Cityam 2012-01-07

BUSINESS WITH PERSONALITY
Maria knew all about the glass ceiling. But she could see a way through it.
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Inspiring stories.
City finance
chiefs fear
triple dip
THE FRAGILE UK economy still has
a two-fifths chance of sinking back
into what would be a triple dip
recession, chief financial officers
warned today.
Rocked by financial and
economic uncertainty, which 93
per cent of finance chiefs judged
above normal, firms surveyed by
Deloitte in the fourth quarter of
2012 said there was a 40 per cent
chance the UK would suffer a
return to economic contraction in
the coming two years.
Investment, hiring and
discretionary spending all looked
to be on their way down though
at a slower rate than in the third
quarter with a majority of CFOs
predicting further decline in each
case. And government didnt
appear to be helping firms out
firms rated the general level of
regulation as the absolute worst
area of government policy and the
only area that was on balance
inappropriate for the long-term
success of business.
But the surveys results were not
entirely negative. Those expecting a
return to recession in the next two
years was lower than in the last two
quarters, and overall economic
confidence moved marginally into
positive territory.
TOUGH new banking rules will be
eased in an effort to stop red tape hit-
ting lending and damaging the eco-
nomic recovery, the worlds top
regulators announced last night.
Banks will get more time to build up
their liquidity buffers and can use a
wider range of instruments, making it
easier for them to hit the targets when
state support is withdrawn.
The decision by the top oversight
body of the Basel Committee on
Banking Supervision represents a suc-
cess for banking lobbyists, who feared
the rules would squeeze banks hard
when they are already weak in the
wake of the crisis.
Under the new rules banks will have
to build up a buffer of liquid assets to
help them survive a downturn in the
markets. This buffer should be big
enough for the bank to meet all of its
outgoings for a month under dis-
tressed conditions, without turning to
central banks for help.
Regulators last night said banks will
have until 2015 to create a buffer of at
least 60 per cent of the required size,
with that buffer increasing by an addi-
tional 10 percentage points per year
until it reaches its full size in 2019.
That is a change from earlier plans
which saw the full buffer coming into
force in 2015, except for struggling
banks which would have been given
longer. Most banks already meet the
target but that is largely because of
huge central bank support, which will
be withdrawn in the coming years.
Now banks are overflowing with liq-
www.cityam.com FREE
uid assets because the major central
banks have expanded their balance
sheets so much, Sir Mervyn King
explained. There is a long period to
adjust plans for liquid assets, a transi-
tion period for banks to find other liq-
uid assets as we move back to a more
normal world. There is a lot of work to
do, but over a long period.
He hopes that will avoid claims reg-
ulators are hurting lending though
Sir Mervyn noted the market may
force banks to raise liquidity buffers
anyway, having the same impact.
Banks will also be allowed to hold a
wider range of assets in the buffer.
At least 60 per cent has to be held in
instruments like central bank
reserves and government debt. But
the remainder can now be made up
of lower quality assets, including up
to 15 per cent from investment grade
corporate bonds, equities and residen-
tial mortgage-backed securities.
Finance industry groups praised the
new proposals. Allowing banks to
include a wider range of assets and
giving them more time to phase the
LCR (liquidity coverage ratio) in is a
pragmatic response to the need to bal-
ance creating a safer financial system
with enabling banks to support a
robust economic recovery, said Mark
Bearman of the Association of
Financial Markets in Europe.
BY BEN SOUTHWOOD
FTSE 100 6,089.84 +42.50 DOW 13,435.21 +43.85 NASDAQ3,101.66 +1.09 /$ 1.61 unc / 1.23 unc /$ 1.31 +0.01
BY TIM WALLACE
BANKRULES EASED
TOSPUR LENDING
FORGOTTEN FREEDOM
ISSUE 1,791 MONDAY 7 JANUARY 2013
CHILD BENEFIT:
THE FACTS
See Page 4 and Debate Page 21
See the Forum, Page 20
MORE: Page 2, Page 15

Certified Distribution
01/10/12 til 28/10/12 is 129,297
Level of uncertainty
2010
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2011
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2014
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100 %whosaylevel ofexternal uncertaintyis
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SIR MARTIN JACOMB ON HOW THE COALITION IS IGNORING LIBERTY
TAX EXILE
GERARD
DEPARDIEU
PICKS UP HIS
RUSSIAN
PASSPORT
See Page 9
allister.heath@cityam.com
Follow me on Twitter: @allisterheath
A PLEDGE to drive down the cost of
childcare for working parents is at
the heart of todays relaunch of the
coalition.
Policies could include a flat-rate
childcare voucher paid through the
tax system, worth up to 2,000 per
child, and allowing childminders to
look after more children. Details
were vague last night but the new
childcare voucher wont be means-
tested and is expected to be funded
from existing budgets.
Our approach is consistent: to
help hard-working families get by
and get on, so that everyone can
reach their full potential, David
Cameron and Nick Clegg state.
The Prime Minister and his
deputy believe voters will respond
to measures that improve the
quality of life for hard-working
strivers.
As a result they will use the
coalitions mid-term review to
promise a housebuilding
programme to make the dream of
home ownership a reality for more
people, as well as introducing an
improved state pension that
rewards saving. They also want to
reduce the cost of care the elderly.
More investment in transport is
promised, with details of the High
Speed 2 railway route from
Birmingham to Leeds and
Manchester to be published.
Coalition plans
2,000 voucher
for childcare
BY JAMES WATERSON
Zurich chief calls for tax
breaks for long-term care
THE GOVERNMENT will not be able
to meet the crushing cost of long-
term care for the elderly and must
introduce tax breaks to avert the
looming crisis, according to one of
the UKs leading insurers.
Gary Shaughnessy, chief executive
of Zurichs UK life insurance busi-
ness, told City A.M. that demand for
long-term care is set to soar as life
expectancy grows, and individuals
should be offered incentives to plan
ahead.
In the future the state will not be
able to afford the cost of long-term
care for the growing number of eld-
erly people, he said. The govern-
ment must consider offering tax
breaks at retirement for those will-
ing to invest part of their pension
perhaps around 10,000 in some
form of insurance for long-term care
cover.
His comments come as the govern-
ment prepares to respond to the
Dilnot report into long-term care
funding. It is expected to introduce
a 75,000 cap on the total amount
an individual must pay towards
their care home costs before the
state picks up the rest of the bill
more than double the 35,000 rec-
ommended in the report.
Shaughnessy fears such a cap will
force people to set aside a substan-
Terra Firma plans to sell Odeon chain
Terra Firma, the private equity fund
founded by Guy Hands, is planning to sell
assets this year that are likely to include
Odeon & UCI group, the European cinema
chain, which could raise more than 1bn.
The plan is a bid to return cash to backers.
Bankruptcy regime for nations urged
Argentinas messy legal battle with hedge
funds over its 2001 sovereign default has
heightened calls to resurrect plans for a
bankruptcy regime for countries, under
the auspices of the International Monetary
Fund. Many senior lawyers, fund
managers and former policy makers say
recent court rulings against Argentina
highlight the weaknesses of the current
approach to government debt workouts.
Companies pay heed to salary protest
A survey by Towers Watson of more than
100 companies in the FTSE 350 found the
median base salary, or fixed pay, increase,
which tends to make up about a third of an
executives pay, has been about 3 per cent
this year. This was similar to last year but
much lower than previous years before the
2007 financial crisis.
Gloves give Oliver Sweeney a hand
Oliver Sweeney enjoyed a double-digit jump
in sales over Christmas as shoppers stocked
up on leather gloves and hip flasks. The
cobbler said that total like-for-like sales
were up by 10.8 per cent in the five weeks to
30 December.
Dont make a mess of my Zipcar
Brett Akker, the founder of Streetcar, the car
club that forms the basis of Zipcars British
business, has urged Avis to avoid meddling
too deeply with the vehicle-sharing venture.
Investors spooked by UK Energy Bill
Investment may not flow into the UK energy
sector for years because uncertainty remains
over new policies, a renewable energy
investor has warned. Ian Simm, chief
executive of Impax Asset Management, said
it would like to invest in wind farms - but the
policy framework was currently too complex.
Top schools flooded with applications
Up to 18 children are competing for each
place at the most popular state schools amid
a scramble for a Rolls Royce education.
Hostess looks to sell off bread brands
Flowers Foods and Grupo Bimbo are in
discussions to acquire pieces of Hostess
Brands bread business, as the maker of
Wonder Bread and Twinkies sells off
assets and liquidates, said people familiar
with the talks.
Venezuela presses hunt for Missoni
The search for a missing plane carrying
Italian fashion executive Vittorio Missoni
and five other people has found no signs
of the aircraft.
Gary Shaughnessy took charge of Zurichs UK Life division in June 2012
2
NEWS
BY JAMES WATERSON
To contact the newsdesk email news@cityam.com
R
EGULATORS are a bit like
retired generals, always
refighting the last war. It will
take another economic
catastrophe before we find out for
sure whether the global banking
reforms, agreed at Basel yesterday,
are truly fit for purpose. Im not
optimistic no centrally planned,
crude attempt at making a complex
system safer ever works but many of
the new rules will be beneficial, and
the regulators decision not to
squeeze the availability of credit even
further is to be welcome.
Banks pre-crisis didnt hold enough
capital buffers to protect themselves
against losses; many of the assets they
did hold were of poor quality. Banks
were merely following the global
rules, as codified by previous Basel
accords; but these were grossly inade-
quate, full of loopholes and incen-
EDITORS
LETTER
ALLISTER HEATH
What we really need is to reintroduce capitalism into banks
MONDAY 7 JANUARY 2013
tivised bad behaviour.
Whenever regulators get involved,
statutory minimum standards
become maximum standards. If you
must hold a certain amount of capi-
tal, at great expense, and this level is
officially deemed to be safe, then why
hold even more? The result is
inevitably a race to the bottom. But it
was actually even worse than that.
Engineering the Financial Crisis by
Jeffrey Friedman and Wladimir
Kraus, one of the few genuinely good
books on the Great Recession,
describes how the original Basel
Accords actually encouraged banks to
stock up on dodgy, mortgage-backed
securities. Perverse incentives at the
heart of the system of bank capital-
adequacy regulations were paradoxi-
cally one of the key drivers of the
incorrect decisions taken.
Add that to moral hazard and the
knowledge that central bankers stood
ready to step in at the first hint of
trouble and one got a toxic mix.
Market discipline with sharehold-
ers, bondholders, depositors and
counter-parties all incentivised to
keep risk under control was
replaced by regulatory indiscipline.
The new Basel III rules are a vast
improvement. Some perverse incen-
tives have been eradicated (though
plenty of outcomes that many wont
like remain it will be prohibitively
and liquid assets at the height of a
recession, when ordinarily they
would have been able to do the oppo-
site, has helped to intensify the crisis.
The cost of credit needed to go up
but more gradually.
Ultimately, however, what is really
required is to reintroduce the fear of
failure into the banking system, and
to banish bail-outs and subsidies.
Basel seeks to reduce the likelihood of
failure; but what we really need are
new tools to manage failures when
they do happen. The game-changing
reforms will be about reintroducing
genuine capitalism into banking. The
G7 and others are working on new
bankruptcy and resolution mecha-
nisms for large banks they must
become a reality in 2013.
expensive for banks to lend to small
firms, as these are much more likely
to default than large ones). They are
also more sensible in some respects
than the original draft. Allowing
some corporate bonds and even some
mortgage bonds albeit with big hair-
cuts to qualify as liquid assets makes
sense. There is no such thing as a
truly safe and liquid asset govern-
ment IOUs fluctuate in value as their
yields change, and states often go
bust or inflate themselves out of trou-
ble. Forcing banks to hold only gov-
ernment bonds could have caused the
next crisis (even with the relaxed
rules, this may still happen).
The new rule on minimum hold-
ings of easily sellable assets will be
phased in until 2019. This is a good
thing. The reforms of the past few
years have been counter-cyclical: by
forcing banks to hold more capital
tial sum to cover the eventuality that
they need long-term care at the end of
their life.
He believes the insurance industry
can help spread the risk with product
bought at retirement that will cover
care costs up to the cap. This would
leave the elderly safe in the knowledge
that they are covered for all eventuali-
ties and free to spend the remainder
of their savings how they see fit.
Research by Zurich suggests that if
the government offered incentives for
people to provide for some of the costs
of care, it would be in a much stronger
position when it comes to asking peo-
ple who need long term care to make
a contribution.
Health secretary Jeremy Hunt said:
We still have a long way to go if this
country is going to be one of the best
places in Europe to grow old. There is
no doubt capping costs the principle
recommended by Dilnot is the best
model the key question is how to
fund it sensibly given the current
deficit. We are looking at how to
achieve this, along with taking action
to ensure people do not have to sell
their homes to pay for care.
n Banks are being forced to raise liquidity
buffers to make sure they can survive a
month of tough conditions without getting
central bank help
n Bank argue that diverting resources into
that buffer could harm lending at a time
when the economy is already weak
n After yesterdays meeting, banks will
now been given more time to meet the
requirements
n They will need to build up 60 per cent
of the required buffer by 2015 not the full
amount as had earlier been planned
n It must then be built up to 100 per cent
by 2019
n Right now, the buffers are artificially
enlarged by central bank support which
is expected to be reduced over the coming
years
n That means banks need to replace that
with other instruments
n Regulators have allowed them to use a
much wider range of instruments to fill
that gap
n That includes corporate bonds, equities
and retail mortgage-backed securities as
long as they are of high quality
n But the buffer is only needed when
times get tough and when that happens,
those instruments values will fall so
banks must apply a haircut of between 25
and 50 per cent when using the
instruments
n On top of that, only 40 per cent of the
buffer can be made of the wider pool of
assets
n The riskiest of the permissable
instruments can only make up a maximum
of 15 per cent of the buffer, in an effort to
keep it mainly made up of top-notch
assets
BASEL III AT A GLANCE
The new jobs website for London professionals
CITYAMCAREERS.com
WHAT THE OTHER PAPERS SAY THIS MORNING
CITY job vacancies plunged to new
lows last year as incoming regula-
tions took their toll on financial serv-
ices firms, making 2012 a worse year
for job seekers than even the height
of the credit crunch, recruiters
Astbury Marsden revealed today.
Just 35,115 new jobs were adver-
tised last year, down 35 per cent on
the 54,025 in 2011.
That compares with roughly
150,000 in 2007, and approximately
90,000 in 2008.
Only 800 new City jobs were avail-
able in December 2012, compared
with 1,490 in the same month of
2011, Astbury Mardens figures show.
Tighter regulation including high-
er capital requirements forced up
costs at a time when revenues dipped
due to a number of factors including
a continued weak economy and less
trading activity, said recruitment
boss Mark Cameron.
Although broad cost cutting is fair-
ly typical in the City during a down-
turn, 2012 was particularly
significant as senior management in
Jobs crisis as
City hiring falls
to record low
BY TIM WALLACE
banks took very decisive action and
implemented major structural
changes including winding down
entire units.
Banks have led City job cuts in
recent months.
Swiss giant UBS is cutting 10,000
jobs by 2015, including roughly 3,000
in London, winding down large parts
of its fixed income business.
Deutsche Bank is chopping 2,000
positions, Bank of America Merrill
Lynch plans to cut 16,000 jobs,
Nomura is slimming its investment
banking headcount by around one-
third, and Barclays is believed to be
considering losing 2,000 staff.
Vodafone faced with $2.5bn tax
demand from Indian authorities
VODAFONES tax dispute with the
Indian government has escalated,
with the countrys authorities
repeating calls for the telecoms
giant to pay $2.5bn (1.6bn) India
claims it is owed.
The company said this weekend
that Indian tax authorities had
sent a reminder to Vodafone,
demanding it pay the sum, relating
BY JAMES TITCOMB to 2007s purchase of Hutchison
Whampoas majority stake in what
is now Vodafone India.
The demand is the latest event in
the long-running feud between the
two parties. Vodafone says it does
not have to pay the tax, since the
demand was quashed by Indias
Supreme Court in January last year.
Since then, the Indian
government has passed a
retroactive tax law in a bid to bring
the money in. Still, the application
of the law is uncertain, since it
applies only in exceptional
circumstances and is technically a
capital gains tax, which should
apply to the seller, not the buyer.
The reminder does not include a
deadline for payment, Vodafone
said. Vodafone has replied to this
reminder, stating that it continues
to believe that no tax is payable on
the above transaction.
City vacancies have collapsed
January2007 December 2012
4
6
8
0
2
10
12
14
16
18 Vacancies(000s)
THE worlds largest platinum
miner Anglo American is on the
verge of appointing the head of
gold miner AngloGold Ashanti
Mark Cutifani as its new chief
executive.
It is understood Cutifani, who
has led South African AngloGold
since 2007, is leading a pack of
candidates to the fill the role left
vacant after current chief
executive Cynthia Carroll
announced she was quitting the
firm in October after five years at
the helm.
He is definitely one of the
Anglo-American closes in on
Cutifani as next chief executive
BY MICHAEL BOW leading candidates, a source said.
A lot things still need to happen
but we are getting close.
Carroll is due to stay on during
the transition period as the new
chief executive takes over. An
announcement is expected in mid-
January on the appointment but
maybe made sooner.
She stepped down after
shareholder frustration over
Anglos lagging share price and
dependence on its South Africa
business. Anglo American has
recently completed a wholesale
review of its platinum business,
and is due to report the findings
by the end of this month.
