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Follow me on Twitter: @allisterheath

Cameron faces rebellionover EU budget increaseDAVID Cameron yesterday foundhimself facing a battle overEuropean Union funding as hisown backbenchers joined forceswith the Labour party to call for areal-terms cut to the EU budget.The Prime Minister faces a struggle

at next months European Councilmeeting where the 27 heads of gov-ernment will discuss EU spendinglimits for the next eight years.

Other European leaders are happyto push ahead with an inflation-bust-ing 6.8 per cent rise in the organisa-tion budget for 2013, and a five percent increase for 2014-2020.

But Cameron continues to insistthat he will only allow the budget torise in line with inflation, currentlyaround two per cent a year. Even thiswould see Britain contributing anaverage of 13.6bn a year to theorganisation. The issue will come toa head tomorrow when the PrimeMinister will attempt to secure par-liamentary approval for his stance.But his plans were thrown into disar-ray yesterday when two euroscepticTory MPs filed an amendment to thegovernment motion, calling for anybudget rise to be below inflation effectively a spending cut.

Mark Reckless, one of the amend-ments backers, said it beggarsbelief that the government is plan-

LACK of transparency, inadequateinformation and inconsistenttreatment of potential bidders bythe Department for Transport (DfT)all contributed to a flawed processto determine which firm would runthe West Coast main line franchise,an interim inquiry into the fiascohas concluded.

The debacle, which earlier thismonth resulted in the decision toaward the multi-billion pound railfranchise to FirstGroup over Virgin

being scrapped by the governmentat an estimated cost of $40m, wasthe result of an accumulation oferrors by the DfT, according to SamLaidlaw leading the independentinquiry.

Laidlaw, non-exec board memberof the DfT as well as chief executiveof energy firm Centrica, said theerrors included inadequateplanning and resourcing issues

within the Dft as well as weakgovernance. Ultimately theseerrors meant the impact of inflationas well as some elements of theincrease in passenger numbers overthe period of the franchise were nottaken into account.

Transport secretary PatrickMcLoughlin, who will appear beforethe House of Commons transportcommittee tomorrow to answerquestions, said the report madeuncomfortable reading.

West Coast Rail

bidding processdeemed flawed

Cameron insists he will fight hard against a real terms increase in EU funding

4 NEWS

BY KATIE HOPE

FORMER Dixons boss John Browettis leaving Apple after just sixmonths, the technology giantannounced yesterday.The departure of the UK retailer,

who was hired to drive the globalexpansion of its stores, wasannounced alongside that of ScottForstall, who oversaw Maps.

Browett, who will leaveimmediately, only joined fromDixons in April this year, and wasthe first major hire by chiefexecutive Tim Cook.

Apple said a search is underwayfor a new retail chief.

Forstall, in his position as head ofiOS software, oversaw thedevelopment and launch of the Siri

voice assistant and the heavilyridiculed Maps software. Forstall

will stay on as an adviser to chiefexecutive Tim Cook until he leavesthe firm next year.

Analysts speculatedthat Forstall was ascapegoat for thedebacle surroundingthe release of Maps,

which forced Cook toapologise tocustomers.

Ex-Dixons boss

leaves Appleafter six monthsBY BEN SOUTHWOOD

BY JAMES WATERSON

To contact the newsdesk email [email protected]

THERE are times, fortunately nottoo often in these days oftechnological revolution andextraordinary scientif ic

progress, that human beings can butbow to the forces of nature. We maybe capable of flying to the moon butthere are some natural events that

leave us powerless and unable tocontrol events. Everybody withfamily, friends and colleagues in NewYork and the United States will behoping that the next few hours gosmoothly and that Hurricane Sandyspares lives and property.

In addition to its potential humanimpact, Sandy will also have an eco-nomic effect. Flights have been can-celled by the thousand, business isnot being conducted, people are notbeing hired, consumers are not spend-ing. The New York Stock Exchangewill be closed again today; it is the

EDITORSLETTER

ALLISTER HEATH

Frankenstorm: Dont fall foul of the Broken Windows Fallacy

TUESDAY 30 OCTOBER 2012

first time since 1888 that the markethas been shut for two consecutivedays due to weather. There may alsobe a political impact: campaigning inthe ultra-close US presidential elec-tions has been disrupted, turnout willfall in some regions (which couldboost Mitt Romney) but Americansmay rally around the president(which would boost Barack Obama).

It is vital for anybody trying toanalyse the effects of Sandy not tosuccumb to what the French econo-

mist Frederic Bastiat called the bro-ken windows fallacy: the wrong-head-ed view that damage caused by thestorm is a good thing as it will boostspending on repairs. That is nonsense.A country doesnt become richerwhen its assets are smashed up, or itsbuildings flooded, or its bridges dam-

aged, even if mending them tem-porarily creates new jobs. Hurricanesdont boost a nations wealth, theyimpoverish it; resources that couldhave been allocated to other thingsneed to be diverted to the reconstruc-tion effort. Savings that would previ-ously have been used to finance a newfactory are suddenly diverted torebuilding an asset that was workingperfectly fine. So much for the eco-nomics today, however, ourthoughts are with ordinaryAmericans struggling with the ele-ments. We wish them well.

(and the default outcome if no agree-ment is reached). Yet now even theLabour party has become willing totake on the pro-EU establishment;there are votes to be won by outflank-ing the Tories.This is a major political milestone.

As the Eurozone moves towards ever-

closer integration, the UK is movingtowards a major renegotiation and anin-out referendum on EU member-ship, with an entirely unpredictableresult, dividing the country, politicalparties, the City and the businesscommunity. Forget about economicreform: a historic and final decisionon Europe by the UK electorate, afterdecades of prevarication, will turnout to be the real politico-economicstory of the decade.

DECISION TIMEEXTREME chutzpah doesnt evenbegin to describe the Labour Partyslatest position on the EuropeanUnion. That most slavishly Europhileof parties and opponent of alldomestic public spending cuts wants the EUs budget to be slashed.

This may be extraordinarily hypo-critical but it is the right position totake, given the waste in Brussels andthe fact that voters are having totighten their belts. It is also a clevertrick which will expose the divisionsbetween David Camerons positionand that of most of his party.Astonishingly, MEPs backed the

European Commissions bid toincrease its budget by 6.8 per cent in2013. Member states want to increaseit by 2.79 per cent. Cameron is callingfor a real terms freeze, equivalent to acash increase of around 2 per cent

ning to exempt the EU entirely fromthe financial pressures facing familiesand governments across Europe.

Meanwhile Labour joined in theapparent ambush as its frontbenchteam also called for a below inflationincrease. Last night Ed Miliband toldthe BBC: With everybody else tighten-ing our belts we have to do that in theEU too. Lets spend that money morewisely and lets get the right deal forBritain.The Prime Ministers spokeswoman

said that any budget increase is com-pletely unrealistic but hinted that it

may be impossible to secure a cut: Weare one member among 27 members.All the indications are that they wantan increase while we want a freeze.

However she insisted the govern-ment would adopt a tough negotiatingstance: There simply isnt the case foran increase in real term spending.Were going to be sticking to our guns.

Writing in todays City A.M. promi-nent Conservative backbencher PritiPatel adds that the Prime Ministershould be prepared to exercise hisveto over the 2014-2020 budget.

John Browettjoined Applefrom Dixons inAprilTHE FORUM: Page 26

LL

New Look moves to reassure suppliersNew Look, the value fashion chain, hasmoved to reassure suppliers over itsfinancial position, after a report last weekin an industry blog that it was poised toenter administration and carry out acompany voluntary arrangement.

Linde seeks deeper cost cutsLinde, the worlds second largest maker ofindustrial gases by sales, is planningdeeper cost cuts to protect profits as itfaces a tougher economic environment.

The German gas and plant engineeringgroup, which vies with Frances Air Liquidefor the number one spot in industrialgases, said it would save up to 900m(725m) by 2016 after an expected uptickin the global economy in the second halfof the year failed to materialise.

Grant Capital Partners to shutGrant Capital Partners, the hedge fundmanager set up by the former GoldmanSachs trading star behind PelotonPartners one of the industrys biggestcollapses is shutting down, according toa letter sent to investors by founder GeoffGrant.

Ferry deal is sent to regulatorsAfter a four-month inquiry into Eurotunnelsdecision to buy three ferries from the bustSeaFrance, the Office of Fair Tradingyesterday ruled that the plan may notnecessarily be above board.

Internet delivers new Royal Mail jobsTen years after Allan Leighton took ashredder to Parcelforce, the expresspackage delivery arm of the Royal Mail willtoday unveil plans to take on 1,000 workersto cope with the boom in internet shopping.

Russia offers to build nuclear plantsMoscow has offered to help Britain buildnuclear power stations in partnershipwith Rolls-Royce, Russias deputy primeminister Igor Shuvalov said yesterday.

Lenders threaten Hibu closureLenders to Hibu, the owner of YellowPages, have threatened to scupper arestructuring of the company and launchwinding-up proceedings against itbecause of a row over debt repaymentson Hibus 2.3bn debt pile.

