IMF Downgrades Global Growth In 2014 And 2015

The International Monetary Fund (IMF) has downgraded its global output forecast but says Britain will have "decent growth" this year and in 2015.

It said global GDP for this year would drop from 3.4% to 3.3% and from 4% to 3.8% next year.

The IMF also cut its semi-annual forecasts for the eurozone area by 0.3% and 0.2% for the two years, giving growth of 0.8% and 1.3% respectively.

But it has kept its UK forecast steady at 3.2% for this year and 2.7% next year.

"The United States and the United Kingdom in particular are leaving the crisis behind and achieving decent growth," IMF chief economist Olivier Blanchard said.

The IMF upgraded its outlook for the United States, highlighting its crucial role again as the growth leader among advanced economies.

But it warned the US could be hit hard if stagnation occurs elsewhere, dampening demand for its goods and services.

This comes amid the sag by both the eurozone and Japan.

It downgraded Japan by 0.7% to 0.9% in 2014 and by 0.2% to 0.8% growth next year.

China would continue to grow at 7.4%, although it faced potential "near-term growth risks".

The world's most populous nation is a key driver of the global economy and in recent decades successive years of double-digit growth, the boom propelling it up world financial tables.

But now the government and analysts say China's economy needs to be rebalanced away from an emphasis on exports and over-reliance on huge and often wasteful state-backed investment projects, towards internal demand.

The bleaker outlook for Europe comes on the back of official data in August which showed that the eurozone economy had unexpectedly ground to halt in the second quarter.

New data on Tuesday also showed that industrial production in Germany, the driving force of the eurozone economy, had suddenly slowed down in August.

A main culprit for poor eurozone recovery is anaemic investment, the IMF said, brought to a standstill by indebted households and businesses still too nervous to risk capital.

The IMF added that Iraq's economy would contract this year due to the threat posed by IS militants.

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Clegg: Lib Dems Would Ask Rich To Pay More Tax

The Liberal Democrats would seek to increase taxes on the wealthy as part of efforts to reduce the deficit, Nick Clegg has said.

Speaking to Sky News from the party's conference in Glasgow, the Deputy Prime Minister accused Chancellor George Osborne of defying the prevailing economic wisdom by trying to cut the UK's national deficit without tax hikes on the rich and instead focusing on cuts in public spending and welfare.

He said his party would insist on around 20% of the £100bn deficit being paid off through higher taxes on the rich, such as their proposed £1.5bn "mansion tax" or a £1bn reduction in tax breaks for wealthy people's pensions.

But he refused to give more details of his "red lines" in any coalition negotiations.

He said: "I know that George Osborne has decided - in a way that I don't think you'll find a single mainstream economist in the world agreeing with him - that you can balance the books by only asking the working-age poor to make additional sacrifices or only by gouging out more and more money from unprotected public services like the police, social services, social care and education.

Video: Cable Backs Plan To Tax Rich More

"It's got to be a balance and we've broadly kept that balance during this coalition Government.

"I think, in taxation, you should start at the top and work down, not start at the bottom."

Mr Clegg signalled a more aggressive approach to the Lib Dems' coalition partners, as Vince Cable launched a stinging attack on "lying" Tories who suggest the Government can balance its books without raising taxes.

Video: Ashdown Attacks Tory Economic Plans

David Cameron had used his speech to the Tory Party conference to unveil his crowd-pleasing plan to raise the threshold of the 40p rate of tax to £50,000 - taking millions of middle income earners out of the higher tax band.

At the same time the Prime Minister promised a Conservative government would eliminate the deficit in the public finances by 2018 - and would achieve its target purely by cutting spending and without putting up taxes.

This was dismissed by Mr Cable in his keynote speech to the Liberal Democrat party conference in Glasgow.

Video: Lib Dems Step Up Attacks On Tories

The Business Secretary said: "The truth is more taxes will be needed. To contribute to deficit reduction and also to address unacceptable inequalities.

"Any politician who tells you that the next Government can balance the budget and avoid tax increases is lying to you."

And his comments were backed by former Lib Dem leader Paddy Ashdown, who said they were "truthful".

