6.18bn.The group hit a fully-loaded Basel III

common equity tier one ratio of 9.5 percent in the quarter.

However the bank did take some hits,with credit losses up 8.6 per cent on theyear to944m.

Shares rose 0.42 per cent on the day.

Munich Re targets 3bn profitas investment income surgesMUNICH RE yesterday raised its

target profit for 2012 to 3bn(2.4bn), thanks to an absence oflarge disasters and a stronginvestment performance.

The worlds biggest reinsureralso announced that third quarterconsolidated profit was 1.1bn up from 290m for the sameperiod last year in part thanks toa 65 per cent rise in investmentincome.

Although the insurer does not

BY JAMES WATERSONknow the full cost ofHurricane Sandy,executives do not

expect disaster claimsto ruin the firmsfinal results.

The high number ofindividual losses andthe vast extent ofthe storm makeloss estimationvery difficult,said chieffinancialofficer Jrg

Schneider. Based on a provisionalestimate characterised by a highdegree of uncertainty, we

anticipate Munich Res share ofthe losses to be in the mid three-digit million euro range.

The announcement followsstrong results earlier this

week from rival Germaninsurer Hannover Re,who also raised year-endexpectations.

BNP Paribas

7 Nov1 Nov 2 Nov 5 Nov 6 Nov

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IN BRIEFWANDisco leaps on patent winn Sheffield software firm WANDiscosaw shares rise more than 10 per centyesterday as it said US officials hadapproved a request for its technologyto be patented. The approval boostsWANDiscos position in the fast-growing Big Data market. Thenewly-patented active:activereplication technology underpinsmuch of WANDiscos businesscollaboration software, which is usedby clients including HP and Barclays.

Warner Bros buys London studion Soho-based post-production filmstudio De Lane Lea was yesterdaybought by US giant Warner Bros.De Lane Lea, which edits films afterthey have been shot, employs around30 people in its studio. The price ofthe deal was not disclosed, but islikely to be minimal. De Lane Leasrevenues last year were around 3m.The studio has worked on dozens ofrecent hits, including the Harry Potterfilms and Casino Royale.

IAG eyes Spanish budget airlinen IAG, the parent company of BritishAirways and Iberia, is eyeing a bid for

Vueling Airlines, a budget carrierbased in Spain, the firm said in astatement yesterday. IAGs board willmeet today to consider a bid and itspossible terms. A subsidiary of IAGalready owns 45.85 per cent ofBarcelona-based Vueling, which offerslow costs flights across Europe. IAGchief executive Willie Walsh has beenon the acquisition trail since BA andIberia merged in 2010.

BURBERRY boss Angela Ahrendts yes-terday spoke out against imposingquotas for women on boards as theluxury fashion brand reported bet-ter-than-expected half year profits.Ahrendts, who has been at the

helm of Burberry since 2006, is oneof only two women running FTSE100 firms after Cynthia Carrollannounced last month she is to stepdown as chief executive of AngloAmerican.

Speaking at Burberrys new globalflagship Regent Store yesterday,Ahrendts said it was about leader-

ship and experience over gender.Asked why there were not morewomen on boards she said:Honestly, its just a matter of time.But do you accelerate it? I dontknow.The luxury brand, which spooked

the market in September when itwarned of a slowdown in China, saidsales had steadied in the last quarter,with revenues up eight per cent to883m in the six months to 30September.

Burberry chiefagainst female

board quotasBY KASMIRA JEFFORD Underlying profit before tax rose six

per cent to 173m when stripping outa one-off 73.8m payment Burberrymade to end a fragrance and beautylicence with French companyInterparfums.

From April next year Burberry willbring fragrance in house, whichAhrendts said she hopes will create ahalo effect on sales of other prod-ucts, tempting fragrance shoppers tobuy higher priced items.

Ahrendts shrugged off fears of aslowdown in the luxury industry andsaid forecasts of four to six per centgrowth was still healthier thanother sectors.

Apple shares hit a five-month

low as it loses Facetime battleSHARES in Apple slumped to a five-month low yesterday after it wasordered to pay $368m (230m) overa US patent dispute over itsFacetime video calling service.

Although the fine, paid toConnecticut company VirnetX, issmall compared to Apples $120bncash pile, the ruling could affectfuture use of the technology in

BY JAMES TITCOMB Apples iPhone and iPad. After thedecision was made late on Tuesday,Apple opened 1.6 per cent down inNew York yesterday and fell below$557. This was 21 per cent down onSeptembers record $705 price, alevel that made Apple the mostvaluable company of all time.

The company also went on theoffensive in the patent battles, itwas revealed yesterday. On Tuesdaynight, Apple filed a lawsuit against

Samsung which brought GooglesAndroid operating system into thefray for the first time.

The claims are against theSamsung Galaxy Note 10.1 tabletand, more significantly, Googleslatest version of its mobile andtablet operating software, AndroidJelly Bean.

If Apple is successful, it could beencouraged to go after other devicesusing Android.

Burberry Group PLC


1,240

1,220

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1,280

1,200

1,180

p 1,250.437 Nov

COMETS administrator has todaybegun slashing prices on selectedstock across the retailers 236stores, as talks to sell all or partsof the business continue.

A spokesperson from Deloittesaid it had launched a gentleclearance sale today on certainitems but said it would not hold afull blown fire sale at this stage.

Opcapita, the owner of theembattled electricals retailer,called in administrators last

Comet launches clearance saleon stock as shop closures loom

BY KASMIRA JEFFORD

month after it struggled to securethe credit insurance needed to buysupplies over the crucialChristmas period.

With no buyer in sight, the firmwhich has more than 6,600 staff, islikely to be broken up, with storessold off to other retailers andliquidators. Sources havesuggested stores could start toclose as early as next week.

Rival Dixons said yesterday ithad delayed its Christmasrecruitment drive to allow Cometstaff to apply for its 3,000 posts.


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REBEL shareholders yesterday wona drawn-out battle to oust Quartochairman and chief executive

Laurence Orbach from the boardof the publishing house, withindustry veteran Tim Chadwick totake his place.

At the special meeting forced byactivist investor Harwood Capital,shareholders voted in favour ofremoving Orbach, Quartos largestshareholder, who founded thepublisher in 1976.

The company which publisheseverything from sex manuals toknitting books has already set out

Shareholders win battle to oustQuarto founder from the board

BY KASMIRA JEFFORD plans to split the chairman andchief executive role, with chiefoperating officer Marcus Leaverset to succeed Orbach as chiefexecutive next year.

Chadwick, has been director tothe board but it is still unclear

whether he will take up the role ofchairman.

