Sainsbury's To Bank On Lloyds Buyout

By Mark Kleinman, City Editor

The supermarket chain J Sainsbury will next week move to take full control of its banking operations by striking a deal to buy out its partner, Lloyds Banking Group.

I have learnt that Sainsbury's is on the verge of an agreement with Lloyds that is expected to cost it several hundred million pounds.

Insiders said that a deal was likely to be announced alongside the retailer's full-year results on Wednesday.

Sainsbury's is understood to have been keen to acquire full control of the joint venture, called Sainsbury's Bank, for some time. Buying the Lloyds shareholding will allow it greater freedom to develop and market new banking products and services.

Launched in 1997, Sainsbury's Bank has 1.4 million active customers, according to the company. The business offers insurance, loans and savings products.

Supermarkets including Tesco and Sainsbury's have bold ambitions to take on the major high street banks.

They believe there is an opportunity to do so because of growing consumer mistrust of the industry's dominant players, fuelled by the banking crisis and the emergence of subsequent mis-selling scandals.

Tesco plans to launch current accounts within the next year, while Marks & Spencer has also been trialling the provision of banking services in some of its shops.

In 2008, Tesco struck a deal similar to the one planned by Sainsbury's, which involved it paying £950m to acquire the 50% stake in its personal finance arm from Royal Bank of Scotland.

People close to the talks between Sainsbury's and Lloyds said that various commercial and service agreements would continue to exist between them following next week's deal.

Sainsbury's Bank is run by Peter Griffiths, the former head of the Principality Building Society, who was appointed to the role last November.

The sale of its stake in Sainsbury's Bank should benefit Lloyds, which is 41%-owned by taxpayers, by bolstering its capital base at a time when regulators are forcing British banks to augment the amount of capital they hold in reserve.

Lloyds is also examining the sale of Scottish Widows Investment Partnership, the fund management arm of its insurance business, as well as a stake in its international wealth management operations.

The joint venture with Sainsbury's is one of many legacy holdings taken on by Lloyds after its rescue of HBOS, the mortgage lender which came close to collapse in the autumn of 2008.

Lloyds declined to comment, while Sainsbury's said it did not comment on speculation.

The supermarket chain does not plan to update the City next week about the future of Justin King, its chief executive, following Sky News' disclosure last month that its board has hired headhunters to work on succession planning for the role.

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Struggling Families Using Loans To Buy Food

Five million families in Britain are approaching financial "breaking point" and struggling to pay for food, according to research.

One in five households said their monthly incomes would not stretch to cover all of their food costs in April and they had to use some form of borrowing such as a credit card, overdraft or loan, or plunder their savings instead, consumer group Which? found.

Which? said this would equate to five million families if the findings were projected across the UK.

The findings provide an indication of the numbers of people who are struggling, despite official figures showing last week that personal insolvencies have fallen to their lowest level in five years.

The group who could not cover their food bills from their income alone was largely made up of low-income households earning less than £21,000 a year and squeezed 30 to 49-year-olds, many of whom had children.

Some 82% of these people said that they were worried about food prices and 57% were finding it "difficult to cope" on their current income.

People in this group were also more likely to be worried about their level of debt and 74% of them described economy as "poor".

Which? executive director Richard Lloyd said: "Our tracker shows that many households are stretched to their financial breaking point, with rising food prices one of the top worries for squeezed consumers.

"It's simply shocking that so many people need to use savings or credit to pay for essentials like food."

The study also found that only one quarter of people said that they were living comfortably on their incomes, while more than one third (36%) felt squeezed.

Two-thirds were worried about the effects of low interest rates on their savings - although insolvency experts have credited low interest rates with helping people's borrowing costs and keeping personal insolvencies down.

Almost one third (31%) of people surveyed cut back spending on essentials last month, mainly women aged between 30 to 49 years old.

Over two thirds (68%) described the state of the economy as poor, with just 9% saying it was good.

