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Follow me on Twitter: @allisterheath

Rules against aggressivetax avoidance delayedNEW rules that will ban companiesand individuals from engaging inaggressive tax avoidance schemeswill not be implemented until atleast summer 2013, according todraft legislation released yesterday.The General Anti Avoidance Rule

(GAAR), which will give HMRC thepower to identify and act againstlegal tax arrangements that areabusive, was due to be enforcedfrom April. Instead enforcement willhave to wait until the Finance Bill2013 receives royal assent.There was also confirmation that

HMRC will have the final word onwhich schemes it considers abusive,rather than an independent body.Yesterdays draft version of Finance

Bill includes a smattering of newannouncements, in addition tofleshing out policies previouslyannounced in this years Budget andAutumn Statement.

It will ensure the main rate of cor-poration tax is cut to 21 per cent by2014 and increase the tax-freeallowance for personal income to9,440 from April 2013.There will also be substantial tax

reliefs for investment in high-end tel-evision and computer games, as wellas an above the line credit forinvesting in UK research and devel-opment activity even if a company

Call for cleaner succession strategiesCompanies must improve their successionplanning and make sure they have strongcandidates ready to take the helm as chiefexecutive, or risk underminingshareholder value and damaging marketperformance. The Association of BritishInsurers (ABI), which represents some ofthe UKs biggest investors, gave thewarning as it fears company returns andgrowth are at risk because of the failure toline up able successors as chiefexecutives. But the ABI did not single outany specific firms with criticism.

Saudia Arabia cuts oil outputSaudi Arabia has cut oil output to itslowest level for a year as a combination ofsurging US crude production andweakening economic growth has sappeddemand. The sharp fall in Saudiproduction, details of which werepublished ahead of a meeting in Vienna ofthe Opec oil cartel, contrasts with surgingUS energy output as hydraulic fracturingor fracking have unlocked largequantities of shale oil and gas. US oilproduction rose by 760,000 barrels a daythis year the largest increase in annualoutput since crude oil started to bepumped commercially in the US in 1859.

Talk is over and the race is on for 4GTelecoms companies have lodged bidswith Ofcom to acquire the newfrequencies needed to offer 4G services.

Labour says cuts may hit Tory votesGeorge Osbornes decision to cut benefitsin real terms could cost the Conservativesdozens of seats, Labour claimed last night.Research by the party shows that the size ofTory majorities in their 60 most vulnerableseats is dwarfed by the number of workingfamilies whose tax credits will be curbed.

HMV gets 40m supplier supportEntertainment retailer HMV is beingbacked over the vital Christmas tradingperiod with funding of around 40m fromits suppliers.

Three in four set to buy fewer presentsSaving not giving seems set to be thetheme for Austerity Christmas 2012, withthree in four people saying they will not tobuy presents this festive season for atleast some of the friends and family theygave to last year.

Rosneft-TNK deal nears completionRussian oil company Rosneft is finalizing anagreement with a group of Soviet-bornbillionaires to buy their 50 per cent stake inoil venture TNK-BP for $28bn (17.4bn),according to people familiar with the matter.

US trade gap widened in OctoberThe US trade gap expanded 4.9 per centto hit $42.2bn (26.2bn) in October asthe deficit with China hit record levels andfuel consumption and costs rose, theCommerce Department said yesterday.

OFFSHORE companies that buyprime London homes forinvestment purposes will beexempt from forthcoming propertytax hikes, the governmentannounced yesterday.

Many wealthy foreign individualshave avoided stamp duty by settingup a company for the sole purposeof buying a high-end property. They

will still be hit by a 15 per centstamp duty rate on homes worthover 2m, as well as an annual levystarting at 15,000 for property

worth between 2m and 5m.But the Treasury said genuinely

commercial investments in primeproperty such as for buy-to-letpurposes will be taxed at theseven per cent stamp duty rate and

be exempt from the levy.Capital gains tax at 28 per cent

will also be extended to non-resident foreign owners sellinghomes worth over 2m. Almost allthe affected properties are inLondon and the south-east.

Naomi Heaton, chief executive ofasset manager London CentralPortfolio, said many foreign owner-occupiers will still chose to buythrough a corporate structure andpay the new 15 per cent rate due toinheritance tax savings andpersonal privacy. She added: Thislevy is likely to be accepted as partof the investment cost.

Investors escapetax hike on 2mLondon homes

George Osborne has said the GAAR rule will combat morally repugnant tax evasion

2 NEWS

BY JAMES WATERSON

BY JAMES WATERSON

To contact the newsdesk email [email protected]

AS ever, the census is chock-a-

block with fascinatingstatistics, including about themajor demographic shifts that

this country is undergoing. Londonhas become a European version ofNew York, a cosmopolitan, globalmelting pot. It also reveals a number

of worrying trends. Just 64 per cent(14.9m) of households owned theirown home in 2011, down fourpercentage points since 2001, andjust 48 per cent in London. The mainreason is the lack of housebuildingand idiotic planning rules whichartificially push up the price of goodquality homes. Combined with a vastpopulation rise fuelled by migration a big reason for the GDP growth ofthe past ten years the situation hasbecome a nightmare for people intheir twenties and thirties. We needmore homes, and we need them now.

EDITORSLETTER

ALLISTER HEATH

Decline in homeownership is the result of bonkers red tape

WEDNESDAY 12 DECEMBER 2012

More people own their home out-right, up from 29 per cent to 31 percent (7.2m). Just 33 per cent of house-holds have a mortgage, down from 39per cent, something politicians needto remember when they focus onpushing down interest rates at allcosts, actively hurting or failing tohelp 61 per cent of the public. Thoserenting privately have jumped from 9per cent in 2001 to 15 per cent (3.6m)in 2011; it is a good thing that Britainnow has a privately provided rented

sector but unfortunate that so manywho would like to buy cannot. But thegovernment must tackle a problem ofits own making an artificial scarcityof homes without creating another subsidising lenders with limiteddeposits or forcing banks to lendmore than they are comfortable, a

strategy guaranteed to end in tears.

TAXING TIMESAnother day and yet more complexand near incomprehensible tax legis-lation from the government in theform of the Finance Bill.This time, as we explain below,

there is an 80-page document whichseeks to explain how the mansion taxwill apply to high-value homes heldby companies unfortunately, evenmany of the tax experts commentingon it seemed pretty baffled. The goodnews is that there are now carve-outs

that can be claimed is silly. If theChancellor thinks there are too manyloopholes, then he should shut them.Operating a dual system whereby peo-ple first calculate their tax return onthe basis of the current laws, andthen again a second time to makesure they dont claim too many

allowances, merely adds anotherdegree of complication and in anycase donations to charity or invest-ments in EIS schemes no longer countagainst the total limit. Yet again, all ofthis shows the urgent and desperateneed for comprehensive tax reform,to make the system clearer and sim-pler, rather than endless piece-mealtweaks that mean that even account-ants now need to hire other account-ants to do their tax returns.

for bona fide businesses such as devel-opers, traders and for investors hold-ing buy-to-let properties the badnews is that these rules involve yetmore complex rules that will proba-bly discourage investment into theUK and raise little or no revenue.The government also released draft

legislation and guidance notes on theproposed General Anti Abuse Rule(GAAR), which aims to eliminate con-trived tax arrangements that areentered into simply to avoid UK tax. Ifsuch a scheme could work, it wouldbe excellent progress but as yester-days release shows, the complica-tions are devilish and nothing is yetset in stone. The danger is that the taxsystem becomes even more arbitraryand unpredictable.

Last but not least, the introductionof a US-style Alternative MinimumTax to restrict the amount of reliefs

does not pay domestic corporation tax.Samantha Vanags of law firm Grant

Thornton said the latter measure willlead to a real bonanza for R&Dinvestment: If a company spends1m, it will get 70,000 in cash backfrom the government.

Income tax relief will be capped at50,000 or 25 per cent of income,though the legislation confirms thatthis now excludes charitable dona-tions following an outcry this summer.

For the first time there will be astatutory residency test for decidingwhether a person is a UK resident for

tax purposes, rather than the previousad-hoc approach. The oil industry wel-comed greater clarity on tax relief fordecommissioning old North Sea oil-fields, saying it would encourageinvestment in new supplies.

However Eloise Walker, a partner atPinsent Masons, said it could have donemore to encourage investment: Wewere briefly excited by the prospect ofseeing the much lobbied-for infrastruc-ture tax relief become reality. No suchluck the increased annual invest-ment allowance for capital allowancesto 250,000 is as exciting as it gets.

The new jobs website for London professionalsCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

n Tax-free personal allowance raised to9,400 from April 2013.

n Income tax relief capped at 50,000per year or 25 per cent of income.

n Main rate of corporation tax reduced to21 per cent from April 2014.

n A new statutory test to decide who willbe treated as a UK resident for taxpurposes.

n A general rule against all abusive taxavoidance, administered by HMRC.

n Legislation to support GeorgeOsbornes employee-ownership scheme,offering shares in return for work rights.

n Pensions tax relief capped at 40,000a year and 1.25m across a lifetime.

n Tax-free limit on life insurance policiescapped at 3,600 a year from April 2013.

n Bank levy increased in January to meettarget of raising 2.5bn a year.

n New research and development taxcredits of 9.1 per cent for largecompanies.

n Substantial tax breaks for companiesmaking high-end television, computergames and animation.

n Annual tax-free investment allowancefor companies increased to 250,000 fortwo years from January 2013.

n Annual residential property tax on asliding scale for non-dom UK residents inhomes worth more than 2m.

n Stamp duty of 15 per cent on thepurchase of property worth over 2m byforeign individuals using corporatestructures, in addition to capital gains tax.

n Clarification of tax arrangements fordecommissioning oil wells, encouragingfirms to sell old North Sea oilfields to smallcompanies and invest in new capacity.

