Hedge Funds In Talks Over RBS Branches Bid

By Mark Kleinman, City Editor

Two hedge funds which made millions of pounds shorting UK bank shares during the 2008 financial crisis are in talks to back a £1bn bid for more than 300 Royal Bank of Scotland (RBS) branches.

I have learnt that Lansdowne Partners and GLG, which is part of the listed Man Group, are among more than 20 institutions which have indicated their interest in participating in an offer for the branch network.

The prospective involvement of the hedge funds is likely to provoke comment in the City because they were among dozens of investors which profited from bets that banks' share prices would fall during the febrile period leading up to taxpayers' rescue of lenders including Northern Rock and RBS.

Neither GLG nor Lansdowne has formally committed funds yet to the institutions' bid, although GLG's interest is understood to be the more advanced of the two.

Lansdowne made handsome profits from shorting shares in banks such as Barclays and HBOS, whose senior executives were last week criticised by the Parliamentary Commission on Banking Standards for their role in its near-collapse.

The offer would involve an investment worth hundreds of millions of pounds being made into a new company that would have a binding commitment to acquire the RBS branches.

The company would then be floated on the stock exchange.

The institutions' offer is principally made up of major UK pension funds and other investors, such as F&C, Schroders and Threadneedle.

It is being led by Andy Higginson, a former finance director of Tesco and non-executive director of BSkyB, the owner of Sky News.

RBS is expected to decide as soon as this week about the next stage of the process to offload the 316 branches.

People close to the auction said the taxpayer-backed bank could elect to enter exclusive talks with a bidder imminently.

The City institutions are vying with a bid from two private equity groups, Corsair Capital and Centerbridge, who are backed by prominent investors such as Lord Rothschild.

Another private equity consortium is also in the running.

RBS has been forced to sell the branches as part of a package of state aid remedies agreed between the UK Government and the European Commission.

Neither GLG nor Lansdowne would comment on Monday.

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Energy Debts: Amount Families Owe Mounts

The number of families in debt to their energy supplier is rising, with around one in five households owing money, a study suggested.

Collectively, Britons are estimated to owe £637m to energy firms, which is £159m more than last year's projections, comparison website uSwitch said.

Some 20% of bill payers surveyed by the website, equating to more than five million households nationally, are in debt to their energy supplier after falling behind with payments or due to discrepancies between estimated bills and actual amounts.

This figure is up from 14% when similar research was carried out last year.

The latest survey of more than 2,000 bill payers in February found that the typical amount owed is £8 less than it was a year ago, at £123.

But a recent string of price hikes by energy companies combined with the unseasonably chilly weather could see the size of people's energy debts shooting back up again, the study warned.

The average annual household energy bill has risen by almost £100 in the space of a year, adding to the pressure on families as wages remain stagnant.

The website said the typical bill now stands at £1,353 a year, which is around £830 higher than it was in 2004.

This sum is based on a consumer who uses a medium amount of electricity and gas on a standard dual fuel bill, paying quarterly by cash or cheque.

Just over one fifth of those in debt to their supplier said they were turning a "blind eye" to what they owe in the hope that the amount will go down naturally over time.

A similar proportion plan to pay off a big lump sum, while one in 12 people in debt said they would need to try and agree a repayment plan with their supplier.

Ann Robinson, director of consumer policy at uSwitch, said: "The soaring number of households in debt to energy suppliers is a clear indication of the pressure people are coming under just to meet the cost of their basic bills."

She said ways that people could cut down on their costs included paying by direct debit as suppliers tended to offer discounts for paying in this way.

And consumers should also make sure that someone was taking regular meter readings, as relying on estimated bills can be a "shortcut to debt".

A Green Deal scheme has recently been launched by the Government, which allows people to make energy efficiency improvements such as loft insulation or double glazing at no up front cost. Repayments are then to be added to the property's energy bill over a period of time.

Last week, utility giant SSE was handed a record £10.5 million fine by regulator Ofgem for "prolonged and extensive" mis-selling.

SSE provided "misleading and unsubstantiated statements" to potential customers about prices and savings that could be made by switching to SSE, according to Ofgem.

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Cold March Weather Puts Freeze On Sales

The coldest March in 50 years saw sales of clothing and footwear freeze but it boosted demand for food and drink, according to new figures.

