W&G Investments launches bid for RBS branches

Consortium of City funds including Schroders, Threadneedle and Lansdowne Partners floats with the aim of raising £15m

A group of City investors and pension funds have called for a return to "simple banking" as they launch a bid to take over more than 300 branches put up for sale by Royal Bank of Scotland.

W&G Investments, a consortium of City funds, is to file its official offer today to take over the 315 branches that RBS is being forced to sell off by Brussels as a condition for approving the bank's £45bn taxpayer bailout at the height of the banking crisis.

The consortium is a roll call of more than a dozen blue-blood City names, including Schroders, Threadneedle and Lansdowne Partners, and floats on the London stock exchange today with the aim of raising £15m to fund its bid.

RBS has already received two rival offers for the branches, which have 1.7 million retail customers and 230,000 small and medium-sized business accounts. One is from a consortium backed by the Church of England that is promising "ethical" investments; another is promoted by private equity firms AnaCap and Blackstone.

Royal Bank of Scotland has now received three bids for the 315 branches it is being forced to sell under EU rulesThe bank is expected to announce its decision in the next few weeks, but could reject all three bids and float the branches as a standalone company on the stock exchange.

The head of W&G Investments, former Tesco finance director Andrew Higginson, said the consortium, with £20bn of assets, was big enough to be the "challenger bank" needed to inject more competition into the UK banking sector.

"We are taking a long-term view about building a genuine challenger bank," he said. "These institutions want a simple banking business that takes deposits in from its customers and lends them out to others and makes a good margin in the middle."

The bank's customers should not necessarily expect the cheapest products, because that was what went wrong during the financial crisis, he said. "There is no great eureka magic formula. It is just a question of behaving well and doing the right thing for them [the customers]."

The group has offered £1.1bn up front, rising to £1.5bn once the branches are formally separated from RBS. The W&G investors would get a £55m payout from the state-backed lender even before the branches were sold, according to the stock market prospectus. Higginson said this was "a very, very low rate of interest" for the risk any investors would be taking on. "We are giving [RBS] £1.1bn on day one and we are getting a 5% coupon – I think it is reasonable."

The bidding for the RBS branches has sparked fierce competition. John Maltby, the former Lloyds Banking Group banker who leads the church-backed bid, insisted this offer was the best value for the taxpayer. "We have completed full due diligence. We have raised the money and we are ready to go."

To entice bidders, RBS is reviving the Williams & Glyn's brand, which disappeared from British high streets in 1986.But the return to an old brand – created by RBS in 1969 to unite its English and Welsh banks – has risks for any investor.

Higginson played down the potential for an exodus of customers. "We have come through that phase of disruption," he said. "This is a business that has had the 'for sale' sign above the door for five years."

He said the W&G team would be ready to exchange contracts this year, with the Williams & Glyn's sign going up on high streets "as soon as possible after that".

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

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A group of City investors and pension funds have called for a return to "simple banking" as they launch a bid to take over more than 300 branches put up for sale by Royal Bank of Scotland.

W&G Investments, a consortium of City funds, is to file its official offer today to take over the 315 branches that RBS is being forced to sell off by Brussels as a condition for approving the bank's £45bn taxpayer bailout at the height of the banking crisis.

The consortium is a roll call of more than a dozen blue-blood City names, including Schroders, Threadneedle and Lansdowne Partners, and floats on the London stock exchange today with the aim of raising £15m to fund its bid.

RBS has already received two rival offers for the branches, which have 1.7 million retail customers and 230,000 small and medium-sized business accounts. One is from a consortium backed by the Church of England that is promising "ethical" investments; another is promoted by private equity firms AnaCap and Blackstone.

Royal Bank of Scotland has now received three bids for the 315 branches it is being forced to sell under EU rulesThe bank is expected to announce its decision in the next few weeks, but could reject all three bids and float the branches as a standalone company on the stock exchange.

The head of W&G Investments, former Tesco finance director Andrew Higginson, said the consortium, with £20bn of assets, was big enough to be the "challenger bank" needed to inject more competition into the UK banking sector.

"We are taking a long-term view about building a genuine challenger bank," he said. "These institutions want a simple banking business that takes deposits in from its customers and lends them out to others and makes a good margin in the middle."

