New Round Of Fuel Price Cuts Revealed

Petrol: The Pump Price Conundrum

Updated: 10:35pm UK, Wednesday 30 January 2013

By Ursula Errington, Business Correspondent

So, the OFT says motorists aren't being ripped off, that the price of petrol on our forecourts is fair and isn't the result of collusion or price-fixing.

Outraged motoring groups still aren't convinced.

The reality is, I don't think anyone knows how to work out the relationship between crude oil and pump price.

From the moment crude oil is pumped out of the ground to when we hand over our money at the till to pay for a topped-up tank, the price of the commodity has been influenced by multiple markets all subject to their own supply and demand idiosyncrasies.

I last worked in oil trading about a decade ago and back then the relationship between the price of Brent crude oil and pump prices was deemed to be pretty sketchy.

Assiduous analysts, whose job it was to structure financial instruments to hedge the bank's customers with exposure to fluctuations in the oil market, pored over oil prices and pump price data looking for a concrete correlation on which to base a safe hedging instrument.

Judging by the collective sighing, teeth-gnashing and head-in-hand gestures, it proved both time consuming and difficult.

Broadly a six-week time lag was identified between a movement in the crude oil price to a correlating adjustment in the pump prices back then but it was considered too statistically patchy to appeal to clients.

So why is it so difficult to find a relationship between the price of oil and the pump price drivers pay?

Firstly, pricing crude oil itself is pretty complicated. Before the black stuff is even out of the ground its anticipated value has been traded on the futures market for weeks, months or years before.

On any one day the oil price is set by taking a combination of a weighted average and straight average up to two months in the future, of all the trades over 600,000 barrels executed on the electronic trading platform the Intercontinental Exchange (ICE).

So it is fair to say that part of the oil price is set by traders who are speculating, who have no intention of allowing their futures contracts to mature and "go physical" (i.e. become related to an actual cargo of oil) but who are buying and selling futures contracts depending on their day-to-day view of the multiplicity of variables effecting the market.

This need not be considered a bad thing. Speculative traders aren't just plucking figures out of the air, they are working on the basis of fine-tuned mathematical models used to assist them in weighting all the factors in play - an outlandish speculative trade based on few decent indicators wouldn't be in their interest at all.

Crucially, these traders add a huge volume of trades to the market, which actually means that big distortions in one trader's view are evened out across the average when the price is set. 

Then there is the shipping market to get the stuff to shore. Highly volatile and as prone to geo-political influences as the commodity itself, shipping deals are opaque because they are over-the-counter and are often based on long-term trading relationships.

The economics of refining are also unhelpfully complex, predominantly because optimising refinery operations is tricky.

Refinery margins (the difference in price between the wholesale value of the products coming out of the refinery and the crude oil from which they were derived) have been surging for many companies of late because of a relative drop in the cost of crude oil and solid demand for products but unscheduled refinery outages, workers on strike, storage costs, changes in the quality of the crude itself - all these things will impact the margin within hours.

And then there's the cost of haulage and the variables at petrol station level, such as a franchise owner's credit rating, local forecourt wars and location.

All of that and we still have some of the cheapest fuel in Europe, according to the OFT.

But it's not over yet - the taxman must also have his share. In the 10 years from 2003 to 2012, prices at the pump increased from 76p per litre (ppl) to 136ppl for petrol and from 78ppl to 142ppl for diesel. Nearly 24ppl of that increase was because of tax and duty.

Is it any wonder then that trying to compare the price of crude oil and the pump price proves a largely fruitless task?

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New EasyJet Chair: Next's Chairman In Frame

By Mark Kleinman, City Editor

John Barton, the chairman of fashion retailer Next, has emerged as a leading candidate to chair easyJet, the FTSE-100 low-cost airline.

I understand that Mr Barton is on a shortlist of contenders vying to replace Sir Mike Rake, who is due to step down from the role this summer and who will assume the presidency of the CBI, the business lobby group.

The board of easyJet has yet to make a decision about Sir Mike's successor and insiders said on Monday that at least one other person was still in the frame alongside Mr Barton.

"His is one of the names in the mix but it isn't the only one," said one insider.

A decision about easyJet's new chairman, which could come as soon as this week, will be significant because of the fractious relationship that Sir Mike and his predecessors have had with Sir Stelios Haji-Ioannou, the airline's founder and largest shareholder.

