Azure Global : 10/22/13

Tuesday 22 October 2013

US unemployment little changed at 7.2% as recovery remains sluggish

Report delayed by shutdown shows American economy fell short of forecasts in September, adding just 148,000 jobs

The US added just 148,000 new jobs in September as employers appear to have cut back on hiring ahead of Washington's budget battle.

The report, delayed by the government shutdown, fell short of forecasts but the unemployment rate dipped to 7.2%. Economists surveyed by Dow Jones Newswires expected a payroll gain of 180,000 jobs for the month – up from 169,000 jobs added in August – and for the unemployment rate to stay at 7.3%.

In previous months drops in the unemployment rate have been driven by people leaving the workforce. September's fall appears to be driven by employment growth, one bright spark in an otherwise lacklustre report. The largest job gains were in construction, wholesale trade, and transportation and warehousing.

Employers have now added an average of 185,000 positions each month over the last year as of September, but gains have slowed in recent months. The number of long-term unemployed (those jobless for 27 weeks or more) has remained high and was little changed in September at 4.1 million. These individuals accounted for 36.9% of the unemployed. The unemployment rates for teenagers (21.4%), black people (12.9%) and Hispanics (9%) also remained high and unchanged.

The 16-day government shutdown began just days before the job report's originally scheduled 4 October release date. The Labor Department's Bureau of Labor Statistics, which produces the monthly snapshot, had collected the data but was unable to finish its analysis after the shutdown.

The change in total nonfarm payroll employment for July was cut from 104,000 to 89,000, and the change for August was revised up from 169,000 to 193,000.

Earlier this month ADP, a payroll company, said US businesses had added 166,000 new jobs in September and warned that the job recovery appeared to be "softening". August's ADP jobs growth number was revised down to 159,000 from 176,000.

According to ADP's closely watched survey, the service industry once again led the jobs growth number, contributing 149,000 new jobs over the month.

Trade and transportation added 54,000 posts, professional and business services added 27,000 jobs and construction added 16,000 posts. Some 4,000 jobs were lost in financial activities.

Mark Zandi, chief economist of Moody's Analytics, ADP's partner on the report, said: "The job market appears to have softened in recent months. Fiscal austerity has begun to take a toll on job creation."

The long-term impact, if any, of the government shutdown is unlikely to be fully reflected in September's figures although a recent report from Macroeconomic Advisers calculated that fiscal uncertainty since 2009 had slowed economic growth by a third of a percentage point per year, equivalent to a loss of 900,000 jobs.

Article Source : http://www.guardian.co.uk

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We must invest in high-speed rail or new motorways, warns HS2 chairman

Outgoing HS2 chair Douglas Oakervee says poor capacity and infrastructure calls for investment over entire transport system

Britain will have to choose between building a high-speed rail line or a new motorway network, the outgoing chairman of HS2 has warned, as the government struggles to hold together a political consensus over the £42.6bn project.

Douglas Oakervee said that the problem of scant capacity and creaking infrastructure was not just one affecting railways but the entire national transport system.

In the annual George Bradshaw address, Oakervee told an audience at the Institution of Civil Engineers on Tuesday that their predecessors "would be turning in their graves if they knew how much we had allowed their infrastructure to decay".

Oakervee, one of the transport industry's most respected and long-serving figures, compared the current capacity crunch with the choices that faced governments in the 1950s when the go-ahead was given to build motorways across Britain.

"We have once again reached a similar point in the cycle of transport planning with a choice to be made. Either we build another similar-sized network of roads or we invest in HS2."

He added: "The stark truth is that our railway network has been allowed to decay for more than 60 years, I would argue that we are already late in acting. In 2010 we published demand forecasts for HS2. Since then the actual growth we have experienced is already outstripping the predicted demand for HS2."

Oakervee warned: "It is clear that all the main transport arteries both road and rail are rapidly becoming congested and are already constraining our ability to grow the economy to allow us to maintain our position in world trade and commerce.

