Lloyds Snubs Goldman Offer For Buyout Arm

By Mark Kleinman, City Editor

The private equity arm of Lloyds Banking Group has snubbed a secret takeover offer for part of its business from Goldman Sachs, prompting the departure of one of its top executives.

Sky News has learnt that a division of Goldman, the Wall Street giant, recently proposed buying the London operation of Lloyds Development Capital (LDC), which owns stakes in companies including Uswitch, the price comparison website, and Fever Tree, a soft drinks producer.

Sources said on Friday that Goldman had been keen to take over some of LDC's investments as well as some senior executives, including Daniel Sasaki, the firm's London managing director.

The approach is said to have exposed tensions between Mr Sasaki and colleagues in LDC's network of regional offices.

LDC rejected Goldman's interest, and Mr Sasaki is understood to have left in its immediate aftermath.

Mr Sasaki had been dismissed after LDC alleged that he had been guilty of "a breakdown of confidence and trust", according to a person familiar with a letter sent to him.

Mr Sasaki's spokesman denied that suggestion.

Lloyds' continued involvement in the private equity business through LDC has at times been controversial since its taxpayer bailout in 2009.

Some rivals have alleged that LDC has been able to enrich senior executives by investing in companies with an unfair advantage of financial support from the Government.

Lloyds is now 25%-owned by the Government following two stake sales during the last year.

A spokesman for Mr Sasaki said he had acted properly at all times.

"(His) success generated external interest in the London part of the business which in turn led to [his] departure," he said. "Daniel Sasaki... behaved with utmost propriety at all times and there is no dispute regarding his departure.

"(Mr) Sasaki is now reviewing all options open to him and has already been approached by competitors of LDC London to replicate the success he achieved within LDC."

There is no ongoing legal dispute between Mr Sasaki and LDC, a source said, while Goldman is not pursuing its interest in the business.

A spokesman for Lloyds said it would not comment on individual employees but denied that it had any interest in offloading LDC.

"LDC is a core part of Lloyds Banking Group's support for SME and mid-market companies and it has a consistent track record of private equity investments in UK SMEs and the mid-market, having invested more than £1.5bn over the last five years to support ambitious businesses' growth," he said.

The Lloyds private equity unit, which also backs companies such as the retailer Joules and Imagine Nation, a media content producer, was one of Europe's most prolific investors last year, investing in 26 businesses.

Darryl Eales, LDC's chief executive, resigned before the Goldman approach, sources said.

Mr Eales has since been replaced by two executives from LDC's Birmingham office, which led Mr Sasaki to conclude that a buyout of the London operation could be in the interests of the firm, a source close to Mr Sasaki said.

Goldman Sachs declined to comment.

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Fake Letters: Wonga May Face Criminal Probe

City of London Police have confirmed they are to look again at whether the payday lender Wonga should face a criminal investigation.

This week the firm agreed to pay £2.6m in compensation to 45,000 customers after it was found to have sent letters from two fake law firms.

The letters were to pressure people in arrears into paying up.

They threatened legal action and gave the impressionthat  outstanding loans had been passed to debt recovery firms.

The police force discussed the case a year ago but decided at the time it should be left to regulators.

However, now a compensation deal has been reached between Wonga and the Financial Conduct Authority (FCA), officers will "be reassessing whether a criminal investigation is appropriate".

Meanwhile, the industry body representing solicitors has urged the Metropolitan Police to launch an investigation into Wonga.

The Law Society has asked Scotland Yard to determine if the fake legal letters amounted to blackmail or deception, and called on the regulator to hand over documents it holds on Wonga.

The FCA confirmed that the Society, which represents around 160,000 solicitors across England and Wales, had been in contact.

Law Society chief executive Desmond Hudson said: "It seems that the intention behind Wonga's dishonest activity was to make customers believe that their outstanding debt had been passed to a genuine law firm.

"It looks like they also wanted customers to believe that court action undertaken by a genuine law firm would follow if the debt was not repaid.

"Depending on the precise circumstances of what has happened, that could amount to blackmail and deception, as well as offences under the Solicitors Act 1974 and Legal Services Act 2007."

Wonga is Britain's biggest payday lending firm, and has since apologised for its action between October 2008 and November 2010.

The short-term consumer credit sector has come under increased regulatory scrutiny over business practices and potential four-digit interest rates.

The Wonga action has been described by consumer campaigners as a "shocking new low" for the payday industry.

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House Sitters Bag Top Properties On Cheap

By Gemma Morris, Sky News Reporter

More and more young professionals, who cannot afford to get on the housing ladder, are bagging themselves plush temporary accommodation for very little money under "guardian schemes".

Becoming a guardian is a bit like glorified house sitting - often in grand and eccentric properties that would otherwise be left standing empty.

It saves the property owners from forking out on security costs and also keeps squatters at bay.

At the same time, the guardians get to live in buildings they could otherwise only dream of - while paying monthly fees which can sometimes be as low as 20% of the market rental rate.

One of the properties on offer to guardians

Robyn Winfield-Smith is a theatre director who lives in a 10,000 sq ft building in the heart of London's West End.

Her bedroom is a spacious former dance studio.

