Cyprus Bailout Deal Is Hit By New Fears

Cyprus' central bank governor has warned he will only work with ministers on the country's EU bailout if the bank's independence is respected.

The comments from governor Panicos Demetriades come following a rift in Nicosia between the bank and political leaders over the EU/IMF-brokered bailout.

Last week, the government said the total bailout cost had jumped 6bn euros (£5.1bn) to 23bn (£19.6bn).

Mr Demetriades was appointed last May by the communist former administration but tension with the ruling centre-right government, in power for just two months, has deepened.

There has been growing pressure on him to resign over his handling of the economic crisis amid an unprecedented levy placed on bank accounts.

Cyprus President Nicos Anastasiades has been accused of meddling

In the past week, the southern Cypriot parliament has started an investigation against Mr Demetriades.

President Nicos Anastasiades's government withdrew the appointment of his trusted deputy and three central bank officials resigned.

The unfolding drama drew a scathing response from European Central Bank (ECB) president Mario Draghi, who wrote to the Cypriot president telling him any attempt to effectively sack the governor could land Cyprus in the European Court of Justice.

Mr Anastasiades, when asked by reporters to comment on the apparent feud between the two bodies, said he was "frankly, very saddened".

"My intention to work with the country's democratic institutions is a given," Mr Demetriades, who sits on the ECB's governing council, was quoted as saying in an interview with the Phileleftheros newspaper.

"We are ready to respond to every call for cooperation and coordination for the benefit of this country always, however within the framework of total respect towards the central bank's  independence, as stipulated by the ECB."

ECB president Mario Draghi has warned the southern Cypriot president

Under European Union law, a governor can only be dismissed if he no longer fulfils the conditions required for the performance of his duties, or if he is guilty of serious misconduct.

The investigation launched by Cypriot politicians last week is seeking to find out whether Mr Demetriades supplied enough information during an investigation into the demise of Cyprus's two biggest lenders, which left the economy in disarray.

The collapse of the Mediterranean island's banking system imposed massive losses on depositors in order to qualify for its 10bn euro (£8.5bn) bailout by the EU and IMF.

:: Gold futures dropped below the $1,500 barrier on Friday, the lowest since July 2011, just days after Cyprus moved to sell 10 tons of reserves to help fund the bailout.

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Little Chef Restaurant Chain Put Up For Sale

By Tadhg Enright, Business Correspondent

Roadside restaurant chain 'Little Chef' has been put up for sale - six years after it was rescued from administration.

Business turnaround specialists RCapital, which took control of Little Chef in 2007, have appointed KPMG to find a buyer.

It is understood there have already been expressions of interest from potential buyers.

Over the past six years, the chain famous for its 'Fat Charlie' logo has been slimmed down from more than 200 to 83 profitable sites beside A-roads all over Britain.

It also recruited celebrity chef Heston Blumenthal to revamp its menu as part of a Channel 4 documentary.

Sky sources say its estate of restaurants, most of which have large car parks, should appeal to coffee chains or convenience stores.

Heston Blumenthal attempted to revive Little Chef's fortunes

In a statement, RCapital said: "Over the last six years, RCapital has successfully completed an operational turnaround and financial restructuring, which has repositioned the business and brought the group of companies back into profitability.

"The move was part of a long-term critical rebuild strategy to create consistently profitable sites against the backdrop of one of the worst recessions in living memory.

"With the turnaround successfully completed, it's time to explore the next phase for the food service operator."

Little Chef employs 1,100 staff and serves six million customers a year.

Its first branch, which had just 11 seats, opened in Reading in 1958, but by the 1980s Little Chef had become a fixture of British motoring with more than 230 branches at its peak.

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USwitch Plots Deal With Taxpayer-Backed LDC

By Mark Kleinman, City Editor

A private equity group backed by UK taxpayers is in talks to acquire a stake in the price comparison website USwitch.com.

I understand that LDC, which is owned by Lloyds Banking Group, is in advanced negotiations about buying a sizeable shareholding in USwitch.

