Tuesday, 2 July 2013

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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Ocado 'well positioned to benefit from online growth' despite another loss

Online grocer hails growth in customer numbers and average spend as it announces pre-tax loss of £3.8m
The online grocer Ocado has insisted it is making progress despite remaining in the red in the first half of the year.
The retailer said growth in customer numbers and average basket values, as well as its 25-year deal with the supermarket chain Morrisons, were signs that it was well-placed to benefit from the growth in the online grocery market.
It made a pre-tax loss of £3.8m in the 24 weeks to 19 May, however, which was bigger than analysts were expecting and compared with a £0.2m pre-tax profit in the same period last year.
Ocado said the loss was driven by advisory costs associated with the Morrisons deal, which is subject to shareholder approval, as well as pre-opening costs of new distribution centres.
Ocado has yet to report an annual pre-tax profitRevenue rose 15.6% to £355.9m, while customer numbers increased to 360,000 from 337,000 at the end of the first half last year. Average spend rose to £114.90 from £113.10.
Tim Steiner, the chief executive, said Ocado was gaining market share. He said: "We believe we remain well positioned to benefit from this continuing growth in online demand with increased optionality and flexibility in how we drive growth and profitability in our business in the future."
He added that the company, which includes Waitrose products in its range, was focused on delivering the agreement with Morrisons, rather than "making a quick announcement about another transaction".
"While we believe that the economic and consumer environment remains challenging, we continue to see that consumers are increasingly looking to shop online for groceries, evidenced by the online growth figures reported across the grocery industry. We expect to continue growing broadly in line with the market," Steiner said.
Ocado appointed Sir Stuart Rose as chairman in May.
Analysts at Exane BNP Paribas said Ocado still had a lot of work to do: "Having signed its first partner, Ocado has made a sizeable step towards being a profitable business but the group still has plenty left to do, not least show its latest technology can work as the group expects and that it can get Morrisons online relatively painlessly."
Article Source : http://www.guardian.co.uk
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EasyJet founder to vote against airline's plan to buy 135 new Airbus planes

Sir Stelios Haji-Ioannou says he will reject £8bn deal over easyJet's failure to disclose discount it secured from Airbus
EasyJet's founder and largest shareholder, Sir Stelios Haji-Ioannou, has said he will vote against the budget airline's plan to buy 135 new aircraft, at an investor meeting later this month.
The company revealed last month that it had agreed to buy 35 current generation A320 aircraft and 100 new generation A320neo aircraft from Airbus, for delivery between 2015 – 2022. It has options to buy a further 100 A320neo planes.
If the deal goes ahead, easyJet will use the new aircraft to replace ageing planes as they leave the fleet, and to facilitate growth.
Haji-Ioannou, who founded the airline in 1995 and owns a 37% stake with his family, said in an open letter to shareholders that he would reject the deal worth around $11.9bn (£8bn) at list prices at the meeting on 11 July.
The easyJet founder said he expected the majority of shareholders to approve the deal with Airbus despite his objectionsIn his latest clash with the easyJet board, he criticised its failure to disclose the level of discount secured from Airbus, describing it as a secret deal, and asking: "Would you eat in a restaurant where the menu has no prices?"
"As the person with the most to gain if this company increases profitability and the most to lose if the outcome from this order is not as promised by the board, it is my firm opinion that this is a good deal for Airbus and a bad deal for easyJet shareholders," he wrote.
He added: "I strongly believe public company directors should be legally held to account for their decisions. I will hold these directors to account, if at some point in the future it turns out that their decision to overcommit the company today was wrong."
Haji-Ioannou said his objections were partly based on a belief that the new order will lead to a hunt for new, unprofitable routes. He also claimed that costs per seat had increased by 25% over the past four years, arguing that if the trend continued, customers were unlikely to pay the "ever increasing ticket prices".
Despite his objections, Haji-Ioannou said he expected the majority of shareholders to approve the plan.
A spokesman for easyJet declined to comment.
Article Source : http://www.guardian.co.uk
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Monday, 1 July 2013

