Wednesday newspaper round-up: BoE, Hungary, RBS

25th Jan 2012 07:01

The Governor of the Bank of England urged against "despair" because "all crises come to an end" as official figures were expected to show that Britain is heading back to recession. Sir Mervyn King said that the economy faced an "arduous, long and uneven" path to recovery but that once it does it will be on a "more sustainable footing than at any point in the past 15 years". He spoke before publication of figures on Wednesday, which forecasters said would show that the economy shrank in the final three months of 2011. A further consecutive quarter of negative growth would mean the country has returned to recession, a "double dip" following the slump of 2008, The Telegraph reports. Europe raised the pressure on Hungary yesterday by threatening to cut off subsidies unless it curbs its budget deficit. European Union finance ministers backed measures to punish Budapest over its excessive deficit while its Prime Minister was across the street at the European Commission, trying to head off legal action over what Brussels sees as an undemocratic takeover of national institutions by his ruling Fidesz party. "Hungary has not done what was needed," said Margrethe Vestager, the Danish Economics Minister, who chaired the ministers' council. "Hungary must take actions to meet its targets." Budapest, which is not in the Eurozone, was taken to task by the Commission last week for failing to keep the budget at a sustainable level under the EU threshold of 3% of gross domestic product, The Times says. David Cameron has intervened to slash the bonus of the chief executive of the Royal Bank of Scotland. The Prime Minister is insisting that Stephen Hester receive no more than £1m, half his bonus last year. Mr Hester is, in theory, eligible for twice his £1.2m base salary in a short-term bonus, with up to £4m in share-based payments, giving him a total possible payout of £7.6m. RBS, which is 84% owned by the taxpayer, has become a touchstone for criticism after accepting a £45bn government bailout. Mr Cameron's move comes a day after Vince Cable, the Business Secretary, set out proposals for a clampdown on "rewards for failure"in Britain's boardrooms, calling on shareholders to reject excessive pay deals, writes The Times. The man behind luxury brands Gucci, Yves Saint Laurent, and Stella McCartney is hoping to spearhead consolidation in the UK insurance market with a £100m bid to merge his AIM-listed Tawa with rival Charles Taylor. François-Henri Pinault, who is best known for his fashion empire PPR and wife Salma Hayak, is also behind insurance run-off specialist Tawa. Tawa, which has gained backing from the Mittal family, has been engaged in a series of acquisitions over the last six months aimed at buying up insurance businesses and building its market position. Charles Taylor offers insurance companies services such as consultancy and back office work and is thought to be a good fit with Tawa's Pro consultancy business. Both companies also manage insurance companies that no longer write new business, The Telegraph says. A Swiss oil company whose collapse has put the future of a key British refinery in jeopardy borrowed more than £100m from its UK offshoot, accounts reveal. Petroplus, based in the canton of Zug, Switzerland, which bought the huge Coryton refinery in Essex from BP in 2007, said yesterday it was filing for insolvency. That pushed the Coryton operation - plus a storage facility in Teesside and a research facility in Swansea - into administration. The move sparked fears that fuel supplies in the south east of England will face disruption as Coryton's output accounts for around 10% of the UK's fuels market. It has emerged that the Swiss company borrowed increasing sums from its British subsidiary after the £715m takeover in 2007. At the end of 2009, the British-based Petroplus Refining & Marketing, which owns Coryton, was owed $65m by the Swiss parent - £42m at today's exchange rates. But by the end of 2010, the Swiss company's borrowings from the British business had mushroomed to $177m (£114m). Accounts show some money flowed in the opposite direction, with the British company borrowing from the parent. But most of these loans were long-term, and the sums involved actually fell during 2010, according to The Daily Mail. A quarter of small business owners say the economic outlook is so bleak they would rather close their firm and return to being an employee, a report warns today. Large numbers of entrepreneurs admit they are struggling to cope as their earnings have crashed, amid fears that official figures to be released tomorrow will show Britain has slipped into a double-dip recession. Tomorrow official figures will reveal the latest state of the economy, amid fears that gross domestic product dropped into negative territory at the end of last year. The report, from insurers Aviva, asked entrepreneurs: 'How do you feel about running a company in the current tough economic climate?' One in four agreed with the statement: 'I am actively considering returning to work as an employee.' A third said they had lost 'enthusiasm' for their business, while half said it is 'too tough to be a business owner or entrepreneur in the current climate,' The Daily Mail reports. AB