Sir Stelios has called on easyJet's management to slow the pace of new aircraft deliveries and focus on improving shareholder returns.

Many independent shareholders have, though, backed Sir Mike and Carolyn McCall, easyJet's chief executive, following a surge in profits and its share price, which have propelled the company into London's blue-chip index.

The easyJet founder has fought a long-running battle against Sir Mike, accusing him of having too many corporate roles and being complicit in the lavish pay culture at Barclays, where he is deputy chairman.

He has threatened to further reduce his stake in the airline if the company places a large order to expand its fleet in the coming months.

Among the other candidates to replace Sir Mike is Charles Gurassa, who already sits on easyJet's board as its deputy chairman and senior independent director.

Mr Barton, who is 68, would probably be viewed by easyJet shareholders as a safe option to take on the role. He has chaired Next since 2006 and would be expected to hand over the reins at some point in the next couple of years.

He has also chaired companies including Brit Insurance, Cable & Wireless Worldwide and Jardine Lloyd Thompson.

An easyJet spokesman declined to comment.

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Boston Blasts Knock Stock Market Values

The apparent terrorist attack on the Boston Marathon has intensified the recent 'run for cover' on world stock markets.

There had already been a rush to dump gold before the blasts while oil took a fresh tumble amid an earlier world sell-off on fears of slowing economic recovery.

The Dow Jones closed 1.8% lower while Asian markets also lost value overnight as commodity stocks fell. European markets also opened lower.

In London, the FTSE 100 dropped 0.5% at the start of trading.

The effect of the attack on Boston, while seen to be a temporary shock, added to the gloom as fears grew that an end was in sight for Federal Reserve support for the US economic recovery.

The sell-off in markets was triggered by the Chinese government's report on Monday that annualised growth in the world's second-largest economy slowed to 7.7% in the first quarter from 7.9% in the final quarter of last year.

Growth was expected to accelerate slightly to 8%.

Gold endured its sharpest drop in price over two days since 1983 on Monday, with the cost of a troy ounce falling to $1,350 before recovering slightly early on Tuesday.

Brent crude oil tumbled below $100 a barrel overnight as weaker Chinese growth was seen as hitting demand.

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Cyprus Bailout Deal Is Hit By New Fears

Cyprus' central bank governor has warned he will only work with ministers on the country's EU bailout if the bank's independence is respected.

The comments from governor Panicos Demetriades come following a rift in Nicosia between the bank and political leaders over the EU/IMF-brokered bailout.

Last week, the government said the total bailout cost had jumped 6bn euros (£5.1bn) to 23bn (£19.6bn).

Mr Demetriades was appointed last May by the communist former administration but tension with the ruling centre-right government, in power for just two months, has deepened.

There has been growing pressure on him to resign over his handling of the economic crisis amid an unprecedented levy placed on bank accounts.

Cyprus President Nicos Anastasiades has been accused of meddling

In the past week, the southern Cypriot parliament has started an investigation against Mr Demetriades.

President Nicos Anastasiades's government withdrew the appointment of his trusted deputy and three central bank officials resigned.

The unfolding drama drew a scathing response from European Central Bank (ECB) president Mario Draghi, who wrote to the Cypriot president telling him any attempt to effectively sack the governor could land Cyprus in the European Court of Justice.

Mr Anastasiades, when asked by reporters to comment on the apparent feud between the two bodies, said he was "frankly, very saddened".

"My intention to work with the country's democratic institutions is a given," Mr Demetriades, who sits on the ECB's governing council, was quoted as saying in an interview with the Phileleftheros newspaper.

"We are ready to respond to every call for cooperation and coordination for the benefit of this country always, however within the framework of total respect towards the central bank's  independence, as stipulated by the ECB."

ECB president Mario Draghi has warned the southern Cypriot president

Under European Union law, a governor can only be dismissed if he no longer fulfils the conditions required for the performance of his duties, or if he is guilty of serious misconduct.

The investigation launched by Cypriot politicians last week is seeking to find out whether Mr Demetriades supplied enough information during an investigation into the demise of Cyprus's two biggest lenders, which left the economy in disarray.

The collapse of the Mediterranean island's banking system imposed massive losses on depositors in order to qualify for its 10bn euro (£8.5bn) bailout by the EU and IMF.