Harwood Capital, which owns19 per cent of the companytogether with the Wellcome trust,

wanted to parachute Chadwick,the founder of Aurum Press, intothe role after accusing Orbach offrittering away 44m onacquisitions amounting to doubleits market value since 2003.

Laurence Orbach co-founded the non-fiction book publisher in 1976

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AGEAS UK, the British arm of the

Belgian insurance giant, yesterdayannounced its best ever results aspre-tax profits jumped 36.4 percent to 106.7m for the first ninemonths of this year.

Total income crept up by lessthan one per cent but a strongunderwriting performance allowedprofits to surge.

Barry Smith, chief executive ofAgeas UK, told City A.M. that hisfirm has benefited from thedecision to focus on profitableareas such as motor cover.

Were growing where we seeattractive markets and not chasingbusiness where we dont seegrowth, he said. In domesticproperty weve deliberatelyincreased prices to take intoaccount assumptions on weatherevents, which has culminated in areduction in [total] premiums.

While income from carinsurance jumped 15 per cent to489.7m during the period,household premiums dropped 9.7per cent to 209.2m.

The fast-growing firm, whichalready operates a joint venturewith Tesco Bank, is in the processof buying French insurerGroupamas UK business.

Once the deal completes AgeasUK will becomes the fifth largestgeneral insurer in Britain.

Ageas UKprofits hitrecord high

BY JAMES WATERSON

BDO and PKF are in advanced talksto merge their UK operations, theaccountancy and advisory firmsrevealed yesterday.A tie-up, which is expected to take

place early next year, would givethe group extra firepower to com-pete with Grant Thornton for mid-market audit and business advisoryclients.The firms said the enlarged com-

pany would have 3,500 peopleworking across the UK, with rev-enues close to 400m a year. Theirglobal arms are expected to remain

separate.Last month, Grant Thornton post-

ed revenues of 417m and repeatedits goal to reach 500m withinthree years.

PKF, which lists mining, socialhousing and the football industryamong its specialisms, said the tie-up would help the companies growin their mid-market heartland.The group gave a gloomy forecast

last month, posting a three percent fall in revenues to 103m and

BY MARION DAKERS warning the economic downturn ishampering activity in professionalservices.

BDO managing partner SimonMichaels was nevertheless keen tohighlight growth opportunities in astatement yesterday: Our twofirms share a closely-aligned visionto lead in the mid-market, as well assimilar cultures and a commitmentto deliver exceptional client serv-ice.

In the latest Morningstar rank-ings, Grant Thornton was thebiggest auditor of Aim-listed clientswith 165 mandates, followed byBDO with 130. PKF came eighth

with 32.The new group would still lag

behind the Big Four PwC, Ernst &Young, KPMG and Deloitte whodominate audit and advisory workfor Britains blue-chip companies.The mid-market auditors have

been among the most vocal criticsof this market concentration, giv-ing evidence to the CompetitionCommissions probe into the indus-try, which is due to report provi-sional findings in the new year.

BDO is billing its tie-up talks with PKF as thefirst strategic merger in the accountancyindustry for 15 years.Both firms have struggled to increaseturnover since the financial crisis, while big-ger and more diversified groups have weath-

ered the storm. This is a trend echoed acrossthe professional services, most dramaticallyin the accounting problems at RSM Tenon thathave wiped 70 per cent off the firms marketcap in the last year.Now accountants and auditors appear to befollowing law firms in looking for strength inmergers and acquisitions. There is also anopportunity for the bean counters in the formof a Competition Commission probe into thestatutory audit market.With 99 of the FTSE 100 using the Big Fourfirms for their audits (the remaining blue-

chip, Randgold Resources, uses BDO), thereis a growing clamour for more competition.The CCs investigation could speed upchanges in the rules for auditors, forcinglarge companies to put audit contracts outfor regular tender, or putting limits on the

amount of other work auditors can do fortheir clients.But the mid-cap specialists are not yet readyto challenge the Big Four in this area.The likes of BDO and Grant Thornton do nothave the expertise within their ranks to signoff the accounts of a complex multinationalfinancial group such as Barclays, for example,which limits the work they could contest.M&A would be a route to beefing up sectorspecialist teams. While BDO and PKF pridethemselves on their mid-cap heartland, a tie-up shows they have one eye on the horizon.

ACCOUNTANCY M&A WHY DO THE FIRMS WANT TO MERGE?

Martin Goodchild of PKF (left) and Simon Michaels of BDO (right) hope to grow together


BDO and PKF intalks for audit

merger deal

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UK institutional pension funds

further cut their exposure to equitymarkets while boosting holdings offixed income and hedge funds lastyear, official data out yesterdayreveal.

Pension schemes, which investbillions of pounds of workersmoney in markets, cut averageequity holdings to 38.5 per cent in2012, a drop from a figure of 61.1per cent just six years ago.

The data, collected by pensionswatchdog The Pensions Regulatorbased on 6,316 UK defined benefitschemes, also reveals a surprise leapin the use of hedge funds byinstitutional investors.

Investors now give 4.5 per cent oftheir cash to hedge funds,compared to 2.4 per cent in 2011and 2.2 per cent in 2010.

Historic low yields on UKgovernment gilts have also driven

schemes away from lending moneyto the Treasury, with allocations togilts plummeting 40 per cent since2008. This has been offset by moreallocations to corporate debt andindex-linked securities.

The data is collected fromschemes eligible to enter thelifeboat fund The PensionProtection Fund, which rescuesschemes which have collapsed.

Investors fallout of lovewith equities

BY MICHAEL BOW

RATHBONE Brothers, one of the oldestwealth managers in the City, yesterdaysnapped up boutique equity managerTaylor Young InvestmentManagement (TYIM) and raised24.7m from investors to give it addi-tional firepower for more acquisitions.

FTSE 250 listed Rathbones, whichtraces its trading roots back to 1742,will pay up to 15m for the CannonStreet-based firm in a deal which willadd 337m to Rathbones asset base, aboost of two per cent.

TYIMs investment team, led byPeter Thomson, will join Rathbones

which is headquartered in CurzonStreet, Mayfair as part of the deal.

In a sign of the sectors fluid M&Aactivity, the firm yesterday also placed24.7m of shares with new and exist-ing investors to fund a warchest forfuture buys.

Rathbone Brothers chief executiveAndy Pomfret said: We expect to seemore acquisition opportunities in theprivate client industry in the next few

Rathbone raises25m to power

more takeoversBY MICHAEL BOW years.

Raising capital now will give us theflexibility to take advantage of theseopportunities as they arise and help usprovide more fully-secured loans toour clients.The firm bought the asset manage-

ment arm of AIB Jersey at the start ofOctober, adding 43m of funds.The deal with TYIM will see the firm

pay 10m in cash, with 2.6m paid upfront and the rest in deferred pay-ments based on the value of fundstransferring to Rathbones. The total iscapped at 15m.

