Forbes Rich List: 1,426 Billionaires Worldwide

The world now has a record 1,426 billionaires with a combined wealth of $5.4 trillion (£3.6trn), according to a new survey.

The 2013 Forbes annual billionaires issue said a total of 210 new billionaires have been added to the list, with their wealth up $800bn (£530bn) on the previous year.

Mexico's telecoms entrepreneur Carlos Slim continued to top the list with a net worth of $73bn (£48bn), up $4bn (£2.6bn) in the previous 12 months.

Zara fashion chain boss Amancio Ortega moved up two spots to number three, with a net worth of $57bn (£38bn), to sit behind Microsoft founder Bill Gates.

The surprise shift was for veteran American investor Warren Buffett, who dropped from second to fourth place with $53.5bn (£35.5bn) - even though he increased his wealth by $9.5bn (£6.3bn) in the year.

It was the first time since 2000 that Mr Buffett failed to make the top three in the list.

The 1,426 billionaires have an average wealth of $3.8bn (£2.5bn), up $100m (£66bn) on the 2012 list.

In 2012 the top three were Carlos Slim, Bill Gates and Warren Buffett

The US continues to lead with 442 billionaires, followed by 386 in the Asia-Pacific region.

There are 366 ultra-rich on the list in Europe, with 129 in the Americas and 103 in the Middle East and Africa.

Forbes said here was a 32% increase in the number of female billionaires, with 138 now on the list.

The richest woman in the world, worth an estimated $30bn (£20bn), is Liliane Bettencourt - whose father foundered cosmetics giant L'Oreal.

Italian fashion head Miuccia Prada ranks 79 on the list with $12.4bn, just slightly behind Facebook founder Mark Zuckerberg's $13.3bn (£8.8bn) position at 66.

Britain's richest man, the Duke of Westminster, is listed as the 89th richest person with $11.4bn (£7.6bn).

Sir Richard Branson is ranked 272 on the list with $4.6bn (£3bn) - behind Topshop's Sir Philip Green at 248 with $5bn (£3.3bn).

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Funding For Lending Credit Cut Sharply

British lenders taking part in a Bank of England scheme to boost firms' and households' access to credit cut lending sharply in the last three months, official statistics have revealed.

The lower than expected Funding for Lending Scheme (FLS) figures have dampened hopes that the project could help revive economic growth.

The BoE announced the scheme jointly with the Government in June 2012, as a way to unblock a credit log-jam which some economists say is a big factor behind Britain's weak economic recovery.

Banks and building societies cut lending by a net £2.425bn between October and December.

The figure compares to an increase of around £1bn in the first months of the FLS's operation.

Total net lending by banks and building societies taking part in the scheme - which includes all major British lenders apart from HSBC - is now down by £1.502bn since June 30.

The bank said that the scheme's benefits will not be fully clear until later in 2013.

"I would not expect to see a return to rising aggregate quantities until we start getting data for 2013 at the earliest," the bank's Paul Fisher said.

Taxpayer-backed lenders Royal Bank of Scotland and Lloyds Banking Group saw lending fall, despite drawing money from the scheme.

Lloyds has drawn £3bn so far, but lending fell by £3.1bn last quarter, while RBS has taken £750m, but its lending still fell by £1.7bn.

Prime Minister David Cameron's official spokesman said that the Government and the BoE had always made clear that it would take some time before the impact of the Funding for Lending scheme was felt, and that it was not expected as early as the fourth quarter of 2012.

"I think the Bank of England at the time of the launch of the policy was clear that it would take some time for the impact of the policy to be fully felt," the spokesman said.

"The most recent figures for lending in the economy, for January - the first month of Q1 2013 (the first quarter of 2013) - show that lending to the economy increased in January.

"I think we are also seeing the impact of the Funding for Lending scheme through lower borrowing costs. I think we are seeing evidence of the policy having a clear impact."

But shadow chancellor Ed Balls said: "These are deeply disappointing figures. Net lending is actually down since the Funding for Lending scheme started and down by £2.4bn in the final three months of 2012.

"And the Bank of England's own figures show that net lending to businesses fell by £4.5bn in the last quarter."

