Wednesday 18 May 2016

BUSINESS, POLITICS & CULTURE www.bloombergbriefs.com

TALKING POINTS EU 'Remain' Has Widest Poll Lead in 3 Months

Khan Backs : London BY ALEX MORALES Mayor said he would back A U.K. opinion poll showed the biggest lead in the proposed Garden Bridge across the three months for remaining in the European Union Thames if plans were amended to meet in next month’s referendum. The pound rose. his requirements. He said the project The Ipsos Mori telephone survey for London’s could rival New York's High Line, a public newspaper showed 55 percent park built on a disused railway line. of respondents saying they’ll opt to stay in the 28- nation bloc in the 23 June referendum, up from 49 Sun Headline Was 'Misleading': The percent last month. Support for a so-called Sun newspaper broke press standards fell to 37 percent from 39 percent, with 8 percent with a front-page headline reading undecided. The 18 percentage-point lead is the “Queen backs Brexit” after Buckingham biggest since mid-February and it was the second Palace filed a complaint saying it was Source: Chris Ratcliffe/Bloomberg poll in as many days to show a double-digit lead Prime Minister David Cameron was inaccurate, a watchdog group ruled. The for “Remain.” likely pleased to see the poll results. Independent Press Standards The poll will provide a boost to Cameron, whose Organisation ruled that the headline was Conservative Party is split down the middle on the issue. While the premier and “significantly misleading” and breached Chancellor of the Exchequer George Osborne are campaigning for a “Remain” vote, an accuracy clause in the group’s Justice Secretary Michael Gove and former London Mayor want to quit. Editors’ Code of Practice. Today’s poll showed that the largest shift in voting intentions was among Conservative Sotheby’s Sets Jewellery Record: supporters, according to the pollster. Sotheby’s beat its own world record for a “Remain has been boosted by a Conservative swing, but they are also more likely to jewellery sale, amassing $175 million at change their mind, so in this volatile election, with voters divided over the short and long- an evening auction of precious stones in term impacts of their decision, nothing can be taken for granted,” Ipsos Mori Head of Geneva where a pink diamond was sold Political Research Gideon Skinner said in an e-mailed statement. for $32 million.The Unique Pink, a 15.38- The pound jumped to a new two-week high against the euro and reversed its drop carat pear-shaped diamond, was against the dollar after the poll was published. estimated to be worth as much as $38 Ipsos Mori surveyed 1,002 adults by phone between 14 and 16 May. It didn’t give a million. margin for error. Android Pay Rolls Out: Alphabet An ORB poll for the Telegraph yesterday showed remain leading on 55 percent Inc.'s contactless mobile payment system support, compared with 40 percent for a leave vote. Android Pay went live in the U.K. today, making the nation the first outside of the Ex-Barclays Trader Says Sushi Offer Wasn’t a Libor Bribe U.S. to support the service. Shoppers will be able to pay with their Android- BY JEREMY HODGES powered smartphones anywhere that A former Barclays Plc trader on trial for rigging Libor said it was made clear to him that accepts contactless payments, including he’d have to help manipulate the benchmark as soon as he joined the bank’s swaps on London’s transit network of buses, desk. taxis and underground trains. Visa and Stylianos Contogoulas told a London jury that his boss, Fred Gourtay, took him to MasterCard accounts are eligible to be meet the money markets desk and that he was introduced to Libor setter, Peter added to compatible Android phones. Johnson. "The gist of it was that" Contogoulas "would be asked to pass on requests to PJ on Alibaba Said to Discuss FIFA occasion," he said as he gave evidence for the first time. His subsequent offers of Sponsorship: Chinese e-commerce coffee and sushi to Johnson and underling Jonathan Mathew were just “to show his giant Alibaba Group Holding Ltd. is appreciation” to the team rather than a “bribe.” discussing becoming a top sponsor of Prosecutors say that Contogoulas, 44, and four of his colleagues conspired to rig the FIFA, according to people familiar with London interbank offered rate, a benchmark tied to trillions of dollars in securities and the matter, a partnership that would loans. Contogoulas, Mathew, 35, Jay Merchant, 45, Alex Pabon, 37, and Ryan Reich, strengthen the ties between China’s 34, all deny conspiracy to defraud charges dating from 1 June 2005 to 31 Aug. 2007. power brokers and global soccer’s top Contogoulas said Gourtay, who is named as a co-conspirator on the indictment, did executives. nothing to suggest that what he was doing was suspicious or secret. Johnson pleaded guilty to manipulating the benchmark rate in October 2014. Gourtay isn’t on trial and hasn’t been charged.

