Beazley launches fidelity & crime insurance service

Beazley Group has launched a new fidelity and crime service, expanding its specialty professional and management liability lines presence in the US.

The insurer said it will provide limits of up to $25m for fidelity bond coverage for financial institutions and for commercial crime coverage for non-financial organizations.

Fidelity and crime insurance will protect organizations from loss of money, securities, or other property resulting from crime by their own employees.

According to the Beazley, it also provides coverage against third party related losses for forgery, theft from premises or while in transit, counterfeit currency, computer fraud as well as client property, credit card and claims expenses.

Beazley's offering will target commercial crime for companies with more than $500m in revenue in technology, media and business services, manufacturing, distribution and retail markets.

The fidelity bond offering will focus banks with more than $1bn in assets, insurance companies, stock brokerage, mutual fund and investment management firms.

Beazley said that the new fidelity and crime insurance team will be led by Bill Jennings, who joined Beazley from AXIS, where he headed the similar role. Jennings will be supported by Juliet White, formerly a fidelity underwriter at Chartis.

Jennings will report to Mike Donovan, who heads Beazley's technology, media and business services (TMB) team.

Jennings said that the dishonest or malicious employees represent a major threat to the health of both financial and non-financial businesses, particularly at times of economic uncertainty.

"The established crime and fidelity market is quite traditional in its approach and has not always been responsive in providing clients with the coverage they need. We look forward to bringing a fresh approach," Jennings said.

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Liberty Mutual receives approval to open branch in Guangdong, China

Liberty Insurance, the wholly owned subsidiary of Liberty Mutual Group, has received an approval from China Insurance Regulatory Commission (CIRC), to establish a new branch in Guangdong province, China.

Pending final approval from Chinese regulator, Liberty will be the first foreign property and casualty firm to offer personal lines products for Guangdong's residents as well as various commercial lines products for small-to-medium enterprises.

Currently, Liberty has operations in Chongqing in Southwestern China, Beijing in Northern China and Zhejiang in Eastern China.

Liberty Mutual Group chairman and CEO Edmund Kelly said that the decision represents another important milestone for the operations in China and the international business strategy, overall.

Liberty Mutual Group has had a presence in China since 1996 when its subsidiary Liberty Mutual Insurance opened a representative office in Shanghai.

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How credit card companies want to debit you

Would you like to increase the sales tax in order to pay the banks another $12bn a year in profits?

That is the issue that is being debated in Washington, these days. In case you missed it, this is because the issue is usually not discussed in these terms. The immediate issue is the fee that credit card companies are allowed to charge on debit card transactions.

We have two credit companies, Visa and MasterCard, who comprise almost the entire market. This gives them substantial bargaining power. Few retailers could stay in business if they did not accept both cards. Visa and MasterCard have taken advantage of their position to mark up their fees far above their costs. This is true with both their debit and their credit cards, but the issue is much simpler with a debit card.

While a credit card carries some risk because some of the debt incurred will not be paid, a debit card is paid off in full with an electronic fund transfer at the time of the purchase. The credit card company only carries the risk of errors in payment or fraud. While these costs are quite small, the credit companies take advantage of their bargaining power to charge debit cards fees in the range of 1-2% of the sale price. They share this money with the banks that are part of their networks.

This fee is, in effect, a sales tax. Since the credit companies generally do not allow retailers to offer cash discounts, they must mark up the sales price for all customers by enough to cover the cost of the fee. This seems especially unfair to the cash customers, since they must pay a higher price for the items they buy – even though they are not getting the convenience of paying with a debit or credit card. Those paying in cash also tend to be poorer than customers with debit or credit cards, which means that this is a transfer from low- and moderate-income customers to the banks.

This is where financial reform comes in. One of the provisions of the Dodd-Frank bill passed last year instructed the Federal Reserve Board to determine the actual cost of carrying through a debit card transfer and to regulate fees accordingly. The Fed determined that a fee of 10-12 cents per transaction should be sufficient to cover the industry's costs and provide a normal profit. The Fed plans to limit the amount that the credit card companies can charge retailers to this level.

This would save retailers approximately $12bn a year, at the expense of the credit card companies and the banks that are part of their networks. The prospect of losing $12bn in annual profits has sent the industry lobbyists into high gear. They have developed a range of bad things that will happen if the regulated fee structure takes effect and also argued that big retailers would be the only ones benefiting.

On the list of bad things that will happen, the banks are claiming that they will deny debit cards to many people who now have them and start charging for services like maintaining current accounts. While banks may cut back some services in response to this loss of profits, if we want to see these services subsidised, it would make more sense to subsidise them directly, rather than allow banks effectively to impose a sales tax for this purpose.

The argument that retailers will just pocket the savings – instead of passing it on to consumers – is laughable, since it comes from people who were big advocates of recent US trade agreements. Their argument in that context is that lower cost imports from Mexico, China and other developing countries will mean lower prices for consumers. It can't be the case that competition forces retailers to pass on savings on imported goods but not savings on bank fees. In reality, the savings will not be immediately and fully passed on to consumers, but it is likely that most of it will be passed on over time, just as has been the case with lower priced imported goods.

The credit card industry and the banks really don't have a case here; they are just hoping that they can rely on their enormous political power to overturn this part of the financial reform bill. If they succeed, then the bill will have even less impact that even the sceptics expected.

The industry is already aggressively working to weaken all the important provisions of the bill. There are more and more exceptions being invented to the Volcker rule that limited the ability of government insured banks to engage in speculative trading. The industry is also trying to expand the list of exemptions from rules requiring derivatives to be traded through clearing houses. And it is rebelling against the requirement that financial institutions maintain a plan for their own resolution.

In these cases and others the industry will raise, it certainly has a better argument than it does on debit card fees. Brushing away their rationalisations, their argument here is that they want larger profits and they have political power to get them. That may turn out to be true.

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Budget 2011: £30bn tax and pensions raid

George Osborne yesterday embarked on a 'clandestine' raid on tax and benefits by switching his cost of living calculations to a method more favourable to the Treasury.

Experts said the move could cost families almost £30bn.

Up to 40,000 more workers might have to pay National Insurance next year. And pensioners could miss out on almost £700 of income as the basic state pension is raised more slowly.

The blow will significantly reduce the positive impact of his Budget announcement of an increase in the amount of money people can earn before they start paying tax.

Mr Osborne said lifting the annual personal allowance to £8,105 will save 25m people up to £326 a year each.

But he also announced that the thresholds for various direct taxes would be linked to the consumer price index from April 2012, instead of the retail price index, which is historically the higher of the two inflation measures.

The change will affect National Insurance and capital gains tax from next year.

The Treasury insisted the change did not affect income tax thresholds. Officials estimate that it will rake in almost £2bn in extra National Insurance by April 2016.

This follows last June's decision to link pensions and benefits to CPI, which will also have an impact on the living standards of millions of families.

It means that from next year benefits and pensions will increase more slowly while more of our income is eaten away by taxes.

The Government expects to save £1.5bn in the financial year starting on April 6 as a result of its inflation switch.

In the 2015-16 year it expects to save £10.6bn bringing total savings over the five years to an astonishing £27.6bn.

The Hendle family
Smiling through the pain: Jason and Debbie Hendle with Monty and Quin

Jason Hendle could soon find himself above the higher tax threshold as a result of changes introduced by George Osborne.

He earns £40,000 as an IT analyst in Northampton, while his wife Debbie earns £6,000 as a part-time parish council caretaker. They have two children Monty, six, and Quinn, three. Mr Hendle, 43, is concerned by the change to the higher-rate tax threshold, which will now be linked to the lower consumer prices index rather than the retail prices index.

This means the threshold will increase at a lower rate than rises in wages - and that even a small pay hike will drag him into the higher-rate bracket.

'The change to the threshold banding is bad news for us,' he said. 'It will mean that any pay rise I get will be likely to send me into the higher-rate band and we would lose £135 a month in child benefits and £40 a month in working tax credits.

'It would effectively put me back a pay rise, which is frustrating at a time when the cost of living is going up.' The changes will more than offset any gain from the rise in the threshold for taxable income.

'It would be a drop in the ocean,' said Mr Hendle. 'We might get £100 extra, but there was nothing in the Budget to curb the rises in energy prices, for example, which cost us over £100 a month. That is a 30 per cent increase for us over the past couple of years.

'They are also doing little about petrol prices, which are astronomical, other than freeze the duty.' Mrs Hendle, 44, said: 'The Budget was a damp squib. They talk about encouraging mothers to work but there is not enough help. Sometimes we wonder if it is worth me working because of the cost of childcare and the taxes.'

Nicola Roberts, tax director of accountants Deloitte, said: 'Switching to CPI is a clandestine way to raise tax. Most people won't understand what this change in the inflation rate means or the corrosive effect it will have on their earnings and benefits.'

CPI tends to rise more slowly than RPI because it does not include housing costs especially mortgage rates. Over the years this can make a big difference to pensions and to the amount of tax paid.

CPI inflation is currently 4.4% while RPI is 5.5%. These are expected to fall to 2.5% and 3.6% from next year. But the difference between the two measures is expected to increase as interest rates rise.

By 2015 RPI at 3.8% is expected to be almost double the CPI rate of 2%. Linking the starting level for paying National Insurance to CPI from next April will cost 21m workers an average of £6 a year.

