Old Mutual Bids £600m For Wealth Manager

By Mark Kleinman, City Editor

Britain's second-biggest independent wealth manager has rebuffed a £600m takeover offer from Old Mutual, the FTSE-100 financial services group.

Sky News understands that Quilter Cheviot, which manages almost £16bn in assets, was the subject of a recent bid from Old Mutual even as it considers a listing that would catapult it into the ranks of London's 350 largest listed companies.

Bridgepoint, the private equity firm which controls Quilter Cheviot, is understood to have rejected the proposal on the grounds that it undervalued the company.

Other prospective buyers, including Investec, are said to have examined a takeover of Quilter Cheviot although it was unclear on Friday whether any other formal offers have been tabled.

It remains possible that Old Mutual could return with a higher bid for the wealth management group, although Bridgepoint is focused on an initial public offering that is likely to take place by the end of the year.

In a statement, the private equity group said: "Inevitably when IPO plans are being prepared there is parallel speculation and rumours about alternatives. We never comment on such rumours."

The addition of Quilter Cheviot to Old Mutual's wealth management arm would create a more powerful platform for serving affluent clients at a time of consolidation across the sector.

Another big player, Bestinvest, was sold to Permira, another buyout firm, last year, with a follow-on deal taking the firm's assets under management to approximately £9bn.

A flurry of deals has been accelerated by regulatory reforms known as the Retail Distribution Review, which have altered the way that wealth managers are remunerated for their work, shifting from a largely commission-based system to one predicated upon the volume of assets under management.

Quilter Cheviot was formed in 2012 from the merger of Quilter & Co and Cheviot Asset Management, with Bridgepoint understood to believe that the combined group is worth at least £700m.

The company traces its roots back to 1771, making it one of the UK's oldest financial services firms.

Evercore, an investment bank, is advising Bridgepoint, which declined to comment, on the process.

Old Mutual, which also declined to comment, is interested in expanding its wealth management business at a time when it is also reshaping parts of its business.

The Anglo-South African group recently filed plans to list its US asset management business, and has hired a number of top fund managers to work in its London-based operation.

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Europe Agrees On Fresh Russian Sanctions

European leaders have agreed to hit Russia with a fresh round of sanctions despite Moscow signing up to a ceasefire in Ukraine.

The sanctions include credit restrictions on Russia companies, export bans, and travel bans and asset freezes on a new set of officials, according to a European Union diplomat who spoke on the condition on anonymity.

Two branches of the world's biggest oil producer - Gazprom Bank and Gazprom Neft - are targeted by the measures, said the diplomat.

Speaking at the end of a Nato summit in Wales on Friday, David Cameron said sanctions would continue despite both sides agreeing to a 12-point peace plan.

However, the Prime Minister said they could be lifted if a lasting peace was found.

The new restrictions, which will be imposed early next week, come as Britain agreed to supply 1,000 troops to a Nato rapid response force aimed at countering Russian aggression in Ukraine and eastern Europe.

Nato Secretary General Anders Fogh Rasmussen revealed the plan for a Spearhead force after discussions with members in Newport.

Ukraine was a dominant topic on the final day of the Nato summit

"This decision sends a clear message: Nato protects all allies at all times," he said.

"And it sends a clear message to any potential aggressor: should you even think of attacking one ally, you will be facing the whole alliance."

Western leaders accuse Russia of sending thousands of troops into the east of Ukraine - prompting fears of future incursions into other eastern European countries.

Mr Rasmussen said the Spearhead force would establish a "command-and-control" presence in the east of allied territories ready to deploy air, sea and special forces in the event of aggression.

He told Sky News Tonight: "We have decided to improve our ability to act swiftly. The force could be deployed within very few days if needed.

"The intention is to strengthen the defence of our allies."

Mr Rasmussen said alliance countries would contribute troops on a rotational basis to the high-readiness force.

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UK Airlines Axe Flights Due To Italian Strike

Several UK airlines have warned passengers of major disruption to flights as a result of a strike by Italian air traffic controllers.

Ryanair says it has been forced to cancel 96 flights to and from Italy. They include a number of flights serving UK airports.

EasyJet has had to axe a further 60 flights, including 20 in and out of the UK.

British Airways has also had to re-schedule a number of flights.

The four-hour strike is scheduled to last from 11.30am to 3.30pm UK time.

However it is expected to cause delays throughout the day, with more cancellations likely.

Ryanair has apologised for the disruption

Ryanair spokesman Robin Kiely said: "We sincerely apologise to all passengers who have had their travel plans disrupted by these unjustified ATC (Air Traffic Controllers) strikes."

The airline encouraged all passengers to check the status of their flight before travelling.

EasyJet said: "We are doing everything possible to minimise the impact to our customers and we are offering anyone flying to and from Italy during those times the opportunity to transfer their flight free of charge to another day to avoid the strike.

"They should go to easyJet.com to make changes to their flights."

Meanwhile a spokesman for BA said: "We are doing all we can to minimise disruption to customers affected by the threatened strike.

"We have re-timed a number of flights and are using larger aircraft where possible to help more customers, from cancelled flights, fly to where they need to be.

