Cable Drawn Into Row Over 'Russian' Oil Bid

By By Mark Kleinman, City Editor

Vince Cable, the Business Secretary, has been drawn into a row about the controversial takeover of a London-listed oil group that is reliant on funds from one of Russia's largest banks.

Sky News has seen a letter sent by the Association of British Insurers (ABI) to Mr Cable warning him that the Stanlow refinery, which produces 15% of the UK's transport fuel, is being used as collateral in a bid for Essar Energy.

Robert Hingley, an ABI director, said in the letter to Mr Cable that Essar Global, the vehicle of the billionaire Ruia brothers who want to buy the company, had failed to provide any indication of its plans for the Stanlow site in north-west England.

By highlighting the Russian provenance of the financing for the offer, the ABI's intervention will escalate tensions over the cut-price bid by Essar Global for the 22% of Essar Energy shares it does not already own.

The Ruias listed Essar Energy in London by selling shares less than four years ago priced at six times the price they are now offering.

The cut-price offer has sparked fury from big City institutions, including Standard Life Investments, which in February described it as "cynical opportunism" and "a calculated attempt to deprive minority shareholders of the substantial future upside in Essar Energy's valuation".

Under stock exchange rules, because the Ruias already control a majority of the shares, they can declare their offer unconditional even if no other shareholders accept their bid.

Doing so would enable them to delist the company without a vote, which would either force investors to accept just 70p-a-share or to remain shareholders in a more highly-indebted and unlisted company where they possess no influence.

The ABI special committee, which represents major City shareholders including Standard Life and Henderson, has urged Essar Global to commit to a delisting only if a majority of the independent investors accept its offer.

The Financial Conduct Authority is changing its rules relating to delistings but has irritated the ABI by not applying that rule-change to takeover situations.

It is unclear what power Mr Cable has to intervene in the situation, although question marks over the future of the Stanlow refinery and the involvement of Russian funds are likely to put the issue on the political agenda.

Investors believe that while the right to make an offer for the company was detailed in a relationship agreement drawn up when Essar Energy floated, its terms were not made clear in the shareholder prospectus, which could provide the ABI with another legal avenue to explore.

Skadden Arps Slate Meagher & Flom, a law firm, is advising the ABI committee.

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Talks To Avert Two-Day Tube Strike Collapse

Last-minute talks to avert strikes by London Underground (LU) workers have collapsed without agreement.

Rail, Maritime and Transport (RMT) union members are set to walk out for 48 hours from 9pm tonight, bringing chaos to the capital.

A second, 72-hour strike is planned for the same time next week.

As well as the Tube, the industrial action is likely to hit buses, trains and the Overground, with services set to be busier than normal as commuters clamber onto alternative routes.

Monday's negotiations followed a deadlock last week, as the union held firm against ticket office closures and potential job losses.

LU said only 3% of tickets are now sold at ticket offices and wants more staff on concourses.

The number of tickets sold over counters is expected to drop further, once contactless bank cards can be used to pay at barriers.

Development of smartphone payment technology will also see a reduction in ticket office revenue.

RMT acting general secretary Mick Cash said: "London Underground have dug themselves into an entrenched position and have refused to move one inch from their stance of closing every ticket office, in breach of the agreement reached previously through ACAS which enabled us to suspend the previous round of action.

"Despite the spin from LU, nothing they are proposing is about 'modernisation'.

"The current plans, closing every ticket office and axing nearly a thousand safety-critical jobs, are solely about massive austerity cuts driven centrally by David Cameron and his Government and implemented by Mayor Boris Johnson."

Mr Johnson attacked the union and described the strike as "pointless".

"I urge the RMT to call off this pointless strike and get back round the table with London Underground and the three other unions who have chosen not to strike," he said.

"It seems the RMT leadership is set against modernisation and has no fresh ideas of its own."

Prior to the strike announcement, LU said the RMT was demanding the withdrawal of long-standing voluntary redundancy arrangements.

Managing director Mike Brown said: "The RMT leadership are making this up on the hoof.