:: Gold futures dropped below the $1,500 barrier on Friday, the lowest since July 2011, just days after Cyprus moved to sell 10 tons of reserves to help fund the bailout.

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Little Chef Restaurant Chain Put Up For Sale

By Tadhg Enright, Business Correspondent

Roadside restaurant chain 'Little Chef' has been put up for sale - six years after it was rescued from administration.

Business turnaround specialists RCapital, which took control of Little Chef in 2007, have appointed KPMG to find a buyer.

It is understood there have already been expressions of interest from potential buyers.

Over the past six years, the chain famous for its 'Fat Charlie' logo has been slimmed down from more than 200 to 83 profitable sites beside A-roads all over Britain.

It also recruited celebrity chef Heston Blumenthal to revamp its menu as part of a Channel 4 documentary.

Sky sources say its estate of restaurants, most of which have large car parks, should appeal to coffee chains or convenience stores.

Heston Blumenthal attempted to revive Little Chef's fortunes

In a statement, RCapital said: "Over the last six years, RCapital has successfully completed an operational turnaround and financial restructuring, which has repositioned the business and brought the group of companies back into profitability.

"The move was part of a long-term critical rebuild strategy to create consistently profitable sites against the backdrop of one of the worst recessions in living memory.

"With the turnaround successfully completed, it's time to explore the next phase for the food service operator."

Little Chef employs 1,100 staff and serves six million customers a year.

Its first branch, which had just 11 seats, opened in Reading in 1958, but by the 1980s Little Chef had become a fixture of British motoring with more than 230 branches at its peak.

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JCB Digs Big Profit In Africa And Middle East

Digger manufacturer JCB has defied a slump in the global construction market to record the highest profit in its 67-year history.

The family-owned company saw its 2012 earnings rise to £365m on turnover which remained virtually unchanged from the previous year at £2.7bn.

Although the Staffordshire-based manufacturer experienced weak construction equipment sales in some areas of the world, it saw business in Africa double and registered growth of 12% in the Middle East.

Announcing the results, JCB chairman Sir Anthony Bamford said: "In view of the continued fragility of the global economy, which has led to renewed slowdowns in emerging and developed markets, JCB's results in 2012 are extremely encouraging.

"They not only demonstrate the resilience of our business, but highlight the importance of continued investment in products, facilities and customer service.

"While construction equipment markets in many parts of the world remained weak, that has been more than offset by strong growth for our agricultural products, particularly in materials handling."

Despite continuing uncertainty, particularly in European economies, 2013 had started satisfactorily, JCB said.

Sir Anthony added: "We are expecting some growth this year but how much will depend on the pace of the global recovery."

Last year's record results eclipsed earnings of £355m in 2011.

Figures for sales of machines also rose slightly to 69,250, from 69,100 in 2011, amid a global market which is estimated to have contracted by around 10%.

During 2012, JCB opened a new factory in Sao Paulo, Brazil and announced plans for a new £62m plant in Jaipur, India, which is due to open next year.

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Floods: UK Insurers Avoid Covering Risky Homes

By Becky Johnson, North of England Correspondent

People whose homes have been devasted by flooding fear they will be unable to get insurance in future as talks between the Government and insurers have so far failed to reach an agreement.

At present insurers are required to provide cover at reasonable rates provided the Government continues to strengthen flood defences, but this agreement - known as the Statement of Principles - is due to expire in June this year.

In St Asaph in North Wales more than 400 homes were deluged when the River Elwy burst its banks last November. So far, the majority of people have still been unable to return to their houses.

James Alcock stands in his kitchen after flood water recedes

John Wynn Jones who is a local councillor and whose own home was flooded told Sky News: "What we are finding is that because people are so concerned about getting insurance, as well as clearing up after the floods themselves, people are actually considering not moving back into their homes.

"They don't want to get back into their properties and then find out they can't get insurance or the premiums are now so high they can't afford it.

"There's one lady who was insured and ... they've told her they won't be able to renew her policy. When she's questioned it, they've told her 'you no longer fulfil our criteria'. It hasn't been explained to her why but she says the only thing that's changed is she has now been flooded.

"Another resident has had to shop around. Her existing premium had been £200 a year and the best deal she can get now is £1,200 a year. Someone else was told they'd only get a policy with a £10,000 excess.

"People are desperate to have the cover but a lot of people are saying they don't have the money to pay so they'll end up living in uninsured properties."