POLITICS 18 May 2016 Bloomberg Brief London 2

POLITICS AROUND WESTMINSTER Cameron Papers Over Tory Splits With Legislative Plan

Green Faces BHS Grilling: Billionaire BY ROBERT HUTTON AND ALEX Philip Green will be questioned by U.K. MORALES politicians on 15 June as part of an With his Conservative Party split over inquiry into the collapse of BHS Ltd., the the U.K.’s membership of the European retail chain he used to own. Green will Union, and ministers insulting each other appear before a joint hearing in London over the airwaves, Prime Minister David of two parliamentary committees that are Cameron published a legislative program looking into the sale of BHS by Green’s designed to upset no one. Arcadia Group Plc to Retail Acquisitions A year after he won a surprise election Ltd. for £1 and his part in allowing the majority, at a point in the political cycle retailer’s pension deficit to swell. when he would usually be expected to Source: Graham Barclay/Bloomberg News announce controversial measures that AROUND EUROPE would need time to push through, the prime minister focused today on expanding broadband access, regulating civilian drones and prison reform. An education bill has EU Dodges Clash With Spain: The been watered down after protests from teachers and Tory members of Parliament. European Commission sidestepped a The pageantry of the Queen’s Speech, which saw Elizabeth II arrive at Parliament in a political conflict with Spain, postponing a horse-drawn carriage to read out words written for her by Cameron, marked a brief truce decision on sanctions for budget in the increasingly hostile battle between senior Conservatives over a so-called Brexit. violations until after the country’s general Cameron, who supports staying in the EU, is opposed on the issue by more than 100 election. The commission has been lawmakers in his own party. One of them, former Work and Pensions Secretary Iain vacillating for weeks over the situation in Duncan Smith, accused him of diluting his program in an effort to avoid confrontation. Spain with its own economists “Many Conservatives have become increasingly concerned that in the government’s recommending punitive measures and helter-skelter pursuit of the referendum, they have been jettisoning or watering down today said it would re-evaluate the key elements of their legislative program,” Duncan Smith said in an e-mailed statement. budgets of Spain and Portugal in “early “Whether it is the Trade Union Bill or the BBC Charter proposals, it seems nothing must July” — just after the Spanish vote on 26 stand in the way of winning the referendum.” June. The commission gave both nations Day-to-day government has been hampered by the Brexit divisions, with a decision on an extra year to bring their deficits below where to expand airport capacity around London and plans to sell the remaining state EU thresholds. holding in Lloyds Banking Group Plc among measures put off until after the vote on 23 June. AROUND THE WORLD Under measures announced by the queen, prison governors will be given “unprecedented freedom,” enabling them to make better educational provisions for prisoners and reduce reoffending. China’s top official for Hong Kong “My government will legislate to reform prisons and courts to give individuals a second denounced calls for the city’s chance,” the monarch said. “Old and inefficient prisons will be closed and new independence, urging the former British institutions built where prisoners can be put more effectively to work.” colony to instead seize the opportunity Ministers will also introduce a Counter-Extremism Bill to help prevent radicalisation for greater integration with the mainland. and tackle all forms of extremism. Abroad, the government will continue to work toward Zhang Dejiang — the Communist Party’s resolution of the conflict in Ukraine and play a “leading role” in the battle against Islamic No. 3 official and the highest-ranking State terrorists, while pushing for a “lasting peace” in Syria, according to the speech. state leader to visit Hong Kong in four Other measures include: years -- made his remarks today at a banquet attended by top city government A Criminal Finances Bill to tackle corruption, money-laundering and tax evasion. officials and business leaders. The A Digital Economy Bill to give every household the right to have access to high-speed speech offered a blunt assessment of broadband connection, of at least 10 megabits per second. recent efforts by some pro-democracy A Modern Transport Bill to promote construction of the country’s first spaceport, spur advocates who call themselves "localists" investment in drones and driverless cars and protect customers who buy vacations for greater autonomy, even online. independence, from the mainland. Legislation to introduce a tax on sugary soft drinks in an effort to combat childhood obesity. An Infrastructure Bill designed to deliver on a government pledge to build 1 million new homes. A bill to make overseas visitors pay for treatment in the state-run National Health Service they may currently receive at public expense. Proposals for a British Bill of Rights.

