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MPs sayBank mustcede power

THE GOVERNMENT should use its over-haul of regulation to bring about a rad-ical shift of power from the Bank ofEngland back to the Treasury, an influ-ential committee of MPs has recom-mended.

The Treasury Select Committee,headed by Conservative MP AndrewTyrie, says that the Bank’s “antiquated”governance means it is not transparentor accountable enough to wield thenew powers it is being given. Instead,ultimate responsibility for financial sta-bility in a crisis must rest with thechancellor.

“A chancellor can be expected to takeresponsibility in times of turbulence,”the committee says, suggesting that theTreasury should have the power to seizecontrol of decisions involving the use ofliquidity and credit facilities that couldrisk public funds.

This would, it says, “create a clearline of accountability for decisionstaken through the chancellor to parlia-ment”. The MPs’ report on Bankaccountability also suggests slimmingdown the court of the Bank from 12 toeight members and renaming it thesupervisory board.

The board would then take responsi-bility for conducting reviews of theBank’s activities and publishing them,which the Bank has refused to dodespite recent requests.

In addition, the monetary policycommittee and new financial policycommittee must have a majority ofnon-Bank members, MPs say.TREASURY VICTORY ON RENMINBI: P5

BY JULIET SAMUEL

REGULATION

▲

Hopes that Berlusconi might resign buoyed markets Picture: REUTERS

www.cityam.com FREE

BOTH SIDESOF THE HEDGE

FUNDS REVEALTHEIR VARYING

FORTUNES P6

QPR AND AIRASIA BOSSON RACISM IN FOOTBALLTONY FERNANDES INTERVIEW P33

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Certified Distribution 29/08/11 till 02/10/11 is 98,447

Issue 1,506 Tuesday 8 November 2011

A DEFIANT Silvio Berlusconi clungon to power last night, dismissingcalls for his resignation as bondyields rocketed to euro-era recordsand markets see-sawed on rumourshe was set to resign.

Yields on Italian bonds soared to6.68 per cent, higher than the levelsseen in August, when the EuropeanCentral Bank restarted buyingbonds to lower borrowing costs.

The 14-year high stoked fears thatItaly is approaching the point atwhich its debts will become unsus-tainable.

Thursday’s sale of three-monthdebt was cancelled yesterday, asfears grew that Italy may soon be ata point where either no investorswill be prepared to take the risksrequired to lend Italy money, orItaly will become unable to pay itsdebts.

“The European Financial StabilityFacility (EFSF) needs to be a lot big-ger to convince investors that it canwithstand an Italian default, and italso needs to make clear where itsfunding will come from,” SimonHill, head of investment research atBuck Consultants, told City A.M.

A crucial budget vote takes placetoday, and hopes that a new govern-ment might take more action onimplementing the budgetary disci-pline demanded by the EU and IMF

helped markets move off lows.Rumours spread yesterday morn-

ing that Berlusconi was about toresign, after a meeting in whichleaders within his own party were

reported to have urged him to go.Investors cheered the possibility

of Berlusconi’s departure, with theFTSE and other European indicesrising by close to one per cent onhopes of a resignation.

However, Berlusconi took toFacebook to deny the suggestions,writing “Rumours of my resigna-tion are groundless” on his officialpage, quickly deflating the bubble.

The FTSE 100 ended the day down0.3 per cent, the DAX was down 0.63per cent and the CAC 40 finisheddown 0.64 per cent. The VIX indexrose 0.265 per cent to 30.240.

Economists feared that the politi-cal situation was impacting morestrongly on markets than any fun-damentals, highlighting the impor-tance of finding a real resolution tothe debt problems afflicting theperipheral Eurozone economiesand Italy.

“The mere fact that you haveequity markets rallying on specula-tion that the Italian Prime Ministerwas to resign today shows thatinvestors have little confidence inBerlusconi’s ability to address andcontain Italy’s debt problems,” saidJoshua Raymond, chief marketstrategist at CityIndex.

MORE EUROZONE: P2, P3, P4

BY TIM WALLACEEUROZONE

▲

BERLUSCONI: ON THE BRINK

News2 CITYA.M. 8 NOVEMBER 2011

YIELDS on Italian debt continuedtheir upward surge yesterday,despite the European Central Bank(ECB) appearing to have boosted itsbond purchase programme in a bidto control debt costs in strugglingperipheral states.

Yields on 10-year Italian debtreached a 14-year high of 6.67 percent yesterday, with analysts againwarning that the government’sfinances could be rendered unten-

able if the figure rises above sevenper cent. Meanwhile, Italian five-year credit default swaps (CDS)increased by 2.15 per cent to503.255.

The ECB has splashed a jaw-dropping €183bn since it beganits bond-buying programme lastyear. It revealed yesterday thatit bought €9.52bn in bonds lastweek – the most the bank hasspent since mid-September.

The jump in outlayscomes days afterMario Draghi (right)took over from Jean-

Claude Trichet as the ECB’s newpresident, and as the bank contin-ues to publicly resist pressure

from – among others -- theUS, Britain and Russia, to

step up the purchases.In his first news con-

ference as ECB presi-dent last week, Draghioffered no commitmentto scaling up the bank’s

b o n d - b u y i n g ,describing itas a “limit-ed” pro-gramme.

ECB ups bond-buyingyet yields still risingBY JULIAN HARRIS

EUROZONE

▲

THE FIRST bond issue by the EuropeanFinancial Stability Facility (EFSF) in itsnew form was slightly oversubscribedyesterday.

Raising €3bn (£2.57) to fundIreland’s refinancing needs, the EFSFpaid 104 basis points (bps) above midswaps, implying a yield for investors of3.59 per cent.

The last time such a 10-year bondwas offered, investors snapped it up at

17bp above mid swaps, and it was ninetimes oversubscribed. Germany andthe EFSF both have triple-A credit rat-ings, yet German borrowing costs aredown at 1.78 per cent on 10-year debt.

Analysts believe the spread is linkedto German debt being seen as themost secure in the Eurozone, whileFrance also guarantees the EFSF – andmay be at risk of losing its covetedtriple-A rating, damaging the EFSF as awhole and illustrating the higher riskinvestors are taking by lending to thefund.

Yet Stephen Gallo of Schneider FXbelieves Eurozone leaders should stayconfident. “There is demand for EFSFpaper because the market wants analternative to investing in the US dol-lar in the medium term, and this canbe seen as a precursor to a commonEurobond,” he told City A.M.

The sale was originally due to goahead last week but the EFSF suspend-ed it in the face of market turmoilcaused by doubts over whether Greecewould stick to the euro debt rescueplans agreed late last month.

BY TIM WALLACE

EUROZONE

▲

KARL Marx is not exactly back, but heis being mentioned far more frequent-ly these days, and not just on the stepsof St Paul’s. I was even asked recently(by an accountant whose pay probablyput him in the UK’s top one per cent ofearners) whether I thought that elevat-ed levels of unemployment meant thatMarx had a point.

My short-answer was no – my longerone was that name-dropping theauthor of Das Kapital has become acheap, lazy and morally indefensibleway of pointing out that the presentsystem is failing to produce enoughjobs and growth, which of course istrue. It is also a facile way of declaringempathy with the St Paul’s protesters,without actually having to grapplewith difficult questions.

It is evident there are massive prob-lems in our society. The question is notwhether something needs to change –that is obvious. What isn’t is whatexact reforms are needed. Marx ishardly the only thinker to have pre-dicted business cycles – and given therest of his agenda, you would havethought that those seeking answers toour woes might actually spend a littlemore time reading other economistswho actually appreciated the astonish-ing growth that well-functioning capi-talism could deliver.

Communism has been tried repeat-edly. It doesn’t work. Most people justabout remember this (though mostyoungsters will have forgotten by thetime the next crisis comes about).Communism’s degree of failure isutterly incomparable with the failureof our present, mixed economy system(what we have is not pure capitalism or

EDITOR’S LETTER

ALLISTER HEATH

7th Floor, Centurion House, 24 Monument Street, London, EC3R 8AJTel: 020 7015 1200 Fax: 020 7283 5334Email: [email protected] www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowActing Night Editor Marion DakersBusiness Features Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Jo SimpsonPictures Alice HeppleCommercialSales Director Jeremy SlatteryCommercial Director Harry OwenHead of Distribution Nick Owen

Distribution helplineIf you have any comments about the distributionof City A.M. Please ring 0207 015 1230, or [email protected]

“neo-liberalism” but a weird andunstable combination of markets com-bined with a large public sector, highand graduated taxes, hugely powerfulmonetary authorities and a hugeamount of regulation). Communismleads to collapse, starvation and dicta-torship. For those who have forgottenabout this, I would recommend theBlack Book of Communism: Crimes,Terror, Repression, written by a groupof French authors led by StephaneCourtois. The book details how at least94m people lost their lives as a resultof communism in the twentieth cen-tury, especially in China, the SovietUnion, Cambodia and North Korea butalso in Africa, Afghanistan, EasternEurope, Vietnam and Latin America.Communist regimes were defined byrepression, executions, torture andlabour camps; one gruesome episodeled to the death from starvation of 4mUkrainians in the 1930s.

The broader failings of commu-nism, which delivered a miserablestandard of living for ordinary folk, iseasier to document. Two naturalexperiments were run last century: anunusually pure version of capitalismin Hong Kong versus real communismin China; a slightly more diluted butstill highly capitalist model in post-warGermany versus a socialist system inEast Germany. In both cases the tri-umph of capitalism was complete.

Instead of wasting time investigat-ing the views of an economist whoseoverall system failed disastrously, weshould be learning from those whounderstand that a free-market is theonly possible system but who alsograsp that current institutions tend tolead to booms and busts, especially ifthe price system is distorted by under-priced credit or underpriced risk as aresult of central bank or governmentactions. If you are into dead econo-mists, try reading Ludwig von Mises orF.A. Hayek. The latter predicted thecrash of 1929 and the stagflation ofthe 1970s; their followers predictedthe dot.com bubble and the collapse of2008. Marx should remain buried.

[email protected] me on Twitter: @allisterheath

We need reform –but that does notmake Marx right

Printed by Newsfax International,Beam Reach 5 Business Park, Marsh Way, Rainham, Essex, RM13 8RS

INTEL SUPERCOMPUTER TO AIDSTART-UPS IN EAST LONDONIntel has thrown its weight behindthe Tech City project in East London,earmarking one its supercomputersfor start-up companies in the area’s“Silicon Roundabout” to use free ofcharge. It has four such computerclusters in Swindon, each of which iscapable of handling 2.25 trillion cal-culations per second.

WHAT THE OTHER PAPERS SAY THIS MORNING

COUTTS TO BE FINED OVER AIG PROD-UCT SALESThe City watchdog will fine Coutts &Co, the private bank that counts theQueen among its clients, about £6mfor the way it sold savings productslinked to failed US insurer AIG. Thefine, expected to be announced assoon as Tuesday, is one of the stiffestpenalties ever handed down by theFinancial Services Authority.

EURO UNCERTAINTY KEEPS RISING

EFSF raises €3bn for Ireland in faceof low demand and choppy markets

ANALYSIS l ECB steps up bond purchases

7/08 14/08 21/0828/08 4/09 11/09 18/09 2/1025/09 9/10 16/10 23/10 30/10

24

12

14

16

18

20

22

10

8

6

4

2

€ bn

weeks

TOTAL€183bn

ANALYSIS l Italian bond yields keep rising

Jun Jul Aug Sep Oct Nov

6.5

6

5.5

5

Silvio BerlusconiRumours of my resignation are groundless.Like • Comment • Translate • Share

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“Berlusconi is bluffing in a last desperate attempt to savehimself,” said opposition politician Dario Franceschini

FRANCE announced €65bn of taxhikes and budget cuts over five yearsyesterday, as President NicolasSarkozy seeks to protect the country’screditworthiness in financial mar-kets without killing his chances of re-election in six months time.

Minister’s salaries, includingSarkozy’s, will be frozen as part of theplan, as the government aims tomake the austerity measures morepolitically palatable. Sarkozy previ-ously attracted criticism for increas-

ing his salary by 170 per cent.The main goal of the measures is to

protect France’s top-notch credit rat-ing, which allows the government toborrow cash at relatively cheap ratesdespite the ongoing Eurozone crisis.

But economists said the govern-ment’s growth outlook was still toooptimistic, even after cutting theforecast for 2012 to one per cent from1.75, meaning the latest measuresmight not be enough for France tomeet its deficit reduction goals.

They also said that much of theplan would have to be carried outafter the April and May election.

BY HARRY BANKSEUROZONE

▲

France announces freshmeasures for austerity

DAVID Cameron warned theEurozone nations they must “sortthemselves out” before any interna-tional aid is given, while negotia-tions between Greece’s politicalparties continued in an effort toform a new unity government.

The Prime Minister addressed theHouse of Commons, telling MPsthat the UK was prepared, “in prin-ciple” to give more to theInternational Monetary Fund (IMF)following discussions at the G20 in

Cannes.However he also warned that

“specific commitments” were notmade because the Eurozone mustdo its best to combat the debt crisisbefore it receives cash from outside.

The Prime Minister reiteratedchancellor George Osborne’s stancethat a resolution to the Eurozonecrisis would be “the single biggestboost to the British economy thisautumn”.

“The Eurozone must now dowhat is necessary and see throughthe agreement it reached inBrussels ten days ago,” he added.

BY TIM WALLACEEUROZONE

▲

Cameron returns to UKtalking tough on Europe

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News 3CITYA.M. 8 NOVEMBER 2011

BANK STOCKS DIVED AGAIN

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GREEK party leaders arestruggling to agree on a newprime minister, despite EUdemands that the politicalclass commit itself to thenation’s financial salvationand end the chaos threaten-ing the entire euro project.

Yesterday came and wentwithout any accord on whowill lead a new nationalunity coalition, despite talkthat a former vice presidentof the European Central

Bank, Lucas Papademos,would get the job. The cabi-net is due to hold an emer-gency session today, andofficials said negotiationswere under way on the 100-day coalition that must winparliamentary approval for aEurozone bailout.

Frustration was apparentin Brussels where officialssaid the government had toshow it was serious aboutpromises Athens has madeto the EU and IMF in returnfor the €130bn bailout.

Greece struggles toagree on new premierEUROZONE

▲

A WAVE of poor economic dataknocked confidence even further inthe Eurozone yesterday, piling morepressure on the beleaguered singlecurrency area.

Retail sales across the 17 memberstates fell 0.7 per cent in Septembercompared to August, official figuresshowed -- far worse than economistsexpected.

“It was a pretty disappointing fig-ure,” said Juergen Michels, an econo-mist at Citigroup. “The 0.7 per centdecline in retail sales really suggeststhere is a huge amount of uncertain-ty coming through to consumers.”

In the same month, Germanindustrial output fell at its sharpestrate since February 2009, fuellingconcerns that Europe’s stutteringgrowth engine could go into reversebefore the end of the year as anabrupt slowdown abroad eats intodemand for its exports.

From Germany news also emerged

that investor confidence in theEurozone has hit a two year low. TheSentix index sank by 2.7 points to -21.2 points, signalling “a continuedweakening of the economic dynamicin Euroland.”

Sentix said that while improvedconfidence has been recorded inother regions this month, such as inthe US and Asia excluding Japan, theEurozone remained stuck in themud.

“The current situation remainsunder pressure and document thereis the risk of recession in Euroland,”the report warned.

Meanwhile productivity across theEuropean Union dropped at itsfastest rate or over two and a halfyears, a study by Markit revealed.

The UK was the only “big four”economy to record improved privatesector productivity, with Germany,France and Italy all printing furtherdeclines. Even on this side of thechannel, “the overall rate of increasein output per work was only mod-est,” Markit said.

New series ofbearish datahits Eurozone

Banco de Valencia, Spain’s smallestlisted bank, warned its plan toincrease its capital by €60m (£51m)may be insufficient. Following a rou-tine inspection by the Bank of Spain,Banco de Valencia said it had share-holder approval to hike capital by upto 50 per cent if needed. That wouldimply about €200m. Trading in itsshares was suspended until the after-noon by the bourse regulator after areport in El Mundo paper said it had afunding gap of about €600m.

Spanish bank incapital warning

MF Global chief Jon Corzine has faced heavy criticism for his strategy Picture: REUTERSBY JULIAN HARRIS

EUROZONE ECONOMY

▲

BANKING ▲

Focus | Euro crisis 4 CITYA.M. 8 NOVEMBER 2011

JEFFERIES has cut its holdings ofEuropean sovereign debts by nearlyhalf in the past week, in a move to dis-pel fears over its exposure to theregion.

The US investment bank has slashedits long and short positions in the sov-ereign debt of Portugal, Italy, Ireland,Greece and Spain by $1.1bn each sinceFriday, it said in a statement and expe-rienced “no meaningful profit or losson today’s trading activity.”

Jefferies said its net exposure to theEurozone now stands at $59m.

Jefferies halvesits EU exposure

BANKING

▲

NEARLY two-thirds of positions fromthe British unit of MF Global werestill open yesterday, a week after itfiled for bankruptcy protection,sparking frustration about delays inmoving business to new brokers.

UK administrators KPMG said954,000 positions were open out ofthe 1.6m in place when MF GlobalHoldings filed for bankruptcy pro-tection on 31 October.

KPMG is in talks about sellingparts of the MF Global business inthe UK. It said the $633m (£395m) in

missing client assets were unlikelyto affect the winding down of theBritish arm.

