Record Online Xmas Sales Boost Festive Figures

Increasing use of tablets and smartphones and speedy delivery times are the major factors behind a sharp rise in online shopping before Christmas.

Web sales growth accelerated to 19.2% compared with the same month in 2012 - the fastest rate for more than three years.

However, overall UK retail sales grew by just 0.4% on a like-for-like basis.

The data from the British Retail Consortium (BRC) survey carried out by KPMG showed online trade represented 18.6% of total non-food sales in December, up from 16.5% the year before.

BRC director general Helen Dickinson said: "More of us clicked into Christmas than ever before, with online non-food sales growth putting in its best performance since March 2010 and accounting for nearly 20% of spending.

"The surge in the use of tablets and smartphones last year, together with the ever-faster delivery times achieved by an increasing number of retailers, has provided a new spur of growth to online shopping."

David McCorquodale, KPMG head of retail, said: "Whilst store sales continue to flatline, online sales remain the main driver of growth for the sector, contributing nearly three quarters of the uptick in non-food sales in the last quarter of 2013.

"The winners this Christmas were those retailers with slick multichannel operations, who could offer consumers the flexibility to shop how, and when, they wanted to."

In clothing, online purchases represented 21.2% of sales in December, up from 18% in 2012, while furniture and flooring products bought on the internet represented nearly a third of all sales, at 32.4% - though this was down a little on 32.6% last year.

The figure for electrical goods and toys was 14.4%, up from last year's 11.9% but a fall on the 15.5% who shopped online for these goods in November.

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China 'Overtakes US' As World's Top Trader

China's annual trade in goods passed the $4trn (£2.4trn) mark for the first time in 2013, official data has revealed, confirming its position as the world's biggest trading nation.

Exports from the world's number two economy rose 7.9% to $2.21trn (£1.34trn), while imports increased 7.3% to $1.95trn (£1.18trn), the General Administration of Customs (GAC) announced.

The trade surplus stood at $259.75bn (£157bn), up 12.8% from 2012.

Total trade came to $4.16trn, an increase of 7.6%, just below the government's 8% target.

The total was a record high and effectively confirmed a historic geo-economic shift, making China the world's biggest trader of physical goods, not including services.

Reports last February said the United States' total trade in goods was lower than China's in 2012, but GAC said due to differences in calculation methods the change happened for the first time in 2013.

Further confirmation of the new status is expected to come when the full US data for the year is released.

"It is very likely that China overtook the US to become the world's largest trading country in goods in 2013 for the first time," Customs spokesman Zheng Yuesheng said.

The European Union was China's biggest trading partner, GAC said, followed by the United States, the Association of Southeast Asian Nations (Asean), Hong Kong and Japan.

Between them the traditional markets of the EU, US and Japan accounted for 33.5% of China's trade, down 1.7%, suggesting emerging markets' share of business was growing.

China's Xi Jinping has been courted by President Barack Obama

"Generally speaking, the environment for trade to grow in 2014 is likely to be better than 2013," Mr Zheng said, citing improvements in international demand and domestic economic factors.

However, China's trade surplus in December fell 17.4% to $25.64bn (£15.5bn), below expectations.

Exports increased 4.3% to $207.74bn (£125bn) last month, while imports climbed 8.3% to $182.1bn (£110bn).

China's 2013 trade performance came as the economy turned in a mixed performance, slowing during the first half of the year before showing some vigour in the final six months.

A government report last month cited in state media suggested GDP grew 7.6% in 2013, from the 7.7% in 2012, which was the worst performance in 13 years.

President Xi Jinping, who assumed office in March after becoming head of the ruling Communist Party in November 2012, wants to transform the economy to one in which domestic demand is the key growth driver, rather than public investment.

China's yuan currency gained more than 3% against the dollar last year, hitting a series of record highs since Beijing launched its modern foreign exchange market in 1994.

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Heathrow Slams Price Cap Put On Airline Fees

The operator of Heathrow airport has slammed a price cap limiting how much it can charge airlines to use the west London site.

The Civil Aviation Authority (CAA) has imposed a far greater price cap on the amount it can charge airlines than it originally proposed.

From April, prices can only rise by 1.5% below the retail prices index (RPI) measure of inflation at Britain's busiest airport.

Heathrow, whose owners include Spain's Ferrovial and the sovereign wealth funds of Qatar, China and Singapore, described the cap as draconian.

It is now reviewing a planned investment programme to see if it is still financially viable.

The CAA said the -1.5% cap would mean price would fall for passengers and service for customers would be increased.

