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Tuesday newspaper round-up: Abbey, British Energy, Logica

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Date: Tuesday 08 Apr 2008

LONDON (ShareCast) - First-time buyers lacking a sizeable deposit will no longer be able to secure a mortgage deal. Abbey, Britain’s third-biggest lender, is the last big bank to abandon 100 per cent mortgages – loans that cover the entire purchase price of a property.

To be eligible for a mortgage deal the average first-time buyer must now save nearly £7,500 for a 5% deposit on the £148,000 cost of an average first home, reports the Times.

The government said yesterday that it would not stand in the way of a foreign-led takeover of British Energy on strategic grounds. As shares in British Energy, which is 35% owned by the government, soared yesterday amid continued speculation about a possible £10bn takeover approach, a spokeswoman for the Department for Business, Enterprise and Regulatory Reform said that it was “not UK energy policy to encourage national champions,” reports the Times.

The private equity owners of Somerfield have started exclusive talks with Co-op and hope to seal a deal to sell the UK’s fifth-largest supermarket chain at close to their £2bn target valuation by next week. The mutually owned Co-op supermarket group has made the only bid for Somerfield. Its initial offer of about £1.7bn left Somerfield’s private equity owners cold but a revised offer at the end of last week has since allowed talks to resume, says the FT.

Software group Logica is set to make significant UK job cuts this month as the new chief executive tries to bring his ailing company in line with changes in the IT services market. Morale at the company is low, with staff facing an uncertain future until Andy Green's strategic review is made public on 22 April, according to an industry insider, reports the Independent.

JC Flowers, the US private equity group, tried to convince Friends Provident to open its books yesterday by providing financing details for its £3.5bn bid but its efforts fell short after Friends refused to budge, reports the Times.

The director-general of the British Retail Consortium has urged the Bank of England to cut interest rates by up to half a percentage point this week or face a possible wave of job cuts across the high street. Stephen Robertson, who took over at the BRC two months ago, said that retailers were coming under intense pressure to shelve recruitment plans and training schemes, given the spending slowdown since the new year, writes the Times.

Economic growth next year will fall significantly below government forecasts, creating a tax shortfall of up to £20bn that will jeopardise one of the Treasury's key stability rules, says the Institute of Directors. In its spring economic forecast, the IoD warns that the Government is "almost certain" to miss its sustainable investment rule of keeping the national debt at less than 40% of the national income, because it expects economic growth next year of 2.25%-2.75%. The IoD claims growth is unlikely to top 1.5% in 2009, reports the Telegraph.

Germany's Deutsche Telekom yesterday faced the first day of a vast and unprecedented case in which it is being sued by thousands of investors. More than 16,000 claimants are taking part in the trial, which is the biggest held in Germany since the creation of a 2005 law allowing cases similar to US "class action" suits. The embittered shareholders claim that Telekom misrepresented its assets in a June 2000 share issue worth more than £10b, reports the Telegraph.

City grandee Paul Myners has been dragged into the libel case being brought by Tesco against The Guardian newspaper. Details of an alleged conversation between Mr Myners, the chairman of Guardian Media Group, and David Reid, the chairman of Tesco, were included in a writ filed by Tesco at the High Court last week. Tesco cites the conversation as evidence that The Guardian published claims that the retailer avoided paying £1bn in tax, despite knowing that the allegations were "false, malicious and defamatory," reports the Telegraph.