Cityam 2012-10-30

BUSINESS WITH PERSONALITY
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THE CANDIDATES
nMillions left without power as
storm surge threatens Manhattan
nInsurers estimate the total cost
of the damage could reach $10bn
BARCLAYS will face a full trial over
Guardian Care Homes (GCH) claims
that the bank mis-sold it an interest
rate swap product, in a landmark
legal case which will determine
which other firms can claim banks
mistreated them.
As part of the trial Barclays will
have to send GCH 1.2m emails logged
in its Libor manipulation probe.
GCH hopes they will prove senior
managers at Barclays knew the bank
was trying to fiddle the key
interbank interest rate and so
defrauded customers who bought
products based on the rate.
The firm also claims it is an
unsophisticated investor and was
missold a costly interest rate swap.
But Barclays denies the claim.
This business had a suite of
advisors and a lot of financial
experience and skill in-house, the
bank said in a statement. We
understand that Graiseley [GCHs
parent] entered into their swaps with
sufficient understanding to exercise
their own judgment as to whether
the products would meet its business
objectives.
They are a significant business
which owes Barclays 70m. We do
not believe the case has merit and
will defend it.
Yesterdays hearing saw a judge
approve the case for trial. Another
hearing next month will determine
the date of the trial, which is likely to
fall in October 2013.
BUSINESS WITH PERSONALITY
Neil was a successful commodities trader in the City. But he wanted more.
To book your place and read Neils story visit www.cassmba.com The Cass MBA. Inspiring stories. Cass MBA Evening Information Session:
Thursday 8 November 2012
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The Cass MBA.
Inspiring stories.
A New Yorker navigates through the Dumbo neighbourhood of Brooklyn, as Hurricane Sandy clatters through the US eastern seaboard
HURRICANE SANDY last night hit the
USs North East coast, closing stock
exchanges, grounding aeroplanes,
flooding low-lying areas, and potential-
ly landing insurers with billion dollar
liabilities.
The storm hit New Jersey at around
midnight GMT and New York shortly
after, buffeting the cities with winds of
up to 100mph, and bringing trading,
business, travel, power-generation, and
even the election campaign to a grind-
ing halt. A total of 10 US states declared
a state of emergency.
Having been forced to close yesterday,
the New York Stock Exchange said last
night it would not re-open until at least
Wednesday, the first time it has been
forced to close for more than a day due
to weather since 1888. The US bond
markets also planned to stay closed
until at least tomorrow.
Many firms were forced to postpone
reporting third quarter results phar-
maceutical giant Pfizer said it would
wait until Thursday instead of today,
while Thomson Reuters postponed its
earnings update until Friday.
www.cityam.com FREE
Wall Street giants said they were pri-
oritising safety and keeping employees
out of dangerous areas, with most
working at home. Goldman Sachs said
employees in other sites including
London would pick up any slack, in a
note circulated internally.
British Airways said it had cancelled
flights to New York, Newark,
Washington, Baltimore and
Philadelphia, among other destina-
tions, and a total of 13,785 flight cancel-
lations were logged by
FlightAware.com. The live flight track-
ing website said this number was
expected to grow, as many airlines had
not yet published their cancellations for
today. New York bus and subway servic-
es came to a halt at 7pm on Sunday, as
storms ahead of the hurricane started
to worsen. The Metropolitan Transit
Authority said it had evacuated
thouands of buses and subway cars.
Power supplies across the Eastern
seaboard were devastated and some
two thirds of oil refining capacity has
been put out of action. Con Edison,
New Yorks biggest electricity utility,
reported outages in the hundreds of
COLUMNIST SAM TORRANCE ON RORYS BID TO TRUMP TIGER
FTSE 100 n5,795.10 -11.61 DOWL13,107.21 +3.53 NASDAQL2,987.95 +1.83 /$ n1.60 -0.01 / 1.24 unc /$ 1.29 unc
BY BEN SOUTHWOOD
FRANKENSTORM
MARVELLOUS MCILROY
ISSUE 1,749 TUESDAY 30 OCTOBER 2012
NEIL BENNETTS
WINE PICKS
The Bottle Opener, Page 31
See Sport, Page 33
Certified Distribution
27/08/12 til 30/09/12 is 128,785
thousands. And both President Barack
Obama and Republican challenger Mitt
Romney put their election campaigns
on the backburner as Sandy wreaked
havoc in the North East. Obama can-
celled a campaign event in Florida to fly
to Washington, while Romney can-
celled events scheduled for last night
and this evening. Insurance firms could
suffer $5bn (3.1bn) to $10bn in losses,
said disaster modeling firm Eqecat in
an early forecast, well above the $4.3bn
hit they took from hurrican Irene last
year.
BY TIM WALLACE
Barclays faces first Libor damages trial as UK judge sets key precedent
nFirst two day close of New York
exchange due to weather since 1888
L L
ALLISTER HEATH: Page 2
allister.heath@cityam.com
Follow me on Twitter: @allisterheath
Cameron faces rebellion
over EU budget increase
DAVID Cameron yesterday found
himself facing a battle over
European Union funding as his
own backbenchers joined forces
with the Labour party to call for a
real-terms cut to the EU budget.
The Prime Minister faces a struggle
at next months European Council
meeting where the 27 heads of gov-
ernment will discuss EU spending
limits for the next eight years.
Other European leaders are happy
to push ahead with an inflation-bust-
ing 6.8 per cent rise in the organisa-
tion budget for 2013, and a five per
cent increase for 2014-2020.
But Cameron continues to insist
that he will only allow the budget to
rise in line with inflation, currently
around two per cent a year. Even this
would see Britain contributing an
average of 13.6bn a year to the
organisation. The issue will come to
a head tomorrow when the Prime
Minister will attempt to secure par-
liamentary approval for his stance.
But his plans were thrown into disar-
ray yesterday when two eurosceptic
Tory MPs filed an amendment to the
government motion, calling for any
budget rise to be below inflation
effectively a spending cut.
Mark Reckless, one of the amend-
ments backers, said it beggars
belief that the government is plan-
LACK of transparency, inadequate
information and inconsistent
treatment of potential bidders by
the Department for Transport (DfT)
all contributed to a flawed process
to determine which firm would run
the West Coast main line franchise,
an interim inquiry into the fiasco
has concluded.
The debacle, which earlier this
month resulted in the decision to
award the multi-billion pound rail
franchise to FirstGroup over Virgin
being scrapped by the government
at an estimated cost of $40m, was
the result of an accumulation of
errors by the DfT, according to Sam
Laidlaw leading the independent
inquiry.
Laidlaw, non-exec board member
of the DfT as well as chief executive
of energy firm Centrica, said the
errors included inadequate
planning and resourcing issues
within the Dft as well as weak
governance. Ultimately these
errors meant the impact of inflation
as well as some elements of the
increase in passenger numbers over
the period of the franchise were not
taken into account.
Transport secretary Patrick
McLoughlin, who will appear before
the House of Commons transport
committee tomorrow to answer
questions, said the report made
uncomfortable reading.
West Coast Rail
bidding process
deemed flawed
Cameron insists he will fight hard against a real terms increase in EU funding
4
NEWS
BY KATIE HOPE
FORMER Dixons boss John Browett
is leaving Apple after just six
months, the technology giant
announced yesterday.
The departure of the UK retailer,
who was hired to drive the global
expansion of its stores, was
announced alongside that of Scott
Forstall, who oversaw Maps.
Browett, who will leave
immediately, only joined from
Dixons in April this year, and was
the first major hire by chief
executive Tim Cook.
Apple said a search is underway
for a new retail chief.
Forstall, in his position as head of
iOS software, oversaw the
development and launch of the Siri
voice assistant and the heavily
ridiculed Maps software. Forstall
will stay on as an adviser to chief
executive Tim Cook until he leaves
the firm next year.
Analysts speculated
that Forstall was a
scapegoat for the
debacle surrounding
the release of Maps,
which forced Cook to
apologise to
customers.
Ex-Dixons boss
leaves Apple
after six months
BY BEN SOUTHWOOD
BY JAMES WATERSON
To contact the newsdesk email news@cityam.com
T
HERE are times, fortunately not
too often in these days of
technological revolution and
ext raordi nar y sci ent i f i c
progress, that human beings can but
bow to the forces of nature. We may
be capable of flying to the moon but
there are some natural events that
leave us powerless and unable to
control events. Everybody with
family, friends and colleagues in New
York and the United States will be
hoping that the next few hours go
smoothly and that Hurricane Sandy
spares lives and property.
In addition to its potential human
impact, Sandy will also have an eco-
nomic effect. Flights have been can-
celled by the thousand, business is
not being conducted, people are not
being hired, consumers are not spend-
ing. The New York Stock Exchange
will be closed again today; it is the
EDITORS
LETTER
ALLISTER HEATH
Frankenstorm: Dont fall foul of the Broken Windows Fallacy
TUESDAY 30 OCTOBER 2012
first time since 1888 that the market
has been shut for two consecutive
days due to weather. There may also
be a political impact: campaigning in
the ultra-close US presidential elec-
tions has been disrupted, turnout will
fall in some regions (which could
boost Mitt Romney) but Americans
may rally around the president
(which would boost Barack Obama).
It is vital for anybody trying to
analyse the effects of Sandy not to
succumb to what the French econo-
mist Frederic Bastiat called the bro-
ken windows fallacy: the wrong-head-
ed view that damage caused by the
storm is a good thing as it will boost
spending on repairs. That is nonsense.
A country doesnt become richer
when its assets are smashed up, or its
buildings flooded, or its bridges dam-
aged, even if mending them tem-
porarily creates new jobs. Hurricanes
dont boost a nations wealth, they
impoverish it; resources that could
have been allocated to other things
need to be diverted to the reconstruc-
tion effort. Savings that would previ-
ously have been used to finance a new
factory are suddenly diverted to
rebuilding an asset that was working
perfectly fine. So much for the eco-
nomics today, however, our
thoughts are with ordinary
Americans struggling with the ele-
ments. We wish them well.
(and the default outcome if no agree-
ment is reached). Yet now even the
Labour party has become willing to
take on the pro-EU establishment;
there are votes to be won by outflank-
ing the Tories.
This is a major political milestone.
As the Eurozone moves towards ever-
closer integration, the UK is moving
towards a major renegotiation and an
in-out referendum on EU member-
ship, with an entirely unpredictable
result, dividing the country, political
parties, the City and the business
community. Forget about economic
reform: a historic and final decision
on Europe by the UK electorate, after
decades of prevarication, will turn
out to be the real politico-economic
story of the decade.
DECISION TIME
EXTREME chutzpah doesnt even
begin to describe the Labour Partys
latest position on the European
Union. That most slavishly Europhile
of parties and opponent of all
domestic public spending cuts
wants the EUs budget to be slashed.
This may be extraordinarily hypo-
critical but it is the right position to
take, given the waste in Brussels and
the fact that voters are having to
tighten their belts. It is also a clever
trick which will expose the divisions
between David Camerons position
and that of most of his party.
Astonishingly, MEPs backed the
European Commissions bid to
increase its budget by 6.8 per cent in
2013. Member states want to increase
it by 2.79 per cent. Cameron is calling
for a real terms freeze, equivalent to a
cash increase of around 2 per cent
ning to exempt the EU entirely from
the financial pressures facing families
and governments across Europe.
Meanwhile Labour joined in the
apparent ambush as its frontbench
team also called for a below inflation
increase. Last night Ed Miliband told
the BBC: With everybody else tighten-
ing our belts we have to do that in the
EU too. Lets spend that money more
wisely and lets get the right deal for
Britain.
The Prime Ministers spokeswoman
said that any budget increase is com-
pletely unrealistic but hinted that it
may be impossible to secure a cut: We
are one member among 27 members.
All the indications are that they want
an increase while we want a freeze.
However she insisted the govern-
ment would adopt a tough negotiating
stance: There simply isnt the case for
an increase in real term spending.
Were going to be sticking to our guns.
Writing in todays City A.M. promi-
nent Conservative backbencher Priti
Patel adds that the Prime Minister
should be prepared to exercise his
veto over the 2014-2020 budget.
John Browett
joined Apple
from Dixons in
April
THE FORUM: Page 26
L L
New Look moves to reassure suppliers
New Look, the value fashion chain, has
moved to reassure suppliers over its
financial position, after a report last week
in an industry blog that it was poised to
enter administration and carry out a
company voluntary arrangement.
Linde seeks deeper cost cuts
Linde, the worlds second largest maker of
industrial gases by sales, is planning
deeper cost cuts to protect profits as it
faces a tougher economic environment.
The German gas and plant engineering
group, which vies with Frances Air Liquide
for the number one spot in industrial
gases, said it would save up to 900m
(725m) by 2016 after an expected uptick
in the global economy in the second half
of the year failed to materialise.
Grant Capital Partners to shut
Grant Capital Partners, the hedge fund
manager set up by the former Goldman
Sachs trading star behind Peloton
Partners one of the industrys biggest
collapses is shutting down, according to
a letter sent to investors by founder Geoff
Grant.
Ferry deal is sent to regulators
After a four-month inquiry into Eurotunnels
decision to buy three ferries from the bust
SeaFrance, the Office of Fair Trading
yesterday ruled that the plan may not
necessarily be above board.
Internet delivers new Royal Mail jobs
Ten years after Allan Leighton took a
shredder to Parcelforce, the express
package delivery arm of the Royal Mail will
today unveil plans to take on 1,000 workers
to cope with the boom in internet shopping.
Russia offers to build nuclear plants
Moscow has offered to help Britain build
nuclear power stations in partnership
with Rolls-Royce, Russias deputy prime
minister Igor Shuvalov said yesterday.
Lenders threaten Hibu closure
Lenders to Hibu, the owner of Yellow
Pages, have threatened to scupper a
restructuring of the company and launch
winding-up proceedings against it
because of a row over debt repayments
on Hibus 2.3bn debt pile.
Chrysler quarterly profit soars
Chrysler Group reported an 80 per cent
jump in its third-quarter profit over a year
ago amid strong demand for its cars and
pickup trucks and a continuing recovery in
the U.S. auto market.
US regulators postpone Nasdaq ruling
US regulators are taking more time to
decide whether to approve Nasdaq OMX
Groups plan to make up losses for firms
damaged in this past Mays botched
Facebook stock market debut.
The new jobs website for London professionals
CITYAMCAREERS.com
WHAT THE OTHER PAPERS SAY THIS MORNING
AN INFLUENTIAL group of MPs and
peers will today probe former HBOS
heads on why their bank collapsed.
The group failed in the financial cri-
sis and was hastily taken over by
Lloyds which itself then needed a
government bailout to cope with the
weight of HBOS on its books.
The Parliamentary
Commission on Banking
Standards (PCBS) will for
the first time appoint coun-
sel to cross-examine the
witnesses from the banking
group, with David Quest
from 3 Verulam
B u i l d i n g s
advising the
Commission.
T h i s
should help
us to get to
the bottom
of what
Parliament to
probe HBOSs
collapse today
BY TIM WALLACE
went wrong and why, said PCBS
chairman Andrew Tyrie.
HBOS former head of group regula-
tory risk Paul Moore, CEO internation-
al Colin Matthew, and group risk
director Jo Dawson will be questioned.
Commission member Lord Turnbull
said the hearing will help determine
the groups recommendations on
banking standards: We will be look-
ing at the lessons that can be learned
with regard to corporate gover-
nance, culture and standards in the
banking industry.
Yesterday John Kay appeared at the
PCBS. He told peers and MPs the bank-
ing ringfence may not work
because it is too difficult
to define what is and is
not a retail-banking
activity.
ADOBOLI TELLS COURT BOSSES INFLUENCED TRADES
EX-trader Kweku Adoboli told a court yesterday his bosses at UBS, including senior executive
Carsten Kengeter, had been pushing him to take more risks when he took positions that cost
the Swiss bank $2.3bn. Adoboli, 32, was arrested on 15 September 2011. He has pleaded not
guilty to two counts of fraud and four of false accounting. The trial continues.
Andrew Tyrie will lead the
grilling of ex-HBOS bosses
5
NEWS
cityam.com
ANGLO-SWEDISH pharma giant
AstraZeneca revealed yesterday
that it lured its new CEO to the
firm with a multi-million pound
remuneration package,
including a base salary of
1.1m a year.
Pascal Soriot, who joined
from arch rivals Roche on 1
October, will also be granted
up to 4m in compensation
for the loss of long-term
incentives from his
previous employer,
the firm said.
The award will be
paid in shares,
conditional on
performance and
stretched over an
eight year period.
New AstraZeneca CEO to get up
to 4m for leaving rival Roche
BY JULIAN HARRIS
Soriot will also be eligible for
potentially lucrative annual bonus
payments, especially if he can turn
around the companys fortunes.
AstraZenecas statement
included reference to a target
annual bonus of 100 per cent of
base salary with a range of zero to
180 per cent.
The new CEO has his work cut
out, after his new employer last
week announced a 19 per cent
decline in revenue during its
third quarter.
Poor results and a
worrying outlook
culminated in then-CEO
David Brennan being
ousted by shareholders
earlier this year.
Senior Bank of England exec sides
with Occupy over economic crisis
A SENIOR Bank of England official
raised eyebrows last night by
telling the Occupy movement of
anti-capitalist protesters that their
analysis of the financial crisis has
been correct and that they have
influenced post-crisis policy.
Andrew Haldane, increasingly
known for his outspoken views,
was addressing a group called
Occupy Economics at Friends
House in Euston.
Occupy has been successful in
its efforts to popularise the
BY JULIAN HARRIS
problems of the global financial
system for one very simple reason:
they are right, he told the
assembled crowd.
By this I do not just mean right
in a moral sense it is the
analytical, every bit as much as the
moral, ground that Occupy has
taken.
Haldane hit out at criticisms
that the Occupy movements
complaints have been vague and
undefined, with few solid solutions
offered.
