PRESS DIGEST – Financial Times – May 22

Financial Times

WALSH LAUNCHES DIVIDE-AND-RULE STRATEGY IN DISPUTE WITH
UNITE

British Airways (BAY.L: ) has launched a divide-and-conquer
strategy against the Unite union ahead of an expected series of
strikes which will disrupt the travel plans of thousands of
people. Chief executive Willie Walsh has used a series of
interviews regarding the record 531 million pound annual loss
suffered by the company to pointedly criticise the ‘rogue’ Unite
branch which represents BA flight attendants. Despite frequently
referring to Unite’s leadership in warm and conciliatory tones,
Walsh said that the behaviour of the British Airlines and
Stewardesses Association was ‘dysfunctional’ and preventing an
end to the dispute. The strike is set to run from Monday until
June 9 unless an agreement is reached.

PREPARE FOR AGE OF AUSTERITY, SAYS LAWS

Treasury Chief Secretary David Laws is to warn the country
next week that the new coalition government is preparing to make
‘aggressive’ cuts to reduce Britain’s 163 billion pound budget
deficit. On Monday, Laws will outline six billion pounds of
savings to be made this year, but he has acknowledged that there
will be more cuts to come, stating: ‘We are moving from an age
of plenty to an age of austerity in the public finances’.
However, Laws said the cuts would be implemented in line with
‘progressive values’ and would make sure that vulnerable people
and key public services will be protected.

LSE HINTS AT BUILDING OWN CLEARING HOUSE

The London Stock Exchange (LSE.L: ) has said that it is
reviewing its relationship with the clearing house LCH.Clearnet,
indicating that a fundamental change in how the clearing
business operates in the City of London is about to take place.
The 210-year-old bourse is thought to be exploring the
possibility of creating its own clearing establishment. LSE
chief executive Xavier Rolet said that the lack of ‘in-house
capabilities’ and ‘dependency on certain not-always-ideal
external suppliers’ had prevented the exchange from ‘innovating
successfully’. The news came as the LSE posted its annual
results, which showed that the exchange made a profit of 144.3
million pounds in the year to March 31.

EX-LEWIS CHARLES BROKER PLEADS GUILTY TO FALSE ACCOUNTING

The Financial Services Authority has banned Jonathan Bunn, a
former inter-dealer broker at Lewis Charles Securities, from any
regulated financial activity. On Friday, Bunn pleaded guilty at
Southwark Crown Court to four charges of false accounting,
although he pleaded not guilty to a fraud charge. According to
the FSA, in July 2009, Bunn entered into several unmatched
trades which resulted in LCS having a short position of 6.95
million shares in HSBC (HSBA.L: ). Bunn then allegedly wrote out
false deal slips designed to trick LCS’ back office into
believing the sales were matched and the trades were genuine.

CARR OFF SHORTLIST FOR M&S CHAIR

Former Cadbury (CBRY.L: ) chairman Roger Carr has ruled
himself out of the running to take over from Sir Stuart Rose as
chairman of Marks and Spencer (MKS.L: ). Carr was believed to be
one of the front-runners to succeed Rose, but he is thought to
be seeking a position with a company with a more international
outlook. M&S, which releases its annual results next week, is
keen to name a successor for Rose before its July 14 annual
meeting. Although Rose’s official departure date is March 2011,
he is expected to leave the retailer before this date. Other
possible candidates for the role include outgoing Whitbread
(WTB.L: ) chief executive Alan Parker and former Standard
Chartered chairman Mervyn Davies.

SURPRISE BOUNCE IN INVESTMENT DESPITE WEAK BANK LENDING

The Office for National Statistics has reported that
business investment rose by six percent to 28.9 billion pounds
in the first three months of 2010. During 2009, business
investment fell by 26 percent, its steepest drop since records
began. Jonathan Loynes, an economist at the consultancy Capital
Economics, said that the news makes it more likely that the ONS’
initial estimate of first quarter GDP growth will be revised
upwards. Most of the increase in business investment came from
the service sector, although investment in manufacturing
continued to fall. The news came as the Bank of England released
figures on bank lending which showed that borrowing by companies
during March fell for the fourth consecutive month.

CON-LIBS YET TO AGREE ON ROYAL MAIL SALE DETAILS

Government insiders have claimed that Tuesday’s Queen’s
Speech will include plans to part-privatise Royal Mail, despite
the fact that ministers have not yet agreed on how much of the
firm should be sold off. In line with Labour’s abandoned plans
to sell the state-owned postal operator, the new coalition
government will exclude the post office network from the sale.
In a bid to overcome employee resistance to the plans, ministers
are also likely to offer Royal Mail shares to workers at the
firm. However, the Communication Workers Union has signalled
that it will continue to oppose all moves towards privatisation.

LABOUR KEPT POVERTY IN CHECK, SAYS IFS

The Institute for Fiscal Studies has released a report which
challenges Conservative claims that the ‘vast sums of money’
poured into the benefits system under Labour failed to reduce
poverty. The IFS also warned that the coalition government’s
plans to reduce public sector spending could raise poverty in
the areas of Britain where it has previously fallen fastest.
Alastair Muriel, a senior economist at the IFS, said: ‘Regions
heavily reliant on public sector jobs will certainly suffer
disproportionately if there are significant public sector job
cuts’. The report also showed that once differences in regional
prices are controlled for, rates of poverty are highest in
London and lowest in Scotland.

CLOSE BROTHERS AIDED BY STEADY RISE IN LENDING BOOK

Close Brothers (CBG.L: ), one of London’s last remaining
independent merchant banks, has released figures showing that it
is on track to modestly increase its annual profits. On Friday,
the bank released figures showing a steady increase in lending,
which will help to offset weak performance at its asset
management arm. The loan book at the company’s banking division
rose by 120 million pounds to 2.7 billion pounds in the three
months to April 31, although the figures were helped by a
seasonal rise in motoring finance. The bank also said that its
net interest margin and the ratio of its bad debts to total
lending remained steady.

FRESH UPHEAVAL AS MORE QUIT WH IRELAND

The chief executive and finance director of WH Ireland are
to resign from the Manchester-based small-cap broker. Richard
Ford, chief executive, will leave the company in August, while
finance director Nigel Gurney will remain in place until
November while a search continues for a successor. The
development comes a year after the firm expelled two other
executives following a failed board rebellion resulting from an
aborted merger with fellow niche broker Blue Oar. WH Ireland
recently released annual results showing that it had narrowed
its pre-tax losses from 2.5 million pounds to 2.1 million pounds
in the year to November.

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PRESS DIGEST – Financial Times – May 22