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'Project Cook' Signals Huge RBS Cost Cuts

By Mark Kleinman, City Editor

The new head of Royal Bank of Scotland (RBS) is preparing to take another axe to the lender's cost-base in a move which could herald thousands more job cuts.

Sky News has learnt that Ross McEwan is working on the plans, to be announced alongside the taxpayer-backed bank's annual results in six weeks' time, under the codename Project Cook.

The name is understood to be a reference to Captain James Cook, the English explorer who sailed along the coast of Australia in 1770, and is a nod to the RBS chief executive's success in cutting costs at Commonwealth Bank of Australia, where he ran its retail operations for five years.

Mr McEwan's plans for RBS will not be finalised until next month, when he will announce the details to the City, but he has told colleagues that he expects "very substantial" cost cuts to be identified as part of his review.

The bank's workforce is already one-quarter smaller than the 161,000 people who were employed by it when taxpayers injected £45.5bn to rescue it in 2008.

More than 40,000 people have left RBS since then, many through redundancy, with others leaving as part of the sale of dozens of businesses by Stephen Hester, Mr McEwan's predecessor.

People close to Project Cook said that Mr McEwan would further shrink RBS's markets and international banking operations, as well as setting out plans for greater automation of high street banking services.

Over time, this would result in far more cost-effective operations that would require a smaller headcount, they said.

About 120,000 people now work for the Edinburgh-based bank.

In RBS's third-quarter results statement in November, the bank said that Mr McEwan was launching a review of its operations in an effort "to capture the full potential of its customer businesses".

"The review will aim to improve the bank's performance and effectiveness in serving its customers, shareholders and wider stakeholders.

"This will include detailed plans to realign the Group's cost base, with a cost:income percentage target in the mid 50s, down from 65% currently."

Even if RBS's income remained constant, that shift would entail slicing hundreds of millions of pounds from RBS's cost-base, but the sale of Citizens in the US and other business units will reduce the bank's profitability in the short term.

"The aim is to put more capital and resource into areas where they generate income, and that will be one focus of the review next month," said one source.

Since the November announcement, RBS has been hit by a series of further IT systems breakdowns which have inconvenienced millions of NatWest, RBS and Ulster Bank customers.

George Osborne, the Chancellor, is being kept informed about the progress of Project Cook, as is UK Financial Investments, the agency which manages taxpayers' 81% stake in RBS.

RBS, which declined to comment on Wednesday, is not alone among UK banks seeking to reduce its workforce.

Barclays, HSBC and Lloyds Banking Group have each either carried out or signalled plans to cut tens of thousands of roles as retail banking customers increasingly frequent use online and mobile-based services.

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M&S Christmas Clothing Sales Fall 2.1%

Extended pre-Christmas discounting by Marks & Spencer has failed to spark sales growth in the company's troubled clothing lines.

M&S confirmed to the City that it had suffered its tenth consecutive quarter of falling sales in its general merchandise division, dropping 2.1% on a like-for-like basis in the eight weeks to December 24.

The group admitted that a series of discounts to drive seasonal sales - which included a pre-Christmas "Mega Day" with reductions of up to 30% on clothing lines - would hit profit margins when full-year results are reported later this year.

Total UK sales fell by 0.2% over the same period on a like-for-like basis - with its popular food offering propping up its performance with growth of 1.6%.

In the quarter ending December 28, total sales rose by 1.5%.

Chief executive Marc Bolland said: "We delivered an improved performance in General Merchandise over the important Christmas period, with sales up 1.5% in a highly promotional market.

"However, an exceptionally unseasonal October, which saw General Merchandise sales down strongly, has resulted in a quarterly performance below our expectations."

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Tesco UK Sales Decline 2.4% Over Christmas

Tesco is blaming "further weakness" in the UK grocery market for a fall in sales over Christmas.

The UK's biggest supermarket chain said sales at British stores open over a year, excluding fuel and VAT, fell 2.4% in the six weeks to January 4.

The company - led by chief executive Philip Clarke - is 21 months into a turnaround plan for its main UK business that has seen over £1bn invested in store revamps, more staff, new product ranges and pricing initiatives.

Mr Clarke confirmed the investment amid plunging sales and complaints it had taken its eye off the ball in the UK, focussing too heavily on its foreign operations.

Tesco said today that despite the fall in UK sales, it still expected to report full year results within the range of current market expectations.

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Co-Op: Regulator Stands By Flowers Decision

A senior City regulator has told MPs he stands by his decision to approve the appointment of disgraced former Co-op Bank chairman Paul Flowers, arguing it was "correct at the time".