But the effects gradually accumulate and become quite dramatic. And by using the Government's inflation forecasts, the change in the starting level for paying NI will cost workers up to £68 a year.

An extra 40,000 low-paid workers will be paying NI next year alone because of the use of the lower inflation measure.

Tax-free savings will be another casualty of the switch to CPI. The annual ISA contribution allowance was recently linked to RPI but will from next year switch to CPI. As a result the allowance by 2015 will be £11,620 rather than £12,315.

The move to CPI could also hit pensioners next year. The state pension will rise by the higher of wages, CPI or 2.5%. But RPI is predicted to be 3.6% which is higher than all three.

The so-called triple-lock is likely to push the pension to £104.70 a week in April 2012 and to £112.75 by 2015. Using the Government's predictions for RPI it would rise to £106.19 in April next year and to £118.19 by April 2015.

By April 2016, pensioners could have missed £696 of income if they had instead received 2.5% under the triple lock. Pensions tax relief for the very wealthy will also be cut, saving £1.2billion this year alone.

Labour was quick to point out yesterday that families will also pay an average £450 in extra VAT this year as a result of the rise in January from 17.5% to 20%.

Other measures also include the introduction of a new 5% stamp duty band on homes worth more than £1m - a 25% increase in tax on properties of this value.

Alcohol duty will rise by 2% above inflation - an increase which experts predict will add 10p to the price of a pint of beer.

The threshold for paying inheritance tax has also been frozen at £325,000, raising the Treasury almost £1bn over four years.

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Portugal bailout to cost every British family £300

British taxpayers could be forced to pay £6bn to bail out Portugal, it emerged last night.

Every family could be liable for £300 of the costs under Brussels plans to prop up the ailing EU nation.

As the UK's oldest ally teetered on the brink of financial collapse last night, David Cameron attended an EU summit where European leaders discussed the prospect of saving it from bankruptcy.

A bailout like those for Ireland and Greece is seen as virtually inevitable after Portuguese prime minister Jose Socrates resigned on Wednesday night when opposition parties refused to back his austerity budget.

Labour chancellor Alistair Darling signed Britain up to an EU-wide bailout fund last year, which has left the UK exposed to billions of pounds in liabilities until the fund closes in 2013.

The £53bn stability fund has about £33bn left, after £20bn was sent to help Ireland. If the entire fund were used to help Portugal, Britain would be liable for £4.5bn if the Portuguese defaulted.

But Britain would also have to give another £1.5bn through the International Monetary Fund.

That would take Britain's contribution to £6bn, which amounts to £100 for every man, woman and child in Britain, according to calculations by Open Europe.

Raoul Ruparel, the think-tank's spokesman, said: 'If the entire mechanism fund has to be used to bail out peripheral economies like Portugal, Britain's contribution would be around €5.1bn - and we would have to pay another €1.7bn through the IMF.

'That would leave British taxpayers to pick up a massive bill of €6.8bn - or £6bn.'

The fragility of Portugal's economy was confirmed by ratings agencies, which downgraded its credit rating from A-plus to A-minus because of heavy debts and high risks for creditors.

There were fears last night that Spain could be the next eurozone country to default on its debt.

Experts said a new EU bailout fund would be needed, as none of the existing packages had enough money to prop up such a large country.

Bailouts and future bailouts graph
Open Europe said that the 'perfect storm contagion' could spread to Spain if Portugal went bust.

Mr Ruparel added: 'If contagion was to spread to Spain and it came close to a default - which seems unlikely at this point - it would be the sovereign debt equivalent of [the collapse of] Lehman Brothers. Current mechanisms for dealing with the crisis fall horribly short of handling such a situation.'

Tory Eurosceptics reacted with fury to the prospect of a Portuguese bailout. Tory MP Philip Hollobone added: 'The whole point of Britain keeping the pound and staying out of the euro was to avoid bailing out countries like Portugal.'

Mr Cameron refused to comment on Britain's potential liabilities when he arrived at the summit of European leaders in Brussels yesterday. In a swipe at the eurozone, the Prime Minister declared that Europe was a 'low-growth economy'.

He added: 'As for Portugal, I don't think it would be right to comment and speculate on another country's finances and I'm not going to do that.'

But Mr Cameron's spokesman admitted there was nothing Britain could do to dodge a bailout from the existing mechanism. He said: 'It was put in place by the previous government. That mechanism still exists.'

Mr Darling signed Britain up to the bailout mechanism in the five days after Labour lost the last general election but before the Coalition was formed. He remained chancellor during that period. Incoming Chancellor George Osborne asked him not to join it, but Mr Darling went ahead.

Portugal's credit rating was slashed by Fitch, as economists warned that a bail out now looks 'inevitable'.

The frailties of neighbouring Spain were also highlighted as Moody's downgraded the debt of 30 of its banks. There are growing fears that the eurozone crisis is entering its second wave, after a period of relative calm following last year's bail outs of Greece and Ireland.

Experts predict Portugal will be forced to ask for up to €80bn (£70bn) in emergency aid.

Fitch cut its rating on Portugal's sovereign debt by two notches in the wake of the political turmoil following the resignation of its prime minister,

Fitch warned further downgrades are likely, especially if there is no 'timely and credible' programme of support from the International Monetary Fund and the European Union.

Because of the backlash among some of Europe's wealthier states over the Greek and Irish bail outs, some fear eurozone ministers may find it difficult to reach a swift agreement on Portugal.

But the currency markets seemed to be in the mood of 'selling the rumour and buying the fact' because the euro actually rose 0.7% to $1.41 in the wake of Jose Socrates' resignation.

The head of the OECD, Angel Gurria, predicted that Portugal was in for 'a rocky few weeks' and said that the political upheaval made a bail out 'more likely'.

Economists went further, with Jacques Cailloux at Royal Bank of Scotland warning 'it's pretty inevitable' that the country will need a bail out.

Spain's banking sector is also giving cause for concern. The country's growth forecasts are grim and its property market has crumbled.

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Fund managers get £3.5bn: you get £2.70

Managers of popular equity income funds have taken more than £3.5bn in charges over the past five years.

But in that same time, the average investor has made just £2.70 profit on a £1,000 investment.

Some £43bn of your money is held by the biggest 20 funds alone and they are often at the heart of investors' portfolios.

Equity income funds aim to grow your money while providing regular income. They do this by buying shares in mainly big, stable UK firms which pay attractive dividends.

Most of these giant funds have failed to beat the FTSE All Share index over one, two, three and five years on average, according to data analysts Morningstar.

Invesco Perpetual's Neil Woodford, who runs more than £18bn in the firm's High Income and Income fund, is one of several high-profile names to have come unstuck.

Over the past two years, his funds have been ranked 89th and 90th respectively out of 92 funds in the sector. While they have grown by 25.8% and 25.5% respectively, this is less than half the 63% growth in the FTSE All Share over the same period.

One of the main drags on performance has been his heavy investment in pharmaceutical giants such as AstraZeneca.

In a telephone conference yesterday, Mr Woodford said pharmaceutical companies represented the best investment opportunity since the technology crash at the turn of the Millennium.

Revealed: How big equity income funds have fared

Another favourite, Jupiter's £2.5bn Income trust run by Anthony Nutt, has performed woefully for the past five years.

Two of its biggest holdings are state-backed Lloyds, which is currently banned from paying dividends, and BP, which halved in value and was forced to suspend its dividend after the Gulf of Mexico oil spill last year.

But Mr Nutt says his biggest mistake was investing heavily in the media sector, specifically Yell, which publishes the Yellow Pages. If you'd invested £1,000 a year ago, you would have lost £24.50, while you would have made a £56 profit in the FTSE All Share.

Mr Nutt says: 'My track record over the longer term has been very strong relative to the market.'
Why are the funds performing badly - and will this change?

Mark Dampier, head of research at financial adviser Hargreaves Lansdown, says their poor performance is mainly down to these funds largely steering clear of commodities, such as oil and gas, with BP being a notable exception.

Mining and oil companies make up around 30% of the FTSE 100 and their share prices have risen strongly as oil and gold prices have soared.

Yet because these firms tend not to pay dividends, they have been largely shunned by equity income funds.

Mr Dampier says: 'If you strip out commodities, you're left with very flat stock market performance.'

These multi-billion-pound funds have also missed out on the rally in smaller companies. The average smaller companies fund produced a 24.8% profit for investors last year.

Unfortunately many equity income funds are simply too big to invest in smaller companies because the company would have a negligible effect on their performance.

Darius McDermott, managing director of financial adviser Chelsea Financial Services, says equity income funds have been hit by a 'perfect storm'.

Interview: Small companies manager who made a 296% return

Most were heavily exposed to banks — traditionally strong dividend payers — which stopped paying dividends. Investors were also hit hard by BP's oil spill. Schroder Income — the worst performing equity income fund over the last year — counts BP among its biggest holdings.

Be patient and reinvest dividends for long-term success

But experts urge investors to be patient. Reinvesting dividends is a proven strategy, accounting for two-thirds of profits over the long term.

If you invested £1,000 in the FTSE All Share 20 years ago, you'd have made a profit of around £1,571 from growth alone.

But by earning and reinvesting dividends, that profit would have soared to £4,178.

