MP's Fury Over Delay To HBOS Crisis Report

By Mark Kleinman, City Editor

A member of the influential Treasury Select Committee criticised City regulators on Friday amid signs of a further delay to the completion of an inquiry into the near-collapse of HBOS in 2008.

Speaking to Sky News, Mark Garnier MP said the further delay, which is likely to mean publication of the report will not take place until at least the summer of this year, undermined the principle of the inquiry.

The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) said last July that they aimed to publish their final report by the end of 2014, more than two years after work on it got underway.

Sky News revealed in December that the watchdogs would fail to hit that deadline because of the lengthy process which allows those criticised in official reports to lodge objections.

The regulators' report was initiated after concerted pressure from the Treasury Committee, which will be determined to scrutinise the findings and recommendations of the final document.

However, one parliamentary source said on Friday that there was now "little or zero chance" of the report being finalised before March 30, when the select committee system will be dissolved ahead of May's General Election.

Select committees can take up to three months to be re-formed after an election, meaning that a reconstituted Treasury committee may not be operating before mid-August.

"The whole point of these inquiries is to learn the lessons of the past," Mr Garnier said.

"If the regulators take so long that it is nine months behind its own deadline, you end up not learning those lessons in a timely fashion."

It is now more than six years since HBOS had to be rescued by a £20bn capital injection from taxpayers into Lloyds Banking Group, which took over the mortgage lending giant.

To date, only one former HBOS executive, Peter Cummings, has faced regulatory censure.

In 2012, he was fined £500,000 and banned for life from working again in financial services after being accused of failing to "exercise due skill, care and diligence".

The HBOS report's preparation has already been snared by repeated controversy, initially when the then Financial Services Authority said it had no intention of publishing such a review.

A process known as Maxwellisation, which allows people criticised in official reports to challenge regulators' comments, was launched last summer but is proving painstakingly slow, according to insiders.

Officials said last summer that because the report would rely on confidential information "previously provided by HBOS and other relevant parties, their consent will also be legally required before publication of this information."

Among the individuals expected to face criticism in the report are James Crosby, the bank's chief executive during a rapid period of expansion, and Andy Hornby, who ran the company immediately preceding its bail-out.

A separate review handled by Andrew Green, a leading QC, will examine whether regulators has reached an appropriate judgement in relation to enforcement actions against individuals.

It will "offer an opinion...as to whether the regulators should consider afresh whether any other former members of HBOS's senior management should be subject to an investigation with a view to prohibition proceedings," regulators said during the summer.

Andrew Tyrie, the Conservative MP who chairs the Treasury Select Committee, declined to comment on the latest delay.

He is expected to stand for a further term as the Committee's chairman if he is re-elected as an MP in May.

The PRA declined to comment.

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Final Whistle For West Ham Shirt Sponsor

Foreign exchange broker Alpari UK has entered insolvency following market turmoil over Switzerland's shock decision to unpeg its currency from the euro.

Within minutes of the early morning announcement on Thursday, the currency spiked around a third against the single European currency and the dollar while Swiss shares tanked more than 8%, prompting confusion and anger across trading room floors.

The move was seen as a bid by Switzerland's central bank to prepare the ground for quantitative easing in the eurozone - expected to be announced next week in an attempt to halt a slide towards deflation and boost economic activity.

Alpari is understood to have more than 200,000 clients and it said the majority had sustained losses.

It was not the only brokerage to take a massive financial hit in the wake of the turmoil with another firm in New Zealand also going out of business.

At the time of the market meltdown, Alpari's chief market strategist had declared the Swiss action "completely irresponsible" given recent support for the peg by the central bank.

Alpari said today: "The recent move on the Swiss franc caused by the Swiss National Bank's unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity.

"This has resulted in the majority of clients sustaining losses which has exceeded their account equity.

"Where a client cannot cover this loss, it is passed on to us. This has forced Alpari (UK) Limited to confirm today, 16/01/15, that it has entered into insolvency.