Leading the placing of nearly 25m ofshares with investors was Martin Green andMike Cuthbert, from brokerage firmCanaccord Genuity, who acted as solebookrunner on the deal.Green is managing director of corporatefinance in the financial sector at CanaccordGenuity.He joined the firm around a year ago fromBank of America Merrill Lynch having previ-ously worked at Cenkos and Smith New

Court. Green previously focused on financialservices in sales before becoming an ana-lyst, where he was top rated by ThomsonReuters Extel reports.He has spent most of his career in corporatebroking. He previously studied electricalengineering at Royal Navy EngineeringCollege in Devon.Working alongside Green was MikeCuthbert. Cuthbert is managing directorand head of UK products at Canaccord,where he is head of the financials team.Cuthbert joined Canaccord after the transferof the financials team from Bridgewell,where Cuthbert previously worked.Canaccord previously raised money for thisyears biggest float on the AlternativeInvestment Market after Eland Oil and Gaswent public with an 118m issue.

ADVISERS CANACCORD GENUITY

MARTIN GREENCANACCORD GENUITY

Carlyle Group terminates planto snap up troubled ChemringJUMBO US based alternative assetmanager Carlyle Group yesterdaypulled out of plans to buy Britishdefence firm Chemring followingmonths of talks between the twofirms.

Carlyle, which owns DunkinDonuts and Hertz car rental, hadalready sought two extensionsfrom the Takeover Panel to tryand strike a deal with the FTSE250 firm following its initial

BY MICHAEL BOW expression of interest on 17 August.Yesterday Carlyle said it had givenup on plans to make an offer.

It follows a profit warning issuedby Chemring at the start of thismonth and the resignation of itschief executive David Price andappointment of new boss MarkPapworth in October.

Chemrings shares plungedalmost 14 per cent on theannouncement, their lowest levelfor over a year.

In a separate development, Carlyle

yesterday announced it had raised$1.1bn from investors which it plansto invest in mid market US firms.

Carlyle will use the cash raisedfrom investors for its Carlyle EquityOpportunity Fund. The fund willinject equity of between equitycapital of $25m to $150m into mid-market firms.

We see incredible opportunitiesin this large and under-servedmarket and have a great team topursue them, Carlyle managingdirector Rodney Cohen said.

Rathbones chief executive Andy Pomfret is on the hunt for more bolt-on acquisitions

Rathbone Brothers PLC


1,280

1,320

1,300

1,260

1,240

p 1,240.327 Nov

SAVINGS and investment groupOld Mutual yesterday revealed asurge in its emerging marketsfocus after growing sales of itsfund management products bynearly a fifth in the sector in justthree months.

The Anglo-African company,which merged its UK assetmanagement arm Old Mutual

Asset Managers with SkandiaInvestment Group in April,increased unit trust and mutualfund sales by 19 per cent to $2.4bn

Old Mutual sharpens focus onemerging market investments

BY MICHAEL BOW (1.5bn) for the three monthsending 30 September.

The surge was led by a 62 percent increase in sales of its fundsin South Africa, where the firm isheadquartered, and a 26 per centincrease in the rest of Africa.

The company posted an overallincrease in assets undermanagement of four per cent,taking its asset base up to263.3bn.

Oriel Securities analyst MarcusBarnard said the results showedOld Mutual to be an emergingmarket growth story.


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INDIA-focused Vedanta reported analmost 50 per cent jump in first-halfprofit yesterday, boosted by recordoutput from subsidiary Cairn India.

Earnings before interest, tax, depre-ciation and amortisation for the sixmonths to September came in at$2.6bn (1.62bn), driven by recordproduction at Cairn India, which wasacquired last year.Vedanta said earlier this year it

planned to overhaul its network ofsubsidiaries and create an umbrellaunit for its assets. The miner said yes-terday that the streamlined groupstructure is on track to complete by

the end of 2012.Revenue over the six months came

in at $7.5bn for the FTSE 100 miner,up 14 per cent year on year.

However, divisional profits from itsindividual base metals sank. Zincprofits fell 27 per cent over the peri-od, while profits from copper fell 28

Vedanta profitssurge as firm

rejig nears endBY CATHY ADAMS per cent. Iron ore profits sank 63 percent over the six months toSeptember, largely due to a year-longban on iron ore mining in someIndian states.

We are operating in challengingmarket conditions with taperingglobal growth, and emerging mar-kets continue to be the major contrib-utor to growth, said chairman AnilAgarwal yesterday.

Shares closed down 2.31 per cent at1,099p.

Vedanta Resources PLC


1,140

1,120

1,160

1,180

1,100

p

1,0997 Nov

GOLD miner Randgold Resourcessaid profit sank 15 per cent overthe third quarter, as it warnedoutput for the full year wouldcome in at the lower end ofexpectations.

Profit for the FTSE 100 miner

came in at $121.3m, down 15 percent from the previous quarter.

Gold output fell three per centin the three months to Septemberto 210,534 ounces.

Its Tongon mine in the IvoryCoast, which has underperformedthis year because of power

Randgold warns over output for2012 as production issues weigh

BY CATHY ADAMS problems, will cause annualoutput to be at the bottom end of

guidance around 825,000ounces and costs to be higherthan anticipated, Randgold said

yesterday.Chief executive Mark Bristow

said he expected production toramp up in the fourth quarter.

Production and costs for the finalquarter are forecast to again showsignificant improvements, hesaid.

Shares in Randgold Resourcesfell 6.4 per cent yesterday to closeat 6,950p as investors weredisheartened by the results.


Chief executive Mark Bristow described the third quarter results as a mixed bag

BOTTOMLINE

MARC SIDWELL

VEDANTA shares have been onquite a ride this year. Over thelast three months, the shareshave outperformed the FTSE

100, up some 10 per cent, but withinthat timeframe they also spent lateAugust and early September downmore than 10 per cent. Over the yearto date, a massive rise of 40 per centby March fell back in line with theindex by mid-May, and Vedanta thenspent June to Septemberunderperforming, before starting itscurrent climb back into positiveterritory.

Yesterdays results were in linewith expectations, and didnt movethe Indian mining and resourcesgroups shares much at all, but theydid reveal some of the strengths andweaknesses behind its volatility.

First and foremost, thankgoodness for oil. Aluminium andmetals mining might be what comesto mind first when thinking aboutVedanta, but its majority stake inCairn India, acquired at the end of2011, gave the group a welcomeexposure to the upside of oil and gasprices even as metals suffered. Theaverage price of aluminium in thefirst half of the year was down 22

per cent. Lead was down 21 per cent,zinc 15 per cent and copper 14 percent. Vedantas revenues for the firstsix months of the year neverthelessmanaged to be up 14 per cent to$7.45bn (4.66bn), largely thanks tothe addition of $1.63bn in revenuefrom Cairn India. Profit before taxwas up 16 per cent, to $1.06bn.

