Corpus of articles from the English newspaper 'The Financial Times' from the year 1993. MLCC machine readable version 1995 This TEI conformant electronic version edited by the MLCC project, 7 July 1995. This file (ignoring this header) is 2743808 bytes long, its text includes 410007 words.

This electronic version was produced by the Multilingual Corpora for Cooperation (MLCC) project funded by the European Union. It has been converted to use the iso-latin-1 character set (where possible) and to be TEI(P3) conformant SGML.

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The original electronic version of this file was produced by the 'The Financial Times' newspaper.

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English 7 July 1995 Masja Kempen David Mckelvie processing of original corpus files into tei conformance.
Repossession prices fall Publication 930304FT Processed by FT 930304 By RICHARD LAPPER

PRICES of properties reposs-essed by mortgage lenders are falling at a much faster rate than house prices in general, according to a survey by Special Risk Services, an insurance broker which specialises in financial insurances.

The survey examined sales of properties repossessed between 1988 and 1992 by looking at 1,058 settled mortgage indemnity insurance claims. It found that on average the values of the properties had fallen by 33 per cent. By contrast general house prices have fallen by up to 20 per cent since 1988.

Mr Dane Douetil, a mortgage indemnity specialist with SRS, said: 'The financial impact on both borrowers and lenders is worse in a repossession situation than the headline figures suggest.'

The extent of the fall indicates that some mortgage lenders may be underestimating the extent of their losses arising from mortgage default.

Mortgage indemnity insurance covers lenders against a portion of losses they suffer on the sale of repossessed properties. In the SRS sample of repossessed properties the average drop in value was steepest in East Anglia (40.45 per cent), while Greater London, the south-west and the south-east show reductions of 35.26 per cent, 34.97 per cent and 30.69 per cent respectively.

Factors responsible for the sharp fall in value of repossessed properties include: the poor state of repair of properties before and after repossession; the fact that an empty house does not 'show well' for potential buyers; and the need for lenders to sell the property within a reasonable period of time following repossession.

The survey also shows that on average over the last three years it has taken 166 days for a lender to apply to the courts for a repossession of a property following the first arrears by the borrower.

A Pounds 577m government programme to buy empty properties in England to aid the housing market and provide accommodation for the homeless has beaten its target of 16,000 homes by the end of March, the Housing Corporation said yesterday.

The scheme, had approved purchases of 18,000 homes.

GB United Kingdom, EC P9611 Administration of General Economic Programs P6514 Dwelling Operators, Ex Apartments CMMT Comment & Analysis P9611 P6514 The Financial Times London Page 9 373
Tyne and Wear Pounds 650m projects Publication 930304FT Processed by FT 930304

TOTAL investment of about Pounds 650m in nearly 30 regeneration projects on land beside the Tyne and the Wear rivers is forecast in the Tyne and Wear Development Corporation's Action Plan for 1993 and 1994, published today.

The corporation expects to provide almost Pounds 100m.

Tyne and Wear Development Corp GB United Kingdom, EC P9532 Urban and Community Development RES Capital expenditures CMMT Comment & Analysis P9532 The Financial Times London Page 9 85
Jobless 'unlikely to fall below 2.25m' Publication 930304FT Processed by FT 930304

UNEMPLOYMENT is unlikely to fall below 2.25m even when the recovery becomes established, the Confederation of British Industry said yesterday.

The employers' organisation is to present to Mrs Gillian Shephard, the employment secretary, with a list of proposals to help bring down the jobless total. These will include Skillfare, a project where young people out of work for more than a year are offered training.

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs ECON Employment & unemployment CMMT Comment & Analysis P9441 The Financial Times London Page 9 102
Fall in number of business failures Publication 930304FT Processed by FT 930304

THERE were 404 receiverships or administrative receivership appointments last month compared with 539 in February last year and 561 in February 1991, figures compiled by accountants Touche Ross show.

Receiverships and administrations are running at 90 a week compared with 100 a week last year but Touche Ross warned that businesses need additional liquidity.

It said: 'The majority of additional funding, at least in the short term, has to come from bank borrowing.'

GB United Kingdom, EC P99 Nonclassifiable Establishments P9611 Administration of General Economic Programs CMMT Comment & Analysis P99 P9611 The Financial Times London Page 9 109
Customs predicts Pounds 250m duty loss Publication 930304FT Processed by FT 930304 By DAVID DODWELL

NEW single-market personal allowances on drink and cigarettes carried into the UK from other European Community countries are expected to cost the government Pounds 250m a year in lost Customs duties, the Commons trade and industry committee was told yesterday, David Dodwell writes.

Mr Michael Knox, head of the Customs and Excise Single Market Unit, said 150 Customs officers had been deployed across the UK in an effort to clamp down on illegal imports. He added that on average one illegal sale a day had been detected since border controls on trade were abolished on January 1.

Most of the cases involved duty evasion of Pounds 1,000 or less.

GB United Kingdom, EC QR European Economic Community (EC) P9721 International Affairs GOVT Taxes P9721 The Financial Times London Page 9 144
Level of business failures declines Publication 930304FT Processed by FT 930304 By RICHARD LAPPER

A CARDIFF-based maker of Christmas crackers, a Cambridge potato farm and five London restaurants were among more than 400 businesses which failed last month.

Fewer companies were wound up than in February 1992, confirming the downward trend in insolvencies. Figures compiled by Touche Ross show that the 404 receiverships or administrative receivership appointments compared with 539 in February 1992 and 561 in February 1991. Receiverships and administrations are running at 90 a week compared with 100 a week last year. Touche Ross warned that businesses need additional liquidity. 'The majority of additional funding, at least in the short term, has to come from bank borrowing. If businesses are to benefit from the upswing, the high street banks will have to give additional support.'

GB United Kingdom, EC P99 Nonclassifiable Establishments P9611 Administration of General Economic Programs CMMT Comment & Analysis P99 P9611 The Financial Times London Page 9 161
Price Waterhouse appointed linchpin at core of government's North America Now campaign Publication 930304FT Processed by FT 930304

PRICE WATERHOUSE, the accountancy and management consultancy group, has been appointed the linchpin in the 'strategic alliances' initiative at the core of the government's North America Now campaign.

Its task will be to work with about 50 medium-sized UK companies a year with the aim of introducing them to up to three prospective US partners. The objective over the three-year campaign will be to forge 10 to 15 successful partnerships each year, generating earnings towards the UK balance of payments amounting to Pounds 30m.

'These companies will not be beginners,' said Mr Ian Guthrie, partner at Price Waterhouse responsible for the project. 'They should have between 100 and 500 staff, a turnover of Pounds 10m-Pounds 50m, and a good foothold in the US market already. They will be companies that have put serious time into export promotion as part of a clear business plan.

'The main challenge is to try to bring to the middle-sized company the type of services that would normally be available only to larger companies. Without these rigorous support services, company initiatives often fade out because smaller firms lack the internal dynamic to bring them through.'

Price Waterhouse has 46 professionals based in the US, with offices in New York, Boston, Atlanta, Dallas, Los Angeles and Chicago providing platforms from which to begin the search for partners.

Price Waterhouse GB United Kingdom, EC US United States of America P99 Nonclassifiable Establishments P8721 Accounting, Auditing, and Bookkeeping Services GOVT Government News MKTS Contracts P99 P8721 The Financial Times London Page 9 272
American investors target Britain Publication 930304FT Processed by FT 930304 By EMMA TUCKER, Economics Staff

THE UK has received more US overseas direct investment since 1987 than any other country, according to a study released yesterday.

Some 21 per cent of US overseas investment came to the UK, which also received 9 per cent of Japanese overseas direct investment, ahead of any country except the US.

Within the European Community the UK benefited from 41 per cent of total Japanese investment over the past three years.

The study, by the Centre for Economics and Business Research on behalf of the Confederation of British Industry, shows that inward investment has become an important component of total investment in the UK, with nearly one-fifth of the Pounds 220bn invested in British industry since 1987 coming from abroad.

The motivations of US and Japanese companies were different, according to the study. US investors aimed at UK domestic markets and specific opportunities in the finance and oil sectors, while Japanese companies pursued access to other EC markets.

The study concludes that the spurt in US investment may have ended, with much of the growth in the late 1980s reflecting companies' desire to 'catch up' with the UK's improved economic growth. It says future US investment will be restrained by the lagged effects of the UK recession.

Companies from both countries, but particularly the Japanese, said the UK's failure to ratify the Maastricht treaty and the perception that the country was in the second tier of a two-speed Europe would have some negative effect on investment.

About 40 per cent of investors said that if the UK withdrew from the EC and the single market it would have a 'major negative effect' on investment.

US and Japanese Investment in the UK and the UK's links with the EC, Centre for Economics and Business Research, 18 Kent Terrace, London NW1 4RP.

GB United Kingdom, EC JP Japan, Asia US United States of America P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9721 P9311 The Financial Times London Page 9 347
Tourist total reaches record Publication 930304FT Processed by FT 930304

A RECORD 18.1m overseas tourists visited the UK last year, the British Tourist Authority said yesterday. The total, including 11.56m from western Europe, was 9 per cent higher than in 1991.

GB United Kingdom, EC P7999 Amusement and Recreation, NEC MKTS Shipments P7999 The Financial Times London Page 9 58
Pit strike ballots start Publication 930304FT Processed by FT 930304 By MICHAEL SMITH and ROBERT TAYLOR

LOCAL leaders of mining unions yesterday predicted a close vote in strike ballots starting tonight. British Coal managers said industrial action would cut redundancy benefits and damage customer confidence.

Members of the National Union of Mineworkers have rejected a series of strike calls from their leadership since the 1984-5 pits dispute, but some local officials expressed optimism that the latest call would be heeded.

The strike vote, called because of impending job losses and privatisation, is being held tonight and tomorrow among members of the National Union of Mineworkers and the Nacods pit deputies' union.

British Coal said 7,379 miners had left the industry since the corporation announced plans last October to close 31 pits. Some 33,300 remain, and the corporation said all the threatened pits had enough staff to continue operations if required.

Union leaders traditionally exaggerate the strength of their members' militancy in the run-up to ballots.

British Coal nevertheless acknowledges that the vote may be close this time because miners feel they have public opinion behind them.

Mr Ted Millward, NUM secretary at Maltby, South Yorkshire, site of one of the 31 threatened pits, said the feeling among his members was that 'if we vote 'no' the union is going to get smashed to pieces'. He added: 'Nationally there will not be much in it, perhaps 53 per cent to 47 per cent, but we think it will be 'yes'.'

Mr Alan Cummings, secretary at Easington, Durham, said the mood for strikes had grown recently because 'no one thinks there is anything to lose'. Branch officials in Scotland and Wales said the ballot was too close to call.

Mr Kevan Hunt, British Coal's employee relations director, warned yesterday that industrial action could 'only lose the public support that had made possible the current review of the prospects of maintaining a larger market for coal'.

Union officials said British Coal had been less vociferous than usual in urging men to vote against the strikes.

The RMT transport union is also holding a strike ballot tomorrow. Although RMT officials have been co-ordinating their disruption plans with the two coal unions they were anxious yesterday to insist the cause of their dispute was quite different to that of the mining industry.

The union wants a pledge from British Rail that if any job cuts are announced as a result of BR privatisation, there will be no compulsory redundancies or contracting out of employment.

The result of the miners' ballots is expected on Sunday. The RMT ballot will not be known for about a fortnight.

GB United Kingdom, EC P12 Coal Mining P8631 Labor Organizations PEOP Labour P12 P8631 The Financial Times London Page 9 459
Minister warns on order for carrier Publication 930304FT Processed by FT 930304 By CHRIS TIGHE

MR JONATHAN Aitken, the defence procurement minister (above left) yesterday visited Swan Hunter to see work in progress at the Tyneside shipbuilder.

The future of the group, which has a blank order book after 1994, is dependent on its bid for a Ministry of Defence helicopter carrier - a Pounds 170m order which may be shelved because of financial pressures on the defence budget.

Mr Aitken warned that a final decision depended on available resources.

A decision will be made by the autumn. Without the order Swan Hunter, now reducing its workforce by 1,400 to 2,200, may close.

Campaigning by management, unions and Tyneside MPs has left ministers well aware of the impact that the closure of Swan Hunter would have on Tyneside's economy and morale.

Speaking during Mr Aitken's visit, joint group chief executive Mr Alex Marsh said the order was an 'absolutely critical contract' for the company, which has spent Pounds 1.5m on its bid.

He denied that the government could have helped Swan Hunter more in its fight for overseas orders. But he said it was of great concern that the project could be withdrawn so late in the tendering process. Such a move would spell 'all sorts of disasters' for the group and for Tyneside.

Swan Hunter GB United Kingdom, EC CA Canada P3731 Ship Building and Repairing P9721 International Affairs COMP Company News GOVT Government News MKTS Equipment sales P3731 P9721 The Financial Times London Page 9 257
Treasury ahead of deficit schedule Publication 930304FT Processed by FT 930304 By EMMA TUCKER, Economics Staff

THE GOVERNMENT is well ahead of its schedule for financing this year's budget deficit, a Treasury report stated yesterday.

The monthly monetary report said the public sector borrowing requirement was overfunded by Pounds 9.6bn by the end of January. The overfunding was almost entirely explained by intervention to support the pound before its departure from the European exchange rate mechanism in September.

However, the financial year runs until the end of March, so it is too early to judge how overfunded the authorities will be at the start of the next one in April. The government is expected to have to finance a PSBR of about Pounds 50bn in 1993-94.

The report also pointed out that the surprise public sector budget surplus in January was due partly to higher value added tax receipts, which have been temporarily distorted by the reintroduction of postponed accounting for VAT.

Elsewhere in the report, the Treasury underlined prospects for an economic recovery this year, pointing out that UK retail sales remain on an upward trend and that output expectations have improved.

"Retail sales rose strongly in January, more than recovering December's unexpected fall,' said the report. It added that 'UK demand and activity in late 1992 appear to have been, if anything, a little stronger than the Autumn Statement forecast assumed'.

Although the report reiterates the government's optimistic view on inflation - pointing to the sharp fall in retail price inflation in January, and a recent fall in pay settlements - it acknowledges the first signs that sterling's devaluation is feeding through to prices.

The Treasury notes that output prices in the latest three months increased at a slightly faster rate than in the three months ending in December.

The Treasury argues that the sharp rise in M0 in January and February appeared to be overstating the strength of the economy while the weakness of M4 may reflect the shift of funds into other assets.

The report, the last before the Budget on March 16, provided no new statistics on the state of the economy and although no conclusions were drawn, the evidence appeared to underline prospects for an economic recovery this year.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 9 394
Parliament and Politics: Major hints at blaming Thatcher Publication 930304FT Processed by FT 930304 By RALPH ATKINS

MR JOHN MAJOR yesterday said that he had disagreed with a central component of government economic thinking under his predecessor Lady Thatcher - that service industries mattered more than manufacturing.

The prime minister said that his belief in the importance of manufacturing had been 'a minority view' in the 1980s - even though he was a Treasury minister during the Thatcher years and was favoured by the former prime minister as her successor.

His comments appeared to suggest that he believes some of the blame for the current economic recession should lie with his Lady Thatcher. Mr Major added: 'I am not a minority view now and, anyway, I am in a better position to expound my views.'

The remarks, in an interview with The Independent newspaper, mark a further substantial distancing by the prime minister from his predecessor's economic policies.

Under Mrs Thatcher the Treasury put the greatest emphasis on the service industry as the engine of economic growth, while manufacturing production declined in relative importance.

But asked in his interview whether he believed the argument that the service sector should be emphasised, Mr Major said: 'I don't agree with it. I didn't agree with it in the 80s.'

The prime minister said that a 'different attitude' was needed to industry and commerce and that Britain undervalued engineering skills. If Britain did not remain at the leading edge of technology 'we will not grow and thrive throughout the 90s. So we have to change our attitudes.'

GB United Kingdom, EC P9611 Administration of General Economic Programs GOVT Government News P9611 The Financial Times London Page 8 283
Parliament and Politics: Clarke call to TV Publication 930304FT Processed by FT 930304

MR Kenneth Clarke, the home secretary, yesterday urged television producers to show less sex and violence in programmes as a way of combating juvenile crime.

Mr Clarke said in a Daily Express interview that he thought exposure to 'casual violence as entertainment' was one reason why the threshold of violence was lower.

GB United Kingdom, EC P4833 Television Broadcasting Stations TECH Standards GOVT Government News P4833 The Financial Times London Page 8 84
Parliament and Politics: Cook warning over Daf plants Publication 930304FT Processed by FT 930304

THE constituencies of at least 19 government ministers would be among those to suffer knock-on effects from the closure or running down of Leyland Daf plants in Britain, Labour alleges this morning.

Mr Robin Cook, the shadow trade and industry secretary, claimed that 6,000 companies would be hit if Leyland Daf 'went under'.

Leyland DAF GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies P9111 Executive Offices RES Facilities P3711 P9111 The Financial Times London Page 8 92
Parliament and Politics: PM will usher in 'classless' honours Publication 930304FT Processed by FT 930304 By PHILIP STEPHENS

MR JOHN MAJOR is expected today to underline his commitment to a more meritocratic society with a Commons announcement on reform of the royal honours system, Philip Stephens writes.

The changes will signal an end to the automatic and carefully graduated award to Whitehall officials of honours from the Order of the British Empire to a knighthood.

The armed forces, meanwhile, are thought to have agreed that medals recognising gallantry by individual soldiers, sailors and airmen should no longer be differentiated according to the rank of the recipient. Generals, admirals and vice-marshals on the forces' active list may also have to give up their automatic knighthood.

Mr Major plans also to merge the British Empire Medal - the traditional mark of royal recognition for service to the community by members of the working class - with the award of Member of the British Empire.

GB United Kingdom, EC P9111 Executive Offices GOVT Government News P9111 The Financial Times London Page 8 178
Parliament and Politics: Tories face further Maastricht wrangle Publication 930304FT Processed by FT 930304 By IVO DAWNAY and RALPH ATKINS

THE threat of fresh internal wrangling within the Conservative party over Maastricht looms over the government today when the committee stage debate on the treaty returns to the Commons.

As the Labour and Liberal Democrat parties tabled fresh amendments on Maastricht's social chapter, the government yesterday faced pressure to get tough with rebel backbenchers amid mounting frustration among pro-treaty ministers and MPs at the slow progress of the bill.

Mr Douglas Hurd, the foreign secretary, again tried to rally the party by warning that Britain's influence in the Community would 'go down the plughole' if the treaty was not ratified.

Pro-European Tories are divided on how to tackle the rebels. Some believe the ever-present danger of ambush by a combined Labour, Liberal Democrat and Tory rebel opposition means party managers have no option but to tread softly or face defeat.

Others argue that it is time to threaten sanctions against the rebels, possibly including withdrawing the whip.

Evidence of the schism is set to surface when the 18-strong executive of the 1922 committee meets to discuss last week's confrontation in which loyalists launched a fierce and probably pre-planned verbal barrage against those seeking to frustrate the bill.

However, Sir Marcus Fox, 1922 chairman, has indicated to colleagues he is highly reluctant to polarise the back benches when the number of rebels appears to be rising.

Meanwhile, Mr Michael Morris, the deputy speaker, is expected to rule today on whether a Labour backbencher's wrecking amendment can be heard.

He will also have to rule soon on the new Labour and Liberal Democrat amendments which would, if passed, require the government to sign up to the social chapter within 30 days of the Maastricht legislation coming into effect.

It is unclear if the amendments will be ruled 'in order' by Mr Morris - and whether Tory Euro-sceptics would support them if they are not seen as 'wrecking' amendments.

Manoeuvrings over the bill will resume tonight. Government whips must decide whether to risk a vote for a late sitting to accelerate the bill or retreat in the face of possible defeat. Last week, the whips had to use the procedural device of refusing to supply tellers for a vote to minimise the impact of a defeat after their numbers failed to add up.

GB United Kingdom, EC P8651 Political Organizations P9721 International Affairs CMMT Comment & Analysis P8651 P9721 The Financial Times London Page 8 421
Parliament and Politics: Shake-up of teacher training starts today Publication 930304FT Processed by FT 930304 By RALPH ATKINS and IVOR OWEN

THE GOVERNMENT will today take a first step towards a wide-ranging shake-up of Britain's system for training teachers by announcing a trial scheme of 'teaching schools' as an alternative to teacher training institutes.

The Pounds 1m pilot - likened to the system of teaching hospitals for training doctors - is intended by ministers as precursor of reforms aimed at reducing the role of conventional university and college courses in favour of more classroom-based experience in schools.

The schools involved in the pilot will train teachers themselves and receive funding direct from the government which they will then be able to use to 'buy' services from the training institutes.

Mr John Patten, education secretary, envisages eventually a nationwide network of primary and secondary schools offering to train teachers. The government has already increased the proportion of time trainee teachers spend in the classroom during their training. The move has been backed by Mr John Major.

Schools involved in the pilot will include both those under local authority control and grant-maintained schools. Ministers are likely to argue that the pressure for change has come from the schools themselves who want more control over the training of teachers.

Currently the training of primary school teachers is closely tied to courses at colleges and universities. and has been attacked by the right of the Conservative party. Ministers believe existing teaching training courses remain too theoretical and have failed to adapt sufficiently to the national curriculum and regular testing.

Legislation on teacher training in the next session of parliament was not being ruled out last night by Department of Education officials, although further changes are likely to depend on the department's consultative exercise.

As the government's Education Bill - with more than 260 clauses the biggest education measure ever introduced - was given a third reading by a government majority of 30 (282-252) in the Commons last night, Mr Patten said that schools controlled by local education authorities are to be given the right to decide on a year-to-year basis whether to seek self-governing status.

GB United Kingdom, EC P8249 Vocational Schools, NEC GOVT Government News P8249 The Financial Times London Page 8 378
Parliament and Politics: Scottish constitutional review is downplayed Publication 930304FT Processed by FT 930304 By ALISON SMITH and DAVID OWEN

MINISTERS are trying to dispel expectations that the exercise of 'taking stock' of the constitutional position of Scotland will lead to radical changes.

Mr Ian Lang, the Scottish secretary, told MPs yesterday that there would be nothing in the government's proposals to undermine the integrity of the United Kingdom or Scotland's place in it.

Other ministers have been hinting privately at a 'minimalist' solution. One of the main elements will be greater use of the Scottish grand committee - made up of all 72 Scottish MPs - for handling Scottish business in the Commons.

The deal is also likely to include more administrative devolution from Whitehall to the Scottish office. It is due to be considered by the cabinet today and to be announced by Mr Lang next week.

Ministers for other departments who were involved in the exercise have been highlighting the danger of an 'English backlash' if the government were seen to be conceding too much to the Scottish lobby, particularly since the Tories' 11 of the 72 Scottish seats is a much higher total than was predicted.

It is already clear that the government's proposals fall far short of what the opposition parties are pressing for.

The Scottish Office is considering the controversial step of putting its proposals for local government and the Scottish water industry into a single bill next session to help ease pressure on the government's legislative programme.

GB United Kingdom, EC P9611 Administration of General Economic Programs GOVT Government News P9611 The Financial Times London Page 8 273
Parliament and Politics: Senior officer tells MPs RAF hopes voluntary redundancies will meet manpower reductions Publication 930304FT Processed by FT 930304 By DAVID WHITE

AS DEMONSTRATORS protested at Westminster yesterday against Royal Air Force plans to scrap one of the last Vulcan bombers, a senior RAF officer told MPs the service hopes to reach its target for manpower reductions through further voluntary redundancies, David White writes.

Air Vice-Marshal Tony Bagnall, assistant chief of the air staff, told the Commons defence committee that a second tranche of redundancies was under discussion but that the RAF hoped to achieve its requirements 'without resorting to compulsory redundancies'. He described as 'alarmist' reports suggesting that many senior officers were facing dismissal.

Under plans drawn up by the government two years ago, RAF personnel are due to be cut to from 89,000 to 75,000 by 1995. Cuts in support services could reduce this level still further. An initial redundancy plan affecting 969 jobs was oversubscribed by applicants.

GB United Kingdom, EC P9711 National Security PEOP Labour P9711 The Financial Times London Page 8 177
Cook warning over Daf plants Publication 930304FT Processed by FT 930304

THE constituencies of at least 19 government ministers would be among those to suffer knock-on effects from the closure or running down of Leyland Daf plants in Britain, Labour alleges today.

Mr Robin Cook, the shadow trade and industry secretary, says a dossier of Leyland Daf's suppliers he has obtained shows that 6,000 companies - one in every 150 - would be hit if Leyland Daf 'went under'.

'If any Conservative MP thought that Leyland Daf was not their problem, this shows they had better think again,' he said.

Leyland DAF GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies P9111 Executive Offices RES Facilities P3711 P9111 The Financial Times London Page 8 125
Political Notebook: A dangerous by-election Publication 930304FT Processed by FT 930304 By PHILIP STEPHENS

By-elections do not count. All governments are vulnerable to protest votes. The shock waves last no more than a day or so. Seats lost in mid-term are almost invariably won back at the following general election.

Already in the bars of Westminster senior Conservatives are arming themselves against the possibility that the Tory stronghold of Newbury will be the scene of Mr John Major's first electoral defeat of the present parliament.

The untimely death last month of Mrs Judith Chaplin robbed the prime minister both of a good friend and of one of his most able back-bench MPs.

No-one doubts that she would have been among the first of last year's new intake to be given a job in government. The resulting by-election is threatening to prove as politically wounding to the prime minister as her death was personally painful.

His party remains in turmoil. The recession and the civil war over Maastricht have drained morale.

Loyalist MPs and ministers are increasingly frustrated by the government's inability or unwillingness to take on the Euro-sceptics. But veiled threats of expulsion from the party whips appear only to solidify the rebels' detachment.

Among the 40 or so implacable Tory opponents of Maastricht there are perhaps a dozen who would see the prime minister fall rather than back the treaty. There are mutterings still that if the rebels fail to derail the bill by voting for the social chapter they might yet support an anti-Maastricht candidate in Newbury.

Friends as well as enemies judge the authority of Mr Major's government to be as weak as any since Mr James Callaghan's ill-fated Labour administration in the late 1970s. The prime minister has been heard to comment ruefully that the now Lord Callaghan has confided that it is easier to govern with a majority of one than with 21.

Newbury is by any standards a prosperous constituency, one of the principal beneficiaries of the 1980s boom along the M4 corridor. It is no accident perhaps that the constituency's biggest employer is a supplier of mobile phones.

But now it offers a microcosm of the ravages of Britain's first middle-class recession. As one minister explained this week, to visit Newbury is to understand why the government is so unpopular with its own natural supporters.

If an unemployment rate of 7.5 per cent remains well below the national average, the number of people out of work has trebled since 1990. The crime rate has almost doubled. The house price slump has left thousands of once-confident aspirants to the Tory good life trapped by negative equity.

It is not certain that the Tories will lose. It would take a hefty swing of just over 9 per cent to the Liberal Democrats - the only serious challengers in the constituency - to overturn Mrs Chaplin's 12,357 majority. Even in times of crisis loyalty to the Conservatives runs deep in Berkshire.

Strategists at Conservative central office are drawing comfort from the fact that during each of the last three parliaments the party has survived its first by-election challenge.

Labour's expected but unimaginative refusal yesterday to withdraw from the contest (it won only 6 per cent of the vote in 1992) raised hopes that a split opposition once again would give the Conservatives victory.

But Mr Major is in no hurry to test favourable precedents. Fresher in his mind are the 25 per cent and 12.5 per cent swings to the Liberal Democrats in Ribble Valley and in Kincardine and Deeside during his first year in Downing Street. In Newbury the Liberal Democrats are firmly entrenched in the council and will field a strong local candidate.

So most Conservatives assume that the poll will be postponed until May 6 to coincide with the local authority elections. The assumption is that is better to get the bad news from both out of the way on the same day. Some, though, are suggesting that Mr Major should wait until the last possible moment in late June before facing the electors.

By then his party may have escaped from the debilitating limbo of Maastricht. By then the economy may have escaped from the worst of the recession. By then his government may have escaped from its present paralysis.

Mr Major must hope so. It may be that through the prism of history, by-election defeats appear frequently as insignificant dots on the political landscape. But it never feels like that at the time. This prime minister cannot afford to lose.

GB United Kingdom, EC P8651 Political Organizations PEOP Personnel News P8651 The Financial Times London Page 8 775
Peers prepare for battle on leases Publication 930304FT Processed by FT 930304 By ALISON SMITH

TORY PEERS have begun drawing clear battle lines for the revolt next week against the government's plans for leasehold reform by tabling amendments to the bill aimed at restricting the proposals.

The plans, which would give about 750,000 holders of long leases the possibility of buying the freehold of their properties provided they meet certain conditions, have already led to high-profile disaffection among Tory peers, most notably the decision by the Duke of Westminster to leave the party.

Two worries for the government are that the amendments have gained some support from independent peers on the cross-benches as well as from some Tory rebels, and that those Tories who have taken the lead in tabling amendments so far are not the great landowners but party loyalists, including former ministers. Lord Peyton of Yeovil, a former minister, has put down amendments which would make it more difficult for tenants in blocks of flats to meet the criteria for clubbing together to buy the freehold, by raising from two thirds to three quarters the majority needed before the purchase can proceed.

Lord Boardman, another former minister, and Lord Clark of Kempston, a former MP nominated by the government as a working peer last summer, have put down a measure to restrict the eligibility for buying the freehold to tenants for whom the leasehold property has been the main or sole place of residence for the past three years.

The bill will return to the Lords next Tuesday, and the leasehold reforms will dominate the beginning of its discussion.

GB United Kingdom, EC P6519 Real Property Lessors, NEC P9651 Regulation of Miscellaneous Commercial Sectors CMMT Comment & Analysis P6519 P9651 The Financial Times London Page 8 297
Unionists increase pressure over coal vote Publication 930304FT Processed by FT 930304 By RALPH ATKINS

NORTHERN Ireland's Unionist MPs are heightening the government's dilemma over Britain's coal industry by hinting strongly that their reaction to ministers' proposals will depend on whether special help is given to the province, Ralph Atkins writes.

The votes of the nine Ulster Unionist MPs and three Democratic Unionist MPs could be crucial to win Commons approval for the proposals to be set out by Mr Michael Heseltine, trade and industry secretary.

The two unionist parties made clear yesterday that they are anxious to help Northern Ireland's electricity users. MPs from the parties have already met Mr Tim Eggar, the energy minister.

'We will be looking at the impact of the government's energy review on the whole of the UK,' said one Ulster Unionist MP.

Northern Ireland MPs complain that large electricity users in the province face charges up to 25 per cent higher than on the mainland. When MPs voted on the proposed pit closures in October, the DUP voted with Labour and the Ulster Unionist abstained - but only after a government assurance that its energy review would include Northern Ireland.

The MPs could demand financial support for the proposed electricity inter-connector with Scotland, although the government is already backing an application for a European Community subsidy for the project.

Unionists also want to boost the local lignite industry, perhaps by being awarded contracts for electricity generation.

GB United Kingdom, EC P9611 Administration of General Economic Programs P12 Coal Mining CMMT Comment & Analysis P9611 P12 The Financial Times London Page 8 267
Scottish constitutional review downplayed Publication 930304FT Processed by FT 930304 By ALISON SMITH and DAVID OWEN

MINISTERS are trying to dispel expectations that the exercise of 'taking stock' of the constitutional position of Scotland will lead to radical changes.

Mr Ian Lang, the Scottish secretary, told MPs yesterday that there would be nothing in the government's proposals to undermine the integrity of the United Kingdom or Scotland's place in it.

Other ministers have been hinting privately at a 'minimalist' solution. One of the main elements will be greater use of the Scottish grand committee - made up of all 72 Scottish MPs - for handling Scottish business in the Commons.

The deal is also likely to include more administrative devolution from Whitehall to the Scottish office. It is due to be considered by the cabinet today and to be announced by Mr Lang next week.

Ministers for other departments who were involved in the exercise have been highlighting the danger of an 'English backlash' if the government were seen to be conceding too much to the Scottish lobby, particularly since the Tories' 11 of the 72 Scottish seats is a much higheer total than was predicted.

It is already clear that the government's proposals fall far short of what the opposition parties are pressing for.

Questioning the Scottish secretary yesterday, Mr Alex Salmond, the Scottish National party leader, said there was a world of difference between increasing the powers of Scotland and increasing ministerial patronage.

Mr Tom Clarke, the shadow Scottish secretary, said Labour would introduce a bill to submit Scotland's constitutional position to a referendum if the government did not 'consult the people.'

There was a clear majority among Scottish MPs for a separate Scottish parliament, he said.

No matter how well-supported among opposition parties such a bill would be, however, it has no prospect of becoming law without government backing.

The Scottish Office is considering the controversial step of putting its proposals for local government and the Scottish water industry into a single bill next session to help ease pressure on the government's legislative programme.

GB United Kingdom, EC P9611 Administration of General Economic Programs GOVT Government News P9611 The Financial Times London Page 8 366
Miner's leaders predict close vote over strike Publication 930304FT Processed by FT 930304 By MICHAEL SMITH and ROBERT TAYLOR

LOCAL leaders of mining unions yesterday predicted a close vote in strike ballots starting tonight. British Coal managers said industrial action would cut redundancy benefits and damage customer confidence.

The miners are being asked to back one 24-hour strike followed by a 'rolling programme of industrial action'. Members of the National Union of Mineworkers have rejected a series of strike calls from their leadership since the 1984-5 pits dispute, but some local officials expressed optimism that the latest call would be heeded.

The strike vote, called because of impending job losses and privatisation, is being held among members of the National Union of Mineworkers and the Nacods pit deputies' union.

Union leaders traditionally exaggerate the strength of their members' militancy in the run-up to ballots. British Coal nevertheless acknowledges that the vote may be close this time because miners feel they have public opinion behind them.

Mr Ted Millward, NUM secretary at Maltby, South Yorkshire, one of the 31 threatened pits, said the feeling among his members was that 'if we vote 'no' the union is going to get smashed to pieces'.

British Coal said 7,379 miners had left the industry since the corporation announced plans last October to close 31 pits. Some 33,300 remain, and the corporation said all the threatened pits had enough staff to continue operations if required.

The RMT transport union is also holding a strike ballot today and tomorrow. Although RMT officials have been co-ordinating their disruption plans with the two coal unions they were anxious yesterday to insist that the cause of their dispute was quite different to that of the miners.

The result of the miners' ballots is expected on Sunday. The RMT result will not be known for about a fortnight.

Northern Ireland's Unionist MPs are heightening the government's dilemma over Britain's coal industry by hinting strongly that their reaction to ministers' proposals will depend on whether special help is given to the province.

The votes of the nine Ulster Unionist MPs and three Democratic Unionist MPs could be crucial to win Commons approval for the proposals.

GB United Kingdom, EC P12 Coal Mining P8631 Labor Organizations PEOP Labour P12 P8631 The Financial Times London Page 7 383
Changes urged in regulation rules Publication 930304FT Processed by FT 930304 By ROBERT RICE, Legal Correspondent

THE SYSTEM of investor protection introduced by the 1986 Financial Services Act is failing small investors, according to a report by Justice, the all-party law reform pressure group.

The system is unnecessarily complex, incoherent and not easily comprehensible, Justice says.

The root of the problem lies in the nature of the system itself with its fragmented regulatory organisations and the inevitable confusion in the mind of the small investor.

Acronyms of the self-regulatory organisations such as Lautro, Fimbra and Imro 'have the ring of biblical incantations and are likely to be incomprehensible to the small investor', the report says.

Lautro regulates the life insurance and unit trust industry, Fimbra is responsible for financial advisers and money brokers and Imro handles investment management.

Justice says that at best the fact that a financial services company is 'authorised' by one of these bodies may 'lull the investor and his advisers into a sense of security that the investment is safe and sound'.

The proposal to set up a Personal Investment Authority for all retail financial services designed to absorb Lautro and Fimbra must be welcomed as 'a major step towards the improvement of the system', the report says.

But it adds that it is doubtful whether the system will ever be effective in eliminating fraud and dishonesty. The time is ripe for a more objective and independent assessment of the self-regulatory system.

Justice calls for:

Simplification of the system and greater consumer representation on the Securities and Investment Board and the other regulatory bodies;

The higher levels of compensation to be increased and backed by an independent financial services ombudsman;

Stricter standards of financial advertising;

Personal liability for directors of investment business companies;

Uniform protection throughout the European Community.

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors TECH Standards CMMT Comment & Analysis P9651 The Financial Times London Page 7 325
Record price for Hilliard miniature Publication 930304FT Processed by FT 930304

A PORTRAIT miniature painted in 1588 by Nicholas Hilliard, A Man Clasping a Hand From a Cloud, sold for Pounds 177,500 to an anonymous buyer at Christie's yesterday.

The price was a record for Hilliard, the most accomplished miniaturist of the Elizabethan and Jacobean era. The pre-sale estimate was around Pounds 50,000.

GB United Kingdom, EC P7389 Business Services, NEC COSTS Product prices P7389 The Financial Times London Page 7 80
Threat to post offices alleged Publication 930304FT Processed by FT 930304

THE National Federation of Sub-postmasters has accused the government of threatening the future of thousands of post offices by encouraging the payment of state pensions directly to bank accounts.

Pensions and National Insurance account for nearly half the work of the UK's 20,000 post offices.

GB United Kingdom, EC P7389 Business Services, NEC P6011 Federal Reserve Banks GOVT Government News TECH Services P7389 P6011 The Financial Times London Page 7 80
One-day strikes for London Buses Publication 930304FT Processed by FT 930304

TWO one-day strikes are to be held by London Buses' employees on March 10 and 17 over an attempt to buy out the current working practices.

London Buses is offering workers a one-off payment of Pounds 3,800. But the employees claim this is in return for lower wages and longer working hours,

London Buses GB United Kingdom, EC P4131 Intercity and Rural Bus Transportation PEOP Labour P4131 The Financial Times London Page 7 84
Drive for more women in science Publication 930304FT Processed by FT 930304

A GOVERNMENT committee is to investigate why women hold so few senior scientific positions, Mr William Waldegrave, public service minister, said yesterday. It will be chaired by Professor William Stewart, the government's chief scientific adviser.

Dr Nancy Lane, a cell biologist from Cambridge University, will chair a working group on how the number of women scientists can be increased.

GB United Kingdom, EC P873 Research and Testing Services GOVT Government News PEOP Personnel News P873 The Financial Times London Page 7 92
Council tax and holidays in RPI Publication 930304FT Processed by FT 930304

THE council tax and foreign holidays are to be included in the retail prices index, Mr Norman Lamont, the chancellor, announced yesterday.

Foreign holidays will be included for the first time in the February index, which will be published on March 19. The council tax, which will be treated as an indirect tax on housing, will be included from next month, when it will replace poll tax.

The moves follow recommendations from the retail prices advisory committee.

GB United Kingdom, EC P9611 Administration of General Economic Programs TECH Services P9611 The Financial Times London Page 7 107
TUC attacks change in safety role Publication 930304FT Processed by FT 930304

THE Trades Union Congress has complained to the government about plans to advertise the job of chairman of the Health and Safety Commission as a part-time, rather than a full-time post. Sir John Cullen, the current chairman, will retire in September.

Mr Norman Willis, TUC general secretary, wrote to Mrs Gillian Shephard, employment secretary, that he was 'surprised and concerned by this decision to reduce the status of the chairmanship of the HSC'.

The Department of Employment said senior management structures had been strengthened, and advertising the post as part-time would open access to a wider range of people, including women.

GB United Kingdom, EC P8399 Social Services, NEC PEOP Appointments P8399 The Financial Times London Page 7 129
44-tonne road/rail lorries on agenda Publication 930304FT Processed by FT 930304 By RICHARD TOMKINS, Transport Correspondent LORRIES weighing up to 44 tonnes

6 tonnes more than the present 38-tonne limit - will be allowed on Britain's roads under proposals published by the government yesterday.

But the increase will only apply to lorries using special types of trailers that transfer to rail wagons for the long-distance section of their journey.

The proposals hope to arrest the decline of rail freight by encouraging so-called combined transport operations which use a combination of road and rail to get goods to their destination.

Although combined transport has made headway on the Continent, it has had little success in Britain because typical freight journeys are too short to justify the handling costs of switching loads from road to rail and back.

The government hopes a weight concession will encourage greater use of combined transport in Britain, particularly at a time when the Channel tunnel is about to open up much longer freight routes to the Continent.

British Rail was yesterday committed for trial after an accident in which 25 people were injured. BR representatives appeared before magistrates in Leeds charged with two counts of failing to ensure safety on May 22 last year.

Heavier Lorries for Combined Road/Rail Transport. Room S16/03, Department of Transport, 2 Marsham Street, London SW1P 3EB. Free.

GB United Kingdom, EC P4213 Trucking, Ex Local P4011 Railroads, Line-Haul Operating GOVT Draft regulations COMP Company News GOVT Legal issues P4213 P4011 The Financial Times London Page 7 254
SIB chairman says financial regulatory body should include banks and building societies Publication 930304FT Processed by FT 930304 By NORMA COHEN

THE Securities and Investments Board is determined that a new regulatory body for retail financial services should include all sectors of the industry including banks and building societies, Mr Andrew Large, SIB chairman, said yesterday, Norma Cohen writes.

The proposed Personal Investment Authority should 'act as the front line regulator for the sale of life insurance and life insurance related product,' regardless of which outlet is selling those products, Mr Large said.

He also urged the life insurance industry to abandon its complaint that full disclosure of charges was too difficult. The new authority should be an appropriate vehicle for disclosure issues to be decisively resolved.

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors TECH Standards TECH Services P9651 The Financial Times London Page 7 147
Lotus wins Taiwan order Publication 930304FT Processed by FT 930304 By JOHN GRIFFITHS

GROUP LOTUS, the Norfolk-based sports car and engineering concern, has won a contract to help develop car engine production in Taiwan.

The contract, which the company yesterday said is backed by the Taiwanese government and would be worth 'quite a few millions' over several years, may make more difficult a decision by General Motors on whether to sell Lotus. GM has owned Lotus since 1987.

Several interested parties have approached GM about the purchase of all or parts of Group Lotus, including a management team led by Mr Adrian Palmer, the managing director. GM has not disclosed details of the other approaches, which followed a decision last year to abandon production of the Elan small sports car after less than two years. Lotus had hoped to sell 3,000 a year but the car was widely regarded as too expensive and never came close to sales targets.

As a result Lotus Cars, the carmaking division which now produces only the very low volume Esprit 'supercar', has been making heavy losses for the past two years. It now employs only 200 people - one third of 1991 levels.

Lotus Engineering, the consultancy division which has won the Taiwan contract, earned more than Pounds 30m in 1991 and is understood to have made substantial profits last year, although figures have yet to be released.

The division is now substantially larger than the carmaking side of the business, with 500 employees.

The Taiwanese deal involves technology transfer by Lotus to the Taiwan government-backed Industrial Technology Research Institute.

Group Lotus Lotus Engineering TW Taiwan, Asia P3711 Motor Vehicles and Car Bodies P3714 Motor Vehicle Parts and Accessories MKTS Contracts P3711 P3714 The Financial Times London Page 7 295
Tyne and Wear Pounds 650m projects Publication 930304FT Processed by FT 930304

TOTAL investment of around Pounds 650m in nearly 30 regeneration projects on land beside the Tyne and the Wear rivers is forecast in the Tyne and Wear Development Corporation's Action Plan for 1993 and 1994, published today.

The corporation expects to provide almost Pounds 100m.

Tyne and Wear Development Corp GB United Kingdom, EC P9532 Urban and Community Development RES Capital expenditures CMMT Comment & Analysis P9532 The Financial Times London Page 7 85
North attracts advice shops Publication 930304FT Processed by FT 930304 By DAVID OWEN

A DISPROPORTIONATE number of the government's new one-stop business advice centres may be located in the Midlands and north of England if the spread of partnerships applying to run them is reflected in contract awards.

These areas are well represented among the 57 applications received by the Department of Trade and Industry. The response in the south and the south-west has been weaker.

Most of the partnerships are led by Training and Enterprise Councils, the employer-led bodies which deliver government training schemes in England and Wales.

Interviews to select 15 pilot outlets, announced last December by Mr Michael Heseltine, the trade and industry secretary, will begin shortly.

Mr Heseltine hopes the shops, which will eventually number 200, will revolutionise support for British companies.

The outlets will bring together the business services of chambers of commerce, local authorities, local enterprise agencies and the DTI.

Mr Heseltine has allocated Pounds 3.5m for the 'one stop shops' from the Tecs' budgets and the government hopes the services, many of which are now free, will be charged for.

Mr Heseltine was asked in the Commons last year whether the pilots would be spread to represent regions of high business failures. He replied that the basis for choosing the successful bids would be 'one of quality'.

'It is critical that the 15 are seen as pace setters, even if that results in districts that might have the most immediate need having to wait for a period,' Mr Heseltine added.

GB United Kingdom, EC P9611 Administration of General Economic Programs TECH Services GOVT Government News P9611 The Financial Times London Page 7 278
Law reform group says system failing investors Publication 930304FT Processed by FT 930304 By ROBERT RICE, Legal Correspondent

THE SYSTEM of investor protection introduced by the 1986 Financial Services Act is failing small investors, according to a report by Justice, the all-party law reform pressure group.

The system is unnecessarily complex, incoherent and not easily comprehensible, Justice says.

The root of the problem lies in the nature of the system itself with its fragmented regulatory organisations and the inevitable confusion in the mind of the small investor.

Acronyms of the self-regulatory organisations such as Lautro, Fimbra and Imro 'have the ring of biblical incantations and are likely to be incomprehensible to the small investor', the report says.

Lautro regulates the life insurance and unit trust industry, Fimbra is responsible for financial advisers and money brokers and Imro handles investment management.

At best the fact that a financial services company is 'authorised' by one of these bodies may 'lull the investor and his advisers into a sense of security that the investment is safe and sound,' the report adds.

The proposal to set up a Personal Investment Authority for all retail financial services designed to absorb Lautro and Fimbra must be welcomed as 'a major step towards the improvement of the system', Justice says.

But it adds that it is doubtful whether the system will ever be effective in eliminating fraud and dishonesty. The time is ripe for a more objective and independent assessment of the self-regulatory system.

'It is short-sighted to stagger from one modification of one part of the system to another without considering the efficacy of the system as a whole,' the pressure group says.

Its report outlines four minimum requirements for protecting small investors: access to reliable expert advice; honest, accurate information about products and reliable advertising and promotional literature; quick, effective compensation if things go wrong; and, a comprehensive but clear regulatory structure.

Justice calls for:

Simplification of the system and greater consumer representation on the Securities and Investment Board and the other regulatory bodies;

Higher levels of compensation to be increased and backed by an independent financial services ombudsman;

Stricter standards of financial advertising;

Personal liability for directors of investment business companies;

Uniform protection throughout the European Community.

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors TECH Standards CMMT Comment & Analysis P9651 The Financial Times London Page 7 395
World Trade News: Turks in Uzbekistan telecoms venture Publication 930304FT Processed by FT 930304 By JOHN MURRAY BROWN ANKARA

TELETAS, Turkey's second largest telecommunications equipment manufacturer in which Alcatel of France has a 39 per cent stake, has formed a joint venture to install digital public exchanges in Uzbekistan, the latest move by Turkish telecom companies into the Turkic-speaking former Soviet republics.

The joint venture between Teletas and Algorithim, a local Uzbek company, will start delivering Alcatel's System-12 public exchange, which Teletas makes under licence in Turkey. The project will initially install 70,000 lines in eight Uzbek cities, eventually leading to full manufacture of the exchange by Altel, the joint venture company.

The deal follows similar moves by Netas, Northern Telecom of Canada's majority-owned Turkish subsidiary, and Simtel the local Siemens operation. Progress has been spurred by a Dollars 25m (Pounds 17.6m) Turkish government aid project to provide digital public exchanges in all five Turkish-speaking former Soviet republics. Teletas installed a 2,500 line exchange in both Tashkent,the Uzbek capital and Bishkek, capital of Kyrgyzstan.

Teletas say they hope also to manufacture the Levent, a small rural switching system, designed in the company's Istanbul laboratory.

Teletas Algorithim UZ Uzbekistan, East Europe P3661 Telephone and Telegraph Apparatus P481 Telephone Communications COMP Joint venture P3661 P481 The Financial Times London Page 6 219
World Trade News: White House to back US chip makers Publication 930304FT Processed by FT 930304 By LOUISE KEHOE SAN FRANCISCO

THE Clinton administration is ready to take a tough stand on the long-running semiconductor trade dispute with Japan, Mr Ronald Brown, commerce secretary, told US semiconductor industry executives visiting Washington this week for their annual caucus.

'When every market in the world, outside Japan, prefers your products, I have to conclude that we are facing unfair trading barriers. We expect Japan to live up to its agreements,' Mr Brown told members of the Semiconductor Industry Association, who gave him a standing ovation.

Under a 1991 trade agreement between the US and Japan, the Japanese government recognised US 'expectations' that the foreign share of the Japanese semiconductor market should rise to at least 20 per cent by the end of 1992. The pact was an extension of a similar 1985 agreement.

Since 1991, the foreign chip maker's market share in Japan has crept upward, reaching almost 16 per cent in the third quarter of 1992. Data for the fourth and final quarter of the period covered by the agreement is expected in about two weeks.

However, the industry expects the market share figure, upon which Japan's compliance with the market opening agreement is measured, to rise. Strong sales of US-made microprocessors in the growing Japanese personal computer market may boost the fourth quarter figure by more than 1 per cent.

Disputes over how market share should be measured, including whether the internal transfer 'sales' of IBM and other US computer companies to their Japanese subsidiaries should be counted in the trade data, might bring the disputed market share figure within range of its target.

This has created a dilemma for the US chip makers, who for the first time in their decade-long trade battle find that they have friends in the White House.

In the past, the SIA has seldom hesitated to raise the spectre of trade sanctions against Japan. Now, however, the industry seems hesitant to push the Clinton administration into applying sanctions that would inevitably be seen as the beginning of a 'trade war' with Japan.

There is no question, however, that the industry will demand sanctions if the market share figure falls short of expectations. The industry group already has a list of proposed Japanese import targets. The group was encouraged by Mr Brown's remarks.

'A few years back, unfair trading practices in the Far East almost destroyed the American semiconductor industry. It took harsh action to end Japanese dumping. We must be prepared to act again - in Japan or any other market,' Mr Brown said in reference to trade sanctions imposed by President Reagan against Japan in 1986 when Japan was deemed to have failed to live up to the original US-Japan semiconductor deal.

'We expect Japan to live up to its agreements. I will work closely with you to evaluate their performance against the objectives of our agreements. We want to ensure that the Japanese market is open so that we can achieve a market share commensurate with our worldwide competitive position.'

Mr Brown also assured the semiconductor industry group that the Clinton administration will continue to fund Sematech, the semiconductor industry consortium that for the past five years has received half its annual budget from the Pentagon's Defence Advanced Research Projects Agency, over the occasional objections of Bush administration officials, and the remaining half from industry members. Sematech is a model for the Clinton administration's technology policy, Mr Brown said.

US United States of America P3674 Semiconductors and Related Devices P9721 International Affairs GOVT Government News P3674 P9721 The Financial Times London Page 6 610
World Trade News: Japan rejects liquid crystal display ruling - US trade body decides imports are harming domestic industry Publication 930304FT Processed by FT 930304 By MICHIYO NAKAMOTO and LOUISE KEHOE TOKYO, SAN FRANCISCO

A DECISION by the US International Trade Commission that Japanese-made liquid crystal displays are being dumped in the US has dismayed Japanese authorities and industry. They say they will seek a fair decision.

US computer manufacturers, too, have protested at the ruling.

The ITC ruled on Tuesday that Japanese-made active matrix LCDs 'materially injure or threaten injury to the US industry', and decided to retain punitive duties of 62.67 per cent.

An official at Japan's Ministry of International Trade and Industry called the decision 'extremely unfair'. Japan had claimed that there was no US industry to be hurt by imports of active-matrix LCDs.

Sharp, a leading Japanese manufacturer, released an official statement deeply regretting the ITC's decision which, it said, raised many questions - from the point of view of US users as well. 'We will continue to work towards a fair judgment,' the company said.

In the US, Apple Computer said the ruling made no sense and vowed to continue the legal battle. 'This is an 'Alice in Wonderland' decision. It defies logic,' said Mr Jim Burger, Apple's director of government affairs.

The ruling upholds part of a dumping petition filed in 1990 by the Advanced Display Manufacturers of America and its member companies. That petition led to a ruling by the ITC the following year that Japanese-made LCDs harmed US industry.

However, the ITC ruled at the same time that electroluminescent LCDs were not harming US industry and that it would withdraw anti-dumping tariffs of 7 per cent.

At the time of the original anti-dumping petition, US users of active matrix displays opposed the ITC ruling on the grounds that no US maker could mass-produce active matrix LCD panels.

US users, which are dependent on Japanese manufacturers of these panels, went to the US-based Court of International Trade, which last year ordered the ITC to re-examine the case.

In seeking to reverse the ruling, Japan could resort to an appeal to the Court of International Trade or ask the Gatt to set up a panel.

LCD flat panels, which are widely used in laptop and notebook computers and medical equipment, are one of the most promising growth areas in electronics.

US United States of America JP Japan, Asia P3679 Electronic Components, NEC P9721 International Affairs GOVT Government News P3679 P9721 The Financial Times London Page 6 421
World Trade News: Irish plan to boost exports Publication 930304FT Processed by FT 930304 By TIM COONE

THE IRISH government is planning to increase exports from indigenous Irish companies by 50 per cent over the next four years, from IPounds 3.7bn (Pounds 3.8bn) to IPounds 5.5bn, with growth coming in particular from the mainland European market.

Mr Charlie McCreevy, the trade and tourism minister, said: 'I see the main growth opportunities coming from continental European markets as Irish industry accelerates its diversification from its traditional UK market.'

The government is to provide an additional IPounds 12m in finance over the next three years, to enable exporting companies to increase their full-time sales forces working in Europe, to take on additional customer support staff with business and language skills and to part-finance 10 new group marketing schemes.

Mr Conor McCarthy, Irish Trade Board chairman, said: 'We have an urgent need to build stronger market positions in mainland Europe. . . the sterling depreciation in September put Irish manufacturers in difficulty, not just in Britain, but right across our whole market-place spectrum.'

He said that the 10 per cent devaluation of the punt in January 'does not represent a return to the status quo'. He pointed out that the proportion of Ireland's trade affected by the weakness of sterling is greater than at first estimated because of the pricing in sterling of many transactions with the Middle East, Africa and the Far East. Around 31 per cent of Ireland's exports go to the UK.

Despite such difficulties, the board says Ireland has continued to gain share in most of its main markets during 1992.

IE Ireland, EC P9611 Administration of General Economic Programs MKTS Foreign trade P9611 The Financial Times London Page 6 290
World Trade News: Computer company to set up in Ireland Publication 930304FT Processed by FT 930304 By TIM COONE DUBLIN

SUN Microsystems, the California-based manufacturer of computer workstations and peripheral devices run on the Unix operating system, is to set up a new software subsidiary in Ireland.

Called Sunsoft, it will open in Dublin this summer and will eventually employ 200 people, developing and localising software specifically for Sun's systems sold in Europe. That market accounts for some 30 per cent of its worldwide hardware sales.

Sun is a market leader in 'open systems' workstations. Demand for these has grown rapidly over the past two years, as the trend by users to 'downsize' from mainframes has accelerated.

The development of complex and powerful new software for multimedia applications is seen by the industry as vital to the development of the workstation market.

Sun's move into Ireland has been welcome news for the government, following the announcement last week by Digital Equipment, another US workstation manufacturer, that it is to consolidate its European manufacturing in Scotland, with the loss of 780 jobs in Ireland.

Mr Ruari Quinn, Ireland's enterprise and employment minister, said the Sun decision 'demonstrates clearly that Ireland has the edge when it comes to software development expertise'.

Sun Microsystems Inc Sunsoft IE Ireland, EC P357 Computer and Office Equipment COMP Company News RES Facilities PEOP Labour P357 The Financial Times London Page 6 235
World Trade News: Trading with purpose - Kevin Brown looks at Australia's promotion effort Publication 930304FT Processed by FT 930304 By KEVIN BROWN

DO trade promotion organisations boost exports by improving access to overseas markets or do they impose a bureaucratic barrier between businesses and potential customers? Under pressure to improve performance and cut costs, the Australian Trade Commission (Austrade) is trying to find out.

Austrade was set up in 1986 to combine several government organisations in a 'one stop shop' to provide assistance to Australia's export effort. But a 1991 review by McKinsey, the management consultants, suggested the experiment had failed. McKinsey found the organisation bureaucratic, top heavy and unfocused. Its report said Austrade was failing to justify its ADollars 127m (Pounds 60.40m) budget, and concluded that changes would be required to justify its continued existence.

Mr Ralph Evans, chief executive since July 1991, says the points made in the McKinsey report have been absorbed. Many staff have been relocated overseas to increase direct contacts in overseas markets. More managers, including Mr Evans himself, are being recruited from the private sector. And resources are being diverted from 'easy' markets such as the UK and US to 'difficult' countries in Asia and Eastern Europe, where McKinsey thought Austrade could provide services that companies were unlikely to establish for themselves.

Austrade is also paying increasing attention to the Asia/Pacific region, which most forecasters expect to play an increasingly important role in Australian trade. The run-down of activities in Australia and other English-speaking countries has helped provide resources to increase representation in Beijing, Hong Kong, Singapore, Jakarta, India, Bangkok, and Vladivostok, in Russia's resource-rich Far East which was still closed to most foreigners less than two years ago.

Operations in Japan, by far the most important of Australia's trading partners, have been boosted by four regional offices to support the main representation in Tokyo and Osaka.

Mr Evans says his goal is to make Austrade as much like a private company as possible. 'We are trying to encourage a culture of enterprise that is oriented towards results, towards actually making a bit of difference to Australia's export business,' he says.

Austrade representatives used to spend much of their time compiling economic statistics and marketing Australia as a whole. Now they are encouraged to bring buyers and sellers together and organise, for example, flexible credit terms for cash-starved buyers in newly-liberalised economies. Sometimes trade commissioners have played an important role in spotting opportunities for Australian companies, and finding partners in big contracts.

There have been some successes. The Beijing office spotted an opportunity to develop an air traffic control system for 50 Chinese airports, and helped find a local joint venture partner for AWA, the Australian electronics group, which subsequently won the contract against stiff competition.

In Hungary, Mr John Charody, a trade commissioner recruited from the private sector, helped put together a series of agreements under which Australian companies will supply thousands of games machines, and set up a national lottery and a chain of computerised betting offices.

McKinsey suggested that Austrade had played a 'worthwhile' role in exports valued at ADollars 3.5bn over three years, and argued that the total could be improved. But assessing the impact of trade promotion is more difficult than adding up the value of goods or services sold. Trade promotion organisations have relied on indirect indicators such as the number of trade displays or the number of meetings facilitated by representatives. But such indicators reveal little or nothing about the amount of business which gets done.

The alternative approach being adopted by Austrade is to assess the value in terms of sales or contracts of efforts on behalf of specific companies. But as Mr Evans points out: 'We have got to set up some criteria. . . to decide whether we have helped a lot in specific cases, or just at the margins.'

Austrade has commissioned an independent investigation to cross-check the results with the companies. Also, exporters will be asked whether they are getting good value from Austrade's offices.

AU Australia P9611 Administration of General Economic Programs GOVT Government News P9611 The Financial Times London Page 6 691
British threat over Californian tax Publication 930304FT Processed by FT 930304 By GEORGE GRAHAM WASHINGTON

A HUNDRED British MPs from all parties will ask their government today to trigger retaliation against US companies if the long-running dispute over California's method of taxing foreign companies is not satisfactorily resolved by the end of the year.

Barclays Bank, whose suit is being treated as the test case for California's system of world-wide unitary taxation, is near the final round in its 10-year legal battle against the tax, as it seeks to persuade the US Supreme Court to declare the method unconstitutional.

British MPs flew to Washington this week to try to convince the Clinton administration to throw its weight behind the Barclays appeal, and to make clear that their threats of retaliation were real.

'I don't see what else we could do if the courts failed us,' said Mr Nicholas Brown, a UK Labour party spokesman on economic affairs.

'It is a new situation. Retaliation is not the taboo word it was a year ago,' added Sir Roger Moate, Conservative party MP for Faversham.

California's unitary system seeks to tax foreign companies' world-wide profits in proportion to their business operations within the state, instead of the usual method of taxing only profits generated in the state.

Barclays won decisions against the method in Californian superior and appeals courts. With the backing of the British government and the US Justice Department, the UK bank had argued that unitary taxation infringed the federal government's constitutional power to conduct foreign policy and regulate foreign commerce.

However, these decisions were overruled by the Californian Supreme Court last year, and the US Supreme Court declined to review. Barclays is now seeking, for the second time, to have the US Supreme Court take up the case, after further action in the state courts.

British officials are watching anxiously to see whether the Clinton administration will follow its predecessors by joining the suit.

The UK parliament passed a measure to enable the UK government to retaliate against US companies in 1985, but this has never been implemented.

Mr Dan Burt, of the Washington law firm Burt, Maner & Miller, argues that the UK's threats of retaliation will not be believed until they are triggered.

Also, retaliation would improve Barclays chances in court by demonstrating that the California tax does interfere with foreign commerce.

GB United Kingdom, EC US United States of America P9721 International Affairs P9611 Administration of General Economic Programs GOVT Government News P9721 P9611 The Financial Times London Page 5 422
Trinidad strike call over firings Publication 930304FT Processed by FT 930304 By CANUTE JAMES KINGSTON

TRADE UNIONS in Trinidad and Tobago are hoping a planned general strike will force the embattled government to cancel the sacking of thousands of workers from three state-owned utilities.

The strike will compound the problems of Mr Patrick Manning, the prime minister, in keeping the struggling oil-based economy from foundering. The date for the strike is being kept secret by the unions. 'We are not going to indicate any date,' said Mr Errol McLeod, president of the National Trade Union Centre, an umbrella for organised labour.

'We wish only to announce that a general strike is very much in the offing if there is no softening of the government's position and if there is no adjustment to their economic programme.'

Thousands of government workers protested in the streets last month after Mr Wendell Mottley, the finance minister, said extensive retrenchment in the public sector was inevitable.

Commodities, Page 30

TT Trinidad and Tobago, Caribbean P49 Electric, Gas, and Sanitary Services P9611 Administration of General Economic Programs PEOP Labour P49 P9611 The Financial Times London Page 5 190
Canadian banks cut prime rate Publication 930304FT Processed by FT 930304 By BERNARD SIMON TORONTO

CANADIAN banks have lowered their prime lending rate by a quarter point to 6.25 per cent, in response to big capital inflows and an accommodating monetary policy.

The new level, which matches the lowest of the past 20 years, takes effect today and has been accompanied by a sharp rise in the Canadian dollar. The currency climbed above 80 US cents this week for the first time since November, and advanced yesterday morning to 80.35 US cents, despite the prime cut.

The Bank of Canada said yesterday that intervention to contain the rise of the currency resulted in a net increase of USDollars 636m (Pounds 447.8m) in its foreign currency reserves in February.

Nervousness in the financial markets about Canada's economic and political prospects was evident during the referendum last autumn on a new constitution. Then, banks pushed their prime rate as high as 9.75 per cent.

However, investors have since been drawn by attractive yields on Canadian securities.

CA Canada P601 Central Reserve Depositories P9311 Finance, Taxation, and Monetary Policy P602 Commercial Banks ECON Balance of payments COSTS Service prices P601 P9311 P602 The Financial Times London Page 5 204
Mexico party finance offer causes furore Publication 930304FT Processed by FT 930304 By DAMIAN FRASER MEXICO CITY

MEXICO'S ruling Institutional Revolutionary party (PRI) celebrates its 64th consecutive year in power today, embroiled in a growing furore over its financing.

The controversy has arisen over claims, first reported in El Economista newspaper, that about 30 of the country's richest businessmen had each promised to give the PRI some Dollars 25m (Pounds 17.6m) to strengthen the party's finances before the presidential election next year.

The pledges are reported to have been made at a dinner party last week in the house of Mr Antonio Ortiz Mena, former finance minister, which was attended by President Carlos Salinas. Mr Ortiz Mena this week said of the meeting: 'There were people who said their group could give more, and others who said they could give less.'

He stressed that the money pledged would go to a trust fund that would enable the PRI to stay independent of the government. The businessmen pledged to give on a large scale because the PRI offered the best guarantee of their investments, he said. Other groups, including labour unions, would also be contributing to the trust fund.

President Salinas last year promised to make the party's finances more transparent, and to put caps on campaign spending. The party finance reform, still to be debated by Congress, is meant to address the huge financial advantages the PRI has enjoyed over Mexico's impoverished opposition parties, and thus prepare the way for more open, competitive elections.

Mr Porfirio Munoz Ledo, a leader of the opposition Party of Democratic Revolution, said of the donations: 'This does nothing but lay bare the obvious - the oligarchic nature of the party and its collusion with the country's great fortunes.'

The list of guests at the dinner party reads like a who's who of Mexican business. Among those present were Mr Emilio Azcarraga, the president of Televisa, Mexico's near-monopoly television station; Mr Carlos Slim, president of Telefonos de Mexico, the recently privatised telephone monopoly; Mr Roberto Hernandez, president of Banamex, Mexico's largest, and recently privatised, bank; Mr Lorenzo Zambrano, head of Cemex, the huge cement company; Mr Bernardo Garza Sada from Alfa, the conglomerate; and Mr Adrian Sada from Vitro, the monopoly glass company.

Don Fidel Velazquez, Mexico's nonagenarian labour leader, showed irritation with suggestions that the PRI was abandoning the labour sector by soliciting money from the business sector. He said Dollars 25m did not appear to be a very large sum, and that he was willing to give the party even more.

Institutional Revolutionary Party (Mexico) MX Mexico P8651 Political Organizations MGMT Management P8651 The Financial Times London Page 5 446
Venezuelan reform pledge Publication 930304FT Processed by FT 930304 By REUTER CARACAS

VENEZUELA'S President Carlos Andres Perez, speaking from a palace still scarred by a recent coup attempt, said the country's political woes would not turn him into a lame duck in his last months in office and he expected Congress to approve all pending economic reforms, Reuter reports from Caracas.

The president said on Tuesday that tax bills critical to attacking a growing budget deficit in this oil-rich nation were likely to be approved this month and other reformist legislation would be passed before December general elections.

Mr Perez, 70, who cannot by law seek re-election, acknowledged that he has felt isolated for scrapping popular subsidies and introducing austerity policies, but he said he was undeterred even by two attempts by rebel troops to topple him last year.

VE Venezuela, South America P9611 Administration of General Economic Programs P9111 Executive Offices PEOP Personnel News P9611 P9111 The Financial Times London Page 5 162
Trinidad strike planned in bid to save state jobs Publication 930304FT Processed by FT 930304 By CANUTE JAMES KINGSTON

TRADE UNIONS in Trinidad and Tobago are hoping a planned general strike will force the embattled government to cancel the sacking of thousands of workers from three state-owned utilities.

The strike will compound the problems of Mr Patrick Manning, the prime minister, in keeping the struggling oil-based economy from foundering. The date for the strike is being kept secret by the unions, apparently in the hope that continuing negotiations with the government will produce an acceptable agreement.

'We are not going to indicate any date,' said Mr Errol McLeod, president of the National Trade Union Centre, an umbrella for organised labour. 'We wish only to announce that a general strike is very much in the offing if there is no softening of the government's position and if there is no adjustment to their economic programme, some of the effects of which we have already begun to witness.'

Thousands of government workers protested in the streets last month after Mr Wendell Mottley, the finance minister, said extensive retrenchment in the public sector was inevitable. About 3,000 workers are to be sacked.

Mr Mottley said the cuts at the Public Transport Corporation, the Port Authority and the Water and Sewerage Authority were unavoidable because of their huge payrolls, falling international oil prices which were affecting the domestic economy, and a heavy foreign debt obligations.

The government has indicated that it cannot continue financing the deficits of the three companies while meeting overdue payments to government employees and servicing the country's foreign debt.

Mr Mottley said the cumulative loss by the three companies last year was TTDollars 342m (Dollars 80m). The government is also under pressure to pay TTDollars 3bn in arrears to its workers. The country's domestic debt has increased by 62 per cent in the last five years to TTDollars 5.2bn, while the country's foreign debt is TTDollars 5.8bn. The government has to pay TTDollars 2.8bn this year in servicing its foreign debt.

TT Trinidad and Tobago, Caribbean P49 Electric, Gas, and Sanitary Services P9611 Administration of General Economic Programs PEOP Labour P49 P9611 The Financial Times London Page 5 367
Perot under attack at congressional hearing: Senator sound-bites back at the Texan billionaire gadfly over his knowledge of US economy Publication 930304FT Processed by FT 930304 By JUREK MARTIN, US Editor WASHINGTON

DARING to criticise Mr Ross Perot is reckoned to be a risky political business these days. Early on Tuesday evening, however, Senator Harry Reid decided to buck the odds.

The billionaire from Texas, now almost as ubiquitous as he was when running as an independent in the presidential election campaign last year, had invited himself to Capitol Hill to testify (lecture was a more accurate description) before Congress on the iniquitous ways of the perk-ridden legislators and foreign lobbyists who were conspiring to export American jobs world-wide.

Warming to his task and flanked by a crowd of cheering acolytes, Mr Perot also laid into the Clinton administration, about which he had been relatively kind, accusing it of incompetent mathematics and 'sound bite' salesmanship.

His particular beef was that the president's energy policy advisers were a bunch of 'poets, philosophers and beekeepers', none of whom had ever 'met a payroll' or created a job in all of their working lives.

Mr Reid is the Democratic senator from Nevada. He is not reckoned a great power in Congress but, whereas his peers had alternately taken Mr Perot's punches on the chin and fawned over him, the senator decided that he had had enough.

'Ross, I like you a lot,' Mr Reid tactfully began. 'But, in your statement here, you gave us 45 minutes of sound bites and five minutes of detail.'

Worse, Mr Perot had demeaned Mr Mack McLarty, the White House chief of staff, who was indeed from 'corporate America, just like you,' and from the energy sector no less.

He then accused Mr Perot of completely misunderstanding the structural nature of the US budget deficit and the caps on federal spending embodied in the 1990 Budget Act.

'I think you should start checking your facts a little more and stop listening to the applause so much,' the senator admonished.

Encouraged by Mr Reid's resolution, several other heavyweight senators then presumed to suggest that Mr Perot's views were not always infused by knowledge.

Mr Perot does not like being contradicted, especially in front of his flock.

In one widely remarked incident last year, on his favourite morning television show, he had come close to losing his temper with a little old lady from Florida who bravely confessed she had not understood his answer to her question on social security.

This time, before the legislators, he bristled and blustered, and hinted darkly that Mr McLarty's tenure as chief executive of Arkla, the natural gas concern, was marked by 'problems'.

But, in the end, he backed off, said Mr McLarty was 'a fine man', and came as close as he ever does to issuing an apology.

'I regret that anything came up where people had to fall on their swords to defend him,' the Texan billionaire said.

Mr Perot then retreated, a little bruised but not bowed, to an evening television talk show, where his reception was far more amenable and where he again laid into Congress and everybody else in Washington with his customary verve.

Mr Reid, meanwhile, found himself in the unaccustomed media limelight as the man who had dared to take on Ross Perot.

US United States of America P9121 Legislative Bodies PEOP Personnel News GOVT Government News P9121 The Financial Times London Page 5 576
Canadian banks drop prime rate Publication 930304FT Processed by FT 930304 By BERNARD SIMON TORONTO

CANADIAN banks have dropped their prime lending rate by a quarter point to 6.25 per cent in response to big capital inflows and an accommodating monetary policy.

The new level, which matches the lowest seen in the past 20 years, takes effect today and has been accompanied by a sharp rise in the Canadian dollar. The currency climbed above 80 US cents this week for the first time since last November, and advanced yesterday morning to 80.35 US cents, despite the prime cut.

The Bank of Canada said yesterday that intervention to contain the rise of the currency resulted in a net increase of USDollars 636m in its foreign-currency reserves in February.

Nervousness in the financial markets about Canada's economic and political prospects was evident at the time of last autumn's referendum on a new constitution. Then, banks pushed their prime rate as high as 9.75 per cent.

However, investors have since been drawn by attractive yields on Canadian securities and a perception that the country's problems may be less severe than those of many other industrial nations. Canadian borrowers have been among this year's most active Euromarkets participants.

Economists expect the prime rate to fall to at least 6 per cent and perhaps lower. But they caution that markets could be unsettled in coming months.

The spring federal and provincial budget season is likely to see unexpectedly large budget deficits, which are widely recognised as Canada's most pressing economic problem. In addition, political uncertainty may rise again during the run-up to the general election, expected in the autumn.

CA Canada P601 Central Reserve Depositories P9311 Finance, Taxation, and Monetary Policy P602 Commercial Banks ECON Balance of payments COSTS Service prices P601 P9311 P602 The Financial Times London Page 5 304
Gore to hunt down waste and fraud in government agencies Publication 930304FT Processed by FT 930304 By GEORGE GRAHAM WASHINGTON

VICE-PRESIDENT Al Gore is to take charge of a six-month review of every government agency to find ways of cutting waste and fraud. He promised 'significant savings' from the review, which he said would start 'a revolution in government right here and now'.

President Bill Clinton, announcing the review, said elimination of waste would be 'a breath of fresh air for American taxpayers', who would be treated in future as customers by government agencies.

Bureaucratic waste has been a favourite target for US political candidates, and Mr Clinton promised in his campaign last year to cut 100,000 unnecessary federal government jobs and to achieve 3 per cent administrative savings in every government agency.

The Gore audit is modelled on a state government performance review carried out in Texas in 1991. That came up with 975 suggestions on ways to save up to Dollars 4.2bn from a state budget of around Dollars 30bn.

The state legislature adopted Dollars 2.4bn of these savings, helping to fill a budget deficit and avert the introduction of a state income tax for the first time in Texan history.

Some of the suggested cuts, however, aimed at programmes that were not necessarily unadulterated waste. One idea was to double the cost of tuition at state colleges.

Like the Texas review, the Gore audit will set up a toll-free telephone number to gather suggestions from the public. It will provide an important task for Mr Gore, who has taken the lead in discussions of the administration's environmental and technology policies but who, like many vice-presidents before him, runs the risk of appearing under-employed.

US United States of America P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 5 304
Afghan rivals agree deal to share power Publication 930304FT Processed by FT 930304 By REUTER ISLAMABAD

AFGHANISTAN'S two main warring rivals have agreed on a peace formula that should allow the arch enemies to share power in Kabul, officials said, Reuter reports from Islamabad.

Under the draft accord, reachedin Islamabad and yet to be agreed by the other main mujahideen parties, President Burhanuddin Rabbani remains in power for several months, while Mr Gulbuddin Hekmatyar, chief of the hardline Hezb-i-Islami party, becomes prime minister.

'Engineer Hekmatyar is ready to take up the post of prime minister and if there are no objections by the other groups we see no difficulty,' Mr Rabbani's spokesman, said. A few small differences remained, he said.

Mr Rabbani was insisting on recognition of the assembly of nationwide delegates that last December elected him as president for the next two years but conceded to Mr Hekmatyar's demand for general elections before his term expired.

Mr Hekmatyar has accused Mr Rabbani of rigging his election and subjected Kabul to a fierce bombardment to back his demand the president step down. More than 1,000 people were killed and 6,000 injured in Hekmatyar's last assault on Kabul.

AF Afghanistan, Asia P8651 Political Organizations PEOP Personnel News P8651 The Financial Times London Page 4 212
Budget buoys Hong Kong stock market Publication 930304FT Processed by FT 930304 By SIMON HOLBERTON HONG KONG

STEEP cuts in taxation and higher spending on social programmes and public works were provided for in the annual budget presented by the Hong Kong government yesterday.

Mr Hamish Macleod, the colony's financial secretary, said Hong Kong's gross domestic product, adjusted for inflation, would rise this year by 5.5 per cent compared with 5 per cent last year. Inflation is expected to hover just below 10 per cent.

His budget cheered the stock market which ended the day 11 points away from its all-time high of 6,447, reached on November 12 last year. The market was also encouraged by signs that Britain and China were edging closer to an agreement to talk about Hong Kong's political development.

Yesterday Governor Chris Patten announced that he would delay a visit to Japan so he could make a statement on the state of Anglo-Chinese talks about Hong Kong.

Mr Patten will address the Legislative Council, LegCo, the colony's law making body, tomorrow where he also is expected to explain why the government has delayed publishing legislation that would give effect to his proposals for wider democracy in the colony.

Mr Macleod described his budget as one which 'built on success'. He confidently forecast that Hong Kong would overtake Britain and Australia in terms of income per head this year and praised local businessmen for their ability to look 'beyond present political controversies' to the colony's long-term prospects.

His budget was, however, unashamedly populist and designed to ensure a smooth passage through LegCo. More money was allocated for social security, housing, health and education. Tax allowances were over-indexed by twice the rate of inflation and the threshold at which income tax becomes payable was raised.

Mr Macleod left the corporate tax rate unchanged at 17.5 per cent. He cut the rate of stamp duty on stock market transactions to 0.3 per cent from 0.4 per cent - at a cost of HKDollars 800m (Pounds 72m) to the revenue. He said that he would look sympathetically on further reductions in stamp duty.

He also decided to bring forward a big roads programme. Tomorrow it will call for expressions of interest from the private sector to build a road linking Hong Kong's container port with the city of Shenzhen, which lies on the colony's northern border.

This project involves the construction of a bridge and tunnel and would, by 1997, provide a direct road link from China's most productive regional economy to Hong Kong's modern port. Mr Macleod earmarked HKDollars 4bn for the government's contribution to the project.

The combined effect of these and other measures is forecast to produce a budget deficit of nearly HKDollars 3.6bn for the 1993/94 fiscal year - the first deficit the Hong Kong government has forecast since the mid-1980s - and compares with an estimated budget surplus of HKDollars 20.5bn for 1992/93.

This was up from an initial forecast of just HKDollars 7.5bn made a year ago. A combination of buoyant tax receipts and under spending by the Hong Kong government on public works were equally responsible for the higher surplus.

In his medium-term outlook for the government's finances, Mr Macleod forecast continued budget deficits. These were due primarily to the building of a new airport and associated projects which, if completed on schedule, would be income producing by the time China resumed sovereignty of Hong Kong, he said.

According to the projection, by 1997 the Hong Kong government's accumulated budget surplus should be more than HKDollars 78bn - well ahead of the HKDollars 25bn which Britain has agreed with China.

HK Hong Kong, Asia P9311 Finance, Taxation, and Monetary Policy P6231 Security and Commodity Exchanges GOVT Government News P9311 P6231 The Financial Times London Page 4 633
S Korea may free interest rates Publication 930304FT Processed by FT 930304 By JOHN BURTON SEOUL

SOUTH Korea's new government yesterday indicated it might deregulate a large portion of interest rates this month in a key step toward financial reform. The action would fulfil a promise by the previous administration that the latest phase of interest rate deregulation would occur in the first half of this year.

The government's tight control of lending and deposit rates has been blamed for distorting credit allocation and causing market interest rates to be higher than those of South Korea's main Asian competitors.

Seoul agreed in 1991 to deregulate interest rates in four stages by 1997 in response to US trade pressure that it open up its financial market. The second phase to be implemented this year would free 75 per cent of bank lending rates and 30 per cent of deposit rates.

It would also completely liberalise lending rates among other financial institutions, such as short-term finance companies and insurance companies, and deregulate 65 per cent of their deposit rates. But officials have hesitated to free rates because they fear it would cause painful adjustments to the financial system, including a temporary jump in interest rates.

A similar attempt at deregulation in 1988 caused interest rates to rise sharply as borrowing expanded to finance property speculation. The government scrapped the reform and put strict limits on property transactions.

Mr Hong Jae-hyong, finance minister, said yesterday the fall in market interest rates since last autumn had improved prospects for deregulation to be managed without significant disruption. Market rates now stand at 11 per cent against a peak 19 per cent early last year. A cut in the central bank's key lending rates in January helped push down market rates.

One concern is that corporate demand for loans usually rises in the spring as companies increase spending on facilities and equipment. The government wants to encourage corporate investment spending this year to help revive the economy, which grew by some 4.5 per cent last year, the lowest rate since 1980.

The finance minister also said yesterday that a schedule to introduce a 'real name' financial transactions system, promised since 1981, would be unveiled by May. Financial accounts can at present be held under pseudonyms and have been used to hide money generated by Korea's underground economy. Introduction of 'real name' accounts would help fight corruption, a move that is in line with the aims of President Kim Young-sam.

Share prices on the Seoul exchange have fallen recently, because of fears the 'real name' system would drain liquidity from the market.

KR South Korea, Asia P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs GOVT Government News P9311 P9611 The Financial Times London Page 4 461
China State Statistical Bureau registers losses for industrial sector Publication 930304FT Processed by FT 930304 By TONY WALKER BEIJING

CHINA'S state-dominated industrial sector last year registered losses of about Dollars 76bn (Pounds 53bn), much the same as the year before, according to the State Statistical Bureau, Tony Walker reports from Beijing.

The military, tobacco, coal-mining and petroleum sectors accounted for the biggest losses. These sectors tend to be most heavily burdened by rigid pricing policies and by overmanning.

Faltering state-owned enterprises accounted for 80 per cent of losses in industry, with the light manufacturing sector hardest hit, the statistical bureau reported.

Heavy industry fared slightly better, because of heightened demand for products such as steel due to a construction boom. China's economy grew more than 12 per cent last year.

Losses in the military sector were attributed to shrinking demand. Heavy investment in industry over the past few years appears to have yielded only limited improvements in efficiency.

China's shrinking state sector accounted for about 50 per cent of industrial output last year. In 1978, at the outset of the 'open door' reforms, it produced 78 per cent of total industrial output.

CN China, Asia P9611 Administration of General Economic Programs P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9611 P9311 The Financial Times London Page 4 218
Westinghouse to face trial in US Publication 930304FT Processed by FT 930304 By JOSE GALANG MANILA

PHILIPPINE negotiations with Westinghouse Electric of the US for an out-of-court settlement on a bribery charge in the construction of a nuclear power plant have collapsed, paving the way for a trial at a US court.

Philippine negotiators yesterday said they 'did not believe' that the latest Westinghouse proposal for a settlement 'would provide substantial benefit to the country'.

They declined to divulge details.

The trial is set to start on March 15 at the New Jersey federal court and could take about two months.

The case was filed in December 1988 by the Philippine government and the state-run National Power Corporation (Napocor), owner of the nuclear plant, which alleged that Westinghouse and Burns and Roe, a US consultant to Westinghouse, had in 1973 bribed the late President Ferdinand Marcos, to win the contract.

The 620MW plant was constructed on the Bataan Peninsula, 60km north-west of Manila, at a cost of Dollars 2.1bn.

Mr Marcos was ousted in a popular uprising in 1986 and the government of Mrs Corazon Aquino mothballed the plant and initiated the court suit.

The Philippine government alleged that Westinghouse and Burns and Roe illegally obtained their contracts by bribing Mr Marcos through Mr Herminio Disini, a Marcos relative.

The government had also claimed that the plant was unsafe and inoperable because of allegedly defective design, construction and testing. It is seeking Dollars 26.5m (Pounds 18m) in actual damages and an unspecified amount for punitive damages.

On the eve of the original trial in March 1992, the two sides came up with a provisional out-of-court settlement that involved Westinghouse payments to the Philippines of Dollars 100m in cash and cash equivalent to repair and upgrade the plant to current safety standards.

In return, Westinghouse was supposed to be granted a licence to operate the plant for 30 years, selling electricity to Napocor at a pre-set price.

Subsequent negotiations, however, failed to resolve the price at which the output from the Bataan plant will be purchased by Napocor, according to Manila officials.

The freeze on the nuclear plant had left the Philippines with a severe shortage of electric-power generating capacity.

Westinghouse Electric PH Philippines, Asia US United States of America P1629 Heavy Construction, NEC GOVT Legal issues P1629 The Financial Times London Page 4 393
What's good for Shanghai is good for China: Zhang Tingting on the role of a city that provides a sixth of the country's budget revenues Publication 930304FT Processed by FT 930304 By ZHANG TINGTING

SHANGHAI has long been regarded as the engine of growth for China's economy. But as the country has experimented with market policies, the city's massive state-run industries have held back its growth.

Shanghai is pinning its hopes for renewed growth on projects such as Pudong, a planned industrial estate the size of Shanghai itself.

The city remains the largest contributor to national budget revenues, providing a sixth of the total - 10 times the amount contributed by fast developing Guangdong province. But it has lost its position as the largest regional economy to Jiangsu province.

Shanghai has long embraced reform - its previous mayor was Zhu Rongji, now leading the national economic reform programme as vice-premier - but the preponderance of large state-run industries, with outdated products, excess labour and lack of management autonomy, has produced huge challenges.

By contrast, industry in Guangdong province, where the 'open-door' policies were first introduced with the creation of special economic zones, has been able to grow from a small base on greenfield sites and has employed what was previously a mainly rural population.

Shanghai is China's industrial centre. It is so interwoven with other parts of the country that almost every move it makes to reform affects the national economy not least because its industries rely heavily on energy and raw materials from other provinces. The initial impact of the transition to a market economy was to divert from them at least 60 per cent of the energy and raw materials which had been provided under central planning.

In 1988, the city found itself with only a few days' coal reserves. The government, which had previously fixed all coal prices, had begun to free them. The immediate result, however, was chaos in supplies. The partial liberation made it hard for Shanghai to find fuel for its industries in competition with manufacturing enterprises throughout China, including those not run directly by the state, which queued up to bid for a share.

Meanwhile, the local state-run textile industry, the biggest hard currency earner, was on the verge of bankruptcy because of new competition from township enterprises in neighbouring Jiangsu and Zhejiang provinces.

Township enterprises, which mushroomed in the mid-1980s as a result of market reforms, usually outperform their state-run counterparts because they have advantages in flexibility of pricing, distribution and the right to hire and fire.

Shanghai's 940 large- and medium-sized state-run enterprises, by contrast, have had little impetus to grow because of old-fashioned inefficient management with no answers to the intense competition.

However, the development of Pudong, a 350sq km area - larger than China's four special economic zones together - offers the chance to renew Shanghai's industrial base. The project is expected to take 30 to 50 years and to cost at least Dollars 10bn (Pounds 7bn).

Premier Li Peng has called the Pudong project 'the focus of China's efforts to attract foreign investment in the current decade'.

Of three special zones within the area, one - Waigaoqiao - allows foreign investors to re-export for the first time since the communists took power in 1949. C. Itoh, the Japanese trading house, was the first to set up there. The other zones are for export processing and financial services.

To finance the development, Beijing will help Shanghai raise 4bn yuan (Pounds 475m) a year through Pudong construction bonds. It will also sell shares in state-run companies on domestic and overseas markets, provide state funding and low-interest loans, and try to revive state-run enterprises by various means including granting them the right to import and export.

According to Shanghai Mayor Huang Ju, the 45.5bn yuan needed in the first five years of development (1991-1995) has been secured and is being spent on capital infrastructure projects such as bridges, roads, telecommunications facilities as well as water, power and gas plants.

To attract investors, the mayor pledged not to change for three years the low 1991 price of land leases. He promised to complete major capital construction projects by 1995 and to cut down red tape.

While most western investors waver, domestic investors have been eager. Anhui province, one of China's leading rural provinces, has committed 1bn yuan to a capital project to get a firm foothold in Pudong.

However much Pudong is being used as a market laboratory to revitalise Shanghai, the city will continue to face problems. The authorities are concerned that higher salaries and better social protection in Pudong will create a completely different system from that in the rest of Shanghai. They fear that social and economic stability may be disturbed by a 'one city, two systems' approach.

State-run enterprises have been converting enthusiastically to the shareholding system, but the legal and accounting framework is inadequate to accommodate the rapid changes.

However, reform is progressing quickly. Mayor Huang has said that, in addition to the national price reforms featuring a free market for grain and edible oil introduced last year, Shanghai would co-operate with neighbouring provinces to free prices of some industrial products such as energy and raw materials. Prices for more than 80 per cent of industrial products in Shanghai are now determined by demand and supply.

Local government officials say the idea behind these localised reforms is to attract investment and trade from all parts of the country with a free market, enhancing Shanghai's position as China's leading trading centre. It already has a stock exchange and commodities markets. National trade centres for non-staple food and non-ferrous metals were set up in Shanghai last year.

Contracts have also been signed for China's first retail joint venture with a foreign investor, involving the Shanghai No 1 Department Store and Yaohan International of Japan.

Deng Xiaoping, the 88-year-old paramount leader who is the architect of the economic reforms, has said that he regretted not having granted Shanghai the status of special economic zone, as he did to Shenzhen in Guangdong province 10 years ago, 'or Shanghai would have been playing a greater role in the national economy'. Yet he believes Pudong will overtake Shenzhen in vitality and contribution to the country's economic future.

Zhang Tingting is a Shanghai correspondent of China Daily

CN China, Asia P9611 Administration of General Economic Programs P9532 Urban and Community Development CMMT Comment & Analysis P9611 P9532 The Financial Times London Page 4 1078
Iranian oil wells bombed Publication 930304FT Processed by FT 930304 By REUTER NICOSIA

IRANIAN security officials are investigating bomb explosions at oil facilities in south-west Iran, Tehran's Salam newspaper yesterday quoted national police chief General Reza Seifollahi as saying, Reuter reports from Nicosia.

It was the first official confirmation of sabotage in oil wells reported last month.

'The intelligence ministry is following the case of bombings in Khuzestan oil installations which occurred over the past month,' Gen Seifollahi was quoted as saying.

Bombs were said to have exploded at three operating wells near Ahvaz, capital of the main oil-producing province of Khuzestan, 540km south-west of Tehran.

IR Iran, Middle East P9229 Public Order and Safety, NEC RES Facilities GOVT Legal issues P9229 The Financial Times London Page 4 127
Egypt to end foreign banks' currency curb Publication 930304FT Processed by FT 930304 By MARK NICHOLSON CAIRO

EGYPT is to remove curbs barring foreign banks from operating in local currency, in a move the government hopes will attract substantial new investment.

The measures, approved at a meeting earlier this week attended by President Hosni Mubarak and the country's top economic policymakers, will allow the 22 foreign bank branches in Egypt to take deposits and make loans in Egyptian pounds without requiring changes in the branches' shareholding structure or legal status.

In practice, the decision would considerably open Egypt's banking market. 'Foreign banks will be able to enter Egypt without any restriction whatsoever,' one senior local banker said. Mr Atef Obeid, cabinet affairs minister, said the move aimed to encourage foreign banks to 'make bold decisions to invest and extend credits'.

A proposed amendment to Egypt's banking law will be put to parliament for ratification next week. Approval is considered a formality.

Foreign bankers in Cairo welcomed the move, suggesting it could herald considerable expansion into the domestic retail market by such banks as Citibank, American Express Bank, Chemical Bank, Bank of Nova Scotia, Credit Suisse and Arab Bank. 'Basically, the move opens up a totally new market,' one US banker said.

The measure has been resisted strongly by some of Egypt's larger and more conservative banks. The banking law had previously held that foreign banks with branches in Egypt should have local partners to be allowed to operate in local currency.

However, some local bankers welcomed the move, saying it would jolt Egypt's banks into greater efficiency. 'I welcome foreign competition, provided the central bank has the capacity to control and monitor the expanded activities,' Mr Hazem Beblawi, chairman of the Export Development Bank of Egypt, said.

The decision to liberalise the banking market comes amid steps to boost growth and impress the IMF and World Bank with Egypt's resolve to expand the private sector. Last week the bank signed a memorandum of understanding unfreezing a Dollars 150m structural adjustment loan, after approving Cairo's plans to speed privatisation of its public sector.

EG Egypt, Africa P9611 Administration of General Economic Programs P602 Commercial Banks GOVT Government News P9611 P602 The Financial Times London Page 4 374
Taiwan and UK to establish air links Publication 930304FT Processed by FT 930304 By REUTER TAIPEI

TAIWAN and Britain will establish direct air links on March 29 in a move expected to benefit trade and tourism, airline officials said yesterday, Reuter reports from Taipei.

Aircraft flying the route will not carry flags or national insignia because of political sensitivities.

Britain does not have formal diplomatic ties with Taipei and instead recognises China, which claims sovereignty over Taiwan.

British Asia Airways, a subsidiary of British Airways, will make two round trips a week between Taipei and London, with a stopover in Hong Kong, Mr Winston Hsieh, the airline's Taipei manager, said.

Eva Airways, Taiwan's second international airline and part of the Evergreen shipping group, said it would make three trips a week with stopovers in Bangkok and Vienna.

Taiwan has struggled to set up direct air links with other countries because of its rivalry with China. The island's growing economic power has helped it establish services with several nations in the past two years.

Taiwanese made about 50,000 trips to Britain last year, up from 35,000 the previous year, Britain's representative office in Taiwan said.

British Asia Airways Eva Airways TW Taiwan, Asia GB United Kingdom, EC P4512 Air Transportation, Scheduled TECH Services COMP Strategic links P4512 The Financial Times London Page 4 222
Balance of payments worsens Publication 930304FT Processed by FT 930304 By ROBERT GRAHAM

ITALY'S overall balance of payments in January registered a deficit of L765bn (Pounds 349m), compared with a L566bn deficit during the same period in 1992, writes Robert Graham.

The deficit reflected movement in the current account which was in the red to the tune of L5,169bn. In contrast, capital movements registered a surplus of L4,603bn. This was largely due to an upsurge of foreign investment totalling L6,163bn.

Portfolio investment accounted for L5,497bn, compared with a mere L47bn in January 1992.

These inflows were only partially offset by L2,736bn of Italian capital going abroad. Significantly the latter outflows were down on the same period in 1992 when they totalled L7,535bn.

The country's foreign currency reserves stood at L37,966bn at the end of January, compared with last September's low of L20,801bn during the currency crisis.

IT Italy, EC P9611 Administration of General Economic Programs ECON Balance of payments P9611 The Financial Times London Page 3 165
More held in Italian probe Publication 930304FT Processed by FT 930304 By ROBERT GRAHAM ROME

A STRING of road building contracts throughout Italy were yesterday brought within the scope of corruption investigations, leading to the arrest of businessmen, officials of Anas, the state roads authority, and Mr Gerardo Pelosi, director-general at the Ministry of Public Works.

As the scope of corruption investigations continued to broaden, parliament delayed a decision on waiving immunity on Mr Bettino Craxi, the former Socialist leader. The delay was caused by new evidence which parliament wished to study. This centred on allegations made by Mr Claudio Martelli, the former justice minister and one-time political associate of Mr Craxi, that the latter had been involved in collecting illicit contributions for the party.

Magistrates in Rome and several other cities have been investigating for at least two months the activities of Anas during the 1980s. Road building accounts for 10 per cent of the annual L30,000bn (Pounds 13.6bn) budget for public works contracts. Some arrests had already been made, but yesterday's arrests underscored the extent of the investigation. They involved six Anas officials and seven businessmen, two of whom have already been caught up in other public works corruption investigations.

In addition, a further eight Anas officials and three contractors were warned they were under investigation. The Milan department of Anas was the most affected but others included Naples, Palermo and Reggio Calabria. The action taken in the three southern cities is of particular significance because they cover areas regarded as infiltrated by organised crime and barely touched by the current wave of corruption investigations. The Anas board and its officials have been traditionally controlled by the main ruling parties.

The latest arrests took place against a growing debate among political parties on the merits of introducing legislation to provide a 'political' solution to the crisis caused by the corruption scandals. The government has said it hopes to have legislation ready by tomorrow. But a growing number of politicians doubt the feasibility of framing legislation that does not appear to be letting the guilty off the hook.

Last night the Socialist party was still undecided whether to endorse the waiving of parliamentary immunity in respect of Mr Craxi to face charges of alleged corruption, extortion and illicit funding.

Matters were complicated by the arrival of new material with potentially serious allegations made by Mr Martelli, who has been warned he is under investigation over the 1982 collapse of Banco Ambrosiano.

IT Italy, EC P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P9229 The Financial Times London Page 3 433
Swiss MPs reject woman as minister Publication 930304FT Processed by FT 930304 By IAN RODGER ZURICH

IT WAS no big surprise yesterday when a majority of (male) Swiss parliamentarians voted down the nomination of Mrs Christiane Brunner to join the country's seven-person Federal Council (cabinet).

Women have made little headway in Switzerland's senior government and business circles.

The new cabinet minister this time had to be, like the outgoing foreign minister, Mr Rene Felber, a Social Democratic party MP from the French-speaking part of Switzerland. Mrs Brunner, 46, and a trade union leader, was one of only two MPs to fit this profile and agreed to be a candidate. She would have been only the second woman minister in Swiss history.

In spite of being an MP for only 15 months, she won her party's endorsement, partly because she was a woman and partly because she came from Geneva, a canton which has not been represented in the cabinet for more than 70 years. (Geneva was ready to declare a school holiday if she had won.)

But her casual manner and taste in clothes raised eyebrows in the male-dominated political establishment, as did the fact that she has had three husbands. After her rejection, women's groups gathered in front of parliament, threw paint bombs and vowed to continue the tough battle for equality. Mrs Brunner herself was in no doubt about the meaning of the vote. 'I am disappointed not for myself, but for all women in Switzerland.'

CH Switzerland, West Europe P9121 Legislative Bodies PEOP Personnel News GOVT Government News P9121 The Financial Times London Page 3 267
Further arrests in Milan bribery inquiry Publication 930304FT Processed by FT 930304 By REUTER MILAN

MILAN magistrates investigating misuse of public funds yesterday ordered arrests linked to reconstruction work in an alpine valley devastated by floods six years ago, Reuter reports from Milan.

The magistrates ordered the arrest of two construction company owners and two officials of the state road-building agency Anas on corruption charges linked to the 1987 Valtellina disaster.

Fifty-three people were killed when a flood swept away two villages in the Valtellina, a valley north-east of Milan. Damage was estimated at L3,000bn (Pounds 1.3bn) and 1,500 people were left homeless in one of Milan's favourite weekend haunts.

The Italian government set in motion massive reconstruction projects after the disaster.

In southern Italy, magistrates have revived separate inquiries about allegations of large-scale fraud over rebuilding work after a 1980 earthquake that killed 3,000 people in the Irpinia region, east of Naples. Investigations into the Irpinia scandal had made no progress for years despite a damning parliamentary inquiry led by Italy's current head of state, Mr Oscar Luigi Scalfaro, then an MP.

The Milan investigations into widespread collusion between politicians and businessmen, however, have spawned a host of similar inquiries in the rest of Italy over the last year and once again turned the spotlight on the Irpinia earthquake.

A former prime minister, Mr Ciriaco De Mita, resigned on Tuesday as the man charged with revamping Italy's chaotic political system after the Christian Democrat politician's brother was arrested in connection with alleged fraud in the Irpinia case.

The parliamentary committee that Mr De Mita chaired yesterday overwhelmingly rejected his resignation, but the former prime minister asked for more time to decide his future.

While the scope of corruption investigations continued to broaden, the Italian parliament delayed a decision on waiving immunity on Mr Bettino Craxi, the former Socialist leader.

The delay was caused by new evidence which parliament wished to study. This centred on allegations made by Mr Claudio Martelli, the former justice minister and one-time political associate of Mr Craxi, that the latter had personally been involved in collecting illicit contributions for the party.

Magistrates in Rome and several other cities have been investigating for at least two months the activities of Anas during the 1980s.

Road building accounts for 10 per cent of the annual L30,000bn budget for public works contracts.

Some arrests had already been made, but yesterday's moves underscored the extent of the investigation.

IT Italy, EC P9229 Public Order and Safety, NEC GOVT Legal issues PEOP Personnel News P9229 The Financial Times London Page 3 430
UK grants for Polish banks Publication 930304FT Processed by FT 930304 By ROBERT MAUTHNER, Diplomatic Editor

BRITAIN has agreed that its grants to the Polish stabilisation fund, amounting to Dollars 100m (Pounds 70.4m), should be used to recapitalise the Polish banking system, Mr John Major, the British prime minister, said yesterday.

The Polish stabilisation fund was set up in 1990, with a total capital of Dollars 1bn, from donations and loans from western countries. Its primary objective was to support the convertibility of the zloty, but it has never been called upon.

Mr Major, who was speaking after talks in London with Ms Hanna Suchocka, the Polish prime minister, also said that Britain continued to back wholeheartedly Poland's eventual membership of the European Community. It would, however, take a number of years for the Polish economy to become sufficiently efficient to face the full blast of competition from the EC members.

Ms Suchocka said she had had a sympathetic hearing from Mr Major for her request that Poland should be upgraded as a recipient of British export credits. At the moment cover is available from the Export Credit Guarantee Department (ECGD) for short-term export credits. But Poland, which feels that it should no longer be classified among the poorest countries, would also like to be able to benefit from medium and long-term export credits.

Mr Major said an answer would be given after further talks in the club of creditors.

GB United Kingdom, EC PL Poland, East Europe P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9721 P9311 The Financial Times London Page 3 267
Army urges Yeltsin to end deadlock Publication 930304FT Processed by FT 930304 By JOHN LLOYD and CHRYSTIA FREELAND MOSCOW, KIEV

THE top command of the Russian army has urged President Boris Yeltsin to take 'resolute measures' to end the political deadlock, according to the daily Izvestia, writes John Lloyd in Moscow. The newspaper reported that 'during a security council meeting chaired by Mr Yeltsin, military representatives expressed concern on the development of the political crisis and demanded that the president take resolute measures to end it'.

The deliberate publicity given to this normally closed discussion highlights the momentum gathering behind a presidential strike against his encircling opponents in parliament and elsewhere - possibly in the form of a declaration of an emergency, or of presidential rule.

Mr Anatoly Sliva, deputy head of the president's legal advisory department, said yesterday the referendum planned for April 11 following an agreement between the president and parliament in December could not now legally be cancelled. A meeting, probably next week, of the Congress of People's Deputies seems certain to repudiate its earlier agreement.

Yesterday, talking to women's groups, Mr Yeltsin said Russia could split into warring states unless opposing sides ended their differences. He asked the groups to use their influence to cool tempers.

The governor of Ukraine's central bank announced yesterday that on March 18 he will raise Ukraine's discount rate to 180 per cent as part of the government's drive to stabilise the Ukrainian economy, writes Chrystia Freeland in Kiev.

Mr Viktor Iushchenko, appointed to head the National Bank of Ukraine last month, said that the refinancing rate would be pegged at 90 per cent and that enterprises unable to pay their debts would be forced into bankruptcy.

'If we do not weed out those enterprises which are dragging us backwards our economy will never survive,' he said.

Editorial comment, Page 19

RU Russia, East Europe P9711 National Security P9311 Finance, Taxation, and Monetary Policy P601 Central Reserve Depositories GOVT Government News P9711 P9311 P601 The Financial Times London Page 2 338
Ruhe wants brake on EFA development Publication 930304FT Processed by FT 930304 By QUENTIN PEEL BONN

MR VOLKER RUHE, German defence minister, yesterday called for more drastic measures to slow down the development programme of the European Fighter Aircraft (EFA), accusing the aerospace industry of inflexibility in negotiating savings.

He announced new measures to submit all spending on the project, jointly carried out with Britain, Italy and Spain, to a new financial control group in his ministry, saying that plans had previously not been controlled closely enough.

At the same time he admitted he no longer had adequate funds in his budget to maintain spending at the current rate on the development programme, and called for the timetable to be extended by two years.

The four aerospace contractors have submitted their proposals on reducing the costs of the fighter aircraft, and stretching out the production programme, in line with a deal agreed by the defence ministers last December.

What Mr Ruhe now wants, however, appears to be a more drastic slowdown in the immediate future, possibly requiring lay-offs of research and engineering personnel involved in the project.

Mr Ruhe was seeking to defend himself in the German parliament against attacks on two fronts: from supporters of the EFA project in his own government, who say he has been irresponsible in axing too much money from the development programme in the current year; and from opponents of the scheme who want the project scrapped.

He was called to give evidence to the Bundestag defence committee after it became apparent that the DM520m (Pounds 220.3m) set aside for EFA development in 1993 would run out, probably by April. The original allocation of DM820m was cut by DM300m in a late round of budget cuts, since when it emerged that another DM180m had to be paid for uncovered spending in 1992.

The DM340m left for EFA in the current budget is estimated to be DM600m short of the likely spending by Deutsche Aerospace, the principal contractor in Germany. The other companies involved are British Aerospace in the UK, Alenia in Italy, and Casa in Spain.

Mr Ruhe said the lack of flexibility shown by the aerospace industry, and the expectations for spending which went far beyond the budget approved by the Bundestag, would endanger the future of the project. Anyone who wanted to see the project succeed 'must be ready to hold back in 1993 and 1994, the most difficult years in the (German) unification process.'

He said Germany remained committed to spending DM5.85bn on the development phase.

DE Germany, EC ES Spain, EC GB United Kingdom, EC IT Italy, EC P3731 Ship Building and Repairing RES Capital expenditures GOVT Government News P3731 The Financial Times London Page 2 455
Thousands flee Serbian advance Publication 930304FT Processed by FT 930304 By LAURA SILBER and MICHAEL LITTLEJOHNS BELGRADE, NEW YORK

AT least 18 people were yesterday reported killed and dozens wounded in Cerska, the Moslem enclave in eastern Bosnia, as thousands of refugees tried to flee the Serb advance through the region.

The continued fighting came as the US claimed air-drops of relief supplies had been a success and said that the operation would continue. Last night Belgrade air traffic controllers said a fourth air-drop had taken place.

A ham radio operator from Konjevic Polje, about seven miles south of Cerska which was the target of the third air-drop on Tuesday, yesterday said villagers had found 18 aid pallets in snow about half a metre deep.

Ms Lyndall Sachs, spokeswoman of the Belgrade office of the United Nations High Commissioner for Refugees, said: 'We have reports that Konjevic Polje is under heavy bombardment by Serbs . . . and on amateur radio we hear they are coming under tear gas, shells, and small arms fire.'

Mr Radovan Karadzic, the Bosnian Serb leader, in a letter to President Bill Clinton, urged the US to abandon the air-drops because they threatened to ignite a wider war. A Serb mayor in eastern Bosnia also urged the US to stop the drops, saying land corridors were safer and more efficient.

However, the US administration is convinced that, in spite of the latest escalation in hostilities, the air-drops have helped to persuade the Bosnian Serbs to allow through more and bigger ground relief convoys. Eleven UNHCR lorries yesterday crossed Serb lines to Gorazde, about 100 miles south of Cerska, carrying 69 tonnes of food and medical supplies.

In a visit to New York that took on enhanced significance because of the worsening situation, Mr Douglas Hurd, the UK foreign secretary, met Mr Boutros Boutros Ghali and endorsed the UN secretary-general's views on the need for the use of force by UN troops to implement any agreement.

Mr Hurd, who also met Lord Owen and Mr Cyrus Vance, the UN and European Community peace negotiators, emphasised that it would be impossible to impose a military solution in the absence of a negotiated settlement endorsed by all the warring parties.

The ideas that were taking shape after last Friday's Nato meeting were still a long way from 'receiving detailed definition,' he added. .

Meanwhile, in a speech in Antwerp yesterday, Mr Hans van den Broek, EC commissioner responsible for external relations, raised the prospect of the EC, the US and Russia using joint military force to bring an end to the conflict. Military intervention might be necessary to uphold a political settlement based on the Vance-Owen plan, or to impose a solution from the outside.

YU Yugoslavia, East Europe BA Bosnia-Hercegovina, East Europe P9721 International Affairs GOVT Legal issues P9721 The Financial Times London Page 2 477
Property reform Publication 930304FT Processed by FT 930304 By VIRGINIA MARSH BUCHAREST

Romania is to allow foreign companies to own property in Romania and repatriate all profits, writes Virginia Marsh in Bucharest.

RO Romania, East Europe P9611 Administration of General Economic Programs P65 Real Estate GOVT Government News P9611 P65 The Financial Times London Page 2 55
Danes cut rate Publication 930304FT Processed by FT 930304 By HILARY BARNES COPENHAGEN

Denmark's central bank reduced its key money market interest rate, the repro rate, by a half point from 12.5 to 12 per cent yesterday, writes Hilary Barnes in Copenhagen.

The step follows easing of speculative pressure on the Danish krone, which peaked at the beginning of February, when the official discount rate was raised from 9.5 to 11.5 per cent.

DK Denmark, EC P9311 Finance, Taxation, and Monetary Policy P601 Central Reserve Depositories ECON Balance of payments P9311 P601 The Financial Times London Page 2 97
No French growth Publication 930304FT Processed by FT 930304 By DAVID BUCHAN PARIS

The first quarter of this year will show zero growth in the French economy, the Insee government statistics office predicted yesterday, writes David Buchan in Paris.

Insee also forecast 'no significant growth' in the first six months of this year. Companies' expectations remain very unfavourable, it said, because they see no early improvement in demand on their main European markets.

Output fell 0.5 per cent in the last quarter of 1992.

FR France, EC P9611 Administration of General Economic Programs ECON Economic Indicators P9611 The Financial Times London Page 2 102
Brussels to clear Perrier takeover Publication 930304FT Processed by FT 930304

THE European Commission is about to approve the takeover of Perrier, the French mineral water company, by Nestle, the Swiss foods group, write Andrew Hill in Brussels and Ian Rodger in Zurich.

Brussels' competition authorities signalled yesterday they were broadly satisfied with the proposed sale of part of Perrier's assets to the French beverage company Castel for FFr750m (Pounds 94m).

A formal go-ahead will have to wait until the French government, and the French town of Thonon-les-Bains have approved Castel as the new operator of the Vichy and Thonon water sources under their control.

The Commission approved the Nestle-Perrier deal last July after a five month inquiry, but on condition the rights to certain mineral water brands and springs were sold to a single buyer.

The Commission wants to encourage a new 'third force' on the French mineral water market, apart from Nestle and BSN, France's biggest food company.

Commission officials said yesterday they did not think the sale of Thonon and Vichy would pose particular problems.

Under the original deal with Nestle, Castel would have acquired the rights to Vichy, Thonon and Saint Yorre, but not Pierval, the fourth brand specified in the Commission's decision last summer. However, under pressure from Brussels, Nestle persuaded Castel to buy Pierval as well, and announced an amended deal last week.

Nestle Source Perrier FR France, EC CH Switzerland, West Europe P5149 Groceries and Related Products, NEC COMP Acquisition GOVT Legal issues P5149 The Financial Times London Page 2 257
Frankfurt draws a discreet veil over extreme right: Local elections in the state of Hesse will test support for Republicans Publication 930304FT Processed by FT 930304 By CHRISTOPHER PARKES

FRANKFURT has been tidied up in preparation for local elections in the state of Hesse this Sunday. The city authorities have cleared 'Needle Park' in the banking quarter of drug dealers and their clientele. The homeless have been shifted out of the main station's shopping galleries.

Unofficial action has ensured that other unsightly elements - the extreme right - have hardly shown their face. Election meetings on behalf of the Republicans and German People's Union (DVU) have been confined by public pressure to backrooms in down-at-heel pubs. Overt signs of their activities - posters installed nightly on lamp posts three metres above the streets - disappear before dawn.

But the result of the vote for 21 district presidencies and 426 local councils, the only scheduled popularity test for Germany's political parties this year before the grand slam sequence of local, state, federal and European elections in 1994, is likely to be an untidy affair.

In the state overall, the Social Democrats (SPD) are expected to sustain light losses on the 44.5 per cent share of the vote last time in 1989, while Chancellor Kohl's Christian Democrats (CDU) suffer more substantial reductions from their 33.3 per cent.

The Greens seem set to improve on their 7 per cent overall share won in 1989, mainly because disillusionment with the main parties has prompted a drift among voters seeking respectable alternatives. These apparently do not include the Free Democrats, who have been losing ground and appear from most recent samplings likely to emerge with less than the 4.4 per cent of the Hesse vote they won in 1989.

But most eyes, in Bonn and abroad, will be focused on Frankfurt. As well as being the largest city in the state, it is the most crime-ridden and most cosmopolitan in the country - a quarter of the population is non-German. It is amply qualified as a political proving ground for the far right.

The weekend election will show the extent to which the Republicans and DVU have been able to transmit their 'foreigners out' message beyond their meeting rooms, and the extent to which they may influence the federal electorate next year.

Opinion surveys in the city have shown the SPD fading sharply and the CDU gaining on the popular perception that for all their failings in Bonn, the Christian Democrats are better equipped to deal with the main issues in this election: a mostly mundane mix of budget management, housing shortages, traffic bottlenecks and rising crime. At the last count the two main parties were neck and neck with 35 per cent each among those who had decided how to vote. This placed the CDU marginally below its 1989 result and SPD down five percentage points.

Meanwhile, the Greens, the SPD's current coalition partners have gained five points to reach 15 per cent overall. The Republicans, representing the other extreme of the spectrum, seem set to win almost 7 per cent of the vote - the same as the National Party (NPD), their ideological predecessors, in the 1989 election.

The figures suggest that the recent widespread public condemnation of racist violence, orchestrated candle-lit processions and posters preaching 'Tolerance' on every corner have had some effect on the city's collective conscience.

But although the issue of asylum-seekers has slipped down the political agenda and is mentioned by only 6 per cent of voters as an important issue, the more general 'foreigner problem' (17 per cent) remains inextricably bound up in local minds with crime (27 per cent).

The final judgment must wait until all the votes have been counted, including those of the 17 per cent of Frankfurters who say they have yet to decide which way to vote.

DE Germany, EC PEOP Personnel News The Financial Times London Page 2 655
Call for intervention in Yugoslavia Publication 930304FT Processed by FT 930304 By LIONEL BARBER BRUSSELS

MR Hans Van den Broek, EC commissioner responsible for external relations, yesterday raised the prospect of the European Community, the US and Russia using joint military force to bring an end to the conflict in former Yugoslavia.

In a speech in Antwerp, Mr van den Broek, formerly Dutch foreign minister, said the Yugoslav crisis had entered a crucial phase. Military intervention might be necessary to uphold a political settlement based on the UN-EC Vance-Owen plan, or to impose a solution from the outside.

'In both scenarios, Europe will face painful choices as to its military intervention,' said Mr van den Broek, 'I believe that only a united front by the US, the European Community and Russia offers a chance of forcing the warring parties to make peace.'

In Brussels yesterday, EC diplomats reacted cautiously to Mr van den Broek's threat to use force, pointing out that such decisions lay with member states, rather than the European Commission. Both the UK and France, who have several thousand troops supporting humanitarian missions in former Yugoslavia, have voiced reservations about an open-ended commitment to use force.

A UK diplomat said Mr van den Broek, a long-time hawk on Yugoslavia, was on 'dangerous ground' if he was threatening to impose an outside settlement. More than 50,000 troops might be needed to broker and enforce a truce. 'He needs to explain where he is going to get the men and the money.'

The European Commission announced yesterday that the EC was accelerating disbursement of Ecu60m (Pounds 50m) to help the victims of the war, the first tranche of an Ecu325m aid package. But Mr Manuel Marin, EC commissioner responsible for development aid, said he could not guarantee that the medicine and food would reach those in need. The EC remained dependent on the United Nations High Commission for Refugees, he said.

Mr Marin said 'all appropriate means' should be used to deliver the aid, including 'active and hard-hitting measures.' But he recognised that the ultimate decisions lay with western governments. 'I would not hide that the war in Yugoslavia has not been the most brilliant page in the history of the European Community.'

YU Yugoslavia, East Europe P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 2 389
Doubt cast on Bonn's plan for company tax reform Publication 930304FT Processed by FT 930304 By QUENTIN PEEL BONN

PLANS by the German government to overhaul company taxation, to make Germany more competitive, could have the opposite effect, leading economists and tax experts warned yesterday.

Far from encouraging investors to come to the country, it was likely to act as a disincentive, because of sharp cuts proposed in depreciation allowances, they told a parliamentary inquiry in Bonn.

In addition, the new law could contradict the German constitution, by discriminating between income tax payers.

Indeed, rather than have an inadequate tax reform, which is supposed to have no net effect on the government's tax income, the experts suggest that it would be better to have no reform at all.

The embarrassing evidence for the German government, and for Mr Theo Waigel, the finance minister, in particular, was presented at a public hearing of the finance committee of the German Bundestag.

The key element in the plan for a new law on corporate taxation, intended specifically to improve the competitiveness of Germany as an investment location - the so-called Standortsicherungsgesetz - is a substantial reduction in the marginal rate of corporate taxation from more than 50 per cent to 44 per cent.

Private companies which pay income tax would see the rate come down from 53 to 44 per cent, and public companies paying corporation tax would also be liable for a marginal rate of 44 per cent, instead of the present 50 per cent.

However, the plan is intended to have no net effect on the government's tax revenues - given the current acute budget squeeze to finance spending in east Germany - and the reduction in overall tax rates is to be financed by abolition of depreciation and other allowances.

In a report on the tax reforms published to coincide with the hearing, the Berlin-based German Institute for Economic Research (DIW) said that 'on balance, it will be precisely those companies intending to invest who will be penalised by the tax changes.

'For them the advantages offered by the planned reduction in basic tax rates will frequently be outweighed by the disadvantages resulting from the worsening of depreciation allowances.'

A series of leading experts in the field of company taxation backed the argument of the DIW. Professor Joachim Lang, of the Institute for Taxation Law at the University of Cologne, said that 'to attempt to improve competitiveness in a way which does not reduce tax revenues is as impossible as trying to square a circle'.

He suggested that, in particular, foreign investors would be discouraged by the reforms which would if anything make German tax law more, not less, complicated.

DIW calculates that particularly in capital intensive industries, like engineering and the chemical industry, the effect would be negative, while labour-intensive industries like textiles would benefit. That was scarcely the intention of the tax reform.

DE Germany, EC P99 Nonclassifiable Establishments P9311 Finance, Taxation, and Monetary Policy GOVT Taxes P99 P9311 The Financial Times London Page 2 506
Walkout at Ford after leak of plans to cut 3,000 jobs Publication 930304FT Processed by FT 930304 By ROBERT TAYLOR, Labour Correspondent

LEAKED internal documents from Ford Motor Company revealing plans to close most of its general services business yesterday led to a walkout at its Dagenham plant.

According to the documents, leaked by unions at the company, Ford intends to contract out most of its general services business in a move affecting 3,000 jobs in its British and German plants by the end of the year, in spite of the risk of industrial conflict.

Service workers at Dagenham staged an unofficial 24-hour strike in protest and union officials said they were shocked and horrified at the proposals.

The workers involved are employed in the transport of supplies and parts between Ford plants in the UK and continental Europe as well as maintenance work, electrical engineering and office administration. The company employs 1,482 service workers in the UK and as many as 1,317 of them would be affected by the restructuring plan. The company says there will be no compulsory redundancies.

Ford confirmed the leaked documents were genuine, and said it was studying how to implement the contracting-out plan, but the outcome could not be prejudged. It added that it was company policy to use outside specialist companies where appropriate. Last year, Ford said it was outsourcing its seat manufacture.

Ford said it needed to cut its costs and could not afford to retain in-house services when these could be provided more competitively from outside.

In the leaked documents, Ford assesses the strike risks of going ahead with restructuring general services. It believes 'the most serious risks' lie with the truck drivers who supply key components to its production plants.

'A British truck fleet dispute would probably result in the progressive closure of all Ford European manufacturing plants within three days,' the documents say.

The company calculates that if it decided to reassign or re-source truck fleet business, it would 'result in a dispute of at least two weeks' duration' because it would mean a loss of earnings and jobs.

The documents say Ford believes the unions would be 'unlikely to act swiftly to influence the drivers to end a truck fleet dispute'.

Another danger area for disruption would be boiler operations, where a strike could halt production quickly, although Ford believes the personnel concerned 'would be willing to explore re-sourcing and reassignment terms before reacting'.

Ford has calculated that it would not be possible to stockpile to protect continental manufacturing plants because of the limited time available. It also believes there would be 'major difficulties' for management in maintaining boiler operations.

The documents also suggest the company fears a 'a high risk of significant disruption' across all general services.

Union officials are due to meet Ford on March 11 to discuss the company's existing threat of compulsory redundancies in its UK plants.

Mazda and Ford end joint venture talks, Page 26

Ford Motor GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies COMP Company News PEOP Labour P3711 The Financial Times London Page 1 516
World News in Brief: Met men warn of floods Publication 930304FT Processed by FT 930304

The east coast could suffer floods worse than those of 1953, in which more than 300 people died, the London Weather Centre warned. A combination of winds and the position of the moon - which controls the tides - could bring some of the highest seas of the century within the next few days.

GB United Kingdom, EC P99 Nonclassifiable Establishments RES Natural resources P99 The Financial Times London Page 1 85
World News in Brief: Hillsborough victim dies Publication 930304FT Processed by FT 930304

Hillsborough disaster victim Tony Bland, 22, died last night after a court ruled last month that doctors could stop feeding him.

GB United Kingdom, EC P99 Nonclassifiable Establishments PEOP Personnel News P99 The Financial Times London Page 1 50
World News in Brief: Dollar hits low against yen Publication 930304FT Processed by FT 930304

The dollar slipped to a new Tokyo traded low of Y116.2 in early trade this morning as interbank dealers and speculators sold the currency. It closed at 116.685 in New York. Purchases of the yen against the D-Mark also strengthened the Japanese currency against the dollar.

JP Japan, Asia US United States of America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 1 83
World News in Brief: Five held over Harrods bombing Publication 930304FT Processed by FT 930304

Police were questioning five people last night over the IRA bombing of Harrods in January, including two men held after an armed raid in north London on Tuesday. Between 20lb and 50lb of high explosives were found at the raid address.

GB United Kingdom, EC P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P9229 The Financial Times London Page 1 78
Bundesbank debates new rate cut: Half-point reduction will be on policymakers' agenda today despite inflation fears Publication 930304FT Processed by FT 930304 By CHRISTOPHER PARKES and REUTER FRANKFURT, BONN

THE Bundesbank will today discuss a further 0.5 percentage point cut in Germany's leading interest rates against a tense background of deepening recession in Germany and elsewhere in Europe.

Today's discussion follows the weekend meeting in London of finance ministers and central bank governors from the Group of Seven leading industrial countries at which Germany's trading partners said they would like an early cut in German rates.

The Frankfurt-based directorate of Germany's central bank is understood to have put the interest rate cut issue on the agenda for today's regular council meeting at which it will be joined by the heads of the regional central banks, who are the main source of pressure for reductions.

Expectations about today's meeting have seesawed since the G7 meeting. Mr Helmut Schlesinger, Bundesbank president, initially fuelled hopes of lower official rates by predicting a slight easing of German money market rates this week. But the Bundesbank's subsequent money market operations have suggested no change. Some economists have warned that the Bundesbank may not act because of continuing fears about inflation.

Until yesterday there had been no sign of the turbulence in the European exchange rate mechanism which prompted surprise cuts in the discount rate and the internationally important Lombard rate to 8 per cent and 9 per cent respectively a month ago.

However, in addition to calls from Germany's partners for a further cut in interest rates to pull Europe out of recession and boost the world economy, German domestic factors have come increasingly into play. This week's industrial production statistics showed output in December and January almost 7 per cent down on a year earlier.

These figures, Deutsche Bank's new forecast that the economy is heading for a crash-landing, and a warning yesterday from Mr Ferdinand Piech, head of Volkswagen, that he was braced for a 'long, massive recession', will tend to weight the opinions of regional heads in favour of cuts.

However, economists warned that over-reaction - especially in the wake of last month's abrupt rate reduction - could damage the bank's credibility and its reputation for guiding events rather than being guided by them.

Mr Klaus Friedrich, chief economist at Dresdner Bank, admitted that the rate of decline in industrial output was unprecedented compared with previous recessions. However, manufacturing accounted for only a third of gross national product, he said.

He still believed there was a better than 50 per cent chance of recovery starting this year, based on service industries' growth and the prospect of rising exports.

'A cut tomorrow could be viewed as giving way to panic in industry,' he said. Exchange markets had settled now that the downward direction of the Bundesbank's rates policy was clear. It was probably not necessary for it to use up more ammunition at present. If further turbulence could be avoided, there was a 'marvellous opportunity . . . to generate real confidence' after the French elections this month.

The leaders of Germany's three-party coalition agreed to boost petrol and diesel taxes from next year to raise revenue for a planned railway reform, Chancellory Minister Friedrich Bohl said, Reuter reports from Bonn.

He said early today that it had been agreed to seek a motorway user fee along with the tax increase to raise about DM8bn in annual revenues as of next year. Coalition leaders had settled on a fuel tax rise of 13 pfennigs per litre starting in 1994, he said.

Currencies, Page 31

World stocks, Page 37

Deutsche Bundesbank DE Germany, EC P601 Central Reserve Depositories P9311 Finance, Taxation, and Monetary Policy ECON Balance of payments P601 P9311 The Financial Times London Page 1 632
Stock and Currency Markets Publication 930304FT Processed by FT 930304

----------------------------------------------------- STOCK MARKET INDICES ----------------------------------------------------- FT-SE 100: 2918.6 (+36.3) Yield 4.15 FT-SE Eurotrack 100 1158.99 (+2.28) FT-A All-Share 1419.72 (+1.2%) FT-A World Index 144.64 (+0.3%) Nikkei 16,853.92 (-10.33) New York: Dow Jones Ind Ave 3,404.04 (+3.51) S&P Composite 449.27 (+1.37) ----------------------------------------------------- US RATES ----------------------------------------------------- Federal Funds: 3 1/4% (3%) 3-mo Treas Bills: Yld 2.983% (3.024%) Long Bond 104 3/8 (103 5/8) Yield 6.777% (6.834%) ----------------------------------------------------- LONDON MONEY ----------------------------------------------------- 3-mo Interbank 6 1/8% (6 1/16%) Liffe long gilt future: Mar 105 9/16 (Mar 105 3/16) ----------------------------------------------------- NORTH SEA OIL (Argus) ----------------------------------------------------- Brent 15-day (April) dollars 18.93 (18.84) Gold New York Comex (April) dollars 329.7 (330.5) London dollars 329.35 (328.95) ----------------------------------------------------- STERLING ----------------------------------------------------- New York: dollars 1.4505 (1.449) London: dollars 1.45 (1.4485) DM 2.385 (2.38) FFr 8.0975 (8.065) SFr 2.2125 (2.205) Y 169.75 (170.5) pounds Index 77.4 (77.3) ----------------------------------------------------- DOLLAR

----------------------------------------------------- New York: DM 1.64535 (1.639) FFr 5.5835 (5.605) SFr 1.5228 (1.5225) Y 116.685 (117.585) London: DM 1.645 (1.6425) FFr 5.585 (5.5675) SFr 1.525 (1.5225) Y 117.1 (117.7) dollars Index 66.1 (66.2) Tokyo open Y 116.8 -----------------------------------------------------

US United States of America JP Japan, Asia GB United Kingdom, EC P6231 Security and Commodity Exchanges P1311 Crude Petroleum and Natural Gas P3339 Primary Nonferrous Metals, NEC COSTS Commodity prices MKTS Market data P6231 P1311 P3339 The Financial Times London Page 1 227
UK shares reach record high on hopes of recovery Publication 930304FT Processed by FT 930304 By PETER NORMAN and PHILIP STEPHENS

THE UK stock market closed at record highs yesterday as investors gained confidence that economic recovery may be under way at last.

Helped by Tuesday's higher prices on Wall Street, encouraging UK company results and hopes that the Bundesbank will cut German interest rates today, the FT-SE 100 index jumped by 36.3 points to a new closing high of 2,918.6. The FT-SE mid 250 index also posted a record closing high after a day in which a healthy 710m shares were traded.

The market took heart from news of a sharp increase in new home sales so far this year. The Treasury's latest monthly monetary report, published yesterday, highlighted the upwards trend of retail sales and commented that demand and activity late last year 'appear to have been, if anything, a little stronger than assumed' in the government's Autumn Statement of last year.

However, the patchy and fragile nature of any recovery was underlined by a Nationwide Building Society report that house prices fell 1.4 per cent in February and a warning from the Confederation of British Industry that unemployment is unlikely to fall below 2.25m even after recovery has become established.

The share price jump coincided with a determined attempt by the government to talk up prospects for recovery.

Mr John Major, the prime minister, again castigated what he called the 'doom-mongers' attempting to paint a picture of a nation in decline. He pointed to record exports, rapid growth in productivity and low inflation as evidence of the underlying strength of the economy.

Lex, Page 20

London stocks, Page 40

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 1 300
Maxwell avoids bankruptcy threat Publication 930304FT Processed by FT 930304

IAN MAXWELL arrives with his lawyer at the High Court in London yesterday where he avoided the immediate threat of bankruptcy by making a payment of Pounds 500,000 to the liquidators of Bishopsgate Investment Management, former manager of the Mirror Group Newspaper pension funds. Mr Maxwell was ordered to pay the money after the High Court ruled he had breached his duty as a director. Proceedings were started after his lawyers indicated he could not make the payment.

Report, Page 10

Bishopsgate Investment Management GB United Kingdom, EC P672 Investment Offices GOVT Legal issues PEOP Personnel News P672 The Financial Times London Page 1 114
BA seeks Branson pledge of silence to end dispute Publication 930304FT Processed by FT 930304 By PAUL BETTS and MICHAEL CASSELL

BRITISH Airways is demanding that Mr Richard Branson, head of Virgin Atlantic Airways, sign a pledge banning him from ever making any public reference to BA's 'dirty tricks' campaign as part of a final settlement of their bitter dispute.

Virgin, in turn, is understood to have asked for signed commitments from BA not to indulge in any further anti-competitive practices.

According to sources close to both sides, the two airlines are refusing, so far, to yield on these issues but are understood to have agreed in principle on a Pounds 9m cash compensation offer to Virgin by BA on Monday to settle the dispute.

As the two sides remained locked in tense negotiations, Sir Colin Marshall, chairman of BA, and Mr Robert Ayling, the airline's managing director, last night came under pressure from some MPs at a private meeting of the House of Commons all-party Aviation Group.

Labour MPs alleged that BA's activities against Virgin had damaged the reputation of UK civil aviation and demanded assurances that the airline would never repeat such behaviour.

Mr Ayling renewed BA's assurances that the 'dirty tricks' involved a small number of incidents and employees.

Mr Peter Mandelson, Labour MP for Hartlepool, dismissed the explanation as 'implausible'.

Pressed by MPs, Sir Colin said any BA activities against Virgin 'had not been authorised by any director'.

Asked about reports that BA was still conducting covert operations against Virgin in the US, Mr Ayling said a full investigation into the latest allegations of passenger poaching was under way.

Sources close to the talks said last night that, unless the outstanding issues were quickly resolved, the lengthy and difficult negotiations between the two airlines risked collapse.

Virgin rejected BA's Pounds 9m offer on Tuesday after Mr Branson was asked to sign a pledge he would remain permanently silent on BA's campaign against his airline.

Although both sides appear anxious to reach an agreement by the end of this week, Mr Branson has made it clear he does not intend to be legally bound never to mention again the events of the past seven years involving BA and his airline.

Under BA's demands, Mr Branson would be required to consult Sir Colin Marshall, BA's chairman, before making any statement concerning the relations between the two airlines. This is understood to be regarded by Virgin as unacceptable. The commitment would preclude Mr Branson from referring to the episode in, for instance, an autobiography without BA's approval.

A Virgin official said last night that 'the lines are still open and negotiations are continuing' but refused to comment on the issues still threatening the talks.

But the main stumbling block remains the demand for silence from BA which, unless resolved in the next 24 hours, could jeopardise a peace settlement.

Mr Branson and Sir Colin first met to try to settle the dispute following Virgin's libel case victory in January.

Although Virgin won Pounds 610,000 in libel damages from BA and a public apology, Mr Branson has repeatedly threatened to take further legal action against BA unless he secured satisfactory compensation for the commercial damages inflicted on his company by BA's undercover activities.

The proposal to pay Pounds 9m to Mr Branson, including about Pounds 6m in settlement over a longstanding aircraft maintenance dispute, appears to have caused dissent among BA board members. Some directors are understood to have opposed any payment, while others insisted it should be presented as an act of goodwill rather than as an admission of wrongdoing.

British Airways Virgin Atlantic Airways GB United Kingdom, EC P451 Air Transportation, Scheduled COMP Company News GOVT Legal issues P451 The Financial Times London Page 1 627
World News in Brief: Out of this world advertising Publication 930304FT Processed by FT 930304

Nasa will launch a rocket in May carrying Arnold Schwarzenegger's name in the first sale of high-flying advertising. The blast-off will promote his latest film, Last Action Hero.

US United States of America P7319 Advertising, NEC P4789 Transportation Services, NEC RES Services use P7319 P4789 The Financial Times London Page 1 65
International Company News: Sabena relaunches with modest profit Publication 930303FT Processed by FT 930304 By ANDREW HILL BRUSSELS

SABENA, the Belgian national airline, yesterday relaunched its corporate and financial image with a surprise announcement that it had returned to modest profit after years of heavy losses.

The company attributed its recovery to the 11-month-old partnership with Air France, the French national carrier.

Mr Pierre Godfroid, chairman, said the group expected a consolidated net profit of BFr6m (Dollars 180,000) for 1992, against a loss of BFr2.44bn in 1991 and a loss of BFr5.17bn in 1990.

Group results cover the performance of the scheduled airline, centralised operations and regional and charter services. Mr Godfroid said more details would be released in April.

Mr Godfroid said Sabena could not have achieved such results without Air France's support, particularly on fleet management, which he said saved the Belgian company about BFr500m last year.

The modest recovery has not come cheaply. Air France and a Belgian consortium agreed last April to inject BFr6bn into Sabena in the years up to 1994, and take a 37.6 per cent stake. The Belgian government contributed a further BFr9bn on top of earlier heavy investment. Further state aid would almost certainly be banned by the European Commission.

Sabena BE Belgium, EC P4512 Air Transportation, Scheduled COMP Company News FIN Annual report P4512 The Financial Times International Page 16 229
Sharp rise in asylum seekers Publication 930303FT Processed by FT 930304 By QUENTIN PEEL BONN

THE number of asylum seekers arriving in Germany reached more than 38,000 in February, a mid-winter record, with a sharp increase in the number coming from Romania.

In spite of strenuous efforts by German border police to stem the flow of would-be immigrants from eastern Europe, the latest statistics show an increase of 20 per cent in the first two months of the year, compared with the same period in 1992.

Mr Rudolf Seiters, the German interior minister, said the latest figures provided confirmation of the need for urgent changes in the country's liberal asylum law, currently delayed in parliamentary procedures.

He also released figures showing that of 34,505 applications for asylum processed in the course of February, only 539, or 1.6 per cent, were granted. Of the remainder, 68 per cent were rejected as economic migrants, not political refugees, and 30 per cent withdrawn.

In the February figures for asylum-seekers, no fewer than 45 per cent came from Romania and Bulgaria - 12,853 from Romania, compared with only 3,760 a year ago. In contrast, there was a 45 per cent fall in the number from former Yugoslavia: 5,637 this year, compared with 12,540 last February.

DE Germany, EC P9721 International Affairs PEOP Personnel News P9721 The Financial Times International Page 3 226
Serbs lift blockade of Danube Publication 930303FT Processed by FT 930304 By VIRGINIA MARSH BUCHAREST

SERBS yesterday lifted a week-long blockade of the River Danube which stranded at least 22 ships in ports along the river and halted international traffic.

The Romanian ministry of transport said 22 convoys, including ships from Austria, Bulgaria, Holland, Hungary, Romania and Ukraine had been stranded on either side of the barricades formed of barges near the Serb frontier port of Prahovo. A further 24 vessels were waiting in Romanian Danube ports.

Serb harbour workers had strung 12 barges across a Serbian and Romanian stretch of the river last Tuesday in retaliation for Romania's enforcement of UN sanctions. The harbour workers had said they would not lift the barricade until Romania allowed a Serbian ship loaded with 4,000 tonnes of fuel oil to sail upstream to Belgrade.

Trade between the Black Sea countries and Europe has been severely disrupted by the blockade. About 35 ships and 120 barges passed through the Iron Gates lock, upstream from Prahovo, each week.

YU Yugoslavia, East Europe P9721 International Affairs P4449 Water Transportation of Freight, NEC GOVT Legal issues P9721 P4449 The Financial Times International Page 2 197
Sweden rules out Ecu peg Publication 930303FT Processed by FT 930304 By KAREN FOSSLI OSLO

SWEDEN'S central bank governor yesterday ruled out pegging the krona to the European currency unit in favour of linking it to the D-Mark or entering the European exchange rate mechanism once Sweden became a member of the European Community, writes Karen Fossli in Oslo.

Sweden, along with Norway and Finland, has applied to join the EC and hopes to become a member by 1995.

Sweden uncoupled the krona from the Ecu on November 19 and the currency has since been devalued by about 20 per cent. The krona was floated after a failed attempt to maintain the Ecu link, including an increase by the central bank in the key overnight lending rate to 500 per cent.

SE Sweden, West Europe P9311 Finance, Taxation, and Monetary Policy P601 Central Reserve Depositories GOVT Government News P9311 P601 The Financial Times International Page 2 155
Turkey to press for early EC entry Publication 930303FT Processed by FT 930304 By DAVID GARDNER BRUSSELS

TURKEY remains determined to push for early EC membership and to trade on its growing importance as a regional power to do so.

Mr Erdal Inonu, Turkey's prime minister, made clear yesterday Ankara was looking beyond its recently-enhanced political relationship with the EC to firm commitments that it will get membership.

'We are sticking to the aim of becoming members in the near future,' he said in an interview with the FT. 'We are not looking for definite dates but for support, so that Turkey is not left in limbo.'

Mr Inonu is the leader of the Social Democratic Populist party, junior partner in Mr Suleyman Demirel's conservative-led coalition.

He stressed the benefit to Europe of Turkey's strategic role as a stabilising force on the Turkic nations of central Asia, and a bulwark against Iranian influence in these former Soviet republics.

'To get that assurance' of EC membership 'would guarantee the benefit of the role Turkey can play in that part of the world,' Mr Inonu said.

'If not, the EC won't get the benefit of that role.'

Mr Inonu was in Brussels for talks with the European Commission, including with its president, Mr Jacques Delors, as part of a European tour taking in five EC member states.

Top-level ministerial contact with the EC was institutionalised last November as part of an upgrading of the 29-year-old association agreement Turkey has with the European Community.

Turkey's 1987 membership application was turned down in 1989 because of doubts about its democratic credentials and human rights record, and because its economy and per capita income lagged far behind average EC development levels.

Mr Inonu said his government's 'aims of democratisation and stable growth had been taken up convincingly'.

They had prompted changes in the attitude of the EC, he declared.

TR Turkey, Middle East P9721 International Affairs GOVT Government News P9721 The Financial Times International Page 2 330
France counts cost of peace Publication 930303FT Processed by FT 930304 By DAVID BUCHAN PARIS

THE cost to France of deploying some 10,000 soldiers in the service of the United Nations and of other emergency military missions abroad will rise from FFr3.2bn (Pounds 400m) last year to FFr4bn this year, Mr Pierre Joxe, the defence minister, forecast yesterday.

Clearly regarding as a dubious privilege France's provision of more troops to the UN than any other country, Mr Joxe told the newspaper Les Echos that he had asked the government to bear the cost of bonuses for soldiers serving overseas out of its general budget. Otherwise, the defence equipment budget would suffer, he warned.

Pay bonuses account for two-thirds of special military operations abroad, the minister said. Conscripts, for instance, who volunteer to serve in Yugoslavia receive FFr5,000 a month, or 10 times their normal stipend at home.

The Socialists strongly oppose the phasing out of conscription, proposed by some leading members of the RPR Gaullists who are expected to form part of the new government after next month's election. The army general staff yesterday published a study claiming that the French army of 250,000 men was not only 'no worse equipped' than Britain's purely professional force of 130,000, but 20 per cent cheaper.

Meanwhile, Mr Joxe has said more arms sales like last month's deal to supply the United Arab Emirates with Dollars 3.5bn (Pounds 2.46bn) worth of tanks could be in the offing.

He cited Oman as a potential buyer.

FR France, EC P9711 National Security P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9711 P9311 The Financial Times International Page 2 273
UN and EC deplore fighting Publication 930303FT Processed by FT 930304 By MICHAEL LITTLEJOHNS UN, NEW YORK

UNITED NATIONS and European Community negotiators yesterday deplored the continuation of heavy fighting in eastern Bosnia while peace talks under their auspices were taking place in New York.

Mr Cyrus Vance and Lord Owen deplored the fact that despite numerous assurances, as well as Security Council calls for the observance of international humanitarian law, land relief convoys were still blocked.

The joint mediators urged immediate access and measures to enable the wounded to be evacuated. They also expressed concern about new displacements of innocent civilians.

Their statement was issued after President Alija Izetbegovic of Bosnia-Hercegovina raised the matter with the mediators at the outset of his first meeting with them since the talks were transferred from Geneva.

On Monday he told reporters in Washington that he was bringing proposals to the UN for a US role in a ceasefire and military disengagement, but no details of this were immediately avail-able.

Responding to the Bosnian leader's insistence that he would not take part in full-scale negotiations, Mr Fred Eckhard, the conference spokesman, observed: 'I think his presence here this morning is the answer.'

However, there was still no indication if or when a negotiating session including all the parties would take place in New York.

BA Bosnia-Hercegovina, East Europe P97 National Security and International Affairs GOVT Government News P97 The Financial Times International Page 2 240
World News in Brief: Children freed Publication 930303FT Processed by FT 930304

Two child hostages were freed by members of a religious cult under armed siege at a ranch in Waco, Texas. Police and US federal agents surrounded the ranch after a shoot-out on Sunday which left four agents and at least one cult member dead.

US United States of America P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times International Page 1 76
World News in Brief: US news chief quits Publication 930303FT Processed by FT 930304

NBC News president Michael Gartner resigned following criticism of the network's programmes notably one in which a crash test of a General Motors truck was rigged.

US United States of America P4833 Television Broadcasting Stations PEOP Appointments Gartner, M president NBC (US) P4833 The Financial Times International Page 1 63
World News in Brief: Congo ferry toll rises to 146 Publication 930303FT Processed by FT 930304

The death toll in a Zairean ferry accident involving illegal immigrants has risen from 33 to 146 after more bodies were recovered from the Congo river at Brazzaville.

ZR Zaire, Africa P4482 Ferries PEOP Personnel News TECH Standards P4482 The Financial Times International Page 1 60
World News in Brief: Children shot in Natal attack Publication 930303FT Processed by FT 930304

Gunmen using automatic weapons attacked a parked truck taking children to school, killing six and wounding seven near Pietermaritzburg in South Africa's Natal province. The Inkatha Freedom party blamed the African National Congress. The ANC denied being involved.

ZA South Africa, Africa P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P9229 The Financial Times International Page 1 75
World News in Brief: Gaza killing Publication 930303FT Processed by FT 930304

An Israeli gas company worker in the occupied Gaza Strip was stoned and shot dead when he drove into the Yibna refugee camp near Rafah town. The incident came shortly after the region was sealed off in response to the murder of two Israelis in Tel Aviv. Picture, Page 4

IL Israel, Middle East P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P9229 The Financial Times International Page 1 84
London Stock Exchange: New highs and lows for 1992/93 Publication 930303FT Processed by FT 930303

NEW HIGHS (125).

BRITISH FUNDS (1) Treas. 8pc '03, OTHER FIXED INTEREST (2) African Dev. 11 1/8 pc '10, Asian Dev. 10 1/4 pc '09, AMERICANS (4) Gillette, Pennzoil, Time Warner, Varity, BANKS (5) Allied Irish, Bk. Ireland, Deutsche, Natl. Aust., Standard Chartd., BLDG MATLS (3) Kalon, Lilleshall, Do 9pc Pf., BUSINESS SERVS (4) ADT, Rentokil, Rolfe & Nolan, Serco, CHEMS (3) BTP, BTR Nylex, European Colour, CONGLOMERATES (1) CSR, CONTG & CONSTRCN (1) Berkeley, ELECTRICALS (2) Jones Stroud, Kenwood, ELECTRICITY (2) East Midlands, Midlands, ELECTRONICS (3) Electrocomps., Macro 4, Sage, ENG AERO (1) Westland, ENG GEN (5) Clyde Blowers, Dickie (J), Fairey, Mayflower, Senior, FOOD MANUF (4) Acatos & Hutcheson, Banks (Sidney C), Goodman Fielder, Nichols (Vimto), FOOD RETAILING (2) Iceland, Park, HEALTH & HSEHOLD (1) CrestaCare, HOTELS & LEIS (1) Stanley, INSCE COMPOSITE (3) Aegon, Allianz, Royal, INSCE LIFE (4) Britannic, Prudential, Refuge, Utd. Friendly, INV TRUSTS (16) CST Emrg. Asia, ECU Wts., Euro. Smllr. Wts., Fidelity Euro. Value Units, Inv. Trust Guernsey, Jos Cap., Jove Cap., M & G 2nd Cap., Mid Wynd, Murray Intl., Rights & Issues Cap., Second Market, TR Euro. Gwth., TR Tech. Zero Pf., Throg. Dual Inc. Cap., Tor Cap., MEDIA (5) Adscene, Blenheim, Harrington Kilbride, Johnston Press, Metal Bulletin, MERCHANT BANKS (1) Schroders, MTL & MTL FORMING (3) ASW, Billam (J), Brit. Steel, MISC (5) Alumasc, Danka, Glenchewton, Heritage, Ricardo, MOTORS (2) Culver, Quicks, OIL & GAS (6) Atlantic Richfield, Command, Kelt Energy, NZ Oil, Santos, Total, OTHER FINCL (4) Govett, Invesco MIM, Do 9pc '95-00, Secure Tst., OTHER INDLS (2) Pacific Dunlop, Wilshaw, PACKG, PAPER & PRINTG (4) Brit. Polythene, Cropper (J), NMC, SCA, PROP (3) Daejan, Davies (DY), Peel, STORES (5) Brown & Jackson, Clinton Cards, Courts, French Connection, Tie Rack, TEXTS (3) Allied Text., Usher (F), Vivat, TRANSPORT (1) Norex, WATER (5) Cheam, Mid Kent, Northumbrian, South West, Thames, MINES (8) Anglo Pacific, Caledonia, Cape Range, Croesus, Greenwich Res., Normandy Poseidon, PosGold, Sons Gwalia.

NEW LOWS (15).

BREWERS (1) Guinness, BLDG MATLS (2) Darby, Johnston, CONTG & CONSTRCN (1) Lon. & Clydeside, ELECTRONICS (1) Prestwick, ENG GEN (2) Beauford, PCT, INV TRUSTS (2) Derby Inc., SPLIT Inc., MISC (2) Hornby, Stonehill, OIL & GAS (1) Tuskar Res., PROP (2) High Point, Warnford, MINES (1) OFS.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 40 409
London Stock Exchange: Abbey dull Publication 930303FT Processed by FT 930303 By JOEL KIBAZO and STEVE THOMPSON

There was slight disappointment in the market with full-year figures from Abbey National, but dealers said most of the sharp fall in the shares was a reflection of their recent strong outperformance against the wider market.

One specialist pointed to the improved profits performance in the second half of the year, which he said went largely unexplained. 'The interest margin was 2.1 per cent in the first half and 2.5 per cent in the second half; there are question marks about the company's ability to maintain margins,' he added.

Abbey dropped to 378p at one stage following the results, but later rallied to close 12 off on balance at 385p.

Fisons' preliminary figures were viewed as marginally disappointing and saw the shares retreat to finish a net 7 down at 222p, after 219p, on good turnover of 5.5m.

General Accident's preliminary results, accompanied by a Pounds 110m issue of preference shares, were much as expected and failed to trigger any substantial excitement in the market.

The shares drifted back 10 to 585p, with analysts adopting the view that the stock's near 30 per cent premium to net asset value was too large in the composite sector.

'There is a useful yield but no prospect of a dividend increase for 1993,' said one analyst, who also pointed out that a rights issue might still be made in around a year's time.

Guardian Royal, reporting today, eased 5 to 188p. Sun Alliance came under more selling pressure, closing 7 weaker at 326p in relatively heavy volume of 6.1m shares; the group announces its preliminary numbers on April 8.

Barclays came in for a flurry of support, ending 7 firmer at 432p ahead of tomorrow's full-year results, which are keenly awaited by the market. A reduction in the dividend, widely forecast by some of the market's leading analysts, would not only trigger a steep fall in Barclays' shares, dealers said, but severely damage confidence in the wider market.

A strong performance by BICC was mostly responsible for the good showing by the FT-Actuaries electricals index, which moved up 2.9 per cent compared with a marginal rise in the FT-SE Mid-250 Index and weakness in the FT-SE 100.

BICC finished 12 higher at 345p, helped by increasing optimism over the preliminary figures due this morning. Turnover reached a healthy 4.6m, boosted by an agency cross of 500,000 shares at 343 1/2 p. SG Warburg, recommending clients to increase holdings, believes the dividend will be maintained.

The general consensus is that the cables and construction group should report profits similar to last year's Pounds 81m, although estimates range from Pounds 70m to around Pounds 85m. The profits total would be net of exceptional charges of Pounds 40m, comprising Pounds 30m for the write-down of the development at Spitalfields, London, and Pounds 10m for the Channel tunnel project.

Delta, second-largest component of the electricals group, rose 6 to 438p.

A cautious statement accompanying the interim results from Raine Industries did little to comfort the market and unsettled the stock, which dropped to 99p before finishing a net 12 off at 101p.

US buying, coupled with hopes of a recovery in European steel prices, helped shares in ASW Holdings, the Cardiff-based steel and wire group, shrug off Monday's poor figures. The stock forged ahead 24 to 177p.

The strong sentiment in ASW helped boost trade in several other stocks. Chief among these was British Steel, which had a busy session as turnover rose to 20m. The shares hardened 3 1/2 to 86p.

Another beneficiary was Glynwed International, which appreciated 4 to 273p, while William Cook advanced 14 to 155p.

Engineering group James Wilkes, in which Suter now holds an 8.9 per cent stake, suffered from profit-taking after Monday's strong run. Having climbed 4 to 70p in early trading, the shares closed 10 lighter on the day at 56p. Suter once again ended unchanged at 135p.

Both James Capel and Hoare Govett were reported to have recommended Siebe and the stock appreciated 9 to 484p.

Among transport stocks, P & O moved forward 6 to 568p as NatWest Securities urged investors to buy the stock. NatWest said it 'provides a good example of a stock which combines security of dividend with improving fundamentals'. With results expected towards the end of the month, the securities house once again said it believed the dividend to be secure.

Hoare Govett was said to have been the big seller of Hays, which reported unchanged interim figures yesterday. The shares gave up 14 to 227p. SG Warburg was positive on NFC, which closed 3 better at 267p.

Shares in Rank Organisation were boosted by recommendations from several brokers. The stock climbed 9 to 676p, with SG Warburg, the company's own broker, among those to recommend the stock. Kleinwort Benson believes the shares to be a buy in the long term.

Nervous trading in Ladbroke Group ahead of tomorrow's figures left the shares 2 lighter at 193p. The range of forecasts is between Pounds 185m and Pounds 190m, before property write-downs.

Shares in Carlton Communications again suffered from the threat of a competitor in the video copying market and they fell 9 to 769p.