The deal is expected to value the online operation at a fraction of the £210m for which it was sold by its founder, Lord Milford Haven, in 2006.

The talks between LDC and USwitch's current owner, Forward Internet Group, are at an advanced stage and a deal is expected to be announced shortly, insiders said.

The precise valuation and size of the stake being bought by LDC were unclear this weekend.

USwitch operates in a fiercely competitive market, and in recent years has seen itself outmuscled in terms of the prominence of its advertising by larger rivals such as Comparethemarket, Go Compare and Moneysupermarket.com.

Lord Milford Haven's windfall from the sale of the site in 2006 resulted in a substantial loss for the buyer, the US media group EW Scripps.

It sold the business to Forward for less than £10m and took a big writedown on the value of Uswitch because of slower-than-expected consumer switching trends.

USwitch works with thousands of direct and affiliate partners, providing their websites with branded comparison tools for a range of home services. Its calculators also appear on many other websites.

LDC provides equity to UK-based companies with profits of more than £1m, and owns stakes in businesses such as Mama, the live music venue operator, and Blue Rubicon, a public relations consultancy.

LDC and Forward declined to comment.

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Benefits Cap Rollout Begins Amid Welfare Row

A Government trial to impose a limit on the amount of benefits a household can receive is beginning to be rolled out.

Couples and single parents in the London boroughs of Croydon, Bromley, Haringey and Enfield will now be able to claim no more than £500 a week and £350 a week respectively.

However, the TUC has accused Work and Pensions Secretary Iain Duncan Smith of misrepresenting Government statistics to claim that the £26,000 benefits cap was driving people to find work.

Last week the Government claimed the number of people expected to be hit by the cap had fallen from 56,000 to 40,000, with 8,000 claimants finding work through Jobcentre Plus.

Mr Duncan Smith is accused of misusing official figures by Frances O'Grady

Mr Duncan Smith hailed the figures, saying the cap had provided a "strong incentive" for people to look for jobs, even before it had started to affect their incomes.

"We have a very clear message: we will provide support to those who need it, but the days of outrageous claims giving people incomes far above those of working families are over," he said.

But TUC General Secretary Frances O'Grady said it was "wrong" for Mr Duncan Smith to claim the benefits cap had spurred people into finding jobs.

"The Government's own analysts say that 16,000 fewer people will be affected because ministers have changed the rules about who is eligible, not because of any change in behaviour," she said.

Ministers claim 8,000 claimants have found work through JobCentre Plus

"The Department for Work and Pensions is a serial offender for misusing statistics. Perhaps ministers should be subject to a three-strikes-and-you're-out rule.

"If you need to make the supporting evidence up, then you must have a pretty weak argument.

"It is essential that the UK Statistics Authority investigates Mr Duncan Smith's use of official figures."

Jonathan Portes of the National Institute of Economic and Social Research, a former chief economist at the Department for Work and Pensions, said there was "no evidence at all" that the cap had affected people's behaviour.

A Department for Work and Pensions spokesperson said: "Jobcentre Plus data clearly shows that 8,000 people who would have been affected by the benefit cap have moved into work and 25,000 are accepting help to get a job.

"We have followed the correct procedures for publishing this data and it is available for anyone to study. Claims to the contrary are utterly unfounded."

The cap is being brought in to cut spending and to bring benefits payments into line with average income.

The policy is expected to come into force nationally by the end of September.

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Gold Sell-Off Amid Fears Over Chinese Growth

Gold has sunk to its weakest level in two years as investors continue to sell off commodities, worried that disappointing Chinese data signalled a setback for the global economy.

Other key commodities, including oil, copper and tin, have hit multi-month lows over rising concerns.

In mid-afternoon Monday trading on the FTSE 100, the top nine fallers were all commodity and mining firms.

At that time Brent crude traded 2.43% down, gold -5.49%, silver -8.93% and platinum -3.23%.