BUSINESS 18 May 2016 Bloomberg Brief London 3

BUSINESS AROUND THE CITY Barclays Said to Plan Further Sale of Africa Unit Shares

Jobs Market Cooling: The U.K. jobs BY RENEE BONORCHIS, AMBEREEN CHOUDHURY AND DINESH NAIR market showed signs of cooling in the Barclays Plc plans to continue selling further stakes in its South African business on first quarter. The number of people in the market after cutting its holding to about 50 percent, three people with knowledge of work rose by 44,000, less than a quarter the matter said. of the gain seen at the end of 2015, the The British bank is leaning towards conducting more sales to money managers - fast, Office for National Statistics in London controlled offerings with little-to-no marketing - after the May 5 transaction drew demand said today. Unemployment fell 2,000, exceeding what was was on sale, the people said, asking not to be identified as the leaving the jobless rate at a decade-low plans are private. Selling to a single buyer may face significant regulatory hurdles, the 5.1 percent, as forecast by economists. people said. The employment rate edged up to 74.2 Dubai-based Abraaj Group is leading a group of investors that plan to bid for a stake percent. of as much as 35 percent in Barclays Africa Group Ltd., people familiar with the matter said earlier this month. That came after ex-Barclays Chief Executive Officer Bob SABMiller Full-Year Profit Falls: Diamond confirmed months of speculation in April when he said he and investors SABMiller Plc, the brewer that’s due to including U.S. private equity giant Carlyle Group LPare working together on a potential be bought by Anheuser-Busch InBev NV bid. later this year, reported a decline in full- The bank is open to selling a significant minority stake, according to one of the people. year profit as it was saddled with charges “As a regulator, we won’t be comfortable with a private-equity play for any of the related to some African operations and banks,” Deputy Reserve Bank Governor Kuben Naidoo said earlier this month. The costs associated with the takeover. central bank would “look quite negatively” on a buyout because these typically involve Adjusted pretax profit fell 16 percent to leverage and exit strategies, and banks need long-term commitments from shareholders $4.1 billion in the year through March, with deep pockets, he said. the London-based maker of Castle lager Barclays in London and Barclays Africa in Johannesburg declined to comment. said today in a statement. Earnings were hurt by a $572 million charge as the brewer scaled back operations in Angola Burberry Cuts Outlook Again, Pressure Mounts on CEO and war-torn South Sudan, as well as BY ANDREW ROBERTS $160 million in costs associated with the Burberry Group Plc unveiled a multi-year turnaround plan AB InBev deal. based on a narrower product range, its biggest cost purge in years and a sharper focus on bags and online sales, MARKETS after lowering profit expectations for the second time in a month. Earnings for the year ending in March are likely to be near the bottom of the range of analysts’ predictions, London-based Burberry said today, only a month after giving a similar warning. Analysts reduced profit estimates Source: Chris Ratcliffe/Bloomberg by almost 10 percent and the shares fell as much as 4.4 Christopher Bailey percent to a four-month low. The muted outlook increases pressure on Chief Executive Officer Christopher Bailey amid concern over whether he can lead the company effectively while doubling up as chief creative officer. The CEO, who faces a struggle to boost sales due to an over-reliance on an ailing Hong Kong market, said he plans “significant changes” to save 100 million pounds ($144 million) a year and will reduce the product range by as much as a fifth. “Creating new demand has to be at the core of Burberry’s future strategy,” Paul Thomas, an analyst at consultant Retail Remedy, said by e-mail. He called on the company to appoint “a commercially experienced heavyweight” to work alongside Bailey, joining a growing roster of analysts who think the CEO needs help. The shares were down 2 percent at 1,120 pence at 9:33 a.m. in London, extending their decline this year to 6.3 percent.

