Greece and Portugal downgraded

Standard and Poor’s has downgraded Greece and Portugal’s credit rating after further debt worries.

The ratings agency downgraded the debt-stricken countries on the risk their debts to a new European bailout fund would be repaid before bond holders.

Their downgrade left Portugal’s rating one notch above junk and Greece’s creditworthiness below that of Egypt.

This turn in fortune for the two countries, two of the weakest in the euro zone, has sent their borrowing costs sharply higher as lenders demanded a higher rate of return for buying government bonds.

Portugal’s rating was cut by one notch to BBB-, having slashed its rating last week after Lisbon’s government fell.

S&P said the downgrades came after a new euro zone debt rescue system was agreed to by European leaders at a summit last week.

The European Union’s bailout fund will be replaced with the European Stability Mechanism in 2013.

Frank Gill, S&P analyst, said: “Our view is that this really is a game changer.

“We do think it is clearly negative for holders of commercial debt, that is our view, that it will weigh on countries’ capacity to serve their commercial debt,” he said.

The downgrade of Portugal added to Lisbon’s economic problems, just as the Bank of Portugal warned the country may need substantial new austerity measures to ensure it can meet budget reduction targets.

Lisbon’s investor confidence has fallen after the minority government’s resignation last week.

The opposition rejected its austerity plan in parliament, prompting many economists to predict that it will not be long before the country will need a bailout like Greece and Ireland.

Standard & Poor’s said: “Given Portugal’s weakened capital market access and its likely considerable external financing needs in the next few years, it is our view that Portugal will likely access the EFSF and thereafter the ESM.”

S&P said Greece’s government was struggling badly to meet the targets set under its 110bn euro (£97bn;$150bn) EU-IMF bail-out deal.

Freya Leng

iPhone 4 back into nation’s top three

Apple’s iPhone 4 has surged back into the nation’s Top 3 favourite mobiles, according to the latest tracker from independent price comparison and switching service.

The Mobile Tracker, which ranks the most popular handsets based on live searches and sales, also shows that for the second month in a row, HTC’s Desire and Desire HD handsets are the nation’s most popular mobiles. Meanwhile, Android has maintained its 50% stranglehold on the charts, further intensifying the battle between the tech giants of Apple and Google.

This month also sees a host of new handsets enter the Top 10 with Motorola, Blackberry and Samsung fighting it out lower down the table, as well as two Nokia phones appearing in the Top 10 for the first time.

Number one handset for March 2011 – The HTC Desire is once again the first choice for UK consumers. In many cases coming free on standard tariffs, gadget lovers can get one of the best Android experiences available on the market from as little as £15 a month.

Biggest climber – February’s biggest faller has become March’s biggest climber, as the iPhone 4 shoots back into the Top 3 from seventh place at the end of February. With retailers keen to shift stock before a possible summer announcement of iPhone 4’s successor and a wave of interest following the release of Apple’s iPad, there has been a flurry of attractive deals with consumers keen to bag a bargain.


Biggest fallers – The Blackberry Curve 8520 has fallen two places, adding to a bad month for RIM, with the Blackberry Torch also dropping a place. Making way for the iPhone 4, the HTC Wildfire has dropped out of the Top 3 and is now fifth. HTC’s falling prices have enabled budget conscious consumers to shift their attention to the attractive yet affordable Android curves of the Desire.

Ernest Doku, technology expert at, comments: “For the second month in a row Android has taken another big chunk out of Apple, which will be sure to leave a sweet taste in Google’s mouth. Maintaining its dominance in the top ten is a clear statement that the search giant won’t be loosening its vice-like grip on the mobile market anytime soon.

“The exciting iPhone deals currently on offer mean that consumers can finally lay their hands on the object of their desire without breaking the bank. Three offers an almost unbeatable 2,000 cross-network minutes plus 5,000 minutes to Three networks, 5,000 texts, all-you-can-eat data and even a free cover for just £30 a month plus £69 upfront.

“HTC may still be dominating the charts, but we are starting to see other handsets fight their way into the top ten. Great phones from Nokia and Motorola are appealing to people who are watching every penny they spend, but still want the best in smartphone functionality. The advertising around Nokia’s N8, complete with 12-megapixel camera, should mean we see it hanging around the Top 10 for a while.”

Budget wont harm, but won’t boost small businesses

A snap poll of more than 800 members of the Federation of Small Businesses (FSB) ‘Voice of Small Business’ survey panel has shown that the Budget will have no real impact on the day-to-day running of their business.

The poll, which ran on 24 March, the day after the Budget, asked members what impact the Budget would have on their firm, with almost half (45%) of respondents saying it would have no impact at all, while 31 per cent thought it would have a positive impact.

Four in 10 (42%) members said that they would be no worse off – but crucially no better off – as a result of the actions taken by the Chancellor. And, of the third of members that think they will be better off half (54%) claim they will get a £1 to £1,000 boost to cash-flow in the next year.

The reduction in Corporation Tax (50%), the increase in the Approved Mileage Allowance (40%) and the freeze on new domestic regulations (37%) were among the announcements that would have the most positive impact on member businesses.

A third (39%) of those surveyed believed that the Budget would have a positive impact on the economy, compared to only 18 per cent that believed it would have a negative impact.

While 52 per cent of members said the introduction of a fair fuel stabiliser would have a positive impact on their business, the FSB has looked more closely at how it would work and believes that it doesn’t go far enough to protect businesses from volatile price increases.

