Fallon To Unveil £2.5bn Royal Mail Flotation

By Mark Kleinman, City Editor

The Government will this week fire the formal starting-gun on the most ambitious privatisation in decades by unveiling plans for a £2.5bn autumn stock market listing of Royal Mail.

Sky News can exclusively reveal that Michael Fallon, the Business Minister, is expected to disclose the news in a statement to the House of Commons. The statement has been provisionally scheduled for Wednesday although the timing could still change, according to people close to the situation.

Mr Fallon's announcement will end any lingering suggestions that the Government could abandon plans for a flotation of Royal Mail in the face of escalating public hostility from trade unions.

The Communication Workers' Union rejected an 8.6pc basic pay rise offer – spread over three years – from the company's management last week, a deal which Mr Fallon described as "pretty reasonable".

It will also confirm the widely-held expectation that the Government wants to pursue a listing in which members of the public can participate, although there may be restrictions on the number of shares for which individuals can apply.

Mr Fallon had previously said the Coalition's "preferred route" to injecting capital into Royal Mail was a stock market flotation but insisted that other options remained under consideration.

Last week, the Government hired three investment banks to add to an existing quartet of advisers that will work on the share sale. They are expected to earn up to £15m in total, a relatively small fee pool for such a sizeable listing.

It is unclear whether this week's statement will include full details of the terms of an initial public offering (IPO), such as the mechanism through which Royal Mail's 130,000 staff will receive shares in the company.

Sources said the Government was leaning towards the option of giving the equity to staff for free rather than at a discount.

However, Sky News understands that the employee share offer, which will take place over a period of some months, will only include those Royal Mail staff who are based in the UK.

Ministers and officials have been deliberating over whether the roughly 13,000 people who are employed by General Logistics Systems (GLS), Royal Mail's European parcels business, should be involved in a staff share ownership scheme.

The Government has been sensitive to potential accusations that they are orchestrating a share giveaway worth hundreds of millions of pounds from which thousands of French, German and Italian citizens would stand to benefit.

GLS, which delivers more than 360 million parcels to 220,000 customers every year, is one of the most profitable parcel delivery businesses in the world. Its earnings have been one of few financial bright spots during the restructuring of Royal Mail during the last decade.

The company has staged a significant financial turnaround under the leadership of Donald Brydon, its chairman, and Moya Greene, the Canadian who was parachuted in to lead the restructuring in 2010.

Royal Mail's annual report, which could also be published this week, is expected to show that she will receive an annual bonus worth almost £500,000 after nearly trebling the company's operating profit to £403m last year.

The Department for Business, Innovation and Skills and Royal Mail both declined to comment.

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Bad Bankers Face Criminal Charges And Jail

Reckless bankers could face criminal charges and jail after the Chancellor pledged to implement most of the recommendations produced by the Parliamentary Commission on Banking Standards.

George Osborne is also backing calls for tighter control of bonuses but he has rejected the Commission's recommendation that UK Financial Investments (UKFI) - the body that handles the state's holdings in the Royal Bank of Scotland and Lloyds Banking Group - be abolished.

In a statement, the Government set out key proposals from the commission to be added to the banking reform Bill in the autumn.

These are to include a new offence of "reckless misconduct" for senior bankers, with those found guilty facing a possible jail sentence.

Lloyds then RBS face returns to private ownership after taxpayer bailouts

Mr Osborne also backed moves to allow bonuses to be deferred for up to 10 years and enable 100% "claw back" of bonuses where banks are propped up by the state.

Further measures, designed to improve competition, will include asking the new payments regulator to look into making it easier to switch between accounts, and beefing up the role of the new Prudential Regulation Authority.

Labour has accused the Government of ducking radical reforms and is demanding that ministers explain how it will protect taxpayers' interests when the state-owned stakes in Lloyds and RBS are sold off.

The commission, chaired by Conservative MP Andrew Tyrie, was set up by the Chancellor in the wake of the financial crisis and the Libor rate-rigging scandal.

Mr Osborne said the main recommendations of its report, published last month, were being delivered.

He said cultural reform was necessary in banking "to move the whole sector from rescue to recovery and ensure that UK banks demonstrate the highest standards, and are able to support business and drive economic growth."

He added: "The Government is determined to raise standards across the banking industry to create a stronger and safer banking system."