"We are advising customers flying to and from Italy to keep checking the very latest information on our website."

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Eurozone Teeters As ECB's Bazooka Is Held Back

By Ian King, Business Presenter

Only in a 100 metre sprint, a Wall Street Journal correspondent joked on Twitter, does a one-tenth of a unit move normally spark such excitement.

The European Central Bank's shock interest cut today, taking its benchmark policy rate from 0.15% to 0.05%, created drama on currency markets, sending the euro down against the US dollar by almost a full percentage point – a move seldom seen – to its lowest level for 14 months.

As dramatic was the ECB's decision to raise the rate it charges commercial banks to deposit money with it from 0.1% to 0.2%.

This negative deposit rate is aimed at getting commercial banks in the Eurozone to lend money to customers rather than hoard it. It highlights how gravely the ECB now views the chronic state of the Eurozone economy.

Mario Draghi arrives at the news conference

The Eurozone, to put it bluntly, is teetering on the brink of a Japanese-style crisis.

Japan is slowly dragging itself out of two decades during which it has suffered deflation, or negative inflation, a sustained period of falling prices.

That might sound good news for shoppers but is, over time, a ghastly phenomenon that strangles confidence and economic activity.

Played out at a national level, it also increases the value of debt, something many highly-indebted Eurozone economies cannot afford.

Deflation raises the risk economies cannot meet interest payments on their debts – the factor that forced Greece, Portugal and Ireland to seek bail-outs from the ECB and the International Monetary Fund.

The ECB knows the Eurozone is not far away from such a crisis. Consumer price inflation in the Eurozone currently stands at just 0.3 per cent but in some Eurozone economies, such as Spain, deflation has already taken hold.

The problem is that today's measures are unlikely to work.

Many economists believe the Eurozone's money transmission mechanism – how interest rate changes by central banks filter through to changes in the real economy – is broken. So cutting rates, on its own, will not be enough.

Quantative easing could have made it easier for Eurozone banks to lend cash

That is why Mario Draghi, the ECB President, also announced plans to buy asset-backed securities (ABS) and covered bonds issued by Eurozone banks.

These are portfolios of loans like mortgages and credit card debt, that banks normally parcel up and sell on to buyers such as insurance companies and pension funds, and the ECB's purpose in buying them is to deliver more money to the banking sector to be lent elsewhere.

The problem here is that the ABS market in the Eurozone is relatively small and so this action is unlikely to deliver dollops of money to the banking sector in the scale that would be needed to make a difference.

But Mr Draghi did not fire his big bazooka - full-blown Quantitative Easing by the buying of Eurozone government bonds - today.

That would be fiendishly complex, not least because it will require approval from the Germans, who are not keen on the idea. Expect calls for it to increase, though, if today's measures prove unsuccessful.

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ECB Cuts Eurozone Rates And Boosts Stimulus

Eurozone Teeters As ECB's Bazooka Is Held Back

Updated: 6:46pm UK, Thursday 04 September 2014

By Ian King, Business Presenter

Only in a 100 metre sprint, a Wall Street Journal correspondent joked on Twitter, does a one-tenth of a unit move normally spark such excitement.

The European Central Bank's shock interest cut today, taking its benchmark policy rate from 0.15% to 0.05%, created drama on currency markets, sending the euro down against the US dollar by almost a full percentage point – a move seldom seen – to its lowest level for 14 months.

As dramatic was the ECB's decision to raise the rate it charges commercial banks to deposit money with it from 0.1% to 0.2%.

This negative deposit rate is aimed at getting commercial banks in the Eurozone to lend money to customers rather than hoard it. It highlights how gravely the ECB now views the chronic state of the Eurozone economy.

The Eurozone, to put it bluntly, is teetering on the brink of a Japanese-style crisis.

Japan is slowly dragging itself out of two decades during which it has suffered deflation, or negative inflation, a sustained period of falling prices.

That might sound good news for shoppers but is, over time, a ghastly phenomenon that strangles confidence and economic activity.

Played out at a national level, it also increases the value of debt, something many highly-indebted Eurozone economies cannot afford.

Deflation raises the risk economies cannot meet interest payments on their debts – the factor that forced Greece, Portugal and Ireland to seek bail-outs from the ECB and the International Monetary Fund.

The ECB knows the Eurozone is not far away from such a crisis. Consumer price inflation in the Eurozone currently stands at just 0.3 per cent but in some Eurozone economies, such as Spain, deflation has already taken hold.

The problem is that today's measures are unlikely to work.

Many economists believe the Eurozone's money transmission mechanism – how interest rate changes by central banks filter through to changes in the real economy – is broken. So cutting rates, on its own, will not be enough.

That is why Mario Draghi, the ECB President, also announced plans to buy asset-backed securities (ABS) and covered bonds issued by Eurozone banks.

These are portfolios of loans like mortgages and credit card debt, that banks normally parcel up and sell on to buyers such as insurance companies and pension funds, and the ECB's purpose in buying them is to deliver more money to the banking sector to be lent elsewhere.