3
NEWS
cityam.com
Australian Mark Cutifani is currently head of South African miner AngloGold Ashanti
TAXES paid in London and the
Southeast are paying for benefits
and public spending in the rest of
Britain to the tune of more than
10bn per year, according to new
figures out yesterday from
analysts at Oxford Economics.
In the tax year 2010-11, London
and the Southeast paid a total of
10.4bn more in taxes than they
received in state spending while
every other part of the country
took more cash from the
Londons taxes are bailing out
the rest of high-spend Britain
BY TIM WALLACE
government than they gave.
Londoners pay 18.5 per cent of
all taxes in Britain, but receive
only 14.4 per cent of spending.
And the imbalance is getting
worse Oxford Economics
believes Londons surplus doubled
this in 2011-12, while other
regions show no signs of paying
their own way.
On our estimates most UK
regions were in deficit even
during the peak years of economic
growth in the early half of the last
decade, the study found.
PROFILE: MARK
CUTIFANI
AngloGold Ashantis chief executive Mark
Cutifani may be Australian by birth but it is
South Africa that has left its indelible mark
on his professional career.
The charismatic 53 year-old father of seven
is a hands-on miner with vast knowledge of
the mining industry, but his experience
leading one of South Africa largest gold
producers should leave him particularly
well placed to tackle the difculties Anglo-
American has experienced with union
unrest at its platinum mines in the country.
Cutifani took the reins at AngloGold
Ashanti in 2007 on the back of a 30-year
career in the business. He began working in
underground coal mining in 1976, rising to
become a manager of underground coal
operations at CRA, which is now Rio Tinto.
He moved into the gold mining sector in
1988, graduating through a variety of com-
panies, including Kalgoorlie Consolidated
Gold Mines , WMC, and Normandy Mining,
before eventually joining Vale Inco, now
part of Brazil's Vale, as vice president of its
Canadian and UK operations in March 2003.
He was subsequently headhunted to run
AngloGold, which itself was spun out of
Anglo Americans gold mining operations,
in 2007 from Inco.
At AngloGold, Cutifani has made himself a
prominent gure on the South African min-
ing scene, and is currently head of the
countrys Chamber of Mines. Should he be
hired at Anglo-American, Cutifani would be
only the second non-South African and
only the second outsider to head the group
after Cynthia Carroll.
His South African credentials could hold
him in good stead if he does eventually
lead the rm. More than half of Anglos
forecast earnings come from its mines in
South Africa, a fact which will no doubt
taken into account when the Anglo-
American board makes its decision.
4
NEWS
cityam.com
THE GOVERNMENT yesterday
acknowledged todays child benefit
changes are not perfect, but insisted
removing the handouts for high earn-
ers is still a step in the right direction.
Any household with at least one per-
son earning over 50,000 will lose
some of its child benefit, with those
on more than 60,000 seeing the cash
stopped completely.
Critics fear many families will now
face a very high marginal tax rate,
and also attacked the lack of consis-
tency as a household could have two
earners both on 49,000 and still
receive benefits.
The change will affect 1.1m people
this year, who will lose an average of
1,300 per year, though the exact
impact varies by income and by the
number of children eligible for the
handouts.
The phased cut-off point means that
those with four children and earning
between 50,000 and 60,000 face an
effective marginal tax rate of over 70
per cent, according to the Institute for
Fiscal Studies, hit by both the 40 per
cent rate and the cut to benefits.
On top of that they will also pay
national insurance on their earnings.
The IFS warned this
will get worse as
child benefit rises
with inflation.
Indexation of
child benefit
rates at two per
cent per year
would increase
these marginal
rates by a further
five percentage
points for a three-
child family over one
decade, the IFS
noted.
T o
avoid
t hi s,
some
Child benefit
for better off
ending today
BY TIM WALLACE
families with an adult on more than
60,000 would have to be allowed to
retain some of their child benefit. But
there are currently no provisions to do
this.
Prime Minister David Cameron hit
back at the idea the changes are
unfair: This will raise 2bn a year.
Now if we dont raise that 2bn from
that group of people the better off 15
per cent in the country wed have to
find somewhere else to take it from. So
it is fair, he told the BBC.
And he added that a means test to
take into account full household
income might be fairer, but it would
be too costly and intrusive.
And writing for the Mail on Sunday,
chancellor George Osborne also
stressed the long-term gains.
I am determined that our children
should not be saddled with paying off
the bills our generation has racked
up, he wrote, noting that increasing
job seekers allowance and tax credits
by only one per cent per year will save
4.6bn over the next three years.
But his Labour counterpart Ed Balls
said the benefits changes hurt those
striving to do well for themselves.
Ministers claim they are targeting
scroungers, but the truth is two-thirds
of people being hit are in work, he
argued yesterday.
Meanwhile the Prudential warned
that taxpayers with a headline income
of below 50,000 could still be affected
by the tax if they have rental or invest-
ment incomes that drag them over
the limit. But it also said child benefit
withdrawal only applies to final tax-
able income so increased pensions
contributions could increase the
amount of child benefit received.
Some parents will be faced with high marginal rates of tax as a result of the changes
1.1m workers across 820,000 households will be afected by the change
That will go up in future as wages rise but the threshold for losing child benet stays the same at 50,000 to 60,000
The average household afected will lose 1,300 per year
The government will save 2bn per year by taking handouts from the richest
Critics say it is not fair that a couple both earning 49,000 will keep the benets, while one adult on 60,000 loses them all
But David Cameron says a fuller means test would be too complex and intrusive, and will keep the 50,000 cap
Families with four children will face efective marginal tax rates of over 70 per cent
STOPPING BENEFITS FOR THE TOP 15 PER CENT
Q
Who is affected by
this new income
threshold on child
benefit claims?
A
Any household
with at least one person earning
over 50,000 will see its child
benefits cut. They are phased out
over the next 10,000 with nobody
on over 60,000 receiving child
benefit. Around 1.1m people fall into
that category.
Q
When will I notice the impact?
A
Anyone no longer eligible can
either opt out now as at least
240,000 have done and stop
receiving the cash from today, or
take it anyway and fill in a tax
return next year when they know
their exact income, then pay back
what they owe.
Q
I thought my state pension was linked to
child benefit. Will I lose this if I opt out?
A
No, you will not lose those
national insurance contributions.
Any stay at home parents get
pension contributions by signing up
for child benefit. But if you sign up
then opt out, you still receive the
national insurance payments, so will
not lose out there.
Q
What if I dont know my spouses
income?
A
You can call HMRC to ask if
anyone in your household is
claiming, and if they are liable to be
charged. Those two questions will let
you know the status of your benefit,
without any intrusive questions on
income levels.
Q
A
and
What is happening
to my child benet?
THE FORUM: Page 21

George Osborne said he will
cut the burden of
debt for future
generations
Efective marginal tax rates will hit more than 70 per cent for some families
30
40
50
0
10
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60
70
80 %
1Child
2Children
3Children
4Children
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160
Annual taxableincome(000s)
US SENATE minority leader Mitch
McConnell yesterday ruled out rais-
ing tax revenues again on top of the
tax hike on the wealthy in the fiscal
cliff deal, and said the full focus
must now be on spending cuts.
The tax issue is finished, over,
completed, the Kentucky
Republican said on US televisions
ABC network.
Thats behind us. Now the ques-
tion is what are we going to do about
the biggest problem confronting our
country and our future, and thats
our spending addiction.
In an another appearance on NBCs
Meet the Press, McConnell said he
favoured tax reform, but it should
not increase revenue.
McConnell said the White House
should start working with Congress
immediately to determine spending
cuts to reduce the deficit, before the
March deadline to raise the federal
borrowing limit brings another fis-
cal crisis.
Republicans to
rule out fresh
tax hikes in US
BY CITY A.M. REPORTER
We could do things very quickly,
these are not new issues, he said on
ABC.
Congress and the White House
reached a deal last week in the nick of
time to avoid the fiscal cliff of severe
tax increases and spending cuts that
many economists said could have
tipped the country into recession.
The deal was greeted with relief in
the worlds financial markets, where
equity prices got off to a flying start
to the year.
But Republicans complained the
deal was focused almost entirely on
raising revenue through a tax
increase on families making more
than $450,000 (280,000) a year, and
did not make significant spending
cuts or reduce deficits.
Asked whether Republicans would
threaten a US credit default in its
press for spending cuts, McConnell
told ABC: Its not even necessary to
get to that point. Why arent we try-
ing to settle the problem?
Why arent we trying to do some-
thing about reducing spending?
THE LABOUR party will this week
demand action to save Britains
pubs from closure after
scheduling a House of Commons
debate on the issue.
Shadow pubs minister Toby
Perkins will use Wednesdays
opposition day debate to call for
action against large landlords,
known as pubcos, that are
accused of abusing their control
over thousands of venues.
Critics claim the pubcos take
advantage of tenants, forcing
them to pay excessive rents and
making them buy drinks and
supplies from the pubco at prices
that go well beyond the market
rate.
Shadow business secretary
Chuka Umunna accused Prime
Minister David Cameron of not
Labour forces Commons vote on
future of the UK pub industry
BY JAMES WATERSON doing enough to protect some of
the most important small
businesses in the country,
despite pledging his support for
pubs while in opposition.
We need a statutory code to
stop exploitation of pub tenants
by the large pub companies but
this out of touch government
refuses to implement one,
Umunna said yesterday. Pubs are
vital independent local businesses
serving our communities they
deserve our help and support.
Figures from the Campaign for
Real Ale suggest as many as 18
pubs are closing every week,
although the organisation places
some of the blame on the beer
duty escalator introduced in 2008
by the last Labour government.
This causes duty to automatically
rise by two per cent above
inflation every year.
5
NEWS
cityam.com
David Cameron has been accused of not protecting smaller British pubs from pubcos
SONY Music and BMG have joined
forces to bid for Parlophone and
other EMI assets being sold by
Vivendis Universal Music Group.
The pair are understood to have
agreed to bid jointly to increase
their chances of winning the
highly sought-after assets over
other suitors.
If their bid is successful, they
will then split the assets between
them, according to the Financial
Times. The move also comes four
years after the two companies
BY KASMIRA JEFFORD
ended their joint venture Sony
BMG,
Universal is being forced to
sell the business to satisfy
regulators concerns about its
$1.9bn takeover of the
recorded music arm of EMI.
The group has received
offers from more than
nine bidders including
Warner, Blackwell
Fuller a venture backed
by Lord Jacob Rothschilds
RIT Capital Partners and Chris
Blackwell, founder of Island
Records and Ronald
Perelmans investment firm
MacAndrews & Forbes.
BMG, the music
publishing firm backed by
Bertelsmann and private
equity group KKR,
bought UK music label
Mute last month. Bids
for Parlophone, one of
EMIs most prized
assets, and other labels
are due to be made in
the next few weeks.
Kylie Minogue is among the
artists signed to Parlophone
Sony Music and BMG team up to
bid for Universals Parlophone
IN BRIEF
France to spend 2bn on jobs
n France will reallocate 2bn
(1.6bn) from its 2013 budget to
state-aided job creation as part of
efforts to stem unemployment, French
budget minister Jerome Cahuzac said
yesterday. With joblessness at a 13-
year high of 10.3 per cent, President
Francois Hollande has promised to
turn things around this year and hopes
that plans to create thousands of
subsidised jobs and incentives for
companies to hire young workers kick
in quickly.
Roche drops bids for Illumina
nSwiss pharmaceutical group Roche
is no longer considering a bid for US
gene-sequencing company Illumina,
chairman Franz Humer was quoted as
saying yesterday. Illumina is
definitely off the table. They were not
willing to abandon the totally
unrealistic price they were asking for.
Roche does not do acquisitions that
dont create value, he told Swiss
paper SonntagsZeitung.
Centamin gold export allowed
nEgypt has allowed Centamin to
export a shipment of gold after
blocking it for several weeks because
it did not have the proper permits, a
customs official said yesterday.
Centamin has been plagued by
difficulties in Egypt over the last three
months, with a court questioning its
right to produce gold at its only mine,
customs officials holding up exports,
and the countrys petroleum ministry
disrupting fuel supplies.
TWO of the UKs biggest hedge funds
have rolled back the US dominance
of the industry to creep into the top
five best performing hedge funds in
the world, a poll shows.
Funds run by CQS, led by founder
Michael Hintze, and Odey Asset
Management, Crispin Odeys
Mayfair based outfit, have both
cracked the top five of a list of the
worlds 100 best performing funds,
having turned around their
fortunes last year to deliver returns
nudging 30 per cent.
CQSs multistrategy Directional
Opportunities fund, run by Hintze,
UK hedge funds
crack elite list
of performers
BY MICHAEL BOW
managed a total return figure of
28.9 per cent for the year ending
October 2012, flipping a poor -10.4
per cent loss made the year before.
This made it the third best
performing fund globally last year.
Odeys 1.8bn Odey European
fund also had a reversal in fortunes,
taking a -20 per cent return in 2011
but transforming into the fifth best
performing hedge fund for 2012,
with a total return of 24.1 per cent.
The placing of the two UK funds
at the top of the poll, to be
published by Bloomberg Markets
magazine next month, masks a US-
dominated list, with just 15 of the
top 100 funds outside the US.
ROLLS-ROYCE has been accused of
bribing two airlines in China, as
more details emerge about a
corruption investigation centred
on the FTSE 100 firms overseas
arms.
The engineering giant said in
December that it had handed
information to the Serious Fraud
Office (SFO), after an internal probe
uncovered matters of concern in
Indonesia and China.
Allegations that Rolls made
payments linked to engine
contracts with Air China in 2005
and China Eastern in 2010, which
BY MARION DAKERS
appeared in a string of online
messageboard posts under the
pseudonym Soaringdragon in
2011, were reported yesterday by
the Sunday Times.
Rolls-Royce would not comment
yesterday on whether the $2bn
(1.2bn) engine deals form part of
its internal investigation, or
whether the SFO has been alerted
to the claims.
The SFO did not respond to calls
for comment yesterday.
The investigation began after
online posts by a former Rolls-
Royce employee detailing claims of
payments in Indonesia caught the
watchdogs attention.
6
NEWS
cityam.com
Rolls-Royce is one of the words largest engineering firms
Rolls-Royce is hit by claims of
bribery in China engine deals
WORLD'S TOP FIVE PERFORMING HEDGE FUNDS
Rank 2012 Fund Country 2012 Return %(Jan-Oct)
1 Metacapital Mortgage Opportunities US 37.8
2 Pine River Fixed Income US 32.9
3 CQS Directional Opportunities UK 28.9
4 Pine River Liquid Mortgage us 28.0
5 Odey European UK 24.1
1
2
3
4
5 S
O
U
R
C
E
:

B
L
O
O
M
B
E
R
G

M
A
R
K
E
T
S
CENTRICA is preparing to replace Phil
Bentley as managing director of British
Gas as the energy giant lays out a
change in strategy.
He is expected to leave his post in the
coming months, though no successor
has been picked.
Bentley, who has spent 13 years at the
firm, is believed to have clashed
with Centrica management
over the firms direction
since he took his current role
in 2007.
The firm could announce
his departure alongside pre-
liminary results on 27
February, which will also coin-
Centrica to lose
British Gas boss
in new strategy
BY MARION DAKERS
HMRC maintains its pressure on
tax evaders with offshore assets
HM Revenue and Customs (HMRC)
made 640 requests to overseas
governments for information on
individuals tax affairs during the
last financial year, according to
figures released today.
Australia was by far the most
targeted country, with 96 requests
made by HMRC for information on
individuals associated with the
country. Spain (49 requests) and
Ireland (38 requests) were in second
and third place.
The requests were made under
BY JAMES WATERSON
Double Taxation Agreements,
which are designed to avoid income
being taxed twice in different
countries but also hand inspectors
the right to check the value of an
individuals declared overseas
assets.
However the figures, uncovered
by law firm Pinsent Masons, also
show the total number of HMRC
requests during the period was
down 40 per cent on the 857 made
during the 2010-2011 tax year.
Phil Berwick of Pinsent Masons
said: HMRC will come down very
heavily on those it suspects are
hiding assets. It is far better to get
on the front foot and tell HMRC
about an undisclosed offshore asset
or other problem before HMRC
finds out begins an investigation.
He attributed this years decline
in the number of requests to a burst
of activity in previous years, which
has also led to more voluntary
disclosures of tax evasion.
HMRC has begun investigations
into thousands of individuals with
overseas assets in the last few years,
and will probably have picked off
most of the low hanging fruit.
Phil Bentley has been
with Centrica since 2000
7
NEWS
cityam.com
cide with the results of a strategic
review of the business.
British Gas and fellow energy
providers have come under fire for a
succession of price hikes in recent years,
for which Bentley has endured much
public criticism.
The big six utilities have also
sparked anger for using complicated
price structures, prompting govern-
ment plans to force firms to simplify
tariffs and switch customers to the
cheapest deals.
Centrica also faces the dilemma of
how to focus the business, which is
made up of retail, oil and gas produc-
tion, and US-based Direct Energy. It is
also yet to make a final decision on
investing in a new nuclear power
plant at Hinkley Point.
Centrica declined to
comment yesterday.
MORE: Page 9

BUSINESS minister Michael Fallon is
set to name and shame FTSE chief
executives who fail to sign their
firms up to a prompt payment code
designed to help small businesses
get paid on time.
