General Trade Fairs

Feb 8-12 - Barcelona - FIB

Jun 4-12 - Bologna - La Fiera

Aug 27-31 - Frankfurt - Herbst

Agricultural including related machinery

Nov 29 '93-Dec 2 - Utrect VIV (intensive animal production)

Jan 25-28 - Amsterdam - NTV (horticulture)

Feb 13-17 - Paris - Sima/Sitepal/Simavip

Aircraft and aerospace

Feb 22-27 - Singapore - Aerospace

Apr 20-24 - Johannesburg - Aviation

May 28-Jun 5 - Berlin - ILA (aerospace)

Nov 22-26 - Guangzhou - Airport and Aviation

Audio visual equipment

Mar 21-24 - Las Vegas - NAB (broadcasting)

Oct 10-14 - Cannes - Mipcom (film)

Nov 1-6 - Stockholm - Vision (radio and TV)

Books and publishing

Jan 15-18 - Cannes -Milia

May 4-8 - Geneva - Books/Press

May 25-27 - Dortmund - Bibliotheca

Building/construction equipment and services

Apr 19-24 - Paris - Intermat

May 16-19 - Abu Dhabi - Buildmat

Jun 7-10 - Hong Kong - IBS

Oct 27-30 - Bangkok - Buildtech

Nov 22-26 - Lyon - Eurobat

Chemicals, cosmetics and pharmaceuticals

Dec 6-9 '93 - New York - Chem Show

Jan 18-20 - Prague - Eastchem

Apr 22-25 - Bologna - Cosmoprof

Jun 5-11 - Frankfurt - Achema

Clothing, fashion and footware

Jan 24-26 - Barcelona - Gaudi Hombre

Jan 29-Feb 1 - Paris - Lingerie

Feb 5-7 - Paris - Mode Enfantine

Feb 13-15 - New York - Premier Collections

Feb 19-22 - Munich - Mode Woche

Mar 6-8 - Dusseldorf - Igedo

Mar 18-21 - Dusseldorf - GDS (shoe trade)

Jun 1-3 - Amsterdam - Job Fashion (company clothing)

Sep 10-12 - Lyon - Mode City (swimwear)

Sep 24-25 - Oslo - Skomesse (shoe trade)

Nov 16-18 - Bologna - Linear Pelle

Computers, office machinery and telecoms

Feb 8-11 - Paris - PC Forum

Feb 15-17 - Boston - Networks Expo

Mar 1-4 - Paris - Micad (CAD/CAM)

Mar 8-11 - Sydney - Personal Computers

Mar 16-23 - Hanover - Cebit

Mar 27-31 - Riyadh - Saudicomputer

Jun 1-4 - Singapore - NetworkAsia

Jun 7-9 - Tel-Aviv - Computax

Display and shop equipment

Apr 15-18 - Padua - Intershop

Sep 27-29 - Paris - Exhibit Expo

Oct 24-28 - Paris - Equipmag

Electrical/electronic engineering

Dec 1-3 1993 - Chiba - Semicon

Jun 23-25 - Munich - Eltech

Jul 19-21 - San Francisco - Semicon

Sep 5-8 - Kuala Lumpur - Elenex

Food and drink/catering

Feb 26-Mar 3 - Paris - Europain (baking)

Feb 26-Mar 3 - Paris - Interglaces (Icecream)

Apr 19-21 - Brussels - ESE seafood

May 4-9 - Zurich - MEFA (butchery trade)

Jul 30-Aug 5 - The Hague - Vegetarian

Sep 18-22 - Munich - IMEGA (food and catering)

Nov 24-27 - Zurich - KASE (dairy trades)

Household furnishing and equipment

Jan 9-12 - Hanover - Domotex

Feb 2-5 - Salzburg - Texbo

Feb 19-23 - Frankfurt - Ambiente

Apr 8-10 - Chicago - Kitchen/bath industry

Apr 19-22 - Tokyo - Lifestyle

Sep 18-21 - Paris - Quojem

Oct 26-29 - Singapore - DecoExpo

Healthcare

Sep 9-11 - Karlsruhe - Medical Therapy

Oct 15-18 - Manama - Medical Health and Fitness

Nov 6-10 - Riyadh - Saudi Medicare

Jewellery and giftware

Feb 11-14 - Milan - Macef

Sep 2-6 - Paris - Paas

Sep 17-19 - Leipzig - Cadeaux

Mechanical engineering

Feb 1-4 - Stuttgart - Fluid Trans

Apr 25-29 - Paris - Mecanelem

Oct 11-15 - Leipzig - MEBA

Mining

Feb 27-Mar 3 - San Francisco - Minerals, metals and materials

Mar 25-28 - Manema - Meos (oil show)

Printing and stationery

May 13-16 - Thessalonika - Graphis

Aug 30-Sep 3 - Leipzig - Bugra

Safety, fire control and security

Feb 7-9 - New Delhi - Fire India

Mar 21-24 - Ghent - Explorisk

Mar 29-31 - Johannesburg - Securex

Apr 19-22 - Kuala Lumpur - Defence Services

Oct 20-22 - Modena - Ambiente Lavoro (safety/hygiene at work)

Scientific and medical

Feb 20-25 - Perth - Geophysics

Ships and boats

Feb 11-20 - Helsinki - Boat Show

Feb 26-Mar 3 - Rimini - Boat Show

Mar 17-20 - Budapest - Boat Show

Mar 23-27 - Istanbul - Boat/Water Leisure

Sep 6-11 - Amsterdam - Boat Show

Sports equipment

Mar 29-Apr 3 - Singapore - Golf Asia

Toys

Jan 26-31 - Paris - Jouet

Feb 3-9 - Nuremburg - Toy Fair

Aug 19-21 - Dusseldorf - Atari (electronic games)

Water and air treatment

Jan 14-23 - Berlin - Green Week

Sep 26-30 - Amsterdam - Aquatech

Oct 18-21 - Lyon - Pollutec

Oct 26-29 - Sinsheim - AWL Tech

For further details please contact:

Exhibition Bulletin. Tel: 44-0-81-778-2288

EUROPEAN bonds rallied after Germany's constitutional court gave its broad approval to the Maastricht treaty for European monetary union.

Prices were also lifted by hopes for further European rate cuts after the Bundesbank switched to variable-rate repos for today's allocation, following two months of fixed-rate repos. The move was seen as paving the way for lower short-term rates in coming weeks.

Ecu bonds were the main beneficiaries of the German ruling and the Ecu bond contract on Matif jumped 0.80 point to 118.94.

The market had moved to a very defensive pricing in recent months amid uncertainty over the treaty's ratification, but the ruling removed the last great unknown, allowing Ecu bonds to become more fairly valued, said Mr Bob Tyley, head of bond analysis at Paribas Capital Markets.

'Ecu bonds are now very attractive, and I expect investors to come into the market who were sidelined since the ratification problems began,' he said. Mr Tyley expects the 10-year Ecu yield spread over bunds to shrink to about 40 basis points before year-end, from 56 basis points now.

Elsewhere, the Bank of England announced the auction of Ecu500m of three-year Treasury notes, which will be fungible with Ecu1.5bn of notes sold earlier this year.

GERMAN bonds, which had attracted safe-haven buying in the run-up to the court ruling, dipped slightly on the announcement but recovered later, aided by the US Treasury rally and technical futures trading. The December bund future hit a new high at 100.07 and closed at 100.02. up 0.22 point from Monday.

The government issued DM3bn of 6 per cent bunds at 100.90, which met with solid demand, mainly from domestic investors. Another DM3bn-DM4bn is expected to be sold at today's auction.

Bunds were lifted by hopes that the minimum rate on 14-day repos may ease at today's Bundesbank repo. Money market dealers forecast a minimum rate of 6.68 per cent, with a liquidity add of some DM10bn seen.

UK gilts rose along with the other markets, but traders reported little cash activity. 'The market's on tenterhooks about (today's) RPI numbers,' said a gilts trader.

FRENCH bonds rose in line with other markets, but gains were capped by technical resistance at 123.18 on the December notional bond future. The short end of the market firmed on hopes that the German repo rate might ease today, causing the 3-month December Pibor future to rise 0.16 point to 93.44. Italian bonds posted strong gains, with the BTP future rising 0.81 point to 117.95 and expected to test 118.00 today.

THE JGB futures contract hit a six-year high and closed at 113.70, up 0.29 from Friday. Prices were fuelled by Friday's US Treasuries rally and solid cash buying, a trader said.

AFTER early gains on follow-through buying of bonds from last Friday, longer-dated US Treasury prices fell back to opening levels yesterday in the wake of higher gold and commodities prices.

By late afternoon, the benchmark 30-year government bond was up 1/32 at 104 19/32 , yielding 5.915 per cent. At the short end of the market, the two-year note was down 1/32 at 100 1/8 , to yield 3.791 per cent.

After taking Monday off for the Columbus Day holiday, the bond market resumed the rally it had started last Friday following the release of a September employment report which traders and investors judged to be bullish for longer-dated Treasury securities.

Although buying was sporadic, it was enough to lift 30-year prices, and send the yield on the benchmark issue below 5.9 per cent for the first time since the Treasury began issuing long bonds on a regular basis in 1977. Prices, however, could not hold on to their early gains as dwindling volume and a brief surge in gold and other commodity prices took the shine off the market's morning glow.

A FUTURES and options contract based on the new Nikkei 300 share index is to be launched in January by the Osaka Securities Exchange, Japan's main futures market.

The new index is likely to be less volatile than the existing Nikkei 225 index. It is capitalisation weighted, whereas the Nikkei 225 is a price-weighted average.

The aim is for Nikkei 300 contracts to eventually replace those on the Nikkei 225.

The move by the OSE should help defuse the debate over futures trading in Japan. The financial authorities have long blamed OSE futures and options trading, based on a volatile index, for the weakness of Japanese share prices.

Although the OSE will not immediately abolish Nikkei 225 contracts, the aim is for the new contracts to take over as the most widely traded index futures in Japan. The bulk of stock futures trading is on the OSE, although its index is based on Tokyo cash prices. Over the past two years, TSE officials have introduced restrictions to curb speculative trading on the futures and options markets.

The restrictions have led to a shift in trading from the OSE to the Singapore International Monetary Exchange, which also lists Nikkei 225 futures. Futures trading volume in Osaka has almost halved since last year.

The ministry of finance and the Tokyo stock market authorities agreed in December that a capitalisation weighted average was needed as a benchmark for the futures market, rather than an average which gives a price weighting to all shares irrespective of differences in capitalisation.

Nihon Keizai Shimbum, the business newspaper that produces the index, insists that the Nikkei 300 is an additional index, and wants the Nikkei 225 to remain as a benchmark for the Tokyo stock market.

Traders pointed out yesterday that it was too early to say whether the new index would replace the Nikkei 225 as a new benchmark. However, Tokyo traders have begun shifting positions from the Nikkei 225 to the Nikkei 300, selling Nikkei 225 component stocks not included in the Nikkei 300.

Japanese traders are now focusing on the reaction at Simex, where volume could suffer if Japanese stock futures trading shifts from the Nikkei 225 to Nikkei 300.

COMMERZBANK, one of Germany's largest banks, is expanding its range of fundraising instruments with its first issue of certificates of deposit (CDs).

These short-term instruments are an extremely popular source of fundraising for banks in the UK and the US, but rare in Germany. Only a handful of German credit institutions has issued CDs since they were made legal by the Bundesbank in 1986.

Commerzbank said yesterday that the minimum investment will be DM5m, and the yield will be above that of comp-arable German government securities.

Available immediately, they will have a maturity of at least 30 days.

Commerzbank said that the secondary market for the paper would be highly liquid.

The chief source of short-term finance for German banks is money left on deposit by corporate and private customers at rates which tend to be more favourable to the banks than in other countries.

The issue is part of a slow trend towards 'securitisation' in German financial markets, the most obvious sign of which is the development of the commercial paper market.

THE European Community is expected to launch its widely-expected Ecu1bn offering of seven-year Eurobonds today. The issue is seen as an attempt by the EC to attract institutional investors back to the Ecu bond market.

Several borrowers, ranging from the Council of Europe to Sweden, injected just over Ecu1bn of liquidity into the Ecu bond market last month but these issues were mainly targeted at retail investors.

The EC's decision to award the mandate jointly to four banks - BNP, CSFB, Dresdner and Goldman Sachs - reflects the importance which the EC has attached to the issue, as well as its desire to achieve the widest distribution.

The bonds are expected to be priced to yield 10-12 basis points below the yield on the French government's 9 1/2 per cent Ecu-denominated OAT due April 2000.

Yesterday, the international bond market was dominated by two large 10-year offerings from Belgium and Depfa, Germany's largest mortgage bank. Both issues had been well flagged and were sold out by the end of the day.

Belgium's issue, which raised Dollars 500m, was seen to be sensibly priced at a spread of 32 basis points over the yield on the 5 3/4 per cent US Treasury due 2003 in view of recent worries about the country's budget deficit and its increasing external borrowings. As a result the spread remained virtually unchanged once the bonds were freed to trade.

Lead manager Merrill Lynch said that there was surprisingly strong demand for the bonds from east Asia, where about one-third of the issue was placed. Interest from the UK was also good but demand from Germany was below expectations.

Depfa achieved a surprisingly low spread of 25 basis points over UK government bonds for its first Eurosterling issue which raised Pounds 500m. The spread tightened to 22 1/2 basis points soon after the bonds were freed to trade.

Syndicate managers said Depfa had done well on pricing, given that it did not have a rating and that it was still relatively unknown outside Germany. However, some felt that the spread left little room for further narrowing in the secondary market.

Joint lead manager UBS said that the issue was targeted at investors who were buying Depfa paper for the first time, in accordance with the issuer's aim to broaden its funding base. The issue was also seen as a platform for any future sterling borrowings by Depfa.

Mr Frank Ruhland, Depfa's treasurer, said the issue reflected the bank's need to diversify its funding away from the domestic market now that it was increasing its lending business abroad.

The proceeds of the issue will be used to fund the bank's growing commercial property mortgage business in the UK. Depfa has also expanded its public sector financing activities outside Germany over the past 18 months and has lent to sovereign borrowers and agencies in Denmark, Belgium, Ireland and Spain.

Depfa has raised DM26bn of its 1993 funding programme of close to DM30bn but only around DM4bn has been raised internationally. Mr Ruhland expects a higher proportion of Depfa's funding to be sourced outside Germany in future.

THREE of Saudi Arabia's 11 joint-venture banks have reported sharply increased profits for the nine months to September 30 compared with the same period in 1992.

Saudi British Bank, 40 per cent owned by British Bank of the Middle East, part of London-based HSBC Holdings, reported nine-month net profits exceeding the full-year profits of any previous year - SR298.8m (Dollars 79.7m), an increase of 50.2 per cent from the SR198.9m in the same period of 1992.

Total assets, at SR21,954m, have increased some 30 per cent in the past two years.

Saudi French Bank, 31 per cent owned by Paris-based Banque Indosuez, saw net profits rise 60 per cent to SR269.3m from SR168.3m.

Net profits at Arab National Bank, 40 per cent owned by Amman's Arab Bank, increased nearly 30 per cent to SR368.9m, compared with SR287.7m in the same nine-month period last year.

Mr Andrew Dixon, managing director of Saudi British Bank, said that sales in the kingdom's private sector were 'buoyant'.

'There is an increasing drive from the non-oil private sector into industry. Import substitution is a reality, and the economy is probably growing at an annual rate of between 4 per cent and 5 per cent,' Mr Dixon said.

However, while private sector non-oil contribution to gross domestic product was growing, the economy as a whole was very much 'oil-driven', so much depended on the future trend of oil prices, he said.

Mr Dixon added: 'I feel reasonably comfortable that we should be able to maintain our present performance in the last quarter of this year, though for next year no one can be sure because of changing interest rate scenarios overseas which are moving from one type of market to another.'

His comments underline the fact that a large proportion of banks' earnings are coming from net interest income, gains on bond portfolios, and higher fee earnings.

TOYOTA, the Japanese car company, said yesterday that its replacement for the Cressida, the Japanese-made large car that it has been selling in the US, is to be an American-built vehicle, the Avalon, which will be introduced in the 1995 model year, writes Martin Dickson.

The car will be built in an Dollars 800m expansion to Toyota's factory at Georgetown, Kentucky, which is one of the most efficient car plants in the US.

THE US television home shopping industry got a boost yesterday when two separate cable television groups announced ventures involving CUC International, which provides offers home shopping to some 30m Americans via the telephone and computer.

Viacom, the cable company bidding for Paramount Communications, said it would be testing a home shopping service, in conjunction with CUC and American Telephone & Telegraph, in the Castro Valley, California, where Viacom and AT&T are due to launch a full-scale test of interactive television services next year.

Time Warner, the second largest US cable operator, said it had agreed with CUC to create an interactive home shopping service in Orlando, Florida, where Time Warner is establishing its first commercial interactive-television service, the Full Service Network.

Viacom, whose bid for Paramount is competing against a higher but hostile offer from QVC - one of the largest television home shopping networks - said the Castro Valley test would give customers the same broad range of products and services CUC currently offered to members through telephones and computers.

Time Warner said its service would offer merchandise from CUC's database of 250,000 brand-named products and would allow customers to view and purchase items on demand. CUC would use its existing systems to process orders.

In another home shopping move, Time Warner announced last month that it and Spiegel, a leading specialty fashion retailer and catalogue company, were joining forces to create two new cable channels, focused mainly on women.

INTERNATIONAL Paper, the US forest products group, yesterday posted third-quarter net income of Dollars 48m, or 39 cents a share, including charges of Dollars 28m, or 23 cents, reflecting a higher federal income tax rate. Sales slid to Dollars 3.4bn from Dollars 3.5bn.

Stripping out the tax adjustment, net income was Dollars 76m, or 62 cents, in the quarter. In the same period of 1992, International Paper earned Dollars 98m, or 81 cents.

Mr John Georges, chairman and chief executive, said that depressed pricing levels for paper and packaging products in the US and abroad had dampened the cyclical rebound that the company had been expecting.

Earnings before interest and taxes fell 6.5 per cent from the previous year reflecting higher interest costs in 1993.

For the first nine months, International Paper had net earnings of Dollars 189m, or Dollars 1.53 per share, on sales of Dollars 10.3bn against income of Dollars 282m, or Dollars 2.17 on sales of Dollars 10.2bn last year. The 1992 figures include charges of 41 cents a share for accounting changes.

GUINNESS Peat Group, the UK-based investment vehicle for Sir Ron Brierley which is now listed in Australia, yesterday launched an ADollars 18m (USDollars 12m) bid for a Queensland-based beer company, Power Brewing - saying that its ultimate plan was to wind up the company.

Under the offer terms, GPG proposes to pay 44 cents a share for half of each investor's shareholding in Power. GPG has been building a stake in Power, which is currently 8.3 per cent. Full acceptance of the offer would take GPG's interest to 52 per cent.

If it wins control, GPG plans to negotiate the end of a joint venture between Power and Carlton and United Breweries, and then liquidate Power or 'otherwise return funds to shareholders'.

Sir Ron claimed yesterday that the business was 'essentially uneconomic', and that the offer would give shareholders an immediate premium for part of their holdings, and then participation in 'an orderly phasing out of unprofitable trading operations'.

Power Brewing urged shareholders not to sell until the company had considered the offer further, and described the bid price as 'seriously inadequate'.

Power's shares closed up 3 cents at 45 cents.

HONDA and Isuzu are to extend their product-sharing relationship, further highlighting the pressure on Japanese carmakers to curb development costs.

Honda will supply Isuzu with a version of its popular Accord to be sold under the Isuzu badge in Japan, and with its Domani model for sale in Thailand.

Isuzu will supply Honda with its Big Horn recreational vehicle, which Honda will sell under its own marque.

The exchange extends an agreement reached earlier this year. Under that agreement Honda already provides Isuzu with its Domani, which Isuzu sells in Japan, while Isuzu will provide Honda with two types of recreational vehicle, the Rodeo and Mu, for sale in the US and Japan respectively.

The arrangement will help the companies to utilise their capacity better during one of the worst recessions the Japanese car industry has faced, as well as extend their product ranges.

The market for recreational vehicles has been growing strongly in Japan, but Honda has been left behind because of a lack of models.

Isuzu, meanwhile, has pulled out of passenger car production and relies on products supplied by other manufacturers to complement its range.

The decision by Honda and Isuzu to rely on other carmakers to provide them with models reflects the dilemma faced by the Japanese car industry.

While carmakers need to supply their dealers with a wide range of products, overcapacity in the market and the urgent need to cut costs has limited their ability to develop a full range of models, not all of which would sell in high volumes.

Although Honda and Isuzu will be competing with each other in the Japanese market for sales of the cars they are to supply each other, such competition was not a significant concern since the two companies' dealers have very different customer bases, Honda said.

The two companies are exploring the possibility of further product exchanges. Any further extension depends on 'whether Isuzu has anything more to offer', Honda added.

NISSAN, Japan's second-largest car manufacturer, yesterday warned it would probably suffer an operating loss in the fiscal year to March 1994 - its second in a row - unless the yen declined in value against the US dollar.

Mr Yoshifumi Tsuji, Nissan's president, warned that the exchange rate of Y106 to the dollar was much higher than that on which the company had based its profit forecast. If it remained at this level, the company would not be able to break even this year, as it had expected.

Nissan based its earlier profits forecast on an exchange rate of Y110 to the dollar in the first half and Y115 in the second half. The yen has been fluctuating recently at around Y106.

Mr Tsuji also said that Nissan was forecasting lower unit sales at between 1.17m and 1.18m units this year, down from the 1.2m units it had expected earlier in the year.

To deal with the difficult market, the company is considering bringing forward plans to reduce its workforce by 5,000 by the end of 1996. It might also reduce its winter bonus, although Nissan has yet to consult its labour union, the company said.

In the year to March 1993, Nissan reported its first net loss of Y15.1bn (Dollars 14m) compared with a net profit of Y54.2bn in the previous year. Pre-tax losses came to Y26.3bn compared with a profit of Y87.8bn and the company was forced to halve its dividend.

Nissan had been looking to break even this year at the pre-tax level, although it is forecasting a loss of Y40bn in the first half, which the company hoped would be offset by profits in the second half.

However, domestic demand has remained depressed. Toyota, the largest car manufacturer in Japan, was recently forced to reduce its unit sales forecast for the second time this year.

Nevertheless, Mr Tsuji was still optimistic about second-half sales, and the company is planning to launch new models.

UNILEVER, the Anglo-Dutch food and consumer products company, has agreed to buy a margarine brand from Ajinomoto, a leading Japanese food manufacturer, for an undisclosed price.

The acquisition will lift Nippon Lever, Unilever's Japanese unit, to Japan's second largest margarine producer, with 25 per cent of the market. The move comes at a time when Japanese food companies are restructuring their operations by cutting down on products and reducing inventories.

Ajinomoto, which is also trying to slim its business by cutting unprofitable operations, will leave the margarine market altogether with the sale of its Marina brand.

The company entered the market 23 years ago.

TWO leading Japanese retailers unveiled depressed interim figures yesterday, displaying evidence of the problems facing the industry as consumer confidence plunges following prolonged economic slump.

Nagasakiya, a large supermarket chain, posted an unconsolidated pre-tax loss of Y1.7bn (Dollars 16m) for the first six months to August, compared with a loss of Y1.2bn a year earlier. The company was hit by the unusually long rainy season and cool summer.

Sales for the March-August period fell 5 per cent to Y197bn, while after-tax losses totalled Y1.4bn against a profit of Y552m the previous year.

The company, which paid an annual dividend of Y7.5 per share, will be forced to forego dividend payments for the current business year to February. Annual pre-tax losses are expected to widen to Y2.9bn from the previous year's Y539m, on a 3.5 per cent fall in sales to Y400bn.

Takashimaya, an upmarket department store, suffered an 89 per cent plunge in pre-tax profit for the the first six months to August to Y380m, on a 9.5 per cent fall in sales to Y3.5bn.

A fall in sales of mainstay items including clothing was caused by slack demand. However, after-tax profits surged 81.8 per cent due to revenue from land sales in Tokyo.

For the year to February, the company expects pre-tax profits to fall 39.1 per cent to Y3bn on a 7 per cent fall in sales to Y730bn. Takashimaya plans to trim capital investment costs by 30 per cent as part of cost- cutting efforts.

MOTOROLA, the US semiconductor manufacturer, reported earnings sharply above forecast, AP-DJ reports.

Third-quarter earnings jumped to Dollars 254m, or 92 cents a share from Dollars 127m, or 47 cents, a year earlier. Analysts had expected between 67 cents and 83 cents a share.

Sales in the quarter totalled Dollars 4.48bn against Dollars 3.48bn in the same period last year.

Nine-month earnings amounted to Dollars 682m, or Dollars 2.50, up from Dollars 272m, or Dollars 1.02, a year earlier. Sales for the nine months totalled Dollars 11.97bn, against Dollars 9.59bn.

Nine-months earnings per share fully diluted were Dollars 2.40, against Dollars 1.01. Last year's figures include a loss of Dollars 123m from the cumulative effect of adopting a new accounting standard.

Motorola said its third-quarter net margin on sales was 5.7 per cent, against 3.7 per cent a year earlier, while in the first nine months net margin on sales was 5.7 per cent, up from 4.1 per cent a year earlier.

Mr Gary Tooker, president and chief operating officer, said sales in the semiconductor products segment rose 31 per cent for the quarter, to Dollars 1.51bn. Orders rose 25 per cent and segment profits increased.

In the general systems sector, sales rose 43 per cent to Dollars 1.35bn, while orders advanced 58 per cent. Segment profits also increased, Motorola said.

The company did not provide any forecast, beyond saying that third-quarter and nine-months results were not necessarily indicative of those for the full year.

FRUIT OF the Loom, the US clothing manufacturer, is to buy Salem Sportswear, a maker of sports and children's wear, for Dollars 12.75 a share in cash, valuing the company at Dollars 132.6m.

Salem, which makes sportswear licensed by the four big US professional sports leagues, is expected to earn about 75 cents a share in the year to next August.

Fruit of the Loom believes the price it paid for the company will be justified by the opportunity to expand its range of sports and children's wear and through the expansion of its distribution channels.

SHARP, the Japanese manufacturer of consumer electronics, said it is to boost production of colour liquid crystal display (LCD) screens to cope with booming demand from computer and game-machine makers, Reuter reports from Tokyo.

Sharp will raise output of its colour version of its passive-matrix LCDs, low-cost panels that are now used widely on the faces of wristwatches, from 80,000 units a month to 120,000 by the end of next year.

SHARES in US securities brokerages rose sharply yesterday after three big Wall Street firms reported strong quarterly earnings.

The results were better than analysts and investors expected and confirmed that low domestic interest rates, heavy investor interest in stock and bond markets and buoyant corporate demand for underwriting services are continuing to fuel Wall Street's profits boom.

Merrill Lynch, the industry leader, led the way with record third-quarter net income of Dollars 360m, up 57 per cent from a year ago, on record net revenues of Dollars 2.64bn.

Investment banking put in the strongest performance, with revenues rising 24 per cent to Dollars 452m as the firm cemented its position as the world's biggest underwriter of debt and equities.

So far this year, Merrill has helped its clients raise Dollars 155bn in financings on US and overseas securities markets.

Revenues from principal transactions rose 20 per cent to Dollars 733m, due to big profits from trading derivatives, equities and money market instruments.

Commission revenues climbed 23 per cent to Dollars 690m, while asset management and custodial fees rose 18 per cent to Dollars 250m. Non-interest expenses rose in line with business activity, increasing by 13 per cent to Dollars 2bn.

As expected, Merrill announced a two-for-one stock split aimed at making its shares, which rose above Dollars 100 for the first time yesterday, more attractive to a wider group of investors. By the close Merrill's shares were up Dollars 2 7/8 at Dollars 101 5/8 on the New York Stock Exchange.

The factors which spurred Merrill's earnings also played a part in the healthy profit gains recorded at PaineWebber and Bear Stearns.

PaineWebber reported a 14 per cent increase in third-quarter net income to Dollars 59.1m, earned on revenues of Dollars 736.8m, up from Dollars 625.8m a year earlier.

Revenues from commissions, principal transactions and asset management were all higher.

The one disappointment was investment banking, where revenues remained strong at Dollars 100.8m but still came in 5 per cent lower than a year ago. The firm's non-interest expenses increased 17.5 per cent to Dollars 637.4m.

PaineWebber's shares rose Dollars 1 5/8 to Dollars 34 3/8 on the NYSE.

Bear Stearns recorded the biggest increase in earnings of the three, with net income jumping 66 per cent to Dollars 104.3m in the company's fiscal first quarter.

Commissions and principal transactions revenues were both strong, but the investment banking business sparkled, with revenues rising 91 per cent to Dollars 119.2m.

On the NYSE, Bear Stearns shares were up Dollars 5/8 at Dollars 24 3/4 at the close.

Discount brokerage Charles Schwab, which two weeks ago said it would post a big increase in third-quarter earnings, announced profits for the period of Dollars 22.2m, up from Dollars 7.8m a year earlier. The results were better than expected and Schwab's shares rose Dollars 1 1/8 to Dollars 37 3/8 on the New York Stock Exchange.

POOR ingot and fabricated product prices, worsened by the European and Japanese recessions, outweighed Alcan Aluminium's cost-cutting efforts in the third quarter.

The company reported a loss of USDollars 13m, or 8 cents a share, against a loss of Dollars 12m, or 7 cents, a year earlier, on revenues of Dollars 1.82bn, against Dollars 1.97bn.

For the first nine months, Alcan's loss was Dollars 68m, or 37 cents a share, against Dollars 56m, or 31 cents, on revenues of Dollars 5.45bn, against Dollars 5.8bn.

LME spot prices for ingot have languished below the equivalent of 50 cents a pound for many weeks, partly because of reports of increasing exports by smelters in the former Soviet Union.

Alcan's ingot shipments in the third quarter were 225,000 tonnes against 213,000 tonnes a year earlier, and of fabricated products 393,000 tonnes against 349,000 tonnes. The trend was similar in the nine months, although average price realisations were lower.

The company did not make any forecast for the final quarter but said no early upturn in prices was expected.

WESTINGHOUSE, the diversified US group which has been struggling to recover from heavy losses by its financial services division, yesterday said that poor performances by its core businesses had contributed to a 29 per cent decline in third-quarter earnings.

The company, which has interests ranging from nuclear power to radio stations, said net income from continuing operations was Dollars 65m, or 15 cents a share, on revenues of Dollars 2.06bn. In the corresponding period of 1992, net income was Dollars 91m, or 22 cents, on turnover of Dollars 2.27bn.

'Obviously the third quarter's financial results are disappointing,' said Mr Michael Jordan, who was named chairman and chief executive in July.

His appointment followed the departure of Mr Paul Lego, who had faced pressure from institutional shareholders to stem losses from the group's property market activities.

Earnings for the nine months to end-September - down 25 per cent from a year earlier - showed a similar rate of decline as the quarterly results.

Net income from continuing operations was Dollars 208m, or 48 cents a share, on revenues of Dollars 6.23bn. This compares with net income of Dollars 278m, or 77 cents, in the same period of 1992, on revenues of Dollars 6.67bn.

In the latest quarter, the performances of environmental services and electronic systems were particularly weak, with revenues 'down substantially' for both divisions. Westinghouse does not provide specific figures for its segments.

The company said the environmental arm had suffered because of sagging demand for its hazardous waste clean-up and incineration services. Sluggish trading conditions in Europe had been a contributing factor, it added.

Westinghouse attributed the decline at its important electronic systems division to reduced spending by the US defence department.

The company recently converted some of its military hardware for use in law enforcement and home security, but it is uncertain whether the extended product range will prove a success.

Westinghouse's broadcasting operation was another lacklustre area. The company blamed a downturn in operating profit at the division on a weak performance in the west coast television market.

The power systems segment, meanwhile, showed a sharp decline in operating profit because of reduced shipments and other factors.

In September, Westinghouse warned investors that it expected a 50 per cent drop in net income in the third quarter.

With the results not quite as dire as had been forecast, Wall Street reacted calmly to yesterday's announcement. GE shares closed Dollars 1/8 lower at Dollars 13 3/8.

THE FEDERAL National Mortgage Association (Fannie Mae) reported record third-quarter profits of Dollars 477.2m yesterday, up from Dollars 412.9m in the same period a year ago.

It was the 23rd consecutive quarter of record profits for the company, which is the largest mortgage provider in the US.

The strong earnings were achieved in spite of Dollars 50.6m in after-tax losses incurred due to the call of debt at a premium and the repurchase of high-coupon debt.

The record third quarter took Fannie Mae's nine-month earnings to Dollars 1.38bn, well ahead of the Dollars 1.19bn recorded over the same period of 1992 and on target to outpace the Dollars 1.62bn earned in all of last year.

Mr James Johnson, chairman and chief executive officer of the company, said various factors were behind the latest results, including a big rise in interest income, healthy gains in guaranty fees, and record income from the sale of Remics (real estate mortgage investment conduits).

Fannie Mae's net interest income rose 5 per cent to Dollars 661.7m, following a 22 per cent increase in the size of the company's net mortgage portfolio to Dollars 179bn and a widening in its net interest margin (the difference between the interest Fannie Mae earns on mortgage loans and the interest it pays to borrow money) from 133 basis points a year ago to 140 basis points.

As for Fannie Mae's readings on the state of the US housing market, the company reported that acquisitions of foreclosed single-family properties rose from 2,790 in the second quarter to 3,206 in the July to September period.

However, it added that its serious delinquency rate for single-family loans, a key indicator of credit quality, declined to a 14-year low of 0.56 per cent.

Fannie Mae's shares were unchanged at Dollars 80 1/8 on the New York Stock Exchange.

PROCTER & Gamble, the US household products and foods group, expects to report record first-quarter unit volume and earnings, Reuter reports from Cincinnati.

Mr Edwin Artzt, chairman and chief executive, told the annual meeting that the company had absorbed less favourable foreign currency exchange rates.

Without these effects, first-quarter earning would be well ahead of the company's average growth rate in 1992-93.

Even after these effects, which have affected most US companies, the company would still report a substantial year-on-year profit increase, Mr Artzt said.

Procter & Gamble's worldwide unit volume growth in the first quarter was 6 per cent, excluding discontinued pulp and orange juice operations.

Mr Artzt cited improved US business as a key to the results. He also said the company's globalisation strategy was paying off and he expected the company's international share to reach 60 per cent of world sales by the year 2000.

He added that there was real momentum in the business, especially in the US, where shipments were up 6 per cent during the past six months.

In addition, cash flow from operations reached a record Dollars 3.3bn. During 1992-93, the company's worldwide unit volume grew 4 per cent.

Mr Artzt said he expected the company's stock to appreciate in line with future earnings growth. The shares closed yesterday at Dollars 50 3/8, up Dollars 5/8.

GENERAL Electric, the diversified US manufacturing and services group, yesterday unveiled slightly better-than-expected third-quarter earnings and predicted record results for the whole of 1993.

Seven of the group's 12 business segments achieved double-digit growth in operating profits.

Only the aircraft engines business posted lower operating profits in the quarter.

The company reported net earnings of Dollars 1.21bn, or Dollars 1.41 a share, compared with Dollars 1.11bn, or Dollars 1.30, in the same period of last year. Most analysts had expected earnings per share of Dollars 1.40 in the latest quarter. Revenues advanced by 4 per cent to Dollars 14.86bn from Dollars 14.27bn.

On Wall Street, shares in GE closed down Dollars 1 at Dollars 95 1/2 .

Last year's earnings included Dollars 114m from GE's aerospace business, which was transferred to Martin Marietta this year.

Mr Jack Welch, chairman, said earnings from GE's continuing operations increased 21 per cent from the previous year.

Mr Welch added that the operating margin for the quarter was a record 11.6 per cent, compared with 10.2 per cent a year ago, excluding 1992 restructuring charges.

He said the company strengthened its global presence during the quarter.

The power systems division recorded more than Dollars 800m in international orders. In Europe, GE's NBC television business acquired a majority stake in Super Channel.

In Thailand, GE Capital Services, the financial services group, formed a joint venture to provide consumer and commercial financing.

For the first nine months of 1993, GE reported net earnings of Dollars 3.7bn, or Dollars 4.33 including a first-quarter accounting charge of Dollars 862m, or Dollars 1.01. A year earlier, it earned Dollars 3.38bn, or Dollars 3.95. Revenues advanced to Dollars 42.48bn from Dollars 40.87bn.

Mr Welch said: 'The first three quarters of 1993 have once again demonstrated GE employees' ability to cope with change and win in a difficult global economy.

'We expect this trend to continue in the fourth quarter and for the year, more than overcoming the absence of Dollars 345m of aerospace operating net earnings,' he added.

PEPSICO, the US food and soft drinks group, reported a 9 per cent increase in third-quarter net income to Dollars 458m.

Strong advances in most parts of the business outweighed a poor performance from the Kentucky Fried Chicken restaurants.

The latest results would have shown a 17 per cent increase in net income to Dollars 495m, but the figure was affected by changes in the US tax regime.

The effect was to reduce the latest earnings per share figure from 61 cents to 56 cents, a 6 per cent increase on last year.

The impact of the tax changes on full-year earnings would be to reduce net income by an estimated Dollars 40m, equivalent to 5 cents a share.

Operating profits rose by 20 per cent to Dollars 886m, with all three divisions growing by 17 per cent or more. Strongest performer was the beverages business, which increased operating profits by 22 per cent to Dollars 355m.

In the US, new products such as Crystal Pepsi helped counter the effects of a product tampering incident in June, taking domestic beverage profits ahead by 21 per cent.

International beverage profits rose by 28 per cent, helped by geographical expansion.

Snack-food operating profits rose by 19 per cent to Dollars 309m with strong volume growth in the US and internationally.

The restaurant division recorded a 17 per cent profits increase to Dollars 222m in spite of 15 per cent downturn in worldwide profits from Kentucky Fried Chicken, partly because of the successful launch of the large-size Bigfoot pizza in the US Pizza Hut chain.

BOMBARDIER, the Canadian transportation group, announced that it is set to launch the 70-seat turbo-prop de Havilland Dash 8-400 airliner early next year.

The Dash 8 family will then include 37-, 50- and 70-seat aircraft designed for short distance service.

The company said that nearly 400 Dash 8 aircraft have been sold to 60 airlines in 22 countries.

The new 400 model will integrate with existing Dash 8 fleets. At 350 knots, the aircraft will carry 70 passengers 500 nautical miles in 107 minutes. Maximum range is 1,240 nautical miles.

The first flight is due in July 1996, and Canadian certification in September 1997, with deliveries starting a month later.

Bombardier is also well advanced with developing a 70-seat version of its 50-passenger Regional Jet, now in service in Europe and North America.

The CRJ-X will have commonality with the smaller RJ and use the same flight simulators. Range will be up to 1,365 nautical miles.

FOREIGN banks owed L6,500bn (Dollars 4.1bn) by the collapsed Ferruzzi-Montedison empire are refusing to comply with the timetable for acceptance of a moratorium on interest payments.

Representatives of Italian banks, owed 75 per cent of Ferruzzi-Montedison's overall debt of L28,000bn, have agreed in principle to accept a freeze on interest payments due this year as part of a radical restructuring plan of Italy's second-largest private group.

However, one of the foreign creditors yesterday indicated that it would be very premature to talk of an agreement.

Representatives of 20 of the most exposed of the 110 foreign banks, which met on Monday in Milan, split into two groups. The meetings were primarily intended to explain the restructuring plan for Ferruzzi Finanziaria (Ferfin), the quoted financial holding, and for Montedison, the industrial group controlled by Ferfin.

The restructuring plan, drawn up by Mediobanca, the Milan merchant bank, and endorsed last week by the Bank of Italy, aims at selling off non-core business to reduce debt, consolidation of debt and recapitalisation. It includes a L800bn fund to cover small creditors needs and dissuade them from boycotting the plan.

A full meeting of all the foreign banks, originally to be held in Zurich on Thursday, is expected to be held in Milan. Only then will the restructuring plan be formally distributed to all the foreign creditors. The document runs to nearly 600 pages and it is thought they are unlikely to make up their minds this week.

Representatives of all the Italian banks meanwhile are due to meet today to give their formal approval to the restructuring plan and the debt moratorium.

The foreign banks' unwillingness to give a quick endorsement is thought unlikely to prevent the holding on Thursday of the board meetings of Ferfin and Montedison to approve their half-yearly results. These were postponed on September 30 because the administrators were unable to write into the accounts the beneficial effects of a debt moratorium.

Rejection of the plan risks bankruptcy proceedings for Ferruzzi-Montedison. The administrators of Ferruzzi-Montedison are arguing that bankruptcy could lead to greater losses than the L1,500bn cost of a debt moratorium.

The debt freeze will provide breathing space for the operating companies, controlled by the Ferruzzi family until the collapse in May, to lift profitability.

POLAND is to sell one of the country's most modern cement works, in Ozarow, to a group of domestic investors led by the Polish Development Bank (PBR), Mr Janusz Lewandowski, the outgoing privatisation minister, said yesterday.

The decision comes in a letter of intent signed yesterday with the state-owned PBR as well as management and unions at the plant.

It follows the sale in July of stakes in two Polish plants, which account for a quarter of Poland's cement output, to Cimenteries CBR of Belgium for DM90.4m (Dollars 56.5m).

CBR has since sold a 43 per cent share of its equity to Heidelberger Zement, Germany's largest producer of building materials.

The Ozarow plant has a 15 per cent share of the market and expects to report a 100bn zlotys (Dollars 5m) net profit on sales of 850bn zlotys, which represents a 30 per cent increase on 1992 sales. It was completed in 1977, along with Gorazdze, one of the two plants sold to CBR.

THE pressures on the French media took their toll on TF1, the country's largest television station, in the first half of this year as net profits fell by 14 per cent to FFr281m (Dollars 50.2m) from FFr327m in the same period of 1992.

TF1 attributed the decline in interim profits to seasonal factors and stressed that its first-half performance might not be indicative of the trend for the full financial year.

The French media has come under strain over the past year as many advertisers have cut their marketing budgets. The reform of media buying, implemented by the former socialist government, has also destabilised the industry.

In spite of these difficulties, TF1, which commands 40.8 per cent of the French television audience, increased its share of TV advertising to 54.4 per cent.

Advertising revenue rose 7 per cent to FFr3.35bn in the first half of 1993, from FFr3.13bn in the same period of 1992.

This contributed to a 5.4 per cent increase in consolidated sales to FFr3.92bn from FFr3.72bn and a 51.1 per cent rise in operating profits to FFr420m from FFr278m.

However, TF1 did not have the benefit of the FFr125m capital gain made in the first half of 1992 from a property sale.

ALLIEDSIGNAL, the US high technology group, and BASF's North American arm have agreed to combine their nylon carpet fibre and textile nylon businesses into an equally-owned joint venture.

The businesses which will form the venture had combined 1992 sales of Dollars 1bn. The venture will include fibre manufacturing sites, research facilities and sales officers.

AlliedSignal, which has enjoyed impressive earnings growth since the arrival of a new chairman in 1991, said the venture would enhance its earnings and cash flow.

Mr Frederic Posses, president of AlliedSignal Engineered Materials, said: 'Our customers will benefit from manufacturing efficiencies and other cost savings.'

BASF, one of Germany's big three chemicals companies, generates Dollars 5bn of sales in North America through its BASF Corporation subsidiary.

The joint venture would create a more cost-effective producer which would be large enough to compete in the global man-made fibre market place, the group said yesterday.

Like other European chemicals companies, BASF is suffering from recession in European chemicals markets. Its problems have been exacerbated by the strength of the D-Mark. Group net profits fell by 57 per cent in the first half of the year to DM199m (Dollars 124m).

The latest move fits with its policy of forging strategic alliances in fields where it believes that it does not have the critical mass to compete on its own.

AlliedSignal, based in Morris Township, New Jersey, expects the venture to be a more cost effective producer of nylon fibre, providing fibre customers with more choice and better value.

Fibres are part of AlliedSignal's engineered materials operations, the smallest of the company's three main segments with 1992 sales of Dollars 2.6bn or about 22 per cent of the company's total 1992 sales. The engineered materials business produces chemicals, catalysts, laminate systems, performance materials, plastics and amorphous metals.

Mr Howard Rubel, an analyst at Goldman Sachs, said the joint venture 'has synergies written all over it. This will allow them to rationalise costs and provide a counter-balance to some of the growing threats in fibres markets'.

AlliedSignal's fibres business is facing growing competition from polyester and polyolefin fibres which often can be used interchangeably with nylon fibres.

THE RESULTS of the French government's sale of shares in Banque Nationale de Paris (BNP), which ends tonight, will be announced on Friday, the economics ministry said, AP-DJ reports from Paris.

The ministry also will announce whether the government has decided to reduce the maximum number of shares that an individual investor can purchase, from the original limit of 40.

VOLVO, Sweden's leading manufacturing group, yesterday sought to reassure its shareholders over the proposed merger of its car and truck operations with France's Renault, saying the French government intended to privatise Renault by the end of 1995 at the latest.

At a meeting of a dozen of the company's biggest shareholders in Gothenburg, Volvo stressed the French commitment to privatise Renault after the merger is completed.

It said that Volvo's interests would be protected through the 35 per cent share it will have in the merged group.

Criticism in Sweden, led by Aktiespararna, the Swedish small shareholders' association which wants the merger deal blocked at a November 9 shareholders' meeting, has focused on fears that Volvo car and truck manufacturing will in effect be handed over to French state control with no concrete guarantees over subsequent privatisation.

The company said it had faith in French statements that Renault would almost certainly be privatised by the end of 1995.

But it acknowledged that after privatisation, it could not increase its 17.85 per cent direct stake in Renault-Volvo Automotive, the operational company, without permission from the French government under its plans to hold a 'golden share'.

However, Volvo said that under the merger agreement it could not be overridden on key issues, such as changes in share capital and mergers, because these will be handled by the RVC holding company in which Volvo will have an effective veto.

Volvo's second-largest shareholder after Renault, a state pension fund, said yesterday that it would back the merger, increasing the odds against Aktiespararna's attempt to stop the deal.

However, analysts said that shareholders would continue to demand more detailed information from Volvo, an issue which was not addressed at yesterday's meeting.

Volvo also announced that its nominees to the six-person RVC board would be Mr Pehr Gyllenhammar, Volvo's chairman; Mr Bo Rydin, its vice-chairman and a respected figure in Swedish industry; and Mr Soren Gyll, Volvo's chief executive.

GIROBANK, the state-owned bank, has confirmed that 51 per cent of its shares are will be sold through an issue to the public before the year-end. Terms were not disclosed.

The flotation will be the first important privatisation sale in Denmark for several years. A minority stake in TeleDanmark, the monopoly telecommunications group, will be sold within the next year.

Girobank was formed in 1991 from the post office giro operation. It ranks as the country's fifth-largest bank with assets at the end of last year of DKr44.7bn (Dollars 6.9bn).

The shares to be issued will have a face value of DKr255m.

COMPAGNIE Generale des Eaux, the French construction and communications group, yesterday reported net profit for the first half of this year had risen to FFr1.98bn (Dollars 35m), up 8.7 per cent from FFr1.1bn in the same period of 1992.

The group said it planned to raise between FFr3bn and FFr4bn through a rights issue by the end of the year, but gave no further details.

Generale des Eaux controls SFR, the only private cellular telephone operator in France (in competition with France Telecom). The rapid growth of SFR investments had created the need for a sharp increase in depreciation allowances, the group said.

Generale des Eaux was recently given permission by the French government to test a new small cordless telephone in Paris, as a possible competitor to the Bi-Bop product launched by France Telecom.

Generale des Eaux said its first-half turnover was little changed, at FFr70.7bn, from the first half last year. But the static overall figure masked a 'sharp slowdown' in construction and property, in spite of its continuing contract to build a new headquarters for Societe Generale, the bank, at the Defense site in Paris.

This drop was offset by 'satisfactory growth' in its traditional activity of water distribution and filtering, and an even better performance in communications.

UNION des Assurances de Paris (UAP) and Groupe Suez, two of the most powerful groups in French finance, yesterday ended their four-year battle for control of Colonia, the German insurance company.

Under yesterday's agreement, UAP - France's largest insurance group and a prime candidate for privatisation - will take control of Colonia by buying a majority stake in Vinci, the holding company that owns the international activities of Victoire, a French insurer in which Suez has a majority stake.

UAP has valued the 59 per cent holding in Vinci - which owns a controlling stake in Nieuw Rotterdam, the Dutch insurer, as well as 55 per cent of Colonia - at FFr11.4bn (Dollars 2bn). As payment, it will cede to Suez its 34 per cent minority stake in Victoire, valued at FFr11bn.

In a parallel agreement, Victoire will cede its remaining 14.6 per cent stake in Vinci to UAP, in return for a 5 per cent stake in the French insurer.

UAP, which owns 5 per cent of Suez, has pre-emptive rights to buy the 21.2 per cent of Vinci owned by the Oppenheim group for DM1.2bn (Dollars 750m). UAP and Suez have agreed to keep their 5 per cent cross-shareholdings for three years.

The agreement marks the end of years of wrangling as Mr Jean Peyrelevade, the chairman of UAP who is tipped as the next head of the Credit Lyonnais banking group, has manoeuvred to win control of Colonia and fulfil his ambition of taking UAP into the large German insurance market.

The negotiations have been marked by the personal tension between Mr Peyrelevade, who was chairman of Suez during the late 1980s, and his former subordinate, Mr Gerard Worms. UAP and Suez late last year almost agreed a deal, only to fall out over the price. Mr Peyrelevade, anxious to resolve the potentially embarrassing Colonia affair before UAP's privatisation and his possible move to Credit Lyonnais, pressed for the talks to resume.

Suez announced static profits of FFr516m for the first half of this year, against FFr528m for the same period of 1992. The group, which made a FFr1.87bn net loss in 1992, confirmed Mr Patrick Ponsolle was resigning as chief executive.

Lex, Page 18

Adverse currency movements, a delay in receiving a large engineering contract and a disappointing performance in consumer electronics all contributed to depress first half profits at Ross Group.

The pre-tax line for the six months to June 30 was down from Pounds 1.35m to Pounds 602,000, on turnover of Pounds 27.3m (Pounds 23.5m).

The shares fell 6p to 23p.

Earnings came out at 0.29p, against 0.73p (0.4p adjusting for profit from the sale of properties in 1992). The interim dividend is held at 0.2p.

Ross is to buy two companies, Cascade and Keenon, from Tomei of Hong Kong for Pounds 4m. Cascade is a consumer electronics company; Keenon provides sourcing, shipping and inspection services in the Far East.

The consideration will be satisfied by the issue to Tomei of 13.3m new shares at 30p. Tomei will also subscribe for an additional 2.3m shares worth Pounds 700,000 to finance future expansion.

TOWN CENTRE Securities, the Leeds-based property development group, lifted pre-tax profits by almost 11 per cent from Pounds 7.25m to Pounds 8.04m over the year to June 30.

Mr Edward Ziff, who was appointed managing director earlier this month, said the group was lucky to hold most of its property in the north of England and Scotland - 'outside the trauma of most of the property market.' Rental growth had been 'only mediocre, but by today's standards any growth is terrific news.'

Gross revenues rose from Pounds 16.9m to Pounds 18.2m, and operating profits were ahead from Pounds 12.8m to Pounds 14.1m. Interest payable increased from Pounds 5.58m to Pounds 6m. Gearing was 50.8 per cent at the group's year-end, compared with 44.2 per cent.

About 65 per cent of the portfolio lies in the retail sector. Mr Ziff said that for the first time in recent years the group had been able to buy good quality retail properties and show an immediate return in relation to the cost of borrowing.

Most of the remaining property is in the office market, which he described as 'very difficult'.

An internal property valuation put values ahead by 1.4 per cent, giving fully diluted net assets per share of 123.07p (118.32p).

Earnings per share were up from 5.12p to 5.59p. A final dividend of 2.3p is proposed, giving a total for the year of 3.4p (3.1p).

The shares rose 4p to 137p.

Cooper Clarke Group, the builders' merchant which earlier this week reported interim profits up from Pounds 125,000 to Pounds 204,000, yesterday announced that it intended to delist its shares on the USM with effect from October 29.

Following the cancellation of its quotation, the company will continue to trade as a plc, but its shares will no longer be traded on the USM.