Chrysler quarterly profit soarsChrysler Group reported an 80 per centjump in its third-quarter profit over a yearago amid strong demand for its cars andpickup trucks and a continuing recovery inthe U.S. auto market.

US regulators postpone Nasdaq rulingUS regulators are taking more time todecide whether to approve Nasdaq OMXGroups plan to make up losses for firmsdamaged in this past Mays botchedFacebook stock market debut.

The new jobs website for London professionalsCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

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AN INFLUENTIAL group of MPs andpeers will today probe former HBOSheads on why their bank collapsed.The group failed in the financial cri-

sis and was hastily taken over byLloyds which itself then needed agovernment bailout to cope with theweight of HBOS on its books.

The ParliamentaryCommission on BankingStandards (PCBS) will forthe first time appoint coun-sel to cross-examine thewitnesses from the bankinggroup, with David Questfrom 3 VerulamB u i l d i n g sadvising theCommission.

T h i sshould helpus to get tothe bottomof what

Parliament toprobe HBOSscollapse today

BY TIM WALLACEwent wrong and why, said PCBSchairman Andrew Tyrie.

HBOS former head of group regula-tory risk Paul Moore, CEO internation-al Colin Matthew, and group riskdirector Jo Dawson will be questioned.

Commission member Lord Turnbullsaid the hearing will help determinethe groups recommendations onbanking standards: We will be look-

ing at the lessons that can be learnedwith regard to corporate gover-nance, culture and standards in the

banking industry.Yesterday John Kay appeared at the

PCBS. He told peers and MPs the bank-ing ringfence may not work

because it is too difficultto define what is and isnot a retail-bankingactivity.

ADOBOLI TELLS COURT BOSSES INFLUENCED TRADES

EX-trader Kweku Adoboli told a court yesterday his bosses at UBS, including senior executiveCarsten Kengeter, had been pushing him to take more risks when he took positions that costthe Swiss bank $2.3bn. Adoboli, 32, was arrested on 15 September 2011. He has pleaded notguilty to two counts of fraud and four of false accounting. The trial continues.

Andrew Tyrie will lead thegrilling of ex-HBOS bosses

TUESDAY 30 OCTOBER 20125NEWScityam.com

ANGLO-SWEDISH pharma giantAstraZeneca revealed yesterdaythat it lured its new CEO to thefirm with a multi-million poundremuneration package,including a base salary of1.1m a year.

Pascal Soriot, who joinedfrom arch rivals Roche on 1October, will also be grantedup to 4m in compensationfor the loss of long-termincentives from hisprevious employer,the firm said.

The award will bepaid in shares,conditional onperformance and

stretched over aneight year period.

New AstraZeneca CEO to get up

to 4m for leaving rival RocheBY JULIAN HARRIS Soriot will also be eligible forpotentially lucrative annual bonuspayments, especially if he can turnaround the companys fortunes.

AstraZenecas statementincluded reference to a targetannual bonus of 100 per cent ofbase salary with a range of zero to180 per cent.

The new CEO has his work cutout, after his new employer last

week announced a 19 per centdecline in revenue during its

third quarter.Poor results and a

worrying outlookculminated in then-CEODavid Brennan beingousted by shareholdersearlier this year.

Senior Bank of England exec sideswith Occupy over economic crisisA SENIOR Bank of England officialraised eyebrows last night by

telling the Occupy movement ofanti-capitalist protesters that theiranalysis of the financial crisis hasbeen correct and that they haveinfluenced post-crisis policy.

Andrew Haldane, increasinglyknown for his outspoken views,was addressing a group calledOccupy Economics at FriendsHouse in Euston.

Occupy has been successful inits efforts to popularise the

BY JULIAN HARRIS problems of the global financialsystem for one very simple reason:they are right, he told theassembled crowd.

By this I do not just mean rightin a moral sense it is theanalytical, every bit as much as themoral, ground that Occupy hastaken.

Haldane hit out at criticismsthat the Occupy movementscomplaints have been vague andundefined, with few solid solutionsoffered.

Occupys voice has been bothloud and persuasive and that

policymakers have listened and areacting in ways which will closethose fault-lines, Haldane said.

The Banks executive director for

financial stability, who sits on itsnew super-regulator the FinancialPolicy Committee cited deep andrising inequality as a primarycause of the global f inancial crisis.

Last week Haldane comparedlarge banks to King Kong andGodzilla while suggestingconsiderably higher capital bufferrequirements, or the fullseparation of investment andcommercial banking.

Pascal Soriot has years ofexperience in the sector

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CVC CAPITAL Partners veteranMichael Smith will step down aschairman in January 2013 and handthe reins to a trio of dealmakerswhose first job will be to raise10bn(8.06bn) from investors.

Smith, who has spent 30 years atCVC from its origins as CiticorpVenture Capital a subsidiary ofCitigroup will be succeeded byDonald Mackenzie, Rolly van Rappardand Steve Koltes as co-chairmen.

CVC has always been run as a part-nership, making important decisions

BY HARRY BANKSby consensus, Mackenzie said in apress release, in a sign that the succes-sion was unlikely to spark a big shift inthe buy-out houses strategy.

CVC this year sold a 10 per cent staketo three sovereign wealth funds: theKuwait Investment Authority, theGovernment of Singapore InvestmentCorporation, and the Hong KongMonetary Authority, a person familiarwith the matter has said.

The three men have worked at CVC which has investments in Formula

One and Merlin Entertainment formore than 20 years.

BOTTOMLINE

MARC SIDWELL

TRINITY Mirror yesterdayconfirmed reports over the

weekend that it is in discussionsover taking a minority interest ina new group formed by combiningthe assets of Iliffe News & Media

with Northcliffe, sending itsshares higher.

Shares in Trinity Mirror rosemore than six per cent to 54.5p in

early trading as it confirmed its

Trinity Mirror shares bounce as itconfirms interest in Northcliffe

BY CITY A.M. REPORTER interest in the plans for a newregional newspaper group, run byits ex-CEO David Yattendon.

DMGT, which owns Northcliffeand its 84 regional newspapers,said on Sunday that talks had

begun on the deal, which is beingsupported by prominent assetmanager Crispin Odey and looksset to be worth around 100m.

No offer has been made andthere is nothing further to report

at this stage, said Trinity Mirror.

GOOGLE and Microsoft bothunveiled challengers to the iPhoneyesterday ahead of the crucialChristmas shopping period.

Although Googles proposed NewYork launch event was blown offcourse by Hurricane Sandy, it stillannounced a new smartphone and10-inch tablet to its Nexus rangeyesterday, adding to the seven-inchdevice it unveiled earlier in thesummer. The Nexus 4 phone, builtby Motorola, will run GooglesAndroid operating software and costfrom 239 when it launches on 13November. The Nexus 10 tablet will

Google and Microsoft unveilNexus and Windows Phone 8

BY JAMES TITCOMB start from 319, which is 80 less

than the cheapest version of Applesflagship iPad.

In a separate event, Microsoft tookthe wraps off its new mobilesoftware, Windows Phone 8, whichwill launch on a range of handsetsfrom Nokia, Samsung and HTC inthe coming weeks. Windows Phone 8is vital to the fortunes of Nokia,which last year agreed to only makesmartphones running Microsoftssoftware, but has not seen theresponse it had hoped for up untilnow. Nokia launches its top-of-the-range Lumia 920 device today,exclusively on the 4G EE networkwhich also goes live today.


No automatic happy ending for publishers that mergeI

T IS hard not to wince at the self-delusion of yesterdays pressrelease from Pearson andBertelsmann. Describing the firms

agreement to merge Penguin andRandom House, Pearsons outgoingchief executive Marjorie Scardinosays: Together the two publishers will

be able to... be more adventurous intrying new models in this exciting,fast-moving world of digital books anddigital readers. Really?

If theres one thing we know aboutinnovation, it is that being biggerdoesnt make it easier. It is oftenhardest for established, successfulfirms to adjust to the disruptivetechnologies that give leaner,younger and hungrier rivals thechance to eat their lunch.

That is why a knockout success likeFifty Shades of Grey, now doing sowell for Random House, came out ofself-published Twilight fan fiction.Meanwhile Pearsons interimmanagement statement showedPenguins revenues still in decline down two per cent after nine monthsof the year, better than the half yearfigures, down four per cent. Clayton

Christensen of Harvard BusinessSchool published his classic TheInnovators Dilemma 15 years ago. Itstill needs to be more widely read.

Much has been said about howthis deal starts to make Penguin andRandom House big enough to getmore bargaining power with

Amazon, as if Amazon were thegiant in the room. But each isalready big enough for significantinfluence. Random House hadrevenues in 2011 of1.7bn (1.4bn).Penguin had 2011 revenues of 1bn.

