The Guardian from London, Greater London, England • 16

16 Thursday January 18 1996 Lloyds bids add fizz to flat market, page 18 Tomorrow: Alan Sugar's other firm and Bill Gates' finals FinanceQuardton Financial Editor: Alex Brummer Telephone: 0171-239-9610 Notebook Government twists in debt trap Parenting help for infant technology ceeds and lower interest payments will help to bring the PSBR back on track. Mr Coleman said: "The numbers simply don't add up. The Treasury has badly misjudged the outlook for disposable income which has been hit by structural changes in the labour market and the lack of confidence restricting wage demand." According to the Central Statistical Office, the number of people out of work and full year would be 29 billion, a 7 billion improvement on the 35.9 billion racked up in 1994-95. But David Coleman, economist at Canadian Imperial Bank of Commerce, said it was unrealistic to expect the public finances to be 7 billion better in the final three months of this financial year than they were a year ago. The Treasury believes that stronger corporation tax receipts, privatisation pro claiming benefit dropped by 7,900 in December to 2,236,900.

leaving the unemployment rate unchanged at 8.0 per cent. However, the separate Labour Force Survey which collects unemployment data on an internationally agreed basis found that all the jobs created in recent months were part-time. The LFS showed that in the three months to Novemher, overall employment rose by 38,000 but within that total the number of full-time jobs fell by 9,000 while part-time posts were up by 50,000. Unemployment on the LFS measure fell by 15,000 in the three months to November, compared to a 47,000 drop in the claimant count. Joblessness is now 228,000 higher on the internationally-accepted yardstick than on the benefit measure.

Although some City economists remain optimistic about the chances of the Gov- Larry Elliott and Richard Thomas STAGNANT wages and the drift to part-time work are playing havoc with the public finances and threatening to push government borrowing above 30 billion this year, according to official figures released yesterday. Despite the 28th successive monthly drop in seasonally adjusted unemployment which took the jobless total to a four-and-a-half-year low. the shrinking dole queues have yet to translate into the expected pick up in tax revenues. The public sector borrowing requirement the gap between the state's income and its spending was 1 billion in December and stood at 23.9 billion for the first nine months of the 1995-96 financial year, virtually unchanged on the 23.8 billion in the same period of last year. Chancellor Kenneth Clarke predicted in last November's Budget that the total for the emment getting close to its PSBR target, they still believe interest rates will be cut over the next couple of months to keep the economy moving.

Mr Clarke met the Governor of the Bank of England, Eddie George, yesterday afternoon, but City analysts said an immediate reduction in the cost of borrowing was unlikely unless today's data on retail sales and prices pointed to further weakness in the economy. The labour market data also showed that earnings rose by 3.25 per cent in the year to November, the fifth successive month that wage growth remained flat. While the overall number of job vacancies dropped by 3,400 in December, manufacturing employment picked up in the autumn, with the latest figures for November showing a 4,000 increase. Rising employment in factories coupled with flat output has hit productivity, which fell by 0.1 per cent in the three months to November, the worst performance for 10 years. Germans likely to France and perhaps even the US than there was a month ago.

The 10 basis point cut in German market rates reflects this to some extent. And despite the Governor running up the flag over wage costs, the latest earnings figures suggests that labour cost pressures remain subdued Vauxhall notwithstanding. Nevertheless, it is not clear that the UK economy unlike its continental neighbours has fizzled. Anecdotal data suggests that retail sales are buoyant, and the economy could receive a decent consumer jolt from the Tessa maturities, building society payouts, electricity rebates and tax cuts to come. By the time the Governor and the Chancellor meet next month the picture could be less cloudy, particularly if this weekend's G7 provokes another burst of easier money.

stick on to 5 and 3 per cent respectively though there are still hopes that they will be reduced in the spring. Those hopes have not been dampened by comments from a number of Bundesbank council members, hinting that the German central bank may still have room for manoeuvre on rates. "It is just too soon," said Chemist's shares soar on 500m sale talks ian King LLOYDS Chemists. Britain's second biggest pharmacy chain, is expected to be sold next week to rival drugs group Unichem for just under 500 million, after it yesterday admitted receiving a bid approach. Unichem, which owns the Moss Chemists chain but which is better known as a pharmaceuticals wholesaler, said it did not comment on market rumours.