DFS supports British manufacturing resurgence

Sofa maker is among firms bringing jobs back to the UK from overseas as Chinese labour falls out of favour
Anyone subjected to brash DFS adverts promising double discounts and 0% finance on sofas would think it was impossible for the furniture firm to get its products from anywhere other than low-cost factories in the developing world.
However, the company is one of a number of British businesses, including Golden Wonder, Hornby and Aston Martin, that has stopped shipping products back to the UK and is transporting jobs to these shores instead, making it the biggest sofa manufacturer in Europe.
At a DFS factory on an industrial estate in Derbyshire there are banks of sewing machines, state-of-the-art fabric cutters and gas-powered staple guns.
Harvey Ellis, head of manufacturing at DFS, who oversees the 838 workers on three sites and in two woodmills, explained: "Once we receive an order, it takes just four days to go from an order on our screens to being loaded on to a van. The frames are shipped in from our wood factory six miles away and we will make 3,000 pieces a week. Today we'll complete 900."
In three years DFS has toned down its Chinese activities to join the march of the makers, increasing UK production by a quarter. One worker, nail gun at the ready, said he could cover an entire sofa with fabric – sewn by the factory's seamstresses – in less than 30 minutes.
It is a skill in much demand. The desire for British-made products has become so great that the factory in Alfreton has just increased its workload, adding an extra shift to keep it running 16 hours a day. Along with two more factories in Doncaster and Long Eaton, it means DFS now makes nearly all of its fabric sofas in the UK, accounting for half of all furniture sold by the company. Only the labour-intensive leather products are still made abroad.
DFS chief executive Ian Filby said he wanted to see the business return to its British roots, and that customers now asked why the company did not make more of its UK credentials.
"Customers are astounded to think that a value-for-money player is also a major UK manufacturer," he said. Then, with a nod to the dark days of the three-day week, he added: "We all know about the bad old seventies, but the historical mindset of 'all UK manufacturing is shoddy' has gone full circle and people now see the UK as the sort of place where people work hard and make a decent crust. People believe that quality product is made in the UK and aren't going to buy British if the product is poor."
DFS appears to have tapped into a patriotic zeal among the British public. Its market share has risen from 25% to 28% in the last three years and Filby believes that there are also compelling financial reasons for bringing work back to the UK.
"I'd be surprised if there's not a lot of British manufacturers wanting to be more responsive to shorter lead times. We're never going to compete with the sweatshops of the Far East as a country, but you can manufacture here as long as you're adding design or R&D [research and development]. I think the other phenomena which people recognise and is going to continue, is that moving things around the globe is expensive."
And it is not just DFS that has seen the benefits of shifting work back to the UK. This year Golden Wonder revealed that its Pot Noodle snack will be made in Leeds instead of being shipped 10,000 miles from China, and Aston Martin Rapide S cars are now built in the Midlands, while clothing businesses including Topshop and Marks & Spencer are selling more British-made outfits.
Lee Hopley, chief economist at the EEF manufacturing association, explained that manufacturing in the UK was increasing as costs overseas grew and customers became more demanding.
"I think customers would be surprised by how much is made in the UK," she said. "There is a lingering perception that it is still made overseas. Manufacturing output is higher now than the 1980s in real terms, although we're still 11% below our pre-recession peak. There's been big investment in technology and equipment, while there is also a focus now on innovation to look beyond the product."
Model railway maker Hornby is another example, shifting its paint production back to the UK from China after there were fears that any quality issues would take several weeks to be resolved. Executive chairman Roger Canham added that making products closer to home helped businesses respond to demand – and check for errors – more easily.
"It takes four weeks for a shipment to arrive from China, which means if you want to check the quality you have to wait until it arrives," he said. "Now, if I want to check all I need to do is jump in a car and go to the factory.
Bringing jobs back home: DFS chief executive Ian Filby at the furniture manufacturer's production facility in Somercotes, Derbyshire"There was a huge surge in manufacturing from China in the 1990s, but now that wages are increasing and shipping is more expensive it's slowed down. We've got a new range of Airfix quick- build models which we will manufacture in the UK because it gives us a better chance to respond to demand quickly."
And with the shift in work back to the UK come much-needed new jobs, at a time when youth unemployment running at around 20%.
Filby said he would create 250 new jobs at DFS this year, having hired 400 new people in the 18 months to January, and revealed that one of the benefits of having UK factories was the loyalty he got from the staff who had worked there for generations.
At Alfreton, for example, nearly half the staff have been there for five years, and 35% have notched up 10 years' service. Owned by private equity group Advent, DFS has promised to reward staff for their loyalty with 1% of any profit made from the company's sale, which is expected to happen over the next few years.
Another reason why British workers will welcome the return of a manufacturing base that dwindled for decades but is showing renewed determination to compete with the rest of the world.
Article Source : http://www.guardian.co.uk
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Archbishop backs payday loans alternatives

