Edwards Boss Taylor Primed For Surprise Exit

By Mark Kleinman, City Editor

One of Britain's biggest manufacturers is poised to announce a leadership shake-up less than a year after it floated on the American stock exchange Nasdaq.

I understand from Wall Street sources that Matthew Taylor, chief executive of Edwards, a leading manufacturer of vacuum pump technology, is preparing to step down.

Mr Taylor's departure could be announced as soon as Edwards' full-year results later this week.

His exit will surprise investors, since he arrived at Edwards only in May 2010, and has a strong record as a senior industrialist.

Before joining Crawley-headquartered Edwards, Mr Taylor was the chief executive of JCB, Britain's biggest manufacturer of earth-moving equipment.

Prior to that, he spent more than two decades at Ford Motor Company, a stint which included three years as managing director of Jaguar Land Rover.

Edwards opted for a listing on Nasdaq over London last year after concluding that it would achieve a higher rating for its shares if it went to the US.

A supplier of vacuum pumps to the world's largest semiconductor manufacturers, Edwards was spun out of the BOC gases group after it was acquired by Linde, a German rival, in 2006.

Its products are also used in flat-screen televisions and solar cells.

Edwards employs more than 3000 people around the world, although it has shifted some jobs from the UK to lower-cost manufacturing sites overseas, including in Asia.

The company is now chaired by Nick Rose, a former finance director of Diageo, the drinks company, who is on the boards of BAE Systems, BT and Williams Grand Prix Holdings, the owner of the Formula One team.

It is understood that Mr Taylor's successor is likely to be announced at the same time as his departure.

Candidates to take over could include Jim Gentilcore, who already sits on the board of Edwards as an independent non-executive director, as well as executives from outside the company.

Large chunks of Edwards' shares are still held by CCMP Capital and Unitas, the two private equity firms which acquired Edwards from BOC. The company has a market value of just over $800m (£527m).

Edwards could not be reached for comment.

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West Coast Rail: £50m Bill Left For Taxpayers

Failures by civil servants over the West Coast rail contract will cost taxpayers at least £50m, MPs have said.

There was a lack of leadership at the Department for Transport (DfT) and a failure to "get basic processes right" over the West Coast fiasco, a report from the House of Commons Public Accounts Committee said.

The MPs raised fears that the basic mistakes could be repeated in future projects such as the London to Birmingham high-speed HS2 scheme and the London Thameslink project.

Margaret Hodge's committee delivered a scathing verdict on the DfT

The report said the department had not learned from errors made in previous projects and senior managers failed to apply common sense during the West Coast bidding project.

Senior managers had also "missed clear warning signs, including from the (rail) industry, that there were serious problems with the (bidding) competition", the report claimed.

The committee said: "We are astonished that there was no senior civil servant in the team despite the critical importance of this multibillion-pound franchise."

After DfT errors in the process had been identified, Transport Secretary Patrick McLoughlin scrapped the bidding which had seen Virgin Trains lose out to rival transport company FirstGroup in the battle for a new, 13-year West Coast franchise.

Instead, Virgin is carrying on running the West Coast service until November 2014, with a new bidding process starting after that.

Unveiling the report, the committee's chairman Margaret Hodge said: "The DfT's complete lack of common sense in the way it ran the West Coast franchise competition has landed the taxpayer with a bill of £50m at the very least."

Bob Crow says ministers 'could not be trusted to run a whelk stall'

She added that the cost could be "very much larger".

Bob Crow, leader of the RMT transport union, said: "The stench from the fall-out of the West Coast franchise continues to hang over Britain's transport industry as it becomes clearer with every examination that the ministers responsible for this shambles could not be trusted to run a whelk stall let alone multi-billion Government contracts."

The report follows a Whitehall-commissioned independent inquiry into the West Coast bidding led by Centrica boss Sam Laidlaw. The inquiry report was extremely critical of the DfT.

A DfT spokesman said the department had accepted all of the recommendations, and had taken steps to improve internal oversight and accountability.

Shadow transport secretary Maria Eagle said: "It's time that David Cameron took responsibility for the rail franchising fiasco, instead of allowing ministers to hide behind their civil servants."