But sources close to Unichem said "an agreed bid of around 4 a. share, valuing Lloyds which also owns the Holland Barratt health stores chain at just under 500 million, was expected to be thrashed out by the weekend. Rumours of a takeover bid for Lloyds, whose shares raced up 75p to 366p after the talks were confirmed, have been circulating in the City for a number of months. Several other potential bidders, including Boots, Asda Edited bv DESPITE some well publicised court cases, the relationship between banks and small and medium sized enterprises in the UK appears to be improving. As interest rates have fallen, the margin over base rates charged by the banks although too high at 3 to 4 per cent has, at least, remained constant.

Moreover, there has been a move from unstable overdraft lending to term lending, and banks are showing more sophistication in dealing with small businesses, according to the latest report from the Bank of England on small firms finance. That is not to say all is now well. The volume of new small business lending slipped last year, even though enterprise is meant to be at the vanguard of British growth. It is difficult to obtain a firm fix on what the situation would be were the economy in recession, rather than on an incline. As the Bank's deputy-governor, Howard Davies, pointed out in Manchester last night, there are still critical shortcomings in small firm finance in the UK, particularly in the area of equity capital.

This is partly the result of UK entrepreneurs unwilling to give up equity in the businesses they have created. But, more seriously, it is the result of a pathetic venture-capital industry and a. shortage of business angels willing to back enterprise. This has put Britain at a'serious disadvantage in areas of new technology where banks are cautious and venture funds too sceptical to back processes they don't understand. Mr Davies advocates the development in the UK of a culture of corporate parenting where larger, research-orientated companies put resources into promising smaller enterprises operating in adjacent areas.

As companies such as Glaxo Wellcome which have backed promising enterprises have found, supporting innovative companies can bring rich rewards for the investor, the infant technology and the nation. Bank's tilt NATURALLY, lower interest rates would help not just small enterprises but the economy as a whole. But following the latest monthly meeting between the Governor, Eddie George, and Chancellor Kenneth Clarke, we may have to wait a bit for that. However, the Bank's analysis may be shifting towards further easing. There appears to be more concern about economic slowdown in Germany, Lord Justice Phillips has the power to discharge a juror in such circumstances and to instruct a jury of 11 to continue its deliberations.

Alternatively, he may suspend the deliberations until she has recovered. The judge asked the 11 jurors to return to their hotel and discuss with the twelfth juror the implications of the delay. In particular, he asked them to consider whether the current delay would make their deliberations "much more difficult" and whether it would create "personal repo cut Bank Julius Baer's chief economist, Gerhard Grebe. "The Bundesbank will want to see the impact of that December rate cut before taking any further steps," he added. Economic growth in Germany has slowed recently, leading to pressure for a further cut in borrowing costs to help get the economy back on a growth path.

Maxwell jury Dan Atkinson THE Maxwell trial was heading into the record books last night after a second day's deliberations were suspended because of a juror's illness. The seven women and five men have now spent 10 nights in a hotel. This exceeds the previous record, believed by the Lord Chancellor's Department to involve deliberations stretching over nine nights. Even if last Sunday night is excluded, as the jury had the day off, Lloyd's answers at which it provides short-term lending to the money markets from 3.73 per cent to 3.65 per cent, ahead of expectations. But analysts argued that it was unlikely the Bundesbank would sanction cuts in the Lombard and discount rates at its regular council meeting today.

They were last reduced by O.S per cent in December A price tag of 4 a share would value chairman and founder Allen Lloyd's 7.5 per cent stake in the Warwickshire-based company at around 36 million. After college, he joined Boots, but left to set up on his own after being told he was not management material. An intensely private man, whose main passion outside work is his collection of Jaguar cars, Mr Lloyd set up the group in 1973 from a single shop. However, he has had a stormy relationship with the City since Llqyds went public a decade ago, prompted largely by scepticism at Lloyds' accounting policy. The row came to the boil last March, when Lloyds shares crashed, following the group's decision to shut its loss-making Supersavc chain.

Mr Lloyd's private fortune, including his shares in Lloyds Chemists, is said to be worth well over 40 million, and last year he collected a total salary, benefits and bonus package worth 648,000. critics The main plank is to register all the insurance market's key senior staff and then to monitor and discipline them closely. Transgressors will be dealt with by warnings, fines and even expulsion from the market. Such measures are possible already but Sir Alan said the revamped system would be directed more sharply at individuals rather than at the firms for whom they work. The new regime aims to ensure that policyholders are treated fairly and that all valid claims are met.

