UK Economy Emerges From Six-Year Downturn

Official figures show the UK economy has emerged from six years of lost growth to return to its pre-crisis peak.

The Office for National Statistics (ONS) said Britain's economy was now bigger than it was before the financial crisis as gross domestic product (GDP) expanded by 0.8% in the second quarter of the year.

The performance matched that of the previous quarter, although today's figure is only a first estimate and subject to revision.

It meant that on an annual basis, growth was 3.1% higher than was measured in the same period last year, leaving total output 0.2% higher than in the first quarter of 2008 - its previous peak.

Consumer spending is still driving growth

The measure of GDP per head - taking account of a growing population and weaker productivity - remains below the peak.

In its April to June calculations, the ONS charted 1% quarter-on-quarter growth in the service sector - which accounts for 75% of total UK GDP - while industrial production rose 0.4%.

However both construction and agriculture made negative contributions of 0.5% and 0.2% respectively. Both were hit by the effects of a very wet winter and spring.

The construction sector was damaged by a weak May

The ONS said only the service industry was now bigger than it was before the crisis, with industrial output and construction still 10% smaller.

Chancellor George Osborne said: "Thanks to the hard work of the British people, today we reach a major milestone in our long-term economic plan."

He tweeted: "We owe it to hardworking taxpayers not to repeat the mistakes of the past.

"Economy bigger than previous peak in 2008 but long way to go - the Great Recession was one of deepest of any major economy & cost UK 6 years."

However many people reacted to the news with scepticism. Posts of Sky News' Facebook page suggested not everyone feels Britain is out of the economic doldrums.

Ed Balls accuses ministers of creating a cost of living crisis

:: Robert Futsal Brassett: "They may declare it. But it don't feel like it."

:: Dorothy Dougan "Just in time for the General Election how fortuitous. So do we all get pay rise now?"

:: Jax Bell - "So NOW can we all get a decent pay rise,MPs 11% everyone who is on benefits/pension 2.5% Working people in North East 1%. Worst Government Leaders in British History"

:: Josephine Hargreaves - "Really? Come out into the real world & talk to the ordinary people to see if its over!"

:: Kerry Livesey - "Good news but let's hope the low paid workers benefit"

The pace of the recovery will feed into expectations about the timing of an interest rate rise by the Bank of England though its governor Mark Carney recently suggested it would be tied to improved data on wage growth.

While employment has soared in recent months, salary growth has fallen to 0.3% year-on-year and continues to lag inflation - last measured at 1.9%.

The scenario that has left the Bank fearing the impact of any rate rise on consumers, whose spending remains the biggest driver of economic growth.

Labour's shadow chancellor, Ed Balls, said of the latest GDP figures: "At long last our economy is back to the size it was before the global banking crisis - three years after the US reached the same point.

"But with GDP per head not set to recover for three more years and most people still seeing their living standards squeezed, this is no time for complacent claims that the economy is fixed.

"Wages after inflation are down over £1,600 a year since 2010, housebuilding under this government is at its lowest level since the 1920s and business investment is lagging behind our competitors.

"Labour's economic plan will make Britain better off and fairer for the future."

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BSkyB Unveils Plan For European Pay-TV Giant

The owner of Sky News has announced an ambitious plan to create a European pay-television giant that will more than treble the company's potential customer base.

Announcing its full-year results on Friday, BSkyB confirmed that it had reached a deal with 21st Century Fox (21CF) to acquire its 100% interest in Sky Italia and 57.4% stake in Sky Deutschland in deals worth a combined £5.3bn.

The transactions will propel BSkyB into market-leading positions in five countries, including three of the four largest pay-TV markets in Europe, and provide a platform to sell a diverse range of entertainment products in some of the Continent's wealthiest economies.

They will also give the company access to markets in Germany and Italy where seven out of ten homes have yet to sign up to pay-TV services.

In total, BSkyB's potential customer base will increase from 30 million households to more than 97 million.

BSkyB sees an opportunity to grow customer numbers

Jeremy Darroch, BSkyB's chief executive, said: "This transaction will create a world-class, multinational pay-TV business with enhanced headroom for growth and immediate benefits of scale.

"The three Sky businesses are leaders in their home markets and will be even stronger together. By creating the new Sky, we will be able to use our collective strengths and expertise to serve customers better, grow faster and enhance returns."

Completion of the takeover in Germany may involve buying out minority shareholders in Sky Deutschland, who are being offered the same price for their shares as that accepted by 21CF.

The German stake is costing BSkyB £2.9bn, while the Italian takeover comprises £2.1bn in cash as well as BSkyB's shareholding in the National Geographic channel worth about £380m, which 21CF is acquiring.

BSkyB is funding the takeovers through a combination of debt and asset sales, as well as raising 9.9% of its share capital through a placing.

Under the terms of the fundraising, 21CF, which is chaired by Rupert Murdoch, will retain its stake of just under 40% in BSkyB by subscribing for its pro rata position, worth approximately £500m.

BSkyB said the deals would generate annual cost synergies of about £200m.

Friday's announcement underlines the quickening pace of media consolidation on both sides of the Atlantic.

Last week, BSkyB received nearly £500m from the sale of its remaining shareholding in ITV to Liberty Global, the owner of Virgin Media.

21CF, meanwhile, is expected to channel the proceeds from its European disposals into a war chest aimed at sealing a takeover of Time Warner, owner of the Warner Brothers film studio and the CNN news network.

The City's reaction to the terms of BSkyB's acquisitions in Germany and Italy is likely to be mixed, with some analysts sceptical about the prospects of penetrating those markets as effectively as the company has done in the UK.

BSkyB's results for the 2013-14 financial year were stronger than consensus forecasts, with adjusted revenue up 6.5% to £7.6bn.

BSkyB's customers take almost 35 million products

Operating profit slipped by just 5% to £1.26bn despite heavy investment in product development and distribution, and the higher cost of Premier League rights.

Negotiations over the next three-year contract to broadcast live top-flight English football are expected to get underway early next year.