Gold price dropped before a slight recovery just before 11.30am on Monday

Monday's drop continued from Friday's selling as fears were raised about central banks turning away from stimulus packages, as gold fell below the psychologically-important $1,500-per-ounce (£980) barrier.

Gold fell more than 3%, after sliding 5.3% on Friday, as investors further slashed their bullion holdings on concern that central banks are bent on halting stimulus measures this year, cutting gold's appeal as a hedge against inflation.

Holdings on global gold exchange-traded funds hit their lowest in more than a year.

Goldman Sachs has been forced to drop its gold futures forecast for the second time this year and Cyprus said it would unload 10 tons of reserves to help fund its bank bailout - the biggest sovereign sale for several years.

Chinese construction has consumed huge quantities of steel and copper

China's economy grew by 7.7% in the first quarter, undershooting market expectations for an 8% expansion.

The growth rate has frustrated investors hoping the world's second largest economy would rebound after posting its weakest expansion in 13 years in 2012.

US job creation fell 60% between January and March

China's weaker than forecast GDP growth is backed by a slower increase in industrial production and fixed-asset investment, despite strong lending growth in March.

"There are questions about the trend of bottoming in China's economy and whether it can re-accelerate above 8% this year in a sustainable way," Vishnu Varathan, market economist at Mizuho Corporate Bank, said.

The Chinese data comes after soft US retail sales and consumer sentiment numbers raised doubts about the economic recovery momentum, driving down commodities and equities on Friday.

US job growth has dropped from nearly a quarter of a million in January to just 88,000 in March.

Oil prices continue to slide as pump prices come under downward pressure

"What we now see is panic selling, perhaps triggered by the Fed's stimulus view," Dominic Schnider, analyst at UBS Wealth Management, said.

"The Fed has given the signal that there's a possibility to reduce QE (quantitative easing) and that took a lot of trust out of gold.

"And people recognise that an environment where you have no inflation is a powerful driver to get out of the metal."

Oil futures were also hit hard after the Chinese and US data stoked investors' concerns of economic slowdown in the world's top two oil consumers.

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New Round Of Fuel Price Cuts Revealed

Petrol: The Pump Price Conundrum

Updated: 10:35pm UK, Wednesday 30 January 2013

By Ursula Errington, Business Correspondent

So, the OFT says motorists aren't being ripped off, that the price of petrol on our forecourts is fair and isn't the result of collusion or price-fixing.

Outraged motoring groups still aren't convinced.

The reality is, I don't think anyone knows how to work out the relationship between crude oil and pump price.

From the moment crude oil is pumped out of the ground to when we hand over our money at the till to pay for a topped-up tank, the price of the commodity has been influenced by multiple markets all subject to their own supply and demand idiosyncrasies.

I last worked in oil trading about a decade ago and back then the relationship between the price of Brent crude oil and pump prices was deemed to be pretty sketchy.

Assiduous analysts, whose job it was to structure financial instruments to hedge the bank's customers with exposure to fluctuations in the oil market, pored over oil prices and pump price data looking for a concrete correlation on which to base a safe hedging instrument.

Judging by the collective sighing, teeth-gnashing and head-in-hand gestures, it proved both time consuming and difficult.

Broadly a six-week time lag was identified between a movement in the crude oil price to a correlating adjustment in the pump prices back then but it was considered too statistically patchy to appeal to clients.

So why is it so difficult to find a relationship between the price of oil and the pump price drivers pay?

Firstly, pricing crude oil itself is pretty complicated. Before the black stuff is even out of the ground its anticipated value has been traded on the futures market for weeks, months or years before.

On any one day the oil price is set by taking a combination of a weighted average and straight average up to two months in the future, of all the trades over 600,000 barrels executed on the electronic trading platform the Intercontinental Exchange (ICE).

So it is fair to say that part of the oil price is set by traders who are speculating, who have no intention of allowing their futures contracts to mature and "go physical" (i.e. become related to an actual cargo of oil) but who are buying and selling futures contracts depending on their day-to-day view of the multiplicity of variables effecting the market.

