Loans to business getting cheaper and more readily available, Bank says

Availability of credit to corporate sector increased significantly in fourth quarter of 2013, according to Bank of England

Hopes of an end to the prolonged fall in business lending were boosted on Wednesday when the Bank of England announced that loans were becoming cheaper and more readily available to the UK corporate sector.

In a regular update, Threadneedle Street said there were signs that credit conditions had eased for companies towards the end of last year.

"The overall availability of credit to the corporate sector increased significantly in the fourth quarter of 2013, according to lenders, and a further increase was expected in the first quarter of 2014," the Bank said. "Lenders reported that the availability of credit had increased for small businesses and large private non-financial corporations."

It added that the final three months of last year had also seen more credit become available for mortgages, particularly on homes with high loan-to-value ratios. A "significant" further increase in availability is expected in the first quarter of 2014.

The Bank said demand for credit remained patchy. Households and medium-sized businesses were taking advantage of the easier conditions, but demand from small businesses was flat and there was a slight increase in demand from big companies.

Threadneedle Street also reported lower interest rates for borrowers as measured by the spread between the official bank rate of 0.5% and the loan rates charged to individuals and businesses.

"Spreads on corporate lending fell in the fourth quarter, with significant reductions reported for medium-sized companies and large private non-financial corporations (PNFCs), and a slight reduction reported for small businesses. Over the next three months, lenders expected spreads to tighten further for medium-sized companies and large PNFCs, and to be little changed for small businesses."

Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "Steady improvements in credit conditions are continuing and the Bank's survey brings further signs that finance providers are making more credit available and risk appetite is increasing. However, the issue of cost is still lingering for smaller businesses. With a turnaround in investment on the cards for this year we will also need to see a real pick-up in net lending to businesses and fewer companies saying they have been discouraged from accessing external finance."

Howard Archer, economist at IHS Global Insight, said the pick-up in credit availability to companies was encouraging but had yet to translate into increased corporate lending.

"Indeed, latest data from the Bank of England shows that net lending to non-financial companies fell by £4.7bn in November. This was the sharpest drop since the series started in April 2011. Net lending had previously fallen by £1.1bn on October following a rare rise of £714m in September."

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UK could be Europe's 'largest' economy by 2030

The UK will be in a position to overtake Germany as Europe's largest economy, according to the think tank the Centre for Economic and Business Research (CEBR).

The CEBR predicts that Germany will lose its current top spot in Europe by 2030.

It cites the UK's population growth as an aid to economic acceleration.

The report echoes the recent confidence of other business groups such as the British Chambers of Commerce (BCC).

Earlier this month, the BCC said that the UK economy would surpass its pre-recession peak in 2014.

In its annual World Economic League Table, where it ranks the ups and downs of global economies, and forecasts their future position, the CEBR said in addition that China will overtake the US in 2028, which is later than some analysts have suggested.

The UK will overall perform second best of all advanced economies, the CEBR said.

Yet, this performance will still lag behind growth in emerging countries such India and Brazil.

The CEBR in its report added that in addition to the UK's population growth boosting economic expansion, that "lesser dependence on other European economies" would also aid progress, as well as "relatively low taxes by European standards."

However, as far as Germany, the group said that should the euro "break up", that "Germany's outlook would be much better."

As for France, the CEBR said it will be one of the "worst performing" of the Western economies, and will be overtaken by the UK by 2018. This is because of slow growth due to "high taxation" in addition to the general issues of eurozone economies.

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HMRC 'lost nerve' over big tax avoiders, say MPs

Report highlights how Treasury is owed £35bn in missing tax payments and says HMRC pursued small firms, not global giants

British officials have "lost their nerve" in tackling tax avoidance by global corporations and have presided over a £35bn tax gap as they pursue easy prey such as small businesses and individuals, a committee of MPs says.

In a report that highlighted how the Treasury is owed missing tax payments of £35bn, the public accounts committee added that HM Revenue and Customs has left the state with another multibillion pound shortfall by failing to gather £2.6bn of an expected windfall from Swiss banks.

The findings follow a series of damning reports into HMRC by the committee which have addressed its failings over taking on tax-avoiding corporations such as Google, Starbucks, Vodafone and Amazon.