The bank's customers should not necessarily expect the cheapest products, because that was what went wrong during the financial crisis, he said. "There is no great eureka magic formula. It is just a question of behaving well and doing the right thing for them [the customers]."

The group has offered £1.1bn up front, rising to £1.5bn once the branches are formally separated from RBS. The W&G investors would get a £55m payout from the state-backed lender even before the branches were sold, according to the stock market prospectus. Higginson said this was "a very, very low rate of interest" for the risk any investors would be taking on. "We are giving [RBS] £1.1bn on day one and we are getting a 5% coupon – I think it is reasonable."

The bidding for the RBS branches has sparked fierce competition. John Maltby, the former Lloyds Banking Group banker who leads the church-backed bid, insisted this offer was the best value for the taxpayer. "We have completed full due diligence. We have raised the money and we are ready to go."

To entice bidders, RBS is reviving the Williams & Glyn's brand, which disappeared from British high streets in 1986.But the return to an old brand – created by RBS in 1969 to unite its English and Welsh banks – has risks for any investor.

Higginson played down the potential for an exodus of customers. "We have come through that phase of disruption," he said. "This is a business that has had the 'for sale' sign above the door for five years."

He said the W&G team would be ready to exchange contracts this year, with the Williams & Glyn's sign going up on high streets "as soon as possible after that".

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

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Tesco 'half-price strawberries' deal prompts red faces and £300,000 fine

Supermarket apologises for mis-selling fruit in promotion trading standards officials condemn as misleading

Tesco has been fined £300,000 for mislabelling its strawberries, selling them at "half price" for three months after they were on sale at the full price for just seven days.

The supermarket, which is trying to shed its "big and bad" image, made a £2.3m profit from the promotion after a customer complained to Birmingham trading standards, a court heard.

Judge Michael Chambers said at Birmingham crown court that the case was "shocking by its very nature" because customers had a high degree of trust in national chains.

For seven days in 2011 Tesco sold 400g punnets of strawberries at £3.99, reducing them to £2.99 for a further week before marking them as half price at £1.99 for a further 14 weeks.

The promotion was a breach of the Consumer Protection from Unfair Trading Regulations Act 2008, which bars retailers from running a promotion for longer than the period over which the product was sold at full price.

Birmingham city council argued that the offer had been presented in a way that could mislead or deceive the average consumer into thinking they were getting a good deal.

It also complained about a further promotion involving the same strawberries in which Tesco offered a free pot of single cream with each punnet but then removed the free cream offer, returning the strawberries to their "half-price" status.

The guilty plea by Tesco followed a preliminary hearing this year when the supermarket argued the council lacked the jurisdiction to proceed outside Birmingham on the case. The court threw out that claim.

Strawberries growing in a polytunnelTesco apologised to the court for the mis-selling, and said its internal processes had been tightened to avoid any repetition. It also agreed to pay Birmingham city council's £65,000 legal bill.

A spokesperson said: "We apologise sincerely for this mistake, which was made in the summer of 2011.

"We sell over 40,000 products in our stores, with thousands on promotion at any one time, but even one mistake is one too many.

"Since then, to make sure this doesn't happen again we've given colleagues additional training and reminded them of their responsibilities to ensure we always adhere to the guidelines on pricing."

On Monday Tesco was selling 454g punnets of British strawberries for £2.

Sajeela Naseer, head of trading standards at the council, said the victory would have benefits for consumers across the country. She added: "It was the council's case, confirmed by Tesco's guilty pleas today, that this was a misleading offer which deceived the purchasers of strawberries over many weeks during the summer of 2011.

"Food pricing, presentation and the depiction of promotional practices is a crucial issue for retailers, and in turn, consumers."

In November last year the Office of Fair Trading tightened its rules on promotions, with Tesco, Sainsbury's, Morrisons, Waitrose, M&S, Aldi, the Co-op and Lidl all signing up to a new code to avoid similar abuses.

The fine is the latest labelling embarrassment for Tesco, which was caught up in the horsemeat scandal after horse DNA was found in its beefburgers. In that case the company attempted to reassure customers by publishing full-page adverts in several newspapers.