KPMG said the entire foreignexchange portfolio in Europe hadbeen unwound, consisting of 25,000trades with a notional value of$60bn.

On Sunday regulator CME alsoasked brokers who took over cus-tomer accounts from MF Global notto distribute any of the moneybefore the end of today.

Meanwhile traders on the LondonMetal Exchange said turnover wasthinner than usual yesterday.

MF Global clients set for furtherdelay as empire’s sell-off begins

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THE CITY has taken a major steptowards becoming the first offshoretrading centre for the Chinese renmin-bi after the FSA began work on loosen-ing up regulations for Chinese banks,City A.M. can reveal.

Following moves by HM Treasury(HMT) to push the issue up the agenda,the FSA has kicked off due diligenceon a proposal from Chinese banks thatcould exempt them from regulationspreventing the movement of largeamounts of money to China.

The Treasury has been keen to speedup the process as part of a majorcharm offensive to lure Chinese tradethrough London rather than theEurozone. The goal is to set up a 24-hour renminbi market in the UK.

But it is fraught with hurdles bothbecause of Britain’s ultra-strict regula-tors and China’s reluctance to cede

control over its currency.The FSA’s move follows reassurance

from Chinese regulator, the ChinaBanking Regulatory Commission, thatthe UK subsidiaries of its banks willadhere to certain limitations on theirmovement of money out of Britain.

Currently, the rules impose strictcaps on the amount of exposure abank can build up to one single coun-terparty if that entity is not in a stategoverned by Basel Committee rules.

In effect, it means that a UK sub-sidiary of a Chinese bank such as Bankof China UK or China ConstructionBank could accrue deposits of renmin-bi abroad but would be unable to get itall back to their parent company inChina to invest it.

They need the FSA to give a nod to alarger-scale movement of cash back toBeijing as a precursor to establishing arenminbi market in London. The FSA’sstringent adherence to the rulebookrisked damaging the City becauseChinese banks were beginning to sim-ply route their trade through EU coun-tries that apply the rules less strictly.

Banks such as HSBC and Standard

Victory in battle to bringrenminbi market to City

George Osborne is trying to make London a world-class renminbi centre Pic: REUTERS


Chartered have lobbied hard for theUK to loosen its rules to avoid losingout to rivals on the continent.

The problem has built up becausecompanies outside China are increas-ingly keen to use the renminbi, caus-ing seven per cent of Beijing’s externaltrade to be settled in the currency ver-sus one per cent just a year ago.

An HMT spokesman said it wasworking on “any regulatory or infra-structure issues that need to beaddressed”.

THE BANKING FILES

BY JULIET SAMUEL

EXCLUSIVE

▲

MORE evidence of the struggles of thehedge fund industry has emerged asLansdowne Partners admitted record-ing losses of up to 20 per cent at twoof its key funds.

Lansdowne, which manages$13.3bn (£8.31bn) and is one of manyCity institutions to have hired TonyBlair after he left Downing Street, hasbeen caught out by rising investorconcern over the political risk in glob-al banks.

The UK Equity fund, Lansdowne’slargest with $7.8bn of assets undermanagement, is down 15.6 per centin the 10 months to the end ofOctober, a stark contrast to its averageannual return of 14.85 per cent in 10years since it was set up.

Its long-only $490m UK StrategicInvestment fund has been hit harderand is down 20.4 per cent so far thisyear, continuing a weak performancesince 2007.

Lansdowne, which made millions

of pounds by shorting banking stockssuch as Barclays and Anglo Irish Bankduring the crisis, is seen as one of thebest-connected funds.

Last year it hired Blair to give asmall number of geopolitical talks toits executives and co-founder PaulRuddock and fund manager DavidCraigen have both donated to theConservative Party. Last monthLansdowne sold its $850m stake inGoldman Sachs.

The average hedge fund globallygained 0.8 per cent in October, leav-ing it down 7.7 per cent for the yearafter a volatile summer that has dam-aged performance across the indus-try, according to Hedge FundResearch’s HFRX index.

The FTSE 100 index was, in con-trast, up 8.1 per cent over the month.

Roberto Botero, director at SciensCapital Management, which runs$3.7bn in hedge fund assets, saidmanagers had adopted “fairly conser-vative” strategies over the quarter,saving their money so it can be allo-cated when turmoil has eased.

Turmoil hitsLansdowne ashedgies falter BIG name managers such as Crispin

Odey and Michael Hintze have buckedthe autumn gloom in hedge funds bymaking gains amid hopes Eurozoneleaders are finally tackling the debt cri-sis.

Odey Asset Management, one ofEurope’s biggest hedge fund firms,saw its European fund, run by founderCrispin Odey, gain 9.1 per cent inOctober, according to ThomsonReuters Lipper data.

The gains mean the fund, which hasperformed strongly in recent years butwhich has suffered this year as Odey’sbullish stance on stocks has been hitby falling markets, is now downaround 15 per cent this year.

Meanwhile, CQS DirectionalOpportunities, a roughly $1.3bn(£812m) multi-strategy fund run byCQS’s Australian founder MichaelHintze, soared 13.8 per cent during themonth.

One of the top performers wasHorseman Capital’s Global fund,which rose 18.5 per cent in October,taking year-to-date gains to 6.89 percent, thanks to bets on the luxurybrands, luxury retailers, luxury autosand Chinese bank sectors. The oncehigh-profile fund has shrunk in sizefrom $2.8bn to $143m after managerJohn Horseman stepped down in 2009.

A FORMER executive at MTV will helpMan Group spearhead its push intoChina.

The hedge fund yesterday appoint-ed Yifei Li as country chair for China.She will work with Pierre Lagrange,the star trader who was recentlynamed chairman of Man Asia.

Man Group has long wished togrow in the East and is thought to be

planning to open a research and trad-ing office in the Chinese capital ofBeijing.

Man chief executive Peter Clarkesaid: “Yifei Lei is widely recognised inthe region for her extensive experi-ence managing multinationals’growth in the region.”

Li, an ex-managing director of MTVNetworks Greater China, andLagrange both previously worked forGLG Partners, bought by Man for$1.6bn (£1.02bn) last year.

Rivals Hintzeand Odey risedespite gloom

Man hires former MTVboss for China venture

Beijing could be a lucrative market for Man; inset China chair Yifei Li Picture: GETTY

BY PETER EDWARDS

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A WEAK end to the year looms forBritish shops, after consumerspending dropped in October.

Spending was down 0.9 per centlast month compared toSeptember, according to a reportpublished this morning by Visa.Compared to October 2010, spend-ing on Visa cards plummeted by1.9 per cent.

And retailers fear a bleakChristmas after like-for-like salesfell by 0.6 per cent in Octobercompared to the same time lastyear, a separate survey alsorevealed today.

“A lasting lift in consumers’mood needs a sense that bettertimes will come for jobs, costs andincomes,” said Stephen Robertsonof the British Retail Consortium

(BRC), which compiled the survey. “The chancellor should use this

month’s Autumn Statement tohelp customers and businesses byoffering hope over next year’splanned fuel duty and businessrates increases,” Robertson added.

Over the last three months totalretail sales are up 1.9 per centcompared to the same time lastyear – yet food sales are entirelyresponsible for the gain. Sales ofitems other than food are downby 0.3 per cent on last year, interms of value.

“Allowing for the VAT rise sincelast year, that suggests a substan-tial drop in sales volumes,”Robertson said.

Like-for-like sales, whichexclude expansions in shopfloors, were down by 0.3 per centoverall, with non-food sales downby 1.8 per cent.

Gloom on thehigh streetas sales dropBY JULIAN HARRIS

RETAIL

▲

* These views are those of the individuals above and not necessarily those of their company.

“There must be a lot of pressure on people this Christmas, butpersonally this won’t affect what I buy. There is no doubt theretail industry is suffering, though.”

PAUL CLAYTON | JRP UNDERWRITING

“When you have a family and kids it is not always easy to cut down: you don’t want to let them down. Not everyone is suffering, but for thosewho are things have to get worse before they get better. People who can’t afford to spend how they usually would should will cut back.”

JACKSON SMITH | ROYAL BANK OF CANADA

CITY VIEWS: WILL RETAILERS SEE LOWER SALES THIS CHRISTMAS?Interviews by Phoebe Torrance

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“People will always try to find spare cash over Christmas, butwith the state the economy is in I think small retailers willsuffer. I am worried about independent shops.”

PETER GODFREY | LLOYD’S OF LONDON

Consumers are spending less on non-food items in the run up to Xmas


CLERGY from St Paul’s want to gointo City boardrooms to lobby direc-tors about the gap between the richand the poor.

The Right Rev Peter Selby said hewanted to use the publication of areport – delayed because of thefurore over the Occupy LSXprotests – to debate “appropriate”levels of pay with chief executives.

He was speaking as the surveysaid the majority of City profession-als think bankers, stockbrokers,bond traders and FTSE 100 chiefexecutives are paid too much.

Asked if it meant clergy wouldenter boardrooms to ensure recom-mendations of the St Paul’s Institutereport are acted on, Selby said: “Itgives us something of a mandate... Itgives us cause, along with every-thing which is going on, to take thissituation to higher levels and say,‘what are you going to do about it?’”

The church’s institutional com-plicity in finance had made it a diffi-

cult topic to address in the past,added Selby, a retired bishop.

The report, Value and Values:Perceptions of Ethics in the City Today,includes contributions by St Paul’sformer Dean, the Right Rev GraemeKnowles, and former CanonChancellor, Rev Dr Giles Fraser, whoboth resigned amid disagreementsover the response to the protests.

The study showed 75 per cent ofCity workers think there is too greata gap between rich and poor andnearly two-thirds (64 per cent) ofthose questioned said salary andbonuses are their main motivation.

The survey, carried out before theprotests began, involved 515 inter-views and was carried out to markthe 25th anniversary of the deregu-lation of the City. Just over half ofpeople said the Big Bang had led toless ethical behaviour.

Last night Occupy LSX said thereport showed a “conflict” betweenmorality and financial incentives. StPaul’s has asked the activists to pre-pare several written responses.

FORUM: P24

Vicars in theboardroomto check payBY PETER EDWARDS

POLITICS

▲

Occupy LSX has run into a fourth week Pic: Laura Lean / CITY A.M.

NEWS International said yes-terday its staff had ordered sur-veillance on two lawyers forvictims suing the group overthe phone-hacking scandalthat has engulfed the group.

The UK newspaper arm ofNews Corp admitted that theaction, the latest in a string of

embarrassing and damagingrevelations about illegal eaves-dropping on phone messages,was “inappropriate”.

Private detective DerekWebb said he had been hiredby the now defunct News ofthe World paper to spy onMark Lewis and CharlotteHarris, who represent some ofthe victims, the BBC reported.

Lawyers were spiedon says NewsCorp

MEDIA

▲ ONE of America’s top headhuntershas warned Wall Street bonusescould fall by as much as 50 percent.

Ilana Weinstein, founder andchief executive of executive searchfirm IDW, told Bloomberg TV: “Thisyear it’s going to be a tough year.We’re hearing bonuses at the seniorend are going to be down between30 and 50 per cent this year.”

Weinstein, a former GoldmanSachs analyst, said between 50 and80 per cent of bonus awards wouldbe paid in shares that will vest inseveral years time rather than cash.

She added that Wall Streetemployees at the “more junior end”were expecting bonuses to be“between flat and 15 per cent” high-er. “That’s the new up,” she said.

Wall Street staff on the sell sidecould jump ship to a hedge fund orother buy-side firm, said Weinstein.

Headhunter: bonuses on WallStreet could fall by 50 per cent

FINANCIAL SERVICES

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LLOYD’S insurer Hiscox said steadylosses from catastrophes and a choosyapproach to underwriting this yearhad put it “in good shape” yesterday,but its investment portfolio lost valuesince June as markets plunged.

Hiscox, which insures specialistcommercial risks and reinsurance,said its revenue from premiums fellby three per cent to £1.2bn in thenine months to the end of September.

The only areas to grow were its UKretail business, which wrote premi-ums of £280m this year compared to£249.1m in the nine months toSeptember 2010, and a small increasein its European business.

Chief executive Bronek Masojadasaid Hiscox was waiting for insurancerates to go up when policies renewedin January.

“The cumulative effect of interna-tional catastrophes is pushing rein-surance rates upwards. As nearly athird of our income comes from rein-

surance, we are ready to benefit atthe January renewal season.”

It also surprised analysts by sayingits investment portfolio had lostvalue so far this year, making 0.5 percent return against inflation of closeto five per cent.

Hiscox has kept £210m reservedagainst losses from catastrophes suchas the New Zealand earthquakes sofar this year, but reassured investorsthat the only new loss to be added toit was a net claim of less than £10mfrom Hurricane Irene, which sweptthe US east coast in August.

Hiscox looksahead to NewYear rate rise INSURERS have warned the UK’s

finance regulator that the industry isunimpressed with the confusionaround the start of far-reaching newregulation on their capital require-ments.

The Financial Services Authority hasweathered an angry backlash from theindustry since October when it said itwould delay the start of new SolvencyII rules by a year until January 2014.

Insurers said the change wouldforce them to comply with two differ-ent sets of reporting rules – Solvency IIand the Individual Capital Assessment(ICAS) – at the same time.

Otto Thoresen, director-general ofthe Association of British Insurers(ABI), told an FSA briefing last weekthat the regulator needed to avoid thatsituation “at all cost”.

“ABI members do not welcome thedelay in Solvency II’s implementation,”he said. “We must provide firms withviable alternatives.”

The FSA’s director of insurance,Julian Adams, defended the change.

“What it is emphatically not is awholesale delay in the implementa-tion date,” he said.

“Our intention is to explore withfirms possible ways of avoiding thecosts associated with the dual runningof an ICAS and Solvency II model.”

Insurers urgeFSA to easenew rules start

BY ALISON LOCK

INSURANCE

▲

INSURANCE

▲


ANALYST VIEWS: IS THE FALL IN PREMIUMINCOME A PROBLEM FOR HISCOX? Interviews by Alison Lock

“JOY FERNEYHOUGH | BANCO ESPIRITO SANTO

The likely reservations from this update will come from the investmentsside where the yield is down. We continue to expect yields to come under pres-sure, but believe Lloyd’s insurers have already taken much of the pain here.”

Hiscox expects less than £10m losses from Hurricane Irene Picture: PA

“SARAH LEWANDOWSKI | PEEL HUNT

The portfolio declined in the third quarter because of a higher equityallocation and widening corporate bond spreads. Hiscox’s focus remains on capitalpreservation, but it is willing to take advantage of market dislocation. ”“

EAMONN FLANAGAN | SHORE CAPITAL

The return reflected the impact of turbulent investment markets, withabout 15 per cent of the bond portfolio in financial bonds, largely senior debt ofstrategically important banks. Hiscox said the return improved in October.”

ANALYSIS l Hiscox

p

1 Nov 2 Nov 3 Nov 4 Nov 7 Nov

372.50

375.00

377.50

380.00

382.50

385.00

387.50

376.807 Nov


BOODLES, the luxury jewellerbeloved by Kate and Pippa Middleton,could be set for a global push afterseeing annual profits soar by morethan a quarter, City A.M. can reveal.

Pre-tax profits rose 25.5 per cent to£4.71m for the year to 28 February,according to the accounts of Boodle &Dunthorne, which were filed lastweek. Turnover rose 13.8 per cent to

£41.9m and the report also hints at astrategy to boost global sales.

“During the year the companymade sales to overseas clients aroundthe world of £8.359m (up from£7.822m in 2010)) which the directorsfeel illustrates an increased interna-tional interest in the brand. The direc-tors consider the company to bewell-placed to take advantage ofopportunities arising in the future.”

The firm’s high-end jewellery sells

for hundreds of thousands of poundsan item, although it also provides arange at more affordable prices.

In recent years both Middleton sis-ters have been spotted at the BoodlesBoxing Ball, an annual event at whichpugilists compete for charity.

The firm is known for its long-serv-ing staff, which its controllingWainwright family ascribe to theirefforts to run the business in aChristian and ethical manner.

Middleton effect means sales sparkle for BoodlesRETAIL

▲

LONDON restaurateurs Jeremy Kingand Chris Corbin are set to retake fullcontrol of their company, three yearsafter its part-owners collapsed follow-ing the 2008 credit crisis.

The founders of Rex RestaurantAssociates, which owns several well-known London venues including TheWolseley, are close to reacquiring the50 per cent share in their business,now under the control of BDO StoyHayward, the administrator to finan-cial services firm Dawnay Day.

King and Corbin are now in talks tosell a stake in Rex to a group of privateinvestors, according to Sky News.

The Wolseleyowners set toreclaim control

HOTEL and restaurant ownerWhitbread said it had changed themake-up of its debt facilities yester-day to rely more on bonds, to bringdown its annual interest bill.

Whitbread, which operates thePremier Inn hotel chain and CostaCoffee cafes, exchanged its £930m ofbank loans for a syndicated five-yearloan facility worth £650m to add to£250m in long-dated bonds it hadissued over the past two years.

The change both gives Whitbread abroader debt funding base to protectit from any unexpected changes tointerest rates or the banks’ lendingpolicies, and a lower overall interestrate.

“We are pleased to have securedthe support of our core relationshipbanks for a loan at an attractive rate,which together with our privateplacement notes, meet the mediumterm funding needs of the group tosupport our growth programme,”said Whitbread’s finance directorChristopher Rogers.

Whitbread currently pays six percent interest on its debt but that willfall to 5.5 per cent from nextFebruary onwards.