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New FSA Rules Prompt Internet Bank Rethink

By Mark Kleinman, City Editor

A new retail bank which has been struggling to secure funding and regulatory approval for more than three years has restarted talks with potential investors, buoyed by new rules governing start-up lenders.

I have learnt that Home & Savings Bank, which has been seeking as much as £250m of external capital since 2009, has in recent weeks resumed canvassing private equity firms, hedge funds and wealthy individuals about backing its launch plans.

The company, which would be a telephone and internet-based lender, is the brainchild of a group of former bank executives and Martin Finegold, the boss of Cambridge Place Asset Management, a London-based hedge fund.

People familiar with Home & Savings Bank's business plan said it had scaled back its ambitions and was now aiming to raise between £100m and £150m.

The nascent bank's management team includes Stuart Sinclair, former head of Tesco Personal Finance, and Peter Birch, one-time head of Abbey National.

Its new fundraising objective has been galvanised by the imminent publication of guidelines by the Financial Services Authority (FSA), which will allow banking start-ups to operate with much less capital than established high street rivals.

Mr Finegold's fund has already burned through millions of pounds in costs incurred by the development of Home & Savings Bank.

Over a three-year period it has held talks with dozens of possible investors, including Advent International and Blackstone, the buyout firms, and Magnetar Financial, the hedge fund. Home & Savings Bank also tried to pursue a stock market flotation but without success.

All of those discussions proved fruitless amid what many analysts see as a vicious circle hindering such embryonic projects: regulators will not approve new lenders until they have sufficient capital, while investors are reluctant to commit capital when there is uncertainty about whether a bank will receive regulatory approval.

Since the financial crisis a number of new retail banks have launched in Britain, the most prominent of which has been Metro Bank. Despite its public relations success, however, even it has made only modest competitive in-roads against the likes of Barclays, Lloyds Banking Group and Royal Bank of Scotland.

Last month, Sky News revealed that talks over the FSA reforms were being held up by demands from the Treasury to accelerate further the timetable for authorising new banks.

A spokesman for Home & Savings Bank declined to comment.

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HSBC Boss Gulliver In Line For £2m Bonus

By Mark Kleinman, City Editor

HSBC is to award its chief executive a bonus of just under £2m for 2012 following a year of successful strategic action to overhaul the bank but which was marred by a £1.2bn fine for violating US money-laundering laws.

I have learned that HSBC, Britain's biggest lender by market capitalisation, will announce on Monday alongside its full-year results that Stuart Gulliver has been awarded the bonus as part of a multimillion pound pay package.

Mr Gulliver intends to accept the award, according to HSBC insiders. His bonus will be deferred and subject to clawback, and he will not be able to cash it in until he retires from or leaves HSBC.

As part of an effort to demonstrate greater transparency over the way it rewards top executives, HSBC will for the first time publish a single figure for the aggregate pay and benefits packages awarded to Mr Gulliver and his most senior colleagues.

This will include pension contributions as well as salary, annual bonus and a long-term share award that has been allotted to him this year. It is designed to show compliance with new Government rules that will come into force later this year, which have been spearheaded by Vince Cable, the Business Secretary.

Douglas Flint, the chairman, Sir Simon Robertson, the deputy chairman, and John Thornton, the non-executive director who chairs the remuneration committee, are understood to have orchestrated the switch to the new disclosure regime ahead of the Government deadline.

For 2011, Mr Gulliver was awarded an annual bonus of just over £2.1m, alongside his base salary of £1.25m and £3.75m in long-term share awards, making a total of £7.2m.

In 2012, his bonus and LTIP are understood to have been determined "in broadly the same ballpark" with a total package worth between £6m and £7m, one person close to the bank said.

HSBC has been applauded by many leading City shareholders for the way it details its executive pay policies through the publication of a 'scorecard' for Mr Gulliver, who took over in 2011.

The chief executive is eligible for an annual bonus of three times his salary and six times his base pay in long-term incentive awards.

A chunk of both payments is determined by HSBC's compliance success and the bank's reputation during a 12-month period. Mr Gulliver is understood to have been awarded nothing in this bracket in 2012, the same outcome as a year earlier, when HSBC was fined for mis-selling bonds to elderly customers.