Among hotels, Queens Moat Houses was wanted and the shares put on 2 at 52p.

The market continued to suspect trading difficulties at Tate & Lyle, where the chief executive resigned on Monday. The shares retreated another 5 to 429p.

Abbey National General Accident Barclays Bank BICC Siebe Hays NFC Rank Organisation Peninsular and Oriental Steam Navigation GB United Kingdom, EC P6231 Security and Commodity Exchanges P6021 National Commercial Banks P6411 Insurance Agents, Brokers, and Service P335 Nonferrous Rolling and Drawing P3625 Relays and Industrial Controls P4412 Deep Sea Foreign Transportation of Freight P7389 Business Services, NEC P781 Motion Picture Production and Services P4731 Freight Transportation Arrangement MKTS Market data CMMT Comment & Analysis P6231 P6021 P6411 P335 P3625 P4412 P7389 P781 P4731 The Financial Times London Page 40 1006
London Stock Exchange: Catalyst hint Publication 930303FT Processed by FT 930303 By JOEL KIBAZO and STEVE THOMPSON

Precious metal refiner Johnson Matthey tumbled late in the session on reports that Allied-Signal, the US chemical company, had developed a palladium-based automobile exhaust catalyst that replaces the use of platinum.

The story has been around before but nevertheless sent shares in the world's leading platinum refiner into retreat, falling 19 to 459p at the day's worst.

Analysts, however, remained sceptical and one said: 'This story has been around before and the falls then were short-lived and this could be the same.'

The company also said there was nothing new in the story, and with the market coming to the view that there was unlikely to be a serious effect on profits derived from platinum, the shares rallied just ahead of the market close to finish 16 down at 462p after thin volume.

Johnson Matthey GB United Kingdom, EC P6231 Security and Commodity Exchanges P3341 Secondary Nonferrous Metals MKTS Market data P6231 P3341 The Financial Times London Page 40 176
London Stock Exchange: Demand from US lifts BP Publication 930303FT Processed by FT 930303 By JOEL KIBAZO and STEVE THOMPSON

YET ANOTHER burst of strong and sustained US buying interest drove BP shares up to their highest level since doubts over its ability to maintain the dividend first appeared over a year ago. Such has been the American appetite for BP shares in recent months that London-based oil specialists believe that US investors now hold more than 25 per cent of the equity.

BP closed 7 1/2 higher at 282 1/2 p, the best closing level since February 12, with exceptionally heavy turnover of 14m shares attributed in the main to buyers from the US.

Demand for the shares was apparent from the outset, with marketmakers hoisting opening levels to accommodate the big rise in BP stock on Wall Street overnight. News of the sale to Western Mining of the 49 per cent minority stake in the Olympic Dam uranium/copper/nickel mine for some Dollars 240m plus repayment of Dollars 190m of loans had been expected; Western Mining exercised pre-emption rights over Olympic Dam after Minorco made a similar offer.

A London-based analyst said US investors 'are not buying BP in isolation', pointing to the recent strong gains in companies such as Exxon, Mobil, Texaco and Chevron. 'US funds have focused on the oils' yield relative against the Treasury long-bond and the Standard & Poor's indices.'

British Petroleum GB United Kingdom, EC P6231 Security and Commodity Exchanges P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining MKTS Market data P6231 P1311 P2911 The Financial Times London Page 40 267
London Stock Exchange: Equity futures and options trading Publication 930303FT Processed by FT 930303

DERIVATIVES markets lacked enthusiasm yesterday, and the March futures contract on the FT-SE 100 Index made no attempt to provide a lead for the underlying stock market. However, it maintained its good premium over cash and reflected underlying confidence which was not seriously dented by indications from the Bundesbank that cuts in German interest rates are unlikely to be announced at tomorrow's policy meeting.

For most of the day, the premium over the Footsie held at around 5 points, contrasting with the 4-point discount to the fair value premium calculated by most market traders. However, after the official close, the March contract touched the 2,900 mark, close to the all-time high on the underlying stock market and the focus of investment attention at present.

Turnover was disappointing, with the day's total of 6,077 contracts barely half of some recent daily figures. The heavyweight securities houses were largely absent from the market and locals had little incentive to take positions.

Increased activity in traded options, where contracts totalled 32,344, against 18,536 the previous day, left aside the FT-SE 100 contract, where only 4,986 lots were traded, against 5,622 on Monday.

The Euro FT-SE traded a total of 9,001, while BP led the league table among the stock options, with 3,696 lots as US funds secured stock.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 40 247
London Stock Exchange: Quiet session as rate hopes dwindle Publication 930303FT Processed by FT 930303 By TERRY BYLAND, UK Stock Market Editor

INTEREST rate hopes dimmed a little on the UK stock market yesterday after the Bundesbank disappointed the optimists with the announcement of its latest repo tender rate. With the governor of the Bank of England also warning that domestic rates would be raised if the pound, or the inflation rate, required defending, equities drifted into a pre-Budget torpor.

Share prices, lacking a lead from stock index futures, moved within narrow bands. Having edged slightly firmer at first, the market turned down to show an 11-point loss on the Footsie at mid-morning after the Bundesbank had set its disappointing repo rate. The move was seen as virtually eliminating the chances of any serious reduction in German rates when the Bundesbank meets tomorrow.

For the rest of the London session, the market rallied very slowly, receiving a final boost towards the close from a modest improvement in sterling, and from a steady opening by New York equities in spite of reports of some slight disappointment with the latest US leading economic indicators.

The FT-SE 100 Index closed just 0.3 down at 2,882.3. Traders noted the evident unwillingness of the market to test the Footsie's trading high of 2,900.1, reached at the beginning of last month. With the Budget now less than two weeks away, there was a cautious response in the marketplace to a forecast by a leading institutional broker of a Footsie at 3,000 by Budget Day.

Strategists expect a modest tightening of fiscal policy in the Budget speech, probably counter-balanced by a cut in base rates. But for the rest of this week the market is likely to be dominated by the flow of results from important UK companies. Abbey National, General Accident and Fisons all shaded easier after announcing trading results yesterday but gave the stock market no evident cause for anguish.

Seaq trading volume increased to 573.2m shares from the 535.2m of the previous session, lifted by activity in a clutch of blue chip stocks in the financial and oil sectors. Non-Footsie stocks made up 62 per cent of yesterday's Seaq total, maintaining recent averages. The healthy level of retail business continued on Monday, when it was worth Pounds 1.15bn.

Leading market indices were held back by weakness in a handful of major names. ICI remained under a cloud as both UK and US investors continued to assess the valuation prospects of the two new companies which will emerge when the existing group is demerged later this year. Glaxo was also out of favour, adding to the gloom which has clouded over the pharmaceuticals sector and thus over ICI's plan to demerge its pharmaceutical interests.

BAT Industries gave ground sharply, with the early fall compounded by weakness in the US dollar later in the London trading session. London traders were puzzled by BAT's weakness, which appeared to be a delayed reaction to transatlantic pressures.

The postponement, yet again, of interest rate hopes, brought some profit-taking in the construction and contracting sectors as some traders decided to withdraw from this area until the opening on Monday of the new equity account, which takes in Budget Day. Store and retail issues, also responsive to interest rate views, traded quietly.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 40 569
World Stock Markets (America): Economic indicators push Dow up sharply Publication 930303FT Processed by FT 930303 By PATRICK HARVERSON NEW YORK

Wall Street

AFTER A hesitant opening, US markets posted sharp gains yesterday, aided by stronger than expected leading economic indicators, heavy demand for RJR Nabisco shares, and a surge of late program buying, writes Patrick Harverson in New York.

At the close the Dow Jones Industrial Average was up 45.12 at 3,400.53, its high for the day. The Standard & Poor's 500 climbed 5.89 to 447.90, while the American SE composite finished 2.53 ahead at 410.07 and the Nasdaq composite 8.21 stronger at 677.72.

Trading volume on the New York SE amounted to 270m shares and rises outnumbered declines by 1,268 to 635.

Prices slipped initially, primarily in reaction to weak bond prices. But the bond market was responding to generally positive news for equities - an unexpected 0.1 per cent rise in January's index of leading economic indicators, which analysts said bode well for both the employment outlook and corporate earnings.

Analysts also noted some technical features which revealed the underlying strength in equities, notably that in the past eight trading sessions the number of advancing stocks has totalled more than 1,000 every day.

Prices were also helped later in the day by news of strong late-January stores sales, by a surge in computer-guided program buying during the final hour of business, and by heavy trading in the shares of RJR Nabisco.

The food and tobacco group announced plans to create a separate group of shares targeted to performance of its worldwide food businesses through a Dollars 1.5bn initial public offering of stock. The plan was warmly greeted by investors, who bid up RJR stock Dollars 1/2 to Dollars 8 7/8 as nearly 13m shares changed hands in busy trading.

Kmart rose Dollars 3/4 to Dollars 24 3/8 in volume of 1.9m shares after the retailing group announced record fourth-quarter profits of Dollars 535m, up from Dollars 479m a year ago. Elsewhere in the sector, Wal-Mart firmed Dollars 1 to Dollars 34 and JC Penney rose Dollars 5/8 to Dollars 81 3/8 .

Knight-Ridder fell Dollars 2 3/8 to Dollars 57 5/8 after securities house Kidder Peabody lowered its rating on the stock from a 'buy' to a 'hold', citing concern about the information group's revenues and costs.

On the Nasdaq market, medical related stocks, recently battered by worries about the implications for corporate earnings of planned healthcare reform, bounced back. Biogen rose Dollars 1 to Dollars 31, Chiron added Dollars 3 1/4 at Dollars 52, SciMed Life put on Dollars 1 3/4 at Dollars 48 and Heart Technology firmed Dollars 1 3/4 to Dollars 18.

Canada

THE TORONTO market ended a three-day losing streak, closing higher after further heavy trading. The TSE 300 index improved 13.5 to 3,446.2, although rises led falls by only 315 to 311.

Volume rose to 52.8m shares from Monday's 42.7m. Yesterday's volume included a block trade of about 2.1m Curragh shares, representing 12.9 per cent of the company's outstanding shares. The price of the block was off 80 cents from Monday's closing price. Curragh said in a press release that it knew of no reason for the decline in the stock, which lost 45 cents at 85 cents.

US United States of America CA Canada P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 37 567
World Stock Markets (Europe): Rate cut optimism ebbs after German repo move Publication 930303FT Processed by FT 930303 By Our Markets Staff

A HIGHER than expected repo rate in Germany slightly dampened hopes of a cut in key interest rates this Thursday, writes Our Markets Staff.

FRANKFURT consolidated, banks staying relatively strong on the view that rate cuts are only a matter of time, and degree. Deutsche Bank ended unchanged at DM711, while Dresdner rose DM2.50 to DM407.30 as the DAX index eased 4.21 to 1,696.74, and turnover fell from DM7.5bn to DM6.8bn.

Notable fallers included Hoechst, down DM5.10 at DM260.90 following adverse media comment on the likely health impact of last week's toxic chemicals spillage in the suburbs of Frankfurt.

Carmakers were mixed, with BMW down DM5.40 to DM497.50, but Volkswagen DM4.50 higher at DM278.50. VW said in Geneva that recent reports on its prospects had been too gloomy, that it would break even this year and that it would focus on profits, not volume, in the 1990s.

PARIS finally broke through the 2,000 barrier to close at its highest level for about 9 months. The CAC-40 index, which had seen a day's low of 1,987, finished just 2.50 ahead at 2,0001.50 in turnover of some FFr2.9bn. Some analysts said that while the 2,000 level had been in target since last week it was not clear who was buying the market, although some US funds had been seen.

Michelin was among the day's losers after an independent research group cut its earnings forecasts in half because of the depressed state of the car sector. The shares fell FFr4.60 or 2.5 per cent to FFr181.60.

MILAN was driven by Monday's late news that the Italian cabinet had approved a decree law allowing the establishment of private pension funds. Even a downgrade by Standard and Poor's, the US rating agency, of the country's long term debt had little lasting effect on sentiment and the Comit index closed up 5.49 at 536.68 in heavy turnover.

Against this, analysts said that economic fundamentals remain poor, that the pension fund news has already been discounted and that, while fresh liquidity will be generated, this is unlikely to have any effect on the equity market before the end of the year.

Generali, the county's largest insurer, which had advanced nearly 6 per cent on Monday ahead of the cabinet's announcement, eased on the kerb, losing L60 to L36,950.

AMSTERDAM weakened with KLM being affected by a statement from SAS which cautioned against hopes that talks between the Dutch carrier and members of the European Quality Alliance - SAS, Swissair and Austrian Airlines - would eventually lead to a merger between the four. The CBS Tendency lost 0.6 to 99.3 with KLM down Fl 1.10 at Fl 24.70.

MADRID eased on profit-taking, the general index closing 1.05 lower at 235.61. Banks were flat on average and constructions generally weaker.

The day's big fall was reserved for the recently ebullient Nissan Iberica, Pta34, or nearly 10 per cent lower at Pta313, reporting a big 1992 loss in the middle of an ambitious expansion programme.

STOCKHOLM retreated on profit-taking, the Affarsvarlden general index slipping 3.8 to 1,014.3 in turnover down to SKr729m from SKr873m.

Skandia, the insurance group, lost SKr6 to SKr112 after Allianz of Germany denied that it was interested in a takeover.

ZURICH's SMI index rose 10.3 to 2,130.8, banks and insurers rising as investors moved frombonds into equities.

Industrials received less attention. Kleinwort Benson was quoted yesterday as advising asset allocators to underweight the Swiss equity market, with particular reference to uncertainty in the pharmaceuticals sector.

DUBLIN's ISEQ overall index closed 30.05 higher at 1,367.47 for a two-day gain of 4.4 per cent. Mr Robbie Kelleher, head of research at Davy Stockbrokers, said that there were three main reasons: a growing belief that interest rates were going to come down significantly; news of a US bid for the government stake in the food group, Greencore; and results from Allied Irish Banks.

The AIB results were better than expected, said Mr Kelleher, leaving the shares 9p higher at IPounds 2.09, and giving added strength to a financial sector already lifted by interest rate prospects.

------------------------------------------------------------------------ FT-SE ACTUARIES SHARE INDICES ------------------------------------------------------------------------ March 2 THE EUROPEAN SERIES ------------------------------------------------------------------------ Hourly changes Open 10.30 11.00 12.00 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1155.97 1155.99 1156.99 1156.53 FT-SE Eurotrack 200 1209.47 1209.28 1209.42 1209.73 ------------------------------------------------------------------------ Hourly changes 13.00 14.00 15.00 Close ------------------------------------------------------------------------ FT-SE Eurotrack 100 1156.03 1156.80 1156.92 1156.71 FT-SE Eurotrack 200 1209.12 1209.20 1212.02 1211.84 ------------------------------------------------------------------------ Mar 1 Feb 26 Feb 25 Feb 24 Feb 23 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1158.20 1139.80 1125.06 1116.05 1119.41 FT-SE Eurotrack 200 1213.57 1194.07 1178.13 1172.14 1178.69 ------------------------------------------------------------------------ Base value 1000 (26/10/90) High/day: 100 - 1157.45 ; 200 - 1212.97 Low/day: 100 - 1155.53 200 - 1207.84 . ------------------------------------------------------------------------

DE Germany, EC FR France, EC IT Italy, EC NL Netherlands, EC ES Spain, EC SE Sweden, West Europe CH Switzerland, West Europe IE Ireland, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 37 843
World Stock Markets: South Africa Publication 930303FT Processed by FT 930303

JOHANNESBURG remained in a negative mood, De Beers leading the declines with a fall of R1.35 to R67. The overall index weakened 26 to 3,397 and industrials 35 to 4,466, while the golds index closed 13 lower at 947.

ZA South Africa, Africa P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 37 68
World Stock Markets (Asia Pacific): Australia shows strength in a weak region Publication 930303FT Processed by FT 930303 By EMIKO TERAZONO TOKYO

INDEX-LINKED selling by investment trusts depressed share prices, and the Nikkei average closed lower in spite of a late bout of arbitrage buying, writes Emiko Terazono in Tokyo.

The 225-issue index ended 15.35 down at 16,864.25 after a day's high of 16,922.75 and low of 16,796.53. The index fell in the morning on lingering concern over weaker than expected corporate profits, but recouped some of its loss in afternoon trading.

Volume picked up to 220m shares from 194m and declines finally led advances by 584 to 377, with 167 issues unchanged. The Topix index of all first section stocks eased by a marginal 0.43 to 1,275.82, and in London the ISE/Nikkei 50 index edged up 0.38 to 1,026.00.

In spite of the fall in the leading index, traders said sentiment was firm. Public funds were seen placing buying orders around the 16,500 level, and continued strength in Nippon Telegraph and Telephone, usually seen as a market benchmark, provided some optimism.

NTT gained Y15,000 at Y646,000 in heavy trading, with 38,618 shares changing hands, the heaviest since March 1991. The issue has advanced due to anticipation of a rise in city call rates, which is expected to improve earnings.

Reports last week that the government will focus its new economic stimulus package on upgrading the country's telecommunication infrastructure also prompted dealer buying.

Telecommunications engineering companies with close ties to NTT strengthened. Daimei Telecom Engineering, which installs telecom wires for NTT, climbed Y23 to Y685, while Nippon Comsys moved ahead Y26 to Y727 and Kyowa Exeo Y34 to Y859. Cable companies were firm, with Fujikura rising Y11 to Y569 and Hitachi Cable Y2 to Y644.

Tokyo Steel, the electric furnace steel maker which declined on Monday following a downward earnings revision by Nomura Research Institute, rebounded Y80 to Y2,210 on bargain hunting.

Toyobo, a leading textile manufacturer, shed Y9 to Y318 on reports that it would close its cotton-spinning plants temporarily due to sluggish demand.

In Osaka, the OSE average fell 59.66 to 17,896.82 in volume of 63.7m shares. Liquidation of margin positions pushed the index below the 18,000 level for the first time since January 27.

In Singapore, the Singapore International Monetary Exchange said trading of the Nikkei 225 futures last month surged 2.45 times from the previous year to 283,118 contracts due to firm interest from Japanese fund managers.

Roundup

WITH THE exception of Australia the region weakened yesterday.

AUSTRALIA continued to climb, adding to Monday's substantial gains. The All Ordinaries index put on 5.8 at 1,645.0 in turnover of ADollars 377.6m.

Good earnings results and the prospects of an interest rate cut contributed to the strength of the market. Among the banks, ANZ advanced 6 cents to ADollars 3.50 with 8.1m shares changing hands, Westpac firmed 3 cents to ADollars 3.22 and Commonwealth appreciated 12 cents to ADollars 7.02.

HONG KONG began to decline at the opening on reports in the Chinese press that Li Peng, the Chinese premier, will make a strong attack on Hong Kong governor Mr Chris Patten in his report to the country's parliament this month.

The Hang Seng index lost 54.59 at 6,344.23, after reaching a low for the day of 6,340.50 in the afternoon, in turnover of HKDollars 3.5bn.

Mr Patten said diplomatic exchanges were still taking place and that he would make an important statement this week 'which will set out the way ahead'.

Some property stocks, which made sharp gains on Monday, fell back: Cheung Kong receded 30 cents to HKDollars 22.20. HSBC fell 50 cents to HKDollars 64.50.

TAIWAN declined on profit-taking and the weighted index closed 172.60, or 3.8 per cent, lower at 4,344.99. Turnover was a heavy TDollars 93bn, its highest since May 1991. Financials, which have led the recent equity rally, were particularly hard hit.

However, some brokers said that in spite of yesterday's weakness, the medium-term outlook remained optimistic because of an improving economic and political situation.

SINGAPORE extended its falls as investors continued to take profits. The Straits Times Industrial index slipped 6.09 to 1,652.81 in volume down to 123m shares from 166m.

SEOUL lost ground for the fifth straight trading day but volume was said to be thin. The composite index dipped 9.23 to 633.73 in turnover of Won234.3bn.

MANILA retreated further, with the composite index giving up 20.44 to 1,473.95 in turnover down to 163m pesos from 196m pesos. PLDT surrendered 15 pesos to 965 pesos.

JP Japan, Asia AU Australia HK Hong Kong, Asia TW Taiwan, Asia SG Singapore, Asia KR South Korea, Asia PH Philippines, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 37 791
World Stock Markets: Bangkok pulls back from 1,000 barrier - One bad news item after another has forced the SET index down Publication 930303FT Processed by FT 930303 By VICTOR MALLET

Only a month ago the Stock Exchange of Thailand index, comfortably supported by strong corporate earnings growth, seemed poised to celebrate the market's bull run by breaking through the 1,000-point barrier.

In the past few weeks, however, one bad news item after another has conspired to force the index down. From a peak of 998.44 in January, the SET index fell to 910.52 on Monday this week before staging a moderate recovery yesterday to 922.48. 'It is funny how quickly a market can lose 10 per cent,' said one stockbroker in Bangkok yesterday.

The first blow to confidence was the closure of First City Investment, a listed finance and securities company which ran out of money and suspended payment of mature promissory notes.

Although the company was regarded as badly managed, and although the Bank of Thailand, the central bank, has arranged a rescue, some local investors remembered the market fall which followed the collapse of Raja Finance 13 years ago and feared that there would again be knock-on effects from the closure.

The mood was not helped by mutterings about a possible dispute within the Democrat Party, which leads the coalition government, over whether to save FCI or not; Ms Patcharee Wongpaitoon, the wealthy businesswoman at the helm of the company, is the daughter of a former Democrat leader. Nor was sentiment improved by the comments of a frustrated opposition MP who called for a military coup d'etat during a dispute over the 1993 budget.

Meanwhile, the authorities have been continuing their painfully slow attempts to prosecute Mr Song Watcharasriroj, a leading player in the market better known as Sia Song, for illegal share price manipulation.

The gloomy assumption among the local speculators who account for most of the SET's turnover is that the regulators have so much egg on their faces over the mishandling of the Sia Song and FCI affairs - it turns out that the central bank knew of FCI's bad debt problems by the middle of last year - that they will redouble their efforts to tighten controls on the market.

Questions were already being raised about the quality of FCI's accounts when Siam Cement, the largest cement producer in Thailand, disclosed that its audited 1992 net profit of Bt3.56bn (Dollars 140m) was Bt400m below the unaudited figures announced earlier, as well as being below the 1991 profit of Bt3.89bn. The share price fell sharply.

Another unsettling factor for the SET has been the suggestion that the widespread premiums for the limited number of shares that can be legally held by foreigners will disappear if the authorities approve a plan to set up a trust fund to keep shares for foreign investors.

As if all this were not enough, news dribbled out that the board of Bangkok Bank, the largest bank which accounts for about 5 per cent of the entire market capital-isation, had approved an eventual doubling of its registered capital to Bt20bn and was planning a three-for-10 rights issue this year.

The disappointment among investors was palpable. They had believed that commercial banks were generating enough money from their record profits to avoid such calls for fresh capital and dilution of earnings; and since Bangkok Bank was the market leader, the others were bound to follow.

Banks shares account for about a quarter of the SET index, and their behaviour has been partly responsible for the rise - and the recent fall - of the index. Several bank share prices have tripled in the past 18 months, prompting some brokers to suggest that the market's recent decline is no more than a timely correction.

Many brokers predict in any case that by the end of the year the index will reach 1,100 or 1,200 because earnings growth remains so strong across the economy.

Yesterday was perhaps a typical day. With the tourist trade dented by the political violence last May, the Oriental Hotel reported a fall in profits in 1992. But Land and Houses, a property company, announced net profits 75 per cent up at Bt1.24bn; Charoen Pokphand Feedmill was up 30 per cent to Bt1.19bn; and Nation Publishing was 52 per cent higher at Bt184.5m. Most companies in Europe and Japan can still only dream of results like that.

TH Thailand, Asia P6231 Security and Commodity Exchanges CMMT Comment & Analysis MKTS Market data P6231 The Financial Times London Page 37 759
Money Markets: Repo rate surprises Publication 930303FT Processed by FT 930303 By JAMES BLITZ

TO THE surprise of many market participants, the prospects for an immediate easing in German monetary policy dimmed yesterday after the Bundesbank announced that it would be offering some wholesale funds to commercial banks at unchanged rates this week, writes James Blitz.

The German central bank stated that it would be offering a fixed rate repo for 14-day bills in its weekly securities repurchase tender at 8.49 per cent.

A variable rate repo will be offered for 28-day bills, and

some dealers felt that the rates for these funds might come down by as much as 15 basis points. Nevertheless, futures dealers scaled back expect-ations of an easing in German monetary policy this week.

Some dealers suggested that the Bundesbank council might still cut the discount rate following its deliberations on Thursday. They claimed that the Bundesbank was keeping its powder dry by not tampering with the repo early in the week.

A more likely reason for the central bank's caution may have been another sharp fall in the German call money rate yesterday, to 8.61 per cent.

This week's reduction in the minimum reserve require-ments for commercial banks by DM32bn has brought the cost of overnight lending down. The Bundesbank may be waiting to see how liquidity behaves in the next few days before moving the repo.

The March Euromark con-tract consequently fell back 7 basis points to close at 91.95, at which level it is targeting three-month money in less than two weeks' time at 8.05 per cent.

The March short sterling contract was down 6 basis points on the day to 94.00, although this was partly due to the Governor of the Bank of England's comment on Monday night that Britain would raise interest rates if it felt a falling pound imperilled its goal of low inflation.

Three-month sterling cash closed 1/16 percentage point higher at 6 1/16 per cent, because of difficulties removing a Pounds 650m shortage in the discount market.

Thursday is increasingly looking like a critical day. If the Bundesbank leaves policy unchanged, the reserve requirement changes might still allow three-month money to converge with the current price of the March Euromark contract. Even so, some dealers would not exclude a backlash.

DE Germany, EC GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 31 403
Foreign Exchanges: Dollar softens on rate news Publication 930303FT Processed by FT 930303 By JAMES BLITZ

THE dollar weakened slightly against the D-Mark yesterday after the Bundesbank revealed that it would not be cutting the rate at which it offers wholesale funds to German commercial banks, writes James Blitz.

Currencies in the European exchange rate mechanism were mostly unaffected by the Bundesbank's decision to leave the 14-day repo in its weekly securities repurchase tender unchanged at 8.49 per cent.

However, the German central bank's decision showed a far more cautious stance on monetary policy than foreign exchange dealers had expected, and the run-up to tomorrow's Bundesbank council meeting will be unsettled.

Mr Gerard Lyons, chief economist at DKB International, believes that if the discount rate is not reduced, the French franc will break through the FFr3.40 level against the D-Mark in the ERM, closer to its floor of FFr3.4330.

For some days now, the dollar has been trading in a broad range of DM1.62 to DM1.6650, restrained by indicators that show the US economy is recovering at only a sluggish pace.

Yesterday's move by the Bundesbank underlined that the differential between US and German short-term rates may remain in the D-Mark's favour for some time to come. There was also a disappointing economic indicator, with US new home sales dropping 13.8 per cent in January after a downward revised 4.7 per cent increase in December.

The dollar finished in London at DM1.6425 from a previous DM1.6465. In New York it slipped further to close at DM1.6390.

In Europe, the French franc remained fairly steady against the D-Mark, ending at FFr3.389 from a previous FFr3.394. Sterling gained a pfennig, closing at DM2.3800.

Some dealers had expected the British currency to perform more strongly in the wake of comments from the Bank of England governor that UK base rates would rise if the currency depreciated further. Mr Jim O'Neill of Swiss Banking Corporation believes that if sterling breaks above DM2.40 in the next few days, it will have been through the worst.

On German rates, Mr O'Neill said: 'It is a brave person who has a confident view about the Bundesbank in the run-up to a council meeting. There is a clear group in the council who are in favour of easing and will be in favour of easing again.'

But he also believes that, whatever the Bundesbank does, it will be hard for the Spanish peseta, the Portuguese escudo and the Irish punt to stay in the ERM. 'Their relatively poor fundamentals and, most importantly, the instability of the lira and sterling make it increasingly difficult for this group to remain within the ERM,' he said.

The yen firmed against the dollar to Y117.70 from Y118.60, and in New York closed at Y117.58. It will remain buoyed by repatriation of Japanese funds as the financial year-end approaches on March 31 but may decline after that.

US United States of America QR European Economic Community (EC) P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 31 508
Commodities and Agriculture: Arizona floods buoy up vegetable prices in US Publication 930303FT Processed by FT 930303 By LAURIE MORSE CHICAGO

YUMA COUNTY in south-west Arizona is best known for its dry heat and its productive agricultural land, but this week its residents are bracing themselves for a once-in-a-lifetime flood that threatens to put more than 30,000 acres of farmland out of production for a year or more.

The county is the US's primary winter supplier of iceberg lettuce, and the second-largest vegetable growing region in the country, after central California. Yuma County growers last week hustled to harvest what remained of the winter lettuce, broccoli, and cauliflower crops.

The flood has ruffled vegetable marketing channels. Arizona wholesale lettuce prices doubled last week, to Dollars 20 and Dollars 25 a 24-head carton, and were sharply above last year's Dollars 4.50 a carton. Wholesale prices in northern US cities followed the jump and supermarket produce managers say retail prices will rise to Dollars 1.50 per head, from about 49 to 69 cents this week.

The immediate impact of the flood may only last a few weeks, as buyers shift toward spring supplies from central California. However, long-term damage in Yuma county may remain with the market. Mr Hank Giclas, spokesman for the Western Growers Association, which represents Arizona and California farmers, said it was too soon to estimate flood damages. 'One thing is sure. You will see significantly reduced supplies of winter vegetables this year, and of summer and fall vegetables next year.'

The Gila River, which normally flows gently through Yuma county's flat lowlands, is swelled by record rains. The river is flooding uncontrolled over the spillways of the Painted Rock Dam, just south of Phoenix.

Mr Clyde Gould, district manager for the Wellton-Mohawk Irrigation and Drainage District, expects the flood to peak sometime this week, leaving the Gila two miles wide.

'After the peak passes, the water could stand on the land for as much as two months,' Mr Gould said. 'I would expect production on that land would go out a minimum of one year.'

Mr Keith Kelly, director of Arizona's Department of Agriculture, estimates that farmers will lose Dollars 10m in crops as the flood hits, and Dollars 75m in revenues next season.

US United States of America P0161 Vegetables and Melons RES Natural resources P0161 The Financial Times London Page 30 394
Commodities and Agriculture: Eddie Mabo's legacy of fear for Australian miners - A judgment named after an obscure aborigine is threatening the industry Publication 930303FT Processed by FT 930303 By KEVIN BROWN

IN MINING circles, the best known name in Australia is not Paul Keating, the prime minister, but Eddie Mabo, an obscure aboriginal activist who lived all his life on an isolated island off the tropical north coast. Mr Mabo, who died last year, gave his name to a historic judgment by Australia's High Court which many mining companies claim is a threat to the future of the resources industry.

Both the Labor government and the conservative opposition have played down the implications of the Mabo case, partly in order to avoid a damaging row with aboriginal activists. However, Australia's approaching federal election has focussed attention on the multitude of questions raised by the case that will face whichever is in government after polling day, March 13.

The uncertainty flows from a High Court ruling that Mr Mabo's Meriam aboriginal group owns Murray Island, which lies in the Torres Strait between Australia and New Guinea. The significance of this is the court's recognition that a form of 'native title' may exist where ownership of land has not been explicitly transferred to private hands - for example, by freehold sale.

The judgment was greeted with jubilation by aboriginal activists because it extinguishes the constitutional doctrine that Australia was terra nullius, or unoccupied, when European settlement began in 1788.

In the long-term, the judgment will help to legitimise aboriginal claims that Australia's indigenous inhabitants were disposessed by British settlers and may increase pressure on the government to negotiate a treaty. More immediately, however, it has prompted claims from aborigines and mining groups alike that other areas, many of which include mines or mining prospects, may be open to similar land claims.

Already, aboriginal groups have indicated that ownership claims will be made on much of the Kimberleys region of Western Australia and the Nabalco bauxite mine at Gove in the Northern Territory. Other claims have been discussed, though not yet filed, on MIM Holdings' McArthur River lead/zinc/silver project in the territory and most of central Brisbane, the state capital of Queensland. More claims are likely according to Mr Mick Dodson, director of the Northern Land Council, an aboriginal advisory group, who says 'blanket land claims' across Australia are likely to prove a 'gold mine' for aborigines.

The ruling was the last straw for many people in the mining industry, which was already concerned about the federal government's decision to block a gold project at Coronation Hill because of Aboriginal religious objections. Sir Arvi Parbo, chairman of Western Mining Corporation, says the ruling raises doubts about the legality of existing mines and warns that new projects may be delayed or cancelled.

Ironically, the federal government has made determined efforts over the last year to overcome unease about the Coronation Hill decision by establishing a 'fast tracking' approval mechanism for major projects. The accelerated approval procedure is likely to be undermined, however, if projects are made the subject of land claims relying on the precedent of the Mabo decision. MIM, for example, received approval within nine months for the ADollars 250m (Pounds 120m) McArthur River project. It believes it holds legal title to the area and intends to press on with development.

It is not clear, however, how the title granted under existing legislation would be affected if the Northern Land Council went ahead with its threat to file a land claim. This is because the High Court judgment says that native title exists only where aboriginal groups can prove continuous occupation or close association with the land being claimed. In addition, the extent of the native title would depend on the traditional rights of the aborigines concerned, which might vary from full ownership to hunting or fishing rights. A further complication is that native title is likely to have been extinguished by mining titles issued before 1975, most of which effectively transferred the land to private ownership. However, most mining titles issued since 1975 would not extinguish native title because of the provisions of the federal Racial Discrimination Act, which prevents the abolition of land claim rights without compensation.

Mr Hugh Morgan, WMC's managing director, has called on the federal government to ease the problem by repealing the Race Discrimination Act. However, such a step is unlikely because it would breach Australia's international treaty obligations.

An alternative approach would be for mining companies to reach specific agreements with local aboriginal groups under which they would trade compensation for a binding agreement that no land claim would be made. Zapopan, a small mining company, recently reached such an agreement with the Jawoyn aborigines which will allow the development of a gold mine at Mount Todd, about 300 km (180 miles) south of Darwin. Other mining groups say, however, that this strategy is fraught with danger because of the fragmented nature of aboriginal society.

'It is impossible to know whether the people signing have the authority to sign on behalf of all the groups which may have an association with the area,' says an executive involved in land claims negotiations.

Faced with this uncertainty both the government and the Liberal/National Party coalition have promised consultations with aboriginal and mining groups to try to find an agreed solution. The coalition has said it would legislate 'if necessary', but has not explained how the legislation would work. Nor has it supported threats by the conservative Northern Territory government to block land claims by legislation.

Mr Gregory McIntyre, the Perth lawyer who represented Mr Mabo, says it may be possible to resolve some of the claims by negotiation, or by legislation that clarifies aboriginal rights. But the complexity of the judgment means that many cases will have to be decided by the courts, prolonging the uncertainty for miners and aborigines alike.

'The only alternative would be for the High Court to rule in the next test case that mining rights extinguish native title (in all cases),' Mr McIntyre says. 'That would put an ened to all the uncertainty. But if the court rules favourably for the Aboriginal people then there would be a drawn out process of claims being made.'

AU Australia P10 Metal Mining RES Natural resources GOVT Legal issues P10 The Financial Times London Page 30 1060
World Commodities Prices: Market report Publication 930303FT Processed by FT 930303 By REUTER

Aluminium prices extended earlier declines during afternoon LME trading, falling to 3 1/2 -month lows and ending weak, but copper and zinc finished steady after rallying from depressed morning levels. ALUMINIUM reeled under speculative fund liquidation, as well as option hedge selling. There is very little significant consumer interest at present, so further falls are possible, although the market is becoming oversold, dealers said. Three-month COPPER edged away from an early 3 1/2 -month low of Dollars 2,139 a tonne, with the market regaining Dollars 2,150 by the close, up Dollars 4. Technical buying emerged below Dollars 2,150, while heavy option-related selling was not in evidence. Today's declarations are expected to be more lively than recent expiries, dealers said. ZINC rallied strongly in the afternoon, with the fall to a 17-month low of Dollars 993 a tonne for three-month metal attracting short-covering and bargain-hunting, although further declines below Dollars 1,000 are likely.

Compiled from Reuters

GB United Kingdom, EC P6231 Security and Commodity Exchanges P3339 Primary Nonferrous Metals, NEC COSTS Commodity prices MKTS Market data P6231 P3339 The Financial Times London Page 30 195
Commodities and Agriculture: Minor metals prices Publication 930303FT Processed by FT 930303

Prices from Metal Bulletin (last week's in brackets).

ANTIMONY: European free market 99.6 per cent, Dollars per tonne, in warehouse, 1,635-1,690 (1,665-1,710).

BISMUTH: European free market, min. 99.99 per cent, Dollars per lb, tonne lots in warehouse, 2.20-2.40 (same).

CADMIUM: European free market, min. 99.5 per cent, Dollars per lb, in warehouse, 0.35-0.45 (same).

COBALT: European free market, 99.5 per cent, Dollars per lb, in warehouse, 15.65-16.30 (15.75-16.40).

MERCURY: European free market, min. 99.99 per cent, Dollars per 76 lb flask, in warehouse, 120-140 (120-145).

MOLYBDENUM: European free market, drummed molybdic oxide, Dollars per lb Mo, in warehouse, 2.00-2.10 (1.90-2.00).

SELENIUM: European free market, min 99.5 per cent, Dollars per lb, in warehouse, 4.70-5.40.

TUNGSTEN ORE: European free market, standard min. 65 per cent, Dollars per tonne unit (10 kg) WO, cif, 33-44 (37-47).

VANADIUM: European free market, min. 98 per cent, Dollars a lb VO, cif, 1.60-1.70 (1.65-1.70).

URANIUM: Nuexco exchange value, Dollars per lb, UO, 7.65 (same).

------------------------------------------------ LME WAREHOUSE STOCKS (As at Monday's close) tonnes ------------------------------------------------ Aluminium +5,850 to 1,670,875 Copper +4,950 to 333,075 Lead -175 to 234,150 Nickel +2,058 to 85,086 Zinc +10,750 to 565,350 Tin +45 to 18,650 ------------------------------------------------

XA World GB United Kingdom, EC P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices MKTS Market data P3339 P6231 The Financial Times London Page 30 235
Commodities and Agriculture: Direst warning yet on state of Russian oil industry Publication 930303FT Processed by FT 930303 By JOHN LLOYD MOSCOW

The direst warning yet on the state of the Russian oil industry came yesterday from Mr Yuri Shafranik, the energy minister, writes John Lloyd in Moscow.

Mr Shafranik, interviewed in Rossiskaya Gazeta, said that only an injection of Rbs3 trillion (Dollars 4.6bn) could stop a further production drop of 60m tonnes this year, from the present level of about 390m tonnes. Even with this investment, he said, production would fall by some 40m tonnes, previously said to be the worst estimate.

Foreshadowing a strengthening role of the state in this sector, Mr Shafranik said that 'instead of disbanding ministries (in the energy sector) we must strengthen them and give them extra powers'. The Russian government is at present reorganising the oil sector under the control of five large, vertically-integrated state companies.

Mr Shafranik, a former head of the main oil-producing region of Tyumen, revealed that 75 per cent of enterprises were technically bankrupt - but blamed a structure of pricing that made agriculture profitable and oil production unprofitable.

RU Russia, East Europe P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining P9611 Administration of General Economic Programs CMMT Comment & Analysis P1311 P2911 P9611 The Financial Times London Page 30 221
Commodities and Agriculture: 'Mini-Opec' formed to tackle CIS energy crisis Publication 930303FT Processed by FT 930303 By CHRYSTIA FREELAND SURGUT

THE LEADERS of 12 former Soviet republics yesterday formed a 'mini-Opec' in an effort to resolve their mounting energy crisis. Russian and Ukrainian representatives at the meeting in the western Siberian city of Surgut also appeared to make progress on untangling their conflict over oil and gas prices, which threatens the supply of gas to Europe.

However, while republic's heads agreed in principle to co-operate in an effort to revive Russia's declining oil industry, they skirted the critical question of the pricing of the oil and gas Russia supplies to the other former Soviet republics.

Sounding a conciliatory note, they were optimistic that their agreement to co-operate in a specific sector of the economy would be more effective than the dozens of more general, and widely-ignored, decisions made by Commonwealth of Independent States.

'We have established something similar to the European Steel and Coal Union,' said Mr Georgy Khizha, the Russian deputy prime minister. He said that the newly formed association's next step would be to set a uniform price for oil and gas 'just as in Opec'.

'It is impossible to stop the inflationary spiral without centrally agreed prices for energy,' Mr Khizha said. He added that the oil and gas association could serve as a model for inter-republican co-operation in other sectors, such as the steel and coal industries.

Russian officials warned that the Surgut agreement, intended to channel investments from the non-Russian republics into the Siberian oil industry, could make it even more difficult for Western companies to reach deals in the Russian energy sector.

The association, which will be governed by an oil and gas council made up of the prime ministers of the member states and administered by a secretariat based in the Siberian oil capital of Tyumen, will co-ordinate investments from all of the republics in the Russian oil industry and in exchange guarantee energy supplies.

Russian oil production, more than 70 per cent of which comes from the Tyumen region, has fallen sharply from a peak of 557m tonnes in 1988 to 385m tonnes last year.

The principal reasons for the decline are a drop in investments in the sector and difficulties in obtaining vital equipment, particularly from non-Russian republics such as Ukraine and Azerbaijan, which were traditionally the oil industry's main suppliers.

The spirit of co-operation appeared to be carried over to Ukrainian-Russian relations, which last week erupted in a bitter dispute over gas prices. Mr Leonid Kuchma, the Ukrainian prime minister, said he had reached a preliminary understanding with Gazprom, the Russian gas company, to pay for gas at about the same, subsidised, prices Russia charges other CIS republics. However, Mr Kuchma said the issue would not be definitively resolved until later in the week when he planned to meet Russian premier Viktor Chernomyrdin in Moscow.

RU Russia, East Europe UA Ukraine, East Europe XV Commonwealth of Independent States P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining P9611 Administration of General Economic Programs P4923 Gas Transmission and Distribution GOVT International affairs P1311 P2911 P9611 P4923 The Financial Times London Page 30 530
Commodities and Agriculture: Russian grain debt solution 'very close' Publication 930303FT Processed by FT 930303 By LAURIE MORSE

DISCUSSIONS IN Washington this week between a high-level Russian delegation and Clinton administration officials aimed at resuming US grain shipments to Russia have come down to the issue of who is going to pay for freight.

Mr Mike Espy, the US agriculture secretary, said before his final meeting with the Russians yesterday that his department was 'very close' to an agreement on the issue, and that he hoped to have a package to offer President Clinton soon. Mr Bill Clinton and Russia's President Boris Yelstin will meet for a summit on April 4 and trade groups believe Mr Clinton will offer a solution to Russia's grain credits problems at that meeting.

Mr Glenn Whiteman, deputy assistant administrator of the US Department of Agriculture's export credit programmes, said the solution would not include the resumption of commercial credits, which is what Russian officials have requested.

Russia has defaulted on Dollars 415.5m in US-backed commercial grain loans, with Dollars 240.3m more due this month. US grain sales to Russia have stalled because of the credit problems. While Russia objects to the stigma attached to receiving food aid, Mr Whiteman said those were the programmes under consideration. However, any food donation programme tapped for Russia will require legislation to lift the Dollars 30m cap on what the USDA can pay to ship donated commodities in a single fiscal year. US humanitarian shipments of food to Africa and eastern Europe this year have already reached that level. Russia will either have to come up with hard currency to pay the freight for grain shipments, or the USDA will have to seek and exemption.

Since US law requires 75 per cent of US food aid to be shipped on US-registered vessels, Russia would have to pay higher freight rates than on commercial shipments.

Mr Dan Basse, a commodities analyst for the consulting group AgResouces, estimates that the cargo preference requirement would bring freight costs for shipping Dollars 1bn of US-donated grain to about Dollars 400m.

Money to buy donated commodities is also running short. Two of the three funding sources for the 'food for progress' programme were nearly exhausted, Mr Whiteman said. 'Right now we're discussing a variety of programmes.'

RU Russia, East Europe US United States of America P011 Cash Grains P9641 Regulation of Agricultural Marketing GOVT International affairs P011 P9641 The Financial Times London Page 30 410
Commodities and Agriculture: Palladium prices up on catalyst news Publication 930303FT Processed by FT 930303 By DAVID BLACKWELL

PALLADIUM prices rose sharply yesterday on news that Allied-Signal of the US had developed an automoive exhaust catalyst using only palladium. Prices of platinum, for which catalysts is the biggest single market, fell sharply, although the New York market was recovering some of the losses in late trading.

Allied-Signal, a leading catalysts manufacturer with 25 per cent of the market, said its new system eliminated the need for other platinum group metals, reducing the cost of precious metal components by up to 50 per cent.

The news should be taken more seriously than previous announcemnts of new catalytic systems which have moved platinum group metal prices, analysts suggested. But more details were needed.

In late trading on Nymex yesterday the March palladium contract had retreated from an earlier Dollars 112.50 a troy ounce to Dollars 109.50, up Dollars 6.80.

US United States of America P1099 Metal Ores, NEC MKTS Market data COSTS Commodity prices P1099 The Financial Times London Page 30 178
World Commodities Prices: Cotton and Jute Publication 930303FT Processed by FT 930303

COTTON

Spot and shipment sales in Liverpool amounted to 398 tonnes for the week ended 26 February, compared with 144 tonnes in the previous week. Improved demand brought moderate purchases mainly in Mali descriptions. American growths made some headway.

JUTE

March/April:

C and f Dundee; BTC USD 355, BWC USD 380, BTD USD 320, BWD USD 340. C and f Antwerp; BTC USD 340, BWC USD 340, BTD USD 315, BWD USD 315.

XA World P0131 Cotton COSTS Commodity prices MKTS Market data P0131 The Financial Times London Page 30 101
Government Bonds: Disappointment with Bundesbank erodes European gains Publication 930303FT Processed by FT 930303 By RICHARD WATERS and PATRICK HARVERSON LONDON, NEW YORK

THE BUNDESBANK yesterday disappointed investors hoping for an early cut in German money market interest rates, in the process erasing some of the gains recorded by most European bond markets on Monday.

After weekend comments interpreted as signalling a rate cut this week, investors had been looking for a significant reduction in the German repurchase agreement (or repo) rate. However, the Bundesbank returned to a fixed-rate offer yesterday, from the variable rate tenders it has held for most of this year, fixing the rate at 8.49 per cent.

This was just one basis point below the last variable rate repo, falling far short of market hopes of a 10 or even 20 basis point cut.

German bonds retraced some of their gains of recent days, with the yield on 10-year bunds rising to 6.68 per cent. This was seen as a minor set-back given the strength of the market's rally, however.

The outcome of the repo tender was taken as a sign that the Bundesbank would not lower its official interest rates at its council meeting this week, though most commentators still expect such cuts in the near future, once the terms of the solidarity pact with the eastern German regions has been completed.

WHILE most European markets followed Germany down, French bonds remained firm yesterday. This was despite confirmation of this week's 10-year year bond auction, and the looming French elections.

Ten-year OATs rose on the day, closing the yield spread over German bunds to around 80 basis points, sharply lower than the 90 basis points on Monday. 'It certainly looks unsustainable at that level,' said Mr Jouni Kokko, an analyst at Warburg Securities in London.

UK government bonds remained flat yesterday in lacklustre trade. The tap stock announced on Monday hung over longer-dated bonds, putting a ceiling on any price rises, while short-dated paper was subdued after comments from the Governor of the Bank of England dampening hopes of an interest rate cut.

US TREASURY prices were virtually unchanged in the wake of mixed economic data.

In late trading, the benchmark 30-year government bond was up 1/32 at 103 19/32 , yielding 6.836 per cent. At the short end, the two-year note was unchanged at 100 1/32 , to yield 3.841 per cent.

Prices were firmer overnight on foreign markets, especially along the middle of the yield curve, but slipped back from their highs when trading in New York opened.

Traders blamed the modest selling on the news that US leading economic indicators gained 0.1 per cent in January. Analysts had been expecting the indicators to register a small decline.

Sentiment and prices, however, were buoyed by a sharp drop in January new home sales, which plunged 13.8 per cent during the month, although the housing figures were offset later in the day by news of strong late January store sales from the Johnson Redbook service.

DE Germany, EC FR France, EC GB United Kingdom, EC US United States of America P6211 Security Brokers and Dealers MKTS Market data P6211 The Financial Times London Page 29 530
International Capital Markets: Intermediary set up to borrow for housing providers Publication 930303FT Processed by FT 930303 By JOHN WILLMAN and RICHARD WATERS

THE MARKET in finance for UK housing associations was widened yesterday with the creation of the first capitalised intermediary to borrow on their behalf from UK institutions. Finance for Homes, which has eight member-associations, successfully placed Pounds 100m of 10 1/8 per cent debenture stock due 2018 at a yield 160 basis points over UK government bonds.

Five per cent of the proceeds will be retained in FFH and invested in gilt-edged stock. The rest will be distributed among the eight member-associations, secured on the broad spread of their rented housing, valued on a tenanted investment basis.

Despite the extra security offered by the structure, the bonds did not command a premium over earlier issues by housing association intermediaries. A Pounds 51.5m issue from The Housing Finance Corporation, launched last year, was trading at a yield spread of 157 basis points yesterday, having advanced since its launch spread of 182 basis points.

'The question for the housing association movement now is what advantage has this sort of structure given them?' said one banker close to the transaction.

He added that it was difficult to break the existing market consensus on the premium housing associations should pay for finance, since only around 10 insurance companies and pension funds are big investors in such issues and effectively determine the yields offered.

The issue had attracted at least five institutions which had not previously invested in housing associations, according to Mr Adrian Bell, executive director of Hambros Bank, which led the issue. However, at least one of the UK's biggest insurance companies said yesterday that it had yet to take part in any housing association transaction.

'Some areas of the documentation, such as income definition, could do with tightening,' said an executive. 'The loan documentations that have come to the market have not been sufficiently rigorous.'

If one borrower is unable to service the loan, FFH will use the 5 per cent reserve to service the debt. This would be sufficient to service the debt of the largest borrower for over two years - long enough, according to Hambros, which led the issue, for cash-flow problems to be sorted out.

Non-defaulting borrowers would have to restore the reserve, so that members are on risk to each other for the first 5 per cent of their borrowing.

Finance for Homes GB United Kingdom, EC P6531 Real Estate Agents and Managers P6726 Investment Offices, NEC FIN Share issues COMP Company News P6531 P6726 The Financial Times London Page 29 437
International Bonds: Belgium and British Gas lead day of large issues Publication 930303FT Processed by FT 930303 By ANTONIA SHARPE

A NUMBER of high-quality borrowers raised large amounts in a variety of currencies in the international bond market yesterday, but the heavy supply was readily absorbed.

The Kingdom of Belgium raised DM1bn through a five-year Eurobond issue. The amount was above market expectations of DM600m and the maturity shorter than expectations of seven to 10 years. Mr Philippe Maystadt, Belgium's finance minister, said that the proceeds would be used to refinance existing D-Mark borrowings.

The bonds were priced at 99.95 to yield 15 basis points over the series 104 of medium-term German government bonds. When the bonds were freed to trade, the spread tightened by as much as five basis points before widening out again to about 12 basis points in the afternoon.

An official at the lead manager, Deutsche Bank, said that Belgium had been advised to raise a larger amount in order to establish a new five-year benchmark.

There was above-average demand from the UK and a good proportion was placed in Switzerland and the Far East. By contrast, the shorter maturity made the bonds less attractive to German institutions which tend to prefer bonds with a 10-year life.

The Deutsche official said Belgium had opted for the five-year maturity in order to reap the cost advantage of the sharp drop in yields at the shorter end of the German government bond yield curve, prompted by hopes that the Bundesbank will cut leading interest rates tomorrow.

He noted that Belgium would have had to pay 40 basis points more if it had opted for a 10-year maturity.

The issuer had also decided against the seven-year area of the yield curve because it would have had to compete with the EC's recent DM2.9bn Eurobond issue. The EC's bonds now yield 12 basis points above underlying German government bonds compared with eight basis points at launch.

The recent widening of sovereign yield spreads on D-Mark Eurobonds, triggered by the warnings on Italy's foreign currency debt by leading credit rating agencies, could dissuade similar borrowers from issuing in D-Marks, the Deutsche official said.

In an active sterling sector, British Gas made its widely-expected appearance with two issues raising Pounds 200m each, one with a maturity of 10 years and the other with a life of seven years. Both issues were priced to yield 32 basis points over comparable UK government bonds and the spread on both issues had tightened slightly by late afternoon.

An official at CSFB, which arranged the deals with Goldman Sachs, said that investors showed a marginal preference for the 10-year maturity but that both issues were quickly placed. There was firm demand from continental European accounts looking for exposure to sterling.

Syndicate managers expect more UK corporate borrowers to tap the Eurosterling sector in the near future, encouraged by the tightening of corporate yield spreads.

The European Investment Bank also took advantage of the pent-up demand for sterling paper and re-opened its Pounds 400m issue of 8 per cent Eurobonds due 2003, launched in January.

The new tranche of Pounds 200m was priced to yield five basis points over the 8 per cent UK gilt due 2003 and the spread tightened slightly by late afternoon. An official at the lead manager, Samuel Montagu, said that most of the demand for the bonds came from overseas.

Meanwhile, the Province of Ontario launched its first Canadian dollar global issue and the level of demand was such that the amount was raised from the minimum CDollars 1bn to CDollars 1.5bn. The bonds, which have a life of 10 years, were priced to yield 93 basis points over comparable Canadian government bonds, the lower end of the indicated range of 93 to 95 basis points and within market expectations. By late afternoon, the spread on the bonds was unchanged.

An official at Merrill Lynch, one of the four joint lead managers, said that 30 per cent of the bonds went to Canada, 10 to 15 per cent to the US, 35 per cent to Europe and the rest was placed in Asia.

BE Belgium, EC GB United Kingdom, EC CA Canada P6211 Security Brokers and Dealers MKTS Market data P6211 The Financial Times London Page 29 714
International Capital Markets: Swiss bourses to embrace reporting standards code Publication 930303FT Processed by FT 930303 By REUTER ZURICH

SWITZERLAND's bourses are likely to adopt a code of reporting standards later this year which would require the vast majority of Swiss companies to improve information they make public on their financial health, Reuter reports from Zurich.

Mr Giorgio Behr, president of the special commission for recommendations on reporting practices (FER), said: 'With the exception of some 10 groups, all Swiss companies currently quoted on the bourse will have to change and improve their reporting practices.'

Switzerland's three bourses are now considering the FER standards and are likely to adopt them this year, he added.

The standards, which are based on International Accounting Standards and European Community guidelines, aim to improve the standard of Swiss corporate reports, more renowned for what they hide rather than reveal.

CH Switzerland, West Europe P6231 Security and Commodity Exchanges MGMT Management P6231 The Financial Times London Page 29 162
International Company News: Banesto net profits slide 62% Publication 930303FT Processed by FT 930303 By PETER BRUCE MADRID

BANESTO, one of Spain's 'big six' commercial banks, yesterday announced a 62 per cent fall, to Pta18.3bn (Dollars 150m), in net group profits for 1992, following an erosion of extraordinary earnings and increased provisions.

The figures include Banesto's industrial holding group, Corporacion Banesto. Extraordinary earnings, which Banesto usually generates through disposals, fell from Pta 51.6bn to an extraordinary loss of Pta 1.56bn. The group also increased provisions by 19 per cent to Pta97.5bn.

The results were largely expected in the markets, which, despite some criticism of Banesto's rush for retail business in the last two years, have also expressed satisfaction with the group's conservative provisioning as a deepening recession in Spain pushes bad debts to record levels.

Even the fall in extraordinary earnings invites conflicting responses. Some analysts believe the bank should reduce its traditional reliance on non-core income. Others believe the income Banesto is able to generate from sales of its banking or industrial assets is vital to the bank maintaining its profile among foreign investors.

The group's operating margin grew by 14 per cent to Pta228.4bn and it said that total assets had increased by 5.41 per cent to Pta6,960bn. The group held the rise in operating costs to under 8 per cent.

The results come as Banesto is poised to make a Dollars 400m rights issue soon.

Banco Espanol de Credito ES Spain, EC P6021 National Commercial Banks FIN Annual report P6021 The Financial Times London Page 28 259
International Company News: Howard Smith improves 4% Publication 930303FT Processed by FT 930303 By KEVIN BROWN SYDNEY

HOWARD Smith, the diversified Australian engineering group, yesterday announced a 4 per cent increase in net profit to ADollars 26.7m (USDollars 18.8m) for the six months to the end of December, but warned that the second half would be tough.

said depressed economic conditions would make it difficult for the group to equal last year's full-year net profit of ADollars 53.3m.

Mr Moss said the interim result was 'pretty good' in the light of depressed trading conditions, which affected all the group's activities except engineering.

The group said sales increased by 14.8 per cent to ADollars 404m, mainly due to a full half-year contribution from Dunlop Industrial Sales, which was acquired early last year.

The directors declared a fully-franked interim dividend of 10 cents, compared to 10 cents unfranked last year. The board said the full-year dividend would also be fully franked.

Tubemakers of Australia said equity-accounted net profit rose 52 per cent to ADollars 21m in the six months to the end of December, on sales down 1 per cent to ADollars 588m.

National Foods, the Australian dairy and groceries group, said net profit increased by 480 per cent to ADollars 13m on sales up 1 per cent to ADollars 440m. The interim dividend was raised to 2.75 cents, fully franked, from 2.5 cents in the comparable period of the previous year.

Tube Makers of Australia Howard Smith National Foods AU Australia P3011 Tires and Inner Tubes P202 Dairy Products P35 Industrial Machinery and Equipment P6719 Holding Companies, NEC FIN Interim results P3011 P202 P35 P6719 The Financial Times London Page 28 280
International Equity Issues: Greece to sell 14% of telecoms company Publication 930303FT Processed by FT 930303 By KERIN HOPE and TRACY CORRIGAN ATHENS, LONDON

OTE, Greece's state-owned telecommunications company, is to offer 14 per cent of its equity to domestic and international investors in a partial privatisation.

The offering, the largest so far in Greece, will include an international tranche of around 5 per cent. It will be aimed at investors in the US and Europe, according to the government's privatisation unit.

The international tranche will be offered simultaneously with a domestic tranche of around 5 per cent. The other 4 per cent will be stripped out earlier and offered on preferential terms to OTE's 28,000 employees. The government will retain control of 51 per cent.

The share issue will follow the sale of a 35 per cent stake in the company, together with management rights, to an int-ernational telecommunications operator. Thirteen groups are in line to bid, with the sale due for completion by July.

The government has not set a price for OTE, one of the few profitable Greek state enterprises. Analysts have valued the 14 per cent stake at around Dr90bn (Dollars 409m).

Last month, 24 international banks and security houses were invited to submit bids to act as global co-ordinator and lead manager. N M Rothschild, the government's privatisation adviser, is assisting in the selection process.

Thailand is about to embark on its first privatisation with the flotation of PTT Exploration and Production, part of the state-owned Petroleum Authority of Thailand. The public offering of just under 40m shares at Baht 33 per share (Dollars 1.29) represents about 15 per cent of PTTEP's total capital.

XA World P6211 Security Brokers and Dealers MKTS Market data P6211 The Financial Times London Page 28 295
International Company News: Mutual & Federal climbs 16% Publication 930303FT Processed by FT 930303 By PHILIP GAWITH JOHANNESBURG

A RISE of 36 per cent in underwriting surplus helped Mutual & Federal, South Africa's largest short-term insurer, lift net income by 16 per cent to R77.2m (Dollars 24.9m) in the six months to the end of September, from R66.6m a year earlier.

The result reflects the continuation of a turnaround in South Africa's insurance sector which has been under way for more than a year, following a period when short-term insurers were hit by uncompetitive rates, a number of natural disasters, and spiralling crime rates.

This improvement is reflected in an increase of about 70 per cent in the insurance index on the Johannesburg Stock Exchange over the past year.

Gross premiums rose 13 per cent to R645.2m from R573.5m and net premiums advanced 14 per cent to R548.4m from R482.4m. The underwriting surplus rose to R34.6m from R25.4m. Mr Ken Saggers, managing director, said the improvement resulted from stringent expense control and the absence of natural catastrophes.

He added, however, that the group's commercial and industrial portfolios remained highly competitive and underrated - to the tune of about 15 per cent - while high levels of crime-related losses remained a concern.

Mutual and Federal Insurance ZA South Africa, Africa P63 Insurance Carriers FIN Interim results P63 The Financial Times London Page 28 232
International Capital Markets: Thailand issues offshore bank licences Publication 930303FT Processed by FT 930303 By VICTOR MALLET BANGKOK

THAILAND has granted offshore banking (OBU) licences to 47 local and foreign banks, out of more than 50 applicants, as part of a scheme aimed at making the country a regional financial centre.

The Thai finance ministry said those granted licences under the Bangkok International Banking Facility (BIBF) include 12 foreign banks with branches in Thailand, 20 foreign banks with representative offices or with no prior presence, and all 15 local commercial banks.

Foreign bankers had assumed that fewer than 10 of the Thai banks would be granted OBU licences because the smaller operations might be unable to meet required capital adequacy ratios.

Under BIBF, banks will be able to take advantage of tax incentives for regional activities, although it is not clear if Thailand will be able to compete against centres in Singapore and Hong Kong.

The corporate income tax rate under BIBF will be 10 per cent instead of the usual 30 per cent. Bangkok Bank said in a research paper that BIBF would reduce the cost of foreign funds brought in to finance the Thai current account deficit.

TH Thailand, Asia P6021 National Commercial Banks P9611 Administration of General Economic Programs TECH Licences P6021 P9611 The Financial Times London Page 28 221
International Capital Markets: Nomura chief attacks banking plan Publication 930303FT Processed by FT 930303 By CHARLES LEADBEATER TOKYO

PLANS to liberalise Japan's financial markets by allowing banks to compete in securities markets are seriously inadequate, Mr Yukio Aida, the chairman of Nomura Securities, said yesterday.

Mr Aida warned that Japan was missing an opportunity for a thorough review of how to reform its financial markets in the wake of the speculative economy of the late 1980s by introducing an unsatisfactory compromise designed to support the banks

His comments are public confirmation of the ferocity of the struggle between banks and securities companies which are attempting to influence the government's policy on financial liberalisation. Securities companies allege the banks are being given favourable treatment to support them while they deal with their bad loans.

Under the plans the commercial banks will be allowed to set up subsidiaries to deal in parts of the securities markets. The plans were drawn up in the late 1980s when the Tokyo stock market was booming. Since then trading volumes have fallen dramatically and most of Japan's stockbrokers expect to make large losses this year.

Mr Aida was speaking at a seminar on co-operation between British and Japanese financial institutions organised by British Invisibles, a trade group which promotes UK financial and other services abroad.

He said: 'I am sceptical of such a reform when the securities industry is in such a dire predicament.'

As an example of the alleged unfairness of the reforms Mr Aida pointed out that the banks will be allowed to lead manage bond issues by Japanese companies in foreign markets, while securities companies will not be allowed into foreign exchange markets in Tokyo. Mr Aida criticised the banks' substantial shareholdings in industrial compan-ies.

He said these cross shareholdings gave the banks great influence over their industrial clients which they could use to attract business.

Japanese bankers speaking at the seminar dismissed Mr Aida's warnings. Mr Yoh Kurosawa, president of the Industrial Bank of Japan, said the reforms would revive the pre-second world war system in which banks had securities' businesses.

Mr Kurosawa, in a thinly veiled comment on the securities scandals which rocked the Tokyo stock market two years ago, said: 'We are aware the Tokyo stock market has its particular practices. We are anxious to learn from Mr Aida about those practices.'

Mr Tasuki Takagaki, Bank of Tokyo president, said commercial banks initially would not compete intensely in the securities market because of the extent of their problems with bad debts.

Mr Takagaki said the non-performing loans would probably provoke management crises at some smaller institutions which would be taken over by larger groups.

However he said this would not threaten the banking system as a whole.

JP Japan, Asia P6211 Security Brokers and Dealers P602 Commercial Banks P61 Nondepository Institutions P67 Holding and Other Investment Offices GOVT Draft regulations CMMT Comment & Analysis P6211 P602 P61 P67 The Financial Times London Page 28 493
International Company News: S Korean vehicle makers struggle as costs rise Publication 930303FT Processed by FT 930303 By JOHN BURTON SEOUL

SOUTH Korea's five main motor vehicle producers reported mixed, but generally worse, results for 1992 in spite of some increases in sales.

The drop in earnings re-flected higher costs as manufacturers offered low-interest consumer loans to revive sluggish domestic demand.

They also had increased costs associated with the production and marketing of several new car models.

Hyundai Motor, the biggest Korean motor company, said net profits fell by 23 per cent to Won41.6bn (Dollars 52m), although sales rose by 8.5 per cent to Won6,079bn.

Sales and profits were harmed in the last two months of 1992 as employees became involved in the presidential campaign of Mr Chung Ju-yung, the Hyundai founder, causing sales activity to slacken. Hyundai was able to balance sluggish sales in South Korea and the US, traditionally its largest foreign market, by increasing exports to Europe, which became its biggest overseas customer last year.

Kia Motors reported a 5.7 per cent decline in net profits to Won14.95bn as sales rose by 20 per cent to Won3,282bn. Earnings were depressed by costs involved with the introduction of the Potentia luxury car and the medium-range Sephia. It also had heavy investment spending in expanding production at its Asan Bay facility.

Daewoo Motors, which is unlisted, continued to post losses. Its deficit shrank to Won90bn from Won146.7bn in 1991. Sales increased by 6.5 per cent to Won1,700bn.

Asia Motors, which is a specialised manufacturer of commercial vehicles and affiliated with Kia Motors, suffered a 29 per cent fall in profits to Won7.4bn as demand weakened because of a downturn in the construction industry. Sales remained almost unchanged at Won970bn.

Ssangyong Motor slipped into a deficit of Won8.75bn after registering a profit of Won9.38bn in 1991. Sales also fell by 15 per cent to Won340.8bn.

The reverse was largely caused by increased competition in the market for the four-wheel drive vehicles, which Ssangyong monopolised until last year with its Korando model. The introduction of the Galloper by Hyundai Precision, a manufacturer of rolling stock and containers, sharply reduced Ssangyong's market share.

Hyundai Motor Kia Motors Daewoo Motor Asia Motors Sangyong Motor SK Slovakia, East Europe P3711 Motor Vehicles and Car Bodies FIN Annual report P3711 The Financial Times London Page 28 391
International Company News: McKesson Corp Publication 930303FT Processed by FT 930303 By REUTER

McKESSON Corp, the largest US distributor of pharmaceuticals, said profits for the quarter and fiscal ending March 31 would exceed its earlier expectations of 10 to 12 per cent growth, Reuter reports.

McKesson Corp US United States of America P5122 Drugs, Proprietaries, and Sundries FIN Interim results P5122 The Financial Times London Page 27 67
International Company News: Northwest Airlines Publication 930303FT Processed by FT 930303 By REUTER

THE Teamsters union of Northwest Airlines said the US carrier's plans to obtain concessions from unions in return for equity was flawed, Reuter reports.

On Monday, Northwest offered unions a 20 per cent equity stake in the company among other tradeoffs in return for wage and other cost cuts of Dollars 883m over three years.

Northwest Airlines US United States of America P451 Air Transportation, Scheduled COMP Company News PEOP Labour P451 The Financial Times London Page 27 91
International Company News: Chargeurs warns of difficult year Publication 930303FT Processed by FT 930303 By WILLIAM DAWKINS PARIS

CHARGEURS, the French textiles-to-media group, reported nearly doubled profits for last year but warned that 1993 would be 'very difficult', writes William Dawkins in Paris.

Net profits rose from FFr366m (Dollars 66m) in 1991 to FFr724m, but this was helped by a FFr410m capital gain from the sale of Chargeurs' 12.9 per cent in UTA to Air France.

The result implies an earnings fall from the first to the second half of the year. Chargeurs reported a FFr712m net profit in the first six months of 1992, up from FFr404m in the same period of 1991.

Stripping out exceptional items, amortisation costs and contributions from disposals, last year's profits rose on a comparable basis from FFr246m to FFr365m.

Chargeurs FR France, EC P22 Textile Mill Products P6719 Holding Companies, NEC FIN Annual report P22 P6719 The Financial Times London Page 27 159
International Company News: DFDS declines despite rising sales Publication 930303FT Processed by FT 930303 By HILARY BARNES COPENHAGEN

DFDS, the Danish shipping and haulage group, returned annual pre-tax profits of DKr100m (Dollars 11m) compared with DKr144m in the previous 12 months.

Sales rose to DKr5.93bn from DKr5.33bn in the corresponding period.

An unchanged dividend of DKr60 per share - 6 per cent - was proposed.

The board attributed the slide in profits to the slump in leading markets, including the UK and Sweden, and to the devaluations of the Swedish krona and sterling against the Danish currency.

Passenger traffic on the Scandinavian Seaways ferries to the UK was down.

The Tor Line freight service was adversely affected by conditions in Sweden and in Britain.

The increase in sales was attributed by the company to an improvement in the haulage division, which has strengthened its position in the European markets.

This year will be a difficult one due to the slump in main markets, the group said.

It predicted a further reduction in operating profits.

DFDS DK Denmark, EC P4412 Deep Sea Foreign Transportation of Freight P4482 Ferries FIN Annual report P4412 P4482 The Financial Times London Page 27 198
International Company News: AT&T to raise capital spending Publication 930303FT Processed by FT 930303 By AP-DJ

AMERICAN Telephone and Telegraph expects total capital spending for this year to exceed 1992's Dollars 3.9bn and capital spending for its AT&T worldwide intelligence network to exceed last year's Dollars 3bn, the company said in its annual report, AP-DJ reports.

The group added that it had not yet decided whether to adopt in 1993 or 1994 the new accounting standard for disability and other benefits provided to former employees.

It is required to adopt the standard by January 1994. AT&T said it could not reasonably estimate the financial impact of the change.

American Telephone and Telegraph US United States of America P4812 Radiotelephone Communications P4813 Telephone Communications, Ex Radio P3661 Telephone and Telegraph Apparatus FIN Annual report P4812 P4813 P3661 The Financial Times London Page 27 142
International Company News: Credit losses up at Swedish co-op bank Publication 930303FT Processed by FT 930303 By CHRISTOPHER BROWN-HUMES STOCKHOLM

FORENINGSBANKEN, the Swedish co-operative bank, saw its operating loss rise to SKr1.35bn (Dollars 175m) last year from SKr907m, as credit losses rose to SKr3.50bn from SKr2.79bn.

The bank said it would need to strengthen its capital base in the autumn through a new share issue, after its capital adequacy ratio fell to 8.1 per cent at the year-end. The government has announced the bank is entitled to state support through guarantees.

Bad debts accounted for 3.8 per cent of total lending in 1992 and mainly related to real estate and small and medium-sized companies. Problem credits amounted to SKr8.9bn at the year-end.

The bank said it expected to remain in the red this year, warning 'there is a substantial risk that loan losses will remain high'.

Foreningsbanken SE Sweden, West Europe P602 Commercial Banks FIN Annual report P602 The Financial Times London Page 27 164
International Company News: Plants to close at offshoot of Cincinnati Milacron Publication 930303FT Processed by FT 930303 By AP-DJ CINCINNATI

CINCINNATI Milacron, the US machine tool group, is restructuring its newly-acquired subsidiary, Valenite, with the closure of nine plants, including two in Brazil and one in Mexico, and net job cuts of about 480, AP-DJ reports from Cincinnati.

The company said the restructuring would improve Valenite's profitability by lowering working capital requirements, reducing overall expenses, increasing plant modernisation and improving capacity utilisation.

Costs associated with the restructuring, to be substantially completed this year, were provided for at the time of the acquisition in February. As a result, there would be no special charges, Milacron said.

Of Valenite's 27 facilities worldwide, nine will close. Those plants are in Kentucky, Michigan, Ohio, Australia, two in Brazil, Italy, Mexico, and the UK.

Two plants in Michigan and Canada will be reduced in size.

Four operations, including plants in South Carolina, Texas, France and Germany, will receive additional work.

Cincinnati Milacron US United States of America P354 Metalworking Machinery COMP Company News RES Facilities P354 The Financial Times London Page 27 187
International Company News: Fokus pre-tax losses reduced Publication 930303FT Processed by FT 930303 By KAREN FOSSLI OSLO

FOKUS BANK, Norway's third biggest commercial bank, announced yesterday that 1992 pre-tax losses, before extraordinary items, had been sharply reduced to NKr426m (Dollars 60m) from NKr2.1bn in 1991.

The substantial improvement was due to an increase in operating income, a reduction in operating costs and a significant cut in credit losses.

Fokus said that, according to its strategic plan, it is set to return to profit within two years.

It charged 1992 accounts with NKr480m for restructuring, against NKr40m in 1991, which took net losses for the year down to NKr907m, from NKr1.884bn in 1991. It said state cash transfers had enabled it to undertake the far-reaching restructuring.

Fokus wrote down the value of its property portfolio by NKr168m to NKr2.6bn last year, against a write-off of NKr425m a year earlier to NKr3.3bn. Net interest income fell by NKr174m to NKr1.1bn as operating income increased to NKr571m from NKr543m.

Fokus said that interest income was lower than had been earlier anticipated, due to unrest last year in foreign currency markets. Operating costs fell by NKr304m to NKr1.332bn last year.

Group operating profit, before credit losses and write-offs, rose sharply last year to NKr323m from NKr165m in 1991.

Fokus Bank NO Norway, West Europe P6021 National Commercial Banks FIN Annual report P6021 The Financial Times London Page 27 234
International Company News: NWA offers staff equity for wage concessions Publication 930303FT Processed by FT 930303 By NIKKI TAIT

NORTHWEST Airlines, the indebted US carrier in which KLM Royal Dutch Airlines holds a minority share stake, has offered its employees a 20 per cent equity interest in the company in return for substantial wage concessions.

Northwest said the proposal was 'the company's best offer for a revised compensation plan'. The lack of progress in talks with unions prompted speculation that the airline might file for Chapter 11 bankruptcy protection, but Northwest has denied this.

It asked labour leaders to agree to the plan by March 10.

The company is asking contract employees - including its pilots, flight attendants and mechanics - for cost savings of about Dollars 883m over three years. Management and non-contract employees would contribute Dollars 92m. The savings would come from wage reductions, employee contributions to medical and dental insurance plans, and holiday accrual rate reductions.

In return, Northwest is offering employees a 20 per cent equity stake and three seats on a 15-strong board of directors. This would match the three representatives appointed by KLM, which would see its share stake diluted pro rata.

Once the employee wage concessions are in place, Northwest will attempt a financial restructuring. If it has not obtained Dollars 500m of new permanent capital by the end of June 1995, the employees' stake could increase to 51 per cent of the equity.

Northwest Airlines US United States of America P4512 Air Transportation, Scheduled PEOP Labour COMP Shareholding P4512 The Financial Times London Page 27 263
International Company News: Marriott bondholders pursue fraud claim Publication 930303FT Processed by FT 930303 By NIKKI TAIT

A GROUP of bondholders in Marriott Corporation, the US hotels and food services group which is planning to split itself into two separately-quoted companies, intends to step up its securities fraud litigation against the company.

The bondholder action is led by PPM America, part of the British Prudential insurance company's investment management division, which holds around Dollars 200m in Marriott bonds - largely on behalf of Jackson National Life Insurance Company, the Prudential's US insurance subsidiary.

The demerger scheme involves spinning off the more profitable operational businesses and leaving most of the group's debt, along with the property assets, in a separate company.

Marriott bonds dropped sharply as a result, although the group's shares have soared.

Some bondholders, including PPM America, sued Marriott, charging that the company failed to disclose its restructuring plan when it was selling new debt issues to investors last year.

Some of the big US institutional bondholders, however, are negotiating with Marriott, with a view to a settlement.

Marriott Corp US United States of America P7011 Hotels and Motels P5812 Eating Places P6211 Security Brokers and Dealers COMP Company News GOVT Legal issues P7011 P5812 P6211 The Financial Times London Page 27 213
International Company News: FMC to buy Siemens offshoot Publication 930303FT Processed by FT 930303 By KAREN FOSSLI

KONGSBERG OFFSHORE, the Norwegian-based supplier of undersea oil and gas production systems, is to be acquired by FMC Corporation of the US.

Terms of the deal were not disclosed. Siemens of Norway, the offshoot of the German group which owns Kongsberg, expects the deal to be completed by the end of the second quarter of this year.

FMC, which supplies chemicals and equipment to the oil, gas and agriculture industries, said the acquisition would strengthen its position in the underwater systems market.

The US group has co-operated with Kongsberg Offshore since 1987, with the latter supplying electronic controls for FMC-produced underwater oil and gas production equipment.

Siemens Norway said undersea production technology was not a core business area of the group, which had decided to concentrate on its core businesses.

The deal is subject to approval by the two companies' boards of directors and Norwegian authorities.

FMC Corp NO Norway, West Europe P3533 Oil and Gas Field Machinery P281 Industrial Inorganic Chemicals P3559 Special Industry Machinery, NEC COMP Acquisition P3533 P281 P3559 The Financial Times London Page 27 195
International Company News: Spanish venture helps lift Generali income by 53% Publication 930303FT Processed by FT 930303 By HAIG SIMONIAN MILAN

AGGREGATE premium income at Generali, Italy's biggest insurance company, surged by 53.6 per cent to almost L17,000bn (Dollars 10.86bn) last year, against L10,964bn in 1991, due to the weaker lira and a big new Spanish venture.

Adjusted for currency factors and the new venture, aggregate premiums rose by 14.9 per cent, the company said.

The preliminary figures come as Generali shares rose sharply on the Milan stock exchange following Monday's decision by the Italian government to open the door to the creation of private pension funds, which are expected to boost sharply the profits of the country's leading insurers.

Generali gave no indications of its net profits or dividend for 1992, which will only be revealed after a board meeting in early May. In 1991, group net earnings before minority interests rose to L672.2bn.

Premiums on directly written Italian business rose to L4,070bn last year, with an 11.9 per cent increase to L1,496bn on the life side and a rise of 7.6 per cent to L2,574 in non-life business.

Directly-written foreign business jumped by 37.6 per cent to L1,661bn, thanks partly to the weaker lira. Adjusted for currency factors, the increase was 20.4 per cent. Indirectly-written business climbed by 21 per cent to L2,768bn.

Assicurazioni Generali IT Italy, EC P63 Insurance Carriers COMP Company News MKTS Sales P63 The Financial Times London Page 26 245
International Company News: Polygram posts income for year up 13% at Fl 506m Publication 930303FT Processed by FT 930303 By MICHAEL SKAPINKER, Leisure Industries Correspondent

POLYGRAM, the music company which is 80 per cent owned by Philips of the Netherlands, reported net income up 13 per cent to Fl 506m (Dollars 273.3m) in 1992, with a strong US performance off-setting a downturn in most of Europe, Japan and Brazil.

Net sales were up 5 per cent to Fl 6.6bn, with popular music accounting for 69 per cent of revenues compared with 70 per cent in 1991. Classical music accounted for only 14 per cent of revenues last year, compared with 17 per cent in 1991.

Film accounted for 8 per cent of revenues last year, compared with 5 per cent in 1991. PolyGram last year paid Dollars 35m for a 51 per cent stake in the film producer Interscope. It also purchased the 51 per cent it did not already own of Propaganda Films.

Income from operations rose 7 per cent to Fl 789m. Net income per share was up 13 per cent to Fl 2.98. The full-year gross dividend is Fl 0.65, up 8 per cent.

Compact discs accounted for 66 per cent of albums sold, compared with 58 per cent in 1991. Cassettes made up 31 per cent, compared with 35 per cent the year before. Vinyl records accounted for only 3 per cent, compared with 7 per cent in 1991 and 18 per cent in 1989.

PolyGram NL Netherlands, EC P3652 Prerecorded Records and Tapes FIN Annual report P3652 The Financial Times London Page 26 268
International Company News: Norsk Data to de-list shares during debt talks Publication 930303FT Processed by FT 930303 By KAREN FOSSLI OSLO

NORSK Data shares will be de-listed for up to two months as urgent debt-restructuring talks continue.

Norsk Data, the troubled Norwegian computer service group, has estimated debt of NKr650m (Dollars 92.75m), plus an outstanding NKr350m German bearer bond programme. The Oslo bourse said yesterday it was unclear what implications a debt restructuring solution would have for Norsk Data's share capital and ownership structure.

The group has returned losses for the past five years. In 1991, losses were NKr810m against losses of NKr134m in the previous 12 months.

Trading in Norsk Data was suspended three weeks ago when the group said it hoped to conclude talks with creditors by yesterday. Norsk Data is listed in Oslo, London and New York and its shares are traded, in the form of depository receipts, in Stockholm, Copenhagen, Frankfurt and Hamburg.

'Norsk Data and the main financial creditors have reached a common understanding concerning the . . . long-term debt situation. A final agreement offering a dividend to all creditors is expected to be formalised before the end of March,' the company said.

Mr Carl Espen Wollebekk, senior vice-president, treasury, was optimistic that a deal would be concluded with Norsk Data's creditors by the end of the month. He said once the deal was settled, Norske Data could publish its 1992 result. It was due yesterday.

Norsk Data reported that Nordic Data, a holding company set up in September 1991 with the same corporate management as Norsk Data, had a 1992 profit of NKr92m on turnover of NKr806m.

Nordic Data's assets were NKr547m at the end of 1992 and total equity at NKr260m, corresponding to an equity-to-debt ratio of 48 per cent.

'The Nordic Data group has about 850 employees and the long-term strategy is to further develop the group within the profitable segments of the computer service business. Nordic Data's strong financial position will be a guarantee for future long-term business relationships,' it said.

Mr Wollebekk said Nordic Data's figures were reported in an effort to calm the market about the temporary delisting.

Norsk Data NO Norway, West Europe P73 Business Services COMP Company News P73 The Financial Times London Page 26 379
International Company News: Norske Skog makes first fall into red Publication 930303FT Processed by FT 930303 By KAREN FOSSLI

NORSKE Skogindustrier, Norway's biggest pulp and paper producer, yesterday unveiled its first annual loss, and warned of up to 450 further job cuts as part of a programme to reduce costs by NKr200m (Dollars 20m).

Norske Skog reported a 1992 pre-tax loss of NKr662m against a profit of NKr480m in 1991 and will not pay a dividend after paying NKr2 a share a year earlier.

The weak performance was due to foreign currency losses on loans, restructuring costs and a NKr191m loss suffered by Papeteries de Golbey, a French newsprint mill of which the company owns 49 per cent.

Norske Skog's A shares closed down NKr1.50 at NKr85 in Oslo.

'The international forest products industry is experiencing the longest and deepest recession since 1945,' Norske Skog said, adding that there was a sharp fall in prices for most of its main products.

Group sales fell to NKr7.83bn last year from NKr8.97bn in 1991, but operating costs were cut to NKr7.10bn from Nkr7.79bn. Norske Skog charged 1992 accounts with NKr200m for restructuring, against a charge of NKr130m in 1991. Minority interests in affiliated companies showed a loss of NKr183m last year, against a NKr23m profit in 1991. Net financial items of NKr432m were charged against 1992 accounts, compared with NKr143m in 1991.

Norske Skog posted a NKr228m unrealised foreign exchange loss on loans, and said that NKr160m could be attributed to December's devaluation of the krone. In sharp contrast, the group achieved a NKr80m foreign currency gain in 1991. The group plunged into an operating loss of NKr47m in 1992, against a profit of NKr500m in 1991.

Mr Arnfinn Hofstad, Norske Skog chief executive, issued a cautiously optimistic view for the group's prospects in 1993, but nevertheless warned the result this year would be poor.

Norske Skogindustrier NO Norway, West Europe P26 Paper and Allied Products FIN Annual report P26 The Financial Times London Page 26 334
UK Company News: Russell Hobbs recovery helps Pifco Publication 930303FT Processed by FT 930303 By ROLAND RUDD

A RETURN to the black at Russell Hobbs Tower helped Pifco, the electrical appliances group, report a 79 per cent increase in profits for the half year to October 31.

Profits rose from Pounds 577,000 to Pounds 1.03m pre-tax on sales down from Pounds 21.8m to Pounds 20.4m.

Mr Michael Webber, chairman, said the fall in turnover reflected the group's drive for profitability over market share.

Extensive surgery had returned RHT to profitability for the first time since the company was bought from the administrators of Polly Peck International in April 1991. In the 28 months before the acquisition it incurred losses of Pounds 31m.

Mr Webber said: 'There is still more to be done in changing the culture of the company. There is no quick fix.'

Export sales to some 40 countries accounted for almost a quarter of revenue. Within five years the group hopes that half of turnover will be generated by exports.

Tight control over working capital and overhead costs resulted in nil gearing.

Earnings per share rose to 11.8p (6.9p). The interim dividend is maintained at 3.5p.

Pifco Holdings GB United Kingdom, EC P363 Household Appliances FIN Interim results P363 The Financial Times London Page 24 217
UK Company News: Analysts search for 'headline' earnings Publication 930303FT Processed by FT 930303 By ANDREW JACK

LEADING financial analysts yesterday called for companies to provide a new 'headline' earnings figure in their annual accounts which would show their trading performance.

In a widely circulated draft, the Institute of Investment Management and Research, formerly the Society of Investment Analysts, calls for the publication of a new figure which strips out the effect of profits or losses on capital items.

The proposal has been generated by the changes brought about by FRS 3, the new accountancy standard on the profit and loss account, which places all elements of company performance above the line, or before the earnings figure.

However, the standard also leaves scope for companies to quote a second earnings figure on a different basis, and the institute is hoping that its own version will become an industry standard.

The headline figure would remove all profits or losses including the tax effects of goodwill, prior year adjustments, the costs of eliminating discontinued operations, and the sale of fixed assets or businesses except those bought for resale.

The idea is to provide a universally adopted figure which would be robust, factual and reflect a company's trading position during the year.

The institute is holding discussions with the Stock Exchange which could lead to an amendment to the 'Yellow Book' of listing requirements for quoted companies, and would require them to include the new figure in their preliminary announcements.

The headline earnings figure is also likely to be partially adopted by the Financial Times, which will mention it in company results stories and may adopt it as the basis for calculating price/earnings ratios.

Other organisations such as Extel will also adopt the headline figure in their stories.

The new figure was produced by a sub-committee created by the institute on the day the final version of FRS 3 was published late last year.

Originally it proposed a 'maintainable' earnings figure which would have attempted to show a company's future profitability. But it concluded that it was impossible to derive such a figure consistently since so much depended on judgment.

Mr David Damant, chairman of the committee, said: 'A definition of earnings refers to a number chosen for a specified purpose. One number cannot do everything.'

He added that calculating a maintainable earnings figure would remain the preserve of individual analysts and research firms.

The institute's exposure draft supports the idea of FRS 3 as 'realistic and constructive'. But it says there will continue to be the need for an earnings figure as an unambiguous reference point which encapsulates a company's performance.

The institute's proposals are out for consultation until April 30.

It hopes to have its recommendations in force by the summer, when FRS 3 becomes compulsory for companies with year ends after June 22.

GB United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services MGMT Management TECH Standards P8721 The Financial Times London Page 24 493
UK Company News: Harrington Kilbride lifted by acquisitions Publication 930303FT Processed by FT 930303 By ANDREW ADONIS

HARRINGTON Kilbride, the specialist publisher, reported profit and turnover sharply ahead in the year to end-December.

Pre-tax profits advanced 46 per cent to Pounds 1.87m (Pounds 1.27m), on turnover up 68 per cent to Pounds 15.4m (Pounds 9.19m).

The company, floated in December 1991, has been expanding rapidly. It now has 40 titles, including the Employment Gazette, a government contract won from HMSO last year. More than half of turnover was generated overseas, almost all from controlled circulation publications.

Expansion has been largely funded by borrowing. Net debt at the year-end rose from Pounds 1m to Pounds 2.4m, taking gearing to 65 per cent. However, falling interest rates cut net interest charges to Pounds 211,000 (Pounds 276,000).

Earnings per share were 11.8p (10.2p). The recommended final dividend is 3p, making 4.5p for the year.

Harrington Kilbride GB United Kingdom, EC P27 Printing and Publishing FIN Annual report P27 The Financial Times London Page 24 171
UK Company News: Pacer Dollars 531,000 back in profit Publication 930303FT Processed by FT 930303

Pacer Systems, the USM-quoted electronics group, swung from losses of Dollars 1.14m to profits of Dollars 531,000 (Pounds 374,000) pre-tax for 1992. Revenue rose 9.5 per cent to Dollars 27.6m.

Earnings per share amounted to 6 cents (losses 13 cents) and a final dividend of 3.5 cents makes a same-again 6.5 cents total.

Pacer Systems GB United Kingdom, EC P3679 Electronic Components, NEC FIN Annual report P3679 The Financial Times London Page 23 88
UK Company News: Paramount edges ahead to Pounds 261,000 Publication 930303FT Processed by FT 930303

Profits of Paramount, the USM-quoted pub operator, rose by Pounds 5,000 to Pounds 261,000 pre-tax for the six months ended November 30 in spite of an 18 per cent fall in turnover to Pounds 2.67m.

The result was struck after interest charges of Pounds 625,000 (Pounds 578,000) and a share of profits of an associate undertaking of Pounds 71,000 (nil). Fully diluted earnings emerged at 0.25p (0.34p).

Paramount GB United Kingdom, EC P5813 Drinking Places P6512 Nonresidential Buildings Operators FIN Interim results P5813 P6512 The Financial Times London Page 23 105
UK Company News: Bad debts behind 43% fall at Instem Publication 930303FT Processed by FT 930303

Instem, the USM-quoted computer electronics and information systems group, saw profits tumble 43 per cent in a 'disappointing outcome' for the 53 weeks to December 31.

After an exceptional Pounds 386,000 provision for bad debts, after three customers went into receivership, the pre-tax line emerged at Pounds 575,000, against Pounds 1.01m in the previous year.

Turnover fell 10 per cent to Pounds 14.3m (Pounds 15.8m), partly attributable to the 'uneven nature of our project work' said to Mr David Gare, chairman.

The final dividend is maintained at 1.8p for a total of 3.1p (3p), covered 2.7 times by earnings of 8.5p (15.2p) per share.

Instem GB United Kingdom, EC P6719 Holding Companies, NEC P3571 Electronic Computers FIN Annual report P6719 P3571 The Financial Times London Page 23 143
UK Company News: Pounds 25.6m raised for Pilot Inv Trust Publication 930303FT Processed by FT 930303

Charterhouse Tilney has raised Pounds 25.6m for Pilot Investment Trust, which will specialise in smaller companies.

The amount raised is on a par with the Pounds 28.5m raised by Hoare Govett for its indexed smaller companies trust late last year.

The bulk of the shares (with warrants attached) were placed with institutions. Only 2.11m shares were applied for in the public offer. About Pounds 10.8m of the fund raised came from institutions swapping their existing small company holdings into trust shares.

Dealings in the trust will start on March 5.

Charterhouse Tilney Pilot Investment Trust GB United Kingdom, EC P6211 Security Brokers and Dealers P6726 Investment Offices, NEC FIN Share issues P6211 P6726 The Financial Times London Page 23 135
UK Company News: Billam rises 57% to Pounds 479,000 Publication 930303FT Processed by FT 930303

J BILLAM, the specialist engineer, returned profits of Pounds 479,000 pre-tax for the year to end-December, an improvement of 57 per cent over the previous Pounds 306,000.

Turnover was static at Pounds 5.99m (Pounds 5.85m) although second half sales showed a 5 per cent rise over those for the corresponding period.

Earnings rose to 20.1p (13.3p) and a final dividend of 3.1p makes a 5p (4.28p) total.

J Billam GB United Kingdom, EC P3429 Hardware, NEC FIN Annual report P3429 The Financial Times London Page 23 101
UK Company News: Kalon continues its progress with 15% rise Publication 930303FT Processed by FT 930303 By PETER PEARSE

KALON, the paints group which in August failed to acquire Manders (Holdings), its rival paints, inks and property company, has continued its progress with a 15 per cent pre-tax profits rise in the year to December 31.

Under the new FRS 3 accounting rules profits worked through at Pounds 10.6m, against Pounds 9.22m, after exceptional charges of Pounds 2.62m, of which Pounds 1.56m was the cost of its abortive bid for Manders and Pounds 1.06m the loss on the disposal of the chemicals division.

Turnover was Pounds 106.3m (Pounds 98.5m), of which Pounds 3.57m (Pounds 4.48m) related to discontinued operations. Operating profits from continuing activities rose 38 per cent to Pounds 13.1m (Pounds 9.51m) but were knocked back by losses of Pounds 560,000 (Pounds 330,000) from discontinued businesses.

Mr Mike Hennessy, group managing director, said Kalon had learnt a lot from the Manders bid, adding that, without its failing, its other acquisitions could not all have happened. In December 1992 it bought the J Mangers' DIY business for Pounds 2.4m, in January the Chelec builders' merchants supply business for Pounds 250,000, and in February Novodec, the French private label paint maker, for Pounds 22m.

Within the decorative division, the retail side of the private label paints business lifted sales 7 per cent in a market which only grew 3 per cent. Kalon's market share is now estimated at 28 per cent.

On the trade side, overall market sales fell 6 per cent, though sales of Kalon's Leyland brand rose 14 per cent, in large part on the back of its 68 Leyland trade centres, up five over the year.

Earnings per share slipped to 5.17p (5.28p). A recommended final dividend of 2.2p (1.5p) lifts the total to 3.2p (2.2p).

COMMENT

It is difficult to find fault with Kalon, and though many concede that it gains much of its drive and clear, coherent strategy from Mr Hennessy, the feeling is that the businesses are sound and well-managed throughout. Growth potential abounds. Its efficient factories still have at least 30 per cent spare capacity and the loss of Manders may be a blessing in disguise. If Kalon is happy not to threaten the multinationals' grip on the overall paints market, there are plenty of other opportunities in sundries and in own-label paints on the Continent and France in particular. Forecast pre-tax profits for 1993 are about Pounds 19m, with earnings between 9.3p and 9.6p, giving a multiple of about 15. Reasonable value.

Kalon Group GB United Kingdom, EC P6719 Holding Companies, NEC P2851 Paints and Allied Products P2865 Cyclic Crudes and Intermediates FIN Annual report CMMT Comment & Analysis P6719 P2851 P2865 The Financial Times London Page 23 465
UK Company News: Provident Financial obtains injunction Publication 930303FT Processed by FT 930303

Provident Financial, the consumer credit and insurance group has obtained a high court injunction to prevent the Halifax Building Society using the name 'Halifax' in connection with motor insurance.

Provident Financial has a motor insurance subsidiary, Halifax Insurance, specialising in private motor insurance. Provident said the injunction would stay in force until a full hearing of the case in up to two years' time.

Provident Financial Halifax Building Society Halifax Insurance GB United Kingdom, EC P603 Savings Institutions P6331 Fire, Marine, and Casualty Insurance COMP Company News GOVT Legal issues P603 P6331 The Financial Times London Page 23 111
UK Company News: GKN makes Pounds 6.5m Mexican expansion Publication 930303FT Processed by FT 930303

GKN has lifted its stake in Velcon SA de CV of Mexico, part of the Desc industrial group, to 39 per cent.

GKN paid Dollars 10.1m (Pounds 6.52m) for an additional 14 per cent of Velcon from its partner Spicer.

Mr Trevor Bonner, managing director of GKN automotive drive line systems, believed Velcon offered a 'significant strategic opportunity for GKN as Mexico is a key growth area within the world automotive market.'

GKN Velcon SA de CV MX Mexico GB United Kingdom, EC P356 General Industrial Machinery COMP Shareholding P356 The Financial Times London Page 23 111
UK Company News: Contract-out trend boosts Serco to Pounds 7.2m Publication 930303FT Processed by FT 930303 By ANGUS FOSTER

SERCO, the facilities and project management company, yesterday announced a sharp rise in profits and turnover, helped by the growing trend for government and companies to contract out services.

Pre-tax profits increased 37 per cent from Pounds 5.25m to Pounds 7.21m in 1992. At the interim stage, profits also increased 37 per cent to Pounds 3.39m.

Mr Richard White, managing director, said he was 'extremely pleased' with the results. 'The whole market remains quite busy,' he said.

Turnover rose 43 per cent to Pounds 149.7m. About half the increase came from International Aeradio Limited (IAL), the civil aviation specialist acquired last April from BT for Pounds 12.3m. IAL contributed pre-tax profits of Pounds 956,000, slightly ahead of expectations.

Operating profits, however, rose only 7.7 per cent to Pounds 5.69m. This was partly due to costs on restructuring IAL.

Serco holds contracts as varied as the maintenance of Hyde Park, Ministry of Defence radars and speed cameras in London. Mr White said the company retained several important contracts after retender.

Associates, which include some Ministry of Defence joint ventures and a New Zealand company, increased their contribution from Pounds 519,000 to Pounds 1.38m, thanks to contract expansions.

Serco had net interest receivables of Pounds 131,000 compared to charges last time of Pounds 561,000, mainly because of reduced borrowings after the Pounds 9.7m rights issue in November 1991.

Fully diluted earnings gained 22.5 per cent to 37p (30.2p). A final dividend of 9.5p is proposed, to make a total of 14p (11.9p).

COMMENT

Serco is undoubtedly a class act working in a market with guaranteed growth. But yesterday's 47p rise in the shares to 810p suggests the market may be a little carried away. To be fair, much of the buying was prompted by analysts upgrading forecasts for this year by about Pounds 1m to Pounds 9m. The shares are also closely held so can over react. But after rising more than 40 per cent since September, they are now on more than 17 times and leave little margin for error. The one question mark is operating profits, where growth has tended to lag behind increases in turnover. This year, the figures are obscured by the IAL acquisition. Next time, it should be clearer whether Serco can make the most of all the new business it is winning.

Serco Group GB United Kingdom, EC P7389 Business Services, NEC FIN Annual report CMMT Comment & Analysis P7389 The Financial Times London Page 23 429
UK Company News: Hays shows modest growth to Pounds 29m Publication 930303FT Processed by FT 930303 By ANDREW BOLGER

HAYS, the business services group, increased pre-tax profits by 9 per cent to Pounds 29.1m in the six months to December 31.

However, the group said that the early opening of a Milton Keynes distribution depot for Waitrose in January had brought forward Pounds 1m of extra costs which would have an effect on the second half's results.

The shares closed 14p lower at 227p.

Mr Ronnie Frost, chairman, said the group had performed well: 'The operating profits of both the distribution and commercial core activities showed good growth.'

Group turnover rose from Pounds 341m to Pounds 381.8m and operating income increased by 8 per cent to Pounds 30.2m.

The distribution division's operating profits rose by 8 per cent to Pounds 17.5m. The group said the performance of Fril, the French distributor bought for Pounds 37.5m in June, had been up to expectations.

Hays Network Distribution, which encompasses the Dagenham, Network and Marine businesses, had been substantially reorganised by its new managing director who was appointed in August. About 20 redundancies, at a cost of Pounds 250,000, reduced profits. However, Mr Frost said these cuts, and closure of two offices, would save Pounds 1m a year.

Chemicals distribution's profits declined, mainly because of a surplus of caustic soda.

The commercial division increased operating profits by 15 per cent to Pounds 10.6m. In spite of the Post Office delaying an increase in the first-class letter rate, Britdoc's profits continued to grow strongly due to new business areas and increasing volumes of mail. The group said its parcels business, Data Express, had done well in a difficult market, increasing both turnover and profits.

The personnel division's operating profits fell from Pounds 2.5m to Pounds 2.1m, partly because of about Pounds 350,000 of reorganisation costs. All 123 branches, which mainly provide accountancy staff, continued to contribute to profits.

Earnings per share rose to 4.9p (4.7p). The interim dividend is lifted to 1.7p (1.5p).

COMMENT

Yesterday's figures were at the bottom end of expectations and that was enough to knock the share price, which has enjoyed a good run from 163p since September. However, the performance of the main businesses remains impressive. The commercial division continues to thrive and the dip in multi-user distribution and the chemicals side shows that recovery would not just benefit Hays' depressed personnel division. Analysts have brought their full-year profit forecasts back to about Pounds 67m, which puts the shares on a prospective multiple of about 20. The 20 per cent premium to the market does not seem unjustified for a group which will respond speedily to economic upturn.

Hays GB United Kingdom, EC P4213 Trucking, Ex Local P7389 Business Services, NEC CMMT Comment & Analysis FIN Interim results P4213 P7389 The Financial Times London Page 23 477
UK Company News: Disposals limit Fisons' decline - Continued withdrawal of products in US behind 24% fall to Pounds 124m Publication 930303FT Processed by FT 930303 By PAUL ABRAHAMS

FISONS, the scientific instruments and drugs group, yesterday reported pre-tax profits for the year to December 31 down 24 per cent from Pounds 162.6m to Pounds 123.6m. The shares fell 7p to 222p.

The results, which suffered from the continued withdrawal of two pharmaceuticals products in the US and the impact of the recession on the scientific instruments division, would have been worse but for a Pounds 23.3m net profit from disposals. Last year there were losses on disposals of Pounds 24.6m.

Trading profits fell 41 per cent from Pounds 197.4m to Pounds 117.4m, on turnover up 4 per cent from Pounds 1.24bn to Pounds 1.28bn.

The figures were prepared according to FRS 3. Last year's reported pre-tax figure was Pounds 190.5m for earnings per share of 20.8p. Earnings per share fell from 17.4p to 13.9p. The proposed final dividend is maintained at 5.4p for an unchanged total of 8.7p.

The pharmaceuticals division reported operating profits down 38 per cent from Pounds 113.6m to Pounds 71m on sales of Pounds 410m (Pounds 427m).

The scientific equipment division's profits were halved at Pounds 35.1m (Pounds 68.4m) on sales 5 per cent ahead at Pounds 676.2m (Pounds 644.5m). The horticultural division which is being sold, generated operating profits of Pounds 11.2m (Pounds 11.5m) on sales of Pounds 107.8m (Pounds 96.7m).

Gearing rose from 38 per cent to 67 per cent, said Mr Roy Thomas, finance director. Disposals had brought debts down from Pounds 349m to below Pounds 200m by February.

Mr Patrick Egan, group chairman, said the pharmaceuticals division's margins had been affected by the costs of overhauling manufacturing and quality control procedures. However, most of this had been completed during the first six months, and margins during the second half had improved from 11.1 per cent to 21.8 per cent.

Sales of Intal, Fisons' best-selling asthma drug fell 1.2 per cent from Pounds 192.6m to Pounds 190.3m. This, claimed Mr Cedric Scroggs, chief executive, was entirely due to trade destocking in the US. He added that this had been planned and that worldwide prescriptions for Intal had continued to grow satisfactorily at some 13 per cent.

Tilade, the group's new asthma product which will shortly be launched in the US, generated revenues up 22 per cent from Pounds 21.4m to Pounds 26.1m. The German market was particularly strong with prescriptions up 22 per cent, said Mr Scroggs.

He pointed out that the anti-inflammatory treatments Intal and Tilade grew 14 per cent compared with 11 per cent growth for the whole of the asthma market.

Sales of Opticrom, an eye product, increased 39 per cent from Pounds 31.4m to Pounds 43.7m thanks to fast growth on the European continent and in Japan.

Fisons continues to develop its two key new compounds tipredane, an asthma drug, and remacemide, an epilepsy treatment. Tipredane should be ready for registration with licensing authorities by 1996, while remacemide should be ready by 1997.

See Lex

Fisons GB United Kingdom, EC P283 Drugs P382 Measuring and Controlling Devices FIN Annual report P283 P382 The Financial Times London Page 22 540
UK Company News: Wm Sinclair down 18% Publication 930303FT Processed by FT 930303 By ANDREW ADONIS

WILLIAM SINCLAIR Holdings, the Lincoln-based supplier to the garden leisure and pet markets, attributed an 18 per cent fall in interim pre-tax profits to Pounds 1.39m to seasonal changes in its sales profile.

Earnings fell to 4.4p (5.8p) but the interim dividend is maintained at 1.7p.

Turnover of Pounds 16.6m (Pounds 16.3m) included a Pounds 1.5m contribution from Secto, which was acquired last April.

Mr Tom Sinclair, chairman, said the fall in profits was due to a shift in sales towards the earlier half of the year, and that turnover and profit levels would improve for the full financial year.

The company was is looking for acquisitions to strengthen its pet, aquatic and household division.

Mr Sinclair will resign as chief executive in July, remaining as chairman. Mr Peter Barton, currently managing director, will succeed as chief executive.

Analysts are forecasting full-year profits of Pounds 5m, slightly up on last year's Pounds 4.61m, assuming fair weather conditions.

William Sinclair Holdings GB United Kingdom, EC P2874 Phosphatic Fertilizers P5261 Retail Nurseries and Garden Stores FIN Interim results P2874 P5261 The Financial Times London Page 22 200
UK Company News: MAM lifts Owners stake Publication 930303FT Processed by FT 930303 By RICHARD GOURLAY

MERCURY Asset Management has bought 1m shares in Owners Abroad, increasing its stake to 14.07 per cent in the holiday company that is fighting a hostile Pounds 268m takeover bid from rival Airtours.

The purchases were reported yesterday and executed at an average price just below 134p, where Owners share price closed unchanged yesterday. Airtours closed 1p down at 308p.

Mercury said last night that it had yet to decide whether or not to accept Airtours' offers.

Mercury is Owners Abroad's largest shareholder and held 13.4 per cent before the latest purchase. At the same time, Scottish Amicable reported that it had reduced its stake to 3.7 per cent through the sale of 250,000 shares at 132p.

Mercury Asset Management Group Owners Abroad Group GB United Kingdom, EC P4725 Tour Operators P8741 Management Services COMP Shareholding P4725 P8741 The Financial Times London Page 22 160
UK Company News: Brabant urges rejection of Aberdeen bid Publication 930303FT Processed by FT 930303 By PEGGY HOLLINGER

Brabant Resources, the oil and gas explorer, yesterday urged shareholders to reject the all-share bid from Aberdeen Petroleum as its prepares to issue its defence document early next week.

Mr Nicholas Gay, finance director, asked investors, 'especially small shareholders, to wait for what we send them'.

The defence document is expected to address several issues raised by Aberdeen in its final offer submission.

These include Aberdeen's estimate that in the period from its formation in 1986 to December 31 1991 Brabant spent Pounds 14m on exploration.

Brabant is expected to argue that this includes the carrying costs of assets held as a result of acquisitions. The figure quoted by Brabant is likely to be closer to Pounds 5m.

The exploration company is also preparing to attack Aberdeen's overhead costs. Brabant will claim that its overheads, which have averaged 9 per cent of turnover for the last three years, compares favourably with Aberdeen's 27 per cent average.

Aberdeen is offering 35 shares for every 10 of Brabant's. Aberdeen shares closed 1p down at 16 1/2 p yesterday, while Brabant's were steady at 42p. Both companies are quoted on the USM.

Brabant Resources Aberdeen Petroleum GB United Kingdom, EC P138 Oil and Gas Field Services P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining COMP Company News P138 P1311 P2911 The Financial Times London Page 22 242
UK Company News: BM selling Blackwood Hodge parts to Imaco Publication 930303FT Processed by FT 930303 By JANE FULLER

BM GROUP, the construction equipment and engineering concern, has sold the UK and Spanish parts of Blackwood Hodge, the international distributor which it took over in September 1990.

BM's share price plummeted last summer after the sudden departure through ill health of Mr Roger Shute, its chairman .

Mr Howard Sutton, chief executive, said yesterday the group was seeking to sell some peripheral or loss-making businesses. He denied rumours that BM Plant was being sold to its management.

The buyer of Blackwood Hodge UK and Spain, plus two other small subsidiaries, is International Machinery Company.

Its chief executive is Mr Gordon Brown, one of the three Yorkshire brothers who built up Brown Group International, which went into receivership in June 1990 with debts of about Pounds 80m.

Mr Brown launched Imaco with the purchase of some of Brown Group's construction equipment operations from the receiver. Its annual turnover will be more than doubled by the sales of more than Pounds 20m brought in through the purchases from BM.

Imaco, based in Wetherby, gained a franchise to sell Terex dump trucks last year, taking it into competition with Blackwood Hodge UK. It also distributed Samsung excavators and wheeled loaders.

BM Group Blackwood Hodge GB United Kingdom, EC ES Spain, EC P35 Industrial Machinery and Equipment P1531 Operative Builders P1629 Heavy Construction, NEC COMP Disposals P35 P1531 P1629 The Financial Times London Page 22 251
UK Company News: Survival Aids expected to call in administrator Publication 930303FT Processed by FT 930303 By CHRIS TIGHE

SURVIVAL AIDS, the outdoor clothing company chaired by Mr John Ashcroft, former Coloroll group chairman, is expected to be placed in the hands of administrators today.

A petition for an administration order, placed yesterday by the company's directors, will be heard today in the High Court in Manchester. The joint administrators are expected to be Mr Ron Robinson, of Buchler, Phillips, Traynor, and Mr Ian Clark, of Clark and Co.

Disgruntled trade suppliers said the news of the proposed administration was not unexpected. Trade sources estimated the company's total liabilities may exceed Pounds 1.5m.

Mr Hugh Lapham, the former B&Q operations director who was to have become managing director said yesterday he remained a retail consultant to the company. He had not become md because a condition on refinancing had not been met.

Survival Aids GB United Kingdom, EC P5099 Durable Goods, NEC P5131 Piece Goods and Notions COMP Company News P5099 P5131 The Financial Times London Page 22 178
UK Company News: Bad debts leave Baltic Pounds 6.5m in red Publication 930303FT Processed by FT 930303 By JANE FULLER

AFTER provisions of Pounds 13.1m for bad debts and property, Baltic, the leasing group, made a pre-tax loss of Pounds 6.55m last year, compared with a profit of Pounds 9.1m in 1991.

The final dividend is cut to 0.5p, making a total of 1p, down from 4.33p.

Mr Michael Goddard, chairman, said a further Pounds 3.3m had been added to bad debt provisions since the interim stage. Withdrawal from construction equipment and aircraft financing incurred charges of Pounds 6.2m. A further Pounds 2m was written off property values.

Operating profit declined by 49 per cent to Pounds 6.02m (Pounds 11.8m) on turnover of Pounds 35.5m (Pounds 38.5m). More than a quarter of turnover was accounted for by contract hire, which has been disposed of.

On continuing activities a profit of Pounds 2.34m (Pounds 21.2m) was made after the Pounds 13.1m provisions. The main items in the leasing portfolio are forklift trucks, other handling equipment and vehicles, and computers.

Mr Harry Hyman, finance director, warned that there could be further bad debt provisions this year. The group believed that any fall in the level of bad debts would lag behind economic recovery.

Attempts to rebuild profitability were constricted by the lack of funding. 'Without gearing an asset finance company will not make an acceptable return on capital.'

Mr Goddard said business had been badly affected by the poor reputation of asset finance, leading 'some banks indiscriminately to withdraw financing across the sector'.

The group's asset finance portfolio had been reduced from Pounds 220m to Pounds 90m and net debt came down Pounds 75m to Pounds 46m.

Since the year-end the contract hire sale had reduced it further to Pounds 22m.

Interest costs declined from Pounds 14.2m to Pounds 11.9m. Mr Hyman said they would be far lower this year.

Diluted losses per share were 16.9p (earnings 13.3p). Basic losses were 27p (earnings 14.7p).

Baltic GB United Kingdom, EC P7353 Heavy Construction Equipment Rental FIN Annual report P7353 The Financial Times London Page 22 352
UK Company News: Burnfield doubled to Pounds 2.7m Publication 930303FT Processed by FT 930303 By CATHERINE MILTON

BURNFIELD, the specialist engineering group, yesterday announced 1992 profits more than doubled to Pounds 2.7m against Pounds 1.2m and a small acquisition.

Analysts said the figures were in line with expectations.

The results, compiled under new accounting rules, showed that Malvern Instruments, acquired in mid-1992, contributed Pounds 1.6m to operating profits which totalled Pounds 2.8m (Pounds 1.3m).

Group turnover rose from Pounds 20.6m to Pounds 29.8m, with Malvern contributing Pounds 7.5m. The interest charge was Pounds 157,000 (Pounds 146,000). Earnings per share were 6.5p (4.8p) and a final dividend of 4.1p is proposed to give an unchanged total of 5.75p.

Profits also benefited from a full-year contribution from Budenburg, the pressure guages and calibration equipment manufacturer acquired in 1991. It made operating profits of Pounds 2.3m, against Pounds 1.1m in the 7 months it was owned in 1991.

Sales at Budenburg had fallen by up to 40 per cent for two to three weeks following Black Wednesday but had now recovered. Analysts said customers had deferred orders because of lack of confidence in the short term.

Analysts said there were still worries about the continuing contraction in demand at Isopad, the electric surface heating product manufacturer, which does about half its business in Germany. Isopad made an operating loss of Pounds 1.1m compared to a Pounds 183,000 profit in 1991.

Burnfield also announced the acquisition of Desranges et Huot, a French manufacturer of pressure calibration equipment, for FFr24m (Pounds 3m).

Mr Ben Thefaut, small business analyst at Albert E Sharp, revised upwards his estimate for this year to Pounds 4.8m, giving earnings per share of 9.1p.

Burnfield GB United Kingdom, EC P3567 Industrial Furnaces and Ovens FIN Annual report P3567 The Financial Times London Page 22 303
UK Company News: Irish government invites bids for Greencore stake Publication 930303FT Processed by FT 930303 By PEGGY HOLLINGER

THE IRISH government yesterday threw open the bidding for its 30.4 per cent stake in Greencore, the recently privatised agribusiness group, following reported objections from minority coalition partners over proposals to sell the holding to a US agricultural conglomerate.

In a statement issued yesterday, the government said it had intended to dispose of the stake through an institutional placing. However, following approaches from an international foods group - believed to be Illinois-based Archer Daniels Midland - and several Irish food companies, it decided to open the bidding until March 24.

Although ADM has categorically denied it is involved in discussions on buying the stake, speculation now centres on Alfred Topfer, a European associate of the US company. Yesterday, that company also denied it was involved.

The decision to put the stake on the open market is reported to have angered management at Greencore, which has been seeking a partner to help it expand in Europe.

In a statement released yesterday, Greencore confirmed that it had introduced a company, believed be a European associate of ADM, to the government with a view to buying the stake. However, it had not been informed of approaches from Irish parties.

Observers in Dublin speculated that the Greencore stake had become a political football, following the controversy over last week's decision by Digital Equipment, the US computer maker, to close its manufacturing facility at Galway. 'Games are being played by the minority parties,' said one observer. 'They cannot be seen to be selling it immediately.'

The government stressed in its statement that any decision on the stake would be based on price and the 'long-term strategic development of Greencore as a major Irish food company'. Greencore's own statement, however, stressed its interest in developing an 'Irish-based international food group'.

Most analysts dismissed the possibility of an Irish company taking the stake. The two domestic groups which analysts suggested would have the cash were Dairygold and Fyffes. Neither would bring any strategic advantages to Greencore, observers said.

The favourite was still ADM or a company associated with it. Greencore will have the last say in any substantial sale by the government, as disposals of 15 per cent or more require the approval of shareholders at an extraordinary meeting.

Greencore announced yesterday that its shares, suspended at 245p in London on Monday, would resume trading this morning.

Reports of the proposal from the international food group cited an offer of about 260p per share, valuing the stake at Pounds 66m. The group is believed to be prepared to go as high as 280p.

Greencore IE Ireland, EC P9611 Administration of General Economic Programs P2061 Raw Cane Sugar P6719 Holding Companies, NEC COMP Company News P9611 P2061 P6719 The Financial Times London Page 22 475
UK Company News: General Accident deficit cut sharply to Pounds 29.3m Publication 930303FT Processed by FT 930303 By RICHARD LAPPER

GENERAL ACCIDENT, the Perth-based insurance company, yesterday reported a fall in pre-tax losses to Pounds 29.3m for 1992, compared with Pounds 171.6m.

Heavy losses from hurricane Andrew prevented the company moving back into the black, despite better trading conditions and an improvement in most lines of business.

The company also announced it was raising a further Pounds 110m by the issue of preference shares. Hoare Govett were lead managers to the issue, which carries a yield of 10.42 per cent.

Explaining the board's decision not to follow in the footsteps of Commercial Union by issuing new ordinary share capital, Mr Nelson Robertson, chief general manager, said: 'We are perfectly happy with our level of solvency.'

The margin, net assets as a percentage of non-life premium income, stands at 46 per cent.

Mr Robertson said GA was gearing for steady rather than rapid growth in 1993, following a 7 per cent increase in premium income last year, in original currency terms.

Premium income on non-life business grew to Pounds 3.83bn (Pounds 3.22bn), with life premiums rising to Pounds 790.4m (Pounds 551.9m). The strengthening of the dollar added Pounds 391m to the total.

Capital was adequate to fuel further growth, added Mr Robertson. 'I don't think we will be under any pressure at this point in the cycle.'

Despite a net loss of Pounds 65m from hurricane Andrew, which caused extensive damage in Florida and Louisiana in August, underwriting losses fell to Pounds 510.1m (Pounds 569.1m). Other storm losses amounted to Pounds 47m.

Investment income rose to Pounds 504.9m (Pounds 448.8m). The estate agency side reported losses of Pounds 18.8m (Pounds 17.8m). Life profits were Pounds 34.8m (Pounds 27m).

Loan interest amounted to Pounds 40.1m (Pounds 59.7m).

Losses emerged at 7p (32.1p). A final dividend of 17.05p makes a same-again 26.75p total, which is uncovered for a third successive year.

The improvement at General Accident has been most marked in the UK, where rises in premium rates fed through into a reduction of underwriting losses to Pounds 175.2m (Pounds 341.9m).

Increases in motor rates and a sharp reduction in exposures, helped cut the loss in motor business to Pounds 68.5m (Pounds 113.9m), although Mr Robertson acknowledged that the improvement was weaker than that reported by some of the company's competitors.

Price increases of more than 20 per cent helped the homeowners' account turnround from losses of Pounds 37.9m to a profit of Pounds 9.3m. All other lines showed improvment.

However, in the US underwriting losses climbed to Dollars 323.7m (Pounds 228m), against Dollars 214.7m, reflecting both the storm losses and a decision to increase reserves on commercial liability following the notification of more potential environmental claims.

See Lex

General Accident GB United Kingdom, EC P63 Insurance Carriers FIN Annual report P63 The Financial Times London Page 22 485
UK Company News: Vivat advances to Pounds 3m as recovery gathers pace Publication 930303FT Processed by FT 930303 By CATHERINE MILTON

VIVAT HOLDINGS, the Lee Cooper clothing group, announced pre-tax profits of Pounds 3m for the 1992 year, recovering from a year-earlier loss of Pounds 678,000.

It is proposing to resume dividends with a 1p final out of earnings per share of 3.9p (losses 1.2p)

A fall in turnover to Pounds 73.4m (Pounds 89.1m) reflected the closure of loss-making activities. Gearing was cut to 51 per cent (73 per cent).

Mr Christopher Burnett, chairman, said: '1992 was a year of consolidation during which we focused on our core Lee Cooper business and brand.'

By focusing on its Lee Cooper brand, Vivat expects to extend its recovery this year. The shares closed up 12p on the day at 45p.

The company made an extraordinary provision of Pounds 541,000 on top of Pounds 4m provided a year earlier against its liability for about 40 retail property leases it had sold in 1988. It regained responsibility for the leases when the purchaser, Chelsea Man, went into administrative receivership.

The company has not yet adopted new accounting rules which restrict the use of extraordinary items but believes its leasehold liabilities would still qualify as extraordinary next year when the new standard is compulsory.

Vivat Holdings GB United Kingdom, EC P23 Apparel and Other Textile Products FIN Annual report P23 The Financial Times London Page 22 241
British Gas uses Eurobonds to raise Pounds 400m at less than 8% Publication 930303FT Processed by FT 930303 By ANTONIA SHARPE

BRITISH Gas raised Pounds 400m in the international bond market yesterday, joining the growing number of UK companies seeking to secure long-term borrowings at the lowest interest rates since the 1970s.

The strength of demand for longer-dated sterling bonds enabled British Gas to fulfil a large part of its 1993 borrowing programme of Pounds 500m in one move. The utility launched two Eurobond issues, each of Pounds 200m, one with a maturity of seven years and the other with 10 years. The average fixed interest rate paid by British Gas is less than 8 per cent.

Mr Arthur Burgess, British Gas's group treasurer, said: 'If someone had told us two or three years ago that we would be able to accomplish this, we would not have believed it.'

Other recent corporate borrowers have been Argyll, the supermarket group, which raised Pounds 150m through a seven-year Eurobond issue, and Peugeot Talbot Motor Company, the UK subsidiary of the French car group, which tapped the market for Pounds 100m through a Eurobond issue with a maturity of just under five years.

Mr Burgess acknowledged that long-term interest rates may fall further still, but added that there might be some wait before base rates were cut again. 'It seemed sensible to us to borrow now,' he said.

The proceeds from yesterday's issues will be used for general corporate funding. British Gas has heavy investments in capital projects, and plans to spend up to Pounds 2bn this year on capital expenditure.

A scarcity of longer-dated corporate bonds has reduced the premium that companies have to pay over the yield on UK government bonds, resulting in cheaper borrowing costs to the issuer.

Last week, Royal Insurance raised Pounds 100m worth of subordinated Eurobonds due 2003. Mr Roy Randall, head of group corporate relations at Royal Insurance, said the beneficial interest rates meant a big saving in the group's borrowing costs.

Also last week, Woolwich Building Society raised a similar amount of subordinated sterling Eurobonds, but with a much longer maturity of 24 3/4 years. At the end of January, the Royal Bank of Scotland launched Pounds 150m of 20-year Eurobonds.

Capital markets, Page 29

British Gas GB United Kingdom, EC P4923 Gas Transmission and Distribution FIN Share issues P4923 The Financial Times London Page 21 401
Companies in this issue Publication 930303FT Processed by FT 930303

--------------------------------------------------------------- UK --------------------------------------------------------------- Abbey National 24, 21 Aberdeen Petroleum 22 Airtours 22 Alliance Resources 15 Allied Irish Banks 22 BM 22 Baltic 22 Billam (J) 23 Brabant Resources 22 British Gas 21 Burnfield 22 Carpetright 24 Cater Allen Lloyd's 15 Charterhouse Tilney 23 Fisons 22 General Accident 22 Grahams Rintoul 23 Greencore 22 Hanson 15 Harrington Kilbride 24 Hays 23 High Income Tst 23 Instem 23 Kalon 23 MCC 21 Norex 24 Owners Abroad 22 Paramount 23 Pifco 24 Pilot Inv Trust 23 Raine 23 Serco 23 Sinclair (William) 22 Vivat 22 --------------------------------------------------------------- Overseas --------------------------------------------------------------- AT&T 27 Asia Motors 28 Austrian Airlines 26 Bank of Nova Scotia 27 BCH 26 BCP 26 BP 26 Cincinnati Milacron 27 Daewoo Motors 28 DFDS 27 Fokus Bank 27 Foreningsbanken 27 Generali 26 Hewlett-Packard 27 Howard Smith 28 Hyundai Motor 28 K mart 27 KLM 26 Kia Motors 28 Kongsberg Offshore 27 Morgan Stanley 26 Mutual & Federal 28 Nissan 6 Nomura Securities 28 Norsk Data 26 Norske Skog 26 Pacer 23 Polygram 26 RJR Nabisco 21 Royal Bank of Canada 27 SAS 26 Ssangyong Motor 28 Swissair 26 WMC 26 Yukong 28 ---------------------------------------------------------------

XA World P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page 21 214
Property deals bolstered Maxwell profits Publication 930303FT Processed by FT 930303 By PAUL TAYLOR

INVESTIGATORS unravelling the affairs of Maxwell Communication Corporation have discovered a series of complex property deals involving Liechtenstein trust companies which were used by the late Mr Robert Maxwell to bolster profits at the insolvent publishing company.

This shows for the first time that Mr Maxwell was under severe financial pressure as early as 1990. He apparently resorted to bogus foreign exchange transactions and inflated property deals to generate substantial paper profits for MCC.

Previously it was thought that the pressure built up in 1991, forcing him to raid company pension funds in the months before his death in November 1991 after which his business empire collapsed.

Investigators from the litigation and special investigation services unit at Price Waterhouse, administrators to MCC, have discovered transactions in which MCC sold property assets to a Liechtenstein trust company shortly before the end of a financial reporting period, and then posted a profit on the disposals, even though full payment was deferred. In a typical transaction the Liechtenstein trust would subsequently transfer the property to one of Mr Maxwell's private companies, which then used the assets as security for new loans. On the basis of three transactions the investigators believe MCC is still owed at least Pounds 62.5m.

The administrators have also submitted substantial insurance claims under policies taken out by MCC. The biggest claims, 18 in total, have been made under the group's 'Fidelity Policy' which provides an indemnity up to Pounds 50m for any one loss, subject to a limit of Pounds 50m per employee in the 1991 policy year. The underwriters are disputing all the claims.

Overall, the administrators estimate that after administration costs of Pounds 43.2m, but excluding up to Dollars 300m (Pounds 211m) of further claims, they will recover between Dollars 781m and Dollars 1.364bn. This would provide creditors with between 22 per cent and 43 per cent of the more than Dollars 3bn they are owed. If all recovery actions were successful the payout could be lifted by up to a further 9 percentage points.

Mr Mark Homan, senior joint administrator, said yesterday the main area where investigators may uncover further allegedly false transactions is in MCC's foreign exchange dealings.

Maxwell Communication Corp GB United Kingdom, EC P6719 Holding Companies, NEC P2711 Newspapers P2721 Periodicals P2731 Book Publishing P275 Commercial Printing P6531 Real Estate Agents and Managers COMP Company News INS Insurance claims P6719 P2711 P2721 P2731 P275 P6531 The Financial Times London Page 21 422
RJR creates 'smoke-free' stock Publication 930303FT Processed by FT 930303 By NIKKI TAIT NEW YORK

RJR NABISCO, the US group which was subject to a record Dollars 25bn (Pounds 17.6bn) leveraged buy-out in 1989, is to create a separate class of shares tied directly to the fortunes of its worldwide food operations, technically making them a 'smoke-free' zone.

The move will allow investors to hold shares unconnected with RJR's tobacco interests. Tobacco shares have been hurt by discount brands and fears that the US will impose higher taxes and tougher rules on smoking at work. Some institutions are barred from holding them by 'ethical considerations'.

RJR's aim is to raise about Dollars 1.5bn, helping to pay off group debt which financial restructurings have already cut from Dollars 30bn at the time of the buy-out to about Dollars 14bn. The shares, to be called RN-Nabisco Group stock, will initially be sold to new investors. The company plans an offering of 93m Nabisco shares, representing 25 per cent of the food group's equity, at a price of Dollars 17-Dollars 19 a share.

About six months later, the company will issue further Nabisco shares, representing a 47 per cent equity interest in the food group, to existing RJR Nabisco shareholders.

Existing RJR Nabisco ordinary shares will be redesignated as RN-Reynolds stock, and will represent a 100 per cent interest in the tobacco operations and a 28 per cent interest in the food business. RJR will also start paying dividends, on both classes of stock.

Someone owning 100 RJR Nabisco shares today would ultimately end up with 12.5 RN-Nabisco shares and 33.3 RN-Reynolds shares. The annual dividend on each RN-Nabisco share would be 52 cents; on each RN-Reynolds share, it would be Dollars 1 in respect of the tobacco interests plus a further 'pass-through' dividend to reflect the retained 28 per cent interest in the food business's equity.

This is not a full demerger of the food operations, which had sales of Dollars 6.7bn last year and operating profits of Dollars 947m, and RJR Nabisco stressed there would be no transfer of legal title to assets.

Mr Lou Gerstner, RJR's chairman, said the move was designed to 'enhance the value of the company for shareholders and attract new shareholders by underscoring the distinct growth characteristics of the food industry and cashflow characteristics'.

RJR Nabisco US United States of America P6719 Holding Companies, NEC P204 Grain Mill Products P2111 Cigarettes COMP Company News FIN Share issues P6719 P204 P2111 The Financial Times London Page 21 420
Abbey National falls 9% to Pounds 564m Publication 930303FT Processed by FT 930303 By JOHN GAPPER, Banking Correspondent

ABBEY National, the banking group, yesterday disclosed a 9 per cent fall in pre-tax profits to Pounds 564m for 1992, compared with Pounds 618m in the previous year. Provisions for bad and doubtful loans more than doubled to Pounds 322m from Pounds 155m.

The company, which complied with the financial reporting standard FRS 3, declared an exceptional loss of Pounds 138m for its estate agency business and an exceptional profit of Pounds 101m on the sale of 29m shares unclaimed from its 1989 flotation.

Sir Christopher Tugendhat, chairman, announced that its estate agency chain was being offered for sale following a Pounds 126m write-down of goodwill taken through the profit and loss account, and a further Pounds 12m restructuring charge.

Sir Christopher said there were grounds for 'cautious optimism' for this year because the low point in the housing cycle appeared to have passed. Pent-up demand in the market would combine with increased life insurance sales.

Abbey's treasury operations reported a 61 per cent increase in profits to Pounds 100m. Its treasury assets rose 49 per cent to Pounds 23.8bn because of rises in sterling and dollar portfolios, and its finance leasing book.

The company announced a provision of Pounds 47m (up from Pounds 12m) for its lending in continental Europe. European operations including operations in France and Spain incurred a total loss of Pounds 50m (up from Pounds 1m) and business in both countries have been restructured.

Pre-tax profits in UK retail operations fell 8 per cent to Pounds 540m. The fall in base rates in the last quarter helped it to widen the margin between lending and funding rates from 1.91 per cent to 2.28 per cent. Provisions for UK retail operations rose to Pounds 275m from Pounds 142m.

Abbey's post-tax earnings fell 23 per cent to Pounds 317m, producing earnings per share of 24.2p (against 31.6p). The 'abnormally high' effective tax rate of 44 per cent (against 33 per cent) was partly caused by its goodwill write-down. The company proposed a final dividend of 7.7p, giving a 9.5 increase in the total dividend from 10.5p to 11.5p, which was covered 2.1 times. Shares closed down 12p at 385p.

Lex, Page 20 Details, Page 24 Market, Page 40

Abbey National GB United Kingdom, EC P6021 National Commercial Banks P6531 Real Estate Agents and Managers FIN Annual report COMP Disposals P6021 P6531 The Financial Times London Page 21 417
Ballot box crusaders ride to foreign wars: The rise of global activism among US institutional shareholders Publication 930303FT Processed by FT 930303 By MARTIN DICKSON

Corporate under-performers of the world beware - the Americans are coming. US institutional investors, having stirred up corporate America over the past five years with demands for better-run businesses and more accountable managements, are beginning to flex their muscles in the other leading western economies.

After years of passive investment abroad, they are starting to vote their shares (known in the US as 'proxies') at foreign companies' annual meetings - sometimes casting them against the incumbent management.

Foremost foreign crusader is the California Public Employees Retirement System, the largest public pension fund in the US and one of the most forceful leaders of the domestic corporate governance movement.

In December it sent shock waves through German boardrooms when it backed a proposal by a German shareholder association to the annual meeting of RWE, the energy conglomerate. This called for one-share, one-vote in place of the RWE system that gave a majority of votes to a minority of shareholders.

A Calpers representative delivered a speech declaring that it was naive for German companies to maintain voting restrictions and still expect to retain access to international capital markets.

In France two months earlier, Calpers had led an unsuccessful protest against food giant BSN's move to limit the voting rights of large investors.

Confrontations such as this are still unusual, but look like becoming increasingly common. A survey of US institutions released last month by the Investor Responsibility Research Centre, a non-profit-making Washington information service, found some larger ones 'gearing up to take shareholder activism worldwide in 1993'.

Whether they will get results is another matter, although Mr Geoffrey Mazullo, of Washington-based Institutional Shareholder Services, which advises US investors on proxy voting, points out that the RWE protest is already having a knock-on effect. A German shareholder activist has tabled a resolution for the annual meeting of electronics giant Siemens on March 11, which calls for the abolition of special voting rights for the Siemens family and specifically mentions Calpers' RWE stand.

A substantial number of experts believe a shortage of global capital, combined with the sheer size of the potential US investment pool, will make foreign companies particularly sensitive to US institutional views. The result could be to move the disparate corporate governance practices of continental Europe and Japan much closer to the Anglo-Saxon models of the US and UK.

Why are US institutions sallying abroad now? The main reason is that US equity investment overseas is growing rapidly. 'With more than Dollars 250bn (Pounds 176bn) of international stocks at stake, US shareholders are saying they can't afford to ignore the hazards of different corporate governance practice abroad,' says IRRC's Mr Stephen Davis.

US Department of Labor guidelines also place a fiduciary obligation on the part of many institutions to vote their proxies, although it remains unclear to what extent this covers foreign as well as US shareholdings.

However, until recently it was difficult for US shareholders to vote in many foreign countries, even if they wanted to, because it was hard to get information about proxy issues in good time or to vote without running up costs, which made the exercise of dubious financial value.

But over the past few years global custodian banks, whose local affiliates are the holders of records for clients' shares, have been putting much greater effort into obtaining voting material, translating it into English and then taking responsibility for executing votes.

For example, TIAA-CREF, the largest US pension fund, made a special drive last year to vote in Japan, even though local companies make proxy materials available only in Japanese and send them out just two weeks before the one day in June when a huge number of Japanese annual meetings are held simultaneously. Helped by its custodians, Bankers Trust and Bank of Tokyo, the fund managed to get its hands on 250 proxies and vote them.

However, the IRRC study points out that many local custodians in Germany, the Netherlands and Japan refuse to cast votes against management, even if instructed to do so by the stock-owner or global custodian, because they maintain close ties to the company. Institutions that find this a problem are likely to contract with one of the emerging global proxy voting services.

ISS, which has long advised US institutions about domestic proxy issues, set up a global corporate governance service a year ago which provides voting guidelines on more than 2,000 shareholder meetings around the globe and can co-ordinate the execution of votes with custodians.

At ISS's annual proxy conference, held in Washington last week, a whole workshop was devoted to global voting and the issues likely to be most important in each country this year.

Increasing US interest was underlined by the IRRC survey, which showed institutions voting 40 per cent of their non-US stock in 1992, up from 24 per cent the previous year.

However, voting stock does not necessarily mean opposing management - and most US investors who bother to cast ballots abroad support boardroom positions most of the time.

Where they have taken issue is on certain specific questions, such as restrictions on shareholder voting rights in Germany and introduction of anti-takeover devices in France.

These are the kind of basic issues on which the corporate governance movement cut its teeth in the US in the late 1980s. However, in its home territory the movement has now moved on to analysing individual companies' financial performance and pressing for management change when this is wanting.

Mr Mazullo of ISS thinks US investors will eventually take a similar approach to foreign stocks, although not for some time. In many countries, he says, 'We're still trying to get very basic types of disclosure, and without that information you can't make those calculations.'

US United States of America P6799 Investors, NEC P6371 Pension, Health, and Welfare Funds MGMT Management P6799 P6371 The Financial Times London Page 21 1001
Abbey National aims to set up insurance subsidiary Publication 930303FT Processed by FT 930303 By JOHN GAPPER and RICHARD LAPPER

A SHAKE-UP in the housing insurance market was predicted yesterday after Abbey National, one of the biggest mortgage lenders, rejected insurance companies' attempts to set higher premiums to compensate for more than Pounds 2bn of losses.

Abbey said it was trying to establish an insurance subsidiary to provide its own mortgage indemnity insurance.

It emerged separately that at least 11 large mortgage lenders are considering breaking with general insurers.

Home buyers now face substantially higher premiums to pay for mortgage indemnity policies, which cover lenders against a portion of losses on sales of repossessed properties.

But Abbey's move could lead to competition between lenders and insurers to provide buildings and contents insurance, as lenders may use new subsidiaries to underwrite household insurance.

Mr Dane Douetil, a specialist in mortgage indemnity business with brokers Special Risk Services, said his group was negotiating with 11 of the country's largest lenders about similar self-insurance schemes.

Although building societies are currently barred from owning more than 15 per cent of a general insurance company, societies are pressing the Building Societies Commission to relax this rule.

Mr Michael Coogan, deputy secretary of the Building Societies Association, said several large lenders had been examining the possibility of establishing their own 'captive' insurers.

Two centralised mortgage lenders - Household Mortgage Corporation and The Mortgage Corporation - have already set up their own subsidiaries to insure indemnity risks.

Abbey said the terms it was offered by Legal & General, Royal Insurance and Commercial Union were not acceptable. Mr Peter Birch, Abbey chief executive, said the company was negotiating with re-insurers. He said it had no cover for new mortgages at the moment, but would achieve new cover by mid-year.

Talks between insurers and lenders have been underway for over a year. In September, insurers established new standard contracts limiting their liability to the section of loans above 75 or 80 per cent of the value of properties. Any losses within this limit will be split between insurers and lenders, with insurers bearing 80 per cent of the loss. Insurers have also restricted the types of properties on which they will insure mortgages.

The insurers made estimated losses of Pounds 1.38bn on mortgage indemnity policies in 1991, and more than Pounds 800m last year.

Abbey National results, Page 21 and Page 24

Abbey National GB United Kingdom, EC P6029 Commercial Banks, NEC P6531 Real Estate Agents and Managers COMP Company News INS Insurance scheme P6029 P6531 The Financial Times London Page 20 433
Setback for Italian reform plans: Head of inquiry into constitutional changes quits after brother's arrest Publication 930303FT Processed by FT 930303 By ROBERT GRAHAM ROME

THE CORRUPTION scandal that is ravaging Italian politics and business claimed another victim yesterday when the head of the parliamentary commission for constitutional reform resigned.

The decision by Mr Ciriaco de Mita, a former Christian Democrat prime minister, followed the arrest on Monday of his brother on charges of alleged corruption.

Leaders of the main political parties asked him to reconsider the decision, which threatened to disrupt the work of the constitutional reform commission at a crucial moment.

The commission has just completed draft proposals for electoral reform which need to be translated into law before a referendum on the subject can be held on April 18.

Mr de Mita's resignation came as parliament began the delicate process of considering whether to waive parliamentary immunity for Mr Bettino Craxi, the former Socialist leader.

Milan magistrates have asked for immunity to be waived so that Mr Craxi can answer charges of alleged corruption and illicit financing of the Socialist party amounting to L36bn (Pounds 16m). A decision is expected today.

In parliament yesterday, deputies were provided with a 135-page document in which Mr Craxi argued that his immunity should not be waived to face corruption charges.

The former Socialist leader claimed that Milan magistrates had mounted an elaborate plot to discredit him and that he as party leader was not involved in the financial administration of the Socialists.

In a letter to the commission, Mr de Mita said he was resigning to prevent speculation that his brother's arrest might upset the task of constitutional reform.

His brother, Michele, was arrested with 11 others as part of a wide-ranging investigation into the use of funds for the relief of the 1980 earthquake at Irpinia in southern Italy. He is alleged to have been part of an organisation which supplied false invoices for the supply of foodstuffs.

Mr Mino Martinazzoli, the Christian Democrat leader, warned that Mr de Mita's resignation would undermine the work of the commission and urged him to reconsider. The opposition former communists in the Party of the Democratic Left (PDS) also backed this view. The populist Lombard League was one of the few groups to accept the resignation.

The 60-member commission was formed from the two houses of parliament last autumn, and has become the central forum for preparing constitutional reform. With an April 18 date now fixed for the referendum calling for the introduction of majority voting to elect members of the senate, it is essential for the commission to have coherent leadership. The commission has to frame concrete legislation on electoral reform either before or immediately after the referendum.

Mr Giovanni Conso, the justice minister, meanwhile has said he hopes to be able to have ready by the end of this week draft legislation to provide a 'political' solution to the widening corruption scandals.

The proposals are expected to centre on new laws for tenders and financing of political parties, combined with amnesties for those who confess to paying and receiving bribes in return for restitution of the monies.

Heroes of the inquisition, Page 2

IT Italy, EC P9121 Legislative Bodies PEOP Appointments GOVT Legal issues P9121 The Financial Times London Page 20 550
Computer to 'speak' Europe's language Publication 930303FT Processed by FT 930303 By DELLA BRADSHAW

A 'SPEAKING' computer that can read the most difficult European words and pronounce them to the satisfaction of the most punctilious local should emerge within the next two years.

The European pronunciation dictionary, which will decide how to say the most commonly used surnames, street names and town and city names in eight European countries, is being funded by the European Commission to the tune of Pounds 2m.

The two-year Onomastica project is intended to do more than alleviate the frustration of people with names such as Mainwaring or St John in places such as Cholmondeley, all of which are not pronounced according to English phonetic rules.

Its aim is to produce pronunciation dictionaries for the UK, Denmark, the Netherlands, France, Germany, Greece, Italy, Portugal and Spain, giving the 1m most commonly used names for each.

'We're filling in the gap in the dictionary,' says Professor Mervyn Jack of the Centre for Speech Technology Research at Edinburgh University, which is co-ordinating the project.

Researchers believe the completed electronic dictionary could be used in conjunction with existing text-to-speech technology to enable recorded announcements to be read from computer screen or paper.

Eventually it could be combined with speech recognition technology to automate entirely telephone directory inquiry services.

Converting the names into spoken form has two stages: the written text is divided into individual sound elements, which are then converted into an audible synthetic voice.

Although the text-to-speech conversion uses the latest technology, gathering the data is laborious. The institutions involved will each begin with a list of the 1m most commonly used names.

In the UK, individuals, including primary school children, will be asked to pronounce their names into a tape recorder. A telephone line is also being set up for those with unusual names to phone up and enunciate them.

This should take 18 months, after which each country will exchange information on the most commonly used of the 8m words.

XG Europe P357 Computer and Office Equipment P7372 Prepackaged Software TECH Products TECH Standards P357 P7372 The Financial Times London Page 20 356
Employers use surpluses to take holiday from pensions Publication 930303FT Processed by FT 930303 By NORMA COHEN, Investments Correspondent

MORE THAN half of all British employers are now using pension fund surpluses to reduce or eliminate their contributions to employee pension schemes, according to an industry survey.

The National Association of Pension Funds, the industry trade association, found in its 1992 survey of pension schemes that 38 per cent of employers are making no contribution while another 16 per cent are making reduced contributions. A further 1 per cent have used scheme surpluses to refund cash to themselves.

The figures show a rise from the previous survey in 1991, which found that 47 per cent of schemes were on full or partial contributions holiday.

Mr Mike Brown, NAPF director of information, said the rise in contributions holidays showed the effects that the recession was having on employers. 'They would rather use the money to pay their suppliers and staff,' he said.

The question of whether employers should have the exclusive right to use scheme surpluses is among the most contentious issues under review by a government panel headed by Professor Roy Goode. The NAPF survey did not ask respondents whether contributions holidays have been accompanied by benefit improvements for scheme members.

The survey covered 852 NAPF members, covering roughly 40 per cent of all UK pension scheme members.

Meanwhile, the survey noted one potentially troubling trend for occupational pension schemes. Last year, 19 per cent of those eligible to join a scheme chose not to do so, up from 16 per cent the year before. Mr Brown said there may have been reasons other than disenchantment with occupational schemes which might account for the figure, such as the inclusion of part-time workers who may feel their earnings are too low to be able to afford contributions.

Meanwhile, the survey found no sign of a much touted trend suggesting that employers are abandoning so-called final salary schemes - which promise employees a percentage of final salary upon retirement - in favor of money purchase schemes in which the employee receives a lump sum of contributions plus investment returns.

Mr Brown said: 'It's the sort of thing many people are talking about but very few are actually doing it.' Employers have threatened that, if the government imposes new regulations on occupational pension schemes, they will abandon them in favour of the less attractive money-purchase schemes.

The survey also found that, after the Maxwell affair, companies are more likely to appoint non-management trustees to their pension schemes.

GB United Kingdom, EC P6371 Pension, Health, and Welfare Funds P9441 Administration of Social and Manpower Programs MGMT Management P6371 P9441 The Financial Times London Page 20 450
The Lex Column: UK economy Publication 930303FT Processed by FT 930303

It is always difficult to make much sense of the UK reserves data. Still, a small underlying fall for the second month in a row suggests that exchange market intervention last September may have been smaller than originally thought. Either that or the Bank has bought back some currency in the market since then. Whatever the case, the upshot is that the contribution to this quarter's PSBR funding from intervention must be scaled back. But since the deficit may well be less than the Pounds 37bn forecast in the Autumn Statement, the authorities still have a chance of starting 1993-94 with some funding in the bag.

GB United Kingdom, EC P9611 Administration of General Economic Programs ECON Economic Indicators CMMT Comment & Analysis P9611 The Financial Times London Page 20 140
The Lex Column: PolyGram Publication 930303FT Processed by FT 930303

Comparisons of stock market values often highlight anomalies. That between the PolyGram music business and its 80 per cent shareholder, Philips, looks decidedly bizarre. Last year, PolyGram's market value overtook Philips' on the Dutch stock exchange. At its current value of Fl 7.9bn, PolyGram is worth 1.2 times more than its parent company. Philips' stake in PolyGram is equivalent to some 96 per cent of its own stock market worth. That suggests the market values the rest of the Fl 57bn turnover company at just Fl 250m. Great as Philips' problems are, that seems to be extreme.

The obvious conclusion is that Philips should realise considerable shareholder value by fully demerging PolyGram as Racal did with Vodafone. It has long resisted the urge. But the pressure to do so may grow as the divergence in performance between the two companies seems set to widen. Yesterday, PolyGram recorded a 13 per cent increase in net income. With its sound balance sheet and strong market positions, it confidently predicted further growth. Tomorrow, Philips is expected to unveil dire annual results. Its recovery potential looks limited.

PolyGram GB United Kingdom, EC P3652 Prerecorded Records and Tapes COMP Company News CMMT Comment & Analysis P3652 The Financial Times London Page 20 217
The Lex Column: General Accident Publication 930303FT Processed by FT 930303

So the gauntlet of Commercial Union's rights issue has not been taken up by General Accident. Sterling's exit from the ERM must take some credit. With a substantial portion of shareholders funds parked in dollar assets, a devalued sterling has been a prop for GA's balance sheet. Rising stock and bond markets have equally offered timely capital gains. That, and some judicious use of preference capital, has produced a comfortable solvency ratio of 46 per cent without recourse to shareholders.

But yesterday's Pounds 110m preference issue does not plug the hole in the balance sheet created by another uncut, uncovered dividend. Although GA could raise more preference capital this year, that can only be taken so far. Since further currency and investment gains cannot be taken for granted, premium growth will ultimately require backing from retained earnings or a rights issue. Yesterday's figures reveal GA's ambition: UK premiums grew at an annual rate of 25 per cent in the fourth quarter, albeit boosted by a block of business taken from Municipal & Mutual.

With Pounds 1.2bn annual premium income in the UK and its chain of 400 estate agencies, GA looks geared to an upturn. Given another respectable result in Asia and a fair wind in the US - literally, given the damage caused by Hurricane Andrew - the 1993 dividend could be covered for the first time in four years. But there is little margin for error.

General Accident GB United Kingdom, EC P63 Insurance Carriers COMP Company News CMMT Comment & Analysis P63 The Financial Times London Page 20 272
The Lex Column: Fisons Publication 930303FT Processed by FT 930303

Fisons describes 1992 as a year of change. A shock collision with reality might be more accurate. The company may be trying to ditch its reputation for nasty surprises and inculcate a less complacent management attitude, but it cannot seem to shake off lingering uncertainties. It is not yet clear that the production difficulties which slowed sales and upset the US Food and Drug Administration have finally been solved. Fisons Opticrom treatment has still not been re-admitted to the US. Its cash cow, Intal, may face competition once its US patent expires in August. The prospects for its new drug Tilade are still muddy. Despite the fall in sterling, the company may have difficulty restoring margins on its scientific equipment business in a weak European market.

Small wonder, then, that no one has summoned up the nerve to bid for the company. Nor are they likely to, since Fisons has neither a gold mine of new compounds nor a steam roller sales force. Even the recovery potential seems pretty well discounted with a prospective 1993 rating which puts Fisons alongside Glaxo. To be fair, a 5.1 per cent yield does offer underpinning. The company is, however, likely to remain a niche player in pharmaceuticals. The delay caused by past management arrogance and shoddy production values seems to have closed the door on greater things indefinitely.

Fisons GB United Kingdom, EC P283 Drugs P382 Measuring and Controlling Devices COMP Company News CMMT Comment & Analysis P283 P382 The Financial Times London Page 20 262
The Lex Column: Abbey's bad habit Publication 930303FT Processed by FT 930303

Abbey National's Pounds 101m windfall from last year's share sale is a curse as well as a blessing. It has provided elegant camouflage for the cost of getting out of estate agency. Net exceptional debits for last year amount to only Pounds 37m, but the gross charge for restructuring the estate agency business was Pounds 138m. Factor in accumulated losses since 1988 and the total cost of this particular venture becomes Pounds 226m. That adds up to a gross strategic blunder which, sadly, Abbey now risks compounding. The timing of its windfall has encouraged it to put the agencies up for sale at what must be about the bottom of the market.

This is a poor advertisement for Abbey's strategic sense, especially since it coincides with growing loss provisions in Europe. Abbey has a deservedly high reputation as a mortgage bank. But, with the exception of the treasury business whose expansion has about run its course, its attempts to diversify have disappointed.

Perhaps insurance will prove otherwise. One must hope so since the mortgage business seems set for a lean 1993. The Pounds 62m general provision will help smooth the effect of the abnormally high net retail margin which Abbey enjoyed as interest rates came down in the second half of 1992. This year, provisions are likely to remain high while the net retail margin will be squeezed. Supporters will argue that the bank has plenty of scope for dividend growth. That is an old story, though, and already in the price.

Abbey National GB United Kingdom, EC P6021 National Commercial Banks COMP Company News CMMT Comment & Analysis P6021 The Financial Times London Page 20 288
Bumpy flight from conflict to concord: Acrimony could give way to co-operation in the international aerospace industry Publication 930303FT Processed by FT 930303 By PAUL BETTS

The European Airbus consortium could not have chosen a worse moment to bring to market a new airliner.

The launch in Hamburg today of the A321 - a larger 186-seat derivative of the A320 twin-engine airliner - comes in the middle of the worst recession to hit civil aviation in the past 40 years.

Aircraft manufacturers around the world have been scrambling to cut production and employment to adapt to the siege-like conditions facing the industry. Airlines, which have made a cumulative loss of more more than Dollars 10bn during the past three years, have continued to defer or cancel an unprecedented number of new aircraft orders booked during the buying spree of the late 1980s.

The crisis, different from previous cyclical downturns because it has coincided with a deep slump in the defence side of the aerospace business, has also revived trade tensions between the US and Europe over the controversial issue of government subsidies for Airbus.

President Bill Clinton warned last week that he was determined to do 'whatever it takes' to maintain US leadership in the commercial aircraft business. The US reached an agreement with the European Commission last year on commercial aircraft subsidies after five years of heated negotiations. But accusations are again flying across the Atlantic that Airbus is selling aircraft to financially troubled US airlines at unfair prices to increase its market penetration at the expense of its two US rivals, Boeing and McDonnell Douglas.

