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FTSE 100 t5,250.84 -3.05 DOW 10,450.64 +16.47 NASDAQ 2,309.80 +2.64 /$ 1.48unc / 1.20 unc /$ 1.24 unc Certified Distribution3/05/10 - 30/05/10 is 106,097

Barclays to

deny foulplay in bid

BARCLAYS president Bob Diamond will today deny the British bankplanned to pocket a secret $11bn(7.5bn) windfall when it boughtLehman Brothers US brokerage atthe height of the financial crisis.

In a resumption of the bitter legalwrangle between Barclays and partiesrepresenting Lehman Brothers,Diamond is expected to tell a New York bankruptcy court it would beunfair to renegotiate the deal nearlytwo years after Lehmans collapse.

Diamond will be cross-questionedby lawyers for Lehman Brothers cred-itors, its trustee and its estate. Thethree groups allege Barclays Capital,Barclays investment banking arm,unfairly profited from its $1.9bn buy-out of Lehman Brothers in September2008 by arranging a hidden profitthat would kick in after the takeover.

They claim Lehman Brothers gaveBarclays Capital $4.2bn to cover liabil-ities such as bonuses and redundan-cies. Barclays Capital booked a further$5bn profit by rearranging a repur-chase agreement with the FederalReserve, lawyers say, with the remain-der of the $11.2bn inheritance com-ing from extra Lehman Brothersassets seconded at the 11th hour.

Lawyers acting for the threeLehman Brothers plaintiffs accusedBarclays Capital of purchasing the US

brokerage at a discount, and say theBritish bank did not give details of thewindfall to the bankruptcy judge incharge, James Peck.

Osborne announced a bank levy in a speech last week and has appointed John Hutton (inset) to review public sector pensions Picture: PA

THE chancellor will deliver the tough-est Budget in almost 30 years tomor-row with a mixture of swingeingpublic spending cuts and painful taxhikes.

Yesterday, he warned the public toexpect tough but fair measures.

In a sign that the chancellor is readyto tackle vested interests in the publicsector, he appointed former Labourminister John Hutton to lead a com-mission into public sector pensions.

The public sector pension bill isunsustainable and we do have to tack-le it, said Osborne.

Hutton was immediately branded acollaborator by former Labourdeputy leader John Prescott, whoaccused him of helping the coalitionto dismantle state pensions.

Others said Huttons appointmentcould well lead to a pensions levybeing imposed on recipients of publicsector pensions.

The chancellor is hoping that byintroducing the most unpopular meas-ures early on, he can convince the pub-lic he is paying for 13 years of Labourseconomic mismanagement.

Osborne will hammer the banks with a new levy on their balance

sheets, and coalition sources yesterdaysuggested he now expects to raise con-siderably more than the 1bn thatwas originally mooted.

OSBORNE SET FORPAINFUL BUDGET

www.cityam.comIssue 1,159 Monday 21 June 2010 FREE

RIDINGHIGHHALFORDS BOSSIS EYEING NEW

TARGETS P24

ENGLAND SQUAD IN WORLDCUP CRISIS MEETING...

...BUT ONE MAN IS CONFIDENT P34

BUSINESS WITH PERSONALITY

High earners are expected to shoul-der a large proportion of the fiscaltightening. There are fears that the toprate of pensions tax relief will bechanged while the 50p rate will stay.

And despite a series of high-levelcampaigns against an increase in capi-tal gains tax (CGT), including one in

this newspaper, the chancellor isexpected to hike rates on non-busi-ness assets with a series of reliefs forentrepreneurs.

Families earning over 40,000 willsee their benefits slashed while themajority of public sector workers willtake a pay freeze for two years.

An increase in VAT is also widelyexpected. The chancellor could raisesome 4.5bn a year by adding 1p to theexisting 17.5 per cent rate.

Vice taxes on alcohol and cigarettes will will be hiked, along with newtaxes designed to make people moreconscious of the environment.

BY OLIVER SHAH

BANKING

BY DAVID CROWPOLITICS

Chancellor toannounce tax hikesand spending cuts

Ex-Labour minister

appointed to reviewpublic sector pensions

Bank levy set toraise considerablymore than 1bn

There will be a handful of sweeten-ers, with an increase in the income taxthreshold, while businesses will broad-ly welcome plans to lower corporationtax.

The threshold for employer NationalInsurance contributions will also beincreased in a bid to kick start a pri-

vate-sector recovery, while firms inareas where huge swathes areemployed by the public sector will begiven tax breaks. MORE: P7-11

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News2 CITYA.M. 21 JUNE 2010

BPs Haywardto head east

TONY HAYWARD, BPs embattledchief executive, is to launch a Russiancharm offensive in a bid to calm thenerves of President Dmitry Medvedevover the groups future.

Although the timing of the meet-ing has yet to be confirmed, Haywardintends to meet with Medvedev toreassure him that BP can survive theliabilities of the oil spill in Louisianathat has created dloubts about thegroups future..

The Russian president expressedconcern on Friday over the Gulf ofMexico oil spill and said he feared thecosts would lead to the "annihilation"of BP.

BPs Russian joint venture, TNK-BP,is the third largest oil group in the

region, with the other half owned byAlfa Access-Renova, a consortium ofbusinessmen.

Next to the US, Russia is one of themost important regions to BP, whichis understood to produce one in fourof BPs barrels.

A spokesperson for BP said hewould not give a running commen-tary on Haywards movements andwould not confirm the meeting withMedvedev. Hayward was facing criti-cism after being spotted with his sonat a yachting event over the weekend.

MORE: P14-15

Public sectors turn to face recession

IT hasnt been fun being in the privatesector in recent years. It bore all of thecost of the recession, with more than100 per cent of the contraction inGDP falling on private firms the pub-lic sector, meanwhile, continued toexpand. Wage growth has been weakto non-existent for most private work-ers over the past couple of years, therehas been a sharp drop in employmentand hardly any firms can afford tooffer pensions any longer.

The gulf with the public sector hasbecome striking: the median salary inthe public sector is now 12 per cent

higher, or 30 per cent higher on anhourly basis, a gap that astonishinglyis still growing and that is evenbefore other benefits are accountedfor. Private employees work 23 per

cent more hours (9.2 years of a publicsector employees working life) overtheir lifetime, thanks to shorterhours, more time off and earlierretirement in the public sector.

As an report from Policy Exchangereveals, between 1997 and 2008 theproportion of public sector workerswithout pension provision from theiremployers fell to 16 per cent. In theprivate sector this rose to 63 per cent.Almost 80 per cent of public sector workers are in defined-benefitscheme, against just 8 per cent in theprivate sector. Such pensions areworth an extra 12-15.6 per cent of totalsalary, depending on estimates.

Job security is another benefit: dur-ing the recession, workers in manufac-turing were 16 times more likely tolose their jobs than public sector staff.In a survey of 60 different public sec-

tor organisations by the CabinetOffice, just 13 per cent of employeesdisagreed with the statement thattheir organisation is too lenient withpeople who perform poorly here. Less

than 1 per cent of civil servants takevoluntary redundancy each year, andjust 0.00007 per cent a year have suf-fered a compulsory redundancy.

Many low-paid workers such ascleaners have been contracted out ofthe public sector but this does not infact explain the wage differential. Thegulf remains for equivalent job cate-gories (such as state sector managers, whose numbers are up 80 per centsince 2002) and holding other factorsconstant. The nationalised banksdont explain the gulf either.

It is clear that the public sectorneeds to shoulder more of the burden;the deficit may be slightly lower thanexpected but it remains cripplinglyhigh at around 150bn. I dont say this with any joy, especially given theimportance of the work performed bynurses, doctors, teachers, the police

and other frontline workers. But thepain must now be spread in a fairerand more sensible way.

Labour set in train a real terms cutin public sector wages by capping pen-

sion contributions and promising tolimit pay increases to 1 per cent.Ireland is implementing a 10 per centreduction in pay, three quarters of which takes the form of increasedpension contributions the so-calledpublic sector levy. Portugal has alsotargeted the pension bill, along with a5 per cent wage cut. In France the pub-lic sector is not replacing half ofretirees. The Netherlands have intro-duced a one year wage freeze, Greece afour year freeze. Spain is pursuing 4per cent cut in the total pay bill. It hasalso introduced a ten out, one inrule. Regardless of which methodGeorge Osborne ends up adopting,one thing is unfortunately clear: thepublic sector is entering a recessionthat will be as painful as that whichthe private sector has been forced toendure. [email protected]

THE European Central Bank presi-dent Jean-Claude Trichet is todayexpected to set out strict proposals tostop further financial crisis in theEurozone.

The ECBs first plan is to rule outexpulsions from the 16-countrygroup, to stop market jitters.

Under Trichets proposals,Eurozone finance ministers wouldbecome guardians of fiscal sustain-

ability, with an independent agencypolicing governments tax and spend-ing decisions. According to an ECBpaper released last week, sanctionsfor countries flouting fiscal rulescould include cuts in EU aid, suspend-ed voting rights or policing by outsideexperts.

