Blockbuster and Barratts enter administration, threatening 3,000 jobs

 Film rental chain's brief revival under Gordon Brothers withers, while shoe retailer failed to attract £5m investment needed

More than 3,000 retail jobs are at risk just weeks before Christmas as the film rental chain Blockbuster and shoe shop Barratts announced they were going into administration.

Both retailers have failed before. Blockbuster was among a string of well-known high-street brands to go bust at the beginning of the year, while it is the third time Barratts has fallen into administration in less than five years.

There were also further job losses at regional airline Flybe, which said it was cutting 500 jobs in an attempt to save £26m a year, having struggled in a downturn that disproportionately affected economies outside London.

The retail collapses reflect ongoing troubles in the economy as inflation has continued to outstrip low wage increases, whittling down consumers' spare cash. This year has seen the failure of a string of retail casualties, including music retailer HMV, Jessops camera shops and bed specialist Dreams, all of which were later rescued by buyers who took on at least some of the stores and employees.

But both Barratts and Blockbuster face an uphill struggle to survive after falling out of step with the fast-changing habits of shoppers.

"Consumers and the retail market have moved on," said Maureen Hinton, research director at retail analysis firm Verdict. "The economic downturn has only speeded up the exit of weaker players that would have found it difficult anyway."

She said the Barratts brand and its products were not strong enough to compete with clothing retailers such as Primark, New Look and the supermarkets, which now sell footwear as well as clothing. Blockbuster, meanwhile, is based on an "outdated concept" that has been overtaken by downloads and TV subscription services.

Philip Duffy and David Whitehouse of Duff & Phelps, joint administrators for Barratts, said they hoped to sell the business as a going concern but that store closures and redundancies could not be ruled out.

Barratts, which employs 1,035 people at 75 stores and 23 concessions in the UK and Ireland, had sought additional investment after a period of difficult trading but the offer of a £5m cash injection was withdrawn on 7 November.

"In view of the financial position of the company and withdrawal of that equity offer the directors were left with no choice but to appoint administators," said Duffy.

The appointment of administrators at Blockbuster comes just a month after the retailer's owner, Gordon Brothers, admitted that its turnaround strategy had not worked because of a rapid switch to renting films online or via TV subscription services.

The restructuring specialist bought about half of Blockbuster's original UK chain in March and promised to invest substantial sums in a revival plan to protect around 2,000 jobs. But Gordon Brothers was unable to secure a licensing deal with Blockbuster's parent company in the US, which also recently filed for bankruptcy, to launch an online business.

Nick O'Reilly, a joint administrator, said: "Gordon Brothers found the marketplace had changed quite dramatically. A lot of people want to rent online, while the price of DVDs on places like Amazon is so cheap – why rent for £3?"

Blockbuster's 264 stores will remain open while the administrator, Moorfields Corporate Recovery, looks for a buyer. But O'Reilly admitted it would be a tough job to find a new owner for Blockbuster in its current form given that Gordon Brothers had already spent weeks seeking a buyer.

Joint administrator Simon Thomas said: "This is obviously a difficult and upsetting time for everyone involved at Blockbuster, in particular employees, who have endured a stressful period since January this year."

"We appreciate that staff and customers will want a speedy resolution, however, we must ask people to be patient over the coming weeks."

Flybe had already cut 490 jobs under its previous boss. Its new chief executive, Saad Hammad, said it had been clear the cost savings were necessary, but the company needed to do more and do it immediately.

He said jobs would go "across the ranks: pilots, cabin crew, engineers management. It's unfortunate it needs to be done to be relevant and viable. We've got to secure the business – it's the lesser of two evils."

The Unite union said it would scrutinise the business plan to limit job cuts. National officer Oliver Richardson said: "Cabin crew have already been through one major reorganisation at Flybe only recently and they will be angry that once again they are on the front line of more cuts.

"Over the coming weeks, the union will scrutinise every inch of the company's business plans in order to protect as many jobs as possible and to avoid compulsory redundancies."

Article Source : http://www.guardian.co.uk
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Greggs slows sales decline as it battles to win back customers

Bakery chain, which issued two profit warnings this year, has abandoned plans to increase number of stores

The bakery chain Greggs has reported a modest decline in sales, as the company battles to win back customers to its hot pies and sausage rolls.

Like-for-like sales fell 0.5% in the 13 weeks to 28 September, after a hot summer curbed Britain's appetite for baked goods. But this represented a better result than the 2.1% decline in like-for-like sales for the year so far.