She says being a guardian works for her and her housemates because they cannot afford typical rents in the capital.

"This enables us to stay within the careers that we want whilst living very cheaply."

Recent figures from LSL Property Services put the average monthly rent in England and Wales at £745 per month.

In London, it's £1,124.

This home in Hampstead Heath is offered as planning permission is obtained

Guardian schemes are only ever temporary, usually for a few months or years, and tend to be while the building owners await planning permission.

But Robyn enjoys the constant change.

"You can bring along all your furniture and create a brand new home every time you move ... Some of the buildings we've had have been extraordinary."

Properties managed by guardian companies include churches, pubs and other commercial buildings as well as privately owned more "normal" looking flats and houses.

Robyn Winfield-Smith enters her London dance studio home

Arthur Duke, managing director of Live-In Guardians, said the number of young professionals applying to be guardians in the past 18 months has grown.

"One of the attractions is the fact that they pay at least 50% of the going market rental which is all inclusive so there's no bills on top and no council tax either.

"We used to get around 8-10 on line applications a day, whereas now we are getting around 15-20."

Critics though warn it is not a solution to the housing crisis.

Antonia Bance, from Shelter, said: "We'd urge caution, [there are] very few tenancy rights attached to property guardianship schemes. If we're looking to solve our housing crisis the thing that we need to do is build more affordable homes."

Robyn admits there are some downsides too, but she is not put off.

"You're not allowed pets, not allowed smoking, and not allowed to have more than two people for longer than three hours  - that's the kind of general rule on guests. But that's fine because what we're getting in exchange is this amazing environment to live in."

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Lidl Supermarket Chain Creates 2,500 Jobs

German supermarket chain Lidl is creating 2,500 jobs as part of a £220m expansion programme in the UK.

The company says it will boost the number of stores from 600 to 620 in the next nine months.

It is recruiting across the board, including store roles, depot staff and positions at its Wimbledon HQ.

The chain says it is also filling specialist positions such as bakery managers and freshness coordinators.

The expansion follows four years of growth in sales and profitability for Lidl in the UK. 

Morrisons has confirmed plans for 2,600 job cuts

Turnover was £3.3bn in 2013 and sales have increased by 20% over the past 12 months.

That has helped to grow market share to a record 3.6% in June, up from 3% in 2013.

The jobs boost contrasts with the 2,600 redundancies recently announced by Morrisons. 

This latest round of investment comes on the back of a £170m investment in 2013, comprising 12 new stores and 3,500 new staff.

The supermarket has also significantly increased the amount of space allocated to fresh fruit and vegetables, meat, poultry and fresh fish.

Ronny Gottschlich, Lidl UK's managing director, said: "This latest phase in our growth is a testament to the continuing success of Lidl in the UK.

"People all over the country are realising they can make huge savings on their weekly grocery shop with us, without compromising on quality."

Chancellor George Osborne said: "It's great news that Lidl is investing in thousands of new jobs across the UK - each job means security and a better future for another family and the country as a whole."

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Alibaba Goes For NYSE And Not Rival Nasdaq

China's giant online retailer Alibaba is to list its shares on the New York Stock Exchange and not the rival tech-heavy Nasdaq.

In a regulatory filing it said American depositary shares will use the ticker symbol BABA on the NYSE.

A NYSE spokesman said: "We participated in a comprehensive and deliberate exchange selection process, and we are pleased to welcome Alibaba Group to the New York Stock Exchange."

In May Alibaba filed for an initial public offering (IPO).

The company, which handles more than three-quarters of online retail transactions in the world's most populous nation, now expected to go public in late summer or early autumn.

Alibaba has not revealed how many shares will be offered or what its expected price is.

However analysts believe it could top Facebook's $16bn (£9.4bn) float on the Nasdaq to become the biggest tech offering ever.

Facebook's highly anticipated float turned damp after glitches hit early trading attempts on the Nasdaq.

The problems were seen as a reason why Twitter subsequently decided to list on the NYSE and not the Nasdaq.

Alibaba's IPO will be the largest Chinese firm to list on a US exchange and brings it under legal controls of the Foreign Corrupt Practices Act (FCPA).

The Securities & Exchange Commission and Department of Justice enforce the strict regulations of the FCPA, which was originally created to stop American businesses from bribing foreign officials after the Watergate scandal.

However most of the biggest FCPA fines in recent years have been against US offshoots of foreign companies.

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888poker Cancels Sponsorship Deal With Suarez

Online betting firm 888poker has cancelled its sponsorship deal with Uruguay's Luis Suarez, following his four-month Fifa ban for biting an opponent.

In a statement, the company said: "888poker signed Luis Suarez following a fantastic season for which his achievements were widely recognised.

"Regrettably, following his actions during Uruguay's World Cup match against Italy on Tuesday, 888poker has decided to terminate its relationship with Luis Suarez with immediate effect."

More follows...

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Centrica Boss Welcomes 'Watchdog Referral'

By Ian King, Sky News Business Presenter

The chairman of Britain's biggest energy supplier has told Sky News he welcomes an expected referral of the sector to the UK's competition watchdog.

