Cable Hits Back At Royal Mail Sale Critics

By Mark Kleinman, City Editor

Vince Cable, the Business Secretary, has rebutted claims that he cost taxpayers hundreds of millions of pounds by undervaluing shares in Royal Mail, arguing that the price of the privatisation should be assessed only after the Government has sold its entire stake in the company.

Sky News has obtained a letter sent by Mr Cable on Friday to the Business, Innovation and Skills (BIS) Select Committee, in which he dismisses concerns that the sale of the postal operator was spectacularly mispriced.

Mr Cable and the Government's investment banking advisers have been accused of undervaluing the company after seeing its share price rise by 38% on its first day of trading.

"Value for money has been central to our strategy as we have taken forward the sale of shares through an initial public offering," he wrote.

"Delivering value for money is about more than just the level of proceeds received on day one.

"Our long-term strategy to safeguard the universal service and deliver value for money for the taxpayer involves not only getting good value for the initial stake sold but also getting good value for the residual stake held by Government (30% of the Company assuming exercising in full the Over-allotment Option), and leaving Royal Mail in a strong, sustainable position capable of accessing the capital markets in the future."

Mr Cable said that the initial price range for the flotation, which attributed a value of between £2.6bn and £3.3bn to Royal Mail, was recommended by Goldman Sachs and UBS, the lead banking advisers, and endorsed by Lazard, which provided independent advice to ministers.

"In August 2013, as the date of the IPO approached, this list of potential investors was narrowed down to a focused group of approximately 20 investors, selected on the basis of feedback gathered during the investor engagement process and, in particular, their understanding of the risks inherent in the Company's industrial relations," he wrote.

The timing of the disclosure that unions would ballot Royal Mail workers for strike action, which was voted through this week, meant that some potential investors in the company indicated that they would opt not to buy shares, the Business Secretary added.

Royal Mail's share price has been mildly buffeted by the vote in favour of industrial action next month, but the stock continues to trade well in excess of the 330p-a-share offer price.

Mr Cable told MPs that the top end of the price range was set because it was "compatible with securing a stable, long term shareholder base as a foundation for achieving value in future sell-downs of the Government's retained stake whilst also taking into account the material risks associated at the time with the ongoing IR situation and the market risks arising from possible US default and the fact that the recent IPO of BPost (a recently-listed Belgian peer) was trading below issue price".

In his letter to committee members, Mr Cable argued that the flotation price placed Royal Mail in a similar dividend yield bracket to comparable companies, but said the "considerable media interest that was predicting a substantial first day premium" was a factor in the initial surge in its share price.

The Business Secretary also sought to counter claims by his Labour opposite number, Chuka Umunna, that Royal Mail's property portfolio could be worth more than £1bn.

"Taking into account the overall position of the surplus portfolio and the relative immaturity of these sites in terms of actual development, a combined value of £330m (as suggested in one of the equity research analyst reports) appears at the top end of any likely range," he wrote.

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Business Round-Up And Week Ahead

Sky's Naomi Kerbel offers a round-up of what's coming up in the week's business news.

:: Monday October 21

Heathrow, the UK's busiest airport which also owns Southampton, Glasgow and Aberdeen airports reports its third quarter results on Monday. Formally known as BAA, Heathrow sold Stansted Airport to Manchester Airports Group for £1.5bn earlier this year following intervention by the Competition Commission due to concerns over competition in the sector.

:: Tuesday October 22

On Tuesday, Peter Marks, the former chief executive of the Co-Operative Group is to be questioned about the Co-op Bank's £1.5bn capital shortfall and the collapse of the bid to buy 632 branches from Lloyds Banking Group in April this year.

Also, Everything Everywhere updates the markets with its third quarter results. The communications company owns the EE, Orange and T-Mobile brands and was the first UK network to launch mobile 4G services.

:: Wednesday October 23

Asos, the online fashion retailer gives a trading statement on Wednesday. 

Also, the City of London Corporation's City Banquet will be hosted by Lord Mayor of the City of London Alderman Roger Gifford. Speakers will include the Financial Conduct Authority's Martin Wheatley and the Prudential Regulation Authority's Andrew Bailey.

:: Thursday October 24

The Governor of the Bank of England Mark Carney will give a speech on Thursday.

Also, a two-day EU Summit starts. UK Prime Minister David Cameron will attend, as well as the German Chancellor Angela Merkel and the French President Francois Hollande.

:: Friday October 25

On Friday, the Office for National Statistics releases the UK's third quarter growth figures. Last month's final figures for the second quarter of the year showed GDP up by 0.7%.

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Energy Bills: Small Firms Challenge 'Big Six'

No10 In 'Wear A Jumper' Row

Updated: 1:36am UK, Saturday 19 October 2013

Downing Street has been forced to backtrack after suggesting people struggling to pay their heating bills should put on a jumper.

Officials had to issue a clarification after initially saying wrapping up warm to avoid paying more was something people could "consider".

Labour, which has accused the Government of failing to act to address soaring energy prices, leapt on the comment as proof the Tories are "out of touch".

Leader Ed Miliband declared: "Their crime policy used to be 'hug a hoodie'. Now their energy policy appears to be 'wear a hoodie'."

The comment also quickly gained traction on social networking site Twitter, with various comical suggestions under the tag #cameronsheatingtips doing the rounds.

One user wrote: "Have your maid stitch a fine coat of swan feathers after your manservant plucks a swan for Sunday brunch."

Another advised: "Simply add a large measure of Courvoisier VSOP to your Vanilla Latte."

The row will have been exactly what Downing Street was seeking to avoid when it was quizzed about the Prime Minister's views on energy price hikes.

It came after Energy Secretary Ed Davey said on Thursday night that he wears jumpers at home to keep his bills down.

On Friday morning, Mr Cameron's official spokesman was duly asked whether people should "wrap up warm" and wear jumpers in the same way.

He said: "That's not a question that I have asked him. Clearly, he is not going to prescribe necessarily the actions individuals should take about that but if people are giving that advice, that is something that people may wish to consider."