Around 2,000 people across the UK took part in the survey, which was carried out last month.

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Barroso 'Mends Austerity Fences' With Merkel

The German Chancellor is not to blame for the eurozone austerity policies, the head of the European Commission has said - in an apparent attempt to mend fences with Berlin.

European Commission president Jose Manuel Barroso drew fire from Germany last month for saying that austerity had "reached its limits", in a public challenge to Europe's biggest economy.

Chancellor Angela Merkel's government has long championed fiscal restraint.

With Greece mired in recession, unemployment in some countries running at more than 25% and France being given more time to cut its budget deficit, there is growing pressure on Mrs Merkel and other hardliners to focus on growth and job creation, not austerity.

But Mr Barroso defended the policies of austerity and said growth built on debt was not sustainable, while reiterating his view that "pure austerity" measures were no longer acceptable.

"What is happening in France and Portugal is not Merkel's or Germany's fault," Mr Barroso told the Welt am Sonntag weekly paper.

"Growth that is based on debt is not sustainable. At the same time, the policies that people see as pure austerity have reached their limits of political and social acceptance.

"But the EU Commission says the current policy mix is right and we must continue it."

Mr Barroso also said Germany should not become complacent in its reform efforts just because its economy was performing better than others, adding that the country needed to open its markets for services and infrastructure.

He added: "Complacency would be dangerous for Germany. We should not forget how tightly interlinked the European economy is.

"And Germany benefits most from the European internal market and from a stable euro.

"In certain sectors Germany should open its market more than before. We will say more on this in our country-specific recommendations at the end of the May."

Germany has fared better than others in the eurozone debt crisis that began in late 2009, but its economy shrank at the end of last year and the government now sees economic growth this year of just 0.5%

However its unemployment rate is fractional of many others in the 17-nation eurozone, sitting at just above 5%.

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Shoppers 'Annoyed' By 'Robotic' Sales Staff

Most Britons find the "robotic" shopping culture of sales staff asking if they want help a turn-off, a study has found.

Two-thirds of shoppers (68%) find offers of assistance from pushy staff annoying, according to the survey of more than 11,000 people by MoneySavingExpert.com.

They said they would rather be left alone to browse than be asked "Can I help you?" by over-zealous members of staff.

However, a fifth of those surveyed (19%) thought there was no harm in being approached and said it saved them having to seek out help.

The website said many people who work in stores have no choice but to approach customers with offers of assistance.

Martin Lewis, the creator of MoneySavingExpert.com, said: "It seems Brits are rejecting the seeming robotisation of shopping, and prefer staff to give help when they're asked rather than pouncing as soon as we cross the threshold.

"A huge majority of people would simply prefer to be left alone to browse.

"Yet shop assistants tell us they're forced to do this - hopefully retailers will remember the customer is always right and listen to the poll."

Mr Lewis also suggested the manner of the approach by retail staff could be putting consumers off.

He said: "An open 'Do let me know if you need any help' is far less off-putting than the closed 'Can I help?'."

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Paris: Thousands Protest Against Austerity

Tens of thousands of protesters have taken to the streets of Paris to demonstrate against austerity measures.

The demonstrations, which started at the Bastille, marked socialist President Francois Hollande's first year in office and accused him of turning his back on the left.

Police estimated around 30,000 demonstrators were on the streets of the French capital, while the communist-backed Left Front said 180,000 had gathered.

"Salaries are frozen. They continue to reduce hiring in the public sector," said Brigitte Blang, a 64-year-old teacher from eastern France.

"We're waiting for true leftist policies. There's money in the coffers."

The protests followed demonstrations on Wednesday by the far-Right

The protests follow another demonstration last Wednesday that brought hundreds of supporters of the far-right National Front to Parisian streets.

It comes as polls show Mr Hollande is now the most unpopular president in modern French history, a mantle he has taken on from his predecessor, Nicolas Sarkozy.

