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THE TRENDS THAT KILLED WESTERN GROWTH

ISSUE 1,802 TUESDAY 22 JANUARY 2013

TIM MORGAN

BUSINESS WITH PERSONALITY

STERLING DIVES TO A 10-MONTH LOW


BY JULIAN HARRIS
THE POUND has sunk to its weakest level since early last year, with analysts fearful that it could crash even further in the coming days. Sterling touched 1.1875 during yesterdays trading, its weakest print against the euro since the middle of March 2012. It has plummeted from a peak of around 1.29 last summer. Against the greenback, the pound neared $1.58, down from $1.63 at the start of this year. A weaker pound is likely to stoke inflation in the UK, with the official consumer prices index (CPI) still stuck at 2.7 per cent. CPI has remained above the Bank of Englands two per cent target for 37 straight months. The governments mammoth debt pile and stubbornly high annual deficit are believed to be partly to blame, along with the UK economys persistently sluggish levels of growth. On Friday the Office for National Statistics will publish its first estimate of Britains GDP in the fourth quarter of 2012. Any contraction in GDP which could signal the start of a technical triple-dip recession would put more downward pressure on sterling, analysts say. Sterling is down 20 per cent since 2007 on a trade weighted basis but this has done little for export growth, commented Louise Cooper, founder of Cooper City. A sterling crisis that does little for exports, imports inflation and results in few international buyers for our government debt gilts would be the worst of all worlds, she warned.

Tullet Prebons chief economist in the Forum, Page 18 www.cityam.com

WINE TO WARM YOU UP


Neil Bennetts column, See Page 22

FREE

UK becomes top German trade partner


BY BEN SOUTHWOOD
THE UK has leapfrogged France to become Germanys top trading partner, according to data highlighted yesterday by a central banking group. Trade between Germany and the UK totalled 153bn (129bn) in the first nine months of 2012, the Official Monetary and Financial Institutions Forum said in a note, according to data from the Bundesbank. This puts the UK ahead of France and the US both on 150bn the Netherlands on 146bn and China, with 115bn of bilateral trade. Author David Marsh said this headline shift underlined a broader movement of German economic interests away from its partners in the Eurozone, and towards countries outside the currency union. German companies have rebalanced their relationships in favour of three diverse groups of countries beyond the euro bloc: the US, faster-growing non-euro European countries and emerging market economies, he said. Exports to Germany from the UK were up 20 per cent between January and September of 2012 compared to a year earlier, with car parts and medical equipment topping the list of tradeable goods. In total Germany did only 37 per cent of its trade with the 16 other countries that use the euro, versus 45 to 46 per cent in 1999 when the currency was created. Given trends in global growth, the note suggests that Germany is likely to carry out a lower and lower proportion of its trade with fellow bloc members, and more with emerging economies in China, India and Brazil. THE FORUM: Page 18
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OBAMA BEGINS SECOND TERM IN THE WHITE HOUSE

BARACK Obama set the tone for a more assertive second term with his second inauguration speech yesterday afternoon. Being true to our founding documents does not require us to agree on every contour of life; it does not mean we will all define liberty in exactly the same way, Obama said, as he addressed fewer than half of 2009s record 1.8m crowd.
DEBT CEILING HOPE: Page 3
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The latest public borrowing figures will be published this morning. In the last six months gilts have gone from yielding 1.5 per cent to over two per cent. So even though gilt prices are heavily manipulated through the [Bank of Englands] extensive quantitative easing programme, there are signs that lending to the UK state is less popular than before. Former Bank of England official Andrew Sentance last night hit out at

the UKs benign neglect of sterling. The Bank governor talks down the pound if the markets see that as the view of the authorities, then they need good reasons to bet against it. And they dont have good reasons at the moment, Sentance told City A.M. Itll take stronger growth and lower inflation [for the pound to recover] and it doesnt look like were going to get that, he added. CURRENCY WAR CLAIM: Page 2
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The pound has sunk from 1.29 to under 1.19


-1.30 -1.28 -1.26 -1.24 -1.22 -1.20 -1.18
Sep 2012 Nov 2012 Jan 2013

Cold snap travel chaos prompts bosses to call for a rethink


BY MARION DAKERS
PARTS of the capitals transport network were left in disarray by snow and ice yesterday, prompting businesses to call for more concerted planning for cold weather. Heathrow cancelled one in ten flights yesterday, hoping to avoid a repeat of the weekends frustrations when passengers waited hours for flights that were eventually axed. Gatwick Airport has urged the government to bring Londons airports together to allow close-tocapacity Heathrow to divert some traffic elsewhere when the weather interferes with its schedule. Clearly in extreme winter weather conditions a level of disruption at airports is to be expected but we should all be able to be open for business when confronted with normal winter weather conditions as we saw this weekend, Gatwick chief executive Stewart Wingate wrote to transport secretary Patrick McLoughlin. The Institute of Directors added that businesses have not been given enough information about disruption during the blizzards. We appreciate that transport companies cannot control the weather, but in cases over the last few days communication with customers has been poor, said senior economic adviser Corin Taylor. Southern and Southeastern trains ran into widespread delays and cancellations yesterday due to the ice and snow, and both plan to run altered timetables today. THE DEBATE: Page 19
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FTSE 100 L 6,180.98 +26.57 DOW 13,649.70 (CLOSED) NASDAQ 3,134.71 (CLOSED) /$ n 1.58 -0.01 / 1.19 unc /$ 1.33 unc

NEWS

TUESDAY 22 JANUARY 2013

To contact the newsdesk email news@cityam.com

Bursting bond bubble will destroy wealth on a giant scale

NE of the greatest risks facing the world economy is a wholesale crash in government bonds markets. Yields on UK gilts, US Treasury bonds and others are still much too low and that means that capital values are too high (the price of fixed income securities move inversely to their yield). Given the extraordinarily large size of government bond markets, and the fact that so many banks, insurers and pension funds are big holders, sometimes for regulatory reasons, this will trigger wealth destruction on a massive scale. Such a correction has already quietly started. As Leigh Skene of Lombard Street Research points out, yields on 30-year US Treasury bonds rose 0.7 percentage points from their July 2012 lows to 3.13 per cent on 3 January, before falling back a little.

EDITORS LETTER
ALLISTER HEATH
This cost Treasury owners 16 per cent of their capital. Those who bought gilts at their peak are also nursing severe losses. But while many commentators agree that US bond markets at least will eventually experience an even greater correction, many still cling to the hope that other bond markets, as well as noncredit assets, will remain insulated from the looming storm. So Im grateful for M&Gs retail bond team for some fascinating num-

ber-crunching which shows why the bears are right to fear the worst. The great US bond market crash of 1994 saw US Treasuries lose just 10 per cent of their value, and the overall total return was just -3.45 per cent that year. The reason for this almost decent performance it felt far worse at the time is that yields starting point were much higher; even a smallish correction today would be immensely greater. But the experience of 1994 was that while American bond markets were hammered, other risk assets including in emerging markets actually sold off even more heavily in reaction. The Bank of America Merrill Lynch emerging market debt index lost 15.33 per cent; and even more remarkably the MSCI emerging market equity index lost 8.67 per cent. Nobody knows for sure how it will

play out this time. Perhaps emerging markets are now deemed less risky than US bonds. Gilts would certainly be caught up in the fallout and in any case they are horrendously overvalued also, with prices propped up by quantitative easing. My guess is that money will pour into equities in most markets, pushing up their prices. This is undoubtedly one reason for the recent rally in stock markets. The S&P 500 rose very slightly in 1994. One can never accurately predict the timing of crashes. But those who believe that it is easy to forecast which assets will turn out to be safe havens amid the inevitable carnage is clearly deluded.

SNOW EXCUSE

The authorities and transport companies reaction to the current, eminently predictable bout of snow has

been better than it was in recent years. Many councils kept main roads relatively clean, though side roads were often neglected. But the progress hasnt gone far enough. It is an outrage that so many trains and flights have been cancelled; the lack of information was appalling. Far too many schools shut unnecessarily, making it nigh-on impossible for many parents to work, jeopardising jobs, livelihoods and the economy. This cant go on. Transport companies must make more of an effort and adapt to the new normal several days of snow every winter. Schools need to stay open. London is a modern, prosperous metropolis: a few inches of snow must never again be allowed to defeat us. allister.heath@cityam.com Follow me on Twitter: @allisterheath

Weidmann says BoJ policy risks a currency war


BY BEN SOUTHWOOD
THE PRESSURE Japanese leader Shinzo Abe is putting on the Bank of Japan (BoJ) threatens central bank independence and could risk a currency war, Bundesbank boss Jens Weidmann said yesterday. Japanese Prime Minister Abe has put heavy pressure on the BoJ to drastically increase its monetary interventions in order to boost inflation to its two per cent target. Hungarys government have also interfered with policy, forcing five successive rate cuts past unwilling rate-setters at the central bank. But Weidmann, who leads the fiercely independent Bundesbank, said in a Frankfurt speech that politicisation of the exchange rate would erode central bank autonomy and remove one restraint on tit-for-tat monetary conflict. Alarming violations can be observed in Hungary or Japan, where the new government is interfering massively in the business of the central bank with pressure for a more aggressive monetary policy and threatening an end to central bank autonomy, he said. Without independence, countries could be tempted to engage in a currency war rounds of competitive devaluations, hoping for a quick fix to labour cost issue, Weidmann claimed.

Bankers leave glamorous jobs for compliance roles


EXCLUSIVE
BY TIM WALLACE
BANKERS are retraining in compliance in unprecedented numbers either to change career as their traditional jobs are cut, or to make sure they are well prepared to cope with tough new regulations, according to figures seen by City A.M. The City has lost over 100,000 jobs since the start of the financial crisis as banks and other finance firms cut costs. But the only real growth area in jobs has been in compliance as firms get to grips with the tidal wave of red tape sweeping the sector. That has driven up wages a recent study from recruiters Robert Half showed bank compliance managers pay soaring 7.1 per cent this year to an average of 100,000. In the last four years we have seen a 10 per cent annual rise in demand for our public courses but in the last 12 months the figure is more like 20 per cent, said Jonathan Bowdler from International Compliance Training (ICT), which runs courses with the Manchester Business School for the International Compliance Association. The public courses, which cost up to 3,100 and end in a professional diploma, are typically attended by senior bank staff who need a higher degree of compliance knowledge.

Ocado chair Michael Grade poised to retire


BY JENNY FORSYTH
OCADO chairman Michael Grade is set to announce his retirement as chairman of the online retailer as early as today. Lord Grade, formerly executive chairman of ITV, has been chairman of Ocado for seven years, overseeing the companys 800m float three years ago. He is tipped to stand down at Ocados annual general meeting in May. Last night Ocado, which supplies Waitrose goods, declined to comment. However a source close to the company told City A.M.: Lord Grade turns 70 this year and I dont think this will be a huge surprise to the City. The retirement, and search for a new chairman, comes as lossmaking Ocado faces more headwinds. It faces increasing online competition and Waitrose could end its supply contract as early as 2017.

Ruth Horgan is the latest regulatory specialist to join HSBC after its money-laundering scandal
But the group has also started running mass workshops for banks, training hundreds of staff at a time as banks try to make sure employees at all levels know how the rules work. We are seeing more people from operations and sales backgrounds, for example, who have put a lot of time into their particular roles and then look to move across to compliance, said Bowdler. That means the group expects to train roughly 1000 bankers in the UK this year, as well as 2000 to 3000 internationally. Major banks have made high-profile hires in compliance to show they are guarding against any more scandals. Barclays has taken on former Financial Services Authority chief executive Sir Hector Sants to head its regulatory relations department. And HSBC yesterday announced it is hiring veteran KPMG partner Ruth Horgan as global head of regulatory compliance. The institution has had to change its procedures radically following the money laundering scandal, upping its budget to deal with the threat nine-fold since 2009.

Lord Grade is ready to retire from Ocado

WHAT THE OTHER PAPERS SAY THIS MORNING


Brussels tables tighter EU media laws Office-flat conversion rules to ease
Developers will be able to convert office buildings into blocks of flats without asking councils for permission under radical changes to the English planning system designed to speed up the delivery of new homes. The plans aim is to increase the countrys housing supply at a time when building figures are approaching an historic low. But the City of London, which fought a vigorous rearguard action against the proposals, will be promised an exemption from the change when it is announced within days. Media outlets across Europe face being tightly regulated by independent agencies with sweeping powers to investigate complaints and enforce fines if the recommendations of a Brusselsappointed panel become law.

Data-hungry customers a fact of Life The FT to axe staff in digital shift


The competition for data-hungry consumers was stepped up yesterday by Phones4u, which has launched a mobile phone brand for 4G services. It is calling its fledgeling mobile phone service Life. The Financial Times is to axe 35 jobs as part of plans to make a big cultural shift from a traditional print news organisation to a digitally focused networked business in a bid to compete with social networks and information-gathering services like Google. The newspaper has been relatively successful in charging for online news content, but editor Lionel Barber said it needs to make wrenching changes to adapt to increasing competition from non-traditional news sources.

Thai tycoon to win Fraser & Neave


Thai tycoon Charoen Sirivadhanabhakdi is poised to win control of Singaporean conglomerate Fraser & Neave after rival bidders led by Indonesias Riady family backed down yesterday, ending a months long stalemate in one of Southeast Asias largest-ever takeover battles.

Aon mulls bonus deferral backtrack


Aon, the insurance broker, is considering following Goldman Sachs and backtracking on a plan to defer UK bonus payments to allow hundreds of highlypaid employees to avoid the 50 per cent income tax rate.

AstraZeneca gets cold shoulder in US


Health insurers and doctors in the United States are turning up their noses at AstraZenecas much-vaunted new heart drug Brilinta, according to broker Socit Gnrale.

Last Berlusconi hearing scheduled


A judge yesterday set the last hearing in former Prime Minister Silvio Berlusconis trial on prostitution charges for 11 March.

