Alex Brummer on Business

Israeli technology a safe bet for gaming

Alex Brummer — Mon, 20 May 2013 10:33:14 +0100

A childhood memory is ever present.

Watching a breed of burly “bookies” in loud plaid suits arrive at our Brighton synagogue on High Holy Days.

The involvement of Jewish figures in horse racing — otherwise known as the “sport of kings” — is a given.

The East End-born bookmaker, philanthropist and ardent Zionist Sir Cyril Strein, transformed Ladbrokes into a global gaming giant. The late Lord Weinstock owned several thoroughbred racehorses, and today Sam Waley-Cohen is one of Britain’s bravest amateur jockeys.

The current star of the gambling world is Playtech Ltd. An Israeli-run company, listed on the London Stock Exchange, providing gaming software from online casinos to sports betting and poker rooms.

The company is credited with saving the fortune of William Hill, as the bookmakers’ online division made a 21 per cent increase in net revenue after investing in Playtech software.

But rival Ladbrokes had not done so well.

Chief executive Richard Glynn attempted to develop an independent digital platform, but it fell behind schedule and investors became increasingly impatient.

So after three years in the job Mr Glynn has finally decided to employ 40 people from Playtech’s Tel Aviv-based marketing team and will get access to 200 Playtech casino games. Playtech leaders will be incentivised through a “success fee” based on earnings from 2017 onwards.

For several years, British bookmakers sought to conquer gaming markets in the US, Australia, Italy and Spain. They were deterred by US state authorities who sought to punish online gaming by arresting overseas executives on charges of wire fraud.

That is now changing. America’s top gaming states, including Nevada and New Jersey, have legalised online gaming and therefore opened up new opportunities for British bookies.

As a result of the UK taxes imposed on machine gambling, and the drug scandal involving horseracing trainer Mahmood al-Zarooni at the Newmarket stable owned by Dubai’s Sheikh Mohammed — the search for top streams of digital income is increasingly urgent.

As is often the case — it is Israeli technology that is coming to the rescue.

British tax benefits attract foreign wealth

Alex Brummer — Fri, 26 Apr 2013 10:08:23 +0100

Britain is once again a magnet for big businesses and the super rich because of its favourable tax scheme.

Chancellor of the Exchequer George Osborne’s attempt to lower the corporation tax rate to 20 per cent has encouraged offshore enterprises to return to Britain — including Sir Martin Sorrell’s leading advertising group WPP.

Labour politicians claim that the top income tax rate reduction this month — from 50 to 45 per cent — was a tax cut for millionaires. But research by the Treasury suggests that the higher tax rate encouraged companies to find ways of avoiding UK taxes.

We need only look at France to understand the impact of high personal taxation. The proposed 75 per cent tax on annual salaries over ¤1 million has led to a flood of financiers turning London’s South Kensington into little Paris.

One of Margaret Thatcher’s greatest legacies was her recognition that lower tax rates yield greater returns because they discourage avoidance and stimulate enterprise. The 2008 — 2009 recession put pressure on this principle as budget deficits soared and government used higher taxes to redress the balance.

But even in France, where President Hollande faces pressure in the polls, the wisdom behind such moves is being questioned.

The American bankers, Russian oligarchs and Middle Eastern potentates who now call Kensington and Chelsea their home, reflect the benefit of a UK tax regime that involves a flat-rate fee. The grotesque prices for apartments at One Hyde Park, where properties have changed hands for £140 million, also indicate the outside wealth pouring into Britain.

Even the Israelis are arriving, with Idan Ofer, described as Israel’s richest man, reportedly moving to Britain.

His Romanian-born father, the late Sammy Ofer, had strong connections to Britain having served in the Royal Navy during the Second World War.

But as co-heir to a shipping fortune and director of Israel Corporation, the Jewish state’s largest holding company, Mr Ofer’s decision to relocate to the UK has led to resistance from Israelis. The current controversy over the proposal to sell Ofer-controlled Israel Chemicals to Potash Corporation of Saskatchewan has put the family at odds with the Benjamin Netanyahu-led government coalition.

Amid the imbroglio Britain’s tax arrangements for non-domiciles remain extraordinarily attractive.

