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Angela Merkel (left) promised intensive talks following calls from David Cameron (right) to renegotiate the UKs membership of the EU

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German chancelloropen to compromiseas Cameron kicks offreferendum campaign

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GERMAN chancellor Angela Merkelyesterday said she would seek a com-promise agreement to stop Britainleaving the European Union, followingDavid Camerons pledge to hold a ref-erendum on the UKs membership ofthe organisation by 2017.

We are prepared to talk aboutBritish wishes but we must alwaysbear in mind that other countries havedifferent wishes and we must find afair compromise, Merkel said. Wewill talk intensively with Britain aboutits individual ideas but that has sometime over the months ahead.

However her foreign minister GuidoWesterwelle warned that cherry pick-ing is not an option with the EU.

French foreign minister LaurentFabius was even less enthusiastic: IfBritain wants to leave Europe we willroll out the red carpet for you.

www.cityam.com FREE

Italian Prime Minister Mario Montisaid he believed Britons would stay inthe EU if they were given a choice,while the White House restated itsbelief that the UK should stay inEurope.

Cameron yesterday insisted that hewould vote in favour of Britain staying

in the 27-member bloc. HoweverLabour leader Ed Miliband rejectedthe entire concept of a public vote onmembership: Our position is no: wedont want an in-out referendum.

However, business leaders came outin support of the Prime Minister with48 industry and City leaders backing

his plans in a letter to The Times, pub-lished today.The Prime Minister delighted

Eurosceptics and angered Europeanleaders in equal measures with hislong-awaited speech, which was deliv-ered yesterday morning in the City.

In it he pledged to renegotiate

EXPERT: EURO CHIEFS SERIOUS ABOUT FINANCIAL RULES

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BY JAMES WATERSON

MERKEL:LETSTALK

FOOTBALL BEWAREISSUE 1,804 THURSDAY 24 JANUARY 2013

MARK KLEINMAN:THE INSIDE TRACKRead our brilliant columist on Page 7Plus Deloittes top 20 richest clubs: Page 31

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Britains relationship with the EU, andput the new deal to a vote by halfwaythrough the next parliament, saying itis time for the British people to havetheir say on Europe.As part of the renegotiation process

Cameron promised to conduct anaudit of the powers Britain wants toclaw back from Brussels. In the speechhe highlighted working time restric-tions on doctors in the health serviceas an example of the EU restrictingBritish practices.

Cameron also attacked City leaderswho fear a referendum may negativelyaffect the economy: Some people saythat to point this out is irresponsible,creates uncertainty for business andputs a question mark over Britainsplace in the EU. But the question markis already there: ignoring it wontmake it go away.Yesterday the fiercely Eurosceptic

Ukip party claimed credit forCamerons decision.

Ukip should be awarding itself amedal. I dont think we would have gothere with internal pressure alone,Eurosceptic Conservative MEP DanielHannan told City A.M. Weve got thething weve been wanting for over 20years.

APPLE posted record profits lastnight, as sales of the iPhone 5 andiPad mini in the months sincetheir releases drove it to new

heights.However, the companysperformance disappointed WallStreet, sending Apple shares down

BY JAMES TITCOMB more than 10 per cent in afterhours trading as it warned oflower revenue growth in thecoming months.

Apples highly anticipatedresults for its crucial first quarter,

which covers October, Novemberand December, revealed sales of$54.5bn (34.4bn), an 18 per centincrease on the previous year.

Profits, which had beenexpected to fall due to lowerproduct margins, rose marginallyto $13.1bn. This was despite thequarter spanning 13 weeks,compared to 14 weeks last year.

Apple sold a record 47.8miPhones and 22.9m iPad, and thiswould have been higher if it hadmanaged to keep up with demand.

The companys profit marginswere hit, however, due to therelatively low price of the iPadmini and the higher productioncosts associated with the iPhone 5.

Were very confident in our

product pipeline as we continue tofocus on innovation and makingthe best products in the world,chief executive Tim Cook said.

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[email protected]

Follow me on Twitter: @allisterheath

THE US House of Representativesyesterday passed a Republican planto allow the federal government tokeep borrowing money until mid-May, after the top Senate Democratand White House endorsed it.

The vote in the Republican-controlled House drew theopposition of 111 Democrats, manyof whom labeled it a negotiatinggimmick that would set up a newfiscal cliff just weeks after theWhite House and Congress reached adeal to avert a package of automaticspending cuts and tax hikes.

The plan avoids for the time beinga repeat of the 2011 debt ceilingstandoff that rattled markets andprompted a downgrade of thegovernments triple-A credit rating.

The US Treasury is expected toexhaust remaining borrowingcapacity under the $16.4 trillion(10.4 trillion) debt limit betweenmid-February and early March.

House Speaker John Boehnerwarned immediately after the votethat Republicans would take thenext opportunity automaticbudget cuts set for 1 March todemand reforms from PresidentBarack Obama.

Boehner said the automatic cuts,which were temporarily delayedearlier this month, are going to gointo effect unless Obama makesconcessions,

Congress votes

to extend USborrowing limitBY CITY A.M. REPORTER

Jobs miracle sees recordnumber of Brits in workUNEMPLOYMENT plunged again inthe three months to November, offi-cial figures showed yesterday, defy-ing fears of a triple dip recession andbringing fresh hope that the econo-my is on the mend.

Employment jumped 90,000 to anew record high of 29.68m whileunemployment dropped again to2.49m. Full time employment drovethat increase, rising by 113,000,while the number of people in parttime employment dipped by 23,000.That sent hours worked soaring 3.3

per cent to 364.9m per week, and thenumber of part time workers unableto get a full time job dropped by23,000 to 1.38m. But youth jobless-ness edged up by 1,000.

Despite the positive figures, GDP isstill expected to have fallen in thefinal three months of 2012.

It remains a puzzle that an econo-my showing basically flat growth isgenerating a rise in total hoursworked of 2.3 per cent on a year earli-er. The apparent continued declinein service sector productivityremains a bit odd, said BNP Paribaseconomist David Tinsley.

Part of the reason for such a sus-tained rise in employment may bethe low rise in pay incomes rose 1.5per cent in the year, hitting 472 perweek in November, well below infla-

GMG ends talks to s ell Trader stakeGuardian Media Group has called off talkswith interested buyers over the sale of itshalf stake in the car classifieds companyTrader Media Group following a failure toagree a price. Apax, its joint venturepartner in Trader Media, was interested inbuying out the 50.1 per cent owned byGMG in a deal that would have netted thepublisher of the Guardian and theObserver around 300m in cash. Apaxsoffer for the stake valued Trader at around1.2bn including net debt of 600m,significantly less than GMG had hoped for

Cuts cause General Dynamics lossGeneral Dynamics yesterday became thefirst big US military contractor to take asignificant writedown for declining USdefence spending when it announced a$2.13bn (1.3bn) fourth-quarter loss atthe start of its reset year.

Chinese fund and Schmidt bank uniteRaine, a boutique merchant bank backedby Google executive chairman EricSchmidt has struck a deal with a Chinesestate-owned fund to work together onmedia, sport and entertainmentacquisitions.

Jobs warned rival to stop poachingworkers from AppleSteve Jobs threatened a patent lawsuitagainst Palm, the maker of phonehandsets, unless it agreed to stop hiringApples employees, according to courtdocuments revealed this week.

Dreamliner inquiry lands at EatonAn aerospace factory in Hampshire hasbeen drawn into a Japanese investigationover a fuel leak that caused an emergencyon one of Boeings 787 Dreamliners.

Ladbrokes homes in on 30m BetdaqLadbrokes chief executive Richard Glynn ison the verge of making his first acquisitionsince taking the reins at the bookmakerthree years ago with the purchase ofbetting exchange Betdaq for about 30m(25m).

Tea cartel formed to boost profitsThe price of a cup of tea could rise afterthe world's biggest producers agreed tojoin forces to boost profits, a Sri Lankanminister has announced.

Goldman opposes independent chairGoldman Sachs is trying to block ashareholder proposal for an independentchairman from appearing on the proxyballot, following an effort last yearagainst a similar proposal that saw thecompany name a lead outside director.

Judge approves Kodak loanA judge has a pproved a financing dealworth $843.7m (533m) for Kodak, whichthe company says should help it emergefrom bankruptcy protection midyear.

RUPERT Murdochs NewsInternational has snapped up therights to show online highlights ofPremier League football games.

The three-year deal, which beginsat the start of the 2013-14 season,means that News Internationalsnews outlets the Sun, the Timesand the Sunday Times will be ableto show Premier League highlightson their websites and smartphoneand tablet apps. Meanwhile, BSkyBextended a deal to show lengthyhighlights of the 226 games notshown on live television.

37,000to8.1%

ALL FIGURES ARE FOR SEP TO NOV 2012 UNLESS OTHERWISE INDICATED*MONTH TO DECEMBER *YEAR TO NOV 2012

FULL-TIMEEMPLOYMENT

MALE

UNEMPLOYMENT

STAYED FLAT AT

7.7%

FEMALE

UNEMPLOYMENT

PART-TIMEEMPLOYMENT

TOTAL HOURS WORKED

113,000

PUBLIC SECTORWAGES

PRIVATE SECTORWAGES

EMPLOYMENT HIT A RECORD HIGH IN NOVEMBER

JOB SEEKERSBENEFIT CLAIMANTS

12,100 to1.56m*

EMPLOYMENT

JUMPED 90,000

to29.68m

UNEMPLOYMENT

FELL 37,000

to2.49m

NOW 7.7%

1,000 to 957,000YOUTH UNEMPLOYMENT

INCLUDES THOSE IN FULL TIME EDUCATION

23,000

3.3% to 364.9mper week

2% to 487 per week*

1.4% to 468 per week*

BOTH BELOW INFLATIONOF 2.7%*

Murdoch scoreswith footie deal

2 NEWS

BY JAMES TITCOMB

THE investigation into interdealerbroker Icap in connection withLibor rate rigging has intensified,a source close to the probeconfirmed last night.