"Retail client funds continue to be segregated in accordance with FCA rules."

The currency peg, which was introduced in September 2011, was an attempt to halt the rise of the franc against the euro at a time when the eurozone debt crisis was at its height.

The strong franc was then particularly problematic for Swiss exporters, who were forced to drastically cut prices to remain competitive.

In an effort to contain the franc's future appreciation and limit any damage to the Swiss economy, the central bank also lowered a key interest rate to -0.75 to dissuade banks from parking their cash at the national bank, opting instead to invest in the Swiss economy.

West Ham, which signed its shirt sponsorship deal with Alpari UK two years ago, refused to comment on the company's financial woes.

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Npower Fuels Debate Over Energy Price Cuts

By Mark Kleinman, City Editor

Npower, one of the UK's biggest energy suppliers, has stoked the political row over utility pricing, blaming the Government for favouring smaller peers and "political factors" for influencing commercial decision-making.

In a letter to Matthew Hancock, the Energy Minister, Npower's chief executive said the scope for reflecting recent falls in wholesale gas and oil prices in consumers' bills was limited by politicians' intervention in the market.

"Political factors have...become increasingly significant over the last few years, particularly as we approach the UK general election," Paul Massara wrote in the letter, a copy of which has been passed to Sky News.

"Any change in prices in the short term will inevitably have to take account [of] potential outcomes after May this year."

Although he did not refer to it explicitly, Whitehall sources said Mr Massara was drawing attention to the Labour leader Ed Miliband's plan for a 20-month price freeze if his party wins the election.

Video: October: Winter Energy Warning

Mr Hancock had written to the six largest gas and electricity suppliers to demand that they pass on recent wholesale price falls to consumers.

He is due to meet them separately in the next few weeks for further talks.

Earlier this week, Eon - which, like Npower, is German-owned - announced that it was shaving 3.5% off the cost of its standard gas tariff, equivalent to £24 off a typical household's annual bill.

Other energy companies have signalled privately, however, that the threat of a price freeze has made it commercially risky to cut prices ahead of the election.

On Wednesday, Labour was defeated in a House of Commons vote to secure support for powers for the regulator, Ofgem, to be able to force companies to reduce consumer bills in line with wholesale price movements.

Labour was forced to adapt the language of its energy policy, insisting that the freeze was actually intended to be a cap, although it continues to use the original language in online material promoting one of its flagship policies.

Mr Massara's letter rejected a comparison drawn by Mr Hancock between the approach to price reductions of the 'Big Six' and smaller suppliers.

"The proportion of customers on fixed-price contracts is much higher for smaller independent suppliers than it is for large suppliers.

Video: Npower On Profit And Pricing

"This allows them to claim that they are reducing prices when in fact they are simply offering a new lower price fixed-price contract for new customers, in the same way we do, which may in part explain your perception that they may have moved earlier."

Mr Massara added that "actions by both Government and the regulator means that small supplier have significant benefits in terms of exemptions from licence conditions and also in terms of passing through the cost of social and environmental levies."

The Npower chief executive also pointed to the impact on global energy markets of unrest in the Middle East and the conflict in Ukraine during the last year.

And he reiterated the argument of energy bosses that a substantial proportion of customers' bills related to network charges and the widespread introduction of smart meters, the costs of which analysts expect to increase this year.

"In the case of our domestic standard tariff, we buy forward in the market to protect our customers from volatile swings in wholesale energy costs, both up and down," he wrote.

Mr Massara also said that "the recent fall in wholesale price is being actively looked at...and we...take into account competitive pressure".

He added that the company would write to standard tariff customers in the next fortnight to outline alternative pricing plans.

Npower refused to comment on the letter.

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Mobile Owners 'Overpay By £5.4bn Annually'

UK mobile phone customers are collectively overpaying £5.4bn to mobile phone firms annually because they are on the wrong contract for their requirements, it has been claimed.

The consumer group Which? said firms must improve contract pricing transparency or risk being referred to the industry regulator, Ofcom.

