PRESS DIGEST - Financial Times - Aug 13

Financial Times

PENSION DEFICITS TO COST MORE THAN NEW CONTRIBUTIONS

According to research from KPMG, within five years, soaring pension deficits mean that the traditional model of spending twice as much on new benefits for existing employees than on pension fund deficits will reverse to four pounds in every five pounds spent allocated to repairing pension deficits. Last year's stock market crash hit the value of pension funds, where pension deficits at FTSE 100 companies increased to an estimated 80 billion pounds by the end of June, compared with 20 billion pounds at the end of 2007.

BANK SAYS UK IS SET FOR SLOW RECOVERY

The Bank of England's quarterly inflation report, published Wednesday, spoke of "encouraging signs ahead" despite the fact that the world economy remains in deep recession. The report clarified the fact that interest rates are set to remain low, for longer than expected by the market, and that its 175 billion pound quantitative easing scheme is unlikely to be unwound in the immediate future. The Bank expects the economy to contract by 4.4 percent this year having revised its May estimate of 3.9 percent after both of the first quarters saw sharper-than-expected declines. Growth is expected within "the next few quarters".

JOBLESS TOTAL SOARS TO HIGHEST IN 14 YEARS

The Office for National Statistics announced yesterday that unemployment rose by 220,000 in the three months to June to 2.4 million. The figure is the highest since 1995, but slightly short of the 2.5 million predicted by economists. The unemployment rate reached 7.8 percent, compared to the 9.4 percent seen in both the US and the eurozone in recent months. The number of new claimants for Jobseekers' Allowance has risen by around 20,000 per month in recent months, far short of the 136,600 seen in February.

BANKS FORCED TO REVEAL DETAILS OF OFFSHORE CLIENTS

HM Revenue & Customs' campaign against secret offshore accounts was stepped up Wednesday when legislation was passed which will force banks to hand over details of clients with such accounts. The Revenue expects that the initiative will raise 500 million pounds in unpaid taxes and Stephen Timms, financial secretary to the Treasury, said that the ruling meant "real progress in creating a level playing field for all taxpayers". Lawyers said that banks may appeal the ruling.

BHP PLEA ON IRON ORE PRICING

BHP Billiton (BLT.L) has called for the "emotion and anxiety" to be taken out of the iron ore business with a shift to market-based pricing like oil or coal. The plea came a day after Chinese authorities formally arrested four employees of Rio Tinto (RIO.L) over Rio's negotiations to fix an annual price for iron ore. As BHP unveiled a halving of full-year profits Marius Kloppers, chief executive, suggested it was only a matter of time before the traditional system of pricing iron ore on contractual agreements was replaced.

LLOYDS SELLS INSIGHT TO BNYM FOR 235 MILLION POUNDS

Lloyds Banking Group (LLOY.L) has agreed to sell its Insight asset management business to Bank of New York Mellon for 235 million pounds, of which 200 million is cash and the remainder in equity. The move may signal the start of consolidation and disposals among mid-sized asset management groups facing increasing margin pressures. BNYM is to take on 80 billion pounds in funds managed by Insight for clients outside the Lloyds group, as well as the Insight management team led by Abdallah Nauphal.

RESTORATION RESTRICTS BUSY HARRODS

Overseas tourists helped Harrods achieve record sales in the year to January 31. However, the 2.5 million pound cost of restoring the historic terracotta façade at the Knightsbridge store dented pre-tax profit, which fell from 58.9 million pounds to 50.3 million. Mohammed Fayed, owner and chairman, did not pay a dividend to himself and his family, marking caution on the outlook for this year. The accounts also showed that the defined benefit pension scheme had fallen to a 14 million pound deficit by January 31, against a surplus of 9.2 million pounds in 2008.

SOCO TARGETS AFRICA AS ASIA LIFTS REVENUE

Oil exploration group Soco International (SIA.L) announced pre-tax profits of 45.7 million pounds on revenue from continuing operations of 66.6 million. The figures were boosted by new production from Vietnamese oil fields and successful drilling in Thailand, with the firm producing an average of 6,734 barrels of oil a day from operations in the two countries. The group is looking to develop new streams in Africa and will begin drilling an appraisal well in the coastal waters of Congo-Brazzaville in the next few days. Shares closed up 46 pence at 13.68 pounds.

SINOCHEM TO BUY EMERALD

State-controlled Chinese chemicals company Sinochem has agreed a 532 million pound deal to purchase London-listed Emerald Energy EMEN.L. The recommended 750 pence/share cash offer was supported by Emerald's two leading shareholders: Waterford Financial and Soyuzneftegas. Emerald shares rose 63 pence to 738p on Wednesday. Emerald executive chairman Alastair Beardsall said the Sinochem offer, at a 34 percent premium to its share price, represented "fair value", while Sinochem president Han Gensheng said that the deal was "another step in our strategy of building a global energy company".

BALFOUR BEATTY AIMING FOR RETURN TO GLOBAL PRESENCE

Revenue from overseas operations at Balfour Beatty (BALF.L) is expected to exceed that generated in Britain within three years. Chief executive Ian Tyler said, "Our plan is for the US to be no smaller and with the same breadth and depth as the UK. So far the US has been hit harder by the recession than the UK, but when the tax revenue returns we would expect to see recovery coming there first." Revenue for the six months to June 27 was up to 5.07 billion pounds from 4.33 billion with pre-tax profits falling from 144 million pounds to 66 million.

Prepared for Reuters by Durrants