Seven of the estimated 50 staffworking on the Libor probe forCity watchdog, the FSA are nowfocusing on Icap.

Icap, founded by MichaelSpencer, said last year that it had

been asked to provide informationto investigators and said it was co-operating fully with theauthorities.

FSAs Libor probegathers speed

BY CITY A.M. REPORTER

BY TIM WALLACE

To contact the newsdesk email [email protected]

GOOD on David Cameron. He hasfinally listened to publicopinion and agreed to seek abetter, renegotiated EU

membership deal for the UK. Nobodyborn af ter 1957 in the UK has everhad a chance to say what they thinkof an organisation that controls more

of UK public policy than ever before.Of course, the details of the primeministers proposed course of actionare not perfect, and all of this couldyet come to nothing as the referen-dum is due to take place after thenext election, which Labour will prob-ably win, but this is nevertheless ahugely important moment. Camerondeserves to be congratulated for hiscourage. He wants to stay in the EU;but understands that without signifi-cant repatriation of powers the publicwill eventually lose patience.

Those who believe in free trade and

EDITORSLETTER

ALLISTER HEATH

Camerons decision to call a referendum is absolutely right

THURSDAY 24 JANUARY 2013

open markets should not fear this ref-erendum. The business community isdivided on the EU, unlike in the 1970swhen it almost universally backedjoining the common market. Nowmany, especially smaller firms butalso plenty of large ones, support alooser arrangement; they realise thatthe EU is in terminal decline as a mar-ket and resent the endless stream ofdamaging, job-destroying rules, withSolvency II for insurers merely the lat-est in an extraordinarily long list.

In the 1970s and early 1980s, it waspossible to portray the EU as a liberal-ising, anti-communist force; thesedays, it is primarily an engine of anti-democratic corporatism and socialdemocracy, with some important pro-individual freedom elementsdrowned out by state-building.

It is sad that most banks remain infavour of the status quo, which inreality means progressively greatercentralisation. They have got this ter-ribly wrong. Yet business as a whole,like British society is divided; mostwant to stay in some much looserrelationship, if it is possible to negoti-ate one. Thats also clearly Cameronsposition, though it remains to be seenwhat he exactly has in mind, andwhat he is able to negotiate.

A referendum will create uncertain-ty. But so does holding general elec-tions or referenda on Scottish

laps with pro-EU integrationists)argued it would have no impact onwhere business chose to locate;Londons pool of talent, language,restaurants and culture would sup-posedly be enough to keep everybodyhere. Yet now, suddenly, none of thesematter: business is about to run away

because of the EU question. Thesepeople need to make up their minds.Above all, the City and business

must stop scaremongering. Theyshould focus on getting the right kindof renegotiation which preservestrade and essential freedoms but lib-erates us of unnecessary interference.If they dont engage in this debate ina constructive manner, they will haveonly themselves to blame if they dontlike the final outcome.

independence, events which are gen-erally backed by opponents of thisparticular referendum. Big City firmshave got their priorities wrong: theprospect of the Labour party winningthe next election and imposing 75 percent tax rates on bonuses, or the pos-sibility of the EU capping them in an

unworkable way, are much greaterthreats to their business models. Carcompanies should spend more timeworrying about energy regulations ora further collapse in demand for theirproducts caused by the dysfunctionaleuro. It is strange that these firms many of which have gone begging forhandouts in recent years are sovocal about opposing any repatriationof political powers to the UK but soquiet on other issues of far greater rel-evance to their prospects.There is a parallel with the 50p tax

rate. Supporters (a group which over-

tion at 2.7 per cent.Recruiters Robert Half forecast a

strong start to 2013, with professionalsparticularly likely to benefit fromstrong hiring. Its study shows 23 percent of directors expect to take onmore staff in the first half of the yearwhile only nine per cent expect firings.

The Association of Graduate

Recruiters predicts a nine per cent risein vacancies for university leavers thisyear, as well as a two per cent rise inaverage starting salary to 26,500.And the British Retail Consortiums

latest figures show a one per cent risein employment in the sector in theyear to December, despite the indus-trys problems.

The new jobs website for London professionalsCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

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BUSINESS leaders yesterday broadlywelcomed David Camerons plans torenegotiate a new deal with theEuropean Union.

In a letter to The Times, 48 industryand City leaders said the PrimeMinisters promises of a negotiationfollowed by an in-out referendumwithin five years was good for busi-ness and good for jobs in Britain.The signatories included London

Stock Exchange chief executive XavierRolet, Standard Chartered chairmanSir John Peace and Diageochief executive PaulWalsh.

Many major UK indus-try bodies also said theywould be happy to seeBritains current EU dealrenegotiated with a newfocus on free trade.

The vast majority of busi-nesses across the UK want tostay in the single market,but on the basis of arevised relationshipwith Europe thatpromotes trade

Business backs

Camerons callon Europe voteBY JAMES WATERSON and competitiveness, said John

Longworth of the British Chambers ofCommerce. Announcing plans for areferendum on British membershipputs the onus on the rest of Europe totake the Prime Minister seriously, asthey will now see that he is preparedto walk away from the table.The Institute of Directors called the

speech realistic and pragmatic andwelcomed any move to curtail largeamounts of costly regulation beingintroduced through unaccountableprocesses.

But there were concerns over thetimescale of the announcement, with

the vote not likely to take placeuntil late 2017. This is a politicaldecision, not an economic deci-sion, said Sir Martin Sorrell, WPPchief executive, at the WorldEconomic Forum in Davos. You

just added another reason why peo-ple are going to postpone invest-

ment decisions.

WHAT DID BUSINESS LEADERS MAKE OF THE PRIME MINISTERS SPEECH?

nThe Prime Ministers commitmentto reshape the EU from within and

his ambition to secure a better deal forBritain is right. But this strategy is notwithout risk. If the door to a UK exit fromthe union is open it will diminish ourability to influence the reforms thatEurope needs. It is far from certain,moreover, that the outcome ofnegotiations will be clear cut, meaningthat greater uncertainty about UKmembership particularly for business,will prevail.

TERRY SCUOLERChief executive of theEEF organisation forUK manufacturers

LSE chief XavierRolet said hebacked Cameron

THE FORUM: Pages 20 -21

THURSDAY 24 JANUARY 20133NEWScityam.com

n David Cameron has committed toholding an in/out referendum on Britainsmembership of the European Union bythe end of 2017 if the Conservatives winthe next general election.

n Before this he will seek to negotiate anew deal with Europe but thereferendum will be on membership, notwhether to accept this revised package.

n The referendum could be required aspart of any Conservative coalition dealafter the 2015 general election.

n Cameron will personally campaign forBritain to stay in the EU but fears astronger Eurozone could curtail free trade.

n The Prime Minister wants completingthe single market to be our drivingmission.

n Cameron used the speech to portrayhimself as heretic, who wants the EU to

be more flexible rather than act with thecumbersome rigidity of a bloc.

n Some powers should return fromBrussels to national parliaments. Camerondid not provide details but hinted theworking time directive is his top target.

n Cameron attacked those who say areferendum creates uncertainty forbusinesses. He said the other option is tolet anti-EU anger build up until the publicvote for complete withdrawal from theorganisation.

n Holding a referendum immediatelywould be inappropriate because it is notclear what form the EU will take followingthe Eurozone crisis.

n Cameron rejects complete withdrawalfrom the EU in favour of the modelpractised by Norway and Switzerlandbecause they are very different from us.

n The Prime Minister believes theEurozone crisis will force the EU to pass anew treaty, providing the opportunity for

Britain to renegotiate its relationship.

HIGHLIGHTS OF CAMERONS EU SPEECH

nFree movement of goods andpeople is enormously important

for the British economy, and we need topreserve that situation. At the sametime, there are serious concerns aboutlarge amounts of costly regulationbeing introduced throughunaccountable processes. A futurereferendum to decide the workings ofour relationship is the best way toaffirm Britains participation in a free-market Europe which is competitive andderegulated.

SIMON WALKERDirector general of theInstitute of Directors

nWe support the Prime Ministersstated goal of keeping the UK

within the European Union albeit onbetter terms. Londons position asEuropes leading international financialand business centre is crucial tosustaining jobs and growth not just in theUK but across the continent. Uncertaintyover this relationship with Europe risksmaking the UK less attractive as aninternational centre across manyindustries by making it more difficult tomake long-term investment decisions.

MARK BOLEATPolicy chairman at theCity of Londoncorporation

nPolling has consistently shown thatthe British electorate want a better,

looser relationship with the EU ratherthan a Brixit or the status quo if thatson offer. David Cameron has outlined aclear course towards precisely the type ofslimmed down Europe that most peopleand MPs in his party have been callingfor. European partners who feared animminent dawn raid on Brussels will berelieved. He has set out a plausible andpowerful case for EU reform and shouldget a fair hearing in national capitals.

