RBS Confirms £1.2bn Loss After PPI Hit

RBS has confirmed it made a loss before tax of £1.2bn in the third quarter, compared with a profit of £2bn for the same period last year.

As revealed by Sky's City Editor, the bank has set aside a further £400m for the mis-selling of payment protection insurance, meaning the scandal has cost it £1.7bn to date.

This provision took the total compensation bill for Britain's four largest lenders past the £10bn mark.

The 82% taxpayer-owned bank also said it had taken a further hit of £50m to cover costs relating to the summer's massive IT failure - which saw many RBS, NatWest and Ulster Bank customers locked out of their accounts.

It takes its bill for the meltdown to £175m.

The bank also expects to face "material fines" in relation to how Libor and other interest rates were set, it added.

RBS is under investigation by US and UK authorities over the rate-rigging scandal and is expected to be one of the next banks to settle after Barclays was fined £290m in June.

"The group expects to enter into negotiations to settle some of these investigations in the near term and believes the probable outcome is that it will incur financial penalties," RBS said.

It added that it had dismissed "a number of employees for misconduct" after investigations into rate setting.

But the group's core banking operations - if the mis-selling and IT charges are stripped out - performed well, with operating profit for the three months reaching £1bn.

A decline in charges on bad debt helped boost performance at the bank, which said its restructuring would be complete in the next 18 months.

As part of this plan, the number of employees was down by 9,900 from a year earlier, resulting in a 5% fall in staff costs compared to the previous quarter.

The bank described the collapse of the sale of 316 branches to Santander as "disappointing".

As a condition of RBS' state bailout, the European Union ordered it to offload the branches by the end of next year. RBS said it did not expect this to change and so had restarted efforts to sell them.

The group's chief executive, Stephen Hester, said it now needed to focus on improving its reputation.

"The extraordinary challenges which RBS faced following the financial crisis are being worked through successfully," he said in a statement.

"The five year restructuring plan is now in its later stages with important work still to do, including an emphasis on dealing with reputational issues now that the bank's safety and soundness has advanced so well."

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Japan Tech Firms Need Revamp To Topple Korea

Japan's top electronic firms have been told to change their business model, amid plunging share prices and booming competition from South Korea.

Shares in Sharp fell on Friday as worries about the TV and display maker's future deepened, a day after it warned of a £3.5bn net loss for the year and said it might not be able to survive on its own.

Panasonic's shares have steadied after a slide to their lowest in more than 30 years, while in August Sony reported a £202m first quarter loss as it pinned its hopes on new TV technology.

Sharp, which makes displays used in Apple's iPads and iPhones, has lost three-quarters of its share price since the start of the year.

Meanwhile, South Korea's Samsung has cemented its place as the world's leading smartphone seller after setting a record for the most units shipped in the third quarter.

Samsung sold 56 million smartphones between July and September, representing 31.3% of the global market - more than twice as much as rival Apple's 15% share.

Japan's giants have been urged to target high value goods, such as cars

"What it is telling us is that the Japanese should be focusing on a lot more on higher value goods – automobiles are going very fine, mechatronics and machinery," Mizuho International director Seijiro Takeshita told Sky News.

"The vertical integration model that the Japanese are very strong at, at least on commoditised products such as televisions, is wearing thin as far as competitiveness is concerned."

"The Koreans are doing a very good job following that model."

The strong yen and falling prices for gadgets are only partly to blame for the ill health for some of Japan's top consumer brands.

Increasingly, Japanese companies have toyed with the idea of strategic partnerships – once anathema to the consumer powerhouse.

"I think this is an alarm bell to many of these companies, so there should be some kind of diversify move or transformational move that is needed," Mr Takeshita said.

Panasonic has said it will lose £5.9bn this business year as it writes down goodwill and assets and plans more restructuring - taking its cumulative loss over five years to nearly £15.6bn.

Sony eeked out a small quarterly operating profit for Q3, helped by the sale of a non-core chemicals business.

"A lot of Japanese companies have not reorganised or refocused. It takes time and there are a lot of political motives not to make the changes," Mr Takeshita said.

"I think it is very clear for Panasonic or Sony that they do have to make these changes."

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Car Insurance Cost Fall 'Will Not Last'

Car insurance premiums are said to have gone into reverse gear by £360 (13.6%) for young drivers - but there are concerns costs could rise dramatically after next month's EU gender ruling.

Insurance comparison site Confused.com has advised 17 to 20-year-old drivers to take advantage of "today's preferential rates" but warned them to avoid 2013's predicted price hikes by "shopping around".

Average comprehensive car insurance prices now stand at £757 as of this year's third quarter, compared to £843 for last year's third quarter - a significant year-on-year fall of £87 (10.3%).

