Exclusive: G4S Talks Stall Over Olympics Deal

By Mark Kleinman, City Editor

The Home Secretary could be asked to intervene in the row over G4S's failure to provide thousands of security staff at last summer's London Olympics amid faltering negotiations over a financial settlement.

I have learned that discussions between G4S and Locog, the organising committee for the Games, have made little progress during the ten weeks since the Paralympic Games ended.

The two sides are approximately £100m apart in terms of their expectations about the eventual cost to G4S, the FTSE-100 support services group, according to sources close to the situation.

The ongoing dispute threatens to cast a shadow over G4S's efforts to win other public sector contracts and could re-emerge as a threat to the role of Nick Buckles, G4S chief executive.

G4S has currently estimated that the Olympics fiasco will cost it little more than £50m – a hit that the company has already taken in its accounts – but Locog executives are at the moment holding out for closer to £150m.

Since the Olympics, G4S has reported healthy financial results but has lost out on a number of prison management contracts.

Details of the dispute resolution agreement between the private security contractor and Locog, whose chief executive, Paul Deighton, will step down next month to become a Government minister, have remained secret until now.

As I understand it, there are a number of stages which must fail to produce an agreement before Theresa May, the Home Secretary, would be required to intervene.

The current talks between the commercial directors of the two organisations have reached an impasse, insiders said today. The next stage would be for Mr Buckles and Mr Deighton to hold face-to-face talks, which sources say are likely to take place before Christmas.

Under the terms of the contract between G4S and Locog, an independent panel of experts would then be appointed if the chief executives cannot reach a deal between themselves. If that panel does not then produce a ruling that is satisfactory to both sides, Ms May would then be asked to oversee the provision of a binding ruling by another independent expert.

People close to G4S said it still hoped to conclude discussions by the end of the year and that it remained committed to its "best estimate" that the contract failings would result in a loss of around £50m.

They insisted that the prospect of the row continuing to the point that Ms May would be asked to intervene was remote.

G4S endured a torrid summer after revealing just weeks before the start of the Olympics that it would not be able to provide more than 10,000 personnel to provide security services at Games venues across the country.

The contract failings led to Mr Buckles being castigated by MPs on the Home Affairs select committee, although he kept his job following a review by the company's board.

Three other directors were not so fortunate, with two of G4S's most senior executives leaving in September followed by a further departure this month.

People close to G4S say the company's chairman, John Connolly, will announce the recruitment of three new non-executive directors before the end of the year.

A Locog spokeswoman said: "We are working hard to reach a financial settlement with G4S."

G4S declined to comment.

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GDP Unrevised At 1% In Third Quarter

Britain's gross domestic product for the third quarter has been unrevised by the Office for National Statistics, with growth confirmed at 1%.

The ONS confirmed the strongest rise in household spending in more than two years helped drive the UK's dramatic bounce back to economic growth between July and September.

The second estimate includes figures on the spending side of the economy for the first time, which revealed that the Olympics and Paralympic Games helped household spending grow by 0.6%, the strongest rate since the second quarter of 2010.

The unchanged headline GDP figure remains the fastest rate of quarterly growth in five years and marked the end of the longest double-dip recession since the 1950s.

GDP is seen as a broad measure for the health of the total UK economy.

Although the headline figure was unrevised, it was still largely driven by one-off factors and is unlikely to alter the view that the underlying health of the economy is much weaker.

The third quarter had one more working day than the previous quarter, due to the Queen's Diamond Jubilee, the ONS said.

Looking further ahead, growth is expected to fall back sharply between October and December amid a series of weak purchasing managers' surveys for services, manufacturing and construction industries.

Construction growth was revised downward from -2.5% to -2.6%

Bank of England governor Sir Mervyn King recently warned that output could even shrink in the fourth quarter.

The economy remains 3.1% below its peak in the first quarter of 2008, the ONS said.

And fourth-quarter output was cut from flat growth to a decline of 0.1%, although this was due to methodology rather than revisions to previous quarters.

The second estimate saw output in the construction sector revised from a 2.5% decline to a steeper drop of 2.6%, while industrial production was downgraded from 1.1% growth to 0.9%.

The services sector grew at 1.3% - unchanged from the previous estimate - as ticket sales for the Olympics and Paralympics were booked in the third quarter.

This was the fastest growth in five years.

A more complete breakdown of household spending will be given in the final estimate next month but the ONS said it was likely driven by ticket sales, hotels and restaurants, and transport.

Elsewhere, new figures revealed an improvement in the UK's trade position during the third quarter with imports falling 0.4% and exports rising by 1.7% when compared with the previous quarter.

However, the rise in exports can partly be attributed to higher spending by foreign tourists during the Olympics as this spending is recorded as an export.