Analysts say the threat of another significant hike in the cost of the rights, or of being outbid altogether, may act as a drag on BSkyB's share price until the outcome of the auction is clear.

However, Mr Darroch pointed to the strongest growth the company had seen for three years, with nearly 35 million products now taken by customers across pay-TV, broadband, telephony, on-demand and mobile services.

BSkyB has also sought to reduce its reliance on the Premier League to attract customers, signing major rights renewal deals with other sports and investing heavily in drama and entertainment content.

Its share price - up 10% over the past 12 months - fell back by 3% in early trading on the FTSE 100 on Friday as investors digested news of the acquisitions and equity-raising.

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Housing Shortage Sees More Tenants Evicted

By Mark White, Home Affairs Correspondent

Increasing numbers of private tenants are being evicted or exploited by landlords cashing in on the increase in house prices and the shortage of rented accommodation, according to latest figures.

Citizens Advice (CAB) saw a 38% rise in the number of people turning to the charity for help with eviction notices served on them, despite being up to date with their rent.

CAB recorded 5,000 cases across the country in 2013/2014 where tenants complained about being forced from their homes, even though they were not in arrears. That figure is up from 3,750 the previous year.

Problems in London and the South East are particularly acute, the charity said, where many house prices are the highest in the country.

Private tenant Ryan Herran told Sky News he was being forced from his Muswell Hill home of five years, because he complained about damp and mould in the property and demanded his landlord fix the problem.

After months of wrangling with the owner, he was eventually served with a section 21 eviction order.

"I was actually in shock for a couple of days because I've always been a good tenant and always paid my rent and never engaged in anti-social behaviour," he said.

"I did ring up the property management company and they told me they don't have to give a reason under the section 21 eviction notice. They said they felt they were doing me a favour by at least giving me two months notice."

Mr Herran believes his eviction is motivated by spite and certainty on the part of the landlord that he would easily be able to find another tenant.

The number of tenants seeking help over eviction has nearly doubled

Roger Harding from the homelessness charity Shelter said: "Sadly landlords can evict for no reason, even if you've been keeping up with the rent. 

"We've found many worrying examples where landlords have evicted people simply because they don't want to have to deal with repair issues and that's something we want to see outlawed."

During January to March 2014 house prices rose by 18% in London and 10% in the South East, compared to the same period the previous year.

CAB's figures reveal those rises were mirrored by an increase in private tenants reporting they had been served with eviction notices, despite being up to date with their rent .

The charity said the number of tenants in London and the South East seeking help over eviction notices between January and March 2014 was 900, compared with 400 over the first quarter of the year before.

Landlord Richard Blanco rents out properties across six London boroughs and is also a member of National Landlords Association. He said private landlords are often unfairly maligned.

"There's a small minority of rogue landlords who might try and increase rents but really the most sensible business model for landlords is to maintain the property well and to have a good relationship with tenants and to try to ensure tenants stay as long as possible," he said.

Mr Blanco said, contrary to widespread belief, more than three quarters of private tenants have not faced an increase in rents over the past 12 months.

The Government is in the process of introducing new legislation which it hopes will strengthen the rights of private tenants and help protect them from exploitation, or unjustified eviction.

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RBS Confirms 92% Profits Boost A Week Early

Royal Bank of Scotland (RBS) has confirmed a 92% rise in half-year pre-tax profits to £2.7bn, despite further writedowns for the mistakes of its past.

The bank, which remains 81%-owned by the taxpayer following its bailout during the financial crisis, brought forward its results by a week saying they were "significantly stronger" than the market had been expecting.

It cited a "statutory duty to provide the markets with the most up to date information".

The RBS share price rose 14% in early trading when the FTSE 100 opened for business on news of the profit performance.

The bank said the better results came as economic improvements in the UK and Ireland fed through to its bottom line while it was also running down bad assets more quickly.

On a separate operating profit basis, a rise of 267% was recorded compared to the same period last year.

However, it made an additional provision of £150m for the costs associated with the mis-selling of payment protection insurance (PPI), taking the total to date to £3.25bn.

RBS also set aside £100m more for the mis-selling of interest rate swaps - taking the total to £1.3bn.

Its chief executive, Ross McEwan, has previously warned that the bank may face additional charges in future arising from regulatory investigations into activities including foreign exchange rigging.

This follows fines for previous mistakes such as the manipulation of the Libor inter-bank lending rate and money laundering.

Mr McEwan said today: "The results we are posting today show the steady progress we are making as we take the steps to be a much simpler, smaller and fairer bank.

"These results show that underneath all the noise and huge restructuring of recent years, RBS is a fundamentally stronger bank that can deliver good results for customers and shareholders.

"There is progress on all of our key priorities – capital is stronger, costs are lower and customer activity is gradually improving – although we have only just started with our programme to make it easier for customers to do more business with us.

"But let me sound a note of caution. We are actively managing down a slate of significant legacy issues.

"This includes significant conduct and litigation issues that will hit our profits in the months and years to come.

"I'm pleased we've had two good quarters, but no one should get ahead of themselves here – there are bumps in the road ahead of us.

"Today's results are pleasing but no one at this bank is complacent about the challenges ahead."

More follows...

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UK Economic Depression To Be Declared 'Over'

By Ed Conway, Economics Editor

The longest economic depression in British history will be declared over today, with the Office for National Statistics expected to confirm that the recovery is strengthening.

The ONS is expected to report that the economy grew by around 0.8% or 0.9% in the second quarter of the year.

George Osborne has been boosted by recent figures on growth

The increase in gross domestic product (GDP) will mean that the economy finally surpasses the size it was at the beginning of the recession in 2008.

The news will come as an added bonus for the Chancellor, who yesterday celebrated as the International Monetary Fund (IMF) upgraded Britain's growth forecast for this year and the next.

The IMF also said that UK growth this year will be stronger than in any other major economy.

However, this strong growth belies the fact that Britain's depression - the period for which GDP is below the pre-crisis peak - lasted longer than any other G7 economy.