Car insurance prices actually fell for all age groups, particularly young female drivers, but predictions from the Treasury indicate that young female drivers could see rises of up to 24% after the EU gender ruling becomes law on December 12.

After this date women and men cannot be priced differently for insurance meaning women will no longer directly benefit from being statistically less risky drivers as far as insurers are concerned.

This predicted insurance price rise could affect female drivers throughout various age groups, according to the Treasury data.

Sharon Flaherty, editor of Confused.com, told Sky News: "At the moment women pay less than men and statistically this is because on average they are less of a risk on the roads than young male drivers.

"However the bad news is that on December 21 the law change will mean that men and women have to be judged as exactly the same on the roads.

"Women will effectively be charged more because statistically they will no longer be allowed to be rated as safer on the roads."

Women aged 26-30 years are forecast an 18% price hike once the gender directive takes effect. Female drivers aged 31-35 are expected to suffer a 10% price rise.

Smaller price rises are expected for women aged 36-40 who are predicted to experience a 3% rise, and 41 to 45-year-old female drivers are only expected to receive a 1% price rise for their future car insurance policies.

Women on average saw their premiums shrink by 11.7% over all in the third quarter.

For spouses of either gender the average premium cost for a joint insurance policy is a lot less than average costs for solo drivers.

Male drivers insured plus spouse are quoted on average £432, compared to £907 as insured only driver, for women it costs an average of £787 for insured only driver cover, but just £418 for women who have a spouse on their policy.

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Lloyds Sets Aside A Further £1bn For PPI

Lloyds Banking Group has set aside a further £1bn to cover costs relating to the mis-selling of payment protection insurance (PPI) - taking its total bill to £5.3bn.

The announcement came as the 40% taxpayer-owned bank said it made a pre-tax statutory loss of £583m in the nine months to the end of September.

This compares with a £3.8bn loss over the same period last year.

If the cost of PPI is stripped from the results, the group's underlying profit hit £1.9bn for the three quarters - compared with 2011's £768m.

Lloyds had already set aside £4.3bn to repay customers wrongly sold the insurance - much more than its rivals because it had the biggest share of the PPI market.

It said it had paid out 70% of its provision by the end of September, and that the volume of claims had fallen to £250m in the last three months. 

The bank's chief executive, Antonio Horta-Osorio, said the "ultimate cost" of the PPI scandal was "going to be huge" - and the bank would not know the full extent of the damage until at least March next year.

Mr Horta-Osorio, who has been charged with turning around the bank following its 2008 bailout, said it is making good progress with its cost-cutting.

Lloyds' bad debts are expected to fall to this year to around £6bn - some £1.2bn less than it expected at the start of 2012.

"We have made further significant progress this quarter, improving underlying performance in a challenging environment, while continuing to deliver returns above the cost of equity in the core business and strengthen our already robust balance sheet." Mr Horta-Osorio said.

On a conference call following the results, he insisted retail banking in the UK was competitive, and stressed that Lloyds was continuing to boost its lending to small and medium-sized businesses and provide mortgages to first buyers.

The group's share price rose 3.6% in early trading. 

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Comet Electricals Chain On Brink Of Collapse

By Alistair Bunkall, Business Correspondent

More than 6,000 jobs are under threat as the high street braces itself for another high profile casualty.

Comet, an electricals chain, will go into administration next week after struggling to stock up for Christmas.

Staff were informed of plans on Thursday morning and restructuring specialist Deloitte has been lined up to handle the administration.

Comet has been trading without credit insurance, which protects its suppliers should the business fail, amid a cash-flow shortfall.

If the credit insurers withdraw their support it tells suppliers that the company cannot be trusted to pay its bills.

The future of the business in question is then a fait accompli.

The potential collapse raises the prospect of a pre-Christmas rush for discounted stock such as TVs and PCs at its 235 stores if the administrator chooses to wind down supplies and raise cash for creditors.

It will also be a boost for rivals Currys, who often jostle for market share sited cheek to jowl on retail parks.

Comet has based its business model on edge of town superstores. This was once, not so long ago, very convenient.

Nowadays the most convenient way to shop is online making Comet's model out of date.

Comet is owned by OpCapita, which bought it for just £2 less than a year ago from Kesa Electricals as it struggled to compete against strong supermarket and online competition.

This has also accounted for the troubles experienced by the likes of Clinton Cards and Game.

Sky News reported last month how OpCapita had received a number of unsolicited approaches for Comet and was exploring the option of a sale as a result.

News of the chain's cash problems come only weeks after JJB Sports called in administrators, resulting in 2,000 job losses.

The Financial Times reported OpCapita was likely to face controversy as it had received a £50m cash dowry from Kesa, now known as Darty, to take it over.

