PRESS DIGEST – Financial Times – May 5

Wednesday May 5 2010

Financial Times

ESSAR IN WEAKEST UK DEBUT FOR EIGHT YEARS

Essar Energy (ESSR.L: ), the power and oil firm, suffered the
worst debut of a big London flotation on Tuesday since early
last decade. The group’s shares plummeted 7.2 percent to 389.5
pence on its first day of trading, after managing to raise 1.2
billion pounds ($1.83 billion) last week. The fall from the UK’s
largest stock market listing in more than two years is the worst
seen since HMV (HMV.L: ), the music retailer, dropped 7.5 percent
in May 2002. Essar’s listing came on a challenging day for the
markets, with the FTSE 100 index closing down 2.5 percent.

BARCLAYS VENTURES ENDS NEW INVESTMENTS

Barclays Ventures, the in-house private equity arm of
Barclays (BARC.L: ), has suspended spending on new investments.
Its decision comes as banking groups across the world reconsider
their private equity businesses amid increasing capital
requirements and growing regulatory pressure. The move also
reflects the disappointing performance of some recent
investments by Barclay Ventures, one of the largest investors in
buy-outs of small-cap UK companies worth between five million
pounds and 50 million pounds. These include the 85.7 million
pound buy-out two years ago of the European arm of sports
clothing brand Fila. Barclays is also seeking to spin-off the
team at Barclays Private Equity, which invests in bigger,
mid-market buy-out deals.

NEWCOMERS PILE INTO LONGEVITY RISK MARKET

A report from consultants Hymans Robertson shows UBS, Legal
& General (LGEN.L: ) and Morgan Stanley are among entrants into
the market for offloading the risks of corporate pension scheme
members living longer. The first quarter of 2010 saw the biggest
volume of longevity trades by pension funds ever seen, with UK
groups focusing on reducing volatility risk following the
financial crisis. James Mullins, Hymans Robertson’s senior
liability management specialist, expects to see more than 15
billion pounds of pension risk transfer deals this year.

BUILDERS’ LEGAL ACTION RISES AS CUTS START TO BITE

The government is facing legal action from builders over the
way it awards work for schools and hospitals as public spending
cuts begin to hit the construction industry. As budget cuts take
their toll, builders are increasingly prepared to hit back at
the sector’s largest client in their battle to support weakening
finances. A change in the law has also helped pave the way for
such legal challenges and lawyers are predicting a flood of new
action. The change enables builders to delay work starting on a
project given to a rival group. They can then claim for damages
by mounting a legal challenge to the basis on which the public
sector has awarded the contract.

ABERDEEN ENDS SPENDING SPREE

Aberdeen Asset Management (AND.L: ) has announced it will put
an end to new acquisitions to refocus on organic growth and
paying off debt. In the space of a year, the Scottish Group’s
assets under management have soared from 96 billion pounds in
March 2009 to the current level of 171 billion pounds. However,
chief executive Martin Gilbert said the buying spree was done
for now, partly because the prices of rival managers have
increased significantly as markets recover from the financial
crisis.

OSBORNE DENIES TORY PLANS DEFICIT CUTS WOULD SPARK UNREST

George Osborne, the Conservative shadow chancellor, has
dismissed claims that his party’s public spending cut drive
could spark Greek-style social unrest. A Tory government would
announce an emergency Budget in June that would map a course for
cutting the UK’s 163 billion pound deficit. An Office of Budget
Responsibility would also be set up to produce accurate public
accounts and forecasts in time for the Budget. Osborne insists a
planned lower public sector headcount would be balanced by a
“private sector recovery”.

ECONOMY DISPLAYS SIGNS OF STRONG RECOVERY

In April, manufacturing output and exports expanded at their
fastest rate in 15 years, according to the CIPS/Markit
Purchasing Managers’ Index. The closely watched survey reveals
the winner of Thursday’s general election will inherit an
economy already showing signs of a strong recovery. Rob Dobson,
economist at Markit, pointed to manufacturing output growing by
as much as two percent in the past three months. This growth
level suggests the sector will make a significant contribution
to second-quarter gross domestic product growth. However,
anecdotal evidence from individual manufacturers suggests the
industry still faces a challenging environment.

POLL WINNER TO INHERIT FRAGILE JOBS MARKET

Recent figures suggest the next government is set to inherit
a jobs market that is poised for recovery but still fragile.
Unemployment, far below the three million-plus predicted last
year, stands at 2.5 million, or eight percent. Although the next
government’s decisions will affect the prospects of individuals,
including young people and the long-term unemployed, ability to
alter the path of unemployment is strictly limited. According to
a YouGov (YOU: ) poll, no party has established a decisive
advantage on this issue. Its survey found 29 percent think the
best policy belongs to the Conservatives, 28 percent Labour and
17 percent the Liberal Democrats.

FILM4 SECURES FUNDING BOOST

On Tuesday, Channel 4 announced the public service
broadcaster would boost the budget of its film division by a
fifth this year to 10 million pounds. The decision returns
Film4’s budget to its 2007 level before the recession, and
partly reflects a cautious confidence at the group. Chief
executive David Abraham said the Digital Economy Act had also
influenced the decision to increase investment in Film4. The Act
formally stated that as part of its public service remit,
Channel 4 should make “high quality films” for cinema release in
the UK.

UNION FOCUSES ON TEESSIDE BID TALK

On Tuesday, Labour and Conservative leaders were pressed by
Community, the steelworkers’ union, to pressure Corus to reveal
whether it had received any formal bids for steel plant Teesside
Cast Products. The move came as it emerged Thai steel group SSI
could be interested in buying TCP but that Corus was stalling
the deal. Gordon Brown and David Cameron were urged by the union
to encourage Tata (TISC.BO: ), the owner of Corus, to establish
exactly what, if any, bids had been made.

Stock Market Research

($1=.6564 Pound)

PRESS DIGEST – Financial Times – May 5