Vodafone says its stake in China Mobile had doubled in 10 years

Vodafone has pocketed $6.5bn (£4.2bn) in cash following the sale of its 3.2% stake in China’s biggest wireless operator, China Mobile.

It is the biggest such sale by the UK-based phone company of its non-strategic investments.

The buyers of the stake, of which there may be several, have not been identified.

The 643m shares, listed on the Hong Kong stock exchange, were offered at a 3.4% discount to the market price.

The sudden new supply weighed on the Chinese company’s share price, which ended the day down 3.8%.

The normal daily turnover for China Mobile’s shares is 21m, but Vodafone’s disposal saw that figure spike to 740m.

Continued co-operation

The company says it intends to return some 70% of the net proceeds to shareholders by buying back shares.

The rest of the proceeds will be used to reduce the group’s net debt.

Newbury-based Vodafone originally invested in China Mobile in 2000 and it says both companies will continue to cooperate in areas such as roaming, network roadmap development, multinational customers and green technology.

“Today’s transaction achieves a near doubling of Vodafone’s original investment in China Mobile and combines our stated portfolio strategy with ongoing co-operation with China’s leading telecommunications company,” said Vodafone’s chief executive, Vittorio Colao.

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The explosion on the Deepwater Horizon killed 11 workers and injured 17

Contractors who worked for BP on the ill-fated Deepwater Horizon oil rig have criticised the company’s report into the Gulf of Mexico oil spill.

Drilling firm Transocean branded the report “self serving” while cement contractor Halliburton said it contained “omissions and inaccuracies”.

BP blamed a “sequence of failures involving a number of different parties” for the spill.

It faces billions of dollars worth of compensation claims over the disaster.

Transocean dismissed BP’s report, accusing the oil giant of having designed a “fatally flawed” well and making “cost-saving decisions that increased risk - in some cases, severely”.

“This is a self-serving report that attempts to conceal the critical factor that set the stage for the Macondo (well) incident: BP’s fatally flawed well design,” the Swiss-based group said in a statement.

Halliburton also hit back at the 193-page report.

“As we continue to review BP’s internal report published earlier today, we have noticed a number of substantial omissions and inaccuracies in the document,” it said.

“Halliburton remains confident that all the work it performed with respect to the Macondo well was completed in accordance with BP’s specifications for its well construction plan and instructions, and that it is fully indemnified under its contract for any of the allegations contained in the report.”

Well capped

The rig exploded in April, killing 11 people, and an estimated 4.9m barrels of oil then leaked into the Gulf.

The well was capped on 15 July, and an operation to permanently seal it is due to take place in the coming weeks.

BP leased the Deepwater Horizon rig from Transocean, and its cement contractor was Halliburton. The BP report was critical of the processes and actions of teams from both firms.

The report, conducted by BP’s head of safety, Mark Bly, highlighted eight key failures that, in combination, led to the explosion.

BP said that both BP and Transocean staff incorrectly interpreted a safety test which should have flagged up risks of a blowout.

“Over a 40-minute period, the Transocean rig crew failed to recognise and act on the influx of hydrocarbons into the well” which eventually caused the explosion.

BP criticised the cementing of the well - carried out by Halliburton - and repeated previous criticism of the blowout preventer.

Among the other findings, the report said:

• There were “no indications” that Transocean had tested intervention systems at the surface, “as was required by Transocean policy”, before they were deployed on the well
• “Improved engineering rigour, cement testing and communication of risk” by Halliburton could have identified flaws in cement design and testing, quality assurance and risk assessment
• A Transocean rig crew and a team described as “mudloggers” working for Halliburton Sperry Sun may have been distracted by what are described as “end-of-well activities” and, as a result, important monitoring was not carried out for more than seven hours
• Crew may have had more time to respond before the explosion if they had diverted escaping fluids overboard.

“To put it simply, there was a bad cement job and a failure of the shoe track barrier at the bottom of the well, which let hydrocarbons from the reservoir into the production casing,” said outgoing chief executive Tony Hayward.

“The negative pressure test was accepted when it should not have been, there were failures in well control procedures and in the blowout preventer; and the rig’s fire and gas system did not prevent ignition,” he said.

The blowout preventer that failed was recovered from the Gulf of Mexico on Saturday. It will be placed in the custody of the US Justice Department and examined.

‘Lessons for future’

BP’s incoming chief executive Bob Dudley said the report proved that the explosion was “a shared responsibility among many entities”.

The company said it had accepted all the recommendations in the report, and would implement them worldwide.

“We are determined to learn the lessons for the future and we will be undertaking a broad-scale review to further improve the safety of our operations,” Mr Dudley said in a statement.

BP says dealing with the aftermath of the spill has cost $8bn (£5.2bn), and it has already paid out about $399m in claims to people affected by the spill.