The problem here is that the ABS market in the Eurozone is relatively small and so this action is unlikely to deliver dollops of money to the banking sector in the scale that would be needed to make a difference.

But Mr Draghi did not fire his big bazooka - full-blown Quantitative Easing by the buying of Eurozone government bonds - today.

That would be fiendishly complex, not least because it will require approval from the Germans, who are not keen on the idea. Expect calls for it to increase, though, if today's measures prove unsuccessful.

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BP's 'Gross Negligence' Led To Gulf Oil Spill

A federal judge has ruled that BP's reckless conduct led to the worst offshore oil spill in US history - a decision that exposes the oil giant to billions more in civil penalties.

BP was assigned the majority of blame for the 2010 Gulf of Mexico spill by US District Judge Carl Barbier on Thursday.

His ruling means BP now faces fines that are expected to total between $10.3bn (£6.3bn) and $17.6bn (£10.7bn).

Judge Barbier ruled that BP bears 67% of responsibility for the spill, while drilling rig owner Transocean Ltd was assigned 30% of blame.

Eleven workers were killed in the April 2010 oil rig explosion

Halliburton, which served as BP's cement contractor on the Deepwater Horizon rig, was assigned 3% of the blame. The energy services giant announced on Tuesday that it had agreed to pay $1.1bn (£665m) to settle plaintiff claims.

Eleven workers were killed when the rig exploded in April 2010, and millions of gallons of oil spewed into the Gulf while BP scrambled for weeks to seal the well.

Judge Barbier said BP made "profit-driven decisions" during drilling that led to the deadly blowout.

"The Court concludes that the discharge of oil 'was the result of gross negligence or wilful misconduct' by BP," Judge Barbier said in his written ruling.

"BP's conduct was reckless."

"These instances of negligence, taken together, evince an extreme deviation from the standard of care and a conscious disregard of known risks," he wrote in a 153-page ruling.

BP said in a news release that it would appeal the ruling, saying the company "believes that an impartial view of the record does not support the erroneous conclusion reached by the District Court".

The company's shares slumped about 6% after the ruling, reducing BP's market value by $7bn (£4.3bn).

BP has spent more than $24bn (£14.7bn) in spill-related expenses in the wake of the disaster. The company estimated that it will pay a total of $42bn (£25.7bn) to the matter is fully resolved.

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Over 40s Should Pay More Into NHS, Report Says

Older generations and the wealthy should be taxed more to pay for the NHS and social care, according to a new report.

A commission established by the think tank The King's Fund also suggested the over-75s should be stripped of their free TV licences and winter fuel payments should only be given to those most in need.

It recommended that in order to relieve the "huge pressures" on the care system and the NHS when someone reaches the age of 40 their National Insurance (NI) contributions should increase by 1%.

Those who work past the state pension age, who are not currently required to pay NI should also be required to pay a reduced rate, the report suggests.

The wealthy would also face a percentage point increase in contributions they pay on earnings over the £42,000 threshold. 

The expert panel concluded that health and social care funding in England should be placed under one ring-fenced budget with funds allocated by a single commissioner.

It said this combined fund would cost between 11% and 12% of England's economic output by 2025 - roughly the equivalent of many other countries around the world.

The report said winter fuel payments should no longer be universal

The report said the current system creates "confusion, perverse incentives and much distress for individuals and families".

"We recommend on the grounds of equity, affordability and inter-generational fairness that at least some of the extra revenue to pay for the large-scale improvements that we seek should come from the group that will be among the biggest beneficiaries of the changes, namely the older generation and particularly its more affluent members," it said.

"Resources can be released by targeting existing benefits ... away from affluent pensioners, and diverting the money into health and social care."

Among other suggestions, the report said prescription charges should be reduced to £2.50 instead of the current £8.05, with fewer people being eligible for free prescriptions.

In total, the recommended measures would generate around £5bn.

Dame Kate Barker, who led the commission, said: "Our system is not fit to provide the kind of care we need and want.

"We propose radical change, greater than any since 1948, that would bring immense benefit to people who fall between the cracks between means-tested social care and a free NHS."

A Government spokesman said: "We agree that health and social care services should be more joined up - our £3.8bn Better Care Fund is making this a reality for the first time ever, bringing NHS and social care teams together to help people live independently for as long as possible.

"We have taken tough economic decisions to support social care services and protect the NHS budget, which we have increased by £12.7bn since 2010."

Labour's shadow health secretary Andy Burnham said: "The simple fact is that there is no sustainable future for the NHS in the 21st century without a long-term solution for social care."

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Standard Life Investors Net £1.75bn Windfall

Shareholders in Standard Life are on course for a £1.75bn windfall from the insurance firm's sale of its Canadian interests.

Canada-based Manulife is to pay £2.2bn for the long-term savings, retirement and insurance business on completion - expected early next year.

Standard Life said its board intended to return £1.75bn to investors, the equivalent of 73p per share, by way of a dual-share scheme that would allow shareholders to choose to receive the proceeds as capital or income.

The deal, which will also herald a global collaboration agreement with Manulife, is the latest in chief executive David Nish's turnaround plan.