HSBC suffered one of the most ignominious episodes in its history last year, when it was forced to pay £1.2bn to US regulators to settle money laundering and sanctions breaches which had allowed its Mexican operation to be used by drug cartels and terrorist organisations.

In January, the bank established a committee to bolster its defences against financial crime, recruiting the former heads of HM Revenue and Customs and the Serious Organised Crime Agency, as well as a former US deputy attorney-general.

HSBC will set out plans on Monday to claw back millions of pounds from senior executives deemed to have been culpable in the Mexican situation.

While the bank will not name the affected individuals, they include Sandy Flockhart, the former head of the bank's Asian operation, who was at one stage seen as a contender against Mr Gulliver for the top job.

Mr Flockhart, who left HSBC last year, ran its Mexican subsidiary between 2002 and 2007, and had several million pounds-worth of shares which he is understood to have been told he will not now receive.

I understand, however, that Lord Green, the trade minister who stepped down as HSBC chairman in 2010, will not be included in the clawback effort, partly because he opted to take his long-term pay awards as pension contributions.

Michael Geoghegan, Mr Gulliver's predecessor as chief executive, has also been excluded from the clawback arrangement because the bank's remuneration committee did not conclude that he had been personally responsible for the compliance failings.

The effort to demonstrate pay restraint will be reflected in a lower bonus pool than the £2.8bn that was paid out for 2011, less than a quarter of which was paid to UK employees. HSBC will say on Monday that there has been an across-the-board reduction in the payout pot because of the US fine, although it is still understood to be paying out roughly £2bn in bonuses to staff around the world.

HSBC is also expected to pay a healthy final dividend, with its payouts to shareholders an increasingly-important source of income to UK investors in the context of a banking sector which has seen dividend expenditure shrink dramatically since the financial crisis.

In the UK, HSBC has abandoned a structure for paying staff that saw it impose a £50,000 cap on cash bonuses last year. The scheme involved the bank issuing shares that were then sold immediately in the market to hand executives larger cash sums.

HSBC bosses felt the initiative, devised with the Bank of England and Financial Services Authority, was "cosmetic". Instead, payouts will not include a cash ceiling but larger sums will have to be deferred for several years and won't pay out until employees leave or retire.

Analysts expect HSBC's full-year results to show continued progress under Mr Gulliver at accelerating the pace of change of what had historically been seen as a sluggish supertanker.

He has sold scores of businesses which did not meet internal targets for generating returns and has prioritised growth in the world's fastest-growing economies.

"HSBC has made excellent progress in its strategy to simplify the business and refocus it on growth markets and markets that benefit from international connectivity," analysts at Shore Capital said.

They predict underlying full-year profit of £12.5bn, against £11.8bn in 2011.

HSBC, which declined to comment, is also expected to outline a further provision for compensating customers who were mis-sold payment protection insurance.

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StanChart Cuts Bonuses After £440m Iran Fine

By Mark Kleinman, City Editor

Standard Chartered will this week cut both its group-wide bonus pool and the payout for its chief executive despite a record trading year buoyed by continued economic growth in its core markets.

I understand that London-headquartered Standard Chartered will announce alongside its annual results on Tuesday that it will pay out around $1.4bn (£930m) in bonuses, down from $1.535bn (£1.02bn) last year.

Peter Sands, the bank's chief executive, will see his own award reduced from $3.5m (£2.3m) for 2011 to less than £2m, according to insiders.

Bank chief executive Peter Sands

The reduced payouts will reflect a $667m (£443m) settlement struck late last year between the bank and US regulators over failings in the disclosure of transactions with entities in countries including Iran.

The smaller bonus pool will come despite analysts' expectations that Standard Chartered will announce underlying profits for last year of approximately $7.5bn (£5bn). Including the US fines at a statutory level, earnings are expected to be flat compared to last year's $6.8bn (£4.5bn).

People close to the bank said the bonus reductions were not only an acknowledgement of the Iran episode. They were, they said, also a reflection of demands for banks to hold more capital and for Standard Chartered's board to continue delivering its commitment to a progressive dividend policy.

More detailed disclosure about pay for top executives will not emerge until Standard Chartered's annual report is published next month.