Occupys voice has been both
loud and persuasive and that
policymakers have listened and are
acting in ways which will close
those fault-lines, Haldane said.
The Banks executive director for
financial stability, who sits on its
new super-regulator the Financial
Policy Committee cited deep and
rising inequality as a primary
cause of the global financial crisis.
Last week Haldane compared
large banks to King Kong and
Godzilla while suggesting
considerably higher capital buffer
requirements, or the full
separation of investment and
commercial banking.
Pascal Soriot has years of
experience in the sector
PEARSON and German media giant
Bertelsmann have agreed a deal to
merge their respective book publish-
ing units Penguin and Random
House, creating the worlds largest
company of its kind as they grapple
with a growing threat from digital
book sellers such as Amazon.
The firms have inked a deal despite
a late bid from Rupert Murdochs
News Corporation. Pearson will take
47 per cent of the new company
which will be called Penguin
Random House, and will have joint
revenues of more than 2.5bn.
Markus Dohle, Random Houses
chief executive, will lead the joint
venture, while Penguins head John
Makinson will become chairman.
Pearson, which also runs the
Financial Times, has owned Penguin
since 1970 but it has become a small-
er part of the business as it has
expanded its education division.
Outgoing chief executive Marjorie
Scardino said: Together, the two
Random House
agrees merger
with Penguin
BY JAMES TITCOMB
publishers will be able to share a
large part of their costs, to invest
more for their author and reader con-
stituencies and to be more adventur-
ous in trying new models in this
exciting, fast-moving world of digital
books and digital readers.
The news came as Pearson revealed
a disappointing set of results for the
first nine months of the year. While
sales rose five per cent, Pearsons
operating profit was down five per
cent, as North American education
was hit by shrinking US budgets.
Simon Marchant at London law rm
Freshelds took the lead on Pearsons side
of the deal. Marchant leads Freshelds
London-based M&A business along with
Oliver Lazenby, who also worked on the
merger. The two were supported by
antitrust partner Alastair Chapman, IP part-
ner Chris Forsyth and counsel Jill Delaney.
Marchant, who has done stints for
Freshelds in New York and Hong Kong,
where he headed the Asia business, has
worked on a number of high-prole deals,
including the $20bn take-private of De
Beers and Vodafone's $190bn purchase of
Mannesmann.
Lazenby has worked on the $7.3bn sale of
FEMSAs beer business to Heineken in 2010,
and 3i Groups acquisition of Mizuho
Investment Management.
Pearson was also advised by US law rm
Morgan Lewis & Bockius.
Bertelsmann was advised by a team from
Slaughter and May, led by corporate part-
ners Charles Randell and Craig Cleaver, sup-
ported by associates Chris Neubauer, Daniel
Okusaga and Carsten Wettich.
The team also includes competition part-
ners Philippe Chappatte and John Boyce.
Both companies did their nancial due dili-
gence internally.
ADVISERS PENGUINS TIE-UP WITH RANDOM HOUSE
SIMON MARCHANT
FRESHFIELDS
Hitachi secures UK nuclear
project Horizon with 700m
HITACHI, Japans largest industrial
electronics maker, last night
secured the deal for British
nuclear new-build project
Horizon,
Hitachi is believed to have
offered in the region of 700m to
secure the project more than
double the sum analysts had
predicted.
Hitachi, along with Canadian
counterparty SNC-Lavalin, and
Westinghouse plus its parent
BY JAMES TITCOMB company Toshiba, are all believed
to have made bids for Horizon.
Horizon, which plans to build 6
gigawatts (GW) of nuclear capacity,
was put up for sale by its owners,
German utilities E.ON and RWE, in
March, as Germanys decision to
pull out of nuclear power hurt
their finances.
Germany last year said it would
end nuclear energy use by 2022.
Hitachi is expected to hold a
board meeting today to approve
the deal and officially announce it.
The UK government plans huge
growth in its nuclear industry,
with new power stations expected
to come on line by 2025 to replace
ageing plants, but it has faced
various stumbling blocks,
including the Fukushima nuclear
crisis delaying licensing and
making projects more costly.
Hitachi, which has two nuclear
power joint ventures with US-
based General Electric Co and
earns just under 10 per cent of
revenues from its power systems
segment, releases financial results
today.
Pearson PLC
29Oct 23Oct 24Oct 25Oct 26Oct
1,210
1,200
1,220
1,240
1,230
1,250
1,260
p
1,225.00
29Oct
TUESDAY 30 OCTOBER 2012T
6
NEWS
cityam.com
PENGUIN AND RANDOM HOUSE MERGER
Founded
1925
Share of
combined
company
43%
2011
Revenues
1bn
2011
Operating
prot
111m
Chief
executive
John
Makinson
Bestseller
Jamie's 15
Minute Meals
Founded
1935
Share of
combined
company
57%
2011
Revenues
1.5bn
2011
Operating
prot
161m
Chief
executive
Markus
Dohle
Bestseller
Fifty
Shades
of Grey
BOTTOM LINE: Page 7
L L
CVC CAPITAL Partners veteran
Michael Smith will step down as
chairman in January 2013 and hand
the reins to a trio of dealmakers
whose first job will be to raise 10bn
(8.06bn) from investors.
Smith, who has spent 30 years at
CVC from its origins as Citicorp
Venture Capital a subsidiary of
Citigroup will be succeeded by
Donald Mackenzie, Rolly van Rappard
and Steve Koltes as co-chairmen.
CVC has always been run as a part-
nership, making important decisions
BY HARRY BANKS
by consensus, Mackenzie said in a
press release, in a sign that the succes-
sion was unlikely to spark a big shift in
the buy-out houses strategy.
CVC this year sold a 10 per cent stake
to three sovereign wealth funds: the
Kuwait Investment Authority, the
Government of Singapore Investment
Corporation, and the Hong Kong
Monetary Authority, a person familiar
with the matter has said.
The three men have worked at CVC
which has investments in Formula
One and Merlin Entertainment for
more than 20 years.
BOTTOM
LINE
MARC SIDWELL
TRINITY Mirror yesterday
confirmed reports over the
weekend that it is in discussions
over taking a minority interest in
a new group formed by combining
the assets of Iliffe News & Media
with Northcliffe, sending its
shares higher.
Shares in Trinity Mirror rose
more than six per cent to 54.5p in
early trading as it confirmed its
Trinity Mirror shares bounce as it
confirms interest in Northcliffe
BY CITY A.M. REPORTER interest in the plans for a new
regional newspaper group, run by
its ex-CEO David Yattendon.
DMGT, which owns Northcliffe
and its 84 regional newspapers,
said on Sunday that talks had
begun on the deal, which is being
supported by prominent asset
manager Crispin Odey and looks
set to be worth around 100m.
No offer has been made and
there is nothing further to report
at this stage, said Trinity Mirror.
GOOGLE and Microsoft both
unveiled challengers to the iPhone
yesterday ahead of the crucial
Christmas shopping period.
Although Googles proposed New
York launch event was blown off
course by Hurricane Sandy, it still
announced a new smartphone and
10-inch tablet to its Nexus range
yesterday, adding to the seven-inch
device it unveiled earlier in the
summer. The Nexus 4 phone, built
by Motorola, will run Googles
Android operating software and cost
from 239 when it launches on 13
November. The Nexus 10 tablet will
Google and Microsoft unveil
Nexus and Windows Phone 8
BY JAMES TITCOMB start from 319, which is 80 less
than the cheapest version of Apples
flagship iPad.
In a separate event, Microsoft took
the wraps off its new mobile
software, Windows Phone 8, which
will launch on a range of handsets
from Nokia, Samsung and HTC in
the coming weeks. Windows Phone 8
is vital to the fortunes of Nokia,
which last year agreed to only make
smartphones running Microsofts
software, but has not seen the
response it had hoped for up until
now. Nokia launches its top-of-the-
range Lumia 920 device today,
exclusively on the 4G EE network
which also goes live today.
7
NEWS
cityam.com
No automatic happy ending for publishers that merge
I
T IS hard not to wince at the self-
delusion of yesterdays press
release from Pearson and
Bertelsmann. Describing the firms
agreement to merge Penguin and
Random House, Pearsons outgoing
chief executive Marjorie Scardino
says: Together the two publishers will
be able to... be more adventurous in
trying new models in this exciting,
fast-moving world of digital books and
digital readers. Really?
If theres one thing we know about
innovation, it is that being bigger
doesnt make it easier. It is often
hardest for established, successful
firms to adjust to the disruptive
technologies that give leaner,
younger and hungrier rivals the
chance to eat their lunch.
That is why a knockout success like
Fifty Shades of Grey, now doing so
well for Random House, came out of
self-published Twilight fan fiction.
Meanwhile Pearsons interim
management statement showed
Penguins revenues still in decline
down two per cent after nine months
of the year, better than the half year
figures, down four per cent. Clayton
Christensen of Harvard Business
School published his classic The
Innovators Dilemma 15 years ago. It
still needs to be more widely read.
Much has been said about how
this deal starts to make Penguin and
Random House big enough to get
more bargaining power with
Amazon, as if Amazon were the
giant in the room. But each is
already big enough for significant
influence. Random House had
revenues in 2011 of 1.7bn (1.4bn).
Penguin had 2011 revenues of 1bn.
In any case, when it comes to the
future of ebook pricing, its not
Amazon the combined publisher
needs to worry about so much as the
US Department of Justice. Random
House was the only big publisher to
fall outside the DOJs price-fixing
suit filed in April, that accuses firms
of colluding with Apple to fix ebook
prices artificially high. Penguin is
one of the firms named. Three
publishers, including Rupert
Murdochs HarperCollins, settled.
Penguin Group decided to fight.
A loss would be damaging, adding
extra risk to this weeks deal. But
whatever the rights and wrongs of
the case, Penguins decision to battle
not settle shows it ranging itself
against the disrupted world of low-
priced ebooks. It is not the sign of a
firm predisposed to adventurous
experiment with the form.
In the brave new world of
publishing, big firms count for less
and less. Big authors can tame
Amazon all on their own: JK Rowling
decided she wasnt going to let
Amazon distribute her ebooks, or
her publishers publish them, and
Amazon is still providing links to
Pottermore to buy Harry Potter
kindle editions. Celebrity authors
remain the backbone of the big
publishers Penguin namedropped
Tom Clancy and Pippa Middleton
yesterday but just as celebrities are
learning to speak with their fans
directly on social media, they may
not continue to see the need to share
book revenues with big publishers.
The next Fifty Shades of Grey may
not see the need to take a Random
House deal after breaking out. Thats
the painful possibility that a bigger
firm wont protect against.
CVC Capital to
lose chairman
A WAVE of new investors from the
Middle East and Far East seeking a
safe haven for their cash are helping
to fuel demand for London office
properties, according to new
research by BNP Paribas.
The French banks property arm
said overseas investors made up 61
per cent of London office
investment in the third quarter.
While some overseas investors
have been in the UK market for
several decades, BNP said it has seen
an increase in new entrants making
their first investments in the UK.
Diversification is a major driver,
as investors seek assets outside their
home country, but the UK is also
benefiting from a preference for
sterling investments, as investors
wait to see stability in the Eurozone
before investing there, Andrew
Cruickshank, international
investment director at BNP Paribas
Real Estate, said.
Middle Eastern investors, who
traditionally prefer outright
ownership, are also opting for
leaseholds for the first time, the
bank said.
Investment into the City from
foreign buyers fell in the third
quarter to 86 per cent compared
with 90 per cent in the second
quarter but was still up slightly
from 85 per cent in the second half
of last year.
Middle Eastern
investors drive
office demand
BY KASMIRA JEFFORD
THE CARLYLE Group revealed yes-
terday it is to submit plans this
week for the giant 1bn regenera-
tion of Londons South Bank
between Blackfriars Bridge and the
Tate Modern.
The nine-building scheme will
create 1.4m square feet of space
including 494 homes, shops and
450,000 sq ft of offices and will also
open Blackfriars railway viaducts
to create a thoroughfare along the
river.
The tallest of the buildings will be
a 48-storey residential skyscraper
that will stand at the foot of
the bridge opposite One
Blackfriars, which is being
built by Berkeley Homes.
The US private equity
giant said the two towers
will form a gateway,
connecting the City and
Southwark.
This is a once-in-a-life-
time opportunity to
truly regenerate
and reinvigo-
rate a large,
Carlyle reveals
a 1bn revamp
for Blackfriars
BY KASMIRA JEFFORD
important and extremely well locat-
ed but under-utilised site right on
the River Thames, Mark Harris,
Carlyle managing director at
Carlyle said.
The scheme, designed by PLP
Architecture, will also see parts of
the Upper Ground thoroughfare
reopen for the first time in 150
years.
The site is currently occupied by
Ludgate House, the headquarters of
publishing group UBM, and
Sampson House, which will become
vacant in 2015 and 2018.
Three of the new buildings will sit
on the western side of the site,
where Ludgate House office
stands, with the rest on the
eastern side.
Carlyle said the project,
which is due to complete
between 2020 and 2023,
would almost double the
number of permanent jobs
in the area to over 3,700 and
deliver 35,000 sq ft of public
space.
Mark Harris, Carlyle
managing director
8
NEWS
cityam.com
Carlyle aims to build a 48-storey tower (left) next to Berkeleys One Blackfriars (right)
The scheme will open up the Blackfriars railway viaducts and create pedestrian access
DEVELOPERS have tall ambitions
for Londons skyline, with more
than 100 residential towers being
built or planned across the capi-
tal, new research shows.
Soaring residential land val-
ues and a booming population
has prompted a revival in high-
rise towers, which lost their
popularity after a backlash
against the concrete block dis-
asters of the 1960s.
A report by agents Knight
Frank released yesterday said
there are 25 schemes current-
ly under construction in cen-
tral London which include
one or more tower over 20
storeys high.
A further 78 schemes
have been granted planning
permission, although not
all approved towers are
guaranteed to be built as
developers struggle to
raise sufficient funds.
Stephan Miles-Brown,
residential development
analyst, said: This is
Londons decade of
towers: with residen-
tial land values up
20.3 per cent in the
last twelve months
BY KASMIRA JEFFORD
and a population boom, a need for the
most effective use of space is evident.
However, only 30 per cent of the
schemes including towers with plan-
ning permission are underway par-
tially a symptom of the challenging
funding climate, he added.
The Tall Towers report, published
together with consultants EC Harris
and planning practice Barton
Willmore, said most towers are
designed for luxury living, with
buyers paying a premium for a
birds-eye view of the capital.
It estimates that the average
price of a flat increases by 1.5 per
cent per foot, the closer it is to the
top of the building.
The ten luxury flats at the top of
the The Shard, Europes tallest
tower which was officially com-
pleted in July, are expected to sell
for up to 50m.
Other developments include
The Heron, a 36-storey residen-
tial tower, which is almost ready
for residents in the City of
London.
The Tower at St George
Wharf, which at 49 storeys will
become one of Europes high-
est residential towers, will be
completed next year.
IS BUILDING RESIDENTIAL HIGH RISE
APARTMENTS A GOOD IDEA?
Interviews by William Campbell
Having people live in large high-rise build-
ings, which are also used as ofces and shops,
integrates the building into the city. But London doesnt
want to lose the street level feel that is unique to the city.
These views are those of the individuals belowandnot necessarily those of their company
MARK TINKER
AXA FRAMLINGTON
There is big money in high-rise space being

used as residential housing, with a good
example of this being the Barbican. It was built in the
1960s but people still love living there.
NICK SCOTT
SCOTT CITY RESIDENTIAL
High-rise buildings offer a different style of
residence that allow more people to live in
cities. In Manhattan, residences in tall buildings are seen
as a cool, modern way to live, but with a good view!
KRISHNA
BODDUPALLY
LEPUS
Regeneration of London Bridge

to cause five years of disruption
COMMUTERS through London
Bridge were yesterday warned to
brace themselves for five years of
daily disruption as Network Rail
unveiled its plans for the
regeneration of the Citys oldest
station.
The biggest redevelopment in
the capital in a generation begins
next May, and will give London
Bridge the biggest concourse in the
country as well as new platforms,
lifts, escalators and entrances on
Tooley Street and St Thomas Street.
BY KATIE HOPE
However, the work will affect
Southern, Thameslink and
Southeastern services until 2018,
Network Rail said.
The rail firm said it would carry
out the work in distinct phases in a
bid to minimise passenger
disruption.
Southerns south London line
services between Victoria and
London Bridge via Denmark Hill
will be withdrawn from 9
December, but Network Rail said
people in Denmark Hill and
Peckham Rye could instead use the
London Overground extension
connecting Clapham Junction to
Surrey Quays. And From May next
year three platforms 14, 15 and
16 will be closed to the public.
The station, built in 1836, will
remain open during the work,
which is part of the 6bn project to
upgrade Thameslink.
Train passengers will be the
biggest winners from this
investment as London Bridge is
transformed from one of the
capitals most congested stations
into one of the most modern, said
Transport secretary Patrick
McLoughlin.
CITYVIEWS
An artists impression of how the redeveloped station will look
The Shards 10 flats are to
sell for around 50m
9
NEWS
cityam.com

100 residential
towers planned
across London
NOMURA Holdings, Japans largest
investment bank, posted its fourth
straight quarterly profit yesterday, as
an upswing in its fixed income oper-
ations helped it counter weak equity
markets and the fallout from an
insider trading probe.
The results were weaker than
expected as the company restruc-
tures operations following an ill-
fated expansion overseas through
the 2008 acquisition of parts of
Lehman Brothers.
But finance chief Junko Nakagawa
said the benefits of a $1bn cost-cut-
ting programme outlined in August
and largely focused on Europe could
show up in the companys results by
the final quarter of its fiscal year to
the end of March.