The spokesman added: "His advice to people is to shop around for fuel prices."

Mr Miliband moved to capitalise on what was interpreted as a gaffe, even though No10 had tried to make clear Mr Cameron would not tell people what to wear.

He wrote on the Labour website: "These responses to the energy price rises show how little Mr Cameron and his Government stand up for the interests of hard-working people.

"He has no grip on the cost of living crisis and he seems to think the solution to this crisis is nothing to do with him.

"Energy bills are already up by an average £300 since he took office. The price hikes we are seeing point to a market that isn't working for consumers. Yet his solution to this market failure was to tell people to shop around and dress warmly.

"Of course people will rightly seek the best deal they can find but that will not fix a broken market, and will not bring the kind of relief that consumers and businesses need."

He added: "Never let the Government tell you that there's nothing they can do, or that it's your responsibility to sort out the problems in our energy market. They could act - they just choose not to."

Downing Street later had to issue a clarification, as insiders admitted the spokesman had used "loose language".

It said: "To be clear, it is entirely false to suggest the Prime Minister would advise people they should wear jumpers to stay warm.

"Any suggestion to the contrary is mischief-making. The Prime Minister would point people to a range of things being done to help people with their fuel bills, such as legislating to put everyone on the best tariff for them.

"He believes Labour's "price freeze" policy is a con - and certainly would not advise people on what they should wear."

Energy policy has been thrust to the heart of the political cost of living row after companies started announcing major hikes in prices ahead of the winter.

On Thursday, British Gas became the second of the "Big Six" to announce price increases after SSE led the charge with an 8.2% rise earlier this month.

Mr Cameron described the hike as "disappointing" and he and Mr Davey encouraged customers to switch to a cheaper deal with another firm.

Labour has said it will impose a 20-month freeze on prices if it wins power in 2015 but this has been dismissed by critics, including the Tories, as unworkable.

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Energy Bills: British Gas Ups Prices By 9.2%

British Gas has become the second major supplier of household energy to announce a rise in its prices - by an average 9.2%.

The company said its electricity and gas prices will rise by 10.4% and 8.4% respectively from November 23 - affecting 7.8 million households.

Regional variations mean some Scottish customers will see prices rise on average by as much as 11.2% while those in London will suffer a 10.6% increase and households in Yorkshire will have a 10.5% lift.

The move comes despite a pledge by British Gas earlier this year to use an annual earnings windfall from the cold weather last winter to keep a lid on tariffs.

Angry customers took to Twitter to complain ahead of an already planned Q&A session with customer services director Bert Pijls.

Twitter users flocked to complain ahead of a British Gas Q&A session

One user asked: "Hey @BritishGas how many vulnerable people do you think you will push into fuel poverty whilst continuing to make billions in profit?"

The average increase is higher in percentage terms than that confirmed by rival SSE last week which is raising its bills by 8.2% from November 15, although research from price comparison website uSwitch suggested it brought their average dual fuel tariffs together in terms of cost.

The Prime Minister David Cameron described the latest increase as "disappointing" and urged households to try to save money by switching suppliers.

E.ON, Scottish Power, EDF Energy and npower are the other so-called 'big six' providers yet to make announcements on their winter pricing.

Electricity prices are rising faster than those for gas

British Gas said it was a hard decision for the company, which is owned by Centrica.

Its statement said: "We recognise that energy bills are a real worry for hard-pressed households, particularly at a time when the cost of living is rising faster than incomes.

"Today's announcement, which will add about £2 a week to the average dual fuel bill, reflects the increasing cost of: buying energy in global markets, delivering gas and electricity to the home, and the Government's social and environmental programmes, which are paid for through customers' bills."

It pledged that more than 500,000 of its elderly and most in-need customers would be protected by an automatic discount to offset the price increase throughout the winter - worth £60 per dual fuel household.

This was, British Gas said, in addition to the £135 that will be paid to many of these customers who qualify for the Government's Warm Home Discount scheme.

Ed Miliband used Labour's conference to announce his 'bill freeze' plan

Ian Peters, managing director of British Gas Residential Energy, added: "I know these are difficult times for many customers and totally understand the frustration that so many household costs keep on rising when incomes aren't keeping pace.

"We haven't taken this decision lightly, but what's pushing up energy prices at the moment are costs that are not all directly under our control, such as the global price of energy, charges that we have to pay for using the national grid that delivers energy to the home, and the cost of the Government's social and environmental programmes.

"Energy efficiency is the best way to keep bills down, and I encourage anyone who has not benefitted from them to go online and check if they are eligible."

The cost of energy bills sparked a political frenzy last month when the Labour leader Ed Miliband pledged to freeze prices for 20 months if his party won power at the 2015 general election.

Shares in both SSE and British Gas-owner Centrica fell sharply in the wake of the announcement, wiping a combined £2.7bn off the value of the firms.

Caroline Flint, Labour's Shadow Energy and Climate Change Secretary, said: "These latest price rises show clearer than ever why Labour's price freeze is needed.

"People are sick and tired of being left out of pocket because of David Cameron's failure to stand up to the energy companies.

"Britain's energy market isn't working for ordinary families and businesses. Labour's energy freeze will save money for 27 million households and 2.4 million businesses and our plans to reset the market will deliver fairer prices in the future."

In an interview with Sky News, Energy Secretary Ed Davey said: "I think British Gas is going to lose a lot of customers over this.

"British Gas in their press release is trying to blame the Government for social and environmental costs but we've looked at their figures and it looks like they're being very inefficient in managing these Government programmes."

Ministers have been encouraging households to switch suppliers as the best way of keeping their bills as low as possible.

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China Economy Rebounds In Third Quarter

China has said its economic growth was on track in the third quarter, potentially easing pressure for more stimulus.

The world's second-largest economy grew by 7.8% over a year earlier in the three months to the end of September - up from a two-decade low of 7.5% the previous quarter.