Since then Tesco has launched a major new marketing campaign in an attempt to regain consumer confidence. However, some experts have suggested this latest scandal may have dented trust even further.

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

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Government ordered changes to report on Barclays use of loan scheme

Business department told auditors to amend report on Barclays' use of state-backed scheme to reflect bank's response

A government department ordered changes to the report of an independent investigation into a loan made by Barclays under a state-backed lending scheme in order to reflect the bank's views, the Guardian has learned.

An MP has said that amendments undermined the relationship between ministers and civil servants, and called for an inquiry into the process.

The Department for Business, Innovation and Skills (BIS) had asked the auditing firm RSM Tenon to investigate whether a 2006 Barclays loan to a company owned by businessman Jeffrey Morris contravened the now defunct small firms loan guarantees scheme (SFLG). The programme cost the taxpayer nearly £200m in compensation for banks, with Barclays claiming £69,471 for the Morris loan when the company defaulted on it in 2009. There is nothing to suggest Barclays behaved improperly.

RSM Tenon delivered its report at the end of October last year, but BIS asked the firm to amend it. The Guardian has learned that within three hours of receiving Barclays' response to its report, BIS told RSM Tenon to "review and amend the report to reflect this response".

RSM Tenon submitted its amended report a month later. According to an internal BIS email, the altered report "reflects a 'softening' towards Barclays' position following recent discussions". Alec Shelbrooke, Conservative MP for Elmet and Rothwell, who has been pursuing Morris's case for almost a year,said: "Ministers need to be able to trust the reports given to them by civil servants and this episode fundamentally undermines that relationship. The permanent secretary now needs to launch a full investigation."

The scheme for startup businesses, which guaranteed banks a return if the borrower defaulted, cost the taxpayer at least £183m between 2006 and 2008. The Guardian reported on the loan last year, prompting BIS to instruct RSM Tenon to carry out a review.

It found that Barclays believed Morris had a net worth of more than £20m at the time the loan was made, but an SFLG loan was only permissible if the borrower had exhausted all other forms of collateral.

The government then guaranteed to repay 75% of the amount outstanding on the loan to the bank if it went bad.

The report was immediately shown to Barclays and the bank was asked for its response.

The notes of a conference call between BIS officials, RSM Tenon and Barclays held on 31 October reveal that Barclays asked for time to address the issues in the report. BIS declined to comment.

On 9 November Barclays produced its response to the RSM Tenon review. It attempts to discredit a previous internal reportby Barclays, which had concluded Morris had a net worth in excess of £20m, which should have precluded Barclays from offering a loan under the SFLG. In a statement, Barclays said: "RSM Tenon audited the loan based on all available information and concluded that 'the loan and the business appear to meet the eligibility criteria of the scheme at the time' and that they had 'no reason to believe that the bank did not follow their normal commercial lending processes, as applicable and expected of the lenders in 2006'.

Barclays was accused of lending multimillionaire businessman Jeffrey Morris (above) £200,000 under scheme meant for budding entrepreneurs"Recent evidence provided by Mr Morris' solicitors to BIS and RSM Tenon did not change this conclusion."Separately, Barclays is seeking to enforce a multimillion pound high court judgment obtained against Mr Morris, but we are unable to comment on this as it is subject to on-going litigation."On 21 November last year RSM Tenon submitted the amended report, including the new line that the auditor had "no reason" to believe that the process was flawed. It added: "Overall we have no reason to believe the bank did not follow their normal commercial lending processes." The amended report was released under the Freedom of Information Act in January this year but was heavily redacted to exclude some of RSM Tenon's more serious continuing concerns.

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

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CBI doubles George Osborne's economic growth forecast

Business lobby group cites growing confidence, forecasting UK growth of 1.2% this year and 2.3% in 2014

The CBI has raised its forecast for UK economic growth this year to 1.2% – double the pace predicted by George Osborne in his March budget – as the business lobbying group cited mounting confidence across the British economy.

It becomes the latest organisation to raise its outlook for the UK after a series of surveys and official data have suggested green shoots of recovery are taking hold, prompting the CBI to raise its 2013 growth estimate from 1%. However, the CBI, which has long been a supporter of the government's austerity drive and promises to cut the deficit, sounded a note of caution as it warned that ministers' push for a rebalancing away from consumption is taking longer than expected.

