Bankers' Bonuses: EU Agrees Cap On Payments

European Union officials have agreed a provisional deal to cap bankers' bonuses, despite the UK Government's efforts to protect the country's dominant financial services sector.

The plan would see the maximum payout set at a year's salary but that could be increased to two year's salary with shareholder approval.

The Treasury opposed the idea because it feared that limits could cost jobs in the City and prompt firms to leave for more favourable shores.

The measures are part of a sweeping overhaul of EU banking rules, which are designed to ensure that banks in the future have enough capital to withstand financial shocks.

Wednesday night's agreement, reached during an eight-hour session between EU lawmakers, the EU Commission and representatives of the bloc's 27 governments in Brussels, ensures the package can take effect next year.

Currently there is no legal pay limit on top bankers and traders, who can earn performance bonuses many times their base salaries.

But public outrage has grown across Europe over large payments to executives of banks that received huge state bailouts during the financial crisis.

Supporters of the bonus cap say the payments encouraged bankers to take massive risks at the expense of the long-term future of their businesses, which helped to destabilise the financial system.

Othmar Karas, the European Parliament's chief negotiator, said: "For the first time in the history of EU financial market regulation, we will cap bankers' bonuses.

"The essence is that from 2014, European banks will have to set aside more money to be more stable and concentrate on their core business, namely financing the real economy, that of small and medium-sized enterprises and jobs."

Final approval by parliament and government leaders of the package is expected to be a formality.

Britain had tried to rally other EU governments behind its position but failed to garner enough support.

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High Street Crisis: Chain Closures Accelerating

The bloodbath on Britain's high streets has accelerated dramatically with the rate of major chain store closures increasing ten-fold, hitting 20 per day in 2012.

Analysis by PwC and the Local Data Company found that year-on-year, the net reduction in the number of stores climbed from 174 closures in 2011 to 1,779 closures in 2012 with the pace intensifying even further since.

A combination of factors - from the consumer spending squeeze to poor business models - is being blamed.

The rate of closures among independent shops is not even included in the figures.

2012 was a year in which a string of retail chains collapsed including Comet, JJB Sports, Ethel Austin and Peacocks.

Camera chain Jessops has been among the failed firms

They were joined, mostly after poor Christmas sales, by the likes of HMV, Jessops and Blockbuster.

Many were accused of being too tied to costly high street operations and failing to overcome strong supermarket and internet competition by selling attractively online.

The data also revealed that across multiple retailers in 500 town centres card, computer games, clothes, banks, health foods, jewellers, travel agents, recruitment agencies and sports goods shops were among the hardest hit in 2012.

Pound shops, pawnbrokers, charity shops, cheque cashing (payday loans), betting shops, supermarkets and coffee shops bucked the trend of a dying high street and actually showed growth during the year.

Additionally, analysis of the three months between December 2012 and February 2013 shows that the potential rate of closures - principally through administrations- would accelerate to 28 per day for this period.

Mike Jervis, insolvency partner and retail specialist at PwC said: "2012 saw more retail chains go into insolvency than ever before.

"The failed chains generally shared two problems - too many stores and too little multi-channel activity.

"A number of them had failed to deal with their underlying issues by hiding behind light touch restructuring processes, especially Company Voluntary Arrangements.

"2013 has seen the downward trend become even worse," he said, adding: "If underperforming retailers are to avoid becoming part of these statistics for next year, their shopping baskets should contain an acute knowledge of their customers and their customers' needs."

Those were, Mr Jervis said; "Robust cashflow planning; honest analysis of the performance of existing and potential new stores; the bravery to admit mistakes regarding products and stores before dealing with them; clinical attention to costs; early engagement with banks, landlords and suppliers; appropriate debt and capital structures."

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RBS Boss: Spring Cleaning Drives £5.16bn Loss

The Royal Bank of Scotland boss has said "spring-cleaning" continues after his firm reported a pre-tax loss in 2012 of £5.16bn.

RBS chief executive Stephen Hester said: "This company is going through a pretty thorough spring-cleaning. It is a pretty dusty job.