A national commission is expected to submit a report to President Barack Obama by January. A Congressional joint investigation will submit a report later than month.

The US justice department is also investigating the disaster.

The Deepwater Horizon explosion according to BP

• 19 April - ‘Bad’ cement pumped down casing to stop gas and oil leaking into wellbore
• 20 April - Gas and oil leak through shoe track barrier and float collar
• 20 April - Tests carried out on the rig incorrectly suggest pressure is at a safe level
• The crew do not recognise there is a major problem or act to control it until the hydrocarbons are flowing rapidly up the riser
• The crew close the blowout preventer and diverter, routing oil and gas to the mud gas separator (MGS) system rather than diverting it overboard
• The MGS is overwhelmed by the force of oil and gas which leaks into the rig’s ventilation system
• The heating, ventilation and air conditioning system is thought to have sent a gas-rich mixture into the engine rooms
• 2149 local time There are two explosions, killing 11 men
• April 21 - 22 - The BOP designed to work automatically failed to seal the well as control pods and cutter (blind sheer ram) were not working

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Factory output had its best annual gain since 1994

UK manufacturing output rose 0.3% in July from the month earlier, according to the Office for National Statistics.

The figure, which excludes mining and the oil and gas sectors, took the rise for the year to 4.9%, the best annual gain since 1994.

Industrial output, which includes these sectors, also rose 0.3% in July, recovering from a 0.5% in June, and taking the annual rate to 1.9%.

The machinery and equipment sectors saw the biggest rise in July, the ONS said.

“It’s a decent reading,” said George Buckley, UK economist at Deutsche Bank.

“But I think it’s going to be quite difficult to achieve the same rates of growth (going forward) that we saw in the first and second quarters of this year.”

Philip Shaw, analyst at Investec, said: “It’s encouraging and we think the outlook for manufacturing remains on the positive side, not just on general recovery grounds but possibly also on reasonable export prospects.”

The ONS said there was scope for further gains in industrial output as more oil rigs came back on stream in August.

Oil and gas output rose 0.8% in July after a 5.2% fall in June, but was still 8.4% lower than the same month a year ago.

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The Bank of Canada says the weak US economy is hindering domestic growth

The Bank of Canada has raised interest rates by a quarter-point to 1% in its third rise this year.

Canada became the first of the leading Group of Seven developed nations to move rates higher since the start of the economic crisis when it increased lending rates to 0.5% in June.

The country’s economy was less badly hit than other G7 members because it did not have a sub-prime crisis.

But the Bank warned that growth would be held back by a weaker US economy.

It added that further rate rises would need to be carefully considered because of what it called the unusual uncertainty surrounding the outlook.

The bank acknowledged that the economic growth projections in its July Monetary Policy Report were too optimistic.

It blamed the weaker economy in the US, which buys three-quarters of Canadian exports, for the slower pace at home.

The most recent figures on the economy showed it had slowed sharply in the second quarter of the year - to an annualised growth rate of 2%, from 5.8% in the first quarter.

But the bank sounded upbeat on domestic consumer spending and business investment.

Its report said: “Going forward, consumption growth is expected to remain solid and business investment to rise strongly.”

The comments were taken to mean it was now more likely rates would rise a fourth time at the Bank of Canada’s next meeting in October.

The other members of the G7 are the US, UK, France, Germany, Italy and Japan.

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Greece has faced months of strikes and protests about the state of its economy

The debt-laden Greek economy shrank 1.8% in the second quarter as households slashed spending.

The contraction was worse than expected and compares with the 0.8% shrinkage in the January-to-March period.

Greece’s national statistics office said that private consumption dropped 4.2% year-on-year, against a rise of 1.5% in the previous quarter.

The figures underline Greece’s struggle against recession and cast a shadow over European stock markets.

The statistics agency said that gross capital investment tumbled by 18.6% in the second quarter, while exports fell 5%.

Greece is in the grip of a deep economic crisis.

The country has imposed radical austerity measures to balance the books and has been granted 110bn euros ($140bn; £90bn) in emergency aid from the European Union (EU) and International Monetary Fund (IMF).

Debt worries

Platon Monokroussos, economist at EFG Eurobank, said that there would be no let-up for the economy in the short term.

“Economic growth is likely to remain firmly in negative territory in the second half, given tight domestic credit conditions and the government’s austerity programme,” he said.

Greece’s weak economic performance could also led to an increase in the country’s cost of borrowing, analysts said.

“The worse-than-expected second-quarter figures are also likely to drive a new increase in Greek government bond yields, which have been rising steadily in recent months,” said Diego Iscaro at IHS Global Insight.

“Indeed, the spread between Greek and German 10-year government bonds currently stands above 900 basis points, just below their peak in May.”

It was the prohibitively high cost of borrowing that led to the rescue package from the EU and the IMF.