National Bureau of Statistics spokesman Sheng Laiyun told a news conference: "The fundamentals of China's economy are turning for the better."

But analysts warned the rebound might not last because growth depends on government spending amid weak global demand and Chinese consumer spending.

Spending on factories and other fixed assets contributed 55.8% of the latest quarter's growth, or 4.3 percentage points of the 7.8% expansion, according to Mr Sheng.

Domestic consumption was 3.7 percentage points of the total.

Trade was so weak that its contribution to overall growth was negative, according to Mr Sheng, and detracted 0.1 percentage point from the quarter's growth rate.

September exports suffered a rare and unexpectedly sharp decline of 0.3%, falling short of forecasts.

Surveys of manufacturers show September activity barely expanded.

Nevertheless the improvement eases some pressure on communist leaders who say their priority is longer-term reform aimed at steering the economy to slower, more sustainable growth based on domestic consumption instead of exports and investment.

The abrupt drop in global demand for Chinese goods prompted them to backtrack temporarily and launch a mini-stimulus of higher spending on railway construction and other public works to prop up growth and avoid politically dangerous job losses.

Communist leaders are due to meet in November to craft an economic development blueprint that reformists hope will include market-opening and more financial support to private entrepreneurs.

The country's top economic official, Premier Li Keqiang, said earlier the government would try to keep growth above 7.5%.

That is far above levels forecast elsewhere in the US, Europe and Japan but barely half of 2009's 14.2% growth.

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Housing: Help To Buy Fails To Dent Rent Costs

Private rents have reached a new record high despite Government efforts to make it easier for people to jump onto the housing ladder.

According to LSL Property Services, which owns the Your Move and Reeds Rains chains, rents across England and Wales reached a record £757 a month on average in September after jumping by 1.8% month-on-month.

Record rents were recorded in seven out of 10 regions across England and Wales, a development the charity Shelter described as "devastating" news for tenants.

Rents reached new peaks in Wales, London, the South East, the West Midlands, the East Midlands, the North West, Yorkshire and the Humber, LSL said.

Average rents in September ranged from £533 a month in the North East to more than double this amount at £1,141 in London.

Annual rental growth in London is running at more than 4%

LSL said this meant that rents are now typically £13 higher than the previous high recorded in October 2012.

It measured annual growth in London at 4.4% on average while Wales saw the next biggest annual rise, with a 3.1% hike.

The East of England was the only region to see rents drop, either on the year-on-year or monthly measures, falling by 1.4% annually and by 0.8% compared with August to reach £739 typically.

The findings show how strong levels of demand for homes are persisting in the private rental sector, despite a string of Government measures designed to ease the leap onto the property ladder.

A new phase of the Government's flagship Help to Buy scheme to offer state-backed mortgages to people with deposits as low as 5% was launched this month.

Mortgage lenders have been handing out more loans to first-time buyers in recent months than at any other time since the credit crunch started.

This was reflected in separate figures from the Council of Mortgage Lenders (CML), which showed gross lending 41% higher than in September 2012.

The CML put gross lending for the third quarter of 2013 as a whole at an estimated £49.3bn - almost 18% up on the second quarter and at its highest level since 2008.

But critics argue that more needs to be done to tackle the underlying problem of a shortage of homes, both for sale and for rent.

Roger Harding, Shelter's director of campaigns, policy and communications, said: "As more people are priced out of home ownership and waiting lists grow longer, too many families are being left trapped in the unstable and expensive private rental market.

"Every day, Shelter hears from people who are having to cut back on essentials as they struggle to pay their rent each month.

"With wages flat-lining, the fact that rents have reached record highs means that even more people will find it harder and harder to make ends meet.

"We need the Government to fix our rental market to provide more security and get on with building many more genuinely affordable homes."

David Newnes, director of LSL Property Services, said: "Higher rents in almost every region show that, despite Government schemes, buying a first home is still a difficult aspiration.

"This is not only down to low salary growth, but also a general shortage of supply, which is the underlying reason why homes are getting more expensive."

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Osborne Signs Nuclear Power Deal With China

By Mark Stone, China Correspondent, Taishan, Southern China

Britain's next generation of nuclear power is almost certain to be funded in part by the Chinese following an agreement between governments and operators in the UK and China.

The announcement was made by the Chancellor George Osborne on a visit to China's Taishan Nuclear Power plant in Guangdong, southern China.

Mr Osborne said: "Today is another demonstration of the next big step in the relationship between Britain and China - the world's oldest civil nuclear power and the world's fastest-growing civil nuclear power."

The agreement will almost certainly mean that a new reactor, already planned for Hinkley Point in Somerset, will be a mirror image of the Taishan plant in China.

The terms of the contracts with China and detailed figures for the proposed Hinkley Point project, including the so-called strike price between the companies and governments, are expected to be announced in the UK next week.

Taishan nuclear power plant in China

However, the broad agreement outlined by Mr Osborne will allow a consortium of French and Chinese firms to build the plant using a proportion of Chinese cash.

China's state-owned China General Nuclear Power Company (CGN), French energy company EDF and the nuclear firm Areva already work together at the Taishan plant, which is due for completion later this year.

Mr Osborne was given a tour of the Taishan plant, where he climbed up one of the unfinished nuclear reactors with CGN general manager Zhang Shanming and the CEO of EDF, Vincent de Rivaz.

"It is an important potential part of the Government's plan for developing the next generation of nuclear power in Britain," he said.

"It means the potential of more investment and jobs in Britain, and lower long-term energy costs for consumers."

Mr Osborne said the deal would mean more jobs and investment

China has the largest new nuclear power construction market in the world. It currently has 17 operating nuclear reactors, with a further 28 under construction.

UK treasury officials, travelling with the Chancellor, have been keen to stress the safety record of the Chinese civil nuclear industry and also the strict regulations under which the Chinese must operate.

"Any investment from any country has to comply with rigorous regulatory standards for safety and security," an official said.

Reports that China has asked for a future licence to operate nuclear power plants in the UK in return for their investment have not been confirmed by British officials.