On Wednesday Vodafone, one of Britain's leading multinationals, made a rare gesture of tax transparency by breaking down its payments on a country-by-country basis.

The company revealed that it paid "little or no corporation tax" in the UK but its direct tax payments – including business rates and national insurance – had dropped by nearly 20% to £275m last year.

Last year HMRC, led by chief executive Lin Homer, promised to launch an unprecedented campaign to increase tax collection, particularly from large corporations.

But in a report released on Thursday the planned income from the Swiss accounts were written into Chancellor George Osborne's budget estimates in last year's autumn statement and said it was "astonished" at HMRC's failure to account for the shortfall.

HMRC brought in £475.6bn in revenue for the government in 2012-13, an increase of £1.4bn over the previous year.

But in real terms, after inflation was taken into account, tax income fell last year, compared to 2011-12, while the "tax gap" – between the amount owed to the Exchequer and the amount collected – grew by £1bn to £35bn in 2011/12.

The shortfall was widely seen as an embarrassment for the coalition at a time when it wanted to be seen as clamping down on wealthy firms and individuals.

Margaret Hodge, the chair of the committee, said that HMRC had not clearly demonstrated it was on the side of the majority of taxpayers and had failed in its ambition to crack down on tax avoidance.

"The tax gap as defined by HMRC did not shrink, but in 2011/12 grew to £35bn. Yet that measure does not capture all the tax government should be collecting. For instance, this figure does not include all the tax revenue lost to aggressive tax avoidance schemes.

"HMRC holds back from using the full range of sanctions at its disposal. It pursues tax owed by the smaller businesses but seems to lose its nerve when it comes to mounting prosecutions against multinational corporations.

"It predicted that it would collect £3.12bn unpaid tax from UK holders of Swiss bank accounts and this figure was built into budget estimates, but in 2013-14 it has so far secured just £440m. We were astonished that HMRC could not give any reasons for such a shortfall."

The report said HMRC needed to show that it was dealing "robustly" with individuals and companies who deliberately mislead it. It noted that just one individual out of 16 identified targets on the so-called Lagarde list of Swiss account holders with potential UK tax liabilities had been successfully prosecuted.

The lack of prosecutions against multinational corporations seemed at odds with HMRC's stance on pursuing tax debt from small- and medium-sized businesses in the UK, the committee noted.

In a reference to widespread criticism of tax arrangements at Amazon and Google, the committee pointed out that tax officials have yet to test how existing tax law impacts on global internet-based companies.

The findings were rejected by HMRC, which accused the committee of "selective and misleading use of figures", particularly when calcuating the tax gap. A spokesman said MPs had highlighted the increase in money which had not been collected instead of calculating a percentage of uncollected tax, which has actually gone down.

"HMRC seeks to collect the tax that is due from all taxpayers, so that everyone pays their fair share in accordance with the tax laws passed by parliament.

"We have secured more than £50bn of additional tax from our compliance work since 2010, including £23bn from large businesses," he said.

Meanwhile, Vodafone revealed that its direct contribution to the UK from taxation dropped 18.6% to £275m in the year 2012-2013 from £338m a year before. The figure includes corporation tax as well as business rates, employers' national insurance and many other items.

Vodafone said it paid "little or no corporation tax" in Britain because its profits in the UK were relatively small at less than £300m and were dwarfed by capital spending of more than £1bn on its UK network and interest costs in excess of £600m paid to British banks.

The company set out the tax it paid in 27 countries compared with a year earlier in unusual detail for a British company. Its biggest direct tax bill was in Turkey, where it paid £454m. Vodafone said it wanted to be open about the tax it paid after it was attacked over its contribution in the UK.

The company said: "As the UK government wants more investment in UK infrastructure and jobs, it allows all businesses to claim relief for the cost of assets used in the business against their profits when determining their corporation tax bills.

"The government also provides relief to all businesses for the cost of interest on their debts to UK banks and financial institutions. Vodafone is no different to any other UK business."

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Judge boosts Bernie Ecclestone hopes in F1 bribery trial

Starement by Mr Justice Newey could be a blow to German media rights firm Constantin Medien, which claims that Ecclestone undervalued Formula One in selling it to CVC

Bernie Ecclestone's chances of winning a $140m (£85m) high court trial were boosted when the judge cast doubt on allegations that the Formula One boss paid a $44m bribe to undervalue the motor racing series.