Video: Lib Dems 'Wrote' Economic Recovery

Lord Ashdown told Sky News: "I stick with Vince's words. Any party that tells you that we can balance what is a phenomenal deficit problem still to be tackled, which has now had not £12bn, but probably of the order of £40bn added to it by the Prime Minister's promise of tax cuts, without saying a word about where they will come from, is not telling the truth.

"You have two levers, two mechanisms, to control the deficit, to reduce the deficit, and to control the economy.

"One is public expenditure cuts and the other is taxes. It's simply economically illiterate to throw one of those away."

Video: Lib Dems In 'Fight Of Their Lives'

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Tesco Suspends Fifth Exec Over £250m Black Hole

A fifth Tesco executive has been suspended over a £250m black hole in its financial accounts.

It is understood to be group commercial director Kevin Grace.

Shares in Tesco were up more than 3% in mid-Tuesday trading, however they are down around 50% over the last year.

Mr Grace has been on the executive committee since December 2011 and has worked at the retailer since 1982.

Four executives were originally suspended following the revelation that Britain's biggest retailer had overstated its profit by £250m.

The company commissioned an independent inquiry into the causes behind the accounting error.

The City watchdog, the FCA, said it would also launch its own "full investigation" into the issue.

Tesco said it is co-operating fully with the watchdog.

The chain said it would update the City on its own internal investigation into the error when its full-year results are released on 23 October.

The four senior executives previously suspended included UK managing director Chris Bush, pending the outcome of the probes.

On 22 September Tesco announced the accounting error, after it issued a profit warning in August.

It also emerged the company had not had a finance chief in place for months.

The £250m figure relates to how it logs suppliers' rebates and if they were reported in the correct accounting period.

A day after the revelation, Tesco said its new incoming finance chief Alan Stewart, who was not due to start until 1 December, would commence work two months early.

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TPG Eyes £2bn Bid For Tesco Clubcard Arm

By Mark Kleinman, City Editor

The private equity giant TPG is among a pack of suitors circling the marketing services group behind the rise of Tesco's pioneering Clubcard loyalty scheme.

Sky News has learnt that TPG, which is one of the world's biggest buyout firms, made an approach several months ago to Tesco about acquiring Dunnhumby, a wholly owned subsidiary that bankers say is worth well over £2bn.

Tesco is understood to be examining its continued ownership of Dunnhumby as part of a broader review of its business being led by Dave Lewis, its new chief executive.

The review was already under way prior to Tesco's shock disclosure last month that it had identified a £250m overstatement of its half-year profits, prompting the suspension of several executives and a share price slump which wiped billions of pounds from its value.

The crisis at Tesco has raised questions about the leadership of its chairman, Sir Richard Broadbent, and triggered investigations by the Financial Conduct Authority and Financial Reporting Council.

The results of a probe ordered by Mr Lewis could also lead to a further inquiry by the Serious Fraud Office.

On Monday, Tesco parachuted in a former chief executive of Ikea, the Swedish flatpack furniture retailer, and the current boss of catering group Compass, to counter accusations that its board lacked retail experience.

TPG's enquiry about a purchase of Dunnhumby came while Mr Lewis's predecessor, Philip Clarke, was still running Tesco prior to his ousting in July, according to a source.

While the UK's biggest retailer is understood to have rejected that initial approach, with no formal talks having taken place, insiders said that TPG remained interesting in the business.

Other private equity firms and big marketing services holding companies are also expected to join the bidding if a formal auction gets underway.

Some bankers believe that Dunnhumby, which is one of the world's leading providers of analysis of consumer behaviour, could be worth up to £3bn.

Dunnhumby was a crucial architect of Tesco's Clubcard scheme and the role it played in catapulting the supermarket chain into a market-leading position in the UK during the 1990s.

After Tesco took full control of the business in 2004, Dunnhumby expanded rapidly, signing up retailers around the world as clients and now counting companies such as Coca-Cola, Procter & Gamble and Shell as customers.

Dunnhumby was founded by Edwina Dunn and Clive Humby, a husband-and-wife team now regarded as having created one of the UK's most successful business start-ups of the last 25 years.