MATS PERSSONDirector of OpenEurope, a think tankcalling for EU reform

nThe Federation of Small Businessesremains neutral on the issue of

being in or out of the European Union,but recognises there is more certaintygoing forward to 2017-18. Nearly aquarter of FSB members export and thevast majority do so within the EuropeanEconomic Area. Generally FSB membersfind it easier to trade with other EUcountries, especially first time exporters.Governments around the world need todo all they can to keep markets open andtake barriers away.

JOHN WALKERNational chairman,Federation of SmallBusinesses

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GROWTH in the UK will be evenmore sluggish than previouslyexpected in 2013, while theEurozones economic output willshrink again, the InternationalMonetary Fund (IMF) said yesterday.The lending body slashed its GDP

projections for regions throughoutthe world, predicting that globalgrowth will slow to 3.5 per cent in2013 slightly down from its earlierestimate of 3.6 per cent expansion.

Britains economy will expand justone per cent this year, the IMFexpects, edging down its previousforecast of 1.1 per cent growth.

In its last World Economic Outlook,published last year, the IMF said theEurozone could expect 0.1 per centgrowth in 2013. Yet now it predicts a0.2 per cent contraction.

While there are plenty of candi-dates vying for the dubious honourof being the sick man of Europe,Europe has got the sick man of theworld gong in the bag, commented

IMF expects UK

to grow just 1pcas forecasts cut

BY JULIAN HARRIS Jason Conibear of foreign exchangespecialists Cambridge Mercantile.

With Germanys economy goingoff the boil again, the bloc's laggardswill drag it into contraction for thesecond year in a row.

Despite being widely regarded asthe Eurozones powerhouse economy,German will fare even worse than theUK in 2013, the IMF said.

German GDP will grow by just 0.6per cent, its economists believe, down0.3 percentage points from lastyearss forecasts.

And the IMF expects France theEurozones second largest economy to expand by just 0.3 per cent.

In crisis-struck Italy and Spain, GDPwill shrink by one per cent and 1.5per cent respectively, the IMF said.Across the pond the situation is

thought to be more robust, however.Despite ongoing strife over the US

debt ceiling, the IMF expects theworlds largest economy to grow bytwo per cent throughout 2013 downby only 0.1 percentage point since itsprevious forecast.

JP Morgan boss Jamie Dimon apologised to shareholders yesterday for the $6.2bn loss

THURSDAY 24 JANUARY 20134 NEWS cityam.com

JP Morgan boss Dimon hits outat accusations of opaquenessJP MORGAN chief executive JamieDimon made a staunch defence of

the banking industry yesterdayafter accusations that big banks arenot transparent enough.

Speaking at the World EconomicForum in Davos, Dimon warned offurther regulation of the industry.I think a lot of regulators areoverwhelmed, he said. Theyreoverwhelmed with rules andregulations.

Responding to accusations fromPaul Singer of hedge fund Elliot

BY HARRY BANKS Associates that large banks are toobig, too leveraged, too opaque,Dimon said: Our [company filing]is 400 pages long. What would you

like to know? With all due respecthedge funds are pretty opaque too.Dimon also apologised to

shareholders for the $6bn (3.8bn)loss associated with a Londontrader nicknamed the Whale. Hesaid the incident was a terriblemistake, but that the bank hasmoved on and is still highlyprofitable.

If youre a shareholder of mine,I apologise deeply, Dimon said.

But we had record results andlife goes on.

Despite a $6.2bn loss from badtrades in JP Morgans chief

investment office last year, the bankstill managed to earn a record$21.3bn in 2012.

JPMorgan Chase is the largest USbank, with $2.36 trillion in assets.Its chief investment office has sincebeen restructured and traders andexecutives involved with thewhale trade were dismissed.

After an internal review,Dimons bonus was cut in half to$11m for 2012.

GREENHILL & CO, the New Yorkbased investment bank andadvisory firm, reported a 6.1 percent fall in profits in the fourthquarter of 2012 on lower returnsfrom investments.

Despite a 17 per cent rise inrevenues from advising clients, apoor run of investments pushedprofits down to $15m (9.5m) from

just over $16m in the previousyear.

Greenhill saw investment lossesof $8m in the quarter, compared

with a $9m profit in the samequarter a year earlier.

The results sent shares in

Greenhill down around 0.8 percent in trading yesterday.

Greenhill profits fall as advisory

gains offset by bad investmentsBY CITY A.M. REPORTER Mergers and acquisitions

worldwide fell in 2012 for the firsttime in three years, stuntingincome from advisory work. Forthe full year, Greenhill saw a fourper cent fall in revenues fromadvisory work.

However, Greenhills chiefexecutive Scott Bok said he expectsthe market for M&A work toimprove in 2013.

For the near term, it is clearthat we began the new year with afar more attractive backlog ofannounced and pendingtransactions than we had a yearago, Bok said yesterday.

Greenhill was founded in 1996by current chairman Robert

Greenhill, who was previouslychief executive of Smith Barney.

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PROVIDERS of a new high-profileinvestment product are actively lobby-ing to be included in a government-run compensation programme, CityA.M. has learned.

Oliver Cardigan, a director at NumisSecurities, said his company has haddiscussions with top people in gov-ernment in the hope of extendingconsumer protection to retail bonds.

Numis want the FSA-controlledFinancial Services CompensationScheme (FSCS) which guarantees upto 85,000 of personal savings with abank or building society to beextended to cover the balance of anindividuals investment in retailbonds.

Retail bonds enable individualinvestors to buy debt directly from acompany. The UK market has grownat a fast rate since 2010, with investorsattracted by yields that can beupwards of 7.5 per cent.

Retail bondsconsidered forcompensation

Under current rules the entireinvestment is at risk if a company isliquidated. Including retail bonds inany compensation scheme is likely todemystify the product and substantial-ly push up demand for retail bonds.

Currently the vast majority of theseissues are taken up by discretionaryfund managers, rather than self-traders, Cardigan explained. Thereare ads in the newspaper [but] becausethe FSA is so cagey about the risk ofany lawsuits you cant put a Facebookcampaign or a TV campaign becauseall the regulatory language wouldspoilt the effect.

Numis is preparing to unveil detailsof the first retail bond issue of 2013 involving FTSE 250 oil and gas explor-er EnQuest within the next week.According to Henrietta Podd, head of

debt advice at Canaccord Genuity,there were 16 new retail issues in 2012,raising a total of 1.5bn up 78 percent year-on-year. She said the averageticket bought by investors in retailissues managed by her company isaround 20,000.

EXCLUSIVEBY JAMES WATERSON

6 NEWS cityam.com

NEW LOOK is in talks with banks over refinancing its 1.1bn debt, following improvedtrading. The fashion retailer, whose designers include Kelly Brook (above), hasrevamped stores in a bid to attract older customers. New Look reported a 3.7 per centlike-for-like sales rise at Christmas, and is seen to be able to attract lower interest rates.

NEW LOOK BROWSING FOR DEBT RESTRUCTURE

TWO top lawyers were yesterdayappointed to the board of theFinancial Services CompensationScheme (FSCS) to bolster theleadership team after thedeparture of two veteran members.

The FSCS acts as a fund of lastresort for depositors in broken

banks and building societies ifthey go under, deposits are

guaranteed up to 85,000, with therest of the sector bearing the cost.

Former Aegon general counselMarian Glen has been appointed by

Banking depositors backstopbeefs up its governing board

BY TIM WALLACE the Financial Services Authority.Her experience in the area includesremediation for Scottish Equitablecustomers, working on redressprovision.

And Charles McKenna, formerlya corporate partner at law firm

Allen & Overy has also joined theboard.

They replace Ros Reston andTony Ashford, who were membersof the board through the financialcrisis, when the FSCS was calledupon to compensate the UK

customers of several failedIcelandic banks.

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JUST a week after revealing theywere in merger talks, Tui Traveland its German parent Tui AGhave called off discussions, send-ing shares in the FTSE 100 com-pany tumbling nearly five percent.Tui AG, which owns 56 per

cent of Tui Travel, said the nil-premium merger on the tablewas not attractive based on thecurrent share prices.The holiday groups are now

barred from rekindling talks forsix months under TakeoverPanel rules.Tui AGs major shareholders,

including Russian billionaire

BY MARION DAKERS Alexei Mordashov and Norwegianshipping magnate John Fredriksen,have been pushing the companiesto save on costs by sharingresources.

Sources close to the companieshad talked up the value of syner-gies, but analysts were scepticalthat the firms could squeeze theclaimed 500m (420.3m) savingsout of two companies that alreadywork closely together.

With denial well ahead of themid-February put-up-or-shut-updeadline the no-deal announce-ment may suggest to the marketsthat Tui Travel shares are overval-ued, Accendo Markets head ofresearch Mike van Dulken said in anote to clients.

TUI Travel PLC


280

285

290

295

300 p 278.0023 Jan

HILCO emerged yesterday as thefront runner to buy the brand ofcollapsed camera chain Jessops.

The retail restructuring firm,which bought HMVs debt from itslenders on Tuesday, is understood to

be mulling a plan to open Jessopsconcessions in HMVs stores.Administrators PwC have received

around half a dozen expressions ofinterest for the brand. All of Jessops187 stores closed on 9 January.