Fallon wrote to every company in
the FTSE 350 in November telling
them that the Department for
Business, Innovation and Skills will
publish a list in February revealing
the names of firms that fail to
adopt the code, operated by the
Institute of Credit Management.
It aims to help small and medium
sized enterprises, which the
government estimates are owed
almost 36.4bn in overdue
payments, mainly by large
companies.
Weve been crystal clear that its
unacceptable for big companies to
drag their heels on paying their
supplier promptly, a BIS
spokesman said.
Its unfair and causes untold
problems for entrepreneurs as they
struggle to pay their way. If
companies fail to sign up, well
name and shame them.
The threat has already driven
Sainsburys, which was exposed for
increasing payment times, to review
its policy.
We already abide by the spirit of
the code and will be responding in
the coming weeks, a spokeswoman
said yesterday.
Fallons threat
to expose FTSE
late payments
BY MICHAEL BOW
8
NEWS
cityam.com
BOW LANE LONDON
GOLF
GOLF CLOTHING
RUGBY
OFF CHEAPSIDE, NEAR BANK TUBE STATION
THE GOVERNMENT minister responsi-
ble for setting rail fares will continue
to use a chauffeur-driven car to com-
mute into London from his Essex
home, the Department for Transport
insisted yesterday.
The department was forced to make
the statement after it emerged that
Simon Burns, the minister who has
ultimate responsibility for fare policy,
has been using a Toyota Avensis from
the governments car pool to make
the journey from his home in
Chelmsford to Westminster. The car,
which can be used by other transport
ministers during the day, costs taxpay-
ers 80,000 a year.
The news angered commuters in
his constituency who rely on the reg-
ular services from the Essex town to
Liverpool Street station. Last week
the cost of a standard class 12-month
season ticket from Chelmsford to
London rose by 120 to 3,540.
The DfT said: The Minister of State
does not have a home in London but
uses his commute to work on official
papers and so travels in a car provided
Rail minister
commutes in
chauffeured car
BY JAMES WATERSON
by the government car service for secu-
rity reasons.
The Ministerial Code permits minis-
ters to use official cars for home-to-
office journeys within a reasonable
distance of London when they are
working on classified papers.
Despite this, many other ministers
chose to work on official business
while travelling on trains. Guidelines
state that ministers can work on offi-
cial papers in public, as long as they
take steps to hide sensitive material.
Labour peer Lord Adonis yesterday
insisted the cars were unnecessary.
I never had a government car when
transport secretary. Ministers should
use the services they expect the public
to use, he said. Sardines on the
Victoria Line every morning, and the
No. 88 bus, gave me a passion for tack-
ling congestion and service failures.
The coalition has already cut the
budget of the car pool by a third to
around 5.5m. Before coming to
power David Cameron scorned its use:
If there is something that really
annoys people its seeing politicians
swanning around in chauffeur-driven
cars like theyre the royal family.
THE FIRST 800 townhouses, flats
and penthouses at Battersea Power
Station will go on sale to the
public this Thursday as building of
the 8bn scheme gets underway
later this year.
The Malaysian developers
behind the site, which has lain
derelict for over 30 years, will say
this week that the first phase of
the development, being built in
blocks next to the power station,
will be called Circus West.
Prices will range from 335,000
for a studio, 420,000 for a one-
bedroom flat to 890,000 for
BY KASMIRA JEFFORD
three-bedroom apartments.
A spokesperson for the
Battersea Power Station
Development company said prices
for the townhouses were not yet
finalised but they are likely to sell
for significantly more.
Singaporean, Hong Kong and
other overseas investors are being
targeted although the developers
said flats will go on sale to the
British public first this week.
The 39-acre scheme will
eventually include 3,400 homes,
1.7m square feet of offices, shops,
and two hotels. The Northern Line
will also be extended with two
new stops to the area.
Work at Battersea will start later this year, with the first residents set to move in by 2016
Battersea Power Stations first
800 Circus West flats go on sale
9
NEWS
cityam.com
Actor Depardieu meets Putin
and picks up Russian passport
FRENCH film star Gerard Depardieu
received a hug from President
Vladimir Putin and a new Russian
passport yesterday after abandoning
his homeland to avoid a new tax rate
for millionaires.
Putin signed a decree on Thursday
granting Russian citizenship to
Depardieu, who has fumed over
French President Francois Hollandes
plan to impose a 75 per cent tax rate.
The two men were shown on state
television shaking hands and hug-
BY CITY A.M. REPORTER ging in the Black Sea resort of Sochi
yesterday during what the Kremlin
said was a private visit by the actor to
Russia.
A brief meeting between the presi-
dent and Depardieu took place,
Kremlin spokesman Dmitry Peskov
said. On the occasion of his visit to
Russia, he was handed a Russian pass-
port.
Peskov did not say if Putin personal-
ly gave him the passport. Depardieu
also told Putin about his career plans,
he said.
Depardieus best known interna-
tional film is Green Card, about a
poor French immigrant who enters a
sham marriage so he can stay in the
United States.
Putin said last month that
Depardieu would be welcome in
Russia, which has a flat income tax
rate of 13 per cent, compared to the
75 per cent on income over 1m
(813,000) that Hollande wants to
levy in France.
He offered Depardieu the Russian
passport saying he had developed
warm ties with the actor even
though they had rarely met. Gerard Depardieu gets a warm welcome from Vladimir Putin
THE level of reported tax fraud rose
to its highest level since 2007 last
year despite a plunge in total
frauds recorded, a study out today
shows.
Tax fraud accounted for almost half
of all fraud reported to authorities in
2012 some 44 per cent and is
almost double the figure reported in
both 2009 and 2010. VAT fraud
accounted for the majority of the fig-
ure, pegged at 41 per cent of all
frauds committed in the UK.
Accountancy firm BDO said the
government was losing around
10bn a year due a gap between what
the government expected to collect
in VAT and what it actually collects,
with a third of this loss due to fraud.
Politicians and the public at large
are presently pointing their finger at
various multinationals for allegedly
not paying the correct amount of
corporation tax, Simon Bevan, who
authored the report, said.
However, our latest survey of UK
fraud shows that, in reality, it is the
fraud element of UKs VAT gap that is
the bigger drain on the public
purse.
The firms FraudTrack report, pub-
lished today, shows total fraud fell in
2012 from 2.1bn to 1.4bn.
Tax fraud soars
to hit five-year
high at 600m
BY MICHAEL BOW
However tax fraud only declined
slightly to 603m, roughly double the
274m reported in 2009 and 309m
in 2010, though much is unreported.
BDO estimates that VAT fraud actu-
ally costs the UKs public purse
around 3.3bn last year, equivalent to
about 1p for every tax payer and
enough to pay for the winter fuel
allowance, free TV licences and with
enough left over to build 17 hospitals.
Around half of VAT fraud, around
56m, is due to general non-compli-
ance. The other half is due to so called
carousel fraud, which lets traders
claim a VAT refund illegitimately, and
missing trader fraud, where compa-
nies dissolve without paying their
VAT liabilities.
Bevan called on HMRC to better
resource the fight
against tax fraud.
If we focus on
serious VAT
fraud and
r e s o u r c e
HMRC accord-
ingly - we can
immeasurably
improve the
public purse in
a relatively cost
effective man-
ner, he
said.
BDO national head of fraud Simon Bevan
ITALYS national airline could be
sold to Air France-KLM, dredging
up historic arguments as the
country heads to the polls in
February.
Air France-KLM has the chance
to clinch loss-making Alitalia when
a lock-up period ends on 12
January, and the newspaper il
Messaggero said yesterday the
Franco-Dutch firm is in advanced
talks to take control. The company
BY MARION DAKERS declined to comment.
Silvio Berlusconi, the former
Prime Minister who blocked the
firms bid in 2008, said he still
opposed a sale. Our country
cannot afford not having its own
flagship airline, he said yesterday.
Mario Monti, who is stepping
down as caretaker Prime Minister
but might stand in the election,
said he would take no dogmatic
positions on Alitalias fate. The
airline has been owned by CAI since
2008. Air France owns 25 per cent.
Talk of takeover bid for Alitalia
stokes political backlash in Italy
Canny shoppers waited for retailers to slash their prices over the festive rush
10
NEWS
cityam.com
SIGNS of a gloomy Christmas are pil-
ing up for British retailers, as two sets
of research out today suggest that
wary customers kept a close eye on
their spending during December.
A survey of retailers by accountancy
firm BDO points to a good if not
exceptional Christmas, with like-for-
like sales up 1.93 per cent on last year.
But this suggests disappointment
for some shops, which were pinning
hopes on a rush following morose
November trading.
Carefully timed discounting man-
aged to provide a late boost for some,
according to the figures. In-store
turnover in the week ending 29
December rose 11.3 per cent, while
Boxing Day online sales were up 17
per cent on a year ago.
This jump was still below the pace of
non-store sales growth throughout
December, which BDO said increased
by an extremely strong 30.85 per
cent.
By building up to Christmas early
Retailers fight
to win custom
over Christmas
BY MARION DAKERS in a planned and measured way there
has been less knee-jerk discounting,
said BDO national head of retail and
wholesale, Don Williams. At the same
time consumers are continuing to feel
the pinch of hard economic condi-
tions and are being much more care-
ful about when and where they spend
their money.
Visa card sales figures also suggested
a subdued festive period. Month-on-
month high street spending in
December fell two per cent, and total
household spending was 0.9 per cent
lower on the month, or 1.7 per cent on
last year, according to the firms card
data compiled by Markit. Even online
spending was broadly flat on last year
during December, though takings
ticked up as Christmas drew nearer.
With inflation continuing to out-
strip pay growth, and worries persist-
ing about job security and the
economic outlook, consumer spend-
ing looks likely to remain under pres-
sure for some time, said Markit chief
economist Chris Williamson.
Tesco attracts investor support as
TESCOs fleet of private jets, used
to ferry its executives around the
globe, has been laid bare for the
first time as a leading City figure
sprang to defend the firm over the
use of the planes.
The supermarket
giant, which
reveals its much-
anticipated
Christmas trading
figures on Thursday,
operates a subsidiary,
Kansas Transportation,
to lease three
planes to fly
executives to
work around
the world,
BY MICHAEL BOW costing the business nearly 9m
last year.
The use of the jets based at
Luton Airport a Hawker 800XP, a
Cessna Citation CJ2 and a
Gulfstream G550 has attracted
attention due to Tescos poor
performance in the short-term
and the rising cost of the
jets, which has
nearly tripled
since
2009.
Since 2005, the
firm has spent nearly
30m on the private
planes.
Between 2005
and 2012 the period the jet
division has operated between
Tesco as a whole has doubled
annual profits from 1.8bn to
3.8bn.
Yesterday City grandee David
Buik rushed to defend the firm
over the use of the jets.
Youve got a pretty big empire
when youre a publicly listed
company.
Providing the use of them is for
executive purposes and its
transparent and improves
efficiency, I have got no problem
with it.
To be seen to be indulgent
would be utterly stupid, but thats
A Gulfstream 550 plane as used by Tesco
SHOPPERS TOOK A WHILE TO WARM UP IN DECEMBER
Non-fashion +1.60 +0.15 +1.20 -6.90 +26.53 +7.07
Fashion -3.51 +0.79 -6.13 +6.22 +6.28 +0.03
Homewares -10.50 +0.33 +7.86 +6.70 +18.21 +3.02
Non-store +3.75 +35.91 +20.29 +70.42 +47.88 +30.85
TOTAL (ex non-store) -2.56 +0.61 -3.73 +7.10 +11.32 +1.93
Like-for-like Week 1 Week 2 Week 3 Week 4 Week 5 December
growth (%) (we 2/12) (we 9/12) (we 16/12) (we 23/12) (we 29/12) total
Source: BDO
THE FORUM: Page 21

11
NEWS
it defends use of private planes
not the case in this instance.
A source close to the company
yesterday said it had received no
complaints from shareholders on
the use of the jets.
Id be surprised if any global
company didnt at some point use
a private jet. We dont have a
reputation for extravagance.
Theyre not a perk, theyre not
just a frivolous luxury, the person
said.
Tesco refused to comment. It
has previously said it is common
for multinational companies to
use private aircrafts help
executives make efficient use of
their time.
Tesco currently operates in 14
countries around the world and
said its travel spend had gone up
after putting more resources into
Asian offices to oversee growth in
the region.
In December, the firm
announced a review of its loss
making US chain Fresh & Easy,
which could see its interests in
America eventually sold.
Tesco has been undergoing a
transition period since its
previous chief executive Sir Terry
Leahy stepped down in 2011 and
was replaced by Philip Clarke in
April 2011.
The use of private jets by global
supermarket jets is not
uncommon.
American multinational
Walmart has its own aeroplane
division, Walmart Aviation, which
it gives significant prominence to
on its website.
The firm proudly boasts that the
jets give it competitive business
advantage on a daily basis.
Tesco set up its jet leasing
operation Kansas Transportation
in 2005 in a bid to obtain better
terms from suppliers of aircraft
and fuel.
The Gulfstream 550 jet,
commonly referred to as a G5, is a
favourite of other high profile
companies.
Google reportedly operates two
of the planes for executives based
out of an air field in California
and Apples Steve Jobs was also
known to own one.
TESCO is expected to emerge as the
winner of a tough Christmas trading
period for Britains big four supermar-
kets as weak consumer confidence,
falling real incomes and rising real
prices put pressure on the sector.
Analysts predict the grocer will on
Thursday post a one per cent rise in
UK like-for-like sales for the six weeks
to 5 January its first increase
in three Christmases.
However, this compares
with dire trading last year
that prompted Tescos first
profit warning in 20 years.
Dave McCarthy, analyst at
Investec, warned the grocer
still faced major structural
issues.
Store profitability
is under pressure
as the internet
and convenience
channels can-
n i b a l i s e
large store
s a l e s ,
Grocers set to
unveil festive
trading figures
BY KASMIRA JEFFORD
and problems in Europe and Asia
remain.
Meanwhile Sainsburys is forecast to
report a 0.9 per cent rise in third quar-
ter like-for-like sales on Wednesday
compared with a 1.9 per cent rise the
previous quarter.
The supermarket group launched a
money-off petrol voucher on 27
December, which McCarthy said was
a sign of a weak Christmas.
However, Morrisons is tipped to be
the Christmas turkey of the three,
with house broker Jefferies predicting
it will today post a 2.8 per cent slump
in like-for-like sales in the six weeks to
30 December.
Panmure Gordon analyst Philip
Dorgan said chief executive
Dalton Philips is likely to
come under pressure as the
grocer lags behind rivals in
moving online and open-
ing convenience stores.
Sainsburys chief
executive Justin King
Ted Baker is among the retail firms updating the market this week
A HOST of retailers are due to give
a glimpse of how they have
performed over the key Christmas
period this week.
Marks & Spencer is expected to
reveal a bruising set of numbers in
its trading statement on Thursday.
Nomura expects the high street
giant to post UK like-for-like sales
1.4 per cent lower than last year,
weighed down by poor clothing
and general merchandise takings.
Debenhams was bullish going
into the festive rush, saying stock
levels were tight as a drum.
High street and high-end shops
to reveal holiday performances
BY MARION DAKERS
While analysts at Panmure Gordon
have noted heavy discounting, they
expect like-for-likes to be 1.5 per
cent higher than last year when
the firm updates tomorrow.
Ted Baker is also expected to
report rising sales in its update on
Wednesday, and JD Sports is also in
line to impress on Thursday.
Leisure firms have generally had
a good Christmas, market-watchers
believe. Pizza chain Dominos has
invested heavily in advertising so is
likely to declare rising sales, while
The Restaurant Group looks set to
beat expectations, Numis has
predicted.
ONE of the worlds richest women,
mining heiress Gina Rinehart, has
caved in to regulatory pressure and
finally revealed the full extent of her
business empire.
Rinehart, executive chairman at
Australian mining company
Hancock Prospecting, has published
two years worth of business
accounts after giving up the fight
with Australian financial watchdog
the Australian Securities and
Investments Commission to keep the
details of the business secret.
The mining mogul, worth an esti-
mated $18bn (11.2bn), had been bat-
tling to keep the accounts under
wraps for fear of revealing sensitive
details about her partnership with
UK miner Rio Tinto, and future plans
for more mining projects in
Australia.
The documents,
filed last month,
show her business
doubled its pre-
tax profits to
A$1.2bn (782m)
for the year end-
ing June 30 2011,
versus profits of
A$688m in 2010.
Rinehart, who
Mining heiress
made to reveal
secret accounts
BY MICHAEL BOW ranked higher than Glencore boss
Ivan Glasenberg in this years Forbes
rich list, is one Australias most pow-
erful business figures and a media
mogul, owning a controlling stake in
newspaper publisher Fairfax, which
publishes The Sydney Morning
Herald.
She inherited Hancock Prospecting
from her father, Lang Hancock, after
he died in 1992.
The accounts for 2010 and 2011
show Hancock Prospecting borrowed
cash from Rio Tinto to let Rineharts
firm carry on contributing its share
of funds to a mining project, jointly
operated by the two firms.
The 2011 accounts for the end of
June show Hancock owed more than
$83m to Rio Tinto.
Hancock also fought to hide the
state of the companys balance sheet
for fear of revealing information
about a future mining and rail proj-
ect currently raising investment.