Justin Welby suggests credit unions use church halls in effort to promote alternative to £2bn payday lending industry
Two thousand years after the financial services industry was ejected from church premises, the Archbishop of Canterbury not only wants to invite the money-changers back in – he wants churchgoers to help them expand their lending.
Justin Welby is promoting credit unions as a credible alternative to the booming £2bn payday lending industry, and says it will help match often vulnerable, low-income borrowers with the most appropriate lenders. He is proposing that credit unions be allowed to use church halls and other properties in order to better access customers. Welby also wants to encourage churchgoers with financial expertise to help these lenders.
Welby, who sat on the parliamentary commission on banking standards and has been an outspoken critic of the financial industry, believes a successful credit union sector could pose a challenge to high-street and internet payday lenders, who target often vulnerable borrowers with expensive loans.
Malcolm Brown, the Church of England's director of mission and public affairs, yesterday said: "It is not about regulating them [payday lenders] out of business. If the market is functioning as it should, there should not be any need for them to exist."
The government has also pledged to spend £38m to strengthen credit unions.
Speedy Cash loans shop in Brixton, south LondonMany high street banks have retreated from offering small, short-term loans in recent years, while demand from low-income groups has soared, sparking an explosion in lightly regulated payday lenders.Welby's intervention comes as ministers and regulators also grapple with how best to curb the ballooning payday lending industry without choking off small-sum credit to low-income groups. Consumer minister Jo Swinson will meet with lenders as well as with debt charities and campaigners to discuss what she calls "widespread irresponsible lending".
Last night she said she would tell companies: "The industry needs to do so much more to get its house in order, particularly in terms of protecting vulnerable consumers. I am concerned that the lenders are not living to the spirit or the letter of the codes of practice."
However, in a weekend column in the Sun newspaper Swinson made clear the government would not impose a cap on loan costs. "That could shut down short-term loans and force people towards illegal loan sharks or other extreme measures," she said. "The solution needs to be more sophisticated than this."
While Welby's plans stop short of inviting church commissioners, who oversee £5.5bn of the Church of England's wealth, to put financial muscle behind credit unions, he nevertheless wants the church to use other means at its disposal to get behind such lenders. The church is also building plans for its own in-house credit union for the clergy, which it hopes will eventually help it build expertise that can be shared with grassroots lenders.Labour's shadow treasury minister Chris Leslie said ministers had "consistently ducked clamping down on predatory pricing and extortionate interest charges". He said regulators already had the power to control costs and loan duration but the political will was absent.
Payday lenders have variously been accused of failing to properly compete with one another on the cost of loans; of conducting too few checks on the financial means of borrowers; and of using overly aggressive tactics to extract repayments.
The OFT referred the industry to the Competition Commmission last week, after repeated warnings that it must get its house in order met with only mixed responses.
Justin Welby, the archbishop of Canterbury. His intervention comes as regulators grapple with how to curb the payday lending industry.One successful payday lender, Wonga.com last week increased customer loan costs to the equivalent of 5,853% APR. Speaking ahead of the meeting with Swinson, co-founder Eric Damelin claimed his company and others were being "used as political footballs". He claimed to be in favour of regulatory reform. "We don't want no regulation, as we want to keep the bad guys out".
At the top of the agenda for the meeting Swinson has called will be the new regulatory regime, which comes into force from April next year, under which industry must answer to the Financial Conduct Authority rather than the Office of Fair Trading. Officials from both the FCA and the OFT will address the meeting.
Last month the House of Common's public accounts committee said the OFT had been "ineffective and timid in the extreme" in regulating payday lenders.
Article Source : http://www.guardian.co.uk
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Rail franchise timetable already showing signs of delay

Department for Transport grapples with lengthy negotiations to extend current contracts before franchise contests can resume
Train operators fear the revised rail franchise timetable announced in the wake of the west coast fiasco is already slipping as documents for the first contest appear likely to be delayed until autumn.
The invitation to tender for Essex Thameside, a competition paused during inquests into the Department for Transport's (DfT) botched award of the London-to-Glasgow line, is due in July. But companies have now been told the schedule may not be met.
The DfT has been grappling with contract extensions that, while intended as breathing space before longterm franchises could be awarded, have themselves required lengthy negotiations with the existing train operators.
The recent extension to National Express's current c2c service on Essex Thameside was signed off a week before the old franchise expired, and on more favourable terms.
Virgin is still renegotiating its west coast contract, while struggling FirstGroup has been frustrated with the progress of discussions for the extension of the Great Western franchise. Any agreement will be heavily scrutinised because FirstGroup has activated a termination clause that allowed it to avoid £800m in premium payments to the taxpayer, but is now negotiating a contract extension that is expected to be on more favourable terms.
Although the train companies want franchising restored, the current swath of extensions offer some security. Stagecoach's finance director, Ross Paterson, last week said that extensions on Southwest, East Midland and Virgin Rail – 49%-owned by Stagecoach – meant his company had "nine years of cash flows and earnings guaranteed".
Labour has called for the retention of the East Coast service as a 'public sector comparator' because it is currently run by the state-owned Directly Operated RailwaysBut the agreement reached with FirstGroup will be politically sensitive, with Labour considering whether the Great Western service could be brought into public hands should it win the election.
Labour has called for the retention of the East Coast service as a "public sector comparator" because it is currently run by the state-owned Directly Operated Railways. However, the coalition has brought the London-Edinburgh train service to the front of the queue for new awards once the "paused" Essex Thameside and Thameslink competitions are completed.
That means East Coast should be in private hands before the 2015 general election. However, the invitation to tender for Great Western is due just weeks before the election is called – potentially allowing an incoming Labour government to void the competition.
The DfT announced a revised programme for awarding franchises in March after the 2012 debacle, in which the award of the west coast service to FirstGroup was scrapped after legal challenge. An inquiry by Sam Laidlaw, the chief executive of British Gas parent Centrica, identified serious errors in an under-resourced and overstretched department, warning that there were "significant issues about the ability of the DfT effectively to conduct rail franchise competitions".
An interim franchising director, Peter Wilkinson, who was appointed to bolster the staff, is due to leave next month. The DfT declined to comment on whether his contract would be extended. The department has also been labouring with the procurement of Thameslink rolling stock. The controversial deal was signed off this week two years after Siemens was chosen to build the trains.
A DfT spokesman said: "The Department for Transport is working hard to deliver the ambitious rail franchising schedule that the secretary of state announced on 26 March. We fully expect to deliver both the Essex Thameside and Thameslink franchises to the published timetable."
Article Source : http://www.guardian.co.uk
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Sunday, 30 June 2013