This goes to show the power ofdiversification, but putting youreggs in more than one basket alsobrings expense and addedcomplexity. Vedanta has also had tospend the year engaged in a processof corporate simplification.Announced in February, this processis on track for completion by theend of the year according toyesterdays release, if Indias highcourt approves. The merger of all

Vedantas Indian assets into SesaSterlite should, it promises, offersignificant synergies, as well ascreating a company big enough tocompete at the highest level. It musthope all that will help with debtreduction, with net debt down onlyabout two per cent over the last sixmonths from $10.06bn to $9.84bn.

But trusting restructuring tobring the sort of bounty to Vedantain 2013 that the addition of Cairngave to 2012 would be naive. And itwill take a sustained recovery inmetals prices to bring that shareprice volatility into line.

STORM WARNINGShipbrokers Clarksons is anothercompany finding its fortunes at themercy of the global economy. Its

shares fell yesterday on a profitwarning that admitted to evenchoppier waters than those forwhich the firm had prepared.

Clarksons shows the value in suchtough markets of being a globalplayer, pointing out that it has seenincreased transaction volumes inmost of its broking operations andgrown market share in most areas.

Yet it also reveals the perfectstorm that is the current globaleconomy. Slowing trade, a weakeneddollar, declining transactions for itsspecialised financial services are allplaying a part in making lifedifficult. Apparently ClarksonResearch Services is still growingwell, presumably as clients try tofind out exactly how much worsethings are going to get.

Global economic woe is testing even the biggest firms

SHIP broker Clarksons warned

yesterday that the gloomy economicoutlook and arid debt markets havedried up business, sending itsshares down 8.7 per cent to 11.87.

The 150-year-old company saidfreight rates and sales volumes havecontinued to fall since July,prompting it to lower expectationsfor its full-year results.

Clarksons has consistentlyhighlighted the demand/supplyimbalance and this remains adominant feature, as does a lack ofavailable debt amidst generalweakness in capital markets, it saidin a statement.

While transaction volumes acrossmost of the firms broking businesshave seen an uptick, this has beenoffset by the weakness of the dollaragainst sterling.

The firms boutique shippinginvestment bank, Clarkson Capital

Markets, is also suffering very lowlevels of activity.

Analysts at Panmure have cuttheir operating profit for the yearfrom 27.5m to 24m, but remainhopeful that Clarksons will be ableto capitalise on the economicrecovery as it picks up pace.

Clarksons seeschoppy watersfor ship broking

BY MARION DAKERS

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GERMAN Chancellor Angela Merkellast night met with David Cameron inthe hope of brokering a deal on theEU budget as the Prime Ministerpromised to take a very toughapproach to the negotiations.

Cameron said yesterday that

attempts to push through a budgetincrease at the meeting of EU leaderson 22-23 November were completelyludicrous amid domestic spendingcuts. The European Commission is

BY JAMES WATERSON seeking a 5.8 per cent rise.Berlin is concerned that Britain is

increasingly happy to play a bit-partrole in Europe. Ahead of the talksMerkel said: I want a strong GreatBritain inside the EU. I cannotimagine a Europe without Britain.

Cameron is in a difficult positionfollowing last months defeat in the

House of Commons. Eurosceptic Toryrebels collaborated with Labour topass an amendment demanding areal-terms cut in EU spending

between 2014 and 2020.

Angela Merkel last night enjoyed a working dinner with David Cameron at Downing Street

Prime Minister gives backingto Microsoft work programmeDAVID Cameron yesterdaywelcomed an initiative from

Microsoft that aims to help300,000 young people gain workskills over the next three years.

The Prime Minister met withthe Microsoft chief executive SteveBallmer and said the Get Onscheme is the kind of support weneed from business to inspire,provide skills, and createmeaningful opportunities in theindustries that will drive oureconomy forward in the future.

A large proportion of theschemes headline figure can beascribed to non-direct forms of

BY JAMES WATERSON training, including the 30,000people aged 16-24 year olds whowill receive workinspiration sessions.

However it will alsoinclude 4,000 paidapprenticeships, 10,000places on pre-apprenticeshiptraining schemes,as well as 1,000positions forgraduates whofailed to get a jobat Microsoft butcan be placed withother technologyfirms.

The news comes as

official f igures released yesterdayappear to show a decline in thenumber of people being referred tothe governments flagship Work

Programme scheme.Around 877,880 people wereinvolved in the programme

between July 2011 and June2012, which offers financialincentives to organisationswho place the long-term

unemployed in jobs.But the number of

monthly referrals appearsto have declined on a regular

basis since the start of 2012.

Microsofts Steve Ballmer saidhis firm has a company-widecommitment to youth

Merkel attempts to make peacewith Cameron over EU spending

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for the 2012 ceremony, Hodgeswooped the award for financial plan-ner of the year for the fourth year insuccession.This was the 17th incarnation of the

awards and once again planners froma range of categories donned theirdinner jackets to receive gongs. Theyincluded investment company plan-ner of the year, won by Allan

Harragan of Grangewood FinancialManagement; and investment plan-ner of the year, which was won byRobin Keyte from Keyte Limited

Chartered Financial Planners.

Left to right: James Rainbow,marketing director at Schroders;Matthew Hodge, senior manageron the wealth advisory team atPricewaterhouseCoopers and CityA.M. columnist John Inverdale

16 cityam.com

cityam.com/the-capitalistTHECAPITALISTThe rogue trader turned academicAlexis Stenfors (pictured below)

made his first public speakingappearance last night at the SOAScampus in Russell Square. The formerproprietary trader at Merrill Lynch was

famously banned in 2010 by TheFinancial Services Authority fromworking in the City for five years.

Stenfors was at the Londonuniversity last night topresent a seminar onEndogenous Deceptionhowever The Capitalist

hears the traders planningto attend were keen to hear

him explain awaysome of the

actions he tookin his former

life as atrader.

THURSDAY 8 NOVEMBER 2012

EDITED BY CALLY SQUIRES

Got A Story? [email protected]

BEAR GRYLLS IN DOCKERS ALPHA KHAKI

ANNABELS private members club inMayfair was where the most eligiblepeople in the land gathered yesterdayevening, in order to celebrate thepublication of Tatlers Little BlackBook.

The Capitalist was pleased to spotsome City names on the inauguralmost wanted list, and indeed just asmany business bachelorettes as bach-elors gracing the pages.