People close to the bank said it would not be able to reclaim past bonuses in relation to the US settlement because the staff involved in the erroneous processing actions were too junior and because the errors took place before clawback was an established feature of bankers' employment contracts.

Standard Chartered, which declined to comment on its bonus plans, is also expected to criticise the deal proposed last week by the European Commission to cap bank bonuses at the level of a year's salary, or two years' with the consent of shareholders.

The rules, which if ratified will come into effect next year, would apply to the global operations of any bank domiciled within the European Union.

Standard Chartered would be at a particular disadvantage from these rules because, although it is based in London, it does little business within the EU. The bank's operations are focused on Asia and Africa, having positioned itself to benefit from the emerging trading blocs of the next few decades.

Mr Sands is thought to be particularly annoyed by the EU proposals after several reviews of Standard Chartered's domicile concluded that the UK continued to offer the most appropriate base for the bank.

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China Energy Firm Bows To Pollution Pressure

China: Life In Polluted Beijing

Updated: 3:40am UK, Monday 04 March 2013

Until I moved to Beijing, I would never have believed that the same view from the same window at the same time could be so strikingly different 24 hours apart, but on Thursday and Friday this week it was.

On Thursday morning I woke up, peered out of the window of my Beijing apartment and saw almost nothing: the skyline of the city's Central Business District was entirely obscured.

It looked like morning mist. If only it was.

With a glance at an ingenious app on my iPhone called "Beijing Air", the depressing news was delivered: the air quality index was 530.

All you need to know to put that figure in context is that the safe level is 25. Take a look at the chart below to see how Beijing and plenty of other Chinese cities fare compared to New York (London is much the same).

Beijing mornings begin not with a glance at the weather app but air app.

The day's activities are largely governed by the number on the screen. If it's less than 150, that's great news despite the fact that anything above 25 is unhealthy.

If it is between 150 and 250, you know it's bad. Anything more than 300 and plans must be made to avoid all contact with the outdoors.

Sky News has provided me with an air purifier. With Swiss efficiency, it sucks in the dirty air and squirts it out, clean. It's not cheap though (in fact it is unnecessarily expensive) and most of Beijing's 20 million residents can't afford the luxury – not that breathing clean air should be a luxury.

Oddly though, from the Beijingers I have quizzed about the air, I have found just resignation mixed with a good pinch of denial.

Every morning on my 8am walk to work, I pass groups of middle-aged women who gather there for their daily exercise in the city's Ritan Park. In perfect unison and to a typically Chinese tune, they dance. It is a wonderfully Chinese sight.

One morning I stopped to chat to them. I met Madame Wong and her two friends, Luo Chunyan and Wang Shulan.

They were all clearly aware of the bad-air issue; they couldn't really ignore it as it hung all around us.

And yet they seemed resigned to it all.

"We live in this world, and although the air is important, we can't stay indoors all the time, can we?" Lou Chunyan told me. "I think it's fine."

Wang Shulan accepted that it was a worry but wondered what she could do about it.

"We are all used to it," she said. "Our club was formed 6 years ago and we come every day unless it's snowing. Of course we are worried but I feel better when I come out and do exercise. If I stay at home I will feel really uncomfortable."

Madame Wang blamed the number of cars on Beijing's roads.

"I remember 20 years ago when I was working, there were foggy days too. I used to cycle 40 minutes to get to work, but it was never this bad," she recalled.

"Then it was fog, not smog. Nowadays when you say fog, you actually mean smog.

The government has to deal with it ... and the control of cars is the most important thing. As you can see, the heavily polluting factories are now outside the city. It is just the car fumes which are to blame."

The government has introduced measures to stem the problem. Among them, a law that uses car registration plates to determine the days when drivers are allowed onto the city's roads and stricter emissions regulations aimed at taking older cars off the roads.

However, their broad approach seems to be more one of awareness than anything else.

Pollution figures, including the most dangerous PM2.5 (the tiny particles which can be absorbed deep into the lungs), are now published for all to see and the state-run media is reporting the dangers on a regular basis.

That will encourage people to make more of an effort, but it will also draw attention to the problem and could turn pressure back on the unelected Communist rulers.

Last month, we were granted access to the government department responsible for monitoring the air.

The vice-manager of the department is Li Yunting. She knows just how bad the air is: the record-breaking figures flash up on her bank of screens on an hourly basis.