Greggs' chief executive, Roger Whiteside, said he was encouraged by the improvement in performance. Whiteside, who was drafted in from Punch Taverns in February, has embarked on a turnaround plan to brighten up the bakeries and broaden the range with a move into new products, such as pizza.

"We are encouraged by the recent improvement in like-for-like performance, although with consumer disposable incomes still under pressure we remain cautious," he said. "Cost inflation is in line with our expectations and the group's cash position remains strong. Our overall outlook for the full year is unchanged."

Greggs has abandoned plans to increase its total number of stores: in the latest quarter it closed almost as many stores as it opened, with 20 new shops appearing and 17 being shut down. The company said it expected to refit 215 shops by the end of the year, around 12% of its entire estate of 1,700 bakeries.

The company has issued two profit warnings this year, the most recent in August, and at various times has attributed its problems to cold weather, hot weather, tough conditions on the high street and "promiscuous shoppers". The company recently abandoned plans to build a second savoury factory in the east Midlands, as well as its Greggs Moment coffee shops which it had been trialling since 2011.

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

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Severn Trent spent £19m fending off takeover approach

Water company says higher prices across economy and 'quasi taxes' will push up its operating costs

Severn Trent has revealed that it ran up a £19m bill – almost 9% of this year's pre-tax profits – fending off a takeover approach.

The water company rejected a third and final offer in June from LongRiver Partners, a consortium of Canadian, British and Kuwaiti infrastructure investors.

Severn Trent's board decided that the proposed £5.3bn offer, at £22 a share, undervalued the future potential of the business, although LongRiver argued it was "a full and fair price" for the company, which supplies water and sewerage services to 4.2 million households in the Midlands and Wales.

In a trading statement, Severn Trent said the saga cost it £19m in "advisory, legal and other services". This is almost 9% of the pre-tax profits of £215m the company earned in the year ending 31 March.

Severn Trent's advisers included Rothschild, Citi, Barclays, Morgan Stanley and the financial PR firm Tulchan.

Severn Trent customers' bills rose by 2% on 1 April, which the company attributed to rising inflation. The statement said higher prices across the economy and "quasi taxes" would push up its operating costs.

Water companies are seen as an attractive investment because they are regulated industries with a constant demand for their services.

The failed LongRiver consortium was led by Borealis Infrastructure Management, the infrastructure investment arm of a Canadian local authority pension fund. The other members were the UK's University Superannuation Scheme and the Kuwait Investment Authority, a sovereign wealth fund.

Takeover rules bar the consortium from making a fresh bid for at least six months.

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

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Economic recovery hopes boosted by drop in failing firms

40% fall in companies in financial distress raises in second quarter, according to restructuring specialist Begbies Traynor

The number of companies in financial distress dropped sharply in the second quarter, in the latest sign of improvement in the wider economy.

Businesses in a "critical" condition fell 39% to 3,001 between April and June compared with the same period a year earlier, according to a report by restructuring specialist Begbies Traynor.

Julie Palmer, a partner at Begbies, said it was the "first real sign that the UK economy has turned a corner towards a sustained recovery".

She warned however the worst may yet be to come for so-called zombie businesses, which are smaller companies that have survived there cession but are chronically underfunded and do not have sufficient cash to take advantage of a recovery.

"We have real fears that many small and medium-sized enterprises will have serious financial difficulties at the time they least expect - during a recovery.

Construction industry saw a big drop in companies in financial distress. "Our experience has shown time and time again that many SMEs run out of cash during the recovery phase, as there is a real temptation to over trade," Palmer said.

The Begbies red flag report, which monitors early signs of financial distress among companies, said that businesses in critical distress also fell 9% in the second quarter compared with the first.

It added that distress levels fell most sharply in the construction, professional services, and financial services sectors, while manufacturing also improved on the back of increased demand both at home at abroad.

Separate data has supported the picture of a strengthening UK services sector, but manufacturing has performed below economists' expectations.

However, official figures to be published on 25 July are still expected to show that economic growth accelerated in the second quarter to about 0.6% from 0.3% in the first quarter.

Begbies Traynor said that businesses depending on discretionary consumer spending were among those to see some of the biggest rises in critical financial distress levels, including hotels, bars and restaurants.

"The consumer-facing industries continue to struggle as shoppers maintain tight control over their purse strings at a time when disposable income has remained under pressure," Palmer said.