The ECB document also suggestedsetting up a crisis management insti-tution which could rapidly buyEurozone government bonds toquickly address disruptions in sover-eign bond markets.

BYHARRY BANKS

WORLD

ECB: More fiscal policingECB president Jean-Claude Trichet wants stricter Eurozone finance rules Picture: REUTERS

NEWS | IN BRIEF

China move spurs marketsThe Australian dollar jumped more than1 percent and the euro hit a three-weekhigh against the U.S. dollar in tradingtoday as investors took China's commit-ment to allow more yuan flexibility as asignal to buy riskier assets.China said on Saturday it would gradual-

ly make the yuan's exchange rate moreflexible, indicating it was ready to breaka 23-month-old U.S. dollar peg that hadcome under intense fire from abroad."Whether there are further gains willdepend on how Asia trades its own cur-rencies and on the yuan against the U.S.dollar fixing rate later today," saidWestpac senior currency strategist ImreSpeizer. MORE: P5

BASF SEALS 2.8BN DEALChemical giant BASF is poised to buyGerman specialty chemicals companyCognis for at least 3.3bn (2.8bn)reports the Wall Street Journal. The dealwas agreed this weekend, when Cognisand its owners, who include GoldmanSachs and private equity group Permira,rejected a higher offer from Lubrizol. Anannouncement on the deal is expected tobe made this week.

Hayward will be hop-ing he has more suc-cess batting for BP inMoscow than he hashad in the US

EDITORS LETTER

ALLISTER HEATH

7th Floor, Centurion House,24 Monument Street,London, EC3R 8AJTel: 020 7015 1200 Fax: 020 7248 1729Email: [email protected] www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor Ben GriffithsNight Editor Katie HopeAssociate Editor David CrowLifestyle Editor Zoe StrimpelArt Director Darren SoulsbyPictures Alex Ridley

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Editorial StatementThis newspaper adheres to the system of

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Distribution helplineIf you have any comments about the distributionof City A.M. Please ring 0207 015 1230, or [email protected]

BY EMMA SADOWSKI

BP IN CRISIS

JPMORGAN PUSHES ON WITH TALKSOVER BRAZILIAN HEDGE FUND JPMorgan Chase is pushing ahead with talks to buy a large Brazilianhedge fund and private equity group,in spite of impending US legislationdesigned to limit the involvement ofcommercial banks in such activities.People close to the situation said theUS financial group was in advanceddiscussions to buy GveaInvestimentos, an asset managementcompany that manages about $5.3bn(3.6bn) in assets.

F&C IN HEDGE FUND LEGAL BATTLEAsset management company F&C isembroiled in a High Court battle withtwo hedge fund managers overwhether it was valid for the men toexercise a series of put options last year. The case, which begins this

week, centres on a limited liabilitypartnership set up in 2004.

AMAZON HAS DESIGNS ON FASHIONAmazon, the largest online retailer, is

relaunching its online clothing andshoe business with a focus on high-end style as it vies with rivals such asYoox and Net-A-Porter in the expand-ing online fashion market. US onlinesales of clothing, shoes and acces-sories increased 17 per cent last yearto $27bn, according to ForresterResearch. Amazon is recruiting soft-ware engineers who it says will buildgreat new feautures that change theway people shop for clothing.

FEAR OVER DEARTH OF ENGINEERS INEUROPEEurope needs to take urgent action

on skills and education to encourageyoung peeople to become engineersor risk losing out to China and Indiaas a manufacturing power, accordingto the continents leading industrial-ists. Chief executives and chairmenfrom Europes 50 biggest countries

list the growing skills shortage as oneof their biggest long-term concerns.

MANUFACTURERS SLAM GOVERNMENTCLIMATE CHANGE BILLBritain's manufacturers have con-demned the government's climatechange policy as "chaotic, overcrowd-ed and complicated" and are callingon George Osborne to use his emer-gency budget to introduce an econo-my-wide carbon tax. Themanufacturers' organisation EEF saysa new single levy based on energyusage to replace the existing mix ofclimate measures would simplify thesystem.

TUC CRITICISES CBI LABOUR IDEASThe TUC has condemned new propos-als from the business lobby group CBIto make it harder for workers to strikeas a charter for exploitation atwork. In a new report today, the CBIwill call for a variety of labour market

measures it says will bolster business-es during the recovery.

MILLIONS IN THE PUBLIC SECTOR TOPAY MORE FOR PENSIONSPublic sector workers will be expectedto pay hundreds or even thousands ofpounds more each year into their pen-sion pots, as the era of early retire-ment on generous payments isbrought to an end. A new governmentcommission, led by John Hutton,could recommend that public sectorstaff begin paying more towards theirretirement as early as next spring.

RAHM EMMANUEL TO QUIT AS WHITEHOUSE CHIEF OF STAFFRahm Emanuel, the White Housechief of staff, is expected to leave hisjob later this year after growing tiredof the "idealism" of Barack Obama'sinner circle. Washington insiders sayhe will quit within six to eightmonths in frustration at their unwill-

ingness to "bang heads together" toget policy pushed through.

FRANCE TELECOM MOVES CLOSER TOLE MONDE BIDFrance Tlcom was yesterday plan-ning to bid as much as 60m (50.2m)for French daily Le Monde and itswebsite, according to a spokeswomanfor the telecommunications group.France Tlcom has formed a consor-tium with two other companies to tryto buy a majority stake in Le Monde,the struggling newspapers publish-ing company.

CITI MOVING PRIVATE-EQUITY VETER-AN TO ASIACitigroup said it is moving veteranprivate-equity banker Chris Laskowskiback to Asia to join senior manage-ment, a signal the US bank believes apickup in the regions buyout activity will likely continue. Mr. Laskowskiwill head a team of bankers dedicated

to servicing buyout firms around theregion.

WHAT THE OTHER PAPERS SAY THIS MORNING

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BSKYBS staff have been told by chiefexecutive Jeremy Darroch that theyshould not be distracted by the near8bn takeover bid launched last week

by the groups largest shareholderNews Corporation.

Darroch, who sits side by side on theSky board with directors who haverejected the bid claiming it does notfully value the satellite broadcastinggroup, addressed staff in an emailshortly after the announcement of theNews Corp offer.

He urged staff to continue to focus

on serving Skys customers and contin-uing to gow the company.

So far News Corporation has lodgedan indicative offer for the 61 per centof the shares it doesnt own in Sky at aprice of 700p a share.

I know that todays bid news willgenerate a lot of noise and raise manyquestions. But the important thing forall of us is that we do not get distract-ed. If there are further developments, I

will make you aware of them as quick-ly as possible, Darroch wrote.

The groups independent directorsled by Nicholas Ferguson say the News

bid substantially undervalues the com-pany.

Stay focused,

urges BSkyBboss Darroch

PRIVATE equity group CVC Capital isclose to purchasing a stake in themepark operator MerlinEntertainments, which ownsLegoland, Madame Tussauds and theLondon Eye. Reports suggests thatCVC would buy a minority stake fromMerlins existing shareholders, whichinclude rival private equity firm

Blackstone, sovereign wealth fundDubai International Capital and theLego Group investment arm, Kirkbi

A/S. Any deal would put an end to

Merlins hopes of an initial publicoffering, following a shelved attemptfour months ago.

CVC is reportedly set to buy a 30per cent stake in the company, leav-ing Blackstone, Kirkbi and the compa-nys managers owning the remainder.

CVC looks to investin London Eye group

THE Unite union is expected to notifyBritish Airways of another strike bal-lot today, which if successful couldmean widespread disruption duringthe peak of the holiday season.

Unite has completed preparationsfor a ballot and voting could com-mence seven days after the unionputs BA on notice.

If BA flight attendants vote infavour of industrial action, the strikecould begin as early as 3 August.

Previous strike ballots havereceived upwards of 90 per cent sup-

port from union members. The expected ballot comes after

Acas talks between the airline andthe union collapsed last week.

Unite has repeated its demands ofthe reinstatement of travel perks foremployees.

In a recent letter to cabin crew,Unites joint general secretaries Tony

Woodley and Derek Simpson said dis-ciplinary action taken against somestaff since the strikes began was vin-dictive.

Chief executive Willie Walsh hassaid the airline will fly through anyfurther strikes.

He said last week he expects the air-line to operate 100 per cent of all long

haul operations during the next waveof industrial action.

Unite union threatens round offresh industrial action at BA

BYDAVID HELLIER

MEDIA

AVIATION

BSkyBs chief executiveJeremy Darroch was quickto urge staff forwardsafter details of the NewsCorporation bid wereannounced

Picture: REX

BYMARION DAKERSM&A

News 3CITYA.M. 21 JUNE 2010

This process could take anumber of months, after which time News

Corporation will decide whether togo ahead with a formal offer andon

what exact terms.I know that todays news will generate a lot of noise and raise many

questions. But the important thing for all of us is that we do not get dis-

tracted. If there are further developments, I will make you aware of

them as quicklyas possible.In the meantime, we must stay focused on our plan and on delivering

for customers. As our last set of results showed, thebusiness is per-

forming well andwe haveanexciting opportunity ahead of us.