The case has been brought by a German media rights firm Constantin Medien and concerns the sale of Formula One in 2006, by a consortium of banks and Ecclestone's Bambino family trust, to the private equity firm CVC.

The German media company claims Ecclestone undervalued Formula One in the CVC deal and that he colluded with the German banker Gerhard Gribkowsky – who was jailed last year for eight and a half years for accepting a $44m payment – to keep control of the sport. Ecclestone denies wrongdoing.

Gribkowsky was an employee of the German bank BayernLB, which was Formula One's single largest shareholder. Constantin claims that Mr Ecclestone and Bambino paid a $44m bribe to Gribkowsky, then Bayern LB's chief risk officer, so that he would agree to sell the bank's stake to CVC. Last year a German court jailed Gribkowsky for receiving the alleged bribe and in May Ecclestone was charged by German authorities with paying it.

Constantin's lawsuit alleges that CVC was Mr Ecclestone's preferred bidder as it had agreed to retain him as chief executive, whereas a rival consortium of banks had considered firing him in the event of a takeover. CVC paid a total of $2bn for Formula One with BayernLB getting $814m. Constantin says it lost out because it had an agreement with BayernLB which entitled it to 10% of the proceeds if the bank's stake had sold for more than $1.1bn.

Constantin claims that other bidders would have paid more if the alleged bribe had not been paid to sell to CVC. However, in court this week Mr Justice Newey said: "I have to say I find the idea of a bribe being paid to get rid of the banks more plausible than the idea of a bribe being paid to undertake an arrangement under which shares were sold at an undervalue."

It could be a big blow for Constantin as it needs Newey to rule that the stake was undervalued in order to win its $140.4m damages claim against Ecclestone, Gribkowsky, Bambino and its former legal adviser.

"A key question, were I to decide there has been a bribe, would be whether Mr Ecclestone thought that the shares were being sold at an undervalue or possibly might have been sold at an undervalue," said Newey, adding that "a lot depends on exactly how Mr Ecclestone gets to his figure of two billion".

To answer the question, Philip Marshall QC, for Constantin, referred to evidence given in November by Ecclestone. He said CVC initially offered a total of $1bn for F1: "That's the figure I think I said to Gerhard and he said he needed it to be double that," Ecclestone told the court last month. When asked by Marshall whether he thought that $2bn properly reflected Formula One's value Ecclestone said: "I don't know. I didn't value the company. I've no idea. I didn't own any shares so I didn't have to worry about that."

In response to Marshall's reference of Ecclestone's testimony, Newey said: "I am not sure that helps you … you have to show that Mr Ecclestone realised it might have been sold at a wrong price and approvingly accepted the risk."

Newey's position on the valuation reflects his comments on the first day of the trial in October when he prevented Marshall from putting on the record details of the German charges against Ecclestone. "It is not as if you would agree with a number of the arguments put forward in the indictment," he said. "It would be fatal to your case, wouldn't it, what they say about the purchase price?"

Referring to this, Robert Miles QC, acting for Ecclestone, told the court that following the sale to CVC, BayernLB's former chairman Werner Schmidt said "we were given the opportunity to get out of the shareholding with extremely high proceeds.

Miles also read out evidence from Kurt Faltlhauser, the deputy chairman of BayernLB's supervisory board, who said it was "very satisfied with the purchase price of Formula One shares which were, at the time, already heavily written down in the bank's balance sheet."Ecclestone and Bambino deny paying a bribe and say that Gribkowsky threatened to make false allegations about Ecclestone's tax affairs if the money had not been paid. The trial comes to a close on Friday with judgment expected in early 2014.

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Margaret Hodge attacks 'voluntary' tax policies for rich

Hodge has led the cross-party committee through a wide-ranging investigation into how multinational firms pay UK tax

The chair of parliament's public accounts committee, Margaret Hodge, has delivered her most outspoken attack to date on the coalition's tax policies, describing the tax system for corporations and the super-rich as "increasingly voluntary".

She also criticised the "growing gap between rhetoric and reality" coming from David Cameron on tax reform.