"Suddenly, they want to unilaterally tear up the long-established and collectively agreed option of voluntary redundancy, throwing into question the plans of over 650 staff who have chosen to leave us.

"The RMT leadership has also failed to take on board the significant changes we have made to our original proposals."

Strike action also hit commuters in the first week of February, with a second strike called off after negotiations amid a wave of flooding in the Thames Valley.

The strike that went ahead caused chaos across the capital, with bus and Overground services struggling to cope with the extra demand and many roads gridlocked.

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Angry Birds Creator's Profits Fall By Half

By Tom Cheshire, Technology Correspondent

Rovio – the makers of the Angry Birds series of mobile games – has seen its profits fall by more than half.

The Finnish games company had profits of £22m in 2013 on revenues of £128m, compared to £45.6m in 2012 on £125m.

It was Angry Birds that lead the headlong, catapult-propelled charge into mobile games, but other Scandinavian rivals have overtaken Rovio.

Finland's Supercell, which makes Clash of Clans, had annual revenue of £529m last year and Sweden's King, which is now based in London and recently floated on the New York Stock Exchange, had revenues of £112bn.

Mojang, the independent Stockholm-based independent studio behind Minecraft, had 2013 revenues of £195m.

Rovio's officers in Espoo, Finland

Rovio is repositioning itself as an entertainment company, rather than a pure games maker and the company has previously said it wants to be bigger than Disney.

Some 47% of its revenues are from consumer products, including an Angry Birds soft drink.

The company also bought an animation studio and has been launching Angry Birds theme parks in Europe and China.

Rovio CFO Herkko Soininen said: "After three years of very strong growth, 2013 was a foundation-building year.

"We invested in new business areas, such as animation and video distribution, ventured into new business models in games, and consolidated our strong market position in consumer products licensing.

"With these investments we have been gearing up for the future growing markets."

Rovio came to prominence as US developer Zynga – the maker of Facebook games like Farmville - started its rise.

Zynga relied heavily on digital goods sold through blockbuster games for its revenues. King and Supercell rely on a similar 'freemium' model.

Rovio is hoping that a more diversified – if less spectacular – revenue stream will help the company stay the long-run.

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Mortgage Lending Clampdown Comes Into Force

Homebuyers will face more scrutiny by mortgage lenders under new regulations which take effect today.

The industry-wide changes affect home buyers and people looking to re-mortgage and they will mean that lenders have to take a much stronger interest in people's spending habits and how their life plans could affect their ability to meet their repayments.

Mortgage applicants will need to sit through longer interviews, and provide more evidence that they can afford a home loan before being offered one.

Each lender will have their own interpretation of the new rules, but in general people are likely to be asked for more detail about regular outgoings such as childcare, food, household bills, loans, credit cards and leisure activities.

The changes also mean lenders will have to test whether homebuyers will be able to afford their mortgage payments if interest rates rise sharply, to 7% or above.

The Mortgage Market Review (MMR) rules aim to ensure there is no return to any irresponsible lending practices of the past, but there are some concerns that it could slow down the housing market.

The changes come amid growing consternation about rising house prices

Paul Broadhead, head of mortgage policy for the Building Societies Association, said: "The Mortgage Market Review was introduced in order to ensure that a common sense approach to mortgage lending is applied by all lenders and that people are not borrowing more than they can afford to pay.

"A number of building societies implemented the process early and have been lending this way, without problems, for a number of weeks."

Andrew Montlake, a director at broker Coreco, said that for people considering applying for a mortgage: "It's important for people to prepare a lot earlier, potentially six months before you apply. Start looking through your documentation and go through a budget."

He said most lenders will want to know whether mortgage applicants are planning to increase their spending for any reason in the near future and if they are expecting a change in their income.

Martin Wheatley, chief executive of the Financial Conduct Authority was asked this week about reports that some people are being asked if they are planning to have children.

He told the Daily Mail: "If you are eight months pregnant, that is a reasonable question. But most of the time that is probably too invasive - and that is not committed expenditure. People have a right to a certain degree of privacy.

