PRESS DIGEST - Financial Times - June 3

The Financial Times

BP CLOSES FINAL SALARY PENSION TO NEW ENTRANTS

BP(BP.L) announced it will scrap its final salary pension offer to new workers from next April so as not to burden shareholders with unknowable risks and costs. A spokesman for the group, one of the last remaining FTSE 100 companies to offer the scheme, said: "We are doing this to avoid burgeoning future liabilities." The company added that it is most concerned about the sharp and unexpected increase in life expectancy at older ages, which has dramatically raised costs. The move is so unusual because BP's final salary scheme is relatively well funded, unlike those of many other employers.

CRITICISM OF SCHEME FOR SMALL COMPANIES DIES DOWN

Business groups lauded the government's flagship scheme to support bank lending to small companies on Tuesday as a "model" for future support programmes, after being highly critical of it. The head of policy for the Federation of Small Businesses, Andrew Cave, said that the benefits of the Enterprise Finance Guarantee were now coming through. Cave said that when it was launched on January 14, "there were problems [with the EFG]," but "those are hurdles that have been overcome".

CONSERVATIVES' DECISION TO QUIT GROUP IRKS BUSINESS

On Tuesday, business groups criticised David Cameron's decision to pull his Conservative party out of the mainstream centre-right European parliament group after Thursday's elections. According to the EEF manufacturers' body, the decision to form a new non-federalist group in the European parliament instead could leave Britain "on the fringes of the debate". The body warned this comes at a time when the global downturn required close co-operation across the continent. EEF told the Financial Times: "The Conservatives taking a decision that is bound to reduce our influence in Europe is not helpful to business."

SLOWDOWN IN LENDING ACTS AS WARNING

In what is seen as a sign that the economy is still in the grip of the credit crunch, lending to companies and households dropped in April for the first time since records began in 1997. According to data from the Bank of England, outstanding loans held by the private sector dropped by 0.1 percent in the month, after rising by 0.2 percent in March. The Bank's data cuts out the effects of securitisations and lending to non-bank financial institutions. The slowdown in lending serves as a warning that constrained access to credit and weak demand for loans in the private sector could yet kill off the "green shoots" seen emerging in the economy.

RISE IN CONSUMER CONFIDENCE

According to the Nationwide consumer index, consumer confidence edged up during May as people felt more optimistic about the future state of the economy. The index increased by two points during the month as it added to an eight point rise in April. The boost was helped by consumers who believed that both the economic and employment situation will be better in roughly six months' time. However, consumers still remain glum about the current situation, with only six percent of those questioned saying they thought the economy was currently in a good state.