Osborne Issues Legal Challenge To EU Bank Tax

By Ed Conway, Economics Editor

George Osborne has launched an unprecedented legal challenge against European plans for a financial transactions tax.

The move, which will be seen as a further sign of fraying relations between the UK and the rest of the continent, is designed to force the European Commission to reconsider the levy on Europe-related financial activity.

The Chancellor revealed the details on the fringes of the International Monetary Fund meetings in Washington.

Mr Osborne told Sky News: "What I am against is the European Commission coming up with a financial transaction tax that damages Britain. I want to make it clear Britain doesn't want to be a part of that and doesn't want to be affected by a European financial transaction tax even if we're not directly part of it.

"And so we've mounted a legal challenge in the European Court of Justice - that is the correct way to handle these things - the challenge went in yesterday."

According to insiders, this is the first time the UK has challenged legislation of this kind. Under the Commission's current plans, there will be a small charge (0.1% for shares and bonds and 0.01% for derivatives) on all financial transactions within the 11 members of the European Union which have signed up to the tax.

This alone is forecast to knock 0.25% off economic growth according to the Commission's official assessment, although some economists fear this could be an understatement.

It is feared the EU tax plans will adversely affect banks in the UK

The Chancellor said the reason for the legal challenge was that the tax will also hit Britain itself in two ways: first because it will affect any euro-denominated transactions – many of which happen in London.

Second, the tax will apply to all transactions of banks with headquarters in the signed-up EU nations, even if they are in London or outside Europe.

Treasury insiders said the worry was that it could knock significant value off British pension funds and investments.

They characterised the legal challenge, which may take years to be heard, as an important insurance policy in the legislative battle to get the tax amended.

However, analysts said that the move marked a significant escalation in tension between the UK and the Commission.

Mats Persson of think tank Open Europe said: "The economic, legal and political implications of this move for future EU-UK relations are huge… Legally, it could set out the parameters for how a 'flexible Europe' involving different levels of participation in the EU – which Prime Minister David Cameron has said he champions – will be governed.

"Politically, it's a test of the extent to which the UK – as a non-eurozone member - can halt or change EU measures with a profound impact on its national interest. Therefore, it will be a key issue in the on-going debate about the UK's continued EU membership."

The Chancellor also defended Britain's economic reputation, which has been dealt a blow this week by comments by the IMF chief economist Olivier Blanchard that Mr Osborne is "playing with fire" with his fiscal policy.

The Fund is due to come to the UK next month to carry out its annual survey of the economy. It is expected to advise the Chancellor to slow the pace of his austerity program.

"When the IMF comes to town we will make it absolutely clear that what we're doing is both enhancing the credibility of the United Kingdom by dealing with our debts and deficits but also supporting the British economy,"  Mr Osborne said. 

"For example, through the new housing scheme - the help to buy scheme which I launched at the Budget, through the work we're doing on funding for lending, through the work we've done on tax, for instance to increase the personal allowance."

Asked about criticisms of the Help to Buy scheme, under which the Government will guarantee mortgages for homebuyers, Mr Osborne said: "We are at a period of real weakness in the housing market, so the risks of a housing bubble are pretty non-existent.

"The key thing is that this scheme is time limited and we've given the keys to it to the [Bank of England's] Financial Policy Committee so it can turn it off in the future."

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Virgin Active Eyes £2bn David Lloyd Merger

By Mark Kleinman, City Editor

Virgin Active is mulling a takeover bid for David Lloyd Leisure that would create a £2bn health and fitness empire, and entrench Sir Richard Branson as the industry's most important British stakeholder.

I have learnt that Virgin Active has been undertaking detailed work on the structure of a possible offer for David Lloyd, which has been put up for sale by its consortium of shareholders.

The Virgin-backed chain is now deliberating over whether to submit a formal offer for the tennis-based network of fitness clubs ahead of a new deadline, which is thought to have been set for next month.

If successfully completed, a deal would create a group of more than 200 venues in the UK, with many more in a host of overseas markets, including Belgium, Ireland and South Africa.

People close to the process said that Virgin Active did not participate in the initial round of bidding for David Lloyd earlier this month, and cautioned that it may yet decide not to make an offer at all.

David Lloyd's advisers at UBS, the investment bank, are said to be seeking a sale worth £900m, although some insiders suggested on Friday that a lower valuation was likely.

Virgin Active, which is chaired by the former Boots boss Richard Baker, would have little trouble financing a deal.

A controlling stake in the business was sold in 2011 to CVC Capital Partners, the buyout firm behind Formula One motor racing, in a deal thought to have valued the gyms chain at £900m.

According to unaudited results published last summer, Virgin Active recorded a profit of £127m in 2011, up 11% on the previous year.

The company is understood to have concluded that a takeover of David Lloyd, which made around £100m last year, would not raise significant competition concerns.

The health and fitness market remains reasonably fragmented, with other significant players including a diminished Fitness First, which now operates around 80 clubs following a financial restructuring that saw many sites sold or closed.

A number of other gym chains are also on the market, with several private equity firms looking at a combination of Pure Gym and the Gym Group at the value end of the sector.

Even if Virgin Active does decide to pursue an offer for David Lloyd, it will face stiff competition to secure a deal. Private equity firms including Blackstone and KSL Capital Partners, which owns the Belfry golf resort, are reported to have submitted offers.

David Lloyd is controlled by London & Regional, the vehicle of the property tycoons Ian and David Livingstone, and Caird Capital, a firm created by former HBOS bankers responsible for many of the bank's biggest corporate deals before it required a rescue in 2008.

