PREMIUM TICKETS AVAILABLE BUSINESS WITH PERSONALITY WickedTheMusical.co.uk PRU SEEKS MEET THE RESTAURATEUR SUPPORT FEEDING THE NORTH BANK THIAM AND MCGRATH DEFEND ENTREPRENEUR OF THE WEEK P24 THEIR ROLES P3 Issue 1,148 Friday 4 June 2010 www.cityam.com FREE Cable says BP CREDIT RATING he is not a socialist ▲ BANKING CUT IN NEW BLOW BY STEVE DINNEEN VINCE Cable attacked banks yesterday ▲ ENERGY for not lending enough to small BY EMMA SADOWSKI firms – though he insisted he was not a socialist and believes in the mar- BP suffered a fresh blow yesterday 560 ket economy. after two of the world’s three largest 432.25p He said that in many cases, the credit rating agencies downgraded most useful thing the government the group’s debt. 3 June could do was to “get out of the way”, Fitch and Moody’s both slashed BP’s adding that the coalition government rating on fears that the company 520 was going to halt red tape. would be significantly impacted by “I sometimes find myself described the mountainous legal and clean-up in the unfriendly press as some kind costs coming from the Gulf of Mexico of socialist,” a label he dismissed. “I oil spill. am a liberal. I am a free trader. I Moody’s lowered its senior unse- 480 believe in open markets.” cured rating of the oil giant to Aa1 But his plans to force state-owned from Aa2 and said the spill represents banks to lend more were slammed by a further setback to BP’s ability to the Institute for Economic Affairs. A overcome past operational issues. spokesman said: “Should the banks “The downgrade of BP’s ratings 440 be cajoled into lending by the govern- reflects Fitch’s opinion that risks to ment and then those loans ‘go bad’ both BP’s business and financial pro- the government will have no option file continue to increase following the but to bail them out again.” Deepwater Horizon accident in the 4 May 11 May 18 May 25 May 2 June Cable also said he had been “per- Gulf of Mexico,” said Fitch yesterday, suaded” the deficit requires immedi- which lowered BP from AA+ to AA. BP, led by Tony Hayward, was yesterday successful in moving one step closer to capping the oil leak Picture: GETTY, REUTERS ate attention, despite previously Fitch has threatened that it could arguing spending cuts should be left further downgrade BP if the rate of oil BP shares edged up 0.58 per cent expecting to quiz Hayward later this Horizon rig. Since then the damaged until after the recovery has solidified. leaking into the Gulf continues to yesterday to close at 432.25p. afternoon on whether the company well has leaked some 19,000 barrels of Speaking at Cass Business School, increase and the costs reach $5bn The rise reflected investor relief will cut its dividend payment in half oil a day into the Gulf of Mexico. Cable denied he holds a “grudge (£3.4bn). after the firm successfully managed to or suspend the payment altogether. The President said: “Well, they have against the City” but admitted he A spokesperson for BP said that AA cut a pipe leading from the damaged The group has pledged $360m to felt the anger. But what I haven’t seen wants to shift the centre of the UK was still a very strong rating and said blown out preventer moving it one construct six barrier islands in a bid to as much as I’d like is a rapid response.” economy away from the Square Mile. that the group does not have a specif- step closer to redirecting the oil spill. reduce the impact of oil meeting the Obama has given BP until 1 July to He also reiterated his commitment ic ratings target. He said: “We look to Hayward called the move a “mile- Louisiana coast. pay a $69m bill related to the spill, an to a banking levy, attacked “greed” maintain a strong balance sheet as set stone” and added that the company However, US President Obama said administration official said yesterday. and said that making Britain “a good out in our financial framework. We will meet obligations to all stakehold- yesterday BP should have acted quick- The $69m figure represents 75 per place to do business” again some- regard the framework as prudent and ers. er to the anger he expressed over the cent of government costs to date, the times “means standing up to busi- have no plans to change it.” Shareholders and investors are 20 April explosion of the Deepwater official said. ness” and fighting cartels. ▲ ▲ ▲ Certified Distribution FTSE 100 5,211.18 +59.86 DOW 10,255.28 +5.74 NASDAQ 2,303.03 +21.96 £/$ 1.46 unc £/¤ 1.20 unc ¤/$ 1.22 unc 5/04/10 - 2/05/10 is 106,285 WINNER! WINNER! MOST BEST POPULAR WEST END SHOW SHOW 0844 826 8000 WickedTheMusical.co.uk