Shire Agrees To £32bn AbbVie Takeover Deal

The board of UK drug firm Shire has agreed to a £32bn takeover deal by American rival AbbVie, it has been confirmed.

Shire said the merger would see its shareholders entitled to £24.44 cash for each share.

The announcement comes on the deadline day for the deal to proceed, amid a record high for Shire shares.

It includes a premium of more than 50% to the stock price of Shire, based on its May 2 price ahead of the initial offer period, and 42% up on an updated June 19 offer.

Shire's share price was up more than 2% in late morning Friday trades.

"The boards of AbbVie and Shire are pleased to announce that they have reached agreement on the terms of a recommended combination of Shire with AbbVie," the pair said in a statement.

The deal comes after Shire reversed its initial opposition to a takeover.

On Monday, the board of London-listed Shire said it was ready to recommend a deal which would value it at £53.20 per share - a rise of more than £2 per share on AbbVie's last bid less than a week ago.

Under the terms of the cash and stock offer AbbVie, which wants to buy Shire to cut its tax bill and diversify its product line-up, would own 75% of the new entity - giving Shire investors a greater stake than the 24% previously proposed.

Dublin-based Shire, which makes drugs to treat rare diseases, had rejected four earlier offers and asked AbbVie to sweeten its bid in order to recommend an agreement to its shareholders.

AbbVie's pursuit of Shire comes just weeks after AstraZeneca fought off takeover interest worth £69bn from US drugs giant Pfizer.

Shire has been under pressure to secure new products, as it currently gets nearly 60% of its revenue from rheumatoid arthritis drug Humira, the world's top-selling medicine, which loses US patent protection in late 2016.

Earlier this week, Professor John Lyon, of Warwick Business School, said: "Shire may be headquartered in Dublin but it is managed from Boston where most of its medicines are sold.

"It is well known for targeting rare diseases with its medicines where accelerated drug development pathways are sometimes available once an orphan drug status is agreed with the regulatory bodies."

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Malaysia Airlines Offers Passenger Refunds

Malaysia Airlines is to refund fares for passengers no longer wishing to travel on the carrier, Sky News has confirmed.

Previously booked passengers due to fly up to and including July 25 can seek a refund without incurring any penalty.

The decision comes amid a wave of concern following the downing of MH17 over eastern Ukraine.

It is unclear how many passengers will cancel their flights.

Nevertheless, the refund will further harm the perception of the carrier both for passengers and investors.

Shares in Malaysia Airlines closed down more than 10% on Friday.

The Kuala Lumpur-listed company saw its stock fall more than 17% at one point before easing prior to the market close.

"Perception-wise it really hits home - It's very challenging. It's very difficult to fight against negative perception," Maybank aviation analyst Mohshin Aziz said.

"I can't comprehend of anything they can do to save themselves."

Many of the carrier's woes precede the loss of MH370 earlier this year

The company has struggled recently, and its accounts have been in the red for the last three years.

In 2013, the airline's full-year losses grew to £215m - up almost threefold on the 2012 loss of £80m.

The Malaysian government owns 69% of the firm.

As a state-owned flag carrier, it is required to fly unprofitable domestic routes, and its strong union has resisted operational changes.

Budget rivals have adapted to the changing air market, particularly in Asia, with greater speed than legacy carriers such as Malaysia.

Many of its woes precede the mysterious loss of flight MH370 in the Indian Ocean.

Airline Weekly managing partner Seth Kaplan described it as being in "worse shape" financially than almost all other carriers - even before MH370 vanished.

"It's just hard to imagine that they could have even survived the first incident without a lot of government help and now they're going to need even more," Mr Kaplan said.

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Top City Banker To Pay £450,000 FCA Penalty

By Mark Kleinman, City Editor

One of the City's top financiers is poised to pay a £450,000 fine after deciding to accept a market abuse ruling by the Financial Conduct Authority (FCA).

Sky News understands that Ian Hannam, a banker who became known as the 'king of mining M&A' after engineering some of the world's biggest natural resources mergers, is to accept the watchdog's original verdict after losing an appeal in May.

An insider said on Friday that a statement from the FCA confirming that the original decision is to be upheld is expected as early as next week.

Mr Hannam, who had a long career at JP Morgan Cazenove before leaving in 2012, was accused by the FCA of inappropriately disclosing inside information in 2008 about Heritage Oil, a client, to a potential buyer.

He had argued that the FCA's ruling was erroneous and that he acted in accordance with City rules, vowing to fight the decision.

The regulator did not accuse or find Mr Hannam guilty of deliberately setting out to commit market abuse or accuse him of lacking honesty or integrity.

The Upper Tribunal of the High Court rejected his appeal in a judgement which was greeted by relief at the FCA but which raised questions about the clarity of guidelines about acceptable City conduct.

Both parties are understood to have made representations about the scale of the fine following the verdict of the Upper Tribunal, which said:

"Although the parties' written submissions did say something about the appropriate penalty if Mr Hannam had been engaged in market abuse, we consider that we cannot properly deal with this aspect of the case without giving the parties the opportunity to make further submissions in the light of our findings on the substantive issues.