"People should be expected to talk about known costs, such as school fees and car loans, but planning for future unknown events is a much more difficult space."

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Unemployed Face Work Scheme Or Sanctions

The long-term unemployed will only receive their benefits if they sign on at a jobcentre every day or commit to a six-month stint of voluntary work under the Government's new Help to Work scheme.

Prime Minister David Cameron says the scheme is designed to ensure "that everyone who can work is in work".

Ministers claim there are more than 600,000 vacancies in the economy at any one time, saying the new measures are intended to help unemployed people fill them.

The voluntary work could include gardening projects, running community cafes or restoring historical sites and war memorials.

The placements will be for up to six months for 30 hours a week and will be backed up by at least four hours of supported job searching each week.

Mr Cameron said: "A key part of our long-term economic plan is to move to full employment, making sure that everyone who can work is in work.

"We are seeing record levels of employment in Britain, as more and more people find a job, but we need to look at those who are persistently stuck on benefits.

"This scheme will provide more help than ever before, getting people into work and on the road to a more secure future."

Mr Duncan Smith says many people were written off under the previous system

Work and Pensions Secretary Iain Duncan Smith said: "Everyone with the ability to work should be given the support and opportunity to do so.

"The previous system wrote too many people off, which was a huge waste of potential for those individuals as well as for their families and the country as a whole. We are now seeing record numbers of people in jobs and the largest fall in long-term unemployment since 1998."

Unite assistant general secretary Steve Turner said there was no evidence that such "workfare programmes" get people into paid work in the long-term.

"We are against this scheme wherever ministers want to implement it - in the private sector, local government and in the voluntary sector," he said.

"It is outrageous that the Government is trying to stigmatise job seekers by making them work for nothing, otherwise they will have their benefits docked."

Shadow employment minister Stephen Timms said: "Under David Cameron's government nearly one in 10 people claiming Jobseeker's Allowance lack basic literacy skills and many more are unable to do simple maths or send an email.

"Yet this Government allows jobseekers to spend up to three years claiming benefits before they get literacy and numeracy training.

"A Labour government will introduce a Basic Skills Test to assess all new claimants for Jobseeker's Allowance within six weeks of claiming benefits."

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Internet Explorer Users At Risk From Major Bug

Users of Microsoft's Internet Explorer web browser are at risk after a major security flaw was discovered.

The bug could allow hackers to gain control of a victim's computer and Microsoft admitted there had already been "limited, targeted attacks" to exploit it.

The flaw affects versions six to 11 of the popular browser, which is pre-loaded on Windows computers and accounts for more than half of the world's browser usage.

Microsoft said hackers attempting to exploit the flaw would have to host a "specially crafted website", before luring potential victims to the site to gain access to their computer.

It warned: "An attacker who successfully exploited this vulnerability could gain the same user rights as the current user."

Gaining user rights would allow the hacker to do everything from adding and removing software to changing passwords.

The flaw was pointed out to Microsoft by security firm FireEye.

One simple temporary solution to avoid the vulnerability is to switch to an alternative browser such as Google Chrome or Mozilla's Firefox.

Microsoft is scrambling to patch the problem but those still running Windows XP will not receive any updates to fix the bug.

The company discontinued support for the 12-year-old XP operating system earlier this month.

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HS2 Rail Link: Government Facing Rebellion

By David Crabtree, Midlands Correspondent

Rebels are expected to oppose plans for the £50bn HS2 scheme in the debate on the Hybrid Bill in the house of Commons.

The second reading of the HS2 Hybrid Bill will see MPs discuss the principle of the high speed rail bill and take a vote.

But there will be many more legal, political and environmental hurdles before a final decision is made on whether the £50bn link will be built.

Construction of the 250mph London-West Midland stage could begin around 2017 and be opened by 2026. The second phase to Manchester and Leeds may be completed by 2032.

Michael Fabricant, a Conservative MP and former Government whip who has tabled a motion against the scheme, told Sky News up to 100 of his colleagues have "really serious doubts" about HS2.