In the solicitor corner was LordElcho and Leeds graduate turnedAllen & Overy trainee Chelsy Davy;whilst Net-a-Porter founder NatalieMassenet and Burberry bigwig SarahManley represented the retail sector.Will Wells was the lucky young hedgefunder making the list, alongsideJames Rothschild who is apparentlygruff in a rather sexy way andquiet. Form an orderly queue ladies.

Net-a-Porter founderNatalie Massenet(left), JamesRothschild (above),Sarah Manley the chiefmarketing officer atBurberry (aboveright) and Allen &Overy trainee lawyerChelsy Davy (right)

Hodge top dog

at the FinancialPlanner Awards

Not one, but two City booksignings this week! Firstly

former world number one golfer SirNick Faldo will be signing copies of his

new book, A Swing For Life, atWaterstones in Leadenhall Markettoday. This is Faldos only UK signing,so to score a personalised present intime for Christmas, head down therepromptly at 12.30pm. Secondly, onefor the girls andboys recent Olympicgold medallist Jessica Ennis will besigning copies of her new book,Unbelievable, on Friday at 1pm atWaterstones in Canary Wharfs JubileePlace shopping centre.

The most eligible people in the

City: Tatlers Little Black Book

MATTHEW Hodge at PwC must be avery fine planner indeed, or else hehas some excellent friends at MoneyManagement, which run the annualFinancial Planner of the Year awards.

Over at the Mandarin Oriental inKnightsbridge, which was the venue

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IN BRIEFSerco buys out Oz maritime firmn Services firm Serco has agreed tobuy the remaining 50 per cent stake inAustralian defence and marineservices firm DMS Maritime forA$106m (68m) in cash. Serco saidthe deal with one o f Australias largestmaritime service operators wouldstrengthen its position as a defenceservices provider in the country.

Sales rise at Spirax-Sarcon Valve maker Spirax-Sarco yesterdaysaid organic sales were up six per centin the four months to October,boosted by double-digit sales growthin the Asia Pacific region andsubsidiary Watson-Marlow. Operatingprofit was eight per cent ahead. Theengineer also said it had bought aChilean distributor for 3.3m.

RPS on track to meet targetsn Natural resources, land andproperty consultancy RPS Group is ontrack to meet its full-yearexpectations, it said yesterday. Resultsin the nine months to September werewell ahead of the same period in

2011, the consultancy added, boostedby strong performance in its energyand energy infrastructure markets.

INCOMES soared across the wholeof British society over the past 25years, according to a report pub-lished yesterday by the Office forNational Statistics.

Even the financial crisis onlyknocked wages by a fraction of thehuge leap experienced between1986 and 2007, the study showed.Average wages even after

accounting for inflation jumped62 per cent for full-time employeesfrom 1986 to 2011.

But from 2007 to 2011 the averagewage fell by 3.2 per cent.

Top earners saw wages almost

double overall, with the top 10 percent earning 26.75 per hour in2011, compared with 14.78 in1986, after controlling for inflation

Meanwhile at the other end the

Long boom inincomes from

1986 to 2007BY TIM WALLACE bottom 10 per cent earned 7.01 anhour last year, up 47 per cent overthe 25-year period.The introduction of the minimum

wage had a major impact from 1998onwards, although pay hadincreased considerably in the 12years before that pay for the bot-tom one per cent jumped 15 percent from 1986 to 1998, then anoth-er 51 per cent from 1998 to 2011.The City provided a particular

boost to wages in London 36 percent of those in the capital are inthe top 10 per cent nationally byearnings with pay of over 26.75 perhour.

But financial sector workers are

not the highest paid on average that title falls to airline pilots andflight engineers who earn an aver-age of 44.49 per hour, excludingovertime.

Quantitative easing decisionon a knife edge, say analystsTHE BANKS decision whether ornot to expand the quantitativeeasing programme could goeither way, analysts said yesterday.

Weak business surveys andgloomy industrial productiondata could push the bank to add25bn or more to its gilt portfolio,analysts said, but better-than-

expected GDP growth would pushrate-setters in the opposite

BY BEN SOUTHWOOD direction.City A.M.s shadow MPC were

unanimous in voting to keep rateson hold, but in an indication ofhow tight the decision could bethree members voted to expandquantitative easing (QE).

It will be a close decision attodays monetary policycommittee (MPC) meeting, saidVicky Redwood at Capital

Economics. We think that thechances of more QE have slipped a

touch below 50/50, and if the MPCdoes vote for more QE, it might be25bn rather than 50bn.

Howard Archer at IHS GlobalInsight, agreed with Redwood thatrising inflation and the positiveGDP figures were likely to swaythe balance against further QE.

He expects the Bank willincrease the stock of QE by 50bnat some point in the f irst quarter

of next year but he said gloomydata could prompt an early move.


To celebrate INGs continuing association with arts charity T he Discerning Eye,ING Commercial Banking has teamed up with CityAM to offer you the chanceto win up to 1,000 of art. The ING Discerning Eye, with its slogan new artists,new audiences, showcases the work of unknown artists alongside their moreestablished contemporaries.

This year a total of 485 pieces of art, representing the work of 184 artists, hasCFFOTFMFDUFECZQSPNJOFOUHVSFTGSPNUIFBSUXPSMEUPHPPOTIPX&BDI

selector will use their own dedicated gallery space to display their choices, pro-viding a unique range of themes which has earned the exhibition an enviablereputation among art lovers and collectors alike. All the art on show is for sale.

For a chance to win 1,000 to spend on the ar twork of your choice from the INGDiscerning Eye exhibition, simply answer the question below:

What is the slogan of the ING Discerning Eye Exhibition?

Please send your answer to [email protected]

Terms and conditionsThe winner will be entitled to choose a painting from the ING Discerning Eye exhibition up to the value of 1,000. The prize isnon transferable, non negotiable and no cash alternative is offered. Entry to the prize draw is free and is open to anyone aged18 years and over resident in the UK, except employees of ING, their families, agents or anyone else professionally associatedwith the draw. Only one entry per person. The closing date is midnight on Sunday 11 November 2012. The winning answerXJMMCFESBXOBUSBOEPNGSPNBMMFMJHJCMFFOUSJFTSFDFJWFEBOEUIFXJOOFSXJMMCFOPUJFECZQIPOFPO.POEBZ/PWFNCFSThe winner must be available on Tuesday 13 November at the Mall Galleries in London to choose their painting. ING assumesno responsibility and is not liable for any costs, charges or expenses which the winner may be required to pay at any time inconnection with the prize. The winner, by accepting the prize, agrees to participate in non paid publicity accompanying orSFTVMUJOHGSPNUIJTESBXJGSFRVJSFE5IF&EJUPSnTEFDJTJPOJTOBMJOBMMNBUUFSTDPODFSOJOHUIJTQSPNPUJPO/PDPSSFTQPOEFODFwill be entered into about a decision regarding eligibility. ING reserves the right to suspend, cancel, or amend this promotionand/or review and revise these terms and conditions at any time without giving prior notice and by continuing to take part in the

promotion subsequent to any revision of these terms and conditions, entrants shall be deemed to have agreed to any such newor amended terms. These terms and conditions are governed by and construed in accordance with the laws of England and

