PRESS DIGEST - Financial Times - Feb 8

The Financial Times

MINISTER WARNS ON NON-DOMS TAX PURGE

Trade and Investment Minister Digby Jones has warned that plans for a tax crackdown on non-domiciled foreigners living in the UK threaten London's role as a world finance centre. The former CBI director-general broke ranks with the official government line in an interview with the Financial Times. He said the tax changes made it harder for him to sell Britain as a destination for skilled foreign workers and inward investment. Jones said he was not consulted on the change and that a lot of people from the City had told him it was a serious issue for the financial services industry.

INVESTORS EXPECT INTEREST RATE FALL TO 4.5 PERCENT BY END OF YEAR

Further to the quarter-point rate cut announced by the Bank of England on Thursday, bringing interest rates down to 5.25 percent, investors are predicting the rates to fall further to 4.5 percent by the end of 2008. While warning of the potential need to keep rates high to counter possible sharp increases in inflation, the bank explained the latest reduction in interest rates by referring to the deteriorating outlook for global growth and the credit crunch. BNP Paribas's Alan Clarke said: "For now the bank is trapped between plunging growth prospects and sharply rising inflation."

NEW HOMEBUYERS MAY NOT REAP BENEFIT

Despite the speed with which banks and building societies moved to pass on the reduction in interest rates to existing mortgage borrowers, brokers expressed doubt as to whether the reductions would benefit new home buyers, with new fixed-rate deals staying above the 5.25 percent base rate. "In the current climate, where there is a chronic lack of supply of mortgage funding, there is a very real danger that new borrowers will see much less of a cut than many of them were hoping for," said Jonathan Cornell, managing director of Hamptons. While expecting fixed rate deals not to experience a reduction, Julia Harris of Moneyfacts.co.uk comparison site said: "Lenders are becoming more proactive about moving existing borrowers on to new cheap deals rather than revert to the standard variable rate."

LENDERS RESPOND TO EARLY WARNINGS OF BAD DEBT

As a confirmation of the increasing vigilance of banks and credit card providers against signs of financial difficulties experienced by customers, Egg withdrew the credit cards of 161,000 customers the bank considered to be high risk. Egg's move came following a review of its businesses in May 2007. Callcredit, a credit reference agency, monitors the customer accounts of at least 10 credit card providers for any activity that could instigate a change in their capacity to service debt.

INVESTOR GROUP BACKS BANK TEAM

The bid led by the non-executive Northern Rock NRK.L director Paul Thompson to takeover the stricken bank has been given a further boost by the Tyne consortium, which includes the U.S. private equity group Five Mile. The consortium has indicated its willingness to underwrite 200 million pounds of a rights issue required to capitalise the mortgage lender. In order to help recapitalise Northern, Thompson believes he needs to raise 500 to 700 million pounds. The Tyne endorsement constitutes a blow to Virgin's takeover plans.

LADBROKES GROWS IN N IRELAND

Adding to its 16 shops in Northern Ireland, Ladbrokes (LAD.L) has acquired a 54-strong-chain of betting shops through a 117.5 million pound purchase of Eastwood bookmakers, Northern Ireland's largest retail betting firm. Analysts questioned whether the leading bookmaker in the UK had paid a full price. Evolution Securities analyst Ivor Jones said the price tag of two million pounds per an Eastwood shop translated into a highly priced purchase that was in line with Ladbrokes' tendency to over invest in retail. Ladbrokes' shares lost 1.5 pence to 289.5 pence on Thursday as the company announced that in the first 12 months it expects earnings before income tax, depreciation and amortisation to be 11 million pounds. The bookmaker expects good growth over the next two years.

TURNBULL RESIGNS FROM ERINACEOUS

Shares in Erinaceous (ERGP.L) lost 2.2 percent to 3.15 pence on Thursday as chairman Nigel Turnbull resigned with immediate effect, citing personal reasons. Turnbull had taken the reins of the ailing property services group after the executive team of Lucy Cummings and Neil Bellis were put on gardening leave in the aftermath of the drastic reduction in share price. The duo had attempted to take the company private.

CAMEC STRIKES DEAL WITH GERTLER

The mining company Camec CFM.L has agreed to give a 40 percent stake to the Israeli entrepreneur Dan Gertler in return for his half of the Mukondo Mountain cobalt mine in the Democratic Republic of Congo. Gertler and his family control Prairie International which shares ownership of the mine with Camec. The deal will lead to the dilution of the Camec shareholdings of four and three percent held by Phil Edmonds, chairman, and Andrew Groves, respectively. Edmonds and Groves, however, will continue to manage the company as Gertler does not wish to run the business himself, said Camec. Shares closed 2.75 pence ahead at 45.5 pence.

PROMOTIONS LIFT TELECOM PLUS

Shares in Telecom Plus (TEP.L) rose 18.75 pence to 223.5 pence on Thursday as the supplier of utility services reported an increase in customer numbers to 212,712 during the third quarter, reversing a downturn experienced over the previous 18 months. The company's broker, Andrew Darley of KBC Peel Hunt, upgraded his forecast for full-year pre-tax profit to 16.5 million pounds from 14.5 million pounds. "We are benefiting from the initiatives taken over the last year to stimulate growth in the number of services provided to our increasing customer bases," said chief executive Charles Wigoder.

SIGNET SALES HIT BY DIFFICULT U.S. TRADING CONDITIONS

Signet (SIG.L) gave a positive outlook for its UK operation where it makes around a quarter of its profits, despite a 1.7 percent fall in like-for-like UK sales in the 13 weeks to Feb. 2, compared with the same period last year. Sales in the United States, however, fell by 8.6 percent in the same period, prompting analysts at Citigroup and Investec to maintain a "hold" rating on the stock, with the former seeing the decline in sales as an indication the group was being outperformed for the first time in six years by rival Zale. The owner of Ernest Jones and H Samuel in the UK and Jared and Kay Jewellers in the United States,is investing one billion dollars over five years to double the size of its U.S. chain to around 2,600 stores. Shares closed 2.75 percent down at 62 pence.

Prepared for Reuters by Durrants.