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Blair's euro "options" open

Corner shops cornered with rates rise
GAURAVSHARMA SMALL RETAIL businesses across England are set to receive their re-evaluated business rates in the next few days which are not likely to make-up for pleasant reading, as the expected rise in rates is being described as nothing short of 'dramatic' by the Federation of Small Businesses (FSB). The FSB is warning that all small retailers will face sharp rises this year, with an average increase of 15.7% and has opined that shop owners in the south-east of England will be hardest hit. Business rates are the second or third highest item of expenditure for most small retailers and valuations take place every five or six years. The rateable value is based on the going rate for a particular area, irrespective of whether the business is doing well or making a profit. Calculated by the Valuation Office Agency (VOA), part of the Inland Revenue, the rateable value broadly represents the yearly rent the property could have been let for on the open market on a particular date. Bills are set to soar because of a combination of three factors: • an increase of more than 3% to account for inflation, • the recent five-yearly revaluation of business premises that has led to a huge increase in the rateable value of shops, particularly in affluent areas, • an extra 4% increase to safeguard the government against any revenue it will lose from subsequent successful revaluation appeals. Currently rates are five times more expensive as a proportion of turnover than they are for large companies, according to the FSB. FSB Business Rates Chairman Roger Culcheth said, "Many OldRV £5,000 £20,000 £55,000 £125,000 Rates Bill £2,280 £9,120 £25,080 £57,000

Small shops 'cornered' with rates rise

small firms will see an increase in their business rate bills but retailers across the south of England face the biggest hikes. Business rates are the second or third highest item of expenditure for most small firms and are five times more expensive as a proportion of turnover than they are for large companies". "The odds are already stacking up against small shops and we are concerned that some independent retailers will find it impossible to absorb these additional costs. Rates relief gives some protection to small businesses but many small shops in affluent parts of the country fall above the £10,000 threshold, "he added, However, many smaller shops in affluent parts of England fall above the £10,000 protection threshold and will struggle to pay the bill in whole, the FSB says. The recent revaluation of business premises by local authorities has led to a huge increase in the rateable value of shops, particularly in wealthy areas The organisation cites as an example a toy shop - Toys, Games and Models in NewRV £6,250 £25,000 £68,750 £156,250 NewBill £2,637.50 £10,550,00 £29,012.50 £65,937.50

Winton, Bournemouth which has a rateable value of £11,500 and cannot benefit from small business rates relief. As a result its rates bill is £4,800 a year. However, a similar shop, one mile down the road, does benefit from rates relief and will pay £900 a year. "Small business rates relief should be extended to all business premises with a rateable value of less than £25,000", suggested Mr Culcheth. The VOA is responsible for setting the rateable values of all 1.75 million business properties in England and Wales. A spokesman for the agency said business owners had been notified of the valuation in October 2004 and added that anyone needing a reliable estimate should use the website: uk Their statement fails to discount what the FSB is saying. The following table demonstrates that before small business rates relief or transitional relief is applied, retailers across England face a 15.7% increase in business rates in 2005/6. Those in the south east of England face an increase of more than 19%.

£375.50 £1430.00 £3,932.50 £8,937.50

OfoIncrease 15.7% 15.70/0 15.7% 15.7%

Asian Voice - Saturday 5th March 2005

HSBC reveals mega profits
GAURAVSHARMA GLOBAL BANKING major HSBC has recorded a massive 37% rise in pretax profit to £9.6bn ($17.6bn) for 2004. Much of its profit, says the UK bank has been made abroad with a quarter of its earnings coming from the UK market. The profi ts come against a background of record earnings for UK banks and complaints from consumer groups that they are making "excess" profits. In February Barclays, another of the UK biggest banks, reported pre-tax profits of £4.6bn, up 20% on the year before. Their results followed a couple of weeks later by Royal Bank of Scotland, which reported a 14% rise in annual pre-tax profits to nearly £7 bn, Chairman Sir John Bond said 2004 was "another good year for HSBC". He described the economic climate as "favourable" when speaking to the BBC on Monday (28.02.05) about the profits which are the biggest recorded by any UK bank. He said he did not think UK banks ._ .... F7~_ made too much money from their customers. "We are in 77 countries and our UK profits are no different from profits in other markets," he said. "We make 24% of our profits in the UK but it accounts for 32% of our salary base." Sir John also acknowledged the contribution of China to the bank's profits. "We think the Chinese growth story is a very impressive one. It has 2~% of the world's population and accounts for just 4% of the world's gross national product; I think that will soon change," he said. Sales at the company rose 23% to £26.29 bn ($50.59bn), benefitin.g from the company's acquiI

