Tuesday
7 June 2016
BUSINESS, POLITICS & CULTURE www.bloombergbriefs.com
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'We deserve a statue of Millicent Fawcett so we can show what an achievement it was for women to win the vote' @CCriado
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TALKING POINTS
Kerviel Wins Payout in Suit Over SocGen Firing: Jerome Kerviel, who was convicted of causing a record $5.6 billion trading loss at Societe Generale, won more than half a million dollars in compensation as a Paris judge berated the lender for its role in the affair. The 455,500 euro ($517,000) award today includes 100,000 euros for unfair dismissal and his 300,000-euro bonus for 2007. Judge Hugues Cambournac questioned some of the bank’s defences since the scandal first emerged nearly a decade ago. "Societe Generale can’t pretend it was not aware of Jerome Kerviel’s fake operations" before January 2008, Cambournac said. The dismissal "didn’t sanction Kerviel’s acts, but its consequences." Read full story .here
Campaigners Call for Suffragette Statue: A campaign for a statue of a suffragette to be placed in Parliament Square has been ramped up today on 150th anniversary of the first petition for women's votes. Campaigners have called for a statue of Millicent Fawcett, who organised signatures for the first petition for women's votes in 1866, to be placed alongside those of Nelson Mandala and Mahatma Gandhi. Currently there are 11 statues of men in the square and no statues of women. The women's rights group, the Fawcett Society, hosted an event today to coincide with the anniversary. The for the statue petitonhas already been signed by a number of well-known women including Harry Potter author JK Rowling.
PM Accuses Cabinet Members of 'Untruths' Over Brexit BY THOMAS PENNY
Prime Minister David Cameron accused two of his fellow Conservatives, Justice Secretary Michael Gove and former London Mayor Boris Johnson, of lying to the public over the risks of Britain staying in the European Union.
Less than two weeks after saying he was taking a “self-denying ordinance” on talking about his Tory colleagues’ views on Europe, Cameron called a short-notice news conference to dismiss six assertions by the “Leave” campaign ahead of the referendum, quoting words by Gove and Johnson as he did so.
“The Leave campaign are resorting to total untruths to con people into taking a leap in the dark,” Cameron told reporters on a central-London rooftop. “It’s not for me to say why they’ve made these factual errors and mistakes, but it is for me to call it out.”
Cameron listed statements on bailouts for the euro area, the rebate on British contributions to the EU and the formation of a European army as examples of misleading claims by Brexit campaigners, contrasting them with the warnings over the risks of leaving the EU from Federal Reserve Chair Janet Yellen and World Trade Organization Director General Roberto Azevedo.
With surveys by Britain’s discredited polling industry fluctuating between leads for both sides in the referendum, Cameron sought to reinforce the economic case for staying in the bloc, which has also been backed by the International Monetary Fund and the World Bank. Those arguing that Britain would be better off out are focusing on the loss of control over immigration and the erosion of sovereignty as a result of membership of the bloc.
House-Price Growth May Ease Later This Year: Halifax U.K. house-price growth may be set to slow after a surge in values stretched affordability, according to Halifax.
Values climbed 0.6 percent in May, after declining 0.8 percent in April, the mortgage lender said in a statement today. Prices were up 8.7 percent from a year earlier, to an average £213,472. On a less-volatile quarterly basis, prices gained 1.4 percent from the previous three months.
“Increasing affordability issues, caused by a sustained period of higher-than-earnings house price growth, should curb housing demand and result in some slowdown in house price growth as the year progresses,” said Martin Ellis, an economist at Halifax. Still, “the strength of demand, combined with very low supply, is causing house prices to rise at a brisk pace.”
Record-low interest rates and strong demand has helped to boost prices, leaving financial stability officials at the Bank of England as the last line of defense against an overheating market. The Halifax data suggests price growth remains robust even amid heightened uncertainty stemming from the U.K.’s vote on its European Union membership.