Neil Woodford was criticised during the technology boom in the late Nineties for shunning technology stocks and preferring tobacco companies. But when the dot.com bubble burst in 2000, his strategy was vindicated.

Someone who had invested £10,000 in High Income when it launched in 1988 would now be sitting on just under £150,000. And despite cuts in dividends, equity income funds are typically paying 4% to 5% income a year.

Fund managers have enjoyed a bumper increase in fees from our pensions and investments, while offering scant returns to investors.

A damning report from charity FairPensions found that while returns on pensions collapsed to 1.1% per year between 2002 and 2007, payments to middlemen (such as fund managers and consultants) rose by more than 50%.

The report highlights the stark difference in the fortunes of the so-called experts responsible for managing our savings and the millions of pension savers in the UK.

It accuses fund managers of putting investors at risk by trying to make short-term profits, instead of making sensible investments for the long term.

Christine Berry, author of the report, says: 'People must be asking whether or not those managing pensions have savers' best interests at heart.' Separate analysis from consultants Lane Clark & Peacock found that last year a fund manager who posted returns 2% lower than the stock market could still expect a 20% increase in fees.

Typical funds levy a total annual charge of just under 1.7%, but some are almost twice this. Pensions, particularly older contracts, can be even more expensive, with some savers seeing their first year's contributions disappear in charges.

The report calls on the Government to introduce tougher rules to ensure all consumers are fully-protected from reckless or self-interested behaviour by those who manage their money.

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Pacific Trade International's Mei Xu: Marketing to China

What kind of opportunities are there for American small businesses in China?
If you go to Shanghai, there are all these European small business people from places like Holland, England, and France. They're from small countries, so they are born with a trader's mentality. They know there is not much to lose and so much to gain in China. Americans often think only about market share in their own country.

How is China different from the U.S. for an entrepreneur like you?
It's very fragmented. There are no national chains like Target (TGT) or Wal-Mart (WMT). But there are 10 cities with more than 10 million people, and in Shanghai there are more than 20 million. If you open 10 stores in Shanghai, you can have a brisk business. You just have to pick the right battles.

What mistakes do companies make in China?
A lot of people think, "There are 1.5 billion people in China. If I sell each of them a set of forks and knives, I'll be very rich." But even a major company such as McDonald's (MCD) had trouble because they insisted on selling hamburgers. Chinese people didn't eat beef. You have to acknowledge life is different.

How does a home products maker such as you woo the Chinese?
We had to design a whole new product line for China. Americans like candles that smell like cookies. Women burn them in their homes so their husbands and children come home and think they have been cooking. The Chinese like floral scents.

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A Virtual Fix for 'Broken' Gift-Card Business

Megan Kendrick, an editor in Phoenix, just discovered 12 plastic gift cards stashed in a drawer, dating as far back as 2003. The unspent balance topped $500. "I didn't realize we had as many as we did," Kendrick, 27, says.

Kendrick is in good company. U.S. households average five cards on hand with a total value of more than $100, according to financial services industry adviser Richard Crone. As many as 20 percent are never or only partially used, he says.

First Data (KKR), Qualcomm (QCOM) and Google (GOOG) are devising a remedy by promoting so-called virtual gift cards. These make it easier for consumers to send and redeem gifts, often in small amounts, by relying on e-mail, mobile phones, or a social-networking site. The cash value on virtual cards will reach $10 billion in the U.S. in 2015, up from less than $500 million last year, says consulting firm Aite Group.

That would benefit users such as Kendrick, as well as merchants, which often can't recognize revenue from gift cards until they are used. Increased gift-card redemptions would also bolster retailers' sales because cardholders typically spend 50 percent more than a card's value, says Crone, whose Crone Consulting is located in San Carlos, Calif.

"The whole gift-cards industry—it's broken right now," says Nicolas Baum, chief executive officer of GiftRocket, a virtual gift-card company that sends money to a mobile phone when the user enters a selected store. "We wanted to take what's bad about gift cards and throw it out the window."
Digital, Liquid, and Timely

Virtual gift cards differ from traditional plastic ones because they're sent digitally and can often be tailored to any value, including small, unrounded amounts. In some cases, they are delivered just as a shopper considers making a purchase.

The new wave in gift cards has drawn notice from venture capital firms, which have invested in startups such as Mountain View (Calif.)-based GiftRocket. The company uses a phone's global positioning system to find a recipient's location and then transmits the funds to their PayPal (EBAY) account. GiftRocket has raised $170,000 from investors Start Fund and Y Combinator, Baum says.

Some services will send a gift card for a particular merchant to recipients who have told social media friends they're headed to that location. Atlanta-based First Data last year began letting consumers send gifts of Cold Stone Creamery ice cream cones via Facebook's social networking site.

"It's going to change the way consumers are giving gifts from an occasion to every day or every week," Sarah Owen, a vice-president at First Data, says. "We'll really see transaction volume pick up over the next five years."

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Made in USA Gives Small Business an Edge

As labor and shipping costs in Asia increase, small stateside apparel makers are able to flaunt their domestic addresses.
With the spring season looming, Dartmouth College men's head rugby coach Alex Magleby didn't want to risk waiting the roughly eight weeks his two suppliers typically took to get jerseys, shorts, and jackets from their workshops in Asia. So in February he turned to Boathouse Sports, a Philadelphia manufacturer that promised to provide similar gear in four weeks at about the same price. "We found that Boathouse delivered the quickest, hands down," says Magleby.

Boathouse and other small U.S. clothing manufacturers that bucked the offshoring trend are catching a tailwind as rising costs for labor and transportation make Asia more expensive. In the U.S. apparel market, domestic production fell from 41 percent in the late 1990s to just 3 percent in 2008, according to the most recent government data. Still, hundreds of small companies, most with just a few dozen employees, manufacture in the U.S. Many are benefiting from their decision to keep production stateside, says Nate Herman, vice-president for international trade at the American Apparel & Footwear Assn. "There haven't been any new manufacturers popping up, but the ones that are around are pretty much at maximum production," Herman says.

The recession winnowed out many factories in Asia, so those that survived—primarily large operations—have started turning down or postponing smaller jobs, says Jeremy Lott, a vice-president at SanMar in Preston, Wash., one of the biggest wholesale apparel suppliers in the U.S. Overseas factories "can really pick and choose the orders they want to take and what they're producing because there's a shortage," Lott says. "If you don't have the buying clout at the factory level, your orders are taking significantly longer than they used to."

That has led to growing interest in the services of Contract Sew & Repair. Cheryl Evans, who runs the 15-employee company from a vast warehouse near Seattle, says established companies are coming to her with sizable orders—as many as 20,000 shirts or pairs of pants—that were spurned by factories in Asia. "This is a reverse," Evans says. "Usually companies come to us when they're first starting out in business because they can't make [big enough orders] for offshore."

For some buyers, the price gap between U.S. and Asian factories is no longer the primary concern. Boathouse President and Chief Executive Officer Doug Tibbetts acknowledges that his prices often are about 10 percent to 15 percent higher than those of rivals that manufacture overseas. That's down from 25 percent two years ago, and the change is enough to win buyers such as Dartmouth coach Magleby, who don't want to wait months for their orders. "When I talk to peers, they're always shocked and surprised that we've made this commitment" to keep production in Philadelphia, Tibbetts says. That decision, though, is paying off for the 200-employee company. "Our business is up significantly across the board," Tibbetts says, over 15 percent this year to the "$20 million range."

Labor trouble in China is making it harder for some retailers that buy from overseas manufacturers to keep their store shelves stocked. Scott Jones, founder of Beyond Clothing, which makes custom outdoor wear in Seattle, says rivals experienced shortages after the weeklong Chinese New Year holiday last February, when many migrant workers decided not to return to factories in Guangdong Province. That supply advantage, combined with growing concern among customers over the loss of American jobs, means sales of Jones's jackets, fleeces, and waterproof pants are on track to jump as much as 40 percent this year. Consumers "are disgruntled about overseas production, they're disgruntled with not being able to get their product," says Jones. Will Manzer, CEO of 65-store outdoor outfitter Eastern Mountain Sports in Peterborough, N.H., says the change in the labor market is hardest on smaller brands. "Many [Asian] factories don't want to take their orders," he says. "The capacity availability is just not there."

Some small companies also say U.S. manufacturers help them maintain a better grip on the quality of the goods they order. While Wal-Mart Stores (WMT), Target (TGT), and other big brands can afford to station buyers in China and send executives across the Pacific to vet suppliers, that would be prohibitive for brands with just a few hundred thousand dollars in sales. Janice Kajanoff, founder of Zentek Clothing, also in Seattle, contemplated using overseas factories, but last year she hired Evans's company, CSR, to make her brand's vests, dog coats, and pet crate mats. "Unless you're gonna hop over and check it all by hand," Kajanoff says, "you don't have control over quality."

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Allies Attack Libyan Military as U.S. Seeks NATO Command

(Updates oil prices, Carney in 12th paragraph. See EXTRA and MET for more on unrest in the Middle East and North Africa.)

March 24 (Bloomberg) -- U.S. and allied warplanes carried out further strikes against Muammar Qaddafi’s ground forces and hit an air base deep inside Libya as coalition nations neared agreement on having NATO assume operational control.