Today's agreement followed a Memorandum of Understanding (MoU) signed in Beijing on Tuesday between Mr Osborne and his Chinese counterpart Ma Kai on civil nuclear co-operation.

The potential importance of a nuclear future was underlined by a report warning that Britain faced a higher risk of power shortages over the next five years as old generating plants began to close.

The Royal Academy of Engineering predicted that capacity would be stretched "close to its limits" from next winter by unexpected events like prolonged cold weather and unplanned plant outages.

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Prince Charles Warns Of Pensions Crisis

The Prince of Wales has warned the pensions industry to ditch its short-term outlook or risk condemning many to a "miserable future".

Prince Charles told investors they had a responsibility to create a sustainable financial system during the economic storm created by unprecedented levels of debt, a rapidly growing world population and climate change.

In a pre-recorded speech to the National Association of Pension Funds' annual conference, he said: "With an ageing population, and pension fund liabilities that are therefore stretching out for many decades, surely the current focus on 'quarterly capitalism' is becoming increasingly unfit for purpose?"

He added: "Your sector plays a very significant role indeed in how our economic system works, both now and in the future.

"So it really does fall to you, I am afraid, to help shape a system designed for the 21st and not the 19th century.

"Make that innovative and imaginary leap that the world so badly needs, otherwise your grandchildren, and mine for that matter, will be consigned to an exceptionally miserable future."

Although he is known for his views on the environment, it is a rare for the Prince, who turns 65 next month, to comment on financial matters.

Business Secretary Vince Cable has already criticised traders in equities markets for going after a "quick buck" rather than looking for sustainable returns through responsible capitalism.

An Office of Fair Trading report published earlier this month warned that up to £40bn of pension savings could already be in schemes which are delivering poor value or are at risk of doing so.

Less than half the population is currently thought to be putting enough money aside for retirement.

Office for National Statistics figures recently showed that the number of private sector workers saving into a company pension fell to an all-time low, since records began in 1953, of 2.7 million last year.

The peak for private sector pension saving was in 1967, when 8.1 million people were saving into a pension.

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Furniture Sales Soar As House Market Recovers

Retail sales rose more strongly than expected in September as the recovery in the housing market boosted demand for furniture.

The Office for National Statistics (ONS) reported a 0.6% increase in sales volumes on the month to take growth to 2.2% compared with a year earlier.

More follows...

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Employment: Jobless Benefit Claims Tumble

The number of people claiming jobless benefits saw its biggest monthly fall since June 1997 in September.

The Office for National Statistics (ONS) measured a drop of 41,700 in the number of Jobseeker's Allowance claims in September following a revised total of 41,600 in the previous month - 9,000 more than first reported.

It means the so-called claimant count has fallen for 11 consecutive months to stand at 1.35 million.

While the jobless rate remained at 7.7%, unemployment in the three months to August fell by 18,000 to 2.48 million.

Employment rose by 155,000 to 29.87 million, the biggest total ever recorded, giving a rate of 71.7%.

Youth unemployment fell between June and August

People classed as economically inactive also fell, by 83,000 to 8.95 million while job vacancies rose by 6,000 over the latest quarter to 541,000, the highest for five years.

But today's ONS data also showed that 1.45 million people were working part-time because they could not find full-time jobs, the highest figure since records began in 1992.

Average earnings growth fell back from 1.2% to 0.7% for the year to August compared to the previous month.

Average weekly earnings in private firms increased by 1.1%, but the annual growth rate in the public sector slumped to minus 0.5%, the lowest since 2001.

There were 958,000 unemployed 16 to 24-year-olds in the latest three months,down by 1,000 over the quarter.

More than 1.1 million people have been unemployed for up to six months, down 32,000, but those out of work for between six months and a year rose by 29,000 to 446,000.

The number of people out of work for over a year fell by 15,000 to 900,000.

More follows...

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Grangemouth Oil Refinery Strike Called Off

A planned strike at the Grangemouth oil refinery has been called off - ending the prospect of big fuel shortages in Scotland.

The decision was announced by the Unite union following talks through the night with the site's owners Ineos at the conciliation service Acas, even though the discussions failed to resolve their bitter row over the treatment of a union convenor.

The meeting broke up at 5am, Unite said, because of  "scandalous behaviour" by Ineos. But it claimed its decision to abandon the 48-hour stoppage, which had been due to begin on Sunday, was in the interest of protecting a national asset.

Unite's Scottish secretary Pat Rafferty said: "We are outraged that Ineos representatives walked away from Acas talks, after 16 hours of negotiation and on the cusp of an agreement, for the ludicrous reason that Ineos chairman Jim Ratcliffe instructed his management representatives to demand an apology on his behalf.

"Acas representatives informed us that we could not conclude an agreement to take to our members because a list of fresh demands were placed upon us and because 'Jim wants an apology' and that this was a 'deal-breaker'.

Ineos says Grangemouth is run at a loss

"I have never came across anything like this in over 30 years of employment relations and it is utterly reprehensible."

Unite accused Ineos of running the Grangemouth refinery and petrochemical sites into a "damaging cold shutdown" which would affect fuel production and supply across Scotland.

Mr Rafferty continued: "As a result, Unite will now call off all industrial action with immediate effect in order to protect this national asset from the scandalous behaviour of its owner.

"The plant should now start the return to full production and there is no excuse for this not to happen."

Petrol and diesel production was suspended at the plant on Monday night in preparation for Sunday's walkout.

Experts had warned that the stoppage raised the prospect of shortages if the dispute was not resolved as all of Scotland's needs are met through supplies from Grangemouth.

The row centred on alleged unfair treatment of plant worker, Stephen Deans, who is also a union official. Unite and the company were already in dispute over terms and conditions at the plant.

Ineos had previously warned the petrochemical site would have to close by 2017 unless a "survival plan" involving cutting pension entitlement and pay was implemented.

The company argued that the refinery, located on the Firth of Forth, was not profitable - losing more than £576m in the last four years.