Darty also retained Comet's pension liabilities.

OpCapita also negotiated a £130m dowry before it bought furniture chain MFI in 2006 which later collapsed.

According to the Local Data Company and PwC an average of 32 chain stores a day closed in July and August, underlining the challenges facing the wider high street.

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RBS Confirms £1.2bn Loss After PPI Hit

RBS has confirmed it made a loss before tax of £1.2bn in the third quarter, compared with a profit of £2bn for the same period last year.

As revealed by Sky's City Editor, the bank has set aside a further £400m for the mis-selling of payment protection insurance (PPI), meaning the scandal has cost it £1.7bn to date.

The 82%-taxpayer owned bank also said it had taken a further hit of £50m to cover costs relating to the summer's massive IT failure - which saw many RBS, NatWest and Ulster Bank customers locked out of their accounts.

This takes its total bill for the meltdown to £175m.

RBS also said it expects to enter negotiations to settle investigations into Libor rate-fixing at the bank, incurring some financial penalties.

But the group's core banking operations - if the mis-selling and IT charges and stripped out - performed well, with operating profit for the three months hitting £1bn.

A decline in charges on bad debt helped boost performance at the bank, which said its restructuring would be complete in the next 18 months.

But the group's chief executive, Stephen Hester, said RBS needed to focus on improving its reputation. 

"The extraordinary challenges which RBS faced following the financial crisis are being worked through successfully," he said in a statement.

"The five year restructuring plan is now in its later stages with important work still to do, including an emphasis on dealing with reputational issues now that the bank's safety and soundness has advanced so well."

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JP Morgan UK Staff Hit By Offshore Tax Demand

JP Morgan workers have been ordered to pay tax - or face legal action - over allegations the firm transferred salary payments offshore, Sky News has learned.

HM Revenue and Customs (HMRC) deemed the money as "disguised remuneration" and not retirement benefits as claimed.

Workers and executives have been told they must agree to pay up to 40% backdated income tax, 1% National Insurance contributions and interest accrued by December 7.

JP Morgan Chase and Co has agreed to pay 12.8% NI contributions for those who accept the settlement terms.

Those who do not agree to the terms face the threat of legal action by the Tax Office.

Sky News understands the money since classified as earnings by HMRC was transferred to Jersey from 1998, with most transferred from the 2005/6 tax year onwards.

The specified amount paid by individuals to the Tax Office to avoid litigation will be determined ultimately by how many agree to the settlement terms on offer. The investment bank employs thousands of people in the UK.

The Tax Office has offered settlements to numerous trust beneficiaries

In a letter to the head of JP Morgan's tax department dated September 10, HMRC said: "As you are aware, the Government put in place legislation in 2011 to put beyond doubt the tax treatment of employee benefit trust arrangements.

"In addition, HMRC continues to robustly challenge the taxation treatment of such arrangements under previous legislation.

It adds: "In this context and where we are unable to agree a settlement HMRC will continue to formally progress its enquiries into the taxation treatment of the trusts."

Last year HMRC contacted more than 2,000 employers and offered settlements over disputed employee benefit trusts (EBTs).

Earlier this year action was taken by HMRC against UBS and Deutsche Bank over EBTs, which contested the Tax Office claims.

HMRC has estimated that up to £1.7bn of tax and NI contributions were at stake in EBTs, including the "dependent fund" plans operated by JP Morgan.

The investment bank's staff who were part of the employee benefit trusts of 1998, 2006, 2007 and 2008 and the 2010 executive retirement plan are affected by the HMRC action.

The ruling impacts both current and former UK-based staff, whether or not they are British citizens or foreign nationals.

The employees' Jersey tax haven funds have been managed by subsidiaries of the Royal Bank of Canada (RBC), which describe the island as "tax neutral".

RBC's wealth management section actively promotes the benefits of using the island for affluent individuals.

"The chief preoccupation of most ultra high net worth families is wealth preservation," RBC explains on its website.

"Only by structuring their affairs legitimately and with the advice of professionals, including lawyers, accountants, trust and tax experts, private clients will be able to protect their assets."

RBC Europe Ltd has offered JP Morgan workers collaterised bridging loans of more than £250,000 to fund the Tax Office demand.

Jersey is described as "tax neutral" by fund manager RBC

JP Morgan's private bank has also offered financing arrangements for those who need more than £300,000, or mortgage arrangements in excess of £1m, to facilitate the settlement payments.

Helplines have been set up for workers in regard to the Tax Office offer by JP Morgan, RBC and advisers KPMG.

JP Morgan still disputes the offshore payments as being salary but has agreed to the settlement to avoid litigation under the recently enacted Disguised Remuneration legislation.