French aircraft bombed an air base 250 kilometers (155 miles) south of Libya’s coast last night, a French military spokesman, Thierry Burkhard, said. The U.S. said there were 15 missile strikes on Libyan forces overnight. Qaddafi loyalists increased their attacks on cities, killing 16 people yesterday in Misrata in the west and six in the nearby coastal town of Zentan, opposition spokesman Abdulhafid Ghoga said at a news conference in Benghazi. The French Defense Ministry said one of its Rafale jets, after tracking a Libyan plane in the no-fly zone, destroyed it after it landed in Misrata.

“Our mission is to prevent attacks on civilians,” French Defense Minister Gerard Longuet told a news conference in Paris today. “That includes tanks and artillery. Legitimate targets also include the command centers that give the orders to hurt civilians.”

French Foreign Minister Alain Juppe said at a press conference in Paris that the military operation will last weeks, not months.

Oil prices have jumped about 25 percent since the Libyan rebellion began last month in the eastern city of Benghazi, heightening concerns about Middle East crude exports. The revolt has evolved from a popular uprising of the kind that ousted leaders in Egypt and Tunisia this year into a civil war with factions of the army on both sides.

Gold Record

Crude oil fluctuated near a 30-month high in New York. Crude for May delivery decreased 48 cents, or 0.5 percent, to $105.27 a barrel at 1:06 p.m. on the New York Mercantile Exchange. Prices have risen 31 percent in the past year. Gold futures jumped to a record of $1,448.60 an ounce as the turmoil helped spur demand for the metal as an alternative investment.

Coalition leaders say they’ve already crippled Qaddafi’s air force and are now concentrating on his army. Government tanks pulled back from the seaside city of Misrata after a bombing raid, the AP reported, citing a local doctor.

“Misrata is still a very dangerous area for civilians,” Captain Clint Gebke, a U.S. military spokesman, said by phone from the USS Mount Whitney, a command ship in the Mediterranean.

Libya’s capital, Tripoli, and the city of Sebha were under air bombardment early today, state television reported. Khaled Kaim, the deputy foreign minister, renewed a cease-fire offer and called for the bombing to stop, Al Arabiya television said.

‘Political Direction’

Juppe told RTL Radio that the North Atlantic Treaty Organization will organize the military operation, while foreign ministers from the participating countries will meet in London next week to set the “political direction.”

Progress is being made on transferring operational control from the U.S. to NATO, U.K. Foreign Secretary William Hague told Parliament in London.

“We are making progress in NATO taking on all measures under resolution 1973 needed to protect civilians from Qaddafi’s attacks,” Hague said, referring to the United Nations Security Council resolution that authorized the mission. “We need agreement to unified command and control for it to be robust, and we expect to get that soon.”

The U.S. will move to a “support and assist” role in the air campaign against Qaddafi’s forces as command of the operation is handed off, likely to NATO, White House press secretary Jay Carney said.

Formidable NATO

Longuet said NATO is a “formidable tool” to manage operations, though less suited to administer political aims, which will fall to the “contact group” of foreign ministers.

The French minister also said the coalition has intercepted conversations among Libyan officers indicating that many are ready to abandon the regime.

Hague reaffirmed that there will be no invasion of Libya by Western countries, though he said he “can’t exclude” the small-scale use of special forces on the ground. Qatar has joined other nations in enforcing the no-fly zone, he said.

Elsewhere in the Middle East, Yemen’s parliament voted yesterday for emergency rule to curtail anti-government protests, as generals, ministers and lawmakers deserted the regime of President Ali Abdullah Saleh and joined the demonstrators calling for change.

Syrians in the southern city of Daraa were ordered to stay indoors yesterday after reports that at least 15 people were killed by police, Amnesty International said.

Israeli warplanes struck targets in the Hamas-controlled Gaza Strip and four rockets hit southern Israel as violence escalated, a day after a Jerusalem bombing killed a British woman and injured 30 other people.

--With assistance from Ola Galal in Cairo, James Neuger and Leon Mangasarian in Brussels, Patrick Donahue in Berlin, Kitty Donaldson in London, Vivian Salama and Maher Chmaytelli in Dubai and Roger Runningen and Kate Andersen Brower in Washington. Editors: Terry Atlas, Steven Komarow

To contact the reporters on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net; Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

More about → Allies Attack Libyan Military as U.S. Seeks NATO Command

Allies Attack Libyan Military as U.S. Seeks NATO Command

(Updates oil prices, Carney in 12th paragraph. See EXTRA and MET for more on unrest in the Middle East and North Africa.)

March 24 (Bloomberg) -- U.S. and allied warplanes carried out further strikes against Muammar Qaddafi’s ground forces and hit an air base deep inside Libya as coalition nations neared agreement on having NATO assume operational control.

French aircraft bombed an air base 250 kilometers (155 miles) south of Libya’s coast last night, a French military spokesman, Thierry Burkhard, said. The U.S. said there were 15 missile strikes on Libyan forces overnight. Qaddafi loyalists increased their attacks on cities, killing 16 people yesterday in Misrata in the west and six in the nearby coastal town of Zentan, opposition spokesman Abdulhafid Ghoga said at a news conference in Benghazi. The French Defense Ministry said one of its Rafale jets, after tracking a Libyan plane in the no-fly zone, destroyed it after it landed in Misrata.

“Our mission is to prevent attacks on civilians,” French Defense Minister Gerard Longuet told a news conference in Paris today. “That includes tanks and artillery. Legitimate targets also include the command centers that give the orders to hurt civilians.”

French Foreign Minister Alain Juppe said at a press conference in Paris that the military operation will last weeks, not months.

Oil prices have jumped about 25 percent since the Libyan rebellion began last month in the eastern city of Benghazi, heightening concerns about Middle East crude exports. The revolt has evolved from a popular uprising of the kind that ousted leaders in Egypt and Tunisia this year into a civil war with factions of the army on both sides.

Gold Record

Crude oil fluctuated near a 30-month high in New York. Crude for May delivery decreased 48 cents, or 0.5 percent, to $105.27 a barrel at 1:06 p.m. on the New York Mercantile Exchange. Prices have risen 31 percent in the past year. Gold futures jumped to a record of $1,448.60 an ounce as the turmoil helped spur demand for the metal as an alternative investment.

Coalition leaders say they’ve already crippled Qaddafi’s air force and are now concentrating on his army. Government tanks pulled back from the seaside city of Misrata after a bombing raid, the AP reported, citing a local doctor.

“Misrata is still a very dangerous area for civilians,” Captain Clint Gebke, a U.S. military spokesman, said by phone from the USS Mount Whitney, a command ship in the Mediterranean.

Libya’s capital, Tripoli, and the city of Sebha were under air bombardment early today, state television reported. Khaled Kaim, the deputy foreign minister, renewed a cease-fire offer and called for the bombing to stop, Al Arabiya television said.

‘Political Direction’

Juppe told RTL Radio that the North Atlantic Treaty Organization will organize the military operation, while foreign ministers from the participating countries will meet in London next week to set the “political direction.”

Progress is being made on transferring operational control from the U.S. to NATO, U.K. Foreign Secretary William Hague told Parliament in London.

“We are making progress in NATO taking on all measures under resolution 1973 needed to protect civilians from Qaddafi’s attacks,” Hague said, referring to the United Nations Security Council resolution that authorized the mission. “We need agreement to unified command and control for it to be robust, and we expect to get that soon.”

The U.S. will move to a “support and assist” role in the air campaign against Qaddafi’s forces as command of the operation is handed off, likely to NATO, White House press secretary Jay Carney said.

Formidable NATO

Longuet said NATO is a “formidable tool” to manage operations, though less suited to administer political aims, which will fall to the “contact group” of foreign ministers.

The French minister also said the coalition has intercepted conversations among Libyan officers indicating that many are ready to abandon the regime.

Hague reaffirmed that there will be no invasion of Libya by Western countries, though he said he “can’t exclude” the small-scale use of special forces on the ground. Qatar has joined other nations in enforcing the no-fly zone, he said.

Elsewhere in the Middle East, Yemen’s parliament voted yesterday for emergency rule to curtail anti-government protests, as generals, ministers and lawmakers deserted the regime of President Ali Abdullah Saleh and joined the demonstrators calling for change.

Syrians in the southern city of Daraa were ordered to stay indoors yesterday after reports that at least 15 people were killed by police, Amnesty International said.

Israeli warplanes struck targets in the Hamas-controlled Gaza Strip and four rockets hit southern Israel as violence escalated, a day after a Jerusalem bombing killed a British woman and injured 30 other people.

--With assistance from Ola Galal in Cairo, James Neuger and Leon Mangasarian in Brussels, Patrick Donahue in Berlin, Kitty Donaldson in London, Vivian Salama and Maher Chmaytelli in Dubai and Roger Runningen and Kate Andersen Brower in Washington. Editors: Terry Atlas, Steven Komarow

To contact the reporters on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net; Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

More about → Allies Attack Libyan Military as U.S. Seeks NATO Command

Assad’s Promises Fail to Halt Protests in Syrian Cities

 (Updates with a comment from protester in the fifth paragraph; Syrian lawmaker in seventh. See EXTRA and MET for more on turmoil in the region.)

March 26 (Bloomberg) -- Syrian President Bashar Al-Assad’s security forces clashed with protesters in several cities after his promises of freedoms and pay increases failed to prevent dissent from spreading across the country.