It said customers are being charged for texts, minutes and data they do not use or are billed for extra charges because their phone package is too small.

The consumer group found 72% of mobile customers could save an average of £159 a year by switching to a contract which better suited their needs, while 77% could save at least £50 a year.

Which? executive director Richard Lloyd said: "It's shocking that consumers are overpaying by billions of pounds for mobile phone contracts that just don't suit their needs.

"Mobile phone companies must do more to help people get the best deal, making switching hassle-free and ensuring that pricing is transparent."

Research for Ofcom showed that 48% of mobile customers have never switched supplier.

A Which? poll for its Unlock Better Mobile Deals campaign found just 28% of people trust mobile phone services.

It wants providers to take voluntary action by unlocking handsets automatically for free, allowing customers greater control over their tariff.

The consumer group also suggests that companies should notify customers at least a month before the end of their contract and provide information on the best deals, with the monthly cost of the handset separated from the service charge.

Which? said some providers were already simplifying the billing and switching process but customers should shop around to ensure they get the best deals for them.

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BP Gulf Spill Fine Estimate Cut By Billions

BP is to face a maximum fine of $13.7bn (£9bn) under a US law after the Gulf of Mexico oil spill in 2010 was ruled smaller than the country's government had claimed.

The reduced bill, which was approximately $4bn less than the UK firm had been facing, was a result of a legal hearing which determined that 3.19 million barrels-worth of oil leaked following the Deepwater Horizon disaster in 2010.

The worst offshore spill in US history remains the subject of several legal cases but the decision helped BP's US-listed shares rise 1% in after-hours trading as investors breathed a sigh of relief.

That rise in value was also reflected on the FTSE 100 when trading began on Friday.

The ruling by federal magistrate Carl Barbier followed a previous finding in September that BP could be fined a statutory limit of up to $4,300 for each barrel spilled for gross negligence under Clean Water legislation.

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1. Gallery: BP Deepwater Horizon Oil Spill

   Fire boat response crews battle the blazing remnants of the off shore oil rig Deepwater Horizon in the Gulf of Mexico on April 21, 2010.

The oil drilling rig burned for 36 hours in the Gulf of Mexico and then sank.

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Amazon Tax Deal May Break State Aid Rules

Amazon's tax deal with Luxembourg may breach state aid rules, according to the findings of a preliminary investigation by the EU.

The inquiry was launched in October amid accusations the arrangement with the online retailer in 2003 allowed it to channel profits through the country in return for low tax rates, thus avoiding higher rates of tax in the EU nations where the profits were achieved - including Britain.

The probe has sparked searching questions of EU Commission president Jean Claude Juncker, who may be asked what he knew of the arrangements struck during his 19 years as prime minister of Luxembourg.

The EU's competition regulators said: "The Commission's preliminary view is that the tax ruling ... by Luxembourg in favour of Amazon constitutes state aid."

Amazon told Sky News that it has received "no special tax treatment from Luxembourg".

"We are subject to the same tax laws as other companies operating here," the statement said.

Luxembourg, which is facing a separate competition probe on its dealings with Fiat, is not the only EU nation feeling the heat on its tax dealings with multi-national firms.

Starbucks' relationship with the Netherlands and Ireland's arrangement with Apple are also being scrutinised.

Amazon is among global firms to have faced fierce criticism in the UK over its tax contribution.

In May 2014, it was revealed Amazon paid a UK corporation tax bill of £10m in its last financial year, despite sales in the country of £4.3bn.

Amazon.co.uk reported a 56% rise in profit to £17m in 2013.

Its statement to Sky News at the time of the publication of the results said it paid all applicable taxes in jurisdictions that it operates in.

It said: "Amazon EU serves tens of millions of customers and sellers throughout Europe from multiple consumer websites in a number of languages dispatching products to all 28 countries in the EU.

"We have a single European headquarters in Luxembourg with hundreds of employees to manage this complex operation."