"If we do not wish our standards of living to deteriorate and our world status eroded it is absolutely essential that we develop all our transport arteries and links as quickly as possible."

Oakervee said that without HS2 the key rail routes connecting London, the Midlands and the north would be overwhelmed. He said that on morning peak trains on the West Coast main line, there were already 115 passengers for every 100 seats on arrival in London and Birmingham, and that forecasts pointed to 200 passengers for every 100 seats by 2030 without additional capacity.

He added: "We must stop prevaricating over the rights and wrongs of each individual project and develop an integrated transport and infrastructure plan."

Oakervee, whose previous roles have included overseeing the passage of parliamentary legislation for the Crossrail line currently under construction in London, is stepping down as chairman of HS2 at the end of the year to be replaced by Network Rail chief executive David Higgins.

The first line linking London and Birmingham is due to open in 2026. The full £42.6bn network linking those cities with Manchester and Leeds is scheduled for completion by 2033.

Opposition to the scheme has intensified in recent months with a succession of studies and reports questioning the cost and value for money, especially after the government announced in June that the overall budget, including contingencies, had risen by almost £10bn. The economic case published by the Department for Transport has been revised downwards on several occasions.

Oakervee suggested that trying to calculate exact figures for its eventual value was futile. "Rooms full of economists are vying with each other to gain kudos for their competing models and analysis while we are battling with public opinion to nail a number to the basic fact that investing in HS2 will deliver good, or even very good economic benefits and the jobs the Midlands and north desperately need."

One supportive review of HS2 came on Monday from the Independent Transport Commission, which said that it would provide a catalyst for better connectivity and growth in the UK's regions if it was planned correctly. The study said that a new high-speed rail line would cost not much more than 10% more than a conventional rail line.

Article Source : http://www.guardian.co.uk

Grangemouth oil refinery: future in doubt after workers reject pay offer

Permanent closure a possibility after half of staff at Scottish site vote against owner Ineos's proposal to cut costs

The Grangemouth oil refinery faces the threat of permanent closure after half its staff rejected management proposals to cut costs at the Scottish site.

Unite said 665 of its members – out of 1,370 staff – had rejected the deal offered by Ineos, which owns Scotland's only refinery and has said it will make a decision about the site's future on Tuesday.

Ineos had given its permanent employees until 6pm on Monday to accept its plan, which included less generous pensions and a three-year pay freeze.

Ineos shut down the giant site on the Firth of Forth last Wednesday and has threatened to leave it shut if its demands are rejected.

Ineos's shareholders, led by its billionaire chairman Jim Ratcliffe, are set to decide on Tuesday whether to go through with their threat of permanent closure.

Pat Rafferty, Unite's Scottish secretary, said the workers who had rejected the plan were "the backbone of the plant, the people who keep the site running and the oil flowing". He called on Ratcliffe to reopen the plant and restart talks.

Ineos attempted to bypass Unite on Friday by putting its "survival plan" for Grangemouth directly to the workforce after months of wrangling with the union. Unite has asked its members, who constitute about 80% of the permanent employees, to give their responses to the union, not to Ineos.

Ineos said it had received about 300 acceptances by Sunday evening. The company had said it would not reopen Grangemouth unless Unite pledged not to strike until the end of this year. Unite said it would give the guarantee if Ineos withdrew its ultimatum to employees and let talks resume.

Grangemouth is a big employer in Scotland, produces most of the country's fuel and supports the economy indirectly in other ways.

Grangemouth houses a refinery that processes about 200,000 barrels of crude oil a day and a petrochemicals operation that produces more than 2 million tonnes of chemicals a year.

Ineos says petrochemicals is its worst-performing division but that closing that operation would damage the refining business because the two are "deeply integrated" and the refinery's byproducts feed the petrochemicals arm.

The company has offered workers up to £15,000 as a one-off payment plus a top-up to the new pension if they accept the deal.

The company claims employee costs contribute hugely to the losses of £10m a month at Grangemouth and that it will only invest to secure the site's future if the workers take some pain.