Laurence Olivier Whatsonstage.com ©WLPL Awards 2010 Awards 2010 APOLLO VICTORIA THEATRE SW1V 1LG 2 News CITYA.M. 4 JUNE 2010 UK must learn from Australia’s error NEWS | IN BRIEF Jittery banks park cash at ECB Nervous European banks parked just over €320bn at the European Central government’s top marginal tax rate of companies don’t respond to changes too has ordered his project leaders to Bank’s overnight deposit facility, a new 98 per cent in the 1970s and seems in tax rates are worthless – yet that is review all its Australian investments record that reflects heightened loan-loss almost deliberately designed to prove exactly the silly assumption that Rudd under a “worst-case scenario” tax and default fears spreading through the Arthur Laffer’s famous adage that appears to have made. model. It is not as if companies such as banking system. ECB data yesterday excessively high tax rates reduce the Xstrata yesterday threatened to Xstrata or Rio aren’t paying plenty gave more evidence of steady increases tax take by crippling effort, work and scrap $5.4bn of coal and copper proj- already: they are financing much of in the funds that banks would rather investment. ects, taking the industry-wide value of the Australian welfare state. Rio alone store at the central bank than loan to Shocked miners have been doing developments put on hold to above paid corporate taxes worth A$14.6bn other banks at higher rates available in EDITOR’S LETTER their maths and finding out that it is $20bn in just one month. Wherever and royalties of A$5.7bn to the the interbank money market, in which simply no longer worth their time to one looks, previously viable projects Australian government between 2000 banks loan short-term funds to each ALLISTER HEATH start new projects in Australia if have become uneconomic; uncertain- and 2009, making the firm one of other to help fund regular operations. returns are cut by 40 per cent; miners, ty and chaos now plague Australia’s Australia’s top taxpayers. The firm’s IT is not just Britain that is about to like everybody else, need to make a mining sector, which accounts for 58 effective tax rate is about 35 per cent Accounting delays criticised shoot itself in the foot with a crippling decent risk adjusted return on capital per cent of that country’s total and it has made huge investments in Michel Barnier, European Union internal and destructive tax hike on investors. for their shareholders and can’t afford exports. KPMG has studied the impact Australia, ploughing back its profits. market commissioner, has criticised the In our case, it is capital gains that are to work for free or for pathetically low of the tax on a typical greenfield proj- The parallels with the UK are obvi- way in which the world’s top accounting being targeted; in Australia’s case, profits (maybe someone should have ect with average costs and found that ous. It is high time politicians in rule makers have handled their decision however, it is the mining industry told Rudd). They are already deciding nickel, copper and gold mines in par- Britain as well as Australia finally to delay the deadline for creating a sin- that is the being subjected to a weird that their capital can better be allocat- ticular would no longer be viable. understood that tax rates matter. gle global accounting standard. experiment in irrationality. It is ed in other, less short-sighted coun- Australia is one of the very few devel- Hiking capital gains tax in this coun- unclear what Labour prime minister tries. The result is that far from raising oped economies to have completely try, as is currently being planned by Morgan Stanley focuses on retail Kevin Rudd was thinking when he billions of dollars a year, the tax will avoided the recession; this remarkable the coalition government, will inflict Morgan Stanley has formed a new retail dreamt up his 40 per cent super-tax on bring in no money at all at least until resilience is being ruined by Rudd’s huge damage and will at best yield products group to offer a wider choice mining profits but the move is likely 2015, calculates Ivor Ries of stupidity. very little money and at worst cut the of funds, according to Bloomberg. The to go down as one of the most absurd Melbourne broker EL & C Baillieu. Rio Tinto, led by boss Tom Albanese, Treasury’s tax take. Why do govern- unit will be led by Laya Khadjavi, who and counter-productive in fiscal histo- Static models of government revenues has rightly described the tax raid as ments never learn? previously ran Morgan Stanley’s markets ry.