Energy Giants To Flag £3bn Tax Contribution

The embattled industry will mount a staunch defence of its contribution to the UK economy on Tuesday, Sky News learns.

Four of the 'Big Six' have increased their prices in recent weeks

By Mark Kleinman, City Editor

Britain's under-fire energy companies will hit back at their critics on Tuesday by arguing that it contributed more than £100bn to the UK economy last year as it calls for "an honest and open debate" about the industry's future.

Sky News has obtained details of a new study of the sector's industrial profile that will be launched at the annual conference of EnergyUK, the lobbying organisation.

According to people briefed on the report, called Powering The UK, the group will say that in 2013 the energy industry was responsible for £102bn of economic value, both directly and through its supply chain, and paid more than £3bn in taxes.

Some £24bn of the economic value figure was direct investment, an increase of £3bn on 2012, EnergyUK will say. The body will add that its £11.6bn of investment to secure electricity and gas supplies was more than either private sector investment in transport, or public sector investment in health or education.

The conference will come at a critical time for the industry, with fund managers warning that they may have to reconsider their investments amid growing political and public hostility.

Four of the six largest energy retailers have increased gas and electricity prices in recent weeks, blaming a combination of rising wholesale costs and Government-imposed green levies.

The resulting political row prompted Sam Laidlaw, chief executive of Centrica, the owner of British Gas, to forfeit his annual bonus for 2013.

Ed Miliband, the Labour leader, pledged to freeze prices for 20 months if the party wins the 2015 general election, a promise which has intensified the cost-of-living debate dominating Westminster politics.

In response, Ed Davey, the Liberal Democrat Energy Secretary, has vowed to force the major energy suppliers to establish a system allowing customers to switch providers within 24 hours.

At a meeting between ministers and the industry on Monday, companies are understood to have argued that while it would be feasible to reduce the current switching timetable from five weeks, reducing it to one day would be impossible because of a statutory two-week cooling-off period.

In her foreword to Powering The UK, which has been produced in conjunction with EY, the accountancy firm, Angela Knight, EnergyUK's chief executive, is expected to refer to ongoing "uncertainty about energy policy".

"The economic climate is still difficult with households and businesses increasingly concerned about rising prices," Mrs Knight will say.

"Energy costs are driven by a mix of world energy prices, investments to meet our climate change commitments and other policy and network charges that flow through onto the bill.

"UK electricity and gas prices remain lower than average in other European countries but affordability is now at the top of most people's agenda. Policymakers - and the industry - must take that into account in everything we do."

Pointedly, Tuesday's report will say that the energy industry continues to create new jobs, unlike other sectors including financial services.

Prior to her role at EnergyUK, Mrs Knight was chief executive of the British Bankers' Association.

(Credit; Sky News)

Flybe’s wings to be clipped again despite profits.

The new boss of Flybe has set out plans to cut another 500 jobs, reduce routes and review its fleet, despite turning a £13.6m half-year profit.

That compares with a £1.6m loss for the regional airline in the six months to October 2012, but the chief executive Saad Hammad, the former easyJet executive who began piloting Flybe in August, said the return to the black was “driven by cost-cutting, and we need to do more of it”.

Flybe’s founder and chairman Jim French quit unexpectedly last week, having told staff that the outlook had improved after a “heavy, tough journey”. Mr Hammad, however, had a different view today, saying: “We simply need to do more and to do it immediately.I’m not in the blame game.” But he added: “We have too much headcount in the business, an expensive fleet and routes that  are not performing. We have built up over time a cost base that is not sustainable.”

The latest results reveal that three former directors who left Flybe shared a £1m pay-off. Mr Hammad said the new round of job cuts would be spread around the business. “They are not focused purely on frontline staff – they will encompass pilots and cabin crew but also middle and senior management. We all share in this.”

But pilots’ union Balpa said it was “shocked” by the decision. Flybe’s passenger numbers actually rose 5.6 per cent to 4.3 million in the half year.

Ryanair has issued two profit warnings in two months. But “We’re very different from [that] focus on “bucket and spade” customers and stag weekends,” Mr Hammad said. “We’re connecting the regions in the UK, that’s our core business.”

He admitted that meant being more reliant on the British economy, but added: “We are seeing some green shoots across the UK – the problem is it’s very fragile.”

He also said Flybe – which pulled out of Gatwick earlier this year, selling its 25 daily slots to easyJet for £20m – could see a return to the capital.

“We’re hoping to come back to London in the fullness of time,” he said. “London is in our pipeline.”

(Credit; Independent)

Inflation falls

UK inflation falls to 2.2% in October

The ONS says transport costs have been falling

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The UK's inflation rate, as measured by the consumer prices index (CPI), fell to 2.2% in October from 2.7% the month before.

The surprise fall saw CPI inflation drop to its lowest rate for more than a year, and eases pressure on the Bank of England to raise interest rates.

The figure was below forecasts of 2.5% and is the lowest since September 2012.

The Office for National Statistics said the fall was driven by the biggest drop in transport prices since July 2009.

It said transport prices fell by 1.5% between September and October.