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Lord Woolf Aids Barclays Ethics Probe

By Mark Kleinman, City Editor

The former Lord Chief Justice who led a probe into ethical standards at BAE Systems, the defence contractor, has been enlisted to assist with a review of the culture and business practices of Barclays as it seeks to repair its battered reputation.

I have learnt that Lord Woolf, who retired as Britain's most senior judge in 2005, is among hundreds of people who have participated in an inquiry being led by Anthony Salz, a former partner at the City law firm Freshfields, on behalf of the Barclays board.

Mr Salz was appointed by the bank's directors last summer, in the wake of its £291m fine for manipulating the interbank borrowing rate Libor. He is expected to deliver his report in April ahead of Barclays' annual meeting.

Lord Woolf is one of the most prominent legal figures in the world, having led inquiries for the International Cricket Council about the sport's governance, and into the London School of Economics' relationship with the Libyan government under Colonel Gaddafi.

In 2007, he was commissioned by BAE Systems to examine the company's business practices following allegations that it had been involved in bribery and corruption in relation to the Al-Yamamah arms contract with Saudi Arabia.

Mr Salz's team has interviewed hundreds of people as part of his inquiry, including Bob Diamond, the bank's former chief executive. Current and former Barclays executives, as well as the bosses of other companies, fund managers and lawyers have all given evidence during the course of the probe.

The report is expected to make a series of recommendations about improving the culture of Barclays and the wider banking industry, although some people close to Barclays have begun to question its relevance following a string of changes announced by Antony Jenkins, Mr Diamond's successor as chief executive.

Mr Jenkins has warned Barclays' 140,000 staff around the world that they must adhere to a strict ethical code of conduct or leave the bank.

At his inaugural results presentation a fortnight ago, he confirmed plans to close the unit of Barclays' investment bank which helped companies minimise their tax liabilities, saying it was "incompatible" with the "new purpose and values" he wanted to instil.

Barclays could not be reached for comment.

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Burger Sales Plunge 43% Amid Horsemeat Scare

Frozen beef burger and ready meal sales have plunged dramatically, according to the first retail sales data since the horsemeat scandal erupted.

Kantar Worldpanel said that in the four weeks ending February 17, frozen burger sales plunged by 43% while frozen ready meals dropped 13%.

While some of the decline can be directly attributed to consumers rejecting the products, there has also been an availability reduction as affected lines were progressively withdrawn by retailers.

Last week Birds Eye withdrew 15 beef products in four European nations

Horsemeat contamination was first revealed on January 16 after analysis was undertaken by Irish food officials. The scandal has since spread across Europe.

A Nielsen consumer survey conducted two weeks ago showed that 96% of UK adults were aware of the horsemeat scandal and 74% were concerned about it.

According to Kantar, the latest research indicates a significant change in shopping habits as a result of the contamination.

The data also indicated changing fortunes of supermarkets during the 12 weeks to February 17.

It said out of the so-called Big Four supermarkets - Asda, Morrisons, Sainsbury's and Tesco - only Sainsbury's increased market share in the quarter.

Horsemeat is still highly regarded in some European countries

Sainsbury's saw a growth rate of 4.6% in the period, while Tesco saw its market share drop from 30.1% a year ago to 29.7% now.

Tesco was the first major retailer to withdraw its frozen burgers, after equine DNA was discovered in products produced by its meat processors.

"It might seem natural to attribute this decline to the horsemeat contamination; however, Tesco undertook heavy promotions this time last year, where consumers received a £5 voucher when they spent £40, and not repeating this offer will have adversely affected its share," Kantar Worldpanel director Edward Garner said.

Morrisons was the only retailer to post a sales decline in the 12 weeks, due in part to easing Christmas demand, a lack of convenience stores and no online presence.

It has since announced a decision to buy a swathe of Blockbuster video stores to convert into metro outlets.

Morrisons is also expected to bolster sales in the coming months as it is the only major UK supermarket with its own abattoir division, assuring meat supply chain integrity.

Brand name Findus was also found to have used horse in its beef products

Meanwhile, there appears to be a growing split in the upper and lower edges of the market.

"Waitrose and Aldi deliver all-time record shares this period of 4.8% and 3.3% respectively indicating that market polarisation and the 'two nations' consumer climate continues," Mr Garner said.