"The economy has started to gain momentum and confidence is picking up, but it's still early days," said John Cridland, the CBI's director general. "We need to see a full-blown rebalancing of our economy, with stronger business investment and trade before we can call a sustainable recovery. We hope that will begin to emerge next year, as the eurozone starts growing again." Government statistics published today show signs of a rebalancing, or at least the impact of austerity measures on public sector jobs, with private sector employment at its highest in 15 years at 24.1 million people.

The CBI said there were "signs of a pick-up in confidence across a broad range of sectors, including services, construction and manufacturing".

For 2014, the group is now pencilling 2.3% growth, up from May's forecast of 2%. Leading thinktank, the National Institute for Economic and Social Research, and forecasters Fathom Consulting both upgraded their outlook for the UK economy earlier this month to 1.2%. That growth is based on a rise in disposable incomes and some support from exports as the eurozone continues to recover following a protracted recession that was finally confirmed over last week.

Official UK data on Friday is expected to add to the tentatively optimistic tone, confirming economic growth accelerated in the second quarter to 0.6%, double the pace in the first three months of this year. That would be unchanged from the number the Office for National Statistics estimated in its first take on GDP for the quarter, which was welcomed by the chancellor as showing the economy has moved "out of intensive care".

A handful of economists believe growth could be revised higher on Friday to 0.7%. Among them, Philip Shaw at Investec, notes that numbers from the construction sector have been revised up since that first estimate on growth and that the performance of the dominant services is also likely to be nudged up.

"Our 2013 GDP forecast is still +1.2%, but we are tempted to upgrade this modestly given the positive data dynamics recorded recently," he added.

But many economists share the CBI's concern that the economy remains overly dependent on consumers, who account for around two-thirds of all spending. They say consumers are not in a strong position to drive a recovery as they grapple with the biggest squeeze on household budgets for decades.

There is fresh evidence of that pressure on Monday. The latest Asda Income Tracker suggests disposable household incomes fell last month as wages failed to keep pace with living costs.

The supermarket chain says the average UK household had £160 a week of disposable income in July, down £1 a week from a year earlier and £5 a week from a peak in February 2010. It blamed energy bills for burning a hole in household budgets after they rose by 8.2% over the past year.

"A 'feel-good' summer has contributed to a boost in retail sales, but we can't ignore the fact that the squeeze on income growth and rising cost of living continue to pull at consumer purse strings," said Asda chief executive Andy Clarke.

But he noted a rise in consumer optimism, nonetheless. That chimes with a separate survey suggesting households spent more in August as they reported that access to unsecured loans improved and they were relatively upbeat about their finances.

Data company Markit, said the measure of financial wellbeing in its Household Finance Index dipped "only slightly" from July's record high. It stood at 40.8 in August, down from 41.5 in July, the highest since the survey was launch in early 2009.

Still, there were contrasting feelings around the country.

"The strains on finances are receding fastest among those in private sector service jobs, while those working in construction, retail and the public sector trail behind. On a regional basis, familiar trends continued in August as people in Scotland and the south of England were the least downbeat about their finances, while those in Wales and the north of England were among the most pessimistic," said Tim Moore, senior economist at Markit.

Growing evidence of a renewed pick-up in house prices has also boosted sentiment among homeowners but at the same time prompted warnings that Britain could be headed for a damaging property boom and bust.

The CBI's director general, John Cridland, said: 'The economy has started to gain momentum and confidence is picking up, but it's still early days.Property website Rightmove is the latest to report rising house price inflation on Monday, adding to a flurry of recent surveys that reignited criticism of government schemes to kickstart the housing market. Average asking prices are up by more than £20,000 so far in 2013 and stood at £249,199 in August, Rightmove said. As is typical for August, that marked a slight dip from July but at 1.8% the holiday season fall was less than in previous years. In annual terms house price inflation accelerated to 5.5% from 4.8% growth in July.

The average asking price for flats hit a record high of £209,652 in August, Rightmove said, as it joined the chorus of warnings over government schemes.