In September it issued two privatedebt placements, of a total £156.4m,for repayment between 2019 and2022 at an average 4.8 per cent inter-est rate. In 2010 it issued £101.8m ofdebt private placement notes due in2017 and 2020.

Whitbread reduces loansand add bonds for value

RETAIL

▲

PREMIER Foods, the company behindHovis bread and Branston Pickle, wonmore time to deal with its £1.3bn debtpile yesterday after its lenders agreedto move back a crunch test on theloan conditions.

Premier said the banks would delaya test of how far its earnings outweighits interest payments by three monthsuntil March 31, sending its shares up9.9 per cent.

Its new chief executive MichaelClarke will use the extra time toimprove Premier’s figures as he triesto refinance the debt on better terms.

“I am very pleased that after shar-ing our vision and high-level plans,our banking syndicate has confirmed

its support,” he said in a statement. Premier’s shares have lost 90 per

cent of their value since May whenthey peaked at 34.8p as trading hasworsened, particularly in its own-labelsavoury products and cakes divisionBrookes Avana.

The loan covenant Premier wouldbreach if tested in December statesthat its earnings before interest, tax,depreciation and amortisation (ebit-da) must be at least 2.75 times its netinterest. Analysts expect Premier tomake £259m ebitda this year, suggest-ing its interest bill is more than £95m.

The debt was built up through aseries of takeovers such as Campbell’sUK and Ireland businesses in 2006, butit has to pay higher interest rates thanusual because of the debt’s structure.

Premier Foods wins moretime to meet debt terms

RETAIL

▲

LEISURE

▲

BP was under pressure yesterdayafter a £4bn sale of its stake in PanAmerican hit the buffers, triggeringrenewed questions over the compa-ny’s recovery from the DeepwaterHorizon crisis.

The deal was ditched after buyerBridas, the oil and gas firm owned byCnooc of China and Argentina’sBulgheroni family, failed to resolve astring of legal issues. It is chief execu-tive Bob Dudley’s second failed multi-billion dollar deal this year and hasrenewed investor concerns about hisvaunted turnaround of the group.

Dudley hinted last month that theoil giant could lift its dividend nextFebruary, saying the group hadreached a “turning point” after itsGulf of Mexico oil spill.

But the failed deal now puts a ques-tion mark over those plans.

“As with all things to do with BPthe issue is as much to do with riskand this deal failure does highlightexecution issues again,” analysts atUBS said in a research note.

In May an Arctic exploration dealwith Rosneft collapsed. But BP yester-day insisted that it would be happy tohang on to its stake in Pan American,which it said had good prospects as abusiness. It added that its disposalsand strategy were still on track.

BP chief hurtby deal blowBY JOHN DUNNE

OIL

▲

KateMiddleton isone of themanyBoodles fans

Picture: REX

ANALYSIS l BP

p


460

455

450

445

440

452.807 Nov


THE vast majority of Europeaninvestors think it unlikely that othercountries will quickly follow the UK’slead in forcing banks to separate theirretail and wholesale arms as recom-mended by the Vickers Commission,according to a survey by ratingsagency Fitch.

But other states could look into itin the medium-term, the investorssaid, which confirms worriesexpressed to City A.M. that interest inthe idea of a ringfence around retailbanking operations could spread.

In the short-term, just 13 per centof the fund managers asked – whobetween them account for €5.8 tril-

lion (£5 trillion) in assets under man-agement – think that other states arein a hurry to put in place their ownversion of the Vickers Commission’sproposals, which are currently beingconsidered by HM Treasury.

The data will raise concerns thatBritain risks damaging its competi-tiveness as a global financial centreby forging ahead with new regula-tions on banks before other stateshave done likewise.

“The recommendations go beyondother resolution regimes being devel-oped. At a time when Eurozone banksin particular are grappling with moreimmediate risks, some of the ICB’smore radical recommendations, forexample around ringfencing, areunlikely to see widespread replica-

tion anytime soon,” said Fitch analystJames Longsdon.

However, a sizeable minority ofthose surveyed – 42 per cent – believethat other countries could consider itif they suffer another banking crisis.

One banking source told City A.M.that regulators in Belgium, theNetherlands and Italy have taken aninterest in the Vickers recommenda-tion to ringfence retail banking oper-ations from investment banks bylimiting their cross-selling and expo-sure to one another.

And it is understood that Europeanbanks have held talks with their UKrivals over the proposals, with thecontinental lenders fearful that theirlocal regulators could eventually takeaction.

Other countries will be slow to copyVickers ringfence idea, say investors

RYANAIR raised its 2011 profit forecastby 10 per cent yesterday, saying a focuson more lucrative routes was pushingup revenue per passenger and offset-ting stubbornly high fuel prices.

The budget airline, headed up byoutspoken boss Michael O’Leary, said ithad seen virtually no impact from theglobal downturn in consumer confi-dence, but warned traffic would fall inthe coming months as it grounded 80aircraft because fuel prices maderoutes unprofitable.

The airline, which flew over 70mpassengers last year, said it expected tomake a profit of €440m (£377.6m) forits 2011 financial year, up from its pre-vious forecast of €400m.

Yields -- the keenly watched measureshowing average revenue gained permile per passenger -- will grow at 14per cent in the six months to March,up from 12 per cent previously fore-cast. The airline earned €543.5m in thesix months to September, up 20 percent, on revenues of €2.71bn.

Focus on morelucrative routesboosts Ryanair

AVIATION

▲

SHARES in DTZ have crashed by morethan 86 per cent after the propertyconsultancy, which is in takeover talkswith several unknown bidders, saidthe equity in its business was worth“minimal value”, if anything at all.

The company put itself up for salelast month, just days after its majorityshareholder Saint GeorgeParticipations, which owns 55 per centof DTZ, was forced to abandon a bidbecause of the Eurozone debt crisis.

The collapse of the bid, whichwould have seen DTZ then mergedwith BNP Paribas Real Estate, left theagency “reviewing its strategicoptions”.

However, DTZ yesterday announcedthat based on the valuation of the pro-posals it had received so far, and givenits level of debt “there is minimalvalue, if any, that may be attributed”

to its shares.The fall in the share price has wiped

£44m from DTZ’s market value andmeans DTZ is worth less than £10m.Shares, which were worth as much as835p in 2006, closed at 2.85p.

The agency, which is saddled withnet debt of £64m, has struggled torecover since the crisis in 2008.

DTZ yesterday would not confirmthe bidders but said there were noformal offers on the table yet.

Shares in DTZcrash by 86pcBY KASMIRA JEFFORD

PROPERTY

▲

BY JULIET SAMUEL

BANKING

▲

Michael O’Leary’s Ryanair has cut unprofitable routes Picture: REUTERS

ANALYSIS l DTZ Holdings

p

2 Nov 3 Nov 4 Nov 7 Nov

25

20

15

10

5

2.857 Nov

Sir John Vickers’ suggestions are unlikely to be taken up outside the UK Picture: REUTERS

AC

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A TAX OFFICIAL lost their bonus follow-ing a blunder that allowed GoldmanSachs to escape a tax bill of around£10m, Parliament was told yesterday.

In a hearing by MPs on the PublicAccounts Committee yesterday, DaveHartnett, permanent secretary for taxat HMRC said the error was dealt withthrough a staff member’s annualappraisal.

HM Revenue & Customs has comeunder fire for arranging a so-called“sweetheart” deal with Goldman Sachsthat waived £10m interest on a £30mbill from a failed tax avoidance schemeon bankers’ bonuses.

When asked whether that meant thetax official had lost his bonus, MrHartnett said: “I think that’s anotherway of putting it.”

The session was part of an inquiry

into tax deals negotiated by HMRC withVodafone and Goldman Sachs, whichwere brought to light after findings bythe Guardian and Private Eye.

HMRC’s most senior solicitor,Anthony Inglese and top civil servantSir Gus O’Donnell, were also asked togive their accounts.

HMRC has been accused of lettingVodafone pay only £1.25bn to settle atax dispute when the amount owed totaxpayers should have been around£6bn, leading to protests outsideVodafone’s annual meeting in July.

Hartnett has previously describedthe sum as an “urban myth” but MPsyesterday said the amount of tax lostcould be as high as £8bn.

Margaret Hodge, the Committeechair, questioned why HMRC appearedto have a special relationship with bigbusinesses, doing deals in a way thatwould not be possible for smaller enter-prises or individual taxpayers.

SEE DIARY: P15

HMRC probedin Commons BY KASMIRA JEFFORD

TAXATION

▲

News14

REPSOL MAKES ITS BIGGEST EVER SHALE FIND

ARGENTINE energy firm YPF, the local unit of Spain’s Repsol, said yesterday it had made avery large shale oil discovery, identifying unconventional energy resources of 927m barrels ofoil equivalent (boe) in Patagonia. The find is Repsol’s largest ever, and could elevateArgentina to becoming one of the world’s leading producers of the oil.

A NIGHT ATTHE OPERAFOR LEGALSOPRANOSBETRAYAL, revenge and murder – itwas business as usual when the MagicCircle decamped to the dress circle atSadler’s Wells to watch Allen & Overy’smodern-day reworking of Carmen setin Seville Airport.

The opera, which follows last year’sstaging of The Magic Flute atGlyndebourne, involved 74 of the firm’sstaff past and present. Ex-senior partnerGuy Beringer played El Dancairo, whileCarine Chassol, a banking partner inthe Paris office, played Michaela andcorporate partner Don McGown was the“jaded bullfighter” Escamillo.

Trainee lawyers David McDonald andEdward Rance also helped make the per-formance “a triumph that other Cityfirms can only dream of”, as one clientemailed the next day, while anotherdescribed the opera as “complete, well-rounded and, frankly, magnificent”.

With reviews like that, it is fair to sayno-one minded that trainee MattFarringdon was unable to complete hisstar turn as Don José due to laryngitis, sohe mimed Act Four as substitute Ed Leesang his part from the wings. Nor did any-one notice that one of the dancers had

been rushed back from hospital momentsbefore the start of show. No plans for atransfer to the West End though – “at leastnot in the short-term”, said a still-hoarseMcGown, who doubles as head of the lawfirm’s music programme.

SOCIAL NETWORKFIRST THE City’s forex brokers had voicetrades; then electronic trading camealong and “put a mute button on theconversation”.

So prepare yourself for the third act inthe City’s dealing communications saysStefan Basiuk, the co-founder ofLetsTalkFX.com – social FX, or bringing the“world’s most incestuous market” closertogether through a private social network.

“Electronic trading took away the per-sonal relationships in the City,” said

Basiuk, sitting in the Royal Exchangewhere he once worked pre-Big Bang as alocal options trader on the ChicagoMercantile Exchange. “The new genera-tion of 20-somethings coming into theCity have been using social media forever,so what tools will they want to use?”

Basiuk and his founding partners –who include JP Morgan Chase PrivateBank’s EMEA chief technology officerPaul Ronan – have so far staked £200kthat the answer is LetsTalkFX, which con-nects the players in the $4 trillion globalFX community. “There is nothing likeus,” said Basiuk, as he lines up furtherfunding talks with five tech investors.

NOT IN THE GOOD BOOKTHESE are testing times in committeeroom 15, where members of the

15EDITED BY HARRIET DENNYSGot A Story? Email [email protected] The Capitalist on Twitter: @dennysharriet

The CapitalistCITYA.M. 8 NOVEMBER 2011

Left: Flamencodancers Kara Lone,Martina Clay andHarriet Stephensonfrom Allen & Overy inthe firm’s staging ofCarmen

Above: The RoyalArtillery Band play

at Leadenhall Marketon London Poppy Day

Commons Public Accounts Committeeare trying to get to the bottom of tax dealsnegotiated by HMRC with Vodafone andGoldman Sachs.

Testing for committee chair MargaretHodge, certainly. She grew so frustratedyesterday with the lack of forthcominganswers from HM Revenue’s top lawyerAnthony Inglese, she threw the book athim, so to speak. She called for a Bible andmade Inglese take the oath.

Testing too for Inglese, who after anhour more of “no comments” was askedby Hodge how much taxpayer money hadbeen spent on his coaching. “None,” hereplied. “I hope it did not show.”

POPPY APPEALTHE FINAL tally is in, and The Royal BritishLegion has confirmed that Londonersraised almost £450,000 on London PoppyDay, a new Poppy Appeal record for a col-lection in a single day.

Perhaps it was the six bands whoplayed around the capital last Thursday– including the Royal Artillery Band inLeadenhall Market – that encouragedthe City to dig so deeply, with £45,000collected at Canary Wharf alone.

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It’s time for UK institutions to take more risk

WOULD-BE investors in UKstocks are in a bad placeright now. The long-onlyfunds have too few successes

to boast about and the hedge funds

are scared of ever-increasing redemp-tions.

As far as the majority of the UKinvestor base is concerned, IPOs ofuntested UK companies are distinctlyoff the menu.

Those same investors are alsoloathe to back transformationalmergers too. Hence the G4S £5bn-plusbid for ISS failed; some say it was tor-pedoed by a reluctance from someinvestors to buy out ISS investorGoldman Sachs at what they believedwas too high a price.

It is too soon to say whether G4Sshareholders were right to have hadqualms about the ISS deal. Butinvestors in the Prudential, who

vetoed a $31.5bn deal for AIA last yearmight be interested to know thegroup they turned down is nowworth nearly $38bn.

The loathing of private equity sell-ers is very real and follows instanceslike the float of Debenhams whereprivate equity groups got out with allthe cream. The existence of privateequity advisers, groups who adviseprivate equity sellers, to get the high-est price possible for their stakes, con-tributes to this feeling of unease.

But if investors are wary of newcompanies and transformationaldeals, some also seem to be wary ofthe very types of groups that are cur-rently keeping the market alive; the

resource rich groups that are partowned by Russian oligarchs or otheroffshore shareholders. These groupsare often keen to gain a listing inLondon and raise billions by offload-ing a minority shareholding.

Here, UK institutions appear to bebehaving like they still lived in aworld where the FTSE100 index wascomprised of companies like Cadburyand ICI (both now in the hands of for-eign owners).

Rather than embracing the newcompanies like Polymetal or EssarEnergy, they are running scared ofthem, fearing their increasing influ-ence on the indices and what thatmeans to their tracker fund offerings.

Yes, there has been the odd corporategovernance disaster (ENRC) but over-all some of the foreign-ownedresource groups have done well.

As Bank of America Merrill Lynch’shead of equity capital markets CraigCoben says: “The tough markets haveaffected the portfolio performance ofinstitutions, and when performancesuffers, it has a knock-on effect fortheir appetite for new issues.

“The new issue market will re-openonce we have a recovery in riskappetite.”

For the sake of the London mar-kets, that appetite for risk had betterreturn soon.

[email protected]

INSIDE TRACK

DAVID HELLIER

NEWS | IN BRIEF

L’Oreal reiterates upbeat goalCosmetics maker L'Oreal reiterated itsfull-year goal to outperform the marketand increase sales and profitability afterstrong demand for its luxury productshelped third-quarter sales meet expecta-tions. Revenue rose 4.8 per cent like-for-like to €4.94bn (£4.2bn) in the threemonths to 30 September, the seller ofGarnier shampoo, Lancome creams andYves Saint Laurent perfume stated.

US bookseller launches tabletUS bookseller Barnes & Noble has intro-duced its first ever tablet to competewith Amazon and Apple for holiday sales.Barnes & Noble will charge $249 (£155)for the Nook tablet, which is expected tohit the shelves late next week. That com-pares to the $199 price tag on Amazon’snew Kindle Fire, which will be shipped on15 November. The firm claims to have aquarter of the US digital book market.

FORMER ENRC director Ken Olisa yes-terday slammed as “silly” a plan bythe mining company to pay $650m(£405.6m) to buy the outstanding 75per cent of Kazakh coal producerShubarkol Komir from its founders.

“The ENRC directors were illadvised to try to do this transaction.Not because it’s a bad deal – it’s not.It’s just a bad idea,” Olisa told City A.M.yesterday.

“Their priority is to convince theCity that ENRC’s corporate gover-nance is beyond reproach. Trying topay $600m to the founding share-holders so soon after the board revo-lution was silly and is deeplyunhelpful to the wider debate aboutthe FTSE.”

ENRC decided last week to post-pone a vote on the deal, fearing theboard would suffer an embarrassingdefeat.

ENRC’s independent sharehold-

ers – excluding the three foundershareholders who are selling theShubarkol shares – had been due tovote on the deal yesterday.

The London-listed miner plannedto secure control of Shubarkol by buy-ing the remaining shares from itsfounder shareholders for up to$650m, a figure independently veri-fied by Lazard, the investment bank.

The company’s senior non-execu-tive director Mehmet Dalmanfavoured the deal, saying it gave ENRCaccess to good quality thermal coal.

ENRC plan issilly, says exdirector Olisa CHIPMAKER InvenSense filed with US

regulators yesterday to sell fewershares at a lower price range than ithad originally expected in its initialpublic offering (IPO) of commonstock.

InvenSense, which in Augustdelayed its IPO due to market condi-tions, said it would sell up to 10mcommon shares priced at $7.00-$8.50(£4.37-£5.30) each.

The California-based company,which had filed for an IPO of up to$100m, originally planned to sell upto 10.5m shares priced at $8.50-$10.50apiece.

The company’s common stock hasbeen approved for listing on the NewYork Stock Exchange under the sym-bol INVN, InvenSense said in a filingto the US Securities and ExchangeCommission.

InvenSense makes motion sensingchips used in smartphones and gam-ing devices.