But while there are concerns about the nature of recent economic growth in the UK and the possibility of a housing bubble in London, George Osborne is likely to emphasise the fact that all major sectors of the economy have been growing recently.

The Chancellor is currently on a tour of northern cities to underline the efforts the Government is taking to attempt to narrow Britain's regional economic divide.

Although overall GDP is back at pre-crisis levels, the natural increase in the population since 2008 means that GDP per capita remains around 6% lower than before the recession.

This, in turn, has contributed to lower wages and the squeeze on incomes felt in recent years.

Economists have also warned that while the services sector is bigger than before the crisis, the manufacturing and construction sectors are significantly smaller.

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BSkyB Unveils Plan For European Pay-TV Giant

The owner of Sky News has announced an ambitious plan to create a European pay-television giant that will more than treble the company's potential customer base.

Announcing its full-year results on Friday, BSkyB confirmed that it had reached a deal with 21st Century Fox (21CF) to acquire its 100% interest in Sky Italia and 57.4% stake in Sky Deutschland in deals worth a combined £5.3bn.

The transactions will propel BSkyB into market-leading positions in five countries, including three of the four largest pay-TV markets in Europe, and provide a platform to sell a diverse range of entertainment products in some of the Continent's wealthiest economies.

They will also give the company access to markets in Germany and Italy where seven out of ten homes have yet to sign up to pay-TV services.

In total, BSkyB's potential customer base will increase from 30 million households to more than 97 million.

Jeremy Darroch is BSkyB's chief executive

Jeremy Darroch, BSkyB's chief executive, said: "This transaction will create a world-class, multinational pay-TV business with enhanced headroom for growth and immediate benefits of scale.

"The three Sky businesses are leaders in their home markets and will be even stronger together. By creating the new Sky, we will be able to use our collective strengths and expertise to serve customers better, grow faster and enhance returns."

Completion of the takeover in Germany may involve buying out minority shareholders in Sky Deutschland, who are being offered the same price for their shares as that accepted by 21CF.

The German stake is costing BSkyB £2.9bn, while the Italian takeover comprises £2.1bn in cash as well as BSkyB's shareholding in the National Geographic channel worth about £380m, which 21CF is acquiring.

BSkyB is funding the takeovers through a combination of debt and asset sales, as well as raising 9.9% of its share capital through a placing.

Under the terms of the fundraising, 21CF, which is chaired by Rupert Murdoch, will retain its stake of just under 40% in BSkyB by subscribing for its pro rata position, worth approximately £500m.

BSkyB said the deals would generate annual cost synergies of about £200m.

Friday's announcement underlines the quickening pace of media consolidation on both sides of the Atlantic.

Last week, BSkyB received nearly £500m from the sale of its remaining shareholding in ITV to Liberty Global, the owner of Virgin Media.

21CF, meanwhile, is expected to channel the proceeds from its European disposals into a war chest aimed at sealing a takeover of Time Warner, owner of the Warner Brothers film studio and the CNN news network.

The City's reaction to the terms of BSkyB's acquisitions in Germany and Italy is likely to be mixed, with some analysts sceptical about the prospects of penetrating those markets as effectively as the company has done in the UK.

BSkyB's results for the 2013-14 financial year were stronger than consensus forecasts, with adjusted revenue up 6.5% to £7.6bn.

BSkyB's customers take almost 35 million products

Operating profit slipped by just 5% to £1.26bn despite heavy investment in product development and distribution, and the higher cost of Premier League rights.

Negotiations over the next three-year contract to broadcast live top-flight English football are expected to get underway early next year.

Analysts say the threat of another significant hike in the cost of the rights, or of being outbid altogether, may act as a drag on BSkyB's share price until the outcome of the auction is clear.

However, Mr Darroch pointed to the strongest growth the company had seen for three years, with nearly 35 million products now taken by customers across pay-TV, broadband, telephony, on-demand and mobile services.

BSkyB has also sought to reduce its reliance on the Premier League to attract customers, signing major rights renewal deals with other sports and investing heavily in drama and entertainment content.

Its share price - up 10% over the past 12 months - fell back by 3% in early trading on the FTSE 100 on Friday as investors digested news of the acquisitions and equity-raising.

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Scottish Referendum: Banks Weigh New Warnings

By Mark Kleinman, City Editor

Britain's biggest banks are weighing up plans to outline further risks associated with Scottish independence when they unveil half-year results with less than 50 days to go before the crucial vote.

Sky News understands that some major lenders are deliberating over whether to highlight potentially politically explosive risk factors when the interim reporting season kicks off next week.

At least two banks are said to be discussing internally the prospect of warning over the implications for payments systems and infrastructure if Scotland secedes from the UK.

Some senior bank executives believe, however, there is little to be gained from providing additional detail so close to the referendum, given the politically charged nature of the campaign.

Britain's two state-backed banking giants are also stepping up talks with the Bank of England about contingency planning ahead of September's referendum.

Some executives at Lloyds Banking Group and Royal Bank of Scotland (RBS) are advocating a scenario under which the central bank would make a public statement ahead of September's vote guaranteeing deposits and liquidity.

Insiders said that Lloyds and RBS, which are 25% and 80%-owned by British taxpayers respectively, have told Bank of England officials at recent meetings that they are keen for it to do so.

Both banks are headquartered in Scotland and have previously cited the independence vote in risk factors in results announcements earlier this year.

Mark Carney, the Bank of England Governor, has said that an independent Scotland would present "clear risks" and that it would have to surrender some sovereignty to the UK because of the size of its financial sector.

One banker said the discussions reflected the extent to which a vote for independence was deemed to be credible, as well as the "reality that Lloyds and RBS are only notionally Scottish".

The Yes campaign is likely to consider discussions between commercial banks and the Bank of England as reflective of the degree to which a joint approach would be necessary in the mutual interest of Scotland and the rest of the UK.

Earlier this month, economists at UBS, the Swiss bank, said depositors would be likely to move their money south of the border if there was a Yes vote, reflecting that Scotland was "perceived to be the weaker part of the fragmenting monetary union".

