British Gas Defends Cold Winter Profits Boost

British Gas has said higher costs largely wiped out profit growth from the unusually cold winter in the first half of its financial year.

Profits for the residential energy business in the six months to June 30 grew by 3.2% to £356m.

While the company admitted a benefit from the bitter conditions between January and June - with gas consumption rising by 13% - it insisted that profits were curtailed by "significantly higher environmental and commodity costs".

It said a new duty to deliver energy efficiency measures in customers' homes drove its environmental costs up 37% in the period.

The supplier raised its domestic tariffs by 6% last December, saying it would put additional revenues over the period to limit further bill increases in future but campaigners have pushed for price cuts to help consumers.

Most energy suppliers raised their prices ahead of winter

It said it could not rule out further increases to tariffs ahead of the coming winter because an "upward pressure on costs" remained.

Nick Luff, finance director of parent firm Centrica, sought to shift part of the blame for any future rises to the Government-backed ECO (Energy Companies Obligation) scheme.

He said: "We will keep prices as low as we can for as long as we can for as long as we can. If prices do have to go up, we will delay it for as long as possible."

He defended the £11m rise in profits, saying it represented just 70p per customer.

Chief executive of Centrica, Sam Laidlaw, added: "With our customers using more gas to stay warm during the unusually cold winter, we're doing everything we can to help them keep their energy costs under control and make bills simpler and clearer."

Centrica posted a 2% rise in adjusted profits over the first half, spurred by higher output from North Sea gas fields.

The company made £767m as overall revenue rose 14% to £13.7bn though the focus remained on earnings at British Gas amid the continuing row over energy supplier profits.

On Tuesday, French-owned energy firm EDF said its profits had risen to a record £903m in the wake of the cold spell though its residential business, the company said, continued to operate at a loss.

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RBS Hunt For Hester Successor Nears Climax

By Mark Kleinman, City Editor

Royal Bank of Scotland (RBS) hopes to announce the appointment of a new chief executive on Friday as its search for Stephen Hester's successor narrows to internal contenders.

Sky News understands that RBS directors will discuss the appointment of its next boss during a board meeting over the next two days ahead of its half-year results on Friday.

The talks are focused on the possible appointment of Ross McEwan, the head of RBS's UK retail banking operations, although Bruce Van Saun, the chief financial officer who was supposed to be moving to the US to head RBS's retail bank there, remains a possibility.

Sky News revealed last week that Mr McEwan had emerged as the leading internal candidate to replace Mr Hester, who will step down by the end of the year.

Insiders said there was no formal target of Friday to announce the new chief executive and insisted that there was still no formal decision, meaning that an announcement might yet slip beyond this week.

Sir Philip Hampton, chairman of RBS, is understood to have discussed the remaining candidates with UK Financial Investments (UKFI), which manages taxpayers' 82% shareholding in RBS, this week, according to a source close to the bank.

UKFI, the Financial Conduct Authority, the Prudential Regulation Authority and the Treasury will all need to approve the chosen candidate ahead of an announcement.

Mark McCombe, an executive at the asset management firm BlackRock, was among external candidates for the role but withdrew from the process, as did Richard Meddings, the finance director of Standard Chartered.

It is possible that Sir Philip has kept another outsider under wraps but people familiar with the process said it was "almost certain" that an internal candidate would replace Mr Hester on a salary and bonus package significantly smaller than that of the current boss.

Mr McEwan spent five years as the group executive for retail banking services at Commonwealth Bank of Australia before joining RBS.

Some analysts have positioned Mr McEwan as a similar candidate to Antony Jenkins, who headed Barclays' retail banking business before being appointed to replace Bob Diamond in the wake of the Libor rate-rigging scandal last year.

Appointing Mr McEwan would, nevertheless, represent something of a gamble for RBS and the Government.

He has limited experience of the British banking sector, having only been appointed to his current role in August last year.

His experience of investment banking is also negligible, although RBS's investment banking operations accounts for only 20% of its balance sheet.

The Treasury is carrying out a review of whether a 'bad bank' containing approximately £60bn of assets could be carved out of RBS, enabling its "good bank" to accelerate lending to the UK economy.

Such a split has been opposed by Mr Hester and was among the factors that triggered tensions between the outgoing boss and the Chancellor in recent months.

One advantage of appointing Mr McEwan would be his availability to take over the top job in time for Mr Hester's departure.

RBS declined to comment.

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Rihanna Wins Topshop Image Rights Fight

Singer Rihanna has won her High Court battle with fashion chain Topshop over T-shirts bearing her image.

The Barbadian singer accused the fashion chain of passing off, or attempting to pass off, the garments as being approved by her.

Topshop disputed her claim.

Judge Mr Justice Birss ruled in favour of the Umbrella singer after a hearing in London.

He said Topshop's sale of a Rihanna T-shirt at the centre of the dispute was an act of "passing off".

But he said the "mere sale" of a T-shirt bearing the image of a famous person was not necessarily an act of "passing off".

He said a "substantial number" of buyers were likely to have been deceived into buying the Rihanna T-shirt because of a "false belief" that it had been authorised by the singer.

The judge said that was damaging to her "goodwill" and represented a loss of control over her reputation in the "fashion sphere".

He said it was for the singer, not Topshop, to choose what garments the public thought were endorsed by her.

Bringing the action under her full name of Robyn Rihanna Fenty, the US-based celebrity alleged an unknown quantity of T-shirts was acquired by Topshop in 2011 and early 2012 and offered for sale under the name "Rihanna Tank".

Court documents claimed that, after being challenged by the singer's lawyers, Topshop dropped her name from the T-shirt and referred to it as "Headscarf Girl Tank", and then to "Icon Tank".

The image under attack was taken by a freelance photographer "without her permission" while the pop star was filming a video in Northern Ireland for one of her singles in 2011.

Rihanna had claimed that she was entitled to over £3m in damages from Arcadia Group Brands, which operates Topshop, for the unauthorised use of her picture.

The judge did not make any assessment of damages in a written judgment published.

Rihanna was not in court for the proceedings.

The European leg of her Diamonds World Tour has just come to an end and she is understood to be taking a break before it continues in Macau, China, in September.

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Dreamliner Grounding 'Cost Carrier ANA £53m'

Japan's All Nippon Airways (ANA) has said the grounding of its Boeing Dreamliner fleet has cost it 8bn yen (£53m).

The announcement comes after the carrier made a second-quarter loss of 6.6bn yen (£44m).

It reversed a small year-earlier profit, despite a 4.4% rise in revenue to 358.3bn yen (£2.38bn).

"The primary reason for the increase in operating expenses was a rise in fuel costs due to the weakening of the yen," it said in a statement.

"Operating revenues were also held back by the suspension of Boeing 787 services for part of the period."

In early January a Japan Airlines (JAL) plane caught fire in Boston

ANA and domestic rival Japan Airlines, which reports its quarterly results Wednesday, were sideswiped by the grounding of Boeing's new aircraft that began in January.

After a long-running probe the planes were allowed to fly again in June.

The carriers at the time operated about half the Dreamliners in service and had to cancel hundreds of flights in the wake of the crisis, which was caused by problems with the plane's lithium battery.

The carrier and Japan Airlines have said they will seek compensation from Boeing having lost a combined total of more than 22.5bn yen (£149m) in revenue.

The fire at Heathrow was suspected to have been caused by a beacon battery

"The impact of the problems was bigger than originally expected," Kei Yamamura, an aviation analyst with SMBC Friend Securities, said.

"But this factor will fade toward the end of the fiscal year as long as these issues don't come up again."

Although issues related to the auxiliary power supply lithium battery appear to have been resolved, emergency locator transmitters (ELT) used by Boeing now appear to be under scrutiny.

A fuselage fire on an Ethiopian Airways 787 at Heathrow airport on July 12 was pinpointed to the ELT manufactured by Honeywell.

The US Federal Aviation Administration advised on the emergency beacon wiring being checked.

Boeing has subsequently told airlines up to 1,200 aircraft across a range of models have the ELTs fitted.

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City Watchdog Rules Barclays Misled Investors

By Mark Kleinman, City Editor

The City watchdog has warned Barclays that it could impose financial penalties on the bank and some of its top executives as part of a probe into fundraisings that allowed the British lender to avoid taxpayers' clutches in 2008.

Sky News has learnt that the Financial Conduct Authority (FCA) has ruled that Barclays struck commercial arrangements on terms that were favourable to Qatari investors in the summer of 2009 which should have been disclosed to the stock market.

In a preliminary judgement handed to the bank late last month, the FCA expressed a view that the arrangements should have been disclosed to the stock market, according to people familiar with the discussions.

The FCA is understood to have told the bank, which on Tuesday announced plans to raise almost £8bn from investors through a combination of new shares and bonds, that it could seek to fine both Barclays and the executives involved, who include John Varley, its former chief executive.

In its half-year results statement on Tuesday, Barclays referred to the progress of the investigation without providing further details.

"The FCA and the Serious Fraud Office are both investigating certain commercial agreements between Barclays and Qatari interests and whether these may have related to Barclays' capital-raisings in June and November 2008.