Article Source : http://www.guardian.co.uk

Barclay twins resume £1bn VAT battle over Littlewoods catalogue business

Lawyers representing Sir David and Sir Frederick Barclay return to high court over six-year battle over record HMRC settlement

Lawyers for tax haven-based tycoons Sir David and Sir Frederick Barclay this week return to the high court in London to pursue the final leg of their six-year battle to extract a record £1bn VAT settlement from HMRC for the brothers' Littlewoods catalogue business.

Littlewoods has already received over £470m after the UK authorities accepted in 2004 that there had been an incorrect tax treatment of commissions paid to an army of Littlewoods regional agents during the previous 31 years.

That ruling led to an initial settlement which included interest value of £268m. The decision was a huge victory for the Barclay twins and their family, who were able to reap the benefits of decades of incorrect VAT treatment despite only having bought the business two years earlier.

But the brothers, who spend much of their time in the tax havens of Monaco and their private island of Brecqhou in the Channel Islands, have since claimed this payout was insufficient compensation for years of VAT overpayments by Littlewoods. In 2007 they claimed a further £1bn was needed to settle the matter.

The brothers, owners of the Telegraph newspaper titles and the Ritz hotel, hired John Kay, professor of economics at London School of Economics, to testify that compound interest is the most appropriate measure to assess compensation. The initial settlement used simple interest.

The argument has already been through the British courts once, before it was referred to the European Court of Justice. The court in Luxembourg ruled that it was for the British court to determine the interest in such cases, so the matter returns to the high court in London this week.

In a statement, a spokesman for the Barclay family told the Guardian: "The Barclay family acquired the loss making Littlewoods business in 2002 and this claim had been lodged prior to the purchase. The size of the compound interest claim reflects the fact that VAT was incorrectly collected by HMRC for almost 40 years.

"The directors would be breaching their fiduciary duties if they did not pursue the claim. The family have responsibilities to the broader group's 20,000 current employees, as well as former Littlewoods staff through the significant legacy pension obligations."

Though their offshore family trust, the Barclays had acquired loss-making Littlewoods – together with its claim against HMRC – for £750m in 2002 from the billionaire Moore family. Founded in Liverpool in the 1930s, together with its sister football pools business it had for years been one of Britain's largest privately owned corporate empires.

In 2003 the Barclay family acquired the catalogue retailing division of General Universal Stores, merging it with Littlewoods and renaming the holding company Shop Direct. They have since added a number of smaller acquisitions, including buying the web brand for Woolworths from administrators in 2009.

Latest accounts for Shop Direct show the business, with just over 14,300 staff, made a pretax loss of £300m on sales of £1.7bn for the year to June 2012. It made a top-line operating profit of £33.6m.

Article Source : http://www.guardian.co.uk

Co-op Group loses majority control of banking division

Co-operative Group will now control 30% of the bank's equity, less than the 75% proposed in the original rescue plan

American hedge funds have forced the Co-operative Group to relinquish control of its banking arm in a deal that raises concerns about its ethical approach to business for 4.7 million customers.

After months of intense talks with two US hedge funds, the UK's largest mutual – and owner of pharmacies, grocers and funeral homes – was forced to cede majority control in the bank as it battles to plug a £1.5bn capital shortfall.

The latest twist in the attempts by the Co-op to stave off nationalisation of the bank means that the group, formed by the Rochdale Pioneers in 1844, will be left with a 30% stake when the bank is floated on the stock market rather than the 75% it had originally hoped for when the rescue deal was first announced in June.

The Unite union's national officer, Dominic Hook, said the inability of the mutual to keep control of the bank was "a tragic day for the UK". He added: "This is dreadful for the staff, customers and the wider banking industry. This may mean customers will have even less choice on the high street and means we will have yet another finance company seeking shareholder returns over better banking."

The loss-making bank was forced to admit it had incurred another £105m of losses caused by mis-selling products including payment protection insurance.