You will be able to see the real
effect of cost-cutting plan in quarter
four or at the beginning of the next
fiscal year starting in April 2013,
Nakagawa told a media briefing.
Nomura, whose top competitor in
Japan is Daiwa Securities Group,
reported a net profit of 2.81bn yen
for the July-September second quar-
ter, against a loss of 46.09bn yen in
the same period last year.
The results were supported by a
boost in bond trading and other
fixed income products, a major fac-
Fixed income
boosts Nomura
as Europe bites
BY HARRY BANKS tor also bolstering banks elsewhere,
including Morgan Stanley and JP
Morgan.
Net revenue in fixed income opera-
tions doubled to 88.6bn yen from a
year earlier, helping Nomuras whole-
sale division swing to a pretax profit
of 200m yen from a year earlier
70.7bn yen loss. The wholesale busi-
ness includes investment banking.
The strong fixed income perform-
ance helped the wholesale division
generate a 68 per cent increase in net
revenue to 137.1bn yen and helped
offset a four per cent slide in net rev-
enue from equity trading.
Still, Nomura also lost underwriting
business due to an insider trading
scandal, which triggered a shake-up
of top management. Its European
operations also showed deepening
pretax losses as the company account-
ed for cost cutting.
Most countries to miss deadline
to implement new bank rules
ONLY SIX globally important
banks are likely to be subject to
new Basel III banking rules from
the internationally agreed start
date, the Basel Committee
warned yesterday, as most
countries have failed to meet the
requirements as planned.
The rules are meant to come
into effect on 1 January 2013.
But less than three months
away from that deadline, only
eight of the 27 countries involved
BY TIM WALLACE have issued final regulations on
time.
The US and the EU are both set
to miss the deadline.
Part of the problem in the EU
comes from disagreements over
the rules interpretation.
The Committee believes the EU
is materially non-compliant in
definitions of capital and the
internal ratings-based approach to
credit risk though the European
Commission disagrees with the
scale of the reported divergence.
Japanese authorities have still
not issued rules on capital buffers,
but are expected to do so by 2015.
And the US is materially non-
compliant in securities
exposures, with the Basel
Committee fearing the Dodd-
Frank Acts prohibition on the use
of external credit ratings cannot
be proved to be stronger than the
international agreements
proposals.
Again, the US authorities
disagree with the Committees
assessment of their proposed
rules. European Commission boss Barroso rejects claims the EU is not ready for the new rules
Nomura Holdings Inc
286
288
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29Oct
NEDBANK Group said yesterday it
is on track for double-digit profit
growth this year, the latest South
African bank to benefit from a rise
in higher-risk lending.
Hampered by weak corporate
demand for credit, the countrys
big banks have ramped up
unsecured lending the profitable
but riskier practice of giving loans
that are not backed by collateral.
Nedbank said in a trading
Old Mutuals Nedbank lifted by
higher-risk unsecured lending
BY CITY A.M. REPORTER
statement that it expects to meet
its full-year target for earnings
growth.
Net interest income, the measure
of earnings from lending, increased
nine per cent to 14.5bn rand (1bn)
in the nine months to 30
September, the bank said.
Non-interest revenue, which
includes fees and commissions,
rose 14 per cent to 12.4bn rand.
Total loans were up by seven per
cent, while the ratio of bad debt
charges decreased.
10
NEWS
cityam.com
SHARES in Swiss bank UBS soared
yesterday in anticipation of a new wide-
spread round of job cuts at the institu-
tion, which are expected to be
announced along with its third
quarter results today.
The bank is expected to announce up
to 10,000 positions will go, largely in
the fixed income units of its invest-
ment banking arm.
That amounts to up to one-sixth of its
global workforce, and would represent
a large step up from the 3,500 job cuts
previously announced.
Instead the bank is likely to focus
resources on its wealth management
business, which has been a more
profitable unit.
Shares jumped 7.28 per cent yesterday
as investors looked to welcome the cost-
saving steps. If the announcement does
Prospect of UBS
cutting further
jobs lifts shares
BY TIM WALLACE
come, UBS will join an industry-wide
rush to reduce costs to shore up profits
at a time of weak market activity and
increased regulatory pressures.
In recent months rival institutions
including Nomura, Deutsche Bank and
Credit Suisse have all announced plans
for more job losses to shore up profits
and restructure their businesses.
UBS AG
12.40
12.20
12.60
12.80
13.00
13.20 CHF
13.12
29Oct
KIAN ABOUHOSSEIN
JP MORGAN
We believe staff
reductions are
mainly related to xed
income as well as sup-
port functions. We esti-
mate the xed income
business has 2,000 front
ofce personnel. So, in
our view staff reduction
of about 6,000 is more
realistic, which would
still be nine per cent of employees at the end of
the second quarter and lead to cost
savings of around SFr2.2bn.
JON PEACE
NOMURA
Credit Suisse and
UBS had broadly
similar cost/income
ratios in the rst half of
2012, on similar annual
underlying cost bases.
Since the rst half, Credit
Suisse has now
increased its additional
cost-savings target by
SFr2bn or 9.5 per cent.
With UBS also a long way through its 2013 plan,
we believe a similar SFr2bn medium-
term cost reduction could be feasible.
ANDREW LIM
ESPIRITO SANTO
Despite the posi-
tive reaction to
reports UBS is undertak-
ing a radical investment
bank restructuring, we
believe it still does not
do justice to the poten-
tial signicant capital
release. We accept there
is likely to be material
book value erosion from
restructuring, but do not believe these come
close to erasing the estimated SFr20bn
capital released from the plan by 2016.
ANALYST VIEWS
HOW MUCH WILL COST-CUTTING AT UBS SAVE
THE BANK?
Interviews by Tim Wallace
WEALTH MANAGEMENT: Page 28
L L
12
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MOST alternative investment
managers are unprepared for
incoming European regulations,
which could leave them unable to
offer services to investors from July
2013, according to a PwC study
published yesterday.
The consulting firm found 85 per
cent of managers have not started
compliance or implementation
programmes to meet the incoming
Alternative Investment Fund
Managers Directive (AIFMD).
PwC believes it will take up to 12
months to implement major
projects, leaving most of these
managers unable to meet the
deadline.
As a result, investors will face a
sudden shortfall in places to put
their money a particularly
damaging result at a time when
other markets are offering poor
returns, driving investors into
alternatives, PwC warned.
It is ironic that European rules
which aimed to protect investors are
likely to end up limiting the choice
of those investors, said PwCs Rob
Mellor. Against a low return
environment, institutional
investors, including the pension
funds for Europes workers, will be
looking to access global markets and
the best managers implementing
AIFMD in time is therefore
potentially a significant barrier.
Investors set to
lose out from
new EU rules
BY TIM WALLACE
DIRECT Line yesterday announced
plans to cut 70 senior management
positions as it looks to make substan-
tial cost savings.
The insurer said that as a result of
the changes Jonathan Davidson,
chief operating officer, and manag-
ing director Sheree Howard, have
decided to leave the organisation.
The news follows last months
announcement that it would sack
900 workers, including the closure of
an entire call centre in Stock-on-Tees,
near Middlesbrough.
Chief executive Paul Geddes said:
We are creating a simpler, more effi-
cient business which costs less to
run. As market leader, these changes
are essential for us to succeed in a
competitive marketplace. I dont
make these changes lightly, and we
will do all we can to support those
affected.
As a result of the changes Angela
Morrison, chief information officer,
will join the executive board.
Howards responsibilities for ensur-
ing Direct Line complies with the
new Solvency II insurance regula-
Direct Line cuts
70 jobs in top
management
BY JAMES WATERSON
tions have been handed to Jose
Vazquez, chief risk officer.
The cost-cutting measures are part
of the companys stated aim of
returning a 15 per cent return on
equity, partly by cutting out 100m of
costs by 2014.
The firm, which was previously part
of RBS, enjoyed a successful London
flotation earlier this month and the
stock has performed well since the
IPO, rising to 190p and valuing the
company at 2.85bn.
However 65.3 per cent of the compa-
ny is still owned by RBS, which has to
offload its shares by the end of 2014,
meaning the firm must remain
attractive to new investors.
Direct Line Insurance
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190.25
29Oct
FORMER Cofunds boss Brett
Williams yesterday launched a
new alternative investments
business, Old Burlington
Investments.
The company aims to take
advantage of the Enterprise
Investment Scheme (EIS), which
offers tax breaks to investors in
small, unlisted companies.
It will initially launch two EIS-
focused funds, both run in
co-operation with industry
investment specialists.
The Renewable Energy Fund will
make investments in green
Brett Williams launches funds
to back alternative investments
BY JAMES WATERSON technology and energy generation
schemes where revenues are
underpinned by the government.
Meanwhile an AIM Growth Fund
will allow private investors to
access new issues on Londons
junior stock market.
Williams said: We believe
alternatives are poised for very
significant growth over the next
three years, partly because of
legislative stimulus and partly
because investors simply arent
getting the returns they need from
traditional asset classes.
Old Burlington is backed by
LW
2
, a private equity firm part-
owned by Williams.
15
NEWS
cityam.com
A reminder that starting from October 2012, all employers must enrol eligible workers
into a qualifying workplace pension scheme. The date you have to do this by depends
on the size of your company, but to give yourself time to prepare, visit The Pensions
Regulator at www.tpr.gov.uk/actnow where youll nd out all you need to know.
Workplace pensions. Were all in.
Williams is a former head of Skandias wealth management unit and ex-Cofunds CEO
THE LEADERS of Spain and Italy
both played down their need for a
full bailout yesterday, during a joint
conference in Madrid.
Speaking alongside Italian techno-
crat Prime Minister Mario Monti,
Spains Mariano Rajoy said a rescue
package was not essential at this
moment.
As soon as I think its good for the
general interests of Spain to ask for
it I will ask for it. [But] while I dont
think that, I wont, he added.
Monti, meanwhile, insisted that
Italy is not in such a condition to
require a bailout at all. Brussels is
believed to be waiting for Spain to
succumb to a bailout offer, a move
that could trigger the European
Central Banks (ECB) new bond
buying plan.
Some analysts believe that any
such move could ease the pressure
on Italys borrowing costs on the
bond markets, even if it did not call
for its own bailout package.
BY JULIAN HARRIS
Both leaders went on to stress their
commitment to the timetable set
out to establish a banking union,
with Rajoy calling for much greater
European integration.
And Monti also played down fears
that Silvio Berlusconis objections to
the governments austerity meas-
ures could threaten the coalitions
stability.
Yields on Italian bonds rose yester-
day, partly blamed on Berlusconis
comments.
Meanwhile across the Ionian sea,
political relations appeared more
harmonious. A senior official at
Greeces socialist Pasok party said
that it would not automatically fol-
low the Democratic Left partys
refusal to endorse the measures.
We will safeguard political stabili-
ty and stick to our strategy of safely
exiting the crisis, the official said.
Pasok will hold high level talks
today in an effort to find agreement
over cuts that are required to ensure
that Greece receives the next
tranche of its bailout.
Monti and Rajoy repeated their support for a banking union across Europe
IN BRIEF
Hollande sticks by austerity pledge
n French President Francois Hollande
has promised EU partners that France
will cut its public deficit to three per
cent of national output next year from
an estimated 4.5 per cent this year
despite stagnating growth. For the
moment we dont have any reason to
think that our targets, which we set in
the budget law, will not be reached,
Hollande said after meeting the OECD.
Spanish bad bank discounts assets
n Spanish authorities said yesterday
that they would apply steep discounts
to property assets transferred into a so-
called bad bank and pledged significant
returns in a move to lure reluctant
investors. The bad bank is a condition
for Spain to receive up to 100bn in
European aid for crippled lenders in the
struggling Eurozone state.
German inflation at two per cent
n German consumer price inflation
held steady at two per cent in October,
just above the European Central Banks
target for price stability, preliminary
data showed yesterday. On a monthly
basis, German consumer prices were
unchanged, the same as in September,
data released by the Federal Statistics
Office showed. The final price data will
be published on 9 November.
Spains retail sales in record drop
n Spanish retail sales fell at their
fastest pace on record in September,
diving 10.9 per cent year on year,
yesterdays National Statistics Institute
data showed. The drop was the biggest
in calendar-adjusted terms since current
records began in January 2004, and
marked the 27th monthly decline in a
row, the Institute said.
17
NEWS
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Deutsche Boerse blames weak
market for cut in revenue target
GERMAN exchange operator
Deutsche Boerse yesterday
abandoned its 2012 revenue target
after third-quarter revenues
dropped thanks to subdued capital
market activity.
Third-quarter earnings before
interest and taxes (Ebit) fell to
245.4m (197.6m) in the third
quarter, down from 333m in the
same period a year earlier, the
Frankfurt-based stock and
derivatives exchange operator said
yesterday.
Deutsche Boerse had been
expected to post quarterly Ebit of
247m.
Based on the continued weak
capital market environment in
October, the company said it now
expects full-year 2012 net revenue
of around 1.95bn, well below the
target range of between 2.15bn to
2.3bn.
In July, Deutsche Boerse
signalled it may have to abandon
its full-year revenue target.
For the third quarter, Deutsche
Boerse said net revenue was 471m,
down from the 578.6m in the year-
earlier period.
We are planning a further
increase in investments for the
next financial year, to further
accelerate the development of
infrastructure and expansion into
new growth areas against the
background of a new regulatory
framework for global financial
markets, said finance chief Gregor
Pottmeyer.
At the same time we are
systematically continuing the strict
management of operating costs
that began well before the
financial crisis, he added.
Spain and Italy
play down need
for rescue cash
SANTANDER UK chief executive Ana
Botin will this week join the
Mayors Fund for London as a
trustee.
Botin, who has led the UK
subsidiary of the Santander Group
for almost two years, will become a
trustee on 1 November, after being
nominated to the board by the
charitys patron, Boris Johnson.
The Mayor of London Boris
Johnson said yesterday: Having
personally nominated Ana to join
the Board of Trustees its wonderful
to see both her and Santander UK
getting behind the capitals young
people. I wholeheartedly encourage
other businesses to do the same.
The fund invests in projects that
aim to improve the job chances of
disadvantaged children.
I have been
impressed with the
approach to
funding projects
that really make a
difference,
helping young
people develop
new skills,
said Botin.
Ana Botin
is CEO of
Santander UK
Santanders
Ana Botin joins
Mayor charity
BY ELIZABETH FOURNIER
18
NEWS
cityam.com
ONE MILLION families will learn that
they are to have their child benefit
payments cut, as the coalitions plan
to reduce middle class benefits takes
effect.
HM Revenue & Customs said yester-
day it would begin sending the letters
to households that it believes will be
affected by the change, which is due
to be introduced on 7 January 2013.
Anyone currently claiming child
benefit will lose at least part of it
if they or their partner earn
more than 50,000. Their com-
bined household income will not
be taken into consideration.
As a result households where
one person earns more
than 60,000 will
immediately lose the
entire payment,
which is worth
1,055 a year for
the first child and
697 for subse-
quent offspring.
Million families
learn of cuts to
child benefit
BY JAMES WATERSON
Other families will have it gradually
phased out, losing one per cent of the
benefit for every 100 earned over
50,000.
Conservative backbenchers have
raised concerns about the policy,
prompting the party to release inter-
nal polling data showing that 82 per
cent of people support the policy.
This is one of the tough decisions
the government has to make, the
Prime Ministers spokesman said
yesterday.
It is very hard to justify paying
child benefit to the wealthiest 15
per cent of families. Many more
people are on lower incomes and
this government is trying to help
people on the lowest wages.
Although the plans are designed to
save the government 1.7bn a
year, they will result in many
more people having to com-
plete a tax return which
could increase admin costs.
Infrastructure projects failing
to attract pension fund cash
INFRASTRUCTURE investment
projects are still not set up in an
attractive way for most pension
funds to invest, the industry
warned yesterday, despite the
government spending the last year
trying to persuade the funds to put
money into big projects.
The aim is to create a fund for
pension funds, creating a market
for funds to invest to deliver what
they need long-term, low risk,
inflation-linked returns with low
leverage, said Joanne Segars from
the National Association of
BY TIM WALLACE
Pension Funds (NAPF).
At the moment, they are often
highly leveraged and geared, at the
expense of inflation linking, so the
projects are riskier than pension
funds really want.
Segars said pension funds want
the government to review the
structure of contracts, looking to
favour long-term, low risk investors.
She also warned that they need
to find a way around political
instability, in case a future
government changed the rules on
infrastructure assets held by
pension funds.
And she added that funds want
to avoid construction risk
associated with the projects.
We are not going to build a
2bn fund overnight, but we have
got a good number of investors
interested so far and hope to
launch in the first half of next
year, Segars said.
But Treasury minister Danny
Alexander argued steps have been
taken in the right direction.
Pension funds have made good
progress, and we are seeing more
interest, he told City A.M.
Now they have money on the
table, we have the ability to engage
in projects to suit them.
LLOYDS Banking Group and the
Royal Bank of Scotland are among
the firms to have joined a new
industry-wide task force set up
following the Mary Portas review
last year to tackle the decline of
the high street.
The Distressed Town Centre
Taskforce, which met for the first
time last week, revealed its list of
members yesterday, which include
representatives from the British
Council of Shopping Centres, the
Mary Portas taskforce set up to
revive UKs ailing high streets
BY KASMIRA JEFFORD
British Property Federation and
the Local Government
Association.
The newly-formed group said its
first priority will be to carry out a
review of UK towns and cities to
identify how to tackle the growing
number of empty shops.
Recent figures from the Local
Data Company showed that
around 20 shops were closed each
day in the first half of the year.
The Taskforce will address
property-related issues raised in
the Mary Portas report.
The so-called Queen of Shops was the brains behind a specific group to town centres
DEFENCE secretary Philip
Hammond yesterday announced a
further 350m of funding to replace
Britains nuclear deterrent as Lib
Dem leader Nick Clegg insisted that
no final decision had been taken to
progress with the project.