Jessops brandeyed by Hilco

BY KASMIRA JEFFORD

AMAZON tightened its grip on CD,DVD and game sales at Christmas,taking a quarter of the market at theexpense of the high street.

Research from Kantar WorldpanelEntertainment found that the onlineretailer took 23.4 per cent of

entertainment sales in the 12 weeksto 23 December, up from 20.3 percent last year. HMV rose onlymarginally to 17.5 per cent, whileTesco and Game saw big losses.

Amazon gainsover Christmas

BY JAMES TITCOMB


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&77!""47

McDonalds to create 2,500 UKjobs as it reveals rise in salesMCDONALDS announced plans

yesterday to create 2,500 jobs atits restaurants this year, takingits UK workforce to 93,500.

The worlds biggestrestaurant group said the move

builds on the 3,500 jobs createdin 2012, of which 70 per cent

were taken by young peopleunder the age of 21.

Business secretary VinceCable, who met with employees

yesterday said: A highly-skilled

workforce is an important partof any growing business. Thats

BY KASMIRA JEFFORD why I am pleased to see howMcDonalds is providingtraining and apprenticeships ina range of skills.

McDonalds is also to beapplauded for helping adultemployees get qualificationsin maths and English.

The fast food giant alsorevealed an unexpectedrise in December sales atestablished US restaurants,

which helped lift itsfourth-quarterprofit by 1.4 per

cent to $1.4bn(883.8m) above

analysts estimates.The group said global same-

restaurant sales for 2012 rose3.1 per cent, with US sales up3.3 per cent and Europeansales its largest market after

by revenue up 2.4 per cent.Total sales rose 1.9 per

cent to $6.95bn.

Tui Travels shares closed at 278p,below the price they were before themerger talks were announced.Shares in German-listed Tui AG fell5.4 per cent to 7.51.Tui Travel was advised by Lazard

during the talks.

Mark Kleinman is the Cityeditor of Sky News@MarkKleinmanSky

AR R O G A N T , i n d o l e n t ,avaricious and these aresome of the politer adjectivesapplied to investment

bankers and private equity firmsduring their ongoing stand-off withCity fund managers.

The permafrost between themhas shown few signs of thawing

since two BlackRock executivesoutlined in 2011 a litany of gripesabout the way bankers sell newshare issues.

Now add the voice of Legal &General Investment Management(LGIM), the most influentialinvestor in the City, to this chorusof criticism.

In its submission to the UKListing Authoritys review oflisting standards, a copy of whichIve seen, LGIM suggests a range ofproposals to reform the pivotalrelationship between fundmanagers and bankers.

Among its most notabledemands is a call for banks topublish their previousperformance record on companylistings and to name theindividuals responsible for thosetransactions.

It also wants to see a limit onthe size of bank syndicates inorder to preserve a broad range ofindependent research oncompanies, and a deferral of

INSIDETRACK

MARK KLEINMAN

Icy times between fund managers and bankers

sponsors fees for up to six monthsafter a company lists withpayments linked to the averagepost-flotation share price.

The fund manager also criti cisesthe widespread practice ofparachuting directors ontocompany boards shortly ahead ofan initial public offering (IPO),which it argues signals alukewarm commitment tocorporate governance.

LGIM is right. The emergence ofever-larger syndicates has acted asan impediment to theaccountability of banks.

Smaller pools of advisers wouldredress that balance. Likewisedelaying fees would demonstratecloser alignment between thelong-term interests of bankers and

investors.The mutual distrust between the

private equity industry and fundmanagers will take time to repairitself. The Citys virtually-

moribund IPO market is testamentto the need for it to happen.

A SWITCHED-ON ROADSHOWOne company that could play arole in that rapprochement isowned not by private equitybarons but by Britains wealthiestbrothers.

Step forward, Global Switch, thedata centre operator founded bybillionaire siblings David andSimon Reuben.

A flo tation of Global Switchhas been on the cards for years. Aroadshow of institutionalinvestors, which City sources saygot underway earlier this month,and the ongoing rally in equitymarkets, lend the idea freshcredence.

The Reubens are in no rush. Themotive for the roadshow, whichalso took place last year, is tofamiliarise prospectiveshareholders with Global Switchwell in advance of a listingprocess one of the otherdemands expressed in the LGIMsubmission.

Global Switchs earnings growthprofile means that it would sit

comfortably in the FTSE 100, witha market value of at least 3.5bn.If it floats in London, that is.

Global Switch is an emergingmarkets technology play that

could list as easily on New YorksNasdaq or in Singapore as in theUK.

That gives t he ownersgeographical optionality (asbankers might put it). It willprovide another test of the CitysIPO credentials.

PREDATOR TURNED PREYAs a rule, chief executives prefer toproject themselves as corporatepredators rather than prey.

Nowhere is this narcissistic traitmore stubbornly exhibited than inthe Citys saturated small- andmid-cap broking sector, where thedearth of fee-generating activity isexacting a stiff toll on the survivalprospects of many firms.

The dire environment hasprompted tentative mergerdiscussions between most of thesignificant operators in this space,including, I understand, PanmureGordon and WH Ireland shortlybefore Christmas.

Another prominent name isunderstood to be in talks about arescue deal that could materialisein the next few weeks.

Expect more news imminently.

Tui Travels mergertalks with parent fail

Business secretary VinceCable applauded

McDonalds forcreating the

new jobs

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ANGLO-Dutch consumer goods giantUnilever said yesterday full-year salesexceeded 50bn (42bn) for the firsttime thanks to strong demand for itssoaps and hair products in emergingmarkets.

The owner of PG Tips, Persil and CifCleaning brands yesterday said pre-tax profit rose seven per cent in 2012to6.68bn on sales up 10.5 per cent to51.3bn.

Underlying sales in emerging mar-kets such as India, China and Brazilgrew by 11.4 per cent and now makeup around 55 per cent of turnover.The company said Magnum ice-

cream and Sunsilk shampoo bothbecame 1bn brands in its portfolio,meaning that Unilever now has 14brands in this category.

Unilever has been focusing on grow-ing its personal care products, whichare more popular in regions like LatinAmerica and Asia. Sales of these prod-

Unilever profitsfrom emerging

market growthBY KASMIRA JEFFORD ucts rose 10 per cent in the period.This helped offset sluggish growth at

its food division particularly spreadssuch as Flora with underlying sales upjust 1.8 per cent in the quarter, due to itsexposure to more developed markets.

Chief executive Paul Pollman said:Markets will remain challenging,with intense competition and volatilecommodity costs. We remain focusedon achieving another year of prof-itable volume growth ahead of ourmarkets.

Shares in PG Tips owner Unilever rose 3.1 per cent to hit a record high of 2,526p

Unilever PLC


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2,480

2,500

2,520

2,540 p 2,526.0023 Jan


BOTTOMLINE

MARC SIDWELL

Swanns way has brought profit but not boosted salesC

HRISTMAS should hardly havebeen a season for merriment atWHSmith, judging by the latesttrading update, with like-for-like

sales down five per cent for the 20weeks to 20 January, and total salesdown four per cent. Yet the stationery,books and impulse goods seller waschipper, pointing to good profitsthanks to careful margin control especially impressive in a season givento heavy discounting.

Investors seemed to share thecheer: shares fell, but remain wellabove both their January lows andthe price they have commanded formost of the last five years. Thatsthanks to the remarkable strategicturnaround worked by Kate Swann,the outgoing chief executive, which

helped WHSmith evolve from a loss-making dinosaur burdened withselling the sort of low margin CDsand DVDs that laid HMV low into anagile, margin-conscious business,returning ever-increasing profits.

However, it might be time for alittle anxiety about how long thisnew vision can remain airborne.

It isnt as if Swann can claim that

there is a problem in one particulardivision. High street sales were downfive per cent like-for-like and five percent in total perhaps hardlysurprising, given the performancesother high street chains have beenreporting over the same period. Buttravel stores in travel hubs liketrain stations and airports, the focusof the new WHSmith strategy wasdown as well. Total sales for thedivision were flat, despite the chainscontinued expansion visible onceagain this month with theannouncement that eight new storeswill be part of the new Doha airportwhen it opens later this year. Andlike-for-like sales in travel, strippingout sales in new stores, were downby four per cent.

The new WHSmith is much lessdependent on Christmas season salesthan it used to be, but these f iguresare no one-off. WHSmith total like-for-like sales were down four per centin 2010, five per cent in 2011 and fiveper cent in 2012.

Investors havent minded that fall,since group pre-tax profits rose atthe same time, and in healthyincrements: group pre-tax profit wasup nine per cent in 2010, four percent in 2011 and 10 per cent in 2012.

Yet there must come a pointwhere one effect starts to cancel outthe other. Despite the expansion intravel and overseas outlets, overallrevenues have continued to decline:down two per cent in 2010, three percent in 2011 and two per cent in

2012. Revenues have fallen only onthe high street side of the business,but like-for-like sales have fallenevery year for travel as well: two percent in 2010, three per cent in 2011and three per cent in 2012.

With profits continuing to marchupwards, it would be foolish to losefaith in WHSmith just yet. No doubtits interims on 11 April will continueto reflect the remarkable success ofSwanns way. But the book andmagazine market faces a continuingonslaught from the digitalrevolution, the high street is on thecritical list and economic gloom iskeeping travel numbers soft.Without growing revenues, or atleast arresting their decline, howlong can profits keep soaring?