A JP Morgan spokesman told Sky News: "Our employee trust has always been transparent to HMRC, and its independent trustee has consistently paid taxes in accordance with UK tax law.

"In addition to taxes paid by the trust, JP Morgan has paid, on average, more than £1bn of corporation and payroll taxes to HMRC annually over the past decade."

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Retail Chain 'Faces Threat Of Administration'

6,000 jobs are under threat amid fears of another high profile casualty among UK retailers.

Comet, the electrical chain, is on the verge of calling in administrators as early as Thursday morning after struggling to stock up for Christmas.

It has reportedly been trading without credit insurance, which protects its suppliers should the business fail.

Comet is owned by OpCapita, which snapped up the retailer for just £2 less than 12 months ago from Kesa Electricals as it struggled to compete against strong supermarket and online competition.

It is that threat that has accounted for the troubles experienced by the likes of Clinton Cards and Game and comes only weeks after JJB Sports called in administrators, resulting in 2,000 job losses.

The Financial Times (FT) reported that OpCapita was likely to face controversy as it had received a £50m cash dowry from Kesa, now known as Darty, to take it over.

Darty also retained Comet's pension liabilities.

OpCapita also negotiated a £130m dowry before it bought furniture chain MFI in 2006 which later collapsed.

According to the Local Data Company and PwC retail chain closures hit an average of 32 stores a day in July and August, underlining the challenges facing the high street.

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Lloyds Sets Aside A Further £1bn For PPI

Lloyds Banking Group has set aside a further £1bn to cover costs relating to the mis-selling of payment protection insurance (PPI) - taking its total bill to £5.3bn.

The announcement came as the 40% taxpayer-owned bank said it made a pre-tax statutory loss of £583m in the nine months to the end of September.

This compares with a £3.8bn loss over the same period last year.

If the cost of PPI is stripped from the results, the group's underlying profit hit £1.9bn for the three quarters- compared with 2011's £768m. 

Its bad debts are also expected to fall to this year to around £6bn - some £1.2bn less than it expected at the start of 2012.

The bank's chief executive, Antonio Horta-Osorio, said it was making good progress on its cost-cutting plan.

"We have made further significant progress this quarter, improving underlying performance in a challenging environment, while continuing to deliver returns above the cost of equity in the core business and strengthen our already robust balance sheet." he said.

He added that Lloyds was continuing to increase its lending to small and medium-sized businesses and provide mortgages to first buyers.  

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Star Wars Given New Hope In £2.5bn Disney Deal

Disney has agreed a deal to buy Lucasfilm from its founder George Lucas and says it will make a new series of Star Wars movies.

The US entertainment giant, which already owns brands such as Pixar, Marvel, ESPN and ABC, announced it is paying $4.05bn (£2.52bn) for the production company.

It also confirmed it is making Star Wars Episode 7, which is scheduled to be released in 2015.

Disney said the project would be the first in a new series of Star Wars films, with Disney chief executive Bob Iger revealing the plan is to release a new movie every two to three years.

The last Star Wars picture was Revenge Of The Sith in 2005, and Lucas has in the past suggested there were no plans for any more.

The deal also includes the rights to the Indiana Jones franchise, although Disney did not reveal if it planned to revive the films featuring the action hero, played by Harrison Ford.

Kathleen Kennedy, the current co-chairman of Lucasfilm, will become its president and report to Walt Disney Studios chairman Alan Horn.

The deal could also spell a return for Harrison Ford's Indiana Jones

Lucas, who created the Star Wars fictional universe and with it one of the most lucrative box office draws of all time, will be creative consultant on the new films.

After the deal was announced he said: "It's now time for me to pass Star Wars on to a new generation of filmmakers.

"I've always believed that Star Wars could live beyond me and I thought it was important to set up the transition during my lifetime."

Lucas will become the second-largest individual holder of Disney shares, with a 2.2% stake.

Disney will pay about half the purchase price in cash and issue about 40 million shares to complete the deal.

Chief financial officer Jay Rasulo, in prepared remarks, said the deal would lower Disney's earnings per share by a low single-digits percentage in 2013 and 2014.

He also said Disney would repurchase all of the issued shares on the open market within the next two years, on top of planned buybacks.

The deal marks the third time in less than seven years that Disney has signed a massive deal to take over beloved studios or characters, part of its strategy to acquire brands that can be stretched across TV, movies, theme parks and the internet.

In early 2006, Disney struck a deal to acquire Toy Story creator Pixar, and in the summer of 2009 it bought the comic book powerhouse Marvel Entertainment.

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Heseltine Reveals Radical Local Growth Plan

By Joey Jones, Deputy Political Editor

Former Cabinet minister Lord Heseltine has published a sweeping report aimed at stimulating growth, which is littered with criticism of Government inertia and delay.