The FCA investigation involves four current and former senior employees, including Chris Lucas, group finance director, as well as Barclays.

"The FCA enforcement investigation began in July 2012 and the SFO commenced its investigation in August 2012.

"The FCA provided its preliminary findings against Barclays on 27 June 2013 in respect of some of these commercial agreements. Barclays has responded on 25 July 2013 contesting the FCA's preliminary findings. Barclays expects further developments in the near term."

Barclays is understood to believe that the FCA's findings are without merit.

The authorities' inquiries centre on two fundraisings which handed Barclays more than £11bn, allowing it - unlike Lloyds Banking Group and Royal Bank of Scotland - to remain out of taxpayers' hands.

The new details come a day after reports that the SFO had requested an additional £2m in funding from the Treasury for its part of the investigation.

The probes pose a headache for Antony Jenkins, the Barclays chief executive, who is attempting to move Barclays on from the scandals of the recent past, which included a £290m fine for Libor-rigging last year.

Reporting half-year profits of roughly £3.6bn, down 17% owing to the cost of implementing Mr Jenkins' restructuring plan, the bank unveiled a deeply-discounted rights issue, which will involve issuing £5.8bn of new shares to investors.

Barclays and the FCA declined to comment further.

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Barclays Half-Year Profit Down 17% To £3.59bn

Barclays has reported a 17% drop in half-year adjusted profit of £3.59bn, as it announced a £5.8bn capital-raising rights issue.

It said adjusted income decreased 3% to £15bn, in the six months to June 30.

Barclays said a payment protection insurance (PPI) mis-selling provision of £1.3bn had been made and £650m had been put aside for provisions in relation to interest rate swaps.

The total mis-selling bill for the bank, which had been criticised previously for its aggressive corporate culture, now stands at £5.5bn.

The lender, which was hit last year by the Libor rate-rigging crisis, said it would seek a capital boost in order to meet capital requirements laid down by the Bank of England (BoE).

Past problems continue to haunt Barclays and its cash call comes after the BoE last month told it to increase its leverage ratio - a measure of equity to assets - to reduce its risk.

Barclays was criticised for its ethics under former CEO Bob Diamond (c)

Sky News City Editor Mark Kleinman said: "In the three full years since Barclays last raised equity capital from external investors, the bank has paid out £6bn in fines, £7bn in staff bonuses and just £2bn in dividends to shareholders.

"Investors will be asking tough questions about this latest cash call."

The rights issue will be for one new ordinary share for every four existing ordinary shares held and priced the issue at 185p per new ordinary share.

Barclays said: "This represents a discount of approximately 40.1% to the closing price on the London Stock Exchange of 309.05p per ordinary share on 29 July 2013 ... and a discount of approximately 34.9% to the theoretical ex-rights price based on the closing price."

The bank said its fundraising was a "bold but balanced plan" which would see it meet regulator demands by June next year.

It stressed it would not impact on its aims to boost lending to households and businesses.

However, shares fell around 5% in early trading as the rights issue was far higher than expected and as Barclays admitted its plans will put back some of the financial targets under its overhaul, dubbed Project Transform.

The bank will also issue £2bn of bonds that are turned into shares or wiped out if the bank gets into trouble.

Chief executive Antony Jenkins said the capital-raising plan enabled the bank to keep growth in its planned level of lending.

"I am certain the decisive and prompt action we are taking will leave Barclays stronger," Mr Jenkins said.

:: The bank said an estimated £42bn of Funding for Lending (FLS) capital was made to UK households and businesses in the six-month period.

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Energy Watchdog 'Failing Consumers', Say MPs

By Tadhg Enright, Business Reporter

The energy watchdog, Ofgem, is failing consumers and undermining trust in the market, a group of MPs have said - urging it to "use its teeth a bit more".

A report by the Energy and Climate Change Select Committee has said there is a "lack of transparency" about profits made by the Big Six energy providers.

Committee member and Lib Dem MP Sir Robert Smith said: "At a time when many people are struggling with the rising costs of energy, consumers need reassurance that the profits being made by the Big Six are not excessive.

"Unfortunately, the complex, vertically integrated structure of these companies means that working out exactly how their profits are made requires forensic accountants."

Labour MP John Robertson added: "Ofgem needs to use its teeth a bit more and force the energy companies to do everything they can to prove that they are squeaky clean when it comes to making and reporting their profits."

There has been long standing criticism of the UK energy market in which six major competitors show little evidence of competing with each other on price.

Rising prices for consumers in recent years has been blamed on higher wholesale prices for energy providers but the Committee notes that many of Britain's major providers are generators of energy and therefore profit from higher wholesale prices too.

The Big Six have also been criticised for offering a confusing range of tariffs which give the impression of greater consumer choice but offer little in the way of discounts.

British Gas and EDF customer Mary Phillips told Sky News that in the winter she frequently has to choose between spending on food or fuel, and that competition in the energy market has done nothing to help.

She said: "I keep getting notes from all these different energy companies saying that they're making their bills much easier to understand. You're joking!

"Every single different supplier says that they're going to give me a much better deal than all the other suppliers. I don't believe it really. I think they might do it for about three months and then it will all go up suddenly."

As the industry's watchdog, Ofgem has the power to order an inquiry into competition in the energy market but has chosen not to do so.

Instead it hopes that the threat of such a forensic analysis of the Big Six's energy practices will encourage them to clean up their acts.

Ofgem's Rachel Fletcher said: "We share the committee's goal of restoring consumers' trust. We agree with the committee that suppliers have been poor at communicating with their customers.

"Ofgem has made energy companies produce yearly financial statements, which have been reviewed twice by independent accountants and found to be fit for purpose."

The report also criticises the Government for not doing enough to help millions of low-income families living in poorly insulated homes and who struggle with fuel poverty.

The MPs argue that programmes to help protect the most vulnerable should be funded through direct taxation rather than levies on the bills of those who can afford it.

Sir Robert said: "Fuel poverty is getting worse as energy prices rise making it all the more critical that the Government must respond to the Hills Review as a matter of urgency.

"Tax-funded public spending is a less regressive mechanism than levies on energy bills, which can hit some of the poorest hardest. Shifting the emphasis from levies to taxation would help protect vulnerable households."

Angela Knight, chief executive of the industry trade association Energy UK, defended the profits firms make, insisting they are vital to allow for investment in infrastructure.

She said: "Profit is actually a good thing and a very important thing because of the huge amount of investment that needs to be made in this country."

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Saudi Prince: Fracking Is Threat To Kingdom

A Saudi prince has warned that his oil-reliant nation is under threat because of fracking technology being developed elsewhere around the world.

Billionaire Prince Alwaleed bin Talal said the Gulf Arab kingdom needed to reduce its reliance on crude oil and diversify its revenues.

His warning comes as rising shale energy supplies in the United States cut global demand for Saudi oil.

In an open letter to his country's oil minister Ali al Naimi and other government heads, published on Sunday via his Twitter account, Prince Alwaleed said demand for oil from Organisation of the Petroleum Exporting Countries (Opec) member states was "in continuous decline".

State-owned Saudi Aramco was hit by a huge cyberattack last year

He said Saudi Arabia's heavy dependence on oil was "a truth that has really become a source of worry for many".

He added that the world's biggest crude oil exporter should implement "swift measures" to diversify its economy.

Prince Alwaleed, owner of international investment firm Kingdom Holding, is unusually outspoken for a top Saudi businessman.

But his warning reflects growing concern in private among many Saudis about the long-term impact of shale technology.

It is allowing the US and Canada to tap unconventional oil deposits which they could not reach just a few years ago.

Small towns, like Carroll County in Ohio, have been boosted by fracking

Chancellor George Osborne has also announced support for fracking in Britain and in offshore waters, to ease a reliance on foreign oil and gas.

Some analysts think this may push demand for Saudi oil, as well as global oil prices, down sharply over the next decade.

Over the past couple of years the Saudi government has taken some initial steps to develop the economy beyond oil.

It has sought to liberalise the aviation sector and provided finance to small, entrepreneurial firms in the services and technology sectors.

Cuadrilla has been exploring for gas in Britain, despite public protests

Mr Naimi said publicly in May that he was not concerned about rising US shale oil supplies.

Prince Alwaleed told Mr Naimi in his open letter, which was dated May 13 this year, that he disagreed with him.

The prince said: "Our country is facing a threat with the continuation of its near-complete reliance on oil, especially as 92% of the budget for this year depends on oil.

"It is necessary to diversify sources of revenue, establish a clear vision for that and start implementing it immediately."

The prince said Saudi Arabia should move ahead with plans for nuclear and solar energy production to cut local consumption of oil.

The shale oil threat means Saudi Arabia will not be able to raise its production capacity to 15 million barrels of oil per day (mbpd), Prince Alwaleed argued.

George Osborne reveals tax breaks to spur fracking investment

Current capacity is about 12.5mbpd; a few years ago the country planned to increase capacity to 15mbpd, but then put the plan on hold after the global financial crisis.

While most Saudi officials have in public insisted they are not worried by the shale threat, Opec has recognised that it needs to address the issue.

