Economics
Britain’s services sector shrank at its fastest for at least 12
years last month, according to the CIPS/Markit purchasing managers survey of
its conditions. The headline index of activity fell to 46.0 last month, its
lowest since the survey began in July 1996. Any figure under 50 indicates
contraction. Outstanding business in services firms fell to the lowest since
1996, and incoming new business was barely above survey lows.
Britons have ended a decade of cashing in on the value of their homes
to pay for big-ticket consumer spending, the Bank of England revealed
yesterday.
The US services sector barely grew last month, according to the latest
survey from the Institute for Supply Management. Its headline index of
conditions for last month fell to 50.2, from August’s 50.6. A reading above
50 signals growth.
The eurozone services sector has continued to shrink, with activity
mired at a five-year low last month, Markit’s purchasing managers’ survey
showed. Its headline index fell to 48.4, from 48.5 in August, lingering just
above a five-year low of 48.3 hit in July.
US employment fell last month by 159,000 as businesses cut staff,
giving the ninth successive monthly drop and the biggest for 5½ years. The
fall left US unemployment unchanged at a five-year high of 6.1 per cent as
121,000 also left the workforce. The official data fuelled expectation that
the Federal Reserve may cut interest rates by up to half a point this month.
Banking
& finance
Optimism rose last night that a line may soon be drawn under the worst
of the global credit crisis as US lawmakers backed the Bush Administration’s
$700 billion bank bailout.
The Bank of England acted again yesterday to ease funding stresses
facing banks. It said it will now accept high-grade corporate loans from
bank groups as security for three-month funding lent in its weekly auctions.
The Bank is to offer £40 billion at its next auction on October 7 and will
continue the weekly extended collateral auctions until at least November 18.
British bankers reacted furiously last night to Irish banks
cold-calling their customers to try to lure their deposits after the
controversial account guarantee given by the Irish Republic’s Government
this week.
Fortis’s break-up began last night as the Dutch Government bought the
Benelux financial group’s Netherlands operations in a €16.8 billion (£13
billion) rescue. The company is already partly state-owned after Holland,
Bel-gium and Luxembourg took stakes at the weekend.
UBS is to cut 2,000 investment banking jobs and shut its commodities
division. It has already announced 7,000 job cuts this year after US
sub-prime writedowns.
Wachovia, the embattled US bank, yesterday dramatically reneged on a
deal struck last Monday to be taken over by Citigroup. It has turned instead
to a better offer from Wells Fargo.
American International Group, the insurance giant bailed out by a US
government loan, has unveiled plans to slim down.
Old Mutual, the life assurer, said that Skandia, its Swedish
subsidiary, has been ordered to pay £47 million to settle a dispute over the
sale of Skandia’s asset management arm in 2002. Payment will be largely from
£41 million that Old Mutual set aside before acquiring Skandia in 2006.
Barclaycard customers have been unable to access their online accounts
for several days because of “high demand” for the service. The website
crashed on Thursday last week and access has not been fully restored since.
A Barclaycard spokesman said: “We fully understand how frustrating this must
be for our customers and are doing all we can to solve the issue.” Customers
needing account details can call Barclaycard on 0844 811 9111.
Construction
& property
Taylor Wimpey, the troubled housebuilder, said it is still in talks on
altering the terms of its debt. However, hopes that the talks with banks and
private placement holders could be concluded in the next few weeks have been
dashed as the company has extended talks to include Eurobond holders. It
said renegotiation of covenants on its £1.7 billion debt would now take
longer and settlement was unlikely before the new year.
Capital & Regional said that the Junction Fund’s banks have agreed
to relax the 60 per cent loan to value (LTV) covenant on its facility to 70
per cent for 12 months. The LTV based on August 31 valuations would be 56
per cent, the co-investing property asset manager added.
Consumer
goods
Carlsberg, the Danish brewer, said that development in its key Russian
market is estimated to have been slightly down in the third quarter, against
last year’s third quarter. Carlsberg blamed poor weather in the region.