Caledonia Investments, the investment holding company controlled by the Cayzer family, is paying Dollars 44m (Pounds 29m) for a 33 per cent stake in Sun International Investments, which is run by Mr Sol Kerzner, the South African resorts operator.

The investment is contingent on Sun completing the Dollars 70m purchase announced yesterday of a 60 per cent stake in the Paradise Island resort in the Bahamas. Sun is planning a Dollars 100m redevelopment of the resort.

The other shareholders in Sun are Royale Resorts Holdings, a subsidiary of Safmarine and Rennies Holdings, and World Leisure Group, representing Mr Kerzner's interests.

Derwent Valley Holdings, the property group, hoisted pre-tax profits by 86 per cent from Pounds 603,000 to Pounds 1.12m in the first half of 1993.

The company pointed out that the results did not benefit from the share issue and acquisitions announced in June.

Following the Pounds 16.9m issue of new shares, Derwent invested Pounds 10.3m in several properties, all of which are let on long leases. An office building in Victoria was acquired for Pounds 1.8m, while the remaining proceeds of Pounds 4.8m would be used for future purchases and refurbishment of existing properties.

Net property revenue improved from Pounds 3.15m to Pounds 3.22m. Earnings per share climbed from 5.2p to 9.9p, and an interim dividend of 3.05p (2.9p) is declared on the increased capital.

The City of Oxford Investment Trust reported a net asset value of 38.5p per share as at September 30.

The figure compared with values of 17.6p at the same stage of 1992 and 32.7p at the trust's March year-end.

Net revenue for the six months to end-September amounted to Pounds 730,219, down from Pounds 781,145, for earnings of 2.43p (2.6p) per share. A second interim dividend of 1.2p brings the total to date to 2.4p.

Frost Group, the independent petrol retailer, is to acquire a further 17 sites from Texaco for Pounds 4.52m cash funded from its own resources.

The majority of the sites are located in the north-west of England and the purchase increases Frost's petrol retailing outlets to 168.

The public offer for the Fleming Chinese Investment Trust was 2.7 times oversubscribed. A total of Pounds 60m was raised, Pounds 45m through an initial placing. Applications for 40.6m shares at Pounds 1 a share, with one warrant attached to every five shares, were received for the Pounds 15m worth of shares available through the public offer.

All applications have been scaled back, and investors have been alloted between 67 per cent and 4.6 per cent of the shares they applied for. Dealings start on October 19.

Transport Development Group said that it hoped to receive the outstanding Dollars 14.3m (Pounds 9.4m) payment on its sale of Willig Freight Lines in the US on or before November 30.

The purchasers had been due to pay Dollars 7.5m on September 30 with the balance on November 30, but despite efforts to adhere to the sale terms, they were unable to make the payment.

However, letters of intent, satisfactory to TDG, had been signed between the purchasers and their potential financial partners which should enable the single payment to be made on or before the end of next month. The sale to a management team was first announced last November.

Guinness Peat Group, the UK investment vehicle of Sir Ron Brierley, the New Zealand entrepreneur, said its wholly owned Australian subsidiary, GPG Pty, would make an offer for Power Brewing Company of Australia.

The offer would be 44 cents a share for 50 per cent of each member's fully paid ordinary 50 cent share in PBC. Total consideration would be about ADollars 17.32m (Pounds 7.46m).

PBC, which is listed on the Australian stock exchange, is mainly involved in marketing Power's beer through its joint venture with Carlton and United Breweries. For the nine months to June 30 it reported operating profits after tax of ADollars 2.13m (Pounds 920,000).

GPG is currently entitled to 8.3 per cent of its issued capital.

Australia has become the third country, following Canada and Russia, whose government has approved the use of sucralose, Tate & Lyle's new low-calorie sweetener, in a wide range of foods and drinks.

Sucralose will be marketed in Australia under the Splenda brand name, by Johnson & Johnson Pacific Pty, a member of the Johnson & Johnson group.

INCLUDING an exceptional currency gain of Pounds 323,000, profits of Boxmore International, the USM-quoted packaging and printing group, rose from Pounds 2.05m to Pounds 2.72m pre-tax for the half year to June 30.

The 33 per cent improvement came from turnover ahead Pounds 1.2m at Pounds 17m. The interim dividend is lifted to 1.25p (1.15p) from earnings of 9.4p (7.3p).

Net cash balances at the period end totalled Pounds 2.73m after investment in new plant and buildings of Pounds 4m. Directors anticipated capital investment of over Pounds 5m in the second half.

VIRTUALITY GROUP, the designer and manufacturer of virtual reality computer games, is to obtain a full Stock Exchange listing by placing 7.43m shares at 170p each, to raise Pounds 9.45m net.

The funds will be used to provide additional working capital, to finance product development, and to redeem outstanding preference shares.

Dealings in the shares are expected to commence on October 19. The placing gives Virtuality - which was founded in 1987 - a market capitalisation of Pounds 44.4m.

The biggest single shareholder will continue to be Apax Partners, the venture capital company, at 50.9 per cent. The total holding by directors will be 12.1 per cent. Other Virtuality employee holdings will amount to some 5 per cent of the enlarged share capital. Motorola intends acquiring 3.8 per cent and IBM (Europe) 2.2 per cent.

Motorola and IBM's decision to invest in the company is thought to be connected with its programme of developing home-based virtual reality technology, aimed at bringing what is at present only available in games arcades into the living room.

Virtuality currently has an installed base of some 360 game machines across the world.

Mr Jon Waldern, managing director, said that the flotation and the capital raised would enable it to continue developing high performance virtual reality technology.

The total number of shares in issue following the placing is 26.1m; the value of the shares being placed in this flotation is Pounds 12.6m. The percentage of enlarged share capital being placed is 28.4 per cent.

The group had turnover of Pounds 5.24m in the 1992 year, with a pre-tax profit of Pounds 217,000 and earnings per share of 1.1p.

CLINTON CARDS, which claims 7.5 per cent of the greetings cards market, against WH Smith's 7 per cent, reduced pre-tax losses from Pounds 1.29m to Pounds 956,000 in the six months to July 31.

Losses per share emerged at 3.66p (4.94p); the interim dividend, however, is lifted to 1.6p (1.5p). The shares fell 4p to 161p.

Mr Don Lewin, chairman, said that as long as the group had been expanding the number of its outlets, first-half losses had been traditional. During the six months, it opened 18 shops, bringing the total to 272. Mr Lewin said the expansion 'was not slowing down, just cautious'.

Mr Barry Hartog, finance director, added that the additional shops had been mostly on high streets and not in shopping centres, so there had been little in the way of reverse premiums, which the group no longer enters into the profit and loss account.

Turnover, including VAT, rose to Pounds 37.6m (Pounds 33.3m). Operating losses shrank to Pounds 770,000 (Pounds 897,000). Net interest payable was Pounds 186,000 (Pounds 393,000) - the group does not reveal borrowings figures at the half-way stage, but Mr Hartog said they were down 40 per cent over last time, though they peak in October in the run-up to Christmas, the group's most important trading period.

Mr Lewin reckoned that any upturn in the UK economy had been patchy. The amount that customers - more than 80 per cent of whom are women - spend had remained stable, but the group depends on 'footfall': if the high streets are emptier, then fewer customers cross the shops' thresholds.

BUOYANT TRADING helped Tie Rack more than double pre-tax profits from Pounds 301,000 to Pounds 872,000 in the specialist retailer's seasonally weak first half to August 15.

Sales rose from Pounds 25.3m to Pounds 33m as the company, which trades in 14 countries, moved into Germany and Switzerland, as well as franchising an outlet in Austria.

'The healthy increase in profits has been generated by good sales growth in the UK, Australia and continental Europe generally,' said Mr Roy Bishko, chairman.

He said sales in the second half were satisfactory.

'We are fairly cautious about the rest of the year because we consider consumer confidence is still fairly fragile and there are all sorts of warning signs about the November budget which could not be worst timed for retailers.'

Tie Rack, which claims 12 per cent of the fragmented Pounds 200m UK tie market, increased outlets to 282 (262), an increase of 10 since the beginning of the year, with 149 in the UK and 133 overseas.

Franchises are now less than 18 per cent of the total.

Since the half year end a further 10 shops had been opened and a further 12 were planned, the company said.

Operating profits jumped to Pounds 787,000 (Pounds 162,000).

Net cash balances were Pounds 6.9m (Pounds 768,000) at the half-way stage on the back of strong profits performance over the last 12 months as well as lower working capital.

Capital expenditure, at Pounds 1m (Pounds 500,000), had been lower than depreciation charges.

The company has yet to pay last year's Pounds 2m tax charge which will be paid in the second half.

Interest payments were Pounds 167,000 (Pounds 161,000).

Tie Rack expects to spend Pounds 3m developing the business over the full year, including Pounds 500,000 as part of its Pounds 1.5m programme of installing electronic funds transfer at point of sale technology in all shops.

Earnings per share moved ahead from 0.38p to 1.05p.

THORNTONS, the chocolate maker and retailer, was plunged deeply into the red in the year to June 26 by the cost of restructuring lossmaking French businesses and new accounting rules.

The company warned of the impending problems in May.

The loss was Pounds 4.8m against a pre-tax profit of Pounds 9.2m a year earlier. Operating profits of Pounds 9.35m (Pounds 10.4m) were wiped out by one-off provisions of Pounds 7.63m made against restructuring in France as well as a Pounds 5.41m charge for goodwill previously written off to reserves taken to the profit and loss account.

But the board, confident about the future, recommended a maintained final dividend of 2.4p to give a same-again total of 3.65p. Losses per share were 11.94p (profits of 9.9p).

'The current year will see the benefit of the changes we made in the past year to our management and organisational structure,' said Mr John Thornton, chairman and chief executive.

Sales rose to Pounds 92.5m (Pounds 84.3m). 'On a like-for-like basis UK sales were up 4.8 per cent. We are seeing the benefit of a lot of work on our ranges and pricing points and believe this performance is good against the broader retail background.'

In the UK and Belgium total sales rose 8.3 per cent to Pounds 81.9m giving operating profits of Pounds 11.1m (Pounds 11.4m) as Thorntons opened a net 12 new shops and franchised 27 others. The company said start up and launch costs associated with product development during the year had depressed UK operating margins.

Total turnover in France was Pounds 10.6m (Pounds 8.73m) and operating losses were Pounds 1.74m (Pounds 960,000). The company has appointed Mr John Coyle as managing director, Europe. He is now based in Paris. The restructured operation will consist of 35 confectionery and ice cream shops, down from 60, concentrated in the Paris region.

Borrowings at the year end were Pounds 8.1m (Pounds 2m) giving gearing of 19 per cent (4 per cent). Interest payments climbed to Pounds 978,000 (Pounds 565,000).

COMMENT

Thorntons' French folly has now cost at least Pounds 20m including accumulated losses and restructuring provisions. It bought lossmaking businesses at the top of the market and then found profits resisted the export of its management expertise and product lines. The company says the pain is over now, with the remaining shops profitable in spite of the downturn in France. Meanwhile, strength in the UK, where most of the business is based, surprised some in the market, with last year's revamp of the core ranges apparently paying off. Still, with analysts forecasting profits of Pounds 11.5m, a multiple of 14 is a discount to other specialist retailers but stands at a small premium to Cadbury Schweppes.

ROXBORO, the Newmarket-based manufacturer of specialist electronic components which is coming to the market later this month, yesterday forecast sharply higher trading and pre-tax profits for the current year.

The group, which issued its pathfinder prospectus yesterday, said trading profits after central costs but before exceptional costs of Pounds 500,000, related to the closure of a factory, would more than double to at least Pounds 6.5m in the year to December 31. This compares with Pounds 3.1m last year.

Pre-tax profits after net interest costs of Pounds 300,000 (Pounds 500,000) were forecast to increase to Pounds 5.7m (Pounds 3.8m).

The profit improvement mainly reflects the positive effects of a restructuring programme undertaken by Mr Harry Tee, Roxboro's chief executive, after he led a management buy-out of the electronic components division of Cambridge Electronic Industries (now Graseby) in mid-1990.

Since then Mr Tee has improved productivity and refocused Roxboro away from low-margin commodity components and towards production of higher-margin value-added devices through its two core businesses, BLP in the UK and Dialight in the US.

As a result, trading margins have risen from 7.6 per cent in the year of the buy-out to 16.4 per cent in the 1993 first half.

The offer for sale and placing with institutional investors is expected to raise about Pounds 50m and value the company at about Pounds 80m. Some 35 per cent of the shares on offer will be available to the public.

Schroder Ventures, which backed the management buy-out, will receive Pounds 25.5m gross of the proceeds and retain a 20 per cent stake in the enlarged group. Roxboro's management will also retain a 20 per cent stake after raising Pounds 10.5m from the offer.

The offer will also raise up to Pounds 15m for the company itself which will be used to repay debt and other borrowings and to fund the group's plans for expansion. After the flotation Roxboro will have about Pounds 5.1m of net cash.

Pricing is set for October 26 and is expected to reflect a prospective multiple of about 18 which would represent a moderate discount to comparable stocks like Bowthorpe and Telemetrix.

The sponsor is Samuel Montague and dealings are expected to begin on November 10.

MARKS AND Spencer plans to open a franchise operation in fast-growing Turkey. The company, which has previously concentrated its franchises in North America and continental Europe said that it was looking for a Turkish partner with the financial muscle for a retail operation with annual turnover of at least Pounds 50m.

GREYCOAT, the property company struggling to fend off receivership, said yesterday it had received a number of approaches regarding a possible financial restructuring.

One has come from the UK Active Value Fund, advised by corporate financiers Mr Brian Myerson and Mr Julian Treger and controlling 18 per cent of Greycoat's ordinary shares.

Greycoat's adviser, N M Rothschild, said it had received at least two approaches, but that all but the UK Active Value Fund had declined to be identified.

The company also said it had received notice from the Law Debenture Trust, trustee of Greycoat's Pounds 50m zero coupon bonds, that it had 30 days to rectify the breach of the gearing covenant.

Greycoat's bond and shareholders last Friday rejected a Pounds 120m refinancing package from Postel, the UK's largest pension fund. The company has been in breach of its gearing covenants on the Pounds 50m of zero coupon bonds since Postel's offer was published in September.

Rothschild had expected the Law Debenture Trust to issue the 30-day notice - which is not a demand for payment - on Monday. If after 30 days, the gearing is not reduced or an alternative refinancing plan is not forthcoming, the trustees of the zero coupon bond are likely to issue a default notice. This would trigger action from other creditors.

FR GROUP, the maker of in-flight refuelling equipment, yesterday disappointed the market with a 5 per cent fall in interim pre-tax profits and a larger fall in earnings, partly due to an increase in the tax charge.

Mr Gordon Page, chief executive, said that the cost of redundancies announced in August at Flight Refuelling and some closure costs would mean the next six month period was unlikely to produce results materially different from the first half.

For the six months to June 30 pre-tax profits fell from Pounds 11m to Pounds 10.4m, on sales ahead 2 per cent at Pounds 86.9m. Earnings per share fell from 10.2p to 9.01p and the interim dividend is unchanged at 2.46p.

The group also announced the Pounds 13m acquisition of High Temperature Engineers, a company that makes aerospace components similar to those produced by Flight Refuelling.

Mr Page said the acquisition should give the group critical mass in fuel systems. It would double Flight Refuelling's aircraft fuel systems business.

Flight Refuelling suffered from lower demand for civil aerospace products worldwide and a fall in defence procurement spending and some delays in the placing of contracts. Stanley Aviation, which supplies engine positioners to the USAF, experienced technical difficulties.

FR was also hit by falling demand from the Dutch armed forces for ammunition containers and has decided to close part of its Markhorst business in the Netherlands.

Mr Page said that the other businesses, comprising about 66 per cent of the group's sales, were doing well. Redundancy costs in the second half should be about Pounds 1.4m.

FR also said it has exchanged a contact to buy the assets of the life support products division of Aro Corporation, a subsidiary of Ingersoll-Rand. It is paying about Dollars 9.5m (Pounds 6.3m) and completion is expected later this year.

FR's shares closed 19p lower at 232p.

COMMENT

In the short term it is difficult to get excited about FR's prospects. Despite being well placed with niche military and aerospace products these results demonstrate that both markets are vulnerable to postponement of customers' programmes. Granted the Ministry of Defence should decide to go with the Phoenix programme after the budget, with positive impact on profitability next year. And the HTE acquisition has for the first time given FR a critical mass in fuel systems that could be developed. But with the uncertainty surrounding timing of its contracts, a prospective multiple of about 12.8, on profits of Pounds 20.8m, is a correct rating.

WILLIAM Sinclair Holdings, a supplier of products to the garden, leisure and pet markets, yesterday reported profits down 17 per cent at Pounds 3.82m.

This was in line with its warning on June 28 that profits for the year to June 30 would be 15-20 per cent below last time's Pounds 4.61m.

However, under FRS 3, the profit and loss account showed that pre-tax profits increased from a restated Pounds 2.96m, after an aggregate Pounds 1.45m exceptional charge in the restated 1992 figures for two disposals.

Interest receivable was sharply cut to Pounds 146,000 (Pounds 345,000), partly as a result of lower interest rates and partly because cash balances declined to Pounds 6m (Pounds 7.5m), after the payment of the cash element of the acquisition of Secto.

Mr Tom Sinclair, chairman, described the year as 'one of mixed fortunes'. The group's profits shortfall was due to 'the cold and wet weather conditions' affecting the horticultural division. Operating profits here declined to Pounds 2.29m (Pounds 3.14m) on turnover of Pounds 27.1m (Pounds 26.9m).

The almost doubled rainfall in Scotland led to a poor peat harvest and the need to buy peat from other suppliers for Sinclair's J Arthur Bowers products. However, market share was increased across Bowers' three products: compost up to 19.1 (17.1) per cent; bark to 14.5 (6.5) per cent; and fertiliser to 31.7 (28.4) per cent.

On the pet, aquatics and household products side profits grew 41 per cent to Pounds 1.38m (Pounds 977,000) on turnover of Pounds 11.4m (Pounds 8.76m).

Group exports expanded to Pounds 3.4m (Pounds 2.87m), with pet products going mainly to Europe and horticultural products to the Middle and Far East.

Earnings under FRS 3 grew to 12.2p (8.3p) per share, though on the headline profits basis, they fell to 11.9p (14.8p). The final dividend is held at 5.3p for a maintained 7p total.

AUTOMATED Security (Holdings), the alarm leasing group, has gone ahead with its enhanced scrip dividend despite a sharp fall in its share price since it fixed the reference price a week ago, as a result of a profit warning last Friday.

The Stock Exchange still has to announce whether it is admitting the new shares to the Official List, although admission is normally a formality.

The group said the scheme was approved at a board meeting yesterday. Going ahead with the scrip saves ASH Pounds 4m through a Pounds 3.1m cash saving on the dividend payment and a Pounds 900,000 reduction in advance corporation tax payable. ASH said it was in the interests of the company and its shareholders to proceed.

Under the terms of the scheme, shareholders were offered an interim dividend of 3.03p in cash or 4.58p payable in new shares. Its share price fell 30p to 102p on Friday and yesterday closed at 97p, down 6p on the day. At this level, tax-paying shareholders would almost have been better off taking the cash dividend rather than the enhanced scrip.

A reference price of 142p a share was set by Barclays de Zoete Wedd, parent of de Zoete & Bevan, then one of ASH's joint brokers, at the market close on Tuesday last week, relating to the share price over the previous two hours. At this price, 3.21m shares needed to be issued to satisfy the 87.5 per cent take up of the enhanced scrip.

The broker then auctioned 892,000 of the new shares which investors had elected to sell at a strike price of 136p, 95.8 per cent of the reference price.

On Friday last week, ASH warned that its third quarter profits would be hit by Pounds 3m of exceptional costs. De Zoete & Bevan resigned as joint broker to ASH on Friday when the company refused to either cancel or amend the terms of the scrip offer.

As foreshadowed by last Friday's warning, ASH's pre-tax profits for the nine months ending August 31, announced yesterday after the market closed, were sharply down, falling by 75 per cent to Pounds 9.17m.

Total operating profit fell from Pounds 22.8m to Pounds 15.2m. However, this time there was a charge on discontinued operations of Pounds 2.1m incurred through the closure of the fire systems division. Previously discontinued operations contributed Pounds 5.5m.

The latest pre-tax figure included restructuring costs of Pounds 1.1m (Pounds 3.7m) and interest payments of Pounds 4.9m (Pounds 12.6m). The comparable figure also included a profit of Pounds 30.3m on the sale of the group's loss prevention subsidiary.

Total group turnover fell from Pounds 135m to Pounds 118m, although the previous figure included Pounds 46.4m from discontinued operations compared with Pounds 9.1m this time.

Earnings fell from 21.5p to 2p. The tax charge was down from Pounds 7.56m to Pounds 1.5m, reflecting the saving on ACT through the enhanced scrip dividend scheme.

MARKS AND Spencer aims to break new ground by opening a franchise operation in Turkey. The country's economy grew faster than any in Europe last year.

The company, which has previously concentrated its franchises in North America and continental Europe said it was looking for a Turkish partner with the financial muscle for a retail operation with annual turnover of at least Pounds 50m.

'We believe there are opportunities for our particular formula in Turkey,' the company said yesterday.

The operation, in line with recent successful franchises in Hungary and Austria, would start by retailing ladies' lingerie and toiletries. The project is a pilot scheme. Initially, the stores would be about 2,000 sq ft, compared with about 30,000 for a UK branch.

Risk capital would be provided by the Turkish franchisee, while Marks and Spencer would supply merchandise.

Turkey's consumer market is driven by rising personal incomes, fast urbanisation and rapid changes in consumer taste, with importance attached to brand names and packaging.

Retails chains currently account for 7 per cent of the market nationally and about 12 per cent in the big cities, Istanbul, Izmir and Ankara.

THE furore over Automated Security's profit warning and enhanced scrip dividend, which led to de Zoete & Bevan, its joint broker, resigning in high dudgeon last Friday, has reinforced doubts about the whole notion of enhanced scrips.

When these beasts first arrived in the corporate finance menagerie in March - invented by BZW, de Zoete & Bevan's parent - they were seen as a clever way for companies with surplus advance corporation tax to cut their tax bill.

At first it was suggested that enhanced scrips would be offered by only a few companies which were suffering surplus ACT because they derived a large part of their profits from outside the UK, and probably only on one occasion. But the list of companies offering these devices has lengthened, and some have come back with a second issue.

Enhanced scrips offer shareholders a dividend in shares at a rate 50 per cent higher than the cash value of the payment. Share dividends do not attract ACT, while cash dividends do.

If investors take up the enhanced scrip, the company saves ACT and retains the cash that would otherwise be paid in dividend.

Investors getting a higher dividend were reckoned to be happy too. Non-taxpaying investors cannot reclaim tax on an enhanced scrip, but the higher payout more than compensates them. Take-up rates for enhanced scrips have been high, often 90 per cent or more.

But some investors fear companies will repeatedly offer enhanced scrips, which in effect become a rolling rights issue - the company is raising money by issuing shares.

Yet the safeguards demanded by the Stock Exchange for rights issues - in terms of the information required in a rights-issue document, such as working capital and current trading statements - do not apply to enhanced scrips. The level of due diligence carried out by the advisers is far lower, even though the risk period is longer. Rights issues typically take three weeks from announcement to completion, while ASH's enhanced scrip was announced in mid-July and will be completed today.

Bankers respond that the same safeguards need not apply, because enhanced scrips increase a company's share capital by perhaps 3 or 4 per cent, compared with a rights issue which might expand the equity base by a quarter or a third.

Further, some companies which have offered enhanced scrips seem to be using them not to get round a structural tax problem but as an alternative to cutting a dividend which they have not got the cash to pay. But the result is they have yet more shares on which to pay dividends.

Forte, the hotel group, combined a cut dividend with an enhanced scrip. Lucas Industries, which announced an enhanced scrip on Monday with its annual results, would have had to pay a cash dividend from reserves.

So what went wrong with ASH's enhanced scrip? Essentially, Friday's profit warning drove down ASH's share price, putting the company in the position of issuing shares at a price far out of line with the market price. Worse, from BZW's viewpoint, the broker had sold some of the new shares to its clients only days before the warning.

In enhanced scrips, shareholders are not just offered the choice of a cash dividend or a larger share dividend. They have a further option to take the dividend in shares, but then sell the new shares, getting at least a guaranteed price through an underwriting arrangement with the company's broker.

In ASH's case BZW underwrote the new shares at a price of 95 per cent of the reference price, the price used to calculate the number of shares to be issued to meet the dividend payment.

With hindsight, this underwriting price might have been a warning. When enhanced scrips were invented, the underwriting price was typically set at 95 per cent of the reference price. But this discount rapidly attracted competition from other houses, led by Swiss Bank Corporation, willing to underwrite closer to the reference price.

Now houses bid for the underwriting and the guaranteed price can be as high as 99 per cent of the reference price. Further, houses attempt to sell the shares above the underwriting price through an auction, giving the selling shareholders 'best execution' and cutting the profit which the brokers could make on the underwriting.

It was not till Thursday last week that ASH told BZW it was concerned about some of the numbers it was seeing when collecting figures for its third quarter results, which were published yesterday.

BZW advised ASH to make a trading statement, which ASH did on Friday morning, and also to either cancel or adjust the price for the enhanced scrip. ASH refused to do the latter within the time limit BZW had set, leading the broker to resign.

The question of enhanced scrips may vanish after the next month's Budget. This is expected to clarify a proposal in the spring Budget for a system of paying ACT-free dividends from foreign income.

If the main structural problem causing surplus ACT is ironed out by the budget, companies which persist with enhanced scrips thereafter would be exposed as using them for other reasons. These may be the dubious ones that their dividends have not stayed in line with the profits available to pay for them, in which case a dividend cut rather than an enhanced scrip is the answer.

Investors would look closely at a company's motives for offering an enhanced scrip before accepting, and the animal may die a natural death.

Westwood Dawes, a subsidiary of Mining & Allied Supplies, has sold certain assets relating to its rollers and idlers manufacturing division to MS International for Pounds 400,000 cash.

THE MARKET value of Micro Focus has fallen sharply over the past few weeks as US investors question the company's ability to maintain its hitherto impressive record for growth and profitability.

Last night shares in the Berkshire-based software house closed at Pounds 13.33 in thin trading having lost 25 per cent of their value in the past seven days alone. They stood at just over Pounds 30 in February this year. The company is now capitalised at Pounds 188m compared with over Pounds 400m at its peak.

The share price was not helped by a sell note last week from a US analyst, Mr Paul Bloom, of brokers Volpe, Welty & Co, a company which in earlier years had praised Micro Focus' management and market positioning. Mr Paul O'Grady, Micro Focus managing director, said Mr Bloom had issued the note without consultation with the company

In the UK, however, analysts were not reassured by a round of presentations last week from Mr O'Grady. He seemed 'downbeat' and had failed to impress UK shareholders.

Micro Focus is a company whose stock is at the mercy of its American Depositary Receipt listing. At one stage almost 40 per cent of its shares were held in the form of ADRs; now the total is about 20 per cent. US investment has been behind the dramatic rise in Micro Focus' share price over the past three years. Now it is the root cause of its collapse.

US investors understand the software market better than their European counterparts. Micro Focus had powerful appeal because it had developed a set of tools - software which makes it easier to write other software - which were of obvious value in corporate data centres. They made it possible to write software in Cobol, the most common business language, on cheap personal computers rather than taking up expensive mainframe time. Micro Focus has an alliance with Microsoft, the world's largest software company, through which Micro Focus tools are included in Microsoft products.

Mainframes, however, are gradually giving way to networks of smaller computers (client-server systems) and Cobol will eventually be superseded by more modern computer languages: the question hanging over Micro Focus has always been: when?

So US investors began to take fright when the company recorded flat profits and a mere 11 per cent rise in revenues in dollar terms in the first half of the year. Typically Micro Focus has grown both revenues and profits by more than 20 per cent. In sterling terms, revenues were Pounds 40.8m and pre-tax profits Pounds 11.6m for the first half.

US investors also noted poor performances from traditional mainframe vendors such as Amdahl and concluded the shift to client-server systems was under way.

Mr O'Grady said yesterday that Micro Focus was well positioned to exploit moves to newer technology.

UK analysts agreed yesterday that little had changed in the company's underlying trading performance and were maintaining estimates of pre-tax profits for the full year at between Pounds 27m and Pounds 30m. The company has Pounds 53m cash.

SUN ALLIANCE, the composite insurance group, yesterday raised Pounds 125m through a placement of cumulative irredeemable preference shares.

The issue, which was foreshadowed when the company reported its results for the first half of 1993 in September, will strengthen the capital base at a time of rising insurance rates in the UK.

Sun Alliance said the money would also allow the growth of its business overseas.

It obtained shareholders' permission to raise up to Pounds 300m in preference shares at an extraordinary meeting last month.

Cazenove and SG Warburg placed the issue.

Sun Alliance reported a profit before tax of Pounds 61.7m in the first six months of 1993.

HCG Lloyd's Investment Trust, one of a number of new corporate investors at the Lloyd's of London insurance market, yesterday published its pathfinder prospectus.

The trust, which is backed by a range of US and UK investment institutions, aims to raise up to Pounds 100m and will support between 25 and 45 Lloyd's syndicates. It will seek a stock market listing later this month via an institutional placing sponsored by UBS and has appointed JPO Hambro & Partners as investment manager.

The trust's underwriting subsidiaries will be advised on Lloyd's syndicate participation by JO Hambro Conning Grimston.

SHARES IN Plysu, the maker of plastic bottles, fell 20p to 220p after the company warned profits would be well below market expectations.

Mr Stephen Nobbs, finance director, said Plysu was comfortable with its brokers' downgrading of pre-tax profits for the year from the Pounds 12m previously forecast to Pounds 8m.

Plysu said it had successfully concluded negotiations with leading UK dairy groups for the supply of milk and juice bottles. The negotiations had, however, taken three to four months longer than anticipated which would have a temporary adverse effect on profits this year.

Profits would be 'well below market expectations' but it remained confident that prospects for subsequent years were excellent.

On the new profits forecast Plysu is trading on a prospective multiple for the year of about 20, described by one analyst as allowing little scope for further delays in the economic recovery.

ST IVES, the UK's largest independent printer, yesterday reported a 4.8 per cent increase in pre-tax profits to Pounds 22.1m for the 52 weeks to July 30.

However, Mr Miles Emley, presenting his first set of results since succeeding Mr Robert Gavron as chairman in May, said there had been little improvement in most of the group's markets and warned that the threat of imposition of VAT in the UK on some of its products 'represents a continuing uncertainty.'

The Pounds 1m improvement in profits came from turnover ahead by 6.4 per cent to Pounds 221.3m.

Earnings per share were unchanged at 15.2p. The recommended final dividend is increased to 4p (3.75p) making a 5.5p (5.25p) total.

Profit margins at both the pre-interest and pre-tax levels were almost static at 9.5 per cent and 10 per cent respectively which Mr Emley said was 'a creditable result in trading conditions which have been far from easy.'

He added that the modest recovery in the UK economy that was experienced towards the end of the financial year had been mainly export-led and had not benefited the group.

The overall returns in the group's core UK magazine business were lower than in the previous year although Mr Emley said the downward pressure on prices had eased and in some cases the group had been able to agree price increases 'modestly in excess of inflation.'

Conditions in the group's US markets, which account for 10 per cent of turnover, deteriorated in the second half leading to markedly lower volumes - particularly in medical titles which were affected by the US government's healthcare review.

Among St Ives other operations the book printing business boosted sales and, based on the group's reputation for thin paper printing, lifted its share of the international bible and reference book market.

Looking ahead Mr Emley said: 'It is still too early to judge whether the current increase in activity represents more than a seasonal upturn.'

COMMENT

St Ives' results were in line with market expectations; however, Mr Emley's comments were cautious and the shares closed 3p lower at 299p, down from a peak of 346p in the spring. Shareholders' funds were just short of Pounds 100m at the year-end and the group had Pounds 21.6m of net cash, up from Pounds 13.5m a year earlier. Capital spending this year will be about Pounds 20m and, like the Pounds 106.9m spent in the past five years, will be financed from cash flow. The UK printing market remains tough and the US business is still losing money. But with a bit of a struggle pre-tax profits should reach Pounds 24m this year producing earnings of 16.4p and a prospective p/e of slightly over 18.

------------------------------------ Companies in this issue ------------------------------------- UK ------------------------------------- Automated Security 20 Boxmore 21 British Coal 18 Caledonia Invs 21 City of Oxford 21 Clinton Cards 21 Cooper Clarke 21 Derwent Valley 21 FR 20 Fleming Chinese 21 Ford 10 Frost 21 GPG 21 Goode Durrant 20 GrandMet 19,18 Guinness 18

HCG Lloyd's 20 MS Intl 20 Marks and Spencer 20 Micro Focus 20 Plysu 20 Ross 21 Roxboro 21 Sinclair (William) 20 St Ives 20 Sun Alliance 20 TDG 21 Tate & Lyle 21 Thorntons 21 Tie Rack 21 Town Centre Secs 21 United Distillers 19 Virtuality 21 Westwood Dawes 20 ------------------------------------- Overseas ------------------------------------- AT&T 25

Alcan Aluminium 25 AlliedSignal 22 Arab National Bank 25 BNP 22 Bear Stearns 24 Colonia 22 CUC International 25 Eli Lilly 10 Fannie Mae 24 Ferruzzi-Montedison 22 General Electric 24 Generale des Eaux 22 Girobank 22 Groupe Suez 22 Guinness Peat Group 25 Honda 25 International Paper 25 Isuzu 25 Merrill Lynch 24 Nagasakiya 25 News Corp 19,18 Nissan 25

PTT Telecom 13 PaineWebber 24 PepsiCo 24 Power Brewing 25,21 Procter & Gamble 24 Saudi British Bank 25 Saudi French Bank 25 Seagram 19 Suez 18 Sun Intl Invs 21 TF1 22 Takashimaya 25 Time Warner 25 Toyota 25 UAP 22,18 Viacom 25 Volvo 22 Wal-Mart 19 Westinghouse 24 -------------------------------------

GRAND Metropolitan is to lose US distribution rights to Absolut vodka, the Swedish-owned premium brand, which has become one of the world's best-selling spirits over the past 13 years.

Vin & Sprit, the Swedish wine and spirits company, yesterday announced that Seagram, the North American drinks group, would take over distribution of Absolut in the US. It would also take over distribution in other world markets as soon as contracts allowed.

The reason for the switch appears to have been growing doubts at V & S about the future development of Absolut alongside GrandMet's own Smirnoff and Popov brands. The decision shocked GrandMet's IDV drinks division. It was informed only 24 hours earlier. Up to then, it had been engaged in the usual review of its US distribution arrangements with V & S which were due for renewal next September.

Mr John McGrath, chairman and chief executive of IDV, said that the company, in 'an excellent and mutually beneficial partnership' with V & S, had developed Absolut in the US from negligible sales in 1980 to almost 3m cases a year.

'Given this impressive track record, and the successful co-existence and compatibility of Absolut alongside IDV's portfolio of other US brands, including Smirnoff and Popov, it is all the more surprising that V & S should take this decision.'

Absolut is ranked 17th in the world's best-selling spirits and is the fifth largest brand in GrandMet's portfolio. Analysts estimate it was worth about Pounds 25m a year in profits. Its loss hit GrandMet's shares which fell 15p to close at 403p. Seagram shares rose Dollars 1/4 to Dollars 26 1/4 at midday.

Mr Claes Dahlback, V & S chairman, said: 'The potential for Absolut vodka and the resources of Seagram make a perfect business match: a worldwide premium brand and a worldwide premium brand marketer and distributor.'

For Seagram, which does not have an international vodka brand in its portfolio, the capture of Absolut is a coup.

Mr Edgar Bronfman, Seagram's president, said: 'We are very excited to have the opportunity and responsibility to join forces with V & S to develop further and realise the full potential of Absolut.'

Lex, Page 18

WAL-MART STORES, the US discount store giant, yesterday suffered a blow to its retailing strategy when an Arkansas court ruled that it had broken state law by selling a range of pharmaceutical products below cost.

The ruling could have ripple effects throughout the US retailing industry by encouraging a series of similar legal suits against Wal-Mart and other store groups which price aggressively to win market share.

Wal-Mart said it was 'extremely disappointed' by what it termed an 'anti-consumer' ruling and said it would immediately appeal to the Arkansas Supreme Court. Its shares fell Dollars 1/2 to Dollars 26.

The civil suit was brought by three independent pharmacies in Conway, Arkansas, who claimed they were suffering from low prices offered by Wal-Mart on items from toothpaste to over-the-counter drugs at its Conway store.

The pharmacies said Wal-Mart's pricing policies were in breach of the Arkansas Unfair Practices Act, which forbids the sale of merchandise below cost 'for the purposes of injuring competitors and destroying competition'. They claimed Dollars 1.1m in damages. Wal-Mart acknowledged that it sold some items below cost, but argued that this was part of normal retailing practice and was not intended to destroy competition.

The court, however, found against Wal-Mart and ordered it to pay a total of Dollars 96,469 in damages to the three pharmacies.

Wal-Mart has become America's biggest retailer by competing aggressively with smaller stores on price. Independents have often accused it of selling goods below cost to put them out of business, then raising prices once the competition had disappeared.

The company has lost at least one other case of predatory pricing, in an Oklahoma state court in 1986. As a result, it agreed to raise prices in the state. This latest case is likely to encourage a flurry of suits against the company in the 22 other states with similar pricing statutes.

Announcing its decision to fight the ruling, Wal-Mart said: 'If this decision is allowed to stand, the result will be higher prices - not just for Wal-Mart customers, but customers of every retail store, large and small, in Arkansas.'

BRITISH investors may remember the record 5 per cent real yield which was briefly featured by index-linked gilts just before the UK's exit from the European exchange rate mechanism last year.

That yield has now collapsed to 3.1 per cent, a change which has been fundamental to the strength of all the financial asset markets over the past 13 months.

Such a yield adjustment has been reflected in big price rises on index-linked gilts. The longest-dated example, redeemable in 2030, has risen by 33 per cent since shortly before Black Wednesday. More importantly, the fall in real yields has created headroom for the equity market, allowing the dividend yield on UK equities to drop below 4 per cent and still allow a premium for risk.

The UK is rare in having a financial instrument which encapsulates the concept of the real yield. The fall in real returns is, however, not a domestic but a global phenomenon. According to Barclays de Zoete Wedd the real return on 10-year government bonds across the Group of Ten countries averaged some 5 per cent during the 1980s but has now declined to about 3 per cent, or possibly 2.8 per cent on the basis of a consensus expectation of inflation next year.

The process has gone furthest in the US, where the real yield on this basis appears to be only about 2.2 per cent. In countries such as France and Spain the figure is about twice as high, a differential which ought to be unsustainable in free-flowing international capital markets.

However, in the absence of index-linked securities the concept of a real return is not wholly robust, and depends upon bondholders' expectations of inflation which may be too pessimistic.

And clearly there is something unusual about the US bond market at present, shored up as it is by the banks, which are operating on the basis of a profitable spread over America's rock bottom short-term interest rates and are scarcely concerned at all with real yields, as a long-term investor should be.

Japan is a particularly interesting case. With 10-year bond yields down to 3.8 per cent, and inflation liable to disappear completely, it is closer than any other country to a 1930s-type scenario. In the first half of the 1930s the real yield on UK gilts averaged about 7 per cent a year, a perverse figure for a slump, and one that arose because prices were actually falling.

Internationally, real returns were very high during the 1980s. Investors were determined not to be caught again by the inflation of the 1970s, although in the event inflation declined until about 1987.

Real rates then dipped, but rose again at the beginning of the 1990s, when the US continued to borrow on a massive scale and Germany unexpectedly joined it in heavy deficit after reunification. There was talk of a global famine of capital as real bond yields peaked in the summer of 1992.

Given the international recession, however, it has not worked out like that. The Bundesbank has bludgeoned the German reunification boom into submission.

The Federal Reserve has pumped liquidity into the US economy but has generated only a stuttering recovery. There turns out to have been plenty of capital, enough not only to finance the deficits but to generate a roaring global bull market in bonds.

Nominal 10-year interest rates have dropped by nearly 2 percentage points for the Group of Ten countries since mid-1992, and since inflation has changed little (and is not expected to fall much below 3 per cent next year either) the effect can nearly all be attributed to the fall in real returns.

How much further can this trend go? Real yields are low, but not exceptionally so. Over the past 30 years real bond returns in the US, Japan and Germany appear to have averaged about 2.5 per cent; exclude the 1970s, when the real yield was negative in the US and Japan (but not in Germany) and 3 per cent would be more typical.

With global GDP growth running at only about 1 per cent against potential trend output growth of perhaps 2 1/2 per cent there is still considerable slack. Although we may be nearing the trough for real returns, we probably have not got there yet. But if recovery were to become more general next year there could be a rapid increase in capital market pressures.

MR RUPERT MURDOCH's News Corporation, the Australian-based media, film and publishing group, yesterday announced plans to create a new class of shares with 'super' voting rights, which would be issued on a one for one basis to existing shareholders.

The proposals, announced at News Corp's annual meeting in Adelaide, could allow the company to issue further ordinary shares in pursuit of expansion or debt reduction without diluting control.

The level of equity controlled by Mr Murdoch - either directly or through his family company, Cruden Investments - has fallen from 45 per cent to 32.7 per cent since 1990 as a result of equity-related issues.

Yesterday's announcement seemed to surprise the Australian Stock Exchange. Shares with 'super' voting rights have never featured in Australia. One official said the proposal raised fundamental investment issues and the ASX would need to canvass the financial community's opinion.

As the plan would tend to lock in the existing voting interests at News Corp, it would also leave the group well defended against potential predators.

Mr Murdoch told shareholders: 'We believe that, if we are successful in increasing News Corporation's capital base through the issue of equity, it must be done in a manner that continues current management.

'If we are to continue to grow and prosper and meet the demand of the technological age in which we live, it is important to ensure that the management that brought News Corporation to this point, be available to lead it in the future,' he added.

At the meeting, Mr Murdoch forecast a profit increase of about 20 per cent for the first quarter of the current financial year.

He defended News Corp's decision to slash the price of its two UK daily newspapers, The Times and The Sun. 'The pricing of all newspapers in Britain over the last five to 10 years has been well ahead of inflation. We were pricing ourselves out of the market.'

He predicted that BSkyB, of which News Corp owns half and in which Pearson, publisher of the Financial Times, also has a stake, should make at least Pounds 180m operating profit this year.

But the recent acquisition of the New York Post - the tabloid daily previously in bankruptcy - would do nothing to help the bottom line. 'We will probably lose in the range of USDollars 5m a year, maybe as high as USDollars 10m.'

News Corp was still interested in magazine publishing in the US, despite the sale of titles two years ago. It was also 'on the lookout' to buy more television stations, adding to the eight already owned. 'We will be able to buy, within the law, two more stations and then be covering about 25 per cent of the US.'

Lex, Page 18

MR CRISPIN DAVIS, managing director of United Distillers, the Guinness spirits division, yesterday resigned from the group by mutual agreement.

The surprise move comes during a troubled period for Guinness. It is under pressure from declining profits and from questions about its marketing strategy and partnership with LVMH, the embattled French group.

Mr Davis's departure, after little more than a year as head of UD, was said to be due to a personality clash with Mr Tony Greener, Guinness's chairman and chief executive.

Their relationship was affected by differences in management style and approach. It is understood Mr Davis's outgoing manner contrasted strongly with Mr Greener's reticence.

Industry observers, including some of UD's competitors, suggest that the differences were reflected in marketing strategy. While Mr Greener, with his background at Dunhill, maintained absolute faith in building premium brands, competitors were bewildered to find UD cutting the prices of some products. Its decision to reduce the strength of Gordon's gin was widely seen as a serious marketing error.

Such tactics were attributed to Mr Davis's marketing experience with Procter & Gamble. 'He was basically a commodity marketer,' said one rival.

At a recent City presentation, a slide showing a hand grasping a bottle of UD's Scotch on a supermarket shelf was followed by a slide in which the hand clutched a bottle of P&G shampoo.

Mr Davis took over as head of UD in July last year. He was recruited from P&G in 1990 as managing director of UD's European operations.

He had a successful career at P&G, joining as an assistant brand manager and rising rapidly to become UK marketing director. He ran the German operation before becoming US vice-president of the food division.

He was paid about Pounds 250,000 a year at UD, where he was on a three-year rolling contract. Compensation is being negotiated.

While Guinness searches for a successor from outside the group, UD's executives will report to Mr Greener. The group reiterated yesterday that there would be no change in strategy.

But the pressures persist. Market disappointment at a decline of 9 per cent in first-half profits was compounded by Mr Greener's forecast of flat profits for the full year and only modest improvements in 1994.

Mr Greener asserted that there was no intention of abandoning its international premium pricing policy. 'To move our brands downwards would put us on a slippery slope from which we would never recover.'

Guinness's difficulties have not been helped by the battering taken recently by shares in LVMH, whose profits have been hit by depressed champagne and cognac markets. Speculation persists, in spite of Guinness's constant denials, that the alliance is crumbling. Lex, Page 18

A RANGE of initiatives to speed up competition in the telecommunications market was unveiled yesterday by Mr Don Cruickshank, director general of Oftel, the industry regulator.

Mr Cruickshank said the measures would enable rivals of British Telecommunications to establish themselves more rapidly. In the next five years he expected competitors would invest Pounds 5bn-Pounds 6bn in the UK - roughly half BT's rate of investment.

The dozen initiatives cover issues such as portability of telephone numbers, publication of BT's previously confidential market information and access for competitors to BT's directory inquiries database. Although many measures are technical, Oftel believes that collectively they will make a big difference to the development of competition.

Mr Cruickshank was speaking following an industry-wide forum held on Monday in London to discuss arrangements for competitors to connect their networks to BT's. The meeting was attended by 18 operators including BT, Mercury Communications, several cable television companies and American Telephone and Telegraph, the largest US telecoms group. Both Oftel and BT said progress had been made but further discussions would be needed.

Mr Cruickshank said he did not expect strong resistance from BT to his agenda for promoting competition. He said BT had an interest in showing there were no obstacles to fair competition in the UK, not least because of its ambition to gain access to foreign markets.

Some of the initiatives are still under discussion but final decisions on whether to press ahead will be taken over the next six to nine months. The main ideas are:

Interconnection - Oftel is working on determining a standard menu of interconnection charges that competitors would have to pay BT for using its network. It is also considering specifying service levels and technical standards that BT would have to abide by when providing interconnection services; Number portability, which would allow people switching from BT to another local operator to keep their numbers; Market information - Oftel will publish information detailing market shares in different segments of the industry; Equal access which would allow customers with BT lines to use the long-distance services of rival operators as easily as BT's services; Opening BT's directory inquiry database to competitors.

THE GERMAN federal constitutional court yesterday cleared away the last legal obstacle to the ratification of the Maastricht treaty on European union.

The court's ruling was greeted with relief in European capitals, allaying fears that the German judicial authorities might impose conditions incompatible with the treaty which is set to become European law from November 1.

The court in Karlsruhe rejected the challenges to the treaty as either inadmissible or unsubstantiated, in a fundamental decision defining Germany's future attitude to European integration.

Mr Jacques Delors, president of the European Commission, said ratification of the Maastricht treaty would end a long period of uncertainty for the EC. But he warned: 'We cannot forget that the preoccupation of Europe today remains the recession and the growth in unemployment.'

Mr Delors avoided any note of triumphalism, a reflection of how divisive the ratification battles have been in Denmark, France, the UK and, latterly, Germany since the treaty was signed in December 1991.

'If we continue like this, failing to recognise the benefits of a European construction, losing our ideals and the will to achieve them . . . we will be marginalised,' Mr Delors, one of Maastricht's architects, said in an interview on German ZDF television.

'We must stop splitting hairs, being morose . . . we must resume moving forward,' he said.

Within hours, the German ratification law had been signed by President Richard von Weizsacker, and was dispatched last night by diplomatic courier to be deposited in Rome.

The decision was welcomed by Chancellor Helmut Kohl, who had staked his political reputation on the treaty and the European integration process. He said it was now urgent to proceed with the programme set out in the treaty.

Belgium, president of the EC, announced that the planned special summit on October 29 would go ahead.

Mr Jean-Luc Dehaene, Belgian prime minister, said the meeting would put into force the treaty's provisions covering the second phase of European economic and monetary union; common security and foreign policy; and co-operation on crime and justice matters.

EC leaders will try to reach a summit deal on the site of the European Monetary Institute, the precursor of the European Central Bank, as well as other sites such as the European environmental agency and Europol. Germany remains the leading candidate for the EMI, with Amsterdam staging a late bid.

The eight German judges decided that the process of European union did not conflict with the principles of democracy enshrined in the German constitution, thanks to national democratic controls implicit in the Maastricht treaty.

A win for all, Page 2

New Tory battle threat, Page 9

Editorial Comment, Page 17

See Lex

In their different ways developments at Grand Metropolitan and Guinness are reminders of how difficult the world spirits market remains. GrandMet's loss of the Absolut vodka brand shows the risk of acting as an agent for others. There will be a perceptible impact on profits from 1995, just as GrandMet is recovering from the dilutive effect of its Chef & Brewer sale. But since GrandMet owns all its other brands, there is no risk of a second hit and the damage is containable.

The unexpected departure of Mr Crispin Davies, Guinness's top spirits man, is harder to fathom. The most obvious explanation is that his background in mass-market consumer goods is not ideally suited to building premium spirits brands. That does not mean that his successor will have an easy task. And Guinness, whose shares have fallen 14 per cent since the interim results, is looking ruffled.

The German constitutional court decision on the Maastricht Treaty was at the benign end of the spectrum as far as the markets were concerned. There is no need for a referendum, and such conditions as the court did impose were not onerous. So it seems surprising that the main beneficiary at the end of the day should have been the D-Mark, rather than the other European currencies which stand to gain from monetary union.

One reason may be that while the court has done nothing to impede European currency union, its decision has not actually hastened it either. Economic convergence remains some way off. The D-Mark will also retain a certain safe-haven status as long as France clings to untenable interest rates. Finally, the court decision has no immediate bearing on monetary policy. Inflation and money supply growth are heading lower, but after yesterday's 6 per cent wage demand by the IG Metall engineering union, the Bundesbank still has reason for caution over interest rate cuts.

The acknowledgment by British Coal's chairman, Mr Neil Clarke, that the pits 'reprieved' in March face closure comes as little surprise. While the intention was for further coal contracts to be negotiated, the deafening silence from the electricity generators has told its own tale. Gas-fired plant is coming on stream quickly and the better performance of nuclear power has left no need for further coal.

A few of these pits may be leased by entrepreneurs like Mr Malcolm Edwards who think they can carve out a niche in the industrial and domestic market. But attention is on the 'core' pits which will be put on the block next year. There are plenty of practical problems to overcome - notably allocating environmental liabilities and dividing up the remaining three years of the coal contract among the pits. Yet the basic shape is becoming clear. A large chunk of liabilities will have to be left with a residuary body, and the final deals on the surviving pits may well be a hybrid of outright sale and operating lease.

If the pits do not go to mining giants, the capital structure of the bidding companies will need examination. Reliable cash flow in the first three years means that any buy-out could afford to assume some debt. That, however, would need to be paid down by 1998 when risks increase and contracts with the generators will be smaller and harder to secure.

The deal between Union des Assurances de Paris and Suez is a fine example of how previously irreconcilable parties can be brought together by force of circumstance. The pair have been haggling over control of Colonia, Germany's third largest insurer, for the best part of four years. But the looming privatisation of UAP and deteriorating trading results at Suez have helped concentrate minds. Selling UAP shares to international investors next year will certainly be easier now a deal has been struck.

It is less clear that the transaction will add much spark to UAP's shares. Exchanging its stake in French insurer Victoire with Suez for control of Colonia makes strategic sense. Yet it is unlikely to transform the group's prospects. Its shares have only just returned to the level of the 1990 rights issue which paid for the Victoire stake. By selling out now, UAP is reducing its exposure to the cyclical upswing in French insurance markets.

Once privatisation is out of the way, UAP might look for growth elsewhere - and possibly under new management should Mr Jean Peyrelevade, its chairman, make the rumoured move to Credit Lyonnais. With a bridgehead established in Germany, the UK looks the most obvious gap in its portfolio. The stake in Sun Alliance built up during the summer through Transatlantic, the investment company jointly owned with Mr Donald Gordon, could provide a toehold. But to judge by its dogged approach to Colonia, UAP will be prepared to wait.

