Business Blogs and News

I support Michael Meacher’s call for a public inquiry into the Consulting Association blacklisting conspiracy (Letters, 25 April). It was documents disclosed at my employment tribunal against the construction giant Carillion that brought to light the probable collusion by police and/or security services in the first place. I was granted a court order to view the entire unredacted database, and it was immediately apparent that information on some blacklisting files could only have been supplied by officers of the state. In my opinion, the most probable source for some of the surveillance intelligence appears to be undercover police officers who infiltrated leftwing and anti-racist groups (as previously exposed by the Guardian). Until a full public inquiry takes place, it will be impossible to get to the truth of how and why this information about union activists made its way on to an illegal blacklist run by private building firms.
Dave Smith
Blacklist Support Group

• I don’t think it is just the government we have to fear over data-sharing (Report, 24 April). A friend who got a supermarket credit card she has never used received a letter from the supermarket including the following paragraph: “We have recently reviewed the information we hold for you and we’ve noticed that you may be Politically Exposed [PE], or related to, or associated with, someone who is. A [PE] person is someone who is in a position of influence or power, for example [an MP].”

To our knowledge she is not PE, but we wonder why they think she is, and how they got their information.
Ed Richardson
Ringmer, East Sussex

http://www.guardian.co.uk/technology/2012/apr/29/shed-light-on-blacklisting-conspiracy

A new service has been launched aimed at mobilising public anger over executive pay.

Building on the protest vote against remuneration policies at Barclays on Friday, a new website will allow savers to email the major City institutions that manage their investments and demand they take action on executive pay.

The rebellion at Barclays came amid signs that institutional investors are beginning to take action against underperforming companies. Last week the pay policies of Central Rand Gold were voted down when 75% of investors voted against the remuneration report of the South-Africa-based company, which is listed in London. The pay policies were also rejected last year after a period of underperformance by the company, which was worth £300m at its flotation in 2007 but has sunk to just £15m now.

The new website – www.yoursayonpay.org.uk – is intended to give people a say on pay and is run by FairPensions. Mike Darrington, the former managing director of the bakers Greggs, is a supporter.

Darrington said: “It’s high time that we get a handle on excessive executive pay. For too long now many of those at the top of Britain’s biggest companies have continued to reap enormous rewards while profits and share prices fail to impress. I … urge anyone who cares about excesses at the top to take their online action.”

Even though investors have had a vote on pay since 2002, only 18 remuneration reports have had more than 50% of votes cast against them in 10 years, FairPensions said. This has sparked mixed responses to Vince Cable’s proposals to introduce new votes on pay policies that would be binding on directors, rather than advisory as they are now.

Catherine Howarth, chief executive of FairPensions, is also attempting to highlight the fact that institutional investors do not have to disclose how they vote at annual meetings.

“Until now scrutiny of high-paying companies has been left to big investors, who have shown themselves reluctant to take a strong stance on spiralling pay awards. It’s high time the public had a chance to influence this debate and have their say on pay,” Howarth said.

Speaking after the Barclays annual meeting on Friday, the bank’s chairman, Marcus Agius, said shareholders were increasingly keen to show they were taking action.

“The institutions … are also very keen to be seen to be exercising stewardship and that I completely respect,” said Agius. “The sentiment of shareholders is being heard everywhere. It’s not a Barclays-specific issue.”

Neither does it appear to be happening only in the UK. More than a third of investors protested against the pay of bankers at Credit Suisse last Friday, while in the US more than 50% of investors voted against remuneration at Citigroup.

http://www.guardian.co.uk/business/2012/apr/30/website-public-anger-city-pay

The “big six” stranglehold on the UK energy market means consumers are likely to pay almost £2bn too much on household fuel by the end of the decade because of failures to improve efficiency, warns a report.

The Institute for Public Policy Research (IPPR) argues that tougher regulation is needed by the industry watchdog, Ofgem, to improve competition and ensure pricing is fairer for consumers. This follows Ofgem findings that in 2010 the least efficient energy company spent more than twice as much on its operations per customer as the most efficient.

“We are calling on the big six and Ofgem to demonstrate whether efficiency savings are being achieved in the energy market and whether consumers are benefiting from lower bills as a result, as we would expect if competition was working,” said Will Straw, IPPR’s associate director.