Alex Brummer is City Editor of the 'Daily Mail'

Insurers’ excessive pay must be curbed

Alex Brummer — Fri, 12 Apr 2013 11:48:06 +0100

Prudential Plc is one of the most respected names in financial services — trusted with billions of the people’s savings in ISAs, pension products and insurance.

So it came as a surprise when the company was fined up to £30 million last month for its failure to deal with the Financial Services Authority in “an open and co-operative manner”.

Banks had already demonstrated what could happen if traditional values were prioritised over risky behaviour. In response to the fine, critics said the Pru had been made a scapegoat while banks had been given an easy ride — but it is a weak argument.

The offence was serious. Pru representatives tried to take over the rival Asian AIA insurer in 2010 in a high-risk and secret £23.4 billion deal partly funded by a £14.5 billion rights issue.

The deal was doomed, leaked by the media and the Pru was heavily fined.

Instead of demotion, Pru chief executive Tidjane Thiam is expected to receive £7 million for 2012. It is an outrageous amount for someone running an insurer in tough times.

After the economic crash, it was widely accepted that extortionate monetary rewards in the City were too high-risk. Sadly, nothing has changed. Barclays chief executive Antony Jenkins promised to clean up the bank’s image after the Libor rate rigging scandal, but still paid 428 workers £1 million each and five workers at least £5 million. Last month, Barclays’ colourful Rich Ricci, the chief of investment banking, pocketed £17 million from selling shares. But Barclays is no worse that its cohorts.

Standard Chartered chief executive Peter Sands was paid up to £5.1 million while the bank was heavily fined by US regulatory authorities for busting sanctions with Iran. The bank farcically described the breach as a “clerical error”. Even the state-owned Royal Bank of Scotland paid out more than £600 million in bonuses despite making a colossal loss of £5.2 billion.

The recovery “claw back”, where senior executives would reduce excessive rewards because of past mistakes, is the least investors should expect when average pay is barely rising and welfare payments are being held to one per cent increases each year.

Despite the national economic uncertainty, the boardroom sense of entitlement is as rampant as ever. Insurers, like bankers, believe that they are entitled to take unjustified risks and demand rewards beyond the dreams of avarice.

Alex Brummer is City Editor of the Daily Mail

Courting Qatar could harm British interests

Alex Brummer — Fri, 29 Mar 2013 10:00:00 +0000

Qatar’s credentials as one of Britain’s biggest inward investors are rarely questioned, and the economic friendship is growing.

In recent weeks, representatives of the Emir of Qatar, Sheikh Hamad bin Khalifa Al Thani, said they were negotiating a possible £10bn infrastructure investment deal with our government. In addition, the sovereign Arab state has reportedly set its sights on buying Britain’s Marks & Spencer, and London’s upmarket hotels, the Berkeley, the Connaught and Claridge’s.

Qatar’s interest in British trophy assets is no secret — the state already owns Harrods and Christie’s, has financed the Shard, joined Delancey Estates to buy the Olympic Village site for £600m and partly financed the Candy brothers for the One Hyde Park residential development.

As a result, Qatar has been tirelessly courted by Downing Street, the Foreign and Commonwealth Office and the Royal family. The Emir was one of the few leaders granted an official stay at Windsor Castle.

Courting Qatar clearly pays financial dividends when bank lending and capital is short. But in reaching out to Qatar economically, the UK seems to have ignored the state’s tenuous foreign policy.

The Emir visited Gaza after Israel’s Pillar of Defence campaign against terrorist attacks from Hamas. Last year, the Emir promised to provide the Hamas-dominated government with $400m and Qatar has also promised to fund terrorist group Hizbollah.

Qatar clearly believes it protects itself from dissention in the region by aligning with extremist movements in the Middle East and upholding strong economic relations with the West.

The Gulf’s conduct when it comes to financial arrangements is also questionable.

After the 2008 financial eruption, Barclay’s Bank turned to the Qataris for a capital injection. Involvement came at a heavy price when Qatar representatives destabilised the share price of the bank and unexpectedly sold five per cent of its stake for £1.3 billion in 2009.