:: Meanwhile, the Organisation for Economic Co-operation and Development has said it expects the UK's national output to shrink by 0.1% this year.

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Eurozone And IMF Reach Greece Debt Deal

Eurozone finance ministers and the International Monetary Fund have reached an agreement on Greek debt, which paves the way for the release of much-needed loans.

After nearly 10 hours of talks, it was agreed that the country's public debt should fall to 124% of GDP in 2020 through a package of extra debt cutting measures.

The deal emerged in Brussels after a meeting of finance ministers from the 17 eurozone countries, the European Central Bank and the IMF on how to make Greek debt sustainable - their third meeting on the issue in as many weeks.

"It's going very slow, but we have financing and a Debt Sustainability Analysis. We've filled the financing gap until the end of programme in 2014," one official said, adding that talks on the details of the debt cutting measures with the IMF were still ongoing.

The deal is a breakthrough towards releasing the next tranche of loans, totalling 44bn euros (£35bn).

It comes after Greece's aid package was suspended in the summer over concerns it was not meeting the conditions of its bailout programme.

The Greek finance minister Yannis Stournaras said earlier that Athens had fulfilled its part of the deal by enacting tough austerity measures and economic reforms, and it was now up to the lenders to do their part.

The IMF has said Greece's debt as a proportion of GDP must be cut to around 120% by 2020, from a forecast 190% next year, for it to be manageable in the long-term.

It was not immediately clear how the debt would be reduced from its currently forecast level of 144% in 2020 to the target, but it is expected to involve a series of measures including the lowering of interest rate on loans to Greece.

Last week Greek Prime Minister Antonis Samaras criticised the failure to deliver bailout funds to Athens after 12 hours of emergency talks among the eurozone finance ministers and representatives of the troika of lenders had ended without agreement.

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Nationwide Profit Slumps After PPI Charge

Nationwide, Britain's biggest customer-owned financial services group, has reported a drop in half-year profits despite seeing a sharp increase in new customers.

The bank said its pre-tax profit fell by almost 50% to £124m for the six months to the end of September, down from £238m a year earlier.

The slump is mainly caused by the cost of the compensation for the rising level of payment protection insurance (PPI) claims.

Nationwide has had to set aside a further £45m to compensate victims of loan insurance mis-selling, which means the total figure for compensating customers will now cost £173m.

However, that is a fraction of the costs incurred by the other big banks.

Barclays, for example, has had to set aside £2bn after mis-selling the product to its customers.

PPI policies were typically taken out alongside a personal loan or mortgage to cover repayments if customers fell ill or lost their job, but they were often sold to people who would not have been eligible to claim on the policies.

In addition to the PPI hit, a £193m impairment on commercial property also dragged Nationwide's figures down.

Chief executive, Graham Beale, said: "Losses on our commercial property loans have increased over the past 12 months and, in addition, we continue to see elevated levels of PPI claims."

Nationwide competes with the 'Big Four' high street banks - Lloyds, Royal Bank of Scotland (RBS), HSBC and Barclays - in the financial services sector.

It has confirmed it is "potentially interested" in buying the 316 branches of RBS that are up for sale as it looks to expand into business lending.

Virgin Money and JC Flowers are also reportedly in the frame to buy the RBS branches.

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Lloyd's Of London In Global Insurance Warning

The world's biggest insurance market has warned that more than a dozen emerging economies are at risk of major rebuilding costs due to minimal insurance cover for natural disasters.

Lloyd's of London said there is a global insurance deficit of $168m (£104m) which now affects at least 17 countries.

Its warning comes after a string of natural disasters caused £3.6trn damage in 2011.

Last year major incidents included the Japanese earthquake and tsunami, major floods in Thailand, a New Zealand earthquake and a Filipino typhoon.

A devastating series of tornadoes in the United States also caused $35bn (£22bn) of damage.

The string of events prompted a £516m loss for 324-year-old Lloyd's. It was its first loss since the terror attacks of 2001.

The industry paid out $107bn (£66bn) in claims, making it the most expensive year ever for insurers.

This year's superstorm Sandy in the US has been estimated to cost up to $50bn (£31bn), and claims from the grounding of the Costa Concordia cruise ship off Italy are still pending.

Lloyd's research, carried out by the Centre for Economic and Business Research (CEBR), said the cost of disasters had increased by £540bn in real terms.

It said booming countries, with fast-growing affluent middle-classes, include China, Colombia, Mexico, Poland, Thailand and Saudi Arabia.

CEBR chief executive Douglas McWilliams said: "The 'insurance gap' has a huge and lasting impact on the ability of businesses, governments and people to recover from the earthquakes, hurricanes, flooding and forest fires that affect us all every year.