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GLOBAL politicians at the weekendcautiously welcomed Chinas move tode-peg its currency from the US dollarfor the first time in almost two years, bowing to international pressure aweek before the G20 meets in Toronto.

US President Barack Obamalabelled the new policy a construc-tive step, although the responsefrom Washington was muted by thePeoples Bank of Chinas (PBoC)refusal to authorise a single large-scale revaluation of the yuan.

Instead, Chinese policymakers saidit would make the exchange ratemore flexible by determining theyuans value on a daily basis with ref-erence to a basket of currencies,allowing it to appreciate slowly andgradually against the dollar. The cur-rencys existing 0.5 per cent dailytrading band will remain unchanged.

Analysts warned that the move,although a welcome development, would be seen by some as a half-baked attempt by Beijing to placate

global policymakers ahead of the G20

meeting this week.The PBoC said the renminbi would,

despite its increased flexibility,remain basically stable at an adap-tive and equilibrium level going forward a statement which SocieteGenerale analyst Glenn Maguire saidcarried the connotation that Chinadoes not believe the yuan is signifi-cantly undervalued and that it is trad-ing close to what Beijing would assessas its fair value.

However, Maguire said even a gen-tle appreciation of the yuan wouldprove a powerful tonic for growthboth in Asia and the rest of the world.

Although Chinese exporters, whohave benefited from strong demandin the past few years due to an artifi-cially weak domestic currency, willnow find it more difficult to sellabroad, other sectors of the countryseconomy stand to benefit from themove. Chinese banks will see theiryuan-denominated assets appreciatein line with the rising currency, whileshares in the countrys top airlinesare also expected to rise in the shortterm, since their main operating

costs are aircraft purchases overseas.

G20 wary onChina move tode-peg yuanBY VICTORIA BATES AND JESSICA MEAD

GLOBAL ECONOMY

THE Agricultural Bank of China haschosen the banks to lead its morethan $23bn (15.5bn) initial publicoffering (IPO), sources involved withthe process said yesterday, a movethat finally sorts out the key roles forthe deal.

AgBanks selection of its top bankscame as key investors swooped in on

the offering while its underwritersmarket the dual listing to institution-al investors. Qatar has agreed toinvest $2.8bn into AgBanks IPO,according to a report.

AgBank, Chinas third largestlender, has selected its internal secu-rities unit, as well as CICC, GoldmanSachs and Morgan Stanley as jointglobal coordinators for the offering,granting these banks top status forthe IPOs handling among the 11

banks picked to underwrite theShanghai-Hong Kong deal.The joint global coordinators take

on the most responsibility for an IPOand also stand to earn the biggest fee,which in the case of AgBank could beone of the largest fee pools ever for anIPO. Should the offering exceed$21.9bn, it would be the largest IPO inhistory, shedding around $450m infees to the banks at an estimated twoper cent charge.

AgBank picks banks for $23bnHong Kong-Shanghai flotationBY HARRY BANKS

BANKING


ANALYSIS l US dollar-Chinese yuan exchange rate over the past five years

7

7.2

7.4

7.6

7.8

8

8.2

8.4

Jan 06 Jan 07 Jan 08 Jan 09 Jan 10

Q&A: CHINAS YUAN POLICY

Q.WHAT HAS BEEN ANNOUNCED BYCHINESE OFFICALS?

A.The Chinese central bank saidon Saturday it would graduallymake the yuans exchange rate moreflexible from Monday. The yuan, alsoknown as the renminbi, was peggedto the dollar at 6.83 yuan in July2008, ending three years of a man-aged floating exchange rate.

Q.WHAT DOES THIS MEAN FOR ITSFOREIGN EXCHANGE POLICY?

A.There will be no one-off move;instead, there will be a gradualincrease in dollar-yuan daily fixings

to around 10-20 basis points from 1-2points.

Q.WHY WAS CHINAUNDER PRESSURETO REVALUE THE YUAN?

A.Beijing had defended the peg inthe face of growing US and inter-national presssure. By keeping itscurrency cheap against the dollar,China has made its imports appearmore attractive. This has resulted ina massive trade surplus in China.

A rebalancing of the yuan has beendeemed necessary to prevent a fur-ther build up of global imbalances. Ifthe US is still assumed to be both theconsumer and importer of lastresort and thus goes back to run-ning large current account deficits

then this would risk a repeat ofrecent history.

Q A&

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CITY economists have broadly backedthe chancellors plans to launch whatcould be the sharpest fiscal tighteningin Britains post-war history but warnedthat the squeeze could harm still-feeblegrowth.

Despite the improving fiscal trend,George Osborne is expected to intro-duce additional tightening measuresin his first Budget tomorrow to putthe public finances onto a more sus-tainable footing. Analysts agree that itis important for the new governmentto deliver a credible package that willkeep the financial markets and rat-ings agencies at bay.

Although some, such as CapitalEconomics Jonathan Loynes, think

that spending cuts will hampergrowth prospects, there is little talk ofBritain plunging back into recession.

Instead, the vast majority welcomethe coalition governments attempts

to rein in the public finances.Barclays Capitals Simon Hayes

envisages policies that would aim tocut the structural deficit by 8 per centof GDP over the parliamentary term.

This implies tax rises of about 24bnand spending cuts worth 94bn.

Such a plan would be viewed posi-tively by financial markets and wouldgo some way towards assuaging theconcerns expressed by rating agen-cies, he said.

Citigroups Michael Saunders haspencilled in an immediate 10bn taxhike most likely through a higher

Vat rate. Although he admitted thatgrowth would consequently not bespectacular, improving fiscal trendsshould make the recovery far moresustainable than many currently

believe.

However, Commerzbanks PeterDixon points out that multi-yeardepartmental spending plans willlimit the chancellors room formanoeuvre tomorrow.

City expectsbudget cutsBY JESSICAMEAD

UK ECONOMY

SENIOR members of the bankingcommunity yesterday implored chan-cellor George Osborne to reconsiderplans to introduce a sweeping tax on

bank balance sheets, arguing that asimple levy on profits would be a fair-er and more transparent option.

Osborne is set to outline details ofthe levy in tomorrows emergencyBudget and is widely expected to tar-get banks balance sheets instead ofprofits, following US President BarackObamas preferred taxation route.

That would mean that banks would be taxed according to a complexmeasure pitting assets against theirreliance on the wholesale markets,rather than handing over an easily-calculated proportion of their spoilsfor the year.

Angela Knight, chief executive ofthe British Bankers Association, said:Clearly with such a measure the gov-ernment would be trying to targetrisky practices in particular, but the

banks worry is that target might wellend up being much wider than antic-

ipated. Just one example could bethat banks start shedding assets seen

as being more risky a category which includes small business lend-ing, the very area ministers are tryingto support.

Some of Britains most powerfulbankers have also been quietly urging

the government to rethink the plan, with institutions like HSBC andStandard Chartered believing that a

balance sheet levy is not the best wayforward.

One said yesterday that the taxwould almost certainly fall victim tothe law of unintended conse-quences and would need to bethought through extremely carefullyto avoid unwanted repercussions forthe sector.

Osborne is expected to announcetomorrow that the tax will aim toraise a good deal more than the 1bnfirst mooted, potentially up to around3bn.

Last week he confirmed plans for alevy in his maiden Mansion Housespeech to the banking and financeindustry.

Osborne said: There are real issuesof fairness. That is why we will intro-

duce a bank levy and demand furtherrestraint on pay and bonuses.

BYVICTORIA BATES

BANKING

Banks implore Osborne torethink balance sheet tax

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AIRLINES have warned that the gov-ernments plans to increase thedeparture levy could see passengersavoid the UKs airports.

It is thought that the rise in thelevy, which is set for November, willcost a family of four travelling abroadup to 300 extra in taxes a year.

The government is also planning totax airlines on the number of planesthey operate rather than the numberof passengers are being carried.

British Airways (BA) argued air trav-el in the UK is already the most heavi-ly taxed in the world.

The airline said in a statement:Increased taxation on the UK avia-tion industry will create a financialincentive for customers to fly viaContinental hubs rather than directfrom or transitting through UK air-

ports.Budget rival easyJet said that it

does not support the rise in a depar-ture levy, but favours the new perplane tax.

Airlines warnover air levyand tax hikes

AVIATION

Budget and Politics News 7CITYA.M. 21 JUNE 2010

WHAT WILL THE EFFECTS BE OF LIKELYBUDGET MEASURES? Interviews by Jessica Mead

SIMON HAYES | BARCLAYS CAPITAL

Higher taxes, large cuts in public services andreduced welfare payments all seem likely. We would expectit to be viewed positively by financial markets.

MICHAEL SAUNDERS | CITIGROUP

A tightening of 25bn, split between a 10bn tax hikeand eventual spending cuts of 15bn. This should mean adrop in the deficit and a more sustainable recovery.

PETER DIXON | COMMERZBANK

Weare doubtful that the private sector is strongenough to take more of a near-term squeeze than 0.5 per centof GDP worth of spending cuts and a hike in VAT.