POLITICS
Source: Simon Dawson/Bloomberg
'Remain' campaigners on streets
House Prices Up
Source: Halifax/Bloomberg
7 June 2016 Bloomberg Brief London 2
POLITICSAROUND EUROPE
EU Plans Refugee-Control Deals: The European Union laid out plans for migration-control agreements with countries ranging from Lebanon to Nigeria in a bid to prevent waves of arrivals that would risk destabilising governments and stoking populism in Europe. Calling migratory pressure the “new normal,” the European Commission proposed to deploy 8 billion euros ($9.1 billion) over the next five years to tackle flows of refugees from the Middle East and Africa to Europe. It’s seeking “partnerships” that would return more arrivals to their countries of origin or transit, address the root causes of forced displacement and limit migrant deaths in the Mediterranean Sea when smugglers’ boats capsize.
A car Istanbul Car Bomb Kills 11:bomb targeting a police vehicle in Istanbul killed 11 people and wounded 36, creating new security anxieties in a country on edge over resurgent Kurdish militant violence and Islamic State attacks. There was no immediate claim of responsibility for the blast, which occurred in the Beyazit area, not far from Istanbul University and sites in the historic old city including the Grand Bazaar. Seven police officers were among the dead, according to Istanbul
Both the Governor Vasip Sahin. separatist Kurdistan Workers’ Party, or PKK, and Islamic State have carried out deadly attacks in Istanbul and Turkey’s capital, Ankara, since October.
Merkel Rejects Turkish Criticism Over Armenia: Chancellor Angela Merkel denounced Turkey’s vilification of German lawmakers who recognised the Ottoman killings of Armenians as genocide, saying the verbal attacks are incomprehensible. Responding in part to reported comments by Turkish President Recep Tayyip Erdogan that lawmakers of Turkish descent who backed the measure should have their blood tested, Merkel said Tuesday that all lower-house members are “freely elected, without exception.” Volker Kauder, the parliamentary chief of Merkel’s Christian Democratic-led bloc, accused Erdogan of inflammatory rhetoric.“The accusations and the statements coming out of Turkey are not comprehensible,” Merkel told reporters in Berlin.
EU Court's Asylum Ruling Could Affect Brexit FightBY STEPHANIE BODONI AND IAN WISHART
Judges at the European Union’s top court ruled that asylum seekers can fight decisions to send them to another EU nation to process their application, in a case that could spill over to the U.K.’s increasingly fierce debate on EU membership and migration.
Asylum seekers have “the right to an effective remedy in respect of any transfer decision,” the EU Court of Justice in Luxembourg said today.
The U.K.’s referendum on EU membership is little more than two weeks away and how the bloc deals with asylum seekers has become one of the hottest topics of the campaign. The biggest influx of refugees to Europe since World War II has put the EU’s migration system under severe pressure as governments have bickered about who should take responsibility for new arrivals.
The EU’s top court in 2013 already ruled that under an earlier version of the law in question, the possibilities to challenge transfer decisions were very limited. The law has since been reviewed to strengthen the legal protection for asylum applicants in the EU, but questions remain as to its scope and the situations in which transfer decisions can be challenged.
Today’s ruling broadened the rights for asylum seekers, allowing them to challenge a decision to transfer their application to another country “even where there are no systemic deficiencies in the asylum process or in the reception conditions for asylum applicants in that” nation.
Although the EU is considering changing the system to deal with the fallout of the exodus from war-torn Syria and other parts of the Middle East and Africa, the ruling is based on existing EU rules that stipulate asylum applications must be processed in the country where the migrant first arrived.
Those campaigning for the U.K. to leave the EU at a referendum say that an exit would allow the government to have far greater control over migration and its borders. They seized on data published by the U.K’s Office of National Statistics last month that showed Prime Minister David Cameron is failing to deliver on a pre-election pledge to slash the number of foreigners coming to live in Britain.
The decision will give further fuel to “Leave” supporters, including Justice Secretary Michael Gove, who told an audience in Stratford-upon-Avon yesterday that the European Court of Justice is a “rogue” body that threatens national security, the Press Association reported.
Running a Brexit Poll? Call Your Lawyer First: WatchdogBY ROBERT HUTTON
Any banks or hedge funds thinking of commissioning voting-day polls into Britain’s referendum on membership of the European Union should speak to a lawyer first, the woman in charge of running the referendum warned.
Polling companies have said they’ve been approached by financial institutions hoping to gain an edge by commissioning on-the-day surveys. But they risk falling foul of British electoral law, which forbids the publication of any information about how people have actually voted before polling stations close at 10 p.m. on 23 June. Section 66A of the 1983 Representation of the People Act specifies a six-month prison term or an unlimited fine.