In any case, when it comes to thefuture of ebook pricing, its notAmazon the combined publisherneeds to worry about so much as theUS Department of Justice. RandomHouse was the only big publisher to

fall outside the DOJs price-fixingsuit filed in April, that accuses firmsof colluding with Apple to fix ebookprices artificially high. Penguin isone of the firms named. Threepublishers, including RupertMurdochs HarperCollins, settled.Penguin Group decided to fight.

A loss would be damaging, addingextra risk to this weeks deal. Butwhatever the rights and wrongs ofthe case, Penguins decision to battlenot settle shows it ranging itselfagainst the disrupted world of low-priced ebooks. It is not the sign of afirm predisposed to adventurousexperiment with the form.

In the brave new world ofpublishing, big firms count for lessand less. Big authors can tame

Amazon all on their own: JK Rowlingdecided she wasnt going to letAmazon distribute her ebooks, orher publishers publish them, andAmazon is still providing links toPottermore to buy Harry Potterkindle editions. Celebrity authorsremain the backbone of the big

publishers Penguin namedroppedTom Clancy and Pippa Middletonyesterday but just as celebrities arelearning to speak with their fansdirectly on social media, they maynot continue to see the need to sharebook revenues with big publishers.The next Fifty Shades of Grey maynot see the need to take a RandomHouse deal after breaking out. Thatsthe painful possibility that a biggerfirm wont protect against.

CVC Capital tolose chairman

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DEVELOPERS have tall ambitionsfor Londons skyline, with morethan 100 residential towers beingbuilt or planned across the capi-tal, new research shows.

Soaring residential land val-ues and a booming populationhas prompted a revival in high-rise towers, which lost theirpopularity after a backlashagainst the concrete block dis-asters of the 1960s.A report by agents Knight

Frank released yesterday saidthere are 25 schemes current-ly under construction in cen-tral London which includeone or more tower over 20storeys high.

A further 78 schemeshave been granted planningpermission, although notall approved towers areguaranteed to be built asdevelopers struggle toraise sufficient funds.

Stephan Miles-Brown,residential developmentanalyst, said: This isLondons decade oftowers: with residen-tial land values up20.3 per cent in the

last twelve months

BY KASMIRA JEFFORDand a population boom, a need for themost effective use of space is evident.

However, only 30 per cent of theschemes including towers with plan-ning permission are underway par-tially a symptom of the challengingfunding climate, he added.The Tall Towers report, published

together with consultants EC Harrisand planning practice BartonWillmore, said most towers aredesigned for luxury living, withbuyers paying a premium for abirds-eye view of the capital.

It estimates that the averageprice of a flat increases by 1.5 percent per foot, the closer it is to thetop of the building.The ten luxury flats at the top of

the The Shard, Europes tallesttower which was officially com-pleted in July, are expected to sellfor up to 50m.

Other developments includeThe Heron, a 36-storey residen-tial tower, which is almost readyfor residents in the City ofLondon.The Tower at St George

Wharf, which at 49 storeys willbecome one of Europes high-est residential towers, will becompleted next year.

IS BUILDING RESIDENTIAL HIGH RISEAPARTMENTS A GOOD IDEA?

Interviews by William Campbell

Having people live in large high-rise build-ings, which are also used as offices and shops,

integrates the building into the city. But London doesntwant to lose the street level feel that is unique to the city.

These views are those of the individuals below and not necessarily those of their company

MARK TINKERAXA FRAMLINGTON

There is big money in high-rise space beingused as residential housing, with a good

example of this being the Barbican. It was built in the1960s but people still love living there.

NICK SCOTTSCOTT CITY RESIDENTIAL

High-rise buildings offer a different style ofresidence that allow more people to live in

cities. In Manhattan, residences in tall buildings are seenas a cool, modern way to live, but with a good view!

KRISHNABODDUPALLYLEPUS

Regeneration of London Bridgeto cause five years of disruptionCOMMUTERS through LondonBridge were yesterday warned to

brace themselves for five years ofdaily disruption as Network Railunveiled its plans for theregeneration of the Citys oldeststation.

The biggest redevelopment inthe capital in a generation beginsnext May, and will give LondonBridge the biggest concourse in thecountry as well as new platforms,lifts, escalators and entrances onTooley Street and St Thomas Street.

BY KATIE HOPEHowever, the work will affect

Southern, Thameslink andSoutheastern services until 2018,Network Rail said.

The rail firm said it would carryout the work in distinct phases in abid to minimise passengerdisruption.

Southerns south London lineservices between Victoria andLondon Bridge via Denmark Hillwill be withdrawn from 9December, but Network Rail saidpeople in Denmark Hill andPeckham Rye could instead use theLondon Overground extension

connecting Clapham Junction toSurrey Quays. And From May nextyear three platforms 14, 15 and16 will be closed to the public.

The station, built in 1836, willremain open during the work,which is part of the 6bn project toupgrade Thameslink.

Train passengers will be thebiggest winners from thisinvestment as London Bridge istransformed from one of thecapitals most congested stationsinto one of the most modern, saidTransport secretary PatrickMcLoughlin.

CITYVIEWS

An artists impression of how the redeveloped station will look

The Shards 10 flats are to

sell for around 50m


100 residential

towers plannedacross London

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NOMURA Holdings, Japans largestinvestment bank, posted its fourthstraight quarterly profit yesterday, asan upswing in its f ixed income oper-ations helped it counter weak equitymarkets and the fallout from aninsider trading probe.The results were weaker than

expected as the company restruc-tures operations following an ill-fated expansion overseas throughthe 2008 acquisition of parts ofLehman Brothers.

But finance chief Junko Nakagawasaid the benefits of a $1bn cost-cut-ting programme outlined in Augustand largely focused on Europe couldshow up in the companys results bythe final quarter of its fiscal year tothe end of March.

You will be able to see the realeffect of cost-cutting plan in quarterfour or at the beginning of the nextfiscal year starting in April 2013,Nakagawa told a media briefing.

Nomura, whose top competitor inJapan is Daiwa Securities Group,reported a net profit of 2.81bn yenfor the July-September second quar-ter, against a loss of 46.09bn yen inthe same period last year.The results were supported by a

boost in bond trading and otherfixed income products, a major fac-

Fixed income

boosts Nomuraas Europe bitesBY HARRY BANKS tor also bolstering banks elsewhere,

including Morgan Stanley and JPMorgan.

Net revenue in fixed income opera-tions doubled to 88.6bn yen from ayear earlier, helping Nomuras whole-sale division swing to a pretax profitof 200m yen from a year earlier70.7bn yen loss. The wholesale busi-ness includes investment banking.The strong fixed income perform-

ance helped the wholesale divisiongenerate a 68 per cent increase in netrevenue to 137.1bn yen and helpedoffset a four per cent slide in net rev-enue from equity trading.

Still, Nomura also lost underwritingbusiness due to an insider tradingscandal, which triggered a shake-upof top management. Its Europeanoperations also showed deepeningpretax losses as the company account-ed for cost cutting.

Most countries to miss deadlineto implement new bank rulesONLY SIX globally important

banks are likely to be subject tonew Basel III banking rules fromthe internationally agreed startdate, the Basel Committeewarned yesterday, as mostcountries have failed to meet therequirements as planned.

The rules are meant to comeinto effect on 1 January 2013.

But less than three monthsaway from that deadline, onlyeight of the 27 countries involved

BY TIM WALLACE have issued final regulations ontime.

The US and the EU ar e both set

to miss the deadline.Part of the problem in the EUcomes from disagreements overthe rules interpretation.

The Committee believes the EUis materially non-compliant indefinitions of capital and theinternal ratings-based approach tocredit risk though the EuropeanCommission disagrees with thescale of the reported divergence.

Japanese author ities have still

not issued rules on capital buffers,but are expected to do so by 2015.

And the US is materially non-

compliant in securitiesexposures, with the BaselCommittee fearing the Dodd-Frank Acts prohibition on the useof external credit ratings cannotbe proved to be stronger than theinternational agreementsproposals.

Again, the US aut horitiesdisagree with the Committeesassessment of their proposedrules.European Commission boss Barroso rejects claims the EU is not ready for the new rules

Nomura Holdings Inc

29 Oct23 Oct 24 Oct 25 Oct 26 Oct

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NEDBANK Group said yesterday itis on track for double-digit profit

growth this year, the latest SouthAfrican bank to benefit from a risein higher-risk lending.

Hampered by weak corporatedemand for credit, the countrys

big banks have ramped upunsecured lending the profitable

but riskier practice of giving loans

that are not backed by collateral.Nedbank said in a trading

Old Mutuals Nedbank lifted byhigher-risk unsecured lending

BY CITY A.M. REPORTERstatement that it expects to meetits full-year target for earnings

growth.Net interest income, the measure

of earnings from lending, increasednine per cent to 14.5bn rand (1bn)in the nine months to 30September, the bank said.

Non-interest revenue, whichincludes fees and commissions,rose 14 per cent to 12.4bn rand.Total loans were up by seven per

cent, while the ratio of bad debtcharges decreased.