President Clinton told an audience of US aerospace executives and Boeing workers in Seattle: 'I've seen these agreements made for years: I've seen people promise us they'd do this, that and the other thing, and nothing ever happens.' Mr Larry Clarkson, Boeing's vice-president for planning and international development, followed this by telling a congressional aviation committee last week that it was 'critical that the Europeans understand that neither the US government nor its aircraft industry will stand on the sidelines and allow these practices to rob us of our market'.

However, at this stage at least, Mr Clinton's broadside against Airbus appears to have been largely dictated by domestic US concerns at a time when thousands of jobs are at risk in the aerospace industry.

Both Boeing and McDonnell Douglas are in the throes of sweeping restructuring. Boeing, the world's biggest manufacturer of commercial jets with about 60 per cent of the world market, is reducing its overall production by 35 per cent and has announced 28,000 job cuts over the next 18 months. McDonnell Douglas, now trailing behind Airbus as the world's number three commercial aircraft maker, plans to reduce its workforce by 10 per cent this year after cutting it by 20 per cent last year. By the end of this year, the group's overall employment will have dropped from 121,000 in 1990 to about 78,000.

Mr Clinton told Boeing workers that 'a lot of these lay-offs would not have been announced had it not been for the Dollars 26bn that the US sat by and let Europe plough into Airbus over the last seven years'.

Airbus has also been forced to revise production plans. But, unlike its two American competitors which are reducing output, Airbus has so far claimed its output will continue to grow, albeit at a slower rate. Mr Jean Pierson, the Airbus managing director, said last month that the consortium's production was expected to grow from about 150 aircraft this year to about 170 in 1995, compared with an original target of 225 in 1995.

This has led to US fears that Airbus will seek to intensify its drive to win greater market share by offering sweetheart financing packages and pricing terms that breach last year's US-EC pact on civil aircraft sales.

'We expect that these types of creative mechanisms will proliferate,' said Boeing's Mr Clarkson.

Airbus and its four partner companies - Aerospatiale of France, British Aerospace, Deutsche Aerospace, and Casa of Spain - have consistently argued that US manufacturers have benefited at least as much from direct and indirect support from their government. They also claim that US manufacturers, like Airbus, have long supplied financing to airline customers to win large orders.

But for all the transatlantic sabre-rattling of the past few weeks, neither the manufacturers nor their respective governments appear anxious to precipitate a trade war over civil aircraft sales. 'No one is about to launch a major new aircraft programme in this market and we are therefore not worried about development subsidies,' Mr Clarkson explained. 'What we want is for the agreement reached last year to be implemented so that we can finally get some visibility on the true financial situation of Airbus,' he added.

To this end, the US administration has now asked for consultations with the EC to review and implement last year's agreement. President Clinton has also decided to establish a national commission to investigate the conditions and problems of the financially strapped US airline industry.

The proposal for a commission has been welcomed by the US manufacturers, which believe their most pressing problem is airline finances rather than Airbus subsidies. 'Let's face it, the Europeans are simply not going to give up on Airbus, but the government could help airlines around the world with financing support to buy our products,' said Mr John McDonnell, chairman of McDonnell Douglas. He was speaking last month at the roll-out of his company's new twin-engine jet, the MD90, a new derivative of McDonnell Douglas's long-established DC9 and MD80 family of narrowbody jets which competes with the Airbus A320 and the Boeing 737.

Of the big three manufacturers, McDonnell Douglas is regarded as the most vulnerable. Many analysts believe the company could follow Lockheed and decide to pull out of the commercial aircraft business to concentrate exclusively on its defence operations. But Mr McDonnell and his senior executives insist that the company is not about to abandon its civil aircraft activities, which are based at Long Beach, California.

McDonnell's strategy has been to drive down costs aggressively and reduce production. The chairman said the company had refused to go after 'bad business' simply to land orders and buy market share.

But he acknowledged that his company suffers a severe disadvantage because it does not have as broad a product line as either Boeing or Airbus. 'Right now, this is not such a big handicap because no airlines are buying aircraft: but it will be important for us not to have this disadvantage when the cycle picks up again in two or three years' time,' he explained.

For McDonnell Douglas the solution lies in a global partnership which would create a new commercial aircraft company, controlled by the US group but with a series of international equity partners prepared to invest in the development of new products. Although Mr McDonnell failed to clinch a partnership last year with Taiwan Aerospace, which was proposing to invest Dollars 2bn for a 49 per cent stake in the Douglas civil aircraft business, he said the company was now engaged in 'mature discussions' with a number of potential partners, including several in the Asia-Pacific region.

He explained: 'We've got two years to establish this new entity with multiple owners which would help broaden our product line.' But the implication is that unless McDonnell Douglas can find international partners, its longer-term future as a manufacturer of commercial jets will be in doubt.

This quest for partners, which would enable the Long Beach company to establish a similar risk-sharing system operated by Boeing with the three Japanese manufacturers (Kawasaki Heavy Industries, Mitsubishi Heavy Industries and Fuji Heavy Industries) and by the four European manufacturers through the Airbus consortium, also explains why the US manufacturers are reluctant to engage in a trade war against Airbus.

Boeing, too, is currently seeking to expand its international links. Significantly, it agreed at the end of January to study with the four Airbus partners the joint development of a super jumbo jet capable of seating 600-800 passengers. 'No single manufacturer could envisage developing such an aircraft on his own,' Mr Clarkson said.

From Seattle to Long Beach to Toulouse, therefore, new realignments are starting to emerge which could lead to a profound transformation in the structure of the commercial aircraft industry over the next decade. 'Like the birth of an airplane, the birth of new enterprises has been an important part of the process of renewal within our industry for many years,' Mr McDonnell said. 'Don't be surprised if the next roll-out you attend at McDonnell Douglas is the roll-out of a new Douglas Aircraft Company that is a global venture with owners from around the world.'

US United States of America JP Japan, Asia XG Europe P3721 Aircraft IND Industry profile COMP Strategic links CMMT Comment & Analysis P3721 The Financial Times London Page 19 1489
Personal View: Ten-point plan for credibility Publication 930303FT Processed by FT 930303 By Dr JOHN PENDLEBURY and DAVID SHIPLEY

The erosion of British manufacturing, which has been going on for much of this century, is now a critical concern. In several sectors Britain no longer has a credible presence. The goal must be to achieve world-class levels of performance in design, engineering, manufacturing quality and cost in sectors critical to the economy in the future. Nothing less will sustain improvement over the long term. That will mean focusing on the problem by sector and drawing in best-practice experience from all of them.

The way forward must also involve a change in our national culture. Anti-industrial and manufacturing attitudes are still prevalent in many quarters; innovation and success in manufacturing are not rewarded. Too few of our best brains choose industry for a career.

The government must demonstrate vision and leadership by providing a clear, broadly based national industrial strategy to embrace relevant aspects of economic policy, education, infrastructure, energy, and investment. That requires sectoral focus and the establishment of priorities and quantified objectives for the short, medium and long term.

In the short term, during the next year, we must concentrate on creating the best 'playing field' for our companies. The concept of Britain as the 'Hong Kong of Europe' is compelling. That means continued deregulation, low taxation and the removal of unnecessary constraints. In this way we also eliminate many 'non-value-adding' elements in company cost bases. The role of government should be to understand how it contributes to 'non-value-added' and to seek constantly to eliminate non-productive processes and elements.

In the medium term, we must emulate the technological and manufacturing superiority of our principal competitor nations, notably Germany and Japan. Worldwide best practice must take root in the UK.

We must, as a matter of urgency, lay the foundations. An action plan now would include:

Encourage investment with a return to 100 per cent first-year tax allowances and provide relief based on investment for those companies with an ACT burden.

Identify priority sectors in a national technology plan and target with investment stimuli such as further tax incentives, R&D funding and other grants and concessions.

Improve export credit arrangements to put British manufacturers at least on a level playing field with foreign competition and preferably ahead of the game.

Devise new export incentives.

Mount a visible campaign to identity and eliminate official bureaucracy stifling our businesses.

Commence the culture change needed by giving more publicity, reward and acclaim to innovation and manufacturing success stories. Reform the honours system to recognise science and engineering more widely.

Set up craft training schools (fachhochschule) in main manufacturing centres to focus on skills and technologies in demand and train more young people. Work with engineering representative bodies to raise the prestige of engineers and ensure training for graduate engineers is improved to compare with the best of other professions. Encourage a longer-term view of investment in manufacturing, and particularly in advanced manufacturing technology, for example, by providing special tax incentives for equity investment in targeted priority sectors (if investment retained for specified periods) and by setting up a national manufacturing investment fund to make available low fixed interest, long-term funds for investment in priority sector projects (funds to be bid for with assessment criteria linked to a national technology plan).

Reform school curricula on science and technology and setting national priorities for R&D at universities.

In the long term, society must recognise that science and technology are the principal instigators of progress for prosperity. We need a vision of an elitist, technology-based society and a bold, innovative national technology plan with nat-ional goals to realise this potential.

The authors, both manufacturing specialists, are respectively a management consultant and an accountant at Coopers & Lybrand

GB United Kingdom, EC P9611 Administration of General Economic Programs CMMT Comment & Analysis P9611 The Financial Times London Page 19 651
Observer: Not fare Publication 930303FT Processed by FT 930303

Proof that the recession really will last for ever? A taxi-driver, pocketing a far-from-princely Pounds 2 after dropping a colleague at Waterloo station, bade him farewell with: 'Thanks for the ride'.

GB United Kingdom, EC P4121 Taxicabs CMMT Comment & Analysis P4121 The Financial Times London Page 19 56
Observer: Polling for May Publication 930303FT Processed by FT 930303

With their customary populist touch, foreign office mandarins are trying to repel efforts to replace May Day bank holiday with Trafalgar Day. Though the majority of those responding to the government's consultation exercise favour a new autumn holiday to coincide with schools' half-term, the FCO is wary of agreeing to October 21 for fear of reminding the French about the battle they lost nearly 200 years ago.

Though it could simply be called the Autumn Bank Holiday, that doesn't have quite the ring the government hoped for when it wanted to abolish the 'socialist' May Day. Expect Tory back-

benchers to settle for nothing less than 'Nelson day' at the very least.

GB United Kingdom, EC P91 Executive, Legislative and General Government GOVT Government News P91 The Financial Times London Page 19 141
Observer: Even-handed Publication 930303FT Processed by FT 930303

Whatever else one might think about Eddie George, the next Governor of the Bank of England, he is certainly a sound pair of hands when it comes to chairing a meeting.

Take yesterday's elegant affair in Tokyo which he was refereeing. The City of London side included some expensive stars like Sir David Walker, deputy chairman of Lloyds Bank, Warburg's Sir David Scholey, and Sir Andrew Hugh-Smith, chairman of the Stock Exchange. The home team was represented by Nomura's Yukio Aida and Daiwa's Toshitoki Chino, among others.

Interrupting such speakers, when in full flood, could risk an international financial incident. But George saved the day by letting them ramble on. 'I have been monitoring the situation closely and I can tell you the deficit was evenly spread,' George summed up. 'This reveals two things: the speakers are equally undisciplined, but only moderately so and they received the kind of understanding treatment people have come to expect from British regulators.'

Bank of England GB United Kingdom, EC P6011 Federal Reserve Banks PEOP Personnel News CMMT Comment & Analysis P6011 The Financial Times London Page 19 192
Observer: Return business Publication 930303FT Processed by FT 930303

Now that Sir Phil Harris doesn't have to worry any more about chairing his beloved Guy's hospital, he can get back to the serious business of making money on his return to the stock market.

This will please those who enjoyed observing, if not participating in, the progress of Harris Queensway up to its Pounds 450m leveraged takeover in 1988. His absence from the market has made it a duller place. His old company survived only two years after Sir Phil sold out at a Pounds 70m profit, showing just what a canny salesman he is. Sir Phil insists the business would not have gone under if he had remained in charge.

Ever positive, the 50-year-old is bursting with enthusiasm about Carpetright, the chain he plans to float this summer. Some things will be different though. He promises no takeovers, and he says people 'will be surprised by the cleanness of the accounts'.

Carpetright GB United Kingdom, EC P5713 Floor Covering Stores CMMT Comment & Analysis P5713 The Financial Times London Page 19 182
Observer: Sizing up Publication 930303FT Processed by FT 930303

What's so special about the Halifax Building Society? It hasn't had an exciting public flotation like the Abbey National or been as profitable as the Cheltenham & Gloucester.

Hence, there will be some pained expressions at Halifax HQ at the sight of a 25 per cent jump in Abbey National's assets to Pounds 71.8bn. True, the Abbey is no longer a building society and its balance sheet has been inflated by money market activities. But unless there has been some nifty end-year window-dressing, it would be surprising if the Halifax balance sheet is bigger than the Abbey's when it reports in a fortnight's time.

Take no notice of Halifax if it says that size doesn't matter any more. Being the biggest was one of its few claims to fame.

Halifax Building Society GB United Kingdom, EC P6035 Federal Savings Institutions P6162 Mortgage Bankers and Correspondents CMMT Comment & Analysis P6035 P6162 The Financial Times London Page 19 166
Observer: Return of the native Publication 930303FT Processed by FT 930303

When, in late 1990, Barclays Bank paid through the nose to buy the highly regarded Bavarian private bank, Merck Finck & Co, and immediately insisted on making one of its own men a partner, there were knowing glances in rival banking parlours. Was Barclays trying to show off on Deutsche Bank's home turf?

Why interfere? Midland and Lloyds don't have any of their men masquerading as partners of Trinkaus & Burkhardt and Schroder Munchmeyer Hengst respectively, yet this has not prevented these banks from doing well. If Merck Finck had been in trouble, as SMH once was, there might have been a reason for putting a Brit into the partnership. But this was not the case.

Now, little more than two years later, Giles Davison, the Barclays partner on the Merck letterhead, is quitting after 34 years with Barclays. Richard Carden, Barclays' European boss, admits that there were policy differences but beyond that is staying 'stumm'.

Merck Finck, by contrast, is unusually talkative. Of Davison, who was relishing Munich's business and cultural whirl, spokesman Otto Gassner says: 'I cannot imagine anyone else who would have fitted in so well. It is a blow to Merck Finck.' Sounds like old Davison might have gone a bit too native for Barclays' comfort.

As for the rumoured policy differences, Gassner is happy to chip in his thoughts. 'Merck Finck is always the playground in which conflicts between the commercial and investment banking sides of the Barclays Group are worked out.' Ouch.

Another sign of the power vacuum which some think currently exists at the top of Barclays? Perhaps. But whatever the reason for the apparent contretemps, some of Barclays' rivals will be permitting themselves a sly smile.

Merck Finck and Co Barclays Group DE Germany, EC P602 Commercial Banks CMMT Comment & Analysis PEOP Personnel News P602 The Financial Times London Page 19 321
Leading Article: Pensions at risk Publication 930303FT Processed by FT 930303

MANY PRIVATE sector employers have long regarded the company pension fund as a profit centre. Now, it seems, the government has cottoned on to the game: it has a beady eye on the pension funds of the remaining nationalised industries, which are worth a great deal more than the industries themselves. The Department of Transport's proposals for dealing with British Rail's pension funds after privatisation look a better deal for the public finances than for the pensioners; and trustees of other public sector pension schemes, including those of British Coal, are increasingly worried that present and future pensioners could be deprived of significant rights and benefits.

In most of the bigger privatisations accomplished to date, existing employees have had the option of remaining in a fund where pension benefits, including inflation-proofing, and improved benefits in the event of future surpluses, were no less favourable than the arrangements before privatisation. This will be true of existing employees of British Rail. But for most of British Rail's 200,000 or so current and deferred pensioners it is another matter. Either they can put their pensions nest egg into a closed fund, where they take on the risk of a reduction of benefits if investment performance is poor. Or they accept a government offer to buy out their funds in exchange for the equivalent of an investment in index-linked gilts.

At first sight, the second option - which, bizarrely, entails the pension fund being nationalised while the rail industry is privatised - appears attractive, since it guarantees continuing inflation-proofing for pensions. Yet, historically, index-linked gilts have tended to underperform equities, which form the bedrock of a normal pension fund portfolio. Moreover, the railmen have, under their present scheme, enjoyed a share of pension fund surpluses. Unlike private sector schemes, where the employer pays the balance of the cost of meeting pension liabilities after a fixed contribution from the employees, many nationalised industry funds operate on shared costs. Employer and employee have contributed in a fixed ratio, and the surplus has been shared, with employees enjoying contribution holidays as well as the employer, and the less well-off pensioners receiving uplifts in benefits.

As for the first option, the prospect of benefit improvements would be poor, because trustees would have to adopt a cautious investment policy in a closed fund with no new income coming in - not an enticing swap for people who have hitherto enjoyed both security and improved benefits.

The government's proposals may not be the most ruthless example of pension fund stripping. But benefits are being diluted. This will do nothing to enhance confidence in a pensions system that has suffered gravely from the activities of the late Robert Maxwell. The government should think again and offer BR pensioners a deal that is genuinely no less favourable than the status quo.

British Rail GB United Kingdom, EC P6371 Pension, Health, and Welfare Funds P4011 Railroads, Line-Haul Operating P9621 Regulation, Administration of Transportation CMMT Comment & Analysis P6371 P4011 P9621 The Financial Times London Page 19 514
Leading Article: Smith squares up Publication 930303FT Processed by FT 930303

MR JOHN Smith's speech on constitutional reform, delivered with little fanfare on Monday night, will do him good. The UK Labour leader observed that too much government power is held at the centre and exercised in secret. Since the Conservatives first took office in 1979 local government has increasingly been hamstrung. A new tribe of unelected, boards, executives and committees has sprung up to run schools, hospitals and hived-off agencies spawned by Whitehall. Actions of the state have become more difficult to hold to account.

Few of the items in Mr Smith's list of proposed remedies are revolutionary. He would give local authorities 'clear statutory powers, a reasonable and stable financial structure, and enough autonomy to find practical local solutions . . . ' A 'new tier' of government would be installed in Scotland, which makes some sense, and in Wales and the regions of England, for which the case has yet to be proved. Mr Smith's opinion that the 'all-powerful nation state' is 'outdated' is not shared by everyone. His classification of the ideal European model of decision-making as four-layered (municipal, regional, national and European) would not be controversial in most of the European Community.

The Labour leader's suggestion that the European Convention on Human Rights be incorporated into British law lays to rest his predecessor's messy compromise of a set of bills of rights tailor-made to suit Labour policies. It is also in accord with the views of senior judges. Mr Smith over-eggs the pudding with his proposed Human Rights Commission and Ministry of Justice, but the intention, to protect individuals, is honourable. He quotes the Financial Times in support of a Freedom of Information Act. No comment.

Economic policy is best made with as much openness as possible. The Labour leader muses about a 'Green Budget', confirms his party's plan for an annual 'state of the nation' report, promises to end the ritual of pre-Budget purdah and, temptingly, argues that the Central Statistical Office should be made statutorily independent, accountable to Parliament, and supervised by a special panel. He reflects his party's obsession with high earnings in his call for 'the cobwebs of unnecessary secrecy' around boardrooms to be blown away, but seems to limit his proposals to those in last year's Cadbury report.

In sum, Mr Smith's modest slate of reforms would move his party further towards the centre. He says nothing about proportional representation for elections to the House of Commons, although he will have to come clean before Labour's conference in the autumn. His wider strategy therefore remains obscure. If he wanted a pact with the Liberal Democrats, he would test the water by persuading the Labour party to stand aside from the forthcoming by-election in Newbury. Meanwhile he has made a canny bid for Liberal Democrat votes.

Labour Party (UK) GB United Kingdom, EC P8651 Political Organizations CMMT Comment & Analysis P8651 The Financial Times London Page 19 496
Leading Article: US targets and Bosnia Publication 930303FT Processed by FT 930303

THE US administration had two main objectives in deciding to parachute emergency aid to besieged Moslem communities in eastern Bosnia; the first was humanitarian, the second political. The difficulty that United Nations land convoys were having in delivering relief supplies to people in areas controlled by Serb militias seemed to justify a new approach.

But at least equally important for Washington was the political consideration that, after all the criticism of Serb atrocities during the presidential election campaign, the new president should be seen to act in line with his principles. The real problem is that members of the administration still seem to disagree over their longer-term policy options. With painful memories of the Vietnam war still relatively fresh, direct military intervention was never a realistic proposition and proposals to arm the Moslems ran into the stiff and well-founded opposition of the US's allies with troops on the ground.

Though the administration's dislike of the international mediators' plan for the division of Bosnia-Hercegovina into 10 semi-autonomous provinces has been well-publicised, the US has not, so far, come up with a viable alternative. Indeed, it has been obliged to pay lip service to the Vance-Owen plan in the knowledge that it is fully backed by Russia, Britain and France, all permanent members of the UN Security Council, which would have to endorse a Bosnian peace settlement.

In the circumstances, the air-drops must be seen as at least partly a political gesture targeted as much at domestic American opinion as on eastern Bosnia. Yet that operation must not be allowed to divert international attention from the efforts to achieve a peace settlement or from the need for the US to pull its full weight in the talks which resumed in New York on Monday.

When the US announced its new 'initiative' on Bosnia last month, the administration made clear that it wanted to work in close association with Russia, in the hope that Moscow would exert pressure on its Serbian allies to make compromises. But the corollary of such a policy is that Washington, too, should try to persuade its Moslem proteges to adopt a more flexible approach.

Mr Alija Izetbegovic, the Bosnian president, has lately proved to be particularly intractable and has refused to lead his delegation in the peace talks. The suffering and grievances of his people are indisputable, but he must be made to realise that a durable peace settlement is in his own people's most fundamental interests.

The assurance the US has given that it will make a substantial contribution to the international force required to enforce a peace agreement should provide the kind of long-term guarantee the Moslems are looking for.

US United States of America BA Bosnia-Hercegovina, East Europe P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 19 478
Those were the days: Transcaucasia may welcome a reassertion of Russian power Publication 930303FT Processed by FT 930303 By EDWARD MORTIMER

'The ebbing of Russian power after the 1917 revolution seemed to provide more auspicious conditions in which the national aspirations of the peoples of Transcaucasia could be realised. As it turned out, Russia's weakness proved only temporary . . . The record of the independent republics of Azerbaijan, Armenia and Georgia established in the interim was in any case not particularly promising.'

The quote is from Post-Soviet Transcaucasia by Jonathan Aves (RIIA, Pounds 6.50) - the latest in the impressive series of papers produced by Chatham House's Post-Soviet Business Forum. And the question it raised for me - one that has been nagging away at the back of my mind ever since the Soviet Union began to break up - was: will history repeat itself?

For if one thing emerges clearly from Mr Aves's paper, it is that the record of those three republics is not very promising this time round, either. Armenia and Azerbaijan have been gradually destroying each other since 1988 in the conflict over the Nagorno-Karabakh region, while Georgia has been destroying itself almost single-handedly.

Georgia's leaders, it is true, tend to blame Russia for stirring up trouble, notably in the breakaway regions of Abkhazia and South Ossetia. Mr Aves, a lecturer in Russian government at the London School of Economics, only partially endorses such accusations. He is much more scathing about the Georgian leaders themselves, especially the self-appointed defence minister, Mr Tengiz Kitovani. Even the widely respected former Soviet foreign minister, Mr Eduard Shevardnadze, does not come out too well.

Mr Aves admits that Mr Shevardnadze's return to head the Georgian government a year ago 'established the credentials of the new regime', but he goes on to point out that, 'dominated by ex-communists', the government has so far taken no significant measures to promote economic reform, 'despite the republic's catastrophic economic situation'.

At the same time he detects a 'drift towards authoritarianism'. A personality cult appears to be emerging around Mr Shevardnadze, and critics of the government find it increasingly difficult to express their views.

Mr Aves is equally pessimistic about Azerbaijan, in spite of its relative good fortune in having 'a strong agricultural base and enough oil to give it a trade surplus with the other republics'. Paradoxically, he says, 'these economic strengths have combined with political turmoil to retard plans for economic reform', since the government 'appears to believe that future income from oil removes the need for rapid change'.

At the same time, military reverses at the hands of the Armenians have undermined political stability, and the hold on power of President Abul'faz El'chibei, the nationalist leader who came to power last year, 'is by no means to be taken for granted'.

Armenia's President Levon Ter-Petrosian gets slightly better marks, for introducing at least some economic reforms, and having the political skill to consolidate his power base without resorting to authoritarianism. But such compliments will ring hollow in the ears of the many Armenians now enduring their second winter in unheated apartments, and often short of food, thanks to the Azerbaijani blockade and the repeated sabotage of the gas pipeline through Georgia.

Nor is Armenia's political stability exactly obvious when, since Mr Aves's paper went to press, the president has had to dismiss his prime minister (for denouncing the government's own economic plan in a speech to parliament), the opposition has spurned the president's offers of a coalition government, and over 100,000 people have demonstrated in the capital, Yerevan, demanding his resignation.

More ominous still is Mr Aves's warning that, although Armenia had the best of last year's fighting, the odds favour an Azerbaijani military victory in the long run. Armenia, he points out, has few natural resources and no outlet to the sea, being 'bordered by an unreliable ally, in the form of Georgia, an uneasy partner, in the form of Iran, a hostile regional power, in the form of Turkey, and a declared enemy, in the form of Azerbaijan'. There must, Mr Aves says, 'be a serious question mark over the long-term future of the state'.

Although Armenians, radicalised by the Karabakh issue, were one of the first Soviet peoples to demand independence in the late 1980s, they are also the one with most to lose when Russian influence in their region declines.

In 1920 Armenia had to beg for Russian protection to prevent itself being overrun by the Turks; and by 1992 it had become, alone in the region, 'a loyal and enthusiastic member' of the Russian-dominated Commonwealth of Independent States.

Most Armenians will therefore be glad to hear that 'in 1992 there has been a perceptible reassertion of Russian influence in Transcaucasia', and may even hope that Mr Boris Yeltsin, the Russian president, obtains the United Nations mandate he requested for his country last Sunday, to serve as 'guarantor of peace and stability' throughout the former Soviet Union.

Pax Russica is, after all, the only peace that Transcaucasia has known in the last two centuries; and the chances of its peoples making peace spontaneously among themselves seem very slight.

XV Commonwealth of Independent States AZ Azerbaijan, East Europe AM Armenia, East Europe GE Georgia, East Europe RU Russia, East Europe P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 18 895
Hitting the roof over reform: Calls for changes to UK commercial property leases are gathering pace Publication 930303FT Processed by FT 930303 By VANESSA HOULDER

'Upwards-only rent review clauses seem designed for a world which had the certainty of an upwards-only pattern of property values. This pattern is not in the interest of the economy as a whole, and the thrust of our anti-inflationary policy is intended to make it obsolete.'

Bank of England

The row unleashed last week over the UK government's plans to allow leaseholders to buy the freehold of their homes is matched by a quite separate but equally controversial debate over leases in the commercial sector.

Since the Bank of England threw its weight behind the case for reform in January, the battle has continued to rage. Its attack focused on one of the most cherished principles of the UK property investment industry: that rents should move only upwards after their five-yearly reviews.

It also criticised the 'apparently absurd outcomes' that stem from privity of contract, another mainstay of the standard 25-year commercial lease. This means that tenants who pass on a lease when they cease to occupy a building remain liable for rent if a subsequent tenant defaults. The system was an example 'of responsibility without power', said Mr Robin Leigh-Pemberton, the Bank's governor.

His remarks drew an angry response from many commercial landlords, who depend heavily on the reliability of the rental income. 'The Bank appears to be sweeping the carpet out from under our feet,' said Mr Michael Mallinson, a past president of the British Property Federation.

Mr John Ritblat, chairman of the property company British Land, concurred: 'It was an uninformed, impoverished statement that was greatly damaging to the industry.'

But the Bank of England has not been alone. As the recession deepened, the case for change was voiced by businesses, politicians and academics with increasing urgency. Mrs Angela Browning, Conservative MP for Tiverton, in a Commons debate last November, cited the example of some constituents who had been forced to sell their home to discharge rental debts relating to former premises.

'This has done more to devastate small businesses than even global recession,' she said. But privity of contract is not simply a problem for small businesses. Boots the Chemist made a provision of Pounds 5.8m in its last financial year related to 'leases where the assignees have defaulted'.

The Adam Smith Institute, the free-market think-tank, recently published a paper arguing that the rigid UK lease structure that allowed rents to rise while retailers' turnover was falling 'had created a situation of nightmarish crisis on the high street'. As well as condemning the structure of leases, it criticised the process by which rents are agreed and the prevalence of confidentiality clauses on the terms of rent agreements, which it claimed tended to favour the landlord.

Critics emphasise that the 25-year, upwards-only lease is almost unknown outside Britain. US and continental leases are generally far shorter and less rigid. In France, for example, tenants sign leases for nine years, with the right to break the lease every three years. Rent reviews are pegged to inflation.

Some aspects of the system differ in Scotland and Northern Ireland, which have no privity of contract. Tenants have no continuing liability once they have passed their leases to another tenant. However, investors enjoy some protection, as they have the right to stop the lease being passed on to a financially weaker tenant.

Many UK investors would be prepared to replace privity of contract with the Scottish approach. A few landlords are prepared to question whether a 25-year lease acts in their interest. They believe that slightly shorter leases, perhaps of 15 years, might enhance their property's value, as it would give them a chance to upgrade the building more regularly to attract higher rents.

But, in general, most landlords view with dismay any suggestion that they should relinquish the present UK lease structure. They say any change would severely reduce property values by undermining the security of their rental income. They argue that the impact of falling commercial property values could go beyond their own industry and damage the entire economy.

First, it could further reduce institutions' appetite for property. That would be a blow for the banks, which are concerned about how the record Pounds 39bn they have lent to the industry over the past few years is to be repaid.

Second, there is a danger that the erosion of companies' asset values could hamper their capacity to borrow, and thus stifle the growth that would spur economic recovery. Commercial property accounts for 30-40 per cent of companies' assets, according to a London Business School study.

This fear is given credence by a recent study by the Centre for Economics and Business Research for the Royal Institution of Chartered Surveyors. The report calculates that a 10 per cent drop in property prices would result in a Pounds 10bn fall in borrowing over the next two years. This would reduce gross domestic product by about 1.5 per cent or Pounds 9.7bn over the period compared with what it would have been if property prices had not fallen.

The landlords' defence of the existing lease structure extends to claiming that it works in the tenants' best interests. 'The irony of the debate about upwards-only reviews is this: only in the current extreme situation does that provision work against tenants' interests,' said Mr Mick Newmarch, chief executive of the Prudential life group.

He argued that, if security of income were removed and institutions became less willing to invest in property, the supply of property would dwindle and rents would rise. 'If the laments of tenants win the day, they will actually be doing themselves more harm than good,' he said.

This argument cuts little ice with tenants. With few exceptions, they view their landlords' interests as incompatible with their own. Their hope is that the property market will remain weak for long enough to allow them to make lasting changes in Britain's commercial lease structure.

Already, many leases signed in the past year involve concessions by landlords - such as giving the tenant the right to break the lease - which would have been unimaginable a few years ago. But without government intervention, reform is likely to be a slow process, since on average just 4 per cent of leases expire in any year.

The pressure for change creates a dilemma for the government, which promised to consider overhauling privity of contract in its manifesto last year. However, the Lord Chancellor, who has been lobbied intensively by both sides of the debate, has not yet arrived at a suitable compromise.

There is a conflict between the needs of struggling tenants and the rights of landlords, who say they would take the government to the European Court if it passed 'confiscatory' legislation affecting existing contracts. 'The government is on a hiding to nothing,' says one of its advisers. 'They have strong constituencies among the property industry and among small business people. They will risk alienating one side or another.'

One area in which the government could act is by legislating on new leases, which could remove privity of contract, upwards-only rent reviews and confidentiality clauses. While this would be seen by many landlords as an unwarranted interference in the free market, it would nevertheless be less controversial than any tampering with existing leases.

For the Conservatives, the dilemma is acute. The government is reluctant to interfere with a system that underpins the strength and security of many financial institutions, from pension funds to banks. Nonetheless, the recession has illustrated powerfully the case for an overhaul. Otherwise, property's importance as an investment medium risks overshadowing its more fundamental productive role in the British economy.

GB United Kingdom, EC P6512 Nonresidential Buildings Operators GOVT Draft regulations CMMT Comment & Analysis P6512 The Financial Times London Page 18 1315
Letter: Verdict on NHS reforms should reflect impact on patients Publication 930303FT Processed by FT 930303 From Mr DAVID BLUNKETT MP

Sir, I was interested to read John Willman's review of the Organisation for Economic Co-operation and Development report, The Reform of Healthcare ('Just what the doctor ordered', March 1). As Mr Willman rightly points out, the OECD can draw no final conclusions on the changes that have been brought either in Britain or the Netherlands.

Nevertheless, it is pertinent to ask the question as to how any final conclusions will be drawn.

Who are the changes expected to have benefited? Is it - as the cutting of costs indicates - governments and the Treasury which are to benefit? Or is it - as any sensible person would expect - the patients who are supposed to be the beneficiaries?

These are crucial questions when National Health Service changes have resulted in rocketing waiting lists and a two-tier health service, with GP fundholders obtaining minor treatment for their patients while serious surgery is delayed for many others. This situation has forced the secretary of state for health to admit, as she did last Friday, that the internal market has led to delays in urgent treatment, as hospitals simply run out of money.

I hope that the OECD will now connect up with those receiving health treatment so that further reports will make a judgment on outcomes and not merely inputs into the system.

David Blunkett MP,

shadow secretary of state for health,

House of Commons,

London SW1 0AA

GB United Kingdom, EC P9431 Administration of Public Health Programs CMMT Comment & Analysis P9431 The Financial Times London Page 18 277
Letter: How the government has made life more difficult for many exporters Publication 930303FT Processed by FT 930303 From Mr CAMPBELL DUNFORD

Sir, I was very pleased to see the article by lvor Owen, 'Minister defends ECGD sell-off' (February 23), regarding the comments made by Richard Needham, the trade minister, on the privatisation of the bulk of the Export Credits Guarantee Department.

It is also encouraging to perceive that Mr Needham is concerned about the vital nature of credit insurance to the UK economy, the balance of payments and employment. But there are several points that require expansion.

The minister has said that the reinsurance arrangements to NCM, which bought the short-term credit arm of the ECGD, would be continued without any time limit. This is not generally understood and indeed represents a significant step forward.

Second, while it may be true that NCM has secured adequate reinsurance treaties, the reinsurance market has shrunk and other would-be competitors might find it difficult to obtain reinsurance.

Third, while supporting any initiative to help our beleaguered export industry, it seems strange that government reinsurance is available only to a Dutch-owned company and not to any of the other competitors in the market. This is a matter which is being looked at in Brussels right now.

Experience from our members would suggest that, while welcoming the privatisation of this arm of ECGD, the government has probably made life more difficult for many exporters in terms of the range of markets covered and the lack of support for other companies wishing to enter the market.

In spite of the minister's confident assertion, it does appear that availability of cover for traditional UK markets has been restricted or withdrawn, and appeals to the DTI on this matter have largely fallen on deaf ears.

Campbell Dunford,

director and chairman,

Export Finance Committee,

London Chamber of

Commerce and Industry,

69 Cannon Street,

London EC4N 5AB

GB United Kingdom, EC P6351 Surety Insurance CMMT Comment & Analysis P6351 The Financial Times London Page 18 335
Letter: Diversity as a function of managerial characteristics Publication 930303FT Processed by FT 930303 From Mr ANDREW CAMPBELL

Sir, Christopher Lorenz's piece, 'Shaking off the heavy brigade' (February 26), in which he argues that diversity is dying in business, correctly knocks another nail in the coffin of 'diversity'.

He rightly defines diversity as a function of managerial characteristics rather than product, market or industry.

A premium product may have widely different managerial characteristics from a low-cost product, even though both are part of the same industry.

As a result, speciality chemicals can be seen to be different from commodity chemicals because of their differing managerial characteristics.

These different managerial characteristics demand different skills from the parent company, making the two types of chemical business awkward bedfellows.

Mr Lorenz does, however, dismiss 'cross-business synergies' somewhat too readily when, summing up the axioms of what he calls the new orthodoxy in business, he says that 'cross-business 'synergies' of any kind - technological, marketing or any other - are far more elusive than was commonly thought in the 1960s and 1970s'.

In our research at the Ashridge Strategic Management Centre, we have identified many situations where businesses benefit from co-ordinating with each other.

Cross-business synergies are not scarce, but we have noted that only a very small portion of these synergies need a parent company to release them.

The synergies can in fact be gained by the mutual consent of the businesses regardless of who owns them.

Only certain kinds of synergies, that is, those involving blockages to arm's-length solutions, require the existence of a parent company.

To borrow Mr Lorenz's analogy, the sap may be flowing between businesses, but it is only in a very few situations that this flow needs to be 'parented'.

Andrew Campbell,

director,

Ashridge Strategic

Management Centre,

17 Portland Place,

London W1N 3AF

GB United Kingdom, EC P99 Nonclassifiable Establishments MGMT Management CMMT Comment & Analysis P99 The Financial Times London Page 18 324
Letter: Proposal at Lloyd's unfair to Names Publication 930303FT Processed by FT 930303 From F S R JOHNSON

Sir, In 'The incredible shrinking market' on Lloyd's problems (FT 24 February), Richard Lapper reports that increasingly market professionals want to 'fence off' old liabilities by leaving syndicate accounts for 1990 open.

It is normal at Lloyd's to leave years of account open when they cannot be closed in the usual way after three years because debt or potential debt is so high as to make it unreasonable to ask new Names to take part in dealing with it.

It is quite another matter to compulsorily ban all syndicates from closing their 1990 year of account based, not on their individual commercial results for 1990, which in many cases would legitimately allow closure, but on a perceived need to encourage members of the corporate sector and others to join Lloyd's and improve its capital base by insulating them from past problems.

I understand the need for Lloyd's to restore its shrinking capital base. But a measure such as this would introduce a two-tier membership. It would penalise the existing membership, the source of Lloyd's capital so far, and perpetuate the despair of those looking to escape from the worry of their Lloyd's commitments by seeing their syndicates closed legitimately at the three-year point. F Johnson,

9 Hazely,

Tring,

Hertfordshire HP23 5JH

Lloyds of London GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service CMMT Comment & Analysis P6411 The Financial Times London Page 18 253
Arts: Picking on Cherry - Jazz Publication 930303FT Processed by FT 930303 By GARRY BOOTH

There is an unfortunate person sometimes heard at London jazz concerts. He seems compelled to react loudly, in the silence of a large auditorium, to whatever crosses his mind at any moment.

I rather wished this tormented soul had been present at the Nu Now concert on the South Bank earlier this week, when Don Cherry first croaked into his pocket trumpet. He might have startled the old man of world music into more coherent action. That Cherry has a uniquely elusive but persuasive sound is without doubt, but his wandering concentration and arthritic trumpet playing on Monday was initially beyond comprehension.

Fortunately, the rest of the Nu Now quartet - the bubbling rhythm of Bob Stewart on tuba, kinetic Hamid Drake on drums and Carlos Ward's sleek alto saxophone - delivered support with such flowing momentum that the early inertia of Cherry's playing was all but overcome. Creeping unsteadily around the piano in black tailcoat and embroidered pill box hat or squatting uncomfortably on his dais with shakers, doussn'gourni and melodica,

Cherry seemed unable to penetrate material which ranged between Nu Now originals, music from Ornette Coleman and Thelonious Monk. By the end of the first set, which ground to a halt with Cherry endlessly tuning the trademark six string African guitar, the doussn'gourni, the Queen Elizabeth Hall squirmed.

Thankfully Cherry appeared after the interval sounding more purposeful: especially at the piano where in a Monk medley he contrived to sound even more dislocated than the original. Ward tangled excitingly with angular rhythms from Drake, and Stewart's golden, classical tone flared in a long-awaited solo excursion. Perhaps fired by his colleagues' enthusiasm Cherry finally managed to make a mouth for the muted trumpet.

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups CMMT Comment & Analysis P7929 The Financial Times London Page 17 318
Arts: The Artifice - Theatre Publication 930303FT Processed by FT 930303 By MALCOLM RUTHERFORD

Susanna Centlivre (c 1667-1723) was one of the first women playwrights. She was also the most prolific and popular of either sex in the early part of the 18th century, a period which included Congreve, Farquhar and Wycherley. She continued to be a box office success with such plays as The Busy Body and The Wonder until well into the reign of Queen Victoria. In the present century she has been forgotten, except as a curiosity.

There is much to be curious about. She probably came from Lincolnshire, attended Cambridge dressed as a boy, and then became a strolling player. Somewhere she must have picked up French, for the French influence in her works is very strong. One of her husbands (she may have had three altogether) was killed in a duel. The last was Joseph Centlivre, who occupied a senior place in the Queen's kitchen, just below the level of master cook. Alexander Pope, who mocked Mrs Centlivre in 'The Dunciad', thus referred to her as the cook's wife.

In politics she was a Whig and a Protestant. As a dramatist, her great merit was that she wrote parts that actors like David Garrick wanted to play again and again. So it is good to see her revived at the delightful Orange Tree Theatre in Richmond. There must be a question mark, however, over the choice of play.

The Artifice is her last work. It ran only three nights at Drury Lane in 1722. John Wilson Bowyer, an American who wrote a book (1952) about Mrs Centlivre, says that it contains 'some of the worst elements of three dramatic schools - light manners, busy intrigues and sentimental reformation - and is really a failure in all.'

Wilson Bowyer did not understate. The Artifice has no central plot, only a number of subplots which do not relate to each other much. The common themes are marital infidelity and the pursuit of wealth and titles, but without the interweaving that you would find in a Congreve or a Sheridan.

Still, Mrs Centlivre could certainly write. There is a pompous country gentleman called Mr Watchit, played here by David Timson, who is very jealous of his wife - and locks her up while he philanders. Louisa, a Dutch lady jilted by an Englishman, enjoys herself by pretending that she has poisoned him while they share a last embrace. She wins him in the end.

Best of all is the ambitious Widow Heedless (Auriol Smith), worth Pounds 20,000, embittered by her first marriage and resolved not to marry again beneath the level of a lord. She succumbs to a captain of a regiment who was posing as her footman.

Individually, these parts are sharply drawn. Others, like Sir Philip Moneylove who thinks that money is all that counts, are much flatter. The pity is that none of them fits together. But such shortcomings in the text are at least partially overcome by the infectious enthusiasm of the production by Sam Walters. The performances are better than the play, and this is a curiosity worth seeing.

Orange Tree, Richmond until March 27. (081) 940 3633

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 17 554
Arts: Not Fade Away - Fringe Theatre Publication 930303FT Processed by FT 930303 By ALASTAIR MACAULAY

'Do you know how scared that makes me? Every day I feel I'm going to cave in if I give way to one of these memories.' Frances, a young woman, is haunted by her own past; and she is possessed by it. So possessed that she feels as if she has no freedom to act independently; and so haunted that she has had to isolate whole facets of her personality and sometimes to banish them from her present life.

It emerges that she was sexually abused by her grandfather from the age of six onwards; that she was called 'the devil's child'; that her mother visited so sporadically that Frances did not realise who she was; and more. All of which Frances tells herself. Part of the wit of Not Fade Away is the way you do not know for some time that the man she is talking to is a psychoanalyst; or that Frances contains so many selves that she is a traumatic case of schizophrenia. By the time you know, you care. She has done horrific things; you never fully understand her, or all that has happened to her; but you care.

The author is Richard Cameron, whose Pond Life had a notable success at the Bush last year. The most tormented character in that play about adolescents was a girl called Togo, from whom Frances seems to have been developed. But here Cameron has a different angle. We never see Frances in everyday social context. She is either alone or talking to the analyst. And we (unlike him) keep hearing (on tape) the several voices in her head - except when, alone on the performing stage of her mind, she sings, powerfully, pop classics. Sometimes it is as if we are in her head.

Any description, however, must detract; as with Pond Life, the best enjoyment comes simply in watching it surprise you as it unfolds. It is full of truth, right down to details of the pyschoanalyst's body language. Only once or twice do you sense that this tour de force has been conceived for wow effect - there are scenes of possession that recall The Dybbuk - and that Frances's more poetic locutions do not ring true to her character. You always watch her objectively, aware of her ultimate unknowability. The play simply shows you fragments from her progress; sometimes too fragmented for clarity.

Kelly Hunter is Frances. This is an astonishing performance, not least because most of its virtuosity is invisible. With complete ease, she shows Frances as child, slut, prude, innocent, victim, tormentor, and the various ways these facets conflict or combine.

Not Fade Away, like Pond Life, is directed by Simon Usher and designed by Anthony Lamble - the duo who have also staged James Robson's remarkable King Baby for the RSC, currently at the Pit. It is now evident that Usher (though I presume he is responsible for the white-voiced and raised-eyebrow version of childish innocence that here repeats from Pond Life) has a rare gift for handling plays that deal with psychological anguish and confession. And Lamble, as in Pond Life, shows great skill in turning the small Bush space into three wholly distinct interiors. Congratulations to all concerned.

At the Bush Theatre, W12, till March 20

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 17 582
Arts: A night of purgatory - Television Publication 930303FT Processed by FT 930303 By CHRISTOPHER DUNKLEY

Every few years someone in the US writes a best selling book which blames one mass medium or another for the ills of society, particularly the violence. First horror comics, then movies, were the butt; then, about 30 years ago, television became the favourite target. Each focused so tightly upon one particular tree that the writer is incapable of observing the wood beyond: the whole span of human history with its wars, tribal conflicts and rape; horrible violence perpetrated in the name of everything from religion to political belief, from territorial greed to entertainment.

The danger and sadness of such books is that they offer unthinking people an easy escape from unpleasant realities. Many jump at the opportunity to blame television for virtually anything: sexual abuse of children, juvenile delinquency, and inner city riots, even though all have been a part of human society for millennia. Repeatedly this column has pointed out the silliness of calling for the censorship of television as though that would somehow change human nature. The response 'Ah, but television makes it all so much worse and increases the numbers of abusers/delinquents/rioters' suggests a failure to read Mayhew, Dickens, or even old copies of Punch in order to understand how bad things used to be.

However, the most recent book is couched in such reasonable terms, so willing to concede that the mass media alone are not responsible for all our ills, that it commands more attention than most. True, author Michael Medved is more concerned with the cinema than television, hence the title: Hollywood vs. America. But the chapter published this week in the Sunday Times is devoted to rock music, including the output on the cable and satellite channel MTV.

As introduction Medved notes 'I do not claim that media messages cause destructive behaviour, but I do contend that they encourage it. At the same time, I never stress the pernicious power of one movie, or one TV show, or one hit song. What concerns me is the accumulated impact of irresponsible messages that are repeated hour after hour, year after year. The most significant problems of the popular culture stem from the pervasive presence of anti-social material, not from a few isolated examples of offensiveness.'

He then gives an undeniably unpleasant catalogue of rock lyrics involving the subjection of women, necrophilia, sado-masochism, and mutilation of female genitals. Specifically he quotes the lines from a Guns 'n Roses number: 'Panties round your knees with your arse in debris . . . Tied up, tied down, up against the wall . . . Turn around bitch I got a use for you' and more. He quotes a research study by America's National Coalition on Television Violence from the winter of 1991 which examined 750 music videos from cable and broadcast television and discovered an average of 20 acts of violence per hour. On MTV, he reports, the situation was even more extreme: 29 instances of violent imagery in an average hour of programming.

I still feel that television mimics people much more than people mimic television, but there were two things in this particular instance which hinted that there might be more reason than usual for concern. First, my own casual viewing of MTV via the Astra satellite suggested that unlike other channels, where a violent or otherwise objectionable programme will invariably be surrounded by different and mainly unobjectionable material, MTV, a channel dedicated pretty well exclusively to rock videos, might be producing abnormal concentrations of nasty material. Second, some parents seemed to use MTV as a sort of baby-sitter for bigger children, not merely allowing them to watch it on their own for hours on end but flatly refusing to watch with them on account of the ghastly noise.

If such concentrations did exist, and if children were left to imbibe it for hours alone, might this not eventually have some effect? On Sunday evening, leaving the video to capture A Year In Provence, Prague in the 'Screen Two' series and the South Bank Show on Jean Genet, I switched to MTV and stayed with it for hour after hour.

It was a deeply dispiriting experience, though not, chiefly, for the reasons advanced by Medved. No doubt he would have been appalled at the words of the song 'School For Fools' by Love Sex And Death, who have presumably been listening to Pink Floyd: 'Whaddya learn at school? School's for fools. Teacher tells yer what ter say, teacher tells yer when ter pray, whaddya learn in school? Nothing', and the lyrics to 'Razzmataz' by Pulp (or it could have been 'Pulp' by Razzmataz) which began 'The trouble with your brother is he's always sleeping with your mother . . .'

But that sort of thing was just as rare as the remarkable (borrowed) words to 'Here Comes The War' from New Model Army: 'Put out the lights on the age of reason . . . the whirling dervish spinning faster and faster, the centre cannot hold . . . give us liberty or give us death'. Mostly on MTV the words - when they could be heard by a normal person which was less than half the time - were like objets trouves: ill assorted and meaningless. Perhaps European MTV is different from the American version but, on this night in Britain, at any rate, the objection was more often tedium than corruption.

Perhaps Medved would argue against this, claiming that there are as many examples here as in the US of what he calls 'a contemptuous attitude towards religion'. Certainly lots of bands seem to have followed Madonna and taken to using the trappings of religion in a profoundly irreverent way. Yet if you regard religious organisation as frequently one of the more pernicious aspects of human society this may not worry you, and if you are opposed to the overloading of violent imagery then presumably you will approve attempts to devitalise the most widespread violent image in the western world: the head and torso of a man, dripping blood from a crown of thorns. That familiar image certainly featured large on Sunday night.

But a solid evening of Anglo-European MTV produces other worries. The sheer tedium of group after group offering nothing but guitar and drums with occasional keyboards has to be experienced to be believed. From Les Thugs to Man-O-War, from Distortion to Protect And Survive all they offer is an undifferentiated outpouring of rhythmical noise. Was I imagining it, or were things utterly different when I was 17? I checked the 1961 charts and found everything from Dave Brubeck to Nat King Cole and Petula Clark. True, there was rhythmical noise from The Shadows but there was also melody from the Everly Brothers and real tunes from Ray Charles.

Perhaps European television still spares our children the worst excesses of its American counterpart, but the rock video seems to be killing the art of popular music and putting in its place a drearily meaningless sequence of unconnected images: fire, desert, motor cars and motorbikes, crucifixes, leather jeans, and back to fire. Watching it for more than five minutes must surely seem, to anyone with even a spark of intelligence, like purgatory.

GB United Kingdom, EC P7812 Motion Picture and Video Production CMMT Comment & Analysis P7812 The Financial Times London Page 17 1237
Arts: Dramatic chronicle - Fringe Theatre Publication 930303FT Processed by FT 930303 By MALCOLM RUTHERFORD

Athol Fugard's Playland is the best play to arrive in London since Tony Kushner's Angels in America at the Royal National Theatre last year. The piece has a seriousness of purpose and a tautness of writing seldom seen on a European stage. It is not just that the subject matters, though by God it does: everything in the production lives up to it.

Fugard, now in his early sixties, has a prolific output behind him. His last play at the National, My Children] My Africa] was a relative flop, partly because it was written before, but presented after, the release of Nelson Mandela. In Playland Fugard returns to being the dramatic chronicler of his times: the man who can present hope out of despair.

The background is the war in what used to be called South West Africa - South Africa's Vietnam. It is new year's eve 1989: the war is over. Two characters come together outside a fairground. One is a white South African former corporal whose experience of killing has left him an emotional wreck, but also perhaps a wiser man. The other is the black nightwatchman, who has been guarding the fair for years.

They talk: or rather at the start the white man talks almost to the point of monologue. He is not especially bitter. He accepts that blacks and whites will have to live together. Gradually, however, there is a role reversal: the watchman begins to talk.

The ostensible subject is killing. The watchman believes the sixth commandment: 'Thou shalt not.' The white cannot get over seeing a record 27 members of SWAPO killed and buried by his unit on one day. But the black, too, has committed murder: he killed a white man for attempting to sleep with his woman. Moreover, despite his belief in the commandments, he is not sorry and would do it again.

Fugard is now a master of dialogue. The facts about both characters slip out. Sometimes they revert to an atavistic past. The white claims there is nothing wrong with a white man taking a black woman against her will: 'That's how little white boys learn to do it. And you know something else: the women like it.' Sometimes the watchman simply wants the white to go away.

Yet the antagonism that occasionally breaks out is not the whole theme. The underlying point is about mutual dependency, liking the same things, such as the freedom to watch the birds in the South African skies and to laugh not the 'laughter of lies'.

Most impressive of all, none of this is piously done. There is no suggestion that all whites have learned the same lesson from the war. Indeed the white soldier now feels estranged from his own people. Here are simply two individuals talking.

Fugard leaves no doubt, however, that they are both identifiably South Africans, and know it. The skill with which he does this is shown in the language. They have begun to share words and accents. This is almost the first time that I have found an Afrikaans accent on stage sympathetic.

The acting by John Kani as the black and Sean Taylor as the white is impeccable. Fugard himself directs down to his fingertips and there should be a special prize for the lighting - note the coming of dawn - by Mannie Manim. The Donmar Warehouse, small like the Market Theatre in Johannesburg, is exactly the right place for Playland.

Donmar Warehouse until April 17. (071) 867 1150

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 17 618
Arts: Today's Television Publication 930303FT Processed by FT 930303 By CHRISTOPHER DUNKLEY

You might have thought that Darwinian evolution would ensure that the utterly credulous were bred out of the human race, yet it does not seem to happen. Today we look on in astonishment as American viewers dutifully post millions to American telly evangelists who splurge it on wine, women and song. People have learned nothing, it seems, since 1830 when preacher John Wroe managed to convince his followers in Ashton-under-Lyne that god had told him to take seven virgins into his household for his 'comfort and succour'. You or I would have said 'Pull the other one, it plays the wedding march' yet, according to the opening episode of Mr Wroe's Virgins, (9.25 BBC2) acquiring his 'helpers' was no trouble at all. Today's episode tells the story of Joanna who wants to be a missionary but is prevented because she is a woman. Two programmes which I missed are repeated tonight: Victoria Wood (8.30 BBC1) is from the 1989 series which were not stand-up routines or skits but rather like single episode sitcoms. Dispatches (9.00 C4) repeats the award-winning programme about children living on the streets of St Petersburg.

GB United Kingdom, EC P7812 Motion Picture and Video Production TECH Services P7812 The Financial Times London Page 17 219
Arts: Mozart on the Fringe - Music Theatre Publication 930303FT Processed by FT 930303 By ALASTAIR MACAULAY

Figaro starts the opera by mapping out his new room: 'TV . . . Video . . . Hi-fi . . . CD . . .' Leporello keeps the list of Giovanni's conquests on his pocket computer. Susanna wants to know if Figaro likes the new colour in her hair. Rosina summons her maid with a bleeper. Ottavio (rhymes with 'gravy-oh') calls Anna 'Kitten' and 'Precious.' Cherubino gets sent to the Brecon Beacons for a fortnight with the OTC. Don Giovanni (call me Don) launches the finale with a paean to sex, drugs and rock 'n' roll.

This up-to-date modernity is just the top layer of Music Theatre London's versions of Figaro and Giovanni, which come to London after a triumphant tour of Germany and Austria. (Figaro has been considerably revised since last shown in London; Giovanni has been adjusted.) Still, if that were all, these stagings would be little better than the Peter Sellars productions seen on TV two years back. (Well, they would certainly be funnier - a big plus. And they would use the language of their audience - another.)

But there are other revelations. The best comes, I think, in casting both operas with skilled actors, who never place vocal effect above communicative singing. Put the words first and you hear how natural Mozart makes the voices sound - how far from high-art plush exclusivity he was.

The only people who should stay away are canary-fanciers and Ur-text purists. It is Music Theatre London style to take more cuts than is usual in the opera house and to replace almost all recitative with speech. Figaro takes one cut too many - the great second-act trio - but it glides along. (Though Giovanni sags slightly at two points - the Commendatore's, sorry, Colonel's, death scene, and the coloratura of Anna's second aria - its general pace is, if anything, livelier.) The singers bring off the speech-song alternation with a naturalness that makes Figaro and Giovanni work like musicals (without the laborious elocution that so often bogs down the spoken bits in operas like The Magic Flute).

Another joy is the sheer musical and dramatic wit with which these versions adapt Mozart to the 1990s. It is, of course, a hoot to see Rosina sing her first aria on an Exercycle, but when her pedalling changes tempo with the music, and as her singing never falters, the episode actually takes you deeper into Figaro. The farcically misdelivered kiss and slap in the Act Four finale work as well as I have seen them, but better yet is the moment that follows: Cherubino, escaping, bumps into both Figaro and Susanna and looks fleetingly aghast as he takes in a realm of adult intrigue beyond his comprehension.

Amid an excellent ensemble, the performances who best exemplify Music Theatre London style are Liza Sadovy (Susanna and Zerlina) and William Relton (Ottavio and Basilio). These two are the most natural actor-singers of all, wonderful in their characterful underplaying; and the way Relton/Basilio says 'Sounds like a bud in need of nipping, Sir' is among the classic line-deliveries I have ever heard. Gerard Casey (Don G. and Sir Cecil ie the Count) is almost as good, though he grievously over-extends every pregnant pause. Simon Butteriss is both Masetto and Marcellina - yes - which may be the most remarkable role-swapping since Lynn Seymour switched from Carabosse to Aurora overnight in 1977; though he pulls faces too much, he is a marvellously amusing clown.

The Britten/Broadhurst translation is so unfailingly good that I hope to return just to catch more of its passing felicities. It has only one tiny bit of translationese ('no tank from the window came down'). The way it never goes in for smart-alec rhymestering is part of its stylishness. And it misses only one target. Surely the modern Elvira does not join a convent? She joins a women's group, or becomes a lesbian, or starts a Ph. D. on the phallocentricity of Eurocentric culture.

Last week you could also catch a more conventional Don Giovanni - period togs and all - at the Hackney Empire. The thrill here was hearing how well this theatre suits Mozart. Sitting way back, I loved both the ease with which the voices projected through the packed house and the absorption with which a largely Eastender audience followed most of the show. The company was Opera Box; its singers offer no new treats to those who know this opera, and the cast veered away from Fraser Goulding's baton too often. But this beautiful Matcham Theatre is the best venue for Mozart in London I have discovered. How appalling to find that it is battling for its continued existence.

Music Theatre London's season at the Drill Hall, WC1, continues until March 21

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 17 832
Business and the Environment: Exploiting the rainforest - Local indians, oilmen and conservationists have formed an uneasy alliance in Ecuador Publication 930303FT Processed by FT 930303 By RAYMOND COLITT

Down in the Oriente, Ecuador's Amazon rainforest, US oilmen and local indians have decided to put aside their differences and enter into a controversial partnership aimed at exploiting the environment without destroying it.

After years of intense battling between oil companies, conservationists, the Ecuadorian government and indigenous groups, Maxus Energy, a US oil company, has been given final authorisation to develop block 16, a 200,000-hectare government concession in the Oriente.

The reason for this controversy is that part of the Maxus concession lies in Yasuni national park, one of the most pristine and biologically diverse areas left in the Amazon forest. Also, block 16 is in the territory of the Huaorani indians, one of the few tribes left in Amazonia living in relative seclusion from the industrialised world. The park has been declared an international biosphere reserve by Unesco.

The government's permission to build an access road and oil pipeline through the rainforest is part of a new policy which seeks to exploit natural resources even in protected areas, an activity permitted by Ecuadorian law. The authorisation was one of the last hurdles for the consortium headed by Dallas-based Maxus to overcome. Conoco, which originally headed the consortium and conducted exploratory work, abandoned the field last year because of government indecision, opposition by conservationists and fresh opportunities elsewhere.

One driving force behind the environmental lobby, besides the area's ecological and tribal importance, was the knowledge that oil companies operating in the Oriente had previously caused enormous destruction and distrust. A report co-authored by the National Resource Defence Council in Washington DC documented the extent of river and soil pollution, excess deforestation and catastrophic health effects on the indigenous people in the Oriente. According to government estimates, up to 4,200 gallons of oil per day are discharged into the environment, equalling 19m gallons in the past two decades.

Against this background and under the requirements of a new federal law on oil operations, Maxus proposed an environmental plan which it argued would minimise the negative impact on the environment and the local people and serve as a model project for rainforest areas.

By reducing the width of the access road from 100m to 25m, including a subterranean pipeline, and using more synthetic materials and fewer tree trunks for the road base, Maxus claims the usual deforestation rate for such roads has been reduced sharply. It plans to minimise deforestation further by using clustered well sites rather than having a separate site and road for each individual well. A reforestation project is under way - seedlings are being cultivated to replace the trees cut down.

A significant previous concern had been that oil companies moving into the Amazon forest opened the way for settlers, who multiplied the deforestation rate by slash-and-burn horticulture. Maxus plans to install guarded control posts along access roads and river crossings to prevent settlers entering the area.

However, until Maxus has had time to comply fully with the plan, environmentalists will remain distrustful, remembering years of oil company abuses in the rainforest. Also, questions remain over the long-term impact. Will the pipeline have enough safety valves to minimise the repercussions of a possible oil spill? Is a complete regeneration of the forest area possible? Can the habitat of rare and endangered species be regenerated?

The local environmental group, Accion Ecologica, argues that the effect of machinery noise and deforestation on many species that require specific breeding grounds is unknown. Yet more mainstream conservationists, while also opposed to the project, are trying to minimise the impact of the oil operations by participating in the process.

'Seeing that the decision to exploit oil in block 16 has been taken, we are now working to make the project as environmentally sustainable as possible,' says Danila Silva of EcoCiencia, an environmental research group.

Maxus has overcome previous opposition to the project by some of the indigenous groups whose livelihood depends on the forest. Through direct negotiations between Maxus and certain groups of the Huaorani indians, both sides have avoided political intermediaries and come to a working agreement. Maxus will provide community services and infrastructure to the Huaoranis. It will also limit helicopter flights over the area to avoid disturbing wildlife, and prohibit employees from bringing in alcohol or pornographic material.

Having experienced the first Maxus community projects, many Huaoranis see a chance to benefit from the venture while preserving their culture. 'The way to protect our way of life and our culture is by reinforcing our historical awareness, our language and our customs,' says Enqueri, a Huaorani leader. 'Through the schools and health centres that Maxus builds, we have this opportunity.'

However, further east, the Tagaeri tribe, which retains its semi-nomadic existence and has refused attempts at contact, remains hostile to oil companies and all development efforts.

For the more acculturated Huaoranis, the contingency plan developed in case of an oil spill, says Enqueri, is to go en masse to the Maxus headquarters to denounce their agreement with the company.

Of the Dollars 752m (Pounds 530m) that Maxus will invest in block 16, about Dollars 50m is earmarked for environmental protection measures, says Boris Abad, its government relations official. The government is investing 57 per cent of the project's total cost, estimated at Dollars 2.2bn. Maxus expects to produce 220m barrels of heavy crude over the next 20 years.

The initiative shown by Maxus so far in protecting the environment and indigenous communities in block 16 is an improvement over previous oil ventures in the Oriente. Yet whether it can be called a model environmental operation in the rainforest will depend on an assessment of the area in a decade.

Maxus Energy EC Ecuador, South America P9512 Land, Mineral, Wildlife Conservation P1311 Crude Petroleum and Natural Gas RES Natural resources CMMT Comment & Analysis P9512 P1311 The Financial Times London Page 16 999
Business and the Environment: Paraguay's parrots get the last word - John Barham describes how the country is cracking down on the illegal trade in live animals Publication 930303FT Processed by FT 930303 By JOHN BARHAM

Good news about the trade in endangered species is rare, especially when it comes from Paraguay, where the illegal trade in live animals, birds and skins flourished for decades.

During the 35-year regime of General Alfredo Stroessner, corruption and contraband were central to Paraguay's political system. Paraguayans hunted down caymans in wildlife refuges by the hundreds of thousands to sell their skins.

The capital, Asuncion, became a centre of the shady international trade in live parrots, snakes and monkeys, though it was banned under Paraguayan law and international treaties. What is more, the smugglers moved in the same underworld as gun-runners, drug traders and car thieves.

But in 1989, a military coup toppled Stroessner and Paraguay began making rapid, if uncertain, strides towards democracy. The government is anxious to improve Paraguay's dreadful image by taking action over human rights violations, corruption, smuggling and the illegal trade in animals.

During the last 18 months, Paraguay has sharpened its environmental laws and promoted determined, honest individuals. The result is more seizures of skins and live animals that were once openly traded. Rich and powerful merchants find their links to the military no longer provide immunity.

Even the Swiss-based United Nations' Convention on International Trade in Endangered Species (Cites), once a bitter critic, now recognises Paraguay is improving. Obdulio Menghi, Cites' scientific co-ordinator, says the Paraguayans 'are working like never before, because of the professional and political (commitment) that the country has assumed for the first time'.

Change has come almost entirely as a result of intense international pressure from groups such as Cites. Luz Aquino-Shuster, head of the government's Cites liaison office, says: 'When I went to conferences, I would be pointed at and people would say Paraguay is a bad country. It was terrible.' Now, she gets letters of support. Moreover, she says: 'Biologists are in charge now. This is important, because before the politicians were in charge and they did not care.'

The US Fish and Wildlife Service is advising the government on improving controls, a further sign that Paraguay's search for respectability is something more than a public relations stunt. However, the Paraguayans have little hard data to show for their work, although they do provide some graphic accounts of their seizures.

For instance, in February, Aquino's staff seized 1,125 skins, coats, belts and shoes from a trader. They also fined a shop selling illegal furs and skins Dollars 37,500 (Pounds 26,600) - a princely sum by local standards.

Since then, traders have become warier and seizures less frequent. Furthermore, some foreign governments caution that Paraguay's improvement is overrated, warning that corruption and smuggling still continue, if only with greater discretion.

Nonetheless, the government is co-ordinating wildlife control operations with the army, police and customs, since the trade in animals is part of a wider underground market in drugs, arms and stolen cars. It is also sponsoring an environmental law in congress and Aquino hopes that smuggling animals - at present a civil offence - will be made criminal.

Falling international prices have made her work easier. Hunters have glutted the market and demand in once lucrative Asian markets is declining. Warehouses around the world are stacked with enough cayman, iguana and boa constrictor skins to last many years.

There is still a lot to be done. Menghi says: 'You have to struggle permanently against contraband, whether of animals, drugs or arms.' And several important European markets are still importing animals and skins, to the Paraguayans' fury.

Clamping down on smuggling hits peasants and Indians, who are used to supplementing their incomes with hunting. Experienced hunters can easily catch a pair of adult parrots or shoot between 15 and 20 caymans a day, although they are paid very little. It is the middlemen who reap the profits: a parrot can retail for up to Dollars 10,000 in Los Angeles.

The government is trying to ease this problem by allowing controlled exports of a few species whose numbers are not in danger. The main candidate for 'rational exploitation' is the heavily hunted Teyu Guazu iguana, whose skin is used to make handbags, belts and cowboy boots. In 1980-85, between 1.5m and 3.6m Teyu Guazu were exported.

Closer co-operation is needed at regional level. Paraguay's neighbour, Argentina, is often criticised for lax controls and its security and conservation forces lack co-ordination. Smugglers habitually exploit its generous export licences to 'launder' species hunted in Bolivia, Brazil and Paraguay. However, Menghi says even Argentina is improving its controls.

However praiseworthy these efforts may be, they do little to alleviate the destruction of habitats, the principal threat to wildlife. The situation is worsening by the day, as Paraguay's forests are cut down and farmers encroach on virgin territory.

PY Paraguay, South America P9512 Land, Mineral, Wildlife Conservation RES Natural resources CMMT Comment & Analysis P9512 The Financial Times London Page 16 842
People: Ambrose to mine cabinet efficiency Publication 930303FT Processed by FT 930303

Less than three years ago 30-year-old David Ambrose was running one of Lord Hanson's quarries in the heart of Shropshire. Now he has been packed off to help Sir Peter Levene, the prime minister's adviser on efficiency, teach government departments how to get value for money from the resources they use.

Ambrose, who has a doctorate in mining engineering from Nottingham University, has been seconded for two years to the cabinet office's efficiency unit. He only joined Hanson in January 1991 but managed to catch the chairman's eye at an early stage in his career.

In 1991 Lord Hanson awarded him his annual Hanson Achiever Award as a result of his 'superior management qualities and the considerable cost savings, productivity and improved efficiency he introduced'.

Before his secondment he was development manager of ARC Central, part of Hanson's aggregates business.

Ambrose's secondment comes only a few weeks after Ian Stewart, a former chief executive of British Ever Ready before Hanson sold it, was seconded to the Department of Trade and Industry.

GB United Kingdom, EC P8733 Noncommercial Research Organizations P9611 Administration of General Economic Programs PEOP Appointments P8733 P9611 The Financial Times London Page 15 206
Management: Down but certainly not out - As white-collar workers join the dole queue in growing numbers, FT writers look at ways of putting them back to work Publication 930303FT Processed by FT 930303 By LISA WOOD and DIANE SUMMERS

Geoff Annison, manager of St Albans JobCentre in Hertfordshire, has recently recruited a new team to market unemployed professionals, managers and executives to local companies.

His JobCentre, serving what was once one of the busiest commuter towns in south-east England, estimates that 40 per cent of its claimants are professionals and executives. Last summer the figure was 30 per cent.

An unprecedented increase in executive, management and professional unemployment has been one of the most eye-catching features of the present recession.

A Department of Employment study of London and the south-east published last summer suggested 19 per cent of the unemployed had worked in professional or managerial occupations. Nationally the figure was estimated at just over 10 per cent. Levels have gone up since then.

A growing number of organisations, in addition to self-help organisations, are trying to rise to the need. They include:

JobCentres. Judging by the four jobs on offer at the St Albans JobCentre, professionals and executives are not a natural target group.

However, with tough targets from the government to get their clients into jobs, JobCentres are focusing on executives.

Annison, for example, has recruited seven new staff to service them. 'Most employers do not naturally think of advertising for executives in a JobCentre, so we are having actively to tell them about our clients,' he says.

Training and Enterprise Councils. Several of the 82 Tecs in England and Wales are introducing imaginative new schemes, most of them built on Employment Training. This offers Pounds 10 per week on top of benefit and a placement with an employer.

Vivien Houson, of Hitchin in Hertfordshire, is an enthusiastic participant. After a business grounding at Merrill Lynch she set up her own marketing and design company. It was forced to close last year after Houson had a serious accident.

Unemployed, she was referred to a new executive programme, designed by Hertfordshire Tec on the ET model. Called Management Link it offers three weeks' general management training before placement with a local employer. Houson's skills were matched by Enterprise Partnership, the training organisation, with a structural engineering company which had a project that it had not been able to develop.

Thirteen weeks later she was offered a full-time post - of managing director of a new division which will exploit a new product she has developed within the company. 'It was the matching that was so crucial and so successful,' says Houson.

Individual consultancy. For an individual not receiving counselling as part of a severance package, it is possible to find a consultant from about Pounds 140 for a half day's session, according to the Institute of Personnel Management*.

The two big dangers for individuals to avoid are wasting money on a cowboy consultant and wasting time approaching counsellors who are only interested in company assignments.

The IPM's consultancy service will help callers with both these problems by checking those on its register, noting callers' requirements and providing suitable names of consultants.

*IPM. Tel 081 946 9100.

Executive Grapevine, 79 Manor Way, London SE3 9XG, Tel 081 318 4462, publishes Executive Moves for more junior managers (Pounds 19.50 plus Pounds 3 p&p) and the Directory of Executive Recruitment Consultants (Pounds 50 plus Pounds 3.50 p&p) for senior executives.

GB United Kingdom, EC P8331 Job Training and Related Services MGMT Management TECH Services P8331 The Financial Times London Page 15 599
People: Cater Allen Lloyd's Publication 930303FT Processed by FT 930303

Edward Bloxham, 50, currently chief executive of RHM Outhwaite (Underwriting Agencies), is to take over as group chief executive of Cater Allen Lloyd's Holdings, which handles the group's Lloyd's agencies interests. Bloxham, a Yorkshireman, spent the early part of his career in the publishing industry. A certified accountant, he joined the Corporation of Lloyd's regulatory department in 1983; he took over as finance director of Outhwaite in 1985, becoming chief executive in 1988.

Cater Allen Lloyds Holdings GB United Kingdom, EC P6719 Holding Companies, NEC P6799 Investors, NEC P6411 Insurance Agents, Brokers, and Service PEOP Appointments P6719 P6799 P6411 The Financial Times London Page 15 115
Management: Finding the right network Publication 930303FT Processed by FT 930303 By TIM DICKSON

'UNTIL recently most managers believed that redundancy only happened to blue-collar workers in the north,' says Nicholas Walters, senior staff tutor at the Guildford Institute of the University of Surrey. 'Those who enjoyed the success and financial rewards of the enterprise culture are largely unprepared for the experience.'

Unemployment in Walters' 'patch' - the traditionally prosperous region of south-west Surrey - has risen by more than 320 per cent since March 1990. Many of the victims are executives.

Efforts to address their needs are being made through courses like the one at Guildford. Another source of support can be found in the informal networks of redundant executives springing up around the UK. Adult education centres, universities, citizens advice bureaux, churches and public libraries may also be able to provide the right introduction.

Executive unemployment is often masked by substantial redundancy payments. But Walters believes that the refinement of job-finding skills is particularly important. Structural changes in industry mean there will be fewer jobs when the economy improves than there were at the top of the last cycle.

Redundant executives are often well-qualified and have specialist skills, but Walters says it is important to look out for transferable expertise. Redundancy, he adds, can be an opportunity to overcome technophobia and to improve language and personal financial management skills.

Philip Thomas, an out-of-work lawyer who recently completed a Guildford course, is a firm believer in unemployed executive networks and has just started one with fellow alumni. He thinks they can be a useful way of developing training techniques and, ultimately, of tracking down jobs.

GB United Kingdom, EC P8331 Job Training and Related Services MGMT Management P8331 The Financial Times London Page 15 294
Management: Getting back on course Publication 930303FT Processed by FT 930303 By TIM DICKSON

NOT many people can claim to have been sacked twice by the same company. Peter Saunders, though, is one of them.

The axe first fell in 1982 when Saunders was pub information bureau manager at Whitbread London, one of the brewing group's operating subsidiaries.

Redundancy was mercifully short lived and his career seemed to be back on course with Berni Inns until 1990 when its then owner, Grand Metropolitan, sold the restaurant chain to Whitbread. Whitbread subsequently decided to run down the Berni brand, with the result that Saunders lost his job as marketing controller last year.

Not surprisingly, he has since opted for a complete change of direction and now runs a marketing consultancy, specialising in the food service field.

Saunders is hoping to capitalise on his commercial experience, but he has also used his periods of unemployment and two outplacement training courses to good effect. Conscious that only a lucky few like him are sponsored for career counselling by their ex-employers, he has written and published a self-tuition manual called Successful Job Hunting.

Saunders' product has been vetted by a senior UK personnel expert (chosen by the FT). She describes it as 'easy to follow and well cross-referenced. There is a strong personal touch. I wouldn't agree with everything in it but the important thing is it's positive.'

She suggests the manual is most suitable for those up to and including middle managers and could be valuable for anyone who has been out of the employment market for a long time.

Saunders is offering the manual* to FT readers at a special mail order price of Pounds 24.50.

*Available from 116 Eskdale Avenue, Chesham, Bucks HP5 3BD. Tel 0494-775867.

GB United Kingdom, EC P2731 Book Publishing TECH Products P2731 The Financial Times London Page 15 310
Management: From hobby to career Publication 930303FT Processed by FT 930303 By LISA WOOD

MOST self-help manuals for the unemployed advise against developing an interest into a job.

But that is exactly what Peter Bradley, a former Bradford-based accountant and amateur bird watcher, has done. Today, aged 33, he is a warden, employed by the Royal Society for the Protection of Birds, at Surlingham and Rockland Reserves on the Norfolk Broads.

'Wonderful' is how he describes his new job. 'I was always keen on natural history but my parents gave me presents like microscopes and chemistry sets,' he says. 'But at the age of 10 one of my favourite projects was how I would design a zoo.'

He embarked on a professional life and after completing his degree at Kent University spent six years as a part-qualified accountant before becoming unemployed. He then considered the different sorts of jobs he would like to explore. Working outdoors was top of the list.

'I was pulled in by the JobCentre and told that I was an accountant and that there were plenty of jobs in accountancy,' he says. 'But I persuaded them that what I really wanted to do was work in nature conservation.'

He was successful in his plea and took up a training place in Snowdonia, Wales, on Employment Training, the government programme for the adult unemployed. 'I had a fantastic year, learning things like building dry stone walls,' he says.

The RSPB traditionally offers short-term contracts before promoting individuals to be wardens. Bradley took a number of these before gaining his present job.

He says if he had remained in accountancy he could be earning twice his current salary. But he has no regrets. 'This is where the action is. We are turning 300 acres of derelict marshland back into a flower-rich reed fen.'

GB United Kingdom, EC P8331 Job Training and Related Services P0971 Hunting, Trapping, Game Propagation MGMT Management P8331 P0971 The Financial Times London Page 15 329
People: Lees to save domestic energy Publication 930303FT Processed by FT 930303

Eoin Lees, head of the Energy Technology Support Unit at Harwell, the Atomic Energy Authority's research laboratories, has been appointed the first chief executive of the Energy Saving Trust.

Lees, 45, a nuclear physicist, has run ETSU for five of his 17 years at Harwell. ETSU, which carries out projects for industrial and business customers, has also worked recently for the Energy Efficiency Office, part of the environment department.

The Energy Saving Trust, which has been one of the main planks of the government's environmental policy, has been criticised for its slow start since Michael Howard, environment secretary, announced its creation last summer. Headed by Lord John Moore, the former cabinet minister, it is intended to encourage the gas and electricity utilities to help households save energy. But critics have been concerned that the utilities would be reluctant to back moves that could damage their revenue, and would seek to pass much of the costs on to customers.

However, Lees, who takes up his post on April 5, says: 'I feel strongly that we can make a convincing case that the trust represents the first real chance to tackle the problems of energy inefficiency in the domestic sector.'

Energy Saving Trust (UK) GB United Kingdom, EC P8731 Commercial Physical Research PEOP Appointments P8731 The Financial Times London Page 15 231
People: Finance moves Publication 930303FT Processed by FT 930303

Susan Allen has been made a director of BARONSMEAD.

Baronsmead GB United Kingdom, EC P6726 Investment Offices, NEC P6799 Investors, NEC PEOP Appointments P6726 P6799 The Financial Times London Page 15 40
People: Finance moves Publication 930303FT Processed by FT 930303

Roy Degenhardt, formerly md European corporate finance at Continental Bank in London, and Thomas Lockett, formerly global foreign exchange director at Midland Bank, have been appointed managing directors at The NIKKO BANK (UK).

Nikko Bank (UK) GB United Kingdom, EC P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 15 63
People: Finance moves Publication 930303FT Processed by FT 930303

Michael Jeffery (above), formerly md of The Nikko Bank, has been appointed a director of ROBERT FLEMING & Co.

Robert Fleming and Co GB United Kingdom, EC P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 15 50
People: Finance moves Publication 930303FT Processed by FT 930303

Stuart Crocker has been appointed head of international private banking at the London branch of RABOBANK NEDERLAND; he moves from Banque Paribas.

Rabobank Nederland GB United Kingdom, EC P602 Commercial Banks PEOP Appointments P602 The Financial Times London Page 15 49
People: Finance moves Publication 930303FT Processed by FT 930303

Jonathan Jamilly, Stephen Peters, Andrew Stockham and Nigel West have been appointed to the board of HILL SAMUEL BANK.

Hill Samuel Bank GB United Kingdom, EC P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 15 49
People: Finance moves Publication 930303FT Processed by FT 930303

Lord Trenchard, president of KLEINWORT BENSON INTERNATIONAL Inc, who has already spent many years in Japan, is to return to Tokyo to become the group's senior representative there in May.

Kleinwort Benson International JP Japan, Asia P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 15 59
Management: Calling on volunteers Publication 930303FT Processed by FT 930303 By ALAN PIKE

REDUNDANCY is a time for feeling sorry for yourself. Perhaps this state of mind helps explain why many redundant managers finish up feeling sorry for others as well, decide they want to 'do something useful' with their lives and consider working for a charity.

There are other motivating factors. A redundancy payment might make it possible for a manager to take a lower-paid post. Although many big charities pay better than they once did, the voluntary sector does not generate lavish incomes.

Neither is it a soft option. Many charities are facing the same recessionary pressures as the private sector. Some are having to make staff redundant and those that are recruiting demand commitment and hard work. However, opportunities do exist. Around one-third of voluntary-sector managers are drawn from commercial organisations, so the right type of person will not find a culture of resistance to outside recruitment.

Who is the right type of person? The voluntary sector is not a quiet backwater - it turns over around 4 per cent of GDP. Big charities need much the same range of finance, marketing, personnel and other specialist skills as private companies.

But many have day-to-day contact with voluntary workers and are run in a more open, committee-structured way than commercial organisations. Managers who incline to a participative, decision-making style are more likely to settle into this atmosphere than those who draw comfort from giving and receiving orders.

Expertise in a charity's area of activities or previous involvement with the voluntary sector can help. For anyone contemplating an eventual career-switch to a charity, this can be gained from voluntary work. The Volunteer Centre UK* is a national charity that exists to promote volunteering.

*Volunteer Centre UK. Tel 0442 873311

GB United Kingdom, EC P8399 Social Services, NEC MGMT Management P8399 The Financial Times London Page 15 316
Jobs: How to minimise an uninsured liability - Evidence that sound selection tests can pay dividends even at basic levels of employment Publication 930303FT Processed by FT 930303 By MICHAEL DIXON

FINDING a note on the desk to return Ken Miller's call, the Jobs column followed the scribbled instructions, got though and arranged to visit his house. He then gave the address, but hearing I planned to go by rail, offered to pick me up by car if I phoned him from the station. So I thanked him, and asked for his telephone number.

'You're calling me on it,' said Dr Miller, an internationally esteemed tester of intelligence.

His voice took on the same pointed tone again when I rang on the due date itself to say that, having come by car instead, I couldn't find his house. It turned out that I'd arrived in a road with the right name, but located in entirely the wrong area.

He nevertheless agreed to stay waiting, probably because I wasn't going there for a by then superfluous assessment of my intelligence. The purpose of my visit was to take one of the many other kinds of test administered from the same household - not just by Ken, but by Mrs Miller better known by her professional name of Barbara Tyler.

The test in question is the Work Attitude Scale which, although popular with employers in the Millers' native Australia, is little known in Europe. Hence their idea of inviting this Pom to come and have a shot at it.

Consisting of just 44 questions to be answered by ticking either 'yes' or 'no', it is normally completed within 10 minutes. But on being left alone to make my attempt, I ran into difficulties on only the second question, which asked: 'Do you find yourself at times full of energy and at others find it hard to get going?'

What stumped me was not the bit about finding myself at times full of energy, which I sometimes do despite usually feeling quite the opposite. The trouble is that even when at my most energetic, I still find it hard to get going. So I went and explained the problem to Ken Miller, who studied me in silence for several seconds before saying the safest advice he could give was to answer 'no'.

Fortunately, things went well enough thereafter for me to finish the form just over 15 minutes after starting. But since it then took the good doctor a good deal less time to to score my efforts and hand down his verdict, I was surprised as well as pleased to come out pretty well.

In exploring people's attitude to work, the test measures three different aspects of character. And the first of them, technically termed service orientation, is essentially how we get on with our fellow humans.

Barbara Tyler was swift to emphasise that there are no hard and fast rules for deciding the right degree of sociability for jobs in general. A score on the stand-offish side could be a plus in work that requires distanced judgment. On the other hand, staff continually badgered by not always sympathetic people might do well to be more than usually gregarious. In the main, though, a score somewhere between the two will be preferable.

The next measure, which the test calls task focus, is of how far we accord with Ecclesiastes 9,10: 'Whatsoever they hand findeth to do, do it with thy might . . . .' But while staff who take personal pride in their accuracy and high productiveness are obviously more desirable than skimpers, those who elevate pride in the job to outright perfectionism tend to be handicaps.

Measure number three, termed work approach, is of the extent to which we characteristically take responsibility for the tasks entrusted to us. Here again the right degree will be determined by what is appropriate for the particular setting. Even so, since responsibility-addicts are apt to be bloody-minded, and their extreme opposites are averse to doing anything unless issued with detailed instructions, the best bet is once more a score in the mid-range.

So how did the Jobs column rate on the three yardsticks?

Well, for the benefit of any readers who happen to be top executives and in the market, Here is the snapshot of me that would be handed to an employing outfit's chieftains:

Service orientation - A bit too open and easy-going.

Task focus - Takes pride in doing a good job.

Work approach - Accepts responsibility.

Hence, in the latter two, the test scored me squarely in the desirable mid-range. Moreover, while on the over-sociable side, I am only slightly so.

Alas I wasn't left preening myself for long before Barbara Tyler brought the chickens home to roost with a vengeance.

'Of course, those results say nothing about your ability for higher-level work such as managing and the professions,' she said sweetly. 'That's not what the process is designed to assess. All that it reflects is fitness for basic jobs - shopfloor manufacture, checking-out in supermarkets, hotel reception, bus conducting - up to the lowest rank of supervisor, perhaps, but not beyond it.'

At which point I would dearly like to know whether readers' instant reaction is the same as mine was. I immediately felt myself losing all interest in the Work Attitude Scale and its applications. But any of us who shared that reaction should surely need only a second's thought to give us reason to feel ashamed of our snobbish reflexes. For the fact that a job is ranked low in a hierarchy is clearly no gauge of its importance to the employing organisation, let alone to the welfare of humanity.

For one thing, there seems little doubt that anybody who talks of such jobs as 'unskilled' can never have tried doing them properly. Even sweeping-up is something that can be done either well or badly, despite being an expertise that is most often noticed only in its absence.

For another, just as people who apply themselves cheerfully to basic work in the spirit of Ecclesiastes are an undervalued asset, skimpers of it are an un-insured liability. Goodness knows how much harm they collectively do to the corporate interest. For example, if I had a fat research contract to hand to one of the universities, a good half thereof would already have disqualified themselves just by employing couldn't-care-less telephonists.

So it is to the credit of the Work Attitude Scale's Australian developers, Doug Mcleod and the late Alf Chandler, that they twigged the decisiveness of low-ranked work. And, having twigged same, they also look to have devised a useful test of some of the necessary abilities.

True, the personality factors the WAS measures are only part of the mix required; as Barbara Tyler says, physical looks can often be no less important. True, too, that the Millers stand to gain from the test's wider usage.

Even so, evidence of its value is there to be seen in before-and-after studies of its effects in companies. Gauged by reductions in basic staff departures both voluntary and otherwise, the improvements range from 17 to 57 per cent, with an average of 31. The testing cost of achieving them is under Pounds 20 a candidate.

Any employer minded to use the test should nevertheless check the facts personally. For the Jobs column, or at least its present writer, now also has a vested interest. With retirement age looming next year, I'm glad to have the WAS certification of qualities that should make me an almost ideal checker-out in a supermarket - if I can only find my way to it, that is.

GB United Kingdom, EC P99 Nonclassifiable Establishments CMMT Comment & Analysis MGMT Management P99 The Financial Times London Page 12 1298
Parliament and Politics: Tories hold more directorships Publication 930303FT Processed by FT 930303

CONSERVATIVE MPs hold a total of 433 company directorships and consultancies against just 103 for the Labour benches, according to details published yesterday by Labour Research, the independent leftwing analysts.

GB United Kingdom, EC P99 Nonclassifiable Establishments P8651 Political Organizations CMMT Comment & Analysis P99 P8651 The Financial Times London Page 11 64
Parliament and Politics: Major cautious on Ulster envoy Publication 930303FT Processed by FT 930303

MR JOHN Major refused yesterday to rule out the possibility of a US 'fact-finding' envoy to Northern Ireland meeting representatives of Sinn Fein, the political wing of the IRA.

But Mr Major, who last night met with a number of Ulster MPs in advance of a possible announcement from Washington, urged the Rev Ian Paisley, leader of the Democratic Unionists, to 'wait and see' what announcement was made about a US fact-finder.

US United States of America GB United Kingdom, EC P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 11 107
Parliament and Politics: Concern over pension assets Publication 930303FT Processed by FT 930303 By DAVID OWEN

A GROUP of 30 Labour MPs yesterday tabled an early-day motion urging British Coal to refrain from any action relating to its pension funds until the social services committee pensions inquiry concludes, David Owen writes.

The motion also charged Mr Michael Heseltine, trade and industry secretary, and Mr Tim Eggar, energy minister, with incompetence in their dealings with the mining industry.

It noted that Mr Rhoslyn Roberts, secretary of the British Coal staff superannuation scheme, considered present safeguards to be inadequate.

Meanwhile, Mr John MacGregor, transport secretary, yesterday stressed to trustees of the British Rail pension fund that the government had no 'hidden agenda' for stripping the fund of its assets.

He said that 'irresponsible speculation' about the future of the pensions after railway privatisation was needlessly worrying BR pensioners.

Editorial comment, Page 19

British Coal Corp GB United Kingdom, EC P1221 Bituminous Coal and Lignite-Surface P6371 Pension, Health, and Welfare Funds P9611 Administration of General Economic Programs GOVT Government News P1221 P6371 P9611 The Financial Times London Page 11 186
Parliament and Politics: Patten move on school ballots Publication 930303FT Processed by FT 930303 By IVOR OWEN and DAVID OWEN

MR JOHN PATTEN, the education secretary, will announce today that the government will take new powers to overturn ballots on whether schools opt for grant-maintained status if local auth-orities interfere in the process.

Under the proposals, ballots could be declared void where one of four types of interference by third parties had taken place. It was not spelled out last night who these third parties were but it was taken to be a reference to local authorities that oppose grant-maintained schools.

Examples of interference would include the intimidation of voters and the dissemination of seriously misleading information during the conduct of a ballot.

Mr Patten is expected to portray the proposals as an attempt to ensure fair play in an important aspect of local democracy.

News of the move emerged last night as Mr Patten was accused of acting like a dictator during the first of two consecutive days' Commons debate on the education bill.

Ms Ann Taylor, shadow education secretary, charged Mr Patten with wanting 'a national system of education under your personal political control'.

With the parliamentary guillotine in operation to ensure that MPs are asked to give the bill a third reading by 10pm today, the government secured a majority of 46 (284-238) to carry a new provision strengthening the minister's powers over schools in England and Wales.

MPs may not get the chance to debate Mr Patten's proposed new measures in full. It is understood the measures are to be inserted in the bill as an amendment to a clause on which debate has already been curtailed.

GB United Kingdom, EC P82 Educational Services P9121 Legislative Bodies GOVT Government News P82 P9121 The Financial Times London Page 11 301
Parliament and Politics: Asylum bill curb imposed by Lords Publication 930303FT Processed by FT 930303 By ALISON SMITH

THE government's controversial Asylum and Immigration Appeals Bill was dented yesterday as the House of Lords insisted that the streamlining of the asylum system should include a new safeguard for child refugees, Alison Smith writes.

Led by Lord Brightman, a former law lord, a cross-party alliance of peers rejected ministerial advice and voted for the setting up of a special panel to advise young and unaccompanied refugees on a range of matters.

Lord Brightman said there should be special reception and support arrangements for vulnerable children arriving alone in Britain. But Lord Ferrers, Home Office minister, argued that local authorities were best placed to look after the welfare of children.

The scale of the government defeat - by 169 votes to 114 - will make it difficult for ministers to reverse the setback.

Earl Ferrers also categorically denied reports that ministers planned to privatise the immigration service.

Replying to Liberal Democrat Lord Bonham-Carter, who asked him about rumours that it would in future be run by a security firm, he said the home secretary had never believed this work was suitable for the market outside.

GB United Kingdom, EC P9721 International Affairs GOVT Draft regulations P9721 The Financial Times London Page 11 219
Parliament and Politics: Hurd seeks EC blueprint Publication 930303FT Processed by FT 930303 By IVO DAWNAY, Political Correspondent

THE GOVERNMENT has set up a high-level committee to draw up a British blueprint for reforms to European Community institutions, aimed at consolidating and entrenching the powers and autonomy of member states.

The committee, combining Foreign Office and Cabinet Office personnel, has been set up by Mr Douglas Hurd, foreign secretary, in anticipation of the 1996 inter-governmental conference on the EC's constitutional arrangements.

It reflects Mr Hurd's growing conviction that the controversy over the Maastricht treaty is in part the consequence of 'reactive' as opposed to 'active' diplomacy.

Mr Hurd concluded that by promoting a British vision of 'a more flexible and decentralised Community', the Conservative party would be able to reunite after the internal strife provoked by the treaty.

A senior official said yesterday there was widespread acknowledgement that Britain had failed to articulate its vision of the Community early enough in the policymaking process, fuelling the impression, he said, that 'we are constantly being shifted by foreigners'.

Labour is to challenge the government to publish details of its regional spending plans, in an effort to highlight the extent to which EC aid to high-unemployment areas may be lost because of a failure by Whitehall to provide matching funds.

GB United Kingdom, EC P9131 Executive and Legislative Combined P9721 International Affairs GOVT Government News P9131 P9721 The Financial Times London Page 11 240
Parliament and Politics: Jobless may mix benefit with work Publication 930303FT Processed by FT 930303 By ALISON SMITH A RADICAL redesign of schemes for the unemployed

to provide programmes combining temporary work with job-hunting - is being planned as a response to rising unemployment.

Instead of offering simply a programme of community work - as happens under Employment Action - or a training course, new schemes targeted at the long-term unemployed and 18 to 24-year-olds and involving 'some element of compulsion' would offer a mix of three days a week on such activities with two days a week spent looking for work.

Extra impetus has been given to work on the initiative by Mr John Major's remarks about workfare-type systems in his speech to the Carlton Club last month. Ministers also believe there is currently a cross-party mood in favour of ensuring that the unemployed are active, which makes it possible to move swiftly.

An important element will be greater flexibility in meeting individual needs, already reflected to some extent in the Training for Work scheme, which will start from the beginning of April.

This brings Employment Action and Employment Training into a single Pounds 972m programme with 320,000 places a year, intended to enable the Tecs to provide more individually tailored opportunities. The Tecs themselves would welcome the sort of initiative being planned.

The programme would be announced in the December Budget and ministers believe it could take effect quickly.

While the Tecs have assumed that they would be responsible for any new locally managed schemes, ministers are considering whether the task should be given to the Employment Service.

This second stage would follow the immediate moves on unemployment signalled for the March 16 Budget.

These include a slight relaxation of the rule on the number of hours that someone can study before becoming ineligible for unemployment benefit.

Mr Michael Forsyth, the employment minister, has already been to the United States to observe unemployment programmes there. Mrs Gillian Shephard, the employment secretary, is to make a similar visit this summer.

GB United Kingdom, EC P8331 Job Training and Related Services P9441 Administration of Social and Manpower Programs GOVT Government News TECH Services P8331 P9441 The Financial Times London Page 11 370
Parliament and Politics: Shift in super soaraway agenda - Why the tabloid papers have reassessed Labour Publication 930303FT Processed by FT 930303 By PHILIP STEPHENS

IT'S THE Sun wot won it, screamed the banner headline in Britain's bestselling tabloid after Mr John Major's election victory last year.

The message was typically immodest but not unconvincing. The Tories had run a hopeless campaign. The Sun had rescued them with its daily vilification of Mr Neil Kinnock's Labour party.

How times change. Earlier this week Mr Kelvin MacKenzie, the Sun's irrepressibly flamboyant editor, hosted an intimate dinner for a select group of senior politicians.

But the guests ushered into a private room at London's Savoy hotel were not from the Tory cabinet he had helped re-elect.

With the government's popularity crumbling, Mr MacKenzie preferred the company of Mr Tony Blair, Mr Gordon Brown and Ms Majorie Mowlam, the youthful rising stars of Labour's shadow cabinet.

Yesterday he was unusually reticent about the dinner. But The Sun is far from alone among the Tory tabloids in deciding to replace scorn for the opposition with a new willingness to give it a fair run.

To the delight of Mr John Smith's team - and the fury of Downing Street - a potent mix of genuine disenchantment with the Tories and crude commercial judgment has warmed relations between Labour and its erstwhile enemies.

The recession, the bitter Tory infighting over Maastricht and Mr Kinnock's departure have all contributed to the shift. The country is disgruntled and no tabloid can afford to be too far out of step with its readers.

The trend has been reinforced by the fierce competition resulting from a shrinking market - and by the opportunity to pick up Labour-supporting readers offered by the Daily Mirror's public rift with the opposition leadership.

A glance at the reception given earlier this week to Mr Smith's call for constitutional reforms tells the story.

The Daily Mail declared that he planned sweeping reforms of Britain's 'crumbling' constitution. The Sun said he had dumped his party's 'Big Brother image'. Today, another member of Mr Rupert Murdoch's Wapping stable dubbed him 'Citizen Smith' for promising to put the individual before the state. Those stories followed a week in which they had offered generous praise for Mr Blair's response to the escalating juvenile crime rate.

The change reflects an informal edict to their political journalists at Westminster: as long as the government is making a hash of things, Labour must be given a fair run. Only the Daily Express has remained unquestionably loyal to the Tories.

The change has been most striking at Today. Its editor, Mr Richard Stott, this week underlined its shift to the left by appointing Mr Alastair Campbell to oversee its political coverage.

Mr Campbell, a close personal friend of Mr Kinnock, left the Daily Mirror only 10 days ago after a row with its chief executive. Mr Stott, once a Mirror editor, hopes Today will be the principal beneficiary of the disarray in the editorial offices of his former employer.

Exasperation with the government is reflected almost daily in The Sun's editorial columns. After a recent opinion poll found that 80 per cent of the population was unhappy with the government, the tabloid declared that the only surprise was that as many as 20 per cent were content.

There is an important caveat to all this. It is not uncommon for the tabloids to dilute their support for Tory governments between elections.

A lot can happen in the next four years. Few at Westminster believe that Mr Murdoch's papers would actively support Labour when it really counts. But in the meantime Mr Smith and his colleagues can enjoy Mr MacKenzie's claret instead of his more familiar vitriol.

GB United Kingdom, EC P2711 Newspapers P8651 Political Organizations MGMT Management P2711 P8651 The Financial Times London Page 11 642
Parliament and Politics: Major cautious on envoy to Ulster Publication 930303FT Processed by FT 930303 By IVOR OWEN

MR JOHN Major refused yesterday to rule out the possibility of a US 'fact-finding' envoy to Northern Ireland meeting representatives of Sinn Fein, the political wing of the IRA, Ivor Owen writes.

However, he urged the Rev Ian Paisley, leader of the Democratic Unionists, to wait and see 'what announcement is made about the fact-finder that I believe may come from the US to Northern Ireland'.

Downing Street believes any envoy would want to spend most time with the political parties who won most votes in elections - the non-violent Unionist and nationalist parties, but the government would not feel embarrassed if the envoy met organisations banned by Britain from appearing on television.

Sir Patrick Mayhew, Northern Ireland secretary, used a speech in Belfast last night to rebuff suggestions that the government was 'neutral' about the province.

Ministers respected the wishes of the population when deciding whether Northern Ireland should remain part of the UK, but Sir Patrick said: 'We are not neutral in our resolve to protect and deliver the people of Northern Ireland from terrorist violence.'

GB United Kingdom, EC IE Ireland, EC US United States of America P9721 International Affairs P9111 Executive Offices GOVT Government News P9721 P9111 The Financial Times London Page 11 224
Parliament and Politics: Labour demands aid cash details Publication 930303FT Processed by FT 930303 By DAVID GARDNER BRUSSELS

THE LABOUR party is to challenge the government to publish details of its regional spending plans. It wants to highlight how much EC aid to high-unemployment areas may be lost because of Whitehall's failure to provide matching funds.

The opposition intends to demand the details at Treasury question time tomorrow, according to Ms Harriet Harman, the shadow Treasury chief secretary. Ms Harman was in Brussels yesterday for meetings with European Commission and parliament officials including Mr Bruce Millan, commissioner for regional policy.

Mr Millan last week confirmed that the UK risked losing large sums of aid to depressed regions because it was not matching EC allocations. Britain has yet to take up a total of Ecu1.23bn (Pounds 1.02bn) in its EC regional fund entitlement for areas in industrial decline for the 1989-93 period.

Ms Harman said: 'We want to measure (the government's) allocation against the (EC) funds available.'

She also wrote yesterday to Mr John Major, the prime minister, calling on him to take up an estimated extra Pounds 82m the UK should receive from the EC social fund as a result of the devaluation of sterling. The fund is to train the younger unemployed or those out of work for more than a year.

Unspent money in the 1989-93 EC structural aid budget will be lost if it is not taken up by the end of this year, even though the Treasury would get some of it back via the UK's EC budgetary rebate.

Failure to resolve the 'matching' finance dispute with Brussels could affect the UK's ability to take up its share of the much greater regional funds it looks set to receive under the 1994-99 programme worth Ecu156bn.

GB United Kingdom, EC P9532 Urban and Community Development GOVT Government spending P9532 The Financial Times London Page 11 317
Parliament and Politics: Blueprint for EC reforms sought Publication 930303FT Processed by FT 930303 By IVO DAWNAY, Political Correspondent

THE GOVERNMENT has set up a high-level committee to draw up a British blueprint for reforms to European Community institutions, aimed at consolidating and entrenching the powers and autonomy of member states.

The committee, combining Foreign Office and Cabinet Office personnel, has been set up by Mr Douglas Hurd, foreign secretary, in anticipation of the 1996 inter-governmental conference on the EC's constitutional arrangements.

It reflects Mr Hurd's growing conviction that the controversy over the Maastricht treaty is in part the consequence of reactive as opposed to 'active diplomacy'.

Mr Hurd concluded that by promoting a British vision of 'a more flexible and decentralised Community', the Conservative party would be able to reunite after the internal strife provoked by the treaty.

A senior official said yesterday there was widespread acknowledgement in government circles that Britain had failed to articulate its vision of the Community early enough in the policymaking process, fuelling the impression, he said, that 'we are constantly being shifted by foreigners'.

He added: 'The last IGC was conducted on other people's terms. We want to be on the front foot from the outset.'

The European Policy Group, a market-oriented, London-based think tank, is engaged in a similar initiative. It is acting as the secretariat to a group of economists and constitutional specialists drawn from right-wing and Christian Democrat opinion across Europe.

Mr Graham Mather, president of the European Policy Group, described its work as a 'fightback' by those who believed in positive engagement in EC affairs but opposed the 'centralising' tendencies of the European establishment. Among the ideas under consideration is a possible role for national politicians in a second chamber of the European parliament.

GB United Kingdom, EC P9131 Executive and Legislative Combined P9721 International Affairs GOVT Government News P9131 P9721 The Financial Times London Page 11 317
Dearing to chair examination body Publication 930303FT Processed by FT 930303

SIR Ron Dearing has been appointed chairman of the new School Curriculum and Assessment Authority, which replaces the School Examinations and Assessment Council and the National Curriculum Council. He will chair both bodies from April 19 until the SCAA is set up in October.

GB United Kingdom, EC P9411 Administration of Educational Programs PEOP Appointments Sir Dearing, R Chairman School Curriculum and Assessment Authority (UK) P9411 The Financial Times London Page 10 83
Gummer admits error on eggs Publication 930303FT Processed by FT 930303

MORE THAN 100 farmers are to share about Pounds 600,000 in extra compensation for the compulsory slaughter of their poultry flocks in 1988. The slaughter was demanded after fears that eggs were contaminated with salmonella.

The compensation comes after a report from the parliamentary ombudsman criticised the Ministry of Agriculture over its failure to 'devise and implement a scheme which complied with the legislation' to pay compensation.

Mr John Gummer, agriculture minister, said the decision to discount the value of slaughtered flocks by 40 per cent to reflect the taint of salmonella infection was 'incorrect'.

GB United Kingdom, EC P0252 Chicken Eggs RES Capital expenditures GOVT Government News TECH Standards TECH Safety P0252 The Financial Times London Page 10 129
Gold and currency reserves fall Dollars 59m Publication 930303FT Processed by FT 930303 By EMMA TUCKER

BRITAIN'S gold and foreign currency reserves fell by an underlying Dollars 59m in February, the Treasury reported yesterday, Emma Tucker writes.

The overall rise in reserves, however, was Dollars 896m, boosted by extra borrowing. Most of the increase came from the proceeds of the fourth tender of three-year Ecu Treasury notes, which amounted to Dollars 622m. There was also a Pounds 409m difference between Ecu Treasury bills maturing and Ecu Treasury bill proceeds. These factors were excluded from the underlying change.

At the end of last month the official reserves stood at Dollars 43.4bn compared with Dollars 42.55bn at the end of January.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy ECON Balance of payments P9311 The Financial Times London Page 10 139
City seen as undamaged by ERM exit: Eddie George, incoming Bank of England governor, is blunt about budget deficit but buoyant about City's standing Publication 930303FT Processed by FT 930303 By CHARLES LEADBEATER

BRITAIN'S departure from the European exchange rate mechanism will not damage the City of London's standing as an international financial centre, Mr Eddie George, the incoming governor of the Bank of England, said yesterday in Tokyo.

Mr George told executives from leading Japanese financial institutions that doubts about the City's standing and the UK's commitment to European economic integration were misplaced.

Mr George was responding to concerns that heavy Japanese manufacturing and financial investment in the UK might be damaged if sterling's exit from the ERM had the result of confining Britain to the sidelines of the European market.

He told a seminar organised by British Invisibles, the export promotion body for services, that the City's position depended on the completion of the single market rather than monetary integration.

He said: 'Monetary integration is less critical than the single market to London's position, which has not depended upon the currency in which business is conducted and has not depended upon the posi-tion of the national curren-cy.'

He said Britain would have plunged into a still deeper recession had it remained within the ERM at the cost of keeping interest rates high.

In spite of signs of an easing of German interest rate policy, Mr George said: 'The divergences between the domestic policy needs in Germany and in the UK seem likely to persist for some time to come, and partly for that reason it is unlikely that the UK will re-enter the ERM for some time.'

Even outside the exchange rate mechanism, the Maastricht treaty's convergence criteria for monetary union would help guide British policy. Mr George said Britain would be as likely to satisfy the Maastricht convergence criteria as most other EC countries.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy ECON Balance of trade CMMT Comment & Analysis George, E Governor designate Bank of England P9311 The Financial Times London Page 10 349
Deficit 'will outlast recession': Eddie George, incoming Bank of England governor, is blunt about budget deficit but buoyant about City's standing Publication 930303FT Processed by FT 930303 By CHARLES LEADBEATER TOKYO

BRITAIN is likely to face a sizeable underlying budget deficit even after its economy recovers from the recession, Mr Eddie George, the incoming governor of the Bank of England, warned yesterday in Tokyo.

Mr George said the government would have to address the structural deficit. The only question was whether it did so immediately, with the economy still fragile, or waited until recovery was under way.

Mr George, the central bank's deputy governor, will take over from Mr Robin Leigh-Pemberton in July.

His remarks confirm the Bank's view that the government will have to embark on a sustained programme of fiscal consolidation even if recent cuts in interest rates and the depreciation of sterling spark a strong recovery.

In the first 10 months of the current financial year, the budget deficit stood at Pounds 21.6bn compared with a surplus of Pounds 14.7bn in the whole of 1988-89. Some City analysts believe the deficit could rise to more than 10 per cent of gross domestic production within five years.

Mr George, speaking before giving a lecture in Tokyo, said: 'I suspect a substantial underlying deficit will emerge which the government will, in time, have to address. The question is whether it addresses it now when the economy is still fragile or later when the economy is stronger.'

He said it was difficult to establish how much of Britain's growing deficit was due to the recession, which has pushed up social security and unemployment spending, and how much to a structural deterioration in government finances.

Mr George said a large part of the deficit, which reflected the recession, would disappear once the economy recovered.

He added: 'The conditions are in place for that and the deficit should diminish of its own accord.'

Britain would start from a strong position, with a relatively light rate of indebtedness as a proportion of gross domestic product, which meant that it could be in a better position than most European countries to meet the Maastricht convergence criterion for economic and monetary union.

The British economy had never been more competitive, Mr George said. The task ahead was to maintain the competitive advantage provided by sterling's recent devaluation.

He said British costs were the lowest by international standards that he could remember for 25 years. He expected sterling to appreciate gradually as other countries reduced interest rates.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis George, E Governor Designate Bank of England P9311 The Financial Times London Page 10 449
Gas-fired station may be delayed Publication 930303FT Processed by FT 930303 By MICHAEL SMITH, DAVID OWEN and DEBORAH HARGREAVES

THE GOVERNMENT is considering delaying for two years the construction of a Pounds 2bn gas-fired power station at Connah's Quay, Clwyd. The delay would jeopardise the development of four offshore oil and gas fields which are to supply the station.

Any move against gas would spark a storm of protest and possibly legal actions against the government, which has previously shown strong support for diversification out of coal-fired electricity.

The government is struggling to find a way of preserving enough of the 31 threatened coal mines to satisfy backbenchers. Difficulties in negotiations with the main power generators appear to have prompted Mr Michael Heseltine, the trade and industry secretary, to reassess previously rejected options for expanding the market for domestic coal.

These include restricting the operation of new gas-fired power stations and tinkering with arrangements under which Britain imports nuclear-generated electricity from France.

The government's problems have delayed publication of a white paper on the subject, which was originally due to appear last month. The cabinet committee dealing with coal is understood not to be meeting for the time being. Whitehall sources say the government has decided that it will allow PowerGen, the electricity generator, to go ahead with the Connah's Quay project. But it may want a two-year delay in construction, initially planned to start this year.

This would mean that the plant would start producing electricity in 1998, when the coal contracts now under discussion expire. Connah's Quay will have the capacity to produce 1,350 MW, the equivalent of 4m tonnes of coal a year.

PowerGen has told the government that a delay would be unacceptable to it and to Hamilton Oil and Gas, Monument and Lasmo, developers of the Liverpool Bay oil and gas field which will supply Connah's Quay.

Mr Charles Howson, external affairs manager at Hamilton, said a two-year delay could 'jeopardise the whole economics of the project'.

The project's partners have invested more than Pounds 70m in preparing for development of the offshore fields. The project would create some 4,000 jobs in the depressed north Wales area. Mr Tony Craven-Walker, managing director of Monument, said government interference in the project would place a question mark over the economics of oil and gas investment in the UK.

Mr David Hunt, Welsh secretary, has promised to raise the matter with Mr Heseltine following repeated requests from Mr Barry Porter, Tory MP for Wirral South.

GB United Kingdom, EC P1629 Heavy Construction, NEC P4911 Electric Services RES Facilities GOVT Government News P1629 P4911 The Financial Times London Page 10 440
Top 3i executive assures on policy after flotation Publication 930303FT Processed by FT 930303 By CHRIS TIGHE

THE CHIEF executive of 3i, the UK's biggest venture capital group, sought yesterday to reassure investee companies (companies in which 3i has taken an equity stake) that a possible Stock Exchange flotation for 3i would not threaten their future wellbeing.

Addressing the first meeting of the 3i Communication Club, an independent organisation formed to represent investee companies' interests, Mr Ewen Macpherson said flotation would not change 3i's policy of long-term investment.

He told representatives of 50 3i investee companies in Newcastle upon Tyne that a review was imminent of 3i's possible flotation, postponed further last year because of the recession. Should 3i decide to float, he said, it would be as an investment trust, the success of which would be measured partly by long-term growth. No pressure would be placed on investee companies to increase their dividend payments.

Mr Macpherson will today address a similar 3i Communication Club meeting in Birmingham, and tomorrow in London. In total, representatives of around 450 3i investee companies are expected to attend the meetings. The formation of the club last November was prompted by fears that flotation would induce an attitude of short termism by 3i towards its investments. There was also criticism of alleged lack of communication by 3i, and calls for preferential treatment for client companies in any 3i share issue.

Asked yesterday who would benefit from flotation, Mr Macpherson said he expected some of the funds raised, should it proceed, would go to 3i's main shareholders, the clearing banks. He hoped some proceeds would be ploughed back into 3i.

3i Group GB United Kingdom, EC P6799 Investors, NEC COMP Company News FIN Share issues P6799 The Financial Times London Page 10 297
Bottomley defends hospital reform Publication 930303FT Processed by FT 930303 By ALAN PIKE, Social Affairs Correspondent

CRITICS who believed the problems of London's hospitals had been caused by the government's internal market in healthcare were 'wrong by about 100 years', Mrs Virginia Bottomley, health secretary, said yesterday.

The problems, she told the Commons health committee, were long-standing and had been the subject of more reports than virtually any other issue. But she accepted that they had been brought to a head by the government's 1991 National Health Service reforms, which had changed from an institution-focused structure to a patient-focused one.

'Under those circumstances, it was inevitable that the institution-dominated health service in London would soon come under fierce scrutiny and face mounting pressure to change,' she said.

Mrs Bottomley added that it was important to look beyond the pleading of individual cases and address the concerns of doctors and other professionals about the 'mounting inadequacy' of the NHS to meet modern needs in London.

'We must live up to the expectations of those who embrace, welcome and want change in the capital. This will mean swift action carried forward according to a tight timetable.'

Mr Tim Chessells, chairman of the implementation group overseeing the London changes, said approaches had been received from other English regions about the possibility of relocating London specialist units elsewhere.

The British Medical Association is telling its members to seek local-level recognition in trust hospitals in readiness for an expected shift from national bargaining on doctors' conditions of service.

By next year almost all hospitals and community health services will have become locally managed trusts. Although staff transfer to trusts on existing national terms of employment, trust managements can seek to negotiate changes in them.

BMA leaders accept that this will lead to a gradual end to the current national structure under which hospital and community doctors enjoy the same pay and conditions wherever they work. There will be a particular incentive for some trust managements to introduce new contracts for doctors in the hope of encouraging consultants to treat private patients on trust premises rather than in independent hospitals.

Some trust managements are examining ways of streamlining collective bargaining, while the BMA is anxious to ensure that medical staff retain flexibility to negotiate independently on issues exclusive to the profession. It has set up a network of local negotiating committees to represent medical staff in almost all existing and potential trusts.

GB United Kingdom, EC P8062 General Medical and Surgical Hospitals P9431 Administration of Public Health Programs GOVT Government News PEOP Labour P8062 P9431 The Financial Times London Page 10 434
Car workers vote Publication 930303FT Processed by FT 930303

CAR workers at Peugeot Talbot in Coventry have voted to accept assurances on job security, ending the threat of industrial action at the company's main production plant.

Peugeot Talbot Motor GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies PEOP Labour P3711 The Financial Times London Page 10 58
Card-crime fall Publication 930303FT Processed by FT 930303

PLASTIC card crime led to losses for card issuers of Pounds 165m last year, Pounds 600,000 down on 1991's record figure. A total of Pounds 7m in a Pounds 50m reward scheme over fraudulently used cards was paid to 100,000 shop staff.

GB United Kingdom, EC P6141 Personal Credit Institutions P9229 Public Order and Safety, NEC STATS Statistics P6141 P9229 The Financial Times London Page 9 73
Hatton acquitted on one charge Publication 930303FT Processed by FT 930303

MR Derek Hatton, former Liverpool City Council deputy leader, and two others were yesterday formally acquitted of one charge of conspiring to defraud the council. They face other charges.

Mr Roy Stewart of Rogerson's Developments, who faced only one charge, was discharged.

GB United Kingdom, EC P9121 Legislative Bodies PEOP Personnel News GOVT Legal issues P9121 The Financial Times London Page 9 72
Case on Piper payouts opens Publication 930303FT Processed by FT 930303

ELF Enterprise Caledonia, the oil company, yesterday began a Pounds 110m court action to try to recover compensation paid after the 1988 Piper Alpha platform disaster in the North Sea in which 167 men died.

The company is the successor to Occidental, which then operated the platform. It is seeking at the Court of Session in Edinburgh to recover from 24 contractors the money paid to survivors and to victims' relatives.

The contractors deny liability and claim the operators were solely at fault.

Elf Enterprise Caledonia GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas P1382 Oil and Gas Exploration Services GOVT Legal issues P1311 P1382 The Financial Times London Page 9 124
Rise in tendering 'would cut costs' Publication 930303FT Processed by FT 930303 By JOHN WILLMAN

GREATER use of competitive tendering would reduce the cost and improve the quality of public services, the Institute of Economic Affairs says in a report published today, John Willman writes.

The think tank says local and central government organisations continue to place obstacles before companies which might bid for contracts. It identifies scope to extend competitive tendering in local government, fire services and some police work.

The report says the rule which excludes tendering of activities worth less than Pounds 100,000 a year should be examined to see if the limit could be lowered.

Testing the Market. IEA, 2 Lord North Street, London SW1P 3LB. Pounds 16.

GB United Kingdom, EC P9121 Legislative Bodies MKTS Contracts MGMT Management COSTS Service costs P9121 The Financial Times London Page 9 142
PM hints at small-business aid Publication 930303FT Processed by FT 930303 By PHILIP STEPHENS, Political Editor

MR JOHN MAJOR yesterday offered a broad hint that small businesses will be among the main beneficiaries of any tax concessions in the March 16 Budget.

Speaking in the Commons, the prime minister agreed to pass on to Mr Norman Lamont, the chancellor, a call from a backbench Tory MP for the Treasury to recognise that small businesses offered the best hope of renewed job creation.

His response was technically noncommittal, but Mr Major's supportive tone reinforced expectations among the government's supporters that a promised 'Budget for jobs' will concentrate on measures to encourage the creation and expansion of small companies.

Tory MPs believe Mr Lamont will increase personal taxes through an extension of the value added tax net.

But they think that he will then use some of the additional revenue to promote investment, exports and employment.

Last month the Confederation of British Industry tabled a 10-point plan for small business which it said could be implemented within the tight constraints imposed by a soaring public sector borrowing requirement.

It is understood that the CBI was encouraged to make its submission during earlier informal contacts with Whitehall.

Mr Howard Davies, the director-general of the employers' organisation, is a frequent visitor to 10 Downing Street.

Among the CBI recommendations were larger capital allowances, higher corporation tax thresholds, new exemptions from capital gains tax and measures to improve the availability of equity finance for small businesses.

The package would cost about Pounds 500m in the first year, although that would rise to closer to Pounds 1bn in later years.

Mr Lamont is also under pressure from the Conservative back benches to relax further the rules on inheritance tax and raise significantly the VAT threshold.

In parallel Tory MPs have been lobbying for a reduction in the uniform business rate as the most effective way to ease the financial pressures on small businesses in the south and south-east.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Taxes P9311 The Financial Times London Page 9 350
Iron Man unveiled in Birmingham Publication 930303FT Processed by FT 930303

Iron Man, a 20-foot cast-iron sculpture designed by Anthony Gormley, was unveiled in Birmingham yesterday to mark the relocation of TSB's headquarters to the city from London

GB United Kingdom, EC P8412 Museums and Art Galleries RES Facilities P8412 The Financial Times London Page 9 55
Employers cut cash for pension funds Publication 930303FT Processed by FT 930303 By NORMA COHEN, Investments Correspondent

MORE THAN half of British employers are using pension fund surpluses to reduce or eliminate their contributions to employee pension schemes, the National Association of Pension Funds has found.

In its 1992 survey of pension schemes, the association found that 38 per cent of employers are making no contribution while another 16 per cent are making reduced contributions. A further 1 per cent have used scheme surpluses to refund cash to themselves.

The figures show a rise from the 1991 survey when 47 per cent of schemes were on full or partial contributions holiday.

Mr Mike Brown, the association's director of information, said the rise in contributions holidays showed the effects the recession was having on employers. 'They would rather use the money to pay their suppliers and staff,' he said.

The question of whether employers should have the exclusive right to use scheme surpluses is among the most contentious issues under review by a government panel headed by Professor Roy Goode.

The survey did not ask respondents whether contributions holidays have been accompanied by benefit improvements for scheme members. It covered 852 association members, covering roughly 40 per cent of all UK pension scheme members.

Last year 19 per cent of employees eligible to join a scheme chose not to do so, compared with 16 per cent in 1991. Mr Brown said there may have been reasons other than disenchantment with occupational schemes which might account for the figure, such as the inclusion of part-time workers who may feel their earnings are too low to afford contributions.

The survey also found no sign of a much-touted trend suggesting that employers are abandoning final-salary schemes in favor of money-purchase schemes. Mr Brown said: 'It's the sort of thing many people are talking about but very few are actually doing it.' Employers have threatened that, if the government imposes new regulations on occupational schemes, they will abandon them in favour of money-purchase schemes.

Editorial comment, Page 19

GB United Kingdom, EC P6371 Pension, Health, and Welfare Funds P9441 Administration of Social and Manpower Programs MGMT Management P6371 P9441 The Financial Times London Page 9 369
Cable TV plan by US companies Publication 930303FT Processed by FT 930303 By GARY MEAD, Marketing Correspondent

COX CABLE Communications and Southwestern Bell, two US telecom companies, yesterday unveiled a preliminary agreement to buy and operate cable television and telephone systems in the UK.

Under the terms of the joint venture, due to be finalised in early April, Cox Cable, based in Atlanta, will take an initial 25 per cent stake in Southwestern Bell's eight UK cable television and telephony franchises covering 1.25m homes in the north-west and Midlands.

Both declined to give financial details. Industry analysts believe the joint venture will see Cox investing about Dollars 300m (Pounds 211.2m) in Southwestern's UK cable operations.

The deal is further confirmation of strong north American interest in the developing UK cable telecommunications sector.

Mr James Robbins, president of Cox Cable, said the joint venture was inspired by a shared belief that the UK 'is the freest competitive telecommunications marketplace in the world today.'

Mr Michael Turner, president of Southwestern Bell International Holdings, said the joint venture this year will spend in the region of Pounds 48m, laying cable to about 160,000 homes in its current UK franchises.

The latest official statistics from the Independent Television Commission, the regulatory body for all commercial television, show that 440,162 homes were connected to modern broadband cable networks by January this year, up from 268,812 in January 1992. The UK has 58 cable operating franchises.

According to Mr Richard Woollam, director-general of the UK's Cable Television Association, cable television will grow by at least 60 per cent this year with 300,000 new subscribers.

Several other US cable operators are understood to be considering investing in UK cable, including Times Mirror, Century Communications, Cablevision Industries and Continental Cablevision.

In mid-February Southwestern Bell, based in Texas, agreed to buy two cable television systems in Washington DC for Dollars 650m.

That deal has yet to be approved by the US Justice department and the Federal Communications Commission. It also has cable interests in Israel.

Cox Cable Communications Southwestern Bell GB United Kingdom, EC P4841 Cable and Other Pay Television Services COMP Joint venture TECH Licences P4841 The Financial Times London Page 9 364
Judge tells BSB to pay Philips damages Publication 930303FT Processed by FT 930303 By RAYMOND SNODDY

A HIGH Court judge yesterday ruled that British Satellite Broadcasting was in breach of a contract with Philips Electronics when it merged with Sky Television in November 1990.

Mr Justice Tuckey said the merger in effect destroyed the market for BSB-receiving equipment.

The Dutch group had signed a contract in 1989 obliging Philips to develop, manufacture and deliver receivers for satellite television reception until the end of 1992. The judge held there was an implied term in the contract that BSB would do nothing to destroy the market for Philips' products. Damages are to be assessed later.

BSkyB, in which Pearson, owner of the Financial Times, has a significant stake, said it would appeal.

British Sky Broadcasting GB United Kingdom, EC P4841 Cable and Other Pay Television Services P3679 Electronic Components, NEC MKTS Contracts GOVT Legal issues P4841 P3679 The Financial Times London Page 9 161
Wyatt calls for list of freelance BBC executives Publication 930303FT Processed by FT 930303 By RAYMOND SNODDY

MR WILL WYATT, managing director of BBC Network Television, has called for a list of BBC executives who are freelances, whether or not they have their own private companies. The action follows the revelation that Mr John Birt, BBC director-general, was a freelance consultant from the time he joined the BBC six years ago until Monday, when he applied to join the staff.

Bectu, the broadcasting union, will ask BBC management for a list of private companies operating within the corporation. Even senior BBC executives do not know how many executives are not on the staff. Virtually all members of the drama department have been freelance for many years.

Apart from some executives of London Weekend Television, private companies for broadcasting staff seem to be rare.

Mr Vernon Lawrence, former head of drama at Yorkshire Television and now head of drama and entertainment at the ITV network, explained yesterday why he went on Yorkshire's staff when he became a department head.

'When you have a company car and a company TV and a company video, how can you be anything else but an employee?' Mr Lawrence asked. 'I've paid through the nose but I can sleep in my bed at night.'

Mr Marcus Plantin, the ITV network director who had a private company when he was at LWT, declined to discuss whether he was now paid through a private company.

Mr Tony Lennon, president of Bectu, said yesterday he was concerned at the 'dual standards ' involved in the Birt case. The BBC had become increasingly strict about who it accepted as a freelance. Mr Lennon said that even categories of production worker recognised by the Revenue as freelance had tax deducted under pay-as-you-earn.

Mr Andy Egan, Bectu's tax specialist, said yesterday the Revenue's usual test was: 'Are you part of the organisation or are you autonomous?' He added: 'Clearly the director-general is part of the organisation, only more so.'

Mr Birt last night rebuffed reporters' questions about the controversy after he had spoken at a public meeting in Cardiff about BBC finances. The audience did not ask about his own finances.

The accounts of Mr Birt since he joined the BBC as deputy director-general show steadily rising turnover and equally rising administrative expenses. In 1987, for instance, turnover was Pounds 93,599 and administrative expenses were Pounds 77,833 including remuneration and National Insurance for the two directors, Mr John Birt and Mrs Jane Birt.

By 1989 turnover had risen to Pounds 136,234 and directors' remuneration was Pounds 82,399. In 1991 directors' fees were Pounds 80,604 out of total administrative expenses of Pounds 159,174.

British Broadcasting Corp GB United Kingdom, EC P4833 Television Broadcasting Stations P4832 Radio Broadcasting Stations PEOP Personnel News COMP Company News P4833 P4832 The Financial Times London Page 9 479
Campaign to fight VAT on papers Publication 930303FT Processed by FT 930303 By GILLIAN TETT

A CAMPAIGN against taxes on the sales of books and newspapers was launched yesterday by the newspaper and publishing industry.

The move comes amid indications that one of the Budget options being considered by Mr Norman Lamont, the chancellor, is imposition of either the full 17.5 per cent level of value added tax or a reduced rate of 5 per cent on books, newspapers and periodicals.

These, together with other items such as food and childrens' clothes, are currently exempt from VAT.

The organisers of the Hands Off Reading Campaign warned that a fifth of local newspapers would be forced to close with the loss of 2,500 jobs if VAT was imposed, citing figures from a recent Price Waterhouse study. They warn that at least two national newspapers could be forced to shut.

About 1,700 magazines - a third of the total - would be forced to close, a similar study by BDO Binder Hamlym warns.

The figures are calculated assuming a VAT rate of 17.5 per cent. But Price Waterhouse stresses that even the imposition of a reduced rate of tax on the industry would have devastating effects.

Government statistics show that VAT on newspapers, magazines and books would raise about Pounds 1bn, about half of which would come from newspapers.

In spite of figures earlier this week showing that book sales are rising, campaign organisers insist that costlier publications will mean fewer readers.

According to the campaign's opinion poll a third of people questioned claimed they would buy fewer newspapers if they were taxed.

GB United Kingdom, EC P2711 Newspapers P2721 Periodicals P2731 Book Publishing GOVT Taxes P2711 P2721 P2731 The Financial Times London Page 9 292
Prescription charges to increase by 13% Publication 930303FT Processed by FT 930303

PRESCRIPTION charges are to rise by 13 per cent to Pounds 4.25 next month, the government announced yesterday. The rise of 50p gave rise to protests and warnings that it would force many patients to do without treatment.

Pre-prescription payment certificates and other charges will also rise by 13 per cent. The charge towards dental treatment will rise from 75 per cent to 80 per cent.

Details of the rises, expected to raise an extra Pounds 278m for the NHS, were announced by Dr Brian Mawhinney, the health minister, in a Commons written reply. Under the changes, needy and elderly people and those who receive free prescriptions on medical grounds will remain exempt.

The value of optical vouchers for spectacles, available to children and people on low incomes, will be raised by 2.75 per cent.

Dr Mawhinney said 80 per cent of prescribed items were dispensed free, more than at any time since prescription charges were reintroduced in 1968.

He claimed that the new charges were still significantly less than the average total cost of a single prescription item.

Mr David Blunkett, shadow health secretary, accused Mrs Virginia Bottomley, the health secretary, of 'caving in' to the Treasury. He said: 'This is a government that is prepared to tax the sick and not the rich.'

The British Medical Association said the sick were being used to 'bolster the severe underfunding of the NHS'. Real growth in NHS funding for this year stood at less than 1 per cent. It added: 'We would like to see a fairer system which avoids deterring patients from seeking the necessary medical treatment.'

The Royal College of Nursing said the rise was 'another hurdle to health care for many thousands of families hit by recession and unemployment'.

The Royal Pharmaceutical Society warned that more and more patients would be unable to afford the medicines prescribed for them.

The BMA is telling its members to seek local-level recognition in trust hospitals in readiness for an expected shift from national bargaining on doctors' conditions of service.

By next year almost all hospitals and community health services will have become locally managed trusts which can seek to negotiate changes in terms now negotiated nationally.

GB United Kingdom, EC P9431 Administration of Public Health Programs COSTS Product prices COSTS Service prices P9431 The Financial Times London Page 9 400
Wider tendering 'would cut costs' Publication 930303FT Processed by FT 930303 By JOHN WILLMAN, Public Policy Editor

MUCH greater use of competitive tendering would reduce the cost and improve the quality of public services, the Institute of Economic Affairs says in a report published today.

The free-market think tank says local and central government organisations continue to place obstacles before companies which might bid for contracts. It identifies scope to extend competitive tendering in local government, the health service, fire services and some police work.

The institute calls for the Audit Commission, the local-authority watchdog, to investigate councils which have contracted out few or none of the services subject to compulsory competitive tendering.

The report says the rule which excludes tendering of activities worth less than Pounds 100,000 a year should be examined to see if the limit could be lowered.

The size of some contracts is an obstacle to bidders, the institute says. Many local authorities package work to be contracted out in ways which suit their in-house workforce.

The institute says an upper limit should be set on the size of contracts, forcing the contracting-out organisation to offer separate contracts of more manageable size. While all the contracts might be won by a single contractor, 'economies or diseconomies of scale should be discovered rather than assumed', the report says.

The report also recommends that experiments should be launched in contracting out the management of hospitals and schools.

Testing the Market. IEA, 2 Lord North Street, London SW1P 3LB. Pounds 16.

GB United Kingdom, EC P9121 Legislative Bodies MKTS Contracts MGMT Management COSTS Service costs P9121 The Financial Times London Page 9 272
Gummer admits egg compensation error Publication 930303FT Processed by FT 930303

MORE THAN 100 farmers are to share about Pounds 600,000 in extra compensation for the compulsory slaughter of their poultry flocks in 1988. The slaughter was demanded after fears that eggs were contaminated with salmonella.

The compensation comes after a report from the parliamentary ombudsman criticised the Ministry of Agriculture over its failure to 'devise and implement a scheme which complied with the legislation' to pay compensation.

In a Commons' written answer, Mr John Gummer, the agriculture minister, admitted that the decision to discount the value of slaughtered flocks by 40 per cent to reflect the taint of salmonella infection was 'incorrect'.

More than 3.25m hens have been destroyed at a cost in compensation - excluding the new awards - of Pounds 5.4m.

GB United Kingdom, EC P0252 Chicken Eggs RES Capital expenditures GOVT Government News TECH Standards TECH Safety P0252 The Financial Times London Page 9 157
Gwent jobs shed Publication 930303FT Processed by FT 930303

PARKE-DAVIES, the pharmaceuticals company, is to cut the workforce at its Mamhilad plant near Pontypool, Gwent, by a third, shedding 300 jobs over the next two years.

Parke Davis GB United Kingdom, EC P2834 Pharmaceutical Preparations PEOP Labour P2834 The Financial Times London Page 9 54
Assurance over BR pension fund Publication 930303FT Processed by FT 930303

MR John MacGregor, transport secretary, yesterday stressed to trustees of the British Rail pension fund that the government had no 'hidden agenda' for stripping the fund of its assets.

He said that 'irresponsible speculation' about the future of the pensions after railway privatisation was needlessly worrying BR pensioners.

Editorial comment, Page 19

British Rail Pension Fund GB United Kingdom, EC P6371 Pension, Health, and Welfare Funds P9621 Regulation, Administration of Transportation GOVT Government News P6371 P9621 The Financial Times London Page 9 93
Campaign opens against VAT on papers Publication 930303FT Processed by FT 930303 By GILLIAN TETT

A CAMPAIGN against taxes on the sales of books and newspapers was launched yesterday by the newspaper and publishing industry.

The move comes amid indications that one of the Budget options being considered by Mr Norman Lamont, the chancellor, is imposition of either the full 17.5 per cent level of value added tax or a reduced rate of 5 per cent on books, newspapers and periodicals.

These, together with other items such as food and childrens' clothes, are currently exempt from VAT.

The organisers of the Hands Off Reading Campaign warned that a fifth of local newspapers would be forced to close with the loss of 2,500 jobs if VAT was imposed, citing figures from a recent Price Waterhouse study. They warn that at least two national newspapers could be forced to shut.

At the same time about 1,700 magazines - a third of the total - would be forced to close, a similar study by BDO Binder Hamlym warns.

The figures are calculated assuming a VAT rate of 17.5 per cent. But Price Waterhouse stresses that even the imposition of a reduced rate of tax on the industry would have devastating effects.

Mr Alan Marmion, author of the Price Waterhouse survey, said: 'As we indicate in our report a lot of local newspapers are only just hanging on. This would be the final straw.'

Government statistics show that VAT on newspapers, magazines and books would raise about Pounds 1bn, about half of which would come from newspapers.

In spite of figures earlier this week showing that book sales are rising, campaign organisers insist that costlier publications will mean fewer readers. According to the campaign's opinion poll a third of people questioned claimed they would buy fewer newspapers if they were taxed. Taxing books and newspapers would be less politically sensitive than imposing VAT on food or children's clothes, but campaigners argue that the revenue raised would be insignificant.

Mr Tim Godfrey, director of the Booksellers' Association, estimates that imposing VAT on books at 17.5 per cent would raise only Pounds 100m.

He said:'It would be a body blow for education and make knowledge much more expensive. But it's a paltry sum for the Treasury.'

GB United Kingdom, EC P2711 Newspapers P2721 Periodicals P2731 Book Publishing GOVT Taxes P2711 P2721 P2731 The Financial Times London Page 9 401
Aston Martin to boost output with 'cheap' model Publication 930303FT Processed by FT 930303 By JOHN GRIFFITHS

ASTON MARTIN Lagonda, the maker of luxury sports cars taken over by Ford in 1987, yesterday unveiled a new model intended to quadruple production to 800 cars a year in 1995.

The company said the car - named the DB7 - would cost 'less than Pounds 80,000,' which is some Pounds 50,000 less than the cheapest of Aston Martin's present range. First-year production is expected to be around 300 cars.

The new model will be built at a separate factory in Oxfordshire by a workforce of 250, instead of at the company's main facilities in Newport Pagnell, Buckinghamshire.

The main design and development work on the DB7, which has a top speed potential of more than 160mph, has been contracted out to TWR (Design), part of the Oxford-based TWR group run by Mr Tom Walkinshaw.

A new company, Aston Martin Oxford, has been formed to operate the facility at Bloxham, Oxfordshire, in which TWR has taken a 25 per cent stake. The majority 75 per cent is held by Aston Martin Lagonda.

The DB7's in-line six-cylinder 3.2 litre supercharged engine, although allocated to Aston Martin's use only, uses a block originally developed by Jaguar but not used. It is expected to be assembled by Jaguar under contract at its Radford engine plant near Coventry.

The bodies are to be supplied by Motor Panels, the Coventry-based components group.

A wholly-owned subsidiary, Aston Martin sales, has been formed to oversee an expansion of Aston Martin's worldwide dealer network.

The cars are to go on sale in Europe initially, starting in April next year, and will go on sale in north America in 1995.

Car workers at Peugeot Talbot in Coventry have voted to accept assurances on job security, ending the threat of industrial action at the company's main production plant.

Aston Martin Lagonda Peugeot Talbot Motor GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies COMP Company News TECH Products PEOP Labour P3711 The Financial Times London Page 8 345
Initiative seeks to find the 'export-ready': Fears that not enough is done for outward goods Publication 930303FT Processed by FT 930303 By DAVID DODWELL ONE OF the UK's most ambitious export promotion campaigns

North America Now - is launched tomorrow at a time of fierce debate over how governments should best help exporters. Britain is not alone in discovering that sustained, non-inflationary growth is better driven by exports than domestic demand. Nor is it alone in worrying about widening trade gaps.

The US campaign is expected to include unique and innovative initiatives to counter criticism that previous government efforts have targeted the 'export-willing', but have been less successful in pinpointing the 'export-ready'.

A core worry for the British government is that a few exporters account for a large proportion of exports - 50 companies are responsible for about 44 per cent of visible exports totalling Pounds 108m last year. As a result, export promotion is invariably targeted at smaller companies, often with limited success.

There is widespread concern that government efforts to aid exporters often miss the mark. Trade missions are often dismissed as 'jollies'; backing for companies to attend trade fairs is attacked as unco-ordinated. The value of export promotion campaigns - like those focused on Venezuela, Spain and Kuwait over the past five years - has been questioned, though export figures provide unclear evidence because they can be influenced by forces ranging from the recession to currency fluctuations.

Mr Graham Bannock, consultant to the Department of Trade and Industry on a number of trade issues, and author of an influential government report on exporting, says: 'Export campaigns don't generate much in the way of exports. But it's terribly difficult to prove anything.'

Business leaders such as Mr Simon Sperry, chief executive of the London Chamber of Commerce, say there is disarray on how export services are delivered, with too many agencies competing for funding.

Mr Ian Campbell, at the Institute of Export, asks when organisations such as the Institute of Freight Forwarders, the Confederartion of British Industry, Institute of Marketing, chambers of commerce and Institute of Directors last met jointly or co-ordinated efforts. 'We need a more co-operative corporate structure,' he says.

Mr Campbell notes that the budget of the British Overseas Trade Board last year was Pounds 173m - 'enough to run the health service for 25 hours'.

Apart from concern that there is too little money for export promotion, there is criticism about lack of continuity at the top of the DTI, which has had 16 trade secretaries in 24 years.

Mr Michael Heseltine, the present trade and industry secretary, and his deputy Mr Richard Needham, appear to have impressed industry with their early efforts to tailor government activities to exporters' needs. Many industrialists would say that this is long overdue in a country where exports account for 18 per cent of gross domestic product.

According to one senior CBI executive: 'The fact that the government is now using the word 'strategy' is an important change from the past. It's not providing a very complete strategy, but at least it has started to use the word.'

Mr Needham yesterday identified three prongs to his export promotion strategy:

Services to improve competitiveness and exportability of British products, particularly in industrial markets.

Aid to the capital goods industry in developing country markets, with a target of raising capital goods exports from Pounds 10bn in 1993 to Pounds 20bn by 2000.

Protecting British trading interests in forums such as the General Agreement on Tariffs and Trade and in bilateral trade conflicts over products like steel and cars, or on taxation of international companies.

His strategy is distinctive in its conviction that export promotion starts with private industry, and at the regional level. It also focuses on improving the wider manufacturing base rather than just exports, with 'local economy promotion'.

One area of general complaint in the UK is export finance, where premium rates to insure exports are often significantly higher than rates offered to exporters from other countries. Mr Bannock said export finance was 'the one area where the UK government is demonstrably doing less than other governments'.

The government has made a strong effort to build into the North America Now campaign policies that meet industry complaints. Its details will be scrutinised with care - not just because the US is Britain's most important export market, but because it will provide clear evidence of whether Mr Heseltine is putting his own, more effective, stamp on Britain's export efforts.

------------------------------------------------------------------------ EXPORT PROMOTIONS: ARE THEY ON TARGET? ------------------------------------------------------------------------ 1990 1991 1992 Other initaitives and their exports Pds bn Pds bn Pds bn ------------------------------------------------------------------------ SPAIN: 1991 'Spotlight Spain' 3.75 4.29 4.41 KUWAIT: 1991 'Reconstructed Kuwait' 0.18 0.18 0.26 VENEZUELA: 1991 'Projecto Venezuela' 0.21 0.17 0.19 TOTAL EXPORTS 103.70 104.82 108.30 ------------------------------------------------------------------------ Source: CSO ------------------------------------------------------------------------

GB United Kingdom, EC P99 Nonclassifiable Establishments P9611 Administration of General Economic Programs MKTS Foreign trade CMMT Comment & Analysis P99 P9611 The Financial Times London Page 8 830
DTI warns of costs risk to N Sea oil Publication 930303FT Processed by FT 930303 By DEBORAH HARGREAVES

THE GOVERNMENT yesterday warned North Sea oil and gas operators that they must cut costs or face a threat to the long-term viability of the offshore industry.

Now that the heyday of North Sea discoveries is over, the government is keen to maintain the cost-effectiveness of an industry which still invests more than Pounds 10bn a year and employs 335,000 people.

The concerns are contained in a Department of Trade and Industry report which highlights the changing nature of the offshore industry.

Future oil and gas finds will be concentrated in much smaller fields, the report says. The industry must reduce its overheads if it is to exploit these finds economically.

Mr Michael Heseltine, trade and industry secretary, said: 'Many of the recommendations will be difficult, requiring innovative thinking and hard work. But the challenge is to ensure they are delivered. What is at stake could be a secure future for the UK continental shelf.'

The report makes 29 recommendations, focusing on reduction of paperwork, streamlining of equipment specifications and greater operator co-operation.

Mr Tim Eggar, energy minister, said: 'If the UK continental shelf doesn't remain competitive, slowly - but inexorably - investment funds will flow to other oil provinces and the infrastructure will move elsewhere.'

The report says that until 1980 the average size of discoveries in the North Sea exceeded 150m barrels of oil equivalent (which includes gas). Since then the average size has been below 50m barrels. Oil prices remain at their lowest level for 20 years.

Government statistics show that expenditure on offshore oil operations rose in real terms from Pounds 2.50 a barrel to more than Pounds 4 a barrel in the three years to 1991, although it is believed to have dropped to Pounds 3.60 a barrel last year.

'Nevertheless, with oil currently trading at Pounds 10 to Pounds 12 per barrel these costs pose a significant threat to the future viability and profitability of the North Sea,' the report states.

Mr Eggar stressed the importance of companies working together, for example, in partnership contracts which share the risks and rewards of developments between oil companies and contractors.

Report of the Working Group on UKCS Competitiveness. Offshore Supplies Office, Alambra House, 45 Waterloo Street, Glasgow G2 6AS. Free.

GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas GOVT Government News STATS Statistics P1311 The Financial Times London Page 8 413
Scots factory set to win IBM support Publication 930303FT Processed by FT 930303 By JAMES BUXTON, Scottish Correspondent

INTERNATIONAL Business Machines is expected to underwrite a project by one of its subcontractors to build a large factory for assembling its personal computers close to its plant at Greenock in western Scotland.

The 400,000 sq ft plant would be built and operated by Mimtec, an electronics manufacturer owned by Murray International Holdings, which is 88 per cent owned by Mr David Murray, one of Scotland's leading entrepreneurs and chairman of Glasgow Rangers football club.

The move partly reflects the increased demand for IBM's personal computers since it introduced a new range last autumn. Mimtec is one of several subcontractors assembling PCs for IBM, using a 75,000 sq ft plant at Livingston, West Lothian.

Mimtec's new plant is likely to be at Gourock, a few miles from IBM's Greenock complex. It could open in about a year and employ about 400 people compared with the 2,200 at Greenock.

The new plant would be built in the Inverclyde enterprise zone, created in 1989 after the rundown of the shipbuilding industry. Projects in enterprise zones enjoy exemption from business rates and development land tax, and 100 per cent tax allowances against buildings.

Some Pounds 9m of the cost of the plant is likely to be met by an enterprise zone trust financed by investors, with the rest coming from grants. IBM would make up any shortfall on the trust and take over the ownership of the plant when the trust was paid back in a few years.

The IBM plant at Greenock, which supplies Europe, the Middle East and Africa, allocates much assembly work to subcontractors while keeping its own workforce stable in order to hold down overheads. In this way subcontractors carry the burden of rapidly expanding and if necessary reducing their labour forces.

International Business Machines Corp Mimtec GB United Kingdom, EC P3571 Electronic Computers RES Capital expenditures RES Facilities COMP Company News P3571 The Financial Times London Page 8 338
Vehicle parts complex for Midlands Publication 930303FT Processed by FT 930303 By PAUL CHEESERIGHT, Midlands Correspondent

THE first business park in the UK dedicated to the manufacture of automotive components will be set up at Wednesbury, north-west of Birmingham, on the sites of the former Patent Shaft steelworks and Moorcroft chemical works.

The Black Country Development Corporation, which is responsible for the regeneration of 10 sq miles of land in the area, yesterday said it had signed contracts with Kyle Stewart, the property and construction group, to develop 30 acres.

Mr David Morgan, development corporation chief executive, said talks were at an advanced stage with the first two prospective tenants of the park. He said they were British subsidiaries of German and US groups.

The 250-acre park is aimed at exploiting the strengthening of the UK motor sector, with component manufacture expected to expand to serve new Honda, Nissan and Toyota plants.

The park will be linked to the national motorway network by the Black Country spine road which will run between the M5 and the M6. Construction contracts for the road will be placed later this month.

However, construction of the spine road has been delayed by escalating costs, and redevelopment of the land at Wednesbury, planned since the mid 1980s, has been thwarted by the collapse of the property market. It had originally been intended for a retail and leisure complex.

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P3714 Motor Vehicle Parts and Accessories P9532 Urban and Community Development P1541 Industrial Buildings and Warehouses MKTS Contracts P6552 P3714 P9532 P1541 The Financial Times London Page 8 270
PM backs lobby to promote industry Publication 930303FT Processed by FT 930303 By RALPH ATKINS

A TORY MP's attempt to re-establish manufacturing as a 'national adventure' won backing yesterday from Mr John Major and the Corporation of London.

Sir Francis McWilliams, lord mayor of London, said at the launch of the Manufacturing and Construction Industries' Alliance: 'Industry has not articulated itself well enough, and often the City has not quite understood what industry is about.'

In September Sir Francis is to launch a Foundation for Manufacturing and Industry, a charity intended to research the problems of industry.

The prime minister sent a message of support to the alliance, launched by Mr Nicholas Winterton, Conservative MP for Macclesfield.

Mr Winterton also received backing from the Labour party, trade unions and some other backbench Tories.

The results of a Mori survey, released to coincide with the alliance's launch, show that 49 per cent of the students surveyed were very or fairly interested in a career in broadcasting or journalism, 39 per cent in public relations and 38 per cent in teaching.

Only 16 per cent were interested in careers in motor manufacturing and only 10 per cent in textiles.

Ten points to recovery, Page 19

GB United Kingdom, EC P99 Nonclassifiable Establishments P30 Rubber and Miscellaneous Plastics Products P31 Leather and Leather Products P32 Stone, Clay, and Glass Products P33 Primary Metal Industries P34 Fabricated Metal Products P35 Industrial Machinery and Equipment P36 Electronic and Other Electric Equipment P37 Transportation Equipment P38 Instruments and Related Products P39 Miscellaneous Manufacturing Industries GOVT Government News CMMT Comment & Analysis P99 P30 P31 P32 P33 P34 P35 P36 P37 P38 P39 The Financial Times London Page 8 281
Tackling 'disarray' in help for exports: Fears that not enough is done for outward goods Publication 930303FT Processed by FT 930303 By DAVID DODWELL

EXPORTING is scary. Assuming that barriers such as language, customs, standards and procedures can be overcome, and adequate representation found in alien markets, the financial exposure alone can be crippling. Uncertainty is assured.

So says Mr William Nothdurft in a book that will strike a chord with exporters everywhere, particularly on the eve of the launch of one of the UK's most ambitious export promotion campaigns - to be called North America Now.

Details of the US trade campaign - expected to include unique and innovative government initiatives - will be unveiled by the Department of Trade and Industry tomorrow. It will be launched at a time of fierce debate over how governments should best help exporters. Britain is not alone in discovering that sustained non-inflationary growth is better driven by exports than domestic demand.

Nor is it alone in worrying about widening trade gaps. Across the Atlantic, the infant administration of President Clinton is obsessed with the link between trade and jobs. The Australian government is reviewing the services it offers exporters. Export promotion is in vogue.

A core worry is that so few exporters account for such a large proportion of exports. In the UK, the top 50 companies account for about 44 per cent of visible exports totalling Pounds 108m last year. As a result, export promotion efforts are invariably targeted at smaller companies, often with limited success. At the same time, however, there is widespread concern that government efforts to aid exporters often miss the mark. Trade missions are often dismissed as 'jollies' - backing for companies to attend trade fairs is attacked as unco-ordinated.

Government efforts have targeted the 'export-willing', but have been less successful in pinpointing the 'export-ready'. Even export campaigns have been questioned. Mr Graham Bannock, a consultant to the DTI on a number of trade issues, and author of a government report on exporting, says: 'They don't generate much in the way of exports. But it's terribly difficult to prove anything convincingly because of the wide variety of other factors that can effect export performance over a period of time.'

Business leaders such as Mr Simon Sperry, chief executive of the London Chamber of Commerce, say there is 'disarray' on the delivery mechanism for export services. He says there are too many agencies - including Enterprise Agencies, Local Employer Networks, Training and Enterprise Agencies and One-stop Shops - competing for funding, and in the end not providing a quality job. At the Institute of Export, Mr Ian Campbell points to export-active organisations such as Tecs, the Institute of Freight Forwarders, the Confederation of British Industry, Institute of Marketing, chambers of commerce and the Institute of Directors, and asks: 'When did they last meet jointly, or co-ordinate efforts? We need a more co-operative corporate structure.'

Mr Campbell notes that the budget of the British Overseas Trade Board last year amounted to Pounds 173m - 'enough to run the health service for 25 hours'. Of this, Pounds 123m goes on staff salaries at the DTI and their equivalents in Scotland Wales and Northern Ireland, and on payments to embassies abroad for commercial services.

Apart from concern that too little money has been budgeted for export promotion, there are criticisms of the lack of continuity at the head of the DTI. It has had 16 ministers in 24 years, with just three of them lasting beyond two years.

Nevertheless Mr Michael Heseltine, trade and industry secretary, and Mr Richard Needham, a junior DTI minister, appear to have impressed industry with their early efforts to tailor government activities to meet exporters' needs. For a country in which exports account for 18 per cent of gross domestic product, many industrialists would say this is long overdue.

Defining his export promotion strategy yesterday, Mr Needham identified three prongs - services to improve competitiveness and the exportability of British products, particularly in industrial export markets; aid to the capital goods industry to help them take opportunities in developing country markets, with a target of raising capital goods exports from Pounds 10bn in 1993 to Pounds 20bn by 2000; and the protection of British trading interests in forums such as the General Agreement on Tariffs and Trade and in bilateral trade conflicts over products like steel, cars, procurement, or on taxation of international companies.

What is distinctive in Mr Needham's strategy is a conviction that export promotion starts with private industry, and at the regional level.