The IPPR report, The True Cost of Energy, shows that annual efficiency savings of 2.5% in the UK’s energy market could deliver £1.9bn in savings for consumers in 2020. As well as easing the squeeze on living standards, this would more than offset the cost of green policies for affected consumers, it argues.

Adam Scorer, director of policy and external affairs at Consumer Focus, said the report raised a number of important questions about how competitive the energy market was and whether consumers lost out as a result.

“There are many improvements which can be made to this market, but a good start would be to ensure that smaller suppliers can compete with the big six on a level playing field. Customers also need to know that suppliers are really competing for their business by passing on efficiencies and wholesale cuts, as well as ensuring customer service is first rate.”

British Gas, RWE npower and other large power firms have faced political and public criticism, with rising energy bills pushing more and more households into “fuel poverty”.

The regulator has introduced a raft of initiatives demanding that companies provide more transparency over pricing and reduce the number of tariffs they offer to reduce scope for confusion.

The energy companies argue that their profit margins are extremely low and they are the victims of soaring prices of wholesale gas that is needed directly for homes or to generate electricity in their power stations.

The big six also argue that they are being blamed for the government’s failure to come up with a coherent energy policy that secures supplies while driving down carbon levels.

Ofgem’s evidence gives no indication that the dominant power companies have achieved efficiency savings and passed these savings on to consumers through lower bills, as would be expected in a competitive market, the IPPR argues.

The thinktank also accuses the big six energy companies of continuing to overcharge their existing customers to subsidise cheap offers. “As a result some families are paying as much as £330 more than their neighbours to use the same amount of energy from the same company. Over 5 million people could be overcharged because tariffs are not cost reflective as required by Ofgem.”

Ofgem has proposed to reform the industry, including plans to increase liquidity in the wholesale market to lower the barriers to competition, but it needs to go further to tackle loss leading and improve competition.

It first identified problems with competition in 2008 but its most recent package of reforms failed to improve conditions. Across 16 indicators, 12 showed no improvement or deteriorated, three slightly improved and one improved.

IPPR says Ofgem needs to address overcharging and loss leading by ensuring energy companies offer tariffs that are reflective of their costs. This includes providing an immediate update on the investigation into whether Scottish Power has breached its licensing requirements.

http://www.guardian.co.uk/business/2012/apr/30/big-six-energy-companies-regulation

Banks and insurers face a rocky 2012 as insolvencies rocket to levels not seen since the 1990s, according to a report by the Ernst Young Item Club.

The economic slowdown will also hamper corporate lending by the banks, the report said, which came after recession became official last week with figures showing the economy contracted 0.2% in the first quarter of the year. Lending to businesses is unlikely to recover to its 2008 peak before 2016, the report predicts.

In a separate study, the accountancy firm Deloitte’s consumer tracker found 51% of people were downbeat about their household’s disposable income, up two percentage points from 49% in the previous quarter.

After six weeks of bad news for the chancellor, George Osborne, starting with his ill-received budget, reports that the current borrowing squeeze will continue for several years will be disappointing. Britain joined many other EU nations in recession, including Belgium, the Netherlands and Spain, following a sharp fall in construction and poor figures from the financial and business services industries.

The Item Club said financial services faced a “worsening outlook as the real effect of sluggish growth continues to impact creditor and consumer behaviour”. It said write-offs on corporate loans will increase to 1.9% of loans in the corporate sector, from 1.6% in 2011. “Insolvencies are likely to rise more sharply in the north-east of England and Wales, where economic output is set to contract by 0.1% and 0.3% respectively,” it said.

Neil Blake, senior economic adviser to the club, said: “Although 1.9% doesn’t sound big, this will be the highest annual rate of write-offs since the mid-90s, and the more loans banks have to write off the less money they will have to lend. Consumer-led sectors such as retail are likely to be hit disproportionately hard as discretionary household spending is cut back amidst difficult labour-market conditions, especially in regions hit hard by government spending cuts.”

Blake said the rise in write-offs and lacklustre outlook for business investment and economic growth was the main reason he believed lending to corporates has worsened considerably since the last quarter.

The forecast is now for a contraction of 6.8% this year rather than the previous estimate of 5.7%. Corporate sector loans are not predicted to return to their pre-crisis peak of £575bn until 2016.

