PRESS DIGEST - British business - June 17

Thursday June 17 2010

The Times

RECESSION STRESS BLAMED FOR RISE IN LONG-TERM SICK

Government department the Office for National Statistics has published updated data on the UK labour market for the three months to April. The figures have shown that the number of people signed off work due to long-term illness has risen to 2.06 million, 58,000 more than in the previous three months. The total number of "economically inactive" people, which includes students and carers, rose to 8.18 million. The number of people claiming unemployment benefits fell 30,900 to 1.48 million, but the total number of unemployed people rose 20,000 to 2.47 million.

WIND POWER BUILT ON THE WINGS OF THE SUPER JUMBO

Engineering firm GKN (GKN.L) is aiming to position itself as the principle manufacturer of wind turbine components in the UK. The British government has committed to building 8,000 offshore wind turbines over the next ten years, with the aim that the renewable energy source should provide 25 percent of power in the UK. GKN has said its experience of manufacturing gear boxes and aeroplane wings would be useful in the construction of the wind farms. Andy Reynolds Smith, a GKN executive, said that the project could create thousands of "green" manufacturing jobs.

PRIVATE SECTOR FEELS PAIN OF PUBLIC CUTS

Consulting and business services group Mouchel (MCHL.L) has begun a cost-cutting programme in response to delays and cancellations of public projects caused by cuts to government spending. Mouchel said that customer demand had begun to decline and it was reviewing its staff numbers and office portfolio accordingly. The group added that it expects the impact of the cuts to be short-term, with a pick-up in business anticipated once the government begins outsourcing work to the private sector to reduce costs. Analysts predicted profits of 36.5 million pounds ($54.10 million) for the year.

RBS BEATS HUMILIATING RETREAT FROM PAKISTAN WITH BANK SALE

State-owned banking group Royal Bank of Scotland (RBS.L) has sold its business in Pakistan to Pakistani bank Faysal Bank for 34 million pounds. The sale is another step in RBS removing itself from international operations. Faysal bought RBS Pakistan for 2.5 rupees a share, a 77 percent discount on its closing price on Tuesday. The sale is still subject to regulatory approval and is likely to complete in the third quarter of 2010. This week, RBS has also announced the sale of its Argentine operations to local bank Banco Comafi for an undisclosed amount.

TEMPUS

Kea Petroleum (KEA.L) (Buy on weakness)

RPC Group (RPC.L) (Solid hold)

Safestore (SAFE.L) (Tuck away)

The Daily Telegraph

PAMPLONA WITHDRAWS FSA APPROVAL APPLICATION TO TAKE STAKE.

Private equity fund Pamplona Capital Management has withdrawn its application for the approval of the Financial Services Authority to acquire a 10 percent stake in the Lloyds of London underwriter Chaucer CHU.L. Pamplona had been in negotiations with the regulator for more than a year over its plans to buy the stake, with a view to increasing its holding to 29.9 percent. Sources close to Pamplona said the fund's frustration at the FSA's lengthy approval process was behind the decision to withdraw its application prior to the regulator ruling whether the fund was a "fit and proper" owner of more than ten percent of a London-listed financial group.

VALUE OF ROTHSCHILD STAKE IN TRANSOCEAN HALVES AFTER SPILL

Lord Rothschild's investment vehicle RIT Capital Partners (RCP.L) has seen the value of its 28.9 million pound investment in Transocean (RIG.N) halve following the oil spill in the Gulf of Mexico. Transocean ran the Deepwater Horizon rig which exploded, killing 11 people and plunging BP into crisis. Although Transocean has escaped the immediate clean-up bill for the spill, its shares have almost halved due to the potential of weaker market conditions in deepwater drilling and its credit rating being placed on negative watch. RIT's entire portfolio saw a 34 percent increase in assets to 1.8 billion pounds last year, making a 66 pound profit for every 100 pounds invested over the past five years.

TEXTILE BUSINESS COATS HEADS FOR MARKET RE-ENTRY

Activist investment company Guinness Peat Group (GPG.L) is planning to re-float textile company Coats within two years as part of an overhaul of the investment group following a strategic review. Coats, one of the oldest textile firms in Britain, was delisted by GPG in 2003. GPG, which is quoted in London, New Zealand and Australia, will also spin off its Australian operations into a locally-listed business. Sir Ron Brierly, chairman of GPG, said the decision to restructure the business was made after the review showed the current model "no longer worked", with asset value "obscured by corporate complexity and geographical diversity".

QUESTOR

Weir Group (WEIR.L) (Buy)

Tullett Prebon (TLPR.L) (Buy)

The Independent

BACKBENCHER'S REVOLT WATERS DOWN REFORMS TO CGT

A furious response by Conservative backbenchers to the government's proposed 40 to 50 percent increase to capital gains tax has forced the coalition government into reviewing the policy before next Tuesday's Budget. Senior ministers are now thought to be working on a "tapering system" for the tax, which will not affect those holding long-term assets but increase the levy on individuals making quick profits. David Cameron stated that high earners reducing the amount of tax they pay by switching to non-cash revenue streams are costing the state one billion pounds annually.

MORE STRIKES ON THE CARDS AS BA CREW TALKS BREAK DOWN

Negotiations hosted by the conciliation service Acas between British Airways BAY.L and the Unite union have failed to bring about an agreement between the two parties. Further industrial action by flight attendants will take place if continuing disputes over cost-cutting and the removal of travel perks for strikers returning to work are not resolved. 22 days of strikes have been held at the airline since March, with year-on-year passenger numbers falling 14.2 percent in May.

INVESTMENT COLUMN

Filtrona (FLTR.L) (Buy)

Harvey Nash HVN.L (Buy)

RPC Group (RPC.L) (Buy)

The Guardian

BANK CHIEF KING GETS POWERS TO PREVENT FURTHER CRISES

Chancellor George Osborne has handed unprecedented powers to Bank of England governor Mervyn King in an attempt to prevent another financial crisis. Osborne announced the shake-up of financial supervision at the annual Mansion House speech. The Financial Services Authority will be abolished, with the tripartite regulatory system, introduced by Gordon Brown in 1997, to be ended. The FSA will be replaced by the prudential regulatory authority in 2012, a legally separate subsidiary of the Bank of England which will be in charge of the monitoring of individual banks. ($1=.6746 Pound)