JONATHAN LOYNES | CAPITAL ECONOMICS

While a better fiscal position will improve the econ-omys long-run prospects, we are certain that the consolida-tion will act as a major drag on the economy.

BBA chief executive Angela Knight opposes the proposed tax Picture: PA

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Budget and Politics News 9CITYA.M. 21 JUNE 2010

Issued by HSBC Bank International, a trading name of HSBC Bank International Limited, HSBC House, Esplanade, St Helier, JerseyJE1 1HS. HSBC Bank International is regulated by the Jersey Financial Services Commission for Banking, General InsuranceMediation, Investment and Fund Services Businesses and licensed by the Guernsey Financial Services Commission for Banking,Collective Investment Schemes and Investment Business. Licensed by the Isle of Man Financial Supervision Commission. Copiesof the latest audited accounts are available on request. Approved for issue in the UK by HSBC Bank plc, 8 Canada Square, Londonunder the UK Financial Services and Markets Act 2000, including the Financial Services Compensation Scheme. To help us tocontinually improve our service, and in the interest of security, we may monitor and/or record your communications with us. HSBC Bank International Limited 2010. All Rights Reserved. MC8245AC18141/SJ/2206322

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SEVERE austerity measures and anuncertain economic climate will killoff the recovery in house prices, prop-erty website Rightmove will warntoday.

Revealing in its monthly surveythat home asking prices only rose 0.3per cent in June on the previousmonth, Rightmove said that the paceis slackening and the market is begin-ning to turn.

Miles Shipside, commercial direc-tor at Rightmove, said: They say thattroubles come in threes. The continu-ing mortgage famine has now been

joined by a surge in sellers followingthe abolition of Hips and investor ret-icence driven by rumours of CGT

increases. Together, these factors arelikely to put an end to this yearsrecovery in house prices.

He added: A surge of Hip-free prop-erties has come to the market, andmortgage-reliant buyers and waryinvestors are failing to match theincreased supply. That spells tougher

times for sellers and tenants, withmore properties for sale and fewerfinding their way into landlordshands.

According to Rightmove, the aboli-tion of Home Information Packs(Hips) caused a 22 per cent increase inthe number of sellers coming to themarket. This has resulted in a large

jump in unsold stock the averageunsold stock per estate agency branchincreased from 71 to 74, the fourthmonthly rise in succession.

Property has typically been viewedas a good hedge against high infla-tion but this appears to be no longerthe case. The annual increase in aver-age asking prices is just five per centhigher, less than annual RPI infla-tion, which is currently running at5.1 per cent.

Half of the 10 regions in Englandand Wales covered by the surveyreported negative monthly changes.Only London managed to post astrong rise in asking prices compared

with last month the 2.2 per centmonthly increase takes the annualchange to 8.2 per cent.

BY JESSICAMEAD

PROPERTY

CONFIDENCE in job security fell atthe fastest level since September 2009in the last four weeks, with house-holds also reporting dwindling sav-ings and concerns over debt,according to a survey out today.

More than a quarter said theirfinances had deteriorated in the last

month, compared to seven per centwho felt their financial prospects hadimproved, said YouGov and Markitsmonthly Household Finance Index.

Job fears remained more pro-nounced in the public sector, as moredetails over public sector cuts emerge,and 24 per cent of all respondents

believed their jobs are less securethan last month.

Job fears hit new high in June

FINANCIAL SERVICES

TOUGHER INDUSTRIAL relations andflexible working are among some ofthe measures proposed today by theCBI to maintain Britains job market.

A report by the business advocacygroup unveiled a number of meas-ures the government should adopt,including blocking regulations that

will cost jobs, taking a tougher stance

on industrial action and enforcingflexible working during a time ofrecession.

John Cridland, CBI DeputyDirector-General, said: As we enter aperiod of fragile recovery, we need todo everything we can to create a jobsmarket that works for Britain, and toensure Britain is the place to work.

As industrial disputes continue tohit Britains telecommunications andtransport industries, the CBI is advo-

cating for a tightening of ballot rulesincluding ensuring that 40 per centof a balloted workforce supports thecall for strike action.

The CBI has argued that employeesshould be given the right to chooseflexible working in the future.

Meanwhile, a sustainable employ-ment test should also be implement-ed, according to the CBI, which saidthat future labour laws should helpto create and not hinder job growth.

CBI: Britain needs tougherstrike laws and flexi workingBY EMMA SADOWSKI

EMPLOYMENT

Increases

Decreases(from previous month)

North

Avg. Price June 2010 169,819

Avg. Price May 2010 167,317Monthly Change 1.5%Avg. Price June 2009 170,562Annual Change -0.4%

North WestAvg. Price June 2010 163,744

Avg. Price May 2010 166,490Monthly Change -1.6%Avg. Price June 2009 155,337Annual Change 5.4%

Yorkshire & Humberside

Avg. Price June 2010 189,049Avg. Price May 2010 195,433

Monthly Change -3.3%Avg. Price June 2009 186,420Annual Change 2.5%

West MidlandsAvg. Price June 2010 165,532Avg. Price May 2010 166,009

Monthly Change -0.3%Avg. Price June 2009 162,318Annual Change 2.0%

East Midlands

Avg. Price June 2010 168,951Avg. Price May 2010 170,562Monthly Change -0.9%Avg. Price June 2009 168,300

Annual Change 0.4%

WalesAvg. Price June 2010 221,944Avg. Price May 2010 222,866Monthly Change -0.4%Avg. Price June 2009 207,166

Annual Change 7.1%

East Anglia

Avg. Price June 2010 152,118

Avg. Price May 2010 151,525Monthly Change 0.4%Avg. Price June 2009 141,430Annual Change 7.6%

North

Avg. Price June 2010 257,502Avg. Price May 2010 256,514Monthly Change 0.4%Avg. Price June 2009 244,511

Annual Change 5.3%

South WestAvg. Price June 2010 429,597Avg. Price May 2010 420,203Monthly Change 2.2%Avg. Price June 2009 397,140

Annual Change 8.2%

Greater LondonAvg. Price June 2010 308,920Avg. Price May 2010 306,674Monthly Change 0.7%Avg. Price June 2009 289,528

Annual Change 6.7%

South East

Source:Rightmove

UK MONTHLY HOUSE PRICE CHANGES

Austerity hitshouse prices

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FORMER Labour cabinet minister John Hutton has been appointed bythe coalition government to lead acommission into public sector pen-sions.

Announcing the appointment,chancellor George Osborne said it wasunsustainable to expect taxpayers tocough up for public sector pensions.

Hutton, a former secretary of statefor work and pensions, will be askedto find ways to make public sector

pensions more affordable.According to Treasury figures, the

total cost of unfunded public servicepensions in 2010-11 is estimated at astaggering 25.4bn more than twicethe cost of child benefit.

The chancellor believes it is unfairfor taxpayers that work in the privatesector to fund public sector pensions,especially when their own pensionsare increasingly meagre.

Only a third of private sectoremployees now get pension contribu-

tions from their employer. For thosethat do, the average contribution is 10per cent almost half the 18 per centthat public sector workers enjoy.

And according to figures in therecently-released Office for BudgetResponsibility report, the gap

between the contributions made bypublic sector workers and the payoutthey eventually get is set to more thandouble over the next four years to9bn.

Hutton will also be asked to exam-ine ways to encourage people to savemore for their retirement and to work

for longer.He will present interim findings in

September ahead of a comprehensivespending review, before delivering thefinal report in time for the 2011Budget.

Reform of public sector pensions isa huge challenge for both the publicfinances and the public sector work-force. I welcome the opportunity tolead a root and branch examinationof both the short-term and longer-term options for reform, said Hutton.

Hutton to leadpublic sectorpension probe CLAIMS that regional developmentagencies (RDAs) are there to help pri-vate businesses were exposed as falseyesterday, after it emerged 62 per cent

of grants were funnelled back into thepublic sector.

Research from the TaxpayersAlliance shows public sector organisa-tions and projects received 1.8bn ingrants between 2007-09 out of a totalof 2.9bn.

Trade unions which donatedalmost 10m to the cash-strappedLabour party last year were amongthe biggest beneficiaries, receivingover 3m in grants in the two-yearperiod.

According to the figures, which were only released following aFreedom of Information request, the

Trades Union Congress walked away

with a staggering 2.6m in RDAgrants.

The Liberal-Conservative coalitionhad promised to scrap the hugelyexpensive quangos, although businesssecretary Vince Cable has since said he

will keep those that are popular withlocal businesses.

If the government were to scrap allof the RDAs, it could afford to cut therate of small business corporation tax

by 3.7 per cent, the Taxpayers Alliancesaid.

Private firmslose out in racefor RDA grants

John Hutton was ennobled in the dissolution honours listBY DAVID CROW

POLITICS

Budget and Politics News10 CITYA.M. 21 JUNE 2010

JOHN HUTTON might sit on the Labour

benches in the Lords, but he agreeswith George Osborne on at least onething: in the run up to the Labour lead-ership election of 2006, he told BBCpolitical editor Nick Robinson thatGordon Brown would be a f***ing dis-aster as Prime Minister.