Clive Adamson, director of supervision at the Financial Conduct Authority (FCA), said the Methodist minister seemed to be the right person to control the "unruly" board at the bank, despite him later becoming embroiled in a drugs scandal and displaying a lack of knowledge about banking.

He said that Mr Flowers was "not the same individual" as he seemed at a later meeting before the Treasury Select Committee last year, when gave a stumbling performance and seemed unable to give basic facts and figures.

Mr Adamson was quizzed by MPs on the same committee about a 90-minute meeting he and two colleagues at the now-defunct Financial Services Authority held with Mr Flowers ahead of his appointment in 2010.

At the meeting, it was agreed two deputies would be needed to assist Mr Flowers as chairman because of his lack of banking knowledge.

Mr Flowers gave a stumbling performance when he appeared before MPs

He told the Treasury Select Committee: "I stand by the decision I made at the time.

"I am as surprised as all of us as to the events that surrounded Mr Flowers' apparent misdemeanours."

Following close questioning by MPs, Mr Adamson eventually agreed that the FSA overall made a mistake, but insisted he stood by the decision on Mr Flowers.

"With the benefit of hindsight, yes we did get it wrong," he said.

But committee member Jesse Norman likened it to a doctor saying: "The operation was a success but the patient died."

The Co-op Bank last year had to be rescued after a £1.5bn hole was discovered in its finances.

Regulators have announced the launch of investigations that could see former senior managers fined or banned from working in the industry.

Mr Adamson told the committee he was surprised by the former chairman's answers during his appearance before MPs last year, and that at his own meeting with Mr Flowers he had been "much more cogent".

But committee chairman Andrew Tyrie told him: "It is an extraordinary state of affairs that you are asking us to believe."

He criticised the decision to put Mr Flowers in place to oversee the board, saying: "Your solution was to put a financial illiterate in charge of it."

Mr Adamson said he was disappointed that no one "in public life or indeed his other associations" who may have "known more about some of his misdemeanours" ever alerted regulators.

But he admitted that he had never before approved a chairman with such little experience, telling MPs: "There was no hiding the fact that he didn't have sufficient experience so the decision was around how that could be mitigated."

Mr Adamson said Mr Flowers' 1981 conviction for gross indecency was disclosed but it was not considered relevant and he was not questioned about it. He said a separate drink-driving conviction was not known.

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Treasury Takes Step Towards £19bn Lloyds Sale

By Mark Kleinman, City Editor

The agency which manages taxpayers' £19bn stake in Lloyds Banking Group has asked Britain's biggest high street lender to work on plans for a share sale to the general public.

Sky News has learnt that UK Financial Investments (UKFI) wrote to the Lloyds board during the Christmas break to ask it to write a prospectus that would accompany a major retail offering.

The development underlines the Treasury's intention to sell a large chunk of its remaining 33% shareholding in Lloyds this year, although an insider said the timing had not yet been decided.

A formal announcement from the Treasury about a new share sale will not take place until after Lloyds' full-year results at the end of next month.

Antonio Horta-Osorio, its chief executive, is likely to signal then that he has been given regulatory approval to resume dividend payments to ordinary shareholders.

George Osborne, the Chancellor, believes that a sale in which the public can participate could be politically useful as well as delivering a financial boost to the Treasury.

He is understood to be undeterred by the controversy surrounding the privatisation of Royal Mail, which saw some private investors excluded from buying shares.

Shares in Lloyds closed on Tuesday at 82.51p after a trading session in which the stock reached a new 12-month high.

The bank now has a market value of £57.17bn, having risen by more than 63% during the last year and meaning that the Government's remaining 33% stake is worth roughly £19bn.

Analysts believe it will be possible to sell a substantial chunk of Lloyds at a premium to the 73.6p taxpayer break-even price, especially after Mr Horta-Osorio sets out a generous dividend policy.

Mr Osborne has made plain his interest in a sale of Lloyds shares to the public and reiterated that ambition in his autumn statement last month, although he stopped short of spelling out details such as the timing or size.

Institutional investors will also be asked to participate in the sale of the remaining stake given its sheer scale.

The Government offloaded a 6% stake in Lloyds in September in a deal which the National Audit Office concluded had resulted in loss to the taxpayer of more than £200m but which nevertheless represented good value.

That transaction, which yielded £3.2bn for the Government, saw the taxpayer's stake reduced from 39% to 33%.

Insiders said that a team of executives at Lloyds were beginning work on a prospectus and that it was likely to be "broadly ready" within weeks.

Lloyds declined to comment on Tuesday.

