PRESS DIGEST - Financial Times - Nov 13

KING BACKS FISCAL BOOST AS STERLING SINKS LOWER

The pound dropped to new lows against the euro on Wednesday after Mervyn King, governor of the Bank of England, approved of the government's plan to use tax cuts or an increase in public spending to tackle the recession, and official forecasts pointed to further interest rate cuts. The pound plunged 2.9 percent to a six-year low of 1.4939 against the dollar whilst also dropping to a record low of 0.8356 pounds against the euro. The Bank's central growth forecast suggested the year-on-year fall in national income would hit 1.9 percent in the second quarter of 2009 - a view that places the UK outlook at the bottom of the league of most advanced economies.

MORE BAD NEWS FEARED AS JOBLESS TOTAL TOPS 1.8M

John Philpott, chief economist at the Chartered Institute of Personnel and Development, claims that the "shockwave" of the second phase of the credit crunch has yet to be felt and is likely to be much stronger. His comments came after the Office for National Statistics reported that unemployment rose by 140,000 to 1.82 million in the last quarter. The number claiming unemployment benefit climbed 36,500 higher to almost 981,000, indicating that the one million mark will be hit by Christmas. Philpott remarked that the country's "decade-long flirtation with full-employment" has come to an end and added that further bad news will follow in the coming months.

BANKS SET TO RAISE PERSONAL LOAN RATES

Banks are set to raise the price of personal loans in retaliation against a crackdown on the 5.5 billion pound market for payment protection insurance. The Competition Commission plans to curb up to 1.4 billion pounds of excess profits it says the industry earns through the sale of loan cover, but bankers say the industry is certain to raise the price of loans if institutions are no longer allowed to subsidise the rates they charge customers from the proceeds of PPI. The Competition Commission will propose a series of restrictions to end what it considers to be the sale of insurance to a captive market.

WOOLIES FEELS THE SQUEEZE ON CREDIT

EUK, the wholesale arm of Woolworths, is being forced to demand cash up front for the millions of pounds worth of books, video games and music it sells to retailers such as Asda and Borders. The move by the company, which would normally give its wholesale customers weeks to settle bills, underlines fears over Woolworths' creditworthiness, with some of its own suppliers beginning to demand immediate cash payments. Retailers supplied by EUK explained privately that although they supported Woolworths, they had had to find alternative suppliers in case the delivery of products was stopped in the Christmas season.

BAE IN NEGOTIATIONS WITH OMAN OVER 1.4 BILLION POUND EUROFIGHTER DEAL

It has emerged that BAE Systems (BAES.L) is in talks to sell up to 24 Eurofighter Typhoon fighter aircraft to Oman in a deal believed to be worth at least 1.4 billion pounds. Sources close to the negotiations say BAE had been talking directly with the Omani government, which aims to replace its ageing Jaguar aircraft with Typhoons within the next four years. An export deal in the Middle East would be a coup for BAE chief executive Ian King while also helping to ease budget concerns at the Ministry of Defence, which is committed to buying 88 new Typhoons as part of its membership of the consortium building the aircraft.

BRITISH AIRWAYS EXECUTIVES IN COURT ON PRICE-FIXING CHARGE

Four of British Airways' (BAY.L) current and former executives appeared at City of London magistrates' court on Wednesday, faced with prospect of five years in jail if found guilty of conspiring with Virgin Atlantic to inflate fuel surcharges on transatlantic flights between 2004 and 2006. The case represents a key test for the Office of Fair Trading, which has recently cracked down on cartel activity in a wide range of industries. The four men did not enter a plea and spoke only to confirm their names, ages and addresses before being released on unconditional bail until January when they will appear at Southwark crown court.

MINERVA LOSES FIFTH OF VALUE ON DOWNGRADE

Property developer Minerva (MNR.L) saw its share price drop by a fifth to 9.5 pence after a broker downgrade renewed doubts about the future of its development pipeline. Merrill Lynch said Minerva remained "one of the higher beta plays" in its UK real estate coverage, due to its exposure to two City of London developments that remain largely unlet. The broker cut its price target from 40 pence to 9 pence, warning of uncertainty surrounding its pipeline, a lack of divided yield and negative recurring income. The Merrill Lynch note said the business model needed to be reworked, which would be no mean feat in the current economic environment.

GALA CORAL AIMS TO HEDGE ITS BETS BEFORE DOWNTURN

Gala Coral is to reduce its five divisions to three in an effort to head off the impact of the economic downturn on its casino, betting and betting revenues. Bingo and casino operations will be merged, while Coral betting shops will be attached to its Eurobets equivalent in Italy in a strategy that could affect up to 200 jobs. Chief executive Dominic Harrison explained that although trading was satisfactory, "this is about planning for a downturn. Like everybody else, we are seeing pressure on the disposable pound." The company has attracted the attention of US private equity group Apollo Management, which owns casino operator Harrah's and has been buying up Gala debt.