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TUESDAY 22 JANUARY 2013

UK businesses hit by jump in VAT and job tax


BY TIM WALLACE
BRITISH businesses are seeing their tax bills stay high despite George Osbornes pledge to cut corporation tax, as the chancellor has simply increased other charges on the firms, according to a PwC study out today. That means the government is not increasing the UKs appeal as a competitive place to do business as much as the chancellor may be hoping. The FTSE100 firms paid 77.1bn in the tax year 2011-12, almost identical to the amount paid the previous year, even though the headline rate of corporation tax fell from 28 per cent to 26 per cent. That represents 14.2 per cent of total government receipts. The difference was made up in other taxes with businesses shelling out more to cover charges like the rise in employers national insurance and the increase in VAT. PwCs study of the top 100 listed firms has been running since 2005. Since then the tax take from firms profits taxes borne, in PwCs words has jumped 19 per cent to 24.8bn. The amount paid from its outgoings, like staff pay known as taxes collected has risen by nine per cent to 52.3bn. Corporation tax only makes up 8bn of the top 100 firms tax payments. Pay as you earn income tax collections come to 13.8bn while national insurance comes to 10.1bn. That represents a shift in government tactics from taxing variable figures, like profits, to more fixed factors like business rates on property and national insurance on employment. PwC fears that could make it harder to start a business as more taxes are due before the firm makes a profit. The effect varies from business to business when setting up a retail business you will pay more national insurance contributions and business rates, while a technology firm has lower costs, with less rates, said PwCs Andrew Bonfield. But the shift to more predictable taxes makes it easier for the government to get the annual deficit down. These other taxes tend to be easier to collect and less volatile since theyre not dependent on profits, added Bonfield.

NEWS

Republicans table deal on US debt limit


BY BEN SOUTHWOOD
REPUBLICANS in the US House of Representatives yesterday tabled a bill that would suspend the debt ceiling until 19 May. Instead of raising the debt limit it would allow spending of any amount to be funded by selling extra debt but the cap on total borrowing would kick back in during May. The bill would also hit politicians with personal financial incentives if Congress cannot pass a budget by 15 April then all their earnings will be withheld until they do. If they did pass a budget, it would be the first in four years, with funding since then largely being authorised through other means. Those markets not closed for Martin Luther King day a US public holiday reacted rapidly. German Bund futures sunk on lower demand for alternative lowrisk assets, while spot gold edged up 0.3 per cent. The FTSE100 climbed by just under 0.8 per cent, though volumes were low due to the poor weather. The US federal government officially reached its borrowing limit on 31 December last year. It has been using accounting tricks to avoid defaulting since then, but says these will run out between mid-February and March this year.

Antony Jenkins has vowed to clean up behaviour at Barclays

Ex-Barclays staff lose right to anonymity in Libor court case


BY TIM WALLACE
UP TO 106 current and former Barclays staff named in emails relating to Libor fiddling lost their right to anonymity in a legal case yesterday, as a judge ruled in favour of a group of media organisations who wanted them unmasked. The staff, a minority of whom are thought to have been found to have misbehaved, can now be named in the proceedings between Guardian Care Homes (GCH) and Barclays. The case is based on GCH claims that Barclays missold it an interest rate swap product. The names could come out in a hearing on Thursday. The fact that someone is named in hundreds of thousands of pages of documents following a wideranging three-year investigation in which no stone was left unturned does not necessarily mean that person was involved in any wrongdoing, said Barclays in a statement. Many entirely innocent individuals may be referred to in the documents underpinning the settlements. Meanwhile Barclays Wealths chief operating officer Andrew Tinney has left the bank after he disposed of a report into behavioural problems in the unit.

NEWS
1963 2007

TUESDAY 22 JANUARY 2013

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TIMELINE: A JOURNEY BACK TO THE MARKETS


Crest Homes founded by Bryan Skinner

1968

The housebuilder oats on the London Stock Exchange

Crest is taken private in a debt-fuelled 1.2bn takeover by Scottish entrepreneur Tom Hunters West Coast Capital and mortgage lender HBOS

2011

William Rucker, the chief executive of Lazard London is appointed chairman. Crest signals that a oat is one of a number of options being explored by its owners Varde Partners and Deutsche.

1972

2009

2012

Crest buys Camper & Nicholsons, the leading yacht maker, and changes name to Crest NicholsoN

Crest becomes majority owned by a consortium of 24 banks after a 648m debt-for-equity swap

1983

2011

2013

Skinner retires and the company starts to sell-off its non-housing businesses

2005

Stephen Stone appointed chief executive of the company

US distressed debt specialist Varde Partners takes control of the rm with Deutsche Bank after buying up Crests 500m debt pile.

Crest announces its intention to return to the stock market and also announces a return to prot.

Crest Nicholson chief executive Stephen Stone

Crest Nicholson plots return to London market


BY KASMIRA JEFFORD
UK HOUSEBUILDER Crest Nicholson is to return to the stock market nearly six years after it was taken private at the height of the housing market crash. The 50 year-old company, which builds homes mainly in the south of England, said it plans to raise 50m from the listing of new shares to pay down debt. Its owners also hope to sell 150m of their existing shares. The offer is expected to value Crest at around 500m, restoring the housebuilder to the FTSE 250, where it traded before its takeover in 2007. Crest said it expected the free float to be a minimum of 35 per cent of the issued share capital and that the offer will be completed in February. Chief executive Stephen Stone said the offering the first of a UK company this year is a sign of confidence in the UK housing market. We think the equity markets are good at the moment. Housebuilders have shown modest improvements in trading over the last six months in particular on the back of the governments Funding for Lending Scheme, Stone said. He added: Crest has got a land bank in the southern part of England with strong margins of 18 per cent. So a land bank, good returns and a sign of a pick-up in the mortgage market are all ingredients we think will be good for shareholders going forward. Crest, one of UKs biggest house builders, was hit hard by the slump in the UK housing market after years of easy credit inflated prices. It was taken private by Scottish entrepreneur Tom Hunter and mortgage lender HBOS in 2007 and is now majority owned by US distressed investment fund Varde Partners, after a series of deals last year. Crest also reported it had made a pre-tax profit of 62.1m in the year to 31 October, compared to a 27m loss in 2011. Sales rose 28 per cent to 408m with completed homes up 24 per cent at 1,882.

Crest Nicholson was one of the highest profile casualties of the 2007 housing crash

ADVISERS
DEREK SHAKESPEARE
BARCLAYS CAPITAL
BARCLAYS Capital and HSBC are acting as joint sponsors, joint global co-ordinators and joint bookrunners on Crest Nicholsons initial public offering. Derek Shakespeare, a managing director at Barclays investment banking division, is leading the effort for the bank. He recently advised Redrow founder and chairman Steve Morgans vehicle Bridgemere and fund manager Tosca on their bid to take over the housebuilder, which was eventually scrapped. Shakespeare has also advised Lufkin, the US oileld pumping equipment provider on its $127m acquisition of Scottish oil services provider Zenith Oileld Technology in March 2012. He is joined by Chris Madderson, part of the banks UK origination team and Ben West in the equity syndicates team. HSBCs advisory team was led by Nick Donald, head of equity capital markets (ECM). Donalds previous deals include acting as joint bookrunner for miner Lonmin on its $817m rights issue in November and he also advised packaging company DS Smith on its 466m rights issue in February last year to buy Swedish rival SCA Packaging. Simon Cloke, head of diversied industries at HSBC and ECM director Stuart Dickson worked with Donald on the deal.

cityam.com

TUESDAY 22 JANUARY 2013

HMV to honour gift vouchers as Hilco deal nears


BY KASMIRA JEFFORD
CRISIS-HIT music retailer HMV has performed a U-turn on its initial decision to refuse gift vouchers, administrators confirmed yesterday. Deloitte, the business advisory firm which took control of retailer last week, said HMV vouchers can now be redeemed in stores from today. It also said funds raised by HMV from the sale of charity releases, including the Hillsborough Justice Collective single, will be paid in full as soon as possible after a public backlash last week. We recognise that both of these matters have caused concern for individuals and organisations affected and are pleased to have reached a positive outcome, joint administrator Nick Edwards, said. We will continue to assess the longer term options for the business whilst continuing to trade. I am hopeful this process will result in the business continuing as a going concern. HMVs initial decision not to redeem vouchers contrasted with Blockbuster, the DVD rental chain, which announced it would honour vouchers after going into administration last week. HMVs 223 stores collapsed into administration last week after restructuring talks with its lenders and suppliers collapsed, putting more than 4,000 jobs at risk. However, it is understood that Deloitte is close to striking a deal with Hilco UK, led by Paul McGowan the owner of HMV Canada that could see the turnaround fund running HMV alongside administrators in the short term, without the business changing hands. Deloitte decline to comment. BOTTOM LINE: Page 7
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NEWS

Carpetright eyes Dreams


BY CATHY ADAMS
FLOOR covering retailer Carpetright is understood to be one of a number of bidders circling beleaguered bed maker Dreams. Accountancy firm Ernst & Young has been hired to handle the sale process for the bed retailer, which was put up for sale before Christmas by main lender Royal Bank of Scotland. Private equity firm Exponent bought Dreams which was founded by Mike Clare back in 2008 for 222m.

The Prime Minister quickly rescheduled his speech on Britains relationship with the EU

David Cameron to give delayed Tesco in new speech on EU links tomorrow online push
BY JAMES WATERSON
DAVID Cameron will finally deliver his speech on Britains future relationship with the EU tomorrow morning, Downing Street confirmed yesterday. The speech was originally due to be delivered in Amsterdam last Friday but was delayed due to the Algerian hostage crisis. Although the Prime Ministers aides wanted the announcement to take place on the continent for symbolic reasons, time constraints mean it will now be at a central London location. The PM is expected to set out which powers he wants to repatriate from the EU, and promise a referendum on any new deal if the Conservatives win a majority at the 2015 general election. A group of Conservative politicians want Cameron to table a straight in/out referendum while business leaders want an end to uncertainty about the EU. Yesterday Cameron responded to the Algerian hostage crisis by committing UK intelligence and counter-terrorism resources to the struggle against al-Qaeda across north Africa. FORUM: Page 18
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BY CATHY ADAMS
TESCO intensified its dotcom push yesterday by opening its fifth dark store near Crawley, West Sussex. The dotcom store, which will create 700 jobs, will serve only online shoppers. The supermarket typically offers an instore pick-up service for its online customers, but is ramping up its dotcom store presence thanks to growing demand in and around London. The Crawley branch follows other stores in the Home Counties in Enfield, Greenford, Aylesford and Croydon.

Paul McGowan runs turnaround firm Hilco

WHAT
At Lombard weve been working hard to raise awareness of the many benefits of asset finance and to highlight just how accessible this form of business funding really is. As a result, to October 2012 wed increased our year on year lending by 16% and were determined to see this figure grow further in 2013. Lombard: Funding Britain. Security may be required and product fees may apply. Call today to find out more. Call 0800 502 402. Typetalk 18001 0800 502 402.

GAP?
lombard.co.uk
Lombard North Central PLC. Registered Office: 3 Princess Way, Redhill, Surrey RH1 1NP. Registered in England No. 337004.

FUNDING

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TUESDAY 22 JANUARY 2013

HE decision by HMVs administrators Deloitte to honour gift vouchers and to pay proceeds raised for charity singles is a piece of luck for those caught out by the music chains crisis. While at first sight this is less heartwarming for the chains other creditors, it may in fact be slightly upbeat news for them as well. As administrator, Deloitte must act in all creditors interests in its attempts to keep the business a going concern. The vouchers move is therefore a bright sign, for two reasons. Firstly, as Deloitte acknowledged yesterday, the ability to honour vouchers depends on the circumstances of the case. Having reviewed HMVs financial position,

Fighting against the future can only buy so much time BOTTOM T LINE
MARC SIDWELL
Deloitte evidently believes things are not bad enough to justify failing to honour these vouchers. Second, such a PR-friendly move suggests a strong commitment to keeping some of the chains stores afloat the only circumstance in which consumer goodwill is vital to retain. But why has the picture suddenly brightened for HMV? Partly because a frontrunner has emerged, apparently willing to take on the struggling entertainment distributor: Hilco, which owns HMV Canada and is a specialist in restructuring troubled firms. Hilco took on HMVs Canadian brand in similar circumstances and it now boasts a re-energised business as the last nationwide bricks and mortar specialist retailer in CDs and DVDs north of the 49th parallel. However, no matter who takes the reins in the UK, HMVs stores have little chance without a business model that makes sense again. That either means adapting to new, digitally-focused consumer demand for which it is already rather too late or persuading content firms, also fighting a fierce rearguard campaign to protect their pre-digital margins, to back HMV as their last UK high street champion. So it comes as no surprise to hear the rumours that Sony, Universal and Warner are lining up to offer HMV special credit arrangements and cheaper wholesale prices on their recordings. As I wrote before Christmas, Trevor Moore had already signalled the firms intention to come cap in hand to suppliers in the new year. Recent events have only heightened the moves urgency. The start of 2012 saw the giant content firms ride to HMVs rescue. It seems they are on their way again. It is hardly a long term strategy though, so spend those vouchers soon.

NEWS

LEADING THROUGH THE DARK

From a chain fighting to keep back the future to one embracing its possibilities. Tesco is opening another so-called dark store, the fifth of its warehouses designed to serve online shoppers, after a Christmas in which online food sales grew 18 per cent. On launch, the retailer conjured up images of its staff rolling trolleys up and down secret aisles on our behalf. However, this month it announced three dark stores will use robots to pick and pack instead, which sounds more reassuringly futuristic. Tesco has its problems, but with dark stores and its investment in Click and Collect, at least its looking for the answer in innovation, not nostalgia.

Pearson warns of tough 2013 as profits falter


BY JAMES TITCOMB
PEARSON, the education and media business behind the Financial Times newspaper, has warned that annual profits will be lower than expected. The company said tough market conditions and structural industry change were to blame for an unexpected fall in operating profits, and that these issues were likely to continue into 2013. The announcement sent shares down almost three per cent in trading yesterday, making Pearson the biggest faller on the FTSE 100. The companys major difficulties came in US education. Its North American education division, which publishes textbooks and runs online learning tools, was hit last year by shrinking education budgets and fewer university students. The FT Group, which has been a constant source of sale speculation since former Pearson boss Marjorie Scardino announced her departure in October, has seen revenue growth but lower profits, due to December 2011s 450m disposal of data service FTSE International to the London Stock Exchange. Scardinos successor John Fallon is seen as less ideologically wedded than Scardino to the FT Group which includes a 50 per cent stake in the Economist magazine as well as the Financial Times. Last night, Financial Times editor Lionel Barber told staff the paper would be focusing on its digital operations, and would cut 35 staff. Pearson said it expects an operating profit of around 935m for 2012, down from 942m in 2011.