Britain needs what Qatar has, from natural gas to capital invested in property, business and infrastructure. But the government’s willingness to sweep aside national security implications is unsettling for Britain.

Osborne must take axe to tax

Alex Brummer — Thu, 14 Mar 2013 09:44:19 +0000

There are two big misrepresentations about the current state of the British economy.
The first is that the present government has engaged in savage cuts in public spending that are shrinking the size of the state in the most painful way. The second is that the size of the economy is shrinking and as a result, the nation is heading into a “triple dip” recession.

In fact, public spending is still climbing at a sustained pace, which is among the reasons why the Coalition is constantly on the lookout for new targets to tax. The fact that despite all the headlines, GDP is still rising, albeit at a much slower pace that hoped for, partly explains why, despite all the mischievous reporting, employment continues to rise and a remarkable 580,000 private sector jobs have been added to the British economy in the past 12 months.

This is the real background against which George Osborne will present his third budget on Wednesday (March 20). In many ways it is a last chance saloon for Osborne.

The next general election (on the basis of five year fixed term parliaments) is just two years away so the Chancellor urgently needs to change the narrative if the Tories are to have any chance of staying in office. In the end it is “the economy stupid,” to quote former American President Bill Clinton, that wins elections.
A close looks at what has been happening to the public finances produces some surprises. Despite all the talk of “cuts”, most of the “cuts” promised have never been delivered.

Under the Coalition’s plans to bring the budget under control by 2017 (a balanced budget already has been postponed for a year) some 85 per cent of the savings are destined to come from cuts in spending and 15 per cent from rises in taxation.

Both variables are failing to deliver according to analysis by the independent Institute for Fiscal Studies. On the spending front, the only part being delivered is cuts in investment spending with 67 per cent so far earmarked or delivered.

This in itself is somewhat crazy. Spending on new infrastructure such as roads, rails, university facilities and sewage, such as the Thames Tunnel, are in fact the key to future growth. They should probably not be cut at all. Indeed, record low interest rates offer an opportunity for the government to use its credit ratio (no longer “AAA”) to finance infrastructure.

In contrast, just 32 per cent of the reductions in benefit spending have been delivered and only 21 per cent of the reductions in day to day spending. Indeed, the latest data from the Office for Budget Responsibility, the government’s pay watchdog, shows that central government current spending will actually rise this year by 2.4 per cent, rather than contract as scheduled. As a result, government borrowing is widening rather than narrowing and the nation’s debt levels (the accumulation of borrowing) will reach a record 96 per cent of national wealth by 2016, when it starts to fall again.

It will be argued that this is happening because in times of hardship, welfare bills, including unemployment benefits, tend to rise. But the reality is that employment is the highest it has ever been so there is no reason, other than non-delivery, why welfare cuts should not be falling.
There are taxation problems too. Income tax receipts are rising reflecting the better employment numbers and the decision to freeze some allowances. VAT is also on the rise reflecting the underlying fact that the economy is expanding, if slowly.

But the corporation tax take is shrinking. This reflects a number of factors including foreign takeovers of UK firms, aggressive tax avoidance schemes used by both UK and overseas enterprises and disruption of production from the North Sea. So what should the Chancellor do? He should reject the political noise being made by the LibDems and Ian Duncan-Smith among the Tories and finally take a meat axe to the welfare budget, thereby dealing with the deficit and freeing funds for investment.

On the taxation side of the equation, it is time for Osborne and the government to move towards lower and flatter taxes. The place where there are the potentially richest rewards are in oil and gas exploration. One of the main reasons for Britain’s GDP shortfall is the loss of production from the North Sea that has fallen 40 per cent from its peak and is dropping at six per cent a year. At present, extraction industries are taxed at between 60 per cent and 81 per cent a year. Changes in North Sea oil taxation last year have already led to new projects.

The “fracking” revolution offers all kinds of new opportunities. Reforming the oil and taxation regime would be a great place for the Chancellor to start if he is to reshape his economic legacy.
Clearly, Osborne is determined to get on top of the public finances even if delivery is proving more difficult. But the real path to future growth is through radical tax reform that will kick-start investment and exports.

