Some of Barclays’s biggest investors have urged Antony Jenkins, the bank’s new chief executive, to take an axe to its investment bank. At meetings with investors in recent weeks, at least three of the 30 biggest shareholders have told Mr Jenkins and other senior Barclays executives that the UK group should consider following the example of UBS of Switzerland, which last month signalled a dramatic retreat from the fixed-income side of its investment banking business, alongside 30,000 job cuts. “The 20 per cent pop in the UBS share price has got investors’ juices flowing,” said one bank insider, suggesting that the idea of closing Barclays’ equities business or spinning off the whole investment bank was gathering shareholder support, writes The Financial Times.
Speculation is growing that George Osborne will target middle and higher earners next week as he seeks to raise £10bn from a combination of tax increases and benefit cuts. The Chancellor’s Autumn Statement on December 5 could include moves to hit pensions and those with substantial homes. An influential group of Conservative MPs last week also called for an end to free TV licences, bus passes and the winter fuel allowance for the wealthiest pensioners. The Free Enterprise Group says those with an income of more than £50,000 should lose the benefits. The Government has so far ruled out any change in universal benefits for pensioners this Parliament, but the move adds to the pressure on Osborne to announce a review of pensioner perks. Financial Mail looks at the key areas that the Chancellor could tackle, The Daily Mail reports.
The world’s biggest emerald producer, Gemfields, is considering investing in Burma in the hope of supplying a fifth of the world’s rubies. Ian Harebottle, the chief executive of Gemfields, said that if the country successfully introduced political and economic reforms, it would be near the top of Gemfields’ list. “There’s now a transition … We would definitely be interested to look at going there,” he said. Burma is a key supplier of rubies to parts of Asia but trading is banned in the West because many workers are subject to slave-labour conditions and the military junta, which held the first general election for 20 years in 2010, has long stood accused of human rights abuses. But with signs that the Government is pursuing democratic reforms, investors are eyeing a return to the country, the Times reports.
Chancellor George Osborne’s attempts to cling onto the nation’s triple-A credit rating look doomed but the loss would be “symbolic, not catastrophic”, the UK’s biggest bank says. Any short-term turbulence in debt markets after a rating downgrade might even present investors with a buying opportunity for UK bonds, according to economists and market analysts at HSBC. Two of the big three ratings agencies – Moody’s and Fitch – at present have the UK on a negative outlook, implying a one in three chance of a sovereign downgrade. They and fellow agency Standard & Poor’s are due to review the UK’s debt position next year. HSBC’s UK economist Simon Wells said: “The UK can issue its own currency – it is a ‘true sovereign’ – and so pure default risk is almost zero as it can create money to finance debt. Reflecting this, the gilt market should largely shrug off a one-notch downgrade. Indeed, any dips might present a buying opportunity,” The Independent says.
European bailout funds will pump €35bn (£28.3bn) into Spain’s state bank rescue package in return for mass job cuts at four nationalised banks, including state-rescued Bankia, as eurozone finannce ministers meet for the third time to agree on Greek aid. The cash injection will be transferred to troubled Spanish banks two weeks after it is paid into Spain’s restructuring fund on December 15, according to El Pais newspaper. Under the agreement, Bankia, which sought a €23.5bn bailout from the state in May, is expected to be forced to lay off up to 6,000 people from its current 20,000 staff. Elsewhere, NovaGalicia Bank is to lay off 2,000 staff – almost a third of its workforce, sources said, according to The Telegraph.
The Institute for Fiscal Studies, a respected think-tank, urged George Osborne not to use his recent raid on the Bank of England’s money-printing fund to claim that he was hitting his fiscal targets. Under a “relatively pessimistic” economic scenario, the IFS said that an austerity squeeze may last for eight years rather than the five first mooted by the Chancellor in 2010, as £23bn of extra deficit-reduction measures are pencilled in. In its “relatively optimistic” scenario, under which the recent deterioration in the public finances is driven by temporary factors rather than a permanent weakening of the economy, the Chancellor will not have to announce further austerity measures beyond those already signalled in the March Budget, writes The Times.
Households are facing the most savage peacetime squeeze on consumer spending in almost 100 years. Figures show that only during the Second World War did spending suffer a deeper fall. Even the Great Depression saw nothing on this scale. Analysis by the independent Centre for Economics and Business Research shows an 8.4% fall in real consumer spending per household between 2007 and the end of this year. The comparable figure for 1939-1945 was 14%. Chief executive Douglas McWilliams said only in the slump of 1919-1920 was there possibly a peacetime drop on today’s scale. The extraordinary figures are published today ahead Tuesday’s expected downgrading of economic growth in the third quarter, The Daily Mail says.
Tesco’s latest online grocery warehouse has broken even within a year of opening, despite running at half its potential capacity. The revelation could alarm Ocado shareholders, who have invested hundreds of millions of pounds in the online-only food delivery firm. Last week, Ocado revealed that it would ask them for a further £36 m, which some analysts said was to help it stay in business. Tesco’s warehouse in Enfield, North London, contains two miles of conveyor belts and, while not as advanced as Ocado’s centre in Hatfield, Hertfordshire, it cost only £30 million to construct. It opened in February and, based on sales so far, will deliver almost £80m of shopping to homes a year, even though it is still only working at 50% of capacity, The Daily Mail explains.
