PRESS DIGEST - Financial Times - May 4

Financial Times

JOBS IN THE BALANCE AS MINISTERS CONSIDER ONE BILLION POUND EUROFIGHTER ORDER

Ministers are trying to calculate the potential costs to jobs and the UK defence industry if the government pulls out of a planned one billion pound order of Eurofighter Typhoon jets. The Ministry of Defence and the department for business have warned that the defence industry would bear the brunt of any decision to cancel the aircraft's third production run, from which Britain is obliged to buy 88 jets. The programme employs 40,000 people in the UK, including staff at BAE Systems (BAES.L) and other smaller supplies. Additionally, there is widespread scepticism over whether the scheme is cost effective or serving the interests of the armed forces.

DOUBTS INTENSIFY ABOUT ROYAL MAIL PLANS

There are growing doubts within the government about the feasibility of Lord Mandelson's bid to partially privatise Royal Mail. The business secretary's team are "proceeding as planned" with the central proposal of selling 30 percent of the postal operator to a foreign rival, which MPs are set to vote on before the summer. However, Gordon Brown's recent Commons defeats have compounded fears that the government will have to give way on the matter. Although Mandelson has the backing of Brown and is eager to make his case to backbenchers, he is not expected to proceed if opponents win their case to delay or redraw the plan.

FAILURES THROW UP BANS FOR DIRECTORS

Hundreds of directors of collapsed businesses face the threat of long bans for suspected criminal offences. Figures from law firm Wedlake Bell reveal that the number of disqualification cases brought against executives of failed companies over allegations such as fraud rose by almost 75 percent last year. The increase adds weight to predictions by fraud experts that the financial crisis will uncover substantial amounts of unlawful activity across corporate Britain. Edward Starling, a solicitor at Wedlake Bell, said the growth in disqualification cases would probably continue, adding, "We probably won't see the peak of this for another couple of years."

OFFICIAL UNEMPLOYED TALLY HALF THOSE SEEKING JOBS

Research by the Trades Union Congress has found that the number of people in Britain who do not have a job and would like one stands at 4.2 million, double the official total of those unemployed. According to Richard Exell, senior policy officer at the TUC, the finding means that "policies to deal with the recession are going to need to last longer than people are imagining". The official jobless total rose to 2.1 million in the three months to the end of February and business leaders expect it to reach the three million mark by this time next year. However, the TUC survey also includes people of working age who are "economically inactive", which gives a total of 7.8 million people.

CHINALCO STANDS FIRM OVER RIO

Wang Wenfu, president of Chinalco Overseas Holdings, has spoken out against suggested changes to its planned $19.5 billion investment in Rio Tinto (RIO.L), despite signs that certain demands will need to be met in order to secure the support of Rio's other shareholders. In a recent interview, Wang Wenfu was dismissive of demands made by some Rio shareholders who want to be given the same opportunity as Chinalco to buy convertible bonds. Chinalco hopes to invest $7.3 billion in convertible bonds, doubling its equity stake in Rio to 18 percent. Opponents of the deal argue that it ignores existing shareholders' pre-emptive rights to refinance the group without diluting their stakes.

EDF EYES SALE OF UK ELECTRICITY BUSINESS

French utility group EDF (EDF.PA) is considering the possible benefits of selling its regulated electricity distribution business in the UK as it acts to slash debts accrued following a year of costly acquisitions. Discussions regarding the matter are part of a wider strategic review of the nuclear power operator's industrial future as it prepares to address unprecedented investment requirements. Politically, EDF would find it easier to consider selling UK distribution because this may calm fears in France that its international expansion could harm investment at home. However, EDF's UK's management is opposed to selling the network.

NATIONAL EXPRESS CALL FOR AID IS REJECTED

Despite calls from National Express (NEX.L) for greater support for its passenger service on the east coast mainline, the government has insisted that rail contracts would not be renegotiated. The government's stance means that National Express may have to ditch its London to Edinburgh service. The rail franchise, which is the UK's most expensive, has been hit by the recession's impact on passenger numbers and revenues. National Express would forfeit guarantee bonds worth tens of millions of pounds if it abandons the contract. The government has stressed that there would be no interruption of services if the group pulled out of the contract.

HEALTH CLUBS GAIN MUSCLE IN DOWNTURN

Statistics from the Leisure Database Company indicate that membership levels at private health clubs have not suffered in the economic downturn. The consultancy said private health clubs had seen a 1 percent like-for-like increase in membership numbers over the last 12 months. However, figures from Mintel indicated a contrasting outlook with predictions of eight million new admissions to public leisure centres this year and a 100,000 fall in private health and fitness club memberships. Esporta is the private health club sector's biggest loser to date as it prepares to fall into the hands of its lenders after administrators failed to find a buyer.

LARGE UK GROUPS CONSIDER MIGRATION

According to consultants Roland Berger, over 80 percent of UK companies with multinational operations are considering shifting at least one of their fundamental business functions overseas in the next five years due to the need to cut costs in the recession. The report, which interviewed 200 senior executives at groups with annual turnover in excess of 200 million pounds, points out that such a development would put a third of their UK workers at risk. David Stern, of Roland Berger, explained that globalisation is allowing them to consider off-shoring across all aspects of business, "which could result in permanent damage to the UK job market and economy".

RBS FINANCE DIRECTOR TO STEP DOWN

Royal Bank of Scotland (RBS.L) is to announce the departure of finance director Guy Whittaker on Monday, ridding its board of one of the last executives that presided over the failed takeover of ABN AMRO. Whittaker was one of just two executive directors to have remained on the bank's board since Fred Goodwin stood down as chief executive following the bank's ill-fated acquisition spree. RBS is expected to describe Whittaker's departure as a "mutual decision". His pay-off is likely to be closely watched following the political furore over the 700,000 pound-a-year pension granted to Goodwin.

Prepared for Reuters by Durrants