Fortnum Boss Warns of Scots Vote 'Disaster'

By Mark Kleinman, City Editor, in Dubai

The chief executive of Fortnum & Mason, the upmarket London-based grocer has warned that a 'yes' vote in the Scottish independence referendum would be a "disaster" for the country.

Speaking exclusively to Sky News, Ewan Venters, a Scot by birth, said that a break-up of the United Kingdom would create a damaging period of uncertainty for businesses.

"I think it would be a disaster. The UK is better as one. We are a small enough island as it is, we don't need to become smaller," he said.

"The consequences of an independent Scotland and an independent England could be very unfavourable economically. That uncertainty is not what the country needs."

Mr Venters, who has run the Queen's grocer since 2012, is one of the most senior English-based Scottish businessmen to articulate his views about the implications of the referendum vote which takes place in September.

A former executive at companies including J Sainsbury and Selfridges, which is owned by the same family as Fortnum & Mason, Mr Venters also criticised the fact that he would not be allowed to take part in the vote.

"It is very disappointing that Scots like myself are not allowed a vote, when someone could be from any nation, move to Scot and be allowed a vote.

Fortnum & Mason is a favourite of the Royal Family

"It is an ill-conceived set-up of the referendum by those in the establishment who know that many of those who have moved away from Scotland to build careers elsewhere are in favour of the union remaining intact."

He is the latest in a growing number of executives and companies to speak out on independence.

In recent weeks, Alliance Trust, Standard Life and Royal Bank of Scotland have highlighted contingency planning being undertaken to prepare for a 'yes' vote.

In its annual report published this week, the defence contractor BAE Systems also said a vote in favour of independence could be disruptive.

Mr Venters, 41, was speaking in Dubai during a trip to mark the opening of Fortnum & Mason's first overseas store, opposite the Burj Khalifa, the world's tallest skyscraper.

Fortnum & Mason, which operated solely from its shop on London's Piccadilly for more than 300 years, was founded in 1707, the year that the Act of Union binding England and Scotland came into being.

Mr Venters wants the Dubai store, which has been developed in conjunction with AKI, a local partner, to be the first step in a carefully and gradually orchestrated expansion of the business.

"It is a very important milestone because customers from this region are hugely important at our Piccadilly store," he said.

"Fortnum has a long history of taking products to customers around the world," he said, which included exporting Christmas hampers to 112 countries towards the end of last year.

Dubai was chosen as Fortnum's first international outpost because of the Emirates' status as the most important luxury retail centre in the world, behind London, he added.

"Tea is the most popular drink after water here. As tea merchants for more than three centuries, we felt it was important to be here," he said.

Mr Venters cautioned against expectations that the Dubai opening would lead to a chain of Fortnum & Mason stores opening around the world, although he has now overseen the launch of two outlets in little more than six months.

Last autumn, the company opened a shop next to the Eurostar terminal at London's St Pancras station, with sales understood to be performing strongly.

"We will carefully consider other opportunities in what I call surging economies rather than emerging markets.

"This is a good moment to look at taking firmer positions in the world on a gradual basis."

"Over half of our business is made up of consumers living in the UK. That trend has increased in recent times as we have tried to make it more relevant to domestic consumers," Mr Venters said.

He described Britain's economy as "two-tier", with London the dominant force, adding that this week's Budget statement by George Osborne was "business-friendly and broadly friendly to working people of Britain by ensuring there's more money in people's pockets".

Mr Venters also waded into the debate about the future of Britain's troubled high streets, calling for a significant increase in residential development in order to stimulate wider usage.

"The opportunity for the high street has never been so good. The drive to buy more online means people are shopping on a more frequent basis.

"With some proactive housing policies on high streets and sensible movement on business rates, there is no reason why you couldn't start to see a revival."

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China 'Targets Foreign Firms To Boost Research'

Chinese investors are targeting hi-tech foreign firms to gain vital knowledge on research and development (R&D) techniques.

That is the reason behind a sharp rise in foreign investments, according to an article in the English language People's Daily - seen as an official source of Chinese government thinking.

In the report author Hao Jie said there was a "logic" behind a huge boost in key markets abroad.

"The rapid increase in China's investments in the US has its internal logic.

Outsourcing US hi-tech tasks has also helped China build IT know-how

"As the world's biggest mature market, with the most advanced technologies and the strongest R&D capability, the US will continue to attract Chinese investment.