GB United Kingdom, EC P99 Nonclassifiable Establishments P9611 Administration of General Economic Programs MKTS Foreign trade CMMT Comment & Analysis P99 P9611 The Financial Times London Page 8 787
Aston Martin to boost output with 'cheap' model Publication 930303FT Processed by FT 930303 By JOHN GRIFFITHS

ASTON MARTIN Lagonda, the maker of luxury sports cars taken over by Ford in 1987, yesterday unveiled a new model intended to quadruple production to 800 cars a year in 1995.

The company said the car - named the DB7 - would cost 'less than Pounds 80,000,' which is some Pounds 50,000 less than the cheapest of Aston Martin's model range. First-year production is expected to be around 300 units.

The DB designation - the initials of former company owner Sir David Brown - is being revived for the first time in 20 years. It re-establishes a link with a long line of previous DB models, the most famous of which was almost certainly the DB4 which starred alongside Sean Connery in early James Bond films.

Aston Martin's 'cheap' DB7 model will mark a radical departure from its past on several industrial fronts.

The new model will be built at a separate factory in Oxfordshire by a workforce of 250, instead of at the company's main facilities in Newport Pagnell, Buckinghamshire. The Buckinghamshire plant now employs 260 people making 200 Virage and Vantage models a year at prices from Pounds 125,000 to Pounds 175,00.

The main design and development work on the DB7, which has a top speed potential of more than 160mph, has been contracted out to TWR (Design), part of the TWR group run by Mr Tom Walkinshaw based in Oxford. It develops and manufactures Jaguar's high-performance sports and racing cars. Jaguar itself is wholly owned by Ford.

A new company, Aston Martin Oxford, has been formed to operate the facility at Bloxham, Oxfordshire, in which TWR has taken a 25 per cent stake. The majority 75 per cent is held by Aston Martin Lagonda.

The DB7's in-line six-cylinder 3.2 litre supercharged engine, although allocated to Aston Martin's use only, uses a block originally developed - but not used - by Jaguar. It is expected to be assembled by Jaguar under contract at its Radford engine plant near Coventry.

The car's bodies are to be supplied by Motor Panels, the Coventry-based components group.

A wholly-owned subsidiary, Aston Martin sales, has been formed to oversee an expansion of Aston Martin's worldwide dealer network.

Aston Martin has only 37 dealers at present, but several times this number are expected to be needed to handle the new model. The cars are to go on sale in Europe initially, starting in April next year, and will go on sale in north America in 1995.

The Bloxham facility is being taken over from Jaguarsport, a joint venture company between Jaguar and TWR which has been responsible for building the Pounds 400,000-plus Jaguar 220 sports car. Production of these is scheduled to be completed by the end of this year.

Aston Martin refused yesterday to comment on the size of investment required for the DB7 project.

Mr Walter Hayes, the former vice-president of Ford of Europe who is now Aston's executive chairman, has made no secret of his ambitions to restore Aston Martin's position in the world luxury sports car sector. Before being bought by Ford it had several brushes with receivership, and lacked the resources for adequate new model programmes.

Aston Martin Lagonda Peugeot Talbot Motor GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies COMP Company News TECH Products PEOP Labour P3711 The Financial Times London Page 8 574
Republicans ponder Clinton plan: Little resistance to economic proposals among divided opposition on Capitol Hill Publication 930303FT Processed by FT 930303 By GEORGE GRAHAM WASHINGTON

PRESIDENT Bill Clinton yesterday was due to hold hours of meetings with his Republican opponents on Capitol Hill. Given the extent to which they have attacked his economic plan for raising taxes too much and cutting spending too little, the visit might seem a foolhardy running of the gauntlet.

However, the Republicans have had so little success in agreeing on a strategy to counter the Clinton plan that the president seemed likely to emerge unscathed.

Senator Robert Dole, the Republican leader in the Senate, said he and his colleagues had no plans to insult or criticise the president, but were reluctant to offer specific proposals for amending Mr Clinton's plan unless they received some assurance that they would be considered seriously.

'If we come up with some alternatives, will he seriously negotiate those, or are we just playing games?' Mr Dole asked yesterday morning.

Ms Dee Dee Myers, the White House press secretary, responded that Mr Clinton would be more than happy to entertain specific ideas from the Republicans for spending cuts.

'There's obviously some philosophical disagreement between the president and the Republican leaders. That doesn't mean he is not willing to listen to their specific suggestions to add additional spending cuts or make the plan better,' she said.

The White House has so far concentrated on ensuring a reasonable degree of party loyalty among Mr Clinton's Democratic supporters, who hold majorities in both the House and the Senate. This is likely to be enough, at least to secure an early budget resolution containing the broad outlines of Mr Clinton's plan.

Mr Robert Michel, the Republican leader in the House, concedes that he will probably not be able to win over enough Democrats to block passage.

But when Congress starts to consider the plan in detail this summer, Mr Clinton may need Republican votes to counter Democratic defections, particularly to ensure the survival of cuts in agricultural subsidies that are popular with many rural congressmen.

The Republicans, however, remain deeply split over how to react to the Clinton plan.

This split is partly over tactics, between those who believe that their job is to ensure that the Clinton plan passes in a form that is as unobjectionable as possible, and those who argue that the task of the opposition is to oppose.

But it is also over ideology -between the traditional deficit hawks, who want to concentrate on proposing deeper spending cuts than Mr Clinton has included, and the supply side idealists, who insist that cutting taxes is the only answer.

If they cannot come up with a persuasive response, they could be outflanked by public support for Mr Clinton's proposals, which have won the approval of 59 per cent of those questioned last week for a Washington Post-ABC News poll.

Most of those questioned said the Clinton plan would hurt them personally, but 62 per cent believed, nevertheless, that it would help the economy. And although more than two thirds felt Mr Clinton was not doing enough to cut the deficit or reduce government spending, a majority also wanted him to go further in taxing the rich and stimulating the economy.

US United States of America P9611 Administration of General Economic Programs GOVT Government News P9611 The Financial Times London Page 6 567
Coal strike over Publication 930303FT Processed by FT 930303 By LAURIE MORSE CHICAGO

More than 5,000 US coal workers employed by Peabody Coal, subsidiary of Hanson, the UK-based materials conglomerate, agreed yesterday to end their month-long strike, writes Laurie Morse in Chicago. Work will resume tomorrow.

Peabody Coal US United States of America P1221 Bituminous Coal and Lignite-Surface PEOP Labour COMP Company News P1221 The Financial Times London Page 6 70
NY bomb will cost Dollars 700m for first week Publication 930303FT Processed by FT 930303 By KAREN ZAGOR NEW YORK

NEW YORK last night put the economic dislocation costs of the bombing of the World Trade Centre, which killed five people, at nearly Dollars 700m (Pounds 493m) in the first week alone, writes Karen Zagor in New York.

The figures, published by New York city comptroller Elizabeth Holtzman, include Dollars 360m in immediate short-term costs of repairing the buildings and business losses. The cost of the first week is estimated at Dollars 332m, with a cost of Dollars 90m for Monday and declining by about 10 per cent each day as businesses find alternative means of operating. This would bring cumulative costs to Dollars 887m if the World Trade Centre towers reopen by March 15.

Ms Holtzman said the biggest economic impact appears to be in terms of lost business. Companies may attempt to recoup losses by making claims against the New York Port Authority 'but to the extent that such payments reduced the Port Authority's ability to invest in the region's transportation infrastructure, that would hurt the region'.

US United States of America P6221 Commodity Contracts Brokers, Dealers P6231 Security and Commodity Exchanges P9229 Public Order and Safety, NEC RES Facilities COSTS Service costs P6221 P6231 P9229 The Financial Times London Page 6 223
Mexican air traffic control deal upheld Publication 930303FT Processed by FT 930303 By DAMIAN FRASER and STEPHEN FIDLER MEXICO CITY, LONDON

FIVE multinational companies which protested against the award of a Dollars 21m (Pounds 15m) contract to install a new air traffic control system in Mexico have lost a battle to have the contract overturned.

Mexico's government watchdog announced last month that it had found no irregularities in the contract tender and rejected the complaints.

The five - IBM Air Traffic Control, Calmaquip of Miami, Raytheon's Canadian subsidiary, Siemens Plessey Electronic Systems and Nissho Iwai - had complained that an initial tender offer for the contract was unjustifiably cancelled by the Mexican Ministry of Transport and Communications. It said none of the bids complied with the contract requirements, a statement contradicted by each company.

Mr Kaveh Moussavi, an agent then acting for IBM, further claimed that three men, whom he took to be government officials, asked him for Dollars 1m to secure the contract. He refused to pay and 10 days later the tender offer was cancelled.

Mexico's General Comptroller of the Federation investigated the complaints lodged by the five companies for several weeks before concluding that the contract was justifiably awarded to Thomson of France and Alenia of Italy in a second tender.

In supporting its case, the comptroller showed excerpts from an independent report by the Canadian subsidiary of Martin Marietta of the US, which indicated where the losing companies had not complied with the original specifications in the first tender. The comptroller also said that it was unable to pursue Mr Moussavi's allegations, because he had offered no names or evidence of his encounter.

Mr Moussavi, however, says the government investigation into his claims was perfunctory. He was denounced on pro-government television and threatened with prison by the minister of transport and communications, actions which he said would deter future whistle-blowers.

The investigation has been criticised by others. A foreign diplomat said that a 'major weakness' in the government's investigation was that the comptroller was limited to looking at procedure and rules, and not at the quality of the different technologies.

Calmaquip maintains that it complied with the required specifications. Mr Armando Paz, its chief financial officer, has demanded to see the background papers of the Martin Marietta report.

Complaints by foreign companies about the awarding of contracts are not rare in Mexico: the comptroller reports there were 400 last year, about 1 per cent of all government contracts.

The number of complaints may reflect in part differences in business practices in Mexico and the US. As the diplomat said: 'In the US and Canada performance details (of the technology) are more significant than the absolute adherence to the letter of the contract. In Mexico any deviation from code, however unimportant, can lead to disqualification.'

However, such deviations are sometimes overlooked if a company establishes good relations with those issuing a contract, according to a businessman representing a big British company in Mexico. 'In Mexico, a decision is often based on who they know and trust, so good contacts can be invaluable. While I do not pay bribes, our Mexican agents can share their commissions.' He believed this was common practice.

Encouraged by the proposed North American Free Trade Agreement, more foreign companies are contemplating business in Mexico.

IBM Air Traffic Control Calmaquip Raytheon Siemens Plessey Electronic Systems Nissho Iwai MX Mexico P3812 Search and Navigation Equipment MKTS Contracts GOVT Legal issues P3812 The Financial Times London Page 6 582
World Trade News: Clinton falls quiet about minivans - The campaign hit that was always out of tune Publication 930303FT Processed by FT 930303 By NANCY DUNNE

AS presidential candidate, Bill Clinton took a stand on minivans, attacking the 'Dollars 300m trade break' given to Japan in 1989, when the Bush administration declined to raise the US tariffs on minivans to 25 per cent.

Nowadays, Mr Clinton does not talk about minivans. The minivan controversy is not likely to appear on the list of American trade priorities, which is due to be released this week by the Office of the US Trade Representative. Nor did it receive a mention when the president gave what was billed as a definitive address on trade and international economics in Washington last Friday.

In fact, Mr Clinton could be in the process of backpedalling from his hawkish rhetoric on this particular issue.

During the campaign, Mr Clinton - intentionally or not - seemed badly briefed on minivans. He seemed convinced that the Bush administration had succumbed to lavishly-financed Japanese lobbyists and reclassified multi-purpose vehicles as cars, when they had always been trucks, in order to give the imports a lower tariff rate.

Although the reverse was closer to the truth, Candidate Clinton's tune played like a symphony in Detroit.

The US tariff on light trucks has been 25 per cent since 1964, when President Lyndon Johnson raised the duty in the infamous 'chicken war' to punish West Germany. Later, when minivans and sport-utility vehicles became popular, it was debatable whether, in fact, they should be classified as cars - with a 2.5 per cent tariff - or trucks.

After much controversy, the US Treasury Department in 1989 ruled that two-door multipurpose vehicles generally would be classified as trucks, because their principal purpose could be described as the transport of goods.

Four-door multipurpose vehicles were classified as cars - as they had been previously - because they were clearly designed for transporting people, the Treasury said. Vans with side windows and rear seats to accommodate at least two people were deemed cars.

This decision raised - rather than lowered - the number of multipurpose vehicles which were classified as trucks, the Treasury said at the time.

In 1989, about 239,000 minivans and sport utility vehicles entered the US. About 44 per cent were classified as trucks and 56 per cent as cars. Under the new definitions, 62 per cent would have been classified as trucks and 39 per cent as cars.

As a result of the ruling, US manufacturers have been able to retain such a dominant share of the market, that the US International Trade Commission found itself unable to sustain a finding of 'injury' last year, when the domestic producers tried to raise the tariffs through a dumping action.

Having failed in that quarter, Detroit tried to secure the entire market through legislation.

A bill to raise the tariff made it through the House, but was stopped by the Senate Finance Committee, headed by the then Senator Lloyd Bentsen.

Mr Bentsen is now the Treasury secretary, in charge of the Customs Service, which makes him a key player on this issue, as well as many others. The Treasury is said to have produced four options: doing nothing; raising all the tariffs for minivans and sports utility vehicles to 25 per cent; establishing a new tariff classification; or sending the whole matter back to Congress.

'It has been kicked down to working group level,' said one closely connected lobbyist, who called the controversy 'a real tar baby'. She continued: 'The administration has to decide if this is the issue they want to go to the mat on.'

What happens next could depend on who gets the recommendation. Will it be the Bill Clinton who apparently found the minivan issue useful during the campaign to blunt criticism for his support of the North American Free Trade Agreement?

Will it be the president who has railed against Airbus subsidies while supporting research and development subsidies for US manufacturing? Will it be the scrapper who promised not to 'roll over and play dead' for the Europeans?

Or will it be the president who vows not to pursue 'a policy of blame but one of responsibility'? The one who sees as 'the truth of our age' that 'open and competitive commerce will enrich as a nation'.

Bill Clinton is a pragmatist, who recognises the irreversibility of the global economy and insists that open US markets be met by 'comparable' market openings abroad.

It is the pragmatist who last Friday complained that the Uruguay Round 'has dragged on entirely too long'. It is probably the pragmatist who will recognise that a higher tariff on minivan imports will raise new suspicions that the US is really set to pursue a divisive and protectionist course.

US United States of America P3713 Truck and Bus Bodies P9611 Administration of General Economic Programs MKTS Foreign trade GOVT Government News P3713 P9611 The Financial Times London Page 6 833
US new home sales down 13.8% Publication 930303FT Processed by FT 930303 By MICHAEL PROWSE WASHINGTON

US SALES of new homes plunged 13.8 per cent between December and January, but the figures may have been distorted by bad weather, Commerce Department figures indicated yesterday.

The official index of leading indicators - a guide to future economic developments - stagnated in January, a setback after big increases in preceding months.

Analysts said the reports confirmed other recent data suggesting the pace of economic growth had slowed from an annual rate of nearly 5 per cent in the final quarter of last year to an annual rate of perhaps 3 per cent.

Some forecasters, however, are growing more bearish. Mr Allen Sinai, chief economist at The Boston Group, an economic consultancy, said economic growth might dip to an annual rate of only 1-2 per cent in the current quarter, raising doubts about whether or not the upturn can be sustained.

The drop in new home sales to a seasonally adjusted annual rate of 561,000 in January was the steepest in 11 years and left sales at their lowest level in eight months. Sales figures were 17 per cent lower than in January last year, a strong month for the housing market.

However, most of the decline occurred in the north-east and west, regions affected by bad weather conditions. Sales in the south were unchanged and sales in the Midwest dipped only modestly.

Sharp falls in mortgage rates and a recent decline in the 'affordability index' - the ratio of house prices to incomes - are widely expected to underpin the market this year.

Mr Bruce Steinberg, senior economist at Merrill Lynch, the Wall Street brokerage, predicted 'very robust growth in the home-building sector' later this year.

The index of leading indicators rose 0.1 per cent in January after robust increases of 0.7 per cent and 1.7 per cent in November and December.

Components of the leading index moved in opposite directions, with five indicators signalling expansion and six contraction.

The positive indicators included a rise in unfilled orders for manufactured goods, higher prices for sensitive materials and a longer average working week.

US United States of America P1522 Residential Construction, NEC P6531 Real Estate Agents and Managers MKTS Production CMMT Comment & Analysis P1522 P6531 The Financial Times London Page 6 388
World Trade News: EC asks Gatt to probe steel row Publication 930303FT Processed by FT 930303 By LIONEL BARBER BRUSSELS

THE European Commission yesterday announced further moves under the disputes procedure of the General Agreement on Tariffs and Trade to resolve EC-US tensions provoked by Washington's decision to impose preliminary duties on some steel products.

The Commission said it had formally requested consultations under Gatt's anti-dumping code, to check whether US actions on steel were consistent with Gatt rules.

The announcement in Brussels came amid renewed challenges to ways the US Commerce Department calculates alleged material injury to the US steel industry, and extent of EC producer subsidies.

Despite the critical tone, EC officials stressed that Brussels intended to avoid escalating the steel dispute and was deliberately avoiding talk of retaliation.

The consultations under Gatt aimed to 'clarify' rather than reach a final agreement on steel subsidies, they said.

One way of avoiding definitive anti-dumping duties would be for Gatt members to forge a multilateral steel agreement, phasing out steel tariffs in return for banning most subsidies. The US government could then ask US steel producers to drop their complaints against foreign producers.

The US International Trade Commission will vote on whether the steel industry has been injured on July 27.

QR European Economic Community (EC) US United States of America P331 Blast Furnace and Basic Steel Products P9721 International Affairs GOVT Government News P331 P9721 The Financial Times London Page 6 241
World Trade News: EC and Japan fail to agree car quotas - Political solution on exports 'now more likely' Publication 930303FT Processed by FT 930303 By MICHIYO NAKAMOTO TOKYO

THE EC and Japan failed to agree on quotas for Japanese car exports to the EC, after two days of negotiations which closed in Tokyo yesterday.

The failure to reach an agreement increases the possibility that the negotiations on whether Japan should reduce its car exports to the EC, and to what extent, might be settled by a 'political' solution, according to an official of the EC Commission.

'There is a recognition on the two sides that 1993 will be a year of contraction of the EC automobile and light commercial vehicle market,' Mr Robert Verrue, director in charge of the internal market and general affairs at the Commission, said in Tokyo yesterday.

The EC and Japan have agreed to monitor Japanese vehicle exports to the EC to pave the way for a smooth transition to unrestricted exports by the year 2000. Until then a quota based on the outlook for the EC vehicle market would be used to restrict Japanese exports to the EC.

However, the two sides have not been able to agree on the outlook for demand in 1993. The EC has said demand in the European market would fall considerably from 1992, while Japan had, until recently, been forecasting that the EC market would expand in 1993.

Japan now accepts that demand will fall this year, but the EC, which in December had forecast a decline of about 2.6 per cent in registrations, now believes it will fall even further, by 4-6 per cent.

The EC's stance is that since market demand is falling Japan should share the burden of cutting supply by reducing the level of its exports from 1.19m units in 1992. 'Otherwise we would fear that markets would be under strains and sometimes under excessive strains,' Mr Verrue said.

There is disagreement, in particular, on the forecast for the German market, which because of its size would have a considerable impact on the overall quota.

The Commission was careful to emphasise that while it took into account all factors, including the level of Japanese local production in the EC, in arriving at a market forecast, the negotiations with Japan on a quota concerned Japanese exports alone and not cars made in the EC.

As a result of the failure of the talks, the two sides will meet again, possibly within the month, to continue their talks, but Mr Verrue emphasised that there was likely to be only one more meeting.

The state of the vehicle market in 1993 was expected to be so bad that unless agreement was reached 'the way the burden would be shared. . . would in the end be subject to a political decision,' Mr Verrue said.

US United States of America JP Japan, Asia P9611 Administration of General Economic Programs P3711 Motor Vehicles and Car Bodies GOVT Government News P9611 P3711 The Financial Times London Page 6 507
World Trade News: US 'in no hurry' over China talks Publication 930303FT Processed by FT 930303 By TONY WALKER BEIJING

CHINA and the US made some progress this week in talks on terms for China's entry to the General Agreement on Tariffs and Trade, but accord remains a 'long way off,' according to the chief US negotiator.

Mr Douglas Newkirk, assistant US trade representative for Gatt, said after two days of talks that China had stepped back from previous understandings on entry terms for the world's fair trade regime.

Among these sticking points is China's apparent unwillingness to accept a safeguards system to prevent such developments as sudden surges in exports that might swamp the domestic markets of Gatt signatories. China is also lukewarm about committing itself to a full market economy as an eventual goal.

Mr Newkirk said that before formal negotiations were suspended in 1989 - talks were frozen in protest at the army crackdown on pro-democracy activists - China had agreed to both the safeguards and market economy provisions. Discussions this week also focused on US demands that China commit itself to a single national trade regime, full transparency in the publication of its trading regulations and the gradual elimination of non-tariff barriers.

Western officials say that China has made significant progress in liberalising trade policies, but much more needs to be done to improve market access for foreign business. They see the Gatt negotiations as a useful device to push the Chinese to go further.

Mr Newkirk said the US was 'not in any hurry' to conclude an agreement. 'We're prepared to go as fast or as slow as they're prepared to go,' he declared. The US made it clear that that unconditional Most Favoured Nation status for China was non-negotiable. The US government is obliged by Congress to review China's human rights record each year before granting MFN.

The US official's predictions of slow progress towards Gatt accession for China are likely to disappoint and frustrate Chinese officials who had been predicting an early agreement.

CN China, Asia US United States of America P9611 Administration of General Economic Programs P9721 International Affairs GOVT Government News P9611 P9721 The Financial Times London Page 6 367
Tunisia pulls off an economic turnaround: But President Ben Ali faces a demanding test of his skills Publication 930303FT Processed by FT 930303 By FRANCIS GHILES

IN sharp contrast to its neighbours, Tunisia has quietly and steadily pulled off an economic turnaround in the last six years.

But as it completes the first phase of reform, aimed at curbing the country's serious economic imbalances, the Tunisian government faces real obstacles to further adjustment. Stabilisation policies are now giving way to a dismantling of the command economy, and with liberalisation is coming resistance.

Strict austerity since 1986 has brought the budget deficit down from 6.7 per cent of GDP in 1984 to 2 per cent last year, while inflation is down to 6 per cent from a high of more than 10 per cent.

Subsidies on food staples and agricultural products have been cut from 3 per cent of GDP to 2 per cent over the last six years, with remaining subsidies now targeted at poorer Tunisians.

Meanwhile, economic growth has averaged 6.6 per cent over the past three years, more than three times the rate of population growth.

But, as Mr Aziz Krichen, a Tunisian academic, argues in 'The Bourguiba Syndrome', the real battle to modernise Tunisian society is now being fought in the economic sphere.

Reforms to date have been backed by a steady flow of World Bank loans, worth Dollars 400m (Pounds 281.6m) last year and Dollars 300m in 1993, and have been helped by the country's political stability, which has survived the upsurge in Islamic fundamentalist tensions since Mr Zine El Abidine Ben Ali succeeded Mr Habib Bourguiba as president in November 1987.

Foreign currency restrictions have been lifted, foreign investors no longer require prior agreement from the central bank to repatriate their capital investments or remit profits, and Tunisians have seen their foreign currency allowances doubled.

Vested interests in the civil service and industry are now to be challenged by reforms aimed at raising industrial productivity, enforcing quality control and boosting exports.

Together with the potentially destabilising impact of religious extremism in the region, the new phase of reform amounts to the most demanding test of President Ben Ali's skills since he took office nearly five years ago.

One of the main obstacles to reform is a banking system which bears all the hallmarks of a command economy: it is overstaffed, has accumulated many bad loans and is often run by former hierarchs of the Central Bank who have little understanding of the needs of the economy.

Recent economic news has been good. Hard currency receipts from over 3m tourists were worth close to TD1bn last year, an increase of more than 50 per cent on the 1991 figure, as the country attracted Europeans who, in more settled times, travelled to Yugoslavia. Three good harvests have also played their part.

But ministers are concerned about the growing trade deficit, which is estimated to have increased last year from TD1.35bn to TD1.85bn. Imports rose faster than expected as Tunisian businessmen took advantage of more liberal import policy - with 85 per cent of imports now free of duties. Simultaneously, export growth slackened, although some factors such as the Mediterranean glut of olive oil, of which Tunisia is a major exporter, are temporary. Others are more structural. Demand in the EC, Tunisia's principle market, has weakened, most notably for leather and textiles.

Younger Tunisians are pushing the government to become more accountable and to stop changing rules abruptly and without explanation, while managers are seeking greater freedom. These reformists do not hide their resentment at what they consider the arbitrary methods of customs and tax officials, who one respected Tunisian businessman bemoans as having 'the mentality of the tax inspector who believes every private investor is out to defraud the state'.

Such attitudes, they argue, act as a brake on investment, particularly at a time when domestic interest rates stand at 15 per cent.

Overall, however, investment is increasing, from TD2.7bn in 1990 to TD3.46bn last year, TD3.3bn of which is domestic. With public investment reigned in by government efforts to cut budget and public company deficits, private investment, worth TD1.5bn last year has now overtaken the contribution made from public funds. Foreign investment has not grown overall, the bulk of it going to the energy sector but the volume of funds going into manufacturing has surged from TD25m in 1988 to TD52 last year. Well known international names such as Alcatel, Siemens, BASF, Ericsson, Goldstar and Sony are now manufacturing in Tunisia. The US corporate presence has traditionally focused on the oil sector, but Sara Lee in the textile sector and AT&T in telecommunications are now considering setting up in Tunisia, where labour costs are, on average, one quarter of those in the EC.

Creating new jobs is now vital for both economic and political reasons as unemployment remains fertile breeding ground for religious fundamentalism.

TN Tunisia, Africa P9611 Administration of General Economic Programs P9311 Finance, Taxation, and Monetary Policy GOVT Government revenues ECON Balance of payments ECON Balance of trade P9611 P9311 The Financial Times London Page 4 851
UK business welcomes India's budget boost for trade Publication 930303FT Processed by FT 930303 By MICHAEL CASSELL, Business Correspondent

'IT IS one thing for the Indian government to talk about trade liberalisation and opening up its markets to foreign competition. Let's hope their customs officers get the same message.'

This note of scepticism, in response to last weekend's budget package from Mr Manmohan Singh, India's finance minister, came yesterday from the chief executive of a Yorkshire-based textile company with years of experience of trying to sell in India.

The businessman, anxious not to offend, said experience showed central government initiatives did not necessarily have much relevance to those trying to win business on the ground in India.

'Unless the message that the rules are changing permeates right down through India's bureaucracy, no budget initiatives intended to boost trade will be any use,' he suggested.

Despite such reservations, India's decision to go for an expansionary budget has been well received in the UK. Plenty of business is at stake.

Mr Howard Davies, Confederation of British Industry director-general, who went with Mr John Major, UK prime minister, and a business delegation to India in January, called the budget measures 'encouraging'.

Although import duty cuts seemed modest, and no action had been taken to reduce dividend withholding taxes (higher than in other countries), the budget made clear New Delhi's determination to encourage more overseas investment.

Figures compiled by the Department of Trade and Industry show Britain sold Pounds 945.5m-worth of goods to India in 1992, including industrial machinery, power generating equipment, organic chemicals, metals, scientific instruments and transport equipment.

In return, India exported to the UK products worth Pounds 862m during 1992, including yarns, textiles, finished clothing, footwear, tea, cocoa and animal feedstuffs.

Expectations are high that trade in both directions can expand significantly. The January visit led to the Indo-British Partnership Initiative, intended to foster political and business links between the two countries.

Mr Robert Evans, British Gas chairman, who is leading the new organisation, welcomed the budget. The measures would advance the considerable potential for trade with India and provide a 'kick start' to the initiative, he declared.

British Gas is anxious to expand business in India. The company has just overcome competition from Europe and Asia to win exclusive rights from the Gas Authority of India to set up a Pounds 35m natural gas supply system in Bombay. A spokesman said India's consolidation of liberalisation reforms should further help business prospects.

The power generation sector also welcomed the budget measures. Mr Graham Hadley, a director of National Power, said he was encouraged by the specific budget references to the power industry, which reflected the government's acknowledgment of that sector's role in India's economic development.

He took a 'bullish' view of the proposals. 'The package offers further evidence the Indian government takes seriously the need to change the rules to attract inward investment, particularly for capital-intensive and infrastructure projects.'

Unilever, the Anglo-Dutch conglomerate which already has extensive food, tea and personal product businesses in India, said the budget offered 'very positive vibes' for future business. The government was 'clearly on the road' to further liberalisation and encouragement of trade growth.

Companies such as GEC-Alsthom, the Anglo-French engineering group which has recently won a deal for a Pounds 140m high-voltage converter station to link regions of India's electricity system, are also keen to develop new markets there, and will welcome measures intended to make access easier.

GB United Kingdom, EC IN India, Asia P9611 Administration of General Economic Programs P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs MKTS Foreign trade GOVT Government News ECON Balance of trade P9611 P9311 P9721 The Financial Times London Page 4 614
Jobless rate in Japan falls to 2.3% Publication 930303FT Processed by FT 930303 By CHARLES LEADBEATER TOKYO

JAPAN'S unemployment rate unexpectedly fell in January to 2.3 per cent, although government economists cautioned that the fall was likely to be temporary.

The Management and Co-ordination Agency said yesterday the seasonally adjusted unemployment rate in January fell from 2.4 per cent in December. The fall largely reflects a strong growth in employment in the construction sector which is enjoying a surge in orders from public works programmes.

The main federation of construction contractors yesterday announced an 8.6 per cent increase in orders in January compared with last year, the first rise in order intake for 10 months.

It is likely, however, that unemployment will grow over the next few months as manufacturers attack their costs by laying off workers.

In the past two weeks leading employers such as Nissan, the carmaker, and NTT and KDD, the telecommunications groups, have announced plans for sweeping job reduction programmes.

Toyobo, the textiles company, yesterday announced it was suspending production at 10 of its factories for between four and eight days this month to help reduce production by 20 per cent. About 3,000 factory workers will be paid to stay at home during the shutdowns.

The aggregate employment figures disguise subtle shifts in the character of the workforce which are helping to restrain the growth in officially recorded unemployment.

The ratio of job offers to applications rose from 0.92 in December to 0.93 in January, which means there were 93 job offers for every 100 people looking for work.

The improvement in the ratio was mainly caused by a sharp drop in the number of people looking for jobs, which fell by 3.1 per cent between December and January as many women withdrew from the workforce. Manufacturers, in particular, are cutting deeply into recruitment with a 28 per cent fall in job offers.

Employment rose by 0.5 per cent, the smallest increase since 1987, with a 6.3 per cent increase in construction employment and a 1.5 per cent rise in the service sector offset by a 1.5 per cent fall in manufacturing.

A substantial part of the rise in service sector employment is accounted for by a growth in part-time jobs at the expense of full-time jobs.

JP Japan, Asia P9441 Administration of Social and Manpower Programs STATS Statistics ECON Employment & unemployment P9441 The Financial Times London Page 4 403
US longer in Somalia Publication 930303FT Processed by FT 930303 By REUTER MOGADISHU

US forces may have to stay in Somalia in large numbers for another two months before the United Nations takes command of military operations, the US military said yesterday, Reuter reports from Mogadishu.

The process could take even longer if the UN Security Council does not pass a resolution setting up a peacekeeping force for Somalia this week, Colonel Fred Peck said.

The US, which has just over 15,000 troops in Somalia, plans to contribute 5,000 to the new UN force which will take over the task of protecting relief supplies, disarming militias and encouraging reconciliation.

Mr Robert Oakley, US special envoy to Somalia, declined to predict how long it would take to complete the process of transition from Unitaf to Unosom 2, the slightly smaller UN force that will take over.

US United States of America SO Somalia, Africa P9711 National Security P9721 International Affairs GOVT Government News P9711 P9721 The Financial Times London Page 4 169
Relations between UK and Iran dip further Publication 930303FT Processed by FT 930303 By ROGER MATTHEWS, Middle East Editor

THE sharp deterioration in diplomatic relations between Iran and Britain, caused mainly by the row over the author Mr Salman Rushdie, is threatening to spill over into the commercial field.

The decision by Iran this week to begin charging Pounds 504 for visas for UK businessmen visiting Tehran is posing doubts over future trade missions, while the latest British restrictions on the export of sensitive material may spark further Iranian retaliation.

Mr Gholamreza Ansari, the Iranian charge d'affaires, was called to the Foreign Office yesterday to be told that the Department of Trade and Industry would not approve licences for items on international lists of banned military or atomic energy equipment.

Iran has strenuously denied accusations that it is seeking to build nuclear weapons, but admits it would like to acquire nuclear technology for civil purposes. It also claims its military re-equipment is much smaller than other countries in the region.

The Iranian embassy in London said yesterday the decision to charge Pounds 504 for a visa, as against the Pounds 14 it levied previously, was direct retaliation for a similar rise in charges made by Britain last year.

British officials insist however that the Pounds 20 charged for a visa in Tehran is in line with other European countries. The change made by Britain was to calculate the visa charge at the free market rate of exchange, instead of the old official rate. This meant that in terms of Iranian rials the cost went up from R1,200 to R50,000. A central economic reform instigated by President Ali Hashemi Rafsanjani has been to move more of Iran's foreign transactions on to the free market rate of exchange.

An Iranian official said the new charge would apply to everyone applying for a visa in London, but there might eventually be exceptions.

The decision is causing the London of Chamber of Commerce to reconsider a trade mission to Iran planned for May. Some 15 companies have signed up for the trip with another 25 registered as possible participants.

In January, the Energy Industries Council was forced to abandon a similar mission to Iran when approval for visas failed to materialise.

UK and Iranian officials say the row over visa charges is distinct from the clash over the death penalty passed by Iran on Mr Salman Rushdie over the publication of his book The Satanic Verses.

The British government's decision to give greater publicity to Mr Rushdie's plight has clearly angered the Iranians. In the past fortnight, Ayatollah Ali Sayed Khamenei, Iran's spiritual leader, has thrown his weight behind the fatwa, or religious ruling, against Mr Rushdie and this was later supported by the Iranian parliament. The issue will be given further prominence when Mr John Major, the UK prime minister, carries out his promise to meet Mr Rushdie.

Iran has been an increasingly attractive market for Britain, with exports up by 20 per cent to Dollars 840m (Pounds 577m) in the first nine months of last year. But with Iran falling further behind in paying letters of credit and oil revenues static, ministers in Tehran have warned of a cut of up to 50 per cent in imports for the financial year beginning March 21.

GB United Kingdom, EC IR Iran, Middle East P9611 Administration of General Economic Programs P9721 International Affairs GOVT Government News P9611 P9721 The Financial Times London Page 4 579
Clinton urged to step up pressure against China Publication 930303FT Processed by FT 930303 By TONY WALKER BEIJING

A New York-based human rights organisation has urged the new US administration to increase diplomatic and economic pressure on China to bring about political change.

Asia Watch, a division of Human Rights Watch, said that President Bill Clinton should ensure that 'clear and verifiable human rights conditions' be attached to any renewal of China's Most Favoured Nation trading status.

In a report, titled 'Economic Reform/Political Repression', Asia Watch denounced China's attempts to present a more benign face to the world, saying there was little sign of genuine political liberalisation to match economic reforms.

In spite of China's 'smile offensive' thousands of pro-democracy activists remained in prison and political opposition to the Communist party was heavily repressed, the report said.

Congress requires the president to decide annually whether China's human rights record warrants continuation of MFN. Mr Bush continued to approve MFN, arguing this would strengthen reform elements in China.

US United States of America CN China, Asia P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 4 187
Traffic turned away at Gaza checkpoint after Monday's stabbing attack Publication 930303FT Processed by FT 930303

Israeli troops at a Gaza checkpoint motion a taxi to turn back after the Strip was sealed following Monday's stabbing attack in Tel Aviv by a Gaza resident which left two people dead and nine wounded. Later Palestinians killed an Israeli who drove into a refugee camp. Meanwhile in Cairo, the Arab League called for immediate international action to protect Palestinians in the occupied territories

IL Israel, Middle East P9229 Public Order and Safety, NEC P9711 National Security GOVT Government News P9229 P9711 The Financial Times London Page 4 104
Floating rupee rises in forex market Publication 930303FT Processed by FT 930303 By STEFAN WAGSTYL NEW DELHI

THE flotation of India's rupee, announced in the annual budget at the weekend, got off to a smooth start yesterday, with the currency rising modestly against the US dollar.

The rupee closed at Rs31.85 to the dollar yesterday, compared with Rs32.78 at the opening and Rs32.58 at the end of trading last Friday, the last day before Mr Manmohan Singh, the finance minister, disclosed his plan to float the currency.

The government has abolished the former two-tier exchange rate in which exporters and other earners of foreign exchange were obliged to change part of their funds into rupees at a low official rate.

This low-cost foreign currency was used by the government to import oil and other commodities.

In place of the two-tier system, the rupee has been made fully convertible on the trade account, though numerous restrictions remain on Indians acquiring currency for other purposes.

Dealers in Bombay said trading was quiet yesterday with the Indian Oil Corporation, the state-owned oil company and a major importer, staying out of the market.

It was 'a very smooth transition,' said a dealer at the Bank of Baroda, an Indian bank, and quite unlike the hectic trading which prevailed when the two-tier rate system was introduced only a year ago.

Meanwhile, in the stock market, shares continued their post-budget decline with the Bombay stock market's leading share index falling 27.36 to 2,543.82.

However, stocks closed well above the day's low of 2,494.52, indicating that the sharp correction may be over.

IN India, Asia P9311 Finance, Taxation, and Monetary Policy P6231 Security and Commodity Exchanges MKTS Market data P9311 P6231 The Financial Times London Page 4 289
German output continues to fall Publication 930303FT Processed by FT 930303 By CHRISTOPHER PARKES FRANKFURT

GERMANY'S industrial slump is continuing unabated, despite signs of a modest improvement in output during January.

Output is falling by an average 2.5 per cent each month and the construction industry is now the only sector showing any growth, according to figures published by the Economics Ministry yesterday.

Meanwhile, steel output has plunged and details of incoming orders in the engineering business showed further falls in domestic and foreign demand.

Total industrial output in January was 3 per cent higher than in December despite widespread short-time working in the automotive industry, according to the Economics Ministry.

The apparent recovery followed a 3 per cent month-on-month fall in December (corrected from 2 per cent), when most of industry took extended Christmas breaks.

A comparison of production in December and January together with the same period a year earlier showed total output had fallen 6.8 per cent: manufacturing was down 7.7 per cent.

Within this figure, production of capital goods slumped almost 11 per cent, while construction rose 2.5 per cent.

New figures from the VDMA engineering and plant makers association showed new orders in January were 18 per cent lower than a year earlier. Domestic demand fell 24 per cent and new foreign contracts were down 11 per cent.

This sector, second only to the motor industry as an export earner, has now recorded falling orders for almost a year with only slight signs of improvement from overseas markets more than cancelled out by diving domestic demand.

In the three months to the end of January total orders were 13 per cent lower than the comparable period 12 months earlier.

The knock-on effects of this downturn, cuts in the motor industry and the international steel crisis are now wholly apparent in the steel sector, where January output of steel and rolled finished products was 25 per cent and 15 per cent lower than in January 1991.

Other government statistics due out later this week are expected to show further sharp increases in unemployment and falling orders across the whole of manufacturing industry.

DE Germany, EC P9611 Administration of General Economic Programs STATS Statistics ECON Industrial production P9611 The Financial Times London Page 3 376
New car sales may fall by 8-9%, warn carmakers Publication 930303FT Processed by FT 930303 By KEVIN DONE, Motor Industry Correspondent GENEVA

LEADING carmakers warned yesterday that West European new car sales could fall by 8-9 per cent this year with a decline of around 1.1m.

Mr Louis Hughes, president of GM Europe, forecast a drop in new car demand across west Europe to around 12.3m from 13.45m last year.

Mr Hughes forecast a fall in new car sales in four of the five main volume markets, Germany, Italy, France and Spain with only a modest increase in the UK. Sales in the five markets, which account for more than 80 per cent of total west European new car registrations, are forecast to fall by more than 1m units to just under 10m this year.

The most dramatic decline was expected in Germany where new car sales were forecast to fall by 19 per cent to around 3.2m, a loss of almost 750,000 units from 1992, said Mr Hughes.

In Italy, Europe's second largest market, new car sales were expected to drop by 10 per cent to under 2.1m, he said.

Mr Hughes warned that the workforce of GM Europe (Opel/Vauxhall) would be cut by around 3,000 this year following a similar reduction in 1992. GM Europe has a complete halt on the recruitment of hourly-paid workers in its European operations.

GM Europe's core Opel/Vauxhall car and light commercial vehicle operations suffered a 31 per cent fall in net profits last year to Dollars 1.36bn from a record Dollars 1.96bn in 1991, the company said yesterday. However, it remained the most profitable volume car maker in Europe.

The chief executives of Ford and Peugeot issued similarly pessimistic forecasts for European car demand this year, which will add pressure to the continuing disagreement between the European Community and Japan over the level of Japanese car sales in Europe this year.

General Motors Europe Ford of Europe Peugeot XG Europe P3711 Motor Vehicles and Car Bodies P5511 New and Used Car Dealers MKTS Sales P3711 P5511 The Financial Times London Page 3 350
Talks break down after employers refuse 26% rise Publication 930303FT Processed by FT 930303 By JUDY DEMPSEY BERLIN

ARBITRATION talks for east Germany's metal and electrical workers broke down in Saxony-Anhalt on Monday night after Gesamtmetall, the employers association, told IG Metall, Germany's giant engineering union, it would not pay the sector a 26 per cent wage increase.

The breakdown of the talks means that IG Metall will have to decide what room there is for compromise without losing face, or gauge whether its 280,000 members have the stomach for an all-out strike in an industry facing increasing unemployment.

Throughout the talks in the five east German states, Gesamtmetall had offered IG Metall a 9 per cent rise, an increase which is becoming the accepted target in other industrial sectors of the eastern economy. However, IG Metall officials yesterday said such an increase ignored the fact that east Germans had to pay west German prices with east German incomes. It also accused employers of reneging on a contract agreed in March 1991 which would bring east German wages up to west German levels by April 1994.

Wages for eastern Germany's metal, electrical and steel sectors are currently 70 per cent of west German levels. A 26 per cent increase next month would have brought them up to 82 per cent, even though productivity is about 70 per cent below west German levels.

Arbeitgeberverband Stahl, the steel employers association, which yesterday started arbitration talks in Berlin with IG Metall for the steel sector, said it too was prepared initially to offer eastern German steel workers a 9 per cent pay increase, instead of the planned 20 per cent stipulated in the March 1991 contract. A spokesman denied the association was breaking the contract. 'A clause in the contract legally entitles us this year to revise the timetable and wage increases, if economic expectations radically changed from the original agreement.'

But IG Metall believes the employers are not negotiating in good faith. 'What is at stake is the entire principle of collective wage bargaining,' Ms Dagmar Opoczynski, a spokesperson for IG Metall said. 'The employers want to opt out of collective wage bargaining and set their own wage levels in eastern Germany. If they break the wage contract in eastern Germany, they can do it in western Germany,' she said.

IG Metall has responded to the breakdown of talks by organising demonstrations.

IG Metall (Germany) DE Germany, EC P33 Primary Metal Industries P34 Fabricated Metal Products P36 Electronic and Other Electric Equipment P8631 Labor Organizations PEOP Labour P33 P34 P36 P8631 The Financial Times London Page 3 435
Hungary widens net in sell-off campaign Publication 930303FT Processed by FT 930303 By NICHOLAS DENTON BUDAPEST

HUNGARY yesterday set in motion plans to draw most of the population into the country's privatisation programme.

J. Henry Schroder Wagg, the UK investment bank which is to advise on the government's campaign to speed sales and recruit the general public as investors, said Hungary was considering offering millions of small investors concessions, including cheap credit, to buy assets remaining in state control.

Entrepreneurs would be able to buy small state-owned companies, or to invest in shares in a company through Hungary's stock market.

The proposals for popular participation mark a departure for Hungary. Until now it has relied heavily on foreign investment and market pricing. The first phase of privatisation, predominantly involving trade sales to western consumer goods companies, is running out of steam.

Acquisitions by Ferruzzi, Unilever, Nestle, British American Tobacco, Philip Morris and many other multinationals helped give privatisation proceeds of more than Ft100bn (Pounds 80.4m) in 1991-92.

But the frequency of large deals is declining because the most attractive and easily digestible properties in the state's portfolio, like the cigarette makers, have already been sold. Foreign investor interest is now focusing on the utilities, but their privatisation needs to be preceded by time-consuming regulation.

The conservative government is anxious to draw in popular support for privatisation because of a widespread belief that foreigners and state company managers, many of them former communists, have monopolised privatisation. The Hungarian Democratic Forum, the governing party, is given added incentive by its political predicament; elections are approaching in 1994, with the Forum trailing the liberal and socialist opposition heavily in opinion polls.

HU Hungary, East Europe P9611 Administration of General Economic Programs GOVT Government News P9611 The Financial Times London Page 3 297
OECD urges reform of Danish benefits Publication 930303FT Processed by FT 930303 By HILARY BARNES COPENHAGEN

A 'SUSTAINABLE and significant reduction' in Denmark's unemployment rate, currently running at 11.7 per cent on a seasonally adjusted basis, cannot be achieved without reforms of the unemployment benefit system, according to the OECD's annual report on the Danish economy.

A benefit rate of 90 per cent of wages for those at the lower end of the wage scale is too generous and reduces the incentive to seek work, while the benefit period - up to nine years - is too long, says the report.

Changing the system is politically difficult, but 'the pay-off in tackling the problems of high income support and of enforcement would be large in terms of fewer people out of work, higher potential output, and improved public finances,' it says.

The report is optimistic about Danish growth potential. Policies which have produced an inflation rate of only about 1.5 per cent and a balance of payments surplus close to 3 per cent of gross domestic product have laid the foundations for the country 'to resume a sustainable path of further growth,' it says.

But it warns against further relaxation of fiscal policy, which was loosened considerably by the budget for 1993.

The OECD forecasts a 2.1 per cent GDP growth rate for Denmark in 1993, which is slightly higher than the latest Danish government forecast and reflects a higher OECD forecast for export growth.

DK Denmark, EC P9611 Administration of General Economic Programs ECON Employment & unemployment ECON Inflation ECON Balance of payments ECON Gross domestic product P9611 The Financial Times London Page 3 274
Contaminated trees in Frankfurt being sawn down Publication 930303FT Processed by FT 930303

Workers in protective suits saw down trees in a contaminated Frankfurt suburb after a toxic cloud escaped from a Hoechst chemical plant. The clear-up will cost at least DM10m (Pounds 4.2m)

Hoechst DE Germany, EC P28 Chemicals and Allied Products RES Pollution P28 The Financial Times London Page 3 62
Sharp fall in demand for plastics Publication 930303FT Processed by FT 930303 By PAUL ABRAHAMS

PRICES and demand for petrochemicals and plastics in Germany 'fell off the edge of a cliff' in the last quarter of 1992, according to Mr Bryan Sanderson, chief executive of BP Chemicals, the UK group.

A 12 per cent fall in manufacturing output between November and December fed straight through to the plastics industry, said Mr Sanderson. 'The downturn was quick and unexpected,' he added. 'Margins for ethylene are the worst since 1982. Manufacturers are losing hundreds of millions of dollars.'

Mr Sanderson called for urgent rationalisation of the European petrochemical industry. At least three and possibly four ethylene crackers needed to be closed, and three plastics plants mothballed if the industry profitability was to return.

'The Germans are in the wrong place for petrochemicals and polymers manufacturing,' said Mr Sanderson. German producers were disadvantaged by an over-valued D-Mark, high environmental costs, excessive wage and social costs, and a high level of absenteeism, he explained.

'German manufacturers used to compensate from their natural disadvantages by being the most efficient producers. That's no longer possible. It's very difficult to be optimistic about the German economy over the next couple of years.'

DE Germany, EC P2911 Petroleum Refining P2821 Plastics Materials and Resins COSTS Product prices MKTS Market data Sanderson, B Chief Executive BP Chemicals P2911 P2821 The Financial Times London Page 3 236
Russia to join US in relief air-drops to Bosnian towns Publication 930303FT Processed by FT 930303 By MICHAEL LITTLEJOHNS at the UN, AGENCIES and VIRGINIA MARSH NEW YORK, BUCHAREST

RUSSIA said yesterday it would join the US in air-dropping aid into Bosnia-Hercegovina, in a move which would mark unprecedented co-operation between the two cold war adversaries.

Mr Andrei Kozyrev, foreign minister, said he expected Russian planes to fly to Bosnia from Nato airfields. There was no immediate indication of when the operations might be launched or their scale.

US aircraft carried out a third air-drop over Bosnia last night but Mr Les Aspin, US defence secretary, said the missions might be stopped temporarily as more land convoys were being allowed to carry aid into the region.

In New York, meanwhile, UN and European Community negotiators deplored the continuation of heavy fighting in eastern Bosnia while peace talks under their auspices were taking place in the city.

Mr Cyrus Vance and Lord Owen also deplored the fact that relief convoys were still being blocked. They urged measures to enable the wounded to be evacuated and expressed concern about new displacement of civilians.

Their statement was issued after President Alija Izetbegovic of Bosnia raised the matter with the mediators at the outset of his first meeting with them since the talks were transferred from Geneva. On Monday he told reporters in Washington that he was bringing proposals to the UN for a US role in a ceasefire and military disengagement, but no details were available.

There was no indication if or when a negotiating session including all the parties would take place in New York. Mr Haris Silajdzic, the Bosnian foreign minister, has been named to lead the government delegation when Mr Izetbegovic leaves for home. He has said he would remain in New York only two or three days.

Serbs yesterday lifted a week-long blockade of the River Danube which stranded at least 22 ships in ports along the river and halted international traffic, writes Virginia Marsh in Bucharest.

RU Russia, East Europe BA Bosnia-Hercegovina, East Europe P9721 International Affairs MKTS Distribution GOVT Government News P9721 The Financial Times London Page 2 360
Bribe scandals hit Italy's credit ratings Publication 930303FT Processed by FT 930303 By ROBERT GRAHAM ROME

THE spreading corruption scandals affecting Italy's political establishment are beginning to affect Italy's credit ratings.

Standard & Poor's, the US credit rating agency, yesterday announced a downgrading of the rating on Italy's sovereign long-term foreign debt from AA+ to AA. This comes after last Friday's statement from Moody's, the other main international credit rating agency, that Italy's debt was to be placed under review.

The Moody's move provoked an unprecedented joint rebuttal from the Bank of Italy and the Treasury. They accused Moody's of failing to take account of the positive corrective measures introduced in recent months to tackle Italy's public sector deficit.

Yesterday the Italian financial authorities issued no formal response to the S&P move. Even with yesterday's downgrading S&P still rates Italy as a significantly better credit risk than Moody's. If Moody's review results in Italy being downgraded to single A status, then many credit-conscious international investors will cease to buy its bonds.

Standard & Poor's action yesterday was based on a combination of political and economic criteria. The agency said the corruption scandals were weakening the fragile government coalition. The markets, which had reacted nervously to Moody's announcement, appeared to have discounted a move by Standard & Poor's.

The lira was being traded yesterday at L955 against the D-Mark.

Last August, when problems first arose with creditors over payment of debts of Efim, the state holding company placed in liquidation, Moody's downgraded Italian debt from AA1 to AA3. Italy has undertaken with its EC partners, in return for a four-tranche Ecu8bn (Pounds 6.54bn) loan, to reduce the public sector deficit from nearly 11 per cent to 9.3 per cent of GDP this year. The budget envisages raising L93,000bn (Pounds 40.6bn) in taxes and extra revenues, about 5.8 per cent of GDP.

IT Italy, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis GOVT Government revenues P9311 The Financial Times London Page 2 332
Transport ministers in toll roads warning Publication 930303FT Processed by FT 930303 By RICHARD TOMKINS, Transport Correspondent

TRANSPORT ministers from Britain and Germany yesterday warned that car and lorry drivers faced the widespread introduction of tolls on Europe's trunk roads and motorways.

They said raising more money from vehicle owners presented the only realistic prospect of funding the increases in road capacity needed to cope with the forecast growth in European traffic.

Opening a Financial Times transport conference in London yesterday, Mr John MacGregor, UK transport minister, said the challenge to governments throughout Europe was how to finance the new roads their economies needed. He said the UK government would this spring be proposing the introduction of direct charges for the use of inter-urban roads to attract private sector finance into roadbuilding.

Mr Gunther Krause, German transport minister, told the conference that Europe faced a looming 'mobility crisis' because of rapidly rising traffic flows - with Germany, the 'number one transit country', at the centre of it.

The German government, he said, was planning to introduce motorway charges to fund new roadbuilding, so creating the conditions for a privatisation of the motorway network. The budget funds released by the new source of income would be spent on improving the railways.

QR European Economic Community (EC) P4785 Inspection and Fixed Facilities P9621 Regulation, Administration of Transportation GOVT Government News P4785 P9621 The Financial Times London Page 2 235
EC in new agreement on small print in contracts Publication 930303FT Processed by FT 930303 By ANDREW HILL BRUSSELS

THE European Community yesterday gave consumers a new weapon to use against unfair small print in contracts.

EC consumer affairs ministers agreed a directive to outlaw standard contracts weighted against the consumer.

The accord ends 16 years of discussion between member states, and could open a range of previously acceptable agreements to legal challenge, including banks' contracts with customers, package holiday deals which allow tour companies to impose surcharges, and even broad warnings that customers use services 'at their own risk'.

But consumer organisations said yesterday that the new legislation, which will not come into force until December 31 1994, did not go far enough, and was too vague.

They believe it should include a definitive list of illegal clauses, rather than an 'indicative' list, and should cover all contracts, including those negotiated by the consumer.

Ms Monique Goyens, legal adviser to Beuc, the European consumers' organisation, said: 'We are pleased that this directive is almost on the statute books, but it will bring few concrete benefits to any of Europe's consumers.'

Other consumer groups said its main benefit would be to raise consumers' awareness of the dangers hidden in the small print.

Ms Rebecca Evans, barrister with the Consumers' Association in London, said: 'A big piece of legislation coming in will reinforce in the public mind that they are not stuck with the small print, and there are things that companies can't do.'

Mr Jan Trojberg, the industry minister in Denmark, which holds the EC presidency, said the directive would raise minimum consumer protection standards in southern EC countries such as Spain and Portugal.

QR European Economic Community (EC) P9651 Regulation of Miscellaneous Commercial Sectors GOVT Regulations P9651 The Financial Times London Page 2 303
Triffin, far-sighted economist: Obituary Publication 930303FT Processed by FT 930303 By MARTIN WOLF

ROBERT TRIFFIN, who played a major role in the recreation of European currency convertibility after the second world war and correctly diagnosed the critical weakness of the Bretton Woods fixed exchange rate system, died on February 23 in Ostend, Belgium, at the age of 81.

Born in Flobecq, Belgium, Triffin was educated at Louvain and Harvard Universities, becoming a US citizen in 1942. Between 1942 and 1949 he held positions with the Federal Reserve System and the International Monetary Fund. His most important official role, however, was in Paris as special policy adviser at the Economic Co-operation Administration and alternate US representative at the European Payments Union, between 1949 and 1951. Thereupon, Triffin taught at Yale University, before returning to Belgium in 1977 and reassuming Belgian citizenship.

Triffin's main practical contribution to international monetary economics came shortly after the second world war in the establishment of the European Payments Union. The EPU set the European currencies on the path towards currency convertibility and provided a framework for the renewal of multilateral trade within Europe.

Triffin's most important intellectual contribution, however, was his seminal critique of the Bretton Woods system, first published in 1959 and reprinted in 1960 in the most famous of his books, Gold and the Dollar Crisis. Though proved largely right, his fate was to be a Cassandra, unable to persuade policy makers to make the changes that would have preserved a system in whose underlying principles he strongly believed.

Triffin argued that the fundamental flaw in the operation of the international monetary system agreed at Bretton Woods, New Hampshire in 1944 would turn out to be not a shortage of dollars, as most economists had argued, but a glut. Inadequate growth of the stocks of monetary gold would make the world increasingly dependent on rising US dollar reserves, which would have to be supplied through a deficit in the US balance of payments. Sooner or later, however, the US would have to correct its deficit, since the rest of the world would become increasingly unwilling to accept the US currency at a fixed exchange rate.

At that stage, he argued, the world would face a three-fold choice: revaluation of the gold stock; generalised floating; or internationalisation of foreign exchange reserves. Triffin preferred the last alternative. As was probably inevitable, however, the US pre-empted that choice by terminating US dollar convertibility into gold in 1971, a decision that left the world with its subsequent regime of floating exchange rates among major currencies.

BE Belgium, EC P8733 Noncommercial Research Organizations PEOP Personnel News Triffin, R Economist (Belgium) P8733 The Financial Times London Page 2 448
Ukraine N-arms 'leaking radiation' Publication 930303FT Processed by FT 930303 By JOHN LLOYD, CHRYSTIA FREELAND and DAVID WHITE MOSCOW, KIEV, LONDON

UKRAINE'S nuclear missiles are leaking dangerous amounts of radiation because Kiev is refusing to give Russia access to the weapons for maintenance, General Mikhail Koleznikov, head of the general headquarters of the Russian army, said yesterday.

'According to our data,the radiation levels from some sites exceed the permissible levels by thousands of times,' Gen Koleznikov said.

The state of the weapons was now 'very serious'. Russia had 'lost control' of the missiles and could no longer take responsibility for their safety.

Mr Boris Tarasiuk, Ukraine's deputy foreign minister, yesterday described the latest Russian claims as 'imaginings'. He said Russia was pressing Ukraine to give up the missiles. 'According to our experts the state of the nuclear missiles located on Ukrainian territory in no way differs from that of the missiles found in Russia,' Mr Tarasiuk said. He said that Russian experts had full access to the missiles to perform necessary maintenance and that Ukraine was fully prepared to pay for Russian spare parts.

A senior Nato diplomat in Kiev said yesterday that he was concerned about the safety of the warheads and hoped the issue would be resolved quickly. He said it was difficult to determine the true state of the missiles 'but I am more inclined to believe the Ukrainian claims'.

Mr Shaun Gregory, a nuclear weapons specialist at the University of Bradford's School of Peace Studies, said nuclear materials would deteriorate more rapidly in older and less sophisticated weapons such as the six-warhead SS-19 missiles, which were deployed more than 10 years ago. Ukraine has 130 of these missiles at Khmel'Nitskiy and Pervomaysk. Warheads would normally be refurbished every couple of years, Mr Gregory said.

UA Ukraine, East Europe P9711 National Security RES Pollution RES Facilities TECH Standards P9711 The Financial Times London Page 2 317
France counts cost of peace Publication 930303FT Processed by FT 930303 By DAVID BUCHAN PARIS

THE cost to France of deploying some 10,000 soldiers in the service of the United Nations and of other emergency military missions abroad will rise from FFr3.2bn (Pounds 400m) last year to FFr4bn this year, Mr Pierre Joxe, the defence minister, forecast yesterday.

Clearly regarding as a dubious privilege France's provision of more troops to the UN than any other country, Mr Joxe told the newspaper Les Echos that he had asked the government to bear the cost of bonuses for soldiers serving overseas out of its general budget. Otherwise, the defence equipment budget would suffer, he warned.

Pay bonuses account for two-thirds of special military operations abroad, the minister said. Conscripts, for instance, who volunteer to serve in Yugoslavia receive FFr5,000 a month, or 10 times their normal stipend at home.

The Socialists strongly oppose the phasing out of conscription, proposed by some leading members of the RPR Gaullists who are expected to form part of the new government after next month's election. The army general staff yesterday published a study claiming that the French army of 250,000 men was not only 'no worse equipped' than Britain's purely professional force of 130,000, but 20 per cent cheaper.

Meanwhile, Mr Joxe has said more arms sales like last month's deal to supply the United Arab Emirates with Dollars 3.5bn (Pounds 2.46bn) worth of tanks could be in the offing.

He cited Oman as a potential buyer.

FR France, EC P9711 National Security PEOP Labour GOVT Government spending P9711 The Financial Times London Page 2 268
Moves on private pension funds buoy shares Publication 930303FT Processed by FT 930303 By HAIG SIMONIAN MILAN

ITALY'S government has opened the way to private pension funds, bringing the country into line with most of its European neighbours.

The step, still to be discussed by parliament but to be passed as a decree law, will take pressure off the over-burdened state pension system and should stimulate the flow of new funds to the stock market ahead of the government's privatisation programme.

Italian shares rose strongly for the second day running yesterday as a result of the decision, which should eventually boost equity purchases by big institutional investors. Shares in insurance companies, seen as the main beneficiaries of the planned new legislation, rose most strongly. Trading was particularly active, according to brokers.

The voluntary system, which will not replace the existing state pension scheme, will be open to individuals, professional associations, trade unions and companies. The attraction of private pensions will be boosted by tax incentives, akin to those currently available on life insurance policies, where regular premiums can be partly offset against income tax.

The finances of Italy's state pension scheme have been increasingly strained in recent years. The system, now being revised, is generous by the standards of most neighbouring countries. Moreover, longer life-expectancy and the steady shift towards an ageing population mean current payments into the system have increasingly had to be used to pay pensions for past contributors, rather than cover future pensions for those currently in work.

The prospect of new pension funds, which could invest part of their resources in shares, contributed to near-record volumes of more than L500bn (Pounds 222m) on the Milan stock exchange on Monday.

IT Italy, EC P6371 Pension, Health, and Welfare Funds P9441 Administration of Social and Manpower Programs GOVT Draft regulations P6371 P9441 The Financial Times London Page 2 309
Heroes of the Italian inquisition: A look at the role of investigative magistrates probing corruption Publication 930303FT Processed by FT 930303 By ROBERT GRAHAM

AN OBSCURE television programme presenting court cases has suddenly become mass viewing in Italy.

The producers hit on the idea of covering a case of municipal corruption in Milan with Mr Antonio Di Pietro, the high-profile investigative magistrate, as the prosecuting attorney. The case, now nearing its close, has attracted more than 8m viewers.

The programme's success derives from the mix of voyeurism at the pathetic figure of a municipal official writhing under the accusations of corruption and the satisfaction of seeing a confident interrogation by Mr Di Pietro as the triumphant prosecution. As the nation is buffeted by the growing wave of corruption scandals, it needs heroes and villains.

The investigative magistrates, led by the team in Milan which started to lift the lid on corruption a year ago and which includes Mr Di Pietro, are undoubted heroes. But to what extent are they behaving correctly and are they stigmatising those investigated as automatic villains?

Their critics have tended to be discounted because they are chiefly among the ranks of the accused like Mr Bettino Craxi, former Socialist leader. However, the comportment of the magistrates raises awkward questions about their tactics and political motivation.

The investigative magistrate plays the role of a detective in an accusatory system of justice with powers of preventive detention. Any person about to be investigated has to be issued with a caution warning them of this avviso. The magistrates have exploited the issuing of the avviso as a form of public announcement of guilt. People like Mr Craxi have heard they are under investigation through the media, who in turn treat the avviso as a proof of magistrates possessing substantial evidence against the individual. The avviso, an instrument intended to protect citizens rights, has thus becomes a form of accusation.

Magistrates have the right to imprison a suspect for three months, renewable on request by the courts. Throughout the Milan corruption scandal there has been a clear correlation between the amount of time a person spends in prison and their willingness to confess.

Mr Salvatore Ligresti, the financier and builder dubbed the 'King of Milan concrete', spent 101 days in prison before he was released after talking of his role in pay-offs to politicians.

Mr Enzo Papi, the managing director of Fiat's construction arm, Cogefar-Impresit, remained in prison for 55 days before being released after a confession. In contrast, Mr Silvano Larini, the Milan architect who helped collect commissions for the Socialists, handed himself in last month after eight months on the run having done a deal with magistrates. He was home on bail within three days.

Milan's now notorious San Vittore prison, which houses the majority of those imprisoned, was built in 1879 to hold 800 detainees. Currently it has 2,040 and a further 80 in its clinic. The lawyer of Mr Antonio Mosconi, the chief executive of Toro, Fiat's insurance arm, complained last week that his client, arrested on February 22, was sharing a cell with three others.

The magistrates argue they need preventive detention both to stop people leaving the country and stop people they are about to charge from talking to each other. At present at least three people are on the run, including the former head of Ferruzzi-Montedison, Mr Giuseppe Garofano, wanted for alleged involvement in pay-offs to the political parties. But it is not just the fact of preventive detention which has worried some of the victims - it is also the way the media is frequently tipped off to be present at arrests.

The media, working in a pool, is also used to filter information on interrogations which in theory are covered by secrecy. In the meantime, the person investigated has either no chance to reply or replies once the magistrates' version is already known. In the case of the Milan corruption scandal, the position of accused persons is complicated because so many people have decided to confess to either taking or receiving bribes - close to 110.

The final issue of the magistrates' behaviour centres on the accusation that the investigation is politically motivated, aimed at decapitating a corrupt politico-economic establishment. The Socialists believe they have been made particular victims with their leadership in the front line. In private top Socialists wonder why the investigative net has not caught up with senior figures in the Christian Democrats.

IT Italy, EC P9222 Legal Counsel and Prosecution GOVT Government News P9222 The Financial Times London Page 2 762
Emergency powers hint by Yeltsin Publication 930303FT Processed by FT 930303 By JOHN LLOYD and DMITRI VOLKOV MOSCOW

PRESIDENT Boris Yeltsin yesterday gave the strongest hint yet he was considering some form of emergency rule in an effort to break the impasse with conservative forces over Russian political and economic reform.

If he could get no agreement on a division of powers during a special Congress of People's Deputies likely to be held in a week's time he would call his own plebiscite to establish whether the president or parliament had supremacy .

At a meeting of the group 'Democratic Choice' he appeared to accept that a constitutional referendum, which requires the agreement of parliament, would not be possible. Parliament appears set to repudiate the agreement it made with him in December to hold such a referendum in April.

He admitted that, 'constitutionally, (the plebiscite) would not carry great weight but at least it would clarify for everyone whom the people support and which way we should go'.

Then, in a heavy hint of authoritarian action, he said that should no agreement be forthcoming even after the plebiscite, 'there is a final option which I don't want to talk about. I don't think things will go that far and I hope that they don't. We should respect the constitution, but if conservatives use extreme measures to destroy Russia, we must use other ways to save democracy and reform'.

The president ended his speech at that point without spelling out the meaning of 'other paths'.

Mr Lev Ponomarev, a leader of the Democratic Russia movement, said after the meeting that he and his colleagues supported Mr Yeltsin's intention to 'act decisively' and said that 'it is his duty to act to safeguard order in a pre-putsch situation'.

As proof of his 'pre-putsch' assertion, Mr Ponomarev pointed to appeals to army officers in the weekly Den - an influentail organ of the hard right opposition forces - to create 'underground organisations', and to the calls by hard left and right deputies for direct confrontation with the constitutional power.

'If an emergency situation is declared, then Democratic Russia would want to influence the government to preserve democratic procedures during that period and for elections as soon as possible after it,' he said.

Hard-line deputies are considering mounting yet another attempt to impeach Mr Yeltsin at the special congress.

Mr Yona Andronov, deputy chairman of the Parliamentary Committee on international Affairs, said yesterday the move would gather more support than a similar effort last December, when more than 300 deputies registered their approval.

Although Mr Yeltsin's comments were veiled, his speech suggests he now sees decreasing room for agreement, and increasing necessity for a swift severing of the noose.

A further indication of this tension was the adoption by the Praesidium of the parliament on Monday of a motion which laid out the procedure for parliament declaring emeregncy rule - a procedure which would strip the President of all effective powers. The draft motion still has to be carried by parliament, but indicates the mood of the parliamentary leadership.

Mr Yeltsin's speech was accompanied by the publication of an interview in the Communist daily Pravda, showing a rather tetchy president grudgingly conceding that some communists could be pro-reform and saying he would talk to their leaders, as to all other party leaders, in a bid to get a general agreement on reform and constitutional change.

That he gave an interview at all may be a recognition of the fact that the Party now claims 500,000 members.

RU Russia, East Europe P9111 Executive Offices P9121 Legislative Bodies GOVT Government News P9111 P9121 The Financial Times London Page 2 612
Sales of new homes increase by a fifth so far this year Publication 930303FT Processed by FT 930303 By ANDREW TAYLOR, Construction Correspondent

SALES OF new homes rose by more than a fifth during the first eight weeks of this year, according to Britain's 15 largest housebuilders.

The figures confirm the revival of activity in the housing market reported by builders, estate agents and building societies.

The sales rise did not prevent a further 0.3 per cent fall in house prices last month compared with January, according to figures published yesterday by Halifax Building Society, the country's biggest mortgage lender.

Halifax said there had been a sharp rise in mortgage applications and in interest from potential buyers through its estate agencies, but this had not yet worked through to prices.

Sales figures compiled by the Housebuilders Federation show that net reservations - sales on which a deposit has been paid less cancellations - totalled more than 5,000 in January and February for the 15 largest housebuilders. This figure compared with 4,200 in the first two months of last year.

The 15 companies account for about 80 per cent of new house sales. The federation's survey, conducted weekly, also shows a 15 per cent rise, to more than 150,000, in the number of people visiting new homes for sale during January and February.

Abbey National, which yesterday announced a 9 per cent fall in annual pre-tax profits to Pounds 564m, said the numbers of new mortgage offers issued by the bank to first-time buyers and of people moving house were 30 per cent higher in January than in the same month last year.

Besides reporting a fall in profits, Abbey also said it intended to sell its Cornerstone estate agency business. The group said it had lost Pounds 226m on estate agency business since its acquisition in 1987.

Mr Peter Parkin, chairman of Raine Industries, one of the housebuilders surveyed, said the number of potential purchasers visiting its sites had risen to more than 1,000 a week in January and February. This compared with fewer than 400 a week in December.

'Net reservations are between a fifth and a quarter higher than during January and February last year,' Mr Parkin said.

'It is too early to talk of a sustained recovery but business is looking better.' The improvement had occurred at sites all over the country rather than in any particular region.

Halifax said the average price of houses which sold in February was Pounds 60,196, 7.2 per cent down on the same month last year. First-time buyers paid 1 per cent more for houses last month as lenders targeted the group to provide the spur to the market. 'Although house prices are still falling, the small size of the declines in January and February could be an early indication of stability returning to house prices in the spring,' Halifax said.

US new home sales drop, Page 6 Abbey aims to set up insurance arm, Page 20 Abbey results and sale plan, Pages 21 and 24 Lex, Page 20 Raine shares fall, Page 23

GB United Kingdom, EC P1521 Single-Family Housing Construction P6531 Real Estate Agents and Managers P6162 Mortgage Bankers and Correspondents STATS Statistics MKTS Sales P1521 P6531 P6162 The Financial Times London Page 1 544
'Hundreds die' as Serbs overrun Moslem enclave Publication 930303FT Processed by FT 930303 By LAURA SILBER BELGRADE

BOSNIAN Serb soldiers were yesterday reported to have killed hundreds of civilians after overrunning Cerska, the Moslem enclave which was the target of US aid drops this week.

Last night Mr Ejup Ganic, Bosnia's vice-president, said parts of Cerska were still controlled by Bosnian government forces. But Ms Lyndall Sachs of the Belgrade office of the United Nations High Commissioner for Refugees (UNHCR) indicated that 19 hamlets, comprising much of the Moslem enclave, had fallen to Serb forces.

The reports came as four US cargo aircraft, from an airbase in Germany, completed their third air drop over eastern Bosnia, according to Yugoslav air traffic controllers. In another development Russia said it would join the US in the air drops, although Mr Les Aspin, US defence secretary, said these might be halted temporarily.

At Cerska, in reports which could not be independently confirmed, local radio operators said more than 500 civilians had been killed after Serb forces seized the enclave.

One radio report said: 'The Chetniks (Bosnian Serb forces) are moving freely around the town. They are burning houses, killing a lot of occupants . . . a lot of civilians, women and children, mostly by slitting throats.'

'Dead bodies all over and people have nowhere to go. People cannot move,' said the radio report, monitored by the representative of the UNHCR in Tuzla, a Bosnian government stronghold in eastern Bosnia. 'People from Cerska are crying for help and begging to be taken out alive. Others are hiding in woods and ditches crying out for help.'

Another amateur radio report broadcast on Sarajevo radio said: 'Many are trapped under rubble and being killed there.' The report said Serbian tanks were moving through the area, razing villages to the ground.

Sarajevo radio said the Serbs were shelling routes by which people were fleeing Cerska. 'The roads are crawling with injured and dead,' it said. UNHCR officials were particularly concerned about reports of shelling in Konjevic Polje where the refugees were fleeing and 1,500 wounded are believed trapped.

Ms Sachs said even if a small part of it was correct, the situation was desperate.

Belgrade television last night showed hazy pictures of what it said were uniformed fighters on foot in Cerska.

In spite of pledges to allow aid to reach the besieged enclaves, believed to house about 100,000 Moslems, Mr Radovan Karadzic, the Bosnian Serb leader who is in New York holding peace talks at the UN, has repeatedly blocked overland convoys to Cerska and other strongholds. General Ratko Mladic, the Bosnian Serb commander, yesterday refused UNHCR pleas for a fleet of 10 specially equipped lorries to enter the enclave and evacuate the wounded.

Amateur radio operators said 14 US aid pallets dropped on Sunday night had been spotted at Cerska, but the heavy Serb artillery fire had made it impossible to collect them. A radio operator in Zepa, the second target for three US transport aircraft, said two parcels of medical supplies were found in the snowy hills around Zepa.

Cerska, the target of the first US air drop of food and medical relief, has been besieged since last April when Serb forces backed by the Yugoslav army killed and drove out hundreds of thousands of Moslems from eastern Bosnia.

After the formal withdrawal of the army, which left the bulk of its equipment and forces in Bosnia, the self-styled Serb republic controlled most of the region except a handful of Bosnian government strongholds. Cerska was left as the most vulnerable community, housing some 6,000 Moslems.

Russia backs drop, Page 2 Editorial Comment, Page 19

BA Bosnia-Hercegovina, East Europe P9711 National Security P9721 International Affairs GOVT Government News P9711 P9721 The Financial Times London Page 1 631
Private sector may run juvenile centres Publication 930303FT Processed by FT 930303 By ALAN PIKE and DAVID OWEN

NEW SECURE training centres for offenders aged 12 to 15 may be run by the private sector or voluntary organisations under proposals announced by the government yesterday.

The two sectors will be invited to bid along with the public sector to operate the centres which Mr Kenneth Clarke, home secretary, said would be 'different from anything that has been offered before'.

Yesterday's announcement - part of a government response to mounting public concern about juvenile crime - extends the potential role of the private sector in the criminal justice system. Two prisons are already privately managed, and competitive bids to run a third are being prepared.

The government will act as purchaser of services from the new centres. About six - providing accommodation for a total of 250-300 young people - are likely to be developed initially.

The centres, for a minority of persistent re-offenders, will be designed to offer constructive training and education that tackles the causes of a young person's behaviour. Young people will be locked up if necessary to prevent them absconding.

Courts would be able to impose secure training orders on 12-15-year-olds convicted of three imprisonable offences who had failed to comply with community supervision.

Organisations working with young offenders accused the government of repeating past mistakes with its proposals.

The National Association for the Care and Resettlement of Offenders said secure institutions for young people increased the chances of re-offending. Mr Stephen Shaw, director of the Prison Reform Trust, said: 'The graduates from Mr Clarke's mini-prisons will be filling the adult jails for years to come.'

Addressing a crowded Commons, Mr Clarke acknowledged the two main parties were moving closer together on crime but one big difference was the government had some 'solid proposals'. 'Our proposals are far in advance of anything the other side has to hand,' he said.

Mr Tony Blair, shadow home secretary, attacked the lack of coherence in the government's proposals and the likely delay in their implementation. 'It is now people require action against the tide of rising crime,' he said.

GB United Kingdom, EC P8361 Residential Care P9223 Correctional Institutions TECH Services GOVT Government News P8361 P9223 The Financial Times London Page 1 381
Stock and Currency Markets Publication 930303FT Processed by FT 930303

--------------------------------------------------------------- STOCK MARKET INDICES --------------------------------------------------------------- FT-SE 100: 2882.3 (-0.3) Yield 4.20 FT-SE Eurotrack 100 1156.71 (-1.49) FT-A All-Share 1403.41 (-0.0%) FT-A World Index 144.2 (+0.8%) Nikkei 16,864.25 (-15.35) New York: Dow Jones Ind Ave 3400.53 (+45.12) S&P Composite 447.91 (+5.9) --------------------------------------------------------------- US RATES --------------------------------------------------------------- Federal Funds: 3% (3 5/8%) 3-mo Treas Bills: Yld 3.024% (2.992%) Long Bond 103 5/8 (103 21/32) Yield 6.834 (6.831%) --------------------------------------------------------------- LONDON MONEY --------------------------------------------------------------- 3-mo Interbank 6 1/16% (Same) Liffe long gilt future: Mar 105 3/16 (Mar 105 11/32) --------------------------------------------------------------- NORTH SEA OIL (Argus) --------------------------------------------------------------- Brent 15-day April Dollars 18.84 (18.95) Gold New York Comex May Dollars 331.1 (329.9) London Dollars 328.95 (328.55) --------------------------------------------------------------- STERLING --------------------------------------------------------------- New York: Dollars 1.449 (1.439) London: Dollars 1.4485 (1.44) DM 2.38 (2.37) FFr 8.065 (8.0425) SFr 2.205 (2.1975) Y 170.5 (170.75) Pounds Index 77.3 (77.1) --------------------------------------------------------------- DOLLAR --------------------------------------------------------------- New York: DM 1.639 (1.65475) FFr 5.605 (5.611) SFr 1.5225 (1.537) Y 117.585 (118.75) London: DM 1.6425 (1.6465) FFr 5.5675 (5.585) SFr 1.5225 (1.526) Y 117.7 (118.6) Dollars Index 66.2 (66.5) Tokyo open Y 117.55 ---------------------------------------------------------------

US United States of America GB United Kingdom, EC FR France, EC DE Germany, EC CH Switzerland, West Europe JP Japan, Asia P1311 Crude Petroleum and Natural Gas P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices COSTS Equity prices P1311 P3339 P6231 The Financial Times London Page 1 236
20,000 staff vote for pay cut to save jobs: Sheffield council agreement will save Pounds 6m on wage bill Publication 930303FT Processed by FT 930303 By IAN HAMILTON FAZEY, Northern Correspondent

NEARLY 20,000 Sheffield council workers have voted to take a 3.25 per cent pay cut in exchange for shorter working hours to stop the city council making 1,400 of them redundant to balance next year's budget.

The deal, which leaders at the Labour-run council believe is the first of its kind in Britain, will boost government hopes that the fight to keep inflation low is beginning to yield dividends in public sector pay where it is endeavouring to confine rises to a maximum of 1.5 per cent.

Yesterday's landmark agreement will also help the council get its budget below a Pounds 366m ceiling imposed by the government. Local authorities all over Britain are facing up to 90,000 job losses as the government tries to peg public spending.

In exchange for the pay cut, the employees will be able to work one hour less a week or take seven extra days' holiday. The move will take nearly Pounds 6m off Sheffield's wages bill. The council should be able to agree a legal budget next week if it can now make Pounds 1.3m savings in the works department and another Pounds 1.5m on education.

About 2,000 works staff refused the deal, while 4,000 teachers could not be balloted because they are employed by school governors and their pay levels are decided by the government.

The council said it would be discussing with teachers ways in which they could improve productivity and so make the required savings.

It was suggested that one area it might look into could be the use made of training days.

All town hall unions at Sheffield have held ballots, but works department shop stewards substituted their own ballot question and campaigned against the deal. Talks have started again with the shop stewards.

The council's chief officers have not yet balloted, and neither have about 200 youth and print workers. The deal will be imposed on all sections that voted for it, including non-union staff who did not take part in the ballot.

'The cut will be treated the same way as a pay rise would - it will apply to everyone,' the council said.

The only exceptions will be low-paid workers earning less than Pounds 90 a week, which means part-timers.

Mr Mike Bower, leader of the Labour-controlled council, said: 'Employees have shown a remarkable degree of commitment both to their colleagues and the community. Nobody is happy we have been put in this situation but the alternative - a destructive cut in services and hundreds of sackings - would have been much worse.'

The deal also makes 1993-94 annual pay increases conditional on finding the money to meet them from productivity improvements.

GB United Kingdom, EC P9121 Legislative Bodies P8211 Elementary and Secondary Schools PEOP Labour P9121 P8211 The Financial Times London Page 1 497
World News in Brief: Divorce for Rushdie Publication 930303FT Processed by FT 930303

Author Salman Rushdie and American writer Marianne Wiggins were granted an uncontested divorce after five years of marriage. Rushdie has been in hiding since Iran passed a death sentence on him for alleged blasphemy.

UK-Iran relations dip further, Page 4

GB United Kingdom, EC P8999 Services, NEC PEOP Personnel News P8999 The Financial Times London Page 1 69
World News in Brief: German output down 2.5% a month Publication 930303FT Processed by FT 930303

Industrial output in Germany is falling by an average 2.5 per cent a month, the Economics Ministry said. Its report came as the Bundesbank dimmed hopes of an easing of monetary policy by saying it would offer funds to commercial banks at unchanged rates this week.

Output continues to fall, Page 3 Money markets, Page 31

DE Germany, EC P9611 Administration of General Economic Programs STATS Statistics ECON Industrial production P9611 The Financial Times London Page 1 92
World News in Brief: Wall Street sharply up Publication 930303FT Processed by FT 930303

Stocks closed sharply higher on Wall Street, buoyed by gains in pharmaceutical, cellular telephone and oil shares. The Dow Jones Industrial Average rose 45.12 to close at 3,400.53.

World stocks, Page 37

US United States of America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 1 65
World News in Brief: Harrods bomb suspects arrested in armed raid Publication 930303FT Processed by FT 930303

Two men were being questioned about the IRA bombing of Harrods in January after an armed raid last night on a house in Stoke Newington, north London, hours after a police video of two suspects was shown on television. Scotland Yard said shots were fired at anti-terrorist squad detectives and a tactical firearms unit during the raid. Police did not return fire. Firearms and explosives were recovered from the house.

GB United Kingdom, EC P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times London Page 1 106
Clarke outlines proposals for young offenders Publication 930303FT Processed by FT 930303

New secure training centres for 12-15-year-olds - part of a government response to mounting public concern about juvenile crime - may be operated by the private sector, the public sector or voluntary organisations.

Mr Kenneth Clarke, home secretary, in a joint news conference with health secretary Virginia Bottomley yesterday, said that all three sectors will be invited to bid to operate the centres, which would be 'different from anything that has been offered before'. About six centres, providing accommodation for up to 300 persistent reoffenders, are likely to be developed initially.

Details, Page 20

GB United Kingdom, EC P8361 Residential Care P9223 Correctional Institutions TECH Services GOVT Government News P8361 P9223 The Financial Times London Page 1 128
World News in Brief: S Africa attack Publication 930303FT Processed by FT 930303

Gunmen killed six children and wounded seven in South Africa's Natal province when they fired at a lorry carrying 22 youngsters, police said.

ZA South Africa, Africa P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times London Page 1 55
World News in Brief: Suspected terrorists held Publication 930303FT Processed by FT 930303

Police arrested two suspected terrorists in north London hours after the release of pictures of two men alleged to have planted the IRA's Harrods bomb, which injured three people in January.

GB United Kingdom, EC P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times London Page 1 63
World News in Brief: Hatton cleared of one charge Publication 930303FT Processed by FT 930303

Former Liverpool city council deputy leader Derek Hatton and two other people were acquitted at Mold crown court, Clwyd, of one charge of conspiring to defraud the city council. Hatton, 44, and one of the others face further charges.

GB United Kingdom, EC P9121 Legislative Bodies PEOP Personnel News GOVT Legal issues P9121 The Financial Times London Page 1 73
World News in Brief: Child hostages freed Publication 930303FT Processed by FT 930303

Two British child hostages were freed by members of a religious cult under armed siege at a ranch in Waco, Texas, Police and US federal agents surrounded the ranch after a shoot-out on Sunday which left four agents and at least one cult member dead.

US United States of America P8661 Religious Organizations P9229 Public Order and Safety, NEC PEOP Personnel News P8661 P9229 The Financial Times London Page 1 82
World News in Brief: Prescription charges to rise Publication 930303FT Processed by FT 930303

Prescription charges will rise by 50p to Pounds 4.25 next month, health secretary Virginia Bottomley said. Dental fees will go up by 5 per cent, with patients paying 80 per cent of the cost of treatment.

GB United Kingdom, EC P9431 Administration of Public Health Programs COSTS Costs & Prices P9431 The Financial Times London Page 1 70
International Company News: Grafton ahead 9% to IPounds 3.87m Publication 930302FT Processed by FT 930305

GRAFTON GROUP, the Dublin-based builders' merchant and DIY concern, reported a 9 per cent advance in pre-tax profits from IPounds 3.55m to IPounds 3.87m (Pounds 3.96m) in the year to end-December.

The outcome was achieved on turnover up by IPounds 1.98m to IPounds 96.4m.

Mr Michael Chadwick, chairman, said that trading during the nine months to September had been strong but the impact of lower construction activity, as a result of higher interest rates and reduced confidence, had been felt in the last quarter.

However, the overall financial position remained healthy, he added, with cash of IPounds 2.6m being generated during the year. Gearing was cut from 31 per cent to 22 per cent.

Earnings per share worked through at 18.6p (17.1p). A maintained final dividend of 3.75p raises the total for the year to 6.5p (6.25p).

Grafton Group IE Ireland, EC P5211 Lumber and Other Building Materials FIN Annual report P5211 The Financial Times London Page 20 173
International Company News: US group denies interest in Greencore Publication 930302FT Processed by FT 930305 By PEGGY HOLLINGER

ARCHER-Daniels-Midlands, the US agribusiness group, yesterday quashed speculation that it planned to take a stake in Greencore, the Irish sugar and foods group which is 30 per cent owned by the government.

Mr Dwayne Andreas, chairman of Illinois-based ADM, said yesterday that the group had been approached a month ago with a view to buying the Irish government's stake. However, the terms and conditions offered had been unacceptable. 'There did not seem to be any way to reach agreement,' he said. There had been no further contact.

Speculation surrounding the fate of the government's stake - the legacy of the group's privatisation in 1991 - resulted in the suspension of Greencore shares at 245p yesterday.

The company said the shares would be suspended for 48 hours pending clarification of the government's position on the future of its holding.

The cabinet is expected to make a statement this morning. In the budget speech last month, the government said it intended to raise IPounds 150m in 12 months through the disposal of state assets - believed to be the Greencore holding and a 45 per cent stake in Irish Life.

The company is believed to have held discussions with the potential investor, and it is thought unlikely a full bid would result. The govern-ment holds a golden share, and is likely to expect under-takings on certain issues such as employment and the maintaining of Ireland's sugar quota.

Possible investors include Conagra and Cargill, both of the US. Reports cited an offer price of Pounds 65m for the stake, or 260p per share. The government is unlikely to accept such a price, however, having disposed of 15 per cent of Greencore last year at 265p.

Analysts speculated that an offer pitched at between 270p and 275p would succeed.

ADM, known to be keen to expand in Europe, was widely favoured as the most likely purchaser of the stake. ADM already owns 7.4 per cent of Tate & Lyle.

It was also noted that Mr Gerry Murphy, Greencore's chief executive, is known to ADM. He was formerly a senior executive of Grand Metropolitan's Pillsbury operations in the US, which has a joint venture with ADM in flour milling.

Analysts in Dublin said they would welcome the sale of the government's stake. 'It would preclude Greencore fund raising in Dublin and bring at least Pounds 65m into the exchequer,' said Mr Joe Gill, an analyst with Dublin brokers, Riada.

Mr Gill said speculation that Greencore would have to come to the market for funds had helped to depress the share price in recent weeks.

Greencore Archer Daniels Midland US United States of America IE Ireland, EC P206 Sugar and Confectionery Products P204 Grain Mill Products COMP Company News P206 P204 The Financial Times London Page 20 479
Names in action to recover losses Publication 930302FT Processed by FT 930304 By RICHARD LAPPER

MORE THAN 2,000 Lloyd's Names are to issue writs against their agents today, kicking off one of the largest actions in English legal history in terms of the number of individual plaintiffs and defendants.

The 2,145 Names - individuals whose assets support the Lloyd's market - are seeking to recover Pounds 396m in insurance losses.

The Names were members of Gooda Walker syndicates 164, 290, 298 and 298, which specialised in 'spiral' reinsurance, in which syndicates and London market companies reinsure each other's exposure to high-level catastrophe loss.

Advised by Wilde Sapte, they are suing 67 members' agents who placed them on the syndicates.

Mr Michael Deeny, chairman of the Gooda Walker Action Group, which is organising the action, said the average loss by each Name is Pounds 184,877.

But he added: 'Some individual members have lost up to Pounds 1m. Some of these were underwriting at Lloyd's on the basis of a bank guarantee secured on their family home and had no other substantial assets.'

Mr Deeny, an accountant and rock music promoter, said that many of the Names involved are old-age pensioners who 'now face total ruin'.

The action group has raised more than Pounds 4m from its Names to fight the action, which could begin in commercial court next year. A final result may take many years, however.

The main action is focused on allegations of negligent underwriting, but litigation on other issues and against other parties is being considered and further proceedings may be issued shortly.

Mr Deeny said that the official Lloyd's loss review report into the Gooda Walker syndicates revealed a 'picture of almost incredible incompetence'.

He described the 'spiral' as a 'financial timebomb which has brought disaster to Names on the Gooda Walker syndicates'.

Gooda Walker Names Action Group (UK) GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service GOVT Legal issues INS Insurance losses P6411 The Financial Times London Page 6 334
International Company News in Brief Publication 930302FT Processed by FT 930303

Group pre-tax profits at Viscofan, the fast-growing Spanish sausage casings producer, fell 72 per cent last year to Pta1.01bn following big redundancy charges at its German subsidiary, Naturin, and enforced provisions to cover foreign currency debt after two peseta devaluations last year.

Viscofan ES Spain, EC P2013 Sausages and Other Prepared Meats FIN Annual report P2013 The Financial Times International Page 18 73
International Company News in Brief Publication 930302FT Processed by FT 930303 By PETER BRUCE MADRID

Consolidated pre-tax profits at Tabacalera, the state-owned Spanish tobacco monopoly, are understood to have fallen by more than 13 per cent to Pta18.9bn (dollars 161m) last year, despite a small 3.5 per cent pre-tax profit increase, to Pta20bn, at the parent company itself, writes Peter Bruce in Madrid.

The group figures are understood to have been hit by poor results from the Philip Morris operation in Spain, in which Tabacalera has a 50 per cent stake, and by the incorporation of Elosua, the loss-making edible oils group, of which Tabacalera took control last year.

Unofficial figures have Tabacalera's 1992 group sales 7.6 per cent up at Pta700.4bn. The group is a potential candidate for some form of privatisation later this year, and is also on the verge of selling its Royal Brands foods subsidiary.

Tabacalera ES Spain, EC P21 Tobacco Products FIN Annual report P21 The Financial Times International Page 18 166
International Company News: Teksid joins Alcan in US joint venture Publication 930302FT Processed by FT 930303 By HAIG SIMONIAN MILAN

TEKSID, the metallurgical products subsidiary of Italy's Fiat group, and Canada's Alcan Aluminium company are forming a US joint venture for the automotive industry.

The new company, Altek Automotive Castings, will be based in Detroit and will include Alcan's automotive castings plant in St Catherines, Ontario. The joint venture excludes Teksid's aluminium facility in Tennessee, which has already established a strong position selling aluminium products to the big three US car producers.

The joint venture will aim to develop and manufacture cast and composite aluminium components for the car industry.

Alcan is one of the world's largest aluminium producers, while Teksid is a leading foundry group specialising in products for the automotive industry. Group sales amounted to L1,160bn (dollars 730m) last year. The joint venture will focus on the North American market. Altek's initial activity will involve making cast lower control arms for Ford's new Lincoln Continental model.

Teksid Alcan Aluminium Altek Automotive Castings US United States of America P3365 Aluminum Foundries COMP Joint venture P3365 The Financial Times International Page 18 192
Italian corruption scandal widens Publication 930302FT Processed by FT 930303 By ROBERT GRAHAM ROME

A FORMER official of the Italian Communist party (PCI) was arrested yesterday by Milan magistrates on suspicion of operating a Swiss bank account to receive pay-offs from contracts in the power industry.

The arrest of Mr Primo Greganti, an official in the Turin branch of the PCI during 1970-87, is part of the widening national investigation into corruption in which a growing number of senior political and busi ness leaders have been implicated.

Mr Greganti voluntarily appeared for questioning in Milan yesterday and was later arrested for alleged corruption and illicit financing of the party.

It is the first time Italian companies have been linked to alleged payments to the PCI made illicitly outside the country. Corruption in the power industry is one of the main lines of investigation now being pursued by Milan magistrates.

According to magistrates, Mr Greganti had been identified by Mr Lorenzo Panzavolta, the head of Calcestruzzi, the construction and cement arm of Ferruzzi, as the recipient of L620m (Dollars 401,000) paid into a Swiss bank account for the PCI in respect of a contract with Enel, the state electricity authority. This is not the first time the corruption scandals have involved the PCI, which has sought to present itself as clean. Mr Giovanni Batista Zorzoli, the PCI representative on the board of Enel, has been arrested. The PCI was dissolved in 1990 and its mantle was taken was up by the newly created Party of the Democratic Left (PDS) of which Mr Greganti was a member. The PDS yesterday vigorously denied any knowledge of the payment and further denied possessing a Swiss bank account.

Milan magistrates also arrested and placed on bail yesterday Mr Arturo Romagnoli, a businessman and the brother of Mr Vincenzo Romagnoli, former owner of the construction company Cogefar. Mr Romagnoli was alleged to have been involved in corruption related to Milan municipal contracts.

In another development likely to prove embarrassing to the Christian Democrats, Mr Michele de Mita, the brother of former prime minister Ciriaco de Mita, currently head of the parliamentary institutional reform commission, was arrested on fraud charges. Mr Michele de Mita was alleged to have been part of a scheme which submitted fake invoices for potatoes supplied to earthquake victims at Irpinia in southern Italy in 1980.

IT Italy, EC P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P9229 The Financial Times International Page 16 414
Cocaine suspect surrenders Publication 930302FT Processed by FT 930303 By AP and REUTER BOGOTA

THE man considered by police to be the financial brains behind the Medelln cocaine cartel has surrendered to authorities, the attorney general's office said yesterday, AP reports from Bogota.

Mr Jose Fernando Posada, 38, turned himself over to representatives of the Medelln prosecutors' office waiting outside a cinema on Sunday night.

He was taken to a maximum security prison outside Medelln where 17 other cartel members are being held.

Mr Posada was the fourth leading cartel member to surrender in recent weeks under a government offer of leniency. Authorities say the surrenders are weakening the organisation led by fugitive drug lord Mr Pablo Escobar.

Meanwhile, a wealthy Medelln businessman who is reported to have links to Mr Escobar was killed yesterday after being abducted from his home by about 20-25 gunmen, police said.

The abduction and murder came 48 hours after an attack on the home of his brother, Mr Diego Londono White, an architect who has said he once worked for Mr Escobar.

Mr Diego Londono White told Medelln television that the gunmen were members of People Persecuted by Pablo Escobar, a secretive group that has pledged to kill Mr Escobar.

Reuter adds: Colombian authorities seized nearly Dollars 5.9m in more than 890 domestic bank accounts and arrested 250 people during a 15-month crackdown on drug traffickers' money-laundering networks, the Colprensa news service said on Sunday.

Quoting police, Colprensa said Colombian authorities and Interpol uncovered the main networks used by the Cali and Medelln drug cartels in a 15-month investigation.

It said the cartels moved their money through fictitious export and import companies and money exchange houses.

CO Colombia, South America P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P9229 The Financial Times International Page 3 304
Hoechst is accused over chemical spray Publication 930302FT Processed by FT 930303 By CLIVE COOKSON FRANKFURT

HOECHST, one of the three giant German chemical companies, has been accused of reacting too slowly after it sprayed about 10 tonnes of chemicals - some potentially toxic - over a Frankfurt suburb, writes Clive Cookson in Frankfurt.

Hoechst insists there is no danger to residents from exposure they have received. Company officals say the direct costs of the accident, which happened a week ago, will be at least DM10m (Dollars 6.14m) and perhaps several times more.

At least 10 different chemicals were discharged in the accident at its Griesheim plant, the company said yesterday after analysing soil samples. Some of the chemicals are potentially toxic or caustic. They include two tonnes of ortho-nitroanisole, a smelly, yellow chemical used to make dyes, which the company says is 'potentially carcinogenic.'

State government officials say Hoechst responded too slowly to the accident and failed to disclose details on what the chemicals are and their potential toxicity.

Hoechst DE Germany, EC P28 Chemicals and Allied Products RES Pollution TECH Standards TECH Safety COMP Company News P28 The Financial Times International Page 2 195
Bonn accepts return of its toxic waste Publication 930302FT Processed by FT 930303 By QUENTIN PEEL

GERMANY has agreed to re-import some 420 tonnes of toxic waste, including leaking barrels of chemicals, pesticides, paints and varnishes, illegally exported to Romania from both east and west Germany in recent years, writes Quentin Peel.

The plan follows a campaign by Greenpeace, the environmental action group, which threatened to bring the waste back to Bonn itself and dump it in the German capital.

The operation, which involves decanting the waste into new containers and shipping it back to Germany in a special goods train, will start this week, Mr Klaus Topfer, the environment minister, announced yesterday.

It will cost DM3.3m (Dollars 1.98m) of taxpayers' money, the minister said. However he promised to pursue the illegal exporters to pay compensation.

The waste is dumped in and near the town of Sibiu, in central Romania, where many of the containers have corroded, or broken open in the frost, and started leaking their contents, according to Greenpeace.

Mr Topfer yesterday praised the action group for its campaign, and promised that the waste would now be disposed of inside Germany. He said that most of it came from the former East Germany, mainly from the Bitterfeld chemical industry complex in Saxony-Anhalt, but some also came from western enterprises.

DE Germany, EC RO Romania, East Europe P4953 Refuse Systems RES Pollution GOVT Legal issues MKTS Foreign trade P4953 The Financial Times International Page 2 245
World News in Brief: Cosa Nostra suspect denies Mafia links Publication 930302FT Processed by FT 930303

Salvatore 'Toto' Riina, (left) accused by the Italian authorities of heading Cosa Nostra, the umbrella organisation of the Sicilian Mafia, denied he had been a Mafia 'superboss'. 'I don't know what Cosa Nostra is,' he said in a Palermo court, in his first public appearance since his arrest in January after being on the run for 24 years. Riina testified for an hour at a trial for the Mafia killings of three Sicilian politicians which began before his arrest.

IT Italy, EC P86 Membership Organizations PEOP Personnel News GOVT Legal issues P86 The Financial Times International Page 1 113
London Stock Exchange: Sell note hits Abbey Publication 930302FT Processed by FT 930302 By JOEL KIBAZO and STEVE THOMPSON

ABBEY National, the building society turned high street bank which came to the market at 130p a share in July 1989, raced up to an all-time high early yesterday before turning off sharply as UBS Phillips & Drew issued a straight 'sell' recommendation on the stock ahead of this morning's preliminary figures.

UBS expects Abbey to record an 8 per cent fall in profits to Pounds 570m. Analysts expect the dividend total to be lifted some 10 per cent to around 11.5p.

Following the UBS recommendation the shares retreated to 387p, before staging a late rally and closing only a penny off at 397p. Turnover in the stock totalled 4.8m shares.

UBS analyst Mr John Wriglesworth said he recommended the sale of the shares for a number of reasons, chiefly recent outperformance that has seen them outpace the market by 10 per cent in the past two weeks.

He added: 'Bad debts will remain a big problem and we do not expect house prices to rise this year. Added to that, Abbey's margins will be squeezed by the commercial banks and mortgage specialists. And they will be hit on the savings side by the government.' Mr Wriglesworth said he expected no pleasant surprises in the figures or at the post-results meeting.

Gen Accident firm

Recent worries that a big rights issue might be on the way from General Accident tended to fade into the background yesterday, giving shares in the composite insurer a substantial boost. The rights issue fears had been triggered by the fund raising carried out by Commercial Union, which launched a Pounds 450m-plus rights issue and the Pounds 100m bond issue made by Royal Insurance.

GA closed a net 26 higher at 595p, a rise of 4.6 per cent, compared with the 0.5 per cent rise in the market and a 2.5 per cent increase in the composite insurance sub-sector.

The company's preliminary figures are expected this morning, with the market range extending from a Pounds 20m to a Pounds 45m loss, compared with last year's deficit of Pounds 172m. Analysts said the figures could reveal a strong improvement in results from motor insurance following rate increases.

Tate & Lyle weak

The news that the chief executive at UK sweeteners group Tate & Lyle was to leave the company caused the stock to buck the strong market trend.

At the day's worst the shares were down 7 at 430p, although dealers said there was no significant selling at the lower levels. Bargain hunting, together with the strong market, helped the shares recover some of the earlier fall and they closed 3 off at 434p after trade of 2.5m. Several analysts were concerned that the departure signalled deeper trading worries at the group.

There was no shortage of strong performers in the financial areas of the market. Standard Chartered delivered another good showing, climbing 17 more to 685p, the highest level since the great crash of October 1987. Standard is scheduled to report preliminary figures on March 10. Lloyds rose 9 to 528p, albeit in relatively light trade. Barclays ended a fraction harder at 425p as the market continued the debate over whether the dividend will be cut on Thursday when the full-year figures are released. The probable flotation of some of its insurance subsidiaries saw Hambros Bank edge up 3 to 316p.

A Smith New Court buy recommendation helped Prudential move ahead strongly to finish 8 1/2 up at 324p. Other life shares also did well, Lloyds Abbey closing 4 1/2 ahead at 426p and Legal & General 4 better at 475p.

Composite insurances attracted keen buying across the board. Guardian Royal, reporting preliminaries tomorrow, settled 6 higher at 193p. Sun Alliance rose 10 to 333p.

Continuing fears that the March 10 figures will see the dividend cut failed to prevent a bounce in Willis Corroon, which ended 5 firmer at 185p. Lloyd Thompson, regarded as the best quality stock in the smaller insurance brokers, advanced 9 more to 290p.

Confirmation that Airtours was to raise its offer for its bid target Owners Abroad to 135p a share saw the stock of both companies gain further strength, as several market watchers came to the view that the new offer might be just high enough to clinch the deal.

Owners closed 3 up at 134p xd, while Airtours also firmed 3, to 309p, Mr Hamish Dixon at Hoare Govett said: 'I believe the improved offer represents fair value and the bid now stands a better chance of success.'

A press suggestion that both Rank Organisation and Carlton Communications may soon face stiff competition for their video copying operations hurt the shares of both companies as each made a dividend payout. Shares in Rank gave up 20 to 667p xd, while those in Carlton retreated 19 to 778p xd. Analysts were, however, sceptical, saying it is an old story, and one said: 'If it is plausible it is a long way off.'

Thorn EMI continued Friday's bounce, shrugging off recent weakness, and added 17 at 859p.

British Gas touched an all-time high of 303p before easing back to close a net 3 1/2 up at 301 1/2 p, after the call by Ofgas, the gas industry regulator, for a break-up of the company into 12 independently owned regional gas supply companies.

De La Rue staged a strong rally after the recent bout of weakness, closing a net 18 higher at 672p.

BT moved up 5 1/2 more to 423 1/2 p, with marketmakers sensing that the campaign to sell the government's remaining 21.8 per cent stake - labelled BT III - is beginning to warm up.

Ferranti was the market's most heavily traded stock, with 21m shares changing hands following strong hints that the group will be a major beneficiary of the huge Al-Yamamah defence contract with Saudi Arabia. Ferranti closed 1 1/2 firmer at 15 1/4 p.

Electrocomponents climbed 8 to 383p and Farnell 3 to 360p after Hoare Govett reaffirmed its strong buy stance on both stocks and upgraded its profits forecast for the latter. Citing good growth in sales during the past six months, Hoare increased its current year forecast for Farnell from Pounds 56m to Pounds 59m and that for next year from Pounds 59m to Pounds 62m.

Shares in engineering company James Wilkes jumped 18 to 66p in heavy trading of 2.2m shares as speculation of a bid from Suter swept through the market.

Shortly after the market close, it was announced that Suter had indeed been the day's big buyer and now has an 8.9 per cent stake in the engineering group. It said, however, that it had taken no further decisions about further action. Shares in Suter closed unchanged at 135p.

Favourable weekend press comment boosted TI Group and the shares moved 8 ahead to 298p in trade of 2m.

Shares in British Aerospace were weak and closed at 261p xd as analysts reflected on Friday afternoon's meeting with the company, the second meeting following last week's results. One aerospace watcher reflected: 'The company still has a lot to do with little room to manouevre given the poor balance sheet.' Rolls-Royce eased 1 1/2 to 132p in sympathy.

The view that Cadbury Schweppes was not about to buy chocolate maker Terrys, funding the acquisition through a rights issue, continued to gain ground and the shares hardened 5 to 471p, with turnover reaching 3.9m by the close. Many expect good results when the group reports figures next week, but several analysts remain negative and have suggested that current year earnings are likely to suffer as a result of a large rise in raw material prices.

Among the food retailers, Hillsdown Holdings and Wm Morrison Supermarkets were wanted. The former, which reports figures next week, added 3 at 161p and the latter gained 3 at 161p.

NEW HIGHS AND LOWS FOR 1992/93

NEW HIGHS (236).

BRITISH FUNDS (39) OTHER FIXED INTEREST (3) African Dev. 11 1/8 pc '10, Asian Dev. 10 1/4 pc '09, Hydro Quebec 15pc '11, AMERICANS (10) Allegheny & Western, BellSouth, California Energy, Colgate-Palmolive, Gillette, NYNEX, Pennzoil, Southwestern Bell, Tenneco, US West, CANADIANS (1) Trans. Can. Pipe BANKS (7) ABN, Abbey Natl., Bk. Scot. 9 1/4 pc Pf., Deutsche, HSBC, Natl. Aust., Standard Chartd., BREWERS (1) Holt (J), BLDG MATLS (3) Lafarge, Lilleshall, Sheffield Instls., BUSINESS SERVS (10) ADT, Capita, Davis Serv., Hutchison Whampoa, Inchcape, Rentokil, Rolfe & Nolan, Salvesen (C), Sherwood, Wills, CHEMS (4) BASF, BTP, BTR Nylex, European Colour, CONGLOMERATES (1) CSR, ELECTRICALS (3) ASEA B, Ericsson, Kenwood, ELECTRICITY (7) Manweb, Midlands, Natl. Power, Northern, PowerGen, Seeboard, Yorks., ELECTRONICS (7) Electrocomps., Lexicon, Macro 4, Polar, Radius, Sage, Trace, ENG AERO (1) Hunting 8 1/4 pc Pf., ENG GEN (4) Fairey, Mayflower, Senior, TT, FOOD MANUF (4) Acatos & Hutch., Banks (Sidney C), Unilever, Do N/V, FOOD RETAILING (3) Greggs, Iceland Frozen, Park, HOTELS & LEIS (4) Owners Abroad, Do 9 3/4 pc Pf., Pelican, Stanley, INSCE BROKERS (1) Lloyd Thompson, INSCE COMPOSITE (3) Allianz, GRE, Royal, INSCE LIFE (4) Britannic, Lon. & Manchester, Refuge, Utd. Friendly, INV TRUSTS (52) MEDIA (8) Adscene, Avesco, Harrington Kilbride, Headline, Johnston Press, News Corp., Sterling Publs., Watmoughs, MERCHANT BANKS (5) Barings 8pc Pf., Close Bros., Rea Bros., Schroders, Do N/V, MTL & MTL FORMING (3) Ash & Lacy, Billiam (J), Clayhithe 9 1/2 pc Cv. '00-01, MISC (6) Alumasc, Heritage, Holders Tech., LGW, Ricardo, Silentnight, MOTORS (1) Culver, OIL & GAS (6) Aran Energy, British Gas, NZ Oil, Pict, Ramco, Santos, OTHER FINCL (5) Govett, Invesco MIM, Do 9pc '95-00, Oceana, Secure, OTHER INDLS (3) BH Prop., Pacific Dunlop, Wilshaw, PACKG, PAPER & PRINTG (4) Bowater, Brit. Polythene, Jarvis Porter, NMC, PROP (5) Brixton Est., Daejan, Lend Lease, Peel, Slough 6pc Cv. '03, STORES (3) Courts, French Connection, GUS, TELE NETWORKS (1) Cable & Wireless, TEXTS (3) Alexandra Workwear, Allied Text., Usher (F), TRANSPORT (3) Eurotunnel Units, Manchester Ship Canal, Mersey Docks, WATER (3) Cheam, East Surrey, Mid Kent, MINES (5) CRA, Kidston, North Broken Hill, Sons Gwalia, Western.

NEW LOWS (13).

BLDG MATLS (1) Johnston, CHEMS (1) Anglo Utd., CONTG & CONSTRCN (2) CRP, Lon. & Clydeside, ENG GEN (2) Beauford, Torday & Carlisle, HOTELS & LEIS (1) Jurys, INV TRUSTS (2) Derby Inc., SPLIT Inc., OTHER FINCL (1) Cambridge, PROP (2) High-Point, Warnford, MINES (1) Joel (HJ).

Other market statistics, Page 25

Tate and Lyle Owners Abroad Group Abbey National General Accident Prudential Corp Airtours Rank Organisation Carlton Communications Electrocomponents British Aerospace Cadbury Schweppes GB United Kingdom, EC P603 Savings Institutions P6231 Security and Commodity Exchanges P2062 Cane Sugar Refining P6411 Insurance Agents, Brokers, and Service P4724 Travel Agencies P4725 Tour Operators P7011 Hotels and Motels P7812 Motion Picture and Video Production P5063 Electrical Apparatus and Equipment P208 Beverages P2064 Candy and Other Confectionery Products P3724 Aircraft Engines and Engine Parts P367 Electronic Components and Accessories CMMT Comment & Analysis MKTS Market data P603 P6231 P2062 P6411 P4724 P4725 P7011 P7812 P5063 P208 P2064 P3724 P367. The Financial Times London Page 36 1850
London Stock Exchange: Equity futures and options trading Publication 930302FT Processed by FT 930302 By TERRY BYLAND

DERIVATIVES markets provided the driving force behind the rise in the FT-SE 100 Index to a new closing peak yesterday, but appeared to lose heart towards the end of the day, writes Terry Byland.

The March contract on the FT-SE Index set the pace, opening with a premium of around 10 points against the cash market, a strong performance compared with a discount of around 4 points on the fair value calculation which allows for carrying costs and dividend flows on the basket of Footsie stocks making up the contract.

A healthy arbitrage opportunity between futures and cash was seized by some UK houses. However, futures traders said that business in their market was not particularly heavy - the March contract finally traded 2,884 contracts, an unimpressive total.

The contract held its premium at the official close when persistent selling by a Scandinavian bank was counteracted by demand from locals, or independent traders. After the offical close, however, the contract slipped back further from the day's peak to show little change from the final reading on the FT-SE Index itself.

Traded options business fell to 18,536 bargains from nearly 30,000 on Friday, with the FT-SE trading only 7,093 and the Euro FT-SE 1,017. Asda headed the individual stocks list with 1,049 lots.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 36 247
London Stock Exchange: New closing peak for the Footsie Publication 930302FT Processed by FT 930302 By TERRY BYLAND, UK Stock Market Editor

THE UK stock market moved comfortably to a new peak yesterday, encouraged by favourable comments on the outlook for German interest rates by Mr Helmut Schlesinger, the Bundesbank president, but it left share traders unsure whether the new ground had been securely captured. The driving force came from stock index futures, and genuine investment interest in equities was undramatic.

After opening lower on ex-dividend adjustments in nine stocks in the Footsie list, the market turned sharply higher at 8.35am when the March contract on the FT-SE 100 Index started trading with a burst of strength.

The previous closing high of 2,873.8 on the Footsie was quickly left behind and a gain of more than 16 points raised hopes that the existing intra-day peak of 2,900.1 might be challenged.

It was soon clear, however, that there was insufficient institutional demand to push the market above the mid-morning level of 2,884.9. Ex-dividend changes held the Footsie back by about 7 points and, although the March future contract maintained a good premium, the stock market settled down for a closing reading on the FT-SE 100 of 2,882.6 to leave an advance on the day of 14.6.

At least one basket trade - a series of deals between the futures sector and the underlying blue chip stocks - was identified, but traders described the session as 'essentially boring'. With Wall Street a mere 5.68 Dow points ahead in UK hours, the London market was lethargic in the final hour of business.

Seaq volume of 535.1m shares fell short of Friday's total of 671.3m, which was worth Pounds 1.41bn in retail terms. Non-Footsie stocks made up around 67 per cent of yesterday's Seaq volume, and the FT-SE Mid 250 Index gained 13.6 to end at 3,049.7, just short of its all-time high.

In reviving optimistic views on the interest rate outlook, the stock market chose to focus on Mr Schlesinger's forecast after last weekend's meeting of Group of Seven finance ministers of a decline in German money market rates. It also elected to ignore Mr Lamont, the UK chancellor of the exchequer, who said following the same meeting that he did not envisage cutting UK rates at present. Stock market traders saw the firmness of sterling as an encouraging sign that the chancellor will feel able to cut rates around Budget Day, March 16.

The first day of the new equity market account was also featured by caution ahead of the continued flow this week of trading statements from blue chip British companies. Abbey National, Fisons, General Accident and BICC are reporting this week and Thursday brings the important trading and dividend statement from Barclays Bank. Several of these names are also on the market's list of possible fund-raisers by means of rights issues in the equity market.

Shell, Rank Organisation and Carlton Communications all took their ex-dividend moves badly yesterday. With these technical factors now taken aboard, the focus today is likely to be on the March stock index future. Traders will be watching closely to see if the FT-SE 100 Index can break through 2,900 convincingly; the March contract remained well short of this level in late trading yesterday.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 36 566
World Stock Markets (America): Friday's blast leads to dull equity trading Publication 930302FT Processed by FT 930302 By NIKKI TAIT NEW YORK

Wall Street

US SHARES lost ground yesterday afternoon after starting the day on a modestly firmer note, with some traders suggesting that Friday's bomb blast at the World Trade Center was having a delayed psychological effect on the equity market, writes Nikki Tait in New York.

Although there was no direct impact from the blast on either the New York Stock Exchange or the American Stock Exchange, which are housed in a different part of Manhattan's financial district, some market participants said the explosion underlined the area's vulnerability to terrorist attack. Dealing yesterday morning began quietly, and end of day volume was somewhat below recent levels.

The Dow Jones Industrial Average was finally down 15.40 at 3,355.41. The Standard & Poor's 500 lost 1.37 at 442.01, while the American SE composite was 0.70 firmer at 407.54. The Nasdaq composite shed 1.26 to 669.51. Trading volume on the New York SE was 237m shares.

The only economic data yesterday had little influence on the market. The National Association of Purchasing Management's survey of business activity in February showed the first decline since September, with the index standing at 55.8 last month compared with 58 in January.

Many of the most actively traded 'mainline' stocks were mixed throughout the day. Wal-Mart Stores gained Dollars 1/2 at Dollars 33 and IBM rose Dollars 3/8 to Dollars 54 3/4 . Two of the drug stocks rallied, Glaxo improving Dollars 3/8 to Dollars 19 1/4 and Merck Dollars 1 to Dollars 39 1/2 .

By contrast, Philip Morris continued to feel the weight of worries about a tobacco tax and ended Dollars 1 7/8 lower at Dollars 65 1/4 . Compaq Computer also declined sharply, by Dollars 3 3/8 to Dollars 41 7/8 , while Chrysler slipped Dollars 3/8 to Dollars 39 1/4 .

Among some of the smaller stocks, Thermedics, a bomb detection equipment maker, rallied in the wake of the World Trade Center blast, by Dollars 1 5/8 to Dollars 13 1/2 . Sensormatic climbed Dollars 2 1/4 to Dollars 35 1/8 on news that Wal-Mart, the nation's top-selling retailer, plans to install the company's electronic article surveillance system in more than 100 additional stores.

Canada

TORONTO stocks closed mixed for the third consecutive trading day in active trading. The TSE 300 index lost 19 points to 3,432.7, but rises outnumbered falls by 333 to 288 after volume of 44.2m shares.

The mining sector posted the day's biggest loss - 1.69 per cent. Alcan Aluminium, which said it has formed a 50:50 joint venture with a Fiat subsidiary to produce components for the automotive industry, declined CDollars 5/8 to CDollars 23 3/8.

US United States of America CA Canada P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 33 484
World Stock Markets: Brazil Publication 930302FT Processed by FT 930302

SAO PAULO dropped by 5.5 per cent yesterday as investors continued to sell after the resignation of Mr Paulo Haddad, Brazil's economy minister. At the close the Bovespa index was 777 points lower at 13,267.

Brokers said the market was anxious about inflation, currently running at around 27 per cent a month, the timing of a new economic programme and the possibility of a delay in Brazil's imminent talks with the International Monetary Fund.

BR Brazil, South America P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 33 104
World Stock Markets (Asia Pacific): Tokyo Steel earnings downgrade leaves Nikkei lower Publication 930302FT Processed by FT 930302 By EMIKO TERAZONO TOKYO

FEARS over lower corporate earnings, triggered by a Nomura Research Institute (NRI) report, unnerved investors and share prices finished lower after thin trading, writes Emiko Terazono in Tokyo.

The Nikkei average closed 73.75 down at 16,879.60 after a day's high of 16,971.00 and low of 16,821.31. The index firmed in early trading on buying of telecommunications stocks, but fell later on selling prompted by fears over lower corporate profits.

Volume dwindled to 170m shares from 266m, while declines led advances by 664 to 265, with 198 issues unchanged. The Topix index of all first section stocks shed 7.96 to 1,276.25, and in London the ISE/Nikkei 50 index eased 0.50 to 1,027.03.

A report by Nomura Research Institute, projecting that Tokyo Steel, a leading electric furnace steel maker, would fall into the red next fiscal year, prompted heavy selling. Investors were shocked by the report, as the company has been a market favourite due to its high profitability relative to blast furnace steel makers.

NRI revised its earnings forecast for Tokyo Steel to a pre-tax loss of Y3.5bn from a pre-tax profit of Y20bn for the year ending March next year, stemming from a plunge in demand for steel bars. NRI said Tokyo Steel could cut its dividend as a result of the loss.

Tokyo Steel dropped Y370 to Y2,130, while other electric furnace steel makers also lost ground. Toa Steel fell Y64 to Y919 and Yamato Kogyo Y100 to Y1,100. Blast furnace steel makers were also weak, Nippon Steel losing Y5 to Y292.

Nippon Telegraph and Telephone gained Y15,000 at Y631,000 on active buying. The issue has risen 6.9 per cent over the past month on reports that the telecommunications group wants to raise its call rates.

Showa Shell Sekiyu, the oil refiner which came under heavy selling pressure last week on its huge foreign currency loss, fell a further Y26 to Y775.

In Osaka, the OSE average dipped 59.13 to 18,046.48 in volume of 48.1m shares. Trading on the OSE surged 30.5 per cent last month from January to 1,297.4m shares. OSE officials said that active cross trading, or selling and buying back shares to realise profits on stock holdings, ahead of the March financial year-end had pushed up activity.

Roundup

WITH THE exception of Bangkok and Singapore, the region showed strong performances yesterday.

BANGKOK saw the banking sector lose more than 5 per cent on rumours that Bangkok Bank was facing substantial bad debts. The SET index closed 27.13, or some 3 per cent, lower at 910.52 in turnover of Bt4.1bn.

The bank issued a statement denying the rumours, which had started to circulate after last Thursday's announcement of a capital increase from Bt10bn to Bt20bn. The shares weakened Bt8 to Bt115.

HONG KONG finished near to its record peak as investors began to anticipate good annual results due later this week. The Hang Seng index climbed 46.83 to 6,398.82 in turnover of HKDollars 4.4bn.

Hang Seng Bank advanced HKDollars 1 to HKDollars 64 and Hutchison Whampoa 20 cents to HKDollars 17.90.

AUSTRALIA closed at its highest level for seven months after the release of the lowest monthly current account deficit in five years. The All Ordinaries index appreciated 29.7 to 1,639.3 in turnover of ADollars 334.6m.

The banking sector was very strong, with NAB rising 25 cents to ADollars 8.40, Commonwealth 17 cents to ADollars 6.90 and Westpac 11 cents to ADollars 3.19.

SINGAPORE was weaker on profit-taking as many investors chose to ignore Friday's budget which came after the close. The Straits Times Industrial index slipped 5.60 to 1,658.90 in volume of 166m shares.

TAIWAN ended at an eight-month high, while turnover, at TDollars 78.4bn, was at its heaviest level since May, 1991. The weighted index rose 132.92, or 3 per cent, to 4,517.59.

The electronics sector was particularly active, with Acer up 80 cents at TDollars 25.60.

NEW ZEALAND was encouraged both by Australia's performance and by gains in FCL, Carter Holt Harvey and Telecom, as the NZSE-40 index gained 21.01 at 1,587.04 in low turnover of NZDollars 25m.

FCL moved ahead 10 cents to NZDollars 2.49, Carter Holt Harvey 5 cents to NZDollars 2.94 and Telecom 4 cents to NZDollars 2.69, but brokers noted that volumes were low.

MANILA eased after Eximbank, of Japan, suspended loans worth Dollars 400m for power projects pending a court ruling on a petition for an electricity rate increase. The composite index fell 24.98 to 1,494.39 in 408m pesos combined turnover.

BOMBAY retreated sharply for the second consecutive trading session as the market reacted to disappointments over the national budget announced on Saturday. The BSE index closed at 2,571.18, down 81.22 or 3.1 per cent, as brokers said that the biggest disappointment in the budget was that the government did not cut corporate taxes.

JP Japan, Asia HK Hong Kong, Asia AU Australia SG Singapore, Asia TW Taiwan, Asia NZ New Zealand PH Philippines, Asia IN India, Asia TH Thailand, Asia P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 33 860
World Stock Markets: US gains offset by Japan's losses Publication 930302FT Processed by FT 930302 By WILLIAM COCHRANE

Wall Street was determined last week to retrieve what it had lost in reaction to Mr Clinton's tax plans the week before, and even the bombing of the World Trade Centre on Friday could not prevent US equities posting a 2.2 per cent gain.

The Nomura Research Institute Europe is not impressed. It stands by a massively under-weight recommendation for the US market, says it is more than fully priced for 'good news' and that failure to break into new high ground after the drop in US long bond yields 'provides the clearest sell signal yet seen'.

Japan's 0.6 per cent decline was the main reason why the FT-Actuaries World Index was limited to a 1.0 per cent rise in local currency terms. Some observers are waiting for a slump in Tokyo when the fiscal year ends, investment books close and balance sheet ratios are set for the banks at the end of this month.

NRI Europe takes the contrary view. It says the deflationary impact of the rally in the yen will push the authorities towards further moves, 'this time massive', to reflate. A full one percentage point cut in the discount rate, and a Y20,000bn (Dollars 170bn) fiscal package would clearly not hurt the equity market, say the researchers: 'On the contrary, we suspect that the market is (finally) going to deliver the coup de grace to the bears by staging a sharp rally up through 20,000.'

The week's worst performer was Mexico, extending a period of relative weakness this year. Market professionals blame worries over prospects for the North American Free Trade Agreement and interest rates, the latter reflect-ing a national trade deficit which has increased five-fold since 1990.

In Europe, opinion gained strength towards the end of the week that a reduction in key German interest rates was again imminent. France, which advanced 2.2 per cent last week, is especially interest rate-sensitive.

------------------------------------------------------------------------ MARKETS IN PERSPECTIVE ------------------------------------------------------------------------ % change % change in % change in local currency** sterling** US Dollars** 1 Week 4 Weeks 1 Year Start of Start of Start of 1993 1993 1993 ------------------------------------------------------------------------ Austria +1.44 +7.14 -19.79 +6.60 +11.24 +4.55 Belgium +0.21 +2.34 +1.47 +7.74 +12.59 +5.82 Denmark -1.55 -1.99 -19.43 +8.78 +15.00 +8.09 Finland +3.60 +13.44 +10.45 +16.63 +8.98 +2.44 France +2.25 +11.54 +1.19 +8.05 +13.82 +6.98 Germany +0.50 +7.67 -5.61 +9.87 +15.34 +8.41 Ireland +3.69 +5.32 -8.59 +9.57 +6.34 -0.05 Italy +2.94 +7.27 +1.90 +18.80 +17.18 +10.13 Netherlands +1.05 +5.29 +5.88 +7.29 +12.44 +5.68 Norway -1.31 +0.46 -6.88 +1.90 +7.10 +0.67 Spain -0.13 +2.01 -8.19 +10.39 +14.27 +7.39 Sweden +0.55 +11.46 +19.12 +6.13 +2.19 -3.96 Switzerland -0.47 +1.23 +13.71 +1.90 +4.12 -2.15 UK +0.75 +2.15 +12.99 +1.50 +1.50 -4.60 EUROPE +0.88 +4.81 +5.31 +5.46 +7.59 +1.12 Australia +1.22 +5.80 -3.46 +3.69 +11.51 +4.80 Hong Kong +3.63 +11.78 +28.45 +15.58 +23.10 +15.70 Japan -0.62 -1.24 -15.48 -1.66 +10.70 +4.04 Malaysia +2.31 +6.20 +14.08 +5.71 +11.81 +5.09 New Zealand -0.70 +5.24 +0.29 +2.39 +11.02 +4.34 Singapore +1.32 +1.90 +3.61 +4.50 +10.84 +4.19 Canada +0.42 +3.88 -6.67 +1.91 +10.34 +3.70 USA +2.18 +0.98 +6.83 +1.68 +8.18 +1.68 Mexico -4.00 -10.56 -15.10 -14.94 -8.95 -14.42 South Africa -1.63 +0.02 -7.00 +5.32 +20.33 +13.09 WORLD INDEX +1.03 +1.56 -0.51 +1.92 +9.00 +2.45 ----------------------------------------------------------------------- ** Based on February 26th 1993. Copyright, The Financial Times Limited, Goldman, Sachs & Co, and NatWest Securities Limited. -----------------------------------------------------------------------

US United States of America JP Japan, Asia MX Mexico XG Europe P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 33 603
World Stock Markets: South Africa Publication 930302FT Processed by FT 930302

JOHANNESBURG saw modest gains, with De Beers improving R1.25 to R68.50 after rising 2.5 per cent in US trading on Friday. The overall index put on 5 at 3,423 and industrials 14 at 4,501, but golds suffered a loss of 12 at 960.

ZA South Africa, Africa P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 33 74
World Stock Markets (Europe): A question of timing for interest rate hopes Publication 930302FT Processed by FT 930302 By Our Markets Staff

HOPES of a further interest rate cut from the Bundesbank this week were behind yesterday's European gains, writes Our Markets Staff. However, Mr Richard Davidson, European equity strategist at Morgan Stanley in London, described the interest rate prospect as a 'red herring'.

The Bundesbank might well cut rates this week, he said, but the cut would have to be one of 100 basis points to underpin, for example, the French franc. Morgan Stanley is overweight in Europe, likes it a lot on the triple prospect of a stronger dollar, lower interest rates and, it hopes, resumed growth in 1994. But its time horizon is over twelve months, not four days.

FRANKFURT saw a four-year low in bond yields and the DAX index, 16.60 higher at 1,700.95, at its highest level since last July 17. Turnover eased from DM7.9bn to DM7.5bn.

The Bundesbank's average bond yield fell another 7 basis points to 6.44 per cent but, as with equities, investors were beginning to see the market as a little overbought by the afternoon, when German inflation figures came in a little worse than expected.

In equities, banks moved up strongly on the interest rate speculation, the critically acclaimed Commerzbank and Dresdner putting on DM6.50 to DM289.50, DM8.30 to DM404.80 respectively.

Carmakers and their component suppliers were more mixed, above average gains for Daimler and BMW being offset by a DM4.10 fall to DM274 for Volkswagen after a German weekly reported that VW could incur a first quarter operating loss of more than DM1bn.

PARIS broke the 2,000 barrier during the day on futures-led activity and strong foreign demand, especially from the US. However, some late profit-taking saw the CAC-40 index lose a little of its strength, closing 15.09 higher at 1,998.80 in turnover of some FFr3.7bn.

Construction and finance stocks were encouraged by the prospect of lower European interest rates with Bouygues gaining FFr20 to FFr658, SocGen FFr5 to FFr650, Suez FFr6.40 to FFr302.90, also ahead of tomorrow's results, and Axa FFr22 to FFr1,200.

With further warnings about a decline in European car sales Peugeot lost FFr1 to FFr638 and Michelin eased FFr4.90 to FFr186.20.

MILAN returned to insurers, which had closed strongly last week, on expectations that a cabinet meeting later in the day would approve plans for the introduction of private pension funds. Some observers believe that if the funds are created, possibly by the third quarter, the fresh inflow of funds into the equity market could amount to as much as L4,000bn. The Comit index closed up 17.98 at 531.19.

Generali led the way with a rise of L2,190 to L37,000 while Alleanza moved ahead L550 to L16,662.

Elsewhere, Fiat maintained its impetus with a gain of L160 to L6,000, and L6,060 on the kerb. Foreign interest in telecommunications was also seen with Stet fixing L146 higher at L2,399 and L2,405 after hours and Sip up L54 at L1,778.

ZURICH, too, featured financials on interest rate speculation, with insurers in the lead. The SMI index closed 21.1 higher at 2,120.5 with Winterthur bearers SFr70 better at SFr3,360 and Swiss Re certificates SFr14 higher at SFr604.

AMSTERDAM was flat, the CBS Tendency index closing at 99.9; but among the actives Unilever built on last week's solid gains following the release of a positive earnings statement, adding another Fl 3.20 to Fl 211.70.

Heineken, which issues 1992 results on Thursday, was another gainer, up to a record high during the session of Fl 188.50 before slipping back to finish up Fl 1.90 at Fl 187.60.

MADRID extended Friday's gains, banks leading with gains of 2 to 3 per cent in several, and the general index putting on another 3.77 to 236.66 in brisk turnover of Pta17.35bn, down from Pta5bn previously. The run of corporate results continued, with no shocks as yet to brake the market.

STOCKHOLM lost some its early gains on late profit-taking but the Affarsvarlden general index still managed a gain of 18.00 points to close at 1,018.10. Turnover was high at SKr873m after Friday's SKr807m.

Astra continued to recover some of last week's losses with a SKr7 rise in the B shares to SKr692. In the banking sector, Handeslbanken advanced another SKr3 to SKr72.

VIENNA finished at its highest close since last July with a rise in the ATX index of 20.21, or 2.4 per cent to 857.33.

The construction sector led the day's rally with Universale up Sch59, or 6.6 per cent at Sch949.

COPENHAGEN was pushed lower by reports that Carlsberg might be overvalued, and by losses at Unidanmark. The brewer's B shares fell DKr12.55 to DKr266 while Denmark's second largest bank group rallied to close unchanged at DKr135 after DKr132. The KFX index closed 0.69 lower at 81.48.

ISTANBUL fell 4.6 per cent as overnight and short term bond rates reflected the banks' need to meet some TL16,000bn in treasury bill auction payments on Wednesday. The market index was 273.52 lower at a provisional 5,650.09, taking its losses to 7.25 per cent since last Wednesday's record high.

----------------------------------------------------------------------- FT-SE ACTUARIES SHARE INDICES ----------------------------------------------------------------------- March 1 THE EUROPEAN SERIES ----------------------------------------------------------------------- Hourly changes Open 10.30 11.00 12.00 ----------------------------------------------------------------------- FT-SE Eurotrack 100 1161.81 1161.26 1161.47 1160.78 FT-SE Eurotrack 200 1214.41 1214.75 1215.03 1214.70 ----------------------------------------------------------------------- Hourly changes 13.00 14.00 15.00 Close -----------------------------------------------------------------------

FT-SE Eurotrack 100 1161.09 1161.06 1159.02 1158.20 FT-SE Eurotrack 200 1215.91 1215.79 1212.13 1213.57 ----------------------------------------------------------------------- Feb 26 Feb 25 Feb 24 Feb 23 Feb 22 ----------------------------------------------------------------------- FT-SE Eurotrack 100 1139.80 1125.06 1116.05 1119.41 1132.76 FT-SE Eurotrack 200 1194.07 1178.13 1172.14 1178.69 1190.84 ----------------------------------------------------------------------- Base value 1000 (26/10/90) ----------------------------------------------------------------------- High/day: 100 - 1162.89; 200 - 1217.16 Low/day: 100 - 1157.66 200 - 1211.60. -----------------------------------------------------------------------

DE Germany, EC FR France, EC IT Italy, EC CH Switzerland, West Europe NL Netherlands, EC ES Spain, EC SE Sweden, West Europe AT Austria, West Europe DK Denmark, EC TR Turkey, Middle East P6231 Security and Commodity Exchanges MKTS Market data STATS Statistics P6231 The Financial Times London Page 33 1009
Foreign Exchanges: Pound rallies against D-Mark Publication 930302FT Processed by FT 930302 By JAMES BLITZ

STERLING enjoyed a strong rally against the D-Mark yesterday, buoyed by the clear hope in both foreign exchange and money markets that the Bundesbank would cut its official discount rate at its council meeting on Thursday, writes James Blitz.

The UK currency advanced 3 1/2 pfennigs on the day, closing at DM2.3700. It also enjoyed a strong rise against the exchange rate index, which measures the pound's value against a basket of currencies. Sterling ended 110 basis points higher at 77.1.

The pound's strength was partly due to several factors specific to the UK. Mr Norman Lamont, the UK chancellor, suggested at the weekend that there would be no further cuts in UK rates for some time to come. Yesterday's data for UK money supply showed that M0 rose 0.7 per cent in February for a 4.8 per cent gain year-on-year, suggesting a rise in consumer spending.

But the main factor behind yesterday's improvement in sterling was the indication at the G7 finance ministers' meeting in London at the weekend that the Bundesbank was prepared to see further falls in money market rates.

Mr Helmut Schlesinger, the Bundesbank president, indicated a more relaxed attitude to falling interest rates. He said the changes in the minimum reserve requirements for German commercial banks should prompt a slight fall in money market interest rates.

Mr Schlesinger's comments helped to unwind tensions in the European exchange rate mechanism yesterday. The French franc firmed to a close of FFr3.394 against the German currency, from a previous FFr3.400.

However, there was concern last night that the market was too optimistic about the possibility of the officially posted rates being reduced.

Market participants expecting an easing in the repo rate, at which the Bundesbank provides wholesale funds to commercial banks, may be justified.

But Mr David Cocker, chief economist at Chemical Bank in London, said the main requirements of an easing in the discount rate were not in place. The German government's Solidarity Pact has not been agreed, wage agreements in the manufacturing sector have not been completed and yesterday's consumer prices figure, at a 4.2 per cent year-on-year rise, was not encouraging.

Yesterday's lacklustre performance by the dollar, which gained 1/2 pfennig against the D-Mark to finish at DM1.6465, may push the Bundesbank in the direction of cutting the discount rate. In New York the US unit advanced to DM1.6547.

One dealer said there was now less risk that an easing of policy would raise the prospect of imported inflation by depressing the German currency. But Mr Neil MacKinnon of Citibank in London remained sceptical. 'The market may be pricing in too much from the Bundesbank this Thursday,' he said.

GB United Kingdom, EC DE Germany, EC FR France, EC QR European Economic Community (EC) US United States of America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 27 493
Money Markets: Germany hints again Publication 930302FT Processed by FT 930302 By JAMES BLITZ

THE Bundesbank gave another subtle hint yesterday that German money market rates should come down this week after it issued rather less volume in its first tender for short-term liquidity paper than dealers had expected, writes James Blitz.

At the weekend, Mr Helmut Schlesinger, the Bundesbank president, revealed a slight change of mood over interest rate policy, suggesting that cash rates could come down as the Bundesbank's new rules on commercial banks' minimum reserve requirements take effect.

Yesterday was the first day that the new rules came into operation, and there was indeed a sharp drop in the value of call money. It fell from around the Lombard rate level of 9 per cent at the start of the day to 8.78 per cent by the close of trading, as more funds came into the market.

However, details of the issue of 3, 6, and 9-month bills may also have implied that rates could soften this week.

Miss Alison Cottrell of Midland Global Markets in London noted that the Bundesbank had said earlier this month that it would allot up to DM25bn in the first of these new allocations of short-dated instruments to the German money market.

Yesterday, the Bundesbank announced it would be allotting DM14.8bn of short-term funds. In Miss Cottrell's view, the central bank was therefore adding liquidity to the market. She believes the Bundesbank's repo rate should therefore come down 15 basis points to about 8.35 per cent later this week.

Dealers in Euromark futures contracts continued to assume that there would also be another cut in the Bundesbank's officially posted discount rate at this week's council meeting.

The March Euromark contract was little changed on the day, closing 3 basis points down at 92.05. At this level it assumes that three-month money in two weeks' time will be at 7.95 per cent, implying a reduction in the discount rate 'floor', currently at 8.00 per cent.

Reflecting the news from Germany, the March French franc contract rose 8 basis points on the day to finish at 88.55.

Sterling futures also gained ground: the March short sterling contract closed 2 basis points firmer at 94.06. Three-month sterling cash ended 1/8 percentage point softer at 6 per cent. This reflected the termination of 'end-of-month' factors, which always bring tighter conditions in wholesale cash markets.

Deutsche Bundesbank DE Germany, EC QR European Economic Community (EC) GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 27 428
World Commodities Prices: Market Report Publication 930302FT Processed by FT 930302 By REUTER

London robusta COFFEE and COCOA limped to a close little changed from opening levels and lamenting the delayed opening of their New York counterparts following the bomb at the World Trade Centre. 'It's been a waste of time this afternoon. Everyone's been sitting around, twiddling their thumbs,' one London cocoa dealer said. The weakness of the French franc against sterling was keeping origins sidelined and adding some light support. Otherwise, dealers were keeping one eye on pact talks in Geneva, where consumers and producers failed to agree last week on a compromise proposal. After separate group meetings, delegates said there were signs the gap between the two sides was beginning to narrow, but many traders were still cynical. Coffee traders were expecting little market-moving news from a two-day producer meeting in Mexico City in preparation for the next set of pact talks later this month. In New York arabica prices were sharply down after a delayed opening.

Compiled from Reuters

GB United Kingdom, EC P0179 Fruits and Tree Nuts, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices MKTS Market data P0179 P6231 The Financial Times London Page 26 201
Commodities and Agriculture: Base metals prices still in retreat Publication 930302FT Processed by FT 930302 By DAVID BLACKWELL

BASE METAL prices were in retreat on the London Metal Exchange yesterday, continuing on the downward path started last week.

Three-month copper led the way, breaking below Dollars 2,150 a tonne to close at a 3 1/2 -month low. Zinc and aluminium followed suit, falling to 15-month and three-month lows respectively, while nickel retreated back below Dollars 6,000 a tonne.

Mr Angus MacMillan, analyst with Billiton-Enthoven, part of the Royal Dutch/Shell group, said Chinese buying had kept three-month copper above Dollars 2,400 a tonne in January, while last month floods in Arizona and strikes in Mexico and at Papua New Guinea's huge Ok Tedi mine had kept the pot boiling above Dollars 2,200.

But any supporting factors had now evaporated, leaving the market with a pessimistic demand outlook for the next 16 months.

GNI, the London futures broker, said copper appeared to be on the brink of a major price collapse. Prospects for a pick-up in the US economy had been offset by news that European car production could fall by 1.5m units this year, and that Japanese car production was 16.5 per cent down in January.

Weak fundamentals, sluggish physical demand, rising stocks and negative chart formations paint a bleak picture for base metal prices, analysts suggest. While some production cuts have been announced for zinc and nickel, they have been too little too late. Cuts in copper production are unlikely as most producers are still making profits.

GB United Kingdom, EC P6231 Security and Commodity Exchanges P3399 Primary Metal Products, NEC COSTS Commodity prices P6231 P3399 The Financial Times London Page 26 281
Commodities and Agriculture: Moscow diamond exchange planned Publication 930302FT Processed by FT 930302 By LEYLA BOULTON MOSCOW

MR VALERY Rudakov, president of the Russian diamond producing company Almazy Rossii-Sakha, said yesterday he would soon set up an exchange in Moscow to sell rough diamonds to the country's diamond-cutting factories.

He said this would reorganise on market principles the system whereby only the Committee for Precious Stones and Metals could sell rough stones to cutters and industrial diamond users. In future, both the exchange, which would start up in a month or two, and the committee would be allowed to sell rough stones, he said.

One western expert said, however, that this only underlined the continuing rivalry between Mr Rudakov and Mr Yevgeny Bychkov, the head of the Committee for Precious Stones and Metals. The two men locked horns two years ago when they were respectively head of the old Soviet Glavalmazzoloto diamond and gold monopoly and the state depository Gokhran.

'Almazy Rossii-Sakha is supposed to have a monopoly to sell Russian rough to De Beers and factories. If the committee goes on selling, it will be an unusual situation,' said the western diamond expert. 'One side will have to win out in the end. While Rudakov is more savvy, Bychkov has good connections (in Russia).'

Under an agreement with De Beers that expires in 1995, Russia can sell only 5 per cent of its rough diamonds on international markets, though De Beers claims that additional quantities are smuggled out.

The committee wants to be in charge of selling this 5 per cent (designed to help Russia monitor the prices fetched by De Beers), while Mr Rudakov suggested that his exchange should carry out this function.

The western expert said that if given a monopoly on sales, the exchange could prevent Russian diamond-cutters from undermining western markets. This is because they would have to bid for stones and De Beers could compete as well, driving up the price of rough stones, and preventing cheap Russian cut-diamonds from indirectly depressing the rough-stone market.

Mr Rudakov said an additional exchange would be set up in Yakutsk, the capital of the autonomous republic which produces 98 per cent of Russia's diamonds, to sell diamonds to its fledgling diamond-cutting industry.

So as to make more of its diamond wealth, Russia is trying to improve its inefficient diamond-cutting industry by bringing in foreign partners. For the moment, however, prospective foreign partners have to choose between whether to team up with Mr Rudakov or Mr Bychkov.

RU Russia, East Europe P1499 Miscellaneous Nonmetallic Minerals P6231 Security and Commodity Exchanges TECH Services PEOP Personnel News Rudakov, V President (Russia) Bychkov, Y Head of the Committee for Precious Stones and Metals (Russia) P1499 P6231 The Financial Times London Page 26 461
Commodities and Agriculture: Aluminium smelters in 'poverty trap' Publication 930302FT Processed by FT 930302 By DAVID BLACKWELL

LOSS-MAKING ALUMINIUM smelters in the West are caught in a poverty trap that prevents them from cutting production in spite of low prices and record stocks, according to a report from the Commodities Research Unit.

The report estimates that more than half Western capacity is losing money on every tonne of production, while the flood of metal from the former Soviet Union shows no sign of abating.

However, while Western production needs to be curbed to bolster prices, companies are entirely rational not to close even their higher cost and economically vulnerable smelters, the CRU asserts. 'Temporary or partial closures are not an attractive option because of the high proportion of fixed or unavoidable costs within total operating costs.'

Permanent closure is also unattractive because in the current state of the market the liquidation value of a plant is small. In addition, any single closure would have little effect on the market, and the CRU believes it unlikely that producers will act collectively on a programme of closures.

The CRU is forecasting only a slow improvement in the market balance as the surplus production is eroded by a gradual increase in demand. It predicts that investment in new capacity will be delayed to the extent that prices will move sharply higher towards the turn of the century when the surplus is finally worked off.

Meanwhile, companies will be better off uprating and upgrading existing plant than investing in greenfield sites, the CRU suggests.

Survival in Aluminium Smelting. CRU International. 31 Mount Pleasant London WC1X 0AD.

XA World XV Commonwealth of Independent States P3334 Primary Aluminum CMMT Comment & Analysis MKTS Production P3334 The Financial Times London Page 26 294
Commodities and Agriculture (Farmer's Viewpoint): Touring Europe's green and set-aside land - A journey from Norfolk to Austria reveals the early evidence of farm policy reform Publication 930302FT Processed by FT 930302 By DAVID RICHARDSON THE DESTINATION

a heavily timbered hotel in a village surrounded by snow-covered slopes in the Arlberg region of Austria. The starting point - a somewhat less pretty but well-loved village in the middle of Norfolk, England. The journey - by road and sea-ferry with a few friends as anxious as I for a temporary change of scenery and the feel of some snow under their skis.

As we left home, much of the autumn-sown corn had begun to recover from indifferent planting conditions and the wettest early winter for years. But, ironically, the forecast was for snow and bitterly-cold weather, which we knew would put back that recovery as well as delaying spring-cereal planting. We would far rather go to find snow elsewhere and have it stay away from our farms in late February and early March.

On the journey to the ferry, the 15 per cent of East Anglian fields left unploughed so that weeds and other green material could regenerate naturally and qualify the land for voluntary set-aside - the most visible result of the 1992 reform of the European Community's common agricultural policy - was beginning to show itself.

And although the devaluation of the pound last autumn will result in increased compensation payments for UK farmers when they set land aside, none of us in the vehicle thought the extra cash made the exercise attractive.

An uneventful crossing from Felixstowe to Zebrugge was notable only for the fact that many of our fellow passengers were only making day trips to fill up their cars and vans with duty-free booze and cigarettes.

Then towards Brussels - the home of Eurocrats and the centre of agricultural decision-making. We did not go into the centre to throw eggs at the EC's Berlaymont building in the Rue de la Loi as some French farmers might have done. But we did say a few rude things about the lack of practicality and grass-roots agricultural knowledge of many of those who worked there as we took the many-bridged by-pass autoroute around the town.

Some might say, however, that we were cursing the wrong people. For about 50 km (30 miles) south-east of Brussels, just off the main road, is the Belgian University of Gembloux. Back in the early and mid-1970s, the professor of agriculture there, a man called Laloux, developed what he called 'blueprints' for the production of cereals, the purpose of these strict planting, fertilising and spraying programmes being to maximise yields.

Little calculation as to whether or not the exercise was profitable was necessary. Yield was everything and the community's guaranteed-price system ensured that profitability followed yields upwards.

Other experts in other areas of the EC followed the Laloux example and developed similar blueprints for their local conditions. And we farmers adopted them with enthusiasm; they meant, after all, that we made bigger profits. But they also led to increases in production, to unsustainable surpluses and eventually to the reform of the CAP.

Nobody uses the blueprints today - we cannot afford to. The emphasis is on minimising inputs and optimising yields rather than maximising production. A series of EC price cuts, which will deepen as CAP reform continues, has seen to that. And, to be fair, the result is a more sensible use of resources as well as being more environment friendly. But the Laloux blueprints of the 1970s were a necessary step to the fuller understanding of the physiology of cereals which, in turn, is helping us to survive the stringent economies of the 1990s.

Moving south, through the Lorraine, across the Maginot Line, into the Moselle and Alsace and towards Strasbourg, home of the European Parliament, I found the road is much improved since I last travelled it, presumably to make it easier for the hordes of EC officials who are forced to make the journey each time the Parliament meets.

The crops of autumn-sown grain were looking even sadder than those we had left at home. A few farmers were out with their fertiliser-spreaders trying to apply nitrogen to encourage them to grow. Here, too, the set-aside land is beginning to be obvious, although there is less of it than in East Anglia because of small-farm exemptions.

We passed through little Luxembourg on the way; not a particularly significant agricultural member of the community but the one that has provided the new Agriculture Commissioner, Mr Rene Steichen, in succession to Ireland's Mr Ray MacSharry, author of CAP reform, who has retired to Ireland.

Onwards, across the Rhine and to the forests and small farms of southern Germany. Most of the land was already covered with a light dusting of snow, so it was not so easy to make roadside judgments. Even so, the occasional farm cart, hauled by horses, reminded us of the wide range of living standards that still exist within our so-called Common Market. I remembered a speech I had heard in Berlin from out-going German farm minister and Bavarian farmer, Mr Ignaz Kiechle, only a few weeks ago at the opening of the Green Week, the annual agricultural jamboree. He had followed on to the platform Mr Jean-Pierre Soisson, the French Farm minister, who had declared unequivocally that there was no way France would accept the agricultural restrictions the US deal on the Uruguay Round of the General Agreement on Tariffs and Trade would impose. Mr Kiechle, in an attempt, no doubt, to cement Franco-German unity on such matters, never mind that it had already been accepted by other members, agreed that the agricultural aspects of the agreement would have to be re-negotiated.

As we crossed the border into Austria and out of the European Community, I could not help reflecting on the enormous and seemingly-insuperable differences that existed between the members of the so-called European family. And yet, in 1989, Austria applied for membership of that family, we are told with the agreement of a majority of its citizens, including most of its farmers.

Why? I know from previous visits that Austrian farmers receive 50 per cent more for their wheat than I do in the UK; those with dairy farms get twice as much for their milk; and instead of the detested set-aside, the Austrian government has decided to subsidise its farmers to produce non-food crops, such as oilseed rape, to refine into diesel fuel.

There is an apparent acceptance by Austrians that they have a duty to ensure that the 6.3 per cent of farmers in their population are as well off as the rest of the community. Oh, for a touch of that attitude in the UK]

Furthermore, partly because of a strong Austrian schilling and a weak pound, I have just paid a man who used to be just a farmer but is now the proprietor of a sports shop as well, the equivalent value of one tonne of UK wheat for a six-day ski-lift ticket and another man the world price of a tonne of wheat to hire a set of skis and sticks for the same period.

The village where I am staying is packed with people from all over Europe who are queueing up to do the same thing. Austria earns more per head from tourism than any European country, in or out of the EC, and a fair proportion of the benefit of that goes directly or indirectly to agriculture.

I can only ask again - why on earth do Austrians, and Austrian farmers in particular, want to risk losing their independence by joining the European Community?

AT Austria, West Europe GB United Kingdom, EC P011 Cash Grains P9641 Regulation of Agricultural Marketing CMMT Comment & Analysis P011 P9641 The Financial Times London Page 26 1315
Commodities and Agriculture: Peru re-awards oil field contract Publication 930302FT Processed by FT 930302 By SALLY BOWEN LIMA

PETROTECH International Corporation has won the new contract to operate the Petromar oil field off the northern Peruvian coast. The concession, formerly held by Belco, was taken over by the state after a 1985 contractual dispute. Settlement of an insurance claim by American International Group is still outstanding.

Petrotech, registered in Delaware, is part of the New York McAllister Brothers group. Its current operations focus on Venezuela and the Gulf of Mexico. Through a subsidiary, International Marine, it has maintained a presence in Peru for ten years, servicing the Petromar offshore field.

Two other international companies - Hallwood Petroleum of the US and Compania Naviera Perez Companc of Argentina - pre-qualified to bid. Petrotech will take an average of almost 79 per cent of all crude produced, leaving 21 per cent for Petroperu, the state-run petroleum giant.