Rick Haythornthwaite, who chairs the owner of British Gas, Centrica, said it was clear there was a lack of trust in the energy market, making it important that the Competition and Markets Authority provided an objective view.

He said: "There's a lack of trust in the system but, most importantly, there's a lack of a commonly-held, independent data set from which we can rebuild the trust.

"And I trust the CMA to provide an objective independent view taking the sector forward because we need to solve some pretty important things together."

Both energy companies and Ofgem itself are keen to de-politicise the sector ahead of next year's general election.

The Labour leader, Ed Miliband, shocked energy companies but won support in opinion polls when, during last year's Labour Party conference, he announced an incoming Labour government would freeze energy bills.

This has subsequently led to suggestions that energy companies have been reluctant to pass on recent falls in wholesale energy prices on the basis it will be difficult to raise prices subsequently ahead of the election.

Mr Haythornthwaite stressed, though, it was important for the CMA to look at as wide a picture as possible rather than focussing on the narrow issue of consumer bills.

He added: "What is really important is to look at it [the sector] as a whole.

"There's a lot of discussion about wholesale prices, but there's more than just that.

"Although they're going down right now with the warm winters, spring and early summers, the environmental costs are going up, distribution costs are going up and everyone needs to understand the basis of that.

"Equally, I think it's important to understand the role that government plays and the regulator in turning around this sector."

Rick Haythornthwaite appeared on Ian King Live

Mr Haythornthwaite disputed that, because none of the major suppliers had yet passed on recent falls in wholesale energy prices, it suggested the energy market was not efficient.

He went on: "In an efficient market, all the competitors have to decide what their target customers need. Ours say they're interested in price and predictability, in what is today an uncertain world, and it's not uncommon for some to believe in buying gas going forward.

"And so what is most important in a competitive market is that customers understand what's on offer to them, can make a choice based on the pure facts and can switch quickly. I hope, when the CMA looks at it, they'll understand there are lots of players in the market.

"We aren't free to create our own creative position through our prices and offering and we certainly can't switch quickly enough. Centrica is absolutely committed to being transparent to ensuring our customers' ability to switch quickly."

Centrica is facing a major overhaul of its top management later this year, with finance director Nick Luff set to leave to join publishing company Reed Elsevier by the end of the year.

At the same time, Chris Weston, the managing director of British Gas, will shortly leave to become chief executive of the temporary power supplier, Aggreko, while the City is buzzing with speculation that Sam Laidlaw, Centrica's chief executive for the last eight years, is poised to leave.

However, Mr Haythornthwaite insisted this did not mean Centrica was "rudderless", as one City analyst recently suggested. He said: "The bigger question I wanted to ask, when I first joined, is there strategic momentum?

"We have strength in depth, our strategy is clear and the company is driving it through. Sam is leading it and we will manage [his] succession in a measured fashion."

He said he had "no doubt" Centrica would find a good candidate for the job if Mr Laidlaw did decide to step down.

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Barclays Faces US 'Dark Pool' Fraud Lawsuit

US authorities have launched a securities fraud lawsuit against Barclays linked to its private trading system, or "dark pool".

New York Attorney General Eric Schneiderman alleged that the London-based bank's dark pool gave advantages to high-frequency traders.

It is alleged Barclays misled investors about "toxic and predatory" practices in the system.

The lawsuit says the bank boosted the market share of its dark pool through a series of dishonest statements to clients.

Dark pools are off-exchange systems that allow investors to trade blocks of shares anonymously, with the size and price of the orders hidden from other participants.

"The facts alleged in our complaint show that Barclays demonstrated a disturbing disregard for its investors in a systematic pattern of fraud and deceit," Mr Schneiderman said.

"Barclays grew its dark pool by telling investors they were diving into safe waters. According to the lawsuit, Barclays' dark pool was full of predators - there at Barclays' invitation."

The attorney general said Barclays falsified marketing material to back up its claims.

It allegedly removed from one marketing document mention that a high-frequency trading firm, known to engage in predatory practices, was a major participant in the dark pool. 

One employee allegedly stated: "I had always liked the idea that we were being transparent, but happy to take liberties if we can all agree."

Mr Schneiderman said of the bank: "And, boy, did they take liberties."

Barclays also heavily promoted a service called Liquidity Profiling, which the bank said would weed out predatory traders.

But the lawsuit says that system falsely assigned safe ratings to "toxic" traders.

Barclays also allegedly overrode ratings for some of its own internal trading desks that were engaged in high-frequency trading. 

A number of former employees of the bank helped the investigation by reporting the wrongdoing, said the attorney general.

A Barclays spokesman, said: "We take these allegations very seriously.

"Barclays has been co-operating with the New York Attorney General and the SEC and has been examining this matter internally. The integrity of the markets is a top priority of Barclays."

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Dixons Hits £1bn Online Sales For First Time

The owner of Currys and PC World has seen its group online sales hit £1bn for the first time.

Dixons Retail said internet shopping rose by 16% in the year ending April 30.

The company said total like-for-like sales were up 5% in the UK and Ireland and 2% in Nordic countries but down 9% in Greece.