Worries about sovereign debt hit stock markets at the start of trading on Wednesday, with all the leading bourses down and bank shares hardest hit.

Greece was not the only concern, with Hungary’s economy barely moved in the second quarter.

The country’s gross domestic product in the April-June period was 0.8% up, but below the European Union average growth of 1% for the second quarter.

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The book supports recent economic data showing that the recovery is losing momentum.

It did, however, report a slight increase in consumer spending.

The influential Beige Book, compiled eight times a year and used to help set interest rates, is based on a survey of business views from around the US.

The Fed reported “continued growth in the national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of deceleration compared with preceding periods”.

The housing market was hit particularly hard during the period.

“Home sales slowed further following an initial drop after the expiration of the homebuyer tax credit at the end of June, prompting a slowdown in construction activity.”

The manufacturing sector also saw growth slowing in several districts across the US, the Fed said.

Spending pick-up

The was some good news on consumer spending, however. This measure is watched particularly closely as it accounts for more than two-thirds of the US overall economic output.

“Consumer spending appeared to increase on balance despite continued consumer caution that limited non-essential purchases, while activity in the travel and tourism sector picked up relative to seasonal norms,” the Fed said.

The latest figures show that the US economy grew by an annualised 1.6% between April and June, considerably less than many leading European economies.

But jobs data released last week showed private sector companies hired an extra 67,000 people in August, which helped to calm fears that the US economy might be heading for recession again.

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Europe is following the US in implementing financial reform

European Union finance ministers have agreed to establish a new framework for financial supervision, designed to help prevent future financial crises.

The measures include a European Systemic Risk Board to oversee the health of Europe’s economy.

Ministers also approved a second instalment of emergency loans to Greece worth 9bn euros ($11.4bn; £7.5bn).

They were unable, however, to agree a new Europe-wide bank levy or bank transaction tax.

Continued uncertainty

Other supervisory bodies that will oversee banking, financial markets, insurance and pensions were also agreed by the ministers.

They include the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority.

These bodies will have the power to intervene in the affairs of individual coutntries if EU members agree that the domestic regulator is failing in its duties.

They will not, however, be able to sanction measures that involve spending taxpayers’ money - they cannot order any bail-outs, for example.

The Council of the European Union said the European Parliament “is expected” to ratify these bodies later this month. They will then become “operational as planned” from 1 January next year.

The framework had already been agreed in principle earlier this month.

EU Economic and Monetary Affairs Commissioner Olli Rehn said the new framework was necessary in light of the continued economic uncertainty in Europe.

“I think it is important to underline that while we have stabilised the situation in the spring and during the summer concerning financial stability in the euro area, we are not out of the woods yet.”

Europe’s move follows the sweeping Wall Street reforms that President Barack Obama signed into law in July.

Bank tax

France, Germany and the UK have already committed to introducing a bank levy, designed to cover the costs of any future financial crises.

Following the multi-billion-dollar bail-outs made by governments across the world in the wake of the financial crisis in 2008, the leaders of Europe’s three biggest economies have argued strongly that taxpayers should not be expected to foot the bill for any future crises.

However, the ministers were unable to agree to a Europe-wide levy. They were also unable to agree to a tax on individual financial transactions.

UK Chancellor of the Exchequer George Osborne said: “It is very difficult to see how in practice you could make a transaction tax operate in a world in which capital markets and financial activity can move very quickly to jurisdictions outside the European Union.”

German Finance Minister Wolfgang Schaeuble did not, however, dismiss the tax altogether: “My view remains that there is no certainty on this, but there is a chance [it will be introduced]“.

Ministers said they would discuss both the bank levy and transaction tax again at an informal meeting in Brussels on 30 September and 1 October.

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The first 45,000 of nearly six million taxpayers have been sent letters telling them that they have paid the wrong amount of tax.

Tax experts say they should consider challenging demands for extra payments.

HM Revenue & Customs is simultaneously trying to recover £2bn that was underpaid in the past two tax years, and to repay £1.8bn that was overpaid.

The rest of the new tax calculations will be sent out by Christmas.

The previous mistakes have been revealed by the introduction of a new computer system.

This has reconciled separate HMRC databases for tax and national insurance payments, and has highlighted where tax had previously been overcharged or undercharged.

Hardship

Repayments to 4.3 million people will be worth on average £420 each and will be made via changes to their tax codes for the next tax year, 2011-12.

Extra tax charges will average £1,380 and most of these will also be recovered via changes to next year’s tax codes.

Where the tax charge is more than £2,000 the taxpayer will, in theory, be asked to pay a lump sum.

But a Revenue spokesman said those could be staggered in cases of hardship.

HMRC will use its experience of the first 45,000 letters - form P800 and its guidance notes - to see just how many recipients write to it, phone or visit its inquiry centres.