In a report earlier this month, Opec forecast demand for its oil in 2014 would average 29.61mbpd, down 250,000bpd from 2013. It cited rising non-Opec supply, especially from the US.

Riyadh has announced a metro system to ease car usage

:: The fracking warning comes as Saudi Arabia announced three foreign consortiums  - led by US, Spanish and Italian firms - have won a $22.5bn contract to build Riyadh's 110-mile, six-line metro train network.

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Pegatron: Second Apple Firm Slammed In China

Tech giant Apple is under renewed fire over workers' rights in China, according to a report issued by a human rights charity.

China Labor Watch (CLW) said it has documented violation of work laws, forced excessive overtime and underage employees at Pegatron, where Apple's iPads and iPhones are made.

The abuses are alleged to have taken place at facilities owned by the Taiwan-based manufacturer, which is subcontracted to make Apple gadgets.

New York-based CLW said workers' rights were violated at several of Pegatron's factories in Shanghai and Suzhou.

Apple boss Tim Cook visited a factory after earlier abuse claims in China

The report said many workers were students or teens, with some forced to work standing up for as as 11 hours. Up to 12 workers shared cramped dormitories with rudimentary facilities.

"The Pegatron factories are violating a great number of international and Chinese laws and standards as well as the standards of Apple's own social responsibility code of conduct," CLW said in the report.

Pegatron, which has market capitalisation of around £500m, said in a statement that it would investigate the matter and would take immediate action to correct any violations of Chinese labour laws and its own code of conduct.

"We strive to make each day at Pegatron better than the last for our employees. They are the heart of our business," Pegatron's CEO Jason Cheng said in the statement.

"That's why we take these allegations very seriously."

Apple supplier Foxconn has admitted using 14-year-old staff

Pegatron posted revenues of around £4.2bn for the first quarter of 2013, up 30.9% on the same period last year, due primarily to tablet growth.

Apple, responding to the CLW report, said it had conducted 15 audits at Pegatron facilities since 2007 that covered more than 130,000 workers to ensure safe and fair working conditions throughout its supply chain.

It has been in touch with CLW for several months and has fixed some issues raised by the organisation, Apple said.

"Their latest report contains claims that are new to us and we will investigate them immediately," Apple said.

"If our audits find that workers have been underpaid or denied compensation for any time they've worked, we will require that Pegatron reimburse them in full."

Staff anger grew so high at one Foxconn plant that a riot broke out

CLW said it sent undercover investigators into three Pegatron factories and conducted nearly 200 interviews with workers outside the factories from March to July.

It said it discovered 86 violations at the three factories making Apple products.

Pegatron's factories in China now employ more than 70,000 workers after it stepped up production of Apple's products as part of the US technology giant's plans to diversify its contract manufacturing partners.

Foxconn Technology Group, which has also been criticised by labour groups for poor working conditions, suicide rates and underage staff, now makes most of Apple's top products through its flagship unit, Hon Hai Precision Industry.

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Royal Baby: George Gives UK Business Boost

By Emma Birchley, Sky News Correspondent

The UK's newest Prince might be less than a week old but he is already proving to be a trendsetter as aspiring parents race to keep up with the Cambridges.

Sales of Britax Baby Safe seats have trebled at Kiddicare superstores since the newborn set off in one on his first car journey after leaving St Mary's Hospital on Tuesday.

And there has been a surge in orders of the £45 hand-finished merino wool shawl made by GH Hurt and Son in Nottingham that Prince George of Cambridge was wrapped in for his first photo shoot.

Alex Fisher, commercial director at Kiddicare, said: "I think it's fabulous news in terms of parents engaging with the fact there is a Royal baby.

"I think it will encourage people to renew and buy new products.

"Parents look at what is the latest product, who is the latest celebrity, and I think on the back of that the seat by default becomes aspirational."

There was so much interest in the dress worn by the Duchess of Cambridge that the designer's website crashed earlier in the week.

But it later emerged that the Jenny Packham design was a one-off and not for sale.

The royal seal of approval has been a blessing for some companies

The Centre for Retail Research predicts the new arrival will end up boosting the UK economy by close to £250 million.

That includes everything from the champagne sipped to help celebrate the baby's safe arrival to commemorative mugs.

And Richard Cope, director of trends at market researchers Mintel, believes spending inspired by the young Prince will be sustained by visitors to the UK.

"Tourist numbers are up by about 10% compared with a year ago. They're going to be here throughout the summer and they buy into the concept of the Royal Family.

"The tourist factor is going to drag out spending for months and months."

But it is not just retailers enjoying the Royal feelgood factor.

William and Kate's chosen charities are already benefiting, including East Anglia's Children's Hospices (EACH), of which the Duchess is patron.

Melanie Chew, fundraising director of EACH, said: "The donations are coming in from the UK, but overseas as well.

"We have had all kinds of generous offers from an ornate handmade cradle from Poland, we've had children's bedroom furniture from Slovenia and we have a charm bracelet on its way, so it's been terrific."

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Barclays Faces Fresh Customer Mis-Selling Bill

By Mark Kleinman, City Editor

Barclays will face up to mis-selling misdemeanours on three fronts next week when it sets aside hundreds of millions of pounds more for historical malpractice.

Sky News understands that the bank will make provisions for compensation for customers who were mis-sold payment protection insurance (PPI), interest rate derivatives and identity theft cover through the stricken credit card insurer CPP.

Insiders said this weekend that Barclays chief executive Antony Jenkins had been told by its regulators to be "conservative" in topping up its previous £2.6bn provision for PPI and an £850m bill for mis-selling swap products - designed to insure customers against sharp interest rate movements - to small businesses.

Barclays directors are also understood to have discussed taking its first hit for compensating CPP customers at a board meeting this week.

The final bill will be signed off by Mr Jenkins, Sir David Walker, the bank's chairman, and the soon-to-depart finance director Chris Lucas on Monday.

A Barclays spokesman declined to comment on the size of the new compensation figures but it is understood that they will take the amount it has set aside for swaps mis-selling to well over £1bn.

The scale of the new provisions will partly explain why Barclays is also planning to announce a major capital-raising comprising conventional shares and contingent convertible (or 'coco') bonds alongside its results.

That follows pressure from the Prudential Regulation Authority for Barclays to meet a target measuring the strength of its balance sheet, called the leverage ratio, by the end of next year.

The announcement will be made as part of Barclays' half-year results on Tuesday, and could undermine Mr Jenkins' efforts to overhaul the bank's reputation following last summer's Libor rate-rigging scandal.

Barclays was fined £290m for its role in the affair, leading to the departure of Mr Jenkins' predecessor, Bob Diamond.

It was also recently hit with a £300m penalty by a US energy regulator for attempting to manipulate electricity prices, although the bank is appealing against it.

Barclays will not be the only lender to add to its PPI mis-selling provisions during next week's results, with Lloyds Banking Group and others also expected to belie suggestions that the tidal wave of compensation claims had abated.

Barclays has, though, been particularly affected by the way interest is calculated on PPI compensation claims because of its liabilities dating back many years.

Mr Jenkins will also spell out the progress of his overhaul of the bank, called Transform, in which he will say that Barclays is exceeding cost-reduction targets announced in February.

Barclays declined to comment.

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£2bn Lloyds Profit Triggers Stake Sale Talks

By Mark Kleinman, City Editor

The agency which manages taxpayers' £19bn stake in Lloyds Banking Group is expected to hold talks with City investors this week about a quick-fire sale of shares as Britain's biggest high street lender unveils a £2bn half-year profit.

Sky News understands that UK Financial Investments (UKFI) and the Treasury will discuss in the coming days the prospect of an accelerated placing of shares in Lloyds with major institutional investors on or around the day that Lloyds announces half-year results on Thursday.

Treasury sources said that the results would show a "stellar" first-half performance from the bank, which owns the Halifax brand and is in the process of spinning TSB off into a separately-listed company.

Lloyds, they said, would report a statutory profit of approximately £2bn - in line with the consensus forecast of analysts - and also provide further positive news in the form of better-than-expected cost reductions and a stronger-than-anticipated capital position.

The move into the black would contrast with a loss of more than £400m at the half-year stage in 2012.

"The stars are aligned for us to start selling shares now," said one Whitehall insider.

The Government is understood to believe that it has a window of a few days beginning on the day of Lloyds' results to place a chunk of stock before the markets slow down too far for the summer to make such a substantial transaction more difficult.

Lord Davies is assembling a consortium keen to buy part of Lloyds

If the discussions do not point to sufficient demand for an institutional placing of shares, the Government would postpone any attempt to begin selling its 39% stake in the bank until September at the earliest.

A Treasury spokesman said that no timetable for the sale of shares had been set and refused to comment on the prospect of a sale next week.

Earlier this month, UKFI hired JP Morgan Cazenove, the investment bank, to advise on its privatisation strategy for Lloyds and Royal Bank of Scotland, in which taxpayers hold an 82% stake.

The agency also appointed a roster of other banks to execute deals in the capital markets to sell down the shares in the two banks during the coming years.