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BP Due To Cut North Sea Jobs As Oil Costs Dive

BP is expected to tell its 3,500 North Sea oil staff today that some are to lose their jobs as its looks to save costs amid the plunging cost of oil.

Sky sources say 300 jobs are involved. BP is due to brief workers in Aberdeen today on its plans, which it had previously said would result in $1bn (£630m) of restructuring costs this year, 

BP is keen to ensure its business in the North Sea remains competitive and sustainable for the long term as Brent crude costs hover below $50 per barrel - down from $115 last June.

The company said on Wednesday: "It has been well signalled around the industry that costs have been rising and we need to respond to toughening market conditions in line with our competitors and move our cost structure into a competitive and sustainable position."

It was due to make its announcement 24 hours after the governor of the Bank of England, Mark Carney, warned that falling oil prices represented a "negative shock" for the Scottish economy - but a "net positive" for the UK as a whole, given benefits for consumers.

Shell and Tullow Oil are among other oil firms which have scaled back their investments.

Tullow reported on Wednesday that its gross annual profits were expected to fall by more than half on 2013 - and it was taking a writedown of $600m due to asset revisions.

It also raised the prospect of major job losses - warning that: "A major internal review of Tullow's organisation is ongoing which will lead to substantial long-term cost savings and efficiencies across the group."

Tullow added that it expected to announce the details at its full-year results on 11 February.

Its share price rose 3.2% in early trading when markets opened for business on Thursday while BP saw a 2.3% boost.

While mining and energy stocks generally recovered some ground following sharp falls on Wednesday, investors tend to like news of cost-savings because they protect profits.

Unions however warned of the potential for long-term damage to the country's energy capacity as a result of falling investment.

The RMT claimed tens of thousands of jobs were at stake.

Its general secretary, Mick Cash, said: "In the wake of the current price slump, RMT is demanding that Westminster and the Scottish Parliament adopt a crisis management approach to ensure sustained production, maintenance of infrastructure, retention of skills, and a robustly regulated regime in the future.

"If immediate action isn't taken then we risk turning today's crisis into longer term damage that would threaten the very core of our offshore industry.

"This is no time for playing politics when the security of UK energy supplies is on the line."

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Caesars Casino Firm Moves To Cut $18bn Debts

A subsidiary of US casino firm Caesars has filed for bankruptcy protection with debts of $18.4bn (£12.1bn).

Caesars Entertainment Operating Company, which owns and operates most of Caesars' properties worldwide, said it intended to keep the casino-hotels running, despite the bankruptcy filing in Chicago.

It was reportedly made to stop three creditors trying to push the firm into involuntary bankruptcy. 

The division of Caesars Entertainment Corporation employs 36,000 people at 38 casino-hotels, including the flagship Caesars Palace on the Las Vegas Strip.

It had been negotiating with creditors and lenders on a reorganisation plan that would turn the division into a real estate investment trust - one to own properties and the other to lease properties - promising creditors cash or new debt.

More follows...

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Minimum Wage: Firms 'Named And Shamed'

The Government has "named and shamed" 37 employers, including high street fashion brand H&M and Welcome Break, accusing them of failing to pay the national minimum wage.

It claimed the companies collectively owed £177,000 to their workers in arrears and they faced financial penalties of more than £51,000.

Other businesses named by the Government include a childcare centre in Wolverhampton, a tanning boutique in Glasgow, a building firm in Edinburgh and a cleaning company in Worksop.

The Department for Business said each company was thoroughly investigated by HM Revenue and Customs after workers made complaints to the free and confidential Pay and Work Rights Helpline.

Business Minister Jo Swinson said: "Paying less than the minimum wage is illegal, immoral and completely unacceptable.

"If employers break this law they need to know that we will take tough action by naming, shaming and fining them as well as helping workers recover the hundreds of thousands of pounds in pay owed to them.

"We are also looking at what more we can do to make sure workers are paid fairly in the first place. As well as being publicly named and shamed, employers that fail to pay their workers the national minimum wage face penalties of up to £20,000.