WHATS IN THE BILL?

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Model shown is a Carrera 4S Coupe at 88,774.00 including first year road fund licence and first registration fee. Fuel consumption figures for the n ew 911 Carrera 4S Coupe in mpg (l/100km): Urban 19.9 (14.2);

Extra Urban 37.7 (7.5); Combined 28.5 (9.9). CO2

emissions (g/km) 234.

Two impressive red lines.

The new 911 Carrera models.

The redline of a Porsche 911 has always been impressive. For almost 50 years n ow, each new generation has pushed t he boundaries

of performance further and further. The n ew 911 Carrera 4 models are no exception. As well as their legendary all-wheel drive handling,

they feature broad shoulders, making for a striking presence.

And the iconic red LED light strip across the rear, means other road users can now appreciate the red line of a 911 too.

To find out more visit www.porsche.co.uk/redlines

INCOMING Bank of England

governor Mark Carney yesterday puthimself at odds with currentTreasury policy by extolling thebenefits of throwing out inflationtargeting.

Making the inflation targetflexible giving a central banklatitude to attempt to boost outputor unemployment in hard times oreven abandoning the targetaltogether, and moving towardnominal GDP (NGDP) targeting,could help build credibility inpolicymakers commitment toeconomic recovery, the Canadianrate-setter said in a Toronto speech.

This contrasts with the UKscurrent monetary policy framework,which tasks policymakers withfocusing solely on a strict inflationtarget set at two per centmeasured by the consumer pricesindex.

But Carney said: To achieve abetter path for the economy overtime, a central bank may need tocommit credibly to maintaininghighly accommodative policy evenafter the economy and, potentially,inflation picks up.

If that failed to bring the economyinto robust recovery, he added,policymakers may need to rip up theentire framework, and replace it byconsidering both inflation andoutput through an NGDP target.

Incoming Bankboss at oddswith Treasury

BY BEN SOUTHWOOD

ADVERTISING giant WPP will moveits tax base back to the UK aftershareholders overwhelmingly votedin favour of the relocation yesterday.

Sir Martin Sorrells companymoved its operations to Dublin in2008, with the chief executive hit-ting out at the double taxation ofoverseas profits.

However, new legislation led theboss of the worlds biggest advertis-ing agency to push forward the moveback to London earlier this year.

At a shareholder vote in Dublin yes-terday, investors backed the movealmost unanimously, with

99.75 per cent voting infavour of it.The technicalities of mov-

ing the conglomerate backto Britain mean that a newcompany, referred to asWPP 2012, will be created,with shares in WPPtransferred over tothe new stock mar-ket listing, whichwill become effec-tive on 2 January.

WPP vote sealshomecoming

after tax cutsBY JAMES TITCOMB Merrill Lynch International is han-dling the move.

Sir Martin first announced the pos-sibility of moving WPP back to the UKafter George Osbornes March 2011Budget, which saw corporation taxesslashed and reforms that removedthe threat of double taxation.

However, he did not confirm theplans until August this year, puttingthe delays down to slow reforms fromthe government.

In last weeks Autumn Statement,Osborne announced a further cut tocorporation tax down to 21 percent as part of a bid to encouragemore firms to settle in the UK.WPP is not the first UK company to

have reversed a move from Londonto Dublin. Last month, businesspublisher UBM also overwhelm-ingly approved the relocation. Thecompany has already moved itself

back to London.Other firms to have moved to

Dublin include pharmaceuti-cals group Shire.

Sir Martin Sorrell changedhis mind earlier this year

TRIPADVISOR chairman BarryDiller is stepping down from therole after selling his stake in the

travel website to LibertyInteractive.

Liberty Interactive, which runsdigital businesses including theshopping channel QVC, bought4.8m shares of TripAdvisorscommon stock from Diller andThe Diller-von Furstenberg FamilyFoundation for a total of about$300m (186m), making it thetravel websites new majorityshareholder.

Liberty now owns shares

TripAdvisors chair Barry Dillersells stake to Liberty Interactive

BY JENNY FORSYTH representing nearly 22 per cent ofthe equity and 57 per cent of thetotal votes of all classes of thecompanys stock.

Media mogul Diller, a former

Fox and Paramount executive,said he is stepping down aschairman as he has moreobligations than time, but willremain a director.

Shares in TripAdvisor, whichtrade on the Nasdaq, soared 6.6per cent on the news yesterday toclose at $40.91.

Liberty Interactive, whichhailed TripAdvisor as a strongaddition, also saw its share pricerise.

WEDNESDAY 12 DECEMBER 20123NEWS

cityam.com

Barry Diller, chairman of TripAdvisor, has sold shares and left his role

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THE FINANCIAL Services Authority(FSA) yesterday announced a clamp-down on HSBC, following the newsthat the British bank will pay $1.9bn(1.2bn) to US authorities over moneylaundering.The City watchdog said it had told

the bank to introduce a number ofmeasures to ensure that all parts ofthe HSBC Group are in compliancewith the relevant legal and regulatoryrequirements across the group to pre-vent similar failings occurring in thefuture.The requirements include: creating

a committee to oversee matters relat-ing to the charges; appointing an FSA-sanctioned money launderingreporting officer; and conducting areview of the banks policies to ensurecompliance with UK law.

However, the FSA did not announceit would impose a further fine.The watchdogs announcement

came after HSBC said it had reached a$1.9bn settlement with US authoritiesfollowing a criminal investigationthat alleged the bank had channelledmoney from rogue nations, drug car-tels and terrorists through the USfinancial system. The charges dateback as far as 2003.

City watchdog

slaps HSBC after$1.9bn US fineBY JAMES TITCOMB HSBC also said it was spending

$700m on a global review of its cus-tomer vetting programme, Know YourCustomer, which it expects will takefive years.

We accept responsibility for ourpast mistakes. We have said we are pro-foundly sorry for them, and we do soagain, the banks chief executiveStuart Gulliver said. The HSBC oftoday is a fundamentally differentorganisation from the one that madethose mistakes.The bank also said it was clawing

back bonuses for a number of seniorofficers, following similar actions inthe last two years.

HSBCs shares were not significantlyaffected however, since the sanctionswere broadly expected.

HSBC Holdings PLC

11 Dec5 Dec 6 Dec 7 Dec 10 Dec

632.5

635.0

640.0

637.5

642.5

645.0

647.5 p 644.8011 Dec

THE BOARD of London-listed minerBumi is due to meet this morning tohear the initial findings from Citylaw firm Macfarlanes on allegedfinancial irregularities at Indonesianarm Bumi Resources.

The report, first commissioned inSeptember, is understood to beconcerned with several developmentassets in Indonesia.

At the meeting, the board couldalso feed back on the proposalssubmitted by both the Bakrie familyand Bumi co-founder Nat Rothschild

to restructure the coal miner.Investment bank Rothschild

Group has been tasked withevaluating both proposals.Rothschild submitted his updatedproposal to Bumi earlier this week,and claimed to have the backing of11 investors.

It is also understood the board isconsidering moving ahead with theproposal to unwind Bumi Resourcesfrom Bumi the first part of theBakries proposal for the Londonminer, and a step also thought toappear in Rothschilds plan.

However, a source with knowledgeof the situation said yesterday that it

was not possible to second guesswhat the board might say.

Bumi board is set to hearfindings from Macfarlanes

BY CATHY ADAMS

THE FORUM: Page 21

WEDNESDAY 12 DECEMBER 20126 NEWS

cityam.com

Treasury economic secretary Savid Javid

Greek debt buybackattracts 31.8bn bidsGREECES debt buyback attractedbids totalling31.8bn (25.7bn), a

senior Eurozone official saidyesterday, but the average price paidfor the bonds was slightly aboveexpectations meaning the total debtreduction will be less than planned.

A banker involved in theoperation confirmed the figures,saying that the average price paidfor the bonds purchased was 33.5cents on the euro.

The marginally higher-than-forecast price means that the

BY HARRY BANKS operation had a shortfall of around450m and the total debt reductionwill be around 9.5 percentagepoints, less than the targeted 11

percentage points.When that is factored in, itindicates that Greeces debt-to-GDPratio will fall to around 126.6 percent in 2020, slightly above the 124per cent that was agreed with theIMF last month, a figure that alsotakes into account furthercontingent measures.

While slightly belowexpectations, officials said it wouldnot take much to close the gap.

THE TAXPAYER-funded arm ofNorthern Rock will have to pay270m back to customers, after aregulatory technicality means

borrowers interest payments were

not legally required.Around 152,000 Northern Rockloans made in 2008 are not valid,the chancellor told parliament

yesterday, because the newly state-owned lender failed to includecertain compulsory information inletters and statements tocustomers. These borrowers, who

borrowed about 1,776 each, onaverage, will be refunded for alltheir interest payments since

Red tape detail forces NorthernRock to repay 270m in interest

BY BEN SOUTHWOOD 2008 though they were notovercharged.

Treasury economic secretarySavid Javid told MPs that repayingthe interest was likely to increasepublic sector net borrowing for2012-13, but would not

significantly delay Northern Rockseventual repayment of governmentfunding, worth 19.6bn.