Wales and the English Courts will have exclusive jurisdiction to determine any proceedings in connection with this competition

ING Discerning Eye, Mall Galleries,London SW1Y 5BD 15-25 November,10am to 5pm, entrance free.Follow us on Twitter : INGDiscEyeand join our Facebook group : ING Discerning Eye

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WAGES HAVE SOARED FOR EVERYONE OVER THE PAST 25 YEARS

0

20

40

60

80

100

120

0 10 20 30 40 5 0 60 70 80 90

PAY DISTRIBUTION PERCENTILES

%increaseinhourlypay(1986-2011)

%

changeinrealwagesfrom2

001to2011

PAY HAS RISEN FOR EVERYONE

5

0

-50 10 20 30 40 5 0 60 70 80 90

PAY DISTRIBUTION PERCENTILES

WAGES HAVE FALLEN SINCE THE CREDIT CRUNCH

PILOTS & FLIGHT ENGINEERSEARN THE MOST

44.49PER HOUR

BAR & WAITING STAFFARE THE WORST PAID

6.25PER HOUR

KITCHEN & CATERING ASSISTANTS

ARE NEXT ON

6.30PER HOUR

CEOs & SENIOR OFFICIALS

ARE NEXT ON

39.24PER HOUR

THE TOP 1%OF EARNERS ARE PAID

61.10PER HOUR

117% MORE THAN IN 1986

THE TOP 1%OF EARNERS ARE PAID

10.3 XTHE WAGES OF THE

BOTTOM 1%

THE BOTTOM1%ARE PAID

5.93PER HOUR

UP 70% ON 1986

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No new quantitative easing and no further cut to rates. The money supply has bounced back. But the main reason why QE needs to behalted - despite worrying signs that the economy has ground to a halt again is that it has created a false markets in gilts and blurredthe distinction between monetary and fiscal policy.

CITY A.M. | OUR SHADOW MPC VOTES 6-3 AGAINST MORE QE

ALLISTER HEATH | CITY A.M.

At long last broad money supply is showing sufficientgrowth to negate the need for further QE, so no change thismonth and lets hope QE has finally come to an end. But we

need current growth to be sustained for that. Hold rates.

GRAEME LEACH | INSTITUTE OF DIRECTORS

Hold rates and QE. Weaker business surveys suggest thatthe improvement in third quarter GDP will not last. S till,concerns about QE's effect in supporting inflation are suffi-cient to warrant a break in policy easing this month.

GEORGE BUCKLEY | DEUTSCHE BANK

50bn more QE. The rise in GDP in the third quarter wasjust due to temporary factors and the recent business sur-veys suggest that the underlying recovery is still strug-gling. Leave rates on hold, but with a bias to cut further.

VICKY REDWOOD | CAPITAL ECONOMICS

50bn more QE and no change to interest rates. Morestimulus is needed. The UK has seen no growth for a yearand a return to contraction in the fourth quarter seemslikely. The outlook for next year is weak.

ROBERT WOOD | BERENBERG BANK

Hold rates, suspend QE. Money growth has picked up glob-ally and at home, suggesting stronger economic activity inearly 2013 and firmer inflation further ahead. And the

Funding for Lending Scheme is still feeding through.

SIMON WARD | HENDERSON

Hold interest rates and further QE but keep under review.UK indicators are mixed, and US economic prospects areuncertain due to the fiscal cliff, while the Eurozone remainsin political paralysis.

VICKY PRYCE | FORMER GOVT ADVISER

Hold bank rate. Extend QE by another 50bn as uncer-tainties about the durability of the uk recovery, US fiscalcliff and challenges in Europe still persist and couldintensify.

TREVOR WILLIAMS | LLOYDS TSB

No change on either count. The decision around further QEin November is a finely balanced one. The advent ofFunding for Lending makes it easier to hold off, but theunderlying economic data remain fragile.

ROSS WALKER | RBS

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THE BASEL rules on bank capital lev-els are built on the shakiest of foun-dations, the Bank of Englands AndyHaldane warned yesterday, arguingthat banks have too little certainty inhow to risk-weight their assets.The official also told MPs and peers

that insurance rules are similarlypoorly designed, bank bondholdersshould get votes like shareholdersdo, and that banks should be threat-ened with full separation if theringfence fails to improve behaviourin retail units.And the director of financial stabil-

ity warned the Bank of England itself

needs to become more accountableto parliament, in a move that showsdisagreement with other seniorBank figures, including outgoinggovernor Sir Mervyn King.That suggests senior staff are gain-

ing confidence to speak out againstSir Mervyns management, and, com-bined with three critical reports outlast week, points towards a shake-upof Bank governance under the newleader next year.

Basel III is a bigimprovement onBasel II, but both arebuilt on the shakiestof foundations, hetold the ParliamentaryCommission onBanking Standards(PCBS).

Haldane attackon inconsistent

Basel risk rulesBY TIM WALLACE

The denominator of the capitalratio is a measure of a assets, weight-ed by risks, which the banks havedone the weighting for.

The range of capital held for thesame asset can differ by a factor ofthree or four or more between banks.As long as those inconsistencies exist,Basel III faces fundamental problems.

Haldane also said regulators shouldforce banks to clean up their opera-tions arguing that the moves to putretail and investment operations atarms length from one another couldbe made even more extreme, split-ting banks in two if they do notbehave as he wants.

The ring fence will need to be

patrolled whatever height and wher-ever it is put, to ensure full imple-mentation of both the letter andspirit of the rules, PCBS chairmanAndrew Tyrie told City A.M. That willmean the Commission will want toexamine whether some further statu-tory support is required.

Haldane also argued that the tech-nological capability now exists for aradical shift to a utilities model ofbanking. He wants all deposits heldin one location, with banks servicingcustomers who are free to shiftfrom one to another, in the sameway as energy electricity and gasfirms operate.

University gap between richand poor narrows, report saysTHE GAP between theuniversity attendance of therichest and the poorestnarrowed between 2004-5 and2009-10, a think tank saidtoday, just as the tuition feecap was raised.

The gap in higher educationparticipation between the

best-off and worst-off stateschool students narrowed

BY BEN SOUTHWOODfrom 40 per cent in 2004-5 to37 per cent in 2009-10, theInstitute of Fiscal Studies (IFS)revealed today, with much ofthe decline after the tuitionfee cap was raised to 3,000 in2006-7.