Unusually for a government employee commenting on a sensitive subject, she offered me a personal view of the problem.

"My child is very young. He is three-years-old and I told his grandparents not to take him outside because the air isn't good," she said.

"These days I am thinking of changing my own mask to a more protective one to protect myself against the pollution. I know my friends and lots of citizens are buying the masks to wear outside."

There is now a clear effort by the Chinese government to tackle the issue. They know it is an international embarrassment that could genuinely affect international business in the Chinese capital.

But they are walking a tightrope: by allowing transparency over the issue (state media once referred to it as "fog"; now they admit it's "smog"), they risk a backlash for not doing enough to tackle it.

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Pressure On First Buyers As House Prices Rise

By Nick Martin, Sky Correspondent

House prices edged up month-on-month in both January and February this year, bringing good news for homeowners but adding pressure on first-time buyers.

Building society Nationwide said it was cautiously optimistic that activity will pick up in the months ahead.

It comes after reports revealed more young people were living with their parents while trying to save for a deposit for a property. 

According to the Halifax, the average age of a first-time buyer is 30 years old - up from 29 in 2011.

There has been a significant increase in the proportion of first time buyers receiving financial help in recent years.

The Council of Mortgage Lenders (CML) estimate that 65% of first time buyers of had financial assistance in mid 2012 compared with 31% in mid-2005.

Kirsty Gilmore, 26, from Bristol, has been living at home for 18 months and has saved more than £30,000. But that is still not enough to buy a property. She says the market is so competitive it is hard to get a good price.

"I want to have my own place, I want to start a family and have a home to call my own, not just my mum and dad's.

"You feel a bit excluded from society - nobody cares and you're stuck in this rut really - and everyone else my age is," she told Sky News.

Mortgage approvals for home buyers have dipped for the first time since a Government scheme to boost lending was launched last August, Bank of England figures showed.

There were 54,719 approvals in January, showing a 2% decline compared with an 11-month high recorded the previous month and marking the first time that there has been a month-on-month decrease since July.

Mortgage approvals for house purchases had been on a steady upward path since the Government's Funding for Lending scheme, which aims to help borrowers by giving lenders access to cheap finance, was launched at the start of August.

The latest figures echo recent findings from the CML, with some analysts blaming the recent bad weather.

Housing minister Mark Prisk said the Government was trying to help first time buyers get onto the property ladder.

"Many people have to rely on the bank of mum and dad - so what we are trying to do with the builders and the Government by putting equity loans forward is make those deposit affordable for first time buyers. It's already helped 17,000 people. We hope it will help 27,000."

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HSBC Boss Gulliver In Line For £2m Bonus

By Mark Kleinman, City Editor

HSBC is to award its chief executive a bonus of just under £2m for 2012 following a year of successful strategic action to overhaul the bank but which was marred by a £1.2bn fine for violating US money-laundering laws.

I have learned that HSBC, Britain's biggest lender by market capitalisation, will announce on Monday alongside its full-year results that Stuart Gulliver has been awarded the bonus as part of a multimillion pound pay package.

Mr Gulliver intends to accept the award, according to HSBC insiders. His bonus will be deferred and subject to clawback, and he will not be able to cash it in until he retires from or leaves HSBC.

As part of an effort to demonstrate greater transparency over the way it rewards top executives, HSBC will for the first time publish a single figure for the aggregate pay and benefits packages awarded to Mr Gulliver and his most senior colleagues.

This will include pension contributions as well as salary, annual bonus and a long-term share award that has been allotted to him this year. It is designed to show compliance with new Government rules that will come into force later this year, which have been spearheaded by Vince Cable, the Business Secretary.

Douglas Flint, the chairman, Sir Simon Robertson, the deputy chairman, and John Thornton, the non-executive director who chairs the remuneration committee, are understood to have orchestrated the switch to the new disclosure regime ahead of the Government deadline.

For 2011, Mr Gulliver was awarded an annual bonus of just over £2.1m, alongside his base salary of £1.25m and £3.75m in long-term share awards, making a total of £7.2m.

In 2012, his bonus and LTIP are understood to have been determined "in broadly the same ballpark" with a total package worth between £6m and £7m, one person close to the bank said.