"Iceland records 10.1% growth confirming that the frozen food category as a whole remains robust."

Research now shows that the total grocery market is growing at a rate of 3.7%, which lags behind grocery price sector inflation of 4.3%.

As a result, pressure continues on shoppers who are using 'coping strategies' to reduce their effective personal inflation rate.

These strategies include switching products and retailers to seek out offers.

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Recorded Music's 12-Year Decline Finally Ends

The recorded music business has seen its first jump in revenues since 1999, raising hopes the sector is on the road to recovery.

Total revenues for the industry rose 0.3% to $16.5bn (£10.9bn) in 2012, with digital making up more than 35% of the figure.

The International Federation of the Phonographic Industry's annual Digital Music Report concluded that the global music industry is now returning to health.

A decade after online file swapping plunged it into turmoil, it appears to have been boosted by licensed services and rapid expansion into new markets internationally.

Digital revenue rose for a second consecutive year, up 9% with most major digital revenue streams including downloads, subscription and advertising-supported all growing.

The report suggested that the digital music business was aiding globalisation, partly thanks to smartphones and new licensed services.

It found major international download and subscription services were present in 23 markets in January 2011 but that had now jumped to more than 100.

Frances Moore, chief executive of IFPI said: "It is hard to remember a year for the recording industry that has begun with such a palpable buzz in the air.

"These are hard-won successes for an industry that has innovated, battled and transformed itself over a decade. They show how the music industry has adapted to the internet world, learned how to meet the needs of consumers and monetised the digital marketplace."

Rod Stewart's 'Merry Christmas, Baby' was among the best-selling albums

Canadian artist Carly Rae Jepsen topped the 2012 global singles chart with Call Me Maybe.

But British singer-songwriter Adele, who won an Oscar for her track to the latest Bond movie Skyfall on Sunday, also achieved phenomenal success.

Her album 21 is the first to top the global albums chart for two consecutive years since IFPI began reporting global best sellers in 2001.

The industry's return to growth has been a long time coming.

Online song-sharing popularised by services such as Napster at the turn of the millennium seriously destabilised the sector, which reacted with a barrage of lawsuits.

But the war on piracy failed to stem the tide of free music, and by the time executives finally began making legal music available through download services such as Apple's iTunes, the industry was in free fall.

Since its 1999 peak, the global music industry's revenues had crashed more than 40%.

The IFPI said the physical music market continued to contract in 2012.

Meanwhile, the US recording and film industries are activating America's first copyright alert system this week to thwart piracy by online users.

Official warnings about specific internet addresses could be made after complaints to internet service providers (ISPs).

It is understood illegal downloaders will be given up to six warnings before ISPs can slow their download speeds, prohibit internet traffic redirections or interrupt connections.

The impositions are expected to be maintained until illegal downloaders acknowledge complaint letters or accept receipt of literature explaining copyright law.

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Italy Election: Focus Should Be On Spain Instead

It is fitting that it is an election which has threatened to send Italy (and perhaps even the broader euro project) back into financial chaos. Not bad economic news; not a credit rating agency downgrade: politics, pure and simple.

After all, Italy's role in the euro crisis has always been rather more political than economic. It's an important distinction: while many try to lump Rome in with Athens and Madrid as the key epicentres of the crisis, Italy doesn't suffer from quite the same problems as its Mediterranean counterparts.

Yes it's true Italy has an enormous national debt: even before the crisis, back in 2006, Italian net debt was about 90%, while most euro members were comfortably below 60% (Spain was a mere 30%). It's true that it is now over 100% and rising, which makes the UK look almost virtuous.

However, Italy has had a large national debt for years, and hasn't had an enormous problem paying it. Indeed, unlike most European countries Italy has never defaulted on its debt - despite all manner of dysfunctional governments since the era of Garibaldi.

One of the reasons the country has managed this is that its large governmental debt has been complemented by a relatively low level of debt in the private sector - households and businesses. Italy, it might surprise you to hear, actually has the least-indebted households in the developed world (that's household debt as a percentage of disposable income), as this chart from the Bank of England, based on OECD figures, shows.