"This means lost orders, lost jobs and wasted taxpayer money as a failure to prepare ahead of such events creates costs that are more severe and unmanageable."

The CEBR said China was top of the list for shortfalls of insurance, with just 1.4% of losses between 2004 and 2011 being covered.

According to The Guardian, damage from the Sichuan earthquake in 2008 totalled $125bn (£78bn) but only 0.3% was covered by insurance.

But insurers may need to reassess their own expectations of insurance cover based on economic vitality and cultural norms in developing nations.

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Afghan War Supplier Issues Major Warning

The British firm that supplies Nato forces with safety devices has revealed major woes ahead of an Afghanistan troop drawdown.

Apache helicopters have been fitted wiith decoys made by Chemring

Chemring issued a trading warning, saying its year-end order book forecast was £760m, down from £878.3m last year.

"The group's performance during 2012 was extremely disappointing," the trading statement said.

"Chemring's operational performance has been weak, and management of investors' expectations over the past year has also been poor."

Chemring also makes pyrotechnics to protect soldiers or show their location

The Hampshire-based firm makes aviation decoys, known as countermeasures, that are fired by military aircraft to thwart missile attacks.

It also makes munitions, counter-improvised explosive device (IED) equipment and pyrotechnic flares, which have been widely used by UK, US and Nato forces against the Taliban.

Dozens of other countries around the world use its products. The firm commands around a 60% share of the £360m global market in countermeasures.

Illuminated artillery munitions have been used against Afghan insurgents

But both US and UK military budgets are under tight pressure ahead of a complete withdrawal from Afghanistan.

The US is expected to cut nearly $500bn (£310bn) from defence expenditure over the next decade and Britain's Ministry of Defence has ordered a review of its procurement process.

Chemring admitted it has been hit by slow adaptation to changing tempos after more than a decade of US and UK military combat in Iraq and Afghanistan.

A Japanese plane sets off a string of flares designed to attract missiles

"In part, this resulted from a failure to anticipate the likely impact of the changing market dynamics on the group's businesses, but also reflected failures in performance at several of our businesses," it said.

Technical faults with a countermeasure product have seen it rejected by a customer recently.

It has also failed to get export licences for a major vehicle-based mortar system for a Middle East customer.

And it hinted that the so-called Arab Spring - with uncertainty over ruling regimes - made export licences "more difficult to achieve in some markets".

US Air Force gunships have used Chemring's countermeasures

The company, which is saddled with net debt of £250m, has recently seen the departure of its chief executive and a decision by private equity firm the Carlyle Group to pull out of takeover talks.

"The wider market backdrop is likely to remain challenging," the company said.

"Chemring needs to adapt and better equip itself in order to meet these challenges."

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Facebook: False Copyright Warning Goes Viral

Facebook has insisted that its users keep full copyright of their photos and videos after a hoax warning went viral.

Tens of thousands of people are now thought to have copy-and-pasted a statement onto their timeline, asserting full copyright over their posted content.

The viral post reads: "Facebook is now an open capital entity. All members are recommended to publish a notice like this, or if you prefer, you may copy and paste this version.

"If you do not publish a statement at least once, you will be tacitly allowing the use of elements such as your photos, as well as the information contained in your profile status updates."

Users then attach a 50-word statement saying: "In response to the new Facebook guidelines, I hereby declare that my copyright is attached to all of my personal details, illustrations, comics, paintings, professional photos and videos, etc. (as a result of the Berner Convention). For commercial use of the above my written consent is needed at all times!"

But Facebook spokesman Andrew Noyes said its users had nothing to worry about.

"We have noticed some statements that suggest otherwise and we wanted to take a moment to remind you of the facts - when you post things like photos to Facebook, we do not own them," he said.

"Under our terms, you grant Facebook permission to use, distribute, and share the things you post, subject to the terms and applicable privacy settings."

Facebook's frequently asked questions section also specifically addresses the point of law.

It says: "Yes, you retain the copyright to your content. When you upload your content, you grant us a licence to use and display that content."

While copyright fears appear to be unfounded, Facebook does collect large amounts of data about its users.

It knows when you look at another person's timeline, send or receive a message, and the time, date and place where your photos were taken.

If you log on or post from a smartphone it can pinpoint where you are, while if you access the site from a computer it records the IP address you are using.

All of this can be released as a result of a valid court order in the UK, or a subpoena in the United States, as part of a civil or criminal investigation.

Facebook says it "stores data for as long as it is necessary to provide products and services to you and others".

This means that most information associated with an account will be kept until the account is deleted.

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Boris Tells Indian Firms To 'Come To London'

Boris Johnson has caused a row with the French by urging Indian firms to set up in London, telling business leaders to "join the business capital of the world".