“There’s nothing to stop you commissioning an exit poll, but it is a criminal offense if you publish that before the close of poll,” Jenny Watson, the chief counting officer and the chair of the Electoral Commission, said in an interview yesterday. “You will want to seek your own legal advice on how you can use it. The intention of the legislation is clear: So that people who are still voting could not be influenced by information being shared about how people have already voted earlier in the day.”
BUSINESS
Source: Kostas Tsironis/Bloomberg
Refugees on Greece-Macedonian border
7 June 2016 Bloomberg Brief London 3
BUSINESSAROUND THE CITY
Sabadell’s TSB Unit to Close TSB Banking Group, Branches:
acquired by Spanish bank Banco de Sabadell last year, is set to close 25 U.K. branches by the end of April 2017, the bank said in an emailed statement. The bank will refit 100 others to upgrade the branch network. There are no compulsory redundancies and the affected staff will be relocated, the company said.
Hands Says More Citigroup Bankers Lied: Guy Hands accused two more senior Citigroup executives of fraud as he battles to recover billions of pounds in losses accrued by Terra Firma Capital Partners’ disastrous takeover of EMI Group Ltd. nearly a decade ago. Lawyers for Hands made the allegations today against Michael Klein, then Citigroup’s head of global banking, and Chad Leat, then Citigroup’s co-head of global credit
—markets. Hands is trying to prove after — losing a lawsuit in New York that Terra
Firma only spent the £4 billion on the struggling record label because the bankers misled him. The private-equity firm is seeking damages of about £2.5 billion.
MARKETS
Tullett Prebon’s ICAP Bid Unit May Face Antitrust ProbeBY PATRICK GOWER, WILL HADFIELD AND AOIFE WHITE
The U.K.’s antitrust regulator may start an in-depth probe of Tullett Prebon's plan to buy an ICAP brokerage unit unless the companies offer concessions to ease antitrust concerns over its oil-broking business. Tullett Prebon shares fell to a February low.
The Competition and Markets Authority said the £1.1 billion deal has "a realistic prospect of a substantial lessening of competition for the voice/hybrid broking of oil products" where the combined firm would face limited competition from electronic platforms, exchanges and brokers.
"Given the potential for this merger to adversely affect customers for voice/hybrid broking of oil products, we think the acquisition warrants an in-depth investigation unless Tullett and ICAP can offer suitable undertakings," Andrea Coscelli, the CMA’s executive director of markets and mergers, said in a statement.
The decision delays ICAP’s shift away from voice broking, a labour-intensive business that has suffered from shrinking margins and increased regulation. Tullett plans to make the combined business more profitable by cutting infrastructure, technology and operations costs.
The CMA said it had no concerns about 19 of the 20 overlapping activities between the two companies. It received complaints from unnamed companies about oil broking, it said. The company said in a statement that it would work to address the CMA concerns.
Shell Deepens Spending Cuts, Promises More SavingsBY RAKTEEM KATAKEY AND RYAN CHILCOTE
Royal Dutch Shell cut spending plans further and promised increased savings following its record purchase of BG Group, as Europe’s largest oil company continues to adjust to the slump in energy prices.
Shell will spend $29 billion this year, it said today. That compares with a May forecast for capital expenditure “trending toward” $30 billion, which was itself down from an earlier projection of $33 billion. Synergies from the BG acquisition will provide $4.5 billion in savings in 2018, up from an earlier estimate of $3.5 billion.
Chief Executive Officer Ben Van Beurden, who staked his reputation to buy BG as oil prices sank, is promising investors higher returns and cash flows at lower oil prices as he resets the company following the $54 billion acquisition. He has renegotiated contracts, eliminated thousands of jobs, maintained Shell’s asset-sale program and sought to improve efficiency to weather the oil-market slump.
“If we see oil price levels at a level where we have to go further, we will go further,” Van Beurden said in an interview with Bloomberg TV. “We still have more in our tank in terms of taking cost out. We have more in our tank in terms of deferring or canceling investment programs.”