Mr Rupert Murdoch's contrarian thinking has served his shareholders well. But his ambitions to create a differential voting structure at News Corporation go unhealthily against the grain of investor opinion. UK companies, such as GUS and Whitbread, have recently felt compelled to enfranchise non-voting shares. Continental European companies, too, are busy simplifying voting structures. The Australian stock exchange would hardly enhance its reputation by condoning the reverse.

The precise motivation for the plan is murky although there may well be a defensive intent. With a market value near ADollars 20bn (Pounds 8.6bn), News Corporation would appear impregnable. Yet, in bidding for Paramount, both Viacom and QVC have shown that some relative minnows have ambitions far above their stations. It seems more probable that Mr Murdoch simply does not want his family's 32.7 per cent shareholding diluted further. This could well have some bearing on as-yet-unknown succession plans. It could also prove crucial if many new shares were issued as part of any strategic alliance or grand expansion. With News's shares trading on a lofty rating, the temptation to fund acquisitions with equity is overwhelming. After all, News is painfully familiar with the perils of bank debt.

THE GOVERNMENT has rejected calls by banks to be shielded from the potential multimillion pound costs of cleaning industrial sites polluted by their corporate customers.

Mr Tim Yeo, the environment minister, is to tell leading banks today that the government believes they must bear some financial responsibility in cases where they have lent money to companies which pollute the environment.

Mr Yeo will tell the British Bankers' Association that the government does not accept that responsibility should fall solely on the polluting company, or on public authorities in cases where the company cannot meet clean-up costs.

He will say that banks are responsible along with polluters and landowners. 'They must live up to those responsibilities and not simply turn it all over to the government to sort it out,' the text of Mr Yeo's speech says.

The speech follows lobbying by banks to be protected from liability for clean-up costs in cases where they take possession of polluted land or where they lend money to companies and so might be held to have an influence over managements.

Banks have argued that they may limit lending to companies in some industries if they face unlimited liability for environmental pollution. They are worried some US legal standards may be adopted in Europe.

The European Commission has issued a green paper on remedying environmental damage which considers a single legal framework for liability. The UK government is also reviewing policy on contaminated land.

Banks have been particularly worried by the Fleet Factors case in the US three years ago, in which a court held that banks must pay for pollution damage if they had the capacity to influence the policy of a company.

Mr Yeo will say that the government does not favour the US framework, but liability 'should follow responsibility - possibly even to bankers under some circumstances'. Public funds should be used to clean up sites only where there is no alternative.

Mr Derek Wanless, chief executive of National Westminster Bank and chairman of the government's advisory committee on business and the environment, has been among bankers calling for banks to be shielded.

Mr Douglas Farrar is a rarity in Redruth, Cornwall: 'I'm the only Yank businessman down here. But the family has been made very welcome, even if we don't speak proper English.'

As managing director of the European subsidiary of Contico International, a Missouri-based manufacturing group, Mr Farrar is responsible for the company's Pounds 4.3m investment in the Cornish town. His factory opened a year ago to make a range of plastic household products for sale across Europe; the plant is cramped and within two years the 71-strong workforce should rise by more than half again.

Contico had considered other European locations. But in spite of worries that British workers would reject a 24-hour-a-day production regime, the comparative ease of setting up shop, generous grant aid and the English language - notwithstanding any transatlantic variations - gave Redruth the edge.

But if 36-year old Mr Farrar feels isolated he can take comfort from the ranks of expatriate managers like him, supervising the colossal sums which foreign investors have injected into the UK's industrial base during a period of unprecedented inward investment activity.

News that Mercedes-Benz, traditionally a hallmark of German engineering excellence, is actively considering Britain as the site for its planned small car manufacturing plant has caused considerable excitement in Whitehall.

But there is also concern in industry and government that Britain's best days as a magnet for industrial investment may even now be over; foreign investment, which has helped supplement the damaging domestic shortfall in home-grown manufacturing capacity and technological skills, could increasingly be directed elsewhere.

A study by the Centre for Economics and Business Research in London underlines the importance of foreign direct investment. It concludes that nearly one-fifth - more than Pounds 40bn - of the Pounds 220bn invested in UK industry in the past five years has come from overseas. The percentage of foreign-owned assets in the UK in relation to its total net assets - not including oil and financial services - now approaches 20 per cent. Five years ago, the figure just topped 13 per cent.

Of all non-EC companies with operations in the Community, nearly 40 per cent of them have opted for the UK. Both the US and Japan, the biggest external investors in European industry, have invested more in Britain than in any other EC country.

Last year, according to the Department of Trade and Industry, overseas companies initiated another 303 projects in Britain, aided by Pounds 100m of regional grants. The electronics, automotive, food and service sectors have proved the most active; the inventory of foreign investments so far involves 3,500 US, about 1,000 German and more than 200 Japanese manufacturing businesses. Overseas-owned companies provide some 16 per cent of all UK manufacturing jobs.

In spite of the political debate over whether Britain's success in winning foreign investment is rooted in its alleged 'sweatshop economy' or in more positive characteristics such as deregulation and low corporation taxes, the UK appears to have left the European competition standing.

But are things set to change?. While global recession has inevitably cut from its 1990 peak the level of inward investment, the fear is that other pressures might permanently undermine Britain's success.

According to Mr Howard Davies, director general of the Confederation of British Industry: 'The task of attracting inward investment on the scale we have seen in the past five years will become increasingly difficult.' Mr Davies' prediction seems safe, with some of the biggest investors refocusing their overseas activities. The US, which makes one-third of all its European investments in the UK, could be looking much closer to home.

'The US preference for the UK is changing,' says Mr Martin Gerra, president of Global Affiliates, the Washington-based international business consultancy, and a former manager of international economics at International Business Machines.

He says that closer trade links between the US, Mexico and Canada, even before ratification of the North American Free Trade Agreement, will give rise to a big increase in cross-border investment. 'Over time, US investment in Europe, relative to total foreign investment, will inevitably decline.'

Japan, the second largest investor in the UK, remains keen to invest in a country offering an EC foothold and which Japanese companies say has been welcoming and supportive. But the rush of activity which has made Japanese names commonplace on industrial estates in towns such as Telford could be over.

'Japan had a lot of catching up to do, which led to their investment boom,' according to Prof Douglas McWilliams, formerly chief economic adviser to the CBI and founder of the Centre for Economics and Business Research.

'In 1981, only 4 per cent of its assets were overseas, against 30 per cent for the US. But big Japanese companies have moved fast to raise the figure to an average of 15 per cent and now the pace has slowed. The UK will remain popular with them but investment is likely to decline over the next few years.'

A study by accountants Coopers & Lybrand concludes the UK also risks losing out on further, high-quality foreign investment. Mr Vince Taylor, one of the authors, says: 'The UK could be squeezed during the remainder of the 1990s between higher cost, but more centrally-located competitors within the EC, and the emerging economies which can undercut our cost base and which now appear able to match the UK in terms of quality.'

Though there is no evidence that inward investors are more likely to close down plants than local owners, companies are also intensifying the search for economies of scale as the European market becomes less fragmented. For example, CPC (UK), a subsidiary of the US food group, recently announced a switch in production of Knorr brand soups and stock cubes from Scotland to France and Italy.

'Where you close down will be as important as where you open up,' emphasises Mr David Rees, head of Ernst & Young's European location service: 'There could be good, strategic reasons for siting second and third investments away from the first.' Britain's position, he emphasises, is not helped by its continuing image as a less than wholehearted EC member, though ratification of the Maastricht treaty might help allay such perceptions.

Dr Wilfried Vossen, managing director of Plant Location International, the Brussels-based location consultancy, offers another view: 'If not signing (Maastricht's) social chapter means Britain's cost structures continue to provide a competitive edge over many of its European partners, then its record on inward investment should be safe.'

Competition to attract inward investment looking for a home within Europe is also escalating, with the number of investment promotion agencies working on behalf of regional authorities and local councils multiplying. Coopers & Lybrand calculates agencies worldwide have doubled in five years.

Mr Christopher Priston, director of the Invest in Britain Bureau, an arm of the DTI, claims it is 'still easier to put up a brass plate in the UK' than in most EC countries. But some such as France - previously giving low priority to attracting overseas investors - are working hard to make up lost ground.

Mr Priston, whose bureau handles 4,000 inquiries annually on everything from the incidence of earthquakes to membership of exclusive London clubs, warns that Britain must 'continue to improve transport infrastructure to help compensate for its location in Europe and also to raise skills training'.

Britain will also have to be demonstrably supportive to companies which have already set up shop. According to Prof McWilliams of the Centre for Economics and Business Research: 'You cannot underestimate the importance to inward investors, particularly the Japanese, of feeling the government is prepared to bat on their behalf.'

With some new investors into the UK privately complaining of being feted before their arrival, only to be promptly abandoned afterwards, the IBB is now contacting 1,000 established foreign companies to see if it can help solve any problems they may have.

A decision by Mercedes-Benz to choose Britain would inevitably be greeted by politicians as further proof of Britain's magnetic lure to world-class manufacturing companies.

Potential new investors, however, will not like being trampled in the rush by those anxious to win their favours. The mere prospect of Mercedes making cars in Britain led initially to an unco-ordinated scramble by companies and organisations to help secure the deal.

'Mercedes would be a real propaganda coup and we cannot afford to shoot ourselves in the foot,' says a DTI minister. 'It would give a very timely boost to an inward investment programme which we cannot allow to falter.'

ORGANISATIONS IN Britain's voluntary sector now play an important part in the delivery of a wide range of public services. In health, social services, housing and education, charities compete with public bodies, quangos and private companies to provide essential services. Some are now big players in the internal markets which have been established throughout the public services.

A report published yesterday by the Home Office suggests that providing public services undermines charities' claims to a distinctive role in society. It argues that those which take the government's shilling are no longer voluntary organisations, and have surrendered their independence and freedom to campaign. If they want to earn money by providing services, the report concludes, they should lose their charitable status, together with the tax reliefs that go with it.

Certainly the role of charities is changing in the new social market economy. Yet charities which provide public services are arguably doing nothing more than returning to the principles of their founders. Before the arrival of the welfare state, many social services were provided by voluntary bodies such as Barnardos and the Children's Society. Charities' return to these tasks reflects a growing understanding that the welfare state cannot satisfy all the demands of society.

Powerful lever

The big difference is that today's services are largely paid for by taxpayers' money. Before the welfare state, it was charitable donations that provided the income. Accepting public service contracts inevitably constrains a charity's ability to criticise the paymaster openly. But it offers the opportunity to influence government decisions from within. And the threat to withdraw noisily from public service contracts because of unacceptable policy decisions can be a powerful lever of persuasion.

The Home Office report suggests that campaigning work should be divorced from service provision. This might be a sensible choice for charities which find government contracts inhibiting their freedom to challenge the social order. But to prescribe this divorce for all charities would be to sacrifice an important link between campaigning activities and charities' ability to provide services. It is often the campaigning of the charity which makes people willing to work voluntarily or less expensively for it in the first place.

Indeed, it is precisely their ability to mobilise volunteers and augment taxpayers' money with charitable donations that makes charities such valuable organisations. As life expectancy increases, there will be a growing demand for the personal care services. Willingness to fund such services through taxes is unlikely to rise commensurately. Expanding the input of volunteers will be essential in meeting the demand.

Community's benefit

This is something which charities are well placed to organise. In an increasingly wealthy society, paid work is often unnecessary for people who have taken early retirement or left employment for family reasons. Charitable organisations offer such people an opportunity to use their skills for the community's benefit.

Volunteering also offers much to those who are involuntarily outside employment. The government has run several schemes that encourage unemployed people to become involved in community projects. Apart from the social benefits, these schemes encourage their participants to maintain their work skills and remain in contact with the world of work. So long as it is not simply a question of displacing jobs from one employer to another, more could be done to encourage voluntary work in return for benefits.

The Home Office report raises valid questions about the purpose of charities and their role in society. But in proposing that charities receive rewards for good contractual performance rather than by virtue of their charitable status, it would risk turning charities into little more than government agencies. The best charities are innovative, flexible and cost-effective. The tax benefits of charitable status and the risk of the odd subsidised broadside are an acceptable price to pay for such an asset.

The government has suffered an early setback in its well-flagged drive to weed out unnecessary regulations. It has decided the Weeds Act 1959 is indispensable. 'It is clear . . . that most people want to see it retained,' the Ministry of Agriculture asserts.

As the majority of readers will no doubt be aware, the act empowers ministers to take action against occupiers of land from the edges of which common ragwort, spear thistle, creeping or field thistle, curled dock and broad-leaved dock are spreading.

Good to hear African National Congress leader Nelson Mandela telling the CBI conference yesterday how the response to his whistle-stop international tour has proved a success 'far beyond' his 'wildest expectations'.

But Mandela should perhaps not underestimate the difficulty of a country coming in from the economic cold.

The October issue of CBI News includes a 12-page Market Report on South Africa, followed directly by a regional survey of Northern Ireland.

Last Thursday Francis Pike dropped in for a board meeting of Drayton Far Eastern Trust, before heading to Chelsea register office to wed Lady Annabel Goldsmith's daughter, India-Jane Birley. Pike's new boss, Philip Tose, chairman of Hong Kong-based investment bank Peregrine Securities, flew in for the day to be best man.

Without further ado, Pike left for Bombay, where he has 10 weeks before opening the doors of a joint venture between Peregrine and Indian tobacco company ITC.

Pike had spent the last 14 years at fund managers Invesco, 24 per cent of which is now held by Peregrine. When management upheavals at Invesco a year ago made his position uncomfortable, Pike, who has spent much of his time in the Far East, took a call from his old friend Tose.

Having created Hong Kong's largest independent merchant banking group in under five years, Tose's ambitions now stretch to repeating the success story throughout Asia.

With the help of close associate Li Ka-Shing, lack of capital is not one of Tose's problems. Peregrine last year sunk Dollars 30m into South Korea in another joint venture, with commodities giant Dongbang.

ITC, meanwhile, rejected several British merchant banks in favour of the Asian partner for its foray into financial services.

An adaptable sort, 39-year-old Pike spent his first three months in Tokyo living in a Zen Buddhist temple before getting stuck into what he calls the 'gaijin ghetto'. But he is far from unworldly, as his blue Ferrari, fondly remembered by Japanese friends, demonstrated.

In taking on the still formidable difficulties of the Indian market, he will not be stuck for more ways to make his mark.

A City lawyer and bibliophile was browsing among the second-hand bookstalls in Farringdon Road when a little tome, Oxford Essays on Jurisprudence, caught his eye. Imagine his surprise when he opened the volume to find an exchange of letters between Balliol College, Oxford and Robert Maxwell, dated September 1965.

The then senior tutor, Donald Harris, first notes his satisfaction at the completion of negotiations concerning the political fellowship the new Labour MP was about to endow.

It continues: 'When you dined at Balliol you expressed an interest in the enclosed volume, particularly the essays on Ownership and Possession.'

The new owner of the letter remarks on how the great man's memory of that particular chapter must have dimmed a little when it came to the Maxwell company pensions.

If this year's Nobel prize winners were to seek any tips from their immediate predecessors, the advice would surely be to press for the lolly quick.

Last year's laureates were spectacular victims of Europe's autumn currency crisis. Their awards, each worth SKr6.5m, were announced in October, but had shrunk by about 15 per cent in dollar terms by the time they were paid in December, following the November flotation of the Swedish krona.

The latest recipients have been told that their prizes, worth SKr6.7m, will again be paid in December. Now worth a third less against the greenback than before the flotation, the krona is still tending to slither southwards.

At least yesterday's winners, Robert Fogel of Chicago University and Douglass North of Washington University, should understand, for they are both economic historians.

They are also upholding a tradition, for American economists have now swept the board for four years running, with the University of Chicago featuring each time.

Self-effacing panel chairman Assar Lindbeck, the Stockholm University economist who earlier this year led a benchmark study on the precarious state of the Swedish economy, even went on to admit that the American dominance of the subject extended into new economic history.

The last non-American to win was Norwegian econometrist Trygve Haavelmo, whose reaction to the announcement in 1989 was to mutter his disapproval of prizes before disconnecting his telephone and retreating to his country cottage. Contrast Fogel, who was called by Stockholm at 5 am Chicago time with the news of his honour. Already in his office, he whipped up the telephone on the first ring.

POSSIBLY THE most remarkable feature of the European Community's Maastricht treaty is the profusion of contradictory opinions it inspires among both backers and detractors. The plan at the centre of the treaty, for economic and monetary union by the end of the century, was once vilified by a British cabinet minister as 'a German racket designed to take over the whole of Europe'. Yet the same plan is opposed by a majority of the German electorate, according to opinion polls, on the opposing grounds that it represents a ploy by Germany's EC partners to take over the D-Mark.

Yesterday's approval of the treaty by the Karlsruhe constitutional court clears the way for Germany to become the final EC state to ratify Maastricht. Since Germany is not only the EC's largest member, but also possesses its hardest currency, any worthwhile form of Emu cannot take place without its participation. The main uncertainty amid the many ambiguities of the Maastricht process - whether Emu will take place at the end of the 1990s, or at all - has, as expected, not been resolved.

The court made clear that Emu's original 'irreversibility' - a notion to which Chancellor Helmut Kohl himself at one stage gave some support - is no longer credible. 'With ratification of the (European) union treaty, Germany is not subordinating itself to an unclear and automatic mechanism towards currency union which it cannot steer,' the court said yesterday. Since hopes that Emu could take place according to the Maastricht timetable had already been set back by recession and currency unrest, this ruling, however, was little more than a juridical statement of the obvious.

Democratic principles

Considerably more important - and greatly to be welcomed - is the court's clarification of the procedures under which Germany would transfer to planned supranational institutions some elements of decision-making which at present are held nationally. These procedures relate in particular to the extension to the proposed European central bank of the monetary powers wielded by the Bundesbank. Such a shift, the court ruled, could be made only under conditions which conform to the democratic principles of the German constitution, under which state power is held to emanate from the German people.

The German parliament has already made clear during ratification that, before the D-Mark could be subsumed into a single currency, it would closely vet the conditions. This examination, it now appears, will relate not simply to the ability of Emu applicants to meet the Maastricht economic performance criteria, laying down which states should make the first move towards a single currency. More widely, parliament will be under the obligation to ensure that European integration meets standards of legislative transparency and accountability which the German people legitimately require to be upheld.

Focus of discord

How these safeguards will be maintained remains unclear. The proposed participation in European law-making of the Bundesrat, which represents the interest of the German Lander, could become a focus of discord with Germany's EC partners.

Mr Kohl has long urged increased powers for the European parliament as part of his original demand - rejected at the 1991 Maastricht summit - for monetary union to take place in step with the much more vague concept of political union. Although yesterday's ruling rejected any formal linkage between monetary and political union, the issue of giving the Strasbourg parliament more muscle will remain firmly on the German government's agenda.

The main message from Karlsruhe is that the process of European integration will suffer further setbacks unless it retains the consent and consensus of European electorates. The unpopularity of the Maastricht treaty displayed in opinion polls and referendums around the continent during the last 18 months illustrates how this consensus has been in short supply. By reminding the Community of the need for democratic and constitutional checks along the route to European union, the Karlsruhe court has not made the path any easier. But it has given politicians strong and wise guidance on how eventually to reach the destination.

The daily 'chokai' sessions for the 500 blue-jacketed employees at the Scottish manufacturing plant of OKI, the Japanese electronics company, have been upbeat affairs in recent months, writes Michael Cassell.

The morning meetings, intended to enable everyone to participate in running the company, take place against a background of growing order books and higher production.

OKI arrived in Cumbernauld in 1987 after a long search to find a European operating centre for its manufacturing, sales and research and development. The company, founded more than 100 years ago, had looked hard at Spain, France and Germany, according to Mr David Ennis, director of personnel and corporate affairs.

It chose Cumbernauld mainly because of the availability of skilled workers, good infrastructure and communications, as well as modest regional grant aid, which was helpful but not critical in reaching the decision. 'The golf courses might have helped a bit as well,' Mr Ennis concedes.

An initial investment of Pounds 20m - spent refurbishing a 500,000 sq ft factory, one of Scotland's biggest - has grown to Pounds 32m with a decision to install specialist plant to make electronic components for Honda's new Swindon car plant.

From Cumbernauld, OKI supplies its entire European customer base with an expanding range of products.

This customer base is now expanding following a decision to use Cumbernauld to service the US with some products. Rising Japanese manufacturing costs have prompted the company to switch to Cumbernauld the production of some dot matrix printers for export to the US. About 100,000 printers a year will be made and shipped from Scotland, instead of Japan, helping to safeguard local jobs and boost exports.

It is a similar story at Yamazaki Machinery UK, the Worcester-based machine-tool manufacturing subsidiary of Japan's Yamazaki Mazak. Last year, it won a Queen's award for its overseas sales efforts.

Yamazaki's UK operation has invested Pounds 40m at Worcester since arriving six years ago, making it Britain's biggest machine-tool maker. It sees itself as a European business serving mainly European markets: 85-90 per cent of output is sold outside the UK.

The company employs 270 people and calculates that it indirectly supports a similar number of jobs among local suppliers. It was attracted to the cathedral town by availability of labour, a mature supply base and the English language. It also received help worth more than Pounds 5m from the DTI, then available to companies implementing flexible manufacturing systems.

Yamazaki had no initial complaints about quality of materials, but unreliable deliveries were a problem. Now, partly thanks to Yamazaki publicising the plant suppliers' performances, 93 per cent of parts are supplied on time.

Mr John Maund, deputy managing director, says efficiency levels are high and pay is in the 'medium rank' for manufacturing.

Yamazaki stages an annual bonfire party on vacant land it owns alongside its Worcester plant. But the venue may eventually have to change: Mr Maund does not doubt future investment will fill the site.

A glow of nostalgia for Greek voters helped propel Mr Andreas Papandreou, leader of the Panhellenic Socialist Movement, back to power in this week's general election. Now he has to find a way of matching the increase in living standards that Greeks enjoyed when he was prime minister between 1981 and 1989.

After running an election campaign in which he pledged to fight for full employment, lower inflation and a lasting 'social contract' between employees and companies on wage levels, Mr Papandreou has to square his ambitions with Greece's deteriorating economic circumstances - particularly its escalating debt.

Efforts by the outgoing conservative New Democracy party to implement far-reaching structural reforms - including the ending of price restrictions, liberalisation of labour laws and strengthening of competition policy - deepened Greece's recession in the short term. The official GDP growth forecast for this year remains 1 per cent. What buoyancy there is can be found in the black economy, which, by some estimates, accounts for 40 per cent of national income.

Voters appear to have held Mr Constantine Mitsotakis, former Conservative prime minister, responsible for this state of affairs. His approval rating in the campaign never exceeded 25 per cent.

The origins of Greece's current problems, however, lie mainly in Mr Papandreou's last term in office. The effects were hidden as Greece benefited from large grants from the European Community, worth about Dollars 2bn a year through most of the 1980s. But, while such inflows helped the agricultural sector and boosted consumer spending, confidence among investors in Greek industry fell off sharply.

A principal cause was Mr Papandreou's decision in 1983 to nationalise Heracles General Cement, Europe's largest cement exporter, and one of Greece's biggest private-sector companies. The move appeared to lack rational explanation and was seen by many as a sop to the radicals in his socialist party. The result was to alarm investors.

Direct investment from overseas in Greek manufacturing and service industries totalled no more than Dollars 2bn in the 1980s, against Dollars 6.5bn in similar-sized Portugal, according to OECD estimates. Although membership of the EC from 1981 offered opportunities for increasing trade, Greek manufacturing shrank during the decade, competitiveness fell and exports grew only modestly.

The travails of manufacturers, however, did not dissuade the socialist government from extending the welfare state, by raising pensions and indexing public sector wages to inflation. In addition, the number of public servants increased in the 1980s by more than 40,000, or about 10 per cent. With spending exceeding economic growth, Greece's public sector borrowing requirement jumped from 5 per cent of GDP in 1980 to about 20 per cent in 1990.

The consequences of his last term of office will fill Mr Papandreou's in-tray as he returns to government this week. The New Democracy party tried to increase tax revenues and to cut civil service numbers, but made little headway. The pressures on Mr Papandreou for such reforms are just as compelling - particularly if Greece is to come close to fulfilling the economic convergence criteria of the Maastricht treaty. Progress on this front could also determine Greece's eligibility for future EC structural assistance.

Though Mr Papandreou is an economist, the signs are he may not give the economy his full attention. His health is poor; a heart condition restricts his working hours. Mr Papandreou prefers foreign policy. He has also to hold together a party that is given to disputes between radical and moderate wings.

His ability to indulge different factions is limited, however, as his party, Pasok, has endorsed the Maastricht treaty's ambition of European economic and monetary union, although its timescale for Greece to meet EC targets is longer than its Conservative predecessor's.

The Conservative government managed to reduce the inflation rate from 20.4 per cent in 1990 to 12.8 per cent last month. By Draconian curbs on public spending - including threats to sack chief executives of state corporations who awarded wage increases above a pre-set level - it also cut general government borrowing to 13.4 per cent of GDP last year.

But these achievements still leave Greece a long way off Maastricht targets. Accumulated debt, currently equal to about 120 per cent of GDP, is double the 60 per cent envisaged under convergence criteria. Debt raised on domestic financial markets has increased particularly rapidly to fund government spending. Interest payments on this debt will rise next year by almost 30 per cent to Dr3,000bn (Dollars 12.5bn), equivalent to 16 per cent of GDP. That means the government will have to raise an extra Dr300bn every month from sales of treasury bills.

'Greece has a huge amount of debt, more than many Latin American countries in the 1980s. It was able to go on borrowing because of being an EC member,' says Ms Miranda Xafa, economic adviser to Mr Mitsotakis.

Additional pressure on Mr Papandreou comes from an expected shortfall in tax revenue this year of about Dr800bn, caused by the recession and over-optimistic forecasts in last December's budget. Moreover, he is committed to cancelling Greece's privatisation programme, so ruling out about Dr330bn in privatisation receipts this year.

One alternative for Mr Papandreou would be to reduce debt charges by cutting interest rates, now at about 20 per cent on a one-year Treasury bill. But the risk would be large-scale outflows of capital as investors sought higher returns elsewhere.

The socialist government may feel obliged to take radical steps that previous governments have shied away from: making big cuts in public spending, eliminating civil service jobs, and curbing tax evasion in the black economy.

In the heady days following his election victory, Mr Papandreou has not given any details of his economic policy. The precedents only underline the difficulties before him. The Conservative government tried to boost efficiency at tax offices. But the finance ministry believes attempts to make life more difficult for tax evaders have been inhibited by corruption among tax officials.

Trimming the public sector payroll proved virtually impossible, despite the Conservatives' promises to the EC that 60,000 jobs would be cut between 1991 and 1993. Mr Mitsotakis says that, over the period, one person was hired for every three who retired from the civil service. But his claims are not supported by the government's economic advisers and it is far from clear whether the 60,000 target is even close to being achieved.

Yet the rewards for returning Greece's economy back towards steady growth, with public spending under control, would be substantial. The EC is set to provide up to Ecu20bn for infrastructure projects over the next six years. If competitiveness can be improved, there is also scope for increasing earnings from overseas and trade; the conflict in former Yugoslavia has not blocked Greek access to markets elsewhere in the Balkans and in southern Russia and Ukraine.

But though there is no formal link, political decisions on allocating EC funds may be affected by perceptions among member states about whether Greece is committed to economic reform. Mr Papandreou may also find it more difficult to convince investors that good times lie ahead than the voters who elected him on Sunday.

Sir, As a future first-time buyer I noted with great interest the article on the long-term view of the housing market ('The long view' October 9). I agree that a home is not a prime money-making asset in today's climate but I do not agree that there will necessarily be a shortage of first-time buyers in the late 1990s and early 2000s.

The reason that I will buy into the housing market in a few years' time is because I feel that owning a house will give me far greater security in later life than renting a house. With this in mind I feel that the market for first-time buyers will continue to prosper under a much 'wiser' generation.

Kaylene Eastwood,

Newbold College,

Binfield,

Bracknell, Berkshire RG12 5AN

Sir, Contrary to your report, 'Singapore goes all out to turn its citizens into share owners' (October 5), the Singapore government is not 'urging the public to go on a share-buying spree'. It is encouraging Singaporeans to own shares as long-term investments and take a direct stake in Singapore's prosperity and success.

Nor is the government granting 'considerable incentives to those who put their money into the stock market'. It is specifically offering a limited number of Singapore Telecom (ST) shares to each citizen at a 45 per cent discount when the company is privatised. This is no different from what the British government did when privatising companies like British Telecom and British Petroleum.

You said that 'Singaporeans have been bombarded by state-sponsored television and newspaper advertisements describing the virtues of share ownership'. The public education programme accompanying the ST flotation is smaller, in proportion to the size of the issue, than similar programmes in overseas privatisations, for example British Telecom.

You pointed out correctly that there is no guarantee ST will thrive after it is listed. This depends on the quality of its management and its ability to exploit rapid economic, technological, and regulatory changes in the telecommunications industry.

But the government is not forcing anyone to buy ST shares. The investing public, within and outside Singapore, will assess ST's prospects and decide what its shares are worth.

Why should Singaporeans blame the government for offering them a discount off the fair market price of these shares?

Abdul Aziz Mahmood,

High Commissioner

for the Republic of Singapore,

9 Wilton Crescent,

London SW1X 8SA

Sir, In so far as your leader, 'Cutting red tape' (October 11), refers to industrial health and safety legislation, you misconceive the problem.

The 'radical idea' of government setting out general regulatory objectives instead of detail has governed our whole approach for 20 years, but now needs applying in other regulatory areas, together with more risk assessment and a cost-based approach - of which we are also the main regulatory pioneer in the UK.

But there are three snags. First, much new EC-based legislation has been unnecessarily prescriptive despite our best efforts in negotiation. Second, industry demands guidance from the regulator, both on good practice and on what general provisions mean. Such guidance obviously includes detail, which is often given unduly prescriptive weight in civil litigation, or paraded as 'law' by safety contractors or less reputable safety consultants. Finally, many small businesses express a clear wish for detailed as opposed to general guidance.

All of these issues are being addressed in the Health and Safety Commission's current fundamental review of health and safety regulations.

John Rimington,

director-general,

Health and Safety Executive,

Baynards House,

1 Chepstow Place,

Westbourne Grove,

London W2 4TF

Sir, Louis Sherwood, chairman of HTV (Letters, October 6), brought out some key points which undermine the lobbying by certain ITV companies to get changes in the takeover rules. He pointed out that there is now a clear majority of ITV companies rejecting ownership rule changes.

What is surely equally important is that a large majority of advertisers - the companies which fund ITV - oppose changes in the ownership rules. The reason is clear: advertisers know that viewers will continue to be more loyal to ITV if they have confidence in the regional company serving them - not a large conglomerate with no real local identity. Also, advertisers do not want to see new cartels and monopolies develop within the ITV system when we have only just got rid of the old monopoly structure, which did so much harm. I hope very much that ITV will take note of the views of their customers.

If there are economies to be made - and we are extremely doubtful about the imaginary Pounds 100m savings - then it is the duty of the ITV companies to remove this cost now, and invest the sums saved in programmes or in better dividends to shareholders. But these savings are probably a myth since we all know 'big is beautiful' is a doubtful argument.

Let us remember, if we want to see competition and choice in ITV, as in broadcasting generally, it would be foolish to allow ITV to merge into a small number of groups, dominated by a few large ITV companies.

Kenneth Miles,

director-general,

Incorporated Society of British Advertisers,

44 Hertford Street,

London W1Y 8AE

Sir, Thank you for providing excellent information on business in Europe. Problems of unemployment and potential growth are clearly very challenging.

I have just finished an assignment in a textile operation in Europe. Some key data are:

Total wage costs per hour: (Europe) Dollars 21.25, (US) Dollars 10.25, (Mexico) Dollars 2.

Benefits as percentage of total wage: 44, 22, 40.

Percentage absent from job: 10-20, 2-4, 1-3.

Approximate employee hours worked per year: 1,490, 1,860, 1,940.

Plant operating hours per year: 5,150, 8,400, 6,000.

North American and European personnel at all levels are going to have to go back to work - fewer holidays, and benefits with more flexibility. There are not enough technology jobs with high pay to provide employment for everyone who wants such a job.

New plant, property and equipment is so expensive that plants must have the capability of operating 168 hours per week for 52 weeks per year with little overtime. No business can forecast customer demand with sufficient accuracy, so personnel and other resources must be shifted about for best operations.

High-cost nations, including the US, must change. Otherwise, growth and employment will be shifted to low-cost countries.

Frank C Wilson,

president,

International Management,

PO Box 1213,

Gainesville,

Georgia 30503-1213, US

There was more than a whiff of history about last weekend's summit of the Council of Europe in Vienna. Parallels were drawn between the 'concert of Europe' established at the 1815 Congress of Vienna to keep the post-Napoleonic peace, and this Council of Europe whose 32 members were meeting to try to define a post-cold war European order.

At least, that's what the more visionary among them thought they should be doing. Others may have had a more limited view of what it was all about. The council can hardly claim to be one of the main centres of power in today's world, or even today's Europe. It does not deal with military or economic matters, and neither the US nor Russia is a member (though Russia has applied to join). Their representatives were cleared from the room, along with other riff-raff such as the presidents of Albania and Croatia, not to mention myself, after the opening speeches and before the 'working session' began.

Officially, the summit had serious work to do. It had to streamline the control machinery of the European Convention on Human Rights, and to agree on ways of protecting national minorities. In reality all that had been done before it started, in months of negotiation among officials. The summit itself was a series of set-piece speeches, most of which were distributed to the press.

Two speeches made a particular impression on those who were privileged to hear them - both made by presidents who have been central figures on the European stage but no longer enjoy the reality of power in their own countries. The summit, an occasion for sounding alarms and setting guidelines rather than detailed horsetrading, might have been tailor-made for them.

Indeed, it was tailor-made by one of them, for the summit had been Francois Mitterrand's idea. The French president's speech - 35 minutes without a text - seemed to some of those who heard it like the final homily of a patriarch to his wayward children. As paraphrased by the well-briefed reporters of Le Monde, the French president 'described the tormented, incomplete landscape of the greater Europe - with fragmentation, dislocation, war on one side, and on the other a multiplicity of institutions with only a partial vocation, none of them capable of giving structure to the whole'.

The EC, he pointed out, has a very high entrance fee, and 'cannot, in the foreseeable future, open its doors to all'. As for the Conference on Security and Co-operation in Europe, it is 'everyone and no one', said Mr Mitterrand. 'Who has ever seen their security protected by it?' Apparently he did not mention Nato, but he hardly needed to. Delegates had only to return to their hotel rooms and switch on CNN, to see President Bill Clinton struggling to extricate the US from Somalia while reporters quoted White House officials as saying the chances of the US committing troops to keep the peace in Bosnia were now greatly reduced.

So, in Mr Mitterrand's view, there is a need for some new structure to fill the vacuum. Could not the Council of Europe become its 'embryo'?

Mr Vaclav Havel spoke next. His speech had been translated, printed and distributed hours before, but it was a devastating riposte - not only to Mr Mitterrand but to all the west European leaders present. He denounced 'the erroneous belief that the great European task before us is a purely technical, a purely administrative, or a purely systemic matter, and that all we need to do, therefore, is come up with ingenious structures, new institutions and new legal norms and regulations . . . without the negotiating partners ever attempting to change anything in themselves and in the habitual motives and stereotypes of their behaviour.

'Twice in the 20th century,' the Czech president went on, 'the whole of Europe has paid a tragic price for the narrow-mindedness and lack of imagination of its democracies' - first when they retreated before Nazism and second when they 'allowed Stalin to swallow up one half of our continent'. And now, he warned, 'I am afraid a third such failure is threatening us. I am not only thinking of the caution and indecision that mark the attitudes of the developed part of western Europe towards the post-communist countries. I am thinking as well, and above all, of how they have behaved so far in relation to what is going on in Bosnia and Hercegovina, and in the whole of the former Yugoslavia . . .

'If various western states cannot rid themselves of their subconscious drive for a dominant position in their own sphere of interests, if they don't rid themselves of their self-centred protectionism and stop trying to outwit history by reducing the idea of Europe to a noble backdrop against which they continue to defend their own petty interests, and if the post-communist states do not make radical efforts to come to terms with the ghosts their newly won freedom has turned loose, then . . . '

Then what? A presidential speechwriter must have intervened, for Mr Havel concluded rather weakly: 'then Europe will only with great difficulty be able to respond to the challenge of the present and fulfil the opportunities that lie before it'. I would bet you anything his first draft said 'we shall all go to hell', or words to that effect.

Mr Havel, of course, is a playwright, not a politician. And the part he has written himself, in the latest act of Europe's long-running tragedy, is that of the fool. One diplomat compared his Vienna speech to 'farting in church'. But in Shakespeare, and perhaps in other playwrights too, the fool often proves the wisest member of the cast.

The Bush Theatre has many virtues but is not normally a load of fun. This week it has thrown-off its sackcloth and ashes and gone up-market with a sprightly comedy about junior ministers in the Conservative Party. Moreover, Keyboard Skills does not even sneer at the Tories in their misfortunes. At times, it is a bit of a sentimental weepie.

The keyboard skills are not those of the piano. They belong to the typing-room. There used to be a woman, played here by Marcia Warren, who trained young girls to become secretaries, indispensable to their boss and perhaps one day becoming his wife. Trouble almost invariably followed, of the kind you read about in the newspapers every other day.

True, much the same thing happens in the Labour Party but, without saying so directly, Keyboard Skills is unmistakeably about the modern Tories. Watch (it would be hard not to) the immaculate performance by Deborah Findley as the girl in question. She is well-dressed, well-coiffured, relatively efficient, patient, forgiving and totally well-meaning. Only when it comes to the mind, which it does not very often, is there something lacking: it is not her fault that she has not been properly educated. She wants her man and will protect him. But the man, through a mixture of vanity and ambition, lets her down. Even then she may stick by him.

After so many real-life stories, there is a danger of parody. Keyboard Skills, written by Lesley Bruce, who learned her own skills while working at the BBC, avoids the pitfalls. As the wife of the junior minister, Ms Findley is an altogether stronger and more interesting character than her husband. Yet Jonathan Coy, as the minister, is not entirely caricature in the way of (say) Spitting Image. He wants a Cabinet job in the next 18 months, then one that really matters before the general election, and who knows what might happen after that? He might even become - he does not say the next two words, but we know what he means. This is quite close to the bone.

Of course, he gets into trouble. Do not expect a David Mellor story. The plot is much cleverer than that. Do not expect an attack on the media either. The newspapers are simply a power in the background. They never pounce and indeed never appear. The minister leaves his bag unattended in a pub in Bromley, rather as the late Richard Crossman (how the social nuances change) once left his papers behind in Pruniers in St James's Street. It is the minister's bag that is taken by the police for an IRA device, though it turns out that there is a real one as well.

There are some lovely twists. If the junior minister seems less than a Tory patrician, he is nothing like such a creep as the young Tories coming up. Early in the play, with a set cunningly designed by Robin Don, we have a peep into the minister's wardrobe. It contains several dinner jackets and about 10 suits in varying shades of grey. The younger MP, aspiring to become a junior minister and whose surname is Compton-Miller, wears a bright blue cummerbund and tie to match.

Wardrobe matters. Almost the best scene in the play comes when Ms Findley opens her own. It is very extensive: from Gucci to the Scotch House, everything that the wife of an ambitious Tory MP could need - 'stylish without being showy', 'sexy without being tarty'. The descriptions go on as, one by one, she throws her costumes to the floor. An impressive array of shoes remains unflung.

This is a much better political play than David Hare's The Absences of War at the National Theatre: livelier, more contemporary and avoiding moralising. If it has a message, it is Tory feminism. The piece is directed without a single fault by Geraldine McEwan. Yet one should be wary of talking about transfers. The production is designed for the small stage, which is probably where it should stay.

Bush Theatre, (081) 743 3388

A celebration of Czech music such as the London South Bank has mounted - the three-week-long 'Czech Festival', now halfway through its course - is bound to follow a well-marked route-map. Dvorak, Smetana, Janacek, Martinu, Suk: these are the obvious attractions of the Czech musical landscape, and there is no sense in not paying all of them properly dutiful attention.

But, all to their credit, the series organisers have attempted to round out the experience by dotting in a few less frequently-visited stopping-points on the schedule. The programme of operas associated with the Terezin concentration camp (on which John Allison reported last Saturday) was one such. Another was the Monday-evening recital by Agon, the Prague-based new-music ensemble, only 10 years old and paying its first visit to Britain.

This was a snatch of Czech cultural history in demonstration. From the start, Agon's declared 'underground' outlook and taste for the gamut of postwar Western modern-music styles and pursuits were evidently much frowned on, turning the composers who wrote for the group into a sort of Prague musical 'salon des refuses'. Even now that political changes have led to the dismantling of the country's state-dominated musical machinery, it remains (one gathers) obstinately outside the Prague musical scene.

Monday's programme, a showcase of some of the wildly varied musical manners Agon has been investigating, explained why. Indeed, the concert provided a good deal more illumination into Czech cultural politics in the dying years and then aftermath of Communism than actual listening pleasure. Whether by intention or design, the outlook seemed to be as much purgative as exploratory: with the exception of the opening work, Jan Rychlk's African Cycle (1961), a rather delightful short outburst of naive-primitivist energy, everything that followed was designed to Stretch Horizons with a vengeance - and with a problem for the listener for whom these particular horizons may have been stretched to breaking point.

In Zbynek Vostrak's Secret Fishing (1973), this involved Stockhausen-ish doodlings for four separate instrumental groups. In Rudolf Komorous's York (1967), it meant post-Dadaist whimsy. Peter Graham's Get out of whatever cage you are in (1992) was a noisy happening on (as the title suggested) John Cage-style chance-principles. Martin Smolka's Rain, Roofs (1993) slammed out a series of chords which were then allowed to disintegrate, at wearisome length.

The cacophony of The Fire is Mine (1993) by Petr Kofron, Agon's conductor, eventually drove me out of the hall: the point of this anarchic exercise in noise-for-noise-sake was plain enough - but it was clearly intended for an audience entirely different from Monday's venturesome Purcell Room handful.

Last week's viewing taught me another use of the word 'mellow'. On Teenage Kicks (BBC2, 8.00), young teenagers explained that 'mellowing up' is one of the agreeable states of mind they achieve from doing drugs. 'Mellowing up' also perfectly captures the goal sought by millions of adults at least once a day as that first icy campari or warm claret courses down their gullets.

The much-publicised statistic was that 50 per cent of teenagers have experimented with an illicit drug. It came from an unpublished Manchester University survey of 750 teenagers in the north-west of England, starting-point for the documentary. But is this figure really so alarming? As a pleasant-sounding young lass of around 15 told the interviewer, 'Everyone's tried everything'. Her ambition was to go into the police force.

What is youth if not the time to experiment? Clearly, more youngsters today do drugs than in my generation, and unlike us they have access to a veritable cocktail-cabinet of the stuff at very cheap prices; Pounds 2.50 for a tab of LSD, cannabis for two nights for Pounds 1 a head. What one really needs to assess is how serious are the possible consequences.

Kids interviewed on the programme were adamant that they would not be graduating to 'dirty', addictive drugs. They take pleasure from feeling that they are in control of potentially hazardous substances which they pick and mix with a sophistication not so far removed from a wine-connoisseur planning what will be served at dinner.

One of the film's themes was that drugs have always elicited a hysterical response from the older generation. These days, politicians find the demonic image of the drugs is particularly welcome since it is more convenient to blame rising crime on drugs than to fend off the suggestion that high youth unemployment is the key factor in increased burglaries and muggings.

If it is true that 50 per cent of young people take drugs 'as casually as their parents drink or smoke', does it matter? Reading this column will be bankers, publishers, doctors, and barristers, people who themselves were once teenage drug-takers. It is interesting to reflect how different things might have been if they had they been caught.

Nowadays, the police let off many people caught with drugs; in 1991, 50 per cent of drug offences were dealt with by cautions. One of the many unsatisfactory aspects of the current situation is that it gives the police too much leeway to discriminate over which kid with cannabis they prosecute - Wykehamist or Walthamstow black.

The only reference to class background and drugs was an academic's vague observation that 'people from middle-class homes turn up in the statistics'. The real risk to teenagers' health was another topic skirted round rather than addressed. We heard that 'every weekend' sees drug tragedies at a Manchester hospital; how many are teenagers and what have they taken? Similarly, how real a risk is dehydration for the frenzied dancers at all-night parties, swallowing 'uppers' and Ecstasy at Pounds 15 a go?

Even so, this was a strong programme which will surely have nudged some viewers nearer the notion that government needs to engage with the question of liberaling drugs. As another good documentary, BBC 2's Assignment: The War on Drugs recently showed, it is an opinion increasingly common in Europe and the US, and argued by some policemen here. At the very least, Teenage Kicks showed that for adults to base their views about drugs on complacency, double-think and ignorance is no use as a response to teenagers' natural desire to mellow up of an evening.

For a lesson in how not to edit a documentary you needed to watch two documentaries on Thursday; the week's instalment of The Dog's Tale (BBC2, Thursday) and C4's Critical Eye: Proud Arabs and Texas Oilmen. Both programmes were quite extraordinarily disjointed, leaping from subject to subject and, in the case of the latter, chucking images together in an infuriating way. This was a pity because both had interesting material.

The Dog's Tale investigated the spiritual significance of the dog across cultures. A Siberian tribe merited only a brief appearance because of their interesting but unphotogenic custom of sacrificing huskies. The Dalai Lama was interviewed in a humorous mood, wondering whether because one of his dogs has no sex drive it suggested that it was a reincarnated monk.

The programme continually veered between two fascinating films, one of which was the opposing attitudes to the dog held by Zoroastrians and Moslems in Bombay and the other dog-fighting in Japan. One moment we were watching a Zoroastrian boy being ritually washed in bull's urine. The next we were with Nobaharu Hamono, godfather to a clan of Yakuza, Mafia-style mobsters, watching Tosa dogs fighting in a forest near Tokyo.

Tosa dogs were an unexpected result of contact between western missionaries and the Japanese in the last century. In the second world war, Tosa fights entertained troops at the front line. Now Tosas amuse Yakuza bosses, who will spend as much as Pounds 1 million each on holding a tournament. Rules are strict and dogs lose if they make as if to copulate - another clue, perhaps, to the past life of the Dalai Lama's dog?

'The last people to deal properly with proud Arabs are Texan oilmen like Bush and Baker, impatient men', ruminated Lord Healey in the C4 documentary about the Gulf War and the effect on Iraq of sanctions. Lord Healey cast doubt on the US official figure of the casualties as being between 75,000 and 120,000, quoting instead a figure of 75,000 just for civilian casualties. Lady Olga Maitland stoutly maintained that the war was 'a job well done'.

The film's thesis was that the US bullied, bribed, and ignored the UN, and that there was no moral justification for the war. Oddly, it overlooked the claim for Iraq's nuclear capability and it also left Israel quite out of the picture. However, its principal weakness was in a bombardment of images which were often dubiously relevant and hackneyed to boot. The narrator had an exceedingly boring voice.

From almost the first line spoken in Mark Lawson's play, The Vision Thing (BBC 2, 925), I thought we were in for a bad do. As the Tory prime minister (competently acted by Richard Wilson) walked to the podium to address the party conference, his party chairman (hammed up by Derek Jacobi) muttered: 'Let's hope he gets their clitoris.' And Lawson thinks that is funny?

It might sound like an obvious recipe for success; Lawson, a journalist, writes a satirical play about politics. Think of Swift, one of the greatest satirists in English literature, who laboured for years as a parliamentary sketch writer. Aha, but Tale of A Tub or Gulliver's Travels were fantastical and wildly inventive. Lawson's play was simply a rehash of all the Tory party's scandals and mishaps of recent years, material well and truly done to death by every comedian and punning headline-writer.

After a brief flash of passable invention - the PM hearing the voice of God - the play reversed into a sputtering imitation of the bonfire of the vanities. Its structure was incoherent. Press secretary Mark Fisher (Nathaniel Parker) starts out as narrator of the God-plot, but then becomes just another character in the second story of how as a young foreign secretary he is brought down by newspaper revelations of his extra-marital affair. Jokes about relations between the Tories and the Press had a deadly knowingness.

Next time Mr Lawson writes a play, the vehicle for his satire should preferably be something he knows nothing about. Might I suggest Tosa fighting?

The pianist Nicholas Walker - early mid-30s, one might guess, and just starting to acquire a reputation - made his Wigmore Hall debut on Monday, with a boldly obscure but fervently Slav-oriented programme. The only non-Slavic composers, Beethoven and Liszt, were represented by inspirations from eastward: a polonaise and variations on a Russian dance from the one, arrangements of Russian songs from the other.

But my real reason for going was that Walker is engaged in recording (for ASV) the complete piano oeuvre of Balakirev, including three pieces in this recital. Nobody else has 'done' Balakirev yet. My conviction is that among piano-composers Balakirev was a great minor master; and that a rediscovery of him, long overdue, should give unexpected pleasure to a lot of music-lovers. So, as a closet Balakirevite I have a keen interest in how his piano music may fare now. He wrote just as many - more than 40 - fine, undiscovered songs as well, but we shall have to wait; some of them require brilliant pianists too.

It was Balakirev who established the 'Great Five', or 'Mighty Handful' of Russian nationalist composers: himself, Mussorgsky, Rimsky-Korsakov, Borodin and the now-forgotten Cui. None of them had any formal Western training, but Balakirev had been a practical musician from his earliest years, long before Glinka made him his protege in St. Petersburg. His only piano teacher was a pupil of John Field (who invented the 'nocturne' before Chopin), and he learned the mid-19th century piano repertoire thoroughly - Hummel, Field, Schumann, Chopin, Liszt. From that, he developed his own fastidious, sparkling piano idiom, which demands strict digital clarity, a wide stretch and plenty of elan.

Walker proved to be the nearest thing to a natural Balakirev performer that I have heard in a long while. When Western pianists go Slavophile, it is nearly always through seduction by Skryabin (Chopin carried to visionary extremes), Rakhmaninov (restless passion, sumptuous noise) or Prokofiev's grittily athletic sonatas. Except for the lusty Islamey, his only well-known piece, Balakirev was a world and almost a generation away from that. Walker's own programme-note called him 'a Russian cocktail of Chopin, Liszt and the Orient', but more could be said: his music is tidily intricate, poised and lucid, with an exotic scent but scarcely a superfluous note.

Too often modern virtuosi deliver Islamey with heedless vulgarity, at grave cost to its best musical effects. Walker's heart and fingers were in very much the right place for Balakirev - roughly a century ago, with all the apposite period-finesse. Candid passion is not his forte: shorn of that, Rakhmaninov's op. 33 Etudes-Tableaux sounded like bleak, fascinating, experiments in the surreal. His Liszt and early Chopin were elegantly calculated, where a dose of extrovert charm would have been a useful bonus.

In Walker's scrupulous Balakirev, however - the sixth Mazurka, the second Nocturne and a Glinka fantasy - we wanted no more than another degree or two of thrustful elan. He played the Mazurka so searchingly as almost to forget its essential lilt. On the forthcoming CDs, what will he make of the towering exuberance of the superb Sonata finale, the winsome glitter of the last Waltzes and the Tarantella, the racing chiaroscuro, the marvellous squib 'La Fileuse'? Given Walker's sympathetic strengths, and with no other competitors in the field, the question pleads for a happy answer.

ScreenPlay; Safe (BBC2, 9.25) won two awards at the Edinburgh International Film Festival this year, a not inconsiderable achievement for a small-budget film against lavishly funded competitors. It is a typical teenage romance of our time, which means to say that it is about homelessness, drugs, alcohol and prostitution.

Notes written on lavatory paper by hunger striker Bobby Sands in the Maze Prison in Northern Ireland are treasured by Republicans as if they were holy relics of early Christian martyrs. Timewatch: Hunger Strike, a Hidden History (BBC2, 8.00) disinters the ghastly 1981 confrontation between the British government and Republican 'martyrs', 10 of whom fasted to death.

Another jail-death, this time inflicted by the state through lethal injection, is examined in Inside Story: Rector versus Clinton (BBC 1, 9.30).