The tribunal and the parties will need to consider the best way forward procedurally for dealing with the question of penalty."

The ruling left open the question of whether the penalty imposed on Mr Hannam should be increased or decreased.

Mr Hannam, who received backing from a number of prominent City figures and company bosses during his appeal, is said to have racked up legal fees of approximately £1m during his case.

Since leaving JP Morgan, he has rebuilt his career, taking control of a number of businesses in the mining and resources industries.

He has also given financial backing to Heathrow Hub, one of the shortlisted candidates for expanding runway capacity in south-east England.

Spokesmen for Mr Hannam and the FCA declined to comment on Friday.

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Bestway To Buy Co-op Pharmacy Arm For £620m

The embattled Co-operative Group has agreed to sell its pharmacy division to Bestway for £620m.

In a statement, the Co-op said the sale would be completed in October, following the successful separation of the division from the parent group.

The sale proceeds would be used to help reduce group debt and plug a capital black hole of more than £1.5bn.

Sky News City Editor Mark Kleinman revealed last March that the Co-op was lining up City advisors for the pharmacy sale, at the time estimated to be around £600m.

As the Co-op attempted to rein in its massive debt a decision was taken to sell the profitable pharmacy section, with the proceeds injected into its retail and consumer services division.

As part of the deal the Co-op said it would provide transitional assistance for up to 18 months and would include branding continuation for up to a year.

Bestway is the UK's 18th largest privately owned company and seventh biggest family-owned business.

Co-op Group interim group chief executive Richard Pennycook said: "The successful sale of our pharmacy business is an important move for (the group).

"The proceeds will enable The Co-operative to reduce debt and invest in our business and is part of the focused delivery of our clear strategic plans and priorities.

"I am pleased that the agreement we have reached with Bestway reflects the quality of the business and the high level of interest from a number of bidders."

With this acquisition, Bestway will have an annual turnover of approximately £3.4bn and a global workforce of more than 32,600 people, with nearly 12,000 people in the UK.

It owns the UK's second largest independent wholesaler serving 125,000 independent retailers and caterers, from 64 warehouses nationwide.

It also operates Pakistan's second largest cement manufacturer, with an annual capacity of 6 million tonnes.

Bestway group chief executive Zameer Choudrey said: "We are delighted to be bringing The Co-operative pharmacy business into the Bestway family, adding to our growing and diverse business portfolio.

"In line with our own ethos, there is a strong focus on supporting and servicing the needs of the local communities within this business."

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Retail Banks Face Competitiveness Probe

The competition watchdog has confirmed it is consulting on a provisional decision to launch an in-depth investigation into the retail banking sector.

The Competition and Markets Authority (CMA) said essential parts of the UK market lack effective competitiveness.

The CMA said the existing structure did not meet the needs of consumers or that required by small and medium-sized enterprises (SME).

It said there will now be a consultation for an in-depth market investigation for personal current accounts and SME banking.

The watchdog said despite claims of competitiveness, customers have not benefited sufficiently from attempts to open up the market.

Recent changes have included a simplification of switching current accounts between providers.

The CMA said it would possibly launch a full-scale market investigation but has told the "big four" banks - Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland - to offer an industry solution.

It said a formal decision on the investigation would be made in the autumn.

The current account sector is around £8bn in size, while the SME sector is worth £2bn.

The watchdog commissioned two reports, one into current accounts and the other into SME functionality.

The SME banking market study was a joint project with the City watchdog, the Financial Conduct Authority (FCA).

It was the first formal collaboration between the organisations since the CMA was formed following a merging of the Office of Fair Trading and the Competition Commission.

The CMA said it was interested in hearing from consumers and companies about their experiences.

It said there appeared to be limited scope for newer and smaller banks and the markets remain concentrated, particularly in Scotland and Northern Ireland.

It added that there was very little movement in the market share of the largest banks - other than as a result of mergers and acquisitions.

The CMA said many customers see little difference between the largest banks in terms of the services they offer.

In addition, it said limited transparency and difficulties for customers in making comparisons between banks, particularly for overdraft charges, are "very complex".

"This makes it hard for customers to choose the cheapest or most appropriate accounts for them, so limiting banks' incentives to compete," the CMA said.

"This may result in higher overdraft charges than would otherwise be the case."

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Microsoft Cuts 18,000 Jobs In Nokia Cull

Microsoft has confirmed plans to "eliminate" up to 18,000 jobs worldwide as part of efforts to simplify the company's operations and cut costs.

The announcement was made in an email to staff entitled 'Starting to Evolve Our Organization and Culture' by new chief executive Satya Nadella, who is moving to reshape Microsoft into a cloud-computing and mobile-friendly software company.

The $7.2bn (£4.2bn) purchase of Nokia's mobile division - which is being integrated into Microsoft - was to account for the majority of the losses, Mr Nadella said, as overlaps were identified.

The deal, completed in April, added 28,000 positions to Microsoft's payroll.

