PRESS DIGEST - Financial Times - May 7

The Financial Times

SERVICE SECTOR GROWTH STALLS

A survey from the Chartered Institute of Purchasing and Supply and NTC has found that in April growth in the service sector slowed almost to a standstill and confidence fell to the lowest level since October 2001. The organisations said their index of service sector activity fell from 52.1 in March to 50.4 in April, weaker than expected and the lowest level since 2003. The findings follow Cips surveys showing similar weakness in the manufacturing sector and a decline in construction. Evidence the credit crunch is hitting confidence in the service sector could revive hopes of a cut in interest rates.

LENDERS REDUCE BUY-TO-LET EXPOSURE

Several buy-to-let mortgage lenders reduced their exposure to risk on Tuesday by cutting maximum loan amounts on new-builds and withdrawing many competitive rates. Bank of Scotland, BM Solutions and The Mortgage Business reduced the maximum loan-to-value they will offer on new-builds for rental from 85 percent to 75 percent. They also withdrew many of their best fixed and tracker mortgage deals. The changes bring the lenders, all part of the HBOS HBOS.L group, more into line with others that have already made similar changes to lending on new-build flats. Figures released by Moneysupermarket.com show the number of buy-to-let loans has fallen from 4,025 to 674 in just one year.

FEARS SPARK SHIFT TO TEMP WORKERS

A survey of 400 recruitment and employment consultancies, published on Wednesday by the Recruitment and Employment Confederation and KPMG, has found employers worried about the economic outlook are hiring temporary workers to fill vacancies rather than risk taking on permanent staff. The findings contrast with official figures which reported record numbers in work and the lowest level of unemployment benefit claims for over 30 years. Strong growth in the appointment of temporary workers, who are easier to dismiss, is often seen as an early indication of a weakening jobs outlook.

SLOWDOWN BITES FOR ESTATE AGENTS

The property Web site Rightmove (RMV.L) has reported the slowdown in the housing market is forcing almost 40 estate agents out of business every week. The company said on Tuesday the retention rate for estate agents has declined to about 85 percent, compared with 92 percent in 2007, as a result of an increase in agents ceasing trading. Rightmove forecasts the number of branches closing and agents ceasing trading in the second quarter will be even higher than in the first. The company said the tougher housing market meant properties were taking longer to sell and that the average time that development remained on its Web site had lengthened.

CONSUMERS FAIL TO BENEFIT FROM POSTAL REFORMS

An independent review of the postal market has found competition has produced no significant benefits for consumers and small businesses. The report said competition had benefited large mail users, but posed a "substantial threat" to Royal Mail's [GBPO.UL] financial stability which may undermine the daily collection of post and its delivery to every house and business in the UK. The report's conclusions have been welcomed by Royal Mail, which said: "We absolutely agree that the one-price-goes-anywhere universal service to the UK's 28 million addresses is at the heart of a successful postal service." TNT Post and UK Mail also welcomed the report but Royal Mail and its competitors remain at loggerheads over the way forward to maintain the universal service.

GSK ISSUES BONDS TO FUND SHARE BUY-BACK

GlaxoSmithKline (GSK.L) is poised to raise a record nine billion dollars from new corporate bonds as part of plans to raise its gearing to finance an ambitious share buy-back programme. An original six billion dollar issue was oversubscribed and GSK added two billion dollars to its five, 10 and 30-year bonds and a further one billion dollars in floating rate two-year notes. The new bonds come at a time of increased borrowing in the wake of a 3.5 billion euro bond issue last December and a further 700 million pounds in February.

PASSENGERS DESERT BA AFTER TERMINAL FIASCO

British Airways (BAY.L) saw passenger traffic fall heavily in April as it was hit by the chaotic opening of Heathrow's T5. The company managed to fill only 71.6 percent of its seats last month compared with 76.7 percent a year ago, although the timing of Easter clouds the comparison. BA said the move to T5 had impacted particularly on transfer traffic with passengers avoiding travelling through Heathrow. The airline also said the market for long-haul economy travel was showing "particular weakness". BA's share price closed down 9.75 pence, at 239 pence, as investor sentiment was hit by a further increase in the price of oil.

RAB WARNS OF EARNINGS PLUNGE