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

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Payouts to former Tesco boss Sir Terry Leahy since retirement top £8m

Former CEO has received two tranches of three-year-performance payouts, despite doubts about his legacy

Sir Terry Leahy, the Tesco chief executive who led the supermarket group for 14 years before retiring two years ago, has received almost £8.5m in performance-based payouts since his departure.

The payments, revealed by a Guardian analysis of share awards no longer disclosed in Tesco annual reports, comes against a backdrop of writedowns, profit warnings and mounting criticism of Leahy's strategic legacy. Last year the company revealed its first profits fall in two decades; Fresh & Easy, Leahy's foray into the US, is being scrapped at a cost of £1bn; and £800m has been wiped off the value of the land bank built up by the former chief executive.

The Guardian study found Leahy had received two tranches of three-year-performance payouts worth £2.95m since departing. Tesco's remuneration committee, chaired by Stuart Chambers, has judged the performance targets to be met, or partly met.

In addition, shares worth £5.47m have been released to Leahy from Tesco's "executive incentive scheme" since his departure. These were deferred annual bonus rewards, held by the company for three years before being released to executives. In Leahy's case, however, the release schedule was accelerated because of his departure.

These rewards were not assessed on performance criteria, but the final batch were subject to a "clawback" clause, designed to prevent payments for failure. However, Tesco said clawback was not relevant to Leahy payouts as it was only triggered by a "material misstatement" in Tesco's accounts.

The bulk of the £8.42m in performance bonuses received by Leahy since leaving were paid out between February and July 2012. During that period the company was still reeling from a shock January profits warning that wiped 16%, or £5bn, off the share value of the group in one day. It was reportedly the biggest fall in the stock since Black Monday, during the stock market crash of 1987.

Terry Leahy, former CEO of Tesco. His tenure included the failure of the supermarket group's foray into the US, Fresh & Easy.Shares have recovered some ground , but the stock is still 16% below the price when Leahy departed in March 2011. Meanwhile, over the same period, the wider FTSE 100 index has climbed 6.8%.

Leahy also took with him an £18.4m pension pot when he stood down. In addition he held options over almost 7m shares – all now unlikely to produce a windfall because of the share price slump and the scrapping of Fresh & Easy.

A Tesco spokesman confirmed the Guardian analysis of post-retirement performance payouts to Leahy was accurate. "These awards were made during Terry Leahy's time as Tesco chief executive," he said. "They were awarded and vested in line with the performance criteria set for them. No new awards will be made to Terry Leahy."

In its latest annual report Chambers said the remuneration committee had strengthened performance criteria "to ensure that they remained motivational for management while still representing long-term value creation for shareholders".

The full extent of the re-evaluation of Leahy's legacy was laid bare at the supermarket group's annual shareholder meeting last week when his predecessor Lord MacLaurin, attending as an ordinary shareholder, delivered a swingeing attack from the floor.

"I think you would probably agree with me that when you judge the performance of a chief executive, you not only judge the performance of his day-to-day operation, but you also have to judge his legacy and I think we're all very sad to see the legacy Sir Terry Leahy has left," he said.

MacLaurin later told the Guardian Leahy had "lost the plot", and that the US venture was a "disastrous" enterprise he had counselled against – even though it was to be run by his son-in-law Tim Mason.

He added: "It's also unforgivable that he [Leahy] took money out of the UK business and allowed it to flounder when our rivals were catching up and expanding."

Leahy's successor Phil Clarke – who still occasionally takes informal soundings from MacLaurin on Tesco business – has shied away from direct criticism of his immediate predecessor. However, he has said "the strategy wasn't delivering", claiming Tesco had been "running up the down escalator" with its focus on land purchases.

"Space growth is too fast. More very big stores aren't the answer any longer," he said last April. "Customers are moving faster to smaller stores and to the internet." He promised to "strike a better balance between growth and returns for shareholders".

Two years ago Leahy had appeared to retire on a high when he was feted by outgoing chairman David Reid as "undoubtedly one of the leading businessmen of his generation … [who] has put in place a strategy which can secure the progress of Tesco for years go come."

Former Asda boss Allan Leighton, for a long time an arch rival, also paid tribute. "The test of all great leaders is the legacy they leave. Terry Leahy inherited a company that was the best food retailer in Britain … He has made it into the best food retailer in the world."

No one appeared more sure of Leahy's achievements than himself. "In every business the chief executive wakes up in the morning wondering where the growth will come from," he reflected in valedictory remarks. "And we have answered that question at Tesco."

