PRESS DIGEST - Financial Times - May 14

Financial Times

KING WARNS OF SLOW RECOVERY

The Bank of England has warned that the 'green shoots' in the economy could wither as banks in the private sector may not have sufficient lending capacity to fuel the recovery. Bank governor Mervyn King disregarded most of the optimism in business surveys and financial markets and said that the future was highly uncertain. The Bank's new forecast suggests that a W-shaped recession, a rebound as mothballed factories reopened, followed by another downturn next year, is a distinct possibility. Mr King said that banks would limit lending because they could not afford losses that might result in their eventual nationalisation.

TEESIDE STEEL PLANT AT RISK

Business secretary Lord Mandelson will on Thursday discuss the future of a large steel plant on Teeside with the chief executive of Corus. The plant is under threat of closure which is putting around 2,000 jobs at risk. The plant could face closure after a consortium of steel companies which is buying most of its output decided last week to cancel the agreement.

VODAFONE AND O2 PREVAIL IN AIRWAVES ROW

Vodafone (VOD.L) and O2 (TEF.MC) emerged on Wednesday as the big winners in plans for a shake-up of the airwaves used by mobile phone operators in the UK. A report commissioned by the government said the two companies should be able to keep their most valuable radio spectrum despite the lobbying of rivals. Kip Meek, the report's author, did say however that Vodafone and O2 should be banned from a further auction of spectrum at the 800 MHz bandwidth unless they give up some of their 900 MHz bandwidth which is suitable for providing internet access on mobiles in rural areas.

VIRGIN TRAINS WANTS FAILING FRANCHISES OPENED TO BIDDERS

Tony Collins, chief executive of Virgin Trains, has said that rival train operators should be allowed to bid for franchises where the existing operator has defaulted on its obligations. The remarks highlight train operators' concern that the Department for Transport might allow National Express (NEX.L) to keep running trains on the East Coast franchise on a temporary basis if it reneges on its contract. National Express has only 0.3 per cent year-on-year growth on the East Coast route, against an assumed growth of nine to 10 per cent, and is struggling to refinance 484 million pounds of its 1.2 billion pounds of debt.