Goldman Sachs and MorganStanley are the lead underwriters forthe offering.

The company was founded in 2003and booked $130m in revenues forthe 12 months ended 30 September2011. The deal is expected to priceduring the week of 14 November.

InvenSense filesto raise up to$85m in IPO

Mehmet Dalman’s (above) plan was described as silly by ousted director Ken Olisa (below)BY DAVID HELLIER

RESOURCES

▲

NewsCITYA.M. 8 NOVEMBER 2011 17

ANALYSIS l Eurasian Natural Resources Corp

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CAPITAL MARKETS

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Sale is a sensible move but it’s time tobreak out the cava, not champagne

CARPHONE took the roughwith the smooth yesterday,cashing in on one successwhile taking the failure of

another on the chin. The US salecrystallises value for Carphoneshareholders – who are in for a pay-day – but the deal is not spectacularin and of itself. Best Buy has fac-tored in an expected slowdown insmartphones in the US next year,meaning Carphone has missed outon a premium on the sale.

Shuttering the heavy loss-makingBig Box white goods stores in the UKis sensible – strip them out andCarphone’s earnings before interestand tax (Ebit) are £65m.

Demand for white goods andflat-screen TVs – both staples of theout-of-town stores – show no sign of

picking up in the new year, whilesmartphones remain high growthin the UK.

Rolling out the Best Buy Mobileformula to emerging markets is asmart move. The US business wasthe only growth division forCarphone, with Ebit hitting £45m.However, duplicating the success inthe wildly different Chinese, Indianand Latin American markets will beno mean feat.

Chief executive Roger Taylorcalled it a low risk move, which will,in theory at least, limit expenditureon the venture. One to watch.

BOTTOMLINEAnalysis by Steve Dinneen

CARPHONE Warehouse yesterdayconfirmed it has offloaded its USjoint venture for $1.3bn (£810m).

The sale of the blisteringly success-ful mobile phone business to its part-ner Best Buy was tinged with regretover the failure of its UK “Big Box”joint venture. It confirmed the longexpected shuttering of its 11 whitegoods stores after it posted anotherquarter of worse-than-expected losses.

Overall the firm posted revenues of£1.59bn, down 4.9 per cent year-on-year as the slowdown in the con-sumer electronics market and thefailure of Best Buy UK took its toll.Pre-tax profits were £8.3m, comparedto £51.2m last year.

The results were broadly in linewith analyst expectations, with theUS deal sending its shares up as muchas 10 per cent before settling back toclose up one per cent.

The proceeds of the US sale will bereturned to shareholders, with

founder Charles Dunstone set for apayout of around £235m from his 29per cent stake in the firm.

Carphone said it will maintain itsrelationship with Best Buy, and willlaunch a new mobile venture cater-ing for emerging markets. Chief exec-utive Roger Taylor said: “The sale ofour interest in Best Buy Mobile crys-tallises significant value for ourshareholders. In addition, the agree-ment is a low risk opportunity torecreate the success of Best BuyMobile and roll out our strategy intohigh growth emerging markets.”

Carphone hitsforecasts asit lets US goBY STEVE DINNEEN

TELECOMS

▲


NEWS | IN BRIEF

Data traffic to jump ten-foldMobile data traffic will grow 10-foldover the next five years as demand forvideo on the go continues to drivegrowth. According to new research byEricsson, mobile broadband subscrip-tions grew 60 per cent in the last yearand are expected to jump from 900mnow to almost 5bn in 2016. Total smart-phone traffic is expected to have tripledby the end of this year. Ericsson expectstraffic generated by smartphones toincrease 12-fold to roughly equal mobilePC-generated traffic by 2016.

Telecity to start paying dividendData centre operator Telecity said yes-terday demand remains strong across itsEuropean markets and said its cashflows will enable it to start paying a divi-dend next year. The group, whose facili-ties are located in Europe's majorbusiness centres like London and Paris, isseeing growth from cloud computingand social networking. Telecity, whichplans to nearly double its capacity overthe next four years, also announced anadditional server at the Dublin site itacquired in August.

Google says disputes hurt progressGoogle’s lawyer has accused Microsoftof using its patent portfolio to capitaliseon the success of Android, and that legaldisputes are hindering innovation in thetechnology industry. Google's patentcounsel Tim Porter told the SanFrancisco Chronicle that Microsoft istrying to use its extensive patent portfo-lio to make money after its WindowsPhone operating system struggled tomake an impact. Google’s Android hasbeen dogged by patent suits fromOracle, Apple and Microsoft.

Carphone founder Charles Dunstone is in for a payday after US sale Picture: REX

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HOMEBUILDER Taylor Wimpey saidtrading in the busy autumn sellingperiod had been stable and it is ontrack to meet margin targets.

The UK’s second-largest volumehousebuilder by market value said itscurrent order book for future comple-tions stood at 6,265 homes, against5,496 homes at the same point lastyear.

The group is targeting 10,000 salesfor the year and said it is on track todeliver a double-digit percentage UKoperating margin in 2012.

Taylor Wimpey, which sold itsNorth American business earlier thisyear, reported an average private netreservation of 0.55 sales per outlet forthe second half to date, comparedwith 0.47 in the same period last year.

“Although mortgage availabilityremains restricted, we have seen anongoing incremental improvementsince the half year results,” said thecompany in a statement.

This echoed comments from small-er peer Redrow last week, which saidreservations and prices were stablewhile underlying demand is set toincrease despite tough macro condi-

tions weighing on the sector.But the UK housing market contin-

ues to tread water and housebuildersare facing further uncertainty as pub-lic spending cuts and rising unem-ployment dents confidence. TaylorWimpey posted first-half pretax prof-its of £28.9m earlier this year, againsta loss of £2.3m in the same period lastyear. Meanwhile chief executive PeteRedfern said that a further escalationof Europe’s debt problems couldspark a damaging UK banking crisis.

“The worse case scenario … is that aproblem in Europe causes a UK bank-ing problem, he said. While theunderlying housing market is strong,if there was a withdrawal of bankingfinance obviously that would be nega-tive.”

OLYMPUS’s ousted chief executiveMichael Woodford said he will meeta member of the third-party panelprobing past M&A deals at the endo-scope maker in London next week.

“I will meet the panel member MrKatayama in London,” Woodford saidin an e-mail to Reuters.

Eiji Katayama, a lawyer, is one ofsix members of a panel headed byretired supreme court justice Tatsuo

Kainaka that was appointed byOlympus to investigate a $687m(£429m) advisory fee paid in connec-tion with its $2.2bn acquisition ofBritain’s Gyrus in 2008.

Fees paid to advisers in M&A dealsdo not typically exceed two per cent.

The group will also scrutinise threeacquisitions in Japan that were quick-ly followed by large write-downs.

Woodford said last week that hewanted to meet investigators appoint-ed to probe the scandal, but believedit would not be safe for him to travel

to Japan. The M&A deals have raised ques-

tions about governance at Olympus,with an internal document showingthat the company replaced its auditorin 2009 after a disagreement overhow to account for the acquisitions.

Olympus shares have lost morethan half their value since Woodfordwas dismissed on 14 October after hequestioned the controversial pay-ments.

Yesterday, they fell a further 7.5 percent to 1,034 yen (£8.26).

Former Olympus chief to meet panelmember investigating M&A scandal

ENGINEERING consultant Costainhas said it is continuing to performwell and that trading is in line withits expectations.

The group’s order book has risen to£2.6bn following major new contractsawarded by Network Rail and thedevelopment of London BridgeStation.

In a statement the group said yes-terday: “As well as including in excessof £600m revenue for 2012, the order

book also provides good long-termvisibility with over £1.8bn of revenuesecured for 2013 and beyond, the bal-ance of the order book being theremainder of 2011.”

Costain said it was benefittingfrom targeting blue chip customers,which it helps with both generalmaintenance and also with meetingregulations. It also announced theacquisition of Promanex, an industri-al support services business operatingin the power, petrochemicals andnuclear markets.

Costain order book hits £2.6bn with rail contract

ENGINEERING

▲

DELPHI Automotive indicated a pricerange for its initial public offeringthat values the former GeneralMotors parts unit below levels project-ed six months ago when the stockmarket was stronger.

Delphi said in a regulatory filingyesterday that the price range for itsIPO would be $22 (£13.70) to $24 ashare, establishing a value for thecompany at about $7.55bn. In May,people familiar with the matter saidthe supplier could be worth $10bn to$14bn.

The offering, which would comeabout two years after the companyemerged from bankruptcy, wouldraise about $554.3m at the midpointof the proposed price range, accord-ing to the filing. That would be farless than the $1bn it was originallyaiming for, sources said.

The company’s shares are expectedto begin trading on the New YorkStock Exchange on 17 November.

The global auto market has shownsigns of a gradual recovery, butinvestors remain concerned aboutthe strength of demand in theEuropean and North American mar-kets.

Delphi filed for bankruptcy in 2005after succumbing to high costs forwages and legacy benefits inheritedin its spinoff from GM in 1999. Itemerged from bankruptcy four yearslater.

Delphi setsindicativefloat price

AUTOMOTIVE

▲

CLEANING and pest control firmRentokil Initial missed third-quarterprofit forecasts yesterday and said itwas unsure if its struggling CityLink delivery business would returnto profit in its key Christmas period.

Rentokil, which offers servicesfrom hiring work uniforms andtropical plants to catering and secu-rity, posted an adjusted pre-tax prof-it of £53.1m for the period, 7.3 percent down on last year, and below amarket consensus of £57.4m.

Revenue was up 2.4 per cent to

£637m. Growth across most of itsdivisions was dampened by anincreased operating loss at CityLink, which rose to £6.8m from£1.3m due to lower prices and morecompetition.

The division has dragged ongroup profit for some time, ham-pered by lost contracts and pooroperations during Britain’s recordcold snap last winter.

“We are not yet clear that we aregoing to get profit in quarter four(in City Link),” chief executive AlanBrown said.

“A lot will depend on how tradinggoes over the next few weeks. I think

we are definitely going to get rev-enue growth, whether we return toprofit will really depend on howquickly we are able to make progresson our productivity agenda.”

Rentokil hit by slow City Link BY HARRY BANKS

SERVICES

▲

Wimpey sayssales solidfor autumnBY JOHN DUNNE

HOUSEBUILDING

▲

HARRY BANKS

M&A

▲


DISNEY TEAMS UP WITH YOUTUBE

YOUTUBE and Disney yesterday announced they are partnering for a co-branded YouTubechannel devoted to family-friendly original series. Although relatively small from a cash per-spective – in the range of $10-$15m – it adds another major collaborator to YouTube’s neworiginal content plan. YouTube plans to create dozens of online channels with original con-tent with the help of high-profile names like Jay-Z and Amy Poehler. Picture: REX

NEWS | IN BRIEF

Weir confident on 2011 outlookBritish pumps and valves maker Weirsaid it was confident of meeting itsexpectations for 2011, supported bystrong demand from customers in themining and oil and gas sectors. The com-pany said yesterday that revenue grew inthe three months to the end ofSeptember, boosted by a swelling orderbook. But it said margins across thegroup were in line with the level seen inthe first half of the year. Weir said thattotal orders rose 27 per cent in the threemonths to September.

Essar Energy performance “solid”India-focused energy company EssarEnergy yesterday reported a “solid” oper-ating performance in the three months to30 September, with energy generated

rising four per cent compared to thesame period a year ago. Export valuesalso rose, climbing to 42 per cent of theotal against 31 per cent a year ago."While higher gas prices, resulting in ahigher generation cost, have impacteddemand at our gas based plants in recentmonths, the quarter saw higher plantload factors at Hazira (up 24 per cent)due to increased demand from theGujarat State utility," the firm said.

Bunzl buys Brazilian safety firmBusiness supplies distributor Bunzl saidyesterday it has bought South Americansafety glove and glasses maker DannyComércio Importação Exportação Ltdafrom Nielzer and Rita Sudré. Danny is thefourth acquisition that UK-based Bunzlhas made in Brazil since 2008.

ANALYSIS l Rentokil Initial PLC

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ANALYSIS l Taylor Wimpey PLC

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37.50

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35.00

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HIGHER activity in the property mar-ket has propped up house prices,according to two leading surveys ofthe industry.

Yet while the market has perkedup, activity remains slow by historicalstandards, with prices largely remain-ing flat over recent months.

The Halifax reported a surprise 1.8per cent spike in house prices lastmonth compared to September. Yetthe three-monthly comparison,which irons out volatility, showsprices down 0.3 per cent compared toMay, June and July of this year.

And a separate survey of surveyorsreleased this morning showed thatover half are reporting stable prices.Of those reporting a decline, almostthree quarters said prices were downonly between zero and two per cent.

“It is encouraging that activity lev-els appear to have edged upwardsover the past month,” said Ian Perryof the Royal Institution of CharteredSurveyors (RICS), which conductedthe survey.

“However, with the chaotic eventsin the euro area threatening tospillover to the UK and banks stillimposing tough conditions on loansto first time buyers, any recovery insales is still likely to be relatively mod-

est,” Perry warned. “This willinevitably leave many people whowould like to own a home unable toaccess the market.”

First time buyers in London mayalso be deterred by rising prices,which continue to buck the nationaltrend. Yet again the capital was theonly region to show increasing houseprices, according to RICS.

Yet supply and demand recoveredthroughout the country, the surveyshowed. Eight per cent more char-tered surveyors reported newlyagreed sales rose rather than fell.

“Although still at historically lowlevels, this rise represents the bestreading since April 2010,” the reportsaid. “Some surveyors attributed thisincrease to growing realism frommany sellers, who now appear tomore willing to take offers in order tosecure a sale.”

Completed sales rose to the highestlevel recorded for six months, averag-ing 15 sales per surveyor over the pastthree months. Both new buyerenquiries and new instructions to selledged up in October.

Meanwhile, another survey claimedthat one in 10 buyers are prepared todip into credit card debt or bank loansas part of their efforts to raise adeposit. “Funding a deposit remainsthe biggest financial hurdle to homeownership,” SmartNewHomes said.

House pricessupported byrising activityBY JULIAN HARRIS

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THE GROWTH in exports from UK-based companies has slowed, abusiness survey revealed thismorning, with exporters facing atough end to the year.

Exporters received fewer ordersthan sales in the third quarter ofthe year, suggesting a furtherslowing of business in the finalthree months of 2011.

“The UK’s exporters are still per-forming well,” said JohnLongworth of the BritishChambers of Commerce (BCC),which conducted the survey

alongside DHL. “However, uncer-tainty around the UK’s recoverycombined with the Eurozone cri-sis means that growth has slowedin the last quarter,” he added.

“Order books have weakened,confidence in increasing turnoverhas softened and exporters’ desireto expand workforces is muted.”

Exporting firms are reluctant totake on new staff, the reportfound. And roughly one fifth (19per cent) of respondents said theywould cut headcount in the finalquarter of the year.

UK goods exports were up threeper cent in the third quarter, com-pared to both the previous quarter

and the same time last year.However, the proportion of firmsreporting an increase in orders (35per cent) was at its lowest for twoyears.

Nearly a quarter of firms (24 percent) experienced a fall in orders –double the proportion at thebeginning of the year, when just12 per cent of exporters said thatorders were down.

“Steps must be taken to supportthose looking to target overseasmarkets, particularly SMEs, whoare less able to ride the trends ofthe economic cycle than theirlarger counterparts,” said DHL’sPhil Couchman.

Growth in exports slows as orderspoint to a tough end of the yearBY JULIAN HARRIS

UK ECONOMY

▲

Taskforcesto lead taxcrackdown

TASKFORCES are being set up to targetdifferent types of tax evasion in differ-ent regions, HM Revenue andCustoms (HMRC) revealed yesterday.

Businesses are the particular focusin London and the south east, withthose failing to submit statutoryreturns for corporation tax, incomeself assessment, PAYE and VAT seen ascore targets by the taskforce.

Five such taskforces have been setup to target problems as they affecteach region. These include scrapmetal dealers and fast food restau-rants in Scotland and landlords in thenorth west and north Wales.

“Taskforces bring together a groupof specialists in any one area, be inVAT, corporation tax or any other taxwhere there is a particularly largeproblem in collection,” HMRC’sJonathan Hall told City A.M.

“The team might look for plumberstaking cash and failing to declaretheir full income, for example, by see-ing if their statements add up withthe level of activity they are doing.”

HMRC said its reaction to wrongdo-ing will be proportionate to offence,whether it is encouraging small com-panies who have accidentally fallenbehind to hand in the relevant forms,or serial offenders who have not sub-mitted tax forms for years.

“Powers HMRC has acquired inrecent years mean you will be treatedmore leniently if you come forwardvoluntarily,” Dawn Registers from lawfirm BDO told City A.M.

BY TIM WALLACE

TAXATION

▲

House prices in London are rising, according to surveyors Picture: REX

NEWS | IN BRIEF

Inflation eases in SwitzerlandSwiss annual consumer prices fell forthe first time in two years in October,arguably boosting the case for policy-makers to cap the strong franc at alower level. Prices fell 0.1 per centyear-on-year having risen 0.5 per centa month ago, the Federal StatisticsOffice said yesterday. Core prices –stripping out volatile components likefood, beverages, tobacco and energy –fell 0.5 per cent. Unemployment inSwitzerland stuck at three per cent ona seasonally-adjusted basis.