Mr Hollande took on the presidency last May, promising to spare France the austerity measures that are being imposed elsewhere in Europe.

The French government has largely avoided deep spending cuts, big tax hikes and wide-ranging reforms.

However, it has cut 10bn euros (£8.4bn) in spending and increasing taxes, largely on the rich, by 20bn euros.

Protesters claim Mr Hollande has turned his back on the Left

France's economy has continued to deteriorate, with growth stagnating and unemployment rising above 10%.

Jean-Luc Melenchon, the Left Front's candidate in last year's presidential elections, told the crowd: "We do not want the world of finance in power. We do not accept the politics of austerity."

Opponents of gay marriage also rallied in major cities including Paris in an attempt to force Mr Hollande to back down from signing a bill approved in parliament last month.

The bill, which is also facing a constitutional challenge, sparked months of demonstrations across the country, with some descending into violence.

It has been one of the most controversial reforms of Mr Hollande's first year in office, with right-wing opponents demanding the issue be put to a referendum.

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Smartphones: Debit Cards Of The Future?

By Liz Lane, Sky News Reporter

Smartphones could soon become an even greater part of our lives as networks join forces to let us pay for high street goods with our mobiles.

The battle to dominate the market for "virtual wallets" is heating up, but with it come concerns about how thieves and fraudsters could take advantage.

Britain's big three mobile networks - EE, Vodafone and O2 - are creating an opt-in service that will allow all bank, credit and loyalty card details to be stored on a phone SIM.

The customer will be able to swipe it on a card reader in a shop and instantly pay for goods.

David Sear, the chief executive of Weve, the company managing the project, said: "You'll be able to pick up your goods from the counter - your sandwich or whatever it might be, on a small transaction - and simply swipe your phone, rather than having to get your card out of your wallet."

He is hoping to get retailers to sign up later this year, with the promise of advertising opportunities.

Stores will be able to send special offer alerts to customers' phones as they walk past in an effort to tempt them in.

Google, Barclays, MasterCard and PayPal have all come up with their own versions of the virtual wallet, but they have not caught on in the UK.

The contactless payment market as a whole has yet to take off, with only 6% of people in the UK having made such a transaction with a credit or debit card.

Bryan Glick, the editor of Computer Weekly Magazine, described it as a chicken and egg situation.

He said: "Retailers aren't going to offer this as a means of paying unless they know they're going to use it, but people aren't going to use it unless they know there are a lot of retailers they can use it at."

As for security, the new system will have a limit on how much can be spent on a phone without entering a Pin code.

However, cyber security expert Jason Hart said he would take further precautions before using it - including having his smartphone, and the payment system itself, password-protected.

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The Sky News Business Round-Up And Look Ahead

Sky's Naomi Kerbel offers a look ahead to what's coming up in the week's business news.

:: Monday 6th May

UK bank holiday

:: Tuesday 7th May

HSBC Q1 results

:: Wednesday 8th May

J Sainsbury Q1 results

:: Thursday 9th May

UK interest rate decision

:: Friday 10th May

G7 finance ministers and central bank governors summit

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US Creates 165,000 New Jobs In April

The United States created 165,000 new non-farm jobs in April, with the figure beating expectations.

Hiring was much stronger in the previous two months than first thought, and the gains trimmed the unemployment rate to a four-year low of 7.5%, official figures showed.

The Department of Labour report showed the job market is improving, despite higher taxes and government spending cuts.

In addition to the April gains, the government said employers added 138,000 jobs in March and 332,000 in February. That is 114,000 more over the two months than was originally estimated.

The economy has created an average of 208,000 jobs a month from November through April, which is above the 138,000 added in the previous six months.

John Silvia, chief economist at Wells Fargo, said: "This is a good report. There's a lot of strength.

"It's good for the economy. It's good for people's income."