However, any liquidity problem at RBS and Lloyds could also stem from customers withdrawing deposits in the rest of the UK, with the stability of both banks of critical importance to the British economy.

The two lenders received nearly £70bn of taxpayer support during the 2008 financial crisis to stave off outright collapse.

While the Bank of England would probably remain the lender of last resort to them during an 18-month transition period following a vote for independence, a row has been taking place for months between Edinburgh and Westminster about whether Scotland could continue to use the pound.

A further argument was ignited this week when MPs on the Scottish Affairs Committee warned that the idea of an independent Scotland retaining sterling was a "dead parrot".

Lloyds, RBS and the Bank of England all declined to comment.

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Facebook Shares Hit Record High As Profit Soars

Facebook shares hit a new record high after the social network posted profits growth of 137% for its last quarter.

All the major indicators of its business health seemingly delighted investors, with revenue from crucial mobile advertising continuing to grow at a strong pace while more people used the service and more often.

The company's shares climbed nearly 5% in extended trading after the results came out - with investors who bought - and held on to - Facebook stock during the company's initial public offering two years ago now being close to doubling their money.

Facebook earned $791m (£464m) in the April-June period - up from $331m in the same quarter a year ago.

Revenue jumped 61% to $2.91bn from $1.81bn with advertising revenue jumping 67%.

Mobile ad revenue is up

Mobile ad revenue, a closely watched figure because of the importance of Facebook capitalising on growing device use, was 62% of Facebook's total advertising revenue for the quarter.

The world's largest internet social network said it now counted 1.32 billion monthly users with almost 63% of them accessing Facebook's service every day in the second quarter, up from 61% in the same period a year ago.

"We had a good second quarter," CEO Mark Zuckerberg in a statement.

"Our community has continued to grow, and we see a lot of opportunity ahead as we connect the rest of the world."

Facebook has been growing its share of the worldwide digital advertising market but it is still a long way from catching up to rival Google.

Facebook had a near 6% share of the market compared with Google's 32%, according to researchers eMarketer.

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Winter Storms: Power Firms To Pay £3.3m More

The energy regulator says two power network operators are to pay an extra £3.3m for failures related to last winter's storms.

Ofgem said it had now secured a total of £8m from SSE and UK Power Networks (UKPN) after its investigation into the companies' handling of the bitter weather event ahead of Christmas.

The south of England was worst affected by the stormiest December since 1969 - and the windiest since 1993.

The combination of strong winds and heavy rain - running at more than double the seasonal average - brought havoc to many towns and villages as river levels rose and power lines were brought down.

The firms had already paid out £4.7m to consumers who were among one million households left without power at some stage though approximately 16,000 suffered lengthy reconnection delays of over 48 hours.

Yalding in Kent was among the worst affected areas

There were 500 premises in the UKPN and SSE Southern regions that were without supply for over five days - with the firms also slammed for poor communication with those affected and for failing to recall enough staff from their Christmas break.

Ofgem said the British Red Cross - which plays a role of helping vulnerable people during severe weather - would be among the organisations to benefit from the latest instalment of cash.

The watchdog said its new compensation regime - due to come into force next April - would guarantee standard payments of at least £70 for customers left without power for more than 24 hours.

Ofgem said the previous cap of £216 per household would rise to £700.

The announcement was made as the Competition and Markets Authority (CMA) set out details of its investigation into Britain's wider energy market to establish whether the 'big six' providers of gas and electricity need to be broken up.

The CMA must deliver its report by December 2015

It confirmed it had started work but was only releasing details of the scope of its inquiry at this stage.

Roger Witcomb, chair of the Energy Market Investigation Group, said: "Given the importance of energy supply to households, businesses and the economy, we very much encourage submissions on the issues we have identified and whether these cover the areas we need to investigate.

"We are looking to identify the underlying causes, at both wholesale and retail level, which could be leading to the widespread concerns that have surrounded this market in recent years - including rising energy bills, service quality, profitability and uncertainty over future investment.

"This is a market which is very complex so it is important at an early stage to focus the investigation on the most relevant issues."

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UK Prepares For EU Ruling On Energy State Aid

By Mark Kleinman, City Editor

The Government is braced for a ruling from Brussels on Wednesday that will influence the fate of billions of pounds in investment in low-carbon energy policies.

Sky News understands that the European Commission (EC) is likely to announce its ruling after several months examining a form of subsidy guaranteeing long-term prices to companies for supplying renewable energy sources.

Known as contracts for difference (CFDs), these instruments are designed to reassure investors about the returns that such projects will generate, and have been an important element of the Coalition's energy policy.

The Government has developed a series of policies under the umbrella of Electricity Market Reform, which are intended to meet legally binding targets to reduce carbon emissions.

They also include the issue of the capacity market, which is designed to incentivise energy companies to commit to keeping the lights on, in exchange for penalties if they fail to do so.

The EU has previously signalled that projects which involve significant subsidies could be deemed to constitute unfair state support.

A senior energy sector source said an announcement was likely to be made on Wednesday but could be delayed.

A source close to the Department for Energy and Climate Change (DECC) said it was confident of securing Brussels' approval for UK policies on low-carbon energy.

They conceded that some material concessions or a more formal EU probe were possible, however.

"We have continued to engage [with Joaquin Almunia, the EU Competition Commissioner] on our EMR cases," a source said.

"These conversations remain constructive and we are making the strongest possible case for our policies, which we believe are consistent with the new energy and environmental state aid guidelines."

State aid for the UK nuclear sector will not be covered by Wednesday's announcement, according to insiders.

A separate ruling on that issue is expected later this year.

Launching its probe of the financial guarantees being provided to EDF, the French utility leading the construction of a new nuclear power plant at Hinkley Point, the Commission said last year that it had "doubts that the project suffers from a genuine market failure".

A Commission spokesman said on Tuesday that it "does not announce state aid decisions in advance, nor does it comment on possible future decisions".

A spokeswoman for DECC declined to comment.