The protests that started earlier this month in the southern province of Daraa “are believed” to have resulted in the deaths of 55 people, London-based Amnesty International said in a statement on its website yesterday. Security forces opened fire on protesters in the town of al-Sanamein in Daraa and carried out arrests in the capital, Damascus, it said.

Video footage on the Internet broadcast by Pan-Arab news networks Al Jazeera and Al Arabiya today showed hundreds of protesters in cities such as Homs and Daraa, some tearing down a poster of Assad. The state-run Syrian Arab News Agency said an armed group killed one man in Homs while another group in Sanamein attacked security forces, who killed several assailants.

Syria is the latest Middle Eastern country to be hit by the wave of uprisings that ousted longtime rulers in Egypt and Tunisia, and sparked a civil war in Libya. Unrest began in Syria on March 15 when as many 200 people took to the streets of Damascus against Assad’s government.

“Security elements are firing live bullets on protesters,” a man who identified himself as Omar al-Masri, told BBC Arabic television in a telephone interview from Daraa. “We are not gangs. We are peaceful protesters.”

Two Options

Assad’s regime has “only two options,” the Brussels-based International Crisis Group said in a report on its website. “One involves an immediate and inevitably risky political initiative that might convince the Syrian people that the regime is willing to undertake dramatic change. The other entails escalating repression, which has every chance of leading to a bloody and ignominious end.”

“There is change and there is reform,” Anas al-Shami, a Syrian parliamentarian told Al Arabiya television in an interview today. “Surely this reform wasn’t perfect but we are working night and day.”

The crackdown on demonstrators yesterday came a day after Assad’s political and media adviser, Buthaina Shaaban, said protesters’ demands were “legitimate” and would be met. The government may lift a 1963 emergency law that suspended most rights, increase judicial authority and prepare a political parties law, she said in a televised briefing March 24.

Calm Way

“The demands of the people of Daraa and the rest of the Syrian people across all provinces are legitimate,” she said. “All legitimate demands will be met, but in a calm way.”

Shaaban said Assad didn’t give orders to fire on civilians, saying “there were some mistakes.”

The Obama administration condemned the violence against civilians by Syrian authorities and urged that those responsible be held accountable. A State Department spokesman, Mark Toner, said the U.S. wants to see actions to back promises from the government.

Syria is confronting the same challenges facing other governments in the region -- the “unmet political and economic grievances of their people,” U.S. Defense Secretary Robert Gates said March 24 while visiting Israel.

“Some of them are dealing with it better than others,” Gates said. “I’ve just come from Egypt, where the Egyptian army stood on the sidelines and allowed people to demonstrate, and in fact, empowered a revolution. The Syrians might take a lesson from that.”

Pay Raises

Assad ordered pay increases of between 20 percent and 30 percent for state employees and an income-tax cut, state television reported. He also ordered a 25 percent increase in the pensions of former government employees.

Shaaban said the additional measures planned by the government include moves to combat corruption, a new media law guaranteeing more freedom, improving living standards for residents of border areas, and changes to criminal law to ban random arrests and speed the processing of cases.

“We have seen this pattern repeated, where there are protests, and the government makes some concessions but they are not enough for protesters and growing opposition,” David W. Lesch, professor of Middle East history at Trinity University in San Antonio, said by phone.

Shaaban accused foreign forces of meddling in Syria and said there are “signs of foreign funding” behind the protests. She denied reports that Iran and Hezbollah, the Shiite Muslim group it is accused of supporting, were helping to quell the unrest.

Border Areas

Daraa residents are seeking the dismissal of some officials and permission to sell land in border territories without government approval. They also want detainees recently jailed on political charges to be freed, including a number of children held for writing anti-government graffiti.

“The excessive force apparently again being used by security forces is the latest example of the Syrian authorities’ appalling and brutal response to recent dissent, and make their pledge to investigate the violence sound rather hollow,” said Philip Luther, Amnesty International’s Deputy director for Middle East and North Africa. For the government to have credibility, it “must immediately issue clear orders to restrain the security forces to prevent further loss of life.”

--With assistance from Zainab Fattah in Dubai and Nayla Razzouk in Amman. Editors: Paul Tighe, Jim McDonald

To contact the reporters on this story: Alaa Shahine in Dubai at asalha@bloomberg.net; Nadeem Hamid in Washington at nhamid3@bloomberg.net

To contact the editor responsible for this story: Riad Hamade at rhamade@bloomberg.net.

More about → Assad’s Promises Fail to Halt Protests in Syrian Cities

Assad’s Promises Fail to Halt Protests in Syrian Cities

(Updates with a comment from protester in the fifth paragraph; Syrian lawmaker in seventh. See EXTRA and MET for more on turmoil in the region.)

March 26 (Bloomberg) -- Syrian President Bashar Al-Assad’s security forces clashed with protesters in several cities after his promises of freedoms and pay increases failed to prevent dissent from spreading across the country.

The protests that started earlier this month in the southern province of Daraa “are believed” to have resulted in the deaths of 55 people, London-based Amnesty International said in a statement on its website yesterday. Security forces opened fire on protesters in the town of al-Sanamein in Daraa and carried out arrests in the capital, Damascus, it said.

Video footage on the Internet broadcast by Pan-Arab news networks Al Jazeera and Al Arabiya today showed hundreds of protesters in cities such as Homs and Daraa, some tearing down a poster of Assad. The state-run Syrian Arab News Agency said an armed group killed one man in Homs while another group in Sanamein attacked security forces, who killed several assailants.

Syria is the latest Middle Eastern country to be hit by the wave of uprisings that ousted longtime rulers in Egypt and Tunisia, and sparked a civil war in Libya. Unrest began in Syria on March 15 when as many 200 people took to the streets of Damascus against Assad’s government.

“Security elements are firing live bullets on protesters,” a man who identified himself as Omar al-Masri, told BBC Arabic television in a telephone interview from Daraa. “We are not gangs. We are peaceful protesters.”

Two Options

Assad’s regime has “only two options,” the Brussels-based International Crisis Group said in a report on its website. “One involves an immediate and inevitably risky political initiative that might convince the Syrian people that the regime is willing to undertake dramatic change. The other entails escalating repression, which has every chance of leading to a bloody and ignominious end.”

“There is change and there is reform,” Anas al-Shami, a Syrian parliamentarian told Al Arabiya television in an interview today. “Surely this reform wasn’t perfect but we are working night and day.”

The crackdown on demonstrators yesterday came a day after Assad’s political and media adviser, Buthaina Shaaban, said protesters’ demands were “legitimate” and would be met. The government may lift a 1963 emergency law that suspended most rights, increase judicial authority and prepare a political parties law, she said in a televised briefing March 24.

Calm Way

“The demands of the people of Daraa and the rest of the Syrian people across all provinces are legitimate,” she said. “All legitimate demands will be met, but in a calm way.”

Shaaban said Assad didn’t give orders to fire on civilians, saying “there were some mistakes.”

The Obama administration condemned the violence against civilians by Syrian authorities and urged that those responsible be held accountable. A State Department spokesman, Mark Toner, said the U.S. wants to see actions to back promises from the government.

Syria is confronting the same challenges facing other governments in the region -- the “unmet political and economic grievances of their people,” U.S. Defense Secretary Robert Gates said March 24 while visiting Israel.

“Some of them are dealing with it better than others,” Gates said. “I’ve just come from Egypt, where the Egyptian army stood on the sidelines and allowed people to demonstrate, and in fact, empowered a revolution. The Syrians might take a lesson from that.”

Pay Raises

Assad ordered pay increases of between 20 percent and 30 percent for state employees and an income-tax cut, state television reported. He also ordered a 25 percent increase in the pensions of former government employees.

Shaaban said the additional measures planned by the government include moves to combat corruption, a new media law guaranteeing more freedom, improving living standards for residents of border areas, and changes to criminal law to ban random arrests and speed the processing of cases.

“We have seen this pattern repeated, where there are protests, and the government makes some concessions but they are not enough for protesters and growing opposition,” David W. Lesch, professor of Middle East history at Trinity University in San Antonio, said by phone.

Shaaban accused foreign forces of meddling in Syria and said there are “signs of foreign funding” behind the protests. She denied reports that Iran and Hezbollah, the Shiite Muslim group it is accused of supporting, were helping to quell the unrest.

Border Areas

Daraa residents are seeking the dismissal of some officials and permission to sell land in border territories without government approval. They also want detainees recently jailed on political charges to be freed, including a number of children held for writing anti-government graffiti.

“The excessive force apparently again being used by security forces is the latest example of the Syrian authorities’ appalling and brutal response to recent dissent, and make their pledge to investigate the violence sound rather hollow,” said Philip Luther, Amnesty International’s Deputy director for Middle East and North Africa. For the government to have credibility, it “must immediately issue clear orders to restrain the security forces to prevent further loss of life.”

--With assistance from Zainab Fattah in Dubai and Nayla Razzouk in Amman. Editors: Paul Tighe, Jim McDonald

To contact the reporters on this story: Alaa Shahine in Dubai at asalha@bloomberg.net; Nadeem Hamid in Washington at nhamid3@bloomberg.net

To contact the editor responsible for this story: Riad Hamade at rhamade@bloomberg.net.