With two recent disposals in US foods, we expect Unilever to continue itsfavourable skew to faster growing categories in 2013. It is encouraging to see cashflow improving...The outlook remains the same; further sales growth aheadof the market and continued steady and sustainable margin expansion.

ANALYST VIEWS

Unilevers fourth quarter and full year 2012 numbers have beaten con-sensus expectations on the key metrics of organic growth and core margins (coreearnings per share was in line). This caps a strong year for Unilever andwe see the trends as supportive of our buy case.

In all, Unilever looks to have moved from a recovery play to a core port-

folio holding. Exposure to the emerging markets remains enticing, cashflow andthe resulting dividend payment still attractive, while its defensive attrib-utes continue to appeal.

WHAT DO YOU THINK OFUNILEVERS RESULTS?

Interviews by Kasmira Jefford

GRAHAM JONES PANMURE GORDON

MARTIN DEBOO INVESTEC

KEITH BOWMAN HARGREAVES LANSDOWNE

Books and stationery retailer WHSmith yesterday said strong margins

helped to underpin profits and offseta five per cent fall in like-for-likesales over Christmas.

Sales at high street stores openmore than a year slipped five percent in the 20 weeks to 20 January2013, but WH Smith said grossmargins improved strongly andcosts were tightly managed to fendoff tough trading conditions.

WH Smiths travel arm, whichincludes 619 stores at airports, trainstations, and motorway servicestations, reported a four per centdrop in like-for-like sales.

We expect the tradingenvironment to remain challenginghowever we are a resilient businesswith a consistent record of bothprofit growth and cash generation,and are confident in making furtherprogress said outgoing chiefexecutive Kate Swann.

Steve Clarke, head of the firmshigh street arm, will takeover in July.

During her nine-year tenure,Swann has expanded WH Smith intomore lucrative travel locations. Shehas exited the ailing entertainmentmarket while also focusing onselling more profitable products.

Margin growthoffsets sales fallfor WH Smith

BY KASMIRA JEFFORD

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THE chief executive of steelworkmanufacturer Severfield-Rowenresigned yesterday as it reportedhuge cost overruns on theCheesegrater project, sending itsshares tumbling.

Cost overruns on the 122Leadenhall project known as theCheesegrater due to its distinctiveshape adversely affected UK

performance, the firm whose otherwork includes the Olympic stadiumand the Shard said.

As a result, the board saidit would reviewexpeditiously its currentcontract base.

Tom Haughey, chiefexecutive of the

Yorkshire-based firm,has resigned withimmediate effect.Chairman John Doddshas assumed the roleof executive chairman.

The firm said it wasin talks with itslending banks overcompliance with itscovenants. Sharesfell 33.26 per cent.

Cheesegratercosts spell endfor steel chief

BY CATHY ADAMS

The Cheesegrater is at122 Leadenhall Street

LAND Securities has baggeditself another tenant for its

Walkie Talkie skyscraper in theCity, the property giant revealed

yesterday in an upbeat tradingupbeat.

Royal Sun Alliance is to takefour floors at 20 FenchurchStreet, meaning thirty-four percent of the building is now pre-let and a further 18 per cent isunder offer.

Insurers Ascot Underwritingas well as Markel and Kiln havealso pre-let office space in the160-metre high tower.

Land Securities said thetower, a joint venture with

BY KASMIRA JEFFORD Canary Wharf Group, is on trackto be completed by March 2014.

Chief executive Rob Noel alsosaid it has now fully let theoffice space at its One NewChange centre in the City andthat elsewhere in the West Endit has seen strong demand withits 123 Victoria Street schemenow 58 per cent let.

The group has also struck adeal with Google to drivefootfall to its malls. The deal,

which allows shoppers to see ifitems are in stock, comes as thenumber of retail units inadministration - including

Jessops, HMV and Blockbuster rose from 1.8 per cent inSeptember to 2.2 per cent.

PROPERTY developer Capital &Counties (Capco) moved a step closer torealising its 8bn Earls Court schemeafter signing a conditional land saleagreement (CLSA) yesterday withHammersmith & Fulham council.The agreement gives Capco the go-

ahead to use land including the WestKensington and Gibbs Green estates in the wider redevelopment of Earls

Court.Capco has the option to buy approxi-mately 22 acres of land in the EarlsCourt & West Kensington OpportunityArea for 105m.

It also has to provide new homes forthe estates 760 households.

Gary Yardley, chief investment offi-cer at Capco said the agreementmarks another important step forthe group after the masterplandesigned by Sir Terry Farrell was grant-ed planning consent by bothKensington and Chelsea council andHammersmith and Fulham councillast year.

We look forward to working withthe local community and deliveringthe Earls Court Masterplan which willcreate 7,500 new homes and 12,000new jobs in the area, he said.The CLSA was granted after a judge

threw out a legal challenge by one of

the Gibbs Green estate residents earli-er this week.

Capcos EarlsCourt schememoves closer

BY KASMIRA JEFFORD

9NEWScityam.com

Walkie Talkie towerseals fourth letting

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IN BRIEFEnQuest buys 8pc stake in Alban North-Sea focused EnQuest hassnagged an eight per cent holding inthe Alba oil field for 19.25m. EnQuestwill acquire two of CIECO Energyscompanies, which together hold atotal of eight per cent in the field. Theoil producer will pay 18.75m in cash,plus a further 0.5m for thecompletion of certain projectmilestones. The stake in the field hasreserves of 5.9m barrels of oil,EnQuest said yesterday.

Iron ore output jumps at BHPn Australian miner BHP Billitonposted a three per cent annual uptickin iron ore production in the last threemonths of the year, as it kept pacewith Chinese demand. The FTSE 100mining giant produced 42m tonnes ofiron ore in the fourth quarter, from41.1m over the same period in 2011.BHP reiterated its productionguidance for the base metal at 183mtonnes, and forecast a five per centincrease in output this year.

Output falls at Hochschild Miningn Gold and silver output edged down

during 2012 for South America-focused silver miner HochschildMining, although it said it hit all of itstargets. Attributable silver productionfell to 20.3m ounces over the yearfrom 22.6m ounces for 2011. Goldoutput sank to 337,660 ounces overlast year, from 377,000 ounces theprevious year. Hochschild reiteratedits target for 2013 of 20m silverequivalent ounces, which is flat on lastyear.

THE CHIEF executive of utility firmSSE resigned yesterday after a decadeat the helm.

Outgoing chief executive IanMarchant, who will step down at thestart of July, said yesterday that thetime is right for a change for bothSSE and me. He gave no detail as towhat his future plans are, althoughit is thought he is not looking foranother executive position.

He will be replaced by deputy chiefexecutive Alistair Phillips-Davies.Finance director Gregor Alexanderwill also have an expanded role insupporting the new chief executive.

Marchant joined SSE predecessorSouthern Electric in 1992 and joinedthe board of SSE as finance directorwhen it was formed in 1998. He isalso a board member of FTSE 100engineering company John WoodGroup.

Incoming chief Phillips-Davies hasworked closely with Marchant overthe past 15 years, joining SouthernElectric in 1997 and the board of SSEas energy supply director in 2002. Hehas held the role of deputy chief

Ian Marchantresigns after a

decade at SSEBY CATHY ADAMS

executive since last year.Phillips-Davies said yesterday he

would build on the companys trackrecord of building real dividendgrowth and making energy suppliesmore sustainable and affordable.The market took the announce-

ment negatively, with the shares clos-ing down 3.69 per cent yesterday at1,382p.

We believe that this is an unneces-sary reaction: much though IanMarchant has generally performedwell as chief executive over the pastdecade, the remaining team is solid,and the progression is orderly,Angelos Anastasiou at SeymourPierce said yesterday.

SSE PLC


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HEALTHCARE Locums, thetroubled staffing provider for thehealth and social care sectors,

yesterday warned that poortrading conditions meant it mightnot meet its banking covenants inMarch and June.

The group, led by chief executiveStephen Burke, has approached itstwo largest shareholders, ToscaFund and Ares Capital, which

between them own around 72 percent of the equity, with a view tothem providing some additionalfunding, as part of a strategy tosafeguard the business.

Healthcare Locums on the huntfor funds to meet covenants

BY DAVID HELLIER Healthcare said it could notguarantee the success of thesetalks until it became clear howmuch was needed and on whatterms the shareholders wished to

provide the additional capital.The company said its trading

had been affected in the UK by theimplementation of a new ITsystem and a delay in the NHSmoving towards a higher volumemodel. In Australia the group has

been hit by a weakness in demandin the private and public sector.

Shares in Healthcare Locums,which is suing its former executivechairman Kate Bleasdale, fell 71.5per cent to 0.70p yesterday.


Stephen Burke said he has approached existing shareholders to provide funding

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IN BRIEFNetflix trounces expectationsn Netflix reported a spectacular risein user numbers last night, sendingshares in the video streamingcompany up by more than 40 per centin after hours trading. The company,which set up in the UK this time lastyear, said it now has 33m subscribers,10m more than at this time last year,following international expansion andthe increasing popularity of tabletcomputers. Netflix profits fell to $8m(5m) as it invested in new content.