In truth, the chancellor and Huttonare politically closer than it firstappears. The former business, workand pensions, and defence secretarywas always on the right wing of the

Labour party. He counts the likes ofAlan Milburn, John Reid and Tony Blairas his closest allies and is a long-stand-ing advocate of public service reform.

When Brown seized the party lead-ership and with it the premiership in2007, Hutton stayed on as a cabinetminister. But he became increasinglydisillusioned as Brown turned awayfrom the New Labour project in favour

of greater centralisation. After step-ping down as a cabinet minister inJune 2009, he kept his reservations tohimself; that loyalty likely helped himsecure a peerage in Browns dissolutionhonours list.

Osborne has picked an ex-Labourminister for this job precisely becausehe wants to be bold. The kind of radicalreforms he expects Hutton to come upwith could never be sold to the publicsector by a Tory. David Crow

LORD JOHN HUTTON

LABOUR PEER

BY DAVID CROW

POLITICS

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JOHN Redwood, the Tory MP lead-ing a Westminster campaignagainst government plans to raisecapital gains tax (CGT), yesterdayurged George Osborne to rethinkthe proposals, just hours before hisfirst Budget as chancellor.

Lets make a statement; lets sayBritain is open for business,Redwood said. We really wantenterprise. If you want to stop

things you tax them. If you want topromote things, you lower the rateand then youll get more revenue.

Redwood, who has backed CityA.M.s own campaign against thehike, beseeched Osborne to reducelong-term CGT on both businessand non-business assets down to 10

per cent, well below the current 18per cent flat rate.

Redwoods comments came asleading think tank the AdamSmith Institute warned that the

Treasury faces a tax revenue loss of2.48bn if the CGT hike goes ahead.

And the Royal Institute ofChartered Surveyors warned a CGTrise would deter investors fromentering the buy-to-let market. RICSalso said a hike could precipitate afire sale of properties by land-lords looking to avoid the increase,derailing a fragile improvement insentiment in the sector.

Redwood calls for arethink on CGT hike

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THE public needs to support Britishtroops more loudly and more proud-ly, the Prime Minister has said aheadof next weeks Armed Forces Day.

David Cameron said his recent tripto Afghanistan had reminded him ofthe sacrifices made by the military.

He said he hoped to see an explo-sion of red, white and blue when thecountry celebrates the armed forcesnext Saturday.

Writing in the Daily Telegraph, thePrime Minister warned the inquiryinto Bloody Sunday was in danger oftrashing the reputation of ourarmed forces and the pride theyinspire.

He added: Over the past few yearstheres been an increasing apprecia-tion of what our Armed Forces do.

But still I believe we should do more.He said that society not just gov-

ernment needed to show stronger backing for the troops consideringthe risks they take for the country.

Cameron tellspublic to backBritish troops

BYDAVID CROWPOLITICS

FOR MORE NEWS

www.cityam.com

Budget and Politic News 11CITYA.M. 21 JUNE 2010

HUHNE LEAVES WIFE

CHRIS HUHNE, secretary of state for energy and climate change, has confirmedhe is leaving his wife of 26-years after revelations about his relationship with aformer assistant. He said he was now in a serious relationship with CarinaTrimingham, head of campaigns at the Electoral Reform Society. Huhne empha-sised the importance of family during his campaign. Picture: REUTERS

BYVICTORIA BATES

CITY A.M.

CAMPAIGN

Conservative MPJohn Redwood hasstepped up calls forOsborne to drop theplanned rise in CGT

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The Capitalist12 CITYA.M. 21 JUNE 2010

EDITED BY

VICTORIA BATESGOT A STORY? [email protected]

NOMURAREADY FOR

ROOF WITHA VIEWOnly weeks to go now before the biggestdecampment the City has seen in a while;Japanese bank Nomuras move back to theCity from the Canary Wharf offices itinherited from Lehman Brothers a fewyears back. The bank, which will move itsstaff floor by floor to minimise disrup-tion, starting on 12 July, is getting a tadexcited about the Watermark Place office.

No wonder, either if the Met Officespredictions of a scorching summer are to be believed (we can but hope), theiremployees are going to have something ofa treat in store. Not only does the new

cafeteria look out over the Thames, com-plete with outdoor tables and chairs, butthe banks new digs also boast the largestoutdoor roof space in the whole ofEurope, split over two separate terraces.

Main pic: Nomurastaffers will have plen-ty of scope to enjoythe summer at

Watermark Place

Above right: Saltyseadog Mike Slade atthe tiller

As one savvy Nomura schmoozerremarked: Were going to be able to hostsome epic parties out there.

Ill say. Are we all invited?

TRUMPET BLOWERLove it or hate it, the vuvuzela hornsincessant drone has been the soundtrack

to the World Cup tournament so far. Butthose in the latter category will be delight-ed to know that it may soon become athing of the past. Audionamix, a Paris

technology firm, is in talks with ITV tolicense software that filters out the blareof the South African horns from footballgames without losing other sounds.

Audionamix, half-owned by RichardBernsteins Eurovestech, has already soldthe technology to French TV portalCanal+, which began offering viewers theability to turn vuvuzelas off last week.

ELLO ELLOCongratulations to Patrick Rarden (pic-tured right), the former Icap equity brokerand City veteran, who last week picked upa Westminster award for his efforts out-side the office, pounding the streets ofthe Square Mile on the beat.

Rarden has been a special constablevolunteer in the City of London policefor the past three years, givingup a hefty 587 hours of his owntime in the past year alone tohelp the force. Alongside hispatrol work, he also providestraining for officers on theintricate workings of thefinancial markets, helps withhigh-level fraud investigationsand has also set up his owncharity, Waste Not Want Not, todistribute discarded food fromEat sandwich shops to roughsleepers in the City. Puts the restof us to shame, doesnt it?

OPEN WATERMuch has been made of besiegedBP boss Tony Haywards jaunt to

the Isle of Wight at the weekend for the JPMorgan Asset Management Round theIsland race, but how did he actually fareout there on the water?

Not half bad, actually Haywards boatBob made it round the course in sixhours and 16 minutes, which is prettyrespectable for a Farr 52 monohull.

But it was another businessman who

was really celebrating after the race,namely Mike Slade, the chief executive ofproperty group Helical Bar, whos nostranger to the waves in his Icap Leopardyacht. Slade was gunning for a record atthe event, but missed out due to the boatbeing held up after it caught on a heavylobster pot.

Still, he managed to take line honours with a time of just over five hours.Thankfully we had a young diver onboard who free-dived below and cut off[the lobster pot], Slade laughs. Wethought we had slowed up and when wesaw the size of the obstacle we realisedwhy. Sadly there was nothing in it.

AND ALL THAT JAZZRegular readers may recall the name ofstockbroking veteran John East, deputychief of Merchant John East Securities, who made a musical comeback earlierthis year, playing the Hammond organ ata jazz gig in Chelsea. East is now planninghis next gig at the 606 Club, on 28 July,and his ambitions dont stop there.

The last gig was recorded and we weregoing to put it out as a CD, but I think Imgoing to wait until after the next one incase there are a couple more numbersworth including, East tells me, explain-ing that the mix will be a mix of classicsand new numbers, to ring the changes.

Its worth a listen, too not only has hebeen playing since his early teens, but themusical maestro was also formerly afounder of CityAid, the Square Milesanswer to LiveAid, in the Eighties.

The banksnew digsboast the

largest roofspace in thewhole ofEurope, splitover twoterraces

AUSTERITY still seems to be the order of the day, if this little group diningat Camdens Gilgamesh restaurant last week are anything to go by. Our din-ers barely touched their alcohol, claiming that theyd stick to a simplesplash of bubbly (a few bottles of Louis Roederer Cristal, natch) becausethey had to stay sober to get back to the office afterwards. Whatever hap-pened to the good old days of liquid lunches that lasted until well after sun-down?

Mind you, the connoisseurs made up for it with a mouth-watering selec-tion of food, including the restaurants signature smoked eel sushi, sashimiand dragon rolls, followed by Chilean seabass, fruits de mer and Cityfavourite Wagyu beef.

They then nibbled on dessert plates and chocolate fondant puds beforeheading off for a full afternoons slog. Curse that pesky financial crisis.

BILL OF THE WEEK

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Exclusive football content on YahoFrom a man who knows a bit about footb

Make Yahoo! your home for football.

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A BITTER legal feud between BP andits Deepwater Horizon partner Anadarko Petroleum is developingafter the latter declared it would notpay out claims linked to the Gulf ofMexico oil spill.

BP said yesterday that it had notmade a decision on whether it willsue Anadarko, which it partnered

with to co-own the leasehold in theMacondo well, and said it stronglydisagrees with allegations that itacted recklessly.

A statement from BP chief execu-tive Tony Hayward said: Other par-ties besides BP may be responsible forcosts and liabilities arising from theoil spill, and we expect those partiesto live up to their obligations.

Anadarko, which had a 25 per centstake in the damaged well, said latelast week that it would not accept

responsibility for the catastrophebased on BPs reckless decisions andactions.