Virgin declined to comment, while David Lloyd could not be reached for comment.

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Fitch Strips UK Of AAA Rating On Debt Outlook

Ratings agency Fitch has stripped the UK of its AAA rating, citing a "weaker economic and fiscal outlook".

The agency placed the UK on an AA+ rating, following Moody's downgrade of UK debt in February.

A Fitch statement said: "The downgrade of the UK's sovereign ratings primarily reflects a weaker economic and fiscal outlook and hence the upward revision to Fitch's medium-term projections for UK budget deficits and government debt."

The downgrade will place further pressure on the Government ahead of next week's first quarter GDP figures, which will reveal if Britain has managed to avoid an unprecedented triple-dip recession.

The agency now expects Government debt to peak at 101% of GDP in 2015-16, only declining gradually in 2017-18. That is worse than its previous forecast of debt peaking at 97% of GDP and declining in 2016-17.

Fitch, which waited until stock markets had closed before announcing the downgrade, had already warned that Government failure to stabilise debt below 100% of GDP and set it on a firm downward path would trigger a downgrade.

Chancellor George Osborne had pledged to retain the UK's AAA status

The statement said: "Despite the UK's strong fiscal financing flexibility underpinned by its own currency with reserve currency status and the long average maturity of public debt, the fiscal space to absorb further adverse economic and financial shocks is no longer consistent with an AAA rating."

Fitch slashed the UK's growth forecast to 0.8% this year, from its earlier expectation of 1.5%. Next year it expects the UK economy to grow by 1.8%, down from its previous 2% forecast.

Earlier this week, the International Monetary Fund also cut the UK's growth forecast growth from 1% to 0.7% this year and 2014's projection from 1.9% to 1.5%, noting the recovery was "progressing slowly".

IHS Global Insight economist Howard Archer said the downgrade was "no surprise" and is likely to have minimal market impact.

"Nevertheless, Fitch's move is another slap in the face for the government - particularly as the Chancellor (George Osborne) made keeping the AAA rating a key focus for the UK," he said.

Fellow ratings agency Standard & Poors held the UK's debt rating steady at AAA earlier this month, but warned over the economy's "negative outlook".

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Ex-FSA Chief Drops RBS Branch Consortium Role

By Mark Kleinman, City Editor

The former chief executive of the City regulator has withdrawn from a consortium bidding to buy more than 300 branches being offloaded by Royal Bank of Scotland (RBS).

I have learnt that John Tiner, who was chief executive of the Financial Services Authority (FSA) between 2003 and 2007, is to play no further formal role in an offer for the branch network being led by Corsair Capital, the private equity firm where he works as a senior adviser.

His decision to step back from the bid comes amid expectations that two forthcoming reports about various aspects of Britain's banking sector will level robust criticism of the FSA's performance in the period before the crisis.

Corsair had planned to install Mr Tiner as chairman of the RBS business if it succeeds with its offer.

But people close to the situation say that Corsair has now informed both RBS and the Treasury that he will no longer assume this role. This decision is understood to have been made by Mr Tiner himself and without any external pressure from the Government or regulators.

"John is a first-class guy, and there has been no external effort to remove him from the bid, but with everything else that is happening now, he thought it better not to proceed," an insider said.

Mr Tiner's withdrawal follows the tirade of criticism which engulfed Sir James Crosby, the former chief executive of HBOS and ex-deputy chairman of the FSA, when a Parliamentary Commission on Banking Standards report accused him of being the architect of HBOS's disastrous expansion.

The Commission is likely to make further critical remarks about the performance of the FSA in its final report in the summer.

More importantly from Mr Tiner's perspective, insiders said, the Financial Conduct Authority - the FSA's successor body - will publish in the autumn its account of the failure of HBOS in the autumn of 2008. That account will be extremely self-critical and lay some of the blame at Mr Tiner's door, regulatory sources said.

Lord Davies, the respected former trade minister who is a vice-chairman and partner of Corsair, could take the chairmanship of the RBS branch network on a temporary basis, they added.

In addition to his advisory role at Corsair, Mr Tiner is a non-executive director of Credit Suisse, the Swiss-based banking group, and of Lucida, a pension insurance firm.

He was awarded a CBE in 2008 for services to the finance industry, although there have been no calls for him to follow Sir James' gesture and voluntarily forfeit the honour.

Corsair has secured backing for its bid for the RBS branches from Lord Rothschild's investment firm, RIT Capital Partners, and Centerbridge, another private equity group.

Its bid is thought to be well-placed but is up against competition from a consortium of City institutions as well as a potential bid from Virgin Money.

Mr Tiner was unavailable for comment, while RBS declined to comment.

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Retail Sales Drifted As March Snow Fell

The coldest March since 1962 stopped shoppers hunting down spring ranges, resulting in a 0.7% fall in overall retail sales.

The Office for National Statistics (ONS) figures said that left sales 0.5% lower on the year.

Despite the early Easter holiday, non-food sales tumbled by 4% in March and this was only partly offset by the biggest rise since March 2009 in non-store retailing, which includes online shopping.

Online sales accounted for 10.4% of all spending, compared with 8.8% a year earlier.

The information suggests that consumers stayed away from stores, especially those with DIY, gardening and spring clothing offerings, and carried out only essential food shopping.

Other earnings reports - and those of individual retailers - have been mixed.