sition of US consumer lender Household in March 2003. The 2004 results also included 10 months of contribution from Bank of Bermuda, which HSBC acquired a year ago. The bank also faces the possibility of. a strik~. Trade union Amicus said it will call on UK workers at HSBC to prepare for strike action over pay and bonuses. It said the company's pay offer will leave many staff worse off than they were last year. "Out of 25 000 HSBC staff covered by the Amicus negotiated pay arrangements, ~p to 10% will get no pay nse at all this year and a further 40% will get below inflation," Amicus said in a statement.

Asian Voice - Saturday 19th February 2005


Profits at Barclavs hit record level ., .-------

THE UK'S third-biggest bank Barclays saw annual pre-tax profits jump to record levels bolstered by a sharp rise in business at its investment arm. Profits for the year to 31 D December rose 20% to ~ £4.6 bn. Earnings at .__~-----: Barclays Capital investment bank rose 25% to £1.04 bn, but investment in branch operations held back growth in its UK retail business. Barclays' chief John Varley said the bank had "caught the winds" of a very strong world economy. Barlcays is the first of Britain's five big banks to report 2004 results. According to analysts' forecasts, HSBC, the biggest UK bank by stock market valuation, is likely to report profits of £9.4bn later this month. Barclays record breaking results were in line with market expectations. Its Global Investors wing made £347 mn, which is a staggering 82% jump over 2003 figures. Profits at Barclaycard rose by 5% to £ 801 mn but were said to have been affected by a series of interest rate rises and investment to grow its customer base. The bank also blamed margins pressure on its mortgage business and spending on its branches over the past year for a 1% fall in profits in its UK retail division to £1.13 bn. ''The outlook for 2005 is good as a result of balance sheet growth and investments made in 2004," Mr Varley said. Barclays cautioned that growth this year. may be slower than in 2004 on the back of softer US and Chinese economies and the impact of interest rate rises on household spending in the UK. It added its bid to acquire a controlling stake in South Africa's leading retail bank Absa, was being considered by regulatory authorities. Barclays also declined to be drawn on reports that Barclays had held merger talks with US bank Wells Fargo. A tie-up between Barclays and California-based Wells Fargo would create the world's fourth biggest bank, valued at $180 bn. While declining to comment on Wells Facgo front, Barclays has criticised the Italian government's resistance to foreign


takeovers of its banks; saying Europe's lenders should combine to combat predatory 'US giants'. On last Thursday Barclays Chairman Matt Barrett said Italy's position violated European rules and that consolidation was inevitable and -:--_~ desirable. "It is anti-EU policy for any government to go up and say, 'Our banks are not for sale'," Mr Barrett told reporters. "In the UK you wouldn't say that because it is a very open market. The EO's internal market chief Charlie McCreevy wrote to Bank of Italy Governor Antonio Fazio this week asking him to treat foreign bids the same as those from Italian banks. Last month Vazio and the government agreed informally to resist foreign takeovers." "It is inconceivable to me, if you take a medium-term view, that there will be the same number of banks (in Europe) in five years' time that there are today," Mr Barrett said. 'The situation in Europe is that it is massively overbanked." He said the lack of cross-border mergers in Europe is holding back the development of a single financial market and that Europe's banks should get together to ward off "the behemoths" that have been created through US bank mergers. Mr Barrett predicted an endgame for global bank consolidation. "I would guess that in the next five years there would emerge - maybe 10 global banks with significant opportunities in Asia Pacific, Europe and North and South America. The rest will play either regional or domestic games," Mr Barrett said. He said Barclays wanted to be one of the 10 global banks and that there was "no yes or no answer" to whether it would buy or be bought. . Barclays shares were the best performers among UK banks last year, fuelled partly by speculation that the company might get a bid from Bank of America or another US lender. The bank is expanding investment banking, credit cards and fund management internationally and beefing up European retail operations, including its Banca Woolwich Italian unit.

