PRESS DIGEST - Financial Times - June 18

The Financial Times

LEARN TO LIVE WITH INFLATION, SAYS KING

On Tuesday, Mervyn King warned that British households must learn to live with higher prices and without increased wages. The governor of the Bank of England predicted inflation would reach at least four per cent by the end of the year in a letter to the government. He also surprised markets by failing to use the letter to signal a series of interest rate rises to combat higher inflation. In May, consumer price inflation rose by more than expected to 3.3 per cent, putting the rate well above the government's target of two per cent.

UK BECOMES LARGEST EXPORTER OF ARMS

According to government figures released on Tuesday, Britain became the world's largest arms exporter last year overtaking the US which normally occupies the top slot. The Defence and Security Organisation's figures show the UK won ten billion pounds of new defence orders in 2007 from overseas, giving it a 33 per cent share of the world export market. In 2006, export orders totalled 5.5 billion pounds. Lord Digby Jones, trade and investment minister, said: "As demonstrated by this outstanding export investment, the UK has a first class defence industry with some of the world's most technologically sophisticated companies."

PRICE DEAL BRINGS NEW CUTS TO DRUG COMPANY PROFITS

New rules on medicine pricing to be unveiled on Wednesday by the government will herald new cuts in income for the pharmaceutical industry in Britain. The health secretary, Alan Johnson, will announce the outline of the agreement to replace the Pharmaceutical Price Regulation System that was cancelled late last year. The proposals are expected to include average price cuts of about five per cent for existing medicines. The changes follow pressure on the Department of Health to slash spending as part of government-wide cost reductions.

MINOR METAL PRICES SOAR ON DEMAND FOR MORE FUEL-EFFICIENT.

The airline industry's struggle to survive in the face of rocketing oil prices has triggered a massive jump in the price of a number of scarce and obscure metals that are used to improve the fuel economy of jet engines. Traders said the demand for minor metals was booming as Rolls-Royce (RR.L), General Electric (GE.N) and Pratt & Whitney bought them for new super-alloys that helped cut aircraft fuel consumption. The rise in the price of rhenium, which is now more than double last year's level, is the most striking example.

SCOTLAND DRINK MOVE CHALLENGED

Scottish government plans to set a minimum price for alcohol and to outlaw "three for the price of two" sales promotions are likely to face legal challenges. The Scottish National party administration's proposals are designed to tackle Scotland's binge drinking culture, and include raising the minimum age for buying drink in supermarkets and off-sales to 21. Scotland's health secretary, Nicola Sturgeon, said: "Setting the minimum price for a unit of alcohol will mean price better reflects the strength of alcoholic drinks."

TESCO INVESTORS URGED TO SUPPORT CHICKEN PROTEST

Tesco's (TSCO.L) institutional shareholders have been asked to aid the campaign by Hugh Fearnley-Whittingstall to improve the quality of life of chickens destined for supermarket freezer cabinets. Pirc has lent its support to the celebrity, arguing in a note published on Tuesday that his resolution "is not unduly prescriptive" and that it was "reasonable to request that the company set a more explicit time-frame in meeting its own stated welfare policy commitments." Mr Fearnley-Whittingstall was helped by Pirc to draw up the proposal, which Tesco opposes.

PLAYTECH PLACING RAISES 112 MILLION POUNDS

Playtech (PTEC.L) has raised 112 million pounds via a placing of 21.6 million new shares. The price of 520 pence a share was a five per cent discount to the average price on June 16, and the placing will enlarge the issued capital by 9.9 per cent on completion. Shares in the world's largest supplier of software to online gaming companies closed at 534 pence, down 14 pence. Playtech said it would use the proceeds to buy some of its marketing affiliates, or other acquisitions that complement its organic growth strategy.

CML SCRAPS FULL-YEAR PAY-OUT