While the British Retail Consortium found 3.7% annual growth in the value of retail sales, the ONS measured it at just 0.1%.

Meanwhile, Debenhams blamed snow in January for a 5.4% dip in profits in its first half.

Debenhams stock is up sharply on Thursday

Britain's second biggest department store group forecast a better second half of the year after making a pre-tax profit of £120.3m in the 26 weeks to March 2.

That was in line with guidance given in a March profit warning, when the firm said snow in January had dented sales.

Chief executive Michael Sharp said: "We expect to make further progress in the second half, despite consumer sentiment remaining weak and challenging market conditions."

Many retailers have been finding trading tough as consumers, whose spending generates about two-thirds of gross domestic product, continue to face a squeeze on incomes at a time of record household energy prices and other higher costs.

The soggy summer of 2012 followed by the cold winter also held back sales - although most economists are now tipping the UK to avoid a triple-dip recession.

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Lagarde: IMF May Urge Osborne Over Austerity

By Ed Conway, Economics Editor

Christine Lagarde has given her firmest signal yet that the International Monetary Fund is on the brink of issuing George Osborne with detailed advice on changing his austerity plans.

The IMF managing director warned that Britain's economic growth performance is "not particularly good", reinforcing suspicions that the fund will ask the Chancellor to moderate the severity and speed of his austerity plans.

The fund's chief economist, Olivier Blanchard, was more forthright earlier this week, telling Sky News that Britain's economic policy plans were "playing with fire".

Ms Lagarde refrained from passing detailed judgement ahead of the fund's official Article IV annual survey of the country, which takes place next month.

But she said: "We have repeatedly said in the last couple of years that should growth abate and be particularly low there should be consideration to adjusting by slowing the pace (of fiscal consolidation).

"Looking at numbers - without having dwelt under the skin - the growth numbers are not particularly good. This is a continuum of (our) position. What has changed is the quality of the numbers."

The comments came as the incoming Bank of England Governor, Mark Carney, said that Britain should be considered one of the world's "crisis economies".

In comments at an event on the fringes of the IMF meetings, he said: "There are three classes of economy. There's the crisis economies, including the United States, which is breaking out of that pack; it includes the Eurozone, the UK and Japan."

Mr Carney also dismissed hopes that central banks such as the Bank of England or the Bank of Canada, where he is currently Governor, could single-handedly generate growth.

He said: "Can they deliver sustainable growth? The answer is no. They can help with balance sheet repair and, for instance, transition to more sustainable euro area.

"But they can't deliver the long term growth necessary. That needs to come through full fiscal adjustment and fundamental structural reforms."

Ms Lagarde's comments on the fiscal situation in the UK will set up one of the most-eagerly awaited IMF annual surveys in recent British history, with the fund expected to set out precisely how far it expects the Government to change its position on tax and spending.

Although the IMF's advice is not binding, a negative judgement would be highly embarrassing for the Chancellor, even beyond the already critical comments of the fund.

Ms Lagarde also addressed the news that she has been summoned to appear in court in France over her handling of a scandal when she was the country's finance minister.

She said: "There is nothing new under the sun. Ever since 2011 I had known very well that I would be heard by the investigating commission of the Courts de Justice.

"I'll be very happy to travel for a couple of days to Paris but it's not going to change my focus, my attention and my enthusiasm for doing the work that I do."

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Tesco Confirms US Exit And Profit Fall

Tesco has confirmed its first fall in annual profits for 20 years and writedowns totalling more than £2.5bn as it moves to concentrate on improving its UK supermarket business.

The retailer confirmed it is exiting its loss-making Fresh & Easy operation in the United States, with a resulting £1.2bn writedown a major factor behind its 51.5% fall in pre-tax profit to £1.96bn in the year to February 13.

Tesco was also hit by costs related to its turnaround plan for the UK while its bank's exposure to the payment protection insurance scandal grew to £115m.

A writedown of £804m was also confirmed on the value of its UK property portfolio as it scrapped more than 100 store developments to focus on store revamps, convenience stores and improved delivery to online customers.

Tesco is seeking a buyer for its Fresh & Easy operations

A £495m 'goodwill impairment' relating to its operations in Poland, the Czech Republic and Turkey was announced too.

Tesco's chief executive Philip Clarke said that the actions would put the company "back on the right track" to deliver long-term growth for shareholders though its share price took a 2.8% hit when trading opened in London.

He continued: "The large stores we have are great and we are doing a lot of work to make them more vibrant and relevant for today's customers, but we won't need many more of them because growth in future will be multi-channel - a combination of big stores, local convenience stores and online."

The group said fourth quarter sales at British stores open over a year, excluding fuel and VAT, grew 0.5% - a slowdown from growth of 1.8% in the six weeks to January 5.

Philip Clarke has signalled an end to 'store wars' by halting new building

Mr Clarke admitted that sales over the past few months had been impacted by the horsemeat scandal as customers steered clear of frozen meat products.

Tesco had to withdraw four products from sale amid the crisis, but said the effect on overall sales was minimal and stressed that trading was now "back to normal".

While still well ahead of its supermarket rivals in terms of market share, Tesco has been facing a greater challenge from the likes of Asda, Morrisons and Sainsbury's.

They had been investing in their UK operations at a time when Tesco had concentrated on diversifying its business.

Tesco apologised in January for horsemeat in some of its burgers

Last year, Mr Clarke pledged a £1bn investment to upgrade its stores and customer service offering - at one stage taking personal charge of the turnaround plan.