One banker said on Saturday that a report suggesting that Lloyds was priming City investors for a sale was inaccurate, arguing that the deal would be orchestrated by UKFI rather than the bank itself.

The source added that it would be theoretically possible to brief a group of investors the night before the results announcement - making them insiders unable to trade in Lloyds shares - with the objective of announcing a deal alongside on Thursday.

Sky News revealed earlier this month that Lord Davies, the former trade minister, was assembling a consortium of investors keen to buy at least half of the Government's stake in Lloyds.

The half-year results are expected to include a modest new provision for payment protection insurance mis-selling, taking Lloyds' total bill so far to more than £7bn, one insider said.

However, unlike Barclays, the bank is not expected to have to set aside money to compensate small businesses for mis-selling interest rate swaps or customers of CPP, the identity theft insurer.

On Friday, Lloyds shares closed at 68.37p, which if sustained until after next week's results announcement would make a placing at or above 61p viable, banking sources said. Such a deal would be likely to take place at a discount to the prevailing share price.

The 61p figure is significant because Lloyds said in March that it had been notified by the Treasury that that was the average price at which taxpayers' support for Lloyds during the banking crisis had been recorded in the public finances.

Selling above that price would be significant for George Osborne, the Chancellor, because it would allow him to hail the return of funds injected by taxpayers into Lloyds after its initially disastrous merger with HBOS.

It would also be potentially meaningful for Antonio Horta-Osorio, Lloyds' chief executive, whose £1.48m deferred share bonus awarded in March will only vest under certain conditions, one of which is that at least one-third of the Government's shareholding is sold for at least 61p-per-share.

Lloyds declined to comment on Saturday.

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Welby Defends Wonga After Church Link Emerges

The Archbishop of Canterbury has insisted he was not picking on Wonga after it emerged the Church of England invests in the payday loan firm.

The Most Reverend Justin Welby admitted being "irritated" and "embarrassed" by the revelation but went on to heap praise on Wonga and its management.

Mr Welby hailed the company for its professionalism and suggested it was far from the worst organisation in the loan sector.

The link between the Church and the firm emerged hours after the Archbishop said he wanted to force Wonga out of business by expanding credit unions.

The Financial Times found the Church's pension fund had put money into Accel Partners, a US venture capital firm that led Wonga's 2009 fund-raising efforts.

Until the report emerged, Mr Welby had no idea about the connection.

Sources suggested he was "furious" but on Friday, in a lengthy interview, he merely said: "I was irritated for a few minutes but, you know, these things happen."

Justin Welby: 'It's very embarrassing'

He did admit the affair was "very embarrassing" and vowed to investigate, signalling there could be a review of the Church's entire investment portfolio.

But he said: "I never took on Wonga in particular. The context was talking about the entire payday lender movement.

"Wonga is actually a very professionally managed company. Errol Damelin, the chief executive is a very clever man, [who] runs it extremely well."

Despite praising the company, he said he was still unhappy about the Church's investment.

"They shouldn't be investing in Wonga. We don't think that's a good thing," he told the BBC's Radio 4 Today programme.

And he insisted he was not backtracking on his commitment to clamp down on the industry, which is currently the subject of a Competition Commission probe.

"We need to provide a proper alternative to these very, very costly forms of finance. The worst people are not Wonga. There are plenty of others much worse," he said.

Mr Welby said Church policy allows investments in a company where 25% of its business is in the loan area, indicating the arrangement with Wonga may be against its rules.

"I think we have to review these levels and make sure we are consistent between what we're saying and what we're doing," he said.

The Archbishop conceded that it was almost impossible for the Church to make an investment that was not somehow tainted.

He said: "If you exclude any contact with anything that directly or indirectly gets in any way bad, you can't do anything at all."

Lambeth Palace has said it will ask the Assets Committee of the Church Commissioners to investigate the link to Wonga and review the holding.

It added: "We will also be requesting the Church Commissioners to investigate whether there are any other inconsistencies as normally all investment policies are reviewed by the Ethical Investment Advisory Group (EIAG)."

Mr Welby is seeking to expand the reach of credit unions as part of a long-term campaign to boost competition in the banking sector and clamp down on short-term loan firms.

The Government announced an investment of £38m in credit unions in April to help them offer an alternative option to payday lenders.

The Office of Fair Trading referred the entire payday lending industry, which is worth £2bn, to the Competition Commission last month after finding "deep-rooted" problems.

It said it decided to make the referral because it continues to suspect that features of the market "prevent, restrict or distort competition".

Wonga said in March that it welcomed any attempt to encourage responsible lending and that it has been "instrumental" in helping to raise industry standards.

Mr Damelin, its founder, said: "The Archbishop is clearly an exceptional individual and someone who understands the power of innovation.

"There is mutual respect, some differing opinions and a meeting of minds on many big issues.

"On the competition point, we always welcome fresh approaches that give people a fuller set of alternatives to solve their financial challenges. I'm all for better consumer choice."

The company has launched a new advertising campaign setting out "ten commitments" about its lending practices in an apparent tongue-in-cheek reaction to the Archbishop's original remarks.

Mayor of London Boris Johnson backed the Archbishop's plans and said it was an "interesting interpretation of the gospels".

He told Channel 4 News: "I think it's a wonderful idea.

"Wonga is a perfectly legitimate business but there's no doubt their rates are usurious. There are people who find it very, very difficult to repay the loans once they get into trouble.

"He's not turning over the tables of the money lenders, he's bringing in his own money lending tables."

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Royal Baby: George Gives UK Business Boost

By Emma Birchley, Sky News Correspondent

The UK's newest Prince might be less than a week old but he is already proving to be a trendsetter as aspiring parents race to keep up with the Cambridges.

Sales of Britax Baby Safe seats have trebled at Kiddicare superstores since the newborn set off in one on his first car journey after leaving St Mary's Hospital on Tuesday.

And there has been a surge in orders of the £45 hand-finished merino wool shawl made by GH Hurt and Son in Nottingham that Prince George of Cambridge was wrapped in for his first photo shoot.

Alex Fisher, commercial director at Kiddicare, said: "I think it's fabulous news in terms of parents engaging with the fact there is a Royal baby.

"I think it will encourage people to renew and buy new products.

"Parents look at what is the latest product, who is the latest celebrity, and I think on the back of that the seat by default becomes aspirational."

There was so much interest in the dress worn by the Duchess of Cambridge that the designer's website crashed earlier in the week.

But it later emerged that the Jenny Packham design was a one-off and not for sale.

The royal seal of approval has been a blessing for some companies

The Centre for Retail Research predicts the new arrival will end up boosting the UK economy by close to £250 million.

That includes everything from the champagne sipped to help celebrate the baby's safe arrival to commemorative mugs.

And Richard Cope, director of trends at market researchers Mintel, believes spending inspired by the young Prince will be sustained by visitors to the UK.

"Tourist numbers are up by about 10% compared with a year ago. They're going to be here throughout the summer and they buy into the concept of the Royal Family.

"The tourist factor is going to drag out spending for months and months."

But it is not just retailers enjoying the Royal feelgood factor.

William and Kate's chosen charities are already benefiting, including East Anglia's Children's Hospices (EACH), of which the Duchess is patron.

Melanie Chew, fundraising director of EACH, said: "The donations are coming in from the UK, but overseas as well.

"We have had all kinds of generous offers from an ornate handmade cradle from Poland, we've had children's bedroom furniture from Slovenia and we have a charm bracelet on its way, so it's been terrific."

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'Barclays To Pay Out More For Mis-Selling'

Barclays will next week set aside hundreds of millions of pounds more to cover product mis-selling, according to Sky sources.

More follows...

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Welby Defends Wonga After Church Link Emerges

The Archbishop of Canterbury has insisted he was not picking on Wonga after it emerged the Church of England invests in the payday loan firm.

The Most Reverend Justin Welby admitted being "irritated" and "embarrassed" by the revelation but went on to heap praise on Wonga and its management.

Mr Welby hailed the company for its professionalism and suggested it was far from the worst organisation in the loan sector.

The link between the Church and the firm emerged hours after the Archbishop said he wanted to force Wonga out of business by expanding credit unions.

The Financial Times found the Church's pension fund had put money into Accel Partners, a US venture capital firm that led Wonga's 2009 fund-raising efforts.

Until the report emerged, Mr Welby had no idea about the connection.

Sources suggested he was "furious" but on Friday, in a lengthy interview, he merely said: "I was irritated for a few minutes but, you know, these things happen."

Justin Welby: 'It's very embarrassing'

He did admit the affair was "very embarrassing" and vowed to investigate, signalling there could be a review of the Church's entire investment portfolio.

But he said: "I never took on Wonga in particular. The context was talking about the entire payday lender movement.

"Wonga is actually a very professionally managed company. Errol Damelin, the chief executive is a very clever man, [who] runs it extremely well."

Despite praising the company, he said he was still unhappy about the Church's investment.

"They shouldn't be investing in Wonga. We don't think that's a good thing," he told the BBC's Radio 4 Today programme.

And he insisted he was not backtracking on his commitment to clamp down on the industry, which is currently the subject of a Competition Commission probe.