Earlier this year, Dunnhumby bought Sociomantic Labs, an advertising technology firm, for a price reported to be in the region of $200m.

TPG has a long track record of investing in retail business and supporting industries with past holdings including stakes in Debenhams, the department store chain, and Victoria Plumb, the bathroom products retailer.

Mr Lewis's review has already led him to conclude that Blinkbox, the video-streaming service, has no future at Tesco.

The grocer's businesses in Central Europe and Asia, its garden centres group in the UK, and its banking arm, are also candidates to be offloaded, analysts say.

Tesco and TPG declined to comment on Monday.

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Samsung Pledges New Phones As Profits Drop 60%

Electronics giant Samsung has forecast a profit plunge of almost 60% in the last quarter but promised it would soon release a new range of smartphones with "innovative designs".

The South Korean firm is struggling to maintain dominance in the ultra-competitive smartphone sector.

It said estimated operating profit for the July to September period was 4.1 trillion won (£2.4bn), down 59.6% from the third quarter last year.

Samsung said sales were estimated at 47 trillion won (£24.9bn), down 20.4% from the 2013 figure.

Its phone sector has come under pressure because of increased advertising spend and lower retail pricing, squeezing margins for the firm.

Video: Users Complain Of 'Bendy' iPhone 6

Samsung said "operating margin declined due to increased marketing expenditures and a lowered average selling price, driven by reduced proportional shipments of high-end models coupled with price decreases for older smartphone models".

The company is the world's biggest smartphone maker and unlike key competitor Apple, produces its own components for devices.

It warned that uncertainty in the mobile sector would carry through into the fourth quarter.

But it promised to release a new range of top-end smartphones featuring "new materials and innovative designs".

Video: Aug 2014: Samsung Boss On Trends

The mobile market, which has been the key driver of Samsung profits in recent years, has become increasingly saturated.

In addition to Apple's 'bendy' iPhone 6 release, competition has intensified from cheaper Chinese handset makers such as Huawei and Lenovo.

In July, Samsung reported a 20% drop in net profit for the second quarter.

Shares in Samsung are currently sitting at a two-year low.

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Rio Tinto Rejects Glencore's £100bn Merger

Mining giant Rio Tinto has rejected a potential merger with key competitor Glencore, which would create the world's biggest commodities firm.

Rio Tinto, which is based in Australia and Britain, said it had rejected a July approach from its Switzerland-based rival, communicating the decision in August.

Shares in Rio Tinto were up more than 5% in early London trades on Tuesday.

The merged companies would be valued at around $160bn (£100bn).

The announcement comes after reports that Glencore was in talks with major shareholder Chinalco, which owns 9.8% of Rio Tinto stock.

The Anglo-Australian firm also insisted there were no ongoing talks with Glencore about such a bid.

In a statement, the company said: "The Rio Tinto board, after consultation with its financial and legal advisers, concluded unanimously that a combination was not in the best interests of Rio Tinto's shareholders."

Chairman Jan du Plessis added: "Under the leadership of Sam Walsh and Chris Lynch, Rio Tinto has made significant progress in refocusing and strengthening its business.

"The board believes that the continued successful execution of Rio Tinto's strategy will allow (it) to increase free cash flow significantly in the near term and materially increase returns to shareholders.

"Rio Tinto's shareholders stand to benefit from the very considerable value that this will generate."

Bloomberg said Glencore had approached Rio shareholder Chinalco, China's largest alumina producer, about its interest in a possible deal.

Rio Tinto is the world's second largest miner and has a market capitalisation of AUD$107.7 billion (£60bn).

Glencore became the world's fourth-biggest commodities company after merging with resources giant Xstrata in May last year.

Tactically, a Glencore takeover of Rio would give it presence in the iron ore market, one commodity that it does not have sizable operations in.

Rio has significant iron ore mining interests, particularly in Australia, which have fed demand in China for industry and construction.

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Banker Pleads Guilty Over Libor Manipulation

A senior banker from a British bank has admitted conspiracy to defraud over the Libor manipulation.