Your next travel adventure is closer than you think.

Pearson PLC
1,250 p 1,240 1,230 1,220 1,210 1,200 1,190

1202.00
21 Jan

15 Jan 16 Jan 17 Jan 18 Jan 21 Jan

Interviews by James Titcomb

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STEVE LIECHTI INVESTEC THOMAS SINGLEHURST CITI

DOES PEARSONS PROFIT DOWNGRADE AFFECT YOUR RATING?

2012 downgrades are expected but 2013 forecasts fall by even more given warnings in a number of areas. US higher education is still seeing drag given state budget pressure while college admissions are reducing. We retain our Hold guidance but cut the price target from 1240p to 1190p.

Our first standalone travel store, in the heart of the City of London, is a fusion of A&Ks 50 years of pioneering travel heritage combined with contemporary sophistication. Pore over traditional maps while exploring exotic destinations digitally. Connect face to face over skype-to-store with our teams on the ground around the globe for the latest word on the street. Get kitted out with all the equipment you need for your travels. And all while savouring a cappuccino, glass of wine or G&T, courtesy of our Sundowner bar.

A miss against consensus earnings is a comparatively rare event. We think the company will continue to post further market share gains as it did in 2012, but we are not convinced overall earnings momentum will improve until late 2013 or even 2014. We are neutral with a target price of 1310p.

IAN WHITTAKER LIBERUM CAPITAL

While the downgrade may seem small, this is a stock that has (had?) a reputation for structural protection and earnings growth. It is clear the structural pressures are increasing within the business particularly in US higher education. We reiterate our Sell guidance with a 1050p target price.

How refreshing.

82 Cheapside, EC2 020 3667 7000 abercrombiekent.co.uk

NEWS

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Resolution taps ex-Stan Chart boss to be chair


BY JAMES WATERSON
FORMER Standard Chartered chief executive Sir Malcolm Williamson is set to become chairman of insurance buy-out vehicle Resolution, it was announced yesterday. Williamson, 73, will succeed Mike Biggs, who is stepping down as part of a plan to streamline the complicated executive structure at the FTSE 100 group, which was founded by industry pioneer Clive Cowdery in 2008. Sir Malcolms experience as a chairman, as well as his understanding of the Groups operations, its people and its regulatory and governance framework, will equip him well to lead the company in the future, Biggs said of his successor. Williamson has been chairman of Resolutions Friends Life subsidiary since February 2010 and will take up his new position when the two boards are merged in March, subject to shareholder approval. He will be tasked with guiding a company that last year abandoned its original business plan buying struggling UK life insurers and combining them into a more profitable whole due to the high cost of acquisitions in the current financial climate. Instead Resolution has said it will focus on running its existing businesses. Williamson began his career with Barclays in 1957 before leaving in 1985 to join the Post Office. He later served as chief executive of Standard Chartered, and card provider Visa, as well as chairman of Clydesdale Bank.

Sir Malcolm Williamson began his career at Barclays in 1957

Resolution Ltd
270 p 268 266 264 262 260

268.30
21 Jan

15 Jan 16 Jan 17 Jan 18 Jan 21 Jan

Virtu Financial ditches London for merged Dublin operations


BY MICHAEL BOW
US MARKET maker Virtu Financial is to shut its London office and relocate all its European trading operations staff to Dublin, it emerged yesterday. The high frequency trader, which merged with fellow US trading outfit Madison Tyler in May 2011, will close its office on the edge of Hyde Park and slim down to a single European office based in Dublin, a source said. The expanded Dublin office will combine all of Virtus European trading operations into a single unit, with further staff also relocated to offices in Singapore and the US. The development, first reported by Private Equity News, will see around 30 staff relocate from London. Virtu has had a presence in Dublin since 2009. It obtained the London office after its merger with Madison Tyler 18 months ago.

cityam.com

TUESDAY 22 JANUARY 2013

EasyJet draws fresh protests from Stelios


BY MARION DAKERS
EASYJETS biggest shareholder Sir Stelios Haji-Ioannou has gone on the offensive as the airline considers its next plane purchase, threatening to sell his holding unless the board calls a halt to any new aircraft orders. Sir Stelios, along with his brother and sister, have already sold 600,000 EasyJet shares in the open market to send a clear message to our directors over the firms spending plans. It is thought to be the first time since 2004 that Sir Stelios has sold down his familys 37 per cent stake in the airline. The EasyJet founder has long been critical of the companys relationship with Airbus, and forced out deputy chairman Sir David Michels in 2011 in a dispute over the firms expansion strategy. He has claimed the company is paying over the odds for too many aircraft at the expense of profit growth. He said in an open letter to the board yesterday that while he welcomed EasyJets recent profits and dividend payouts, another aircraft order could screw up this financial success story. EasyJet, which has 217 aircraft in its fleet, has been speaking to Airbus, Boeing and Bombardier about its next order, for delivery after 2017. The firm declined to comment.

Cruddas due to face accuser in the High Court


BY DAVID HELLIER
PETER Cruddas, the majority shareholder of spread-betting group CMC Markets and a former Conservative party treasurer, is set to appear in the High Court tomorrow to proceed with a defamation claim against the political lobbyist Mark Adams. Sources said that a meeting aimed at reaching a settlement in the case failed yesterday, with Adams unable to make an acceptable offer. The meeting was attended by Adams and a lawyer for Cruddas, Jeremy ClarkeWilliams of Slater & Gordon. Cruddas resigned as Conservative party treasurer in March last year after it was alleged he had welcomed the offer of a donation to the party from a company based overseas, a claim he denies. Adams was the original source of the allegations. Cruddas has since alleged that Adams has caused him distress, anger and annoyance through a series of references on his blog and on Twitter. Adams is defending himself in the action. Last week City A.M. revealed that Cruddas has recently regained the position of chief executive at CMC Markets, where he is the principal shareholder.

NEWS

Atari reached prominence in the 1970s and 1980s with its early video game consoles

Arcade game legend Atari looks for extra lives after bankruptcy
BY JAMES TITCOMB
THE VIDEO game firm behind classics such as Pong and Asteroids has filed for bankruptcy in the US. Atari, one of the firms credited with kickstarting the industry in the 1970s, is being separated from its French parent company, in a bid to isolate the business from the French firms debts and give it a chance to succeed on its own. Ataris Paris-listed owner was formerly known as Infogrames but changed its own name to Atari after it bought the US firm for $11m (6.9m) in 2008. The parent firms business has declined in recent years, and Atari US is seen as having a chance to revive itself as a developer of smartphone games based on its 1970s classics. The company, founded in 1972, had a string of arcade successes before making its own home consoles. Its hardware lost popularity in the late 1980s and Atari began to develop games for other systems, scoring hits with the likes of Roller Coaster Tycoon. It then fell into financial difficulty before it was bought out.

EasyJet plc
890 p 880 870 860 850
15 Jan 16 Jan 17 Jan 18 Jan 21 Jan

857.50

21 Jan

Dell appoints Evercore Partners to find alternative buyout offers


BY JAMES TITCOMB
DELL, the US personal computer manufacturer which is currently negotiating a private buyout deal, has appointed advisory firm Evercore Partners to find out if a better offer can be found, according to reports. Dell is believed to be close to a deal led by buyout firm Silverlake Partners, which is being supported by founder and chief executive Michael Dell in a deal worth around $23bn (14.5bn). However, because of Michael Dells 15 per cent stake in his company, any deal involving him would be heavily scrutinised by shareholders. In order to avoid the risk of lawsuits from those shareholders anxious to get the best return on their investments, the firm has hired Evercore to test whether Dell could get a better deal elsewhere, Bloomberg reported, citing people familiar with negotiations. The move would supposedly protect Dell against criticisms and lawsuits over its handling of the deal. Shares in Dell, which rose 20 per cent in two days last week as news of Silverlakes interests emerged, were flat in New York yesterday. Dell is believed to have appointed JP Morgan as its lead adviser on the deal, while Silverlake has tapped Barclays, Bank of America Merill Lynch, Royal Bank of Canada and Credit Suisse for funds. The personal computer manufacturer, based in Texas, saw its share price decline by a third last year as sales were hit by rising competition from Chinas Lenovo, and the increasing popularity of tablet computers. Because of this it is seen as a bargain buy by investors hoping to improve the companys fortunes. Dell did not comment last night, while Evercore was unavailable.

Vouchers and cashback offers boom as shoppers tighten belts


BY JAMES TITCOMB
OFFERS on price comparison websites, cashback services and voucher schemes have become an advertising market worth more than 800m in the UK. Research from professional services firm PwC out today claims that the offers known as online performance marketing (OPM) have become one of the fastest growing parts of the advertising business, with spending expected to rise by 25 per cent in 2013. PwC claims that the 814m spent by advertisers on OPM in 2012 generated 9bn in sales, so for every pound spent, businesses take 11 back. Unlike with display advertising, OPM advertisers only pay if someone completes an action, for example clicking a link or completing a purchase. Examples include cashback site Quidco, in which shoppers receive a small return on purchases they make, or special banking rates on comparison websites such as MoneySupermarket. The rise of the ecommerce, as well as squeezed budgets, has led to savvy shoppers using these services. Economically challenging times have seen marketing budgets squeezed, PwCs Anna Bartz said. As a result, we expect that the attractiveness of paying for advertising based on an extremely measurable and specific consumer action will see more advertisers using OPM.

The HAILO app. Black Cabs just got easier.

Moscow stock exchange plans Russian float


BY HARRY BANKS
MOSCOWS stock exchange plans to float on its own platform, seeking to revitalise Russias capital markets and convince companies to list domestically rather than abroad. Shareholders of the Moscow Exchange, Russias main venue for trading in stocks, bonds, foreign exchange and derivatives, are expected to sell stock worth at least $500m (315.9m), one source familiar with the situation said yesterday. The exchange is valued at between $4.2bn and $6.5bn by the banks organising the initial public offering (IPO), a second financial source said. The exchanges dominant position in Russias markets and expected benefits from reforms such as upgrades to clearing and settlement could attract investors. Its a really interesting asset in its own right its unusual as an exchange as it has several different business lines with equity, forex and derivatives, said Roland Nash at Moscow hedge fund Verno Capital. Details of the IPO were limited, but shares will be offered to institutional and retail investors in Russia, and offshore investors and qualified institutions in the US. The exchanges largest shareholder is Russias central bank, which will keep its 24.3 per cent stake. Other shareholders include Sberbank with 10.3 per cent, Unicredit, VTB, Gazprombank, US private equity fund Cartesian Capital and Russian state-backed private equity fund the RDIF. The exchange has a deadline of 30 June to float, after which RTS shareholders could exercise a put option allowing them to sell their shares back to the exchange.

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cityam.com

FLOODS DEVASTATE INDONESIAN CAPITAL

MPs hear RBS should be split in two for sale


BY TIM WALLACE
RBS should be broken up to make it easier for the government to sell the bailed out bank, former policymaker Adam Posen said yesterday. The ex-Bank of England Monetary Policy Committee member told a committee of MPs and peers that selling simple units of the retail banking and investment banking arms could be a better option than offering up the whole institution. The suggestion comes as RBS considers splitting the leadership of its investment banking arm. It is thought that current boss John Hourican could be pushed to take the blame for Libor fixing, not because he was involved or knew about the bad behaviour, but simply because he was a senior figure in the relevant part of the bank at the time. One possible option for dealing with the arm after his departure could be to cut out a layer of management, leaving the heads of the markets arm and the institutional banking unit reporting directly into the board.

FLOODING has hit the centre of Jakarta, resulting in at least 20 deaths and causing millions of pounds worth of damage to the Indonesian capital. Insurers now face a substantial bill for the catastrophe, although the floods do not appear to be on the same scale as Indonesias 2007 monsoon season which cost the industry $400m (250m).

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THECAPITALIST
Transport bosses invite buskers with the X Factor to auditions
THE DIZZYING career arc of a reality TV music star often takes in a spot of busking along the way. But Transport for London has decided to turn the format on its head, inviting prospective London buskers to take part in a terrifying round of X Factor-style auditions to win a coveted spot serenading droves of weary commuters on the Underground. TfL has assembled a judging panel made up of music industry professionals, people from the capitals music scene and London Underground to size up the aspiring performers for the 150 busking licences on offer across the Tubes 37 pitches. The Capitalist recalls that PwCs Andrew Sentance is pretty nifty on the guitar...

12

TUESDAY 22 JANUARY 2013

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Got A Story? Email thecapitalist@cityam.com Cally Squires is away

WITH just over six months until he picks up Sir Mervyn Kings mantle as governor of the Bank of England, Mark Carney must have been bracing himself for scrutiny from regulators and analysts. But he cant have been expecting criticism coming his way from dendrologists (trees and shrub experts, of course). Eagle-eyed leaf-lovers have claimed that the decoration on Canadas new $20, $50 and $100 notes far from being the sugar maple beloved by mounties and pancake devotees alike is actually closer to a Norwegian maple leaf. In response the Bank of Canada has claimed artistic licence, saying the image is stylised. Eh?

Its snow joke as Merkel faces Davos bookies

Its a sure bet that not everybody is only interested in finance at Davos

HE MOST important people in the world are currently packing their toothbrushes, making sure the neighbour will feed the cat and getting ready for five days discussing the global financial system in the Swiss Alps. But The Capitalist wonders whether those attending this weeks World Economic Forum or Davos to you and me really have much fun. Moreover, do those world leaders ever want to skip another roundtable on reforming ratings agencies and mess about on the slopes? Ladbrokes has been thinking along the same lines and has opened a range of markets for those whose mind instinctively drifts to less weighty matters than the financial crisis. You can get 8/1 on
Good odds on Merkel sledging antics

Germanys Chancellor, the nevercaught-smiling-in-public Angela Merkel, being hit with a snowball at any point during the event. Alternatively, a joint sledging session involving David Cameron and chancellor George Osborne is a hefty 100/1. And while Cameron insists his favourite band is The Smiths, theres a good value 33/1 that the Prime Minister is spotted on a night out with U2 frontman Bono. Alex Donohue of Ladbrokes said: Should Merkel get pelted during Davos the odds on who threw the snowballs will be pretty short. As for the serious stuff it doesnt look like there will be any immediate solution this week.