TUESDAY 30 OCTOBER 201210 NEWS cityam.com

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SHARES in Swiss bank UBS soaredyesterday in anticipation of a new wide-spread round of job cuts at the institu-tion, which are expected to beannounced along with its thirdquarter results today.The bank is expected to announce up

to 10,000 positions will go, largely inthe fixed income units of its invest-ment banking arm.That amounts to up to one-sixth of its

global workforce, and would representa large step up from the 3,500 job cutspreviously announced.

Instead the bank is likely to focusresources on its wealth management

business, which has been a moreprofitable unit.

Shares jumped 7.28 per cent yesterdayas investors looked to welcome the cost-saving steps. If the announcement does

Prospect of UBScutting further

jobs lifts sharesBY TIM WALLACE

come, UBS will join an industry-widerush to reduce costs to shore up profitsat a time of weak market activity andincreased regulatory pressures.

In recent months rival institutionsincluding Nomura, Deutsche Bank andCredit Suisse have all announced plansfor more job losses to shore up profitsand restructure their businesses.

UBS AG


12.40

12.20

12.60

12.80

13.00

13.20 CHF 13.1229 Oct

KIAN ABOUHOSSEINJP MORGAN

We believe staffreductions are

mainly related to fixedincome as well as sup-

port functions. We esti-mate the fixed incomebusiness has 2,000 frontoffice personnel. So, inour view staff reductionof about 6,000 is morerealistic, which wouldstill be nine per cent of employees at the end ofthe second quarter and lead to costsavings of around SFr2.2bn.

JON PEACENOMURA

Credit Suisse andUBS had broadly

similar cost/incomeratios in the first half of

2012, on similar annualunderlying cost bases.Since the first half, CreditSuisse has nowincreased its additionalcost-savings target bySFr2bn or 9.5 per cent.With UBS also a long way through its 2013 plan,we believe a similar SFr2bn medium-term cost reduction could be feasible.

ANDREW LIMESPIRITO SANTO

Despite the posi-tive reaction to

reports UBS is undertak-ing a radical investment

bank restructuring, webelieve it still does notdo justice to the poten-tial significant capitalrelease. We accept thereis likely to be materialbook value erosion fromrestructuring, but do not believe these comeclose to erasing the estimated SFr20bncapital released from the plan by 2016.

ANALYST VIEWS HOW MUCH WILL COST-CUTTING AT UBS SAVETHE BANK?Interviews by Tim Wallace

WEALTH MANAGEMENT: Page 28LL


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MOST alternative investment

managers are unprepared forincoming European regulations,which could leave them unable tooffer services to investors from July2013, according to a PwC studypublished yesterday.

The consulting firm found 85 percent of managers have not startedcompliance or implementationprogrammes to meet the incomingAlternative Investment FundManagers Directive (AIFMD).

PwC believes it will take up to 12months to implement majorprojects, leaving most of thesemanagers unable to meet thedeadline.

As a result, investors will face asudden shortfall in places to puttheir money a particularlydamaging result at a time whenother markets are offering poorreturns, driving investors into

alternatives, PwC warned.It is ironic that European rules

which aimed to protect investors arelikely to end up limiting the choiceof those investors, said PwCs RobMellor. Against a low returnenvironment, institutionalinvestors, including the pensionfunds for Europes workers, will belooking to access global markets andthe best managers implementingAIFMD in time is thereforepotentially a significant barrier.

Investors set tolose out fromnew EU rules

BY TIM WALLACE

DIRECT Line yesterday announcedplans to cut 70 senior managementpositions as it looks to make substan-tial cost savings.The insurer said that as a result of

the changes Jonathan Davidson,chief operating officer, and manag-ing director Sheree Howard, havedecided to leave the organisation.The news follows last months

announcement that it would sack900 workers, including the closure ofan entire call centre in Stock-on-Tees,near Middlesbrough.

Chief executive Paul Geddes said:We are creating a simpler, more effi-

cient business which costs less torun. As market leader, these changesare essential for us to succeed in acompetitive marketplace. I dontmake these changes lightly, and wewill do all we can to support thoseaffected.As a result of the changes Angela

Morrison, chief information officer,will join the executive board.Howards responsibilities for ensur-ing Direct Line complies with thenew Solvency II insurance regula-

Direct Line cuts70 jobs in top

managementBY JAMES WATERSON tions have been handed to JoseVazquez, chief risk officer.

The cost-cutting measures are partof the companys stated aim ofreturning a 15 per cent return onequity, partly by cutting out 100m ofcosts by 2014.The firm, which was previously part

of RBS, enjoyed a successful Londonflotation earlier this month and thestock has performed well since theIPO, rising to 190p and valuing thecompany at 2.85bn.

However 65.3 per cent of the compa-ny is still owned by RBS, which has tooffload its shares by the end of 2014,meaning the firm must remainattractive to new investors.

Direct Line Insurance


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194 p 190.2529 Oct

FORMER Cofunds boss BrettWilliams yesterday launched anew alternative investments

business, Old BurlingtonInvestments.

The company aims to takeadvantage of the EnterpriseInvestment Scheme (EIS), whichoffers tax breaks to investors insmall, unlisted companies.

It will initially launch two EIS-focused funds, both run inco-operation with industryinvestment specialists.

The Renewable Energy Fund willmake investments in green

Brett Williams launches fundsto back alternative investments

BY JAMES WATERSON technology and energy generationschemes where revenues areunderpinned by the government.

Meanwhile an AIM Growth Fundwill allow private investors to

access new issues on Londonsjunior stock market.

Williams said: We believealternatives are poised for verysignificant growth over the nextthree years, partly because oflegislative stimulus and partly

because investors simply arentgetting the returns they need fromtraditional asset classes.

Old Burlington is backed byLW2, a private equity firm part-owned by Williams.


A reminder that starting from October 2012, all employers must enrol eligible workersinto a qualifying workplace pension scheme. The date you have to do this by dependson the size of your company, but to give yourself time to prepare, visit The PensionsRegulator at www.tpr.gov.uk/actnow where youll find out all you need to know.

Workplace pensions. Were all in.

Williams is a former head of Skandias wealth management unit and ex-Cofunds CEO

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THE LEADERS of Spain and Italyboth played down their need for afull bailout yesterday, during a jointconference in Madrid.

Speaking alongside Italian techno-crat Prime Minister Mario Monti,Spains Mariano Rajoy said a rescuepackage was not essential at thismoment.

As soon as I think its good for thegeneral interests of Spain to ask forit I will ask for it. [But] while I dontthink that, I wont, he added.

Monti, meanwhile, insisted thatItaly is not in such a condition torequire a bailout at all. Brussels isbelieved to be waiting for Spain tosuccumb to a bailout offer, a movethat could trigger the EuropeanCentral Banks (ECB) new bondbuying plan.

Some analysts believe that anysuch move could ease the pressureon Italys borrowing costs on thebond markets, even if it did not callfor its own bailout package.

BY JULIAN HARRIS Both leaders went on to stress theircommitment to the timetable setout to establish a banking union,with Rajoy calling for much greaterEuropean integration.And Monti also played down fears

that Silvio Berlusconis objections tothe governments austerity meas-ures could threaten the coalitionsstability.Yields on Italian bonds rose yester-

day, partly blamed on Berlusconiscomments.

Meanwhile across the Ionian sea,political relations appeared moreharmonious. A senior official atGreeces socialist Pasok party saidthat it would not automatically fol-low the Democratic Left partysrefusal to endorse the measures.

We will safeguard political stabili-ty and stick to our strategy of safelyexiting the crisis, the official said.

Pasok will hold high level talkstoday in an effort to find agreementover cuts that are required to ensurethat Greece receives the nexttranche of its bailout.

Monti and Rajoy repeated their support for a banking union across Europe

IN BRIEFHollande sticks by austerity pledgen French President Francois Hollandehas promised EU partners that Francewill cut its public deficit to three percent of national output next year froman estimated 4.5 per cent this yeardespite stagnating growth. For themoment we dont have any reason tothink that our targets, which we set inthe budget law, will not be reached,Hollande said after meeting the OECD.

Spanish bad bank discounts assetsn Spanish authorities said yesterdaythat they would apply steep discountsto property assets transferred into a so-called bad bank and pledged significantreturns in a move to lure reluctantinvestors. The bad bank is a conditionfor Spain to receive up to 100bn inEuropean aid for crippled lenders in thestruggling Eurozone state.

German inflation at two per centn German consumer price inflationheld steady at two per cent in October,just above the European Central Bankstarget for price stability, preliminarydata showed yesterday. On a monthlybasis, German consumer prices wereunchanged, the same as in September,data released by the Federal StatisticsOffice showed. The final price data willbe published on 9 November.

Spains retail sales in record dropn Spanish retail sales fell at theirfastest pace on record in September,diving 10.9 per cent year on year,yesterdays National Statistics Institutedata showed. The drop was the biggestin calendar-adjusted terms since currentrecords began in January 2004, andmarked the 27th monthly decline in arow, the Institute said.