John Walker, National Chairman, Federation of Small Businesses, said:

“The Budget was pro-business and we are pleased that the Government has listened to some of our concerns and has extended small business rate relief and scrapped the planned 1p rise in fuel duty and the escalator. But, as the results from the poll show, the Budget has not hurt small businesses, but it won’t help them to grow either.

“While we welcome the introduction of Enterprise Zones across parts of the UK, the missing link in the Budget was measures to help all UK businesses to take on staff and grow their business. This could have been done easily through extending the National Insurance Contributions holiday to micro-businesses.”

Modernisation continues at Royal Mail

Royal Mail is undergoing one of the most important change programmes undertaken in the UK. New delivery methods designed to enable Royal Mail employees to deal with the changes in the postal market – a decline in letters and an increase in packets – are being introduced. Significant reductions in the number of mail centres are also underway and around half of the 64 centres in 2010 could eventually close by 2016 or sooner.

Today, after more than nine months of consultation with the CWU under the 2010 Business Transformation agreement, Royal Mail is announcing its plan for rationalisation and investment in Greater London. With the number of postal items posted in London expected to more than halve between 2006 and 2014, it is imperative that Royal Mail continues the modernisation programme.

Following these consultations with the unions, it is likely that only five mail centres will be needed in Greater London. We expect the rationalisation of the mail centre estate to see the phased closure of the East London and South London mail centres to commence immediately. The mail centres remaining are: Croydon, Greenford, Jubilee (Feltham), Romford and Mount Pleasant. New accommodation is also being sought for the administrative and support staff based at Rathbone Place. The Greater London rationalisation programme is expected to achieve annual savings of £30 million.

Mount Pleasant is a large facility which needs significant investment to handle the postal volumes in London, including the change in the mix of items. Royal Mail expects to invest £69 million in Greater London as part of the UK-wide modernisation programme; of this, £32 million will be invested in Mount Pleasant. The latest automation equipment will be installed there; working conditions will be significantly improved.

Royal Mail would like to thank the CWU for its valuable input including a report produced by the union. Following the union’s input, East London mail centre will close six months later than originally planned. The company is also providing extended outplacement facilities for its employees in London, as discussed with the CWU. The consultation on the London mail centres commenced in early June. In November 2010, Roger Poole and Peter Harwood were asked to assist in bringing the review to a successful conclusion. Both Roger Poole and Peter Harwood had played a significant role in the 2010 Business Transformation agreement.

After much study and careful thought, Royal Mail believes it will not have to resort to compulsory redundancies to manage the reduction in the number of employees. With people demonstrating reasonable flexibility, Royal Mail expects that everyone who wants to remain in the business will be able to do so. As a result of the rationalisation programme, we expect the number of people employed in London will decline by approximately 751. The company has in place a well-developed programme to help its people to adjust to these changes.

Consultations with Unite/CMA will also begin shortly on reducing the number of Royal Mail operational line managers across the UK by up to 1,000 through voluntary means. This follows a separate review of managers in head office departments which will result in 1,700 people leaving the Group when this specific initiative concludes. The company has reduced the number of employees by around 65,000 since 2002.

Mark Higson, Managing Director of Operations and Modernisation, said: “Royal Mail’s modernisation programme, which is vital to ensuring a successful future for the letters and parcels business, depends on having the right number of people in our business as well as deploying the right technology and equipment.

“We are conscious of the impact today’s announcement will have on our staff in London. It is hard to reduce job numbers at any time; we are committed to doing everything we can, in line with our agreement with the union, to make these changes on a voluntary basis. We will be providing specialist outplacement advice to help our people affected by this announcement to look for new opportunities outside Royal Mail.”

Punch Taverns to sell over 2,000 pubs

Punch Taverns, the UK’s biggest pubs group, announced plans today to split its business in two and sell over 2,000 of its pubs.

The announcement is the result of a strategic review by Chief Executive, Ian Dyson, following his take-over of the company in 2010.

Punch has been hit by the recession, the smoking ban and the rise in cheap supermarket booze. This has resulted in a fall in company profits and sky high debt, hitting a massive £3.3bn last year.

The company plans to separate the managed and leased pub operations to create two new public companies.

The leased side, where landlords rent the property and get their supplies from Punch is facing more difficult conditions and will face the bulk of the cuts.

Currently they have 6,000 leased, or tenanted, pubs, over half of which will be sold at a rate of about 500 per year.

And some will be transferred to the managed division, Spirit, which includes brands such as Chef & Brewer, Fayre & Square and Flaming Grill.

Although the managed side is suffering lower sales and profit margins than its competitors Punch believe they are well placed to take advantage of the growing trend in eating out.

Ian Dyson said: “We believe that there is a significant value creation opportunity at Punch, with immediate upside in managed and longer term upside in leased.

“We do not believe that either opportunity can be maximised within the current Group structure and accordingly, we propose that the two businesses be separated.

“This will be achieved by the demerger of Spirit and the creation of two independent public companies.

“Spirit will be positioned to deliver market leading sales and profit growth and to expand with the aim of becoming the UK’s leading managed pub operator.”

But bondholders expressed concerns that the restructuring did not tackle the issue of turning around poor trading results.

A spokesman for a special committee of the company’s creditors said: “We remain concerned to see the real issues in the operating businesses addressed fast.

“We have waited six months for the review to be conducted, during which time operational performance in the leased estate, where bondholders have £2.5bn at risk, has continued to decline.”

Shares in Punch Taverns rose 4% following the announcement and ended the day 2.3% higher.

Sarah Taylor