"Flats are most in demand by first-time buyers and buy-to-let investors and we have seen prices for this property type hit their highest ever level as supply fails to keep up with an increase in demand at the bottom of the market," said Rightmove director Miles Shipside.

"Demand is already on the up, and that's before the roll-out of phase two of the Help to Buy stimulus. It is now critical that the supply of property improves so that the goal of a significant increase in transaction numbers is not over-shadowed by an unsustainable boom in property prices."

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Vodafone in multimillion tax deal over Irish office

Previously unreported settlement with HMRC came in wake of dispute over tax paid by subsidiary

Vodafone made a previously unreported multimillion-pound settlement with HM Revenue & Customs in the wake of a dispute over the tax paid by an Irish subsidiary created to collect royalty payments for using its brand.

The UK-based mobile phone group used an Irish subsidiary, which employed no staff between 2002 and 2007, to collect hundreds of millions of pounds a year in royalty payments from operating companies and joint ventures around the world. By 2007, Vodafone Ireland Marketing Ltd, a company registered to an industrial estate in the Dublin suburb of Leopardstown, was reporting a turnover of €380m (£320m) a year.

During a four-year period, these royalty payments, collected from most countries except the UK and Italy, have helped Vodafone send more than €1bn worth of dividends to the low tax jurisdiction of Luxembourg from Dublin. The dividends, which include a final payment of €142m due to be delivered this year, came from profits made after taking advantage of Ireland's low corporation tax rates.

In an arrangement which echoes those made by Apple in Ireland, Vodafone moved senior marketing managers to Dublin to protect global royalty revenues from UK taxation, and trigger a lower Irish corporation tax bill from 25% to 12.5% of profits. This was significantly lower than the UK corporation tax rate, which between 2008 and 2010 was 28% of profits.

Accounts filed in Dublin show that in 2009, HMRC settled a dispute with Vodafone over its Irish tax returns. The overall size of the settlement has not been revealed, but it involved Vodafone reclaiming €67m from the Irish government in tax that should have been paid in the UK. Vodafone, the world's second largest mobile phone company by revenue, has paid no corporation tax in Britain for two successive years, despite paying £2.6bn in international taxes in 2012.

The company confirmed its Irish settlement had never been separately disclosed in its annual reports, and was not connected to a £1.25bn payment to HM Revenue and Customs in 2010 to settle a much publicised dispute over the use of a Luxembourg subsidiary. A spokesman for HMRC refused to confirm whether any settlement over Vodafone's Irish tax affairs had been made, saying it was prevented by law from discussing the affairs of individual taxpayers.

Vodafone went to great lengths to protect its Irish income, eventually relocating a section of its global marketing team from the UK to Dublin in 2007. The transferred staff were responsible for handling such high profile sponsorships as the operator's longstanding deal with Formula 1 and the Champions League.

The Irish brand subsidiary was wound down after the staff were brought back to the UK in 2011. According to a company spokesman the unit's activities have transferred to a UK company which pays all its profits into the British plc and is taxed under UK rules.

The disclosure comes as MPs revealed the British mobile phone group, which is under fire for its minimal corporation tax payments in this country, has emerged as the largest supplier of mobile phones to the government. More than 30 departments and public bodies, including the prime minister's office, have signed contracts worth £14m a year with Vodafone.

In a stand against tax avoidance, ministers updated laws in April to ensure companies whose tax returns have been challenged by HM Revenue & Customs on grounds of tax abuse can be disqualified from working for the government.

Vodafone strongly rejected any suggestion of tax avoidance and said there have been no allegations of wrongdoing from HMRC. The company said its disputes with the UK taxman over its tax arrangements in Ireland and Luxembourg would not block it from government contracts under current rules, but MPs argued there was a principle at stake.

By 2007, a Vodafone subsidiary registered to an industrial estate in Dublin was reporting a turnover of €380m (£320m) a year."The fact that government departments are using companies which have been challenged about the tax they owe clearly shows that current tax laws need reform," said Labour MP Pamela Nash, whose parliamentary questions helped reveal the extent of Vodafone's government work.

The rules which eventually came into force have been described by tax experts as narrow in scope, and Vodafone says they would not have applied to its HMRC settlements, even if they had been in force at the time.