Capital expenditure fell by 19% or £0.7bn to £3bn in the financial year.

Recent surveys have suggested the supermarket chain is still struggling to win round customers, with a study by Which? in February suggesting that Tesco was the most complained-about.

Researchers Espirito Santo said this week that customer perceptions of Tesco had deteriorated since November, with the horsemeat scandal a contributory factor.

It found that views on Tesco's quality, prices, promotions and overall value for money had all fallen while a net 16% of Tesco customers chose to shop more elsewhere because of horsemeat.

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'Quick House Sale' Market Investigated

The Office of Fair Trading (OFT) is investigating fears people desperate for money are being preyed on by firms offering "quick house sales".

Fifty unidentified companies operating in the market have been contacted by the watchdog for details on their business models while consumers are being urged to contact the OFT with information on their experiences.

Firms in the sector offer to buy a house themselves or find someone else to snap it up, often for less than the full market value of the property.

The OFT said that while such companies may offer a "valuable service" for people who need fast access to cash, it is concerned that stressed and vulnerable home owners looking for a way out of financial difficulties could be misled into selling for far less than their home is worth.

There have been suggestions that some customers have been told at the final stage of the 'quick sale' process that the price they were getting had been considerably reduced.

Other practises the watchdog is watching for include firms hiding their fees behind initial valuations which appear to offer a good price and severe penalties for breach of contract.

The number of 'quick sale' operators has grown as the tough economic climate has continued.

More than 157,900 UK households had fallen behind on their mortgage payments at the end of 2012 and over 110,000 couples divorced in 2011 in England and Wales.

The OFT plans to publish a report on the quick house sale sector in July.

The new regulator, the Financial Conduct Authority, welcomed the investigation and said it will work with the OFT to tackle any concerns.

Peter Bolton King, global residential director of the Royal Institution of Chartered Surveyors, said that anyone considering a quick house sale should take a step back and consider other options.

He said they should get an estimate of what their house could sell for on the open market, even if their house is priced for a quick sale.

Mr Bolton King said: "Naturally, people feel under financial pressure. You think: 'I can sort out my problems in one fell swoop'.

"But you should take a breath, take a step back and make sure you totally understand what it will mean."

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Apple Share Value Peels Away On Demand Fears

Apple shares fell below the $400 mark on Wednesday for the first time since December 2011 amid fears about weakening demand for its iPhone and iPads as competition intensifies.

A surprise warning about disappointing revenue at Cirrus Logic, which makes audio chips for both products, sparked the sell-off.

The US firm's forecast added to market speculation that sales of the iPhone - which make up more than half of Apple's revenue - are slowing more quickly than expected as Samsung and other rivals flood the market with cheaper devices.

It also threw the spotlight on Apple's quarterly earnings announcement due out next week, with some analysts saying the results could miss already reduced estimates.

"This is a tough environment. Apple is in transition between products," said Michael Yoshikami, a portfolio manager at California-based Destination Wealth Management which owns about 50,000 Apple shares.

Cirrus Logic had warned of a reduced product forecast from one customer - which it did not name - but at least 90% of its business comes from Apple.

Apple shares dipped below $400 on the Nasdaq before closing 5.5% lower at $402.80.

The drop wiped more than $22bn (£14.4bn) off its market value.

Since its September 2012 peak, Apple has lost 40% of its market value - slightly more than Google's entire capitalisation.

The drop has been fuelled by worries about the effect on Apple's industry-leading margins if it is forced into faster updates of its products to keep up with rivals.

Some say Apple will not be able to sustain its high gross margins as competition in the tablet and smartphone markets leads to lower prices.

Analysts expect Apple to report a 9% increase in quarterly revenue on April 23, with net profit expected to be down 17%.

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Npower: Energy Firm Denies Tax Avoidance

Npower has admitted it has not paid corporation tax in the UK for three years - just months after increasing prices by around 9%.

The company made the admission to the Energy and Climate Change select committee - but its boss said they had invested billions in new power stations and wind technology.

Chief Executive Paul Massara said: "Effectively we have invested £5bn in the last five years building power plants, creating jobs, creating employment and helping to keep the lights on.

"If we had not made that investment we would not have the deductibility that we would be allowed. That is a simple accounting UK rule."

Npower reported a 34% rise in profits to £413m last year.

The admission came as the "big six" energy companies were questioned by MPs over topics including profits and how they treat their customers.

A company statement added: "Looking at RWE npower specifically, our investment programme since 2008 has amounted to almost £3bn, which means we have seen a large increase in tax relief.

"This is in no way tax avoidance, and all of our business is taxable in the UK. We've not paid corporation tax because we've been investing hundreds of millions to keep the UK's lights on."

Prime Minister David Cameron's official spokesman said: "I wouldn't comment on an individual taxpayer.

"More broadly, the Prime Minister's view is that it is important that companies pay the tax that is due."

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M&S Fightback Hit As 'Knicker Queen' Quits

Marks & Spencer's battle to overturn a slump in clothing sales has suffered a blow after its head of lingerie and beauty quit after just three months in the job.

The appointment of Janie Schaffer, who is known as the Knicker Queen, was announced amid much fanfare in November as part of a wider plan to bolster its general merchandise offering.

A spokeswoman for M&S confirmed last night that Schaffer, who had previously worked as chief creative officer at Victoria's Secret, had left the firm but declined to comment further.

It is understood she had wanted more creative input at M&S.