The company, which now employs 127,104 people globally, has 3,500 staff in the UK but no announcement was made on exactly where the cuts would be made, apart from identifying 1,300 losses in Seattle.

It estimated costs of up to $1.6bn (£1bn) initially before any savings would be felt.

Mr Nadella told staff: "The first step to building the right organisation for our ambitions is to realign our workforce.

"With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year.

"Of that total, our work toward synergies and strategic alignment on Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers.

"We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months.

"It's important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas.

"My promise to you is that we will go through this process in the most thoughtful and transparent way possible.

"We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company."

Microsoft's share price rose more than 1% in pre-market trading after news of the plan was confirmed.

The shake-up was seen as central to the company's shift from being software-focused to one that sells online services, apps and devices it hopes will make people and businesses more productive - challenging the dominance of firms like Samsung, Apple and Google.

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Putin: Sanctions Could Cause 'Serious Damage'

Vladimir Putin has warned a fresh wave of sanctions will take US relations with Russia to "a dead end" and damage America's business interests.

The US and the EU have stepped up measures over what is viewed as Russia's interference in Ukraine.

President Barack Obama has imposed the most wide-ranging sanctions yet, targeting major banks, energy and defence firms including Gazprombank and Rosneft Oil Co.

Steps are also being taken to prevent rebel groups and senior officials in Ukraine getting hold of funds.

"Sanctions have a boomerang effect and without any doubt they will push US-Russian relations into a dead end, and cause very serious damage," Mr Putin said.

Mr Obama announces fresh wave of sanctions

"And I am convinced that this will harm the national long-term interests of the American state, the American people."

Mr Obama said the US measures were "significant but targeted".

"I've repeatedly made it clear that Russia must halt the flow of weapons and fighters across the border into Ukraine.

"So far, Russia has failed to take any of the steps that I mentioned."

Meanwhile, EU leaders meeting in Brussels agreed a more limited package.

They agreed to impose asset freezes against around 11 more individuals but said measures will be expanded significantly at the end of July to cover "entities and persons" helping to undermine Ukraine's "sovereignty, territorial integrity and independence".

The European Commission will also "reassess and potentially suspend" co-operation programmes with Russia.

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Shale Gas Terminal 'Saves' Grangemouth

The owners of the Grangemouth terminal, threatened with closure last year, say its future has been secured by a Goverment loan to help build a shale gas facility.

Ineos says the promise of £230m would allow it to raise funds to invest in a new terminal to import, store and process ethane from shale gas as North Sea supplies dwindle.

The company said it was one of the most important infrastructure projects of recent times in Scotland and would protect thousands of jobs across the UK by ensuring the long-term future of petrochemical manufacture at Grangemouth.

The ethane tank will be the largest in Europe and is central to the company's plans to import shale gas from the US - a product that has helped bring down world gas prices but is controversial because of the use of a process called fracking to extract it.

The prospect of UK-based fracking has faced stiff opposition from environment campaign groups and communities, though ministers argue it is needed to bring prices down and boost gas supplies.

Under its plans, Grangemouth will, by 2016, be a shale gas-based facility, which Ineos said was essential if it is to compete in world markets beyond 2017.

The future of the site was in doubt last year because of an industrial dispute, but Ineos said it had invested £300m as part of a long-term survival plan.

Chief Secretary to the Treasury Danny Alexander said: "Over £1bn of infrastructure projects have now been brought forward as a result of the UK guarantees scheme and £36bn worth of projects are pre-qualified.

"Our action is creating the right conditions for more investment in our infrastructure, helping to build a stronger economy and a fairer society across the country.

"The Grangemouth guarantee is fantastic news for Scotland's economic future, and for the UK's energy security."

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Eurostar Growth Takes World Cup Penalty

Eurostar has blamed football's World Cup for a slowdown in passenger and revenue growth.

The Channel Tunnel high-speed train operator said demand was affected by a rising number of people choosing to stay at home to watch the tournament in Brazil in the final weeks of its first half trading period.

Nevertheless, Eurostar reported 2% growth in passenger numbers over the first six months of 2014, rising to 5m from 4.9m a year previously.

Sales revenues also grew by 0.5% to £456m from £453m.

The company said the "convergence" of Easter and May holidays this year had also not helped its business as travellers were booking only one trip under the English Channel, when previously they may have booked more.

Eurostar chief executive Nicolas Petrovic said: "While a number of factors in the second quarter of the year led to a dampening in demand, we are now beginning to see a more benign trading environment with encouraging signs of economic stability in France as well as the UK".

As well as its small rise in passengers, Eurostar saw an increase of 6% in more luctrative business bookings compared to the same period in 2013.

Mr Petrovic added: "These more favourable conditions have helped deliver strong growth in business travel across our markets".

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Watchdog Warning On Price Comparison Sites

Some price comparison websites are failing to meet regulatory standards, according to the Financial Conduct Authority (FCA).

The City regulator found operators in the general insurance sector, which includes property and vehicle cover, were not meeting consumers' expectations and did not always ensure that people were given appropriate information to help them make informed decisions.