Shell’s capital investment will be in the range of $25 billion to $30 billion a year to 2020. The company can reduce that further if required by low oil prices, even though it needs to spend about $25 billion a year to ensure future growth, Van Beurden said.
“Following the addition of BG we remain optimistic for deep value delivery given Shell's shift in focus back to long term themes,” said Jason Kenney, an Edinburgh-based analyst at Banco Santander. “This is aimed at supporting sustainable free cash flow and attractive returns.”
The cost-cutting measures announced by Shell come as executives say that the oil industry could reduce spending in 2017 for a record third-consecutive year. Companies have already cut investment for two straight years in 2015 and 2016, the first time since 1986-87.
OUT OF OFFICE
Source: Bloomberg. Change since previous close.
Source: Chris Ratcliffe/Bloomberg
Ben Van Beurden, chief executive officer of Royal Dutch Shell
7 June 2016 Bloomberg Brief London 4
OUT OF OFFICESports Billionaire Mike Ashley Really Isn't Being Funny BY ANDREA FELSTED, GADFLY
Leave aside the discussions in Parliament today that Sports Direct staff could get a black mark on their records for taking too long in the toilet or get docked 15 minutes of pay for being one minute late.
Because for investors, Billionaire Mike Ashley's testimony in front of MPs produced two important disclosures on the inner workings of the company he founded.
Firstly, Sports Direct has outgrown him — by his own account, it went from an inflatable dinghy to an oil tanker overnight. He acknowledged that the company had probably expanded beyond his ability to manage it (he's also the deputy chairman).
His testimony in parliament was riddled with protestations that he couldn't oversee every little problem at the company, of which there were many, and which needed further investigation.
This naturally raises questions about the performance of chief executive Dave Forsey — Ashley may be the controlling shareholder, but it's Forsey (whose wife is currently appearing in a TV reality show) who runs it day to day. He's been with Ashley for years, after working on the floor of his first store in the 1980s.
Forsey once said his primary role was to protect Ashley. But there didn't seem to be much reciprocity today. Ashley never gave him a mention, either to say he'd done well or that he was on the case with the issues about the way the company treats its staff.
Forsey is giving up a £3.7 million ($5.4 million) bonus, the Financial Times reported, but Ashley's performance today raises wider questions about his future.
The way Sports Direct's operations shifted from supplying 36 pairs of socks to one store to providing one pair of socks to one customer, reveals the broader failings of management. Ashley claimed it could only cope by making liberal use of contract workers, who are now substantially connected to the complaints about how the company treats its people.
But Sports Direct was hardly the only retailer to find itself having to deal with the rise of the internet. Why was it so hard for it to do so without relying on temporary staff? MPs asked Ashley
this many times, but he never gave them an answer.A business model that relies on contract workers instead of
embracing automation, alongside permanent staff, is going to be less efficient. Ashley said today that more-efficient operations will be in place in time for the peak Christmas trading period, but it's not clear why it hasn't been done already.
Secondly, Ashley, defying the advice of his PR to stay quiet, said he "100 percent" had wanted to buy BHS, the U.K. department-store chain that collapsed last week.
The two points are not unrelated.To continue to grow, Sports Direct must make acquisitions,
and it's missed out on a few recent targets, including BHS and House of Fraser.
Today's testimony shows not just that these missed targets have perhaps made a lucky escape, but also that Sports Direct doesn't have the management bandwith to cope with an acquisition, and that its future depends on bolstering its operational capabilities.
It is still largely run by the close-knit team who built the group alongside Ashley. It only has an acting finance director. As for the board, a chairman with more experience of running a retailer than former U.K. drug Czar Keith Hellawell would be welcome.
But, there is another possibility: as Gadfly has suggested, Ashley should take Sports Direct private. The slump in the share price has made this even more affordable.
A private equity investor might also be interested in backing him. With no other investors to contend with, that would be a counterweight to the might of Ashley, and a fund with a focus on operating the businesses it invests in, rather than just the financials, might help Sports Direct to be managed more effectively too.
Ashley made multiple attempts today to assure MPs that his comments were all made in earnest, telling them, "I'm not being funny." He should think about telling shareholders, and himself, the same.
This column does not necessarily reflect the opinion of Bloomberg LP and its
owners.
Bloomberg Brief: LondonSimon Kennedy
Bloomberg News London
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