Only last week the company announced its seventh straight quarterly fall in underlying sales of clothing, footwear and homewares - a performance which intensified pressure on chief executive Marc Bolland.

He had previously said that his turnaround plan would not make a major impact on sales until July when autumn and winter collections hit the shops.

His new general merchandise management team is led by John Dixon, the former boss of M&S's food business, and Belinda Earl, the former chief of Debenhams and Jaeger.

News of Schaffer's departure overshadowed M&S's announcement that it was to make a greater advance into Europe in the Netherlands, Luxembourg and Belgium.

M&S, which exited all of its stores in continental Europe in 2001, had previously confirmed a return to France.

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Tesco Confirms US Exit And Profit Fall

Tesco has confirmed its first fall in annual profits for 20 years and writedowns totalling more than £2.5bn.

The retailer confirmed the closure of its loss-making Fresh & Easy business in the United States, with a resulting £1.2bn writedown a major factor behind its 51.5% fall in pre-tax profit to £1.96bn in the year to February 13.

Tesco was also hit by costs related to its turnaround plan for the UK while its bank's exposure to the payment protection insurance scandal grew to £115m.

A writedown of £804m was also confirmed on the value of its UK property portfolio as it scrapped more than 100 store developments to focus on store revamps, convenience stores and improved delivery to online customers.

A £495m 'goodwill impairment' relating to its operations in Poland, the Czech Republic and Turkey was announced too.

Tesco's Chief Executive Philip Clarke said that the actions would put the company "back on the right track" to deliver long-term growth for shareholders though its share price took a 2.8% hit when trading opened in London.

He continued: "The large stores we have are great and we are doing a lot of work to make them more vibrant and relevant for today's customers, but we won't need many more of them because growth in future will be multi-channel - a combination of big stores, local convenience stores and online."

The group said fourth quarter sales at British stores open over a year, excluding fuel and VAT, grew 0.5% - a slowdown from growth of 1.8% in the six weeks to January 5.

While still well ahead of its supermarket rivals in terms of market share, Tesco has been facing a greater challenge from the likes of Asda, Morrisons and Sainsbury's.

They had been investing in their UK operations at a time when Tesco had concentrated on diversifying its business.

Last year, Mr Clarke pledged a £1bn investment to upgrade its stores and customer service offering - at one stage taking personal charge of the turnaround plan.

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New Round Of Fuel Price Cuts Revealed

Petrol: The Pump Price Conundrum

Updated: 10:35pm UK, Wednesday 30 January 2013

By Ursula Errington, Business Correspondent

So, the OFT says motorists aren't being ripped off, that the price of petrol on our forecourts is fair and isn't the result of collusion or price-fixing.

Outraged motoring groups still aren't convinced.

The reality is, I don't think anyone knows how to work out the relationship between crude oil and pump price.

From the moment crude oil is pumped out of the ground to when we hand over our money at the till to pay for a topped-up tank, the price of the commodity has been influenced by multiple markets all subject to their own supply and demand idiosyncrasies.

I last worked in oil trading about a decade ago and back then the relationship between the price of Brent crude oil and pump prices was deemed to be pretty sketchy.

Assiduous analysts, whose job it was to structure financial instruments to hedge the bank's customers with exposure to fluctuations in the oil market, pored over oil prices and pump price data looking for a concrete correlation on which to base a safe hedging instrument.

Judging by the collective sighing, teeth-gnashing and head-in-hand gestures, it proved both time consuming and difficult.

Broadly a six-week time lag was identified between a movement in the crude oil price to a correlating adjustment in the pump prices back then but it was considered too statistically patchy to appeal to clients.

So why is it so difficult to find a relationship between the price of oil and the pump price drivers pay?

Firstly, pricing crude oil itself is pretty complicated. Before the black stuff is even out of the ground its anticipated value has been traded on the futures market for weeks, months or years before.

On any one day the oil price is set by taking a combination of a weighted average and straight average up to two months in the future, of all the trades over 600,000 barrels executed on the electronic trading platform the Intercontinental Exchange (ICE).

So it is fair to say that part of the oil price is set by traders who are speculating, who have no intention of allowing their futures contracts to mature and "go physical" (i.e. become related to an actual cargo of oil) but who are buying and selling futures contracts depending on their day-to-day view of the multiplicity of variables effecting the market.

This need not be considered a bad thing. Speculative traders aren't just plucking figures out of the air, they are working on the basis of fine-tuned mathematical models used to assist them in weighting all the factors in play - an outlandish speculative trade based on few decent indicators wouldn't be in their interest at all.

Crucially, these traders add a huge volume of trades to the market, which actually means that big distortions in one trader's view are evened out across the average when the price is set. 

Then there is the shipping market to get the stuff to shore. Highly volatile and as prone to geo-political influences as the commodity itself, shipping deals are opaque because they are over-the-counter and are often based on long-term trading relationships.

The economics of refining are also unhelpfully complex, predominantly because optimising refinery operations is tricky.

Refinery margins (the difference in price between the wholesale value of the products coming out of the refinery and the crude oil from which they were derived) have been surging for many companies of late because of a relative drop in the cost of crude oil and solid demand for products but unscheduled refinery outages, workers on strike, storage costs, changes in the quality of the crude itself - all these things will impact the margin within hours.

And then there's the cost of haulage and the variables at petrol station level, such as a franchise owner's credit rating, local forecourt wars and location.

All of that and we still have some of the cheapest fuel in Europe, according to the OFT.

