PRESS DIGEST - Financial Times - May 22

Financial Times

PROTRACTED SLOWDOWN LOOMING, SAYS BANK

Forecasts from the Bank of England predict that the economy is heading for its most protracted slowdown since the early 1990s and show a sharply widening gap between its and the government's outlook. The forecast is for economic growth to slip from 3.3 percent in 2007 to 1.5 percent in 2009, however, a year ago, the bank's Monetary Policy Committee was expecting 2.8 percent growth in 2009. The MPC also thinks that in 2010 there is an even chance growth will be below 2.4 percent. These figures contrast with the Treasury's most recent forecast which expects growth of 2.25-2.75 percent in 2009 and 2.5-3 percent growth in 2010.

BUSINESSES PLAN TO SELL HOLDINGS AS CRUNCH BITES

A survey conducted by the CBI employers' organisation and GVA Grimley has found that more business are planning to reduce their property holdings as a result of the weakening economic outlook and difficult credit conditions. A fifth of companies now expect to reduce their property space over the coming six months, this compares with just 12 percent in the previous half-yearly survey. The survey shows that most companies in the manufacturing, extraction and utilities sectors expect to reduce space, although financial services companies unexpectedly plan to continue expanding.

RESIDENTIAL LETTINGS MARKET GATHERS PACE

The quarterly survey conducted by the Royal Institution of Chartered Surveyors has found that the residential lettings market is gathering pace as the uncertain price outlook and tighter credit conditions make it more difficult to buy or sell property. The survey shows that more people are looking for rented accommodation, more landlords are instructing surveyors to let property, and stronger rental growth is driving up gross yields, also, fewer landlords are selling property when a lease expires. Figures from the Council of Mortgage Lenders show that lenders advanced 33,590 new mortgages for buy-to-let purchases in the first quarter of 2008, 22 per cent fewer than the year before.

INCREASE EXPECTED IN CREDIT CARD DEBT

Ratings agency Moody's, which monitors the performance of 28.5 billion pounds of credit card loans which have been securitised into the capital markets, warned on Wednesday that credit card borrowers are showing signs of financial strain due to the economic slowdown. In its report, Moody's said that credit card borrowers would come under increasing pressure because of the increased cost of living and the weaker economic environment. The rating agency said it expects credit card companies to increase debt collection and become more stringent in credit assessment.

BROADBAND CONTROLS ON BT LIFTED

After finding BT(BT.L) faced strong competition in many urban areas, Ofcom is to lift strict controls on how the company sells wholesale broadband services in about 70 percent of the market. Companies such as Carphone Warehouse(CPW.L) and British Sky Broadcasting(BSY.L) are competing with BT in these areas by opening their own exchanges and taking control of their own telephone lines. Restrictions will remain in about 30 percent of the market, particularly in rural areas, where BT is still the only wholesale internet provider. BT has welcomed the move, saying that it would now be easier to compete for big contracts.

TESCO VICTORIOUS IN DRAWN-OUT FIGHT FOR DOBBIES

The drawn-out battle between Tesco(TSCO.L) and Sir Tom Hunter over the control of Dobbies Garden Centres has gone the way of the supermarket group after Sir Tom agreed to sell his stake in the garden centres. Almost a year after Tesco revealed its 155.6 million pound acquisition attempt, the company on Wednesday announced that Sir Tom's West Coast Capital had agreed to accept 12 pounds a share for its 29.2 percent stake, giving Tesco 94.7 percent and allowing it to delist Dobbies. After a difficult campaign, Tesco should now succeed in consolidating its first non-food acquisition, which will continue to be run and developed separately under the Dobbies name.

MK ONE OWNER PUTS IT INTO ADMINISTRATION

Hilco, which bought MK One earlier this month from Bauger, has put the lossmaking fashion chain into administration. Deloitte has been appointed administrator of the company, which has 172 stores and employs 2,500 people. Deloitte's Lee Manning said: We are continuing to trade the business as a going concern whilst seeking a buyer. MK One has a strong customer base, a range of good brands and an excellent store portfolio.' MK One made a pre-tax loss of 16.7 million pounds in the year to January 2007, the last year for which accounts are available.

SKYEPHARMA TO CHANGE CHIEF EXECUTIVE

SkyePharma's chief executive, Frank Condella, is to leave his position after the company completes its financial restructuring this year. Mr Condella will remain on the board as a non-executive and will be succeeded by chief operating officer Ken Cunningham. Mr Condella has overseen significant restructuring and said: 'I was brought in to turn the company round and now we are nearly there. There wasn't really a need for a CEO and COO. I also wanted to return to the US to be closer to my family.' SkyePharma is renegotiating the terms of bonds which mature next year because it cannot meet the liabilities, The company expected the sale of Flutiform, its leading asthma product, to solve the problem but the US Food and Drug Administration has requested extra data on the potential blockbuster.

STAGNANT QUARTER FOR FRENCH CONNECTION

In a trading statement released on Wednesday, French Connection reported 'broadly flat' sales and a 'similar level' of margin in the 15 weeks to May 17. Oriel Securities analyst Ramona Tipnis is now forecasting that the company will slip into a full-year loss, which would complete a downward spiral over the past four years. Shares in the company fell 1.75 pence to 97 pence. French Connection's founder Stephen Marks owns 41,8 per cent of the share capital while Bauger controls 20.1 per cent. This unusual shareholder base has contributed to speculation that one of the two main investors may seek to take the company private.

THUS ACHIEVES OPERATING PROFIT

Telecoms group Thus has recorded its first operating profit, reflecting continued demand for next-generation hosted telecoms services. The group, which reported a loss of 11.1 million pounds a year ago, has moved to a profit of 3.9 million pounds, helped by winning contracts to supply services to HSBC(HSBA.L) and Johnston Press(JPR.L). Revenues in its mobile division, however, fell 5 percent to 38.5 million pounds, but chief executive Bill Allen said he plans to fix the business in the coming year, possibly by selling the unit. Shares closed at 117.25 pence, down 1.75 pence.

Prepared for Reuters by Durrants.