In January 1992, with poll ratings looking queasy, governor Bill Clinton showed his cloven hoof - or if you prefer, his passion for justice.

He rejected the appeal for clemency of Rickey Ray Rector, a mentally ill black murderer.

When Eiko Fukagawa, a 40-year-old housewife in Tokyo, turned on her television last August, she was surprised to see an unfamiliar advert with a film star shaking a translucent rubbish bag, telling viewers about new rubbish collection rules due to begin this month. 'At first I didn't quite understand what it was about,' she says.

Fukagawa was not the only one confused by the sudden changes. The Tokyo metropolitan government's decision to enforce the separation of combustible and unburnable waste using translucent bags, has caused such an uproar among residents, retailers and plastic manufacturers that city officials have been forced to postpone the changes until January.

The new rules, which require rubbish to be thrown away in semi-transparent bags approved by the metropolitan government, apply to the 3.4m households in Tokyo's central 23 wards. In order to burn easily, the polyethylene bags must contain 30 per cent calcium carbonate. Initial plans also required residents to write their names on the bags.

However, the unexpected announcement and rumours that rubbish thrown away in bags other than the designated type would not be collected, caused panic buying of translucent bags, triggering shortages at supermarkets. Amid the confusion, some households were visited by door-to-door salesmen claiming to be Tokyo metropolitan government employees, trying to sell translucent rubbish bags at high prices.

On October 1, only about 10 per cent of the rubbish was thrown away in the designated bags. The confusion was such that Shunichi Suzuki, governor of Tokyo, had to apologise before the city assembly. 'The Tokyo government is to be blamed for the short notice over the rule changes,' he said.

Many people are still unhappy at having to pay double the price of the ordinary plastic rubbish bags for the designated ones. And the requirement to label the bags with residents' names drew so many complaints from people who saw the rule as an invasion of privacy that it was abolished.

Retailers still hold stocks of black plastic and paper rubbish bags and manufacturers are unable to catch up with the demand for the new translucent ones.

Other Japanese cities which have implemented similar changes in rubbish collection rules have owed their success partly to starting their promotional campaigns one or two years before their implementation.

The Tokyo government, which started publicising the changes in mid-August, admits that the campaign period was too short. 'We now realise we need time to make people understand the purpose of the changes and to allow retailers and manufacturers to get rid of their inventories,' says a spokesman at the Tokyo sanitation bureau.

However, the spokesman adds, the tumult has brought Tokyo's rubbish problem to the centre of everyone's attention. 'Awareness of the seriousness of the situation needs to be raised,' he says.

Having seen a sharp increase in rubbish during the economic 'bubble period' of the late 1980s - last year's Tokyo garbage total was 4.5m tonnes - the city's existing waste landfill will be full in two-and-a-half years. A new landfill, planned for the Tokyo Bay, is expected to last only 20 years.

The Tokyo sanitation bureau says that Tokyo's unburnable waste contains 20 per cent combustible rubbish, increasing the bulk of waste put into landfills, while its burnable waste contains 10 per cent unburnable rubbish, which decreases the burning efficiency of the incinerators. By making people use translucent bags, 'they will be more responsible for their rubbish,' says the bureau.

The new rule is also expected to protect Tokyo's rubbish collectors, who face a high risk of being injured by broken glass and bamboo skewers in the bags.

Over the next three months, the city government intends to increase its campaign activities, and explain to residents what is burnable and what is not. The city intends to collect 'incorrect' rubbish for a while after it implements the rule changes in January.

Meanwhile, the city's sanitation bureau faces a challenge from plastic bag manufacturers, who are unhappy with the rule changes.

'We weren't even consulted,' says the Japan Polyolefin Industry Association, which says many of the smaller plastic bag makers may be hit by the shift in new requirements.

'Making the designated polyethylene bags containing calcium carbonate means capital investment, which is hard for smaller makers already facing hard times due to the bad economy,' says the association, which officially handed in a complaint to the Tokyo metropolitan government last week.

The association is also challenging Tokyo's notion that the bags containing calcium carbonate will burn more easily than traditional polyethylene bags. It contends that since the designated bags are thicker than the usual polyethylene bags, the amount of heat needed to burn them does not differ radically.

Some of the road signs in deepest Saxony are rusty. But there is no mistaking the route to Wismut, one of the largest uranium mines on the European continent.

Follow the direction leading to the giant, brown mountains of waste dug out from the mines. Then, just a few kilometres before the small town of Aue, turn off and drive along a small road. There, former miners who spent years underground are now working on state-financed job creation schemes, weeding, mending the roads and putting up fresh signs. Before German unification, there was hardly any need for signs. Wismut was out of bounds.

'Wismut was a state within a state,' says Jana Bienick, a 29-year-old official at Aue's city hall. 'It had its own hospitals, its own kindergartens, its own transport system. It was a system within a system. But not anymore,' she added.

'But please, just remember, it was not that bad. There has been a lot of negative propaganda about Wismut. When the press was allowed to come here in 1990, some journalists were afraid to get out of the car in case they would get contaminated. They did not understand that it was not like that at all. We want companies to invest here.'

The uranium mines in eastern Germany straddle the states of Saxony and Thuringia. Dating back to medieval times, they provided a livelihood for the local population because they also contained silver deposits. But when the Red Army took control of the former East Germany after the second world war, it was not interested in silver, but uranium, crucial for building up its nuclear capability.

The Soviets were set on tapping the potential of the hydrothermal vein deposits near Aue which contained high percentages of uranium. As a means of seeking war reparations, the Soviet Union confiscated the mines and, in 1947, placed them under a company called the Sowjetische Aktiengesellschaft (SAG) Wismut. Seven years later, Moscow euphemistically created a joint venture in the region, called Sowjetisch-Deutsche AG (SDAG) Wismut. Soviet miners and engineers were moved to the region to supervise the digging of the mines. The Soviet Ministry of Defence issued the instructions.

Wismut was worth the reparations. Between 1946 and 1990, more than 220,000 tonnes of uranium were mined and shipped to the Soviet Union. 'That was about a third of the world's production,' says Werner Runge, spokesman for Wismut.

Throughout this period, a top security network, employing 40,000 people, was created. 'The entire system was tightly controlled,' explains Runge. 'Special buses collected the employees to and from work. It was a highly organised state within a state. People's lives were intrinsically linked to Wismut. It is difficult for them now to adapt to the new conditions. Less than 4,500 workers are today employed on the sites. Not to mine, but to clean up.'

The task is awesome. As soon as the German government secured control of the mines after October 1990 and closed them down, Klaus Topfer, the country's environment minister, moved quickly to assess how long and how much it would cost to try to decontaminate, or stabilise, the sites.

Under Soviet control, the waste rock from the mining was normally piled outside mine-shafts, with little effort made to replace it into the exhausted mine volumes.

The waste rock contains small but significant amounts of radioactive, unprocessed low-grade uranium. Vast piles can be seen near Aue: 42 of them cover an area of 310 hectares and a volume of 45 cu m. At the Ronnenburg site in Thuringia, the amount is even larger - 100 cu m of waste.

The federal authorities have embarked on a massive two-stage investment programme totalling DM13bn (Pounds 5.2bn). First is an attempt to level off the high piles to avoid mini-avalanches. The piles cannot be disposed of due to their size and because there are no suitable alternative sites in this fairly densely populated area.

Plans also include creating channels to run down the piles to prevent rainfall seepage and contamination of what remains of the uncontaminated water supply. Progress so far has been remarkable. More than 30 hectares have been recultivated. Although no vegetables fit for human consumption will be grown, some grass and plants have been sown.

The second stage of the programme is more difficult. When digging in mines stops, the water levels, contained during the mining through pumping, rise. The underground water in Wismut is contaminated so the authorities have to be careful to avoid further contamination by flooding.

Dietmar Rosmej, an engineer who worked at Wismut until all mining was stopped in late 1990, says this task is vast. 'As part of the programme, we have to prevent any fresh rain water coming into contact with the underwater levels.' The government estimates it will take 15 years to stabilise the region.

The inhabitants of Aue have mixed feelings about the clean-up. Some regret the loss of job security. 'The closure of Wismut means very high unemployment,' says Michelle, a mother on a job creation scheme at the city hall.

Others are almost defensive about the past 40 years. 'Oh, well. We were born here. We worked all our lives here. It was OK. We had everything we wanted,' says Heinrich, a technician who is helping with the clean-up at Wismut.

But most agree that the closure will mean a healthier and safer environment for the next generation. One official at Wismut reckons more than 8,000 people have serious health problems, particularly cancer, from working at Wismut.

Even those who did not work directly with the mines were affected, as the contaminated underground water levels seeped through the cellars of houses. 'Some homes will have to be specially insulated,' says Runge. Yes, it was pretty bad at times. But now we have to look towards the future.'

Most organisations make some investment in training their staff in management techniques: they either hire training consultants, staff an in-house department or, in addition, send managers on external training courses (often a combination of all three).

The courses come in various packages with different titles. There are the skill-based courses, teaching such topics as negotiation, presentation, social or time-management skills.

Others on offer are developmental workshops, customer-focused programmes and modified business-school courses.

Just as people come to resemble their dogs, so trainers seem to have personalities that fit their courses. The presentation course tutor is immaculate; the customer-driven trainer exceptionally attentive to your needs, and the lecturer for the finance course for non-financial managers highly numerate.

But what about the people who attend training courses? Many experienced, full-time trainers tend to develop simple typologies to describe training course attenders or delegates.

Cabin crew, waitresses, nurses, traffic wardens and all those who deal with the general public as their customers also classify people into different groups

(with sometimes unflattering labels).

It is a shorthand to characterise the large numbers of individuals whom they encounter.

These typologies, of course, pigeon-hole. They are prototypes that may never exist in pure form but which amuse the trainers who recognise their generic characteristics.

They refer to the attitudes and behaviours of the delegates. Indeed they may also reflect the delegates' attitudes to their work. The following categories cover the vast majority of individuals:

The prisoner: the scowl on the face, the arms tightly folded across the chest and the folded letter from the boss or personnel demanding - requiring - that they have to attend the course, characterise this type. They have probably managed to avoid this course, or ones like it, many times before, but eventually are caught. They are prisoners - they do not want to be there and wish they were somewhere else. They are sour, negative, unhelpful and unco-operative.

The escapee: this type is the course-junkie who jumps at the opportunity to get out of the office. They may hate their work or simply enjoy education and training at the company's expense.

The escapee is usually rather too experienced at course activities, games and questionnaires and may well have done them before.

They are easy to deal with from the trainer's point of view, but not good value for money from the perspective of their company.

The old dog: there are various reasons why some people believe they cannot be taught new tricks. Some delegates are on-the-job retirees, in the departure lounge of the organisation. They may be quite a long way from retirement, but they are

not interested in learning anything.

Others believe courses are too abstract, too theoretical, too vague and have nothing to add to their day-to-day working lives.

The eager-beaver: this type comes in two forms. The first is the enthusiastic learner, genuinely interested in gaining skills, insights and knowledge. The second is the slightly naive delegate who is happy to take anything on board but has few critical faculties.

This makes them gullible and unfocused, though certainly easy for the trainer.

The intellectual: whereas the old dog may reject what he has been told because it is too vague and theoretical, the intellectual wants to know the empirical and epistemological bases of the data being presented. Many are snobs who believe that they know more than the trainer (sometimes they do).

These high-flyers may believe either the content or the style is not appropriate for their level. They may enjoy humiliating the trainer if they can.

The bastard: familiar to UK prime minister John Major, they are arrogant know-it-alls. They usually believe personnel departments should be closed, all consultants fired and the money put into the company's pension fund.

In a curious way, they enjoy courses in the same way that they enjoy meetings, because they have learnt to create the maximum disruption. They may be simple attention-seekers and in some organisations they are intellectually under-powered.

They are a nightmare for trainers because they are solely interested in scuppering or damaging the proceedings.

The ingratiator: many people are anxious when attending courses because they fear being shown up in front of others. These people tend to be what Americans charmingly call 'apple polishers'.

The ingratiator tries to do a deal with the trainer: 'I will be a good boy/good girl if you don't expose or humiliate me.' And for trainers it is a good deal.

Most trainers will probably recognise the above, although they may have rather different categories or titles.

And they also know that different companies tend to have more or less of each type.

Thus the publicly owned bureaucracy probably sends mainly old dogs, escapees and prisoners to courses, while the successful private company

may send rather a lot of intellectuals and the occasional ingratiator.

Next time you are on a course, look around the room, and see who's in.

The author is head of the Business Psychology Unit at University College London.

Norman Lessels has added another arrow to his quiver of non-executive directorships by becoming chairman of Tilney & Co, the private client stockbrokers, who resumed an independent existence earlier this month.

Lessels, 55, is a professional non-executive chairman and director. Though he is the senior partner of the Edinburgh chartered accountants Chiene & Tait, his boardroom activities take up 90 per cent of his time.

Lessels' career as a non-executive director began in 1980 when he left the accountants Ernst & Whinney, who did not encourage its partners to sit on boards.

He is chairman of Standard Life, the Edinburgh-based mutual, and of the quoted Scottish companies Cairn Energy and Havelock Europa. He is also chairman of several unquoted companies, and on the boards of Bank of Scotland, Scottish Eastern Investment Trust, Bupa and the Securities and Investment Board. He has never been a rescue chairman.

'My biggest agony is trying to get my diary into shape,' says Lessels, a calm, friendly and precise Edinburgh man who went to the Edinburgh Academy, an incubator for the Scottish accountancy and legal networks.

Though Tilney's base in Liverpool is out of his usual area, he says it is convenient for Chester, where he sits on the board of NWS Bank, a Bank of Scotland subsidiary, and for Wilmslow, Cheshire, where he is director of General Surety and Guarantee, an offshoot of Swiss Re.

THE last thing you would expect to find hanging in the office of one of Europe's top telecommunications executives is a McDonald's advertisement. But Ben Verwaayen, president of PTT Telecom, the Netherlands' telephone operator, has enshrined the US company's Big Mac on his wall for a very good reason.

For nearly five years, Verwaayen, 41, has been telling his 33,500-strong staff that if PTT Telecom is to survive in the turbulent, competitive world of international telecommunications, it must be customer-led, not simply technology-driven. 'At the end of the day, it's like McDonald's: they don't just sell hamburgers, they sell a service as well.' The Big Mac on the wall is a reminder to all that they are, at heart, in a service industry.

'When I came here people were convinced that we sold technology. To me that's really nonsense,' says Verwaayen. 'No one is interested in opening up a telephone set to look at the circuit boards and admire their quality.' What they want, he says, is reliable, quick and imaginative service.

Verwaayen, who came to the job with a degree in law and an extensive background in personnel management, public relations and business development at ITT in the Netherlands, makes no claims to being a technical wizard. 'I have two left hands,' he jokes. 'If I have to change a light bulb at home, I have to call on my wife to give me assistance.'

But self-deprecating humour does little to disguise Verwaayen's central role in telecommunications, both at home and, increasingly, abroad.

His company is the main operating subsidiary - as measured by turnover and by profit, not by employees - of Royal PTT Netherlands (KPN), the Dutch state-owned postal and telecommunications authority due to be floated on the Amsterdam Stock Exchange in several tranches starting next year.

KPN, the biggest corporate employer in the country, with a workforce of nearly 102,000, has undergone rapid internal change since it was turned into a limited company in 1989 and allowed to operate at arm's length from the government.

PTT Telecom is also a founding partner of a three-way European joint venture called Unisource, which is designed to enable the telecommunications companies of the Netherlands, Sweden and Switzerland to compete with the industry's giants for the lucrative but demanding business of operating internal communications networks for the world's multinational companies.

Given his role and his company, Verwaayen is closely involved not only in managing a change in corporate culture but also in the art of conducting cross-border joint ventures.

When he arrived at the company in 1988, PTT Telecom was a state agency with a hierarchical top-to-bottom structure. Telephone operators and repair staff were at the bottom of the pile, carrying out duties according to a rule book rather than in keeping with customers' demands.

Verwaayen and his team turned the structure by 90 degrees, emphasising contact with the customer rather than internal bureaucracy. 'We now have a front office and a back office, and I'm sitting all the way in the back,' he says. 'Everyone in the back office is only to be measured by what they do for people in the front office.'

Verwaayen's approach to shaking up the company cannot be reduced to any easy formula or any standard method of presentation. 'I take every soapbox that I can find,' he says.

His message, delivered energetically and often, is that change should be embraced, not avoided, and that everyone in the front office with direct contact with the customer should be an 'ambassador' for the company.

Compared with the task of making PTT Telecom a service-orientated outfit, next year's privatisation is expected to have only a minor impact on Verwaayen's management style and priorities. However, Verwaayen, who admits to being blunt, says stock exchange rules on disclosing profit forecasts mean that 'I'll have to be more careful about what I say and when I say it'.

So far, progress has been made in shaking up PTT Telecom. Verwaayen says the company is half-way through its process of internal reorganisation, and about three-quarters of the way home in changing its business mentality. But more needs to be done.

At the level of individual employees, for example, the results are more mixed. 'There's a certain percentage, though less than 10 per cent, which still thinks the old days were better than the present days,' he says. 'We also have at least 25 per cent of people who think that we are not moving quickly enough.'

Of all the decisions he has had to take, the single most important was the agreement to launch Unisource. This had the effect of carving out PTT Telecom's most international business and putting it in a separate joint venture with the Swedes and, later, with the Swiss.

Verwaayen, who spends up to 60 per cent of his time on Unisource-related business, rejects the view that cross-border joint ventures are a recipe for failure, especially if they involve three partners in three different countries.

The key to Unisource's success, he believes, is that the Dutch, the Swedes and the Swiss not only share the same objective but also the same motivation in pooling their international activities for multinationals. Each, he says, is convinced that a joint approach is the only way they can survive and, at the same time, remain the masters of their own destiny.

The arrangement inevitably brings to the fore cultural differences. 'The Dutch are not great diplomats. We are very straight-forward,' Verwaayen says, noting that the Swedes and the Swiss have 'subtle methods' of correcting traditional Dutch bluntness.

PTT Telecom's move to spin off services to multinationals into a joint venture is a serious step for any organisation to take, but Verwaayen believes that his staff have come to accept the step, despite the challenges involved.

Those employees who relished the thought of greater international travel now also realise that decision-making has shifted to a European rather than a national plane.

'I'm convinced that if I were replaced in this organisation tomorrow for one good reason or another, my successor would find an organisation believing in Unisource and working as well with our partners as they do today, perhaps even better,' he says.

National Westminster has restored to full strength its roster of three non-executive deputy chairmen following the retirement of Tom Frost.

The bank has appointed Sir Sydney Lipworth QC, below, the former chairman of the monopolies and mergers commission, and one of the founders of Allied Dunbar in 1970.

NatWest's board has been slimmed down from over 30 members by its chairman Lord Alexander since his own appointment in 1989. It now consists of 13 non-executives and seven executives. Lord Alexander said yesterday that Sir Sydney would bring 'an invaluable perspective' as a practitioner and regulator.

Sir Sydney, 62, joins two other knights, Edwin Nixon, the chairman of Amersham International, and Michael Angus, president of the Confederation of British Industry, as deputy chairmen of NatWest. He is joining the board immediately following Tom Frost's retirement last month.

Like Lord Alexander, Sir Sydney is a barrister, whose legal training and experience encouraged a no-nonsense approach at the Mergers and Monopolies Commission, which he chaired between 1988 and April this year.

Besides being one of Allied Dunbar's founders, he was also its joint managing director from 1980 to 1984, having previously helped form Liberty Life in South Africa.

Anthony Simonds-Gooding has joined Lilliput, one of the UK's leading producers of hand-painted, miniature collectable cottages, as a non-executive director.

Lilliput, with a turnover of Pounds 13.5m and pre-tax profits of Pounds 2m in 1992, plans to float on the London Stock Exchange in November.

Joining a miniature cottage-maker is perhaps an unexpected way for Simonds-Gooding, right, to dip his toes back into public company waters; his previous plc contacts were on a Brobdignagian rather than Lilliputian scale.

With Unilever for 13 years, he joined Whitbread in 1972, ending up group managing director. 1985 saw him join Saatchi & Saatchi as chairman and chief executive; in 1987 he took on the same roles at British Sky Broadcasting, until 1990. Since then, something of a quietus. He became chairman of the Design and Art Directors' Association in May 1992.

Should his move to Lilliput be seen as a step towards much grander things? Maybe. He describes Lilliput as a 'whizzy little company' and says that it 'intrigues' him; the company is involved in 'the business of brand marketing, and I relish being part of that again.'

At 55 Simonds-Gooding is far from retirement, though he is at this stage a little enigmatic: 'I am reviewing what I am about; watch this space.'

Lancer Boss Group, the Leighton Buzzard-based lift truck manufacturer, has strengthened its senior management by going outside the industrial truck industry to appoint Ludwig Schneider as its first group chief executive.

The appointment is an important move for Lancer Boss, one of Britain's biggest privately-owned manufacturing companies.

Lancer Boss is 100 per cent owned by Sir Neville Bowman-Shaw, the chairman, and his brother Trevor Bowman-Shaw, vice-chairman.

Schneider's appointment to the company is the clearest sign yet that Boss is preparing the ground for a new generation of management, 35 years after the two brothers founded the company.

Sir Neville, who is 63, has previously combined the chairman and chief executive's roles, but will now concentrate on broad strategic issues as chairman.

Sir Neville, said the matching of senior management skills to one of the most modern, comprehensive and internationally attractive product ranges would give the group the 'drive and management resource it needs well into the next century.'

Boss said Schneider would bring his wide experience in the automotive and related industries in Europe and elsewhere. Schneider is in his mid-40s and holds German and Brazilian nationality.

Besides his automotive experience, Schneider has also held senior positions with major consumer goods companies such as Procter & Gamble.

PROPOSALS TO develop a 200 sq mile National Forest in central England were greeted with scepticism yesterday by landowners, farmers and industrialists, who said substantial government finance would be needed for such a scheme.

The government, which yesterday launched a three-month consultation process on the forest in conjunction with the Countryside Commission, said it could not guarantee any public funds would be available.

It will examine the viability of planting 30m trees to create a wooded landscape across parts of Staffordshire, Derbyshire and Leicestershire.

Mr Tim Yeo, environment minister, said: 'The government will not decide what, if any, its contribution will be until completion of the consultation period.'

His comments were criticised by the Country Landowners Association and National Farmers Union. Both said that farmers could not comply with the draft strategy for the National Forest, also published yesterday, if it meant they were expected to convert arable land to forestry without any promise of grant aid.

Expectations that industry will pay for the forestation of disused workings were also criticised. Mr Stephen Hardy, group property manager of Ibstock Johnson, a brick manufacturer in the area, told Mr Yeo: 'There has to be a firm financial commitment from the government.'

The Countryside Commission said it was confident that the proposals would go ahead.

PROPOSALS to abolish charitable status and to split Britain's voluntary sector into service-delivery and campaigning charities, were attacked yesterday by charity leaders.

The proposals are contained in a report by three former advisers to the Home Office Voluntary Services Unit. Although the report is not official policy, it is published and partly funded by the Home Office, and is based on one of the most extensive studies of the sector for 45 years.

The report argues that charities providing welfare services under public contracts can no longer be regarded as conventional voluntary organisations. It says the sector should be divided into service and campaigning organisations.

Ms Judy Weleminsky, director of the National Council for Voluntary Organisations, the sector's umbrella body, said the proposal was 'simplistic and destructive'.

Mr Fred Heddell, chief executive of Mencap, the leading charitable provider of residential services for the mentally handicapped, said that the size and Pounds 60m turnover of his organisation brought 'power and political influence' which were vital in campaigning on behalf of disabled people.

He said that if campaigning and service provision were split, much of Mencap's effectiveness would be lost.

'At a time when statutory services are failing to meet so many of the needs of people with a disability, it is irres-ponsible to make proposals which, if implemented, would throw the organisations that provide so much of the limited care available into structural turmoil,' said Mr Heddell.

The government intends to study the report before reaching any conclusions. Mr Alun Michael, a Labour spokesman on home affairs, welcomed this cautious approach but said that splitting the sector would be 'bad in principle and dangerous in practice'.

He said the government had shown 'unhealthy' signs of wanting to control the voluntary sector.

A forum on the social economy organised in London yesterday by Unity Trust Bank agreed there was a need for a formal structure in which non-profit organisations could exchange ideas and information.

Voluntary Action, Home Office Library, 50 Queen Anne's Gate, London SW1H 9AT.

AS CHIEF executive of Allied-Lyons, one of Britain's biggest food and drink groups, Mr Tony Hales is a busy man; not too busy, however, to place himself at the head of an ambitious mission to restore the image and performance of manufacturing industry.

Today, Mr Hales 45, will preside over his first meeting as chairman of the Confederation of British Industry's National Manufacturing Council, set up nearly two years' ago to spread best practice in management, build new partnerships with government and the City and give industry a more attractive profile. The post is for two years and, by the end of it, he wants to be able to demonstrate that UK competitiveness has improved to the point where industry can show some real manufacturing leadership in Europe. He also wants to see the beginning of the end of industry's 'dirty, slummy' image, promoting it back up the list of respectable professions.

A trifle ambitious?: 'I have to believe that hopes of real improvement are realistic or I might as well pack up and go home.'

But can the National Manufacturing Council, bringing together nearly 60 executives from every corner of industry, prove anything more than a high-powered talking shop?: 'It certainly will be a rather unusual meeting to chair', he concedes. 'But it is more a question of the individual initiatives pursued by the various sub-groups set up to tackle separate issues. In that respect, we are making progress'.

At its annual conference next month, the CBI will launch its Competitiveness Forum programme, to help companies improve performance in areas such as innovation, marketing and manufacturing.

Mr Hales acknowledges that manufacturing has acquired a new political priority and that government, led by the Department of Trade and Industry - 'we used to call it the department of trade interference' - is gradually proving more supportive. 'It has been impressed by structured argument put forward on behalf of manufacturing but we have to keep banging away at the same themes across government.'

But though he has demands of government to help improve the chances of a strong, sustained manufacturing revival - 'above all, a stable macroeconomic climate' - he stresses that the solutions lie primarily with industry itself. 'It is too easy to say everything wrong with British industry is the fault of government. We have to get on and be very much more professional managers ourselves.' Mr Hales says productivity is improving, labour relations are good and Britain can offer a flexible, well-trained workforce which should not be constrained by the 'bureaucracy of Brussels'.

Most worryingly, corporate investment is not improving. He therefore wants the institutions to be more imaginative in providing financing and he believes the government has a clear and pressing role to play in this respect. 'It is crunch time for Kenneth Clarke, who has said he wants to be remembered for what he did to help commerce and manufacturing. He has used the right language; now he has to deliver.'

A Budget priority must be extra investment incentives, particularly for small and medium-sized companies. 'Not enough has been done on tax breaks to help stimulate investment in growing businesses. Dividends have been treated more favourably than investment. The invitation to consume rather than to invest has proved harmful. Attitudes have to change.'

MR MICHAEL HESELTINE, the trade and industry secretary, was yesterday forced to delay his return to work for at least a week because of flu.

He had been expected to return to his desk today.

THE National Council of Building Material Producers says that imports are rising as the rate of growth of export markets shows signs of weakening.

The council's six-month survey of about 2,000 producers - 28 per cent of companies in the sector - found imports accounted for more than 10 per cent of the market compared with 20 per cent of companies six months ago. Nearly half of UK producers had seen exports rise in the past six months as a proportion of total sales. But 10 per cent had seen their export ratio decline.

Mr Nigel Chaldecott, director-general, said members were worried about next month's Budget. 'Cuts in capital spending projects or further increases in taxation will knock the tentative recovery currently under way,' he said.

TRAVEL company Sea-sun called in receivers yesterday. The company, which specialised in coach and camping holidays to Spain and France, shut its offices in Colchester, Essex, and telephone callers were met with an answering machine advising the company had ceased trading.

The Association of British Travel Agents said Sea-sun had been a member since 1989 and holidaymakers would not be left stranded. The costs of their holidays and return travel would be met from a bond. Holidays due to start from or after today had been cancelled and the money would be refunded.

A MIDLANDS local authority was last night at the centre of a fraud inquiry following the arrest of one of its senior executives. Mr Geoff Wilson, chief planning officer at Warwick district council, was arrested after a year-long police inquiry, Tim Burt writes.

Warwick police said the inquiry involved planning applications for housing and industrial developments. Serving councillors, former councillors and officials will also be questioned.

Mr Wilson, one of the longest-serving chief planning officers in the country, was arrested at the headquarters of the Tory-led council. Police sealed off the building's first-floor planning offices and removed a large number of documents.

It emerged yesterday that Mr Tony Dalton, leader of the council's Tory group, had been helping with the investigation for more than a year.

GOVERNMENT proposals to get tough on crime are 'short-sighted and irresponsible' says Lord Woolf, who conducted the official inquiry into the 1990 riots at Strangeways and other prisons.

Last night he told an audience of prison service chiefs, politicians, senior police officers and churchmen that policies of imprisoning greater numbers of people had a 'miserable record of failure'. Cramming more people into a prison system already under acute pressure could lead to further riots.

Mr Michael Howard, home secretary, last week announced wide-ranging proposals to crack-down on crime and acknowledged that his plans were likely to increase the prison population.

Lord Woolf said: 'The cost of prisons to the public is heavy and only justified when there really is no alternative.' The new prisons would cost hundreds of millions of pounds to build and more than Pounds 66m a year to run and yet the system would still be overcrowded. He called for more resources for community punishments and crime prevention.

He proposed legalising some drugs in controlled circumstances so addicts would no longer need to commit crime to feed their addiction. He also called for fines on people who did not take steps to protect their property.

HARPERCOLLINS, publisher of Baroness Thatcher's memoirs, intends to report the Daily Mirror to the police because it believes that a criminal offence may have been committed in connection with publication of unauthorised extracts in the paper. Mr David Banks, editor, may also be reported.

A version of the book, The Downing Street Years, complete with accurate quotations, appeared in the left-of-centre daily newspaper last week in advance of the official serialisation in The Sunday Times.

The publisher took elaborate security precautions to protect the book, advised by former senior policeman Mr John Stalker.

HarperCollins believes the loss of information, whether it was in the form of a copy, a computer disc or waste pages from the printing process, involved theft. HarperCollins believes that the Daily Mirror and Mr Banks might be guilty of an offence in receiving such information.

Mr Banks said yesterday: 'I don't know if the book was stolen. If there was a book stolen it was not used here. We have been very careful all along.'

He added: 'I have never had a complete copy of the work in any form. This is like a murder inquiry without a corpse.'

HarperCollins paid Pounds 3.5m including serialisation rights for the book, which is to be published on Monday.

The Sunday Times failed last week to get an injunction preventing the Daily Mirror publishing material from the book on the grounds that publication was in the public interest. The Sunday Times may now sue the Mirror for damages over the publication of the material.

Action is likely to be taken against The Mail on Sunday for alleged contempt of court. On Friday Sir David Napley, acting for Lady Thatcher, obtained a High Court injunction preventing the paper from publishing material from the her memoirs. The action followed rumours that the paper was about to publish extracts.

HarperCollins believes that the material published by the Mail on Sunday amounted to a breach of that injunction.

Mr Peter Brooke, national heritage secretary, yesterday defended to the European Commission the UK's decision to license Mr Ted Turner's new European satellite channel, the combined TNT/Cartoon Network.

The channel has been banned from cable television networks in France and Belgium because of its American content.

It is believed the commission has written to the French and Belgian governments asking why Mr Turner's channel is being blocked.

MR TIM SAINSBURY, the industry minister, said yesterday the government would give serious consideration to a call by the Confed-eration of British Industry for a white paper setting out its industrial objectives for the recovery.

Responding to CBI demands for a more 'co-ordinated and coherent policy', Mr Sainsbury said the government's main objective in industrial policy was to maintain low inflation and steady growth.

'The overriding need to keep inflation down means that we will have to take tough and unpopular decisions on public spending and taxation,' he told business leaders in Birmingham last night. The CBI's call on ministers to publish industrial objectives comes against a background of government efforts to develop a new partnership with business.

Mr Howard Davies, CBI director-general, told the dinner of industrialists that he was not calling for the old industrial strategy of picking 'winners and losers'.

Instead, he said he is seeking a middle approach between old-fashioned intervention and a minimalist government role towards industry.

Businessmen need to hear what government industrial policy is, he argued, in order to understand how it affects ministerial decisions towards public spending and taxation.

His call to Mr Sainsbury follows the CBI's publication yesterday of a new policy document. The document said industrialists 'are not convinced that the current structure of decision-making in government is ideally suited to the creation of a coherent approach to competitiveness'.

The paper concludes by calling on the government to take a more direct role in representing the interests of British industry in Europe and other markets. Mr Sainsbury, meanwhile, said the government had already pursued that role through its increased commitment to export promotion.

He said that over the past 18 months the government had increased the extent of export credit cover by Pounds 2bn.

DEFENCE suppliers may in future contract to provide staff as reservists to support the armed forces, under proposals put forward by the Ministry of Defence yesterday.

Companies would undertake to provide a service, such as maintaining equipment sent to foreign trouble spots, for an agreed payment. They would have to ensure that enough of their employees became members of the volunteer reserves, to allow them to be deployed.

GOVERNMENT proposals to get tough on crime were described last night as 'short-sighted and irresponsible' by Lord Woolf, who conducted the official inquiry into the 1990 riots at Strangeways and other prisons, Alan Pike writes.

Policies of imprisoning greater numbers of people, he said, had a 'miserable record of failure.' He warned that cramming more people into a prison system already under acute pressure could lead to further riots.

Lord Woolf's comments in a London lecture were in contrast to those of Mr Michael Howard, home secretary, at the Conservative Party conference last week. Mr Howard announced wide-ranging proposals to crack down on crime and said his plans were likely to increase the prison population.

MR NEIL CLARKE, British Coal chairman, said yesterday he was pessimistic about saving any of the pits selected for closure a year ago.

The fears extend beyond the 12 mines reprieved in March after a public outcry. Pit managers believe some of the 19 'core pits' which have never been earmarked in public for closure are also vulnerable.

A delegation from the Trades Union Congress will tomorrow meet Mr Tim Eggar, energy minister, to press him to halt pit closures and extend redundancy arrangements for miners beyond December 31. The unions are arguing for a 'balanced energy policy making full use of all resources'.

British Coal has closed 21 pits since March, but still operates 30. Industry analysts believe the market can sustain fewer than 15.

British Coal is keen to win ministerial approval to start the closure programme at one or two pits.

Depending on the reaction, other closures are expected to follow in the following months. The option of closing a large number of pits simultaneously has been ruled out.

Mr Steve Tulley, an official of the National Union of Mineworkers at the Frickley pit in the Yorkshire region, said miners at his pit believed closure was inevitable. He said: 'It is worth fighting for but the will is not there in the industry. We are totally demoralised.'

Since the white paper in March, the coal industry's problems have been exacerbated by a better-than-expected performance from nuclear power stations and an acceleration in gas-fired generation. The two largest generating companies have indicated they are unlikely to take substantial amounts of coal in this financial year, ending next March, in addition to the amount they have agreed to take. Almost 1m tonnes of coal is being stockpiled at pitheads each month to add to the 14m held by British Coal and the generators' 36m.

Some 20,400 mineworkers and 2,100 white-collar staff have taken redundancy since October, leaving just 30,100 workers in an industry which once employed more than 1m. Mr Robin Cook, shadow trade and industry secretary, said the government had not tackled the 'rigged market' in electricity against coal.

THE INDEPENDENT radio industry yesterday attacked the BBC's plans to replace Radio 5 with a news and sport format, saying it would limit the choice available to those applying for the third national commercial licence, to be based mainly on speech.

Mr Stewart Francis, chairman of the AIRC, the industry trade body, said: 'News and sport was the last great format.' He added that the BBC should have to make 'promises of performance', and stick to them.

His comments came as the BBC set out its evidence for its belief that sport and news can co-exist on the new Pounds 30m national radio network which will replace Radio 5 next April.

Mr Phil Harding, taskforce leader for the new network, provided the research evidence that sunk the concept of a 24-hour news network on Radio 4 longwave and instead persuaded the BBC governors to go for the new network - its motto is 'first and live'.

Mr Harding, a former editor of Radio 4's Today programme, told of the detailed plans drawn up to demonstrate how the new network would have coped with the evening of September 21.

The evening combined a heavy football programme with President Boris Yeltsin dissolving the Russian parliament.

The new network would have managed to 'cover' the events in Moscow, handle 60 minutes of the Huddersfield v Arsenal match while still being no more than 2 minutes away from announcing all 65 goals scored that evening.

The new BBC news and sport service will be broadcast on medium wave 909 and 693, and will cost Pounds 30.2m a year to run, compared with Radio 5's cost of Pounds 23.7m. About 75 jobs will be lost at Radio 5, although all of those involved will be interviewed for jobs resulting from the new service.

Children's programmes will be the main losers in the shake-up. About 200 hours of stories and drama are broadcast for children each year on Radio 4. This is being reduced to 75 hours.

Primary schools programmes will move to Radio 3 FM in the afternoons, youth programmes will move to Radio 1, and Open University coverage will go to Radio 4 longwave.

EXCESSIVE regulations covering genetic engineering are handicapping the biotechnology industry, the Lords science and technology committee says today.

The committee's report on biotechnology says the regulatory regime is based on an 'obsolete' view of the hazards of genetic engineering. It calls for urgent government action to streamline the UK regulations and to relax the European Community directives on which the regulations are based.

The report says the rules are 'bureaucratic, costly and time-consuming and is an unnecessary burden to academic researchers and industry alike'.

The Lords found that regulations were simpler and less demanding in some Continental countries, notably France and Belgium, which interpreted the EC directives less stringently, and the US and Japan.

The report says that whatever the nature of a genetically modified organism - be it a lethal virus or a harmless plant - a UK researcher faces a 'bureaucratic nightmare', and has to answer 89 standard questions and pay Pounds 1,800 for each release. US researchers face nine questions, no fee and a faster procedure, said Lord Howie of Troon, who chaired the subcommittee that drew up the biotechnology report.

The BioIndustry Association, the trade body for UK biotechnology companies, welcomed the report and urged the government to implement its recommendations.

Dr Peter Doyle, research director of bioscience company Zeneca, agreed that 'the current regulatory regime is outdated, unscientific, fails to discriminate in terms of the level of real risk, and is an unnecessary burden to academic researchers and industry alike'.

But the industry's opponents expressed outrage. Dr David King of the Genetics Forum, an environmental pressure group, said: 'It is completely irresponsible to say that the current regulatory regime needs to be relaxed.'

He added: 'We have no hard evidence that regulation is affecting the competitiveness of the biotechnology industry - just unsupported assertions.'

Ms Sue Mayer, science director of Greenpeace UK, said: 'It is rather alarming that the environment has been set aside in the interests of the industry.'

Regulation of the UK Biotechnology Industry. HMSO. Pounds 21.

THE EXTENT of so-called phantom withdrawals and fraud from cash machines has been exaggerated, according to Halifax building society's senior lawyer.

A well-publicised High Court class action launched against Barclays Bank and other card issuers had fuelled public fears about the safety of automatic telling machines (ATMs), Mr Christopher Jowett told the International Bar Association in New Orleans yesterday.

Since the adoption of the banking code of practice last year limiting customers' liability to Pounds 50 and placing the burden of proving fraud on the card-issuer, banks had been paying out on phantom withdrawal claims more regularly. But it was easy to exaggerate the size of the problem.

Halifax has just under 3m cards on issue, handling 130m transactions a year. Last year there were more than 1,000 alleged phantom withdrawals involving Pounds 238,000. Halifax payed out in 334 cases, refunding Pounds 69,000.

Mr Jowett said that, in reality, there was no such thing as a phantom withdrawal. Fraud lay at the heart of most un-explained automatic transactions.

There was, however, a need to reassure the public about the security of ATM systems.

Banks and building societies had to take steps to ensure opportunities for fraud, particularly inside banks, were cut to a minimum.

He said public confidence in the integrity of card transactions could only be maintained by improving methods of card authentication and card verification.

There had been some discussion in the UK about the use of personal identification numbers (PINs) at the point of sale for credit card and debit card transactions.

But UK card issuers were extremely concerned about the risk of PIN numbers being compromised, said Mr Jowett.

THE GOVERNMENT of the Irish Republic yesterday welcomed statements from a leading Unionist in Northern Ireland that Sinn Fein, the political wing of the IRA, might be accepted at the negotiating table.

Speaking on Irish radio, the Rev Martin Smyth, Ulster Unionist MP for South Belfast, said that if Sinn Fein delivered a genuine cessation of violence in Northern Ireland the Ulster Unionists would give Sinn Fein 'the recognition that they are a bona fide political party and have a right to take part in a political process, representing those who vote for them . . . It is not a question of saying we'll give you this or give you that, that is a matter for discussion when they come (to the negotiating table)'.

He also said in an earlier interview with the BBC that Sinn Fein should recognise unionist rights to be part of the UK. Mr Albert Reynolds, the Irish prime minister, described Mr Smyth's comments as 'positive and constructive' and added: 'It has always been my view that a cessation of violence would radically transform the situation.'

The Irish government continues to guard its silence however regarding the content of the peace initiative launched two weeks ago by Mr Gerry Adams, Sinn Fein leader, and Mr John Hume, the leader of the Social Democratic and Labour party. After receiving a briefing on the initiative last week from Mr John Hume, Mr Reynolds said the initiative would be evaluated by the Irish cabinet next Tuesday.

After yesterday's cabinet meeting however, the Dublin government said only that 'evaluation is ongoing' and gave no indication whether any proposals are about to made to the British government.

The Hume-Adams initiative appears to be driving a wedge into Unionist ranks, with the Democratic Unionist party reacting angrily to the latest UUP position.

Mr Peter Robinson, deputy leader of the DUP said: 'Since Sunningdale (the 1973 conference which established an ill-fated power sharing executive without the DUP), no deeper wound has been inflicted upon unionism than this.' He said the UUP position was 'an act of monumental folly'.

Long-distance call technician John Simpson is pictured with 1,100 nautical miles of cable onbaord BT Marine's flagship C S Sovereign. The cableship is en route for South Africa and is one of six ships installing and maintaining cables for British Telecommunications. Even in the age of the satellite 60 per cent of all calls still use cable

THE ISOLATION of Mr David Hunt, employment secretary, over the European Community works council directive was disclosed at yesterday's meeting of EC social affairs ministers in Luxembourg.

While the other 11 EC member states have signalled their intention to push ahead with the directive after November 1, Britain was excluded from the discussion.

But when the directive comes into force, British private companies, who employ more than a 1,000 workers elsewhere in the EC, will have to introduce a works council for their continental employees.

Employees working in UK-based subsidiaries of large Continental companies can also expect to participate in Europe-wide works councils.

Last night Mr John Monks, TUC general secretary, said the UK government had 'lost the argument' over the issue. 'The works council directive will sooner or later apply in Britain,' he said. 'The era of the British veto is over. This is good news for British workers and the whole country.'

At the moment there are an estimated 30 European works councils at large companies, none of them UK-owned.

The number will grow when the directive comes into force to an estimated 1,000: all those which have head offices in EC; which employ more than 1,000 people; and which have subsidiaries with at least 100 employees in at least one other member state.

A third of these are UK companies, and they include British Telecommunications, Grand Metropolitan, Barclays Bank, Thorn EMI, Royal Dutch Shell, Imperial Chemical Industries and Unilever.

The proposed European works councils will not be involved directly in collective bargaining. Their purpose is to provide a forum for employees in European transnational companies to receive information and consultation on their business activities.

British union leaders do not see how these companies would be able to insulate their UK operations from the effects of the directive. Enormous pressure would be exerted on them to allow their UK workers to be involved in the works council system as well.

A survey published last weekend by Industrial Relations Services found that half the UK companies surveyed did not believe a European works council would add to their costs.

But Britain's employer organisations can be expected to resist change strongly. The Confederation of British Industry has been at the forefront of the battle to oppose the works council directive.

The question is whether Britain's employers will find themselves, like their country's government, isolated from their colleagues on the Continent over the issue.

ELI LILLY, the US pharmaceuticals group, is to cut 275 UK jobs in its international rationalisation programme. The redundancies, which will be voluntary, cut across all levels and categories.

They will be concentrated at Speke near Liverpool where 107 of the 834 staff will leave, and Basingstoke in Hampshire where 112 out of 650 employees will go. Research staff at Windlesham, Surrey, will be reduced by about 30.

The UK subsidiary, employing 2,100 staff, had a turnover last year of Pounds 224m with overseas sales worth Pounds 132m.

There will also be cuts in the 35 staff at the European headquarters in London, while the Vienna office, which handles east Europe, will be scaled back. The group said it was still committed to Europe.

Earlier this week, the Indianapolis-based parent company announced it was cutting 2,000 jobs, equivalent to 10 per cent of its worldwide workforce.

Last year the group turned in its first quarterly loss of Dollars 268.5m.

The deficit reflected mainly restructuring and other charges of Dollars 519.6m. Northern Ireland Electricity, the former public utility which was privatised in June, is to shed 600 jobs in the next three years.

The redundancies, announced yesterday, will affect management and manual workers in all areas of the company except the shops which sell electrical appliances.

CARMAKERS Toyota and Renault have both fallen foul of the Advertising Standards Authority over the way they have advertised the speed of their cars, according to the latest report on complaints made to the authority published today, Diane Summers writes.

The authority said it had received fewer complaints about car advertisements following its clampdown in 1990.

However, the authority said there had been a 'blip a couple of months ago' as some manufacturers 'appeared to be returning to speed as an advertising platform'.

It said that the text of the Toyota national press advertisement for the MR2 GT (above) 'placed too great an emphasis on fast and possibly unsafe driving'.

A complaint against a Renault Clio advertisement showing a car on a race track ahead of a Formula One racing car was also upheld.

THE DISPUTE on London Transport's Central line was settled yesterday at Acas, the conciliation and arbitration service. The management and the RMT rail union agreed to the creation of a joint inquiry into procedures and an arbiter was appointed to settle the cases of two men who were dismissed for alleged breaches of discipline.

MRS DEBORAH MILLER, a former Royal Air Force servicewoman, has received a record Pounds 33,000 award from an industrial tribunal as compensation for being dismissed by the Ministry of Defence when she became pregnant.

The award means the ministry may have to pay up to Pounds 100m in compensation to 4,500 women who have been dismissed from the services since 1970 as a result of pregnancy.

LOCAL government employers yesterday announced a 1.4 per cent pay rise for firefighters under their wage formula, ending the threat of a strike this autumn, Robert Taylor writes.

The settlement is lower than the government's 1.5 per cent public-sector pay limit and adds Pounds 4.50 to the present Pounds 305 a week basic rate of firefighters.

The Fire Brigades Union had been warning of conflict if the pay formula that links their members' pay to the upper quartile of male manual earnings was not honoured.

MANAGERS' pay is accel-erating, a survey published today shows.

The survey by P-E International, the management consultants, shows the median annual increase is 3.5 per cent. This compares with a 25-year low of 3 per cent at the beginning of the year.

The survey, which covers nearly 700 companies across 18 sectors, shows that managers have fared better than the workforce in general, where basic salary increases have levelled off at about 2.6 per cent.

Mr Simon McBride, P-E consultant, said there were a number of factors, including inflation, which would influence salaries in 1994.

He said companies would need to consider the effect of a further year of low pay increases on their ability to retain highly regarded managers. Also important was the uncertainty of recovery in continental Europe and the continued fears over job security.

The number of managers receiving no pay increase over the 12 months to July was still one-in-10.

However, the number of directors whose wages were frozen had increased - 21 per cent of managing directors and 13 per cent of other directors received no increase compared with 14 per cent and 11 per cent respectively over the 12 months to July 1992.

Average base salary increases for managing directors were highest in sectors such as textiles, and food, drink and tobacco.

Survey of UK Salaries and Benefits 1993, P - E Centre for Management Research, Park House, Wick Road, Egham, Surrey TW20 0HW. Pounds 400.

AN URGENT meeting with ministers is being sought by Ministry of Defence unions following Friday's announcement of 500 redundancies at Devonport naval dockyard in Plymouth, Devon.

Mr Jack Dromey, chairman of the group of MoD industrial unions, said yesterday that when the government awarded the Trident submarine refitting contract to Devonport in June, ministers had promised job losses of no more than 350.

A DEMAND for 'jobs for life' will be made today when unions representing Ford's 20,000 manual workers present their annual claim.

Mr Tony Woodley, TGWU general union negotiator for the car industry, hinted yesterday that the unions are prepared to negotiate on the introduction of multi-skilling for Ford workers in return for a guarantee of employment security.

But it was unclear last night whether the other unions at Ford, notably the AEEU engineering and electricians' union, will support this position.

In spite of the recession Ford has managed to avoid any compulsory redundancies and has cut its workforce through natural wastage and voluntary severance. But union leaders are concerned that the company may not be able to continue this policy.

'Our top priority in these negotiations will be job security,' said Mr Woodley. He added that the unions at Ford wanted only what had been achieved at other UK-based car plants such as Rover, Nissan, Honda and Toyota.

The unions will also be seeking a 'substantial' increase in basic wage rates for manual workers.

'Ford UK has a world-class workforce with the lowest labour costs in Europe,' said Mr Woodley. 'We want to see them have the same wages and job protection that the best has to offer.' He added that only Peugeot Talbot paid lower basic wage rates than Ford among car companies in the UK.

The unions want Ford to drop what they see as its piecemeal approach to workplace change and take a more comprehensive view of what needs to be done.

'If they want to compete with the best, the company must provide job protection to its employees so they can deliver the goods,' said Mr Woodley.

The company is expected to respond to the manual unions' claim when they meet again on October 28.

Vauxhall shop stewards at Ellesmere Port on Merseyside have rejected the company's last two-year pay offer. The unions will decide next week whether to ballot Vauxhall's 9,000 workers for strike action.

NORTHERN Ireland Electricity, the former public utility which was privatised in June, is to shed 600 jobs in the next three years.

The redundancies, announced yesterday, will affect management and manual workers in all areas of the company except the shops which sell electrical appliances.

Discussions have already started with the trade unions.

The company said: 'We are operating in a new environment and part of the redundancy programme has already been discussed in the context of reorganisation.'

The utility's privatisation began in April last year when the province's four power stations were sold.

The transmission, distribution and supply side of the business were sold in a public flotation in June.

More than 600,000 applications for shares were received with the initial price set at Pounds 1 a share with a further Pounds 1 instalment payable next June.

Turnover and operating profits for 1992-93 were Pounds 452.4m and Pounds 56.6m respectively.

Around 500 people have already left the company since the power stations were sold and a further 600 will reduce total employment to around 2,600.

Many employees have long service records and are likely to be attracted by an enhanced redundancy package.

Management said customers would not expect the company to unnecessarily add costs to services. The job losses were part of a long-term plan aimed at stabilising prices, it said.

YESTERDAY'S JUDGMENT in the Commercial Court that Lloyd's Names can sue the agents who handled their affairs has underlined the importance of efforts by Lloyd's of London to reach out-of-court settlements.

Mr David Rowland, the chairman of Lloyd's, hopes to offer Names a deal before the end of the year. But if he fails to come up with an acceptable offer, Names - the individuals whose assets support the market - are now free to go ahead with their actions. Mr Justice Saville's court ruling means that members' agents are potentially liable for millions of pounds of losses.

Several thousand Names are involved in actual or possible legal action. Almost all have targeted members' agents - as well as the managing agents who administered their syndicates - as defendants.

The first case to go ahead - on 26 April next year - involves 3,000 Names, who were members of four Gooda Walker syndicates (numbers 164, 290, 298 and 299) between 1988 and 1990. The Names allege negligent underwriting and are seeking more than Pounds 550m in damages from 71 Lloyd's members' agencies.

In October Mr Saville will hear a case brought by 1,650 Names, who were members of Feltrim syndicates 540/542 and 847 between 1988 and 1989. Feltrim Names are also suing for negligent underwriting, targetting 60 agencies, 59 of which are members' agencies in an effort to recover up to Pounds 600m in losses.

A third large case could come to court early in 1995. Some 2,000 Names on Merrett syndicate 418 are taking legal action against 130 members' agents, the Merrett managing agency, the syndicate's auditors, Ernst Whinney, and Mr Stephen Merrett, the syndicate's underwriter, over losses registered in the 1985 year. The claim is estimated at about Pounds 350m.