Check the facts

Tax experts say that anyone who appears to owe extra tax should first check the facts on their letter to make sure the updated record of employment and income is accurate.

“Look back through your coding notices and compare them to your payslips to ensure your employer has applied the correct coding,” said Tony Bernstein, tax partner at accountants HW Fisher.

“Study the PAYE codes, particularly the last one, and check that all the figures in the code reflect your circumstances.

“If there has been a mistake somewhere, then get in touch with your tax office and make them aware of this,” he added.

Appeal

If someone wants to challenge the new calculation, they can simply phone HMRC to ask for a recalculation.

In some limited circumstances, it may be possible to ask the authorities to write off the extra money being demanded.

A procedure called the extra statutory concession allows HMRC to write off tax, if it was provided with all the relevant information but failed to use it within 12 months of the end of the tax year in which the information was received.

“In those cases where HMRC had all the information needed and the taxpayer could reasonably have thought they were being accurately taxed, [but] an underpayment has still arisen, it can be written off,” said an HMRC spokesman.

“In fairness to all taxpayers, this is not a blanket exemption and very much depends on the specific circumstances of each case.”

The Low Incomes Tax Reform Group said: “If you disagree with HMRC’s decision on that, you can refer the matter to the Adjudicator, but you cannot appeal.

“However, it is important to know that the concession exists, something about which HMRC are notoriously reticent,” it said.

Dummy of letter - form P800 - from HM Revenue & Customs which will be sent to nearly six million taxpayers

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He will lobby Congress - including a blocking minority of Republicans in the Senate - to let companies in the US write off investment costs until 2011.

With unemployment stuck at 10% and the economy appearing to slow sharply, the president’s Democratic Party could face big losses at the November elections.

On Monday, Mr Obama also called for $50bn of new infrastructure spending.

Officials said the president would announce the latest proposals during a speech in Cleveland later on Wednesday.

Last week, the President used a speech on the economy to attack the Republicans’ “blockade” for holding up a bill aimed at helping small businesses.

The administration said that the new tax plan would save companies about $200bn over two years.

It would also provide an added incentive for businesses to increase investment.

Federal Reserve chairman Ben Bernanke noted in a recent speech the worrying failure of businesses to increase their fixed capital investment, and the crucial role this would play in sustaining the recovery.

Political games

On Friday, the US Labor Department announced that the US economy had lost a further 54,000 jobs, while the unemployment rate rose to 9.6%, from 9.5% in July.

Yet Republicans have set their faces against any further stimulus spending by the federal government, despite the slowing economy.

Some Democrats accuse them of playing games with the economy in the belief that the President will be blamed by the public for the slowdown.

However, many Republicans have said they favour tax cuts - including making all of former President George W Bush’s tax cuts permanent.

The latest move may be an attempt by Mr Obama to call the Republicans’ bluff over tax cuts ahead of the Congressional elections due in November.

Recent polls give the Republicans a significant lead over the Democrats.

Politics vs markets

“The White House is missing the big picture,” said John Boehner, leader of the Republican minority in the House of Representatives.

“None of its plans address the two big problems that are hurting our economy - excessive government spending, and the uncertainty that their policies… are creating for small businesses.”

But despite Republican fears about the size of the US government deficit, markets are still willing to lend to the US Treasury at unprecedentedly low interest rates.

The 10-year US government bond currently trades at a rate of around 2.6% per annum.

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There are some sectors with job shortages, according to Rec

Job appointments grew at their slowest rate in 10 months in August, raising further questions about the strength of the UK job market, a survey suggests.

The Recruitment and Employment Confederation (Rec) said both permanent and temporary placements rose at the weakest rate since October 2009.

Growth in pay also continued to slow, Rec said.

“Growth [in the UK's jobs market] is rapidly slowing as public sector job freezes start to bite,” it added.

The body did, however, find that there were opportunities in some sectors, such as chefs, nurses, engineers and internet developers, where there were a shortage of skilled workers.

“A priority for government is to ramp up the support and guidance for job-seekers and to raise awareness of these growth areas within our labour market,” said Rec’s chief executive Kevin Green.

‘Substantial cuts’

The latest figures show that the number of unemployed people in the UK fell by 49,000 in the three months to the end of June, to 2.46 million.

However, a number of analysts expect that number to rise in the coming months as a result of public sector job losses that will result from government spending cuts designed to reduce the country’s budget deficit.

“Whereas demand for staff is growing in the private sector, many public sector organisations have started redundancy programmes,” said Bernard Brown at KPMG, which produced the survey with Rec.

“In the months ahead we will see a substantial reduction in public sector headcount as the cuts begin to bite.

“The big question is whether the private sector can create new jobs in sufficient numbers and quickly enough to offset the downturn in the public sector.”

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