It said underlying pre-tax profit across the group reached £166.2m in the year, up 10% on the restated 2013 figure of £151m.

Dixons owns the Kotsovolos business in Greece and Elkjop in Scandinavia.

In the financial year it discontinued operations in Turkey and Italy and announced disposal of its business in Slovakia and the Czech Republic.

The figures come as the company, which is Europe's second largest electrical retailer, prepares to merge with the continent's biggest phone retailer, Carphone Warehouse.

The two firms have agreed on an all-share merger as they seek to maximise involvement in the increasing convergence of technology, known as the "internet of things".

Group chief executive Sebastian James said: "This has been a great year for the group with some excellent performances across our multi-channel businesses, together with the achievement of a number of important strategic objectives."

He added: "I'm very excited about the opportunities the proposed merger with Carphone Warehouse offers for the group.

"We'll build what I hope will be the first and best truly multi-channel proposition that allows customers not only to buy and experience the explosion of new connected products ... but to also get the advice, connectivity and services that will allow them to use technology as it should be used - to make their lives better."

The company's UK pension scheme deficit is £400m, down slightly on last year's figure of £406m.

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Strike By French Air Traffic Controllers Slammed

Airlines have been forced to cancel dozens of flights to and from France on the first day of a six-day walkout by air traffic controllers.

The stoppage comes at the height of the tourist season and follows a rail strike that affected services abroad and domestically and is still continuing in some parts.

According to the country's civil aviation watchdog, about one in five flights travelling to and from several big cities in the south, or taking off from Paris to the south, Spain, Portugal, Morocco, Tunisia and Algeria, were cancelled.

Passengers also experienced delays on other services.

Some 20% of flights are expected to be cancelled today.

Those who are travelling have been warned not to go to the airport "without having been guaranteed that their flight is maintained".

Ryanair was forced to cancel more than 200 flights on Tuesday, and is set to cancel more than 250 today.

The airline slammed the strike, calling on the EU Commission "to remove the right to strike from Europe's air traffic controllers, who are once more attempting to blackmail ordinary consumers with strikes".

The International Air Transport Association (IATA) airlines group also condemned the action.

IATA head Tony Tyler said: "Unions bent on stopping progress are putting at risk the hard-earned vacations of millions of travellers, and from the public's perspective, the timing of the strike could even be regarded as malicious.

"In addition to vacationers, businesspeople undertaking important trips and those awaiting urgent shipments will all face hassles and uncertain waits as flights are cancelled, delayed or diverted around a major portion of European airspace."

Twenty-eight easyJet flights were cancelled, while British Airways said eight flights had been affected.

The majority of Air France's flights were unaffected by the strike, with only 10% of short and medium-haul journeys scrapped.

Not all air traffic controllers are striking, but those who have walked out are protesting against what they say is a lack of sufficient funding for a sector they say is in dire need of modernisation.

They want airport fees for airlines to increase by 10%, while companies want them to decrease.

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Home Building Being Hit By Skills Shortage

By Becky Johnson, North of England Correspondent

A serious shortage of skilled construction workers is impacting on the industry's recovery.

Experts have told Sky News that thousands of workers need to be recruited and trained in order to meet intense demand for new housing.

A shortage of homes is among the factors fuelling rapidly rising house prices.

Last year just 108,190 houses were completed in England, fewer than half the 220,000 the Home Builders Federation says are needed to keep up with demand.

However, there currently aren't enough skilled workers. During the recession 390,000 workers left the industry according to the national training organisation, the CITB.

Fewer apprentices have joined the sector since 2008, resulting in an aging work force. A further 410,000 workers are due to retire in the next five years.

Mark Aldcroft, who manages a new build site near Stockport, told Sky News: "Definitely bricklaying and roofers, we're struggling to get an influx of them.

"Sometimes we can't get enough of the joinery industry because they're being pulled from pillar to post, various other contractors and house builders.

"Inevitably it does cause delays," he said.

Jay Culbert, who works as a labourer, said he has noticed fewer young people coming into the industry.

He told Sky News: "People have obviously steered away from it because they were unable to make a career in this when we suffered the recession.

"I think people have steered toward those jobs that require more thinking rather than obviously physical, manual labour."

Mike Bialyj from the CITB said there will "undoubtedly" be an impact on the housing sector.

He told Sky News: "One in 20 companies were forecasting that their business could be damaged or even irreparably damaged due to the skills shortage, so we really do need to make sure we fill the gap."

Tomorrow, the Bank of England Governor Mark Carney will outline his plans to take the heat out of the housing market.

It comes as research from charity Shelter shows that rising prices mean 80% of properties for sale in England are now unaffordable for the average working family.

In an exclusive interview with Sky News last month Mr Carney said: "The issue around the housing market in the UK … is there are not sufficient (numbers of) houses (being) built."

Asked if more houses need to be built, Mr Carney replied: "That would help us out."

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Zero-Hours Contracts Face New Controls

Plans to tackle abuses of zero-hours contracts by allowing people to work for more than one employer have been attacked as insufficient by unions.

The business secretary Vince Cable said the reforms, aimed at outlawing so-called exclusivity clauses, would tackle "unscrupulous" employers who had had been abusing the flexibility offered by zero-hours.