Chairman and chief executive JimHackett said: We recognize that ulti-mately we have obligations underFederal law related to the oil spill, butwill look to BP to continue to pay alllegitimate claims as they have repeat-edly stated that they will do. TheTexas based production company lastweek had its credit ratingslashed byMoodys to Ba1 from Baa3.

Anadarko wages bitter warover Macondo well claims


BP IS structuring a plan to raise morethan double the amount it hasalready dedicated to paying out incompensation claims arising from theGulf of Mexico disaster.

It is understood that the board iscurrently discussing a number ofoptions that could see the embattledoil major raise roughly $50bn(33.7bn) to cover the costs of the spill.

The group is thought to be plan-ning a $10bn bond sale, which couldstart as early as next week, while a fur-ther $20bn could come from the saleof assets over the next two years.

BP is also understood to haveentered into discussions with severalbanks in a bid to raise the remaining$20bn in loans.

A spokesperson from the embattledoil major declined to comment on

specifics, but said that it is in ongoingdiscussions with its advisers, includ-ing Goldman Sachs, Morgan Stanley,UBS and Blackstone.

Last week BP had its rating slashed by Moodys, Fitch and Standard &Poors (S&P).

Moodys downgraded BP to A2 fromAa2, while Fitch knocked BP down sixnotches to BBB and S&P down twonotches to A.

Meanwhile, BP announced over theweekend that it has already paid out$104m in compensation claims linkedto the Gulf disaster.

Darryl Willis, of the BP claims teamsaid: Our focus has been on gettingmoney into the hands of fishermen,shrimpers, condo owners and others who have not been able to earnincome due to the spill.

We have also been addressing thelarger, more complex claims and have been successful in sending morecheques to commercial entities.

Last week BP agreed to set up a$20bn escrow account to pay for com-pensation claims coming from theGulf.

The fund will be independentlymanaged by Kenneth Feinberg, whofamously managed the claims arisingfrom the 9/11 attacks.

BP to launchlarge scalefund raising

Oil is burned of f the surface of the Gulf near the spill Picture: REUTERS

3notches

ANALYSIS l Credit rating downgrades for BP

Moodys

A2 BBB A

2notches

6notches

Standard& Poors

Fitch

BY EMMA SADOWSKI

BP IN CRISIS

BY EMMA SADOWSKI

BP IN CRISIS

8/9/2019 CityAM 21/06/2010

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BOOKMAKERS are taking bids on whois likely to replace BP chief executive

Tony Hayward, as uncertaintymounts over who will take the helm.

Iain Conn, Bob Dudley and DougSuttles are among some of the BPexecutives tipped on Irish bookmaker Paddy Powers website, withodds favouring Conn, who is chiefexecutive for refining and marketingat the embattled oil giant.

Odds are three-to-one that Connwill be the next BP boss, while Dudley

is seven-to-two and Suttles six-to-one.Paddy Power also lists

ConocoPhillips James Mulva, ShellsSimon Henry and Totals Christophede Margerie as possible heirs to the BPthrone.

Ladbrokes odds that Hayward willstand down by the end of the calen-dar year were five-to-one earlier thismonth, with 16-to-one that former

Tesco boss Sir Terry Leahy would takeover.

But it is understood that formerBHP Billiton chief executive ChipGoodyear and Conn are the marketfavourites to take the post.

Speculation has been mountingacross the UK and US since the spill

began over whether Hayward will

exit the oil group once the leak iscapped and the clean-up is underway.

Bookies take bets

on CEO successor

Former BHP Billiton chief executiveChip Goodyear is a favourite

THE WHITE House has hit out at BPchief executive Tony Hayward, who

was spotted on his yacht just off theIsle of Wight over the weekend.

US President Barack Obamas chiefof staff, Rham Emanuel said thatHaywards trip was part of a longline of PR gaffes and mistakes.

He said: To quote Tony Hayward,hes got his life back. I think we canall conclude that Tony Hayward is not

going to have a second career in PRconsulting.

Hayward was sailing on his 52-foot yacht Bob over the weekend afterattending the annual JP Morgan AssetManagement Round the Island Race

with his son. A spokesperson from BP pointed

out that this was the first day offHayward had taken since the 20 Aprilexplosion of the Deepwater Horizonrig and that it was private time withhis son.

Members of the business commu-

nity came out in his defence yester-day, criticising the way the US govern-ment has responded to the event.

David Buik of BCG partners said:Having been castigated and pilloried

by the US President and Congress asthe most loathed man in the US, onecan hardly blame Tony Hayward fortaking a couple of days off to spendtime sailing with his son.

The embattled chief executive, whoreceived a stark grilling by a US con-gressional panel last Thursday, willhand over operations in the Gulf toBob Dudley, the former chairman of

BPs Russian venture, TNK-BP.It is uncertain when the handover

will officially take place, but the oilmajor said the process is currently

being phased. Dudley was appointedwith the task of handling and manag-ing the clean up of the Gulf coastmore than a week ago.

News comes as congressman EdMarkey, who chairs the House energyand environment committee, said100,000 barrels of oil a day could have

been leaking from the well if theblow out preventer was removed.

White Househits out overyachting race

BP chief executive Tony Hayward's yacht Bob during the JP Morgan Asset Management Round the Island Race Picture: REUTERS

BY EMMA SADOWSKI

BP IN CRISIS

BY EMMA SADOWSKI

BP IN CRISIS

BP executive Iain Conn has beentipped multiple times as a successor

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WORKERS at a plastics parts supplierfor Toyota in China resumed work yes-terday, ending a three-day strike overpay and benefits.

The strike, at Toyota-affiliated partsmaker Toyoda Gosei Co, had forced astoppage for most of Friday at the Japanese car makers joint venturefactory in the northern city ofTianjin, near to Beijing.

China has been hit by a rash ofstrikes at factories across the countryover the past few weeks, mainly overpay.

The wage rises demanded by thefactories would add little to the costof products made in China, meaningthe countrys role as a manufacturingbase appears secure. But the outbreakof worker unrest presents a trickychallenge for Chinas rulingCommunist Party, which has vowed

to improve workers incomes but is jit-tery about any protests.

Toyota actionends amid rashof China strikes

AUSTRALIAN mining magnate KenTalbot and all four other board mem-bers at Sundance Resources are miss-ing after their plane disappeared inCameroon on Saturday.

Talbot, one of Australias richestmen and non-executive director atSundance, was one of nine people fly-ing to the Republic of Congo, whereSundance has opened a major ironore project.

The firm has halted all operationsin the area to divert resources to thesearch efforts, and said it will requestthat trading in its shares on the Australian Stock Exchange be sus-pended today.

Weather conditions at site are cur-rently favourable and a comprehen-sive multi-national air and ground

search effort commenced at 1000local time on Sunday, the firm said.

Cameroons government has saidsix Australians, two British, twoFrench and one American were onthe aircraft.

The other Sundance personnel onthe flight were confirmed by thecompany as being chairman GeoffWedlock, chief executive John Carr-Gregg, and non-executive directorsJohn Jones and Craig Oliver.

A search for the aircraft byCameroon, Congo Republic andGabon authorities is under way, withassistance from Australian, Canadianand US diplomats.

Talbot, 58, rose to prominence asthe founder of Macarthur Coal, which he sold in 1995 for A$700m(equivalent to 332.4m at the time).He is currently at the centre of a cor-ruption enquiry.

The Foreign and CommonwealthOffice said last night it was urgently

investigating reports that two Britishcitizens were on board the plane.

Australian miningmagnate is missing

AUTOMOTIVE

INVESTORS in Spice, Britainslargest installer of water meters,have signalled private equity houseCinven will have to significantlyimprove its 316m approach for thecompany if deal talks are to open.

Spices board last week rejectedan indicative offer of 56p per sharefrom Cinven as opportunistic. Although the offer represented a51.5 per cent premium to Spicesclosing price the day before theapproach, the shares rallied in theintervening period after Spice dis-posed of its troubled gas business.

Based on Fridays closing price of54p, Cinvens approach now repre-sents a premium of just 3.7 percent. Geoff Allum, an analyst atArden Partners, suggested Cinvenwould need to up its offer to 75pper share or 423m to get the utili-ties services company to the table.He cited the appointment of chiefexecutive Martin Towers, a numberof contract wins and the possible10m sell-off of the firms facilitiesbusiness as positive factors.

Several shareholders said theybacked managements decision toimmediately knock back theEuropean buyout outfit. One small-er companies fund manager from a

well-known institution said: 56p isthe wrong price by a million milesso I have no problem with manage-ment turning it down. Cinven isbeing incredibly opportunistic.

Spice investors tellCinven to up its bidBYOLIVERSHAH

UTILITIES

BYMARION DAKERSMINING

Toyoda workers returned to work yesterday after a three-day strike Picture: REUTERS


ANALYSIS l Spice

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30

40

60

50

8Jun10May29Apr9Apr

p54.00

18 Jun

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BAE SYSTEMS has signed an agree-ment with Lockheed Martin to sus-tain and support a series of combatfighter planes in Australia.