As this came just after theGeorge Osbornes AutumnStatement, but did not appear inthe main fiscal figures, shadowchancellor Ed Balls accusedOsborne of trying to play fast andloose with the public f inances. ButOsborne said the Treasury had

been completely transparent.

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KAZAKHSTAN-based mobile telecomsgroup Kcell has its book largelycovered ahead of closing on itsLondon float today, according tosources close to the situation.

It is understood orders areflooding in from Kazakhstan, withthe possibility that the book couldbe oversubscribed. The news willprovide a welcome boost toLondons struggling market forinitial public offerings (IPOs).

London Kcellbook near full

BY CITY A.M. REPORTER

THE PERCENTAGE of home-owners inEngland and Wales plunged between2001 and 2011, according to censusfigures out yesterday.There were 14.85m home-owners

across the two countries, according tothe 2011 census, carried out by theOffice for National Statistics.The rise of around 7,000 came

despite a 1.71m increase in the num-ber of households over the period.This meant only 63.5 per cent ofEnglish and Welsh residents wereowner-occupiers in 2011, versus some68.2 per cent back in 2001.And the same figures for London fell

even more sharply. Just 33.5 per centof Londoners owned their home in2011, versus 55.6 per cent in 2001.The number in private rented

accommodation soared from 14.3 percent eleven years ago to 23.7 per centlast year. The fraction in social rentedaccommodation rocketed from 26.2per cent to 32.2 per cent.And the total number of London

homeowners also fell, from 1.68m to1.58m, despite a rise in the number ofhouseholds in the capital there were3.27m last year, compared to 3.02m.

London leadscollapse in GB

home ownersBY BEN SOUTHWOOD As well as leading the country in themove toward renting, London saw thefastest boom in population over theten year period. The number of resi-dents in the capital soared 851,000 12 per cent between 2001 and 2011,meaning the city represents some 15per cent of the total population ofEngland and Wales.

London is also the most ethnicallyand culturally diverse region of theUK and it got more diverse over theperiod. Some 36.7 per cent of residentswere born outside the UK, up from27.1 per cent in 2001, compared to afigure of 13.4 per cent across Englandand Wales. Around 44.9 per cent ofLondoners called themselves White

British, compared to 80.5 per cent forthe country as a whole.As well as boasting unparalleled

diversity, London enjoyed the mostqualified populace. Some 37.7 per centof residents had qualifications higherthan A levels, up from 31.0 per cent in2001, and against a rate of 27.2 percent across the population at large.To top it off, London managed to

swim against the current of age, bring-ing the proportion over 65 down from12.4 per cent to 11.1 per cent.

BUDGET watchdog boss RobertChoate yesterday told MPs that farfrom tweaking processes to help thechancellor, the changes makebudget targets harder to meet.

Changing its model for theoutput gap when it was spitting outimplausible numbers was theright thing to do, Robert Choate,who heads the Office for BudgetResponsibility, maintained at theTreasury Select Committee, against

BY BEN SOUTHWOOD suggestions he had done so to makelife easy for George Osborne.

He said that reducing its estimatesof potential growth for the comingfive years would outweigh thebenefits of this years reduction inthe output gap making it harderfor Osborne to meet budget targets.

He also stressed the difficulty ofeconomic forecasting and said thatsince the average forecasting errorfor the budget was 15bn to 16bn,the prediction that the deficit wouldfall by 1bn was very uncertain.

I own my housewith a mort-gage. Im very lucky thatI got a fixed rate mort-gage at two per centabove base so its very easy. Im probablyoverpaying my mortgage right now!

These views are those of the individuals aboveand not necessarily those of their company

KEVIN LAWRENCEPEMBROKE MANAGING AGENCY

I rent. Its diffi-cult to buy first

time, and Ive only beenin London for a couple ofyears. Im trying to builda deposit to buy somewhere quite centralbut its difficult.

ABDUL DAKHILDAIWA SECURITIES

I rent. I simplycouldnt afford

an apartment at themoment. Especially not inthe City, where I live cur-rently. Of course it would be nice to owninstead of putting the money into someoneelses pockets, but what can you do?

SEAN CONVERYLLOYDS

DO YOU RENT OR OWN THEPROPERTY WHERE YOULIVE?

CITYVIEWS

THE FORUM: Page 2 0-21


cityam.com

MELTING POOL LONDON SEES MASSIVE FALL IN HOME OWNERSHIP

LONDON IS UKS MELTING POT WITH MIX OF WORLDS BEST

HOME OWNERS MAKE UP DECLINING FRACTION OF LONDON RESIDENTS

0% 10% 20% 30% 40%

ENGLAND& WALES

SOUTH EAST

WEST MIDLANDS

EAST OF ENGLAND

EAST MIDLANDS

YORKSHIRE &THE HUMBER

NORTH WEST

SOUTH WEST

WALES

NORTH EAST

LONDON

Foreign born as percentage of total usual residents

2011

2001

Rent from local authority - 18.8%

Own with mortgage - 19.4%

Own outright - 14.1%

Private renting - 23.7%

Other - 3.9%

Other social renting - 14.0%

2011

Rent from local authority - 17.1%

Own with mortgage - 33.5%

Own outright - 22.1%

Private renting - 14.3%

Other - 3.9%

Other social renting - 9.1%

2001

Source:OfceorNationalStatistics

THE US Treasurys sale of itsremaining stake in AmericanInternational Group (AIG) will fetch$7.6bn (4.7bn), bringing the

government a total profit of$22.7bn from its crisis-era bailoutof the insurer.

The share offering will close thechapter on one of the mostpolitically contentious rescues of2008, which ultimately gave AIG upto $182bn of government support.

US Treasury to make $7.6bn insale of remaining AIG shares

BY CITY A.M. REPORTER AIG said yesterday that theTreasury agreed to sell 234.2mshares to investors for $32.50apiece. The insurer said thatTreasury has additional AIG

warrants that it can sell to boostthe governments $22.7bn of totalreturns so far.

At one point, the governmentestimated that it would neverrecover all of the bailout money,

but as AIG restructured, it was ableto repay the entire rescue fund and

generate a profit for US taxpayers.

Interviews by Jakob Villumsen and AlexWynick

OBR denies that it made lifeeasier for George Osborne

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Flooring retailer Carpetrightprofits from store makeover

BHP Billiton exitsBrowse for $1.6bn

Costa buzzing as furyover rival boosts sales

BY JAMES TITCOMB

ASOS STRIDES AHEAD THANKS TO JUMP IN AMERICAN SALESA 57 per cent jump inUS sales boostedfashion retailer Asosyesterday, as itposted a 30 per centrise in sales over itsfirst quarter. Asos,which reported salesof 165.8m in thethree months toNovember, was

flattered by a 34 percent increase in itsinternationalbusiness. Chiefexecutive NickRobinson said hewas prettyconfident" aboutChristmas trading.

Whitbread PLC


2,4002,425

2,450

2,500

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2,550

2,575 p 2,488.0011 Dec

WYN ELLISNUMIS SECURITIES

Whitbread saysit is on track to

deliver full year resultsin line with expecta-tions and thus we donot expect muchmovement in consen-sus numbers today.This is a very solid

update and we have increased our target pricefrom 2,650p to 2,700p and our recom-mendation remains add.

SIMON FRENCHPANMURE GORDON

Performance islikely to have

been boosted by nega-tive publicity aroundStarbucks tax affairsalthough Costa hasconsistently reportedthis level of growth inthe past 18 months. We

remain cautious on current trading and hencereiterate our hold recommendationand 1,994p target price.

JAMES HOLLINSINVESTEC

No change toour forecasts,

although there is alsono change to our viewthat the shares arepricing in an outlookfor substantial groupreturns improvementsthat, Costa-aside, we

do not think exists. We retain our sell guid-ance and 1,650p target, with bettervalue elsewhere in the sector.

ANALYST VIEWSWHAT DID YOU MAKE OF WHITBREADS TRADINGUPDATE? Interviews by James Titcomb


cityam.com

CONSUMER anger over the taxaffairs of its main rival was high-lighted as a reason for better-than-expected sales figures from CostaCoffee yesterday.The UKs largest coffee chain saw

a 7.1 per cent rise in like-for-likesales in the 13 weeks to 29November, Costas parent companyWhitbread said yesterday.

Commentators put some of thisdown to recent criticism of CostasUS rival, Starbucks, which hasfaced a public and political outcryover the amount of corporation taxit pays.

We have been the UKs favouritecoffee shop for some time and weremain the taxmans favourite cof-fee shop too, Whitbreads chiefexecutive Andy Harrison said,although he said the situation withStarbucks could be one of many

factors leading to better sales.With the 302 new Costa stores

opened in the last year, sales rose25.5 per cent year-on-year,Whitbread said.

The company also saw a 12.6 percent overall increase in revenues atPremier Inn, the mid-priced hotelchain that continues to beWhitbreads biggest business byrevenues. And the restaurant busi-ness, which operates Beefeater and

Brewers Fayre, saw overall sales up4.1 per cent.Across the group, Whitbread post-

ed a 3.3 per cent rise in like-for-likesales, and a 14.4 per cent increasein overall revenues.

However, growth slowed inCostas roughly 200 outlets inChina. Whitbread said it wouldcontinue to expand in the comingmonths, opening 330 more Costacoffee shops, creating 4,500 newhotel rooms, and launching eightrestaurants.