THE FORUM : PAGES 18-19 WEALTH MANAGEMENT PAGE 21

Davos has traditionally been a mysterious event, with the real business happening well away from the prying eyes of journalists. So its unfortunate that the entire 2,630-strong attendance list for this years event has been leaked to the Quartz website. It shows Barclays is sending chief executive Antony Jenkins but RBS Stephen Hester and Lloyds Antnio Horta-Osrio are missing out. Tony Blair, Bill Clinton and David Cameron will also be at the event. But the best job title on the list? Thats Rossanna Figuera, Ambassador of Good Things at food firm Wafels & Dinges.

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TUESDAY 22 JANUARY 2013

Dijsselbloem elected to succeed Juncker as Eurogroup president


BY BEN SOUTHWOOD
JEROEN Dijsselbloem, Dutch finance minister, will succeed his Luxembourger counterpart JeanClaude Juncker as Eurogroup president, after a vote yesterday. The 17 Eurozone finance ministers chose the widely-tipped 46-year-old after they managed to convince French delegate Pierre Moscovici, seen as the only member with misgivings about the appointment. The Netherlander, in only his 12th week of his current role, will take over from Eurozone stalwart Juncker, who has chaired the group for eight years. Dijsselbloem indicated he wanted to expand the role from being mainly focused on crisis-resolution to more of a long-term focus on growth and prosperity. This came in a meeting where Eurozone financial ministers revealed that Cyprus will have to wait until at least March to get the 17bn bailout package they seek from their lenders. Negotiations surrounding the aid were still ongoing, according to Jean- Claude Juncker, currently president of the Eurogroup of financial ministers. We will wait for the troika report, Juncker said, referring to the group of lenders made up of the European Central Bank, the EU and the IMF. I dont think that we will come to a decision on Cyprus in a short time. I also dont think thats necessary.

NEWS

13

Fitch says southern European banks in for another hard year


BY BEN SOUTHWOOD
THIS year will be another one of struggle for southern European banks, Fitch said yesterday, as it put the sector on a negative outlook. Banks in Spain, Portugal, Italy, Greece and Cyprus will be kept in a tight grip by continued macroeconomic weakness and sovereign debt crisis. Lenders ratings are closely correlated with their governments rating. Weak macro conditions will continue to put pressure on earnings generation and asset quality, said Erich van Lumich at Fitch. The outlook is unlikely to change back to stable in the absence of an improvement in financial market conditions, which would allow for a more sustainable funding and liquidity profile across the sector with reduced reliance on the European Central Bank. A more positive movement may come from mergers and acquisitions, Fitch predicted, which could clear up overcapacity and improve efficiency, especially if there is continued lender flight to higher quality institutions. But this will not erase the basic problems banks will have trying to boost their bottom lines, Fitch said, and it will be difficult to fill the gaps with patchier fee and commission income.

Jeroen Dijsselbloem will expand the Presidents role

Business loans down as firms stop borrowing


BY TIM WALLACE
THE BANK of Englands Funding for Lending Scheme (FLS) seems to have kicked in to reduce lending costs for firms, official figures showed yesterday. But business lending kept on falling, which industry groups believe points to a lack of demand from firms for credit. Net lending to firms fell another 2.8bn in November, resulting in a 4.1 per cent fall in net lending on the year. A net balance of more than 30 per cent of large firms saw interest rates coming down. But despite that, larger firms increasingly looked to the capital markets for funds, raising 29.1bn in December, up from 13.5bn in November. But smaller firms have less chance to use alternative funding sources and a small net balance saw bank loan interest rates rising in the month. Signs that lower borrowing costs are beginning to reach firms are encouraging and show that Funding for Lending is beginning to make an impact, said Matthew Fell from the Confederation of British Industry (CBI). However, weaker demand for finance among small and mediumsized businesses indicates that they are still lacking confidence to invest, so raising awareness of available schemes is crucial. Meanwhile the Labour party called the governments efforts to boost lending to businesses an abject failure. Labour has led calls for a proper British Investment Bank to back business, but ministers are dragging their feet and bickering over their plan, said the partys shadow business secretary Chuka Umunna. The governments Business Bank looks highly unlikely to get off the ground much before the next general election.

LENDING DROPPED AGAIN TOWARDS THE END OF 2012

IN BRIEF
Goldman chief backs China
n Goldman Sachs Asset Management chairman Jim ONeill yesterday said China should be ditched from the Brics concept he originally coined because it had grown too important. Speaking at the London School of Economics, ONeill said China was so far ahead of its Brics counterparts Brazil, Russia and India it should not be included. China is of a scale of importance which is way more than the other three, he said.

LENDING TO FIRMS

2.8bn

HOMEOWNERS PAID BACK A NET

200m

100m

UNSECURED BORROWING ROSE

*ALL FIGURES ABOVE ARE FROM NOV 2012

2-YEAR MORTGAGES RATES DOWN TO 3.35%


NET FUNDS RAISED BY UK BUSINESSES

70% LTV
billions

2-YEAR RATES DOWN TO 5.31%

90% LTV
Loans Bonds Commercial Paper Equity Total

UK workforce facing 3.1m shortfall


n The UKs workforce will be short of 3.1m skilled workers by 2050 if it fails to boost skills or loosen controls on its borders, a recruiter said yesterday. If the UKs population rises to 74.5m by 2050, as expected, even with an employment rate at pre-crisis levels of 71.6 per cent, just 32.3m out of 45.1m people of working age will be in work, Randstad projects, unless the government U-turns on the restrictive migration policy it began in 2010.

*ALL FIGURES ABOVE ARE FROM DEC 2012

120 100 80 60 40 20 0 -20 -40 -60

Fed easing assumptions attacked


n The assumption that monetary easing can slash US unemployment is based on a false assumption that all unemployment is cyclical, ING researchers argued yesterday. The Federal Reserve is radically loosening monetary policy as it believes unemployment is due to the downturn but actually much of it is structural, the ING note argues meaning Fed policy may be in vain.

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
SOURCE: BANK OF ENGLAND

Mortgage market is stagnating well below pre-crisis peak level


BY TIM WALLACE
MORTGAGE lending barely budged in 2012 despite hopes that the economy could be recovering and government-led efforts to improve credit conditions, the Council of Mortgage Lenders (CML) revealed. Total lending came in at an estimated 143bn for the year as a whole, hardly up on the 141bn recorded in 2011. But the industry body estimates that lending will start to recover a little this year, forecasting a nine per cent rise in mortgages to 156bn. We are more positive about the UK housing market and wider economy than a year ago, despite economic headwinds and downside risks, said the CMLs chief economist Bob Pannell. A key reason is that lenders currently face few funding pressures, in part reflecting the Funding for Lending Scheme (FLS). The FLS is a Bank of England scheme backed by the Treasury, giving cheap funding to banks as long as they promise to lend it on to households and consumers. Although the forecast increase represents a solid rise, it is only increasing from a very low base level. Before the financial crisis, lending was far higher it peaked at 362bn, well over twice the level forecast this year.

Lloyds pledges 6.5bn for first time buyers through this year
BY TIM WALLACE
LLOYDS is increasing its mortgages to first time buyers to its highest level since the group was dragged down in the financial crisis and had to be bailed out, indicating it is edging closer back to health. The banking group has promised to lend 6.5bn to 60,000 first time buyers in 2013. That is an increase on the 5bn pledged to 50,000 last year, and up on the 5.7bn loaned in first time mortgages in 2011, 5.6bn in 2010 and 5.3bn in 2009. Before that the figures are not comparable as that was when Lloyds merged with HBOS. The bank has been the biggest user of the Funding for Lending Scheme so far, drawing down 3bn from the Bank of England. It says it is using the cash to support mortgages and lending to small and medium-sized enterprises (SMEs). But the bank also noted it is hard for one institution alone to boost overall lending or the economy. The recovery in the housing market rests on growth in the wider economy, said Lloyds Stephen Noakes. Whilst the property market is likely to continue to be challenging, we remain committed to getting things right at the start of the chain, creating liquidity in the housing market and helping more people get on to the property ladder in 2013."

Mortgage lending is edging up


350 300 250 200 150 100
2001 2003 2005 20072009 2011 2013

estimates

400 bn

cityam.com

TUESDAY 22 JANUARY 2013

Stobart shakes up board after profit warning


BY MARION DAKERS
STOBART Group has taken the unorthodox step of appointing an executive chairman to help the haulage firm get back on course. A week after the FTSE 250 firm warned its profits would be below forecasts, Stobart Group said yesterday that deputy chief executive Avril Palmer-Baunack will become executive chairman with immediate effect. The Cumbria-based firm also announced the surprise retirement of non-executive chairman, Rodney BakerBates, after four years in the role. Another nonexecutive director, David Beever, has also abruptly left his seat on the board to spend more time on other business commitments. Chief executive Andrew T i n k l e r, who owns almost 10 per cent of Stobart stock, said in a statement: To meet the challenges and opportunities within our strategy the board now believes it is appropriate that Stobart is headed by an executive chairman. In the relatively short time that she has been with the group, Avril has demonstrated to the board that she is the right person to carry out this demanding role. Palmer-Baunack joined the firm in September after its purchase of logistics group Autologic. The move was welcomed by investors, who sent the stock soaring 3.8 per cent. But the appointment of an executive chairman goes against the UK Corporate Governance Code, which calls for a division of responsibilities between a companys chairman and chief executive. Proxy voting agency Manifest described the appointment as a continuation of poor governance standards.

NEWS

14

IN BRIEF
EADS sees 2012 sales improvement
n European aerospace and defence group EADS achieved a very significant improvement in revenue and operating profit in 2012, chief executive Tom Enders said yesterday. All four of our divisions have delivered good performances in 2012, all exceeding our objectives, he said at a New Year media event. The firm, whose units include Airbus, space division Astrium and defence arm Cassidian, is due to publish full-year results on 27 February.

Equistone closes 1.5bn fund


Urenco is owned in equal parts by the UK, German and Dutch shareholders
n Equistone, the private equity shop spun out of Barclays last year, yesterday said it had defied a tough fundraising environment to entice 1.5bn (1.3bn) from investors for a new fund. The groups fourth European buyout fund will target investments of up to 300m. The firm has already completed three investments from the fund, including the acquisition of bespoke UK travel agent Audley Travel in March 2012.

UK moves closer to Urenco sale as Toshiba and Areva mull bids


BY CITY A.M. REPORTER
FRANCES Areva and Japans Toshiba are considering bids for nuclear fuel producer Urenco, but British, German and Dutch authorities disagree over what to do with the ultra-secret firm, industry sources said. Britain is keen to sell its 33 per cent stake, and German utilities RWE and E.ON are talking to potential buyers over their combined 33 per cent, but the Dutch government is not considering a sale. Analysts estimate that the uranium enrichment firm is worth between 2.5bn (2.1bn) to 3.6bn, but some of the sellers are hoping for as much as 12bn. Both Areva and Toshiba declined to comment. Any transaction would require an agreement between the three governments due to the firms unique corporate structure. A spokesman for the UKs Department for Business, Innovation & Skills said yesterday that Britain was considering a sale of its Urenco stake and that the government was discussing its options with Urencos other shareholders but that no formal position had been taken yet.

City of London Group profit falls


n Money manager City of London Group yesterday reported declining revenues and profits for the six months ending November 2012. Chairman David Cardale said the period was not an easy one for the asset manager, as funds under management dropped 500,000 to 2.4bn, with revenues down 12 per cent and pre-tax profits falling 18 per cent. The group was hit after a client took a large fund mandate in-house.

Avril Palmer-Baunack will take up the chair

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cityam.com

TUESDAY 22 JANUARY 2013

Portmeirion pre-tax profits on target after bumper revenues


BY KASMIRA JEFFORD
PORTMEIRION Group, the chinamaker best known for its Botanic Garden pattern and collection by Sophie Conran, said full-year profits are likely to be in-line with forecasts after enjoying a strong Christmas trading period. The Aim-listed manufacturer said it expects to report revenues for the year to 31 December 2012 of over 55m, around three per cent above last year its fourth consecutive year of record sales. A strong performance in its UK and South Korean markets helped offset a fall in US sales, which Portmeirion said were hit by hurricane Sandy. The achievement of another record level of sales in such challenging conditions is highly satisfying, Dick Steele, nonexecutive chairman, said. Our diversity of export markets has enabled us to balance harsh conditions in the US with opportunities elsewhere in the world. Analysts at Seymour Pierce expect the company to report a pre-tax profit of around 6.7m. Portmeirion announced last week it has appointed Philip Atherton as its new sales and marketing director to accelerate its expansion overseas in its existing markets, such as Hungary and Canada, and to launch in new markets such as Russia and China.

NEWS

15

RIM chief Heins says BlackBerry could feature on rival devices


BY JAMES TITCOMB
BLACKBERRY software could be licensed to other phone manufacturers, the chief executive of owner Research in Motion (RIM) has said. Thorsten Heins, who was made RIMs chief executive 12 months ago, said offering the BlackBerry operating system to other parties, such as Samsung and HTC, was a possibility, and that the Canadian company could even sell its hardware business. There are several options, including the sale of hardware production, as well as licensing our software. But there is no reason for us to decide in haste, Heins told German newspaper Die Welt. The companys plans hinge on the success of BlackBerry 10, RIMs next generation of handsets which will run new software. Heins said licensing would only be considered after the new software had a chance to succeed. The main thing for now is to successfully introduce Blackberry 10. Then well see, Heins said. The German-born chief executive is hoping BlackBerry 10 can revive RIMs fortunes having lost out to the likes of Apple and Samsung. The current BlackBerry software has seen little innovation in recent years, and is seen as outdated. However, parts of RIMs software, such as its BlackBerry Messenger chat service and reliable email, are still viewed as valuable assets.