"Vodafone has long been a major supplier to central UK government departments and we have always complied in full with all procurement criteria defined by government," the company said in a written statement.

"In all respects and at every point, Vodafone has conducted itself with the highest integrity and in full compliance with the law."

Vodafone's status as the dominant supplier of mobile phones to government departments was exposed by a series of parliamentary questions asked by Conservative and Labour MPs. Questions were put by Nash, by Labour MPs Dai Havard and Jenny Chapman, and Tory MPs Gary Streeter and Mike Freer.

Steve Barclay, a member of the Commons Public Accounts Committee, which has previously tackled Vodafone's tax affairs, said: "The government now needs to close any existing tax loopholes to ensure that large companies, such as Vodafone, are not legally able to avoid paying their fair share of tax. The need for swift action is particularly highlighted when it is public money that is paying for these substantial contracts with private companies."

Vodafone is the largest or only mobile supplier to a raft of departments, including the Cabinet Office, which covers David Cameron and Nick Clegg's offices, the Treasury, including HMRC, the Department for Business, Innovation and Skills, the Ministry of Defence, the Department of Health, and the Department for Work and Pensions.

Many of the contracts are based on commercial terms agreed between the Cabinet Office and Vodafone in a Memorandum of Understanding that runs from 2010 to 2014. While rival networks EE and O2 have some government work, EE is pushing for more open competition in the awarding of mobile contracts by ministries.

A Cabinet Office spokeswoman said: "Since 2010 we've radically changed the way government buys goods and services to make the most of our unique buying power.

"Last year alone these reforms saved taxpayers £800m by renegotiating contracts with our largest suppliers, of which Vodafone is one.

"We are determined to continue to increase competition and innovation amongst a range of suppliers to make sure that every option to cut waste and make savings are explored, especially when opportunities to review large-scale contracts arise."

Chief secretary to the Treasury Danny Alexander launched an overhaul of the rules around government contracts last year, saying "taxpayers' money should not be funding tax dodgers".

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

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RBS announce Ross McEwan as Stephen Hester's successor

New Zealander McEwan, who joined RBS a year ago to run the retail bank, will take over in October

A low-profile New Zealander has been named as the new boss of Royal Bank of Scotland on a salary of £1m a year, the bailed-out bank announced on Friday when it reported £1.4bn of profits.

Ross McEwan, who joined RBS a year ago to run the bank's retail arm, will take over from Stephen Hester, who was parachuted in to run the bank following its £45bn taxpayer bailout.

In a sign of the change of direction at the 81% taxpayer-owned bank, McEwan immediately waived his bonus for 2014 and will have his bonuses from 2015 onwards linked to the share price at which the taxpayer paid for its stake. His salary is less than the £1.3m his predecessor received.

The 56-year-old is taking charge when the government is considering whether to carve out a "bad" bank to make it easier to privatise in the future and his background in retail banking will spark speculation that he will further shrink the investment bank.

Sir Philip Hampton, the RBS chairman, attempted to play down the idea that external candidates had walked away from being considered for the role. He also spelt out that the government could be prevented from creating a bad bank by the remaining shareholders who would need to vote on any such move.

The RBS results contained another £185m provision for mis-selling payment protection insurance, taking the total bill to £2.4bn, and an unusual charge of £385m to cover legal costs associated with unspecified regulatory actions which indicates it faces further fines from global regulators. In total, charges for legal action and regulatory actions is £620m.

The first half results of RBS demonstrated its contrasting fortunes with Lloyds Banking Group, where the government is expected to start selling down its stake soon. On Friday, shares in Lloyds continued to trade higher than the 73.6p the taxpayer paid for its 39% stake at above 74p – giving the chancellor chance to start selling at profit. But shares in RBS were down nearly 3% at 334p, well below the average price of more than 500p at which the 81% stake was bought in the bank.

Hester, who took over a bank in 2008 that made a record £24bn loss, said: "It really is good news that RBS is back in the black". The bank made it first two consecutive quarters of profit since 2008.

