PRESS DIGEST - Financial Times - July 1

Financial Times

KROES THREATENS BANK BREAK-UPS

On Tuesday, the European Union's competition commissioner, Neelie Kroes, warned that Lloyds Banking Group (LLOY.L) could be forced to sell its Halifax or Bank of Scotland branch networks to comply with European anti-trust rules.

Kroes believes that Lloyds would have to make a "viable carve-out that won't lead to job cuts". She also said that the Royal Bank of Scotland (RBS.L) was "highly dangerous" to Europe's single market. At a British Bankers Association conference, Kroes said: "Having co-operatively agreed changes to several German banks, our attention must turn to UK banks."

SFO CALLED TO INVESTIGATE 103 MILLION POUND SUSPECTED FRAUD.

The Serious Fraud Office will investigate a suspected 103 million pound fraud at Keydata Investment Services, according to PwC, the joint administrator of the failed investment manager. PwC revealed that as a result of the irregularities it has uncovered, a planned sale of the group could not go ahead. Dan Schwartzman, PwC partner, said: "The company was using its funds, but you would expect to see the investments used . It's from there that you would expect payments to be made."

CBI WARNS ON DELAYS TO BIG DECISIONS

According to the CBI employers' group, the government's reluctance to make decisions pending the election is creating damaging uncertainty for employers. Prime Minister Gordon Brown is being urged to investigate the next comprehensive review now, rather than postpone spending plans for April 2011 onwards until after the general election. Such a delay was suggested by business secretary Lord Mandelson this week. However, CBI director-general Richard Lambert said the economy was not robust enough to cope with immediate fiscal curbs.

CONTRACTION DEEPER THAN ANYONE THOUGHT AT TIME

New figures released on Tuesday showed that the first quarter of this year was a time of broad-based contraction that proved far deeper than anyone thought at the time. However, recent indicators, such as the Nationwide price index, suggest that the economy has stabilised since March. The latest figures reveal house prices increased by 0.9 per cent in June. Danny Gabay, director of Fathom Financial Consulting, said: "We may be past the worst, but the past is worse than we thought." According to Nationwide, the largest building society in Britain, house prices rose on a quarterly basis for the first time since December 2007.

SMALL BUSINESSES REPORT SIGNS OF TENTATIVE RECOVERY

A survey by the Federation of Small Businesses suggests that the country's smallest companies are experiencing a tentative recovery after being hit hard by the credit crunch and the recession. A survey of 4,400 FSB members found that 57 per cent were "quite confident" about the future prospects of their business. Some 68 per cent also said that they planned to expand in the next six months. "Although we are certainly not out of the woods yet, many small firms are seeing increased footfall and finding it easier to obtain crucial finance," said FSB national chairman John Wright.

TRADE BODY CALLS FOR STATE BANK

The EEF manufacturers' federation has announced proposals for a new state-owned bank to support technology-based industry. The Bank for Industry would use the proceeds from a gradual sell-off of the government's stakes in Royal Bank of Scotland (RBS.L) and Lloyds Banking Group (LLOY.L). The trade association believes the new bank could provide necessary sources for finance to help manufacturing and other related sectors, as well as to lead the UK out of the recession. It would have between five billion and ten billion pounds in capital that could be lent to companies in specific areas of production and technology that have potential.

SECTOR TO ENJOY 'MINI-RENAISSANCE', SAYS ADVISER

According to the managing director of UK industry at Siemens (SIEGn.DE), Juergen Maier, the UK is set for a "mini-renaissance" in manufacturing. The senior executive of one of the biggest industrial businesses in the world believes that Britain was one of the most competitive locations in the world. He said: "Manufacturing as a share of gross domestic product will fall from 13 per cent to 12 per cent but will be up to 15-16 per cent in a decade." Maier is also an adviser to business secretary Lord Mandelson.

SHARP FALL IN REVENUE GROWTH HURTS ARRIVA

Arriva (ARI.L) has indicated that the impact on Britain's rail market is deepening, as revenue growth from ticket sales on its key CrossCountry franchise plunged sharply. The group revealed revenue growth on the franchise dropped to 2.4 per cent between January and May, down from 4.5 per cent in the January to March period and 11.2 per cent overall last year. The bus and rail operator said in March that it needed passenger revenue growth of ten per cent to maintain profitability on the route.

KEYDATA DIRECTORS PAID 7.9 MILLION POUNDS IN TWO YEARS

Directors at Keydata Investment Services paid themselves 7.9 million pounds in the two years prior to the company coming under investigation by the Financial Services Authority. According to findings at Companies House, three directors received 3.7 million pounds in the year to September 2008 - even though the company reported just 2,004 pounds profit on 15.7 million pounds of turnover. Administrators believe 103 million pounds of private investors' money may have gone missing.

COMEBACK FOR UGLY FRUIT AND VEG

Following a two-decade absence, knobbly carrots and peculiar-shaped plums will return to supermarket shelves on Wednesday as the EU relaxes regulations on imperfect-looking fruit and vegetables. It is estimated that retailers turn away some 20 per cent of produce because it does not meet marketing regulations governing appearance. J Sainsbury (SBRY.L) believes consumers could save up to 40 per cent.

Prepared for Reuters by Durrants