Portmeirion Group PLC


555 p 550 545 540 535 530
15 Jan 16 Jan 17 Jan 18 Jan 21 Jan

540.00

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787 Dreamliner probe spreads to Meggitt unit


BY MARION DAKERS
FTSE 100 engineer Meggitts shares dropped almost two per cent yesterday as the international probe into the 787 Dreamliner widened to include one of its subsidiaries. Securaplane Technologies, a US firm owned by Meggitt, makes chargers for the lithium ion batteries used on Boeings new Dreamliner planes, which have been grounded worldwide amid safety worries. Investigators are due to travel to Securaplanes Arizona base today to examine the chargers for any signs they might be behind the problems. They also plan to carry out similar tests at the site where a unit of United Technologies builds the power unit, after looking at battery maker GS Yuasas production line in Japan. A spokesperson for Meggitt said the company is taking part in the investigation but could not comment further. US aviation watchdogs have been working with Japanese authorities to find the cause of the issues in the batteries used in the Dreamliner, which have shown signs of burning. Authorities around the world last week grounded the new Dreamliners after an All Nippon Airways plane made an emergency landing. But the regulators remain in the dark about the underlying cause, with Japans Civil Aviation Bureau saying it might have been sparked by overcharging, while the US National Transportation Safety Board declared that the battery did not exceed its designated voltage.

Huawei posts a 33pc surge in its earnings


BY JAMES TITCOMB
CHINESE telecoms giant Huawei saw profits rise by a third in 2012, as it was buoyed by strong growth in Europe and Japan despite facing a US security investigation. The company said it anticipates further growth in 2013, as it expands its smartphone business into more developed markets. Huaweis main presence outside of east Asia is in installing equipment such as radio masts for mobile networks. In this regard it ranks second only to Swedish firm Ericsson, which it is expected to overtake in the coming months. The Chinese firm recently announced a 1.3bn investment in the UK that will create around 700 jobs. However, it has a tiny presence in the worlds richest economy, the US. Huawei, along with fellow Chinese firm ZTE, has faced a Senate investigation over allegations that it has installed surveillance technology in its infrastructure. Chief financial officer Cathy Meng said the security concerns would not dampen Huaweis growth and said it would keep an open mind about a potential listing. Huawei saw annual revenues rise eight per cent to 220bn yuan (22.3bn) and profit of 15.4bn yuan.

Cartier watch maker Richemont missed sales forecasts

Richemont slumps after sales growth slows in Asia Pacific


BY CITY A.M. REPORTER
CARTIER watch maker Richemont said yesterday sales growth had ground to a halt in the Asia-Pacific region, rekindling fears about a market which has been the driving force of luxury sales in recent years. Shares in the worlds secondbiggest luxury goods company fell up to six per cent in trading after it posted a smaller-than-expected rise in fourth-quarter group sales. At this stage, it is unclear how business patterns may develop and how the business in the Asia Pacific region will evolve in the near future, Richemont said. Richemont sales rose five per cent at constant exchange rates in the three months to 31 December to 2.86bn (2.3bn), missing forecasts for a 7.6 per cent rise in an analyst poll, as the previously booming Asia-Pacific region reported no growth. Wholesale growth fell in the quarter to just two per cent from eight per cent in the April to September period due to caution by retailers in Hong Kong and mainland China.

Meggitt PLC
445 p 440 435 430 425 420
15 Jan 16 Jan 17 Jan 18 Jan 21 Jan

429.40

21 Jan

HR Owen shares accelerate as the car seller beats its forecasts


BY MARION DAKERS
SHARES in upmarket car seller HR Owen roared nearly four per cent ahead yesterday after it revealed that it was set to beat profit forecasts for the year. The FTSE-listed firm said a particularly good sales run at its Rolls-Royce and Bentley franchises had driven its performance in the second half of the year. HR Owens success echoes reports of record turnover at several luxury car makers including Jaguar and Audi in recent weeks. The firm opened a new Ferrari showroom at The Berkeley in Knightsbridge in summer 2011, which has also helped to improve its sales figures. Orders for the new Lamborghini Aventador were also a welcome boost during 2012. The company said the first half of 2013 will be less pronounced than last year as car makers are expected to roll out fewer new models, but the firm added that it has several plans for growth during the year. House broker Charles Stanley has raised its pretax profit forecast for 2012 from 1.8m to 2.2m, and increased its 2013 profit outlook by 0.1m to 1.8m. Whilst allocations are not expected to be a problem, in part due to weakness in some overseas European markets, we feel it appropriate to remain somewhat cautious at this early juncture in the year, the analysts said, while remaining upbeat in the long term. Shares in HR Owen closed up 3.7 per cent at 69.5p yesterday.

Afren hails top year as output and revenue hit record levels
BY CATHY ADAMS
OIL explorer Afren reported record production for 2012 yesterday, as it said full-year revenues were up 151 per cent. The FTSE 250 oil and gas company which made three significant exploration discoveries last year: the Okoro Field Extension and Ebok North Fault Block in Nigeria and a Kurdistan block said full-year production was in line with guidance at 42,830 barrels of oil equivalent per day. Full-year production for this year is estimated to average between 40,000 barrels of 47,000 barrels of oil a day. Record financial results are also expected, with sales revenues forecast to hit a total of $1.5bn (944m) for last year, a 151 per cent increase over the previous year. Additionally, Afren said it would ramp up investment spending to $620m, from $520m last year. In 2013 we expect to further grow our reserves base through a multi-well exploration and appraisal drilling campaign in both established and new basins, while continuing to grow our production base, chief executive Osman Shahenshah said yesterday. Analysts from N+1 Singer yesterday hailed Afrens trading statement a strong 2012 performance, with production coming in as per guidance.

Demand for luxury cars moved up a gear in the last year

CITYDASHBOARD
CITY MOVES WHOS SWITCHING JOBS
Edited by Tom Welsh

16

TUESDAY 22 JANUARY 2013

cityam.com

YOUR ONE-STOP SHOP FOR JOB MOVES, BROKER VIEWS AND MARKET REPORTS
in association with
manager at the fund management firm. He joins from Skandia, where he was a sales manager for 13 years. Webbs team will report directly to Adam Hughes, head of UK wholesale at Neptune.

Mayer Brown
The law firm has appointed Alistair Graham as a litigation partner in its London office. He joins from White & Case, where he was a partner in its London commercial litigation practice. Graham has previously worked as enforcement counsel to the FSA, where he assisted in the run up to the introduction of the Investigative Disciplinary and Enforcement regime.

Bank of America and BNP Paribas.

EUROPE
REPORT
Investors sell off European luxury shares

Mitsubishi UFJ Securities International


Paul Hartwell has been appointed chief executive of the European capital markets arm of Mitsubishi UFJ Financial Group. He joins from Standard Bank, where he was group chief risk officer. Hartwell has over 30 years experience in the industry.

Takeover Appeal Board


Lord Collis of Mapesbury has been appointed deputy chairman of the Takeover Appeal Board. He was appointed a lord of appeal in ordinary in 2009, and served as a justice of the Supreme Court between 2009 and 2011. Collis was a partner at Herbert Smith & Co between 1971 and 2000.

Baird
The investment bank has appointed two London-based directors to its European investment banking team. Matthew Gehkre has worked at Baird since 2006. He was previously a fighter pilot in the US air force. Gary Page has been a member of Bairds UK investment banking team since 2009. He has also previously worked at Merrill Lynch.

RBC Capital Markets


The investment banking arm of Royal Bank of Canada has appointed Christoph Seibel as managing director and head of corporate debt capital markets in Europe. He was most recently head of Europe, Middle East and Africa corporate debt capital markets origination at UBS. Seibel has 15 years experience in the sector, and has also held roles at

Equifax
The credit information business has appointed Martin Hagerty to its banking and financial institutions team. He joins from HSBC, where he was most recently head of retail risk for Latin America. Hagerty was previously head of retail risk for the UK at HSBC, and has also held senior risks roles at Marks & Spencer, MBNA and at HBOS.

Neptune Investment Management


Nick Webb has been appointed intermediary sales

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LONDON REPORT
FTSE 100 soars to a 4 1/2-year high as investors take heart from the US

BESTof the BROKERS


1,240 1,220 1,200 1,180 1,160 15 Jan 16 Jan 17 Jan 18 Jan 21 Jan

Admiral Group PLC p

1,211.00
21 Jan

RITAINS FTSE 100 scaled fresh 4-1/2 year peaks yesterday, with signs of progress in US budget talks encouraging investors shift from low-yielding government bonds into higher risk, higher return equities. US Republican leaders signalled they would allow the government to raise the debt ceiling and borrow to prevent a default in the next three months without demanding immediate spending cuts from President Barack Obama. Britain, with a heavy dose of internationally-focused companies among its blue chips, was a key beneficiary of easing concerns about the US budget, together with recent signs of stronger economic growth there and in China. The FTSE 100 closed up 26.57 points, or 0.4 per cent, at 6,180.98, its highest finish since mid-2008. There are clearly some political issues that face us in the near term ... (But) if you are an investor, equities are cheap against fixed income, that combined with an improving global environment means there are plenty of opportunities," said John Haynes, head of research at Investec Wealth and Investment, who recommends some industrial companies and strong brand names like Unilever and Diageo. But the strong gains, which have put the FTSE 100 on track for its best month in half a year, have also taken it into overbought territory on the 7-day relative strength index (RSI), raising the risk of a correction or at least consolidation. If you look at stochastics and RSI, they are massively overbought so I am envisaging a correction in the fairly near future, said Jack Pollard, of Sucden Financial. If we saw a correction to around the 5,977 area, it wouldnt be a massive concern. If we then managed to hold that, I think people will start loading up on longs and we could move higher again into the end of the first quarter. Traditional risk-on sectors led the way on Monday with miners up 1.3 per cent. Financials added their weight to gains too, with insurers bolstered by a 4.9 per cent rally to 1211p in Admiral Group after Goldman Sachs upgraded the firm to

buy and added it to its conviction list. Goldman Sachs analysts, led by Ravi Tanna, said the stock has the potential to return 30 per cent over the next year. Analysts believe shares will be helped by proposals for legislative change in Britain, such as capping whiplash claims and limiting fees paid to no win no fee lawyers, and holding down costs and premiums. We believe there is potential for claims inflation to decline faster than the market expects, Tanna wrote in the note. As a result of renegotiated reinsurance terms, the group has significant gearing towards lower claims inflation. The outlook for earnings, however, remained a key concern, with Pearson the top faller among the blue chips after the education and media group reported a weak finish to 2012 and said it expects tough market conditions to continue. Its share price fell 2.9 per cent to 1202p. The Financial Times publisher now expects adjusted earnings per share of around 84p, down from the 84.9p it stated in October, with full-year operating profit of around 935m. Pearson said cuts in government spending would continue to hold back its school publishing business in the UK and US, but its international division would report double digit sales growth due to the strong demand in emerging markets. Given the lack of earnings momentum and the current valuation 14 times consensus 2013 earnings, which we believe will see downgrades as we go through the year we would continue to take profits, analysts at Killick said in a note.

ADMIRAL GROUP

Goldman Sachs yesterday upgraded Cardiff-based insurer Admiral from neutral to buy, sending the companys share price up five per cent. The banking giant said the stock had underperformed over the last six months due to softening premium rates and regulatory intervention but it now presents an investment opportunity, as there is potential for claims inflation to decline faster than the market anticipates.

160 158 156 154 152 150 148 146

Henderson Group PLC p

158.70
21 Jan

15 Jan

16 Jan

17 Jan

18 Jan

21 Jan

HENDERSON GROUP

Shore Capital have upgraded money manager Henderson Group to a buy from hold with a target price of 151p, following the settlement of legal claims against the fund manager last week. A group of investors sued the firm in 2009 for misrepresentation of mandate after poor performance. Last week the claim was withdrawn, leading Shore to rerate the group citing its attractive fund positioning

FTSE
6,200 6,175 6,150 6,125 6,100

6180.98

21 Jan

2,440 2,430 2,420 2,410 2,400 2,390 2,380

Unilever PLC 2,450 p

2,440.00
21 Jan

15 Jan

16 Jan

17 Jan

18 Jan

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UNILEVER

15 Jan 16 Jan 17 Jan 18 Jan 21 Jan

Investec analysts have upgraded Unliver from hold to buy ahead of the consumer giants fourth quarter results tomorrow and raised its target price from 2400p to 2800p. Investec said the principle catalysts for choosing to upgrade the stock are the potential for margins to surprise on the upside in 2013 and a belief that Unilevers developing market business is still being undervalued.

UROPEAN shares rose yesterday, climbing back towards near two-year highs, as investors bought back into relatively undervalued sectors such as utilities and steel as they bet Europes economy will improve. A sell-off in luxury stocks capped gains, however, sparked by comments from Swiss watch maker Richemont about weak sales growth in China. Its shares lost 5.6 per cent, while Burberry dropped 1.4 per cent and Louis Vuitton owner LVMH fell one per cent. The FTSEurofirst 300 index of top European shares ended 0.3 per cent higher at 1,166.53 points, just a few points shy of a near-two-year high of 1,170.29 hit on 10 January. The Eurozones blue chip Euro STOXX 50 index added 0.6 per cent to 2,726.63 points, moving back towards an 18-month high hit a week ago. Trading volume was low in Europe on Monday as Wall Street was closed for Martin Luther King Jr. Day. Shares of utilities and basic resources companies which were among the worst performers in Europe in 2012 led the gainers yesterday, with ArcelorMittal up four per cent, GDF Suez adding 1.8 per cent and E.ON climbing 1.6 per cent. Investors are switching to the value stocks, theyre looking for the cheapest valuations. If things finally improve on the macro side in Europe, these are the stocks that could outperform, after years of underperformance, a Paris-based trader said. The STOXX Europe 600 utility sector index lost 1 per cent last year and the STOXX Europe 600 basic resources sector index gained 3.9 per cent, both underperforming the STOXX Europe 600 benchmark, which gained 14 per cent on the year. Investors have been scooping up European shares in the past two months with the Euro STOXX 50 surging 13 per cent since midNovember as fears about a potential break up of the Eurozone abated and global macroeconomic data improved. The stress is coming down in Europe, Barclays France director Franklin Pichard said. Bond yields are falling in Southern Europe, while theres a bit of tension on German and French 10year bond yields. Could this finally be the start of reallocation out of bonds from Northern Europe countries and into equities? According to EPFR Global data, flows going into equity funds outpaced flows going into bond funds for a fifth straight week in the week ending 16 January, with equity funds attracting money from retail investors for a second week running. Despite the brisk two-month rally, European equities remain relatively cheap, with about a third of the stocks listed on the Euro STOXX 50 still trading below their book value.