United Technologies profit fallsn United Technologies reported a 26per cent decline in profit, reflectinglarge restructuring charges at the endof a year that saw the company closeits largest-ever acquisition and sellseveral small units. The diversified USmanufacturer said yesterday thefourth-quarter earnings fromcontinuing operations fell to $945m(596.8m) from $1.28bn a year earlier.Per-share profit from continuingoperations came to $1.04, down from

Motorola gloomy on 2013 growthn Communications gear maker

Motorola Solutions yesterday forecastcurrent-quarter revenue belowanalysts estimates, and said itexpected growth in its governmentbusiness to moderate in 2013 after theend of an upgrade program for two-way radios. Net income fromcontinuing operations rose to $336m(212.2m), or $1.18 per share, in thefourth quarter, from $177m, or 54cents per share, a year earlier.

MERCHANT bank Close Brothers yes-terday delivered a good set of resultsfor its lending and money manage-ment divisions but its market mak-ing side continued to disappoint.The 134 year old independent bank,

listed on the FTSE 250, grew its loanbook by boosting lending to smallbusinesses. It increased its assetsunder management three per cent to8.5bn for the five months ending 31December, it said.

Its troubled securities divisionWinterflood Securities continued tobe plagued by low trading volumes

currently hitting all firms in the sec-tor. Average bargains per day werelower versus a year earlier, whileincome per bargain was broadlyunchanged.The group, led by Preben

Prebenson, is expected to revealmore details when it publishes itsinterim results in March. Sharesremained flat in trading yesterday,masking a 12 per cent climb in thestock price since the start of the year.Analyst Robin Savage at Canaccord

Close Brothersweighed down

by slow marketBY MICHAEL BOW Genuity said: This pre-close state-

ment confirms its banking divisioncontinues to grow profitably; its secu-rities should be seen in the context ofcurrent market conditions; we viewClose Asset Management as immate-rial to CBGs share price.

Close, which started life in 1878making farm mortgage loans in theAmerican state of Idaho, said it grewits current banking divisions loanbook by six per cent, up to 4.4bn, butwith a lower net interest margin thanlast year.The company said its asset manage-

ment arm would move into prof-itability this year.

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CHARTERED accountants are notprotected by the same rules on

client secrecy as lawyers, the UKshighest court decided yesterday.

The Supreme Court said it couldnot extend legal professionalprivilege to cover tax advice given

by non-lawyers.Prudential had claimed that the

privilege rules meant it did notneed to hand over documents totax inspectors back in 2004. Thepapers were linked to a taxavoidance scheme set up by PwC.

Michael Izza, head of the

Institute of Chartered Accountantsin England and Wales (ICAEW), saidhe will lobby politicians to haveprivilege extended to its members.

We want people to be free to seekadvice from whichever adviser is

best able to provide that advice,irrespective of their profession, hesaid.

The court said it would be up toparliament to alter the rules.

As parliament is well-stockedwith lawyers it has to be doubtfulwhether it will bother, said lawfirm CMS Cameron McKenna.

Prudential and PwC declined tocomment on the case.

Court says accountants cannotuse privilege to protect advice

BY MARION DAKERS

THE WORLDS biggest activistinvestors spent a third morebuilding up disclosable shareholderslast year, and used their influencemostly to gain boardoom seats,

according to industry research.In a year that saw FTSE firmsXstrata, Intercontinenal Hotels andAlliance Trust attract activistinterest, the biggest spent $12bn(7.6bn) on disclosable stakes in2012, from less than$9bn in 2011.

Bulldog Investorswas the most active in2012, according to

research by Activist Insight. It made12 new investments and exited one.

The most common strategy is togain a seat at the top table, almostalways in US firms. Of the 135investments in the research, 58 saw apush for board representation, of

which 45 succeeded.The strategies appear to payoff: the figures show thatactivist funds beat the MSCI

World Index by 5.54percentage points in the nine

months to the end ofSeptember.

Activist investors spend $12bnand push for change on boards

BY MARION DAKERS

Philip Goldstein ofBulldog Investors

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cityam.comTHURSDAY 24 JANUARY 201314 NEWS

BIDDING for the UKs 4G mobile air-waves kicked off yesterday, with com-munications watchdog Ofcomhosting an auction that is expected tohand George Osborne a multi-billionpound windfall.

Seven parties are now vying for aslice of spectrum that will enablethem to deliver the next generation ofmobile internet, promising speedsaround 10 times faster than current3G connections.

Ofcom chief executive Ed Richardssaid the auction is a very significantmilestone for the UKs communica-tions sector. The bidding is expected

to take several weeks before winnersare announced, with 4G set to go livein late spring or early summer.The UKs four mobile operators

O2, Vodafone, EE and Three are expected to snap up most ofthe spectrum available, whilethe three other bidders BT,Hong Kongs PCCW, and MLL will be looking to buy less desir-able parts of the airwaves toimprove their wirelessbroadband offerings.

4G bidding warstarts as Ofcom

opens auctionBY JAMES TITCOMB

The auction follows years of attacksand legal threats between the regula-tor and the telecoms firms, whichcame to a head in the summer whenOfcom controversially allowed EE touse its current spectrum to deliver 4G,giving the company a six-month head-start on its rivals.

EE has heavily marketed its 4G serv-ice since its launch, but consumershave criticised the price and data lim-its imposed on users. EE reduced someprices this week in response.The auction takes place over several

rounds, with many different combina-tions of lots on offer at a fixed price.The price of a lot is then raised if there

is more than one party prepared tomeet the previous cost, until there isonly one bidder left. The auction has

been specially designed to extractmaximum value for the Treasury.George Osborne has pencilled in3.5bn, although recent auctionsin Ireland and the Netherlandshave beaten expectations.

SOFTWARE maker Sage said yester-day that it had continued to beaffected by tough trading in Europe.

The company said that conditionsin the UK and Ireland had improvedin recent months, but that tradingsince October had been in linewith the previous financial year, inwhich Sages growth slowed to twoper cent.

Sage, the only software firm in theFTSE 100, is best known for its pay-roll software, Sage Pay, which it saidsaw strong growth in the period.

Economic conditions for our cus-tomers are challenging across our

Software group Sage highlightscontinuing European troubles

BY JAMES TITCOMB markets and we remain particular-ly watchful of the uncertain mar-ket environment in mainlandEurope, chief executive GuyBerruyer said.

Despite Sages troubles in Europe,Sage has performed relatively steadi-ly, with growth in North America,South Africa and Brazil impressing.

In fairness the iffy mainlandEuropean operational backdrop iscommented on by other vendors sowe do not see Sage losing marketshare it just needs to grindthrough the conditions, PanmureGordons George OConnor said.

Shares in the company fell justover two per cent yesterday.

Sages French chief executive Guy Berruyer has been at the FTSE 100 firm since 1997

Osborne expects theauction to raise 3.5bn

GERMAN industrial bellwetherSiemens yesterday said it wouldstick with its focus on cost cuts asa weak global economy saps

demand for factory equipment.The engineering group, whichmakes products ranging from fasttrains and gas turbines to hearingaids, reported a three per cent fallin new orders to 19.1bn (16m)for its financial first quarter.

Profit fell 12 per cent to 1.2bn,partly due to a 115m writedownon its solar power business.

Siemens to cutas profit drops

BY HARRY BANKS

SWISS pharmaceuticals groupNovartis said its long-standing

chairman and former chief executivewould step down next month.

Daniel Vasella, who has served asNovartis chief executive andchairman for 17 years, said he wouldnot stand for re-election to the boardof directors.

Novartis, which said results willbe hit this year by the loss of acrucial patent, expects sales to growin the mid-single digits from 2014once it has absorbed the full impactof competition from cheaper drugs.

Novartis bossto step down

BY HARRY BANKS

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Got A Story? Email [email protected]

15cityam.com

THECAPITALIST

THURSDAY 24 JANUARY 2013

cityam.com/the-capitalist

Anthony Thomsonchaired the bankuntil Hill took thetop job last month

MOST ad campaigns about funfirms or service with a smile arejust talk a half-hearted effort tolook like a generous firm whichcares for its staff.

But Metro Bank founder andchairman Vernon Hill insists smil-ing is a very serious business.

In fact, if staff look grumpy,theyre not going to be staff formuch longer.

If you dont smile in your firstjob interview here, that is theend, Hill said yesterday, taking a

tough line on sad faces.Employees are also expected to

take an unconventional approachto the rules, with the bossdemanding they kill stupid

rules whenever they see them.Every computer has a button

that staff press to send in any stu-pid rule theyve foundto kill for example,why do banks notopen on Sundayslike other highstreet stores? saidthe billionairechairman, whofounded the bank in2010 and took the topjob at the start of this

year.And US-style service is not

the only unusual thingabout Metro Bank.

Hill likes to

supersize everything he sees,too with his ambitions evenstretching to the expandingborders of Londons sprawlingmetropole.

We want 200 branches inGreater London, he told theWestminster Business

Council event.For me, that stretches

from Brighton to MiltonKeynes, from Reading to

Southend.A much Greater London,

it seems.

Metro Bank crackingdown on staff frowns

Following David Camerons earlymorning oration, the corporate

world was aflutter yesterday withEuropean chatter. Eurotunnels Frenchboss Jacques Gounon did his best tobuild bridges during a conference callby declaring: I would be pleased tolive in London and my wife would behappy to live in London. Flybes JimFrench, by comparison, admitted: Ican just about find enough brain powerto work in the airline industry; I donthave enough to talk about politics.