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Major Airlines Suspend Flights To Israel

Major airlines from the US, Europe and Canada are refusing to fly to and from Israel after a rocket fired from Gaza landed near Tel Aviv's Ben Gurion international airport.

Delta Air Lines and United Airlines have suspended services between the US and Israel for at least 24 hours, while Germany's Lufthansa and Air France also suspended flights.

Low-fare airline EasyJet is also scrapping its scheduled services for today. The airline said it will "review its operations to and from Israel on a day-by-day basis".

It comes as Israel's military confirmed two of its soldiers died overnight in further fighting, raising the Israeli death toll to 29 soldiers and two civilians.

The US flight bans followed advice from the Federal Aviation Administration (FAA), which stopped American flights from travelling to Tel Aviv, citing the "potentially hazardous situation" caused by the ongoing conflict in the region.

An Israeli military excavator searches for tunnels on the border with Gaza

The European Aviation Safety Agency has recommended that all European airlines avoid Tel Aviv "until further notice".

Greece's Aegean Airlines and Air Canada have also grounded flights to Tel Aviv.

But a spokeswoman for British Airways said the airline's twice-daily service from London to Tel Aviv would continue.

"We are continuing to operate to Israel as normal," the spokeswoman said.

Israel's Transportation Ministry has urged the airlines to reconsider their decision, insisting that the nation's busiest air hub was secure.

"Ben Gurion Airport is safe and completely guarded and there is no reason whatsoever that American companies would stop their flights and hand terror a prize," it said in a statement.

The flight cancellations came as Israel continued its offensive in Gaza, where the death toll has passed 620 people.

Israel launched a major offensive on July 8 in Gaza to stop Hamas militants firing rockets over the border.

United Airlines planes seen at Newark International Airport

Palestinian militants have fired more than 2,000 rockets towards Israel, but many have been intercepted by Israel's Iron Dome defence system.

More than 600 Palestinians, many of them women and children, have been killed in the conflict.

Ceasefire negotiations have been taking place in Egypt, where US Secretary of State John Kerry has been meeting with regional leaders.

The Palestinian leadership says it has proposed a ceasefire plan to mediators aimed at halting the violence.

On Tuesday, Mr Kerry spoke to Israeli Prime Minister Netanyahu and to Qatari and Turkish foreign ministers after meeting Egyptian President Abdel Fattah al Sisi for two hours.

"The Egyptians have provided a framework and a forum for them to be able to come to the table to have a serious discussion together with other factions of the Palestinians," Mr Kerry said.

"Hamas has a fundamental choice to make and it is a choice that will have a profound impact for the people of Gaza."

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Apple Profits Up 12% As Microsoft Innovates

Strong iPhone sales in China have boosted Apple's profits as rival Microsoft endures a Nokia hangover.

The latest results from the two tech companies exceeded analysts' expectations but underlined conflicting challenges.

For Apple, investors want to see if it can again produce a revolutionary new product, something it has not done since the iPad in 2010.

Profits rose 12% to $7.75bn (£4.5bn) in the third quarter as revenue surged 28% in China, despite stiff competition in its third-largest market.

Apple sold 35.2 million iPhones in total over the three months, with chief executive Tim Cook describing Apple's Chinese performance as "honestly surprising" given its continuing struggles in its biggest markets of Europe and the US.

Lower-cost phones sold in China by up-and-coming rivals such as Xiaomi appeared to be grabbing market share mainly from other companies that rely on Google's Android software, Apple said.

Market leader Samsung admitted earlier this month that its new Galaxy S5 had sold more slowly than expected in the face of severe competition.

Many expect Apple to now make a play for the wearable device market with a smart watch, dubbed iWatch, and introduce two iPhone versions later this year including a 5.5-inch screen model that thrusts Apple into the market for larger-sized phones.

Microsoft updated investors on its progress just a week after confirming 18,000 job losses - mostly related to its purchase of Nokia's phones division. 

Chief executive Satya Nadella, who took control from Steve Ballmer five months ago amid promises to shift its focus towards cloud computing, painted a positive picture for the future.

While fourth quarter profits fell 7% to $4.61bn, revenues rose 18% with those from commercial cloud services such as its Office 365 software suite more than doubling to an annual rate of $4.4bn.

Nadella confirmed that the next version of Windows would be unified across screens of all sizes.

He acknowledged the headache the company had created for software developers by making multiple versions of Windows that work differently on phones, PCs and tablets, Xbox and other devices.

Nadella said the company was aiming to simplify the platform so developers could create apps that work on many devices at once.

"We are bringing teams together to approach Windows as one equal system - very different than we ourselves have done in the past," he said.

The move was welcomed by analysts who also pointed to wider efforts to trim costs at Microsoft.

It sold 1.1 million Xbox consoles, benefiting from a price cut on its latest Xbox One when it allowed consumers to buy it without the Kinect motion detecting sensor.

The Nokia business sold 5.8 million Lumia smartphones though many of those were lower-priced devices.

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China Chicken Scandal Hits Fast Food Chains

A growing number of fast food and cafe chains are becoming embroiled in a scandal linked to a single supplier accused of passing off "toxic meat".

Starbucks, McDonald's and Burger King are among the outlets that have taken action since a video came to light which was said to show staff at Shanghai Husi Food Co using expired meat and picking up meat from the floor to sell on to stores in China.

The supplier, which was shut down after the TV report was shown, is a unit of US-based OSI Group.

McDonald's said meat from the supplier had even been sold to its branches in Japan, where it was used in the firm's McNuggets.

The hamburger chain and KFC's parent firm Yum Brands apologised to Chinese customers while Starbucks said some of its stores previously sold products containing chicken originally sourced from Shanghai Husi.

KFC's owner has apologised to diners

Burger King and Dicos, China's third-ranked diner owned by Ting Hsin International, said they would remove Shanghai Husi food products from their outlets.

Pizza chain Papa John's International said on its Weibo blog that it had taken down all meat products supplied by Shanghai Husi and cut ties with the supplier.