A fireman helps a member of the public in Aberfoyle

Aidan Kerr, head of property at the Association of British Insurers (ABI), said: "We continue discussions with Government on the model we have developed to safeguard the availability and affordability of flood insurance for those at high risk.

"With flooding the biggest natural risk the UK faces, it is important we have consensus on managing the risk going forward, which includes sustained and targeted flood defence investment and sensible planning decisions."

A spokesperson for the Department for Environment, Food and Rural Affairs told Sky News: "We want to get an agreement on insurance that provides a lasting solution and secures affordability and availability of flood insurance for policy holders.

"Constructive negotiations are ongoing and Government is meeting with the ABI regularly."

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Exclusive: CVC Mulls £750m Gamble On Betfair

By Mark Kleinman, City Editor

The private equity group behind Formula One motor racing is mulling a takeover approach for Betfair, the online betting exchange which floated on the London market three years ago.

I have learned that CVC Capital Partners, one of the biggest buyout firms in the world, is in the early stages of considering a bid to take Betfair private.

The private equity group, which has reaped a handsome profit from its investment in F1, has not approached the board of Betfair, and has yet to line up financing for a bid, insiders said on Saturday.

Betfair's share price has risen sharply in recent months, largely on the back of speculation that it might be ripe for a takeover.

One person close to the situation cautioned that the company's share price "already contained a takeover premium", and warned that a further jump in the value of the stock may bring a premature end to CVC's interest in the company.

On Friday, Betfair's shares closed at 699.5p, roughly 9 per cent above a 52-week low set in January.

The authorities which govern the City's takeover disclosure regime have become increasingly fastidious in recent years and are likely to force CVC to declare its hand if Betfair's share price moves sharply on Monday.

One person familiar with CVC's thinking confirmed that it had begun contemplating an offer for Betfair but said it may yet opt to cease that work if approached by the Takeover Panel, enabling it to issue a statement saying that it was not pursuing an offer.

"We never comment on market rumour or speculation," a CVC spokesman said on Saturday.

Key to the success of any bid to take control of Betfair would be the attitude of the gambling exchange's founders, Andrew Black and Edward Wray.

Between them, they own approximately 20% of the company, with a number of big technology investors such as the Japanese firm Softbank and Balderton Capital also holding significant stakes.

It is unclear whether CVC has approached either Mr Black or Mr Wray about its interest, although one insider said any takeover ambition would be "dead" without their support.

Betfair floated at £13-a-share, but its poor post-listing performance left investors nursing significant losses, making it one of a series of prominent companies, such as Ocadon, the online grocer, and Glencore, the commodities trader, to suffer a slump in its value after launching an initial public offering.

Betfair has endured a torrid time during its brief life as a public company, parting with a string of top executives.

The current boss, Breon Corcoran, joined in 2012 from rival gambling group Paddy Power. He has opted to reshape the company's operations, withdrawing from troubled Eurozone markets such as Greece, and selling non-core assets such as its stake in LMAX, a financial trading platform.

Like many gaming companies, it has also faced regulatory battles over tax issues, leading to a decision to pull out of the German market. It now intends to focus on regulated markets, and is attempting to turn around the fortunes of its struggling online poker business.

Last month, Betfair reported a 4% fall in unaudited revenues for the three months to January 31 against the same period a year earlier.

"Betfair performed well in the third quarter and the business is on track against our full year expectations. UK revenue was up 6% driven by the continued strength of mobile betting as well as favourable sporting outcomes," Mr Corcoran said in March.

"In line with our previous guidance, international revenues declined as a result of regulatory change and our focus on sustainable jurisdictions.

"The new leadership team is in place and has started to implement the changes required to make Betfair a more focused and leaner organisation."

A spokesman for Betfair, which is chaired by Gerald Corbett, the former Railtrack boss, declined to comment.

CVC, which owns stakes in the Virgin Active gyms chain and the parent company of Madame Tussauds, has an extensive track record in the leisure and sports industries.

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Banks Slammed Over Account Complaints Handling

A fifth of complaints about current accounts at banks and building societies are not being resolved to the customer's satisfaction, a survey says.

Consumer group Which found that 26% of customers, equating to 12 million people across the country, have experienced problems in the last 12 months.

Of these, two-thirds have made a complaint and 22% of people who did so were not happy with the end result.