More about → Assad’s Promises Fail to Halt Protests in Syrian Cities

Investors in race against time to retain 120% GAD rates

FAs face a race against time if they want to lock clients into the 120 per cent GAD income rates for the next five years, Suffolk Life says.

Treasury reforms ending compulsory annuitisation come into force in 12 days time. Under the new rules investors entering drawdown for the first time from April 6 onwards will have their maximum income calculated using 100 per cent of the GAD rate.

Providers often split pension pots into ‘units’, with each unit representing a fraction of the total fund. Suffolk Life, for example, splits its plans into 1,000 units.

Pensions technical manager Claire Brooks says clients could only need to crystallise one of those units to secure 120 per cent GAD rate for five years.

She says: “There are still opportunities for advisers to help their clients. If a client wants to take benefits now whilst in the process of moving providers, it may be possible to crystallise just one unit.

“Depending on the way in which the provider administers partially drawn plans this could mean that as they crystallise further units the limits will be recalculated using the 120 per cent of GAD rate instead of 100 per cent of GAD.”

A J Bell marketing director Billy MacKay (pictured) says: “The wording of the rules as they stand allows investors to lock themselves into the higher 120 per cent GAD figure for five more years by moving part of their pension into drawdown before April 6.”

More about → Investors in race against time to retain 120% GAD rates

Chuka Umunna: 'Governor has bank watchdog under his thumb'

Treasury select committee member Chuka Umunna says Bank of England governor Mervyn King has the BoE’s court of directors “under his thumb”.

Last week, the select committee heard evidence from the court as part of its inquiry into accountability at the bank.

The court’s responsibilities include determining the bank’s objectives and strategy, ensuring the effective discharge of the bank’s functions, ensuring the most efficient use of the bank’s resources and to review the bank’s strategy in relation to the financial stability objective.

Giving evidence at the session were court chairman Sir David Lees and court members Sir Roger Carr, Lady Rice and Brendan Barber.

Speaking to Money Marketing, Labour MP Umunna says he was “distinctly unimpressed” with the court representatives’ performance.

He says: “There is confusion about whom the executive committees of the bank are accountable to. They take their accountability to Parliament very seriously but one did not get the sense the court was viewed in the same serious context.

“Mervyn must be loving this. In some senses, the impression I was given is he has got them under his thumb and that should not be the way it operates.”
Under the Treasury’s plans for regulatory reform, the court will be responsible for holding the Financial Policy Committee to account for its role in delivering systemic financial stability by setting macro-prudential policy.

The FPC is proposed to have a “comply or explain” power over the Financial Conduct Authority and the Prudential Regulation Authority, as well as macro-prudential tools that could include the ability to set loan-to-value ratios.

The TSC raised concerns in the session about the court’s role during the run on Northern Rock, the fact that Lees did not consult monetary policy committee external member Adam Posen about his public criticism of an “excessively political” statement in a bank inflation report and the ability of the court to take action against the governor.

During the evidence session, court chairman Sir David Lees was accused of not being on top of what the bank spent on its functions.

TSC chair Andrew Tyrie asked the court to release all its documentation covering its activities during the financial crisis. Tyrie said they would be used to judge the court’s effectiveness during what he called the “most colossal failure of bank policy”.

Umunna says the court displayed a “fairly hands-off” approach during the session and he was especially concerned when Lees told the committee he could not recall a widely reported speech given by governor Mervyn King in January.

In it, King said the “credible” path of fiscal consolidation means the UK is well placed to return to growth in the next few years, adding: “The right course has been set, it is important to maintain it.”

Umunna says: “Speeches by MPC members or the governor can move markets and here you have a non-executive director saying: ’Oh well, lots of people make speeches in the bank and you cannot keep tabs on everything.’ Well, that is his job.”

In what Umunna calls an “extraordinary” committee session in November, MPC external member Adam Posen questioned whether King should involve himself in political matters, specifically criticising a paragraph in the May inflation report calling for “a more demanding” path of fiscal consolidation.

Court member Roger Carr told the committee last week the political independence of the bank was of “paramount importance” but Lees admitted he had seen Posen since the hearing and did not question him about his criticism.

Umunna says: “When I asked why he did not raise this with Posen, he said: ’Because he had not raised it with me’. I asked, does that mean on every important issue you expect the MPC to initiate a conversation? Should you not be actively raising that with him?

“He did not seem to have any response to that, so we were not terribly impressed.”

More about → Chuka Umunna: 'Governor has bank watchdog under his thumb'

Nest confirms default investment strategy

Nest’s default investment fund will target long-term returns of CPI plus 3 per cent following the national scheme’s decision to adopt a low-risk investment strategy.

The Government-backed pension scheme also confirmed details of the additional fund choices available to members.

These will include a higher risk fund, a lower growth fund, an ethical fund, a Sharia fund and pre-retirement fund. The pre-retirement fund will be available for members who, in the early years of the scheme, want to buy retirement income with their pension pot rather than target a cash lump sum.

Nest chairman Lawrence Churchill says: “Agreeing the investment approach is a significant landmark for Nest in achieving our aim of helping millions to save confidently for their retirement.

“The investment strategy will develop over time and we’re confident our approach will encourage saving and support our members in achieving their aspirations for retirement.”

More about → Nest confirms default investment strategy

Boulger slams network panel model

John Charcol senior technical manager Ray Boulger has slammed the network panel model, suggesting that many clients are being denied the best deal.

He says brokers should turn clients away if they do not have a suitable lender on their panel.

He says: “The only real argument of having a panel is that you could have more sway with some of the lenders because you do a lot of business with them but there are lots of other cases where it means you cannot give your client the best deal.

“My view would be that if you do not have a suitable lender on your panel, you should tell your client you cannot place the case.”

Chadney Bulgin mortgage partner Jonathan Clark says: “I think the FSA’s definition of whole of market needs looking at. A lot of brokers claim to be whole of market but they are not. They only recommend lenders who pay them a proc fee.”

London & Country head of communications David Hollingworth says: “The arguments that people would make for using panels is that they have got a number of the major lenders on there and they do represent a large slice of the market by volume.

“But, of course, what you miss out on as a customer is the potential for other lenders which offer better deals at the time you are looking for a mortgage.

“Therefore, you are just reducing your chances of getting the best deal. It is a question that borrowers should ask brokers.”

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Shared scheme is 'small plaster on a big wound'

Mortgage experts suggest the £250m shared-equity scheme to help first-time buyers raise a deposit will have a limited impact in boosting the housing market.

Chancellor George Osborne said the scheme would help up to 10,000 first-time buyers raise a deposit for a newbuild property. Borrowers have to raise 5 per cent deposit and the Government and homebuilders will offer up to 20 per cent of the mortgage between them as a low-interest loan.

Your Mortgage Decision director Dominik Lipnicki says the Government has missed an opportunity to fix the housing market. He says: “It is putting a small plaster on a big wound. It will help a few thousand people but will not make any material changes to the housing market.”

First Action Finance head of communications Jonathan Cornell says: “My concerns are it does not help the first-time sellers. Those people cannot really move up the ladder. It is all very well for the Government to launch schemes but, unless lenders accept them, it is not going to work. Similarly, lenders, as a rule of thumb, are more cautious about newbuild property.”

MAC Consulting chief executive Mark Chilton is concerned that homebuilders could inflate prices. He says: “If you are a developer, all you have to do is add 10 per cent to the value and mark it off as a qualifying FirstBuy property. My suggestion is that they must be subject to independent valuation for it to work.”

More about → Shared scheme is 'small plaster on a big wound'

FSA uncovers serious failings in auditor reports

The FSA has referred several auditors to their relevant auditing bodies after uncovering serious failings in their client asset reports.

The regulator published a consultation paper on improving client assets in September, following a review in 2009.

It found auditors were providing unchanged or ‘clean’ reports despite significant breaches of client asset rules.

The FSA has now put out its final rules for auditors which include the requirement for a template to be used for the auditor’s report, the individual carrying out the audit to sign the report, and a separate template identifying specific rule breaches.

FSA client assets unit leader Richard Sutcliffe says: “We have seen serious failings in relation to auditors’ client assets reports. As a result we have referred a number of auditors to their relevant auditing bodies over the past year and are currently considering referring several other cases.

“Ultimately it is a firm’s responsibility to ensure they have adequate systems in place, but we rely on their auditors to provide some of the necessary independent assurance. These new rules make it crystal clear for firms what we require of their external auditors when it comes to producing high quality and consistent client assets reports.”

The rules will come into force on June 1, but firms and their auditors will have the option of not applying the new rules until September 29 to transition to the new rules.

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Metro Bank to break into buy-to-let

Metro Bank is planning to launch into the buy-to-let sector later this year.

The move is unlikely to be before the third quarter. Both Santander and Yorkshire Building Society have entered the buy-to-let sector in recent months.

Chief executive Craig Donaldson says: “We are currently developing our buy-to-let offering with the expectation to launch at the at the end of Q2 or Q3.”

Metro Bank launched in July last year. It currently has four London branches, in Holborn, Earl’s Court, Fulham, Borehamwood and has recently opened a branch in Tottenham Court Road.

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"Japan is bust", says Neptune's Taylor

Chris Taylor, head of research at Neptune and manager of the Neptune Japan opportunities fund, has declared that “Japan is bust”.

In a statement released today, Taylor adds the yen is overvalued and that global multinationals are the “only functioning parts of the economy”. He says overvalued yen is hurting the recovery process by hampering the tax take on multinational’s profits.