The company said the agreements marked "another major step in furthering Standard Life's strategy to build a global investment solutions business" and accelerating the growth profile of the Group.

The collaboration, Standard Life said, would deepen its access to global markets for Standard Life Investments, with Manulife seeking to distribute its funds into Canada, the US and Asia.

It forecast a trebling of total assets under management distributed by Manulife within three years.

Mr Nish said of the deals: "This transaction provides our Group and its shareholders with significant strategic and financial benefits.

"It accelerates our growth and reduces capital-intensity, while delivering substantial value today.

"The proposed capital return of £1.75bn , equivalent to 73p per share, will take the total amount of dividends and returns to shareholders since 2010 to 147p per share.

"We have transformed our Canadian operations into a business which has consistently delivered strong results, contributing to the overall success of the Group.

"As a result, the Canadian business is now a much more attractive proposition and the Sale allows us to realise fully the value of the business for our shareholders".

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CBI Forecasts Economic Growth Slowdown

The CBI has forecast a slowing of economic growth during the second half of the year - weighed down by flatter confidence and uncertainties over the Scottish referendum.

The business lobby group predicted UK GDP growth would ease to 0.7% in the third quarter and 0.6% during the final three months of the year, after growth of 0.8% in each of the first and second quarters.

It said its expected slowdown also reflected weakness in productivity and wage growth, though average earnings would soon start to rise - by 1% this year.

CBI director-general John Cridland said: "The UK's recovery is on solid ground, with our quarterly growth on average outstripping G7 competitors over the last year.

"For the rest of the year, we expect growth to get onto a more even keel and the recovery to become further entrenched next year.

"Business investment has been growing better than expected so far this year, but it still has a lot of catching up to do to get back to its pre-crisis level.

"Although hundreds of thousands of new jobs are being created in the economy, there is little upward pressure on starter salaries outside a few hot spots, such as in parts of the IT sector.

A separate CBI survey showed economic growth slowed in the three months to August.

Mr Cridland said heightened tensions in Ukraine and the Middle East added to risks such as higher commodity prices and global market instability.

He described the possibility of a Yes vote in the Scottish independence referendum on September 18 as "the most important risk that the CBI and business are facing".

"The economic case for Scottish independence has not been made," he said.

"Overwhelmingly, British business believes that the UK should stay together."

Deputy director-general Katja Hall added: "It is a one-way ticket to uncertainty and there is no return."

In another development, the CBI also confirmed a story by Sky News that it was launching a "great business debate" to highlight the positive contribution made to society, as well as to answer public concerns on issues such as wages, diversity and tax contributions.

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Financial Jargon Is Costing Customers Hundreds

By Poppy Trowbridge, Consumer Affairs Correspondent

Consumers are losing more than £400 a year because they do not understand financial terms and conditions.

According to research from the Money Advice Service many customers do not know what key concepts mean at all.

The study of 3,000 UK adults shows this is a particular problem for payday loan customers.

Considering that one fifth of the UK population falls within this group, the fact that 52% could not correctly identify the meaning of the word "loan" is worrying.

These "loans" carry high interest rates (another term that caused confusion) and without regular repayment, can quickly drag a customer into serious debt.

Even common abbreviations used by the financial industry led to confusion:

:: 61% could not identify what EAR stands for (Equivalent Annual Rate)

:: 30% could not identify what APR stands for (Annual Percentage Rate)

:: 22% could not identify what ISA stands for (Individual Savings Account)

:: 32% misunderstood the meaning of the terms "interest" and "budget"

But putting these rather simple, yet admittedly still quite specific concepts aside, the survey reveals three far more worrying facts that put large portions of the population at risk.

First, 84% of UK adults do not read the full terms and conditions when taking out a financial product.

Some 84% of people do not read the full terms and conditions

There will be very few people in the country that will not have a debit card, mortgage or car loan.

That means each and every one of them who does not read  the terms of their contracts is taking a chance.

Nearly 31 million people are in the workforce and many of them will be saving into a pension as a result of the government's auto-enrolment program.

Yet the term most misunderstood in this survey was "compound interest" - the concept of paying interest on interest already accrued over a number of years, which applies to millions of savings accounts and mortgages.

The Money Advice Service estimates the average UK adult is out of pocket by £428 per year because of the confusions surrounding all this financial jargon.

Luckily, this year, personal finance officially joins the national curriculum alongside more traditional subjects like history and maths.

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Apple Denies System Breach Over Nude Photos

Leaked nude photos of Oscar-winning actress Jennifer Lawrence and other female celebrities were deliberately targeted and not the result of a system-wide breach, Apple has claimed.

The company said on Tuesday that an internal probe found that individual accounts were compromised by hackers.

Apple denied initial reports that its iCloud and Find my iPhone services had been breached.

More than 60 photographs of Lawrence were among those reportedly stolen.

The intimate images first appeared on an online bulletin board in the US before going viral.

A representative for Lawrence said in a statement that the actress contacted authorities over the "flagrant violation of privacy" and would prosecute anyone who posts the stolen photos.