Business Secretary Vince Cable said: "If we're to get our economy back on track, we need to get the banking system back on track first.

"Creating new powers to jail bankers who are reckless with other people's money and getting more competition into banking, is a start."

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M&S Clothing Sales Continue To Unravel

Retailer Marks and Spencer has seen a continued decline in its troubled clothing department, according to its latest trading update.

It said like-for-like clothing sales declined by 1.6% during the 13 weeks to the end of June.

Clothing sales has been a particularly disappointing area for the retailer in recent years.

It overhauled key staff in the department an attempt to reconnect with shoppers but has been unable to halt the section's decline for eight straight quarters.

Meanwhile, lIke-for-like food sales increased 1.8% in the quarter and total UK like-for-like sales were up 0.3%.

M&S' food business contributes over half of group sales.

The retailer's annual general meeting is to be held at 1100 today.

The performance will ratchet up the pressure on management to deliver a swift turnaround when new season ranges start hitting the shops later this month.

In May the company revealed a pre-tax annual profit of £665.2m for 2012/13, down 6% on a reported profit for 2011/12 of £705.9m.

At the time boss Marc Bolland said: "In a challenging market, M&S sales grew by 1.3%. Three of the four parts of the business made strong progress.

"We are working hard to get the general merchandise performance back on track."

The 129-year-old group serves 21 million customers a week from 766 UK stores.

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Ex-Trade Minister Plots £10bn Raid On Lloyds

Lord Davies, the former trade minister, is masterminding a £10bn raid on Lloyds Banking Group that would allow the Government to offload a big chunk of its shareholding in Britain's biggest high street lender.

Sky News can exclusively reveal that Lord Davies, who served in the last Labour administration, has assembled a consortium of blue-chip City and international investors to buy as much as half of the taxpayer's 39% stake in Lloyds.

Lord Davies has been working on the plan for more than a year, according to insiders, and approached the Treasury about his proposal several months ago.

Corsair Capital, the financial services-focused private equity firm where he is a senior partner, would be part of the consortium but would not buy the stake on its own.

A former chairman and chief executive of Standard Chartered, the emerging markets bank, Lord Davies has enlisted the backing of sovereign wealth funds in Asia and major City institutions.

The deal would be structured to acquire the Lloyds stake at somewhere close to the current share price, which by one measure is now above the taxpayers' break-even price.

HSBC and JP Morgan, the Wall Street bank from which Corsair was spun out several years ago, are said to be helping Lord Davies to structure and finance a deal.

The Government paid more than £20bn to rescue Lloyds during the banking crisis of 2008, although it quickly recouped £2.5bn as a fee for the implicit guarantee the bank had enjoyed from its prospective participation in a giant scheme to insure toxic banking assets.

Lord Davies is understood to be in active dialogue with the Treasury about his proposal, which would be structured to allow the Government to share in any future rise in the Lloyds share price.

Arranging it in this way would allow George Osborne, the Chancellor, to avoid any future accusation that he had sold the Lloyds shares too cheaply.

Gordon Brown was dogged by criticism that he had sold Britain's gold reserves too cheaply, leading to broader questions about his economic competence.

The Government paid more than £20bn to rescue Lloyds

Institutions such as Standard Life Investments have been approached about participating in Lord Davies' deal, although sources played down the likelihood that Temasek Holdings, the Singaporean state-backed fund, would be involved.

The Treasury has not yet decided whether to proceed with a transaction with Lord Davies's consortium, although the former trade minister is said to be positive about the prospects of a deal.

However, one insider insisted on Saturday that it could still not happen because of competing proposals from other investors keen on buying the Government's Lloyds shares.

The exact size of the stake that the consortium would buy is unclear, although it is likely to be much larger than 10%, or a quarter of the Government's shareholding.

Lord Davies would not seek board representation as part of any deal, a source said, despite the fact that - if it bought 20% of the bank - it would become easily the biggest private sector shareholder in Lloyds.

At Friday's closing share price of 64.63p, Lloyds had a market capitalisation of £46.1bn.

Antonio Horta-Osorio, Lloyds' chief executive, will receive a larger bonus if the Treasury sells at least a third of its stake for more than 61p-a-share.

The bank's share price has recovered sharply during the last year as its underlying earnings power has become apparent.