This could be down to thefact that the reform was more

generous to students frommore deprived backgrounds

and hit more privilegedstudents relatively hard

contrary to popular belief the IFS tentatively suggested.

The fact that the previoustuition fee cap rise led to ashort-term dip, followed by along-term return to growth,suggests the current dip couldalso be temporary, the reportauthors speculate cautiously.

Another report from the IFSshowed how top universities

were providing more extensivesupport for poorer students.

Ex-policymaker wants Bankto plan for interest rate hikeTHE BANK of England shouldabandon quantitative easing(QE) for the time being, andplan on bringing the baseinterest rate back up towardssustainable levels by mid-2015, ex-ratesetter AndrewSentance said today.

The risks of the banks veryloose monetary policy are

BY BEN SOUTHWOOD beginning to outweigh thebenefits, Sentance argued,especially when the economy ison its way to recovery. Keepinginterest rates so low is distortingeconomic decision-making, andkeeping inflation above target,Sentance says in the PwC report.

These claims came in tandemwith optimistic forecasts foreconomic growth in 2013 growth of 1.8 per cent. This

projection is a 0.1 percentagepoint improvement on PwCs lastforecast in July, and comes wellabove consensus forecasts,running at 1.1 per cent.

We believe that our views arejustified in the light of the latestfigures that showed a healthyrebound to GDP growth of oneper cent in the third quarter,said chief PwC economist JohnHawksworth.

TOP banking official AndrewBailey yesterday denied claimsthat judgement-based regulation

will lead to uncertainty andarbitrary controls in the bankingsector, instead arguing itrepresents the best way to reducecomplexity in regulations.

Regulators have faced criticismfor promoting a shoot first, askquestions later model, as it could

give excessive powers to theauthorities and undermine banksefforts to innovate.

But Bailey a director at theFinancial Services Authority, who

will sit on the Bank of Englandsnew Financial Policy Committee said exercising judgement will

Bailey says his judgement isbest chance for banking sector

BY TIM WALLACE end both the box-ticking cultureamong officials, and the efforts of

banks to sidestep onerous rulesby gaming the exact letter ofregulations.

The art of supervision is tolook at a situation from severalangles and seek thereby toidentify weaknesses. Goodsupervision is about judgment,he told an audience at a Bank of

America Merrill Lynch conference.And the top regulator also said

that banks should hold morecapital against unlikely butdamaging events, such as aEurozone breakup, despite

worries that forcing banks to holdlarge amounts of capital candamage lending and so economic

growth.


Official Andrew Bailey said banks should hold more capital against the risk of a euro collapse

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Andy Haldane said the Bankneeds to be more accountable

IRISH airline Aer Lingus saidyesterday its operating profitsslipped in the third quarter, butthat year to date earnings remainalmost 30 per cent ahead of last

year.Operating profits fell 2.9 percent to 90.9m (72.6m), the carriersaid, while revenues rose 5.7 percent to 460.8m.

Aer Lingus also posted strongyield growth, in spite of an eightper cent rise in operating expensesthanks to fuel and tax hikes.

We remain focused onachieving continued cost savingsand greater efficiency within the

business against a challengingmacro-economic backdrop, saidchief executive Christoph Mueller.

Revenues riseat Aer Lingus

BY MARION DAKERS

STOBART, the transport andinfrastructure group, isconsidering the launch of a retailbond to raise around 25m.

The terms of the issue have yet tobe finalised and, according toinformed market sources, the issuemight yet be pulled over a disagree-ment over the rate of interestCanaccord is suggesting the grouppays for its money. Canaccord isadvising on the deal.The bond issue, which would

carry with it a coupon of five percent or more, would allow Stobartto retire some of its existing bankloans from and keep its averageinterest rate around five per cent.

Stobart eyes

25m bondBY DAVID HELLIER

The newjobs websitefor London

professionalsThenewjobswebsiteforLondonprofessionals

C

ITYAMCAREERS.com

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IN BRIEFEricsson cuts 1,550 Swedish jobsn Ericsson yesterday announced aplan to cut 1,550 jobs at its head officein Sweden around nine per cent of

the 17,700 people employed there following a third quarter profit fall of43 per cent to 2.18bn kronor (203m).Tomas Qvist, head of human resourcesat the Swedish telecoms giant, calledthe redundancies inevitable andsaid he needed to focus on reducingcosts as sales dry up.

Cognizant profits up a fifthn IT outsourcing firm Cognizantyesterday reported a 22 per cent risein profits in the third quarter of theyear. The US-based company, whichprovides technology consultancyservices to many blue chip companies,said growth was driven by morebusiness from financial services firms.Cognizant, which employs most of itsstaff in India, saw revenue at $1.89bn(1.18bn) up from $1.6bn last year.

Veolia profits drop 25 per centn French utility firm VeoliaEnvironnement yesterday reported a25 per cent drop in nine-month profit,as it sought to reassure investors thatplans to reduce debt remained ontrack. The waste, water and energyfirm said it could cut debt by up to3bn (2.4bn) in the fourth quarter bydivesting several small assets, and theclosure of its US waste business in thecoming weeks.

BRITAINS second-largest mobile net-work O2 saw revenue fall more thanfive per cent in the third quarter ascustomers held off on renewing con-tracts ahead of the launch of theiPhone 5, it said yesterday.

Regulation on roaming charges andmobile termination rates theamount networks can charge for callsto other operators have affected allof the UKs mobile operators thisyear.

However, O2 took a much biggerhit than its major rival EE in thethird quarter.

O2s turnover was down5.4 per cent year-on-yearin pound sterling termsto1.8bn (1.4bn), com-pared to EEs 1.5 percent fall. O2 wasmuch more suscepti-ble to lower industrycharges on phonecalls.The firm a division

Upgrade delay

and regulationhit O2 revenue

BY JAMES TITCOMB of European telecoms giantTelefonica gained 110,000 mobilecustomers on the period last year, as arise in new contracts offset peopleleaving pay-as-you-go plans. O2 nowhas 22.5m mobile customers.The figures suggest that a short net-

work blackout that hit O2 in the sum-mer did not damage the company.The gains came despite a nine per

cent year-on-year fall in contractrenewals as people held off onupgrades ahead of the launchof the iPhone 5.

Meanwhile, Telefonica which also has operations in

Germany, Spain, Ireland,the Czech Republic,Slovakia and LatinAmerica swung to aprofit after losingmoney in the quarterlast year. The debt-ladengroup has been hit hard

by the recession.