Source: BoE/OECD

The problem at the heart of the euro crisis (and, for that matter, Britain's crisis) is when a large budget deficit comes alongside a heavily-indebted private sector. That toxic combination means that not only is the country's government desperate to sell off new bonds and finance its deficit, it cannot fall back on its own citizens to buy them.

Over time, countries with these twin deficits (budget and current account) pile up debt upon debt, borrowed from other countries, until they end up with a large and intractable reliance on foreign creditors. You can see this by examining their International Investment Position (IIP) - if anything the most reliable measure of vulnerability to a Greece-style crisis where investors stop buying your debt.

As you can see, there's no doubt Portugal, Spain and Ireland have a problem - they have very large international liabilities built up over many years. Germany has a positive position, reflecting all its amassed savings. But Italy, far from being with the other euro problem nations, actually has only a slightly negative IIP.

I can't emphasise how much this matters. It means Italy is far less vulnerable to a buyers' strike in international capital markets, in the same way Greece, Spain, Portugal et al are.

None of this is to say the country doesn't have big problems: there's that large public debt load, which necessitates it selling a staggering number of new bonds every month. The country desperately needs to liberalise its labour market and cut back on business regulation and corruption. It's been stuck in a deep recession and needs to find a way out. Unit labour costs are high and rising, meaning the country is becoming less, not more, competitive. Plus it faces a demographic timebomb in the coming decades.

The absence of a stable government (or one willing to do something about these problems) is clearly a cause for concern. Clearly it will make investors charge it more to borrow. But does the country face the kind of crisis Greece and Spain do? It shouldn't do - at least not yet.

Of course, investors will take fright. Indeed, they already are, selling off Italian bonds, which in turn pushes up interest rates. But the point is that Italy has not yet passed the point of no return, building up twin deficits that in past episodes have almost always led to default. The same cannot be said of Spain, Portugal and Greece.

So, looking at the Italian election results I would still be more worried if I were in Madrid than if I were in Rome. The result is a reminder that there is still little public support for the rescue plans imposed by Brussels. And a reminder that, in the end, the silver bullet shot by Mario Draghi last summer - the European Central Bank's Outright Monetary Transactions scheme - still relies on politicians being willing to pull the trigger on it.

So don't mistake what's going on now as an Italy specific phenomenon. If indeed the euro crisis is back, we should be just as worried about Spain and Portugal as we are about Italy.

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Bank Of England Mulls Negative Interest Rate

By Ed Conway, Economics Editor

The Bank of England has raised the prospect of introducing negative interest rates to get borrowing going in Britain again.

Paul Tucker, the BoE's deputy governor for financial stability, said it was one of the ideas he had been considering to try to push cash out in the real economy.

Speaking to the Treasury Select Committee (TSC), Mr Tucker said: "I hope we will think about whether there are constraints to setting negative interest rates.

"This is an idea I have raised. This would be an extraordinary thing to do and it needs to be thought through very carefully."

Although several other central banks have experimented with negative interest rates in recent years - most notably Sweden and Denmark - this is the first time the idea has been raised by a BoE official.

At present, the bank pays an interest rate of 0.5% on deposits UK banks leave in reserve at the BoE.

The theory behind negative rates would be to try to encourage those banks to leave less cash at the central bank and instead to lend it out to businesses around the country.

If the interest rate was -0.5%, they would have to pay the BoE a 0.5% rate each year to hold money with it.

The Bank of England is looking at ways to stimulate growth

However, the idea of reducing the BoE's interest rate to zero - let alone into negative territory as raised by Mr Tucker - has been dismissed by the governor, Sir Mervyn King.

He has cited internal bank studies suggesting it would cause major financial problems for building societies because of the way their balance sheets are structured.

Although Mr Tucker acknowledged that it was "quite a radical idea and not something anyone should clutch onto as the answer to the question of the universe," he agreed to provide the TSC with a detailed written explanation of his idea.

During the committee hearing, Mr Tucker, who until the appointment of Canadian Mark Carney had been the favourite to succeed Sir Mervyn as BoE governor, also acknowledged that not enough cash was getting through to Britain's small and medium-sized enterprises (SMEs).

He said: "I am worried, as are others, that our current battery of credit policies may not be reaching as far as they might. We should have a think about can we harness non-bank lenders.

"The other thing, I find it regrettable that market for working capital finance aren't as healthy as they were. I think that the authorities in the bank could play a role in that.