Shares in the company rose to all-time highs yesterday, before set-tling slightly and finishing the dayalmost three per cent up.

Harrison said that Costa had seena record week last week, taking10m as public anger overStarbucks came to a head andprotests were organised. However,this may also have been down tothe extremely cold weather.

CARPETRIGHT posted a rise inoperating profit for the first half,as a small increase in UK salescounteracted a continued declinein its European business, theretailer said yesterday.

Like-for-like revenue at its UKbusiness, which accounts forabout 80 per cent of group sales,

grew by 0.7 per cent in the 26weeks to end-October, supported

by a programme ofrefurbishment and new productranges. Group underlyingoperating profit rose 46 per centto 5.4m, keeping the companyon track to meet its full-yearexpectations, as the newproducts and less promotionalactivity boosted margins.

Chief executive DarrenShapland said the increase in UK

sales and the improvement ingross profit was encouraging.

BY CITY A.M. REPORTERBHP Billiton said last night it isselling its interest in the troubledBrowse liquefied natural gasproject to an arm of PetroChinafor $1.63bn (992m).

The London-listed miner is thesecond joint venture partner toexit the $30bn project afterChevrons disposal in Augustincreased the stake held by Shell.Browse has faced opposition from

campaigners over its proposedlocation in north west Australia.

BY CITY A.M. REPORTER

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cityam.com

Boris poaches City economistLyons to become finance guruMAYOR of London Boris Johnsonyesterday appointed top City econ-

omist Gerard Lyons, formerly ofStandard Chartered, as his chiefeconomic adviser to help pre-serves Square Miles dominanceas a global financial hub.

Lyons, who stepped down aschief economist at StandardChartered earlier this monthafter 13 years at the bank, will bepaid an annual salary of 127,200for around 30 hours of work perweek.

BY MICHAEL BOW He joins the Mayors team ofstaff at the start of next year.

Johnson said: It is increasinglyevident that if Londons

businesses are to stay ahead of thegame and compete in theglobal market, we need thebest strategies and policiesinformed by the very bestoverarching economicadvice.

Lyons is a well-respected economiccommentator inthe City, havingpreviously been

chief economist DKB Internationaland Swiss Bank Corporation.

He also predicted the UKs deeprecession in 2008 and his team at

Standard Chartered came top of apoll of 360 global forecasters byBloomberg in 2010 and 2011.

It is a great honour to havebeen asked by the Mayor to advise

him on economic issues and tohelp contribute to thecontinued success ofLondon, Lyons said.

Former City economistGerard Lyons joins mayor

Business secretary Vince Cable will today unveil a 110m small business funding package part of the British Finance Partnership scheme, which was left out of the AutumnStatement to go through extra legal due diligence. Government will provide 55m,matched by funds from the private sector, to help small firms invest and grow, he will say.

CABLE TO ANNOUNCE 110M LENDING SCHEME

BLUE CHIP explorer Tullow Oilplummeted more than eight percent in trading yesterday as itannounced it is to acquire SpringEnergy Norway for up to $672m(417m).

Spring, a Norwegian oil explo-ration company, holds 28 offshorelicences in the North, Norwegianand Barents Sea covering more than18,000 square kilometres. Since2008, it has made six commercialdiscoveries out of 12 wells drilled.The London-listed oil firm will pay

$372.3m for Spring, plus a bonuspayment of up to $300m conditionalupon exploration success.Tullow also said yesterday that it

intends to divest its gas assets in theUK and Dutch Southern North Sea which produce around 18,000 bar-rels of oil equivalent a day by theend of next year. It marks a strategicmove by Tullow to focus on oil

rather than gas.Aidan Heavey, chief executive of

Tullow snaps upNorway oil firmbut shares sink

BY CATHY ADAMS Tullow, said yesterday that thereshuffle was designed to refocus thebusiness towards high potential oilexploration.

In a separate statement, Tullow saidthat a well it drilled off the coast ofGhana had disappointed by not find-ing oil in its main target, which con-tributed to the downward spiral ofits shares yesterday.

Meanwhile, chairman SimonThompson beefed up his holding inTullow Oil yesterday, purchasing anadditional 4,000 shares to take histotal holding to 14,360.

Investment bank Jefferies was appointed toadvise Tullow Oil on the planned disposal ofthe UK and Dutch gas assets, which isdesigned to streamline the companys port-folio.Jefferies, whose operations focus on the US,Europe and Asia, has worked on severalhigh-profile oil and gas deals recently.In November, the investment bank acted asfinancial adviser to oil behemoth BP on the

sale of a number of its central North Sea oil

and gas fields to Abu Dhabi national energyfirm TAQA. Jefferies oil and gas team alsoworked with BP in June of this year, when itadvised the oil giant on its deal to sell itsminority stakes in two North Sea fields toJapanese trading company Mitsui.It also had a role advising Williams Partnerson its $2.5bn (1.6bn) acquisition of CaimanEastern Midstream in March.Jefferies has been in business for nearly 50years and operates in 30 cities around theworld. As well as M&A it works on corporaterestructuring, private placements and highyield, convertible debt and equity place-ment.In February, Tullow Oil appointed MorganStanley and Barclays Capital as joint corpo-rate brokers in place of BAML and Hoare

Govett.

ADVISERS JEFFERIES

JEFFERIES

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IG Group, the spread betting compa-ny, yesterday said it would curb coststo help deflect flatlining revenuesforecast for the second half of thefinancial year.The company, which yesterday

revealed a 14 per cent drop in rev-enues for the first half of the year,said the traditionally booming sec-ond part of the calendar betweenDecember and May would be broadlyin line with the first half.

IG, which is the worlds largestspread betting company, said it hadalready made headcount reductions,cut planned marketing spend and

deferred recruitment to offset theheadwinds.

Revenue between the end of Juneand the end of November was169m. The figures for the secondquarter crept up seven per cent fromthe first quarter.

Last year IG delivered a stellar set ofnumbers as the extreme levels ofvolatility helped the firm attractbusiness. It said continuing subdued

IG Group getstight on costs

to head off fallBY MICHAEL BOW markets this year had impacted clientactivity.

Shares in the company closed down2.2 per cent yesterday.

Canaccord Genuity analyst RobinSavage said: The good news is IGGsmarket leadership position strength-ens as the weak market impacts itscompetitors more than IGG.

Numis analyst James Hamiltonadded: The scale of IG enables it tomatch an unrivalled proportion of itscustomer trades with other cus-tomers while its competitors have totrade against their customers toachieve profitability.

Bolton backs Chineseeconomic upswingONE of the UKs most successfulmoney managers has forecast areversal of fortunes for the Chineseeconomy next year.

Anthony Bolton, the star fundmanager of the 510m FidelityChina Special Situations, saidincreased political certainty inChina following the appointmentof new leaders and an upswing ininvestor sentiment will open thedoor for better returns in 2013.

Bolton, once the poster boy of thefund management industry for his

investment success, has beenhammered since he moved to run

BY MICHAEL BOWmoney in China, with his fundposting negative returns last year.

Bolton predicted that Chinas A-Share market, its renminbidenominated market, would pullthrough a three-year trough todeliver better growth in 2013.

Bolton has been driving a moveinto internet stocks this year,snapping up positions in Baidu,Sina and the Alibaba Group. Hislargest holding as of September wasin Ping An, which was recently soldout of by UK bank HSBC.

Bolton has committed to run thefund until April 2014 but said he

would decide whether to extendthis next July.

Fidelitys Anthony Bolton is one the UKs most high profile retail money managers

IG Group Holdings PLC


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Lords call for a battle to retainLondon as EUs financial centreTHE HOUSE of Lords EU Committeethis morning called on the

government to f ight for the positionof the City as Eurozone membersconsider a banking union.

Without proper oversight, such aunion could threaten the singlemarket, the peers warned.

Tomorrow the government mustgo into battle at the criticalEuropean Summit to fight for theCity of London to retain its premierposition as the centre of EUfinancial services, said committee

BY BEN SOUTHWOOD chairman Lord Harrison. It is vitalthe UK government gets thenegotiation right so that thebanking union does not undermine

the single market as a whole, andthe single market in financialservices in particular.

This came after Sweden yesterdaysaid it would, like the UK, stayoutside any banking union,potentially turning theScandinavian country the secondbiggest EU banking centre outsidethe Eurozone, according to theGlobal Financial Centres index2011 into a key British ally on

financial rules.The Lords committee wants the

government to insist that bothnational parliaments and the EU

parliament had powers to overseethe European Central Banksrunning of the overall union. Theyalso called for separation betweenECB staff running monetary policyand those overseeing banks.

The peers also wanted thegovernment to stress the distinctionbetween the European BankingAssociation and the ECB with theformer setting the rules and thelatter enforcing them.

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STAFF at the Guildhall, the Cityshistoric headquarters, are under thecosh to chase up errant businessesin the Square Mile which, despiteseveral reminders, still haventfilled in their registration formsto vote in the forthcoming localelections.A dedicated team of three assis-

tants at the Guildhall are currentlyspending most of their time bash-

ing the phones to urge firms toreturn their forms before the dead-line of 16 December.

So far, the team has been success-ful in registering 15,000business voters from 3,700 firms,but the push is now on to round upthose who are dragging their heels.The cold calling is not without

incident it seems. The Capitalist hearsthat some of the morebelligerent City companies say:Thank you for the call, but why

should we bother? Apparently theyare gently reminded that voters canhave their say about how variousservices in the City are run.Any firms wishing to flex their

political muscle must fulfil theiradmin and polling duties quickly,before the week draws to a close.