Yesterdays announcement means
that 700m has been allocated this
year to fund design work on a new
submarine to carry Trident missiles
from 2028 onwards.
BAE Systems will receive 315m of
the latest tranche of funding, with a
further 38m going to Babcock.
Hammond said: This latest
BY JAMES WATERSON
expenditure for the next generation
of nuclear-armed submarines is an
investment in UK security and the
British economy, sustaining high-
quality jobs and vital skills.
However Lib Dem leader Nick
Clegg yesterday insisted the
project will not be given the go-
ahead until 2016, however
much other people may not
like it that way.
In the meantime his
party will continue to
call for talks over
finding an alternative
replacement for the
submarine-based
Trident.
We need to have a considered
facts-based debate about what kind
of deterrent we need in the future,
the Deputy Prime Minister said.
Lets remember the idea of a
like-for-like, entirely
unchanged, replacement for
Trident is basically saying we
will spend billions of pounds
on a nuclear missile system,
designed for the sole
strategic purpose of
flattening Moscow at the press
of a button.
A TASKFORCE set up by the G20s
regulatory arm, the Financial
Stability Board (FSB), last night
proposed seven recommendations
to improve banking risk
disclosures.
The recommendations include
listing risks from the banks
business model, outlining sources
of funding, how risk-weighted
assets are calculated, forbearance
of loans and how this affects the
reported level of impaired or non-
performing loans.
Disclosures that describe risks
and risk management practices
transparently help to build
confidence in the firms
management, which is particularly
G20 risk disclosure suggestions
aim to restore faith in banking
BY CITY A.M. REPORTER important in attracting debt and
equity investors and may in turn
support higher equity valuations.
The taskforce, made up of banks,
investors and accounting firms,
said many of the recommendations
would start to be weaved into
annual reports for 2012 or 2013
onwards. The move was broadly
welcomed in the City last night.
Confidence in financial services
is a vital component in the recovery
of economies across the world,
said Deloittes Mark Rhys.
The recommendations should
make it easier for investors and
analysts to understand the risks a
bank has, and help to restore trust
in the industry.
HSBC said the recommendations
were comprehensive and timely.
EU ANTITRUST regulators have
told trader Glencore to offer
concessions in its zinc operations
to ease concerns about its
planned $33bn (21bn) buy of
miner Xstrata, a person familiar
with the matter said yesterday.
The European Commission,
which handles competition
regulation in the 27-member
European Union, is currently
examining the deal and has set a
8 November deadline for its
decision.
The EU competition watchdog
told Glencore about its concerns
on Friday and has given the
world's largest diversified
commodities trader until today to
EU regulators want Glencore
concessions on Xstrata deal
BY HARRY BANKS
come up with concessions, the
source said.
Neither Glencore nor Xstrata
had any comment.
The European Commission was
not immediately available for
comment.
Analysts say the combined
company could have 50 per cent
of the European market for zinc,
making that a logical area of
concern for regulators. Zinc is
used in metal alloys, especially in
applications where it can prevent
corrosion.
Industry analysts said the most
likely concession could be the
disposal of Xstratas San Juan de
Nieva refinery in Spain, the
largest zinc production unit in
the world.
Philip Hammond said it was
an investment in UK security
George Osborne was forced to
water down the original
proposals after protests
Clegg disputes Trident spend as
Hammond pledges 350m more
WITH Halloween almost upon us,
supermarket Asda has conjured up
some facts and figures on the annual
fright night.
Given that the 31 October was a
rather insignificant day in the British
diary 10 years ago, The Capitalist was
surprised to learn that the UK
Halloween market is now worth
300m. Poor old Guy Fawkes has been
shoved out of the limelight, and
Halloween is now Asdas third most
lucrative sales flog after Christmas
and Easter.
For those brave souls hoping to get
spooked in the City tomorrow The
Capitalist has conducted some thor-
ough research and suggests starting
off at The Ten Bells on Commercial
Street. It was formerly known as the
favourite haunt of Jack the Ripper, so
no explanation necessary as to the
pubs haunted credentials. Follow this
by a guided walk around Sinister
Smithfield which promises tales of
execution, body snatchers and a
famous meat market. To finish, a visit
to City watering hole Abacus, a meat
market of a different kind but no less
terrifying on a Wednesday evening.
19
cityam.com
New research was released
yesterday on the trend of
kidflation, as coined by retail and
commercial bank Santander. The firm
notes that prices of items bought by
children, such as sweets and chocolate,
have risen at a rate of 4.7 per cent in the
last year. A pretty hefty hike considering
it is two-thirds faster than the retail price
index. Its bad news for parents looking
to negotiate fixed rate pocket money in
these dark times of recession. Not
fantastic news either for any home-
owners looking to stock up on sweet
bribes to appease trespassing trick-or-
treaters tomorrow on Halloween night.
How would they like them (toffee)
apples? Probably not much.
If youre reading this on a
packed 6am train to the City
braced for another 12 hours at your
desk before trudging home in the
dark, then Channel 4s offer may perk
you up. Its looking for people who
feel their work/life balance is out of
synch. If you want to make some
dramatic changes next year, this could
prove a starting point. The new series,
produced by True North Productions,
is seeking couples and families who
want to overhaul their lives by running
their own business. If you ever fancied
yourself as a coffee shop owner, or
running a pig farm then nows your
chance. To be considered, email
compareyourlife@truenorth.tv with
some information about yourself and
your current situation.
cityam.com/the-capitalist
THECAPITALIST
EDITED BY CALLY SQUIRES
Got A Story? Email
thecapitalist@cityam.com
To register go to
Our knowledge on MT4 isnt.
For the first time ever, were opening our doors to host
our first live trading workshop. And youre invited.
Sign up today and join Chief Market Analyst James Hughes
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Live Forex and CFD trading involves significant risks.
Losses can exceed your initial deposit.
AVIATION maharajah Richard
Branson took to the streets of
Mumbai for the launch of Virgin
Atlantics new Mumbai-London
service, which began yesterday.
In typical Branson style he was
decked head to toe in local dress
and sitting on the roof of a taxi
while Indian performers and
cheerleaders danced around him.
However, not even his warm
embrace of the local culture
could secure him position as top
dog with Mumbais hoteliers.
The Capitalists mole reports
that Branson has been forced to
stay in a mediocre suite in the
Mumbai Oberoi, a mere one
bedroom and one reception
room (stocked with warm,
distinctly low quality white wine
to add insult to injury).
The reason for the hotel snub
is because Bransons publicity
tour happens to coincide with
the arrival of several Arabian
sheikhs, who are hogging all the
best rooms in town.
Virgin Atlantic founder Sir Richard Branson and his entourage cruise the streets of Mumbai
Posh
pumpkins:
The Fortnum
& Mason
hamper and
its gruesome
carving
competition
Branson the slumdog billionaire
Where to get
spooked in the
City tomorrow
F&C ASSET Management suffered
3.7bn in net outflows in the third
quarter, as a large planned client
withdrawal offset a positive
investment performance, the
company said yesterday.
Assets under management had
fallen to 96.8bn at the end of
September from 98.2bn at the
beginning of July, due in part to a
previously announced 2.9bn of
withdrawals of fixed income assets
by Friends Life, according to the
companys trading statement.
Its consumer and institutional
assets under management increased
by 500m to 36.74bn, including
400m of net inflows from
institutions and a 2.2 per cent
investment gain. Friends Life is set to
withdraw a further 2.4bn in the
final quarter of 2012, F&C said.
The impact of foreign exchange
movements also contributed to
968m of the net outflow figure, the
company said. The update comes a
year after executive chairman
Edward Bramson, who won control
in a controversial management coup
18 months ago, announced a shake-
up which set out to cut costs, reduce
staff and focus on institutions.
Withdrawal of
Friends Life a
knock to F&C
S
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U
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C
E
:

B
A
N
K

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F

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N
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LENDING to individuals bounced
back in September, data out yester-
day showed, as the full impact of
the Funding for Lending scheme
(FLS) began to be felt.
Consumer credit climbed 1.2bn
in the month, the Bank of England
said, in the second month of the
government and Bank of Englands
plan to boost lending.
Analysts said the rise added to the
case suggesting the underlying
economy was finally recovering
from years stuck in the doldrums.
This might be a reflection of
improved underlying health in the
economy, said Ross Walker at RBS,
but Walker went on to warn that
the overall lending situation was
anaemic despite the signs of
improvement.
September also saw a 0.5bn rise
in mortgage lending, the Bank
said, as rates on new secured loans
Lending jumps
as government
scheme helps
BY BEN SOUTHWOOD
slid from 3.84 per cent on average
in August to 3.77 per cent in
September.
LSL Property Services boss David
Newnes called the mortgage market
buoyant, but said the improve-
ments were not enough. He cited
low loan-to-value ratios on available
loans, as well as strict capital ade-
quacy requirements as major
restrictions on the markets health.
Rates on new unsecured loans
plunged from 7.11 per cent on aver-
age to 6.72 per cent on average in
the same period. However savers
were hit by the falling interest
rates, with average returns on new
time deposits slashed from 3.01 per
cent in August to 2.75 per cent in
September.
The business lending data painted
a more sombre picture of the mar-
ket. Lending drooped 0.9bn during
September, the data showed, driv-
ing the total 3.1 per cent below
where it was a year ago.
Broadbent: Construction set to
start growing again this spring
PUBLIC sector spending on
construction is stabilising and
private activity is growing,
meaning the sector will at last start
to recover early next year, a top
policymaker said yesterday.
The Bank of Englands Ben
Broadbent believes the industry has
also begun to overcome its long
productivity problems, again
contributing to growth.
Official data show the sectors
output fell 11 per cent in the last
year, now standing 18 per cent
below its pre-crisis peak.
BY TIM WALLACE
One thing that does not account
for the scale of the slump since
2008 is public-sector spending,
Broadbent said. Public sector
investment grew strongly during
the recession itself and in line
with the plans formulated by
the last government and
matched by the current
administration has since
fallen back.
Public sector investment is
still slightly higher than it was
on the eve of the crisis and it
accounts for only a quarter
of sectoral demand
anyway.
Rather, he said a boom in lending
burst and hit private sector
demand.
As state spending is stabilising at
a level above that at the start of the
crisis, he said growth is now
returning.
And in nominal terms,
work on private-sector
construction projects has
grown by just over five per
cent a year over the past
couple of years, he added.
INDIAS central bank faces
growing pressure to cut interest
rates today for the first time since
April after the finance minister
pledged to rein in the countrys
fiscal deficit.
Remarks by finance minister
Palaniappan Chidambaram at a
hastily called news conference
yesterday that he would nearly
halve the deficit in just over four
years had increased the chances
for a rate cut, some analysts said.
Net-net, the odds for a rate cut
have increased because of todays
press conference, said A.
Prasanna of ICICI Securities
Primary Dealership in Mumbai.
Indias attempts to cut deficit
may see interest rates slashed
A Reuters poll on 19 October
found most economists expected
the Reserve Bank of India to keep
its policy repo rate unchanged at
eight per cent.
Nearly half said the RBI would
take a more targeted measure and
cut the cash reserve ratio, the
share of deposits banks must hold
with the central bank, from 4.5
per cent in an effort to get banks
to pass along earlier rate cuts to
borrowers.
The central bank has kept the
policy repo rate at eight per cent
since April despite calls from
members of the government and
industry for action to revive the
countrys flagging economic
growth.
20
NEWS
cityam.com
Exclusive VIP Packages Available
PRESENTED BY
BANK LENDING SHOWED SIGNS OF LIFE IN SEPTEMBER
HOME LOANS RECOVERED IN SEPTEMBER
Nov
0.5
0
-0.5
1
1.5
2 Netflow, bn
Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
-2
-3
-4
-5
-1
1
0
2
3 Netflow, bn
THE FALL IN BUSINESS LOANS EASED LAST MONTH
CONSUMER CREDIT BOOMED LAST MONTH
Nov Oct
0.4
0
-0.2
-0.4
-0.6
0.6
0.2
1.0
0.8
1.4
1.0
Netflow, bn
Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Netflow bn
Ben Broadbent joined the
Bank of England in 2011
IN BRIEF
Tetragon buys hedgie Polygon
nTetragon Financial Group yesterday
bought Polygon Management, once
one of the worlds biggest hedge
funds and a high-profile casualty of
the financial crisis, for $98.5m
(61.4m), to expand its asset
management business. Tetragon said
it will use 11.7m of its non-voting
shares to buy Polygon, founded in
2002 by Paddy Dear and Reade
Griffith, as well as its stakes in LCM
Asset Management and GreenOak
Real Estate. Dear and Griffith are also
directors of Tetragon, which invests
mainly through long-term funding
vehicles such as collateralised debt
obligations.
NBC Universal has won the US
broadcast rights to show Premier
League games for the next two
seasons beating current rights
holders Fox, the football league
said yesterday.
The deal raises major questions
over the future of Fox Soccer
Channel, which has now lost
rights to North Americas Major
League Soccer, Italys Serie A and
its flagship English league but
retains rights to UEFAs
Champions League.
The Premier League statement
did not give financial details of
the deal but Sports Business Daily
cited sources saying NBCs bid was
for around $83m per year, more
than triple the $23m per year that
reports say Fox is paying.
The Premier League has grown
in popularity in the US in recent
years with viewing figures rising
significantly.
Last season a tape-delayed
broadcast of Chelsea v Liverpool in
November drew a US record 1.7m
total viewers on Foxs free-to-air
channel.
The channels that will be used
have a combined reach of 95 per
cent of the US viewing public each
month, the league said.
NBC wins rights to broadcast UK Premier
League football games for next two seasons
MINER Anglo American Platinum
yesterday offered an olive branch to
striking miners, offering for them to
return to work no later than 7am
this morning to end a six week strike
that has crippled production.
The worlds largest platinum
miner, which has been in discussions
with the recognised South African
unions, yesterday reached an agree-
ment for employees to return to
work. No wage details were dis-
cussed, it said.
Amplats said yesterday that it will
offer a one-off hardship allowance
of ZAR2,000 (144) to compensate
miners who are in financial difficul-
ty due to the strike, but it will only be
paid if they report for duty this
morning. The workers who didnt
strike will also receive ZAR2,000.
The offer includes reinstating the
12,000 dismissed workers, who were
fired last month after failing to turn
up to a disciplinary hearing.
The employees who heed the ulti-
matum will return to work on the
same terms as existed before the
strike, but will receive a final written
disciplinary warning.
Workers who do not report for
work this morning will either
remain dismissed, or be ineligible for
the ZAR2,000 payment.
Chris Griffith, chief executive of
Amplats, said yesterday he was call-
ing for calm in the strike-affected
Amplats makes
miners offer to
return to work
BY CATHY ADAMS areas.
Our commitment to the platinum
centralised engagement structures,
driven by the Chamber of Mines, has
not changed and, as we have men-
tioned, we are considering the possi-
bility of bringing forward wage
negotiations that are within our cur-
rent arrangements, he said.
The six-week strike, which has cost
Amplats around 3,800 ounces of plat-
inum each day and around ZAR1bn
in revenue, spread to the miners
Rustenberg operations in mid-
September, before quickly spreading
to its Kumba Iron Ore unit.
At the start of October, industrial
action began at the Sishen mine,
which has led to the miner losing
around 2.2m tonnes of iron ore.
The agreement comes just days
after Anglo American chief executive
Cynthia Carroll announced she
would step down from her role.
Anglo American shares closed down
0.85 per cent yesterday at 1,917p.
Anglo American PLC
1,860
1,880
1,900
1,920
1,940
1,960 p 1,917
29Oct
Telefonica chief Csar
Alierta is cutting debt
PREMIER Oils offer of a
convertible bond swap has been
met with strong demand from
investors.
Holders representing more than
98 per cent of $250m (156m)
worth of Premier Oils convertible
bonds due in 2014 elected to swap
into guaranteed convertible bonds
due in 2018, the oil and gas
company said yesterday.
The new bonds, which will have
a conversion price of $7 and a
coupon of 2.5 per cent, compare to
the existing bonds which have a
conversion price of $6.69 and a
coupon of 2.875 per cent.
The settlement date for the
bonds is expected to be in the next
few days.
Chief executive Simon Lockett
Premier Oil bondholders jump
at offer for convertible swaps
BY CATHY ADAMS said that he welcomed the high
level of response from
bondholders. The exchange offer
takes advantage of improved
terms and longer maturity
available in the current
convertible markets, he said.
Premier, listed on the FTSE 250,
announced the exchange offer two
weeks ago, and said that the swap
was conditional upon a minimum
of $100m of existing bondholder
acceptances.
The firm, which has operations
in the North Sea as well as a
presence in Asia, the Middle East,
Africa and Pakistan, has a
resource base in excess of 500m
barrels of oil equivalent. It is
currently producing around
60,000 barrels of oil each day, but
is targeting a rate of 100,000
barrels a day in the medium term.
21
NEWS
cityam.com
Chief executive Simon Lockett joined Premier 18 years ago from Anglo Dutch giant Shell
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O2 Germany set to raise 1.5bn
in years biggest European IPO
EUROPEs biggest initial public
offering (IPO) this year, of the
German branch of O2 owner
Telefonica, is set to raise about
1.5bn (1.2bn), the Spanish
telecoms giant said yesterday.
The Frankfurt-listed company,
also called O2, is expected to
begin trading today at 5.60 per
share.
The IPO is Germanys biggest
since 2007 when engine
BY HARRY BANKS
manufacturer Tognum went
public, and Europes biggest
since Spains Bankia raised
3.1bn in July of last year.
Listing the 23 per cent
stake of its O2 Germany
on the stock market is
part of Telefonicas efforts
to cut its 58bn debt.
Telefonica, which
declined to
comment, closed
the order books on
the sale at 1pm
yesterday.