Unions and campaign groups have long demanded that the contracts, under which workers do not know if they have work from one week to the next, should be banned but Mr Cable told Sky News they have a place, provided they are "fair".

He said: "It has become clear that some unscrupulous employers abuse the flexibility that these contracts offer to the detriment of their workers.

"Today, we are legislating to clamp down on abuses to ensure people get a fair deal.

"Last December, I launched a consultation into this issue. Following overwhelming evidence we are now banning the use of exclusivity in zero-hours contracts and committing to increase the availability of information for employees on these contracts.

"We will also work with unions and business to develop a best practice code of conduct aimed at employers who wish to use zero-hours contracts as part of their workforce".

The Government said the ban would benefit 125,000 zero-hours contract workers estimated to be tied to an exclusivity clause and allow workers to look for additional work to boost their income.

Frances O'Grady wants measures to guarantee incomes

While the move was largely welcomed by business lobby groups, Labour suggested that ministers had allowed the controversial contracts to soar out of control.

Shadow business secretary Chuka Umunna said: "Under David Cameron's government we've seen a rising tide of insecurity.

Zero-hours contracts, which were once a niche and marginal concept, have become the norm in parts of our economy as families have been hit by the cost-of-living crisis.

"The Government has watered down people's rights at work and have failed to match Labour's plans to outlaw zero hours contracts where they exploit people.

"Labour will ensure that people at work get a fair deal and proper protections so they are not forced to be available around the clock, are paid if shifts are cancelled at short notice and are able to demand a full contract if, in practice, they are working regular hours".

TUC general secretary Frances O'Grady added: "The ban is welcome news but it's not nearly enough to really tackle the problem.

"A lack of certainty is the real issue. Far too many employees have no idea from one week to the next just how many hours they'll be working or more importantly how much money they'll earn.

"This makes managing households budgets stressful and organising childcare very difficult indeed.

"The one change that would really make a difference would be for employers to have to guarantee their staff a minimum number of paid hours each week".

But John Longworth, director general of the British Chambers of Commerce, argued: "Maintaining the UK's flexible labour market is crucial to keeping unemployment down.

"Zero-hours contracts are vital for a successful jobs market, but they must be fair and work for all parties".

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WPP Pay Rebel Changes Tack Ahead Of AGM

By Mark Kleinman, City Editor

One of the most trenchant City critics of pay at WPP Group is to change tack by voting in favour of remuneration policies at this week's annual meeting of the world's biggest marketing services provider.

Sky News understands from fund management sources that Scottish Widows Investment Partnership (SWIP), which holds a stake of more than 2% in WPP, has decided to support last year's directors' pay report as well as a binding vote on future policy.

The decision is a surprise since SWIP, which is now owned by Aberdeen Asset Management, has voted against resolutions on pay at previous WPP AGMs.

Wednesday's shareholder meeting, which will be held at the Shard, the City skyscraper, is expected to see well over 70% of investors supporting the WPP board once abstentions are taken into account.

Excluding abstentions, the vote in favour is likely to be above 80%, slightly ahead of last year's figure.

City sources said that other notable supporters of the pay resolutions were likely to include Blackrock and Legal & General Investment Management, while Standard Life Investments, another leading institution, was expected to oppose the board.

Some investors have expressed reservations about the earnings of Sir Martin Sorrell, WPP's chief executive, who received total remuneration worth nearly £30m last year.

That figure represented a hefty increase on the previous year's £17.5m package, although some leading shareholder proxy groups have recommended voting in favour because more than 90% of Sir Martin's remuneration is performance-related.

The near-£30m deal included £22.7m awarded under a long-term share scheme which was handed to him after a surge in the company's share price.

WPP had a successful 2013, benefiting from the turbulence caused by the ultimately-aborted merger talks of its two principal rivals, Omnicom Group of the US and France's Publicis Groupe.

Last weekend, WPP, which owns agency networks such as JWT, Ogilvy & Mather and Young & Rubicam, won prestigious awards for being the most creative and effective marketing services holding company at the Cannes Advertising Festival.

The WPP boss has been a staunch defender of his pay, frequently pointing to the risks he took to fund its growth during precarious phases of the company's expansion.

One ally of Sir Martin's pointed out that during the five-year period covered by the £22.7m share payout, there was a £12.35bn uplift in returns to WPP's wider shareholder base.

Reforms to WPP pay policies saw investor support for the company's remuneration report rebound to 80% last year from a meagre 40% in 2012.

Vince Cable, the Business Secretary, has forced an overhaul of the way companies report executive pay, and handed shareholders a binding vote on future compensation policies.

Votes on the previous year's pay deals, which have seen bloody noses given to boards at Barclays and Pearson this year, remain non-binding.

A WPP spokesman said previously: "The vast majority of Sir Martin Sorrell's pay relates to the five-year LEAP scheme already disclosed and designed to link long-term shareholder value creation with executive rewards as prescribed in Vince Cable's recent communication with companies."

The spokesman declined to comment on shareholders' voting decisions ahead of Wednesday's AGM.