LAURALEAN/CITY

A.M.

A TRADER over at Citi clearlyhasnt heeded The Capitalistsrecent warning about officeChristmas party hijinks, whichresult in one in ten festive revellers

being disciplined at work the nextday.

At a desk at Citi, one teamdecided to take the matter ofpunishment into their own hands

when a colleague was AWOL the

Thats a wrap: Citis tardy

trader gets extra paperworkmorning after the groupsChristmas gathering.

Our party boy turned up to workthe next morning to discover histeam had (remarkably neatly) gift-

wrapped his entire desk screens,chair, keyboard, mouse and eventhe stapler.

Certainly the most lenient ofmetaphorical slaps on the wristthat The Capitalisthas come across.


The trading floor at Citis London office gets a Christmas makeover

15cityam.com

cityam.com/the-capitalistTHECAPITALIST EDITED BY CALLY SQUIRESGot A Story? Email

[email protected]

City bookworms short of a goodread to delve into over Christmas,

JP Morgan has a few suggestions in theform of its 2012 JP Morgan HolidayReading List. The 2012 compilation is thesixth incarnation of the banks

suggested holiday literature, which iscompiled from suggestions all 412 ofthem made by asset managementemployees globally, and whittled downto a final seven by a special book reviewcommittee. Making the Lit-list this yearare A Million Little Bricks, which is anunofficial illustrated history of the LEGOphenomenon, and The End of Your LifeBook Club, hardly a jolly Christmas read.Out of stock by popular demand isanother illustrated tome, The MastabaProject for Abu Dhabi.

The City is no stranger to losingthe occasional lawyer to another

profession post qualification. HoweverSJ Berwin has had a two year qualifiedtax lawyer leave its midst, for a ratherunusual reason. Lucy Gregory jumpedoff the legal career ladder to pursue avocation in the field of artisan cheese.The former tax associate is now a BigCheese in the world of dairy delights,and has authored a book on thesubject the London Cheese and WineGuide. Gregory was also wheeled outto judge the Cheesemonger of theYear category at the recent WorldCheese Awards. With daily tastings offood and fine wines, sounds like shewould have been crackers not to makethe move.

Guildhall chases

voters in localCity elections

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cityam.com

IN BRIEFPolymetal buys Olcha depositn Russian gold producer Polymetalyesterday acquired the Olcha gold-silver deposit licence, which covers 2.5

square kilometres in the Far East ofRussia, from junior stock market listedOvoca Gold in exchange for 775,000ordinary shares in Polymetal. Chiefexecutive Vitaly Nesis said yesterdaythat the acquisition of the depositmarks a natural extension of itsportfolio in the Magadan Region.

Sales edge up at Victrexn Sales at polymer manufacturerVictrex edged up over the year toSeptember, it said yesterday. Revenuerose two per cent to 219.8m over the12 months in what chairman AnitaFrew labelled a challenging economicenvironment. Good growth in itsVictrex Polymer Solutions businessand growth in developing markets ofits biomaterial solution business

Invibio flattered the firm, it said.

Peugeot plans more job lossesn Peugeot will eliminate an additional1,500 French jobs by 2014, on top ofthe previously announced 8,000layoffs, the French car maker toldtrade union representatives yesterday.The job reductions will be achievedthrough non-replacement of workerswho will be leaving the company orretiring rather than compulsoryredundancies, a spokesman said aftera meeting with management.

DIAGEO has called off talks over amulti-billion dollar buyout of themaker of Jose Cuervo tequila.

Paul Walsh, the drinks companyschief executive, said a deal forMexicos Cuervo had failed to materi-alise, since it has not been possibleto agree a transaction which deliversvalue for Diageos shareholders.

Diageos valuation of Cuervo isunderstood to have differed signifi-cantly from its owners, theBeckmann family. The major point ofcontention was over the value ofCuervos mainstream tequila busi-ness, which has shown signs ofdecline in recent months.As well as shelving the up-to $3bn

(1.9bn) acquisition, Diageo has putan end to a long-term partnershipwith Cuervo that sees it distributethe Mexican companys tequila inseveral international markets,including North America, whichaccounts for 90 per cent of globaltequila sales. Diageo said it would

Diageo shelves

bid to buy outCuervo brand

BY JAMES TITCOMB work to ensure the orderly termina-tion of the current distribution agree-ment, which ends next yearWalsh has previously indicated that

he did not feel the agreement waspaying its rent. Diageo, which ownsSmirnoff, Guinness and Baileys, isnow expected to focus on its premi-um tequila brand, Don Julio.Yesterdays developments are bound

to lead to speculation that the FTSE100 company will re-ignite interest inUS spirits group Beam, althoughthere could be disagreements over thevalue of Beams own tequila, Sauza.

Sunbelt shines on Ashtead as itraises its annual profit forecastsINDUSTRIAL equipment hire firmAshtead yesterday posted recordfirst-half profit of 141m, as it lif tedits profit expectations for the fullyear.

First-half profit for Ashtead,which makes 85 per cent of itsrevenue from US arm Sunbelt, wasup 64 per cent from 84m over thesame period last year.

Strong growth on rents andyields in the US boosted profits, ascompanies across the pondincreasingly rented equipment.

As a result, Ashtead posted a 17per cent increase in revenue from

BY CATHY ADAMS US-based Sunbelt to 576.8m overthe six months to October.

Revenue for the group over theperiod came in at 680.4m, up 17per cent year on year.

Ashtead chief executive GeoffDrabble said yesterday: With thismomentum clearly established inthe business we now anticipate afull year profit ahead of our earlierexpectations.

He added that the firm remainedwell-placed to see growth over themedium term, from either astructural shift towards companiesrenting equipment rather than

owning it, or economic recovery.Analysts at Canaccord Genuity

said in a note yesterday that theyexpect the trend of Sunbelt takingmarket share to continue.

Ashtead shares closed down 0.23per cent yesterday.

Hedge fund take off to shortairlines stocks despite tie-upsSHORT selling of airline stocks byhedge funds has continued to

remain buoyant despite a spate ofproposed deals between nationalcarriers, data out yesterday revealed.

Demand to borrow stock fromAir-France-KLM has increased byjust over six per cent, with 4.9 percent of the stock out on loan, arecord high, in spite of its USpartner Delta taking a stake inVirgin Atlantic, according to thedata from Markit.

Shares in Virgin Australia, whichis also part-owned by Sir RichardBranson and listed in Australia,

BY MICHAEL BOW have also soared in demand.The total shares out on loan have

jumped 142.4 per cent over themonth and now stands at 4.2 per

cent of share lent out.Hedge fund traditionally borrowshares to short the stock and makemoney if the share price falls.

The top three shorted stocksremained US airlines, JetblueAirways, US Airways Group andUnited Continental.

The only London listed airline onthe top 15 list is EasyJet.

Shares out on loan in thebusiness have increased 27.5 percent over the month, with 2.6 percent of shares now out on loan.

JOSE Cuervo isnt on the rocks, butlosing its distribution deal withdrinks giant Diageo must be a blow.

Yet, like the notorious tequilahangover, it shows every sign of

being a self-inflicted injury.Negotiations between Diageo and

the Beckmann family, which ownsthe tequila brand, are understoodto have been ongoing for well overa year, in a deal that could have

been worth $3bn (1.9bn). Diageohas evidently concluded, as it

warned it would, that without anownership stake at the right priceit could not afford to continue.

Thats partly because of shiftingpatterns of tequila consumption.Like champagne in France, tequilacan only be made in a small area ofMexico by agave distillers. The bestis 100 per cent fermented fromagave. Jose Cuervo includes some100 per cent products, but it mostlysells 51 per cent agave tequila. Inthe US, which accounted for 76 percent of tequila exports in 2011,tequila consumption is still

growing, but the trend has beentowards super-premium, all-agavespirits. That is also where Diageo

wants to be boosting its marginsand profits. And without more of asay in the future of Jose Cuervo, it

wasnt in a position to drive thebrand as upmarket as it wanted.

The deals failure is not just badfor Cuervo. It leaves Diageo with athirst for top tequila. Speculationlast weekend that it was renewingits interest in US-based Beam makeseven more sense after this news, forBeam owns the world number twotequila brand, Sauza. The all-agaveSauza Blue brand is the most likelycure for Diageos tequila headache.

The FTSE 100 firm has gone cold on taking a slice of Cuervo

PASSENGER traffic at LondonsHeathrow airport rose 3.1 percent on the same month last

year, Heathrow, the Britishairport operator formerly known

as BAA, said yesterday.Of the 5.4m passengers whopassed through the London hublast month, passenger numbersto China rose 12.9 per cent, withBrazil and Russia also delivering

good growth, the company said.European traffic was also upstrongly on November 2011.

Passenger figures to the Briceconomies continue to be strong,illustrating the demand forroutes to emerging markets. Buttheres more demand that the UK

Heathrows November trafficup 3.1 per cent year-on-year

BY CITY A.M. REPORTERcant meet because its only hubairport, Heathrow, is full, saidHeathrows chief executive ColinMatthews.

The airport operator said partof the increase was due to the

late half term school holidays inBritain, as well as disruption inNovember last year.

Heathrows load factor showing how full the averageflight was was up to a record72.8 per cent, the group said.