Alex Brummer is City Editor of the Daily Mail

Watch out Sky, the rivals are coming

Alex Brummer — Thu, 28 Feb 2013 09:09:34 +0000

The domination of Rupert Murdoch’s BSkyB in Britain’s pay television space looks set to face its greatest challenge since the launch of satellite broadcasting more than two decades ago. Changes in technology, delivery systems and ownership structures threaten to undermine Sky’s market leadership, under which it has gained more than 10 million UK subscribers.

The huge expansion of mobile devices, with their instant access to movies and sport via streaming, provides a generation of smart phone users who have other ways of accessing their entertainment than the TV set.
The use of movie applications such as Netflix and LOVEFiLM allows Sky’s generally inferior selection of films to be bypassed. The skilled laptop or mobile device user also knows how to access Premier League and international football by tapping into live feeds from overseas. As critical are the big beast commercial challengers. These include a transformed BT and Virgin Media that will shortly fall under the control of America’s “cable cowboy” John Malone of Liberty Media, a long-time rival of Murdoch, in the American battle of the airwaves.

Elsewhere, Vodafone has signalled its interest in cable and is looking at Germany’s Kabel Deutschland, and Comcast of the US has just paid GE $18.1 billion for full control of the NBCUniversal network.
British Telecom, under the leadership of chief executive Ian Livingston, is a very different beast from when the Scottish-Jewish accountant took over the chief executive’s seat in 2008. The overhang of big losses in provision of global services has been overcome; a strategy for dealing with the group’s whopping pension fund deficit has been put in place and the group has invested heavily in the provision of high-speed broadband.

The next frontier for Livingston is pay TV. BT has parked its tanks on Sky’s lawn with the acquisition, from August 2013, of 38 Premier League games a season for each of the next three years. It is also looking at buying ESPN’s sports rights in the UK. In bidding high for Premier League and other sports rights, BT Vision is learning the secrets of Sky’s success that was built on dominating sports and movie rights.

BT has the means of delivery through its broadband network and a relationship with almost every household in the country. As importantly, BT having cleaned up some of its past problems has as estimated £2.5 billion of free cash flow to potentially invest each year. This gives it the muscle to bid or outbid Sky for the rights to sports, movies and other content including high quality America television. It is clear from the price it is willing to pay for sports rights that BT views itself not just as a supplier of content, but a delivery pipeline.

The other new player in the frame is American cable giant, Liberty Global with its $20 billion bid for Virgin Media. Liberty, one of the biggest beasts in the American cable jungle, is a historic rival of Rupert Murdoch.

Until 2008 he was the most threatening shareholder of News Corporation with a 16 per cent stake and was only displaced when Murdoch agreed to sell the Liberty boss John Malone his 41 per cent interest in US satellite network, DirectTV. Malone has long been interested in extending his global cable empire to the UK having recently bought networks in Germany and Southern Europe. He has timed his assault well.
Nasdaq-quoted Virgin Media has for years been beset by legacy problems. It has sought to pay-off the debt built up by the predecessor companies, Telewest and NTL and struggled with problems of customer service and reliability. The UK cable firms acquired the Virgin branding when it merged with Sir Richard Branson’s telecoms, leaving the Virgin group with a three per cent stake and a licensing deal for the use of the name.
The recent re-opening of the corporate debt markets for mergers and acquisitions provided Liberty with the financial means to do the deal.

What is still unknown is Liberty’s intentions for Virgin Media. In recent times, Virgin Media has chosen to steer clear of content and expensive bidding wars and focused on being a “quadruple play” delivery system, offering customers cable TV, broadband, mobile and landline services. Malone has yet to show his hand in Europe and his first goal may be to squeeze out costs by bringing together Virgin Media with his other European cable operations. But it would be a surprise if his goals in Europe were so limited. Virgin Media, with the right amount of investment, could become a better challenger to BSkyB.

All of this is potentially difficult for News Corporation. It is the biggest investor in BSkyB with just under 40 per cent of the shares, It voluntarily withdrew its offer for the rest of the stock after its UK sister company, News International was ensnarled in the phone hacking crisis. Until now BSkyB has had a relatively clear run at the hugely remunerative UK pay television. The advance of mobile devices and the arrival of well-resourced commercial competitors could signal the end of its hegemony.