The concession for the 400-hectare lot Z-2B will run for ten years with an option to renew for a further ten. Output from the field has slumped since the Belco days, from a peak of 30,000 barrels a day to an all-time low last year of less than half that. In recent months, despite a dearth of equipment and spare parts, output has risen to 17,000 b/d.

The concession is an important step in the planned privatisation of Petroperu. According to Mr Jaime Quijandria, the company's president, 'the most attractive part of the field lies in the 50 per cent still unexplored. And while that exploration goes ahead, the new operating company will be earning cash from the half that's already working'.

Contract terms require Petrotech to drill at least 40 development wells over the next three years and five exploration wells by the year 2000. Petrotech officials estimated drilling costs at Dollars 80m and Dollars 20m respectively. The operator will also pay Petroperu Dollars 10m a year for the lease of existing assets. Another Dollars 30m to Dollars 60m will have to be spent on repairs and modernisation.

Meanwhile, other advances were made in the transformation Petroperu. Three weeks ago, New York-based Booz, Allen and Hamilton was contracted to advise the Peruvian government on an overall privatisation strategy for the oil sector. And ten days ago Great Western Resources, through its Peruvian affiliate, signed an exploration agreement with Petroperu for Block 65 in the Maranon basin. It is the company's first ever venture outside the US.

The Belco insurance claim remains unresolved. While AIG tacitly agreed to the re-leasing of the ex-Belco field, sources said that the dispute, involving Dollars 185m in compensation and already recognised by the Fujimori government, had by no means been dropped.

Petrotech International PE Peru, South America P1311 Crude Petroleum and Natural Gas P9611 Administration of General Economic Programs MKTS Contracts GOVT Government News P1311 P9611 The Financial Times London Page 26 483
World Commodities Prices: Tea Publication 930302FT Processed by FT 930302

Landed sales were good but with selective demand reports the Tea Brokers Association. The limited quantity of Assams sold readily at firm rates but South Indians were easier. Bright East Africans showed some irregularity at around last levels but medium and plainer descriptions were generally firm. Offshore good demand with prices mostly firm at previous rates. The highest price realised this week was 193p for a Rwanda pf. 1. Quotations quality 170p, nom good medium 155p, medium 140p, low medium 110p.

GB United Kingdom, EC P0831 Forest Products COSTS Commodity prices MKTS Market data P0831 The Financial Times London Page 26 110
Government Bonds: Gilts strengthened by a sharp recovery in sterling Publication 930302FT Processed by FT 930302 By RICHARD WATERS and KAREN ZAGOR LONDON, NEW YORK

GERMAN government bonds rose sharply yesterday on hopes of a cut in official interest rates by the Bundesbank on Thursday, dragging other European bond markets in their wake. UK government bonds were further helped by a sharp recovery in sterling, prompting longer-dated gilt price to rise by a point.

The yield on 10-year bunds fell to 6.66 per cent as prices jumped by half a point. The yield had broken below 6.75 per cent only last Friday, having stood at 7 per cent two weeks ago.

Comments made after the weekend meeting in London of G7 finance ministers were the cause of the continuing enthusiasm for German bonds, analysts said.

The beneficial effects of the German wage round, completed at the end of last week, had already been reflected in market prices.

However, several observers warned that the rally had been so strong in recent days that little short of a 50 basis point cut in official German interest rates this week, and a significant reduction in the Repurchase agreement rate, would meet the market's hopes.

'It's difficult to see what the Bundesbank can do to satisfy these expectations,' said Ms Alison Cottrell, of Midland Global Markets.

LONG-DATED gilts jumped by a point as sterling bounced from its recent lows, prompting speculation that foreign investors would soon start to return to the market.

There was further encouragement from official figures which showed that banks and building societies in the UK increased their holdings of gilts by Pounds 2.9bn during January, to Pounds 11.4bn, as the steepening sterling yield curve made longer-dated bonds more attractive.

This was likely to encourage the UK government to amend its funding rules to allow such purchases to count towards funding of the government's borrowing requirement, analysts said.

The strong rise in gilts prompted the Bank of England to issue four further tranches of tap stock, weighted towards the longer end of the yield curve: Pounds 400m of 7 1/4 per cent stock due 1998, Pounds 250m of 9 3/4 per cent stock due 2002, Pounds 250m of 8 3/4 per cent bonds due 2017 and Pounds 100m of 2 1/2 per cent index-linked gilts due 2013.

With market observers generally revising down their forecasts of the current year's borrowing requirement in the wake of good figures for January, such sales are likely to eat further into next year's PSBR.

OTHER European bond markets jumped on the hopes of a German rate cut and an easing of tensions within the European exchange rate mechanism.

French government bonds rose almost as sharply, though the yield spread between French and German bonds widened out slightly to around 90 basis points.

With elections later this month, the political risk presented by French bonds was likely to keep the yield spread against Germany at least at current levels, analysts warned.

An auction of French OATs later this week would also limit the gains on 10-year bonds, said Mr Philip Tyson, an economist at UBS Phillips & Drew.

US TREASURY prices moved broadly higher yesterday as the market paid more attention to the morning's purchasing manager's report than to Friday's explosion at the World Trade Center.

In late trading, the benchmark 30-year government bond was 25/32 higher at 103 21/32 , yielding 6.831 per cent.

At the short end of the market, the two-year note was up 3/32 to yield 3.858 per cent.

Volume, however, was light, reflecting the absence of the Cantor Fitzgerald inter-dealer broker screen, which was knocked out in Friday's bomb blast. In addition, some dealers reported having trouble settling Friday's trades

Bond market investors were encouraged by a report by the National Association of Purchasing Management which showed a drop in the business activity index to 55.8 in February from 58 in January. The decline was steeper than expected.

DE Germany, EC GB United Kingdom, EC FR France, EC US United States of America P6211 Security Brokers and Dealers MKTS Market data P6211 The Financial Times London Page 25 686
International Bonds: Borrowers kept on sideline by interest rate hopes Publication 930302FT Processed by FT 930302 By ANTONIA SHARPE

ONLY a handful of Eurobond issues surfaced yesterday, as the international bond market took a breather after several weeks of heavy new-issue activity.

Expectations that the Bundesbank would cut leading interest rates at its fortnightly meeting on Thursday kept borrowers on the sidelines, syndicate managers said.

However, new-issue activity is expected to pick up again quickly, with the market waiting for the Province of Ontario's first global Canadian dollar bond issue later this week. The province expects to raise a minimum of CDollars 1bn through the issue, which is likely to have a maturity of 10 years and a yield spread of around 90 basis points above comparable Canadian government bonds.

However, a decline in swap spreads in the Canadian dollar market has caused other potential issuers of Canadian dollar Eurobonds to reconsider their options, syndicate managers said.

Among yesterday's issues, ABN Amro Bank led a seven-year guilder Eurobond issue for itself, raising the amount to Fl 1bn from Fl 750m due to good demand. The bonds, which carry a coupon of 6 5/8 per cent, were priced to yield 17.5 basis points above the 9 per cent Dutch government bonds due 2000. When the bonds were freed to trade, the spread narrowed slightly.

An official at ABN Amro said the issue had been placed by mid-afternoon, mainly with institutions and banks in the Netherlands, Switzerland, Belgium, Luxembourg and Austria. He added that the bonds had been pitched at the seven-year area of the yield curve where supply was scarce. Recent guilder issues have been concentrated in the 10-year area.

Elsewhere, the Council of Europe re-opened its 9 per cent Ecu1bn Eurobond issue due 2001 and raised a further Ecu100m. The original issue was launched in November 1991. The new tranche was priced at 106.30 to yield 7.96 per cent. When the bonds were freed to trade, the price rose to 106.40 to yield 7.94 per cent.

An official at the lead manager, Goldman Sachs, said that the Council of Europe had been looking to re-open the issue for some time and that it had made sense to lock into current rates in view of the recent strength in the Ecu market.

Goldman Sachs also arranged a four-year Y30bn Eurobond issue for Mitsui Fudosan Company, Japan's largest commercial real estate developer.

The bonds, which carry a coupon of 4.3 per cent, were sold around par, within total fees of 1 5/8 per cent.

They were mainly placed with investors in the Asia Pacific region.

Late in the day, Electricite de France re-opened its FFr3bn zero-coupon Eurobond issue for the second time, and raised a further FFr1bn. The original issue of FFr2bn was launched in November 1991 and was increased by FFr1bn in November 1992.

The new tranche was priced at 49.50 to yield five basis points above the 8 1/2 per cent OATs due 2002.

The European Bank for Reconstruction and Development has raised more than half of its planned Ecu900m of borrowings for this year, Mr Rene Karsenti, treasurer, said yesterday. He added that the EBRD was looking closely at returning to the Ecu bond market, but that it could still achieve a lower all-in cost by borrowing in other currencies and swapping.

The EBRD's average borrowing costs last year, after swaps, amounted to 40 basis points below Libor, with an average maturity of seven years.

European Bank for Reconstruction and Development XA World GB United Kingdom, EC P6211 Security Brokers and Dealers MKTS Market data COMP Company News P6211 The Financial Times London Page 25 606
International Capital Markets: OECD highlights risk to corporate issuers Publication 930302FT Processed by FT 930302 By ANTONIA SHARPE

CORPORATE borrowers could be crowded out of the international and foreign bond markets by the heavy borrowing requirements of public sector entities, the Organisation for Economic Co-operation and Development (OECD) warns in its latest report on financial market trends.

However, even if the financing demands of the public sector remain heavy for a prolonged period, favourable market conditions may induce large corporate borrowers to lock in borrowing terms in those markets that are perceived to be near the bottom of the interest rate cycle.

'Even if this strategy may imply the acceptance of somewhat larger spreads relative to treasuries, its pursuit may prove profitable in a longer-term perspective,' the Paris-based OECD says. It adds that all available indicators support the view that the size of capital demand for 1993 will be much larger than in recent years.

According to the OECD, offerings by governments in the international and foreign bond markets rose to Dollars 64bn in 1992 from Dollars 43bn one year earlier, and accounted for 19 per cent of overall new issues of Dollars 334bn last year. This compared with a share of 14 per cent and 11 per cent in 1991 and 1990 respectively.

XA World P6211 Security Brokers and Dealers CMMT Comment & Analysis MKTS Market data P6211 The Financial Times London Page 25 234
International Capital Markets: German money markets lifted by new paper Publication 930302FT Processed by FT 930302 By RICHARD WATERS

THE development of the German money markets was given an added stimulus yesterday as the first issue of short-dated government paper, or bulis, coincided with the first issue of money market instruments from a German bank.

The Bundesbank sold DM14.8bn of three, six and nine-month paper, soaking up some of the extra liquidity created as a cut in German minimum reserve ratios took effect.

The change in minimum reserve policy, announced last month, released DM32bn to the banking system, which had previously been tied up in interest-free deposits with the Bundesbank.

The cut in minimum reserves on bank deposits to 2 per cent prompted Bayerische Vereinsbank to issue short-dated paper. It is the first German bank to take such a step.

The bank's paper has been timed to mature on the quarterly settlement days of the Euro-DM futures contract on Liffe, potentially making it a more useful instrument in interest rate risk management, said Mr Norbert Juchem, a deputy member of the board of managing directors.

The bulis auctioned yesterday attracted bids of more than DM30bn, helping to push the yield levels on the paper sold well below current yields on comparable short-term deposits. The DM4.7bn of three-month paper issued, for example, was sold at a yield of 7.86 per cent, below the 8.06 per cent deposit rate.

Some DM5.7bn of six-month bulis were sold at a yield of 7.52 per cent, with the DM4.4bn of nine-month paper giving a yield of 7.06 per cent.

'The auction went well, with a high level of bids,' said Mr Klaus Baader of UBS Phillips & Drew in London. He expressed surprise, though, that the three-month paper was yielding so much less than the three-month deposit rate.

Bayerische said its paper was trading late yesterday at a yield 1/8 point below the London Interbank Bid Rate (Libid), in line with price levels for commercial paper issued by such names as Daimler-Benz and the Bundespost.

Bayerische Vereinsbank DE Germany, EC P6211 Security Brokers and Dealers MKTS Market data COMP Company News P6211 The Financial Times London Page 25 363
International Company News: Teva 36% ahead on back of US sales surge Publication 930302FT Processed by FT 930302 By HUGH CARNEGY and AP-DJ JERUSALEM, TOKYO

TEVA, Israel's leading pharmaceutical manufacturer, reported net profits up 36 per cent to Shk87.7m (Dollars 31.7m) in 1992, due mainly to a surge in US sales which carried overseas turnover ahead of domestic for the first time.

Sales in the US, where Teva has been targeting growth for several years, rose by more than 30 per cent to account for some 35 per cent of total group sales of Shk1.09bn, which in turn were up by 23 per cent. Total overseas sales reached Shk560m, reflecting Teva's strategy of growing beyond the limited local market and establishing itself as one of Israel's leading technology-based exporters.

The company said Teva's concentration on generic and prescription drugs through its own manufacturing and through Lemmon, its US subsidiary, had enabled it to sustain strong overseas growth despite the generally weak economic background throughout much of the year.

Teva, which is listed on Nasdaq in the US, has put much of its effort abroad into the more homogenous US market. But it said it was now seeking to expand in Europe, which at present accounts for 10 per cent of sales. It has acquired companies in Italy and Germany, and says it is looking for further acquisitions to extend its penetration in Europe.

The inflation-adjusted results showed earnings per ordinary share at Shk3.34, up from Shk2.74 in 1991.

Green Cross, a Japanese pharmaceutical and blood-products concern, posted a 59 per cent fall in consolidated net profits to Y1.24bn (Dollars 10.5m) from Y2.97bn for the year to December, AP-DJ reports from Tokyo.

Sales rose 4.9 per cent to Y106.6bn from Y101.58bn, while pre-tax profits fell 15 per cent to Y5.3bn from Y6.2bn. Earnings per share fell 58 per cent to Y5.99 from Y14.35.

Green Cross Teva Pharmaceutical Industries IL Israel, Middle East JP Japan, Asia P2834 Pharmaceutical Preparations FIN Annual report P2834 The Financial Times London Page 24 337
International Company News: North Broken Hill Peko up 24% Publication 930302FT Processed by FT 930302 By KEVIN BROWN

NORTH Broken Hill Peko (North), the Australian resources group, has reported a 24 per cent increase in net profit to ADollars 52.3m (USDollars 36m) for the six months to the end of December.

However, the group said pre-tax profit fell by ADollars 25m to ADollars 113m, partly because of the cost of restructuring in the forestry and paper production divisions.

The improvement in net profit reflected a gain of ADollars 16.8m from the sale of shares and a reduction of ADollars 11.4m in net interest costs, which fell to ADollars 23.4m as a result of debt reduction and lower interest rates.

The board said second-half net profit should equal the first-half result, but warned that earnings would be affected by lower iron ore prices and difficult trading conditions facing the forestry and paper businesses.

At the operating level, the group said three of its four divisions suffered falls in pre-tax earnings. Warman International, the mining pump manufacturer, increased profit by 70 per cent to ADollars 14m. Sales fell 7 per cent to ADollars 751m.

North Broken Hill Peko AT Austria, West Europe P1044 Silver Ores FIN Interim results P1044 The Financial Times London Page 24 213
International Company News: New Zealand Refining improves 7% over year Publication 930302FT Processed by FT 930302 By TERRY HALL WELLINGTON

NEW Zealand Refining Company, which operates the Marsden Point Oil Refinery, has reported a 7 per cent rise in profits to NZDollars 53.02m (USDollars 27.77m) in the year to December 31.

New Zealand Refining is controlled by a consortium of Shell, BP, Mobil and Caltex, with 20 per cent held by the New Zealand public. The company is recommending a final dividend of 75 cents a share, making a full-year payment of NZDollars 1.25, up from 70 cents in 1991.

Total operating revenues rose to NZDollars 280.35m from NZDollars 275.2m, while operating profits advanced to NZDollars 79.76m from NZDollars 74.34m. Tax took NZDollars 26.73m compared with NZDollars 24.81m.

Fernz Corp, one of the biggest listed fertiliser companies in Australia and New Zealand, yesterday announced expansion into Malaysia, taking a controlling interest in Ancom, a Malaysian agricultural chemist, for NZDollars 12m.

Ancom Berhad is listed on the Malaysian Stock Exchange. Fernz is involved in industrial chemicals, timber treatment processing, and fertiliser making.

Fernz announced its first links with Ancom Berhad in 1991. The purchase of the Malaysian interests is through Fernz subsidiary Nufarm Energy. The agreement needs Malaysian government approval.

New Zealand Refining Fernz Corp Ancom Berhad NZ New Zealand MY Malaysia, Asia P2911 Petroleum Refining P287 Agricultural Chemicals FIN Annual report COMP Shareholding P2911 P287 The Financial Times London Page 24 241
International Company News: Robotics chief warns of tough 12-months Publication 930302FT Processed by FT 930302 By ANDREW BAXTER

EUROPE'S Dollars 500m robotics market is facing a tough year in 1993 because of the recession in Germany and reduced investment by the automotive sector, said Mr Bruce Potts, executive vice-president of Fanuc Robotics Europe.

But the market was likely to bounce back next year because of strong underlying demand for robots by European manufacturers keen to improve their productivity, he said.

Mr Potts was speaking in Coventry at the unveiling by Fanuc Robotics, the world's largest robot producer, of its new series of robot control systems.

The controller is a key plank in Fanuc's strategy to broaden the use of robots in non-automotive markets; in Europe, for example, about 60 per cent of the installed base of 50,000 to 60,000 robots is used by the motor industry.

It is also an important element in Fanuc's strategy to become the market leader in Europe, where, said Mr Potts, it runs a 'solid second' behind ABB Robotics.

In the past two years, the European robotics market has been relatively more resilient than other sectors of mechanical engineering.

Last year, the market was flat, with weakness in some countries offset by the effects of reunification in Germany, which accounts for about half the total market, and by carmakers' spending.

This year, said Mr Potts, the North American robot market will come out of recession and will be the best-performing of the major markets. The European market could fall from last year, but would still perform better than the recession-bound Japanese market.

Fanuc believes the new controller will have the same effect on the robot market as the 'graphical user interface' had on personal computers by making the robot easier to understand for users in areas such as welding, mechanical handling and painting.

DE Germany, EC XG Europe P3569 General Industrial Machinery, NEC CMMT Comment & Analysis P3569 The Financial Times London Page 24 328
International Company News: Comalco returns to the black Publication 930302FT Processed by FT 930302 By KEVIN BROWN

COMALCO, the Australian aluminium manufacturer, yesterday reported net profits of ADollars 42.5m (USDollars 29.54m) after abnormal items for the year to December, compared with losses of ADollars 72.2m in the previous year.

However, net profits before abnormal items increased by a more modest ADollars 18m to ADollars 39.6m, largely as a result of a lower tax bill. The group warned that it expected 'difficult' conditions to continue in the current year.

Comalco said the bottom-line result included an abnormal profit of ADollars 2.9m following a detailed review of asset values. The 1991 result included an abnormal loss of ADollars 93.7m caused by a ADollars 200m provision against asset values offset by a transfer of ADollars 106.3m from the group superannuation fund.

Mr Nick Stump, chief executive, said sales volumes had been reduced by difficult trading conditions. However, the impact was offset by a more competitive exchange rate, which helped sales increase to ADollars 2.1bn from ADollars 2bn.

Comalco said an improved result from Commonwealth Aluminium, a US subsidiary, was largely offset by lower aluminium and alumina prices. Aluminium prices averaged Dollars US1,279 a tonne, compared with USDollars 1,333 in 1991. The group said prices had averaged Dollars US1,227 this year.

'No major improvements in price and demand are likely to occur before 1994, but the longer-term outlook is sound as demand grows in the Asian economies and there is increased use of aluminium worldwide by the packaging and automobile industries,' Comalco said.

The directors raised the final dividend to 3 cents, fully franked, from 2 cents in 1991, making a total dividend of 5 cents, compared with 4 cents. Comalco is 67 per cent owned by CRA, the Australian resources group, which is 49 per cent owned by RTZ of the UK.

Comalco AT Austria, West Europe P3334 Primary Aluminum FIN Annual report P3334 The Financial Times London Page 24 327
International Company News: Wine export growth steadies SA Brewing earnings at midway Publication 930302FT Processed by FT 930302 By KEVIN BROWN SYDNEY

SA BREWING, the Australian food and industrial group, yesterday reported a 1.1 per cent increase in interim net profit to ADollars 57.15m (USDollars 39.72m) for the six months to the end of December.

The group said strong appliance sales, higher wine exports and lower interest costs offset poor results from beer and packaging operations. Sales increased by 7.3 per cent to ADollars 1.12bn.

Mr Ross Wilson, managing director, said the outlook for the second half 'looks reasonably favourable'.

Mr Wilson said wine exports were growing strongly. He forecast a significant increase in profits from the US following the rationalisation of the recently-acquired Mor-Flo water heater business.

The group's packaging margins came under pressure in the first half following the loss of a contract to supply cartons to Carlton and United Breweries, a subsidiary of Foster's Brewing Group.

The loss of the contract was reflected in the beverage and food division's reduced earnings before tax and interest, which fell to ADollars 36.8m, compared to ADollars 43.8m in the comparable period of the previous year.

The group said the lower contribution also reflected a fall of 6.3 per cent in the core South Australian beer market during the period, compared with a decline of 4.7 per cent in the national market.

SA Brewing said the contribution from the packaging division fell to ADollars 48.6m from ADollars 49.5m before tax and interest costs. The appliance division contrib-uted ADollars 33.8m, compared with ADollars 29.8m.

Mr Wilson said the group's balance sheet was strong, and confirmed that the board had considered a number of potential acquisitions.

The directors declared an unchanged dividend of 7.75 cents a share, fully franked.

SA Brewing shares closed 4 cents higher at ADollars 3.43 on the Australian Stock Exchange.

SA Brewing AU Australia P2082 Malt Beverages FIN Interim results P2082 The Financial Times London Page 24 328
International Company News: RH Macy to close five stores Publication 930302FT Processed by FT 930302 By NIKKI TAIT

R. H. MACY, the bankrupt New York-based department store group, says it is to close five of its underperforming department stores and six of its I. Magnin outlets, Nikki Tait reports.

The five department stores employed about 850 people and the annual revenues of the outlets was about Dollars 108m.

RH Macy US United States of America P5311 Department Stores COMP Company News RES Facilities P5311 The Financial Times London Page 23 90
International Company News: Severance costs push railway to heavy loss Publication 930302FT Processed by FT 930302 By BERNARD SIMON TORONTO

CANADIAN National Rail-ways, the government-owned railway company, expects to report 1992 losses of over CDollars 1bn (USDollars 800m), largely reflecting the cost of severance packages for about 11,000 workers. The previously-announced job cuts, which will cut CN's workforce by a third, are due to be implemented over the next three years.

But Mr Paul Tellier, who recently took over as CN president, said the entire CDollars 900m cost would be taken in the 1992 accounts. The company expects to pay workers an average of CDollars 80,000 each to entice them to give up contractual job security.

Both Canada's national rail companies, CN and Canadian Pacific, are in the throes of far-reaching retrenchment in an effort to improve their competitiveness against US railways and truck operators.

CP Rail has reported a 1992 loss of CDollars 343m, most due to restructuring charges, including the cost of reducing the size of train crews.

Mr Tellier predicted that CN would suffer a loss of about CDollars 70m for 1993 but would return to the black in 1994.

Besides the job cuts, CN and CP are anxious to accelerate rationalisation of their rail networks. This has been slowed by regulatory and political obstacles. Mr Tellier said CN was negotiating joint use of track with CP. It planned to sell parts of its network to short-line operators.

Canadian National Railways CA Canada P4011 Railroads, Line-Haul Operating COMP Company News P4011 The Financial Times London Page 23 260
International Company News: NWA offers staff equity for wage cuts Publication 930302FT Processed by FT 930302 By NIKKI TAIT and ROBERT GIBBENS NEW YORK, MONTREAL

NORTHWEST Airlines, the indebted US carrier in which KLM Royal Dutch Airlines holds a minority share stake, yesterday offered its employees a 20 per cent equity interest in the company in return for substantial wage conces-sions.

The company has been negotiating with representatives of the various labour unions and groups at Northwest. It said yesterday's proposal was 'the company's best offer for a revised compensation plan'. The lack of progress in the talks has prompted speculation that the airline might file for Chapter 11 bankruptcy protection, although Northwest has denied any such intention.

The carrier, the fourth largest in the US, said the labour cost reductions needed to be in force by the end of March. It asked labour leaders to agree to the plan by March 10. Northwest said it might 'fine-tune' its offer, but could not 'agree to material changes'.

The company is asking contract employees - including its pilots, flight attendants and mechanics - for cost savings of about Dollars 883m over a three-year period. Management and non-contract employees would contribute Dollars 92m. The savings would come from wage reductions, employee contributions to medical and dental insurance plans, and holiday accrual rate reductions.

In return, Northwest is offering employees a 20 per cent equity stake and three seats on a 15-strong board of directors. This would match the three representatives appointed by KLM, which would see its share stake diluted pro rata.

Once the employee wage concessions are in place, Northwest will attempt a financial restructuring. If it has not obtained Dollars 500m of new permanent capital by the end of June 1995, the employees' stake could potentially increase to 51 per cent of the equity. PWA, parent of Canadian Airlines, has sent a revised restructuring plan to senior creditors and aircraft lessors which reduces the total prepayment of claims through the issue of rights to buy PWA common stock, Robert Gibbens reports from Montreal.

The prepayment would be reduced from CDollars 506m (USDollars 400m) to CDollars 423m. Partly-secured creditors could also take prepayment in non-interest-bearing 10-year notes.

Holders of PWA subordinated debt, preferred and common stock, would also receive warrants to buy additional PWA stock.

Northwest Airlines US United States of America P4512 Air Transportation, Scheduled PEOP Labour COMP Shareholding P4512 The Financial Times London Page 23 406
International Company News: Marriott bondholders to push on with fraud claim Publication 930302FT Processed by FT 930302 By NIKKI TAIT

A GROUP of bondholders in Marriott Corporation, the US hotels and food services group which is planning to split itself into two separately-quoted companies, said yesterday it intended to step up its securities fraud litigation against the company, writes Nikki Tait.

The bondholder action is led by PPM America, part of the British Prudential insurance company's investment management division, which holds around Dollars 200m in Marriott bonds - largely on behalf of Jackson National Life Insurance Company, the Prudential's US insurance subsidiary.

The demerger scheme involves spinning off the more profitable operational businesses and leaving most of the group's debt, along with the property assets, in a separate company.

Marriott bonds dropped sharply as a result, although the group's shares have soared.

Some bondholders, including PPM America, sued Marriott, charging that the company failed to disclose its restructuring plan when it was selling new debt issues to investors last year.

Some of the big US institutional bondholders, however, are negotiating with Marriott, with a view to a settlement.

Marriott Corp PPM America US United States of America P7011 Hotels and Motels P5812 Eating Places P672 Investment Offices COMP Company News GOVT Legal issues P7011 P5812 P672 The Financial Times London Page 23 222
International Company News: Australian poll could unlock door to bank mergers - Kevin Brown analyses the prospects for financial services if John Hewson wins this month's elections Publication 930302FT Processed by FT 930302 By KEVIN BROWN

THE possibility of a conservative victory in Australia's federal election on March 13 raises the prospect of a radical shake-up of the troubled banking sector.

Mr John Hewson, leader of the opposition Liberal/National Party coalition, has yet to release a considered strategy for the financial services industry under a conservative government. But, as the coalition increases its lead in the opinion polls, attention is turning to the likely consequences of the defeat of the decade-old Labor government, now led by Mr Paul Keating.

The impact of a conservative victory would be felt first by the four trading banks - National Australia Bank (NAB), Westpac, ANZ and Commonwealth - and the two big life insurance institutions, AMP Society and National Mutual.

Merger negotiations between the big six have been banned since 1990, when Mr Keating, the then treasurer, (finance minister) unexpectedly blocked a proposed merger between ANZ and National Mutual.

Mr Keating's sought to prevent a diminution of competition within and between the bank and insurance sectors. However, Mr Hewson and Mr Peter Reith, the opposition's candidate for treasurer, have promised that merger proposals would be considered 'on their merits'.

Officials say Mr Hewson believes a merger might strengthen competition by reducing the substantial differences in the financial strength of the banks.

Westpac and ANZ have sustained heavy losses since 1990 on loans secured against commercial property in the late 1980s, when both banks gave a higher priority to rapid asset growth than to credit control.

By contrast, NAB has benefited from its more conservative policy of lending against cash-flow and largely eschewing the risky corporate lending market in favour of housing loans.

Mr Don Argus, NAB managing director, has publicly played down prospects of a takeover offer, claiming the bank is fully occupied in digesting its recent ADollars 1.1bn (USDollars 765m) takeover of the Bank of New Zealand.

However, he is known to have looked closely at the merits of a bid for either Westpac or ANZ. A management committee is believed to be working on details of a bid.

Analysts say NAB is likely to be most interested in ANZ, which wrote off ADollars 1.9bn against bad and doubtful debts last year, but is widely believed to be on the road to recovery.

Westpac wrote off ADollars 2.6bn last year, but Mr John Uhrig, chairman, has said the bank's troubles may not be over. Mr Robert Joss, the chief executive recruited last month from Wells Fargo, is supervising a property review which may force further provisioning.

Meanwhile, National Mutual has indicated it is still interested in merging with one of the banks to gain access to a retail branch network, which offers a cost-effective means of marketing life policies.

Such a merger would give the bank involved greater access to Australia's growing market in compulsory superannuation contributions, which is emerging as the biggest growth area in financial services.

It might also provide an escape hatch for one of the weaker banks, probably ANZ, which had reached an advanced stage in negotiations with National Mutual when Mr Keating stepped in in 1990.

Westpac and AMP have a more limited marketing arrangement which might also provide a basis for a merger or close defensive alliance. AMP owns 15 per cent of Westpac, and the two groups share a number of directors.

An incoming conservative government could drop the ban on mergers without legislation, but a bid by any of the big six might be opposed by the Trades Practices Commission, the competition regulator.

The TPC can block mergers if it believes they would lead to 'a substantial lessening of competition'. The commission has not yet decided how this test would apply to the banks.

Mr Bernie Fraser, governor of the Reserve Bank of Australia (RBA), told a parliamentary banking inquiry last year he would not object to a banking merger on grounds of prudential supervision.

A coalition government would probably draw the line at a single merger. However, Mr Hewson might also be tempted to allow one of the weaker banks to be acquired by a strong overseas bank.

Such a takeover would end the balance sheet weaknesses undermining the sector. But it would require an amendment to the Bank Shareholders' Act, which would probably be opposed by the non-conservative majority in the Senate.

Mr Hewson has indicated a conservative government would sell the federal government's 70 per cent stake in Commonwealth, which was part-privatised by Labor last year.

Commonwealth has a strong balance sheet and the largest share of the loans and acceptances market. But it is unlikely to play much part in the rationalisation of the banking sector until after full privatisation, which could take some time.

The quoted banking sector will be expanded during the three-year term of the next parliament by the sale of state-owned banks in South Australia, Western Australia and New South Wales.

The coalition has also suggested during campaigning that it would set up an inquiry into the system of prudential supervision, described by Mr Hewson as 'haphazard'.

The inquiry would probably focus on the division of responsibilities between the RBA, which supervises the trading banks, and the state governments, which regulate building societies.

But it could be widened to review the roles of the Insurance and Superannuation Commission, which oversees the life offices, the Australian Securities Commission, the main corporate regulator, and the Australian Stock Exchange.

ANZ Bank Westpac Banking Corp National Mutual Life Association Of Australasia Commonwealth Bank of Australia National Australia Bank AMP Society AU Australia P6311 Life Insurance P6021 National Commercial Banks P9121 Legislative Bodies CMMT Comment & Analysis P6311 P6021 P9121 The Financial Times London Page 23 974
International Company News: Rail job cuts push CN to heavy loss Publication 930302FT Processed by FT 930302 By BERNARD SIMON and REUTER TORONTO

CANADIAN National Railways, the government-owned railway company, expects to report 1992 losses of over CDollars 1bn (USDollars 800m), largely reflecting the cost of severance packages for about 11,000 workers. The previously-announced job cuts, which will cut CN's workforce by a third, are due to be implemented over the next three years.

But Mr Paul Tellier, who recently took over as CN president, said the entire CDollars 900m cost would be taken in the 1992 accounts. The company expects to pay workers an average of CDollars 80,000 each to entice them to give up contractual job security.

Both Canada's national rail companies, CN and Canadian Pacific, are in the throes of far-reaching retrenchment in an effort to improve their competitiveness against US railways and truck operators.

CP Rail has reported a 1992 loss of CDollars 343m, most due to restructuring charges, including the cost of reducing the size of train crews.

Mr Tellier predicted that CN would suffer a loss of about CDollars 70m for 1993 but would return to the black in 1994.

Besides the job cuts, CN and CP are anxious to accelerate rail network rationalisation.

Canadian Imperial Bank of Commerce is to restructure its operations in the Caribbean, Reuter reports from Toronto.

Under the first stage of the plan, which is still subject to regulatory approval, the bank will create two new companies in Barbados, to be named CIBC West Indies Holdings and CIBC Caribbean. It will sell and transfer its branches and trust unit in St Lucia, St Vincent and Antigua to CIBC Caribbean. CIBC Caribbean will be wholly owned by CIBC West Indies.

In the second stage, CIBC West Indies Holdings will offer shareholders of the Bank of Commerce Trinidad and Tobago the chance to swap their shares for those of CIBC West Indies Holdings.

Canadian National Railways Canadian Imperial Bank of Commerce CIBC West Indies Holdings CIBC Caribbean Bank of Commerce Trinidad and Tobago CA Canada BB Barbados, Caribbean LC St Lucia, Caribbean VC St Vincent and the Grenadines, Caribbean AG Antigua and Barbuda, Caribbean P4011 Railroads, Line-Haul Operating P6021 National Commercial Banks COMP Company News P4011 P6021 The Financial Times London Page 23 382
International Company News: Chilean airline falls to Dollars 1.17m Publication 930302FT Processed by FT 930302 By REUTER SANTIAGO

LAN CHILE, the Chilean airline in which Scandinavian Airlines System has a 35 per cent stake, said it had net profit of Dollars 1.17m in 1992, Reuter reports from Santiago.

Profits were lower than the Dollars 3.5m posted for 1991, but Lan said they were made 'in the context of a deep crisis in the world aviation industry'.

Lan Chile CL Chile, South America P451 Air Transportation, Scheduled FIN Annual report P451 The Financial Times London Page 23 96
International Company News: Worldwide demand lifts Levi Strauss to new highs Publication 930302FT Processed by FT 930302 By LOUISE KEHOE SAN FRANCISCO

LEVI STRAUSS, the San Francisco-based clothing manufacturer, reported record sales and earnings for 1992 and became the first apparel company to exceed Dollars 5bn in annual sales.

The company said worldwide consumer demand for its denim jeans and US demand for its casual clothing lines were strong.

Levi Strauss Associates, the privately-held parent company of Levi Strauss & Company, reported net sales for the year of Dollars 5.6bn, a 14 per cent increase over the Dollars 4.9bn in 1991.

Net income for the year was Dollars 360.8m, up 1 per cent from Dollars 356.6m, despite a Dollars 158m pre-tax stock-option charge in the third quarter.

Excluding the charge, net income would have been approximately Dollars 475.8m, an increase of 33 per cent over 1991, the company said.

Record revenues and unit sales, a lower effective tax rate and lower interest expenses contributed to the income rise, the company said.

'Our results are particularly gratifying during a period of economic uncertainty in many of the markets that we serve worldwide,' said Mr George James, chief financial officer.

For the fourth quarter of 1992, Levi unveiled net sales of Dollars 1.6bn, which were up 15 per cent from the same period last year.

US United States of America P2325 Men's and Boys' Trousers and Slacks P2339 Women's and Misses' Outerwear, NEC FIN Annual report P2325 P2339 The Financial Times London Page 23 251
International Company News: Brazil state ore producer advances to Dollars 299.4m profit Publication 930302FT Processed by FT 930302 By BILL

COMPANHIA Vale do Rio Doce (CVRD), the state-controlled Brazilian mining company and a leading exporter of iron ore, unveiled profits of Dollars 299.4m for 1992, against a 1991 earnings figure of Dollars 251.9m.

Net sales were off slightly, to Dollars 2.28bn from Dollars 2.34bn in 1991.

This was due to a 4.9 per cent drop in mineral prices, and a 7 per cent decline in sales volume, said Mr Vitor Hallack, director of market relations.

He added that positive factors included a reduction in the company's debt, to Dollars 1.18bn from Dollars 1.54bn in 1991, and cuts in personnel expenditures of about Dollars 77m, owing to increased subcontracting of services.

Freios Varga, a leading Brazilian auto parts company, posted losses of Dollars 4.4m last year, about half of the Dollars 9.6m it lost in 1991.

The company blamed Brazil's economic and political instability, particularly high inflation and high interest rates.

Varga, which makes brakes and exports 35 per cent of its production, is completing the reorganisation of an Argentinian subsidiary, Frenos Varga.

Companhia Vale do Rio Doce Freios Varga BR Brazil, South America P1011 Iron Ores P3714 Motor Vehicle Parts and Accessories FIN Annual report P1011 P3714 The Financial Times London Page 23 223
International Company News: PWA plans rights issue to creditors and lessors Publication 930302FT Processed by FT 930302 By ROBERT GIBBENS MONTREAL

PWA, parent of Canadian Airlines, has sent a revised restructuring plan to senior creditors and aircraft lessors which reduces the total prepayment of claims through the issue of rights to buy PWA common stock.

The prepayment would be reduced from CDollars 506m (USDollars 400m) to CDollars 423m.

Partly-secured creditors could also take prepayment in non-interest-bearing 10-year notes.

Holders of PWA subordinated debt, preferred and common stock, would also receive warrants to buy additional PWA stock.

As part of the restructuring, employees would invest the equivalent of CDollars 207m via pay concessions and AMR of the US would invest CDollars 246m in Canadian Airlines for a 25 per cent voting interest.

PWA said that if the revised plan were approved by the senior creditors, then it could resume paying interest and amounts due to lessors on April 30.

Payments were halted on all non-operating debt last November while the restructuring plan was worked out.

PWA Corp CA Canada P451 Air Transportation, Scheduled COMP Company News FIN Share issues P451 The Financial Times London Page 23 195
International Company News: Nokia halves annual deficit to FM158m Publication 930302FT Processed by FT 930302 By CHRISTOPHER BROWN-HUMES STOCKHOLM

NOKIA, Finland's leading electronics and communications group, cut pre-tax losses to FM158m (Dollars 26.53m) last year from FM324m in 1991, as sales rose 18 per cent to FM18.2bn from FM15.5bn.

The group would have made a profit but for the performance of its consumer electronics division, where operating losses deepened sharply to FM783m because of worse-than-anticipated conditions in the European market.

However, profits rose substantially within telecommunications and mobile phones, and the group is confident of further progress this year. Nokia was heartened by the trend in its performance in the final four months, when operating profits amounted to FM440m compared with a FM71m loss in the same 1991 period.

This enabled the group to record an operating profit of FM288m for the whole year after 1991's FM96m loss. A further increase in operating profit is predicted for 1993, although the group is wary about forecasting an overall return to the black given continuing currency turbulence.

Nokia is planning additional rationalisation within consumer electronics this year to cut costs by at least a further FM200m. It is also looking to form alliances with other groups within the tubes and home electronics sectors.

'The difficult situation in the market place means internal measures alone are not enough,' said Mr Jorma Ollila, president and chief executive.

Sales at Nokia Telecommunications rose 73 per cent to FM3.21bn last year and operating profit amounted to FM427m. Mobile phones recorded a FM437m operating profit on a 45 per cent increase in sales to FM3.64bn. Consumer electronics saw a 9 per cent rise in sales to FM5.76bn. This is the first time the group has specified operating profit for each of its individual divisions.

The group said sales of mobile phones doubled, helping it to consolidate its position as Europe's leading mobile phone manufacturer.

The group loss after extraordinary items rose to FM723m from FM211m. The group made a FM332m profit on the sale of its shareholdings in the European soft tissue maker Jamont and a Finnish power company. But it is taking a FM342m provision to cover the costs of further rationalisation within consumer electronics this year. The FM2.00 per share dividend is maintained.

Nokia FI Finland, West Europe P36 Electronic and Other Electric Equipment P481 Telephone Communications FIN Annual report P36 P481 The Financial Times London Page 22 403
International Company News: Viag to hold payout despite setback Publication 930302FT Processed by FT 930302 By CHRISTOPHER PARKES FRANKFURT

VIAG, the German energy-based conglomerate, is likely to maintain its dividend despite a 9 per cent fall in profits last year.

The group, which last summer forecast higher earnings and its ninth consecutive pay-out increase, said yesterday that performance had been hit by the accelerating downturn in the second half.

There were no real signs of improvement in the German economy, although the company said it expected the worst to be over in some business areas in the second half of the current year.

Cost-cutting programmes and structural adjustments would continue, it added. Numbers employed rose 14 per cent to 84,200 during the year as a result of consolidating recent acquisitions, although on a like-for-like basis the workforce was cut by 3 per cent.

Net profits of DM370m (Dollars 225.4m), on sales up 3 per cent at DM24.3bn, were eroded by falling income from the can-making and trading interests. Results from the glass business, grouped under the Gerresheimer subsidiary, were 'heavily burdened' by over-capacity and import competition.

The rise in group turnover was largely attributable to the inclusion for the first time of sales from Viag's one-third stake in the Kuhne & Nagel shipping and freight concern.

Profits from chemicals, the group's third-largest sector after energy and aluminium, 'improved significantly', while sales fell from DM1.9bn to DM1.6bn.

Increased earnings were attributed to good demand for special products for the building industry and structural changes in the metallurgy business.

Restructuring also helped improve results in fire protection, where sales were virtually unchanged at DM1.4bn.

Deliveries of electricity and natural gas from the energy subsidiaries, which contributed DM3.6bn to group sales compared with DM3.2bn last time, were unchanged and earnings remained at the high level of the previous year.

Earnings from aluminium were also unchanged despite the impact on prices of shipments from the former Soviet Union.

VIAG DE Germany, EC P6719 Holding Companies, NEC P28 Chemicals and Allied Products P44 Water Transportation P4911 Electric Services P4923 Gas Transmission and Distribution COMP Company News P6719 P28 P44 P4911 P4923 The Financial Times London Page 22 362
International Company News: Devaluation hits Spanish utilities Publication 930302FT Processed by FT 930302 By TOM BURNS MADRID

SPAIN'S second-tier electrical utilities reported lowered results yesterday, reflecting the impact of two devaluations of the peseta in the final quarter of last year.

Union Fenosa raised its group profits by just 1.7 per cent to Pta19bn (Dollars 161m) despite raising its sales by 6.5 per cent to Pta308bn, Sevillana, which raised its sales by 6.6 per cent to Pta249bn, dropped its consolidated income by 3.3 per cent to Pta12.7bn, and Fecsa, which posted a 3.7 per cent fall in sales to Pta208.6bn, registered an 8.5 per cent fall in profits to Pta15.4bn.

They were penalised by the peseta devaluations of 5 per cent and then of 6 per cent in September and November respectively last year. Union Fenosa holds 33 per cent of its debt in foreign currencies and the proportion at Sevillana and Fecsa is 27 per cent and 25 per cent respectively.

Earlier, Iberdrola, the Spanish electricity producer, posted a 7.5 per cent drop in pre-tax profits to Pta78.5bn. The company, which has 31 per cent of its debt in foreign currencies, borrowed strongly in dollars and yen and it registered a year-on-year Pta50bn increase of its global debt at the end of last December.

In contrast, Endesa, Iberdrola's state-owned rival which has only 14 per cent of its debt in non-peseta denominations, posted net income of Pta106.2bn, a 13.6 per cent increase on 1991, and raised its dividend by the same percentage to Pta408 per share.

Endesa's profits were in line with those of previous years and could fuel plans by INI, the state industrial holding, to place part of the 76 per cent stake it holds in the utility.

Union Fenosa Iberdrola Endesa Sevillana de Electricidad ES Spain, EC P4911 Electric Services FIN Annual report P4911 The Financial Times London Page 22 314
International Company News: Thomson-CSF, Shorts in missile deal Publication 930302FT Processed by FT 930302 By WILLIAM DAWKINS PARIS

THOMSON-CSF, the French state-controlled defence electronics group, and Short Brothers, the Belfast aerospace subsidiary of Bombardier of Canada, yesterday agreed to join forces to make very short-range ground-to-air missiles.

The move sparked anger from Matra Defense, France's main private sector defence electronics group, against which the Thomson-CSF-Shorts joint venture will compete. Normally, the French defence industry avoids competing against itself, on national interest grounds.

Thomson-CSF and Short Brothers will have an equal share in the venture, to be called Shorts Missile Systems in the UK and Thomson Shorts Systemes in France. It will have a FFr1bn (Dollars 179m) annual turnover, representing one-fifth of the world market for this type of weapon, with a top range of 3km.

Thomson-CSF denied the venture would compete directly with Matra. Matra's Mistral used an infra-red guidance system which made it suitable for use against heat-emitting targets such as jet fighters, while Shorts' missiles were laser guided, and so more suitable for cooler targets such as helicopters, said a Thomson-CSF official.

Shorts will make the missiles, while Thomson-CSF will produce the electronics and guidance systems.

Thomson CSF Short Brothers Shorts Missile Systems Thomson Shorts Systemes FR France, EC GB United Kingdom, EC P3761 Guided Missiles and Space Vehicles COMP Strategic links P3761 The Financial Times London Page 22 231
International Company News: Unibank chief to quit as losses soar Publication 930302FT Processed by FT 930302 By HILARY BARNES COPENHAGEN

UNIBANK, the Danish bank, yesterday reported a 1992 loss of DKr4.66bn (Dollars 737m), compared with losses of DKr1.65bn in 1991. This is the biggest loss ever reported by a Danish bank.

Mr Hugo Schroder, chairman of the supervisory board, will resign at the bank's annual meeting in April 'as a consequence of the highly unsatisfactory result for the bank in 1992'.

The company will not pay a dividend for the second consecutive year.

The capital adequacy ratio at the end of the year was 11.6 per cent on a balance sheet which was slimmed from DKr263bn to DKr221bn. Equity capital declined from DKr15.4bn to DKr10.7bn while the total capital base was unchanged at DKr20.8bn.

Mr Thorleif Krarup, chief executive, said the bank did not expect to need new capital in 1993. He forecast a reduced loss and a moderate further reduction in the balance sheet for the current year.

He said that on an unchanged balance sheet total equity capital would need replenishing if the bank loses much more than DKr3bn in 1993.

The 1992 loss was caused by bad loss provisions of DKr6.28bn, up from DKr5.4bn in 1991, and a loss on the value adjustment of the securities portfolio of DKr492m compared with gain of DKr1.15bn in 1991. A loss of DKr656m, up from DKr487m in 1991, by the bank's London subsidiary, Unidanmark Holding, contributed to the group's loss.

The losses in London have arisen almost entirely as a result of property engagements.

The bank's forecast of a reduced loss in 1993 assumes unchanged interest rates and share prices (which fell by 25 per cent last year), continued slack demand for credit and high bad loss provisions.

Unibank DK Denmark, EC P6021 National Commercial Banks FIN Annual report P6021 The Financial Times London Page 22 316
International Company News: Viag to hold payout despite setback Publication 930302FT Processed by FT 930302 By CHRISTOPHER PARKES FRANKFURT

VIAG, the German energy-based conglomerate, is likely to maintain its dividend despite a 9 per cent fall in profits last year.

The group, which last summer forecast higher earnings and its ninth consecutive pay-out increase, said yesterday that performance had been hit by the accelerating downturn in the second half.

There were no real signs of improvement in the German economy, although the company said it expected the worst to be over in some business areas in the second half of the current year.

Cost-cutting programmes and structural adjustments would continue, it added. Numbers employed rose 14 per cent to 84,200 during the year as a result of consolidating recent acquisitions, although on a like-for-like basis the workforce was cut by 3 per cent.

Net profits of DM370m (Dollars 225.4m), on sales up 3 per cent at DM24.3bn, were eroded by falling income from the can-making and trading interests. Results from the glass business, grouped under the Gerresheimer subsidiary, were 'heavily burdened' by over-capacity and import competition.

The rise in group turnover was largely attributable to the inclusion for the first time of sales from Viag's one-third stake in the Kuhne & Nagel shipping and freight concern.

Profits from chemicals, the group's third-largest sector after energy and aluminium, 'improved significantly', while sales fell from DM1.9bn to DM1.6bn.

Increased earnings were attributed to good demand for special products for the building industry and structural changes in the metallurgy business.

Restructuring also helped improve results in fire protection, where sales were virtually unchanged at DM1.4bn.

Deliveries of electricity and natural gas from the energy subsidiaries, which contributed DM3.6bn to group sales compared with DM3.2bn last time, were unchanged and earnings remained at the high level of the previous year.

Earnings from aluminium were also unchanged despite the impact on prices of shipments from the former Soviet Union.

Viag, which has expanded rapidly since it was privatised in 1988, appeared last year to slow its acquisition programme and focus more sharply on consolidating its interests. The group spent less than DM600m on acquisitions last year, compared with DM2.3bn in 1991.

However, the creation of a new division, transport and logistics, to house the Kuhne & Nagel business suggests it has further ambitions in this area.

Capital investment rose 11 per cent to DM1.9bn last year, as the company completed a primary aluminium plant in Canada and its new drinks can works in Saxony-Anhalt.

VIAG DE Germany, EC P6719 Holding Companies, NEC P28 Chemicals and Allied Products P44 Water Transportation P4911 Electric Services P4923 Gas Transmission and Distribution COMP Company News P6719 P28 P44 P4911 P4923 The Financial Times London Page 22 457
International Company News: Repsol posts 1.8% advance ahead of further placing Publication 930302FT Processed by FT 930302 By PETER BRUCE MADRID

REPSOL, the Spanish oil and gas conglomerate being prepared for further partial privatisation by the Spanish government, yesterday reported a 1.8 per cent increase in net profits for 1992, to Pta71.43bn (Dollars 607m), despite a sharp drop in cash flow.

Repsol said it was delighted with the results, 'particularly if one compares them with the rest of the sector'. Operating profits fell nearly Pta10bn to Pta119.8bn, while cash-flow, after tax, fell 10.4 per cent to Pta154.06bn.

The Spanish government is planning to place up to 40m shares in Repsol - roughly 13.3 per cent of the group - with institutions in the Spanish and international markets before the end of May. The flotation could raise close to Dollars 1bn and, if fully used, will reduce the state's holding from 54.5 per cent to just over 40 per cent.

Repsol said it had managed to squeeze the most out of a difficult year thanks to good returns on some recent investments and the impact of a tough cost reduction programme. The group had shed nearly 2,000 jobs over the year, bringing the workforce to 19,632 people.

It posted a 77 per cent increase in operating profits to Pta18.6bn in its exploration and production division thanks, it said, to exploration successes and to a 20 per cent increase in crude production.

As expected, however, Repsol's troubled chemicals division continued to suffer along with the rest of the international chemicals industry, losing Pta7.9bn after making a meagre operating profit of Pta1.2bn in 1991.

The Repsol refining and marketing division saw operating income fall more than 16 per cent to Pta86.6bn partly because of new accounting rules, partly because it is having to shed service stations belonging to the Campsa group under EC monopoly rules and, lastly, because of tighter margins for refined products in international markets.

Lex, Page 18

Repsol ES Spain, EC P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining FIN Annual report P1311 P2911 The Financial Times London Page 22 351
UK Company News: ASW incurs Pounds 10.8m deficit Publication 930302FT Processed by FT 930302 By ANDREW ADONIS

CONTINUED PRESSURE on margins pushed ASW Holdings, the Cardiff-based steel and wire group, deep into the red last year, but the shares yesterday jumped 20p to 153p amid hopes of an upturn in steel prices.

The pre-tax deficit of Pounds 10.8m for 1992, struck after restructuring costs of Pounds 4.6m, compared with a profit of Pounds 2.3m.

The operating loss for the second half of 1992 was virtually the same as that for the first six months.

Turnover fell 6 per cent to Pounds 367.8m (Pounds 390.7m). Losses per share were 16.2p (1.9p).

The recommended final dividend is 3p, making 6p (9p) for the year.

Net borrowings were Pounds 17.2m, with gearing at the year end of 14.5 per cent.

Mr Alan Cox, chief executive, said 'abnormally low prices', at below 1982 levels, caused the poor outcome.

Nevertheless, the group maintained volumes and made a profit on its basic steel operations.

'We remain one of the lowest cost producers in Europe, and have have again improved our cost base.

'Last year prices were reaching loss-making proportions across Europe; now they are recovering, and I expect to see a real improvement in results for the next half,' he added.

With scrap prices up to about Pounds 70 a tonne from Pounds 53 at the start of the year, analysts estimated that margins for scrap-based products were improving markedly. Prices for other products - like wire rod and reinforcement bar in coil and length - were also rising.

COMMENT

ASW's reputation as a low cost producer remains untarnished despite yesterday's results, but with 40 per cent of its business on the Continent, in the immediate future it needs a recovery in European steel prices more than Mr Lamont's green shoots. Efforts to promote that recovery appear to be under way. But are they enough and will they be sustained? Regarding the state of Europe's steel industry, and the nervousness of the Commission in tackling state aids in their numerous guises, it is hard to be confident on either front. But with analysts predicting a 1993 profit of Pounds 12m pre-tax, and a prospective p/e of 15, things are looking up short-term.

ASW Holdings GB United Kingdom, EC P331 Blast Furnace and Basic Steel Products FIN Annual report P331 The Financial Times London Page 21 399
UK Company News: Gartmore American assets increase Publication 930302FT Processed by FT 930302

Gartmore American Securities, a split capital investment trust specialising in high yielding North American equities, reported net asset value per share of 43p at December 31 compared with 35.2p at March 31 1992.

Net revenue for the nine months to end-December was Pounds 842,000 (Pounds 1.11m) for earnings per share of 2.28p (3p). A third interim dividend of 1p has already been declared, payable on April 2.

Gartmore American Securities GB United Kingdom, EC P672 Investment Offices FIN Annual report P672 The Financial Times London Page 21 100
UK Company News: Sharp decline to Pounds 80,651 at Goodwin Publication 930302FT Processed by FT 930302

Goodwin, the Stoke-on-Trent engineering company, reported pre-tax profits for the six months to October 31 of Pounds 80,651, a little more than a third of the comparable Pounds 232,040.

Turnover fell 8 per cent, from Pounds 7.13m to Pounds 6.59m.

The company said that reorganisation had been undertaken to improve efficiency. Investment in exports remained high and as a result margins were unlikely to recover before the end of the year.

Earnings per share came out at 0.75p (2.16p).

Goodwin GB United Kingdom, EC P34 Fabricated Metal Products P35 Industrial Machinery and Equipment FIN Interim results P34 P35 The Financial Times London Page 21 120
UK Company News: Increased losses at CountyGlen Publication 930302FT Processed by FT 930302

Losses before tax at CountyGlen, the Dublin-based property investor and trader, rose from IPounds 153,000 to IPounds 170,000 (Pounds 175,000), for the six months ended October 31.

Directors stressed that the deficit mainly represented costs incurred in finalising agreements in the UK for CountyGlen to recover its Pounds 500,000 loan to the Videoplus distributors as well as write-offs of rent accepted by the company to obtain possession of the Blackrock site.

The company added that it was examining a number of merger and takeover suggestions but it was too early to bring them to shareholders. The shares have been suspended since October 20.

CountyGlen IE Ireland, EC P1531 Operative Builders FIN Interim results P1531 The Financial Times London Page 21 133
UK Company News: Platon repeats call for no action on bid Publication 930302FT Processed by FT 930302

Mr Robin Meyer, chairman of Platon International, has written to shareholders of the USM-quoted instrumentation group, repeating the board's earlier advice to take no action on the bid from Wills Group.

The letter follows the publication of Wills' offer document in which Mr David Massie, chairman, said there were a number of advantages of a merger, including complementary product ranges, geographic fit and opportunities for an increase in sales.

He also drew attention to the recent achievements of Wills, an industrial, electronic and automotive products company. They included a return to profits, a strong balance sheet and reduced bank borrowings. They compared with Platon's recent losses, lack of dividend and qualified accounts.

The 5-for-4 share offer values Platon at Pounds 2.93m, or 27 1/2 p a share. Platon's shares were unchanged at 25p yesterday while Wills' rose 1/2 p to 22p. Wills claims undertakings to accept representing 15.7 per cent of Platon.

Wills also published details of its rights issue to raise Pounds 5.4m. The 34m shares are offered at 16p on the basis of 1-for-3 ordinary, 1-for-3 warrants and 10-for-3 preference.

Platon International Wills Group GB United Kingdom, EC P3823 Process Control Instruments COMP Company News P3823 The Financial Times London Page 21 221
UK Company News: Tuskar cancels USM quotation Publication 930302FT Processed by FT 930302

Tuskar Resources, the oil and gas explorer, has cancelled its share dealings on the Unlisted Securities Market.

The company's 262.66m ordinary shares have now been admitted to the exploration securities market in Dublin.

Regarding the offer from Animex, directors said the proposals contained 'nothing of any significant value' and should be rejected.

Tuskar Resources GB United Kingdom, EC P138 Oil and Gas Field Services COMP Company News MKTS Market data P138 The Financial Times London Page 21 90
UK Company News: Final offer for Wheway posted Publication 930302FT Processed by FT 930302

MCLEOD Russel Holdings, the paints producer and distributor which last month launched a hostile bid for Wheway, the struggling environmental group, yesterday despatched formal offer documents on its 1-for-10 offer to Wheway shareholders.

The McLeod board said it believed that was in the best interests of shareholders, employees and creditors of Wheway that a rapid transfer of control was accomplished because Wheway was a 'company in distress'.

Other interested parties had been aware of the 'For Sale' sign on Wheway since December 23 1992, and no other parties had announced an offer, McLeod directors asserted.

Wheway McLeod Russel Holdings GB United Kingdom, EC P2851 Paints and Allied Products P5198 Paints, Varnishes and Supplies P34 Fabricated Metal Products P35 Industrial Machinery and Equipment COMP Company News P2851 P5198 P34 P35 The Financial Times London Page 21 149
UK Company News: Citibank Investments buys assets of Randsworth Trust Publication 930302FT Processed by FT 930302 By VANESSA HOULDER, Property Correspondent

CITIBANK Investments, a wholly owned subsidiary of the US bank, is acquiring the assets of Randsworth Trust, a London property company, the parent of which has been in receivership for the past year.

Citibank is facing a book loss of more than Pounds 100m on the deal, on which its exposure of Pounds 310m compares with assets valued at about Pounds 200m.

This is the most prominent example of a bank taking control of a property company in the UK since Barclay's acquisition of Imry at the end of last year.

Citibank said its decision reflected confidence in the company's prospects.

Citibank's involvement in Randsworth dates back to 1989, when it backed a Pounds 258m acquisition of the company by JMB Realty, a US investment group.

This deal, which was the first large investment in the UK property market by US investors, proved disastrous.

As the value of Randsworth's portfolio in the West End of London halved in value, the shareholders - who injected a further Pounds 58m in 1991 - lost their equity.

Even the debenture holders, who had first claim on the assets of London & Provincial Shop Centres, Randsworth's chief subsidiary, lost money.

Last month, Citibank agreed to repay Pounds 135m of debentures at a price of Pounds 95 for Pounds 100 of stock, in the first time in recent memory that holders of secured bonds have accepted a loss. At the same time, it said it intended to buy all or part of Randsworth.

Citibank Investments has set up a company called CIPL to own Randsworth. The portfolio consists of 35 office and retail buildings in the West End, including 25 Berkeley Square, 91 Kensington High Street and St Christopher's Place, an area of shops, offices and restaurants near Oxford Street.

Citibank excluded from its acquisition two small properties which have negative value.

Mr Nigel Kempner, a former joint managing director, said the deal would allow the management to concentrate on enhancing the value of the business.

'Citibank is prepared to take a long term view of the property market,' he said.

Citibank Investments Randsworth Trust GB United Kingdom, EC P672 Investment Offices P6512 Nonresidential Buildings Operators COMP Acquisition P672 P6512 The Financial Times London Page 21 392
UK Company News: Fragile reappearance of customer confidence - Flames of hope spark sharp rally in share prices of leading motor companies Publication 930302FT Processed by FT 930302 By JANE FULLER

ONE OF the purest recovery plays in the stock market is the motor trade. Car dealers proved particularly vulnerable to high interest rates, which raised their financing costs and reduced custom. Now that 'double whammy' has flipped into reverse.

Share prices of the leading quoted groups have outperformed the market by nearly 40 per cent over the past three months - the flames of hope fanned by the revival of interest in smaller, UK-orientated, companies.

This year sales of new cars are forecast to rise by about 7 per cent to 1.7m. It would reverse a trend which has seen the market fall from a record 2.3m in 1989 to less than 1.6m in both 1991 and 1992.

The picture also looks better for used cars as the lower levels of new car sales feed through into a shortage of quality second-hand ones.

If firmer demand can be used to improve profit margins from the niggardly 1 to 2 per cent brought about by widespread discounting, bottom lines could revive quite rapidly.

However, most of these rosy factors are for the future. Few of the motor traders due to report 1992 results over the next few weeks will show a rebound in their figures.

Two exceptions are T Cowie and Lex Service.

Cowie, which has a substantial fleet leasing operation - and hence substantial debt - went through the fire in 1990 when pre-tax profit fell to Pounds 9m. Interest costs soared to Pounds 44.6m and the dividend was cut.

Profit is estimated to have recovered to Pounds 23m last year - not far short of the Pounds 25.8m peak recorded in 1988.

Lex, which slumped to Pounds 500,000 pre-tax in 1991 and cut the dividend, is expected to have bounced back to Pounds 25m.

The group's exit from electronic components has proved highly profitable through a residual investment in Arrow of the US. Payments from Volvo to end an import agreement have cleared debts and allowed the Pounds 46m purchase of Swan National to boost the dealership network.

While these two put most of their troubles behind them, one or two others - such as Pendragon and Reg Vardy - have limited the recessionary damage and enhanced their managerial reputations.

More commonly, however, motor traders' profits have remained bogged down.

Among the laggards is Appleyard Group, one of the oldest names. Its expansion ran out of steam after the purchase of Ian Skelly in 1989. In 1991 profits slumped to Pounds 1.81m and the dividend was uncovered. The figures may be worse for 1992 and a dividend cut is feared.

Companies which disappointed at the interim stage included Evans Halshaw and Perry Group, while Lookers was more than 40 per cent down at the pre-tax level in the year to September.

But even the laggards have outperformed the market.

Apart from the recovery arguments, a number of other issues have gingered up the sector and should continue to do so.

The first is takeover talk. Popular choices of predator are Cowie and Lex. The former tried unsuccessfully to acquire Henlys in a hostile bid last year, but remains keen to expand both its dealership network and its leasing fleet - the latter from 60,000 to 100,000 cars.

Nor has Lex made any secret of its expansion plans, with the priority going to car retail. A substantial deal could propel it to the top of the motor retail league, as monitored by the magazine Automotive Management.

The two organisations ahead of it are Inchcape's UK motor retail operation, a small part of an international concern, and Automotive and Financial Group (AFG), controlled by Mr Octav Botnar.

Inchcape has cut dealerships from 110 to 87 since last March's takeover of TKM. AFG has had to react to the loss of the Nissan franchise by finding replacements.

Turning to the mooted acquisition targets, the most frequently cited are Appleyard, Lookers and Perry Group, all quoted, and Dutton Forshaw, part of Lonrho.

The background to the speculation is that the sector remains fragmented. The long list of quoted motor traders only accounts for a small portion of the market.

Last year saw a fair amount of consolidation. Apart from the Inchcape-TKM and Lex-Swan deals, Hartwell won control of Trimoco, and emergent motor groups - such as European Motor Holdings and Sanderson Murray & Elder - added to their portfolios.

An advantage the smaller groups have is that they have some way to go before bumping up against the limits imposed by Ford, which still has about 22 per cent of the new car market.

Hartwell was left with 12 Ford dealerships after the Trimoco takeover, four more than Ford's limit.

Ford says agreement has been reached for four to be sold off. It is sticking to its rules, which also limit location, in spite of criticism of manufacturers' restrictions in a Monopolies and Mergers Commission report published last year.

Ford's stance, which contrasts with Rover and Vauxhall's modified approaches, also has a bearing on another big issue in the motor trade: multi-franchising. This involves a company selling a variety of makes of new car either on one site or from a local network of sites.

Evans Halshaw, for instance, is developing two multi-franchise sites in the Birmingham area. One is orientated towards Japanese makes, the other will bring together Vauxhall, Rover and Toyota.

Currie Motors, on the other hand, which has nine showrooms in London, has recently switched from Ford to five new franchises, although there will be only one brand of new car available at each site.

Ford argues that multi-franchising will enable local dealerships to be concentrated in too few hands, and that it will compromise after sales service - in terms of the range of parts carried and the skill of fitters.

As about 28 per cent of cars on UK roads are Fords, the after-sales operation has considerable weight. This is not the case with the Japanese makes, which are not yet around in sufficient numbers.

However, the build-up of UK-made Japanese cars is a big issue in the new car market. Mr Rob Golding, motors analyst at SG Warburg, says Japanese cars are forecast to increase their share from 11 to 25 per cent by 1996. A key factor is that fleet buyers will increasingly consider the home-grown models - and corporate sales account for 60 per cent of the new car market.

This has led motor traders to queue up for Japanese franchises, although the weak after-sales outlook has led Cowie, for instance, to utter reservations about 'rushing in in a big way'.

While the Japanese build-up offers a long-term opportunity, the dealers' immediate attention will be focused on the Budget. Mr Golding says the money which the Treasury has given up in car sales tax will be raised from motorists in some other way.

Given the level of recovery hope in the share prices, there is a fear that increased road tax or petrol duty could hinder the fragile reappearance of customer confidence and make 1993 another year of disappointment.

GB United Kingdom, EC P5511 New and Used Car Dealers CMMT Comment & Analysis IND Industry profile P5511 The Financial Times London Page 21 1228
UK Company News: Acquisitions help Lilleshall advance Publication 930302FT Processed by FT 930302 By CATHERINE MILTON

LILLESHALL, the industrial distribution and building products group, lifted pre-tax profits by 30 per cent, from Pounds 2.4m to Pounds 3.1m, in the year to December 31 1992.

The rise was mainly due to the acquisition in January 1992 of Crystalware Products, the plastic housewares and garden products manufacturer, and the purchase of Bradgrange Packaging in February.

The shares closed up 3p at 133p. Lilleshall's stock, which had fallen below 100p, has been climbing since late December.

Barlow Fastener Centres was acquired too late in the year to affect profits. The acquisitions brought gearing to 33 per cent by the year end.

Currency movements on the group's French franc borrowings also increased gearing and pushed interest payments from Pounds 33,000 in 1991 to Pounds 539,000 in 1992.

Mr John Leek, chairman, said that since the year end gearing had reached 40 per cent but was budgeted to come down as more stocks were taken out of the business, especially from industrial consumables which it said was overstocked.

Group turnover rose from Pounds 36.7m to Pounds 52.1m and a final dividend of 2.65p is proposed, making a total of 4.25p (4p) for the year. Fully diluted earnings per share rose 15 per cent from 8.5p to 9.8p.

The building products division recorded a small drop in operating profits from Pounds 2.5m to Pounds 2.3m. The plastics and engineering division produced higher operating profits of Pounds 1.68m (Pounds 446,000) with most of the increase from the Crystalware acquisition. The group recorded reduced losses on industrial consumables of Pounds 461,000 (Pounds 628,000).

There was an exceptional gain of Pounds 81,000, masking a Pounds 522,000 provision against stocks following refocusing of the fastener division. This was offset by gains including Pounds 230,000 proceeds from litigation and a Pounds 202,000 release of pension provisions.

These were released because the company closed its defined benefits pension scheme (which relates pension income to final earnings) and invited all employees to join a contracted out scheme. The group does not expect to pay out less as a proportion of gross income but said the move had been prompted by possible changes in pensions law.

Lilleshall GB United Kingdom, EC P5211 Lumber and Other Building Materials FIN Annual report P5211 The Financial Times London Page 20 393
UK Company News: Differences in management style at Tate & Lyle Publication 930302FT Processed by FT 930302 By MAGGIE URRY

MR NEIL Shaw, who is chairman of Tate & Lyle, the sugars and sweeteners group, who is adding 'executive' to his title, and Mr Stephen Brown, chief executive, who yesterday left the group after less than two years following 'differences in management style', writes Maggie Urry.

Mr Shaw said he would be easing out of some of his outside interests. Mr Paul Lewis will become deputy chairman as well as finance director. Mr Shaw said he did not expect his role to change. Instead of a single chief executive reporting to him there would be four people. These four, with Mr Shaw and Mr Lewis, will form the group's executive management committee. The four, all in their 40s, are likely to be contenders to succeed Mr Shaw, who is 63. They are:

Mr Paul Mirsky, 46, who is joining the board and will add the North American sugar business to his role running the Australian activities. He was described by one analyst as the 'even money favourite',

Mr John Walker, 48, also joining the board and becoming managing director of the European sugar business,

Mr Stuart Strathdee, 41, not a board member but to become managing director of the international division,

Mr Larry Pillard, 45, also not a main board director. He joined the group last year to head the problematic AE Staley corn wet milling business in the US.

Tate and Lyle GB United Kingdom, EC P2062 Cane Sugar Refining PEOP Appointments Brown, S Chief Executive Tate and Lyle (UK) P2062 The Financial Times London Page 20 279
UK Company News: Regal Hotel buy Publication 930302FT Processed by FT 930302

Regal Hotel Group has confirmed agreements to purchase Catermax and Woodmount for an aggregate Pounds 500,000, satisfied by the issue of 84.2m ordinary shares and Pounds 78,777 of convertible loan stock.

Regal Hotel Group Catermax Woodmount GB United Kingdom, EC P7011 Hotels and Motels COMP Acquisition P7011 The Financial Times London Page 20 65
UK Company News: Brabant returns to the black Publication 930302FT Processed by FT 930302 By PEGGY HOLLINGER

BRABANT Resources, the oil and gas explorer being stalked by fellow USM company Aberdeen Petroleum, yesterday announced a return to the black with profits of Pounds 366,000 for the year to December 31.

The turnround, which compared with a loss of Pounds 4.8m last time, was struck on sales 86 per cent higher at Pounds 5.4m. The improvement was largely due to the acquisition of producing assets from Monument Oil & Gas in the second half.

Brabant said it had increased average net oil production during the year by 52 per cent to 1,786 barrels per day. The Monument acquisition had left it well placed to fund future exploration, the company said.

Brabant could 'rely on internally generated funds to support its exploration and development programme for the foreseeable future'.

Mr Malcolm Butler, managing director, said the group could now begin exploring its own prospects, as opposed to ones dictated by obligations such as those arising through acquisitions. A substantial drilling programme, to be funded through cash flow, was planned for 1994. It was unlikely that the company would seek investment from shareholders for this programme.

Any payment of a dividend would depend on exploration success - as in previous years there is again no pay-out.

Brabant Resources GB United Kingdom, EC P138 Oil and Gas Field Services FIN Annual report P138 The Financial Times London Page 20 245
UK Company News: Rowland's salary rises despite 'difficult' year Publication 930302FT Processed by FT 930302 By ROLAND RUDD

MR TINY Rowland's salary and emoluments rose from Pounds 1.6m to Pounds 1.65m in the year to September 1992, according to Lonrho's annual report which was published yesterday.

Mr Rowland, joint chief executive of the international trading group, saw his salary rise by Pounds 48,401 in a year in which the group's pre-tax profits fell from Pounds 205m to Pounds 80m.

In his message to shareholders Mr Rowland said: 'This past year has been the most difficult in your company's financial history.'

Lonrho said Mr Rowland's overall pay included his remuneration as chairman, which he briefly took over when Sir Edward du Cann resigned, as well as expense allowances and benefits in kind.

The annual report also shows that a significant amount of borrowings have become secured. Some Pounds 140m (Pounds 54m) of long-term loans are secured. Of the short-term loans Pounds 90m (Pounds 52m) is secured.

Lonrho GB United Kingdom, EC P6719 Holding Companies, NEC FIN Annual report PEOP Labour Rowland, T Joint Chief Executive Lonrho (UK) P6719 The Financial Times London Page 20 194
UK Company News: French Property Tst Publication 930302FT Processed by FT 930302

The net asset value per share of French Property Trust stood at 73.29p at December 31, against 68.21p six months earlier. The year end has been changed to end-December with comparatives based on the six months to June 30.

Net revenue for the period was Pounds 245,138 (Pounds 132,786). Earnings per share were 0.98p (0.53p). A final dividend of 1.3p is proposed making 2.3p for the period to December 31.

French Property Trust GB United Kingdom, EC P672 Investment Offices FIN Interim results P672 The Financial Times London Page 20 102
UK Company News: New chiefs at Tate & Lyle Publication 930302FT Processed by FT 930302 By MAGGIE URRY

MR NEIL Shaw, chairman of Tate & Lyle, the sugars and sweeteners group, who is adding 'executive' to his title, and Mr Stephen Brown, chief executive, who yesterday left the group after less than two years following 'differences in management style', writes Maggie Urry.

Mr Shaw said that he would be easing out of some of his outside interests. Mr Paul Lewis will become deputy chairman as well as finance director.

Mr Shaw said he did not expect his role to change. Instead of a single chief executive reporting to him there would be four people. These four, with Mr Shaw and Mr Lewis, will form the group's executive management committee.

The four, all in their 40s, are likely to be contenders to succeed Mr Shaw, who is 63.

They are:

Mr Paul Mirsky, 46, who is joining the board and will add the North American sugar business to his role running the Australian activities. He was described by one analyst as the 'even money favourite',

Mr John Walker, 48, also joining the board and becoming managing director of the European sugar business. He already runs the UK sugar operation,

Mr Stuart Strathdee, 41, not a board member but to become managing director of the international division,

Mr Larry Pillard, 45, also not a main board director. He joined the group last year to head the problematic AE Staley corn wet milling business in the US.

Mr Shaw said a new remuneration and appointments committee comprising non-executive directors would be formed. This would 'have very strong control over me, the board and the senior management of the company'.

Mr Murray McEwen, currently managing director of the North American sugar division is retiring on April 1.

Tate and Lyle GB United Kingdom, EC P2062 Cane Sugar Refining PEOP Appointments Brown, S Chief Executive Tate and Lyle (UK) P2062 The Financial Times London Page 20 332
UK Company News: Ashcroft company problems Publication 930302FT Processed by FT 930302 By CHRIS TIGHE

MR JOHN ASHCROFT, former Coloroll group chairman, confirmed yesterday that Survival Aids, the outdoor clothing company which was his first acquisition following Coloroll's collapse with debts of about Pounds 350m, is having problems over refinancing.

Mr Ashcroft, chairman of the Cumbria-based company, declined to elaborate. He said rumours that receivers had been called in were incorrect.

'The refinancing had been agreed but there was a bit of trouble,' he said. It had not yet been completely sorted out,' he added.

In January, Mr Ashcroft said he had not been happy with Survival Aids' payment situation and was nervous about trading prospects this year.

Last month, he stepped down as managing director making way for Mr Hugh Lapham, a former B&Q director.

Survival Aids GB United Kingdom, EC P513 Apparel, Piece Goods, and Notions P5099 Durable Goods, NEC COMP Company News P513 P5099 The Financial Times London Page 20 163
UK Company News: Trafalgar to press on with cash call Publication 930302FT Processed by FT 930302 By ROLAND RUDD

TRAFALGAR House is to proceed with its rights issue after winning support from small shareholders at yesterday's extraordinary meeting.

The engineering, construction and shipping group already had more than 274m proxy votes, mainly from institutional investors, in favour of its Pounds 204.5m cash call with only 800,332 against.

Directors were visibly relieved that small shareholders, after voicing criticism of the management, voted overwhelmingly in favour of the 1-for-2 rights issue at 60p.

Small shareholders voted at the recent annual meeting against reappointing Touche Ross, the auditors, after 1991 results were restated.

Although institutional investors voted in favour of retaining the auditors, Trafalgar said it would look at the question later this year.

Small shareholders yesterday asked whether the Pounds 120m of exceptional losses and write-downs which may be required in the year to end-September would be the last word on the subject.

The warning of further write-downs followed the decision to announce substantial write-downs for 1992.

Mr Alan Clements, chairman, said: 'I cannot say that this is the last final word on the subject.'

The rights issue proceeds will be used to repay borrowings. Mr Clements said it would take the pressure off the group to make quick disposals. The group has said it wants to sell its hotels, which include the Ritz and the Stafford.

Mr Clements said there were no plans to change the group's advisers, which include Kleinwort Benson and UBS Phillips & Drew, or to make further changes to the board. other than those already announced. He accepted that non-executive directors, who include Mr Tony Ryan, chairman of GPA, the aircraft leasing company, and Mr David Howell, Conservative MP, 'did not realise early on enough the problems facing the company'. Mr Clements is non-executive chairman.

Trafalgar House GB United Kingdom, EC P1522 Residential Construction, NEC P1542 Nonresidential Construction, NEC P44 Water Transportation COMP Company News FIN Share issues P1522 P1542 P44 The Financial Times London Page 20 340
UK Company News: Suter takes stake in Wilkes Publication 930302FT Processed by FT 930302 By ANGUS FOSTER

SUTER, the conglomerate chaired by Mr David Abell, has taken a 8.9 per cent stake in James Wilkes, the engineer which last year fought off a hostile bid from Petrocon.

Suter said it bought the shares for 'investment purposes' and had not decided what further action to take. A decision is 'not imminent', a company adviser said.

Wilkes's shares, which had fallen from a high last year of 190p to 48p, yesterday jumped 18p to 66p on takeover speculation. The company refused to comment until Suter's intentions 'become clearer'.

Suter is reknowned for taking small stakes in companies and not necessarily making a bid. Last year it built up a 7.4 per cent stake in Brown & Tawse, the steel and pipeline group, again insisting the stake was for investment purposes.

Yesterday's move is Suter's first since publication in January of a DTI report on share dealings by Suter and Mr Abell in the mid 1980s.

The report found no evidence that these and other parties acted in concert, but strongly criticised Mr Abell and questioned the timing of his private share purchases in Suter's bid targets. Last month Suter announced Mr Abell had been cleared of insider dealing by the DTI.

Petrocon's all-share bid valued Wilkes at about Pounds 35m. Since then, Wilkes' shares have tumbled, partly because of an interim loss announced in October. The company's market capitalisation, before Suter started building its stake, was only about Pounds 8m.

Suter James Wilkes GB United Kingdom, EC P34 Fabricated Metal Products P35 Industrial Machinery and Equipment P6719 Holding Companies, NEC COMP Shareholding P34 P35 P6719 The Financial Times London Page 20 289
UK Company News: Breathing space for Control Publication 930302FT Processed by FT 930302 By MAGGIE URRY

HOLDERS of Control Securities' two Swiss franc bond issues agreed yesterday to defer interest payments until June 1.

They also waived the right to declare the bonds in default until the same date by which time further meetings will be held.

Control, the property, brewing and leisure group, is in the middle of a financial restructuring which is taking longer to complete than originally hoped. The company recently revealed a deficit on shareholders' funs of Pounds 31.8m.

Shareholders have been asked to a meeting on March 17 to authorise continued discussions while the banks have repeatedly renewed a standstill agreement.

The group has exchanged contracts for the sale for Pounds 3.44m of a housing estate at Saxmundham, Suffolk.

Control Securities GB United Kingdom, EC P2082 Malt Beverages P7999 Amusement and Recreation, NEC P65 Real Estate COMP Company News RES Facilities P2082 P7999 P65 The Financial Times London Page 20 165
UK Company News: Stakis justifies Pounds 90,000 payment Publication 930302FT Processed by FT 930302 By JAMES BUXTON

STAKIS, the hotels and casinos group where the corporate rescue specialist Sir Lewis Robertson is chairman, paid Pounds 90,000 to Mr David Michels, its chief executive, when he joined the company in December 1991.

This emerged yesterday from Stakis's report for the year to September 30 1992.

Mr Michels was paid a total of Pounds 258,000 in the 1992 financial year. At the time he joined the company it was about to report a loss of Pounds 47.4m.

Stakis said it had been necessary to offer Mr Michels special inducements to leave a secure and well paid job at Hilton UK, where he was deputy chairman and managing director.

Directors now felt that, with Stakis back in profit, Mr Michels' extra remuneration had been well justified.

Stakis GB United Kingdom, EC P7011 Hotels and Motels COMP Company News FIN Company Finance Michels, D Chief Executive Stakis (UK) P7011 The Financial Times London Page 20 172
Inquiry into MCC foreign exchanges Publication 930302FT Processed by FT 930302 By PAUL TAYLOR

INVESTIGATORS probing the affairs of Maxwell Communication Corporation believe they have uncovered false foreign exchange transactions allegedly used by the late Mr Robert Maxwell to boost substantially the insolvent publishing company's pre-tax profits.

Price Waterhouse, administrators to MCC, claim in a New York bankruptcy court filing that pre-tax profits were overstated by at least Pounds 36.9m in the year to end-March 1991. MCC posted pre-tax profits of Pounds 145.5m in the period, including Pounds 80.7m of foreign exchange gains.

According to Mr David Lee, head of the litigation and special investigation services unit at Price Waterhouse, investigation of MCC's 1991 profits show that at least some of the foreign exchange transactions may never have taken place. His investigators have examined four photocopies of documents purportedly related to the currency deals which he said, 'show typographical inconsistencies'.

The first document purports to show that on November 9 1990 MCC bought a Dollars 242.5m (Pounds 170.7m) contract for settlement on March 28 1991, three days before the end of MCC's financial year. This was followed by a Dollars 279m contract on December 21 1990, and a Dollars 247m contract on December 28 also for settlement on March 28.

The fourth document purports to show that on March 28 1991 MCC closed its position by selling the Dollars 768.5m at a spot rate of Dollars 1.739, supposedly generating the Pounds 37.9 profit. However, the Wall Street investment bank purportedly involved in the transactions has told investigators that it has no record of these transactions.

The Pounds 36.9m net profit from the currency transactions was supposedly paid directly by the bank to one of Mr Maxwell's private companies which allegedly then paid the money to MCC as part of a Pounds 40m cash transfer received by MCC on April 4 1991. Administrators to the private companies have confirmed that a Pounds 40m payment was made, but said it did not represent the proceeds of foreign exchange transactions.

Last night, Mr Lee said: 'The documents could well have been cut and pasted and as a result of this discovery we are now looking even more closely at MCC's foreign exchange deals.' Price Waterhouse has provided details of its investigations to the Serious Fraud Office.

Maxwell Communication Corp GB United Kingdom, EC P27 Printing and Publishing COMP Company News P27 The Financial Times London Page 19 404
Tate & Lyle chief executive leaves after 11 months Publication 930302FT Processed by FT 930302 By MAGGIE URRY

MR STEPHEN Brown yesterday left Tate & Lyle, the sugar and sweeteners group where he was chief executive. Mr Brown joined the company only in April 1991 as group managing director. He became chief executive in April last year, when Mr Neil Shaw split the roles of chairman and chief executive.

Tate also announced other board changes. The shares fell 3p to 434p. Analysts said Mr Brown's sudden departure was embarrassing for Tate and for Mr Shaw and raised questions about management succession at Tate.

Mr Brown's original appointment had suggested Tate could not find a successor to Mr Shaw internally. Mr 'Red' Wilson, who had run the group's North American businesses and had been seen as a possible successor, left in 1989, although he remains a non-executive director.

Mr Shaw said yesterday that he planned to stay for at least two years and there would by then be 'a lot of candidates' to succeed him.

Mr Brown, who had a three-year rolling contract on a basic salary of around Pounds 300,000, is expected to receive compensation of around Pounds 900,000. He will also have to move out of his Kensington home, which is 70 per cent-owned by Tate and 30 per cent by himself, or exercise an option to buy Tate's share. The house was bought for Pounds 900,000 last June.

Mr Shaw said there had been differences over management style and Mr Brown 'didn't fit in'. There had been 'no big scene' but both sides agreed that it 'wasn't working'.

He said there was a difference between an agricultural company such as Tate and a manufacturing group such as Alcan, the aluminium company, where Mr Brown worked before.

He admitted that this had not been foreseen when Mr Brown was appointed two years ago.

One analyst said Mr Brown 'never managed to impose himself'. Others suggested that Mr Shaw had continued to dominate decisions.

However, insiders said that Mr Shaw had stepped back from day-to-day management, taken on a number of outside interests and had 'played fair'.

They admitted there could have been some difference of perception between Mr Shaw and Mr Brown over the role of a chief executive.

Lex, Page 18; Picture, Page 20

Tate and Lyle GB United Kingdom, EC P2062 Cane Sugar Refining COMP Company News PEOP Appointments Brown, S Chief Executive Tate and Lyle (UK) P2062 The Financial Times London Page 19 418
US price warriors spark revolution in desktop Japan: A successful assault by American computer makers Publication 930302FT Processed by FT 930302 By MICHIYO NAKAMOTO

As the Japanese economy began the year showing signs of a worsening slump, Dell Computer, the US company, announced its arrival in the second largest personal computer market in the world.

Dell announced a low-priced desktop computer - a move that heralded a revolution in the Japanese PC market's pricing structure and distribution system.

Dell's debut in Japan has added momentum to a concerted assault on the Japanese market by leading US manufacturers which has forced Japanese computer companies to rethink their strategies.

Shortly after Dell arrived in Japan, Toshiba announced its first low-cost notebook PC, bringing the price-cutting trend into the notebook market.

The Japanese PC market has long been one that seemed to work according to its own rules.

The difficulty of producing software which used the Japanese language had allowed a handful of domestic manufacturers, led by NEC, to carve up the PC market among them.

While the rest of the world was dominated by IBM-compatible machines, in Japan NEC ruled supreme with 53 per cent of the market, followed by Fujitsu with 13 per cent and Toshiba with 11 per cent, according to the Nikkei Industrial newspaper. IBM had to content itself with a meagre 7 per cent market share. Until as recently as a few months ago, US PC manufacturers had made little impact on the minds of the Japanese PC-buying public, but a price war, triggered last autumn by Compaq, the US company, changed all that.

On October 1, Compaq introduced a machine at half the price of comparable Japanese-made PCs. IBM immediately followed suit by introducing its own range of low-priced PCs.

This offensive sent a tremor through the Japanese PC industry. Most leading Japanese PC manufacturers, including NEC, the market leader, cut their prices within months. In return, Compaq reduced the price of some of its machines further and added a three-year guarantee.

NEC's response has been mostly defiance. It insists that the outbreak of the price wars has had no effect on its business. 'NEC will never compete in a price war,' says Mr Katsuichi Tomita, general manager of NEC's personal computers marketing division.

Yet NEC felt threatened enough to use nationwide advertising to spell out that its own system could boast 14,500 software applications, 379 service points throughout the country and proven experience with Japanese language software.

In spite of NEC's tactics, the impact of the price wars has been to raise substantially the profile of US manufacturers and improve their fortunes in Japan. Undercutting the domestic competition on price proved to be the quickest, most effective, route for outsiders trying to gain market share.

'We brought out low-priced models because it was the main way to differentiate between IBM's and NEC's machines,' says Mr Tsutomu Maruyama, director of personal systems operations at IBM's Japan General Business Company.

IBM and Compaq both report strong sales.

The groundwork for the success of the price wars had been laid by IBM. In a bid to spread the use of its own PC/AT standard, IBM had set up an Open Architecture Developers' Group and invited foreign and domestic manufacturers to support DOS-V, a bilingual operating system that allows users to use the English language DOS, as well as more than 1,000 Japanese applications.

Most of the leading manufacturers, apart from NEC and Apple, have joined the IBM-led consortium.

Yet in spite of the momentum building up around DOS-V, the attempt by US manufacturers to break NEC's dominance still faces formidable obstacles.

NEC controls national distribution channels. Two-thirds of PC sales in Japan are still through specialist dealers which have traditionally sold NEC machines. US manufacturers, which were late to enter the Japanese market, will need to build up their distribution channels.

The DOS-V camp, with about 1,000 Japanese language software applications, cannot compete with NEC's 14,500 applications. The willingness of developers to write software for DOS-V depends on the penetration rate of hardware, which in turn depends on the number of software programmes available.

For the huge installed base of NEC users, there is little incentive, apart from price, to switch to DOS-V. But NEC has already closed the price gap by introducing a low-priced range of its own. 'NEC already has a huge installed base. Why would those people want to give up the security of using something they are already familiar with?' asks Mr Katsushi Shiga, industry analyst at Dataquest, the high technology consultancy.

There is also some question as to how far price alone can woo Japanese consumers away from domestic manufacturers. Many in the industry believe that in spite of the attraction of lower prices, discount superstore and tele-marketing sales will not take off as strongly in Japan as in the US and Europe. Japanese consumers, they say, would rather pay for having equipment installed and serviced than having to do it themselves. 'There isn't much of a do-it-yourself culture in Japan,' admits IBM's Mr Maruyama. 'Japanese people don't have that kind of time.'

Unless US manufacturers can keep the price gap between their products and those of domestic manufacturers wide, the momentum building up could quickly fizzle out. The signs are that US manufacturers intend to keep up the heat. And Japanese consumers are becoming more cost-conscious and more sophisticated as familiarity with PCs spreads.

Apple Computer saw Japanese market revenues lift 50 per cent in the year to September 1991 and 30 per cent in the past fiscal year.

The most likely outcome of the current price wars is that the large US manufacturers will gain market share at the expense of smaller Japanese players.

The chill wind of foreign competition has forced domestic manufacturers to ask what consumers really want - high prices and free service, or choice.

US United States of America JP Japan, Asia P357 Computer and Office Equipment P7372 Prepackaged Software CMMT Comment & Analysis MKTS Market shares P357 P7372 The Financial Times London Page 19 1006
GPA shares priced at Dollars 1 in latest issue Publication 930302FT Processed by FT 930302 By ROLAND RUDD

GPA GROUP, the aircraft leasing company, is offering its shareholders the right to buy shares at Dollars 1, compared with the Dollars 30 it said they were worth less than a year ago. In an attempt to raise new funds, GPA has set the conversion price of its Dollars 200m (Pounds 140m) preference share issue at Dollars 1. The cash is needed to ensure the company's survival.

The price compares with Dollars 20 a share offered in the Irish-based company's aborted flotation last June and the Dollars 30 a share it said they were worth less than a year ago. Nomura International, the Japanese securities house which is organising the new share issue, has told GPA's shareholders that restructuring the Dollars 5.5bn of debts depends on raising new equity.

Shareholders have been asked to give their response before the end of this month, when the restructuring is due to be completed. One shareholder said: 'If we do not take part in this share issue, we have been told the banks will take effective control of the company.'

It is the third time in less than a year GPA investors have been asked to raise cash. The company was forced to pull a preference share issue, with a conversion price of Dollars 8, at the end of last year following its failure to go public in the summer.

Of the four big shareholders which account for 35 per cent of the group, Aer Lingus, the Irish airline, is unlikely to take part. A spokesman said last night that the airline was 'keeping the situation under close review. The matter was discussed at last week's board meeting and no decision was made.' Air Canada has not yet made a decision. Mitsubishi Trust and Banking Corporation and Irish Life are understood to be inclined to take part, although part of Irish Life's shareholding is made up of non-beneficial trusts which may not take up the new shares. Other shareholders contacted yesterday said they had yet to decide whether to take up the new shares.

GPA's banks have already make clear they will only agree to the restructuring if shareholders take part in the new issue. The banks are being asked to defer to late 1996 approximately Dollars 1bn of debt repayments due between the end of last year and September 30.

The issue means a dilution of stakes owned by shareholders unable to take part in the fund raising.

GPA Group IE Ireland, EC P451 Air Transportation, Scheduled COMP Company News FIN Share issues P451 The Financial Times London Page 19 446
Companies in this issue Publication 930302FT Processed by FT 930302

------------------------------------ Companies in this issue ------------------------------------ UK ------------------------------------ ASW 21 Aberdeen Petroleum 20 Airtours 19,18 Beauford 21 Brabant Resources 20 British Gas 18,1 Castle Mill Intl 21 Control Securities 20 CountyGlen 21 French Property Tst 20 GPA 19 Gartmore American 21 Goodwin 21 Grafton 20 Greencore 20 Holliday Chemical 20 Inoco 21 Lilleshall 20 Lonrho 20 McLeod Russel 21 Owners Abroad 18,19 Platon Intl 21 Quality Software 20 Randsworth Trust 21 Royal Bank Scotland 1

Stakis 20 Survival Aids 20 Suter 20 Tarmac 14 Tate & Lyle 18,19,20 Trafalgar House 20 Tuskar Resources 21 Wheway 21 Wilkes (James) 20 Wills Group 21 ------------------------------------ Overseas ------------------------------------ Canadian Nat Rail 23 Comalco 24 Endesa 22 Fecsa 22 Iberdrola 22 KHL 22 Klockner-Werke 19,22 Levi Strauss 23 Macy, RH 23 Marriott 23 N Broken Hill Peko 24 Northwest Airlines 23 NEC 24

NZ Refining 24 Nokia 22 Ranuc 24 Repsol 18,22 SA Brewing 24 Safren 24 Sevillana 22 Short Brothers 22 Teva 24 Thomson-CSF 22 Unibank 22 Union Fenosa 22 Viag 22 ------------------------------------

GB United Kingdom, EC P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page 19 196
Owners rebuffs Airtours' final bid Publication 930302FT Processed by FT 930302 By RICHARD GOURLAY

OWNERS Abroad yesterday rejected a raised final hostile offer from rival holiday group, Airtours, which values the company at Pounds 268m.

Mr Howard Klein, the Owners Abroad chairman who was offered an increased cash alternative by Airtours last week, said the new offer still undervalued his company.

'The board believes the strategic alliance with Thomas Cook and LTU will deliver far greater value to shareholders than Airtours' final offers,' said Mr Klein. Thomas Cook and LTU, the German travel company are both controlled by Westdeutsche Landesbank, the German state bank, which is still hoping to create a pan-European holiday group with Owners Abroad.

The immediate reaction of some Owners Abroad shareholders was that Airtours' new offer was not over-generous. One said it was 'touch and go' whether Airtours would win at this level.

Airtours' increased all-share offer includes 15 Airtours shares for every 34 ordinary Owners shares. With Airtours shares up 3p at 309p last night, this offer values Owners' shares at 136p, 2p above Owners' closing price.

Airtours also increased, and made final, its preference share offer, in which it will give 218 convertible preference shares for every 100 Owners Abroad convertible cumulative redeemable preference shares.

The company did not increase its partial cash alternatives. These are Pounds 67.94 and 19.41 Airtours ordinary shares for every 100 Owners Abroad shares, and Pounds 122.08 in cash and 95.92 Airtours convertibles for every 100 Owners Abroad convertible shares.

Mr David Crossland said the final offer was fair both to shareholders in Airtours and Owners Abroad, who had never before seen a price that high.

He said Airtours bookings continued to gain momentum and its market share continued to be ahead of Owners Abroad's. Airtours is currently the number three in the holiday tour market behind Owners Abroad, both of which are less than half the size of market leader, Thomson.

Airtours also forecast a 1993 dividend of not less than 8.7p, a 20 per cent increase.

Airtours offer is final, unless a 'competitive situation arises' from another bidder.

Lex, Page 18

Airtours Owners Abroad Group GB United Kingdom, EC P4724 Travel Agencies P4725 Tour Operators COMP Company News P4724 P4725 The Financial Times London Page 19 379
Sterling boosted by prospect of lower German interest rates Publication 930302FT Processed by FT 930302 By JAMES BLITZ and RICHARD WATERS

STERLING enjoyed a powerful rally against the D-Mark yesterday amid strong expectations in financial markets that Germany's official interest rates would be lowered again after an interval of just four weeks.

European bond and equity markets also experienced rallies following comments at the weekend by Mr Helmut Schlesinger, Bundesbank president, indicating that he has taken a more relaxed attitude to further interest rate cuts.

However, Germany's latest inflation figure yesterday raised concern that the Bundesbank might not be willing to ease its Lombard and discount rates at its council meeting on Thursday, despite the deterioration in the German economic outlook. Consumer price inflation rose to an annualised rate of 4.2 per cent in the year to February.

After falling to new historic lows against the German currency last week, sterling yesterday rose 3 1/2 pfennigs against the D-Mark to close in London at DM2.37. In New York the pound was trading at DM2.3725 and closed against the dollar at Dollars 1.439.

It also rose sharply when measured by its exchange rate index, which expresses the pound's value against a basket of currencies. The pound closed at 77.1 on the index from a previous close of 76.0.

The London stock market also surged to an all-time closing high, on hopes that a cut in German interest rates would assist a further easing in UK monetary policy. The FT-SE 100 index of leading shares closed 14.6 points up on the day at 2,882.6.

European stock markets were buoyant on expectations of an easing in Bundesbank policy.

In Paris, the CAC-40 share index gained 15.09 points on the day to end at 1,998.8. In Frankfurt, the 30-share DAX index gained 16.6 points to close at 1,700.95. German government bond prices rose half a point with 10-year bonds yielding around 6.65 per cent yesterday evening.

After the weekend meeting in London of finance ministers of the Group of Seven leading industrial nations, Mr Schlesinger suggested that a reduction in the minimum reserves which German banks have to hold in non-interest bearing accounts at the Bundesbank should prompt a slight fall in German money market rates.

New reserve requirements introduced yesterday triggered a sharp fall in the cost of borrowing D-Marks overnight, from about 9 per cent to 8.78 per cent.

This raised speculation that the Bundesbank could lower its 'repo' rate - at which it provides wholesale funds to commercial banks - by as much as 15 basis points later this week from the current level of 8.5 per cent.

However, the operations of dealers in German money markets clearly implied that they also expect a cut in the discount rate, currently at 8 per cent, which sets the floor for German interest rates.

Mr David Cocker, chief economist at Chemical Bank in London, said the main requirements of an easing in the discount rate were not in place. The German government's solidarity pact had not been agreed and important wage agreements with the country's trade unions had not yet been completed.

Gilts strengthened by sharp recovery in sterling Page 25

Eurobonds: borrowers kept on sideline by interest rate hopes Page 25

Currencies Page 27

World stocks Page 33

London stocks Page 36

GB United Kingdom, EC DE Germany, EC P9311 Finance, Taxation, and Monetary Policy P6231 Security and Commodity Exchanges MKTS Market data P9311 P6231 The Financial Times London Page 18 578
NY Trade Centre partly reopens after blast: Two-thirds of workers estimated to be displaced following bomb Publication 930302FT Processed by FT 930302 By NIKKI TAIT and KAREN ZAGOR

OFFICE WORKERS jostled with television crews and emergency services yesterday as Manhattan's World Trade Centre partly reopened after Friday's bomb blast which killed five people.

Mr Stanley Brezenoff, executive director of the Port Authority of New York and New Jersey, which operates the complex, estimated that about two-thirds of the 50,000 people who normally work there had been displaced.

He confirmed that it would be at least another week before the complex's 110-storey twin towers reopened, but said there was no fresh information on who was responsible for the bomb. Police said about 55 calls claiming responsibility had been received.

Many of the hundreds of financial firms based in the complex had used the weekend to shift operations to other offices. Deloitte & Touche, the international accountancy firm which normally has 1,200 people working from seven floors of One, World Trade Centre, one of the towers, said it was temporarily housing them in its Broadway office.

Deloitte said it had been allowed into the towers on Sunday to retrieve urgent files, and the only visible damage was from smoke. 'There's a fine soot on the computer equipment, but we won't know whether that's affected the hardware until we turn it on,' an official said.

Salomon Brothers, the big US investment bank based in Seven, World Trade Centre, said yesterday it planned to convert one of its computer rooms into a temporary trading floor for 200 'displaced' Cantor Fitzgerald employees. Cantor Fitzgerald Securities, based in One, World Trade Centre, is the largest interdealer bond broker.

Dean Witter Reynolds, the brokerage firm and largest single tenant of the complex, said it had relocated 4,500 employees to six company offices in New York and three more in New Jersey. It said its trading operations were running normally.

US firms were not the only ones affected. Some subsidiaries of foreign financial services firms based in the twin towers also faced disruption. Commerzbank Capital Markets normally has about 50 people working out of One, World Trade Centre. They were attempting to move across West Street, to the bank's offices in the separate World Financial Centre complex.

New York's futures exchanges, which share a single trading floor at Four, World Trade Centre, managed to open for abbreviated sessions yesterday, and most hope for business as usual today.

However, the New York Mercantile Exchange, where most of the world's crude oil is priced, is again planning delayed openings and early closes.

The New York Commodity Exchange operated in a make-shift environment, but spirits were high on the trading floors. Traders particularly enjoyed the fresh air being pumped onto the trading floor to compensate for lost air conditioning.

The New York commodity exchanges provide the world's largest markets for crude oil, coffee, sugar and cotton and are important trading centres for precious metals such as gold and platinum. World prices for these commodities are set in New York, making it essential that trading time is not lost.

Meanwhile, early morning commuters to the WTC found transport running almost normally. The Port Authority stressed that there had been no structural damage to the twin towers.

New York state officials said a Dollars 5m (Pounds 3.5m) programme had been set up to assist small and medium-sized businesses displaced as a result of the blast. Mr Richard Leone, chairman of the Port Authority board, said: 'Obviously, we're suspending rent.'

Insurers brace for bomb damage claims, Page 3

US United States of America P6221 Commodity Contracts Brokers, Dealers P6231 Security and Commodity Exchanges P9229 Public Order and Safety, NEC RES Facilities TECH Services P6221 P6231 P9229 The Financial Times London Page 18 627
Parliament to cost over Pounds 200m for the first time next year Publication 930302FT Processed by FT 930302 By ALISON SMITH

PARLIAMENT is to cost the taxpayer more than Pounds 200m for the first time next year, according to Treasury figures.

Revised figures, to be published next week, will show that the total cost of the House of Commons and the House of Lords is Pounds 198m for 1992-93, including ministers' salaries, and is estimated to be Pounds 210m in the financial year beginning next month. This figure is based on cutting the salary bill by Pounds 3m, in ways which have not yet been decided, so could turn out to be higher.

While the government is cracking down on public spending in every department, the parliamentary budget is one area over which ministers have little control.

Treasury officials say the rise in the Commons budget for fees and salaries from Pounds 58m last year to Pounds 72m this year comes partly from an MPs' decision last summer to vote themselves a rise which took office costs allowances for each of them to almost Pounds 40,000 - above annual salaries.

Spending on the House of Lords, including allowances for the 400 or so peers who regularly attend, is planned to rise from Pounds 36m this year to Pounds 41m next year, while spending on House of Commons administration is set to rise from Pounds 90m to Pounds 100m.

Comparisons with previous years are difficult, because until recently costs such as printing or building work were concealed in other departments' budgets.

But in 1979-80, the first year of the Thatcher government, the spending on Commons fees and salaries was Pounds 12.5m, while in 1992-93 the comparable figure is Pounds 72m - an increase of well over 450 per cent. Between 1979 and 1991, the retail price index rose by 136 per cent.

However, taxpayers may feel they are getting value for money, at least in terms of effort; parliament sits for longer each year than many other legislatures.

GB United Kingdom, EC P9121 Legislative Bodies GOVT Government spending P9121 The Financial Times London Page 18 353
The Lex Column: Tate & Lyle Publication 930302FT Processed by FT 930302

All is not sweetness on Tate & Lyle's board as Mr Stephen Brown's abrupt departure as chief executive testifies. Mr Brown was only at the company for two years. As the architect of Tate's recent success, the chairman, Mr Neil Shaw, is well qualified to fill the breach. Nevertheless, the unhappy episode raises questions about the board's judgment.

This year is not a worry: Tate should show reasonable recovery following earlier disappointments. But Tate has yet to prove it has a longer-term growth recipe for its portfolio of mature businesses. A new chief executive would help find an answer.

Tate and Lyle GB United Kingdom, EC P2062 Cane Sugar Refining CMMT Comment & Analysis PEOP Personnel News P2062 The Financial Times London Page 18 136
The Lex Column: Airtours/Owners Abroad Publication 930302FT Processed by FT 930302

The battle for Owners Abroad may turn out to be close, despite the increased offer from Airtours. A company used to driving hard bargains with its suppliers was unlikely to be over-generous to Owners' shareholders. Still, an exit multiple of 11 looks thin. Airtours has a superior management record and its offer represents a large premium to Owners' pre-bid share price. But Owners has presented a good case for its proposed link-up with Thomas Cook. Airtours has failed to quantify equivalent benefits for Owners' investors, making the continued absence of a full cash alternative perplexing.

The failure to deliver a knock-out blow raises the possibility of Owners coming under foreign parentage. Germany's WestLB bank, which controls Thomas Cook, may seek to secure its investment or even launch an outright bid. That would be a highly unusual move. But Owners' shareholders should not rush to respond to Airtours just yet.

Owners Abroad Group Airtours GB United Kingdom, EC P472 Passenger Transportation Arrangement CMMT Comment & Analysis COMP Acquisition The Financial Times London Page 18 184
The Lex Column: Repsol Publication 930302FT Processed by FT 930302

The timing of the Spanish government's international sale of up to Dollars 1bn of Repsol shares has more to do with deteriorating public finances than choosing an opportune moment in the business cycle. Yesterday's full-year figures maintained the company's record of earnings growth, but refining, marketing and petrochemicals are all slowing. The extent of rationalisation suggests the government's current 54 per cent stake has not been too much of a restraint on management.

Since car ownership and the economy are forecast to grow faster than the European average, Spain ought to be comfortable home turf. Yet with its home market in recession and the government soon reduced to a minority, Repsol is understandably considering expansion abroad. BP and Elf have started to encroach on Spain. Exceptionally high refining and marketing margins cannot last forever. Deregulation of the local butane market will produce wider margins in the short run. It also brings the long-term threat of competition.

Diversification could be achieved through asset swaps with other oil companies. Repsol might surrender a portion of its local refining share in return for a marketing toehold in France or the UK. If crude oil prices start to rise, it will be harder to resist the temptation to acquire more upstream assets to match downstream capacity. Either option carries a degree of risk. Repsol has proved itself in a protected domestic energy market. The risk is that it gets sucked into unwise expansion.

Repsol ES Spain, EC P2911 Petroleum Refining P9611 Administration of General Economic Programs CMMT Comment & Analysis FIN Share issues P2911 P9611 The Financial Times London Page 18 277
The Lex Column: British Gas Publication 930302FT Processed by FT 930302

One begins to wonder why Sir James McKinnon is so determined to conduct the debate about the future of British Gas in public. Traditionally, participants respect the confidentiality of submissions to the Monopolies and Mergers Commission. But the director-general of Ofgas has aired his views in the manner of someone who suspects that the argument is not going his way. If Sir James is merely trying to apply extra pressure to ensure he triumphs, then he is playing with fire.

Besides, the latest Ofgas document does not adequately address many of the thorny issues raised by the break up of British Gas. Should the proposed regional marketing companies have a local monopoly, and, if not, who should assume the obligation to supply customers with gas? Will the government accept that low-usage domestic customers should pay more? Does the cheap interruptable gas market have a future, and is it economically efficient for companies such as ICI to be supplied with gas at marginal prices?

Whether British Gas is dismembered or not, the most important factor for valuing the company is the rate of return earned on its pipelines. Here the gap between Ofgas's recommendations and British Gas's requests is still vast. Privatisation has produced several poorly thought-out structures. Now that gas is justifiably getting a second look, both customers and investors deserve more than yet another half-baked publicity stunt.

British Gas Office of Gas Supply (UK) GB United Kingdom, EC P4923 Gas Transmission and Distribution P9631 Regulation, Administration of Utilities CMMT Comment & Analysis P4923 P9631 The Financial Times London Page 18 272
The Lex Column: Sterling takes a shine Publication 930302FT Processed by FT 930302

At last, things seem to be going more the chancellor's way. The Bundesbank has hinted at lower interest rates to come; UK inflation appears under control; after a further robust rise in M0 money supply, there is a whiff of recovery in the air which makes Mr Lamont's reluctance to cut rates that bit more credible. At least he should be spared a sterling crisis in the run up to the budget. A stable pound as well as a competitive exchange rate is needed to attract overseas buyers into the gilts market.

Sterling's 3.5 pfennig rise yesterday suggests the markets may be getting ahead of themselves. There is no guarantee that the Bundesbank will cut official rates that quickly. Long bond yields have fallen in Germany and there has been some good news on the wages front, but retail price inflation of 4.2 per cent, continuing high wage demands in the construction sector and the unresolved budget negotiations give pause for thought. The Bundesbank may confine itself for the time being to a further cut in the money market repurchase rate.

Mr Lamont has a balancing act to perform at home. While the recovery remains tentative, a tight budget would be difficult to sell in the absence of lower interest rates. Without some sign of fiscal discipline, the markets might come to doubt his ability to finance the PSBR. Since the government appears to be concerned about the exchange rate, it could certainly do with some timely accommodation from the Bundesbank.

GB United Kingdom, EC P6231 Security and Commodity Exchanges CMMT Comment & Analysis P6231 The Financial Times London Page 18 283
Leading Article: John Birt Inc Publication 930302FT Processed by FT 930302

THE AVERAGE British citizen has long been entitled to take all possible steps, provided they are legal, to minimise his or her tax bill. But the director-general of the British Broadcasting Corporation is not an average citizen; and the revelation that Mr John Birt's pay has been finding its way into the family coffers via a tax-efficient private company has understandably raised eyebrows.

Yesterday's belated decision to turn him into an employee of the corporation is undoubtedly the right one. But it leaves a disconcerting impression that, just as long as the public remained in the dark, the BBC and its board of governors were happy to live with an arrangement that did not stand up to public scrutiny.

It was certainly a curious arrangement for any director-general of the BBC. By calling himself a consultant and paying himself through a company, Mr Birt was able to offset a wide range of expenses against his remuneration, something which no ordinary employee is able to do. This is particularly unsettling to BBC staff at a time when they are being asked to absorb the effects of a programme of radical change initiated by Mr Birt.

Unlike most of those who are paid under contracts at the BBC, the director-general enjoys several years of tenure. And unlike most television producers who operate under a corporate banner, he does not derive his income from a wide range of sources.

The arrangement was nonetheless agreed by the Inland Revenue and has been sanctioned over many years. There is no way of knowing how widespread such arrangements are in broadcasting or any other business.

The fact that a tax avoidance mechanism is legal does not necessarily make it acceptable for individuals in important positions to exploit it. This point has force whether the individual is in the private or public sectors, although those who hold high public offices have a responsibility to accept demanding standards.

But more reliable information is needed before it can be judged whether it would be appropriate to take an early opportunity to tackle the specific loophole which permitted Mr Birt's arrangements. There are good arguments for reviewing the whole structure of corporation tax to address this and other concerns, but not only on the basis of tax avoidance by a few television personalities.

The main policy matter to arise from the affair is a reminder that the pursuit of a simple tax system which is widely felt to be fair requires constant vigilance and determination. The fall in personal income tax rates under the Thatcher governments did much to undermine many of the more Byzantine tax avoidance methods, but there is still work to be done.

For the BBC, the main issue is the question mark raised, once again, over the judgment of the board of governors. But they seem no more likely than others in British public life to accept responsibility for an evident blunder.

British Broadcasting Corp GB United Kingdom, EC P4833 Television Broadcasting Stations P4832 Radio Broadcasting Stations CMMT Comment & Analysis PEOP Personnel News P4833 P4832 The Financial Times London Page 17 527
Observer: Paid out Publication 930302FT Processed by FT 930302

The newly-minted Forum of Insurance Lawyers has an appropriate acronym - FOIL. Sounds just right for a bunch of briefs dedicated to advising insurance companies on how to combat fraud. If they're short of a motto, how about: 'They shall not pay]'

GB United Kingdom, EC P8621 Professional Organizations CMMT Comment & Analysis P8621 The Financial Times London Page 17 68
Observer: Golden debate Publication 930302FT Processed by FT 930302

Bulls of the gold price may be an endangered species, but they were out in force at yesterday's opening of South Africa's Leeudoorn gold mine. Anton Rupert, doyen of South African industrialists, led the celebrations.

His belief in the yellow metal is no surprise given that his Rembrandt tobacco business has big stakes in Gold Fields. Still, his view that the world has too little gold is at least novel. 'It is so scarce,' he says, 'that all the gold mined since Noah could be fitted into one luxury yacht such as that of King Fahd of Saudi Arabia.' No doubt Rupert is talking from first-hand experience.

ZA South Africa, Africa P1041 Gold Ores CMMT Comment & Analysis RES Facilities P1041 The Financial Times London Page 17 135
Observer: Nothing ventured Publication 930302FT Processed by FT 930302

If anyone doubted Robert Drummond, chairman of the British Venture Capital Association, when he said back in January that one of the biggest challenges facing venture capitalists was raising new funds, they should have been watching the final episode of BBC2's Adventurers programme.

The series, based on Drummond's own venture capital firm, Grosvenor Venture Managers, revealed that Grosvenor set out in early 1992 to raise Pounds 60m. It was forced progressively to reduce its sights until, by the end of the series, it had gathered in only Pounds 7m. On top of this, the two young turks who joined the firm at the start of the series were both quitting.

Clearly Drummond has not got the same sort of star qualities as TV Troubleshooter Sir John Harvey-Jones who comes from the same TV production stable. But it would be a great pity if Drummond's experience deterred others from revealing warts and all on camera.

GB United Kingdom, EC P8611 Business Associations P6799 Investors, NEC CMMT Comment & Analysis P8611 P6799 The Financial Times London Page 17 184
Observer: Troubled brew Publication 930302FT Processed by FT 930302

Given the fanfare accompanying Jose Dedeurwaerder's arrival at the top of Interbrew, the fast-growing Belgian beer giant, his sudden decision to quit is mystifying.

The Belgian brewer of expensive Stella Artos lager had hired the former Renault car troubleshooter to consolidate the merger of privately-owned Piedboeuf and Artois, and to expand the company internationally. The simple explanation is that he has completed that job, and successfully. But some suspect he may have trodden on toes on the way - all too easy for the professional manager of a family-owned concern.

The vacancy will be filled temporarily by Jean-Marie Descarpentries, on the board for two years and better known as the former boss of French packaging company Carnaud. He engineered the merger with Metal Box - and reduced his audience to glassy-eyed bemusement with a two-hour philosophical justification of it.

Interbrew BE Belgium, EC P2082 Malt Beverages PEOP Personnel News CMMT Comment & Analysis P2082 The Financial Times London Page 17 169
Observer: Far East pioneer Publication 930302FT Processed by FT 930302

When it comes to finding well-paid retirement jobs for ex-British ambassadors to Japan, demand seems to exceed supply, judging by the speed with which Sir John Whitehead has been picking up jobs lately.

However, it seems that there may also be an untapped demand for retired Japanese big-wigs. Shijuro Ogata, former deputy governor of the Japan Development Bank, is on Barclays' board, but there are precious few other examples.

Full marks then to Foreign & Colonial which has recruited Kazuo Chiba, Japan's man at the Court of St James until 1991, on to the board of its Far Eastern flagship Foreign & Colonial Pacific Investment Trust. Chiba, with his impeccable English and considerable cultural versatility, was a big success in London.

F&C's Eric Elstob says he got the idea of recruiting Chiba after he 'popped up this winter giving a seminar at the LSE in Far East international relations'. The fact that Chiba will be sitting alongside Sir Hugh Cortazzi, Britain's man in Tokyo between 1980 and 1984, may have helped. Even so F&C seems to be living up to its pioneering reputation.

Foreign and Colonial Pacific Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC CMMT Comment & Analysis PEOP Appointments P6726 The Financial Times London Page 17 220
Observer: One more talking shop Publication 930302FT Processed by FT 930302

Hands up anyone who hasn't yet formed a pro-manufacturing industry lobby group? After the lost years of the 1980s, during which British business apparently forgot how to make anything except Japanese cars, manufacturing is firmly back on top of the agenda.

The CBI, finally bludgeoned into championing the makers of nuts and bolts after its love affair with the service sector, has its National Manufacturing Council, businessman David Turnbull has started the UK Industrial Group, and now an odd bunch of politicians is launching the Manufacturing and Construction Industries Alliance.

It's the brainwave of maverick Tory MP Nicholas Winterton. He's got Robin Cook, the Labour industry spokesman, GMB boss John Edmonds, the Lord Mayor of London and a bevy of industrialists from Rolls-Royce downwards on his side.

Indeed, the only weakness is Winterton himself. He doesn't have the ear of the PM, to put it politely, and he and his new chums can be rather full of themselves sometimes. Even so, the presence of veteran campaigner Des Wilson suggests that the new alliance will get heard. But why another organisation whose motto 'Making things happen' sounds no different from the CBI's 'Making it in Britain'?

It seems Winterton had initially tried to cuddle up to the CBI without success. Nevertheless, all sides are being very polite and the CBI's Howard Davies has even sent a message of support.

GB United Kingdom, EC P8611 Business Associations CMMT Comment & Analysis P8611 The Financial Times London Page 17 256
Exposed to chill economic winds: French banks are beginning another bruising year in their domestic markets Publication 930302FT Processed by FT 930302 By ALICE RAWSTHORN

If you ask Mr Andre Levy-Lang, chairman of Paribas, the French banking group, how his company is faring, the answer is scarcely cheering. 'We had a tough time in 1992,' he said, 'and 1993 is going to be another difficult year.'

Mr Levy-Lang is not alone. The 1992 figures for Paribas and the other big French banks, due to be published over the next few weeks, will paint an unpleasant picture of sluggish operating profits from their banking activities and steep provisions against losses on property and industrial investments.

The French banks, which include six of Europe's 20 biggest banks, are now beginning another bruising year of struggling with both the short-term pressures of the economic slowdown and the long-term challenge of adapting to life in an increasingly competitive market. The problems could not have come at a worse time for Credit Lyonnais and Banque Nationale de Paris (BNP), the state-controlled banks which are prime candidates for privatisation if, as the opinion polls suggest, France's conservative coalition wins this month's parliamentary elections.

One of the main difficulties is the sluggish state of the banks' domestic market. The high level of French real interest rates, at more than 7 per cent, has depressed demand for credit among consumers and industry. 'Demand for credit is static for the first time since the war,' said Mr Michel Pebereau, chairman of Credit Commercial de France. 'This means that the volume of banking activity is very low.'

The credit problem has also made it difficult for the banks to respond to the recent rise in short-term interest rates triggered by the Bank of France in its battles to defend the franc. The bank raised its short-term lending facility, which sets the rate at which banks borrow money, from 10 per cent to 12 per cent in early January. The action was aimed at deterring speculation, by making it more expensive to borrow funds in francs.

This increase also raised the banks' borrowing costs. In normal conditions they would have responded by raising the base rate they charge for loans to their own customers. But they have been reluctant to do so, partly for fear of offending the government, which is anxious to avoid another interest rate rise before the elections, and partly because of concern that higher base rates would further depress demand for credit.

The big banks have left base rates at 10 per cent since December. The French banking association estimates that, since the short-term facility rose in early January, their total borrowing costs have risen by FFr10m (Pounds 1.25m) a day. The Bank of France is committed to reducing short-term rates, but is unlikely to make substantial cuts until German rates fall further, for fear of imperilling the franc. The banks have been left in the unenviable position of having to decide whether to struggle on with higher borrowing costs, or to risk losing business by raising base rates.

These problems have been aggravated by the fragile state of the property market, particularly in Paris where average rentals have fallen by 20 per cent over the past three years. Mr Levy-Lang estimates that the banking industry may have to write off up to FFr70bn on property loans.

Banks have also been hit by the plight of small companies. The number of business failures - mostly small concerns - rose by 7.3 per cent in the year to last August, leaving the banks with a string of bad debts.

As a result, the four largest commercial banks - BNP, Credit Lyonnais, CCF and Societe Generale - have seen their average level of provisions as a percentage of average loans treble from 0.4 per cent in 1989 to 1.2 per cent in the first half of last year. While this level may be relatively high for French banks, however, it is low by international standards. The comparable figure for the four big UK banks in 1992 was 2 per cent. Moreover, French bankers argue that higher provisions, like the credit squeeze, are due to short-term factors.

'We've been through all this before in the mid-1970s and early 1980s,' said Mr Marc Vienot, chairman of Societe Generale. 'The property crisis, business failures and the market slowdown are all cyclical problems which will be resolved when the economy picks up.'

So far, there is no sign of a pick-up. The latest Bank of France survey suggests the economy has deteriorated in the opening months of this year, largely because of the effect of the strong franc on exports. Economists expect the strains to continue until after the elections, with the recovery starting in the second half of the year.

'The worst is probably over,' said Mr Chris Davis, banking analyst at BZW in London. 'The cyclical pressures should have eased by the end of this year and the banks must then address their main structural problem - the high cost of their branch networks.'

French banking overheads are high by international standards, with a cost-to-revenue ratio of 70 per cent, against 65 per cent in the UK. The banks are trying to resolve this by shedding staff, which represents 60 per cent of costs. The French banking association estimates that the industry, which employs 430,000 people, is now reducing staffing at an annual rate of 2.3 per cent, against an average of 1 per cent for the past four years.

The banks are also responding to domestic pressures by expanding outside France. The industry has traditionally taken a cautious approach to international investment, with the exceptions of Paribas in capital markets and Credit Lyonnais with its successful European commercial banking network. However, last month CCF joined forces with Germany's BHF Bank to take control of Charterhouse, the UK merchant bank, and BNP declared an interest in buying Banco de Fomento of Spain.

The most pressing question on the domestic agenda is whether the banking industry's present problems will jeopardise the conservatives' plans to privatise BNP and Credit Lyonnais. Both state banks have been badly affected by the economic slowdown. BNP, which has adopted the more cautious strategy of the two, saw net profits fall from FFr2.94bn in 1991, to about FFr2.78bn in 1992, and is on course for a modest recovery to FFr3.2bn this year, according to Shearson Lehman, the investment bank.

Credit Lyonnais is in a more precarious position. It barely broke even in the first half of 1992 and analysts forecast a fall in net profits from FFr3.2bn in 1991 to less than FFr1bn last year. The crux of its problems is the aggressive lending policy, pursued since Mr Jean-Yves Haberer became chairman in 1988, which has left it exposed to a string of corporate catastrophes, including Dollars 350m to Olympia & York, the Canadian property group, and Dollars 900m to MGM, the stricken US film studio. The bank is also worried by speculation that its MGM exposure is far higher than its Dollars 900m estimate.

'Could you privatise Credit Lyonnais right now? No way,' said one observer. 'And I wouldn't try selling BNP on last year's figures.' However, analysts are confident that both banks should be marketable in two or three years. The most discussed scenario is that Mr Haberer will be replaced at Credit Lyonnais after the elections and BNP will liven up its image with deals such as Banco de Fomento.

'This certainly isn't the right time to sell either BNP or Credit Lyonnais,' said a second observer. 'But there's no reason why they shouldn't be sold in late 1994 or 1995. The whole French banking system should look a lot healthier by then. If there are no more disasters, Credit Lyonnais might even look like an exciting investment - exciting in the right way.'

------------------------------------------------------------------------ FRENCH BANKING: NO SIGN OF A PICK-UP ------------------------------------------------------------------------ 1990 1991 Net profit Provisions Net profit Provisions FFr bn FFr bn FFr bn FFr bn ------------------------------------------------------------------------ Banque Nationale de Paris 1.6 7.1 2.9 8.1 Credit Lyonnais 3.7 6.5 3.2 9.6 Societe Generale 2.7 6.8 3.4 5.5 Credit Commercial de France 0.8 0.1 0.9 1.1 ------------------------------------------------------------------------ 1990 estimate 1993 estimate Net profit Provisions Net profit Provisions FFr bn FFr bn FFr bn FFr bn ------------------------------------------------------------------------ Banque Nationale de Paris 2.8 8.1 3.2 7.8 Credit Lyonnais 0.8 13.5 1.5 13.5 Societe Generale 3.4 6.0 4.0 5.7 Credit Commercial de France 0.9 1.1 1.0 0.8 ------------------------------------------------------------------------ Source: Company accounts and analyst estimates ------------------------------------------------------------------------

FR France, EC P602 Commercial Banks P6211 Security Brokers and Dealers IND Industry profile MKTS Market shares P602 P6211 The Financial Times London Page 17 1443
World Bank's worst-kept secrets: Michael Holman argues for an open approach in Africa Publication 930302FT Processed by FT 930302 By MICHAEL HOLMAN

The time has come for the World Bank to open to public scrutiny its relationships with the governments of Africa, just as it has urged the continent's leaders to open up to their citizens. Transparency and good governance demand it.

Instead the bank withholds information. Country reports, sectoral analyses and project evaluations are classified as confidential. Often they are the only source of reliable data in Africa, but bank officials apart, only a handful of politicians and civil servants is allowed access to them. This restrictive approach does Africa a disservice - it stifles debate, protects vested interests and gives structural adjustment programmes a bad name.

Many governments around the world would like to control the information supply, but in Africa it is easier to do so than elsewhere. The private sector is weak, the press is vulnerable, universities starved of resources, think-tanks are almost non-existent. Who can fill the information gap if governments will not? Only the bank.

It already plays an important part. Its 1989 analysis - Sub-Saharan Africa: From Crisis to Sustainable Growth - remains required reading. Hardly a month goes by without a new study on some aspect of the continent's economic crisis. But it is a different matter when it comes to operations in individual countries.

The bank's relationships with some of its African clients are profoundly unhealthy: protective, secretive or defensive, sometimes all three. Governments are too often being given the benefit of the doubt when practice falls short of promise, and presidents' white elephants are indulged.

Take Nigeria: why the circumspection with which the bank handles its biggest customer in Africa? The bank has been the main supporter of the structural adjustment programme launched by President Ibrahim Babangida in 1986. After a promising start the programme ran into serious difficulties, undermined by corruption, weak management and fading political commitment.

But these factors are not evident from a look at the bank's 1992 annual report on the state of black Africa's largest economy. 'Growth in Nigeria's GDP and agricultural sectors,' it says, 'both rose by about 5 per cent in 1991 with total non-oil productions rising by just under 4 per cent. However the combined effect of the political transition and the short-lived effect of the Gulf crisis contributed to some weakening of fiscal and monetary discipline' (my italics).

This euphemism conceals a crisis. The unexpurgated view of Nigeria is revealed in a bank report - Public Expenditure Management in Nigeria - not intended for public consumption. It was based on a review conducted in early 1991. In this study, one finds a more enlightening account of Nigeria.

The report tells of 'large-scale' spending of oil revenues 'outside the purview of statutory controls'. It speaks of 'a lack of transparency and accountability of big spending decisions'. It says that 'public expenditures (are) used more to distribute oil riches and generate lucrative business opportunities for selected groups than to ensure efficient delivery of goods and services to the country as a whole'.

Ask Nigerians about their economic crisis and most will blame corruption and 'sap' - the acronym for the structural adjustment programme, which has become synonymous with hardship, inflation and unemployment. But if they had access to information that the World Bank treats as confidential, they would be better able to see the link between corruption and mismanagement and the failure of 'sap'. They would gain more insight into Nigeria's plight, and why 'sap' was introduced in the first place. This information would not ease the pain of austerity. But at least there would be a better understanding of why 'sap' was not working and a more informed debate about alternative strategies.

Of course, the bank has an explanation for the secrecy. Without it, officials argue, governments would not co-operate. And confidentiality is clearly important. Yet all too often information that should be in the public domain remains secret. When information about grave mismanagement is withheld, confidentiality overlaps with complicity.

It is now widely accepted that international aid should carry conditions, whether linked to human rights or political accountability. The World Bank should add access to information to that list. The reports and analyses on which adjustment programmes are based should be open to public scrutiny.

Nigeria, which has promised to return to the path of reform, would be a good place to start. Chief Ernest Shonekan, chairman of the country's governing Interim Council, set out the blueprint in his budget in January, together with an appeal for debt relief. Few actions would do more to convince sceptical donors and creditors that he means business than allowing the World Bank to open the books on Nigeria. The governments that object the loudest to such scrutiny would be those with the most to hide.

World Bank XM Africa P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs CMMT Comment & Analysis MGMT Management P9311 P9721 The Financial Times London Page 17 838
Leading Article: Breaking up British Gas Publication 930302FT Processed by FT 930302

THERE IS a strong prima facie case for some form of break-up of British Gas, and the current Monopolies and Mergers Commission investigation provides an opportunity to do so. Whether the radical dismemberment proposed yesterday by Ofgas is the right way to go remains unproven.

The underlying principle behind the industry regulator's plan is right: competition wherever possible, and monopoly and regulation only where necessary. Ofgas convincingly argues that British Gas's transportation business is the only part of the gas supply market to constitute a 'natural monopoly'. It would be wasteful to build duplicate pipelines into customers' premises and, provided rivals can get fair access to these facilities, there is no reason why the rest of the gas market should not be competitive.

But is forcing British Gas to sell off 14 different companies necessary to achieve competition?

The case for creating a separate transportation company is compelling. The current integrated structure has made it difficult for competitors to get fair access to British Gas's pipelines. Divestment would ensure fair treatment, as the transportation business would no longer have an incentive to show favouritism to British Gas's marketing arm.

There is also something to be said for breaking the marketing business into 12 competing companies. A more modest proposal would be to remove British Gas's de jure monopoly to supply domestic customers. But the group's de facto monopoly would be eroded more quickly if it was split into regional companies able to make raids into each others' territories.

More competition would create a greater incentive to improve efficiency, expand the market for gas and deliver a better quality of service. The main objection is political. Competition might lead to prices for some customers going up as cross-subsidies inherent in the system were eliminated.

The least convincing part of Ofgas's plan concerns a separate gas purchasing company. British Gas's dominant position in this part of the market is largely due to long-term contracts signed before privatisation. It is already being forced to sell on some of this gas to competitors and it is not clear that more should be done.

Moreover, most of Ofgas's arguments are theoretical. Before embarking on big structural changes to the industry, it is important that hard figures on the costs and benefits of a break-up are produced. So far the only published figures are a Pounds 3bn estimate from British Gas and a Pounds 250m one from Ofgas for the break-up costs. No attempt has been made to explain where these numbers come from, although the MMC has been given more detailed figures. British Gas and Ofgas must now make more financial information available to the public. The issue is too important to be decided behind closed doors.

British Gas Office of Gas Supply (UK) GB United Kingdom, EC P4923 Gas Transmission and Distribution P9631 Regulation, Administration of Utilities CMMT Comment & Analysis P4923 P9631 The Financial Times London Page 17 497
Leading Article: Russia's backyard Publication 930302FT Processed by FT 930302

AS THE political and economic situation in Russia worsens, the responses of President Boris Yeltsin grow more unpredictable. Already struggling to maintain his political authority at home, he has now touched off alarm bells abroad with careless talk concerning Russia's role in its immediate neighbourhood. In a speech to the centrist Civic Union grouping on Sunday, Mr Yeltsin said that given its 'heartfelt interest' in suppressing conflicts around its borders, Russia should be granted 'special powers' by the United Nations to act as guarantor of peace and stability in the former Soviet Union.

It is not clear whether even Mr Yeltsin knows what precisely he has in mind. But if - as Russia's wary neighbours and former subjects were bound to suspect - he is demanding some sort of international carte blanche to intervene beyond his country's borders, either in defence of Russian interests or in the more general cause of containing instability, he deserves a dusty response from the west. If he is attempting to appease hardliners in his armed forces by promising them a new extra-territorial role, then he is playing a dangerous game which, far from creating a 'belt of good-neighbourly, friendly states' around Russia as he says he wants, could merely fan the flames of conflict.

Russia undoubtedly has an overriding interest in preventing the spread of conflict to its south and west: its troops are already in combat in Georgia and Tajikistan, and keeping a fragile peace in Moldova; refugees from these wars represent a further burden on its resources; and fissiparous tendencies abroad could easily infect the Russian federation itself.

It also has reasons for concern about the internal arrangements of some of its peers in the Commonwealth of Independent States. Some 25m ethnic Russians live in other parts of the former Soviet Union, and in some cases - Latvia, Kazakhstan and eastern Ukraine - they constitute nearly half the population. Such communities are a target for anti-Russian sentiment at a time when relations between governments are coming under increasing strain over energy prices, currency links and trade. In Latvia and Estonia, discrimination against Russian minorities represents a flash-point waiting to ignite.

But to acknowledge such interests is one thing; to give Russia a free hand in dealing with them unilaterally quite another. In some of the conflicts on its borders, Russia could conceivably play a useful mediating role. But in many of them, its status as honest broker is not undisputed - and is likely to be further tarnished if it arrogates to itself an open-ended right to intervene in other sovereign states.

The west should tell Russia that it can only hope to resolve such disputes, and take its place in the community of civilised nations, by playing the fullest role in the international body set up to deal with them, the UN. Attempts to bypass that machinery will only make matters worse.

RU Russia, East Europe P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 17 508
Personal View: The beauty of a vote - Reform of bankruptcy law could help revive ailing companies Publication 930302FT Processed by FT 930302 By PHILIPPE AGHION, OLIVER HART and JOHN MOORE

On both sides of the Atlan-tic, a debate is taking place about bankruptcy law. There is a lot at stake. When a company needlessly goes to the wall, the overall health of the economy is threatened - to say nothing of lost jobs and wrecked lives.

Bankruptcy law should play an important role in resuscitating financially distressed companies that are inherently sound. But current procedures are failing to deliver. A recent Coopers & Lybrand report concludes that, despite reforms in 1986, UK insolvency procedures too often 'bayonet the wounded'. In the US, Chapter 11 is thought to be slow, costly and too soft on debtors.

Practitioners have suggested ways of amending current procedures. While many of these changes are sensible, there are more fundamental problems that no amount of tinkering will solve. A radical restructuring of bankruptcy law is needed. We propose a new procedure, which is simple and quick, and gets the balance between liquidation and reorganisation right.

Almost all existing procedures can be crudely classified into two types. In the first type, a bankrupt company's assets are sold off for cash, and the proceeds distributed to creditors according to the seniority of claims. This type of procedure - in essence a cash auction - is how Chapter 7 operates in the US, and how most liquidations and receiverships work in the UK.

Cash auctions are attractively simple. The worry is that they lead to the piecemeal liquidation of healthy companies. Of course, in principle, there is nothing to stop someone from making a cash bid for the company as a going concern. The problem is that it is costly to buy the whole of a large company for cash. So even viable companies may be broken up.

To overcome the danger of inefficient liquidation, a second type of procedure has been developed. In the UK, this is the administration order; in the US, it is Chapter 11. Although the details of the UK and US procedures are very different, both can be viewed as forms of structured bargaining. The idea is to encourage creditors to agree on a reorganisation plan for the company, including a restructuring of their claims. Crucially, a plan can be agreed by a suitable majority of the creditors: unanimity is not required. Creditors may of course decide to liquidate, and this is how most cases end up.

Reorganisation is a laudable objective, but there is an inherent problem with structured bargaining procedures. Creditors are being asked to make two decisions. First, what should happen to the company - should it be reorganised or liquidated? Second, who should get what - whose debt should be forgiven, and by how much?

Serious conflicts of interest arise when these two matters are decided together. Senior creditors may push for rapid liquidation since they will certainly get paid. Junior creditors and shareholders may want to gamble on the reorganisation process, since they enjoy the upside gains if the company's prospects improve, but do not suffer the downside losses. In structured bargaining, people are not only squabbling over how to divide the cake, they are also fighting over which cake to divide. This mixing of decisions is a recipe for failure.

We propose a procedure that has the simplicity of a cash auction, but which is flexible enough to allow for reorganisation, without conflicts of interest. At the outset of bankruptcy, an insolvent company's debts are cancelled. The accountant or judge supervising the process then solicits bids for the company. The crucial difference from a cash auction is that bidders can offer to buy the company using as means of payment securities in the post-bankruptcy company.

Suppose the company's managers believe that the bankruptcy was owing to bad luck rather than their bad management. They want to continue running the company, but do not have the cash to buy it outright. Under our proposal, they could bid to retain their jobs by offering equity in the post-bankruptcy company.

Another possibility would be to make a bid comprising cash and equity, where the cash is raised by borrowing against the company's future profits. An outside management team could make the same kinds of bids. And of course anyone is free to make a purely cash bid.

The difficulty in evaluating these various bids is that they are chalk and cheese. How does one compare a cash bid to a non-cash bid? The answer is to transform the former claim-holders into shareholders, and then let them vote on the bids. There are a number of ways of doing this.

One market-based mechanism gives all the equity initially to senior creditors. Junior creditors have the right to buy out the senior creditors once the bids are announced: someone owning 1 per cent of the junior debt is given the option to buy 1 per cent of the equity from the senior creditors at a price equal to 1 per cent of the senior debt. Similarly, former shareholders are given the option to buy back the equity from the creditors as a whole.

The merit of this scheme is that it preserves the seniority of claims without requiring an external valuation of the company. No junior claimant need feel short-changed, since he or she can always buy out the senior claimants if he or she thinks their equity allocation is worth more than what they are owed.

Once the new shareholders have been determined, they vote on which bid to accept. If the vote goes in favour of a cash bid, the company is in effect liquidated or sold. If a non-cash bid wins, then the company is in effect reorganised.

The advantage of a vote is that it leaves the decision over the company's future - whether to liquidate or reorganise - in the hands of the (new) owners. And at the moment of decision, these owners' interests are aligned, since they are all shareholders. Moreover, there is no squabbling over the division of the company's value, since the procedure determines this mechanically via the options.

We think our procedure strikes the right balance between liquidation and reorganisation.

Unlike a cash auction, the procedure gives claim-holders the option of maintaining the company as a going concern if the company's bad fortunes are the result of bad luck rather than bad management.

Unlike administration or Chapter 11, the procedure avoids conflicts of interest. It is quick and cheap. And it is not biased in favour of incumbent management. Managers must persuade the new shareholders to vote them back into office, presumably against a competing cash bid. The threat of losing one's job provides a strong incentive to avoid bankruptcy.

The authors are, respectively: official fellow at Nuffield College, Oxford; BP visiting centennial professor at the London School of Economics; and professor of economics at the LSE

GB United Kingdom, EC P9222 Legal Counsel and Prosecution CMMT Comment & Analysis GOVT Legal issues P9222 The Financial Times London Page 16 1186
Letter: Why Mulroney's effect on society means he will not be missed Publication 930302FT Processed by FT 930302 From Mr BRIAN MCNAMARA

Sir, While it may seem mean-spirited, I think that you will find that most of your Irish readers would object to your characterisation of Brian Mulroney ('Irish charm turns sour on Mulroney', February 25) as an 'Irish charmer'.

Look at it this way: while you would perhaps be comfortable attributing a stereotypically British characteristic - for instance, a 'stiff upper lip' - to a politician of British origin, you would think again before headlining Jesse Jackson's or Nelson Mandela's 'sense of rhythm'.

Innocent as it may seem, your Irish charmer label is in fact a stereotype, with more negative images, such as the usual 'tendency towards exaggeration' (which was included in the same article), never far away.

Brian McNamara,

Washington DC,

US

CA Canada P9111 Executive Offices CMMT Comment & Analysis P9111 The Financial Times London Page 16 159
Letter: Why Mulroney's effect on society means he will not be missed Publication 930302FT Processed by FT 930302 From Mr NICHOLAS LOWSON

Sir, The resignation of Mr Brian Mulroney, the prime minister of Canada, has garnered a fair share of attention. However, I feel the focus of the commentary has failed to highlight the true reason for the demise of Mr Mulroney's leadership career.

While it is true to say that his tenure suffered from the blight of economic recession in Canada, other issues are more central to his unpopularity. Mr Mulroney, like many other politicians, failed to heed the history of his nation and the protestations of the citizenry.

Mr Mulroney's greatest error was his transgression on the citizens' ideal of the nation of Canada. He fostered and supported policies that attacked the institutions of the national political and social identity. These ranged from simple incidents such as the controversy over the Royal Canadian Mounted Police uniform, to the Meech Lake and Charlottetown Accords.

One must realise that being a Canadian means more than playing hockey and objecting to being called an American. There are intangible aspects that few Canadians can define, but they are all too aware of them when they are vio-lated.

A national identity does exist in the hearts and minds of every Canadian, which is built up from the aspects of the Canadian social structure and lifestyle.

In the final analysis, Brian Mulroney showed too much petulant disdain for that which the man in the street holds dear, and his fate was predictable. Therein lies the true reason for his fall from grace.

Nicholas R M Lowson,

Hollyhock Farmhouse,

Guildford Road,

Cranleigh,

Surrey,

GU6 8LT

CA Canada P9111 Executive Offices CMMT Comment & Analysis P9111 The Financial Times London Page 16 295
Letter: Why Mulroney's effect on society means he will not be missed Publication 930302FT Processed by FT 930302 From Dr HAROON AKRAM-LODHI

Sir, Your leader, 'Mr Mulroney's political legacy' (February 25) suggests that history will be kind to Brian Mulroney. However, the view from Main Street is very different from the view from Southwark Bridge in London.

Mr Mulroney pursued policies designed to restructure the Canadian economy. The results have been: an erosion of the east-west trade which has historically served as the foundation of Canada's economic logic; a decimation of the Canadian manufacturing sector; a loss of tens of thousands of jobs, many of which have shifted south to the US; and the longest, deepest recession recorded since the 1930s.

By undermining the social solidarity upon which the Canadian federal state is built, these policies have been instrumental in worsening Canada's divisions, not only between French and English-speaking Canadians, but also between eastern and western Canadians.

Mr Mulroney will not be missed.

Haroon Akram-Lodhi,

Economics Division,

South Bank University,

London

CA Canada P9111 Executive Offices CMMT Comment & Analysis P9111 The Financial Times London Page 16 186
Letter: The Duke of Westminster 'should have read Marx' Publication 930302FT Processed by FT 930302 From Mr LUCA SALICE

Sir, The Duke of Westminster seems genuinely surprised at the Conservative government's desire to interfere in property rights with the lease reform bill currently before Parliament.

The Conservatives are clearly trying to remove some power and wealth from the large London estates in favour of the professional middle classes that live in West End flats.

This is a case of redistribution of wealth from the very rich to the merely rich.

Had the Duke of Westminster read his Karl Marx as a young man like everybody else, he would have realised that the shifting of the balance of power between social classes is what politics is all about.

Politicians of all persuasions endeavour to protect or extend the power of some social classes at the detriment of others.

Had the Duke realised that, he might have adopted the well-known policy of diversifying one's investments.

Luca Salice,

8 Ascham Street,

London NW5 2PD

GB United Kingdom, EC P6513 Apartment Building Operators P6514 Dwelling Operators, Ex Apartments P9531 Housing Programs CMMT Comment & Analysis P6513 P6514 P9531 The Financial Times London Page 16 199
Letter: Politicians ignore national identity at their own peril Publication 930302FT Processed by FT 930302 From Mr NICHOLAS LOWSON

Sir, The resignation of Mr Brian Mulroney, the prime minister of Canada, has garnered a fair share of attention. However, I feel the focus of the commentary has failed to highlight the true reason for the demise of Mr Mulroney's leadership career.

While it is true to say that his tenure suffered from the blight of economic recession, other issues are more central to his unpopularity. Mr Mulroney, like many politicians, failed to heed the history of his nation and the protestations of the citizenry.

His greatest error was his transgression on the citizens' ideal of the nation of Canada. He fostered and supported policies that attacked the institutions of the national political and social identity, from simple incidents such as the controversy over Royal Canadian Mounted Police uniform, to the Meech Lake and Charlottetown Accords.

One must realise that being a Canadian is more than playing hockey and objecting to being called an American. There are intangible aspects that few Canadians can define, but they are all too aware of when violated.

A national identity does exist in the hearts and minds of every Canadian, which is built up from the aspects of the Canadian social structure and lifestyle.

Brian Mulroney showed too much petulant disdain for that which the man in the street holds dear, and his fate was predictable. Therein lies the true reasons for his fall from grace.

Nicholas R M Lowson,

Hollyhock Farmhouse,

Guildford Road,

Cranleigh,

Surrey,

GU6 8LT.

CA Canada P9111 Executive Offices CMMT Comment & Analysis P9111 The Financial Times London Page 16 278
A colour-blind vision Publication 930302FT Processed by FT 930302 By JOE ROGALY

Police chiefs everywhere will recognise the powerful phrases used by Mr Paul Condon, the new commissioner of London's metropolitan police, at the weekend. 'The dire consequences of racially based nationalism, ignorance, prejudice and outright thuggery,' he said, 'have already been seen to a greater or lesser extent in Italy, in France, in Belgium and of course in Germany.' He did not exclude his own country. 'Our society is in the process of becoming an even richer mix of races and nationalities,' he reminded his audience at a three-day conference on 'fairness, community and justice', organised by the Metropolitan police.

His clear implication was that 'outright thuggery' is used against Asians, Africans and West Indians in Britain. We all know this. England's assaults on Indians and Pakistanis long preceded Germany's recent murderous attacks upon Turkish guest-workers. On the western side of the English channel, the perpetrators are usually young louts, but sometimes police constables. 'This is an area where we must be totally intolerant - intolerant of racially motivated attacks, intolerant of those who indulge in racial abuse, and intolerant of those who use hatred and violence as the tools of their political expression,' said the commissioner.

As to the police themselves, 'we must be equally intolerant of our own colleagues who fail to meet the required standards. The argument that there is some excuse for poor behaviour because the culture of the service can only be expected to mirror that of wider society . . . is simply specious.'

Mr Condon's words echo the warnings given to the Los Angeles police by Mr Willie L Williams, the black successor to Mr Daryl F Gates as chief in LA. In saying this, I acknowledge the substantial differences between Scotland Yard and LA law. Blacks constitute a far greater proportion of the Los Angeles population. The ugly beating by four white officers of the black motorist, Rodney G King, on March 3 1991, and the subsequent riots in Watts county, caused much more damage in California than anything that has happened in Britain. The burned-out acres of Watts are evidence of that, as I saw the other day. Yet the fears in both cities are the same.

The British theory of assaults on ethnic minorities is that the less said about them the better. The Commission for Racial Equality has so far failed to persuade the government to create a new offence of racial violence. The government does collect figures showing reported attacks. But, although these suggest that there have been sharp increases over recent years, the actual numbers are meaningless, since black or brown victims often believe that there is no point telling the police. Worse, there is plenty of anecdotal evidence to suggest that some younger members of the force automatically assume that the non-white participant in any fight is the aggressor, no matter who started it.

My exposure to such stories started a few months ago with a telephone call from the CRE. It proposed a new set of annual media awards, for sensitive reporting or interpretation of racial matters. Would I be one of the judges in the radio section? A few weeks later 32 tapes arrived - a total of 22 listening hours. Heavens] The only solution was to keep them for the motorway.

What I thought would be a bore turned out to be fascinating. The Britain revealed by these tapes is every bit as multi-ethnic as Mr Condon says it is. Non-whites constitute only 5 per cent of the population but a disproportionate number of them are under 16. These young new Britons may be visible in the streets, but many are indistinguishable to the ear. The really interesting voices were exactly those of natives of these isles. On one tape a Chinese girl spoke with a pure Ulster accent; on another we had a Glaswegian Singh; on a third a Patel of the Welsh valleys. West Indians who speak undiluted Birmingham are well-known; I heard a few as I sped along the M4.

Some of those interviewed, such as Diane Abbott, Labour MP for Hackney North (Harrow County grammar school and Newnham College, Cambridge), have clearly been able to look after themselves; many have not. Accounts of racial harrassment, by pavement thugs or by the very police officers to whom the incidents were reported, were too consistent to be ignored. There is a contrary argument. Some forces have officers whose duty it is to record complaints of racial abuse, and to follow these up. The good intentions are there, but one or two individuals in a large and busy force cannot plod through the huge volume of reported incidents of violence.

None of the above should be taken by contestants as an indication of which tape has won. That is a separate matter, to be decided at the CRE ceremony at the end of the month. The point this morning is that Britain's ethnic community speaks to the rest of us through many hours of air-time. What it says fully justifies Mr Condon's weekend observations. These might serve to increase the propensity of victims to report racial incidents.

Beyond that, it is hard to see what can be done. British race relations are governed by a tacit agreement between the government and the majority of the electorate that remains suspicious of foreigners in general and black or brown ones in particular. The deal is this: whichever party is in government, and whichever the official opposition, will combine to enact an increasingly severe series of laws aimed at keeping non-whites out.

The latest example, debated in the House of Lords last month, is the Asylum and Immigration Appeals bill. On February 16, Lord Bonham-Carter observed that 'there is racial discrimination in the way in which the system works at present; and that will become worse if there is no appeals procedure', as there will not be under the new legislation. 'I should be surprised,' he added, 'if the more than one-in-1,000 Americans who were refused . . . entry - as opposed to the one-in-five Ghanaians and one-in-27 Jamaicans - were not black.'

In return for this restrictive covenant, the native inhabitants of the white homeland of Britain are expected to treat the few Africans, Asians and West Indians in their midst with a degree of decency. Most do. Mr Condon's is the right approach to those who do not.

GB United Kingdom, EC P9221 Police Protection CMMT Comment & Analysis P9221 The Financial Times London Page 16 1094
Letter: A Welsh perspective on the freight transport debate Publication 930302FT Processed by FT 930302 From A J GOODING

Sir, In his article 'Little Engine Who Can't' (February 15th), Richard Tomkins makes a valuable contribution to the debate on road and rail as regards freight traffic.

His analysis of the issues is certainly borne out in south Wales, where there has been a dramatic decline in rail freight traffic consequent upon the collapse of the coal industry and the rundown in the steel industry, both of which were virtually captive markets for the railways.

It is of course true that the government and various other agencies have had considerable success in diversifying the economy of the area through inward investment and indigenous growth of manufacturing. But for the reasons given in Mr Tomkins' article, this has done little or nothing to halt the decline in the amount of freight carried by rail.

I believe that a fresh approach is needed. The government is now more committed than for a long time to promoting transport infrastructure developments.

In these circumstances I suggest that it should commission a detailed study into the viability of establishing between a dozen or 20 railway-motorway interchanges with the most modern handling equipment, so that anything from a parcel to a full container load could easily be switched from one form of transport to the other.

I am convinced that if all the important industries within, say, a 20-mile radius of such an interchange were satisfied that freight deposited there between 4pm and 8pm one day would be available for collection at the nearest destination interchange between 6am and 10am the next morning, a good deal of long-haul traffic would be switched.

The truth of the matter is that most of our transport infrastructure is related to an economic structure which no longer exists or which has been transformed beyond recognition and over the years has 'grown like Topsy' with little or no regard to an overall strategic plan.

The time has come for a fresh start. While we cannot wipe the slate clean, we should at least take steps to ensure that future infrastructure developments are coherent and meet the needs of the next century and not continue to be related to those of an earlier one.

A study along the lines I suggest would be an important step in the right direction.

A J Gooding,

chairman,

Gooding Group,

27 Park Place,

Cardiff,

CF1 3BA

GB United Kingdom, EC P4011 Railroads, Line-Haul Operating P4213 Trucking, Ex Local P9621 Regulation, Administration of Transportation CMMT Comment & Analysis P4011 P4213 P9621 The Financial Times London Page 16 438
Letter: The dangers of stereotypes Publication 930302FT Processed by FT 930302 From Mr BRIAN MCNAMARA

Sir, While it may seem mean-spirited, I think you will find that most of your Irish readers would object to your characterisation of Brian Mulroney ('Irish charm turns sour on Mulroney', February 25) as an 'Irish charmer'.