Blake said: “The contraction expected in 2012 is more acute than the 6.1% contraction last year, and means that the funding squeeze that corporates and SMES have been experiencing is only set to get worse.

The downbeat assessment of the economy was echoed by Ian Stewart, chief economist at Deloitte, who said the only positive note from its study were the signs that the slump in consumer sentiment may be bottoming out.

He said: “For consumers to spend more, disposable incomes need to improve. Wages are unlikely to see much growth this year, so the big hope is that sharply lower inflation will support consumer spending power. He added: “If inflation drops in the second half of this year, the UK consumer should see some modest growth. Yet the UK consumer remains vulnerable to events, particularly an intensification of the euro crisis or further rises in oil and energy prices.”

A rise in oil prices is often cited as a potential barrier to growth. Britain is particularly vulnerable to higher prices for oil and gas following a drop in the value of the pound and a dramatic fall over the last decade in North Sea output.

Concerns that the situation was already set to worsen came after a speech from a senior Bank of England official who said inflation was likely to stay higher than predicted. Deputy governor Paul Tucker warned that recent falls in inflation may come to a halt and stay above the bank’s target level of 2%. Wages are currently increasing at 1.1%, leaving a 2.4% shortfall in light of the 3.5% rate of inflation.

http://www.guardian.co.uk/business/2012/apr/30/uk-economy-forecasts-further-downturn

Social unrest is expected to grow in Europe as governments impose steep welfare cuts and fail to implement policies to reduce unemployment, according to a report by the International Labour Organisation.

As German engineers embarked on a wave of strikes in pursuit of a 6.5% pay increase and Spanish workers took to the streets of 50 towns to protest at welfare cuts and a jump in unemployment, the ILO said the situation in the 27 EU countries was becoming more unstable.

It said: “Society is becoming increasingly anxious about the lack of decent jobs. In 57 out of 106 countries, the Social Unrest Index increased in 2011 compared with 2010.” The report highlighted Europe, the Middle East, North Africa and sub-Saharan Africa as the areas most affected by strikes and protests.

IG Metall, Germany’s powerful industrial trade union, said stoppages and demonstrations that began across the country would intensify after Tuesday’s May 1 public holiday. Factories in Bavaria in southern Germany were the worst affected.

While manufacturing workers have kept their jobs, they have missed out on rewards enjoyed by shareholders and company executives. The employers’ organisation has offered a 3% pay rise over 14 months, which amounts to a freeze once inflation of 2.7% is taken into account.

In Spain, thousands protested against spending cuts introduced by prime minister Mariano Rajoy’s conservative government. The cuts, being particularly severely felt in the education and healthcare sectors, are aimed at tackling a debt crisis that has pushed the country back into recession and driven unemployment close to 25%.

Speaking at a party rally, Rajoy, who on Friday announced a new set of tax hikes to come into effect next year, said he had “no alternative”. He added: “Spain needs deep structural change, not makeup.”

Protesters in northeastern Barcelona, northern Bilbao, eastern Valencia and many other regional capitals carried banners urging Rajoy to not “mess around with health and education”. Labour unions called for large-scale protests to continue in coming months to persuade Rajoy and regional governments to implement measures to stimulate growth.

So far the number of protesters has remained small, though organisers blamed the rain over the weekend for the low turnout.

“People are not protesting in huge numbers; I don’t know what it’s going to take for the people to really stand up. The disenchantment is so brutal that people will not stand up and protest,” said Julian, a pensioner.

The ILO said it was concerned at the way young people were being shut out of labour markets and the rise of short-term contracts, which also hit the young and women more than other groups.

“Four years into the global crisis, labour market imbalances are becoming more structural, and therefore more difficult to eradicate. Certain groups, such as the long-term unemployed, are at risk of exclusion from the labour market. This means that they would be unable to obtain new employment even if there were a strong recovery.

“In addition, for a growing proportion of workers who do have a job, employment has become more unstable or precarious. In advanced economies, involuntary part-time employment and temporary employment have increased in two-thirds and more than half of these economies respectively,” it said.

http://www.guardian.co.uk/business/2012/apr/29/social-unrest-europe-cuts-strikes