But it's not over yet - the taxman must also have his share. In the 10 years from 2003 to 2012, prices at the pump increased from 76p per litre (ppl) to 136ppl for petrol and from 78ppl to 142ppl for diesel. Nearly 24ppl of that increase was because of tax and duty.

Is it any wonder then that trying to compare the price of crude oil and the pump price proves a largely fruitless task?

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New EasyJet Chair: Next's Chairman In Frame

By Mark Kleinman, City Editor

John Barton, the chairman of fashion retailer Next, has emerged as a leading candidate to chair easyJet, the FTSE-100 low-cost airline.

I understand that Mr Barton is on a shortlist of contenders vying to replace Sir Mike Rake, who is due to step down from the role this summer and who will assume the presidency of the CBI, the business lobby group.

The board of easyJet has yet to make a decision about Sir Mike's successor and insiders said on Monday that at least one other person was still in the frame alongside Mr Barton.

"His is one of the names in the mix but it isn't the only one," said one insider.

A decision about easyJet's new chairman, which could come as soon as this week, will be significant because of the fractious relationship that Sir Mike and his predecessors have had with Sir Stelios Haji-Ioannou, the airline's founder and largest shareholder.

Sir Stelios has called on easyJet's management to slow the pace of new aircraft deliveries and focus on improving shareholder returns.

Many independent shareholders have, though, backed Sir Mike and Carolyn McCall, easyJet's chief executive, following a surge in profits and its share price, which have propelled the company into London's blue-chip index.

The easyJet founder has fought a long-running battle against Sir Mike, accusing him of having too many corporate roles and being complicit in the lavish pay culture at Barclays, where he is deputy chairman.

He has threatened to further reduce his stake in the airline if the company places a large order to expand its fleet in the coming months.

Among the other candidates to replace Sir Mike is Charles Gurassa, who already sits on easyJet's board as its deputy chairman and senior independent director.

Mr Barton, who is 68, would probably be viewed by easyJet shareholders as a safe option to take on the role. He has chaired Next since 2006 and would be expected to hand over the reins at some point in the next couple of years.

He has also chaired companies including Brit Insurance, Cable & Wireless Worldwide and Jardine Lloyd Thompson.

An easyJet spokesman declined to comment.

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Boston Blasts Knock Stock Market Values

The apparent terrorist attack on the Boston Marathon has intensified the recent 'run for cover' on world stock markets.

There had already been a rush to dump gold before the blasts while oil took a fresh tumble amid an earlier world sell-off on fears of slowing economic recovery.

The Dow Jones closed 1.8% lower while Asian markets also lost value overnight as commodity stocks fell. European markets also opened lower.

In London, the FTSE 100 dropped 0.5% at the start of trading.

The effect of the attack on Boston, while seen to be a temporary shock, added to the gloom as fears grew that an end was in sight for Federal Reserve support for the US economic recovery.

The sell-off in markets was triggered by the Chinese government's report on Monday that annualised growth in the world's second-largest economy slowed to 7.7% in the first quarter from 7.9% in the final quarter of last year.

Growth was expected to accelerate slightly to 8%.

Gold endured its sharpest drop in price over two days since 1983 on Monday, with the cost of a troy ounce falling to $1,350 before recovering slightly early on Tuesday.

Brent crude oil tumbled below $100 a barrel overnight as weaker Chinese growth was seen as hitting demand.

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Cyprus Bailout Deal Is Hit By New Fears

Cyprus' central bank governor has warned he will only work with ministers on the country's EU bailout if the bank's independence is respected.

The comments from governor Panicos Demetriades come following a rift in Nicosia between the bank and political leaders over the EU/IMF-brokered bailout.

Last week, the government said the total bailout cost had jumped 6bn euros (£5.1bn) to 23bn (£19.6bn).

Mr Demetriades was appointed last May by the communist former administration but tension with the ruling centre-right government, in power for just two months, has deepened.

There has been growing pressure on him to resign over his handling of the economic crisis amid an unprecedented levy placed on bank accounts.

Cyprus President Nicos Anastasiades has been accused of meddling

In the past week, the southern Cypriot parliament has started an investigation against Mr Demetriades.

President Nicos Anastasiades's government withdrew the appointment of his trusted deputy and three central bank officials resigned.

The unfolding drama drew a scathing response from European Central Bank (ECB) president Mario Draghi, who wrote to the Cypriot president telling him any attempt to effectively sack the governor could land Cyprus in the European Court of Justice.

Mr Anastasiades, when asked by reporters to comment on the apparent feud between the two bodies, said he was "frankly, very saddened".

"My intention to work with the country's democratic institutions is a given," Mr Demetriades, who sits on the ECB's governing council, was quoted as saying in an interview with the Phileleftheros newspaper.

"We are ready to respond to every call for cooperation and coordination for the benefit of this country always, however within the framework of total respect towards the central bank's  independence, as stipulated by the ECB."

ECB president Mario Draghi has warned the southern Cypriot president

Under European Union law, a governor can only be dismissed if he no longer fulfils the conditions required for the performance of his duties, or if he is guilty of serious misconduct.

The investigation launched by Cypriot politicians last week is seeking to find out whether Mr Demetriades supplied enough information during an investigation into the demise of Cyprus's two biggest lenders, which left the economy in disarray.

The collapse of the Mediterranean island's banking system imposed massive losses on depositors in order to qualify for its 10bn euro (£8.5bn) bailout by the EU and IMF.