Look at it this way - while you would perhaps be comfortable attributing a stereotypically British characteristic (for instance, 'stiff upper lip') to a politician of British origin, you would think again before headlining Jesse Jackson's or Nelson Mandela's 'sense of rhythm'.

Innocent as it may seem, your Irish charmer label is in fact a stereotype, with more negative images, such as the usual 'tendency towards exaggeration' (which was included in the same article), never far away.

Brian McNamara,

Washington DC,

US

CA Canada P9111 Executive Offices CMMT Comment & Analysis P9111 The Financial Times London Page 16 149
Letter: Housing bill and Britain's constitution Publication 930302FT Processed by FT 930302 From Mr GEORGE DONATH

Sir, My regard for the Conservative Party is much enhanced by its steadfast pursuit of the Housing Bill, albeit in a somewhat emasculated form, and notwithstanding the loss of the Duke of Westminster's support.

The Duke wishes to use Britain's unwritten constitution as an impediment to change. It is in fact the opposite, for it permits parliament to update legislation in an orderly fashion, while restricting upheaval to the legislative chamber.

The Grosvenors have a litigious record in both the British and the European courts.

One would hope that the present Duke will not now set out to try to frustrate parliament's will by either further attacking the principle or searching for loopholes in the legislation.

This can only create bitterness, expense, a modicum of delay and further legislation.

George Donath,

37 Eaton Mews South,

London SW1W 9HR

GB United Kingdom, EC P9531 Housing Programs CMMT Comment & Analysis P9531 The Financial Times London Page 16 171
Arts: Dmitri Hvorostovsky - Recital Publication 930302FT Processed by FT 930302 By RICHARD FAIRMAN

The noisy enthusiasm which greeted this recital suggests that Dmitri Hvorostovsky is well on his way to becoming a fully-fledged matinee idol. With arms outstretched and head held high, a smile of audacious pride allowed to creep across his face as he polishes off another song to his own satisfaction, Hvorostovsky is clearly practised at how to play the part.

For the young Russian baritone who rocketed into public awareness when he won the BBC Cardiff Singer of the World competition in 1989 fame was won quickly. He has, however, worked in earnest to further his standing. His matinee recital at the Queen Elizabeth Hall on Sunday was no mere after-lunch selection of favourite titbits from the celebrity singer's sweet-trolley. This was a serious programme of Russian song at its most demanding.

The first half was all Tchaikovsky. By chance the audience included the Russian mezzo Olga Borodina (in London to sing Berlioz's La Damnation de Faust at the Royal Opera) whose Tchaikovsky recital at the Edinburgh Festival last year was so unforgettable. Comparisons are difficult to resist: if Borodina was the more determined to get to the heart of each song, Hvorostovsky was also musically eloquent, dramatically varied.

Occasionally there were odd phrases in these songs where the baritone's instrumental shaping of the vocal line recalled old recordings of bel canto singers of the past. But when he sings out, especially at the top, the voice does not grow in size and brilliance as one might expect. The top notes at the end of 'Be it day that reigns', with the singer proudly inviting applause and Mikhail Arkadiev thunderously coming close to drowning him at the piano, suggested both of them thought that he was making more noise than he really was.

The pleasure of the recital came not in the thrill of hearing a fine voice in full flood, as Hvorostovsky might suppose, but in the beauty of so much of the singing, its malleability, its sensitivity to colour. Of the Tchaikovsky songs, 'Amid the din of the ball' stood out for its conversational intimacy and 'On yellow cornfields', a marvellous song, for its feeling of intensity with room to spare. Musorgsky's Songs and Dances of Death were not monochrome sepulchral black, as they were with Christoff and Nesterenko, but subtly contrasted studies of Russian gloom.

Encores included a pair of arie antiche and Bellini's I Puritani, suavely sung, the breath control as remarkable as ever. By that point it was no doubt a sensible idea to vary the programme, but it is Hvorostovsky's accomplishment as an imaginative and serious interpreter of Russian song that will stay in the memory. Now that so many young Russian singers are coming forward who fully have the measure of this repertoire, there is no excuse for audiences in the West to ignore it.

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups CMMT Comment & Analysis P7929 The Financial Times London Page 15 505
Arts: The Magic Fundoshi - Theatre Publication 930302FT Processed by FT 930302 By ALASTAIR MACAULAY

This triptych of short Japanese plays were written in Kyogen style by Donald Richie, the British authority on Japanese film, during his 50 years in Japan. Kyogen drama, as Richie has written, is 'satyr-play, anti-masque; it is Pyramus and Thisbe to Noh's Theseus and Hippolyta.' And all three of these are miniature comedies in nicely bawdy vein. Perfect Servants is like an erotic joke by Marivaux; The Magic Fundoshi is like a dirty rewrite of The Emperor's New Clothes; and The Misplaced Goddess is like a Whitehall farce set in a temple.

They are, however, acted here with laborious cuteness and zero finesse. I am sure that Glen Goei and Stephen Night, who co-direct, know far more about Japan than I; but this, surely, is Japan for tourists. David Tse, Adrian Pang, Danile York and Andrew Mallett perform with an archness that implies that (a) 'We're being Japanese, and refined, and quaint' (b) 'You couldn't take any of this seriously, it's too silly' (c) 'But aren't we a hoot'. Everything smacked of schoolboy theatricals. I think I laughed once, but have forgotten when. Not when the Lady Chibusa (Mallett) reads Hello magazine, anyway.

Acted with more authority, these plays could probably be enchanting. (Alas, there is always an audience to cherish crummy nudge-nudge acting, and the audience at Hammersmith's Lyric Studio chortles merrily.) Richie has a comic gift, which only falters in the climax of The Misplaced Goddess. The real goddess appears, and tells off these men for underestimating women - an apotheosis evidently intended as a feminist dea ex machina idea. But its feminism is expressed with such pc deadness that it seems to have been written by a machina for a machina, with no serious dea or idea in its head.

At the Lyric Studio, Hammersmith, W6, until March 20

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 15 336
Arts: Today's Television Publication 930302FT Processed by FT 930302 By CHRISTOPHER DUNKLEY

Last week's Assignment reported on malaria in countries such as Cambodia and Thailand, and showed that the disease was killing 20 times as many as Aids, yet receiving much less research money. This week's programme quotes what it calls 'Asia's leading Aids prevention campaigner' saying that Aids is 'Asia's largest non-military security threat'. It seems that Aids spreads through Thai brothels and 95 per cent of Thai men are said to use the brothels (7.45 BBC2). We progressed from de Quincey to Aldous Huxley in last week's survey of artists and drugs in Without Walls. Today (9.00 C4) we move on to the 1960s and such characters as Ken Kesey, Timothy Leary and JG Ballard. 40 Minutes finds nine young men from north-east England packed into a Benidorm flat intended for four. 'Loud, aggressive, abusive, they drink too much and leer at the topless girls', we are told. 'It looks like an orgy of loutish behaviour but, for them, the excesses are an escape from the drabness of life in everyday Britain'. Surprising really that they are not all mass murderers given the unique horror of the drabness (9.50 BBC2).

GB United Kingdom, EC P7812 Motion Picture and Video Production TECH Services P7812 The Financial Times London Page 15 220
Arts: Horizontal slice of European art / A look back to the works of 1893 at the Musee d'Orsay Publication 930302FT Processed by FT 930302 By WILLIAM PACKER

The chronological study of a movement's development, or the retrospective account of a particular artist and his work, is the staple of art-historical museum practice. But there are other ways to slice it for the microscope than up and down. The Musee d'Orsay has been looking sideways more and more in recent years, and now, after the success of its contextual studies of Van Gogh and then of Munch in their Paris periods, it has made the horizontal slice much thinner and chosen to see what artists of all kinds throughout Europe were up to in a single year.

The single-year idea is not new - I can remember a modest but excellent show at the Tate in the mid 1970s, of works in the collections made in 1935 - but this is the first I can think of to attempt so ambitious, pan-European a view. As such it can hardly fail to be interesting and enjoyable to anyone of open mind and catholic tastes. Here, cheek by jowl, sit great works alongside manifest oddities, the familiar with the unfamiliar or unjustly forgotten, different views and approaches to the same subject, the different results to be had from similar practice.

A full century ago, 1893, is as good a year as any to settle on, with Europe, fin de siecle, at its most cosmopolitan. And if Paris remained at the heart of things, we have for once a French exhibition that does admit of a significant world beyond. The sectional titles set out the possibilities - inspiring places; daylight; primitivisms; science and poetry; intimism and modernity; myths, religions, allegories; muses, nymphs and shepherdesses; crowds, processions, solitudes; artists, writers, musicians.

Every section springs its surprises and pleasures. Here are Prince Eugen (Sweden), with a barn-like castle beneath a wide northern sky, and DeGouve de Nuncques (Belgium), whose strangely lit pink house is a clear anticipation of Magritte, with a row of Monet's Rouen facades across the room. Here are towering cliffs by Mednyanszky (Hungary); a mystical sunset by Sohlberg (Norway); trees on breezy hill-top by Thoma (Germany). Tea, for Casas (Spain), is taken in pregnant silence on the verandah; for Guthrie (Scotland), with gossip in the garden; Kroyer's young lady (Denmark) sits quietly reading beneath the rose bush.

We are given two magnificent Gauguins, a self-portrait and 'Otahi', a small but monumental image of a crouching Tahitian girl. And alongside are a Breton girl lying in the sun, by Amiet (Switzerland); a seated Breton girl in blue-striped shawl by the excellent Roderic O'Connor (Ireland); and a quite extraordinary, abstracted painting of Van Gogh's funeral, three broad bands of colour, yellow, purple-black and pink, and a row of orange heads above the pew, by Emile Bernard.

So it goes on, the influence accepted and remodelled, the intuitive sympathy, the unlooked-for correspondence - Burne-Jones's strange grey painting (England) of Perseus stealing, while they slept, the single eye of the Graiae, sisters of the Gorgons; Malczewski's spirit of the whirlwind in the cornfield; Masek's prophetess Libusa (Austria); Moreau's apocalyptic Moses saved from the water. The point of the strength and continuing importance of symbolism throughout the period, too often over-looked in the modernist preoccupation with post-impressionism, is well made.

The academic tradition, vivified by current impressionist example, is also well represented, most especially in the portraits and conversation pieces - Breitner's tall girl before the mirror (Hollland); Rusinol's piano lesson (Spain) with Renoir's two young girls at the piano; Corinth's vigorous, cool portrait of the painter Leistikow (Germany); Rothenstein's of the painter Conder, turning to leave the room (England); Serov's of the painter Levitan (Russia); the artist's wife splendid in her scarlet dress by Anders Zorn (Sweden).

But most remarkable, perhaps, is the Italian contribution with its technical debt to Pissarro and pointilism, its conscious social realism and over-lay of symbolism and its clear fore-shadowing of the Italian avant-garde, Balla and Boccioni some ten years on. Here are Morbelli's old men in the bleak hospice, and his rice-pickers bent double in the fields; Nomellini's workers at a factory gate; and Pollizza da Volpeda's religious procession in the summer sunshine, at once poignant, memorable and technically advanced.

The show ends with the proto-expressionism of Munch (Norway) and Ensor (Belgium) and a genuflection to Cezanne. There is also the mandatory audio-visual display, usually so resistible but this the most charming I have ever seen: an anthology of rare cinematic vignettes of the period, made by the Lumiere brothers in the streets of all the capitals of Europe.

But interesting as it is, the show is not an unqualified success. With barely 90 exhibits, it is small enough, which is no bad thing; the Orsay space for special shows is constrictive and ill-designed in any case. But such portmanteau shows do hold out the promise of a generous and comprehensive presentation, and here the promise is not truly delivered. The omissions are all too clear, where comparatively few additions, 20 or so, would have more than done the trick. Perhaps the loans were asked for and denied. Yet surely there could have been a Whistler and a Sargent, not say a Degas. And, from a British point of view, why so poor and trivial a Sickert, why no Steer, no Nicholson, no Clausen, no Stanhope Forbes . . .

'1893: l'Europe des peintres' - Musee d'Orsay, Paris 7me, until May 23

FR France, EC P8412 Museums and Art Galleries CMMT Comment & Analysis P8412 The Financial Times London Page 15 940
Arts: 'The Juliet Letters' - Elvis Costello and the Brodsky Quartet Publication 930302FT Processed by FT 930302 By ANDREW CLEMENTS

'This is no more my stab at 'classical music' than it is the Brodsky Quartet's first rock and roll album' warns Elvis Costello in the sleeve notes to The Juliet Letters. The release of the disc, and the performance at Drury Lane on Sunday, are the latest stage in Costello's carefully calculated move away from the rock background of his earlier work and towards something (not 'that junkyard named 'Cross-Over' he insists) that he clearly hopes will prove to be richer and stranger.

With sublime hindsight hints of growing disaffection with the direction of his career could be traced through Costello's last two albums, Spike and Mighty Like a Rose. But neither of those patchy collections contains anything to anticipate The Juliet Letters, in which he seems to have abandoned almost every shred of his past work and started again from scratch, working with the members of the Brodsky Quartet on a sequence of songs for which the writing credits are shared equally.

The intentions may have been honourable enough, but the result is hugely disappointing; in submerging himself in this collectivity Costello seems to have sacrificed almost all his creative identity as a songwriter. There are just flashes that reveal the distinctive tang of his best work, an occasional twist to a vocal line or a familiarl modulation, but the hard acerbic edge to the songs has all but gone; the rhythms of the lyrics are flatter, less abrasive, and the emotional power has been drastically dimmed.

The textures of a string quartet marry uneasily with Costello's voice; there are songs in the set in which the accompaniment would undoubtedly be far more effective on a guitar-based band, while at best the string figures simply blur the melodic shapes. Promoting the Brodsky from a perfectly decent string quartet into creators in their own right has really added little; the accompaniments and interludes which the players invent for The Juliet Letters simply paraphrase choice nuggets of their mainstream repertoire - a Bartok pastiche here, some Shostakovich or Britten tags there. It is not surprising there is little sense of coherence, while hearing some of their words put into Costello's mouth only reminds one of the power his own lyrics regularly generate.

In live performance, with a sound very faithfully duplicating the recording, the anodyne effect of the songs was if anything emphasised. Costello sings them well enough, standing among the quartet to underline the blamelessly democratic basis of the exercise. No one could deny the finest British singer-songwriter of his generation has not earnt the right to experiment, to explore new directions; it is the extent of Costello's failure here that is so surprising; the huge sense of disappointment that is hard to accept.

Theatre Royal, Drury Lane; 'The Juliet Letters' on Warner Bros 9362 45180-2

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups CMMT Comment & Analysis P7929 The Financial Times London Page 15 505
Arts: Festival of Britten - London concerts Publication 930302FT Processed by FT 930302 By MAX LOPPERT and RICHARD FAIRMAN

The Barbican's latest big concert series (February 25 - March 21) is a celebration of Benjamin Britten by the London Symphony Orchestra and a whole galaxy of singers, choirs, instrumentalists and composers, led by Mstislav Rostropovich. He is its artistic director and guiding light; he is conducting most of the concerts, playing the cello in two others, and infusing everyone and everything with his overflowingly generous musical personality.

This is, above all, his tribute to Britten, the last of the 'three composers who have had the most influence in shaping my musical life': thus he writes in a foreword to the LSO programme book, itself decked with photographs documenting the association of Britten, Pears, Rostropovich and Vishnevskaya - relatively short in clock-time (not quite two decades), infinitely significant in creative terms.

But while the festival may focus on the artistic stimulus - of composer on cellist (and soprano wife) and vice versa - that resulted from this association, its programme is by no means narrowly single-minded. The LSO's opening concert, last Thursday, had no Britten in it but much Britten-by-reflection. The opening item was his little-known 1941 arrangement of the 'flowers' movement from the Mahler Third Symphony; the finale was Shostakovich's Fourteenth Symphony, dedicated to him.

Mahler as Britten influence and Shostakovich as Britten's 20th-century artistic companion-in-arms are potent, fascinating subjects that cropped up again for examination in Sunday's two Barbican Hall concerts - the afternoon Borodin Quartet recital (which showed both Britten and Shostakovich learning the metier of string-quartet composition) and the evening LSO concert (which ended with Britten's 1939 Sinfonia da Requiem, its anguish and consolatory calm deeply imbued with the spirit of Mahler's Ninth Symphony). This intelligent artistic cross-referencing adds to the excitement of the whole enterprise.

Another strand concerns Britten as enlightened patron of younger composers such as Robert Saxton, Oliver Knussen and Colin Matthews. All three are featured during the series; for Thursday's concert the LSO had commissioned Matthews's Memorial. This sombrely impressive single-movement threnody attempts to capture in music a war-vision something like Lutyens's 'great untriumphal arch' at Thiepval, commemorating the fallen of the Somme (where Matthews's grandfather is buried).

A single pedal-note tolls in the bass throughout the 20-minute length. Above it, reflections of two of Britten's most impassioned musical war-protests, the Sinfonia da Requiem and the War Requiem, seem to play on Matthews's harmonic language and the carefully graded evolution of his orchestral writing from grim chordal stasis to hallucinatory fast flourishes. The concentration on rhythmic variety-in-unity that has preoccuppied so much of his recent orchestral composition - fast-moving, exuberantly punchy - here works up a powerfully intense effect of slowly unfolding lamentation, dignified yet forcefully disquieted.

On Sunday evening, alongside the Sinfonia da Requiem, there was another Britten composition presaging war: the Piano Concerto, a bittersweet cocktail of Shostakovich raucousness, Prokofiev-like virtuoso glitter and wit, and Britten's own angular, quintessentially English lyricism. It was expertly mixed and shaken by the pianist Barry Douglas and the vast batteries of the LSO.

As a Britten conductor Rostropovich responds with an uninhibited fervour that nevertheless proves apt only some of the time. He gave the Simple Symphony so fiercely loving and drawn-out a bear-hug that its 'Sentimental Saraband' all but collapsed under the strain; the slow sections of the Sinfonia da Requiem were likewise distended. Even then, however, while longing for a lighter touch and a sharper sense of half-lights and expressively glancing orchestral effects, one tends to find oneself disarmed by his all-embracing Britten enthusiasm.( The festival is supported by Britten-Pears Foundation and Britten Estate.)

*****

Earlier on the opening evening of the festival there was real Britten to be heard, though only for a select number of the audience. In the intimate setting of St. Giles Cripplegate students of the Guildhall School of Music presented Curlew River, the first of Britten's three Church Parables.

Even when they are encountered straight after work and at a church in the very centre of a city, far from the hallowed rustic silence that the composer had in mind, these remarkable pieces cast a unique spell. Curlew River, a Japanese Noh play transferred to the misty fenland of East Anglia and given a Christian slant, is probably the best of them. Its music is spare, infinitely sensitive to the touch; its atmosphere is haunting.

Various student groups have tried their hands at the Church Parables over the years, but the Guildhall's production, in the care of Jonathan Alver, came closest to the exaggerated Noh-style gestures of the original. The vocal parts, including Mark Milhofer's plangent Madwoman and Mark Evans's sturdy Traveller, were without exception well taken. Every good festival has its fringe activities and the success of this one reflected well on the main programme.

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups CMMT Comment & Analysis P7929 The Financial Times London Page 15 827
People: St Thomas' Matthews defeats Guy's Griffiths Publication 930302FT Processed by FT 930302

A battle between two of Britain's most prominent hospital managers to run the biggest National Health Service trust in London ended in victory yesterday for Tim Matthews, chief executive of St Thomas' hospital.

St Thomas' and Guy's hospital trusts are due to amalgamate into a single trust next month. The eventual aim, based on recommendations of the Tomlinson report into London healthcare, is to combine the hospitals on one site.

Matthews (left) defeated Peter Griffiths (right), chief executive of Guy's, for the new job. The decision is a severe blow for Griffiths, who gave up the high-flying post of deputy chief executive of the NHS management executive in Whitehall to run Guy's when it became a trust in 1991. It is also a blow for Guy's morale - the hospital has frequently been promoted as the flagship of the government's health reforms and a prototype for other trusts.

Lord Hayhoe, who will chair the new combined trust, said yesterday that Tim Matthews' leadership would provide an opportunity to build 'the best hospital in London for patients, staff, teaching and research'.

Matthews first task, after getting his senior management team in place this month, will be to develop a strategy for combining St Thomas' and Guy's. The government wants proposals for consolidating services on a single site within six months. It has not yet been decided which location will be chosen.

Griffiths, 48, who is expected to leave Guy's soon after the new trust comes into effect next month, said yesterday that he would 'continue to provide the maximum support' in preparing for its launch. 'I have no doubt that working together Guy's and St Thomas' will be a world beating combination,' he said.

Matthews, 41, was previously district general manager of Maidstone health authority and manager of the Middlesex hospital. Before that he, like Griffiths, worked in the Department of Health.

GB United Kingdom, EC P8062 General Medical and Surgical Hospitals P6733 Trusts, NEC PEOP Appointments P8062 P6733 The Financial Times London Page 14 346
People: Lovering joins Tarmac's trio Publication 930302FT Processed by FT 930302

John Lovering, Sears' finance director until mid-1992 who resigned from the retailing group at the end of January, has arrived at Tarmac, the UK construction and building materials group which is expected to announce substantial losses for the past financial year. In the newly-created position of chief operating officer, he will be working in harness with Neville Simms, chief executive, and Terry Mason, Tarmac's finance director.

Simms said yesterday: 'Tarmac is a very large group and I see us working as a triumvirate. John Lovering will assist me with day-to-day operational management and with business planning and development.'

Lovering joined Sears in 1986, becoming finance director in 1988. Last year he was moved to the post of managing director of corporate development and international operations. Sears chairman Geoffrey Maitland Smith commented at the time of Lovering's departure: 'He felt his talents were not being utilised.'

Before joining Sears, he held senior posts at Lex Service, Grand Metropolitan and Imperial Group.

*****

John Millar and David Bryant have been appointed regional chairmen responsible for Scotland and the north west, and East Anglia and the south east, respectively, at PERSIMMON.

*****

Keith Calvert has been promoted to become md of Alford Brothers, part of PROWTING.

Tarmac Persimmon Alford Brothers GB United Kingdom, EC P1611 Highway and Street Construction P1622 Bridge, Tunnel and Elevated Highway P1521 Single-Family Housing Construction P1531 Operative Builders PEOP Appointments P1611 P1622 P1521 P1531 The Financial Times London Page 14 252
Business and the Law: Software ruling - Legal Briefs Publication 930302FT Processed by FT 930302

IN A test case for the copyright of computer software, the English High Court has ruled that a plaintiff can establish an infringement without showing that his software code has been literally copied.

The case is of great significance to software developers and owners. Previously, the law had been unclear in cases where 'the look and feel' of one program duplicated another, according to solicitors Dibb Lupton Broomhead, who acted for John Richardson Computers, the successful plaintiff.

The Court said that non-literal aspects of a computer program could infringe copyright. The plaintiff did not have to show copying of a substantial part of the structure and organisation of the program even where the program source code had not been copied.

GB United Kingdom, EC P7372 Prepackaged Software TECH Patents GOVT Legal issues P7372 The Financial Times London Page 14 153
Business and the Law: Former head of merger task force joins Allen & Overy - Legal Briefs Publication 930302FT Processed by FT 930302

MR COLIN Overbury, the outgoing director of the European Commission's merger task force, has joined the international London-based law firm Allen & Overy as a consultant on competition issues.

Mr Overbury, who qualified as a solicitor in 1955, joined the European Commission in 1973 and was put in charge of competition in mechanical, electrical and electronic industries in 1984. From 1986 to 1990 he was in charge of competition for financial services, media, telecommunications, information technology and all manufactured products including motor vehicles.

In 1990, Sir Leon Brittan, then competition commissioner, asked Mr Overbury to set up and head the merger task force. He is widely credited with its success in making important decisions within the tight deadlines of the EC Merger Regulation.

GB United Kingdom, EC P8111 Legal Services PEOP Appointments P8111 The Financial Times London Page 14 161
Business and the Law: A good life at the top of the charts - Robert Rice unveils the results of an FT poll of legal firms Publication 930302FT Processed by FT 930302 By ROBERT RICE

Clifford Chance, the UK's largest law practice, has emerged as the leading UK commercial law firm in the 1992 FT law firm poll of polls.

The group's move to the top of the table, ahead of Linklaters & Paines and Slaughter and May, both of which were ahead of it in 1991, suggests it is now reaping the rewards of the ambitious 1987 merger between Clifford Turner and Coward Chance which led to its formation.

The overall strength and depth of the firm's base is reflected in its high ratings across the complete range of performance indicators used in the FT poll. Profitability remains the only area where it lags behind its main competitors, its weak showing in Legal Business magazine's table of the most profitable law firms being largely due to extraordinary costs associated with a move to new City premises.

Although perhaps not yet enjoying the reputation of Linklaters and Slaughters, it appears to be 'benefiting from a more competitive pricing policy' than some of its rivals, according to one City observer.

Linklaters, ranked second, also had an exceptionally good year being involved in most of the big transactional deals during 1992 and continuing to benefit from the strength of its international capital markets work. The firm would have finished as a clear leader but for its lack of involvement in the main management buy-outs of 1992.

The 1992 poll also confirms the existence of a 'super group' first identified in 1991. These top five firms continued to move ahead in 1992 in spite of the depth of the recession largely through the strength of their international practices and their domestic, corporate and financial client base, which allowed them to tighten their grip on high quality, high value work.

Mr James Wyness, joint senior partner of Linklaters, says 1992 was a year in which to be grateful for a strong corporate and financial client base, a view echoed by Mr Giles Henderson the new senior partner of Slaughter and May.

In terms of the domestic market for legal services, 1992 was very tough and increasingly competitive. For the big firms this meant concentrating more on tailoring their services to client needs and learning to be flexible on fees.

Companies began to recognise in increasing numbers that the recession had changed the marketplace and that they could now exert a much greater influence on the legal services they purchased and on what those services cost.

In spite of the recognition by most law firms of the need to be flexible over fees in these market conditions, the top UK commercial practices were caught off balance in the autumn by a league table published by the International Financial Law Review which suggested that the average hourly rate for legal advice from a partner in a leading City of London law firm had risen by 20 per cent in the last 12 months.

IFLR labelled UK commercial law firms the most expensive in the world, charging Dollars 235 an hour more than their US counterparts. If, in practice, they had demonstrated the need to be flexible on fees, they had failed to get that message across to the public. Some firms had even found themselves attacked for apparent inflexibility.

In spite of difficult market conditions, the top 10 firms all appear to have enjoyed a relatively successful year. Figures published last September by Legal Business for the 1991/92 financial year showed revenues holding up very well in the early part of the year.

The top six firms all had turnovers roughly equivalent to Pounds 1m per partner. Clifford Chance the UK's largest law firm had a turnover of Pounds 244m, comparing well with American firms of similar size such as Skadden Arps (Pounds 280m), Baker & McKenzie (Pounds 273m) and Jones Day (Pounds 232m). Linklaters (Pounds 154m), Freshfields (Pounds 135m), Lovell White Durrant (Pounds 120m), Slaughter and May (Pounds 113m) and Allen & Overy (Pounds 112m) also compare favourably with their US counterparts.

All of them say that since April they have managed to maintain revenues and that, if anything, business has picked up. The 1992-93 figures are likely to show continued growth for these six.

The explanation for this success can be found partly in the counter-cyclical nature of some sectors of the legal services market and partly in the strength of the firms' international practices.

Mr John Pritchard, editor-in-chief of Legal Business magazine, says that all the leading firms have benefited from the huge increase in corporate restructuring and refinancing that has accompanied the recession. But two firms in particular, Allen & Overy and Lovell White Durrant, have shone out, he says.

Mr Bill Tudor John, managing partner of Allen & Overy says his firm has had a particularly good year because of the strength of its banking and insolvency practice.

Allen & Overy had a hand in most of the big insolvencies and debt reschedulings in 1992, acting for the administrators of the Maxwell private companies and Canary Wharf and for WPP, Guinness Peat Aviation, Heron Corporation and News International in their reschedulings.

On the international front, Linklaters, Allen & Overy, Slaughter and May, Clifford Chance and Freshfields have all benefited from their domination of international capital markets and structured finance work.

The IFLR Eurobonds league table used in the poll of polls is supported by a recent survey, by Euromoney, of senior executives in the Eurobond syndicated loan and derivatives departments of leading financial institutions. That showed that international capital markets are dominated by Clifford Chance and Linklaters with Allen & Overy and Slaughter and May vying for third place.

With some 40 per cent of its work now having an international element, it is not surprising that Linklaters and other such firms have found it easier than most to ride the UK recession, Mr Wyness says.

To add insult to injury for those firms fighting for a share of the domestic markets, what little high quality transactional work there was in 1992 also appears to have gravitated to the top firms.

Freshfields, arguably the leading corporate finance law firm, Linklaters and Clifford Chance were all involved in either the Pounds 3.7bn Hongkong and Shanghai/Midland Bank deal or the merger between Reed International and Dutch publisher Elsevier. Linklaters and Slaughter and May were involved in the public sale of Wellcome shares and Linklaters worked all last year on the ICI demerger.

This domination is likely to continue in 1993. Linklaters, for example, has been appointed by the government on both the British Rail privatisation and on the sale of the third tranche of British Telecom.

The picture for those outside the top 10 is not so encouraging. While the UK economy remains in recession, all law firms are likely to suffer to an extent. But it is outside the top 10 that structural problems, born of the boom in legal business during the late 1980s when many law firms grew much too rapidly in size to meet the huge demand for legal services, are likely to make themselves felt in 1993.

----------------------------------------------------------------------- LAW FIRM POLL OF POLLS ----------------------------------------------------------------------- Firm Legal Crawford's Legal International 500 City Business: practice Directory: most (by size) most stock profitable firm ----------------------------------------------------------------------- 1 Clifford Chance 19 18 11 19 2 Linklaters & Paines 18 19 19 17 3 Slaughter and May 16 20 20 15 4 Allen & Overy 15 12 18 11 5 Freshfields 17 14 16 18 6 Lovell White Durrant 20 11 17 16 7 Ashurst Morris Crisp 7 16 15 0 8 Simmons & Simmons 13 10 13 13 Equal 9 - Norton Rose 12 15 7 3 Equal 9 - Herbert Smith 14 17 12 12 -----------------------------------------------------------------------

Acquisitions KPMG: IFLR: KPMG: Total Monthly: leading Eurobonds new (max M&A MBO issues 160) advisers ----------------------------------------------------------------------- 1 Clifford Chance 17 20 17 18 139 2 Linklaters & Paines 18 0 20 20 131 3 Slaughter and May 14 8 18 18 129 4 Allen & Overy 9 17 19 18 119 5 Freshfields 20 0 14 18 117 6 Lovell White Durrant 0 19 0 5 88 7 Ashurst Morris Crisp 13 17 0 19 87 8 Simmons & Simmons 11 0 9 11 80 Equal 9 - Norton Rose 19 8 0 14 78 Equal 9 - Herbert Smith 15 8 0 0 78 ----------------------------------------------------------------------- Firms score 20 points for a first place and 0 where there are 20 firms ranked above them in a league table. The FT's table of the top 10 law firms is based on a poll of polls - from a number of publicly available lists and rankings. The polls used in 1992 vary slightly from those used in 1991 to take account of newly published information, in particular the Legal Business table of the most profitable law firms. The 1992 table also attempts to reflect the increasing importance of international work by ranking firms by the size of their international practice. -----------------------------------------------------------------------

GB United Kingdom, EC P8111 Legal Services TECH Standards MKTS Market shares P8111 The Financial Times London Page 14 1541
People: 'CBI activist' for new environment panel Publication 930302FT Processed by FT 930302

The Confederation of British Industry has set up a new environmental lobbying panel and chosen Harry Robinson, a divisional director of John Mowlem Construction, as its first chairman.

The Environment Protection Panel, which replaces a series of panels concerned with individual issues, is designed to 'sharpen the thrust' of the CBI's lobbying effort, according to environment director John Cridland. It held its first meeting on February 4.

Robinson, 63, whom Cridland describes as 'a CBI activist', had for the past two years been chairman of the South-Western Regional Council. He has spent 30 years at John Mowlem, and until last year was chairman of the South West Division of the construction group. He remains a divisional director, with special responsibilities including the corporate image; he also says he 'gets involved with major projects in the early stages'.

Cridland explains that the CBI had been particularly keen to involve someone from the construction industry, rather than a representative from the 'classic polluters' such as chemicals or plastics. 'Land contamination for instance is very hot on the political agenda,' says Cridland. 'We are all more concerned than we were - and rightly so - about environmental liability, but the CBI is keen to encourage the setting of effective rules for the future rather than dwelling on the past.'

Confederation of British Industry (UK) GB United Kingdom, EC P8611 Business Associations COMP Company News PEOP Appointments P8611 The Financial Times London Page 14 253
Business and the Law: When to use the national courts - European Court Publication 930302FT Processed by FT 930302 By BRICK COURT CHAMBERS BRUSSELS

The European Commission has published new guidelines on co-operation with national courts in EC competition cases, designed to encourage the use of national courts in the application and enforcement of EC competition rules.

Publication of the guidelines in a Commission Notice has been hastened by three recent developments: the post-Maastricht philosophy of subsidiarity; the European Court's judgment in the Delimitis case setting out the procedures which national courts may follow in EC competition cases; and the recent Court of First Instance judgment in the Automec case. The Commission relied on that case to justify exercising a discretion as to which competition complaints it should give priority.

Since 1974, the ECJ has recognised that companies and individuals have the right to enforce the EC competition rules in national courts. A line of cases has established the general right to an effective remedy for infringements of Community law.

The Commission Notice rather timidly says that this means that all procedural rights and remedies such as damages, injunctions and interim measures provided by national law should be available to litigants on the same conditions as would apply if a comparable breach of national law were involved. The Commission does not deal with the situation where there is no effective remedy for a comparable breach.

National courts, however, have been reluctant to exercise their jurisdiction for a number of reasons, such as the Commission's exclusive competence to grant exemptions for agreements and business conduct which would otherwise be prohibited as anti-competitive, the often complex economic questions involved, and the absence of specific procedural rules. The Notice sets out to provide sufficient reassurance to overcome this reluctance.

When applying EC competition law, national courts should be guided by formal Commission exemption decisions, as well as any other official statements such as comfort letters, the case law of the ECJ, other Commission decisions, general notices and the block exemption regulations.

In difficult cases the national court is encouraged to stay proceedings to await the outcome of any Commission procedure relating to the same conduct, or seek the Commission's views on certain issues, or refer the matter to the ECJ for a preliminary ruling.

It is envisaged that national courts may, within the limits of national procedural law, request the Commission to provide:

information of a procedural nature;

consultation on points of law, including an interim opinion on eligibility for individual exemption;

and factual data to be used as evidence by the parties subject to availability and the principle of confidentiality.

Replies from the Commission on these points will neither bind the courts nor affect their right to refer questions to the ECJ. The right to request economic market data from the Commission is one of the most obvious benefits of the Notice.

Although bringing an action before a national court may be more expensive than filing a complaint with the Commission, the Commission identifies some of the advantages of court action:

damages are available; injunctions may be available and interim measures may be more readily adopted;

claims under national and Community law can be combined;

and legal costs may be awarded.

In spite of such potential benefits, however, the policy of encouraging co-operation raises almost as many potential problems as it seeks to solve. Effective decentralisation may demand a more radical approach along the lines of harmonisation.

QR European Economic Community (EC) P9222 Legal Counsel and Prosecution GOVT Legal issues P9222 The Financial Times London Page 14 594
Technology: Steamed up over irons Publication 930302FT Processed by FT 930302 By ANDREW BAXTER

After the reunification of Germany, eastern households very quickly switched from their heavy, sometimes unsafe irons to new, lighter western versions with more features.

Further south, Italian housewives might find themselves ironing 10 shirts a day. Anything that makes the chore easier, quicker and produces a better result will lighten their load.

Sales of irons in Europe are rising in real terms even though volumes are flat or down slightly, a sure sign of a market demand for more sophisticated products.

But, as often happens in the appliance industry, the approach to innovation falls somewhere between that of Japan and the US.

Japanese iron manufacturers are using electronics to give users information considered of doubtful benefit in Europe - such as soleplate temperature. In the US, by contrast, the market is driven by price - what European producers scathingly call the 'Dollars 9.99 syndrome'. European irons are using electronics more as a means than as an end - to control product functions and improve safety.

But national markets still vary. Italy is the most innovative, says Leon Ramselaar, ironing product manager at Philips. In the UK, says Ian Mackey, Tefal UK's marketing manager, consumers do not want too many buttons to press - believing there could be more to go wrong.

Tefal, its sister company Rowenta, and Philips dominate the European iron market. When it comes to innovation, it is a 'nip and tuck affair'. Occasionally, a company will come up with a feature that is enough in itself to persuade consumers to buy, such as Tefal's replaceable anti-scale cassette introduced in 1990.

Scale build-up can leave stains on clothes and the Tefal cassette system converts the calcium carbonate that causes scale to sodium carbonate as the water passes through it. Philips has now responded with a permanent anti-scale system.

Other ideas might contribute to a purchase decision. Philips has just introduced a drip-stop system for steam ironing on its top-of-the-range irons. The idea, says Ramselaar, is to prevent the incomplete evaporation of water which can cause drops to slip through and stain silks.

One important development is the 'ironing system'. Borrowed from commercial ironing, this links the iron by tube to a steam-producing unit which acts like a pressure cooker. The result is a lighter iron and more steam.

Producers are cagey about future plans, but Tefal and Philips are working on 'quantum leaps' in technology. One possibility is to use ceramic hob technology to produce a new type of soleplate, ending the need for an element.

XA World P3633 Household Laundry Equipment TECH Products MKTS Market data P3633 The Financial Times London Page 13 449
Technology: Searching for the perfect rice cooker Publication 930302FT Processed by FT 930302 By MICHIYO NAKAMOTO

The recession in Japan may have dampened consumers' appetite for electronic goods, but a quick glance in any electrical retail shop in Tokyo shows it certainly has not killed their taste for high technology.

The decline in consumer spending in Japan has led manufacturers to review their product strategies and adjust their marketing and distribution plans to the new environment. Product ranges and cycles have been reduced. Some retailers report that certain manufacturers have clamped down on discounts and rebates for poorly selling products.

However, one thing that has not been affected is the rising level of sophisticated technology that manufacturers feel compelled to incorporate in their products.

Take rice cookers, for example. There is no denying that the Japanese take their rice seriously. But when facing a row of rice cookers, each proudly proclaiming the use of microcomputers, induction heating or fuzzy logic, it is difficult not to feel that things have gone a bit too far.

The key to cooking good rice is a strong initial burst of heat. Conventional rice cookers, in which a coil at the bottom of the rice cooker heats the inner pot, do not provide sufficiently strong heat. But a new range of rice cookers has appeared on the market using a method known as induction heating. Friction between a magnetic coil at the bottom of the cooker and the pot that contains the rice creates the heat which is transferred through the pot. The heat is stronger than in conventional cookers and spreads around the pot to cook the rice evenly.

Induction heating is a method long used in industrial furnaces. With the use of more semiconductors, rice cookers can also obey instructions to cook the rice normally, or slightly drier or wetter than normal. Because the new rice cookers do not just turn on and off, but can make subtle adjustments depending on the circumstances, they are described as being 'neuro-fuzzy'.

From toasters to washing machines, manufacturers are testing the computer programming skills of housewives with the use of microcomputers and liquid crystal display panels that show any number of programmes which need to be set up to get the machines to work. Manufacturers claim Japanese consumers are becoming increasingly sophisticated and they are only trying to meet the demands of consumers for better-performing household appliances. But it is more likely that the excess of high technology in recent electronic products stems above all from manufacturers' needs to stimulate consumer demand and their desire to earn a higher profit from new products.

They are also clearly desperate to offer an incentive for domestic consumers to replace their old equipment. According to the Economic Planning Agency, the penetration rate of washing machines in Japanese households is 99.4 per cent, while that of refrigerators is 98.9 per cent.

In a country where penetration of electrical goods is as high as it is, it is not surprising that stimulating extra demand will take more than a few extra buttons. However, added features also provide a convenient excuse to raise prices. The latest rice cookers, for example, are about twice as expensive as conventional ones.

As the difficulty consumers experience in programming video tape recorders has shown, too much high technology runs the risk of turning away potential buyers. Some manufacturers now recognise the need for easier-to-use electronic equipment and have started to introduce much simplified products such as VCRs.

Whether or not Japanese consumers are happy with all the high technology in their homes, it will be some time before they start to express their exasperation. Meanwhile manufacturers possess a powerful trump card. Since the production of old models is usually discontinued after some time, Japanese consumers are left with little chance to vote with their purses by keeping them closed.

JP Japan, Asia P3634 Electric Housewares and Fans P363 Household Appliances P365 Household Audio and Video Equipment TECH Products P3634 P363 P365 The Financial Times London Page 13 670
Technology: Tempted by green gadgetry - Andrew Baxter takes a look at the latest innovations from white goods manufacturers Publication 930302FT Processed by FT 930302 By ANDREW BAXTER

Inside one of Zanussi's new dishwashers is a multiple detergent dispenser - pour in the fluid and there's enough for a month before it needs refilling.

It is a simple idea, if less easy to put into practice, says Fulvio Caccio of Electrolux, which owns the newly relaunched Zanussi brand. Making the electrical parts humidity-proof was the main problem.

Zanussi and its rival white goods producers were displaying dozens of similar innovations at last month's Domotechnica appliances show in Cologne.

The dominant theme of Domotechnica was the environment - from the reduction and phasing out of CFCs in fridges to reducing water consumption of washing machines and dishwashers. But functional innovation was an important accompaniment and the technological challenge for the white goods industry is twofold: to produce worthwhile new features and better environmental performance.

A combination of both might just tempt consumers to trade in their old machines before the end of their useful lives - crucial in mature western markets. The Zanussi dishwasher, for example, has an alternate top and bottom spray system to save water.

One way to tempt customers is to act on a good idea before the opposition. But intelligent use of electronics is also vital for innovation and enhancing environmental performance without confusing the customer. However, this is where problems can arise.

According to a 1991 report by market research company Frost & Sullivan on Europe's white goods industry, 2 per cent of all semiconductors are used in domestic appliances, and this share is rising.

'Microchips have made possible far more sophisticated switching, control and timing devices,' says the report.

'However, many suspect these new 'bells and whistles, knobs and knockers' are only a manifestation of unnecessary gadgetry . . . many doubt whether the typical consumer really wants such frills and actually uses them.'

A few, at least, of the most recent functional innovations are not driven by electronics. Electrolux, for example, has introduced a new, low-frost system for chest freezers which cuts out 80 per cent of ice build-up.

Freezers warm up and cool down as the compressor switches off and on, but here the dry air normally expelled in the warm-up phase is held in a flexible cavity connected to the inside by a small pipe. When the freezer cools down, dry air is recycled into the freezer rather than humid air which deposits its moisture as ice on the freezer walls.

Another simple idea was launched by Whirlpool for its dishwashers - a 'long door' which is counterbalanced to stay open in any position.

Most innovations, however, depend substantially on electronics. One of the big issues at Domotechnica was the extent to which western producers would introduce products with 'fuzzy logic' - where a central microchip receives signals from several sensors in the machine and then sends out fresh instructions accordingly.

The answer is that western producers are taking a much more selective approach to fuzzy logic than their Japanese counterparts, which market the concept heavily.

'In fridges and laundry products, I see us moving towards fuzzy logic in this decade,' says Ronald Kerber, Whirlpool's chief technology officer. 'Not because there is any desire by consumers to have it, but because of its role in controlling the performance of the machine.'

AEG launched a washing machine with fuzzy logic that is due to go on sale in Germany later this spring. The big German producer also enthuses about the 'massive potential' of fuzzy logic for appliance efficiency. The sensor system means, for example, that the machine can ensure exactly the right amount of water is used, making the half-load button redundant.

Whirlpool, meanwhile, launched its first fuzzy-logic product, a new 'Sixth Sense' microwave for its top-selling VIP range. This eliminates the guesswork from two common but boring tasks - reheating or defrosting food.

The user presses a single button to reheat or defrost and the oven works out the type and weight of the food, then calculates the correct time and power output. The cooking is left to be done manually.

The approach to 'interactive' or intelligent cooking is also cautious, although some manufacturers believe the effort is worthwhile for top-range machines. Fagor, the biggest Spanish producer, unveiled its Todo Plus oven which combines traditional heat, circular heat and microwaves and links them to a small screen in the control panel. This can show how to prepare more than 125 recipes, work out quantities and choose the best cooking sequence.

AEG unveiled another important new feature, so-called Bio phase programming for dishwashers and washing machines. This is geared to the latest ultra-compact detergents for both types of machines, which include enzymes that work best at low temperatures.

In AEG's new washing machine, the water is held at 40'C for 20 minutes to allow the enzymes to work effectively, before it is heated to the set temperature for the rest of the wash.

As for genuinely new products, one to watch - especially for microwave producers - was the Jet-Stream Oven from Minnesota-based American Harvest. This uses cyclonic cooking, a patented technology that heats air to 204'C and moves it around the food at 2,200 feet per minute. The result, says the producer, is oven-quality food at microwave speeds.

XG Europe P3822 Environmental Controls P363 Household Appliances TECH Products P3822 P363 The Financial Times London Page 13 913
Management (The Growing Business): The merchants' adventure - Charles Batchelor asks whether trade missions are of any value to smaller companies Publication 930302FT Processed by FT 930302 By CHARLES BATCHELOR

John Major's recent return from Saudi Arabia with an order from King Fahd for 48 Tornado aircraft in his briefcase focused attention on that cornerstone of exporting: the trade mission. The prime minister was so inspired by the experience that he enthused on his return about Britain's need for 'merchant venturers, not merchants of gloom'.

But are trade missions of any relevance to the smaller business or are the merchant venturers only to be found in larger companies? The deals which are trumpeted are usually multi-million pound construction, engineering or defence projects.

Nigel Grainger, founder of Offspring International, a two-year-old, Droitwich-based export agency supplying products and services for the offshore, petrochemical and power-generation industries, is proof that the small business can make use of trade missions.

Grainger, who has one other full-time employee, one part-timer and a projected turnover this year of Pounds 300,000-Pounds 350,000, spent eight days in Yemen in December with a mission arranged by the London Chamber of Commerce. He says he made useful initial contacts though he did not expect people to place orders.

The Yemen trip was not without incident. Rioting prompted by the rising cost of living prevented a lunch appointment in Sana'a with a visiting British minister, says Tracey Dorrell, manager of the mission. A cancelled airline flight led to a six and a half-hour drive through the mountains from Aden in taxis which would probably not have passed a conventional test of roadworthiness.

It is difficulties like these which prove the value of trade missions, says John Dorrell, head of international services at the London chamber. 'Missions to countries which involve some discomfort or uncertainty tend to be oversubscribed,' he says. 'People want the support of the group and the backing of the local embassy. If there are unlikely to be problems, who needs a trade mission? There are none to European Community countries.'

Missions are normally organised by either a chamber of commerce or a trade association and typically consist of between 10 and 30 members. The Department of Trade and Industry subsidises most missions but recently modified its policy to make the programme more cost-effective. It raised travel grants by between 5 and 25 per cent but placed a limit on the number of missions a business could join. There is an overall limit of 10 with a maximum of three to any single country except Japan, where the maximum is five.

The past three years have seen a fall in the number of DTI-funded missions but an increase in the number of businessmen and women travelling. In 1990-91 1,725 participants went out on 133 missions. By 1992-93 there were just 123 missions but 2,350 participants, the DTI calculates. To encourage small and medium-sized companies to join missions it normally requires 60 per cent of participants to be from businesses employing fewer than 500 people.

Although the organisers usually like to have a mix of participants from both large and small companies there are particular benefits for the smaller firm:

The chore of booking flights, hotels and making local travel arrangements is removed.

Advice on local market conditions and the practicalities of doing business is available from both the organisers and more experienced exporters. A briefing meeting is usually held before the mission leaves and on arrival in the foreign destination. The local embassy or high commission will produce lists of contacts though it normally makes a charge.

A programme of receptions and visits is arranged. Participants are not obliged to take part in these events but they can provide valuable introductions. 'Don't just treat the mission as the chance of a cheap trip,' says Tracey Dorrell.

Companionship. 'There is no substitute for travelling with other people,' says Nigel Bateman, sales manager of Euro-Tech (Export), a Croydon-based exporter of electronic components with 16 employees and sales of between Pounds 2m-Pounds 3m. Bateman compares a recent visit to Saudi Arabia on a London chamber mission with an earlier three-week visit to the Gulf states. 'Spending a lot of time on your own can sap your enthusiasm and means you are less effective. The companionship of a mission is a big plus.'

Support when things go wrong. The organisers or the local embassy can help with problems with visas or changes in travel arrangements. Women face particular difficulties in many countries in the Middle East. Three women on the Saudi mission were initially told they needed police approval to stay at one hotel, though this demand was subsequently dropped. Cost. Government subsidies do reduce the cost though some organisers think the sums involved are not significant enough to affect a decision to participate. The London chamber charged participants in its 10-day Saudi mission Pounds 1,269 with a Pounds 350 rebate from the DTI payable on return. The chamber advises participants to allow a further Pounds 50 a day for taxis, meals and incidentals.

But the prospect of a cheap trip should not be a significant factor, the experts say. Most important is whether the company's products or services are likely to find a market in the country being visited. Once this has been established the would-be exporter needs to check that he can repatriate the proceeds of any sales. Will he be able to obtain insurance cover on the commercial and political risks of that particular destination?

The exporter also has to be prepared for the extra business which may be generated by the trip. Janet Crawford, managing director of London-based Angel International Recruitment, calculates she won Pounds 120,000 worth of business from her trip to Saudi Arabia. She says she was surprised by the volume of business she obtained and estimates it will take a year to turn the 'orders' (for trained personnel) into cash.

Participants should not necessarily expect to sign up firm orders on their first visit. Making contacts and establishing confidence is a slow process and regular visits will probably be necessary. 'Investigate the market on your first trip,' advises Bateman. 'Don't expect to come away with armloads of inquiries or orders. And don't be rushed into signing up exclusive agency deals.'

A mission also requires careful preparation. Places must normally be booked three months in advance to be eligible for DTI subsidies and participants are advised to think about the trip well ahead of time. 'Some people don't do their homework beforehand,' says Peter Valpy, director of the British Knitting & Clothing Export Council, which has five missions planned. 'Prepare good promotional material in advance and send it to the embassy for distribution ahead of your visit,' he says.

A drawback of a trade mission is that it does require participants to keep to the general timetable. The London chamber's 10-day mission to Saudi Arabia involved three-day stops in Jeddah and Riyadh followed by a day of rest and then three days in the Eastern Province. Some participants may find they can generate most business in one location but have little to do in the others.

This problem can be overcome by extending the visit, an option which is permitted by the DTI rules. Jean Morgan-Bryant of Sebvia, an equipment supplier to the oil and construction industries, extended her Saudi visit by three days before flying on to another destination. Grainger says he makes his first trip to a country with a mission but makes subsequent visits on his own so he can set his own itinerary.

Missions organised by trade associations are normally only open to members. Chamber of commerce missions are usually open to members and non-members and to businesses outside the geographical area covered by the chamber. Contact trade associations, chambers or the DTI's Outward Missions section Tel. 071 276 2414. Fax. 071 222 4707.

GB United Kingdom, EC P9611 Administration of General Economic Programs P8611 Business Associations MGMT Management P9611 P8611 The Financial Times London Page 11 1333
Management (The Growing Business): Cross-border barriers surveyed - In A Nutshell Publication 930302FT Processed by FT 930302

The barriers to cross-border venture capital investments is the subject of a two-month survey initiated by the European Commission.

The survey, by accountants KPMG Peat Marwick, will identify the type of information where difficult access may be an obstacle to cross-border syndications.

Cross-border deals have not taken off as many venture capitalists expected and the EC is keen to increase activity following the creation of the single market.

GB United Kingdom, EC P6799 Investors, NEC MKTS Market data P6799 The Financial Times London Page 11 101
Management (The Growing Business): Creating a network for investors - In A Nutshell Publication 930302FT Processed by FT 930302

Private individuals invest many times more in small businesses than the formal venture capital sector in the US. But efforts to create a similar investors' network in the UK have had only very limited success.

A new attempt to form such a network has come in the shape of The Capital Exchange, a members-only organisation which publishes CX Monthly, a newsletter to help investors find businesses seeking finance and businesses seeking joint venture partners. The organisers, a group of Hereford businessmen headed by Nigel Lacy, a former bank manager, plan to launch a scheme for syndicating private equity investments later this year.

Contact The Capital Exchange, Wyvern Centre, Barrs Court Road, Hereford HR1 1EG. Annual membership Pounds 60.

GB United Kingdom, EC P6799 Investors, NEC COMP Company News P6799 The Financial Times London Page 11 153
Management (The Growing Business): A chance to influence BSI policy - In A Nutshell Publication 930302FT Processed by FT 930302

The British Standards Institution has set up a policy committee for small businesses following complaints from some small firms that its BS5750 quality management standard was too onerous. The committee is to look at this and other aspects of BSI's activities where a small firm's view is needed.

Chairman of the committee is Roger Dunn, founder and managing director of Arcontrol, a manufacturer of electrical switchgear employing 70 people. The committee's first chance to influence BSI policy will come at a BSI board meeting in May.

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors MGMT Management P9651 The Financial Times London Page 11 124
Management (The Growing Business): Factoring volumes stagnate - In A Nutshell Publication 930302FT Processed by FT 930302

Worldwide factoring volumes stagnated in 1992, according to Factors Chain International, an international network of factoring companies. The turnover of companies making use of factoring was Dollars 264bn (Pounds 174bn), against Dollars 266bn for 1991.

Factoring activity declined in Europe from Dollars 165bn to Dollars 151bn but increased in the Americas from Dollars 73bn to Dollars 79bn and in Asia from Dollars 26bn to Dollars 32bn.

The Association of British Factors and Discounters, representing all the large UK factors, reported last month that business in the UK had increased by 13 per cent to Pounds 16bn in 1992.

XA World GB United Kingdom, EC P6153 Short-Term Business Credit Institutions MKTS Sales P6153 The Financial Times London Page 11 134
Management (The Growing Business): Acquiring the bookkeeping habit - In A Nutshell Publication 930302FT Processed by FT 930302

Barclays Bank is offering a choice of three free bookkeeping products to new business customers to get them into the habit of maintaining up-to-date financial records. Cashflow management difficulties are one of the most frequent problems businesses face, the bank said.

National Westminster Bank, meanwhile, is to start advising customers in advance of account charges from Friday March 5. NatWest is the first of four large clearing banks to take this step.

GB United Kingdom, EC P602 Commercial Banks TECH Services P602 The Financial Times London Page 11 105
Management (The Growing Business): Checking out your bank account - In A Nutshell Publication 930302FT Processed by FT 930302

Ninety-five per cent of business bank accounts contain errors, according to a survey of 152 accounts carried out by Bankchek, a specialist consultancy.

It found that in 75 cases banks had overcharged their customers, while in 70 they had undercharged. Only seven accounts were correct. The average amount overcharged was Pounds 1,412 a year while the undercharging amounted to Pounds 956.

Bankchek ascribed the high error rate to poor administrative systems.

GB United Kingdom, EC P602 Commercial Banks TECH Standards P602 The Financial Times London Page 11 105
Parliament and Politics: Abell inquiry cost DTI Pounds 0.5m Publication 930302FT Processed by FT 930302

THE Department of Trade and Industry's investigation into Mr David Abell, chairman of Suter, the industrial conglomerate, cost the government Pounds 501,000, Mr Neil Hamilton disclosed last night.

In a written Commons answer Mr Hamilton, an industry minister, said no proceedings were contemplated against Mr Abell or anyone else as a result of the four-year enquiry into share transactions. The investigation report was published last month.

Suter GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors P358 Refrigeration and Service Machinery PEOP Personnel News GOVT Government News P9651 P358 The Financial Times London Page 10 111
Parliament and Politics: Dewar warns on pension funds Publication 930302FT Processed by FT 930302

SURPLUSES arising in the pension funds of nationalised industries should not be seen as a windfall for the Treasury, Labour said yesterday, arguing that gains must be used for the benefit of pensioners.

Mr Donald Dewar, shadow social security secretary, said pensioners were 'rightly suspicious' when they saw evidence that the Treasury 'had its eye on pension fund assets.'

Trustees of British Rail's pension scheme are due to meet Mr John MacGregor, transport secretary, today.

GB United Kingdom, EC P6371 Pension, Health, and Welfare Funds P9311 Finance, Taxation, and Monetary Policy GOVT Government News P6371 P9311 The Financial Times London Page 10 115
Parliament and Politics: Lyell declines to advise on treaty Publication 930302FT Processed by FT 930302 By DAVID OWEN

SIR NICHOLAS LYELL, the attorney-general, yesterday took refuge behind deputy speaker Mr Michael Morris in declining to advise MPs on whether they could reverse the government's opt-out from the Maastricht treaty's social chapter, David Owen writes.

Questioned by Labour frontbencher Mr John Fraser, Sir Nicholas said he was 'surprised' to be invited to comment on an amendment to the bill which Mr Morris was still considering whether MPs would be able to debate.

Mr Fraser had asked whether an amendment tabled by Mr Calum MacDonald, Labour MP for Western Isles, or any other, would be an effective route via which MPs could adopt the social chapter.

GB United Kingdom, EC P9721 International Affairs GOVT Draft regulations GOVT Legal issues P9721 The Financial Times London Page 10 143
Parliament and Politics: Sales to Iran face tighter controls Publication 930302FT Processed by FT 930302 By JIMMY BURNS and GILLIAN TETT

BRITAIN IS tightening controls on sales of defence-related equipment and so-called dual-use technology to Iran, Mr Douglas Hurd, the foreign secretary, announced yesterday.

The Department of Trade and Industry will not approve licences for items on international lists of banned military or atomic energy equipment.

Licences will also be refused for attempted exports of any equipment 'where there was knowledge or reason to suspect that it would go to a military end-user or be used for military purposes'.

There will be two exceptions to new guidelines, announced in a written answer to a parliamentary question: goods judged essential for the safety of civil aircraft and radioactive material for medical use.

The Foreign Office would not elaborate last night on the reasons for the changes but it is thought they are aimed at blocking potential loopholes in the old guidelines.

These were announced in 1985 and applied to equipment which the government felt 'significantly enhanced the capability' of Iran and Iraq following the outbreak of their territorial conflict.

Iranian groups have approached UK exporters recently for military parts to replace equipment lost or damaged over the last 10 years, and some western officials have expressed fears of a new military build-up.

Last month UK customs officers interviewed a number of UK businessmen after seizing about 12,000 counterfeit engine parts for US-made Iranian jet fighters. The Foreign Office said last night that Tehran's continuing death threat against the author Salman Rushdie remained a 'factor in our bilateral relations', although the issue was not directly related to yesterday's announcement.

GB United Kingdom, EC IR Iran, Middle East P9611 Administration of General Economic Programs P372 Aircraft and Parts P381 Search and Navigation Equipment P348 Ordnance and Accessories P376 Guided Missiles, Space Vehicles, Parts P3795 Tanks and Tank Components P366 Communications Equipment TECH Licences GOVT Government News MKTS Foreign trade P9611 P372 P381 P348 P376 P3795 P366 The Financial Times London Page 10 338
Parliament and Politics: Councils map for Wales to be redrawn Publication 930302FT Processed by FT 930302 By ANTHONY MORETON and IVOR OWEN

THE MAP of local government in Wales is to be redrawn for the second time in 19 years.

Mr David Hunt, Welsh secretary, yesterday announced his intention to replace the eight counties and 37 districts with 21 unitary authorities responsible for all services.

Elections for the new councils will be held next year and the authorities will come into being legally on April 1 1995.

Making the announcement - appropriately on St David's day - Mr Hunt said the 'desirable reform' would give electors a 'better understanding of who is providing local services, which will result in greater accountability'.

The reshaping of local councils brings to an end two years of talks. A similar reorganisation is being discussed in Scotland and in England, where the Boundaries Commission is not likely to report for some time.

Mr David Thomas, chairman of the Council of Welsh Districts, said the reform would give Wales 'a system of government that can for the first time be clearly understood by the people it serves'.

The Assembly of Welsh Counties, which had lobbied against diminishing county powers, made no statement. Under Mr Hunt's proposals, county names such as Clwyd, Dyfed, Gwent and Gwynedd - introduced by a Conservative government in 1974 - will disappear. Names then wiped off the local-government map, such as Monmouthshire, Pembrokeshire, Carmarthenshire and Cardiganshire, will re-appear along with new districts such as Heads of the Valleys in south Wales.

The reform will affect 120,000 workers though the districts. Mr Thomas did not think more than 1,000 - 'all in central administration' - would lose their jobs.

A report last month by management consultants Touche Ross put the cost of the re-organisation ranging from as little as Pounds 66m over 15 years to as much as Pounds 153m at constant prices.

Touche Ross also projected potential savings from a minimum of Pounds 17m a year, and Mr Hunt said he was 'confident the reorganisation will pay for itself well within 15 years'.

The Welsh capital, to be known in future as the City and County of Cardiff, is to be given a special role.

A study is to be undertaken of how the city, and its position as capital, should develop over the next 25 years.

Mr Hunt told MPs Wales would lead the UK out of the recession. Announcing a five-year programme for the regeneration of the valley communities, he insisted the portents were good for the whole of Wales to 'go for growth'.

The Welsh secretary also looked to the new local government structure based on a single tier of 21 unitary authorities to secure a more co-ordinated approach to economic issues through the Welsh Economic Council.

He emphasised that Wales had established itself internationally as the 'first option for new projects and expansion'.

Assurances by Mr Hunt that the reform of local government was unlikely to lead to massive redundancies failed to satisfy Mr Ron Davies, the shadow Welsh secretary, who said the high level of unemployment was 'blighting the economy of Wales'.

Mr Hunt emphasised the success of the first five-year programme for the valleys, due to end on March 31, in bringing to bear the full range of government policies on the problems and challenges of a single area.

He said the creation of long-term sustainable employment of improved quality should be the first objective.

GB United Kingdom, EC P9121 Legislative Bodies GOVT Government News P9121 The Financial Times London Page 10 595
Parliament and Politics: Smith outlines plan for constitutional change Publication 930302FT Processed by FT 930302 By IVO DAWNAY, Political Correspondent

MR JOHN SMITH last night called for 'a fundamental shift in the balance of power between the citizen and state' as the central goal of a wide-ranging programme of constitutional reform.

In a clear effort to seize on the widely-perceived 'atmosphere of decline and gloom' across Britain, the Labour leader attributed the mood to poor and unaccountable government feeding a sense of impotence among the public.

He poured scorn on Mr John Major's claims to champion citizens' interests by warning that 14 years of Conservative rule had reinforced alienation and centralised power and had left Westminster 'dictatorial and remote'.

Siding firmly with the modernising faction in his party, he said: 'It is clear to me that the institutions which purport to embody our country's democracy no longer do so. Instead they hold real democracy back.'

Among a long list of proposals aimed at extending citizens' rights, Mr Smith advocated an end to the practice of 'Budget purdah' - the traditional news blackout before Budgets - and new legislation obliging companies to detail remuneration packages for their directors.

Arguing for greater transparency in government, he also said that the Central Statistical Office should be made statutorily independent and accountable to Parliament as one of a number of measures aimed at de-politicising the dispersal of official information.

A further move proposed in his speech in London to Charter 88, the lobby group for constitutional reform, was the introduction of an annual State of the Nation speech to the Commons in which the government would outline the economic outlook. A 'green budget' might also be published to inform a wider debate on the economy.

But Mr Smith was careful to stop short of declaring his own position on electoral reform, now being debated by the Plant committee, which will report to the Labour party conference later this year.

He would not be drawn on his views on House of Lords reform, beyond reaffirming his opposition to the hereditary principle.

The bulk of his 21-page speech covered familiar territory, not least the long-promised revival of the powers of local government and a new tier of government for Scotland, Wales and the English regions.

It also included Labour's longstanding commitment to freedom of information legislation and the incorporation of European human rights principles in a Human Rights Act, overseen by a Human Rights Commission.

Alongside these came a pledge to create a Justice Ministry, empowered to pull together supervision of the law and its reform under one departmental roof.

Party officials underlined that the speech built on Mr Smith's address to Labour's local government conference at Bournemouth last month in which he attempted to redefine the party's central goal as broadening opportunities for individual citizens.

That message has been echoed in speeches by other Labour frontbenchers, including an attack on vested interest groups by Mr Gordon Brown, the shadow chancellor.

GB United Kingdom, EC P9121 Legislative Bodies P8651 Political Organizations GOVT Government News P9121 P8651 The Financial Times London Page 10 515
Parliament and Politics: Lords fight bill to reform unions Publication 930302FT Processed by FT 930302 By ALISON SMITH

MINISTERS were warned yesterday of changes they will be pressed to make to the latest bill on trade union reform, as the legislation began its passage through the House of Lords.

The most vehement opposition to the bill, which includes the provision to abolish wages councils, came from Labour and Liberal Democrat peers led by Baroness Turner of Camden for Labour. Some elements of it were also criticised by Tories.

Employers' groups expressing serious reservations about the measure - cited by peers on both sides of the House as the measure was given a second reading - included the Confederation of British Industry, the Industrial Society, the Association of British Chambers of Commerce and the Engineering Employers' Federation.

The two provisions about which employers are particularly unhappy are the greater freedom for individuals to join the union of their choice, and the proposed changes to the 'check-off' arrangements, though which union dues are deducted automatically from employees' pay.

The bill would mean that an employee would have to indicate continuing approval of the arrangement every three years. Lord Prior, a former Tory cabinet minister and chairman of GEC, the electronics and telecommunications group, emphasised the importance to foreign companies investing in the UK of the ability to negotiate single-union deals. 'That is the nub of the problem with the bill,' he said.

Lord Murray of Epping Forest, a former general secretary of the TUC, warned Viscount Ullswater, the junior employment minister, that the bill made rods for employers' backs.

Baroness Young, another former minister, welcomed much of the bill, but said the government should think again about the provisions on maternity leave.

Reflecting the views of the Equal Opportunities Commission, she said that the provision allowing women 14 weeks might well not be long enough, and that it might be to the benefit of employers as well as their staff to increase it to 18 weeks.

GB United Kingdom, EC P8631 Labor Organizations P9441 Administration of Social and Manpower Programs GOVT Draft regulations P8631 P9441 The Financial Times London Page 10 358
Parliament and Politics: Tory associations criticise Fowler Publication 930302FT Processed by FT 930302 By PHILIP STEPHENS, Political Editor

THE Tory leadership faces an embarrassing row with party activists later this week over its refusal to give local constituency associations a direct role in the running of party headquarters.

Supporters of the Party Reform Steering Committee - a pressure group seeking democratic accountability within the party organisation - have tabled a rare motion of censure condemning the management reforms unveiled last month by Sir Norman Fowler, the party chairman.

The motion, which will be debated on Friday at a meeting of the Conservatives' policy-making Central Council, has the support of at least 50 local party associations.

It underlines the rumbling discontent among activists over the autocratic style of the party's Smith Square headquarters and the debt of nearly Pounds 20m it has accumulated in recent years. Many associations are refusing to hand over funds to the national party organisation.

The council, which meets once a year, brings together the various wings of the party including MPs, MEPs, local associations and councillors. Public debate of censure motions is highly unusual.

Moved by the Brentford and Isleworth association, the motion condemns the refusal of the party's National Union to call a special meeting to examine proposals for a radical overhaul of the party machine.

The steering committee wanted the council to establish a party executive committee - with at least half its members elected by a postal ballot - to take over responsibility for the administration of Conservative Central Office and the party's central funds.

But Sir Norman blocked the attempt by questioning the credentials of some of the 50 local associations supporting the demand. Some of the associations were alleged not to have paid their subscriptions.

The party chairman then unveiled his alternative plan for a new, appointed board of management under his chairmanship to bring together the different wings of the party. In parallel, the party chairman announced more than 60 job losses as part of an economy drive designed to reduce the debt.

But Mr Michael Normington, the chairman of the pressure group, yesterday condemned the new board as having 'no constitutional basis'.

He said that it could be changed or scrapped by Sir Norman at any time and would not provide any democratic accountability for party members.

Mr Normington also attacked the procedures under which party headquarters hoped to have his blueprint endorsed by the central council. Sir Norman's plan will be debated at a special session on Friday morning, before many party activists have arrived in Harrogate for the council's formal opening session later that afternoon.

Conservative Party (UK) GB United Kingdom, EC P8651 Political Organizations COMP Company News MGMT Management P8651 The Financial Times London Page 10 460
Parliament and Politics: Hunt optimistic on future of valleys Publication 930302FT Processed by FT 930302 By IVOR OWEN

WALES would lead the UK out of the recession, Mr David Hunt, the Welsh secretary, told the Commons last night when announcing a five-year programme for the regeneration of the valley communities, Ivor Owen writes.

Insisting that the portents were good for the whole of Wales to 'go for growth', he also looked to the new local government structure based on a single tier of 21 unitary authorities, to secure a more co-ordinated approach to economic issues through the Welsh Economic Council.

Mr Hunt emphasised that Wales had established itself internationally as the 'first option for new proejcts and expansion'.

Assurances by Mr Hunt that the reform of local government was unlikely to lead to massive redundancies failed to satisfy Mr Ron Davies, the shadow Welsh secretary, who said the high level of unemployment was 'blighting the economy of Wales'.

Mr Hunt emphasised the success of the first five-year programme for the valleys, due to end on March 31, in bringing to bear the full range of government policies on the problems and challenges of a single area.

GB United Kingdom, EC P9532 Urban and Community Development GOVT Government News P9532 The Financial Times London Page 10 214
Parliament and Politics: Backbenchers strain for leadership amid gloom - Ralph Atkins takes soundings from the Tory rank and file Publication 930302FT Processed by FT 930302 By RALPH ATKINS

A QUIET Monday afternoon in the Commons chamber, dominated by Welsh business and with no votes scheduled, gave the normally loyal Tory MP, chatting in Members' Lobby time, a chance to ponder on the leadership qualities of the prime minister.

'If you are saying, do we want a return to the apparent certainties of Margaret Thatcher, then definitely 'no',' he decided.

'But we are being a bit wishy-washy. John Major's friends are trying to get a bit of clarity of thought.'

His words were, perhaps, harsher than he intended. But the sense of unease within Tory ranks at Westminster - though still a notch or two from open revolt and driven largely by economic gloom - was palpable yesterday.

The prime minister's falling poll ratings have encouraged a febrile atmosphere to which there seems no early respite. Only 19 per cent of electors believe he is a capable leader, according to a Mori poll for The Times. Just 21 per cent believe he understands the problems facing Britain.

'What is worrying is the criticism of Major coming from the constituency parties,' said one young Tory, first elected last April. 'It is not acerbic like the newspaper editorials, but it is there.'

A combination of past incidents and looming difficulties has meant that among Tory MPs it is almost unfashionable not to add a measure of cynicism or malice in the privacy of the Commons' lobbies.

The Maastricht bill is bogged down in committee, good economic news is elusive, a package to save coalpits has yet to be agreed, and the by-election in Newbury, caused by the death of Mrs Judith Chaplin, is already being written off by many Tories as a Liberal Democrat gain.

'I would be amazed, astonished and delighted if we won; I reckon we will lose by 5,000,' said one Tory MP for a constituency not far from the town.

Mr Major's efforts to impose authority are not yet seen as credible by the right wing. There is frustration that Maastricht has pushed out other government business, that there is an apparent vacuum of new ideas from the cabinet.

An obviously stage-managed revolt by government loyalists against the Euro-rebels at a backbenchers' meeting last Thursday won a few headlines but changed nobody's mind.

'There is no leadership,' said an MP who voted for Mr Major to become prime minister in 1990. 'What we get now and again is a petulant lashing-out - headlines saying, 'Major to crack down on Euro-sceptics' - and then nothing happens. It is like a turn-of-the-century plane, lots of flapping of wings and noise and then the thing nosedives.'

In the background is Baroness Thatcher, still a totem for the Tory right, and her former cabinet ministers. Mr John Biffen, ex-leader of the House, wrote last week that there was a 'determined restiveness' on the Tory backbenches. Lord Lawson, a past chancellor, has derided the government over its handling of sterling's exit from the exchange rate mechanism.

A lunch last week, hosted by the former prime minister and attended by rightwing cabinet ministers Mr Peter Lilley, social security secretary, and Mr Michael Portillo, chief secretary to the Treasury, set off unsubstantiated murmurings of behind-the-scenes plotting.

In truth, ministers can legitimately argue that much of the pessimism is transient and recession-related. 'The economy is always the thing that will help bolster the government,' admited one Euro-sceptic. One veteran MP was prepared to go against the trend. 'There is nothing unusual about the mood,' he insisted.

But, for now, many Conservatives are restless over Mr Major's apparent reluctance to replace Mr Norman Lamont as chancellor. 'A lot of the pessimism is because of the occupant of Number 11 Downing Street,' said one London Tory. 'There is a universal feeling that he should go to another department.

'But I suppose that reflects frustration about Mr Major and his leadership credibility.'

GB United Kingdom, EC P8651 Political Organizations P9111 Executive Offices GOVT Government News P8651 P9111 The Financial Times London Page 10 693
M0 growth lifts retail sales hopes Publication 930302FT Processed by FT 930302 By EMMA TUCKER and NEIL BUCKLEY

CASH IN circulation grew strongly last month, raising hopes that retail sales continued to rise in February, according to Bank of England figures released yesterday.

Narrow money, M0 - consisting mainly of notes and coins in circulation - increased by a seasonally adjusted 4.8 per cent in the year to February. The rise breached the government's official target range of zero to 4 per cent for the second consecutive month. In the year to January M0 rose by 4.1 per cent.

However, Treasury officials indicated that the latest increase was unlikely to prompt tighter monetary policy. Other indicators are showing different trends. Growth of the broad money measure M4 - M0 plus bank and building society deposits - is below the floor of its 4 per cent to 8 per cent monitoring range and inflation indices continue to point to disinflationary pressures in the economy.

The 0.7 per cent month-on-month rise in M0 in February points to buoyant consumer spending. A number of other factors could explain the higher than expected monthly and annual increases in the narrow measure of the money supply.

Economists said recent reductions in base rates to 6 per cent meant that there was less incentive for people to hold money in savings accounts, which could account for the boost to cash in circulation.

Mr Roger Bootle, chief economist at Greenwell Montagu, said: 'Low interest rates means that once money is withdrawn it stays out for longer.'

At the same time borrowing on credit cards, the rates for which have stayed relatively high, is expensive and is acting as a further incentive to use cash rather than credit.

The strong growth of M0 might also reflect the fact that people are buying cheaper goods that can be purchased with cash, rather than expensive durable goods.

Mr Bootle said: 'I suspect that there is rather a lot in the balance of all these factors and it would not be the first time that a monetary indicator is giving a misleading picture.'

Many retailers say the rise in sales that started over the Christmas and new year period was maintained into February. The British Retail Consortium said yesterday it expected February's trading figures to be 'reasonable.'

WH Smith said the firmer tone that came in after Christmas has been broadly maintained. Sales were stronger both compared with the same time last year and with the autumn period.

The John Lewis Partnership said its department store chain had seen encouraging sales growth of 5.9 per cent for the first three weeks of February compared with the same period last year.

Revised figures from the Bank of England showed that bank and building society lending to the private sector rose in January by Pounds 4.36bn after a fall of Pounds 198m in December.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs P602 Commercial Banks P6162 Mortgage Bankers and Correspondents ECON National income CMMT Comment & Analysis STATS Statistics P9311 P9611 P602 P6162 The Financial Times London Page 8 523
Birt-type deals said to be common Publication 930302FT Processed by FT 930302 By NORMA COHEN and MICHAEL CASSELL

TAX CONSULTANTS say arrangements similar to Mr John Birt's employment contract with the BBC are common among entertainers, computer consultants, North Sea divers, fishermen and non-executive directors of large companies.

Ms Moira Elms, senior manager at Coopers & Lybrand Financial Planning, says Mr Birt's position as sole employee of a limited company in which he is the sole shareholder was 'a valid arrangement and the Inland Revenue have a difficult time overturning it'.

In 1897 the House of Lords ruled that an employee of a company is legally distinct from the company itself, even if he or she is the only shareholder. To prove otherwise, the Revenue would have to 'pierce the corporate veil,' tax consultants say.

Mr Lochlan Hickey, partner at KPMG Tax Partners, identifies two main advantages of the arrangement: cashflow benefits as tax is not deducted at source and the freedom enjoyed by limited companies in deducting legitimate business expenses for tax purposes.

The disadvantages are that the limited company must comply with all Companies Act rules, including filing annual accounts at Companies House and holding an annual general meeting - even if attended by only one person. It must also pay national insurance contributions and VAT and corporation taxes which, at 25 per cent to 35 per cent of profits, are preferable to the 40 per cent income tax on top-rate salaries.

Mr Hickey says the Inland Revenue has intervened where an employer has used a one-person limited company to fill a position likely to be ongoing.

Employers and executive recruitment specialists expressed surprise that the Revenue would grant freelance consultancy status to executives earning their living predominantly from one source.

Mr Peter Brown, chairman of Top Pay Research Group, which advises non-executive directors, says it is 'virtually inconceivable' that a permanent chief executive would be employed on a freelance basis.

Mr John Courtis of Courtis & McManus, the headhunters, warns that companies employing executives as freelances could be held liable for outstanding tax liabilities.

GB United Kingdom, EC P8741 Management Services P9311 Finance, Taxation, and Monetary Policy MKTS Contracts GOVT Taxes PEOP Personnel News P8741 P9311 The Financial Times London Page 8 374
Street-Porter paid via company Publication 930302FT Processed by FT 930302 By RAYMOND SNODDY

THE BBC'S head of Youth and Entertainment Features, Ms Janet Street-Porter, is paid as a freelance through her own private company.

Janet Street-Porter Ltd is a company set up principally 'to provide and promote the services of Miss Janet Street-Porter in broadcast, journalism, films and television'.

The company had a turnover of Pounds 94,256 last year, according to records which have been filed at Companies House. This would have included other freelance earnings apart from her BBC salary.

The company had distribution costs of Pounds 9,775 and administrative expenses of Pounds 39,364, leaving an operating profit of Pounds 45,117.

For the past four years Ms Street-Porter has been a senior programme executive at the BBC, but is a freelance on two-year contracts. Last year she paid corporation tax of Pounds 11,515.

Last night the BBC declined to discuss Ms Street-Porter's payment arrangements.

Ms Street-Porter said in a statement that she had been 'a freelance for over 20 years, including broadcasting, writing books, journalism, television presentation and television production'. She added that her last contract with the BBC ran out at the end of December 1992 and that arrangements for a new one were still under discussion.

It is apparently not unusual for heads of department at the BBC not to be members of staff.

Mr Jonathan Powell, who resigned as controller of BBC1 in December, was never on the staff of the BBC. His successor Mr Alan Yentob always has been.

London Weekend Television confirmed last night that four executives were paid in part through private companies. They are Mr Marcus Plantin, former director of programmes who is now ITV's network director; Mr Greg Dyke, chief executive and also non-executive chairman of GMTV, the breakfast television company; Mr Barry Cox, director of corporate affairs; and Mr Brian Tesler, former managing director of the company.

The LWT annual accounts make clear that part of the services of all four is paid in this way. In each case it is believed the main part of the salaries are paid to them as employees.

Mr Dyke's company, Vine Productions, had a turnover of Pounds 52,810 in the year to March 1991 and made a profit of Pounds 32,503.

Payment through a service company in ITV has been less usual in recent years because of the growth of share option schemes.

The Inland Revenue said that only employees and full-time directors of companies are eligible for share options. Full-time directors of a company cannot be executive directors of another company.

Other benefits such as profit-sharing schemes and redundancy pay are also linked to employee status.

Meanwhile, there was widespread agreement yesterday, before Mr Birt's change of heart, that his method of payment was untenable for a director-general of the BBC.

Senior broadcasters who met yesterday to start the organisation of the next Royal Television Society Cambridge convention saw it as 'extraordinary behaviour'. They decribed it as a moral issue.

The political reaction to the revelations about Mr Birt's salary was low-key. The general feeling at across the parties at Westminster was that it was up to the BBC to determine the details of Mr Birt's remuneration package.

British Broadcasting Corp GB United Kingdom, EC P4833 Television Broadcasting Stations P8741 Management Services PEOP Personnel News MKTS Contracts P4833 P8741 The Financial Times London Page 8 563
When taxing questions need an answer: Peter Norman examines ways in which Lamont could bring some extra revenue to the Treasury - Spring Budget Publication 930302FT Processed by FT 930302 By PETER NORMAN

IF NEARLY 14 years of Conservative government have achieved anything, it is a reduction in the burden of direct taxation placed on the individual. But with Britain's public sector borrowing requirement widely forecast to reach Pounds 1bn a week in 1993-94 even the most sacred cows have to come under critical scrutiny.

As Mr Norman Lamont, the chancellor, considers whether to start increasing taxes to curb the UK's growing budget deficits in his March 16 Budget, it is an odds-on bet that Treasury officials have been weighing the merits of raising more revenue through income tax or National Insurance contributions.

There are political and economic constraints on precipitate action. The Tories owe their fourth term in office largely to their fierce opposition to Labour's manifesto plans for a sharp increase in direct taxes on middle-income families.

There are tentative signs of recovery in Britain's industrial and retail sectors, but indices of consumer confidence have been slow to reflect any upturn. And there are widespread fears that a sharp increase in direct taxation could nip any revival of confidence in the bud.

It is therefore unlikely that the government will embark on large-scale revenue raising through direct taxes in 1993-94. But it will be conscious of a need to close the budget gap in the years ahead and that eliminating or reducing some of the anomalies in the income tax and National Insurance systems could serve this goal. In the short term there are plenty of relatively minor changes that would bring increased revenue.

The most obvious step would be to freeze the allowances and thresholds enjoyed by all Britain's 24.8m income tax payers. Under the provisions of statutory indexation these are due to go up by 2.6 per cent in 1993-94 unless parliament decides otherwise.

The projected 2.6 per cent increase reflects the rate of retail price inflation in the year to last December. It already looks generous compared with January's 1.7 per cent inflation rate and expectations that retail price inflation will fall further this spring.

Most taxpayers would not suffer a great loss if the personal allowance - the amount of income that all people can enjoy before income tax is levied - were held at the 1992-93 level of Pounds 3,445 instead of rising in line with indexation to Pounds 3,565 in 1993-94.

A 20 per cent income taxpayer with a taxable income of up to Pounds 2,000 would forego 34 pence a week. A higher rate taxpayer paying 40 per cent on taxable income of more than Pounds 23,700 would 'lose' 69p a week if the personal allowance were frozen. He or she would forego a further Pounds 2.0l weekly if the upper 'basic rate limit' at which the 25 per cent basic rate of income tax gives way to the top 40 per cent rate were not indexed upwards to Pounds 24,400.

Freezing all allowances would save the government Pounds 750m in the next tax year with three quarters of the saving coming from no change in the personal allowance. The main disadvantage of such a blanket freeze would be to inflict a real-income loss on very low paid workers who would be brought into the tax net on the strength of only modest wage increases.

The Institute for Fiscal Studies has suggested as an alternative that the chancellor might choose to freeze just the married couple's allowance and the basic rate limit. Such action would be in line with recent practice, but the yield would be comparatively small. Another option canvassed by the institute would be to restrict the value of the personal allowance to the basic tax rate rather than subtract it as at present from gross income to obtain taxable income.

Such a change would be a blow to Britain's 1.7m higher-rate taxpayers, for whom the personal allowance is worth Pounds 1,378 a year compared with Pounds 861.25 for the basic-rate taxpayer. But the yield for the government would be large - about Pounds 1.3bn according to IFS estimates - nearly as much as the Pounds 1.6bn that would be raised by a 1 percentage point increase in the basic rate of tax to 26 per cent.

Mr Lamont's direct tax options do not stop with income tax. Britain has a second tax on incomes in the form of National Insurance contributions. But the arguments for extracting more from this source are finely balanced.

Increased NI contributions of some sort might be quite easy to sell to the electorate. NI contributions have long since ceased to finance a genuine fund to pay for such social services as old age pensions or unemployment, but they are generally perceived as serving that purpose. Mr Lamont could point to the greatly increased cost of social security for the unemployed to justify an increase in revenues from this source.

On the other hand, any radical increase in the NI take would lay the chancellor open to a charge of misleading the electorate. During last year's campaign he focused the Conservatives' counter attack on the Labour party's plans to extend NI contributions to the full pay of middle and upper income earners.

Increases in direct taxation are normally the preserve of the brave or the strong. Mr Lamont has proved surprisingly resilient through the crises of his chancellorship in the past six months, but his political position is weak.

That fact and continuing uncertainty about the economy argue against radical changes in UK direct taxes to redress the budget deficit. But the chancellor has scope for action at the margin.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Taxes P9311 The Financial Times London Page 8 974
Freedom helps unlock offenders' potential: Alan Pike examines the efforts of charities to divert young people from a life of crime Publication 930302FT Processed by FT 930302 By ALAN PIKE

TWELVE teenagers from Chatham, Kent, are unlikely to be among the first to hear the news when Mr Kenneth Clarke, home secretary, announces plans for a new generation of secure schools for young offenders shortly.

They will be climbing a Welsh mountain as part of a motivational training course run by Fairbridge, a charity working with young people from disadvantaged inner-city backgrounds. Many of Fairbridge's clients are offenders, including some likely candidates for Mr Clarke's new schools.

Fairbridge is one of a number of charities that try to divert young people from crime. A group of the biggest - the Children's Society, National Children's Homes, Rainer Foundation and Howard League for Penal Reform - have been pressing unsuccessfully for a meeting with Mr Clarke ahead of his announcement. They want to tell him that they fear the government is in danger of making a serious and expensive mistake if more young offenders are locked up.

During the 1980s there was a strong shift away from custodial sentences for young people. The number of 14 to 17-year-old males sentenced to custody fell from 7,700 in 1981 to 1,400 in 1991.

There were two major reasons for that. Custody seems to increase the likelihood that a young person will reoffend, and it is also very expensive - the average weekly cost of a community penalty or probation order is only 5 per cent of a custodial sentence.

Follow-up studies of young people completing the eight-day Fairbridge course show that around 60 per cent have gone on to jobs, education or further training. A remarkable 85 per cent to 90 per cent retain contact with the charity.

'It becomes more difficult to define and calculate success at times of high unemployment,' says Mr Steve Mellors, manager of the Chatham project. 'If someone who has spent five of the last six years in prison slows down his reoffending rate, I regard that as success.

In financial terms the cost of the charity's course - around Pounds 400 - would keep a teenager in a young offender's institution for a week.

A Department of Education report described the Fairbridge approach as an excellent model reaching those young people who are most in need of help.

Yet the proportion of Fairbridge's income received from the public sector has declined since the mid 1980s. Mr Michael Butler, the charity's southern regional manager, says its work would be immeasurably enhanced by only an extra Pounds 1m a year from the government. That compares with suggestions that the new network of special schools could cost Pounds 75m to develop.

The message that leaders of the voluntary sector want to give Mr Clarke is: 'Most young offenders grow out of crime as they become more mature and responsible. They need encouragement and help to become law-abiding. Even a short period of custody is quite likely to confirm them as criminals, particularly if they acquire new criminal skills from more sophisticated offenders. They see themselves labelled as criminals.'

Until an explosion of media attention to youth crime last month united government and opposition in calls for tougher penalties, the sector believed ministers had already grasped the message, for the words quoted above words come from the 1988 Home Office green paper Punishment, Custody and the Community.

GB United Kingdom, EC P8361 Residential Care P8399 Social Services, NEC TECH Services P8361 P8399 The Financial Times London Page 8 595
Rise in university graduates forecast Publication 930302FT Processed by FT 930302

THE number of students graduating from traditional universities those other than the former polytechnics - will be 6.6 per cent higher in 1993 than last year according to the Graduate Employment Service.

A further rise of 8.2 per cent is expected by 1994, bringing the total increase between 1991 and 1994 to 24 per cent.

Growth in the supply of graduates is not being matched by demand from employers, the service says. But graduate unemployment has been held down by the numbers going on to teacher training and further academic study.

GB United Kingdom, EC P8221 Colleges and Universities PEOP Personnel News STATS Statistics P8221 The Financial Times London Page 8 121
Confidence gap emerges in north Publication 930302FT Processed by FT 930302

A MARKED difference in confidence about recovery has emerged between professional property advisers and companies with head offices in northern England, a survey by Coopers & Lybrand, the accountancy firm, shows.

Nearly 70 per cent of 154 firms or businesses surveyed expect an upturn in northern property markets in the second half of this year. But while a quarter of professionals in surveying, engineering and construction think recovery is already under way, only 14 per cent of occupiers agree.

GB United Kingdom, EC P6512 Nonresidential Buildings Operators MKTS Market data P6512 The Financial Times London Page 8 107
Gilts sales may force PSBR changes Publication 930302FT Processed by FT 930302 By EMMA TUCKER

HEAVY purchasing of gilt-edged securities by banks and building societies in January will increase pressure on the government to alter the rules by which it finances the public sector borrowing requirement, Emma Tucker writes.

Official money supply figures from the Bank of England show that gilts sales to banks and building societies in January totalled Pounds 2.84bn - more than three quarters of gilts sales in January. Sales to the non-bank private sector were just under Pounds 500m.

The 'full-fund' rule means that the government does not recognise gilts sold to UK banks and building societies as contributing to the funding of the PSBR. This forces it to sell an equivalent amount to the non-bank sector.

The banking sector has tended to show little interest in UK government stock. But the sharp fall in inflation and interest rates could increase the attraction of gilts to them.

GB United Kingdom, EC P6211 Security Brokers and Dealers P9311 Finance, Taxation, and Monetary Policy MKTS Sales GOVT Government revenues P6211 P9311 The Financial Times London Page 8 188
Gilts sale may affect PSBR funding Publication 930302FT Processed by FT 930302 By EMMA TUCKER

HEAVY purchasing of gilt-edged securities by banks and building societies in January will increase pressure on the government to alter the rules by which it finances the public sector borrowing requirement.

Official money supply figures from the Bank of England show that gilts sales to banks and building societies in January totalled Pounds 2.84bn, accounting for more than three-quarters of total gilts sales in January.

Sales to the non-bank private sector were just under Pounds 500m.

The current 'full-fund' rule means that the government does not recognise gilts sold to UK banks and building societies as contributing to the funding of the PSBR. This forces it to sell an equivalent amount to the non-bank sector.

One argument against altering the full-fund rule was that the banking sector previously showed little interest in UK government stock.

However, the sharp fall in inflation to an annual rate of 1.7 per cent in January, along with the drop in short term interest rates to 6 per cent, could increase the attraction of gilts for UK banks.

Banks purchased most of the gilts in January. They bought Pounds 2.48bn while building societies bought Pounds 358m. The private sector bought Pounds 497m.

GB United Kingdom, EC P6211 Security Brokers and Dealers P9311 Finance, Taxation, and Monetary Policy MKTS Sales GOVT Government revenues P6211 P9311 The Financial Times London Page 8 239
Increase in unfair dismissals is alleged Publication 930302FT Processed by FT 930302 By LISA WOOD, Labour Staff

EMPLOYERS are increasingly sacking staff just before they qualify for protection against unfair dismissal, the National Association of Citizen's Advice Bureaux said yesterday.

The association pointed to 'growing exploitation' of employees during the recession, reflected in an increasing number of complaints to bureaux on employment issues. Such complaints represent the third-largest category of enquiries dealt with by the service after consumer debt and social security.

The association yesterday published a report on the problem and pointed to several cases which, it said, illustrated exploitation.

A bureau in Oxfordshire reported a case of a man dismissed after 23 months and 3 weeks allegedly because he visited the toilet too often.

Bureaux also reported an increase in employers unilaterally changing employees' terms and conditions, particularly in hours and pay.

A bureau in Taunton reported a 17-year-old youth who worked part-time for a fast-food restaurant was dismissed because he objected to compulsory Saturday working. His sister, who also worked at the restaurant, was made full-time and expected to work 50 hours a week with no overtime pay.

The association's report made several recommendations to restrict exploitation. It wants employees with six months' service to be able to claim for unfair dismissal. The current threshold is two years.

At present full-time employees must have accumulated two years' continuous service before they can claim unfair dismissal. Part-time workers working between 8 and 16 hours a week have a qualifying period of five years.

'Without any doubt this lack of protection against unfair dismissal is the dominant theme in the hundreds of thousands of employment problems the CABs service deals with each year,' the association said.

Job Insecurity. Social Policy Section. National Association of Citizen's Advice Bureaux, 115-123 Pentonville Road, London N19LZ. Pounds 6.

GB United Kingdom, EC P99 Nonclassifiable Establishments PEOP Labour GOVT Legal issues MGMT Management P99 The Financial Times London Page 8 325
Enforcing a punishing regime for offenders: Alan Pike examines the efforts of charities to divert young people from a life of crime Publication 930302FT Processed by FT 930302 By ALAN PIKE

TWELVE teenagers from Chatham, Kent, are unlikely to be among the first to hear the news when Mr Kenneth Clarke, home secretary, announces plans for a new generation of secure schools for young offenders shortly.

They will be climbing a Welsh mountain as part of a motivational training course run by Fairbridge, a charity working with young people from disadvantaged inner-city backgrounds. Many of Fairbridge's clients are offenders, including some likely candidates for Mr Clarke's new schools.

Fairbridge is one of a number of charities that try to divert young people from crime. A group of the biggest - the Children's Society, National Children's Homes, Rainer Foundation and Howard League for Penal Reform - have been pressing unsuccessfully for a meeting with Mr Clarke ahead of his announcement. They want to tell him that they fear the government is in danger of making a serious and expensive mistake if more young offenders are locked up.

During the 1980s there was a strong shift away from custodial sentences for young people. The number of 14 to 17-year-old males sentenced to custody fell from 7,700 in 1981 to 1,400 in 1991.

There were two major reasons for that. Custody seems to increase the likelihood that a young person will reoffend, and it is also very expensive - the average weekly cost of a community penalty or probation order is only 5 per cent of a custodial sentence.

The charities believe the law already provides for the tiny group of offenders who must be detained. They fear that the development of new secure schools would encourage more frequent use of custody.

They say this would be at best a waste of money. At worse, says Ms Frances Crook, director of the Howard League, it might mean 'a rise in the number of children found hanging from their cell bars'.

Follow-up studies of young people completing the eight-day Fairbridge course, which involves canoeing, abseiling and rock climbing, show that around 60 per cent have gone on to jobs, education or further training. A remarkable 85 per cent to 90 per cent retain contact with the charity.

'It becomes more difficult to define and calculate success at times of high unemployment,' says Mr Steve Mellors, manager of the Chatham project. 'If someone who has spent five of the last six years in prison slows down his reoffending rate, I regard that as success.

'But in the better economic climate of 1985-86, more young people went into jobs as a result of our Chatham scheme than were placed in employment by the Chatham, Rochester and Gillingham Jobcentres.'

In financial terms the cost of the charity's course - around Pounds 400 - would keep a teenager in a young offender's institution for a week. A Department of Education report described the Fairbridge approach as an excellent model reaching young people most in need of help.

Yet the proportion of Fairbridge's income received from the public sector has declined since the mid 1980s. Mr Michael Butler, the charity's southern regional manager, says its work would be immeasurably enhanced by only an extra Pounds 1m a year from the government. That compares with suggestions that the new network of special schools could cost Pounds 75m to develop.

The message that leaders of the voluntary sector want to give Mr Clarke is: 'Most young offenders grow out of crime as they become more mature and responsible. They need encouragement and help to become law-abiding. Even a short period of custody is quite likely to confirm them as criminals, particularly if they acquire new criminal skills from more sophisticated offenders. They see themselves labelled as criminals.'

Until an explosion of media attention to youth crime last month united government and opposition in calls for tougher penalties, the sector believed ministers had already grasped the message, for the words quoted above words come from the 1988 Home Office green paper Punishment, Custody and the Community.

GB United Kingdom, EC P8361 Residential Care P8399 Social Services, NEC TECH Services P8361 P8399 The Financial Times London Page 8 704
Women engineers warn on equal opportunities Publication 930302FT Processed by FT 930302 By DIANE SUMMERS, Labour Staff

ENGINEERING union negotiators should refuse to sign annual pay and conditions agreements with employers unless they contain an 'open commitment to guaranteeing equal opportunities,' the women's section of the AEEU engineering and electrical workers' union said yesterday .

The AEEU's ruling executive council looks certain to accept the unanimous vote at the women engineers' annual conference that no agreements be signed without the equal opportunities clause.

The conference also condemned Opportunity 2000, the employer-led initiative which aims to improve the position of women in the workforce, as 'no more than a convenient smokescreen' behind which companies were hiding.

Separately, the banking union Bifu accused employers in the finance sector of paying lip service to equal opportunities and claimed that banks had lost interest in issues such as childcare since the recession.

Mrs Edwina Hart, Bifu president, said of Opportunity 2000: 'It is very easy for the banks to be involved in high-profile publicity campaigns like this, but in reality they do nothing for women.'

GB United Kingdom, EC P8631 Labor Organizations P8711 Engineering Services MGMT Management P8631 P8711 The Financial Times London Page 8 200
ICI not to pay 'pool uplift' charges Publication 930302FT Processed by FT 930302 By MICHAEL SMITH

IMPERIAL Chemical Industries will not have to pay 'pool uplift' charges for the purchase of electricity from Teesside power station for its adjacent Wilton site, the company announced yesterday, Michael Smith writes.

Since electricity privatisation, virtually all electricity in England and Wales has had to be sold through a pool, or wholesale market, which then results in a higher price to cover administration and other 'uplift' costs.

Until this decision on uplift charges by the pool executive committee, ICI would have been liable to pay Pounds 1.5m a year to the pool on top of what it will pay to the consortium that operates the power plant, which is on land owned by ICI.

ICI said it was too early to say what the effects would be on talks to bypass the pool at its Runcorn chlorine plant.

The situation there is different because the potential supplier, PowerGen, would be physically separate from the plant and electricity would have to be supplied through equipment owned by a regional electricity company.

South Wales Electricity is to reduce tariffs for more than 900,000 customers for the second time in six months. Domestic customers paying quarterly will see a 1 percentage reduction in bills.

Electricity prices for 3m Eastern Electricity customers are to be held at 1992 prices for a year from April.

Both companies made their decisions following reductions in the price of coal which is used to generate electricity.

Imperial Chemical Industries South Wales Electricity Eastern Electricity GB United Kingdom, EC P4911 Electric Services COMP Company News COSTS Product prices P4911 The Financial Times London Page 6 282
Former managers to aid pit areas Publication 930302FT Processed by FT 930302 By CHRIS TIGHE

REDUNDANT and retired managers are to be recruited for a 'timeshare' scheme piloted by Recharge North East, an initiative launched yesterday to help regenerate former coalfield areas in north-east England, Chris Tighe writes.

Recharge will employ managers on part-time contracts, placing them in small and medium-sized enterprises on tasks aimed at helping companies survive and grow.

Recharge's director, Mr Danny Sharpe, a former deputy director of the Department of Trade and Industry in the region, said many smaller companies lacked spare management capacity to implement the advice they were given.

The Pounds 3m, three-year Recharge initiative is funded by the DTI, British Coal Enterprise and the European Community's Rechar programme for declining mining areas.

GB United Kingdom, EC P9611 Administration of General Economic Programs P8331 Job Training and Related Services PEOP Labour TECH Services P9611 P8331 The Financial Times London Page 6 156
Monopolies body looks at condom market Publication 930302FT Processed by FT 930302 By ROBERT RICE and MAGGIE URRY

THE Pounds 45m a year condom market is to be investigated by the Monopolies and Mergers Commission.

Sir Bryan Carsberg, director-general of fair trading, said changes in the market meant price controls introduced after an earlier MMC inquiry in 1982 needed to be reviewed.

The supply of contraceptive sheaths in the UK is dominated by LRC Products, part of the London International Group, which has about 75 per cent of the market with its Durex brand.

Mates - originally owned by the Virgin Group but sold three years ago to the Australian Ansell Corporation - is the second largest with about 20 per cent of the market.

When the MMC last looked at the market it concluded that LRC's monopoly position with 90 per cent to 95 per cent of the market operated against the public interest and that its prices might be expected to become excessive.

LRC gave undertakings to the Office of Fair Trading that it would limit growth in its average realised price (total UK turnover divided by total UK volume) to below 1.5 per cent below an index of costs close to the retail prices index.

Sir Bryan said yesterday: 'Although the price control arrangements have restrained the rate of increase of average realised prices, I believe the market has changed and the price control arrangements now need to be reviewed.'

He added he would be particularly interested in the MMC's views on the price control mechanism and whether it had damaged the prospect of successful competition from Mates and other suppliers.

LIG yesterday welcomed the MMC reference. It said the business affected represented about Pounds 20m of sales, at wholesale prices, 5 per cent of group turnover.

LIG's shares fell on the news but recovered to close unchanged at 220p.

The company agreed circumstances had changed since 1983, citing the arrival of Mates as a strong competitor in the market and the Aids problem.

LIG, which is a leading maker of condoms worldwide, said the UK was the only market where it faced price controls.

With LIG as market leader competitors cannot charge more for their products. LIG is likely to argue to the MMC that price controls hinder competition, deterring competitors from entering the market. It may also argue that consumers are thought to put safety and reliability above price when making purchasing decisions.

The commission has been given nine months to report.

The MMC yesterday took the unusual step of issuing a statement to correct press reports that it has already reached conclusions on its investigation into the supply of national newspapers. The commission said it still hoped to report by the end of July.

LRC Products London International Group Ansell Corp GB United Kingdom, EC P9131 Executive and Legislative Combined P3069 Fabricated Rubber Products, NEC P2711 Newspapers MKTS Market shares GOVT Government News COSTS Product prices P9131 P3069 P2711 The Financial Times London Page 6 501
Radio licences Publication 930302FT Processed by FT 930302

THE Radio Authority will tomorrow advertise eight commercial radio licences for services covering the Greater London area. Four are for FM services and four for AM.

GB United Kingdom, EC P4832 Radio Broadcasting Stations TECH Licences P4832 The Financial Times London Page 6 50
Drugs research Publication 930302FT Processed by FT 930302

VRG INTERNATIONAL, a US drugs research company, yesterday announced it would locate its Pounds 2.25m European headquarters at Livingston near Edinburgh.

VRG International GB United Kingdom, EC P283 Drugs P8731 Commercial Physical Research RES Facilities P283 P8731 The Financial Times London Page 6 51
Quick sale of railway mooted Publication 930302FT Processed by FT 930302

THE government yesterday indicated it was to press ahead as quickly as possible with the privatisation of London's Docklands Light Railway.

It has given the management consultancy arm of Ernst & Young, the accountancy firm, four weeks to draw up a list of options for getting the railway into private hands.

Docklands Light Railway GB United Kingdom, EC P4111 Local and Suburban Transit P9621 Regulation, Administration of Transportation COMP Company News P4111 P9621 The Financial Times London Page 6 90
Warning on equal opportunities Publication 930302FT Processed by FT 930302

ENGINEERING union negotiators should refuse to sign annual pay-and-conditions agreements with employers unless they contain an 'open commitment to guaranteeing equal opportunities', the women's section of the AEEU engineering and electrical workers' union said yesterday .

The AEEU's ruling executive council looks certain to accept the unanimous vote at the women engineers' annual conference that no agreements be signed without the equal opportunities clause.

The conference also condemned Opportunity 2000, the employer-led initiative which aims to improve the position of women in the workforce, as 'no more than a convenient smokescreen' behind which companies were hiding.

GB United Kingdom, EC P8631 Labor Organizations P8711 Engineering Services MGMT Management P8631 P8711 The Financial Times London Page 6 125
Unfair dismissals 'increasing' Publication 930302FT Processed by FT 930302

EMPLOYERS are increasingly sacking staff just before they qualify for protection against unfair dismissal, the National Association of Citizen's Advice Bureaux said yesterday.

The association pointed to 'growing exploitation' of employees during the recession, reflected in an increasing number of complaints to bureaux on employment issues. Such complaints represent the third-largest category of inquiries dealt with by the service after consumer debt and social security.

The association yesterday published a report on the problem and pointed to several cases which, it said, illustrated exploitation.

Bureaux also reported an increase in employers unilaterally changing employees' terms and conditions, particularly in hours and pay.

The association's report made several recommendations to restrict exploitation. It wants employees with six months' service to be able to claim for unfair dismissal. The current threshold is two years.

At present full-time employees must have accumulated two years' continuous service before they can claim unfair dismissal.

Part-time workers working between 8 and 16 hours a week have a qualifying period of five years.

Job Insecurity. Social Policy Section, National Association of Citizen's Advice Bureaux, 115-123 Pentonville Road, London N19LZ. Pounds 6.

GB United Kingdom, EC P99 Nonclassifiable Establishments PEOP Labour GOVT Legal issues MGMT Management P99 The Financial Times London Page 6 213
Guinness case men pursue appeal Publication 930302FT Processed by FT 930302

MR ANTHONY PARNES and Mr Gerald Ronson, who were convicted of theft in the first Guinness trial, have asked Mr Kenneth Clarke, home secretary, to refer their cases back to the Court of Appeal.

Lawyers for Mr Parnes believe that evidence showing that share support operations were common City practice in the 1980s was in the hands of the Serious Fraud Office before the trial began.

The evidence of indemnities being given to assist in six other takeover bids was given to the Department of Trade and Industry by directors of TWH/NV, a licensed share-dealing firm, during a separate investigation and then passed to the SFO, the lawyers believe.

Mr Parnes might have conducted his defence differently had this evidence been known about during his trial, Mr Keith Oliver, his solicitor, said yesterday.

'It is our view that a serious miscarriage of justice has occurred,' he said.

GB United Kingdom, EC P2082 Malt Beverages P2085 Distilled and Blended Liquors PEOP Personnel News GOVT Legal issues P2082 P2085 The Financial Times London Page 6 183
Companies call for merger inquiry reform Publication 930302FT Processed by FT 930302 By ROBERT RICE, Legal Correspondent

PROCEDURES for in-vestigating monoplies and mergers by the UK competition authorities are slow in focusing on the real issues, involve duplication of effort and impose an unnecessary burden on managements over an extended period, according to a survey by accountants Ernst & Young.

The survey of 25 companies involved in recent Monopolies and Mergers Commission inquiries found the Office of Fair Trading was thought to be too quick to initiate inquiries and gave inadequate explanations of the reasons for references to the commission.

The companies also felt the commission collected too much detailed information and that there was a lack of commercial awareness in the OFT and the commission. They also felt that MMC inquiries were too wide-ranging. Issues of little relevance were often left open at a late stage of the inquiry.

The majority of the companies felt the OFT and the commission should be merged but many of them wanted to preserve the MMC's independent role.

Ernst & Young recommends that OFT investigations should be more in-depth so that they can be either terminated before referral to the commission or passed on for a shorter inquiry.

In the recent green paper Abuse of Market Power the government indicated that it planned to increase the OFT's investigatory powers and give the MMC responsibility for handling appeals against decisions of the director-general of fair trading rather than undertaking an investigation itself.

Ernst & Young welcome these proposals but say they do not go far enough as they only affect anti-competitive practice and restrictive trade practices investigations. It says there is no logic in merger and monopoly investigations still being undertaken by the commission following an OFT investigation. The accountants say their proposals would significantly reduce the average length of inquiries as well as avoiding unnecessary duplication.

GB United Kingdom, EC P9131 Executive and Legislative Combined MGMT Management GOVT Draft regulations P9131 The Financial Times London Page 6 333
Leyland Daf truck plant nears supply deal Publication 930302FT Processed by FT 930302 By JOHN GRIFFITHS

THERE was new hope yesterday for the 1,346 workers at the threatened Leyland Daf truck plant in Lancashire after an agreement was reached in principle for Leyland to supply trucks to Daf Trucks NV, the Dutch company created on Friday.

The agreement, which the administrative receivers of Leyland Daf said yesterday 'still needs a lot of 'i's dotting and 't's crossed', was reached after a week of talks in Eindhoven in the Netherlands.

They took place between Mr John Gilchrist, the Leyland truck plant's managing director, and the management of the Dutch company created by receivers in the Netherlands with aid from the Dutch and Belgian governments.

As a result, and provided that a detailed agreement is reached, the Leyland plant could soon step up production substantially.

It is now making about 50 trucks a week to fulfil its outstanding orders.

Mr Gilchrist, who is leading a planned management buy-out of the Lancashire truck operations, was negotiating the agreement on behalf of the receivers, Mr John Talbot and Mr Murdoch McKillop of the accountancy firm Arthur Andersen.

One reason for the protracted length of the talks is understood to have been the need to establish how readily the supply agreement could be transferred to any new owner of the Leyland facilities.

The receivers refused to speculate on when a final agreement would be reached.

Factors still to be settled include the volume of trucks and the precise financial terms under which the vehicles would be supplied.

However, all sides indicated yesterday that they were treating the issue as a matter of urgency and seeking a conclusion within days rather than weeks.

The boost to the truck factory's prospects came as a separate management team at the Leyland Daf van plant in Birmingham, led by managing director Mr Allan Amey, met the receivers to present its own formal proposals for a management buy-out.

The Birmingham plant, which still employs 1,200 people, has resumed building vans at a rate of 250 a week.

Both buy-outs are being advised by Coopers & Lybrand, the accountancy firm.

Leyland DAF DAF Trucks GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories MKTS Contracts COMP Company News P3711 P3713 P3714 The Financial Times London Page 6 398
Challenge of moving mountains: The difficulty of tackling growing stocks of coal Publication 930302FT Processed by FT 930302 By MICHAEL SMITH

MIKE CHILDERLEY heaves a deep sigh as he peers down from the top of a 3m tonne heap of coal next to the Cottam, Nottinghamshire, power station which he manages.

There is enough coal there for six months, he says, but 'today, like every day except Sundays, we have 17 trainloads of the stuff coming in'.

His problems are unlikely to ease. The government's four-month review of the coal industry has come up with few solutions. But one almost certain to be adopted in an attempt to save some of the 31 threatened pits involves persuading the electricity generators to maintain or even increase stocks.

UK coal mountains have grown because demand for electricity has risen more slowly than expected as a result of the recession, a mild winter, stronger competition from the nuclear industry and a rise in imports.

Stockpiles in England and Wales are about 46m tonnes, enough to keep power stations going for six months and three times the level the coal and electricity industries believe is commercially justified.

British Coal has about 11.2m tonnes, against the 5m it would ideally like; National Power has about 18m tonnes (against about 5m-6m) and PowerGen, which owns Cottam, has 16m tonnes (5m-6m). British Coal executives argue that maintaining or raising stockpiles would merely postpone pit closures. 'What we need is a bigger market, but the government does not seem prepared to create that,' says one. 'Leaving coal stocks where they are merely means that the market will collapse when the next five-year contracts with the generators end.'

Some power stations may close before they burn all the coal they have. Even for those like Cottam, with a secure future, there are considerable penalties for being so overstocked.

Before the coal review, Mr Childerley planned to reduce his mountain to about 750,000 tonnes in the next few years.

Each tonne of coal added to the pile adds 50p to the company's costs in handling charges alone, on top of the cost of capital tied up in the stocks, he says, adding that the stockpile can take little more. 'Our preference would be that the coal stays in the bowels of the earth until it is needed,' says Mr Childerley.

The government's preferred method of saving some pits hinges on persuading, or coercing, the generators to take an extra 65.5m tonnes of coal over five years. The generators say there is a firm market for 40m-43m tonnes.

PowerGen has said it wants about Pounds 140m for keeping stocks at their current level; National Power, the larger of the two generators, has not specified an amount but would want at least as much again as the amount wanted by PowerGen.

Whatever the generators get, British Coal is likely to suffer most if stockpiles remain high. By 1998, when the next set of contracts run out, the coal industry is likely to be in the private sector and the government will have less of an interest in preserving pits.

In addition the 34m tonnes in generators' stocks then would last a lot longer than now because coal burning will have been reduced further as other sources of fuel grow in importance.

'Imagine if by then BC has by then been split into several companies,' says a BC executive. 'The generators will simply be able to pick one supplier off against another.'

British Coal Corp GB United Kingdom, EC P4911 Electric Services P1221 Bituminous Coal and Lignite-Surface P9611 Administration of General Economic Programs RES Product use MKTS Contracts RES Natural resources P4911 P1221 P9611 The Financial Times London Page 6 617
Coal chief warns of stockpile dangers Publication 930302FT Processed by FT 930302 By MICHAEL SMITH

MR NEIL CLARKE, chairman of British Coal, warned yesterday on the dangers of keeping pits open by maintaining electricity generators' stockpiles. He suggested that such a solution would deter potential buyers in privatisation.

His comments to the Coal Industry Society in London came amid growing fears among British Coal officials that the white paper on coal will depend heavily on persuading the generators to keep stocks at high levels.

The generators currently hold stocks of about 35m tonnes but want to reduce them by about a third.

Mr Clarke said that any additional demand for coal should result in it being burnt and 'not simply put to stock'. British Coal needed a durable solution to its problems.

Such a solution could only come from creating a more substantial market for coal now, while not neglecting what happened beyond the five-year contracts likely to be agreed shortly.

'The longer-term risk is in creating an artificial demand for coal. The end of the five-year contract period would then almost certainly see further intense pressure on our collieries.'

Mr Clarke said that any assessment of potential demand for coal must be linked to a redesign of contract structures between British Coal and its customers. The issues he had raised would have a fundamental impact on the potential for privatising the business.

Behind Mr Clarke's comments is a growing feeling at the corporation that the government's apparent solution will merely delay the closure of pits, with the biggest danger point in 1998.

In that year the five-year contracts already tentatively agreed for 160m tonnes between British Coal and the generators will end.

Additional contracts under discussion for a further 40m to 65.5m tonnes would also expire then. If stocks remained at their current level, the generators would be able to produce electricity without buying coal for more than six months.

Mr Clarke said he found it sad and regrettable that leaders of the National Union of Mineworkers were campaigning for strike action in a ballot to be held later this week. He said: 'Industrial action could not be a worse signal to send after we have rebuilt belief in the security of our supplies.'

British Coal Corp GB United Kingdom, EC P1221 Bituminous Coal and Lignite-Surface P9611 Administration of General Economic Programs MKTS Contracts COMP Company News RES Natural resources P1221 P9611 The Financial Times London Page 6 409
'Timeshare' scheme piloted by Recharge North East Publication 930302FT Processed by FT 930302 By CHRIS TIGHE

REDUNDANT and retired managers are to be recruited for a 'timeshare' scheme piloted by Recharge North East, an initiative launched yesterday to help regenerate former coalfield areas in north-east England, Chris Tighe writes.

Recharge will employ managers on part-time contracts, placing them in small and medium-sized enterprises on tasks aimed at assisting the companies to survive and grow.

Recharge's director, Mr Danny Sharpe, a former deputy director of the Department of Trade and Industry in the region, said the scheme was needed because many smaller companies lacked spare management capacity to implement advice they were given.

About 400 people have applied to advertisements in the region for the first batch of 12 'timeshare' managers. Those selected will be placed in companies, free of charge, for up to 10 days, possibly spread over many weeks.

The Pounds 3m, three-year Recharge initiative is jointly funded by the DTI, British Coal Enterprise and the European Community's Rechar programme for declining mining areas.

The initiative was announced in October after the government's decision to close 31 pits. Mr Sharpe insisted that setting up Recharge had not pre-empted final decisions on the threatened pits, but was designed to cushion the effect of losing 18,000 north-east coalfield jobs since 1982.

Recharge will help smaller businesses improve marketing, identify those with greatest growth potential and recruit volunteer businessmen as mentors for small companies.

GB United Kingdom, EC P9611 Administration of General Economic Programs P8331 Job Training and Related Services PEOP Labour TECH Services P9611 P8331 The Financial Times London Page 6 269
Refloat attempt Publication 930302FT Processed by FT 930302

SALVAGE experts were last night attempting to refloat the Freja Svea, a Danish-owned oil tanker grounded off Cleveland, as gale-force storms swept across north-east England.

An RAF helicopter landed four salvagemen on the deck yesterday with gale force winds and waves of 30 to 40 feet. The four joined 12 members of the 21-man crew who stayed on board.

GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas P4412 Deep Sea Foreign Transportation of Freight RES Facilities P1311 P4412 The Financial Times London Page 6 93
Rise in university graduates forecast Publication 930302FT Processed by FT 930302

THE number of students graduating from traditional universities those other than the former polytechnics - will be 6.6 per cent higher in 1993 than last year according to the Graduate Employment Service, the co-ordinating body for higher education careers services.

A further rise of 8.2 per cent is expected by 1994, bringing the total increase between 1991 and 1994 to 24 per cent.

Growth in the supply of graduates is not being matched by the demand from employers, the service says. The graduate unemployment figure has been held down by the numbers going on to teacher training and further academic study.

Graduates 1992-94, Volume I. CSU (Publications) Ltd, Armstrong House, Oxford Road, Manchester M1 7ED. Pounds 21.

GB United Kingdom, EC P8221 Colleges and Universities PEOP Personnel News STATS Statistics P8221 The Financial Times London Page 6 147
Northern business confidence seen Publication 930302FT Processed by FT 930302

A MARKED difference in confidence about recovery has emerged between professional property advisers and companies with head offices in northern England, a survey by Coopers & Lybrand, the accountancy firm, shows.

Nearly 70 per cent of 154 firms or businesses surveyed expect an upturn in northern property markets in the second half of this year. But occupiers of buildings are more cautious than senior professionals in surveying, engineering and construction.

GB United Kingdom, EC P6512 Nonresidential Buildings Operators MKTS Market data P6512 The Financial Times London Page 6 97
World Trade News: Eurotunnel train output halted Publication 930302FT Processed by FT 930302 By RICHARD TOMKINS, Transport Correspondent

A ROW between customer and supplier has halted production of shuttle trains intended to carry coaches and mini-vans through the Channel tunnel when it opens at the end of this year, it emerged yesterday.

Bombardier Eurorail, the Brussels-based company building the trains for Eurotunnel, said it had to stop making the shuttles because it had no room left to store them.

It said its Bruges production line was blocked because Transmanche-Link, the Franco-British contractor for the Channel tunnel, had failed to give the necessary authorisations for deliveries to begin.

TML reacted with astonishment to the statement. 'TML has not received any detailed particulars of any such claims from Bombardier. . .'

Bombardier is building 108 carriers for coaches and minivans as part of a FFr4bn (Pounds 506m) contract for Channel tunnel rolling stock.

Bombardier Eurorail Transmanche Link BE Belgium, EC P3743 Railroad Equipment MKTS Production MKTS Contracts P3743 The Financial Times London Page 5 172
World Trade News: Indonesia power scheme Publication 930302FT Processed by FT 930302 By WILLIAM KEELING JAKARTA

THE Indonesian government has approved an investment licence for Mission Energy of the US to build a Dollars 2bn (Pounds 1.42bn) power station at Paiton in East Java. The licence follows the personal intervention of President Suharto after negotiations between the government and Mission Energy stalled last December.

The project, which consists of two coal-fired 600 MW power units, will be Indonesia's first privately built, owned and operated station linked directly into the national grid.

The plant is at the heart of the government's drive to attract private companies into the power sector. Donors estimate Indonesia must invest Dollars 30bn into the national grid this decade to satisfy demand, one-third of which should come from private investors.

Mission Energy ID Indonesia, Asia P1629 Heavy Construction, NEC P4911 Electric Services P9631 Regulation, Administration of Utilities TECH Licences GOVT Government News P1629 P4911 P9631 The Financial Times London Page 5 164
World Trade News: Tokyo defies US anger over supercomputer Publication 930302FT Processed by FT 930302 By MICHIYO NAKAMOTO TOKYO

THE Japanese government yesterday brushed aside US criticism of its supercomputer procurement policy and went ahead with the installation of a Japanese-made supercomputer in an attempt to end one of the most controversial trade disputes between the two countries.

Japan's National Institute for Fusion Science, a government research institute, has installed a supercomputer made by NEC, the Japanese electronics group, which won a contract over Cray Research, a leading US manufacturer.

The installation of the NEC machine rejects outright claims by the US that the Japanese company won the contract as a result of a public procurement policy that favours Japanese companies.

It comes as the US has stepped up pressure on Japan to open its markets, particularly for high technology electronic products.

Mr Mickey Kantor, the US trade representative, expressed concern on Friday about Japanese public procurement of supercomputers.

The US is sending Mr Ira Wolf, assistant trade rep-resentative, to Japan at the end of the week to discuss a number of thorny trade issues, and is more than likely to touch on government procurement of supercomputers.

Cray Research said yesterday it had not been able to evaluate, at a demonstration held by the Japanese research institute, whether NEC's machine met the performance criteria required to satisfy the terms of the bid. The US company has questioned whether NEC's machine could actually do what it professed to do and claimed that the institute had used an evaluation process that favoured NEC's machine.

The Japanese government, which set up a Supercomputer Procurement Review Board after US threats of retaliation, rejected Cray's complaint last October. The research institute held a test of the NEC machine's performance last week and found it met required criteria.

The Japanese side believes it holds a trump card and is not prepared to bow readily to US demands.

'Cray has already supplied a few supercomputers to Japanese government institutes,' Mr Tadashi Watanabe, general manager of NEC's supercomputer marketing division, pointed out yesterday. 'But not one US public body has bought a Japanese supercomputer.'

A representative of the research institute said: 'We are the ones who bought the supercomputer so we are the ones who need to be satisfied by the NEC machine's performance.'

Cray Research NEC Corp JP Japan, Asia P3571 Electronic Computers P8733 Noncommercial Research Organizations MKTS Contracts GOVT Government News P3571 P8733 The Financial Times London Page 5 413
World Trade News: Irish misty eyed over Digital days / A look at the local impact of a shake-up in the world computer industry Publication 930302FT Processed by FT 930302 By TIM COONE

THE decision last week by Digital Equipment, the US computer maker, to close its manufacturing facility at Galway in the west of Ireland has produced much dismay and soul-searching in Ireland.

Digital has been in Ireland for 22 years, and was the biggest employer in the electronics sector until its decision to concentrate production at Ayr in Scotland, with the loss of 780 jobs at the Galway factory.

The Irish government has blamed the British government for allegedly offering lucrative government contracts to Digital (although it admits to having no hard evidence).

The opposition blames the government and the Industrial Development Authority for having done 'too little too late' to save the Galway factory. More nationalistic voices, including some in government, have been heard questioning the dominant role being played by multinationals in Ireland's industrial sector, and arguing that fewer tax and grant incentives should be given to foreign companies and greater support given to indigenous Irish industry.

More sober reflection by those not so close to the political front line, though, view the Digital closure as part of an inevitable shake-out of an industry facing rapid technological change.

Mr Edward Johnston, the director of the Federation of Electronic and Informatic Industries in Ireland, said: 'We have to live with the fact of occasional failures in terms of closures.'

Digital's Galway plant was primarily manufacturing VAX minicomputers. In early 1992 it decided to start building its new Delta workstation around its newly developed Alpha chip. According to industry sources, test marketing of the Delta in Europe proved a failure, as PCs have increasingly come to dominate the market over workstations and minicomputers.

As Digital had already begun PC manufacturing at Ayr, and had opened a new semiconductor plant in Scotland, the concentration of production at Ayr became inevitable.

Next to the food processing industry, electronics is Ireland's most important manufacturing sector. Built up in just 25 years it now employs 17,000 people with a further 7,000 employed in software production and development.

Net investment in fixed assets in the electronics sector amounts to IPounds 763m (Pounds 747m), which produces an annual output worth close to IPounds 5bn, of which 80 per cent is exported.

In the early 1970s, jobs in the industry were mainly in the basic assembly of low-cost products. Today workers are involved in the production of high-value systems, components and software.

According to the IDA, the government agency responsible for promoting inward investment into Ireland, as much as 40 per cent of the 9,000 jobs in the electronics sector in 1980 no longer exist. Nonetheless the sector has experienced continuous growth, with high-tech plants replacing the older assembly 'screwdriver plant' type operations, and demanding better trained employees.

The past year has been one of even greater change. Last year, Wang, which went into receivership, shed 75 per cent of its 700-strong workforce in Ireland. Apple was on the point of putting off 400 of their 800 workforce, but have since revised their decision.

By the end of 1993, in the space of two years, about 10 per cent of the workforce in the existing electronics industry will have been made redundant as a result of the Wang and Digital wind-downs and the closures of several smaller companies.

Nonetheless this is being offset by new entrants such as Dell and Intel, which are making major investments which within two years could boost the sector's output by as much as 25 per cent. Dell decided to set up its sole European manufacturing base Ireland just two years ago.

According to Mr Buddy Griffin, the managing director for manufacturing, 'there has been no cause for pain or regrets. On the contrary the operation has been highly successful and facilitated very rapid growth in sales in the European market.'

Intel is in the process of constructing a IPounds 500m semiconductor plant, the biggest electronics investment ever in Ireland. The plant will manufacture wafers for its new generation Pentium chip, otherwise known as the 586 processor, and will be the company's main world manufacturing facility for the processor, with sales projected at a level of 'billions of dollars'. Some 1,500 jobs in total will be created at the plant.

Mr Frank Turpin, the external affairs manager at Intel, said the reasons for choosing Ireland for this strategic plant were primarily due to the workforce skills available and the 10 per cent corporation tax regime.

'Due to the complexity of the technology, we felt it had to be an English language location, and in Scotland we felt we would face poaching by other companies,' he said. Intel itself has poached 200 Irish engineers from other electronics companies worldwide.

Mr Dan Flinter, the executive director for overseas industry at the IDA, is in no doubt that, despite the setback of Digital's closure, the electronics industry will continue to grow in Ireland. 'We shall continue to back strong companies that want to locate here. We are in the business of applying capital resources to get the best return, not necessarily the safest.'

It is not the most comforting message for the 780 who are to lose their jobs at Galway, but as Mr Turpin said: 'There is a whole world of difference in the industry now compared to when Digital came to Ireland.'

Digital Equipment Corp Intel Corp IE Ireland, EC P3674 Semiconductors and Related Devices P3571 Electronic Computers IND Industry profile RES Facilities P3674 P3571 The Financial Times London Page 5 940
World Trade News: Japan to step up spending on LCDs Publication 930302FT Processed by FT 930302 By MICHIYO NAKAMOTO

TWO leading Japanese manufacturers of liquid crystal displays (LCDs) intend to invest a total of Y160bn (Pounds 950m) over the next three years in moves that could further widen the lead of Japanese LCD manufacturers over their western competitors.

Sharp plans to invest Y80bn to expand its thin-film transistor plant in Nara prefecture in the coming fiscal year, modernise a separate plant in Nara and set up a plant in southern Japan which would begin production in 1995.

NEC, which is building a plant in Kagoshima, southern Japan, is investing Y80bn in setting up a new thin-film transistor manufacturing plant, among other things. Total investment by the company since 1989 would rise to Y100bn by 1996, it said.

Sharp and NEC are expanding their LCD manufacturing capacity despite the recession in the hope they can maintain leadership in a market which is expected to grow to Y1,000bn by the next decade.

LCDs are used increasingly in portable computers, camcorders, car navigation systems, electronic diaries and other communication devices.

The industry believes that with the growth in personal communication devices, such as Apple's personal digital assistant which is scheduled for launch this year, demand for LCDs will increase.

US and Europe have been left behind in the race to capture one of the largest growth areas in electronics and western companies are dependent on Japan for LCD supplies.

Philips, the Dutch electronics group, has joined Thomson and Sagem of France in an LCD joint venture plant in an attempt to break into the market. Philips already has a pilot plant in its home country. But LCD technology requires many years of manufacturing experience and the Europeans are likely to take some time to catch up.

Sharp Corp NEC Corp JP Japan, Asia P3679 Electronic Components, NEC RES Capital expenditures RES Facilities P3679 The Financial Times London Page 5 326
World Trade News: China in US talks on Gatt entry Publication 930302FT Processed by FT 930302 By TONY WALKER BEIJING

SENIOR Chinese and US officials yesterday focused on conditions for China's entry to the General Agreement on Tariffs and Trade at talks in Beijing. It was the highest level contact between the US and China since the change of administration in Washington.

The US, whose negotiating team was led by Mr Douglas Newkirk, assistant trade representative for Gatt affairs, has indicated support for China's rejoining Gatt; but US officials say that the 'process of Gatt accession is some way off'. China was a founding member of Gatt in 1948, the year before the communists swept the US-supported nationalists from power.

Formal consultations between Beijing and Washington on Gatt accession - China launched its bid to rejoin Gatt in 1986 - were suspended after the 1989 Tiananmen episode in which hundreds of democracy protesters died in an army crackdown.

CN China, Asia US United States of America P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 5 178
Phoenix of Beirut starts to rise from the ashes of civil war Publication 930302FT Processed by FT 930302 By JULIAN OZANNE BEIRUT

THE chic and wealthy young wives of east Beirut browse through the Coco Chanel and French lingerie stores in the modern glass and steel ABC indoor shopping mall, built after the end of the civil war.

After a busy morning buying expensive perfume, cosmetics and designer clothes and enduring occasional power cuts the fashionable women eat a light lunch together before zooming home in BMWs and Mercedes. On both sides of the city, once divided by the killing zone known as the 'Green Line', a new Beirut is rising from the debris of 15 years' fratricidal bloodshed.

Two years of peace and five months of government under billionaire prime minister Rafik Al-Hariri has restored confidence to many Lebanese. The government has started to reassert economic control and speeded a Dollars 5bn (Pounds 3.46bn) public and private reconstruction of the city. The political situation remains volatile and the government faces a Herculean challenge in financing its rehabilitation plans and stabilising an economy awash with corruption, unemployment and poverty.

The armed sectarian militias which once mounted checkpoints and ran parts of the city as fiefdoms have been cleared off the streets and replaced with the Lebanese Army. Syrian troops still operate checkpoints, marked by pictures of President Hafez al - Assad taken against a bouquet of red roses, but their presence is more discreet.

Much of the business optimism is based on a belief in the miracles expected from the government of Mr Hariri. Mr Michel Sinoura, finance minister, says the government has already made substantial economic gains, particularly in turning round the balance of payments deficit. The Lebanese pound has been stabilised, despite a politically-motivated attack on the currency in late January which was successfully fought off by a Dollars 300m Central Bank intervention.

Mr Sinoura says big efforts are under way to slash a soaring budget deficit of LPounds 1,200bn (Pounds 472m) last year by reducing expenditure and improving revenue collection. Stabilising the macro-economic environment and reforming an unwieldy and disintegrated public service are critical in attracting the huge sums required to implement the government's reconstruction plans. On the public sector side the government is trying to speed implementation of a World Bank-backed Dollars 2.3bn three year project for rebuilding and modernising the city's infrastructure.

Mr Al-Fadl Chalak, president of the Council for Development and Reconstruction, says the CDR has just completed pre-qualification of tenders for the Dollars 250m-Dollars 280m electricity rehabilitation and expects to award the tender in July. All other projects are almost ready to go to tender. However the CDR has so far received financing pledges for only Dollars 400m. The rest may be raised at a Paris meeting of donors in April.

In the private sector, the second main thrust of the reconstruction project is a controversial Dollars 3bn plan to rehabilitate 1.3m square metres, including 660,000 square metres of private property, in the bombed-out centre of Beirut.

While western diplomats say the economic plans and achievements of the government are impressive, there are still serious contraints. Politically, Mr Hariri is walking a tightrope between the different factions. The Maronite-Christian community boycotted last year's elections because of the continued presence of Syrian troops in Beirut in contravention of the peace agreement hammered out in late 1989 in Taif, Saudi Arabia.

They remain suspicious of the increasing power of Mr Hariri, a Sunni Moslem, at the expense of the presidency, which is reserved for a Maronite Christian. Last month Mr Hariri clashed with President Elias Hrawi over government appointments, marking the end of the political honeymoon.

Maronite businessmen, who have a large part of the estimated Dollars 30bn-Dollars 40bn held by nationals abroad, were accused of leading an attack on the Lebanese pound in an effort to weaken the government. The Kataeb, the Maronite political party, is also torn by an internal power struggle.

Another problem is the continued power of the Islamic fundamentalist Hizbollah, which is building its influence through charitable activities.

Curbing the Hizbollah and finding a political solution to Maronite discontent are largely dependent on external factors. Hizbollah remains almost untouchable while it heads the forces fighting against Israeli occupation in the south of Lebanon.

The Maronites are unlikely to be reassured until the Syrians abide by the Taif accord and redeploy all their 40,000 troops to Lebanon's Bekaa Valley.

Regaining Lebanese sovereignty will be critical to overcoming the looming political problems and without it Mr Hariri will find his grand economic ambitions much more difficult to achieve.

LB Lebanon, Middle East P9611 Administration of General Economic Programs P9532 Urban and Community Development GOVT Government News P9611 P9532 The Financial Times London Page 4 791
Israelis seal Gaza Strip Publication 930302FT Processed by FT 930302 By REUTER JERUSALEM

Israel yesterday said it would seal off the occupied Gaza Strip, after a knife-wielding Palestinian killed two Israelis and wounded eight others in Tel Aviv, Reuter reports from Jerusalem.

Prime Minister Yitzhak Rabin said the closure, which was to begin at 0100 GMT today and would affect over 100,000 Palestinians who enter Israel daily, would last only a few days.

IL Israel, Middle East P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Government News P9229 The Financial Times London Page 4 95
Suharto promises to relax 'iron grip' Publication 930302FT Processed by FT 930302 By WILLIAM KEELING JAKARTA

PRESIDENT Suharto of Indonesia yesterday opened the national assembly with a promise to relax the 'iron grip' of government.

'We have been enjoying dynamic national stability for more than a quarter of a century. Such stability cannot be maintained by an iron hand, regardless of its strength,' he told the People's Consultative Assembly.

Government critics, who say the assembly itself reflects the government's intolerance of democracy, greeted the speech with cynicism.

The 1,000-member assembly, which meets once every five years to elect president and vice-president and discuss state policy, is certain to elect the unopposed President Suharto for his sixth five-year term. General Try Sutrisno, who last month retired as head of the armed forces, is expected to be elected vice-president.

Although the assembly is the nation's highest body, it has never used its power to initiate legislation and remains, critics say, beholden to the president. Its membership consists of 500 members of the lower parliament - which is dominated by Golkar, the governing party, and representatives of the armed forces - and a further 500 people directly appointed by the government.

The government also dissuades the assembly from using its right to vote, arguing that agreement by consensus better reflects Indonesian values. Members have been told not to disrupt the meeting.

'It's a pretence of democracy. Indonesia's got 180m people and we're all being fooled,' complained one dissident former army officer.

Government supporters, however, say the assembly's support of the government has been the bedrock for political stability and economic growth averaging 6 per cent over the past 20 years.

ID Indonesia, Asia P9121 Legislative Bodies GOVT Government News P9121 The Financial Times London Page 4 292
Canada becomes an Australian issue: Mulroney's tax policy makes its mark on the election campaign Publication 930302FT Processed by FT 930302 By KEVIN BROWN

AUSTRALIA'S somewhat lacklustre federal election campaign came to life last week on the day that Mr Paul Keating, the prime minister, promised that a re-elected Labor government would review the future of the monarchy. But it was not Mr Keating's tepid republicanism which caught the public imagination.

Paradoxically, Australians were more interested in the resignation of Mr Brian Mulroney, Canada's Conservative prime minister, whose profile was previously rather lower than that of the Toronto Blue Jays baseball team.

Mr Mulroney was catapulted into the campaign because he is associated with the introduction of a goods and services tax (GST), the one issue which could prove capable of preventing the election of a conservative Liberal/National party government when Australians go to the polls on March 13.

Opinion polls suggest that Australian voters do not believe Labor's claims that rapid economic growth will soon reduce unemployment, which peaked in November at 11.4 per cent.

After a decade in power, Labor lacks credibility on economic issues, as illustrated by the cool response to Mr Keating's economic statement at the beginning of the campaign.

But many voters are also fearful of the opposition's tax proposals, raising hopes among Labor advisers that a well-thought-out negative campaign may yet enable the government to stave off defeat.

In line with this strategy, Mr Keating has dropped the statesmanlike style he adopted at the beginning of the campaign in favour a brawling onslaught on the proposed GST, which he describes as 'a monster'.

'This is not some small tax on the edge. The result will be that the Australian lifestyle as we know it will change forever,' he warned in a rowdy television debate with Mr John Hewson, the conservative leader.

Against this background, the upheaval in Ottawa was a heaven-sent opportunity for Labor, which Mr Keating boldly exploited by asserting that Mr Mulroney had been forced to quit by public anger about Canada's GST.

His explanation ignored the strains imposed on Canada by recession, high unemployment, the North American Free Trade Agreement and Mr Mulroney's failure to resolve Canada's constitutional problems.

It was also challenged by commentators with knowledge of Canada, who pointed out that the conservative proposal forms part of a wide-ranging package of tax reforms which make comparisons difficult.

Nevertheless, the anecdotal evidence of letters to newspapers and radio talkback programmes suggests that the Mulroney factor has contributed to a significant improvement in Labor support.

The latest batch of opinion polls, published yesterday, put Labor only 1-7 percentage points behind the conservatives, compared with 6-12 points a week earlier.

The apparent success of Labor's anti-GST campaign presents a dilemma for Mr Hewson, who has tried to make unemployment the main issue, but has been unable to persuade voters that Australia's economic problems can be solved by imposing a new tax.

The coalition's fight-back policy platform claims that a 15 per cent GST would stimulate exports and help reduce Australia's long-term dependence on foreign capital by encouraging domestic saving.

It also claims that most voters would be better off because the GST would be offset by personal tax cuts and the abolition of seven indirect taxes, including payroll tax, wholesale sales tax and petroleum excise tax.

But Mr Hewson knows that while a few thousand voters will read the platform, many more may respond to Mr Keating's simpler warning that the GST will increase the price of everything except basic foods by 15 per cent.

The result is likely to be a messy exchange of slogans in the last two weeks of the campaign as the government tries to exploit its advantage on the public relations battlefield where the election will be decided.

Tough campaigning comes naturally to Mr Keating, a master of the pithy phrase, whose insulting labels for Mr Hewson include 'Dr Doom' and 'Gordon Gekko' the fictional Hollywood businessman whose creed was 'Greed is Good'.

Mr Hewson attempted to win back the initiative yesterday with an attack on Labor's 'secret taxes', such as the variable rate sales tax which is added to the retail price of most consumer products.

He also showed that he is prepared to step up his own rhetoric in an attempt to put the prime minister on the defensive in the last phase of the campaign.

'He has got no plan, he has got no answers, all he has got left is a negative scare campaign,' Mr Hewson told supporters in Sydney.

Future for the banks, see International Company News

AU Australia P8651 Political Organizations P9121 Legislative Bodies P9311 Finance, Taxation, and Monetary Policy GOVT Government News P8651 P9121 P9311 The Financial Times London Page 4 790
China to act on power stations Publication 930302FT Processed by FT 930302 By REUTER HONG KONG

CHINA is ready to allow 100 per cent foreign ownership of power stations in an attempt to tackle energy shortages caused by explosive economic growth, a senior government official said, Reuter reports from Hong Kong.

Mr Zhou Heliang of the Ministry of Machinery and Electronics said China would need to invest at least Yuan 50bn (Pounds 6bn) at 1993 prices in power plants up to the year 2000.

Hong Kong companies have led the drive to build up China's power industry but have done so by forming joint ventures with local partners to build and run plants.

But Mr Zhou, who is director of the ministry's Department of Major Project Equipment, said: 'We welcome foreign businessmen to China to build wholly-owned power plants.'

In Hong Kong recently, he said power shortages were especially severe in Shanghai, Beijing and Guangzhou. China's economy grew 12.8 per cent last year, over twice the original target. Internal funds were insufficient to boost power output.

'Premier Li Peng has said part of the market should be reserved for foreign businessmen and they should be allowed to make profits,' Mr Zhou added.

But some analysts said foreign investors might well prefer to continue working in joint ventures because Chinese partners have the influence needed to cut through red tape.

Mr Allan Ng, of SG Warburg Securities, said Chinese infrastructure projects could be profitable. But foreign companies should not bypass local partners unless familiar with China.

Problems could arise if utility tariffs did not rise quickly enough. 'Setting up a wholly-owned subsidiary could be unfavourable while the government regulates tariffs.'

CN China, Asia P4911 Electric Services P9631 Regulation, Administration of Utilities RES Capital expenditures GOVT Government News CMMT Comment & Analysis P4911 P9631 The Financial Times London Page 4 307
House starts in Japan slow down Publication 930302FT Processed by FT 930302 By CHARLES LEADBEATER TOKYO

JAPANESE housing starts, which have been one of the few bright spots in an increasingly bleak economic landscape, may be slowing down, the country's construction ministry reported yesterday.

The ministry said housing starts appeared to be entering a slowdown phase after their strong growth in the second half of last year, with a 0.9 per cent rise in January compared with the same month last year.

The slowdown is likely to add to pressure for the government to include tax credits on housing in a special package to stimulate the economy.

The package is expected to be announced soon after the original budget for 1993 passes through parliament later this month.

For the past few months the strong growth of housing starts has been one of the few straws in the wind that economic policymakers have pointed to as evidence that the economy may not be heading for outright recession.

The marginal rise in housing starts in January followed a 5.4 per cent rise in December. The construction ministry expects that housing starts for February will be below the level of last year, particularly because fewer houses for rent are being built.

Generally, however, the construction industry is starting to feel the full force of the sharp increase in public works spending under the Y10,700bn (Pounds 63bn) emergency spending programme announced last year. Orders received by the country's top 50 contractors in January were 7.6 per cent up on the year before, the first annual increase for nine months. The rise was due to a 60 per cent jump in public sector demand.

The financial authorities hope this public spending will gradually feed its way through into higher production in industries such as steel and chemicals, which will in turn stimulate investment.

Consumer spending is likely to remain severely depressed however. Household spending fell by 0.9 per cent in real terms in December, while new vehicle registrations last month were 7.9 per cent down on last year, according to the Japan Automobile Dealers' Association.

Isuzu Motor, which is pulling out of passenger car production, reported a 27 per cent drop in registrations.

Japanese companies' profits are likely to suffer a continuing squeeze, according to official figures published yesterday which show that unit labour costs rose by 8.5 per cent in the final quarter of last year and by 4.7 per cent in January.

Productivity was 7.5 per cent down in January on the year before.

JP Japan, Asia P1522 Residential Construction, NEC P9531 Housing Programs P9611 Administration of General Economic Programs MKTS Production ECON National income ECON Industrial production STATS Statistics P1522 P9531 P9611 The Financial Times London Page 4 455
Algeria accused of torture Publication 930302FT Processed by FT 930302 By REUTER LONDON

Torture has become widespread and human rights violations have increased dramatically since Algeria was placed under a state of emergency a year ago, Amnesty International said yesterday, Reuter reports from London.

The human rights organisation said that since February 1992 more than 9,000 suspected Islamic activists had been held in internment camps in the desert without charge or trial; 1,000 were still held.

About 300 people have been killed by security forces. Amnesty said a significant number appeared to have been innocent bystanders deliberately killed.

DZ Algeria, Africa P9221 Police Protection P9223 Correctional Institutions TECH Standards GOVT Legal issues P9221 P9223 The Financial Times London Page 4 119
Interest rates to be cut in Australia Publication 930302FT Processed by FT 930302 By KEVIN BROWN

Australia's official interest rates are likely to be cut later this month following an unexpected improvement in the current account deficit and a rise in the value of the Australian dollar, Kevin Brown writes.

The Labor government and the conservative opposition parties both indicated that the stronger currency clears the way for a cut in rates, whatever the outcome of the federal election on March 13.

The Australian dollar closed just over one US cent higher at 70.27 cents after the government statistical agency said the current account deficit narrowed in January to ADollars 489m (Pounds 232m), seasonally adjusted. The January figure was the lowest monthly deficit for five years.

The agency also issued revised monthly figures for the first six months of the 1992-93 financial year which suggested that the full-year deficit will be below the Treasury forecast of ADollars 17bn.

The announcement sparked a bond market rally which cut the yield on the 10-year bond to 7.75 per cent from 7.98 per cent. The yield on three-month bills fell nine points to 5.41 per cent.

The last easing of monetary policy was in July, when the official cash rate was reduced by 75 basis points to 5.75 per cent.

AU Australia P9311 Finance, Taxation, and Monetary Policy GOVT Government News GOVT Government revenues P9311 The Financial Times London Page 4 237
India plans more currency liberalisation soon Publication 930302FT Processed by FT 930302 By STEFAN WAGSTYL and R C MURTHY NEW DELHI, BOMBAY

THE INDIAN government, which this week floated the rupee on foreign exchange markets, is planning further currency liberalisation 'in the near future', Mr Manmohan Singh, the finance minister, said yesterday.

Mr Singh told a press conference he was considering ending restrictions on the amounts of foreign exchange Indians could take out of the country for travel and other purposes covered by the current account.

'We want to go for full current account convertibility in the near future,' he said.

Mr Singh was commenting on the annual budget, which he presented on Saturday and which contained wide-ranging economic reforms, including the liberalisation of the rupee for trade-related transactions.

This involves the abolition of a system of dual exchange rates - a free-market rate (last week about Rs31 to the US dollar) and an official rate (Rs26 to the dollar).

By abolishing dual rates, Mr Singh hopes to boost business for exporters, who can now exchange all revenues at market rates. However, the government will have to pay more for imports.

The exchange markets were closed yesterday to give bankers time to consider the changes. When dealings start today, Finance Ministry officials expect the rupee to settle close to last week's free market rate.

Some foreign exchange dealers believe there could be wild swings in early trading as dealers try to find a level for the currency. However, the Reserve Bank of India, the central bank, has the right to intervene in the market and its trading capacity is very large in comparison with that of the commercial currency dealers. So it could dampen fluctuations it considered excessive.

Meanwhile, Indian stock prices dropped sharply yesterday, following a similarly precipitous decline on Saturday, as investors judged that the budget fell short of their expectations.

The chief disappointment was the finance minister's failure to cut corporation tax or capital gains tax.

The Bombay stock exchange's index of leading shares fell 81.22 to 2,571.18, after losing 160 on Saturday.

The decline reflects investors' belief that a cut in corporation tax would have been an immediate boost to profits. Industrialists, mostly having a longer-term horizon, have reacted much more positively to a budget which has brought big cuts in import duties and domestic sales taxes - moves which give scope for increasing margins.

After the budget, the Finance Ministry must now prepare for negotiations this month with the International Monetary Fund for a loan to help tide India over any unexpected balance-of-payments problems.

The IMF, which is monitoring India's reforms, has supported the country so far with a stand-by credit which expires at the end of the current financial year this month. For next year, India hopes to negotiate exceptional financing of about Dollars 2.5bn (Pounds 1.76bn).

The 1993-94 budget includes measures welcome to the IMF, such as customs duty cuts, a reduction in the fiscal deficit and financial sector reforms. But Mr Singh has not gone as far as the IMF would wish. The government's target for the fiscal deficit is 4.5 per cent of GDP, whereas the IMF would like it to be under 4 per cent.

Mr Singh made clear yesterday he had gone as far with liberalisation as political considerations allowed. 'The world has to accept that India is a functioning democracy,' he said.

IN India, Asia P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 4 582
Beijing quashes HK voting role Publication 930302FT Processed by FT 930302 By SIMON HOLBERTON HONG KONG

HONG KONG was yesterday given a glimpse of its future ruler's intentions when a senior Chinese official ruled out publicly a role for Hong Kong in determining arrangements for its 1994 and 1995 elections.

In so saying, Mr Lu Ping, director of the Hong Kong and Macao Affairs Office of the State Council (cabinet), made it plain that China's key concern with Governor Chris Patten's proposals for greater democracy was not only with their substance but the thought that the Legislative Council, the colony's lawmaking body, might have a part in determining them.

In an impromptu but carefully scripted meeting with Hong Kong's media in Beijing, Mr Lu said Britain would have to guarantee that Hong Kong's Legislative Council go along with any Sino-British deal.

'If not, then you don't need to talk. What use is it?' he said.

Mr Lu, who by most accounts is well informed on Hong Kong matters, must know that such a precondition to talks is one the British government and Mr Patten could not agree to and is, indeed, impossible to guarantee.

As Mr Douglas Hurd, Britain's foreign secretary, said in an interview published in Sunday's South China Morning Post: 'The constitutional position is clear: the Legislative Council is responsible for enacting the legislation for the 1994 and 1995 elections. We will stand by LegCo's decision.'

Mr Lu must also have known that Mr Hurd's position was firmly based in reality. In late 1991, LegCo threw out a deal that Britain and China had made on the Court of Final Appeal - the court which will become Hong Kong's highest appellate court after the colony reverts to Chinese sovereignty in 1997.

This issue still sits in limbo awaiting either renegotiation with China or a change of heart in LegCo.

Hong Kong has been in thrall to daily reports of 'talks about talks'. They have dominated local newspapers ever since Chinese officials leaked the news that the two sides were discussing the possibility of dialogue three weeks ago.

The stock market has taken heart ever since. Yesterday the blue-chip Hang Seng index ended 46.83 points, or 0.74 per cent, higher at 6,398.82 - a whisker short of its all-time high of 6,447 in November.

But as the 'talks about talks' drag on, China appears more and more to be manoeuvring. A month ago Mr Patten's Executive Council, his highest advisory body, signed off his proposed legislation without amendment. Only then did China hint that it might be prepared to accept Mr Patten's offer of talks made as far back as last October.

The past three weeks have been difficult for Mr Patten and his government and have cast him on the horns of a dilemma. There is widespread support in the community for Sino-British dialogue and Mr Patten does not want to be seen as the party who scuppered talks before they had a chance of starting. But the longer he delays the greater the risk he faces of losing the momentum that has built up behind his proposals and the support he has in the legislature and the community.

Last week, after his third delay in introducing the legislation into LegCo, an adviser said Mr Patten had to go 'an extra mile' to show Britain's sincerity in offering talks. But after Mr Lu's demarche yesterday, he may be advised that it was 'a mile too far'.

HK Hong Kong, Asia CN China, Asia GB United Kingdom, EC P9121 Legislative Bodies P9721 International Affairs GOVT Government News P9121 P9721 The Financial Times London Page 4 605
President's grumbling strikes a chord: Brazilians love it, but the business community and economists are wincing Publication 930302FT Processed by FT 930302 By CHRISTINA LAMB

PRESIDENT Itamar Franco has Brazil's business community and economists apoplectic, but his support among the public in general continues at levels that most government leaders can only envy. When Mr Franco visited the historic town of Olinda last week to watch the carnival celebrations he received standing ovations. The latest polls show popularity ratings of 75 per cent.

Mr Franco seems to have struck a chord among the Brazilian people, who feel long abused by profit-hungry businessmen and ministers with high-faluting economic theories that have caused a three-year recession, soaring unemployment and public debt, with no visible results in terms of reducing inflation.

For many, his down-to-earth honesty and daily gripes have come as a welcome change from the slick talk and glamorous ways of his predecessor Mr Fernando Collor, who was accused of lining his pockets while talking austerity, resulting in his impeachment.