"We need to provide a proper alternative to these very, very costly forms of finance. The worst people are not Wonga. There are plenty of others much worse," he said.

Mr Welby said Church policy allows investments in a company where 25% of its business is in the loan area, indicating the arrangement with Wonga may be against its rules.

"I think we have to review these levels and make sure we are consistent between what we're saying and what we're doing," he said.

The Archbishop conceded that it was almost impossible for the Church to make an investment that was not somehow tainted.

He said: "If you exclude any contact with anything that directly or indirectly gets in any way bad, you can't do anything at all."

Lambeth Palace has said it will ask the Assets Committee of the Church Commissioners to investigate the link to Wonga and review the holding.

It added: "We will also be requesting the Church Commissioners to investigate whether there are any other inconsistencies as normally all investment policies are reviewed by the Ethical Investment Advisory Group (EIAG)."

Mr Welby is seeking to expand the reach of credit unions as part of a long-term campaign to boost competition in the banking sector and clamp down on short-term loan firms.

The Government announced an investment of £38m in credit unions in April to help them offer an alternative option to payday lenders.

The Office of Fair Trading referred the entire payday lending industry, which is worth £2bn, to the Competition Commission last month after finding "deep-rooted" problems.

It said it decided to make the referral because it continues to suspect that features of the market "prevent, restrict or distort competition".

Wonga said in March that it welcomed any attempt to encourage responsible lending and that it has been "instrumental" in helping to raise industry standards.

Mr Damelin, its founder, said: "The Archbishop is clearly an exceptional individual and someone who understands the power of innovation.

"There is mutual respect, some differing opinions and a meeting of minds on many big issues.

"On the competition point, we always welcome fresh approaches that give people a fuller set of alternatives to solve their financial challenges. I'm all for better consumer choice."

The company has launched a new advertising campaign setting out "ten commitments" about its lending practices in an apparent tongue-in-cheek reaction to the Archbishop's original remarks.

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Samsung Hits New Record Amid Smartphone Fears

Samsung has reported another record quarterly profit, amid fears over flagging demand for expensive smartphones.

The South Korean tech giant, the world's largest technology firm by revenue, said its April-June profit after tax surged 49.7% year-on-year to 7.77 trillion won (£4.49bn).

The profit rise is based on robust shipments of its flagship Galaxy S smartphones and higher chip prices.

Second-quarter operating profit surged 47.5% on-year to 9.53 trn won (£5.56bn) in the same period as sales grew 20.7% on-year to 57.46 trn won (£33.56bn).

"Entering into a typically strong season for the IT industry, we expect earnings to continue to increase," Robert Yi, senior vice president, said.

But he warned: "We cannot overlook delayed economic recovery in Europe and risks from increased competition for smartphone and other set products."

However, Samsung's share price has been falling - wiping about £20bn off the firm's value - since late April when the flagship Galaxy S4 hit stores, as sales have not been as high as hoped.

That is despite the company spending billions on a global marketing campaign that has squeezed margins.

Samsung's share price fell 0.91% on Friday at the close in Seoul.

"Expectations had been too high for high-end smartphone sales. Many investors now think the Galaxy S4 has not been selling so well," Oh Young-Bo, of Hanmag Securities, said.

He added that investors are growing concerned as Samsung relies heavily on sales of smartphones to drive growth.

With an expected drop-off in demand for high-end phones, analysts began cutting their forecasts for profit and sales in June.

Samsung did not reveal smartphone shipments but it is thought to have sold about 75 million in the past quarter, some 760,000 a day, including around 20 million Galaxy S4s.

But while that helped Samsung maintain its status as the world's largest handset maker, the figure is only slightly up from the estimated 70 million shifted in the previous three months.

The easing of shipped units has suggested a slowdown in growth momentum.

That compares with Apple, which sold 31.2 million iPhones in April-June  - a record for the quarter - compared with 37.4 million in the previous three months, according to research firm Strategy Analytics.

However, Apple's fiscal third-quarter results on Tuesday showed net profit plunged 22% year-on-year.

And while iPhone sales beat expectations, there are still fears for the high-end smartphone market as cheaper Android devices from China and emerging markets become more attractive options.

Samsung, Nokia Corp and HTC Corp are launching more affordable devices to diversify their product line-ups, although analysts have warned that such a move could hit their profit margins in the longer term.

ABI Research said Apple's global smartphone share was down to 13.1% from 16.6% a year ago - its lowest level since Q3 2009 - despite the market growing 52% in the same period.

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Toyota Still Global Top Seller Amid Boycott

Toyota has shrugged off anti-Japanese sentiment in China to remain the world's top selling carmaker for the first half of this year.

It sold 4.91 million cars and trucks around the world for the January-June period - 26,830 vehicles daily.

Although the sales figure was down 1.2% from the previous year it still outpaced US rival General Motors (GM).

Earlier this month GM revealed it sold 4.85 million vehicles worldwide in the six months, growing almost 4% as it gained US sales faster than Toyota.

For the second quarter alone, GM had a slight edge, outselling Toyota by about 10,000 vehicles.

GM was the top-selling manufacturer for seven decades before losing that title to the Japanese brand in 2008.

The American maker, which owns marques such as Chevrolet, Vauxhall, Opel, Pontiac and Hummer, retook the spot in 2011.

General Motors held the global top position for seven decades

That was at a time when Toyota's plants were slowed by an earthquake and tsunami in north eastern Japan that wiped out parts suppliers.

Toyota has since recovered and was at the top again last year even as sales in China were hurt by boycotts of Japanese goods over a territorial dispute.

It has also suffered successive vehicle recalls over safety concerns.

The Japanese firm stayed ahead of GM in the first half of 2013 because of solid sales in other regions.

The maker of the Prius hybrid, Yaris and Verso also did better than expected in Japan, where the car market has been stagnant for years.

Volkswagen AG of Germany, which includes Audi, Porsche and Bentley, trailed Toyota and GM in the global race, selling 4.7 million vehicles during the first half of this year.

Yet it is posting strong growth in countries such as China, offsetting a bleak European market, and it is also determined to become the world's premier brand.

Toyota President Akio Toyoda said sales were not the only measure of excellence, and profitability, quality of workers and productivity were also significant.

"What truly defines being number one is an eternal pursuit for which there is never an answer," he said earlier this week.

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Wonga: Archibishop Aims To End Payday Lenders

Church Credit Union Plans Q&A

Updated: 10:52am UK, Thursday 25 July 2013

:: What is a credit union?

A credit union is essentially a co-operative whose members pool their savings to provide credit at a low interest rate. Members may live in the same community, work together or belong to the same organisation. Consumer group Which? estimates there are now around 450 credit unions in Britain. Around 950,000 people are members, according to the Association of British Credit Unions (ABCU). Rules regarding membership were relaxed in January 2012, allowing organisations as well as individuals to sign up.

:: How safe are savings invested in a credit union?

Just like savings accounts offered by high street banks and building societies, accounts offered by credit unions are protected up to £85,000 per person through the Financial Services Compensation Scheme (FSCS).

:: Are loans offered by credit unions more affordable?

Interest rates vary but according to the ABCU they can be as little as 1% per month (12.7% APR). It means a £1,000 loan paid back over 12 months would incur around £70 in interest charges. By contrast, paying back a one-year, £1,000 loan from a high street bank at a typical 29.9% APR would cost around £170.

:: What is the Church of England proposing?

The proposed Anglican Mutual Credit Union (AMCU) would allow clergy, ordinals, licensed lay ministers and employees or trustees of Anglican churches and charities to become members. People living in the same household as existing members would be able to join, as would Anglican churches and charities based in Britain.

:: Why does the church believe a credit union is needed?

Its website says the credit union model is "increasingly recognised as a more responsible and ethical form" of lending. It adds: "The subsequent banking crisis and the increasing understanding that the Church of England's financial resources are limited, underlined the need to assist clergy in taking personal responsibility for their finances and to help them plan for both living on a stipend and future retirement."

:: What sort of services would the credit union provide?

The AMCU would offer savings accounts, including cash ISAs, as well as loans for the purchase of cars, the consolidation of existing debts and the purchase of retirement houses or flats.

:: How far advanced are the plans?

The idea for a church credit union came about in 2008 at the height of the financial crisis. Those behind the project have applied for start-up funding and are waiting to hear whether the scheme has been approved by the Financial Services Authority. They hope to launch the scheme in autumn 2014, four years after a business plan was originally drawn up.

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GDP: Green Shoots Amid 0.6% Growth In Q2

The UK economy saw an estimated GDP growth of 0.6% in the second quarter, according to the Office for National Statistics (ONS).

The figure matched market expectations and comes on top of 0.3% growth in the first three months of 2013.

The nation recorded growth of 0.6% in both the service sector and manufacturing sectors. Construction output was up 0.9%.

It was the first time since 2011 that the UK has seen back-to-back quarterly increases.

The ONS figures showed all the main sectors of the economy grew for the first time since the third quarter of 2010, adding to hopes for a recovery.

The data boosts the Chancellor's position, seen here visiting roadworkers

Prime Minister David Cameron said the figures were "encouraging" and showed the UK was on the "right track".

