25 JANUARY 2011
UK subsidisedby City: report
LONDON contributes far more to theExchequer than it receives in publicspending, a report will say today. The capital is estimated to havemade a £1.4bn net contribution tothe public purse in 2009-10, accord-ing to new research published by theCity of London Corporation. The report said no other regionmakes a net positive contribution –the UK in the aggregate has a huge budget deficit as a result. And 21 per cent of all the UK’s eco-nomic growth is driven by businessactivity in the city, researchers atOxford Economics found.London’s contribution is forecastto rise substantially by 2015-16 withthe financial and business servicessector a core driver of growth.“This report demonstratesLondon’s ongoing importance for wealth generation at a time whenthe government is attempting toreduce the overall UK budget deficitand promote growth across the econ-omy,” said Stuart Fraser of the City of London Corporation.“However, concerns over highertaxation, increased regulation, infra-structure issues and immigrationneed to be addressed if we are to sus-tain London’s pre-eminence in globalfinancial and business services,” headded.
FSA CHIEF SEEKS NEW SAFEGUARDS
The head of the Financial Services Authority has called for a “radicalrethink” of consumer protection inthe UK, including the possible imposi-tion of fee caps and bans on someretail financial products. The regula-tor has historically adopted a “lighttouch” approach for the regulation of financial products, emphasising fulldisclosure, but the financial crisisand a series of mis-selling scandalshave forced politicians and regulatorsto reconsider.
DEFENCE FIRMS TARGET US SPENDING
A market facing severe cuts in govern-ment spending is not usually anattractive prospect for new entrants.But, over the past month, UK compa-nies have been rushing to grab a sliceof the US defence market despitenews earlier this month that USdefence spending will fall by $78bn(£49bn) over five years.
BARCLAY BROTHERS TO BUY HOTELS
Sir David and Sir Frederick Barclay,owners of the Telegraph MediaGroup, are poised to take a control-ling stake in three of London’s mostprestigious hotels includingClaridge’s. The publishing and prop-erty entrepreneurs are set to raisetheir stake in the parent company of Maybourne Hotel Group to 60 percent with the acquisition of the inter-est of Derek Quinlan, the Irish proper-ty tycoon.
WALL STREET’S BULLISH MOOD BACK
Wall Street continues to chug for- ward, dragging other markets with it,in spite of signs of a weakening risk rally evident in last week’s wobbly trading. The FTSE All-World index isup 0.6 per cent, and many commodi-ties are again in demand, with tin hit-ting a record, as the dollar weakens. The S&P 500 in New York is up 0.6 percent.
BANKS TO CUT SWITCHING TIMES
Banks are planning to offer to make itmuch easier for customers to switchaccounts in an attempt to head off more draconian measures from theGovernment to boost competition. The big lenders are consideringinvesting hundreds of millions of pounds each to bring in measuresthat would cut the time it takes cus-tomers to switch banks to betweenone and two weeks.
ADVISER BACKS THE ASSAULT ON F&C
The activist shareholder fighting for boardroom control at F&C AssetManagement has won influentialexternal backing. InstitutionalShareholder Services, previously RiskMetrics, urged F&C’s owners to vote for Ed Bramson as chairman at aspecial meeting next month. It hasalso supported the call by Sherborne,for a further change at the top.
OPEC TO BOOST OIL OUTPUT
Saudi Arabia has promised that oilcartel OPEC would boost oil suppliesto meet demand and maintainhealthy spare capacity as rising pricescontinued to send alarm around the world. Ali al-Naimi, the kingdom’s oiland energy minister, quoted studiesshowing world oil demand wouldgrow by 1.5m to 1.8m barrels of oil perday this year, or around 2pc.
BG GROUP TO INVEST IN DEEPWATER
BG Group is to invest $10bn (£6.26bn)in Brazil over the next decade as itseeks to accelerate the development of the country’s deepwater oil fields. Thecompany is aiming for an output of 400,000 barrels of oil a day by 2020, which would make it Brazil’s second biggest oil producer after the state-run energy giant Petrobras. The plans were revealed by Nelson Silva, presi-dent of BG Brazil.
FRANCE PROPOSES WAYS TO UP YUAN
France said China's yuan should beincluded in the InternationalMonetary Fund's basket of curren-cies that fund members use as areserve asset, a proposal it says isaimed at edging the Chinese cur-rency closer to its true market value.
FACEBOOK ALTERS TOOL IN GERMANY
Facebook Inc. ended a long runningprivacy dispute with German regula-tors by agreeing to change the way ithandles the personal data of non-users of the social network via its"Friend Finder" feature. The compromise, which Facebook agreed to implement in Germany,resolves legal proceedings that data-protection officials in the Germancity-state of Hamburg launchedagainst the social networking giantin July.