Alex Brummer is City Editor of the Daily Mail. He has been shortlisted for Business Journalist of the Year in the 2013 UK Press Awards.

Tough task for Israel's new banking boss

Alex Brummer — Thu, 14 Feb 2013 09:19:45 +0000

Central bankers used to be grey anonymous figures that operated largely behind the scenes to set interest rates and stabilise currency markets. The great recession of 2008-10, followed by the crisis in euroland, changed all that.

It has been central bankers, as much as governments, that have been tasked with stabilising economies. In Britain, the current governor, Sir Mervyn King played a key role in the stabilising of a tottering banking system but as importantly the Bank of England’s inflation fighting mission was transformed into deflation fighting.

The Chancellor took on the task of controlling the budget and restoring fiscal credibility. But securing growth through interest rates and monetary policy was largely left to Threadneedle Street.
Britain has not been alone in this. Ben Bernanke at the Federal Reserve, a noted expert on depressions, has taken it upon himself to adopt some of the most radical polices in the American Central Bank’s history, choosing to link monetary policy in America directly to unemployment. And in Europe, the Italian president of the European Central Bank, Mario Draghi, cast away the caution of his predecessor, lowered interest rates and developed a series of new monetary instruments that have temporarily stilled the crisis of the euro.
Israel too has relied heavily on its central banker Stanley Fischer, the former deputy managing director of the International Monetary Fund. Fischer’s intention to resign from the Bank of Israel in June, 18-months before the end of his official term, has created a huge vacuum.

The Israeli Central Bank governor is widely credited with having steered the Israeli economy safely through the shoals of the financial crisis, heading off inflation and carefully managing the exchange rate for the shekel.

Zambian-born Fischer is now even mentioned as a possible successor to Shimon Peres as Israel’s president.
The showbiz element of central banking has its downside. The choice of Canadian central banker, Mark Carney — on a salary and benefits just shy of £1 million (including housing allowance) — has turned him into a superstar. Personal profiles proliferate and his arrival in London in June, to take over from Mervyn King, is being greeted as the second coming.

Carney inherits a much more powerful bank than that operated by King. By the time he arrives the Bank will have assumed full control not just of monetary policy, but prudential supervision of the banks and responsibility for financial stability.

The selection of Carney, the first foreigner to head the Bank of England, underlines how global central banking has become. Carney won attention for his role in keeping Canada’s banks sound during the financial crisis on Wall Street and steering the Canadian economy through the recession without capsizing. The Canadian will look at new approaches to running the Bank when he arrives in London, including the possible replacement of the monetary target (a government decision) with a new approach (money GDP) that formally gives the Bank of England a more active approach in securing growth.
Finding a new governor of the Bank of Israel will be an early c
hallenge for the next Netanyahu administration in Israel. One of the reasons that people set so much store about independent central banking is that it takes part of the task of running the economy directly out of politics.

This is especially useful under Coalition government where it is often difficult to agree strategy.
Finding economic superstars to take on the role of running the Bank of Israel has paid rich dividends for the country. Among Fischer’s predecessors were Josef Frenkel, the former chief economist of the International Monetary Fund (IMF), and the late Michael Bruno, who held a similar job at the World Bank. The strong representation of Jews in high-level economic policymaking means that there are plenty of choices if Jerusalem decides to look beyond its borders again. Figures such as John Lipsky, a former chief economist at JP Morgan Chase and until recently deputy managing director of the IMF, would almost certainly suit the role along with a slew of US Nobel prize-winning economists including such internationally renowned figures as Joseph Stiglitz. The attractions of running our own central bank, in a medium sized OECD economy, are considerable.

This is true in that the Fed job does not come up very often and the last two holders Alan Greenspan and Ben Bernanke have held onto the job for a considerable period of time.
The challenges of the Israeli economy are considerable. As an open economy, in which foreign trade and cash inflows play a big role, Israel faces tricky problems of inflation targeting and controlling the value of the shekel. As seriously, the OECD, IMF and others point to an unbalanced financial system dominated by a handful of powerful, oligarchical families.

Breaking the grip of this group on the economic system will be a critical challenge for whatever candidate, internal or external, eventually emerges as Israel’s next governor.