Rinehart is currently locked in a
legal battle with her children over
the familys fortune.
Rineharts father co-founded
the business after locating vast
tracts of lucrative iron ore
land in North West Australia
in the 1950s.
Think tank slams plan to splash
out on UK broadband arms race
GOVERNMENT spending on
broadband infrastructure has been
criticised by an influential think
tank, which claims ministers should
instead focus on educating people
about internet connections.
In a report published today, the
Policy Exchange is calling for
culture secretary Maria Miller to
end the broadband arms race and
stop the fixation with having the
fastest broadband speeds in the
world. Instead, the think tank
BY JAMES TITCOMB believes the money should be spent
on encouraging small businesses to
use the internet effectively, rather
than merely having access to the
highest speeds.
The report will chime with
concerns made by Virgin Media, the
UKs second biggest broadband
provider by subscribers, which has
recently written to Miller calling for
a rethink of the governments
broadband spending plans.
Virgin Media has criticised the
150m plan for building superfast
broadband networks in urban areas,
claiming that with better
management from authorities, any
proven demand could be met by the
private sector.
The author of the Policy
Exchanges report, Chris Yiu, said:
The governments current
spending plans will extend fast
broadband to the vast majority of
people. Any further public money
should be spent on making sure we
are putting this to good use.
Its far from clear that your taxes
should help to pay for me to have an
even faster connection. The Policy Exchange wants Maria Miller to push for more education on internet connections
12
NEWS
cityam.com
Gina Rinehart leads miner
Hancock Prospecting
THE chief executive of Shareholder
Executive, the organisation that
oversees the governments billons
of pounds of shareholdings in
companies including Royal Mail, is
to quit after five years at the helm.
Stephen Lovegrove, who has
presided over key deals such as the
governments 4.4bn sale of British
Energy to EDF, is to leave his role to
become the new permanent
secretary of the Department for
Shareholder Executive chief in
line for Energy department job
BY KASMIRA JEFFORD Energy and Climate Change.
A spokesperson for the
Department of Energy and Climate
Change declined to comment but
said the appointment of a new
permanent secretary will be
announced in the coming days. The
story was first reported by Sky
News. Lovegrove also sits on the
board of the London Organising
Committee of the Olympic Games
and is a director-general of the
Department for Business,
Innovation and Skills.
BOTTOM
LINE
JAMES TITCOMB
13
NEWS
cityam.com
THE WORLDS technology giants will
convene in Las Vegas this week for
the industrys biggest trade event,
featuring many of the gadgets that
will shape the next 12 months.
From tomorrow, the annual
Consumer Electronics Show (CES)
will see announcements from global
brands such as Samsung, Sony and
Panasonic, as well as displays from
emerging companies including
Chinas Huawei and ZTE.
As well as the gadgets on display,
multi-million dollar deals will be bro-
kered behind closed doors, with
many of the worlds biggest
technology players in
town.
Two British
companies with
a keen interest
in this weeks
events are ARM
Holdings and
I m a g i n a t i o n
Technologies, the
microchip designers
whose technology is
used in devices including the iPhone.
ARM is braced for further chal-
lenges from Intel, the US chip giant
that has repeatedly made efforts to
crack the smartphone market where
ARM is dominant, whereas
Imagination will be promoting the
latest technology from its digital
radio subsidiary, Pure, in a bid to
turn the lossmaking division
around.
Imaginations chief executive, the
Worlds electronics giants hit Las Vegas
BY JAMES TITCOMB recently-knighted Sir Hossein Yassaie,
has also scheduled a punishing pro-
gramme of meetings as he aims to
license his technology to companies
from car manufacturers to tablet
computer makers.
Sir Hossein has outlined the diver-
gence of internet-connectivity into
goods such as cars and fridges as a
key driver of growth for his company.
This phenomenon the so-called
internet of things will be a key
theme at this years CES, especially
among car and TV manufacturers.
Despite the shows reputation as a
haven for gadget fans, a record num-
ber of car companies will take the
stage to show
off their latest
navigation and
in-car entertain-
ment systems.
Connect i ng
the living room
will also be a
major theme at
this years event,
with a flurry of
internet TVs set to
be unveiled.
The likes of Panasonic and LG are
likely to use the show as a platform to
reignite their struggling TV divisions,
introducing ultra high-definition
sets which promise TVs with images
four times as sharp as current high-
definition ones.
Samsung, HTC and Sony are all set
to unveil new smartphones, although
technology giants such as Google,
Apple and Microsoft will have little or
no presence.
Tech giants conspicuous by their absences
T
AKE a look at the roster of
companies vying for attention at
this years Consumer Electronics
Show Samsung, Sony and
Intel and the names not on that list
stand out as much as those on it.
The most recognisable names in
technology today Apple, Google
and Microsoft will be nowhere to
be found, save for the partner compa-
nies making iCompatible acces-
sories, and the manufacturers of
new tablets and smartphones using
Microsoft or Google technology.
Apple has never had much of a
presence at CES, preferring to use its
own carefully choreographed events
to unveil its products, and Google
and Microsoft have taken the same
road in recent months.
Of course, this presents an opportu-
nity to technologys underdogs, who
will grab some much-needed atten-
tion, and there are bound to be some
very innovative and important devel-
opments this year. The smartphone
market which has been dominated
by Apple and Samsung in the last
year could be shaken up by new
entries from the well-resourced
Huawei and ZTE, and there is a grow-
ing interest in internet-connected tel-
evisions, which will be everywhere
you look this week.
But we should be wary of jumping
to conclusions about the state of con-
sumer technology when the three
aforementioned titans are not in play,
such is their influence.
At last years CES, for example, the
word on everyones lips was ultra-
book fast, light, laptops that were
going to reinvigorate the flagging PC
market. Fast forward 12 months, and
PC sales are still in decline, while
Apples iPad and Amazons Kindle
tablets go from strength to strength.
And in 2010, one of CESs hottest
products was 3D TVs. Three years
later, and manufacturers seem to
have all but given up.
2013s show will feature many of
the most innovative products in tech-
nology today, but many of them may
take some time to catch on.
The annual Consumer Electronics Show brings thousands of companies together
TECH TRENDS AT CES
Ultra high-definition TV
nTelevision is set to be the hot topic
of this years show, with enormous,
internet-connected sets promising
displays many times more detailed
than currently available.
Even bigger smartphone screens
nWith Apple nowhere to be seen, the
onus is on Samsung, HTC and Sony to
produce the standout handset of the
show. Screens of over five inches are
expected to be commonplace.
Microchip wars heat up
nChip giant Intel is expected to
launch a fresh push into making
smartphone processors as sales of PCs
decline. Intel has so far failed to keep
up with FTSE 100 firm ARM Holdings.
ONLY a couple of weeks to go now
until PwC brushes away the post-fes-
tive cobwebs with the highlight of
every drag-loving accountants calen-
dar the 27th annual Christmas
cross-dressing pantomime.
Over 200 staff and alumni are don-
ning lycra and wigs for the produc-
tion of Peter Pan, including a few
cheeky cameos from
board members
Richard Sexton,
Richard Oldfield,
Kevin Ellis and
S t e p ha ni e
Hyde.
Director
of the
show and
PwC finance
employee Dave
Gironi assured
The Capitalist:
Bean counters
swap the office
for pantomime
Despite a few post-Christmas cob-
webs, rehearsals are going really well.
Mind you, flying accountants across
the stage is a hurdle were yet to cross.
He added: I guess well find out in
the next two weeks if theyve
got a head for heights as
well as figures. Oh no, he
didnt make an a finance
joke did he? Altogether
now...
The panto will run
from 21 - 26 January
at the Peacock
Theatre on
Kingsway before
going on tour to
Nottingham.
PwCs Chloe
Shipman (l)
and Alex
Baker (r)
14
cityam.com
cityam.com/the-capitalist
THECAPITALIST
Following hot on the heels of
Prudential chief executive Tidjane
Thiam, another businessman found
himself on Radio Four's Desert Island
Discs yesterday Sony chairman Sir
Howard Stringer. The Vietnam vet talked
about poaching David Letterman from
Rupert Murdoch (The only battle I ever
won against him) and attempts in vain
to ban his children from buying rival
Apples iPods. He talked about spending
time with president Johnson during his
early TV days: It was like having lunch
with Henry VIII, he would be dripping
beans down his bathrobe and doing
imitations of president Nixon. Though
the Welshman picked a few records not
from the Sony catalogue, he toed the line
with his first disc Adeles Skyfall the
theme to Sonys latest Bond mega-hit.
EDITED BY CALLY SQUIRES
Got A Story? Email
thecapitalist@cityam.com
An avalanche of goals over
Christmas and the New Year may
have made for great entertainment for
football fans, but it has meant a painful
festive period for bookies. A total of 120
goals were plundered in top flight
fixtures such as Chelseas 8-0 demolition
of Aston Villa, Newcastles 3-7 and 3-4
defeats at Arsenal and Manchester
United respectively and Manchester City
winning 4-3 at Norwich. Online spread
betting firm Spreadex reported losses of
more than 250,000 on those four
matches alone: We are hoping players
can rediscover the art of defending
during 2013 even if it does mean a drop
in the entertainment levels said a
hopeful representative from the firm.
A HUGE thank you to the record
number of readers who filled in
our survey, offering us lots of
welcome feedback and suggestions
for the paper. The close to 2,200
readers who participated were
entered into a fantastic prize draw
to win a holiday for two at Sandals
Grande Antigua Resort & Spa.
The Capitalist is pleased to
reveal the winner is Clifford
Chance associate Lukas Hirst.
Our lucky lawyer said: This is
outstanding news. I have just
returned from two weeks in LA
with my son and had forgotten
how amazing sunshine and the
beach are. I cannot wait to
reacquaint myself with them in
the Caribbean soon thanks to City
A.M. Another seven readers will
shortly be receiving a bottle of
champagne, the runner-up prize.
Thanks very much to all.
City A.M. competition winner and Clifford Chance associate Lukas Hirst with his son
M&A lawyer bags holiday to
Antigua in our reader survey
15
NEWS
cityam.com
Kate & Lucas
03.10.12 at 6.04pm
Lovestruck
here
Now its your turn to
meet someone amazing

THE UK manufacturing sector will
grow less than half as fast as
previously hoped during 2013,
according to figures released this
morning.
Manufacturers will produce just
0.7 per cent more next year than in
2012, industry organisation EEF
predicted today, down from earlier
forecasts of 1.5 per cent growth.
However, on a more positive note
some 30 per cent of firms said they
expected overall conditions to
improve, versus 23 per cent who
expected the economic climate to
worsen yet further. And EEF boss
Terry Scuoler put a positive sheen on
the outlook for the coming year,
saying he believed factory firms
could boost exports and add more
value despite global difficulties.
The past year has been a
challenging one for manufacturers,
but as they look to 2013 there is still
the potential for growth in their
businesses, Scuoler claimed.
The increases in investment in
innovation in recent years will bear
fruit as companies see opportunities
from new product development and
the commercialisation of new
technology.
But firms were still worried about
a slowdown in the world economy,
with around two thirds of
companies citing that as the biggest
risk to growth, up from just 10 per
cent last year.
Manufacturers
slash growth
forecast in half
BY BEN SOUTHWOOD
EUROZONE lending will be squeezed
into a 2013 decline by bad loans and
red tape, Ernst & Young forecast this
morning.
Non-performing loans will rise from
6.8 per cent of the total in 2012 to
reach 7.6 per cent in 2013, the
accounting firms financial services
team predicts, the highest fraction
since the formation of the Eurozone.
Combined with deleveraging forced
by regulation, and the impact of slow
growth or recession, loan books will
be forced into decline over the next 12
months, Ernst & Young believes.
The outlook for new lending to
consumers and many corporates is
pretty dire, said Ernst & Youngs
Andy Baldwin, with figures expected
to fall across the board.
The total stock of loans is predicted
to fall from 12.3 trillion (10 trillion)
to 12.1 trillion, driven by a 25bn fall
in mortgage lending and a 7bn fall
in consumer credit. The stock of busi-
ness lending will rise just 9bn, the
firm expects. This deleveraging will
see average loan-to-deposit levels fall
Eurozone credit
conditions will
tighten in 2013
BY BEN SOUTHWOOD
from a pre-crisis peak of 124 per cent
in 2006 to 111 per cent at the end of
2012. By 2016 it will have dropped to
just 104 per cent.
And the overall figures hide further
divergence between northern and
southern Europe, Ernst & Young says.
It predicts 2013 will actually see higher
lending in France, Germany and the
Netherlands, but significant falls in
Italy and Spain. Between 2011 and
2013 the former three will have
enjoyed a lending boost totalling
108bn whereas the latter two will see
total credit drop off by 143bn, accord-
ing to the accounting partnerships
estimates.
More money printing off the
menu for cautious rate-setters
BANK of England policymakers will
keep the printing presses out of
action again in January, analysts
predicted over the weekend.
A more positive raft of data
releases, combined with renewed
concerns about the effectiveness of
the quantitative easing (QE)
programme, will stay a new bout of
monetary expansion, according to
market observers.
We expect the QE target to
remain at 375bn and there are few
prospects of a move in the Bank rate
from 0.5 per cent, where the official
benchmark has been for almost four
years, said Investecs Philip Shaw.
There seemed to be few clear
intentions to ease again in
December and although there have
since been one or two notable weak
spots in the data, the general tone of
the UK indicators has been more
mixed than soft.
This came after a Bank research
BY BEN SOUTHWOOD
paper that suggested the impact of
one-off demand shocks on the UKs
slow recovery had been exaggerated,
and that supply-side factors,
especially weak productivity, were at
least as important as blows to
demand.
Since QE is designed to boost the
total level of demand in the
economy and does nothing to deal
with long-run structural and supply-
side concerns, the paper appears to
favour a more limited role for asset
purchases in future.
PREDICTIONS FOR 2013
Consumer credit will slip to
597bn
in 2013, from 604bn in 2012
Total assets will fall to
33.2 trillion
in 2013, from 33.6 trillion in 2012
Real GDP will sink
0.2%
in 2013, after sliding 0.4% in 2012
Average 10-year government bond yields will drop to
3.5%
in 2013, down from 4% on average in 2012
Business lending will edge up to
4.63 trillion
in 2013, from 4.62 trillion in 2012
INFORMATION technology
contractors are investing more
and more hope in the prospect of
a boost to public sector contracts,
just as jobs from the financial
sector are expected to dry out.
The fraction believing the
biggest wedge of new jobs will
come from the state in the next 12
months hit 15 per cent at the end
of 2012, according to recruiter
Giant Group, up from nine per
cent a year ago and just six per
cent in 2010.
Giant managing director
Matthew Brown put this public
sector boost down to the need for
departments to reduce permanent
headcounts by contracting out IT
staff. Brown also suggested a drive
for efficiency across government
departments was creating a
demand for skilled IT
professionals to design and
implement new systems.
This comes just as the fraction
placing its hopes on the financial
sector fell to 23 per cent, having
stood at 35 per cent just two
IT firms look to government as
hopes in financial sector slide
BY BEN SOUTHWOOD
years ago.
The financial services sector
has continued to experience a
tough time in 2012 as the UK
entered a double-dip recession,
while the sector continues to
suffer from the aftermath of the
banking crisis this has limited
the demand for new IT contractor
roles, Brown said.
Overall, the biggest fraction of
those surveyed 26 per cent
thought most new IT jobs in the
next 12 months would come from
the support services sector, up
from 22 per cent at the end of
2011 and 19 per cent back in 2010.
Paul Tucker and Charles Bean decide rates as part of the monetary policy committee (MPC)
Worst is not yet over for crisis-hit Eurozone
2007 2010 2013
2
4
6
0
8
10
12
14
16 Proportionofnon-performingloans, %
Germany
Eurozone
Spain
S
o
u
r
c
e
: O
x
f
o
r
d
E
c
o
n
o
m
ic
s
, W
o
r
ld
B
a
n
k
IT contractors look to state to ll gap
15
20
25
0
5
10
30
35
40
Publicsector
Financial sector
2010 2011 2012
%ofcontractorswhothinksectorwill createmostjobs
16
cityam.com
SJ Berwin
The law firm has announced the
appointment of Steven Fogel to
its partnership board and as a
non-executive director. He was
previously senior partner of
Titmuss Sainer, and led the law
firm in its merger with Dechert.
Fogel then served as managing
partner of Decherts London
office before retiring in June
2012. He is additionally a board member for London
University and chairman of Uropharma, the medical
device business.
TMF Group
The business service provider has appointed Alan Coffey
as chief sales officer. He joins from Logica, the technology
firm, where he was chief sales officer. Coffey has also held
roles at Hewlett Packard in Europe, at IBM in the US, and at
BT, where he ran its South East Asia business operations.
Mount Anvil
Clive Fenton has been appointed chief executive of the
central London property developer. He was most recently
a member of the group board of Barratt Developers,
where he oversaw its operations across London, the South
East and the South West. Fenton has over 30 years
experience in the industry, and is also a chartered
accountant.
Pramerica Fixed Income
The asset management firm, part of Prudential Financial,
has appointed Simon Males as managing director,
institutional client relations. He was previously head of
global consultants and UK institutional business for Pictet
Asset Management. Males has also held roles at F&C Asset
Management and Prudential.