At least four smaller groups of Names also have actions that are well advanced:

A case involving more than 320 Names on Pulbrook syndicate 334 in 1985 should come to court in December this year. The Names face losses of at least Pounds 80m. 310 Names on another Pulbrook syndicate, number 90, have served writs on 12 members' agents, the Pulbrook managing agency and Winchester Bowring, a firm of insurance brokers. They are taking action to obtain compensation for losses that could exceed Pounds 225m. Writs have also been served in an action by 470 Names, who were members of Poland syndicates 105 (in 1985 and 1986) and 108 (in 1985 and 1986). The Names are suing members' agents and the Poland managing agency and seek to recover more than Pounds 80m.

More than 30 members of the Oakeley Vaughan syndicates between 1981 and 1983 are suing Lloyd's over its failure to regulate the market. Their case, which was lost in the Commercial Court, comes to appeal in February next year.

Other Names who have formed action groups and who are at various stages of legal action include 850 Names on Bromley 475; 1,000 Names on Cuthbert Heath 404; 1,000 Names on Devonshire 216, 527, 833, 1137; 490 Names on Gresham 321; 861 Names on King 745; 850 Names on Rose Thomson Young 255; and 600 Names on Wellington syndicates 406 and 448.

THE GOVERNMENT headed off another revolt by Tory backbench peers against the Railways Bill last night by promising to consider providing additional legislative safeguards for British Rail's 130,000 pensioners.

Ministerial assurances that a new pension fund to be established after privatisation would not be allowed to become insolvent, and that benefits would be index-linked, failed to satisfy critics of the bill. They were led by Lord Peyton of Yeovil, former Conservative transport minister, who moved the amendment permitting British Rail to apply for franchises to operate passenger services on which the government was defeated in July.

Lord Peyton was strongly supported by Lord Marsh, the cross-bench peer and former chairman of BR, when he insisted that guarantees covering solvency and index-linking should be written in. They were unimpressed by claims by the Earl of Caithness, transport minister, that the government had gone '85 per cent of the way' on their concerns.

Lord Peyton maintained that by enshrining guarantees in the bill, the government would be able to remove a 'residue of suspicion and ill-will' among BR pensioners. He finally agreed not to move an amendment seeking to achieve this objective pending the outcome of further talks with ministers.

But Lord Peyton warned that unless they reached a satisfactory conclusion he would move a similar amendment at the next stage of the bill.

In an effort to avert a further setback for privatisation, Mr John MacGregor, transport secretary, and Mr Roger Freeman, a transport minister, are to meet Tory backbenchers who want BR to be allowed to bid for franchises.

THE Conservative party's deep divisions over the European Community re-emerged yesterday as pro- and anti-EC MPs threatened a fresh battle in the wake of Maastricht. Rightwing Euro-sceptics said they were disappointed by the German constitutional court's decision to allow Germany to ratify the treaty.

Sir Teddy Taylor, the rightwing MP for Southend East, said the government would face a further fight over a bill to increase British contributions to EC finances. Enough MPs were willing to vote against the government to block the bill, which implements revisions to the EC budget agreed at last year's Edinburgh summit, he added.

The threat of a further battle indicates that the right has not been mollified by the sceptical tone of recent government comments on Europe.

Ministers believe there is little prospect of defeat on the bill, which will be introduced in the next session of parliament beginning next month.

But senior ministers concede that the rightward shift in government rhetoric has prompted 'rumblings' of discontent among previously loyal MPs on the centre and left.

Pro-Europe MPs were annoyed by anti-EC passages in speeches delivered at last week's Conservative conference by Mr Peter Lilley, social security secretary, Mr David Hunt, employment secretary and Mr Michael Howard, home secretary.

Sir Edward Heath, former prime minister, said the speeches showed a 'very nasty nationalistic approach' which was 'childish and stupid'.

He said pro-Europe MPs planned 'a major fightback' against the right, and urged Mr John Major, the prime minister, to ignore 'the people who criticise us in our own ranks'.

He said pro-Europe MPs had helped the government by remaining silent during the passage of Maastricht bill. He warned: 'We are not going to stay silent any longer.'

Labour yesterday tried to exploit Tory divisions over Europe by publishing a list of 24 Conservative MEPs who voted for a European parliament motion supporting a federal EC.

Leading rightwingers, including Lord Tebbit, have said they will decline to campaign for federalist candidates in the European parliament elections next June.

Mr Michael Portillo, the rightwing chief secretary to the Treasury, said on Sunday that federalist MEPs should be deselected.

THE CONFLICT between councils over the local government review intensified yesterday as counties claimed that transitional costs of restructuring would be Pounds 1.1bn.

Mr John Gummer, the environment secretary, announced last month that he favoured replacing two-tier authorities with unitary authorities, even if this incurred extra cost.

But Mr Dennis Pettitt, chairman of the Labour-controlled Association of County Councils, said that the government had already said that there is not likely to be more money for local government next year.

The association's evidence came in a formal submission to the environment department. Using estimates which have been independently validated, it found that the costs of the restructuring had been underestimated, and predicted an average cost of Pounds 27.2m for each county.

District councils, claimed that polls in three counties where plans for reform have been published - Durham, Derbyshire and Cleveland - showed that most voters wanted unitary authorities to replace the two-tier system.

Voters in Durham and Derbyshire indicated that retaining the two-tier status quo was their favourite option. But the Labour-led Association of District Councils pointed out that a separate question yielded majorities for unitary authorities in Cleveland and Derbyshire.

TORY BACKBENCHERS will next week launch an attempt to stop further deep cuts in defence spending in the drive to meet public spending targets for the next three years.

Several Tory MPs are expected to use a two-day Commons debate on this year's defence white paper to say the armed forces are already stretched.

This will follow the publication on Monday of a report by the Commons defence committee which is expected to be critical of some of the the white paper's plans.

Sir Nicholas Bonsor, Conservative chairman of the committee, said this week he was 'extremely alarmed' by reports that more defence cuts might be in the offing.

This new expression of backbench discontent follows clashes between Mr Malcolm Rifkind, defence secretary, and the Treasury over demands for billions of pounds of additional cuts from the Pounds 23.5bn defence budget. Mr Rifkind is demanding a full-scale review of the armed forces if the Treasury refuses to drop its demands.

Even if he beats off all the Treasury's demands, defence spending is set to drop by 1995-96 to its lowest level as a proportion of Britain's gross domestic product for decades.

Though the white paper contained a series of new cuts, some long-awaited measures were put off. These may now be examined by EDX, the cabinet committee charged with sharing out the spending cake. They include plans for an air-launched nuclear missile and a decision on whether to upgrade existing tanks or buy more Vickers Challenger 2s.

MoD pension payments have been outside the public spending control total from April. This makes the option of encouraging staff to retire early more attractive since the wage bill could be trimmed while the corresponding increase in pension outlays would not be counted.

Defence suppliers may in future contract to provide staff as reservists to support the armed forces, under proposals put forward by the Ministry of Defence yesterday.

Companies would undertake to provide a service, such as maintaining equipment sent to foreign trouble spots, for an agreed payment. They would have to ensure that enough of their employees became members of the volunteer reserves, to allow them to be deployed.

Unions are seeking talks with ministers following over the 500 redundancies planned at Devonport naval dockyard in Plymouth, Devon. They say that the government had promised when it awarded the Trident submarine refitting contract to Devonport that there would be no more than 350 job losses.

THE GOVERNMENT of the Irish Republic yesterday welcomed statements from a leading unionist in Northern Ireland that Sinn Fein, the political wing of the IRA, might be accepted at the negotiating table.

The Rev Martin Smyth, Ulster Unionist MP for South Belfast, said on Irish radio that if Sinn Fein delivered a genuine cessation of violence the Ulster Unionists would give Sinn Fein 'the recognition that they are a bona fide political party and have a right to take part in a political process, representing those who vote for them'.

He also said in an interview with the BBC that Sinn Fein should recognise unionist rights to be part of the UK.

Mr Albert Reynolds, the Irish prime minister, described Mr Smyth's comments as 'positive and constructive'. He added: 'It has always been my view that a cessation of violence would radically transform the situation.'

The Irish government continues to guard its silence however regarding the content of the peace initiative launched two weeks ago by Mr Gerry Adams, Sinn Fein leader, and Mr John Hume, the leader of the Social Democratic and Labour party.

Mr Reynolds was briefed by Mr Hume last week on the initiative. After yesterday's cabinet meeting the Dublin government said that evaluation of the initiative was 'ongoing'. It gave no indication whether any proposals are about to made to the British government.

The Hume-Adams initiative appears to be driving a wedge into unionist ranks, with the Democratic Unionist party reacting angrily to the latest UUP position.

Mr Peter Robinson, deputy leader of the DUP, said: 'Since Sunningdale (the 1973 conference which established an ill-fated power sharing executive without the DUP), no deeper wound has been inflicted upon unionism than this.' The UUP position was 'an act of monumental folly'.

LLOYD'S yesterday said its liability over the 1989 Exxon Valdez oil spill disaster amounted to Dollars 289m (Pounds 191.3m) compared with the Dollars 1.2bn total claim lodged in Texas courts by Exxon.

It said there was a limit of Dollars 850m on the policy, of which it would be liable for Dollars 289m.

Exxon has filed claims against insurers, saying the company's policies included oil spills and other catastrophes.

The underwriters say the agreements excluded marine pollution protection for tankers, and that Exxon as the cargo owner was not legally required to clean up the spill.

The Exxon Valdez spilled some 11m gallons of crude oil off Alaska.

THE Mexican government plans to sign a free trade agreement with Venezuela, Colombia and possibly Bolivia by the end of this year, and another with Costa Rica, according to Mr Jaime Serra Puche, Mexican trade minister.

Mr Serra told the Financial Times the government hoped to join the Organisation for Economic Co-operation and Development (OECD) early next year. Entry should be eased by passage of a new, more liberal foreign investment law, which the government is expected to submit to Congress at the end of this year.

Mr Serra said the foreign investment law would be submitted whether or not the North American Free Trade Agreement (Nafta) is ratified. The substance of the proposed legislation would be similar in either eventuality, but the access that it gave to specific countries could be different.

Mexico has been concurrently negotiating trade agreements with Central America, Venezuela and Colombia in an effort to balance the proposed agreement with the US.

President Carlos Salinas said last week that Mexico's relations with the US could be damaged if the trade accord with the US and Canada was not approved. Officials are talking of a possible backlash against US companies in such an event.

A senior Mexican government official said he would not rule out the possibility that Mexican tariffs would be raised if Nafta was not passed. Such comments may be no more than part of a campaign to press the US Congress into approving the treaty. A move to discriminate against the US could backfire, since Mexico depends on it for about 60 per cent of its direct foreign investment.

The Mexican government expects the fate of Nafta to be settled by November 25, the day by which the House of Representatives has been asked by President Clinton to vote on the legislation which permits Nafta to go ahead.

The vote in the Senate, where support for the treaty is stronger than in the House, may not come until after the New Year.

Nancy Dunne adds from Washington: Mexico has granted a licence for a joint insurance venture between an Iowa-based company and a Mexican insurance broker in the first new foreign licence issued by Mexican insurance authorities in more than 50 years.

The licence allows Principal International to complete an agreement with Servicios Especiales Profesionales to market life insurance and pensions plans.

The Ecu rate which was not available for publication in the Financial Times of October 12 for the period October 15 to November 14 is 7.13 per cent, compared with 7.33 per cent for September 15-October 14. These rates are published monthly by the Financial Times.

WHEN the world's four biggest trading nations struck an unexpected deal on tariffs last July in Tokyo, there was an almost audible sigh of relief from the other participants in the 116-nation Uruguay Round of trade liberalisation talks.

The apparent resolution of disagreements related to industrial goods between the so-called Quad nations - the US, the European Community, Japan and Canada - was seen as paving the way for an ambitious tariff-cutting package going well beyond the Round's one-third target reduction.

However, with just more than two months to go to the December 15 deadline for concluding the seven-year-old Round, the negotiations to improve market access for imports are still being held up by the Quad's failure to agree how precisely the Tokyo accord should be applied, tariff line by tariff line.

Under the most-favoured-nation principle of the General Agreement on Tariffs and Trade, tariff concessions agreed by the leading traders are extended to all, providing a basic platform for bargaining by others. Mr Peter Sutherland, Gatt's director-general, said at the end of September that the Quad's 'unfinished agenda' was putting 'clear obstacles' in the way of the Geneva talks.

The meeting in Brussels today between Mr Mickey Kantor, US trade representative, and Sir Leon Brittan, EC trade commissioner, is thus seen as crucial in breaking the logjam. 'If this meeting is unproductive, the Uruguay Round will be in a very difficult situation,' says a senior official from another Quad country.

Senior Quad negotiators will meet in Geneva tomorrow to review progress in the market access negotiations before an important stocktaking meeting of all Uruguay Round participants on Friday.

The basic problem appears to be a difference between the EC and its Quad partners on how the Tokyo accord should be interpreted. EC negotiators say it provides an agreed 'formula' for tariff cuts across the board: zero tariffs for some categories of goods, harmonised low tariffs for others, peak tariffs (15 per cent and over) to be halved, and other tariffs to be cut by a third.

The US, Japan and Canada say the accord sets out objectives, to be hardened up through the normal bargaining process. Community officials argue that the 'request and offer' approach - which the EC has always opposed - is simply impracticable at this late stage of the negotiations.

The EC is particularly annoyed because it thought it had won agreement from the US in Tokyo to halve most tariff peaks on textiles, a key objective for the Community. Instead, Washington has offered 50 per cent cuts on only half the textile tariff peaks the EC has identified, and the reductions on the rest amount to less than a fifth.

In the tariff category targeted for a one-third reduction, the US has chosen to meet the goal by offering extra zero-tariff sectors, notably electronics, rather than lowering duties across the range.

For its part, Japan has offered 50 per cent reductions on fewer than half its tariff peaks. High tariffs on leather goods, where both the EC and the US are pushing for reductions, have barely been touched.

Community negotiators say they cannot agree to more than the eight zero-tariff categories already accepted unless the US and Japan make further concessions. Apart from electronics, the EC's Quad partners want Brussels to scrap duties on paper and pulp and scientific instruments, and to reduce or eliminate tariffs on glass, ceramics, toys, wood and non-ferrous metals.

The other Quad nations are laying blame for the impasse in the negotiations at the EC's door. 'It's Brussels that needs to move,' says one senior trade diplomat, pointing out that the Community's tariff offer is by far the worst of the four and falls well below the one-third Uruguay Round target.

According to one estimate, Japan's offer on industrial goods amounts to an average tariff reduction of about 60 per cent, Canada's 50 per cent, the US's 37 per cent and the EC's 26 per cent, though EC officials say their offer was pitched low deliberately to put pressure on trading partners.

US negotiators are hoping that, in the textiles area at least, a settlement may be in sight after signs that the American and European textiles industries are close to a tariff-cutting agreement on products of bilateral interest, mostly wool. Similar industry accords, on zero tariffs for pharmaceuticals and low harmonised tariffs for chemicals, were taken on board in the July Quad deal.

As for the rest, according to one sanguine insider, 'there are few issues left and the trade-offs are clear. Mr Kantor and Sir Leon should be able to close in on a deal.'

FRENCH efforts to protect its subsidised farm exports, which are putting in jeopardy a successful conclusion of the Uruguay Round of talks on world trade liberalisation, could inflict enormous damage on the European Community, Mr Richard Needham, UK trade minister, warned yesterday.

On the eve of a high-profile trade-promotion visit to China, Hong Kong and Taiwan, Mr Needham insisted Britain 'could not stand back and agree to fall in with a protectionist Europe'.

'If one country in the EC wrecks the Uruguay Round, they have to know it will do enormous damage to the Community,' he said.

His comments come in the wake of drab trade figures showing UK exports in July to the depressed markets of Europe - which account for almost 60 per cent of all British exports - fell to Pounds 4.85bn, their lowest level for 18 months. In contrast, exports to non-EC countries are 2.5 per cent up on the year, with sales to China up by 90 per cent.

'These figures illustrate well the new British priority being given to Asia's markets,' Mr Needham said. This will be his fourth visit to China since assuming office last year.

Complaining about the comparatively poor performance of UK exporters in Asia, Mr Needham said the government intended to exploit more effectively the Crown Agents, the Commonwealth Development Corporation, and multilateral agencies such as the World Bank in seeking contracts in Asia and other parts of the developing world.

He noted that last year, France won 15 per cent of World Bank procurement contracts in the developing world, and Italy 12.8 per cent, while the UK won just 2.2 per cent.

David Buchan adds from Paris: Prime Minister Edouard Balladur is today to spell out proposals for an interim world trade deal this year to break the current impasse in the Gatt negotiations. He called seven of his ministers together yesterday to discuss his idea of identifying a list of trade issues which could be settled by the December 15 deadline agreed between the EC, the US and other main Gatt participants, leaving the rest for later negotiation.

But several officials conceded that they were 'in the dark' about much of the state of bargaining in several of the 15 Gatt areas of negotiations, because Sir Leon Brittan, EC chief negotiator, and his Brussels officials 'have not chosen to enlighten us'.

US AND Japanese negotiators gathered in Tokyo yesterday to discuss the possibility of smoothing access to each other's insurance markets.

The US says business practices of Japanese companies create an obstacle to foreign insurers in the Japanese market. Japanese companies tend to deal with insurance companies in their own corporate groups, or keiretsu. This and the fact that car insurance is mainly sold through car dealers have been cited as barriers to foreign companies, which have only about 4 per cent of the Japanese market. Japan, meanwhile, has told the US its state licensing system for insurance companies made it difficult for foreign companies to enter the US market.

The insurance talks come at the start of a period of intense trade talks between the two countries. They had been preceded by inconclusive talks between Mr Mike Espy, US secretary of agriculture and Mr Eijiro Hata, agriculture minister.

Later this week, officials will turn their attention to Japan's pensions fund management market - another bone of contention. Japan agreed this summer to expand the scope of corporate pension funds that can be managed by foreign investment advisers as part of market opening measures agreed with the US, Canada and the EC in an effort to bring the stalled Uruguay Round to a successful conclusion.

The talks this week between the US and Japan covering financial services will be followed next week by talks on trade in cars and car parts, and on government procurement of high technology equipment. In both cases, the US is likely to press Japan to further open its markets to US products.

PRESIDENT Bill Clinton last night put on hold the US technical assistance mission to Haiti and said he wanted to renew UN sanctions against the military regime in Port-au-Prince.

'I have no intention of sending our people there until the agreement is honoured,' he said, referring to last July's UN-sponsored pact designed to pave the way for the return at the end of this month of Fr Jean-Bertrand Aristide, the president ousted by the military in 1991.

'I will not have our forces deposited on Haiti when they cannot serve as advisers,' Mr Clinton said.

'We were not asked to come in and make the peace or keep the peace.'

Earlier the troopship carrying about one-third of the detachment of 600 US and Canadian military engineers and trainers left Port-au-Prince harbour for Guantanamo, the US base in Cuba, while the Defence Department announced that a second ship, due to leave today, would not depart.

The Harlan County had been prevented from docking on Monday and US and UN officials were harassed in what appeared to be a demonstration orchestrated by the Haitian military command under General Raoul Cedras.

In his brief remarks Mr Clinton said: 'I want the Haitians to know that I am dead serious about honouring the agreement they made. Now the time has come for the people clinging to their last gaps of power to honour the agreement.'

Fr Aristide, still in Washington, immediately endorsed Mr Clinton's action, including the reimposition of economic sanctions. He described Gen Cedras and Mr Joseph Michel Francois, the police chief, as leaders of 'a gang of thugs involved in drug trafficking' and demanded that they step down by Friday.

Over the last week the pending Haitian intervention, which would have left exposed lightly armed US troops, had come to appear almost like another Somali quagmire for the administration. The Pentagon's distaste for the mission became public last week and the public's, as manifested in several polls, this week.

THE Nobel prize for economics was yesterday awarded to Robert Fogel of the University of Chicago and Douglass North of Washington University in St Louis for pioneering work on the causes of economic and institutional change.

The Nobel committee's decision to break with tradition and award the prize for work in economic history, rather than economics proper, reflects the growing importance economists attach to the role of social institutions in providing a framework for economic growth.

Professors Fogel and North are widely credited with revolutionising economic history as an academic discipline by applying rigorous statistical techniques and theories. The approach is known as 'cliometrics' or 'the new economic history'.

'It's a tremendous decision,' said Prof Roderick Floud, provost of London Guildhall University, who has collaborated with Prof Fogel for the past 10-15 years. He said their emphasis on quantitative techniques had transformed economic history and stimulated greater numeracy in other branches of history.

Prof North, 72, has cast doubt on many traditional explanations of economic growth, arguing that factors such as technical change and innovations are less important than previously claimed. He puts more stress on legal and social institutions, such as property rights, that create the conditions in which market economies can flourish.

His work is of particular relevance to former communist countries where the lack of capitalist institutions is widely seen as one of the main obstacles to development. Prof North recently advised the Czech Republic on privatisation. He previously acted as a consultant in Russia, Argentina and Peru.

'He is adamant that you cannot just leave development to markets,' said Prof John Nye, a colleague of Prof North at Washington University. 'He is trying to push back the boundaries of economics by getting economists to focus on institutions as well as exchange and allocation.'

Prof North has also used the modern economic theory of transactions costs to throw new light on feudal and medieval economies. He concluded these forms of economic organisation were efficient given existing institutional constraints.

Prof Fogel, 67, pioneered the application of rigorous statistical techniques in economic history, in the process turning conventional wisdom on its head.

Historians, for example, have long argued that the development of railways played a crucial role in US economic development. Prof Fogel rejected this claim, arguing that had railways never existed, US gross national product would have been only 3 per cent lower. He argued that in the absence of railways substitute forms of transport such as roads and canals would have played a more important role. This type of 'counterfactual' analysis, familiar to economists, was new to economic historians.

In a study that provoked bitter criticism, Prof Fogel rejected the conventional wisdom that American slavery was an inefficient, unprofitable economic system. His careful statistical analysis indicated that slavery was economically viable and would have persisted but for political opposition. He did not, however, attempt to justify slavery, arguing that it was morally unacceptable.

More recently Prof Fogel has helped to develop a new branch of economic history that uses biomedical data on human height, weight, food intake and morbidity as a gauge of changes in economic welfare.

THE Clinton administration will probably send its detailed healthcare reform bill to Congress next week, according to one of its chief architects.

Mr Ira Magaziner, White House adviser, said in a speech in Washington yesterday that publication of the bill had been delayed by last-minute number-crunching over new taxes and fees to finance the extension of basic health coverage to all Americans.

This delay has offset some of the initial momentum gained from the impressive presentation of the outlines of the package by President Bill Clinton and his wife late last month.

Mrs Hillary Clinton has continued to draw favourable reviews as she campaigns around the country on behalf of the plan, which she also played a leading role in shaping. But her husband, and the public, have been distracted by events in Somalia.

However, yesterday the president flew down to North Carolina, one of the biggest tobacco producing states, with the apparent intent of at least trying to make the case that it is right and proper to help finance national healthcare reform through the levying of higher 'sin taxes'.

The suspicion of some lost momentum was confirmed by the latest Washington Post poll released yesterday. This found public support for the Clinton plan down to 51 per cent from 56 per cent after his speech to Congress, while opposition had risen from 24 per cent to 39 per cent.

Most reservations centred on the undoubted fact that people will have to pay more, directly or indirectly, for their medical care and on the fears that its quality, including the freedom to choose doctor and hospital, might decline.

Nevertheless, as the White House was quick to point out yesterday, the Post poll still found a comfortable majority (59-31 per cent) believing that the Clinton plan was better than the current system. Even many Republicans concede that reform is essential.

The details of the bill, likely to run to over 1,000 pages, will be critical, with countless interest groups some representing indisputably worthy of causes, waiting to pounce.

MEXICO'S ambitious programme to privatise electricity generation has received a blow after investors pulled out of buying a plant in the northern state of Coahuila.

The Carbon II plant was to be sold for Dollars 1.6bn (Pounds 1.05bn) to a consortium 49 per cent owned by Mission Energy, a subsidiary of Southern California Edison, and 51 per cent owned by Mexico's Grupo Acerero del Norte and Organizacion Autrey.

US environmentalists complained pollution from the plant would blow over the border into the Big Bend National Park in Texas, and demanded smokestack scrubbers be fitted at a cost of about Dollars 300m. Such scrubbers are demanded by US law, but not by Mexico.

Mr John Bryson, chief executive of Southern California Edison, said circumstances were not favourable to conclude the deal.

THE Haitian capital of Port-au-Prince was tense yesterday, with many shops and offices closed and heavily-armed men roaming the almost empty streets.

Public transport was at a standstill. Small-arms and machine-gun fire was heard through the night, following Monday's violent demonstrations which prevented the landing of US troops on a UN mission intended to oversee the restoration of democracy on the island.

The offices of national radio and television were occupied by plainclothes police auxiliaries, known as 'attaches', who also led Monday's demonstrations.

The UN special representative in Haiti, Mr Dante Caputo, cancelled a planned trip to Washington because of the incident. He blamed the Haitian military for Monday's incident, saying the attacks were an insult to the UN and a clear violation of the agreements signed in New York between the army and exiled president Mr Jean-Bertrand Aristide, due to return to Haiti at the end of this month under the peace plan.

The USS Harlan County, carrying the troops, remained anchored outside port yesterday as US officials tried to negotiate a plan for its safe arrival.

In Washington Mr Warren Christopher, secretary of state, yesterday accused Haiti's military leaders of violating the UN-mediated accord and warned that if sanctions were reimposed, they would be severe.

'By their actions, Gen (Raoul) Cedras and Chief of Police (Joseph Michel) Francois are inviting reimposition of severe economic sanctions that could affect their country and would also affect them personally,' Mr Christopher said.

Gen Cedras, who led the 1991 coup which ousted Mr Aristide, condemned the violence but said he sympathised with the Haitians' outrage at the threat to their sovereignty.

ARGENTINA has been in talks with a US subsidiary of Smiths Industries of the UK to modernise second-hand fighter bombers its air force is buying from the US to replace those shot down by Britain in the 1982 Falklands conflict.

Smiths' US unit says it 'actively competed' for the contract, even though a British arms embargo imposed during the conflict remains in force.

The company's avionics division, based in Grand Rapids, Michigan, said this week it had held meetings in Buenos Aires with local defence ministry officials. More talks were planned this week in the US with Mr Oscar Camilion, Argentine defence minister, who will make a counter-proposal to the bid.

UK and Argentine government officials agree there is little chance that Smiths will win the contract unless the embargo is relaxed. By negotiating with a British company for a defence contract Argentina may be trying to underline the 'anachronistic' nature of the embargo.

Smiths in the UK said: 'This is a responsible company. It is not one that is going to break any embargoes or sanctions imposed by governments.' Smiths was 'not going to supply anyone that does not have the approval by the government agencies involved.'

Argentina is negotiating to buy 36 second-hand A4M Skyhawk fighter bombers from the US Navy. The US agreed to sell the aircraft to Argentina in 1992, but bowed to requests by the UK that they should not be equipped with electronics or weapons systems that might threaten British forces based on the Falkland Islands.

A senior Smiths executive was in Argentina last week 'answering questions' from the air force. A marketing director involved in the talks said Smiths had informed both Washington and London it would make an 'initial top-level presentation' in Argentina concerning the contract.

MEXICO'S ambitious programme to privatise electricity generation has received a blow after investors pulled out of buying a plant in the northern state of Coahuila.

The Carbon II plant was to be sold for Dollars 1.6bn (Pounds 1.05bn) to a consortium 49 per cent owned by Mission Energy, a subsidiary of Southern California Edison, and 51 per cent owned by Mexico's Grupo Acerero del Norte and Organizacion Autrey. It was to be the first privately-owned electricity plant in Mexico.

However, US environmentalists complained that pollution from the plant would blow over the border into the Big Bend National Park in Texas, and demanded that smokestack scrubbers be fitted at a cost of about Dollars 300m. Such scrubbers are demanded by US law, but not by Mexico.

Mr John Bryson, chief executive of Southern California Edison, said in a statement issued by Mexico's energy ministry that circumstances were not favourable to conclude the deal.

The problems over the plant have highlighted growing pressure on Mexico to upgrade environmental regulations to the levels in the US even though this is not required by Mexican law. Mexico has recently been willing to cede to the US over the environment, in an effort to win support for the North American Free Trade Agreement.

NEGOTIATORS for the United Mine Workers of America and coal company representatives resume talks in Washington today, amid hopes that the long-running US coal strike may be near its end. The talks are being led by Mr William Usery, who was appointed by the White House as a mediator in the dispute in September.

Mr Usery met the union and coal companies separately yesterday in preparation for today's discussions. Both sides are returning to negotiations after a week-long recess for consultations.

A spokesman for Mr Usery said: 'We are hopeful for a resolution by this weekend. That is our objective.'

The union and the Bituminous Coal Operators Association, the coal companies negotiating group, would not comment on the talks.

The UMWA called a selective strike against the US's largest coal companies in early May, after working without a contract since February. Since then, more than 14,000 coalworkers have joined the picket lines. Peabody Coal, a subsidiary of UK-based Hanson, has estimated the strike has cost about Dollars 1m a day in lost profits.

INDIAN police have dropped an inquiry into claims by Bombay stockbroker Harshad Mehta, the central figure in a huge financial scandal, that he paid Rs10m (Pounds 212,000) to an aide of Prime Minister P V Narasimha Rao, Reuter reports from Delhi.

Mr Rao, who survived a no-confidence motion in parliament over the accusation, has denied receiving the money.

NIPPON STEEL, the world's largest steel maker, said yesterday it would ask its 37,000 staff to take two extra days holiday per month on reduced pay.

This is the latest and most radical cost-cutting step in Japan's steel industry, faced with declining demand from most of its main markets, plus a recession at home.

It follows similar moves from NKK and Sumitomo Metal Industries and is likely to add to the risk of labour tension at a time when many of Japan's top companies are shedding jobs or considering wage and bonus cuts.

The two other leading Japanese steel makers are expected to follow. Kawasaki Steel, which has already moved some workers out of steelmaking into other divisions, said it was considering temporary holidays from next January, subject to union approval. Kobe Steel was also studying temporary leave.

Unions will be unhappy about the Nippon Steel plan but will agree, predicted Mr Minoru Udono, steel industry specialist at James Capel Pacific. He estimated Nippon Steel has a 10 per cent labour surplus, as against an average of 17 per cent for the Japanese steel industry.

Unlike European and US competitors, Japanese steelmakers have so far avoided redundancies, considered socially unacceptable.

Nippon Steel, which recently forecast a loss for this year, says it will ask all staff, including management, to take extra holiday during November and continue every month until further notice. It last resorted to this step from December 1986 to July 1989, to cope with the downturn in domestic demand.

Japanese steel companies are also planning to cut output this month, in line with reduced demand. Nippon Steel officials believe domestic demand will fall to 24.2m tonnes this quarter, from 24.8m tonnes last quarter.

In one glimmer of encouragement for the steel industry, public works starts rose 1.5 per cent in August against August last year. That was the ninth monthly rise running and the best monthly result for a year.

It bodes well for demand for long products such as girders, wire and bars, used in the construction industry, though demand for flat products like hot rolled coil continues to be weak from the car and electrical goods industries.

HONG KONG'S Governor Chris Patten yesterday attempted to blame China for the failure to achieve any breakthrough in the long-running Sino-British talks over Hong Kong's political future.

The comments came as the negotiations appeared to deteriorate into an argument over which side is guilty for the current stalemate.

The governor was replying to Monday's statement by Chinese vice-foreign minister Jiang Enzhu that it would be 'no big deal' if an accord could not be reached. Mr Patten said: 'I think everybody in Hong Kong thinks it would be a big deal if we didn't reach an agreement in the talks.' He questioned China's sincerity in its approach to the talks.

The 13th round in Beijing lapsed yesterday with the two sides remaining divided. They are trying to reach agreement over proposed changes to the mechanism for electing Hong Kong's 60-seat Legislative Council. Britain's chief negotiator, Sir Robin McLaren, said: 'I won't say we have made no progress, but I can't say I'm satisfied with the progress we have made.'

Britain and China have agreed to start a 14th round on October 20, but local expectations of a breakthrough are declining along with the tone of the diplomatic exchanges between the British and Chinese negotiating teams.

The atmosphere in the talks has deteriorated sharply in recent weeks. China recently republished an 11-year-old policy document on Hong Kong, voicing the threat of an early takeover of the colony. It has reacted angrily to Mr Patten's statement last week that the talks could continue for 'only weeks rather than months'.

Analysts think Mr Patten's expected meeting with the UK cabinet on November 11 will provide the effective deadline for talks, unless there is a last-minute compromise.

The chairman and vice chairman of Shimizu, Japan's largest construction company, resigned yesterday after being charged with bribery, writes William Dawkins in Tokyo.

Mr Teruzo Yoshino and Mr Hiroyuki Koyama are accused of bribing a prefectural governor to obtain local government contracts.

The arrests follow an investigation into bribery by the construction industry, until recently an important source of political funds.

CHINA has more than 100 land-based nuclear ballistic missiles, some 50 per cent more than previously estimated, according to figures published by the London-based International Institute for Strategic Studies today.

The IISS says its revised estimate does not imply any recent dramatic increase in the Chinese nuclear arsenal, which has always been 'shrouded in secrecy'. China is now believed to possess about 14 intercontinental missiles and at least 90 intermediate-range missiles. It also deploys a nuclear-armed submarine.

In the 1993-94 edition of its Military Balance, the IISS cites fears that a new spate of nuclear testing could jeopardise renewal of the Non-Proliferation Treaty (NPT), due in 1995. The IISS points to the build-up in conventional arms by most nations in east Asia. It describes as 'worrying' the emphasis on improved capability for naval and air forces.

The IISS highlights Iran's efforts to rebuild its forces with modern aircraft, including Russian MiG-29 fighters, submarines and medium-range ballistic missiles. Iran, like North Korea, is strongly suspected of working towards a nuclear arsenal, but the IISS says no proof exists as yet; 'In all probability Iran cannot hope to produce its own nuclear weapons before 2000 at the earliest.' But it notes that Iran 'is actively procuring weapons systems (aircraft and missiles) capable of delivering nuclear weapons'. IISS, The Military Balance 1993-94, Brassey's, Pounds 36.

THE Australian government finally got a break over its stalled budget proposals, when one of the two minority parties, which hold the balance of power in the Senate, said it would not support an Opposition plan to block all sales and fuel tax rises unless the government withdrew its threat to delay tax cuts.

The promised cuts are due to take effect next month. Ms Cheryl Kernot, Australian Democrats' leader, said the Opposition plan, outlined to the minority parties by the Opposition's Treasury spokesman, Mr Alexander Downer, did not consider the possible effects on the economy.

'The suggestions contained in Mr Downer's letter are cute, but flawed and irresponsible,' Ms Kernot said. The Democrats believed the government had the right to get the core of its budget passed.

Two elements in the budget package were voted down by the Senate last week: the proposed increased wine tax, where the Democrats joined forces with the Opposition to block the measure, and a second round of sales tax rises, due to come into effect in 1995, where the vital vote was cast by Mr Brian Harradine, an independent senator.

The government has threatened to delay implementing proposed income tax cuts, which have been approved, unless all its revenue-raising measures are passed. Yesterday, the Australian dollar jumped more than a third of a US cent, breaking through US cents 66, after the Democrats' decision.

PRESIDENT Boris Yeltsin yesterday moved to patch up relations with Japan, on the first day of an official visit that had been expected to produce scant progress.

Mr Yeltsin pleasantly surprised his Japanese hosts by making a spontaneous apology for 600,000 prisoners held in Siberia after the second world war and by acknowledging the existence of Japan's claim on four islands annexed by Soviet troops at the end of the war.

The apology 'will be extremely significant in building the foundation for the spiritual and psychological reconciliation of our two peoples,' said Mr Morihiro Hosokawa, the Japanese prime minister.

Mr Yeltsin's readiness to discuss the islands, through a twice yearly meeting of foreign ministers 'goes beyond what was said before' and is 'the basis for further negotiations,' said a foreign ministry official. The dispute has prevented Russia and Japan from signing a post-war peace treaty.

Tokyo has made large-scale economic aid to Russia dependent on progress on the islands, though officials said yesterday no further pledges were envisaged for the moment. The Kurile islands are popular symbols of slighted pride in Japan and the source of Japanese mistrust of Russia, seen as an opportunistic aggressor in the war.

Some Japanese officials had expected deadlock over the islands when the Russian leader announced, just before leaving Moscow, that he hoped Tokyo would not spoil the visit by raising the issue. In recognition of this progress yesterday, Mr Hosokawa accepted an invitation to visit Moscow.

Mr Hosokawa was the first to raise the territorial problem by telling Mr Yeltsin that it was 'an objective fact' that the islands were 'inherent territories' of Japan.

Mr Yeltsin replied that he appreciated the existence of the problem and said Russia took responsibility for treaties between the former Soviet Union and Tokyo. Japanese government officials interpret that to include a 1956 joint declaration in which Moscow offered to return two of the islands and negotiate on the other two.

Mr Yeltsin also promised to withdraw the remaining 5,000 Russian troops stationed on the islands.

Separately, he agreed to start joint research on Soviet dumping of nuclear waste in the Sea of Japan.

Mr Hosokawa gave no clear answer to Mr Yeltsin's request for further rescheduling of Russia's Dollars 1.6bn (Pounds 1bn) debt to Japan, beyond saying he understood the importance of this, given Russia's own importance to the global economy. Russia and Japan should continue economic co-operation, Mr Hosokawa said, citing as examples a Dollars 200m optical fibre telecom link between Moscow and the Russian far east and oil and gas development in Sakhalin.

SOUTH KOREA yesterday smoothly completed the introduction of a ban on anonymous financial accounts and avoided a panic on money markets.

The government had stipulated that yesterday was the deadline for all accounts to be registered under the real name of their owners. The ban on false-name accounts is meant to reduce the large underground economy, estimated to be equal to 20 per cent of GNP.

About 95 per cent of the won300,000bn (Pounds 241bn) in financial accounts had been identified as of yesterday.

There had been widespread fears that the deadline would provoke a massive withdrawal of hidden assets from banks and the stock market in a desperate attempt to beat the tax collector, causing a liquidity drain and a financial crisis in its wake.

But the government on Monday suggested that accounts listed under borrowed names would not have to be converted to the owner's real name until 1996, when a new tax system is introduced.

Analysts believe that most of the untaxed assets are hidden under borrowed name accounts.

It is common practice for large depositors to use the names of family, relatives and friends to hide their assets and reduce their tax bill.

The concession will enable the nominee holders to withdraw money from the accounts over the next three years without officials discovering who actually owns the funds in the account.

The stock market reacted soberly to the deadline. The general index rose by 2.5 points to 724, almost precisely the same level before the real-name system was announced two months ago and caused a brief panic on the exchange.

The bourse has recovered since then because the government promised that it would not impose capital gains taxes for the next five years to persuade investors to keep their money in the market.

THE detention of nine foreign teenagers in Singapore for suspected vandalism has sparked a heated debate over justice, with calls to jail and deport them, Reuter reports from Singapore.

The nine were detained on suspicion of spraying paint on cars and stealing road signs. They include three Americans, a Belgian and a Chinese. All are Singapore residents.

ISRAEL and the Palestine Liberation Organisation today begin a complex process of working out the details of how to implement the historic peace accord signed one month ago in Washington.

The negotiations in Egypt mark the coming into effect of the Declaration of Principles, a broad framework for a peace settlement, sealed at the White House with a handshake between Mr Yitzhak Rabin, Israel's prime minister and Mr Yassir Arafat, PLO chairman. The talks also start the tight nine-month countdown to Palestinian self-rule in the occupied territories with Israeli military withdrawal from the Gaza Strip and the West Bank town of Jericho to be completed by April 13 and an elected Palestinian Council to take over internal administration by July 13.

Two standing committees, which begin work today in Cairo and the Red Sea resort of Taba, will over the next two months hammer out a lengthy agenda of difficult and sensitive security issues ranging from the role of the Palestinian police force to the release of Palestinian prisoners.

The overall liaison committee, led by Mr Shimon Peres, Israeli foreign minister and Mr Mahmoud Abbas (Abu Mazen), a senior PLO official, will meet in Cairo. A committee of experts led by Major-General Amnon Shahak, Israeli deputy chief of staff and Mr Nabil Shaath, adviser to Mr Arafat, will meet in Taba to concentrate on the protocol for Israeli military withdrawal which both sides have agreed to reach by December 13.

A third committee will meet in Washington to prepare a protocol for the holding of Palestinian elections and detailing the powers of a Palestinian Council. A fourth committee will concentrate on a crash programme of economic assistance to the territories.

Both Israel and the PLO appear committed to thrashing out the problems and keeping the peace momentum on track. But it is clear that many of the issues will severely test the Palestinian side as hardliners in the occupied territories continue to seek to sabotage the agreement and level charges of betrayal against Mr Arafat.

The most difficult issues revolve around the security of Jewish settlers who will continue to live in the territories throughout the five-year period of interim self rule. Last weekend's killing of two Israeli hitchhikers by Palestinian gunmen near Jericho has heightened Israeli concerns about security. Mr Rabin has made clear that the security issue and Palestinian guarantees will be the touchstone of the next two months negotiations.

The Taba committee will be the centre point for talks about security and its location on the Israeli-Egyptian border will allow the negotiating team to make site visits into the territories to resolve demarcation lines on the ground. Any deadlock between the two sides will be referred up to the higher level liaison committee.

Among the issues to be resolved in Taba are the extent of the hitherto unspecified area around Jericho from which Israeli troops will withdraw; the level of co-operation between the Palestinian and Israeli police forces and in particular what right Israeli policemen will have to pursue Palestinian suspects who commit crimes in Israel and flee across the border into the territories.

The Taba talks must also resolve the extent of Israeli military protection for Jewish settlers travelling on roads in the territories; what will happen to Palestinians currently living under Israeli protection who have been dubbed 'collaborators'; the conditions for the release of Palestinian prisoners held by Israel; the right of passage for Palestinians crossing the Egypt-Gaza border and the Jordan-Israeli border and the right of Jewish settlers to pass through Palestinian controlled areas.

Israeli officials say they will arrive at Cairo and Taba today with a clear agenda, working papers and a will to reach solutions within the next two months. However, concern has been expressed in Jerusalem about the extent of preparation on the Palestinian side. The PLO, however, come to he talks buoyed by a vote in the PLO's central council in Tunis approving the peace agreement by 63 votes to eight with 11 abstentions.

Although the negotiations are going to be difficult and lengthy, Israeli officials believe it will be much more difficult to deliver on the agreements when they come into force. They say that building confidence and relationships between the two sides are as important as the details of the agreements.

MR Robert Oakley, the US special envoy to Somalia, is to extend his stay in Mogadishu following an encouraging two days of talks aimed at breaking the impasse between UN peacekeepers and Somalia's rebel warlord, Gen Mohammed Farah Aideed.

'Mr Oakley will probably remain in Somalia until Thursday due to positive signs emerging from his meetings,' Mr Stephen McIlvaine, the US charge d'affaires in Mogadishu said yesterday.

But confusion remained over what President Bill Clinton's special envoy hoped to achieve. Statements from Washington did not clarify whether the US wanted Gen Aideed behind bars for the killing of UN peacekeepers, or whether they wanted to cut a deal with the fugitive general to end his guerrilla war in Mogadishu, in which 70 UN soldiers have died.

'Anything Mr Oakley said could be misinterpreted,' Mr McIlvaine said. 'But he is not dealing with Aideed and he is not competing with the Unosom (the UN Operation in Somalia).'

Mr Oakley's meetings have been shrouded in secrecy but he is believed to have met members of Gen Aideed's Haber Gedir clan. Mr Oakley, a former ambassador to Somalia, is said to be respected by the Haber Gedir, having obtained US visas for many of those who were persecuted under the Siad Barre dictatorship.

He has also held consultations with the UN's top man in Somalia, Admiral Jonathan Howe, and the Italian ambassador, Mr Mario Scialoja. The latter said he was 'in perfect agreement' with Mr Oakley's mission, but refused to spell out what this was.

Mr Farouk Malawi, the UN spokesman in Mogadishu, also sought to play down policy differences between Washington and the United Nations. 'There is co-ordination and full understanding of Mr Oakley's mission,' he said yesterday.

Nevertheless, Mr Oakley must be under orders to secure the freedom of the US helicopter pilot seized by Gen Aideed's militias during last week's bloody gun battle in which 15 US soldiers and more than 200 Somalis were killed. A Nigerian peacekeeper is also being held hostage.

Mogadishu's war-weary residents have greeted the intense diplomatic activity and Gen Aideed's offer of a ceasefire on Sunday, with great relief. 'I need peace, bread and a job,' says Ahmed Mohammed, who worked for a British hydro-engineering company before the civil war. He now scrapes a living selling his services as an interpreter.

Even this brief interlude without fighting has allowed a semblance of normality to return. Children's voices could be heard across school playgrounds yesterday afternoon. Traffic jams piled up outside the port, where lorries waited to load rice, maize and cooking oil for distribution around town. Pick-up trucks, which once carried militias and mounted guns, were ferrying passengers.

'Of course we know that the ceasefire is temporary, that it could blow up again any minute,' says a UN official. 'But morale has definitely picked up since Oakley's arrival. Both on the UN and the Somali side.'

But Mr Oakley's mission is being interpreted by Gen Aideed's rivals as a policy of appeasement towards the man who defied the United Nations. 'Other clans are getting restless,' says another UN official inside the heavily-fortified Unosom compound. 'They are even getting angry. They don't want the US to build Aideed into a strong opponent. If he is granted too many concessions, it may complicate the UN's relations with other clans.'

But after four months of increasingly bloody warfare, both UN and US officials are seeking a way to end the fighting. The risk is that Mogadishu may be flooded with too many diplomatic initiatives. Apart from Mr Oakley, Ethiopian and Eritrean diplomats are also in town trying to mediate an 'African solution' - currently gaining favour in Washington - as a convenient way to disengage from the Somali quagmire.

Mr Koffi Annan, UN under-secretary general for peacekeeping operations, is also in Mogadishu, and Mr Boutros Boutros-Ghali, the UN secretary-general, is expected to arrive this week.

MR NELSON MANDELA yesterday rejected a referendum as a way of breaking an impasse in South Africa's constitutional talks and said that the African National Congress was determined to go ahead with next April's general election as scheduled.

The ANC leader, in London to address a Confederation of British Industry conference, was responding to a speech by President F W de Klerk in Stellenbosch on Monday. Mr de Klerk suggested a referendum as a way of ending a deadlock caused by a boycott of the talks by the Inkatha Freedom Party, the ANC's main black rivals, and the extreme right Conservative party.

Mr Mandela, who received an explanatory telephone call from Mr de Klerk on Monday night said: 'At no time did President de Klerk make a specific proposal that a referendum should be held. All that he said was that this was a matter which must be addressed in one way or the other. One way might be to have a referendum.'

Some political analysts in South Africa have suggested that holding a referendum would allow the government and the ANC to claim international legitimacy and a mandate to govern in the face of right-wing opposition which could disrupt the proposed election.

Addressing the CBI conference in London, Mr Mandela said he wanted a reassurance that the Freedom Alliance between right-wing whites and Chief Mangosuthu Buthelezi's Inkatha Freedom party would recognise and accept the results of a referendum.

'I got no such reassurance,' he said, adding that a referendum was 'entirely unlikely' to resolve the situation.

Earlier, Mr Mandela said South Africa should abolish exchange controls at the earliest opportunity.

'We are fully aware that the existence of exchange controls could act as a deterrent to many potential investors who may not be certain about the full implications of this system to their investments,' he said.

Abandonment of the system would be possible 'once some semblance of stability returns to the economy, particularly the balance between capital inflow and outflow,' he said.

Mr Mandela, who later met Mr John Major, the prime minister, was nearing the end of a trip to the US and the European Community to promote investment in South Africa.

THE FUTURE of all Russia's democratic institutions is likely to be decided on December 12 following indications yesterday that President Boris Yeltsin would opt for a presidential poll in December.

This would coincide with elections to both houses of the federal assembly, or new parliament and to the regional and republican councils.

Earlier, Mr Yeltsin had insisted that presidential elections be held in June to guarantee stability in the country over the parliamentary election period.

However, Mr Georgy Satarov, a presidential aide, was quoted yesterday by the official Itar-Tass news agency as saying that Mr Yeltsin, presently on a visit to Japan, was now looking more favourably on the December date.

The latest opinion polls suggest Mr Yeltsin has gained in popularity, and many of those advising him believe he should stand while he remains popular and while his popularity would benefit those parties and groups which support him.

Several supporters, including Mr Anatoly Sobchak, the mayor of St Petersburg and Mr Boris Fyodorov, deputy prime minister with responsibility for finance, have called on him to stand in December.

The biggest uncertainty facing the December polls is whether there is enough time left for them to be organised.

Boundaries have to be drawn, electoral commissions appointed, party lists made up and rules on media coverage published.

Many parties and some papers remain banned during the state of emergency - due to end on Sunday.

Mr Satarov said yesterday that another possibility was to move all elections to a later date.

However, the main forces of the far right and left now seem likely to participate.

Mr Sergei Baburin, a nationalist deputy and a former deputy chairman of the banned National Salvation Front group, said yesterday he would call on his comrades in the Russian Popular Union - a smaller party of which he was also chairman - to put up candidates because 'it is important to participate . . . in order to make the federal assembly, which is now purely decorative, into a real organ of representative power'.

Mr Gennady Zyuganov, leader of the Russian Communist party, said that of the 120 nationalist/communist parties, only a few had been banned - and that communist and nationalist candidates could use the legal parties for their campaigns.

He said that the Agrarian Union and the trade unions would also serve as vehicles for these forces.

However, the main trade union federation - the Russian Federation of Independent Unions - said yesterday it wished to be free of all political affiliations.

On Monday, its praesidium accepted the resignation of Mr Igor Klochkov, the federation president - apparently as a 'peace offering' to Mr Yeltsin, whose policies Mr Klochkov had strenuously opposed and whom the unions now fear may confiscate all or a large part of its property holdings.

Meanwhile, several key Russian regions, until now broadly opposed to Mr Yeltsin, are falling into line with his plans. The diamond-producing republic of Yakutia yesterday dissolved its local parliament and has set December 12 as a date for fresh elections.

In the Siberian city of Irkutsk, local politicians promised to reform their legislature, as Mr Yeltsin has demanded.

RUSSIAN research and development, once the largest system of scientific research in the world, is now in 'profound crisis', according to a study by the Organisation for Economic Co-operation and Development.

The report, by a group of western experts, says that many institutions are now on the verge of collapse, that the break-up of the Soviet Union has severed links between parts of the same research institutes and that young researchers are either leaving or refusing to join institutes because of low pay and morale. The rapidity of the decline in funding and projects, especially in the military sphere which accounted for more than 70 per cent of all R&D, has left politicians and administrators with a huge problem of redefining priorities.

The Russian Academy of Science, the most prestigious centre for basic research, has seen its budget decline by 2.5 times in real terms between 1990 and 1992. The report says that R&D investment (corrected to OECD norms) accounted for 2.1 per cent of gross domestic product in 1990, falling to 1.4 per cent in 1991. Of the estimated 950,000 people working in R&D in Russia (excluding space research) in 1991, 200,000-300,000 people have left the system, with further cuts expected. The 'brain drain' has, so far, not been very large - with an estimated 30,000 people leaving to work abroad since 1990.

The continuing domination of the military sector, accustomed to working with large budgets and no cost constraints, means that the introduction of an innovation system based on interactions between science and the marketplace 'will be slow and difficult'. The space sector, an area of excellence, employs some 1m workers, of whom more than half were in R&D. However, recent budget reductions have been substantial.

The report recommends a range of changes, focusing on continued opening up of the sector to international co-operation and a reduction in secrecy.

Science, Technology and Innovation Policy, Federation of Russia, Evaluation Report. OECD, September.

MS MARY Harney was elected yesterday to lead Ireland's Progressive Democrat party. It is the first time a woman has led a political party in the Irish Republic.

The election follows last week's announcement by the outgoing leader, Mr Des O'Malley, that he would withdraw from the frontline of Irish politics.

A reforming politician, Ms Harney, 40, has campaigned for the liberalising of Ireland's conservative social legislation since she was elected to the Dail in 1981. She was a key figure in the founding of the Progressive Democrats in 1985 by a group which split from the Fianna Fail party on policy differences over Northern Ireland, the contraceptive issue and internal party democracy. The Progressive Democrat party has 10 seats in the 166-seat Irish parliament.

