PRESS DIGEST - Financial Times - Sept 26

The Financial Times

MPC DOVE HINTS AT INTEREST RATE CUT

Kate Barker, a member of the Bank of England's monetary policy committee, said on Thursday the credit crunch is proving to be a much more "serious and durable shock" than was expected a year ago. In a speech to the North West Chief Executives Club, Parker said the MPC will need to look at the impact on the wider economy in the months ahead. She defended the committee's approach to curbing inflation and conceded that access to credit for some corporate and household borrowers is becoming more expensive and restrictive.

COST OF MORTGAGES TO INCREASE AGAIN

Mortgage rates are rising again as lenders react to the sharp rise in funding costs. On Friday, Woolwich (BARC.L) and HSBC (HSBA.L) are to raise some of their fixed mortgage rates by 23-35 basis points. Mortgage brokers have now warned more rate rises, concentrated particularly on fixed rate deals, are likely to follow in coming days. HSBC is to increase the rates on mortgages to borrowers with small deposits, while the Woolwich is putting up rates on its fixed deals.

FOUR BILLION POUND SCHOOLS CONTRACT UNVEILED

The government will unveil a four billion pound round of contracts on Friday to build academies as it accelerates its drive to open independent state-funded schools. The four billion pound tender will offer some relief to the building industry, which is increasingly viewing the state-backed education sector as a safe haven from the current financial turmoil. Bidding for the contracts will begin in early 2009.

MILD FORECAST CHEERS ENERGY CONSUMERS

Consumers worried about increasing energy bills may be heartened by Thursday's prediction from the Met Office that temperatures over the winter will be above the long-term trend. The UK uses on average around 380 million cubic metres of gas a day in winter, but when the temperature is one degree above average usage drops by 20 million cubic metres a day. National Grid (NG.L) said each degree of difference in temperature during winter translated into 400 megawatts more or less of electricity usage.

AIRPORT REGULATOR SUPPORTS BREAK-UP OF BAA

The Civil Aviation Authority has expressed strong support for the break-up of BAA (FER.MC) and has urged the sale of two of its airports in London and one in Scotland. The aviation regulator said a break-up of BAA could be expected to "significantly" increase competition between airports in Scotland and in the southeast of England "to the benefit of passengers, airlines and the wider economy". The regulator has urged the Competition Commission to "reject BAA's argument that airports cannot compete when their runways are full".

HERMES TO SCRAP QUARTERLY RENT IN ADVANCE

Hermes, which oversees 11 billion pounds of property in the UK, has broken ranks with the property industry by agreeing to end the requirement to pay rent quarterly in advance for all of its 2,000 tenants. The pension fund manager will offer to scrap existing lease terms and introduce more flexible conditions. Retailers have complained that quarterly payments are an unwelcome burden on their finances in difficult market conditions and the final quarter rent is particularly testing as it comes after the slow summer period and before the Christmas rush.

3I REALISATIONS FALL TO FIVE-YEAR LOW

3i has reported sharp drops in investment and realisation activity in the five months to August. Realisations fell 45 per cent to 560 million pounds and investment fell 38 per cent to 622 million pounds. The slowdown at the UK's biggest listed private equity group mirrors a wider slump across much of the global private equity industry. 3i said it still managed to achieve a relatively strong uplift on the carrying value for the assets it sold in the five months to August. Shares closed at 812 pence, up 14 pence.

CHEAP DRINKS STEADY LUMINAR