"Areas with the greatest investment potential include infrastructure, energy, and middle and high end manufacturing."

She said that the investments helped Chinese companies improve their own R&D ability and "get closer to American consumers through developing local logistics and distribution channels".

Foreign direct investments (FDI) in the US have increased quickly in recent years.

Before 2011 private investments in the US were less than a third of the total, rising to 54% in 2012 and 76% last year.

A Chinese food firm agreed to buy the US' biggest pork processor for $1.2bn

Total investment in America doubled last year to a record $14bn (£8.5bn), according to the Rhodium Group.

Europe, as America's key mature competitor, has also been a hot spot for Chinese firms for investment and trade.

According to Eurostat, China's stock across the EU grew almost threefold in 2011, to €15bn (£12.5bn).

FDI has been seen as a way around certain restrictions placed on Chinese firms getting a direct foothold in Western countries.

Chinese direct investment was also ploughed into the US energy sector

China's telecoms giant Huawei has been thwarted in its attempts to establish foreign arms.

In 2012, Australia banned it from involvement in its $36bn (£22bn) national broadband network on security grounds.

Its founder was said to be linked to China's military and Australia's security agency Asio opposed its bidding.

Later that year, the US House Intelligence Committee said Huawei "cannot be trusted" to be free of Beijing's influence and recommended limitations on its involvement in public networks.

Chinese companies on US soil have been called a security threat

In July, a former CIA boss said Huawei spied on behalf of China, a claim the company denied.

Huawei already has a major foothold in Britain, but last December it was announced intelligence agency GCHQ would be given a greater role at the company's Cyber Security Evaluation Centre.

Since then intelligence agencies from the US, Australia and Britain have themselves come under increasing public scrutiny over their alleged spying activities on global telecommunications, in the wake of revelations by ex-NSA worker Edward Snowden.

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Business Round-Up And Week Ahead

Sky's Naomi Kerbel offers a round-up of what's coming up in the week's business news.

:: Monday March 24

On Monday, the Chancellor's budget "perk" to reduce beer duty by a penny comes into effect. 

:: Tuesday March 25

Energy provider, SSE will cut its dual fuel prices by 3.5% on Tuesday. The company's prices rose by 8.2% on average on November 15, 2013.

:: Wednesday March 26

On Wednesday, teachers who are members of the National Union of Teachers are due to strike against changes to their pay and pensions. 

:: Thursday March 27

It is a big day for Sky News Business on Thursday. At 7pm, Jeff Randall will host his final Jeff Randall Live business programme.

:: Friday March 28

On Friday, the ONS will deliver final growth figures for the fourth quarter in the UK. The last estimate showed growth of 0.7%.

Tweet your business stories to @SkyNKTweets

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Next Looks Good As Annual Profit Rises 11%

High street fashion retailer Next has seen its annual underlying pre-tax profit rise by 11.8%, to almost £700m.

The clothing retailer, which is Britain's second biggest in the sector, said growth in its online and catalogue business was behind the strong figures.

The firm has more than 500 stores in the UK and Ireland, along with around 200 outlets in some 30 other countries.

Next said total pre-tax profit to the end of January was £695.2m.

The figure was in keeping with analysts' expectations and compared to £621.6m in the previous financial year.

Its strongest growth was in the combined catalogue and online 'Directory' division, which grew revenue by 12.4% to £1.341bn.

The Directory business generated 50% of operating profit, meaning the division had an operating margin of 26.7%.

This compares very favourably to the core retail segment that generated 48% of operating profit at a margin of only 15.6%.

Total revenue and sales were up 5.4% to £3.74bn and the company increased its dividend by 23% to 129p.

It forecast sales growth this financial year of between 4% to 8%, with a pre-tax profit estimate of around £750m.

"In the year ahead we expect the fourth quarter to provide tough comparatives and it will be hard to beat," the company said.

"Accordingly, we are budgeting very cautiously for the final quarter."

Shares in Next have risen around 61% over the last 12 months.

The firm added: "However, conditions are likely to remain far from buoyant and there are real risks to the sustainability of the current recovery."

Sky News City Editor Mark Kleinman recently revealed that high street fashion rival Marks and Spencer had appointed two brothers responsible for streamlining Next's sourcing supply chain.

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Hitachi In UK Move To Shunt HS2 Rail Rivals

Japanese engineering giant Hitachi is to move its rail division's decision-making hub to Britain, in an attempt to shunt its European rivals.