Asian Voice - Saturday 29th January 2005

Chancellor's 'Golden' optimism
not shared by experts
GAURAV SHARMA CHANCELLOR GORDON Brown's golden rule of balancing the public finances may still be broken after the latest borrowing figures proved contradictory, according to analysts across the board. According to the government's preferred measurement, net monthly public sector borrowing was down to £S.2bn in December, from £7.5 bn a year earlier. Borrowing in the first nine months of the financial year totalled £37.1 bn. This is £1.2 bn higher than the same stage in 2003. Mr Brown's 'golden rule' which means the government should borrow only to fund investment, and not day-to-day - or "current" spending, looks to be under serious threat. He has consistently said the golden rule will be met, but in December's pre-budget report he did predict a slight increase in public borrowing for this year and the next - widening to £34 bn and £33 bn from previous _~ budget expectations of £33 bn and £31 bn. The policy's success is measured by whether surpluses and deficits can be balanced over a full economic cycle. The current economic cycle is expected to end in 2006. "The figures are a little better in December, and less than people anticipated. Yet they do remain poor though, especially if you look at the split between investment and current spending. There remains a very clear danger that the [golden] rule will be broken," said Jonathan Loynes, chief UK economist at Capital Economics. In a speech to the CBI in Manchester on January 21st, the Governor of the Bank of England Mervyn King also urged the Chancellor to maintain a firm grip on government borrowing. Ruth Lea, from the Centre for Policy Studies (CPS), believes that the Chancellor is being remains over optimistic. Ms Lea says "Taking 2007/08, for example, the 2004 Pre-Budget Report (PBR) forecasts a current budget surplus of £4 bn. If his (Chancellor's) average annual error in the past five years (£11 mn) persists into the future, then rather than having a current budget surplus of £4 bn in 2007/08, the public finances would show a deficit of £7 bn. If this estimate eventually turned out to be correct, then a Labour Government, if it stuck to its current spending plans, would clearly need to increase taxes ttl return the current budget to balance and avoid breaking the golden rule". The economy as a whole faces pressures ahead according to the British Chamber of Commerce (BCq. The UK manufacturing sector will continue to face "serious challenges" the BCe has

__ ~~ said. Though the group's quarterly survey of companies found exports had picked up in the last three months of 2004 to their best levels in eight years, the BCC still found that the whole UK economy continues to face "major risks" and warned that growth is set to slow. It recently forecast that economic growth will slow from more than 3% in 2004 to a little below 2.5% in both 2005 and 2006. Manufacturers' domestic sales growth fell back slightly in the quarter, the survey of 5,196 firms found. "Despite some positive news for the export sector, there are worrying signs for manufacturing. These results reinforce our concern over the sector's persistent inability to sustain recovery", said the BCC. The outlook for the service sector was "uncertain" despite an increase in exports and orders over the quarter, the BCC noted. The BCC found confidence increased in the quarter across both the manufacturing and service sectors although overall it failed to reach the levels at the start of 2004. The reduced threat of interest rate increases had contributed to improved confidence, it said. The Bank of England raised interest rates five times between November 2003 and August last year. But rates have been kept on hold since then amid signs of falling consumer confidence and a slowdown in output. ''The pressure on costs and margins, the relentless increase in regulations, and the threat of higher taxes remain serious problems," BCC director general David Frost said. "While consumer spending is set to decelerate significantly over the next 12-18 months, it is unlikely that investment and exports will rise sufficiently strongly to pick up the slack."