WHAT THE OTHER PAPERS SAY THIS MORNING
Cameron needs to listen to business
GOOD on Sir Richard Lambert, theusually mild-mannered outgoing bossof the CBI, for taking the governmentto task over its abject lack of pro-growth policies. It is a shame he didn’tsay as much in such strongly wordedterms a few months ago, but betterlate than never. Crucially, the CBIdoesn’t object to the coalition’s auster-ity plans – these have broad supportamong the business community.Lambert’s problem is the rest of the business-related agenda – and this is bad news for the government.Not since Edward Heath in the1970s has a Conservative PrimeMinister’s approach to business so dis-mayed the great and the good of theprivate sector – clearly, the anti-capi-talist elements within the LiberalDemocrats, led by business secretary Vince Cable, hold huge sway over thecoalition, while the intellectual frame- work put in place by Labour remainsthe dominant influence on policy-makers. The government and thefaces at the top have changed – but ona broad range of issues, the policieshaven’t. They are all about heapingcosts and restraints on private firms, with no understanding that making itmore risky or expensive to take onstaff will cut the demand for labour.Lambert’s list is a good reflection of the feedback I’ve been getting at my own meetings with executives. Thereis the immigration cap, still a sourceof concern for companies; the extrauncertainty thrown into planningapplications by new local rules; whatLambert describes as the “poorly-han-dled introduction of the new LocalEnterprise Partnerships”; the aboli-tion of the default retirement age which will trigger an explosion of liti-gation when staff cease to performdue to old-age. The CBI chief’s list of failings is embarrassingly long: thecarbon reduction commitment, akinto “an additional tax running to morethan £1bn”; a rabidly anti-airport avia-tion policy; the incompetently-draftedanti-bribery legislation, which threat-ens to criminalise innocuous activity while handing excessive powers to thecourts. Then there is the mortgagemarket review, which will make mort-gages harder to obtain – in Lambert’smind, at the worst possible time.It’s not all bad: corporation tax willfall over the next few years. But itmakes no sense to do this for compa-nies and not for individuals. AsLambert points out, the take-homepay of a UK executive now ranks way below that of someone receiving simi-lar compensation in just about allcompetitor jurisdictions. What is most depressing is thatLambert’s list is incomplete. The City is under massive attack. There has been a large increase in the EU’sreach. Other business leaders andentrepreneurs I speak to are angry about the increase in paternity leave,other unintended consequences of the equality bill, the latest loominghike in national insurance, last year’sincrease in capital gains tax and thequietly increasing top tax rate (it willreach 52 per cent from April, includ-ing national insurance). Virtually allthese business people back theplanned spending cuts, most supportmarket incentives in higher educationand the NHS, as well as welfarereform. But when it comes to businesspolicies, the lack of support and down-right hostility for the coalition’s agen-da is astonishing. David Cameronmust urgently start listening toBritain’s wealth-creators –and recon-nect with those producing the growthand jobs he so desperately needs.
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THE IRISH government will bring for- ward its general election to late nextmonth if the country’s crucialFinance Bill can be passed this week, with 25 February touted as a likely date.Opposition parties including FineGael and the Labour Party had threat-ened to bring an action of no confi-dence against Prime Minister BrianCowen’s minority administrationtoday, unless the Bill was fast-trackedthrough Parliament. Though Cowen had earlier indicat-ed that the opposition’s deadline of Friday was “not possible”, it seems acompromise was reached to allow anextra day of debate. The general election was originally scheduled for 11 March.“I believe it will be extremely likely now that the general election will beheld on Friday 25 February,” saidLabour finance spokeswoman JoanBurton.
Early election for Ireland
Irish Prime Minister Brian Cowen is expected to call an early election in February Pic: PA
NEWS | IN BRIEF
Jackson ousted from board
Alexander Jackson, co-founder of UKhedge fund Polygon InvestmentPartners, has been ousted from theboard of a listed credit vehicle he helpedset up six years ago. Jackson was yes-terday removed from the board of direc-tors of Tetragon Financial Group (TFG)by its other directors. The Amsterdam-listed firm said the move was “a resultof Mr. Jackson's conduct following theboard’s approval in July 2010 of theinvestment in GreenOak Real Estate,from which Mr. Jackson dissented.”Jackson will remain a principal of Tetragon Financial Management, theformer Polygon Investment manage-ment and investment manager of TFG.
Spain’s banks face nationalisation
Spain's savings banks have sevenmonths to raise capital through privateinvestors or the state will partially takethem over, economy minister ElenaSalgado said yesterday. Concerns thatSpain’s savings banks, which account for50 per cent of the financial system, willrequire an expensive bailout have fuelledfears it will need an EU/IMF-backedbailout like Ireland.
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City of LondonCorporation headStuart Fraser says theCity is concerned overincreased regulation