In Germany, O2 is the smallest
mobile operator with roughly 16
per cent of subscribers, trailing
Deutsche Telekom, Vodafone
and Dutch group KPNs E-Plus.
Some analysts have
criticised O2s targeted
valuation as high
compared to peers.
Ford rated low for reliability
nFord tumbled to nearly the bottom
of an annual survey of vehicle
reliability due to flaws in its touch-
screen navigation and entertainment
system, while Japanese automaker
Toyota swept the top three spots. In a
Consumer Reports survey released
yesterday, Ford fell seven spots to
27th of 28 brands surveyed overall,
while its upscale Lincoln brand fell 12
spots to 26th place. Two years ago,
Ford placed in the top 10 with more
than 90 per cent of its models being
average or better. The survey is based
on data over the past three years.
While mechanical problems are now
rarer, for all brands electronic systems
are where more issues tend to occur.
Correction
nIn our edition on 29 October, City
A.M. wrote that ESPN had sold the
British TV rights to football leagues
including the Italian Serie A, the
American MLS and the French Ligue 1
to BT ahead of the launch of BTs new
sports channel. What we should have
said is that BT has purchased the
rights to the leagues for next season
from the rights holder, not ESPN.
IN BRIEF
Serco wins 170m pensions deal
nOutsourcing firm Serco, which runs
the Docklands Light Railway,
yesterday secured its first pensions
deal. Serco, which also runs the Boris
bikes scheme, will provide back office
support services for life and pensions
company Aegon in a deal worth
170m over the ten-year term.
It will also manage some of Aegons
so called zombie funds, policies
which are no longer sold but require
ongoing management.
HEATHROW Ltd, formerly known as
BAA, warned yesterday that full-year
earnings would fall short of its target,
after fewer passengers travelled
through Europes busiest airport this
summer.
Traffic over the summer months
was lower than expected, particularly
in July and August when passenger
traffic was down about 400,000 on
the same period in 2011, chief finan-
cial officer Jos Leo said yesterday,
referring to Londons Heathrow air-
port.
In June, the group predicted it
would report adjusted earnings
before interest, taxes, depreciation,
and amortisation (Ebitda) of around
1.27bn for 2012.
Heathrow said its Ebitda rose 9.6 per
cent to 922.9m in the nine months
to the end of September on revenue
8.2 per cent higher at 1.84bn, helped
by an increase in tariffs it charges air-
lines.
The company, owned by Spanish
Heathrow hurt
by summer lull
in passengers
BY HARRY BANKS
infrastructure group Ferrovial, said
Heathrow, Europes busiest airport,
handled 53m passengers in the first
nine months of 2012, up 0.6 per cent
on last year.
But traffic at Stansted, which is pre-
dominantly a low-cost leisure and hol-
iday airport and more exposed to
domestic economic conditions, fell 4.6
per cent to 13.5m in the same period.
The operator said the sale of Stansted
was now underway after the competi-
tion regulator forced it to sell the air-
port to loosen the groups grip on the
UK.
TNTs quarterly income drops as
EU awaits concessions on deal
TNT Express, the Dutch mail
delivery group being bought by
UPS said yesterday that third-
quarter profit fell 12 per cent.
The company also repeated that
it expected EU Commission
approval for the deal.
UPS, or United Parcel Service, is
not expected to complete the
5.2bn (4.3bn) acquisition until
early next year after the
European Commission expressed
objections.
TNT Express reported operating
profit at the low end of
expectations in the third quarter,
down 12 per cent to 38m on sales
of 1.8bn.
Forecasts were in a range of
30m to 91m, with most at the
lower end of that range.
TNT said it booked 51m in
provisions in the quarter, 19m of
which was for claims in Brazil.
Operating losses in the Americas
eased from 30m a year earlier to
23m.
The European Unions antitrust
chief has said UPS and TNT would
have to offer concessions to
secure regulatory approval for
the deal.
A merged UPS and TNT would
have a quarter of the European
express services market, ahead of
DHL Worldwide Express BV with
19 percent, according to analysts
at Bernstein Research.
The European Commission is
scheduled to decide on the
proposed merger by 15 January
next year.
Analysts had already warned
that the deal would give UPS a
dominant position in some
markets, including the UK, and
that as a result it would have to
sell assets to soothe regulatory
concerns.
Ferrovial SA
10.5
10.6
10.7
10.8
10.9
11.0
10.63
29Oct
HONDA Motor cut its full-year net
profit forecast by a fifth yesterday
after sales in China were hit by a
popular backlash against Japanese
goods, and warned it could be
February before business in the
worlds biggest autos market
returns to normal.
The cut, prompted by a slump in
sales amid protests in a dispute
about ownership of islands in the
East China Sea, makes it likely that
Japanese rivals Nissan Motor and
Toyota Motor, will follow suit when
they report earnings next week.
Honda, which provided
motorcycles for the latest Bond
film, cut its net profit forecast for
the year to March to 375bn
(2.93bn) from 470bn.
Last year, Honda reported net
profit of 211.5bn. It also cut its
forecasts for annual operating
profit and revenue, citing
uncertain markets.
Net profit for July to September
rose 36.1 per cent to 82.2bn, some
way below estimates.
22
NEWS
cityam.com
Honda provided motorbikes for the latest Bond movie Skyfall, starring Daniel Craig
Blinkx shares rocket as election
and Olympics drive ad growth
VIDEO search engine Blinkx saw
shares rise by 25 per cent yesterday
as the company said the Olympics
and US elections had driven more
people to its website.
The search engine, which trawls
content from video sites including
YouTube, said it expects profits of
around $2.4m (1.5m) for the six
months ending 30 September. City
experts had forecasted a loss.
Blinkx said turnover would be
around $80m, also above
expectations. The company, which
was founded in 2004 before the likes
of YouTube entered the market, saw
BY JAMES TITCOMB
shares hit a six-month high.
The Aim-listed company also said
that acquisitions of US advertising
firms Burst Media and Prime
Visibility Media Group (PVMG) had
been integrated ahead of schedule.
Chief executive S. Brian Mukherjee
said: This has been an exceptional
first half for Blinkx. The business has
shown strong growth, driven by its
underlying fundamentals in
combination with the ahead of-
schedule integration of Burst and
PVMG into the Blinkx engine and
increased advertising spend
allocated to special events
specifically the summer Olympics
and the US presidential elections.
Citi Research analyst Thomas
Singlehurst said the update gives
comfort in the drivers of growth for
online video advertising and
therefore the market as a whole.
GLOXOSMITHKLINE yesterday
raised its bet on a promising drug
for HIV/AIDS by redrawing a deal
with Japans Shionogi which gives
it a much bigger economic interest
in the new product.
Dolutegravir, a once-daily drug
that has performed strongly in
clinical trials, is seen by analysts as
a potential multi-billion-dollar-a-
year seller and a strong competitor
to treatments from market leader
Gilead Sciences. The drug belongs
to a novel class known as integrase
inhibitors that block the virus
causing AIDS from entering cells.
Under the new agreement
Shionogi will take a 10 per cent
stake in Viiv Healthcare an HIV
GSK raises bet on HIV/AIDS
drug with new Shionogi deal
BY CITY A.M. REPORTER drug joint venture set up in 2009
between Britains biggest
drugmaker and Pfizer in
exchange for its rights to
dolutegravir.
Previously income from the
medicine would have been shared
50:50 between ViiV and Shionogi,
which analysts calculate would
have given GSK only around a 40
per cent interest in the drug, after
taking account of Pfizer's minority
stake in ViiV.
Now GSKs economic interest will
be between 60 and 66 per cent, its
chief strategy officer David Redfern
said. Redfern said the new
arrangement was expected to
dilute GSKs earnings by around 1p
a share in 2013 and 2014 but
should boost earnings thereafter.
PERFORM Group, the internet
sports distribution firm, yesterday
said expansion in new markets had
pushed turnover up 44 per cent in
the third quarter.
The company, which operates
video-on-demand services online,
owns sports websites including the
popular Goal.com, and sells
adverts on other sports websites,
said group revenues had increased
from 27.4m last year to 39.5m.
The FTSE 250 group has secured
new rights deals with the
American football competition, the
NFL, and Spains La Liga football
league in the last three months, as
well as launching eight new
international editions of Goal.com.
Perform Groups US touchdown
generates sports revenue boost
BY JAMES TITCOMB
Revenue has increased 10 per
cent on the last quarter.
We are pleased to report that
our strong operational and
financial performance has
continued through the third
quarter, which reflects the
successful execution of our growth
strategy, joint chief executive
Oliver Slipper said.
Performs content distribution
service, which distributes video
and data to other websites and
organisations, and accounts for
most of the groups revenues, saw
a 47 per cent surge in sales. The
video advertising business grew 56
per cent and the display ad
division surged 132 per cent.
Shares in Perform fell 2.8 per
cent yesterday.
Demand for Windows 8 surges
nMicrosoft chief executive Steve
Ballmer said yesterday demand for
the companys new Windows 8
operating system, released to the
public last Friday, was running at a
higher rate than its last release,
Windows 7. Were seeing preliminary
demand well above where we were
with Windows 7, Ballmer said.
Windows 7 is the best-selling version
of Windows so far, selling more than
670m licenses in three years.
Aegis buys Tokyo-based Hablar
nMedia and digital communications
group Aegis yesterday bought Tokyo-
based marketing and search agency
Hablar. Aegis said the purchase was
aimed at boosting its digital
capabilities. Hablar will now be
merged into iProspect Aegis
existing search and performance
marketing agency in Japan. Hablar,
which was founded in 2003, has
already worked with Aegis in Japan.
Blinkx PLC
55.0
57.5
60.0
50.0
52.5
62.5
65.0
67.5 p
64.6
29Oct
Honda cuts profit forecasts as
China dispute hits 2012 sales
Visit
You can't short sell
on customer
Were an FSA regulated broker and we dont
offer advice. But if we did, wed recommend
speaking to our teams.
They can help you choose the account thats
right for you when you start trading, and are
fluent in our platforms and tools to help you
stay trading.
In fact, they put your interests at the heart
of everything they do. Because anything else
would be selling you short.
Forex, spread bets and CFDs are high risk
and losses can exceed your initial deposit.
24
Europe hurt by
fears over the
storms impact
E
UROPEAN stocks fell yesterday,
led by insurers on expectations a
huge hurricane in the United
States would boost damage
claims, while political jitters in debt-
laden Italy cast shadows on the
Eurozone.
Reinsurers Swiss Re and Hannover
RE led a weaker European insurance
sector index as the market tried to pre-
dict the cost of cleaning up after
Hurricane Sandy, which has forced
Wall Street to shut.
Eurozone blue chips shed 0.7 per
cent to 2,478.84 points after former
Prime Minister Silvio Berlusconi
threatened to bring down his succes-
sor Mario Montis government, which
has appeased financial markets with
its austerity agenda.
Italys FTSE MIB fell 1.5 per cent, the
worst performer in western Europe,
weighed down by banks, which have
the largest exposure to the countrys
debt. The Euro STOXX 50 volatility
index, which gauges option prices on
euro zone blue chips and is regarded
as a measure of investor fears of future
price swings, rose 4.9 per cent to 23.22
points.
The index has risen 21 per cent from
a six-month low hit in mid-September,
when the European Central Bank and
the US Federal Reserve had calmed
markets with plans to tackle the euro
crisis and shore up the U.S. economy,
respectively. It was still well below a
2012 high of 38 hit in early June.
A profit warning from Japans Honda
Motor triggered a sell-off in the
European auto sector, with Frances
Peugeot shedding seven per cent and
Germanys Daimler down 1.8 per cent.
The pan-European FTSEurofirst 300
closed 0.3 per cent lower at 1,093.57
points in volume 62 per cent of its 90-
day average as Wall Street was closed.
B
RITAINS leading shares dipped in
low volume yesterday as concerns
over the costs of Hurricane Sandy
in the United States added to
uncertainties about future corporate
earnings.
Many investors were sticking to the side-
lines ahead of a pick-up in the UK third-
quarter earnings season this week, notably
from the energy and banking sectors.
Insurers were among the big fallers on
hurricane costs worries, while energy
stocks were dented by a drop in crude
prices as the storm saw refineries on the
US eastern seaboard shut. Ai r line shares
fell on concerns over flight disruptions.
The FTSE 100 closed down 11.61 points, or
0.2 per cent at 5,795.10 points, in volume of
60 per cent of the 90-day daily average,
reflecting the absence of US trading inter-
est with US stock markets closed because
of the hurricane threat.
Blue chips rallied from earlier lows, how-
ever, with technical factors helping explain
the indexs recovery, although overall cau-
tion remained.
The FTSE 250 index ended down 0.1 per
cent, weighed by falls in Lloyds of London
insurers such as Amlin, Hiscox, Catlinand
Lancashire, which shed around 1.7 per
cent on Hurricane Sandy exposure worries.
The impact of the storm provided anoth-
er worry for investors already concerned
about a relatively glum third-quarter earn-
ings season, with a third of UK companies
so far having missed expectations.
Weakness in oil major BP, down 1.6 per
cent, before it kicks off the UK sectors
third-quarter reporting season today,
accounted for almost five points, or about
half of the blue chip indexs decline,
according to Thomson Reuters data.
UK stocks dip as Hurricane Sandy
hits insurers and energy shares
BESTof theBROKERS
Julius Baer Gruppe AG
CHF 32.8
32.6
32.4
32.2
32.0
31.8
32.30
29 Oct
JULIUS BAER
UBS has upgraded the
Swiss bank from neutral
to buy with a target
price of SwFr39, saying it
likes the scale argument
and changing regional
profile of the recent
Merrill Lynch wealth unit.
DASHBOARD CITY
YOUR ONE-STOP SHOP FOR JOB MOVES,
BROKER VIEWS AND MARKET REPORTS
cityam.com
FTSE
5,900
5,875
5,850
5,825
5,775
5,800
5,795.10
29 Oct
Lokn Store Group PLC
p 124
122
120
118
116
120.00
29 Oct
LOKNSTORE
Panmure Gordon has
raised its target price on
the storage firm from 126p
to 137p and maintained a
buy rating after results
to July showing solid
progress and portfolio
developments.
Sta ine Group PLC
p 234
232
230
228
226
224
228.00
29 Oct
STAFFLINE
Shore Capital has
upgraded the recruitment
group from hold to
buy with a target price
of 229p, saying that its
acquisition of Select from
Randstad makes a lot of
sense.
ETF Securities
Peter Lidblom has been
appointed as head of Nordic
region at the exchange-traded
investment products provider.
He joins from NSBO, the
institutional broker, where he
was responsible for sales to
Nordic investors.
Renaissance Capital
The investment bank has hired two London-based sales
traders for its Europe, Middle East and Africa (EMEA)
platform. Shu-Ming Peng joins Renaissance Capitals
equity products group as director of EMEA sales trading.
Peng was previously executive director, head of
emerging Europe equity sales trading at Morgan Stanley.
Aimee Crane joins as vice president of EMEA equities
sales trading. She previously worked at ING and at JP
Morgan.
Threadneedle Investments
Peter Yarrow has been appointed client relationship
director at the asset management firm, where he will
have dedicated responsibility for the firms insurance
client partnerships. He previously held senior roles at
Turner International and Fidelity Pensions Management.
Throgmorton
Neil Oliver has been appointed tax director at the
accountancy practice. He was most recently a senior
director at Ernst & Young and has over 20 years
experience advising the investment management sector.
Marsh
Stephen Wares has been appointed head of cyber risk for
EMEA at the insurance broking and risk management
firm. He joins from Hiscox, where he was most recently
global head of its technology product line.
Mid Europa
Michelle Capiod has been promoted to partner at the
private equity firm. Capiod has been at the firm since
2003, having previously worked in the investment
banking division of Merrill Lynch.
WHOS SWITCHING JOBS Edited by Chris Harlow
+44 (0)20 7092 0053
morganmckinley.com
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REPORT
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in association with
R
EGULAR readers of this
column will be familiar with
the theme of a paper Ive just
published. Called In Search of
Austerity, and published by
the Mercatus Center, part of George
Mason University in the US, it probes
the idea that there is far less austerity
going on than people think.
Its a controversial topic. Some
argue that austerity caused the
double dip recession. Others say that
austerity isnt even happening. A look
at recent Budgets helps.
Firstly, we should consider total
managed expenditure (TME), which
shows government department
expenditure limits. This data
demonstrates that a majority of
departments are actually seeing
T
HIRTY years ago, Margaret
Thatcher secured reforms to
the European Economic
Communitys budget
including the UK rebate
which have since saved taxpayers a
total of some 65bn. She defied
those who said this was impossible
by standing firm, defending the
national interest and fighting hard
on a political and intellectual level.
Negotiations are currently ongoing
over next years EU budget and the
multi-annual financial framework
(MFF) for 2014-20. David Cameron
should not forgo the opportunity to
secure his place in history as another
Prime Minister to defend Britains
economic interests and to deliver
reform to Europes bloated budget. In
the days ahead, he has the chance to
let the British public and business
know that he will do everything in
his power including exercising
Britains veto to block Europes out
of touch political elite, as it seeks to
pillage ever-increasing amounts of
money from Britain.
Only last week the European
cityam.com/forum
The Commission is
pushing for a 5 per
cent budget rise above
inflation until 2020
Twitter: @cityamforum on the web: cityam.com/forum or by email: theforum@cityam.com
Agree? Disagree? Got a sharp comment?
The Forumwants you to join the debate.
Top responses will be reprinted in The Forum.

PRITI PATEL
Parliament voted to agree with the
European Commission and to
increase the EUs budget for 2013 by
6.8 per cent. The Commission also
continues to push for 5 per cent
above inflation rises in the period to
2020. Britain already makes a net
contribution of over 9bn a year to
the EU budget, on top of the multi-
billion pound bill to business caused
by red tape from Brussels. Additional
costs, imposed by Europe for the
remainder of the decade, would pose
a serious barrier to economic growth
and job creation, as well as the gov-
ernments plans to restrain public
sector spending.