The banker is the first person in Britain to plead guilty to the offence.

The person cannot be named for legal reasons.

The Serious Fraud Office (SFO) said in a statement: "A senior banker from a leading British bank pleaded guilty at Southwark Crown Court on 3 October 2014 to conspiracy to defraud in connection with manipulating Libor.

"This arises out of the Serious Fraud Office investigations into Libor manipulation. Further details cannot be given at this time for legal reasons.

"This is the first criminal conviction arising from the Serious Fraud Office's Libor investigation.

"Eleven other individuals stand charged and await trial. The investigation into others continues."

Two bankers have already admitted guilt in the US to Libor fraud offences.

Libor - the London inter-bank offered rate - is the benchmark figure used as the basis for vast amounts of money globally.

Its potential for manipulation was revealed in the wake of the financial crisis.

The revelations seriously undermined the foundation of the system, which was overseen by the British Bankers' Association.

A number of regulators around the world launched their own investigations, and they also spread to the European benchmark equivalent - Euribor.

A total of seven banks and brokerage firms have already reached settlements over rate-rigging allegations.

Last month Lloyds Banking Group said it had dismissed eight staff and was withholding bonuses due to vest, as part of a new scheme known as clawback.

Lloyds settled penalties and fines totalling £218m in the UK and US over the issue.

Regulators around the world are also examining the possible manipulation of the foreign exchange market.

In metal exchanges, silver pricing has been transferred to a new system to avoid potential manipulation, and the so-called gold-fix is due to be changed from its century-old valuation.

Collectively, the revelations and overhauls deemed necessary have undermined public and governmental trust in the whole finance sector, whose riskiest elements prompted massive bailouts amid the global crisis of 2008.

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HSBC Directors Quit In Protest At Jail Threat

By Mark Kleinman, City Editor

Two directors of HSBC's UK arm are poised to quit in protest at new Bank of England rules that pave the way for lengthy jail sentences to be imposed on senior managers of failed lenders.

Sky News can exclusively reveal that Alan Thomson, a member of the audit and risk committees of HSBC Bank plc, has tendered his resignation and will leave the board at the end of October.

John Trueman, the deputy chairman of the legal entity that manages the UK high street and commercial bank, is also understood to be on the verge of resigning, despite having only taken on that role in December last year.

Sources close to the situation said that the likely departures of both men were a direct consequence of Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) proposals to strengthen accountability for senior bankers.

A public filing about Mr Thomson's exit will be made by the end of the month, with a separate one about Mr Trueman following if his resignation becomes official.

The likely exits of the two HSBC directors over the proposed regulatory reforms has caused deep disquiet both there and among senior executives elsewhere in the sector, according to insiders.

They are the first bankers to have decided to relinquish their roles because of the impending regime.

"This is just the tip of the iceberg," said a lawyer close to another major UK bank.

Under proposals on which the PRA is consulting until the end of this month, bank directors and other top executives could face a new criminal liability if they were deemed to have taken reckless decisions which led to the collapse of their employer.

They would also be subject to disciplinary action from the City regulator for up to six years, twice the current time-limit, and be obliged to certify that all customer-facing staff and material risk-takers are competent to perform their duties.

Crucially, the new measures would be framed on a 'guilty until proven innocent' basis, according to lawyers, making it more difficult for bank bosses to clear their names if their organisation failed.

The PRA is also introducing new rules next year forcing bankers to defer bonuses for seven years from the point of award, creating the toughest pay framework of any global financial centre.

George Osborne, the Chancellor, pushed for the more stringent regime in the aftermath of the banking crisis and the conclusions last year of the Parliamentary Commission on Banking Standards, set up following the Libor rate-rigging scandal.

The resignations of the HSBC directors are, however, expected to throw the reforms into a sharper light at a time when bank boards are struggling to identify suitably qualified directors.

The PRA document published in June made it clear that the FCA would be responsible for oversight of banks' non-executive directors under a significant management functions regime.

On Monday, the PRA set out further details of its plans to ring-fence high street lenders from the same groups' investment banking arms by 2019.