Lloyd's also hopes its enforcement of strict market standards will convince Names that they too are being dealt with fairly. Gung-ho culture average salary in Patrick Donovan, Chris Barrie and Paul Murphy BRITAIN'S highest paid director, Charles "Cop-perfingers" Vincent who was yesterday revealed by the Guardian as earning at least 15 million a year runs the world's most bizarre management training programme. While many companies send staff on outward bound courses or weekend brain-storming sessions, Mr Vincent's Winchester Commodities Group reckons that the Monte Carlo gaming tables are a better way of developing an esprit de corps. According to one former employee, four of Winches-ter's top traders were recently given 25,000 each and told not to return until they had turned their stake into at least 500,000. That gung-ho culture runs right through the extraordinarily profitable futures and commodity dealing operation which must be paying the highest average salary in corporate Britain.

Mark Miner THE Bundesbank eased a key money market interest rate yesterday but analysts warned the move was unlikely to herald an immediate reduction in interest rates in the wider German economy. The German central bank cut its repo rate the rate and Tesco. all but ruled themselves out of the running. Last night, a leading City analyst said it would "make sense" if Unichem was the bidder, as the two companies were very complementary businesses. He went on: "Unichem is big on the distribution side but weaker on the retail side, while Lloyds is the opposite, so it would be a good match." Lloyds Chemists Share price, (p) 340 I AMJJASOND'J man of Lloyd's regulatory board.

Yesterday, Sir Alan said he was confident that the new plan addressed all the committee's concerns in full. Sir Alan said the main aim of the plan was to "get regulation on the front foot. A great deal of time has been spent fi re fighting, plugging holes and dashing from one place to another." The new-look regulatory system would take preemptive, remedial action rather than let problems build up. The plan is likely to be seen as the first stage in preparing Lloyd's for external regulation, something Labour has already committed itself to. because they earned less than 15,000 a year.

The judge ruled that the European Council's "Acquired Rights Directive" excluded pension rights and required member states to provide protection only for pension contributions accrued up to the date of privatisation. He said the directive had been correctly written into UK domestic law in the 1981 Transfer of Undertakings (Protection of Employment) Regulations TUPE. In a joint statement Unison and the GMB, the two trade unions which backed the women's case, said they were "extremely disappointed and considering an So far CCT has been limited to blue-collar workers but is being extended to public sector white-collar workers employed in a number of services. Chris Mullen, of Biddle Co, the law firm which represented BET Catering Services, said the ruling will force the Government to "rethink" the guidance which it issued less than a year ago requiring those tendering for local authority contracts to provide a broadly comparable pension scheme. SOD VP' 280 jj iw Stretching EMU THERE is a degree or irony about Italy's foreign minister Susanna Agnelli pledging to keep the European Union on a timetable for monetary union her country will not be able to meet.

But at least the problems of doing so are becoming clearer. Take yesterday. On the one hand, Bundesbank council member Hans Jtirgen Krupp was warning that Germany's efforts to achieve the monetary union criteria laid down in the Maastricht treaty would hit the country's economic development, but allowing the timetable to slip would see others backslide on monetary rectitude. On the other hand, Eddie George is reported to have told an Austrian magazine that forcing EMU through without sufficient economic convergence risks dividing, rather than uniting, Europe. The snag for the EMU hares is that economic slowdown is reducing the chances or a credible group effectively Germany, France and the DM satellites being ready for EMU by the end of 1997.

They may have to pin their hopes on some "flexible" interpretations of the treaty's terms and a recovery in economic growth. The French and German governments are working on both aspects. Economic growth will be a vote winner, but talk of flexibility is not what they like to hear in Frankfurt. Pharmacy chase LLOYDS Chemists has looked like a bid target for some time. City dissatisfaction with its corporate governance, accountancy practices, and its capacity to spring unpleasant surprises like the restructuring of its Supersave drugs chain have left it fairly friendless.

Moreover, the price cutting started by Asda in food supplements was unlikely to assist. Unichem may be the favourite to make founder Allen Lloyd a very rich man. but other high street names could push up the asking price. problems" for their domestic lives. Lord Justice Phillips asked the jury to put the result of their discussions in a note to be handed to him this morning.

