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).
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.
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.
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 (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.
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.
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.
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.
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.
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.”
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.
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