The FCA said it was particularly concerned that consumers' focus on headline price and brand when using such sites could distract from crucial product features, such as policy coverage and terms.

As a result, the websites were increasing the risk that consumers bought products without understanding key features such as level of cover or excess levels.

Clive Adamson, FCA director of supervision, said: "Price comparison websites have increased in popularity among consumers, with an estimated one third of consumers buying their motor insurance policy through them.

"They provide an important service for millions of consumers bringing convenience and simplicity to buying financial products online.

"However, our review found that they were not meeting our requirements in delivering fair and consistent outcomes for consumers. 

"We also found, through our consumer research, that consumers had a number of misconceptions about the services they provided.

"We expect price comparison websites to take on board the findings of the review.

"It is also important for consumers to understand that not all products are the same and the cheapest product may not always be the best for their needs".

The review's survey also found some people mistakenly believed that a price comparison website had provided them with quotes on the best policy for their individual needs and had assessed the suitability of the policy for them. 

The FCA said too that not all comparison sites, that were part of a larger group of an insurer or broker, disclosed this potential conflict of interest, which was against FCA rules.

The watchdog declined to name any firm found to be at any fault.

Hayley Parsons, the chief executive and founder of Gocompare.com, told Sky News it had contributed to the review and supported efforts to improve standards though it had "always strived" to operate in its customers' best interests.

She said: "Gocompare.com fully supports measures to promote best practice in the PCW industry.

"Although we regularly update our services to reflect our customers' evolving needs, we will be reviewing the findings of the FCA's report".

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Economy: Weakest Pay Growth For Five Years

Official figures show pay is growing at its weakest level for five years, hightening renewed concerns over the cost of living.

The Office for National Statistics' (ONS) latest monthly update on jobs and pay showed an improving picture for employment, with the jobless rate falling to 6.5% in May, but highlighted a deteriorating picture on pay growth despite the improving economy.

In the three months to May, total pay including bonuses rose at an annual rate of 0.3% - down from a yearly rise of 0.8% in the three months to April.

The ONS said the figure continued to be affected by comparisons with the same month last year when many companies delayed paying bonus awards to help their employees benefit from a cut in income tax.

When the effect of bonuses was excluded, growth of 0.7% was measured - which the ONS said was the slowest rate under that measure since records began in 2001.

Just 24 hours previously, the ONS charted a steeper-than-expected increase in the headline measure of inflation from an annual rate of 1.5% in May to 1.9% in June confirming that the gulf between rising prices and pay increases was widening further.

The Government admitted there was "more work to do" to help bolster living standards but pointed to the unemployment figures as evidence that progress was being made.

The employment minister Esther McVey told Sky News the recovery had "reached a milestone" in terms of employment, with the total rising by 254,000 in the three months to May.

Much of the increase was attributed to hiring by companies rather than rising self-employment levels which had been credited for rises over previous months.

The unemployment total was calculated at 2.12m - a fall of 121,000 - with the numbers claiming jobseeker's allowance dropping by 36,300 in June.

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Banks To Overhaul Gold-Fix Amid Rigging Fears

By Mark Kleinman, City Editor

The banks which set the global price of gold are to open the process to independent scrutiny amid evidence that it has been subject to the same manipulation as other crucial financial benchmarks.

Sky News can exclusively reveal that the 95-year-old gold fixing mechanism is poised to seek an independent chairman and third-party administrator for the first time, under plans to be unveiled by its current operators.

A new code of conduct for participants in the fixing process is also being finalised and is expected to be published shortly.

An announcement about the changes is likely to be made as soon as Wednesday, according to people close to the discussions.

The reforms will represent a crucial step towards protecting a globally-recognised mechanism set in London and used across the world's gold industry to set a reference price for bullion.

They will come during a period of intense scrutiny of financial benchmarks such as Libor and amid a string of scandals which have fines running into billions of pounds.

A quartet of banks - Barclays, HSBC, Canada's Scotiabank and Societe Generale of France - set, or fix, the gold price in twice-daily auctions which establish a level at which the participants will buy and sell the precious metal.

The process is managed by London Gold Market Fixing Ltd, which has been taking advice about the future structure of the gold-fix from Slaughter & May, the law firm, insiders said.

Concerns about manipulation in financial markets led the International Organisation of Securities Commissions (IOSCO), a regulatory body, to set out a series of principles for reform, including a greater emphasis on transaction-based pricing, last July.

Benchmark-setters were given 12 months to demonstrate their compliance with these principles, raising the prospect of announcements from supervisors of other financial indices in the coming days.

LGMFL is expected to say that its proposed reforms will make it broadly aligned to the IOSCO principles.

Approximately $220bn of gold changes hands each day through over-the-counter trades, according to a one-off survey conducted by the LBMA in 2011, with several different gold price benchmarks set in London.

However, the integrity of the gold-fix has, like the Libor interbank borrowing rate and foreign exchange markets, been called into question following allegations that it is susceptible to being rigged.