When households, companies and
public sector organisations in
Britain, and elsewhere in Europe,
are taking tough decisions to make
savings, Europe should follow suit.
But the Commission has chosen to
ignore Europes economic realities
and push for unsustainable levels of
higher EU spending, instead of tak-
ing the austerity pill. The Prime
Minister should take the chance to
lead the way in pressing for financial
restraint and cuts in the MFF.
Although the Prime Minister can-
not block the Budget for 2013 by him-
self, he can veto the MFF for 2014-20,
and he should be prepared to do this.
Europe has shown itself to be unre-
pentantly addicted to spending and
the Prime Minister should use force
the EU to go cold turkey, and to kick
its dangerous habit once and for all.
As well as fighting for reductions in
EU spending and reduced UK contri-
butions to its Budget, the Prime
Minister should take broader advan-
tage of both the MFF negotiations
and discussions over a new EU
Treaty. Britain is in a position of eco-
nomic strength relative to the rest of
the EU. This is why we can be bold
and ambitious in both pursuing the
repatriation of powers back to
Britain and in alleviating the regula-
tory burdens the EU imposes on busi-
ness. While the political elite in
Europe want to use the Eurozone cri-
sis as an excuse to grab more powers
from national governments and par-
liaments, we should use it as an
opportunity to shrink the size of the
EU to support jobs and economic
growth.
Taking a tough stance on the EU
budget is not only the right thing to
do for our economy, it is also the
right course of action to take politi-
cally. This is why shadow chancellor
Ed Balls, and shadow foreign secre-
tary Douglas Alexander, are trying to
give the impression that the Labour
Party is changing its position on
Europe by calling for real term cuts
in future EU spending. But their
approach on this issue is shallow,
opportunistic and incredulous. The
public will not forget that it was the
current Labour leadership that
played such a pivotal role in the last
governments surrender of a large
chunk of Britains rebate, and denied
the British people a vote on the
Lisbon Treaty.
The outcome of the EU budget and
MFF negotiations matter. The Prime
Minister now has a chance to demon-
strate that he, and the Conservative
Party, can deliver a successful pack-
age of reforms to the heart of the
European project. By doing so, he
will not only save British taxpayers
money and support economic
growth, he will also secure his place
in history as the statesman that
brought sanity to Europes finances.
Priti Patel is Conservative MP for
Witham.
nominal spending increases. In the
two years from 2012, the average rise
across all departments will be 7.7 per
cent. In total, 13 departments will
receive an increase, ten a decrease,
and four will see no change. This
doesnt mean cuts are a myth on
the contrary. Some departments are
being cut heavily (like local
government). But changes in the
distribution of government spending
should not be confused with changes
in the total amount. Indeed, its
inevitable that larger cuts will be
made to smaller departments, given
that one of the biggest spending
programmes (the NHS) has been
ringfenced. An increasing debt
burden also means increasing
interest payments.
Secondly, TME is forecast to fall,
but not in absolute cash terms.
Commentators typically look at TME
as a percentage of GDP. Indeed, the
government expects that the
spending ratio will fall between now
and 2015. But this ratio can fall for
one of two reasons either because
spending is falling, or because GDP is
rising.
The governments figures come
from the Office for Budget
Responsibility (OBR), but the Treasury
also publishes forecasts from several
private firms. According to these
statistics, the OBR consistently
overestimates GDP growth. Indeed its
most recent figure is twice as high as
the median of the independent
forecasters. I wondered what the
spending to GDP ratio would be if
GDP were to grow at half the rate the
OBR forecasts. As the chart shows, it
would mean the spending ratio rises.
It is interesting that people are
criticising the government for harsh
spending cuts. In reality, its really
just guilty of believing in over-
optimistic growth projections. It is
always dangerous to trust the
forecasts of economists and, when
the OBR updates its figures, this ruse
will be exposed. The problem isnt
austerity, its a lack of growth.
Anthony J. Evans is associate professor of
economics at ESCP Europe Business School.
www.anthonyjevans.com. Twitter:
@anthonyjevans
FRONTLINE
ECONOMICS
ANTHONY J. EVANS
The austerity myth: Why the government is counting on unrealistic growth
Ocial vs. alternative forcast of spending to GDP ratio
2015 2014 2013 2012 2011 2010
49.0
49.5
48.5
48.0
50.0
50.5
51.5
51.0
52.0 %GDP
Growthat half of OBRforecast
OBRgrowthforecast
MORNING UPDATE
A.M.
Cameron should wield the UK veto
and block the EUs bloated budget
THEFORUM
26
27
The Forum is open for you to take part. Got a sharp comment on
one of todays columns? Do you have another subject you want
to share your opinion on? We want to hear your views.
Email theforum@cityam.com or comment at cityam.com/forum
Tax nightmare
[Re: How income tax has become such a
nightmare for so many, yesterday]
The main problem with Britains income
tax system is that government gets larger
with every tax rise. Its about time we
tried doing things the other way round.
Jeremy Poynton
Whatever problems our tax system
causes, Labour would do nothing about it.
Its populist posturing over the 50 per cent
income tax rate, and its strange
intellectual belief that people dont create
wealth without the explicit assistance of
the government, mean that it is certainly
not the party to do anything about this
mess.
Tommy Hill
Lending to SMEs
[Re: Item says Cables business bank will
crowd out private lending, yesterday]
High street banks argue that demand from
small to medium-sized enterprises for
borrowing is low, but this isnt supported
by our research. Our lending levels have
increased by 16.5 per cent since this time
last year, suggesting that businesses are
looking further afield as traditional finance
becomes less available. Despite a raft of
government schemes to boost traditional
lending, the situation doesnt appear to be
improving. Its therefore crucial that
businesses, banks and the government
wake up to the idea that high street
lending is no longer the only option.
Peter Ewen, managing director of ABN AMRO
Commercial Finance
G
OVERNMENTS have used
motorists as a cash cow for
decades. Fuel duty and road
tax raise around 35bn a
year, while less than 10bn
is spent on road maintenance and
improvements. As motoring taxes
have increased, investment in new
road capacity has collapsed.
Transport policy has gradually
become dominated by an agenda
that seeks to reduce emissions and
shift journeys to public transport. In
terms of revenues, however, this pol-
icy is beginning to backfire. Drivers
are now buying smaller and more
fuel-efficient cars, meaning they pay
much less tax. Electric vehicles also
threaten a collapse in receipts.
This potential tax shortfall explains
the urgency with which the govern-
ment is exploring new ways of charg-
ing motorists. This week, it emerged
that officials are considering a two-
tier system of road tax, with
motorists paying a higher rate if they
wish to use motorways.
Charging that better reflects differ-
ent levels of usage makes sense. But
taxes are a very crude way of doing
this. Charges should reflect infra-
structure costs and congestion levels.
Drivers should pay more to use an
expensive urban motorway, with
huge peak demand, than a relatively
empty rural motorway.
In practice, an efficient road net-
work can only be obtained through
more widespread pricing. The gov-
ernment, however, is not well suited
to managing a tolled network.
Pricing and investment decisions
would be influenced by special inter-
ests and political expediency. Tolls
would probably be added on top of
existing taxation. Under political
control, many of the benefits of road
pricing would be lost.
A better long-term solution is to
transfer ownership and control to
TOP TWEETS
The merger of Penguin and Random House
will be good for investors, but bad for many
authors.
@BW
The Penguin Random House merger is
expected to be finalised in second half of
2013. Itll be a tricky six months for both.
@philipdsjones
The US has been fixated on its election.
Hurricane Sandy is a reminder the countrys
not completely in charge of its destiny.
@JimDenison
The European Commission has warned that,
if no budget deal is agreed, EU grants will be
cut. I hope MEPs will vote accordingly.
@DanHannanMEP
Will a merger between Penguin and Random
House better place the firm to tackle Amazon?
YES
The merger of Penguin and Random House is ultimately about the
survival of the fittest. Publishing is going through revolutionary
changes, and this merger shows just how much some brands will
need to adapt to survive in todays marketplace. Given the size of
the two companies, there are some obvious cost-savings the
businesses will be able to make. But more interesting is the potential
for these traditional publishers to take power back from a number of
new market entrants, like Amazon. Penguin-Random House now
has the potential to explore new publishing platforms and create a
brand that maintains relevance. The wider proliferation of the e-
reader is our current benchmark, but there is a broader opportunity
for the merged company to renew its position in the market. Lets
just hope the Penguin-Random House maintains Penguins original
values of publishing pioneering new authors.
Lizzie Carr is strategy director at The Gild.
Lizzie Carr
NO
Ian Whittaker
This deal is not a game changer for the publishing market. But it
does make strategic sense for Pearson to go down the joint
venture route rather than directly selling Penguin. Pearson will
gain exposure to cost savings from the joint venture, and will
maintain savings within its education business. Its a neat way of
reducing the companys consolidated expenses. Selling Penguin
outright would also have had a large capital gains tax impact in
the US. Importantly, what would Pearson have done with the cash
if it had sold Penguin outright? Any other alternative deal would
have been dilutive even if Pearson had returned all the cash back
to shareholders. Further, this deal implies that the case for a
breakup of Pearson is now unlikely, as the company cannot sell its
stake in the newly-merged firm for three years.
Ian Whittaker is a media equity research analyst at Liberum
Capital.
RAPIDresponses
A radical proposal
for privatising the
UKs road network
the private sector. Pricing would
then be based on consumer demand
rather than political calculation.
New investment would be directed to
locations where the highest returns
could be achieved. Productivity-
boosting innovations would also be
possible, like raising speed limits and
increasing lorry weights.
But privatisation and pricing need
to be combined with a very substan-
tial reduction in motoring taxes to be
both politically acceptable and eco-
nomically efficient. In our new
report Which Road Ahead: govern-
ment or market?, we set out a way of
achieving this. Flotation receipts
from the privatisation of motorways
and trunk roads estimated at
around 150bn would be used to
abolish road tax and reduce fuel
duty by at least 75 per cent. Public
spending on transport would gradu-
ally be phased out and, in the longer-
term, the Treasury would also enjoy
a large increase in general tax rev-
enues as efficiency gains such as
lower congestion fed through into
higher economic output.
The denationalisation of roads is
therefore a win-win policy. For most
drivers, tax cuts would mean cheap-
er journeys despite the introduction
of tolls. And for the government, sub-
stantial short-term flotation receipts
would be followed by a lower spend-
ing burden and a major boost to the
wider economy.
Dr Richard Wellings is head of transport
at the Institute of Economic Affairs
(www.iea.org.uk).
RICHARD WELLINGS
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28
cityam.com
C
ORPORATES are wielding the
axe, and blood is being spilt
on both sides of the Atlantic.
Bloomberg data reveals that
US companies have announced
158,100 layoffs this year up 23 per
cent from 2011. But the problem
isnt isolated to the US. Ford
announced 1,400 UK job cuts just
last week and UBS, which employs
6,500 in London, is likely to cut
10,000 globally.
SOMETHING DOESNT ADD UP
Headline data has improved recent-
ly, so why are companies cutting
staff? UK unemployment has fallen
to 7.9 per cent and GDP grew by 1
per cent in the third quarter.
Similarly, annualised US GDP was
up to 2 per cent in the third quar-
ter of this year, with unemploy-
ment also falling. But traders
should be wary about headline
data and the optimistic headlines
it begets. Beneath the surface,
there is still weakness.
Olympic ticket sales contributed
0.2 per cent to UK growth, and the
unwinding of the effect of the
Jubilee bank holiday in June added
0.4 per cent. US GDP growth was
largely driven by defence spending.
A rise in US consumer spending
can be attributed to confidence in
the job numbers; but employment
is still not growing fast enough.
Business investment and exports
remain fragile, highlighted by
recent purchasing managers data.
The Eurozone, China and the US
fiscal cliff are the concerning fac-
tors, says Neil Gilbert of GFT
Markets. Corporates are preparing
for the worst-case scenario.
CAUTIOUS CORPORATES
The uncertainty is infecting many
sectors. Slowing demand from
China contributed to poor earnings
for both Dupont (which slashed
1,500 jobs) and Dow Chemical
(which slashed 2,400 jobs). Given
The impact on markets
of devastating job cuts
Companies need to
trim their costs, says
Yogesh Chandarana
TRADING MANAGEMENT WEALTH
THE TIPSTER
DRUG MAKER NEEDS A HIGH
P
HARMACEUTICAL giant
GlaxoSmithKline will
announce its third quarter
trading results tomorrow.
The drug maker has had a
mixed year, and shares currently lie
towards the middle of their 52-week
range. GSK has appointed
headhunters to find a replacement for
Sir Chris Gent, who had been
chairman since 2005, and traders will
want details about when his
replacement will be in place. Analysts
expect sales to come in at 6.6bn,
down from 7.1bn in the third quarter
of 2011. ETX Capital quotes a price of
1,410.9p-1,414.1p for GlaxoSmithKline.
Due to additional provision made
for Payment Protection Insurance
(PPI) compensation, Barclays looks
set to post a loss when it reports its
latest earnings tomorrow. This could
erode some of the gains made in
recent weeks, potentially pushing
shares below 220p a key support
level. CMC Markets quotes a price of
for 228.55p-229.19p for Barclays.
Analysts are gloomy about the
outlook for Lloyds Banking
Group, and forecast a pre-tax loss of
700m. Traders also want
confirmation on whether the 4bn
provision for PPI mis-selling will be
increased. There is some optimism,
however, after the company
announced that it was to scrap
incentives linked to product sales in
line with a FSA crackdown. Spreadex
quotes a price of 40.33p-40.45p for
Lloyds Banking Group.
High street bellwether Next is
preparing for the upcoming festive
season, and investors will be hoping
that its share price strength can
continue when it releases its trading
statement tomorrow. Historically, the
last two months of the year are the
strongest for retailers. Capital
Spreads quotes a price of 3,594.1p-
3,598.9p for Next.
YOGESH CHANDARANA
of Accendo Markets. Companies
need to protect their margins, and
cost-cutting is the way to do this.
We want shares to appreciate and
dividends to be sustainable, even if
that means jobs cuts.
STREAMLINED ATTRACTION
Traders must assess whether these
companies and sectors are now
more investable or whether this is
a sign of more weakness ahead.
Beauchamp says that the classic
reaction may be to short these sec-
tors, and buy defensive equities.
Gilbert is more optimistic:
Streamlined companies could be a
buying opportunity. The US market
has the backing of the Fed, which
will prop up equities once the fis-
cal cliff risks have subsided.
While the effects of layoffs is dev-
astating for those affected, this sad
necessity may result in leaner,
more efficient companies.
Chinas importance to the global
economy, this is concerning.
Chris Beauchamp of IG says that
there is crisis fatigue but that
Eurozone dangers still lurk as the
most recent German IFO business
survey shows, which was the weak-
est in over two years. The crisis is
taking its toll on companies like
Ford, which announced 35,000
global job cuts. Peugeot will also
cut 8,000 jobs.
The previously resilient tech sec-
tor has also seen a slew of compa-
nies downsizing: Zynga will shed 5
per cent of its workforce, and AMD
up to 15 per cent. Siemens and
Hewlett-Packard have announced
8,000 and 29,000 layoffs respective-
ly. Tech hasnt escaped the uncer-
tainty. The general malaise is
affecting everything, says
Beauchamp.
The job cuts are sending a power-
ful message, says Mike van Dulken
fx360.com
AUSTRALIA COULD STUMBLE
AS CHINA LOOKS UNCERTAIN
Australian dollar - dollar
Oct Sep Aug Jul Jun May Apr Mar Feb 2012
0.98
1.00
1.04
1.02
1.06
1.08 $
twitter.com/fx360 facebook.com/fx360
The contents of this column are provided for general information purposes only. One should consider the appropriateness
of the information in light of their own objectives, financial situation or needs before trading. CD11UK.074.010612
NEAL GILBERT
SENIOR MARKET STRATEGIST, GFT
O
VER the last decade, the
Australian economy has grown
significantly. Its become a key
supplier of raw materials to the
emerging Bric economies, and
China has been at the heart of this demand.
For a time, materials like iron ore couldnt
be shipped out of Australia fast enough to
sate huge Chinese demand on the back of
unparalleled infrastructure projects, rapidly
growing cities, towering skyscrapers and a
vast high speed rail network. To put this
into context, in 2001 Australias GDP was
$380bn (236bn). By 2011, it had reached
$1.37 trillion.
But the question is just how sustainable
such growth can be, and whether any
slowdown in Chinese economic expansion
is likely to be mirrored if not amplified
in Australia. Granted, headline growth
numbers coming out of Beijing continue to
impress, especially when compared to
lacklustre growth in Europe and the US.
However, with Chinese businesses
reporting an increase in cashflow problems,
company debts are growing as the
countrys business climate weakens. And
this is just one sign that the tide is perhaps
starting to turn for the new economic
powerhouse. But just how long will it take
for any impact to trickle down to Australia?
Some of Australias largest exporters are
arguably been well ahead of the curve in
calling this slowdown. In August, BHP
Billiton shelved a planned expansion
project at the worlds largest iron ore
harbour at Port Hedland. Over the last six
months, other Australian miners have also
been making redundancies to account for
lower demand. National unemployment in
Australia is also creeping up again. Even
though the rate remains impressive
compared to Europe and the US, it stood at
5.4 per cent in September the highest in
almost two years. This will be a trend worth
watching as an early indicator of what may
be ahead.
So where are the trading opportunities?
The Australian dollar-dollar pair has been
hugely range-bound of late, holding above
parity despite occasional wobbles in the
fundamentals. However, theres no
shortage of analysts happy to call the pair
overvalued. With the US economy
seemingly finding its feet once again, this
doesnt yet seem to have been priced in.