Mr Franco, whose thick glasses give him a permanently bemused air, spends his spare time taking his ministers to the circus or watching children's movies like Home Alone 2. He apparently sees no contradiction in wanting low interest rates, low inflation, higher wages and increased public spending and believes that removing three zeroes from the cruzeiro - now 22,800 to the dollar - would weaken it.

What traders have called 'the Itamar effect' - off-the-cuff comments on the economy which send the markets plummeting - made its first appearance on the day he took office. Mr Franco said he did not care what the markets in Brazil or the bankers in London and New York thought, and that if foreign bankers wanted to negotiate with Brazil they should learn Portuguese.

He woke his first economy minister up early in the morning, furious that an increase in fuel prices had been authorised without his knowledge, and told the press he would take charge of all tariff increases - a situation that drove the head of Petrobras, the state oil company, to resign and pushed the company into red.

Discovering that the price of his mouth ulcer cream had gone up, he declared war on the pharmaceutical companies with a series of punitive measures scaring off any potential foreign investment.

Criticising the price of cars, he offered incentives to the manufacturers to relaunch the VW Beetle, causing dismay among richer Brazilians eager for the country to start producing up-to-date models. A staunch defender of the state, he suspended the privatisation programme and talked about renaming the currency the cruzeiro forte - 'strong cruzeiro' - as if a simple change in nomenclature could solve all Brazil's problems.

Each day a new comment has economists groaning. One trader said: 'Each morning I take a deep breath before I look at the headlines to see the latest from Itamar. He acts as if he is opposition rather than president.'

Most damaging of all have been his open attacks on his economy ministers. Mr Gustavo Krause, the first, quit in December after being subject to a series of criticisms from the president.

It is not clear how far Mr Franco's strategy is deliberate. Mr Pedro Motta Veiga, director of the Rio-based Foreign Trade Foundation, says: 'I think Itamar is just as much a marketing man as Collor.'

The marketing seems to work. Around the news-stands of Brazilian cities can generally be found clusters of ordinary people murmuring in agreement with the president's latest complaints, as if he himself bore no responsibility for the country's problems.

But it is not clear how much longer Mr Franco's honeymoon with the public will last. Yesterday the main Brazilian papers were preparing angry editorials over the departure of Mr Paulo Haddad from the Economy Ministry. His replacement, Mr Eliseu Rezende, may not allow himself to be made the scapegoat for inflation in the same way as his two predecessors.

BR Brazil, South America P9111 Executive Offices P9611 Administration of General Economic Programs PEOP Personnel News GOVT Government News P9111 P9611 The Financial Times London Page 3 684
Insurers brace for NY bomb damage claims Publication 930302FT Processed by FT 930302 By RICHARD LAPPER

INSURERS, including underwriters at Lloyd's of London, could face claims of hundreds of millions of dollars as a result of the weekend's bomb damage at the World Trade Centre in New York City.

However, with considerable uncertainty surrounding the circumstances of the claim, it is likely to be weeks before the industry can estimate the loss.

The New York Port Authority, which owns and operates the centre, has a complex series of insurance policies covering both property and liability claims, which is reinsured in the London insurance market.

London market sources last night doubted whether the policies would cover damage caused by terrorists. However, lawyers acting for the Lloyd's underwriters involved met Port Authority officials yesterday and last night spoke of a 'spirit of co-operation' between the parties.

It was 'too early to tell one way or the other about coverage,' said Mr Lawrence Pollack of New York lawyers LeBoeuff Lamb Leiby and MacRae, but the Port Authority had a long history of placing insurance with Lloyd's, which 'values this business dearly'.

If claims do prove to be valid, it is understood that damage to the building's fabric and interruption to business alone will generate substantial losses.

Last year UK insurers and their continental European reinsurers paid Pounds 800m on property, interruption and loss of rental policies after the bomb attack on the Commercial Union building in the City, a much smaller building than the Trade Centre.

In New York legal actions - both from the wounded and relatives of the five people killed in the attack, and potentially from commercial interests - are expected to swell the total size of the loss.

Many of those caught up in the bombing might sue for compensation for stress, possibly producing additional claims on other policies. 'This is one of the most litigious cities in the world. It is a can of worms,' commented one London broker.

On the Port Authority insurance programme, US companies would meet claims to a limit of Dollars 400m (Pounds 282m). Above this Lloyd's underwriters would meet all property claims up to an overall limit of Dollars 600m, through an excess of loss reinsurance programme placed by CE Heath, the brokers.

These property damage policies would also typically cover losses through business interruption.

Heath has also placed a reinsurance programme in London to provide Dollars 100m of cover for all liability claims above Dollars 4m. Below Dollars 4m, all claims will be paid from the Port Authority's insurance programme.

Additional claims could also come from the building's tenants, which make their own insurance arrangements to cover risks to property, business interruption and liabilities.

US United States of America P6331 Fire, Marine, and Casualty Insurance P6231 Security and Commodity Exchanges P9229 Public Order and Safety, NEC RES Facilities INS Insurance claims P6331 P6231 P9229 The Financial Times London Page 3 487
Caribbean economic hopes rest with trading partners: Growth in industrialised countries seen as vital Publication 930302FT Processed by FT 930302 By CANUTE JAMES KINGSTON

CARIBBEAN countries can expect to improve on last year's sluggish economic performance only if there is significant growth in the industrialised countries, particularly in North America and Europe, according to the Caribbean Development Bank.

In a review, the Barbados-based bank said the medium-term prospects were also clouded by fears among the region's producers and exporters about the impact of new trade blocs.

The bank said the weak economic performance of most of its borrowing members last year 'reflected prolonged recession in their major trading partners and tight fiscal and monetary policies as many countries sought to protect the balance of payments contracting aggregate demand'.

The CDB, which has resources of Dollars 800m (Pounds 563m), provides project loans for its 17 borrowing members. Its main contributors are the US, Canada, Britain, France and Germany.

The bank reported that while some economies, such as Barbados and Dominica, contracted last year, Guyana and Belize each grew by about 7 per cent. Guyana's economy was buoyed by improved performance in all sectors except bauxite, while there was expansion in agricultural output in Belize.

Other countries recorded growth below 4 per cent, the report said, with Jamaica's performance aided by stabilisation of interest rates and the slackening of inflation. Trinidad and Tobago suffered from a weak balance of payments.

'The generally weak regional performance has contributed to mounting unemployment, with several of the larger borrowing members reporting rates in excess of 20 per cent.'

Tourism, increasingly important to many Caribbean economies, grew by 2 per cent last year, with a decline in the North American market being compensated for by an increase in the flow of visitors from Europe.

The fall in volume from North America was caused mainly by recession in the US and Canadian economies, the bank said.

Favourable weather last year contributed to an increase in banana exports to Britain, the CDB reported. But it warned that despite the European Community's agreement on a new marketing arrangement to be implemented in July, 'the future of this industry in the region appears relatively uncertain'.

The region's sugar producers improved last year - with the exception of Barbados - with output growing by 38 per cent in Guyana.

The bank reported, however, that the industry had been adversely affected by a reduction in import quotas by the US.

Recession in the region's key markets dampened manufacturing output, while a weak aluminium market depressed demand for bauxite produced in Jamaica and Guyana. Falling oil prices and reduced production cut Trinidad and Tobago's earnings from its petroleum sector.

XF Caribbean P9611 Administration of General Economic Programs ECON Gross domestic product ECON Balance of trade STATS Statistics P9611 The Financial Times London Page 3 470
Second economy minister quits Franco team Publication 930302FT Processed by FT 930302 By CHRISTINA LAMB MINAS GERAIS

BRAZILIAN economic policy was thrown into further confusion yesterday with the resignation of Mr Paulo Haddad, the second economy minister in three months to quit the government of President Itamar Franco.

Mr Haddad resigned after the president refused to grant him more time to present an economic stabilisation plan and publicly criticised him for failing to reduce spiralling inflation. Mr Gustavo Loyola, the governor of the central bank, also resigned yesterday, along with the bank's entire directorate.

Within hours Mr Franco named Mr Eliseu Rezende, head of the state-owned electricity company Eletobras, as the new economy minister. Although not an economist, Mr Rezende has a long history of public-sector experience.

Mr Haddad's decision heightened fears that the government would resort to a shock economic plan, including a price freeze, in an attempt to bring down inflation from current levels of 30 per cent a month. But a presidential spokesman denied any economic shock plan was being considered.

Mr Antonio Delfim Neto, a congressman and former planning minister, predicted an immediate rise in inflation. 'I think Itamar wants the best for the country but just doesn't understand the significance of his actions,' he said.

He added: 'How can anyone take us seriously when we are now on our eighth economy minister since the start of civilian government in 1985? Instead of the peace and caution we need, we are changing ministers quicker than the movement of lovers through a motel.'

The news hit Brazil's financial markets as the country returned to work after week-long carnival celebrations. The main Sao Paulo bourse dropped 6 per cent, before recovering to 4.6 per cent down after Mr Rezende's nomination.

Mr Rezende, an engineer, was minister of transport during the military regime of 1979-85. A friend of Mr Franco, he is from the president's home state of Minas Gerais. He described himself yesterday as 'a soldier of Itamar'.

Given Mr Franco's past interference in economic matters and his preference for policies such as price freezes, Mr Rezende is expected to have considerable difficulty attracting good economists to his team.

Mr Haddad said he had resigned not because of his failure to reduce inflation but as a protest against political interference in the central bank. Mr Franco wants to leave the nomination of central bank directors up to Congress.

Mr Haddad's resignation coincided with the arrival in Braslia of a team from the International Monetary Fund to assess the economy prior to negotiations on a new accord, necessary for the closure of a deal with foreign creditors to restructure Brazil's Dollars 44bn (Pounds 30.9bn) commercial debt. The team is now expected to fly back to Washington.

BR Brazil, South America P9611 Administration of General Economic Programs PEOP Personnel News Haddad, P Economy Minister (Brazil) P9611 The Financial Times London Page 3 482
Key index hints at slower US growth Publication 930302FT Processed by FT 930302 By MICHAEL PROWSE WASHINGTON

A SLEW of figures yesterday pointed to a steady expansion of the US economy but probably at a slower pace than the 4.1 per cent annual rate of growth registered in the second half of last year.

The purchasing managers' index - a closely watched barometer of conditions in manufacturing industry - fell to 55.8 per cent last month from 58.0 in January. The dip mainly reflected a slower rate of growth of new orders, which had soared to a nine-year high in January.

However, the index remained well above the 50 per cent level which is the threshold for growth of the manufacturing sector.

Mr Robert Bretz, a spokesman for purchasing managers, brushed off the dip in the index. He noted several encouraging signs, including the second highest reading in five years of the association's production index.

The Commerce Department said personal incomes grew 0.5 per cent between December and January following a 1 per cent increase in the previous month. Personal consumption spending rose 0.3 per cent against a 0.8 per cent increase in December. After allowing for inflation, however, real consumer spending fell 0.1 per cent in January, a reaction to pre-Christmas spending.

However, officials said December incomes had been boosted by the bringing forward of bonus payments in the securities industry, farm subsidies and social security benefit payments. Excluding special factors, incomes grew by only 0.3 per cent in December, less than in January.

The department also reported a 1.3 per cent decline in construction spending between December and January, the first drop in five months.

Separately the National Association of Realtors reported that sales of existing homes fell 6.4 per cent between December and January, after seasonal adjustment, against a revised 4.7 per cent gain in the previous month. However, on an annual comparison sales were up nearly 15 per cent in January.

US United States of America P9611 Administration of General Economic Programs ECON National income ECON Industrial production STATS Statistics P9611 The Financial Times London Page 3 350
Clinton moves on community service: Congress urged to act quickly on pilot scheme Publication 930302FT Processed by FT 930302 By GEORGE GRAHAM WASHINGTON

PRESIDENT Bill Clinton yesterday unveiled a pilot scheme he hopes to develop into a far-reaching national service programme with the impact of the GI bill in the 1950s or the Peace Corps in the 1960s.

Mr Clinton asked Congress to act quickly on a summer initiative designed to create a core group of about 1,000 leaders to spur community service programmes around the country.

The pilot programme is intended to develop into a broader scheme to provide loans for university education, to be paid off by community service, which the president hopes will involve 100,000 people by 1997. He proposes that participating graduates would undertake either one or two years of direct community service, or repay the loans as a percentage of the graduate's subsequent income.

The president's promise that 'in a Clinton administration everyone will be able to get a college loan as long as they're willing to give something back to their country in return' was one of his most productive themes during last year's presidential campaign.

With tuition costs at US universities rising by an average of more than 10 per cent a year throughout the 1980s, the cost of higher education has become a particularly daunting prospect for the middle-income families that Mr Clinton targeted during the campaign.

Budget realities, however, have forced the new president to scale back some of his ideas. The programme is now budgeted at Dollars 98m (Pounds 69m) next year, climbing to Dollars 3.4bn in 1998, as part of a broader 'lifelong learning' spending package totalling Dollars 37.8bn in 1994-97, compared with Dollars 63.3bn spent over four years in Mr Clinton's campaign manifesto.

The president said in an article in the New York Times on Sunday that his national service programme would concentrate on providing young people to work in schools, immunisation clinics, police forces and environmental projects.

He argued, however, that the programme could have a wider impact on a whole generation, as the Peace Corps created by President John Kennedy had for his own generation.

'At its peak, the Peace Corps enrolled only 16,000 volunteers yet it changed the way a generation of Americans look at themselves and the world,' Mr Clinton wrote.

He was also due to present his national service scheme last night on a special programme on MTV, the music video channel which last year became the favourite means of targeting younger voters for both Mr Clinton and his opponent, former President George Bush.

US United States of America P9441 Administration of Social and Manpower Programs GOVT Government News P9441 The Financial Times London Page 3 452
Protests grow against Chamorro Publication 930302FT Processed by FT 930302 By REUTER MANAGUA

NICARAGUA'S President Violeta Chamorro is facing mounting protests against her government's links with the leftist Sandinistas, her predecessors in office, Reuter reports from Managua.

On Sunday about 30,000 protesters packed Managua's main plaza, many shouting 'Out] Out] Out]' at the mention of the president's name. The crowds arrived by bus from the west of the country and from marches held in the capital.

The speakers, cheered on by the crowd, accused Mrs Chamorro of betraying promises from the 1990 campaign, when she headed the 14 parties that formed the National Opposition Union to defeat the Sandinistas.

No incidents were reported at the rally, organised by right-wing politicians from the same coalition that elected Mrs Chamorro three years ago, but one leader threatened to call for widespread civil disobedience against the government.

A series of speakers urged Mrs Chamorro to dismiss her chief aide, Mr Antonio Lacayo, and General Humberto Ortega, the Sandinista who stayed on as chief of the defence forces.

A virulent attack on Mr Ortega by US Senator Jesse Helms was read out at the demonstration.

Mr Helms, a North Carolina Republican, has helped delay US aid to Nicaragua on the grounds that the Sandinistas wield too much power. The Sandinistas won 42 per cent of the vote in the 1990 elections.

Mrs Chamorro has rolled back much of the Sandinistas' revolutionary programme, established a largely free-market economy and widened the bounds for political dis-sent.

NI Nicaragua, Central America P91 Executive, Legislative and General Government PEOP Personnel News GOVT Government News Chamorro, V President (Nicaragua) P91 The Financial Times London Page 3 277
Campbell sets pace in Canada succession race: The forceful defence minister widely tipped to replace Brian Mulroney as prime minister later this year Publication 930302FT Processed by FT 930302 By BERNARD SIMON

IT HAS taken less than two months for Ms Kim Campbell to make her mark as Canada's defence minister. Foreign diplomats have already detected a more forceful articulation of defence policy, ranging from a blunt affirmation of Ottawa's contentious order for 50 European-built helicopters, to the deployment of Canadian troops on a risky new mission in Bosnia-Hercegovina.

The diplomats have also noticed that, since Ms Campbell took over the portfolio in January, statements which used to be made by the chief of defence staff now come from the minister's office.

Such evidence of decisiveness and ambition help explain why Ms Campbell - whose real first name is Avril - has quickly emerged as the front-runner to succeed Mr Brian Mulroney as Canada's 19th prime minister.

Mr Mulroney announced his resignation last week but, as is normal in Canada, will remain in office until his party holds a convention to choose a new leader. The convention will probably be held in June, giving the new leader no more than five months to prepare for the general election, which must be called by November.

No one has yet stepped forward as an official candidate. For the moment all those who may be in the running are taking the lie of the land, putting together alliances and organisations, and scraping together the substantial funds required for a leadership campaign.

Besides Ms Campbell, the candidates are expected to include Mr Perrin Beatty, communications minister, and Mr Jean Charest, who holds the environment portfolio. Mr Michael Wilson, the veteran trade minister, may also throw his hat into the ring.

Each of these men appears, however, to have a weak spot.

Mr Beatty, who is in his early 40s, has been in parliament for 21 years but is widely regarded as lacking substance. Mr Charest, 34, is bright, personable and bilingual. But convention delegates, many of them from western Canada, are unlikely to favour one Quebecker handing over the leadership to another. Mr Charest will probably emerge from the convention as a man to watch in the future.

Mr Wilson's seniority is offset by his plodding manner, his poor French and his identification with the most unpopular policies of the Mulroney era, such as free trade and the goods and services sales tax.

Early opinion polls indicate that, of all the prospective candidates, Ms Campbell has the best chance of narrowing the gap which has opened between the Conservatives and the opposition Liberals.

Before last week, the Liberals could count on the backing of about 45 per cent of decided voters, against less than 19 per cent for the Conservatives. But according to a Gallup poll taken shortly after Mr Mulroney's announcement, the two parties would be almost neck-and-neck with Ms Campbell at the helm. Mr Wilson was the second most popular choice.

Ms Campbell, who turns 46 next week, has the rare combination in Canadian politics of being a woman from British Columbia who speaks fluent French. She gained a reputation during three years as justice minister as an intelligent, ambitious and forthright politician with a knack for pushing legislation through parliament. 'She knows what she wants, but she's able to work in a team and to convince people that she has the right solution,' says Mrs Paule Gauthier, president of the Canadian Bar Association.

The UK government will have an opportunity to size up Ms Campbell when she visits London later this month for talks with Mr Malcolm Rifkind, her British counterpart.

Political observers say Ms Campbell's biggest handicap is an intellectual aloofness. She studied Soviet government at the London School of Economics (and speaks passable Russian), lectured in political science at the University of British Columbia and, in her mid-30s, qualified as a lawyer. Her hobbies include painting and playing the cello.

Opinions are divided on whether Ms Campbell can repeat Mr Mulroney's success in persuading Quebeckers to vote Conservative; she is not well known in the francophone province. The Tories have yet to cement the Quebec political organisation crucial to victories in 1984 and 1988.

One favourite convention scenario is that Ms Campbell will emerge as the winner, but with a Quebec 'lieutenant' at her side, perhaps Mr Charest or Mr Benoit Bouchard, the popular health and welfare minister. But with three months to go before delegates gather, no firm bets are being placed.

CA Canada P9711 National Security PEOP Personnel News Campbell, K Defence Minister (Canada) P9711 The Financial Times London Page 3 774
New York Police Commissioner Kelly outside the World Trade Centre towers Publication 930302FT Processed by FT 930302

New York Police Commissioner Raymond Kelly in front of the World Trade Centre towers, hit by a bomb last week that left five dead. Police officers have found traces of nitrate, an ingredient in dynamite, at the blast site but investigation is being hampered by the instability of the twisted rubble beneath the towers. However, authorities say they have a number of leads.

US United States of America P9229 Public Order and Safety, NEC P6231 Security and Commodity Exchanges RES Facilities P9229 P6231 The Financial Times London Page 3 105
Carmakers in EC tax plea Publication 930302FT Processed by FT 930302 By ANDREW HILL BRUSSELS

The European Commission should take 'political action' to harmonise car taxes in EC member states, according to European carmakers, writes Andrew Hill in Brussels.

ACEA, the European automobile manufacturers' association, says wide disparities in car tax 'constitute the single most important cause of car price differences in the EC, maintaining low pre-tax levels in high taxation countries'.

QR European Economic Community (EC) P3711 Motor Vehicles and Car Bodies P9621 Regulation, Administration of Transportation GOVT Taxes P3711 P9621 The Financial Times London Page 2 97
Fabius appeal starts campaign Publication 930302FT Processed by FT 930302 By DAVID BUCHAN PARIS

The campaign for France's two rounds of parliamentary elections on March 21 and 28 officially opened yesterday, with more than 5,000 candidates contesting 577 seats, reflecting the rise of fringe parties and incomplete electoral pacts between certain mainstream parties, writes David Buchan in Paris.

Seeking to minimise impending defeat, Mr Laurent Fabius, leader of the ruling Socialists, said it was high time for the left 'to wake up' and for the Socialists and environmentalists to get together to stem the 'tidal wave' forecast for the centre-right opposition.

FR France, EC P8651 Political Organizations P91 Executive, Legislative and General Government GOVT Government News P8651 P91 The Financial Times London Page 2 123
Kinkel points finger over UN Publication 930302FT Processed by FT 930302 By Our Foreign Staff

Mr Klaus Kinkel, the German foreign minister, said yesterday that Britain and France remained opposed to German membership of the United Nations Security Council, Our Foreign Staff writes.

In a statement likely to fuel controversy within the EC, and for Chancellor Helmut Kohl within his own government, he also said it would be 'unrealistic' to imagine the EC taking a seat on behalf of Europe in the council. 'The United States says Germany should be on the Security Council, but there are still two countries that are opposed - Britain and France,' Mr Kinkel said at a privately sponsored conference on US-German relations, according to Reuters news agency.

DE Germany, EC P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 2 138
Germany to revise policy on energy Publication 930302FT Processed by FT 930302 By QUENTIN PEEL BONN

THE German government and opposition agreed yesterday to set up an all-party conference to negotiate a long-term energy policy, including a decision on the future of nuclear energy in power generation.

The deadline for agreement has been set for the end of the year, before the country faces a whole series of local, state and national elections in 1994.

However, there remain widespread doubts in the nuclear industry over whether the political parties, ranging from the conservative Bavaria-based Christian Social Union to the anti-nuclear Greens, will be able to agree on any consensus. Apart from the future of nuclear energy, the conference will be asked to propose a solution for the direct disposal or reprocessing of nuclear waste, on which the political parties are deeply divided.

That question is vital to the long-term future of Britain's Thorp nuclear waste reprocessing plant built by British Nuclear Fuels (BNFL) at Sellafield, with which the German utilities have a 10-year reprocessing contract.

The all-party talks, expanded to include representatives of the energy producers and consumers, trade unions and environmental groups, will also make recommendations on issues such as energy conservation and renewable energy.

DE Germany, EC P9611 Administration of General Economic Programs P4911 Electric Services P4953 Refuse Systems P2819 Industrial Inorganic Chemicals, NEC GOVT Government News P9611 P4911 P4953 P2819 The Financial Times London Page 2 238
Serb push in area around US air-drop Publication 930302FT Processed by FT 930302 By LAURA SILBER and REUTER ZVORNIK

SERB forces were yesterday close to seizing Cerska, the Moslem enclave in eastern Bosnia which United Nations officials said was the target for the first US air-drop.

Reports from Cerska said there was no evidence that any of the 21 tonnes of food and medicine dropped by US air force C-130 aircraft were recovered either by the 6,000 Moslems trapped in the area or by any of the other parties to the conclict.

However, Mr Les Aspin US defence secretary, said the operation had been successful, with many parcels landing in clear areas near Cerska. He added it was believed the other parcels had landed in or near the drop zone.

Mr Aspin said the information was provided by national technical means, which usually refers to aircraft or satellite photographs.

In Germany US troops prepared for a second air-drop but refused to say when it would take place.

An amateur radio operator, Cerska's only link with the outside world, said an object which could have been an aid pallet had been spotted behind Serbian lines.

He suggested that the US aircraft might have mistaken Moslem villages set alight during recent fighting for bonfires in the enclave.

Serb fighters at the weekend seized several villages in the Moslem area. Artillery shells yesterday fell in the Drina valley as Serb forces fought for control of more territory around Cerska. Western diplomats said the outgunned Bosnia government forces in Cerska were unlikely to hold out much longer.

The Belgrade office of the UN High Commissioner for Refugees last night sent two officials to the Zvornik area, just 10 miles away from Cerska, to investigate reports of a likely outflow of Moslem refugees.

Local Bosnian commanders said that there were 1,500 wounded in Cerska and that Serb fighters had set 10 villages on fire. Bosnian Croat forces said yesterday they were enforcing a blockade of supply convoys for their estranged Moslem allies despite Bosnian government reports that it had been lifted, Reuter reports from Zvornik. The Bosnian Croat militia force said it was halting about half of the Moslem forces' traffic between the Croatian border and central Bosnia.

BA Bosnia-Hercegovina, East Europe P9711 National Security P9721 International Affairs GOVT Government News MKTS Distribution P9711 P9721 The Financial Times London Page 2 395
Rome moves to restore political confidence Publication 930302FT Processed by FT 930302 By Our Foreign Staff

THE Italian justice minister announced an initiative late last night aimed at restoring confidence in the country's political system, which has been battered by a widening corruption scandal.

Mr Giovanni Conso said after a cabinet meeting that the government would on Friday unveil measures to 'restore legality' and ensure swift and simpler justice for corruption suspects. For many, this would apparently mean avoiding jail.

Mr Conso said: 'We all feel how grave the situation is and there is a deep yearning for renewal. You can feel it in the air. We are surrounded by it. . . The country wants to turn over a new page and honest politicians must give it a chance. We must clean up every sector of our community from these worms which have undermined our democracy.'

The government package will be reviewed at a cabinet meeting on Thursday. Rome's apparent intention is to ensure that public life is not paralysed by the scandals and to put some of the most common crimes beyond the reach of prosecutors. A growing number of senior political and business leaders have been implicated in corruption.

Mr Conso said those who confessed and immediately paid back ill-gotten gains could request suspended jail sentences, he said. Other punishments, however, would also await them.

Mr Conso said measures being discussed included barring politicians convicted of corruption from holding elected office. Businessmen found to have paid bribes would face unspecified 'commercial sanctions' and public administrators who took them would be excluded from jobs in the public service.

The minister said that a new law on political party funding was needed but that the government wanted parliament to take the lead.

Earlier yesterday, a former official of the Italian Communist party (PCI) was arrested by Milan magistrates on suspicion of operating a Swiss bank account to receive pay-offs from contracts in the power industry.

Mr Primo Greganti, an official in the Turin branch of the PCI during 1970-87, voluntarily appeared for questioning in Milan yesterday and was later arrested for alleged corruption and illicit financing of the party. It is the first time Italian companies have been linked to alleged payments to the PCI made illicitly outside the country.

IT Italy, EC P8651 Political Organizations P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Government News P8651 P9229 The Financial Times London Page 2 406
Bosnia peace talks resume at the UN Publication 930302FT Processed by FT 930302 By MICHAEL LITTLEJOHNS NEW YORK

A FURTHER round of Balkan peace talks opened at the United Nations yesterday, with UN and EC mediators due to hold separate meetings with the three main parties.

A spokesman for Mr Cyrus Vance and Lord Owen voiced optimism that all parties to the conflict would be brought together before the end of a 'crucial' week.

Mr Radovan Karadzic, the Bosnian Serb leader who came to New York on Sunday ignoring the threat of a human rights lawsuit, was the first to call on the mediators. Mr Mate Boban, the Bosnian Croats' leader, made an appointment and Bosnian president Alija Izetbegovic sent a message he was leaving Washington for New York and would be available for a meeting last night. UN officials were elated the talks were under way after more than three weeks.

Mr Fred Eckhard, spokesman for the mediators, said they 'continue to feel they have the three parties close to agreement, and with sufficient leverage applied by governments day to day, it could be wrapped up'. If the parties left New York later this week without agreement it could be hard getting them together again.

BA Bosnia-Hercegovina, East Europe P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 2 222
E Europe expects more from EBRD Publication 930302FT Processed by FT 930302 By RICHARD WATERS

THE European Bank for Reconstruction and Development, set up two years ago to promote economic development in eastern Europe, ploughed only Ecu200m (Pounds 165m) into the region during 1992, though the bank's lending is expected to increase sharply this year.

Agreement was reached during 1992 to invest Ecu1.2bn in projects in eastern Europe, and commitments of a further Ecu2.6bn are expected this year, the EBRD revealed as it announced its annual results.

The slower disbursement of cash reflected the length of time taken to implement projects, said Mr Anders Ljungh, vice-president for finance.

Commitments made so far show a bias towards economically and politically more stable states such as Poland and Hungary, rather than the former Soviet Union.

Poland and Hungary account for 44 of the 71 projects approved by the EBRD so far. The Russian Federation, by comparison, accounts for just eight, with less capital committed than to Romania and the Czech and Slovak republics.

'We've done less than we should (in the former Soviet Union), particularly as it accounts for over half of our operations,' said Mr Ljungh.

A number of large projects are currently under discussion in the former Soviet Union, including energy projects requiring capital of Dollars 5.5bn in all. The bank has been presented with 'fewer good projects than we would have liked', said Mr Ljungh.

European Bank for Reconstruction and Development XL East Europe P6011 Federal Reserve Banks P9611 Administration of General Economic Programs RES Capital expenditures ECON Balance of payments P6011 P9611 The Financial Times London Page 2 270
Gonzalez faces call for early poll: Spain's economic woes herald unofficial start of election campaign Publication 930302FT Processed by FT 930302 By PETER BRUCE MADRID

THE Spanish parliament is to hold an emergency debate on unemployment today.

It will pit Prime Minister Felipe Gonzalez against his increasingly confident conservative opponent, Mr Jose Maria Aznar, in what Spaniards assume will be the unofficial start to a long 1993 election campaign.

With polls showing Mr Aznar's Partido Popular (PP) rapidly gaining on Mr Gonzalez's Socialists, unemployment at a record 21.06 per cent and business failures at historic highs, today's debate promises to be one of the most acrimonious in the 10 years that the Socialists have held power.

Mr Gonzalez has to hold an election by the end of November and is anxious to delay for as long as possible.

As a first effort to put a brake on his party's declining popularity, he will today put forward a Pta300bn (Pounds 1.8bn) emergency economic package, agreed in cabinet last Friday.

It aims to accelerate infrastructure spending, ease small business taxes and increase the statutory length of temporary job contracts to slow unemployment growth.

The European Community will fund 80 per cent of the package, Madrid hopes, and thus limit its impact on the tight 1993 budget.

But this is the first time opponents such as Mr Aznar and the leader of the communist Izquierda Unida (IU), Mr Julio Anguita, find themselves approaching an election with the economy in recession. These men believe that they are about to end Socialist party dominance in Spain, and will demand early elections.

Mr Gonzalez is unlikely to do them that favour, but pressures on the government are immense.

Unemployment is expected to continue to rise until the summer and, with both the business community and the opposition calling for Spain to float the peseta, cut interest rates and raise spending, the currency may see a turbulent period in the markets. Meanwhile, industrial production figures published yesterday showing a 5.6 per cent fall in December 1992 against the same month in 1991, and a 1.7 per cent fall in overall output in 1992, are likely to sharpen calls for drastic action to revive the economy.

Despite persistent rumours, however, it is most unlikely that the government would unilaterally take the peseta out of the exchange rate mechanism.

Signs that German interest rates may soften soon will probably make it easier for the Spanish to cut rates.

ES Spain, EC P9441 Administration of Social and Manpower Programs GOVT Government News ECON Employment & unemployment P9441 The Financial Times London Page 2 432
Ukraine-Russia tensions hinder oil deal Publication 930302FT Processed by FT 930302 By CHRYSTIA FREELAND and JOHN LLOYD SURGUT, MOSCOW

REPRESENTATIVES from all of the former Soviet republics yesterday began a two-day meeting in the western Siberian oil city of Surgut, in an effort to revive Russia's collapsing oil industry through co-operation.

However, the increasingly tough line being taken by Russia and Ukraine, the two most powerful republics, could make a lasting deal elusive.

Further evidence of tension between the two emerged yesterday, with Ukraine rejecting the call by Mr Boris Yeltsin, the Russian president, for Russia to be given a free hand by the international community, especially the United Nations, to 'guarantee peace and stability' throughout the former territory of the Soviet Union.

Mr Mikola Mikhailchenko, chief political adviser to Mr Leonid Kravchuk, Ukraine's president, said: 'Ukraine will never recognise that Ukrainian territory is a sphere of special Russian interest . . . we want relations of equality.'

In addition, Mr Leonid Kuchma, the Ukrainian premier, accused Russia of imposing an economic blockade on Ukraine. He saw no alternative but to shift trade between the neighbours to world prices.

'No matter how much we try to negotiate with Russia over prices, we have realised that we cannot escape world prices. But we, in turn, will insist on world prices,' the prime minister said.

Ukraine has threatened to charge transit fees at international rates for exporting the Russian gas which goes through Ukraine's pipelines. This amounts to 93 per cent of Russia's total foreign sales.

This was in response to Russia's threat to cut off all gas supplies over Ukraine's gas debt to Russia. Moscow told Ukraine earlier this year that it would charge world prices for gas from February 1.

By contrast, republics such as Belarus and Kazakhstan, which have retained close political links with Russia, appear confident in restoring economic ties as well. However, political rebels such as Georgia said they were in the same position as Ukraine.

'We must speak of an economic blockade,' said Mr Tengiz Sigua, the Georgian premier. 'Russia is not supplying us with anything at all.'

The comments of the leaders of the former Soviet states appear to indicate that Russia, in the grip of continuing economic crisis, is now determined overtly to reward its friends and punish those with which it has strained relations.

Russia expects to produce between 340m-347m tonnes of oil this year, down from 395m tonnes in 1992. The Surgut meeting represents an effort to re-establish these links in the oil and gas sector by creating a 'mini-Opec' to co-ordinate investment and production.

Mr Yuri Shafranik, Russian fuel and energy minister, warned that unless the republics co-operated, oil production might be insufficient by 1995 to meet even Russia's own requirements. Mr Shafranik hoped the non-Russia republics would contribute up to Rbs700bn to the Siberian oil industry in exchange for a guaranteed supply of cheap fuel.

XV Commonwealth of Independent States P1311 Crude Petroleum and Natural Gas P9611 Administration of General Economic Programs P9721 International Affairs COMP Strategic links GOVT Government News P1311 P9611 P9721 The Financial Times London Page 2 519
Collapse of bribery edifice traps corporate Italy: As more construction company executives are caught in the investigation net, Robert Graham examines the impact Publication 930302FT Processed by FT 930302 By ROBERT GRAHAM

A QUICK glance down the list of businessmen involved in Italy's ever expanding corruption scandal reveals a common thread: almost without exception they are connected with the construction business.

This has been underscored by the latest batch of arrests that include Mr Giampiero Pesenti, the Italian cement baron, and Mr Francesco Paolo Mattioli, chief financial officer of Fiat, in his capacity as president of the group's civil engineering arm, Cogefar-Impresit.

At least nine of the leading 15 construction groups in Italy are involved in the inquiries relating to illicit funding of political parties. Apart from Cogefar-Impresit, the country's largest private group, these include Ferruzzi's Calcestruzzi, Mr Salvatore Ligresti's Grassetto, and the family groups Lodigiani and Belelli.

Nor is it a coincidence that Mr Giovanni Prandini, a former Christian Democrat minister of public works, has been caught in the corruption investigations. Tendering for public works contracts, worth more than L30,000bn (Pounds 13.7bn) a year, lies at the heart of the magistrates' countrywide investigations. The politicians have allegedly been taking kick-backs in return for either rigged contract bids or providing favoured treatment to the bidding consortia.

But as more executives and owners are caught in the magistrates' investigative net, the impact is increasingly being felt on company decision-making processes, their balance sheets, and company reputations. 'We are particularly concerned about the impact this will have on the reputation of Italian contractors abroad,' commented a spokesman for Ance, the Italian construction association.

In the case of state-run entities where management has been arrested or placed under investigation, the decision-making process has been especially slowed. At Anas, the state roads authority which accounts for 10 per cent of the annual value of public works contracts, the entire board has been decapitated by a corruption investigation. Another victim of closer judicial scrutiny is the prospective L30,000bn worth of contracts in prospect for the development of a high-speed rail network which was to be the mainstay for the contractors in the mid-1990s.

But the main worry of company owners is the paralysis in public administration caused by the scandals. According to one building company proprietor: 'No decisions are being taken: everyone - from the local councils, through to the regional councils and ministries - is terrified of putting their signature to a document for fear of being accused of corruption.'

If it is not a case of bureaucrats being afraid, public works contracts are being delayed because of the collapse of city administrations. Currently Italy's four main cities - Milan, Naples, Rome and Turin - have no councils, thanks to the scandals.

Mr Francesco Merloni, the public works minister, readily admits that he himself has blocked a large number of contracts, especially road works, because the ministry he inherited eight months ago had awarded so many contracts by private tender. Almost two-thirds of all public works contracts, including those in transport, during the 1980s were awarded by private tender or by methods which ignored established guidelines, according to a recent report by Censis, the research institute.

The minister has few illusions about the extent to which the contracting business was subject to abuse. Bidding was uncompetitive; cartels among different contractors were common, and contracts were frequently awarded to shell companies. It was also difficult for the government to keep tabs on the companies. Some 15,000 had the formal qualifications to bid for contracts and 12,000 public bodies could award construction contracts.

Officials estimate that the real value of contracts was inflated by at least 15 per cent to accommodate 'commissions' and extra profits. Another tactic was to halt work in mid-contract to renegotiate the price. These practices help to explain why Italy spends 4 per cent of GDP - close to the EC average - on infrastructure yet has comparatively poor networks of modern roads, railways, urban transit systems and ports.

The paralysis in bureaucratic procedures affects not only public works contracts. Ance maintains the civil service's fear of being investigated for corruption is also holding up private sector activity, which accounts for 52 per cent of the construction business.

The problems arising from corruption scandals are compounded for the construction business by the state of the economy. The economy moved into recession in the second half of 1992 and some 100,000 jobs were lost. Since last July the government of Mr Giuliano Amato has cut back pubic spending to hold down the public sector deficit. In the last half of 1992, the value of public works contracts put out to tender dropped 27 per cent in real terms compared with the same period the previous year. The 1993 budget has cut out L11,200bn of expenditure, a reduction of almost 30 per cent.

The drop in spending has been accompanied by a corresponding rise in unpaid contracting debts.

Contractors are currently owed a staggering L11,000bn which is being covered by short-term finance at punitive rates of 20 per cent. One positive development of the scandals has been the drafting of a new law governing tenders, subjecting them to greater transparency and scrutiny. Mr Merloni also believes Italy will in future be in a better position to comply with EC regulations on tenders and bidding. This in turn should guarantee greater competitiveness, both between domestic companies and with outsiders.

Increased competition, combined with the bleak economic climate, is expected to encourage more mergers and force many small operators to disappear. The problems produced by the corruption scandal are also obliging conglomerates like Fiat or Ferruzzi to question whether they need to maintain a presence in the construction business.

Fiat's Cogefar-Impresit is the largest private construction group, itself the product of a series of mergers, but it is not central to the core business of the automotive sector.

Mr Silvio Berlusconi, the media magnate, recently claimed he had pulled out of the construction business more than a decade ago because it was too wrapped up with politics at all levels.

IT Italy, EC P1611 Highway and Street Construction P162 Heavy Construction, Ex Highway P9532 Urban and Community Development P8711 Engineering Services MKTS Contracts GOVT Legal issues P1611 P162 P9532 P8711 The Financial Times London Page 2 1049
Germany seeks energy pact Publication 930302FT Processed by FT 930302 By QUENTIN PEEL BONN

THE German government and opposition agreed yesterday to set up an all-party conference to negotiate a long-term energy policy, including a decision on the future of nuclear energy in power generation.

The deadline for agreement has been set for the end of the year, before the country faces a whole series of local, state and national elections in 1994.

However there remain widespread doubts in the nuclear industry over whether the political parties, ranging from the conservative Bavaria-based Christian Social Union to the anti-nuclear Greens, will be able to agree on any consensus.

Apart from the future of nuclear energy, the conference will be asked to propose a solution for the direct disposal or reprocessing of nuclear waste, on which the political parties are deeply divided.

That question is vital to the long-term future of Britain's Thorp nuclear waste reprocessing plant built by British Nuclear Fuels (BNFL) at Sellafield, with which the German utilities have a 10-year reprocessing contract.

The all-party talks, expanded to include representatives of the energy producers and consumers, trade unions and environmental groups, will also make recommendations on energy conservation, use of renewable energy, plans for the future use of fossil fuels, and for a common European energy policy.

Pressure for such an 'energy consensus' has come from Germany's leading power utilities, including RWE, Veba and Bayernwerk, which have been demanding clarity from the government and opposition over the future of nuclear energy, which now provides about 34 per cent of Germany's electricity supply.

DE Germany, EC P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 2 277
Further Gibraltar talks planned Publication 930302FT Processed by FT 930302 By TOM BURNS MADRID

THE first Anglo-Spanish ministerial meeting in two years on the future status of Gibraltar ended yesterday without significant progress.

Mr Douglas Hurd, the British foreign secretary said 'difficulties remain but we have charted a possible way forward.' Mr Javier Solana, Spain's foreign minister, said: 'We have taken a small step but one in the right direction.'

Officials from the two countries are to hold further talks in the coming months in the hope of arranging another ministerial meeting before the end of the year. Summing up yesterday's events, Mr Hurd said: 'We have been talking essentially about procedures for possible talks about matters of substance in the future.'

At the centre of the Gibraltar dispute lies Spain's claim of sovereignty over the three-mile long peninsula that lies at its southern tip, and Britain's commitment to stand by the enduring opposition among the colony's 20,000 inhabitants to any deal with Spain.

Mr Solana restated his policy mix of 'persuasion and pressure' which aims at waking Gibraltarians up to the realisation that 'their best interests lie in the normalisation of the situation' - this being Madrid's code for progress towards returning the Rock to Spain.

GB United Kingdom, EC ES Spain, EC GI Gibraltar, West Europe P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 2 230
Fabius call to stem 'tidal wave' vote Publication 930302FT Processed by FT 930302 By DAVID BUCHAN PARIS

THE campaign for France's two rounds of parliamentary elections on March 21 and 28 officially opened yesterday, with more than 5,000 candidates contesting 577 seats, reflecting the rise of fringe parties and incomplete electoral pacts between certain mainstream parties, writes David Buchan in Paris.

Seeking to minimise impending defeat, Mr Laurent Fabius, leader of the ruling Socialists, said it was high time for the left 'to wake up' and for the Socialists and environmentalists to get together to stem the 'tidal wave' forecast for the centre-right opposition.

A CSA poll published yesterday predicted that the RPR-UDF opposition parties would get 38.5 per cent of the popular vote, translating into an enormous majority of 424-436 seats out of the total of 555 for mainland France. It put support for the Socialists and their minor allies at 20 per cent, giving them 91-98 seats, and backing for the two environmentalist parties at 17 per cent, translating into only 2-8 seats.

FR France, EC P8651 Political Organizations P91 Executive, Legislative and General Government GOVT Government News P8651 P91 The Financial Times London Page 2 197
EC urged to bring car taxes into line Publication 930302FT Processed by FT 930302 By ANDREW HILL BRUSSELS

THE European Commission should take 'political action' to harmonise car taxes in EC member states, according to European carmakers, writes Andrew Hill in Brussels.

ACEA, the European automobile manufacturers' association, says wide disparities in car tax 'constitute the single most important cause of car price differences in the EC, maintaining low pre-tax levels in high taxation countries'.

An ACEA study of car taxes across Europe reveals that the overall level of tax on an average 2-litre car in the EC varies from 15 per cent in Luxembourg and Germany to 213 per cent in Denmark. 'Apart from being contrary to the philosophy of the single market, these discrepancies obviously cause distortion in the cross-border movement of new motor vehicles,' ACEA says.

EC legislation has set minimum levels of value added tax across the Community, and cut higher VAT rates, but it has not affected additional sales and registration taxes in some member states.

QR European Economic Community (EC) P3711 Motor Vehicles and Car Bodies P9621 Regulation, Administration of Transportation GOVT Taxes P3711 P9621 The Financial Times London Page 2 196
Nato-style military for Soviet states Publication 930302FT Processed by FT 930302 By JOHN LLOYD

A Nato-style military structure could emerge from talks between former Soviet states on closer military integration, a common defence industry and a common draft, writes John Lloyd.

Six members of the Commonwealth of Independent States have agreed to closer integration, but differ on how an integrated military should be structured, Marshal Yevgeny Shaposhnikov, CIS forces commander, said yesterday. The six states are Russia and Armenia, with the four central Asian states of Kazakhstan, Uzbekistan, Tajikistan and Kyrgyzstan.

XV Commonwealth of Independent States P9711 National Security P9721 International Affairs GOVT Government News P9711 P9721 The Financial Times London Page 2 112
German with plan for EC glasnost Publication 930302FT Processed by FT 930302 By LIONEL BARBER BRUSSELS

LIKE Theodore Roosevelt, the reformist US president at the turn of the 20th century, Mr Dieter Wolf speaks softly but carries a big stick.

After six months in office, Mr Wolf, the new president of the Federal Cartel Office, Germany's anti-trust authority, has started to spell out his views on the future of EC competition policy. His thoughts may disappoint those in Brussels who saw the 1990s as a decade of expansion of EC powers at the expense of member states.

Speaking in his office in Berlin, Mr Wolf makes clear that Germany's attitude to EC competition policy mirrors the Bonn government's views on the evolution of the EC as a whole. There is, he argues, a need for more openness in decision-making, more accountability and, in some cases, more devolution of power to member states.

The European Commission is nearing the end of a wide-ranging review of its September 1990 merger rules. Already Germany, along with the UK and France, have indicated that they will resist moves to lower the turnover thresholds above which the EC's competition watchdogs automatically investigate deals affecting the EC market.

EC officials said yesterday the Commission remained 'neutral', but Mr Wolf says lowering the current threshold of Ecu5bn (Pounds 4.13bn) is premature. He is pushing for other reforms, mainly clarity on how and why decisions in Brussels are made, noting that the Commission is not obliged to set out in writing the reasons for competition decisions. True, the Commission does produce a short summary, but in nowhere near the detail of the UK's Monopolies and Mergers Commission.

He says: 'Inevitably there is some political colouring because of the need to have a majority in the Commission. Inevitably, there is the suspicion of a fix.'

Because Germany's competition credentials are stronger than most in the EC, Mr Wolf jokes about a two- or three-speed Europe, with Germany, Denmark, the Netherlands and the UK in the fast lane. Thus, it is also premature to talk up the prospects of a new EC-wide competition authority independent of the Commission: 'It won't probably happen before the end of the century.'

Harmonising the varying competition laws among member states could take even longer, even if this means a delay in a true single market.

Instead, Mr Wolf would like greater clarity in procedures for vetting cartels and abuse of a dominant market position, under Articles 85 and 86 of the Treaty of Rome.

At present, he estimates some 200 cases are outstanding in Brussels, and the number is expected to rise because of the single market.

DE Germany, EC QR European Economic Community (EC) P9651 Regulation of Miscellaneous Commercial Sectors P9721 International Affairs CMMT Comment & Analysis P9651 P9721 The Financial Times London Page 2 471
Low pound may push up interest rates, Bank warns Publication 930302FT Processed by FT 930302 By PETER NORMAN, Economics Editor

BRITAIN WOULD raise interest rates if it felt a falling pound imperilled its goal of low inflation, Mr Robin Leigh-Pemberton, governor of the Bank of England, warned last night.

Speaking in Bristol, Mr Leigh-Pemberton insisted that the Bank was 'in no way indifferent' to the behaviour of the exchange rate and stressed that the UK had 'most certainly not been seeking a competitive advantage' for its exports through sterling's depreciation.

Mr Leigh-Pemberton, who is to retire at the end of June, said the 'substantial fall' in sterling's value since its departure from the European exchange rate mechanism in September 'was not a deliberate object of policy'.

Although sterling gained 3 1/2 pfennigs against the D-Mark to close in London at DM2.37, its value measured on the Bank's trade-weighted exchange rate index was 15.2 per cent lower than before leaving the ERM.

The governor warned that continued success in pursuit of the government's target of keeping underlying inflation within a 1-to-4 per cent band during the life of this parliament 'could be impaired if the exchange rate were to fall too far'.

Giving his clearest warning yet of higher interest rates in the event of a further sterling slide, he said: 'We will need to monitor very carefully the impact of the exchange rate on inflation and to respond with tighter monetary policies if we believe the inflation target to be threatened.'

As money markets throughout Europe yesterday looked forward to an easing of German monetary policy, Mr Leigh-Pemberton made clear that Britain would not follow any cut in interest rates.

'In such circumstances, there would be no question of the UK seeking to hold the exchange rate down to maintain competitive advantage,' he said. 'Indeed, the appreciation of the (sterling) exchange rate which would result from easier policies elsewhere would greatly assist the achievement of the government's target for reducing inflation.'

The governor's remarks came only hours after provisional Bank figures for M0, the narrow measure of money supply, pointed to a continuing upturn of British retail sales last month. The sharp seasonally adjusted 4.8 per cent year-on-year increase of M0 in February was well above the government's 0-to-4 per cent target.

Retail sales hopes, Page 8

Boost for sterling, Page 18

Lex, Page 18

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P6011 Federal Reserve Banks GOVT Government News P9311 P6011 The Financial Times London Page 1 419
Stock & Currency Markets Publication 930302FT Processed by FT 930302

------------------------------------------------------ STOCK MARKET INDICES ------------------------------------------------------ FT-SE 100: 2882.6 (+14.6) Yield 4.19 FT-SE Eurotrack 100 1158.20 (+18.40) FT-A All-Share 1403.48 (+0.5%) FT-A World Index 143.01 same Nikkei 16,879.60 (-73.75) New York: Dow Jones Ind Ave 3355.41 (-15.4) S&P Composite 442.02 (-1.36) ------------------------------------------------------ US RATES ------------------------------------------------------ Federal Funds: 3 5/8% (3 1/8%) 3-mo Treas Bills: Yld 2.992% (2.993%) Long Bond 103 21/32 (103) Yield 6.831% (6.882%) ------------------------------------------------------ LONDON MONEY ------------------------------------------------------ 3-mo Interbank 6 1/16% (6 3/16%) Liffe long gilt future: Mar 105 11/32 (Mar 104 1/2) ------------------------------------------------------ NORTH SEA OIL (Argus) ------------------------------------------------------ Brent 15-day April Dollars 18.95 (18.825) ------------------------------------------------------

Gold ------------------------------------------------------ New York Comex April Dollars 329.3 (329.0) London Dollars 328.55 (327.75) ------------------------------------------------------ STERLING ------------------------------------------------------ New York: Dollars 1.439 (1.427) London: Dollars 1.44 (1.423) DM 2.37 (2.335) FFr 8.0425 (7.94) SFr 2.1975 (2.1725) Y 170.75 (168.0) Pounds Index 77.1 (76.0) ------------------------------------------------------ DOLLAR ------------------------------------------------------

New York: DM 1.65475 (1.646) FFr 5.6110 (5.588) SFr 1.5370 (1.5265) Y 118.75 (118.2) London: DM 1.6465 (1.6415) FFr 5.585 (5.58) SFr 1.526 (same) Y 118.6 (118.0) Dollars Index 66.5 (66.6) Tokyo open Y 118.7 ------------------------------------------------------

XA World P1311 Crude Petroleum and Natural Gas P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices COSTS Equity prices P1311 P3339 P6231 The Financial Times London Page 1 219
Birt gives up freelance status to join BBC staff Publication 930302FT Processed by FT 930302 By RAYMOND SNODDY

MR JOHN BIRT, the director-general of the BBC, yesterday backed down and decided that he would become an employee of the Corporation for the first time, six years after joining as deputy director-general.

Mr Birt's change of status follows revelations that he had been paid during his time at the BBC through a private company, John Birt Productions.

After a meeting yesterday with Lord Barnett, the vice-chairman of the BBC governors, Mr Birt said in a statement: 'The argument has been strongly made in the past few days that it is inappropriate for the director-generalship to be occupied by someone who is not an employee of the BBC.

'I recognise the force of that argument. And I have today told the BBC I would like to accept their offer to change my status and to become a member of the BBC's staff.'

On Sunday, the BBC was still publicly defending Mr Birt's role as a 'freelance' with his own service company and a senior governor made it clear no pressure would be brought on Mr Birt from the governors to change his mind.

The news of Mr Birt's change of heart comes as further information became available about the private companies of other senior broadcasters, who have, like Mr Birt, worked or still work at London Weekend Television. Such arrangements are legal and have been accepted by the Inland Revenue.

Ms Janet Street-Porter, head of youth and entertainment features at the BBC, has her own private company, Janet Street-Porter Limited. Ms Street-Porter is not on the staff of the BBC and money from her contract is paid to her private company. The company had a turnover of Pounds 94,256 last year, although that would include other freelance earnings.

The BBC refused to discuss the details of Ms Street-Porter's contract last night. Ms Street-Porter said she had been a freelance for over 20 years including broadcasting, writing books, journalism, television presentation and television production. She said her BBC contract ran out at the end of last year and a new one was being negotiated.

The BBC emphasised yesterday that no other member of the current board of management, apart from Mr Birt until now, was paid on a freelance basis.

However, Mr Jonathan Powell, until recently controller of BBC 1, was never on the staff of the BBC.

LWT confirmed yesterday that four executives have been paid in part through private companies. They are Mr Marcus Plantin, the former director of programmes who now is director of the ITV network, Mr Greg Dyke, chief executive of LWT, Mr Barry Cox, director of corporate affairs, and Mr Brian Tesler, former managing director. Mr Dyke's company, Vine Productions, had a turnover of Pounds 52,810 in 1991.

The BBC said yesterday that following Mr Birt's appointment as director-general, the Corporation 'preferred new arrangements for the post of director-general. These have now been agreed and John Birt will become an employee of the Corporation'.

It is not clear if Mr Birt will be compensated for the fact that he will not be paid gross in future and is likely to have to pay more tax. The BBC refused to discuss details of his new contract.

In his statement, Mr Birt said his particular arrangement had been agreed with the Inland Revenue. 'I have always been entirely open about the basis on which my services are provided,' he said.

Street-Porter paid via own private company Page 8

Editorial Comment Page 17

British Broadcasting Corp GB United Kingdom, EC P4833 Television Broadcasting Stations P4832 Radio Broadcasting Stations PEOP Personnel News P4833 P4832 The Financial Times London Page 1 619
Scottish bank offers bonuses for charging customers more Publication 930302FT Processed by FT 930302 By JOHN GAPPER and DAVID OWEN

ROYAL Bank of Scotland was yesterday criticised by the Labour party for introducing an incentive scheme which offers bonuses to employees who increase the number of account charges levied on customers.

Mr Nigel Griffiths, Labour's consumer spokesman, said the Performance Plus scheme was 'the last straw for many small businesses'. He said it undermined banks' claims to treat customers sensitively, and on an individual basis.

The Royal Bank scheme, introduced on a trial basis from February to April, sets a target for each branch to raise its collection of ancillary charges such as those levied for returning 'bounced' personal and business cheques.

Each branch has a second target to increase the number of customers opening savings accounts. Employees at a branch which meets one of the two targets will receive Pounds 40 a quarter, and those at a branch which meets both will get Pounds 100.

All retail banks have been trying to raise income from account charges and other fees to compensate for high bad debts. Royal Bank raised its commission and fee income by 23 per cent to Pounds 391m in the year to last September.

Mr Griffiths called on Mr Michael Heseltine, trade and industry secretary, to investigate banks' charges. The call followed an attack on banks' treatment of small businesses last month by Mr Gordon Brown, the shadow chancellor. Banks have figured heavily in Labour's recent attacks on the government for protecting the vested interests of big business.

Using a parliamentary early day motion, Mr Griffiths urged Lord Younger, Royal Bank's chairman and a former cabinet minister, to end the scheme. He said many businesses and individuals were already unable to meet bank charges.

Mr Tony Schofield, Royal Bank's managing director for branch banking, said the scheme was the first attempt by the bank to provide incentives to clerical staff to meet business targets similar to those already in place for managers.

Mr Schofield said the bank was not curtailing managers' discretion. 'We want to curtail acts of omission by staff who fail to apply standard charges because of a busy daily schedule,' he said.

The bank had identified a 'significant amount of leakage' due to staff failing to impose standard charges. Mr Schofield said some of these charges were levied by computer at other banks, and might also be at Royal Bank within two years.

Mr Sandy Boyle, assistant secretary of the Banking, Insurance and Finance Union, said Performance Plus was 'an ill-conceived scheme' which would create tension between Royal Bank's 13,500 branch staff and its customers.

Banks have placed more emphasis on collecting fees and charges on personal accounts because the fall in base rates has reduced earnings from such accounts. Royal Bank does not charge customers who remain less than Pounds 100 overdrawn.

Royal Bank of Scotland GB United Kingdom, EC P6021 National Commercial Banks TECH Services PEOP Labour P6021 The Financial Times London Page 1 503
World News in Brief: New ballet chief Publication 930302FT Processed by FT 930302

Derek Deane, a former senior principal of the Royal Ballet, is to be artistic director of the English National Ballet in succession to Ivan Nagy, who said in January that he would not seek to renew his contract.

English National Ballet GB United Kingdom, EC P7922 Theatrical Producers and Services PEOP Appointments P7922 The Financial Times London Page 1 72
World News in Brief: Four hurt in IRA attack Publication 930302FT Processed by FT 930302

An IRA double mortar bomb attack on a heavily-fortified RUC base at Bessbrook in South Armagh left four civilians slightly injured and up to 60 houses damaged. Nobody inside the base was hurt.

GB United Kingdom, EC P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times London Page 1 67
World News in Brief: Strangeways rioters sentenced Publication 930302FT Processed by FT 930302

Eleven men involved in the 1990 riots at Strangeways prison, Manchester, were given jail sentences ranging from four to 10 years at the city's crown court on top of their original sentences. Three were sentenced in their absence after escaping from the court's cells 12 days ago.

GB United Kingdom, EC P9223 Correctional Institutions PEOP Personnel News GOVT Legal issues P9223 The Financial Times London Page 1 79
World News in Brief: Warrington blast charges Publication 930302FT Processed by FT 930302

Three men were charged in connection with the IRA bombing of a gasworks at Warrington, Cheshire, on Friday. Two of them were also charged with shooting a policeman. The men are expected to appear in court in east London today.

GB United Kingdom, EC P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times London Page 1 72
World News in Brief: Hume's call Publication 930302FT Processed by FT 930302

Cardinal Basil Hume, Archbishop of Westminster, suggested on BBC television the setting up of a royal commission into 'the way society is going'. His call followed criticism of the government at the weekend by the Archbishop of York, Dr John Habgood, who blamed it for a breakdown of law and order.

GB United Kingdom, EC P8661 Religious Organizations CMMT Comment & Analysis P8661 The Financial Times London Page 1 80
Break-up of British Gas urged: Watchdog wants division into 12 regional companies to reduce domestic prices Publication 930302FT Processed by FT 930302 By DEBORAH HARGREAVES

A CALL for the wholesale break-up of British Gas as a way of reducing prices for household customers came yesterday from the industry's regulator.

The radical proposals to introduce more competition have plunged the relationship between the company and Sir James McKinnon, director-general of the industry watchdog Ofgas, to a new low. British Gas called his suggestions 'a smash and grab raid' on its business that would cost Pounds 3bn over 10 years.

The proposals call for British Gas to be broken into 12 regional marketing companies with a separate gas purchasing arm. The regional companies would not have British Gas's current monopoly over domestic supply, opening up the market for rivals.

The regulator, who has waged a battle of attrition against British Gas's market power, wants the break-up in addition to hiving off the company's pipelines and storage system. 'It's a logical development,' Sir James said. 'If there is any desire to give domestic customers some kind of choice, this is the route to go.'

He believes that more choice will lead to lower prices. 'It must be for customers themselves to decide how much they want to pay for the kind of gas supply services they require,' he said.

Sir James's proposals were made in a submission to the Monopolies and Mergers Commission and released to the public yesterday. The commission is reviewing the structure of the gas industry after previous rows, and is due to make its report next month.

Mr Cedric Brown, chief executive of British Gas, who was yesterday giving evidence to the commission on why the company should not be broken up, predicted that Sir James's proposals could lead to price increases of up to 15 per cent.

He called the proposals 'superficial and poorly argued', and questioned 'the irresponsibility of a body that is supposed to be responsible'.

British Gas said that to dismember its business would cost Pounds 166 on average for each customer as well as Pounds 1,500 per shareholder, although it gave no indication as to how the costs would break down. The company also said the industry would face disruption for 18 months.

Ofgas claims that the cost of the break-up would be closer to Pounds 250m than the Pounds 3bn cited by British Gas.

Mr James Cooper, chairman of the Gas Consumers' Council which represents domestic customers, said he was 'astonished' by Sir James's proposals. 'I wonder whether real competition can exist for the punter. Am I really going to have the same choice as I have between Sainsbury and Tesco? I suspect not.'

British Gas has 30 rival companies already supplying industrial customers. Many of these, including the regional electricity companies, are keen to enter the domestic market.

But British Gas says its competitors would not have the same safety standards or an obligation to maintain supplies. According to the company, its break-up could also mean that customers furthest from the east coast gas terminals would face higher prices.

Editorial Comment, Page 17

Lex, Page 18

London Stocks, Page 36

British Gas GB United Kingdom, EC P4923 Gas Transmission and Distribution P9631 Regulation, Administration of Utilities COMP Company News COSTS Product prices P4923 P9631 The Financial Times London Page 1 558
World News in Brief: James Bulger's funeral Publication 930302FT Processed by FT 930302

The funeral of two-year-old James Bulger, who disappeared while shopping with his mother in Bootle, Merseyside, and whose body was found 15 days ago on a railway line, took place in nearby Kirkby. Two 10-year-old boys have been accused of abducting and murdering James and attempting to abduct another two-year-old boy.

GB United Kingdom, EC P9229 Public Order and Safety, NEC PEOP Personnel News P9229 The Financial Times London Page 1 83
International Company News: Rescue agreed for Nippon Housing Publication 930301FT Processed by FT 930304 By CHARLES LEADBEATER TOKYO

THE NINE financial institutions which back Nippon Housing Loan have agreed a rescue plan for the deeply-troubled lending institution which faces mounting bad debts from the collapse of the Japanese property market.

The banks which back Nippon Housing Loan, led by Sanwa Bank and Sakura Bank, have agreed to forego interest of loans for up to 10 years. The group will also require substantial new loans to pay off mortgage-backed securities which fall due within the next two years.

Agricultural banks, which were also heavy lenders to Nippon Housing in the 1980s, have agreed to reduce the interest rate on their loans to 2.5 per cent from 4.5 per cent.

Nippon Housing Loan was set up in the 1970s by a group of commercial banks to provide housing finance. It is thought to have bad loans of about Y1,300bn out of a total loan book of about Y2,200bn.

The president of Kawasho, a Japanese steel trader, is resigning after disclosing a huge loss at a financial subsidiary.

Mr Kinji Ibaraki said he would be tending his resignation at the end of June to take responsibility for a Y4bn (Dollars 34m) net loss in the year to March 1993, forced by a Y19.5bn charge for an investment loss at a financial subsidiary.

Kawasho said Captain, the wholly-owned Osaka financial subsidiary, would be liquidated after making a net loss of Y12bn and with unrealised losses of Y7.5bn on failed investments. Kawasho said it would make a loss despite selling more than Y13bn of securities.

Nippon Housing Loan Kawasho Corp JP Japan, Asia P6162 Mortgage Bankers and Correspondents P602 Commercial Banks P5051 Metals Service Centers and Offices P6211 Security Brokers and Dealers COMP Company News PEOP Personnel News Ibaraki, K President Kawasho P6162 P602 P5051 P6211 The Financial Times London Page 19 317
International Company News: Authorities criticised over Uni raid Publication 930301FT Processed by FT 930304 By KAREN FOSSLI OSLO

A NORWEGIAN government-appointed commission has sharply criticised the country's finance ministry and Banking, Insurance and Securities Commission for failing to prevent the disastrous raid by Uni Storebrand, Norway's biggest insurer, on Skandia, its Swedish rival.

The inquiry report examines the events following the bid which culminated in Uni's collapse in August into the hands of public administrators.

Although the minority Labour government is expected to survive the repercussions of the commission's findings, the report's criticism casts doubt over the future of Mr Sigbjoern Johnsen, Norway's finance minister. So far he has refused to resign over the affair, and over the role of his special adviser, Mr Arne Oeien.

The commission, led by Mr Erling Sandane, a former supreme court judge, outlined a series of failings in the finance ministry's handling of Uni's raid on Skandia.

The report said the ministry and BISC allowed Uni to build a NKr4.7bn (Dollars 601m) 28.3 per cent stake in Skandia in spite of a law forbidding Norwegian financial institutions from owning more than 10 per cent of foreign financial concerns without a special concession.

Uni built the stake before the permit was issued. The commission said the subsequent permit should never have been issued, but it cleared the ministry of allegations that Uni had been given an unofficial go-ahead to pursue Skandia.

'The commission of inquiry points out that Uni Storebrand had a considerable liquidity problem, and the finance ministry ought not to have issued a permit when the question of a capital expansion was unclear.'

The report said Uni provided inadequate details of its plans and financial position while the authorities failed to make strong enough demands for the information.

Uni borrowed heavily to finance the Skandia acquisition in an abortive attempt to force the Swedish insurer into a Nordic insurance pact. Skandia rejected Uni's advances. This precipitated a sharp fall Uni's shares leading to a liquidity squeeze which forced the company's collapse.

In response to the report the finance ministry said it would follow a recommendation to set up a public commission to undertake a further probe into Uni's collapse and the role of its board and top executives.

Uni Storebrand Skandia Life Insurance NO Norway, West Europe P6311 Life Insurance P6331 Fire, Marine, and Casualty Insurance P9131 Executive and Legislative Combined P9651 Regulation of Miscellaneous Commercial Sectors COMP Shareholding GOVT Government News P6311 P6331 P9131 P9651 The Financial Times London Page 19 419
International Company News: Rising exports give lift to South Korean electronics Publication 930301FT Processed by FT 930304 By JOHN BURTON SEOUL

HIGHER sales of semi-conductors and increased exports of consumer electronics led to South Korea's four main electronics companies all reporting growth in turnover and profits for 1992.

The continued growth of the Korean economy, although weakening, is another reason for their improved profitability in contrast to their Japanese rivals, which are suffering from the effects of a domestic recession.

Combined profits among the four electronics manufacturers jumped by 70.2 per cent to Won125.5bn (Dollars 157.8m), while sales rose by 11.9 per cent to Won12,600bn. However, 1993 results could be much lower if the US decides in favour of imposing dumping duties on Korean chips, which would severely curtail exports to its largest overseas market.

Samsung Electronics, Korea's largest electronics company, reported a 5.5 per cent increase in net profits to Won72.4bn, while sales rose by 16.6 per cent to Won6,100bn.

Sales of its semiconductor division, which is the world's fifth-largest producer of memory chips, grew by 25 per cent to Won1,340bn, and provided most of the group's profits. The consumer electronics division's sales were up 10 per cent at Won3,300bn. Sales for the computer and telecommunications division rose by 29 per cent to Won1,430bn.

Earnings at Goldstar jumped by 43.2 per cent to Won26.5bn, although sales only grew by 2.9 per cent to Won3,780bn.

The improvement was mainly due to exports, which grew by 7.6 per cent to Won2,000bn. Sales were brisk in south-east Asia and Latin America, where Goldstar has increased marketing efforts to counter weakening exports to North America.

Domestic sales slipped by 2 per cent to Won1,780bn, which Goldstar blamed on depressed consumer spending caused by slower economic growth.

Daewoo Electronics posted a 22 per cent increase in profits to Won16.6bn, while sales rose by 9.6 per cent to Won1,700bn.

Daewoo said it performed particularly well in the domestic market in spite of the general slowdown in consumer spending because of the introduction of new products, especially washing machines and televisions. Domestic sales rose by 16.6 per cent to Won664.4bn.

Hyundai Electronics, which suffered a loss of Won27bn in 1991, reported a profit of Won10bn as sales grew by 25 per cent to Won1,030bn. The recovery was largely caused by increased sales of semiconductors, with exports up 60 per cent to Won500bn.

Samsung Electronics Daewoo Electronic Goldstar Electric Hyundai Electronics Industries KR South Korea, Asia P3651 Household Audio and Video Equipment P3674 Semiconductors and Related Devices P3571 Electronic Computers P3661 Telephone and Telegraph Apparatus P363 Household Appliances FIN Annual report P3651 P3674 P3571 P3661 P363 The Financial Times London Page 19 445
Observer: Phew Publication 930301FT Processed by FT 930304

Norman Lamont can breathe a sigh of relief - well, at least from March 26 he can. The dummy issue of OK] magazine, the monthly glossy being launched by publishers Northern & Shell to rival Hello], tells us so. The OK] dummy promises not just 'exclusive picture stories' and 'royal features'. Its main headline says: 'Everything is going to be OK]'

GB United Kingdom, EC P2721 Periodicals CMMT Comment & Analysis TECH Products P2721 The Financial Times London Page 15 91
Observer: Tory home rule Publication 930301FT Processed by FT 930304

One of the rules of thumb for up-and-coming Tory politicians is that reputations are more easily damaged than enhanced by a Home Office posting. Hence, some surprise at the extensive supporting cast for the Home Office's local government conference.

Health secretary Virginia Bottomley banged on about the need for a firm stand on persistent juvenile delinquents as did John 'hellfire' Patten, the education secretary. Even Sir Norman Fowler, the Tory party chairman, was keen to get his message across, opining that law and order would be one of the two great national issues in the local elections in May.

But despite all this tough talk about cracking down on offenders, the underlying impression was left that for many Tories the real villain of the piece is Tony Blair, the shadow home secretary, whose high-profile stance on crime over the past week or so has been threatening to rob the Tories of one of their most prized political assets - a popular belief that Labour is 'soft' on the issue.

Hong Kong Parkview Group GB United Kingdom, EC P9121 Legislative Bodies P922 Public Order and Safety CMMT Comment & Analysis P9121 P922 The Financial Times London Page 15 207
Writs likely at Lloyd's this week Publication 930301FT Processed by FT 930304 By RICHARD LAPPER

MORE THAN 2,000 members of syndicates at the Lloyd's insurance market formerly managed by the Gooda Walker agency expect to serve writs against their agents early this week, Richard Lapper writes.

But there are strong indications that the prospects are receding for an out-of-court settlement between about a dozen groups of loss-making Names - the individuals whose capital backs the Lloyd's market - and their agents.

Mr Peter Middleton, chief executive of Lloyd's, said: 'The problem has some fairly intractable dimensions.'

Seven Gooda Walker syndicates lost more than Pounds 900m between 1987 and 1990, mainly because of their involvement in so-called 'spiral' reinsurance business in which syndicates and companies reinsure each others' exposures to high-level catastrophe loss.

Some 2,000 Gooda Walker Names, some of whom face losses more than five times the amount they deposited with Lloyd's, voted last November to take legal action against 67 agents who placed them with the Gooda syndicates.

Mr Michael Deeny, an accountant and rock concert promoter who chairs the Gooda Walker Names Action Group, said his group had raised more than Pounds 4m to finance the action.

Gooda Walker Names Action Group (UK) GB United Kingdom, EC P6331 Fire, Marine, and Casualty Insurance P6411 Insurance Agents, Brokers, and Service GOVT Legal issues P6331 P6411 The Financial Times London Page 8 232
Writs likely at Lloyd's this week Publication 930301FT Processed by FT 930304 By RICHARD LAPPER

MORE THAN 2,000 members of syndicates at the Lloyd's insurance market formerly managed by the Gooda Walker agency expect to serve writs against their agents early this week, Richard Lapper writes.

But there are strong indications that the prospects are receding for an out-of-court settlement between about a dozen groups of loss-making Names - the individuals whose capital backs the Lloyd's market - and their agents.

'The problem has some fairly intractable dimensions,' said Mr Peter Middleton, chief executive of Lloyd's. 'I don't have the power to impose a settlement.'

Seven Gooda Walker syndicates lost more than Pounds 900m between 1987 and 1990, mainly because of their involvement in so-called 'spiral' reinsurance business in which syndicates and companies reinsure each others' exposures to high level catastrophe loss.

Some 2,000 Gooda Walker Names, some of whom face losses more than five times the amount they deposited with Lloyd's, voted last November to take legal action against 67 agents who placed them with the Gooda syndicates.

Mr Michael Deeny, an accountant and rock concert promoter who chairs the Gooda Walker Names Action Group, said his group had raised more than Pounds 4m to finance the action.

Hopes of an out-of-court settlement were raised last October when Mr Middleton appointed a panel of Names and market professionals to examine the possibility of a deal.

This would involve errors and omissions (E&O) insurers, who covered the agents against possible negligence claims. But the E&O insurers are themselves Lloyd's syndicates, which must satisfy both their own Names that a settlement is also in their interests, Mr Middleton pointed out.

Gooda Walker Names Action Group (UK) GB United Kingdom, EC P6331 Fire, Marine, and Casualty Insurance P6411 Insurance Agents, Brokers, and Service GOVT Legal issues P6331 P6411 The Financial Times London Page 8 312
Pakistan finds coal field of 80bn tonnes Publication 930301FT Processed by FT 930302 By REUTER ISLAMABAD

COAL reserves of 80bn tonnes have been found in Pakistan's Sind province, Reuter reports from Islamabad.

Prime Minister Nawaz Sharif was informed about the find in the southern province's Thar area while flying to the central Sind district of Nawabshah, the official APP news agency said.

No further details were immediately available about Pakistan's biggest reported coal discovery.

Mr Sharif issued instructions to concerned authorities to develop fully the mine for coal-based generation of electricity to help meet Pakistan's energy shortage, APP said.

Pakistani authorities said last that year they had found what they called the largest coal field in south-east Asia and the Middle East. The field's reserves have been put at more than 10bn tonnes.

Those reserves are also located in Sind at Thara-Jo-Goth near the Indian border.

Previously Pakistan had estimated its coal reserves at only 579.6m tonnes with an annual production of more than 2m tonnes in recent years.

PK Pakistan, Asia P12 Coal Mining RES Natural resources P12 The Financial Times International Page 5 184
Yugoslav peace talks to resume Publication 930301FT Processed by FT 930302 By REUTER NEW YORK

Yugoslav peace talks are scheduled to resume at the United Nations today provided all the main participants show up, Reuter reports from the UN.

They are to focus on a plan and map drafted by the co-chairmen of the international conference on the former Yugoslavia, Mr Cyrus Vance, representing the UN, and Lord Owen, on behalf of the European Community.

The plan would divide embattled Bosnia-Herzegovina into 10 provinces - three with Moslems majorities, three Serb, two Croat and two mixed.

Bosnian Serb chief Radovan Karadzic was due to arrive in New York yesterday apparently satisfied he would not be impeded by a private lawsuit brought against him during his previous stay by organisations acting on behalf of two victims of alleged atrocities by Serb forces in Bosnia.

YU Yugoslavia, East Europe P9721 International Affairs GOVT Government News P9721 The Financial Times International Page 2 159
Bosnian Croats close Moslem supply routes Publication 930301FT Processed by FT 930302 By LAURA SILBER BELGRADE

FIGHTING was reported on several fronts in Bosnia yesterday as Moslems cut off by Serb rebels in the east waited for the US to begin an air-drop of emergency relief.

Moslem-controlled Sarajevo radio said shellfire killed one person and wounded another in the besieged Bosnian capital. Shells also landed in the city's outskirts and sniper fire was intense at times, it said.

A fresh row flared between Moslem-led Bosnian government troops and Bosnian Croats, nominal allies in the civil war, when Bosnian Croat forces announced that they were closing all supply routes between Croatia and Moslem-held territory.

The Croatian Defence Council (HVO) accused the Bosnian government forces of deploying 25,000 troops in central Bosnia and abandoning the fighting against Serb forces. 'The HVO has therefore decided to close all roads between Croatia and Bosnia for supplies of the Bosnian army,' it said in a statement from Mostar, Croat military headquarters in Bosnia-Hercegovina.

In spite of promises to allow aid convoys to Moslems, Bosnian Serb forces often block or delay overland convoys. Mr Radovan Karadzic, the Bosnian Serb leader, banned a convoy of the UN High Commissioner for Refugees from going to Cerska, eastern Bosnia, which has been without any outside relief in the last 11 months. 'He said the convoy would be allowed to go to Zepa, which means people would have to travel for miles and miles over the mountains, through snow and across front lines to pick up the aid.' said Mr Laurens Jolles of the UNHCR Belgrade office. Western journalists were also refused permission to travel Serb-held parts of Bosnia.

Serb forces at the weekend continued to expel Moslems from the Banja Luka region, western Bosnia. Some 2,500 Moslems, clutching all the belongings they could carry, were forced to walk to Turbe, a Bosnian-held village. UN peacekeepers and western journalists helped carry children unable to walk over the snowy hillsides.

At one point, Serb fighters reportedly fired on the queue of refugees.

BA Bosnia-Hercegovina, East Europe P9721 International Affairs GOVT Government News P9721 The Financial Times International Page 2 357
World News in Brief: Soldiers killed in crash Publication 930301FT Processed by FT 930302

Two British soldiers serving in Cyprus died when their car overturned.

CY Cyprus, Middle East P9711 National Security PEOP Personnel News P9711 The Financial Times International Page 1 41
World News in Brief: 10 die in train bombing Publication 930301FT Processed by FT 930302

A bomb exploded on an Azeri train in the breakaway south Russian region of Chechnya, killing 10 and injuring 15 in an attack believed to be linked to a conflict over control of the territory of Nagorno-Karabakh.

RU Russia, East Europe P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P9229 The Financial Times International Page 1 74
Leaders versus parties: Europe Publication 930301FT Processed by FT 930301 By IAN DAVIDSON

Mr Michel Rocard has long been the white hope of a certain free-wheeling school of liberal social democracy in France. So when he launched his proposal for the creation of a broad new centre-left political movement, encompassing socialists, ecologists, reformed communists and moderate liberals, the immediate reaction from rivals and opponents (two categories that include just about all the stars in the French political firmament) was astonishment followed almost immediately by cynical dismissal.

This was just a wily manoeuvre, they said, designed to change the rules of the game in his favour. By calling for the creation of a broad-bottomed movement, he was seeking to enlarge his own constituency as well as making a takeover bid for the ecological vote, which has swelled as fast as the Socialist vote has shrunk.

By criticising the accumulated mistakes of the Socialist party, he was effectively criticising President Francois Mitterrand, distancing himself from his discredited rivals in the party leadership, and trying to position himself for the presidential election campaign of 1995.

The Rocard proposal is more than clever footwork, however; it may yet start a serious debate on political reform in France, and perhaps in Europe as well.

One reason for the Socialists' decline, according to Mr Rocard, is that they have told too many political lies. In 1981 they promised miraculous economic improvements which were unrealistic; then in 1983 they did a massive U-turn to economic austerity, but tried to hide the fact. A second reason was that many have engaged in wholesale corruption.

But the heart of Mr Rocard's analysis is much more structural than these two factors: traditional socialism no longer corresponds to the modern world. 'The very name of socialism was forged in a conception of the world wholly based on production and class relationships . . . We have entered a market society where inequalities appear in many forms, but where the feeling of belonging to a class, to a collective movement, is no longer perceived as a reality.'

This explains the rise of the ecological movement, he believes. 'When the French can no longer find the springs of their identity in a social class, nor in a religion, nor in a profession, nor in a generation, nor in a level of income, what is left to identify with? What surrounds them immediately: their environment.'

The dilemma for a convinced socialist such as Mr Rocard is that he needs, but does not yet have, a new message for the times. Conservatives may delude themselves that this is just a socialist problem, which leaves them free to triumph. In reality, the conservative agenda has been essentially defined for most of this century by and in opposition to socialism. The best ideological hope for conservatives, is that socialists should fail to modernise their message.

The question is, how can the socialists set about modernising their message? In most west European countries politics has been, for several generations, a war of classes, dressed up as a war of doctrines, and organised through a war of parties. As ideological organisations, it is in the nature of parties to resist changes in their doctrines; just look at the British Labour party and its absurd clinging to Clause IV and the idea of nationalisation.

Rocard's implicit answer is threefold: you must break the old party stranglehold of dogma, ritual and faction; you need someone who is above the party, and free from the dogmas, to lead the process of rethinking; and therefore you need to dilute the party into a larger, looser group, under a paramount chief.

Now the French political system may be peculiarly amenable to this strategy of political reform. First, the political spectrum contains enough different parties to permit a flexible choice of groupings.

Second, the lure of the presidency generates a number of potential leaders who are not wholly dependent on their parties; at the moment, there are at least six credible potential candidates for the presidency, three on the left and three on the right; and Rocard is one.

Italy and Britain, which are in even greater need of reform than France, have systems that will make reform more difficult, if not impossible.

Italians used to claim their PR system gave them 'representative' government. However, the parties represented only themselves and their clients. Political decadence has gone so far that the parties are paralysed, except in their resistance to change; their leaderships are largely decapitated. Virtually the last desperate hope for reform is that it will finally come from grassroots referendums.

The British myth is that the voting system provides 'strong', therefore good, government. In fact the British system is locked solid by the anachronistic war of the parties; as a result, not merely are there no alternative political leaders who are independent of party, but the leaders in place are the prisoners of their parties. Where the governing party is deeply and irreconcilably split on the most important issue of the day, as it is now, there is no escape from government which is both weak and bad.

In France, some constitutional reforms are already under discussion; the paradox is that these might be good for the quality of ongoing government, but bad for structural political reform. If members of parliament were forbidden to hold a second elective office, parliament might be more effective; but politicians who did not have an alternative power base in a town hall or region would be less independent and more subject to party discipline.

FR France, EC P91 Executive, Legislative and General Government P8651 Political Organizations CMMT Comment & Analysis P91 P8651 The Financial Times London Page 30 949
Monday Interview: Poland's reigning queen - Hanna Suchocka, prime minister of Poland, talks to Anthony Robinson and Christopher Bobinski Publication 930301FT Processed by FT 930301 By ANTHONY ROBINSON and CHRISTOPHER BOBINSKI

Hanna Suchocka, Poland's first woman prime minister, who begins a three-day official visit to Britain tomorrow, is not the first politician to detect the hidden hand of providence behind an unexpected rise to power. But she is hard-pressed to find another explanation behind the telephone call she received last July which led to her appointment to the second most powerful political office in Poland.

Poland was in crisis: the then prime minister designate, Waldemar Pawlak, was unable to form a cabinet and the country's political matchmakers were worried by growing public discontent. Poland's foreign partners were concerned about the outlook for political stability, economic reform and foreign investment.

Bronislaw Geremek, leader of the Democratic Union party, Solidarity veteran and close adviser to President Lech Walesa, and one of the most influential strategists in Polish politics, recognised that Poland needed a new leader, untainted by the endless compromises and intrigue of Polish politics. He remembered Hanna Suchocka, the competent, no-nonsense woman with a brisk but friendly manner with whom he had worked on drawing up the post-communist constitution.

Geremek's telephone call to President Walesa, proposing Suchocka for the prime minister's job, produced a positive response. Another call followed to Suchocka in London, where she was attending a legal conference - and Poland had its first female leader since the Angevin Queen Jadwiga in the 14th century.

Speaking in her newly furnished office in Warsaw's Council of Ministers building, with reproduction Austrian Biedermeir furniture and vases of freesias and chrysanthemums, Suchocka recalled that her first reaction to Geremek's offer was 'sheer panic'. When she asked whether there were other candidates, she was told that all alternatives had been excluded. 'I never had any ambition to become prime minister; at most I thought of a career in an international organisation,' she says.

'Maybe it was providence. I certainly don't see myself as a saviour or anything like that. But it happened and somehow a sort of consensus has grown up around me.'

After seven tough months as the prime minister of 'a very difficult country by tradition and national character', she enjoys a 76 per cent approval rating in opinion polls. Such support helps provide the moral authority needed to preside effectively over a disparate seven-party ruling coalition which does not enjoy a guaranteed majority in the 460-seat Sejm, the lower house of parliament.

Public support also helped to stiffen her resolve through a wave of strikes in the car plants and coalmines just after taking power last summer and a second wave in the Silesian coal mines early this year. She has also survived months of gruelling parliamentary debate as opposition and government MPs alike tried to tack extra spending provisions on to a 1993 budget which the government had to keep within tight limits to gain a Dollars 660m stand-by loan from the International Monetary Fund, due to be approved soon.

Last month the government finally managed to garner enough votes from outside the coalition to gain parliamentary approval for the budget as originally proposed.

What clinched the outcome was a threat by Suchocka to resign if the vote went against her and a warning from President Walesa that he would dissolve parliament and hold new elections if the vote led to the government's defeat. The prime minister and president gambled successfully on their hunch that MPs would not have the stomach for fresh elections, which could have led to the downfall of an increasingly popular prime minister.

The upshot is that Suchocka comes to London, where she will address a Polish-UK business conference organised by the Confederation of British Industry as well as meeting John Major, prime minister, with the budget crisis safely behind her. This has opened the way to a new IMF agreement which in turn is linked to future loans from the World Bank and is expected to make Poland more attractive to foreign investors.

Suchocka, who is 46, has not only emerged as one of central Europe's most successful politicians, she is also presiding over growing signs of an economic recovery after three years of recession. Last year the economy stabilised; this year it is expected to grow by between 2 and 3 per cent.

She has established a close working relationship with both former academics such as Jerzy Osiatynski, finance minister, and Jacek Kuron, labour minister, once feared by the communist regime for his close rapport with Poland's militant workers. Suchocka and Kuron, in particular, make an unlikely team. The fast-talking Kuron, with his jeans and cigarette-and-whisky-tainted voice, relishes his rapport with the rather prim prime minister in twinsets and pearls. They co-operate closely in trying to sell the government's 'enterprise pact', which offers wage restraint by workers in exchange for more union say in management and the privatisation process.

Fellow politicians say one of Suchocka's strongest points is her ability to address the public in simple, everyday language. 'I never use the language of hatred. But that does not mean that I don't sometimes feel the urge to lay into somebody,' she says, giving a hint of the underlying tensions in the government.

Andrzej Olechowski, a former finance minister and now an economic adviser to the president, says the prime minister's main qualities are those of a good chairman. She is not a forceful, self-opinionated leader like Lady Thatcher, but a good listener able to reach a consensus and enforce it.

In this she resembles her close friend, Hanna Gronkiewicz-Waltz, chosen as chairman of the Polish central bank by President Walesa 18 months ago. The fact that women head both the government and the most important financial institution in post-communist Poland is without precedent.

Thus far both appointments have turned out well. Thanks to her management skills, Suchocka has managed to keep together a coalition of unlikely political bedfellows: free-market liberals to dyed-in-the-wool Polish nationalists and Catholic fundamentalists. Where she has strong views, Suchocka manages to express them without causing offence.

As a practising Catholic, for example, she holds forceful anti-abortion opinions but managed to distance the government from this divisive issue by insisting that parliament voted freely. As a result, Poland now has a highly restrictive abortion law, but one which stops short of the virtually total ban demanded by the powerful Catholic church.

Her ability to steer the government past potential hazards is helped by the unwillingness of the coalition partners to push their differences to breaking point. Suchocka herself may be popular, but the political parties and the government itself are not.

Ultimately, the secret of her success seems to lie in the way her personality and background as the daughter of a small town pharmacist from Pleszew, western Poland, appear to make her the personification of the desire of millions of Poles to live in a reasonably prosperous, stable and above all 'normal' society.

After 60 traumatic years of war, invasion and communist domination, Poles now have the opportunity to forge good relations with their powerful neighbours, Germany and Russia, and return to the mainstream of European culture and trade to which they have always felt they belonged. Strengthening ties with Britain, with its large Anglo-Polish community and wartime alliance, is part of this process.

It is also part of rebuilding Poland as what Suchocka herself defines as 'a normal country'. This may sound an excessively modest goal in the west, but not to Poles and the citizens of other countries in east and central Europe now spreading their wings after decades of captivity.

------------------------------------------------------------------------ PERSONAL FILE ------------------------------------------------------------------------ 1946 Born Pleszew. Graduated with law degree from Poznan University. 1968 Legal counsel to a small business organisation. 1972-92 Law lecturer, Poznan. 1980 Joined Solidarity. 1980 Elected to parliament for Democratic party. 1989 Re-elected to parliament on Solidarity ticket. 1992 Prime minister. ------------------------------------------------------------------------

PL Poland, East Europe P91 Executive, Legislative and General Government CMMT Comment & Analysis Suchocka, H Prime Minister Poland P91 The Financial Times London Page 30 1348
Clinton eclipses Republican sun: America Publication 930301FT Processed by FT 930301 By MICHAEL PROWSE

After Franklin Roosevelt defeated Herbert Hoover in 1932, the Democrats controlled the White House for 20 years, created a taste for government activism and permanently altered the social and economic landscape. It is far too soon to argue that President Bill Clinton will have a remotely comparable impact on US politics. But his remarkable personal attributes, coupled with seismic changes in the economic, social and diplomatic environment, suggest American conservatives may face some very lean years.

At times Republicans are confronted by a politician so perfect that he might be an android built in some mad scientist's lab. Mr Clinton has a formidable IQ and a near-photographic memory. Yet he radiates warmth as well as rationality; he understands popular culture (would any republican leader feel comfortable on stage with Michael Jackson?); and he is a superb communicator. Mr Clinton has a gift for mastering complex subjects and presenting them in simple terms children can grasp. He is equally comfortable delivering a televised address to the nation, debating in a 'townhall' meeting, jousting with journalists or merely chatting with folks at a MacDonald's restaurant.

Who can the Republicans throw into battle against so accomplished a political quarterback? Messrs Robert Dole and Robert Michel, the Republican leaders in the Senate and House of Representatives, are solid, honourable politicians, but they can match neither Mr Clinton's intellect nor his rhetoric. Potential Republican presidential candidates in 1996 are mostly lying low. Among governors, Mr Pete Wilson of California, once highly rated, may have been irretrievably damaged by his state's deep recession and budget crisis. Mr Dick Cheney and Mr Jack Kemp, defence and housing secretaries respectively in President Bush's cabinet, remain well respected. But one wonders how either would measure up against Mr Clinton, whose authority will be steadily enhanced by the pomp and ceremony of office.

Much else is going Mr Clinton's way. The timing of the business cycle is just perfect for the Democrats. George Bush was torpedoed by three years of economic stagnation; Mr Clinton inherits an economy that we now know was growing at an annual rate of almost 5 per cent in the fourth quarter of last year.

Yet the good news is sinking in so slowly that popular opinion will probably associate the recovery with Mr Clinton's economic package. Given the nature of business cycles, the US economy is likely to grow at an annual rate of 3 per cent (perhaps more) for the next few years, almost regardless of the White House's policies. Yet in 1996 Mr Clinton will sound extremely plausible when he claims credit for restoring jobs and prosperity.

The end of the cold war, while welcomed by Republicans, represents another heavy blow to their electoral fortunes. The potential threat from a heavily armed communist foe - an 'evil empire' in Ronald Reagan's words - gave American conservatives a sense of unity and purpose. Now that the US is the only military superpower, defence is largely neutralised as a political issue. There has been little public reaction to the very deep real defence cuts proposed by Mr Clinton.

Republicans seem equally vulnerable on social issues. Mr Clinton will undoubtedly propose a comprehensive plan for reforming the flawed healthcare system. People will dislike some aspects of the plan, especially the need for new taxes to finance cover for the uninsured, but they will respect him for tackling an issue that Republican presidents dodged for too long. Mr Clinton is also more in tune with changing social mores than his conservative opponents: by being pro abortion and pro gay rights he is moving with the tide of public opinion (especially among the young). The Republican party's ability to adapt flexibly to social change is badly hampered by the growing influence at local level of the fundamentalist Christian right.

As if this were not enough, conservatives have to realise that their political ascendancy during the past 12 years was never quite what it seemed. In the 1980s, Republicans briefly controlled the Senate; but Democrats have enjoyed large majorities in the House of Representatives for four decades. If the nation had really been converted to conservative doctrines in the Reagan years, the Republicans would have won far more Congressional seats.

There is always a chance that Mr Clinton will stumble badly. He could be undermined by a foreign-policy disaster or (less likely) by some unexpected economic setback. But if conservatives want to regain power in 1996, they will have to articulate an agenda for government that competes with Mr Clinton's. This will not be easy, if only because he has appropriated much of their best language - from 'empowering' individuals to 'reinventing' government.

Mr Clinton is also canny in deliberately framing his policies to appeal to middle-income families, which are far more numerous than the minority groups that monopolised the attention of Democrats during much of the 1970s and 1980s or the rich, who still enjoy disproportionate clout in the Republican party. It all adds up to a challenge of historic proportions for the conservative thinktanks which, at least geographically, still surround the White House.

Republican Party (US) US United States of America P91 Executive, Legislative and General Government P8651 Political Organizations CMMT Comment & Analysis P91 P8651 The Financial Times London Page 30 889
Foreign Exchange and Money Markets: Eyes on Germany Publication 930301FT Processed by FT 930301 By JAMES BLITZ

THE MAIN focus in foreign exchange markets this week is on whether the Bundesbank will ease monetary policy again at its council meeting on Thursday, writes James Blitz.

Mr Helmut Schlesinger, the Bundesbank president, hinted at the weekend that the easing in minimum reserve requirements for German banks, due to take effect today, could lead to a decline in lending rates in the German cash market.

However, there has been considerable speculation that the lombard and discount rates might also be changed on Thursday, not least because of the fledgling tensions in the European Community's exchange rate mechanism.

Mr Gerard Lyons, chief economist at DKB International in London, believes there are several reasons why a cut could come now.

He points out that monetary growth is slowing, the recession in the manufacturing sector is deepening and business confidence fell further in January.

Recent inflation data from the German states may have dented any willingness to cut rates. But, Mr Lyons says: 'Although the February inflation data was stubbornly high, the other recent domestic indicators point to the need for lower rates.'

Miss Alison Cottrell, an international economist at Midland Global Markets in London, thinks that the Bundesbank will not ease its official rates at all.

It will not want to be seen to make any policy change immediately after this weekend's G7 meeting, giving the impression that it can be swayed by international pressures.

Today's change in minimum reserve requirements also ties the Bundesbank's hand, because there will be more liquidity in German money markets, and the central bank would not want to confuse markets by easing policy.

If there is tension in the ERM, Miss Cottrell believes the Bundesbank could buy time by cutting the repo rate, which it has not done since rates were cut earlier this month.

Deutsche Bundesbank DE Germany, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 27 337
International Bonds: Sterling borrowers ready to lock into low rates Publication 930301FT Processed by FT 930301 By ANTONIA SHARPE

THE Eurosterling sector of the international bond market is poised for a marked rise in new issuance in the coming weeks, as an increasing number of borrowers take the view that the time is right to lock into the lowest interest rates the UK has enjoyed for 20 years.

UK corporate treasurers, who have so far declined to borrow extensively in the sterling Eurobond market for fear of missing out on further base rate cuts, are now looking hard at the various opportunities for raising fixed-rate sterling funds.

A strong UK government bond market, which had fully discounted a further cut in base rates before this weekend's comments from the chancellor of the exchequer that no cut was in prospect, has also increased the attraction of tapping the Eurosterling sector.

There is talk in the Eurobond market that the World Bank is considering proposals from banks with regard to reopening by as much as Pounds 100m to Pounds 150m its Pounds 200m 7 1/4 per cent Eurobond issue due 1998, launched last November.

British Gas is also said to be looking to raise Pounds 200m through a fixed-rate Eurobond issue with a maturity of seven to 10 years.

Neither borrower had any official comment on the rumours. However, British Gas, which announced its 1992 results last week, is known to want to take Pounds 500m out of the market this year, and is also known to favour the longer end of the yield curve.

British Gas is a frequent and highly-regarded borrower in the Eurobond market, and syndicate managers say that any sterling Eurobonds it issues will be snapped up by domestic and international investors who are currently starved of paper with seven-to-10-year maturities in the sector. This lack of supply has caused the yield spread on recently-issued paper with those maturities to tighten.

For example, the spread on the seven-year Pounds 150m issue by Argyll, the UK supermarket group, has fallen to about 72 points over the 9 per cent UK gilt due in 2000, from a spread at launch of 80 basis points on February 17.

The spread on the Royal Bank of Scotland's Pounds 150m 20-year issue of subordinated Eurobonds has dropped to 125 basis points above the comparable UK gilt from 140 basis points at launch on January 28.

The exception has been last week's Pounds 100m issue from Peugeot Talbot Motor Company, the UK subsidiary of the French car group. The yield spread on its bonds, due December 1997, has risen to more than 100 basis points above the 8 3/4 per cent UK gilt due 1997 from a spread at launch of 90 basis points.

Syndicate managers involved in the deal offer two overriding reasons for the widening: the fact that Peugeot's long-term debt is not rated, and the issuer's absence from the Eurosterling market since 1981. Furthermore, the maturity of just under five years is not so attractive to institutional investors.

However, they note that competition for the Peugeot mandate was fierce, with no fewer than seven banks in the running. They also believe that the spread on the bonds would have widened further if the supply of corporate paper had not been so low.

In recent weeks, a high proportion of the UK borrowers in the sterling Eurobond market have been financial institutions seeking to raise long-term funding either to top up their regulatory capital or, in the case of insurance companies, to raise extra capital for their operations.

The issues have tended to coincide with the publication of the borrowers' 1992 results, and syndicate managers expect more UK borrowers to announce fund-raising exercises with their annual results over the next few weeks.

Last week, Royal Insurance raised Pounds 100m of subordinated Eurobonds due 2003. 'We wanted to lock into beneficial interest rates,' says Mr Roy Randall, head of group corporate relations at Royal Insurance.

The bonds have replaced the group's existing short-dated bank borrowings and have served to push out its debt profile. Together with Royal's Pounds 76m issue of convertible Eurobonds, launched last December, one-third of the group's borrowings has now got a 10-year maturity profile. More importantly, Mr Randall says that the recent bond issues have resulted in a considerable saving in the group's borrowing costs.

Also last week, Woolwich Building Society raised a similar amount of subordinated sterling Eurobonds, but with a much longer maturity of 24 3/4 years.

The Province of Ontario will launch its first global Canadian dollar bond issue in the near future. The issue, of at least CDollars 1bn with a maturity of 10 years, will be lead-managed by Merrill Lynch Canada, Nomura Canada, ScotiaMcLeod and Wood Gundy.

Ontario said the indicated yield spread of the bonds was around 90 basis points above comparable Canadian government bonds. It said the issue would be at a fixed rate, and there were no plans to swap the proceeds into floating rate.

The issue will be part of the province's borrowing programme for 1993-94, estimated at about CDollars 8.9bn.

XA World CA Canada P6211 Security Brokers and Dealers MKTS Market data STATS Statistics P6211 The Financial Times London Page 21 871
Risk and Reward: The value of hedging comes in for re-assessment Publication 930301FT Processed by FT 930301 By RICHARD WATERS

SOME fund managers are giving hedging a bad name. To most people, the term implies risk reduction: logic suggests that a 'hedge fund' should carry less market exposure than a normal investment fund, for instance.

In practice, that may not be true. The growing number of such funds being sold internationally carry a wide array of risk profiles. How potential investors assess for themselves the balance between risk and potential return from such vehicles is an open question.

From their inception in the US, hedge funds have always looked remarkably unhedged. Among the leaders in the field is Mr George Soros, the Hungarian fund manager who achieved near-legendary status when a massive bet he placed against the European exchange rate mechanism came good last year.

But Mr Soros himself lost Dollars 800m when he wrongly predicted a stock market crash spreading from Japan in the mid-1980s: 'hedge' hardly seems the right word to describe such an investment approach

Some hedge funds - many of which grew up in the commodities markets - run rudimentary hedging strategies that hardly warrant the name.

Such imperfect hedges can come disastrously unstuck. Many US currency funds - a popular investment vehicle in 1991 and the first part of 1992, as US interest rates fell - discovered this last autumn.

A popular approach had been to go long of higher-yielding European currencies (the Italian lira or sterling ) and shorting the D-Mark to create a currency 'hedge'. Such a strategy was based on the apparent belief that the parities between currencies in the ERM were fixed, effectively making the lira or sterling a proxy for the D-Mark.

The hedge funds now becoming familiar outside the US largely take a more cautious approach, or so they claim. They still claim to be able to make returns far in excess of normal market levels, given the apparent level of risk, though.

The demand for such vehicles has come with falling worldwide interest rates. Not surprisingly, hedge funds - or other geared 'futures funds' - like investors to judge their promised returns against money-market levels. Cresvale, a UK-based securities house that has raised Dollars 140m for three hedge funds over the past year, says it aims to make around three times the return available from cash, with no extra risk.

Citibank has just attracted Dollars 257m for a three-year geared fund, Spectrum 95, which aims for returns between two and three times more than three-year dollar rates (which currently stand at little more than 4 per cent). Both have targeted the averagely well-off who are now the target for such leveraged investments (Citicorp's minimum investment was Dollars 100,000, Cresvale's Dollars 10,000.)

Is it possible to make higher returns without also taking on higher risks? Only if the market has mispriced particular financial instruments (Cresvale's claim), or through a portfolio diversification approach which reduces overall exposure (Citibank's).

For investors, the problem is how to assess the claims fund managers make for their own ability to identify and take advantage of these opportunities - as well as the quality of their risk-management analysis at hedging away risks.

Cresvale, for instance, claims to hedge investments in Japanese equities with equity warrants in a way that leaves it with no underlying exposure to the Japanese equity market. 'The mispricing is in the relative valuation of the warrants,' says Mr Lester Petch, managing director of Cresvale International Asset Management.

Analysed on the standard Black-Scholes method of option pricing, the warrants (or long-dated options) look cheap, he says, 'but you have to know how to extra the value'.

In theory, such option strategies should struggle to show a return when market volatility is low - as in the Japanese market over recent months. However, Cresvale claims a return of 18 per cent in the year since its funds started. As leveraged investment funds like this become more familiar, it may well be time to reassess what hedging really means.

GB United Kingdom, EC P672 Investment Offices CMMT Comment & Analysis P672 The Financial Times London Page 21 692
UK Gilts: Adjustment in perception of inflation trends Publication 930301FT Processed by FT 930301 By PETER MARSH

THE SLOW but steady rally in gilts is starting to attract attention. It indicates the degree to which perceptions about long-term inflation trends in the UK have changed over the past month.

Since late January, yields for 10-year gilts have come down by about 50 basis points from 8.2 per cent to around 7.7 per cent, their lowest level for 21 years. The reduction in yields for 20-year bonds has been even more marked, with a fall of 90 basis points, while the fall at the five-year mark has been about 70 basis points.

According to Mr George Magnus, international economist at S . G. Warburg Securities, the downward movement in yields underlines how gilt practitioners are taking a sanguine view on price pressures in the UK economy over. That fits in with the fragile state of much of the world economy, with demand pressures and consequently inflationary pressures extremely muted.

These trends have depressed yields for government bonds in most markets in the past month. While the investment return on gilts rose by a healthy 2 per cent during February, the performance of Japanese, German and French bonds was slightly better, at between 2.2 per cent and 2.3 per cent. The return for US bonds was somewhat lower at 1.9 per cent, according to calculations by Warburg Securities.

Economic data published in the UK during the past week have done little to alter the view that any economic recovery will be slow and protracted. Economists have tended to ignore indications that the M0 measure of the money supply is rising at above the Treasury's target rate, a development which would normally be taken as a sign of inflationary pressures.

According to preliminary estimates based on Bank of England figures, M0 rose in February by a year-on-year rate of between 4.2 per cent and 4.6 per cent. Confirmation of these figures, due later today, would make last month the second month running in which the measure has risen at above the 4 per cent year-on-year target.

However, many in the gilt market accept the explanation that recent cuts in interest rates have reduced the incentive for consumers and businesses to hold money in bank accounts. As a result, more funds have found their way into notes and coins - the main constituents of the M0 measure.

Over the longer term, worries remain that the Pounds 50bn or so of government borrowing expected in 1993-94 will lead to such a large volume of gilt issues from the Bank of England that yields along the yield curve will be pushed up to an unacceptably high level.

According to Mr Roger Bootle, chief economist at Midland Bank, the government is making a strategic mistake by issuing most new gilts in the form of long-dated bonds which threaten to cause 'unnecessarily high long yields'. His view is that - in order to reduce the threat of what he calls a 'financial crisis' - the Bank of England should switch more issues into a mixture of short-dated gilts, National Savings bonds, index-linked gilts and foreign currency debt.

He reckons this would ensure long-dated yields did not go too high, helping to bring down the long-term costs of borrowing and aiding economic recovery in Britain over the next few years.

According to calculations by Mr Neil Williams at the London office of Japanese investment house Daiwa, the government is likely to overfund the public sector borrowing requirement in 1992-93 by about Pounds 4.5bn, meaning that cash of roughly this amount will go towards funding the 1993-94 PSBR. That news should be generally positive for the gilt market. It should depress the volume of issues in the coming financial year.

More goods news for the gilt market would come from any government announcement that the full-funding rule is to be abandoned, meaning that purchases by banks and building societies of gilts would count towards financing the PSBR.

While many gilts specialists have been pressing for some time for a change in the rules, there are confident expectations that Mr Norman Lamont, the chancellor of the exchequer, may indeed announce an end to full funding in the March 16 Budget, on the grounds that the switch would boost the money supply and so help an economic upturn.

GB United Kingdom, EC P6211 Security Brokers and Dealers MKTS Market data CMMT Comment & Analysis P6211 The Financial Times London Page 20 748
US Money and Credit: Corporate issuers take advantage of all-time lows Publication 930301FT Processed by FT 930301 By NIKKI TAIT

WHATEVER the US stockmarket's qualms about the Clinton economic plan, the bond market is having no such doubts. Bond yields fell to all-time lows last week, and corporate issuers took full advantage, offering record amounts of new paper.

The slide in yields occured at the start of the week, with the price of the benchmark 30-year Treasury bond rising by 7/8 to 102 7/16 on Monday, and then gaining almost a point and a half on Tuesday. This, in turn, caused the long bond yield to fall below the 7 per cent mark, to 6.93 on Monday, and then drop to 6.82 per cent a day later.

This change in sentiment has been swift. Something over a month ago - on January 12 - the long bond yield was standing at 7.47 per cent. Last week's developments can also claim a place in the history books. Since the US Treasury began regular auctions of the 30-year bonds in 1977, the closing yield had never dropped below 7 per cent until this month, and the 6.82 per cent level marked a record low.

The market, admittedly, did not hold on to all of these gains for the rest of the week. Midweek, there was a fairly sharp fall in prices, and trading then remained volatile on Thursday, although the closing yield on the day was unchanged at 6.88 per cent.

On Friday, dealers paid more attention to the blast under New York's World Trade Center complex - which disrupted trading by several large firms - and the long bond yield ended its momentous week at 6.9 per cent.

The question is whether the market can hang on to these levels over the next five sessions, when some key economic statistics will be released.

Last week, the bond market cheered the latest consumer confidence data - which showed that the heady 'holiday season' optimism was waning even before the Clinton plan was announced - and shrugged off an upward revision to fourth-quarter gross domestic product data, which suggested that the economy was growing at an annualised rate of 4.8 per cent.

This week, it will confront a more fulsome list of economic statistics - from home sales and personal consumption expenditures for January to the February unemployment figures - and some traders suggest that the market could be volatile.

The most-closely watched data is likely to be the jobs report, due out on Friday. Here, analysts generally expect signs of a modest strengthening in the labour market, with the increase in payroll employment perhaps repeating January's 106,000 rise. However, the overall unemployment rate is reckoned to show little shift from last month's 7.1 per cent level.

Corporate issuers are not waiting to see where the market goes next. They took full advantage of the fall in long-term interest rates last week, issuing billions of dollars-worth of new debt.

The biggest outpouring of new paper came of Thursday, when approximately Dollars 5.8bn-worth of issues hit the market, compounding the roller-coaster trading. In terms of new corporate debt offerings, that represented a one-day record, outstripping the Dollars 5.25bn-worth which was issued on January 8 1992.

The range of companies taking advantage of the opportunity was wide - from Georgia-Pacific, the wood products group, to Bass America, part of the UK's Bass group.

Among the largest borrowers, however, were Dean Witter, Discover, which is being spun off from Sears, Roebuck, with a Dollars 1.5bn offering; the Tennessee Valley Authority, which sold Dollars 1bn of three and five-year bonds; and Wal-Mart Stores, the fast-expanding discount retailer, which raised Dollars 750m by issuing five-year notes and 10-year bonds.

US United States of America P9611 Administration of General Economic Programs MKTS Market data CMMT Comment & Analysis P9611 The Financial Times London Page 20 645
Japanese Bonds: Yields tumble on sharp rise in yen Publication 930301FT Processed by FT 930301 By EMIKO TERAZONO

BOND yields in Japan fell to their the lowest level since July 1987 last week as the market took its cue from a surge in the value of the yen.

The yield on the 10-year benchmark bond No 145 closed on Friday at 3.865 per cent, a fall of 22.5 basis points on the week. Although profit-taking before the March financial year-end is expected to dampen the rally in the near-term, most investors expect a further decline in yields.

In spite of denials by the government of a concerted effort to raise the yen to reduce the country's surging trade surplus, calls from top US officials added weight to speculation that an agreement would be reached to bolster the currency.

The yen's sharp rise heightened fears that a fall in competitiveness of the country's exporters would delay economic recovery. Moreover, the yen's strength would lower imported inflationary pressure, setting the stage for a further official discount rate cut.

Last week's spate of corporate restructuring announcements added to hopes for lower interest rates. Nissan Motor said it would close its vehicle plant near Tokyo by early 1995 and reduce its workforce by 5,000 to 48,000 by 1996.

Matsushita Electric Industrial, the world's largest consumer electronics company, posted a 63 per cent fall in pre-tax profits for the nine months to December, while Nippon Telegraph and Telephone said it would reduce its workforce of more than 200,000 by 30,000 over the next three years and cut its 1,300 retail outlets by a third.

The unexpected announcement by NTT, strongly backed by the government, to cut staff by encouraging early retirement of middle-aged workers, unnerved many Japanese office workers. Economists said further corporate restructuring announcements could hurt consumer confidence, further hitting consumption.

Investors have rushed to the bond market since the official discount rate cut early last month, and February's market turnover leaped by 40.6 per cent compared with January's total to Y39,344bn.

The rally has resulted from the lack of alternative investments. The Tokyo stock market has floundered around the 17,000 level and is not likely to recover shortly. Demand from corporations for loans is still low as capital investment is slow, and short term interest rates have plunged, with three-month certificates of deposit yielding around 3.25 per cent.

While demand for bonds remains high, the market may be suffering from a lack of liquidity, as an increasing number of bondholders are becoming reluctant to sell due to the lack of other attractive investments. 'There's no need to take profits because one would only plough them back into the bond market,' says Mr Marshall Gittler, bond analyst at Merrill Lynch in Tokyo.

Bond yields could have more room to fall, if inflation is taken into account. With inflation at around 1 per cent, the JGB 145 currently offers a real (inflation-adjusted) yield of just under 3 per cent. Since 1989, the real yield has averaged 3.3 per cent, ranging between 3.97 per cent and 2.63 per cent. With inflation expected to fall further, the yield could still have more room to fall.

Meanwhile, economists predict another cut in the discount rate, currently 2.5 per cent. Mr Takashi Oshio, economist at Morgan Guaranty Trust in Tokyo, believes the Bank of Japan will lower the discount rate around June.

The bond market may face a temporary lull as investors take profits and adjust positions ahead of the March financial year-end. However, bond yields could see further easing on a slow economic recovery, sluggish corporate profits and a continuing consumer slump. The yield on the benchmark bond is expected to fall to 3.3 per cent during the third quarter of this year.

JP Japan, Asia P62 Security and Commodity Brokers MKTS Market data CMMT Comment & Analysis P62 The Financial Times London Page 20 646
International Company News: Sony ends word processing Publication 930301FT Processed by FT 930301 By MICHIYO NAKAMOTO TOKYO

SONY, the Japanese electronics company, is pulling out of word processor manufacturing in a move that reflects its falling fortunes in the highly-competitive market.

The company will cut production gradually of its PJ700 word processor and not develop a successor. The decision reflects a growing trend within the Japanese industry to withdraw from unprofitable products.

Sony Corp JP Japan, Asia P36 Electronic and Other Electric Equipment P3579 Office Machines, NEC MKTS Production TECH Products P36 P3579 The Financial Times London Page 19 99
International Company News: Repola holds deficit to FM810m Publication 930301FT Processed by FT 930301 By CHRISTOPHER BROWN-HUMES STOCKHOLM

REPOLA, the Finnish forestry and engineering group, improved its performance in 1992 but high financing costs and difficult industry conditions meant it still made a loss of FM810m (Dollars 136m).

The result, which compares with a FM1.43bn loss in 1991, was hit by FM709m of exchange rate losses connected to the impact of the weaker markka on foreign loans. The dividend was held at FM0.65 per share.

The group noted that its operating profit more than doubled to FM1.72bn from FM656m, with half of the total arising in the final four months. It said it benefited from cost-saving measures, divestment of unprofitable businesses and the devaluation of the markka.

However, this profit was more than wiped out by the exchange rates losses and other financial losses of FM1.82bn.

The group blamed low capacity utilisation, falling newsprint prices, the divestment of the group's marine technology activities and poor profitability within forest machine manufacture.

Repola is more positive about prospects in 1993 although it has not made a specific forecast.

Sales expanded 7 per cent to FM23.7bn from FM22.3bn, thanks to a better performance from all three of the group's industrial units.

Rauma, the metals and engineering unit, saw sales rise 11 per cent to FM8.2bn, and the unit's pre-tax loss dropped to FM167m from FM609m.

Repola FI Finland, West Europe P2411 Logging P2621 Paper Mills P3559 Special Industry Machinery, NEC FIN Annual report P2411 P2621 P3559 The Financial Times London Page 19 259
International Company News: Vard losses deepen to NKr213m Publication 930301FT Processed by FT 930301 By KAREN FOSSLI

VARD, the Norwegian cruise and ferry group, reported an increase in net losses in 1992 to NKr213.5m (Dollars 30.49m) from NKr180.9m a year earlier, due mainly to a rise in foreign currency losses, high interest payments, and a huge loss on the disposal of a cruise ship.

Vard forecast a weak first quarter for Kloster Cruise, its cruise business. However, the group said it was continuing with efforts to improve its capital structure through a disposal or equity partnership.

Last autumn, Vard declared its intention to find a partner to invest in the cruise business.

Group revenue edged ahead to NKr5.47bn from NKr5.36bn while operating expenses dipped to NKr4.67bn from NKr4.77bn. Net financial costs, comprising mainly interest expenses to service debt, widened to NKr480.3m from NKr399.81m, and foreign exchange losses shot up to NKr108.93m from NKr61.33m in 1991. Group operating profit, however, advanced to NKr459.3m from NKr274.4m

On the bright side, Vard's ferry business posted a record result last year.

Vard Group NO Norway, West Europe P4481 Deep Sea Passenger Transportation, Ex Ferry P4482 Ferries FIN Annual report P4481 P4482 The Financial Times London Page 19 203
International Company News: Magnum goes ahead 48% to MDollars 310m Publication 930301FT Processed by FT 930301 By KIERAN COOKE KUALA LUMPUR

MAGNUM Corp, the Malaysian gaming and investment holding company, has announced pre-tax profits of MDollars 310.2m (USDollars 117m) for the year to December 31 1992. This represents an increase of 48 per cent on 1991 taxable profits of MDollars 209.2m.

Turnover reached MDollars 1.55bn, up 28 per cent on the 1991 figure.

Magnum said the improved performance was partly due to better management controls, plus a significant increase in the sales of its lottery tickets in Malaysia.

Magnum is one of a number of Malaysian companies chasing what are believed to be highly-lucrative gaming projects in China.

Late last year, the com-pany announced that the Chinese authorities had approved 'in principle' its application to run a lottery in Guang-dong province, in southern China.

Magnum Corp MY Malaysia, Asia P7999 Amusement and Recreation, NEC P6719 Holding Companies, NEC FIN Annual report P7999 P6719 The Financial Times London Page 19 169
International Company News: Improved sales push Saga profits to NKr802m Publication 930301FT Processed by FT 930301 By KAREN FOSSLI

SAGA Petroleum, Norway's biggest independent oil company, posted an increase in 1992 pre-tax profits to NKr802m (Dollars 114.5m) from NKr777m a year earlier, helped by a rise in oil and gas sales and an increase in income from pipeline tariffs.

Saga proposed lifting its dividend to NKr1.75 a share from 1991's NKr1.25.

Group revenue increased last year to NKr5.36bn, from NKr4.58bn, in 1991 as operating expenses rose to NK4.11bn from NKr3.22bn. Group net profit rose to NKr277m from NKr173m.

Saga recorded a charge of NKr119m for an unrealised currency loss on a long-term dollar loan and also wrote down the value of its 11.7 per cent stake in Elkem, the Norwegian light metals group, by NKr92m. Saga initially bought a 12.4 per cent stake in Elkem two years ago for NKr460m.

Total financial charges fell last year to NKr449m from NKr588m in 1991, while group operating profit dipped to NKr1.25bn from NKr1.37bn.

Gas sales rose to 424m cu metres from 350m a year earlier, while revenue from pipeline tariffs reached NKr450m.

Taxes for 1992 were estimated at NKr525m, down from NKr604m in 1991.

Saga Petroleum NO Norway, West Europe P2911 Petroleum Refining P1311 Crude Petroleum and Natural Gas FIN Annual report P2911 P1311 The Financial Times London Page 19 228
International Company News: Philippine government takes control of airline Publication 930301FT Processed by FT 930301 By JOSE GALANG MANILA

PHILIPPINE Airlines is back under government control, just over a year after it was auctioned in the country's biggest privatisation.

Mr Gabriel Singson, president of the state-run Philippine National Bank, has been elected chairman and president of PR Holdings, a consortium of private and government-owned groups that acquired 67 per cent of PAL in January 1992. He replaces Mr Antonio Cojuangco, who is also president of Philippine Long Distance Telephone.

Meanwhile, at PAL, Mr Cojuangco is to step down today as chairman and president in favour of Mr Carlos Dominguez, a former banker and agriculture secretary.

The appointment of two government nominees to the top positions at PR Holdings and PAL results from a compromise reached between two rival groups of businessmen that have fought for control of the two companies over the past couple of months.

One group is lead by Mr Lucio Tan, a Chinese-Filipino businessman with cigarette and banking interests who holds 40 per cent of PR Holdings. The other group is led by Mr Cojuangco who with his allies also holds 40 per cent.

A dispute arose over whether to purchase Dollars 1.2bn of new aircraft. The row became increasingly bitter until Mr Fidel Ramos, the Philippine president, intervened early last month and asked Mr Singson to work out a scheme acceptable to the two groups.

The compromise came after Mr Andres Soriano, an ally of Mr Cojuangco, sold his stake in PR Holdings to International Container Terminal Services which then sided with Mr Tan.

It is not clear whether the changes represent a victory for Mr Tan. At today's PAL board meeting to formalise the new management team, an announcement is also expected that the airline will continue to pursue the controversial aircraft acquisition plan.

Philippine Airlines PH Philippines, Asia P4512 Air Transportation, Scheduled P9621 Regulation, Administration of Transportation PEOP Appointments COMP Company News P4512 P9621 The Financial Times London Page 19 336
Cross border M&A deals Publication 930301FT Processed by FT 930301

------------------------------------------------------------------------ BIDDER/INVESTOR TARGET SECTOR VALUE COMMENT (pds) ------------------------------------------------------------------------ Altus Finance Unit of Costain Mining 173m US court (France) (UK) blocks sale ------------------------------------------------------------------------ RTZ (UK) Cordero Mining Mining 85m Confirms RTZ (US) US expansion ------------------------------------------------------------------------ Howden Group Novenco Industries Engineering 22m Estimated (UK) (Denmark) total cost ------------------------------------------------------------------------ Goodyear Tire Goodyear Canada Tyres 10m Mopping up & Rubber (US) (Canada) operation ------------------------------------------------------------------------ Credit Lyonnais/ Dia-Met Minerals Diamond mining 7m Small stake Societe (Canada) in stampede Generale (France) ------------------------------------------------------------------------ Prudential MIM Property Property 2m Buy via PIC Insurance Services/ management Holdings (US) Trans-European Property (UK) ------------------------------------------------------------------------ Unilever (UK/ Roma (Poland) Food n/a Buying Netherlands) private company ------------------------------------------------------------------------ Sun Alliance Hafnia (Denmark) Financial n/a Making (UK) services conditional bid ------------------------------------------------------------------------ Union Bancaire Unit of Hafnia Financial n/a Cambio + Privee (Denmark) services Valoren sold (Switzerland) ------------------------------------------------------------------------ Morgan Crucible Shanghai Morgan Electrical n/a 51/49 split (UK)/Shanghai Carbon (JV) Electrical Machinery (China) ------------------------------------------------------------------------

XA World P99 Nonclassifiable Establishments COMP Mergers & acquisitions P99 The Financial Times London Page 18 172
UK Company News: Institutions back Trafalgar cash call - Board braced for criticism from small shareholders Publication 930301FT Processed by FT 930301 By ROLAND RUDD

TRAFALGAR HOUSE'S institutional shareholders have backed the group's controversial Pounds 204.5m rights issue in advance of an extraordinary general meeting today to approve the transaction.

Proxy votes received by Trafalgar are understood to show a clear majority in favour of a cash call at 60p a share. Nevertheless, the board is bracing itself for criticism from small shareholders at today's meeting.

News that the Institute of Chartered Accountants in England and Wales is investigating the group following its decision to restate its 1991 accounts has cast a shadow over the egm. The Institute said it had not launched any formal investigation against the accountants associated with Trafalgar House. Mr Andrew Colquhoun, secretary of the Institute, said the inquiry followed automatically after the Financial Reporting Review Panel forced the group to bring a Pounds 138m write-down on property assets into its profit and loss account. This turned a reported Pounds 122.5m profit into a Pounds 30m loss.

Mr Colquhoun said it was too early to say whether any accountants on Trafalgar's board would be reported to the Institute's disciplinary committee. There are four accountants on Trafalgar's board - Mr John Ansdell, financial director, Mr David Calverly, property division chairman, Mr Ian Fowler, company secretary, and Sir Eric Parker, deputy chairman.

The inquiry comes as a number of Trafalgar's executives believe Hongkong Land, which is expected to shortly take its stake up to 29.9 per cent, is preparing to push through a series of management changes as well as bringing in new financial advisers.

Mr Allan Gormly, Trafalgar's chief executive, said there were no planned changes to the group's advisers, which include Kleinwort Benson and UBS Phillips and Drew, or to the board other than those already announced. He condemned the 'speculation' surrounding people's future and described Trafalgar's relationship with Hongkong Land as very good.

However, the company believes that it would not be surprising if over a period of time a number of changes were made at the behest of Hongkong Land.

Trafalgar House GB United Kingdom, EC P1542 Nonresidential Construction, NEC P6512 Nonresidential Buildings Operators P7379 Computer Related Services, NEC P8721 Accounting, Auditing, and Bookkeeping Services FIN Share issues COMP Company News P1542 P6512 P7379 P8721 The Financial Times London Page 18 397
UK Company News: Hambros to float insurance subsidiaries Publication 930301FT Processed by FT 930301 By RICHARD LAPPER

HAMBROS, the merchant banking group, is completing plans to float some of its insurance subsidiaries on the stock market and expects to go ahead with an issue designed to raise more than Pounds 30m by the end of the month.

Hambros, which sold part of its stake in CE Heath, the insurance broker, last year, will retain a stake of about 50 per cent in the new company, Hambros Insurance Services Group.

The group's existing management is expected to acquire 15 per cent of the capital, with some 35 per cent being sold to outside investors.

The flotation will be by means of a placing coupled with an intermediaries' offer through Panmure Gordon. The new group will be chaired by Mr Christopher Sporborg, the deputy chairman of Hambros Bank. Mr Nicholas Page will become chief executive.

HISG, which is expected to earn profits in excess of Pounds 9m this year, will consist of four main elements.

Cunningham Hart, one of the country's top three loss adjusters, has been acqui-sitive in recent years, taking over IAP, a London-based firm of international loss adjusters, and the Dutch group, Polak Schoute Beheer. Profits in the 12 months to March 31 1992 amounted to Pounds 5.3m on turnover of about Pounds 35m.

Hambro Legal Protection, which provides legal, medical and other advice services by telephone helpline, selling services through companies, brokers and other intermediaries. Its legal expenses insurance policies are underwritten at Lloyd's.

Beale Dobie, a market maker in sales of second hand with-profit endowment policies.

Berkeley Insurance Services, which provides advice about brokers and intermediaries, recommending which one is appropriate to handle a particular type of account or problem.

Hambros CE Heath Hambros Insurance Services Group GB United Kingdom, EC P6211 Security Brokers and Dealers P6411 Insurance Agents, Brokers, and Service FIN Share issues COMP Disposals P6211 P6411 The Financial Times London Page 18 328
UK Company News: Secure Trust to acquire Pounds 4.8m Peoples Bank Publication 930301FT Processed by FT 930301

Secure Trust, the financial services group, has conditionally agreed to buy Peoples Bank from Provident Financial for Pounds 4.8m cash.

Secure said that Bradford-based Peoples served a similar customer base to its own, would give it a presence in Yorkshire, and broaden its range of products and services. Peoples provides personal banking services to 6,000 customers in the UK and has a loan book of more than Pounds 4m.

At December 31 it had audited net assets of Pounds 14m, though since then a court approved capital reduction reduced this to Pounds 5m. 1992 pre-tax profits were Pounds 318,000.

Secure Trust Group Peoples Bank Provident Financial GB United Kingdom, EC P6163 Loan Brokers P6411 Insurance Agents, Brokers, and Service P602 Commercial Banks COMP Acquisition P6163 P6411 P602 The Financial Times London Page 18 150
UK Company News: Relisting expected following restructure at Fairbriar Publication 930301FT Processed by FT 930301 By ANDREW JACK

FAIRBRIAR, the insolvent south-east based property developer which had its shares suspended at 8p in September 1991, is likely to be relisted on the Stock Exchange in the next few weeks.

The joint administrators from Ernst & Young, the accountancy firm, have applied to the High Court to be released from their appointment following the approval by creditors in late January of a company voluntary arrangement.

That would pave the way for what is believed to be the first ever example of a British company being relisted intact since administration orders were first introduced in the 1986 Insolvency Act.

Under a restructuring proposal accepted in late January, unsecured creditors have been offered Pounds 400,000 in cash and 3.45m new shares in exchange for outstanding debts.

Preferential creditors will be paid in full at Pounds 200,000. An interim distribution is expected within four months. There will also be a subscription of 7.67m new shares at 1p.

The Bank of Scotland will receive 4.13m ordinary shares, 8.82m convertible preference shares and up to Pounds 10.6m in zero coupon secured loan notes. It will extend a new working capital facility of Pounds 2.5m.

Mr Terry Carter, one of the joint administrators, said the allocation of shares between the creditors was based on 'a horse trade'. He said Fairbriar showed that administrations to save a company could be made to work.

He added that failure to achieve approval for the company voluntary arrangement would have led to liquidation, with the loss of tax credits worth tens of millions of pounds and little prospect of any dividend for creditors.

The company's properties are valued in the balance sheet at Pounds 51.9m at March 31 1992, against borrowings of Pounds 81.9m. Contingent claims from unsecured creditors are believed to total about Pounds 25m.

Under the proposed restructuring, debt would be reduced to Pounds 60.3m leaving the company with an accumulated deficit. No dividend will be paid until this is removed.

The relisting follows approval at a series of creditors' meetings on January 22 for a company voluntary arrangement.

Fairbriar GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries COMP Company News FIN Share issues P6552 The Financial Times London Page 18 384
UK Company News: NFC sees 1993 as year of growth Publication 930301FT Processed by FT 930301 By ANGUS FOSTER

NFC, the transport and logistics group, yesterday forecast growth in profits and earnings of between 6 per cent and 10 per cent this year, thanks to acquisitions and an expected upturn in the US.

Mr Jack Mather, chief executive, said the company's 'best view' forecasts were for profits before tax of between Pounds 95m and Pounds 100m in the year to end-September, compared with an adjusted Pounds 89.9m last time.

Mr Mather told several thousand NFC shareholders, gathered in Nottingham for the company's annual meeting, that first quarter profits before tax increased 10.2 per cent to Pounds 19.5m. The logistics division increased operating profits 48 per cent to Pounds 17.5m, helped by US growth, favourable exchange rates and lower restructuring costs.

Neither the first quarter figures nor the profits forecast take into account NFC's sale of its waste management subsidiary in January. The company was sold for Pounds 113m to Wessex Waste Management, the joint venture between Waste Management International of the US and Wessex Water.

First quarter turnover increased 12 per cent on continuing operations, while turnover including acquisitions and disposals increased 11 per cent to Pounds 557.4m. Interest costs increased sharply to Pounds 6.6m (Pounds 2.3m), reflecting higher borrowings to finance acquisitions.

Last year gearing increased from 29 per cent to 55 per cent.

Earnings increased 8 per cent to 2.7p. A first interim dividend of 1.35p is being paid, a 3.8 per cent increase. Full year earnings are set to increase from 11.7p to between 13p and 13.7p, the company said.

Mr Mather retires today and is replaced by Mr Peter Sherlock, who resigned from Bass last year.

NFC GB United Kingdom, EC P4212 Local Trucking, Without Storage P4213 Trucking, Ex Local COMP Company News P4212 P4213 The Financial Times London Page 18 315
UK Company News: Gartmore Value net assets advance Publication 930301FT Processed by FT 930301

Gartmore Value Investments, an investment trust, reported a net asset value of 28.3p per share as at January 31, up from 27.4p at the April year-end. The figure for the zero dividend preference shares was 79.1p (72.1p).

Net revenue for the nine months to end-January was Pounds 1.09m (Pounds 987,000). Earnings per share emerged at 2.18p (1.99p).

A third interim dividend of 0.9525p (0.925p) is declared, making 2.8575p to date. The directors expect to announce a reduced fourth interim of 0.9525p (1.5p) cutting the total to 3.81p (4.275p).

Gartmore Value Investments GB United Kingdom, EC P672 Investment Offices FIN Interim results P672 The Financial Times London Page 18 122
UK Company News: Deadline extended for Buckingham bid Publication 930301FT Processed by FT 930301

At the request of the independent directors of Buckingham International, the hotels and nursing homes group, the Takeover Panel has extended the deadline by which Jemma Trust and Naaz Holdings must make mandatory offers for the company.

In December the Panel ruled that Jemma and Naaz were acting in concert in Buckingham shares and that an offer at 2.75p per ordinary share and an appropriate offer for the secured convertible loan stock 1995 of Buckingham were to be made by February 28 1993.

The Buckingham directors anticipate that the offers, together with the advice of the independent direc-tors, will be announced by March 5.

Buckingham International GB United Kingdom, EC P7011 Hotels and Motels P8051 Skilled Nursing Care Facilities COMP Acquisition P7011 P8051 The Financial Times London Page 18 143
UK Company News: Boardroom changes at Arthur Shaw Publication 930301FT Processed by FT 930301

ARTHUR SHAW, the buildings materials group, has announced further management changes following an egm at which rebel shareholders ousted the board.

Mr Peter Ryan, the caretaker chairman, has resigned. He has been replaced by Mr Brian Phillips, a former managing director. The moves follow the removal of Mr Gordon Pearson and the board after shareholders backed rebel demands for a change in direction at the loss-making group.

Mr Alan Bearman and Mr Donald Crammond, two directors on the original board who were first ousted last August for backing the rebels and then reappointed recently, have also stepped down.

Mr Ian Tickler, the rebel leader and Mr Pearson's predecessor, will remain a director.

Mr Tickler, whose family controls 49 per cent of the equity, hopes to sell the Jackdaw engineering subsidiary to reduce the group's Pounds 3.35m debt.

Arthur Shaw and Co GB United Kingdom, EC P3442 Metal Doors, Sash and Trim P3369 Nonferrous Foundries, NEC P3469 Metal Stampings, NEC PEOP Appointments P3442 P3369 P3469 The Financial Times London Page 18 184
Crisis of confidence among business leaders: The mood of big company bosses in continental Europe Publication 930301FT Processed by FT 930301 By FT Correspondents

Continental Europe's big company bosses have written off 1993; most expect no improvement in the economic climate until next year. That is the common theme running through conversations with leading executives in the past few weeks.

Their eyes are fixed firmly on Germany, Europe's largest economy and one facing some of the most difficult problems over the next few years.

German bosses have no illusions. Mr David Herman, chairman of Adam Opel, the German arm of General Motors, paints the darkest picture. Opel will still make profits this year, but they will be reduced. Beyond that, he makes no guesses. 'Business confidence is not yet down at post-war lows, but the mood trend is the steepest downward curve seen since the war.'

Mr Edzard Reuter, chairman of Daimler-Benz, Germany's biggest industrial company, cites a similar time scale. The post-war trend of steady growth interrupted by brief slowdowns and characterised by continuously improving prosperity has apparently come to an end, he says. This has created a pressing need for change in expectations and behaviour within Daimler, German industry and German society at large.

Structural change at Daimler, including harsh cuts at the core Mercedes-Benz motor business, is underpinned by efforts to persuade the workforce that today's business conditions require revolutionary changes in behaviour.

'The relationship with our people and the unions should be changed,' says Mr Herman. 'We all need to open our eyes and see things in a worldwide perspective'.

In charge for only a few months, he is clearly shocked by the routine 10 per cent absenteeism for sickness. 'Who would ever have dreamed that the UK would have 50 per cent the sickness rate of Germany?'

Veba, the big German energy company, also finds local costs its most pressing worry. 'It is essential for Germany to remain competitive in terms of production costs', the company says, 'in order to protect market positions against low-cost producing nations, especially in eastern Europe.'

Mr Hilmar Kopper, chief executive of Deutsche Bank, Germany's largest bank, says the gloom spread by the current cyclical downturn has been compounded by a revival of doubts about Germany's ability to attract investment and broader issues of structural change.

However, he feels the depression is overdone. When the going becomes rough, Germany tends to labour under a sort of 'hysteria' which exaggerates the real scale of the problem, he says.

Opel's Mr Herman ascribes part of the gloomy outlook to the Bundesbank's high interest rate policy and adverse exchange rates. 'But that's not an issue with me', he says, 'because I can't affect it'.

If German business leaders cannot influence the Bundesbank, others feel even more impotent. Mr Carlo De Benedetti, chairman of the Olivetti computers group, is particularly critical of the Bundesbank's policies, which he believes are stifling growth in Germany and exporting recession to other European countries.

Mr Jean-Rene Fourtou, chairman of Rhone-Poulenc, France's biggest chemicals group, says a cut in French and German interest rates after the elections in France next month is indispensable. 'The state of the European economy is worse even that during the 1973 oil-shock. I don't expect it to improve until 1994 at the earliest,' he says. His finance director, Mr Jean-Pierre Tirouflet, warns that without a cut in interest rates, France risks the destruction of its industrial base.

Those who have escaped, through devaluation, from the strait-jacket of German interest rates bless their good fortune. Mr Bo Berggren, president of Stora, Europe's largest pulp and paper group, takes comfort in the drop in the Swedish krona. Thanks to that, and to signs that overcapacity in pulp and paper is gradually being absorbed, he feels relatively optimistic. 'If things do not get substantially better in the next two years, I would be very disappointed.'

Mr Giorgio Garuzzo, chief operating officer of Fiat, Italy's biggest private sector company, draws comfort from the decision to take the lira out of the exchange rate mechanism. The lira's float 'is very positive for the Italian economy and for Fiat,' he says. Although it will probably take at least six months, and possibly a year, for the full benefits to come through for Fiat, 'our competitiveness has been greatly enhanced'.

Demand in the Italian car market, Europe's second biggest, is a concern, however. Last year it stayed relatively buoyant, but has been falling in recent months. January's figures showed a fall of almost 14 per cent on the same month the previous year.

The outlook for the European car industry is of prime concern to Mr Mauritz Sahlin, group chief executive at SKF, the world's leading roller bearing manufacturer. 'Consumer confidence is so low in Europe that people are saving money rather than spending it on cars and household appliances,' he says. 'Until consumer confidence picks up, it's not very likely that there will be any increased demand in the European market.' In Germany, Opel's Mr Herman says: 'Consumer confidence is in free fall.'

If those who rely on selling consumer durables such as cars are gloomy, one man who sells lower-priced consumer goods is noticeably more cheerful. Mr Nicolas Hayek, chairman of Switzerland's SMH, the world's largest watch making group, sees 'many signs' of consumer confidence recovering, especially in France, the UK and Germany.

France was also singled out for optimism by Stora's Mr Berggren, who says firm French and improving UK markets are offsetting the downturn in Germany.

This optimism about France from its neighbours contrasts with an almost uniformly pessimistic view from industrialists in that country. Mr Louis Schweitzer, chairman of Renault since last year, was boasting in mid-1992 of the company's best sales performance for a decade. He struck a far gloomier tone two weeks ago: the group barely broke even in the final quarter, because of sluggish sales and the handicap of the strong franc. Mr Schweitzer has no doubt that Renault is on course for another difficult year in 1993.

Alcatel Alsthom in electronics, LVMH in luxury goods, Pechiney in packaging and Michelin in tyres have all experienced a deterioration in trading conditions since the autumn; all have suffered from the rise of the franc.

Coping with a weak economic outlook is particularly hard when an industry is undergoing wrenching technological change. Mr De Benedetti's Olivetti, like other computer companies, is undergoing just such an experience. As a result, analysts say, it is likely to report a 1992 net loss which could reach L750bn (Pounds 332m). Mr De Benedetti's one dominant concern for the group 'is to convince our large customers that we will be around in five years'.

For some business people, it is the threat to society, rather than to their own companies, that is the most serious concern. Mr Josef Ackermann, new chief executive of Credit Suisse, argues that though the European economy should start to pick up next year, an investment-led upswing will not be strong enough to bring about a significant reduction in unemployment.

'This is cause for great concern,' he says. 'The danger of protectionism will increase, raising the threat of a complete breakdown of the Gatt negotiations. High unemployment in general, and mass unemployment in certain countries, regions and cities, as well as among young people, will place the social and political fabric under pressure.'

SMH's Mr Hayek also stresses the social threat of unemployment. 'I just hope we will not see an extremist coming with a plan to build autobahns, as we did 60 years ago,' he says.

Several of those interviewed stressed the need for government actions. Mr Jorma Ollila, president of Nokia, the Finnish consumer electronics and telecommunications, company, points to a hopeful transatlantic example: 'The fact that we have a leader in the US who is clearly trying to address the economic issues brings a certain amount of optimism about a healthy long-term development there.'

Few were as positive about European governments. Daimler-Benz's Mr Reuter says there are economic policy vacuums in European capitals. He wants a framework industrial policy for the EC bound together by a common European currency. 'The roots of our problems lie in the lack of convincing European solutions,' he says.

Mr Leonardo Vannotti, president of Ascom, the Swiss telecommunications manufacturer, speaks for others when he asks: 'How can I be optimistic when I do not see any concerted action in Europe to get things moving?'

Reports from: Christopher Parkes in Bonn, Christopher Brown-Humes in Stockholm, Alice Rawsthorne in Paris, Haig Simonian in Milan, Ian Rodger in Zurich and Paul Abrahams in London

------------------------------------------------------------------------ HEADACHES FOR THE HEADS OF INDUSTRY ------------------------------------------------------------------------ Jean-Rene Fourtou ------------------------------------------------------------------------ chairman of Rhone-Poulenc 'The state of the European economy is worse even than during the 1973 oil-shock. I don't expect it to improve until 1994 at the earliest.' ------------------------------------------------------------------------ Edzard Reuter ------------------------------------------------------------------------ chairman of Daimler-Benz 'The roots of our problems lie in the lack of convincing European solutions.' ------------------------------------------------------------------------ David Herman ------------------------------------------------------------------------ chairman of Adam Opel 'Consumer confidence is in free fall.' ------------------------------------------------------------------------ Bo Berggren ------------------------------------------------------------------------ president of Stora 'If things do not get substantially better in the next two years, I would be very disappointed.' ------------------------------------------------------------------------

XG Europe P9611 Administration of General Economic Programs P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9611 P9311 The Financial Times London Page 17 1556
Lonrho in talks with Gencor to raise cash Publication 930301FT Processed by FT 930301 By ROLAND RUDD

LONRHO, the international trading group, is in talks with Gencor, South Africa's biggest mining house, about a cash raising exercise which could see its shareholding in Western Platinum reduced to 51 per cent.

The proposals are part of the group's recently unveiled strategy of reducing debt by selling stakes in core businesses. Lonrho has put the value of Western Platinum at Pounds 1bn, though independent brokers say it is worth only half that.

Lonrho wants to wipe out the borrowings of the three platinum mines, which have risen to more than R800m (Pounds 180.5m).

Talks between Lonrho and Gencor, which has a 27 per cent stake in Lonrho's platinum assets, have been under way since the end of last year.

According to a Lonrho executive the group has narrowed its options down to three proposals:

Gencor would buy a further 22 per cent of the platinum mines, taking its stake to 49 per cent.

The platinum mines would be floated off as a separate company on the Johannesburg Stock Exchange.

Lonrho's platinum assets would be put into one of its existing investment companies, such as Tweefontein United Collieries, which is quoted on the Johannesburg Stock Exchange. The investment company would then have a rights issue to raise funds.

It is understood that Lonrho directors hope the talks will reach a conclusion within a fortnight. An announcement may then come as early as this month.

However, the recent fall in the prices of precious metals means all three proposals would be more expensive than first envisaged. Since the beginning of the year the price of rhodium has fallen from Dollars 1,800 an ounce to around Dollars 1,450, while the value of platinum fell from Dollars 370 an ounce to Dollars 350.

Lonrho last year broke off merger talks with Gencor when it decided to a deal with Mr Dieter Bock, the German financier. Mr Bock joined the group's board as joint chief executive with Mr Tiny Rowland. Lonrho decided against merging with Gencor because it did not want to be South African controlled. Mr Rowland has said the group only needed 51 per cent of its key assets to retain control.

Lonrho Gencor Western Platinum GB United Kingdom, EC ZA South Africa, Africa P6719 Holding Companies, NEC P1099 Metal Ores, NEC COMP Company News P6719 P1099 The Financial Times London Page 17 408
Economics Notebook: Time for west to help Russia's transformation Publication 930301FT Processed by FT 930301 By LEYLA BOULTON MOSCOW

The impression in the west that chaos and confusion are overwhelming both Russian politics and the economy is only partly true.

The paradox is that in spite of its mounting troubles, Russia has perhaps come closer to grappling with crucial reforms than ever before.

The west, which has much to lose if attempts at a relatively peaceful transition to a market economy collapse, also has a good opportunity to help the best reformist government that Russia is likely to get in the foreseeable future.

For in spite of the drama surrounding the power struggle between President Yeltsin and the parliamentary chairman, the threat of hyperinflation is helping to focus at least some minds on the need for painful macroeconomic stabilisation.

An unprecedented growth of money supply - culminating in the issue of Rbs1,600bn of central bank credit in December alone, or 60 per cent of national income - helped push weekly price increases to hyperinflationary heights of 10 per cent a week in January.

With inflation back down to 5 per cent a week, the government on Wednesday finalised a plan to restrict money supply growth to 7 per cent a month. This would be accompanied by selective support for state-owned enterprises, and continuing to build badly-needed market institutions.

Many of the pre-conditions for effective reform which were missing last year are also now in place.

As inflation fuelled by an unprecedented growth in money supply has ravaged living standards, the government no longer needs to justify financial austerity as part of a comprehensive reform package it is now trying to implement.

The government is also finally forcing other former Soviet republics to drop the rouble as their currency unless they co-ordinate monetary and credit policy with it.

Bankruptcy and other key legislation is in place. The country is now even building proper borders with other republics which should help it implement foreign exchange controls.

And in spite of dismay over the fall of Mr Yegor Gaidar, the reformist prime minister who launched economic shock therapy but abandoned it under political pressure, the government itself has become more effective since his departure.

Mr Boris Fyodorov, the new deputy prime minister for economics and finance, has both the expertise and the time which Mr Gaidar never had as prime minister, to focus on what he calls the 'elaboration and detailisation' of the Gaidar strategy.

For this he has the support of Mr Viktor Chernomyrdin, the new prime minister who has the advantage of being elected by parliament and therefore does not need to constantly fight for his political survival.

What happens next largely depends on talks between the government and the central bank, described by a government economist as 'a lengthy persuasion process'.

The central bank has come back with counter-proposals to those of the government which include setting money supply growth at 20 per cent a month. But the bargaining has only just begun.

Previously, the government engaged in political polemics by blaming the central bank for the failure of last year's stabilisation attempts.

Now, Mr Fyodorov is working hard to reform the relationship so that both sides recognise their responsibilities: the central bank to defend the currency, and the government to implement the economic reform it has talked about.

Mr Fyodorov also wants the central bank to restrict the government to commonly agreed credit expansion limits. And he believes the government should pay a higher interest rate for central bank credits. At present it has paid just 10 per cent a year, compared with 80 per cent paid by commercial banks.

Such a practice would in turn mean admitting to a much bigger budget deficit than the 5 per cent of Gross Domestic Product proclaimed last year and planned in earnest for this year. If cheap credits to the government were factored into the calculation, the deficit would be closer to 30 per cent .

This is where the west, which last year found a convenient excuse to wait and see about financial aid as Mr Gaidar failed to live up to promises made to the IMF, can make a big difference.

Tied to specific conditions such as the selective distribution of credit to enterprises and the building of a social safety net, western transfers would lessen the hyperinflationary pressures caused by printing money to cover spending which cannot be cut overnight.

Continued technical assistance is also vital, with focus on the provinces rather than Moscow, which is already saturated with foreign advice.

While some of Russia's problems are connected to internal politics, including the present conflict between the executive and the legislative branches, fear and ignorance over what should be done is even greater.

A few regions of Russia are boldly pressing ahead with reform with the help of western advisers. Others, though, fearing unpopularity and not knowing any better, are falling back on the even more dangerous formula of half-baked reform.

Another danger is Russia's old habit of preferring talk over action, and setting up new rules and superfluous structures to tackle old problems. Typical is the recent establishment of a new presidential body to attract foreign investment (duplicating an existing government agency which itself replaced a committee), when what is really needed is the removal of very basic obstacles to investment.

It is more important than ever that the west should not be cowed by the confusion in Russia, but should declare itself ready to provide targeted assistance as soon as the authorities produce some proof of their resolve.

President Bill Clinton, who has some well-informed Russia experts in his administration and meets President Yeltsin on April 4, would do well to consider providing the leadership for a concerted western aid policy whose time has now come.

RU Russia, East Europe P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs CMMT Comment & Analysis P9311 P9611 The Financial Times London Page 17 997
Companies in this issue Publication 930301FT Processed by FT 930301

---------------------------------------------- UK ---------------------------------------------- Airtours 17 Arthur Shaw 18 Buckingham Intl 18 Fairbriar 18 Gartmore Value Invs 18 Hambros 18 Lonrho 17 NFC 18 Owners Abroad 17 Provident Financial 18 Secure Trust 18 Trafalgar House 18 ---------------------------------------------- Overseas ---------------------------------------------- Daewoo Electronics 19 Gencor 17 Goldstar 19 Hyundai Electronics 19 Magnum Corp 19 Nippon Housing Loan 19 Philippine Airlines 19 Repola 19 Saga Petroleum 19 Samsung Electronics 19 Skandia 19 Sony 19 Uni Storebrand 19 Vard 19 ----------------------------------------------

XA World P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page 17 100
Yeltsin seeks peacekeeper role: Russian leader wants right to curb conflicts on his borders Publication 930301FT Processed by FT 930301 By JOHN LLOYD and JUREK MARTIN MOSCOW, WASHINGTON

PRESIDENT Boris Yeltsin told the international community yesterday that Russia must be given a free hand to act as guarantor of peace in the former Soviet bloc, possibly with special powers granted by the United Nations.

Fresh from a 12-day break at a country house near Moscow, the Russian leader said he believed 'the world community is increasingly coming to understand Russia's special responsibility in this difficult task'.

His country had 'a heartfelt interest' in suppressing conflicts round its borders, he told an open meeting of the political council of the influential centrist Civic Union bloc.

'The moment has come when responsible international institutions, including the United Nations, should grant Russia special powers as guarantor of peace and stability in the region of the former (Soviet) Union,' Mr Yeltsin said.

At the same time, he stepped up the battle at home over the division of power between president and parliament.

He warned his opponents he would no longer tolerate their blocking of constitutional and economic reform. He did not feel bound by oath to the present constitution, which is a patched up version of the old Soviet era document. 'If we refuse to divide powers, we will get dictatorship or anarchy,' he said.

The strength of his latest call for more power for the president appears to indicate he is contemplating decisive action soon in the power struggle.

Mr Yeltsin's warning to the international community comes at a time when western states are in despair at their inability to control the fighting in former Yugoslavia. The Russian president appears to be assuming that major foreign states would not protest too much about Russian 'peace keeping' in the former Soviet Union where there are similar nationalistic disputes.

The remarks also signal that Russia is no longer willing to accept the fiction of being one among equals in the Commonwealth of Independent States.

Russian troops are already enmeshed in fighting in Georgia and Tajikistan; holding an uneasy peace in Moldova; and in the Baltics where tension is rising between the native and Russian populations. There is also tension between Russia and Ukraine over the Black Sea fleet.

Jurek Martin, in Washington, writes: On the question of Russia's economic and political reform, Mr Warren Christopher, US secretary of state, yesterday offered an unqualified endorsement of US support for Mr Yeltsin, who is due to meet President Bill Clinton on April 4.

Mr Christopher said in a television interview that the Russian president's convictions in favour of 'greater democracy and freedom' made him 'in our estimate the best choice in Russia'.

Economics Notebook, Page 17

RU Russia, East Europe P9121 Legislative Bodies P9721 International Affairs P9111 Executive Offices GOVT Government News P9121 P9721 P9111 The Financial Times London Page 16 483
China boxes clever for the Olympics with US match Publication 930301FT Processed by FT 930301 By TONY WALKER BEIJING

IN A drab stadium in Beijing on Saturday night, the workers of China came face to face with the blood, sweat and hoopla of American professional boxing. It was billed as the 'Brawl at the Wall'.

The promoter, Mr Harold Smith, appeared elegantly attired in a dinner jacket. Local girls, in short white skirts and matching tops, semaphored each new round. Many in the crowd, bemused and exhilarated by the spectacle, had spent a month's wages on a single ticket.

Muhammad Ali, boxing envoy, former world champion and sporting icon, was introduced to the cheering crowd. He raised his arm in acknowledgement of the greeting.

Mr Han, a producer for Chinese television, which was broadcasting the event to millions, caught the mood of joyful puzzlement: 'It's crazy, but I like it.'

If China, preparing a bid to host the Olympics in 2000, needed a lesson in sports promotion, it certainly got one. Fighters were greeted on their arrival in the ring with their signature tunes blaring from amplifiers.

A honey-voiced American ring announcer boomed out their details. The bill included five bouts, featuring 10 boxers, whose abilities were not undersold. At the ringside sat the American promoters, managers, attorneys, wives, mistresses, girlfriends, sponsors and other assorted hangers-on.