It claimed the pension scheme was £200m in deficit and pension costs of 65% of salary were "unsustainable".

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US Default Threat Prompts Downgrade Warning

The credit rating agency Fitch has warned it is reviewing the US government's AAA credit rating for a possible downgrade, citing the impasse in Washington that has raised the threat of a default on the nation's debt.

Fitch placed the US credit rating on negative watch as House and Senate leaders face a Thursday deadline to raise the nation's $16.7trn (£10.4trn) borrowing limit.

The agency said that while it expects the debt limit to be raised soon, "the political brinkmanship and reduced financing flexibility could increase the risk of a US default".

A Treasury Department spokesman said Fitch's announcement, which was made after US financial markets closed on Tuesday, "reflects the urgency with which Congress should act to remove the threat of default hanging over the economy".

Politicians spent most of Tuesday trying to reach an agreement to lift the government's borrowing limit and avoid a potential default.

The partial government shutdown has entered its third week

However, experts said that even without a deal, it was possible that US government contingency planning could mean bills continued to be paid after Thursday through tax revenues or the printing of money.

If leaders are able to forge a deal, it would potentially extend US borrowing authority until February 7 and fund government agencies until January 15, ending the partial shutdown of government operations which has lasted more than two weeks.

The renewed push in the Senate followed chaotic developments in the House that saw two separate GOP plans buried after it became apparent they failed to gain enough support among Republican rank-and-file.

Senator Barbara Mikulski, a Democrat, stood on the Senate floor at mid-afternoon and declared: "We are 33 hours away from becoming a deadbeat nation (that does not pay) its bills to its own people and other creditors."

Polls indicate that Republicans are bearing the brunt of public anger over the deadlock.

Many Americans are unhappy with the way budget talks have been handled

A Washington Post/ABC News poll released on Monday found that 74% of Americans disapprove of the way congressional Republicans have handled the standoff, compared with a 53% disapproval rating for Obama.

Even if a deal is done to avert a default, ratings agencies will maintain their pressure on the world's biggest economy.

A credit rating, provided by an agency, is an assessment of how able a country or company is to repay the money it has borrowed.

An AAA rating lets companies and governments borrow at super-low rates because the investments in the resulting bonds are seen as of little risk.

Standard & Poors downgraded US long-term debt to AA+ in August 2011 because of the mountain of borrowing undertaken by the country and its failure to tackle it.

So far, most investors have remained confident in US debt, though rates have risen on short-term Treasury bills.

Further evidence of nerves emerged when the Dow Jones closed sharply down on Tuesday, while a cautious approach was taken in Europe in early trading on Wednesday.

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Immigration: Brit Workers 'Against The World'

By Ed Conway, Economics Editor

Immigration is changing Britain. This is not merely a theory - it's statistical fact. Back in 2004, less than a decade ago, one in 11 of those living in Britain were born abroad. Today the proportion is one in eight - 12.4%.

And, just as is the case for economic growth and productivity, the immigration picture varies throughout the country. Some 42% of London's population was born outside the UK, compared to just 5% in the North of England.

Though more attention tends to be focused on the flows of immigration - in other words people entering and leaving the country, the gradually-changing make-up of the UK population represents a significant shift - both in social and economic terms.

On the one hand, there's the question of how much immigrants cost Britain's welfare state. A quarter of new-born babies in Britain last year had non-UK-born mothers - the highest proportion since records began in 1969.

But you can only really get a clear sense of the absolute impact by taking a step back and comparing the cost of immigration with the related income - the taxes these new members of the population pay.

Research from the OECD shows that immigrants actually bring in over £7bn more than they cost. That's the equivalent of a penny off the basic rate of income tax.

There are other economic arguments in favour: Free movement of labour is usually good news for businesses, since it allows them to attract workers from all over the world, not merely locals.

But there are clearly challenges as well. Immigration increases GDP (though not necessarily GDP per capita), but it also increases the demand for housing - a real problem in a country facing a chronic shortage of property. And more potential workers means more competition for British employees.

In pure statistical terms, immigrants work harder than their UK counterparts. Some 71% of foreign nationals are economically active, compared with 67% of UK nationals. They are better-qualified: 38% of non UK-born people in Britain have degrees, compared with 30% of UK nationals.

And contrary to popular opinion, they are not just plumbers. The biggest proportion of immigrants actually work in finance, followed by health, then retail, then manufacturing.

According to the OECD half of all immigrants hired in Britain are high-skilled - and the proportion is increasing.

This has had an undeniable impact on Britons' job prospects. Since the start of the crisis in 2008, seven British workers have lost their jobs for every one non-British worker to have lost theirs.

Some are likely to see this as an argument against immigration. However, the economic message is just as significant. Britons need to work harder if they want to compete. That's the inevitable consequence when you're competing against a whole world's worth of workers, rather than just one country.

:: Immigration UK: A week of special coverage on Sky from October 14 to 18 - watch on Sky 501, Virgin Media 602, Freesat 202, Freeview 82, Skynews.com and Sky News for iPad

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Burberry Boss Angela Ahrendts To Join Apple

Burberry has confirmed its respected chief executive Angela Ahrendts is to leave the luxury goods firm next year to join Apple.

The company confirmed she would be replaced by chief creative officer Christopher Bailey by mid-2014 and that Bailey would assume both roles.

Ahrendts, who is 53 and originates from the United States, will assume a title of senior vice president of retail and online stores at Apple - a new position - and will report directly to CEO Tim Cook.

Angela Ahrendts has championed online growth

He said of the appointment that Ahrendts shared Apple's focus on innovation and customer experience and was an "extraordinary leader with a proven track record."

She responded: "I have always admired the innovation and impact Apple products and services have on people's lives and hope in some small way I can help contribute to the company's continued success and leadership in changing the world."

News of her departure saw Burberry stock lose 6% when trading began on the FTSE 100 on Tuesday morning.

Over the last five years, its share price has risen a staggering 461% under her leadership.

