RBS Confirms £8.2bn Loss And New Revival Plan

Royal Bank of Scotland (RBS) has reported a loss of £8.2bn - its biggest since the year it was bailed out by the taxpayer - and announced plans to help restore customer trust.

The loss for 2013 included its previously-announced provisions for mistakes of the past, which continue to haunt RBS and the rest of the UK banking industry in the wake of the financial crisis.

It took the bank's total losses over the past six years to a staggering £46bn.

Ross McEwan, RBS chief executive, said the pre-tax loss for the year 2013 was "sobering" and "huge" and promised reform would turn around not only its financial fortunes but also its treatment of the customer following a number of high profile IT problems, misconduct fines and mis-selling.

The Business Secretary says the RBS bonus culture "must go"

Its share price fell 4% when the FTSE 100 opened for business and later extended those losses to beyond 8% in mid-morning trade, wiping almost £2bn off its value.

The bank confirmed new cost savings of £5bn over the next four years - reported earlier by Sky News - with its focus shifting back to the UK and further away from investment banking.

It was its investment arm that accounted for most of its bonus pool for 2013, which had shrunk by 15% to £576m, though the scene was set for further reductions in later years as RBS said it would concentrate on serving personal and business customers.

The bank also announced it was lifting its proportion of UK assets to 80% of its business from 60% under pressure from the Government, which still holds a stake of over 80% in the lender, to concentrate on supporting the UK's economic recovery.

Mr McEwan said his revival plan would make the bank "smaller, simpler and smarter," shrinking from seven divisions to three.

He has not put a figure on the potential number of job losses his plans would entail.

The overhaul of its service and products for retail customers will see the Group outlaw different product rates for branch and online customers from mid-March.

Among its other pledges were bans on teaser rates for any product and an end to 0% balance transfers for credit cards.

The revival plan is designed to help get the bank into a position where it could return to private hands - likely to be some years away.

The Business Secretary Vince Cable said of it: "I am pleased by the overall direction of travel of RBS, getting away from the disastrous obsession with scale and risky casino banking of the Fred Goodwin years, focusing instead on British customers and British business.

"But British taxpayers are still paying for the terrible mistakes of the past and I see no sign yet of a turnaround in the continuing decline of net lending to small business.

"The public will simply not understand why big bonuses and large salaries continue to be paid out by a loss-making public enterprise, still underperforming in many areas.

"The smaller bonus pool is due to the bank's US-based investment banking operations, which will soon be sold.

"If RBS is to become the sensible, boring bank envisaged by the CEO, the bonus culture will have to go."

Mr McEwan defended the bonus handouts, saying: "We need to keep people engaged in the job they do all day every day - from the high street to those in our markets business in the United States.

"We need to pay these people fairly in the marketplace to do the job."

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Qantas To Axe 5,000 Jobs After £126m Loss

Australian airline Qantas has announced it will cut 5,000 jobs after posting a first-half net loss of £126m.

The airline, which is battling record fuel costs and fierce competition from subsidised rivals, is working to slash costs by £1.08bn over three years.

Part of the restructuring programme will see 5,000 full-time positions lost from its 32,000-strong workforce.

A wage freeze will also be applied across the whole company until the airline returns to a profit.

The airline also highlighted "significant changes" to its fleet plans and network and a reduction in capital expenditure of £500m over the next two financial years.

Chief executive Alan Joyce said: "We are facing some of the toughest conditions Qantas has ever seen.

"Hard decisions will be necessary to overcome the challenges we face and build a stronger business."

He added the Australia had been "hit by a giant wave of international airline capacity", with a 46% increase in competitor capacity since 2009.

Following a profit warning in December, ratings agencies Moody's and Standard & Poor's downgraded Qantas' credit rating to "junk" status, increasing the cost of financing for the airline.

Qantas has since been working on its finances to convince the government it deserves a debt guarantee and also lobbying the Australian government to relax the Qantas Sales Act, which limits foreign ownership in the airline to 49%.