Economic perfect storm: The four trends that killed Western growth
T
HE West lies at the confluence of four extremely dangerous long-term developments. Individually or collectively, they have already begun to reverse more than two centuries of economic expansion. The first is well-known: the creation of the worst financial bubble in history the great credit super-cycle. Since the 1980s, a relentless shift to immediate consumption resulted in the accumulation of debt on an unprecedented scale. The financial crisis was not entirely the result of a short period of malfeasance by a tiny minority. What began in 2008 was the denouement of a broad-based process that lasted for 30 years. The problem is shown in the relationship between GDP and aggregate credit market debt in the US. Between 1945 and 1981, the ratio barely changed reaching 168 per cent of GDP. But then a relentless upwards shift began. Between 1981 and 2009, debt grew by 390 per cent in real terms, far outpacing US economic growth (of 120 per cent). By 2009, the debt ratio reached 381 per cent of GDP.

THEFORUM

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TUESDAY 22 JANUARY 2013

In association with

cityam.com/forum

TIM MORGAN
Most remarkable was that this lasted for so long, in defiance of logic. And a spendthrift public had nothing on policymakers. Gordon Brown declared the end of boom and bust and gloried in growth, despite expansion being nothing more than the spending of borrowed money. Between 2001-02 and 2009-10, Britain added 5.40 of private and public debt for each 1 of GDP growth. Between 1998 and 2012, real GDP increased by 338bn, while debt soared by 1.1 trillion. No other country got it so wrong, but the same was happening across the West. The compounding mistake was a belief that globalisation would make everyone richer. The problem was that the West reduced production without corresponding reductions in consump-

tion. At constant 2011 values, US consumer consumption rose by $6.5 trillion (4.1 trillion) between 1981 and 2011, while government consumption rose by $1.7 trillion. But the combined output of manufacturing, construction, agriculture and the extractive industries grew by $600bn. At less than $200bn in 2011, net services exports did little to bridge the gap. This left domestically-consumed services and debt. Talk of Western economies moving into services was waffle consumers sold each other greater numbers of hair cuts and fast food, while increasingly depending on imported goods. The debts used to buy them also soared. Between 1981 and 2011, US indebtedness rose from $11 trillion to $54 trillion. The third trend the massaging of economic statistics may serve as explanation for why this happened. In the US, the benchmark inflation measure has been modified by substitution, hedonics and geometric weighting to the point that reported numbers seem six percentage points lower than under the calculation used until the

1980s. US unemployment excludes so many categories (like discouraged workers) that it hides higher levels of inactivity. The critical distortion is inflation. It feeds into calculations showing growth, when evidence from other benchmarks is that Western economies have stagnated for a decade. Distorted inflation also tells earners that they are

to 2009, From 20015.40 in Britain added

debt for every 1 of GDP


getting better off, even when this conflicts with their own perceptions. But a final development is perhaps most concerning. The modern economy began when agriculture created an energy surplus, liberating people to engage in non-subsistence activities. A larger liberation occurred with the invention of the heat engine energy delivered by labour could be leveraged by coal, oil and natural gas. A single gallon of petrol delivers work equivalent to

360 to 490 hours of human labour. The critical equation is the difference between energy extracted and energy consumed in extraction energy return on energy invested (EROEI). Since the Industrial Revolution, EROEI has been high. Oil discovered in the 1930s provided 100 units of energy for every unit consumed. But EROEI has fallen, as discoveries have become smaller and more costly to extract. The killer factor is the non-linear nature of EROEIs. Once returns ratios fall below 15:1, there is a dramatic cliff-edge slump in surplus energy, combined with a sharp escalation in cost. And the global average EROEI may fall to 11:1 by 2020. Energy will be 50 per cent more expensive, in real terms, than today. And this will carry through into the cost of almost everything including food. We are nearing the end of a period of 250 years in which growth has been the assumed normal. And, without action, this will have stark implications for the economies of the West. Dr Tim Morgan is global head of research at Tullet Prebon. Perfect storm can be read in full at www.tulletprebon.com

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The eurosceptic case for renegotiating EU trade relationships with caution

ECD secretary-general Angel Gurra summarised succinctly, last week, the extent to which globalisation has led to the interconnectedness of countries through trade. In a speech in Paris, he said: A good produced in the EU and exported to the US includes components from China and Japan, using raw materials and services from Australia, Russia or India. Indeed, today we have to think about goods and services as made in the world. This, he suggested, offers stark lessons for trade policy. Not only is protectionism self-defeating in todays global economy (where imports are required for exports),

FRONTLINE ECONOMICS
RYAN BOURNE
but administrative costs at borders can deter firms from locating key parts of value chains in particular areas. This all has a particular resonance for the current domestic debate about our future with the European Union. Eurosceptics (of which I am one) wish to repatriate significant powers from the EU while

maintaining what would loosely be described as free trade with it. But wonderful as this sounds, only a few people have given thought to what this would mean in practice. Leaving the customs union and single market, and coming to a bilateral free trade agreement with the EU, would eliminate duties on our EU exports. But this is not the same as having the completely free movement of goods we currently enjoy. The Trade Policy Research Centre has shown that our exports would then be subject to so-called rules of origin tests rules designed to ensure duty-free trade would only apply to goods largely manufactured in the UK-EU free-trade area.

The practical implications would be that UK exports of, say, cars to the EU containing Chinese parts would have to comply with these regulations or else face a 10 per cent tariff. For many manufacturing firms, in particular, this would undeniably be time-consuming and disruptive, and would probably mean they were less likely, all else given, to locate here. Eurosceptics who want a looser relationship based on trade therefore face a choice in what sort of relationship we can hope for. Either we push for a bilateral customs union agreement, which keeps us in the single market and continues to enable the free movement of goods without tariffs

or rules of origin tests (the price of which would be the inability to run an independent external trade policy). Or we can instead work towards a bilateral free trade agreement, which enables us to run an independent trade policy, but also means we are bound by the rules of origin requirements. On balance, some might settle that rules of origin tests are a price worth paying for the sort of free trade agreement that Norway or Switzerland already enjoy. But they should not pretend that firms would not face disruptive difficulties, or that the make-up of firms locating here would not be likely to change. Ryan Bourne is head of economic research at the Centre for Policy Studies.

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North Africa crisis Protectionism


[Re: Does the crisis in North Africa represent the start of a new wave of global instability, yesterday] Media portrayals of recent events in Mali and Algeria paint a picture of a high-risk continent, blighted by radical jihadists, chronic instability and incompetent governments. But Africa is far larger and more varied than Europe, with 55 countries. Most are safe and increasingly visitor and investor friendly. In West Africa, elections in Ghana, Senegal and Sierra Leone have shown democracy is deepening. And remember that, in Sierra Leone a decade ago, a brutal civil war had just ended. We mustnt abandon West Africa. Its an important emerging market frontier.
Alex Vines, head of Africa at Chatham House

LETTERS to the editor


BEST OF TWITTER
Barack Obamas inauguration speech shows hes learnt absolutely nothing in the last four years about fiscal responsibility.
@Billymanning

[Re: The protectionist beast is back in a subtly fresh form, yesterday] As Stephane Garelli points out, protectionism is nothing new and will never disappear. Worryingly, it just evolves. Our key concern should be developing a strategy to prevent our companies competitiveness disappearing beneath huge state-guided companies, with the full weight of emerging market superpowers behind them. We cant, as Garelli points out, retrench into protectionism. We must, therefore, open up much more than just our borders. Flexible labour, efficient capital markets, high quality education, and a simple low rate tax system are the answer. We cant erect barriers to unfair competition. We must undercut it.
Oliver Michael

Its highly likely that the government will use heavy snowfall as its latest excuse for slow growth.
@JohnLehal

I wonder if more people lost a days work because the snow made roads impassable, or because their kids schools were closed.
@IanAustinMP

US budget battle looms as leading concern at Davos


RICHARD QUEST
internal scrap that could mean cutbacks, a default, or even a complete economic shutdown. Is all this talk a little hysterical? Like so much of the debate around the economys woes, the answer is probably yes. Few really believe that the US will fail to avoid such a fate. But speculation at Davos will focus on the dysfunctional political process that has hamstrung America. Each year, Davos picks a banner topic under which the conference is supposed to take shape. In 2013, it is Resilient Dynamism. I have no idea what that means. WPPs Sir Martin Sorrell rather eloquently refers to it as Davosian language. This means you can interpret it however you wish. I dont mean to sound cynical, because Davos will be heaving with the global economys rock stars, and the panels, speeches and meetings taking place will be a privilege to attend. But you cannot expect actual decisions from Davos. What will emerge is a picture of exactly where the political and economic pitfalls are located, and ideas on how we might avoid them. Everyone will know where the major players stand, and where alliances might be made. And those alliances will be crucial to the year ahead, not least the ones that might be forged in Washington. Richard Quest is CNNs business correspondent. He presents Quest Means Business live from Davos, daily at 7pm GMT on CNN International.

HMRCs crackdown on tax avoidance will be counterproductive if it just drives business out of the UK.
@RichardWellings

After recent heavy snow, is the UK uniquely poor at dealing with bad weather conditions?
Adam Marshall
All businesses are impacted by severe weather. This weeks heavy snowfall, and the slow response, are no exception. The closure of schools comes first. When parents have to take time off, productivity falls, affecting local and national economies. Theres also the impact on international trade. Many businesses are inconvenienced by flight disruptions. Further, many also move their products globally as part of complex supply chains. Delays at airports, ports, on the roads and railways costs them time and money. The UK needs to be better prepared for extreme weather; experts call it resilience, but businesspeople call it common sense. A mixture of public and private investment, as well as company-specific plans for badweather, are increasingly critical as weather becomes more unpredictable. Dr Adam Marshall is the director of policy at the British Chambers of Commerce.
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YES

Stephen Glaister
To many, Germany is a byword for efficiency. But a check of the news reports reveals it and much of northern Europe is mired in the same travel chaos as us. It is true that, in places like Scandinavia and North America, where the snow appears each year as regular as clockwork, they have the equipment and the skill to deal with it. But in other countries which share our latitude not just Germany but also the Netherlands, France and Poland the picture is mixed. One advantage these nations have over us is that their road networks are less heavily congested, meaning weather disruption does not have quite the same impact. But UK councils are now better prepared than ever, with plentiful supplies of salt and whole fleets of gritting lorries and snow ploughs. But what we all lack, authorities and drivers alike, is regular experience in dealing with extreme conditions, which remain rare events. Professor Stephen Glaister is director of the RAC Foundation.

NO

TS that time of year again. High streets are full of bargainhungry shoppers, Christmas decorations are back in their boxes, New Years resolutions are still holding, and a ski resort in Switzerland is preparing itself for an influx of global economic powerbrokers. The World Economic Forum is about to descend on Davos. The Eurozones enduring sovereign debt crisis has dominated Davos for the past few years, with the currencys very survival the most recent hot topic. As Greece looked to be heading for the exit door, and some delegates wondered if it was all a big German conspiracy to control Europe, eyes turned to China as the global economys potential saviour. The debate became increasingly extreme and nonsensical, going round and round in circles. This years bte noire is easy to predict: the parlous state of the budgetary process and political machinations in the US will dominate proceedings. America avoided the abyss beyond the fiscal cliff (in spite of Congress, rather than thanks to it), but any one of the deadlines created by the last minute deal could unsettle global markets this year. To begin with, despite recent moves by Republicans to potentially extend the deadlines, we will soon see the postponed $100bn (63.1bn) in budget cuts back at the top of the agenda, when the US Treasury exhausts the legal cap on its total borrowing as set by Congress. Its ability to juggle the monetary balls under the debt ceiling will be curtailed. But that is not the only fiscal contortion the US is currently facing: the expiration of another resolution will soon see Congress unable to spend money, potentially plunging the economy into its biggest crisis yet. America is gearing up for another

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DAVID BUIK Japan hopes to stimulate VIEW FROM THE CITY itself back to prosperity BANK RECOVERY IS
UNLIKELY BUT TRUE S W
HO would have thought that the banking sector would make such a spectacular recovery in 2012? And who expected it would do so in the wake of a breathtakingly toxic European sovereign debt crisis, which came to a crescendo when the European Central Bank president Mario Draghi made that immortal statement last summer We will do everything that needs to be done. This calmed the troubled waters of an exasperated and fragile bond market, when Europe was staring recession in the face, and growth was falling all around the world. Markets have been sucked in by Draghis reassuring rhetoric. Consequently, nothing meaningful is ever solved. Those in charge of the decisions that matter have no incentive to actually do anything beneficial for their countries economies. Look at Greece. Its economy has completely imploded to the point that children are being admitted to hospitals every week for malnutrition. And it will still have a projected debt to GDP ratio of 133 per cent in 2022. No one seems to care, as we are told it will be alright on the night. To cap it off, huge fines have been meted out to banks by regulators. Libor manipulation, money laundering and the missselling of payment protection insurance have led to 13bn in costs for UK banks. And you have to respectfully ask the question whether banks have been downplaying the true, long-term implications of losses, impairment charges and provisions in recent years. The Bank of England and other central banks have made it abundantly clear that significant amounts of fresh capital will need to be raised in the ensuing years. Fortunately, the central banks and Basel III have ordained that the banks be given an extra four years until 2019 to meet their liquidity requirements, which is extremely accommodative. Against a background of such dark cumuli nimbus clouds of financial concern, banks have made huge gains in the last year much to my personal chagrin, as I did not have the vision to get involved. Compared to this time last year, Goldman Sachs shares have risen by about 34 per cent, JP Morgan Chase by 25 per cent, Societe Generale by 61 per cent, BNP Paribas by 31 per cent, RBS by 33 per cent, Lloyds by 62 per cent, and HSBC by 28 per cent. Barclays has risen by almost 100 per cent since last July. There are still analysts who believe there are more gains to be made, particularly with French and German banks. But its a big ask. INCE taking office in December, the Japanese Prime Minister Shinzo Abe has been determined to throw everything he can at his economy to try to get it moving again. As well as a massive 10.3 trillion (72bn) government stimulus package, the newly-installed Japanese government has fixed the strong yen in its sights, and has made it a major policy objective to weaken the currency in order to try and give struggling Japanese exporters a helping hand. Many have rightly questioned these interventionist policies. Whether or not you agree ideologically with the concept of currency controls, the Bank of Japan is notoriously bad at executing them. And so, if you want to take a bullish position on Japanese exporters, you have to ask yourself whether things will be different this time.