Skadden Arps Slate Meagher & Flom
The law firm has announced the appointment of Helena
Derbyshire. She is an employment law specialist, and will
provide advice relating to Skaddens English law corporate
advisory capabilities.
Kennedys
Jonathan Greensmith has been appointed partner in the
law firms London office. He joins from Russell Jones &
Walker, where he was the principal lawyer in its
professional discipline and regulatory department.
Greensmith is joined by solicitor Robert Drury, who will
work to develop Kennedyss regulatory defence practice.
De La Rue
Andrew Stevens has been appointed non-executive
director on the board of the commercial banknote printer.
He was previously chief executive of Cobham, and has also
held senior positions at Rolls-Royce.
WHOS SWITCHING JOBS Edited by Tom Welsh
+44 (0)20 7092 0053
morganmckinley.com
SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT
January Bank
rates are likely
to stay steady
T
HE European Central Bank
(ECB) is likely to keep interest
rates on hold when it meets for
its first policy meeting this
year, analysts predict.
We believe the continued improve-
ment in the forward-looking survey
data will have been sufficient to stay
the hand of those on the council who
last month were willing to wait and
see before lowering rates, said Nick
Matthews of Nomura.
We believe the next 25bp interest
rate cut by the ECB will most likely
take place in March (or potentially
earlier).
Also on Thursday, the Bank of
England is set to review interest rates,
with analysts expecting no change.
We expect the committee to keep
policy on hold, with the Bank rate at
0.50 per cent and QE at 375bn. Our
baseline forecast is for no additional
QE in the immediate future, but
should the growth outlook deterio-
rate further, there could be more loos-
ening, said Barclays Blerina Uruci.
In other economic news, tomorrow
brings the release of the British Retail
Consortium (BRC) retail sales monitor,
plus a swathe of EU data, including
consumer and economic confidence,
retail sales and the unemployment
rate.
On Wednesday the BRCs shop price
index will be released, along with UK
trade balance figures.
The week ends with UK industrial
and manufacturing production fig-
ures on Friday.
The corporate calendar sees trading
announcements tomorrow from
Balfour Beatty, Persimmon, Robert
Walters, Debenhams, Interserve and
Dominos Pizza.
On Wednesday Restaurant Group,
supermarket giant Sainsburys,
Greggs and Ted Baker will all report.
On Thursday Bwin.party, Goals
Soccer Centres, Hays, Hilton Food
Group, Rathbone Brothers, SIG,
Tesco and Marks & Spencer are all
set to update the market, while
Tullow Oil will report on Friday.
Panmure Gordon gave an optimistic
forecast for Tesco, giving it a buy rat-
ing and a target price of 440p.
Analyst Philip Dorgan said: We
believe that Tesco has had the
strongest Christmas sales growth of
the Big Four....It sets up very nicely
what we believe will be a year of sig-
nificant strategic change. We expect
to see a substantial reduction in capi-
tal expenditure, a refocus online and
a commitment to much higher ROCE
(return on capital expenditure) and
sustained share buybacks.
I
NVESTORS fiscal cliff worries are likely
to give way to more fundamental
concerns, like earnings, as fourth-
quarter reports get under way this
week.
Financial results, starting tomorrow with
aluminum company Alcoa, are expected
to be only slightly better than the third-
quarter's lacklustre results. As a warning
sign, analyst current estimates are down
sharply from what they were in October.
That could set stocks up for more volatili-
ty following a week of sharp gains that put
the Standard & Poors 500 index on Friday
at the highest close since 31 December,
2007. The index also registered its biggest
weekly percentage gain in more than a
year.
Based on a Reuters analysis, Europe ranks
among the chief concerns cited by compa-
nies that warned on fourth-quarter results.
Uncertainty about the region and its weak
economic outlook were cited by more than
half of the 25 largest S&P 500 companies
that issued warnings.
In the most recent earnings conference
calls, macroeconomic worries were cited
by 10 companies while the US fiscal cliff
was cited by at least nine as reasons for
their earnings warnings.
The number of things that could go
wrong isnt so high, but the magnitude of
how wrong they could go is whats worri-
some, said Kurt Winters, of Whitebox
Mutual Funds in Minneapolis.
Negative-to-positive guidance by S&P 500
companies for the fourth quarter was 3.6
to 1, the second worst since the third quar-
ter of 2001, according to Thomson Reuters
data.
US lawmakers narrowly averted the fis-
cal cliff by coming to a last-minute agree-
ment on a bill to avoid steep tax hikes last
driving the rally in stocks but the battle
over further spending cuts is expected to
resume in two months.
Investors also have seen a revival of wor-
ries about Europes sovereign debt prob-
lems, with Moodys in November
downgrading Frances credit rating and
debt crises looming for Spain and other
countries.
You have a recession in Europe as a base
case. Europe is still the biggest trading
partner with a lot of US companies, and its
still a big chunk of global capital spend-
ing, said Adam Parker, of Morgan Stanley
in New York.
Among companies citing worries about
Europe was eBay, whose chief financial
officer, Bob Swan, spoke of macro pres-
sures from Europe in the companys earn-
ings conference call.
One of the biggest worries voiced about
earnings has been whether companies will
be able to continue to boost profit growth
despite relatively weak revenue growth.
S&P 500 revenue fell 0.8 per cent in the
third quarter for the first decline since the
third quarter of 2009, Thomson Reuters
data showed.
Earnings growth for the quarter was a
paltry 0.1 percent after briefly dipping into
negative territory.
On top of that, just 40 per cent of S&P 500
companies beat revenue expectations in
the third quarter, while 64.2 per cent beat
earnings estimates, the Thomson Reuters
data showed.
For the fourth quarter, estimates are
slightly better but are well off estimates for
the quarter from just a few months earlier.
S&P 500 earnings are expected to have
risen 2.8 per cent while revenue is expect-
ed to have gone up 1.9 per cent.
Back in October, earnings growth for the
fourth quarter was forecast up 9.9 per cent.
In spite of the cautious outlooks, some
analysts still see a good chance for earn-
ings beats this reporting period. Energy,
industrials and consumer discretionary
are the S&P sectors most likely to win out
in the upcoming season, analysts believe.
Worries over fiscal cliff give way to
concerns about latest US earnings
BESTof theBROKERS
DIRECT LINE INS
28Jan 31Jan 2Jan 3Jan 4Jan
p 218
217
216
215
214
213
212
211
214.00
4 Jan
DIRECT LINE
Numis cheers the insurer as one of its key picks for 2013, and has a
buy rating and an increased target price of 265p. The broker sees
Direct Lines price to earnings ratio as modest at 9.4 times, in spite of a
22 per cent share price rise since Octobers float. Numis also points to
ongoing cost-cutting measures and motor claims changes that will
significantly increase profits.
S&P 500
4Jan 28Dec 31Dec 2Jan 3Jan
1,470
1,460
1,440
1,430
1,450
1,410
1,400
1,420
1,466.47
4 Jan
FTSE
4Jan 28Dec 31Dec 2Jan 3Jan
6,100
6,050
5,950
5,900
6,000
6,089.84
4 Jan
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CITY MOVES
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LONDON
REPORT
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in association with
Interserve PLC
p 400.0
397.5
395.0
392.5
390.0
387.5
385.0
382.5
392.00
4 Jan
INTERSERVE
Peel Hunt has a hold rating and a target price of 350p ahead of the
support services and construction groups pre-close update on
Wednesday. The broker believes Interserve has weathered a tough
trading backdrop well, and expects to see a stronger balance sheet with
29m of net cash. The firms pensions liabilities have also been reduced,
helping set the scene for future bolt-on acquisitions.
SIG PLC
p 125
124
123
122
121
120
119
124.00
4 Jan
SIG
Panmure Gordon rates the construction materials supplier buy with a
target of 165p. The broker expects to see signs of tight cost control
when the firm releases a full-year trading update on Thursday, along
with good margin management and smaller growth initiatives. Panmure
is also upbeat about SIGs chief executive Stuart Mitchell, who starts in
March.
in association with
THE WEEK AHEAD
in association with
17
cityam.com
T
HE girl was absolutely
gorgeous and I was thrilled to
be chatting her up. It was
about 2.30 in the morning
and I sat with her in Jimmyz
in Monaco, a very expensive
nightclub, drinking Cristal, a very
expensive champagne. What do
you do? she asked, music
thumping in the background. I
tried to adopt an air of complete
coolness and proudly said, Im
retired. We kept chatting and
about 20 minutes later she looked
puzzled and said, but you dont
seem retarded?
At 34, I had just walked into the
sunset after a 12 year career in
finance. Is it the most stupid thing I
have ever done? I had a spectacular
record of correctly predicting big
moves in the interest rate, currency
and commodity markets and, by the
early 90s, I was one of the highest-
paid people in the world. Surely, if I
had stayed in the hedge fund world,
Id be a billionaire by now. But I
hadnt and I had moved to the
south of France. I wanted to escape
the life of economic data and
computer screens, and to enjoy a
life of leisure. I bought myself a
Ferrari, a 58 foot motor yacht
from Ralph Schumacher,
the formula one driver, and
I played tennis almost daily
at the Monte Carlo Country Club.
Deep down though, I was still
struggling with the right balance. I
had stopped being a slave to money,
but I had become a slave to my
possessions. After a while, the
Ferrari annoyed me. It looked great,
but it was damned uncomfortable
and you were always worried about
scratches. The stereo sucked. And
while I enjoyed trips on my boat
Terra Australis, going out more
than once a fortnight was boring.
Meanwhile, like a high maintenance
mistress, it required constant care
and attention. Rather than a gin
palace, I
started to see it as a floating
caravan.
Friends too, were falling into the
trap. They spent their riches on
houses around the world, but then
spent their time worrying about
them. Their conversations were
about getting air conditioning fixed
or changing light globes, and the
endless problems with domestic
staff. Their standards of living were
high, but their expectations often
even higher. I remember a
billionaire friend being extremely
agitated because his private jet was
20 minutes late. He was shouting at
someone on the phone; not a great
way to start a family holiday.
Other male friends spent their
time discussing their choice of
buttons on their blazers, and some
were even getting manicures along
with their massages.
So not long after my Jimmyz
conversation, I gradually started to
change. I learnt to ski, wrote my
book Taming The Lion, started
playing competitive chess again,
and reached out more to friends
and family. At the same time, I got
involved in the wonderful world of
business start-ups. I realised that
life is about experiences, memories
and personal relationships. Now,
hopefully, Im no longer retarded,
and Ill never really retire.
Richard Farleigh has operated as a
business angel for many years, backing
more early-stage companies than anyone
else in the UK.
www.farleigh.com
Annabel Palmer on the initiatives that could encourage the trend towards entrepreneurship
L
AST years employment
market was characterised by
insecurity, scarcity of supply,
and job losses in once
buoyant sectors. Previously
good reasons for staying in a City
job could now be gone. While an
uncertain jobs market may not be
incentive enough alone for you to
take the equally difficult path into
entrepreneurship, according to
Stuart Watson of Ernst & Young
the balance of risk is on the
move.
By some measures, Britain is
steadily becoming a more entrepre-
neurial society. Research by the
Centre for Policy Studies (CPS)
found that 2012 saw the number of
small enterprises increase for the
first time since 2008. Roughly half
of this rise was due to changes in
HMRC categorisations, with previ-
ously excluded businesses added for
the first time. But Ryan Bourne of
the CPS still thinks it is reason for
optimism. 2013 may see British
entrepreneurship flourish.
NEW MOVES
The trend is not necessarily new,
but is certainly accelerating.
According to Global
Entrepreneurship Monitor (GEM)
data, 5.7 per cent of the 18-64 popu-
lation was either a nascent entre-
preneur or owner-manager of a new
business in 2009. By 2011 this had
jumped to 7.3 per cent. Recently,
GEM also found that 20 per cent of
the working age population intend
to start their own firm in the near
future.
Despite gloomy headlines, this is
partly because the resources at an
entrepreneurs disposal are better
than ever before. It is now relatively
cheap to start a business, with
advances in technology giving start-
ups the chance to build a presence
online without significant investor
funding.
Brave start-up entrepreneurs
may be set for a positive 2013
ENTREPRENEURS
The money delusion: How I escaped the misery of my millions
GOVERNMENT HELP
The UK government has also taken
steps towards helping entrepreneurs.
The Business Finance Partnership
aims to ease the flow of credit to
small firms by making it easier to
access finance. And it is just one part
of a larger programme of credit eas-
ing measures announced by the
chancellor last year. A total of 1.2bn
has been made available, with 100m
allocated to small businesses.
And promoting entrepreneurship
looks set to continue. The Seed
Enterprise Investment Scheme (SEIS)
has been designed to help small,
early-stage companies raise equity by
offering tax relief to investors.
Investment platform Seedrs has
described the scheme as one of the
most generous available. If an
investor disposes of an asset, and rein-
vests the gain in shares that qualify
for SEIS relief, the amount invested
will be exempt from capital gains tax
up to 100,000 in the tax year.
Another notable incentive is
research and development relief. This
is effectively a subsidy of 25p for
every 1 spent on qualifying expendi-
ture for small to medium-sized,
according to SME web, and can sub-
stantially reduce corporation tax pay-
ments. Additionally, the
governments new Patent Box
scheme, which comes into effect this
year, seeks to encourage companies to
locate jobs and activity associated
with the commercialisation of
patents in the UK. It will allow com-
panies to apply a reduced 10 per cent
corporation tax rate to profits attrib-
uted to certain forms of intellectual
property.
A DIFFERENT APPROACH
Business lending by banks has been
shrinking since 2008, leading some
entrepreneurs to shun traditional
ways of raising capital.
Crowdfunding, provided in the UK
by companies like Seedrs and
Crowdcube, was originally conceived
as a way to fund projects like indie
films or album recordings. But
Crowdcube also allows start-ups to
sell shares currently not possible in
the US. Investors pool together their
capital to support entrepreneurs.
Crowdfunding is still relatively new
in the UK, the market is small, and
the FSA also warns that many crowd-
funding opportunities are high risk.
But innovative new financing solu-
tions could offer support where
banks cannot.
Theres no denying that it still takes
bravery and courage to start a new
business in the current economic cli-
mate. But the underlying trends are
auspicious. Perhaps its time for a
new start
of a SERIAL
ENTREPRENEUR
RICHARD FARLEIGH
CONFESSIONS
L
AST week, the government
announced the expansion of its
start-up loan scheme, headed up by
serial entrepreneur James Caan.
Originally aimed at 18 to 24 year
olds, and with funding of 82m, the loans
are now available to anyone aged up to 30
and the total amount of funding will
increase to 112m.
The inevitable plaudits rolled in. A late
but very welcome Christmas present, said
Lee Perkins, managing director of Sage
UKs small business division. A great
success, said Doug Richards of the School
for Startups. But the sad truth is that only
3,000 people have applied for a loan from
the scheme since its launch in May and
they received a total of just 1.5m.
Part of the problem is likely to be
awareness. The application process itself is
actually fairly easy, and all the details are
nicely set out on the Start-Up Loan
Companys website
(www.startuploans.co.uk) An average of
2,500 is available to successful applicants,
potentially a much-needed boost to any
early-stage company.
But there are also broader explanations
for the slow take-up. The loans arent
exactly a hand-out. They are personal loans
which have to be paid back over five years,
at an interest rate currently fixed at 6 per
cent.
And as the Bank of Englands most
recent Credit Conditions survey reminds us,
small businesses arent exactly chomping
at the bit for credit. While loan availability
rose across all sizes of companies, demand
actually fell in the fourth quarter of 2012 for
smaller-sized enterprises.
Theres little point chewing over the
reasons for declining demand, but its
worth reflecting that the availability of
funding is not necessarily the main break
holding back business growth. Its quite
possible to develop a idea, grow a
company, win sales and innovate without
getting into debt. In fact, in some
instances, it might be more sensible to do it
yourself with your own savings.
Tom Welsh is financial features editor at
City A.M.
Government loans
arent hand outs
INNOVATION
DIARY
TOM WELSH
Not so fun if youre worrying
about the scratches
STAY LIQUID
At least 80 per cent of your portfolio
should be in liquid investments you
can sell immediately. This is not
because the world is falling apart, but
because there will be some amazing
buying opportunities for investors
over the next six months.
Part of this strategy should be to
keep about 30 per cent of your
investable assets in cash and short-
dated bonds. If you want to put your
money into property, hedge funds or
private equity, be sure to keep your
exposure low. Remember, you are
taking much higher risks when
putting your money into these
broadly illiquid investments
BOND PROSPECTS.
Bonds remain expensive but cant be
avoided. Depending on your base
currency, stick to top quality
government bonds over the longer
term UK gilts, German bunds and
US treasuries only. We advise most of
our clients not to own government
bonds more than three years in
M
AY I suggest a New Years
resolution? Spend some time
thinking about whether you
should top up your pension
pot. It does not have to take long,
and there are a number of good
reasons why it is important to act
sooner rather than later.
One is that chancellor George
Osborne announced changes to the
annual and lifetime allowances on
pension contributions in his
Autumn Statement last December.
From April 2014, the annual
allowance will drop from 50,000 to
40,000, while the lifetime
allowance (the overall ceiling on the
amount of tax-relieved pension sav-
ings you can make over the course of
your career) will fall from 1.5m to
1.25m. Although none of this kicks
in until the end of the next tax year
in April 2014, now is a good time to
maximise your pension savings.