The stronger job growth suggests that the federal budget cutting "does not mean recession," Mr Silvia said. "It does not mean a dramatic slowdown."

The release of the figures in the US came with certain drama after a fire overnight at the department's headquarters shut down the building for most employees.

Members of the media were allowed in for the release of the report.

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Claims Firms Face Shut-Out From CPP Scandal

By Mark Kleinman, City Editor

The claims management firms which have made millions of pounds from payment protection insurance mis-selling face being shut out from a new redress scheme being set up for customers of CPP, the stricken credit card insurer.

I have learnt that the Financial Conduct Authority (FCA), the new City watchdog, is trying to construct a compensation deal with the major high street banks that will stress the ability of affected consumers to obtain refunds directly.

The attempt to devise a scheme that bypasses claims management companies (CMCs) follows intense criticism of their role in the PPI scandal.

Millions of customers have been paid compensation by UK banks, which have been forced to set aside more than £12bn for one of the worst mis-selling scandals in the industry's history.

Hundreds of CMCs have been launched to act as intermediaries, arguing that they can help consumers win the appropriate compensation, despite the claims process being relatively straightforward.

The claims firms, frequently labelled as ambulance-chasers, can take 30% of any successful claim, earning the secretive backers of these businesses huge profits.

Households across the UK have been plagued by unsolicited phone calls and text messages promoting CMCs, even where those consumers have never held a PPI policy.

CPP founder Hamish Obston

Banks such as Lloyds Banking Group have argued for robust action against the proliferation of CMCs on the basis that even fraudulent claims are costing them huge sums to process.

Although the likely bill for compensating CPP customers is likely to remain significantly below £1bn, people familiar with the talks between the banks which sold CPP products and the FCA says it is attempting to create a programme which will allay any need to use CMCs.

"The regulator is very aware of the issues surrounding CMCs and is sympathetic to the banks' argument that they should be cut out of processes such as the one that will ensure that CPP customers get proper redress," said a person close to the talks.

The discussions about compensating CPP customers remain fluid and may not be resolved for several months.

The credit card insurer and fraud protection provider has been forced to the brink of collapse, and recently agreed the sale of its North American business as part of a deal to secure a six-month stay of execution from its lenders.

Insiders said CPP was also likely to dispose of its other international operations, although a decision about such a move will depend upon the fate of a takeover bid for the group by Hamish Ogston, its founder.

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Consumer Rights To Be Boosted Under New Laws

A bill giving increased rights to consumers and reducing burdens on business is set to be unveiled in the Queen's Speech.

Ministers believe reforming legislation will save the economy around £4bn over 10 years in more effective protection and better understanding of consumer rights.

The expected bill would consolidate consumer rights, currently split between eight pieces of legislation, into one place.

It will cover goods, services, digital content and unfair contract terms and consolidate over 60 pieces of legislation on Trading Standards' powers to investigate beaches of consumer law into one piece of legislation.

Consumer Minister Jo Swinson said: "Stronger consumer protection and clearer consumer rights will help create a fairer and stronger marketplace.

"We are fully aware that this area of law over the years has become unnecessarily complicated and too confusing, with many people not sure where to turn if they have a problem.

"We are hoping to bring in a number of changes to improve consumer confidence and make sure the law is fit for the 21st century."

Ministers believe businesses will benefit from faster resolution of complaints as they would spend less time and money dealing with them.

The bill is expected to help people unhappy with home improvements and make it easier to seek refunds for faulty goods.

It will also be confirmed this week that Citizens Advice and Citizens Advice Scotland have agreed to take on the responsibilities of Consumer Focus from April 2014.

Richard Lloyd, Which? executive director, commented: "A Consumer Bill of Rights is a welcome step towards ensuring that we have consumer laws fit for the 21st century.

"This bill is about making it easier for people to understand their rights and giving consumers power to challenge bad practice. It should also mean that both consumers and regulators have the tools they need to challenge unscrupulous businesses that breach the law."

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