Food safety is one of the top issues for Chinese consumers after a scandal in 2008 where dairy products tainted with the industrial chemical melamine led to the deaths of six infants and made many thousands sick.

Other food scandals have hit the meat and dairy industries in recent years, and many Chinese look to foreign brands as offering higher safety standards.

Starbucks said on its Chinese microblog site that it had no direct business relationship with Shanghai Husi but that some of its chicken acquired from another supplier had originally come from Husi for its "Chicken Apple Sauce Panini" products.

Burger King said in a Weibo statement that it had taken off its shelves all meat products supplied by Shanghai Husi and had launched an investigation.

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Russia Faces 'Hard-Hitting' Sanctions Over MH17

Europe's Russia Sanctions Avoid Self-Harm

Updated: 9:34pm UK, Monday 21 July 2014

Sanctions against Russia have now been in place since its annexation of Crimea in March - but following the flight MH17 disaster, all the signs are that they will soon be reinforced.

So what, precisely, do the current sanctions consist of, have they been at all successful, and what might they be followed up with?

In short, the current set of restrictions are, in the jargon, referred to as "stage-two" sanctions.

Rather than affecting the entire economy, or entire sectors, they are forensically focused restrictions on a few individuals and smallish companies.

Both the US and Europe have imposed visa restrictions and asset freezes on a number of influential Russians. The US list is longer and includes a number of President Vladimir Putin's most senior advisers.

Neither jurisdiction has yet added the president to the sanctions list, as was done with Robert Mugabe in Zimbabwe, for instance.

The US has also imposed financial blocks on two small banks, one of which Putin claimed never to have heard of.

The day before the crash last week, it also extended the restrictions to a couple of oil companies, including Rosneft, the country's biggest oil producer.

However, it's worth noting that these are purely financial restrictions, preventing the companies from raising cash in the US, rather than stopping them from pumping oil out of the ground and around the world.

While the EU has signalled it will stop European Investment Bank and European Bank for Reconstruction and Development programmes in Russia, it has stopped short of more severe sanctions.

Why? In large part because of its reliance on Russia for trade. A full 15% of Russia's gas exports end up in Germany. Some 17% of its trade goes to the Netherlands, though this is probably an over-estimate because much of that is merely passing through the port of Antwerp.

While Mediterranean parts of the continent have less direct economic exposure to Russia, save for Italy, which sucks in 9% of Russia's gas, they are also desperate not to upend any chances of an economic recovery following the euro crisis.

It's very difficult indeed to find any evidence that the sanctions themselves have made much difference.

The Russian economy is in a recession, but it was already heading in that direction before the Ukraine crisis.

And while investment and share prices have both fallen in Moscow, that seems due to fear of "proper" sanctions rather than the semi-sanctions now in place.

So what more can be done? The short answer is to extend the sanctions to some sectors, or some mega-companies, and individuals.

Open Europe's Raoul Ruparel thinks a three-pronged approach, involving roughly equal sacrifice from the continent's biggest players, would be most reasonable: Some financial sanctions (which would hurt Britain); some arms sanctions (which would hurt France) and some manufacturing and technology sanctions (which would hurt Germany).

But such system-wide sanctions - "stage three" measures, as they are called - are far from decided.

They would be deeply controversial, and raise the risk, feared by all in Europe, that Putin could retaliate by cutting off the gas supply to Europe.

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Royal Mail Warns Of Lower Parcel Revenues

Royal Mail has warned of a hit to its full-year revenue expectations because of growing competition for parcel deliveries.

In its first quarter results statement, the postal operator said that while total revenues had risen 2% - thanks to a 3% increase in cash from letters - UK Parcels revenue fell 1%.

It blamed growth among rivals for the performance and said it would have to rely on cost control measures and letters sales to meet full-year expectations.

The revenue growth from letters was put down to stamp price increases.

Letter volumes declined by 3%.

Chief executive Moya Greene said: "In the first three months of our financial year we have delivered low single digit revenue growth in line with our strategy.

"Trading has been characterised by a good performance in letters, with the decline in addressed letter volumes better than our expected range, but a weaker than expected performance in UK parcels, largely driven by the intensifying competitive environment in the account, consumer/SME and export channels.

"On costs, performance is better than expected. Given the increasing challenges we are facing in the UK parcels market, our parcels revenue for the year is likely to be lower than we had anticipated.

"However, through cost control measures and with continued good letters performance we expect to be able to offset the impact on profit such that our overall performance would remain in line with our expectations for the full year.

"Our parcels revenue will be dependent on our performance in the second half, which includes the Christmas trading period, and on no further weakening in our addressable UK parcels market."

The results were released 24 hours before Royal Mail's AGM and four days after it warned it faces a possible fine in France for anti-competitive behaviour.

Ms Greene is now able to firmly focused on the day-to-day business following the highly controversial privatisation of Royal Mail.

A critical report by MPs earlier this month prompted the Government to announce a review of how state assets are sold in future amid accusations the listing did not deliver taxpayer value.

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BBA: City Sanctions Regime Needs Overhaul

By Mark Kleinman, City Editor

Procedures for punishing bankers who breach City rules require urgent changes, including the option of "part-settlement" of cases brought by regulators, the banking industry lobbying group has said.

In a submission to the Treasury obtained by Sky News, the British Bankers' Association (BBA) accused financial watchdogs of lacking objectivity and transparency.

It said the Regulatory Decisions Committee (RDC), which scrutinises judgements made by the Financial Conduct Authority (FCA) should be reformed to guarantee its independence.

"There are ... questions about the extent to which the RDC can be said to be truly independent of the FCA's enforcement function," the BBA said.

"This raises doubts over whether the arrangements can be said to provide a true 'check and balance' on the enforcement function's powers."

The RDC could be replaced by a body which sits within the FCA but is autonomous, "possibly with a lay majority and a chair with senior judicial experience", the BBA added.

The BBA was responding to a review launched in May by George Osborne.