But the Japanese central bank has poor form, writes Craig Drake

Nikkei Vs dollar-yen

10 % 0 -10 -20 -30 -40


2008 2009 2010 2011

Nikkei Dollar-yen
2012 2013

Previous interventions have achieved little


est rates to make it less attractive to keep money in the bank, and have done everything else short of putting yen directly in consumers hands and frog marching them to the shops. But the Japanese just will not spend. The second issue, and the one currently in the cross hairs of the Japanese government, is the currency. At the same time as consumers in Japan not spending, the strong yen relative to the dollar and the euro makes Japanese exporters less competitive. There are many who argue that Japan can live with a strong yen, and that it is a waste of resources for its central bank to keep fighting yen strength. But while there is certainly some post hoc ergo propter hoc in the comparison, the decline in Japans benchmark equities index, the Nikkei, has gone hand in hand with yen strength. Should the Japanese central bank intervention succeed in weakening the yen and so help these exporters, there could be some real value to be had among the Japanese large cap manufacturers. They are largely in very strong cash positions but have been hurt by the weak domestic market. But this takes a pretty big leap of faith in a central bank with a poor track record. Will it be different this time?

YEN TROUBLES

For the last couple of years, the Japanese domestic economy has had a woeful time of things. The likes of Honda, Panasonic, Sony, Nissan have all taken an absolute hammering. Beyond the story of a Chinese slowdown, alongside European and US uncertainty weighing on demand a common factor in all bear markets these companies also suffer from deeper problems that have sandbagged Japans recovery. The first is cultural. The Japanese have a higher propensity to save than in the West. And while this may be all good and prudent, it is bad news for an economy dependent on the velocity of the money supply and on consumer spending. Every yen stored in the bank is a yen not being spent in the shops on electrical goods, on cars and other goods that Japan produces domestically. The Bank of Japan has tried everything to make Japanese consumers spend savings. They have slashed inter-

THE TIPSTER

HE glass is half-full for Fuller Smith Turner. Backed by steady growing turnover and profit, the brewers shares have risen by nearly 9 per cent over the last year. Like-for-like sales over Christmas and the New Year are also expected to be up, giving traders something to toast when it issues an interim management statement on Thursday. GFT Markets quotes a price of 761.23p-764.77p.

THE GLASS IS HALF FULLERS


Investors in WH Smith have endured a rocky time recently. But despite tricky sales, margins have been improving, and shares are up a fifth over the last year, so there may still be life left in the retailer. Tomorrows trading statement is expected to show that numbers are broadly in line with forecasts. But traders will want to hear about the retailers future growth plans. IG quotes a price of 634p-639p. YOGESH CHANDARANA

cityam.com

TUESDAY 22 JANUARY 2013

Davos never fixes global economy


The World Economic Forum has a poor record of staying relevant

WEALTHMANAGEMENT TRADING

21

NOUGH is enough. No more snow please. As an Englishman, I know deep down we are atrocious at handling Alpine conditions in this country. Britains recent heavy snowfall is threatening to send the country flying into a triple dip (or whatever number we are up to now) recession, as the UK economy grinds to a halt under three inches of the white stuff. But there are no such problems for the World Economic Forum (WEF) in Davos. It positively welcomes more downpours. Poor weather rarely stops the great and the good from getting up the valley from Zurich, and makes the whole place look extremely pretty. Heavy Swiss snowfall has the added attraction of making it almost impossible for protestors to get anywhere near the annual C-suite love in without freezing their placardcarrying arms off. But there are larger challenges than the weather for anyone following the Forum. The biggest will be to discover from the multitude of VIP attendees exactly why they are there and what they aim to

CNBC COMMENT
STEVE SEDGWICK
achieve. This years line-up is certainly very impressive. Mark Carney, the next governor of the Bank of England, will jostle for place alongside Christine Lagarde of the International Monetary Fund. But beyond the schmoozing, great parties, business card swapping and grandstanding, just what are they really doing there? Dont get me wrong, I think it is essential for everyone to pay attention. These are some of the most important decision makers in the world. I just have a feeling that, when you look back at the major issues discussed under the big thematic headline topics each year, the Forum gets it wrong as often as not. Let me give you a couple of examples to back up my concerns. In 2007, the major theme of Davos

was The Shifting Power Equation, which in the WEFs own words was focusing in particular on political and socio-economic issues. Now call me an old cynic, but did they not miss the tiny little global financial meltdown that was building up nicely at about that time? Wouldnt How we dont fall into the abyss in the global financial markets? have been a slightly more relevant title? And, dont laugh, back in 2009 WEFs meeting was labelled Shaping The Post-Crisis World. So, if 2009 was post-crisis territory, then what have the last three years been about? OK, enough of the cynicism. This years theme is Resilient Dynamism. According to the blurb, that means the world needs resilience to adapt to changing political and economic contexts, and dynamism to overcome the ongoing economic malaise. I dont think too many of us will disagree with those lofty aims. Lets just hope that, this time, the WEF grandees can deliver something along those lines before they toddle off back down the slopes to the day jobs. Steve Sedgwick is anchor for SquawkBox Europe at CNBC.

An ideal location for swapping business cards and schmoozing

ANALYST PICKS
CURRENCY STRATEGIST

CHRIS VECCHIO

STRATEGIST

DAVID RODRIQUEZ

CHIEF STRATEGIST

JOHN KICKLIGHTER

My pick: Short Aussie dollar-yen, euro-yen and dollar-yen Expertise: Fundamental and technical analysis Average time frame of trades: A few hours to a few days The Bank of Japans policy meeting on 22 January should formally usher in new ultra dovish monetary policies. The yen remains oversold we recently saw the highest weekly relative strength index reading in dollar-yen since December 2005, and net non-commercial futures positioning are the most short since July 2007. Therefore, seeing a top in the Aussie dollaryen, euro-yen and dollar-yen after the Bank of Japans meeting would not be surprising. The conditions are ripe for a reversal.

My pick: Short dollar-yen Expertise: System trading Average time frame of trades: 2 days to 10 weeks I have been long on dollar-yen since September, since I believe the currency pair made an important long-term bottom. Yet the incredible rally has left the pair exposed to market corrections. More recently, it appears that a sentiment and positioning extreme may have been set. With that in mind, I have moved into a short dollar-yen position. I have a price target of 87, and will hold this trade open as long as we dont see a daily close above 90.

My pick: Short sterling-yen, long euro-sterling Expertise: Fundamental and technical analysis Average time frame of trades: 1 day to 1 week Yen crosses have soared, equities are at five-year highs, but risk isnt fully engaged. In the absence of clear market sentiment, my short positions in euro-dollar and sterling-Aussie dollar from last week failed to gain traction. This week, Im keeping an eye on Aussie dollar-New Zealand dollar, as the wedge chart pattern may break down. The euro-sterling long position from 0.8165 still looks good. And with the Bank of Japan meeting this week, sterling-yen may reverse below 140.50.

LIFE&STYLE FOOD & DRINK


RESTAURANT
GAILS KITCHEN FOOD SERVICE ATMOSPHERE
11-13 Bayley Street, Bedford Square, WC1B 3HD Tel: 020 7323 9694
AILS Bakery, the well-known artisan chain, is the brainchild of Tom Molnar and Ran Avidan. Their focus has always been on producing traditional handmade-quality bread and this mantra has been transported into the duos latest venture, their first restaurant, which sits adjacent to their Bloomsbury bakery. Dcor wise, it doesnt differ too far from the bakery. Its minimalist, so think exposed wooden tables and neutral coloured walls. While the result is slightly Scandinavian, its not chilly. Its actually rather cosy the perfect place to catch up with friends for a mid-week meal or to escape the crowds on Oxford Street on the weekend. At the same time, this helps the restaurant feel a bit like an upscale Zizzi rather than a destination for a big night out. It would probably have been better placed in somewhere like Chelsea or Blackheath than Bloomsbury. Like so many restaurants nowadays, the menu is comprised of small plates. There seems to be bread with almost everything this is not the restaurant for anyone watching their carb intake in January or cutting out grains on the paleo diet. But in terms of the quality of the dishes, Gails Kitchen on the whole delivers. At its best, as with the cakes in its popular bakeries, it elevates humdrum ingredients into something memorable. I started with baked red mullet with paprika, tomato and spinach, served, inevitably, on a piece of toast. The mullet was soft, delicate and perfectly seasoned. Next up was a dish of smoked prawns with caramelised garlic bread. It looked basic but the crisp, rich crumb contrasted well to the

22

TUESDAY 22 JANUARY 2013

cityam.com

AMUSE BOUCHE
BRUCE WILSON

Bread as a matter of course


G
Cost for two with wine: 65

Catch game birds before they fly


LAME IT on TV schedules stuffed with period dramas like Agatha Christie and Downton Abbey, but every winter, I always end up feeling nostalgic about everything that is quintessentially British. Watching the upper crust engaged in their traditional pastime of shooting game birds reminds me that theres only a few weeks left of the season in which to enjoy cooking pheasant, woodcock, partridge and wild (mallard) duck, or to sample less common birds like snipe, teal or widgeon. Perhaps because of the elitist connotations of game shooting, many people shy away from game birds thinking they require very specialised cooking and are difficult to eat in fact this is not necessarily true. Simply roasting whole at lower temperatures until pink makes a difference because pheasant is prone to drying out. And its important to know what to look for when selecting game birds to ensure they have been properly shot, handled and hung to maintain their quality - the meat shouldnt be bruised or peppered with too much shot. But if youve ever been on a shoot, youll know that while game birds might be a challenge to catch, they are incredibly rewarding to eat. Granted, you may only get a few mouthfuls off the smaller water birds like snipe and teal, but they make a great starter served roasted whole on a crouton or accompanied simply by some caramelised pears. Larger birds such as pheasant or partridge can make an interesting change from chicken or farmed duck and can be used in much the same way. Since they live freely in woodland feasting on seeds, the meat is leaner and more flavoursome but slightly drier and less tender, hence the need for more delicate cooking. Mallard and widgeon are for the more adventurous, packing a real punch of flavour. For me, the traditional way of serving all these birds roasted with bread sauce and game chips is hard to beat but they will also hold their own if you attack them with strong flavours, for instance, in a stew known as a salmis, cooked in stock and gutsy burgundy red wine or madeira with juniper berries and chestnut mushrooms, served with some hardy green veg like kale on the side. To my mind, these cold winter days and nights really lend themselves to the rich heartiness of game birds and the produce of Britains great estates offers us great variety and versatility. But hurry: catch them while stocks last the seasons up on 31 January.

Head chef, Paternoster Chop House

hhhii hhhhi hhhhi

Despite branching out from being just a bakery, bread still dominates the menu at Gails Kitchen to the detriment of the other dishes
punchy flavours of the seafood. It was followed by pizza bianca with violet artichokes, parma ham and burrata (not, in fact, another type of bread but a special creamy cheese). I topped it all off with a delicious steak sandwich, served with fresh horseradish. As youll have gathered, on this menu, bread is not what you get while you wait for your meal bread is your meal, with plenty of bread served on the side. Now theres no denying that Gails has mastered the art of a good loaf and you cant blame the restaurant for trying to show that off. The downside is that you quickly feel bloated and uninspired to explore the menu in more depth. It also detracts from the other high quality ingredients, a great shame. Aside from being too heavy, the small plates were good. My pudding, however, proved to be a crime against flour. Somehow I managed to find space for the rum baba, served with a winter fruit compote and cream. I was expecting it to be rich but not sickeningly sweet, so much so that my guest and I had to drain its syrup against the bowl to be able to eat it. Theres an old Chinese proverb that says if you have two loaves of bread, sell one and buy a lily. Gails Kitchen should meditate on that. One calamitous dessert aside, if the restaurant is going to be half as successful as the bakery, it is going to have to allow its dishes to move beyond a thousandand-one elaborations on the humble slice of bread that is, if they know what side their toast is buttered on.

Naomi Mdudu

The split personality grape that will get you through the winter

T IS January. It is bitterly cold, Christmas has cost a fortune, the chap next to you on the train is hacking viruses all over you, its dark outside and you know it is going to get dark again at 4pm. Happy times. In these circumstances there is only one wine I turn to, the real winter warmer: Syrah, or (to give it its New World name) Shiraz. Wines made from Syrah grapes are the cheerful wines of the world, guaranteed to banish winter misery, at least for a while. They may differ hugely in style and taste, but they are all big, powerful wines with an amazing depth of colour and personality. But there is more to this brash grape than you might think. Spend a little while getting to know it and you realise it has quite the most fascinating history and diversity of any grape in the winemakers armoury. Syrah started off in the

THE BOTTLE OPENER


NEIL BENNETT
bottle.opener@cityam.com
nineteenth century as an unremarkable grape grown in the northern Rhone region. Truthfully it was always going to be outshone by others, like the snooty Pinot Noirs from Burgundy and rock star Cabernet/Merlot Clarets from Bordeaux. The berries were small with a thick skin and it played nasty tricks during wine making since it was prone to reduction and could produce a wine with a delightful cabbage aroma. That said, it does produce some of the French wines I adore Crozes

Hermitage and Cte-Rtie. The wonderful, purplish glow and spicy aromas of either would help you through a winters evening. These are austere wines, that dont let you forget their northern roots. Then something wonderful happened. Like many 19th-century European peasants, Syrah left for the New World, changed its name and become famous. Syrah vines were imported into Australia, and the name, never easy to pronounce by an Anglo-Saxon tongue, became Shiraz. When you put the wines into warmer soil, it completely changes its personality, says Mark Pardoe, a wine buying director and lecturer from Berry Bros. You get a wine with a much rounder personality, with more fruit and a taste of figs and raisins. Now liberated, Shiraz became a New World superstar, providing the raw material for some of the most

famous and expensive wines in the world, most famously Penfolds Grange, at 300 a bottle and more. This is well deserved, since these wines have everything great structure, length, fruit and power. And they can last in a bottle for 20 or 30 years and more. The amazing thing about Syrah is that it can do and be almost all things, from a jug wine all the way to some of the great and long lived wines of the world. It has a split personality, says Pardoe. Now the migr wine has come full circle and has returned to France and Spain, where it is being grown in the sunnier climes, turning out the powerful, fruit-filled wines redolent of Australia and South Africa. Dont get me wrong, there are some shockers out there. Ive been poured some near-black glasses of Shiraz that would have been better used as fertiliser. But next time you feel the winter blues, try some of these.