Those concerned about the new
lifetime allowance can also register
for fixed protection 2014 so that, if
you are left with a pension pot of
between 1.25m and 1.5m, you will
not be penalised. However, once you
are registered, you will not be
allowed to make any further contri-
butions.
Another compelling reason for
looking at your pension this new
year is because of the carry forward
rule. If you did not use up your full
annual allowance in the last three
tax years, you can carry your leftover
tax relief into the current tax year. In
short, you have until April 2013 to
use up your allowances for the tax
years 2009-10, 2010-11 and 2011-12.
You can contribute more than your
annual allowance this tax year with-
out incurring a charge.
However, the ability to go back
three years and use up your remain-
ing tax relief operates on a rolling
basis. Therefore, any unused tax
relief from the 2009-10 tax year will
It is the perfect time to get
your pension affairs sorted
G
LOBAL equity markets have
started the year strongly.
Investors seem pleased that the
US fiscal cliff has been averted,
or at least deferred. Now the bigger
and more important issue is the US
debt ceiling, which will be reached in
spring 2013. Until then, financial
markets will likely remain volatile. In
the longer term, we are more
optimistic and see short-term
volatility as an opportunity to make
some good strategic investment
decisions.
FINDING VALUE
Large cap global equities look fairly
valued, and dividend yields remain a
meaningful component of returns.
Global equities are also a good
inflation hedge if you are optimistic
about long-term prospects.
It is important to remember that it
is company profitability that drives
share price appreciation, not
geopolitical events. Over the long
term, we are encouraged by fair
valuations along with better-than-
expected earnings numbers.
And the US is still the engine of the
world economy as big as the
economies of China, Japan and
Germany combined. In Europe,
equity markets look oversold, while
in emerging market growth
prospects continue to improve.
CHECK YOUR FEES
Total fees should be no more than 0.8
per cent of assets under
management. This includes
management fee charges, execution
costs, custody fee charges and any
rebates. Always understand clearly
what the charges are, and dont be
afraid to switch advisers or negotiate
them down when charges become
excessive. It is not in your best
interests to be in high cost
alternative investments. So-called
structured products only serve to
make the banks wealthy.
maturity. High quality short-dated
corporate bonds are an alternative
and can offer more return over cash
or government bonds.
Investors should avoid taking
significant credit and interest rate
risk, and remember that chasing
yield or income in the bond market
is the worst thing possible. And all
cash-like investments should always
be in your base currency. Investments
in other non-base currencies are
speculative in nature and just add
more risk to your portfolio.
GOLD BUBBLES
Gold remains in bubble territory, so
avoid the hype. Anyone buying at
current levels is basically speculating,
not investing. When market volatility
is high, investors sell their gold as it
seems to be viewed as a short-term
provider of liquidity or cash. The big
global investors have already made
their long-term money allocations to
gold. When markets recover,
investors again sell their gold and
reallocate money into riskier
18
cityam.com
PERSONAL FINANCE MANAGEMENT WEALTH
be lost if it is not used up before the
end of this tax year in April 2013.
According to pensions tax expert
David Fairs of KPMG, although you
might think you have plenty of time
to organise your pension savings
before these measures kick in, you
shouldnt leave it to the last minute.
Pension rules are complex and can
seem daunting, so seek professional
advice if you are unsure.
More importantly, make sure the
tax savings you gain are not eroded
by unnecessary fees. Some personal
pensions are very complex but most
are a simple way to take advantage
of tax breaks. Good service and
choice shouldnt lead to extra costs.
Be aware that some providers charge
more than the annual management
fee of the underlying funds, so do
your research to ensure that youre
getting good value for money high
charges compound over time and
can easily reduce your pension
funds overall return.
So, why not kick start 2013 with
your pension affairs in order?
Spending a small amount of time on
it now could make a huge difference
in the future.
Chris Davies is head of Fidelity Wealth.
Strategic investment in an uncertain 2013
assets, like shares and commodities.
Global markets are very uncertain
at the moment, but there are positive
signs that, over the longer term,
problems will get resolved and
markets will improve. In the
interim, do not get caught up in
all the short-term noise. Above
all, do not trade or speculate
around uncertain
geopolitical events.
Yogesh Dewan is chief
executive and founding partner
of Hassium Asset Management.
INVESTMENT
COMMENT
CHRIS DAVIES
Savers should plan how much to top up their retirement pots before new taxation rules come into effect
FINANCIAL
ANALYSIS
YOGESH DEWAN
G
E
T
T
Y
CASE STUDY: PENSION CONTRIBUTIONS
KPMG pensions tax partner David Fairs
illustrates the benefit of contributing
more towards your pension in this tax
year:
Tax Year Contributions
2009-10 25,000
2010-11 27,000
2011-12 29,000
John Smith has previously made the
pension contributions listed above. Johns
total contributions are 81,000. He had
the option to contribute 50,000 in each
tax years. Therefore, he still has 69,000
of tax relief available that can be carried
over, in addition to the 50,000 that is
available in the current tax year. John can
contribute 119,000 into his pension pot
in the 2012-13 tax year, including relief. If
John is a top rate tax payer, making these
contributions this year rather than next
could save him up to 5,950, due to the
reduction in the top rate of tax.
T
HIS week will see the
coalition government
publish a mid-term review
that will look back at its
achievements, and set the
agenda for the period running up
to the next general election in
2015.
In many ways, the coalition has
already exceeded expectations by
overcoming political differences to
still be a fully functioning
government halfway through this
Parliament. Few believed with any
certainty that this agreement
between the Conservatives and
Liberal Democrats would hold
together for so long.
The coalitions policy document
will be able to point to some
A
SOCIETY must provide its
people with certain basics,
including security, food and
shelter. A civilised society
should also provide freedom.
There is no precise definition of the
term, but it is basically a status that
allows people to do what they want,
provided they do not interfere with the
freedom of others. A market economy,
with restraints to prevent abuse, is a
necessary basis for this to work.
Freedom is not synonymous with an
easy life, however. It includes the free-
dom to fail, as well as to succeed. It
incorporates the necessity of making
choices and living with the conse-
quences. It is not necessarily fair. Some
individuals are born with greater abili-
ty. And while freedom may be consis-
tent with equality of opportunity, it is
not synonymous with equality itself.
The possibility of failure is important.
If we compensate those who deal with
businesses that fail because they are
badly run, others will bear the cost of
failure. Worryingly, governments are
now progressively curtailing freedom
by a process of salami slicing. They give
cityam.com/forum
Banking regulation
has made no effort to
incentivise prudence
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Agree? Disagree? Got a sharp comment?
The Forumwants you to join the debate.
Top responses will be reprinted in The Forum.
20
SIR MARTIN JACOMB
way to pressure groups by imposing
regulations, with the incidental effect
of restricting the freedom of others.
Any organisation seeking to avoid
mistakes like this must have a sense of
purpose. In other words, if it is to suc-
ceed, it needs an ideology. Freedom of
the individual should be that ideology.
You can see the need for purpose in the
contrast between the Olympics, where
the organisers had to take thousands of
decisions but with a single clear goal,
and the present coalition, which has no
visible ideology and has made numer-
ous blunders and U-turns. Its appetite
for inquiries into banking, Heathrow
and the media is just one sign of this
ideological vacuum.
This is also reflected in current bank-
ing regulation. A clear identification of
ideology would make things simpler.
There is an overriding need to ensure
the health of the financial sector as a
provider of vital services, as an earner
of foreign exchange, and as an employ-
er. But this has to be reconciled with
the need to keep banks as safe as possi-
ble to protect the taxpayer.
There is an inconsistency automati-
cally built into this banking is never
without risks and badly-run banks can
fail. For this reason, some regulation to
limit excessively risky conduct is always
needed. But the search for safety can be
carried too far. Too many restrictions,
and demands for much greater capital,
are liable to damage efficiency. We have
this problem now. Without an overrid-
ing principle the promotion of the
health of the economy and the free-
dom of our citizens it is a difficult
inconsistency to resolve. To do so
requires judgement, and this judge-
ment should be based on the need to
preserve as much freedom as possible.
Unfortunately, the approach to bank
regulation taken since the financial cri-
sis has been directed entirely to restric-
tion. There has been no attempt to
incentivise prudence. The damage
done to the flow of credit has been
great, and it has also damaged London
as a financial centre.
The current approach stems from the
idea that depositors must not lose their
money, and the view that some banks
are too big to fail. However, if depositors
do not worry about which banks are
safe, they will be tempted by better
returns from riskier banks. The incen-
tive to run a bank prudently falls. An
increase in risky behaviour follows and
brings with it the need for restrictive
regulation. But the large cost of all of
this, and the enormous cost of bank
failures, falls on the innocent public.
If those in authority had had the fore-
sight to stick with the principle of pre-
serving as much freedom as possible, to
allow buyer beware to prevail, and to
let badly managed banks fail, a great
deal of waste would have been avoided
and rewards would have gone in the
right direction. Preserving freedom
would have provided the guideposts.
Clearly some regulations are neces-
sary. But the test should be to restrict
the ambit of regulation to the mini-
mum needed to prevent abuse. The
idea that a purely pragmatic response
can work is misguided. The practice of
responding to problems with reference
to populist opinion will never lead to
good government. Indeed, it is fre-
quently the cause of misguided regula-
tion.
Monopolies and cartels must of
course be controlled. And when two
unequal parties contract with each
other, there have to be rules to safe-
guard the weaker party. But the right
approach should be to ensure that reg-
ulation does what is necessary but no
more than that.
Sir Martin Jacomb is chairman of Share,
former chairman of Prudential, former
deputy chairman of Barclays, and author of
Some Reflections on Freedom for the Centre
for Policy Studies. www.cps.org.uk
notable successes most recently
in the positive negotiations on the
European banking union that
safeguarded the interests of those
outside the Eurozone.
Nevertheless, it would be unwise
to become complacent on Europe
not least because it is likely to be
the defining issue of the next few
years. The Eurozone crisis is likely
to come to a resolution of one sort
or another over this period, while
the process of European
integration will continue to evolve
and will eventually require a new
EU-wide treaty to be passed.
The Prime Ministers speech on
the subject later this month needs
to outline a strategic vision for the
UK in this context. London is the
EUs financial capital, so it is
important to make the case for the
Single Market and the benefits it
brings to the UK and Europe as a
whole.
Our politicians and civil
servants have a critical role to play
in shaping the European debate by
engaging early in the legislative
process and building alliances
with other countries. The recent
successful banking union outcome
demonstrates that British
diplomacy can influence the
direction of travel in Brussels.
This will be increasingly
important, as other nations opt for
greater integration. Ensuring that
all voices across the EU both
those inside and outside the
banking union carry equal
weight needs to be a fundamental
principle for all European
institutions.
The coalition will have to work
hard over the coming years to
make the case for a level playing
field to be maintained at the heart
of the Single Market. It is the only
way to ensure that new regulation
supports a business environment
conducive to job and growth
creation.
Proposals like capping bonuses
relative to salary or Solvency II a
review of the capital adequacy
regime for the European
insurance industry will need to
be carefully considered and will
have to undergo thorough impact
assessments to ensure that they do
not damage the EUs international
competitiveness.
European policymakers must be
reminded that they are not acting
in isolation. This is a vital task for
the coalition government in the
second half of its term.
Mark Boleat is policy chairman of the
City of London Corporation.
CITY
MATTERS
MARK BOLEAT
The government must use its mid-term review to focus on our role in Europe
MORNING UPDATE
A.M.
The coalitions lack of purpose has
ruined our freedom to fail or thrive
THEFORUM
21
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one of todays columns? Do you have another subject you want
to share your opinion on? We want to hear your views.
Email theforum@cityam.com or comment at cityam.com/forum
Export revolution
[Re: We need an export-led revolution to
save the UK economy, Friday]
Exporting is a key area where the UK should
be doing better. An export-led revolution
should focus on small and medium-sized
enterprises (SMEs) that are not keeping up
with the pace of our overseas competitors.
Currently, only 20 per cent of UK SMEs
export, compared with 29 per cent globally.
At the London Chamber of Commerce,
supported by British Airways and KPMG, we
encourage small companies to explore
exporting through a series of private sector
trade missions. This enables companies to
research foreign markets and meet
potential trading partners in a cost-effective
way. But if we are going to see a significant
impact, more SMEs need to consider
whether they have an exportable product.
Some SMEs disregard selling abroad
because they are unaware of the benefits, or
they dont think they have a product or
service that is exportable. With the help of
UK Trade & Investment we are launching an
export challenge in the spring to guide
companies through the process. But we also
need government help to tackle trade
barriers. Access to foreign markets would be
vastly improved if we had a clear aviation
policy, for example. The more companies
can sell overseas, the sooner we can export
our way back to prosperity.
Peter Bishop, deputychief executiveof the
LondonChamber of CommerceandIndustry
A
FTER holding their breath
for the last few weeks, some
retailers can at last allow
themselves a cautious sigh
of relief. Positive sales
numbers from the likes of John Lewis
and Next have given the sector a
much-needed dose of optimism,
resulting in a slight hike in share
prices for some of the larger players.
But with relentless price discount-
ing across UK high streets to compete
with the Primark-Tesco effect, it
remains to be seen if good-looking
sales have come at the heavy price of
margin erosion. The old adage of
sales is vanity, profit is sanity has
never held so true. Like-for-like sales
growth can offer a rose-tinted view of
a retailers underlying health.
There is no room for complacency.
The recent news that two-thirds of
the UK population are struggling to
pay their housing costs offers cold
comfort to the retail sector. In the
face of hefty increases in costs for
transport, energy, food prices, and
petrol, UK consumers are starting to
buckle under the pressure. They are
increasingly gravitating towards
value retailers such as Aldi, Lidl,
Primark, and Poundland. When they
can buy the kids school uniform and
furnish the spare room all for under
20, traditional retailers are seeing
huge numbers of their loyal cus-
tomers migrating to the value play-
ers.
While larger shops are doing their
best to compete on price in this race
to the bottom, the hard fact is that
they do not have the low cost supply
chain that allows their cheaper com-
petitors to charge such low prices and
still make a profit.
As if this overwhelming price pres-
sure was not enough for retail chief
executives to contend with, they also
have to work out how to respond to
the relentless growth of online retail,
TOP TWEETS
UK service industries have contracted for the
first time in two years. If we fall into a triple-
dip, the chancellors role will be untenable.
@LucyRigby
Sterling sank heavily versus the dollar and euro
on Friday. Sir Mervyn King will be cheering, but
it means more imported inflation is on the way.
@asentance
Politicians make me laugh: moralising about
tax avoidance if they didnt create the
loopholes, companies wouldnt exploit them.
@MichaelHewson
When leaders in Brussels declare the euro
crisis to be over, its probably time to bale out.
@DanHannanMEP
Should the governments policy to cut child
benefit for higher earners be welcomed?
YES
These reforms are the next step to rolling back the culture of
benefits for all, and they should be applauded. Nobody earning
more than 50,000 a year needs extra money from the state.
Arguments against withdrawing benefits for the poor may be
compelling, but it is hard to feel the same way about benefits for
people earning over 50,000 a year. It may be awkward for
some to adjust, but it will not impoverish anyone. We need
similar reforms for all welfare. Only those who have no other
choice should get money from the taxpayer. The biggest problem
with these reforms is that they add to the high marginal tax rates
faced by these earners, discouraging work. Instead of making
more people dependent on the state, taxes should be lowered.
The era of state handouts for everyone, regardless of need, is
over.
Sam Bowman is a policy director at the Adam Smith Institute.
Sam Bowman
NO
John Whiting
The highest earners in households in receipt of child benefit face a
higher effective tax rate from today, thanks to the new high-
income child benefit charge. Assuming they do not elect to stop
receiving the benefit, a higher tax bill looms: every 100 over the
50,000 threshold means an amount equal to 1 per cent of child
benefit will be lost. A person with two children, receiving 1,750 in
annual child benefit, will lose 17.50 per 100 (17.5 per cent) in a
full year. On top of the 40 per cent higher tax rate that already
applies to such incomes, it implies an effective marginal rate of
57.5 per cent something to strongly consider when thinking
about other actions to mitigate the effect of the charge. More
children will mean a higher effective marginal rate. It could even
exceed 100 per cent, although you would need eight eligible
children.
John Whiting is a director at the Chartered Institute of Taxation.
RAPIDresponses
Flailing high street
has worse to come
in the year ahead
click and collect, and mobile shop-
ping. These present massive opera-
tional challenges to traditional
retailers, which have spent decades
optimising their businesses to deliver
pallet loads of stock to their stores,
not to deliver a cold pint of milk to
someones house.
A further blow is the structural
shift towards digital commerce.
Traditional high street retailers sell-
ing books, CDs and DVDs must now
be wondering when the end will
finally come.
Bill Grimsey and other prominent
retail commentators have recently
talked about the inevitable demise of
the high street. While some of this
may be hyperbole, it is difficult to
avoid the conclusion that the UK
high street will look very different in
three years time. So what can retail-
ers do about it?
They have to figure out how to offer
an attractive service to their cus-
tomers that is not simply about the
lowest price. They need to examine
every aspect of their operating mod-
els, stock management, and supply
chain, and make sure all the nuts and
bolts are fully tightened. Operational
efficiency used to be an optional
extra, today it is a critical necessity.
The uncomfortable truth is that far
too many retailers are woefully ineffi-
cient. They will not survive unless
they grasp this nettle, and fast.