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Deutsche Boerse blames weakmarket for cut in revenue targetGERMAN exchange operatorDeutsche Boerse yesterday

abandoned its 2012 revenue targetafter third-quarter revenuesdropped thanks to subdued capitalmarket activity.

Third-quarter earnings beforeinterest and taxes (Ebit) fell to245.4m (197.6m) in the thirdquarter, down from 333m in thesame period a year earlier, theFrankfurt-based stock andderivatives exchange operator saidyesterday.

BY CITY A.M. REPORTER Deutsche Boerse had beenexpected to post quarterly Ebit of247m.

Based on the continued weak

capital market environment inOctober, the company said it nowexpects full-year 2012 net revenueof around 1.95bn, well below thetarget range of between 2.15bn to2.3bn.

In July, Deutsche Boersesignalled it may have to abandonits full-year revenue target.

For the third quarter, DeutscheBoerse said net revenue was 471m,down from the 578.6m in the year-

earlier period.We are planning a further

increase in investments for thenext financial year, to further

accelerate the development ofinfrastructure and expansion intonew growth areas against thebackground of a new regulatoryframework for global financialmarkets, said finance chief GregorPottmeyer.

At the same time we aresystematically continuing the strictmanagement of operating coststhat began well before thefinancial crisis, he added.

Spain and Italy

play down needfor rescue cash

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SANTANDER UK chief executive AnaBotin will this week join theMayors Fund for London as atrustee.

Botin, who has led the UKsubsidiary of the Santander Groupfor almost two years, will become atrustee on 1 November, after beingnominated to the board by thecharitys patron, Boris Johnson.

The Mayor of London BorisJohnson said yesterday: Havingpersonally nominated Ana to jointhe Board of Trustees its wonderfulto see both her and Santander UKgetting behind the capitals youngpeople. I wholeheartedly encourageother businesses to do the same.

The fund invests in projects thataim to improve the job chances of

disadvantaged children.I have been

impressed with theapproach to

funding projectsthat really make adifference,

helping youngpeople develop

new skills,said Botin.

Ana Botinis CEO ofSantander UK

SantandersAna Botin joins

Mayor charityBY ELIZABETH FOURNIER


ONE MILLION families will learn thatthey are to have their child benefitpayments cut, as the coalitions planto reduce middle class benefits takeseffect.

HM Revenue & Customs said yester-day it would begin sending the lettersto households that it believes will beaffected by the change, which is dueto be introduced on 7 January 2013.Anyone currently claiming child

benefit will lose at least part of itif they or their partner earnmore than 50,000. Their com-bined household income will notbe taken into consideration.

As a result households whereone person earns morethan 60,000 willimmediately lose theentire payment,which is worth1,055 a year forthe first child and697 for subse-quent offspring.

Million families

learn of cuts tochild benefit

BY JAMES WATERSON Other families will have it graduallyphased out, losing one per cent of thebenefit for every 100 earned over50,000.

Conservative backbenchers haveraised concerns about the policy,prompting the party to release inter-nal polling data showing that 82 percent of people support the policy.

This is one of the tough decisionsthe government has to make, the

Prime Ministers spokesman saidyesterday.

It is very hard to justify payingchild benefit to the wealthiest 15per cent of families. Many morepeople are on lower incomes andthis government is trying to help

people on the lowest wages.Although the plans are designed to

save the government 1.7bn ayear, they will result in manymore people having to com-plete a tax return whichcould increase admin costs.

Infrastructure projects failingto attract pension fund cashINFRASTRUCTURE investmentprojects are still not set up in anattractive way for most pensionfunds to invest, the industrywarned yesterday, despite thegovernment spending the last yeartrying to persuade the funds to putmoney into big projects.

The aim is to create a fund forpension funds, creating a marketfor funds to invest to deliver whatthey need long-term, low risk,inflation-linked returns with low

leverage, said Joanne Segars fromthe National Association of

BY TIM WALLACE Pension Funds (NAPF).At the moment, they are often

highly leveraged and geared, at theexpense of inflation linking, so theprojects are riskier than pensionfunds really want.

Segars said pension funds wantthe government to review thestructure of contracts, looking tofavour long-term, low risk investors.

She also warned that they needto find a way around politicalinstability, in case a futuregovernment changed the rules oninfrastructure assets held by

pension funds.And she added that funds want

to avoid construction riskassociated with the projects.

We are not going to build a2bn fund overnight, but we havegot a good number of investorsinterested so far and hope tolaunch in the first half of nextyear, Segars said.

But Treasury minister DannyAlexander argued steps have beentaken in the right direction.

Pension funds have made goodprogress, and we are seeing moreinterest, he told City A.M.

Now they have money on the

table, we have the ability to engagein projects to suit them.

LLOYDS Banking Group and theRoyal Bank of Scotland are amongthe firms to have joined a newindustry-wide task force set upfollowing the Mary Portas reviewlast year to tackle the decline ofthe high street.

The Distressed Town CentreTaskforce, which met for the firsttime last week, revealed its list ofmembers yesterday, which includerepresentatives from the BritishCouncil of Shopping Centres, the

Mary Portas taskforce set up to

revive UKs ailing high streetsBY KASMIRA JEFFORD British Property Federation andthe Local Government

Association.The newly-formed group said its

first priority will be to carry out areview of UK towns and cities toidentify how to tackle the growingnumber of empty shops.

Recent figures from the LocalData Company showed thataround 20 shops were closed eachday in the first half of the year.

The Taskforce will addressproperty-related issues raised inthe Mary Portas report.

The so-called Queen of Shops was the brains behind a specific group to town centres

DEFENCE secretary PhilipHammond yesterday announced a

further 350m of funding to replaceBritains nuclear deterrent as LibDem leader Nick Clegg insisted thatno final decision had been taken toprogress with the project.

Yesterdays announcement meansthat 700m has been allocated thisyear to fund design work on a newsubmarine to carry Trident missilesfrom 2028 onwards.

BAE Systems will receive 315m ofthe latest tranche of funding, with afurther 38m going to Babcock.

Hammond said: This latest

BY JAMES WATERSON expenditure for the next generationof nuclear-armed submarines is aninvestment in UK security and theBritish economy, sustaining high-

quality jobs and vital skills.However Lib Dem leader NickClegg yesterday insisted theproject will not be given the go-ahead until 2016, howevermuch other people may notlike it that way.

In the meantime hisparty will continue tocall for talks overfinding an alternativereplacement for thesubmarine-basedTrident.

We need to have a consideredfacts-based debate about what kindof deterrent we need in the future,

the Deputy Prime Minister said.

Lets remember the idea of alike-for-like, entirelyunchanged, replacement forTrident is basically saying wewill spend billions of poundson a nuclear missile system,designed for the solestrategic purpose of

flattening Moscow at the pressof a button.

A TASKFORCE set up by the G20sregulatory arm, the FinancialStability Board (FSB), last nightproposed seven recommendationsto improve banking riskdisclosures.

The recommendations includelisting risks from the banks

business model, outlining sourcesof funding, how risk-weightedassets are calculated, forbearanceof loans and how this affects thereported level of impaired or non-performing loans.

Disclosures that describe risksand risk management practicestransparently help to build

confidence in the firmsmanagement, which is particularly

G20 risk disclosure suggestions

aim to restore faith in bankingBY CITY A.M. REPORTER important in attracting debt and

equity investors and may in turnsupport higher equity valuations.

The taskforce, made up of banks,investors and accounting firms,said many of the recommendations

would start to be weaved intoannual reports for 2012 or 2013onwards. The move was broadly

welcomed in the City last night.Confidence in financial services

is a vital component in the recoveryof economies across the world,said Deloittes Mark Rhys.

The recommendations shouldmake it easier for investors andanalysts to understand the risks a

bank has, and help to restore trustin the industry.

HSBC said the recommendationswere comprehensive and timely.

EU ANTITRUST regulators havetold trader Glencore to offerconcessions in its zinc operationsto ease concerns about itsplanned $33bn (21bn) buy of

miner Xstrata, a person familiarwith the matter said yesterday.The European Commission,

which handles competitionregulation in the 27-memberEuropean Union, is currentlyexamining the deal and has set a8 November deadline for itsdecision.

The EU competition watchdogtold Glencore about its concernson Friday and has given the

world's largest diversifiedcommodities trader until today to

EU regulators want Glencoreconcessions on Xstrata deal

BY HARRY BANKS come up with concessions, thesource said.

Neither Glencore nor Xstratahad any comment.

The European Commission wasnot immediately available forcomment.

Analysts say the combinedcompany could have 50 per centof the European market for zinc,making that a logical area ofconcern for regulators. Zinc isused in metal alloys, especially inapplications where it can preventcorrosion.

Industry analysts said the mostlikely concession could be thedisposal of Xstratas San Juan deNieva refinery in Spain, thelargest zinc production unit inthe world.

Philip Hammond said it wasan investment in UK security

George Osborne was forced towater down the originalproposals after protests

Clegg disputes Trident spend asHammond pledges 350m more

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WITH Halloween almost upon us,supermarket Asda has conjured upsome facts and figures on the annualfright night.