The British Retail Consortium (BRC) said sales grew by 1.9% in March on a like-for-like basis, weaker than February's 2.7% surge but a performance described as "encouraging" given the weather impact.

While clothing and footwear retailers endured a "dismal" month, food sales were up as families treated themselves over Easter and cold weather boosted the appetite for hearty meals.

BRC director general Helen Dickinson said: "Snow and the prolonged cold were not ideal but not a disaster. They brought mixed fortunes for different categories.

"2013 has got off to an encouraging start for the market as a whole.

"Retailers are now hoping for a boost in consumer confidence and the general mood to lift performance across all, not just some sectors, as we head into the second quarter.

Across the whole of the January to March quarter, like-for-like retail sales increased 2.2%, with 1.9% non-food growth offset by 2.5% food growth.

Continued expansion by the retail sector will add to hopes the UK economy managed to eke out growth in the first quarter, thus avoiding a feared triple-dip recession.

KPMG head of retail David McCorquodale said it may be the start of a positive trend for retailers, adding clothing and shoe stores will be "desperate for a change in weather in April".

The BRC said clothing and footwear were the worst-performing non-food categories in March and the only ones where sales declined, but did not break out specific figures.

Marks & Spencer, one of the UK's biggest clothing retailers, is likely to be a major casualty of the big chill, and is expected to report falling clothing sales for the three months to the end of March on Thursday.

However, the retail bellwether's food sales are forecast to grow by 3%, as consumers continue to treat themselves and opt to eat in rather than dine out.

Roasts and oven chips were popular categories as shoppers sought out warming meals, the BRC said - while beer and ready meals were also big sellers, as shoppers stocked up for the Six Nations rugby tournament.

House textiles were the best-performing category, as sales of duvets boomed and Easter boosted table cloth sales.

Furniture and flooring was the second-best category, helped by a gradually improving housing market.

Online sales were up 6.6%, but that growth was much slower than the 13.9% increase recorded in March 2012.

That was the slowest online growth since August, and the BRC said it may suggest shoppers are searching out items online but completing the purchase in-store, as well as spending less time online over Easter.

:: House sales have been lifted to a three-year volume high in March, according to the Royal Institution of Chartered Surveyors.

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Cable 'Wants Investigation Into HBOS Life Bans'

An investigation is to be launched into whether the three former HBOS directors blamed for the banking group's collapse can be banned as company directors for life, it has been reported.

The Business Secretary has asked his officials to see if there is enough evidence against Lord Stevenson, the former HBOS chairman, Sir James Crosby, the former chief executive, and Andy Hornby, his successor, to start a formal probe under the Company Directors Disqualification Act.

Vince Cable told The Sunday Times it was the first step in a process which could lead to the three - who have so far not faced formal sanction - being barred from acting as company directors.

The move comes in the wake of a damning report into the collapse of the bank by the Parliamentary Commission on Banking Standards published on Friday.

The group was given a £20.5bn bailout

It found Sir James was the "architect of the strategy that set the course for disaster" and held primary responsibility for the collapse along with former chairman Lord Stevenson and fellow chief executive Andy Hornby.

Their "toxic" misjudgments led to the bank's downfall and a £20.5bn taxpayer bailout at the height of the financial crisis and they should never be allowed to work in the financial sector again, according to the influential commission of MPs and peers.

Mr Cable told The Sunday Times: "It's quite a legalistic process. I can ask (officials) to look at whether the companies investigations branch take action.

"We do have this power which I have begun to initiate."

Sir James stepped down from his role as a member of Bridgepoint's European Advisory Board on Friday but remains chairman of the car credit company Money Barn and a senior independent director for Compass, one of the country's largest catering firms, according to company spokespeople, as well as a trustee for Cancer Research UK.

Mr Hornby's current employer, Gala Coral, has said he has their "complete backing" as chief executive.

Sir James and Lord Stevenson have so far retained their titles, though the Royal Bank of Scotland's disgraced former boss Fred Goodwin was stripped of his knighthood.

Peter Cummings is the only former HBOS director to have been penalised by the Financial Services Authority, after being fined £500,000 and banned for life from working in the City last September.