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Dozens Of Flights Cancelled Over France Strikes

By Mike McCarthy, Sky News Correspondent

Thousands of air passengers are facing travel disruption due to a strike by air traffic controllers in France.

The action, starting today, is expected to last for six days. Last night, French authorities were still trying to assess the likely impact.

Airports in the UK say the industrial action is likely to affect many flights using French airspace including those to Spain.

EasyJet, which is the second biggest airline in France, is telling customers they will have to cancel about 25% of flights.

These include a number of flights from Lyon, Marseille, Toulouse, Bordeaux, Paris Orly, and Paris Charles de Gaulle.

EastJet has promised refunds to passengers

The airline says it is doing everything it can to minimise the impact on customers and that all those on affected flights will be informed by text message or email. 

It has promised to offer free transfers to a new flight or a full refund for travellers hit by the action. 

The company has advised people against re-booking journeys between today and June 30, because of the likelihood of further disruption.

Cancellations and delays may be significant but are not expected to be as bad as first feared. One of the two French unions involved called off its action after talks. 

The unions are opposed to plans for a re-organisation of air navigation in France.

Airports and airlines have been planning in an effort to avoid as much of the disruption as possible.  

Each week 17,000 seats are available between France and Manchester alone.

Manchester airport, which is part of a group including Stansted, East Midlands and Bournemouth, says up to 13,000 passengers could be affected this week.

It has advised passengers who are concerned to check with their airline before arriving at the airport.

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Carpetright Profit Trampled By Consumer Fears

High street flooring firm Carpetright has seen its full-year pre-tax profit drop by more than half, which the firm is blaming on falling consumer confidence.

It said in the 52 weeks to April 26, group pre-tax profit was £4.6m, down 52.6% from £9.7m a year earlier.

Total revenue for the year was £448m, down 2.2% on the 2013 figure of £458m.

UK like-for-like sales declined 0.2% in the year, while European operations reported a significant loss.

The company said in a statement: "Operations in the UK continued to be challenged by a fragile consumer environment where the disposable incomes of our customers remained under pressure."

Carpetright said the drop was also partially the result of the costs involved in ending or renegotiating leases at unprofitable out-of-town stores.

The company, which has a large freehold property portfolio, reduced its total store count by six in the year and now has 614 stores.

It has 472 outlets in the UK, 95 in the Netherlands, 26 in Belgium and 21 in Ireland.

The most significant impact came from an overhaul of its Dutch operations, in what it described as "extremely difficult trading conditions".

It added: "The key driver in the performance of the rest of Europe continues to be the deterioration of consumer confidence in the Netherlands, where the floor coverings market remains weak."

Carpetright said it was expanding its online presence, improving search engine optimisation and has modernised more than half of its stores.

No dividend would be paid to shareholders.

The company has sought to renegotiate leases in the unprofitable out-of-town locations and expects to reduce the store count further when lease contracts expire within the next four to five years.

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Trainline Tracks Float Despite Tech Wobble

By Mark Kleinman, City Editor

Britain's biggest online rail booking operation is on track for a stock market flotation despite disappointment over the performance of technology listings in London so far this year.

Sky News understands that the owner of Trainline has kicked off discussions with banks about an initial public offering (IPO) that could value the company at in excess of £400m.

Exponent Private Equity, which has held a controlling stake in Trainline since 2006, is expected to appoint City advisers to oversee a flotation within weeks, although the timing of any listing is uncertain and an outright sale to another investor is a possibility, sources said.

A flotation would provide a further test of investors' appetite for shares in technology companies following a mixed reception for a spate of technology debuts in recent months.

Businesses such as AO World, a digital channel for white goods sales, and Just Eat, an online takeaway service, attracted strong demand ahead of their listings but both have traded down since going public.

Trainline's recent performance has been strong, and Exponent is understood to believe it possesses a sufficiently visible growth profile to reassure prospective investors.

It made around £9m in profit in the year to March 2013, despite having to pay £2m in fees to advisers who led an unsuccessful sale process.

The business, which handles ticket sales for the majority of UK rail operating companies, added two million customers in the year to March and has seen its digital app downloaded more than six million times since its launch.

The company also said that its site was the most popular travel app on iPhone and Android devices.

In an attempt to drive the shift to mobile usage of its site, Trainline reshuffled its top management earlier this month, recruiting Clare Gilmartin, a former eBay manager, as its new chief executive.

Murray Hennessy became deputy chairman following Ms Gilmartin's appointment.

Established in 1999, Trainline was bought by Exponent for about £160m from a consortium which included Virgin, Stagecoach and National Express.

A previous attempt to sell the business in 2012 collapsed when bidders including Priceline.com, the US-based bookings site, and a Canadian pension fund declined to meet the owner's asking price.

Exponent subsequently paid itself a multimillion pound dividend from Trainline as part of a £190m refinancing.

The company faced a sudden loss of revenue in 2012 when the Department for Transport (DfT) decided to strip Virgin Trains of the West Coast mainline franchise and award it to FirstGroup.

However, that decision was overturned after embarrassing flaws in the bidding process were exposed, triggering an overhaul of the entire rail franchising system.