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

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Portugal's soaring bond yields spell end of line for austerity

Portugal bond yields are back to 7.5%, after briefly hitting 8%, as ministers resign and coalition government nears collapse

Here we go again. The eurozone crisis is stirring, confounding the boasts of various eurogroup leaders that the worst is past. Their claims have usually rested on the observation that governments' bond yields, and thus their borrowing costs, have fallen. The austerity medicine must be working, it is asserted, and a bright new dawn beckons just as soon as the current recession in the eurozone clears. Just look at Ireland, they say, or even Portugal, to see how bailout programmes can give countries time and space to adjust.

But look at Portugal's bond yields now: they are back to 7.5%, after briefly hitting 8% on Wednesday, as ministers resign and the centre-right coalition government edges towards collapse.

It is a radical turnaround from the position in May, when Portugal was able to raise €3bn (£2.6bn) via a ten-year bond issue at a yield of 5.7%. At that point, it seemed credible that Portugal might be able next year to exit, on schedule, its three-year €78bn bailout programme and start to fund itself in the market. If 7.5%, or worse, is sustained, forget it. The numbers don't work for an economy still deep in recession.

The political crisis in Lisbon is the market's cue to look under the bonnet of the economy. Steep tax hikes have allowed the annual budget deficit to fall but the International Monetary Fund predicted last month that public debt would peak at 124% of GDP next year "on current policies and outlook." Others think that it is too optimistic – 134% in 2015, say analysts at Barclays.

The political crisis in Lisbon is the market’s cue to look under the bonnet of the economy.One problem is lack of competitiveness. "Improvements in external competitiveness indicators remain limited," said the IMF report, noting that only a quarter of the rise in unit labour costs since 2000 has been reversed. Thus the export recovery is weak, not helped by lack of demand from neighbouring Spain. In the meantime, domestic demand has collapsed amid pay freezes and an unemployment rate of 18%. "Economic recovery is proving elusive," commented the IMF. You bet: output contracted by 3.25% last year.

The IMF's other concern was that the "social and political consensus" behind the bailout programme was weakening. It was right to worry: austerity fatigue is the cause of the current political crisis, with the coalition split over how much reform the economy can bear. It seems highly unlikely any Portuguese administration could deliver the package of cuts and tax rises that the IMF and eurozone leaders are currently demanding.

For now, the crisis is not at boiling point since Portugal can fund its next big debt repayment in September. But even at current temperatures some form of compromise between Portugal and its lenders will be necessary since it should now be clear to all that the austerity programme has run out of road.

Logic says a Greek-style write-off should happen as part of another bailout, this time with softer austerity conditions. But experience says the road to that point will be long – it always is in the eurozone. Complicating factors include: the fact that the terms of the 2011 bailout have already been tweaked twice in Portugal's favour; the IMF's anxiety for the eurozone partners to fill any funding shortfall; and Angela Merkel's election fight in September.

What happened to Mario Draghi's bond-buying pledge? Forget that, too. As the European Central Bank has always made clear, it applies only to countries that can also raise some money from the market under their own steam. Portugal, at present, doesn't fit the bill.

It's the job of the bailout lenders to get it to that point – and it means that the IMF and eurozone leaders should admit that an overload of austerity is a self-defeating strategy in Portugal.

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

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Angela Merkel: youth unemployment is most pressing problem facing Europe

In interview with the Guardian, chancellor promotes merits of Germany's dual system of schooling and work experience, and says she regrets impact of eurozone crisis on young people

Angela Merkel has said youth unemployment is the biggest crisis facing Europe and urged other governments to do more to copy the German system – concentrating on apprenticeships and not simply academic study – to prevent the emergence of a "lost generation".

In an interview before a summit to tackle joblessness among young Europeans, the German chancellor said her country's tried and tested dual system – a mix of classroom learning and on-the-shop-floor work experience – was the best way forward at a time when almost six million under-25s in Europe are out of work.

"Youth unemployment is perhaps the most pressing problem facing Europe at the present time," she told the Guardian and five other European newspapers. "We in Germany have learned a lot from successfully reducing unemployment by means of structural reform since reunification and we can now bring that experience to bear."

Twenty European Union heads of state and all of the bloc's 28 labour ministers have descended on Berlin to hammer out concrete measures to deal with the problem. Economists say the young generation faces the very real prospect of ending up worse off – materially, professionally and socially – than their parents because of the evaporation of jobs in Europe.

Hundreds of twentysomethings have told the Guardian of their endless job frustrations: receiving rejections because they are overqualified, writing scores of unanswered letters, unable to build a life without a job to structure it around.