The shift is also seen as an attempt to lay a track for plans to bid for the High Speed Two (HS2) contracts.

Alistair Dormer, who has headed its London-based European rail section, will be responsible for refocusing the division away from a Japanese viewpoint to a greater global perspective.

"Europe is one of the largest rail markets in the world and has a lot of potential for new growth," an Hitachi spokesperson told Sky News.

"Passenger numbers are rising and it gives us a stronger focus in capability and business opportunities."

The announcement comes a day after Chancellor George Osborne told Parliament in his Budget speech that Britain has "under-invested for decades" in infrastructure.

The HS2 future project has been opposed by environmental groups

Mr Osborne said: "We've been reminded again this week of the benefits high-speed rail will bring to the north of our country and I'm determined it goes further north faster."

The company is building a new plant in Newton Aycliffe, County Durham, after winning a £1.2bn contract for 270 next generation intercity carriages.

That order, won last year, is part of the larger £5.8bn Intercity Express Programme.

Its 395 class high-speed trains have been in operation since December 2009 on lines from London to Kent, where it also has maintenance facilities in Ashford.

Its factory will initially employ 750 people and it hopes to increase the company's rail section workforce by 60%, taking the global total to 4,000.

Existing Intercity rolling stock is being replaced by Hitachi's new trains

Business Secretary Vince Cable called it a "huge vote of confidence for Britain".

"It's further testament to the Government's industrial strategy which is giving companies of Hitachi's stature the confidence to invest in the UK in an expanding rail sector," he said.

Hitachi is an engineering and electronics conglomerate with more than 320,000 staff, and its total profit for the last quarter of 2013 reached £725m.

It has a long rail history, making its first steam locomotive in 1920 and an electric version four years later - it also created the famous hi-tech Japanese 'bullet train' in 1964.

Rail has become an increasingly important issue in Britain amid expansion plans and contracts going to foreign firms.

Canadian-owned Bombardier, which has facilities in Derby and Germany, has won a £1bn Crossrail contract for 65 trains on the London line.

Germany's Siemens has also won a £1.6bn deal to build 1,140 state-of-the-art carriages for use on the Thameslink rail line.

Rival Bombardier has won a large contract for London's Crossrail

France's Alstom Transport is also a major player in Europe's high-speed rail infrastructure.

Britain's rail use has grown significantly in recent decades.

Although it remained roughly static between 1950 and 2000 at 20 billion passenger miles annually, it has nearly doubled since then.

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Ukraine Crisis: EU Sanctions For More Russians

Faces Caught In The Middle Of US-Russia Spat

Updated: 8:45pm UK, Thursday 20 March 2014

The fresh wave of US sanctions against Russia include banning some of the country's richest and most influential businessmen - and President Vladimir Putin's closest friends - from entering America.

Among the individuals targeted with and travel bans and freezing of US assets are billionaire brothers Arkady and Boris Rotenberg.

The co-owners of SMP Bank and SGM Group, a major supplier of construction services to Russian gas giant Gazprom, were judo sparring partners with Mr Putin.

The pair - friends of Mr Putin since childhood - also made billions in Sochi Olympics-related contracts.

Financier Yuri Kovalchuk, the largest shareholder of Bank Rossiya, is a personal banker for senior Russian officials - including, reportedly, Mr Putin. He is another close friend - and a neighbour - of the president.

They have known each other since the early 1990s when Mr Kovalchuk was deputy mayor of St Petersburg.

The bank - also on the hit list - serves some of the country's wealthiest officials and controls two big insurance firms - Sogas and SK Transneft.

High-level Kremlin officials including Mr Putin's chief of staff Sergei Ivanov and deputy chief of staff Alexei Gromov are also targeted, as well as Vladimir Yakunin, chairman of the board of the Russian state-owned company Russian Railways and a close confidant of the president.

Gennady Timchenko, a prominent businessman and owner of the private investment group, Volga Group, which specialises in investments in energy, transport and infrastructure assets is also named by the US.

President Putin's spokesman said some of the names on the list caused "nothing but extreme bewilderment" - and Russia immediately responded with its own list of sanctions on American officials.

These included Obama aides Caroline Atkinson (deputy assistant and deputy national security adviser for international economics), Daniel Pfeiffer (senior adviser and assistant ), and Benjamin Rhodes (assistant and deputy national security adviser for strategic communications and speechwriting), as well as senators Mary Landrieu, John McCain and Daniel Coats.