It also confirmed yesterdaythat Heathrow Airports newTerminal 2 will be home to STAR

Alliance and Aer Lingus flightsas well as Virgin Atlanticsdomestic routes when it opens in2014.

PUBLIC transport group Go-AheadGroup yesterday said it wasconfident of meeting forecastedfull-year figures, after a welcome

boost from the Olympics.In a trading update for the six

months ending 29 December, thecompany said both its rail and busdivisions had delivered a robustperformance, despite difficulteconomic times, and expectationsfor the full year to 29 June 2013

were unchanged.Total London bus revenue is

expected to have grown by 17 percent up from the likely 14 percent increase without the lift

from the Olympics.Meanwhile earnings for its

Go-Ahead Group confident it

will arrive at full-year forecastBY JENNY FORSYTH Southern rail line sped up by eight

per cent, with takings for theSoutheastern and LondonMidland lines up by 13 per cent.Go-Ahead said growth wouldlikely have been seven, nine and11 per cent respectively for thethree lines, without the Olympicseffect.

Chief executive David Brownsaid: Our bus division continuesto perform well in a challengingeconomic environment and we are

well placed to meet our target toachieve bus operating profit of100m by 2015/2016.

He acknowledged the impactthat driver shortages has had onLondon Midland line passengers

and said restoring a reliablepassenger service is a priority.

Diageo PLC


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MARC SIDWELL

Diageo calls shots over tequila

THE MOST SHORTED AIRLINE STOCKSNAME ON LOAN % MONTH CHANGE

JETBL UE AIRWAYS 20. 8 0 .8%

US AIRWAYS GROUP 15.5 10.5%

UNITED CONTINENTAL 10.2 -5.6%

GOL-ADR 9.1 -0.3%

REPUBLIC AIRWAYS 6.2 1.1%

ALL NPPON AIRWAYS 5.9 -7.7%

ALLEGIANT TRAVEL 5.6 10.4%

HAWAIIAN HOLDING 5 -36.6%

AIR FRANCE-KLM 4.9 6.1%

VIRGIN AUSTRALIA 4.2 142.4%

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JAGUAR Land Rover (JLR) has signed apreliminary deal to build a plant inSaudi Arabia, extending itsexpansion in fast-growing marketshaving already started work on aplant in China.

The British luxury marque,owned by Indias Tata Motors,signed the deal to look at thepossibility of making 50,000 LandRovers a year at a Saudi plantcosting some 4.5bn riyals (744m),the countrys commerce andindustry ministry said in astatement.

A spokesman for JLR said theagreement was purely exploratoryand it was too early to provide anydetails.

JLR has seen huge demand overthe past year from emergingmarkets such as China, Russia andcountries in the Middle East for itsluxury SUVs and sleek sedans,offsetting sluggish growth indeveloped markets.

The company and its Chinesepartner Chery Automobile said lastmonth they had laid the foundationstone for a factory near Shanghai.

I cant make any statement forthese kind of investment figures.We have just signed a letter ofintent, said JLR chief executive RalfSpeth.

Jaguar signsdeal to build

a Saudi plantBY CITY A.M. REPORTER


cityam.com

LARGE insurance companies do notpose the same threat to global econ-omy as big banks and should not bedesignated as systemically impor-tant financial institutions, accord-ing to a study published yesterdayby the Geneva Association, an indus-try-funded think tank.

Global regulators plan to imposestricter capital rules on banks inorder to avoid a repeat of the 2008banking crisis and insurance com-panies fear similar rules could soonapply to them. Twenty-eight globalbanks have been designated as sys-temically important financial insti-tutions and will be forced to holdextra capital.

Insurers are much less intercon-nected with the financial systemthan banks, the report states aftercomparing the worlds 28 biggestinsurance companies includingPrudential, Standard Life andMunich Re with their bankingequivalents.

Insurance firms

fight bank-stylerules on capital

BY JAKOB VILLUMSENIt found the average big bank holds

$1.5 trillion (930bn) in assets,whereas the figure for the insurancecompanies is only a quarter of that,according to the study.The biggest banks have also sold

158 times as much protectionthrough credit default swaps, securi-ties that shield investors from non-payment of debt, magnifying thepotential consequences if they gobust, the report said.

Whether the regulators agree withthe study will be clear early nextyear, when the InternationalAssociation of Insurance Supervisorsis expected to publish a list of insur-ance companies that constitute arisk to the global financial system.

Insurers largely escaped the worstof the financial crisis but in 2008AIG had to be bailed out after heavylosses in the derivatives market.Today, AIG and its competitors haveminimised their exposure, whichhas left the average bank to owe 68times more to counterparties onderivatives than the average insurer.

Whiplash claims crackdown topush down cost of premiumsDRIVERS will find it harder to makefraudulent insurance claims for

whiplash injuries, thanks to new pro-posals that the government saysshould drive down the cost of motor-ing.

Proposals unveiled yesterdayinclude independent medicalassessments of whiplash claimantsto ascertain which injuries are real.

In addition, most whiplash claimswould be dealt with in the smallclaims court, making it cheaper forinsurance companies to challengepotentially fraudulent cases withoutrunning up substantial legal costs.

BY JAMES WATERSONHelen Grant, a junior justice

minister, said that Britain hasbecome the whiplash capital ofthe world.

Between 2006 and 2012claims for personal injurycaused by road trafficaccidents increased by 60 percent. Over the same periodthe number of reportedroad traffic accidents fell by20 per cent, she added.

The Association ofBritish Insurers saysfraudulent whiplashclaims cost the industry2bn in 2010 adding 90a year to the cost of the

average car insurance premium.Consultation on the measures will

end in the spring and the insuranceindustry has promised to pass on any

cost savings it makes to consumers.The government has alreadyintroduced measures tocrack down on no-win-no-fee legal cases including,from April 2013, a ban onselling the personaldetails of people involvedin accidents to thirdparties.

FORMER Deputy Prime MinisterLord Heseltine yesterday said manycivil servants are amateur andsuggested Whitehalls structure isrestraining economic growth.

The official world is largely ageneralist civil service withoutexpertise and without experienceoutside their own activities, hesaid. There is a great need formuch more professional expertisein the civil service. No one knows

what is going on in Whitehall.Theres no way to find out.

Heseltine was appearing in frontof the business, innovation and

Heseltine says civil servants inWhitehall hold back growth

BY JAMES WATERSON skills select committee followingthe publication of his government-commissioned report intoeconomic growth.

He said too much emphasis isplaced on the performance ofindividual Whitehall departmentsrather than considering the overalleffect of government policy onlocal economies.

The essence of my report is weneed to stimulate economic activity

wherever we can, he added. Themore you can enthuse those whohave a local knowledge in order tocontribute to that process, themore you get a relevance to localeconomic circumstances.

The government is due to respond to Lord Heseltines report in the spring

CANADIAN train-makerBombardier has won a 106mcontract to maintain VirginTrains Super Voyager fleet onthe West Coast Main Line until

March 2016.Bombardier will maintain thetrains at its Staffordshire depot.The contract extension is a boonfor its UK staff, after the firmlast year lost its bid for train

work on the Thameslink pro ject.Virgin last week won a short-

term extension to its West CoastMain Line franchise, and has theright to run the route untilNovember 2014 while new bidsare submitted.

The Department for Transport

BY MARION DAKERS scrapped a decision to award theroute to FirstGroup in Octoberand pledged to rerun thecontest in light of seriousflaws in its franchising process.

Trains on UK franchisedroutes are typically operated by

the franchisee, but owned byother companies and leasedback.

Winning this contract allowsus to continue our strongrelationship with Virgin, whichhas been in place since 1998,said BombardierTransportations UKrepresentative Paul Roberts.

It demonstrates Virgins trustin Bombardier to continuedelivering an excellent and cost-effective service.

FRONTIER IP Group, the Londonlisted portfolio company whichsells intellectual property rights tofirms, yesterday licenced one of itsprotein products to Tate & Lyle.

The company, through itsportfolio company Nandi ProteinsLtd which is a spin-out venturefrom Heriot Watt University inEdinburgh will benefit fromadvisory fees paid by Tate & Lyle.

Tate & Lyle, well known for itssugar products, will add thelicence to its texturant productportfolio.

Frontier chief executive NeilCrabb said: Tate & Lyle look for

innovations that will lead toexciting new food and beverage

Frontier IP university spin-out

sells protein idea to Tate & LyleBY MICHAEL BOW ingredients and Nandi's

technology offers this. Theagreement also reflects Nandi'sstrategy of developingpartnerships with major industryplayers, which continues.

The protein product is said toimprove the functional propertiesof common proteins. In food and

beverages it can boost the texturalattributes, or mouthfeel, of food.

Frontier IP, listed on Aim,works by helping universityresearch departmentscommercialise their research byselling intellectual property rightsto corporate firms. It now hasthree university partnerships withUniversity of Dundee, Robert

Gordon University, Aberdeen andPlymouth.

Justice secretary ChrisGrayling is making changes

in most industries.This is transformational, for

our two firms but also thebroader market, said BDOmanaging partnerSimon Michaelsyesterday. Weredelighted that twofirms with similarcultures and a focuson client service willcombine to create aneven stronger entity nextyear.

In the latest Morningstarrankings, Grant Thornton wasthe biggest auditor of Aim-listedclients with 165 mandates,

followed by BDO with 130. PKFcame eighth with 32.

The new group still lagsbehind the Big Four PwC,Ernst & Young, KPMG andDeloitte and is awaiting aCompetition Commissionreport on these firms

dominance of thestatutory audit

market, whichis expected in

the new year.