"Life blood of working capital finance was a trade finance instrument that was transferrable and marketable and that we would buy. We are lending to companies via the FLS I would like to explore whether some kind of working capital instrument."

The chairman of the TSC, Andrew Tyrie, said: "The lack of lending to SMEs is inhibiting economic growth in the UK. The MPC (Monetary Policy Committee) is right to be looking at additional tools, or changes to existing tools, that could help.

"Some of the proposals we heard today, such as moving to negative interest rates, are radical; others are not. They all warrant careful consideration."

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Google Battles European Judges Over Privacy

By Niall Paterson, Media and Technology Correspondent

European judges are considering a case which could have significant implications for how personal information on the internet is managed.

Their decision potentially has huge repercussions for search engines like Google.

The European Court of Justice (ECJ) is to rule on whether the technology giant invades personal privacy after a referral from Spain's high court.

A leading Spanish surgeon complained that Google search results treat him unfairly.

Charged with criminal negligence in 1991, he was later acquitted - but when a Google search of his name is carried out, only references to his arrest are immediately visible.

Spain's equivalent of the Data Protection Agency, the Agencia Espanola de Proteccion de Datos (AEPD), argues that the online "right to be forgotten" enshrined in European Directive should include the ability to delete incorrect or out-of-date information.

Google has argued that to do so would be an attack on freedom of expression, arguing that it is not the creator nor the controller of the information.

Instead it sees itself as an intermediary, and that it should not be compelled to remove data from its website when it has been published entirely legally elsewhere on the internet.

The ECJ will also decide on where data protection complaints should be heard - and which rules should apply.

Google says that as its headquarters are in California, and that Google Spain is only responsible for selling advertising so the wider company is subject to US data protection legislation.

But the AEPD argues that Google indexes Spanish websites and has a Spanish domain name - and that the "centre of gravity" of the litigation is in Spain, as it involves information about Spanish citizens, on Spanish websites, in Spain.

Google has in the past filtered its search results in certain jurisdictions to comply with the law.

In France and Germany, it deletes results for neo-Nazi and racist groups, and in the US it blocks sites known for copyright violation.

If the search engine is unsuccessful, it would have to delete the information concerned from its Spanish website, and deal with a further 88 complaints to the AEPD.

But it would then undoubtedly face similar complaints from citizens of other European countries.

Google's mission statement - to "organise the world's information and make it universally accessible and useful" - might soon need a bit of redrafting.

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Horsemeat: Whitbread Shares Slide On New Tests

The Whitbread pub chain, which found horsemeat in its food products, sees its share price fall after announcing a new test regime.

At the close of trading on the FTSE 100, Whitbread's share price was one of the biggest fallers, losing 3.67%.

The slide occurred after the group said it would impose the new testing regime on all processed meats provided by suppliers and introduce a new system of certification.

Chief executive Andy Harrison said: "We have been dismayed by the recent discovery of equine DNA in two of our restaurant products.

"This situation is totally unacceptable and, as a leader within our industry, we are taking a wide range of actions to fix the problem and to ensure that it does not happen again."

Mr Harrison added: "Whitbread will also be working with the Food Standards Agency (FSA) to assist them in setting tougher standards and controls to apply right throughout the restaurant industry.

"This is not just a Whitbread problem, but a wider issue of quality control within parts of the processed meat supply chain, which supplies a number of restaurants and retailers."

The company operates the Beefeater, Table Table and Brewers Fayre pub chains.

Approached by Sky News, the FSA was unable to confirm what role Whitbread would take in any food regulation overhaul.

Whitbread also operates Premier Inns and Costa coffee outlets, and the new testing regime announcement comes as it revealed its latest group results.

The share slide occurred even though the company reported solid returns for most sectors.

Sales across the company rose 2.7% in the 11 weeks to February 14 and 16.9% for the 50 weeks to the same date.

Global sales at Costa were up 5.5% in the 11 weeks, with total system sales up 22% - to £962m - in the same 50-week period.

Costa's UK retail arm saw sales grow by 20.2% to £525m in the year, with like-for-like store sales up 6.6%.

The coffee group has reaped the benefits from consumer displeasure at US-based rival Starbucks, which was revealed late last year to have paid virtually no corporation tax.