THREE TO FOLLOW
One for the weekend
BVS Shiraz Peter Lehmann, Barossa Valley (9.99 on offer, Majestic). Everything a Shiraz is supposed to be when theres snow on the ground

One to impress the neighbours

Crozes Hermitage Les Trois Chnes, 2010, Emmanuel Darnaud (19.95, Berry Bros). This is a regular in the Bennett cellar and, when deployed, never fails to excite the neighbours

One to tuck away

Mollydooker Carnival of Love, 2010 (370 case of six, winedirect.co.uk). Once tried, never forgotten. Mollydooker means lefthanded punch in Australia and this one blows you away. A star that will last for decades.

cityam.com

TUESDAY 22 JANUARY 2013

TV & GAMES

23

TERRESTRIAL TERRESTRIAL

BBC1 BBC1

6pm BBC News 6.30pm BBC London News 7pm The One Show 7.30pm EastEnders: BBC News 8pm Holby City 9pm CHOICE Death in Paradise 10pm BBC News 10.25pm Regional News; National Lottery Update 10.35pm Allotment Wars 11.30pm FILM Greenfingers: Fact-based comedy drama, starring Helen Mirren and Clive Owen. 2000. 12.55am Weatherview
1am-6am BBC News

6pm Eggheads 6.30pm Great British Railway Journeys 7pm Heir Hunters 8pm The Great Comic Relief Bake Off 9pm CHOICE Locomotion: Dan Snows History of Railways 10pm The Sarah Millican Television Programme 10.30pm Newsnight: Weather
11.20pm Why the Industrial Revolution Happened Here 12.20am Bowls 1.20am Sign Zone: The Battle for Malta 2.20am Sign Zone: Natures Weirdest Events 3.20am Close 4am-6am BBC Learning Zone

BBC2 BBC2

ITV1 ITV

6pm London Tonight 6.30pm ITV News 7pm Emmerdale: Hour-long episode. Debbie strikes a deal with Dom. 8pm Celebrity Who Wants to Be a Millionaire? Pantomime Special 9pm CHOICE Great Houses with Julian Fellowes 10pm ITV News at Ten 10.30pm London News 10.35pm River Monsters 11.35pm The Cube 12.30am Jackpot247
3am Loose Women 3.50am-6am ITV Nightscreen

CHANNEL4 CHANNEL5 TV PICK CHANNEL4 CHANNEL5


6pm The Simpsons: Homer discovers the power of prayer. 6.30pm Hollyoaks 7pm Channel 4 News 7.55pm 4thought.tv 8pm Supersize vs Superskinny 9pm The Undateables 10pm Utopia 11.10pm 8 Out of 10 Cats 12.10am Random Acts 12.15am European Poker Tour
1.15am Sailing: Americas Cup Discovered 1.40am KOTV Boxing Weekly 2.10am Beach Volleyball 3.05am FILM Mad Hot Ballroom. 2005. 4.55am Deal or No Deal 5.50am-6.05am Quick Bakes with Eric Lanlard

6pm Home and Away 6.30pm 5 News at 6.30 7pm Monkey Life: 5 News Update 7.30pm Highland Emergency 8pm New Benidorm ER: 5 News at 9 9pm Body of Proof 10pm Celebrity Big Brother 11pm Celebrity Big Brothers Bit on the Side 12am Botched Up Bodies

DEATH IN PARADISE

1am SuperCasino 3.55am House Doctor 4.20am House Doctor 4.45am Michaelas Wild Challenge 5.10am Wildlife SOS 5.35am-6am Wildlife SOS

BBC1, 9PM British DI Richard Poole and his team of Caribbean cops investigate when a body is discovered in the pool of a cosmetic surgery clinic.

SATELLITE CABLE SATELLITE & & CABLE

6.30pm Revista De La Liga 7.30pm Live Capital One Cup 10pm Britains Best: The Gloves Are Off 11pm Revista De La Liga 12am Capital One Cup 1.30am Live Cycling 3.30am Sporting Greats 4am Capital One Cup 5.30am-6am Football Asia

SKY SPORTS 1

BRITISH EUROSPORT

5.30pm Live Africa Cup of Nations 8pm Tennis: Australian Open 11.15pm GT Academy: Race to Dubai 11.30pm Game, Set and Mats 12am-6am Live Tennis: Australian Open

11pm Jerry Bruckheimers Chase 12am Bones 1am Supernatural 2.40am CSI: Crime Scene Investigation 3.30am Bones 4.20am Nothing to Declare UK 5.10am-6am Motorway Patrol

ESPN

BBC THREE

Theory 1am Happy Endings 1.30am The Ricky Gervais Show 2.05am The Cleveland Show 2.25am Rude Tube: Ultimate Stunts 3.20am Dont Blame Facebook 4.10am Happy Endings 4.30am-6am Made in Chelsea

2am Battle Castle with Dan Snow 3am Gold Divers: Under the Ice 3.50am Swamp Loggers 4.40am Raging Planet 5.30am-6am Meerkat Manor

SKY SPORTS 2

12.30pm Live International OneDay Cricket 9pm Golf 10pm Sailing 11pm Cycling 11.30pm Badminton 12.30am Golf 1.30am Football Asia 2am Britains Best: The Gloves Are Off 3am-4am Premier League Review

SKY SPORTS 3

7pm Sailing 8pm British Basketball 10pm Golfing World 10.30pm European Tour 11pm Pool 12am Sports Unlimited 1am Sailing 2am Ironman Lanzarote 70.3 3am-6am Live International One-Day Cricket

7pm ESPN Kicks: Bundesliga 7.15pm FA Cup Preview Show 7.45pm Live Coppa Italia 9.45pm ESPN Kicks: Premier League 10pm Eredivisie Review Show 11pm ESPN FC Press Pass 11.30pm Copa Libertadores Preview 12am FIS Alpine Ski World Cup Report 12.30am Planet Speed 1am UFC: The Ultimate Fighter 2.45am UFC 5.45am-6am ESPN Kicks: Premier League

7pm Total Wipeout 8pm Growing Up Poor 9pm Sun, Sex and Suspicious Parents 10pm Pramface 10.30pm EastEnders 11pm Family Guy 11.45pm American Dad! 12.30am Sun, Sex and Suspicious Parents 1.25am Pramface 1.55am Crazy for Party Drugs 2.55am-3.55am Sun, Sex and Suspicious Parents

HISTORY

DISCOVERY HOME & HEALTH

LOCOMOTION: DAN SNOWS HISTORY OF RAILWAYS

7pm Storage Wars 7.30pm Pawn Stars 9pm Storage Wars 10pm Grave Trade 11pm Storage Wars 11.30pm Pawn Stars 12am Storage Wars 1am Grave Trade 2am American Pickers 3am Ice Road Truckers 4am Swamp People 5am-6am American Restoration

7pm Dr Oz 8pm Jon and Kate Plus 8 9pm True Life 10pm Emergency: Life in the ER 11pm A&E 12am True Life 1am Emergency: Life in the ER 2am A&E 3am Dr Oz 4am Myleene Klass Bumps, Babies and Beyond 5am-6am Student Midwives

BBC2, 9PM The historian examines the impact of the arrival of the railway to London in the late 1830s.

E4

SKY LIVING

7pm Criminal Minds 8pm Bones 9pm Criminal Minds 10pm CSI: Crime Scene Investigation

7pm Hollyoaks 7.30pm How I Met Your Mother 8.30pm The Big Bang Theory 9pm Rude Tube: Ultimate Stunts 10pm The Cleveland Show 10.30pm The Inbetweeners 11pm Dont Blame Facebook 12.05am The Big Bang

DISCOVERY

SKY1

7pm Bear Grylls: Born Survivor 8pm Ice Pilots 9pm Gold Divers: Under the Ice 10pm Swamp Loggers 11pm Auction Hunters 11.30pm Auction Kings 12am Gold Divers: Under the Ice 1am Swamp Loggers

8pm Last Resort 9pm Stella 10pm FILM Switchback 1997. 12.15am Brit Cops: Law & Disorder 1.15am Road Wars 2.05am NCIS: Los Angeles 2.55am Road Wars 3.45am Crash Test Dummies 4.10am-6am Stargate SG-1

GREAT HOUSES WITH JULIAN FELLOWES ITV, 9PM

Part one of two. The history of stately homes Burghley House and Goodwood House through the lives of those who owned them and their servants.

SPORT Toffees waste


24

TUESDAY 22 JANUARY 2013

a tough It wasplayers situation for both more obviously for him


Andy Murray on his Australian Open defeat of Gilles Simon, who could barely walk

@cityam_sport cityam.com/sport
ROBSHAW RETAINS ENGLAND CAPTAINCY

chance to leave London trio in sticky situation


BY FRANK DALLERES
LONDON trio Tottenham, Arsenal and Chelsea were let off the hook last night when Everton, their main rivals in the four-way battle for two Champions League places, failed to beat turmoil-hit Southampton. The Toffees, who remain fifth in the Premier League, missed the chance to close to within a point of Spurs and five of Chelsea, and increase their lead over Arsenal, who have a game in hand, to six points. Indeed it might have been even worse for Everton, who somehow made it to half-time without conceding, despite being subjected to a barrage of attacks from the relegation-threatened Saints. Goalkeeper Tim Howard repeatedly denied Southampton, in their first game under new manager Mauricio Pochettino, and when striker Rickie Lambert did beat the American his header was scrambled off the line by Nikica Jelavic. The visitors improved markedly after the interval, Croatia forward Jelavic squandering their best chance to snatch all three points, but left manager David Moyes ruing an 11th league draw of the season. We are a good bit through the season, we have had a lot of draws and we need to look to win. We will certainly try to ensure we win more than we draw in the second half of the season, said Moyes. Last nights result at St Marys means third-placed Chelsea enjoy a seven point cushion from Everton, while Tottenham are three clear of their closest challengers. Arsenal, four points behind the Merseysiders, could slash the gap to one against West Ham tomorrow. Saints were plunged into chaos by the sacking of boss Nigel Adkins on Friday but almost scored when Lambert beat Howard with a header from a corner, only for Jelavic to throw himself in the way, and the goalkeeper recovered quickly to stop Jos Hooivelds follow-up volley. TEAM Man Utd Chelsea Tottenham Everton Arsenal PLD W 23 18 23 15 23 23 22 13 9 9 23 12 D 2 6 6 5 11 7 L 3 2 4 6 3 6 F 57 45 47 47 35 41 A PTS 30 56 19 22 51 41 22 45 26 38 36 34

GOLF COMMENT
SAM TORRANCE

Hail McGinley and dont fret about McIlroy


EFORE I tackle the weekend action I must start by saying how pleased I am that Paul McGinley has been named the European Ryder Cup captain for 2014. Paul did all the groundwork: he had two successful stints leading Great Britain and Ireland in the Seve Trophy and was also vice-captain on two winning Ryder Cup teams. He also holed the winning putt in the 2002 competition. (I forget who Europes captain was that year.) McGinley is meticulous and congenial. Sometimes captains can be like headmasters but hes not like that; hell be very approachable. The fact that Rory McIlroy, Luke Donald and Ian Poulter all voiced their support spoke volumes and made it impossible not to pick him. Also enjoying a good week was Jamie Donaldson, who won the Abu Dhabi Championship. It was the Welshmans second European Tour win and credit must go to his swing coach because his technique is much improved and the work is paying off. McIlroys debut with Nike clubs did not go so well, but Im inclined to think it was just a bad week. Missing the cut is very unlike him, but he was in good company with Tiger Woods, and a month off will help Rory overcome teething problems. Finally, well done to Brian Gay, who won a three-man play-off to claim his fourth PGA Tour title at the Humana Challenge in California. Sam Torrance OBE is a multiple Ryder Cup-winning golfer and media commentator. Follow him on Twitter @torrancesam

PREMIER LEAGUE SOUTHAMPTON .........................0 EVERTON ...................................0

TOP SIX
Man City

HARLEQUINS skipper Chris Robshaw has been re-appointed England captain for the Six Nations, which begins next month. The flankers decision making was called into question during a mixed autumn internationals campaign, but head coach Stuart Lancaster said: Hes grown as a leader on and off the field. He showed those qualities this autumn, especially against New Zealand when the whole squad got behind him.

Murray ruthless in Australia but Armstrong set wont turn his back on US Open for Hollywood
BY FRANK DALLERES
BRITAINS Andy Murray distanced himself from talk of boycotting this years US Open yesterday, after breezing into the Australian Open quarter-finals for the fourth successive campaign. Players are said to be ready to abandon the Major in New York because they disagree with the mens final being moved to Monday and believe the increase in prize money is too small. But Murray, the reigning US Open champion, insisted he had not discussed the unrest with his ATP Tour peers since a players meeting earlier this month. I know the ATP are not particularly happy with the Monday final, because however much revenue they make from having an extra day on their tournament hasnt reflected in the increase in prize money, he said. That was what players wanted, better prize money, but not with an extra day. But I personally havent spoken with anyone about boycotting the event. Third seed Murray is still to drop a set in Melbourne this year after despatching an exhausted Gilles Simon 6-3, 6-1, 6-3 yesterday and will meet another Frenchman, the unseeded Jeremy Chardy, in the last eight late tonight.

IN BRIEF
Fergie faces rap for officials rant
n FOOTBALL: Manchester United boss Sir Alex Ferguson has been asked by the Football Association to explain his criticism of assistant referee Simon Beck following Sundays 1-1 draw at Tottenham. Ferguson, who blamed the linesman for failing to award a penalty, faces a fine or touchline ban if found guilty of misconduct.

Results

BY FRANK DALLERES
DISGRACED former cyclist Lance Armstrong, who last week admitted cheating his way to seven Tour de France titles, is set to be the subject of a Hollywood blockbuster by Star Trek director JJ Abrams. Abrams, the man behind TV series Lost and box office hits Cloverfield, Super 8 and Mission Impossible 3, has bought the rights to produce the film verison of new book Cycle of Lies: The Fall of Lance Armstrong. The Texan ended years of denials last week by confessing to using a cocktail of banned substances during the most successful years of his glittering and lucrative career.

Shingler quits Exiles for Scarlets


n RUGBY UNION: London Irish fly-half

Steven Shingler is set to be reunited with brother Aaron after agreeing to rejoin the Scarlets in the summer. Steven, the subject of an eligibility row between Scotland and Wales last year, has signed a three-year deal, while Aaron has also committed to the Llanelli side until 2016.