Small firms call for more creditThe government should channel itscredit easing plans towards helpingsmall businesses, an industry body saidyesterday. “Credit easing must be boldand look to boost competition by stim-ulating innovative models such as peer-to-peer lending and smaller internetbanks,” said John Walker of theFederation of Small Businesses (FSB).Over a third (34 per cent) of smallfirms to have applied for bank financein the last two months have beenturned down, the FSB said.

Consumer credit spikes in USAmericans boosted their levels of bor-rowing in September, data revealedlast night, while separate figures sug-gested that the US economy remainstoo weak to combat its relatively highlevel of unemployment. TheConference Board index edged up to101.92 from 101.20 in September yetthe group’s statement said: “We thinkthat the economy is simply not strongenough to deliver more than 125,000jobs a month.” Consumer credit was upby $7.4bn in September, meanwhile.

Altana WealthThe new investment management groupfounded by ex-Trafalgar AssetManagers founder Lee Robinson has

appointed David Helm as global head ofsales and marketing. Prior to joiningAltana, Helm was the chief executive ofhedge fund Sofaer Capital.

Scipion CapitalThe African investment specialist hashired Jonathan Hargreaves as an ana-lyst in its London office and JeanCochard as an office manager in itsGeneva office. Hargreaves joins fromIHS Jane’s and Cochard most recentlyworked at Cosmorex SA Geneva.

BlackRockPaul Tebbit has joined the fund manag-er’s UK real estate team as a director.Tebbit most recently worked as a direc-tor for Telereal Trillium, specialising inreal estate and corporate investmentopportunities, debt raising, valuationand transaction structuring.

Baker TillyDavid Griffin has joined Baker TillyRestructuring & Recovery as a directorin the special investigations department.Griffin was previously a director at ZolfoCooper in the British Virgin Islands.

Stephenson HarwoodThe law firm has appointed FraserSparks as a partner in the pensionteam. Sparks joins from SquireSanders & Dempsey, where he hasbeen a partner since 2008.

AshmoreThe investment manager has appointedDominick Peasley as head of European

third party distribution to establish keyrelationships with retail and wholesaledistributors. Peasley joins fromGoldman Sachs asset management,where he was an executive director,heading UK third-party distribution.

Mytrah EnergyThe wind power developer has appoint-ed Russell Walls and Peter Neville asindependent non-executive directorswith immediate effect. Walls is currentlyindependent non-executive director andchairman of the Audit Committee ofAviva, and Neville is currently chairmanof Kleinwort Benson (Channel Islands)and non-executive director of KleinwortBenson Channel Island Holdings.

CITY MOVES | WHO’S SWITCHING JOBS Edited by Harriet Dennys

+44 (0)20 7092 0053 morganmckinley.com

To appear in CITYMOVES please email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

Wall Street edgesup in choppy day

US stocks closed a volatile, lightlytraded session slightly higheryesterday, with sentiment con-tinuing to shift with the latest

headline from Europe.Wall Street spent most of the ses-

sion lower before rebounding afterJuergen Stark, a member of theEuropean Central Bank’s ExecutiveBoard, said the region’s debt crisismight be overcome in “one or twoyears at the latest”.

In a signal that investors remaincautious, the strongest performerswere healthcare and telecommunica-tions stocks, both considered defen-sive sectors. The S&P Health Caresector rose 1.2 per cent, with Pfizergaining 2.1 per cent to $20.07.

Volatility in the stock market hasbecome more closely correlated withshifts in European bond markets,another sign of Europe’s influence onUS equities.

“Given the overhang that Europehas been having on equities, stocksare going to be subject to intradaymoves based on innuendo or conjec-ture as much as fact,” said MarkLuschini, chief investment strategistat Janney Montgomery Scott in

Philadelphia.“Any news that’s viewed positively

is going to move the market, but Idon’t trust the move. We could just aseasily fall back down.”

The Dow Jones industrial averagewas up 85.22 points, or 0.71 per cent,at 12,068.46. The Standard & Poor’s500 Index was up 7.89 points, or 0.63per cent, at 1,261.12. The NasdaqComposite Index was up 9.10 points,or 0.34 per cent, at 2,695.25.

The latest source of anxiety is Italy,where Prime Minister SilvioBerlusconi defied pressure to resign,keeping markets on edge before a keyparliamentary vote on budgetreforms.

Volume was light, with about 6.3bnshares traded on the New York StockExchange, the American StockExchange and Nasdaq, below lastyear’s daily average of 8.47bn.

Adding to the uncertainty, Greece’soutgoing Socialist prime minister andconservative opposition leader racedto forge a coalition government andimplement a new bailout pro-gramme.

Equities have been very sensitive toheadlines from Europe, especiallywith a light US economic calendarthis week and as earnings seasonwinds down.

The CBOE Volatility Index fell 0.9per cent after rising earlier in the ses-sion. Fresh worries about sovereigndebt default have boosted the stockmarket’s volatility.

BRITAIN’S blue-chip share indexfell yesterday as political tur-moil in Italy sparked fears theEurozone’s largest debtor may

fail to deliver much-needed economicreforms.

The FTSE 100 ended down 16.34points, or 0.3 per cent, to 5,510.82,with banks weighing the most asinvestors positioned for months ofcontinued uncertainty on the eurofront and declining economicprospects.

Italy’s prime minister, SilvioBerlusconi, struggled to hold a crum-bling coalition together ahead of aconfidence vote today.

Reports of Berlusconi’s imminentresignation had pulled the market offlows in morning trade, as investorshoped a new government couldimplement urgent measures aimedat reducing government debt andspurring growth.

Berlusconi’s refusal to step downraised the prospect of a politicalimpasse, sending benchmark Italiangovernment bond yields to 14-yearhighs, close to levels seen as unsus-tainable.

Meanwhile, Greece was fast-track-ing its hunt for a new prime minister,

to appease markets and satisfy EUcalls for a speedy resolution of itspolitical crisis. Lucas Papademos, aformer deputy head of the EuropeanCentral Bank, was tipped as the mostlikely successor to GeorgePapandreou.

“Following an irrelevant G20 sum-mit and the yo-yoing in Greece, thepillars of the EU summit are startingto crack as each requires a level ofpatience from the market that is justnot there,” said Robert Quinn, chiefstrategist at Standard & Poor’s CapitalIQ.

“Even if stocks move a lot on politi-cal decisions, I am still negative onequities. We are probably in recessionstarting in the fourth quarter as thebusiness cycle downturn has yet totrough.”

“What we have seen throughoutthe day is buyers of back-end vol, solonger-dated volatility,” he said, sug-gesting a lack of confidence furtherout.

“They are not confident at all. Ithink there are a lot of shorts in themarket and people are buying volatil-ity in the longer months now.Gambling on the market goingdown,” he said, citing action out toDecember 2012 “although there hasnot been a mass of action”.

Volumes were low, with the FTSEtrading at 76 per cent of its 90-day-average.

ICAP was a notable exception,recording volumes more than double

its three-month average to close 3.5per cent higher. The money brokerrebounded after dropping 5 per centon Friday and 30 per cent since theend of June.

Pumps maker Weir, which alsorecorded strong volumes, dropped 3.7per cent despite a solid interim state-ment, as profit-takers cashed in on a40 per cent rally since the start ofOctober.

Meanwhile European stocks fellyesterday in choppy trading driven bypolitical turmoil in Italy, where bondyields hit euro-era highs, though equi-ties pared losses on hopes ItalianPrime Minister Silvio Berlusconi wasabout to resign.

The FTSEurofirst 300 index of topEuropean shares fell 0.6 per cent toclose at 974.66 points, having beendown almost 2 per cent in early trade.Volume was light, at 87 per cent ofthe 90-day average. Financial stockswere down, with the STOXX Europe600 Banking Index down 0.9 per cent.

FTSE ends in the red basedon soaring Italian debt costsTHELONDONREPORT

THENEW YORKREPORT

BEST OF THE BROKERS To appear in Best of the Brokers email your research to [email protected]

ANALYSIS l Betfair

800

750

700

650

600

Sep Oct Nov

p

789.507 Nov

BETFAIRNumis rates the online betting group as a “buy” with a target price of1,150p, ahead of first-half result to be published on 14 December. The bro-ker forecasts sports revenue for the second quarter of £66m, up from£60m in the first quarter. It expects first-half numbers to show healthygrowth in Ebitda to £42m, up from £36m, and says that as the sportsbookis added to the site investor sentiment should improve further.

ANALYSIS l Hamworthy

650

625

600

575

550

525

500

Sep Oct Nov

p 648.007 Nov

HAMWORTHYEvolution Securities rates the marine engineering group an “add” andincreases its target price from 700p to 750p after contract awards wereannounced yesterday worth £40m with Hyundai and Hoegh. The brokerincreases its forecast for March 2012 earnings per share to 33p from29.5p, and March 2013 to 40.4p from 38.4p. Evo expects these forecasts toform a base, and could expect further improvement as the year progresses.

ANALYSIS l Admiral Group

1,500

1,400

1,300

1,200

1,100

Sep Oct Nov

p1,180.00

7 Nov

ADMIRALNomura rates the insurance group as a “buy” with a target price of 1,900p,ahead of a third-quarter management statement on Thursday. The brokerexpects Admiral to confirm it will meet consensus earnings expectationsfor the full year, and is looking for policy count growth to moderate toaround +28 per cent for the nine-month stage. The focus is likely to be onclaims trends, which have precipitated the recent share price fall.

26 Aug8 Aug 16 Sep 6 Oct 26 Oct

5,800

5,400

5,200

5,000

5,600

ANALYSIS l FTSE5,510.82

7 Nov

RFC GroupJohn Harrison, who retired as a managingdirector of Numis Securities last month, hasbeen named as chairman of AmbrianPartners, subject to completion of RFC’sacquisition of 100 per cent of Ambrian’sshare capital. Harrison joined Numis in 1994following a career at Lloyd’s of London.Since 2003, he has led the Numis corporatefinance activities in the resources sectors,floating a number of UK and overseas com-panies in London.


IT IS widely expected that the Prime Ministeris going to start calling for a more moralform of capitalism. I have a simple test ofwhether a politician is trying to debate, or

avoid, tough policy questions – I ask myselfwhether anybody would disagree with the oppo-site of what the politician is calling for.

During the 1997 election campaign, for exam-ple, the Labour Party called for an “integratedtransport system”. Clearly nobody wanted theopposite – a dis-integrated transport system.What the Labour Party actually wanted was astate-planned transport system because they didnot believe that the market would bring about amore integrated system. But it was not conven-ient for Labour to talk about specifics.

So, who is for a more immoral form of capital-ism? Since no party would make that its cam-paign slogan, the harder question is whatdetailed policies does David Cameron want to

put behind his empty slogan? Does hebelieve that morality within the marketsystem can be improved by state regula-tion? Does he simply want people to lookat their own consciences and freelychoose a better way of life? Or does he,like some other politicians who call fora more moral capitalism, want a mar-

ket system that punishes people whoare reckless with and lose largeamounts of other people’s money?

These are the substantive policyissues on which the Prime

Minister needs to reveal hisposition.

This newspaper recentlycriticised a recent report bythe Vatican’s Justice and

Peace Commission – pub-lished under its own auspices, it

should be noted, not by the Popehimself – that called for global regulation

of the financial system and a global bankbailout fund. Those criticisms were welltargeted. However, if we go back 20years, we will find some wise statements

in a document called Centesimus annus pub-lished by John Paul II. The late pope noted thatthe social order will be all the more stable if thepursuit of personal interest is aligned to theinterests of society as a whole so self interest andthe interests of society are brought into “fruitfulharmony”. Clearly this is not an original insight,but it was, in fact, an insight rooted in a recogni-tion of the potential problem of moral failure.

Those who believe in free markets and a moremoral capitalism need to consider this issue. Toput it in more prosaic terms, have people beenallowed to get away with reckless and imprudentbehaviour because they are able to impose thecosts on others? The answer to this question is,emphatically, “yes”. We have had the bailout ofsome banks in the UK. In the US, risk in the

financial system has been underwritten in a bigway for more than a generation. This has encour-aged imprudent behaviour both by customerstaking out credit and by bank managers, andthere have been weak incentives for theproviders of capital to rein in that behaviour.

Before financial systems were regulated,before deposits were insured and – in the US –mortgages guaranteed, prudent behaviour blos-somed. People were disciplined by the market.Banks would often have unlimited liability orhave double liability for shareholders.Alternatively, banks and insurance companiesmight be owned by their customers. On the stockexchange, a jobber’s word was his bond.Companies used all sorts of mechanisms to sig-nal to the market that they would behave pru-dently and honestly. It was not just the standards

of the time demanding it – the demands of themarket helped to form the standards of the time.

This is not to say that, if you have completelyfree markets, morality will look after itself. But,if you ensure that those who behave recklessly,immorally and imprudently gain the most, youare asking for trouble – and you will attractexactly the wrong type of people into the mar-kets. This is true in the welfare state for bankersjust as it is true in the traditional welfare statewhere government imposes huge costs on work,saving and family formation.

Politicians who set up economic systemswhere the cost of immoral behaviour is pushedonto others, and then respond by calling for“more morality”, are trying to get water to flowuphill. Let Cameron make his speech, but then itwould be nice to return to the traditional divi-sion of labour in this field. Let the Archbishop ofCanterbury and the Vatican’s Justice and PeaceCommission comment about the need formorality in finance. And perhaps the PrimeMinister can start discussing the day-to-day poli-cy issues that he seems to have left to the church-es. Does the Prime Minister believe we shouldhave an economic system that rewards impru-dence and recklessness? If not, what policyreforms does he want to see and how is he goingto bring those reforms about?

Philip Booth is Professor of Insurance and RiskManagement at Cass Business School and the editorialdirector of the Institute of Economic Affairs.

24 The Forum CITYA.M. 8 NOVEMBER 2011

People have got away withimprudent behaviour byimposing the costs on others

David Cameron is to call formoral capitalism: He needsto tackle moral hazard first

cityam.com/forum

PHILIP BOOTH

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25

Breakdowns arenot terminal: It’stime to come outof the Dark Ages

End the stigmathat surroundsstress in the City

LLOYDS Banking Group has announcedthat Antonio Horta-Osorio is expectedto return before the end of the year, butCity sources have been saying there is

no way that he will be able to come back aschief executive after taking time off for phys-ical and mental exhaustion.

The persistent stigma is that after anyepisode of stress-related or mental illness theindividual will no longer be a safe pair ofhands able to handle a high pressure job.

In fact, many people will recover entirelyfrom an episode of stress or other psycholog-ical illness, while others may be highly effec-tive while managing ongoing conditionswith medication or talking therapy as neces-sary. Human beings are frail and risks relat-ing to illness can never be ruled outcompletely. But a mental illness, even a fluc-tuating one, can be managed in the work-place in a similar way to chronic physicalconditions like diabetes.

Stigma is born of ignorance. So few peoplein public life have disclosed the truth aboutremarkably common illnesses (now overtak-ing back pain as the most common cause ofsickness absence), that we continue tobelieve the myth that people are “broken” bythem.

Yet figures like Alastair Campbell and LordStevenson, the former Chairman of HBOSand Pearson, have done much to bring us outof the dark ages. Both have revealed thatthey have experienced depression duringtheir high-profile careers. Impressively, theformer Norwegian Prime Minister Kjell-Magne Bondevik disclosed his depressionwhile in power, before returning from sick-ness leave to finish his term and then be re-elected.

At Stand to Reason we have thousands ofsupporters who have experienced mentaldistress from all walks of life, including sen-

ior positions in financial services organisa-tions. At KPMG, Citi, Deloitte, Ernst & Youngand Legal & General, employees have comeforward to break the silence and change theculture within their firms.

If one contrasts the mature way that Appleunderstood that Steve Jobs could continue tomake a contribution while being treated forhis cancer to how we once used to talk aboutthe “Big C”, with people referred to as dyingfrom a “long illness”, there is hope that intime we will progress to a similar modernapproach to psychological illness.

Horta-Osorio had a first-class track recordof handling high-pressure roles and it isunlikely that these competencies will havedeserted him. Whether he returns to his roleor not in the time allotted is yet to be seen.Much will depend on the details of his par-ticular case and whether there are ongoingstressors outside the workplace of which weare unaware.

All things being equal, and putting stigmaaside, the expectation should be that Horta-Osorio will return to work and thrive there,just as he would after returning from a phys-ical illness.

Jonathan Naess was a partner in a corporatefinance firm before founding Stand to Reason.www.standtoreason.org.uk

Pay may be earnedAlbert Ellis made some goodpoints about executive pay [Thedebate over chief executives’pay isn’t simple, yesterday]. Thedebate seems to have reached astage where too many look fordata to support their prejudiceabout overcompensated fat catsand don’t investigate any fur-ther the quality of the studiesinvolved. Research this monthfrom two academics at the LSE,Brian Bell and John Van Reenen,also found that the picture was

n’t as simple as some want it tobe. Their study covered 90 percent of the UK stock market’smarket capitalisation and foundthe performance of firms mayexplain between one-quarterand one-half of the rise in thegap between chief executivepay and the pay of workers.Falls in performance are alsofollowed, although less aggres-sively, by chief executive paycuts and firings. Mary Willmott Freeman

Speak your mindThe Forum is open for you totake part. Got a sharp commenton one of today’s columns orrapid response topics? Do youhave another subject relating tobusiness and the economy youwant to share your opinion on?We want to hear your views.Readers are invited to commenton the web: cityam.com/forum;by email: [email protected];and on Twitter: @cityamforum.The best responses will bereprinted in The Forum.