Mark Carney urged to kick start lending to small businesses

BBC ask Carney, who takes over from Sir Mervyn King today, to help sustain economic recovery by supporting small enterprises 
Business leaders urged Mark Carney on Sunday to back a £1bn investment bank at his first meeting as governor of the Bank of England to kickstart lending to small businesses.
The British Chamber of Commerce (BCC) also called on Carney, who takes over from Sir Mervyn Kingon Monday, to inject further funds into the economy as part of its quantitative easing (QE) programme to maintain the UK's fragile recovery.
BCC director general, John Longworth, said Carney needed to find ways to channel money to manufacturers and smaller enterprises or risk the recovery running out of steam.
"While we are seeing signs of a stronger recovery across the business community, we have no illusions about the challenges ahead for the UK economy," he said.
NEF spokesman Tony Greenham says Mark Carney’s arrival is the perfect opportunity to review the remit of our central bank.The Bank of England's interest rate setting committee is expected to reject boosting QE beyond its current £375bn level at its monthly meeting on Thursday, despite the arrival of Carney amid a welter of expectations that he will spur his colleagues into action.
City analysts agree that the monetary policy committee will hold its fire until the publication of a review in August of its policies, which will broaden its remit and encourage committee members to adopt a more radical mix of initiatives.
A report by the Bank's officials into the prospects for rising prices is also likely to show inflation falling over the next two years, giving the MPC more leeway to boost QE.
The chancellor wants the committee to take a more active role in encouraging lenders to promote borrowing to the wider economy. He has already allowed the committee to adopt a more flexible view of how to meet the 2% inflation target.
A report by the CBI and the accountants Price water house Coopers into the health of the financial services industry appeared to support the view that the banking sector is returning to health. It found that banks recovered strongly in the three months to the end of June after long period of cost cutting following the 2008 crash, though with lower profits and further cuts in employment.
However, the BoE's own figures show that RBS and Lloyds have reduced the amount of money they lend to households and businesses, while Barclays has threatened to cut back following demands from the main City regulator that it must bolster its reserves. Meanwhile the Co-op, which until earlier this year planned to take over 600 Lloyds branches, is in trouble after discovering a large shortfall in its capital reserves.
A funding for lending scheme designed to cut the cost of borrowing has pushed down the cost of mortgages since it was launched last year, but has so far had little effect on business lending.
A leading thinktank called on Carney to bypass the main banks with a direct intervention into the housing industry to support the building of 60,000 homes.
The New Economics Foundation said that instead of using quantitative easing to buy government bonds, the BoE should buy assets that will directly support the economy, which would mean purchasing bonds to support home building and energy efficiency, infrastructure projects and small business lending.
A foundation spokesman, Tony Greenham, said: "It's time for the Old Lady of Threadneedle St to get some new clothes. Mark Carney's arrival at the Bank of England is the perfect opportunity to review the remit of our central bank.
"Measures like QE and funding for lending are not providing the investment boost our economy clearly needs. Strategic QE can enable the Bank of England to maintain independence and control over inflation whilst more effectively supporting the government's economic objectives."
Greenham said Carney should adopt a new monetary allocation committee that would redirect central bank funds for investment in green projects and house building.
Like the BCC, the thinktank also backed funding for an investment bank.
"The funding for lending scheme uses public money to give cheap loans to banks to persuade them to lend to small businesses. Strategic QE could make loans to a British Business Bank, set up specifically to support lending to SMEs.
"Capitalising the green investment bank and British business bank so they could reach a scale similar to the investment banks of our major competitors like Germany, Brazil and Scandinavia would be a good place to start," Greenham said.
Article Source : http://www.guardian.co.uk
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