Given that the 31 October was arather insignificant day in the Britishdiary 10 years ago, The Capitalistwassurprised to learn that the UKHalloween market is now worth300m. Poor old Guy Fawkes has beenshoved out of the limelight, and

Halloween is now Asdas third mostlucrative sales flog after Christmasand Easter.

For those brave souls hoping to get

spooked in the City tomorrow TheCapitalist has conducted some thor-ough research and suggests startingoff at The Ten Bells on CommercialStreet. It was formerly known as thefavourite haunt of Jack the Ripper, sono explanation necessary as to thepubs haunted credentials. Follow thisby a guided walk around SinisterSmithfield which promises tales ofexecution, body snatchers and a

famous meat market. To finish, a visitto City watering hole Abacus, a meatmarket of a different kind but no lessterrifying on a Wednesday evening.

19cityam.com

New research was releasedyesterday on the trend of

kidflation, as coined by retail andcommercial bank Santander. The firmnotes that prices of items bought bychildren, such as sweets and chocolate,have risen at a rate of 4.7 per cent in thelast year. A pretty hefty hike consideringit is two-thirds faster than the retail priceindex. Its bad news for parents lookingto negotiate fixed rate pocket money inthese dark times of recession. Notfantastic news either for any home-owners looking to stock up on sweetbribes to appease trespassing trick-or-treaters tomorrow on Halloween night.How would they like them (toffee)apples? Pro bably not much.

If youre reading this on apacked 6am train to the City

braced for another 12 hours at yourdesk before trudging home in thedark, then Channel 4s offer may perkyou up. Its looking for people whofeel their work/life balance is out ofsynch. If you want to make somedramatic changes next year, this could

prove a starting point. The new series,produced by True North Productions,is seeking couples and families whowant to overhaul their lives by runningtheir own business. If you ever fanciedyourself as a coffee shop owner, orrunning a pig farm then nows yourchance. To be considered, [email protected] withsome information about yourself andyour current situation.


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

[email protected]

To register go to

Our knowledge on MT4 isnt.

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AVIATION maharajah Richard

Branson took to the streets ofMumbai for the launch of Virgin

Atlantics new Mumbai-Londonservice, which began yesterday.

In typical Branson style he wasdecked head to toe in local dressand sitting on the roof of a taxi

while Indian performers andcheerleaders danced around him.

However, not even his warmembrace of the local culturecould secure him position as topdog with Mumbais hoteliers.

The Capitalistsmole reports

that Branson has been forced tostay in a mediocre suite in theMumbai Oberoi, a mere one

bedroom and one receptionroom (stocked with warm,distinctly low quality white wineto add insult to injury).

The reason for the hotel snubis because Bransons publicitytour happens to coincide withthe arrival of several Arabiansheikhs, who are hogging all the

best rooms in town.

Virgin Atlantic founder Sir Richard Branson and his entourage cruise the streets of Mumbai

Poshpumpkins:

The Fortnum& Mason

hamper andits gruesome

carvingcompetition

Branson the slumdog billionaire

Where to getspooked in theCity tomorrow

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F&C ASSET Management suffered

3.7bn in net outflows in the thirdquarter, as a large planned clientwithdrawal offset a positiveinvestment performance, thecompany said yesterday.

Assets under management hadfallen to 96.8bn at the end ofSeptember from 98.2bn at thebeginning of July, due in part to apreviously announced 2.9bn ofwithdrawals of fixed income assetsby Friends Life, according to thecompanys trading statement.

Its consumer and institutionalassets under management increasedby 500m to 36.74bn, including400m of net inflows frominstitutions and a 2.2 per centinvestment gain. Friends Life is set towithdraw a further 2.4bn in thefinal quarter of 2012, F&C said.

The impact of foreign exchangemovements also contributed to

968m of the net outflow figure, thecompany said. The update comes ayear after executive chairmanEdward Bramson, who won controlin a controversial management coup18 months ago, announced a shake-up which set out to cut costs, reducestaff and focus on institutions.

Withdrawal ofFriends Life aknock to F&C

BY CITY A.M. REPORTER

SOURCE:BANK

OFENG

LAND

LENDING to individuals bouncedback in September, data out yester-day showed, as the full impact ofthe Funding for Lending scheme(FLS) began to be felt.

Consumer credit climbed 1.2bnin the month, the Bank of Englandsaid, in the second month of thegovernment and Bank of Englandsplan to boost lending.Analysts said the rise added to the

case suggesting the underlyingeconomy was finally recoveringfrom years stuck in the doldrums.

This might be a reflection ofimproved underlying health in the

economy, said Ross Walker at RBS,but Walker went on to warn thatthe overall lending situation wasanaemic despite the signs ofimprovement.

September also saw a 0.5bn risein mortgage lending, the Banksaid, as rates on new secured loans

Lending jumpsas government

scheme helpsBY BEN SOUTHWOOD slid from 3.84 per cent on averagein August to 3.77 per cent inSeptember.

LSL Property Services boss DavidNewnes called the mortgage marketbuoyant, but said the improve-ments were not enough. He citedlow loan-to-value ratios on availableloans, as well as strict capital ade-quacy requirements as majorrestrictions on the markets health.

Rates on new unsecured loansplunged from 7.11 per cent on aver-age to 6.72 per cent on average inthe same period. However saverswere hit by the falling interestrates, with average returns on newtime deposits slashed from 3.01 per

cent in August to 2.75 per cent inSeptember.The business lending data painted

a more sombre picture of the mar-ket. Lending drooped 0.9bn duringSeptember, the data showed, driv-ing the total 3.1 per cent belowwhere it was a year ago.

Broadbent: Construction set tostart growing again this springPUBLIC sector spending onconstruction is stabilising andprivate activity is growing,meaning the sector will at last startto recover early next year, a toppolicymaker said yesterday.

The Bank of Englands BenBroadbent believes the industry hasalso begun to overcome its longproductivity problems, againcontributing to growth.

Official data show the sectorsoutput fell 11 per cent in the lastyear, now standing 18 per centbelow its pre-crisis peak.

BY TIM WALLACE One thing that does not accountfor the scale of the slump since2008 is public-sector spending,Broadbent said. Public sectorinvestment grew strongly duringthe recession itself and in linewith the plans formulated bythe last government andmatched by the currentadministration has sincefallen back.

Public sector investment isstill slightly higher than it wason the eve of the crisis and itaccounts for only a quarterof sectoral demandanyway.

Rather, he said a boom in lendingburst and hit private sectordemand.

As state spending is stabilising ata level above that at the start of thecrisis, he said growth is now

returning.And in nominal terms,

work on private-sectorconstruction projects hasgrown by just over five percent a year over the pastcouple of years, he added.

INDIAS central bank facesgrowing pressure to cut interestrates today for the first time since

April after the finance ministerpledged to rein in the countrysfiscal deficit.

Remarks by finance ministerPalaniappan Chidambaram at ahastily called news conference

yesterday that he would nearlyhalve the deficit in just over four

years had increased the chancesfor a rate cut, some analysts said.

Net-net, the odds for a rate cuthave increased because of todayspress conference, said A.Prasanna of ICICI SecuritiesPrimary Dealership in Mumbai.

Indias attempts to cut deficitmay see interest rates slashed

BY CITY A.M. REPORTERA Reuters poll on 19 October

found most economists expectedthe Reserve Bank of India to keepits policy repo rate unchanged ateight per cent.

Nearly half said the RBI wouldtake a more targeted measure andcut the cash reserve ratio, theshare of deposits banks must hold

with the central bank, from 4.5per cent in an effort to get banksto pass along earlier rate cuts to

borrowers.The central bank has kept the

policy repo rate at eight per centsince April despite calls frommembers of the government andindustry for action to revive thecountrys f lagging economic

growth.


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BANK LENDING SHOWED SIGNS OF LIFE IN SEPTEMBER

HOME LOANS RECOVERED IN SEPTEMBER

Nov

0.5

0

-0.5

1

1.5

2 Netflow,bn

Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

-2

-3

-4

-5

-1

1

0

2

3 Netflow,bn

THE FALL IN BUSINESS LOANS EASED LAST MONTH

CONSUMER CREDIT BOOMED LAST MONTH

NovOct

0.4

0

-0.2

-0.4

-0.6

0.6

0.2

1.0

0.8

1.4

1.0

Netflow,bn

Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Ben Broadbent joined theBank of England in 2011

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IN BRIEFTetragon buys hedgie Polygonn Tetragon Financial Group yesterdaybought Polygon Management, onceone of the worlds biggest hedgefunds and a high-profile casualty ofthe financial crisis, for $98.5m(61.4m), to expand its assetmanagement business. Tetragon saidit will use 11.7m of its non-votingshares to buy Polygon, founded in2002 by Paddy Dear and ReadeGriffith, as well as its stakes in LCMAsset Management and GreenOakReal Estate. Dear and Griffith are alsodirectors of Tetragon, which investsmainly through long-term fundingvehicles such as collateralised debtobligations.