RAPID RESPONSES

JONATHAN NAESS

CITYA.M. 8 NOVEMBER 2011 The Forum

I’M A big fan of theBank of Englandmuseum. I find theway it attempts to

educate children abouthow monetary policy isconducted to be charm-ing. There is an exhibitwith a tube of clear

plastic containing a ball. The tube is “balanced”when the ball is level with a marker for 2 per centinflation, and there is a lever labelled “interest rate”.As you pull down on the lever, the tube rotates andthe ball shoots over 2 per cent. If you pull up, thetube moves in the opposite direction. Just as yougrasp the mechanistic relationship between the tar-get and the tool, “economic shocks” are added tosend the tube into constant motion.

They also have a large replica hot air balloon,once again serving as an engaging representationof monetary policy. Just pull the lever, and watchthe impact on inflation. It is a live version of thecomputer game they have on their website, whichI encourage students to play. Not so that theyunderstand monetary policy, but so that theyunderstand how central bankers view monetarypolicy. [Find it at: www.bankofengland.co.uk/edu-cation/inflation/balloon/balloon.htm]

At the San Francisco Federal Reserve museumthe point is the same but the scale bigger. A mas-sive sphere annotated with terminology rotates inevery direction and the viewer is invited to place asmall magnet on a recoilable cord onto the appro-priate symbol on the ball. Once you’ve “locked on”your aim is to direct the movement, being carefulnot to make any sudden yanks given that the mag-netic force binding the magnet to the sphere isweak. I have to confess to being flummoxed as to

what symbolises what (is this the economy? Or theglobe?), and indeed if Ben Bernanke seeks to lobbyCongress for bigger “magnets”. But it’s all goodhands-on entertainment.

This computer game is more advanced than theOld Lady’s – not only must you control inflation butalso employment. You have 16 “quarters” in whichyou need to respond to different news headlineswith a decision on the Federal Funds rate, attempt-ing to keep both indicators on track. Of course thisis fiendishly hard, and at the end of the game thechairman of the Fed is inevitably forced to retakecontrol and sort things out. The lesson for childrenis that monetary policy may appear simple, but itis really quite difficult and best left in the hands ofthe experts.

As a member of the IEA’s Shadow MonetaryPolicy Committee I felt obliged to keep playing thegame until I managed to gain reappointment. Itwas a delightful way to spend a lunchtime. Thecomplexity of monetary policy is the right lesson,but not perhaps its enthusiam for the power ofexperts to step in and save the day. Perhaps suchstories work for children, but they are certainlynot suitable for politicians.

Economic education is a laudable aim: success-ful monetary policy relies on public understandingof economic issues as well as central expertise. Butsimplification runs the risk of trivialisation, andprojecting the wrong metaphor can do more harmthan good. The economy is not a balloon and cen-tral banks don’t have hold of any levers. It’s farmore complicated than that.Anthony J. Evans is Associate Professor ofEconomics at London’s ESCP Europe BusinessSchool, and Fulbright Scholar-in-Residence atSan Jose State University.His website is www.anthonyjevans.com.

Monetary policy is notall about pulling levers

Email: [email protected]: @cityamforum

In association with

BY ANTHONY J. EVANS

YESTERDAY saw the removal of some of the politicaluncertainty that has dogged Greece over the pastweek. A new coalition government is to be formed,Papandreou is standing down as Prime Minister and a

general election is expected early next year. All this should beenough to ensure that Greece receives its next bailouttranche, so it should be able to struggle on for another monthor so.

Attention has turned back to Italy. Few investors takeeither the proposed Italian austerity measures or PrimeMinister Berlusconi very seriously. The country’s bonds fellsharply again yesterday morning, with yields approachingdangerously high levels. They bounced sharply higher laterin the day on speculation that Silvio Berlusconi was on thepoint of resigning, but reversed quickly after the ItalianPrime Minister denied the stories.

But a change in leadership in a few Eurozone countrieswon’t address the region’s debt crisis. And it looks like a newEuropean Central Bank (ECB) president won’t either. So far,the European Central Bank has thrown its weight behindItaly’s bonds in an attempt to keep a lid on yields. But at hisfirst ECB meeting as President, Mario Draghi offered awarning:

“What makes you think that to become the lender of lastresort for governments is actually the thing that you needto keep the euro area together? I don’t think that is really inthe remit of the ECB.”

This came as a surprise to those observers who felt thatDraghi would be more open to intervention. But he is nowinsisting that any bond purchases should be temporary andlimited in scope. This puts him more in line with Bundesbankthinking and has helped to reinforce his hawkish reputation.

With Italian bonds under such pressure, the major stockindices are still struggling to break above significant resist-ance. For the S&P, this comes in at 1,260 which is the 61.8per cent Fibonacci retracement of the May/October sell-off.For the FTSE, the 5,600 level is proving to be an obstacle.For now, all the major indices are positively correlated withthe euro. A rally in the single currency will pull stocks upwith it. But a break below $1.3650-60 would be a big redflag for equities.

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Wealth Management | CFDs26 CITYA.M. 8 NOVEMBER 2011

ACCOUNTANCY firm BDO joins anever-growing group warning thatthe UK’s economy is on the cusp ofrecession. In its latest business

trends report, optimism levels came inbelow the crucial 95.0, for the first timesince July 2009, for both the manufactur-ing and services sectors.

BDO partner Peter Hemington says:“Businesses’ hiring intentions point tomore job losses ahead which, coupled withtumbling optimism and output, indicatestough times in early 2012.” He adds: “Giventhat the latest ONS growth figures havebeen revised downwards, this concern iseven more acute.” Hemington calls for sup-ply side reforms – particularly reform ofthe tax system – to introduce measuresencouraging private sector investment.

The UK is a largely powerless spectator inthe unremitting Eurozone crisis, withmany fearing its impact. The NationalInstitute of Economic and Social Researchis the latest to weigh in on the issue, sug-gesting that there is a 70 per cent chance ofthe UK heading into recession unless thecrisis is resolved, and 50 per cent even if itis. The think tank also predicts that growthwon’t return to pre-recession peak before2014.

Not everyone is bunkering down.Against the consensus view that a collapsein the euro would be a disaster for the UK,economists at the Centre for Economicsand Business Research (CEBR) think theend of the euro would “not be anythinglike the disaster that has been argued”. Ifthe currency’s decline were undertaken ina proactive and orderly way CEBR’s boldclaim might be true – but this is highlyunlikely given the ineptitude Europe’spoliticians have displayed to date.

Either way, one thing’s for sure – traderslike volatility and we are certainly in for alot of that over the coming months.

Philip Salter asks howfive experts trade these euro-sceptered isles

UK’s economic outlookreveals unsightly view

IG MARKETSCHRIS BEAUCHAMPThe UK economy may have grown by 0.5 per cent in the thirdquarter, but this is not exactly cause for celebration. The medi-um-term outlook remains fairly bleak, as growth remains decid-edly anaemic. Not only this, but the travails of our Eurozonepartners threatens to sweep away even this small amount ofprogress. With the Bank of England firing up the printing presses once

again, the prospects for sterling-dollar look bleak indeed. Our own pound might gainsimply from being an alternative to the beleaguered euro, but yet more money printingfrom Sir Mervyn and his band is not exactly conducive to the health of the currency.In addition, UK consumers are still recovering from their debt hangover, as the after-effects of years of excessive spending continue to be felt. Retailers have been hit hard,as the great British public errs on the side of caution. Any glance at the share price ofcompanies like Mothercare, Carpetright or HMV will confirm that this sector is facing ahard time. However, one company that has weathered the storm so far is Next, whoseshares are up nearly 40 per cent since the start of the year, compared to a drop of 7 percent for the FTSE 100. Outside of the high street, northern supermarket Morrisonsmight also be a possibility, as consumers trade down to cheaper products, abandoningthe hallowed halls of M&S and Waitrose for low-cost alternatives.In these difficult times, we can only hope that our eminent chancellor has some fairlyinventive ideas up his sleeve.

CAPITAL CFDSANGUS CAMPBELLThe UK economy expanded more than was expected in the thirdquarter, which was welcome news for many, in particular the UKchancellor. But we can’t get too excited, as it simply represents abounce from the Japanese earthquake and multiple bank holidaysearlier in the year. This growth is not expected to be maintainedinto the next quarter and 2012. It will also be particularly difficultto see the economy grow this winter, if we see anything like the

disruption we’ve seen in the past two years caused by terrible weather conditions.Confidence for both businesses and consumers is downbeat with lots of well-respectedthink tanks saying that the likelihood of a double dip recession has increased. Businesses are still very worried about the outlook for growth and as a result they don’twant to invest or employ new staff. As a result, unemployment looks like it will remainhigh for some time and even the City is not immune to the downturn, with redundanciesincreasing and job vacancies falling, putting further pressure on the wider economy and inparticular the government’s coffers.The woes for the struggling UK economy are not all down to government spending cuts,but a general slowdown across Europe and the globe as a whole. Our biggest tradingpartners across the English Channel are in trouble and it is having a knock on effect for us.Unfortunately, the future for the UK economy looks bleak and for those political followersout there we can expect more of the shadow vhancellor’s impersonation of a cricketumpire signalling four runs across the despatch box.

LAST week’s reports of tumbling prof-its and the ongoing confusion overthe economic outlook for Europe isweighing on International Airlines

Group, the stock of the merged BA andIberia entity, IAG. Even the prospect ofadding more prized take off slots atHeathrow, through the reported plans to

purchase competitor BMI, is failing todeliver any cheer, as the share pricedescends rapidly back towards post-merg-er lows. IG Markets quotes 152.3p-152.4p.

Energy provider Scottish andSouthern Energy reports tomorrow.Households are tightening their pursestrings as the cost of using energybecomes increasingly expensive. This mayhave a knock-on effect on its revenues. Itwas recently downgraded by GoldmanSachs with a target of 1,230p. CapitalCFDs quotes 1,319.3p-1,321.7p.

Gold has had a bullish few days recov-ering from the $1,600 an ounce mark ris-ing back towards $1,800. It wouldindicate that the bulls are back in town,

driving the price of the precious metalhigher, as investors pile back into the safehaven. Capital CFDs quotes $1,766.0-$1,766.4 for spot gold.

Admiral Group releases an interimmanagement statement tomorrow. Itsshares recently hit a 52-week low of1,089p, but bounced hard off the 61.8per cent Fibonacci retracement of the2008 lows, to 2011 highs, at 1,100p.With a dividend yield of around 6.5 percent and a potential recovery in the shareprice on the horizon, dips to around1,100p should be used to buy with 1,350pas a target. Spread Co quotes 1,199.1p-1,202.9p.

Philip Salter

THE TIPSTER

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CITYA.M. 8 NOVEMBER 2011 27

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ALPARIJAMES HUGHES

2012 is still being billed as the magic year for theUK economy. For a long time we have been told thatinflation would start to fall, growth would pick upand unemployment (the most important barometer)would turn the corner at the start of the Olympicyear. However, that was before the Eurozone prob-

lems intensified. I think one thing that we can count on is inflation takinga sharp turn lower. It is expected to fall sharply in the first half of 2012and gradually continue towards the benchmark 2 per cent, if not a tadbelow. The big issue, and a long term question for many economies is whether ornot we will get any more quantitative easing (QE). Over the last month wehave seen the Bank of England (BoE) expand its bond buying programme,and many expect to see another shot in the arm in the first quarter andmaybe even more in second of 2012.The recent minutes from October’s Monetary Policy Committee meetingshowed yet more concern over the state of the economy in the UK andthis could be set to continue. The November meeting, although unlikely tosee any more QE or a movement in rates, will have the BoE growth andinflation forecasts to dissect. With a plethora of poor economic datareleased in the last few weeks and the worsening crisis in the Eurozonethere is still likely to be a lot to discuss. All in all, the UK economy will be on high alert as we approach the festiveperiod. The inflation report on 16 November will be the biggest indicationas to where we are headed, but with QE back on the table, recent pooreconomic data and the fear of Eurozone contagion, we look set for at leastanother quarter of uncertainty in both the markets and the economy.

FOREX.COMKATHLEEN BROOKS

The UK has been something of a wall flower of late asthe Eurozone has taken the spotlight. But while Greecehas imploded and Italy is next in the firing line, the UKhas managed to make itself and its own debt problemfade to the background.UK gilt yields have sunk as Italian yields have surged

and the UK credit market is becoming a bit of a safe haven. The yield on the10-year bond is currently 2.3 per cent, a level Rome can only dream about.Two-year yields are a ridiculously low 0.5 per cent. The UK had a budget deficit last year of 10.5 per cent of GDP; however,although its budget gap may be more like levels in Greece, its borrowing costsare more like Germany’s.So why this discrepancy? The markets like certainty and that is what the UKgovernment gave them. The UK identified its debt problem fairly early on andthe coalition has implemented an austerity plan. This is something Greece andItaly have struggled with. Weak growth may mean that the UK misses its fis-cal targets, but the markets don’t seem to mind. The UK at least has a planand that is providing certainty to the market.The credit market may be booming, but the pound and the FTSE are a differ-ent story. The UK’s equity index is mostly made up of foreign corporates withglobal reach. Since the Eurozone debt crisis threatens to cause a slowdown inthe world economy, the fortunes of the FTSE 100 lie with Europe and the UK’sequity index is at risk from changes in risk appetite.The pound is also struggling under the weight of weak growth and generalrisk aversion. However, the more the debt crisis threatens Italy the worse it isfor euro-sterling. A break below £0.8550 would open the way for further losses in the singlecurrency.

CITY INDEXJOSHUA RAYMONDWhile the latest GDP figures, which showed thatthe UK grew at a rate of 0.5 per cent in the thirdquarter, higher than earlier estimates, are certainlypositive, it is nothing to get overly optimistic about.The UK economy is still at significant risk of at leastone quarter of negative growth, particularly should

the Eurozone succumb to its sovereign debt crisis, a prospect that is fastgathering pace with Italian 10-year bond yields hitting a new euro erahigh yesterday.Germany and France are among the UK’s top trading partners in theworld and so a weak Eurozone that impacts these two nations is bad forUK growth and there is every chance that the Eurozone is heading backinto a recession. An admission by new European Central Bank (ECB) presi-dent Mario Draghi last week emphasised this point. What’s more, onceyou strip out exceptional one off items from the latest “initial” GDP read-ing too, it looks far less rosy than from the outset, if 0.5 per cent growthcan look rosy in the first place.A separate PMI reading also saw the manufacturing sector fall at itsfastest rate in two years to read at 47.4, below the 50.0 growth level. Thisis evidence that the UK economy is struggling and could dip back intorecession soon if the drop becomes a trend. While the move by the Bank of England to increase its asset purchases isa move designed to reignite the faltering UK economy, the current size ofthe increase, £75bn, is unlikely to do much in the near term and we arealso expected to see this size remain unchanged when the MonetaryPolicy Committee meets later this week. The UK economy remains teeter-ing on the edge of recession.

Receive £200 trading credit* when you deposit £1000 into your

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*Deposit £1000 and place three trades at £3 per point or more before 30th November to claim your £200 trading credit.

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Spread betting and CFD trading can result in losses that exceed your initial deposit.

TRADING is a solitary pursuit.All that time spent watchingthe screen can leave tradersemotionally tied up in their

trading choices. Pride takes over andwe can become wedded to a bad trad-ing decision. It takes a lot of disci-pline to clock your own behaviourwhen this happens. But fear not,we’ve asked some veteran tradershow they navigated their waythrough this when they started out.

1.DON’T BET THE FARMOne sure-fire way to prevent yourselfgetting emotionally hung up onyour trade is not to bet too much onany single trade. You don’t ever wantto risk the mortgage payment or any-thing else. Mike van Dulken ofAccendo Markets says that the firstquestion a trader should ask is “whatpotential loss can I take on thistrade?” Only then should you consid-er the potential profit. Van Dulkensays: “A risk/reward ratio greaterthan 1:3 is considered good.”

2.BE THE MASTEROF TRADES Traders literally can’tafford to be a Jackof all trades.They need tobe masterof a few.Elliott

Winnerof CapitalSpreads says:“Spend time look-ing at a couple ofmarkets that youwill eventually goon to trade. By fol-lowing only a cou-ple, you are

learning the ranges, the markettrades and what particular data andnews affects that market.”

3. STEP AWAY FROM THE SCREEN Much like watching the clock atwork, sitting in front of your tradingscreen all day only makes a bad situ-ation worse. David Jones of IGMarkets says: “I think one of the bestways to take the stress out of tradingis simply not to constantly watch themarket. Particularly, if you are trad-ing over hours, days or weeks. Thetemptation to edit your strategy istoo great.”

4.EXECUTE A STRATEGYWinner says that sticking to a strate-gy prevents you running a loss-mak-ing position on the hope that it willbounce back. He explains: “Decidewhere you will enter and set yourtwo exit strategies – your stop andlimit. City Index’s Joshua Raymond

thinks this advice is bestpaired with the lasttip: “The best riskmanagement strategyis just to set your stopsand profit target andthen walk away.”

5.USE THETOOLS AT HAND Every trading

system seems tooffer stops and lim-

its these days, but many alsooffer other fancy planningand history applications.These allow traders to learn

from their mistakes and puttogether more robust strategies

that are harder to get distractedfrom.

Trading contracts for difference requirespsychological discipline. Here are our five top tips, writes Donata Huggins

Discipline isn’t much fun, but it’s necessary Picture: GETTY

Get your emotions incheck andunder control

Wealth Management | Contracts for Difference28 CITYA.M. 8 NOVEMBER 2011

GFT is hosting an informal seminar to equip binary beginners with theskills to get started and experiencedbinary traders to take their strategiesto the next level.