Merkel has been blamed for compounding the situation by insisting that southern European economies balance their books rather than spend money on job-creating policies. But she dismissed the suggestion that her jobs drive was a way of boosting Germany's poor public image abroad three months before she faces a general election.

She said the Berlin conference on Wednesday was about best practice, pointing out that Germany had halved its youth unemployment since 2005. "We are now in a position to offer a place on a [dual system] training programme to every young person who wants one," she said. "That wasn't always the case … One thing that experience taught us is that there is of course no need for any country to introduce the whole dual system straight away. Inter-company vocational training can be an alternative.

"We should not just try to make our young people more academic," she said. "Germany is seeing the positive effects of skilled workers and master craftsmen having an excellent reputation too."

Angela Merkel is hosting summit in Berlin to tackle joblessness among young EuropeansMerkel exhorted young Europeans as well as employers to become more flexible, calling for greater mobility in Europe. She said that with language barriers often preventing mobility, she wanted to open up the Erasmus exchange programme to include vocational training.

Five years of economic crisis have prompted thousands of Europeans to migrate in search of work. Southern Europeans are now coming to Germany in record numbers, and Merkel quipped that while not all of them would enjoy the conditions offered to the Spaniard Pep Guardiola as Bayern Munich's new coach, they would be given good chances in Germany.

"We have no intention of expanding the low-wage sector, as there is a great demand for skilled workers, which cannot always be met by Germans, although they remain of course our first priority. To reiterate, Europe needs a more mobile labour market. To that end, the way students and academics move around the single market as a matter of course could be better reflected among skilled workers."

Last week Europe earmarked an extra €6bn to tackle youth unemployment. However, Merkel said: "Money alone won't be enough. We will need intelligent reform."

She stressed that contrary to widespread accusations that Germany was trying to impose its ideals and economic models on souther European countries, she did not expect everyone to conform to the strict German model.

"It's absolutely fine for a country to want to structure its economy in a completely different way to Germany's," she said. "I'm always pleased to see different roads leading to success. But what nobody can negate is the need to be competitive and to work for and earn prosperity. When I look at Italy, Spain or Greece I do see very different, successful industries.

"What is crucial is that we all realise how much the world has changed. China, India, Brazil, South Korea and many other countries have been competing with us [Europe] for quite some time in areas we used to dominate … We either offer those parts of the world attractive and innovative products, or we resign ourselves to losing market shares and therefore prosperity, which is precisely what I do not want, either for Germany or for Europe".

Speaking on the sixth floor in the cuboid chancellery in Berlin, with its sweeping views over the Tiergarten park and the sea of cranes that continue to reconstruct the German capital almost 23 years since reunification, Merkel said it was up to governments to solve the problems so as to prevent the social unrest that has been increasingly visible on the streets of southern European towns and cities in recent years.

"When things start to become dysfunctional, it is the job of politicians to remedy the situation. Youth unemployment has been much too high in some countries for many years and now the crisis has driven it even higher. That is unsustainable in a continent with an ageing population. We must not allow there to be a lost generation".

Merkel said the plight of young people was one of her major regrets about the crisis. "I am sorry that it is often those who had absolutely nothing to do with those wrong turnings, the young or the poor, who bear the brunt of the hardship today … It is highly regrettable that parts of the economic elite assume so little responsibility for the deplorable situation."

Highlighting another cultural difference between the approaches taken to the crisis by Germany and other parts of Europe, Merkel said the word "austerity" had entered her vocabulary for the first time only after the crisis had been well under way, as she preferred the term "sound budgeting".

"I see no dichotomy between sound budgeting and growth," she said. "The road we have now started on is therefore the right one, with budget consolidation on one side and fundamental structural reform on the other. That is what will bring sustainable growth."

Asked whether she had ever personally faced the worry of being out of work, Merkel – the daughter of a protestant pastor who moved his family to communist East Germany when she was six weeks old – said: "Fortunately not. In the first few years when I became a politician, I did sometimes think about what I would do if my political career suddenly came to an end.

"I imagined running a jobcentre," she said. "It's a pleasant task to help people find work."

She said her experience as an MP since 1990 in the northern state of Mecklenburg-Vorpommern, where the unemployment rate has dropped from 25% to 10% in recent years, had taught her how important it was to have experienced advisers on hand helping young people on a local level. "The [young people] need both to be given hope and to be pushed into investing their own energies … that can't be done centrally by Madrid or Berlin."

