Scottish Business Briefing – February 6th 2008

Published on Wednesday 6 February 2008 07:46

WELCOME to scotsman.com's Scottish Business Briefing. Every morning we bring you a comprehensive round-up of all news affecting business in Scotland today.

Olivant not to re-enter race for Northern Rock

Olivant, the private equity group led by former Abbey chief Luqman Arnold, are not set to re-enter the race to take-over Northern Rock. (The Scotsman) Olivant pulled out of the race at the last minute on Monday, but there had been speculation that the treasury may be able to persuade Olivant to revive its bid. It is believed that Arnold wanted the government's financing package to last for longer than the three years suggested by the treasury.Sir Richard Branson's Virgin Money now appear to be leading the race to take over the bank as they compete against a restructuring proposal from Northern Rock's own management team. The man leading Virgin's bid, Sir Brian Pitman, has denied that the proposed take-over is a ticket for a "gravy train" to make a killing at the taxpayers' expense. (Financial Times) The former chief executive of Lloyds TSB said: "When I say we are not going to make a killing that's what I mean. This is a viable proposition but to suggest that we are going to turn round this thing in half a year and everyone is on a gravy train is ridiculous." Virgin propose to raise 1.3 billion in fresh equity including 500 million from its own consortium, but it has not received shareholder support who appear to favour the management proposal which involves up to 500 million of new equity.

Norwich Union to distribute 2.3 billion bonus

The insurer Norwich Union Life, which is part of the Aviva group, is to distribute 2.3 billion to policyholders and shareholders to resolve the future of surplus assets in two of its with-profits funds. (The Herald) The special bonus will be paid to 1.1 million policyholders in its CGNU and CULAC with-profits funds. The two funds have 4.6 billion in surplus assets. The policyholders will share a bonus payment of 2.1 billion, which will be paid in instalments over the next three years. Policyholders whose policies mature during the next three years will not receive the full amount. The remaining 10% (230 billion) of the cash will go to shareholders, again being paid over three years. Clare Spottiswoode, who looks after Norwich Union policyholders' interests, welcomed the news but disagreed with the payments being paid in instalments. She said: " The surplus funds are available now, yet policyholders whose policies mature before the end of the three years will not be paid the full amount." Norwich Union presented Spottiswoode with the proposals yesterday and wants her to respond by the end of the month.

Airlines to be excluded from Standard Life Investments ethical funds

Standard Life Investments is to stop investing in airlines through its Socially Responsible Investment (SRI) range of funds. (The Scotsman) The move has been prompted by concerns about the amount of carbon monoxide commercial aircraft produce and the impact these have on the environment. Standard Life Investments manages 585.5 million in ethical funds, which do not hold investments in unethical companies such as arms dealers or pornographers. Standard Life made the decision to cease investing in airlines after almost one-third of its customers called for them to stop in an annual survey. Green industry campaigners praised the move, while the airline industry argued that aviation has a minimal effect on climate change. Dan Glass from environmental group Plane Stupid Scotland said: "Standard Life is putting other companies and the Scottish Government's green "attempts" in the shade and demonstrates that there are economic as well as environmental consequences from climate change." Andy Harrison, the chief executive of Easyjet said: "The impact of UK aviation on climate change is mathematically minimal. This is not an excuse for inaction, but aviation will only ever be a small part of the solution."

Alliance Trust set to join FTSE 100

Dundee based investment group Alliance Trust is set to join the FTSE 100 index tomorrow. (The Scotsman) The group which is Britain's largest general investment trust was formed in 1988 and merged with the Second Alliance Trust group in 2006. It is set to replace Kelda, the owner of Yorkshire Water who were taken over by a group of investment firms, this week. Alliance Trust chief Executive Alan Harden said: "Over the last four years a huge amount of work has gone into building a sustainable performance and company." He added that the company is planning to increase its range of services through its new savings business for customer wealth management.

Read all today's banking news from scotsman.com

ECONOMY

World stock markets decline as US recession fears increase

Share values across the world stock markets have fallen sharply amid fears about the health of the US economy. (BBC Online) The UK's FTSE 100 index fell 2.6% as fears of a slowdown in the US increased. The Dow Jones index fell by nearly 3%, its biggest one-day slide in a year. Royal Bank of Scotland shares fell by 5.5 per cent, wiping 2 billion from its market value. (The Herald) Read all today's economics news from scotsman.com

ENERGY & UTILITIES

BP committed to North Sea production

New BP chief executive Tony Hayward has made a commitment to North Sea production, promising to be there "until they turn the lights out." (The Scotsman) Hayward said: "We remain strongly committed to the North Sea. It's been very good business for us and it continues to be a good business for us." While acknowledging declining capacity and rising costs in the area, Hayward said that government policy would determine the viability of future production in the North Sea. "There's at least another 15 to 20 years' future in the North Sea. The ultimate future will depend on the fiscal structure," he said. He made the comments as BP revealed that full year profits for 2007 were down 22% to $17.3 billion and confirmed that there would be 5,000 redundancies worldwide. 30% of the redundancies will be in the UK, including 350 at BP's Aberdeen office, which were first announced last year. Hayward said that the redundancies were to "cut back on corporate bureaucracy." A spokesman for BP explained that 60% of the redundancies would be in corporate offices, 30% in downstream activities and 10% in upstream. Hayward blamed the drop in profits on "a disappointing performance from our US refining operations." He predicted that production would rise this year and that previous forecasts of four millions of oil a day by 2009 would be met.

Subsea 7 seeking additional personnel for new site

Subsea engineering and construction contractor Subsea 7 is to recruit more than 100 people than originally anticipated for its new headquarters in Aberdeen. (Aberdeen Press & Journal) When plans for the HQ were released in 2006 it said that 100 new engineers and office staff would be recruited, but yesterday it was revealed the figure is likely to be closer to 200. 850 staff are to relocate to the new site at Westhill from the companies existing bases around Aberdeen. The HQ, which will have a capacity of 1,100 people, is likely to be complete by the middle of next year. The announcement was made after the group revealed better than expected fourth quarter profits of 51.75 million to December 2007.

Read all today's energy and utilities news from scotsman.com

TECHNOLOGY

ITI to invest 4.3 million in software to stop computers crashing

ITI Techmedia, the Scottish Government funded techmedia, is to invest 4.3 million in a research and development programme aiming to create software that will stop computer crashes. (The Herald) The market opportunity for such quality control tools was $2 billion in 2007, ITI techmedia estimate that this could grow to $3.8 billion by 2016. The research and development programme is expected to develop technology that will significantly reduce the critical code weaknesses, which cause computers to crash. The ITI initiative is a key part of the Scottish Government's Smart Successful Scotland programme, which aims to create high-growth companies. The Government is investing 450 million in the drive over a ten-year period.

Read all today's technology news from scotsman.com