Both companies signed a memo-randum of understanding yesterdayin Australias Newcastle, which willsee BAE help support the govern-ments F-35 Lightning II Joint StrikeFighter plan.

The Australian government hasalready approved the procurementof 14 out of 100 F-35 jets and BAEsaid that it is well placed to providesupport to the programme throughits Williamtown aerospace head-quarters.

John Monaghan, director of aero-space in Australia, said: Leveragingour capability at Williamtown willreduce the transition risk and cost ofintroducing the F-35 aircraft intoservice in Australia from 2018.

It will also assist in retaining thisimportant defence industry capabili-ty for the Hunter region andAustralia more generally.

Monaghan and Lockheed vicepresident of global industrial inte-gration aeronautics Bob Bolz signedthe agreement.

Lockheed won the contract tobuild the F-35 Lightning jets as longago as 2001.

The initial order was worth$200bn (134.8bn) for a consign-ment of 3,000 planes.

Lockheed signs upBAE as jet partnerBY EMMA SADOWSKIDEFENCE

SEVERAL institutional shareholdersare agitating for the resignation ofPrudential chairman HarveyMcGrath as pressure grows on theboard over the aborted attempt tobuy AIA in Asia for $35.5bn (25bn).

Fidelity, Legal & General,Schroders and F&C are understoodto be among those demanding achange at the top of the FTSE 100insurer, which was forced to pay450m in advisory and break feeson the failed bid for AIGs FarEastern operations. Fidelity is dueto meet McGrath and senior inde-pendent director James Ross today, while Schroders will meet themlater in the week.

Lord Myners, the former Cityminister and ex-chairman of Marks

& Spencer, and Jim Schiro, the for-mer chief executive of ZurichFinancial Services, were named inthe weekend press as possible can-didates for McGraths role. NaguibKheraj, the former chief executiveof JPMorgan Cazenove, and MichaelMcLintock, the head of fund man-ager M&G, have been mooted aspotential successors to Prudentialboss Tidjane Thiam.

Sources close to Prudential saidthe firm would continue to meetwith City investors, many of whomare dismayed at the fall-out fromthe AIA move. Although the boardrecognises some shareholders wanta change of management, itbelieves the majority are in favourof McGrath and Thiam staying on.

One problem for frustrated

investors is the dearth of talent inthe highest echelon of the insur-

ance sector. Thiam, who held posi-tions at McKinsey and Aviva before becoming finance director andthen head of Prudential, is seen as atalented manager by many despitehis gaffes during the AIA process.

While more hawkish fund man-agers would prefer McGraths headin the near term, many also wantThiam to depart soon after.

City sharpens knifefor Prus chairmanBYOLIVERSHAH

INSURANCE

AIR ASIA CONSIDERS LONDON IPO

AIRASIA is weighing its options of a $1bn (674m) London Stock Exchange listing nextyear when the company floats its long haul business, AirAsia X. The groups chief execu-tive, Tony Fernandes (pictured), said the airline would initially list in Malaysia, but thatit was considering a secondary listing in either London or New York. AirAsia has becomethe larges t budget carrier in the region. Picture : Alex Ridley/ CITY A.M

ANALYSIS lPrudential

500

520

540

560

600

580

14 Jun24 May4 May13 Apr22 Mar

p566.00

18 Jun

NEWS | IN BRIEF

Toy Story 3 sets Disney recordMovie giant Walt Disney smashed a boxoffice record with the opening weekendfor Toy Story 3, the third in its animatedseries about toys that come alive. Thecartoon sold $153.8m (103.7m) worthof tickets at the weekend, with $109mtaken in the US and Canada a new

opening record for a film produced byDisneys Pixar Animation unit. The filmreceived an extra boost from premiumpricing for 3D screenings, whichaccounted for about 60 per cent ofsales, Disney said.

Gold hits an all-time record highGold rallied to an all-time record above$1,260 an ounce on Friday, as investorslooked to precious metals for an alterna-tive to equity or debt investments givenrenewed uncertainty about the econom-ic recovery. Surprisingly weak US eco-nomic data hiked the tangible asset andspot gold hit an all-time high of$1,261.90 an ounce. US gold futures forAugust delivery also climbed to a recordat $1,263.70, and settled up $9.60 at$1,258.30, its highest ever close.

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10.1M

M

1.5M

2.3M

519k

70k

27k

585

25k

537k

833k

.3M

815k

2k

65k

1M

.1M

.2M

330k

31k

339k

497k

37k

386k

504k

33k

333k

535k

734k

27k

385k

2.3M

1.9M

2.2M

.4M.8M

1.1M

433k

338k627k

19k

361k

99k

364k

343k

380k

309k

404

504k

335k

85k

609k493k

13k556k

92k

484k

417k

43k

302k

757k744k

442k

300k

415k

.6M

.3M

805k

756k

620

989k

.2M

1.2M

1.3M

1.7M

1.9M

978k

941k

1.2M

1.7M

730k

81k

317k

74k

450k

02k

70k

871k

614k

94k

1.5M

79

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VODAFONE may receive a dividendfrom its stake in American mobile car-rier Verizon by 2012, according toVerizons chief financial officer.

John Killian said there was a rea-sonable chance of issuing a dividendin two years, assuming no change inthe structure of the business.

Its a Verizon-controlled decision asto when we pay the cash out and howmuch we pay, he added.

A payout could increase Vodafonessizeable dividend stream. The firm hasnot received a payment from its 45 percent stake in Verizon since 2005.

Americas biggest mobile phonecompany has instead been pouringmoney into paying down its $55bndebt pile, most of which relates to itstakeover of Alltel.

Vodafone has been under pressurefrom shareholders and Verizon Group,which owns the remaining 55 per centof the company, to sell its stake in thejoint venture.

Verizon Group has long maintainedit would like to take full ownership ofthe firm, and has previously hinted ata merger with Vodafone onceVerizons debts are resolved.

CITY investors will be closely watch-

ing Jupiter Fund Managementsdebut on the London Stock Exchangetoday, after its shares rose from 165pto 190p in unofficial dealing.

Rival asset manager Gartmore hasdisappointed since its initial publicoffering (IPO) in December. Its shareprice has almost halved from 217p to

117.7p amid fears over internal andFinancial Services Authority investi-gations into trades made by star man-

ager Guillaume Rambourg. Although Jupiter also relies on ahandful of well-known managers Tony Nutt, John Chatfeild-Roberts,Philip Gibbs and Guy de Blonay run38 per cent of its assets it claims itsrevenues are diversified and it doesnot rely on blockbuster products.

Investors will be hoping market jit-ters around the indebtedness ofperiphery eurozone countries such as

Spain and Greece do not turnJupiters first few weeks as a publiclylisted company into a rocky ride.

Last week, chief executive EdwardBonham Carter said he was pleased with the outcome of the IPO eventhough the shares were pricedtowards the bottom end of the range.

Jupiter prepares for first day of trading

GERALD Ronson, the property tycoon

currently building the Heron Tower,was named as a surprise bidder forTower 42 in reports over the weekend.

The tower, the tallest completedbuilding in the City at 600ft, was putup for sale by owners BlackRock andHermes in April.

A spokesperson for Heron

International, Ronsons private prop-erty company, refused to commenton the reported bid, telling City A.M.

that Heron are always actively look-ing at properties in the market. Tower 42 is on the market for

around 300m, as its owners try tocash in on a resurgence in propertyprices. It is seen as a bellwether ofhigh-end City rents, having com-manded 70 per square foot in 2007.

Heron may buy Tower 42FUND MANAGEMENT

PROPERTY

Verizon may

pay Vodafonedividend soonBYMARION DAKERS

TELECOMS


TPG BAGS REPUBLIC FOR 300M

TPG Capital, the US private equity giant behind the controversial quick flip ofDebenhams in 2006, has moved down the market capitalisation scale to buy youth fash-ion retailer Republic for 300m. TPG aims to double the number of Republic outlets inthe UK and Ireland from 103 to more than 200. The transaction marks a 4.7 times returnon initial investment for Change Capital Partners, which will exit the company.

NEWS | IN BRIEF

Resolution eyes 800m in AxaClive Cowderys insurance consolidationvehicle, Resolution, is hoping to free uparound 800m from the inherited

estate of Axas UK business if its 2.8bntakeover goes ahead. Axa had previouslysought permission from the FinancialServices Authority to expatriate excessfunds from the groups with-profits lifeassurance portfolios over the next twoyears, and Resolution is understood towant to do the same. A source said themove would benefit both policyholdersand shareholders.

Troubled retailer bounces backUSC, the chain of youth fashion outletsowned by Scottish private equity mag-nate Sir Tom Hunter, has returned toprofit after going through a pre-packadministration in 2008. Accounts filedat Companies House show the clothinghouse delivered pre-tax profits of 1.3mfor the year to January 2010 on rev-enues of 69m, compared with a loss of9m last year. Sir Tom vowed to take amore hands-on approach with USCwhen the company folded under mount-ing rent bills and falling revenues.