One major transport cost factor came from fuel price cuts at many major supermarket chains engaged in a price war.

There were also downwards price movements on some air fares.

Inflation target

Another inflation fall came in education costs, with the impact of rising tuition fees being smaller than at the same time a year previously.

And food inflation fell too, from 4.8% to 4.3%.

"Falling petrol and diesel prices seem to have done the most to drag the inflation rate down, and the ongoing softness in Brent crude prices means there may be a little more of this to come in the months ahead," said economist Rob Carnell at ING.

"There was also some price softness in furniture and household items too."

A separate measure of inflation, the retail prices index (RPI), fell from 3.2% in September to 2.6% in October.

The drop in the inflation rate means the Bank of England is considerably closer to its inflation target of 2%, which it has exceeded since December 2009.

However, recently announced price rises by most of the UK's large energy firms have yet to take effect and will have an inflationary impact in the coming months.

The Bank will publish its latest inflation forecast on Wednesday.

"The Bank of England's forward guidance states that a hike in interest will not be considered until unemployment drops below 7%," said economist Chris Williamson at Markit.

He said the Bank's forecast was likely to "bring forward when the Bank expects this to happen from late 2016 to perhaps late 2015, given the recent flow of stronger than expected economic data".

(Credit; BBC News)

BSkyB stock hit by BT football rights deal win.

Shares in BSkyB plunged 10% after it lost the rights to broadcast live Champions League and Europa League football matches to rival BT Sport. 

Shares in ITV, which currently splits the rights with Sky, also fell, trading 1.1% lower. BT'sshares rose 0.4%.

BT Sport has won the rights to show all 350 fixtures each season from 2015 after talks with European governing body Uefa.

It paid £897m for the exclusive three-year deal.

BT said the deal would make European football "far more accessible and affordable for fans".

It said it would show a selection of the games for free on BT Sport even to homes that have not signed up to the channels.

The new contract, priced at £299m a season, is worth more than double the current arrangement.

Both ITV and BSkyB suggested that BT had overpaid for the rights.

"We were not prepared to pay over the odds in the latest live rights round," ITV said in a statement.

Sky said in a statement that it bid "with a clear view of what the rights are worth to us".

"It seems BT chose to pay far in excess of our valuation ... If we thought it was worth more, we'd have paid more," it added.

When asked on Saturday if it had overpaid for the rights, BT Consumer chief executive John Petter said: "Of course I don't feel that."

"These were the crown jewels properties for Sky. I'm sure they'll be kicking themselves today. I feel for them obviously, but they got it wrong."

BT said its financial outlook was unchanged despite the extra payments. And BT, which only launched its UK sports channels on 1 August, said the rights would improve revenue and profit in its consumer division in the "medium term."

Investec media analyst Steve Liechti said the deal was a "hugely important showcase for BT's long term intent and the competitive threat to Sky".

(Credit; BBC News)

RSA shares fall 14% after troubles with Irish division.

But he maintained that the problems were "isolated to the Irish business" and that "no policyholders have been affected." 

Shares in RSA Insurance Group have tumbled after the company suspended Philip Smith, chief executive of RSA Ireland, and two other senior executives.

RSA said they were suspended due to "issues in the Irish claims and finance functions".

Group chief executive, Simon Lee, said the problems could reduce operating results by £70m in 2013.

Shares in RSA, which owns the More Than brand, fell 14% in early trading.

The problems were discovered after a routine audit, but RSA did not give details about what happened.

"We are extremely disappointed with the issues which have been identified and their financial impact on the Group," he said in a statement.

Eamonn Flanagan, analyst at Shore Capital Stockbrokers, said that while the accounting irregularities would be "extremely damaging for the group's reputation and credibility in Ireland", they would be "unlikely to topple the group."

RSA has appointed accountancy firm PwC to investigate the financial and regulatory reporting processes and controls within the Irish business.

This latest financial hit comes on top of last week's announcement that the company would have to increase reserves to cope with the increase in bodily injury claims.

RSA is also facing a greater than expected number of claims following bad weather across the globe.

It expects 2013's return on equity to be below 10% as a result.

The St Jude storm, which ripped through the UK on 28 and 29 October, is likely to have cost insurers at least £130m in damage claims, the Association of British Insurers said last month.

Four people died when the storm battered southern Britain.

(Credit; BBC News)

Barclays to move four bank branches to Asda.

Barclays is to close four branches and move staff and banking services to nearby Asda stores.

It said it then wanted to open another four branches in Asda supermarkets by early next year in an attempt to make banking more convenient.

The initial four branches will swap locations to make parking easier, and sees branches with relatively low footfall being moved to the stores.

Asda said that access to banking services was vital for communities.

Bank staff will work at the new supermarket-based branches during normal bank opening hours, with cash and cheque machines accessible during the supermarkets' opening hours.

The first branch will be opened in an Asda store at Birchwood in Cheshire in February.

Three more will later be opened at Asda stores in Pudsey in West Yorkshire, North Watford in Hertfordshire and Broadstairs in East Kent.

The additional four stores for new branches will be chosen later.

Bank branches in supermarkets are common the US.

(Credit; BBC)