Mr McCain, the former Republican presidential candidate, and Mr Putin have long been engaged in a bitter personal feud.

During their last war of words in September 2013, the US senator accused Mr Putin of corruption, repression and self-serving rule in an opinion piece for a Russian website in response to a letter Mr Putin wrote in The New York Times, urging America not to use military force in Syria.

In an opinion piece headlined "Russians Deserve Better Than Putin", Mr McCain also accused the president of being "a friend to tyrants and an enemy to the oppressed" for siding with Syria's President Bashar al Assad.

Back in December 2011, Mr Putin let his views be known on Mr McCain after the US politician tweeted "Dear Vlad, The #ArabSpring is coming to a neighbourhood near you" at a time of huge protests across Moscow.

When pressed about the tweet during a televised phone-in, the Russian president hit back, calling the senator "nuts".

"Mr McCain fought in Vietnam. I think he has enough blood of peaceful citizens on his hands. It must be impossible for him to live without these disgusting scenes anymore," he said.

Mr Putin added: "Mr McCain was captured and they kept him not just in prison, but in a pit for several years. Anyone [in his place] would go nuts."

Earlier this month, Speaker of the House John Boehner, also on the Russian list, called Mr Putin a "thug" over its actions in Crimea, according to The Enquirer.

The Republican told the Cincinnati newspaper it was "time to stand up to Putin", adding: "At what point do you say enough is enough? We are at that point."

He, and Senators Landrieu, McCain and Coats hailed their inclusion on the Russian list as a "badge of honour", while the White House refused to comment.

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Pension Firms 'Lose Billions' After Speech

Mixed Reaction To Budget Measures

Updated: 3:22pm UK, Wednesday 19 March 2014

Reaction to the Budget has been split, with industry praising measures to cut energy costs and unions criticising an "obsession" with austerity.

Paul Kenny, general secretary of the GMB, said: "This Budget reeks of the stuck-up complacency of the well-heeled elite.

"The Budget is doing very little to get the 912,000 unemployed aged 16-24 into proper jobs. As some 246,000 have been out of work for over a year, there is a grave danger of seeing a lost generation."

Public and Commercial Services union general secretary Mark Serwotka said: "This Government's obsession with austerity is causing misery for millions of people while the over-hyped economic recovery benefits only a wealthy few."

Dave Prentis, leader of Unison, said: "The Chancellor has run out of time and ideas. His claims that people are feeling the benefits of his austerity agenda are wearing thin."

Len McCluskey, Unite general secretary, said: "This was a blue rinse budget for the stockbroker belt who will celebrate their tax reductions and help with their savings."

TUC general secretary Frances O'Grady said: "There was nothing for the young who continue to face the worst job market in decades and unaffordable housing."

Matthew Reed, chief executive of The Children's Society, said: "Raising the personal allowance and lifting three million people out of taxation may appear a positive move.

"For hundreds of thousands of working families that depend on housing benefit to top up their meagre earnings, this will gain them very little."

Friends of the Earth campaigner David Powell said: "Merely weeks after promising action on flooding and global warming, the best the Chancellor can manage is a U-turn on his own reckless flood defence cuts, and caving in to big business lobbying on pollution tax."

British Chambers of Commerce director general John Longworth said: "Business wanted a Budget that was disciplined, focused, and geared toward the creation of wealth and jobs - and that's what the Chancellor has delivered.

"By making a better business environment his top priority, the Chancellor has recognised that successful and confident companies are the key to transforming Britain's growing economic recovery into one that is felt in homes and on high streets."

Terry Scuoler, chief executive of manufacturers' organisation EEF, said: "The Chancellor said this would be a Budget for manufacturers and he has delivered on his word.

"The Government clearly recognises the need to make the competitiveness of the UK a priority. We now have some of the building blocks in place which will help re-balance the economy."

John Allan, chairman of the Federation of Small Businesses, said: "The Chancellor delivered a Budget to maintain positive momentum in the economy, while incorporating fiscal prudence."

Simon Walker, director general of the Institute of Directors, said: "This is a responsible and imaginative Budget which should promote growth, exports and investment. It will be widely welcomed across the business community."

CBI director general John Cridland said: "This was a make or break Budget coming at a critical time in the recovery and the Chancellor has focussed his firepower on areas that have the potential to lock in growth."