HSBC has been applauded by many leading City shareholders for the way it details its executive pay policies through the publication of a 'scorecard' for Mr Gulliver, who took over in 2011.

The chief executive is eligible for an annual bonus of three times his salary and six times his base pay in long-term incentive awards.

A chunk of both payments is determined by HSBC's compliance success and the bank's reputation during a 12-month period. Mr Gulliver is understood to have been awarded nothing in this bracket in 2012, the same outcome as a year earlier, when HSBC was fined for mis-selling bonds to elderly customers.

HSBC suffered one of the most ignominious episodes in its history last year, when it was forced to pay £1.2bn to US regulators to settle money laundering and sanctions breaches which had allowed its Mexican operation to be used by drug cartels and terrorist organisations.

In January, the bank established a committee to bolster its defences against financial crime, recruiting the former heads of HM Revenue and Customs and the Serious Organised Crime Agency, as well as a former US deputy attorney-general.

HSBC will set out plans on Monday to claw back millions of pounds from senior executives deemed to have been culpable in the Mexican situation.

While the bank will not name the affected individuals, they include Sandy Flockhart, the former head of the bank's Asian operation, who was at one stage seen as a contender against Mr Gulliver for the top job.

Mr Flockhart, who left HSBC last year, ran its Mexican subsidiary between 2002 and 2007, and had several million pounds-worth of shares which he is understood to have been told he will not now receive.

I understand, however, that Lord Green, the trade minister who stepped down as HSBC chairman in 2010, will not be included in the clawback effort, partly because he opted to take his long-term pay awards as pension contributions.

Michael Geoghegan, Mr Gulliver's predecessor as chief executive, has also been excluded from the clawback arrangement because the bank's remuneration committee did not conclude that he had been personally responsible for the compliance failings.

The effort to demonstrate pay restraint will be reflected in a lower bonus pool than the £2.8bn that was paid out for 2011, less than a quarter of which was paid to UK employees. HSBC will say on Monday that there has been an across-the-board reduction in the payout pot because of the US fine, although it is still understood to be paying out roughly £2bn in bonuses to staff around the world.

HSBC is also expected to pay a healthy final dividend, with its payouts to shareholders an increasingly-important source of income to UK investors in the context of a banking sector which has seen dividend expenditure shrink dramatically since the financial crisis.

In the UK, HSBC has abandoned a structure for paying staff that saw it impose a £50,000 cap on cash bonuses last year. The scheme involved the bank issuing shares that were then sold immediately in the market to hand executives larger cash sums.

HSBC bosses felt the initiative, devised with the Bank of England and Financial Services Authority, was "cosmetic". Instead, payouts will not include a cash ceiling but larger sums will have to be deferred for several years and won't pay out until employees leave or retire.

Analysts expect HSBC's full-year results to show continued progress under Mr Gulliver at accelerating the pace of change of what had historically been seen as a sluggish supertanker.

He has sold scores of businesses which did not meet internal targets for generating returns and has prioritised growth in the world's fastest-growing economies.

"HSBC has made excellent progress in its strategy to simplify the business and refocus it on growth markets and markets that benefit from international connectivity," analysts at Shore Capital said.

They predict underlying full-year profit of £12.5bn, against £11.8bn in 2011.

HSBC, which declined to comment, is also expected to outline a further provision for compensating customers who were mis-sold payment protection insurance.

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Obama Signs Order To Start Spending Cuts

President Barack Obama has signed an order authorising $85bn cuts in domestic and defence spending following the failure of efforts to strike a deal with Republicans on cutting the US deficit.

Mr Obama and Republican leaders in the House and Senate declared themselves still deadlocked after a last-minute White House meeting last night.

The two sides are at odds over the president's insistence on increasing tax revenue as part of any plan to tackle the country's $16.6trn debt.

Mr Obama signed the order which officially enacts the across-the-board reductions - known as a "sequester" in government budget language. Under the law, the president had until midnight.

The $85bn cuts apply to the remainder of the 2013 fiscal year, which ends on September 30. But the legislation that requires the spending reduction will continue slashing government spending by about $1trn more over a 10-year period.