He wrote on Twitter: "Today's economic growth figures are encouraging. We are on the right track - building an economy for hardworking people."

The Chancellor, George Osborne, who has been touring parts of the country's industrial heartland ahead of the data release, shared the sentiment.

Mr Osborne tweeted: "GDP stats better than forecast. Britain's holding its nerve, we're sticking to our plan, the economy's on the mend.

"But still a long way to go."

The size of the economy still remains 3.3% smaller than pre-financial crisis.

Construction has grown above other sectors but still lags its pre-2008 peak

Vicky Redwood, of Capital Economics, said: "Of course, we shouldn't get too carried away. Even a 0.6% quarterly rise is fairly mediocre after such a deep recession and GDP is still 3.3% below its peak.

"And with households' real pay still falling, bank lending flat and public sector austerity measures building, the economy may struggle to maintain its recent rate of growth in the second half of this year.

"Nonetheless, evidence is building that the economy is gradually getting back on its feet."

The powerhouse services sector, which represents three-quarters of the economy, represented the bulk of the increase.

Within this area, business services and finance rose 0.5% after slipping back in the first quarter - with architectural and engineering activities making the strongest contribution.

Hotels, restaurants and distribution also contributed to the services improvement, growing 1.5%.

George Osborne has found reason to smile with continued GDP growth

Gains in the beleaguered construction and manufacturing sectors, still well below their 2008 peaks, will be especially welcome.

Construction, boosted by Government initiatives to stimulate home buying, rose 0.9% after falling 1.8% in the previous quarter.

Despite welcoming the figures, the Opposition criticised Government policy.

Shadow chancellor Ed Balls said: "After three wasted and damaging years of flatlining, this economic growth is both welcome and long overdue.

"But families on middle and low incomes are still not seeing any recovery in their living standards.

"While millionaires have been given a huge tax cut, for everyone else life is getting harder with prices still rising much faster than wages."

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Aston Martin Signs V8 Mercedes Engine Deal

British motoring icon Aston Martin has confirmed it has signed a technical partnership deal with Germany's Mercedes to help it to develop a new generation of models with powerful V8 engines.

As part of the deal, Mercedes owner Daimler will take a stake of up to 5% in the 100-year-old maker of the DB9 and Vanquish sports cars.

According to What Car? editor-in-chief Chas Hallett, the investment iinjection is exactly what is needed by the firm.

Mr Hallett told Sky News: "This is the deal that Aston has needed for a long time - a ready supply of world class sports car engines which it couldn't afford to develop itself.

"It's great news for the UK sports car maker."

Aston Martin became a British icon with the James Bond franchise

The investment will help Aston Martin to compete better with Volkswagen's Bentley and rival UK luxury car manufacturer Jaguar Land Rover, which was bought by India's Tata Motors in 2008 and has since achieved huge sales growth, especially in China.

No value for the Aston Martin deal was provided but the two companies said that a supply agreement between Mercedes-AMG, Daimler AG and Aston Martin was an essential element of the arrangement.

"The proposed deal will see Aston Martin access significant Mercedes-AMG GmbH and Mercedes-Benz Cars' resources," Ian Minards, Aston Martin's product development director, said in a statement.

"Allowing the development of bespoke V8 powertrains and the use of certain components of electric and electronic architecture."

Aston Martin, favoured back in the day by James Bond and the Prince of Wales, sold 2,340 cars in the nine months to September 30 last year, down 19% on 2011.

Italian private equity group Investindustrial last year bought a 37.5% stake in Aston Martin for £157m via a capital increase agreed with majority Kuwaiti owner Investment Dar.

Aston Martin said the deal would enable it to invest in new products and a technology programme to 2018.

Royal newlyweds drove off on honeymoon in Prince Charles's vintage motor

Definitive agreements concerning the new partnership will be signed during the second half of the year, Stuttgart-based Daimler said.

Earlier this week Bentley, which is owned by Volkswagen, announced a plan to make the world's most luxurious and powerful 4x4 vehicle in 2016.

The high-end luxury car sector continues to see growth above other areas, with emerging markets crucial to future strategic vision for many marques.

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Retail Boss McEwan Leads Race For Top RBS Job

By Mark Kleinman, City Editor

The head of Royal Bank of Scotland's (RBS's) UK retail banking operations, Ross McEwan, has become a frontrunner to replace Stephen Hester at the helm of the state-backed lender.

Sky News understands that Mr McEwan has become the leading internal candidate for the job and could be announced as Mr Hester's successor as soon as RBS's half-year results on August 2.

People close to RBS cautioned that the chairman, Sir Philip Hampton, had yet to make a decision about his preferred choice, who would almost certainly oversee the eventual reprivatisation of the taxpayer's 82% shareholding in the bank.

A number of unidentified external candidates are also still in the running, although some other outsiders have been deterred from participating in the process by the extent of the Government's interference in the bank's strategy, according to insiders.

"The process is still live and there is no final decision at this point," a person close to the situation said. They stressed that it was possible that one of the external candidates could yet be picked to take over from Mr Hester.

RBS CEO Stephen Hester has announced his decision to leave the lender

Sir Philip's search for a new boss is understood to have encompassed candidates in Australia, Canada, Hong Kong, Singapore, the UK and the US - "the entire English-speaking banking world," as one insider said on Tuesday.

Mr McEwan, a New Zealand national, is understood to have told Sir Philip that he would be prepared to commit to a long-term stint in the UK if he is chosen as the new boss.

RBS's board will meet next week to finalise the bank's interim results announcement and discuss the appointment of a new chief executive, although naming a new boss could yet slip beyond next week.

UK Financial Investments, the agency which manages the Government's shareholding in RBS, has not yet been asked to give its verdict on Mr McEwan or the other contenders.

Mr McEwan would - if chosen as Mr Hester's successor - almost certainly win the crucial support of Cabinet ministers such as Vince Cable, the Business Secretary, and George Osborne, the Chancellor.

He spent five years as the group executive for retail banking services at Commonwealth Bank of Australia before joining RBS, and is credited at the Edinburgh-based lender with driving through reforms aimed at improving customer service.

Some analysts have positioned Mr McEwan as a similar candidate to Antony Jenkins, who headed Barclays' retail banking business before being appointed to replace Bob Diamond in the wake of the Libor rate-rigging scandal last year.

Appointing Mr McEwan would, nevertheless, represent something of a gamble for RBS and the Government. He has limited experience of the British banking sector, having only been appointed to his current role in August last year.

His experience of investment banking is also negligible, although RBS's investment banking operations are now sufficiently small at less than 20% of its balance sheet that appointing a deputy to Mr McEwan with greater experience in that area is seen as possible but unlikely.

The Treasury is carrying out a review of whether a 'bad bank' containing approximately £60bn of assets could be carved out of RBS, enabling its 'good bank' to accelerate lending to the UK economy.

Mr Cable has been vocal in his demands for RBS to grow its business lending, prompting the bank to announce this month an independent review of its lending practices.

Such a split has been opposed by Mr Hester and was among the factors that triggered tensions between the outgoing boss and the Chancellor in recent months.

One advantage of appointing Mr McEwan would be his availability to take over the top job in time for Mr Hester's departure in December.

Among the other RBS executives who have been seen as credible candidates for the chief executive's role were Nathan Bostock, the new finance director, who may still be in the frame; Chris Sullivan, the chief executive of corporate banking; and Rory Cullinan, who has led the rundown of RBS's non-core division during the last five years and is leading the group's engagement with the Treasury's 'bad bank' review.

Bruce Van Saun, who is leaving as finance director to head RBS's US retail bank, Citizens, was also a possibility if he could have been persuaded to remain in the UK, although his dealings with the Treasury about RBS's strategy are also understood to have been tense at times.

RBS declined to comment.

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Action! Brit Films Hits New Record High

UK cinema box office receipts rose 6% in 2012 to hit a record of £1.1bn, according to newly released figures.

According to the British Film Institute (BFI) 2013 Statistical Yearbook, cinema admissions reached 172.5 million, the third highest level in the last 40 years.

The BFI said that UK films took $5.3bn (£3.45bn) at the global box office, claiming a 15% share of the international market - the third highest global box office take ever recorded.

The yearbook also revealed that filmgoers over the age of 45 became the largest proportion of British cinema audience for the first time.

Skyfall, the latest film of the James Bond franchise, was the year's biggest movie and it took $1.1bn (£715m) around the world.

It took £103m at the UK box office, setting a new domestic record as the highest earning film of all time.

British films are now in the leading two spots for the most successful film franchises of all time, with the Harry Potter series taking over $7.7bn (£5bn) worldwide, followed by Bond with more than $6.1bn (£3.97bn).

Although a number of top films have foreign funding, according to the BFI statistics British actors have also been big winners.

It said that two-thirds of the top 200 films released worldwide since 2001 feature UK actors in "lead or prominent roles".

It added that 31 films based on stories and characters created by UK writers were in the top 200 global box office successes between 2001 and 2012 - together earning more than $22bn (£14.3bn).