Lloyds has been the most heavily punished of the UK banks from the scandal surrounding the mis-selling of payment protection insurance, having had to pay out well over £4bn to date.

Mr Osborne said in his Mansion House speech last month that he was actively considering proposals to sell Lloyds shares and it is conceivable that the first disposal could come as soon as  the next few weeks.

UK Financial Investments, the agency which manages the taxpayer's stake in Lloyds, is understood to be aware of Lord Davies's consortium.

The Lloyds stake is not the only state-backed banking asset for which Lord Davies is trying to make an offer. Corsair is also among three remaining bidders for more than 315 Royal Bank of Scotland branches, and has secured the backing of the Church Commissioners for England in an attempt to provide an ethical dimension to its plans.

Lloyds and Lord Davies were unavailable for comment.

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Billionaire Backs UK Music Dotcom Shazam

By Mark Kleinman, City Editor

Carlos Slim, the Mexican telecoms magnate who has become the world's richest man, is investing tens of millions of pounds in Shazam, the British digital music company.

Sky News can reveal that Mr Slim, whose net worth is estimated at $73bn (£49bn), is injecting $40m (£26.8m) through his wireless group, America Movil.

The investment will see America Movil, which is the biggest mobile network in Mexico, become a significant minority shareholder in Shazam, which uses sophisticated technology to help users identify music and then proceed to buy the track with a single click.

The deal represents a coming-of-age for Shazam, which has in the past struggled to convince many in the technology industry that it can make a sustained move into profitability.

America Movil has more than 262 million wireless subscribers across Latin America, one of the world's fastest-growing regions for mobile services.

The exact size of Mr Slim's stake in Shazam is unclear although people familiar with the deal said his investment valued the technology company at broadly the same sum as its most recent fundraising round in 2011.

That would reflect investors' caution over the valuations being attached to even the most well-known digital companies, with the soaring multiples enjoyed by some groups evoking echoes of the original dotcom boom.

Shazam came to London in 2000 after failing to secure funding in Silicon Valley, and has since gone on to become one of the UK's most internationally-recognised technology start-ups.

The music company, which is branching out into television and other consumer services, recently appointed Rich Riley, a senior Yahoo! executive, as its new chief executive.

The appointment was interpreted by technology analysts as a signal that Shazam is likely to pursue a stock market listing in the next few years.

Andrew Fisher, Shazam's executive chairman, said when Mr Riley was appointed that he expected the company to be worth $1bn (£671m) when it went public.

America Movil's investment in Shazam - which describes itself as "the world's leading media engagement company" - will be accompanied by a strategic partnership across the markets in which the telecoms group operates.

The music company now has roughly 350m users around the world, a figure that has doubled in the last two years. Its number of active monthly users has trebled to more than 70m, with sales of digital products now more than $300m (£201m) annually through affiliates such as Apple's iTunes service.

Shazam declined to comment ahead of an announcement about the investment from America Movil, which insiders said was likely as soon as Monday.

Mr Slim's wealth is estimated by Forbes magazine to put him marginally ahead of Bill Gates, the Microsoft founder.

The UK-based company employs more than 180 people and has offices in Australia, South Korea and the US.

Among Shazam's existing investors are Kleiner Perkins Caufield & Byers, one of the most prolific  firms in Silicon Valley, and Brent Hoberman, the co-founder of Lastminute.com who has gone on to create a string of other tech start-ups.

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Retailers Agree Bangladesh Factory Inspections

Leading names in European retail have backed plans for co-ordinated inspections of factories in Bangladesh, in an attempt to prevent a repeat of the building collapse that killed 1,129 people in April.

The collapse of Rana Plaza, a factory built on swampy ground outside Dhaka, ranked among the world's worst industrial accidents and galvanised brands to look more closely at their suppliers.

The new accord led to the creation of a team of inspectors to evaluate fire, electrical, structural and worker safety in factories supplying signatory brands.

Crowds gathered when news of the collapse spread on April 24

In a report published on Monday, the implementation team said the brands now had to provide full details of the Bangladesh factories from which they source goods - the first time such data would be collected or shared in such a comprehensive way.

The world's two biggest fashion retailers, Zara-owner Inditex and H&M, have agreed to accept legal responsibility for safety at their Bangladesh factories.