The report, entitled No Stone Unturned, was commissioned by the Chancellor more than a year ago, but has been dogged by rumours that senior ministers have become increasingly doubtful about its viability.

Lord Heseltine advocates a major shift of power and money from Whitehall departments to Local Enterprise Partnerships (LEPs), the grassroots business organisations that have replaced Regional Development Agencies under the current Government.

His proposals would result in a massive expansion of LEP finance. Currently each LEP manages a budget running into millions of pounds, but Lord Heseltine suggests they should be empowered to bid for tens of billions of pounds currently administered by central Government.

The report earmarks £49bn of Government funding under the current spending period that would be better spent by LEPs, but suggests the bidding process should only begin in the run-up to the next spending review.

Lord Heseltine is harshly critical of Government departments' unwillingness to change, and argues that the current administration has been guilty of damaging delay in its approach to major projects including re-equipping the aviation network in the southeast of England.

The former president of the Board of Trade admits that many of the ideas contained in his report have been put forward in the past only to be kicked into the long grass.

He argues that there are grounds for optimism in that the current Government will act where others have sat on their hands.

The fact that the Chancellor and Prime Minister were eager for him to take on the job indicates, in his view, their appetite for controversial but productive reform.

Lord Heseltine also points out that some of his proposals "go with the grain" of the Government's localism agenda.

When asked how he would react in a year's time if his report ends up gathering dust like so many before it, Lord Heseltine was philosophical.

"I'll just get on running my garden," he told Sky News. "I've done my bit."

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Barclays Reports Loss After PPI Charges

Barclays reports a pre-tax statutory loss of £47m for the third quarter - compared with a £2.4bn profit over the same period last year.

The loss is primarily due to increasing costs relating to the mis-selling of payment protection insurance (PPI).

The bank, which was also rocked by the Libor rate-rigging scandal, unveiled two new US regulatory investigations into its conduct.

Barclays said the US Department of Justice and US Securities and Exchange Commission were investigating whether its relationships with third parties who help it win or retain business are compliant with the US Foreign Corrupt Practices Act.

It is also being investigated for past power trading in the West of the US.

The bank had previously said it would set aside a further £700m to cover its costs after customer complaints over PPI continue, taking its total estimated bill to £2bn.

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Royal Mail Delivers 1,000 New Parcel Jobs

Royal Mail is to create 1,000 new jobs as it looks to cash in on the boom in online retailing.

Royal Mail is planning a £75m investment programme in its UK express parcels business as packages become increasingly important to the company against a backdrop of a plunging letter numbers as email takes more of the strain.

In the last reported financial year, its parcels businesses accounted for almost half of the group's revenues, excluding the Post Office, and online retailing is expected to continue increasing as stores place a greater emphasis in their online offerings.

High rents, other cost pressures and low consumer confidence have combined to hurt the high street since the financial crisis, prompting many retailers to invest heavily in online.

As a result, Royal Mail is to open a new parcel processing centre in Chorley in Lancashire next year, two new depots will be opened in Cornwall and Hampshire with a further nine existing depots expanded or moved to larger sites over the next four years.

Royal Mail Group's chief executive Moya Greene said: "Our investment is part of Royal Mail Group's strategy to grow its parcels businesses in the UK and overseas.

"Our strategy is to convert the rise in parcel volumes into profitable growth. That means becoming a much more customer-focused company being run on commercial lines and investing in new, vital technology."

The move was welcomed by the Government.

Mark Hoban, minister for employment, said: "It is great news that 1,000 new jobs will be created across the country as a result of this investment.

"We've now got a record number of people in employment and these jobs will provide welcome opportunities for people who are looking for work."

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Superfast 4G Launched In 10 Cities Across UK

Superfast 4G broadband is made available to millions of consumers in 10 UK cities today, heralding a new era for mobile phone use.

The network EE, which owns Orange and T-Mobile, is launching its range of 4G products and services in London, Bristol, Birmingham, Cardiff, Leeds, Sheffield, Edinburgh, Glasgow, Liverpool and Manchester.

Formerly known as Everything Everywhere, the company is offering speeds up to five times faster than 3G.

The service will be available on the Apple iPhone 5 and devices from HTC, Samsung, Nokia and Huawei.

It comes as EE's 4G pricing plans faces heavy criticism, with additional charges for customers on certain tariffs if they exceed download allowances.

Long queues are expected at shops across the country as consumers rush to sign up to the new service and get their hands on a 4G device.

EE is the sole UK provider of 4G until next year

EE customers in six more cities - Belfast, Derby, Hull, Newcastle, Nottingham and Southampton - will have access to 4G by the end of the year.