The findings, which come at a time when moves are under way to make it easier for people to switch current accounts and encourage competition, were made following a survey of 2,000 people across the UK in February.

Common causes for complaint included poor customer service, incorrect charges, difficulty getting through to someone and mistakes showing up on statements.

Three in 10 people who did complain said they had to do so more than once before the issue was put right.

Which? said it had found Lloyds TSB to be the bank with the highest proportion of customers saying they had experienced some sort of problem at 30%, followed closely by Lloyds' sister bank Bank of Scotland, as well as the Co-operative Bank.

Out of the 12 banks and building societies surveyed, the proportion of customers who had experienced problems tended to be lower among First Direct and Nationwide customers, according to the findings.

Which? executive director, Richard Lloyd said: "There's been a lot to complain about in banking over the last few years and to win back our trust they must sort out their complaints handling. When things go wrong it is critical that banks act swiftly and fairly to deal with the problem, identify what caused it and make sure it's not repeated.

"The way that a bank deals with complaints says a lot about the culture of the organisation. Some banks are getting this right but they all need to do more to put their customers first."

Lloyds Banking Group said it was "disappointed" to see the Which? findings, particularly as it has reduced its number of complaints last year by 28%.

A spokeswoman for Lloyds said: "Our commitment to service is central to our aim of being the best bank for our customers. To do this, we'll continue to listen to our customers' feedback, focus on their needs and fix the cause of complaints and urge any customer who has an issue with their account to contact us."

The Co-op Bank also said it was disappointed, adding that the findings do not reflect its experience with customer satisfaction surveys or complaints.

A statement from Co-op said: "Despite the very low sample size of our customers in this survey, we are not complacent about the findings or our position and we do take any feedback on our customer service extremely seriously.

"We are now working with Which? to understand the research in more detail and will be addressing those areas in which we have fallen short as a priority."

Here are the proportions of each bank and building society's customers in the Which? survey who have experienced problems with their accounts in the last 12 months:

:: Lloyds TSB, 30%
:: Co-operative Bank, 29%
:: Bank of Scotland, 29%
:: RBS, 28%
:: Barclays, 27%
:: Santander, 27%
:: Halifax, 27%
:: NatWest, 26%
:: HSBC, 22%
:: Yorkshire Bank, 19%
:: Nationwide, 12%
:: First Direct, 9%

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HBOS: Bosses Get Bonuses 'For Going Bust'

Pressure is mounting on disgraced former HBOS bosses amid anger over mammoth pension pots and nearly £1m of "bonuses for going bust".

Seven directors of HBOS landed £914,000 in "change of control" payments triggered by the bank's rescue takeover by Lloyds Banking Group, following its £20.5bn taxpayer bailout in 2008.

It also emerged that Sir James Crosby and Andy Hornby - two of the three former HBOS chiefs damned last week by a parliamentary commission for "catastrophic failures of management" - were on pension schemes that accrued benefits at twice the rate of average workers.

Mr Hornby, eligible to start drawing down a £240,000-a-year HBOS pension when he turns 50 in four years' time, is now in the spotlight following Sir James's decision earlier this week to hand back 30% of his £580,000-a-year pension.

Under the change of control payments handed out at the time of the Lloyds takeover, Mr Hornby received £251,000 cash and 7,599 shares - on top of salary, pensions awards and redundancy payments.

MPs are now demanding an inquiry into the handouts.

John Mann, MP and member of the Treasury Select Committee, said the due diligence done at the time of the deal needed to be investigated, while the former bosses should also pay the money back.

He told the Guardian: "This is taxpayers' money being used to pay bonuses to bankers that brought down their own bank and cost thousands of ordinary workers their jobs - These are bonuses for going bust."

Others to receive the payments include Peter Cummings - the former head of corporate lending and the only ex-HBOS director penalised by the Financial Services Authority (FSA) after being fined £500,000 and banned for life from working in the City. He received £129,000 and 2,051 shares.

Lloyds said the decisions to award change-of-control payments and pensions were made by HBOS before its takeover.

A spokesman said: "At the time these arrangements were settled, Lloyds did not own HBOS.

"All decisions with respect to the redundancy or severance terms applicable to departing HBOS senior executives, including pensions, were made by the HBOS remuneration committee or board of HBOS prior to the acquisition by Lloyds."

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