Last week, Virgin won a further two-year extension to run the line, one of the UK's most lucrative, prompting Sir Richard Branson to pledge to bid again for the next licence period.

As well as its own website, Trainline's runs digital sales operations for the majority of train operating companies and has expanded overseas, serving major companies and travel agents as clients.

Exponent and Trainline declined to comment on Sunday.

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HS3 From Leeds To Manchester To Be Outlined

By Jason Farrell, Senior Political Correspondent

Britain needs a third high-speed railway line to create "a northern powerhouse", George Osborne will say today.

The Chancellor will use a speech in Manchester to argue that he wants to go beyond the north-south HS2 to create an east-west HS3.

In doing so he hopes to create "a collection of cities - sufficiently close to each other that combined they can take on the world".

The east-west connection between Leeds and Manchester would be based on existing rail routes but speeded up with new tunnels and infrastructure.

The first phase of HS2

It is an effort to address Britain's financial dependence on London, which currently accounts for nearly a quarter of the country's economic output.

It will also be seen as an attempt to win support for the Conservatives outside their southern heartlands before the 2015 General Election.

Under current plans the £50bn HS2 project will provide 225mph trains from London to Birmingham in its first stage, before creating a Y-shaped network with lines to Manchester and Leeds by 2032/33.

The second phase would then connect Leeds and Manchester.

The high-speed network with HS3

George Osborne will say: "We are building High Speed 2, which will connect eight of the 10 largest cities in the UK, including Manchester, Leeds and Sheffield.

"Phase two is a £21bn investment, and will support at least 60,000 jobs. It's the most important investment in the north for a century."

A number of MPs with constituencies along the route are opposed to the project.

Mr Osborne will say: "Of course, there are opponents of the project - just as there were opponents of the original railways. I've discovered that almost everything worth doing in politics is controversial."

No timescale is in place for the Leeds-Manchester link.

:: Watch George Osborne's speech live on Sky News at 9am.

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Asos 'Loses 20% Of Stock' In Warehouse Fire

Online fashion retailer Asos has confirmed that 20% of its stock was "compromised" after a fire broke out at its main distribution warehouse.

Asos said that at the end of May the company held £159m of stock at cost price, with 70% of it held at the warehouse in Barnsley.

Although the stock damage at cost price is estimated at around £20m, at retail prices the value may exceed £30m.

The company said in a statement: "None of the technology, automation or structure of the building has been affected by the fire.

"Our initial estimate is that approximately 20% of the total stock at the site has been compromised by fire damage and the sprinkler systems."

"The clean-up process commenced on Saturday morning and progressed quickly.

"Consequently at 2am this morning we recommenced taking orders. We are fully insured for loss of stock and business interruption."

In early stock market trades, shares were down more than 2%.

The fire affected four floors of its warehouse in Park Spring Road, Grimethorpe, and led to 500 workers being evacuated after the alarm was raised at 9.50pm on Friday.

After initial investigations South Yorkshire Police determined the fire as being deliberately lit and have launched a criminal inquiry and appealed for anyone with information to get in touch.

Asos said it is "co-operating fully" with the investigation.

The warehouse is thought to handle over 10 million packages at any one time.

It is more than 60,000 square metres in size - bigger than seven football pitches.

In early June the fashion giant's share price dropped 40% after the retailer issued an unexpected profit warning.

At the time Asos said it would be less profitable this year due to higher promotional activity, the strong rate of growth in low-margin products, and foreign currency weakness because of the strong pound.

Previously, ever since it floated on the stock exchange in 2001, it had been a darling for investors who saw its value rise sharply.

ASOS - which was originally called As Seen On Screen - has worldwide sales of £750m.

It has been one of the most successful businesses at capitalising on the large number of British consumers who have switched from high street shopping to buying clothes online.

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Ramada Owner Was £6bn InterContinental Suitor

By Mark Kleinman, City Editor

The owner of the Ramada hotel chain was the mystery suitor behind a recent £6bn takeover offer for the FTSE-100 hospitality provider InterContinental Hotels Group (IHG), Sky News can reveal.

Wyndham Worldwide Corporation, which is the world's biggest hotel operator with 7,500 sites, made a preliminary offer to acquire IHG in a deal that would have united leading industry brands such as Holiday Inn, Travelodge, Knights Inn and Crowne Plaza.

Sources said this weekend that Wyndham's initial approach to combine with IHG, which was made earlier this year, had been rebuffed and was no longer live, but suggested that it could subsequently be revived.

Wyndham is understood to have been examining a merger with IHG as a means of pursuing a so-called inversion, under which its tax domicile would have switched to the UK to take advantage of favourable corporate tax rates.

Such deals have become an important driver of trans-Atlantic mergers and acquisitions activity.

Pfizer recently failed with an attempt to buy its British rival AstraZeneca for roughly £70bn after provoking a hostile reaction from its target and Westminster politicians, who were angered that the offer was partly predicated upon tax benefits.

This week, Shire, a London-listed and Irish-headquartered pharmaceuticals group, rejected a £26bn offer from AbbVie, a US-based company which wants to use a deal to relocate its tax base.