NBC Universal has won the USbroadcast rights to show PremierLeague games for the next twoseasons beating current rightsholders Fox, the football leaguesaid yesterday.

The deal raises major questionsover the future of Fox SoccerChannel, which has now lost

rights to North Americas Major

League Soccer, Italys Serie A andits flagship English league butretains rights to UEFAsChampions League.

The Premier League statementdid not give financial details ofthe deal but Sports Business Dailycited sources saying NBCs bid wasfor around $83m per year, morethan triple the $23m per year thatreports say Fox is paying.

The Premier League has grown

in popularity in the US in recentyears with viewing figures risingsignificantly.

Last season a tape-delayedbroadcast of Chelsea v Liverpool inNovember drew a US record 1.7mtotal viewers on Foxs free-to-airchannel.

The channels that will be usedhave a combined reach of 95 percent of the US viewing public each

month, the league said.

NBC wins rights to broadcast UK PremierLeague football games for next two seasons

BY CITY A.M. REPORTER

MINER Anglo American Platinumyesterday offered an olive branch tostriking miners, offering for them toreturn to work no later than 7amthis morning to end a six week strikethat has crippled production.The worlds largest platinum

miner, which has been in discussionswith the recognised South Africanunions, yesterday reached an agree-ment for employees to return towork. No wage details were dis-cussed, it said.Amplats said yesterday that it will

offer a one-off hardship allowanceof ZAR2,000 (144) to compensate

miners who are in financial difficul-ty due to the strike, but it will only bepaid if they report for duty thismorning. The workers who didntstrike will also receive ZAR2,000.The offer includes reinstating the

12,000 dismissed workers, who werefired last month after failing to turnup to a disciplinary hearing.The employees who heed the ulti-

matum will return to work on thesame terms as existed before thestrike, but will receive a final writtendisciplinary warning.Workers who do not report for

work this morning will eitherremain dismissed, or be ineligible forthe ZAR2,000 payment.

Chris Griffith, chief executive ofAmplats, said yesterday he was call-ing for calm in the strike-affected

Amplats makesminers offer to

return to workBY CATHY ADAMS areas.Our commitment to the platinum

centralised engagement structures,driven by the Chamber of Mines, hasnot changed and, as we have men-tioned, we are considering the possi-bility of bringing forward wagenegotiations that are within our cur-rent arrangements, he said.The six-week strike, which has cost

Amplats around 3,800 ounces of plat-inum each day and around ZAR1bnin revenue, spread to the minersRustenberg operations in mid-September, before quickly spreadingto its Kumba Iron Ore unit.At the start of October, industrial

action began at the Sishen mine,

which has led to the miner losingaround 2.2m tonnes of iron ore.The agreement comes just days

after Anglo American chief executiveCynthia Carroll announced shewould step down from her role.

Anglo American shares closed down0.85 per cent yesterday at 1,917p.

Anglo American PLC


1,860

1,880

1,900

1,920

1,940

1,960 p 1,91729 Oct

Telefonica chief CsarAlierta is cutting debt

PREMIER Oils offer of aconvertible bond swap has beenmet with strong demand frominvestors.

Holders representing more than98 per cent of $250m (156m)

worth of Premier Oils convertiblebonds due in 2014 elected to swapinto guaranteed convertible bondsdue in 2018, the oil and gascompany said yesterday.

The new bonds, which will havea conversion price of $7 and acoupon of 2.5 per cent, compare tothe existing bonds which have aconversion price of $6.69 and acoupon of 2.875 per cent.

The settlement date for thebonds is expected to be in the nextfew days.

Chief executive Simon Lockett

Premier Oil bondholders jumpat offer for convertible swaps

BY CATHY ADAMS said that he welcomed the highlevel of response from

bondholders. The exchange offertakes advantage of improvedterms and longer maturityavailable in the currentconvertible markets, he said.

Premier, listed on the FTSE 250,announced the exchange offer two

weeks ago, and said that the swapwas conditional upon a minimumof $100m of existing bondholderacceptances.

The firm, which has operationsin the North Sea as well as apresence in Asia, the Middle East,

Africa and Pakistan, has aresource base in excess of 500m

barrels of oil equivalent. It iscurrently producing around60,000 barrels of oil each day, butis targeting a rate of 100,000

barrels a day in the medium term.


Chief executive Simon Lockett joined Premier 18 years ago from Anglo Dutch giant Shell

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O2 Germany set to raise 1.5bnin years biggest European IPOEUROPEs biggest initial publicoffering (IPO) this year, of theGerman branch of O2 ownerTelefonica, is set to raise about1.5bn (1.2bn), the Spanishtelecoms giant said yesterday.

The Frankfurt-listed company,also called O2, is expected tobegin trading today at5.60 pershare.

The IPO is Germanys biggestsince 2007 when engine

BY HARRY BANKS manufacturer Tognum wentpublic, and Europes biggestsince Spains Bankia raised3.1bn in July of last year.

Listing the 23 per centstake of its O2 Germanyon the stock market ispart of Telefonicas effortsto cut its 58bn debt.

Telefonica, whichdeclined tocomment, closed

the order books onthe sale at 1pm

yesterday.In Germany, O2 is the smallest

mobile operator with roughly 16per cent of subscribers, trailingDeutsche Telekom, Vodafoneand Dutch group KPNs E-Plus.

Some analysts havecriticised O2s targeted

valuation as highcompared to peers.

Ford rated low for reliabilityn Ford tumbled to nearly the bottomof an annual survey of vehiclereliability due to flaws in its touch-screen navigation and entertainmentsystem, while Japanese automakerToyota swept the top three spots. In aConsumer Reports survey releasedyesterday, Ford fell seven spots to27th of 2 8 brands surveyed overall,while its upscale Lincoln brand fell 12spots to 26th place. Two years ago,Ford placed in the top 10 with morethan 90 per cent of its models beingaverage or better. The survey is basedon data over the past three years.While mechanical problems are nowrarer, for all brands electronic systemsare where more issues tend to occur.

Correctionn In our edition on 29 October, CityA.M. wrote that ESPN had sold theBritish TV rights to football leaguesincluding the Italian Serie A, theAmerican MLS and the French Ligue 1to BT ahead of the launch of BTs newsports channel. What we should havesaid is that BT has purchased therights to the leagues for next seasonfrom the rights holder, not ESPN.

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IN BRIEFSerco wins 170m pensions dealn Outsourcing firm Serco, which runsthe Docklands Light Railway,yesterday secured its first pensionsdeal. Serco, which also runs the Borisbikes scheme, will provide back officesupport services for life and pensionscompany Aegon in a deal worth170m over the ten-year term.It will also manage some of Aegonsso called zombie funds, policieswhich are no longer sold but requireongoing management.

HEATHROW Ltd, formerly known asBAA, warned yesterday that full-yearearnings would fall short of its target,after fewer passengers travelledthrough Europes busiest airport thissummer.

Traffic over the summer monthswas lower than expected, particularlyin July and August when passengertraffic was down about 400,000 onthe same period in 2011, chief finan-cial officer Jos Leo said yesterday,referring to Londons Heathrow air-port.

In June, the group predicted itwould report adjusted earningsbefore interest, taxes, depreciation,and amortisation (Ebitda) of around1.27bn for 2012.

Heathrow said its Ebitda rose 9.6 percent to 922.9m in the nine monthsto the end of September on revenue8.2 per cent higher at 1.84bn, helpedby an increase in tariffs it charges air-lines.The company, owned by Spanish

Heathrow hurt

by summer lullin passengers

BY HARRY BANKS infrastructure group Ferrovial, saidHeathrow, Europes busiest airport,handled 53m passengers in the firstnine months of 2012, up 0.6 per centon last year.

But traffic at Stansted, which is pre-dominantly a low-cost leisure and hol-iday airport and more exposed todomestic economic conditions, fell 4.6per cent to 13.5m in the same period.The operator said the sale of Stansted

was now underway after the competi-tion regulator forced it to sell the air-port to loosen the groups grip on theUK.

TNTs quarterly income drops asEU awaits concessions on dealTNT Express, the Dutch maildelivery group being bought byUPS said yesterday that third-quarter profit fell 12 per cent.

The company also repeated thatit expected EU Commissionapproval for the deal.

UPS, or United Parcel Service, isnot expected to complete the5.2bn (4.3bn) acquisition untilearly next year after theEuropean Commission expressedobjections.

TNT Express reported operatingprofit at the low end of

BY CITY A.M. REPORTER expectations in the third quarter,down 12 per cent to 38m on salesof1.8bn.

Forecasts were in a range of30m to 91m, with most at thelower end of that range.

TNT said it booked 51m inprovisions in the quarter, 19m ofwhich was for claims in Brazil.Operating losses in the Americaseased from 30m a year earlier to23m.

The Eur opean Union s antitr ustchief has said UPS and TNT wouldhave to offer concessions to

secure regulatory approval forthe deal.