The appeal of cinema in 2012 came despite competition for the public's attention coming from the Olympics, Paralympics, the Diamond Jubilee and Euro 2012 football.

Overall, the number of tickets sold in Britain was up 0.5%.

BFI chief executive Amanda Nevill said: "UK films captivated audiences and 007 spearheaded another strong year for UK film internationally.

"(They) collectively pulled in $5.3bn and helped export British culture and creativity around the world in 2012.

"Our Yearbook shows film's continued importance to the UK economy overall, with a record turnover of £7.7bn and trade surplus of £1bn in 2011."

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Help To Buy Extension Sparks New Warnings

Experts Divided Over Help-To-Buy

Updated: 12:45pm UK, Tuesday 23 July 2013

By Tadhg Enright, Business Correspondent

The Chancellor says that Help-To-Buy will "fix a broken housing system" but critics claim it risks creating another bubble at taxpayers' expense.

Anyone looking to buy a new home will have noticed Help-To-Buy branding on the hoardings outside new developments across the country.

It offers buyers the opportunity to buy a new home with a deposit of just 5%. 

An additional 20% of the property's value is provided by way of a five-year, interest free loan to the buyer leaving a shortfall of 75% to be made up by a mortgage lender which is a lot less risky.

Homebuilders attending a round-table discussion at Downing Street toasted its success in boosting business.

Some 7,000 new homes have already been reserved as part of the scheme.

The economic filip of such schemes is that building new homes creates jobs for builders as well as the ripple effect that any new home purchase has across the economy when new owners invest in fixtures, fittings and furniture too.

And from January, the offer will be extended to purchasers of existing as well as new homes with the Government guaranteeing up to 15% of their mortgages up to a maximum property value of £600,000.

Good idea? It depends who you talk to. 

Chief among those raising red flags was the former governor of the Bank of England, Lord King, whose parting shot was a warning not to allow Help-To-Buy become a permanent fixture.

Over the weekend I met Brunel University's Professor Moorad Choudhry to talk about prospects for the economy at large and he also felt the need to raise his concerns about the plans.

He said: "I'd like to ask why is the Government subsidising house purchases. That is something we got out of years back when we unwound tax relief on mortgages interest.

"If I inject cheap money into the stock market and it rises, that's not genuine growth. It's conceptually similar to subsidising anything and it's a false growth."

I also interviewed the former government economic advisor Vicky Pryce that day and she thought it was a fabulous initiative which would, in Keynesian style, raise the fortunes of the entire economy.

Ask anyone with a rudimentary understanding of property economics and they will tell you that if you boost the budget of the average homebuyer, that enables them to stretch that little bit further and offer that little bit more to get the place they want.

Economists at the estate agents Savills have already increased their forecasts for property price increases over the next five years from 11.5% to 18.1% by 2018.

Director of Savills residential research, Lucian Cook said:  "A combination of low interest rates and stimulus measures means there is capacity for improved price growth over the next three years or so.

"Help-to-Buy goes further than any of its predecessors in being aimed at all buyers, not just first time buyers, but we believe its primary impact will be increased transaction levels and that higher than expected price growth is a secondary impact."

It will give first-time buyers and ordinary homeowners seeking to trade up a greater ability to compete with property investors who are barred from the scheme but in the southeast where there is a shortage of housing, increased competition can only lead to increased prices.

Mortgage advisor, Martin Wade from Your Mortgage Decisions, sees another benefit.

He said: "What is great is that it's open to existing homeowners to remortgage. We've got a lot of people out there stuck on unattractive rates but because lending criteria have changed, they are effectively prisoners of their mortgage.

"What this will allow them to do is to remortgage, free up some capital, and it will be a huge relief for tens of thousands of people who are stuck on standard variable rate mortgages with very unattractive terms."

And talking of attractiveness, Capital Economics have singled out Help-To-Buy's most potent effect: the feelgood factor. 

How do you help the disenfranchised feel like they have a real stake in life and society?  Help them to buy a home.

Capital Economics' Michael Pearce said:  "While the policy has been criticised for its ropey economics, it may be more successful politically.

"Indeed, the risk that it pushes up house prices may be positive for the Conservatives' election chances in 2015."

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GSK Admits China Execs Flouted Law Over Drugs

GlaxoSmithKline (GSK) has said that some of its executives in China appeared to have broken the law as part of a major bribery scandal that has ensnared the UK pharmaceutical firm.

The news comes as rival UK drugmaker AstraZeneca has confirmed to Sky News its Shanghai office has also been visited by Chinese investigators.

GSK said that new proposed changes to its operations would result in lower prices of its medicines in China - an original issue and complaint made by authorities.

"Certain senior executives of GSK China, who know our systems well, appear to have acted outside of our processes and controls which breaches Chinese law," the firm's head of emerging markets, Abbas Hussain, said in a statement.

Mr Hussain, who was sent to China last week to lead GSK's response to the crisis, held a meeting with the Ministry of Public Security at which he also promised to review GSK's business model.

"Savings made as a result of proposed changes to our operational model will be passed on in the form of price reductions, ensuring our medicines are more affordable to Chinese patients," Mr Hussain added.

Meanwhile, AstraZeneca believes the Shanghai investigation police launched relates to enquiries on a single employee.

GSK boss Sir Andrew Witty

In a statement given to Sky News, it said: "AstraZeneca can confirm that it was visited by the Shanghai Public Security Bureau ... regarding a local police matter focused on a sales representative.

"We believe that this investigation relates to an individual case and while we have not yet received and update from the Public Security Bureau, we have no reason to believe it's related to any other investigations."

GSK initially denied any wrongdoing when police first announced an investigation into the company's Chinese operation.

Authorities alleged that more than £200m was funnelled to hundreds of travel agents in the country, which was then given to doctors, hospitals and health foundations as travel kickbacks.

Chinese police last week accused GSK of bribing officials and doctors to boost sales and raise the price of its medicines in China.

They said GSK transferred up to 3bn yuan (£232m) to 700 travel agencies and consultancies over six years.

Four senior Chinese executives from GSK have been detained and it said it was deeply concerned by the allegations, which it called "shameful".

In a statement, China's Ministry of Public Security said Mr Hussain apologised for the scandal during the meeting.

Mr Hussain was dispatched to China by chief executive Sir Andrew Witty, along with the group's global head of internal audit and a senior legal official on Friday, according to sources.

The CEO is expected to further detail what action the drugmaker is taking in response to the bribery allegations when he presents quarterly results on Wednesday.

The company has run into problems despite conducting up to 20 internal audits in China each year, resulting in the sacking of dozens of staff for misconduct.

In 2012, GSK dismissed 312 staff for policy violations worldwide, according to its annual corporate responsibility report, of which 56 were in China.

There has been widespread speculation that other multinational drug companies would be drawn into the corruption investigations.

The National Development and Reform Commission (NDRC) - China's powerful economic planning agency which sets and enforces drug prices - has announced the sector.

The NDRC said it would establish a web platform to monitor the pricing behaviour of drugs distributors, but has so far given few details.

Since 2000, the NDRC has made three rounds of adjustments on the maximum retail prices for medicines, the agency said in a statement posted on its website.

Those efforts were geared toward preventing a rise in prices.

"The next step is to establish an online platform for medicine factory price monitoring, and strengthen monitoring of distributors' pricing behaviour," the statement said, citing an unnamed official.

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Big Firms' Audit Overhaul Plans Revealed

The auditing of major UK companies is to be overhauled, according to new plans revealed by the Competition Commission (CC).

The accounting sector for large businesses is currently dominated by the so-called big four audit firms - KPMG, Ernst & Young, Deloitte and PwC.

The four audit some 90% of the UK's biggest firms on the stock market but concerns have been raised that they are too dominant and not always acting in shareholders' interest.

The new plan means all top 350 UK-listed companies must put their audit work out to tender at least every five years.

The tendering is expected to have a provision for it to be deferred for a further two years in exceptional circumstances, and the new rules are expected to be phased in over five years.

Firms would be banned from allowing only the big four from applying for audit roles.

The regulatory body said: "The CC has put forward a package of measures to promote competition and to ensure that competition is directed towards satisfying the demands of shareholders.

"The remedy package includes measures to improve the bargaining power of companies and encourage rivalry between audit firms - measures to enhance the influence of the audit committee - and measures to promote shareholder engagement in the audit process."

Only company audit committees will be allowed to negotiate and agree audit fees, initiate tenders, recommend appointments and authorise non-audit services.

Meanwhile the Financial Reporting Council is to get powers to boost competition in auditing, and will review every audit engagement of the 350 companies roughly every five years.

There is also expected to be a ban on banks requiring companies they lend money to being audited by one of the big four.

Shareholders of a company will also be allowed to vote annually on whether information in a firm's audit committee report is sufficient.

Furthermore, there will be tougher limits on advisory services auditors can offer clients whose books they already check.

However the CC did stop short of forcing companies to change auditors on a regular basis.

The audit industry was heavily criticised during the financial crisis for not scrutinising banks' books adequately, amid claims of an unhealthily close relationship with clients.