He will now leave on 1 October and described McEwan as a "person of integrity who has been a valued colleague over the past year". He had convinced him to move from Australia - where had been working at Commonwealth Bank of Australia. "I promised him an adventure and I think he will accept that an adventure is what we've delivered," said Hester.

Hampton has signalled that he will leave once the new chief executive has settled into the role and described McEwan as "the strongest candidate". "Pay wasn't an issue. Ross was very aware of the external pressures on banking pay. He wanted to make some gestures," said Hampton.

Any bonus McEwan could receive for 2013 while was running the retail bank is to be deferred to 2017 and then "subject to conditions around share price and extent of government sell down designed to allow taxpayers to gain value first".

He said: "We are a bank that millions of British families have entrusted with their finances. We support more companies – from the very smallest to the very biggest – than any other bank in the UK. Our international business helps customers access global markets and export goods and services around the world."

His appointment was welcomed by the chancellor. "He's impressed me with his vision of RBS as a strong, UK-centred corporate bank that is focused on supporting the British economy.

"He's committed to a new culture at the bank that puts the customer first, whether it's the family or small business or large company.

"I think he'll provide the leadership RBS needs as the bank puts the mistakes of the past behind it, and the government seeks to get the best value for the taxpayer from the money the last government put into the bank," George Osborne said.

In the same period last year RBS reported a loss of £1.5bn.

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

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Brazil's real economic crisis lies in its overvalued currency

Soaring value of the real has badly hits exports – and without growth, neither the Olympics nor the pope can help

As Pope Francis pushed his way through the crowds in Rio de Janeiro's shantytowns on Thursday, his message that next year's World Cup and the 2016 Olympics would provide jobs and alleviate poverty was greeted with some scepticism.

Brazil is facing hard times. While major sporting events hold out the prospect of a short-term boost to growth and prosperity, they can only disguise a problem that has loomed for some time: that a high currency kills the trade in price-sensitive goods.

The soaring value of Brazil's currency, the real, has badly hurt exports. Last year, the UK sent $3.5bn (£2.28bn) of goods and services to south America's largest economy – up 3.8% on the previous 12 months – while Brazil's exports to the UK were down 13%.

Manufacturing, already inefficient and overpriced after years of protectionist policies, has suffered. Exports of gold and other metals, alongside soya beans and sugar, have also declined. Commodities are the bedrock of Brazil's economy and the combination of a high currency and decline in demand from China, it's biggest customer, was always going to stymie growth.

Bert Colijn, a labour market economist at the Conference Board, said signs unemployment was rising were cause for concern – especially after the riots, which started earlier this month and were still going as the pope began his week-long visit. The unemployment rate is still low at 6%, but is up from 5.8% in May.

In 2010, the country appeared to shrug off a brief recession. GDP growth reached 7.5% – the highest rate for 25 years. But rising inflation forced the government to cool the economy just as the eurozone crisis unsettled international markets. The economy slowed, growing just 2.7% in 2011, and 1.3% in 2012.

Cooling the economy meant shoving up interest rates. However, this tactic made Brazil a more attractive place for international investors in search of high returns on their money. To buy Brazilian assets, investors need to buy the local currency. Increasing demand for the real increased the price, and hence the exchange rate.

With inflation still at 6.7%, the government has little room to stimulate the economy. It is a common problem among emerging economies as China slows to a crawl. Turkey is struggling. So is South Africa. All of them are trying to avoid the vortex of pain when social problems triggered by their stuttering economies only goes to make the situation worse.

Turkey's problem is a persistent trade deficit funded by investment inflows. GDP growth is strong by western standards (the economy raced to 1.6% in the first three months of the year), but the need for foreign investment has kept the currency inflated hampering domestic exporters. Recently, the opposite has been true. Investment has slowed and the currency fallen. The central bank has intervened in the markets to defend the lira, which hit an all-time low against the US dollar earlier this month, but Turkey's international liquidity ratio is weak and it does not have a sufficient stock of foreign exchange reserves to maintain this strategy for long.

Each country is dodging and weaving to overcome its special mix of problems, but in esence they need the world economy to grow at a time when the IMF says in its latest report that the trend is for growth to slow. What happens in China over the next year could prove crucial for their economies and their ability to maintain some semblence of social cohesion.

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

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