A merged UPS and TNT wouldhave a quarter of the Europeanexpress services market, ahead ofDHL Worldwide Express BV with19 percent, according to analystsat Bernstein Research.

The European Commission isscheduled to decide on theproposed merger by 15 Januarynext year.

Analysts had already warnedthat the deal would give UPS adominant position in somemarkets, including the UK, andthat as a result it would have to

sell assets to soothe regulatoryconcerns.

Ferrovial SA


10.5

10.6

10.7

10.8

10.9

11.0

10.6329 Oct

HONDA Motor cut its full-year netprofit forecast by a f ifth yesterdayafter sales in China were hit by apopular backlash against Japanese

goods, and warned it could beFebruary before business in the

worlds biggest autos marketreturns to normal.

The cut, prompted by a slump insales amid protests in a disputeabout ownership of islands in theEast China Sea, makes it likely that

Japanese rivals Nissan Motor and

BY CITY A.M. REPORTER Toyota Motor, will follow suit whenthey report earnings next week.

Honda, which providedmotorcycles for the latest Bondfilm, cut its net profit forecast forthe year to March to 375bn(2.93bn) from 470bn.

Last year, Honda reported netprofit of 211.5bn. It also cut itsforecasts for annual operatingprofit and revenue, citinguncertain markets.

Net profit for July to Septemberrose 36.1 per cent to 82.2bn, some

way below estimates.


Honda provided motorbikes for the latest Bond movie Skyfall, starring Daniel Craig

Blinkx shares rocket as electionand Olympics drive ad growthVIDEO search engine Blinkx sawshares rise by 25 per cent yesterday

as the company said the Olympicsand US elections had driven morepeople to its website.

The search engine, which trawlscontent from video sites includingYouTube, said it expects profits ofaround $2.4m (1.5m) for the sixmonths ending 30 September. Cityexperts had forecasted a loss.

Blinkx said turnover would bearound $80m, also aboveexpectations. The company, whichwas founded in 2004 before the likesof YouTube entered the market, saw

BY JAMES TITCOMB shares hit a six-month high.The Aim-listed company also said

that acquisitions of US advertisingfirms Burst Media and Prime

Visibility Media Group (PVMG) hadbeen integrated ahead of schedule.Chief executive S. Brian Mukherjee

said: This has been an exceptionalfirst half for Blinkx. The business hasshown strong growth, driven by itsunderlying fundamentals incombination with the ahead of-schedule integration of Burst andPVMG into the Blinkx engine andincreased advertising spendallocated to special events specifically the summer Olympicsand the US presidential elections.

Citi Research analyst ThomasSinglehurst said the update givescomfort in the drivers of growth foronline video advertising and

therefore the market as a whole.

GLOXOSMITHKLINE yesterdayraised its bet on a promising drugfor HIV/AIDS by redrawing a deal

with Japans Shionogi which givesit a much bigger economic interestin the new product.

Dolutegravir, a once-daily drugthat has performed strongly inclinical trials, is seen by analysts asa potential multi-billion-dollar-a-

year seller and a strong competitorto treatments from market leaderGilead Sciences. The drug belongsto a novel class known as integraseinhibitors that block the viruscausing AIDS from entering cells.

Under the new agreement

Shionogi will take a 10 per centstake in Viiv Healthcare an HIV

GSK raises bet on HIV/AIDS

drug with new Shionogi dealBY CITY A.M. REPORTER drug joint venture set up in 2009

between Britains biggestdrugmaker and Pfizer inexchange for its rights todolutegravir.

Previously income from themedicine would have been shared50:50 between ViiV and Shionogi,

which analysts calculate wouldhave given GSK only around a 40per cent interest in the drug, aftertaking account of Pfizer's minoritystake in ViiV.

Now GSKs economic interest willbe between 60 and 66 per cent, itschief strategy officer David Redfernsaid. Redfern said the newarrangement was expected todilute GSKs earnings by around 1p

a share in 2013 and 2014 butshould boost earnings thereafter.

PERFORM Group, the internetsports distribution firm, yesterdaysaid expansion in new markets hadpushed turnover up 44 per cent inthe third quarter.

The company, which operatesvideo-on-demand services online,owns sports websites including thepopular Goal.com, and sellsadverts on other sports websites,said group revenues had increasedfrom 27.4m last year to 39.5m.

The FTSE 250 group has securednew rights deals with the

American football competition, theNFL, and Spains La Liga footballleague in the last three months, as

well as launching eight newinternational editions of Goal.com.

Perform Groups US touchdowngenerates sports revenue boost

BY JAMES TITCOMB Revenue has increased 10 percent on the last quarter.

We are pleased to report thatour strong operational andfinancial performance hascontinued through the thirdquarter, which reflects the

successful execution of our growthstrategy, joint chief executiveOliver Slipper said.

Performs content distributionservice, which distributes videoand data to other websites andorganisations, and accounts formost of the groups revenues, sawa 47 per cent surge in sales. The

video advertising business grew 56per cent and the display addivision surged 132 per cent.

Shares in Perform fell 2.8 percent yesterday.

Demand for Windows 8 surgesnMicrosoft chief executive SteveBallmer said yesterday demand forthe companys new Windows 8operating system, released to thepublic last Friday, was running at ahigher rate than its last release,Windows 7. Were seeing preliminarydemand well above where we werewith Windows 7, Ballmer said.Windows 7 is the best-selling version

of Windows so far, selling more than670m licenses in three years.

Aegis buys Tokyo-based Hablarn Media and digital communicationsgroup Aegis yesterday bought Tokyo-based marketing and search agencyHablar. Aegis said the purchase wasaimed at boosting its digitalcapabilities. Hablar will now bemerged into iProspect Aegisexisting search and performancemarketing agency in Japan. Hablar,which was founded in 2003, hasalready worked with Aegis in Japan.

Blinkx PLC


55.0

57.5

60.0

50.0

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29 Oct

Honda cuts profit forecasts as

China dispute hits 2012 sales

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Europe hurt byfears over thestorms impact

EUROPEAN stocks fell yesterday,led by insurers on expectations ahuge hurricane in the UnitedStates would boost damage

claims, while political jitters in debt-laden Italy cast shadows on theEurozone.

Reinsurers Swiss Re and HannoverRE led a weaker European insurancesector index as the market tried to pre-

dict the cost of cleaning up afterHurricane Sandy, which has forcedWall Street to shut.

Eurozone blue chips shed 0.7 percent to 2,478.84 points after formerPrime Minister Silvio Berlusconithreatened to bring down his succes-sor Mario Montis government, whichhas appeased financial markets withits austerity agenda.

Italys FTSE MIB fell 1.5 per cent, theworst performer in western Europe,weighed down by banks, which havethe largest exposure to the countrysdebt. The Euro STOXX 50 volatilityindex, which gauges option prices oneuro zone blue chips and is regardedas a measure of investor fears of futureprice swings, rose 4.9 per cent to 23.22points.The index has risen 21 per cent from

a six-month low hit in mid-September,when the European Central Bank andthe US Federal Reserve had calmedmarkets with plans to tackle the eurocrisis and shore up the U.S. economy,respectively. It was still well below a2012 high of 38 hit in early June.A profit warning from Japans Honda

Motor triggered a sell-off in theEuropean auto sector, with FrancesPeugeot shedding seven per cent andGermanys Daimler down 1.8 per cent.The pan-European FTSEurofirst 300

closed 0.3 per cent lower at 1,093.57points in volume 62 per cent of its 90-day average as Wall Street was closed.

BRITAINS leading shares dipped inlow volume yesterday as concernsover the costs of Hurricane Sandyin the United States added to

uncertainties about future corporateearnings.

Many investors were sticking to the side-lines ahead of a pick-up in the UK third-quarter earnings season this week, notablyfrom the energy and banking sectors.

Insurers were among the big fallers onhurricane costs worries, while energystocks were dented by a drop in crudeprices as the storm saw refineries on theUS eastern seaboard shut. Ai r line sharesfell on concerns over flight disruptions.The FTSE 100 closed down 11.61 points, or

0.2 per cent at 5,795.10 points, in volume of60 per cent of the 90-day daily average,reflecting the absence of US trading inter-est with US stock markets closed becauseof the hurricane threat.

Blue chips rallied from earlier lows, how-ever, with technical factors helping explainthe indexs recovery, although overall cau-tion remained.The FTSE 250 index ended down 0.1 per

cent, weighed by falls in Lloyds of Londoninsurers such asAmlin, Hiscox, Catlin andLancashire, which shed around 1.7 percent on Hurricane Sandy exposure worries.The impact of the storm provided anoth-

er worry for investors already concernedabout a relatively glum third-quarter earn-ings season, with a third of UK companiesso far having missed expectations.Weakness in oil major BP, down 1.6 per

cent, before it kicks off the UK sectorsthird-quarter reporting season today,accounted for almost five points, or abouthalf of the blue chip indexs decline,according to Thomson Reuters data.

UK stocks dip as Hurricane Sandyhits insurers and energy shares

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