David Morrison, GFT’s derivatives market strategist and a City A.M. columnist, will present a talk on:

● What are binaries?● What influences their pricing?● What markets does GFT offer?

It will be held at the Grange St. Paul’s Hotel at 8.30am-10am on 9 November 2011. Call GFT on 0808208 5197 or go to www.gftuk.com for more information.

TRADING SEMINAR

See which pairs our traders are watching live

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Our team will navigate you through the Intricacies of the FX world helping you betterunderstand the pitfalls of trading FX pairs.

Streaming live trade data displays TMC's traders' latest trades and insights together withreal-time market information; trading chart analyses display up-to-the-minute tradingcharts; and our live question feature allows users to ask the traders any related questionsthat may arise during the day’s trades.

For more information about the Trader Management Company and how you mightincorporate TMC's service into your own trading, visit TraderManagement.com.

Don't get hung out to drywhen choosing a pair to trade

Real thinking - Real trading

Forex trading carries a high level of risk & is not suitable for all investors. The leverage associated with Forex trading can result in losseswhich may exceed your initial investment. Consider your objectives & level of experience carefully before trading & if necessary seek advicefrom a financial advisor. The Trader Management Company Ltd. is authorised and regulated in the United Kingdom by the FinancialServices Authority under FSA Registration Number 525164. TMC is compensated through subscriptions to its live trading room service.

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Through the delivery of real-time education and trades, TMC'slive trading room can act as an unparalleled reactivation toolfor dormant clients. To learn how your organisation couldreceive free client access to TMC's complete trading roomservice, email [email protected] today.

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Wealth Management30 CITYA.M. 8 NOVEMBER 2011

BUNGA BUNGA37 Battersea Bridge Road, SW11 3BA020 7095 0360, bungabunga-london.com

FOOD hhiiiSERVICE hiiiiATMOSPHERE hhhii

Cost per person without wine: £25

There’s often a point in theApprentice TV show when a contes-tant’s confidence surpasses sense.Someone has an idea, and you

spend the next 50 minutes watching theteam run round and execute it in someterrifying way, pretending to be experts insomething they’re not.

There was a sense of Apprentice déjà vuin last week’s visit to Bunga Bunga inBattersea. Except the chaos was not onscreen. Instead, we were living in TeamBunga chaos – the overexcitement for agreat idea far outstripping the execution.

To be fair, the evening did start promis-ingly. Though the front of house werechatting away for a while before I couldask them about my booking, there wereno airs and graces. Nor was there the stiffservice you might have expected from aplace that had royalty and the cast list

Not as wild as the original

from Made in Chelsea in their openingparty pictures. The website promisedtongue-in-cheek banter, and there werenice little touches – all guests were given afun newspaper with updates withinBunga world, and there were phrases atthe bottom of the menu to help you orderin Italian should you want to have a go.

Cocktails were okay (although I’venever had a Bellini before with a foamytop layer), and the food on the menusounded like simple rustic fare, namedthings like “artichoke heart stealer”, and“Italy’s fun guy”. Guffaw.

But then the entertainment started. Mygoodness. It was as though someone with-in Team Bunga had said “wouldn’t it begreat if a contortionist in flesh-colouredleotard stretched their groin next to thediners”. Because that’s what he did. Thenext act simply stopped halfway through(we hadn’t even noticed it had until themanager made a point of coming up totell us). The staff themselves seemed unim-pressed with the acts, dodging a contor-tionist’s limb or an opera singer’sgesticulation with resentment as theydelivered pizza to table. And then therewas the re-enactment of the murder ofGeorge Bizet’s Carmen and the awkwardscene where fake blood was smeared allover Carmen’s décolletage while the roomtucked into their plates of Prosciutto diParma. At that moment, it seemed thatmost in the room couldn’t help but sharea withering Merkozy-esque smirk with fel-low diners. The bizarreness was unfath-omable.

And then the food. Let’s start with thegood things. The pizza wasn’t too bad(although my companion was less forgiv-ing as a prime supporter of the “best-everpizza in London” from Brixton’s FrancoManca). The sourdough base was lovely

and crisp, with a smatter of spicy sausageand juicy squirt-as-you-bite cherry toma-toes. And even though it looked like a tart-ed-up Jackson Pollock, the salad ofavocado, tomato and mozzarella tastedfine and fresh.

The rest of the food was a bit of a disas-ter. Fried sage leaves with anchovy filletswere bitter and terrible. Courgettes werelimpid batons of blandness and wereserved with a basil non-garlic “aioli” thathad the extraordinary talent of increasingtheir blandness. A bruschetta with under-cooked wild mushrooms was forgettable.The cured meats on garlic bread weretasty, but then it’s hard to mess that up.And, worst of all, Team Bunga couldn’tquite get the hang of the meaning of serv-ice, which consisted of constant badger-ing, and almost 30 instances ofconversation-stopping interruption.

What would have been charmingbecame try-hard kitch, and as the DJ spunKings of Leon’s “sex on fire”, we felt asthough we were coming to the end of thenight at a batty uncle’s wedding. BungaBunga will thrive because there areenough real-life Made in Chelsea types topopulate the bar. I would rather spend mytime watching the drama unfold on mytelevision. And as far as Team Bunga isconcerned, I’m afraid, “you’re fired”.

Above: the kitch inte-rior at Bunga Bunga,above right: a crispsourdough pizza

Bizarre performancesand intrusive servicemake for a very oddparty, says Helena Lee

HEAD SOMMELIER AND MANAGER OFLUTYENS RESTAURANT

ANDREW CONNOR

QUAFFER’S CORNER

With Thanksgiving fast approaching,I’m devoting this week to helpingmy American readers select awine to have with their turkey. It’s

not a festival that we celebrate in NewZealand but, as my sister-in-law is from NewMexico, I’m familiar with the palate offlavours and the challenges there are tomatching these with wine.

I think it’s only right to drink Americanfor such a quintessentially American festival.Champagne has its place at other celebra-tions but this is the perfect time to kick offwith one of the hoppy US craft beers thathave become increasingly easy to find in UKshops (Sierra Nevada Pale Ale is widelyavailable and delicious). It’s the perfectpalate cleanser to sharpen your appetite.

Let’s be frank here: there is a lot of sweet-ness going on, from the squash and sweetpotato (maybe with some sneaky marshmal-lows) to the cranberry sauce and pumpkinpie.

Turkey is a forgiving (dare I say bland)meat and will happily accommodate justabout anything, but I tend to think that asthe nights are getting shorter it’s best todrink red. I like the red fruit and warm spiceof Sonoma Coast Pinot Noir (Belle Glos, LaCrema) and my Canadian assistant Andresis a great advocate for Beaujolais (but stickto one of the 10 Crus such as Morgon orJuliénas). There’s been an explosion in quali-ty in Beaujolais recently (particularly withthe excellent 2009 vintage) so if you’ve nottried one recently, give it a shot. If it’s notvulgar to say so, this is a celebration ofnature’s bounty so choose something at aprice that will allow wine to flow abundant-ly (while drinking responsibly of course–ahem).

When the pumpkin pie comes around, Imust confess that I struggle to select a wineto accompany it. Why not throw caution tothe wind with a bottle of rye whiskey (spicySazerac 18 would be my choice), then tweakthe nose of the trade embargo by sittingback and enjoying a fine Cuban cigar. Ifyou’re celebrating in London rather thanback home, why not take full advantage?Follow Andrew on Twitter @LutyensWine

Giving thanksfor all the wine

FOOD & BOOZE NEWSHELENA LEE

TOP VIEWS AT REVAMPED BARWith 360-degree views across London, thisbar is particularly stunning on a clear nightover Oxford Street where you can see theChristmas lights. The revamped viewinggallery on the 33rd floor has extended itscocktail bar so you can enjoy well-craftedcocktails, such as the aged Barcardi 8 yearManhattan that has been matured in oakcasks for six weeks, and hearty bar snacks.The Merguez sausages are a treat. CentrePoint, 101-103 Oxford Street, WC1A 1DD

CANTEEN IN COVENT GARDENCovent Garden market’s first “restaurant inresidence” is a pop-up version of the Canteenrestaurants. They are also hosting one-offmenus with former Gordon Ramsay chefMark Sargeant on 8 December,and the up and coming NeilBorthwick on 15 December. Eachdinner is £45 and also includes aglass of hot cider. Email [email protected], or phone020 7608 2627 to book.

TSURU SUSHI LUNCH DELIVERIESFeeling peckish, but too busy to leave thedesk? Tsuru have launched a lunchtime deliv-ery service for all EC postcodes. Now you canpick up the phone and order fresh maki, tem-pura and miso soup, katsu sandwiches andeven sake or champagne should the occasion

call for it. To order, call Bankside 020 7928 2228,

Bishopsgate 020 7377 1166, MansionHouse 020 7248 1525, www.tsuru-sushi.co.uk

Left: Paramount barat Centre Point

Lifestyle | RestaurantsTOYOTA YARISREVIEWIN TOMORROW’SLIFESTYLE

31

TERRESTRIAL

JAMESMAY’S MAN LABBBC2, 8PMJames works in his own foundry toform a lemon squeezer from variouskitchen utensils, and provides a lessonin how to cheat at playing the guitar.

THE UNFORGETTABLE NORMANWISDOM ITV1, 7.30PMFamily and friends pay tribute to thefunnyman. Including contributions byNorman’s son Nick, singer Vera Lynnand actress Honor Blackman.

MY TRANSSEXUAL SUMMERCHANNEL 4, 10PMSeven transgender individuals gatherat a summer retreat, where they sharemutual understanding of what it is liketo be a transsexual in Britain today.

BBC1

SKY SPORTS 17pm Sky Sports News at Seven7.30pm Live Johnstone’s PaintTrophy Football. Sheffield Unitedv Bradford City (Kick-off 7.45pm).10pm Revista De La Liga 11pmA League of Their Own 12amFootball’s Greatest 12.30amFootball Asia 1am Johnstone’sPaint Trophy Football 2.30amFootball Asia 3am Revista De LaLiga 3.55am-6am Live TestCricket

SKY SPORTS 210am Live Masters Tennis 10pmGolfing World 11pm LadiesEuropean Tour Golf 12am TestCricket 2am-4am InternationalBowls

SKY SPORTS 37pm Cycle Sports World 7.30pmLive Greyhound Racing 10pmThinking Tackle 11pm SportsUnlimited 12am European

Challenge Tour Golf 1am ThinkingTackle 2am Ladies European TourGolf 3am-4am EuropeanChallenge Tour Golf

BRITISH EUROSPORT6pm Live Weightlifting. TheWorld Championships from Paris.8pm Boxing 11pm GT Academy:Road to Dubai 11.15pm InsideWTCC 11.45pm-12.15amRallying

ESPN7pm Eredivisie Review Show8pm ESPN Kicks: Serie A8.15pm Russian Premier LeagueReview 8.45pm NFL 10.45pmSerie A Review 11.15pm ESPNKicks: Premier League 11.30pmESPN Press Pass 12am PlanetSpeed 12.30am World Series ofPoker 2011 Main Event 2am LiveWorld Series of Poker 2011 MainEvent 4am FIA GT1 WorldChampionship Review 5am-6amNHRA Drag Racing

SKY LIVING7pm Criminal Minds 8pm SignedBy Katie Price 9pm America’sNext Top Model 10pm CriminalMinds 11pm Bones 12am JerryBruckheimer’s Chase 1am CSI:Crime Scene Investigation2.40am Maury 3.30am Bones4.20am Nothing to Declare5.10am-6am Jerry Springer

BBC THREE7pm Total Wipeout 8pm HotLike Us 9pm Don’t Tell the Bride10pm EastEnders 10.30pm Him& Her 11pm Family Guy 11.45pmAmerican Dad! 12.30am Don’tTell the Bride 1.30am Him & Her2am Hot Like Us 3am Young,Dumb and Living Off Mum4am-5am The Growing Pains ofa Teenage Genius

E47pm Hollyoaks 7.30pm HowI Met Your Mother

8pm Shipwrecked: The Island9pm Sorority Girls 10pm ToolAcademy 11.05pm Rude Tube:Viral Ads 12.10am The Big BangTheory 1.05am Scrubs 1.55amHow I Met Your Mother 2.20amRude Tube 3.15am Rules ofEngagement 3.35am DesperateHousewives 4.20am-6amSwitched

HISTORY7pm Heir Hunters 8pm AmericanPickers 9pm Cash Cowboys10pm American Restoration11pm Ancient Aliens 12am MudMen 1am Cash Cowboys 2amMega Movers 3am Heir Hunters4am American Pickers 5am-6amAncient Discoveries

DISCOVERY7pm Mythbusters 9pm Coal10pm Deadliest Catch – Behindthe Scenes 11pm Ice Pilots 12amBear Grylls: Born Survivor 1amCoal 2am Deadliest Catch –

Behind the Scenes 3am DeadliestCatch 3.50am Dino Gangs5.30am-6am Destroyed inSeconds

DISCOVERY HOME &HEALTH7pm Birth Days 8pm I Didn’tKnow I Was Pregnant 9pmMystery Diagnosis 10pm BabyER 11pm Britain’s Fattest Man12am Mystery Diagnosis 1amBaby ER 2am Britain’s FattestMan 3am I Didn’t Know I WasPregnant 4am A Baby Story5am-6am Bringing Home Baby

SKY18pm Glee 9pm Inside Gatwick10pm FILM Patriot Games 1992.12.20am In Time Special12.50am Road Wars 1.50am UKBorder Force 2.45am Mental4.20am Paul McKenna: I CanChange Your Life 5.10am -6amLiza and Huey’s Pet Nation

BBC2 ITV1 CHANNEL4 CHANNEL5

SATELLITE&

CABLE

TVPICK6pm BBC News6.30pm BBC London News7pm The One Show7.30pm EastEnders: BBC News8pm Holby City9pm Death in Paradise10pm BBC News10.25pm Regional News;National Lottery Update10.35pm Imagine: Simon &Garfunkel: The Harmony Game11.50pm FILM The Name of theRose 1986. 1.55am Weatherview2am Sign Zone: Andrew Marr’sMegacities 3am Sign Zone: HistoryCold Case 4am Sign Zone: NigelSlater’s Simple Cooking4.30am-6am BBC News

6pm Eggheads6.30pm Strictly Come Dancing– It Takes Two7pm MasterChef: TheProfessionals: Five chefs face askills test of spinning sugar.8pm CHOICE James May’sMan Lab9pm Dam Busters: The Race toSmash the German Dams10pm Later Live – with JoolsHolland: Steve Earle performs.10.30pm Newsnight: Weather11.20pm The Choir: MilitaryWives12.20am Damages 1am BBC News4am-6am BBC Learning Zone

6pm London Tonight6.30pm ITV News7pm Emmerdale7.30pm CHOICE TheUnforgettable NormanWisdom8pm High Stakes9pm The Jury10pm ITV News at Ten10.30pm London News10.35pm Babies Behind Bars11.35pm Joanna Lumley’sGreek Odyssey12.30am The Zone: Interactivegaming; ITV News Headlines3.05am Kojak 3.55am-5.30am ITVNightscreen

6pm The Simpsons 6.30pmHollyoaks 7pm Channel 4 News7.55pm 4thought.tv8pm The Food Hospital9pm Jamie’s Great Britain10pm CHOICE My TranssexualSummer11.05pm Rory Peck Awards 11.10pmTrue Blood 12.25am UK & IrelandPoker Tour: Action from London.1.25am Sailing 1.50am BeachVolleyball 2.45am KOTV Boxing3.10am Formula Ford Festival 20113.35am Formula Ford Championship4am Great Scottish Swim 4.55amPost Modern Pastimes5.10am-6.05am ParalympicWheelchair Rugby GB Cup 2011

6pm Home and Away6.25pm OK! TV7pm 5 News at 77.30pm Lost Heroes of WorldWar One: 5 News Update8pm London: The Inside Story:5 News at 99pm CSI: Miami10pm Big Brother11pm FILM Edison: Crimethriller. 2005.12.50am Inside Hollywood1am SuperCasino 4.05am ChineseFood in Minutes 4.10am The HotelInspector 4.55am Rough Guide toBeaches 5.10am House Doctor5.35am-6am House Doctor

4 6 10

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Fill the grid so that each block adds up to the total in the box above or to the left of it.You can only use the digits 1-9 and you must not use the same digit twice in a block. The same digit may occur more than once in a row or column, but it must be in a separate block.

COFFEE BREAKCopyright Puzzle Press Ltd, www.puzzlepress.co.uk

KAKUROQUICK CROSSWORD

LAST ISSUE’SSOLUTIONS

KAKURO

WORDWHEELUsing only the letters in the Wordwheel, you have ten minutes to find as many words as possible, none of which may be plurals, foreign words or proper nouns. Each word must be of three letters or more, all must contain the central letter and letters can only be used once in every word. There is at least one nine-letter word in the wheel.

SUDOKU

Place the numbers from 1 to 9 in each empty cell so that each row, each column and each 3x3 block contains all the numbers from 1 to 9 to solve this tricky Sudoku puzzle.