"We are legislating through the Small Business, Enterprise and Employment Bill so that this penalty can be applied to each underpaid worker rather than per employer."

Almost 100 employers have now been publicly named by the Government since a new regime came into force in October 2013.

Unions have been pressing for larger fines against firms found to be paying less than the statutory rate of £6.50 an hour for adults, £5.13 for 18 to 20-year-olds, £3.79 for 16 and 17-year-olds and £2.73 for apprentices.

Sky News is contacting firms identified by the Government for their response.

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Why Record Inflation Fall Is Not All Good News

How low is too low? That's the question economists are asking today after the Consumer Price Index (CPI) inflation rate dropped from 1% to 0.5%.

It's the lowest official inflation number for a decade-and-a-half, and the first time it has halved in the space of a month.

Moreover, with oil prices continuing to fall – now below $50 a barrel on the Brent crude international measure – the likelihood is that the CPI will only continue to fall.

At the very least it will drop to the lowest level since comparable records began in 1989. It may even drop into negative territory.

Should consumers be concerned? No. In the short term, this fall is good news – the equivalent of a tax cut for most consumers.

In fact, according to calculations by Capital Economics, the fall in petrol prices alone should put £455 back into the average household's pockets.

The fact that lower energy prices also push down a host of other costs should continue the 'tax cut' in coming months.

Moreover, with inflation at 0.5% it is now comfortably below the rate at which wages are increasing (1.6%, excluding bonuses) – so the longest squeeze on living standards since Victorian times is now at an end.

Finally, because inflation is well below the Bank of England's 2% target, it is even less likely to raise interest rates in the near future.

Market expectations for the date of a rate increase have now shifted from this summer to next spring. And the expected level in five years is now 1.4%, compared with 2% expected a couple of months ago.

That means more impetus for consumer spending in the coming months and, perhaps, an even stronger recovery later this year (though the near-term turbulence in Russia and elsewhere caused by falling oil prices might weigh on growth in the immediate future).

However, it's not all good news. There is good deflation and bad deflation. Good deflation, of the kind depicted above, is a temporary cut in prices – a temporary boost to consumers' real incomes.

No one changes their behaviour or spends less as a result – quite the contrary. Bad deflation is the kind witnessed in the US in the 1930s when prices fell for a prolonged period of time along with wages.

Because this deflation lasts longer, and is associated with weaker growth, it is trickier to shake off.

There are serious concerns this kind of deflation is taking hold in Europe – quite apart from recent oil-led falls. Indeed, in certain countries, such as Greece, this 1930s-style deflation is already quite evident.

Prices are now falling across the Eurozone, and if economists' forecasts are to be believed, they could stay low for some time.

That's why the European Central Bank looks likely to engage in full-blown quantitative easing either this month or soon afterwards.

The only question is quite how it has managed to structure the programme so it doesn't fall foul of the inflation hawks at the Bundesbank.

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Osborne: No Need To Fear Low Inflation Rate

Britain should celebrate the low inflation rate and not be frightened by it, Chancellor George Osborne is to insist.

He will say the slump in the headline rate to just 0.5% is due to external factors - and the benefits for consumers should be welcomed.

The comments, in a speech to the Royal Economic Society on Wednesday, come as Mr Osborne and Bank of England governor Mark Carney seek to calm nerves over the issue.

Bank of England chief Mark Carney

The Consumer Prices Index (CPI) hit its joint lowest level in December, thanks mainly to cheaper food and petrol.

Economists said the continued plunge in the oil price meant it was likely to fall further and a brief period of negative inflation was "not entirely out of the question".

Video: Consumers Welcome Price Drops

Mr Carney - who is due before the Treasury Select Committee later - has conceded deflation is now "possible", but insists Britain has the tools to deal with it.

Mr Osborne is expected to say: "The low inflation we see here in the UK is much more welcome than in the eurozone where inflation has been very low for some time and is now negative.