Heineken, the Dutch brewer, said it had gained regulatory consent in
the Irish Republic for acquiring Beamish & Crawford, a Scottish &
Newcastle subsidiary. There had been suggestions that, because of its
existing Irish presence, Heineken would have to sell some brewing assets to
gain approval.
Engineering
Elektron, the maker of electromechanical components, reported a fall in
first-half profits amid tough conditions. The company said current economic
turbulence may provide further opportunities for growth through acquisition.
Tata, the Indian group, yesterday abandoned a partially completed
factory in West Bengal that was to build the world’s cheapest car, the
£1,250 Nano, after months of violent protests by local people in a land
dispute. The step will cost up to $350 million (£197 million) in investment
to be written off, plus relocation costs of $100 million, analysts say.
Indian business leaders fear India’s standing as an emerging industrial
power will suffer.
Health
United Drug said results for its year just ended will be in line with
its forecast of a double-digit percentage rise in profits and that it
remains positive on core markets.
Industrials
ArcelorMittal, the steel group, is standing down staff. Its Kazakh unit
has sent home a third of its work force, about 4,200 people, on half pay for
two weeks in a planned output cut. ArcelorMittal this week said it would
reduce output by 30 per cent year-on-year in 2008 because of a fall in
demand.
Leisure
GuestInvest’s chief executive, Johnny Sandelson, is trying to put
together funding to buy back the buy-to-let hotel operator after it fell
into administration.
Media
The Local Radio Company said that overall revenue for its year is
expected to be 4 per cent less than the previous year on a continuing
station basis because it has been a difficult period for advertising sales.
The group said the relaunch of Jazz FM on October 6 on digital television
and online represents a significant opportunity to build on strong brand
loyalty to Jazz FM.
UBC Media Group said that it has agreed to a further two weeks of due
diligence for the initial £11 million sale of its commercial division to
Nasdaq-listed Global Traffic Network, citing recent changes in the
commercial radio industry in the UK. The specialist radio services company
expects completion by November 15.
CSS Stellar has agreed to sell its branding unit, Icon Display, for
£4.3 million to Maidstone Road Holdings, which is backed by a consortium of
investors that includes two Icon directors, John Francis and Keith Goodwin.
Digital Marketing Group, the direct marketing group, said that it has
bought Cybercom, the tech consultancy, for £6 million. It said the deal
offers significant scope for cross-selling. Separately, the group is to pay
up to £9 million for Gasbox, the voice marketer.
Freshwater UK, the public relations and marketing group, said full-year
profits would be below market expectations because of a fall in revenue from
the consumer and housing fields.
Phonevalley, the mobile marketing agency owned by Publicis, the French
advertising agency, is opening its first offices in Asia to try to tap the
explosion in mobile phone growth in the region. It is opening offices in
Singapore, China and India. The company said it expects mobile advertising
expenditure in the Asia Pacific region to exceed Europe and the US by 2012.
Natural
resources
TNK-BP, half owned equally by BP and a quartet of Russia-connected
billionaires, said that it had fully resolved its shareholders’ dispute. BP
and its partners made peace in August when the British oil major bowed to
demands from the billionaires, which included ousting Robert Dudley,
TNK-BP’s chief executive.
Norilsk Nickel, the world’s largest nickel and palladium miner, said
that net profits fell by a third to $2.68 billion (£1.51 billion) in the
first half of 2008 because of lower metal prices and inflation.
Regal Petroleum, the oil and gas explorer, has denied speculation that
it has had a $1.2 billion bid approach from Royal Dutch Shell.
Elixir Petroleum, in an update on its US assets, said that its two
wells at Pompano have resumed pumping at levels achieved before their
precautionary shut-in against Hurricane Ike last month.