He added that if Labour opposed the scheme any potential Tory revolt against HS2 would be much bigger.

"It'd be double the amount of rebellion that we've got now. People are saying, 'Well, if it's going to go through anyway, why use up our stocks with the whips?'," he said.

The former Cabinet minister Cheryl Gillan has also moved a rebel motion and as many as 40 Tory MPs are expected to vote against HS2.

The rail link is expected to cost around £50bn

She believes the case for the benefits of the scheme have not been compelling and a think-tank report from the Institute of Economic Affairs on Monday casts doubts on the Government's case it will transform the economy in the north of England.

However, the bill is expected to pass because of support from Labour MPs.

David Cameron said he expected a big Commons majority in favour of the Bill.

He said: "I think it is right for Britain to get on board the high-speed rail revolution and I expect the House of Commons to endorse it in a big vote tonight."

The huge project has split opinion across the UK.

The Institute of Directors have called it a "grand folly", and say a recent survey suggests that businesses are simply not convinced by the economic case for HS2.

The Confederation of British Industry believe it offers an opportunity to regenerate local economies, provide jobs and boost growth.

Greenpeace support the project in principle, saying it has enormous potential to reduce carbon emissions by getting people away from short-haul flights.

The Woodland Trust says it should not be built at the expense of Britain's natural heritage. They claim it will destroy at least 40 ancient woods, with a similar number put at significant risk.

In Birmingham it is planned to link an HS2 hub to one of the biggest urban regeneration schemes in Britain.

It will be focused around a new city centre station at Curzon Street with the promise of 14,000 new jobs, 2,000 new homes and a boost to the city's economy of £1.3 billion a year.

Birmingham businessman David Smeeton says: "This would be a game-changer for Birmingham - just what it needs for growth, investment and regeneration."

But HS2 Action Alliance, which opposes the scheme, claim more than 70% of the forecast new jobs linked to regeneration in stage one will be based in London.

The protest group also maintains that capacity arguments do not stack up.

"Even the most aggressive forecasts for future demand can be met by improving existing lines," it says.

Compensation packages have recently been announced. Under the proposals the state would buy properties within 60m (197ft)  of the line at full market value plus 10%.

Those up to 120m (394ft) away, who prefer not to move, would be eligible for 10% of the home's value.

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Banks To Be Tested On 35% House Price Slump

By Mark Kleinman, City Editor

Britain's biggest banks and building societies could be forced to raise billions of pounds of fresh capital unless they can demonstrate their ability to withstand a house price slump of roughly 35%.

Sky News has learnt that stress tests to be carried out by an arm of the Bank of England later this year will also assess their readiness to cope with a sudden spike in interest rates to more than 5%.

A series of commercial real estate losses will also be applied to the banks' balance sheets as part of the tests, insiders said.

Details of the stress tests, which have been drawn up by the Financial Policy Committee and the board of the PRA, will be disclosed to markets on Tuesday.

It is unclear whether the interest rate hike will be quantified as part of the tests, while the 35% figure is "in the ballpark" of the housing market scenario to be tested by the PRA, a source said.

The Prudential Regulation Authority (PRA) will unveil the UK tests of banks' resilience alongside a similar exercise being carried out by the European Banking Authority, which will include lenders from across the Continent.

The PRA is to announce the stress test of UK banks

The tests will come amid growing concerns about overheating in the housing market, particularly in London, where price rises have accelerated amid the improving economy.

Government ministers including Vince Cable, the Business Secretary, have warned that the Help to Buy scheme has contributed to the inflation of a housing bubble.

Banking sources have expressed concern about the PRA's methodology for conducting the tests, with some uncertainty about the timing and extent of the publication of the results.

In a statement last month, the FPC said the stress test "was not intended to be the FPC's expectation of what would happen, but a coherent tail risk event against which banks' resilience could be tested".

"A key part of the scenario would examine the resilience of the banks to a housing market shock and to a snap back in interest rates," it added.