The group then plans to roll out the service to further towns, cities and rural areas next year, with population coverage of 70% and rising to 98% in 2014.

Rival operators including Vodafone, O2 owner Telefonica and Three will be able to launch their own 4G services and products from next spring.

The companies had threatened legal action against communications regulator Ofcom over its 4G auction process, which has allowed EE to be the sole UK provider of the superfast services until next year.

Vodafone launched a "4G phone promise" last week, offering customers the chance to bring an eligible phone into any store and have 70% knocked off their remaining contract in exchange for taking on a 4G device.

The services will allow uninterrupted access to the web on the go, high definition films to be downloaded in minutes and television to be streamed without buffering.

The cheapest EE tariff offers just 500mb worth of downloads each month, with customers who want to download more than their allowance forced to pay extra.

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UBS Cuts Thousands Of UK Jobs Amid Restructuring

UBS has confirmed it is cutting 10,000 jobs as it looks to drastically shrink its ailing investment bank which has a large presence in London.

Switzerland's biggest bank announced the plans as part of its third-quarter results which revealed a loss of 2.2 billion Swiss francs (£1.43bn) compared to a profit of 1.02 billion (£0.67bn) in the same period last year.

It said the result for the July-September period was damaged by a one-off charge of 3.1 billion Swiss francs (£2bn) linked to the restructuring of its investment banking division and a debt-related charge of 863 million (£574m).

Chief Executive Sergio Ermotti said the investment unit, which has been hit by a series of costly blunders in recent years, would "continue to be a significant global player in its core businesses" but there would be "a significant acceleration" in its transformation.

Of the total job cuts, 2,500 positions would be lost in Switzerland while the rest would be felt in the UK and US.

A spokesperson for the bank's operation in London told Sky News there was currently no confirmed figure for UK losses but said it would be fair to assume it would be in the thousands.

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Report: Small Firms In Credit Drought Fear

Bank lending to corporate clients is set to drop to its lowest level for six years despite Government funding, a new study suggests.

According to the Ernst & Young ITEM Club, a funding gap for small and medium enterprises (SME) will remain even though Government funding has been announced.

The study said corporate lending is forecast to drop by £429bn at the end of 2012.

The annual rate of contraction is estimated at 4.6%, which is markedly slower than the 6.1% decline during 2011.

It said positive growth is forecast to resume from 2013, but corporate loans will not recover to 2008 levels  – the year of the global financial crisis - until 2016.

Item Club senior economic adviser Carl Astorri said: "The good news is that 2012 is likely to be the last year of such marked deleveraging in the UK - the bad news is that, once again, SMEs will bear the brunt of it.

"Government schemes to increase lending may help a lucky few but, as banks are encouraged by regulators to store up more capital and to look again at their forbearance policies and so-called bad-loan books, most small business are going to continue to feel the squeeze."

According to surveys from the Office for National Statistics (ONS) and Warwick Business School, the rejection rates for SME loan applications have trebled recently.

Rejection rates averaged around 11% between 2005 and 2008, whereas the rate in mid-2012 averaged around 38%, the Federation of Small Businesses and the SME Finance Monitor said.

The loan rejection rates provide an indication of the 'financing gap' facing SMEs over the coming year, experts believe.

Data from the Bank of England indicate that gross lending to SMEs amounted to £44.2bn in the 12 months to the first quarter of 2012.

If this lending data reflects a rejection rate for credit of 38%, then lowering the rejection rate to the pre-crisis level of 11% would imply the need for additional loan facilities worth around £19bn.

In September, Business Secretary Vince Cable announced the first steps of a Government-funded British business bank to help SMEs grow.

Mr Astorri said: "The figures suggest that the British business bank's lending capacity could be exhausted in less than a year.

The new bank's aim was to attract private sector funding so that when fully operational it could support up to £10bn of new and additional business lending.

"Its impact will also be reduced by competition with private sector lending activity - even if the Government aims to lend at market interest rates, it is unlikely to be able to avoid displacing existing lending activity," Mr Astorri said.

"Indeed, we expect the business bank will have to compete for projects that are commercially viable, and so we do not think the scheme will have a tangible impact on the economy."

The study also found that there was evidence that lower funding costs were being passed on to homeowners following implementation of the funding for lending scheme in July.

It also found that contraction in profits of the insurance industry would slow from 31% in 2011 to 9.5% this year, before a slow recover from 2013 onwards.

The Item Club said the combination of continued low interest rates, higher hedging costs, lower business volumes and more onerous capital requirements continues to create a challenging environment for UK insurers.

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Exclusive: Lords Unite In Newspaper Deal

By Mark Kleinman, City Editor

One of the City's most influential investors is to back an audacious attempt to consolidate Britain's flagging regional newspaper sector by merging the business interests of Lord Rothermere and Baron Iliffe.