Simon Michaels has

overseen themerger

BDO and PKF agree to merge asthey eye more mid-cap clientsPARTNERS at BDO and PKFyesterday approved a deal tomerge the UK operations of thetwo firms, giving the enlargedgroup extra f irepower to competein the mid-tier accountancy andadvisory markets.

The new firm, operating underthe BDO brand, has 3,500 peopleworking across the country, withrevenues close to 400m a year.The two companies global armswill remain separate.

The tie-up gives the group a

presence in 19 UK locations, and itboasts mid-market sector experts

BY MARION DAKERS

Bombardier wins 106m workto maintain West Coast trains

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IN BRIEFRedstone swings to first profitn IT firm Redstone has made its firstever profit, the company announcedyesterday. Redstone was 448,000 in

the black in the six months to 30September, even as revenues fell 22per cent to 28m. Chief executiveTony Weaver put the profit down tofocusing on higher-margin managedservices in which companiesoutsource IT responsibilities to thelikes of Redstone instead oftraditional network operations.

Ryanair bullish on Aer Lingus buyn Ryanair chief exec Michael OLearysaid yesterday he is confident theEuropean Commission will accept anew package of remedies offered towin approval for its bid to buy Irishrival Aer Lingus. The concessions to EUantitrust regulators were submitted onFriday. OLeary said that if theproposed deal is reviewed on thesame basis as all other flag carrier

airline mergers its hard to see howthe Commission could turn us down.

Sberbank on track for growthn Russias Sberbank expects that its2012 net profit under local accountingstandards will total at least 340bnroubles (6.9bn), the banks chiefexecutive officer German Gref toldreporters yesterday. The state-controlled lender last month reporteda 12 percent increase in RAS net profitfor the first 11 months of the year to332.3bn roubles. In 2011, its net profitunder RAS came in at 321.9bn roubles.

BT is selling its 9.1 per cent stake inTech Mahindra in a deal expected toraise about $183m (113m) and seethe British telecoms operator exit anIndian IT services group it co-foundedmore than two decades ago.The Tech Mahindra shares are being

sold at a floor price of 855 rupees($15.68), according to a term sheet, adiscount of 2.8 per cent fromTuesdays 879.50 rupees closing price.The stock is up about 53 per cent thisyear.

BT, which set up technology out-sourcing services provider TechMahindra with Indias Mahindra &Mahindra in 1986 and was its secondlargest shareholder in the past, hasbeen gradually paring its stake in theIndian joint venture.

It sold 14.1 per cent of TechMahindra stake for about $250m inAugust.

Britains biggest fixed-line telecomscompany is also one of the majorclients of Tech Mahindra, which pro-

BT to sell $183m

stake in IndiasTech Mahindra

BY HARRY BANKS vides technology services to global tele-coms operators, and its exit is likely tocloud the outlook for future contractsfrom BT. JP Morgan and Credit Suisseare advising BT on the share sale, andthe shares will change hands on theIndian stock exchanges via block dealsyesterday morning, the term sheetshowed.

BT had to rely on deep cost cuts tomaintain its full-year earnings outlookafter an adverse regulatory ruling andweak European corporate demandsent revenues down nine per cent inthe second quarter.

Sportech boss plots expansionin US after Connecticut approvalSPORTECH, the horseracing andfootball pools operator, yesterdayannounced it had won approval forits latest US expansion as it bids tobecome the countrys dominantinternet betting service.

The company has been grantedan exclusive licence to offer onlinegambling on horseracing andgreyhound racing in Connecticut,opening it up to around 4mcustomers.

Ian Penrose, Sportechs chiefexecutive, said the companys

continuing expansion in the US ispositioning it well for the expected

BY JAMES TITCOMB liberalisation of much of thecountrys gambling laws.

This is an important step for theintegrity and trust in Sportech,and as regulation comes we arewell positioned to take advantageof that, Penrose told City A.M.

It all bodes well for us goingforward, we think there is a realopportunity in America.

Sportech now holds licencesfor horseracing in 29 ofthe USs 50 states,and makes aroundhalf of its revenuesin the country,

having purchasedNew York based

Scientific Games Racing in 2010.The company believes it iswell placed if online

gambling laws are relaxedat a federal level. It hasrecently appointed a chiefoperating officer for the

Americas region, sportsindustry veteran David

Schreff.Sportechs online

Connecticutoperations will golive in March.

BT Group PLC


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11 Dec

A NEW body to regulate the presscould be set up early next year, thehead of current newspaper

watchdog the Press ComplaintsCommission said yesterday.

Tory peer Lord Hunt of Wirraltold the Culture, Media and SportCommittee that he was working

with newspaper editors on a planfor the revamped body.

The new watchdog wouldenforce most of Lord JusticeLevesons recommendationsstemming from his inquiry intopress ethics, but without the needfor legislation to underpin it.

Revamped press regulator tocome next year, PCC head says

BY JAMES TITCOMB He put forward proposals for asystem of press self-regulation that

would require newspapers to signcontracts, thus giving a watchdog

binding powers without the needfor a press law.

The contract model would beright at the heart of the new body.I cannot understand how the new

body would have the power to fineand investigate unless membershad signed up to it, he said.

Lord Hunt also indicated thatcandidates for the watchdogs new

board would be announced onFriday. His comments come aftertalks between industry bosses andDavid Cameron.


cityam.com

Lord Hunt told MPs that the industry was close to finishing plans for a new watchdog

PRINTING technology companyDomino Printing yesterday put a32-year run of increasingrevenues to an end.

The company, whichmanufacturers printers for

barcodes and labels, posted a oneper cent decline in annualturnover to 312m, owing to weaksales in Europe. This is the firsttime revenue has fallen since thecompany was incorporated.

Pre-tax profits fell by 10 percent to 54m due to higherinvestment in research anddevelopment. This impacts short-term profit but means the group

remains well placed to deliversustained growth, even in more

BY JAMES TITCOMB difficult markets, DominoPrinting said yesterday.

However, the City was notimpressed, sending shares in theFTSE 250 constituent down 6.7per cent yesterday. The companyschairman, Peter Byrom, put thedisappointing performance downto difficult market conditions.

Our businesses in the USA,most of Asia, the Middle East and

Africa have all made goodprogress but in parts of Europeand in China sales were below last

year, Byrom said.Domino attributed some of the

poor performance in China to athird-party manufacturer passingoff equipment as Domino-

branded products.

AS each year draws to a close Ilike to look back overYouGovs BrandIndex andconsider the big gainers and

fallers of the previous twelvemonths.

Usually this involves examiningBritains most recognisable corpo-

rate brands, such as last week whenwe looked at how the competitionbetween department store giantsJohn Lewis and Marks & Spencerhas become increasingly fierce oflate.

But the most high-profile successstory of 2012 was of course theOlympic Games, and so this weekrather than considering a compa-nys brand performance, lets take alook at the ups and downs enjoyedby the London 2012 brand over thelast year.

SPORTING ROLLERCOASTERThe story from January toSeptember is a well known one staunch scepticism throughout thebuild-up to the Games was eclipsedby mass enthusiasm and positivityonce the contests started.The Index score for the Olympics

leapt from +10 to +47, while theParalympics jumped from +9 to +36,peaking slightly lower and slightlylater to coincide with the start of

the second phase of the competi-tion.

But what has happened sincethen?

POST-GAMES BUZZAs one would expect, Buzz (hearingpositive or negative news) has

steadily fallen back to close to itspre-Games levels in the mid +20s,having got as high as +61 for theOlympics and +58 for theParalympics.As we are no longer hearing daily

stories of Olympic stars, the latestgold tallies and our new favouritesports, it is to be expected thatbuzz would die off quickly.

What is interesting, however, isthe sustained high levels on theIndex score (which is made up of acomposite of six key image attrib-

utes).There has been a decline, but it is

a slow one, and scores remain wellabove those of the first half of theyear.

As of Monday, the Olympicsremained at +34 and theParalympics at +27.

We all know what a triumph

London 2012 was, and that successis reflected in what boils down to alegacy of happy memories amongthe British public.

How very different perceptionslook in December than they did inJanuary.Stephan Shakespeare is the chief executive

of YouGov

BOTTOMLINE

STEPHAN SHAKESPEARE

Buzz

Dec12Oct12Aug12Jun12Apr12Feb120

70

60

50

40

20

30

10 2012SummerOlympicGames

2012SummerParalympicGames

Index

05

50454035

202530

1015

2012SummerOlympicGames

2012SummerParalympicGames

Dec12Oct12Aug12Jun12Apr12Feb12

The lasting public legacy of the 2012 Olympic Games

Printing firm Domino tumbles

as it puts end to 32-year record

Sportech chiefIan Penrose

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US stocks up asApples shareslift the market

US stocks rose yesterday, led bygains in technology companies,helping the S&P 500 end at itshighest level since Election Day.

A 2.2 per cent gain to $541.39 inApples stock lifted the Nasdaq, as thelargest US company by market valuerebounded from a week in whichinvestors took profits before a possibletax rise next year. Prior to yesterdays

trading, Apple shares had lost 25 percent from an all-time intraday high hitin September.

Stocks pared some gains by late after-noon as more news on the fiscal cliffnegotiations emerged. US SenateMajority Leader Harry Reid said it willbe difficult to reach agreement resolv-ing the cliff tax hikes and spendingcuts before Christmas.