Alex Brummer is City Editor of the Daily Mail

Battle is on for Bolland's M&S

Alex Brummer — Thu, 31 Jan 2013 09:22:05 +0000

Among the bigger retail losers in the January reporting season was the private shareholders’ favourite, Marks & Spencer.

The travails of HMV and Blockbuster, that went into administration, may have dominated the headlines, but it is the Dutchman Marc Bolland, who took the helm at M&S in May 2010, succeeding the popular executive chairman Sir Stuart Rose (now chair of Ocado), who finds himself under pressure.
Bolland did not inherit a strong hand from his predecessor. Rose succeeded in steadying the ship after the disastrous rule of Luc Vandevelde and Roger Holmes and steered the group through the post financial crisis recession of 2007-2010. He was, however, unable to make up for what he has called M&S’s “lost decade.” While other UK retailers Burberry and Tesco expanded overseas, M&S largely was left at the starting blocks.
Next, Tesco, John Lewis and other specialist retailers made the transition to on-line retailing effectively. M&S was slow to embrace the new model.

Also, behind the scenes, M&S was still operating with an extraordinarily old-fashioned logistics system, using dozens of high cost warehouses and distribution centres, when others had modernised many years before.
Finally, M&S’s fashion offering, directed by Kate Bostock, had become stale. As the dominant force in womenswear for decades this left M&S with a problem.
Direct rivals like Lord (Simon) Wolfson’s Next and upstart discount rivals such as Primark, have been, and are still eating its cake.

It is interesting to note that Next and Primark, both parts of family dynasties (the Wolfsons and the Westons) have enjoyed more consistent family management in the period since the founding M&S families stepped back from the fray.

The task then for Bolland has been considerable. In his specialist area of food and drink learnt at Heineken and Morrison, Bolland has done well. M&S was among the better performers over Christmas with same-store sales up 0.3 per cent. By introducing more than 200 special holiday lines, Marks managed to stay ahead of the pack despite the squeeze on household incomes.
In contrast, general merchandises sales, that include clothing and other on-food items such as furnishings, tumbled 3.8 per cent. Bolland is instituting the changes but it looks to be in a race against the clock.

M&S’s biggest investors are American long-term value funds, Brandes and Capital Research, that have a reputation for patience. But some of the UK funds, including Standard Life, are more short-term in their thinking. David Cummings of Standard Life Investments, that controls 1.6 per cent of the shares, has given Bolland until the Autumn of 2013 to turn things around.
It may be a tall order. Bolland argues that the traditional measure of same store or like-for-like sales does not help M&S. He believes that the group has enough floor space in the UK and unlike its rivals has preferred to upgrade existing stores rather than expand. Competitors like Next and Sainsbury add floor space each year building in automatic same stores sales growth.

The most important change made by Bolland so far is the choice of a new fashion team led by former Debenhams and Jaeger boss, Belinda Earl. The first results of her team’s efforts will be seen this summer. He has also invested heavily in on-line with Laura Wade-Geary leading the transformation.

The impact of some of her work can already be seen in stores where sales assistants use iPads, hung around their necks, to help customers source and size what they want. Real advances will be made, however, when the company moves from the existing Amazon-run platform to its own that will project the M&S brand around the world and will move beyond clothes to food, wine and other lines.
In contrast to Next, that has always had a comprehensive catalogue and mail order service, M&S has been starting from scratch.

Among Bolland’s other project is to make M&S global again. In Europe it began in France on the Champs Elysees with a small store that has been a resounding success followed by a much larger suburban Paris store, that has seen people queuing around the block.

Further afield, India has been seen as a priority and the group sensible has linked with the Reliance Group and is in the process of opening 50 stores there. Nevertheless, several years of underperformance is seen as having made M&S vulnerable again to a bid possibly from private equity.

The company, however, enjoys one weapon that is not available to other bid targets. Any buyer will need to win over the company’s army of up to three million private investors and are fiercely loyal having seen off Sir Philip Green’s bid in June 2004.

It is the ultimate poison pill against unwanted advances. However, even this loyal group could be tested if the sub-performance of the last year were to continue.