Critics argue that commodities markets are opaque, do not retain sufficiently detailed historical trading records and are not properly audited, prompting an overhaul of the silver-fix process last week.

The change to the silver-fix will involve CME Group and Thomson Reuters replacing the historical method later this year with an electronic benchmark.

In April, Barclays was fined £26m by the City regulator after one of its traders was found to have sought to manipulate the gold price at the expense of a client, who was reimbursed by the bank.

The banks and FCA declined to comment, while the LBMA could not be reached.

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IFS: Recession Has Hit Young Adults Hardest

Young people have "borne the brunt of the recession" with their pay and job prospects hit much harder than older generations, a leading economic think tank has said.

The Institute for Fiscal Studies (IFS) found that among those aged 22-30 household incomes fell 13% between 2007-2013, wages plunged 15% and employment levels dropped by four points.

For those aged 31-59, income fell by 7%, wages by 6% and employment stayed stable, while the over-60s saw almost no impact on those measures.

The gap would have been even more pronounced but for the 25% of young adults still living with their parents, the IFS said.

The think tank - working with the Joseph Rowntree Foundation (JRF) social research charity - based its conclusions on the Government's Household's Below Average Income data.

It also found there was "no clear north-south divide" in recession-hit areas - with a wide spread in falls in median income from 8% in Northern Ireland to 2% in the East Midlands.

The IFS pointed out that a sustained period of low interest rates and real-terms falls in private rents had benefited young people's finances but that home ownership continued to plummet - spelling further costs for a generation of renters.

Only 21% of people born in the mid-1980s had bought their own place by the age of 25 - compared with 34% of those a decade earlier and 45% born in the mid-1960s, it said.

IFS research economist Jonathan Cribb said: "Pay, employment and incomes have all been hit hardest for those in their 20s. A crucial question is whether this difficult start will do lasting damage to their employment and earnings prospects."

JRF head of poverty research Chris Goulden said the research showed how a shortage of affordable homes and rising rent costs were forcing some 600,000 people to live below the poverty line after paying housing costs.

He said: "We need a comprehensive strategy and sufficient political will to get to grips with poverty. That means addressing low pay, the high cost of essentials, such as housing and childcare, and reform to the tax and benefits system to ensure work is a route out of poverty."

Labour Treasury spokeswoman Catherine McKinnell said: "While David Cameron denies there is a cost-of-living crisis, these figures show people have seen a substantial fall in their income since 2010.

"The IFS's research shows that young people have been hit particularly hard over the last few years.

"Labour will act by boosting apprenticeships and making sure young people who don't have the skills they need to get a job are in training, not on benefits."

A Treasury aide said: "This shows just how hard Labour's great recession hit young people and why it's vital we keep working through our long-term economic plan which is cutting the deficit, creating jobs and equipping people with the skills they need for the future."

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Payday Loan Caps To Cut The Cost Of Borrowing

The City regulator is to impose caps on payday loans from January to tackle abuses in the quick-credit market, in a move set to cost the industry £420m of its annual revenue.

The headline measure was a limit in the overall cost of a loan, which the Financial Conduct Authority (FCA) said should never exceed 100% of the total amount borrowed.

For example, if a borrower was to take out a loan of £300, the person's liability would not be more than £600.

Fixed default fees were also to be capped at £15, the regulator said, with interest on unpaid balances and default fees not exceeding 0.8% per day of the outstanding amount.

News of the restrictions - reported by Sky News on Monday night ahead of the announcement - prompted the industry body the Consumer Finance Association (CFA) to warn that the limits could force many of its members out of business, driving customers towards loan sharks instead.

The FCA admitted the measures were likely to cost the payday sector £420m annually but its chief executive Martin Wheatley dismissed the industry's claim as a "scare story" - telling Sky News the caps would only take out those firms preying on their customers.

He said: "For the many people that struggle to repay their payday loans every year this is a giant leap forward.

"From January next year, if you borrow £100 for 30 days and pay back on time, you will not pay more than £24 in fees and charges and someone taking the same loan for 14 days will pay no more than £11.20. That's a significant saving.

"For those who struggle with their repayments, we are ensuring that someone borrowing £100 will never pay back more than £200 in any circumstance.

"There have been many strong and competing views to take into account, but I am confident we have found the right balance.

"Alongside our other new rules for payday firms - affordability tests and limits on rollovers and continuous payment authorities - the cap will help drive up standards in a sector that badly needs to improve how it treats its customers."

The measures were announced 24 hours after Wonga - the country's biggest payday lender - confirmed its new chairman was to lead a drive to improve standards in the wake of damaging revelations the firm created fake legal letters to threaten borrowers in arrears.

Citizens Advice chief executive Gillian Guy said of the caps: "Up until now, payday lenders have had the green light to send people into a spiral of unmanageable debt.

"The cap will help limit the scale of debts but its success will depend on enforcement and is part of a raft of measures, including limiting rollovers, that the FCA must make sure lenders are sticking to."

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Inflation Jump 'May Be Down To Good Weather'

Inflation rose by more than forecast last month - possibly driven by retailers delaying summer sales because of good weather.