Retailing
John Lewis’s sales slid 8.3 per cent last week, marking one of the
worst trading weeks of the year for the department store chain. A
combination of the end of the month, when people are waiting to be paid,
unseasonably good weather and bad news on the global financial crisis was
blamed for deterring shoppers. Sales fell 8.3 per cent to £48.7 million in
the week to last Saturday, after a 5.6 per cent fall the week before.
Blacks Leisure, the outdoor equipment group, said its first-half loss
would deepen to about £4.5 million, from £600,000, after of a “difficult”
August and plunging surfwear sales. The operator of the Blacks and Millets
chains said group sales were off 7.7 per cent in the six months to the end
of August, although trading in the first weeks of its second half had been
more encouraging. It is considering selling its surfing division.
Adili, the ethical fashion retailer, reported “substantial progress” in
its maiden annual results. Turnover for the year to the end of April rose to
£354,000, from £66,000 a year ago, although losses widened to £1.6 million
as a result of start-up costs.
HR Owen, the car dealer, is to receive up to £10 million through a
property lease surrender with Ip- cress, its landlord. The deal relates to
premises occupied by Owen’s Jack Barclay arm in Wandsworth.
Support
services
John Menzies’s ground handling and cargo arm has been hit by the
airline industry downturn. The company, employing 14,000 at airports
worldwide, said that cuts to winter airline schedules and weaker cargo
volumes would have a “material effect” on earnings of Menzies Aviation.
Menzies said that its newspaper distribution arm continued to trade in line
with expectations.
Macfarlane Group, the packaging products maker, has agreed to buy
Allpoint Packaging for about £4.8 million in cash.
Filtrona, the supplier of speciality plastic products, said it will
acquire Lendell Manufacturing, a US foam products company, for $35 million
(£19.7 million).
Technology
Nokia, the world’s largest mobile phone maker, said it will start
selling its first touch-screen model, its rival to Apple’s iPhone, in seven
markets. It will roll out the 5800 model this year in India, Indonesia, the
United Arab Emirates, Hong Kong, Taiwan, Russia and Spain.
Intelek said that it is to embed Nasdaq-listed ViaSat’s Paired Carrier
Multiple Access technology into modems made by the Intelek unit Paradise
Datacom, for better bandwidth efficiency. Intelek said this technology can
halve satellite space segment costs.
Autonomy said it has entered a significant licence agreement with Bayer
to license its intelligent data operating layer software for compliance
purposes. Autonomy also said it has entered an OEM licence agreement with
Xerox to license Autonomy software.
Telecoms
Georgia has launched a criminal investigation into MegaFon, Russia’s
third-largest mobile phone operator, which is part-owned by the Nordic
operator TeliaSonera, and wants Interpol to issue an international alert for
its top managers. Georgia’s Government alleges that MegaFon’s mobile signal
covers the breakaway region of South Ossetia, where Russian and Georgian
forces fought in August. MegaFon has denied that it operated on Georgian
territory, saying it could not stop people accessing its services from base
stations in nearby Russian regions.
Transport
British Airways carried 5.6 per cent fewer passengers last month than
in September 2007. Nearly 2.8 million passengers flew with it last month,
against 2.96 million a year earlier. Forward bookings are being hit by
“anxiety in financial markets and by the uncertain economic outlook”, BA
said.
Network Rail’s chairman, Sir Ian McAllister is to step down next July.
Sir Ian, 65, was criticised after engineering overruns held up thousands of
rail passengers at the turn of the year. State-backed Network Rail, which
operates Britain’s rail track and signalling, also said that Ron Henderson,
62, its finance director, is to retire.
Utilities
Britain’s power industry yesterday welcomed creation of a new
energy ministry.
Scottish & Southern Energy has deliberately cut the amount of
electricity generated by some of its plants to qualify for
multimillion-pound subsidies meant for smaller new energy projects.
RWE, the Germany utilities giant, has been selected by Bulgaria for a
strategic investor in its planned ¤4 billion nuclear plant. The company
outbid rivals from across the Continent for a 49 per cent stake in the
Belene plant.