Playtech Ltd


425

420

430

435

415

410

p425.90

7 Nov

Betfair Group PLC


750

740

760

770

730

720

p764.60

7 Nov

THE WORLDS fourth-largestbrewer Carlsberg reported a slightdrop in profits yesterday, but saidit stood by its full-year outlookafter gaining in Russia.

The company said it wasparticularly pleased that efforts todrive its international brands wereimproving its market share in key

growth regions.Our performance was in line

with our expectation and it isparticularly positive to report that

we are back on a growth trend inRussia, chief executive Jorgen

Carlsbergs bottom line hit byweather but Russia improves

BY ALEX CROELL Buhl Rasmussen said.Eastern Europe and Asian sales

cushioned sluggish trading inwestern Europe, which countedfor 55 per cent of group revenue.

Carlsberg said the westernEuropean beer market wasespecially challenging due to poor

weather conditions during thesummer.

The group reported a 7.8 percent year-on-year increase in salesto 18.8bn Danish kroner (2bn) inthe third quarter versus an 18.6bnDKr forecast. Pre-tax profit,however, fell 20 per cent to 3.15bnDKr due to restructuring costs.


Chief executive Jorgen Buhl Rasmussen said he was seeing positive signs in Russia

Betfair pulls out of Germany astax on sports bets is introducedONLINE betting exchange operatorBetfair yesterday announced it had

pulled the plug on the majority ofits German business after a tax hikemade the operation unworkable.

Due to the way Betfairs modelworks, with users staking moneyagainst each other rather thanagainst the bookie, Germanysrecently-introduced five per centtax on sports betting has forced thecompany out.

A tax at this rate, if applicable,would make Betfairs currentexchange model unviable, thecompany said.

BY JAMES TITCOMB Betfair said it had been workingwith tax officials to see if it couldcontinue to operate its exchangemodel.

But yesterday it said: Thecompany is disappointed, however,that to date the tax authorities havenot been able to agree to aninterpretation of the law that wouldallow Betfair to continue to offerthe exchange product.

It will continue to offer its casino,poker, and fixed odds operations,although these account for a muchsmaller part of the business thanthe exchange system.

Approximately four per cent ofBetfairs revenue came from

Germany last year.The companys share price was

relatively unaffected yesterday, withBetfair having already highlighted

the issue at its recent earnings.

Playtech hits the jackpot in thirdquarter due to casino gamblingPLAYTECH, the company thatprovides gambling software to thelikes of bet365 and PaddyPower,yesterday said gross income was up32 per cent on last year in the thirdquarter, thanks to a strong showingin its casino gaming products and itsstake in William Hill.

Shares in the London-listedcompany, which bases itself inEstonia, rose as much as 5.7 percent on the news yesterday as itsresults exceeded forecasts.

Playtechs revenue in the period

was79.9m (63.8m), thirty percent up, while it took in 12.8m

BY JAMES TITCOMB from its 29 per cent stake inWilliam Hills online business arise of 50 per cent.

William Hill is consideringbuying back Playtechs share, andhas started the process of valuing itahead of a possible offer next year.

Playtechs stake is believed to beworth around 400m.

Regardless of William Hills asyet undetermined final decision onthe call option we remaincommitted to our importantrelationship with William Hill andthe continued success of WHOgoing forward, chief executive Mor

Weizer said.He pointed to mobile gaming as

an important and lucrative growtharea for Playtech, as more peopleshift to placing bets on theirsmartphones rather than onpersonal computers.

FUEL logistics supplier HargreavesServices is to mothball the Maltbymine in Yorkshire, it said

yesterday.In August Hargreaves warned

that Maltby, which supplies DraxGroups power station in NorthYorkshire Europes largest coal-fired plant was at risk of beingmothballed because of worsening

geological problems.A report subsequently

commissioned by Hargreaves saidthat one of the mines coal panels,

which was leaking gas, oil andwater, was not viable on healthand safety, geological and financial

grounds, causing the AIM-listedfirm to close the mine.

Hargreaves Services mothballsMaltby coal mine in Yorkshire

BY CATHY ADAMS The closure of the MaltbyColliery will mean around 500staff will be at risk of redundancy.

Hargreaves earlier this yearissued a profit warning triggered

by problems at Maltby, whichproduces more than 1m tonnes of

coal each year. The company saidthat delays in mining a new coalseam would reduce profit by 12mto 16m for the year ending May2013.

Hargreaves said alternativeproposals for Maltby should betabled before the end of month, to

be considered by the board.In September, Hargreaves posted

record profit of 43.1m for theyear to 31 May, up 16.8 per centyear on year. Revenue over the yearrose 24.6 per cent to 688.3m.

INDUSTRIAL conveyor belt makerFenner yesterday posted a spike infull-year profit, as it bucked thetrend of a spate of bad news fromthe engineering sector.

Underlying pre-tax profit rose30 per cent to 103.9m over the

year to August, boosted bydemand in its core engineeredconveyor solutions division.

The industrial division whichaccounts for about three quartersof Fenners revenue postedoperating profits of 84.4m, up 38per cent.

Revenue for the FTSE 250company increased by 16 per cent

to 830.6m over the period.Strong demand from the oil and

Profits up 30 per cent at Fenner

as it raises dividend by a thirdBY CATHY ADAMS gas sector, and higher demand for

its conveyor belts used in coal andiron ore extraction drove positivetrading conditions for the firmover the period.

However, Fenner said it had seenslowing orders from the US coalsector in the second half of the

year.Scott Cagehin at Numis

Securities said that he remainedpositive for its 2013 prospects dueto Fenners exposure to strongmarkets.

Looking forward, we expectfurther investment to capitalise on

both organic and acquisitivegrowth opportunities, he added.

On the back of strong results,

Fenner raised its dividend by 31per cent to 10.5p a share.

O2 boss Ronan Dunne saw110,000 extra customers

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AS AMERICANS congregatedaround their television setson election night, all eyeswere on Florida. With its 29electoral college votes, losing

the state would put an early end toMitt Romneys hopes of winning theWhite House. But, with quick anddecisive victories elsewhere, it wasclear that President Barack Obamawould win re-election handsomely.As the Sunshine State continued tocount up the votes into the weehours, this thing was already over.

Republicans, who had hoped thata late surge in enthusiasm forRomney would be enough, failed tosee the much-hyped talk ofexpanding the map into

Democratic states materialise. Big

THERE are three things thatmatter about the US electionresult, seen from my pollsterspoint of view. What do we learnabout the role of demographics

against attitudes in determiningoutcome? What might the result meanfor the next UK general election? Andwhy did we get that Mitt Romneyphantom swing?A lot has been written about how

divided a country the US has become,with support for the two parties split

down race, age and gender lines. Butlooking more closely, are demograph-ics really the most important angle?True, YouGovs final survey (of 36,000Amer

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