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Disability Benefits: New System Rolled Out

By Siobhan Robbins, Sky Reporter

Major changes to disability benefits, which critics say will leave many worse off, are beginning to be rolled out today.

New claimants in parts of northern England will now receive Personal Independence Payments (PIP) in place of the old Disability Living Allowance (DLA).

The new system which includes face-to-face assessments and regular reviews will take at least two years to roll out across the rest of the country.

Steven Sumpter from Worcestershire, who suffers from ME and diabetes so finds walking painful, told Sky News he was worried about the future.

Previously, to get disability benefit he had to prove he was unable to walk 50m, but that will be changed to 20m.

He said he fears in the future he will lose half of the money he receives and the subsidised car he relies on.

"It means every single trip to the shops and the doctor will turn into maybe three hours of effort and that will leave me in bed, exhausted and in pain for days afterwards," he said.

The Government insists DLA was outdated and the changes mean those who really need support will now receive it.

Work and Pensions Secretary Iain Duncan Smith has described the previous system as "ridiculous".

Iain Duncan Smith: Old system is "ridiculous"

"We've seen a rise in the run-up to PIP. And you know why? They know PIP has a health check. They want to get in early, get ahead of it. It's a case of 'get your claim in early'," he told the Daily Mail.

He added that rigorous new health checks for claimants were "common sense".

Some charities have already expressed concerns that it will mean 600,000 people miss out on support.

Chief Executive of Scope, Richard Hawkes admitted changes were needed but claimed the Government was motivated by cost cutting.

"The Government has already announced how much the Disability Living Allowance budget is going to be reduced, they've already announced how many people are going to lose DLA and they're introducing a test which is going to provide them with the results they want to reduce those costs. It's not right, it's not fair," he told Sky News.

PIP will initially be introduce for new claimants in northwest England, Cumbria, Cheshire, northeast England and Merseyside.

As the new scheme is being rolled out, welfare reform campaigners will present a petition calling for Mr Duncan Smith to live off £53 a week to his office.

Musician and part-time shop worker Dominic Aversano, who started the petition on campaigning website Change.org, said: "When I started this petition I never imagined the level of support it would get, and the amount of encouragement people would give me.

"It has sent a powerful message to this Government, showing the level of opposition to their vicious welfare cuts."

George Osborne has defended the changes

Mr Duncan Smith was challenged to live on £53 a week after a market trader on a radio show said that was all he had to live on despite working 50 to 70 hours a week.

Asked whether he could live on £53 a week, the former army officer who now earns around £1,600-a-week after tax replied: "If I had to I would."

As well as the Personal Independence Payments, other reforms including a below inflation 1% cap on working-age benefits and tax credit rises for three years, have already come into force.

Around 660,000 social housing tenants deemed to have a spare room will lose an average of £14-a-week in what critics have dubbed a "bedroom tax".

Trials of a £500-a-week cap on household benefits are also due to begin in four London boroughs.

Chancellor George Osborne insisted on Sunday that the public was behind his changes to the benefits system.

Mr Osborne also said he felt "angry" that too much money was being "spent in the wrong way in our welfare system".

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Luxembourg 'May Ease' Bank Secrecy Laws

Luxembourg has said it is prepared to ease its banking secrecy rules and work more closely with foreign authorities amid a crackdown on tax havens.

Its finance minister, Luc Frieden told Germany's Frankfurter Allgemeine Sonntagszeitung of the possible shift in policy.

He said there was an international trend towards automatically exchanging information about depositors, adding: "We no longer strictly reject this, in contrast to before."

"Luxembourg does not rely on clients who want to save tax," he said.

Last month's 10bn euro (£8.5bn) bailout of Cyprus, whose banking system was swollen by foreign deposits attracted by low taxes and easy regulation, has put the spotlight on tax havens.

Australia has warned 2,000 top firms that their tax arrangements are to be revealed while Britain has pushed for bank secrecy changes.

Prime Minister David Cameron and Chancellor George Osborne have both urged the G20 group of countries to improve transparency.

Some firms have been criticised over 'transfer pricing', where local divisions must buy goods and services from a parent firm - often from a small office in places such as Luxembourg.

Austria and Luxembourg are the only European Union states that do not share with other EU members the identities of EU residents with cross-border bank accounts.

