PRESS DIGEST - Financial Times - July 10

Financial Times

OUTSOURCING TO PRIVATE SECTOR DOUBLES TO 80 BILLION POUNDS

A new government-sponsored study is to report on Thursday that the amount of public services delivered by the private and voluntary sectors has almost doubled, growing from revenues of 42 billion pounds in 1995-96 to 79 billion pounds last year. The study by DeAnne Julius, the economist, will show that those sectors supply a third of public services, with the market employing almost the same number of workers as the NHS and accounting for six percent of gross domestic product. However, growth has reduced, falling at three percent a year real after 2003-2004, compared to the seven percent in the years before.

AIRLINE INDUSTRY WARNS ON ID CARD COSTS

The British Air Transport Association slammed the government's proposed ID scheme for the people working in the industry, saying it will only increase bureaucracy and passenger costs to an already comprehensive system. Roger Wiltshire, secretary-general of BATA, said: "The last thing the airline industry needs at the moment is the extra costs and hassle of this proposal that adds no value in security terms and seems intended only to meet the government's political objectives." The bosses of British Airways (BAY.L), Virgin Atlantic [VA.UL], EasyJet (EZJ.L) and Monarch Airlines [MONA.UL] were among the executives who sent a protest letter to Home Secretary Jacqui Smith, while BAA (FER.MC), which did not sign the document, said it was "broadly aligned" with the industry's concerns.

POOR HIT HARDEST BY INFLATION, SAYS PWC

A new study by PwC has found soaring food, fuel and energy costs hit Britain's poorest population hardest, contradicting previous reports that suggested that middle-class families were the biggest sufferers of rising inflation. The PwC research shows that in May the poorest 10th of households were hit by a four percent consumer price inflation on average, with the equivalent rate for people on higher income being at 3.1 percent. John Hawksworth, of PwC, said the study, which was based on a representative sample of families' bills instead of a few examples, was accurate because of "the much higher weight of domestic energy and food bills in the budgets of poorest households".

GLG HIRES MORGAN STANLEY PAIR TO REPLACE EXITING HOT-SHOT COFFEY

GLG Partners (GLG.N) has announced the hiring of Bart Turtelboom and Karim Abdel-Motaal from Morgan Stanley to replace hot-shot fund manager Greg Coffey. The two senior traders are expected to run three of Coffey's funds, including his 4.6 billion dollars flagship, when he steps down at the end of October. Coffey's surprise exit in April provoked two billion dollars of redemptions from GLG and prompted the shares to plunge. Driss Ben-Brahim, a top trader of Goldman who was hired by GLG last week, will take over a fourth fund.

3i INSISTS GOOD PRICES ARE STILL TO BE HAD

Private equity group 3i said the mid-market remained open in the three months to June, offering investment opportunities despite the tough economic environment. Excluding 240 million pounds of sales which were agreed but not completed by the quarter end, realisations in the period fell to 301 million pounds, compared to 605 million pounds in the same quarter of the year before. Chief executive Philip Yea said he expects sales and investments to be broadly in balance over the financial year and that the group was being "highly selective" over its investments. Shares in 3i gained 28.5 pence at 822 pence.

BT PAYS 20 MILLION POUNDS FOR IOMART ARM

With the purchase of Ufindus, the local search business, from Iomart, BT (BT.L) will enhance its online classified advertising business. With more than 20,000 small and medium-sized business customers across the UK and 1.9 million online directory listings, Ufindus is one of biggest Internet classified advertisers. Shares in Iomart climbed four pence to 49.5 pence on the news that it had secured a price of 20 million pounds, which is over the market's valuation. "It's a very impressive price for Iomart and lets them focus on data centres, which still looks like it has solid fundamentals," said Evolution Securities analyst Roger Phillips.

BEGBIES FORECASTS A RISE IN FAILURES

Having put out a profit warning in December, the corporate insolvency specialist Begbies Traynor (BEG.L) said its financial year to April 30 had had a quiet start, but had picked up quickly after November. Executive chairman Ric Traynor described the second half as "very, very strong and the momentum is carrying us forward". In its "Red Flag" survey, to be published later in July, the company was expected to show a material increase in the number of companies in distress, said Traynor. He said that since January 1 business insolvencies were running at around 33 percent higher than last year, which had registered the lowest level of insolvencies since the early 1990s. Group revenues rose from 41.9 million pounds to 48.1 million pounds, helped by acquisitions.

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