Local Government Association chairman Sir Merrick Cockell said: "Much more can be done to build new homes, create jobs and stimulate the economy if local government's hands were untied by the Chancellor to drive this through at a local level."

Dot Gibson, National Pensioners Convention general secretary, said: "Pensioners will be concerned that benefits such as the winter fuel allowance, cold weather payments and the Christmas bonus have all been placed into the welfare cap, which could lead to cuts in the future, at a time when fuel bills in particular are continuing to rise."

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Budget 2014: The Key Points You Need To Know

The Chancellor George Osborne has delivered his fifth budget. Here are the key points.

Savings

:: Tax-free ISAs to be boosted to £15,000 per year from July. Junior ISAs up to £4,000 a year.

:: Stocks and shares ISAs can be tranferred to new single ISA scheme.

:: Premium Bonds cap lifted from £30,000 to £40,000 in June, and to £50,000 next year.

:: 10p rate of tax for savers to be abolished.

:: Zero tax band to cover £5,000 of savings.

Reliefs

:: Alcohol escalator to be scrapped for all alcohol duties, instead a rise with inflation.

:: Scottish whisky duty to be frozen as it is "a huge British success story".

:: Cut of 1p in duty per pint of beer.

:: Export finance lending interest rate to be cut by a third and lending doubled to £3bn.

:: From 2015, all long haul air passenger flights carry same, lower, band B tax rate.

:: Right to Build scheme for builders of their own homes including £150m of finance to support it.

:: New £200m fund for councils "to bid for" to fix potholes across Britain.

:: Additional £140m help for flood damage.

:: September's fuel duty rise will not be brought in.

Taxes

:: Duty on fixed-odds betting terminals to rise to 25%.

:: Horse race betting levy to be extended to bookmakers based offshore.

:: Bingo duty will be halved to 10% "to protect jobs and protect communities".

:: Tobacco duty to remain at 2% above inflation and escalator will not be stopped.

:: Increased disclosed tax avoidance schemes scrutiny for the wealthy.

:: City fines over Libor rate-rigging to continue going to military charities and emergency service charities.

:: From midnight anyone buying home over £500,000 through corporate entity to pay 15% stamp duty to "avoid abuse".

:: "We will expand the tax on residential properties worth over £2m to those worth more than £500,000."

:: Private jets, previously not taxed, will see tax levied on flights.

Income Tax

:: Personal tax allowance rises to £10,500 next year, giving average saving of £800.

:: 40p tax rate threshold to rise from £41,450 to £41,865 from next month and then up by further 1% to £42,285 next year.

:: Transferable tax allowance for married couples rising to £1,050.

Pensions

:: All retirees on defined contribution pensions to be offered free, impartial, face-to-face advice.

:: No need for pensioners to buy annuities if they do not wish to.

:: Removal of all remaining tax restrictions on how pensioners have access to their pension pots.

:: Income requirement for flexible draw-down from £20,000 to £12,000, raised cap draw-down limit from 120% to 150%.

:: Lump sum small pot level lifted five-fold to £10,000.

:: Almost doubling total pension savings as a lump sum to £30,000.

:: £20m  to be spent in next two years working with consumer groups over pension advice.

:: New Pensioner Bond paying market leading rates, issued by National Savings and Investments, open to everyone aged 65 or over. Available from January next year.

 

Spending and Welfare

:: Foreign aid to be 0.7% of national income.

:: Public sector spending reduction to reach £1bn by 2015-16.

:: A permanent cap on welfare, excluding state pension, set at £119bn in 2015-16, rising in line with forecast inflation to £127bn in 2018-19.

Growth

:: Independent OBR growth forecast revised upwards to 2.7%, up from 2.4% in Autumn Statement.

:: Growth next year is also revised up to 2.3%, then 2.6% in 2016 and 2017, with growth expected to return to long-term trend of 2.5% in 2018.

:: 1.5 million new jobs forecast in next five years.

Borrowing

:: Deficit this year of 6.6% reduced to 5.5%  next year, then expected to be 4.2%, 2.4% and finally 0.8% in 2017-18. Following year forecast surplus of 0.2%.

:: Expect to borrow £108bn this year, £12bn less than forecast last year. No borrowing from 2018-19.