ISErejects German takeover bid

Deutsche Boerse and (inset) the LSE (AFP PHOTO)

THE WNDON Stock Exchange (LSE) has rejected a fresh takeover proposal from German rival Deutsche Boerse in what has been the talk of the markets across the EU. The LSE said the 530p per share cash offer - valuing it at about £1.35 bn - "undervalued" both its own business and the benefits of such a tie-up. However both companies said they would continue talks, a prospect which sent the LSE's shares soaring more than 25%. Deutsche Boerse has long wanted to link up with London, and the two tried and failed to seal a merger in 2000. The attempt had foundered on concerns from UK traders and on a hostile bid from Sweden's OM Group. News of the approach by Deutsche Boerse sent the LSE's shares spiralling to a record level of 537 pence - above Deutsche Boerse's offer. The past six weeks had seen a 25% gain as rumours of an impending bid from the German rival spread. Deutsche Boerse shares on the contrary fell 3.8% to EUR 42.84. Responding to the LSE's rebuff, Deutsche Boerse - whose market capitalisation is more than £3 bn - said it believed it could show its proposal offered benefits, and that it still hoped to make a cash bid. Its proposals would help lower the cost of listing on the exchange, it said. But the LSE said not only was the bid undervalued, but that it had "been advised that there can be no assurance that any transaction could be successfully implemented". Major shareholders in the LSE backed the board's refusal. Monday's move is the latest in a succession of attempts to consolidate European markets. The LSE, as Europe's biggest stock market, is a k~'y prize, listing stocks with a total capitalisation of £ 1.4 trillion - more than twice that of Deutsche Boerse. A counterbid is largely thought to be likely - perhaps from Euronext, which owns London's derivatives market LIFFE and runs markets in Paris, Brussels, Amsterdam and Lisbon.




Asian Voice - Saturday 23rd October 2004

Man Utd takeover saga boils on
GAURAV SHARMA THE TUSSLE for the control of Manchester United is likely to drag on as US sports tycoon Malcolm Glazer raised his stake in the world's richest football club for the second time in four days. It emerged on Monday (18.10.04) that Mr Glazer spent £17 mn towards the acquisition of another 6 mn shares to lift his holding in the club to 27.63%. This move comes after he splashed out £45 mn on Friday (15.10.04) to buy 15.4 mn shares. The new purchase is yet more indication that Mr Glazer, owner of the Tampa Bay Buccaneers, could be seeking to take control of the famous football club. This journalist has spoken to a source close to one of Mr Glaziers associates who maintained that the latest share purchase is not necessarily ground work to line-up a bid but was intentioned to confirm that Mr Glazer will be a long-term investor. The BBC also cites a source close to the Glazer camp who maintained the same line. The explanation however stands on thin ice. In a further twist, on Friday shares in Manchester United leapt by 8% in late trade with dealers reporting that investment bank Credit Suisse First Boston (CSFB) was looking to buy about 18 mn shares in the soccer club at 285 p per share. Earlier that very day an alleged breakdown in talks occurred between the clubs biggest investors, Irish race horse owners John Magnier and J.P. McManus and Mr Glazer. CSFB were not available for comment when contacted by Asian Voice. Fans remain bitterly opposed to any takeover attempt believing the American tycoon will siphon off profit to make up costs rather than pool the funds into buying new players and making Old Trafford better and improving the youth academy. A Man Utd. supporters' group Shareholders United has made a plea to the club's board to help them stave off any takeover bids. The board announced that there has been "no definitive proposal" of a takeover bid from US tycoon Malcolm Glazer but refused to rule out one in the future.