"There the debate has understandably turned to the dangers of deflation - the risk of a self-reinforcing spiral where economic activity falters, consumers defer purchases as prices fall and nominal debt burdens become ever harder to manage."

Mr Osborne will suggest the European Central Bank's inflation target could be changed so it is obliged to take action when inflation is below 2% - as well as above it.

Video: Low Inflation - Good Or Bad?

"In the UK our system is well equipped to deal with negative inflation shocks just as it dealt with the surge in commodity prices in 2010 and 2011," he will say.

He will add: "Of course we will always remain vigilant to ensure that inflation is low for the right reasons.

"But we should not confuse this welcome news for Britain's households as a result of falling oil prices with the threat of damaging deflation that we see in the eurozone.

"Rising real incomes, a recovery spreading to all parts of our economy, and family budgets that can stretch that little bit further - let's celebrate these effects of low inflation, not fear them."

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Global Economy 'Running On One Engine'

The World Bank has cut its growth forecast for 2015 and next year, declaring that the world's economy is "running on a single engine."

Its twice-yearly Global Economic Prospects report said that weakness in the eurozone, Japan and in some major emerging economies offset the benefit of lower oil prices.

The global development lender predicted the global economy would grow 3% this year - falling from its previous forecast of 3.4% in June last year.

GDP growth would achieve 3.3% in 2016, it predicted.

World Bank chief economist Kaushik Basu said: "The global economy is at a disconcerting juncture.

"The global economy is running on a single engine, ... the American one. "This does not make for a rosy outlook for the world."

The body said strong growth prospects in the United States and Britain separated them from other rich nations.

It warned on the potential impact of deflation in the countries using the euro and in Japan and said that among emerging market economies Brazil and Russia in particular weighed on its predictions.

Russia, which is heavily dependent on oil revenues, is suffering amid a 60% plunge in world oil prices - coupled with sanctions imposed by the West over its actions in Ukraine.

The resulting weakness of the rouble has stoked inflation leaving the country facing the prospect of recession.

Growth has slowed in China but it is more a managed slowdown as it transitions away from an investment-led growth model.

The report said that while lower oil prices should be a  net positive for the world economy, it would increase short-term market volatility and reduce investments in unconventional oil such as shale and deep sea oil.

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Energy Bills: E.ON Cuts Gas Prices By 3.5%

E.ON, one of the so-called 'Big Six' energy firms, has confirmed it is to reduce its standard gas charge by 3.5% with immediate effect.

The company said the decision, coupled with a new one-year fixed dual fuel product it was also launching, represented a "risk" given Labour's pledge to introduce an energy price freeze should the party win May's election.

It insisted it had passed on to customers as much as it could, with wholesale costs having plunged by around 30% in the past year.

E.ON said the average reduction to its standard gas price was equivalent to two weeks' gas use or £24 off an annual gas bill.

The household supplier, which has 4.5 million residential customers, claimed the fixed product was the best on offer in the market at an average £923 annually and was available from today, saying it was open to new and existing customers.

Chief executive Tony Cocker said: "Today's 3.5% cut to our standard gas price and the launch of the UK's cheapest energy tariff, our one year fixed product,  demonstrate that we fundamentally believe in doing the right thing for our customers.

"This is further evidenced by the fact we are the first supplier to reflect through our standard tariff the overall drop in wholesale gas prices this winter but also that, when our prices had to increase at the start of 2014 to reflect cost increases, for the second year running we announced later than any other major supplier and, on that occasion, at a lower average percentage increase level than any other major supplier.

"While oil prices have slumped, the gas price has remained volatile - some days up, some days down - and many of the other non-energy costs that we don't control but make up a customer's bill have increased and are set to increase further.

"However, today we've taken steps so we can make a price cut on our standard gas tariff at the same time as offering customers, existing and new, the chance to sign up to the UK's lowest priced energy tariff.

"As we have always said where it is possible we will try to pass savings on to our customers."

