PRESS DIGEST - Financial Times - June 29

Financial Times

PROPERTY SLUMP HITS FUTURE SPENDING PLANS

Prime Minister Gordon Brown's plans to help rescue public finances by raising 16 billion pounds from asset sales between 2011 and 2014 are looking increasingly unrealistic given the collapse in the real estate market. The Local Government Association said councils were refusing to sell properties, and those that were doing so were only getting half of the previous price. However, Brown wants property sales by councils to make up 11 billion pounds of the 16 billion pound target. The remainder of the target assumes two billion pounds of property sales by Whitehall departments and three billion pounds from disposal of assets such as the Land Registry and Ordnance Survey.

BANKS SAY CAPITAL RULES WILL HIT RECOVERY

Angela Knight, chief executive of the British Bankers' Association, has urged regulators to hold off for up to 10 years before they force banks to comply with new rules on holding more cash and capital. Knight said "the number one priority is that we get out of recession" and that there was a "real risk of a double dip" if capital and liquidity requirements were toughened now. Knight, speaking ahead of Tuesday's annual BBA conference, said excessive regulation on everything from capital and liquidity to bankers' pay would be like "imposing a 30 mph speed limit on motorways" in order to reduce accidents. "You would dramatically reduce the ability of the country to function."

BUSINESSES MAINTAIN SPENDING ON TRAINING DESPITE ECONOMIC DOWNTURN

In a survey of nearly 1,000 business leaders conducted by the Institute of Directors, four out of five say their companies increased or maintained spending on training over the past six months. The finding suggests companies see training as a way of increasing productivity, boosting staff morale and preparing to take advantage of an upturn. The majority of those surveyed said they were reducing expenditure such as staff bonuses and hospitality and cutting jobs, rather than decreasing training budgets. However, the recession has affected the type of training that businesses are prioritising, with almost half saying they are focusing on "essential" training to meet immediate needs, such as short courses for sales and customer service, rather than addressing longer term aims, such as professional qualifications and degrees.

OPTIMISM RETURNS TO INVESTMENT AND INSURANCE GROUPS

The CBI/PwC quarterly survey of financial services reveals optimism has returned to the sector for the first time in two years but that banks and building societies are less confident as they are having to deal with record levels of bad debt. An overall balance of 13 percent of companies were more optimistic about the business situation in the sector and the rise in confidence came amid a growing sense that the worst of the recession and credit crisis has passed. There was a sharp improvement in confidence across the insurance industry, with hopes of higher profits, and securities traders reported higher business volumes for the first time in nearly two years. The signs of mounting non-performing loans threaten hopes that UK banks will be able or willing to support greater lending in the future and underline Bank of England fears that the financial system is fragile.

NATIONAL EXPRESS SNUBS BID FROM RIVAL

In a surprise development which is likely to put further pressure on National Express (NEX.L), the bus and rail operator has rejected an unsolicited takeover bid from FirstGroup (FGP.L). A refusal by the government to renegotiate the terms of National Express's East Coast rail franchise has called into doubt the future of the company, but analysts say the bid approach suggests an agreement with the Department of Transport is imminent. National Express is contracted to pay the government 1.4 billion pounds to run the franchise until 2015, and to meet its original bid forecasts the group needs annual passenger revenue growth of nine-ten percent. It managed only 0.3 percent in the first three months of the year.

VALENTINO HITS PERMIRA'S POCKET

The UK buy-out house Permira is close to completing talks with lenders to Valentino, the Italian fashion house, about renegotiating its 2.5 billion euro debt. Having been bought by Permira at the peak of the credit bubble in May 2007 for 5.3 billion euros, Valentino has suffered from a drop in sales across the luxury goods industry as a result of the economic downturn. A person familiar with Valentino said the lenders to the fashion house, which include Citi Group, UniCredit and Mediobanca, were not expected to seek a debt-for-equity swap and Permira was unlikely to provide more equity. Hugo Boss, which is owned by Valentino and generates more than three-quarters of Valentino's sales, has also faltered in the first three months of this year, as sales fell five percent.

BLACKSTONE RETURNS TO EUROPEAN PROPERTY

After the closing on Monday of a larger-than-expected 3.1 billion euro real estate fund, the private equity group Blackstone is to return to the traditional commercial property market in Europe for the first time since 2004. Having sat on the sidelines of the commercial property market over the past years, regarding it as overpriced, Blackstone will use the fund in its hunt for opportunistic purchases from banks that have called in defaulted loans, or distressed property investors being forced to sell. The Blackstone Real Estate Partners Europe III fund will mainly focus on over-leveraged traditional real estate, which had been acquired at peak levels and aggressively financed.

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