Dan Murphy is a managing director at
Alvarez & Marsal, and has held senior roles
with retailers including River Island, Next
and House of Fraser.
DAN MURPHY
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LIFE&STYLE
22
cityam.com
TRAVEL
I
T HAS become a cliche to mourn
the death of the once unspoiled
fishing village that was St
Tropez the days when Brigitte
Bardot walked barefoot along the
Quai de LEpi and you could barter
over a freshly caught sea bass at the
pier. Or even the days when you could
still get a parking space. Yet it is still
makes for a rollicking good long
weekend or longer and you can
also still find its old fashioned charm,
if you scratch far enough beneath the
surface.
The town, situated 100km from Nice
airport, may have its naysayers, who
talk of its vulgar, perma-tanned clien-
tele and gold-plated Bugattis. Yet this
is where Kate Moss and her pals still
come ever year to feast on Club 55s
unmissable anchoiade over long
boozy lunches; it is where Elton John
rocks the scene with his entourage of
hunks; and it is still the place to go if
you want to see most of Europes go-
faster crowd party like it is going out
of fashion.
The trick is to go when it is a little
quieter and also live like the locals.
If you can go early or late summer,
and avoid the mega hoards of July and
August, then you will still get the glitz
without the grind. Those completely
in the know head there for the yacht
week in early October Le Voile de St
Tropez when out go the racy Herve
Leger crowd and in come the Loro
Piano clad yachting lot who are far
more understated. Resident locals
such as Tara Getty hold all night bash-
es on their yachts and it is possible to
get into the remaining open night-
clubs without having to bribe the
door-staff. This is off duty St Trop
and the weather is still glorious.
Base yourself at the legendary Byblos
(open between April 17 and October
27) the hotel that still rocks the
scene. Its restaurant, the B, serves an
excellent local version of tapas
Byniz and its nightclub Caves du
Roy is really (apart from private yacht
parties), the place you want to be seen
post 11pm. Bear in mind, though, that
it is social death to get there too early,
or, indeed, when the lights come up at
6am the carpets are not a pretty
sight after a particularly raucous
night. The hotels Sisley spa is the tick-
et for a mid-trip cleanse try the radi-
ance treatment with ginseng for a
pre-party facial pep-up. There are
some great deals early and late season,
when prices are slashed by up to 50
per cent, which, with the sometimes
whacking prices around the town, is
appreciated. Rooms are spacious
choose one with a balcony and view of
the poolside action.
Lunch at Club 55 on the beach is a
must, where rose is drunk by the mag-
num and chargrilled fish and steak
tartare keep the tables heaving all day
(and dont miss their to die for rasp-
berry tart). Granted, there are still the
obligatory sugar daddies doling out
Cartier Love bracelets to their young
floozies over pink fizz but this is half
the fun and it makes for some good
rubber necking if nothing else.
Warning: take lots of cash to St
Tropez, and if you are smart youll do
a pre-tox too to cleanse the liver.
Lunch at Club 55 can seamlessly slip
into afternoon drinks at Nikki Beach
(RIP Le Voile Rouge once the spot for
some outre afternoon fun, but closed
by the mayor in 2011), followed by
table-top dancing at Le Cave du Roi or
VIP club. Then wake up and repeat the
next day.
However, bling aside, if you scratch
beneath the surface you can find
some of the towns old charm.
Gawping at the mega yachts and man-
icured Chihuahuas (yes, for real) on
the jetty from the balcony of the hotel
Sube has to be done once and watch
in amazement as the clientele of the
yachts emerge. However, it is also won-
derful to head around the corner into
the Places des Lices and watch the
games of petanques. Bars such as Le
Cafe are reasonably priced and serve a
delicious Kir.
Another way of seeing a different
side of the city is to head to the food
market which is held twice a week.
Here, bright eyed marlin lie alongside
wriggling lobster, and around the cor-
ner an abundance of fruit and veg is
piled high, and being scooped up by
local inhabitants (they do exist). Take a
walk to the 17th century citadel, situ-
ated a little way out of the town on a
hill and admire the views of the har-
bour below.
However, if it is solace you seek
hire a bike through the Byblos, and
head into the hills, stopping off at
some of the many vineyards along the
way far less crowded than during
the height of the summer. The
concierge at the hotel will organise
entry to the vineyards. For keen walk-
ers, the St Tropez peninsular can be
explored along coastal paths, with
magnificent views across the waters.
The 12km hike takes you from
Pampelonne beach to the Portalet
Tower, taking in the vistas of Tahiti
beach and Cap de St. Tropez along the
way. Riders can take polo lessons in
the nearby St Tropez polo club or
watch a tournament the season
kicks off again on 6 April.
If this all seems too much like hard
work, you can of course just sit back
by the hotel pool or the comfortable
loungers at Club 55 and take a well-
deserved disco nap.
Despite its rep, St
Tropez is still where
Kate Moss and Elton
John choose to relax
I
F YOU want to get a flavour for
Cephalonia and stay in one of
the prettiest harbours, head for
Faros Suites in Fiskardo.
There's nothing ritzy about the
apartments but they're
comfortable, modern and tinged
with South African artefacts
installed by the owners who spent
their childhood there.
There are seven apartments,
some with sea-views, some
without. They all look on to a
small pool, which is blissful and
rarely populated by more than a
couple of cautious bathers.
Faros, which is managed by
Tassos Tselentis, a charming host if
ever there was one, has sister
properties in Fiskardo, some
looking onto a square in the
centre of the quaint town, where
other family members run the rest
of the business.
There are small beaches all
around, caves to visit and a
museum. But more than anything
it's the perfect base for a few days
to relax in the Greek sunshine
from anytime between April and
October.
Since discovering Faros ten years
ago, we've been back eight times,
we recently calculated. Its that
good. (visit farossuites.gr for more)
Enjoy Cephalonia in style at Faros Suites, Fiskardo
The quaint harbours at Fiskardo are some of the most stunning in the world
Jemima Sissons
discovers St Tropez
isnt only perma
tans and Bugattis
St Tropez: glitz, glamour
and a little genuine beauty
The old port at dusk
David Hellier
Fly to Nice with BA: (ba.com)
Byblos, St Tropez (+33 4 94 56 68 00,
byblos.com) offers classic rooms from
424* per room per night.
23
Madrid might just be the best
capital city youve never been to
T
O MOST Brits, Barcelona is the
Spanish city. The whacky
cathedral by Gaudi that isnt
finished almost 90 years after
he died, Barca the only football
team in the world that leads a
debate on independence, Las
Ramblas, F1, the list goes on. Yet to
the Spanish, Madrid is their Capital,
not just in name but in style,
fashion, culture and, yes, football.
Its a magnificent city, Madrid.
Three of the best museums in the
world are here, and maybe the
worlds most amazing park. A few
years ago the city fathers decided
the six mile long motorway that
bisected the city was a disaster for
anyone living nearby so they
buried it. Then they covered it with
Madrid Rio, a 10 kilometre park
containing the river (now clean
and vibrant where before it was
stagnant), riverside walks, cycle
and roller skate routes, cafes and
bars. There are restored bridges
and magnificent new ones. Instead
of being bisected, the city is now
homogeneous. It is a triumph of
daring urban planning and has
transformed the city.
Of course, Spain has its problems.
Dont mention Frau Merkel in a
Madrid bar and expect a cordial
response. But those problems,
ironically, mean that for us non-
Eurozone inhabitants, Madrid is
also something of a bargain.
So, what to do when in Madrid?
Id start by going to the old post
office. Yes, I know, what could be
more boring? And yet, confronted
by the Palacio de
Communicationes is to be
reminded of a world when the
delivery of mail was the lifeblood
of commerce and social life,
romance and despair. Now a bit of
a dodgy art space, the hero is the
building itself.
Madrids Royal Palace is
extraordinary. According to my
guide, when King Phillip the fifth,
the first Bourbon King of Spain,
arrived at his new home he was a
little disappointed by its scope. On
his first Christmas in residence
while he was at a party elsewhere
and when all the precious contents
and everyone living there had been
removed it caught fire and was
completely destroyed. Overcoming
his disappointment Philip
instituted a programme of building
that latest 26 years and produced
what may be the largest palace in
the world. The final rooms were
decorated 100 years after
construction started. The official
tour takes 65 minutes yet accounts
for just 5 per cent of the total area.
What else? Well, Placa Mejor is
special. An early Kings mistress
was a bit of a diva and wanted to
appear in front of the crowds
during fetes, bullfights, hangings
and other crowd-pleasers. His wife,
however, wasnt so keen and
demanded that she was kept out of
sight. So, as you cast your eye
around the giant square, notice
there is only one recess it was
here that the mistress held court
unseen by the Queen on the
opposite side.
Not that Spanish Queens were
particularly virtuous. The Botin
restaurant has two major claims to
fame. Firstly, it is the worlds oldest
continually-operating restaurant
entertaining bon-viveurs since 1725
and it was also where another
Queen entertained her lovers. It is
also recommended by Frederick
Forsyth, if that catches your fancy.
While in the area, go to San
Miguel market. The fabulous cast
iron structure is now a foodie
heaven, where you can buy
anything from seasonal wild
mushrooms, over 100 varieties of
cheese or fresh oysters and coffee
and (very) sticky buns.
Madrid, then, is a surprise. I
wouldnt go there for a fortnight
but for a four-day break it might
just be the least known of Europes
great capitals and rewards the
adventurous. It is small, so walking
around is possible. Spanish cuisine
is now recognised as among the
worlds finest be it tapas,
Santceloni or the wonderful
Baroque magnificence of Paco
Ronceros two Michelin-starred
Terraza Restaurant at the Casino.
One of the best places to be
based is a presidential suite at the
Hotel Hesperia on Castellana, the
road from the airport to the city
centre. For most of the year, the
outside combination of jacuzzi,
relaxing and dining areas is a
blissful retreat from the heat of the
city. And downstairs is one of
Europes finest restaurants
Santceloni.
The Spanish have an imperious
disdain for the conventions many
of us deem inviolable. For example,
you might think a two star
Michelin restaurant should be
formal, the waiter a pain in the
bum, the food perfect but a bit
stuffy, the wine ludicrously
expensive. And while a meal at
Santceloni is not a steal youll
spend 150 a head with a decent
drop or two of wine you will also
have a stylish, relaxed evening. And
thats because of another
Madrileno characteristic their
sheer enjoyment of life . If
hospitality means generosity and
if it doesnt it should do then this
restaurant is far superior to the
mean spirited specimens that so
often masquerade as Michelin-
starred.
Of course the hotel has other
restaurants including a sushi bar
and La Manzana from Estaban
Gonzales, the man tipped to be the
citys next Michelin-starred chef
with his inventive take on tapas.
My lasting memory of this capital
city in one of Europes most
economically depressed countries is
the life-affirming enthusiasm of the
Madrilenos. Well, that and the
jacuzzi outside my presidential suite.
Tanya Mehmet explains why there is more to Spain than Barcelona and economic woes
NEED TO KNOW
Dont mention Frau
Merkel in a Madrid bar
and expect to receive
a cordial response
HOTEL HESPERIA
Paseo de la Castellana, 57. 28046,
Madrid
hesperia.com/nh/en/hotels/spain/ma
drid/hesperia-madrid.html
Reservations
Phone: +34 913 984 661
Email: hotel@hesperia-madrid.com
Room rates
nDeluxe: 200 BB
nDeluxe U.nique: 240 BB*
nPremium: 220 BB
nPremium U.nique: 260 BB*
nJunior: 300 BB
nJunior U.nique: 340 BB*
nExecutive suite: 1000 BB
nPresidential suite: 1500 BB
All mentioned prices are VAT excluded.
*All U.nique rates include Rituals
amenities and Bvlgari in junior and
presidential suites.
Gastronomic Getaway Package
Available 1 January-31 December 2013
INCLUDES
nOne night in exclusive junior suite
nBuffet breakfast
nDinner at the prestigious two
Michelin star restaurant Santceloni,
including appetisers, two starters,
main course, dessert, coffee and petit
fours, wine pairing and mineral water
nLate check-out
nWi-fi
nBvlgari amenities
nSkyGym access
Total for two people is 560 including
VAT, subject to availability.
Air Europa
Air Europa is Spains second largest
airline and operates out of Madrid to
36 destinations in 16 countries.
For further information and details on
prices, routes and flight schedules
please visit aireuropa.com
The fabulous cast
iron Miguel market is a
foodie heaven with over
100 types of cheese
24
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7.30pmLive Irish Football
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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
digits1-9 and you must not
use the same digit twice in
a block. The same digit may
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row or column, but it must
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COFFEE BREAK
Using only the letters in the Wordwheel, you have
ten minutes to nd 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.
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.
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk
KAKURO
QUICK CROSSWORD
LAST ISSUES
SOLUTIONS
KAKURO
WORDWHEEL
SUDOKU
SUDOKU
QUICK CROSSWORD
WORDWHEEL
1 2 3 4 5
6
7
8 9
10 11 12
13 14
15 16 17
18 19
20
21
22
30 26
45
13
8 16 13
45
35
45
4 17 6
27
45
10 12
17
10
11
6
14
9
4
7
11
29
21
9
31
45
42
7
23
11
15
16
5
12
10
3
14
8
7
ACROSS
1 Distinctive odours (6)
6 Materialise (6)
7 Part of an animal (4)
8 Abominable (6)
10 Brook (5)
13 Confer dignity or
honour upon (7)
16 Flavour (5)
18 Collection of
townships to the
south-west of
Johannesburg in
South Africa (6)
20 Computer modem
data transmission
rate (4)
21 Less light in colour (6)
22 Drool (6)
DOWN
1 Trick (5)
2 Reduced to
liquid form (6)
3 Milk pudding
ingredient (4)
4 Takes away (7)
5 Thin slice of potato
fried in deep fat (5)
9 Financial
obligation (4)
11 Nematode (7)
12 Entanglement (4)
14 Greek L (6)
15 Digression (5)
17 Tree which
produces berries
in autumn (5)
19 Belonging to us (4)
A
I
R
N
L C
B
U
T

4

4
4

C E R I S E B N
A U A V E N U E
N I N E S A R
V N S T U D I E D
A T E N N Y
S E L F A S S U R E D
R K E A V E
P R O T E S T R A
I B O B E L L
N E P A L I L E
R R L A W Y E R
5 3 1 2 4 2 1 6
8 4 7 1 3 5 6 2 9
6 2 8 9 9 5 8
9 8 7 8 2 7
6 8 9 7 4 7 9
9 5 1 7 6 3 8 4 2
6 1 5 2 1 4 3
7 8 5 2 1 4
9 3 8 1 2 2 9
7 2 9 3 4 8 1 5 6
3 1 6 2 9 3 6 8
4
4
4
4
4
4
4
4
4
The nine-letter word was
TRAMPLING
T
E
R
R
E
S
T
R
I
A
L
S
A
T
E
L
L
I
T
E
&
C
A
B
L
E
BBC1 BBC2 ITV1 CHANNEL4 CHANNEL5
MIRANDA
BBC1, 9PM
The shop owners friends accuse her of
being immature, so she sets out to
prove she can officially be an adult.
With Miranda Hart and Tom Ellis.
LEWIS
ITV1, 9PM
Following the murder of a psychologist
who was moonlighting as a psychic,
Lewis struggles to unravel the victims
baffling double life.
THE HORSE HOARDER
CHANNEL4, 8.30PM
Documentary following the life of
pensioner Clwyd Davies, who
dedicates his every waking moment to
caring for 52 untamed horses.
TVPICK
SARACENS director of rugby Mark
McCall believes Stuart Lancaster
should be looking at David Strettle
for his England Six Nations squad
after the wings star turn against
Sale Sharks yesterday.
Strettle scored a second-half try
and set up another for Charlie
Hodgson against his former club as
Saracens eased to a 32-12 victory over
the Aviva Premierships bottom club
at Vicarage Road.
Owen Farrell is almost certain to
be named in Lancasters elite squad
on Wednesday after the fly-half
impressed with 22 points, but McCall
would not be surprised if Strettle
joins him.
David Strettle was made man-of-
the-match and he was magnificent,
he said. Hes really relished this
opportunity to play on the left wing
and England dont have that many
natural left wingers.
No one has been putting their
hands up as an out-an-out starter and
the last five weeks has seen some of
the best rugby Ive seen from him.
Strettle tipped
for Six Nations
England recall
Elsewhere, champions Harlequins
returned to the top with a 31-26 win
at London Welsh, but the Exiles boss
Lyn Jones was pleased to collect a los-
ing bonus point given their 40-3 ham-
mering by Quins in round two.
Were showing weve got determi-
nation, were showing weve got spir-
it but the biggest thing were
showing is that were good enough to
stay in this league, said Jones.
Weve settled as a team since that
cold wet night at the Stoop weve
built, and I think we deserved the
bonus point. Theyre a very ambitious
side and its a shame more teams in
England dont play like them.
London Wasps climbed into the top
four with a 29-15 victory over Bath
Rugby at Adams Park, while on
Saturday, George Skivington inspired
London Irish to their first triumph in
seven Aviva Premiership games with
an 18-12 victory over Gloucester.
Aviva is proud to be title sponsor of Aviva
Premiership Rugby, one of the world's lead-
ing rugby union competitions. Each season
will feature 135 games, which will be
watched by 1.7 million people live at the
grounds. Visit www.premiershiprugby.com
F1 disorganised, blasts Sir Jackie
THREE-TIME Formula One
champion Sir Jackie Stewart has
launched a stinging attack on
motor racings governing body the
FIA, saying that it needs to change
to boost the sports credibility.
