PRESS DIGEST – British business – April 10

The Guardian

CABLE ATTACKS ‘NAUSEATING’ BUSINESSMEN

Vince Cable, the Treasury spokesman for British political
party the Liberal Democrats, has said in an interview that
leading businessmen who have voiced their support for the
Conservative political party’s opposition to an increase in
National Insurance Contributions paid by employers are “utterly
nauseating” and “being used”. Cable said that opponents of the
increase have failed to provide details of how the abandonment
of the raise would be paid for. More than 80 businessmen have
signed a letter protesting the increase, including Sir Stuart
Rose, chief executive of retailer Marks & Spencer (MKS.L: ).

INFLATION FEARS PROMPT WARNING OF INTEREST RATE RISE

Economists have warned that interest rates are likely to
need to be increased before the end of the year if the current
spike in factory output prices continues. High petrol prices
have caused manufacturers to experience rising energy and raw
materials prices, the burden of which is being transferred to
retailers and may soon be placed on consumers, stoking fears of
a rise in inflation. A five percent rise in year-on-year FOPs in
March out-paced analyst expectations, causing them to refigure
the probability that the Bank of England will raise rates
earlier.

The Independent

RIO FOLLOWS IRON ORE RIVALS AND KILLS OFF YEARLY PRICES

Mining group Rio Tinto (RIO.L: ) has announced that it is to
end the traditional practice of setting iron ore prices annually
and will instead move to quarterly negotiations. Sharp rises in
the price of iron ore over the last eighteen months have left
Rio selling at well below market value. Rio follows industry
rivals BHP Billiton (BLT.L: ) and Brazillian group Vale in its
move to quarterly arrangements. All three companies had
difficulty in persuading their steelmaking customers to accept
large price rises set for a whole year.

WELLCOME JOINS WITH BLACKSTONE FOR RBS BID

Medical research charity the Wellcome Trust is to provide
financial backing for private equity firm Blackstone’s bid for
300 high street bank branches being sold by part-nationalised UK
bank Royal Bank of Scotland (RBS.L: ). The Trust’s investment arm
manages a portfolio worth 14 billion pounds, and provides 650
million pounds of funding for the charity’s activities. The
Trust is to provide financial support only and will play no
managerial role in the business. Other expected bidders for the
branches include the bank Santander, National Australia Bank and
the financial services arm of Sir Richard Branson’s company
Virgin, Virgin Money.

Daily Telegraph

40,000 PUBLIC SECTOR JOBS COULD BE LOST IN TORY CUTS

The six billion pounds of efficiency savings promised by the
Conservative Party adviser Peter Gershon if they win next
month’s general election are likely to lead to between 20,000
and 40,000 job losses in the public sector. The party leader
David Cameron claimed that this would not lead to any
redundancies in 2010, as 400,000 vacancies were created in the
public sector every year. Other party leaders remarked that the
figures belied Tory claims to be the party that would best
support jobs.

LABOUR TO OFFER A MONTH OF LEAVE FOR NEW FATHERS

The Labour Party’s manifesto plans to include an extension
of paternity leave from the current two weeks to one month.
Currently the government pays companies so that their employees
can take two weeks paid leave at the rate of 124 pounds and 88
pence per week or 90 percent of their salary. Other measures
will include attracting good quality teachers to poorly
performing schools with a “golden handcuffs” offer of 10,000
pounds, a promise to reduce pensioners’ heating bills by 100
pounds by putting pressure on energy companies, and support for
an increased “living wage” of 7.60 pounds an hour.

BARCLAYS TO STAND TRIAL OVER $11 BILLION LEHMAN WINDFALL

Barclays Capital (BARC.L: ), the investment banking arm of
Barclays, will face legal action from the estate, creditors and
trustee of the defunct American investment bank Lehman Brothers
over accusations that BarCap received a “windfall” when it
purchased Lehman’s U.S. brokerage for only $1.75 billion. The
Lehman estate alleges that the British bank gained billions of
dollars of extra assets after certain managers offered BarCap a
$5 billion discount on the purchase price.

WHAT THE BROKERS SAY

Legal & General (LGEN.L: ) (Buy)

HMV (HMV.L: ) (Buy)

Rexam (REX.L: ) (Buy)

First Group (FGP.L: ) (Buy)

Shanks Group (SKS.L: ) (Buy)

De La Rue (DLAR.L: ) (Hold)

Cable & Wireless (CWC.L: ) (Sell)

Royal Bank of Scotland (RBS.L: ) (Sell)

Vodafone (VOD.L: ) (Sell)

The Times

LENDERS QUIZZED ABOUT CREDIT AFTERSHOCK FEARS

City minister Lord Myners wrote to Britain’s five biggest
banks on Thursday, asking them to explain how they are preparing
to deal with bad credit card debts. The letter was sent
following a House of Lords debate on the issue, with a number of
peers concerned that banks could be forced to write off billions
of pounds worth of toxic debts, precipitating an aftershock to
the financial crisis. Tory peer Lord Marlesford said that some
banks have received less than 20 pence for every pound of debt
passed on to debt collectors.

AVIVA MAKES U-TURN TO FOLLOW RIVAL INTO ASIA

Insurer Aviva (AV.L: ) is set to return to Asia, having
largely abandoned the region five years ago. The company has a
significant presence in the Asian life insurance market, but
sold almost all of its non-life insurance operations in 2005.
The insurer plans to gain a new foothold in the region through
the sale of direct online car insurance in Singapore, before
offering home and travel insurance across the region. Simon
Machell, chief executive of Aviva Asia Pacific, said that demand
for asset insurance in the region has grown as a result of
increasing wealth among Asian consumers.

XSTRATA JOINS THE FRAY OVER AUSTRALIAN COALMINER

Miner Xstrata (XTA.L: ) has approached Australian coalminer
Macarthur Coal over a possible 2.25 billion pound buyout, two
months after Xstrata chief executive Mick Davis said that the
company would concentrate on its own growth prospects. Xstrata
is believed to have held discussions with steel producers
ArcelorMittal and Posco, who hold a combined 24.9 percent stake
in Macarthur. Coalminers are currently particularly attractive
targets, the price of coal having risen by up to 50 percent this
year.

Stock Analysis

PRESS DIGEST – British business – April 10