Ms Harney said yesterday she wanted the party to field candidates in every constituency at the next general election, and to mount an 'effective but constructive opposition' to the present government. On economic policy the PDs are conservative in outlook, favouring low taxation and low government spending.

The PDs held the balance of power in the last coalition government and were instrumental in the downfall of Mr Charles Haughey, the former prime minister, and the collapse of the last coalition led by Mr Albert Reynolds.

Coalitions are likely to be the norm in the foreseeable future, due to Ireland's proportional representation system, and a trend of declining support for Fianna Fail, previously the majority party. This should create an opportunity for the PDs to return to government sometime in the future.

THE high-spending world of Italian football has received a rude shock from magistrates investigating alleged phoney transfers, tax evasion and falsified balance sheets.

Five first division and two second division clubs are involved along with nine of their players. At stake are the reputations of the best-known and richest clubs - including AC Milan, owned by media magnate Mr Silvio Berlusconi, and Juventus, the team of Mr Giovanni Agnelli, head of Fiat.

These clubs, along with Cosenza, Inter-Milan, Genoa, Torino and Venezia, have all had their offices raided by police this week. Police have also visited the homes of players and managers. The top-named players are Milan's Gianluigi Lentini, who reputedly was responsible for the game's record transfer fee of L60bn (Pounds 24.92m), and one of Italian football's idols, Dino Baggio, now playing for Juventus.

Almost a year ago Turin magistrates were alerted by a small Torino shareholder to the suspicious circumstances of a player's transfer to Venezia. Inquiries revealed the L570m transfer was fictitious and the player's name was none other than the son of a Torino employee.

As a result, the magistrates extended their investigations into the management of the then Torino chairman, Mr Gian Mauro Borsano, a socialist member of parliament.

Apart from transfers of fictitious players, the magistrates are examining the disparity between the figures for which transfers are booked and the figure quoted. Lentini was transferred from Torino to Milan in July 1992 for a sum said by his old club to be around L60bn. He appears in Milan's books worth L27.2bn.

Again Dino Baggio was party to a curious triangular deal whereby in the space of a few days he was transfered from Torino, to Juventus to Inter for a mere L4.5bn - a figure considered surprisingly low for someone of his reputation.

One of the tricks magistrates believe they have uncovered is the accounting for a player's transfer for half the real price in one year, then next year the remainder is paid over to a 'ghost' player. By splitting the fee in two the payment to the fictitious player looks more realistic. The Italian press has carried statements from former football managers claiming the practices have been long known and tolerated.

A ONE-DAY strike in protest at pay restraint, job cuts and employment worries yesterday caused widespread disruption in France's public sector, affecting rail, air, postal and telecommunications services.

The strike was called by two of France's union federations, the Force Ouvriere (FO) and the left-wing Confederation Generale du Travail (CGT) and took place mainly within public sector companies, though one in four civil servants stayed away from work.

Train services in much of the country were cut by two-thirds, as was much of the Paris Metro, while striking Air France employees for a time blocked access to their airline's terminal at Charles de Gaulle airport and caused the cancellation of many medium-haul, but not long-distance, flights.

Pay is the main issue for the national civil service which has been offered an increase of 4.5 per cent for the 1993-95 period. But elsewhere strikers were mainly preoccupied by job cuts, privatisation plans and the Balladur government's employment bill which is aimed at introducing more flexibility in French labour law.

The strike was widely followed at Air France which has announced a further 4,000 lay-offs over the next year. Air France is on the government's privatisation list, while the postal service and France Telecom are not. But striking postal workers cited privatisation as one of the reasons for their protest.

Nearly three-quarters of France Telecom staff stayed away from work. The government has announced its intention to turn the telecoms utility into a public limited company so that it is better adapted to form international alliances. But many France Telecom staff see this as a step to eventual privatisation.

While Mr Louis Viannet, head of the CGT, hailed the action as a success, Mr Francois Perigot, head of the Patronat employers' federation, said such a revival of strike action would 'block action already underway to get the country's out of its rut'. He contrasted yesterday's action in the public sector with the labour climate in the private sector 'where the number of disputes is the lowest since 1945'.

Meanwhile, Mr Edmond Alphandery, the economy minister, claimed yesterday that the recession was now no longer getting any worse. 'One swallow does not make a summer,' said the minister. But he said it was important not to minimise encouraging signs. With an upturn already in new housing and household consumption, it was possible to hope that unemployment would stabilise in 1994.

The draft budget for 1994, on which the national assembly started debate yesterday, would support economic activity and fight unemployment, he said.

GREECE'S newly elected Socialist prime minister, Mr Andreas Papandreou, yesterday named a cabinet dominated by old political allies from his first term in office.

He did not appoint a deputy prime minister, but created a special cabinet post for Mr Antonis Livanis, an adviser who worked closely with him when the Pasok was in power from 1981-89.

The post of economy minister went to Mr Giorgos Gennimatas, Pasok's most popular member, but who is suffering from cancer. However, Mr Yannos Papantoniou, a young economist, will be alternate economy minister and is likely to represent Greece at EC finance ministers' meetings.

The foreign minister's job went to Mr Carolos Papoulias, a specialist in Balkan affairs, while Mr Theodoros Pangalos got back his old post as alternate foreign minister in charge of EC relations.

Ms Melina Mercouri, the actress, returns to head the culture ministry. Mr Papandreou's personal physician, Dr Dimitris Kremastinos, was appointed health minister.

Meanwhile, Mr Constantine Mitsotakis, outgoing premier, is stepping down as leader of the New Democracy party.

Blast from past, Page 16

THE German ruling on the Maastricht treaty clears the way for small, but potentially significant changes in how the European Community does business, writes Lionel Barber in Brussels.

Treaty ratification will increase the powers of the European Parliament, and deepen co-operation between governments on drugs, immigration and crime. It also lays the groundwork for greater co-operation on foreign policy, and provides for a move to a single currency by 1999 at the latest.

Some of these changes look incremental; others such as the move to European economic and monetary union look problematic. But, as one long-serving EC diplomat in Brussels said: 'The powers are there in the treaty. It depends on whether the politicians are prepared to use them.'

The obvious winner among EC institutions is the parliament. Under Article 189b, it gains the right of 'co-decision' on legislation, to be shared with the council of ministers. This does not extend to core issues such as foreign policy and judicial co-operation, rather to mundane matters such as the internal market.

A senior EC official predicts that the legislative struggle between EC ministers and parliament will resemble bargaining between House and Senate in the US, with the European Commission playing the broker.

The parliament will exert greater scrutiny over the Commission, starting from January 1, 1995. On this date, both bodies will begin five-year terms.

Other important changes include:

More qualified majority voting in social policy legislation. Britain has a treaty opt-out, but remains involved in discussions.

The right of EC citizens to vote or stand as a candidate in local and European parliament elections.

Accelerated devolution of power to national and local levels under the principle of 'subsidiarity'.

Establishment of 'joint actions' in foreign and security policy. This does not mean the EC will be sending combat troops to ex-Yugoslavia, but should lead to less reactive diplomacy.

Creation of a committee of the regions. Only four states have so far put forward a list of members, and some senior EC officials worry about bureaucratic confusion over its role.

Lastly, the EC will be known in future as the European Union, but not apparently in all its future guises. Top lawyers in Brussels are studying variations. The safe bet is that the British, who remain worried about federal connotations, will stick to the 'Community' - or even better, the 'Common Market'.

THE TRANSFER of Germany's seat of government from Bonn to Berlin will be completed by the year 2000, Chancellor Helmut Kohl said yesterday, ending months of debate about the timing of the move. However, parliament might decide to move earlier, possibly in 1998, when the parliamentary factions will discuss the cabinet decision next week.

The cabinet decision was welcomed by the Berlin Senate, or state government, which said there was 'finally a clear perspective'. It will also send a signal, however late, to investors and property developers, who always believed the move would attract more investment into the five eastern states.

Officials in Bonn, particularly those who have established careers and homes in the Rhineland, have tried to delay the move as long as possible, largely because of the cost and upheaval. Mr Theo Waigel, finance minister, has estimated the move will cost about DM30bn (Pounds 12bn).

The decision to move the government to Berlin was voted by the Bundestag, the lower house, in June, 1991.

The slow timetable, however, has prompted sharp criticism by commentators, most notably Marion Grafin Donhoff, publisher of Die Zeit. She recently wrote that the government's reluctance to move to Berlin was slowing the social and psychological unification of eastern and western Germany.

The Treuhand, the agency charged with restructuring and privatising east German industry, yesterday announced it had liquidated 3,151 enterprises with the loss of 235,000 jobs since it was set up in July 1990. They had been liquidated largely because they proved unviable, even after restructuring, or could not be privatised.

The Treuhand has already privatised almost 12,000 of the 13,000 enterprises under its control. Some 1,300 are in the process of being sold, leaving about 500, many of which will also be privatised.

However, there is increasing concern about the fate of 15 enterprises, which together employ about 100,000 people, and include the chemicals, mining and heavy machinery sectors.

ON THE face of it, Chancellor Helmut Kohl seems to have got pretty much what he wanted from Germany's august constitutional court, giving the green light for ratification of the Maastricht treaty.

Of course the devil is in the detail, and after the 85-page judgment was delivered yesterday, both proponents and opponents of European union were claiming victory.

The eight red-robed judges of the constitutional court in Karlsruhe gave their own interpretation on how the treaty, and the whole process of European integration, should and would be implemented. Yet their words appear close to what the German chancellor, and the German parliament, have already agreed.

The end result is that all agree that the German Bundestag and Bundesrat, the two houses of parliament, should in future exercise stronger national democratic control over EC decision-making. In future, German overseeing of Brussels legislation will be similar to that in Britain and Denmark, and not the rubber stamp it used to be.

'The principle of democracy does not prevent Germany joining a supranationally organised community of states,' the judges said in their main guidelines.

'If an association of democratic states takes on sovereign tasks and exercises sovereign powers, it is principally the peoples of the member states who must legitimate this through their national parliaments.'

The judges did pay tribute to the need for democratic control at the European level - through the European parliament - but without quite the same sense of conviction.

'Increasingly as European nations grow together . . . democratic legitimation is conveyed by the European parliament elected by the citizens of the member states,' they said. 'It is of decisive importance that the democratic basis of (European) Union should keep pace with integration, and that a vital democracy should be maintained as the integration of member states continues.'

They then went back to stress the need for national democratic controls.

'If, as is currently the case, the peoples convey democratic legitimation through national parliaments, then the principle of democracy sets limits on the expansion of the tasks and powers of the European communities. The German Bundestag must retain substantial tasks and powers.'

In weighting their judgment in favour of national control, the judges are following the inclination of the Bundestag and Bundesrat when they ratified the Maastricht treaty. In a considerable tussle with the German government, the two chambers have wrested constitutional powers to oversee all future Brussels legislation.

The constitutional court judgment, by stressing that trend, may help to reinforce it. According to a new article of the German constitution wrung out of the government by parliament last year, the government must now 'consult and take into consideration' the opinions of its parliament.

Moreover the judges have gone further in reserving their own right to keep a sharp eye on future developments towards European union. 'The federal constitutional court will consider whether legal acts carried out by the European institutions and organs remain within the sovereignty rights accorded to them, or whether they go beyond them,' they said.

The court agreed with the German government that a loosely-worded article in the Maastricht treaty which allows the European Union to give itself the 'means' necessary to achieve its goals, did not amount to a blank cheque. Germany, and all the other members states, agreed that the statement was merely a compromise clause to allow future financing to be arranged, without a clear commitment.

As for the transition to economic and monetary union, the court seems to be satisfied that the controls to be exercised by the Bundestag, and perhaps even more strictly by the Bundesbank, will be adequate.

'With ratification of the Union treaty, Germany is not subordinating itself to an unclear, automatic and uncontrollable mechanism leading to currency union. The treaty opens the way to a further step-by-step integration of the European community of law which depends at every further step either on conditions which the parliament can now foresee, or on further approval by the federal government, subject to influence from the parliament.'

Mr Kohl could hardly have put it better himself.

UNION calls for pay rises of up to 6 per cent for west German engineers next year and a moratorium on job cuts were rejected by employers yesterday as 'poison' for business.

Gesamtmetall, the industry association, which will start negotiations with the IG Metall union next month, said such a settlement would have to be paid for with tens of thousands of jobs.

Mr Klaus Zwickel, the new IG Metall president, told a news conference the claim was based on next year's expected inflation rate of between 3.5 and 4 per cent and productivity increases of at least 2 per cent.

Engineering and metal employees had already paid the price of recession with 'alarming job losses and severe cuts in real earnings,' he said. Real income increases would increase spending power and demand, he argued.

The unveiling of the IG Metall claim marks the formal opening of what promises to be a tense but relatively strife-free pay round in all sectors of German industry.

IG Metall, with around 3.6m members, is the country's most powerful union and traditionally sets the pattern for other industry awards. While Mr Zwickel's statement was peppered with the ritual, veiled hints of possible strife, the overall tone was moderate.

It indicated guarded readiness to negotiate on more flexible working times and practices, and appeared to leave the way open for a long-term deal such as last year's 21-month settlement which expires at the end of December.

However, Gesamtmetall's sharp response reflected local economists' opinions that the employers hold the upper hand. According to independent analyses, west German unemployment is rising by 27 per cent year-on-year. This year alone the industrial workforce has shrunk by 7 per cent.

Gesamtmetall, which has yet to make any proposals on pay, said 30,000 jobs a month were being lost in engineering and metalworking. Unit labour costs had risen 11 per cent in the first half of this year, production had fallen 14 per cent and productivity was down 2 per cent.

However, observers are sceptical about many industrial employers' hopes of winning a general wage freeze, pointing to real earnings cuts in some IG Metall areas of up to 3 per cent this year, and a sharp drop in personal savings.

Most preliminary forecasts for 1994 assume nominal pay increases at or near an expected 3.5 per cent inflation rate.

Lex, Page 18

The UK's Nigel Short gained his first victory over world chess champion Garry Kasparov in the 16th game of his world title challenge. Kasparov leads the 24-match series by 10 1/2 points to 5 1/2 .

Heavy rain caused flooding in Lincolnshire, Norfolk, Suffolk, Devon, Kent and Sussex, with roads blocked and homes flooded.

Following the party conferences, Labour's popularity is at a three-year high of 46 per cent, according to an ICM opinion poll in today's Guardian. It shows the Conservatives rising to 31 per cent with the Liberal Democrats dropping five points to 19 per cent.

About 160 English soccer fans were arrested in Amsterdam after renewed skirmishes with police on the eve of England's crucial World Cup match with Holland in Rotterdam. Eight supporters were already being held while another 30 were deported at the weekend.

Police said an explosives cache thought to be enough to make up to 20 bombs had been discovered in north London, an area that has suffered a spate of small explosions over the past 11 days.

CABINET MINISTER Mr William Waldegrave yesterday accepted that he had erred in approving exports to Iraq that were used to boost the country's military capability.

But he blamed Whitehall officials for not passing on key intelligence to ministers that might have shed light on the Iraqi build-up and the involvement of British companies.

It was the most serious public admission by a serving minister since the Scott inquiry began last May and may refuel the furore over the arms-for-Iraq affair.

Mr Waldegrave said that in 1989 as foreign office minister he had decided on 'the balance of probability' that British machine tools would be used for civilian purposes by the Iraqis.

'I took the view maybe wrongly - clearly wrongly in hindsight - that the priority in Iraq had changed and these were going for civil use,' he said. 'Clearly, with hindsight, that was the wrong judgment.'

The government faced a further embarrassment when Mr Waldegrave agreed to retract an earlier statement to the inquiry that 'no dual use exports (to Iraq) were allowed if it was believed they were to be used to produce weapons'.

Mr Waldegrave, now public services minister, was being questioned over his role as foreign office minister between July 1988 and November 1990.

He was referred by the inquiry to a series of intelligence reports showing that when he agreed to the British exports there was firm evidence that the Iraqis were using the machine tools for military purposes.

He said he had not been made aware of the reports which were circulated among his own officials. Had the reports been made available to him, he said, it would have been easier for him to argue against other government departments and to block the export of machine tools.

'I have a very high regard for the capacity of the intelligence services in this country but I don't think we used them properly in this story,' he said.

Documents made available to the Scott inquiry and referred to yesterday appear to confirm a contradiction at the heart of the government's handling of its defence policy towards Iraq.

Ministers agreed in 1989 to approve the export of machine tools made by Midlands company Matrix Churchill in spite of intelligence linking the company to a munitions contract. The information was used later to prosecute directors of the company.

The defence in the Matrix Churchill trial argued that the directors acted in the full knowledge of government. The trial collapsed after a judge refused the government's attempt to withhold documents.

Mr Waldegrave was asked by Lord Justice Scott why, given the intelligence on Matrix Churchill, there had not been an earlier prosecution or whether such a prosecution at all was fair. The minister said: 'I find it very difficult to judge this. Perhaps that is what all the inquiry is about.'

THE LAST legal obstacle to the ratification of the Maastricht treaty on European union was removed by the German federal constitutional court yesterday.

The court in Karlsruhe rejected a series of challenges to the treaty as either inadmissible or unsubstantiated.

The ruling by the eight judges, four of whom are pictured above, was greeted with relief in European capitals, allying fears that the German judicial authorities might impose conditions incompatible with the treaty.

Report, Page 18;

Ruling a win for all, Page 2;

Fresh Tory battle threatened over Maastricht, Page 9;

Editorial Comment, Page 17;

Lex, Page 18

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MR KENNETH CLARKE, the chancellor, was urged yesterday to think carefully before raising taxes in the November 30 Budget and to be prepared to cut interest rates to offset any tightening of fiscal policy.

In his first meeting with the Treasury's panel of independent forecasters, the so-called 'wise men' were divided on the merits of a further fiscal squeeze in the Budget, with several voicing doubts about the wisdom of tax increases.

However, the Bank of England is thought to have suggested tax increases in the Budget rather than additional spending cuts. In a letter to Mr Clarke, the Bank urged the government to take extra action to cut the fiscal deficit.

In the past, the Bank has expressed a preference for tightening fiscal policy through spending cuts rather than tax rises and advocated increases in indirect rather than direct taxation when taxes must be raised.

By suggesting tax increases, the Bank appears to have accepted Mr Clarke's claim that there is no way the government's pre-set spending target for 1994-95 can be reduced.

Mr Clarke's brief meeting with the 'wise men' came as Budget preparations moved into high gear. The chancellor is chairing meetings this week of the EDX cabinet committee, which is struggling to keep public spending in 1994-95 within its preset 'control total' of Pounds 254bn.

On Friday, Mr Clarke will be closeted with Treasury ministers and senior officials in the government mansion of Dorneywood to discuss Budget strategy and the economic outlook.

Yesterday, the Treasury published its monthly monetary report, which noted that recent economic indicators such as manufacturing output, retail sales and consumer confidence pointed to continuing growth. It contained no clues as to the Treasury's likely Budget judgment and will in any case be overtaken by more up-to-date information on the economy in the next eight days.

Mr Clarke has said he will not decide on taxes before November. In his 30-minute meeting with the 'wise men', it emerged that at least two of the panel expressed doubt over whether there should be any fiscal tightening in the Budget.

Mr Andrew Sentance of the Confederation of British Industry said the government should cut spending but not raise taxes.

He told Mr Clarke of the danger that the recent rise in consumer spending might 'fizzle out' should the chancellor decide on a further tax increase in the next financial year.

Other panel members expressed worries about the strength of the recovery.

It is understood that Professor Minford of Liverpool University urged Mr Clarke to cut interest rates, held at 6 per cent since January, to boost the recovery. Prof Minford believes monetary relaxation and a low pound could kick the UK economy into substantial growth over the next year without undue inflation.

Picture, Page 9

LLOYD'S underwriting agents could face actions claiming more than Pounds 2bn in damages for alleged negligence following a judgment in the High Court yesterday.

Mr Justice Saville ruled that agents had a legal duty to exercise reasonable care and skill when acting on behalf of Names, the individuals whose assets support the London insurance market.

The ruling, largely expected at Lloyd's, means the way is now clear for a number of actions by Names seeking to recover hundreds of million of pounds in losses. The judgment also puts pressure on Lloyd's to deliver an out of court settlement.

The ruling was welcomed by leaders of the Names. 'This is an enormously important victory,' said Mr Michael Deeny, chairman of the Gooda Walker Names Action group, the biggest group of loss-making Names. It was the 'last major hurdle' for Gooda Names before their case comes to court next April, he added.

'It does not decide the outcome of the war but goes a long way to determine its strategic direction,' said Mr Colin Hook, chairman of the Feltrim Names Association which represents 2,000 Names who are claiming damages of Pounds 600m from agents.

The Names had argued that their agents were under a legal duty to exercise reasonable care and skill and perform to the standard of reasonably competent and efficient professional underwriters. The agents disputed this, saying the contracts between agents and Names excluded such a legal duty.

Giving judgment in the Commercial Court, Mr Justice Saville said that it 'literally' went without saying that agents had to act with reasonable care and skill.

The wide authority given to agents to act on behalf of Names, the potentially unlimited liability faced by Names and the remuneration received by agents pointed 'irresistibly' to the conclusion that the agents have such a legal duty of care, the judge said.

He found that members' agents, who handle the affairs of Names, were liable for the conduct of managing agents, who administer syndicates in the insurance market. In addition, he found that managing agents, who administer syndicates, owed a duty of care to Names in tort law even if they did not have an agency contract with the Name.

The agents are considering appealing against yesterday's ruling.

Lloyd's faces race against time to settle out of court, Page 9

THE British government last night predicted that multinationals in Europe might move their operations to the UK to save costs, after Britain won a six-year opt-out from legislation to protect young people at work.

But Britain failed to prevent the 11 from deciding to go ahead with plans for the mandatory introduction of elected works councils in companies that operate in more than one country.

The compulsory introduction of works councils comes under the social chapter of the Maastricht treaty. The treaty was finally ratified by Germany yesterday after the country's federal constitutional court removed the last legal hurdle to its approval.

Mr David Hunt, UK employment secretary, claimed victory on all fronts. In spite of Britain's isolation, he said: 'We are turning the tide in Europe.' He added: 'In private, many of my (EC) ministerial colleagues agree with me.'

He said of the opt-out from the main provisions of the young workers' directive: 'We have won a victory for newspaper boys.' On works councils, he said Britain had refused to accept 'an alien model of compulsory consultation' of workers on investment, relocation and jobs plans.

He was backed by Sir Michael Angus, president of the Confederation of British Industry, who said in a letter to Mr Hunt that it would 'impose a rigid and bureaucratic procedure for informing and consulting'.

Mr John Monks, the TUC's general secretary, disagreed, saying the UK government had 'lost the argument' over the issue.

'The works council directive will sooner or later apply in Britain,' he said. 'The era of the British veto is over. This is good news for British workers and the whole country.'

The British government's resistance to the introduction of the working hours directive for young people stems from its general belief that the EC will add unnecessarily to the cost burdens on business by introducing inflexibility into labour market regulation in giving protection to young people aged 16 and 17 who have left school.

Mr Hunt predicted that 'there may well be companies that decide to concentrate more of their activities in the UK,' a provocative remark in view of controversy that the UK is gaining unfair advantage in investment by staying outside EC social and employment regulations.

German, Dutch and French officials poured scorn on the idea of a mass industrial exodus from the Continent to the UK. 'But you can be sure the Council (of Ministers of the 12) will react if any such thing were to happen,' a German official said.

The object of the directive is to regulate the number of hours and the conditions of work for children (up to the age of 15) and adolescents (from 15 to 18 years).

The EC works councils directive, obliging companies with more than 1,000 workers in more than one member state to consult and provide information to elected workers' representatives on the German and, increasingly, French model, will now be put forward again under Maastricht's social chapter for the 11.

More than 100 British companies in continental Europe would fall under the rules, which the UK will now be powerless to shape. In addition, multinationals based in Britain and on the Continent may face demands from their workers to offer the same consultation rights in the UK as in the rest of the EC.

A challenge to the pole position, Page 17

MR Andre Rossinot's two jobs, as France's civil service minister and mayor of Nancy, incarnate two trends in today's Europe: the way in which provincial cities and regions are gaining power at the expense of the national state; and how they are allying with each other across national borders.

Mr Rossinot has a special brief to continue with all deliberate speed the transfer of French bureaucrats out of over-crowded Paris to the more sparsely populated provinces.

For a UDF politician such as Mr Rossinot, it is the ideal job. The UDF has long believed in the regions. Its partner in the ruling coalition - the RPR Gaullists, who inherit the centralising tradition of the Bourbon kings and the Jacobin revolutionaries - has been only reluctantly convinced of the need in recent years for some devolution of power.

But Mr Rossinot cautions that 'the idea of regions is new in France' - a regionalisation law passed in the early 1980s only really took effect in 1986. Interviewed in his stately office overlooking the Place Stanislas, he also complains that his Socialist predecessors gave delocalisations (the transfer of government offices out of Paris) a bad name by being 'too brutal'. Prime minister Edith Cresson's peremptory ordering of the famous Ecole Nationale d'Administration (ENA) from Paris to a refurbished prison in Strasbourg led to legal problems, which Mr Rossinot and others in the Balladur government have subsequently had to sort out.

Nonetheless, Mr Rossinot is sticking to Mrs Cresson's plan for an exodus of 30,000 civil servants out of Paris by the end of this century; so far a tenth have left the French capital. Indeed, the mayor-minister says he intends to make delocalisations a permanent feature of French territorial planning.

'We have the advantage of having more space than Britain to work with, but we also have the disadvantage of over-concentration in some urban areas and desertification in some parts of the countryside'. The Balladur government will continue to shift new powers, such as responsibility for professional training, to the regions, says Mr Rossinot.

As mayor, Mr Rossinot has been able to preside over his city's growing international links. Although Nancy is also twinned with Padua in Italy, Liege in Belgium, Kanasawa in Japan and many others, its key relationship is with Karlsruhe.

Twinning with this German city 35 years ago was 'an act of political courage,' says Mr Rossinot. It has paid off since, and not just in terms of sporting, student and tourist exchanges. Karlsruhe has been very active in joining Nancy and other French and German cities to lobby for a high-speed Franco-German rail link. 'As a result, the last two Franco-German summits have stressed the importance of extending the TGV east of the Rhine,' says the mayor-minister.

For Nancy, in its enthusiastic courting of Karlsruhe - which extends to close co-operation between the cities' universities in chemical engineering - Nottingham and Halle count for relatively little, despite the success of the 1991 joint exhibition by the four cities at the Hanover trade fair.

Nancy is still formally twinned with Newcastle. The only economic link seems to be a plant near Nottingham belonging to Pont a Mousson, the Nancy tube-maker. Some people in Nancy also express disappointment that Nottingham's interest in the four city arrangement is more in marketing and 'Europeanisation' of the cities' image to impress the European Commission, rather than in establishing more basic business or educational links.

By contrast, Nancy may eventually be drawn much closer to Halle through the medium of its German sister town, Karlsruhe.

EUROTUNNEL said yesterday it was on target to begin phased commercial operations of the Channel tunnel next March, but confirmed it would need to raise at least another Pounds 1bn by mid-May 1994, from its banks and shareholders.

The group has also been forced to reduce its initial revenue estimates because of service start-up delays and fierce price competition and surplus capacity on the Dover-Calais ferry routes. Eurotunnel's prices are due to be announced in January.

Shareholders will be asked to support a rights issue for at least half the additional funds, probably early next year after negotiations with Eurotunnel's 220 banks are completed. Eurotunnel's share price fell by 6p to close at 488p.

Sir Alastair Morton, Eurotunnel's chief executive, said the new funding was mainly required to pay interest costs on the group's existing Pounds 7.28bn of debt. Although he said projected revenues are expected to cover operating costs by next August, it will be 1998 before the tunnel breaks even on a cash basis.

By that stage Eurotunnel estimates the total cash requirement for the project will have reached Pounds 10bn - Pounds 965m more than existing resources including the anticipated exercise in 1995 of warrants which will generate Pounds 220m.

Eurotunnel acknowledged the shortfall could be even higher 'depending on a number of continuing uncertainties', including claims by contractors and talks with the banks which have been insisting on additional contingent requirements of almost Pounds 400m. Sir Alastair said he was confident this would be reduced.

Mr Graham Corbett, chief financial officer, said Eurotunnel's total cash requirement, from establishment in 1986 to the start of commercial services in March, will be Pounds 8.75bn compared with Pounds 8.4bn estimated in June.

He said the bulk of the increase reflected the signing of the 'Protocol' agreement in late July with Transmanche Link, the Anglo-French contractors building the tunnel. Under the agreement, Eurotunnel agreed to advance the contractors Pounds 235m pending settlement of the claims.

Sir Alastair said that following that agreement there had been a 'significant improvement' in the relationship between Eurotunnel and TML and that work was on schedule for the start of heavy goods vehicle freight shuttle services on March 7.

These will be followed by rail freight and tourist shuttle services ahead of the state opening on May 6, and the start of Eurostar train services between London and Paris at the end of June.

Because of the advanced payments to TML, partly offset by a new Pounds 120m standby bank loan agreement, Eurotunnel's projection of when it would exhaust its existing resources has been brought forward to mid-May.

The additional funding requirement also reflects the reduction in projected revenues in the tunnel's early years - due in part to initial capacity constraints, the late introduction of some services and lower anticipated fare yields pending 'the inevitable rationalisation of ferry capacity'.

Eurotunnel is now projecting total revenues in 1994 of Pounds 224.1m, some Pounds 44.5m lower than indicated in April. Revenue forecasts for 1995 and 1996 have been reduced by Pounds 32m and Pounds 18m respectively to Pounds 554m and Pounds 690.7m.

Editorial Comment, Page 17

Lex, Page 18

A. P. MOLLER, the Danish shipping, shipbuilding and oil group, is consolidating its position as the world's leading container carrier.

The group announced last week that it had placed an order for five container vessels with its own shipyard, the Odense Steel Shipyard.

Capable of carrying 4,800 TEU (standard 20-foot containers) each, these are the biggest container vessels yet ordered by Moller's Maersk Line shipping operation.

Maersk passed Taiwan's Evergreen in terms of container carrying capacity earlier this year, when it took over nine vessels from its erstwhile Danish rival, the East Asiatic Company, which has withdrawn from liner shipping.

Maersk's capacity on the group's 50 ships is about 140,000 units to Evergreen's 135,000, according to available estimates. Maersk also has about 20 ships on charter to its global liner services.

With last week's order, Maersk has on order 10 new vessels with a total container capacity of 30,510. However, the expansion of the liner business is only one of the factors which has made the Moller group's twin parent companies, D/S 1912 and D/S Svendborg, two of the strongest shares on the Copenhagen stock exchange this year, with the B shares increasing by about 56 per cent.

The most important factor behind the rise in the share price, Copenhagen analysts say, was a new contract for sale of natural gas from the group's fields in the Danish sector of the North Sea. The Moller group has a 39 per cent share in Danish Underground Consortium (DUC), in which it is the operating company for the North Sea oil and gas operations. Its partners in DUC are Shell and Texaco.

DUC's production is relatively small - about 7.9m tonnes of oil and 3.6bn cubic metres of natural gas in 1992 - but this is about 110 per cent of Denmark's oil and gas needs.

DUC and the state's oil and gas distribution company, Dansk Olie og Naturgas (Dong), earlier this year signed a contract under which DUC's deliveries of gas from 1997 will be doubled, taking them to 7bn cubic metres a year.

On the management side, Moller is going through an interesting transitional period. Mr Maersk McKinney Moller, whose father founded the group at the beginning of the century, stepped down from the day-to-day running of the group on reaching the age of 80 in July this year.

He remains chairman of the parent companies, but he made Mr Jess Soderberg, 49, the group's chief executive from July 1. Mr Soderberg's entire career has been with Moller, where he became finance director before being made a partner and chief executive.

The Moller group's oil and shipping operations had a turnover in 1992 of about DKr23bn (Dollars 3.5bn) and reported net profits of DKr1.5bn.

MANNESMANN, the industrial, engineering and telecommunication group which announced a one-for-eight rights issue late last month, said it will issue the new shares at DM250 each, AP-DJ reports from Dusseldorf. The new shares will be entitled to half the company's 1993 dividend.

Existing shares traded yesterday at DM330.50, DM2.70 higher than at Friday's close. The subscription period for the issue is to run from October 18 through November 2.

SWEDEN'S small shareholders' association yesterday stepped up its campaign to block a proposed merger between Volvo's car and truck business and France's Renault, claiming it had won the support of an institutional shareholder.

The group, called Aktiespararna, also wrote to Volvo insisting the merger would require a change in the company's articles of association at the November 9 shareholders' meeting on last month's deal, a move that would require two-thirds support instead of the simple majority needed to approve the merger.

Mr Lars-Erik Forsgardh, chief executive of Aktiespararna, refused to identify the institution he said was ready to support the association, or how big a share of votes it held. But he said he had received verbal assurances it would give Aktiespararna its proxy votes and added that he was optimistic of winning over more institutional shareholders. However, the association still appears to have the odds against it.

Volvo is already assured of support from more than 20 per cent of the voting stock. Aktiespararna said yesterday its members probably held a little less than the 7.7 per cent of votes they controlled when a survey was last conducted three years ago. The largest institutional shareholder, a Swedish state pension fund, holds around 7 per cent.

Volvo will today have a chance to press its case further at an annual meeting at its headquarters in Gothenberg of a dozen of its largest shareholders. Apart from Renault, the biggest single shareholder with 8.2 per cent, they include state pension funds, investment companies, bank pension funds and insurance groups. The company said it did not accept that the Renault merger required a change in its articles, saying the terms of the deal were covered under its existing articles.

ALGERIA yesterday executed 13 Moslem fundamentalists, the largest number to go before the firing squad in 20 months of violence, Reuter reports from Algiers.

The executions, announced by the Justice Ministry, signalled a continuing crackdown despite efforts to find a political consensus before the end of the year.

'The execution of these criminals reaffirms the will and determination of the state to protect lives and property and ensure stability and social peace,' the ministry said.

Announcing the executions in a statement carried by the official news agency APS, the Ministry said six other condemned men had been reprieved. After the rejection of court appeals, condemned men may be reprieved only by the head of state, Mr Ali Kafi. Earlier this year, he commuted eight death penalties to life imprisonment but allowed three batches of executions to go ahead.

Violence erupted in January after the army-backed authorities cancelled a general election in which the now-outlawed Islamic Salvation Front (FIS) had taken a huge first-round lead. The then president, Mr Chadli Benjedid, quit in what diplomats termed a bloodless coup. A five-man presidency took over, promising to return the country to a state of law, ensure the safety of its 26m people, and stand down by the end of this year.

The FIS was later banned and its hardline wing is frequently blamed for ambushes in which members of the security forces, their relatives, intellectuals, politicians and journalists have been murdered. In response, special courts, in the capital and two of the country's biggest cities, were set up late last year with tough powers to combat killings, sabotage and 'terrorism'.

RICE thieves are on the rampage in Japan, attracted by the high prices created by the worst harvest since the war, according to the the national police agency.

Thefts of the staple are increasing throughout Japan, traditionally known for an absence of petty crime beneath the big financial corruption scandals of the past few years.

The agency said rice worth Y34m (Pounds 212,000) had been stolen in 208 incidents in the first nine months of the year, almost the same as for the whole of 1992. Police expect the number of thefts to rise as the harvest progresses from southern to northern regions.

Police are worried by the spread in rice-stealing from criminals to ordinary workers, which they take to be a mark of the seriousness of the recession.

NEW HIGHS (226).

BRITISH FUNDS (4) OTHER FIXED INTEREST (2) AMERICANS (1) Lowe's, BANKS (7) Bk. Ireland, Bk. Scotland, Barclays, Deutsche, Natl. Australia, Natl. Westminster, Standard Chrtd., BREWERS (3) Gibbs Mew, Grosvenor, Matthew Clark, BLDG MATLS (4) Grafton, Heywood Williams, MB Caradon, SWP, BUSINESS SERVS (6) BNB, Coutts, Dart, Hays, Hutchison Whampoa, Serco, CHEMS (5) Akzo, BASF, Bayer, Hoechst, Schering, CONTG & CONSTRCN (6) Ashtead, Hewden-Stuart, Lon. & Clydeside, Severfield-Reeve, Sheriff, Vibroplant, ELECTRICALS (5) ASEA B, Arlen, Chloride, Critchley, Thorpe (FW), ELECTRICITY (14) China Light, East Midlands, Eastern, London, Manweb, Natl. Power, Northern, Norweb, PowerGen, Seeboard, South Wales, South Western, Southern, Yorks., ELECTRONICS (6) Eurotherm, Kalamazoo, Macro 4, Pegasus, Phonelink, Tunstall, ENG GEN (4) Fenner, Kvaerner, Quadramatic, Renold, FOOD MANUF (1) Kakuzi, HEALTH & HSEHOLD (4) Amersham, IWP, Mayborn, Proteus, HOTELS & LEIS (2) Airtours, Barr & WAT A, INSCE BROKERS (2) Archer (AJ), Oriel, INSCE COMPOSITE (4) Allianz, Domestic & Gen., GRE, Trade Indemnity, INSCE LIFE (2) Legal & General, Prudential, INV TRUSTS (75) MEDIA (7) Dorling Kindersley, Elsevier, Flextech, HTV, Sleepy Kids, Storm, VTR, MERCHANT BANKS (3) Close Bros, Warburg, Wintrust, MTL & MTL FORMING (3) Cook (Wm), Glynwed, Thyssen, MISC (3) Black (P), Gt. Southern, Spandex, MOTORS (3) ERF, First Tech., Lucas, OIL & GAS (3) Brit Borneo, Norsk Hydro, Total B, OTHER FINCL (5) Cater Allen, Gerrard & Natl., Mercury Asset Mngmt., St James Pl., Swire Pacific, OTHER INDLS (2) Bruntcliffe Aggrts., Charter, PACKG, PAPER & PRINTG (3) Bunzl, Delyn, Hunters Armley, PROP (20) STORES (7) Asprey, Blacks Leis., Brown (N), Courts, Marks & Spencer, Moss Bros., Tie Rack, TELE NETWORKS (2) BT, Security Servs., TEXTS (1) Shani, TRANSPORT (4) Brit. Airways, Cathay Pacific, P & O 5 1/2 pc Pf., Stagecoach, MINES (3) Antofagasta, Blyvoor, Western Areas.

NEW LOWS (12).

BRITISH FUNDS (3) Treas. 13 3/4 pc '93, Exch. 13 1/2 pc '94, Treas. 12pc '95, ELECTRONICS (1) Micro Focus, ENG GEN (1) WB Inds., HEALTH & HSEHOLD (1) Healthcare, INSCE BROKERS (1) Hogg, MEDIA (1) Birkdale, MISC (1) Photo-Me, OIL & GAS (1) Triton Europe, OTHER FINCL (1) Policy Portfolio, PACKG, PAPER & PRINTG (1) Lawson Mardon.

The stock market debut of Hamlet, the clothes importer supplying the retail trade, was marked by a strong performance from the shares.

They opened at 140p - a 10p premium to the issue price of 130p and traded firmly with volume reaching 5m.

Hamlet, which supplies low-ticket items to almost all the main clothing retailers except Marks and Spencer, had been expected to make a substantial mark on its first day of share trading. But the high turnover surprised at least one analyst who said the volume had been expected to be nearer 2 1/2 to 3m.

Much of the activity was attributed to large institutions securing positions in the stock and trading was steady throughout the day. A little profit-taking knocked some of the shine off the price and the shares closed at 139p.

Property shares again showed good gains following recent bullish broker comments and positive weekend press coverage. The leading stocks again recorded healthy advances, with Friday's James Capel recommendation still echoing in investors' ears, and second liners also caught the upbeat mood. Among the former, British Land rose 10 to 423p, Land Securities, busy in the options market, 11 to 714p and MEPC 9 to 519p. Elsewhere, Town Centre advanced 5 to 133p, Asda Properties 5 to 120p, Chesterfield 7 to 523p and Dencora 7 to 164p.

Investor enthusiasm for water and electricity utility shares showed no signs of waning, both sectors surging on yield considerations. Among the Recs, London climbed 12 to 593p, Yorkshire 10 to 619p and South Wales 9 to 534p. Selected water stocks advancing included, Thames, up 8 at 563p and Yorkshire 8 to 572p.

Boots responded to continued talk that its results early next month would herald announcements over either a restructuring at its Do It All business and or the merging of its drugs division. Gossip at the end of last week linked the latter concern to Fisons, the pharmacuetical group, with suggestions that the two could link-up their non-ethical drug businesses. Boots shares, with UBS also said to be positive. gained 5 to 494p. Fisons edged forward a half-penny to 166p.

Reports that US executives of leading brand name companies were buying their own stock led some optimistic dealers to decide that the war on brands was over. However, this failed to affect the UK's leading brand producers, with Unilever off 2 at 1050p and Tate and Lyle 6 at 370p. Hillsdown Holdings, up 8 at 167p, was said to be responding to a BZW 'buy' note.

Speculation that construction projects may be a target for the UK government's plans to cut public spending wiped value off some building stocks. But with share trading volumes generally low, industry analysts thought the market was treating the stories cautiously rather than seriously.

RMC lost 5 to 818p and Redland gave up 6 to 536p. Redland may also be weaker as the date for a placing of scrip dividend shares, expected in three to four weeks, moves closer.

In banks, Lloyds, left behind in recent sessions found admirers and ended the day 10 up at 570p. A broker's recommendation at the end of last week along with weekend press reports of rationalisation plans boosted National Westminster and the shares gained 8 to 549p.

Talk of a negative broker's note saw TSB run back 3 1/2 to 220p.

Some rebalancing of positions in SmithKline Beecham after the confirmation last week that it was to retain FT-SE 100 status was cited as the reason for much of the activity in the stock.

The A shares fell 6 to 412p while the units fell 3 to 367p in substantial trading. Interest in SmithKline will be largely pegged to next week's anti-infective conference in New Orleans as will that in Wellcome which made a gain of 5 to close at 728p.

The conference is expected to hear new results that will mark out the competitive position of the two companies which are both very active in anti-viral drugs.

However, one analyst said that similar interest ahead of a recent conference in Copenhagen had proved to be largely misplaced and the event had turned out to have little impact.

Trafalgar House shed 4 to 103p, with SG Warburg said to be cautious on the stock. Weekend reports of board room changes at the group were also said to have weakened sentiment.

Uncertainity about board room changes at international trading group Lonrho undermined the shares and they declined 4 to 117p.

Bargain hunters thought to be from the US, together with renewed bid talk, saw shares in Tiphook, the troubled container leasing group, advance 15 to 138p.

Automated Security, whose joint broker BZW resigned on Friday after it issued a profits warning, attempted a rally but finished just a penny ahead at 103p. Westland Group also firmed a penny to 224p, following news of a Pounds 250m contract for one of its subsidiaries.

Oil discoveries in the Gulf of Mexico and further acquisition of land in Texas for exploration pushed up the shares of British Borneo. The stock climbed 6 to 203p in the face of a downward trend afflicting most of the oil sector. Burmah lost 3 to close at 767p; Shell gave up 2 at 682p and BP ended a half-penny down at 322 1/2 p.

Theme park operator Euro Disney slumped 35 to 610p as reports from Paris suggested that a leading French broker had turned negative, prompting old worries over the need for a bumper rights issue.

Ladbroke, still embroiled with claims and counter-claims with a Sunday newspaper over the company's debts, recovered 4 to 182p in heavy turnover of 9m. Dealers said positive comments from Hoare Govett and house broker Smith New Court had garnered some support.

Other statistics, Page 25.

Shares in Channel tunnel operator Eurotunnel closed 6 off at 488p, having been lower, after it cut revenue forecasts and disclosed that it would need further funding before the Tunnel's official opening next May.

The revenue forecast for 1994 was cut by Pounds 44.5m to Pounds 224.1m and the group plans to raise at least Pounds 500m in fresh equity next year. UBS was said to have reiterated its 'sell' advise to investors, while other brokers also remain cautious. However, much of the dealing in the stock takes place in Paris where it is also quoted and volume in London remained light.

AUTOMOTIVE and aerospace components group Lucas Industries cheered an otherwise dull market after it reported bumper profits at the top end of most analysts' forecasts, and maintained the dividend.

The group posted profits of Pounds 50.3m against Pounds 22.5m a year earlier, when the range of forecasts in the market was Pounds 40m-Pounds 56m. Lucas maintained the full-year dividend at 7p, with many researchers predicting a reduction, the more pessimistic even expecting it to be halved.

The shares leapt forward in heavy demand for the stock and closed 12 ahead at 167p, on good volume of 10m. The equivalent of 1.3m shares was also dealt in the traded options market.

However, dealers said the failure of the group to name a new chief executive, as had been expected, prevented a stronger advance in the shares, and profit-taking was also seen just ahead of the market close which brought the stock from the day's high.

Many analysts upgraded profit expectations for the current year, moving the range of forecasts from Pounds 60-Pounds 80m to Pounds 90-Pounds 100m.

Mr Robert Speed, at Henderson Crosthwaite, a long-time bull of the stock, is maintaining his forecast for the current year at Pounds 100m. Explaining the day's performance of the stock, he said: 'Today's share price movement reflects final recognition that Lucas has got to grips with tackling its cost base. It can now make gains in spite of difficulties in the underlying market conditions for aerospace and motor components.'

WITH most New York markets closed for Columbus Day, derivatives were left firing on very few cylinders as the market missed the driving force of US buying, Christine Buckley writes.

As the influx of US money has formed such an important part of recent trading for FT-SE 100 futures, the December contract yesterday found itself with few friends. Largely deserted by domestic institutional investors, it opened shakily and fell victim to a period of mid-morning selling.

But, considering the small volume, the downward movement was felt to be more of a drift than a positive judgment on the value of the contract.

The UK's trade deficit figures had some impact on market sentiment but the slide was well under way by the time of their publication.

December traded within a 25 point range with its day's high at 3,145 and the low at 3,120, with the latter mark emerging as a support level.

At the close, the contract was 3,128 - 7 points ahead of the fair value premium to the cash market, although much of the day's trading had been on a par with fair value.

Activity in traded options was moderate and at 29,658 lots was only slightly down on the previous session's levels. The heaviest traded of the stock options was Land Securities - a reflection of the positive sentiment moving through the cash market for property stocks.

IN THE absence of a reliable lead from the US and Japan, the London stock market was left to react to domestic factors yesterday, with a handful of company features providing such highspots as there were. The announcement of a UK visible trade deficit of Pounds 1.55bn in July was certainly a disappointment to the stock market but with currency markets sluggish, share prices rallied from their initial fall. Domestic producer statistics for September were regarded as mildly favourable. London was helped by a firm stock market in Germany, which has been seen as a competitor with the UK for US fund investment.

The session started well, with the Footsie 8.5 ahead to a new trading peak within the first half hour of trading as shares extended the gains scored late on Friday.

The UK weekend newspapers had drawn attention to the pressure of demand for shares in European markets from the US mutual funds. However, the stock market has already taken this information on board and was inclined yesterday to wait for a return to full trading in New York before drawing any fresh conclusions.

The early advance was halted and then reversed when stock index futures ran into sellers. The equity market slipped away and the Footsie 3,000 mark was briefly lost at mid-session as London contemplated the prospect of a Wall Street market trading while the Federal bond market, together with the banks, was closed for Columbus Day.

The only saving grace of the London market was the extremely slow pace of equity trading, particularly in the first half of the session. Seaq volume was still under 300m shares in early afternoon.

Sentiment picked up later and business also improved as the Footsie 3,000 proved a recovery platform. By the close, the FT-SE Index had rallied to 3,102.2, a net 6.4 points off on the day.

The slow pace of the stock market showed itself most in a lacklustre performance from the blue chip stocks. Second line stocks continued to trade more hopefully, the FT-SE Mid 250 Index, at 3,482.2, gaining 4.2 points.

Seaq volume finally looked almost respectable at 444.3m shares against Friday's 477.4m for a retail worth of Pounds 1.03bn. Non-Footsie business made up around 63 per cent of yesterday's Seaq total.

UK equity strategists sounded marginally satisfied with the stock market's ability to hold on to the Footsie 3,000 level on the first day of a week heavily featured by data on the domestic economy. In particular, there are some doubts ahead of the Retail price index (RPI), due tomorrow, which will follow two somewhat disappointing sets of monthly RPI data.

The market was led yesterday by utility stocks, still attractive on yield considerations. Bank and property stocks, both seen as sectors likely to benefit quickly from the one further reduction in base rates still expected in this cycle, were also well supported.

With the third quarter corporate reporting season now virtually over, it was left to Lucas Industries to please the market with its dividend and trading statement. However, the disclosure that Eurotunnel will have to call for at least another Pounds 500m from its shareholders was no help to investor sentiment.

BRAZILIAN equities remained ahead with speculative purchases by big investors continuing to support prices ahead of Wednesday's futures settlement. The Bovespa index closed 774 higher at 18,065.

Wall Street

US SHARE prices edged higher in light trading yesterday as the Columbus Day holiday depressed business activity and kept the bond market shut, writes Patrick Harverson in New York.

At the close, the Dow Jones Industrial Average was up 8.67 at 3,593.41. The more broadly based Standard & Poor's 500 ended 0.57 firmer at 460.88, while the Amex composite was up 2.89 at 467.59, and the Nasdaq composite up 3.39 at 767.66, a record high. Trading volume on the NYSE was 183m shares, and rises outnumbered declines by 1,009 to 944.

Analysts had said that the markets would be quiet because of the Columbus Day holiday (which closes the country's banks and many companies), and they were right. Trading was light throughout the day, and prices remained in a narrow trading range, rarely straying far from Friday's closing values until a late surge at the end.

Sentiment remained subdued in the wake of last week's September employment report, which revealed continued weakness in the manufacturing sector and sub-par job creation growth rates. Equity investors were unable to look to bond prices for a lead because the cash bond market was closed for the day, although trading of Treasury bond futures in Chicago remained open. Activity overseas was no help either - European markets were little changed, and Tokyo was closed for a holiday.

Among individual stocks, Aluminum Company of America, a leading Dow constituent, fell Dollars 7/8 to Dollars 66 7/8 after the big brokerage house, Merrill Lynch, downgraded its short-term rating on the stock in the wake of the company's earnings report last Friday.

Paramount Communications eased Dollars 1/4 to Dollars 76 1/2 after the board of the entertainment group said that it would open 'informational discussions' with QVC, the home shopping network which has launched a bid for Paramount, but that it also remained committed to completing its agreed merger with Viacom, the cable television company. QVC, traded on the Nasdaq market, eased Dollars 1/4 to Dollars 56 1/4 on the news while Viacom 'A' shares rose Dollars 1/2 to Dollars 56 5/8 and the 'B' shares climbed Dollars 1 to Dollars 52 3/4 .

Eli Lilly rose Dollars 3 1/2 to Dollars 53 5/8 in active trading after the big drugs group announced several cost-cutting measures which, the company hopes, will reduce its global pharmaceuticals workforce by 2,000, or 10 per cent, over the next year.

Chock Full O Nuts rose Dollars 5/8 to Dollars 9 1/2 after the company said that it expected to achieve an 87 cents a share after-tax gain in its fiscal second quarter from the sale of its Hillside coffee operation.

On the Nasdaq market, Intel fell Dollars 4 3/4 to Dollars 65 1/2 in volume of 20m shares after investors expressed disappointment at the group's third-quarter net income of Dollars 1.33 a share, which came in just below the median of analysts' forecasts.

INTEREST rates have further to fall, said Mr James Cornish, European market strategist at NatWest Securities, yesterday, and bourses could rise between 7 and 15 per cent over the next 12 months after a 37 per cent gain since the beginning of the currency crisis in late August, 1992, writes Our Markets Staff.

FRANKFURT scored its fifth consecutive high, but getting there seemed an effort and, after peaking at an intraday 2,021.20, the DAX index closed just 6.01 higher at 2,011.02.

Turnover fell from DM9.4bn to DM8.5bn. Sector rotation continued with banks, construction stocks and retailers mostly higher, and the automotive sector and a number of other recent winners down.

In insurance, for example, Allianz fell DM16 to DM2,730 after Mr Peter Constable, of Robert Fleming Securities, recommended a sell on profit-taking grounds, saying that recent outperformance in the stock

conflicted with poor fundamentals. 'Rises in premium rate in Germany,' said Mr Constable, 'are inadequate and too late to improve underwriting results significantly there in 1993.'