Shareholders United spokesman told the press," We want the board to help us put 25% of the shares in the hands of fans so we can effectively block any takeover. The fact is, this is not about Malcolm Glazer, it's about Manchester United and the fans." "Nearly 50% of the club's shares are owned by just two parties _ Glazer and Cubic Expression owned by JP McManus

L~~ __ ":::~~:_-:-

around 300p which is just about the right asking price which sellers would demand and perhaps the Glazer camp would be willing to pay," he said. The ongoing saga has caught the attention of the press not just in the UK but across the world, given the fact that Man Utd. are such a mega sports franchise. It's doubtful therefore that Mr Glazer would be bidding for football matters. In fact the American has never visited Old 'Irafford. He supposedly views Man Utd. as a profitable business preposition and the fans are only too aware of that.

and John Magnier, and that is the road to instability. We are determined to put our message across. If the structure of the club and the shares remain as they are, there's always going to be a danger," he said. 'We want the 18% of the shares that are owned by the fans to come under the Shareholders United umbrella, and we want the board to help us get that other 7%. Any money the club makes we would want to go," he said. One city analyst told Asian Voice that Man Utd was one of the only two profitable clubs in England. "The share was at one time trading at 400p. Its now down to

GAURAV SHARMA period. However, he now believes the UK was moving from that into a "not-so-bad" decade, an acronym for "Not Of The Same Order But Also Desirable". Mr King's speech sounded a warning to the economists who had ruled out further interest rate rises after low inflation figures. Inflation, judged by the consumer price index, fell 0.2 points to 1.1% last month. That tinge came from comments that there is ''little if any spare capacity" in the economy and that there had been "rapid expansion of total money spending", both of which are signs of inflationary pressure. The Office for National Statistics (ONS) believes that discounted air tickets, a fall in the price of vegetables and cheaper mobile phone charges had reduced the rate of inflation in September. If the rate of inflation falls 0.1% further, Mr King will have to write an open letter of explanation to the Chancellor. The fall in Consumer Price Index (CPI) inflation was accompanied by a 0.1% fall in the retail price index, which includes mortgage repayments and house prices, to 3.1%. The low rate is exactly in line with the Bank's forecasts of ''under 1.2%" CPI inflation for the third quarter, before it begins to mount again.

Asian Voice - Saturday 6th November 2004

'Governor warns prosperity era maybe over as UK economy slows
GOVERNOR OF the Bank of England Mervyn King warned that the country's golden age of prosperity could be coming to an end as UK's economic growth slowed in the third quarter with Gross Domestic Product (GOP) increasing by only 0.4% in the three months to September. Speaking at the Eden Project in Cornwall, Mr King recently said that the UK could no longer rely on falling unemployment, strong growth and low inflation. He said uncertainty over oil prices and world trade had already hit the economy and there would be more shocks ahead. He said, 'We must be conscious of the dangers of hubris. After all, starting from the Garden of Eden there can only be a fall from grace. What is clear is that the combination of low and stable inflation and continuously falling unemployment must come to an end at some point, and may already have done so." A year ago, Mr King had opined that UK had enjoyed a "NICE" decade - his acronym for Non-Inflationary Consistently Expansionary - with smaller ups and downs than any other previous historical
The Governor took credit for keeping inflation on a tight course, saying that since the Labour Party gave the Bank of England control over setting interest rates, "there is convincing evidence that changes to inflation are much less persistent". The ec0nomic slowdown in growth makes it less likely that the Bank of England Will raise interest rates. It could also create problems for Chancellor Gordon Brown's budget, as slower growth means lower tax revenues. The present third quarter GDP figure represents the weakest pace of growth since the first quarter of last year Then slower growth was linked to the fact that the Iraq war had damaged business and consumer confidence. Retailers reported their weakest sales for eighteen months in September, according to a CBI survey. The housing market also appears to be cooling off. The market grew 0.2% in September, according to figures from the Nationwide Building Society, after a 0.1% rise in August. Meanwhile,

accountancy finn Ernst & Young said recently that the Chancellor is facing a £6bn shortfall in tax revenues and may have to raise taxes soon after the election. The Bank of England's Monetary Policy Committee (MPC) will make its next interest rate decision on 4th November.