PRESS DIGEST - Financial Times - Feb 19

Financial Times

BANK DEFENDS STANCE ON PRIVATE SECTOR QE

Monetary Policy Committee member Paul Fisher has strongly defended the Bank of England's decision to centre its quantitative easing (QE) programme around the purchase of gilts rather than private sector loans. Responding to criticism from several leading economists who argued that the Bank needed to purchase more private sector assets, Fisher said the shrinking gap between the cost of borrowing for companies and the cost of borrowing for government meant only limited intervention was necessary under QE. He said the 200 billion pounds of gilts purchased under QE had provided vital aid.

SUPPORT FOR LABOUR IN BATTLE OVER DEBT

More than 60 prominent economists have supported Chancellor of the Exchequer Alistair Darling's decision to delay spending cuts until 2011, leaving the profession divided on how to tackle the UK's budget deficit. In the Sunday Times last weekend, 20 economists wrote backing Conservative calls to start fiscal tightening this year. However, two letters in Friday's Financial Times reject this approach, saying any such action would be "reckless" and questioning how foreign creditors would react if immediate and significant cuts triggered a second recessionary round. The letters are signed by two Nobel Laureates and five former members of the Bank of England's monetary policy committee.

POUND'S DROP FAILS TO LIFT SAGGING TOURISM

Figures published by the Office for National Statistics show that sterling's weakness against the dollar and the euro failed to help the UK's travel industry last year. Although the pound has declined 16 percent against the dollar and 21 percent against the euro since the start of 2008, visits to the UK by overseas residents fell seven percent in 2009 to 29.6 million. Business visits from overseas fared the worst, falling 20 percent to 8.1 million as recession-hit companies cut travel budgets.

OFT STOPS SHORT OF PUSH FOR HOME SALES REFORM

Property industry bodies have attacked the Office of Fair Trading for not pressing for stronger reform of how British homes are sold following its year-long study of the estate agency sector. The OFT identified weak competition on price in a market dominated by traditional high street estate agents, but ignored industry requests for more regulation. The Royal Institution of Chartered Surveyors' director of regulation, Steven Gould, criticised the OFT's focus on price competition, and Peter Bolton King, chief executive of the National Association of Estate Agents, also lamented the OFT's lack of vision.

BABCOCK TO APPEAL DIRECTLY TO VT INVESTORS

Support services group Babcock International (BAB.L) has indicated it will take its 1.2 billion pound-plus proposal to buy VT Group VTG.L directly to shareholders after its rival rejected its second indicative offer. The latest development comes after VT slammed a second offer on Tuesday of 680 pence to 715 pence a share, a small improvement on Babcock's earlier proposal, describing it as "a retrograde strategic step" for the company. Babcock chairman Mike Turner expressed surprise at VT's aggressive position and said "there is huge strategic sense in what we want to do".

EASYJET ADOPTS NEW PAY POLICY DESPITE ANGER FROM INVESTORS

Discount airline Easyjet (EZJ.L) pushed through its executive pay policy on Wednesday in spite of considerable opposition from investors. Almost 30 percent of investors in Easyjet opposed or abstained from a vote on the airline's remuneration policy at its annual meeting at Luton airport. Opposition was centred on a hastily approved pay deal for chief executive Andy Harrison, giving him an extra one-year pay-off of 1.2 million pounds when he leaves the group in June. The Easyjet investor rebellion on pay expresses the increasing sentiment of investors to keep executive pay in check and follows similar disputes at Royal Dutch Shell (RDSa.L), Punch Taverns (PUB.L), Bellway (BWY.L) and Grainger (GRI.L).

FRIENDS REUNITED SALE GETS GO-AHEAD

Broadcaster ITV (ITV.L) has been given approval by the Competition Commission for its 25 million pound sale of social networking site Friends Reunited. The decision comes after the competition authorities reviewed the deal, which would see Brightsolid, an IT business services provider, acquire the site from ITV. Uncertainty over the deal emerged when Brightsolid revealed plans to merge Genes Reunited with its family history sites -- Find My Past and 1911 Census. In its provisional findings, the Commission said the merger may actually facilitate increased competition by supplying the consumer with a bigger rival to the current market leader Ancestry.co.uk.

BLOCKBUSTER TRIES TO CUT RENTS AND STORES

Blockbuster BBI.N, a movie and video game rental chain, is in negotiations with its UK landlords to reduce store numbers and rents, as it embarks on a cost cutting exercise. With the assistance of its advisers KPMG, Blockbuster has been deliberating over several lease restructuring options across its UK shops, after coming under heightened competition from Internet rivals such as Lovefilm.com. Consequently, analysts have called into question the viability of large networks of regional stores, of which Blockbuster has about 630 around the UK. So far Blockbuster has renegotiated about 1,200 leases across its global business.

CPP JOINS FLOTATION QUEUE WITH 450 MILLION POUND TARGET

Product insurer CPP Group is the latest company to present itself for a stock market flotation, showing reinvigorated confidence in UK IPOs. The York-based group, which supplies credit card and mobile phone insurance schemes for clients such as HSBC, is hoping to list on the main market in March, with a post-float enterprise value of 450 million pounds. Chief executive Eric Woolley said a market listing would help support CPP expansion plans into India, Mexico and China as well as reducing its net debt of 48.8 million pounds.

HOPES FADE ON TEESSIDE AFTER CORUS TALKS

Hopes that a last-minute visit by Lord Mandelson could stop Friday's mothballing of steel maker Corus's [TISCG.UL] Teesside Cast Products site have receded after the business secretary did not immediately offer a rescue package. Following talks with Corus management and unions on Thursday, Mandelson insisted a sale of the site still remained possible. However, the only immediate help pledged was 2.4 million pounds for an apprenticeship scheme aimed at helping trainees at Corus and other Tees Valley businesses to finish their training. This money will come from an existing 60 million pound support package for Teesside's economy.

Prepared for Reuters by Durrants