Speaking at an event organised by tax campaigning charities in London, Hodge said: "They [ministers] believe we should engage fully in the global race to the bottom … I now believe David Cameron doesn't mean what he says when he says multinational companies should 'wake up and smell the coffee'."

Despite tough language on combating tax avoidance, the coalition government has been acknowledged among tax professionals as accelerating the pace of tax competition in a drive to lure in foreign investment. Measures such as new rules for overseas finance subsidiaries, tax breaks for groups owning patents in the UK, and the plunging corporation tax rate, have been cited by critics of Cameron's approach to tax reform.

Hodge's attack on Cameron harked back to a speech he gave at the World Economic Forum in Davos in January, shortly after the use of aggressive tax avoidance strategies at Starbucks' UK operations had been exposed by a Reuters investigation. The coffee chain had taken £3bn of sales in the UK over 14 years, but paid only £8.6m in tax.

Cameron told the audience of business leaders in the luxury Swiss resort: "When some businesses aren't seen to pay their taxes, that's corrosive to the public trust … Some forms of avoidance have become so aggressive that I think it is right to say these are ethical issues and it is time to call for more responsibility."

In a blunt jibe at Starbucks, he urged multinationals to "wake up and smell the coffee".

Hodge has spent the last two years leading the cross-party committee of MPs through a wide-ranging investigation into how multinational firms pay UK tax. Her tough questioning of company executives, big-four accountancy partners and HMRC bosses has played a major role in keeping tax reform high on the political agenda.

After firms such as Google and Amazon were subjected to a barrage of angry questioning from Hodge's committee, George Osborne responded a year ago by issuing a joint statement with his German counterpart Wolfgang Schäuble, calling for urgent reform of the international tax rules. "Some multinational businesses are able to shift the taxation of their profits away from the jurisdictions where they are being generated, thus minimising their tax payments compared to smaller, less international companies," they said. "We want global companies to pay those taxes."

Since then, however, Schäuble has dramatically switched his view of Britain's commitment to shoring up the integrity of international tax regimes, attacking Osborne's "patent box" tax break. "That's no European spirit," he said. "You could get the idea they are doing it just to attract companies."

Behind the scenes, a growing number of fellow G8 nations have also become increasingly irritated at the apparent gap between Cameron's use, on the one hand, of a language of ethics on tax reform, and, on the other, what some see as begger-thy-neighbour measures to poach business activity from rival economies.

Article Source : http://www.guardian.co.uk
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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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Eurozone unemployment stuck until 2015, warns European commission

Commission warns jobless total will remain at record 12.2% in 2014, as growth forecast drops to 1.1%

The European commission is warning that it is too early to claim victory in the euro area's fight against recession after its latest forecasts showed it would be 2015 before weak growth generated a fall in the jobless total.

Although the 17-nation single currency zone started to expand in the summer after a six-quarter double-dip recession, Brussels said there will be a lag before the pickup in activity leads to a fall in unemployment.

The commission trimmed its growth forecast for the euro area in 2014 from 1.2% to 1.1% and said unemployment will remain stuck at a record 12.2% next year. It added that there were encouraging signs that the recovery would continue but said the legacy of Europe's debt crisis would continue to act as a brake on growth.

Only in 2015, when growth is expected to increase to 1.7%, does the commission see a dent being made in the jobless total, with unemployment predicted to drop to 11.8%.

Olli Rehn, the commission's vice-president for economic and monetary affairs and the euro, said: "There are increasing signs that the European economy has reached a turning point. The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery.

"But it is too early to declare victory: unemployment remains at unacceptably high levels. That's why we must continue working to modernise the European economy, for sustainable growth and job creation."

The commission, publishing forecasts three times a year for the eurozone and the EU, stresses that the return to solid growth in the countries that belong to the monetary union is set to be gradual, with big differences in economic performance across member states. Financial markets believe the combination of sluggish growth, high unemployment and the threat of deflation will prompt the European Central Bank into fresh efforts to boost activity.

Of the bigger euro area countries, only Germany is forecast to grow by more than 1% in 2014. Spain is expected to expand by 0.5%, Italy by 0.7% and France by 0.9%.