German finance minister Wolfgang Schaeuble said he was pleased with the comments from Luxembourg.

"I welcome every step towards automatic information exchange," he told the Saarbruecker Zeitung newspaper.

Amid growing outrage over the scale of tax evasion, Mr Schaeuble said last week Berlin would push the EU to take legal measures against tax havens.

The German government this weekend also urged several German publications to hand over details they have obtained on suspected tax cheats.

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US New Jobs At Lowest Level For Nine Months

US Jobs Figures Are Deeply Worrying

Updated: 4:04pm UK, Friday 05 April 2013

By Ed Conway, Economics Editor

Americans are dropping out of the jobs market, and fast. That's the depressing takeaway from today's non-farm payroll report.

The overall participation rate – a measure, essentially, of the proportion of people of working age either in a job or looking for one – has fallen to the lowest level since 1978.

It is, as far as employment experts are concerned, a deeply worrying signal: increasingly, potential workers are giving up on getting work, dropping out of the jobs market instead of attempting to find a new position.

In fact, as you can see from the chart, participation has been falling since the turn of the millennium, though it's only in the wake of the financial crisis that the drop has become more vertiginous.

Why be concerned about this? Well, a high participation rate has typically been seen as evidence of the American economy's strength – a complement to its high productivity rate and consistently-strong GDP growth rate.

A low participation rate, on the other hand, is often evident in economies which are more sclerotic and less efficient – particularly ones with over-generous welfare states which some think discourage people from working.

So, for instance, Japan and Spain both have participation rates below 60%: Germany's has only just tipped fractionally above it.

The reality is that now, for the first time since 1977, America's participation rate, at 63.3%, is lower than Britain's, which is 63.6%, or was in the three months to the end of January.

It would be nice to claim that this was because Britain was in some way becoming leaner and meaner, but the statistics suggest otherwise: Britain's participation rate has remained steady since 2005 while America's has fallen sharply as people leave the workforce.

It might be odd, having said all of the above to say that today's nasty US jobs report (the headline, by the way, was that a mere 88,000 net jobs were added in March – well below the rise in the population) also technically make it more likely that the Federal Reserve will scale back its stimulus.

But in one sense they do. The Fed has committed to more quantitative easing, buying up $85bn (£55.8bn) of debt each month until the unemployment rate drops below 6.5%.

But because unemployment measures the number of working people as a percentage of the total workforce, it can fall as a direct result of the workforce falling – and that's what happened this time, with the rate dropping from 7.7% to 7.6%.

Now, pragmatically speaking the Fed will try to "look through" this optical illusion. But it's an important reminder that when you tie your monetary policy to a very specific number, it doesn't always make it easy to predict future moves from the central bank.

Mark Carney, who is coming in as Bank of England Governor this summer and has nodded approvingly over at what the Fed has been doing, should take note.

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Axminster Rescue To Save 100 Devon Jobs

By Mark Kleinman, City Editor

One of Britain's oldest carpet-makers is to be rescued in a deal that will preserve about 100 jobs in the south-west of England.

I understand that Axminster Carpets, which traces its roots back to 1755, will be bought out of administration by a local consortium. An announcement about the deal is expected.

The consortium is being led by Stephen Boyd, a businessman who chairs Pittards, a major leather supplier, and includes backing from Centric Commercial Finance, an invoice discounting and asset-based lending group.

Axminster fell into administration last month, citing difficult trading conditions, with the loss of about three-quarters of the company's 400-strong workforce.

A supplier to Clarence House, 10 Downing Street and the Royal Albert Hall, the carpet-maker was founded by the Whitty family in the 1750s, and gave rise to what became known as the Axminster method of weaving.

After going out of business in the 1830s, it was subsequently revived a century later.

Joshua Dutfield, grandson of the founder of the current incarnation of Axminster, is expected to remain involved with the company following the rescue deal.

Axminster's collapse sparked an emotional response in Devon, with thousands of people signing a petition aimed at saving the company.

A spokeswoman for Axminster declined to comment ahead of the announcement. Duff & Phelps, which has been handling the administration, could not be reached for comment.

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Cable 'Wants Investigation Into HBOS Life Bans'

An investigation is to be launched into whether the three former HBOS directors blamed for the banking group's collapse can be banned as company directors for life, it has been reported.