So has she now, on a far grander scale than she might ever have imagined, finally fulfilled her wish by becoming Europe's jobs tsar?

"No," she answered, appearing faintly annoyed by the question. "My task is to set the right political course in Germany and alongside my colleagues in Europe."

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

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UK avoided double-dip recession in 2011, revised official data shows

But initial collapse in output following financial crash was bigger than first thought, Office for National Statistics says

Britain never suffered a double-dip recession in 2012 but suffered a deeper collapse in output following the financial crash than previously thought, according to new data that show the economy is even further away from a full recovery.

The Office for National Statistics has reworked its quarterly growth figures for the beginning of last year to show a flat performance instead of previous estimates of a 0.1% decline. Without a fall in GDP in the first three months of 2012, Britain did not suffer two consecutive quarters of negative growth that would have resulted in its second recession in three years – otherwise known as a double-dip.

The ONS said, however, that the first post-crunch recession in 2008/2009 was deeper than first estimated, meaning that economic output is now 3.9% lower than its pre-crash peak, compared with a previous estimate of 2.6%.

David Tinsley, UK economist at investment bank BNP Paribas, said the figures revealed a weak economy in need of further stimulus from the Bank of England.

"The data highlights both the damage done to the economy following the crisis and the size of the challenge still facing it to rebalance. Unless it bounces considerably it raises serious concerns that after a solid second quarter, growth will at best be weak. These are good arguments for new Bank of England governor Mark Carney to consider a significant easing in policy as early as next week."

George Osborne will be cheered that the double dip has been erased from the economic history books

Carney takes over from Sir Mervyn King on Monday and is under pressure in some quarters to take a more active role than his predecessor. But the nine-strong monetary policy committee that he will head has shown little appetite in recent months to pump further central bank funds into the economy, under the £375bn quantitative easing programme. King and two other committee members have voted since February to increase the QE stock by £25bn, only to be blocked by the remaining six.

Jeremy Cook, the chief economist at the foreign exchange firm World First said Carney and the chancellor need to take further action to bring about a sustainable recovery.

"Whether the UK entered a double-dip or - as today's numbers show, it didn't - matters little to the man on the street who is seeing large falls in real-term wage growth as a result of the lack of business output. Sterling has fallen in the aftermath of this announcement, and although this data is three months old and could be considered stale, the lack of real improvement since leaves the government and the new Bank of England governor a lot to do."

Coming a day after George Osborne was forced to announce a further £11.5bn of cuts to government spending in 2015/16, the news that a double-dip recession has been written out of the economic history books will cheer the Treasury. Ministers have battled to show that the economy was healthier than official statistics showed during the turbulent years of 2011 and 2012, which were marred by the euro zone crisis and fears that the currency zone would break up.

Separate figures revealed the economy is further away from getting back to its early 2008 peak and disposable incomes are at levels last seen in 1987. The ONS said the downturn in 2008/09 saw GDP decline by 7.2%, from the previous estimate of 6.3%.

A deeper recession and a prolonged period of low growth leaves the government with a higher mountain to climb to restore the economy back to health, said analysts.

Figures showing a long-term fall in disposable incomes emphasised the difficult task facing the Treasury as it struggles to boost consumer confidence and high street spending, both of which remain weak. Household disposable income fell by 1.7% in the first three months of 2013 compared with the previous quarter, which left it down by 0.3% year on year.

Howard Archer, the chief UK economist at IHS Global Insight, said the fall "undoubtedly reflected higher inflation, very low wage growth and faltering employment at the start of the year".

Consumer spending continued to rise, however, which Archer said was partly financed by a drop in the household savings ratio to 4.2% from 5.9% in the fourth quarter of 2012 and 7.1% in the third quarter. "This highlights the fact that consumers do still face serious headwinds," he said.

Chris Leslie, Labour's shadow financial secretary to the Treasury, said the revised figures showed the economy has grown by 1.1% since 2010, compared to the 6% forecast at the time.

"That's why living standards are falling and the deficit is not coming down."

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

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Supermarkets face fine of percentage of turnover for mistreating suppliers

Christine Tacon, the new groceries code adjudicator, will be able to arbitrate on contract disputes and investigate complaints

The UK's new supermarket watchdog wants to fine retailers a percentage of their turnover if they mistreat suppliers.