Stewarts outburst follows the
uncertainty over Red Bull Racing
driver Sebastian Vettels narrow
championship victory over Ferraris
Fernando Alonso at last years
season-ending Brazilian Grand Prix.
Vettel was eventually cleared of
wrongdoing, having appeared to
have overtaken illegally, but only
after a shadow had been cast over
the Germans third consecutive
title triumph.
Stewart said: Was the
judgement of yellow and green
flags right or wrong in Brazil and
why would that have to come up on
a Wednesday or Thursday? That is a
huge statement of a disorganised
function that it should come up
then. The whole world is
celebrating a new world champion
and then that happens on a
Wednesday. That is a poor
declaration of management.
An FIA spokesman insisted: It
was not a lack of management as
there was no case to answer. Race
control did not refer this to stewards
because it was not deemed to be an
incident.
Stewart puts the confusion down
to the lack of the same stewards at
every race a situation in place
since 2008, when lone authority
Tony Scott Andrews stepped down
and was replaced by multiple
officials.
How can you possibly have four
different stewards at every Grand
Prix? Why have you not got one
professional? said Stewart, who
called for one man who goes to
every race who is going to make
consistent judgements and has got
authority.
The addition of a former driver to
the line-up is one of the decisions
which has been driven by FIA
president Jean Todt who took over
from his controversial predecessor
Max Mosley in 2009.
I am surprised how silent Todt
has been, said Stewart. I expected
him to have more presence. I dont
know whether hes biding his time.
I dont think he is by any means not
smart so there must be a reason.
Strettle, playing on the left wing, scored one try and set up another against Sale
BY BEN BAKER
ENGLAND batsman Ian Bell has
staked his claim to remain at the
top of the order for the tourists
upcoming one-day series in India,
despite the team succumbing to a
demoralising defeat at the hands of
an India A side yesterday.
Bell, who opened the batting
alongside Kevin Pietersen, top
scored with 91 runs in Delhi, yet
England were bowled out for 175
more than 50 runs short of their
target of 229, calculated by the
Duckworth-Lewis method.
Ive enjoyed opening, 100 per
cent, its gone really well in the last
three series, said the Warwickshire
man. Weve got plenty of options
but its something Ive really enjoyed
and something hopefully I do
consistently now. Its
nice to be at the top of
the order and get
some time in the
middle.
Captain Alastair
Cook missed
yesterdays warm-up
match through
illness, but could
return for
tomorrows day-
night tie against
Delhi. The first of
Englands five ODIs is
played on Friday in
Rajkot, with Cook
expected to lead the
side. He could open with
Bell, shuffling the
mercurial Pietersen down
the order.
Kev played really well
actually, Bell said of Pietersen,
despite his partner being out
for only 19 runs.
Its a shame he got out but I
guess at the top of the order,
with the fielding restrictions,
you have to take the odd risk.
But he was going really nicely
and it was a shame to lose him.
After Pietersen fell at the end of
the seventh over, England lost
momentum. Former Ashes hero
Ashley Giles, coaching the team for
the first time, had to watch Samit
Patel, Eoin Morgan, Jos Buttler, Craig
Kieswetter and Chris Woakes all be
dismissed for a combined 17 runs.
Englands tail wagged briefly with
respective knocks of 22 and 15 from
Tim Bresnan and Steven Finn, yet
they were bowled all out for 175
after 36 overs. Indias 39 overs ended
on 224-4. The game had originally
been delayed for bad light.
Elsewhere in Delhi yesterday, India
beat Pakistan by 10 runs to prevent a
whitewash in the three-match ODI
series, which the tourists won 2-1.
BY JULIAN HARRIS
Ian Bell top scored for
England with 91 runs
SPORT
25
cityam.com
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Bell hits top note in opening role audition
EXCLUSIVE
BY CHRISTIAN SYLT
ENGLANDS Nick Matthew and
Laura Massaro both fell short at the
World Series Squash Finals at
Queens Club yesterday.
Massaro lost in straight games to
world No1 Nicol David for the
second successive tournament in
the womens final, before Matthew
was beaten 3-1 by Egyptian Amr
Shabana. The Englishman took the
first set 11-4, but Shabana showed
class to upstage the world No2, and
praised his rival.
Nick is one of the best athletes
out there, Shabana said after
retaining his crown. When you
play him there are very few areas of
the court to hit to where he wont
punish you.
English lose
squash finals
BY JONNY SINGER
WORLD footballs most powerful
man Sepp Blatter has urged players
not to follow the example of AC
Milans Kevin-Prince Boateng,
accusing the Ghanaian of running
away and arguing that this is not
the solution.
Boateng led his team-mates off the
pitch on Thursday after suffering
racist abuse from fans at fourth-tier
Pro Patria, prompting the match to
be abandoned a move that was
supported by his club.
Fifa president Blatter yesterday
responded by reiterating that there
is zero tolerance of racism in the
stadium from his governing body,
but stressed that federations, rather
than players, should lead the way.
Walk off? No. I dont think that is
the solution, he said. The Italian
federation have yet to provide Fifa
with the report detailing what
exactly has happened. I dont think
you can run away, because
eventually you can run away if you
lose a match.
This issue is a very touchy
subject, but I repeat there is zero
tolerance of racism in the stadium
we have to go against that. The only
solution is to be very harsh with the
sanctions, and the sanctions must be
a deduction of points or something
similar.
Blatters comments follow
criticism of European footballs
governing body Uefa, after they last
month fined Serbian football chiefs
just 65,000 for their fans racist
abuse of England U21 players. The
sum was 15,000 less than Denmark
striker Nicklas Bendtner was fined
for revealing branded underwear
during last summers European
Championships.
This action is an example that
the spectators must behave well
because, as I understand it, the
player ran away and the others went
with him, he added. They cannot
go on abusing afterwards.
Boateng had been widely praised
for his action, with manager
Massimiliano Allegri and club
president Silvio Berlusconi both
stating that the players would be
encouraged to act in the same way
should further racist incidents occur.
The former Tottenham midfielder
has vowed to do the same in a major
game, while Milan players wore T-
shirts with anti-racism messages on
them before Sundays match against
Siena at the San Siro.
Walk-off wont
solve racism,
insists Blatter
ARSENAL manager Arsene Wenger
insisted his side has been unfairly
denied a penalty after Danny
Grahams 87th-minute equaliser
denied them a place in the FA Cup
fourth round.
Wenger fumed at referee Howard
Webbs failure to penalise a trip on
midfielder Aaron Ramsey, arguing
the official had seen the foul but let
off Swanseas Dwight Tiendalli.
A lively tie saw Michu put the
hosts ahead on the hour, before sub-
stitute Lukas Podolski and a fine vol-
ley from full-back Kieran Gibbs
appeared to have sent Arsenal
through.
It was one and the referee saw it,
Wenger said of the penalty claim.
You know why he didnt give it?
Because he thought the guy had not
done it on purpose. It was accidental
but he [Ramsey] didnt trip himself.
He was caught clearly by the leg of
the Swansea player. He had a hesita-
tion, the referee, and in the end he
didnt give it.
A replay a week on Wednesday for
the right to face Brighton means
Arsenal could play seven times this
month, though Wenger resisted sug-
gestions it would increase pressure
to make January signings.
Lets first keep the players we
Penalty call
irks Wenger
as Gunners
pegged back
have and maybe add one or two, he
said. We lost [Marouane] Chamakh
and [Johan} Djourou [both on loan],
so theres some room.
Swansea manager Michael
Laudrup rested regular starters
Michu, Pablo Hernandez and Angel
Rangel, while Wenger left Thomas
Vermaelen and Podolski on the
bench, and both sets of subs would
prove decisive.
Former Arsenal defender Kyle
Bartleys header onto the top of the
bar was the best chance of a tepid
first half, but Michu ignited the con-
test on 58 minutes within seconds of
coming off the bench.
The Spanish forward lifted a loose
ball over Per Mertesacker, who he tor-
mented in the 2-0 Premier League
win in north London last month, and
held off two defenders before
stroking past Wojciech Szczesny.
Gunners striker Olivier Giroud
headed off-target and Theo Walcott
dragged a shot wide before Podolski
spun and rifled past Michel Vorm
after Swansea had failed to clear a
corner in the 81st minute.
Left-back Gibbs looked to have
clinched the comeback two minutes
later when he played a one-two with
Giroud on the edge of the penalty
area before lashing a volley high past
Vorm. But Arsenals familiar defen-
sive frailties were exposed again just
moments later when a Swansea cor-
ner caused chaos and Graham swept
home the equaliser.
Michu (right) scored the opening goal,
though Arsenal hit back through Podolski
and Gibbs before Grahams equaliser
26
SPORT
cityam.com/sport
BY JONNY SINGER
SWANSEA CITY...........................2
ARSENAL....................................2
BY FRANK DALLERES
THE F.A. CUP
MANSFIELD TOWN......................1
LIVERPOOL.................................2
BY JULIAN HARRIS
THE F.A. CUP
@cityam_sport
Blatter has called for points deductions
Suarez has scored 19 times this season
Suarez hands Reds cup victory
LIVERPOOL boss Brendan Rodgers
last night stuck by his controversial
forward Luis Suarez, despite
admitting that the Uruguayan
handled the ball for a goal that
knocked non-league Mansfield out
of the FA Cup.
New signing Daniel Sturridge
gave the Reds an early lead, but a
second goal only came on the hour
mark when Suarez appeared to
control a deflected ball with his
right hand to score from close range.
With Matt Green netting for the
home side in the 79th minute,
Suarezs goal proved crucial.
Its not Luis job to do that,
Rodgers said when asked if Suarez
should have owned up to the offence
in question.
There is no doubt it was handball
but the officials have seen it was not
deliberate. I asked the fourth official
if it was handball and he said it was.
It is unfortunate for Mansfield and
lucky for us we got the goal.
Liverpool, who will play Oldham
in the fourth round, burst out of the
traps at the start of the game, and
were soon ahead.
On seven minutes Jonjo Shelvey
played a slide-rule pass and debutant
Sturridge, a 12m arrival from
Chelsea last week, curled a simple
shot inside the far post.
The England striker was
withdrawn for Suarez 10 minutes
after the break, the substitute
scoring his debatable goal his 19th
strike of the season within five
minutes of coming on.
A close range effort from Green
gave Mansfield hope, but the Stags
could not find an equaliser despite
pressing hard until the final whistle.
27
IN BRIEF
Adams beaten by Dutch teenager
nDARTS: Three-time champion
Martin Adams crashed out of the BDO
world championship in the first round
yesterday at Lakeside. Adams lost 3-2
to Dutch 18-year-old Jimmy Hendriks.
Robson loses to American starlet
nTENNIS: Britains Laura Robson fell
out of the Hobart International
yesterday, losing in two sets, 6-4 7-6
(7-4), to the USs Sloane Stephens.
Saunders appointed Wolves boss
nFOOTBALL: Dean Saunders has left
Doncaster Rovers to become the new
manager of Wolves.
He relished his opportunity to play on the
left wing and England dont have many natural
left wingers
cityam.com
BRITAINS Andy Murray appeared to
dedicate victory to friend and Davis
Cup team-mate Ross Hutchins, who
has been diagnosed with cancer,
after defending his crown at the
Brisbane International yesterday.
Murray stepped up his
preparations for next weeks
Australian Open in encouraging
fashion by beating Bulgarian world
No48 Grigor Dimitrov 7-6 (7-0), 6-4 in
little more than 90 minutes.
The Scot then struggled to control
his emotions at the trophy
presentation, where his
words appeared to refer to
27-year-old Hutchins,
who it emerged
yesterday is battling
Hodgkins
lymphoma.
Id like to
dedicate this
victory to one of my
best friends, said
Murray. Hes back
home watching and youre
going to get through.
Murray, 25, has represented
Britain alongside doubles
specialist Hutchins in the Davis Cup,
while the pair were also part of the
tennis squad for last years London
2012 Olympics.
The US Open champion,
who is targeting consecutive
grand slams in Melbourne,
came from 3-0 down in the
first set and a break down in
the second against his 21-
year-old opponent, who
was playing in his
maiden ATP Tour final.
Murray (left) beat Grigor
Dimitrov in straight sets
CHELSEA have been rewarded for
Saturdays 5-1 demolition of
Southampton with a trip to
Southend United or Brentford in the
FA Cup fourth round.
Arsenal will head to the south
coast to face Championship side
Brighton if they can overcome
Swansea City in a replay.
West Ham and Fulham could be
on course for the only all-Premier
League London derby, but only if
they both win their replays, away to
Manchester United and Blackpool
respectively.
Tottenham will face lower league
opposition for the second round in a
row, travelling to the winner of Leeds
and Birminghams replay, while
Championship high-fliers Crystal
Palace will host top-flight champions
Manchester City if they beat Stoke
City at the second time of asking.
Kieron Dyers last minute
equaliser for QPR has earned them a
home tie against Sheffield
Wednesday or MK Dons if they can
see off West Brom at the Hawthorns,
with fellow strugglers Aston Villa
away to Millwall.
The lowest ranked London club
still left in the hat, Leyton Orient,
will host Barnsley if they can first see
off Hull City in their replay.
Chelsea facing
lower league
round four trip
BY JONNY SINGER
How can sport in 2013 possibly live up to
the fun of 2012? Luckily, we have no idea
I
F I had a pound for every person
who put a note in their Christmas
card saying how on earth will the
sport of 2013 match 2012?, Id
have four pounds.
But fear not, miseries. A vintage
12 months lies ahead, starting with
jockey Frankie Dettori winning
Celebrity Big Brother, and then after
a brief spell at scrum-half for Italy in
the Six Nations, and suitably
rehabilitated into the publics good
books, winning the Derby two
weeks after returning to the saddle
following his drugs ban.
A last minute drop-goal by Richie
Gray will give Scotland victory in
the final match of the Six Nations
against France, handing England
the title by default.
GREATEST
The British and Irish Lions will then
come back from losing the first Test
in Australia to win the series 2-1
with a last-gasp try from substitute
Stuart Hogg, converted by Toby
Flood another fine example of the
Anglo-Scottish accord.
The Ashes will rival the 2005
series, with England stuttering in
the opening two Tests, only to
triumph 3-2 when captain Alastair
Cook creates history, carrying his
bat in both innings in the final
match at the Oval.
Chelsea will beat Manchester
United 4-3 in the greatest FA Cup
final ever, Frank Lampard in his
final match for the club scoring the
first hat-trick since Stan Mortensen
sixty years earlier.
United manager Sir Alex
Ferguson, incandescent at only 16
minutes of added time being played,
will resign live on television,
forgetting that the following week
his side are in the Champions
League final against Barcelona.
Rafael Benitez, sacked as Chelsea
boss after the FA Cup Final, will then
take charge of United for a single
match, when Rio Ferdinands last-
minute bicycle kick from outside the
penalty box will make United
champions of Europe.
CONTROVERSY
Andy Murray, third in Sports
Personality of the Year in 2012, will
be runner-up in 2013 behind Cook,
despite winning two grand slam
titles, but losing a five-set
Wimbledon final to the unseeded
comeback story of the year, Lleyton
Hewitt, proving the Aussies can at
least win one thing. Next year, says
Murray.
Honest. Thats how 2013 can
follow 2012.
And then of course it will be 2014.
A year that will end in huge
controversy when, following his
victory in three of tenniss grand
slams, including Wimbledon,
Murray is overwhelming favourite to
succeed Cook as Sports Personality
victor.
Except Scotland will have just
voted to become independent,
thereby ruling him out.
You see, pessimists, what the
amazing 2012 taught us was that
sport has no script. Sometimes you
really cant make it up.
SPORT
COMMENT
JOHN INVERDALE
In association with
Unknown sporting dramas are likely to lie around the corner for Frankie Dettori (top), Frank Lampard (left) and Alastair Cook (right)
Fourth round draw
Norwich v Luton
Oldham v Liverpool
Macclesfield v Wigan/Bournemouth
Derby v Blackburn
Hull/Leyton Orient v Barnsley
Middlesbrough v Aldershot
Millwall v Aston Villa
Leeds/Birmingham v Tottenham
Brighton v Swansea/Arsenal
Crystal Palace/Stoke v Manchester City
West Ham/Manchester United v
Fulham/Blackpool
Southend/Brentford v Chelsea
Reading v Sheffield United
Huddersfield v Leicester
QPR/West Brom v Sheffield
Wednesday/MK Dons
Bolton/Sunderland v
Cheltenham/Everton
Ties to be played weekend of 26 January
BY FRANK DALLERES
BRITISH tennis player Ross
Hutchins has revealed he is
battling Hodgkins lymphoma, a
form of cancer that affects the
immune system.
The 27-year-old, ranked world
No28 in doubles, has represented
his country in Davis Cup and at
last years Olympic Games.
Hutchins wrote on Twitter: I
will be away from tennis for a
while as I was recently diagnosed
with Hodgkins lymphoma.
I have cancer,
says Hutchins
BY FRANK DALLERES
Murray pays tribute to ill friend after win in
Brisbane boosts hopes of back to back slams
Saracens director Mark McCall talks up David Strettle
Star Deals
Ultimate Internet 500 Plan.
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