The Business Secretary has asked his officials to see if there is enough evidence against Lord Stevenson, the former HBOS chairman, Sir James Crosby, the former chief executive, and Andy Hornby, his successor, to start a formal probe under the Company Directors Disqualification Act.

Vince Cable told The Sunday Times it was the first step in a process which could lead to the three - who have so far not faced formal sanction - being barred from acting as company directors.

The move comes in the wake of a damning report into the collapse of the bank by the Parliamentary Commission on Banking Standards published on Friday.

The group was given a £20.5bn bailout

It found Sir James was the "architect of the strategy that set the course for disaster" and held primary responsibility for the collapse along with former chairman Lord Stevenson and fellow chief executive Andy Hornby.

Their "toxic" misjudgments led to the bank's downfall and a £20.5bn taxpayer bailout at the height of the financial crisis and they should never be allowed to work in the financial sector again, according to the influential commission of MPs and peers.

Mr Cable told The Sunday Times: "It's quite a legalistic process. I can ask (officials) to look at whether the companies investigations branch take action.

"We do have this power which I have begun to initiate."

Sir James stepped down from his role as a member of Bridgepoint's European Advisory Board on Friday but remains chairman of the car credit company Money Barn and a senior independent director for Compass, one of the country's largest catering firms, according to company spokespeople, as well as a trustee for Cancer Research UK.

Mr Hornby's current employer, Gala Coral, has said he has their "complete backing" as chief executive.

Sir James and Lord Stevenson have so far retained their titles, though the Royal Bank of Scotland's disgraced former boss Fred Goodwin was stripped of his knighthood.

Peter Cummings is the only former HBOS director to have been penalised by the Financial Services Authority, after being fined £500,000 and banned for life from working in the City last September.

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US New Jobs At Lowest Level For Nine Months

US Jobs Figures Are Deeply Worrying

Updated: 4:04pm UK, Friday 05 April 2013

By Ed Conway, Economics Editor

Americans are dropping out of the jobs market, and fast. That's the depressing takeaway from today's non-farm payroll report.

The overall participation rate – a measure, essentially, of the proportion of people of working age either in a job or looking for one – has fallen to the lowest level since 1978.

It is, as far as employment experts are concerned, a deeply worrying signal: increasingly, potential workers are giving up on getting work, dropping out of the jobs market instead of attempting to find a new position.

In fact, as you can see from the chart, participation has been falling since the turn of the millennium, though it's only in the wake of the financial crisis that the drop has become more vertiginous.

Why be concerned about this? Well, a high participation rate has typically been seen as evidence of the American economy's strength – a complement to its high productivity rate and consistently-strong GDP growth rate.

A low participation rate, on the other hand, is often evident in economies which are more sclerotic and less efficient – particularly ones with over-generous welfare states which some think discourage people from working.

So, for instance, Japan and Spain both have participation rates below 60%: Germany's has only just tipped fractionally above it.

The reality is that now, for the first time since 1977, America's participation rate, at 63.3%, is lower than Britain's, which is 63.6%, or was in the three months to the end of January.

It would be nice to claim that this was because Britain was in some way becoming leaner and meaner, but the statistics suggest otherwise: Britain's participation rate has remained steady since 2005 while America's has fallen sharply as people leave the workforce.

It might be odd, having said all of the above to say that today's nasty US jobs report (the headline, by the way, was that a mere 88,000 net jobs were added in March – well below the rise in the population) also technically make it more likely that the Federal Reserve will scale back its stimulus.

But in one sense they do. The Fed has committed to more quantitative easing, buying up $85bn (£55.8bn) of debt each month until the unemployment rate drops below 6.5%.

But because unemployment measures the number of working people as a percentage of the total workforce, it can fall as a direct result of the workforce falling – and that's what happened this time, with the rate dropping from 7.7% to 7.6%.

Now, pragmatically speaking the Fed will try to "look through" this optical illusion. But it's an important reminder that when you tie your monetary policy to a very specific number, it doesn't always make it easy to predict future moves from the central bank.

Mark Carney, who is coming in as Bank of England Governor this summer and has nodded approvingly over at what the Fed has been doing, should take note.

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