Christine Tacon, the groceries code adjudicator who started work on Tuesday, is able to impose fines and force supermarkets to apologise publicly with ads in national newspapers if they do not treat suppliers fairly. She is in charge of overseeing a legally binding code of practice, put in place more than three years ago, for supermarkets with a turnover of more than £1bn, such as Tesco, Sainsbury's and Asda.

The code does not govern the prices retailers agree with their suppliers, but aims to prevent changes part-way through the contracts. It covers groceries including food, drink and toiletries, but does not include clothing or tobacco.

Christine Tacon, new groceries code adjudicator, will oversee a code of practice governing relations between supermarkets and suppliersSpeaking on her first day in office, Tacon said her first job is to recommend the rules under which investigations would occur and the maximum fines that could be imposed.

Those recommendations are expected to be published in the next few weeks and will then undergo a 12-week consultation. The new system must be in place before Christmas Day, before which MPs will have to approve the maximum fine.

Tacon said she was inclined to base fines on supermarkets' turnover as this was a straightforward approach similar to that used by the Office of Fair Trading. She said: "Fines are there as the ultimate deterrent. I am prepared to use my powers but I hope we don't have to get to that stage."

She has spent several months talking to suppliers ahead of her official appointment this week but will only be able to look into complaints about breaches of the code that occur from her first day in office. She will be able to arbitrate on disputes and investigate complaints made anonymously or by third parties such as the National Farmers' Union.

She will be looking at issues such as supermarkets charging up to £1m to display suppliers' products, or the imposition of fines for customer complaints that have nothing to do with quality of the goods supplied. Tacon argues that such ruses add extra costs to the industry, forcing up prices for shoppers.

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

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Anglo Irish Bank tapes: executives mock Germans amid bailout

Latest leaked recordings compound outrage over behaviour of Anglo Irish bankers amid multibillion-euro state rescue

The Irish prime minister has pledged to open an investigation into the €30bn (£25.5bn) bailout of Anglo Irish Bank as it emerged that an executive sang "Deutschland, Deutschland, über alles" as colleagues joked about German money flowing into the country after a state guarantee of the institution's deposits.

A banker is heard on tape joking and singing the former first lines of the Deutschlandlied – not used since the Nazis made the first stanza their anthem – as the bank's then chief executive, David Drumm, urges his executives to "get the fucking money in". The recording was made in September 2008, when the Irish state stepped in to rescue a bank brought low by a property lending spree.

Enda Kenny, the taoiseach, paved the way for a parliamentary inquiry into an "axis of collusion", although he stopped short of a full, Leveson-style inquiry. Referring to the former taoiseach Brian Cowen, who ran the country during the Anglo Irish bailout, he said: "I assume that our predecessors here, people who served … in high office and in those governments, would have the opportunity and would have the willingness, I assume, to come to a parliamentary inquiry."

The latest recordings to be leaked from inside the bank will compound national outrage in Ireland over the behaviour of Anglo Irish bankers.

Anglo Irish Bank headquarters in St Stephen's Green, DublinDublin intervened in September 2008 with a guarantee of the bank's deposits to keep it afloat – a move that angered London and Berlin because it enticed money from British and German savers.

Cowen's blanket bank guarantee, much criticised as foolish by other European Union governments, was designed to prevent Anglo's immediate collapse but instead put Ireland on a slippery slope to bailing out all six Irish-owned retail banks. In one conversation, two days after the fateful bank guarantee, Drumm giggles while his colleague John Bowe, then director of capital markets, recites lines from the Deutschlandlied.

Drumm, who has since fled to the US, and Bowe are heard laughing about fears that the guarantee would drive a wedge between Ireland and its EU partners.

The former said he would give "two fingers" to UK concerns.

Bowe was recorded boasting that he had picked as the cost of the state rescuing them a random figure, of €7bn (£5.9bn), "out of my arse".

Ireland's deputy prime minister, Eamon Gilmore, admitted on Tuesday ministers had been unaware the recorded conversations existed, even though the state has owned the bank since it was nationalised in 2009.

He said the degree of arrogance and hubris of the bankers highlighted in the tapes was shocking, and made clear the need for a full parliamentary inquiry into the Irish banking collapse.

"That's why we have brought forward legislation to establish such an inquiry, and I hope that the legislation will be enacted before the summer and we can get on with it," Gilmore told RTÉ radio. Gilmore added that the revelations couldcompromise Irish attempts to win further debt relief from the European Union. "It makes it more difficult, of course it does, but we're going to continue to work to get the best possible outcome for the Irish taxpayer," he said.