Alex Brummer is City Editor of the Daily Mail

Iran sanctions are stepped up

Alex Brummer — Thu, 17 Jan 2013 09:03:53 +0000

There is no better time to bury news than when newspapers are not published or when the attention of those who report the news is elsewhere. Traditionally, the most dodgy companies hold their annual general meeting on Christmas Eve or New Year’s Day.

I was reminded of this recently when scrutinising the Treasury website. On December 24 2012, one of the few days of the year when the media is not watching closely, HM Treasury revealed that, in compliance with a European Union request, it was tightening the financial sanctions against Iran.

Moreover, on January 3 2012, as a result of the short-term fix between the Congress and the White House over the fiscal cliff, the United States passed strengthened sanctions designed to isolate Iran’s energy and financial sectors. The measure was tacked onto a $622 million defence spending bill.

Given the timing and placement of the announcements, neither attracted the attention of media fixated on other events including the 60,000 death toll of the Syrian conflict.
The good news is that Western attempts to isolate Iran, using economic and financial measures, are proving unyielding, despite the turmoil in the region. There is a general tendency to dismiss economic sanctions as ineffectual when it comes to forcing nation states — even those most trenchant in their views — to change direction. But the economic literature suggests that the tighter the noose, the more likely there is to be success.

The eventual collapse of the Apartheid regime in South Africa occurred after financial sanctions were tightened and Western banks, like Barclays, withdrew or refused to do business with the country.

Arguably, the arrival of Glasnost and the implosion of the old Soviet Union, occurred after Ronald Reagan applied maximum pressure on Moscow through economic measures and upping American defence spending and technology to the point that Russia could no longer keep up. Israel has had its own experience of economic sanctions with the administration of George Bush senior, who in 1991 temporary withdrew loan guarantees for house building in response to American objections to settlement activity in the West Bank and Gaza. The battle by the West to isolate Iran is on in earnest and against a tight deadline. For much of 2012 there was concern that if the main democracies did not act, to slow or stop Iran arming itself, then Israel would take military action. At the end of June 2012 the European Union, including Britain, imposed a total ban on oil imports to Iran.
There was some delay as a result of Asian customers being unable to obtain the “Protection and Indemnity Insurance” — much of which is written in Britain. Once this problem was overcome the noose was tightened and by October 2012, with the oil revenues and foreign drying up, the informal value of the Iranian currency plunged among Iran’s foreign exchange traders leading to riots on the street. This was among the first public signs that sanctions have been hurting.
As importantly, Washington has been clamping down on big international banks including British-based HSBC and Standard Chartered, both of which were found by regulators to have processed billions of dollars of transactions for Iranian connected enterprises. The banks have since paid large fines to the US authorities, admitted their culpability and vowed to clean-up their operations under threat of losing their American banking licences — potentially a huge blow.

New orders implemented by the UK Treasury on 24 December 2012 list 18 new Iranian connected entities as proscribed by the government’s “Sanctions and Illicit Finance” group that has the powers to freeze assets. These range from financial institutions, such as the First Islamic Investment Bank, with offices in the Far East, to disguised enterprises such as the Hongkong Intertrade Company, described by the UK Treasury as a “front company” controlled by the EU designated National Iranian Oil Company.

In the US, a new sanctions measure shepherded through Congress by Democratic Senator Bob Menendez and Republican Senator Bob Kirk seek to close a major loophole that has allowed Iran to circumvent existing sanctions. It aims to stop Iran bartering oil for precious metals that can be used in financial transactions amid some evidence that such deals have been done with Turkey.

In addition, the legislation designates Iran’s energy, port, shipping and ship building industries as “entities of proliferation” and prohibits transactions in these area. It also seeks to block vital material supplies necessary for nuclear facilities. Quietly, the West is recognising that unless it does more to cut off the flow of resources to Tehran, the military option –— with all the dangers that raised in terms of blocking the Strait of Hormuz and oil prices — will come to the fore again.

Encouragingly, latest moves in Brussels, London and Washington suggest that on the issue of Iranian sanctions, the West is able to act to together and keep up an unrelenting pressure.