Inversion have also sparked anger in the US, with several leading politicians vowing to pursue legislative measures to prevent American companies relocating overseas.

It is unclear how Wyndham, which has a market value of $9.5bn (£5.6bn) and is the world's biggest hotel group by number of properties, was proposing to structure an offer for IHG, which is valued at just under £6bn.

Sky News revealed in May that IHG's board had met to consider an approach from an unnamed suitor but rejected it on the grounds that it was too low.

The report prompted a shareholder in the UK-based group, Marcato Capital Management, to call for IHG to examine merger opportunities.

"We believe that a combination with a larger hotel operator would have compelling strategic and financial merit and represents a unique opportunity to reshape the global hospitality industry," it said.

"We strongly encourage InterContinental Hotels Group's board of directors to explore such a combination and engage advisers to conduct a formal process to ensure it evaluates the full range of opportunities available to maximise value."

Since then, IHG's management has shown little appetite to heed the request. Sources close to the company pointed to its recent strong performance as evidence that it had no need to seek a suitor.

The British group is chaired by Patrick Cescau, a former boss of Unilever, and run by Richard Solomons, who has pleased investors with a series of large capital returns.

These have been generated by the sale of many of its flagship hotel properties, including most recently sites in San Francisco and New York, as IHG shifts its business model to hotel management rather than ownership.

IHG still owns the LeGrand Paris and InterContinental Hong Kong, but is also expected to sell these properties and return hundreds of millions of pounds more to shareholders.

It has also been accelerating the expansion of its pipeline of new hotels, with 237 locations opened last year and 444 more added to its roster of future openings.

The company operates about 5% of the world's hotel rooms but has more than twice that volume of the industry's known slate of new rooms.

Last year, IHG reported pre-tax profits of £600m, a 10% rise on the previous year.

Its future growth will be driven by emerging markets, with Hualuxe, a premium brand aimed at Chinese customers, launched in 2012.

IHG declined to comment while Wyndham was unavailable.

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TSB Shares Up 11% On First Day Of Trading

Shares in retail bank TSB jumped more than 11% in value after public trading in the Government-back lender started.

The list price of 260p was quickly up to more than 290p, 11.5%, within minutes of trades commencing at 8am.

In early afternoon trades on Friday the price had climbed further, to 294p, before easing back to 290p at the close.

The initial pricing of 260p, slightly above the mid-range estimate, valued the new retail bank at £1.3bn.

Lloyds Banking Group originally planned to offer 25% of TSB shares but upped the figure to 35% after keen interest was shown by investors.

A total of 175 million shares have now been offered to the public.

Lloyds is still 25%-owned by the British taxpayer after a multi-billion bailout in the financial crisis.

Lloyds chief executive Antonio Horta-Osorio said: "The successful initial public offering of TSB is an important further step for Lloyds Banking Group as we act to meet our commitments to the European Commission.

"The significant investor demand for shares in TSB, which reflects investors' confidence in the prospects for the business, has meant that we have been able to set the offer size at 35%.

"TSB has a national network of branches, a strong capital base, robust liquidity and significant economic protection against legacy issues."

EU regulators ordered to Lloyds to sell 631 branches in 2009 over competition concerns, and must now sell the remaining holding by the end of 2015.

The original buyer of the branches was to be the Co-op Bank, until a £1.5bn capital black hole was discovered in the mutual's books.

The share price range was initially set at between 220p and 290p, on June 9.

At the time, Lloyds said in a statement that the float would commence around June 24.

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Cashless High Street Ditches Notes And Coins

By Becky Johnson, North of England Correspondent

Shoppers will find their cash is worthless in one Manchester suburb as only cards will be accepted by stores on the high street.

As part of a social experiment, shops along fashionable Beech Road in Chorlton will only take payments on plastic.

It comes as research shows people are increasingly using cards instead of notes and coins.

Many of the shops, bars and restaurants on the road are independently owned.

Mary Paul, of the Beech Road traders' association, said: "Businesses can see the way things are going with more money being taken on cards across the board, so this is a very interesting glimpse into the future for all of us."

This month the British Retail Consortium (BRC) revealed cash use has fallen by 14% in the last five years.

Card use is increasing rapidly, with debit cards currently being used for 32% of transactions compared to 30% last year.

Some experts predict physical currency will cease to exist within 20 years.

Shops on Beech Road in Chorlton are trialling plastic-only payments

Helen Dickinson, director general of the BRC, said: "Customers are taking advantage of new ways to shop and pay. The availability of contactless cards, handy express stores and self-service tills, as well as online sales, has increased the use of debit cards for smaller payments in place of cash."

Mark Latham, product and innovation director at Handepay, the card payment provider behind the idea to trial a cashless high street, added: "Britain is at the forefront of countries heading towards becoming cashless because the public are always eager to embrace new technology.

"Recent research showed most Londoners would welcome a cash-free society as they're so used to paying for everything with cards.

"There's now an expectation that card payment is available everywhere - it takes us aback as consumers if it isn't.

"Business owners love it too as it cuts down on queues, reduces lost sales and gives them more time to interact with their customers.

"All evidence shows consumers spend more too, as they're no longer limited to just the cash in their pockets."

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