By contrast, the commission said the outlook for the UK – which has exceeded expectations in 2013 – was "quite bright". Growth of 2.2% is pencilled in for 2014, rising to 2.4% in 2015.

Article Source : http://www.guardian.co.uk
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Ross McEwan to make first presentation to City as RBS boss

New Zealander expected to set out ambitions for RBS amid speculation he will also announce outcome of 'bad bank' review

Ross McEwan is to make his first presentation to the City as boss of Royal Bank of Scotland on Friday amid speculation that the outcome of a government review into spinning off a bad bank will be announced with the third quarter results.

The New Zealander is expected to set out an ambition to end lingering concerns about the bank's financial strength after taking over from Stephen Hester on 1 October. It is thought McEwan will outline the outcome of the government-commissioned review into whether a "bad bank" of underperforming loans should be spun out of 81% taxpayer-owned RBS.

He is also expected to publish a report the bank commissioned from the former Bank of England deputy governor Sir Andrew Large after it faced criticism about its lending to small businesses.

It is thought the government will step back from asking RBS to create an extensive bad bank holding as much as £120bn of problem loans. But McEwan is expected to set out his thoughts on the future of the RBS investment bank, its US arm, Citizens, and its private bank Coutts – banker to the Queen.

Citizens, already due for a stock market flotation in 2015, could be sold off more quickly, and there has been repeated speculation that Coutts could also be earmarked for sale. The investment bank, where the headcount has already shrunk from 25,000 before the bailout to 9,000, could be forced to retrench further.

The new chief executive is not expected to use the third quarter results to outline his strategic vision for the bank he joined a year ago as head of the retail operations. Sky News reported last night however that he would open talks with the government over restarting dividend payments to shareholders, although it could be years before such a move was approved.

McEwan has been readying the bank's staff for the outcome of the government review into a breakup. He recently told them he believed it would resolve an outstanding uncertainty about the future of the bank, bailed out five years ago with £45bn of taxpayer money.

In an email to staff a fortnight ago, he said: "The future of this company will not be about whether we operate in particular areas or where our problem assets sit. The future of this company is about how good a job we do for our customers, including those who are having difficulty repaying their loans. And it will be about how well we live up to all our responsibilities, particularly those we have to the UK."

The same week, George Osborne told the Daily Telegraph he was close to a decision on RBS. "We are looking at the case for a bad bank and if not a bad bank, what is the alternative strategy that really gets on top of the problems in that bank and goes on being what I want it to be, which is a bank supporting the British economy," he said.

The City is anxious about the creation of a bad bank although speculation in recent days has focused on the expansion of the existing non-core division. Even so, Ian Gordon, banks analyst at Investec, said: "We still fear that, even in the absence of an outright good bank/bad bank split, more covert steps may still destroy value".

Mortgage firm sues over Libor

US mortgage finance company Fannie Mae sued nine of the world's largest banks yesterday, including Barclays and Royal Bank of Scotland, accusing them of colluding to manipulate interest rates and seeking more than $800m of damages.

In a complaint filed in the US district court in Manhattan, the company accused the banks of manipulating the London Interbank Offered Rate, or Libor, as well as other interest rate benchmarks.

Fannie Mae said this manipulation caused it to lose money on interest-rate swaps and other transactions. It is also seeking punitive damages.

Smaller rival Freddie Mac filed a similar lawsuit in March against more than a dozen banks.

"Fannie Mae filed this action to recover losses it suffered as a result of the defendants' manipulation of Libor," a spokesman said. "We have a responsibility to be good stewards of our resources."

Four of the banks sued by Fannie Mae – Barclays, Rabobank, Royal Bank of Scotland and UBS - have previously settled with regulators over similar allegations and admitted wrongdoing.

The other bank defendants are Bank of America, Citigroup, Credit Suisse, Deutsche Bank and JPMorgan Chase.

Representatives of Bank of America, Barclays, Citigroup, Deutsche Bank, JPMorgan and RBS declined to comment. The other banks did not immediately respond to requests for comment.

The case is Federal National Mortgage Association v Barclays Bank Plc et al, US District Court, Southern District of New York, No. 13-07720.

RBS has already signalled it is involved in the new global investigation into foreign exchange trading and last night it was reported to have suspended two traders.

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