Figures released by the Office for National Statistics showed the annual pace of inflation rose in June to 1.9% from 1.5% in May.

It also measured - in a separate release - a sharp rise in house price inflation in London with annual growth calculated in May at a record 20.1%.

The average house price was 10.5% higher on a national, year-on-year basis the ONS said.

The official house price statistics were the first to cover the first month of tighter mortgage lending rules - aimed at ensuring greater affordability for both borrowers and lenders alike.

In its wider inflation statistics, the ONS said clothing and footwear prices rose month on month at a time when they are usually falling - as stores held off on summer discounts due to warmer weather bringing shoppers out.

Furniture, air fares and sea transport also had an upward effect but petrol prices went up by less than the same month a year before.

It meant inflation remained well above the rate of wage increases, which were last recorded at 0.7%, meaning real-terms pay is still stalling.

Inflation had been dragged down in May by the supermarket price war which saw food and non-alcoholic drinks costs fall but these were flat in June.

The headline measure still remains below the Bank of England's 2% target, with CPI having now been at or below target for seven months in a row - the first time this has happened since 2005.

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Energy Complaints Soar To All-Time High

Ofgem's Energy Market Probe 'Will Restore Trust'

Updated: 1:22pm UK, Thursday 26 June 2014

Ofgem has announced an investigation in the energy market, to ensure there are no barriers to effective competition.

The regulator said it has referred the energy market to a probe by the Competition and Markets Authority (CMA).

It said the investigation is the best way to ensure that consumers are receiving the best quality, service and price availability.

The so-called big six energy providers have come under increasing scrutiny over profits, rising prices and how their wholesale and retail firms are structured.

The six big firms control around 95% of the UK retail market.

Ofgem said it would continue to protect consumers amid planned major changes to the energy market.

It said the CMA would begin its investigation immediately and a final report would likely be published before the end of next year.

Ofgem chief executive Dermot Nolan said: "Now is the right time to refer the energy market to the CMA for the benefit of consumers.

"There is near-unanimous support for a referral and the CMA investigation offers an important opportunity to clear the air.

This will help rebuild consumer trust and confidence in the energy market as well as provide the certainty investors have called for.

"The energy market is also going to change rapidly over the next few years with the roll-out of smart meters, the Government's electricity market reforms, and closer integration with European energy markets."

The energy watchdog said it has made an assessment, along with the Office for Fair Trading and the CMA, and found that competition is not working in consumers' best interests.

The regulator now expects the CMA  to consider action against the sector to improve competition and protect consumers.

Ofgem will also use its powers to address any "structural or behavioural issues" that may undermine competition.

After the announcement was made SSE chief executive Alistair Phillips-Davies said: "This reference will be an important opportunity to demonstrate the competitiveness of the energy market, address any issues of public concern and deliver good outcomes for consumers and a stable framework for investors.

"Throughout the reference SSE has an appetite for reform that is in the interests of customers and competition generally, as demonstrated by our price freeze until 2016."

Centrica CEO Sam Laidlaw, of the parent company of British Gas, said: "We want an energy market that is trusted by customers, and we believe that an in-depth and thorough review by an independent and respected authority can help to achieve this. So Centrica welcomes the investigation."

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£1.1bn To Fight Terror And Cyber Threats

RAF's New Fighter Jet Misses Air Show Debut

Updated: 5:11pm UK, Sunday 13 July 2014

By Alistair Bunkall, Defence Correspondent

The Royal Air Force's expensive new fighter jet has failed to make its long-awaited UK debut after a fire grounded the entire fleet of aircraft.

The F-35 Joint Strike Fighter (JSF) is known as the Lightning II in the UK and is supposedly the future of military aviation.

It had been due to fly at the Farnborough Air Show in Hampshire on Monday, after failing to make the Royal International Air Tattoo in Fairford, Gloucestershire, on Friday.

But in a hugely embarrassing glitch for the Government, the costly planes will have to remain on a runway in Florida until engineers can be sure the fire was caused by an isolated fault.

A senior British defence source told Sky News that Lockheed Martin, the primary manufacturers, and the Pentagon will "get a shoeing" over the grounding.

The UK is investing billions of pounds and staking the reputation of the military on the eventual success of the F-35 programme.

Four of the Lightning II jets were due to fly over Farnborough and organisers of the show said they were "hopeful" the aircraft would make its transatlantic journey by the end of the week.

They added: "We fully support the stance to never compromise safety of either pilots or show participants and we thank them all for their continued hard work."

To coincide with the aircraft's planned appearance at Farnborough, the UK Government is expected to announce how many aircraft it will buy in its first tranche of orders.

Later this decade, the F-35 will fly off the new Queen Elizabeth aircraft carrier, which was officially named last week.

The aircraft can take off on a short runway and land vertically - much like its predecessor, the Harrier.

The F-35 Lightning II programme has been beset by problems, with aircraft grounded on a number of occasions and spending that has run wildly over budget.

Different versions are being built by Lockheed Martin for the US Marines, the US Air Force and the US Army.