"We are spring-cleaning this house and it is looking shinier."

The significant loss was in part due to provisions RBS has made for customer redress for payment protection insurance (PPI) mis-selling and other so-called bad practices.

It said the annual return was impacted heavily by a £4.64bn "accounting charge for improved own credit".

However, the firm's bankers will still share a bonus pool of £607m - including £215m for investment bankers.

In 2011 the total bonus pot was around 25% higher, at £789m.

Boss Stephen Hester said RBS must be "cleaned up"

When asked to justify the £607m payout, Mr Hester said: "We are a very big company so the numbers end up being substantial, but they are much smaller than other banks.

"We believe that we are doing a responsible job on bonus restraint while acknowledging our staff are badly needed."

The bonus reduction was done to help recoup cash to pay for its recent Libor-rigging settlement with UK and US authorities.

Last month RBS reached an agreement with the Financial Services Authority and US authorities over Libor and other rate fixings to include penalties of £381m.

Mr Hester admitted 2012 had been a "chastening" year to "put right past mistakes", with losses were up significantly from £1.2bn in 2011.

The company revealed it took a £450m charge in the last three months of 2012 over PPI mis-selling, taking its cumulative provision to £2.2bn.

By December 31 a total of £1.3bn had been paid out in redress over the scandal.

The disgraced ex-boss Fred Goodwin reigned over the previous RBS regime

The bank said: "Our target is for 2013 to be the last big year of restructuring. There will be important work still to do, but an increasingly sound base from which to work.

"As the spotlight shifts to the 'new RBS' post restructuring, we are determined that it will show a leading UK bank striving to be a really good bank."

RBS saw changed fortunes in its core business, with retail and commercial sector income down 6% but markets up 68%.

The bank added: "RBS is four years into its recovery plan and good progress has been made. We are a much smaller, more focused and stronger bank.

"By serving customers well RBS can become one of the most respected, valued and stable of banks. That is our goal."

In its annual report the bank, which was bailed-out in Britain's biggest ever corporate disaster, said there is an intention to float an estimated 25% of its stake in US banking arm Citizens.

This was welcomed by Chancellor George Osborne who said: "The Government's strategy is for RBS to be a stronger and safer bank, which in time can be returned to full private ownership.

"I have been very clear that I want to see RBS as a British-based bank, focused on serving British businesses and consumers, with a smaller international investment bank to support that activity rather than to rival it."

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Horsemeat: Tesco To Source More Meat From UK

By Poppy Trowbridge, Business and Economics Correspondent

Tesco is to announce a commitment to source more of its meat from the UK at a farming conference in Birmingham later.

The supermarket kingpin will tell the National Farmers Union meeting that by July all its chicken will come from British farms, and pork products will follow.

Tesco will also offer suppliers two-year contracts to help companies plan their business for the longer term.

The company's chief executive, Phillip Clarke, who will address the conference today, told Sky News: "We feel the need to bring the food closer to home.

"We think it's right to bring more of it back to the UK, so long as we can get the demand from the UK."

Earlier this month, Mr Clarke said in a video on Tesco's website that the company would take a more open approach to food processing after it was found to be selling products contaminated with horsemeat.

Tesco was one of the first retailers to pull products from its shelves after the horsemeat contamination was revealed on January 16 after analysis was undertaken by Irish food officials.

Tesco has blamed its suppliers for the meat contamination

Tests on Findus beef lasagne revealed that some of the ready meals were made entirely from horsemeat.

And Tesco found levels of horse DNA exceeded 60% in tests on its Everyday Value Spaghetti Bolognese.

Since the horsemeat scandal broke, supermarkets have been criticised for not communicating with customers quickly enough.

They have also seen frozen burger sales and ready meal sales plunge dramatically, data by Kantar Worldpanel showed.

In an attempt to be more transparent, Tesco said it would put cameras on the supply chain so shoppers could see where the food they are eating has come from and how it was produced.

"There's nothing for anybody to hide. There never should be," said Mr Clarke.