The scale of the disaster overwhelmed rescuers

But a number of US chains, including Asda parent firm Wal-Mart, Gap, Macy's, Sears and JC Penney have shunned the deal, saying that it gives labour unions too much control over ensuring workplace safety and have proposed a non-binding initiative.

Under the accord, every factory will undergo an initial inspection within the next nine months, with repairs initiated where necessary.

Relatives were desperate for news on their loved ones

"Brand signatories are responsible to ensure that sufficient funds are available to pay for renovations and other safety improvements," the report said.

Tesco, the world's third-largest retailer and one of the accord's backers, said last month that it had stopped sourcing clothes from a Bangladesh site because of safety concerns.

Some were lucky to make it out of the building alive

European, Bangladeshi and US officials will meet in Geneva on Monday for talks aimed at improving safety conditions and discussing the country's trade benefits, which the EU has threatened to suspend without greater action from the Bangladesh government.

Bangladesh has pledged to improve safety, but it has not offered new money to relocate dangerous buildings.

An estimated 3.6 million people work in Bangladesh's clothing sector, employing mostly women on wages as little as £30 a month.

Tax concessions offered by Western countries and the low wages paid by the manufacturers have helped to turn Bangladesh's garment exports into a £12.7bn a year industry, with 60% of clothes going to Europe.

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Superfast Broadband Roll-Out Running Late

The Government programme to roll out superfast broadband to 90% of the population is running late and lacks strong competition to protect public value, the National Audit Office has reported.

It has already announced that superfast broadband will reach 95% of the population by 2017, just two years after the original target of 90%.

Just nine out of 44 local projects are expected to reach the original target, according to the report, with the delay partly attributed to the EU State Aid process taking six months longer than expected.

The NAO said that competition among suppliers had been "limited", leaving BT as the only active participant and expected to win all 44 local projects.

It warned that the Department for Culture, Media and Sport (DCMS) had "secured only limited transparency" over the costs in BT's bids.

And it said the DCMS now expected BT to provide just 23% of the overall projected funding of £1.5bn - £207m less than expected.

Amyas Morse, head of the NAO, said: "The rural broadband project is moving forward late and without the benefit of strong competition to protect public value.

"For this we will have to rely on the department's active use of the controls it has negotiated and strong supervision by Ofcom."

Public Accounts Committee chairwoman Margaret Hodge said. "The DCMS has not had a good enough grip on its rural broadband programme."

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Slump In Pound Signals Gloom For Holidaymakers

The pound has fallen heavily against the dollar for the second time this week after key US jobs figures showed better than expected evidence of an economic recovery.

While stock markets rallied, seemingly shrugging off recent fears about US stimulus being slowly withdrawn, sterling lost two cents against the world's reserve currency when news of the positive employment data from the US emerged.

The pound, which had also dropped heavily the previous day when the Bank of England confirmed the base rate of interest was to remain at its current level for at least two years, fell below the $1.48 mark.

While such exchange rates are good news for exporters, it will hit the spending power of British holidaymakers heading to America.

The euro has also strengthened against the pound.

The US payroll rose by 195,000 in June and the jobless rate remained the same at 7.6% - raising hopes for a stronger economy in the second half of 2013. The forecast was for around 165,000.

Hiring was more robust in the two previous months than earlier estimated, with some 70,000 net new jobs in May and April.

The positive data was seen as suggesting that the US Federal Reserve may start to ease off its support for the economy as early as this autumn - while quantitative easing and low interest rates will continue to push down the pound in the UK.

The US job market and the economy have proved surprisingly resilient this year. Hiring and consumer confidence have remained steady despite higher taxes and federal spending cuts.

The US economy has added an average of 202,000 jobs a month for the past six months, up from 180,000 in the previous six. That suggests businesses are growing more confident in the economy.

If the gains continue, the Federal Reserve might start to scale back its bond purchases before the year ends.

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Ex-Trade Minister Plots £10bn Raid On Lloyds

Lord Davies, the former trade minister, is masterminding a £10bn raid on Lloyds Banking Group that would allow the Government to offload a big chunk of its shareholding in Britain's biggest high street lender.

Sky News can exclusively reveal that Lord Davies, who served in the last Labour administration, has assembled a consortium of blue-chip City and international investors to buy as much as half of the taxpayer's 39% stake in Lloyds.