Alex Brummer is City Editor
of the Daily Mail

It's not all over for high streets

Alex Brummer — Sat, 22 Dec 2012 14:14:07 +0000

The shape of retailing on Britain's high streets, in the shopping malls and in local neighbourhoods, is changing rapidly. The advance of the internet has been catastrophic for some retailers. The electronics and entertainment sector has been among the worst hit, with Comet recently joining Woolworth, Zavi, Game Group, newcomers Best Buy and HMV (still clinging on by its fingertips) on the list of casualties.

With each failure there is a temporary uplift for competitors. So those companies remaining in the business, including catalogue retailer Argos and Dixons (the owner of Currys and PC World), cannot take anything for granted.

Argos is seeking to lift its downmarket image with a refurbishment of stores and the replacement of its ubiquitous catalogue with tablet shopping.

Dixons aims to keep ahead through store refurbishment and a focus on customer service. It is now impossible to enter a PC World branch without being faced by a swarm of customer advisers. Like so many other retailers, including the supermarkets, Dixons also has embraced the "click-and-collect" model that allows customers to pick up the goods they want, at their own convenience in their local store.

This is especially important now that the big grocery chains, having covered the country in out-of-town mega-stores and supermarkets are moving back into neighbourhoods. It is now possible, for instance, to follow through on John Lewis's "never knowingly undersold" pricing promise and pick up the goods from the nearest branch of its grocery offshoot Waitrose.

The supermarkets are leading the return to the high street and neighbourhood revolution. As so often has been the case over the past couple of decades, it was Tesco that first saw the opportunity. Under the leadership of its previous chief executive, the legendary Sir Terry Leahy, it embarked on an ambitious localism programme and now has an estimated 1,500 local shops nationwide.

J Sainsbury, the fastest growing of the big supermarkets at present, is playing catch-up. So far it has opened some 500 Sainsbury locals and it is continuing the expansion at a rate of one or two per week. The goal, senior Sainsbury executives say, is to reach 1,000. They also believe that Sainsbury local stores can also be helpful to customers as collection centres for non-food items closer to people's homes and neighbourhoods.

The food chain with the most local and neighbourhood stores, but somewhat downmarket of most of its rivals, is the Co-op with an estimated 2,500 outlets. As the only substantial business in Britain to have given into the demands of the anti-Zionist boycott of fresh produce from the Palestinian territories (even if it is produced by the Palestinians themselves), the Co-op foods shops and the expanding Co-op bank should be given the widest of berths.

The race to catch-up with the biggest players recently has been joined by Bradford-based Wm Morrison that has so far opened an estimated eight local stores. Waitrose has developed 20 so far and is still counting.

Marks & Spencer, with the most up-market offering through its 'Simply Food' range operates 90-100 neighbourhood stores.

In much the same way as the arrival of the supermarkets was seen as damaging to the high street there is now a view that their return is hurting the neighbourhood shop many of them operated by Asian-owners. Sainsbury among others disputes this. It believes that in some towns, the return of high-quality food chains has brought back footfall, which has been a real benefit to the traditional butchers, greengrocers and other merchants.

As for the independent stores they offer far longer opening hours, that are not matched by the supermarket chains, and a range of other services from Oyster travel cards, to newspaper delivery and the lottery that are now part of the grocery chain offerings.

None of this means that the crisis in the high street or the shopping centres are over. The long drawn out downturn in the economy has created ghost towns of some badly placed early shopping centres and destroyed the high streets in some less well-off neighbourhoods, particularly in Northern England.

It is too easy to blame the big supermarket groups and the out-of-town shopping centres for this. But there is growing evidence that with fuel prices rising along with public transport costs customers are returning to the neighbourhood especially for their secondary, rather than main weekly shop. Moreover, the return generally has lifted standards because the established chains, like Sainsbury and M&S, set great store standards with freshness and cleanliness.

One of the changes being made by the current Tesco boss Philip Clarke is to improve the shabby appearances and service at many of its local and high street shops, that have been under-invested in recent years as the company focused on its bigger outlets, developing a working bank and expanding overseas. Forget the negativism and an unacceptably high number of closed shops.

New investment by the grocery chains means it is not all over for neighbourhood shopping just yet.

Alex Brummer is City Editor

of the Daily Mail