Speaking after the White House meeting, Mr Obama said: "Let's be clear, none of this is necessary."

He blamed the deadlock on Republicans who he said refused to close tax loopholes that benefit the wealthy, adding that "the pain will be real" for the American people.

"I am not a dictator. I'm the president," Mr Obama said, warning he could not force his Republican foes to "do the right thing," or make the Secret Service barricade Republicans leaders in a room until a deal is done.

"These cuts will hurt our economy, will cost us jobs and to set it right both sides need to be able to compromise," Mr Obama added.

US Speaker of the House John Boehner walked out of the meeting

Republican John Boehner, speaker of the House of Representatives, walked out of the meeting to say there would be no compromise as long as Mr Obama insisted on higher tax revenue.

Republicans are standing fast against further increasing taxes and will not compromise on achieving debt reduction through spending cuts alone.

The opposition party is still feeling the sting from its most conservative members after agreeing at the end of 2012 to allow the expiration of Bush-era tax cuts for Americans earning $400,000 or more a year.

Friday's meeting was the first the two sides have held this year on the budget battle, and it lasted less than an hour.

The immediate impact of the cuts on the public is uncertain, but they will carve 5% from domestic agencies and 8% from the Pentagon between now and October 1.

Defence officials say they will be forced to reduce the working week of 800,000 civilian employees, scale back flight hours of warplanes and postpone some equipment maintenance.

The deployment of a second aircraft carrier to the Persian Gulf has also been cancelled.

The US Navy will gradually stand down several hundred planes starting in April, the Air Force will curtail flying hours and the Army will cut back training for all units except those deploying to Afghanistan.

Several major programmes will be unaffected, including the Social Security pension programme, the Medicaid health care programme for the poor and food stamps.

Pentagon chief Chuck Hagel warned that the budget cuts will endanger the US military's ability to conduct its missions.

"This will have a major impact on training and readiness," he said. "Later this month, we intend to issue preliminary notifications to thousands of civilian employees who will be furloughed."

Mr Hagel also acknowledged that the budget cuts "will cause pain, particularly among our civilian workforce and their families".

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Pound Falls As Triple Dip Fears Fuelled

Sterling has fallen to a two-and-a-half-year low against the dollar after manufacturing figures for February revealed a fall in output.

The closely watched Markit/CIPS purchasing managers' index showed a slump in activity to 47.9 - well below the 50 level which separates growth from contraction.

It was the first time since last November the sector's activity shrunk, and followed 50.2 in January.

The value of the pound slipped following the data, and fell below $1.50 on Friday afternoon - its lowest since the middle of 2010. 

Sterling has only been beneath the $1.50 mark for four of the 200 years since the US Declaration of Independence.

The last time it was at this level was briefly during the 2010 election and coalition-building process, and before that the 2008/09 recession.

Chris Williamson, chief economist at Markit, said the manufacturing data increased the chance that Britain will slip back into recession. 

"The return to contraction of the manufacturing sector is a big surprise and represents a major set-back to hopes that the UK economy can return to growth in the first quarter and may avoid a triple-dip recession," he said.

"The data so far this year point to manufacturing output falling by as much as 0.5%, meaning a strong rebound is needed in March to prevent the sector from acting as a drag on the economy as a whole in the first quarter."

The struggling sector contributed to the UK's worse-than-expected 0.3% decline in output in the fourth quarter of last year, and a negative reading for the first quarter of 2013 would see the UK enter a triple-dip recession.

Nawaz Ali, a market analyst with Western Union, said the manufacturing data could increase pressure on the Bank of England (BoE) to launch a new round of asset purchasing - or quantitative easing - as early as next week.

"The data is a major setback for sterling and the size of the manufacturing decline indicates that there is still a chance the British economy may suffer an unprecedented triple-dip recession," he said.

"The data also adds to growing concerns that not only could the BoE re-start monetary printing in March, the central bank's new flexible inflation strategy puts it in a position to launch a prolonged period of asset purchases, similar to what the US have done and what the Bank of Japan is planning to do."

More quantitative easing is likely to hit sterling further because it increases its supply and drives the currency's exchange value lower.

So far this year, sterling - which was also hit by Moody's downgrade of the UK's credit rating - has lost 7.5% against the dollar.

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