The loss for the six months through December 2013 followed a £68m profit for the same period in 2012.

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Standard Life May Quit Independent Scotland

By James Matthews, Scotland Correspondent

The financial giant Standard Life is making contingency plans to pull out of Scotland in the event of a vote for independence.

Just hours after the Edinburgh-based company intervened in the debate on Scotland's future, the credit rating agency Standard and Poor's (S&P) weighed in too with a warning that an independent Scotland would face "signficant challenges."

Standard Life said that post-referendum uncertainties have already prompted it to establish companies outside of Scotland to where it could transfer parts of its operation.

In its annual report, the firm cites a number of "material issues" which give rise to uncertainty:

:: The currency that an independent Scotland would use.

:: Whether agreement and ratification of an independent Scotland's membership to the European Union would be achieved by the target date (currently March 24, 2016).

:: The shape and role of the monetary system.

:: The arrangements for financial services regulation and consumer protection in an independent Scotland.

:: The approach to individual taxation, especially around savings and pensions, as a consequence of any constitutional change.

Publishing its annual report, Standard Life Chairman Gerry Grimstone said: "Scotland has been a good place from which to run our business and to compete around the world.

"We very much hope that this can continue. But if anything were to threaten this, we will take whatever action we consider necessary - including transferring parts of our operations from Scotland - in order to ensure continuity and to protect the interests of our stakeholders.

"We will continue to seek further clarity from politicians on both sides of the debate, so that we can reach an informed view on what constitutional change may mean for our customers, our business and our shareholders."

Standard Life has 5,000 Scottish-based employees.  It has been based in Scotland for 189 years.

The intervention of such a big financial beast into the referendum debate is extremely significant and harmful to the campaign for Scottish independence.

S&P followed by suggesting the economy of an independent Scotland "could be subject to volatility" and would face "comparatively high public debt."

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Energy Bills: New Rules To Boost Competition

The energy regulator has announced new rules to try to boost competition between household suppliers and provide greater clarity for bills.

Ofgem has confirmed that new regulations due to be implemented at the end of next month will force the so-called Big Six energy suppliers to publish their wholesale generation prices to independent suppliers up to two years in advance.

The move is aimed at making it easier for smaller competitors - who do not produce their own energy - to budget better, while giving consumers more information on the charges they face.

Ofgem said that a failure to ensure fair trade in the wholesale market will result in financial penalties, while a range of other measures would result in the annual statements produced by the large companies being more "robust, useful and accessible".

The Energy Secretary has welcomed Ofgem's approach

The Big Six - British Gas, SSE, ScottishPower, npower, EDF and E.ON - endured a fresh public and political backlash on bills last year when inflation-busting increases were announced ahead of winter - rises that were later reduced when green levy costs were stripped from bills.

The row resulted in greater Government pressure on Ofgem to act on competition and price clarity. 

Its chief executive, Andrew Wright, said: "Our rules for a simpler, clearer, fairer energy market are coming into force, meaning that it is getting easier for consumers to pick out the best deals.

"Now we are also breaking down barriers to competition for new entrant suppliers. These reforms give independent suppliers, generators and new entrants to the market, both the visibility of prices and opportunities to trade that they need to compete with the largest energy suppliers.

"Almost two million customers are with independent suppliers, and we expect these reforms to help these suppliers and any new entrants to grow.

"We also want to ensure that information on revenues, costs and profits of the largest energy suppliers is as clear as possible for consumers."

Energy Secretary Ed Davey added that the moves were a "big step forward" in creating a fairer, more competitive energy market in the UK.

He said: "This is a significant and welcome toughening up of competition in electricity markets. By making these wholesale prices more transparent, it will help reveal how the Big Six energy companies are trading, and make it easier for new competition to challenge their business model."

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Co-op Hits 6,500 Staff With Job Uncertainty

The Co-operative Group has confirmed it may sell its pharmacy business, employing 6,500 staff, as part of its strategic review.

