15 Dec 2015 08:54am

economia a.m. December 15

An early morning round-up of finance and accountancy

Review highlights flaws of HBOS probe

The Financial Services Authority’s decisions over the downfall of HBOS bank were ‘significantly’ flawed’, according to a review by senior barrister Andrew Green QC. Only one director received a fine and ban as the “easiest of the pickings”, while other senior figures were overlooked, says Green, who was speaking to the Treasury select committee of MPs on Monday. A much-delayed report into the collapse of the bank in 2008 found risky lending within the corporate banking division was one of the main reasons for the collapse of HBOS, and Green, who independently reviewed the FSA’s role, assigned blame to bank’s board and senior managers, as well as the watchdog itself. About 10 senior managers and board members of HBOS face a further investigation. (The Financial Times, Reuters, The Guardian, The Telegraph, the Times)

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National Living Wage to cost businesses ‘more than £1bn’

UK businesses face more than £1bn in costs from the introduction of the National Living Wage, The Regulatory Policy Committee, which advises the government. From April, workers aged over 25 will receive a minimum of £7.20 per hour. The Committee estimates the change will cost companies £804.4m in extra wages and staff costs, with a further £234.3m of "spillover" costs. The figures only apply to the cost of the initial increase in minimum wage to £7.20 an hour in April; the final cost to businesses is likely to be greater. (Source: The Telegraph, the BBC)

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Corporate bodies replace culled quangos

The prime minister’s so-called “bonfire of the quangos” led to the abolition of 285 public bodies but the creation of 184 new organisations. This is according to the National Audit Office, which says there was a “blurring of definitions” between the set-ups and that there was no clear guidance about whether a “company is the most appropriate form”. The FT says a range of corporate structures were used by the government, including mutuals and limited companies, to shift from public bodies to corporations. This raised “issues of transparency, accountability, governance and review”, the NAO said. (Source: The Financial Times)

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Rates and NI outstrip tax take from big business

Britain’s biggest businesses paid more in rates and national insurance contributions than in corporation tax last year. The 100 Group, which represents FTSE 100 and large private companies, said the findings mark a historic shift in the way companies are taxed, a trend towards the taxation of people, production and property rather than profits. According to the Financial Times, reduced profitability in the oil, gas and retail sectors and a cut in the rate levied drove the corporation tax paid by the 100 Group of the largest UK businesses down by nearly 18% to £4.3bn. Big businesses rejected the idea that they don’t pay enough tax. (Source: Financial Times)

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FTSE sinks to three-year low as oil and commodities slide

The FTSE 100 slumped to close at its lowest in three years yesterday, as tumbling oil and commodity prices hit European markets. The index of Britain’s biggest listed companies extended its losing streak to an eighth successive day, as the FTSE closed down 78.72 points, or 1.32%, to 5,874.06. This is the lowest since December 2012. London’s leading share index is down by 17.3% since April’s peak and has fallen by 10.5% since the start of the year. About £133bn has been “wiped off” the FTSE 100 since the beginning of December. (Source: The Times, The Telegraph, The Guardian, The Times)

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Call for younger boards to cut cyber risk

A Financial Times poll has suggested that companies should hire a younger generation of boardroom directors to head off the “systemic threat” that cyber risk poses to the financial system. The survey of City bosses reflected widespread alarm among business leaders about the damage that could be wreaked by cyber attacks, especially following high-profile attacks on companies such as TalkTalk and JD Wetherspoon in the past few weeks. According to the Institute of Directors, only four FTSE 100 board members are under 40. Former trade minister Lord Davies advocated ‘corporate youth boards’. (Source: Financial Times)

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Productivity is ‘key to higher wages’ says Resolution Foundation

Wages are unlikely to significantly rise next year unless productivity jumps, says a new report from think tank the Resolution Foundation. The group is warning that UK pay growth could be as low as 1% in 2016. Pay increased this year in real terms - after six years of stagnation - but only because inflation levels remained low. If productivity doesn’t increase, average pay levels might not return to the levels they were at before the financial crash for at least a decade, warns the report. (BBC, Financial Times)

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Government warns Sports Direct it will act if wage laws are flouted

British sportswear Sports Direct has come under fire in Parliament over allegations it has not been paying the minimum wage. The FTSE 100 company owned by Mike Ashley has been in the spotlight after media reports that some workers effectively earned less than legal levels, claims denied by the company. MP Chuka Umunna said, "We know enough about the practices at Sports Direct ... to conclude that this company is a bad advert for British business and one with a culture of fear in the work place." HMRC is facing increasing pressure to launch an inquiry into the sportswear retailer, and government minister Nick Boles said he was sure that any company faced with enforcement action would comply. (Source: Reuters, The Times, The Guardian, Financial Times)

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Retreat from final salary pensions gathers pace

Analysis shows that the retreat by FTSE 100 companies from “gold plated” staff pensions has gathered pace. The UK’s largest employers are feeling the burden from pension deficits, says consultancy JLT Employee Benefits, who compiled the research. According to the FT, only 23 FTSE 100 companies still provide a significant number of employees defined benefit schemes, which typically pay a pension that is a proportion of final salary. Although that number had remained static over the past year, it is expected to fall as many large employers recently signalled a defined benefit pensions retreat, says the analysis. (Source: The Financial Times)

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Helen Roxburgh