The Government wants to avoid a 'too big to fail' scenario

Lenders including Nationwide and Santander UK, which have a substantial proportion of their business skewed towards the UK mortgage market, are said to be concerned about the possible outcome of the tests.

Banks such as HSBC, meanwhile, are also being tested for the impact of a severe slowdown in the Chinese economy.

The stress tests are designed to ensure that British banks have sufficient capital to withstand another economic slump, obviating the need for taxpayers to bail them out, as happened during the crash which began in 2007.

"The philosophy is that banks' bondholders and shareholders, rather than UK citizens, should pick up the tab," said a source familiar with the PRA's plans.

Banks would be given a substantial period of time to raise any capital that the PRA deems necessary as a consequence of the stress tests, insiders said.

The PRA declined to comment on Monday on the details of the stress tests ahead of Tuesday's announcement.

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Pfizer Confirms Bid Interest For AstraZeneca

AstraZeneca: The Key Statistics

Updated: 10:51am UK, Monday 28 April 2014

American pharmaceutical giant Pfizer, which makes Viagra, has until May 26 to confirm its intentions in what could be Britain's biggest ever takeover. Here are some key statistics and history about AstraZeneca:

:: Pfizer's original bid earlier this year for AstraZeneca valued the company at just under £60bn.

:: AstraZeneca operates in more than 100 countries and employs 51,500 people worldwide.

:: Around 9,000 of its staff work in research and development (R&D).

:: It attracted £15.6bn of annual sales in year ending December 31, 2013, however this was down 24% in two years - from £20.4bn in 2011.

:: Reported operating profits have fallen from £7.8bn to £2.2bn, a fall of 71% over the same period.

:: Key to these falling sales and profits is the loss of exclusivity on some of its blockbuster drugs including Arimidex, Atacand, Crestor, Nexium and Seroquel IR. In 2013, the loss of exclusivity directly reduced revenues by £1.3bn.

:: The group forecast that, with new drugs coming online and its extensive acquisition activity, revenues will be back in line with its 2013 figures by 2017.

:: In the three years to 2013, it has completed more than 150 acquisitions including Pearl Therapeutics and Omthera Pharmaceuticals.

:: In 2013, it bought Amplimmune for £700m to help the group secure future products.

:: Analysts see the group battling to sustain itself in a more competitive industry, where cheaper generics eat into the profits on successful drugs post exclusivity.

:: The R&D cost and difficulty of developing new equivalent blockbuster drugs keeps growing.

:: Pfizer's previous proposal on January 5 included a combination of cash and shares which represented an indicative value of £46.61 per AstraZeneca share.

:: The bid included a substantial premium of approximately 30% to AstraZeneca's closing share price of £35.86 on January 3.

:: AstraZeneca was formed in 1999 when Sweden's Astra - which was formed in 1913 - merged with the UK's Zeneca.

:: Zeneca was created in 1993 following a de-merger from ICI.

:: Pfizer's revenues were $51.6bn (£30.7bn) in 2013.

:: Pfizer employs 78,000 people worldwide including 900 in Britain.

:: It makes Viagra and Chap Stick.

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Three Ex-Barclays Staff Charged Over Libor

The Serious Fraud Office (SFO) has charged three former employees of Barclays Bank in the manipulation of the London inter-bank offered rate, Libor.

The SFO said Jay Vijay Merchant, Alex Julian Pabon and Ryan Michael Reich have been charged with conspiracy to defraud.

The charges are in connection with an investigation into the scandal related to the rigging of the key market interest rate.

Libor is widely used in international finance between institutions and the rate-setting is decided daily.

The SFO said the trio's first appearances will be at Westminster Magistrates' Court in several weeks' time.

A total of 12 people have now been charged in relation to alleged Libor manipulation, including three other ex-Barclays employees.

Trillions of dollars are underpinned by the Libor rate in world markets.

The SFO first announced it would look into the inter-bank lending rate set in London and its alleged manipulation in July 2012.

It said the investigation, in conjunction with the Financial Conduct Authority in Britain and the Department of Justice in the United States, will continue.

Libor was previously overseen by the British Bankers' Association.

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