Ahrendts said: "Burberry is in brilliant shape, having built the industry's most powerful management team, converted the business to a dynamic digital global retailer, created a world class supply chain, state of the art technology infrastructure, sensational brand momentum and one of the most closely connected creative cultures in the world today.

"It has been an honour to have partnered with Sir John Peace (chairman) and Christopher for the last eight years.

"I am confident that, with Sir John's continued guidance and the executive team's support, Christopher, as one of this generation's greatest visionaries, will continue to lead Burberry to new heights.

"Today, Burberry is not only a great brand, but a truly great company," she concluded.

Burberry's revenues rose 14% in the first half of the year

Her successor has been at Burberry since 2001 and has held the major creative role for six years.

Burberry also updated the market on its first half progress, saying its retail revenue rose 17% to £694m in the six months to Sept. 30 - in line with analysts' forecasts.

Retail sales from stores open at least a year grew by 13%, helped by double digit growth in Asia Pacific and the Europe, Middle East, India and Africa (EMEIA) division region and high single digit growth in the Americas.

Total revenue was £1.03bn pounds, up 14%.

Ahrendts' departure leaves Carolyn McCall and Alison Cooper, the bosses of budget airline easyJet and cigarette firm Imperial Tobacco respectively, as the only remaining female chief executives heading Britain's biggest listed companies.

She has spent a total of ten years with Burberry, transforming it into a global luxury brand with a growing presence in emerging markets.

It has been suggested that her success in growing Burberry in Asia - particularly China - will have been attractive to Apple which has struggled to secure the market penetration enjoyed there by many of the iPhone and iPad-maker's rivals.

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Royal Mail: Value Climbs As Dealing Starts

Royal Mail's value continued to grow when full dealing began on the London Stock Exchange on Tuesday morning though some individuals expressed frustration they were unable to sell.

Investors - lured by the promise of healthy dividends - sought out shares with the price rising more than 3% in early trading when the stock became available to the wider market following its conditional launch.

In the first day of dealing for many of the 690,000 small investors who bought stock the shares opened at 478p - almost 45% above their privatisation price - before climbing further to 490p in the first hour.

Price correct at 08:35 BST

That made them almost 50% more valuable than the Government's price tag last week and gave Royal Mail a value of £4.9bn.

That compares with the 330p per share price they were sold for on Thursday, which valued the group at £3.3bn, meaning small investors who were allocated shares worth £750 originally are today sitting on paper profits of more than £360.

But not everyone was able to trade - the Department for Business confirming that those who applied for shares via the post had been told they would receive a letter within a week setting out how they could sell their shares.

Those who applied online should, the department said, receive an email within two days of listing, giving them an ID and password to sell their shares via the official website.

Only institutional investors such as pension funds and those individuals who ordered stock through a broker offering conditional trade were able to sell before Tuesday.

Around 150,000 postal workers are having to sit on stakes now worth more than £3,000 each because they can not sell their shares for three years under the terms of the 10% free-holding.

While fewer than 390 staff eligible for the offer turned it down, staff are known to bitterly oppose the privatisation and Wednesday will see the result of a strike ballot by members of the CWU over issues linked to the sale.

The windfall for investors has prompted further questions about whether the Government short-changed the taxpayer over the privatisation.

Sky News has learned that some members of the Business, Innovation and Skills Select Committee of MPs want to interview executives from the syndicate of banks responsible for pricing the initial public offering at 330p-per-share.

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UK To Relax Visa Rules For Chinese Nationals

Visa rules for Chinese nationals coming to Britain are being relaxed by the Government in a drive to boost visitor numbers.

Chancellor George Osborne, who is leading a UK trade delegation to China, said the changes will "streamline and simplify" the visa application process for tens of thousands of Chinese visitors.

He told students in Beijing: "We already have 130,000 Chinese students like you studying in Britain.

"I want more of you to come. And more Chinese visitors too.

"Let me make this clear to you and to the whole of China. There is no limit to the number of Chinese who can study in Britain.

"No limit to the number of Chinese tourists who can visit.

"No limit on the amount of business we can do together. For in the end what is a true dialogue?

"Not just a meeting between governments. Not just a conference of politicians.

"A real dialogue is where people get together, and talk, and learn, and understand and embrace the future together."

The move comes amid signs of a thaw in relations with Beijing which have been frosty since David Cameron met the Tibetan spiritual leader, the Dalai Lama, last year.

The move will make it easier for tourists to visit

The changes will reduce the need for Chinese visitors to the European Union to submit separate visa applications for Britain, with selected Chinese travel agents able to apply for UK visas by submitting just the EU's Schengen area visa form.

A new 24-hour "super priority" visa service will become available from next summer, while officials are also looking at expanding a VIP mobile visa service, currently operating in Beijing and Shanghai, to the whole country.

The service involves visa teams going out to applicants to collect their completed forms and biometric data, with the whole process taking less than five minutes.

The move will be welcomed by businesses in the UK who have complained that the existing regime is discouraging high-spending Chinese visitors from coming to Britain.

In 2012, 210,000 visas were issued to visiting Chinese nationals who went on to contribute around £300m to the British economy.

Mr Osborne, speaking to Sky News from Beijing, said there was a "big difference" between people visiting Britain on holiday or for business and immigration.

Chinese nationals contribute £300m to the British economy

He insisted it was time to change British perceptions of China from the view that it is a "big sweatshop on the banks of the river" just making cheap manufacturing goods.

"The China of today has some of the world's largest internet companies, does some of the most advanced high-tech engineering, develops some of the world's leading medicines," he said.

"This is about the future of China. China has changed dramatically even in the last few years. I think if we in Britain don't understand that and appreciate that then we will miss out.

"I want us to be part of China's success. I don't see it as a threat to us. I see it as a great opportunity because there are many millions of people we can sell British goods and services to."

Mayor of London Boris Johnson, who is also on a trade visit to China, said he was pleased the Government had listened to him on simplifying the visa system for Chinese people.