It is also looking to offload 15 farms it owns, which have an estimated land value of £49m.

The review - ordered in the wake of the financial crisis at its bank - is yet to be completed.

But a short statement on Wednesday said: "As part of the wider strategic review of all of its businesses, The Co-operative Group has decided that its farms are non-core and has started a process that is expected to lead to a sale of the business.

"In addition, it is exploring options for the future of the pharmacy business; this could include the sale in whole or part of the business."

The Co-op operates 15 farms, three in Scotland and the rest in England, covering 50,000 acres in total with an estimated land value of £49m.

The division also owns three packing sites.

They are seen as surplus to requirements because the cereals and vegetables they produce only make up a small proportion of produce for Co-op supermarkets.

The chemists business, which operates out of 750 outlets, has suffered in recent times amid Government attempts to reduce its prescription costs.

The group ordered the strategic review after a huge £1.5bn capital black hole emerged in its banking arm, resulting in control passing to bondholders including US hedge funds.

The problems at the bank are currently subject to a number of inquiries.

The scandal also brought the appointment of Paul Flowers, now ex-chairman of the bank, into the spotlight amid questions about his lack of banking experience.

Just nine days ago the Co-op Group launched an online poll to help shape its future, admitting the mutual had lost touch with its customers and members.

Group chief executive Euan Sutherland said it would listen to suggestions and the results would feed into the strategic review.

The Co-op operates a wide variety of businesses, including supermarkets and funeral services.

Its 2013 results - due to be released in late March - are expected to confirm growing losses.

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Cameron Criticised On Flood Defence Spending

The boss of the country's biggest insurance firm, Legal & General, has told Sky News he is concerned about a lack of spending on flood defences.

As the industry faces Government pressure to pay out quickly on the costs of the winter storms, Nigel Wilson also spoke out against policy on home building in flood-prone areas.

He said: "We've had a housing policy that has encouraged too much building in flood plains area. And we've been on and on about this.

"There's an issue in the UK. We're not building enough and where we're building them is in the wrong place.

"So we've got a multi-phased approach in actually increasing housing supply.

L&G is facing a multi-million pound flood bill

"The Government needs to focus much more attention on housing supply and where that supply is."

He was speaking hours after David Cameron's boast that flood defence spending will increase under his leadership was contradicted by the UK's statistics watchdog, which claimed the budget had actually been cut by £250m.

Sir Andrew Dilnot, head of the UK Statistics Authority, called on the Government to publish its real-term figures "in the public interest."

Mr Cameron claimed at Prime Minister's Questions that spending between 2011 and 2015 would be higher than in the previous four years under Labour.

The results of the wettest winter on Met Office records

Environment Secretary Owen Paterson went further, saying the Government is "providing more than any previous government in this spending review".

The discrepancy stems from the Government including money spent by private firms and other third parties in its figures.

Flood defence spending was £2.37bn between 2007 and 2011, according to House of Commons library figures.

Between 2011 and 2015 it will be £2.34bn - a £247m cut in real terms.

The Army was called in to help tackle the rising waters

Sir Andrew believes the House of Commons numbers are more credible than those being stated by Mr Cameron and his colleagues.

He said: "We agree with their finding that, as of January 2014, government funding for flood defences was expected to be lower in both nominal and real terms during the current spending period than during the last spending period.

"Our analysis also supports the conclusion that the statement 'over the current spending review period, more is being spent than ever before' is supported by the statistics if the comparison is made in nominal terms and includes external funding, but is not supported by the statistics if the comparison is made in real terms or if external funding is excluded."

Labour and Friends of the Earth say the cuts contributed to the damage endured across swathes of the country this winter - and the issue will be debated by MPs on Wednesday.

Mr Paterson has already apologised for "any offence" caused by his flood defence spending claims, but denied there had been any "manipulation of figures".

A spokesperson for the Department for Environment, Food and Rural Affairs said: "Figures on flood defence spending are published. The Government is spending £2.4bn on flood management and protection from coastal erosion which is more than ever before.