Australian equities are a slightly tougher
call, with the Australian All Ordinaries
index having underperformed the Dow
repeatedly in recent years. Against the
prospect of a relatively quick depreciation
of the Australian dollar, local equities may
well end up looking somewhat
undervalued on the global stage.
Obviously any stimulus measures
especially from the Peoples Bank of China
would certainly have the scope to stave
off any wholesale correction for the time
being. But will this happen? China is likely
to be increasingly wary of rhetoric coming
out of the US, after a bill was passed in the
US Senate, allowing the country to target
nations with undervalued currencies. But
with Beijing the biggest holder of US
sovereign debt, picking a fight with the
Chinese would seem foolhardy.
Australia has done phenomenally well in
recent years. But simply maintaining the
status quo never mind hoping to
maintain past growth rates may well
prove a stretch too far. Inflated prices for
resources have given the economy an
enviable boost. But as production capacity
nudges upward at the same time as
demand falls away, its becoming
increasingly difficult to see how this ends
well.
WIELDING THE AXE
Company Global job cuts
Ford 35,000
Peugeot 8,000
UBS 10,000 expected
Dow Chemical 2,400
Dupont 1,500
Colgate Palmolive 2,300
Zynga 150
AMD 1,700
Hewlett Packard 29,000
Siemens 8,000
Alcatel-Lucent 5,500
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The value of your investment can go down as well as up and you may not get back the full amount
you invest. IWeb Share Dealing, operated by Halifax Share Dealing Limited who are authorised
and regulated by the Financial Services Authority.
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The US will still have to address its shortfall, writes Craig Drake
The US could face a perfect storm of fiscal woes
time that the New York Stock Exchange
has closed two days in a row since 1888.
Besides the potentially devastating
effects of a storm surge and high levels
of rain fall, with wind speeds predicted
to hit 90mph, could the hurricane
change the run of the presidential race?
There has been some speculation that
the non-farm payroll report, due to be
released on Friday, may be delayed. This
could come in handy for Barack
Obama, who has struggled to get
Americas jobs market moving again,
despite Federal Reserve assistance.
FISCAL CLIFF
In the longer term, however, a shift in
focus away from the imminent fiscal
cliff could be more economically dam-
aging than the storm itself. Hurricane
Sandy is hugely unwelcome in normal
circumstances, says David Buik, strate-
gist at Cantor Index. However, were it
to influence the outcome of the elec-
tion, with neither candidate able to
command a majority in Congress or the
Senate, it would mean that attention to
the US debt mountain would not
receive the positive outcome it
requires.
And the US is running out of time.
The Budget Control Act of 2011 is sched-
My pick: Long New Zealand dollar-dollar and euro-dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few days
Currencies like the Australian and New Zealand dollars have
been quite resilient in the face of declining equity markets.
This fits in neatly with my assessment that diminished
concern over Chinas economy would allow the higher
yielding currencies to appreciate. With the catalysts for
more risky behaviour rooted in Europe, Im now looking to
buy euro-dollar weakness for a move towards $1.3500 by
the end of the year.
ANALYST PICKS
The calm before the fiscal storm
A
S HURRICANE Sandy hits the
eastern seaboard of the US,
just how much will it rock
the markets? And could it be
a game changer for the
presidential elections now only a
week away?
According to an analyst note by
the chief investment strategist of
S&P Capital IQ, Sam Stovall, history
says that hurricanes typically dont
trigger big market declines.
Individually, the markets per-
formance following major hurri-
canes has been uneven, as equities
are more likely driven by wider-
reaching global events than
localised natural disasters, says
Stovall. According to his research,
the S&P 500 has posted median
gains of between 3 per cent and 6
per cent in one, three and six-
month periods following past
North American hurricanes.
Yesterdays closure of the east
coast US exchanges, which will con-
tinue today, was the first time that
the US stock market has been shut
because of weather conditions
since 27 September 1985, when
Hurricane Gloria forced all US mar-
kets to close. This is also the first
STRATEGIST
ILYA SPIVAK
My pick: Stay long dollar-yen
Expertise: Global macro
Average time frame of trades: 1 week to 6 months
I entered long dollar-yen at 78.67 on 17 October, as prices
corrected lower after taking out major technical resistance. The
pair has since moved aggressively higher, amid speculation that
the Bank of Japan will expand stimulus measures this week.
Prices are now pulling back to support in the 79.53 to 79.60
area. I will continue to hold long for now but I have revised the
stop loss to be triggered on a daily close below 79.53. The
objective remains a close above the 80.39 level.
CHIEF STRATEGIST
JOHN KICKLIGHTER
My pick: Long sterling-yen and dollar-yen
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 day to 1 week
US equities marked a big shift last week, but sentiment hasnt
remained bearish. The potential for risk aversion is there, we
just need capitulation. I like euro-dollar below $1.2825 if fear
kicks in. If, however, there is a Spanish aid request, a $1.3100
break could be a quick, temporary rally. Im bearish overall on
yen, so Ill keep dollar-yen on the channel break and am
newly long sterling-yen at 128.15, after the multi-year
wedge break.
MONDAY 30 OCTOBER 2012
MANAGEMENT WEALTH
cityam.com
uled to go into effect at midnight on
31 December. It brings in a slew of
measures, including the end of the
Bush-era tax cuts, the end of some
business tax breaks, the end of last
years temporary payroll tax cuts and
the beginning of the taxes to finance
President Obamas health care laws.
The biggest fear is that the US
Treasury will struggle to handle the
predicted 3.5 per cent drag on GDP
that the measures will cause.
It is possible that the White House
will propose a new tax cut to replace
the existing payroll tax cut
designed to give Americans some
breathing space in the midst of the
financial crisis. The new tax cut
would require congressional
approval after the election. But the
longer that worries about the fiscal
cliff continue, the greater damage
they will have to consumer and busi-
ness confidence.
Whether the storm will work in
Obamas favour or against him is
highly debatable. But unless the US
remains committed to addressing
its enormous deficit, the US will
have an even bigger financial worry
than the bill for repairing storm
damage.
TRADING
30
CURRENCY STRATEGIST
CHRIS VECCHIO
US PRESIDENTIAL ELECTION ODDS
Sporting Index prices subject to uctuation
Obama States Won 23.8 - 24.2
Romney States Won 26.8 -27.2
Obama/ Romney States Won 2.7 - 3.3
Obama Electoral College Votes 291 - 296
Romney Electoral College Votes 242 - 247
31
Vinho Verde, on the other hand,
fared much better, scoring 25.5.
Waitrose takes a different
approach to its cheap wines.
Rather than attributing them to a
specific location, it offers
anonymous blends instead:
Cuvee Pecheur for the white
and Cuvee Chasseur for the red.
Of these, I thought the red was
just drinkable, but still a good
effort and the white actually
came second in the voting.
But the leader, by a huge
margin, was Majestics offering. I
reckon that the 2010 Chateau
Mont Milan (a Corbires) offers
great value. It is domaine-bottled
for a start, and is a full blend of
Syrah, Grenache, Carignan and
Mourvdre grapes so you are
dealing with a proper wine here.
We tasted it last to universal
acclaim. One person went as far
as calling it in the knight in
shining armour of the bunch.
The overall score was 41.5 points
out of 60, a full 9.5 points ahead
of its nearest rival. At 4.99, it is a
bargain and you should seriously
consider buying a few before it
disappears.
So the long answer to the
question is pretty much the same
as the short one. Dont buy cheap
wine if you can possibly avoid it.
Spend a pound or two more and
you wont be sorry. But every once
in a while, something like the
Mont Milan comes along and
when it does, you should count
yourself lucky.
LIFE&STYLE
MONDAY 29 OCTOBER 2012
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Cheap doesnt always mean bad but be prepared for a challenge
THE BOTTLE
OPENER
NEIL BENNETT
T
HE 5 bottle of wine has long
been a staple in everyones
shopping baskets but thats
changing. Todays 20 per cent
VAT and the general impact of
inflation is quickly making it
nothing more than a distant
memory. With that in mind,
accompanied by six City A.M.
readers, I set on a quest to find out
whether its still possible to buy a
decent bottle of wine for under a
fiver.
Of course, the short answer is
no. After duty and tax, any 5
bottle quickly turns into a 2.25
bottle. Once you then take the
retailers profits, transport and
labelling into account, what you are
actually paying for is 50p wine. So
thats 50p for the process of
growing the vines, harvesting the
grapes and the whole wine making
process. The only way to do it is by
applying manufacturing in bulk
and using industrial techniques
that would make a petrochemical
engineer envious, which is why
cheap wines dont tend to fare so
well.
Undeterred, though, I set out to
discover whether it really is as
impossible as it sounds now. To do
so, I asked Sainsburys, Tesco and
bottleopener@cityam.com
Give Tequila
another chance
Stylist Andrew Davis tells us how
to take the trouble out of stubble...
T
EQUILA has a bad reputation. The
mere sniff of the spirit invokes
Proustian recollections of nights out
that went very bad. Many a youth has
been misspent licking salt off the back of a
hand, downing a shot of questionable
tequila and sucking on a wedge of lime. It's
a right of passage. Plenty of people long in
the tooth, and who really should know
better, continue to think this is the best way
of appreciating one of Mexico's finest
exports.
From innocent enough beginnings it is
produced by fermenting and distilling the
sap from the heart of the Agave tequilana
plant it has become the drink of choice for
those looking for the quickest of fixes. To
paraphrase the indisputably awful song by
Terrorvision: Tequila, it makes you happy
(until it doesn't).
Agne Krasauskaite, who is head barman at
Home House, doesn't shy away from
acknowledging that tequila can lift your
spirits but she is passionate that it should be
appreciated for so much more than
inebriation. Krasauskaite, and plenty other
top mixologists across the globe, are
working hard to reform the tainted
reputation of this noble spirit. They want
you to save your lime for your gin and
tonics, and your salt for killing slugs.
Although the Margarita is the signature
tequila cocktail, it fails to escape its
shameful association with both salt (on the
rim of the glass) and lime (juice) - which,
along with Cointreau and tequila, forms the
basis of the drink.
The Margarita is an acquired taste, but is
by no means a bad cocktail. However,
decent tequila does not need masking,
which is why Krasauskaite came up with the
Green Jacket: "I wanted to show that tequila
can be easily mixed with other ingredients,
not just with lime juice. For her,
"this drink is a wonderful
marriage between my two
favourite spirits, they so
beautifully compliment one
another." Krasauskaite will
be putting her new cocktail
on Home House's next cocktail
list.
GREEN JACKET
n50ml Tequila Blanco
n20ml green Chartreuse
n5-10ml elderflower cordial
Method
lMix all three ingredients in a mixing glass
with ice (or shake quickly).
l Serve in a cold cocktail glass.
l Garnish with a lime twist (dont forget to
cut out the pith of the lime otherwise it will
be bitter).
You and tequila may have got off to a bad
start: your relationship likely turned abusive
in the early hours of a Sunday morning,
dancing to Terrorvision in one of London's
many shoddy nightclubs. But all is not lost..
I write as a reformed tequila abuser. More
recently than I care to remember, a Mexican
friend put me on the path to righteousness.
Her best advice was to stay clear of the
popular Jose Cuervo tequilas, and instead,
seek out lesser-known gems such as
Herradura, Don Julio and Patron. The salt
and lime was promptly banished and
instead, we sipped neat shots at a suitably
slow pace from brandy glasses.
It will still make you happy, but you won't
wake up in the morning feeling like a slug.
STRAIGHT
UP
@ PHILIPSALTER
City A.M.s resident cocktail expert
Waitrose to offer up the
bets that they have to
offer. Tesco never
responded so I chose two
of theirs off the shelf,
along with a bottle from
my local Majestic. As you
would expect, the results
were interesting.
In last place, by a wide
margin, was Tescos Simple
Soave at 4.79. Bitter,
sour, unpleasant, was one
of the kinder comments
and sadly, Sainsburys did
not fare much better. They
offered up a Pinot Noir
from Romania priced at
4.79. Despite the
promising description on
the bottle of cherry and
raspberry notes, it didnt
deliver. Nasty aftertaste
was the general consensus
on the panel and it scored
a rather sorry 18 points
out of a possible 60. The nphilip.salter@cityam.com
Hirsutes you, sir
I am a massive fan of a nice full beard and they have
become a key fashion accessory over the past few years.
For best results, keep the back and sides of your hair
short and classic and your beard hair neat and tidy, for an
easily maintained but polished style. The Braun CuZer 6
is good for dealing with unruly head and facial hair.
1. BEARDS
If youre afraid of a full beard and dont feel youre suave
enough for a styled moustache or goatee, a traditional,
neat style with defined sideburns is for you. After
growing out your facial hair for a week or so, trim your
beard and sideburns so the length is consistent all over.
Team with a tweed jacket or wool flat cap to top it off
and youre sorted.
4. ENGLISH GENT STYLE
Although facial hair has become a key fashion accessory,
body hair should still be kept tidy and to a minimum. If
youre jetting off to a sunny destination this winter,
make sure you are prepared and dont have too much
body hair on show. Excess body hair is still a no-no.
5. HAIR-FREE BODY
If youre on the more ambitious side, why not take the
plunge and experiment with your moustache? One of my
favourite trends for this season, which is by no means for
the faint hearted, is a pronounced but polished look I like to
call, the moon raker. Keep hair gelled back off the face to
make sure the moustache is the main focal point. Make sure
the shape you go for stays tidy by using a trimmer.
This is the perfect look for a guy who enjoys a relaxed
off-duty style and is not afraid of some healthy
stubble. Three days before the desired look is
required, have a clean shave. Then, using a shaver,
tailor the length of your stubble to achieve an undone
but polished look.
T
he boom in male grooming
continues apace and according to
Brauns new ambassador Andrew
Davis, it isnt all about tapping into
ones inner metrosexual, despite what
some brands would have you believe.
Youll be forgiven for not recognising
Davis name, but if youre a fan of the
respective looks of Tom Cruise, Tinie
Tempah, Amir Khan or Daniel Craig, then
youre well and truly acquainted with his
work.
Over the years hes consulted for D&G
and Calvin Klein and worked at maga-
zines including Arena Home and The
Face, so its pretty safe to say that he
knows a thing or two about grooming.
I caught up with him to find out his top
five tips and ideas to style your facial hair
without the fuss.
3. WEEKENDER STUBBLE
2. STYLISH MOUSTACHES
Naomi Mdudu
32
TV & GAMES
cityam.com
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SKY SPORTS 1
10amLive Masters Tennis 7.30pm
Soccer Special 10pmRevista De
La Liga 11pmPremier League
Review12amCapital One Cup
1.30amFootballs Greatest 2am
Football Asia 2.30amRevista De
La Liga 3.30amPremier League
Review4.30am-6amCapital One
Cup
SKY SPORTS 2
6.30pmRevista De La Liga
7.30pmLive Capital One Cup
10pmPremier League Poker
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Great Run Series 1.30am-3.30am
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SKY SPORTS 3
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Live Masters Tennis 9pmSporting
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the Transplant List 9pmDont Tell
the Bride 10pmCuckoo 10.30pm
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Dooley in the USA
E4
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Fill the grid so that each
block adds up to the total
in the box above or to the
left of it.
You can only use the
digits1-9 and you must not
use the same digit twice in
a block. The same digit may
occur more than once in a
row or column, but it must
be in a separate block.
COFFEE BREAK
Using only the letters in the Wordwheel, you have
ten minutes to nd as many words as possible,
none of which may be plurals, foreign words or
proper nouns. Each word must be of three letters
or more, all must contain the central letter and
letters can only be used once in every word. There
is at least one nine-letter word in the wheel.
Place the numbers from 1 to 9 in each empty cell so that
each row, each column and each 3x3 block contains all the
numbers from 1 to 9 to solve this tricky Sudoku puzzle.
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk
KAKURO
QUICK CROSSWORD
LAST ISSUES
SOLUTIONS
KAKURO
WORDWHEEL
SUDOKU
SUDOKU
QUICK CROSSWORD
WORDWHEEL
1 2 3 4 5
6
7 8
9 10 11 12
13 14
15 16 17 18
19 20
21
22
23
19 11
12 29
34 7
13 12
10 37
45
22 4
16 16
14 16
27 20
13 28
9
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42
10
5
24
37
7
29
8
44
8
3
30
37
7
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25
21
ACROSS
1 Construction built
by a spider (6)
6 Warm up again (6)
7 Point in orbit (6)
9 Jersey (7)
13 Sarcastic
pessimist (5)
14 Come up (5)
15 Having the leading
position (5)
18 Eighth letter of the
Greek alphabet (5)
19 Moving and bending
with ease (7)
21 Intense feeling
of love (6)
22 Admittance (6)
23 Clouded as with
sediment (6)
DOWN
1 Dark grey colour (8)
2 Small squares of rich
chocolate cake (8)
3 Make beer (4)
4 Cut the wool from (5)
5 Projecting edge
of a roof (5)
8 Former monetary
unit of Portugal (6)
10 Time of celebration
in the Christian
calendar (6)
11 Preset explosive
device (4,4)
12 Put in working
order (8)
16 Snag, difculty (5)
17 Poplar tree (5)
20 Sturdy upright
pole (4)
D
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4

B A N A L B A S I L
E G G A G A O
S I T E S N A D I R
T N U T N D
S I S T E R F E E S
E U T A D S P
L A R D C E N S O R
L G T E E A
E V E R Y R I S K Y
R O Y E Z G E
S I N E W C H A I R
1 4 7 2 3 2 1 7
4 7 9 6 1 2 5 3 8
9 8 7 5 8 6 9
1 3 1 3 2 4
9 8 6 3 4 6
7 6 9 2 5 3 4 1 8
4 1 2 1 2 5
8 5 7 9 3 9
6 2 3 4 1 9 5
9 3 8 6 2 5 1 4 7
7 1 5 3 8 6 7 9
4
4
4
4
4
4
4
4
4
The nine-letter word was
HESITANCY
T
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BBC1 BBC2 ITV1 CHANNEL4 CHANNEL5
THE PARADISE
BBC1, 9PM
Denise is unable to keep her true
feelings about Moray hidden any
longer just as he commits to a life-
changing decision.