SUDOKU

QUICK CROSSWORD

ACROSS 2 Evaluating (9)

6 Bulgarian capital (5)

7 Girl who features in Lewis Carroll’s famous stories (5)

9 Pin (3)

10 Grin (5)

12 Enrol (5)

14 Off the cuff (2-3)

17 Grate (teeth) (5)

19 Melody (3)

20 Voice qualities (5)

21 Famous American battle (5)

22 Refuse to stop (9)

DOWN 1 Helper (9)

2 Civilian dress worn by a military person (5)

3 With the mouth wide open, as in wonder or awe (5)

4 Employment (5)

5 Imbecile (5)

8 Creature found in the soil (9)

11 Hawaiian floral garland (3)

13 Grandmother (3)

15 Ocean-going vessel (5)

16 Coat in fat (5)

17 Level (5)

18 Speedily (5)

A

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H A S T E N I SI A E T H N I CJ E R I C H O H UA C R I B A L DB A S H F U L L S

A I L E W EA V E N T H R A LG O A T E E I EN G C A R N A G EE X E T E R G RS D S E E M L Y

1 6 2 7 8 73 4 2 1 6 2 4 14 7 1 3 5 6 9 8 27 8 6 8 9 9 75 9 8 9 1 82 5 3 1 7 9 8 5

9 7 5 7 5 31 7 2 1 6 3 25 9 7 3 2 8 4 6 12 3 1 4 9 8 7 68 9 3 7 9 4

WORDWHEELThe nine-letter word was

TREMBLING

Lifestyle | TV&Games CITYA.M. 8 NOVEMBER 201132

Sport 33CITYA.M. 8 NOVEMBER 2011 WORDS BY FRANK DALLERES

‘I’ve been physically and mentallyabused many times at games in UK’

QPR’s new ownerand airline mogulTony Fernandes onracism and polishinga rough diamond

TOPICS of conversation are not hardto come by with Tony Fernandes,the gregarious Malaysian entrepre-neur who recently added Premier

League football club Queens Park Rangersto an empire that includes AirAsia andFormula One racing team Lotus.

In a whirlwind half-hour he explains hisrecipe for business success, discusses QPRbecoming bigger than Liverpool within 10years, reveals the club’s plans for a new40,000-seat stadium in west London andhis attempts to sign England star and glob-al brand David Beckham.

The charismatic 47-year-old (motto: Nodream is too big) could not be more at easein a hospitality box at the team’s LoftusRoad ground, expounding on his ambi-tious plans for Rangers and recalling thechildhood experiences that would latercolour his portfolio.

But there is an elephant in the room.When Fernandes meets City A.M. the clubis still engulfed in a racism row that beganalmost two weeks earlier, when Chelseaand England captain John Terry wasaccused of shouting vile insults at QPRdefender Anton Ferdinand.

Terry denies racial abuse and his clubhave supported him fully, yet the potentialdamage posed by separate investigationsby the Metropolitan Police and theFootball Association (FA) have kept the

story firmly in the spotlight.Fernandes and QPR have pledged sup-

port for Ferdinand and co-operated withthe FA but Fernandes is at pains to pointout that, contrary to popular belief and ina development that casts a fresh light onreports of death threats received byFerdinand, neither the club nor playercomplained to the FA over the incident.

He also rejects the suggestion that aguilty verdict against Terry would wreaksevere damage on the reputations of bothone of England’s most distinguished play-ers and the game in this country.

“Let’s put the matter in context,” hebegins. “I don’t think Anton has com-plained. I don’t think QPR have com-plained. We have just said ‘If you want toinvestigate we will give you full support’,which we have. And we have given ourplayer full support.

“I don’t think, if it happens, it’s the endof English football. I don’t necessarilythink if John Terry said it, he’s a racist. Weall say things in the heat of the matter. AllI can say, as someone who has been watch-ing football for the best part of 30 years, isthat English football should be proud ofhow racism has, in my opinion, become asmaller issue than it was.”

KICKED, SPAT ATFernandes, who fell in love with footballvia the BBC’s World Service and Shoot!magazine as a schoolboy in England andplayed striker for London School ofEconomics (“I was a poacher, but with adifferent body,” he jokes), vividly remem-bers the dark days of the 1980s, when ter-race violence and racism were rife.

“I’ve been physically and mentallyabused many, many times at footballgames in the UK,” he says. “I have beenkicked, spat at. I used to be scared. I’d stillgo because I loved the game, but you’dworry which Tube you took, where youwere standing, you’d hide your scarf some-

times. I don’t feel that one bit [now].”So comfortable is he in his new role as

majority shareholder of the top-flightnewcomers that he regularly chats withfans on social media sites Twitter andFacebook, and even met them in a pub fordrinks before a recent home game – to thediscomfiture of the club’s media staff.

“I wasn’t worried about security – hewas,” he laughs, pointing at QPR’s pressmanager. “They sent two [security] guyswho couldn’t even get through the door,they were so wide. It didn’t scare me forone moment. The fans here are fantastic,they need to be appreciated and I need tohear their views; to show I am like them.”

He goes on: “I want to watch a game inthe stands.” Will he? “Yeah. I haven’tthrown it at the guys here yet, but I’d liketo do that, because then you get to reallyunderstand what the club is all about.”

It is hard not to warm to Fernandes andQPR fans have, with an influx of signingsand some good results, including a winover more illustrious neighbours Chelsea,lifting them to mid-table since his Augusttakeover. He has “tremendously enjoyed”the ride, even if he has been taken abackat its effect on his already high profile.

“I’ve got a Formula One team, I’ve gotan airline, I’ve been relatively public any-way, but football has put it on anotherwavelength,” he says, launching into afavourite anecdote. “It’s funny: one of theother owners came into Heathrow and theimmigration officer said ‘Why are youhere?’. He said ‘I’ve come to watch my foot-ball club, QPR’. The officer said ‘You don’town it, Tony Fernandes does’!” He chuck-les and surmises: “It’s a global sport.”

His wealth was built on AirAsia, thestruggling carrier he bought for a fewpence and turned into a business worthmore than £2bn, using what he calls his“little recipe”. He has high hopes the sameapproach – “My whole philosophy is pol-ishing an unfinished diamond” – will revi-

talise car manufacturer Caterham, whosename will replace Lotus in his FormulaOne team next year, and also QPR, who hebelieves can make money long term.

BECKHAMOne part of that plan involves moving to anew stadium and Fernandes confirms theclub have identified soon-to-be-formerBBC premises at White City as the pre-ferred site. “It’s true, but it’s one hell of ajob,” he says. “Without a doubt I thinkQPR could fill a 40,000-seat stadium, and abit more. I’ve only looked at White City.Logically, I’d like to stay where we wereborn, so we haven’t looked at other sites.”

Overseas owners have been accused ofheresy for floating the idea of scrappingrelegation and, in the case of Liverpool’sAmerican investors, switching from collec-tive to individual selling of broadcastrights. Fernandes is firmly opposed toboth proposals and insists he cannot seethem gaining sufficient support.

“No I really can’t. I think, if we stay up,in 10 years time we could be as popular asLiverpool. Secondly, the Premier Leaguewas set up in this structure. It’s not rightto say ‘Drop this, screw everybody else’.”

Fernandes, who calls Kuala Lumpurhome but has a house in London, has com-piled a shopping list for the January trans-fer window. However, Beckham, who mayleave LA Galaxy, is unlikely to be on it,despite QPR’s interest.

“I think signing Beckham is dead in thewater, to be honest,” he admits. “It was anice thought but midfield is probably oneof our strongest parts and I’m not surewhere Beckham would play, to be honest.We had initial discussions. It will be nicerin this transfer window because we have abit of time. We’ve got a list, I’ve told every-one to dream big and they certainly have.”

With Fernandes at the helm, it lookslike QPR will be giving people plenty totalk about for years to come.

Fernandes believesQPR could become aspopular as Liverpoolwithin a decade

Picture: LauraLean/CITY A.M.

“I don’t thinkAnton hascomplained. Idon’t thinkQPR havecomplained.We have justsupported aninvestigation”

Sport34

SECRETARY of State for Culture,Olympics, Media and Sport Jeremy Hunthas defended the Government’s deci-sion to spend nearly £750,000 on ticketsfor next summer’s London Games.

Hunt’s department applied for andhave been allocated 8,846 tickets to theGames, including 213 tickets to theOpening Ceremony at a total price of£194,525.

The allocation, which also incorpo-rates £33,085 spent on 256 athleticstickets and £26,600 on 410 beach volley-ball tickets, primarily funded by the tax-payer, is sure to anger the generalpublic, especially after 700,000 of the1.9m people who applied ended upwith nothing.

But Hunt said yesterday: “The firstpoint to make is that this is less than0.1 per cent of all tickets and none ofthem are going to be given away tocivil servants or politicians.

“A small number of those tickets willbe made available to people who havebeen working hard on the project forthe last five years or so but they have tobuy those tickets at face value.”

Governmentsplashes out£750,000 on2012 ticketsBY JAMES GOLDMAN

OLYMPICS

▲IRELAND captain Brian O’Driscoll hasbeen ruled out for six months with ashoulder injury and will miss nextyear’s Six Nations.

The 32-year-old has not played sincethe World Cup quarter-final defeatagainst Wales last month and is set toundergo surgery for a trapped nervein his shoulder next week.

The centre, who recently revealedhis intention to bow out of the gameafter the 2013 Lions Tour to Australia,is likely to be out of action for up to sixmonths and faces a race to be fit intime to take any part in Leinster’sHeineken Cup defence.

“The shoulder has become uncom-fortable over the last eight monthsand has just got progressively worse,”said Ireland’s record try-scorer. “I cer-tainly see myself coming back fromthis and playing another season.

“I have been out for six monthsbefore so I know how to cope withthese things – it’s about keeping fitand involved. The danger of beingaway for six months is that you couldbe totally forgotten about.”

O’Driscoll outof Ireland’sSix NationscampaignBY JAMES GOLDMAN

RUGBY UNION

▲

QPR owner Tony Fernandes says nei-ther Anton Ferdinand nor the clubare to blame for prompting the ongo-ing police and Football Associationinvestigations into allegationsChelsea and England captain JohnTerry used racially abusive languagetowards the Rangers player.

Ferdinand has received deaththreats since the controversy eruptedlast month, following QPR’s 1-0defeat of Chelsea at LoftusRoad, and was the subjectof derogatory chantsfrom some Chelsea fol-lowers in theirChampions Leaguematch at Genk lastweek. He has co-operat-ed with the FA’s probeinto the Terry incidentand last week gave thegoverning body a full state-ment.

But Fernandes, in an interviewwith City A.M. published today andconducted before the death threatsagainst Ferdinand emerged, said theFA made the first move by askingQPR to co-operate, contrary to wide-spread reports that the club hadlodged a complaint against Terry.

“I don’t think Anton has com-plained. I don’t think QPR have com-plained,” Fernandes (inset) said. “Wehave just said ‘If you want to investi-gate we will give you full support’,which we have. And we have given

our player full support.”The complaint about Terry, who

vehemently denies racially abusingFerdinand, is understood to havebeen made to the FA by a member ofthe public. A separate complaint tothe Metropolitan Police over thesame incident was last month alsomade by a member of the public.

Malaysian Fernandes, who says hewas spat at and kicked on visits toBritish football grounds in the 1980s,defended Ferdinand over his han-dling of the controversy.

“I think he has behaved in anincredibly polished and gentle-

manlike way,” he said. “Hecalled up to say thank youfor the support. I didn’t getinto the details of how hefelt; I just said ‘We arethere 100 per cent for you,focus on the football, stand

above it, don’t let peopletaunt you into silly state-

ments’.”Fernandes does not believe a guilty

verdict would necessarily damn Terryand says the game has made hugestrides since his own days as a school-boy and student in England.

“I don’t necessarily think if JohnTerry said it, he’s a racist,” he added.“We all say things in the heat of thematter. All I can say, as someone whohas been watching football for thebest part of 30 years, is that Englishfootball should be proud of howracism has, in my opinion, become asmaller issue than it was.”

TONY FERNANDES INTERVIEW: P33

Death threatAnton not toblame, saysFernandes

IT’S FAR from ideal to have to com-ment on matters that have takenplace away from the golf course,but it would be remiss of me not

to voice my disappointment at thecomments made by Steve Williamstowards his former employer TigerWoods.

I don’t wish to inflame an alreadydelicate situation, but while I’m sad-dened by what Williams said at a cad-die awards dinner in Shanghai last

week, I’m equally upset at the lack ofaction taken by Adam Scott, who hasopted to retain his services.

FAIR PLAYOn a far more positive note I wasdelighted to see Martin Kaymerreturn to winning ways at the WGCChampions tournament. In a year oftremendous individual performanc-es the German’s final round wasright up there with anything I’veseen this season.

I felt more than a measure of sym-pathy for Freddie Jacobson, who real-ly did very little wrong on the finalday, and you can only really holdyour hands up and say ‘fair play’when someone reels off nine birdiesin the last 12 holes of such a high-pro-file event.

SPOTLIGHTIt would be harsh to describe

Kaymer’s year as sub-standard but it’sfair to say he’s struggled to cope withthe extra trappings and media focusthat comes as part of being rankedNo1 in the world.

He admitted as much last weekand I wasn’t entirely surprised. RoryMcIlroy seems to have taken the extraattention in his stride, but the spot-light isn’t for everyone and it’s easyto forget that at just 26, Kaymer isstill relatively young in golfing terms.

It was a remarkable achievementto have headed the rankings, howev-er briefly, at that age and I’m surehe’ll have learned a lot over the past12 months and certainly done a lot ofgrowing up.

NATURAL GAMETo me it seemed like he reverted backto his natural game in Shanghaiwhich is encouraging – it’s the wayhe should be playing. After the Ryder

Cup he was looking to draw the ballin order to add an extra dimension tohis game and I think that threw himout of kilter.

Winning in Shanghai couldn’t becompared to lifting a Major but it was the next best thing and I’msure it will trigger a return to more consistent performances. Sponsored by the LondonGolfShow 2011 -11th-13th Nov at Earls Court - To book your tickets now and take advantage of our CITY A.M 2 for1 tickets offer go towww.LondonGolfShow.com/golf-tickets and use the code: CAM241 or call 0844-858-674

GOLF COMMENT

SAM TORRANCE

Let down by Williams, pleased for Kaymer

BY FRANK DALLERES

EXCLUSIVE

▲

Ferdinand has receiveddeath threats since thecontroversy erupted lastmonth

Picture: ACTION IMAGES

35

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WORLD and European championsSpain have named seven members ofthe Barcelona side that lifted theChampions League trophy atWembley back in May in their squadto face England on Saturday.

Vincente del Bosque’s squad alsoincludes former Arsenal captain CescFabregas, who returned to Camp Nouin the summer, while injured clubcolleague Pedro has been replaced bySevilla winger Jesus Navas.

Del Bosque has selected fourPremier League based players in his23-man squad, including Chelsea duoFernando Torres and Juan Mata andManchester City’s David Silva, whoseteam-mate at Etihad Stadium, MicahRichards, insists he isready to fight for anEngland place, havingagain been overlookedby manager FabioCapello.

The 23-year-old right-back, man of the matchin his side’s 6-1 victoryover rivalsManchester Unitedlast month, hasmade only oneappearance sincethe Italian tookcharge of the nation-al team.

Despite being anintegral part of City’srise to the PremierLeague summit,Richards, who becameEngland’s youngest-everdefender when SteveMcClaren picked him asa 17-year-old in 2006, hasfailed to force his wayinto Capello’s plans,

with Liverpool’s Glen Johnson andTottenham youngster Kyle Walkerpreferred.

Richards reacted angrily onTwitter on Sunday when he learnedof his latest omission, but yesterdayhe was in more reflective mood,believing international recognitionwill come his way if he is able tomaintain his current form.

“I must be doing something right,”Richards admitted. “In seasons goneby I have not been playing my best.Now I’ve started off well and we aretop of the league.

“As I’ve said before, it’s up toCapello. If he wants to give me ashout I am always there. I haveimproved, twice, three times sincethe first time I played for England.

“I’ve still not been given a startunder this England manager, so I’venot been able to show what I can do.

“I know my form has to be right forCity before he can pick me, but if hegives me my chance I am sure I cantake it with both hands, just like I did

before.“To be fair when I firstgot called up I was play-

ing centre-half forCity. I then played

right-back forEngland, so I

can’t reallycomplain –it happens.

“ J o n e sa n dS m a l l i n ghave been

doing well forM a n c h e s t e r

United. If themanager wants

to give them achance it is up to

him, there is nopoint me moaning.”

BY JAMES GOLDMAN

FOOTBALL

▲

Richards still hopesto join Silva on theinternational stage

Results

email [email protected]

SPORT | IN BRIEFGourlay outlines stadium needFOOTBALL: Chelsea chief executive RonGourlay has warned the club could strug-gle to compete in Europe unless theymove to a new stadium. He said: “Wehave corporate hospitality that is secondto none and 30,000 season ticket hold-ers. But we have a stadium slightly largerthan 40,000 which drops to 38,000 on

Champions League nights.”

Sarries sign Wigan’s TomkinsRUGBY UNION: Wigan centre JoelTomkins, 24, has completed his switchfrom league to union by signing a four-year deal with Saracens in a movethat has cost the Premiership championsa reported £250,000.

BASE CAMP | England 2012 HQ revealed

This is the Polish train-ing base England willuse to launch theirEuro 2012 campaign.Fabio Capello’s side willplot their tactics at theHutnik MunicipalityStadium in Krakownext summer. And fromthe look of this scuffedgoalmouth, Joe Hartmay have to bring apair of tracksuit bot-toms with him.

Picture: GETTY

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