"The Prime Minister also recently announced £130m extra for flood defence repairs following the extreme weather."

All this comes as the Institution of Civil Engineers called on Chancellor George Osborne to use next month's  Budget to return spending on flood risk management to pre-2010 levels.

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Demand For Real Butter Is Spreading

By Vicki Hawthorne, Sky News Ireland Correspondent

The demand for real butter is increasing according to the latest sales figures for the product.

In the last five years sales of butter have risen 7% in the UK, while margarine sales have dropped by 6%.

However, the market for margarine is still bigger with 271 million kilograms sold per year, while butter sells 141 million kilograms.

The increase in demand for butter has helped boost the business of many artisan producers, including Abernethy Butter in County Down in Northern Ireland.

Will and Allison Abernethy started making butter on their farm three years ago, and the enterprise has turned from a hobby into a business producing one tonne of butter a month.

Will Abernethy churning butter at his farm

Mrs Abernethy said: "We didn't realise there was such a demand for butter and the public were saying 'we love butter, we don't like margarine and we're going back to butter'."

Their hand-made product has even melted the hearts of Michelin Star chefs including Heston Blumenthal and Marcus Wareing. They supply butter to their London restaurants as well as high-end retailer Fortnum and Mason.

Even the big producers of margarines are starting to realise there has been a shift towards butter.

Last Autumn consumer goods giant Unilever, which produces Flora margarine, introduced butter into one of its spreads for the very first time.

For decades the health benefits of margarine have been promoted over butter.

Abernethy Butter is used by top chefs

But now the experts say butter isn't that bad for us after all.

Belfast based nutritional therapist Jane McClenaghan has been telling people to convert back to butter for years.

She said: "Not only are people looking for a more natural product but also research actually doesn't really back up the evidence that we should cut saturated fats out of our diet totally so our trends are following what the research says, but it has just taken us a while."

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Sofa Giant DFS Gets Comfortable With £1bn IPO

By Mark Kleinman, City Editor

The furniture retailer DFS has drafted in bankers to prepare for a £1bn stock market listing later this year, Sky News has learnt.

Advent International, the private equity firm which owns DFS, has appointed UBS to explore options for its investment, the most likely of which involve a return to the London stock market.

A flotation is unlikely to take place until at least the third quarter of this year, with DFS's financial year ending in July.

A source close to the company, which was founded by the Conservative Peer Lord Kirkham, confirmed that it had begun examining the move amid a deluge of prospective company listings.

DFS is one of many retailers examining flotations as the UK economy continues its recovery, although the mixed fortunes of high-street chains at Christmas suggest that investors may be wary of backing some of those that want to sell shares on the public markets.

Appliances Online, Fat Face, House of Fraser, Pets At Home and Poundland are among those exploring share sales, with strongly performing stock markets offering encouragement to retail executives.

Advent bought DFS, the UK's second-biggest furniture retailer after IKEA, in 2010, netting Lord Kirkham several hundred million pounds.

The company is now chaired by Richard Baker, the former boss of Boots, and who also chairs Virgin Active, the health and fitness chain.

It has performed robustly during difficult economic times. Sales rose 7.4% to a record £671m during the year to July 27, with profit up 5% to £86m.

DFS had positive news last month when the Office of Fair Trading dropped an investigation into the chain's pricing practices.

Spokesmen for Advent and DFS declined to comment.

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Lloyds Sets Target For Women Executives

By Mark Kleinman, City Editor

Lloyds Banking Group is to break new ground in the debate about gender diversity in British business by pledging that 40% of its top 5,000 jobs will be occupied by women within six years.

Sky News can reveal this weekend that the taxpayer-backed lender will become the first FTSE-100 company to establish a formal gender target for its most senior management positions.

The pledge, to be outlined by Antonio Horta-Osorio, Lloyds' chief executive, in a speech next week, will come at a time of unprecedented scrutiny of boardroom diversity and governance.