Theres been a real explosion in anx-iety over this thing. Because marketshave become the way they are, you'vegot people just stepping back, saidJames Dailey, portfolio manager ofTEAM Asset Strategy Fund inHarrisburg, Pennsylvania.

Theres a tremendous absence of liq-uidity in the market, he said.The S&P 500 had lost 5.3 per cent in

the seven sessions following ElectionDay as investors refocused on thethreat posed to the economy by the fis-cal cliff, a series of automatic spendingcuts and tax increases. Markets havemostly recovered those losses, but vol-ume has been thin, suggestinginvestors are not betting aggressivelydue to the uncertainty.The Dow Jones industrial average

was up 78.56 points, or 0.60 per cent,at 13,248.44. The Standard & Poors 500Index was up 9.29 points, or 0.65 percent, at 1,427.84.The Nasdaq Composite Index was up

35.34 points, or 1.18 per cent, at3,022.30.

BRITAINS blue-chip index posted itshighest close in nine monthsyesterday, supported by strongGerman economic data but

enduring a late sell-off as it balked attechnical resistance.The FTSE 100 closed up 3.34 points, or 0.1

per cent, at 5,924.97, edging off an intradayhigh of 5,937.93 on a bout of selling in thelast 45 minutes of trading.The sell-off dragged the index back below

a September intraday high that had beenthe top end of recent ranges.

A close above the September high of5,932.62 would be a very positive sign, butwith resistance at the year high (of 5,989)before we get to 6,000, Id still bepatient,said Phil Roberts, head of techni-cal analysis at Barclays Capital.

Despite failing to post a strong close, theindex rose for a fifth day, the second suchrun this month and the fourth this year.

Supporting the rise was a much biggerthan expected jump in Germanys influen-tial ZEW survey of economic sentiment inNovember. The FTSE 100 added 0.2 per centin the 70 minutes after the data.

Miners were among the top gainers inBritain, with basic materials adding 6points and bringing the index into positiveterritory. Miners are sensitive to global eco-nomic sentiment, and were further sup-ported as a ZEW economist said Germanywas not heading for recession.

Whitbreadwas among the top gainers,up 2.5 per cent as Britains biggest hoteland coffee shop operator posted a rise inthird-quarter sales. Tullow Oil lost 8.4 percent, making it indexs biggest faller, afterit said a well drilled off the coast of Ghanafound no oil in its main target area.

BESTof the BROKERSBrewin Dolphin Holdings PLC

5 Dec 6 Dec 7 Dec 10 Dec 11 Dec

p195.0

192.5

187.5

190.0

193.3011 Dec

BREWIN DOLPHINNumis continues to giveinvestment company ahold rating, and raisesthe target price to 188p.After a reorganisation, thebroker thinks the firm canexceed its 20 per centoperating target, butadmits changes couldimpact results for clients.

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

FTSE


5,940

5,930

5,920

5,910

5,890

5,880

5,870

5,900

5,924.9711 Dec

Inchcape PLC


p447.5

445.0

40.0

442.5

432.5

435.0

30.0

437.5

446.1011 Dec

INCHCAPEUBS has issued a buyrating for the car retailer,setting a price target of515p. The broker expectsthat car sales will increasein emerging markets, andan increase in aftersales

activity to grow to 54 percent of gross profit by2016.

Caretech Holdings PLC


p176

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173

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171.0011 Dec

CARETECHCanaccord downgradesthe care service providersrating to hold, andreduces its target price to184p. The firm needs todemonstrate organicgrowth, said the broker.The costs of expansionsmust be kept down to helpmarginal improvement.

UBSJames Broderick has been

appointed chief executive ofwealth management, UK andJersey, at the bank. He joins fromJP Morgan, where he was head ofits asset management business inEurope, Middle East and Africa.Broderick previously held roles atWellington ManagementCompany.

Royal London Asset ManagementRob Williams has been appointed head of distribution at theasset management firm. He was previously chief sales and

marketing officer at Skandia Investment Group. Williamshas also held roles at JP Morgan Asset Management.

JP Morgan Private BankSara Yates has been appointed global currency strategist inthe private banks foreign exchange and commoditybusiness. She joins from Barclays Capital, where she waslead FX strategist for its European corporate business. Yateshas also held roles at UBS Wealth Management.

AT KearneyThe management consultancy has appointed Phil Dunne asUK managing partner. He has been a partner at AT Kearneysince 2003, and currently leads its London mergers andacquisitions practice. Dunne has over 25 years experience in

the consulting industry.

Reynolds Porter ChamberlainThe law firm has announced three partner hires fromWragge & Co to its corporate team. Richard Haywood wasWragges managing partner and is a mergers andacquisitions lawyer. Maurice Dwyer is a corporate financelawyer and was Wragges head of corporate. David Marshallalso previously worked at Travers Smith.

Kuber VenturesThe portfolio management firm has appointed DebbieMahanta as business development director. She haspreviously worked for St Jamess Place, UBS and GoldmanSachs.

WHOS SWITCHING JOBS Edited by Tom Welsh

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

CITY MOVES in association with

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

FTSE 100 hits a nine-month closinghigh after strong German figures

7/30/2019 Cityam 2012-12-12

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FORECASTS of the end of theworld have an even worsetrack record than economicpredictions. Followers of theMayan calendar believe it will

all come to an end next week.But we have been here before. In

1956, an American group led by asuburban housewife believed acatastrophic flood would destroy theworld on a specific date. Concealinghis true identity, leading US socialpsychologist Leon Festinger joinedthem several months previously.When the flood failed to appear, henoted that, far from abandoningtheir beliefs, the members becameeven fervent in their view that theworld was about to end.

Festinger used this evidence to

LONDON is booming. Figuresfrom the 2011 census show thecity has witnessedunprecedented demographicchange since 2001. Over the last

10 years, its population increased by11.6 per cent from 7.3m to 8.2m in2011. A full 10 of the 20 fastest growinglocal authorities in England and Walesare located in the capital. Thepopulation of Tower Hamlets (whereCanary Wharf sits alongside vibrantWhitechapel) grew by 26.4 per cent.

Aside from becoming more populousand diverse (only 45 per cent ofLondons population is now whiteBritish), London and Britain moregenerally is also getting older. Thereare 905,000 people aged 65 or above inthe capital. The proportion of those inthis category in England and Wales isthe highest ever recorded. Most aston-ishingly, the number of people aged 90or above has leapt up from 340,000 in2001 to 430,000 today.All this leaves business with a puzzle.

Despite the argument that an ageingpopulation will leave Britain at themercy of demographic crisis that

cityam.com/forum

Those 55 or above

will account for 80 percent of extra spendingover the next 20 years

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.

20WEDNESDAY 12 DECEMBER 2012

DICK STROUD

Old age Britain: An opportunity forfirms to profit from demographics

there arent enough young people tofund benefits for the elderly, and thattaxes must therefore rise this is also amega-trend that will significantly

change the way business operates.Demographics isnt destiny. But thescale of ageing, combined with theconcentration of wealth in the handsof older consumers, could providecompanies with rare opportunities ina difficult economic environment.

Recent reports from Accenture, BCGand Bain all predict the primarysource of increased consumer spend-ing in the US and most of Europe willbe driven by older shoppers. In France,McKinsey estimates that those aged 55or over will account for 80 per cent ofthe growth in consumer expenditureover the next 20 years. In the US,

research by Nielsen shows that twothirds of the 13m most affluent house-holds are headed by someone over theage of 55.And in Britain, the Institute for Fiscal

Studies has reported good and badnews for older Brits. The recessionreduced the average household grosswealth of the over 50s by 60,000. But80 per cent of those aged between 50and the state retirement age will onlysuffer a 20 per cent drop in their retire-ment income.

This represents a sizeable group ofconsumers who are no longer financ-ing mortgages, pensions or children.And, importantly, the income of theseolder people (through their purchaseof annuities or other low-risk assets) isfar less exposed to economic vagariesthan that of their children or grand-children.

It is baffling why companies haveproven so slow to realign their busi-ness activities to cater for this older,more prosperous market. This mysterywas illustrated by research from theEconomist in 2011. Less than 10 percent of executives thought their mar-

keting to older consumers was effec-tive, yet 65 per cent expected the pro-portion of revenue derived from themto increase.

So how can companies improve this?A good start would be to fully grapplewith the most obvious factor commonto older people. They are all ageingphysically. Companies in the food,

pharmaceutical, medical, optics, andcosmetics industries are alreadyresponding to the increase in demandcreated by demographic change. Theglobal market for anti-ageing prod-ucts is expected to grow to $300bn by2015, and smaller but significant mar-kets already exist for spectacles, dentalcosmetics and hearing devices. These

are the age-silo products that areused by and marketed to older people.

But the effects of physical ageingreach beyond these industries andinclude retail, finance and hospitality.One company that has proven particu-larly adept at recognising the broaderpotential is Apple. Its obsessive atten-tion to detail from user-friendly prod-uct design to packaging, support andadvertising is peculiarly attractive toolder consumers, who have weakereyesight, hearing and dexterity.

According to recent polling by YouGov,Apple products are disproportionatelypopular among older consumers.The changing face of society can be

daunting to business. The primary rea-son why companies are not reacting toobvious trends is their uncertainty ofwhere to begin. But as Apple shows,there is first mover advantage to behad. Expect to see shops, products,even banks, quickly adapting to thenew realities of old age Britain.Dick St

cityam 2012-12-12

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