This need not be considered a bad thing. Speculative traders aren't just plucking figures out of the air, they are working on the basis of fine-tuned mathematical models used to assist them in weighting all the factors in play - an outlandish speculative trade based on few decent indicators wouldn't be in their interest at all.

Crucially, these traders add a huge volume of trades to the market, which actually means that big distortions in one trader's view are evened out across the average when the price is set. 

Then there is the shipping market to get the stuff to shore. Highly volatile and as prone to geo-political influences as the commodity itself, shipping deals are opaque because they are over-the-counter and are often based on long-term trading relationships.

The economics of refining are also unhelpfully complex, predominantly because optimising refinery operations is tricky.

Refinery margins (the difference in price between the wholesale value of the products coming out of the refinery and the crude oil from which they were derived) have been surging for many companies of late because of a relative drop in the cost of crude oil and solid demand for products but unscheduled refinery outages, workers on strike, storage costs, changes in the quality of the crude itself - all these things will impact the margin within hours.

And then there's the cost of haulage and the variables at petrol station level, such as a franchise owner's credit rating, local forecourt wars and location.

All of that and we still have some of the cheapest fuel in Europe, according to the OFT.

But it's not over yet - the taxman must also have his share. In the 10 years from 2003 to 2012, prices at the pump increased from 76p per litre (ppl) to 136ppl for petrol and from 78ppl to 142ppl for diesel. Nearly 24ppl of that increase was because of tax and duty.

Is it any wonder then that trying to compare the price of crude oil and the pump price proves a largely fruitless task?

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Minimum Wage To Be Increased This Year

The adult national minimum wage is to increase by 12p an hour from October, the Government has announced.

The rate for 18 to 20-year-olds will rise by 5p to £5.03, and by 4p to £3.72 for 16 and 17-year-olds.

Ministers said they had rejected a recommendation from the Low Pay Commission that the rate for apprentices should be frozen, announcing a 3p an hour increase to £2.68 an hour.

Business Secretary Vince Cable said: "The independent Low Pay Commission plays a crucial role in advising the Government when setting the national minimum wage every year. It balances wages of low paid workers against employment prospects if the rate was set too high.

"We are accepting its recommendations for the adult and youth rate increases, which I am confident strikes this balance. However, there is worrying evidence that a significant number of employers are not paying apprentices the relevant minimum wage rate.

"Apprenticeships are at the heart of our goal to support a stronger economy, and so it is important to continue to make them attractive to young people.

"Therefore, I am not taking forward the LPC's recommendation to freeze the apprenticeship rate due to non-compliance, but instead am raising it in line with the youth rates. We are working on a series of tough new measures to ensure we tackle non-compliance issues across the board."

Tim Thomas, of the manufacturers' organisation the EEF, said the announcement meant "a delicate balance between the need for an element of pay progression and the limitations employers face in accommodating pay rises".

He said: "The modest increase in the apprenticeship rate is unlikely to negatively affect apprenticeship recruitment and of much greater importance is the raising of apprenticeships standards, better information and advice to students and ensuring that apprenticeships are truly employer-led and employer-driven."

TUC general secretary Frances O'Grady said: "Boosting the incomes of the low paid goes straight into the economy and wage-led growth must be part of the recovery so we would have liked to have seen minimum wage rates go up further ... even if the Government has rightly rejected calls for a freeze.

"But we are pleased that ministers have increased the apprenticeship rate. This sends a positive signal about the importance of apprentices.

"We will continue to press ministers for more action to ensure the minimum wage is properly enforced - particularly for apprentices where there is considerable evidence that many miss out. It is time to get tough with wage-cheat employers who break this law.

"We will continue to urge the many employers who can afford it to implement a full living wage for their staff."

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Tesco Investors Urge Clawback Over US Failure

By Mark Kleinman, City Editor

Leading shareholders in Tesco are demanding changes to the company's boardroom pay practices as it prepares to terminate its loss-making American misadventure.