I can reveal that Iliffe News & Media, owner of the Cambridge News and Hertfordshire Mercury, and Northcliffe Media, the regionals arm of Daily Mail & General Trust (DMGT), are in advanced talks to pool their assets into a new vehicle spearheaded by David Montgomery, the former editor of the News Of The World.

The deal will create a business with more than £250m of annual revenue and could spark a bidding war in the regional newspaper industry involving Trinity Mirror and Johnston Press, two of the three largest players.

I understand that Crispin Odey, whose hedge fund Odey Asset Management is among the most prominent names in the City, has agreed to support a deal that would combine Iliffe and Northcliffe.

They will be folded into a new vehicle called Local World plc that will be privately-owned. Mr Montgomery will own a stake in it, while Iliffe's parent group, Yattendon, and DMGT will between them own close to 50%.

The deal is also being backed by a syndicate of banks led by Bank of Ireland, HSBC and Lloyds Banking Group, which are on the verge of agreeing new borrowing facilities with the enlarged group.

A spokeswoman for Yattendon said: "I can confirm that Yattendon Group has held preliminary discussions with David Montgomery about becoming founder shareholders in a new local media company.

"We have a shared vision about the long term opportunities for local media but at this stage there is no certainty whether these discussions will lead to a satisfactory conclusion."

DMGT tried to sell Northcliffe in 2005 in a deal that would have valued the business at more than £1bn.

The proposed new transaction will value Northcliffe at little more than 10% of that price-tag, underlining the declining fortunes in the regional newspaper sector in recent years.

The industry has been hit by the waning economy as well as sharp declines in print advertising revenue and soaring print costs.

DMGT has subsequently cut hundreds of jobs at Northcliffe and switched some of its newspapers to digital-only titles to combat the slump.

Yattendon, which owns assets in agriculture, property and marine leisure as well as local media, will not take any cash out of the deal but will roll its entire newspaper investment into the new vehicle.

The group used to own titles including the Birmingham Post and the Coventry Telegraph before selling them.

The deal to create Local World has not yet been formally agreed but could be within weeks. If it does get completed, it would represent a significant step in the long-awaited consolidation of the regionals sector.

Mr Montgomery is likely to use the initial deal to pursue further mergers, potentially with Johnston or Trinity, according to insiders. Reports of his interest in Northcliffe have been circulating for the last few weeks.

A spokesman for DMGT said: "In response to media speculation, DMGT confirms that it is currently in talks regarding the future of Northcliffe Media.

"No deal or transaction has been agreed, but if these talks move to the point where agreement is reached, an announcement will be made to the market."

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Leading Publishers Confirm Partnership

Pearson and Bertelsmann have confirmed they will create the world's largest consumer publishing organisation by combining Penguin and Random House.

Penguin, the famous publishing brand, and Random House, the leading English language publisher in the US and the UK, will combine their businesses in a newly-created joint venture named Penguin Random House.

Bertelsmann will own 53% of the joint venture and Pearson 47%.

John Makinson, currently chairman and chief executive of Penguin, will be chairman of Penguin Random House and Markus Dohle will be its chief executive.

The companies said the combination means readers "will have access to a wider and more diverse range of content in multiple print and digital formats".

In 2011, Random House reported revenues of £1.48bn, whilst Penguin reported revenues of £1bn.

More follows...

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Tearful 'Rogue Trader' Tells Of UBS Losses

A trader accused of Britain's biggest fraud was allegedly trying to cover millions of pounds worth of losses incurred during the financial crisis for the bank he called his "family", a court has heard.

Kweku Adoboli, 32, is accused of gambling away £1.4bn while working as a trader for Swiss bank UBS.

At one point, he was at risk of causing the bank losses of $12bn (£7.5bn), jurors at Southwark Crown Court were told.

Adoboli wept as he gave evidence for the first time at his trial, in which he claimed his off-book trades were to cover $40m (£24.9m) annual losses of his portfolio of companies from 2008.

The court heard that by 2007 Adoboli, aged just 27, and more senior trader John Hughes, 25, were in charge of a portfolio of companies with assets of $50bn (£31.1bn).

"Our book was massive. A tiny mistake led to huge losses. We were these two kids trying to make it work," he said.

Mr Adoboli, wearing a dark suit and red tie, denied he was a "gambler" and said his knowledge of UBS's systems did not result in "fraudulent behaviour".

Fighting back tears, he said: "It's hard to find the words to describe the relationship I had with UBS as an organisation. It isn't about a bank. It was about what I thought was my family, considering how much (I) neglected my real friends and family.