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Xmas Discounting 'Strongest For Seven Years'

The scale of the discounting deployed by stores to attract Christmas shoppers has been laid bare in a report which identified a 'double whammy of good news' for consumers.

According to a survey by the British Retail Consortium (BRC) and researchers Nielsen, prices fell at their fastest rate for at least seven years last month.

It found that high street shops and supermarkets resorted to aggressive discounting to boost festive sales - a sign that many chains were concerned about business volumes in the run up to Christmas.

The BRC said overall shop prices fell by 0.8%, dropping for the eighth consecutive month and at the fastest pace since its survey began in December 2006.

Households were offered some welcome respite as food price inflation slowed to its lowest level for more than three years - at 1.7% - while widespread discounting in the wider retail sector saw non-food prices fall by 2.3%.

Mike Watkins, head of retail and business insight at Nielsen, said: "This will have brought a festive cheer to shoppers filling their trolleys with food and drink at supermarkets, especially as Christmas fell later this year.

"With the continuation of price cuts and promotions across all of retailing, and with many shoppers holding back on shopping to the last week, there will have been bargains and some great savings for the savvy Christmas shopper."

But plunging prices are likely to have taken their toll on many retailers, with food chains in particular expected to have seen their profits hit.

The BRC said weak sales in the lead-up to Christmas led to higher than normal promotional activity as retailers fought over market share.

"While inflationary pressure in the supply chain remains benign, deep and widespread discounts have come at the expenses of profit margins," it said.

Trading figures so far from retailers have revealed the pressure to discount in a highly competitive Christmas.

Debenhams last week issued a profits warning after disappointing festive sales forced it to slash price tags, while Marks & Spencer also launched a major sale, rolling out its "Mega Day" on the Saturday before Christmas, with 30% reductions across clothing lines.

The BRC-Nielsen data showed prices fell across clothing and footwear, electricals and furniture and floorings, while the cost of books, entertainment and home improvement products also dropped to attract shoppers preparing for the festive break.

But the non-food price figures were also impacted by the inclusion of Cyber Monday early last month, which led many high street stores to follow the lead of their online rivals with hefty promotions.

In food shops, the best deals were found on alcoholic and soft drinks.

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Bank Regulators Kick Off Formal Co-Op Probes

By Mark Kleinman, City Editor

Banking watchdogs are poised to kick off formal probes into last year's crisis at the Co-operative Bank in a move which could lead to significant fines or bans for former directors of the lender.

Sky News understands that the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are likely to confirm this week that they are commencing enforcement investigations into the circumstances which led to the Co-op Bank requiring a £1.5bn rescue package.

An insider said that statements confirming the widely-expected decisions by the two regulators could come as soon as Monday, although they could yet be delayed.

The move to begin formal enforcement investigations could result in substantial financial penalties being imposed on the Co-op Bank as well as former directors if they are deemed to have been reckless in their stewardship of the lender.

The recapitalisation of the bank, which was approved by bondholders last month, saw hedge funds take majority ownership and the Co-op Group left with a 30% stake.

The FCA and PRA inquiries are among a host of investigations launched into the crisis at the previously mutually owned bank, which was left saddled by hundreds of millions of pounds of toxic assets, partly as a result of its merger with the Britannia Building Society in 2009.

The Treasury Select Committee will continue to take evidence on Tuesday about the ill-fated effort by the Co-op to acquire 630 Lloyds Banking Group branches.

A separate probe commissioned by the Treasury and undertaken by an as-yet unidentified figure from the world of banking or law will also take place.

In a statement in November, the Treasury said its inquiry would "cover the actions of relevant authorities (regulators and government) and the institution itself, including prudential issues, governance (including the appointment of senior staff) and acquisitions".

That investigation will not, however, begin until after any PRA and FCA enforcement action has been concluded. A shortlist of candidates to oversee the probe has been drawn up with an announcement about the chosen individual expected in the coming weeks.

The FCA said in November that it "fully agrees that the investigation should be led by an independent person, and looks forward to supporting them in their work. The FCA will make its full resources available to support the investigation".

It said: "The timing of the investigation must not prejudice any other criminal or regulatory proceedings. The FCA is already undertaking work to establish whether it should commence a formal enforcement investigation and expects to reach a conclusion shortly."

The PRA, the arm of the Bank of England which is responsible for maintaining financial stability, issued an identical statement.

Euan Sutherland, the Co-op Group chief executive, has also paved the way for two further reviews.

One, led by Sir Christopher Kelly, will examine historical events at the mutual, while Lord Myners, the former City minister who recently joined the group's board, will assess the need for future corporate governance reforms.

Neither the FCA nor PRA would comment on Monday.

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