The Mayor of London angered the French government when he told an audience of businessmen in Delhi they should avoid "persecution" in Paris and base their European operations in the Uk capital instead.

Mr Johnson was referring to a recent row between British steel tycoon Mittal and the French government, which erupted after its industry minister Mr Montebourg said ArcelorMittal, the world's biggest steel-maker owned by Mr Mittal, had shown a lack of respect to France.

Mr Montebourg, said: "We don't want Mittal in France anymore because they haven't respected France."

Off the back of that, Mr Johnson, said: "On a day when the sans-culottes appear to have captured the government in Paris and a French minister has been so eccentric as to call for a massive Indian investor to depart from France, I have no hesitation or embarrassment in saying to everyone here 'venez a Londres, mes amis."

He added: "Come to London, come to the business capital of the world, the place where 73 Indian firms are listed on the London Stock Exchange, where Indian companies already raise 53% of their international equity."

The sans culottes were a radical faction in the French Revolution.

Mr Mittal has been accused of "not respecting France" by the French

Currently, Indian markets remain relatively closed, with strict and complex restrictions preventing Indian businesses from setting up bases overseas.

It is, however, already the fourth largest foreign investor in the UK, while London receives eight times more investment than Paris, Amsterdam and Frankfurt.

But Mr Johnson is wary that in a global market, politicians from other European nations will be hovering to snap up the business.

As part of the drive to promote London, in which 570,000 people of Indian origin live, Mr Johnson met Kamal Nath, India's minister of urban development, at the beginning of his six-day trip.

He said: "We've had a very good discussion about planning, about urbanisation, about regeneration, and about the importance of putting in public transport links before you build housing. I look forward very much to pursuing the process of further engagement with India."

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Welfare-to-Work Scheme Misses Its Target

The Government has defended its flagship employment scheme after new figures showed the programme has missed its target.

Only 3.5% of the long-term unemployed helped by the scheme were still employed six months later, according to data published by the Department for Work and Pensions (DWP).

Figures showed that 800,000 people had started the Work Programme since it was launched last year, but that only 31,000 stayed in a job for six months.

A target of 5.5% was set for finding sustainable jobs.

But employment minister Mark Hoban defended the scheme, saying the programme is succeeding in getting people off benefits and into work.

He said that 56% of people who joined the scheme were no longer receiving benefits, with one in five of the earliest participants spending at least six months without them.

Mr Hoban also revealed that notices had been sent to a number of organisations involved in the programme, asking them to come up with plans to improve their performance

But Labour leader Ed Miliband criticised the programme and said it was on course to be a "miserable failure".

Labour leader Ed Miliband has called the scheme a "miserable failure"

During a visit to Stevenage, he said: "It is just not working. What we've seen from the Government is a failure to reform welfare."

The initiative, which was launched in June 2011 to help the long-term unemployed find work, divides the country into regions, with each comprising a range of private, public and voluntary sector organisations.

It is a two-year scheme which supports some of the hardest-to-help claimants, including the long-term unemployed, disabled and ex-offenders.

Employers are paid by results to get people into work, and providers can earn between £3,700 and £13,700 per person, depending how hard it is to help an individual.

The DWP says the scheme so far has cost just over £2,097 for every participant.

The statistics were expected to be poor after various leaks showed the programme slowly "descending into chaos" as one source put it.

Unemployment is now slowly falling despite a stagnation in GDP, a phenomenon that has become known as the "productivity puzzle".

The Employment Related Services Association (ERSA), the trade body for the welfare-to-work industry, said criticism of the scheme was unfair, predicting that an increasing number of people will be helped into a sustained job.

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Ex-Network Rail Boss To Head National Express

By Mark Kleinman, City Editor

The former head of Network Rail, Sir John Armitt, is to become the new chairman of National Express, the bus and rail operator.

I have learned that Sir John's appointment is to be announced by National Express later today.

Sir John will replace John Devaney, who has been a member of the National Express board since April 2009. Mr Devaney's tenure as chairman has been an eventful one as the transport group fought off a takeover bid from CVC Capital Partners, the buyout firm, and overcame a hostile activist campaign from Elliott Advisers, a hedge fund.

The recruitment of Sir John, who led the Olympic Delivery Authority for five years, culminating in last summer's successful hosting of the Olympic and Paralympic Games, is a coup for National Express.

He was previously chief executive of Network Rail from October 2002 and chief executive of Railtrack plc from December 2001.

Sir John is also a non-executive director of the Berkeley Group and an advisory board member of PricewaterhouseCoopers and Siemens.

National Express is the UK's biggest operator of urban bus services outside London, and operates the c"c commuter rail franchise between London and Essex.

National Express could not be reached for comment.

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