PRESS DIGEST: Sunday British Business July 8

LONDON, July 8 (Reuters) - British newspapers reported the following business stories on Sunday:

THE SUNDAY TIMES:

BARCLAYS BOARD WEIGHS BREAK-UP Following the rate-rigging scandal, directors at Barclays will consider spinning off its investment banking arm, Barclays Capital, and floating it in New York, with the rest of the group retaining its London listing.

LLOYDS IN TOXIC ASSET SELL-OFF Lloyds is to ditch a 1 billion pound ($1.55 billion) collection of toxic loans and struggling companies that it took on as part of its deal to save HBOS with a number of funds already having made bids for the 'Project Lundy' portfolio comprised of loans that turned sour after the credit crunch and other businesses.

XSTRATA IN DEAL DELAY Xstrata will tell shareholders this week that the vote on its planned merger with Glencore has been put back to September.

PERMIRA EYES BIRDS EYE PAYOUT Private equity firm Permira will make around 500 million pounds from the planned recapitalisation of Birds Eye, which will see the frozen food producer loaded with more debt.

FRENCH GROUP IN HAMLEYS TALKS France's Groupe Ludendo is in talks to buy British toy shop Hamleys for 60 million pounds with a deal likely to be completed by the end of this month.

THE SUNDAY TELEGRAPH:

BARCLAYS TO ASK DIAMOND TO CUT PAY-OFF Barclays' board is to ask former chief executive Bob Diamond to give up at least part of a possible 17 million pound pay-off to save the bank's reputation from further damage.

RATE RIGGING EVIDENT IN 2007 Several members of the Bank of England's Money Markets Liaison Group (MMLG), chaired by Paul Tucker, warned that Libor rates had been lower than actual traded interbank rates in 2007, according to minute notes from an MMLG meeting.

CONSUMERS MOVE CASH TO ETHICAL BANKS A report by campaign group Move Your Money UK estimates that an average of 80,000 savers a month have switched their accounts from crisis-prone high-street banks to smaller alternatives that consumers hope will take a more ethical approach.

SHORT SELLERS BET ON GLENCORE TO SAVE MERGER Short-selling in Glencore is at an all-time high since its flotation, on the back of rising hopes that it will save its threatened 38 billion pounds merger with Xstrata.

BAE BIDS TO LAND US PROJECT BAE Systems is the frontrunner to provide the United States Air Force with 350 new Hawk training jets in a deal worth up to 7 billion pounds. The company is in competition with U.S. rival Lockheed Martin to win the T-X contract.

PERMIRA EYES VALENTINO SALE Luxury designer Valentino is being sold to an unidentified sovereign wealth fund for 476 million pounds in a deal which will see the Valentino brand separated from Hugo Boss.

WATER FIRMS SEEK MERGER GO-AHEAD Britain's water sector needs major consolidation to tackle droughts, floods and rising customer bills, water company chiefs have warned ahead of the unveiling of a new draft water bill this week.

AER LINGUS TO BID FOR HEATHROW SLOTS Aer Lingus will bid for some of the 12 Heathrow take-off and landing-slots available after the acquisition of bmi by British Airways. The move is a signal to Ryanair that it is pursuing its own growth strategy and has no intention of submitting to a takeover.

THE OBSERVER:

DIAMOND WOULD HAVE KNOWN ABOUT RATE RIGGING A former senior Barclays employee claims the bank's ex-chief executive Bob Diamond would have been told that his traders were involved in the interest rate rigging scandal in 2008.

BOEING CLOSING IN ON AIRBUS The chief executive of Boeing expects the U.S. planemaker to move ahead of European rival Airbus for "a number of years", driven by growing demand for its short-haul 737 Max.

THE MAIL ON SUNDAY:

GOVT IGNORED FSA RATE-FIXING WARNING Britain's Financial Services Authority told the Treasury of failings in Libor and the urgent need to have it monitored by the watchdog itself or by the Bank of England two years ago.

UNIVERSAL HITS BACK OVER EMI DEAL Universal Music, part of French conglomerate Vivendi, has filed a response to the European Commission's statement of objections to its planned 1.2 billion pound takeover of Citigroup -owned EMI, with the EC due to review Universal's responses this week.

THE SUNDAY EXPRESS:

MAN UTD TAX BILL COULD DOUBLE British soccer club Manchester United's tax bill will double if its owners, the Glazer family, complete their proposed move of the club's parent company to the Cayman Islands. If United's proposed flotation in New York goes ahead it will have to pay U.S .taxes as well as the British levy it already pays.

($1 = 0.6449 British pounds) (Reporting by Rhys Jones; Editing by Erica Billingham)