The UK is known as a "tier one" partner, meaning it is the most important contributor after the Pentagon.

Despite much criticism and speculation over the aircraft's future, Washington and London will not back out.

A spokesman for the Ministry of Defence said the UK "remains fully committed" to the programme.

To cover the humiliation of the F-35's absence, the Government may make announcements about increased defence capabilities instead.

Sky News understands the lifespan of the Sentinel surveillance plane will be extended.

The fleet had been earmarked for retirement but has seen strong demand in recent years in Mali, Ukraine, Afghanistan, Nigeria and Libya.

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Shire 'Welcomes £31.3bn Bid From AbbVie'

The board of London-listed pharmaceutical firm Shire has confirmed it has entered "detailed" discussions with US firm Abbvie after receiving an improved takeover offer of £31.3bn.

Shire said it was ready to recommend a deal which would value it at £53.20 per share - a rise of more than £2 per share on its last bid less than a week ago.

Under the terms of the cash and stock offer AbbVie, which wants to buy Shire to cut its tax bill and diversify its product line-up, would own 75% of the new entity.

Dublin-based Shire, which makes drugs to treat rare diseases, had rejected four earlier offers and asked AbbVie to sweeten its bid in order to recommend an agreement.

Discussions are now taking place in an effort to finalise a deal ahead of a Friday deadline.

AbbVie's pursuit of Shire comes just weeks after AstraZeneca fought off takeover interest worth £69bn from US drugs giant Pfizer.

It would give AbbVie an opportunity to reduce its tax bill by shifting its tax base from the US to the UK, where corporate tax rates are significantly lower.

The company is also under pressure to secure new products as it currently gets nearly 60% of its revenue from rheumatoid arthritis drug Humira, the world's top-selling medicine, which loses US patent protection in late 2016.

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Shareholders Slam £23m Burberry Boss Pay Deal

More than half of shareholders at the annual general meeting (AGM) for luxury retailer Burberry have rejected a pay deal worth up to £23.6m for the chief executive.

Some 52% of votes cast in the non-binding ballot did not support the remuneration report for Christopher Bailey or the other executive directors of the 158-year-old retailer's plan.

Included in the payment is his annual salary of £1.1m – which has not changed since his last role – and a golden handshake worth £7.25m provided to Mr Bailey if he loses his job.

It would also include his £440,000 allowance, which Burberry said does not include allowances for clothing or a company car.

A large part of the package includes a performance-based bonus and participation in the firm's executive share plans, any awards from which will vest from 2017.

Chairman John Peace defended Mr Bailey's pay at the meeting, arguing that the pay is comparable with competitors.

Burberry defended the pay deal for CEO Christopher Bailey

He said: "We know the amount paid to Christopher is a lot of money but much of it is performance related."

Mr Bailey took on the role of chief executive alongside his role as chief creative officer last May. He joined the firm in 2001.

Burberry also defended Mr Bailey ahead of the AGM.

It said: "The board believes that Christopher's vision and leadership will keep Burberry on the forefront creatively, digitally and financially."

But the Institute of Directors (IOD) said the revolt was a "warning shot" over pay concerns.

IOD director of corporate governance Dr Roger Barker said: "Burberry shareholders have fired a warning shot with today's vote.

"They are clearly not convinced that executive pay at the company has been transparently linked to tough performance targets.

"The onus in now on the board to urgently engage  with shareholders to convince them they are responding to their understandable concerns."

Burberry also mentioned in its 2013/14 annual report that Mr Bailey's promotion would "create further value for shareholders in the next exciting stage of its evolution".

Earlier this week, the Investment Management Association gave Burberry an "amber top" rating on the proposed pay policies, hinting that its members, who account for 15% of the stock market, should carefully read into Mr Bailey's awards before making a final decision.

As well as the controversial pay deal, other issues debated at the London AGM include the directors' remuneration policy and report.

The meeting comes after shares in the designer brand rose 2% on the FTSE 100 early on Thursday, when like-for-like sales were up by 12% in the three months from June 30.

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Cable Plots Tougher Foreign Takeover Rules

By Mark Kleinman, City Editor

Vince Cable is to set out new proposals to force buyers of key British companies to make watertight commitments aimed at protecting jobs and research budgets.

The Business Secretary is expected to detail plans that would oblige foreign bidders for UK businesses to offer binding guarantees to the City's takeover watchdog in order to prevent the erosion of Britain's knowledge base.

His pledge will come less than two months after the American pharmaceuticals giant Pfizer's interest in a £69bn takeover of AstraZeneca ignited a political storm in Westminster about a perceived threat to scientific research and development in Britain.

Mr Cable is understood to want to strengthen the powers of the Takeover Panel, which oversees mergers and takeovers involving British companies, but his plans will nevertheless fall short of the more stringent regulatory framework for which Labour has been calling.

The Business Secretary's proposals are expected to be set out later this weekend.

It was unclear on Saturday whether Mr Cable would require legislative change to push through his proposals or whether there would be a formal threshold above which acquirers of UK companies would be forced to adhere to any new rules.