He said: "I'm pleased that the Government has listened to the many voices, mine included, who have called repeatedly for a streamlining and simplification of the Chinese visa system.

"Whilst I await the detail, it would appear the Government's announcement of a pilot scheme available through select travel agents is a welcome step forward.

"The move will hopefully encourage ever greater numbers of Chinese tourists to London.

"Only today I launched the first ever Chinese language website dedicated to studying in and visiting London. Chinese visitors now have all the information they need to access London, and changes to the visa system that will hopefully make getting here a good deal easier."

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US Shutdown: Lagarde Issues Recession Warning

The head of the International Monetary Fund has warned failure to break the political stalemate over raising the US debt ceiling risks tipping the world into recession.

Christine Lagarde was speaking as there were few signs in Washington that solutions were close in either the row over the budget - which has left government in a partial shutdown for two weeks - or the debt ceiling wrangle.

However, Harry Reid - the Democratic Leader in the Senate - painted an optimistic picture of the dialogue with Republicans late on Sunday, though nothing concrete was disclosed.

Failure to lift the debt limit by Thursday would leave the US government unable to pay its bills or service its debts, leading to a default that analysts warn will devastate market values and tip the global economy back into recession.

In an interview on NBC Sunday talk show "Meet the Press," Lagarde said the US economy was already showing "real improvement," evident from indicators including those from the housing sector to household spending.

But she said it was crucial politicians work out a deal to re-open the government and continue borrowing so it does not default on its debt - and not just for a few weeks.

Lagarde warned of serious consequences from "a combination of the government shutdown for a period of time and, more seriously, more damaging, if the debt ceiling was not lifted with a degree of certainty and enough time so that people could, you know, sort of have the assurance that the economy was in good standing."

She said: "If there is that degree of disruption, that lack of certainty, that lack of trust in the US signature, it would mean massive disruption the world over. And we would be at risk of tipping, yet again, into recession."

She called on politicians to address spending on social programmes like Medicare and Social Security but cautioned that spending cuts must not be too drastic.

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Banks Defend Charges From 'Rip-Off' Claim

Banks insist they are offering clear and simple charges amid research claiming their fees for going overdrawn can be as expensive as those imposed by payday lenders.

Research by Which? found that people can rack up "sky high" default charges if they slip into an unauthorised overdraft while it also criticised some other borrowing arrangements as "eye-wateringly" expensive.

The consumer group cited a number of examples from its findings: Borrowing £100 for 31 days will cost £30 with a Halifax authorised overdraft or £20 with some Santander accounts, while borrowing the same amount for around a month with a payday loan firm such as Quickquid or Wonga costs between £20 and £37.

For consumers using the Halifax Reward current account and the Santander Everyday Account it can cost £100 in charges for going £100 into an unauthorised overdraft for a month, Which? said.

The group's findings follow hot on the heels of tougher action against the payday loans industry while the whole credit market will come under the supervision of the Financial Conduct Authority (FCA) next year.

The FCA recently announced measures it plans to impose, including limiting the number of times payday lenders are allowed to roll over loans to two and forcing them to put "risk warnings" on their advertising.

Which? urged the FCA to crack down on poor lending and unscrupulous practices across the credit market and demanded that default charges reflect lenders actual costs.

It also called for tougher affordability checks and an end to lenders making unsolicited increases to people's credit limits.

Richard Lloyd, Which? executive director, said: "The Government and regulators have rightly focused on the scandal of payday lending but they must not lose sight of the urgent need to clean up the whole of the credit market.

High street bank overdraft fees can be just as eye-watering as payday loans.

"Consumers need the credit market to work competitively. It's time to clamp down on excessive charges and irresponsible lending, and to make sure borrowers are being treated fairly whatever form of credit they're using."

Anthony Browne, British Bankers' Association chief executive, said overdraft charges for customers had fallen "significantly" in recent years.

He said: "The Office of Fair Trading estimates that customers are now up to £1bn better off due to reductions in these fees.

"The higher figures quoted by Which? are based on extreme examples of unauthorised overdrafts. This is not a form of borrowing that we would ever recommend."

Santander told Sky News: "Santander's overdraft charges are clear, transparent and easy for customers to understand.

"In addition to the simple daily charging structure, we have a number of tools and policies that help our customers stay in control and minimise charges such as overdraft buffers, text alerts, caps and grace periods.

"Whenever possible, customers should discuss short-term borrowing requirements with Santander in order to avoid un-necessary charges."

Halifax also released a statement: "Halifax offers a clear and simple overdraft charging structure, whereby customers are charged one daily fee rather than multiple fees."

It added that it would always contact a customer if they were in their unplanned overdraft for more than seven days to discuss alternative payment options.

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London Battles For Slice Of £5bn ISS Float

By Mark Kleinman, City Editor

London is facing a battle to secure a slice of one of the biggest stock market listings anticipated next year as its owners step up preparations for a £5bn flotation.

Sky News understands that the private equity groups behind ISS, a Danish cleaning and catering company that ranks among the world's largest private sector employers, have appointed investment banks to oversee its initial public offering (IPO).

The investment arm of Goldman Sachs and EQT Partners, a Swedish buyout firm, have enlisted bankers from Goldman and UBS for the flotation.

ISS, which has around 500,000 staff, will be floated in Copenhagen but its shareholders are also evaluating the possibility of a dual listing in London, insiders said this weekend.

A decision to include London would deliver a further boost to the City's IPO market, which has been revived in the last 12 months and on Friday saw the spectacular stock market debut of the privatised Royal Mail.

ISS has made at least two previous attempts to list, in 2007 and 2010, and is best-known in the City as the aborted merger partner of G4S, the UK security firm which breached a contract to provide personnel at last year's London Olympics.

G4S and ISS agreed a merger in 2011 but it was abandoned after a revolt by G4S shareholders.

The Danish group is now chaired by Sir Charles Allen, the former ITV boss who also played a key role on the organising committee of the 2012 Olympics.