Brit waits for higher Apollo bidShareholders in Brit Insurance, theLloyds of London company, are waitingto see if US private equity player Apollowill raise its 770m buyout bid thisweek. Brit Insurances largest investorshave dismissed Apollos offer of 10 pershare as speculative, suggesting theywant at least 11 per share.

Budget focus should not be on banker bashing

Tomorrow George Osborne willdeliver one of the most impor-tant Budget announcements inrecent memory as he outlines

plans to deal with the harsh financial

realities facing our nation. The chancellor has already taken

steps to trim the structural deficit butthere is more to do if we are to main-

tain our reputation for f iscal stabilityamong international investors andavoid a sovereign debt crisis.

In such challenging circumstances,we must all pull together in the samedirection. That is why it is importantto remember as I told the chancellorand Mervyn King last week at MansionHouse that finance is the lifeblood ofBritains manufacturing and widerservices industries. Without funding,products are not produced, there is nobudget for innovation and services go

unprovided.A successful financial services sector

helps to support and drive the widereconomy forward. So when people

talk about rebalancing the economy,the debate should centre on howfinancial services can help businessesacross the UK grow rather than cut-ting the City down to size.

There can be no return to businessas usual. Therefore it seems pragmaticthat the Bank of England the lender oflast resort should have a greaterauthority in macro-prudential andmicroprudential regulation.

But as the regulatory landscapechanges both domestically and

internationally policymakers mustmake sure each organisation involvedis clear about its responsibilities.

So I trust the new Independent

Commission, led by Sir John Vickers,will not simply focus on the possibleseparation of retail from wholesale banking. It was not the integrated banks which failed. It is importanttherefore any proposals are rigorouslyassessed and help put capitalism backinto the heart of capitalism.

Past failings have understandablyaltered the way the City is perceived bythe public and politicians, and indeedhow we perceive ourselves. But theindustry has historically overcome a

range of financial crises that havethreatened to undermine its reputa-tion. And each time the City hasemerged bruised, but intact.

Therefore I would like to repeat thechancellors hopeful statement atMansion House last week echoingthe famous words of Sir WinstonChurchill that we have now reachedthe end of the beginning.

So let us put an end to banker bash-ing, pointless recriminations, andharmful uncertainty. It is time now tomove forward together and help shapethis new financial era.

Nick Anstee is Lord Mayor of the City ofLondon

MONDAY COMMENT

NICK ANSTEE

ANALYSIS l Vodafone

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135

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155

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DAILY Express and Daily Star ownerRichard Desmond has joined the bid-ding for ailing TV station Five, itemerged yesterday.

Desmond, who has trumpeted his1bn acquisitions war chest in recent

weeks, is said to have registered hisinterest in the asset ahead of todaysfirst-round deadline.

The newspaper tycoon, who ownsthe Daily Express and OK! magazine,

joins a long line up keen to take own-ership.

Others thought to be interestedinclude Endemol, famed for the pro-grammes Big Brother and Total

Wipeout, Fives terrestrial competitorITV, plus American broadcasters.Endemol is thought to favour a deal

because its long-running contract toshow Big Brother on Channel 4expires at the end of this series.

Desmonds interest has traditional-ly been in print, but analysts havesuggested he would be wise to investin other media. He already ownsPortland, which produces adult TV

channels Television X and Red Hot.Five, formerly known as Channel 5,

is owned by RTL. The European broad-caster last year attempted to merge

with Channel 4 but is now keen tobow out completely.

The channel, whose hit showsinclude Neighbours and CSI, made anoperating loss of 9.1m last year, butafter writeoffs and restructuringcosts were accounted for the total loss

was 37m.Desmond, who has a personal for-

tune of around 950m according toThe Sunday Times Rich List, said in aRadio 4 interview recently that thenewspaper industry had to consoli-date and said he hoped to be in the

vanguard of that consolidation. Heeven hinted he would be in the mar-ket to buy The Sun if it ever came upfor sale.

In an interview in the Independenthe boasts having so much money itsridiculous and said while he drew asalary of 1m a week for a few years,he now takes just 50,000 annually -as he would rather see his businessgrow than lose 70 per cent of his cash.

Daily Expressboss Desmondeyes Five TVBY OLIVER SHAH

BANKING

Investors need to get used to lower returns

Until last week Id never been in

The Galerie Doree, but if youever get the chance its well

worth a peek.Situated inside what is now the the

Banque de France but was once theHotel de Toulouse it equals anything

in Versailles with a French version ofthe of the Sistine Chapel on top.

Mind you, during the revolutionthey didnt think too much of it theroom was used to store paper.

Anyway, there I was after lunch withthe Governeur, gazing through thisbeautiful room, when I was struck bythe thought; Wed all better get usedto much lower returns from ourinvestments.

Now admittedly it wasnt the artis-tic beauty in front of me that inspiredthis conclusion I was rather helped

by the speakers on my investmentpanel at the GIC conference.

Martin Barnes from BCA laid outthree basic macro views Doomsday,Limbo and Revival. Happily for the

digestion Martin was in the revivalcamp, which made my Fois Gras sitrather more comfortably.

Unhappily, however, he said thateven with the best global economic

conditions he could forsee, a bal-anced equity portfolio that excluded banks was unlikely to yield muchmore than six per cent in annualisedgains. With banks wed be toast.

From there it got worse. Martin Jetzer from Bellecapital told usclients are now much more interest-ed in the return of investments thanreturn on investment and was fearfulof the huge demographic challengesthat face us in the West.

John Mauldin writes an investmentletter called thoughts from the

frontline. He tells me its read byover 1.5m people. I can only say theymust be suckers for punishment.

John is universally bearish and con-vinced were heading for a double dip

recession in both the US and Europe.His reasoning, on top of all the spend-ing cuts, huge and rising taxation

will push us over the edge.The answer is to invest in traders

or in other words hedge funds. Theproblem with that, he reckons, is thatonly 20 per cent of them are going tomake any money and even the goodones might only return high singledigits.

As for private equity funds buyer beware. Andrew Boyle from Londonand Capital says many of the big play-

ers are holed below the water line.Investors have to be wary theyre

not investing in new funds that arepurely designed to earn fees to bailout existing investments that have

gone bad. Perhaps, like all of us, private equity funds can only makemoney by going back to fundamen-tals and creating wealth by support-ing entrepreneurial activity.

Coming back on a packed EurostarI realised, if I hadnt known before,that we really are in the world of thesingle digit return and likely to stayhere for quite some time. As a resultIve been to my local bookie and gonefor the win double with Murray andEngland. I cant lose.

Ross Westgate, Anchor, CNBC

CNBC COMMENT

ROSS WESTGATE

Wedlake BellThe City law firm has hired Shapna Roy,a major infrastructure project special-ist, as a partner in its corporate team.

Roy joins from Amey, where she was

senior legal counsel in the group legaldepartment. Prior to that, she spentalmost 12 years at Lovells, latterly as ofcounsel in the infrastructure and proj-ect finance department.

She has previously advised on proj-

ects such as the 2.7bn BirminghamHighways PFI project and the 3.4bnSkynet 5 PFI project procured by theMoD.

Kleinwort BensonThe private banking group has appoint-ed Richard Stanwell as head of itsNewbury office, responsible for leadingthe wealth management practice in aregion stretching from the ThamesValley into the West Country.

Stanwell joins from Barclays Wealth,where he has been a senior privatebanker for the past four years.

Catherine Whyle has also beenappointed to support the Newburywealth management team, joining fromCoutts & Co.

Standard Life InvestmentsThe asset manager has appointed direc-tor David Paine as head of propertyinvestments, following managing direc-tor Alex Watts decision to take earlyretirement in November.

Paine is currently responsible for thegroups Heritage With Profits Fundproperty portfolio and the UK ShoppingCentre and UK Retail Park Trusts. Hehas over 25 years of experience inproperty fund management and devel-opment.

Buck ConsultantsThe human resource and benefits con-sultancy has appointed Mike Tyler tolead its health and productivity practicein the UK, effective from July.

Tyler joins from Mercer, where hewas UK chief operating officer and pre-viously led the firms health and bene-fits practice. More recently, he ran hisown consulting business alongside hisinterests in the healthcare and benefitssector.

DeticaThe business and technology consultan-cy, part of the BAE Systems group, hashired Chris Coker as its new financedirector.

Coker joined Detica in 2007, workinghis way up through central and opera-tional finance role to become UKfinance director. He previously workedat accountancy firmPricewaterhouseCoopers.

CITY MOVES | WHOS SWITCHING JOBSEdited by Victoria Bates

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

AvivaThe insurance giant has appointed DipakWarren as a corporate risk solutions director.

Warren joins from Mitsui SumitomoInsurance in London, which she joined in 2000.In her last role as active underwriter and direc-tor of the firm, she was responsible for the syn-dicate business plan and performance acrossproperty, casualty, motor, PI, marine, construc-tion, commercial mid-market and aviation.

She will take up her new role in September.

THE number of directors of insolventcompanies facing disqualificationproceedings for involvement in crimi-nal activity has increased by 52 percent in a year, new figures show.

cityam 21/06/2010

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