:: Gold futures dropped below the $1,500 barrier on Friday, the lowest since July 2011, just days after Cyprus moved to sell 10 tons of reserves to help fund the bailout.

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Little Chef Restaurant Chain Put Up For Sale

By Tadhg Enright, Business Correspondent

Roadside restaurant chain 'Little Chef' has been put up for sale - six years after it was rescued from administration.

Business turnaround specialists RCapital, which took control of Little Chef in 2007, have appointed KPMG to find a buyer.

It is understood there have already been expressions of interest from potential buyers.

Over the past six years, the chain famous for its 'Fat Charlie' logo has been slimmed down from more than 200 to 83 profitable sites beside A-roads all over Britain.

It also recruited celebrity chef Heston Blumenthal to revamp its menu as part of a Channel 4 documentary.

Sky sources say its estate of restaurants, most of which have large car parks, should appeal to coffee chains or convenience stores.

Heston Blumenthal attempted to revive Little Chef's fortunes

In a statement, RCapital said: "Over the last six years, RCapital has successfully completed an operational turnaround and financial restructuring, which has repositioned the business and brought the group of companies back into profitability.

"The move was part of a long-term critical rebuild strategy to create consistently profitable sites against the backdrop of one of the worst recessions in living memory.

"With the turnaround successfully completed, it's time to explore the next phase for the food service operator."

Little Chef employs 1,100 staff and serves six million customers a year.

Its first branch, which had just 11 seats, opened in Reading in 1958, but by the 1980s Little Chef had become a fixture of British motoring with more than 230 branches at its peak.

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JCB Digs Big Profit In Africa And Middle East

Digger manufacturer JCB has defied a slump in the global construction market to record the highest profit in its 67-year history.

The family-owned company saw its 2012 earnings rise to £365m on turnover which remained virtually unchanged from the previous year at £2.7bn.

Although the Staffordshire-based manufacturer experienced weak construction equipment sales in some areas of the world, it saw business in Africa double and registered growth of 12% in the Middle East.

Announcing the results, JCB chairman Sir Anthony Bamford said: "In view of the continued fragility of the global economy, which has led to renewed slowdowns in emerging and developed markets, JCB's results in 2012 are extremely encouraging.

"They not only demonstrate the resilience of our business, but highlight the importance of continued investment in products, facilities and customer service.

"While construction equipment markets in many parts of the world remained weak, that has been more than offset by strong growth for our agricultural products, particularly in materials handling."

Despite continuing uncertainty, particularly in European economies, 2013 had started satisfactorily, JCB said.

Sir Anthony added: "We are expecting some growth this year but how much will depend on the pace of the global recovery."

Last year's record results eclipsed earnings of £355m in 2011.

Figures for sales of machines also rose slightly to 69,250, from 69,100 in 2011, amid a global market which is estimated to have contracted by around 10%.

During 2012, JCB opened a new factory in Sao Paulo, Brazil and announced plans for a new £62m plant in Jaipur, India, which is due to open next year.

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Floods: UK Insurers Avoid Covering Risky Homes

By Becky Johnson, North of England Correspondent

People whose homes have been devasted by flooding fear they will be unable to get insurance in future as talks between the Government and insurers have so far failed to reach an agreement.

At present insurers are required to provide cover at reasonable rates provided the Government continues to strengthen flood defences, but this agreement - known as the Statement of Principles - is due to expire in June this year.

In St Asaph in North Wales more than 400 homes were deluged when the River Elwy burst its banks last November. So far, the majority of people have still been unable to return to their houses.

James Alcock stands in his kitchen after flood water recedes

John Wynn Jones who is a local councillor and whose own home was flooded told Sky News: "What we are finding is that because people are so concerned about getting insurance, as well as clearing up after the floods themselves, people are actually considering not moving back into their homes.

"They don't want to get back into their properties and then find out they can't get insurance or the premiums are now so high they can't afford it.

"There's one lady who was insured and ... they've told her they won't be able to renew her policy. When she's questioned it, they've told her 'you no longer fulfil our criteria'. It hasn't been explained to her why but she says the only thing that's changed is she has now been flooded.

"Another resident has had to shop around. Her existing premium had been £200 a year and the best deal she can get now is £1,200 a year. Someone else was told they'd only get a policy with a £10,000 excess.

"People are desperate to have the cover but a lot of people are saying they don't have the money to pay so they'll end up living in uninsured properties."

A fireman helps a member of the public in Aberfoyle

Aidan Kerr, head of property at the Association of British Insurers (ABI), said: "We continue discussions with Government on the model we have developed to safeguard the availability and affordability of flood insurance for those at high risk.

"With flooding the biggest natural risk the UK faces, it is important we have consensus on managing the risk going forward, which includes sustained and targeted flood defence investment and sensible planning decisions."

A spokesperson for the Department for Environment, Food and Rural Affairs told Sky News: "We want to get an agreement on insurance that provides a lasting solution and secures affordability and availability of flood insurance for policy holders.

"Constructive negotiations are ongoing and Government is meeting with the ABI regularly."

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Exclusive: CVC Mulls £750m Gamble On Betfair

By Mark Kleinman, City Editor

The private equity group behind Formula One motor racing is mulling a takeover approach for Betfair, the online betting exchange which floated on the London market three years ago.

I have learned that CVC Capital Partners, one of the biggest buyout firms in the world, is in the early stages of considering a bid to take Betfair private.

The private equity group, which has reaped a handsome profit from its investment in F1, has not approached the board of Betfair, and has yet to line up financing for a bid, insiders said on Saturday.