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BBA To Fight Critics With Lending Pledge

By Mark Kleinman, City Editor

The British Bankers' Association (BBA) will today attempt to counter critics' argument that its members have done too little to promote business lending with an initiative designed to appease Vince Cable.

Sky News understands that the bankers' lobby group will announce at its annual dinner in the City that it will begin publishing postcode lending information for small and medium-sized companies (SMEs), showing data for up to 120 areas across the country for the first time.

The initiative has been among the demands tabled by Mr Cable, the Business Secretary, as part of his drive to ensure the major banks do more to lead the economic recovery.

The BBA has been stung by accusations that it has done too little to assist the policy agenda in Whitehall in relation to promoting bank lending, and found itself discredited because of its role sponsoring the scandal-hit Libor benchmarks.

The postcode lending data project is likely to take place through the Better Business Finance Taskforce, a vehicle set up in the aftermath of the financial crisis.

However, critics are likely to argue that the initiative will do little to address the root causes of continuing declines in SME lending. Across the industry, borrowing by such companies fell by 4% last year.

"In difficult economic times many businesses have chosen to pay down debts rather than take out new loans," the BBA said recently.

Last week, Stephen Hester, the outgoing chief executive of Royal Bank of Scotland, was accused of "butchering" one SME by its founder at an event hosted by the Institute of Directors.

The BBA could not be reached for comment.

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OECD Warns Of 'Double-Tax Chaos' For Firms

By Ed Conway, Economics Editor

The OECD has raised the prospect of a global tax war, with companies caught having to pay double the levels of previous years, unless countries agree to a new international deal on corporate tax avoidance.

In a landmark report, the Organisation for Economic Co-operation and Development has warned that the international agreements set up in the 1920s to prevent companies paying double the tax on their profits in different countries could be abandoned, leaving "chaos" in their wake.

The warning came as it presented a 15-point action plan aimed at tackling tax avoidance by multinational companies such as Google and Starbucks.

It said that many companies - particularly those involved in the digital and internet sectors - were able to reduce their tax bills by shifting profits around the world to areas where rates are lowest, taking advantage of 90-year old rules aimed at preventing them being charged tax twice in different countries.

The perverse upshot of these League of Nation "double taxation" rules, it pointed out, was "double non-taxation".

However, it warned that unless Governments agreed an international scheme to police this, countries were likely to throw away the existing rules, resulting in "the replacement of the current consensus-based framework by unilateral measures, which could lead to global tax chaos marked by the massive re-emergence of double taxation".

The report added: "In fact, if the Action Plan fails to develop effective solutions in a timely manner, some countries may be persuaded to take unilateral action for protecting their tax base, resulting in avoidable uncertainty and unrelieved double taxation."

The report was delivered as finance ministers from the G20 group of nations met in Moscow for their annual meeting.

The OECD's hope is that the action plan is adopted either at this conference or at the heads-of-state meeting in St Petersburg next month.

However, some countries, including Russia and the United States, have expressed concern about the consequences of rewriting international corporate tax agreements that have been in place for almost a century.

The OECD plan suggests an investigation into measuring the creation of value in internet firms (in order to identify where taxes ought to be paid), as well as proposals to tackle complex structures which help companies avoid tax.

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Mothercare Mulls Sale Of Early Learning Centre

By Mark Kleinman, City Editor

Mothercare is considering the sale of its loss-making Early Learning Centre (ELC) chain as it bids to meet a target of restoring its UK operations to profitability by 2015.

Sky News has learnt that Mothercare has been holding talks with potential advisers about a sale in recent weeks, although the company has not yet made a formal decision to offload the specialist retailer of educational toys for young children.

Analysts believe that disposing of the business, which has perennially underperformed during the six years that it has been owned by Mothercare, may be difficult because of its poor track record.

It may, however, appeal to firms which are accustomed to investing in struggling high street chains, such as Hilco, which snapped up HMV for a token price earlier this year.

In a trading update published on Thursday, Mothercare said that it had continued to close stores in the UK amid difficult trading conditions.

"The UK market has been very competitive during the last quarter and we have continued to focus on delivering cash margin," it said.

"In line with our plan, we closed a further 13 loss-making stores (four Mothercare and nine Early Learning Centre) during the first quarter of the year.

"We now have 242 stores (192 Mothercare and 50 Early Learning Centre) in the UK. Space is down 7.7% year-on-year and is reflected in the 7.9% decline in total UK sales for the first quarter."

The talks with banks about a sale of ELC could result in an appointment imminently, with Lazard understood to be in the frame for the role.

Mothercare paid £85m for ELC but is unlikely to recoup anything like that sum if it manages to sell the chain.

The group wants to cash in on the imminent birth of the royal baby with the launch of a range of themed products, Simon Calver, the former Lovefilm executive who now runs Mothercare, said on Thursday.

Mothercare, which has a market value of around £400m, now has a much larger business outside the UK than in its home market. It's share price has rebounded strongly since Mr Calver's arrival.

A Mothercare spokeswoman declined to comment.

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Economy Figures Set To Show 'Positive Growth'

By Tadhg Enright, Business Reporter

Economists are predicting good news when the first estimate of economic growth during April, May and June is revealed next week.

Analysts expect the Office for National Statistics to say that the economy grew by around 0.5% when it reveals its preliminary estimate for Q2 GDP on Thursday.

They point to several important economic indicators which have been positive in recent months.

Consumer confidence was at a 25 months high in June. Business confidence in Q2 was at its highest since 2007.

Retail sales volumes rose by 0.9% between Q1 and Q2. New car sales were 13.4% higher in June compared with the same month last year. 

Economist Vicky Pryce says consumers are more confident in spending money

Former government economic advisor Vicky Pryce told Sky News: "I think what's going on right now is that the consumer is very keen on spending. The consumer has reduced his savings ratio very substantially from about 7% a year ago to about 4% now so they are spending their way out of this recession. 

"It's not because they're earning an awful lot more because of course average earnings have not really moved very much and there all sorts of restrictions in terms of public sector wages so they are suffering a little bit from that. But they are feeling a lot more confident so they're out there spending."

Even the International Monetary Fund, which recently encouraged the Government to ease public spending cuts, has revised upwards its forecast for UK economic growth in 2013 from 0.7% to 0.9%.

However, some of the economy's biggest problems remain with more Government cutbacks still on the horizon, banks still reluctant to lend and consumer prices rising at a faster rate than average wages.

There are also signs of a resurgence in the property market

Howard Archer, chief UK & European economist at IHS Global Insight, said: "There are still significant headwinds to growth which suggest that the upside for growth will be limited for some time to come and that the economy will likely remain prone to periodic losses of momentum.

"While we are encouraged by the recent extended and diverse good news on the UK economy, we currently remain cautious in markedly raising our GDP growth forecasts - especially given the many false dawns that there have been in recent times and the fact that events in the eurozone still pose a significant threat."

There is also mounting evidence of a resurgence in the property market with house prices rising in June and mortgage approvals at a 41 month high in May.

However critics of the Government's homebuying incentives such as Help to Buy have warned that it risks fuelling a property bubble.

Brunel University professor Moorad Choudhry told Sky News: "I'd like to ask why is the Government subsidising house purchases? That is something we got out of years back when we unwound tax relief on mortgages' interest.

"If I inject cheap money into the stock market and it rises, that's not genuine growth. It's conceptually similar to subsidising anything and it's a false growth."

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Mothercare Mulls Sale Of Early Learning Centre

By Mark Kleinman, City Editor

Mothercare is considering the sale of its loss-making Early Learning Centre (ELC) chain as it bids to meet a target of restoring its UK operations to profitability by 2015.

Sky News has learnt that Mothercare has been holding talks with potential advisers about a sale in recent weeks, although the company has not yet made a formal decision to offload the specialist retailer of educational toys for young children.

Analysts believe that disposing of the business, which has perennially underperformed during the six years that it has been owned by Mothercare, may be difficult because of its poor track record.

It may, however, appeal to firms which are accustomed to investing in struggling high street chains, such as Hilco, which snapped up HMV for a token price earlier this year.

In a trading update published on Thursday, Mothercare said that it had continued to close stores in the UK amid difficult trading conditions.

"The UK market has been very competitive during the last quarter and we have continued to focus on delivering cash margin," it said.

"In line with our plan, we closed a further 13 loss-making stores (four Mothercare and nine Early Learning Centre) during the first quarter of the year.

"We now have 242 stores (192 Mothercare and 50 Early Learning Centre) in the UK. Space is down 7.7% year-on-year and is reflected in the 7.9% decline in total UK sales for the first quarter."

The talks with banks about a sale of ELC could result in an appointment imminently, with Lazard understood to be in the frame for the role.

Mothercare paid £85m for ELC but is unlikely to recoup anything like that sum if it manages to sell the chain.

The group wants to cash in on the imminent birth of the royal baby with the launch of a range of themed products, Simon Calver, the former Lovefilm executive who now runs Mothercare, said on Thursday.

Mothercare, which has a market value of around £400m, now has a much larger business outside the UK than in its home market. It's share price has rebounded strongly since Mr Calver's arrival.

A Mothercare spokeswoman declined to comment.

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