:: OBR forecasts public debt to be 74.5% of GDP this year; 77.3% next year; peaking at 78.7% in 2015-16 - lower than the 80% previously forecast - before falling to 78.3% in 2016-17, then falling to 76.5% and then 74.2% in 2018-19.

:: The new £1 coin to thwart forgery and "In honour of our Queen".

Jobs

:: Support for more than 100,000 new apprenticeships.

:: New Alan Turing Institute for computing "big data" to boost Britain's IT prowess.

Business

:: New allowance for ultra high pressure, high temperature oil field for North Sea oil and gas.

:: Tax relief of up to 25% for touring theatrical productions.

:: VAT relief on fuel for air ambulances and inshore rescue boat services across Britain, and a new air ambulance for London.

:: Accept recommendation to move collection of Class 2 NICs into self-assessment, abolishing for 5 million people "this wholly unnecessary bureaucracy".

:: Corporation tax - high street stores will get £1,000 off their rates, and businesses the £2,000 Employment Allowance.

:: From next year, corporation tax to drop from 21% to 20% and under-21s taken out of the jobs tax.

:: Business rates discounts and enhanced capital allowances will be extended for another three years.

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Next Looks Good As Annual Profit Rises 11%

High street fashion retailer Next has seen its annual underlying pre-tax profit rise by 11.8%, to almost £700m.

The clothing retailer, which is Britain's second biggest in the sector, said growth in its online and catalogue business was behind the strong figures.

The firm has more than 500 stores in the UK and Ireland, along with around 200 outlets in some 30 other countries.

Next said total pre-tax profit to the end of January was £695.2m.

The figure was in keeping with analysts' expectations and compared to the £621.6m in the previous financial year.

The company increased its dividend by 23% to 129p.

It forecast sales growth this financial year of between 4% to 8%, with a pre-tax profit estimate of around £750m.

"In the year ahead we expect the fourth quarter to provide tough comparatives and it will be hard to beat," the company said.

"Accordingly, we are budgeting very cautiously for the final quarter."

Shares in Next have risen around 61% over the last 12 months.

It added: "However, conditions are likely to remain far from buoyant and there are real risks to the sustainability of the current recovery."

Sky News City Editor Mark Kleinman recently revealed that high street fashion rival Marks and Spencer appointed two brothers responsible for streamlining Next's sourcing supply chain.

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Osborne Close To Landmark China Banking Deal

By Mark Kleinman, City Editor

George Osborne is closing in on a landmark deal that would see the City become one of the world's most important offshore centres for trading the Chinese currency.

Sky News understands that the Government hopes to announce by the end of the month the establishment of a London-based clearing bank that would act as a hub for offshore renminbi (RMB) payments.

The move would be significant because of the rapid growth in the volume of international RMB transactions as China's financial system and economy have become less insular.

The Chancellor has made it clear that increasing the City's share of trading in the China's currency represents a vital growth opportunity.

A London-based institution would effectively "oil the wheels" of the clearing process, reducing transaction and settlement costs, a source said.

A number of the country's vast state-owned lenders, including Bank of China and Industrial and Commercial Bank of China, have been vying to be appointed as Beijing's clearing bank in London, according to insiders.

A decision about the chosen institution could be made public within days.

The Treasury is understood to have been hoping to get a deal wrapped up in time for Wednesday's Budget statement, although that was now unlikely, a City source said.

In a speech in Hong Kong last month, Mr Osborne said the UK and China had an economic "two-way relationship of equals".

"Gone are the days when the British finance minister was only interested in securing greater market access to China.

"Now almost two thirds of all RMB payments outside of China and Hong Kong take place in London," he said.

The Chancellor said he was unashamed about having secured agreements establishing a swap line with China's central bank and allowing Chinese banks to apply to set up UK-based wholesale branches.

"Now London firms are able to invest directly in Chinese stocks and shares in RMB - something that's just not currently possible anywhere else in the West - thanks to our agreement with the Chinese Government last year.

"Ultimately what we all want to see is RMB being used more and more as a currency of choice in the world.

"The UK and Chinese Governments are in active discussions about the appointment of a renminbi clearing bank in London."

City sources cautioned that the Prudential Regulation Authority (PRA), the banking oversight arm of the Bank of England, would also need to approve any deal.

The PRA is leading the consultation on rule changes that would mean Chinese banks operating in the UK as branches rather than subsidiaries, effectively entailing lighter-touch regulation by the UK authorities.

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