PRESS DIGEST - Financial Times - May 12

The Financial Times

BANKS' LOSSES TO HIT PUBLIC FINANCES

The losses suffered by Britain's biggest banks as a result of the crisis in the financial markets will add further pressure on public finances by cutting the amount of corporation tax paid by the financial services industry. The Financial Times has calculated the 10 billion pounds worth of write-downs unveiled in recent weeks by Lloyds TSB (LLOY.L), Royal Bank of Scotland (RBS.L) and HBOS HBOS.L will knock over 2.5 billion pounds off the three banks' combined tax bills. This figure represents over five percent of the Treasury's forecast for corporation tax receipts in the 2007-08 fiscal year.

CHANCELLOR FIRES BLAST AT EU'S FARM POLICY

Chancellor of the Exchequer Alistair Darling is to urge fellow European Union finance ministers to support the dismantling of the Common Agricultural Treaty because it is costing EU consumers billions of pounds in higher food bills, while at the same time hurting farmers in the developing world. In a strongly worded letter, Darling calls current EU farm policies "unacceptable". He also repeats Britain's insistence that Europe must review its 10 percent biofuel target as he believes this may be forcing up food prices in developing nations. The future of the EU farm budget could become the most contentious issue facing the union in the next few years.

TREASURY PURSUES EXTRA EFFICIENCY SAVINGS OF FIVE BILLION POUNDS

The Treasury is about to start the next stage of the government's efficiency drive, which it hopes will deliver billions of pounds of extra savings by next year's Budget. Whitehall estimates put possible savings over the next year at over five billion pounds. This is in addition to the 30 billion pounds already planned for the present spending review. The focus will initially be on four cross-cutting strands where the potential for efficiency gains has been identified, these being: buying in bulk; using property more efficiently; asset management and sales; and back office and IT.

MINISTER IGNORES POLITICAL RISK TO PRESS ON WITH POST OFFICE CLOSURES

Post Office Minister Pat McFadden will make clear on Monday he will go ahead with planned controversial closures of post offices. McFadden will tell the annual conference of the National Federation of Sub-Postmasters that if the network is to face up to the challenges of "lifestyle, technology and competition" then it has no choice but to reorganise itself and modernise. McFadden will argue the main objective of the closure programme is to increase the sustainability of the remaining network of 11,500 outlets.

SHIPPING RATES NEAR RECORD LEVELS

Consumers of basic commodities are facing some of the highest shipping costs after a combination of ship shortages, strong demand and port delays last week sent bulk shipping rates back close to record levels. The increase in rates, which have seen a jump of almost 80 percent in the last year, come after Brazilian iron ore producers won large price increases from steelmakers that encouraged them to make more ore available for shipment. Last week, average charter rates on the Baltic Exchange for a Capesize vessel reached a high of 188,195 dollars, just below the record rate of 195,115 dollars last November.

MINERS EXPECT MORE AND BIGGER TAKEOVERS

A survey of mining and metals executives carried out by Ernst & Young has found the wave of mergers and acquisitions in the sector looks set to continue in the year ahead. Of the executives interviewed, 96 percent have expanded through M&A in the past 24 months and 87 percent said they thought this would continue. Ernst & Young's head of metals and mining transactions, Michael Lynch-Bell, said he expected to see three takeover bids worth at least 50 billion dollars each in the coming year, not including BHP Billiton's (BLT.L) hostile bid for Rio Tinto (RIO.L).

SHELL QUITS IRANIAN GAS PROJECT

Royal Dutch Shell (RDSa.L) and Repsol (REP.MC) are to withdraw from one of Iran's biggest gas projects, the 10 billion dollar development of phase 13 of South Pars. The decision, which is a blow to Tehran's attempts to expand its energy exports, comes as Washington intensifies pressure on international companies to stop operating in Iran as it tries to isolate Tehran for its refusal to halt its nuclear programme. Neither oil major would comment on the decision but those close to the companies cited geopolitical uncertainty and rising costs as the reason behind the decision.

CHLORIDE'S RECORD SALES HELP ATTRACT TAKEOVER ATTENTION