Some of the retailer's biggest investors are keen for Tesco to introduce more stringent clawback measures that would allow it to more easily reclaim bonuses paid to executives for past performance.

Tesco will confirm plans to withdraw from the US market alongside its annual results on Wednesday.

The closure or sale of Fresh & Easy is expected to incur a charge of approximately £1bn, in addition to similar losses already accumulated at the six year-old business.

According to last year's annual report, the supermarket group's existing pay policies enable it to exercise "clawback for deferred share awards under the annual bonus plan and long-term incentive (PSP) awards to allow the committee to scale back awards in the event that results are materially misstated."

However, the "material misstatement" of results covers a narrow set of circumstances that many shareholders believe should be broadened to encompass situations such as Tesco's US withdrawal.

Deferred shares worth more than £11m awarded to Sir Terry Leahy, the former chief executive, will be forfeited because of the decision to abandon Fresh & Easy, The Daily Telegraph reported.

Philip Clarke, Sir Terry's successor, and other senior colleagues are also expected to miss out on bonuses for 2012 as a consequence of the US failure.

"The company is taking a very substantial hit on this," one leading shareholder said. "It is not enough to simply not award potential bonuses. An element of past bonuses also need to be clawed back."

The sentiment from investors is unlikely to escalate into a full-blown row with Tesco over its pay policies at the retailer's annual meeting, but it highlights the extent to which shareholder groups want clawback to become an entrenched feature in executive contracts beyond the banking industry.

Tesco declined to comment.

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Betfair Shares Jump 14% On Takeover Talks

Betfair has seen its share price shoot up 14% after takeover talks were confirmed by the investment firm behind Formula One.

The price later eased slightly but remained above 12% as the session progressed.

The news comes two days after Sky's City Editor revealed that CVC Capital Partners had mulled a £750m offer for Betfair.

Betfair, which floated on the London market three years ago, has seen its price rise steadily in recent months.

On Friday, its shares closed at 699.5p, roughly 9% above a 52-week low in January.

CVC said it had held preliminary discussions with investors Richard Koch, Antony Ball and other partners about Betfair.

Mr Koch, a co-founder of international strategy consultancy LEK Consulting, holds a 6.5% stake.

Mr Ball is a non-executive director at Luxembourg-listed investment group Brait and is the co-founder of its private equity business.

Betfair, which operates an online exchange that allows gamblers to bet against each other, declined to comment.

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JCB Digs Big Profit In Africa And Middle East

Digger manufacturer JCB has defied a slump in the global construction market to record the highest-ever profit in its 67-year history.

The family-owned company saw its 2012 earnings rise to £365m on a turnover which remained virtually unchanged from the previous year at £2.7bn.

Although the Staffordshire-based manufacturer experienced weak construction equipment sales in some areas of the world, it saw business in Africa double and registered growth of 12% in the Middle East.

Announcing the results, JCB chairman Sir Anthony Bamford said: "In view of the continued fragility of the global economy, which has led to renewed slowdowns in emerging and developed markets, JCB's results in 2012 are extremely encouraging.

"They not only demonstrate the resilience of our business, but highlight the importance of continued investment in products, facilities and customer service.

"While construction equipment markets in many parts of the world remained weak, that has been more than offset by strong growth for our agricultural products, particularly in materials handling."

Despite continuing uncertainty, particularly in European economies, 2013 had started satisfactorily, JCB said.

Sir Anthony added: "We are expecting some growth this year but how much will depend on the pace of the global recovery."

Last year's record results followed profits of £355m in 2011.

Figures for machine sales also rose slightly to 69,250, from 69,100 in 2011, in a global market which contracted by an estimated 10%.

During 2012 JCB opened a new factory in Sao Paulo, Brazil and announced plans for a new £62m plant in Jaipur, India, which is due to open next year.

JCB's future potential benefits from growing demand in Africa received a boost on Monday.

Increased investment, high commodity prices and a pick-up in the global economy should help accelerate sub-Saharan Africa's growth to more than 5% on average over 2013-2015, according to the World Bank.

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