Costa's rapid global expansion is also set to continue, with plans to open 320 new stores worldwide over the year, along with around 1,300 express coffee outlets.

It also plans to open a similar number of stores across the globe next year.

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Markets Dive Amid Italian Election Stalemate

World markets have been rocked after elections in Italy seen as crucial for the eurozone ended in deadlock.

No group emerged as a clear winner after the vote, which saw a populist anti-austerity party make a stunning debut.

The Italian stock market in Milan fell 5% on opening and state borrowing costs rose as investors took fright at the political stalemate.

At the close of trading on Tuesday the FTSE 100 was down 1.34%, Italy's MIB 4.89% lower, Spain's Ibex off 3.2%, Germany's Dax down 2.27% and France's Cac reduced by 2.67%.

Comic Beppe Grillo's protest party appears the real winner

Banking stocks were particularly badly hit with the Royal Bank of Scotland and Barclays the biggest fallers on the FTSE 100, losing more than 4% of value.

The euro also fell to an almost seven-week low against the dollar in Asia on fears about the eurozone debt crisis, down as far as $1.3042, its lowest since January 10.

While other European stock markets, including the FTSE 100 in London, saw falls greater than 1% the Dow Jones opened positively on Wall Street following a 1.6% loss on Monday.

Pier Luigi Bersani's centre-left bloc has a majority in the lower chamber

The market reaction reflects concerns that the election result could spark a new crisis in Italy, which has the eurozone's third largest economy.

There are fears it will jeopardise tough reforms required to heal its economic woes and prevent a new round of global financial turmoil.

The centre-left block of Pier Luigi Bersani will have a majority in the lower house thanks to a premium of seats given to the largest block in the chamber.

In the upper house, the Senate, seats are awarded on a region-by-region basis. Here, the centre-left looks set to end up with around 119, compared to 117 for the centre-right but 158 are needed for a majority to govern.

Any coalition government that may be formed must have a working majority in both houses to pass legislation, which means Italy is now in a state of limbo with a hung parliament that is unprecedented in its post-war history.

"It is clear to everyone that this is a very delicate situation for the country," Mr Luigi Bersani said.

Former prime minister Silvio Berlusconi has already indicated his centre-right could be open to a grand coalition with the centre-left under Mr Bersani but he wants a recount for the Senate vote.

"Italy cannot be left ungoverned, we have to reflect," he said, describing the market reaction as "a bity crazy" and saying all sides had to "sacrifice something" if the impasse was to be broken.

An ally of conservative German Chancellor Angela Merkel urged Italy to stick with reforms pursued by the outgoing technocratic emergency government of Mario Monti.

Silvio Berlusconi did better in the Senate

But the poor showing by Mr Monti's centrist bloc, which took just 10.6%, showed a weariness with austerity that was exploited by both Mr Berlusconi and comic Beppe Grillo.

The latter's anti-establishment 5-Star Movement won more votes than any other party, taking 25% nationally.

In just three years, the 5-Star Movement - heavily backed by a frustrated generation of young Italians increasingly shut out from permanent full-time jobs - has grown from a marginal group to one of the most talked about political forces in Europe.

Comparing single parties without coalitions, it is now the biggest party in the lower house with 25.55% to the Democratic Party's 25.41% - a shock success that analysts predicted would reverberate around an austerity-weary Europe.

"The 'non-party' has become the largest party in the country," said Massimo Giannini, commentator for the Rome newspaper La Repubblica about Grillo, who mixes fierce attacks on corruption with policies ranging from clean energy to free Internet.

"This is fantastic! We will be an extraordinary force!" Mr Grillo said on his website, warning mainstream politicians they would "only last a few more months".

"We'll have 110 people in parliament and we'll be millions outside."

Mr Monti said: "It's not that surprising if you consider how much people were let down by politics in its traditional forms."

Some Democratic Party officials suggested fresh elections may have to be held within a few months after a reform of Italy's complex electoral laws. Others said some form of agreement could be found with the anti-austerity 5-Star Movement.

Political analysts suggested a possible return to the grand coalition agreement between right and left seen over the past 18 months, or even dissolving the Senate alone to hold fresh elections for only one chamber of parliament.

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