PRESS DIGEST - Financial Times - Feb 15

Financial Times

PENSION FUNDS FACE A SHORTFALL OF BILLIONS

The Pensions Regulator is to unveil plans next week to force companies to use more realistic projections of how long workers will live after they retire, thus forcing them to add billions of pounds to their pensions liabilities. The standard to be proposed is tougher than that used by 99.5 per cent of UK schemes and will increase liabilities for companies from six to eight per cent. Roughly a third of all schemes could see disclosed liabilities increase by as much as 15 to 20 per cent. The regulator is concerned that companies are ignoring scientific evidence showing longer lives at older ages and that employers and insurers are not putting away enough cash to pay pensions in full.

BUSINESS URGES SECOND LOOK AT COUNCIL LEVY

Business leaders are calling on the government to rethink the supplementary business rate tax councils will be able to levy on businesses. The British Chambers of Commerce and the Institute of Directors say the tax will be the latest in a series of burdens imposed on companies which include a new capital gains tax and a levy on 'non-doms'. The director-general of the IoD, Miles Templeton, said the supplementary business rate would 'rock' business because it would be imposed on companies regardless of their profitability. The levy is to be used for specific infrastructure projects upon which local business people would in some circumstances have a vote.

SHIPPING TAX BREAK VITAL TO INDUSTRY, SAYS REPORT

A report from Oxford Economics and commissioned by the Chamber of Shipping suggests Britain's shipping industry contributes around 5.2 billion pounds to GDP and is far bigger than it would have been without significant tax breaks. The study shows the generous tax regime may have halted the industry's decline with UK-operated shipping now three to five times the size it would otherwise have been. The report is an attempt to quantify the impact on the economy of the large concentration of shipping businesses in London.

STUDY WARNS ON PUBLIC FINANCES

The consultancy firm Capital Economic warned on Thursday that Britain's public finances could deteriorate to a 'pretty catastrophic' position if the economy moves into recession next year. Capital Economics has joined the Institute of Fiscal Studies, the National Institute of Economic and Social Research and PwC in worrying about the UK's financial health. The analysis found that even if the economy performed as strongly as the Treasury expected, tax revenues would fall short of government forecasts. If the economy slowed more than this, the study found that public borrowing would rise to 'around 50 billion pounds per annum and stay there throughout the forecast period' up to 2012-13.

EUROZONE GROWTH SLOWS SIGNIFICANTLY

Figures from Eurostat, the EU's statistical office, show growth in the eurozone halved in the final months of last year with GDP in the region only growing by 0.4 per cent in the fourth quarter, against growth of 0.8 per cent growth in the previous quarter, however, the eurozone grew faster than the 0.2 fourth quarter growth reported by the US. The European Central Bank softened its hawkish tome last week in a move interpreted as opening the door for possible cuts in eurozone borrowing costs. Analysts have warned however that the latest growth data were unlikely to have simply reflected temporary economic weaknesses and that the situation is still foggy.

CUSTOMERS' ANGER COULD DAMAGE EGG

The rating agency Fitch has warned the withdrawal by Egg of 161,000 credit cards could lead to a rise in arrears and non-payment by customers disgruntled by the move. The internet bank outraged customers last month when it said cards would be withdrawn from customers deemed a high credit risk. Fitch believes Egg's actions could lead to an increase in defaults and write-offs and stated there was 'an increased likelihood.that this action could lead to delinquencies and charge-offs.' Citigroup, which acquired Egg from Prudential last year, said the decision to withdraw cards from higher-risk customers came after a thorough review of the acquisition and it did not expect bad debt to increase significantly as a result of the action.

JUDGE CRITICISES DROPPING OF BAE PROBE

Lord Justice Moses, one of Britain's most senior judges, on Thursday accused the government of 'rolling over' to Saudi threats in scrapping the corruption probe into arms deals between the Saudi Arabian government and BAE Systems(BAES.L). The judge made the comments during a legal challenge, brought by Campaign Against Arms Trade and Corner House Research, against the Serious Fraud Office's decision to drop the investigation. The lobby group claims Tony Blair and his government caved into intense lobbying from BAE after senior members of the Saudi royal family threatened to cancel a 10-billion-pound aircraft contract and withdraw co-operation on security if the investigation was not halted. The case concludes on Saturday.

BT BOOSTED BY EU SUPPORT FOR DEREGULATION