While it already sources all its beef products from the UK and Ireland, the food retailer admits suppliers had cut corners.

"The impact so far on sales is minimal," Mr Clarke added, though he acknowledged that some customers are buying fewer frozen ready meals.

George MacDonald, Retail Week executive editor, told Sky News, "The shopper can feel fairly confident that anybody involved is going to be looking very closely indeed at how they can sort out these problems."

As the nation's biggest supermarket, Tesco should be at the forefront of campaign to restore trust in food, Mr MacDonald believes.

"It is essential for them to fully reconnect with the customer," he said.

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Budweiser Rejects 'Watered-Down' Lawsuit

Drinkers of Budweiser - marketed as the "King of Beers" - are taking the company to court over allegations the popular American lager is watered down to boost profits.

A lawsuit, filed in California, accuses Anheuser-Busch of violating consumer protection laws in the state and in Missouri by "falsely representing the alcohol content of the products it sells".

It demands unspecified "compensatory damages" for anyone in the United States who has bought Budweiser products in the past five years.

The legal action - said to be based on allegations made by staff and former brewery workers - was flatly rejected by the company which is also understood to be facing similar claims in other US states.

Peter Kraemer, the firm's vice president of brewing and supply, said: "The claims against Anheuser-Busch are completely false and these lawsuits are groundless.

"Our beers are in full compliance with all alcohol labelling laws.

"We proudly adhere to the highest standards in brewing our beers, which have made them the best-selling in the United States and the world," he added.

The lawsuit claims that Anheuser-Busch can produce "a significantly higher number of units of beer from the same starting batch of ingredients" by watering down its product.

"As a result, Anheuser-Busch's customers are overcharged for watered-down beer and Anheuser-Busch is unjustly enriched by the additional volume it can sell," it alleges.

Besides Budweiser, which is sold as having 5% alcohol by volume, the lawsuit further claims that Anheuser-Busch waters down nine other brands, including Bud Ice, Bud Light Platinum and Michelob.

One of those bringing the lawsuit, Nina Giampaoli, claimed: "I think it's wrong for huge corporations to lie to their loyal customers.

"I really feel cheated. No matter what the product is, people should be able to rely on the information companies put on their labels."

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British Gas Sees Profit Up 11% To £606m

British Gas has reported a profit increase for the full year of 11% to £606m.

The company said it performed well in the financial year to December 31, despite a weak economy and energy cost increases.

It said: "This is having a real impact for both residential and business customers and, against this backdrop, it is important that we continue to focus on improving customer service and reducing costs."

British Gas is the UK residential arm of energy giant Centrica.

Overall, group adjusted operating profits rose 14% to £2.7bn, but Centrica, which employs around 40,000 people, said it paid more than £1bn in tax and invested £2.7bn in 2012.

Centrica said the sharp profit increase at British Gas residential came after last year's colder-than-normal weather saw gas use leap 12%, despite a fall in customer accounts.

The company said the number of residential customers dropped 1% in the year to 15.7 million, compared to 15.9 million in 2011.

It said customer "churn" was at its lowest rate ever.

British Gas raised its tariff costs late last year ahead of January's snow

The results are likely to raise questions over the fairness of energy bill increases after British Gas raised tariffs by 6% for around 8.4 million households at the end of last year.

To help thwart criticism the company provided a breakdown of the average customer bill, which it said totalled £1,188 a year.

It said the average wholesale energy cost for a customer was £568, delivery to the home was £283, environmental and social policies £112 and tax of £72.

The company said its own operating costs were £104, leaving a profit of £49.

Chief executive Sam Laidlaw also addressed the issue of corporate tax responsibility, amid the public furore over multinational tax avoidance.

He said: "It's important that Centrica makes a fair and reasonable return so that we can continue to make our contribution to society and invest."

Centrica is the parent energy company of British Gas

British Gas said the growth of online accounts was 20% last year, with 3.4 million customers using web access.

More than a third of all energy bills are now sent electronically. Some 70% of customers' meter readings are now sent online.

It also revealed that it has struggled to lure new customers to the maintenance arm, British Gas Services, and boiler installation services dropped by 10%.

