PRESS DIGEST – British business – July 12

The Times

NEW BREED OF BANKER LINING UP TO TAKE OVER THE HIGH STREET

Single branch building society Kent Reliance is being lined
up for acquisition by U.S. private equity firm JC Flowers in
order to gain a banking licence in the UK and build up assets to
become a big lender. If successful, the Flowers vehicle could
increase its presence by buying up available branches, brands
and accounts of Royal Bank of Scotland (RBS.L: ), Northern Rock
(NRKx.L: ) and Lloyds Banking Group (LLOY.L: ).

FACTORIES CALL FOR RETHINK ON RENEWABLE ENERGY TARGETS

Manufacturers in the UK, represented by the Engineering
Employers Federation, have suggested the government’s targets
for the expansion of renewable energy are too ambitious and
could result in “customers paying over the odds to achieve a
reduction in emissions”. The government is pushing for an
increase to the previous Labour administration’s commitment of a
sevenfold expansion of renewable energy by 2020. “The projected
costs of meeting the target are significant and highly
uncertain, anywhere between 4.4 billion pounds and 24.9 billion
pounds on top of existing subsidies a year by 2020,” says Roger
Salomone, the EEF’s energy and regulation adviser.

NEED TO KNOW: EASYJET

Carolyn McCall, the newly-appointed chief executive of
easyJet (EZJ.L: ), has said the low-cost airline will be reviewing
its business model and will be aiming to update investors when
it releases full-year results in November. The focus of the
review is likely to be on the pace of growth at the airline and
how this impacts on easyJet’s fleet requirements.

NEED TO KNOW: BAE SYSTEMS

On Monday, defence group BAE Systems (BAES.L: ) will
officially unveil its first ever high-tech roboplane. The trial
aircraft, dubbed Taranis, cost 143 million pounds to construct
and spearheads BAE’s drive to convince the Ministry of Defence
to invest in the next generation of unmanned aircraft. Test
flights for the Taranis plane will commence in 2011.

The Daily Telegraph

BP BUILDS DEFENCE IN TAKEOVER THREAT

BP (BP.L: ) is preparing to unveil a 40 billion dollar defence
strategy at its second quarter results on July 27. It is
understood that U.S. oil and gas corporation Exxon Mobil (XOM.N: )
has sought approval by Washington to launch a bid for the
British energy company and speculation has also arisen that a
possible bid from Chevron (CVX.N: ) has been approved. BP’s
defence rests on hopes that it will be able to plug the
continued oil spill in the Gulf of Mexico and halt the
precipitous fall in its share price.

COMPANIES FEAR AUSTERITY EFFECT

A new survey from BDO accountants has shown that UK
businesses remain downbeat about the potential for growth
despite a recent boost in orders. The output index, which tracks
companies’ experience of current trading, reveals a jump in June
to 101.6, up from 101 in the previous month. However, the
optimism index, which predicts future growth, fell to 96.9 in
June from 97 in May. BDO highlighted commercial concerns about
public sector austerity measures.

PENSIONS SPLIT FROM RPI COSTS BUSINESS

KPMG has said government plans to cut the private sector
pensions deficit by up to 100 billion pounds will require a
change in the law and present companies with a “big headache”. A
strategy to reduce the burden on occupational pension schemes by
linking pension payments to the Consumer Prices Index instead of
the Retail Prices Index by as early as next year could reduce
the estimated 239 billion pound black hole in final salary
pension schemes by up to 100 million pounds. However,
professional services firm KPMG warned employers that they would
have to review the terms of their pension schemes to establish
their eligibility to take advantage.

The Independent

NATIONWIDE CALLS TIME ON FRESH BAILOUTS OF RIVAL SOCIETIES

After coming to the aid of three smaller rivals during the
financial collapse, Nationwide Building Society (POB_p.L: ) has
ruled out any further involvement in the rescue of struggling
competitors. Nationwide has made the decision in light of
concerns that such a move would have a negative impact on
society members, particularly when the Financial Services
Authority is pushing smaller building societies to raise more
capital despite increasingly slender margins. Although
comparatively robust, such pressures have taken their toll on
Nationwide, which saw its 2009 profits drop by nearly 50
percent.

CARBON TRADERS GRAB HEFTY PAY INCREASES

Recruitment firm Selby Jennings has revealed that the pay
gap between carbon traders and conventional energy traders has
dropped 50 percent in three years. Carbon traders have enjoyed a
63 percent increase in pay over this period, as opposed to the
32 percent rise seen by energy traders. This takes the former to
an average of 122,000 pounds and the latter to 139,000 pounds.
However, for the first time, some senior carbon traders are
actually earning more than their energy trader counterparts,
indicating a growing interest in the sector among mainstream
financial institutions.

FEWER PUBS GOING BUST BUT EXPERTS WARN OF MORE PAIN

Professional services firm PricewaterhouseCoopers has
revealed that 60 pub companies filed for insolvency in the
second quarter of this year, down from 88 in the final quarter
of 2009. Although the figure represents a 30 percent drop in
pubs falling into insolvency, PwC’s David Chubb said: “Pub
company insolvency rates have fallen from where we were a year
ago but trading remains difficult and further failures are
expected as lenders consolidate their positions.”

The Guardian

BLUE-CHIP COMPANIES BRACED FOR GREAT BOARDROOM PAY REBELLION

Meetings to be conducted this week by British Land (BLND.L: ),
Sainsbury’s (SBRY.L: ), Marks & Spencer (MKS.L: ) and Burberry
(BRBY.L: ) are all expected to be disrupted by shareholder unrest
over recent controversial executive pay packages meted out by
the companies. Pirc, the governance advisory group, has urged
investors to vote against what it describes as “excessive”
executive remuneration deals, saying such packages are not in
the companies’ long-term interests. Wednesday’s M&S shareholder
meeting marks the first of the week’s standoffs, although
chairman Sir Stuart Rose has predicted approval for the
retailer’s executive pay will be “passed adequately” — a
statement likely to add to investors’ ire.

SKY-HIGH CITY RENTS MAY FALL TO EARTH

According to data compiled by performance analyst Investment
Property Databank, growth in City property values is slowing.
IPD’s Phil Tily, director of UK client reporting, said: “The
10-month rally in prices since last August, which has seen 14
percent capital growth, seems to be running out of steam.”
Tily’s comments are echoed by real estate adviser CB Richard
Ellis which points to a third consecutive monthly slowdown in
the growth of commercial property prices, to 0.6 percent in
June. However, a report released on Monday by NB Real Estate
shows continued recovery in London office rents, currently
averaging 53 pounds a square foot in Q2, up from 47.50 pounds in
the same period last year.

Prepared for Reuters by Durrants

PRESS DIGEST – British business – July 12