Kenny later confirmedthat the country's that police had had the Anglo Irish Bank tapes for four years. He told the Dáil they had been originally handed over to the Gardai when they began their when criminal investigations into the bank.

His cabinet colleague, the finance minister, Michael Noonan, confirmed that he, too, was unaware of the tapes, even though it was standard procedure to record calls between senior banking personnel.

Recordings obtained by the Irish Independent of Drumm joking about the rescue plan on the tapes will intensify anger in Ireland towards the top bankers, given that he remains in exile in Boston, allegedly owing the state €8m.

Bowe has denied trying to mislead the state, adding that the reported remarks were "off-the-cuff comments".".

The secret tapes have compounded suspicions that Anglo Irish Bank's senior executives had lured the then Fianna Fáil-led il-led government into a costly financial trap in the autumn of 2008. The figure of €7bn cited by Bowe more than quadrupled, to €30bn.

During the Irish boom, Anglo Irish Bank became the preferred lender to property speculators and builders. Among its high-profile clients was Ireland's one-time richest man Seán Quinn, who borrowed hundreds of millions of euros from the bank to fund a global property portfolio stretching from the US to the Ukraine and Russia. When the world property market crashed, Quinn's empire crumbled, leading him to bankruptcy and prison.

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

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Public money set to be used to cover shortfall in private-finance projects

Promised £3bn to invest in infrastructure and stimulate economy may all be used to plug gap in overhauled PFI scheme

A £3bn investment in infrastructure promised by George Osborne to stimulate Britain's flat-lining economy "could be entirely consumed" by problems with his overhauled Private Finance Initiative, according to economists.

Public funds will be required simply to make up a shortfall in the hoped-for private finance for three large investment projects, each worth £1bn-£2bn, said Mark Hellowell, of Edinburgh University. "It looks as if much of the extra public capital expenditure that the chancellor talks about is in fact substituting for the disappearance of planned private capital."

In opposition, Osborne slammed the PFI as an accounting wheeze beset with "perverse incentives", but late last year he reinvented it as "PF2", a rebrand and refinement which seeks to entice new investors into the market by limiting their financial exposure and keeping more risks with the public sector. Before the recent increase to public capital spending was announced, Whitehall had been looking to PF2 to finance a raft of major infrastructure projects. Subsequently, however, several of these have come unstuck.

After Michael Gove's move to ditch Labour's school rebuilding plans in 2010 ran into the wrath of parents and teachers, the coalition made a partial U-turn and announced that it would upgrade the institutions in most urgent need, through a PFI-style "priority school programme" worth around £2bn. This month the Department for Education let slip that private finance of that programme had been scaled back by £1bn. The department was forced to make an immediate allocation of £300m of its own money to cover 27 schools, and hopes that June's spending round will agree sufficient public funds to cover the rest.

In March, the government conceded that an intended £1bn public-private partnership to finance the rolling stock for the Crossrail project running through central London would now be entirely footed through Whitehall's own capital budgets.

In the same month, the Ministry of Defence backed away from the planned use of private finance for its Future Force 2020 scheme for soldiers' accommodation, with the defence secretary, Philip Hammond, allocating £1bn from his own budget to fund the proposals instead.

With no central list of all the schemes going ahead or being cancelled, the total cost to the public finances of plugging gaps in private finance cannot be known for certain. But Hellowell said that "in the worst case the extra capital spending the chancellor talks about could be entirely consumed in addressing the gaps left by a failing PF2".

The government has conceded that a £1bn public-private partnership to finance rolling stock for the Crossrail project in London will now be entirely funded by Whitehall’s capital budgets.

Jonathan Portes, of the National Institute for Economic and Social Research, warned that problems with PF2 could undo action the government is taking to boost growth: "To the extent that its claimed additions to public investment simply substitutes for investment that was planned to be financed 'off balance sheet' via PFI, it will have no significant macroeconomic impact at all".

A Treasury spokesperson defended PF2, insisting that the model "will provide more flexibility, transparency and better value for money". The spokersperson said "five batches of schools projects at a value of around £700m" were going ahead. The government was "committed to using private finance where it delivers the best outcome for the project", but recognised "that there is 'no one size fits all' solution to the delivery of complex infrastructure projects".

Chris Leslie, Labour's shadow financial secretary to the Treasury, said: "George Osborne has already invested billions less in infrastructure than the plans he inherited, meaning house-building is at record lows and the construction sector is in decline. Now it looks like the relatively small amount of extra funding in the budget will simply offset the shortfall in private finance."

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