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July/August Update: Essential News

Into the sidings
National Express has lost its franchise on the East Coast Main Line train
service, which will be nationalised as the company struggles with its debt load
and failed to reach an agreement on its continuing operation with the Department
for Transport.

Return to sender
Lord Mandelson said that selling a 30% stake in Royal Mail to a private company
is unlikely to go ahead in the current economic climate, but he will look to
resurrect the idea when conditions improve. The government denied the about-turn
was due to the threat of a backbench rebellion.

Flight of fancy
Talks between BA and workers’ unions Unite and GMB broke down as Financial
Director went to press because Unite said BA’s representatives did not show up
for negotiations on 1 July ­ the day after BA’s self-imposed deadline. BA said
6,940 employees took voluntary unpaid leave, part-time working or unpaid work in
June.

Goodwin rolls over
Former RBS CEO Sir Fred Goodwin agreed to reduce the value of his pension pot by
nearly £5m, to £342,500 instead of £703,000 annually. Chairman Philip Hampton
said that while an internal inquiry found “no conduct on Fred’s part that would
justify reducing the pension”, it had become a “symbolic” issue that needed
fixing.

Bank on it
Tesco is interested in buying Northern Rock, The Times has reported. The group
has not commented on the rumours, but such a purchase could make sense for Tesco
Personal Finance as its CEO ­ former group FD Andy Higginson ­ plans to build it
into a retail bank. To read our interview with Higginson, click
here.

Sukuk it and see
London Stock Exchange announced the first Sukuk to be listed in Europe in 2009 ­
a $750m sovereign bond issued on behalf of the government of Bahrain. Sukuks are
compliant with Shariah law because they do not charge or receive interest.

Sweet deal
Amstrad founder Sir Alan Sugar has been appointed the government’s “Enterprise
Champion”. He will focus on SMEs and advise government on the needs of
entrepreneurs.

TECHNICAL UPDATE
Corporate governance
The Financial
Reporting Council
has published more than 100 responses received so
far to its March consultation document on reviewing the Combined Code. The FRC
expects to publish a progress report in July and a final report later in the
year. Responses have come in from listed companies, audit firms, academics and
one priest.

Pensions
A statement by
The
Pensions Regulator
reinforced its belief that there needs to be
more flexibility in funding arrangements for defined benefit schemes where the
employer is “cash constrained”. It reminds trustees that they should consider
“lengthening recovery plans, step-up payments, back-end loading of recovery
plans and further security through the use of contingent assets and the
distribution of profits fairly between creditors and equity providers.”
John-Paul Augeri, a principal at
Towers
Perrin
, says “companies can also reasonably ask for more control
over asset strategy, benefit changes, strategies to reduce risk and volatility,
as a pre-condition to increasing company contributions to the pension plan.”

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