OUT OF OFFICE BY MARK GILBERT 18 May 2016 Bloomberg Brief London 4

OUT OF OFFICE BY MARK GILBERT Barclays Libor Woes Started When It Broke Ranks: Bloomberg View Five former Barclays traders are on cost 5.75 percent which — yes, you've seemed to confirm my skepticism. trial in London, accused of rigging money- guessed it — was also the highest rate Today, I suspect the Barclays market rates. A lawyer used a story I among the 16 institutions canvassed. So executive was telling the truth. Everyone wrote nine years ago when the credit what the hell is happening at Barclays else was trying to conceal just how crisis was erupting as a stick to beat up and its Barclays Capital securities unit fractured the markets were becoming. bank executives called as witnesses in that is prompting its peers to charge it Money wasn't available; so instead of the case, who deny they were aware of premium interest rates in the money using transactions (actual or potential), any problems with the interest rates the market?" the banks were using guesswork — and bank was submitting. With hindsight, I'm I'd given the press officers at Barclays no-one wanted the stigma of a high increasingly convinced that the scandal the opportunity to comment on the borrowing cost, even if the truth was that came to light because Barclays, unlike its Friday, which they declined. The story money was clearly becoming more peers, tried to do the right thing by ran first thing on Monday. Not long after expensive every day. reporting that borrowing costs were breakfast, I found myself on the phone Prosecutors for the Serious Fraud surging as financial markets fractured. with a Barclays executive. Speaking off Office disclosed last week that Peter The events in the money markets eight the record, the executive told me I'd Johnson, the former Barclays trader who years ago prompted wide-ranging gotten was responsible for the bank's Libor changes to how benchmarks are set in submissions, pleaded guilty in October many financial markets, with 2014 to conspiracy to manipulate the investigations following into how rates. Five of his former colleagues, commodity prices and currency values Not long after currently on trial, all deny the charges. are set. And the authorities are still I feel a tinge of compassion for pursuing legal action over the breakfast, I found Barclays; in the fetid environment of the manipulation of market prices that credit crunch, I can believe that Barclays distorted $350 trillion of securities. myself on the phone and its management may have believed In 2007, I was spending a lot of time they were being leaned on by the central watching Libor. Banks were later with a Barclays bank to keep Libor lower. So when the accused of rigging those rates and paid August attempt to submit a higher rate about $9 billion in fines. More than 20 executive. that better reflected true market individual traders in the U.S. and the U.K. conditions backfired and Barclays found have been charged, though only the itself suspected of struggling to borrow, I former Citigroup trader Tom Hayes has the wrong end of the stick entirely. It can see why it might abandon that been convicted (he is appealing the wasn't that Barclays was paying more for initiative. verdict). But back then I was interested in money; his bank, he told me, had Trying to paper over the cracks in the what the rates were saying about market decided to address what was really money markets by lowballing Libor stress for individual firms. So after new happening in Libor. Its rates looked submissions, if that is indeed what was rates published by the British Bankers higher than anyone else's because happening, would have been wrong and Association on the last day of August everyone else was still pretending it was bound to backfire. But given that Libor highlighted a jump in borrowing costs for business as usual in the funding world, rates at the time were clearly a matter of Barclays, I wrote: submitting normal borrowing rates as if guesswork rather than calculation, it's "Barclays Plc, the U.K.'s third-biggest money was still freely available. The possible to see how an entire industry bank, told the BBA that borrowing banks weren't ready to admit that the could convince itself that being pounds for three months would cost it 6.8 money market had dried up. Barclays, he economical with the truth about percent -- more than any other bank on insisted, was trying to be the good guy borrowing costs was serving some public the panel, and a full 11 basis points and end the charade. good in maintaining confidence in the above the official Aug. 31 fix. Three- My instinct was to dismiss his financial system. month euros would cost Barclays 4.76 pleadings as self-serving, but I offered to This column does not necessarily reflect the percent, also more than any other write a second story examining his claim opinion of the editorial board or Bloomberg LP contributing bank. Three-month dollars, -- on the condition that Barclays went on and its owners. The article has been edited and meantime, would the record. He declined to do that, which condensed. Read the full version here. Bloomberg Brief: London

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