The Chancellor has made toughening the sanctions regime a priority as he seeks to demonstrate that the Government is intent upon punishing past miscreants.

In a speech last month, he said he wanted to make the manipulation of financial benchmarks such as the gold-fix and foreign exchange rates a criminal offence.

The Sunday Times reported that the Serious Fraud Office was poised to announce a criminal probe into alleged forex-rigging as soon as this week.

The consultation on the use of enforcement powers follows a string of cases involving prominent bankers.

"For enforcement action to be effective, wrongdoers must believe that they face a real and tangible risk of being held to account and must expect to face meaningful and proportionate sanctions," the Treasury said in May.

Some of the FCA's actions, such as a decision to fine Ian Hannam, a former JP Morgan executive, for inappropriately disclosing inside information, have faced criticism in the City.

Decisions by the FCA's predecessor body, the Financial Services Authority, relating to the near-collapse of HBOS also face scrutiny as part of a probe of the bank's troubles.

The BBA said in its submission to the Treasury that an appeals process and enforcement panel set up by the energy industry could provide a model for the financial services sector.

The lobby group also said the enforcement process could be accelerated, with additional communication with those under investigation desirable.

Under the current system, cases can only be settled in full, but the lobbying group insisted that introducing scope for part-settlement could "significantly strengthen decision-making".

The BBA added that actual rather than potential losses to consumers should be taken into account by regulators when calculating punishments, and said that the self-reporting of misconduct "could be given a more positive emphasis and better incentivised".

And it criticised regulators for their approach to enforcement actions, accusing them of requesting information whose "relevance...is not always immediately apparent".

It said the subjects of investigation were also frequently left in the dark about the detailed reasons underlying the probes.

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Newly-Listed TSB Says Yes To £1.4bn UKAR Bid

State 'Bad Bank' Plots £1.5bn Mortgage Sale

Updated: 3:07pm UK, Tuesday 03 June 2014

By Mark Kleinman, City Editor

The state-owned 'bad bank' which holds the remnants of Bradford & Bingley and Northern Rock is to sell a £1.5bn mortgage portfolio that will attempt to exploit buoyant demand for UK housing market assets.

Sky News has learnt that UK Asset Resolution (UKAR) has hired investment bankers at Credit Suisse to market the loans, with the agency understood to be determined to secure a sale price at close to or better than the book's par value.

Prospective buyers are likely to include investment funds and a number of UK high street lenders, sources said on Tuesday.

The auction will represent the first such transaction since July 2012, when UKAR agreed the sale of £465m of Northern Rock Asset Management (NRAM) mortgages to Virgin Money.

The proceeds of that sale were used to repay part of NRAM's loan from the Government, which enabled it to stave off outright collapse in 2008.

Since then, the most significant deal involving UKAR took place last year, when NRAM's portfolio of standalone unsecured personal loans was sold to OneSavings Bank plc and Marlin Financial Group for a combined price tag of £400m.

News of the latest sale process emerged on the day that UKAR trumpeted its return to the taxpayer of roughly a quarter of the £38.3bn loan it took on six years ago.

Richard Banks, UKAR chief executive, said the results represented "good progress" for the taxpayer-backed organisation.

"It is also pleasing to see the significant reduction in arrears due to the dedication and professionalism of colleagues proactively working with our customers to help them achieve the right outcomes."

He went on to warn, however, that the prospect of rising interest rates would be a significant obstacle for many of its 467,000 customers.

"The signs are that the UK economy is continuing to recover, both in terms of growth and employment and in the housing and mortgage markets," UKAR said.

"House prices have increased faster than expected over the past 15 months, which, combined with continued low rates of interest, is good news for our customers and has driven increased redemption activity.

"However, despite the more positive conditions, many households continue to be under financial pressure. This, together with the prospect of interest rate rises and higher mortgage payments, will be a concern for many of our customers."

That warning echoes those of leading public figures in recent weeks, with representatives of major housebuilders due to meet Vince Cable, the Business Secretary, and George Osborne, the Chancellor, this week.

UKAR declined to comment on the new mortgage sale.

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Tesco Chief Philip Clarke To Step Down

Tesco's chief executive Philip Clarke is to quit after a string of poor results for the supermarket giant.

The group, which is seeing its worst sales performance in four decades, announced Mr Clarke's departure as it issued a fresh warning on profits.

He will stand down on October 1 and will be replaced by Dave Lewis from Unilever, who is a non-executive director of BSkyB, owner of Sky News.

Tesco's sales fell by 3.8% in the three months to May 24 on a like-for-like basis, an acceleration of the 3% slide in the previous quarter.

Mr Lewis will receive a basic salary of £1.25m, plus "standard" benefits. He will also receive £525,000 in lieu of his current year cash bonus from Unilever

Mr Clarke, who earned £1.14m in the role, will get a payoff worth 12 months salary.

The retailer is battling to stop a decline in sales figures

Tesco chairman Sir Richard Broadbent said: "Having guided Tesco through a substantial re-positioning in challenging markets, Philip Clarke agreed with the Board that this is the appropriate moment to hand over to a new leader with fresh perspectives and a new profile."

He added: "Dave Lewis brings a wealth of international consumer experience and expertise in change management, business strategy, brand management and customer development."

Mr Clarke said: "Having taken the business through the huge challenges of the last few years, I think this is the right moment to hand over responsibility and I am delighted that Dave Lewis has agreed to join us.

"Dave has worked with Tesco directly or indirectly over many years and is well-known within the business. I will do everything in my power to support him in taking the company forward through the next stage of its journey."

Mr Clarke, who had worked his way up from the shop floor to head Tesco, admitted last month the chain's sales figures were the worst he had known in 40 years.

But a trading update said conditions were more "challenging" than predicted.

The group said: "The overall market is weaker and, combined with increasing investments we are making to improve the customer offer and to build long-term loyalty, this means that sales and trading profit in the first half of the year are somewhat below expectations."

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Malaysia Airlines Offers Passenger Refunds

Malaysia Airlines is to refund fares for passengers no longer wishing to travel on the carrier, Sky News has confirmed.