The FBI said on Monday it was investigating the matter.

A list of those allegedly hacked contained more than 100 names, including Kate Upton, Cara Delevingne, Aubrey Plaza, Cat Deeley, Kelly Brook, Kim Kardashian, and Rihanna.

The hacker also claims to have a "full set" of photographs of US soccer star Hope Solo.

Actress Mary Elizabeth Winstead, who was on the list, tweeted: "To those of you looking at photos I took with my husband years ago in the privacy of our home, hope you feel great about yourselves."

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UK Rises In Economic Competitiveness Rankings

A league table charting the economic competitiveness of countries has given the UK a boost.

Britain gained one place, rising to ninth in the annual rankings - produced by the World Economic Forum (WEF) - which saw many developed economies recover some ground in the wake of the financial crisis.

It said of the UK: "The country improves its performance thanks to gains derived from lower levels of fiscal deficit and public debt.

"In addition to these more favourable macroeconomic conditions, the UK continues to benefit from an efficient labour market and a high level of financial development, despite the recent difficulties in parts of its banking system and the fact that the difficult access to loans remains the most problematic factor for doing business in the country.

The report went on to rank the UK second in uptake of information and communications technology, saying it allowed the country to create "highly sophisticated and innovative businesses".

However, it recommended the UK "raise the overall quality of its education system, most notably in the areas of mathematics and science".

The United States and Japan were the biggest winners in the top ten.

The WEF said: "The United States improves its competitiveness position for the second consecutive year, climbing two places to third on the back of gains to its institutional framework and innovation scores".

The body, which organises the annual Davos meeting of the global political and business elite, said Switzerland remained the world's most competitive economy followed by Singapore.

It also pointed to countries facing "major competitiveness challenges" and cited France and Italy, unchanged at 23rd and 49th respectively, saying they "appear not to have fully engaged" in the process of implementing reforms.

China - the world's second-largest economy - gained one place, moving to 28th.

The WEF rankings are based on a raft of criteria: institutions, infrastructure and the macroeconomic environment, plus health and education, goods and labour market efficiency, financial market development, technology, market size, business sophistication, and innovation.

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PPI Complaint Volumes Ease In First Half

Complaints about payment protection insurance (PPI) have eased back by more than 50% from last year's record peak.

But the Financial Ombudsman Service (FOS) - set up to settle disputes between financial firms and consumers - said the volume it was receiving remained at a "significant level" at a time when complaints about other issues within the industry rose.

The FOS said it took on 133,819 PPI complaints in the first half of the calendar year, compared to 193,054 over the previous six months.

The body stated: "Around 5,000 people a week are currently asking the ombudsman to look into their PPI complaint.

"This is down from the highs of 2013 when we were receiving over 12,000 a week, but still significantly more than any other financial product."

The City regulator, the Financial Conduct Authority (FCA), said last week that banks and others in the financial services industry had so far paid out £16bn in just over three years to compensate customers mis-sold PPI.

PPI policies were meant to protect customers who fell ill or lost their jobs but were often sold to people who didn't need them or would have been ineligible to claim.

The FCA confirmed last Friday that lenders had been asked to look again at 2.5 million complaints they had either paid too little to or originally dismissed 

It acted after noticing a significant fall in the number of cases being upheld in favour of consumers.

The FOS's chief ombudsman Caroline Wayman said: "We're seeing more and more people turn to us in frustration where they feel their bank or insurer simply doesn't understand or really care.

"And we're hearing growing dissatisfaction from people about being processed industrially as a number rather than being listened to as an individual customer."

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Payday Loans: Charity Demands Tougher Action

A charity has reported a 42% rise in the number of people suffering under the weight of payday loan debts and called for tougher regulation of the market.

StepChange said it dealt with 43,716 people in the first six months of this year, compared with 30,762 for the same period last year, handling more that £72m in debts.

The body argued that its experience showed that plans to toughen regulations in the payday market from January did not go far enough to protect vulnerable consumers.

Under the measures announced by the Financial Conduct Authority (FCA), those who cannot repay payday loans on time will never have to pay back more in charges than the amount borrowed.

The plans include capping default fees at £15 and a limit of 0.8% per day on interest on unpaid balances.

StepChange said it wanted to see a tougher total cost cap than 100% of the value of a loan, the default fee cap reduced and a regulation to promote more responsible lending by ensuring lenders see a borrower's history in advance.

Its chief executive Mike O'Connor said: "Today's figures show that the payday market all too often fails to treat customers fairly, especially those in financial difficulty.

"High-cost short-term credit is rarely the answer to financial difficulties.

"While the FCA's proposed price cap is a crucial step forward, there is still much work to be done to ensure that payday loans can no longer plunge people into a cycle of unsustainable borrowing and entrenched financial hardship.

"Consumers will continue to need access to short-term credit and FCA action should also stimulate the reform of this market.

This needs to include problems in the adjacent markets including overdrafts, logbook loans and home credit where consumers also suffer detriment.

"The goal of an affordable lending market treating consumers fairly will also involve others but the FCA has a critical role to play in creating the right environment."