The pharmaceuticals group, Schering, fell DM17 to DM1,041. Here again, the reason was profit taking after a rise of DM75 last week.

ZURICH moved ahead to a record close, the SMI index rising 14.9 to 2,548.5. Financials led the way, supported by a firm domestic bond market.

Winterthur registered were active, rising SFr8 to SFr720 while CS Holding put on SFr55 to SFr3,150.

Swissair rose SFr10 to SFr735 on the prospects for a special dividend after a Financial Times report that the Alcazar alliance partners had agreed on how to value their stakes and that the negotiations would come to a head at a meeting in Zurich today.

PARIS saw a late drop inter-

preted as a correction following an extended bull period. The CAC 40 index closed 17.66 lower at 2,138.72.

Eurotunnel and Euro Disney were among the hardest hit stocks during the session. Eurotunnel's downward revision of its revenue estimates left it FFr1.05 lower at FFr42.10. Euro Disney fell FFr3.90, or 7 per cent to FFr51.90 on unfavourable analysts' reports.

MILAN was unnerved by the resignation of Mr Paolo Savona, the industry minister,

as a result of serious disagreements over the government's privatisation programme and the Mibtel index fell 118 to 10,307 in thin trading.

Among early privatisation candidates, BCI shed L132 or 2.8 per cent to L4,596 and Credito Italiano fell L69 or 2.7 per cent to L2,465 amid concern that the programme could face delays. Savings shares in both banks were suspended before board meetings that are expected to propose changes to their statutes ahead of privatisation.

Montedison was L51 or 6.4

per cent ahead at L850 and Ferruzzi added L2 to L400 after the progress at the weekend by the main Italian creditor banks.

AMSTERDAM saw ING, the financial services group, another Fl 1.90 higher at Fl 79.80 on Thursday's news that the Dutch state had sold its 7 per cent stake to a Dutch pension fund. The CBS Tendency index rose 0.5 at 128.5.

ABN-Amro gained Fl 1 to Fl 66.60 with strong foreign demand noted. After the bourse closed, the Dutch state said it had selected the bank to lead the privatisation of the Dutch PTT.

MADRID heard Spain's state-owned power company, Endesa, deny reports in a Spanish economic newspaper that it was to distribute Pta50bn to its competitors. However, Endesa fell Pta70 to Pta5,460 as the rest of the sector rose. The general index closed 1.65 higher at 294.23.

VIENNA pursued Frankfurt

with the ATX index up 19.82, or nearly 2 per cent to 1,027.13, its highest since March, 1992.

ISTANBUL dropped 5.3 per cent, the composite index closing 821.5 lower at a provisional 14,617.6. However, turnover dropped from TL1,350bn to TL786bn and brokers said the decline in trading volume showed that there was no strong selling sentiment.

ATHENS greeted the Socialist general election victory with the general share index down 14.34, or 1.7 per cent at 831.05 in thin trading. This followed a gain of nearly 3 per cent last Friday.

WARSAW's general optimism prevailed over political fears linked to a left-wing victory in elections last month, the WIG index rising 333.5, or 4.9 per cent to 7,164.8, in turnover of just over 1,000bn zloty (Dollars 50m).

Written and edited by William Cochrane and Michael Morgan.

------------------------------------------------------------------------ FT-SE Actuaries Share Indices ------------------------------------------------------------------------ October 11 THE EUROPEAN SERIES ------------------------------------------------------------------------ Hourly changes Open 11.30 12.00 13.00 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1319.10 1319.25 1320.25 1319.02 FT-SE Eurotrack 200 1401.68 1401.58 1401.10 1400.66 ------------------------------------------------------------------------ Hourly changes 14.00 15.00 16.00 Close ------------------------------------------------------------------------ FT-SE Eurotrack 100 1319.02 1319.95 1319.91 1319.96 FT-SE Eurotrack 200 1401.02 1400.80 1401.09 1401.02 ------------------------------------------------------------------------ Oct 8 Oct 7 Oct 6 Oct 5 Oct 4 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1321.16 1317.76 1321.84 1313.91 1299.14 FT-SE Eurotrack 200 1405.46 1401.97 1403.39 1391.47 1377.73 ------------------------------------------------------------------------ Base value 1000 (26/10/90) High/day: 100 - 1321.18; 200 - 1402.35 Low/day: 100 - 1318.19 200 - 1399.43. ------------------------------------------------------------------------

European equity markets put in an impressive performance last week, rising at double the level of the FT Actuaries World Index, with several bourses hitting all-time highs.

Mr Marcus Grubb of Salomon Brothers notes that increased buying by US investors was rumoured to be behind the rallies. Net sales of US mutual funds this year have reached Dollars 180bn, he says; during the last two months, the amount of new cash flowing into foreign funds has exceeded Dollars 1bn a week. He adds that some global funds have increased their weighting in foreign assets to more than 20 per cent.

'The bullish medium-term arguments for European equities are compelling,' he says. 'In a recessionary environment with high savings ratios, low inflation and falling interest rates, liquidity will flow towards long-term financial assets. This flood of liquidity will continue unless spending picks up on consumption, investment and real assets or, alternatively, inflation pressures build up, reversing the trend in interest rates. Neither of these scenarios,' he maintains, 'is likely to occur in Europe in the near future.'

Germany was one beneficiary of the foreign investment process. The end of the fighting in Moscow triggered an 80 point rally which took the DAX index to a new all-time high above the 2,000 level.

According to the UBS global research team, the low selling pressure during the course of the Russian turmoil indicated that investors were willing to hold their positions in German stocks. They say that stabilisation around the 2,000 level in the DAX seems likely in the short term.

UBS expects financials to outperform but sees a good opportunity to take profits in the retailing sector, given the gloomy outlook for disposable income and consumer expenditure in Germany.

Mr Albert Edwards at Kleinwort Benson takes a more bearish view of German equities, believing that the German market 'has all to do with liquidity and little to do with valuations'.

'In all markets that are financed by a wall of foreign liquidity,' he says, 'there always remains the risk of a sudden reversal . . . With US mutual funds notoriously fickle, we prefer the liquidity situation in France.'

Mr Edwards believes that the profits outlook will disappoint in Germany and that the fundamentals are falling into place for underperformance.

He takes the same view of Hong Kong which surged to a succession of record high closes during the first four days of last week, and took itself to a new record high yesterday in response to increases in the weightings of the market by a number of US houses.

Mr Edwards comments that, having previously convinced itself that no slowdown was in sight in Hong Kong, the market now believes that, although the economy is slowing, there will be a soft landing: 'Soft-landing is a word we used to hear a lot of in the late 1980s about western economies - and it came to nothing,' he says.

'The first two quarters of China's slowdown has come to an end and the current quarter should start to see the real pain beginning and intensifying in the first quarter of 1994. Cutting money supply growth from 50 per cent to 20 per cent will be a shuddering experience. Hong Kong,' he concludes, 'remains vulnerable from a draining of Chinese liquidity.'

Norway was another strong performer last week after a month characterised by profit-taking in connection with the general election and weaker international markets.

Ms Tone Varmann of Unibors in Copenhagen sees the market focusing this month on a crop of interim results and the new government's 1994 budget, due to be released tomorrow.

----------------------------------------------------------------------- MARKETS IN PERSPECTIVE ----------------------------------------------------------------------- % change % change % change in local currency ?? sterling ?? in US dollars ?? ------------------------------------------------------------- 1 Week 4 Weeks 1 Year Start of Start of Start of 1993 1993 1993 ----------------------------------------------------------------------- Austria +3.58 +1.59 +26.88 +26.48 +25.31 +27.13 Belgium +2.06 +1.86 +24.87 +20.40 +13.24 +14.88 Denmark +1.49 +0.67 +39.31 +31.79 +25.21 +27.03 Finland +6.46 +7.47 +158.67 +87.92 +68.96 +71.43 France +1.84 +2.44 +31.09 +19.76 +15.90 +17.58 Germany +4.78 +7.32 +36.35 +29.05 +28.44 +30.30 Ireland +0.60 -0.76 +55.13 +41.19 +25.71 +27.54 Italy -0.39 -0.75 +70.23 +43.11 +30.97 +32.86 Netherlands +1.67 +3.60 +30.12 +25.61 +24.88 +26.69 Norway +5.14 +5.49 +55.28 +33.71 +29.74 +31.62 Spain +1.96 +2.06 +54.78 +37.44 +18.87 +20.60

Sweden +2.76 +6.04 +89.69 +34.94 +17.63 +19.33 Switzerland +2.14 +6.78 +36.06 +23.15 +26.57 +28.40 UK +2.12 +2.04 +25.68 +10.93 +10.93 +12.54 EUROPE +2.35 +3.32 +34.09 +20.54 +18.10 +19.82 ----------------------------------------------------------------------- Australia +2.89 +4.73 +33.55 +25.83 +18.77 +20.49 Hong Kong +3.91 +5.06 +37.81 +42.95 +41.20 +43.25 Japan +1.60 -1.00 +26.57 +25.67 +46.60 +48.73 Malaysia +5.12 +11.19 +83.48 +64.51 +66.94 +69.37 New Zealand +4.57 +2.10 +54.93 +35.84 +43.74 +45.81 Singapore +2.26 +5.25 +62.25 +38.03 +42.34 +44.41 ----------------------------------------------------------------------- Canada +2.14 +1.52 +16.05 +12.86 +6.19 +7.73 USA -0.28 -0.32 +12.84 +5.58 +4.07 +5.58 Mexico +0.04 -4.65 +25.75 +1.39 +0.13 +1.58 ----------------------------------------------------------------------- South Africa +3.50 +1.87 +29.18 +23.22 +40.73 +42.77 ----------------------------------------------------------------------- WORLD INDEX +1.18 +0.63 +23.19 +16.05 +19.95 +21.70 ----------------------------------------------------------------------- ?? Based on October 8th 1993. Copyright, The Financial Times Limited,

Goldman, Sachs & Co., and NatWest Securities Limited. -----------------------------------------------------------------------

THERE were another four record highs in the region, but Seoul, still some way short of its mid-year peak, probably came top for topicality as it rose ahead of today's deadline for 'false name' transactions and holdings.

Tokyo and Taiwan were closed for public holidays.

SEOUL had reported fears of a massive, last minute withdrawal of funds from bank and stock accounts by large depositors in an effort to hide their money from the tax collectors.

In the event, the market chose to anticipate government market boosting measures after today's deadline for implementing the 'real-name' financial system, and the composite index ended 9.74 higher at 722.09 in turnover of Won396.7bn, compared with Won209.3bn during Saturday's half-day session.

Sammi Corp and Sammi Steel went limit-down, losing Won600 each to Won10,300 and Won10,400 respectively, following unconfirmed rumours about the group.

HONG KONG scored its sixth rise in seven sessions, the Hang Seng index climbing 186.62, or 2.3 per cent to a new record high of 8,192.18 as overseas money continued to come into the market, and domestic investors followed suit.

Turnover was a provisional HKDollars 5.48bn, up from HKDollars 3.86bn on Friday. Property companies were traded heavily, Sun Hung Kai rising HKDollars 2.75 to HKDollars 45.25 following last week's 43 per cent jump in profits.

Henderson Land soared by HKDollars 4.50, or 19 per cent to HKDollars 28.70 on news of a USDollars 400m bond issue convertible after three years into shares in its Henderson China Holdings unit, which is not even listed yet.

AUSTRALIA consolidated its break through the 2,000 level and advanced again, the All Ordinaries index closing at another post-1987 crash high of 2,039.8, up 13.6.

Continuing foreign interest and a rise in the gold price helped push the index higher. Golds put on 35.9 to 2,130.2 following a USDollars 2.00 rise in bullion prices over the weekend.

Overall, turnover was light at ADollars 314.22m.

MANILA hit another record high as it rode the sharp rise of Philippine Long Distance Telephone (PLDT) on Wall Street, the composite index ending 43.81, or more than 2 per cent higher at 2,026.53.

Combined Manila/Makati turnover rose from 667.4m pesos to 742.8m. PLDT, which turned over 55m pesos by itself, climbed by 55 pesos, or 3.8 per cent to 1,520 pesos.

KUALA LUMPUR extended its rally on the back of strong speculative and institutional buying, the KLSE composite index closing 10.53 higher at a new record high of 895.15 as volume rose from 702.6m shares to 839.1m.

Brokers said that the strong presence of foreign institutions continued to inject liquidity into the market, which has been driven by anticipation of a generous 1994 budget to be presented later this month. They expect the composite index to test the key 900-point level this week.

SINGAPORE saw healthy interest, generated by the giant flotation of Singapore Telecom shares due today. The Straits Times Industrial index ended 15.12 higher at 2,046.57.

Sentiment was boosted by the huge size of the Telecom offer - over 1bn shares at a minimum price of SDollars 2 each. Some dealers said that the Telecom valuation made other Singapore blue chips look cheap. Analysts, however, said that the offer was overpriced at 27 times prospective earnings against the market p/e of 22.

BANGKOK extended its rally into an eighth trading day, the SET index rising 25.10, or 2.3 per cent to 1,123.74 in heavy turnover of Bt16bn.

Active stocks included major property developers and banks. Interest rate hopes saw Bangkok Land climb Bt7 to Bt140, Tanayong Bt7.50 to Bt84.00 and Krisda Mahanakorn Bt5 to Bt135. Bangkok Bank jumped Bt6 to Bt153 and Krung Thai Bank Bt1.50 to Bt52.50.

KARACHI took settlement day in its strike, the KSE index closing 16.12 higher at 1,378.24 on fresh institutional buying.

JOHANNESBURG saw early gold share gains which were retained as the index rose 49, or 2.9 per cent to 1,724. Industrials edged 9 higher at 4,513, and the overall index finished 39 higher at 3,909.

INTERNATIONAL foreign exchange markets held steady yesterday in spite of a rate cut by the Danish national bank as dealers looked towards today's all important German ruling on Maastricht and its implications for European currency union, writes Peter John.

The day began with a sharp mark-down of the US dollar, continuing Friday's trend on the back of disappointing employment statistics and the expectation that those figures have set the agenda for the next few weeks.

The US markets were operating at reduced capacity because of Columbus day celebrations and a public holiday in Japan. Consequently, the dollar lacked support and slipped in very thin trading, to be quoted at well below DM1.60 in early European dealing.

However, it rose steadily throughout the day as technical positions were adjusted and by the close it was up at DM1.6040, unchanged on Friday's weak close.

This was less a justification of the US currency's fundamental value than a refocus on today's judgment by the German constitutional court on the validity of the Maastricht Treaty on European union.

If the court votes against the Treaty there could be catastrophic consequences for a number of leading European currencies.

It is more likely that the court will produce a verdict that agrees with Maastricht but imposes conditions.

In any event, the D-Mark is likely to be the main gainer and the currency was firmer against a range of European currencies.

Meanwhile, sterling was generally weaker after indications in the latest producer prices statistics that some inflationary pressures might be returning. It closed at DM2.4550 against the D-Mark, down from DM2.4650.

Several economists were taking a very cautious line on inflation yesterday and cracks were beginning to show in the rate-cut-by-November argument.

Much depends on the outcome of tomorrow's Retail Prices Index figure, particularly the figure for underlying inflation which excludes the impact of mortgage interest payments.

Meanwhile, the Danish Krone held steady as the central bank cut its key CD interest rate by half a percentage point to 8.5 per cents. However, economists said any hope that this signalled a return of generally lower interest rates in Europe was misplaced. Danish rates were around 11 per cent after the crisis in the European exchange rate mechanism broke in early August and were merely returning to conventional levels.

The Greek drachma came under pressure in early trading after the Socialist victory in Sunday's election. The Drachma opened at Dr146.50 against the D-Mark in light trading down from Friday's fixing at Dr145.48 but by the close in London dealers were quoting it at Dr144.75.

VARIOUS vacuums affected the UK money markets yesterday. The Tory party conference had given no real cause for concern, the latest economic data produced nothing of real import, liquidity was not unacceptable and the market was on hold, writes Peter John.

Financial futures traded marginally lower and Bank of England operations went ahead smoothly if not quite as effortlessly as last week.

The December contract for short sterling was down by one basis point to 94.37 at the close on gentle turnover of around 12,500 contracts. French and German cash futures were also weaker on balance.

December short sterling has traded within a very tight range between around 94.32 and 94.38 for some time as the market has sat back waiting for some indication of the long-anticipated rate cut.

One sterling dealer said: 'Basically, we have had the same interest rate for nine months and the market is hungry for change.'

A number of market operators were surprised at lack of bad news from the party conference. What they saw as neutral to non-inflationary producer price statistics did not give a boost to the argument for another rate cut in the next few weeks.

Several analysts pointed to the 2 per cent fall in import prices which might be expected be expected to follow through to lower prices in the high street.

There was suspicion that the gilts market might be homing in on something different. Government bond prices were weaker across the board and a fall in bond prices often signals concern that inflation might be on the turn.

Generally, the market is looking nervously towards the key retail price index figures tomorrow and several economists are predicting small rises in underlying inflation, the index that excludes mortgage interest payments. SGST, the French owned securities house, predicts a 0.1 point rise in September to 3.1 per cent.

Interbank operations began the week with a forecast liquidity shortage of Pounds 1.05bn, later revised to Pounds 1.2bn. The pressure of the shortage was defused early on after the Bank of England provided Pounds 412m of assistance.

This was followed by further injections of Pounds 6m and Pounds 545m topped off with late assistance at an unspecified rate of Pounds 50m bringing the total to Pounds 1.013bn.

BEFORE the unification of Germany there was hardly an ambitious communist party apparatchik who did not want to be promoted to run the eastern German city of Halle.

It was a powerful sinecure. Its importance as a party post lay primarily in the region's old industrial base, which in turn had bred a radical socialist movement. Not surprisingly, the city's nickname, 'Red Halle', was coined long before east Germany's communists assumed power in 1949.

The city's economy was anchored on heavy industry, consisting of machine-tool manufacturing, chemicals, and brown coal. These were the three main engines which also drove the east German economy. But they were never tested on the world market. After the declaration of German unification on October 3 1991, preceded by monetary union which did away with the Ost Mark, the eastern German currency, the inhabitants of Halle were faced with a new and harsh reality: its industry was uncompetitive.

Without huge restructuring, investment, and privatisation, this region of Saxony-Anhalt would never be able to compete either on the domestic or the world markets. These are some of the challenges facing the 300,000 strong population of this city, the birthplace of George Friedrich Handel.

To meet this challenge, the Treuhand, the agency charged with privatising and restructuring eastern German industry, placed almost the entire industrial network of Halle and its environs under its control. It brought in western German managers to introduce new accounting methods in the enterprises, reduce inefficiency, and above all, prepare the manufacturing, brown coal, and chemicals sectors for privatisation. There is hardly an inhabitant of Halle who has not been affected by these sweeping changes.

The most fundamental changes have occurred at the work place. Instead of employment for life, more than 124,000 people have lost their jobs. This does not include the 14,500 on short-time work, or the 46,100 on job creation schemes. In all, the total unemployment rate in Halle is 40 per cent of the labour force.

The virtual collapse of the industrial base, combined with high unemployment, has had a debilitating affect on the city's finances. Mr Klaus Rauen, the mayor of Halle, says the city is running a budget deficit of 70 per cent. The annual budget is DM1bn.

'What would you expect?' he said in his office overlooking Halle's old, elegant, but neglected town square. 'Without revenue from industry, and without people working, it will be a long time before we even approach the level of financing to similar-sized cities in western Germany.'

Mr Rauen gives a poignant example. Bonn and Halle have the same size population. While the latter was, and is still dependent on industry, the economy of the former is fuelled by services. Thus, more than DM250m revenue from services is earned by Bonn's city council each year. In Halle, revenue from industry totals DM18m, and total tax revenue does not exceed DM65m. Narrowing the gap between expenditure and revenue is now one of the key tasks facing Halle's administration. The question is how.

There is no doubt, that, in common with the other cities and states in eastern Germany, Halle will be reliant on financial transfers from Bonn for many years to come. Annual transfers to the five eastern states total DM180bn gross. However, the future economic growth of Halle will depend on what happens to two key sectors: the chemical and brown coal industry.

These two sectors are located less than half-an-hour's drive from Halle.

To the north-east lies Bitterfeld, home to Germany's chemical industry before the second world war and one of the first big manufacturing centres of Germany's own industrial revolution of the late nineteenth century. After 1945 the Allies broke up the huge industrial conglomerates led by, among others, IG Fraben and Bayer. After 1949 the entire region, in common with other parts of the east German economy, was placed under state control.

Until 1990, the regime was more intent on extensive development, determined to become the main industrial country in Comecon, the former socialist trading bloc. But the price was heavy. The industry proved to be uncompetitive after unification. And environmental standards were ignored, leading to soil pollution on such a scale that more than a third of Bitterfeld's chemical sites are unlikely to be fit for use again.

The Treuhand and west German investors are now slowly turning Bitterfeld around. It will take several years. But Mr Klaus Schucht, head of chemicals and mining at the Treuhand, and one of the most energetic officials working to open up the region to competition, has no doubt that Bitterfeld will have potential in one important aspect: by attracting through generous investment grants and tax holidays, companies such as Bayer, the pharmaceuticals and chemcial manufacturers, and others, will create a competitive industrial base.

After all, these green-field sites will bring with them very high technological standards. But green field sites and high technology do not create many jobs. 'That is true,' says Mr Schucht. 'But you must remember that these new, capital intensive industries, coupled with research and development, have to be serviced, and it will be attractive for other investors.'

Signs of a services sector are already emerging in Halle itself. These consist of handwerken - small work shops employing fewer than 10 people, which specialise in anything ranging from car and house repairs, to computer programming and engineering.

Mr Michael Wilkens, head of Deutsche Bank in Halle says that these work shops, together with the mittelstand, the small and medium sized industries which formed the backbone of western Germany's post-war growth, are sprouting up. But he recognises the need for an industrial base, however small, to act as a magnate for the mittelstand.

Apart from the future development of Bitterfeld, Halle's economy will also depend on the Mitteldeutsche Braunkohle, or Mibrag, the giant lignite fields which straddle Saxony-Anhalt. An Anglo-American consortium led by Britain's PowerGen, NRG of Minneapolis, and Morrison Knudsen of Idaho are set to sign contract later this month to buy Mibrag. Although Mibrag's pre-1989 work force of over 50,000 has been reduced to under 10,000, the consortium is committed to turning the mines round.

Certainly these two sectors alone will not revitalise Halle's entire economy. Construction and services are already playing a key role, as any visitor to Halle will testify - it is hard to avoid the bulldozers and the scaffolding. But together, all three sectors will eventually generate tax revenue. The budget deficit will remain. But at least it might narrow over time.

LIFE would have been much simpler and easier for Mr Klaus Rauen if he had stayed in Bonn. But Mr Rauen, the former Christian Democratic Union mayor of Germany's seat of government, is a restless man who rises to challenges.

German unification provided the perfect opportunity. 'I wanted to contribute to this great event. I felt that by becoming mayor in Halle, I could really help to do something.'

He took up office in the city's Rathaus in May 1991. But instead of the normal eight-hour day he was accustomed to in Bonn, Mr Rauen now works at least 12 hours.

His time is divided between reforming the local administration, meeting foreign investors, opening new enterprises, visiting schools, and above all, helping to restore the self-confidence of Halle's community.

Mr Rauen, who is 57 years old, believes the self-esteem of the eastern Germans has been shattered largely because of what happened after German unification. 'People here feel ashamed in the sense that they feel that everything they had worked for over the past 40 years under the former communist regime was a complete waste of time,' he says. 'They feel disorientated because they feel they were living in a system which had lost any respect. We must restore that self-confidence.'

One of the ways Mr Rauen has set about this is by trying to restore parts of the old city. Unlike other cities in eastern Germany, Halle was not seriously damaged during the second world war. Its elegant central square is still intact. But its elegance has been impaired by dull, concrete buildings put up by the former communist administration.

'There was no need to put these buildings up around the square. But I feel that the former regime wanted to destroy memory, or a kind of historical consciousness. I want to help restore the best of Halle's past,' explains Mr Rauen. The fact that George Friedrich Handel, the composer, was born in the city, has helped. But one name is hardly enough to compensate for 40 years which led to the complete neglect of the infrastructure. Nor is it enough to shake up the local administration so as to attract west German and foreign investment which could help revitalise and renovate the city.

Mr Rauen has the misfortune to be saddled with the old communist local council constitution.

This means that he cannot dismiss certain senior officials, even though they may be incompetent. One particular official is in charge of settling property disputes. The current law states that all owners of property confiscated by the Nazis between 1933 and 1945, and by the communists between 1949 and 1990, are allowed either restitution or compensation.

'We have been so slow in resolving these disputes,' explains Mr Rauen. 'In fact, Halle is one of the slowest in eastern Germany. We have settled only 6 per cent of all cases.' He says the city's solicitor is partly to blame. 'He just looks for problems, rather than solutions,' he adds.

The upshot is that the 11,000 old delapidated houses and apartments in the centre of the city are still the subject of property disputes. The longer they take to resolve, the greater cost for repair. And investors will stay away . . .

Another problem facing Mr Rauen is the size of the local administration. In common with all city councils in eastern Germany, he inherited a bloated bureaucracy of 13,000. He wants to pare it down bo 4,000 by the end of the year. After that, by law, the staff at the city hall will have tenure.

Pushing through cut-backs might be blocked by Halle's coalition, in which the social democrats, the PDS, the former communists, and the Greens hold the majority, while the CDU holds 30 per cent of the council seats.

But Mr Rauen is a persistent man. 'We have to turn round the city and make it more efficient. It's the price we have to pay for the past four decades.'

AMONG the more pessimistic economists on eastern Germany, there is a school of thought which argues that the five new eastern states will be relegated to the status of Mezzogiorno.

That is, their economies will be akin to southern Italy, or indeed the southern republics of the former Yugoslavia, devoid of an indigenous economic and industrial base, and completely dependent on the richer north to subsidise and sustain them. If this theory is applied to Halle in particular, or eastern Germany as a whole, then the conclusion is that there is no prospect of the region moving towards a self-sustaining economy.

Don't tell that to the people of Halle.

Not only because they would be deeply offended - and depressed. It is difficult enough, coming to terms with high unemployment. But they would point out that the Mezzogiorno theory should not have, and cannot have, any credibility in a region of eastern Germany so traditionally strong in finance, commerce, and the arts. A walk around the city explains why.

Starting from Marktplatz, the city's old town square, you see fine, elegant town houses built in the 19th century, which were homes to the city's former business community. That community, specialising in industry, developed a local banking and trading system which used the Rathaus or city hall, to lobby their interests.

Walk across the town square and you will see the Rathaus - just about. It is currently decked with scaffolding, undergoing a much-needed refurbishment. Go past the Rathaus and ramble down towards Number 5, George-Schumann-Platz. There you will come across the Industrie und Handelskammer, or IHK, the co-ordinating body for trade and commerce which has branches all over Germany.

Halle's own IHK branch was originally established on this site more than a century ago. History interrupted its work. After the second world war, the local communist party used the IHK as its headquarters - despite the interior design, whose fine woodwork, engravings, and imperial emblems contrasted sharply with the party's hammer and sickle.

Three years after unification, the IHK has regained its rightful place. It is now a thriving centre, set on promoting the city as a Standort, or location, for investment.

'Halle. Der Standort', may seem an ambitious slogan for the city's drive to attract investment. But then, apart from its old industrial base, it is easy to forget that one of the keys to western Germany's post-war economic success was the way in which the government forged close links between research institutes, universities and enterprises.

These links, which earlier had helped forge Germany's own industrial revolution in the 1890s, were used for ideological purposes by the former eastern German communist regime.

But once again they are playing a greater role in training a younger generation for the market economy. Mr Klaus Rauen, the mayor, is determined to link local industry with the centres of higher education.

At his disposal he has the Martin-Luther University, the respected School for Art and Design at Giebichenstein, the Environment Research Centre, and the Institute for Economic Forecasting, one of the six economic think-tanks which advises Chancellor Helmut Kohl.

But Halle is now only about commerce and the drive to restore its economy. Unbelievably for a city of 300,000 inhabitants, it has an opera house, four theatres, one concert hall, six museums, the great Gallery Moritzburg and a respected orchestra.

You won't be bored in Halle. But there are two warnings. At rush hour, avoid driving into Halle on the motorway from Leipzig. The congestion is horrific. And, to avoid upsetting your hosts, don't ask if Halle is akin to the Mezzogiorno. The people of Halle have a long memory, and a 1,000 year-old history.

KARLSRUHE'S reputation as a technology centre dates back to 1815 when one Baron Karl Friedrich Freiherr von Drais invented the velocipede, the forerunner of the bicycle.

It spoils the story only slightly to know that the baron subsequently moved to Mannheim - it was there, rather than in Karlsruhe, that he patented his invention and began industrial production.

Other 19th century inventors include the machine-builder Emil Kessler who started making locomotives in Karlsruhe in 1842, and Heinrich Hertz who discovered magnetic waves in the town in 1888.

Coupled with the foundation of the Polytechnical School in 1825 - the forerunner of the Technical University and today's Fridericiana University - this points to a long tradition of co-operation between Karlsruhe scientists and industry.

This tradition is alive today in a city which boasts where 10,000 scientists work - more per head of the population than any other part of Germany. There are three Fraunhofer institutes which specialise in the scientific research which has a practical industrial application.

The Fridericiana University has close links with industry - especially via the Computer Sciences Research Centre, which works with companies such as IBM and Nixdorf in developing information technology.

There is also the Technology Factory, an institution founded in the early 1980s at the initiative of Mr Lothar Spath, the then president of the state of Baden-Wurttemberg.

He came back from visit to Silicon Valley in California inspired by the idea to set up a co-called 'innovation centre' which would promote technology-oriented start-ups and help replace jobs lost in more traditional manufacturing industry. Housed in a former sewing-machine factory, the Technologie Fabrik is now the largest institution of its kind in Germany.

Founded with the help of DM14m in state funds, the Technologie Fabrik now houses 40 firms and six institutes, which collectively employ between 600 and 800. Entrepreneurs present their business plan to the Factory's administrators. If the plan is accepted, the fledgling company can stay for a maximum of five years, starting on a peppercorn rent which increases over the course of the tenancy.

The Factory's administration provides secretarial and other support services to the tenants, and advice on how to raise finance.

Since the centre was founded, a handful of tenants have gone bankrupt, but the survivors far out-number the normal 70 per cent success rate for start-ups in Germany. In total, 1,400 jobs have been created since the factory was founded: an appreciable contribution to Karlsruhe's workforce of 180,000.

The biggest existing tenant is a company called INIT, which has 70 employees specialising in communications equipment for the transport sector.

Of the 30 tenants which have moved out, the most successful is probably Pipetronix, a company which devised electronic equipment for identifying faults within pipelines. The company now employs 250 people and was sold in February 1992 to Preussag, the Hanover-based conglomerate.

Pipetronix also benefited from co-operation with the Kernforschungszentrum Karlsruhe. Literally translated, this is the Nuclear Research Centre, but it does not limit itself to nuclear research: it has developed expertise in environmental technology, information technology, microsystems technology and cellular and molecular biology.

Dr Jurgen Wust, head of the centre's Technology Transfer Co-ordination Office, explains that the centre plays an active role in seeking industrial applications which emerge from these research areas. 'We market ourselves aggressively,' Dr Wust says, 'concentrating on licensing and patenting what we discover here.'

One such patent was the sensor which is at the core of Pipetronix's pipeline equipment. The centre has 320 licensing arrangements and is working on 70 formal projects in co-operation with industry; since it was founded in 1956 it has worked with 5,000 different industrial companies.

Karlsruhe is confident that its historical connection with technology will guarantee its future. As a measure of its confidence in the future, the city will start to build a 30 hectare technology park early next year and the technology factory is set to be enlarged by a further 8000m squared.

KARLSRUHE can legitimately claim to be Germany's dream city.

According to legend, the town came into being after the Margrave Karl-Wilhelm von Baden-Durlach fell asleep under a tree after a day's hunting. He dreamt of a splendid palace, with pathways leading up to the building like a fan. On waking he determined to move his court from Durlach and build the palace on the spot where he slept. Thus in 1715 Carol's-Ruhe - 'Charles' Peace' - was founded.

It is no exaggeration to say that modern Karlsruhe retains the charm identified by its founder more than two and a half centuries ago. With 273,000 inhabitants it is the 20th largest city in Germany, bright and open. At its centre is the palace built by the margrave, and the expanse of the Marktplatz, surrounded by the 18th century facades built by the architect Friedrich Weinbrenner.

Following the contours of the dream, the rest of the city spreads out, fan-like, from the centre, its suburbs interspersed with parkland. The local food is more refined than the average German fare, reflecting the influence of France, barely 20km away. The scenic delights of Alsace and the Black Forest are likewise not far away.

Karlruhe is a pleasant place to live, work and study, with none of the abrasive qualities of many of Germany's bigger cities. 'It retains many of the qualities of a small town but lacks nothing that a large city can offer,' claims Mr Horst Zajonc, head of the city's business promotion office.

The third largest city in the south-western state of Baden-Wurttemberg, after Stuttgart and Mannheim, Karlsruhe came late to industrialisation. In time of European warfare its geographical position close to the French border discouraged investment in manufacturing industry. Until 1952 it was the capital of the state of Baden, giving the city a reputation as 'civil-servant' city.

Germany's federal constitutional court ensures that Karlsruhe still plays a role as an administrative centre, but the city's regional importance diminished after Baden merged with the state of Wurttemberg to form what developed into the most prosperous of western Germany's Lander, and the city of Stuttgart became the state capital.

For years Karlsruhe trailed behind Stuttgart, as the former state of Baden failed to develop as successfully as Wurttemberg - or Swabia, as the eastern half of the state is called. Swabia is an almost mythical land, its inhabitants fabled for their love of independence and hard work; technically minded entrepreneurs who built up corporate giants such as Daimler-Benz - Germany's biggest industrial company - or Robert Bosch, the car components group, not to mention dozens of medium-sized or Mittelstand companies which acted as the motor of Germany's post-war economic miracle.

The charms of Baden, its scenery and its vineyards, did not appear to compensate for the success of Swabia; Karlsruhe had to work hard to fashion for itself an identity. The city has built itself up as a technology centre (a term reflecting the presence of more scientists as a percentage of the population than anywhere in Germany), an abundance of research centres, and the Fridericiana Technical University, founded in 1825 and the oldest of its kind in Germany, together with many other technically-orientated higher education establishments.

Research institutes in the city include the federal nuclear research centre (Kernforschungszentrum Karlsruhe); three Fraunhofer institutes (one for system technology and innovation research, one for chemical technology, another for information technology and data processing, which is a special strength of the local university); a research centre for informatics; federal institutes for mathematics and data-processing, for nutrition, for hydraulic engineering; the state institute for environmental protection.

Some 10,000 people are employed in the city's research institutes. There are also numerous other institutes which specialise in converting research results into commercially viable products and processes. Karlsruhe has linked up with seven municipalities and two rural districts in Baden to form the so-called TechnologieRegion Karlsruhe, proudly sold as a mixture of 'high-life and high-tech'.

For decades, the 'ideas factories' of Karlsruhe and neighbouring towns were not enough to give Baden the edge against the real factories of Wurttemberg. Now, amid Germany's worst recession since the second world war, the tables have been somewhat turned.

The Stuttgart region's dependence on the car-making industry and on machine-tool manufacturing means that Wurttemberg has become a German crisis region. Unemployment is higher than it has ever been. GDP for the state of Baden-Wurttemberg fell more sharply in the first six months of the year than for western Germany - by 4 per cent compared to 2.6 per cent.

It is easy to exaggerate the problems of the Stuttgart region - after all, its decline is from a very high base - but there is no doubting that it is suffering badly amid a crisis in the European car making industry and the collapse in world demand for capital goods which has hit the state's machine-tool industry particularly badly. By contrast, Karlsruhe's economy, while hardly immune from Germany's recession, is looking more resilient.

'For the first time in 10 years our unemployment figures are better than the average for the state as a whole,' Zajonc of the business promotion office says gleefully. In July last year unemployment in the city was 4.9 per cent compared to 4.6 per cent for Baden-Wurttemberg. In July this year unemployment had risen to 6.5 per cent for Karlsruhe - and to 6.7 per cent for the entire Land.

This relative resilience reflects the structure of Karlsruhe's economy: less dependent on manufacturing and on big companies than Baden-Wurttemberg as a whole. Manufacturing accounts for about a third of the city's jobs. The average number of employees at the region's 10,000 companies is 180.

The service sector is well-represented: big local employers include the Karlsruhe Lebensversicherung life insurance company; the Badenia Bausparkassen investment company; the Landeskreditbank Baden-Wurttemberg, a regional bank; and the Heinrich Heine mail-order firm.

The region's heavy reliance on research institutes is not good for Karlsruhe's employment outlook: they are mainly public-sector bodies feeling the impact of the German government's need to cut expenditure. At the Kernforschungszentrum, for example, where 90 per cent of its DM700m budget comes from government grants, the workforce is set to shrink by 480 people - about 15 per cent - by the end of 1995.

Despite the clouds of unemployment, one fact ensures that Karlsruhe maintains some of the dream-like qualities of its origins. It gets more sunshine than any other city in Germany.

FOR the past few months Mr Hans-Georg Zierlein, director of the German constitutional court in Karlsruhe, has been watching with some horror the events unfolding in Moscow.

It was not so much the collapse of the Russian economy, or the political confusion, or even the sight of tanks firing rockets at the Russian parliament, which shocked him. It was the extraordinary political behaviour of the Russian constitutional court.

Mr Zierlein is director of the German federal constitutional court in Karlsruhe, spokesman for the court, head of protocol and chief of security, just to name a few of his functions.

He is not a judge, although he is qualified to be one, and has written learned papers on the functions of the court. Indeed, if he were a judge, he would have been long gone from the job: they must leave after a maximum 12 years. Mr Zierlein has been in charge of the court's administration for 20 years, and in Karlsruhe for 23. And he remains irrepressibly enthusiastic.

'You must not think that we are remotely like that constitutional court in Moscow. The president of the court there appears to be totally political,' he says. 'We have never been anywhere near that. Very occasionally, this court is accused of stepping across the borderline between the law and politics. Perhaps it is inevitable. But we are talking about the 499th case out of 500.

'It is recognised everywhere, inside Germany and abroad, that this court is an independent court. Our independence has played an important role in the stability and credibility of the German Federal Republic.'

If Karlsruhe features in the headlines of the German press, then the chances are that the cause is the federal constitutional court. Alongside the staunchly independent German Bundesbank, it is the institution which has done most to give German citizens a belief in the resilience of their post-war democracy, and the revival of a law-based state after the Nazi era.

'People trying to transform their countries from dictatorship to democracy look to our case as an example,' Mr Zierlein says proudly.

The court is modestly tucked away in a grey marble-faced modern block in the palace gardens, self-effacing like so many of the federal republic's post-war institutions. Nonetheless, the court is being forced to play an ever greater role in German life, with a steady increase in the flow of complaints and appeals and constitutional quarrels being passed on to its judges by the political institutions of the state.

For a supreme court, it has the unusual distinction of being a single entity, but it is divided into two chambers, or senates, each consisting of eight red-robed judges. 'In 1951, when the court was founded, there were 800 cases in one senate, and none in the other,' says Mr Zierlein. 'So they had to change the division of powers, to balance the workload.'

The number of approaches to the court now totals more than 4,000 a year. This year, the second senate alone has had to deal with reform of the abortion law, challenges to the Maastricht treaty, the dispute on where and when German troops can serve outside the Nato area, and the complaint by former East German spies that they cannot be tried under West German law for their offences.

The system is certainly creaking under the strain. But Mr Zierlein is not complaining. The court must remain scrupulously non-political, and seek to interfere in the political process as little as possible, he says - on the lines of the US Supreme Court concept of judicial self-restraint. The very fact that it is being used so much shows that it works.

'WE will now probably go for external growth and make an acquisition or two - we've got plenty of cash,' says Mr Pierrick Haan, president of Sefam, a company which did not exist 10 years ago but is now the French market leader in breathing equipment for patients being treated at home.

Sefam (Societe d'Etudes et Fabrication d'Appareillage Medical) is a show case example of how ideas and techniques in the laboratories of Nancy and the surrounding area can be successfully brought to market.

In his brand new offices in the Brabois science park on Nancy's southern outskirts, Mr Haan recalls how he and another engineer at the INSERM national health institute in Nancy, in 1983, conceived the idea of making small series of specialist equipment. But he says that their company only took off a couple of years later, when they started to make a respiratory machine invented by a Strasbourg neurologist.

'We were lucky enough to fall into an enormous market,' says Mr Haan. The machine caters for serious snorers who suffer breathing and sleep interruption, and for chronic sufferers from bronchitis and emphysema. Last year Sefam sold some 4,000 respiratory machines, half in France and half in the rest of Europe.

Its equipment does not come cheap; its Continuous Positive Pressure machine sells for about FFr10,000. But the cost is generally borne by governments (except the UK's National Health Service, which is even more short of cash than its continental counterparts), because these machines allow patients to be treated at home - cheaper than hospital care.

With a FFr70m annual turnover now, Sefam may have reached saturation point in respiratory equipment, but Mr Haan intends to target other 'home care' products such as wheelchairs and electric beds for the handicapped.

Mr Haan says he is not a big fan of the local authorities 'nursery' programme for infant companies - though Sefam benefited by only paying a nominal rent for its first two years on the Brabois science park. But that science park now has 12,000 people working on its 500 hectares. Mr Bernard Guerrier de Dumast, of Nancy's Development Agency, points out that the science park depends on bringing the university and business worlds together. 'This requires constant pressure. The moment you relax this pressure, the two sides fall apart.'

Someone who has applied constant pressure is Mr Michel Gantois. In addition to founding a couple of companies in his own field, engineering materials, he used his 1986-92 presidency of the Institut National Polytechnique to federate this engineering faculty with Nancy's much larger universities. Thanks to Mr Gantois' efforts, Nancy's universities, like those of Strasbourg and Grenoble, are now considered by the French government to form a pole universitaire europeen.

This is not just a public relations effort to attract European Commission attention and money. It is a recognition of what Nancy's universities have done to pool research in areas such as engineering materials, industrial safety and cleaner manufacturing, and to improve foreign links. Nancy's French students are being given more facilities to learn foreign languages. Extra French is laid on to increase the share of foreign students in Nancy. Nancy is also reaching out to help universities in Poland and Hungary.

SIR David White is tired of waiting for Britain's politicians to reach agreement on Europe.

The industrialist, regarded by many businessmen in Nottingham as the city's corporate champion, puts his frustration bluntly: 'We have spent the last 20 years in Parliament arguing about Europe and it's getting in the way of business. Most companies recognised years ago that we couldn't screw around, we had to get on with the market.'

Companies faced a clear risk by waiting for parliamentary approval: their overseas competitors would proceed without them - forging alliances to pave the way for orders worth millions of pounds. If businessmen regarded the European Community with the same suspicion as the Euro-sceptics at Westminster, lucrative contracts would have been lost and thousands of jobs threatened, says Sir David.

Speaking in his oak-panelled office at Nottingham Health Authority (which Sir David has added to his clutch of chairman-posts, along with Nottingham Trent University and Mansfield Brewery), he says that securing such contracts depends on creating a climate of mutual trust between trading partners.

As an initiative to foster that trust, the Four Cities Partnership is a valuable asset - albeit a delayed one - for companies operating out of Nottingham, he adds. 'It may be that we've got away with it because other countries such as the US have not taken advantage of the EC market while we've been faffing around.'

Now that the partnership has been formed, Sir David - a former deputy chairman of National Freight Consortium and founder chairman of Nottingham Development Enterprise - says companies should waste no time in exploiting the opportunity to establish a greater presence in Europe.

Citing the success of the Mansfield Brewery in winning export orders to Russia, he warns companies to develop a keen sense of customer tastes if they are to win the kind of contracts that secure jobs at home. 'It's not just about getting your feet under the boardroom table but under the kitchen table. We must make every effort to understand our customers - if we get to know them culturally then we can judge their foibles and moods.'

Winning the trust of companies and politicians overseas demands flexibility among executives and councillors in Nottingham. Sir David says businessmen may have to give up some sacred cows if they are to establish that trust - primarily the adherence to sterling rather than a single European currency.

Sir David sees the Four Cities Partnership's main role as changing perceptions over links with Europe. 'If it creates closer relations that would be helpful, but it's really just setting the scene rather than producing jobs.'

TRAVELLING into Nottingham can be wearing. Rush-hour commuters know they are near the city centre when the traffic grinds to a halt.

The capital of the East Midlands has congestion worthy of a metropolis three times the size. At peak times, queues of motorists joust with buses, which have crowded into the city following deregulation and the decision of rival companies to compete head-on.

Planning officials have inadvertently made the problem worse by turning a number of city streets into pedestrian malls, leading to delays and jams on remaining roads when buses stop to pick up passengers or trucks make deliveries. To the west of the city, the congestion stretches into the suburbs where motorists travelling in from the M1 motorway are filtered on to a single-lane road.

Mr Malcolm Reece, chief executive of Nottingham Development Enterprise, has no illusions about the dilemma. 'Compared with similar European cities our infrastructure is a problem. Our road links are poor - you have to queue to get into the city. That is a bad sign.'

Aware of the deterrent effect of poor infrastructure to businesses and consumers, Nottingham is planning a new transport system to ease the jams.

The city is going back to the future. Like other British cities which ripped up tramlines in the 1950s, Nottingham is looking wistfully at light rail systems to take pressure off the roads.

Planners in the East Midlands are following the example of their colleagues in Manchester, Sheffield and Birmingham, which all have new transit systems in operation or under development.

Although systems elsewhere in the UK are more advanced, Nottingham Development Enterprise (NDE), which is masterminding the project, says it has been successful in forging links with overseas cities with rapid transit systems in place.

Citing the advantages of rapid transit - involving light rail carriages capable of running on regular railway track or mingling with road traffic on street rails - NDE claims that a similar system in Grenoble 'immediately attracted 65,000 users every day'.

Karlsruhe, one of the prime movers in the Four Cities Partnership, has also offered technical expertise to Nottingham. German officials have acted as advisers on proposals for a Pounds 65m line stretching north from the city centre to the outlying village of Hucknall.

Advice from Karlsruhe has focused on the German city's pioneering model of track sharing between trams and regular trains. If adopted in Nottingham, trams would intermingle with trains on a five mile section of track currently operated by Regional Railways, the division of British Rail, between the suburb of Basford and Hucknall.

Officials at VBK and AVG, the two companies operating the Karlsruhe system, have also offered information on vehicle selection, maintenance and civil engineering. The aims - to relieve congestion, attract more consumers, retailers and new businesses into the city - are laudable. But there is considerable doubt over whether it can get off the drawing-board.

The department of transport has told city authorities around Britain that it can afford to make grants available to one rapid transit system a year. But Nottingham is some way down the pecking order in the list of applicants.

Sheffield is expected to win the next tranche of state aid for its system, with Birmingham next in line. After that Croydon, Leeds and Nottingham are all vying for contention.

With increasing curbs on public sector spending, the government may not be so well disposed to rapid transit schemes by the time Nottingham reaches the front of the queue.

'I don't know when the government will have the money,' admits Mr Reece. 'So we have to spread the risk.'

The enterprise agency is seeking private backing for the venture and says local companies have raised Pounds 700,000 out of Pounds 2m committed so far. That leaves a yawning gap in the financial arithmetic; the money raised is only a fraction of the sums needed and the government may be reluctant to pick up the shortfall.

Nottingham, however, is determined to reform its transport infrastructure. It could do worse than looking at Nancy, where the city opted for trolley buses in preference to trams. Development costs for the system, a hybrid between buses and light rail, were offset by a levy on businesses.

It could be an attractive option in the East Midlands, where the dreams of a rapid transit network are a long way from reality. Whichever system the city chooses, Mr Reece knows there must be a change. 'If there's no public transport relief the city will lose economically. The consumers and businesses will go elsewhere.'

NANCY is a city with far more self-confidence than the surrounding region of Lorraine.

This is not surprising. It was always going to be easier for this city of services, with its three universities, 45,000 students and long cultural tradition, to adjust to a post-industrial future than Lorraine, hit by the triple decline of coal, steel and textiles.

Nancy, too, naturally thinks of itself not just on a regional but also a European scale. Many of the bewildering number of institutions in the city have 'European' attached to them, (as in the city's 'European university pole' or 'European enterprise and innovation centre'); or 'international', as in 'International Water Centre'. It is as if the city believes that whatever it is doing should automatically be of significance to the wider world.

If this sounds as though Nancy is getting above its station, it should be remembered that it did once occupy a rather high station as an independent principality which only joined France in the mid 18th century.

Its last ruler was Stanislas Leszczynski (1737-66) who, after losing the throne of Poland in yet another division of that country, accepted Lorraine's invitation to come and rule it - near to his daughter, who was married to Louis XV. He then used his own money, and his son-in-law's, to great effect by creating the Place Stanislas and the rest of the rococo heart of Nancy.

A century later Lorraine was split into two; Metz and the eastern part were annexed by Germany from 1870 to 1919, and Nancy was left very much on the front line as the standard-bearer of French revanchism.

Baron Bernard Guerrier de Dumast, a vice-president of the Greater Nancy Development Agency (ADUAN) and scion of one of Mancy's oldest families, describes the legacy of this chequered history. 'First, it made Nancy a far more Latin city than its neighbours, even to the point of making it more Florentine than French, a city of intrigue still which harks back to the time of a prince, a court and courtiers.

'Second, and more positively, it is a city with a capital spirit. Metz became Lorraine's military and administrative capital, but Nancy remains its cultural and even economic centre, harbouring no fewer than 450 regional headquarters of private companies and public authorities.

'Third, Nancy, like Lorraine, has been squeezed over the centuries between the Holy Roman and German empires on the one hand, and France on the other, and thus invaded a lot. But it has left it undeniably a European city.'

Today's 'prince' of Nancy is its mayor, Mr Andre Rossinot, a former doctor who is now also the minister for France's large civil service in the Balladur government (see profile). Mr Rossinot has no doubts about his city's place in the European sun. With the eastward extension of the TGV (train a grande vitesse) from Paris to Nancy, Strasbourg and eventually points in Germany, he says, 'We will no longer be a frontier zone leading nowhere, but at the heart of the Moselle-Rhine basin.,'

The mayor does not rate the TGV as a miracle cure, but simply 'as one of the criteria by which companies will now judge where to invest.' However, as a result of the Balladur government's latest plan, Nancy is scheduled to get its TGV link with Paris several years before Strasbourg - a fact which Nancy's developers hope to exploit.

Even without the TGV Nancy is not suffering unduly. To the extent that the city has problems, these stem from the decline of industry on its periphery. To the north and south west, it has the former steel-making basins of Pompey and Neuves Maisons. In Dombasle, to the south east, it has the chemical plants of Solvay and Rhone-Poulenc, which are in better shape.

In all, the periphery still provides 12,000 industrial jobs. But, as Mr Gerard Rongeot, director-general of ADUAN, says, industry provides only 10 per cent of private sector employment for greater Nancy's 350,000 population, while services account for 70-80 per cent, with the construction sector filling the rest.

Unemployment is a little more than one percentage point below the national average (10.4 per cent as against 11.7). There are several reasons for this. According to its secretary-general, Mr Jean-Luc Robaux, St Gobain's Pont a Mousson pipe-making division has laid off none of the 2,000 workers it employs full time in the town of that name. At the same time, however, the Pont a Mousson executive remains rather pessimistic about worldwide over-capacity in iron pipe-making.

Mr Robaux lauds the 'long-standing savoir-faire' of Pont a Mousson iron-forgers. If so, it is hard to see why the French company would want, or need, to continue making anything as basic as the cast iron manhole covers which, Mr Robaux complains, are coming in large and cheap quantities from eastern Europe.

Some local banks have done their bit, as Mr Bernard Yoncourt, president of SNVB, explains. To the charge that banks are letting new or small companies go under in the present recession, Mr Yoncourt retorts that not only is SNVB still lending to one in three of every small and medium sized company in its catchment area (the Seine-Marne, the Champagne Ardennes and Lorraine regions), but its venture capital fund invested FFr50m in new companies last year.