He says: “Given the yen’s rally, the G7 decided to intervene to stabilise the yen, to which no members objected. They understand Japan’s predicament and all of the Bank of Japan’s monetary intervention has not been sterilised.

“This corresponds with our analysis: Japan is bust, the currency is overvalued and the only functioning parts of the economy are the large global multinationals.”

Taylor says this recent rally was owing to momentum rather than the result of foreign asset repatriation. The seasonal inflow witnessed towards the end of the financial year will be reversed, he adds.

Meanwhile Taylor says that it does not appear the Japanese are selling their foreign assets to allegedly fund reconstruction. There remains a net outflow year to date of the yen and most companies foreign currency deals are already being processed as the financial year-end is March 31.

Taylor predicts only individuals with foreign currency reserves will switch back into yen for the purposes of reconstruction. Companies are more likely to relocate their production outside of Japan as their funds are already in yen.

Despite the most recent estimate for reconstruction costs in the Tohoku region being between 5 and 20 trillion yen, the government’s share of liability is likely to remain comparatively low, Taylor says.

An estimated 95 per cent of the population do not have earthquake insurance and those that are part of the government earthquake insurance scheme will only get back somewhere in the region of 30-50 per cent, he says.

More about → "Japan is bust", says Neptune's Taylor

Chuka Umunna: 'Governor has bank watchdog under his thumb'

Treasury select committee member Chuka Umunna says Bank of England governor Mervyn King has the BoE’s court of directors “under his thumb”.

Last week, the select committee heard evidence from the court as part of its inquiry into accountability at the bank.

The court’s responsibilities include determining the bank’s objectives and strategy, ensuring the effective discharge of the bank’s functions, ensuring the most efficient use of the bank’s resources and to review the bank’s strategy in relation to the financial stability objective.

Giving evidence at the session were court chairman Sir David Lees and court members Sir Roger Carr, Lady Rice and Brendan Barber.

Speaking to Money Marketing, Labour MP Umunna says he was “distinctly unimpressed” with the court representatives’ performance.

He says: “There is confusion about whom the executive committees of the bank are accountable to. They take their accountability to Parliament very seriously but one did not get the sense the court was viewed in the same serious context.

“Mervyn must be loving this. In some senses, the impression I was given is he has got them under his thumb and that should not be the way it operates.”
Under the Treasury’s plans for regulatory reform, the court will be responsible for holding the Financial Policy Committee to account for its role in delivering systemic financial stability by setting macro-prudential policy.

The FPC is proposed to have a “comply or explain” power over the Financial Conduct Authority and the Prudential Regulation Authority, as well as macro-prudential tools that could include the ability to set loan-to-value ratios.

The TSC raised concerns in the session about the court’s role during the run on Northern Rock, the fact that Lees did not consult monetary policy committee external member Adam Posen about his public criticism of an “excessively political” statement in a bank inflation report and the ability of the court to take action against the governor.

During the evidence session, court chairman Sir David Lees was accused of not being on top of what the bank spent on its functions.

TSC chair Andrew Tyrie asked the court to release all its documentation covering its activities during the financial crisis. Tyrie said they would be used to judge the court’s effectiveness during what he called the “most colossal failure of bank policy”.

Umunna says the court displayed a “fairly hands-off” approach during the session and he was especially concerned when Lees told the committee he could not recall a widely reported speech given by governor Mervyn King in January.

In it, King said the “credible” path of fiscal consolidation means the UK is well placed to return to growth in the next few years, adding: “The right course has been set, it is important to maintain it.”

Umunna says: “Speeches by MPC members or the governor can move markets and here you have a non-executive director saying: ’Oh well, lots of people make speeches in the bank and you cannot keep tabs on everything.’ Well, that is his job.”

In what Umunna calls an “extraordinary” committee session in November, MPC external member Adam Posen questioned whether King should involve himself in political matters, specifically criticising a paragraph in the May inflation report calling for “a more demanding” path of fiscal consolidation.

Court member Roger Carr told the committee last week the political independence of the bank was of “paramount importance” but Lees admitted he had seen Posen since the hearing and did not question him about his criticism.

Umunna says: “When I asked why he did not raise this with Posen, he said: ’Because he had not raised it with me’. I asked, does that mean on every important issue you expect the MPC to initiate a conversation? Should you not be actively raising that with him?

“He did not seem to have any response to that, so we were not terribly impressed.”

More about → Chuka Umunna: 'Governor has bank watchdog under his thumb'

Nest confirms default investment strategy

Nest’s default investment fund will target long-term returns of CPI plus 3 per cent following the national scheme’s decision to adopt a low-risk investment strategy.

The Government-backed pension scheme also confirmed details of the additional fund choices available to members.
These will include a higher risk fund, a lower growth fund, an ethical fund, a Sharia fund and pre-retirement fund. The pre-retirement fund will be available for members who, in the early years of the scheme, want to buy retirement income with their pension pot rather than target a cash lump sum.

Nest chairman Lawrence Churchill says: “Agreeing the investment approach is a significant landmark for Nest in achieving our aim of helping millions to save confidently for their retirement.

“The investment strategy will develop over time and we’re confident our approach will encourage saving and support our members in achieving their aspirations for retirement.”

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Boulger slams network panel model

 John Charcol senior technical manager Ray Boulger has slammed the network panel model, suggesting that many clients are being denied the best deal.

He says brokers should turn clients away if they do not have a suitable lender on their panel.

He says: “The only real argument of having a panel is that you could have more sway with some of the lenders because you do a lot of business with them but there are lots of other cases where it means you cannot give your client the best deal.

“My view would be that if you do not have a suitable lender on your panel, you should tell your client you cannot place the case.”

Chadney Bulgin mortgage partner Jonathan Clark says: “I think the FSA’s definition of whole of market needs looking at. A lot of brokers claim to be whole of market but they are not. They only recommend lenders who pay them a proc fee.”

London & Country head of communications David Hollingworth says: “The arguments that people would make for using panels is that they have got a number of the major lenders on there and they do represent a large slice of the market by volume.

“But, of course, what you miss out on as a customer is the potential for other lenders which offer better deals at the time you are looking for a mortgage.

“Therefore, you are just reducing your chances of getting the best deal. It is a question that borrowers should ask brokers.”

More about → Boulger slams network panel model

Shared scheme is 'small plaster on a big wound'

Mortgage experts suggest the £250m shared-equity scheme to help first-time buyers raise a deposit will have a limited impact in boosting the housing market.

Chancellor George Osborne said the scheme would help up to 10,000 first-time buyers raise a deposit for a newbuild property. Borrowers have to raise 5 per cent deposit and the Government and homebuilders will offer up to 20 per cent of the mortgage between them as a low-interest loan.

Your Mortgage Decision director Dominik Lipnicki says the Government has missed an opportunity to fix the housing market. He says: “It is putting a small plaster on a big wound. It will help a few thousand people but will not make any material changes to the housing market.”

First Action Finance head of communications Jonathan Cornell says: “My concerns are it does not help the first-time sellers. Those people cannot really move up the ladder. It is all very well for the Government to launch schemes but, unless lenders accept them, it is not going to work. Similarly, lenders, as a rule of thumb, are more cautious about newbuild property.”

MAC Consulting chief executive Mark Chilton is concerned that homebuilders could inflate prices. He says: “If you are a developer, all you have to do is add 10 per cent to the value and mark it off as a qualifying FirstBuy property. My suggestion is that they must be subject to independent valuation for it to work.”

More about → Shared scheme is 'small plaster on a big wound'

Addison Lee's Business is booming despite economic climate

The company, which operates 2,600 minicabs and a luxury fleet of 200 VIP cars in London, announced a turnover of £105 million for 2010-11, up 19% on last year.

Addison Lee, which serves over 16,000 corporate clients and carries 10 million passengers per year saw bookings rise by 24% in 2010. Profit after tax was £3,255,515 (up from £1,717,830 the previous year).

John Griffin, founder and chairman of Addison Lee said: “Our performance this year proves that smart businesses can thrive in the recession. Addison Lee has continued to invest in new vehicles and new technologies such as iPhone and Blackberry booking applications and now we’re reaping the rewards.”

“Big businesses in the City may have been focussed on reducing costs but it’s clear that Addison Lee’s competitive pricing and superior service has made us the de-facto choice for corporate travel in London.”

“I have always said that the recession would act like a colonic irrigation for the economy; flushing out badly run or uncompetitive businesses, so it’s very pleasing to see that our commitment to professionalism and technological innovation has helped us to grow as our rivals are fading.”

More about → Addison Lee's Business is booming despite economic climate

It takes more than money and magic to succeed

Patti and David Bailey own Motormouse, creating and marketing novel wireless computer mouse devices which look like sleek, shiny miniature cars, available in the form of a classic sports car or Mini Cooper models. They now know what an impact there is when a “Dragon” breathes fire into your business.

The clever couple took Motormouse to the Dragons’ Den, where they impressed James Caan, both with their product and business acumen. He agreed to invest £120,000 to help Patti and David open up markets for their unique gadget, and develop a complementary product range.