Kevin and lan Maxwell and financial adviser Larry Trachtenberg deny one charge of conspiring to defraud pension funds by misusing 22 million of pensioners' assets. Kevin denies a second charge of conspiring with his late father Robert to defraud pension funds by misusing 100 million of assets. Kingfisher emphasised the patchy sales picture with an increase of more than a fifth at Comet, but sales at do-it-yourself chain, down by 3 per cent on a comparable basis. The Woolworths chain bounced back from last year's dismal Christmas, which prompted a boardroom clear-out, with sales more than 7 per cent higher. The group's other UK chain, Superdrug, boosted sales by 2.5 per cent to produce its best Christmas yet.

Paulina Springett LLOYD'S of London yesterday published the first regulatory plan in its 300-year history and insisted it had tackled all the criticisms of its system made by a Commons Select Committee last year. The committee had recommended that Lloyd's should scrap its current system of internal rule enforcement and switch to external regulation. It condemned Lloyd's existing system as "fundamentally and irretrievably tarnished" and also severely criticised Sir Alan Harcastle, the chair The Smoke in flames The NatWest tower in the City of London was hit yesterday by a spectacular fireball which ripped through the 45th (top) floor of the 150 million building, devastated by an IRA bomb in 1993. No one was injured. About 30 firefighters tackled the blaze, putting it out within 30 minutes photograph: tom jenkins deliberations head for the record books School-dinner ladies lose right-to-pension test case pays out highest corporate Britain Just 48 staff are employed at its luxuriously appointed headquarters in Winchester, complete with gilt chandeliers and high-backed leather chairs on the dealing floor.

But the bill for salaries and fee income amounts to as much as 55 million. Nearly 30 million of this was paid out as fees to Mr Vincent and Ashley Levett, a former director and business partner who resigned last year. Complete with private helicopter and fleet of luxury sports cars, Mr Vincent lives behind the electric gates of The Old Rectory, an extensive spread in the village of West Tytherley, near Salisbury. But his high-rolling lifestyle appears to have won him few supporters at Black Horse, the local pub. Villagers complain that he makes little effort to get involved in the community.

He is the only other director listed for one of his private companies, CAMV, which receives the multi-million fee payments from the parent Winchester Commodities Group. the trial seems certain to set a new peak in terms of time taken to reach verdicts. The judge. Lord Justice Phillips, told the 11 fit jurors yesterday on Day 129 of the trial that the sick juror, whose illness led to the suspension of deliberations on Tuesday, was still unfit for duty. There was a chance she may have recovered by today, said the judge.

If not, he would be "very reluctant to discharge someone who has been one of your number right up to this Tesco's December sales were 10 per cent higher than in the previous year, excluding sales from new stores. That boosted the sales picture for the autumn as a whole, with sales for the 20 weeks to Christmas 8.5 per cent above autumn 1994 almost half of which was due to higher prices. Sir Ian said that fresh produce and delicatessen lines had gone particularly well, with wine and Christmas gift items selling strongly. He noted that the record Margaret Hughes Perianal Finance Editor HUNDREDS of thousands of former public sector workers whose jobs have been or will be privatised through the Government's Compulsory Competitive Tender (CCT) scheme, yesterday lost their automatic right to a comparable pension. A High Court ruling said they are not covered by European employment protection laws.

The decision also covers former employees of private companies who have sold off part of their businesses to other companies. In a test case brought by 11 Lancashire school-dinner ladies, Mr Justice Robert Walker held that Lancashire County Council did not breach European law in failing to ensure that their right to belong to an occupational pension scheme carried over into their new employment with BET Catering Services. The women, who when they worked for the council were entitled to join the nationwide Local Government Pension Scheme, were not eligible to join BET's own scheme Tesco winter sales buoyant but Body Shop issues profit warning sales performance coincided with the first Christmas that Tesco had not advertised on television. Instead, the company relied on direct marketing, associated with its Club-card loyalty scheme. Customers cashed in Clubcard vouchers worth more than 25 million at Christmas.

At the other end of the supermarket spectrum, Bud-gens reported a 4.5 per cent rise in sales in the six months to mid-November, which continued over Christmas. Roger Cowe TESCO emphasised its pole position among UK supermarkets with news yesterday of buoyant sales this winter, including what chairman Sir Ian Maclaurin described as "the best Christmas But there was a mixed picture from other retailers, ranging from a profit warning at Body Shop to booming sales at Kingfisher's Comet electrical chain..