A £5bn flotation of ISS would value the company at roughly ten times its annual profits, the mid-point at which analysts expect its shareholders to be able to exit their investment.

A large stake in ISS is now owned by Ontario Teachers Pension Plan and Kirkbi, the investment vehicle of the family behind the Lego empire.

Kirkbi is also a big investor in Merlin Entertainments, the theme park operator which plans to announce a London flotation as soon as there is greater clarity about the fate of negotiations over the US government's debt ceiling.

ISS and the investment banks declined to comment.

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Unemployed Migrants: '600,000 Living In UK'

More than 600,000 unemployed migrants from across the European Union are living in the UK, according to a survey.

The 291-page report - commissioned by the Brussels commissioner for employment and social inclusion, Laszlo Andor - found there were 611,779 "non-active" EU migrants in the UK last year compared with 431,687 in 2006 - a 42% increase.

The total number of jobless migrants is greater than the population of Glasgow.

While between 2005 and 2006 the growth of non-active EU migrants in the UK stagnated, since 2006 it has been steadily rising, the report said.

The Sunday Telegraph said that the number of people arriving without employment had increased by 73% in the three years to 2011.

It reported that the figures meant the annual cost to the National Health Service amounted to £1.5bn.

The details emerged as a poll indicated there was strong public support for an early referendum on withdrawing from the European Union.

The opinion poll for the Mail on Sunday found more than half of voters want a referendum on the UK's membership before the next election.

While nearly two-thirds support a vote in the Commons on the issue as early as next month, almost half said they would vote to quit the EU if a poll went ahead in 2014.

Prime Minister David Cameron has pledged to hold a referendum by 2017, but has dismissed the idea of holding it before the next general Election in 2015.

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Boris And Osborne Make Chinese Trade Visits

By Mark Stone, China Correspondent in Beijing

The Chancellor and the Mayor of London have arrived in Beijing on separate trade visits to China.

Both George Osborne and Boris Johnson will spend a week in the country, promoting British business but also trying to attract more Chinese investment in the UK.

Mr Osborne's arrival signals the end of a diplomatic spat between Beijing and London which has lasted more than a year.

Both men are expected to sign a number of multimillion pound investment deals in which Chinese companies will fund or part-fund UK infrastructure and building projects.

Mr Osborne is expected to announce the names of the Chinese backers behind an £800m development at Manchester Airport.

Using Chinese money, five million square feet of land next to the airport will be developed into retail, office and manufacturing space.

Creating 16,000 new jobs over 15 years, the airport will be turned into a hub destination in its own right.

Similar projects in Amsterdam and Frankfurt have proved successful and eased congestion at other airports.

An £800m investment in Manchester Airport will create thousands of jobs

Speaking to Mark Stone, Sky's Beijing correspondent, Mr Osborne said: ""£800m of investment; 16,000 new jobs; one of the biggest developments since the Olympic games, and I think it shows our economic plan of doing more business with China and also making sure that more economic activity happens outside the city of London is working.

"That's good for Britain and is good for British people."

He is travelling with the UK Trade Minister Lord Green, City Minister Lord Deighton and the Minister for Science and Innovation, David Willetts.

With them are executives from a variety of British technology companies who will try to showcase the best of Britain's digital technology industry in China.

The delegation will hope the trip allows UK companies to gain access to the rapidly expanding Chinese market.

"The Chinese economy is changing," Mr Osborne said.

"Those who think it is just a low-wage, low-tech economy are making a mistake.

"It is becoming a cutting edge player in industries like technology and this is a huge opportunity for Britain."

Chinese tech company Huawei is investing £1.3bn in British broadband

The Chancellor will lead the delegation to the Shenzhen-based headquarters of Huawei, the world's largest telecommunications manufacturer, and TenCent, the world's third largest gaming and social media firm.

Huawei's growing footprint in Europe and America has caused controversy, with some suggesting that Chinese involvement in Western telecoms firms poses a security risk.

Despite that, Huawei has already pledged to invest £1.3bn in the UK's broadband network over the next four years.

Mr Osborne's visit is a clear endorsement of the company.

Alongside the commercial strands of his visit, the Chancellor will also hold governmental meetings with his Chinese counterpart Ma Kai.

Known as the UK/China Economic Financial Dialogue, the discussions will focus on a range of financial issues including the global economic recovery, the US debt ceiling debacle and London's efforts to become a Chinese currency trading hub.

Significantly, the talks represent the first face-to-face bilateral ministerial contact between the UK and China for over a year.

The UK has been in the political dog house with China since May 2012 when David Cameron and Nick Clegg chose to meet and be photographed with the Dalai Lama, the exiled spiritual leader of Tibet.

Mr Cameron and Mr Clegg met the Dalai Lama last year

The meeting enraged Beijing given the controversial claim China holds over Tibet.

Ministerial meetings between the two countries were cancelled and Beijing made its disapproval very clear.

Diplomatic sources in the Chinese capital have suggested the move was designed by Beijing not only to punish the UK but to send a clear message to other countries that it is not worth upsetting the world's second largest economy.

However, British officials are always keen to stress that despite the Dalai Lama meeting, for which the UK refused to apologise, trade between the two countries been unaffected by the spat.

Diplomats point out that inward Chinese investment to the UK in the last 18 months has been greater than the past 30 years combined.

The London Mayor's trip is separate but the broad objectives are the same.

Mr Johnson is travelling with the chief executives of several large companies including Justin King of Sainsbury's and Marc Bolland of Marks & Spencer.

He will spend three days in Beijing, where he will visit a UK brands fair, take a ride on the subway and attend a private meeting with China's richest man, Wang Jianlin, whose company Dalian Wanda is investing heavily in the Nine Elms area of London.

Mr Johnson will then travel to Shanghai before ending his trip in Hong Kong.

Both men are effectively cashing in on the thawing of diplomatic relations between the two countries.

By the end of the week, they hope to have signed a variety of deals, forged new relationships and facilitated meetings between UK and Chinese firms.

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