Previously booked passengers due to fly up to and including July 25 can seek a refund without incurring any penalty.

The decision comes amid a wave of concern following the downing of MH17 over eastern Ukraine.

It is unclear how many passengers will cancel their flights.

Nevertheless, the refund will further harm the perception of the carrier both for passengers and investors.

Shares in Malaysia Airlines closed down more than 10% on Friday.

The Kuala Lumpur-listed company saw its stock fall more than 17% at one point before easing prior to the market close.

"Perception-wise it really hits home - It's very challenging. It's very difficult to fight against negative perception," Maybank aviation analyst Mohshin Aziz said.

"I can't comprehend of anything they can do to save themselves."

Many of the carrier's woes precede the loss of MH370 earlier this year

The company has struggled recently, and its accounts have been in the red for the last three years.

In 2013, the airline's full-year losses grew to £215m - up almost threefold on the 2012 loss of £80m.

The Malaysian government owns 69% of the firm.

As a state-owned flag carrier, it is required to fly unprofitable domestic routes, and its strong union has resisted operational changes.

Budget rivals have adapted to the changing air market, particularly in Asia, with greater speed than legacy carriers such as Malaysia.

Many of its woes precede the mysterious loss of flight MH370 in the Indian Ocean.

Airline Weekly managing partner Seth Kaplan described it as being in "worse shape" financially than almost all other carriers - even before MH370 vanished.

"It's just hard to imagine that they could have even survived the first incident without a lot of government help and now they're going to need even more," Mr Kaplan said.

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Top City Banker To Pay £450,000 FCA Penalty

By Mark Kleinman, City Editor

One of the City's top financiers is poised to pay a £450,000 fine after deciding to accept a market abuse ruling by the Financial Conduct Authority (FCA).

Sky News understands that Ian Hannam, a banker who became known as the 'king of mining M&A' after engineering some of the world's biggest natural resources mergers, is to accept the watchdog's original verdict after losing an appeal in May.

An insider said on Friday that a statement from the FCA confirming that the original decision is to be upheld is expected as early as next week.

Mr Hannam, who had a long career at JP Morgan Cazenove before leaving in 2012, was accused by the FCA of inappropriately disclosing inside information in 2008 about Heritage Oil, a client, to a potential buyer.

He had argued that the FCA's ruling was erroneous and that he acted in accordance with City rules, vowing to fight the decision.

The regulator did not accuse or find Mr Hannam guilty of deliberately setting out to commit market abuse or accuse him of lacking honesty or integrity.

The Upper Tribunal of the High Court rejected his appeal in a judgement which was greeted by relief at the FCA but which raised questions about the clarity of guidelines about acceptable City conduct.

Both parties are understood to have made representations about the scale of the fine following the verdict of the Upper Tribunal, which said:

"Although the parties' written submissions did say something about the appropriate penalty if Mr Hannam had been engaged in market abuse, we consider that we cannot properly deal with this aspect of the case without giving the parties the opportunity to make further submissions in the light of our findings on the substantive issues.

The tribunal and the parties will need to consider the best way forward procedurally for dealing with the question of penalty."

The ruling left open the question of whether the penalty imposed on Mr Hannam should be increased or decreased.

Mr Hannam, who received backing from a number of prominent City figures and company bosses during his appeal, is said to have racked up legal fees of approximately £1m during his case.

Since leaving JP Morgan, he has rebuilt his career, taking control of a number of businesses in the mining and resources industries.

He has also given financial backing to Heathrow Hub, one of the shortlisted candidates for expanding runway capacity in south-east England.

Spokesmen for Mr Hannam and the FCA declined to comment on Friday.

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Newly-Listed TSB Says Yes To £1.4bn UKAR Bid

State 'Bad Bank' Plots £1.5bn Mortgage Sale

Updated: 3:07pm UK, Tuesday 03 June 2014

By Mark Kleinman, City Editor

The state-owned 'bad bank' which holds the remnants of Bradford & Bingley and Northern Rock is to sell a £1.5bn mortgage portfolio that will attempt to exploit buoyant demand for UK housing market assets.

Sky News has learnt that UK Asset Resolution (UKAR) has hired investment bankers at Credit Suisse to market the loans, with the agency understood to be determined to secure a sale price at close to or better than the book's par value.

Prospective buyers are likely to include investment funds and a number of UK high street lenders, sources said on Tuesday.

The auction will represent the first such transaction since July 2012, when UKAR agreed the sale of £465m of Northern Rock Asset Management (NRAM) mortgages to Virgin Money.

The proceeds of that sale were used to repay part of NRAM's loan from the Government, which enabled it to stave off outright collapse in 2008.

Since then, the most significant deal involving UKAR took place last year, when NRAM's portfolio of standalone unsecured personal loans was sold to OneSavings Bank plc and Marlin Financial Group for a combined price tag of £400m.

News of the latest sale process emerged on the day that UKAR trumpeted its return to the taxpayer of roughly a quarter of the £38.3bn loan it took on six years ago.

Richard Banks, UKAR chief executive, said the results represented "good progress" for the taxpayer-backed organisation.

"It is also pleasing to see the significant reduction in arrears due to the dedication and professionalism of colleagues proactively working with our customers to help them achieve the right outcomes."

He went on to warn, however, that the prospect of rising interest rates would be a significant obstacle for many of its 467,000 customers.

"The signs are that the UK economy is continuing to recover, both in terms of growth and employment and in the housing and mortgage markets," UKAR said.

"House prices have increased faster than expected over the past 15 months, which, combined with continued low rates of interest, is good news for our customers and has driven increased redemption activity.

"However, despite the more positive conditions, many households continue to be under financial pressure. This, together with the prospect of interest rate rises and higher mortgage payments, will be a concern for many of our customers."

That warning echoes those of leading public figures in recent weeks, with representatives of major housebuilders due to meet Vince Cable, the Business Secretary, and George Osborne, the Chancellor, this week.

UKAR declined to comment on the new mortgage sale.

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