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Friday newspaper round-up: British Gas, BP, Ryanair

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Date: Friday 18 Jul 2008

LONDON (ShareCast) - Gordon Brown and Alistair Darling are to attempt to borrow their way out of Britain’s economic problems by drastically revising the rules that have governed Labour’s stewardship of the economy for 11 years, reports the Times.

The Chancellor is expected to change the fiscal rules in the autumn to enable borrowing to go beyond the maximum 40%of gross domestic product allowed under the existing rules.

Meanwhile, an independent panel of "wise men" would be able to advise the Government on how much it should borrow and spend each year under radical new plans being considered by the Conservative Party. The Tories are planning a complete overhaul of Gordon Brown's borrowing rules should they win office, warning that the rules have enabled Britain to generate the biggest structural budget deficit in the Western world, reports the Telegraph.

Sixteen million customers of British Gas will pay about a third more for gas and electricity from next month, with average bills rising to £1,300 a year. The other five major energy companies - E.ON, EDF, Scottish and Southern Energy, ScottishPower and npower - are expected to announce similar increases. Centrica, which owns British Gas, issued a fresh warning that domestic gas bills will rise from about £600 now to more than £1,000 per year if oil prices remain high, reports the Times.

Josef Ackermann, Deutsche Bank's chief executive, yesterday said the credit crunch was at "the beginning of the end" as banks and regulators have taken action to deal with the crisis and many businesses were slowly returning to normal, reports the FT.

TNK-BP's beleaguered chief executive has said a battle between BP and its Russian partners threatens to tear the oil venture apart after 16 of the company's senior Russian managers rebelled by filing suit against him for discrimination. Robert Dudley said yesterday the lawsuit was a cynical "attack at the heart of the company" engineered by BP's Russian billionaire partners in the 50:50 oil venture to split the company along nationalistic lines, reports the FT.

The International Monetary Fund (IMF) has raised its global economic forecast for this year and 2009 because the effects of the credit crisis were not as bad as expected. The IMF yesterday revised up estimates it made in April and said it now expects the world economy to grow by 4.1 per cent this year, up from 3.7 per cent. The IMF revised up its forecasts for growth in the UK. The fund had forecast 1.6 per cent growth in the UK this year and next but it now expects expansion of 1.8 per cent in 2008 and 1.7 per cent in 2009, writes the Independent.

The Financial Services Authority has provisionally fined Winterflood Securities £4m, the biggest penalty for market abuse imposed on a regulated financial firm, it emerged yesterday. Winterflood, which is owned by Close Brothers, the investment bank, was fined over share dealings in an AIM-listed company called Fundamental E Investments (FEI) that took place in 2004. Winterflood denied the allegations yesterday and said it had referred the case to the Financial Services and Market Tribunal for a formal ruling, reports the Times.

Ryanair brushed off criticism that it had expanded too fast as it revealed it would ground 20 planes this winter, mostly at Stansted, and temporarily close seven European bases as rocketing oil prices and airport costs made services unprofitable. Michael O'Leary, chief executive, said the low-fare airline would cut its fleet at Stansted to 28 planes for the winter schedule - eight fewer than in winter 2007. It is also taking out four planes at Dublin and one at an as yet undisclosed Spanish airport. Around 100 Ryanair jobs will go at Stansted and 50 at Dublin, reports the Telegraph.

Dawnay, Day, the troubled property to banking conglomerate, has placed two of its property companies in administration as its directors sold more shares in Dawnay, Day Treveria, the listed property fund. It has also emerged that the group is in discussions to sell a 51 per cent stake in its investment banking arm to a Portuguese bank after receiving 13 expressions of interest in the business. Dawnay, Day Investment Banking was put up for sale last week as its parent company sells assets to pay its debts.Dawnay, Day yesterday appointed BDO Stoy Hayward as receivers at Starlight Investments and Insureprofit, two of its privately held property companies, as they went into administration, reports the Times.

UBS caved in to mounting pressure from the US Government yesterday and announced plans to close the Swiss bank accounts of all its American customers and prepared to lift the veil of secrecy that has protected its clients for centuries. Mark Branson, the chief financial officer of UBS's global wealth-management unit, told a Senate hearing into tax evasion in Washington: “We have decided entirely to exit the business. UBS will no longer provide offshore banking or securities services to US residents through our bank branches,” writes the Times.

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