But the most important influence is the economic stability provided by Nancy's outsize academic population - 45,000 students act as a steady 'employer' of some 5,000 people to teach them, and perhaps as many again to house, feed, transport and entertain them - and the technological hope for the future represented by the numerous government and university laboratories, and the 15 grandes ecoles for engineers and managers, clustered in and around the city.

Local politicians, businessmen and university leaders have joined together in an effort to try to put all this pure research to commercial use. This has helped to create new businesses (see accompanying article) and to preserve existing industry.

Mr Henri Begorre, mayor of the Nancy suburb of Maxeville and the politician responsible for dealing with all the universities in the city, estimates that the universities have been very important to the survival of the local subsidiaries of Rhone-Poulenc, the chemicals group, and of SGS-Thomson, the semi-conductor maker which has now sold its Maxeville plant to a Hong Kong group. In stepping in to help business, Nancy's academia is returning past favours from locally-established business. Solvay, for example, helped to found Nancy's ecole de chimie.

By the high standards of eastern France, Nancy has attracted a reasonable but not spectacular amount of foreign investment. Notable among investors are Kimberly-Clark of the US, making Kleenex; Ferruzzi, in food; Clarion of Japan, in car radios; Bauer of Germany, in electric motors. Nancy is choosy. 'We don't want bounty-hunters, because we have not got big bounties (in the form of EC, national or regional investment incentives) to offer,' says Mr Begorre.

'What we want are companies with the right strategies,' he says. He gives an example: a Nancy university invention in anti-adhesives, better known as non-stick materials, which has applications not only in the kitchen but also in reducing friction in motors. 'One of the bidders is a company called Tefal, which obviously needs to sort out its marketing image with Teflon of the US if it is to be competitive with other possible exploiters' of the university invention.

This is typical of the slightly know-all attitude of many of Nancy's leaders. But, then, some of them do know a lot. Nancy is a city with a high average IQ.

THE RECESSION in Britain wounded Nottingham. But the economic injuries inflicted on the city have not scarred it permanently.

Unlike other cities, where dependence on a single industry or employer has left large sections of the workforce facing unemployment, the self-proclaimed capital of the East Midlands has been protected by a diversified economy.

The full impact of the recession was defused because the shock waves were spread across a large number of employers.

While the collapse of Swan Hunter devastated parts of Tyneside, or the loss of British Aerospace cast a pall over Hatfield, Nottingham was able to fall back on a mixed economy based on textiles and a clutch of large companies such as Boots and Raleigh and a host of small manufacturers.

But Nottingham did not emerge unscathed. British Coal's decision to close the nearby pits of Cotgrave and Silverhill has dealt a serious blow to the mining workforce. Nottingham County Council estimates that the full effect of pit closures could lead to a 15 per cent shrinkage in the area's gross domestic product.

The knock-on effect of the closure programme has yet to be felt, but the county council claims that for every two jobs which disappear from the mines, another goes outside. There could be serious implications for an economy where spending by mines on goods and services has been estimated at Pounds 210m a year.

Redundancies among miners are likely to exacerbate high levels of unemployment in parts of Nottingham. Although unemployment of 11.6 per cent in the Nottingham travel-to-work area is only 1.2 per cent above the national average, some inner city wards have suffered disproportionately. Unemployment in Radford is estimated at 44 per cent; 39.2 per cent in Lenton; and 35.2 per cent in Forest.

These pockets of high unemployment reflect small business failures and the shake-out of jobs by companies introducing labour-saving technology.

Overseas inward investment, a big priority for the city council, has not yet produced the results to offset such deprivation. Five inward investment projects last year created just 117 jobs in the city, according to Invest in Britain, the department of trade and industry's development agency. By contrast, unemployment in Nottingham's 10 worst-hit wards exceeded 10,800 in the year to July 1993.

In its determination to counter the decline, the city council has launched an economic development strategy aiming to deal with the effects of social deprivation. The goals include capitalising on the strong growth in the service sector, protecting the diverse industrial base and emphasising the role of the excellent higher education facilities in helping new companies.

The ideas are ambitious but attaining them is another matter. Any of the 1,340 miners facing redundancy at Cotgrave or Silverhill would probably be sceptical; Mr Jim Taylor, director of development at the city council, is not.

Mr Taylor, a leading advocate of the Four Cities Partnership, claims Nottingham already has the strength to become the economic powerhouse of the East Midlands. He points to the success of companies such as Boots, whose pharmaceuticals division is headquartered there; GEC Plessey Telecommunications; ZF Gears; and Central Television as examples of how the city is moving away from traditional industry.

While acknowledging there are problems of deprivation, Mr Taylor says: 'We've got the best city centre management scheme in the country. There is Pounds 37.5m of City Challenge money going into rundown areas, and we've cleaned up 3,500 buildings in 10 years.'

His optimism is echoed, albeit cautiously, by Nottingham Development Enterprise, the local business promotion agency. Mr Malcolm Reece, the agency's chief executive, believes the recession has changed the culture among companies seeking outside investment. 'Companies now realise our future lies in Europe. It would have been good if that had been recognised five years ago, and the Four Cities Partnership is a response to that,' he says.

The move toward Europe reflects the need to refocus on new markets, according to the enterprise agency, and, if successful, should soften the blow of pit closures.

The city aims to lure inward investors with attractive incentives such as its stable and low wage workforce. The average gross weekly pay for male workers is Pounds 270, compared with a national average of Pounds 300; while the average number of days lost to strikes is the second lowest in the country.

The accountancy firm of Price Waterhouse, meanwhile, claims the region's prospects have been increased by a recent survey showing that 81 per cent of businesses thought they had now experienced the worst of the recession, against 59 per cent in 1992.

Aware of the need to capitalise on signs of increasing confidence, Nottingham has taken on some ideas pioneered by its sisters in the Four Cities Partnership. These include setting up a technology region offering low cost sites to innovative design companies modelled on a similar scheme in Karlsruhe; a rapid transit system, on which the developers have sought German advice; and putting increased emphasis on international links between academic institutions.

The Four Cities Partnership, however, is not responsible solely for these initiatives. It is a useful arena for exchanging expertise and development proposals but it does not have the muscle to force through change. That is up to the partners themselves, and Nottingham would have to develop plans to safeguard its economy whether the partnership existed or not.

For the city, therefore, inward investment means not only attracting continental companies but also wooing business from elsewhere in the UK. Citing some success in this strategy, the city council says it has persuaded the Inland Revenue and English Heritage to move to Nottingham as part of a Pounds 90m relocation package. It also hopes to site a Channel tunnel freight village at Toton sidings on the city fringes.

Mr Taylor is certain that this mixed response to the recession is the right way to cure Nottingham's economic ills.

The prospects for a recovery have been boosted by the presence of finance houses in Nottingham with venture capital to aid expanding companies.

Mr Roger Cole, director of 3i in Nottingham, says companies that survived the recession now need to raise new equity. 'It's helpful to be close to your financiers. All the major firms of accountants have offices here, as do most of the clearers.'

Assessing the local economy, he adds that fewer 'distressed' parent companies are selling off subsidiaries and most employers are happier with domestic orders and export growth than a year ago.

By his analysis, if Nottingham was characterised as a patient recovering from a trauma then it would be out of intensive care. The prognosis is hopeful: stable and getting better, but not able to get out of bed yet.

THE creation of the Single European Market, bringing with it a lifting of economic frontiers across Europe, has forced not only national governments but also individual cities to re-examine the ways they do business.

A number of cities which have seen their former industrial bases decline have begun to cast around for international partners. The prize is access to new export markets and the prospect of attracting inward investors. There is also the opportunity to learn from the experience of other similarly-sized cities or regions with similar industrial and economic problems.

Nottingham, the de facto capital of the East Midlands, is one example. By the late 1980s, it was clear to council officials that they had to widen their economic horizons if the city was to rediscover the formula which a decade earlier had helped make the region one of the most buoyant in the country.

Three years ago, the city's economic development committee approached its namesake in Karlsruhe, the German university town in the state of Baden-Wurttemberg.

Attracted by the idea of a loose alliance, fuelled by an exchange of industrial expertise, research projects and joint business ventures, Karlsruhe invited its own twin cities of Nancy in eastern France and Halle in the former East Germany to join the group - giving rise to the formal launch of the Four Cities Partnership 18 months ago.

Karlsruhe itself has managed very successfully over recent years to find a new role for itself, and new prosperity. As such it is perhaps the partner with the most to offer.

Once the capital of Baden, it lost out to Stuttgart which became the chief city of the merged Baden Wurttemberg land, but it refused to allow the polarisation of business round its Swabian rival to relegate it to a backwater.

The economy of Baden-Wurttemberg has been weakened by its dependence on big employers such as Daimler-Benz, and state unemployment has increased from 4.6 per cent to 6.7 per cent.

Karlsruhe, however, has been protected from the worst of the recession by a diverse economy - even though unemployment has increased to 6.5 per cent. The city has developed an economy based on service industries and is home to some of the country's leading research institutions.

Nancy, for its part, has been affected by the decline in heavy industry around Lorraine. But, as in its German twin city, unemployment has been contained by the concentration of service companies and large academic institutions. Unemployment In Nancy is 10.4 per cent against a national average of 11.7 per cent in France.

Nottingham is having to come to terms with a rundown in the local mining industry, following the decision by British coal to close two nearby pits, and there are fears that the knock-on effects on the local economy could undermine the recovery among local companies. British Coal's decision to close the nearby pits at Silverhill and Cotgrave. Cuts in the mining workforce, according to local authority estimates, could lead to a 15 per cent shrinkage in the area's gross domestic product. That could undermine the recovery among local companies just when they thought they had beaten the UK recession. Unemployment totals in the city, at 11.6 per cent, are already worse than in its continental partners. In some inner city areas the total exceeds 40 per cent.

The city retains, however, a diversified industrial base, including the headquarters of one of Britain's biggest companies, Boots the Chemist, the retailing to drugs group.

Like Nancy and Karlsruhe, Nottingham has also seen strong growth in services. Recent arrivals in the city include the Inland Revenue and English Heritage.

Halle, by contrast, has problems of a different scale, and in theory it has most to learn from its richer neighbours. Once the powerhouse of its region, the unification of Germany has rendered Halle's manufacturing, machine tool and chemical industries uncompetitive, and about 40 per cent of the workforce is unemployed.

In the limited time since the partnership was formed the city partners have put in place a number of exchanges between businesses, academics and individuals, but so far they have not been able to take many of their joint initiatives beyond the discussion stage.

But some tangible projects are now beginning to emerge.

Among these is the establishment of technology regions based on a successful model in Germany. Designed to attract new companies with promises of cheap and readily available factory space and skilled workers, the technology zones have been taken up in all four cities.

Universities in each city have also embraced the alliance. There are student and academic exchange programmes under way and a pooling of expertise. For example, a business graduate from Halle could seek the advice of management buy-out research centre in Nottingham.

The exchange of expertise has also been taken up by city planners. The main beneficiary of this so far has been Nottingham, where officials developing a rapid transit system have been able to consult executives operating an existing network in Karlsruhe.

Inevitably there are some problems in the relationship between the cities; some of the links between them work more effectively than others. These problems are more of tone than of substance, however, and partnership officials are determined to solve them.

City leaders backing the Four Cities Partnership believe, too, that investment by the partners in each other's cities will come - given time. They acknowledge that the recession in Europe has delayed their vision, but are adamant that it has not been derailed.

All four are determined to press ahead with their alliance, which they regard as a vital building block for future development. They also believe that they are creating a model which other cities and regions across Europe will find well worth examining and adapting to their own needs.

ALUMINIUM PRODUCERS must accept further cuts in output if the industry as a whole is to survive, a London Metal Exchange seminar heard yesterday, reports Reuter.

Mr Colin Pratt, of Commodities and Research Unit International, said the western world aluminium industry was already operating at about 91 per cent of capacity but that more cuts were needed, and suggested a 5 to 10 per cent reduction by all producers. 'They must adopt a shared pain, shared gain approach,' he said.

The crisis had been caused by world recession, the coming on stream of 1.8m tonnes of new smelter capacity over the past three years, and a huge increase in Russian exports, said Mr Pratt.

But no new capacity was expected in the short term, giving the industry a two-year breathing space.

Demand growth, which had averaged about 1.5 per cent a year for the past four years, would increase to 3 per cent in 1994 as economies emerged from recession, he said.

However, huge Russian exports would continue as they represented genuine excess of production over consumption, not just a stocks drawdown.

Without the shared approach to production cuts, the industry faced prices, already at all-time lows in real terms, drifting further downwards, Mr Pratt warned.

Mr Huw Roberts, of research consultancy Brook Hunt and Associates, told the seminar that action to bring the lead and zinc markets into balance would be taken over the next 12 months, as smelters in some cases would simply run out of concentrates to process.

Lead would outpace zinc in the recovery, thanks to the positive outlook for replacement battery demand, said Mr Roberts.

Production cuts had already made an impact in both markets, he said, and there was no chance of large-scale reactivation of mothballed mines next year.

This year, he estimated, some 400,000 tonnes of zinc mine production would be lost, while lead output would be 200,000 tonnes lower.

Zinc prices would average Dollars 925 a tonne next year, unchanged from the projected 1993 level, Mr Roberts said. He saw the lead price average recovering to Dollars 500 a tonne from Dollars 390, but that would still be low in real terms.

The LME should consider extending its business beyond the London daytime and look at introducing contracts further forward, Mr Barry Marshall, president of Hunter Douglas Metals, told the seminar.

'We would like to see a 24-hour market and currently only four or five brokers provide such a service,' he said. Presenting a consumers' view of the LME, he welcomed the recent decision to move contracts out to 27 months but added that more could be done. 'We have to look at prices four, five or six years ahead,' he said.

Mr Marshall thought the LME offered a very good hedging mechanism but said some fine tuning was required. More transparency on prices and volumes of LME business was desirable as at present a lot of the exchange's business went unreported.

COFFEE AND cocoa futures prices rallied at the London Commodity Exchange yesterday after their recent 'corrections'. But dealers were at a loss to explain the rise.

The January delivery coffee position, which at one point last week dipped to Dollars 1,139 a tonne, closed at Dollars 1,207 a tonne, up Dollars 29 on the day. But that was still Dollars 128 below the 2 1/2 -year high reached at the end of August as bullish assessments of the likely impact of the producer's export retention scheme reached their peak.

The scheme, to hold 20 per cent of supplies off the export market until prices rise to a target about 12 per cent above the present level, came into operation on October 1, but by that time confidence in the producers' ability to make the strategy work was already on the wane.

'The real problem is the retention scheme is a paper tiger which is not yet biting. No-one is trying to buy coffee and not being able to get any because of the retention scheme,' one trader told the Reuter news agency.

In the absence of news to justify the price rise of the past few days, dealers said it was due to speculative activity that began in the New York market last Friday.

The March cocoa position's Pounds 21 rise to Pounds 936 a tonne was also seen as a purely technical bounce after last week's Pounds 72 setback.

'People are trying to push the market higher in the hope there is lots of buying above current levels,' said one dealer. 'At the same time there's also quite a bit of selling waiting below the market if near March dips back again towards Pounds 900.'

In its daily commodity report GNI, the London trade house, said Pounds 900 a tonne was 'the critical level' for the prompt December price, which closed at Pounds 905 tonne. But it was not looking for recent 40-month highs to be re-tested. 'While we remain positive long-term,' it said, 'we doubt that we will see a significant jump from here while the West African crops are coming in.'

SRI LANKA. the world's largest exporter of tea, is expected soon to announce substantial changes in the contracts awarded last year for the private management of 450 government-owned tea, rubber and coconut estates.

The changes are likely to include a decision to extend the contract period from five years to around 30 years, which will amount to an effective privatisation, though the land will still technically be owned by the government.

'In Sri Lanka land is a sensitive issue and there is no way we could sell it to the private sector. But before the end of the year I fully expect to be in a position to grant a new contract, possibly a usufruct contract, of 40 years,' says Mr Rupasena Karunatilleke, Sri Lanka's minister of plantation industries.

The package, which has yet to be finally approved by the Sri Lankan cabinet, comes after a clamour of complaints from the country's 22 privately owned management companies. They argued that with only a five-year contract it was to raise the money needed for large-scale investment to boost productivity and stem heavy losses.

When the companies took over last year the two government plantation boards that ran the industry had accumulated losses of around SLRs13bn (Pounds 178m) and had put the viability of the nation's two main banks in jeopardy.

Investment of several hundred million dollars is required to modernise Sri Lanka's ageing plantations and factories. The tea bushes on many estates are more than 50 years old and of the wrong type. A massive replanting scheme is required to double output per hectare.

Sri Lanka's output of tea is about 1,000kg a hectare, half that of Indian plantations and even further below those of Kenya. With less than 10 per cent of Sri Lankan tea output converted to CTC form (curt, tear and curl, as used in tea bags), the country also needs substantial investment in new factories.

The government is talking to The Asian Development Bank in the hope of obtaining loans of around Dollars 60m, which would be re-lent to those management companies willing to put in investment of their own. The ADB is insisting that the 'lease or management' contract between the government and the companies be put on a more long-term and commercially viable basis.

Base metal trading was largely routine on the London Metal Exchange, as many participants were absent because of LME week. The three months COPPER price pushed higher in the afternoon, as sellers lost interest. The market eroded the band of resistance between Dollars 1,705 and Dollars 1,710 a tonne and final business was at Dollars 1,709 a tonne, up Dollars 9, with Dollars 1,725 the next target. NICKEL prices lost ground following the rally fuelled late last week by Inco's announcement of plans to cut production. Traders attributed the retreat, which took the three months position to Dollars 4,455 a tonne, down Dollars 105, at the end of after-hours trading, to disappointed liquidation as many believed that the Canadian company's move would not be matched by other producers. LEAD prices edged up, as the move above Dollars 385 a tonne for three months metal touched off some light short-covering. Final business was at Dollars 390 a tonne, up Dollars 5.50 from Friday. TIN prices fell back in nervous trading as the market continued to fluctuate in a wide band. The three months position ended at Dollars 4,590 a tonne, down Dollars 60.

Compiled from Reuters

WORLD COTTON consumption is expected to outstrip output in the 1993-94 season (August/September), but stiff competition among exporters may keep prices low, the International Cotton Advisory Committee said yesterday, reports Reuter from New Delhi.

Output in 1993-94 is forecast at 18m tonnes, unchanged from the previous year, but consumption is likely to rise by 450,000 tonnes to 19.3m tonnes.

Despite the growth in the world total, consumption in many importing countries is declining and there is stiff competition among exporters resulting in lower prices.

The ICAC said that the average of Cotton Outlook magazine's Cotlook A Index for the season to date was around 55 cents a lb, compared with the 1992-93 average of 58 cents and a 20-year average of 72 cents.

The committee is a worldwide organisation of 46 governments created to monitor developments affecting cotton production and to promote the use of cotton. At least 190 foreign delegates and observers are attending the five-day meeting in New Delhi.

ICAC estimated world cotton stocks at the beginning of the season at 9.1m tonnes, including 3.3m in China and 1m in the US, the two biggest producers. Stocks are expected to fall to 7.8m tonnes by the end of the season.

While stocks in China are forecast to fall by 1m tonnes to 2.3m because of lower production, US stocks may rise to 1.3m tonnes.

Landed strong demand, reports the Tea Brokers' Association. Selected besty and coloury medium North Indians sold well at firm to dearer rates but plainer types were irregularly easier. Brighter East Africans advanced 10 to 15 pence following quality. Mediums remained fully firm to occasionally dearer with Pekoe dusts a strong feature throughout the sale. Ceylons moved higher particularly brighter types. Offshore good demand at dearer rates. Quotations: quality 200p nom, good medium 140p, medium 125p and low medium 100p nom.

THE GOLD price climbed above Dollars 360 a troy ounce yesterday for the first time since it plunged on selling by US computer-controlled funds on September 7.

Dollar weakness encouraged early commission house buying as the price was driven to Dollars 361.50 an ounce at one point. But with expected upside resistance looming at Dollars 362 the rise ran out of steam and the price retreated to Dollars 360.25 an ounce, up Dollars 3 on balance, at the London bullion market close.

Silver, which led the precious metals rally last week with a 26-cent net rise, put on another 2 cents to close at 434.5 cents an ounce, just below last Thursday's high.

In New York early commission house buying lifted Commodity Exchange (Comex) silver prices to the highest levels in a month and a subsequent back-off was slowed by some emerging investment fund buying, dealers told the Reuter news agency.

The platinum market, which took part only half-heartedly in last week's rally, was again the laggard, with its price closing in London at Dollars 363.40 an ounce, up Dollars 1.65 on the day.

MY FIRST job as a 16-year old farm student on a neighbouring farm was milking cows. It was not planned that way - the intention was that during the 12 months I was to work on the farm I would be given a variety of arable and livestock jobs to broaden my experience.

But when I took up my post one of the regular herdsmen was having an illicit affair with another herdsman's wife. The day I arrived the cuckold found out and punched his colleague in the mouth, breaking his jaw. Needless to say they refused to work together again and I was drafted into the cow shed to fill the gap.

I bet you thought such excitement only took place in towns. At my tender age and in my innocence I too was a little shocked. It taught me a little about human weakness and a lot about dairy cows.

Believe it or not milking can be a very satisfying job. You get to know the animals by name. Or at least you did then, before herds got so big that they started giving cows numbers. It must be more difficult to establish a relationship with number 123 than with Ada or Mabel. And apart from the inevitable inconvenience of the fact that it had to be done twice every day of the year it was a job I really enjoyed doing.

But if new technology from the Netherlands catches on in this country the herdsmen of tomorrow may be denied the hands-on pleasures of pulling milk out of cows.

The fully automatic milking machine has been the dream of some enthusiasts for years but until recently the difficulty of developing a device to accomodate different shapes of udders and placings of teats has proved too much.

Now, it is claimed, the Dutch have cracked it. A few machines are already operating in Holland and it is expected that the first will be installed in the UK within a matter of months.

In truth the automatic milker is an inevitable and logical development. Any task that is repeated daily and is labour intensive will attract the attention of technologists. Moreover the hand-operated milking machine introduced half a century ago, even before I started doing the job, was the first breakthrough. Overnight one man, who had been hand-milking perhaps 10 cows a session into an open bucket, could deal with 40 or 50 cows and do so more hygienically and thoroughly.

Some years later automatic cluster removers enabled that figure to be more than doubled. The cow man attaches the cluster of four teat cups to each cow by hand, but when the udder is empty and the flow of milk ceases a cord attached to the teat cups gently pulls them off. It saves internal damage to the empty teats from continuous vaccuum pressure when it is not needed to draw milk. It has led to fewer cases of diseases such as mastitis.

Other electronic labour saving devices have also been introduced to dairying over the years. In some herds, for instance, cows wear collars containing tiny transponders. These are programmed by the computer in the dairy to trigger the individually desired delivery of feed to the cow concerned when, of her own free will, she enters an enclosed feeding stall.

When she has eaten her fill the device lets her out and another cow in to repeat the process.

Pedometers with radio transmitters are sometimes fixed to cows' front legs to measure their activity rate. Increased activity, again recorded on the computer in the dairy, indicates she is on heat and ready for artificial insemination. A decreased in her activity could mean that she is ill.

It is also possible, by fitting special thermometers into the milking machine, to measure the heat of the milk drawn from each cow and each teat. A rise in the temperature, once more recorded on a computer, indicates that the cow has a fever, maybe sickening for some disease and probably needs treatment.

Most of these hi-tech developments have been incorporated into the new automatic milking machine. The cow decides, according to the fullness of her udder, when she wishes to be relieved of the burden of her milk. She enters the milking stall and is identified by the transponder round her neck. The computer causes a little feed to fall into the trough in the stall.

Then comes the really clever bit.

The computer delves into its memory bank for the shape of the udder of the cow in the stall. It then instructs the pneumatic cylinders which control the teat cups exactly where to attach them. After a few days' training apparently, the cow does not object.

Once successfully attached, the milking procedure begins with automatic teat washing inside the teat cup. The washings are then discarded and the inside of the cup rinsed clean. After that, milking takes place in the normal way and the cow is released from the stall. If at any point the procedure goes wrong, the whole process is aborted, the cow is released into a holding pen and an alarm is sounded to alert the herdsman that he is needed after all.

As will be deduced from all this, milk production can be a technical and sophisticated business, although in truth very few dairy farmers have all the gadgets I have described. It may perhaps be surprising, therefore, that a similar level of sophistication has seldom shown itself in dairy farmers' approach to marketing.

The fact is, of course, that it has not been necessary for the last 60 years since the advent of the Milk Marketing Boards. The boards have a statutory duty to buy and pay the same price for all milk (according to quality) from all milk producers whether they do it on top of Mount Snowdon or inside the M25.

But that situation is fast drawing to a close as the boards are wound up (April 1, 1994 is the target date) and then Britain will once again have a free market for milk.

The Milk Marketing Board of England and Wales intends to turn itself into a producer-owned co-operative and hopes to secure committments to purchase 80 per cent of its present turnover and broker it to other milk users. Other companies, such as Northern Foods, Nestles, MD Foods and Unigate, on the other hand, hope substantial numbers of milk producers will sell direct to them, by-passing Milk Marque, as the new co-operative will be called.

So, over the next few months, milk producers will be faced with a difficult choice. Do they stick with the people they know and hope they can trust at Milk Marque but run the risk that it will ultimately fail like so many UK agricultural co-operatives before it? Or do they sign up with a commercial outfit with a proven record of adding value but risk having ex-farm milk prices squeezed as buyers respond to market pressures and shareholders demands for maximum profits?

It is a choice most would prefer not to have to make and as each of the players makes their increasingly aggresive pitch for milk producers over coming weeks it is anybody's guess how the future structure of the milk business will pan out. But it will be a fierce battle - that much is quite certain. I just hope there will be no broken jaws.

EUROPEAN bond markets were quiet yesterday as participants eyed today's ruling by the German Constitutional Court on the Maastricht treaty for European monetary union (Emu). Moreover, holidays in Japan, the US and Canada kept a lid on activity, leaving prices to drift lower on moderate volume.

While Germany's supreme court is widely forecast to rule in favour of the treaty, many expect it to attach provisos which could further delay the timetable for Emu and undermine the weaker currencies in Europe's exchange-rate mechanism (ERM).

These expectations triggered some unwinding of trades based on European economic convergence and sparked speculative switching into German assets, causing bunds to outperform most markets and reinforcing the D-Mark.

After a short-lived breach of key resistance at 100 - hitting a record high at 100.02 - the December Bund future drifted lower to end at 99.76.

The Bundesbank's call for repo tenders is likely to be closely watched today.

Most market participants expect another two-week repo at a 6.70 per cent fixed rate and a variable-rate four-week repo, in spite of speculation last week that both tranches could be offered at variable rates.

With payment on the government's new bunds due Friday and October tax payments beginning to drain money-market liquidity this week, 'a reversion to variable-rate repos on the shorter tranche could risk a small rise in the minimum rate which the Bundesbank probably would wish to avoid', said Mr Paul Meggyesi, senior German economist at MMS International.

Elsewhere, the government today will issue 10-year bunds via the federal bond consortium, with another portion to be auctioned tomorrow.

Traders are betting on a 6 per cent coupon and expect the issue to total DM10bn.

UK gilts drifted lower in line with most European markets and the December long gilt contract slipped 5/32 to 114 9/32 .

Remembering how higher-than-expected August inflation data had sent gilts tumbling last month, many investors remained nervously sidelined ahead of tomorrow's release of September RPI.

Participants are eyeing Friday's announcement of the next gilts auction, with many traders expecting a new five-year benchmark for next year.

IN France, the December notional bond futures contract eased 0.04 point to 123.98 on moderate turnover.

Traders reported some switching into bunds out of OATs, which caused French 10-year bonds' yield premium over bunds to widen to six basis points from two basis points on Friday.

DANISH bonds were the day's only winners, with the 10-year benchmark bond rising 0.30 of a point after the central bank cut its leading interest rates by 1/2 point.

Denmark has taken advantage of its new latitude to cut rates independently of the Bundesbank, aided by the strength of the krone, since the fluctuation bands for most ERM currencies were widened to 15 per cent on August 2.

BELGIAN bonds posted the biggest losses, with the 10-year benchmark bond falling nearly 1/2 point on the day.

The 10-year yield premium over bunds rose to 133 basis points, from 126 basis points on Friday.

Nevertheless, Mr John Hall, economist at Swiss Bank Corporation, feels 'there is good value for medium-term investors with the spread around 130 basis points'.

For one, Mr Hall argues, the market has discounted much of the uncertainty over the likelihood of a social pact.

Moreover, he expects a compromise pact to be delivered, and while it may not solve all of Belgium's problems, it will defuse the threat of an outright debt crisis.

He warned that a failure on the pact could push the spread out to 150 basis points and recommended that 'more cautious investors wait until we see what the pact actually looks like'.

The report from the committee of experts charged with preparing the social pact talks is expected to be published next week.

CHILE, which was one of the first Latin American countries to return to Eurobond markets after the 1980s debt crisis, has pre-paid its Dollars 320m bond issue placed as part of its 1991 debt refinancing accord, Reuter reports from Santiago.

Mr Jose Pablo Arellano, Chile's finance ministry budget director, said the operation was completed last month when the government paid Dollars 260m for outstanding bonds.

Chile placed Dollars 200m in Eurobonds with a five-year maturity plus two years of grace at Libor plus 1.5 per cent in 1991 and in 1992 followed with a Dollars 120m placement.

A total of 20 banks from the US, Japan and Europe subscribed the issue.

Mr Arellano said the difference between the Dollars 260m and Dollars 320m total issue was accounted for by bonds which had already been repaid under the scheduled amortisation calendar.

HENDERSON Land, the Hong Kong property developer, has issued HKDollars 3.12bn (USDollars 405m) in bonds which convert into shares in its unlisted subsidiary, Henderson China.

Henderson is the latest in a growing list of property companies which are capitalising on low interest rates and renewed global interest in Hong Kong shares, by issuing convertible preference shares or bonds.

The bonds have a three-year life and pay a coupon of 4 per cent. They can be redeemed at par, or converted into shares in Henderson China upon its initial public offering. There is no guarantee that the company will be successfully listed.

The share price of Henderson Land climbed 19 per cent yesterday with the issue apparently implying substantial value to the group's China assets. An independent audit has given an estimated net tangible assets per share for Henderson Land of HKDollars 42.69, against yesterday's closing price of HKDollars 28.70.

Mr Lee Shau-kee, chairman of Henderson, said the move 'provides funds for our China property business and creates an opportunity for investors specifically interested in China'.

Hong Kong investors have tended to shun companies with Chinese property interests, due to concerns over the impact of the austerity programme in China. Overseas institutions have been less concerned.

New World Development, a Hong Kong property developer with substantial Chinese exposure, reacted to local fears recently, by launching a USDollars 200m Dublin-listed China investment fund.

The fund has acquired a number of the group's China infrastructure and property projects and is only 50 per cent owned by the company, reducing the parent company's exposure and raising funds for China investment.

THERE were relatively few new issues in the international bond market yesterday as the public holiday in the US restricted activity.

However, syndicate managers expect a wide range of new issues to emerge over the next two weeks. Belgium is expected to raise Dollars 500m through a fixed-rate offering of 10-year Eurobonds, priced to yield about 30 basis points over underlying US treasuries. Banks made their bids for the deal yesterday and the mandate should be awarded today.

Depfa, Germany's largest mortgage bank, could launch its Eurosterling issue today or tomorrow, via Salomon Brothers and UBS. The issue of 10-year Eurobonds is likely to raise about Pounds 500m and be priced to yield 20 to 25 basis points over UK government bonds.

Regarding Turkey's planned Eurosterling issue, lead manager SG Warburg said that it was not in a position to comment on the details of the offering following news last Friday that Moody's, the international credit rating agency, had placed Turkey's long-term credit rating under review for possible downgrading.

However, based on the feedback from investors following Moody's announcement, SG Warburg remained optimistic that the deal could be launched during the course of this week.

Banco Bamerindus, Brazil's third-largest private-sector bank, is expected to launch a Dollars 100m offering of five-year Eurobonds next Monday. Mr Anthony Pain, the bank's international and corporate director, said the bonds were likely to be priced to yield between 450 and 475 basis points over underlying US Treasuries.

The market is waiting for two issues from the European Community, one denominated in Ecu and the other in D-Marks.

Among yesterday's issues, Fisons, the UK pharmaceuticals company, made its first public bond issue since 1986 when it raised Pounds 100m through an offering of 10-year Eurobonds.

The yield spread of 120 basis points over gilts was seen to be fair in view of the company's lack of a credit rating and the residual negative sentiment following its poor equity performance. The bonds closed at 98.70 bid, with the spread intact.

Fokker, the Dutch aircraft manufacturer in which Daimler-Benz took a majority stake via its Deutsche Aerospace subsidiary last April, raised DM500m through an offering of five-year Eurobonds. A put option on the bonds was seen as an insurance policy for investors who had bought the bonds because of Daimler's commitment to building Europe's leading aircraft manufacturing group. Bondholders can exercise the put option in 1996 if Deutsche Aerospace decides to take its stake in Fokker below 50 per cent. Minus full fees, the bonds were priced to yield 81 basis points over medium-term German government notes. The bonds were trading at 99.30 bid in the afternoon, within fees.

FORD Credit Europe will launch several funding programmes in coming weeks to finance the growth of its various European units.

The company plans to launch a US-commercial paper programme totalling Dollars 1.5bn and a Euro-CP programme worth Dollars 1bn, Ford said.

In addition, a planned Euro medium-term-note (MTN) programme, scheduled for early November, will total up to Dollars 1.5bn, it said.

Under this programme Ford will be targeting the shorter end of the maturity spectrum, with most issuance likely in the 10- to 15-year sector, Ford said.

The CP-programmes are rated A-1 by Standard and Poor's and P-1 by Moody's Investors Service, while the MTN programme has been rated A by S&P and A-2 by Moody's.

DIGITAL Equipment, the US computer manufacturer, has unveiled about 150 products and services designed to position the company as a significant supplier of client-server systems.

Mr Geoffrey Shingles, chairman of Digital's UK operations said the announcements were 'the basis for the new Digital'. The intention is to become the leading client-server company by 1995.

Client-server systems involve workstations and personal computers tied together in networks.

Digital has been the world leader in minicomputers but was slow to capitalise on the trend towards personal computers and open networks where machines from different manufacturers can be linked together easily.

With today's announcement, the company is attempting to recover lost ground and position itself for the future. The products will include special software to enable groups of staff to work co-operatively over a shared computer system and a number of high-powered workstations based on Digital's Alpha chip, said to be the world's fastest.

The company has improved its pricing structure and simplified ordering procedures for most of its products and services. It is extending and developing its consultancy services.

Digital's move is seen by industry experts as essential for any company hoping to take a large share of tomorrow's data processing markets. There is little or no growth in mainframe or minicomputer based systems.

Digital emphasised its global commitment to information technology. It said development of its client-server products had been spread through countries where it operates.

FLEET Financial, New England's biggest banking group, said yesterday it would pay Dollars 125m in stock to acquire Sterling Bancshares of Massachusetts.

The announcement comes just two weeks after Fleet's share price rose sharply amid talk that it would be taken over by an even bigger regional bank, NationsBank of North Carolina.

The acquisition of Sterling, however, is not regarded as a defensive manoeuvre to discourage NationsBank from launching a bid.

The Fleet-Sterling deal is the third regional banking merger unveiled in the last month, which suggests that a new round of consolidation in the US banking industry is under way. Last month, the second and third largest banks in Wisconsin, Marshall & Illsley and Valley Bancorp, announced they would merge in a transaction valued at almost Dollars 1bn. On October 5, Keycorp and Society Corporation, two banks with operations in several states, unveiled a merger that will create the 10th largest bank in the US with assets of Dollars 58bn.

Sterling has assets of almost Dollars 1bn and operates 13 banking offices in Massachusetts, which will be added to Fleet's 155 branches in the state.

Fleet's chairman and chief executive Mr Terrence Murray said the acquisition would allow it to expand its middle-market corporate lending, consumer services and investment services businesses in the region.

Under the terms of the deal, which has yet to be approved by Sterling's shareholders and banking authorities, Fleet will offer 1.1575 of its own shares for every Sterling share, which are valued at Dollars 39.50 each.

News of the acquisition lifted Sterling's stock Dollars 5 3/4 to Dollars 36 1/4 on the over-the-counter Nasdaq market. Fleet's shares eased Dollars 1/8 to Dollars 34 on the New York Stock Exchange.

INTEL, the world's largest computer chip maker, yesterday reported record revenue and earnings for the third quarter.

Net income increased 143 per cent over last year's corresponding quarter, while revenues advanced 57 per cent.

Intel, the dominant supplier of microprocessor 'brain' chips for personal computers, is riding on a wave of strong demand for PCs.

The company's 486 DX2 microprocessor has become the 'workhorse of business computing', said Mr Andrew Grove, president and chief executive.

Net income was Dollars 584m, or Dollars 1.33 a share, compared with Dollars 241m, or 56 cents, in last year's third quarter. Revenue for the quarter rose to Dollars 2.24bn, up from Dollars 1.43bn last time.

The company said its nine-month revenue and net income exceeded the corresponding totals for all 1992.

For the first nine months of 1993, net income advanced to Dollars 1.7bn, or Dollars 3.86 a share, from Dollars 638m, or Dollars 1.49 a share, in the same period last year. Revenue was Dollars 6.39bn, up 60 per cent.

Earnings were in line with Wall Street's expectations, but failed to match the most optimistic projections. Intel's stock price closed at Dollars 65 1/2 , down Dollars 4 3/4 from a Friday close of Dollars 70 1/4 , in heavy trading.

Intel said it expected to ship 'hundreds of thousands' of its latest microprocessors, called Pentium, this year and millions next year. It added that about 100 Pentium-based computers will be launched by computer manufacturers later this year.

The company said strong demand for other semiconductor products, including flash memory chips and microcontrollers, contributed to its strong third-quarter revenues.

During the quarter two other chip manufacturers announced plans to compete with Intel in the PC microprocessor market. Texas Instruments of the US and United Microelectronics of Taiwan are the latest entrants into a growing field of Intel 'clone' chip makers.

Sun Microsystems announced yesterday that it had set up a sales and distribution organisation for Sparc microprocessors and supporting chips, manufactured by Texas Instruments and other licensees.

Sparc chips are used in Sun's computer workstations. The move represents Sun's latest effort to establish Sparc as an alternative standard to Intel's microprocessors.

SPRINT, the US telecommunications company, is to take an after-tax charge of Dollars 56m, or 16 cents a share, to cover the cost of restructuring, tax increases and debt reduction in the third quarter.

Most of the provision is associated with the cost of reorganising the company's operations following its merger with Centel, a Chicago-based provider of cellular and local telephone services.

Sprint, the third-largest long-distance telephone company in the US, acquired Centel in a Dollars 3.6bn stock-swap deal completed in March.

Mr Charles Schelke, an analyst at Smith Barney Shearson, said the announcement would have no effect on his third-quarter earnings forecast of 51 cents a share.

In the quarter to the end of September 1992, Sprint posted net income of Dollars 115m, or 52 cents a share.

The results are not directly comparable to figures for the current quarter because of the issue of new shares as part of the Centel acquisition.

The warning by Sprint follows an announcement in August of a plan to eliminate about 1,000 jobs, about 5 per cent of the workforce, at its long-distance division.

In addition, two facilities in Indiana and Virginia are to be closed. In the first quarter, Sprint said it would eliminate 1,500 jobs as part of a consolidation of its cellular and local telephone operations.

In breaking down the components of the third-quarter charge, Sprint said the cost of restructuring would reduce after-tax earnings in the period by Dollars 28m. Federal tax increases enacted in August would require it to take a one-time charge of Dollars 13m, or 4 cents. A further Dollars 15m charge would cover the cost of refinancing and the early retirement of debt.

On Wall Street, Sprint stock fell Dollars 3/4 yesterday to close at Dollars 36 1/4.

FRUIT OF the Loom, the US clothing manufacturer, has agreed to buy Salem Sportswear, a maker of sports and children's wear, for Dollars 12.75 a share in cash, valuing the company at Dollars 132.6m.

Salem's shares, which are quoted on the Nasdaq over-the-counter market, rose Dollars 3 1/8 to Dollars 12 3/8 .

Salem, which makes sportswear licensed by the four big US professional sports leagues, is expected to earn about 75 cents a share in the year to next August.

Fruit of the Loom believes the price paid for the company will be justified by the opportunity to expand its range of sports and children's wear and through the expansion of its channels of distribution.

PHILIP Environmental of Canada is buying two US hazardous waste companies for almost USDollars 100m.

The acquisition of Seattle-based Burlington Environmental for USDollars 75m and Nortru for USDollars 23m will add hazardous waste, recycling and environmental engineering revenues of USDollars 120m to Philip's annual volume. This will increase Philip's total sales to about USDollars 325m.

Philip, based in Hamilton, Ontario, is financing the deal by selling USDollars 120m of special warrants to underwriters, allowing investors to buy convertible debentures.

St Lawrence Cement, eastern Canada's biggest cement maker which is controlled by the Swiss Holderbank group, bought 11 per cent of Philip in 1991 and has the right to maintain an interest up to 22 per cent.

Philip is an industrial recycler, which also collects waste and operates landfill sites across Canada and in key US markets. The company had dropped plans for an equity issue because of poor first-quarter results. Its latest acquisition was a Hamilton-based metals recycler.

Philip recorded first-half net profit of CDollars 4.8m (USDollars 3.6m), or 15 cents a share, down from CDollars 7m or 24 cents, a year earlier. It blamed the first-quarter problems on severe weather and said the shortfall would be made up by year-end.

Mr Allen Fracassi, president, said Philip would apply the Dollars 22m remaining from the warrant issue to reduce debt.

Belgium's Tractabel has formed a joint venture with the Montreal property and construction group Desourdy to introduce new European waste treatment technology to the Canadian market. Projects worth CDollars 50m are planned in Ontario and Quebec.

SHARES in Motorola, the US semiconductor manufacturer, surged Dollars 3 to Dollars 101 1/2 in after-hours trading on the New York stock exchange yesterday after reporting earnings sharply above forecast.

Third-quarter earnings jumped to Dollars 254m, or 92 cents a share from Dollars 127m, or 47 cents, a year earlier. Analysts had expected the company to earn between 67 cents and 83 cents a share.

Sales in the quarter totalled Dollars 4.48bn against Dollars 3.48bn in the same period last year.

Nine-month earnings amounted to Dollars 682m, or Dollars 2.50 a share, up from Dollars 272m, or Dollars 1.02, a year earlier. Sales for the nine months totalled Dollars 11.97bn, against Dollars 9.59bn.

Nine-months earnings per share fully diluted were Dollars 2.40, against Dollars 1.01. Last year's figures include a loss of Dollars 123m from the cumulative effect of adopting a new accounting standard.

Motorola said that its third-quarter net margin on sales was 5.7 per cent, compared with 3.7 per cent a year earlier, while in the first nine months net margin on sales was 5.7 per cent, up from 4.1 per cent a year earlier.

Mr Gary Tooker, president and chief operating officer, said sales in the company's semiconductor products segment rose 31 per cent for the quarter, to Dollars 1.51bn. Orders rose 25 per cent and segment profits increased, he added.

In the general systems sector, sales rose 43 per cent to Dollars 1.35bn, while orders rose 58 per cent. Segment profits also increased, Motorola said.

The company did not provide any forecast, beyond saying that third-quarter and nine-months results were not necessarily indicative of those to be expected for the full year.

ICI AUSTRALIA, part of Imperial Chemical Industries, is to go ahead with construction of a ADollars 300m (USDollars 200m) pipeline linking the Moomba gas fields in South Australia with its Botany Bay petrochemical plant. This follows a decision by the South Australian government to sell ethane to the ICI plant.

ICI's expenditure will be spread over a couple of years. About ADollars 170m will be spent on the pipeline; ADollars 100m on the Botany Bay facility; and the remainder in South Australia's Cooper Basin. The pipeline will be about 1,380km long, and follow a similar route to the existing Moomba-Sydney pipeline.

The aim is to switch the Botany Bay plant over to South Australian ethane by May 1996. ICI has been anxious to secure long-term feedstock supplies locally.

The decision to sell ethane to ICI followed a deal between the South Australian authorities and the Queensland government for the latter to supply natural gas to South Australia after existing contracts between the states expire in 2003.

RELIANCE Industries, the Indian textiles and chemicals group currently in the middle of the country's largest corporate fund-raising exercise, yesterday posted a 14 per cent increase in interim pre-tax profits to Rs2.07bn (Dollars 66.8m).

Sales in the six months to the end of September rose 35 per cent to Rs24.7bn. Reliance said it had performed well in the first half and forecast 'an even better performance on all major indicators in the second half'.

Reliance Industries is the flagship of the fast-growing Reliance group headed by Mr Dhirubhai Ambani and his sons Mr Anil Ambani and Mr Mukesh Ambani.

Last year it raised funds for two plastics factories being built in partnership with Itochu, the Japanese trading company. Now it is raising Rs8.6bn in the first slice of a Rs21.7bn convertible bond issue for a new company, Reliance Petroleum, which plans to construct a Rs51.4bn oil refinery. If the project goes ahead as planned, the refinery will be India's biggest private-sector industrial investment.

Mr Dhirubhai Ambani has built Reliance over the last 25 years from a small trading company into one of India's largest industrial houses, rivalling much older combines such as the Tata group. Unlike longer established houses which are usually highly diversified, Reliance has concentrated on building a vertically integrated group focused on oil, petrochemicals and their derivatives such as artificial fibres, plastics and chemicals.

NEARLY two years after taking operating control of Venezuela's national telecommunications concern, GTE of the US has provided the Caracas government with an opportunity to ease the state's fiscal deficit.

Compania Anonima Telefonos de Venezuela (CANTV) has been turned from a money-losing, inefficient concern into a profitable company, although GTE has a long way to go in its transformation.

The Venezuelan government, which owns 49 per cent of CANTV following a partial privatisation in 1991, hopes to raise some Dollars 800m from the sale of part of its stake this year.

GTE led Venworld Telecom, the international consortium that won 40 per cent of CANTV with a bid of Dollars 1.89bn. Venworld is controlled by GTE, which has 51 per cent, and has four other partners: Telefonica de Espana (16 per cent), La Electricidad de Caracas (Venezuela's largest private utility, holding 16 per cent), CIMA (the investment arm of Venezuela's Banco Mercantil group, with 12 per cent) and AT&T (5 per cent). CANTV employees will eventually own 11 per cent of their company's shares.

CANTV was in poor shape when it was privatised. An erratic telephone service was not only a social irritant, but also seriously hindered economic development. Under government ownership CANTV invested little in equipment and had an appalling record in maintenance and service to the public.

For example, in 1991 Venezuela had eight telephones per 100 inhabitants, compared with 49 per 100 in more developed countries. Digital lines accounted for only 20 per cent of total lines (62 per cent), 80 per cent of outgoing international calls were not completed (35 per cent), and 57 per cent of public telephones were out of service at any time (5 per cent).

Since December 1991, Venworld has made more capital investments than the country's telecommunications industry received over the previous two decades. The 'new CANTV' invested Dollars 500m last year and plans capital outlays of Dollars 650m in 1993 as part of a Dollars 6bn capital investment programme between 1992-2000.

Other than using its own cash to invest, the company will receive more than Dollars 300m in loans this year from external sources such as export-import banks in the US, Japan, France, Germany and Sweden, as well as from syndicated bank loans and commercial paper.

Investments cover new digital telephone lines, new public telephones, infrastructure and service improvements, installation of fibre-optic systems, expansion of international telecommunications capacity, rural and cellular telephone systems, new services for telephone customers, businesses and other communications clients, plus other areas.

CANTV installed 413,000 digital telephone lines in 1992 and is adding 459,000 more this year. It installed or replaced 18,400 public telephones last year, and is aiming for another 17,000 by December.

Customers have noticed a big improvement in reliability of services, and repairs are often done within days rather than weeks or months.

Financial results during the first year of privatisation were also a big improvement over previous years, when CANTV regularly produced red ink and paid little in taxes to the Venezuelan treasury.

Using figures adjusted for inflation, CANTV had operating revenues of Dollars 986m in 1992 (78.5bn bolivars), up from Dollars 637m the previous year. Net income for 1992 was Dollars 169m, compared to a loss of Dollars 72m in 1991. The improvement was due to higher rates for telecommunications services, better collection procedures and expanded services.

Aside from normal income taxes, CANTV now also pays the treasury a special tax of 5 per cent of its ordinary annual revenues, plus quarterly royalty fees.

The 35-year concession contract grants CANTV the exclusive right to operate all local and long-distance (national and international) telephone services for nine years. Other services, such as cellular phones and data transmission, are open to competition.

There is still debate among Venezuelan officials and CANTV executives over when the government should put its remaining shares up for sale. While some in the cash-strapped government want to tap the US stock market as soon as possible to shore up official finances this year, others argue that the uncertainties of a presidential election year and recent political upheavals will have a negative effect on the sales price of shares.

Pricing for these new shares is also a problem, since the privatisation is still in its early stages and the company declared no dividends in 1992.

CANTV's privatisation, the biggest sale of Venezuelan state assets so far and one of the largest in Latin America, is a big test for the government's privatisation programme - and for CANTV, which must continue to develop services, retrain (or replace) the 20,000 employees it inherited from the days of government ownership, and cope with a militant labour union in Caracas.

NESTLE, the international confectionery and foods company, has won the exclusive right from the Polish authorities to negotiate a joint venture with Goplana, the last major state-owned chocolate manufacturer. This gives Nestle its first production base in the country.

The successful bid, mounted only two months ago, thwarts a two-year effort by ED and F. Man, the cocoa and sugar brokers, working with Elite Industries from Israel, to establish a joint venture with Goplana in Poznan, which controls 10 per cent of the domestic market.

Nestle said it would take 42 per cent in the new joint venture, making its investment worth around Dollars 32m.

This leaves a 5 per cent share with the recently privatised Wielkopolski Bank Kredytowy based in Poznan, which bid with Nestle.

The level of additional spending by Nestle on developing Goplana has yet to be negotiated before a final contract is signed.

Poland's other important chocolate manufacturers have already been sold with Wedel, the best known brand going to PepsiCo Foods International, while Wawel in Krakow has been taken over by management and employees.

Kraft Jacobs Suchard have also bought Olza, a chocolate and biscuit maker in Cieszyn. Meanwhile, Pozmeat, a Poznan-based meat processor, was sold yesterday to management, employees and private investors, including Animex, a major meat foreign trader, in a deal valuing the plant at 80bn zlotys (USDollars 4.1m).

The purchasers have pledged to invest 90bn zlotys over the next four years in Pozmeat, which reported sales worth 358bn zlotys in the first half of this year with a net profit of 10bn zlotys.

The sale came as the government announced that Rolimpex, Poland's state-owned grain and farm produce foreign trader, would be privatised through a public share offer by the end of March next year.

Up to 40 per cent of Rolimpex's shares are to be sold to private investors with 35 per cent retained by management and employees.

Twenty-five per cent of the equity is to be retained by the treasury and state-owned institutions.

BROKEN Hill Proprietary, the Australian steel and natural resources group, yesterday confirmed that it now has a stake of more than 50 per cent in Ok Tedi, the large copper and gold mine in Papua New Guinea.

The increase in BHP's stake follows the decision by Amoco, the US oil group, to sell its 30 per cent interest in the mine. BHP, which already held a similar 30 per cent interest, is understood to have acquired the Amoco stake and is expected to pass on one-third of this to the Papua New Guinea government.

Yesterday's announcement said the government was expected to raise its holding from 20 per cent to 30 per cent, with effect from January 1 1994.

Metall Mining Corporation, the Canadian subsidiary of Germany's Metallgesellschaft, has also doubled its interest in the project recently, to 15 per cent, by buying out the 7.5 per cent stake held by Degussa.

The remaining 5 per cent interest is held by DEG, the German government's overseas development body.

BHP declined to discuss how much it had paid for the stake, or the terms of transaction, saying that discussions over final details of the ownership structure at Ok Tedi were continuing.

There has been speculation that BHP would pay less, on a pro rata basis, than the USDollars 35m which MMC paid for the additional 7.5 per cent holding, but would indemnify Amoco against future indemnity claims.

The Ok Tedi project was developed at a cost of USDollars 1.4bn in the 1980s.

Expected life of the mine is expected to be at least 15 years.