It said: "The economic impact was seen more clearly in British Gas Business, leading to lower profitability and a reduction in the number of accounts served in a highly competitive market."

On Tuesday Sky's City Editor revealed that the company would announce its ambitions to become a big player in North America and the global energy sector.

He revealed that Mark Hanafin, the executive who runs Centrica Energy, the division focused on exploiting UK and Norwegian gas reserves, will head a new unit focused on broader international upstream effort.

Centrica also confirmed that British Gas' managing director Phil Bentley would leave the company this year.

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AAA Credit Rating Lost: Osborne Defiant

George Osborne has come under attack over what Labour calls his "catastrophic economic policy failure" after the UK lost its top-grade AAA credit rating.

International agency Moody's downgraded it by one notch to AA1, citing slow growth and a rising debt burden.

The Chancellor said the coalition would not "run away" from its economic problems and it was determined to stick by its plan for recovery.

The downgrade is a major blow for Mr Osborne, who has been coming under increasing pressure to take action to stimulate the economy.

In the last election, Mr Osborne made safeguarding Britain's credit rating one of his key pledges.

He has used maintaining the rating for government bonds as one of the main arguments for the Government's austerity programme.

The Chancellor insisted the Government was delivering on its commitment to tackle the UK's debt.

He said: "We have a stark reminder of the debt problems facing our country - and the clearest possible warning to anyone who thinks we can run away from dealing with those problems.

"We are not going to run away from our problems, we are going to overcome them."

He added: "In the end, the test of our credibility as a country is there every day in the markets when we borrow money on behalf of this country from investors all around the world.

Moody's said it did not expect Britain's slow recovery to change

"At the moment we can do that very cheaply with very low interest rates precisely because people have confidence that we have got a plan, we've got to stick to that plan and we are going to deliver that plan."

Labour's shadow chancellor Ed Balls told Sky News: "They (the Government) are paying the price for an absolute catastrophic failure of economic policy and everybody can see that now pretty much other than the chancellor and the prime minister.

"Until they face up to reality, we're just going to have more of the same."

Moody's said Britain's recovery was proving to be significantly slower than previous rebounds from recession and it did not expect the situation to change.

"(There's) increasing clarity that, despite considerable structural economic strengths, the UK's economic growth will remain sluggish over the next few years," it said.

Moody's is the first of the major credit rating agencies to knock the UK off of its top rating.

The ratings agency also cut the Bank of England's AAA rating by one notch, also to AA1. The US' top credit rating was downgraded by one notch in 2011.

Sky's Economics Editor Ed Conway said: "The fact that Britain has lost its AAA crown for the first time since credit ratings were given to the UK back in the 1970s, is a really big blow to Britain's reputation.

"It's something of an economic blow, but in a way it's more of a political problem for George Osborne. He made a key part of the Conservative election pledge to safeguard Britain's credit rating."

Moody's said that the British economy is constrained both by the troubled global economy and the drag from businesses and the Government slashing its debt burdens.

"Moreover, while the Government's recent Funding for Lending Scheme has the potential to support a surge in growth, Moody's believes the risks to the growth outlook remain skewed to the downside," it said.

Labour has insisted that withdrawing demand from the economy has put it more at risk by stunting growth.

Mr Balls said: "This credit rating downgrade is a humiliating blow to a prime minister and chancellor who said keeping our AAA rating was the test of their economic and political credibility.

"In the Budget the government must urgently take action to kick-start our flatlining economy and realise that we need growth to get the deficit down. If David Cameron and George Osborne fail to do so and put political pride above the national economic interest we face more long-term damage and pain for businesses and families."

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Exclusive: RBS Mis-Selling Bill To Add £1.1bn

By Mark Kleinman, City Editor

The state-backed Royal Bank of Scotland (RBS) will next week set aside another £1.1bn to compensate customers for mis-selling products to consumers and small businesses.

I can reveal that the bank is preparing to say in its full-year results announcement next Thursday that it is increasing its provision for mis-selling interest rate swaps by roughly £700m, which will take its cumulative bill to £750m.