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'Huge Leap In The Dark': Boris Island Rejected

Boris Johnson's proposal for a new four-runway airport to be built in the Thames Estuary has been rejected by the Airports Commission.

The grounding of an airport in Kent leaves three options for expanding airport capacity: two additional runway plans at Heathrow and one at Gatwick.

These are being considered by the Airports Commission, which was established by the Government to recommend the best option for expansion, and will issue its final report after next year's election.

How a Thames Estuary airport would have looked. Pic: Foster and Partners

Mr Johnson, who is against a third runway at Heathrow, spoke of his disappointment ahead of the decision, which was widely expected.

The London Mayor said: "In one myopic stroke the Airports Commission has set the debate back by half a century and consigned their work to the long list of vertically filed reports on aviation expansion that are gathering dust on a shelf in Whitehall.

"Gatwick is not a long term solution and Howard Davies must explain to the people of London how he can possibly envisage that an expansion of Heathrow, which would create unbelievable levels of noise, blight and pollution, is a better idea than a new airport to the east of London that he himself admits is visionary, and which would create the jobs and growth this country needs to remain competitive.

One of the proposals for a third runway at Heathrow

"It remains the only credible solution, any process that fails to include it renders itself pretty much irrelevant, and I'm absolutely certain that it is the option that will eventually be chosen."

Sir Howard Davies, head of the Airports Commission, told Sky News: "This would be a huge leap in the dark and we simply don't think it's a practical scheme."

He added there were "a lot" of reasons to rule the idea out.

Boris Johnson attends a rally against Heathrow expansion

"We think that it is too expensive; we don't believe that a future government would be prepared to spend the public money, between £30bn and £60bn that would be necessary to even the smaller version of his airport up and running," he said.

"We think that is too risky, the logistical problems of moving an airport 70 miles and of doing so in an environmentally extremely sensitive area are, we think, awe-inspiring and we're not entirely sure in fact it's the right model for London to think of one huge airport in a very diverse market where we think that competing airports produce a better solution."

The Heathrow and Gatwick options had been shortlisted by the commission last year, with Sir Howard announcing that further studies would be made on the estuary plan with a decision towards the end of 2014.

Sir Howard Davies said he didn't think Boris Island was 'practical'

The issue of airports is a thorny one for Mr Johnson, who is trying to become the Conservative candidate for Uxbridge and South Ruislip at the election.

That constituency borders Heathrow and contains many people who depend on it for their livelihood.

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Branson Banks On £2bn Virgin Money Float

By Mark Kleinman, City Editor

Sir Richard Branson is poised to pull the trigger on a stock market listing of Virgin's banking arm that City insiders predict could value it at up to £2bn.

Sky News has learnt that directors of Virgin Money are in talks with advisers about announcing an intention to float as soon as early October, as they look to exploit strong current trading and investors' appetite to buy shares in the company.

A final decision about the timing of an initial public offering (IPO) will not be taken for several weeks and it remains a strong possibility that Virgin Money could opt to wait until next year, according to people close to the company.

If it does press the button on a listing this year, Virgin Money, which has more than four million customers, would become the third so-called challenger bank to sell shares on the London Stock Exchange this year.

OneSavings, which does not offer current accounts, listed during the spring, while TSB was spun out of Lloyds Banking Group as part of the bank's state aid settlement with Brussels triggered by its taxpayer bailout in 2008.

Aldermore, another new lender, is also planning a flotation this autumn and could announce its plans at around the same time as Virgin Money.

Sir Richard's plan to float his banking business has been well-flagged, although it was not expected to happen as soon as this year.

Sources said that Virgin Group, which owns just over 46.5% of Virgin Money, planned to retain a large a shareholding as possible after a flotation.

WL Ross, the investment vehicle of billionaire US financier Wilbur Ross, also wants to hold onto the vast majority of its 45% stake, meaning that the free float of Virgin Money shares after the sale of new equity is likely to be close to the minimum requirements under City rules.

Virgin Money has been performing strongly in recent months, according to insiders, with a new current account making strong progress in Scotland and Northern Ireland before its wider nationwide launch.

The product, branded Essential, is designed to build a substantial presence in the current account sector at a time when ministers are attempting to foment greater competition.

Last month, Virgin Money announced a deal to raise £160m in the debt markets in order to repay part of a financing package taken on when it acquired Northern Rock from the Government in 2011.

Jayne-Anne Gadhia, Virgin Money's chief executive, said in July that 200 new jobs would be created by the business this year.

"We have grown the business strongly, exceeding market growth in both our core mortgage and savings business, and returned to profitability," she said.

"We have achieved this whilst maintaining the strength and quality of our balance sheet."

The bank added that it had grown mortgage balances by over 40% to exceed £20bn, significantly ahead of market growth, while savings balances had increased by more than 30% to over £21bn.

Last year, Virgin Money made an underlying profit of £53.4m in 2013, compared to a £2.5m loss the year before.

Chaired by Sir David Clementi, the former Prudential chairman, Virgin Money is expected to add further board members ahead of a listing.