Now Patti and David are seeing their product literally “take off”. The Motormouse is a top in-flight seller on a variety of airlines, including British Airways, Emirates, Etihad and KLM, and they are currently flying off the shelves at Harrods. Recently the Bailey’s have successfully negotiated deals in 11 destinations abroad, and the Motormouse is now gracing desks from Australia to Turkey, the USA to Norway.

“Our association with James (Caan) has been extremely positive and enormously rewarding,” says Patti, “but anyone who thinks that we just had to stand by while he waved a magic wand to make us successful should think again.”

Right from the outset the Baileys decided they were not going to expect Mr Caan to “do it for us”.

David explains: “We have controlled our own activities, sales, and business mechanics, taking advice and guidance as we progressed. The result is a flourishing partnership between us and Mr Caan’s team, which has opened up a joint investment vehicle so in turn we can help others.”

He said that Caan had helped the company to negotiate new contracts, access otherwise inaccessible markets, and assisted in numerous other ways besides the actual financial investment.

“There is a myth that once you have ‘made it’ on Dragons’ Den the sky’s the limit. This is not necessarily true – it’s what YOU do and the effort you put in that makes the difference, no matter how much help you get along the way.”

Patti and David are in agreement, though, that being associated with a Dragon was the catalyst which they needed to set Motormouse on the road to success.

“James (Caan) has always been accessible, personable, and extremely supportive. We meet with him and his team frequently and have the use of their Mayfair offices for our London-based meetings. His support can’t be quantified in money terms – it’s not just a case of stumping up cash. The investment of time, ideas, guidance and PR association has inestimable value,” says Patti.

Mr Caan commented: “The Baileys are a fine example of an enterprising partnership who didn’t sit around hoping they’d get lucky, but went out and created their own luck. I am delighted to have spurred them on their way, and look forward to continuing to work with them in the future.”

More about → It takes more than money and magic to succeed

Sterling falls back on weak retail figures

Sterling is falling back against the dollar after news that British retail sales fell more than expected in February.

Data from the Office for National Statistics (ONS) showed sales fell 0.8% in February after a jump in prices, which was only partly due to the rise in VAT.

Steeper than the 0.6% drop predicted and following January's 1.9% rise, this sign of consumer weakness saw sterling weaken by half a cent to $1.615.

The pound had traded above $1.64 on Tuesday after a high inflation reading saw the money markets bringing forward their expectations of a rate rise.

But it fell back yesterday when UK growth forecasts were downgraded in George Osborne's Budget. GDP growth projections were lowered this year from 2.1% to 1.7%, and the 2012 forecast from 2.6% to 2.5%.

With consumer spending accounting for more than half of the economy, today's figures deliver a blow to hopes that GDP will achieve a strong recovery from the 0.6% contraction seen in the final quarter of 2010.

Hetal Mehta, of Daiwa Capital Markets, said: 'I can't say I'm surprised by the sharp fall in retail sales in February. The January bounceback - which has been toned down - was clearly in response to the the adverse weather conditions in December.

'Today's figures prove that underlying conditions in the retail sector are weak. Consumers are being buffeted by falling real wages and high unemployment, which are undermining consumer confidence.'

Although it follows a series of gloomy updates from retailers including Sainsbury's and John Lewis amid slowing sales growth in recent weeks, better results today from B&Q owner Kingfisher and Next provided evidence of cheer in the sector.

The ONS said there was downward pressure on all retailers in February, apart from those selling petrol and goods for cars. Household goods stores, which include DIY and electronics retailers, saw a 2.5% decline in volumes from January, with sales of music and video recording equipment down 12.6% on a year ago. Supermarkets and food retailers saw volumes decline 2.2% on the previous year, marking the 13th month of declining figures in a row. Non-store sales, which include internet and mail-order firms, also saw month-on-month sales volumes growth slow to 17.3% in February.

Vicky Redwood, senior UK economist at Capital Economics, said: 'This drop in sales volumes adds to evidence of a significant slowdown in consumer spending in the last few weeks.

'The level of sales has now fallen below the pre-snow level in November, suggesting an underlying slowdown is at work. What's more, the outlook for spending remains pretty bleak. Although the Chancellor provided some modest help for consumers yesterday, real incomes still look set to fall sharply this year.'

Alan Clarke, from BNP Paribas, took a more stoic line: 'It could have been even worse given the plunge in consumer confidence and higher inflation. Retail sales are going to be weak all year. We just have to get used to it.

More about → Sterling falls back on weak retail figures

Chris Brown Defends Good Morning America Outburst Via Twitter

Chris Brown, who has been desperately trying to rehabilitate his image in order to sell his new album F.A.M.E, reportedly exploded behind the scenes at Good Morning America this morning, according to reports.  Apparently, he wasn’t thrilled with GMA anchor Robin Roberts, who asked him on-air about the 2009 Rihanna assault.

The singer, like many stars in a public relations crisis, quickly (perhaps too quickly!) turned to Twitter and his two million-plus followers to defend himself.

Brown tweeted at 9:49 a.m., “I’m so over people bringing this past s**t up!!! Yet we praise Charlie sheen and other celebs for there bulls**t.”

That ill-advised tweet was quickly removed and followed up with this fan-friendly message: “All my fans!!! This album is for you and only you!!! I’m so tired of everyone else!! Honestly!! I love team breezy!!”

He tweeted a similar message moments ago, “#FAMEnumber1 I love all my fans and teambreezy!!! I hope this album is everything you wanted!”

For Brown, today’s behind-the-scenes drama is the last thing he needed in his career rehabilitation tour.  Will his album sales be affected by this type of behavior?  Stay tuned.

Mark Pasetsky is the editorial director of CoverAwards.com.  Follow mark on Twitter @coverawards

More about → Chris Brown Defends Good Morning America Outburst Via Twitter

Mock Rebecca Black All You Want, She’s Laughing To The Bank

Rebecca Black has a hit song. The 13-year-old singer’s video for her song “Friday,” which has quickly become the fascination of the Internet, is a smashing success despite the fact that it owes its meteoric rise to, well, mediocrity. Put more bluntly, the video has become the laughingstock of millions, who have latched on to its simplistic lyrics and low-price polish to push it into the public consciousness. Despite the movement’s dubious beginnings, though, Black may be the one laughing now.

The “Friday” video — which was uploaded to YouTube on February 10th — didn’t get much traction until early last week, when it suddenly caught a web tailwind. Black’s name trended on twitter and the video spiraled to go viral. It now has over 30 million views. For those of you who haven’t seen the video, which debates morning routines, car seat selection and the days of the week, while celebrating the weekend, check it out below:
So is it true that any press is good press? For the young singer, who has appeared gracious and composed in her few media appearances, that axiom seems to hold true. And her decision to keep the video online, despite being given the opportunity by the song’s producers to take the video down when the comments started to turn nasty, may end up to be a boon to her college fund.

Black’s tune comes courtesy of Ark Music Factory, a so called record label that churns out tween pop for a couple thousand bucks a tune. Co-founded by Patrice Wilson and Clarence Jey, the L.A. based company courts young teenage singers and “signs” them to short, vanity recording projects. Jey reportedly is the lyrical genius behind “Friday.” According to The Daily Beast, Black’s mother forked over $2,000 for two songs written by Ark Music Factory’s team and one video, the now infamous “Friday.”

It would seem that the investment paid off, many times over. Although the YouTube/Google party line on video ad revenue is vague (“There are no guarantees under the YouTube Partner agreement about how much you will be paid.”) some digging turns up speculation on potential profits. TechCrunch’s Erick Schonfeld reported today on Google and YouTube’s revenue figures. Looking at 2010’s actual numbers, the site makes about $1 per thousand page views. For videos running ads as part of the revenue sharing program, that revenue is then split between YouTube and the content creator. Content creators, or partners, take 68% of the profit. At 30,000,000 views, that lands Black and Ark Music Factory $20,000 – a 1000% return on investment. That number matches the figure reported by Damian Kulash Jr., the lead singer of indie pop band OK Go, who have made a name for themselves via viral videos.

The revenue doesn’t stop there, though. Where Google has had a notoriously tough time monetizing YouTube content, Apple’s iTunes has had significantly fewer problems. Since hitting the online music store last Monday, “Friday” has amassed a staggering number of downloads, reportedly topping 2 million; the song currently sits at #45 on the iTunes Top Singles chart. According to 101 Distribution, an independent music distributor, iTunes pays out $.70 per single download in the United States. That’s a much juicier check for Black and Ark Music Factory; even if the numbers are exaggerated, the intake from “Friday” could top $1 million. What’s more, Black is planning to release an acoustic version of the song to disprove speculation that her voice is reliant on AutoTune. Cha-ching! Update: As an astute commenter points out, that estimate number of downloads is likely an overshot. Although iTunes has not released sales numbers, it seems more likely that the song has a few hundred thousand downloads (and counting) rather than 2 million. The song is also for sale on ArkMusicFactory.com, Amazon.com, CDBaby.com, and other online retailers.

According to The Daily Beast, Black plans to donate a portion of her profits to “Japan relief organizations and school arts programs.”

Like it or not, there’s probably more to come from Rebecca Black and Ark Music Factory. As I type, another Ark Music product, Alana Lee, is racking up views by the tens of thousands on her video “Butterflies,” likely basking in the afterglow of Rebecca Black. Fun, fun, fun indeed.

More about → Mock Rebecca Black All You Want, She’s Laughing To The Bank