Wholesale gas costs fell 26% between the third quarter of 2013 and and the same period in 2014 and have fallen further since.

The plunging costs have prompted political parties, with the election in mind, to pass on the reductions to households.

Sky News reported at the weekend that firms were reluctant to slash standard bills before May, given the fact that raw energy had been purchased at higher prices over years to ensure supply and the prospect of a looming price freeze.

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Debenhams Shares Take 9% Hit On Trading Woes

Investors headed for the exit door after Debenhams reported a fall in first quarter sales, despite an improved Christmas performance.

The country's second-largest department store chain said UK like-for-like sales fell 0.8% in the 19 weeks to 10 January.

However the firm, which has 240 stores and trades across 28 countries, said that over the four weeks to 10 January underlying sales were up 4.9%, with revenues boosted by less discounting and an improved online delivery offer.

Debenhams said trading was at record levels over Christmas week.

Chief executive Michael Sharp said: "I am pleased with our performance in the critical Christmas trading weeks, driven by our strength in a diverse range of product categories and a strong marketing campaign focussed on gifting.

"Our performance steadily improved following the well documented challenges in the clothing market in the autumn.

"We now have a competitive online proposition with next day delivery to home and next day click and collect, which customers took full advantage of and which performed well over Christmas.

"I would like to thank the whole Debenhams team for their tremendous efforts in delivering this performance."

Shareholders did not seem to agree that the trading update was positive, with Debenhams' value down 9% in early trading.

Among other retailers reporting Christmas trading updates on Tuesday was ASOS, the online fashion specialist.

It said there was a 15% increase in like-for-like sales for the six weeks to 9 January - helping its share price grow 12% when the market opened following a tough 2014 that saw it hit by a damaging warehouse fire.

Greggs, the bakers, raised its full-year profit guidance while reporting an 8.1% rise in like-for-like sales for the five weeks to 3 January.

Its share price rose 6% when trading began.

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Morrisons Boss Quits After Festive Sales Fall

By Mark Kleinman, City Editor

The chief executive of Wm Morrison is to step down after a slump in Christmas sales led the grocer's board to conclude that a new leader was required to transform its fortunes.

Confirming an exclusive report on Sky News, Morrisons said that Dalton Philips would leave the company following its full-year results, with a search underway for his successor.

News of the change came as Morrisons reported Christmas trading figures which underlined its status as the also-ran among the big UK supermarket chains, with a like-for-like sales fall for the six weeks to January 4 of 5.2% including fuel.

Mr Philips said he would be leaving "a great company", adding that during his five-year tenure "many improvements [have been made] to the business and given Morrisons strong foundations for the future".

Morrisons also confirmed that Andrew Higginson, a former Tesco executive, would take over as its chairman from Sir Ian Gibson in January.

Mr Higginson said: "In the next chapter of Morrisons development, we need to return the business to growth. The board believes this is best done under new leadership. I would like to thank Dalton for his contribution as CEO. 

"He has brought great personal qualities and values to his leadership of the business, having had to manage against a background of considerable industry turmoil and change."

Mr Philips deserved "particular credit for facing into and dealing with the pricing issues that have now become evident, for taking the business into the convenience and online channels, and for the steps he has taken to modernise the company's operating systems," Mr Higginson added.

Morrisons' like-for-like trading performance was worse than the City had forecast, and placed the company firmly in the foothills of the battle for growth, with J Sainsbury and Tesco both reporting superior figures last week.

Mr Philips, a former executive at Loblaw, Canada's biggest food retailer, became Morrisons' boss in March 2010, and also sits on the board of the Department for Business, Innovation and Skills.

During his tenure, Morrisons has struggled to modernise its business in the face of tough competition from supermarket discounters and established rivals.

Last autumn, Morrisons announced thousands of job cuts and the introduction of a new loyalty scheme in a bid to stem the decline in sales.

When asked about Mr Philips' departure on Monday night, Morrisons said it did not comment on management changes.

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