Some news to cheer Lord Mayor ofLondon and celebrated pianistRoger Gifford a report from the City ofLondon corporation has shown that artsand culture across the Square Mile gave291m of gross value added to thecapital in 2011-12, as well as providingmore than 7,000 jobs. But not to beoutdone by its more central neighbour,Canary Wharf also chose yesterday to putout its events programme for the nextfew months, including a Valentines TeaDance and the 10th annual squash classic.

BEDSPACE may be tight at Davos, but every inch of space is utilised. While TheClinic may sound like a luxury spa, its actually an asthma hospital offeringspare beds to attendees. If you fancy your own oxygen supply, this is the place.

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Legal Commentby Julie Morris

Julie Morris is

Employment Practice

Group Leader with

Slater & Gordon

Here she discusses the law

on the sensitive issue of

bankers' bonuses

Bankers bonuses are never far from

the news at this time of year and thisyear is no exception. Goldman Sachs

apparent decision not to defer its

bonuses until the new tax year to save

their staff from the 50% tax band

shows just how sensitive banks have to

be to keep the tide of public opinion, ifnot on side, then at least from crying

for blood.

It has been reported that this years

bonus pool is very significantly down

on the boom years and even lower thanlast year. That must make for some un-

happy bankers on announcement day

but is there anything they can do about

it? We have seen less litigation on

bonuses in recent years, following the

2006 case of Keen v Commerzbank,

which suggested then it was harder tochallenge the level of a discretionary

bonus.

The negative publicity banks and

bankers have been getting has alsocontributed, making some reluctant to

put their head above the parapet. How-

ever, times are (relatively) hard and

this could be the year where we see

more litigation following the success

of the ex Dresdner employees in theirclaim against Commerzbank last year.

This case is still under appeal but

the employees managed to hold the

bank to promises it made about their

bonus levels in order to persuade them

to stay. The bank had tried to breakthose promises when it announced the

amount of the bonuses, seeking to re-

duce them by as much as 90%. Whilst

this case had unusual facts, it is likelyto have a more mainstream application.

The current FSA Code on bonuses

imposes some onerous restrictions on

what banks can formally do to givestaff specific guarantees on their

bonuses. We understand that some

managers are feeling the need to give

assurances about bonus pools or bonus

levels to ensure individuals stay on

side, or to keep an employee who is

threatening to leave.Although human resources and legal

departments would not approve of

such assurances, if an employee has

sufficient evidence of bonuses beingoffered, that employee can have some

confidence in pursuing a claim where

their bonus does not match up with the

promises given.

If you have similar concerns or need advice

contact Julie Morris on 0808 175 7742

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THE COST of raising a child hassoared 58 per cent in the last 10years, pushed up by the price ofchildcare and education.

Figures released this morningestimate that raising a child untilthe age of 21 leaves a 222,458 holein parents pockets, on averageacross the UK.

Insurance firm LV=, whichcompiled the figures, reports thatchildcare costs have shot up 60.9 percent to an average of 63,738 foreach child.

And outgoings on education,which include school uniforms anduniversity costs, now average 72,832per child an eye-watering 123.5 percent higher than in 2003.

The data refers to the 21 yearperiod ending December 2012.

It also revealed stark gaps in thecost of raising offspring in variousparts of the country.

In London the average cost ofraising a child is 239,123, yet in thenorth east of England it isconsiderably lower, at 206,495.

If the costs associated withbringing up children continue torise at the same pace, parents couldface a bill of over 350,000 in tenyears time, warned Mark Jones,head of protection at LV=.

Cost of raisinga child jumps

to 220,000BY JULIAN HARRIS

THE BANK of England is balking at afurther expansion of its balancesheet, with minutes of its Januarymeeting, released yesterday, reveal-ing that senior officials are wary ofthe effects of more quantitativeeasing (QE).The Monetary Policy Committee

(MPC) has ordered 375bn in assetpurchases to date, in a bid to stimu-late the UKs sluggish economy. Butonly one of the nine-man groupvoted in favour of more QE.

While saying there remains con-siderable further scope for moreasset purchases, the committeewarned: But there remaineduncertainty about their impacton nominal demand, and theymight prove less effective inboosting real output whenresources needed to beshifted between sec-tors and while thebanking systemwas constrained.

Minutes show

Bank wary ofmore easing

BY JULIAN HARRIS Economic developments in themonth prior to the meeting, held on9 and 10 January, had been modestlypositive, the committee also said.

While these developments had notsubstantially altered the balance ofrisks associated with maintainingand increasing the size of the mone-tary stimulus, they had strengthenedthe belief of some of these membersthat no further asset purchases wererequired at the current juncture.

For the third straight month DavidMiles voted for the QE programme tobe boosted by a further 25bn in pur-chases, yet seven of his colleagues on

the MPC supported governor SirMervyn Kings recommenda-tion to hold policy as it is.

On Tuesday night SirMervyn said more QE couldhappen, but advised we

should not rely solely ongeneral stimulus to aggregatedemand.

Confident Dubai raises $1.25bnas it returns to the bond marketTHE GOVERNMENT of Dubaicemented its comeback to the bondmarkets late on Tuesday,comfortably selling $1.25bn (787m)in notes as the Middle Eastern statetakes advantage of its improvedimage among investors.

It launched both a $750m 10-yearIslamic bond known as a sukuk as well as offering a moreconventional $500m 30-year bond.

Both portions of the debt salewere substantially oversubscribed,

allowing the emirate to securerelatively low borrowing costs.

BY CITY A.M. REPORTER The 10-year sukuk launched at3.875 per cent, while the longer-term debt will yield 5.375 per cent.

Dubai has strived to regain itscredibility among investors after itrocked global markets in 2009 withits $25bn restructuring request forstate entity Dubai World.

It has since successfullyrefinanced or reorganised debtwhile benefiting from its status as aregional safe haven amid the ArabSpring turmoil.

The 10-year sukuk received ordersof $11bn. Over half (52 per cent) of

the paper was placed in the MiddleEast followed by 26 per cent in

Britain. By investor type, banks wereallocated 46 per cent, followed byfunds with 34 per cent. The rest wasevenly placed with private banksand other investors.

Of the 30-year conventional deal,investors in Britain received thehighest allocation at 38 per cent,followed by Europe at 24 per centand US investors at 22 per cent.

Dubai Islamic Bank (DIB),Emirates NBD, HSBC Holdings,National Bank of Abu Dhabi andStandard Chartered arranged thesukuk, while the same banks,

minus DIB, were bookrunners onthe 30-year bond.

Spending on the UK high streetknocked by January snowstorm

BRITAINS ailing high street hasbeen dealt another blow by thecold snap of weather felt inrecent weeks, data from Visarevealed yesterday.

Spending through Visa dippedby more than four per cent in t helast week, compared to the sametime a year ago, the companyreported.

Deterred from hitting theshops, some consumers choseinstead to boost their onlinepurchases but this failed tooffset their absence on the highstreet.

While high street spending wasdown by five per cent on a year-ago basis, online spending

BY JULIAN HARRIS increased by only one per cent,according to Visa.

The squeeze on the UK highstreet has been evident this year,with Jessops, HMV andBlockbuster all tumbling intoadministration. With tomorrows

quarter four figure [for 2012]expected to show a contraction inGDP, Visas data highlights thereal danger of a triple diprecession if quarter one 2013 doesnot improve, the firm said.

Heavy snowfall has previouslycontributed to quarters of officialeconomic contraction. Yet retailstarted the year reasonably well,Visa added spending on its cardswas unchanged in the f irst weekand up slightly in the second weekof 2013.

Governor Sir Mervyn King votedto stick with the current policy


HOUSE prices in the US shot up by5.6 per cent in the year toNovember, according to a widely-observed survey released yesterday.

Prices of American homesclimbed 0.6 per cent in November,compared to the previous month,according to the Federal HousingFinance Agency (FHFA).

The FHFA compiles data fromnew mortgages owned or

guaranteed by US home loan giantsFannie Mae or Freddie Mac, tocalculate its monthly figures.

While the numbers appear tobode well for a recovery in the US

housing market, tight supply isbelieved to be one factor behind

House prices in US climb 5.6pc

in the 12 months to NovemberBY CITY A.M. REPORTER the growing prices.

The National Association ofRealtors said on Tuesday that USexisting home sales dropped oneper cent last month to a seasonallyadjusted annual rate of 4.94munits.

Michael Gapen of BarclaysCapital said yesterday that heexpects prices to continue trendingupwards. The improvements inthe FHFA index are very much inline with what we have seen inother home price indices recentlyand point toward furthermomentum in US house pricesheading into year-end, Gapencommented.

We look for this momentum tocontinue into 2013.

CHILDCARE AND EDUCATION WIDEN HOLES IN PARENTS POCKETS

THE COST OF RAISING

A CHILD HAS REACHED*

IN LONDON

239,123 237,233IN THE SOUTH EAST

58%COMPARED TO 10 YEARS AGO

222,458

IN CHILDCARE63,738

ON GADGETS302 per year

ON FOOD19,270

And for every child at...

PRIVATEDAY SCHOOL

ADD ANOTHER

106,428 195,745

PRIVATEBOARDING SCHOOL

ADD ANOTHER

UK Average

INCLUDES:

*FROM BIRTH TO 21

PEOPLE are cutting down the levelof debt they take into their

retirements, data from Prudentialshowed yesterday yet nearly onein five still have debts when theyleave the workplace.