This structural overhaul will entail banks recruiting separate boards for the different entities within their businesses, further increasing the need for individuals willing to serve as directors.

Mr Thomson and Mr Trueman, along with boardroom colleagues, are understood to have been briefed on the implications of the new rulebook by HSBC compliance staff in the weeks after the PRA and FCA outlined their regulatory framework at the end of July.

That explanation of the Senior Managers Regime is said to have prompted them to reconsider their roles as directors.

Mr Trueman is an experienced banker, having been a director of HSBC Bank plc since 2004 and previously the deputy chairman of SG Warburg.

Mr Thomson has a portfolio of jobs: since stepping down as finance director of Smiths Group, the FTSE 100 engineering business, he has become chairman of Hays, the recruitment agency, as well as Bodycote and Polypipe, two industrial groups.

HSBC's UK arm is the country's fourth-biggest lender, reporting a pre-tax profit of £3.3bn last year, and also manages some of its international assets in overseas markets.

HSBC and the PRA declined to comment on Tuesday.

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Yahoo Denies Shellshock Flaw Led To Hack Attack

Hackers have exploited a vulnerability to infiltrate Yahoo's servers - but the firm has denied it was the notorious Shellshock flaw and says no user data was put at risk.

A report by Future South Technologies claimed Yahoo had failed to patch the well-known Shellshock vulnerability, which some people have described as more serious than the Heartbleed bug discovered earlier this year.

But Yahoo said it had patched the flaw before the attack, and that it was another part of its system that was exploited.

A post of the security firm's blog said: "This breach affects all of us in one way or another, and it's crucial that this problem be resolved with haste.

"I notified the FBI of the breach, and also attempted to contact Yahoo! several times.

"Though the FBI seemed intrigued by this, in my opinion, they aren't moving with any form of haste. And every minute that goes by jeopardises the safety of yours and my personal information, financial data and much much more."

Also known as the Bash bug, Shellshock is a flaw apparent in the majority of computers that run Linux and Unix, including Apple's Mac OS X.

Yahoo said the exploit was unrelated to Shellshock, and said it was a different vulnerability specific to a debugging script Yahoo was running at the time of the attacks.

Yahoo's chief information security officer wrote in a blog post: "Earlier today, we reported that we isolated a handful of servers that were detected to have been impacted by a security flaw.

"After investigating the situation fully, it turns out that the servers were in fact not affected by Shellshock."

A spokesman said the breach was isolated and no user data was housed on the affected servers.

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Which? Warning Over Smart Meter Costs

The Government has been warned over the potential cost of installing energy smart meters "spiralling out of control".

Consumer group Which? has told Energy Secretary Ed Davey action must be taken ahead of the official roll-out next year.

The £10.9bn programme is designed to fit smart meters in every UK home before 2020, to help people control their energy costs.

The call comes after the public spending watchdog said the project would cost each household £215 over a 15-year period but only cut energy consumption on bills by 3% per annum by 2030.

Westminster's Public Accounts committee estimated an average saving of 2% until 2020, rising to 3% a decade later - calculated at cutting bills by £43 a year.

Which? Said there should be centralised procurement for suppliers for the expensive meters and it wants a more efficient approach to installation in multiple occupant buildings, to reduce cost and disruption.

The present system means suppliers are required to take 'all reasonable steps' to install meters in every home by 2020, but Which? said the phrase lacks definition.

Which? executive director Richard Lloyd said: "Without immediate action the cost of the smart meter roll-out is in danger of spiralling out of control, while consumers foot the bill.

"The energy market is undergoing a full scale investigation, so the Government cannot expect competition alone will keep costs low.

"Major reforms are needed to fix the 'big six' and restore trust in this broken market."

But some consumers who have been trialling the smart meters, say once installed, awareness is improved on energy consumption.

"The installation was very straight forward, I just needed to spend some time learning how to use my display," Londoner Dariusz Bogal, who is trialling a British Gas meter, said.

"The display shows your gas and electricity use in near real time so I can easily see which appliances around the house are pushing my costs up and where I need to keep an eye on how much I'm using."

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