Lord Davies has been working on the plan for more than a year, according to insiders, and approached the Treasury about his proposal several months ago.

Corsair Capital, the financial services-focused private equity firm where he is a senior partner, would be part of the consortium but would not buy the stake on its own.

A former chairman and chief executive of Standard Chartered, the emerging markets bank, Lord Davies has enlisted the backing of sovereign wealth funds in Asia and major City institutions.

The deal would be structured to acquire the Lloyds stake at somewhere close to the current share price, which by one measure is now above the taxpayers' break-even price.

HSBC and JP Morgan, the Wall Street bank from which Corsair was spun out several years ago, are said to be helping Lord Davies to structure and finance a deal.

The Government paid more than £20bn to rescue Lloyds during the banking crisis of 2008, although it quickly recouped £2.5bn as a fee for the implicit guarantee the bank had enjoyed from its prospective participation in a giant scheme to insure toxic banking assets.

Lord Davies is understood to be in active dialogue with the Treasury about his proposal, which would be structured to allow the Government to share in any future rise in the Lloyds share price.

Arranging it in this way would allow George Osborne, the Chancellor, to avoid any future accusation that he had sold the Lloyds shares too cheaply.

Gordon Brown was dogged by criticism that he had sold Britain's gold reserves too cheaply, leading to broader questions about his economic competence.

The Government paid more than £20bn to rescue Lloyds

Institutions such as Standard Life Investments have been approached about participating in Lord Davies' deal, although sources played down the likelihood that Temasek Holdings, the Singaporean state-backed fund, would be involved.

The Treasury has not yet decided whether to proceed with a transaction with Lord Davies's consortium, although the former trade minister is said to be positive about the prospects of a deal.

However, one insider insisted on Saturday that it could still not happen because of competing proposals from other investors keen on buying the Government's Lloyds shares.

The exact size of the stake that the consortium would buy is unclear, although it is likely to be much larger than 10%, or a quarter of the Government's shareholding.

Lord Davies would not seek board representation as part of any deal, a source said, despite the fact that - if it bought 20% of the bank - it would become easily the biggest private sector shareholder in Lloyds.

At Friday's closing share price of 64.63p, Lloyds had a market capitalisation of £46.1bn.

Antonio Horta-Osorio, Lloyds' chief executive, will receive a larger bonus if the Treasury sells at least a third of its stake for more than 61p-a-share.

The bank's share price has recovered sharply during the last year as its underlying earnings power has become apparent.

Lloyds has been the most heavily punished of the UK banks from the scandal surrounding the mis-selling of payment protection insurance, having had to pay out well over £4bn to date.

Mr Osborne said in his Mansion House speech last month that he was actively considering proposals to sell Lloyds shares and it is conceivable that the first disposal could come as soon as  the next few weeks.

UK Financial Investments, the agency which manages the taxpayer's stake in Lloyds, is understood to be aware of Lord Davies's consortium.

The Lloyds stake is not the only state-backed banking asset for which Lord Davies is trying to make an offer. Corsair is also among three remaining bidders for more than 315 Royal Bank of Scotland branches, and has secured the backing of the Church Commissioners for England in an attempt to provide an ethical dimension to its plans.

Lloyds and Lord Davies were unavailable for comment.

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Superfast Broadband Roll-Out Running Late

The Government programme to roll out superfast broadband to 90% of the population is running late and lacks strong competition to protect public value, the National Audit Office has reported.

It has already announced that superfast broadband will reach 95% of the population by 2017, just two years after the original target of 90%.

Just nine out of 44 local projects are expected to reach the original target, according to the report, with the delay partly attributed to the EU State Aid process taking six months longer than expected.

The NAO said that competition among suppliers had been "limited", leaving BT as the only active participant and expected to win all 44 local projects.

It warned that the Department for Culture, Media and Sport (DCMS) had "secured only limited transparency" over the costs in BT's bids.

And it said the DCMS now expected BT to provide just 23% of the overall projected funding of £1.5bn - £207m less than expected.

Amyas Morse, head of the NAO, said: "The rural broadband project is moving forward late and without the benefit of strong competition to protect public value.

"For this we will have to rely on the department's active use of the controls it has negotiated and strong supervision by Ofcom."

Public Accounts Committee chairwoman Margaret Hodge said. "The DCMS has not had a good enough grip on its rural broadband programme."

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