City sources say that RBS will also announce that it is raising its payment protection insurance (PPI) mis-selling bill by just over £400m, meaning it will have put aside just over £2.1bn for its part in the industry-wide scandal.

The new provisions will further elevate the total bill for Britain's biggest banks from two of the sector's biggest mis-selling episodes. RBS's new PPI charge will mean that the four major lenders have had to provide more than £11bn for compensation, while its hit on interest rate hedging products will enlarge the industry bill to £1.6bn.

Neither of those figures will, however, include imminent upward revisions in both categories by both HSBC and Lloyds Banking Group, which also report full-year results in the next ten days.

Both RBS and Lloyds, which are 82% and 39% owned by British taxpayers respectively, will report losses for 2012.

RBS is also expected to confirm that it is examining a separation of its US retail banking business, Citizens, through a stock market listing in the US, in a move that over time could raise billions of pounds for the British lender.

George Osborne, the Chancellor, is likely to welcome the move when he appears in front of the Parliamentary Commission on Banking Standards on Monday.

Both Mr Osborne and David Cameron have been increasing the pressure on RBS's management, led by chief executive Stephen Hester, to accelerate the group's restructuring.

Mr Hester is expected to respond next week by pointing to a further retrenchment of its investment banking operations. RBS, he is understood to be preparing to say, will continue to reshape its operations into a British retail bank that is also able to support the international business objectives of core UK clients.

The new provisions for PPI and swaps mis-selling will reflect ongoing claims trends and the recent agreement between the major banks and the Financial Services Authority to offer redress to small business customers according to a defined framework.

Barclays added another £1bn to its own mis-selling tab when it reported its full-year results earlier this month.

The major banks have grudgingly accepted the swaps settlement with the City regulator although they have argued that many of the cases for which they will have to pay compensation should not be categorised as mis-selling.

They have also pointed to the vast numbers of bogus PPI claims they have received, many of which have been paid out anyway. The industry has been discussing the imposition of a time limit on PPI mis-selling claims although at least one major bank is lukewarm about the idea.

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Myners: Ex-Minister Courted For Tabloid Role

By Mark Kleinman, City Editor

Lord Myners, former chairman of The Guardian's parent company, has been approached about chairing a new venture that is targeting a foothold in Britain's cut-throat tabloid newspaper market.

I understand that the board of Phoenix Newspaper Publishing has sounded out Lord Myners about chairing the company, which is in talks with Trinity Mirror about a deal to take control of the Sunday People.

Friends of Lord Myners said today that he was "flattered" by the interest from Phoenix but suggested that he was likely to reject the invitation to chair the company.

A City Minister in the last Labour administration, Lord Myners has rebuilt an extensive boardroom career since the 2010 general election.

He is a non-executive director of MegaFon, the London-listed Russian telecoms group, and chairman of the UK activities of Cevian Capital, a well-known activist shareholder.

Among the companies where he has previously held directorships are Land Securities, the property company, and Marks & Spencer.

Phoenix has been trying for more than a year to raise millions of pounds in funding to support the development of a new tabloid title that would target the vacuum left by the demise of the News Of The World.

Dozens of potential investors have been approached about putting money into the vehicle, and insiders say that Phoenix is optimistic that it will secure the necessary backing in the coming months.

The executives behind the venture, who include Sue Douglas, the former Sunday Express editor, and Rupert Howell, the former ITV commercial director, plan to relaunch Trinity Mirror's title as News of the People.

They believe there is an opportunity to pick up many of the estimated 1.3m News Of The World customers who stopped buying a Sunday newspaper when News International closed it during the phone-hacking scandal in 2011.

Last month, Trinity Mirror confirmed the talks with Phoenix, saying: "Trinity Mirror plc confirms that it has been approached by a group of investors who have expressed an interest in working with the Group to invest in and develop the Sunday People.

"Discussions are at a very preliminary stage and there is nothing further to report. A further announcement will be made as and when appropriate."

Phoenix and Lord Myners both declined to comment.

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