Mr Horta-Osorio is expected to set the target as part of a broader set of objectives aimed at demonstrating Lloyds' awareness of its wider societal role as the UK's biggest high street lender.

Sources said that he was also planning to establish formal annual goals for lending to small and medium-sized businesses (SMEs) and to first-time house-buyers.

Targets for the number of female executives and a commitment to the level of funding for Lloyds' charitable causes would be made over a six-year period, they added.

It is the gender diversity target, which will entail the appointment of an additional 600 women to senior jobs at Lloyds by 2020, that is likely to attract the greatest attention.

Speaking exclusively to Sky News, Fiona Cannon, the bank's director of diversity and inclusion, said the initiative made sound business sense.

Fiona Cannon says the workforce should reflect the diversity of customers

"One of our visions is to be the best bank for customers. As the largest UK bank we are located in communities across the country and our customers are incredibly diverse," she said.

"There is a whole body of research suggesting that where organisations have a diverse senior management team they are much more financially successful than those that do not."

The Lloyds executive said that a 40% target was stretching but achievable. 28% of the bank's top 5000 jobs are currently held by women, a spokesman said.

"Creating an organisation that is meritocratic is good for everyone, not just for women," Ms Cannon said.

Lloyds' pledge comes amid mixed results from a concerted push in recent years to get more women elevated to board positions, with advocates arguing that greater diversity improves the stewardship of major companies.

That argument has acquired more weight in the aftermath of the financial crisis, although empirical evidence backing the superior performance of boards populated by women remains patchy.

The Government has thrown its weight behind a voluntary campaign to ensure that 25% of the directorships of FTSE-100 companies are held by women by the end of next year and has threatened to impose formal quotas if the objective is not met.

Since the initiative was launched by the former Trade Minister, Lord Davies, the proportion of women on boards has grown from 12% to 20%.

However, amid additional pressure from Brussels for the introduction of legally-binding quotas, there are concerns that the pace of change has been insufficiently rapid.

Vince Cable supports voluntary targets for women on boards

Vince Cable, the Business Secretary, said he supported Lloyds' work and hoped it would become a template for other major businesses.

"We are not tapping into the talents of half the population. If we are going to get proper balanced representation in companies, it has got to start with senior executives, working up to chief executive level," he said.

Mr Cable has been a supporter of voluntary rather than mandatory targets for women on boards, saying there was little evidence that more female leadership of financial institutions would have averted the 2008 banking crisis.

"I don't buy into that stereotype one way or the other," he said.

"All the evidence we have suggests that companies which do make use of the female labour force do very well at the top end. We need to make sure that becomes standard practice in the UK."

Lloyds' plan to announce the gender target is understood to have been signed off by the bank's board on Friday, less than two weeks before it reports full-year results for 2013.

The company, which provoked a row with Mr Cable by axing more than 1000 jobs this week, is preparing for a return to full private sector ownership in the coming months.

Ms Cannon dismissed the idea that Lloyds' proposals could be labelled as a publicity stunt, although critics of gender targets have argued that they are tokenistic and risk promoting mediocrity at the expense of genuine talent.

The 'gene pool' of available women to fill senior positions is questioned

Only four FTSE-100 companies - Burberry, easyJet, Imperial Tobacco and Royal Mail - have female bosses. Severn Trent, the water company, has also named a woman as its next chief executive, although Angela Ahrendts, the boss of Burberry, has resigned to take up a role with Apple.

Even fewer companies have a female chairman, with reform-minded businesspeople urging the pipeline of executives to be bolstered in order to facilitate future boardroom appointments.

Speaking to Sky News, Ruth Lea, an economist and director of Arbuthnot Banking Group, said doubts remained about the "gene pool" of available women to fill senior positions.

"I don't think positive discrimination is the best way forward for women. It breathes tokenism and suggests that somehow women cannot make it on their own merits," she said.

"It isn't a matter of discrimination. There simply isn't the gene pool of qualified and experienced women in comparison with the number of men. Men and women make different choices about their lifestyles and careers."

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