The bank declined to comment on Saturday on the potential timing of a flotation, which is being handled by Bank of America Merrill Lynch and Goldman Sachs.

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Boris: Heathrow Third Runway Plan 'Barbaric'

Boris Johnson has issued a last ditch appeal in his battle to prevent a third runway being built at Heathrow, insisting it would be "barbarically contemptuous" of local residents.

The Mayor of London, who has long championed the construction of a new hub airport dubbed "Boris Island" in the Thames Estuary, spoke out as the Airports Commission prepared to give its verdict on the idea.

The Commission chairman Sir Howard Davies said the body would take a look at the proposal after it was left out of his initial shortlist which contained only the options of expansion at both Heathrow and Gatwick.

Writing in his Daily Telegraph column, Mr Johnson described any backing for Heathrow - in west London - as "madness".

He added: "What frustrates me is that third runway (at Heathrow) is so desperately short-sighted.

There is significant opposition to Heathrow's expansion

"You could not conceivably get it built before 2029, by the airport's own admission - and as soon as it opened it would be full".

Mr Johnson, who plans to stand as the Conservative candidate for Uxbridge and South Ruislip in the 2015 General Election, argued Heathrow expansion would lead to medical problems associated with pollution, as well as congestion on the road network.

However, he dropped his plan to close Heathrow under his Thames Estuary proposal, saying it could continue to operate as a secondary airport alongside a four-runway "Boris Island" hub.

He argued the UK stood to lose its position as a "great trading nation" as the business lobby group the CBI demanded "spades in the ground by 2020".

Its report, which declined to name a preferred candidate to offer the extra airport capacity, said that having a single UK hub airport with spare capacity to add new routes was critical to the UK's long-term sustainable growth.

Its deputy director-general Katja Hall said: "UK business wants action. There can be no more excuses - we need to see the Airports Commission deliver a strong case for new capacity and a clear schedule for delivery, and politicians to commit to spades in the ground by the end of the next Parliament.

"With Heathrow full and the UK slipping behind in the race for new connectivity, it is essential that the Airports Commission delivers a solution that addresses the ticking time bomb of our lack of spare hub capacity."

The biggest obstacle to "Boris Island" is the estimated cost of more than £50bn while expanding Heathrow to become a three-runway airport and Gatwick to two-runways is priced around £15bn and £10bn respectively.

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Major Tesco Shareholder Warns On Strategy

As Tesco's new chief executive starts work on reviving the chain's fortunes it has been revealed that a major shareholder has warned over its strategy.

Harris Associates, which held 3% of Tesco stock,  told the Financial Times it had halved its investment over the past three months.

The US fund manager's chief executive, David Herro, hit out at what he described as "unclear management direction and incoherent strategy".

He said it was prudent to cut its exposure to Tesco as both its chief executive and chief financial officer would be new in their posts.

The publication of Mr Herro's email coincided with the first day in the chief executive's chair for Dave Lewis, whose start date was brought forward by a month to September 1 following the sacking of Tesco veteran Philip Clarke who presided over a 41% decline in the company's share price.

Philip Clarke left Tesco on Friday

The development was revealed on Friday as Tesco shocked investors by issuing a third profit warning for the year and confirmed its interim dividend would be slashed by 75% to 1.16p-per share.

The supermarket chain, which has seen its position as the UK's market leader slowly eroded amid a price war with rivals, said Mr Lewis would review all aspects of the business.

Tesco shares, which lost 7% of their value on Friday, fell a further 1.9% in early trading on the FTSE 100 on Monday.

The problems at Tesco underline a big challenge for the so-called 'Big Four' chains from hard discounters.

According to industry figures by Kantar Worldpanel released last week, Tesco sales declined 4% in the 12 weeks to August 17 compared to the same period last year.

Kantar estimated the drop in sales cost Tesco £300m.

Morrisons has also been suffering in the battle with Aldi and Lidl, with Asda the only member of the Big Four to be growing its share.

Analysts have speculated that the savings Tesco is planning could allow it to cut its prices further to tackle the discount threat.

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Co-op Members Vote Through Big Reforms

Co-operative members have backed a shake-up of the way the crisis-hit group is run after a landmark vote on Saturday.

At a special general meeting in Manchester, 83% of votes were in favour of proposals drawn up after the mutual made record £2.5bn losses, the Co-op said.

The proposals include reform of the group's board structure, with elected directors largely replaced by professional business people.

The new structure also includes the creation of a smaller board of directors and the adoption of a one-member one-vote system.

Ursula Lidbetter, Co-op chair, said: "These reforms represent the final crucial step in delivering the change necessary to return the group to health.

"This will strengthen the society and enable us to move forward with the urgent work to rebuild the business and deliver on our renewed purpose, in the interests of all our colleagues and our millions of members and customers."

A poll in May saw unanimous support for the key principles behind the reforms.

The changes, which followed a review by former City minister Lord Myners, required the backing of a two-thirds majoriy.

The board will consist of an independent chairman, five independent non-executive directors, two executive directors and three elected directors.