Euan Sutherland, the former boss of the retailer B&Q who became chief executive of the Co-op in May, said the renegotiated deal was a good one for the group and its bondholders even though it had forced the group to redraw its original plan. "This is the first bank to be rescued and to survive as a standalone entity without taxpayer money," Sutherland said.

But the dramatic change in the ownership of the bank, which is likely to take place later this year, led to concerns about cultural change in the bank, its future approach to its ethical stance and the job prospects of its 10,000 staff. It is also a blow to the government, which had been hoping mutuals would create vast new challenger banks on the high street.

Co-op Bank had spent a year negotiating to buy 631 branches from Lloyds Banking Group before abandoning the ambitious scheme in April when its problems began to emerge.

Sutherland's predecessor, the Co-op veteran Peter Marks, who led the proposed takeover of the Lloyds branches, will face questions from the Treasury select committee of MPs about when he knew about the losses in the bank.

Many disgruntled customers of the bank took to Twitter, one saying: "Closing my account tonight after 23 years run by members for members you have let us down." Another said: "I think I'd rather you'd have taken taxpayers money than to sell out to Corporate Vultures!"

The hedge funds that have scuppered the Co-op's original plans are known for their activism at troubled companies. Aurelius Capital Management, best known for forcing Argentina to pay out on its debts, and Silver Point Capital, linked to distressed groups such as Lehman, are thought to have amassed their stakes in the bank's bonds after it was downgraded to junk in May.

They had been fighting for a bigger a stake in the bank and in convincing the Co-op to reduce the group's stake to 30% they are also taking bigger losses on their bonds. The bondholders are now expected to put £1bn into the bank – compared with £500m previously – while the Co-op will now inject less than the £1bn it had originally been stumping up to prop up the bank.

Led by Mark Brodsky, Aurelius has been involved in debt restructurings as diverse as port owner Dubai World and the US publisher Tribune, owner of the Los Angeles Times.

Silver Point Capital is run by two former Goldman Sachs employees, Edward Mulé and Robert O'Shea, and has a wide range of investments covering broadcasting – it bought two US TV stations out of bankruptcy – as well as car-makers and financial services and was involved in the bankruptcy of Hostess, the US food company best known for its Twinkies cakes.

The Co-op Group is thought to be ready to make a concession to 15,000 private investors – who were "very elderly and vulnerable", it had been warned. It is expected to swap their bonds for new ones that continue to pay them regular income streams rather than handing them shares. Trading in bonds has been temporarily suspended.

The precise details, which are still being hammered out, are likely to be revealed in the coming days. Sutherland said customers should not be concerned about the changing structure of ownership. The Co-op Bank has been a plc for some time but it is fully-owned by the mutual group which is now relinquishing total control.

For the first time Sutherland said the bank's ethical approach would be embedded in its articles of association. "This bank will remain the Co-operative Bank. We are embedding the co-operative principles in the constitution of the bank to guarantee this," he said.

But Andre Spicer, professor of organisational behaviour at Cass Business School, doubted that the bank would maintain its ethical stance in the long term. "History suggests that once a mutual bank is privatised it drops the focus on doing good to focus on doing well for shareholders. Many ex-mutuals became some of the worst offenders in the lead-up to the financial crisis . The number of staff the Co-op employs is likely to drop as management search for efficiencies. Staff who remain are likely to find themselves loaded down with various restructuring efforts. Despite assurances by the new owners, the Co-op is likely to have a more commercially focused culture."

New management had been hired for the bank only as recently as Maywhen a former veteran of HSBC, Niall Booker, was appointed as chief executive. He is expected to stay as part of the deal. Richard Pym, the former boss of Alliance & Leicester and now the chairman of nationalised parts of Northern Rock and Bradford & Bingley, was also appointed as chairman for the Co-op Bank. The pair had been part of the independent committee set up by the Co-op Group to review the approach from the hedge funds.

While a deal has been hammered out in principle, the details will need to be voted on by bondholders. As part of the attempt to raise the £1.5bn ordered by the Bank of England, the Co-op asset management division has been sold off and the insurance arm is also on the block.

Article Source : http://www.guardian.co.uk