Betfair's share price has risen sharply in recent months, largely on the back of speculation that it might be ripe for a takeover.

One person close to the situation cautioned that the company's share price "already contained a takeover premium", and warned that a further jump in the value of the stock may bring a premature end to CVC's interest in the company.

On Friday, Betfair's shares closed at 699.5p, roughly 9 per cent above a 52-week low set in January.

The authorities which govern the City's takeover disclosure regime have become increasingly fastidious in recent years and are likely to force CVC to declare its hand if Betfair's share price moves sharply on Monday.

One person familiar with CVC's thinking confirmed that it had begun contemplating an offer for Betfair but said it may yet opt to cease that work if approached by the Takeover Panel, enabling it to issue a statement saying that it was not pursuing an offer.

"We never comment on market rumour or speculation," a CVC spokesman said on Saturday.

Key to the success of any bid to take control of Betfair would be the attitude of the gambling exchange's founders, Andrew Black and Edward Wray.

Between them, they own approximately 20% of the company, with a number of big technology investors such as the Japanese firm Softbank and Balderton Capital also holding significant stakes.

It is unclear whether CVC has approached either Mr Black or Mr Wray about its interest, although one insider said any takeover ambition would be "dead" without their support.

Betfair floated at £13-a-share, but its poor post-listing performance left investors nursing significant losses, making it one of a series of prominent companies, such as Ocadon, the online grocer, and Glencore, the commodities trader, to suffer a slump in its value after launching an initial public offering.

Betfair has endured a torrid time during its brief life as a public company, parting with a string of top executives.

The current boss, Breon Corcoran, joined in 2012 from rival gambling group Paddy Power. He has opted to reshape the company's operations, withdrawing from troubled Eurozone markets such as Greece, and selling non-core assets such as its stake in LMAX, a financial trading platform.

Like many gaming companies, it has also faced regulatory battles over tax issues, leading to a decision to pull out of the German market. It now intends to focus on regulated markets, and is attempting to turn around the fortunes of its struggling online poker business.

Last month, Betfair reported a 4% fall in unaudited revenues for the three months to January 31 against the same period a year earlier.

"Betfair performed well in the third quarter and the business is on track against our full year expectations. UK revenue was up 6% driven by the continued strength of mobile betting as well as favourable sporting outcomes," Mr Corcoran said in March.

"In line with our previous guidance, international revenues declined as a result of regulatory change and our focus on sustainable jurisdictions.

"The new leadership team is in place and has started to implement the changes required to make Betfair a more focused and leaner organisation."

A spokesman for Betfair, which is chaired by Gerald Corbett, the former Railtrack boss, declined to comment.

CVC, which owns stakes in the Virgin Active gyms chain and the parent company of Madame Tussauds, has an extensive track record in the leisure and sports industries.

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Banks Slammed Over Account Complaints Handling

A fifth of complaints about current accounts at banks and building societies are not being resolved to the customer's satisfaction, a survey says.

Consumer group Which found that 26% of customers, equating to 12 million people across the country, have experienced problems in the last 12 months.

Of these, two-thirds have made a complaint and 22% of people who did so were not happy with the end result.

The findings, which come at a time when moves are under way to make it easier for people to switch current accounts and encourage competition, were made following a survey of 2,000 people across the UK in February.

Common causes for complaint included poor customer service, incorrect charges, difficulty getting through to someone and mistakes showing up on statements.

Three in 10 people who did complain said they had to do so more than once before the issue was put right.

Which? said it had found Lloyds TSB to be the bank with the highest proportion of customers saying they had experienced some sort of problem at 30%, followed closely by Lloyds' sister bank Bank of Scotland, as well as the Co-operative Bank.

Out of the 12 banks and building societies surveyed, the proportion of customers who had experienced problems tended to be lower among First Direct and Nationwide customers, according to the findings.

Which? executive director, Richard Lloyd said: "There's been a lot to complain about in banking over the last few years and to win back our trust they must sort out their complaints handling. When things go wrong it is critical that banks act swiftly and fairly to deal with the problem, identify what caused it and make sure it's not repeated.

"The way that a bank deals with complaints says a lot about the culture of the organisation. Some banks are getting this right but they all need to do more to put their customers first."

Lloyds Banking Group said it was "disappointed" to see the Which? findings, particularly as it has reduced its number of complaints last year by 28%.

A spokeswoman for Lloyds said: "Our commitment to service is central to our aim of being the best bank for our customers. To do this, we'll continue to listen to our customers' feedback, focus on their needs and fix the cause of complaints and urge any customer who has an issue with their account to contact us."

The Co-op Bank also said it was disappointed, adding that the findings do not reflect its experience with customer satisfaction surveys or complaints.

A statement from Co-op said: "Despite the very low sample size of our customers in this survey, we are not complacent about the findings or our position and we do take any feedback on our customer service extremely seriously.

"We are now working with Which? to understand the research in more detail and will be addressing those areas in which we have fallen short as a priority."

Here are the proportions of each bank and building society's customers in the Which? survey who have experienced problems with their accounts in the last 12 months:

:: Lloyds TSB, 30%
:: Co-operative Bank, 29%
:: Bank of Scotland, 29%
:: RBS, 28%
:: Barclays, 27%
:: Santander, 27%
:: Halifax, 27%
:: NatWest, 26%
:: HSBC, 22%
:: Yorkshire Bank, 19%
:: Nationwide, 12%
:: First Direct, 9%

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