One in five men enterretirement with debt, the firmsresearch showed, compared to 16per cent of women.

The amounts owed by theseindebted retirees is falling, itadded.

The average owed by men withdebts fell from 45,300 a year agoto 33,800 in this survey, while for

Britons reduce levels of debtbeing taken into retirement

BY JULIAN HARRIS women with debts it fell from29,400 to 28,100.

Average monthly debtrepayments for this demographic

thus fell to 215, from 257.The fall in average debt owedby this years retirees is a welcomesign that people are paying offsome of the money they owe

before they stop working, saidVince Smith-Hughes, Prudentialsretirement income expert.

The region with the highestproportion of people enteringretirement with debt is Wales,

with 26 per cent. In London andthe south east exactly one fifth ofpeople enter retirement with debt.18 per cent of people still retire with debts

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IN BRIEFBig Yellow raises 37m in placingn Big Yellow said yesterday it hadsuccessfully sold 10m new shares aspart of a fundraising to expand itsself-storage sites, pay down debts andgive bigger dividends to shareholders.JP Morgan led the placing for BigYellow, raising 37m through theoffering to existing shareholders andnew institutional investors. Membersof the board, including chairmanNicholas Vetch, said they intended toinvest up to 320,000 in the placing.

Britvic plots Fruit Shoot growthn Britvic yesterday posted a 4.8 percent rise in first quarter revenue andsaid it would accelerate distribution ofits troubled Fruit Shoot drink in the USand also launch it in Spain this year.The drinks company whose profits lastyear were hit by a costly recall of thechildrens drink over faulty caps, didhowever warn that its second quarterhad started more slowly due to achallenging economic and tradingenvironment.

Finsbury Food sales edge highern Finsbury Food Group, the cake and

gluten free bread manufacturer, saidrevenues in the first half of the yearrose 1.3 per cent to 103m, in line withmanagement expectations. Thecompanys cake business grew twoper cent to 1.1m. However LightbodyEurope, the Groups 50 per centowned joint venture business, was hitby a 17 per cent drop in sales, whichFinsbury blamed on the strength ofthe pound against the euro.

REGIONAL airline Flybe is cutting 300jobs as part of its plan to stem losses bysaving 35m a year.The carrier, which has been hit hard

by falling profitability on its short-haul flights, said 20 per cent of itsmanagement will be cut, while execu-tive directors are forfeiting onemonths wages this year as part of itsbid to turn around the business.

One in ten UK staff are expected tolose their jobs once talks with workersand unions are complete. Flybe said itcurrently loses 1.30 per seat, which ithopes to improve to breakeven nextyear and eventually to a 3 per seat

profit over the next three to five years.It will spend 10m to 12m on its

restructuring this year, and outsourceits call centre, ground handling andpossibly its maintenance work to save35m a year by 2014-15.The Exeter-based airline will also

beef up its European contract flyingunit, though it said the UK willremain the engine room of the busi-ness. It will decide whether to alter itsroutes later in the year.

Chief financial officer Andrew

Flybe axes jobsand cuts costs

to stem lossesBY MARION DAKERS Knuckey blamed some of the airlinesproblems on the UKs air passengerduty (APD), levied on customers eithertaking off or arriving in the country.

Im not saying every challenge thisairline faces is down to the govern-ment but 75 per cent of our passen-gers are domestic passengers, andthese passengers pay tax both ways.

Chief executive Jim French suggestedemployees could write to the govern-ment on the matter, and believes APDcould be cut at regional airports bycharging more in London.The airline estimates that 18 per cent

of its UK ticket revenues is eaten up byAPD, or 68m this year, compared toaround six per cent at rival carriers.

Flybe Group PLC


47

48

49

50

51

52 p 47.0023 Jan

EUROTUNNEL hopes that Britonswill continue to use the ChannelTunnel while the UK reassesses its

relationship with the Continent,after the firm posted recordrevenues for 2012.

I would recommend that GreatBritain remains in Europe, saidchief executive Jacques Gounon,

who thinks the vast majority of hiscustomers support Britains placein the EU.

Tunnel traffic is 75 to 80 percent related to the UK economy.

When I see in London the cranesand the restaurants that are full,

Record revenues for ChannelTunnel as freight delivers gains

BY MARION DAKERS even if I see staff reductions in theCity, Im still impressed, he said.

Revenues for the tunnel operatorrose 14 per cent to 993.1m(833.9m) last year.

This was helped by a 28 per centsurge in turnover to 209.5m atEuroporte, the groups freight arm.

Truck shuttle traffic rose 16 percent to 1.46m vehicles in 2012,

which the firm said made it aworld leader in piggy backtransport.

Car traffic rose seven per cent to2.4m as tourists drove in to see theQueens Jubilee and the Olympics,

while the Eurostar carried 9.9mpassengers in 2012.


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Eurotunnel benefited from Olympic tourists and athletes travelling to London

7/29/2019 Cityam 2013-01-24

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19THURSDAY 24 JANUARY 2013cityam.com

LONDON REPORT

Lloyds Commercial BankingAnthony Williams has been

appointed head of consumerservices and entrepreneurs atLloyds. He joins from WesthouseSecurities, the advisory firm.Williams has over 25 yearsexperience in banking, and hasalso held roles at ABN Amro/RBS,most recently as head ofconsumer sector advisory.

Altius AssociatesJoachim Suter has been appointed partner in the privateequity and asset management businesss Europe, MiddleEast and Africa investor relations team. He joins fromMacquarie Infrastructure and Real Assets, where he wassenior vice president for private placement. Suter has alsoheld roles at PIMCO Europe, Credit Suisse and UBS AssetManagement.

Baker TillyPaul Merris has been appointed financial reporting

advisory partner at the business services firm. Hespecialises in international finance reporting standards andUK accountancy practices, and has previously held roles atboth BDO and KPMG.

Valence GroupThe investment banking boutique has appointed IanGeorge as managing director. He has over 18 yearsexperience as a mergers and acquisitions investmentbanker, and most recently worked at EPIC Private Equity.George has also held senior roles at both Nomura and BearStearns.

KNG SecuritiesThe fixed income specialist has appointed Derrick Lockleyand Gwenael Fort to its convertible bonds team. Lockleyjoins from Salomon Brothers/Citigroup Global Markets,

where he was most recently managing director ofEuropean convertible bonds. Fort joins fromCommerzbank, and has also held senior roles at MorganStanley and Merrill Lynch.

JLT Employee SolutionsMargaret Snowdon has been appointed as an executive inthe employee benefit providers trustee solutions business.She is currently governor of the Pensions Policy Institute,and chair of the Pensions Administration StandardsAssociation. Snowdon is a former vice president of thePensions Management Institute.

Insolvency Practitioners AssociationMark Sands, head of personal insolvency at RSM Tenon, hasbeen appointed deputy vice president of the membershipbody for licensed insolvency practitioners. Sands willbecome president of the association in 2015-16. Hespecialises in personal insolvency, professional practicesand investigating fraud transactions.

WHOS SWITCHING JOBS Edited by Tom Welsh

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

US rises againas Google andIBM lift mood

THE S&P 500 rose for a sixth dayyesterday after stronger-than-expected profits from IBM andGooglebut the rally could be

halted as Apples after-hours misssend its shares lower.The S&P was just 4.7 per cent from

its all-time closing high as IBMs andGoogles earnings, released afterTuesdays close, followed on the heels

of stronger US economic data.ButApple, still the largest US pub-

licly traded company, fell more than 4per cent in extended trading aftersales of its flagship iPhone came inbelow analyst targets and quarterlyrevenue slightly missed Wall Streetexpectations.

Declining issues beat advancers inboth the NYSE and Nasdaq duringregular market hours, in a sign themarkets rally may be overstretched.The broad Russell 2000 index closedthe day down 0.3 per cent after earlierhitting and intraday historic high justbelow 900 points.

Shares in IBM, the worlds largesttechnology services company,climbed 4.4 per cent during regularmarket hours to $204.72, providingjust about all of the Dows 67-pointgain.Also helping the tech sector was a

5.5 per cent jump in Google to$741.50. The Internet search companyreported its core business outpacedexpectations and revenue was higherthan expected. The S&P technologysector rose 1.2 per cent.The Dow Jones industrial average

rose 66.96 points or 0.49 per cent, to13,779.17, the S&P 500 gained 2.22points or 0.15 per cent, to 1,494.78,and the Nasdaq Composite added10.49 points or 0.33 per cent, to3,153.67.The benchmark S&P 500 is a mere

0.35 per cent away from hitting 1,500,a level not seen since12 December,2007.

Netflix shares soared 32 per cent,above $136, after the video subscrip-tion service said it added subscribersin the United States and abroad andposted a quarterly profit.

LED maker Creejumped 22 per centto $40.85 after it forecast a higher-than-expected third-quarter profit,and reported results above analysts'estimates.

Upscale leather goods maker Coachplunged 16.4 per cent to $50.75 afterreporting sales that missed expecta-tions.

Clearing a market hurdle, the USHouse of Representatives passed aRepublican-led plan to extend thecountrys borrowing authority untilmid May. This delays a confrontationin Congress similar to one in 2011,which generated a stalemate that trig-gered the first-ever US debt ratingdowngrade.Thomson Reuters data through

Wednesday showed that of the 99 S&P50

cityam 2013-01-24

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