Last year saw the Co-op group experience its worst crisis in its 150-year history after it discovered a £1.5bn hole in its balance sheet.

A separate report by Sir Christopher Kelly found the group had let down its members by failing to provide "proper stewardship".

Its stake in the bank has now fallen from 100% to 20% after a rescue plan that saw bondholders, including US hedge funds, take majority ownership.

Last week, the lender reported first-half losses had shrunk from £845m to £76m.

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PPI Scandal: Lenders To Re-Open 2.5m Claims

The City regulator says banks and other lenders are to reassess more than 2.5 million payment protection insurance (PPI) complaints.

The Financial Conduct Authority (FCA) says the claims, which were made in 2012 and 2013, may have either been unfairly rejected or paid too little.

It intervened after investigating falling 'uphold' rates in relation to complaint volumes.

The scandal has resulted in 13 million complaints in total since 2007 - with victims receiving more than £16bn in redress since the FCA started tracking payments in 2011.

The sum is widely tipped to have risen above £20bn.

Lloyds has set aside more than £10bn for PPI compensation

The FCA added that seven-in-ten claims had been upheld in the consumer's favour since the scandal broke.

Martin Wheatley, its chief executive, said: "Making sure anybody previously mis-sold PPI is treated fairly now, and paid redress where its due, is an important step in rebuilding trust in financial institutions.

"In around two-and-a-half million complaints this was not necessarily the case so, at our request, firms will be looking at these complaints again.

"The process is now working well; in just over three years £16bn has been put back into the pocket of the consumer - that is unprecedented.

"Given the enormity of this exercise it is no surprise that there have been some issues along the way but our approach is delivering a good result for consumers."

The FCA issued its update as the Financial Ombudsman Service remains jammed with complaints about PPI.

It has received over one million complaints from people unhappy with the response from their provider, equal to about a quarter of all rejected complaints.

The cash which has found its way back to PPI mis-selling victims has been credited with boosting the UK's economic recovery - particularly the car and property markets - but also wider consumer spending.

:: In a separate announcement Coutts, the private bank that counts the Queen among its clients, has set aside £110m to compensate thousands of customers who may have been sold unsuitable investments.

Its review of advice to clients dated back as far as 1950.

Coutts confirmed the news days after its parent firm, Royal Bank of Scotland, was fined £14.5m for "serious failings" in its advice to mortgage customers from June 2011 to March 2013.

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Branson Banks On £2bn Virgin Money Float

By Mark Kleinman, City Editor

Sir Richard Branson is poised to pull the trigger on a stock market listing of Virgin's banking arm that City insiders predict could value it at up to £2bn.

Sky News has learnt that directors of Virgin Money are in talks with advisers about announcing an intention to float as soon as early October, as they look to exploit strong current trading and investors' appetite to buy shares in the company.

A final decision about the timing of an initial public offering (IPO) will not be taken for several weeks and it remains a strong possibility that Virgin Money could opt to wait until next year, according to people close to the company.

If it does press the button on a listing this year, Virgin Money, which has more than four million customers, would become the third so-called challenger bank to sell shares on the London Stock Exchange this year.

OneSavings, which does not offer current accounts, listed during the spring, while TSB was spun out of Lloyds Banking Group as part of the bank's state aid settlement with Brussels triggered by its taxpayer bailout in 2008.

Aldermore, another new lender, is also planning a flotation this autumn and could announce its plans at around the same time as Virgin Money.

Sir Richard's plan to float his banking business has been well-flagged, although it was not expected to happen as soon as this year.

Sources said that Virgin Group, which owns just over 46.5% of Virgin Money, planned to retain a large a shareholding as possible after a flotation.

WL Ross, the investment vehicle of billionaire US financier Wilbur Ross, also wants to hold onto the vast majority of its 45% stake, meaning that the free float of Virgin Money shares after the sale of new equity is likely to be close to the minimum requirements under City rules.

Virgin Money has been performing strongly in recent months, according to insiders, with a new current account making strong progress in Scotland and Northern Ireland before its wider nationwide launch.

The product, branded Essential, is designed to build a substantial presence in the current account sector at a time when ministers are attempting to foment greater competition.

Last month, Virgin Money announced a deal to raise £160m in the debt markets in order to repay part of a financing package taken on when it acquired Northern Rock from the Government in 2011.

Jayne-Anne Gadhia, Virgin Money's chief executive, said in July that 200 new jobs would be created by the business this year.

"We have grown the business strongly, exceeding market growth in both our core mortgage and savings business, and returned to profitability," she said.

"We have achieved this whilst maintaining the strength and quality of our balance sheet."

The bank added that it had grown mortgage balances by over 40% to exceed £20bn, significantly ahead of market growth, while savings balances had increased by more than 30% to over £21bn.

Last year, Virgin Money made an underlying profit of £53.4m in 2013, compared to a £2.5m loss the year before.

Chaired by Sir David Clementi, the former Prudential chairman, Virgin Money is expected to add further board members ahead of a listing.

The bank declined to comment on Saturday on the potential timing of a flotation, which is being handled by Bank of America Merrill Lynch and Goldman Sachs.

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