PRESS DIGEST - Financial Times - Dec 10

Financial Times

DARLING CONSIDERS WIDER LOAN GUARANTEES

As part of his review of the effectiveness of the 50 billion pound recapitalisation of the banks, Alistair Darling is considering an extension of taxpayer guarantees to cover business lending, in an admission that the economy still lacks sufficient credit. The chancellor is also mulling over the option of cutting the fees charged to guarantee bank funding under a current scheme. Darling faces pressure from the Tories and businesses to do more to increase lending and is expected to announce new measures in early 2009. Shadow chancellor George Osborne said: "Alistair Darling needs to change his bank rescue plan so it rescues the economy, not just banks".

TREASURY PROPOSES CHANGE TO CORPORATE TAXATION

The Treasury has unveiled a change in the corporate tax regime in an effort to boost the UK's reputation as an attractive business location after multinationals moved their tax bases overseas. Businesses have welcomed the government's proposed tax exemption for dividends received by multinationals from foreign subsidiaries. However, some businesses still fear they will face higher taxes as a result of stricter anti-avoidance rules. Ian Brimicombe, head of tax at AstraZeneca (AZN.L), doubted whether businesses that had moved abroad would return to the UK since those with particular intellectual property or finance divisions would still benefit from being outside the UK's tax rules.

DATA POINT TO GROWING SPEED OF CONTRACTION

Figures from the National Institute of Economic and Social Research have revealed the UK economy is shrinking at a much faster pace than expected, with industrial output down by 1.8 percent in the three months to October 31. The institute said industrial production data suggested that the economy shrank by one percent in the quarter to November, and that it would show even more contraction in the fourth quarter. In the three months to September, the economy shrank by 0.5 percent and the latest forecast suggests that activity was falling at twice the rate of just a few months ago. NIESR said the main problem for the government to tackle is the availability of credit, adding: "Further interest reductions are unlikely to have much effect."

PAYMENT WOES DEMOLISH "POSHEST BUILDER"

Robin Ellis Construction, the company known as "London's poshest builder", has gone into administration as the economic downturn hits the once-thriving market for construction work at the capital's prime residences. The company, established in 1984, had earned a reputation among the super-rich as specialists in conversions of listed period homes. Robin Ellis said the collapse was a "dreadful shock" and was brought about by a "climate of non-payment and slow payment by clients". The company, which turned over about 15 million pound a year, has made all 35 staff of Robin Ellis Construction and Robin Ellis Projects redundant.

EQUITABLE RESPONSE DUE "SHORTLY"

Policyholders who lost money in the Equitable Life fiasco are due to learn the government's response to a report by Ann Abraham, the parliamentary ombudsman, describing a decade of regulatory failings. Ian Pearson, economic secretary to the Treasury, refused to comment on whether the government would give in to pressure to compensate policyholders, but said he did not think there was "very reliable evidence" on the overall figure for potential losses to policyholders. Pearson's comments seemed to dash policyholders' hopes that compensation may be offered for losses incurred when the life assurer almost collapsed.

LAND OF LEATHER WITHOUT CUSHION TO PAY RENT BILL

Loss-making sofa retailer Land of Leather LAN.L halted talks with potential bidders on Tuesday as it turned its attention to raising money to pay an upcoming rent bill totalling six million pounds. The group said last week it had been approached by several bidders, but found that they offered "insufficient value to shareholders". The firm said last week that sales orders almost halved in the quarter to November 2. On that date it had 6.9 million pounds in cash, but 4.5 million pounds of that is unusable collateral owed to Barclays (BARC.L) for credit clearing facilities, thereby leaving it with half the money needed for its quarterly rent.

SENIOR EXECUTIVE DEPARTS AT QINETIQ

Graham Love, chief executive of defence research group Qinetiq (QQ.L), has taken charge of its UK and Europe unit after unexpectedly parting company with Clive Richardson, chief operating officer of the group's European, Middle East and Australasian division. Defence industry sources speculated on Tuesday night that the two had clashed and had disagreements over how the business was run. Qinetiq confirmed that Richardson had left and said his departure had been a "board decision". Richardson could not be contacted for comment.

NORTHGATE DIVES ON WARNING

Van hire company Northgate (NTG.L) has warned that worsening conditions in both Spanish and UK markets were likely to result in a 50 percent cut in pre-tax profits for the year to April 30. Shares in the group, which are already at a 10-year low, lost 31.25 pence to close at 103 pence after a 46 percent drop in pre-tax profit to 23.9 million pounds for the six months to October 31. The residual value of vehicles has plummeted and the number of vehicles hire has also dropped. The group will axe 380 jobs through redundancies, resulting in annual savings of eight million pounds.

SOUTHERN CROSS IN 23 MILLION POUND DEFICIT

Southern Cross Healthcare made a pre-tax loss of 22.9 million pounds after a summer that forced it to issue a profit warning and apply for a waiver from banking covenants. The care homes group, which made a profit of three million pounds last year, swung to a loss due to financing costs, losses on property disposals and charges for future rent increases.

BIG PUB OPERATORS DEFEND DEBT LEVELS

Pub operators Enterprise Inns (ETI.L) and Punch Taverns (PUB.L) have hit back at suggestions that their business models were careless by pointing out that the groups are no more indebted than the average homeowner. Speaking in a session before a parliamentary inquiry into the industry, Ted Tuppen, chief executive of Enterprise Inns, and Giles Thorley, head of Punch Taverns, rejected allegations that high debts at the groups were threatening the livelihood of thousands of publicans. Tuppen pointed out that while his group had 3.7 billion pounds of debt, the value of its assets totalled six billion pounds. Thorley said Punch's 4.5 billion pound debt represented less than 70 percent of its asset value.

Prepared for Reuters by Durrants.