"Every single bit of effort I put into that organisation was for the benefit of the bank, the people around me and the book I worked on.

"If I was not so proud to work for UBS, I would never put so much effort trying to convince them that we could achieve something at this bank."

He added: "To find yourself in Wandsworth Prison for nine months because all you did was work so hard for this bank..." before stopping as he broke down in tears.

Mr Adoboli is facing two counts of fraud and four counts of false accounting between October 2008 and September 2011, allegedly gambling away the money on high-risk illegal trades aimed at boosting his annual bonuses and job prospects.

The former public schoolboy worked for UBS's global synthetic equities division, buying and selling exchange traded funds (ETFs), which track different types of stocks, bonds or commodities such as metals.

Ghanaian-born Mr Adoboli enjoyed a rapid rise at UBS after completing an internship while a student at Nottingham University in 2002, the court heard.

Mr Adoboli told the court he feared UBS would not survive $52bn (£32.3bn) losses incurred in 2007-08 as the banking crisis took hold.

He said: "The effect on the organisation was incredible. There were times we thought there was no way the organisation would survive. I grew up with UBS. I felt very loyal to UBS.

"What could we do to help this organisation survive this incredible crisis?"

The trial continues.

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Exclusive: RBS Eyes Worldpay Payout

By Mark Kleinman, City Editor

The taxpayer-controlled Royal Bank of Scotland is in line for a substantial windfall from the sale of part of the payments processing business it was forced to offload as punishment for its £45bn bail-out four years ago.

I understand that Advent International and Bain Capital, the controlling shareholders in Worldpay, have appointed JP Morgan, the investment bank, to explore a sale of the company's US operation.

Such a disposal could fetch as much as $1bn (£620bn), bankers say, and insiders tell me that a large chunk of the proceeds is likely to be returned to Worldpay's investors.

For RBS, that would represent a rare piece of welcome financial news. When it sold Worldpay in 2010, it was allowed to retain a 19.99% stake in the business by the European Commission.

Although that stake has since been diluted to 18%, the bank could still reap a dividend worth tens, or even, hundreds of millions of pounds, depending upon the sale price and the proportion of the proceeds that is paid out to shareholders.

Worldpay, which is one of the world's largest electronic payments processing companies, operates in more than 40 countries.

It said this year that its US revenues fell by 3.6% in the first half of the year following a "strategic decision to withdraw from certain unprofitable market segments".

RBS sold Worldpay for about £1.7bn in a deal structured to provide the former owner with additional payments worth up to £200m if the business met unspecified performance thresholds.

RBS and Worldpay declined to comment.

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Victory For Man Who Took Cold Caller To Court

A businessman plagued by nuisance phone calls offering compensation for Payment Protection Insurance has secured £220 in an out-of-court settlement.

Richard Herman, 53, was so fed up with the unwanted calls arriving from India, he decided to take matters into his own hands.

He warned the company that, in future, he would invoice them £10 for every minute of his time they used.

When the calls continued he began recording them before finally invoicing the company £195 for their use of his "time, telephone and electricity".

Upon receipt of the invoice the marketing firm acting on behalf of UK-based PPI Claimline Ltd, denied making the calls. When Mr Herman revealed he had recorded evidence, they still refused to pay.

But when Mr Herman filed a claim in the small claims court for the unpaid invoice - plus £25 in costs - the company offered to settle the debt out of court and transferred £220 into his bank account.

Mr Herman filed in the small claims court when his invoice was not paid

Mr Herman said: "I kept being called, as we all do, and I thought the only way for them to stop would be for me to speak to them and say, 'For goodness sake, take me off your list!'

"Then it occurred to me to tell them that if they call again I'll charge for my time. When they continued calling I sent them an invoice for 19.5 minutes."

To encourage others to do the same Mr Herman has set up a website with examples of covering letters and invoices to send to nuisance callers.

Even though the validity of Mr Herman's original invoice was not tested in court, he believes anyone who warns cold-calling companies they will be charged if they call, have a right to invoice them.

"I did business studies at 17 and studied 'offer-and-acceptance' so I knew a verbal contract is just as valid as a written one but harder to prove.

"The recorded calls proved I did tell them I would charge for my time if they called again".

Mr Herman, who works in the telephone industry selling call-recording equipment, said his action was a last resort after asking the Information Commissioner and the Telephone Preference Service for help.

In a statment, PPI Claimline said: "We would like to stress that all our supplier relationships are subject to strict contractual provisions requiring full compliance with all relevant regulations, including those which relate to data protection and the telephone preference service.

"We would like to draw a clear line between the two calls to Mr Herman made on behalf of PPI Claimline and any other calls he received, which were nothing to do with PPI Claimline or its suppliers."

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