OPERATION ICEBERG
BBC2, 9PM
Chris Packham leads an expedition of
adventurers and scientists to the
Arctic to explore the unknown world
of icebergs.
BODY OF PROOF
CHANNEL5, 9PM
A millionaire is accused of shooting his
wife while out hunting deer, and Kate
and Megans relationship takes a turn
for the worse.
TVPICK
UK Athletics are to appoint Peter
Eriksson as Charles van Commenees
successor as head coach after the
formers success in charge of Great
Britains Paralympics team.
The 59-year-old overlooked the
accumulation of 120 medals
throughout the London 2012
Paralympic Games in which Britain
secured an overall third place with a
tally of 17 more medals than the
target originally set by funding body
UK Sport.
It is a great privilege to be asked
to take on this role, said Eriksson,
whose first substantial challenge as
head coach will be the 2013 World
Athletics Championship in Russia.
I will continue with the
methods and approach that has
proved so successful in the
Paralympic arena. The next five years
look like an exhilarating time for
British athletics.
It will not be until the expiration
of the outspoken Van Commenees
contract in December that Eriksson
will officially begin the role, but it is
hoped that he will be able to inspire
further improvement in the team
before the Rio 2016 Olympic Games
and the 2017 World Athletics
Championships in London.
Under Van Commenee who was
appointed after the disappointing
2008 Games Team GB produced
their best performance since 1964.
Swedish coach
Eriksson hopes
to bring success
Woods had quickest
start of all, but Rory
on course to pip him
Rory McIlroy (left) is closing in on a repeat of Luke Donalds money list double
33 cityam.com
BY DECLAN WARRINGTON
SPORT
Results
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T
HOSE seeking to assess the
relative merits of Rory McIlroy
and Tiger Woods might have
noted that the current world
No1 beat the former incumbent in the
Duel at Jinsha Lake one-day exhibition
event yesterday.
But there is a far more pertinent
set of figures when it comes to
proving why the young Northern
Irishman bears comparison with
Woods, and they relate to the
European and US money lists.
Last year Luke Donald became
the first man in history to officially
finish top on both sides of the
Atlantic a magnificent feat
yet just 12 months on and McIlroy
is looking likely to replicate
the achievement.
With just a handful of events left,
he is more than 800,000 ahead of
his nearest challenger in Europes
Race to Dubai and almost $2m in
front of second-placed Woods in
America. Its incredible stuff.
Woods unofficially topped both
lists seven times, from 1999 to 2002
and then 2005 to 2007, but did not
enter the record books because he
did not play the required minimum
number of tournaments on the
European Tour.
Yet McIlroy is poised to do it at a
younger age than Woods Rory will
be 23 and seven months at the end
of this year against Tigers 24 for his
first in 1999 and Woods has had
the fastest start to a career of anyone.
McIlroy is taking a well-earned
break this week, having finished a
close second to Peter Hanson at the
BMW Masters in Shanghai, who
deserves credit for summoning a
final-round 61 to move to a career-
high world ranking of 17.
Over in Italy, meanwhile, there
was a fairytale end to the European
Challenge Tour season for young
English pro Seve Benson, named
after the great Spaniard and a good
friend of my sons.
Needing a top-five finish to end in
the tours leading 20 players and
earn a spot on the main tour next
season, he came back in a five-under
par 32 to tie for fifth and beat 21st
spot on the list by just 343.
Sam Torrance OBE is a multiple Ryder
Cup-winning golfer and media
commentator. Follow him on Twitter
@torrancesam
GOLF
COMMENT
SAM TORRANCE
| PROMOTION
Terms & Conditions: ATP is the promoter of this competition and entrants must be over the age of 18 with one entry per reader and must live within the UK. Entrants must be available on Sunday 11th November 2012.
Prizes are non transferable, no cash alternatives will be offered The prize is a pairs of complimentary tickets and a private coaching session with Andy Murrays former coach, Mark Petchey on Sunday 11th November at The O2 arena for the winner
.The closing date for the competition is Sunday 4th November 2012 at 11.59pm with the winners drawn randomly from all the correct entries. By entering the competition you agree to further information from ATP, if you don't wish to receive any fur-
ther information please add "No" after your answer.
WIN
AN EXCLUSIVE
COACHING CLINIC
WITH MARK PETCHEY
The Barclays ATP World Tour Finals (5-12 November) is the season ending showdown
for the worlds top eight singles and doubles players and you could be there!
To buy tickets to the Barclays ATP World Tour Finals and to stay up to date with all the latest news from the event visit www.barclaysatpwordtourfinals.com
City AM has teamed up with Barclays to one reader plus their
guest for the chance of a lifetime to win a private coaching
session with Andy Murrays former coach, Mark Petchey on
Sunday 11th November at The O2 arena. The prize also
includes two tickets to watch the evening session singles
and doubles Semi Final action.
For you chance to win this fantastic prize,
simply answer the following question :
Who is the current number one in the world ?
A. Andrew Murray
B. Roger Federer
C. Novak Djokovic
Send you answer and contact number to lucky@cityam.com,
if you are not lucky enough to win there are still opportunitie
www.atpworldtour.com.
35
IN BRIEF
Kompany insists City are happy
nFOOTBALL: Manchester City captain
Vincent Kompany has dismissed
rumours that the Premier League
champions squad have become
disillusioned with the management of
Roberto Mancini. He said: Its part of
the game, and I accept that part of the
game. I just wonder where the
integrity of some journalists stands
when they come out with stories with
no foundation whatsoever.
Redpaths spell in charge over
nRUGBY UNION: Brian Redpath has
been removed as Sales director of
rugby after the clubs worst ever start
to a Premiership season in which they
have lost their opening seven fixtures,
though he remains Sale employee. A
club spokesman said: Ive spoken to
one of the owners and Bryan Redpath
has not left the club. He is still an
employee of the club.
Cleverly unaffected by doubts
nBOXING: WBO light-heavyweight
champion Nathan Cleverly insists his
preparations for his scheduled 10
November title defence against Ryan
Coyne in Los Angeles are not being
undermined by doubts about the
latters involvement. He said: This
should be frustrating but Ive taken it
all in my stride. Its something Im
used to by now because there always
seems to be drama around my fights.
Im getting on with my business and
Ive trained well. Mentally and
physically I feel great.
McIlroy seals Woods win
nGolf: Rory McIlroy yesterday
defeated Tiger Woods by a single shot
during their match at the Jinsha Lake
Golf Club in central China to win a
reported pot of 1.25m. Woods said:
It was certainly not like most
Mondays. To have this many people
come out is pretty special were
ranked one and two in the world so a
match like this can really promote the
game in China.
THE SHORTLIST
Sergio Aguero, Mario Balotelli, Yaya
Toure (all Manchester City), Xabi Alonso,
Karim Benzema, Iker Casillas, Mesut
Ozil, Cristiano Ronaldo, Sergio Ramos
(all Real Madrid), Gianluigi Buffon,
Andrea Pirlo (both Juventus), Sergio
Busquets, Andres Iniesta, Lionel Messi,
Gerard Pique, Xavi (all Barcelona),
Didier Drogba (Shanghai Shenhua),
Radamel Falcao (Atletico Madrid),
Zlatan Ibrahimovic (Paris St Germain),
Manuel Neuer (Bayern Munich), Wayne
Rooney, Robin van Persie (both
Manchester United) Neymar (Santos)
n25 Oct: England flew to Dubai
for three-day training camp
n 30 Oct-1 Nov: Tour match v
India A, Mumbai
n 3-5 Nov: Tour match v
Mumbai Select XI, Mumbai
n 8-11 Nov: Tour match v TBC,
Mumbai
n 15-19 Nov: First Test,
Ahmedabad
n 23-27 Nov: Second Test,
Mumbai
n 5-9 Dec: Third Test, Kolkata
n 13-17 Dec: Fourth Test,Nagpur
ENGLAND are to today recall the
batsman Kevin Pietersen for the
warm-up match against India A as
his reintegration to the side comes
to its conclusion.
The 32-year-old was in August
dropped from the international
scene for the sending of provoca-
tive text messages to South Africa
players as Englands Test series
against the Proteas was unfolding
and was only recently recalled
following the retirement of then-cap-
tain Andrew Strauss and a meeting
with coach Andy Flowers and
senior players.
Pietersen was in a position to join
Englands pre-India tour training
camp in Dubai after Delhi
Daredevils, his Champions League
Twenty20 side, were eliminated
before Sundays final and is conse-
quently to appear in the first match
of the tour.
[Pietersen] is down to play and
will be batting at four. Weve had
some great success and some great
times together over the last few
years. I think we can work very well
together in the future and weve
already started that process. It takes
a little while to get back into your
rhythm and top form, but hes an
amazing cricketer, explained
Flower, for whom the batting will be
opened by Nick Compton and cap-
tain Alastair Cook, who himself has
high hopes about the South Africa-
born batsmans return.
Hes desperate to get going and
England turn to
Pietersen for
India tour start
we are desperate to have him back in
the team, said Cook. As I have
always said, its great to have world-
class players in our team and, if we
want to play the standard of cricket
we know we are capable of, we will
have to have our best players.
As a senior batter, he is there to get
runs and, off the field, to pass on his
experience to the rest of the lads.
He has played a huge amount of
cricket, some 90 Test matches, and he
has experience of sub-continent crick-
et with the IPL [Indian Premier
League]. That experience is valuable
to us if we are going to get used to the
conditions as quickly as we can.
Wenger hails miracle worker
McDermott for Reading revolution
ARSENAL manager Arsene Wenger
has praised the work of Reading
counterpart Brian McDermott and
hailed last seasons Championship
winning campaign as a miracle.
McDermott followed 2011s
play-off final defeat to Swansea by
inspiring his side to the 2012
Championship title despite the loss
of influential striker Shane Long to
West Bromwich Albion and losing
five of the seasons first seven
fixtures. That he did so without
spending significant sums of money
is something the decorated French
manager particularly admires, and
he understandably cites their
impressive scouting network as a
specific reason for their success.
Reading have done well over the
years, said Wenger, whose team
tonight travels to the Madejski
Stadium for their fourth-round
Capital One Cup tie.
You have to congratulate Brian
McDermott for promotion last year, I
believe he made a miracle basically.
When you get to the Premier League,
the level of expectation is to stay and
I feel they have a chance.
McDermott has the qualities to
achieve that. We expect a challenge
and we know Reading will give
absolutely everything when they
play us. Reading have done very well
in their scouting. They are one of the
examples of that and living within
their resources. I always respect that.
There is some quality work behind
their success.
Wenger will tonight select Laurent
Koscielny, Johan Djorou and Andrey
Arshavin as he rotates his squad,
though Alex Oxlade-Chamberlain,
Gervinho and Wojciech Szczesny
remain unavailable.
ENGLAND and Manchester United
forward Wayne Rooney has been
included as the solitary British
player among Fifas 23-strong list
for the Ballon dOr award for
2012s best player.
The Merseysider is among five
Premier League based players
alongside United team-mate Robin
van Persie and Manchester Citys
Sergio Aguero, Mario Balotelli and
Yaya Toure included on the
players list, while Uniteds Sir
Alex Ferguson, Citys Roberto
Mancini and Chelseas Roberto Di
Matteo are in contention in the
coachs category.
cityam.com
England batsman Kevin Pietersen plays Champions League T20 for Delhi Daredevils
Rooney makes 23-man cut for
Fifas Ballon dOr shortlist
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SPORT
INDIA TOUR: KEY DATES
T
HE FESTERING row
enveloping referee Mark
Clattenburg should act as a
wake-up call for football to
stop and take a look at itself,
because matters on the pitch
have got out of control.
I will be gobsmacked if it
transpires that Clattenburg has
stepped over the line and said
something inappropriate, let
alone racist, to one of Chelseas
players. Racism is utterly
abhorrent and there should be
zero tolerance at all levels, but
while there is an investigation
under way he should be treated
as innocent until proven guilty.
In the meantime it draws
attention to the increasingly
fractious nature of referee-
player relations, in which the
officials routinely get a far
harder time than when I was a
professional. Referees are
verbally abused and subjected to
aggressive behaviour over the
slightest decision. Players are
influenced by their managers,
who accuse officials of
incompetence or worse, bias,
and kids are copying. Pressure
on and scrutiny of referees has
been building, and when players
contend every call for 90
minutes it must be wearing.
Rugby union, where players
accept referees decisions, has
got it right. Weve reached the
tipping point; clubs, players and
the Football Association have to
stop the abuse of officials.
Trevor Steven is a former England
international who now works as a
media commentator.
REFEREE Mark Clattenburg has been
stood down from this weeks fixtures
after the Football Association
launched an investigation into alle-
gations that he used a racial slur
towards Chelsea players.
The Blues made an official com-
plaint about Clattenburg using
inappropriate language to two of
their stars believed to be John Obi
Mikel and Juan Mata after Sundays
explosive defeat to Manchester
United. It is understood that part of
the claims involve Clattenburg using
a reference to race.
Clattenburg, one of the countrys
top referees who regularly officiates
international matches and took
charge of the mens Olympic final at
Wembley in August, sent off Chelsea
pair Branislav Ivanovic and Fernando
Torres as the Blues lost a contentious
Premier League contest 3-2 at
Stamford Bridge.
Referees body Professional Game
Match Officials (PGMO) yesterday
confirmed that the Durham 37-year-
old would be rested until after the
weekend in order to shield him from
undue attention.
PGMO believe that, with any foot-
ball match, the focus should not be
on the officials but on the players
and the game itself, it said in a state-
ment. Mark Clattenburg is one of
the elite referees in world football
and, in these circumstances, the
Ref Clattenburg
given time off
as FA examine
race row claims
intense level of scrutiny would
detract from the match and be unfair
to the clubs and the supporters of
both sides.
The FA issued a brief statement to
confirm it had begun an investiga-
tion relating to allegations made fol-
lowing Sundays fixture at Stamford
Bridge between Chelsea and
Manchester United.
FA chiefs will study Clattenburgs
report of the game, as well as that of
the Premier Leagues match delegate,
and may request footage from broad-
caster Sky. One of the flashpoints in
question is thought to have occurred
when Clattenburg booked Nigeria
midfielder Mikel.
A verdict may rest on evidence
from Clattenburgs assistants, who
were in radio contact with the referee
throughout and therefore in a posi-
tion to corroborate Chelseas claims.
The controversy comes amid height-
ened debate about racism in football,
after Chelsea captain John Terry was
found guilty by the FA of racially abus-
ing QPRs Anton Ferdinand. Terry
denies the allegation.
Metropolitan Police, meanwhile,
confirmed yesterday they are investi-
gating an incident during the same
match that left a Chelsea steward
hospitalised. Chelsea have also
launched their own probe into the
matter, amid reports of objects,
including coins and part of a seat,
being thrown onto the pitch after
Uniteds winning goal.
Mullan joins England fold as
Hartley and Lawes await news
ENGLAND have followed the
call-ups of the hooker David Paice
and lock George Robson with that
of the prop Matt Mullan after
concerns arose surrounding Joe
Marlers tight hamstring.
Paice and Robson were turned to
on Sunday as potential respective
replacements for Dylan Hartley
and Courtney Lawes after the
Northampton pair suffered knee
injuries in Sundays 16-6 defeat to
Saracens, though they could yet
both be declared fit depending
upon todays results from scans
underwent last night.
Worcesters Mullan becomes
part of Englands ever-changing
front row scene in which the
Saracens prop Mako Vunipola
has also received the first call-up
of his career to follow Marlers
summer debut, and there
remains the potential for further
change elsewhere.
Head coach Stuart Lancaster will
also today announce his captain for
Englands impending four Tests
against Fiji, Australia, South Africa
and New Zealand from November
10 in which the reign of flanker
Chris Robshaw which began in
February for the Six Nations may
or may not be extended. Robshaw,
incidentally, injured an eye playing
for Harlequins on Sunday when
London Irishs Jonathan Joseph also
injured an ankle, but there have
been no replacements called up.
The greatest concern surrounds
Hartley, Lancasters first choice in a
position where Tom Youngs is the
only other option in the squad.
FOOTBALL
COMMENT
TREVOR STEVEN
Chelsea say referee Mark Clattenburg used inappropriate language to their players
TEAM Sky sports director Steven de
Jongh last night became the third
leading figure to leave the hugely
successful British outfit in a week as
chiefs continued their zero-tolerance
policy on doping.
De Jongh, 38, departed after
admitting to taking banned
substances during his riding career.
Team Sky boss Dave Brailsford has
demanded all staff and cyclists
confess any past doping, amid fresh
scrutiny of the sport following seven-
time Tour de France winner Lance
Armstrongs fall from grace.
De Jonghs exit followed that of
Team Sky lose another man
after De Jonghs confession
race coach Bobby Julich, who last
week confessed to doping, and
lead sports director Sean Yates,
whose exit on Sunday the team
emphasised was not forced by a
doping admission.
Brailsford said there was no
doubt about Stevens work with us,
which included helping Bradley
Wiggins become the first British
man to win the Tour earlier this year.
He added: Steven deserves our
respect for the courage hes shown.
Wiggins has been promoted from
fourth to third in the 2009 Tour
results after Armstrong, who is not
contesting US Anti-Doping Agency
charges, was disqualified.
BY FRANK DALLERES
BY FRANK DALLERES
36
SPORT
cityam.com/sport
Kevin Pietersens official
return to the England team
has been decided upon
Cricket: Page 35
@cityam_sport
Out of control
game needs
to be fixed
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