Currently, the formal public interest test which gives politicians power to intervene in corporate deals is restricted to areas such as media plurality and financial stability.

The Takeover Panel, which regulates mergers and acquisitions, can force foreign bidders for UK companies in any sector to make or clarify public statements about their intentions.

However, it is not deemed by ministers to have sufficiently robust powers to compel companies to make legally-binding commitments on issues such as jobs and R&D.

Promises made by Kraft on UK jobs and manufacturing were reneged upon

That became a politically sensitive issue under the last Labour Government, when Kraft Foods of the US reneged on a pledge to retain a Cadbury manufacturing facility in the UK.

Speaking before a House of Lords select committee earlier this week, Mr Cable said he was not interested in introducing rules purely designed to protect the Union flag, pointing out that Britain's biggest manufacturer is Tata, the Indian conglomerate which owns Jaguar Land Rover.

"A crude nationality test has no merit," he said.

Hinting at a possible strengthening of the Takeover Panel's powers, he also said that an extension of the national interest test could risk breaching European Union law.

Ian Read, Pfizer's chief executive, said in May he regarded commitments to UK jobs made during the recent bid situation as legally enforceable.

When Pfizer abandoned its offer two months ago, Chuka Umunna, the Shadow Business Secretary, reaffirmed his commitment to subjecting the deal to a public interest test if a fresh approach was made under a Labour administration.

"While Labour was standing up for British jobs and British science throughout this takeover bid, David Cameron and his ministers were cheerleading for it when one of the primary motivations behind the deal was financial engineering - cited by the AstraZeneca board as one of the execution risks justifying rejection of the bid," he said at the time.

Pfizer was forced to walk away from its bid after a string of rejections by the AstraZeneca board, despite a desire from some of the UK company's shareholders for it to engage with its suitor.

AstraZeneca could invite Pfizer to enter fresh talks towards the end of August, although it would be late November before the US company could make a new unsolicited approach under Takeover Panel rules.

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Chinese Takeaway For £900m PizzaExpress Chain

Cable Plots Tougher Foreign Takeover Rules

Updated: 12:07am UK, Sunday 13 July 2014

By Mark Kleinman, City Editor

Vince Cable is to set out new proposals to force buyers of key British companies to make watertight commitments aimed at protecting jobs and research budgets.

The Business Secretary is expected to detail plans that would oblige foreign bidders for UK businesses to offer binding guarantees to the City's takeover watchdog in order to prevent the erosion of Britain's knowledge base.

His pledge will come less than two months after the American pharmaceuticals giant Pfizer's interest in a £69bn takeover of AstraZeneca ignited a political storm in Westminster about a perceived threat to scientific research and development in Britain.

Mr Cable is understood to want to strengthen the powers of the Takeover Panel, which oversees mergers and takeovers involving British companies, but his plans will nevertheless fall short of the more stringent regulatory framework for which Labour has been calling.

The Business Secretary's proposals are expected to be set out later this weekend.

It was unclear on Saturday whether Mr Cable would require legislative change to push through his proposals or whether there would be a formal threshold above which acquirers of UK companies would be forced to adhere to any new rules.

Currently, the formal public interest test which gives politicians power to intervene in corporate deals is restricted to areas such as media plurality and financial stability.

The Takeover Panel, which regulates mergers and acquisitions, can force foreign bidders for UK companies in any sector to make or clarify public statements about their intentions.

However, it is not deemed by ministers to have sufficiently robust powers to compel companies to make legally-binding commitments on issues such as jobs and R&D.

That became a politically sensitive issue under the last Labour Government, when Kraft Foods of the US reneged on a pledge to retain a Cadbury manufacturing facility in the UK.

Speaking before a House of Lords select committee earlier this week, Mr Cable said he was not interested in introducing rules purely designed to protect the Union flag, pointing out that Britain's biggest manufacturer is Tata, the Indian conglomerate which owns Jaguar Land Rover.

"A crude nationality test has no merit," he said.

Hinting at a possible strengthening of the Takeover Panel's powers, he also said that an extension of the national interest test could risk breaching European Union law.

Ian Read, Pfizer's chief executive, said in May he regarded commitments to UK jobs made during the recent bid situation as legally enforceable.

When Pfizer abandoned its offer two months ago, Chuka Umunna, the Shadow Business Secretary, reaffirmed his commitment to subjecting the deal to a public interest test if a fresh approach was made under a Labour administration.

"While Labour was standing up for British jobs and British science throughout this takeover bid, David Cameron and his ministers were cheerleading for it when one of the primary motivations behind the deal was financial engineering - cited by the AstraZeneca board as one of the execution risks justifying rejection of the bid," he said at the time.

Pfizer was forced to walk away from its bid after a string of rejections by the AstraZeneca board, despite a desire from some of the UK company's shareholders for it to engage with its suitor.

AstraZeneca could invite Pfizer to enter fresh talks towards the end of August, although it would be late November before the US company could make a new unsolicited approach under Takeover Panel rules.

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