Among many bizarre moments during a long night which combined American and Chinese entrepreneurship in unlikely circumstances was the brief opening ceremony. Hardened veterans of the American fight game became misty-eyed at the playing of the US national anthem on the site where not many years ago mass rallies were held to denounce American imperialists and all their works.

When American Leeonzer Barber retained his World Boxing Organisation (WBO) light-heavyweight crown over countrymen Mike Sedillo, it was probably the first time a world title fight had been staged on Chinese soil, certainly since the communist revolution in 1949, and perhaps for many years before.

China's rulers banned boxing as cruel, exploitative and capitalist, but in 1986 the ban was lifted after the Chinese began to move back into the mainstream of international sport.

Entering into the diplomatic spirit of the occasion the fighters - nine out of the 10 were Americans - said they had come on a mission of peace, never mind that inside the ring several exhibited murderous intent.

Chinese media reporting revealed a certain lack of expertise. A reporter for the official New China news agency described as a 'demonstration' the first bout between a hulking Kevin Ford and a puny, by comparison, Keith McMurray. This is likely to have been news to a battered McMurray who was sent crashing to the canvas several times.

The Chinese promoters made little secret of their motives for staging the 'Brawl at the Wall': 'Of course, we see this as part of our campaign to stage the Olympics,' said one official.

CN China, Asia P7941 Sports Clubs, Managers, and Promoters COMP Company News PEOP Personnel News P7941 The Financial Times London Page 16 508
Opposition mounts to widening Brussels' merger role Publication 930301FT Processed by FT 930301 By ANDREW HILL and LIONEL BARBER BRUSSELS

FRANCE, Germany and the UK have joined forces to oppose any expansion of the European Commission's powers to vet large mergers when EC rules come up for review this autumn.

The governments in Bonn, Paris and London have indicated to Brussels that they will resist moves to lower the turnover thresholds above which the EC's competition authorities automatically investigate deals affecting the EC market.

Brussels officials last week said the Commission remained 'neutral' on the matter of thresholds. At present, Brussels looks at all mergers involving companies with a combined turnover of Ecus5bn (Pounds 6.1bn).

Last December, Sir Leon Brittan, then EC competition commissioner, said existing thresholds were too high. Mr Karel van Miert, his successor, has yet to comment. But if he does propose lower thresholds, he will face strong opposition from France, Germany and the UK which see the matter as a test case for 'subsidiarity' - the principle that powers should be devolved to the most appropriate national or regional authority.

Mr Michel Sapin, French finance minister, has suggested scaling back the Commission's competition powers, starting with higher thresholds for merger investigations. Paris was incensed in 1991 when the Commission blocked a Franco-Italian takeover of de Havilland, the Canadian aircraft-maker - the only merger so far rejected under the 1990 EC merger rules.

Sir Bryan Carsberg, the director-general of the Office of Fair Trading in London, is reported to view an increase in Brussels' jurisdiction as premature.

Similarly, the Bundeskartellamt in Berlin believes that, after only two years of operating the new rules, it is too soon to make a judgment on change. A senior Bundeskartellamt official suggested that Germany was pushing first for other reforms, specifically more open decision-making in Brussels.

The Commission is conducting a wide-ranging review of its September 1990 merger rules. Consultations with industry, lawyers and governments are likely to be wrapped up in a fortnight, at which point the Commission must decide whether to push for more powers. Mr Van Miert must table any amendments by the end of the year for approval by member states.

The EC's merger task force, the special unit set up within the Commission competition directorate, has won praise for its speed and comparative efficiency in examining more than 300 cases over the past two and a half years.

The Commission is also examining whether to bring all joint ventures under the merger rules, and whether to allow companies to amend their deals to win approval during the preliminary inquiry.

FR France, EC DE Germany, EC GB United Kingdom, EC QR European Economic Community (EC) P9651 Regulation of Miscellaneous Commercial Sectors COMP Acquisition GOVT Regulations P9651 The Financial Times London Page 16 464
The Lex Column: UK gilts Publication 930301FT Processed by FT 930301

The gilts market is whipping itself into a frenzy of anticipation about a change to the full funding rule in the Budget. Today sees yet another recommendation to that effect, this time from Midland Montagu. At this rate the market will be very disappointed if Mr Lamont does not oblige. That must be doubly irksome to the Treasury. The main advantage of conceding the change would not have been immediate sales of gilts to banks: the yield curve is not nearly steep enough to tempt them and even Treasury bills are too expensive. But the authorities would have derived tactical gain by announcing the change as a surprise. They could then have funded aggressively into a rising market.

Indeed, if Mr Lamont can pull something out of the hat to make the market feel good, this would still be a sensible Budget day strategy. Tax concessions to retail buyers of gilts would help, as would a downward revision of the PSBR. More effective would be a foreign currency borrowing programme. That would be controversial but it makes more sense to borrow abroad with sterling at DM2.33 than it did to defend a higher parity within the ERM.

GB United Kingdom, EC P6211 Security Brokers and Dealers CMMT Comment & Analysis P6211 The Financial Times London Page 16 227
The Lex Column: Hong Kong Publication 930301FT Processed by FT 930301

The poker game between Mr Chris Patten and the Chinese government gets more absorbing, not least because it is unclear who is bluffing. By rallying to within an ace of all-time highs, the market clearly believes a fudge will be agreed behind the scenes, presumably with the British doing most of the backing down. Such a deal is also expected to include agreement on the new airport and associated large construction contracts.

That view may be too sanguine, given the void between Mr Patten's public position and the apparently implacable Chinese opposition. Even if the gap can be bridged it will take time, and the market will not keep patience for ever. Besides, the Legislative Council is no longer just a rubber stamp and requires a reasonable period to debate the proposals before the end of the session in July. If Mr Patten cedes too much to Beijing, he may also get flak from the democratic reformers who, thus far, have been his main support. None of that will lower the political temperature in the colony, however much the business community wants to hush up the whole affair. The market thus remains vulnerable, all the more so since over half the Hang Seng's earnings still come from property, which can hardly move to safer shores.

HK Hong Kong, Asia CN China, Asia GB United Kingdom, EC P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 16 250
The Lex Column: Dividend dilemma Publication 930301FT Processed by FT 930301

The moment of truth arrives for Barclays Bank this week when it must decide on its dividend for 1992. The stock market assumes the payout will be maintained despite large property lending losses. But should Barclays blithely pay a dividend out of reserves as if nothing adverse had occurred? The question, if the bank and its shareholders are being honest, is far from easy.

A bad reason for doing so would be to save the skin of Mr Andrew Buxton, the bank's executive chairman who was managing director for a period from 1988 when much of the bad property lending was approved. A cut dividend would almost certainly set the City baying for blood. It might no longer be possible for Mr Buxton to satisfy his critics simply by splitting the functions of chairman and chief executive.

Yet a cut dividend could also imply the bank was gloomy about its own prospects despite the succession of interest rate cuts since last September. The signal would be seriously misleading if the real reason was to atone for past mistakes. Barclays would have some justification for maintaining its dividend if it felt confident of continued growth in operating income - provided the cost to its reserves did not impair its ability to finance higher lending in the recovery. Having squandered the proceeds of its 1988 rights issue, it can scarcely ask shareholders for more.

All other things being equal, an unchanged final dividend costing around Pounds 195m would knock only about 20 basis points off Barclays' tier one capital ratio. That would leave it at around 5.7 per cent, substantially above National Westminster's 5.2 and comfortable enough for this year. But that assumes no more nasty surprises in this week's results. Barclays must also decide if it will be able to retain enough future earnings to rebuild reserves going forward. That is the test for the dividend. Even if it passes, shareholders should still ask why a system of collective responsibility for lending decisions turned out to be a system that effectively absolves management of any responsibility.

Barclays Bank GB United Kingdom, EC P602 Commercial Banks CMMT Comment & Analysis FIN Annual report P602 The Financial Times London Page 16 379
Observer: Caught out Publication 930301FT Processed by FT 930301

Never underestimate the ability of a computer to offer fresh insights into investment conditions. A fund manager was checking a document discussing prospects for rental growth in the UK property market when the computer flashed up the following query: 'Rent review'. Is this a mistake? Is it the expression rigor mortis?

GB United Kingdom, EC P6512 Nonresidential Buildings Operators CMMT Comment & Analysis P6512 The Financial Times London Page 15 78
Observer: Hwang-power Publication 930301FT Processed by FT 930301

Not everyone believes that Battersea power station is God's gift to the London landscape. But Victor Hwang, who has the job of explaining why his Hong Kong family is venturing where even the UK's most hardened property developers fear to tread, insists that he doesn't want to pull it down.

The 39-year-old Victor is no stranger to Britain. Along with his other three brothers, he was educated at Lindisfarne College. He says his father chose to send his boys to a minor British public school in north Wales because he wanted to keep them well out of the way of London's Chinese community. However, the Hwangs' arrival on the 31-acre Battersea power station site has caught the attention of not just the London Chinese. What is it that the Hwang boys have spotted that has escaped London's canny property types?

Victor remains tight-lipped on his family's plans for London's famous landmark. All he will say is that he probably won't turn the power station into a hotel, because 'it doesn't have any windows'.

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries CMMT Comment & Analysis P6552 The Financial Times London Page 15 201
Observer: King cat Publication 930301FT Processed by FT 930301

Whatever might be said about Lady Thatcher, her loyalty to her old business heroes is admirable. When TV-am lost its breakfast slot, Lady Thatcher wrote to tell chairman Bruce Gyngell how heartbroken she was, especially since she was partly responsible for the legislation which lost TV-am its franchise.

Now it seems she has been consoling Lord King who has lost his British Airways chairmanship somewhat earlier than planned. According to yesterday's Sunday Times a lady called Margaret phoned Lord King to say: 'I just wanted to tell you, you were the greatest achievement of my years in office. I am so proud of you.'

Whatever the truth of the tale, it is clear that Lord King has not lost his sense of humour judging by his performance at last week's annual dinner of the Institution of Electrical Engineers, where he recounted the story of a hungry mouse. Every time it tried to venture out of its hole, it was terrified by a loud feline 'miaow'.

Eventually the 'miaows' were replaced by a dog's bark. Thinking that the coast was clear, the mouse ventured out, only to be pounced upon by the cat. Moral of the tale: it pays to learn a second language, even if you are a cat.

GB United Kingdom, EC P4512 Air Transportation, Scheduled P9111 Executive Offices PEOP Personnel News CMMT Comment & Analysis Lord King, Former Chairman British Airways P4512 P9111 The Financial Times London Page 15 250
Observer: Show business Publication 930301FT Processed by FT 930301

Top marks to Britain's life assurance industry for resourcefulness under enemy fire and braving a counter-attack in face of hopeless odds.

Under assault from regulators and customers provoked by the sales agents' high-pressure tactics, the industry has mounted the classic defence. It has commissioned a survey showing that six in every seven people think life insurance is valuable if not essential.

Among the survey's more astounding findings is that 70 per cent of respondents actually agreed that policy-buyers who cash them in early deserve to lose out financially. The number believing the sales agent should bear the penalty was only 7 per cent.

In the meantime, however, Observer hears that the industry has also launched a less conventional undercover operation. Companies ranging from Allied Dunbar to Legal & General have begun rattling people's letter boxes with unsolicited suggestions that they might like to change career and become 'financial consultants'.

One recipient is singer-songwriter Dilly Keane, formerly with the Fascinating Aida trio. She reported on radio the other day that she had just had a second such approach, from Allied Dunbar.

The company's John Morgan, who wrote the letter, said Keane's name was obtained from a marketing company with a very high success rate. So far, though, the only actual recruit from show business was a certain Dennis Lipton, whose wife used to run a stripper-gram enterprise.

GB United Kingdom, EC P6311 Life Insurance CMMT Comment & Analysis MGMT Management P6311 The Financial Times London Page 15 254
No longer a superficial wound: The profits squeeze is forcing Japanese companies to rethink how they do business Publication 930301FT Processed by FT 930301 By CHARLES LEADBEATER

Japanese companies are admitting an unpalatable truth. Their success in the late 1980s was partly a mirage, which disguised some strategic misadventures and a lack of discipline about costs.

Last week, corporate Japan made its realisation public. Nissan, the carmaker, announced plans to shut a domestic production plant in a drive to save Y200bn (Pounds 1.2bn) in three years, with a cut of 5,000 in its workforce of 53,000. NTT, the telecommunications group, plans to cut 30,000 jobs by 1996.

Restructuring has become publicly acceptable. Nissan and NTT have opened the way for other companies to announce plans to halt a three-year slide in profits.

That fall was set off by the slowdown in economic growth after the the rapid acceleration of the late 1980s. But Japanese companies face more than simply a cyclical slump in demand.

They are starting to acknowledge a deeper malaise. Operating profitability for all industrial companies declined in the 1980s, owing to a steady rise in costs. In addition, the car and electronics companies, which have been the industrial engines of Japan's growth, face saturated domestic markets.

So as companies start cutting costs, they are facing more troubling questions about the way they do business. Have they reached the limits of their traditional methods of management? Will their profits improve only if they retreat from what they have stood for - lifetime employment, a wide array of trend-setting products and a constant effort to expand market share?

The problem stems from the costs left over from the high growth of the late 1980s. The increase in investment between 1986 and 1990 has left behind a depreciation charge which has risen to 4.5 per cent of manufacturing industry's sales. Personnel costs have increased, because white-collar employment in manufacturing has expanded by almost a fifth since 1985. Labour costs per head last year were 25 per cent higher than in 1988.

Japanese companies were able to carry these costs on two conditions: high rates of growth and cheap capital. With the collapse of the speculative bubble economy of the late 1980s, those conditions have evaporated. The result has been a severe profits squeeze. Total profits earned by the industrial sector in Japan this year could be half the level they were in March 1990, according to Mr Peter Norton, chief strategist at Baring Securities.

Until this winter the corporate response to the profits squeeze was superficial. Cuts in executive salaries of up to 15 per cent at companies such as Omron, the electrical machinery maker, have been commonplace. Nippon Steel started locking its doors at the weekend to reduce overtime. The elimination of new-year cards saved the company about Y3m.

Job reductions were confined to workers on the fringe of companies' full-time workforces. JVC, the electronics group, shed about 1,500 part-timers. Kanebo, the textiles and cosmetics group, is retiring 300 workers over the official retirement age.

Deep cuts in investment are widespread and more than superficial. But they will not yield big short-term savings. Nissan is cutting investment by 15 per cent, but its depreciation charge will rise from Y96.9bn in 1990 to Y160bn next year to pay for its past investment.

Until this year most companies had limited themselves to measures such as these. But last month something changed. Companies began to recognise that the downturn would be protracted. A new phase of restructuring began, which typically involves a combination of:

Changes in senior management. The president of Matsushita, the ailing electronics giant, last week resigned to take responsibility for its poor performance. Bridgestone, the tyremaker, has taken the unprecedented step of appointing as president an executive from its highly decentralised chemical division who has extensive overseas experience.

Much deeper staff cuts. Iseki, which makes rice-planting machines, plans to cut its workforce by a fifth to 2,300 by November 1995. Mazda, the carmaker, has transferred 5,000 administrative staff to its production lines.

Retreating from new businesses. Taking advantage of cheap credit in the 1980s, many companies entered the high-growth electronics markets. Now chemicals group Ube Industries, for example, is withdrawing from making floppy discs.

Companies are cutting product ranges to make production simpler and reduce development costs. Nissan plans to cut the number of options it offers with its models - such as styles of steering wheel, or interior design - by 35 per cent in three years.

The proliferation of products in the past decade often generated large costs but little revenue. Ajinomoto, the food group, plans to halve its product range to 2,500 items after finding that 40 per cent of its products contributed only 3 per cent of its sales.

Revising corporate structure. Sanyo, the electronics group, has replaced its centralised divisions with eight business units, each responsible for its own profitability under the slogan 'No excuses'.

Reducing such costs is a quick way to boost profitability. A 5 per cent cut in administrative costs at the average manufacturer would improve operating profits by more than 25 per cent, said Mr Norton.

But cost-cutting on this scale may not be enough to help manufacturers respond to the longer-term pressures they face: more expensive capital; a decline in prices for electronic goods; mounting competition from low-cost Asian producers, especially in traditional industries such as textiles; and the prospect that Japan's maturing economy will grow only slowly in the 1990s.

These pressures mean further restructuring to come.

International strategies are likely to be reassessed. More companies may follow Shimizu, the construction group, which is pulling out of the UK and Australia. Japanese companies may start to retreat from their ambitious investment plans for the US and Europe, in favour of investment in low-cost production plants in the high-growth economies of south-east Asia.

Within Japan, there is likely to be consolidation in whole sectors of industry. A 30 per cent fall in paper prices since 1989 has already forced Kanzaki Paper Manufacturing, the seventh largest paper-maker, to merge with Oji Paper, the largest. That followed plans for a merger between Jujo Paper and Sanyo Kokusaku Pulp.

The car industry, with nine manufacturers competing over a slowing market, is another candidate for consolidation. There may have been room for nine manufacturers in the 1960s, when automobile ownership in Japan was growing at an annual rate of about 37 per cent. But in the next few years most analysts expect ownership to grow by about 3 per cent at most. That may not be enough to sustain them all. The tie-up between Honda and Isuzu announced late last year could be the first step in a wider rationalisation of the industry.

The heavily overpopulated electronics industry could also consolidate. One senior executive admitted: 'We will no longer be able to make the profits we need just from making hardware. No matter how efficient we are, it just cannot be done.'

For the electronics companies, cost-cutting will not be enough. They need new strategies to take them further into high-growth areas, such as software.

As Japan's companies embark upon such changes, they have large resources to draw upon: highly educated workforces employed in efficient, modern factories. They also have a big incentive: the large productivity gains to be reaped from cutting into bloated administrative and office divisions.

Moreover, the financial pressure upon them is unlikely to ease. Since previous periods of restructuring in the 1970s and 1980s, the relationship between the Japanese finance sector and industry has changed significantly. In the 1970s, when companies restructured after the oil shock, they relied upon the patient support of their banks. In the 1980s, large companies turned to capital markets for their finance.

Now the banks have their own problems with mounting bad loans. The Tokyo stock market is in the doldrums and Japanese investors are wary. The international capital markets will provide funds, but they will demand that Japanese companies make an internationally competitive return on investment. That will maintain the pressure for improved profitability.

As Japan's companies start stripping themselves down to their competitive core, many appear to be introspective and uncertain. When they emerge, in three or four years, however, they may be more competitive than ever before.

JP Japan, Asia P99 Nonclassifiable Establishments COMP Company News MGMT Management P99 The Financial Times London Page 15 1393
Leading Article: Public services Publication 930301FT Processed by FT 930301

LAST WEEK'S report on the collapse of the London Ambulance Service's new computer for despatching vehicles to emergencies makes sorry reading. The computer system crashed after a series of management failures, plunging the capital's ambulance service into chaos. The LAS chairman has resigned and reforms are under way, but there are lessons here for all the public services.

In the health service, as in other key public services, the government has delegated management responsibility to a series of quangos. These are usually dominated by professional managers and by business executives; elected representatives of the local community have often been excluded. The aim is to work along more businesslike lines, giving managers more freedom.

Much of this revolution in the management of public services is valuable and long-overdue. It has also required determination, given the opposition of many who work in the public services. But in its haste to force through change, the government has given inadequate attention to the question of accountability. It is not enough for public services to be efficient: they must be accountable to those who pay for them.

This accountability can often be exercised through choice. Parents, for example, can choose between different state schools, patients between competing family doctors. But where there is a monopoly - as, currently, with the ambulance service - mechanisms are needed to ensure that the taxpayer who pays the piper calls the tune.

That was manifestly not the case under the arrangements for managing London's ambulances. It was obvious to patients, doctors and hospital administrators that the service was quite inadequate. Yet the LAS board failed to remedy those defects: it demanded too little information to make informed judgments; and it was too ready to accept the assurances of senior managers that problems were being resolved. The regional health authority responsible for the ambulance service was reluctant to interfere, since it had delegated responsibility to the LAS board.

The problems were exacerbated by a management style which created a 'fear of failure', mistakenly believed to be modelled on best private-sector practice. This put undue pressure on managers to meet over-ambitious targets and to ignore obvious difficulties. It also undervalued good communications between managers and staff, leaving an atmosphere of mistrust.

If similar failures are to be avoided in the future, the government must ensure that clear lines of managerial and public accountability are established when responsibility for services is delegated to quangos. With similar reforms now mooted for the police, it would be unforgiveable if the lessons of the London Ambulance Service were not learnt.

GB United Kingdom, EC P4119 Local Passenger Transportation, NEC CMMT Comment & Analysis MGMT Management P4119 The Financial Times London Page 15 456
Personal View: Growth for sale at One Stop Shops Publication 930301FT Processed by FT 930301 By DAVID GRAYSON

Researchers recently looked at every known scheme around the world for helping small businesses. To their amazement, it seems that every form of scheme has either been started or subsequently tried in the UK. Britain is a great inventor of 'schemes' for small business.

But many schemes have confused social objectives (cutting unemployment) with economic goals (maximising wealth creation). They have often been under-funded, chopped and changed, or run by people not trained to provide the necessary quality of service. The sheer multiplicity has bewildered clients: few schemes have had sufficient marketing to reach their target audience, and running them separately has raised costs and reduced effectiveness and led to 'turf wars'.

As Michael Heseltine, trade and industry secretary, declared last July: 'I tell you frankly, we can no longer afford to continue to waste our collective energy on this unhelpful debate.'

Mr Heseltine has just run a national competition to pilot the idea of 'One Stop Shops' for business support. He wants the shops to target those with the aspiration and potential to grow. These are the people who will really contribute to wealth creation and to Britain's international competitiveness. This is not picking winners, but developing them. It cannot be done by national government, but by good business advisers who can spot and nurture such businesses because they have seen a client's commitment and ambition over time.

A common complaint about business advice agencies is that the information they give is too general. Information technology, however, makes it possible to identify what businesses in a particular area and sector are asking for.

Mr Heseltine has stressed that the shops must make the most of new technologies. They will need to be on-line to commercial databases, and to be connected to each other by electronic mail so that inquiries unknown to one shop can be checked out with others.

Sharing expertise might be reinforced if shops have both a geographic responsibility and sectoral specialisms. IT would also allow video presentations and conferences in which business advisers and individual companies could participate via each shop.

Considerable resources are already being spent through training and enterprise councils, chambers of commerce, enterprise agencies and local councils to help small firms. The impact could be greatly enhanced, but it is necessary to be realistic about what activities can become self-financing and what will need subsidy. Public money for One Stop Shops should clearly be for outcomes - not inputs. It should not, for example, be linked to 'bottoms on seats' on training courses, but to improvements in the client's business performance.

Banks and companies such as Shell and BT have given large amounts of cash, people and expertise to enterprise agencies and other small business initiatives during the past 15 years. Apart from maintaining existing commitments, larger firms can help the One Stop Shops through making available expertise and contacts - for example, in total quality management, 'green' auditing and supplier opportunities.

The government has repeatedly emphasised the distinction between policy formulation and delivery of services. There is no reason why the Department of Trade and Industry should deliver services such as consultancy or export advice to companies. In time, most of these can be contracted out to the One Stop Shops.

Once established, it is essential that shops enjoy a period of stability and continuity - and that they are clearly seen not as a government scheme but as local partnerships in which government (not just the DTI) is an active partner.

Cynics believe these One Stop Shops will end up as just one more government scheme. However, combining the vision of a political heavyweight such as Mr Heseltine with the emerging consensus among business support organisations on the ground, a 'once in a decade' opportunity is being given to achieve a national network of business advice centres setting world-class standards.

The author is managing director of Business in the European Community's business strategy group

GB United Kingdom, EC P9611 Administration of General Economic Programs CMMT Comment & Analysis P9611 The Financial Times London Page 15 691
Leading Article: Bankers and small business Publication 930301FT Processed by FT 930301

RELATIONS BETWEEN Britain's high-street banks and its small and medium-sized businesses are under severe strain as the recession drags on. Talk of the renewal of a British 'enterprise culture' during the 1980s has rung increasingly hollow as the number of small company failures has grown. Their banks have been unable to get back overdrafts and short-term loans secured on property that has fallen in value.

The number of company insolvencies in England and Wales rose from 9,400 in 1988 to some 22,000 in 1991. A continued attrition appears inevitable as banks burned by bad debts refuse loans to highly geared businesses. Nearly half of National Westminster's Pounds 1.3bn provision in UK branch banking last year was against loans of less than Pounds 50,000.

In this unhappy climate, one bank chief executive has suggested that the system of financing small business should be fundamentally rethought. Mr Brian Pearse, of HSBC's Midland Bank, says that a 'partnership' of banks, businesses and the government is required to wean smaller companies from their addiction to short-term debt financing.

Mr Pearse has a number of ideas. He thinks the government should provide tax breaks to individuals who invest in equity capital for local businesses. He also believes Britain should imitate the German KfW bank by providing a subsidy so that banks can provide medium and long-term loans at 1 percentage point above base rates, rather than the current 2 to 3 points.

Mr Pearse does not absolve banks from blame. He thinks they need to improve risk assessment, and offer businesses new forms of debt finance. But many will sniff self-interest in his plan. The banks have weakened their capital by paying out uncovered dividends in the past few years. Although Midland's capital is now backed by that of its parent, UK banks would like to be eased over the awkward phase before retained profits recover. Shareholders who are unhappy at their record might well hesitate to subscribe to fresh rights issues. This suggests the government should exercise caution before offering even the Pounds 67m Mr Pearse believes his scheme would cost at most.

This does not detract from the validity of his more general point, that British financing of small businesses requires a rethink. Many businesses have been tempted into accepting an excess of short-term debt from banks by the lack of equity alternatives. One recent study found that 58 per cent of debt held by small companies in Britain was in the form of overdrafts, compared with only 14 per cent in Germany.

Midland is not alone in thinking incentives are needed to lessen this dependence. Several business organisations have called on Mr Norman Lamont, the chancellor, to provide tax incentives to increase capital in his forthcoming budget. Corporation tax is biased against equity funding and capital gains tax is set at 40 per cent - the same as the top rate of personal income tax. Mr Lamont will be right to respond.

GB United Kingdom, EC P602 Commercial Banks CMMT Comment & Analysis P602 The Financial Times London Page 15 519
Leading Article: India's budget Publication 930301FT Processed by FT 930301

THERE ARE some welcome surprises in Mr Manmohan Singh's third budget, unveiled on Saturday. In floating the rupee and sharply cutting tariffs, he has gone further than expected and shown that he remains committed to reforming and opening up India's economy. Exporters and foreign investors should draw encouragement.

However, the flourish of Mr Singh's delivery cannot disguise his dual purpose. Almost all the measures can be justified as extending the reform process. Cuts in excise duties were necessary. The fall in interest rates follows a reduction in inflation. Who can deny the need in India for spending on health, education and agricultural development if the fiscal austerity of the past two years now provides some leeway? But it is hardly coincidence that most of the measures are also vote-winners.

Provided that fiscal discipline is maintained and that a sudden surge in imports does not wreck the balance of payments, it would be harsh to blame Mr Singh for adopting a more populist approach. The government of Mr P V Narasimha Rao needs to restore confidence in its direction and to boost national morale after the violence which has followed the destruction of the mosque at Ayodhya. Several important state elections are due and an early general election cannot be ruled out.

The government's argument is that the past 20 months of cuts in the budget deficit, subsidies, inflation and the balance of payments deficit, coupled with the end of many bureaucratic hurdles in the way of investment, have provided a base from which to accelerate economic growth. Without increases in spending and cuts in duties, the budget deficit would be even smaller than the 4 per cent of GDP desired by the International Monetary Fund.

This may be true. In the longer term, however, India's prosperity will depend on the government tackling the most sensitive issues: tax reform, subsidised lending, and the size of the public sector and of government itself. Mr Singh has skirted round the edges of these except in one important regard: his decision to inject capital into state-owned banks so that they can clean from balance sheets un-provisioned bad debts, tighten their management and prepare themselves to sell equity to the public.

The problem of dismantling India's complex web of controls is that each step immediately provokes calls for the next. But this budget should not be judged severely. It is a substantial move forward, with important incentives for exports and for investors - in particular, the large cut in duties on imports of capital goods and tax incentives for investment in infrastructure projects, especially power generation. Faster economic growth will give the government greater popular support to push reforms further. Then the most difficult issues will have to be addressed.

IN India, Asia P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page 15 484
Just what the doctor ordered: The merits of managed markets in the provision of healthcare services Publication 930301FT Processed by FT 930301 By JOHN WILLMAN

As Mrs Hillary Clinton examines strategies for reforming the US's costly and incomplete healthcare system, she could learn much from the experience of European countries in reforming their health services.

A recent Organisation for Economic Co-operation and Development report* on healthcare reforms in seven European countries (see table) concludes that, despite starting with very different health systems, they are converging on the same solution to the problem of escalating costs.

That solution is what the OECD calls a 'managed market' in healthcare. The details vary from country to country but, in each case, some sort of market mechanism is created, in which doctors and hospitals compete to provide health services paid for or underwritten by the government.

Some countries are further down the road towards managed markets than others - Germany, the Netherlands and the UK are the most advanced. And none of them has all the elements of the model in place, with many still experimenting with or in the middle of implementing their reforms.

However, all the important components of the model have been successfully tested in one or other of the seven countries, allowing the OECD to describe the managed market approach as 'not a high-risk strategy'.

All the countries provide healthcare universally or almost universally - those with limited public provision have widened its scope in the past decade. Methods of funding vary, however, with some paying for it out of taxation, others through compulsory insurance contributions paid either to private insurers, public bodies or a mixture of both.

All had experienced 'unacceptably high' growth rates in healthcare costs in the 1970s, according to the OECD, with the share of GDP swallowed by health rising during the decade by between 29 per cent in the UK and 71 per cent in Ireland. The desire of politicians to contain these costs was the main motive behind healthcare reforms.

Universal funding has proved to be the key to containing costs, says the OECD. By setting overall budgets, governments can take the lead in controlling expenditure by bearing down on producer interests such as surgeons, hospitals and the pharmaceutical industry. Where health costs are demand-led and open-ended - as in privately insured systems - there is no such force for economy and efficiency.

Universal cover is also the key to improving the standard of health since it allows basic medical care to be allocated according to need rather than ability to pay. Without universal cover, insurers select healthier groups, leaving the less healthy people - often on low incomes or ageing - with little or no protection.

An additional argument in favour of universal funding is that it can help reduce the financial burden on middle-income groups. With voluntary insured systems such as in the US, they pay twice: their own insurance premiums, and higher taxes to pay for public health services for the low-income groups who are not covered by insurance.

But capping the budget is only the first step. The seven countries have all experimented with market-type mechanisms for spending the budget more efficiently. The common elements of these mechanisms are:

Decentralised purchasing agencies to buy health services for customers in the light of local needs. In the UK, these are the district health authorities, which purchase health services on behalf of most people living in their areas.

Competition among 'providers', such as doctors, hospitals and other community health services. Payments systems have been restructured to reward those that are more efficient, so that money follows the patient.

A mixture of private-sector and public-sector providers to inject market forces. In the UK, the entrepreneurial spirit is provided by the National Health Service trusts, which are independent and self-governing.

Self-regulation on quality assurance - leaving it to professionals and purchasing agencies to regulate the market, rather than heavy-handed interference from above.

Within the managed market, paying for health services through a contract for services is more cost-effective than reimbursement of fees for each service. In France, for example, where healthcare was mostly paid for by reimbursement of fees during the 1980s, the share of GDP consumed by healthcare rose from 7.6 per cent of GDP in 1980 to 8.8 per cent in 1990. The share was static in Germany and the Netherlands, which used the contract method throughout this period.

There is evidence that countries that pay doctors fees for services have higher consultation rates, longer consultation times and higher prescribing rates. When Ireland switched from fee-for-service to a fixed annual contract for each patient on the doctor's register, doctors' consultation rates fell by a fifth. Fixed payments per head remove the incentive to over-treat to earn fees - a big problem in the US.

The good news for US reformers - where 'socialised medicine' has traditionally been viewed with suspicion - is that none of the seven is moving towards a centralised, command economy-type health service.

The best example of the latter is in the UK. Until the recent reforms, the NHS was largely organised on what the OECD describes as a 'public integrated system': hospital and community health services were paid for and provided by a centralised, vertically integrated, monolithic organisation.

Now the British health service is held up by the OECD report as one of the two most advanced in its reforms. In addition to introducing managed markets for healthcare providers, the UK has begun to introduce competition in purchasing of health services. It is doing this by giving some family doctors, called fund-holders, direct control of the budgets for hospital treatment of their patients.

While most patients are treated under block contracts negotiated by district health authorities, fund-holders can shop around for the best deals for their patients. The OECD says that this has improved the responsiveness of hospital services, though it concedes that it remains to be seen whether the benefits can be extended to all patients.

Similar attempts to introduce competition in purchasing are being implemented in the Netherlands, which will allow consumers to choose between competing insurers and sickness funds. Membership of a scheme is to be compulsory, and requires a flat-rate premium which is expected to cover 15 per cent of health costs.

The balance of health finance comes from a central healthcare fund which collects income-related premiums from every consumer. This money is distributed to purchasers according to the profile of their customers, so that healthcare is allocated according to need. Selection and cream-skimming are avoided by a requirement on schemes to accept all applicants.

The OECD accepts it is too early to make a final assessment of either the UK or Dutch reforms. But the creation of managed markets in healthcare in each of the seven European countries appears to have extended healthcare to most or all the population at costs much lower than those in the US.

* The Reform of Healthcare, OECD, Pounds 30.

---------------------------------------------------------- EUROPE'S HEALTH ---------------------------------------------------------- Health Change in expenditure share of as % of GDP GDP spent in 1990 on health 1980-90 % ---------------------------------------------------------- Belgium 7.6 15 France 8.8 16 Germany 8.1 -4 Ireland 7.5 -22 Netherlands 8.0 0 Spain 6.5 18 UK 6.2 7 ---------------------------------------------------------- Source: OECD Health Systems: Facts and Trends, 1993. ----------------------------------------------------------

XG Europe P9431 Administration of Public Health Programs CMMT Comment & Analysis GOVT Government News P9431 The Financial Times London Page 14 1238
Letter: Risks no reason to delay aid to Bosnia Publication 930301FT Processed by FT 930301 From SILVIA MISKULIN

Sir, I am sick and tired of comments that everything to do with helping Croatia and Bosnia 'entails some very real political and military risk', according to Mr Robert Mauthner's article 'Air-drops to land in a political minefield' (February 25).

I am maybe naive, but has anyone ever joined in any war without 'some very real political and military risk'? Are the soldiers being trained to be afraid of risk, afraid of fighting, being shot at and shooting? The reason why people don't join the army is because it is a risky occupation, which is also one of the reasons why they do.

So far the British have done their best to postpone any kind of real help to stop victimisation of Croats and Bosnians because of the risks involved. Fair enough.

Therefore it is true that the Moslems' last hope were the Americans; so why don't the British, if they themselves are afraid to help, allow someone else to do it? They now say the American air-drop would stop the preace process. What peace process? Within recent days the Serbs have destroyed another part of Sarajevo. The Serbs have never yet stopped aggression for any peace negotiations (ie going back to Lord Carrington's endless famous cease-fires in Croatia).

So how can US air-drops start something that has never stopped? War cannot escalate any further against Croats and Moslems. It could prove troublesome to the Serbs and Serbs don't like to be troubled, as they keep warning the west.

It seems to me that, in order not to annoy the Serbs, we condemn them on the one hand and let them get away with murder on the other, and why shouldn't Serbia vote for a war criminal to be their leader? After all, crime does pay, as their leader Milosevic has proved and the west has allowed for far too long.

Silvia Miskulin,

3 Wentworth Court,

Wentworth Avenue,

London N3

BA Bosnia-Hercegovina, East Europe P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 14 355
Letter: Speaking in vernacular Publication 930301FT Processed by FT 930301 From JOHAN ENEGREN

Sir, It is comforting to read that Philip Stephens ('Premier makes music in a minor', February 26) believes that Mr Major suppressed his doubts about the US air-drop operation in Bosnia by calling it 'brave' and 'imaginative'.

However, if Stephens had read his Yes, Prime Minister, he would know that such words can imply damning praise indeed, to be translated into 'foolhardy' or 'idiotic' or even worse. One can only hope that Mr Major's vernacular has not been too contaminated by Appleby-ese. Of course, the cabinet secretary, Sir Robin Butler, seems a far cry from Sir Humphrey, so maybe the risk is not too great.

Johan Enegren,

Avenue de l'Amazone 4,

B-1640 Rhode-Saint-Genese,

Belgium

GB United Kingdom, EC P9111 Executive Offices P9721 International Affairs CMMT Comment & Analysis P9111 P9721 The Financial Times London Page 14 148
Letter: A voting system that leads to capricious election results Publication 930301FT Processed by FT 930301 From Mr GARY TITLEY MEP

Sir, Edward Mortimer's defence of the single transferable vote (Foreign Affairs, February 24) was ironically given the headline 'Vote to break the bosses'. Ironically because, in fact, one of the effects of the STV is actually to strengthen political 'bosses'.

STV encourages the development of a client system in which individual politicians nurture their electorate, often in direct competition with politicians in their own party and often in ways which more closely represent 'pork-barrel' politics than we would believe could be acceptable.

STV is also extremely complex. As the Irish general election showed, it can often take weeks for the final result to be known. Further, as the Plant Report showed, STV is 'capricious' with the elimination process, throwing up results which are clearly not the ones intended by the electorate.

STV therefore does not have a clear link between voters' intentions and final outcome - which ought to be the prerequisite of any electoral system.

In short, STV is neither proportional, nor simple, nor conducive to party discipline or to effective constituency representation. It is difficult, in fact, to find a good reason even to consider it.

Gary Titley,

MEP Greater Manchester West,

16 Spring Lane,

Radcliffe M26 9TQN

GB United Kingdom, EC P9121 Legislative Bodies CMMT Comment & Analysis P9121 The Financial Times London Page 14 238
Letter: The route round the late-payment cycle Publication 930301FT Processed by FT 930301 From Mr BRIAN SUMNER

Sir, We are constantly hearing about how the late payment of debts is, supposedly, causing the downfall of many a business, and I dare say this is a factor in the appalling company-failure statistics.

Nevertheless, the reality is that most trading companies selling on credit to other businesses should never go down because of late payment of debt.

The reason is the existence in the financial markets of invoice discounting and factoring products. By advancing to the company up to 80 per cent of invoice value (including VAT) as soon as it is raised - the balance reverting after collection - the greater part of the debt is properly funded at the outset, enabling working capital to be replenished and the business cycle to continue.

Brian Sumner,

managing director,

Causeway Invoice Discounting Company,

123 St Ann's Square,

Manchester M2 7HS

GB United Kingdom, EC P99 Nonclassifiable Establishments CMMT Comment & Analysis MGMT Management P99 The Financial Times London Page 14 176
Letter: Government must play part in boosting industry Publication 930301FT Processed by FT 930301 From Mr MARK H J RADCLIFFE

Sir, We shall do nothing for Britain's vital export trade if we continue to talk in terms of problems rather than solutions in the manner of your articles 'Industry's unstoppable slide' (February 19) and 'Charting the mechanics of decline' (February 22).

No one disputes that the UK has an unacceptable trade deficit. Britain needs to capture an extra 1 per cent of world trade in manufactured goods and increase exports by at least Pounds 12bn a year to balance the books. But to suggest, as you do, that the prime minister may be disappointed in looking to industry for an export-led recovery is rather like shrugging your shoulders and saying nothing can be done. A more positive approach is needed.

The CBI's National Manufacturing Council is carrying out an examination of those sectors of industry which have a trade imbalance, especially those in which the deficit is increasing, with a view to finding ways of reversing the trend. In addition, we are studying 11,000 categories of imports to establish why such products are bought in from overseas rather than being produced in the UK.

The CBI is also seeking improvements in the UK's inadequate education system and weak transport infrastructure, to overcome their adverse effects on our industrial performance.

Improved international competitiveness is the only real solution to capturing a greater share of world markets, recognising, as we must, that 96 per cent of market potential is outside the UK. One solution to Britain's inadequate performance is to raise the standards of many average UK companies to world-class levels.

The NMC is seeking to do this by spreading best practice, and attracting the best people into industry to make this happen. World-class performance depends on world-class talent.

However, the government also has a role to play and we will be looking to the forthcoming Budget for evidence that the government recognises the need to encourage investment and exports to provide the basis for a sustained recovery.

Mark Radcliffe,

CBI National Manufacturing Council,

Centre Point,

103 New Oxford Street,

London WC1A 1DU

GB United Kingdom, EC P9611 Administration of General Economic Programs CMMT Comment & Analysis ECON Balance of trade P9611 The Financial Times London Page 14 385
A rich new seam: The UK's latest source of energy Publication 930301FT Processed by FT 930301 By CLIVE COOKSON

Natural gas trapped in coal seams could give Britain a vast new source of usable energy. Geologists say UK reserves of coalbed methane, as the gas is called, may exceed 1,000bn cubic metres - comparable with the total volume in conventional North Sea gas fields.

The oil industry is starting to drill wells to extract the methane, which Mr Tim Eggar, the energy minister, believes 'could represent a very valuable addition to our future energy supplies'. Yet it has hardly been mentioned in the debate currently raging about coal and gas in the UK.

'There seems to be a conspiracy of silence,' says one operator. 'No one wants to talk about a new huge source of gas at a time when many people think we already have more than we need.'

Several technical, fiscal and regulatory obstacles will have to be overcome before Britain can exploit coalbed methane on the same scale as the US, where gas is now flowing at a rate of 30m cu m a day. But it could offer a vital supplement to UK gas supplies early in the next century, when the main offshore reserves are likely to have been used up.

The Department of Trade and Industry awarded the first eight exploration licences for coalbed methane in 1991; 27 more followed last year. They cover coalfields in England, Wales and Scotland.

UK exploration for methane is led by companies with US experience. Evergreen Resources, based in Colorado, is now testing the first well, Sealand-1 just west of Chester in north-west England, and is drilling a second well south of Rhyl on the north Wales coast.

'We believe Sealand is capable of production but we are still evaluating its commercial possibilities,' says Mr Ian Thompson, Evergreen's UK managing director.

A dozen other companies are involved in UK coalbed methane exploration. They include Eastern Electricity, Kirkland Resources, Hillfarm Coal, Puffin Oil, Babcock Energy, Powergen and Conoco. All are drilling well away from collieries which could interfere with gas production.

Any well is bound to find some methane because all coal seams contain the gas, adsorbed chemically on the surface of coal particles and filling the tiny spaces between them. The question is whether it can be extracted in commercial quantities.

The methane is traditionally regarded as a safety hazard in coalmines. It has to be drained from the seams to prevent explosive quantities building up underground. Although small amounts of gas are sometimes used locally, for example to fire colliery boilers, it is normally vented into the atmosphere - a waste of energy similar to the flaring of natural gas in an oilfield.

From the environmental point of view it is better to extract methane for use as a fuel, because it is a powerful 'greenhouse gas'. Each molecule contributes 50 times more to global warming than a molecule of carbon dioxide.

Commercial exploitation of coalbed methane started in the US during the 1970s, stimulated by new federal tax credits for unconventional gas production. Six thousand wells have been drilled in three main areas in Colorado/New Mexico, Alabama and Pennsylvania.

The technology developed for extracting methane depends first on creating long fractures in the coal seam to enable the gas to flow more easily. The simplest technique, hydraulic fracturing, involves injecting water at high pressure. Then the pressure is reduced at the surface - for example, by pumping water out of the well - to stimulate the flow of gas.

Mr Eric Allen, an engineer with LAS Energy, a Canadian methane company, says the technology has improved significantly over the past 10 years. 'With recent advances in completion techniques, many new wells produce at levels which are spectacular by any conventional comparison.'

Gas does not flow through coal seams as readily as through conventional sandstone reservoirs, so coalbed extraction generally requires more wells for a given area. But methane enthusiasts say the latest wellhead equipment does not make an obtrusive impact on the landscape.

'Drilling costs are higher in the UK than in the US but all other factors appear to compare favourably with the most productive areas in the US,' says Mr John Garratt, managing director of Puffin Oil, an independent energy company with methane interests in both countries. One attraction of the UK market is that gas prices 'are among the highest in the world'.

But Mr Henry Boyd, secretary of the UK Onshore Operators Group, says: 'Coalbed methane will not be a bonanza for anyone. The returns will at best be moderate.'

Mr Boyd points out that the outlook for coalbed methane in the UK is overshadowed by uncertainties about the fiscal and regulatory regimes. These are spelt out in a memorandum on coalbed methane prepared by Oil Management Services (OMS), a London consultancy which provides the group's administration.

The main fiscal uncertainty concerns the point at which petroleum revenue tax would apply to a coalbed methane field. OMS says the reaction of some US companies is: 'Let us know when the UK works out its tax regime; meanwhile we will go to third-world countries which do know what their tax regime is.'

A more fundamental legal question is: who owns coalbed methane? British Coal maintains that its property includes not only all coal in the UK but also the gas trapped within it. The onshore operators, on the other hand, insist that the methane belongs to the crown, although most agree that British Coal's permission is required to drill into its seams.

'Licensees have been outraged at the claims being made by British Coal,' says OMS. 'They did not expect to be required to make substantial additional payments to British Coal as a condition for exercising their petroleum licences.'

The operators are lobbying the DTI hard to resolve the uncertainties and encourage methane production. The incentive is not only to provide a new indigenous energy source for the next century; it is also to lay the foundations for a UK industry which could export services and equipment to other European countries seeking to exploit their coalbed methane resources, just as the North Sea fields provided the basis for Britain's offshore oil and gas industry.

British Coal Corp GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas P9611 Administration of General Economic Programs P1221 Bituminous Coal and Lignite-Surface RES Natural resources TECH Licences P1311 P9611 P1221 The Financial Times London Page 14 1079
Arts: Snow Orchid - Theatre Publication 930301FT Processed by FT 930301 By ALASTAIR MACAULAY

Is it because of the greater influence of psychoanalysis there that the United States in this century has developed so much stronger a tradition of serious drama set in the family home than we have ever had in Britain? Joseph Pintauro's Snow Orchid presents an Italian-American family nucleus of mother, father, and two sons, and illumines the traumatic psychological damage effected by spouses/parents upon each other and their children. Every scene but the last occurs inside the family's tight little apartment. The only intruder is the elder son's boyfriend; and he doesn't stay long.

Though Snow Orchid is sometimes funny and does not actually ring true at every moment, you can't miss how it addresses family matters in a psychologically serious way that our theatre has avoided. At the Gate, where it is having its British premiere performances, its intensity has terrific force. Rob Howell's designs turn the tiny space into the apartment's several rooms with wonderful detail; Tim Luscombe's direction has produced a kind of Italian-American detailed conviction of playing rare in our theatre.

Snow Orchid is in no way radical today - it was probably not radical when written in 1979 - but over here it is still a shot in the arm, simply because of the nature of its realism. The painful recriminations between husband and wife, between father and elder son, between mother and younger son, and the wealth of detail that each such scene drags up: all is marvellously persuasive, even cathartic.

The play's final scene is the wrong kind of catharsis - a touch of optimism that arrives too neatly, though staged at the Gate with a surprise scene change that is something of a coup de theatre. Details are thrown away too lightly, such as the father's admission that he not only never loved his wife, he never loved anyone - puzzling, since he demonstrates love for both sons. And, though it is presented here by the London Gay Theatre Company, its handling of gayness and gay issues is not its most central concern or successful achievement. Snow Orchid is ultimately about the claustrophobia of family life.

The linchpin of the Gate staging is Paola Dionisotti as Filumena. Her Italian accent is flawless, even in its incipient Americanisms; and the aggressive fury that has always made her remarkable is given a fresh spark by enacting a Mediterranean temperament. Here, as in Vassa Zheleznova (same theatre, 1990), she is playing a minor latterday Clytemnestra; how about reviving Mourning becomes Electra for her?

As her husband and two sons, Roger Lloyd Pack, Adam Magnani and Jude Law are excellent. The playing sags only twice; first, after the climax of Sebbie's tremendous bathroom scene with his father; second, in Blaise's too mild reproaches to his mother. These are brief lapses in a performance that holds its audience gripped from first to last.

Gate Theatre, London W11, until March 27 (071 229 0706)

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 13 519
Arts: Mark Murphy and Eurodance - Dance Publication 930301FT Processed by FT 930301 By ALASTAIR MACAULAY

If you knew the new-dance scene but not who choreographed Mark Murphy's Headshot, you might well assume that it had been made across the Channel. But if you didn't know the new-dance scene, you wouldn't think that Headshot was a dance anyway.

The dancers of Mark Murphy's V-Tol Company, performing the 70-minute Headshot at the Place, London, last weekend, are attractive and fit, but dancing is hardly what he asks them to do. Though his choreography is authoritative, it is much too important to have mere dance on its mind. Why should it concern itself with petty things like showing you how these dancers respond to music; or what kinds of rhythm and phrasing they can develop; or the degree of virtuoso articulation of which they are capable? All that has been out of date for years.

In this respect, Murphy is like scores of choreographers on the new-dance scene. The two things that make Headshot unusual are first, that in one or two moments he reveals an instinct to make these dancers (of whom he is one) really move commandingly across the stage, turning and/or jumping; and second, that otherwise it has been very smartly organised as a perfect example of Eurodance - ie non-dance physical theatre, full of aggression and irony, with deliberately 'controversial' flashes of sociology.

Men and women get hit, brutalised, and shot by one another. Every aspiration to tenderness or romance is to no avail. As for the episodes of brutality, when they are fitted to rock or jazz music, they actually start to look droll, even hip. The mixture of elegance and violence is part of the work's deliberate irony.

This sour world view - albeit despondent and cynical - has been expressed with apparent conviction by a host of cross-Channel choreographers: notably Pina Bausch. It has even produced a few works of art. But Headshot does not appear sincere, or like an attempt to make art. It is a mere exercise in audience manipulation, in slick modishness. Murphy has mastered every trick - even the cliched Kamikaze jump now widely known as the Eurocrash, in which the dancer lands bang on the floor, rolls over, picks himself up, and dives splat back on to the ground.

Yet I suspect that Murphy's dance instincts are more innocent and lively than Headshot would have us believe. Though there is very little here that should be dignified by the name of dance, that little has a sweep, an attack and a pleasure in precisely controlled energy that are all welcome.

But so what? Does Murphy have the courage to follow his dance instincts when the prevailing trends from the Continent blow so strongly in the opposite direction?

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 13 486
Arts: The Venetian Twins Publication 930301FT Processed by FT 930301 By ANDREW ST GEORGE

THE Venetian lawyer Carlo Goldoni (1707-1793) was told his face was too jovial for the profession. Turning a jolly disposition to good account, he found himself better fitted for writing commedia dell'arte than subpoenas, and embarked on an extraordinary career in Venice and Paris which yielded nearly 300 plays in Italian and French.

Now Goldoni's The Venetian Twins (1746) at the Oxford Playhouse (Oxford Stage Company) opens his bicentenary. This is anarchic comedy looking back to Rabelais, sideways at Marivaux and forward to Feydeau. Goldoni's subjects are social, rarely political: 'The secret of the art of writing comedy,' he wrote, 'is to cling to nature, and never leave her.' The quality of the invention and insight is a reminder that Goldoni has been overlooked and undervalued.

The plot beggars belief. Zanetto and Tonino are identical twins, one simple-stupid and the other suave-clever. Unknown to the other, each arrives in Verona. There, Zanetto is betrothed to local beauty Rosaura, a horror in fluffy mules; meanwhile Tonino is awaited by his pudgy fiancee, Beatrice. The ensuing confusion runs out of breath after two deaths, two marriages and the appearance of the twins' long-lost sister.

The mistaken identities and cross-purposes are like The Comedy of Errors or the last act of Twelfth Night. Robert David MacDonald's stiff translation is laced with Shakespearean borrowings in true commedia dell'arte style.

Goldoni was one of the first commedia dell'arte playwrights to give written parts to actors used to improvisation. The dialogue here keeps up a Whose Line is it Anyway? unpredictability: 'I managed to purloin a gondola and make my way here' - 'By land?' - 'My adventures would amaze you.'

The acting, especially from Peter Jordan as the twins and Clare Cathcart as the winsome Beatrice, is robust and energetic. Jordan's best scenes are when Tonino visits Rosaura and takes his brother's bride-to-be for a whore and his future in-laws for pimps, and a wonderful scene where the two brothers meet, offstage, in a public lavatory.

Other highlights include Polly Kemp as Rosaura's lubricous maid and Malcolm Scates as Lelio, who wears an amoebic waistcoat and a fixed grin whilst pursuing Beatrice. Juliet Hill's busy pastiche score keeps the action flowing, while Mark Brickman's direction finds a measure of mess within the ordered plot. The moral, from the lips of a dying Veronese: 'If we were always good, we should not need to be wise.'

On tour to: Winchester, March 2-6 (0962 843434); Bury St Edmunds, March 9-13 (0284 769505); Warwick, March 15-20 (0203 524524); Poole, March 22-27 (0202 685222); Worthing, March 29 - April 3 (0903 235333). Sponsored by BT

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page 13 469
Arts: Architectural free-for-all Publication 930301FT Processed by FT 930301 By COLIN AMERY

Earlier this month the government published a report by a Mr John Warne (an assessor appointed by the Department of the Environment) that reviewed the Architects' Registration Acts from 1931 to 1969.

This slim, blue and grey document, published by Her Majesty's Stationery Office at Pounds 6.50, is not on the current bestseller lists - which is hardly surprising because it deals with the pretty arcane subject of the legal registration of the title 'architect'. But in some quarters it is seen as a small bombshell that completely changes the nature of professionalism for architects and has wide repercussions for education and practice.

The Warne Report's main recommendation is that The Architects' Registration Acts should be repealed and the profession be deregulated. At the moment architecture is a uniquely protected profession. It was a struggle to pass the Architects' Registration Act in 1931, five bills having been previously defeated by parliament, which felt that to hand the official registration and control of the architectural profession to its own Royal Institute would be too monopolistic.

The Act of 1931 created an independent council, the Architects Registration Council of the United Kingdom, to regulate the membership, conduct and education of the profession. You cannot legally call yourself an architect unless you register with ARCUK. The case for this independent council was declared to be 'the protection of the public from the half-trained, the untrained and the absolute imposter'.

The government has accepted Mr Warne's report and when the repealing legislation is passed in two years time, Britain's architects will no longer be a protected species. Architectural services will be offered by builders, designers and consultants, and self-regulation will be the order of the day for the architects who will be able to call themselves 'chartered architects', with institutions like the RIBA and its Scottish and Ulster equivalents becoming the self-regulatory bodies.

Mr Warne is the former secretary of the Institute of Chartered Accountants and his report suggests that architects should organise themselves very like accountants. His main recommendations are that the title 'architect' should no longer be protected by statute; that ARCUK and its Board of Architectural Education should be abolished; and that the RIBA should be confirmed as a self-regulatory body operating in the public interest.

Sir George Young, the minister at the Department of the Environment responsible for any legislation, said on the report's publication: 'There is no reason why architects, uniquely amongst the construction professions, should be regulated by statute. The established arrangements for self-regulation through the chartered professional institutions provide for satisfactory protection of the public interest and of consumers.'

The Royal Institute of British Architects has pondered the report and decided that the abolition of registration 'is a retrograde step, not in the public interest'. This reaction is not surprising, but seems short-sighted as the Warne Report also goes out of its way to suggest that a reformed and improved RIBA has a key role to play in developing a 'client-friendly' profession. Warne recommends that the RIBA should be invited to include lay members on its committees and to examine ways in which users of architectural services and the construction industry could help to develop architectural education.

It is tragic that the RIBA has reacted in such a Pavlovian way. It has been made a series of offers in the report that could set it up as the inclusive body for the construction of buildings. The profession is very vulnerable: there are too many architects in too many small firms chasing too few jobs. The RIBA has for years wasted endless time and money on internal political bickering (for which it is justly criticised in the report). Architects have a bad name with the public, which does not see any benefit to them in the statutory protection of a title. The RIBA is invited to have formal annual discussions with government - something it has long wanted - about priorities in design matters.

The excellent president of the RIBA, Richard MacCormac, is worried about the arrival on the scene of 'cowboys' calling themselves architects. He should understand that much of the profession has behaved little better than the average cowboy to its clients - all under the umbrella of special statutory protection. Architects are judged by results not by their nomenclature.

This freeing up of the profession offers important chances for the reform of education and will encourage new schools. The Prince of Wales's Institute of Architecture is already pioneering a more holistic approach to the design of buildings and encouraging the demise of professional divisiveness among the various professions and trades that design buildings. I hope the Prince's institute will promote public discussion of the important questions raised by this report about educational reforms, and make a bid for some of the ARCUK education fund. I suspect that, while the RIBA continues to contemplate its navel, others will step in and take advantage of the spirit of free competition. Architects will have only themselves to blame if they fail, yet again, to get their professional act together.

GB United Kingdom, EC P8712 Architectural Services P9651 Regulation of Miscellaneous Commercial Sectors GOVT Regulations TECH Standards P8712 P9651 The Financial Times London Page 13 877
Arts: Iron hands in velvet gloves - Sponsorship Publication 930301FT Processed by FT 930301 By ANTONY THORNCROFT

Companies can expect to have their arms twisted more gently and effectively in future by the development officers of arts organisations whose task it is to drum up sponsorship money. The arrival on the scene of full-time development officers has transformed the sponsorship industry: on average, development officers will have raised around Pounds 125,000 for their arts groups last year.

Last month, WH Smith sponsored, with Business in the Arts, a residential course for 16 development officers with the aim of improving their skills in persuasion and negotiation. The presence of a successful revenue raiser in an arts company takes a great burden off the shoulders of the chief executive. Artistic directors and museum directors have spent too many hours being nice to potential and existing sponsors. No wonder that good development directors are regarded as worth their weight in gold.

The heavily over-subscribed course, which attracted executives from the National Theatre, the Fitzwilliam Museum in Cambridge, the Aldeburgh festival, and the Orchestra of the Age of Enlightenment, will be repeated.

Mixing business and the arts at an even more senior level is also proving a rewarding experience. In January five arts managers, including Stephen Remington, chief executive of Sadler's Wells, and Bubble Lodge, chief executive of the Everyman, Cheltenham, won bursaries which will send them to institutions such as the Cranfield School of Management. English Estates will put up about Pounds 10,000 towards their fees. So far, 23 arts executives have already received intensive management training through the bursary scheme.

In addition there is the Business in the Arts placement programme which works the other way, seconding corporate managers with special skills - in computing, accountancy, marketing - to advise local arts organisations. To date there have been 250 such mind-expanding experiences.

IBM has always been a stalwart sponsor of the arts. In cash terms its commitment is not amazing, about Pounds 400,000 a year, but it has been supporting them for more than 20 years. For most of this time Peter Wilkinson supervised the budget.

Last year, to cut costs, IBM shed all its marketing departments. A new company, Comark, was established, mainly staffed by ex-IBM personnel, to supply advertising, PR, and marketing services generally to IBM under a five-year contract. Wilkinson's sponsorship department, which includes sport and the community, is part of Comark, and twice a year now he makes proposals to the thinned-down IBM management.

So far there has been little change to the arts programme. The budget, while not increased, has not been cut, and the bias remains towards youth projects and the creation of new events with a community appeal. Corporate entertaining scarcely features.

You could hardly get more innovative than 'Da Capo - From the Beginning' at the Royal Academy of Music, which IBM is sponsoring from March 8. It is a five-day festival of works by 57 living composers all of whom studied at the Royal Academy. Rodney Bennett, Maw and Tavener are composers in residence and there will be pieces by Birtwistle, Berkeley, Dankworth and many, many, more.

*****

Companies are very reluctant to sponsor big, elitist, arts events in the current climate. More and more of the budget is being directed towards community, environmental, or charity causes. This is true at Thorn-EMI which has a corporate budget of about Pounds 750,000 for good works, including the arts.

Last year it made a big promotional splash and invested Pounds 400,000 in touring Europe with Beethoven's Broadwood piano. This year arts expenditure is going towards such events as National Youth Theatre workshops in Feltham Prison; a residency by London Contemporary Dance at the Brimble Hill Special School; and Pounds 40,000, over three years, towards Music for Youth. Tomorrow it is underwriting a charity evening for the new musical Crazy For You which will benefit the Cancer and Leukaemia in Childhood Trust by Pounds 80,000. Even the guests of chairman Colin Southgate will be expected to pay for their tickets.

*****

A major new award for the arts, worth Pounds 100,000, has been announced. Each year the Vivien Duffield Foundation will present the Vivien Duffield Award to a British performing arts company to allow it to mount a project which would otherwise be beyond its means.

The first recipient is Welsh National Opera, which next winter will present three operas based around the Cinderella myth. Nine other opera companies were asked to suggest ideas. Theatre companies will be approached for the 1994 award, and in subsequent years dance and classical music will benefit.

*****

On the same theme the RSC is looking for a sponsor, or two, for the Prince of Wales Shakespeare School. The Prince is keen that Shakespeare should be taught in schools and he is putting his influence behind two 12-day courses at the RSC's Other Place theatre in Stratford in the summer at which 70 teachers will be trained by RSC experts. The cost of the venture is Pounds 90,000, and the Prince will be putting in an appearance.

*****

British Telecom is enjoying itself as the UK's leading arts sponsor. It has now upped its 1993 budget to Pounds 1.8m, way ahead of any competitor, and is displaying its market leadership by getting into bed with the Association for Business Sponsorship of the Arts, the industry pressure group. In future it will help fund ABSA seminars, literature, and general proselytising work.

Last year's BT New Contemporaries art show is currently on display at the ICA in London at the end of its tour and BT has committed itself to sponsor the 1993-94 show, with about Pounds 65,000, starting in Manchester in June.

GB United Kingdom, EC P7922 Theatrical Producers and Services P8412 Museums and Art Galleries P7319 Advertising, NEC MKTG Marketing RES Capital expenditures P7922 P8412 P7319 The Financial Times London Page 13 981
Arts: Today's Television Publication 930301FT Processed by FT 930301 By CHRISTOPHER DUNKLEY

New ideas about the state of the universe are discussed in Horizon (8.00 BBC2) which looks at the 100-inch telescope built 70 years ago by Edwin Hubble in California, and also at the Hubble space telescope. Although the only thing most of us know about the space telescope is that it has a defect in its mirror, it has still been surveying distant parts of the universe and showing that more galaxies existed when our solar system was young. ITV's new drama, September Song, is about Billy and Ted (Michael Williams and comedian Russ Abbot) who suddenly change their lives when, in their late fifties, Billy loses his job as a barman and Ted loses his wife. They decamp to Blackpool when Billy is offered a job as a compere in what turns out to be a strip joint. Tonight's episode (8.00) lasts an hour. History will surely conclude that, among all the social experiments tried in the later part of the 20th century, closing the mental hospitals and pushing the patients out to sink or swim was the most iniquitous. Panorama looks at a mother who killed her children a month after leaving a mental hospital (9.30 BBC1).

GB United Kingdom, EC P7812 Motion Picture and Video Production TECH Services P7812 The Financial Times London Page 13 229
People: Finance moves Publication 930301FT Processed by FT 930301

Paul Hancock, formerly chief executive of Security Pacific Holdings, has been appointed sales and marketing director of International Factors, part of LLOYDS BANK.

International Factors GB United Kingdom, EC P6111 Federal and Federally-Sponsored Credit Agencies PEOP Appointments P6111 The Financial Times London Page 12 53
People: Finance moves Publication 930301FT Processed by FT 930301

John Fitch has been appointed deputy chief executive, John Purdy director, treasury and regulation, and Alistair Beeston director, group risk management, at LOMBARD NORTH CENTRAL.

Lombard North Central GB United Kingdom, EC P6159 Miscellaneous Business Credit Institutions P602 Commercial Banks PEOP Appointments P6159 P602 The Financial Times London Page 12 59
People: Finance moves Publication 930301FT Processed by FT 930301

Laurie Faulkner, formerly a director of Kleinwort Benson Securities, has been appointed senior vice-president at FIDELITY BROKERAGE.

Fidelity Brokerage GB United Kingdom, EC P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 12 46
People: Finance moves Publication 930301FT Processed by FT 930301

Nicholas Chamberlen, chairman of Clive Discount and a former chairman of the London Discount Market Association, has been appointed a director of IMPERIAL GROUP Pension Trust.

Imperial Group Pension Trust GB United Kingdom, EC P6371 Pension, Health, and Welfare Funds PEOP Appointments P6371 The Financial Times London Page 12 58
People: Finance moves Publication 930301FT Processed by FT 930301

David Webb has been appointed a director of Cantrade Investment Management, a subsidiary of Bank Cantrade.

Cantrade Investment Management GB United Kingdom, EC P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 12 46
People: Finance moves Publication 930301FT Processed by FT 930301

Alan Dickinson (below right) has been appointed director for credit of The ROYAL BANK OF SCOTLAND's branch banking division.

Royal Bank of Scotland GB United Kingdom, EC P602 Commercial Banks PEOP Appointments P602 The Financial Times London Page 12 48
People: Finance moves Publication 930301FT Processed by FT 930301

George Kalorkoti (below left) has been appointed divisional director at BIS Information Systems, a subsidiary of NYNEX.

BIS Information Systems GB United Kingdom, EC P737 Computer and Data Processing Services PEOP Appointments P737 The Financial Times London Page 12 48
People: Finance moves Publication 930301FT Processed by FT 930301

John Ainsworth, Lesley Buckett, Alan Brunsden and Peter Jones have been appointed directors of HILL SAMUEL Investment Management.

Hill Samuel Investment Management GB United Kingdom, EC P651 Real Estate Operators and Lessors PEOP Appointments P651 The Financial Times London Page 12 50
People: Finance moves Publication 930301FT Processed by FT 930301

David Courtney, director of European operations for First Continental Trading, has been appointed marketing director of OM LONDON.

OM London GB United Kingdom, EC P99 Nonclassifiable Establishments PEOP Appointments P99 The Financial Times London Page 12 45
People: Finance moves Publication 930301FT Processed by FT 930301

Roger Kuhnel has been appointed a director of PSIT PROPERTIES, a subsidiary of Property Security Investment Trust.

PSIT Properties GB United Kingdom, EC P6531 Real Estate Agents and Managers PEOP Appointments P6531 The Financial Times London Page 12 47
People: Finance moves Publication 930301FT Processed by FT 930301

Graham Ross Russell, chairman of Emap, has been appointed to the board of FOREIGN & COLONIAL PEP INVESTMENT TRUST.

Foreign and Colonial PEP Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC PEOP Appointments P6726 The Financial Times London Page 12 51
People: Finance moves Publication 930301FT Processed by FT 930301

Mike Davis has been promoted to md of BARCLAYS COMMERCIAL SERVICES; he replaces David Storey who becomes director of the bank's south east regional office.

Barclays Commercial Services GB United Kingdom, EC P6111 Federal and Federally-Sponsored Credit Agencies P6153 Short-Term Business Credit Institutions PEOP Appointments P6111 P6153 The Financial Times London Page 12 62
People: Finance moves Publication 930301FT Processed by FT 930301

Robert Timms, 47, has taken over as personnel director at brokers UBS Phillips & Drew, replacing Chris Cawcutt who resigned last September shortly after Terry Smith was sacked as head of research.

Timms, who has been Smith New Court's executive director in charge of personnel since October 1989, is a career personnel man, unlike many of his contemporaries in other City firms. He spent his early career in industry with Burroughs and then Cyanamid of Great Britain, before joining Chase Manhattan where he was the European human resources chief.

UBS Phillips and Drew GB United Kingdom, EC P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 12 120
People: Daks Simpson Publication 930301FT Processed by FT 930301

Daks Simpson, the clothing manufacturer and retailer, has made two new appointments to its board as part of the continued reorganisation since its takeover by Japan's Sankyo Seiko in 1991.

Colin Campbell, who joined Daks in 1975 and became group company secretary in 1976, has become a group director with responsibility for legal, administrative and personnel matters. Don Ruffle, who joined Simpsons of Piccadilly in 1961 as a buyer and was latterly marketing director of the group's Invertere casual and rainwear division, has become group merchandising director and a board member.

Daks says the appointments reflect the desire to have all important group functions represented at board level.

Wim Van Overdijk, an outside director since 1989 who advised Daks on design and technical matters, has resigned to pursue his other design and manufacturing interests, including his company Design House in the Netherlands.

Daks Simpson GB United Kingdom, EC P2311 Men's and Boys' Suits and Coats P2325 Men's and Boys' Trousers and Slacks P233 Women's and Misses' Outerwear P561 Men's and Boys' Clothing Stores P562 Women's Clothing Stores PEOP Appointments P2311 P2325 P233 P561 P562 The Financial Times London Page 12 199
People: Shell UK Publication 930301FT Processed by FT 930301

Ronald Garrick, md and chief executive at Weir, has been appointed a non-executive director at Shell UK.

Shell UK GB United Kingdom, EC P2911 Petroleum Refining PEOP Appointments P2911 The Financial Times London Page 12 44
People: The Weir Group Publication 930301FT Processed by FT 930301

The family ties which have bound the descendants of George and James Weir to Scotland's biggest and most successful engineering company for more than a century are slowly unravelling. George Weir, a 52-year-old great grandson, has retired after 20 years on The Weir Group board, leaving his brother, Viscount Weir, 59, as the sole remaining member of the family involved in the business. Viscount Weir has been chairman since 1972, apart from a brief gap in the early 1980s when the company ran into financial problems and Lord Tombs took the chair.

Weir Group GB United Kingdom, EC P3559 Special Industry Machinery, NEC P3561 Pumps and Pumping Equipment PEOP Appointments P3559 P3561 The Financial Times London Page 12 128
People: Erskine gets on the mobile Publication 930301FT Processed by FT 930301

Mars was marvellous for Peter Erskine but the call of the portable phone proved compelling and he has just been appointed director of BT's Mobile Communications division.

Erskine, 41, describes it as an opportunity to take a leading role in one of the few markets which are booming at the present time. The division, 700-people strong, deals with BT's cellular telephones and radio pagers, serving more than 600,000 customers.

A marketeer by training and inclination, Erskine clearly relishes the prospect of competing against Vodafone and a host of new entrants to what is one of the fastest moving high technology markets. 'My job is to make sure we take a leading share of this market,' he says. The portable phone business will be revolutionised over the next few years as personal communicators using digital transmission replace today's mobile telephones.

Erskine went to Liverpool University where he read psychology before learning the essentials of sales and marketing with Colgate Palmolive. He then worked for companies in the Mars group, ending up as vice-president for Mars Electronics International. A brief interlude with Unitel, now part of Mercury, kindled his enthusiasm for mobile phones: 'The challenge is using consumer marketing techniques in a area where they have not been used extensively before,' he says.

BT Mobile Communications GB United Kingdom, EC P4812 Radiotelephone Communications PEOP Appointments P4812 The Financial Times London Page 12 242
People: Anderson. Bank of England to Bank of Egypt Publication 930301FT Processed by FT 930301

One of the perks of working for The Bank of England is that its former executives tend to get snapped up by foreign banks keen to make the right impression on the authorities. In the 1970s, before foreign exchange controls were abolished, there was a heavy trade in retired Bank of England officials who knew their way around the forex markets. Nowadays, former members of the Bank's supervisory staff seem most in demand.

The latest ex-Bank of England official to resurface in the Square Mile is John Anderson, 56, a former deputy head of banking supervision. He has joined the board of the newly formed National Bank of Egypt International and has been given the job of chairing its audit committee whose job is to make sure that the bank's executives don't go off the rails.

The National Bank of Egypt is the biggest of Egypt's state-owned banks and has operated in London for more than a decade. However, it has set up National Bank of Egypt International to take advantage of the European Commission's second banking directive which allows UK-authorised banks to do business in an EC country without the need to get the permission of the supervisor in that other country.

Nabil Ibrahim, a former National Bank of Egypt chairman, has been appointed chairman of the new London bank, and other board members include Mahmoud Abdel Aziz, chairman of the National Bank of Egypt, Kazem Barakat, the Egyptian bank's senior man in London, and John Harding, the general manager who joined from Turkey's Akbank last July.

National Bank of Egypt International GB United Kingdom, EC P602 Commercial Banks PEOP Appointments P602 The Financial Times London Page 12 294
Construction Contracts: Water networks Publication 930301FT Processed by FT 930301

North West Water has signed long-term consultancy contracts with three specialist engineering design companies. The contracts, which will govern work in the wastewater network field, are thought to be a first in the British water industry.

The three companies, PARKMAN CONSULTING ENGINEERS, ALLOTT AND LOMAX CONSULTING ENGINEERS and ACER CONSULTANTS, will work with North West Water's 150-strong team of wastewater network engineers based at Chadwick House, Warrington.

Over an initial three-year period they will develop compatible working practices, improving efficiency, and engineering methods and techniques.

Parkman Consulting Engineers Allott and Lomax Consulting Engineers Acer Consultants GB United Kingdom, EC P8711 Engineering Services P8742 Management Consulting Services MKTS Contracts P8711 P8742 The Financial Times London Page 12 126
Construction Contracts: Superstore Publication 930301FT Processed by FT 930301

TRAFALGAR HOUSE CONSTRUCTION has been awarded three contracts worth a total of Pounds 14m. The largest is for a 70,000 sq ft Tesco superstore on Barnes Wallace Drive at the Brooklands Business Park, near Weybridge. Consisting of a steel frame with external brick cladding and a slate roof, construction work will also include a 16 pump petrol station and 700 parking bays.

In Wales the company has won a design and construct contract worth nearly Pounds 5m from the Wales and West Housing Association for 123 houses and flats.

Trafalgar House Construction GB United Kingdom, EC P1542 Nonresidential Construction, NEC P1521 Single-Family Housing Construction MKTS Contracts P1542 P1521 The Financial Times London Page 12 123
Construction Contracts: Research facility in Hampshire Publication 930301FT Processed by FT 930301

MATTHEW HALL has won a Pounds 12.7m building engineering services contract for the new centre for deep sea oceanography in Southampton.

Working for main contractor, Wimpey Construction UK, Matthew Hall has been called in to supply and install the mechanical, electrical, public health and fire engineering services.

The 25,000 sq metre building is being jointly funded by the Natural Environment Research Council and the University of Southampton and will house laboratories, offices, workshops, lecture theatres and other service facilities.

Matthew Hall GB United Kingdom, EC P8712 Architectural Services P1711 Plumbing, Heating, Air-Conditioning P1731 Electrical Work MKTS Contracts P8712 P1711 P1731 The Financial Times London Page 12 118
Construction Contracts: Residential accommodation in Dubai Publication 930301FT Processed by FT 930301

Tilbury Douglas Construction's partner in Dubai, KHANSAHEB CIVIL ENGINEERING LLC has recently been awarded contracts totalling Pounds 50m.

The Pounds 23m Wafi residential building will provide 11 floors of apartments including a penthouse suite, and commercial facilities on the ground and mezzanine floors. A central atrium area will incorporate three panoramic lifts. The project's clubhouse and leisure centre will house squash courts, changing facilities, a multi-gym, a restaurant, a function room and bars. Its terrace will overlook a landscaped area and pools leading out to the tennis courts.

Other contracts include a 22-storey commercial building, facilities for the Jumeirah American High School, and an extension to Jebel Ali port.

Khansaheb Civil Engineering LLC XY Dubai, Middle East P1522 Residential Construction, NEC P1542 Nonresidential Construction, NEC MKTS Contracts P1522 P1542 The Financial Times London Page 12 147
Construction Contracts: Pounds 37m motorway improvement scheme Publication 930301FT Processed by FT 930301

The Secretary of State for Transport has awarded BALFOUR BEATTY CIVIL ENGINEERING the contract for the widening of the M6 motorway improvements between junctions 30-32, in Lancashire, valued at Pounds 37.5m.

The works comprise the widening of the dual three-lane M6 motorway, between junction 30, which is the interchange between the M6 and the M61 at Blacow and junction 32 at the interchange between the M6 and the M55 at Broughton, to dual four-lane motorway standard.

The work will be achieved by a combination of asymmetrical and parallel widening with a short section of off-lane replacement.

Extensive environmental features include earth mounding and noise attenuation measures.

Junctions 30 and 31 will be remodelled. Junction 31 is the junction of the M6 with the A59 and will include the realignment of the trunk road and roundabouts together with two new slip road bridges over the River Ribble.

A new underbridge, together with provision for new south facing slip road stubs associated with a possible future junction 31A, are to be constructed.

In addition, 15 bridges will be either demolished, demolished and reconstructed, widened and redecked or refurbished and extended. Hard shoulders, which have discontinuities at all bridges, will be made continuous throughout.

Scheduled for completion in December 1994, the project also involves new lighting and motorway signalling erected on gantries.

The consulting engineer for the development is Rendel, Palmer and Tritton.

Balfour Beatty Civil Engineering GB United Kingdom, EC P1611 Highway and Street Construction P1622 Bridge, Tunnel and Elevated Highway MKTS Contracts P1611 P1622 The Financial Times London Page 12 272
Construction Contracts: Waterloo Station project Publication 930301FT Processed by FT 930301

BOVIS CONSTRUCTION has begun work on a Pounds 20.85m design manage construct contract to refurbish a four-storey office building for British Rail at Waterloo Station.

With the offices situated above the main entrance to one of London's busiest stations, the P&0 company's project team faces the task of stripping out the interior and refurbishing the building through very restricted access, alongside a pedestrianised station concourse and a taxi cab access road.

A continuous planning dialogue between British Rail and Bovis will ensure that minimal disruption is caused to the 250,000 commuters who pass beneath the building every day.

The Bovis team has just 16 months to create three office suites, each providing about 60,000 sq ft of lettable office space. Whilst the majority of the floor area will be of an open plan design, at least 10 per cent will be cellularised.

As well as the structural alterations and additions, Bovis will be managing the fitting out for British Rail tenants.

These include British Transport Police, for whom a new police station is being created, and European Passenger Services, a subsidiary of British Rail.

Internally, each building will feature raised floors, suspended ceilings, carpets and partitions. New services, including power, heat and air conditioning, will be installed within ceiling voids.

Bovis Construction GB United Kingdom, EC P1542 Nonresidential Construction, NEC MKTS Contracts P1542 The Financial Times London Page 12 240
Economics: Focus turns to Germany and worries about interest rates and prospects Publication 930301FT Processed by FT 930301 By EMMA TUCKER

A RUSH of figures in Germany will turn attention this week to the state of Europe's biggest economy. Analysts are expecting the indicators - including industrial production, manufacturing new orders, and employment data - to confirm that the economy is 'going nowhere'.

Ms Alison Cottrell, international economist at Greenwell Montagu, suggests that 'a barely changed level of industrial output in January on the month may look better than December, but it ranks poorly in comparison to rises of 5.1 per cent in January 1992 and 2.7 per cent in 1991'.

Prospects for monetary easing after the Bundesbank's regular council meeting on Thursday will add to the interest in Germany although the market is divided over whether the central bank will cut officially posted rates.

Labour figures on Friday are forecast to show a fall in west German employment of around 20,000 reflecting the decline in manufacturing industry.

The following are some of the week's other economic highlights. The figures in brackets are the median of analysts' forecasts from MMS International, a financial information company.

Today: UK February M0 (up 0.6 per cent on month, up 4.6 per cent on year); Belgium, regular EC monetary committee meeting in Brussels; Germany, reduction in reserve requirements takes effect; US, January existing home sales, February NAPM index (58.4 per cent), January personal income (up 0.3 per cent), Q4 merchandise trade, January construction spending (0.5 per cent); Canada, December real GDP - factor cost (up 0.3 per cent on month), Q4 real GDP (up 2.7 per cent on quarter), Q4 consumption (up 1.1 per cent), Q4 GDP deflator (up 1.6 per cent on quarter), Q4 current account (CDollars 27.5bn deficit); Australia, March current account (ADollars 1.35bn deficit), January building approvals; Japan, December income - workers, January construction orders, January housing starts (up 5.1 per cent), January construction starts, February forex reserves, January wholesale prices index - second 10 days.

Tomorrow: UK, February official reserves (unchanged on month); Denmark, February forex reserves; Spain, Spanish parliament to debate unemployment; US, January leading indicators (down 0.2 per cent), January new home sales (645,000), Johnson Redbook week ended February 27; Japan, January unemployment rate; Australia, Q4 private capital expenditure.

Wednesday: US, January home completions, auto and truck sales February 21-28; Canada, February foreign reserves. December building permits; Spain, foreign, defence and treasury ministers from Spain and Italy meet, plus Italian prime minister Amato.

Thursday: Belgium, world finance conference, IMF president speech in Brussels; Germany, cabinet meets in Bonn to finalise Solidarity Pact proposals, Bundesbank council meeting in Frankfurt; US, initial claims week ended February 20 (325,000), state benefits week ended February 13, January factory orders (down 0.7 per cent), January factory shipments, money supply data for week ended February 22; Australia, Q4 stocks.

Friday: Germany, February vacancies - west (down 10,000), January employment - west (down 20,000), February unemployment - west (up 40,000), February unemployment - east (up 10,000), February short time work - east (down 4,500); Switzerland, February federal CPI; Netherlands, February CPI (up 0.3 per cent on month, up 2.4 per cent on year); US, February non-farm payrolls (up 121,000), February manufacturing payrolls (up 12,000), February hourly earnings (up 0.2 per cent), February average workweek, February unemployment rate (7.1 per cent), January consumer credit (up Dollars 1.4bn); Japan, January current account, January trade balance, January foreign bond investment.

During the week: Germany, January import prices (up 0.2 per cent on month, down 2 per cent on year), January manufacturing output (down 1 per cent on month), January industrial production (down 1 per cent on month), January manufacturing orders (down 1 per cent on month); Italy, January PSBR - cumulative (L11.8trillion), January hourly earnings; Denmark, January unemployment rate (11.8 per cent); Switzerland, February Zurich CPI; Japan, February trade balance, first 20 days.

DE Germany, EC QR European Economic Community (EC) US United States of America JP Japan, Asia P9611 Administration of General Economic Programs P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis ECON Economic Indicators P9611 P9311 The Financial Times London Page 11 687
The Week Ahead: Results due Publication 930301FT Processed by FT 930301

WILLIAMS HOLDINGS, the industrial conglomerate, is expected to have suffered a 5 per cent fall in pre-tax profits, from Pounds 168m to Pounds 160m, when it announces its full-year results on Thursday.

The company's exposure to DIY and aerospace markets are behind the likely slip in earnings per share to 20.1p (22.8p). The dividend is expected to be maintained.

Another round of write-downs on property and the Channel Tunnel contract is thought to have kept BICC's pre-tax profit flat at about Pounds 80m last year. It reports on Wednesday.

This time the cables and construction group is expected to provide for its Spitalfields joint venture among roughly Pounds 40m of charges. Although this will again leave the 19.25p total dividend uncovered, BICC said it would maintain it when it made a Pounds 154m rights issue last year. The proceeds went towards buying continental and US cables businesses and helped to reduce debt.

Two more composite insurance companies, General Accident and Guardian Royal Exchange, are expected to report sharply reduced losses this week.

Rising premium rates and milder weather are mainly responsible for the improvement at both companies, neither of which are heavily exposed to losses from domestic mortgage indemnity business. General Accident is expected to report a loss of between Pounds 20m and Pounds 30m tomorrow, compared with a deficit of Pounds 171.6m in 1991. On Wednesday, Guardian Royal Exchange could also report losses of between Pounds 20m and Pounds 40m, against losses of Pounds 209.7m in 1991.

Fisons, the drugs and scientific instrument group, reports its full-year results tomorrow. Analysts are unsure about the net impact of disposals during the last 12 months, which must now be carried above the line to conform to the new FRS3 accounting standard.

Lehman Brothers estimates the underlying business will report profits down from Pounds 190.5m last year to about Pounds 105m. This represents a 50 per cent improvement during the second half of the year. Followers will be watching for a statement about future prospects more than the historic results.

The 1992 results for Barclays will be announced on Thursday. These will be preceded tomorrow by Abbey National, and on Wednesday by Midland.

Barclays is expected to make a pre-tax loss of about Pounds 100m, and a retained loss of Pounds 500m-Pounds 600m after maintaining the final dividend. However, BZW is predicting a cut in the dividend.

Abbey National will make pre-tax profits of about Pounds 570m, and retained profits of about Pounds 200m. Its provisions for possible bad debts are expected to double to about Pounds 320m, reflecting the depressed UK housing market.

Midland is expected to show the effect of a significant lightening of its provisions for possible bad debts to about Pounds 700m for the year compared to Pounds 903m in 1991. This is expected to boost pre-tax profits to about Pounds 200m from Pounds 36m.

DIVIDEND & INTEREST PAYMENTS

TODAY

Abbey National Treasury Servs. 13 3/8 % Gtd. Nts. 1995 Pounds 133.75

Aberdeen (City of) 10.80% Rd. 2011 Pounds 5.40

Ahmanson & Co. Dollars 0.22

Amax Dollars 0.10

American Brands Dollars 0.4925

American General Dollars 0.55

Automated Security 5% Cv. Cm. Rd. Pf. 2.5p

Bank of New Zealand 11 3/8 % Cap. Nts. 1993 Dollars 568.75

Barclays Bank Non-Cm. USDollars Pf. Ser. A Dollars 0.52125

Do. Ser. B Dollars 0.50975

Do. Ser. C1 Dollars 0.421875

Do. Ser. C2 Dollars 0.105475

Do. Units Dollars 0.52735

Do. NC Dollar-Denominated Pf. Ser. D1 Dollars 0.43125

Do. Ser. D2 Dollars 0.10781

Do. Regd. Ser. D pf. Units Dollars 0.53906

BP America 9 3/4 % Gtd. Nts. 1999 Dollars 487.50

Casket 0.3p

Commerzbank Overseas Finance 10 3/4 % Nts. 1994 Pounds 107.50

Coventry Bldg. Society 12 1/8 % Undated Man. Cv. Sub. Nts. Pounds 6.0625

Daiei 6.375% 2000 Y637,500

Danae Inv. Tst. Income 3.375p

Dixons 1.6p

Dobson Park Inds. 3.85p

East Surrey Hldgs. 7 1/4 % Rd. Db. 1991/93 Pounds 3.625

do. 10% Rd. Db. 1997/99 Pounds 5

Eksportfinans 8 3/4 % Nts. 1996 Ecu87.50

Electric & General Inv. Co. 9% Db. 1989/94 Pounds 4.50

Electricite de France 12 1/2 % Gtd. Ln. 2008 Pounds 312.50

ENSERCH Dollars 0.05

Farepak 1.65p

Fleming Claverhouse Inv. Tst. 3.2p

Fleming Mercantile Inv. Tst. 3 1/2 % Rd. Db. 1960/95 Pounds 1.75

Fletcher King 0.5p

Ford Motor Dollars 0.40

Do. BDR Dollars 0.02

Forsmarks Kraftgrupp 9 7/8 % Gtd. Nts. 1996 Ecu98.75

French Property Tst. 1p

Halifax Bldg. Society 12% PIBS Pounds 3000

Honda Motor 5 1/4 % Cv. bds. 1998 Dollars 131.25

Do. 5 1/2 % Cv. Bds. 1997 Dollars 137.50

Hydro-Quebec 6 5/8 % Deb. Ser. GE 1994 Y66250

Ingersoll-rand Dollars 0.175

IBRD 10% 1999 Pounds 100

Do. 11 1/8 % Nts. 2001 Pounds 111.25

Jessups 7.3p Cv. Rd. Pf. 3.65p

Lockheed Dollars 0.53

London (Corp. of) 3 1/2 % Db. 1983/93 Pounds 1.75

London (County of) 2 1/2 % Cns. Pounds 0.625

Do. 3% Cns. Pounds 0.75

Low & Bonar 6% 1st Cm. Pf. 2.1p

Do. 6% 2nd Cm. Pf. 2.1p

Do. 5 1/2 % 3rd Cm. Pf. 1.925p

Lucas 6 1/2 % Cm. 1st Pf. 2.275p

Lynx 0.75p

Merchant Retail 0.35p

Metropolitan Water 3% 1934/2000 Pounds 1.50

Mexico (Utd. Mexican States) 16 1/2 % Ln. 2008 Pounds 8.25

National Home Loans Sec. Fltg. Rate Nts. 1995 Dollars 2.32

Northumbrian Water 7.5p

Oldham Metropolitan Borough Council 11.25% Rd. 2010 Pounds 5.625

OMI Intl. 0.75p

Peninsular & Oriental Steam Nav. 3 1/2 % Deb. Pounds 1.75

Do. 3 1/2 % 2nd Deb. Pounds 1.75

Racal Electronics ADR Dollars 0.053

Redland Universal Funding 14 3/4 % Gtd. Nts. 1995 ADollars 147.50

Republic of Italy 9 5/8 % Nts. 1999 Dollars 962.50

Richards 2.93p

River Plate & General Inv. Tst. 5% Cm. Pf. Pounds 1.75

Sainsbury (J) 8% Irred. Uns. Ln. Pounds 4

Do. 12 3/4 % Nts. 1995 Pounds 127.50

Schneiders (S. & Son) 6% Cm. Rd. Pf. 2.1p

Security Services 4 1/2 % Cm. Pf. 1.575p

Seiyu 7 1/4 % Cv. Bds. 1996 Pounds 36.25

Slough Estates 8.25p Cm. Cv. Rd. Pf. 4.125p

Symonds Engineering 0.15p

Transcanada Pipelines 16 1/2 % 1st Mort. Pipeline Bds. 2007 8.25p

Union Carbide Dollars 0.1875

United Kingdom 8 3/4 % Treas. Ln. 1997 Pounds 4.375

Do. 14 1/2 % Treas. Ln. 1994 Pounds 7.25

Welsh Water 7.8p

Williamson Tea Hldgs. 10p

Witan Inv. Co. 8% Deb. 1996/99 Pounds 4

Wolseley 10% Deb. 1990/95 Pounds 5

TOMORROW

British Airways 10% 1998 Pounds 100

General Motors Acceptance Canada 11% Nts. 1994 CDollars 110

Local Authority Short-Dated Bds. 10 1/4 %. 1993 Pounds 5.2935

Marubeni Intl. Fin. 5%. 1993 Y500,000

State Bk. of New South Wales Puttable Adjustable Rate Nts. 1994. ADollars 78.13

WEDNESDAY MARCH 3

Fuji Bk. Intl. Fin. Fltg. Rate Nts. Dollars 1,212.50

Gold Fields of South Africa R0.70

LETINVEST 10 1/4 -11 1/4 %. Stped. Int. First Mort. Deb. 2012 Pounds 5.625Marubeni UK Step-Down Coupon Nts. 1994. Y773,200

Nippon Telegraph & Telephone 9 3/8 % Nts. 1995 Dollars 937.50

Norway (Kingdom of) 8 3/4 % Nts. 1993 Dollars 837.50

United Kingdom 9% Conv. 2000 Pounds 4.50

THURSDAY MARCH 4

American Express Credit 8% Dual Currency Yen Red. Bds. 1996 Y80,000

Associated British Foods 5.5p

Exmoor Dual Inv. Tst. Income 2.5p

Grainger Tst. 4.05p

South West Water 7.8p

Woolwich Bldg. Society Ftlg. Rate Nts. 1996 Pounds 180.15

FRIDAY MARCH 5

Aberforth Smaller Co. Tst. 2.5p

Aberforth Split Level Tst. Uts. 2p

Do. Income 2p

Australia (Commonwealth of) 10 1/4 % 1997 Pounds 102.5

Boeing Dollars 0.25

Finland (Rep. of) 10 1/8 % 1997 Pounds 101.25

Gillette Dollars 0.18

GT Japan Inv. Tst. 0.4p

Guaranteed Export Fin. 7 5/8 % Gtd. Nts. 1997 Dollars 762.50

Neotronics Tech. 1.75p

Northern Foods 3.4p

Prism Leisure 0.9p

River & Mercantile Extra Income Tst. 1.96875p

Southern Business 2.23p

THORN EMI 9p

SATURDAY MARCH 6

Bank Of Greece 10 3/4 % Ln. 2010 Pounds 5.375

Dares Estates 8% Uns. Ln. 1992/97 Pounds 4

Joseph (L) 9 1/4 % Uns. Ln. 1997/2002 Pounds 4.625

Waddington (John) 10 1/2 % Deb. 1990/95 Pounds 5.25

Whitbread 9 3/4 % Rd. Deb. 1991/96 Pounds 4.875

Yorkshire Chemicals 10% Deb.

1991/96 Pounds 5

UK COMPANIES

TODAY

COMPANY MEETINGS:

Alvis, Abraham Lincoln Room, Savoy Hotel, WC., 12.00.

Dewhurst, Melbourne Works, Inverness Road, Hounslow, Middlesex, 11.00.

BOARD MEETINGS:

Finals:

ASW

French Property Tst.

Lilleshall

TOMORROW

COMPANY MEETINGS:

Bradstock Group, Hyde Park Hotel, 66 Knightsbridge, SW. 12.00.

Torex Hire, Plymouth Moat House, Armada Way, Plymouth, Devon. 11.30.

BOARD MEETINGS:

Finals:

Abbey National

Allied Irish Bank

Billam (J)

Brent Chemicals

Burnfield

Fisons

General Accident

Harrington Kilbride

Instem

Kalon

Pacer Systems

Serco

Vivat

Interims:

Hays

Paramount

Pifco

Raine

William Sinclair

WEDNESDAY

MARCH 3

COMPANY MEETINGS:

Blick, Blick House, Bramble Road, Swindon, Wilts. 12.00.

BOARD MEETINGS:

Finals:

BICC

BWD Secs.

CRH

Courtaulds Textiles

Cowie (T)

Grosvenor Dev. Cap.

Guardian Royal Exchange

Metal Bulletin

Midland Group

Radius

Stat-Plus

TR High Income Tst.

Trans World Comms.

Interims:

Fleming Emerging Markets

Gent (SR)

Linx Printing Tech.

Savage

THURSDAY

MARCH 4

COMPANY MEETINGS:

Chilton Radio, Farbon Room, National Farmers Union, 55 Goldington Road, Bedford, Beds., 10.00.

First Philippine Inv. Tst., Knightsbridge House, 197 Knightsbridge, SW., 10.30.

BOARD MEETINGS:

Finals:

Anglo Am. Inds.

Barclays Bank

Bilston & Battersea

Boddington Group

Braime (TR & JH)

Ferry Pickering

Hambro Countrywide

Ladbroke

Lloyds Smaller Co. Tst.

MTL Instruments

Pentos

Philips Electronics

Sema

Sumit

Unidare

Wessanen (Konink)

Williams Hldgs.

Interims:

Brierley Inv.

Galliford

Intereurope Tech. Serv.

Renishaw

FRIDAY

MARCH 5

BOARD MEETINGS:

Finals:

Latin American Inv. Tst.

Murray European Inv. Tst.

Interims:

British Data Management

Company meetings are annual general meetings unless otherwise stated.

Please note: Reports and accounts are not normally available until approximately six weeks after the board meeting to approve the preliminary results.

PARLIAMENTARY DIARY

TODAY

Commons: Welsh, Attorney General's and Overseas Development questions. Debate on Welsh affairs.

Lords: Trade Union Reform and Employment Rights Bill, second reading. Debate on Animal Procedures Committee report.

Select Committee: 4.30pm, Public accounts: subject - statutory sick pay and statutory maternity pay. Witnesses: Sir Michael Partridge, permanent secretary department of social security, and Miss Ann Chant, chief executive, contributions

agency.

TOMORROW

Commons: Education questions. Questions to the Prime Minister. Education Bill, report.

Lords: Asylum and Immigration Appeals Bill, report. London Docklands Development Corporation Bill, second reading.

Select committee: 10.30am, Health: subject - London's health service. Witness: Mrs Virginia Bottomley, health secretary.

WEDNESDAY

Commons: Scottish questions. Education Bill, remaining stages. Debate on Local Government Finance (England) Special Grant Report.

Lords: Debates on rural areas' social and economic needs and the building industry.

Select committees: 9.15am, Environment: subject - Housing Corporation. Witnesses: Association of District Councils and Association of Metropolitan Authorities.

10.30am, Trade and Industry, subject: trade with Europe. Witnesses: Department of trade and industry officials including a representative from single market compliance unit and Customs & Excise.

10.45am, Welsh Affairs: subject - preservation of historic buildings and ancient monuments. Witnesses: Council of Welsh Districts, Church in Wales and Free Churches Council for Wales.

10.50am, Defence: subject - UK peacekeeping and intervention forces: air forces. Witnesses: MoD officials.

4.10pm, Education: subject - special educational needs. Witnesses: Prof K. Wedell and Ms Ingrid Lunt, National Curriculum Council (at 4.35pm), Independent Panel for Special Educational Advice (at 5pm).

4.15pm, Employment: subject - import and export of jobs. Witnesses: GEC, Society of British Aerospace Companies.

4.15pm, Health: subject - community care. Witnesses: National Council for Voluntary Organisations, Joint Care Council.

4.15pm, Public Accounts: subject - health services for physically disabled people. Witness: Sir Duncan Nichol, chief executive, NHS Management Executive.

4.45pm, Home affairs: subject - juvenile offenders. Witnesses: Association of Chief Officers of Probation, National Association of Probation Officers, Association of Directors of Social Services and British Association of Social Workers.

THURSDAY

Commons: Treasury questions. Questions to the Prime Minister. European Communities (Amendment) Bill, committee.

Lords: Clean Air Bill, third reading. Radioactive Substances Bill, third reading. Charities Bill, third reading. Asylum and Immigration Appeals Bill, report.

Select committee: 10.30am, National Heritage: subject - privacy and media intrusion. Witnesses: M. Jacques Vistel, member of the Conseil d'Etat, French Republic, former members and officers of Press Council.

FRIDAY

Commons: Debate on crime and crime prevention.

Lords: Not sitting.

Williams Holdings General Accident Guardian Royal Exchange Fisons Abbey National Midland Bank GB United Kingdom, EC XA World P91 Executive, Legislative and General Government P99 Nonclassifiable Establishments P3429 Hardware, NEC P5051 Metals Service Centers and Offices P3542 Machine Tools, Metal Forming Types P5521 Used Car Dealers P6331 Fire, Marine, and Casualty Insurance P6311 Life Insurance P2834 Pharmaceutical Preparations P602 Commercial Banks FIN Annual report COMP Company News GOVT Government News P91 P99 P3429 P5051 P3542 P5521 P6331 P6311 P2834 P602 The Financial Times London Page 11 2101
Management: When employees rate their superior - Appraising your boss Publication 930301FT Processed by FT 930301 By ADRIAN FURNHAM

More and more organisations subscribe to the fundamental ideas of performance management. All employees should be given regular feedback on their job performance. And these ratings are often tied - in some loose way - to promotions, merit pay, sideways moves, or are used more simply for training purposes. Some organisations determine pay increments by these ratings so that salary is not decided by collective bargaining but rather by rated, individual effort. Performance management means true meritocracy.

For performance management to work, appraisals need to be seen to be accurate, fair, sensitive and reliable. For most corporations, employees are rated by their bosses on criteria such as time-keeping and contribution to innovation. In effect this means once or twice a year a manager must fill out a rating form on his or her employees. Some managers may have to appraise many subordinates, which leads to certain problems - do the managers know all their staff? How much time does it take to appraise so many? What about problems of favouritism?

Innovative organisations have found a simple, radical solution to these problems. In the UK, BP, British Airways and Central Television among others are changing their methods. Employees are not rated by their superiors but by their subordinates. Not top-down but bottom-up. Simple and democratic though it is, the idea puts the fear of God into many managers.

What can be gained from this method? The following points have arisen from work in Cathay Pacific Airlines.

Subordinates tend to know their superior better than superiors know their subordinates. They see their bosses and know their moods, foibles and preferences, their adequacies, skills, strengths and limitations and things they do and do not like doing.

As all subordinates rate their managers statistically, these ratings tend to be more reliable - the more subordinates the better. Instead of the biases of individual managers' ratings, the various ratings of the employees can be converted into a representative view. If the employees have very differing views of their bosses this can present problems, but represents very significant data meriting further investigation.

Subordinates' ratings have more impact because it is more unusual to receive ratings from subordinates. It is also surprising to bosses because, despite protestations to the contrary, information often flows down organisations more smoothly and comfortably than it flows up. When it flows up it is qualitatively and quantitatively different. It is this difference that makes it valuable.

What are the dangers of converting the appraisal system to a bottom-up approach?

Some employees might hesitate to give a frank and fair appraisal of their boss for fear of reprisal. On the other hand, employees may be unused to giving either negative or positive feedback. This can be observed by a 'halo effect' where bland, safe-ratings, half-way up the scale are given. However, an anonymous rating might lead some employees to be vindictive, for example to a boss who is pushing staff to do better. Such a rating would easily be detected however, because it would differ significantly from other ratings.

There are also greater costs involved. More forms have to be processed, probably by computer programme, than in the top-down method. But there are now companies such as Pilat of Israel, or Forum (Europe), a US company, which have written the software for this type of analysis. Subordinates also need training on how to rate individuals without falling into some of the well-known traps. Training courses, paperwork and computing software cost money.

Do the benefits, costs and risks outweigh the dangers and disadvantages of the bottom-up system? The fact that such innovative companies have persisted with these methods indicates they believe it has benefits.

To some extent initial enthusiasm has been tempered, as in the case of BA, but it is recognised that working well, the bottom-up system is efficient and equitable. To put in place the performance management system an organisation needs to trust staff to be honest, fair and constructive. It also needs to pay more than lip service to the idea that communication is a two-way process. More importantly it needs to be willing to act on the ratings of subordinates. This takes some courage and for multinationals, real culture change.

The bottom-up approach is the first step in the process of taking staff opinions seriously and allowing staff to influence the organisation. The management toast for the successful go-ahead service-related business is a good one, not 'down the hatch' but 'bottoms up'.

The author is head of University College London's Business Psychology Unit.

XA World P99 Nonclassifiable Establishments MGMT Management P99 The Financial Times London Page 10 785
Management: Support for Aids project Publication 930301FT Processed by FT 930301 By DIANE SUMMERS

Picture the scene: a jack collapses in a repair workshop, a mechanic is trapped under a car and there is blood everywhere. The mechanic is known to be gay. No-one wants to touch him in case he has got it - Aids. The first-aid kit cannot be found and the victim screams for help while his workmates freeze in horror and indecision.

This chilling sequence of events - played by actors in this instance, but only too plausible - comes from a training video from the Terrence Higgins Trust, in partnership with a group of blue-chip employers. Companies which have given their backing to the training project include IBM, Marks and Spencer, Unilever, Kingfisher and WH Smith.

The project has also published a training manual and briefing notes, covering basic medical information, recruitment issues, confidentiality, pensions, first aid and travel abroad.

Separately, the Society of Occupational Medicine has also produced a booklet which covers some of the same ground and serves as a good introduction to the subject.

European companies have been slower than their US counterparts to draw up policies covering HIV and Aids and educate their workforces. A degree of complacency, even, has crept in. This latest batch of training material will help to reawaken interest in the issue.

HIV and Aids: Positive Management. Complete training package Pounds 149 plus VAT. Briefing notes available separately Pounds 5. From: The Sales Unit, The Industrial Society, 49 Calthorpe Road, Edgbaston, Birmingham B15 1TH. Tel: 021 454 6769.

What employers should know about HIV and Aids. Available free (send a large SAE, 74p postage) from: The Society of Occupational Medicine, 6 St Andrews Place, London NW1 4LE

GB United Kingdom, EC P8331 Job Training and Related Services MGMT Management P8331 The Financial Times London Page 10 308
Management: Streamlined for speed - A report on General Accident's 'inside-out' transformation Publication 930301FT Processed by FT 930301 By RICHARD LAPPER

It's 16.32 on a Friday afternoon. The electronic indicator board high on the wall of General Accident's new Glasgow offices shows that 1,365 calls have been handled by the claims staff of the country's second-biggest insurance company. Five staff are on the phone dealing with customers' inquiries.

No calls are waiting to be answered, a pleasing statistic for Alistair Waters, at 32, one of a new generation of insurance managers at the UK's second-biggest insurance company. He says that 98 per cent of calls are handled within three seconds and most claims are handled within two days.

It is a far cry from the recent past when it could take General Accident weeks to respond to its policyholders. But, in common with other insurers, GA is changing its ways, overhauling its traditional bureaucratic organisation in order to transform relationships with its customers.

Stung by losses of more than Pounds 2bn in 1990 and 1991 and spurred by new competitors who have been quick to take advantage of new technologies, the UK's biggest insurers have slashed jobs, reducing numbers by up to a third in some cases.

But there is more to the industry's reorganisation than a simple reduction in headcount. In many companies whole layers of middle management have been removed, while new responsibilities are being given to lower-grade staff. Status-conscious hierarchies are giving way to flatter, more responsive and more goal-oriented businesses.

The changes are all the more striking at General Accident because the company has long been one of the industry's most conservative, dominated by generations of Scottish actuaries. Yet two years of losses have underlined the need for change, which has quickened since the departure of Buchan Marshall, the former chief general manager, who retired at the end of 1989. One of the main aims of the reorganisation - orchestrated by the head of UK operations, Bob Scott - has been to improve the speed with which claims are paid, as well as the quality of back-up services and complaints procedures.

Such changes have had an important influence on the organisation's culture, with the company shifting from what Scott calls an 'administrative-centred' approach to one based on 'long-term customer service', heavily influenced by the experience of companies such as Toyota. GA has been turned 'inside out', says Ray Andrews, a former Saatchi and Saatchi executive, recruited in 1990 to head an overhaul of GA's internal communications.

Scott explains how management and organisational changes have paved the way for much more rapid handling of claims. The goal is to respond to all claimants within five days, says Scott. Five years ago 'a claim would have been processed by the clerk, sent to the under manager, then the manager to be checked and finally back to the clerk. The whole process could take weeks,' says Scott. 'You could justify the old system on the grounds that it guaranteed accuracy. But it destroyed people's initiative.'

Under the new system GA's lower-grade claims staff have been given more responsibility to carry out basic tasks. 'They have to get it right. They are responsible,' says Scott.

Computers have helped. Over the past three years, GA has abolished its typing pool and has weaned staff away from the use of paper files. Staff at GA's 'new model' office in Dundee - where the new systems were first introduced - make extensive use of computer training techniques, as part of a programme which equips them to handle all aspects of insurance transactions - underwriting, claims and accounts, and the like - instead of the much narrower focus of the past.

While lower-grade staff are being asked to be more responsible, managers are under pressure to take a more active interest in the development of the company's business.

For a start there are fewer of them. Scott has pushed through a radical overhaul of GA's branch structure, replacing over two thirds of the company's 60 or so branch managers. A middle management position, responsible purely for office administration, has been scrapped.

Relieved of many of their control and checking functions, managers are being encouraged to develop areas of new business. John Munro and his management team in Dundee, for example, are examining ways of persuading motor policyholders to take out home or creditor insurance.

'There is much more emphasis on accountability,' says Munro, who runs the group's Dundee office. 'We have much more headroom and much more room to take initiatives.' There are now six management layers, against eight previously, improving the company's responsiveness and increasing the opportunities for younger managers such as Waters and Munro to rise within the organisation, where promotion is no longer tied to seniority and time serving.

Performance-related pay is becoming common and information about the company more widely disseminated. In the past, middle management has seen its control over information as a source of power, says Scott. By contrast GA senior management now report details of the company's performance.

All this is good news for younger managers such as Waters, who began working with GA 13 years ago at the group's offices in Ayr and began building up GA's direct motor subsidiary at the age of 29, a position of prominence unimaginable for a young manager even 10 years ago.

'Everyone is on first-name terms,' says Waters. 'We are trying to develop an operation that downplays concern for status. It's much more open - more frank and more goal-orientated than in the past. All the layers have been taken away. All the bullshit has gone.'

General Accident GB United Kingdom, EC P6311 Life Insurance P6331 Fire, Marine, and Casualty Insurance MGMT Management P6311 P6331 The Financial Times London Page 10 962
Move on council-house mortgages Publication 930301FT Processed by FT 930301 By ALISON SMITH

THE GOVERNMENT is to press building societies to be more willing to provide mortgages on homes that have been bought by former council tenants.

Ministers will be holding meetings with the Council of Mortgage Lenders in the run-up to a new campaign which will encourage council tenants to exercise their right to buy their homes. The lenders will be urged to end their reluctance to provide mortgages for some former council properties, particularly flats.

Some Conservative councillors say that the building societies' attitude can lead to former tenants who have bought their homes being unable to move because prospective purchasers cannot get mortgages.

When complaints were first raised on this matter last summer the council assured ministers that if a building society had once provided a mortgage on a property then it would continue to be ready to provide one in future.

This has run into difficulties however, because of a change to mortgage indemnity insurance which makes it harder for building societies to obtain insurance on such mortgages.

The tightening of insurance policies has led the council to call for local authorities to take a role in helping to provide the insurance.

Ministers are determined that the problem will not hinder the new campaign and are anxious to get an agreement with building societies before it starts later this month.

Ministers will also discuss with the lenders the prospect of providing fixed-rate mortgages on former council properties, so that potential purchasers will know how much they will have to pay over the next few years.

The campaign will also stress the cash incentive scheme, through which a tenant in, for example, a tower block flat which they do not want to buy can receive a cash lump sum towards buying a home in the private sector.

GB United Kingdom, EC P603 Savings Institutions GOVT Government News P603 The Financial Times London Page 8 326
Small player looks for a chance to stay in the game: The man who is leading the buy-out attempt at Leyland Daf Vans Publication 930301FT Processed by FT 930301 By JOHN GRIFFITHS

MANAGING director Mr Allan Amey and five colleagues launching a management buy-out attempt today for Leyland Daf Vans in Birmingham know they must explain an apparent paradox to potential backers.

Backers are certain to ask how such a small vanmaker could possibly be viable.

There are 190 employees still working in the Birmingham plant who are subcontracted to Renault of France. They are developing the new van range which Renault and Daf had intended to launch jointly at a cost approaching Pounds 400m if Daf and its Leyland Daf subsidiary had not collapsed into receivership.

Renault will move this Excel van project to France later this year for sale throughout Europe at projected volumes approaching 100,000 a year.

The company envisaged by Mr Amey's management buy-out would have no access to this van range, and would seek to modernise the current Leyland Daf 200/400 van range, which has its origins in the British Leyland Sherpa van launched 20 years ago.

Further, the buy-out company's sales activities would, initially at least, be confined mainly to the UK market, where Leyland Daf sold fewer than 14,000 vans last year. The new Daf company formed in the Netherlands and Belgium has already made plain that vans will not form part of its activities. So until alternative distribution arrangements could be made, an EC market which last year absorbed 7,000 Leyland Daf vans would be lost to the Birmingham production lines.

Mr Amey, 46, who has run Leyland Daf Vans for the past three years, questions that being a small player should be seen as a problem. 'Big doesn't necessarily mean anything except the potential for big profit - or big losses. You've simply got to be the right size for your market,' he says.

'Excel is a massive project to design, develop and produce a completely new van. We won't do that, at least in the short term.

'Our customers want economic load-carrying capacity at a competitive price. We can provide that today. But instead of revolution, like the Excel, we can evolve the product perfectly satisfactorily.'

He acknowledges that Ford and other vanmakers might seek to move in for the kill with a price war, but says the company is already well versed in fighting its corner.

The breakeven level for the Birminghan operation is believed to have been about 14,000 units a year before the Daf takeover. Mr Amey says this can be cut sharply. The plan envisages an operation of such a size that the 'vast majority' of the remaining 1,200 workers would be retained.

As for backers, Mr Amey gives a clear hint that short- termism is not on the agenda. 'We are intent on the long-term development of the product and processes, and the foundations necessary for them.'

As for assumptions that little investment has been made at the Birmingham facilities in recent years, Mr Amey insists that this is not true. 'Millions have been spent in the past few years, particularly on the factory structure . . . in terms of facilities, there is the risk of confusing low technology with fitness of purpose.'

With pledges of support also made at last week's Leyland Daf dealers' council, 'realistically, we think the vast body of the network will stay loyal and work with us to develop our market', Mr Amey insists.

The management team - which includes finance director Mr Roger Cable, marketing director Mr Malcolm Jefferies, commercial operations director Mr Jim Parks, technical director Mr John Rae and manufacturing director Mr Tony Sergeant - has already held talks with local Department of Trade and Industry officials on whether the buy-out qualifies for regional selective assistance.

Otherwise, Mr Amey said, 'the financial net is wide open'. He added: 'A number of financial institutions have already contacted us to say that 'when you're ready, come and talk to us'. We have to be cautious, though - we don't want anyone taking a 45 per cent stake on a three-year, sell-it-off basis.'

He insists the business plan is predicated on a viable, stand-alone operation. 'But it would be wrong at any point to be blinkered. If an opportunity came along which it was felt might be in our best interest, then naturally we would explore it fully.'

Leyland DAF Vans GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies COMP Company News COMP Buy-out P3711 The Financial Times London Page 8 764
Call for end to Budget 'purdah' Publication 930301FT Processed by FT 930301

MR JOHN SMITH, the Labour leader, will today call for an end to the traditional Budget 'purdah' arrangements, as part of a move to bring greater openness to the government's economic decision-making.

In a speech to Charter 88, the constitutional reform movement, Mr Smith will also extend the idea of a 'new deal' for the citizen beyond the customary ground of a ministry of justice, a bill of rights and wider eligibility for legal aid.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P8651 Political Organizations GOVT Government News P9311 P8651 The Financial Times London Page 8 110
CBI has doubts on legislation Publication 930301FT Processed by FT 930301

THE CONFEDERATION of British Industry has 'serious' reservations about substantial parts of the government's latest industrial relations legislation that starts its passage through the House of Lords today.

Some of the biggest company members of the CBI have protested to the Department of Employment about a proposal that would provide workers with the right to decide which union they wanted to belong to. They fear that it would threaten single-union agreements established by Japanese companies in the UK.

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs GOVT Regulations P9441 The Financial Times London Page 8 108
Managers' pay rises by 3.7% Publication 930301FT Processed by FT 930301

THE RAPID fall in the rate of inflation seems to have taken many companies by surprise, resulting in larger than intended salary increases for private sector managers, a survey of pay over the three months to January reveals.

Overall, managerial and professional salary rises averaged 3.7 per cent between November 1992 and January 1993, compared with an average of 4 per cent for the previous quarter. When pay freezes are excluded, the figure for the average rise in the last quarter rises to 4 per cent, ranging from, a 1.5 per cent average rise at Apricot Computers, to up to 7 per cent for senior managers at Kraft General Foods.

The independent pay research group, Incomes Data Services, which compiled the figures, has found one in six companies imposing pay freezes on managers' salaries.

GB United Kingdom, EC P99 Nonclassifiable Establishments PEOP Labour STATS Statistics P99 The Financial Times London Page 8 162
Lord Pennock: ICI deputy chairman and CBI president Publication 930301FT Processed by FT 930301

LORD PENNOCK, former deputy chairman of Imperial Chemical Industries and president of the Confederation of British Industry, died last week aged 72.

Raymond Pennock spent more than 30 years at ICI, initially in personnel and later as head of the agricultural operations. He was appointed a director in 1972 and became deputy chairman between 1975 and 1980.

Knighted in 1978 for his services to exports, he was widely tipped as a possible chairman of ICI, but the position went to Sir Maurice Hodgson. Between 1980 and 1982 he was president of the CBI and at the end of his term he was made a life peer.

In 1980 he became chairman of BICC, the cables and construction group, where he was already a director.

He stayed at the post until 1984, helping to turn the company around.

His entry in Who's Who mentions his directorship at Eurotunnel, but not his unhappy year-long stint as the group's co-chairman between 1986 and 1987.

He stepped down after criticisms from the Bank of England about the handling of an international share placing which almost failed.

Lord Pennock, an energetic committee member, was a member of the National Economic Development Council from 1979 to 1982.

He was the first British president of the Union of European Community Industries from 1984 to 1986 and was president of the Chemical Industries Association in 1978 and 1979.

He was a director of Morgan Grenfell and deputy chairman of Standard Chartered Bank and Plessey.

In 1943 he married Lorna Pearse and they had a son and two daughters.

GB United Kingdom, EC P99 Nonclassifiable Establishments PEOP Personnel News P99 The Financial Times London Page 8 290
Major to re-assert authority over rebels Publication 930301FT Processed by FT 930301 By ALISON SMITH

MR JOHN MAJOR will this week seek to re-assert his authority over Tory Euro-rebels after the disclosure of a meeting between two senior rightwing ministers and Baroness Thatcher.

Tory party officials were at pains to point out that Maastricht had not been discussed at the lunch last Thursday attended by Mr Peter Lilley, social security secretary, and Mr Michael Portillo, Treasury chief secretary. They also underlined that both cabinet ministers had consistently voted for the Maastricht bill in its passage through the Commons.

While the meeting with Lady Thatcher is a sign of the confidence of the Tory right wing, no one at Westminster seriously expects a ministerial exodus over Maastricht.

Instead, the most sensitive issue is the government's attitude towards the European exchange rate mechanism.

Mr Major has said that the UK will not rejoin the mechanism this year, but some right-wing ministers are letting it be known that there should be no question of rejoining during the lifetime of this parliament.

Although Downing Street was relaxed about the lunch - also attended by Lord Tebbit, a leading Euro-sceptic, and Sir Alan Walters, formerly Lady Thatcher's economic adviser - its timing is particularly awkward.

A week ago ministers faced renewed embarrassment over the bill but fought back with a display by loyalist MPs at a private meeting of Tory backbench MPs on Thursday aimed at putting the Euro-sceptics on the defensive.

Today Mr Major will discuss the handling of the Maastricht legislation with Mr Richard Ryder, the chief whip, Lord Wakeham, leader of the Lords, and other business managers.

The bill returns to the Commons on Thursday and ministers are keen that it regains some of the momentum it has lost recently.

Mr Major will also discuss today with Sir Norman Fowler, the Tory party chairman, his speech at the Tory central council on Saturday.

The prime minister intends to use the speech to set out more fully the renewed Tory emphasis on crime and press home the causes for economic optimism.

The gathering of constituency officers will also give party managers an opportunity to exert pressure on some dissident Tory MPs through their local party associations.

GB United Kingdom, EC P91 Executive, Legislative and General Government GOVT Government News P91 The Financial Times London Page 8 392
Backbench MPs support phasing out of mortgage interest tax relief Publication 930301FT Processed by FT 930301 By ALAN PIKE

THE PHASING OUT of mortgage interest tax relief is supported by 55 per cent of backbench MPs, according to a survey commissioned by the housing charity Shelter, Alan Pike writes.

Shelter says MPs of all parties endorse proposals for better targeted help for homeowners, which it is publishing today.

The charity wants the government to accompany the ending of tax relief - which costs the exchequer Pounds 5bn a year - with other arrangements for helping the needy.

These might include a mortgage benefit scheme, based on existing housing benefit, or an alternative form of assistance for low-income home owners, and a review of further ways to help with housing costs.

Ms Sheila McKechnie, director of Shelter, said the recent record mortgage arrears and repossessions had 'highlighted the absurdity of the current mortgage tax relief policy'.

The call to abolish mortgage tax relief is supported by the Tory Reform Group, a moderate Conservative pressure group, in its Budget submission to the chancellor.

It believes tax relief should be phased out over five years. In the meantime, the group argues, the chancellor should stimulate the housing market by offering homebuyers a cash alternative to tax relief.

Such one-off payments would, it suggests, be about Pounds 2,000 initially and diminish annually.

'This would help to encourage first-time buyers, offsetting the current incentive to remain outside the market while prices continue to fall,' it says.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 8 270
Civil servants without salaries after blunder: Computer system overlooks 65,000 payments Publication 930301FT Processed by FT 930301 By ALISON SMITH and PAUL ABRAHAMS

ABOUT 65,000 Department of Employment staff are waiting this morning to see if the government will keep its promise that a cheque is in the post. A clerical slip in the department's computers has left its employees without last month's pay.

'The error is going to cost an awful lot of money,' said department officials, who declined to disclose details.

The personnel division has agreed to pay any overdraft or bank charges incurred by staff because of the mistake.

After the problem emerged on Friday morning senior officials and managers spent hours making arrangements, so far as they could, to tide staff over. 'It was a bit of a panic,' admitted one official.

Managers agreed with some building societies to credit staff's accounts on Saturday. Others rushed around organising Giro and cash payments to employees relying on their salaries over the weekend.

Officials were relieved to confirm that the department's ministers - Mrs Gillian Shephard, Mr Michael Forsyth, Mr Patrick McLoughlin and Viscount Ullswater - had received their salaries on time because they have separate pay arrangements.

'We weren't that surprised,' says Mr Ian Taylor, national officer of the National Union of Clerical and Public Servants for the Department of Em-ployment. 'It's happened before - about five or six years ago.'

The exact cause of the embarrassment has not yet been tracked down. It was only revealed on Thursday evening when the Bank of England ran the department's faulty tapes.

Mr Taylor said he understood someone had failed to tell the computers to pay out on Friday rather than on the last day of the month, a Sunday.

The cost will not be known until all affected employees have submitted claims, but the department will almost certainly have to absorb it from within its existing budget.

Mr Taylor said: 'We accept that errors occur. Providing the cheques are available today, we'll put it down to human error.'

GB United Kingdom, EC P9199 General Government, NEC PEOP Labour P9199 The Financial Times London Page 8 356
Dispute delays Sellafield plans Publication 930301FT Processed by FT 930301 By BRONWEN MADDOX, Environment Correspondent

TENSION IS rising in government departments over the question of whether British Nuclear Fuels' Sellafield site will be used to store other countries' radioactive waste for many decades.

The Trade and Industry Department received a report from the government's Radioactive Waste Management Advisory Committee before Christmas saying that Sellafield could be used for long-term waste storage, but the department has so far refused to discuss the implications with the Environment Department.

BNF has repeatedly rejected charges that its Sellafield-based Thorp plant for reprocessing nuclear fuels, which has taken nearly 10 years and Pounds 2.8bn to build, would become a 'nuclear dustbin'. It argues that most of its overseas contracts require customers to take back reprocessed waste.

The latest tension arises over a BNF 'waste substitution' proposal - which means customers will take back only the 'radiological equivalent of their waste'. Under this proposal large volumes of waste would be left at Sellafield.

BNF wants Thorp to start operating soon. Unless the waste substitution plan is implemented, however, this may not happen. Japanese customers, who with German customers account for much of Thorp's order book, have made preparations to take back only a small amount of highly radioactive waste.

While some customers have said publicly that they are committed to their contracts with BNF, others are increasingly apprehensive about taking back the reprocessed waste because of the high storage and shipping costs and political sensitivity.

Environment Department officials have been refused some details of BNF's customer contracts by the Trade Department on grounds of commercial confidentiality, making an assessment of long-term waste storage at Sellafield more difficult.

Before Thorp can start operating it needs authorisation from the Pollution Inspectorate.

According to one official the inspectorate is unlikely to submit its recommendation to the Environment Department before May because the decision has become so sensitive that 'we need to be seen to get every dot and comma right'.

BNF has claimed that if Thorp does not go ahead the UK will lose Pounds 900m in profit in the next 10 years. Officials are concerned, however, that difficulties over sending reprocessed waste back to customers could undermine those projections.

British Nuclear Fuels GB United Kingdom, EC P2869 Industrial Organic Chemicals, NEC P2819 Industrial Inorganic Chemicals, NEC P4911 Electric Services P4953 Refuse Systems RES Facilities GOVT Government News P2869 P2819 P4911 P4953 The Financial Times London Page 8 409
Birt expected to keep freelance deal at BBC Publication 930301FT Processed by FT 930301 By RAYMOND SNODDY and ANDREW JACK

MR JOHN BIRT, who became BBC director-general in January, is likely to continue to be paid as a freelance consultant rather than as an employee, just as he has since joining the corporation in 1987, it emerged yesterday.

A senior BBC governor said he did not expect there to be any pressure from the board of governors on Mr Birt to change his status.

Financial details of John Birt Productions, a private company owned by Mr Birt and his wife Jane, were disclosed yesterday.

Mr Birt's salary from the BBC, believed to be between Pounds 135,000 and Pounds 140,000 in the year to August 1991, was paid gross to his private company.

This meant the director-general was able to deduct more than Pounds 30,000 in administrative expenses and pay income tax only on the Pounds 59,000 he was paid by John Birt Productions.

Mr Birt has not yet signed a contract with the BBC as director-general but a committee of the board of governors, including Mr Marmaduke Hussey, the chairman, has already agreed that Mr Birt can be paid in his normal way through John Birt Productions.

The arrangement is legal and has apparently been accepted by the Inland Revenue.

The revelation that Mr Birt is not being paid as a full-time employee of the BBC is, however, likely to be controversial.

It is not unusual in the television industry for entertainers, presenters, senior reporters, producers and directors to be paid as freelancers. With the increase in independent production and the growing move to short-term contracts, this is becoming more common. But it is extremely unusual for senior executives of the BBC to be paid in such a way. The BBC said yesterday that no other member of the corporation's board of management was paid as a freelance consultant. That includes Mr Bob Phillis, who arrives soon as deputy director-general.

Although there are examples of such practices in ITV - Mr Brian Tesler, the former chief executive of London Weekend Television, is believed to have had such a contract - they are still considered unusual at senior executive level. In the past 10 years, for example, no directors of Thames Television were paid on such a basis.

At director level, the trend has been the other way. Share options, which have turned, or are about to turn, many ITV executives into millionaires are difficult to arrange for those not employed directly. Redundancy money is also available only to employees.

The BBC said in a statement: 'John Birt has either been a freelance or has contracted his services through his own company on fixed-term contracts for over 20 years. The same contractual arrangements that operated when he was director of programmes at LWT applied when he joined the BBC as deputy director-general.'

The arrangement means that Mr Birt will almost certainly be paying less income tax than many of his subordinates.

The Inland Revenue said it would not comment on any individual's tax affairs, Andrew Jack writes. But it said there was an official in every tax office charged with determining whether individuals should be permitted to be registered to pay tax as self-employed.

It is far easier to gain tax deductions under Schedule D, the tax system for the self-employed, than it is using the pay-as-you-earn system. Many allowances against tax - such as entertainment - are permitted if they are a legitimate part of the business.

Under PAYE, by contrast, only items which are 'wholly, necessarily and exclusively' work-related can be claimed against tax.

John Birt Productions British Broadcasting Corp GB United Kingdom, EC P4833 Television Broadcasting Stations P4832 Radio Broadcasting Stations P8742 Management Consulting Services P9311 Finance, Taxation, and Monetary Policy PEOP Labour GOVT Taxes P4833 P4832 P8742 P9311 The Financial Times London Page 8 647
Cancer therapy ready for trials Publication 930301FT Processed by FT 930301 By CLIVE COOKSON, Science Editor

THE Imperial Cancer Research Fund plans to test in patients later this year a genetic treatment for melanoma, Europe's fastest-increasing form of cancer.

Scientists with the fund said yesterday that their 'gene therapy' had given promising results in experiments with cell cultures and mice. They will apply next week for government approval to start human trials at the fund's Oxford Clinical Oncology Unit.

Melanoma is the most dangerous form of skin cancer. Its incidence in the UK is doubling every decade and it kills about 1,300 people a year - many of them young adults. Although melanoma can be cured by surgery if it is caught early, the later stages are usually fatal.

Dr Michael Crumpton, the fund's laboratories director, said the gene therapy technique developed for melanoma could be extended to other untreatable cancers. 'We believe we have an exciting discovery with important clinical implications for the treatment of tumours.'

The prospect of inserting killer genes into cancers is emerging as one of the most promising avenues of medical research. Several US teams are developing gene therapy for cancer.

One distinctive feature of the fund's approach is its simplicity. The British scientists inject their chosen genes, in the form of a few millionths of a gram of DNA, directly into the melanoma with a micro-syringe. Their animal experiments suggest that this works as well as more complicated US techniques.

Laboratory tests by the fund show that a 'promoter gene' can 'switch on' other genes in melanoma cells but not elsewhere in the body.

Now the scientists are hooking on to the promoter other genes that will provoke an attack on the targeted cells. The fund says the effect is like sprinkling a selective weedkiller over a lawn.

They will try first a gene that instructs melanoma cells to make a substance called interleukin-2, which will stimulate the body's immune system to attack the cancer.

Simply injecting IL-2 into patients has an effect on melanoma, but only at high doses which cause severe side-effects. The ICRF team hopes that localised production of IL-2 will kill the tumour without causing damage elsewhere.

Prof Adrian Harris of the Oxford Clinical Oncology Unit expects to receive approval to start clinical trials before the end of the year. Gene therapy for cancer is unlikely to be widely available for five to 10 years.

Imperial Cancer Research Fund (UK) GB United Kingdom, EC P2836 Biological Products Ex Diagnostic TECH Products P2836 The Financial Times London Page 8 428
Dublin woos Ulster Unionists Publication 930301FT Processed by FT 930301

MR DICK SPRING, foreign minister of the Irish Republic, sought yesterday to woo Northern Ireland's Unionist leaders into fresh talks on the province by softening slightly his stance on the republic's claim to the territory of the north.

He said that constitutional change 'will be, if necessary, implemented' and that the republic should be prepared to 'change and look forward'.

Speaking on BBC television, Mr Spring said articles 2 and 3 of the constitution, which refer to Northern Ireland, 'are not set in bronze'.

IE Ireland, EC P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 8 109
MPs 'support ending of tax relief' Publication 930301FT Processed by FT 930301 By ALAN PIKE

THE PHASING OUT of mortgage interest tax relief is supported by 55 per cent of backbench MPs, according to a survey commissioned by the housing charity Shelter, Alan Pike writes.

Shelter says MPs of all parties endorse proposals, which it is publishing today, for better targeted help for homeowners. The charity wants the government to accompany the ending of tax relief - which costs the exchequer Pounds 5bn a year - with other arrangements for helping the needy. These might include a mortgage benefit scheme, based on existing housing benefit, or an alternative form of assistance for low-income home owners, and a review of further ways to help with housing costs.

Ms Sheila McKechnie, director of Shelter, said the recent record mortgage arrears and repossessions, had 'highlighted the absurdity of the current mortgage tax relief policy'.

The call to abolish mortgage tax relief is supported by the Tory Reform Group, a moderate Conservative pressure group, in its Budget submission to the chancellor. It believes tax relief should be phased out over five years. In the meantime, the group argues the chancellor should stimulate the housing market by offering homebuyers a cash alternative to tax relief.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 8 229
Can Britain make it?: Foreign ownership handicaps electronics - FT writers make a closer examination of two sectors that have traditionally been strong, in our series on manufacturing Publication 930301FT Processed by FT 930301 By ALAN CANE BRITISH manufacturing may have declined, but the electronics sector

consisting of telecommunications, consumer electronics, information technology and components - seems in better shape today than it has been for many years.

The UK now has the fourth largest electronics industry in the world after the US, Japan and Germany. The industry accounted for about 15 per cent of the UK's visible exports last year.

A quarter of the large-screen television sets produced in western Europe are made in Britain and 59 per cent of Europe's personal computer production comes from the UK and Ireland.

The critical question is whether the health of the sector is sustainable or a transitory phenomenon which could be slowed or reversed by decisions taken abroad. US computer maker Digital Equipment's decision to close its computer manufacturing plant in Galway, Ireland, is a case in point.

Mr John Gardner, managing director of computer maker ICL's UK operations, points to the difficulty of drawing conclusions in a global business where manufacturers site production according to market requirements. The Far East is falling out of favour as European manufacturers improve efficiency. Transport and distribution costs are lower when production is geographically close to a company's principal markets, he argues.

The bright spots are dazzling. Applied Materials of the US, one of the world's largest makers of semiconductor manufacturing equipment, carries out the research and development for its most sophisticated instruments in Horsham, West Sussex. The Santa Cruz Operation, a leading US software house, last week bought IXI, a tiny Cambridge company, to acquire IXI's unique technology.

These examples, however, illustrate the predicament of the UK industry. Local levels of skill and inventiveness are high but the companies are often in foreign hands. The trade association for consumer electronics manufacturers has 16 members but only one is British-owned.

Mr Geoffrey Shingles, chairman of the UK subsidiary of Digital Equipment, is convinced the government should do more to encourage home grown market leaders. 'The UK has always been good at small start-up companies. What we have not done well is to grow companies able to compete at global level,' he says.

The result is that Britain's trade deficit in electronics last year was about Pounds 1.4bn but there are signs of improvement. Last year electronics exports were 15 per cent smaller than imports. Ten years ago the gap was twice as large. Some of the improvement is due to recession but the primary reason is extensive foreign investment.

The most obvious example is consumer electronics, where the deficit is now only a quarter of the Pounds 1.1bn reached in 1983. Sony started making television sets in south Wales in the 1970s and inward investment accelerated in the last decade. Now the list of UK-made Japanese products includes video recorders from Mitsubishi, compact disc players from Pioneer, mobile phones from NEC and TV sets from Matsushita and JVC.

Mr Hugh Peltor, director of Brema, the consumer electronics trade association, says 'We have done well in inward investment.'

The recovery in telecommunications has different origins. The privatisation of BT created a wave of demand for new equipment and services from BT and its competitor Mercury in the 1980s. At the same time, the privatisation freed BT to buy equipment from abroad, hence stimulating competition in the home market.

In the past couple of years the investment wave has abated, so cutting imports. But at the same time, UK suppliers - chiefly the part-German owned GPT and Canada's Northern Telecom - have been sharpened by competitive pressures.

Now they are waiting for the closed and regulated telecommunications markets of mainland Europe to follow the UK's liberalised example.

The mainland European markets could offer rich pickings when they are opened. It is thought that Deutsche Bundespost Telekom is paying two to three times as much as BT for comparable German equipment in a tightly regulated market.

Computer software has often been touted as an area where the UK should excel. The value of computer software and services purchased worldwide will soon exceed the value of computer hardware.

The industry is dominated by US companies such as Microsoft and Lotus, however, and there are no signs the position will change.

Nevertheless, the electronics industry gives grounds for modest optimism although nobody should expect it to become a shooting star in the UK's economic firmament. The chief concern is its dependence on inward investment, where fashions may change suddenly and without warning.

GB United Kingdom, EC P366 Communications Equipment P3651 Household Audio and Video Equipment P357 Computer and Office Equipment P7372 Prepackaged Software P481 Telephone Communications P3674 Semiconductors and Related Devices IND Industry profile P366 P3651 P357 P7372 P481 P3674 The Financial Times London Page 7 816
Producing abroad trims drug exports Publication 930301FT Processed by FT 930301 By PAUL ABRAHAMS

THE DRUGS industry is trumpeted as one of Britain's few remaining manufacturing success stories. The UK's position as a world leader in manufacturing medicines should be secure. It has two of the world's top six pharmaceuticals groups, the world's best-selling drug (Zantac) and a record trade surplus last year of Pounds 1.3bn.

But the outlook is worrying. Although exports have grown from Pounds 139m in 1970 to Pounds 2.99bn in 1992, the rate of import penetration has grown faster.

Whereas exports exceeded imports by a factor of four in 1970, the ratio was 1.5 by last year.

One reason for this is that British doctors are prescribing increasing numbers of foreign drugs. According to Lehman Brothers in London, the second largest prescription drugs company in the UK by sales last year was Astra of Sweden, rather than UK groups such as SmithKline Beecham, Wellcome or Fisons.

UK-based companies continue to discover and market world-class drugs, however. Six of the world's 20 top selling drugs in 1991 were developed by British companies.

But many British groups are manufacturing a larger proportion of their drugs abroad.

Dr Joe Blaker, group technical director in charge of manufacturing at Glaxo, the biggest drugs group in the UK and Europe, explains: 'It would be inappropriate for a global drugs concern like us to put all our manufacturing facilities in one country, even if we are a British-based company.'

Dr Blaker says that the turning point came in the early 1980s when Glaxo began to internationalise its research and development activities.

The aim was to tap scientific expertise outside the UK. By locating drug development in markets such as the US, products were also likely to be licensed by regulatory authorities more quickly.

Overseas manufacturing soon followed the research and development push. Manufacturing problems can be ironed out faster by locating production near research and development centres, allowing drugs groups to launch products earlier.

Dr Blaker says: 'Ten years ago the US market was almost entirely supplied by product from the UK - the American manufacturing side was very embryonic.' Glaxo's sales to the US in the last six months of 1992 were Pounds 954m.

Last year Glaxo's UK manufacturing investment was Pounds 72m, compared with Pounds 124m outside the UK. Over the last four years manufacturing investment overseas has been greater than that in the UK.

The company is currently building a Pounds 100m complex in Singapore to manufacture primary materials for medicines. It already manufactures 53 per cent of its product volume outside the UK.

Glaxo's example is not unique. Wellcome manufactures an increasing amount overseas. While 65 per cent of the active ingredients for its medicines are manufactured in the UK, only 40 per cent of its finished products are made in Britain.

The company says local production plants are more easily able to deal with local requirements, such as dosing, packaging and leaflets.

The future of the UK's leading drugs groups is not in doubt. The best - Glaxo, SmithKline Beecham and Wellcome - continue to attain double-digit earnings growth. But the benefits of their success for Britain's export balance are likely to diminish.

GB United Kingdom, EC P2834 Pharmaceutical Preparations MKTS Market shares MKTS Foreign trade P2834 The Financial Times London Page 7 555
Surveys find signs of recovery Publication 930301FT Processed by FT 930301 By ALAN PIKE

EVIDENCE of the first increase in manufacturing activity in eight months is claimed by the Chartered Institute of Purchasing and Supply in its monthly survey today.

A separate survey of consumer purchasing intentions by Verdict Research, retail analysts, also says that its results for last month are the first to justify optimism in an economic upturn.

The institute's survey of UK purchasing managers shows a rise in its overall purchasing managers' index from 49.3 per cent in January to 51.2 per cent last month. Index readings below 50 per cent suggest that the manufacturing economy is generally declining, while readings above 50 per cent point to an expansion.

Two components of the purchasing managers' index - the output index and new orders index - have both stood above 50 per cent for the past four months. The output measure rose from 50.2 per cent to 53.8 per cent between January and February and the new orders index from 52.8 per cent to 53.9 per cent - although in December it was 54.1 per cent.

The institute attributes the improvements to stronger demand, increased sales and improved confidence. Devaluation continued to affect order books as a number of companies reported an increase in overseas orders.

Verdict says the most encouraging feature of its survey - which tracks consumers' intentions to purchase property, cars and large household items over the next six months - is the upturn in intentions to move house. The proportion of people interviewed who planned to move rose to 6 per cent in February, following five consecutive months at 4 per cent. Verdict concludes that its results 'confirm the beginnings of better times' in the housing market.

GB United Kingdom, EC P30 Rubber and Miscellaneous Plastics Products P31 Leather and Leather Products P32 Stone, Clay, and Glass Products P33 Primary Metal Industries P34 Fabricated Metal Products P35 Industrial Machinery and Equipment P36 Electronic and Other Electric Equipment P37 Transportation Equipment P38 Instruments and Related Products P39 Miscellaneous Manufacturing Industries CMMT Comment & Analysis P30 P31 P32 P33 P34 P35 P36 P37 P38 P39 The Financial Times London Page 7 364
Nigeria may need debt relief to secure democracy Publication 930301FT Processed by FT 930301 By EDWARD BALLS

MR ERNEST Shonekan, chairman of Nigeria's transitional council, faces an unenviable task. Six months is not long for the council, which will run the country under military supervision until an elected government is installed in August, to re-impose fiscal and monetary discipline and devise a credible medium-term economic strategy. But unless radical changes occur, and soon, Nigeria's new civilian government risks sinking in a mire of inflation, economic stagnation and civilian unrest.

Nigeria's return to democracy could hardly have come at a more difficult time. Over the past year, the scale of recent economic mismanagement has emerged. Domestic credit expansion doubled in the first nine months of 1992, compared to the previous year; annual inflation has risen to 45 per cent; the budget deficit has more than doubled since 1989 to over 12 per cent of GDP; and the exchange rate has collapsed, falling from 18 naira to the dollar a year ago to over 30 naira in last week's cancelled foreign exchange auction.

The transitional council has wasted little time. It has announced a three-year plan to reduce the fiscal deficit as a percentage of GDP to 3.3 per cent in 1995 and cut inflation to 5 per cent, hoping this will allow it to negotiate an extended structural adjustment facility with the IMF and reschedule Nigeria's external debts.

Yet Mr Shonekan must also persuade the civilian government to persist with IMF-style structural adjustment. Nigeria's own Structural Adjustment Programme (SAP), instituted in 1986, may have halted the decline in the country's fledgling manufacturing base. However there is little evidence to suggest it has stopped the fall in living standards that has persisted throughout President Babangida's seven-year military rule. The combination of falling oil prices and exchange rate depreciation has reduced average real income per head from Dollars 1,000 in 1980 to a mere Dollars 290 in 1991, making Nigeria one of sub-Saharan Africa's poorest countries, as well as its most populous.

Structural adjustment has been impeded by the debilitating drain on resources from Nigeria's external debt which has grown since the SAP began, as the upper chart shows. Nigeria's external debt stood at Dollars 27.6bn last year, about 100 per cent of Nigeria's GDP. Over 60 per cent of this debt is now owed to members of the Paris Club of government creditors, with the UK still the largest single creditor.

World Bank officials describe this debt burden as unsustainably high. Without rescheduling, interest payments would average Dollars 5bn a year in 1993-96, consuming 36 per cent of Nigeria's total export revenue compared to an average 19 per cent for all developing countries last year and 30 per cent for severely indebted countries.

Yet the Paris Club continues to treat Nigeria as a middle-income country, even though it is officially classified as a heavily indebted low-income country and qualifies for concessional debt relief. Debt rescheduling on middle-income country terms merely reduces the interest burden today by raising it in the future while leaving the debt stock little changed.

A sustainable solution requires outright debt reduction, either using the enhanced Toronto terms or the more generous Trinidad terms which were proposed in 1991 but have never been applied by the Paris Club. The Trinidad terms imply a a one-off reduction of two-thirds of eligible debt and an extended repayment period. But the cost of rescheduling Nigeria's debts on concessional terms exceeds that for the rest of sub-Saharan Africa combined.

The coming months are critical for Nigeria. The UK has said it will consider a unilateral application of the Trinidad terms if Nigeria can reach an IMF agreement. But without substantial debt relief, preferably linked to public sector reform to root out corruption, Nigeria has little chance of sustaining an IMF programme. The Shonekan government offers only a brief window of opportunity for western creditors to do a conditional deal with a non-elected civilian authority for the new elected administration to inherit. It is a chance which may not recur.

NG Nigeria, Africa P9611 Administration of General Economic Programs GOVT International affairs ECON Economic Indicators P9611 The Financial Times London Page 6 697
No progress on Malacca pirates Publication 930301FT Processed by FT 930301 By KIERAN COOKE KUALA LUMPUR

Maritime experts from Malaysia, Indonesia and Singapore have made no headway on piracy in the Strait of Malacca, one of the world's busiest waterways, Kieran Cooke reports from Kuala Lumpur.

MY Malaysia, Asia SG Singapore, Asia ID Indonesia, Asia P44 Water Transportation GOVT International affairs GOVT Legal issues P44 The Financial Times London Page 6 70
UN begins Angola truce bid Publication 930301FT Processed by FT 930301 By REUTER ADDIS ABABA

The United Nations mounted a last-ditch attempt yesterday to convene peace talks between the Angolan government and a team of Unita rebels which said it was trapped in Angola by fighting, Reuter reports from Addis Ababa.

Delegates who had been waiting in Ethiopia since Friday for the talks to start said the UN was in touch with Unita in the hope that the rebels would accept elaborate plans to take them to Ethiopia.

AO Angola, Africa P9711 National Security GOVT International affairs P9711 The Financial Times London Page 6 103
Rocket attack on Kabul kills 60 Publication 930301FT Processed by FT 930301 By REUTER KABUL

ROCKETS and shells ploughed into homes and a busy bazaar in Kabul yesterday, killing more than 60 people and injuring 100 a day before planned peace talks between rival Afghan leaders in neighbouring Pakistan, Reuter reports from Kabul.

Two mortar bombs exploded among crowds in the Feruzhgar bazaar, killing 14 people and injuring more than 60 in the bloodiest attacks since an informal ceasefire took effect two weeks ago.

The Defence Ministry blamed the hardline dissident Hezb-i-Islami party of Gulbuddin Hekmatyar for shattering the ceasefire and bombarding the city with more than 40 rockets and shells.

AF Afghanistan, Asia P9229 Public Order and Safety, NEC GOVT Legal issues P9229 The Financial Times London Page 6 129
Taipei firefighters rescue people trapped under collapsed building Publication 930301FT Processed by FT 930301

Taipei firefighters rescued four people trapped under this four-storey apartment building which collapsed yesterday. The cause is unknown, but the building is next to a construction site

TW Taiwan, Asia P6513 Apartment Building Operators PEOP Personnel News TECH Standards P6513 The Financial Times London Page 6 59
China boosts trade drive in S Africa Publication 930301FT Processed by FT 930301 By TONY WALKER BEIJING

CHINA will extend its trade drive to South Africa next month when it opens its first trade fair there, a move that suggests that the establishment of formal diplomatic relations with Pretoria may not be far off.

About 80 Chinese companies will participate in the Trade Expo organised by the China Council for the Promotion of International Trade and to be held in Johannesburg from April 19 to 25.

The CCPIT-organised fair in South Africa is one of 22 planned internationally and coincides with a rapid increase in China's exports, expected to reach Dollars 100bn (Pounds 70.4bn) this year.

China's efforts further to accelerate its trade growth - it is expected to leap into the top 10 of the world's trading nations this year - comes as Beijing intensifies its attempts to rejoin the General Agreement on Tariffs and Trade. China and the US formally resume Gatt talks in Beijing this week after a three-year break following the 1989 Tiananmen Square massacre.

China and South Africa last year established visa-issuing representative offices known as 'research centres' in each other's capitals as preparation for full normalisation.

China, which has been discreetly trading with South Africa for many years, has said that formal relations would follow further constitutional reforms, including agreement on a national unity government pending elections.

The foreign ministers of the two countries have exchanged visits. South Africa's Mr Pik Botha visited Beijing in 1991 and China's Mr Qian Qichen went to Pretoria last year.

Gold-hungry Chinese consumers spent the equivalent of Dollars 4.3bn on gold jewellery last year, according to China's official Business Weekly.

Quoting a report of the Geneva-based World Gold Council, the newspaper said that, based on 'conservative estimates', jewellery sales in China exceeded 250 tons.

This was equivalent to one quarter of all the gold sales in Asia - a region that is traditionally a big gold consumer. Taiwanese buy about 10 grams of gold on average a year, Hong Kong residents 6 grams and China 1.8 grams.

The huge Chinese demand for gold jewellery has been partly spurred by concerns about the depreciating value of the local currency - the renminbi - and also by growing affluence in a country where economic growth last year topped 12 per cent.

The World Gold Council, an association of producers, said that it would devote more resources to developing the gold market in China. It planned to target women consumers.

The People's Bank of China, the country's central bank, has purchased large quantities of gold in the past year, but the Chinese have not disclosed details. China has not divulged the extent of its gold reserves for more than 10 years.

CN China, Asia ZA South Africa, Africa P9611 Administration of General Economic Programs P3911 Jewelry, Precious Metal GOVT International affairs MKTS Sales CMMT Comment & Analysis P9611 P3911 The Financial Times London Page 6 493
S Africans get the taste for disclosure: Pressure is growing on government to clean up its act Publication 930301FT Processed by FT 930301 By PATTI WALDMEIR

IN THE twilight months of white rule, South Africans have discovered a taste for public disclosure: not just for chilling revelations of human rights abuse, but for evidence of economic crimes and misdeeds that have been buried for years under apartheid - and would probably have brought down a government in any western country.

Over the past week the auditor general, Mr Peter Wronsley, has published the accounts of government departments and statutory bodies showing widespread mismanagement and abuse. Local newspapers have attacked the large perks paid to government ministers. And a member of parliament from the liberal Democratic party pointed out in the House that, although financial scandals involving R5bn (Pounds 1.1bn) in expenditure had been disclosed over the past 18 months, no minister had been sacked or had resigned.

Some 35 government officials are under investigation for corruption, 16 have been or are being tried, with six convicted so far.

The unspoken message is that the white government must clean up its public management act before handing over to a mostly-black administration. Most whites and some blacks assume, by African precedent, that this will do an even worse job of managing public finances.

However, exasperation with the ruling National party has reached such levels that white callers to a recent popular phone-in show, on Johannesburg's Radio 702, have begun to say regularly that they cannot imagine a black government exceeding National party mismanagement.

The auditor general's report for last year condemns weak management systems and inadequate financial controls, especially in the South African Defence Force (half of whose budget is earmarked for secret funds, on which he did not comment) and the Department of Foreign Affairs, which provides billions of rands in funding annually (R5.4bn last year) to the nominally independent homelands of Transkei, Ciskei, Bophuthatswana and Venda.

Mr Wronsley found, overall, that he could not publish unqualified audits for three government departments and 14 statutory institutions, and that he could express no opinion on the accounts of two other government bodies.

But he condemned most severely the black homelands for failing to keep to financial guidelines, overspending on salaries and poor project controls, and said he doubted whether Transkei, Venda and Ciskei could repay some R3.3bn in debts guaranteed by South Africa.

Threatened now with reincorporation into a unitary South Africa, homeland officials are widely suspected of siphoning off large sums as protection against an uncertain future.

Only a day later, parliament's joint committee on public accounts criticised projects by the now-disbanded secret military unit, the Civil Co-operation Bureau, widely alleged to be involved in the murders of anti-apartheid activists: the committee questioned R13m in what it considered unauthorised or improper spending.

As the new South Africa approaches, allegations abound of government officials fiddling with pension entitlements to insure against racially motivated retrenchments. This includes a recent case in which 4,000 white teachers were offered early retirement (with pension) by the white education department, but left free to sign up for fresh employment (and a new pension) with the separate departments which administer non-white education.

Whatever its shortcomings, the National party is likely to pay no immediate price for poor administration of public funds: South Africans know they have no choice but to continue supporting the party if they seek a stable transition to majority rule.

But as the Johannesburg daily, Business Day, commented last week, the public must continue to demand accountability or 'the voting public will have only itself to blame when the pattern of corruption continues'.

ZA South Africa, Africa P91 Executive, Legislative and General Government CMMT Comment & Analysis P91 The Financial Times London Page 6 628
International economic indicators: Balance of payments Publication 930301FT Processed by FT 930301

Trade figures are given in billions of European currency units (Ecu). The Ecu exchange rate shows the number of national currency units per Ecu. The nominal effective exchange rate is an index with 1985=100.

------------------------------------------------------------------------ UNITED STATES ------------------------------------------------------------------------ Visible Current Ecu Effective trade account exchange exchange Exports balance balance rate rate ------------------------------------------------------------------------ 1985 279.8 -174.2 -159.7 0.7623 100.0 1986 230.9 -140.6 -150.0 0.9836 80.2 1987 220.2 -131.8 -141.6 1.1541 70.3 1988 272.5 -100.2 -107.0 1.1833 66.0 1989 330.2 -99.3 -91.8 1.1017 69.4 1990 309.0 -79.3 -70.9 1.2745 65.1 1991 340.9 -52.3 -3.0 1.2391 64.5 1992 346.5 -64.0 1.2957 62.9 ------------------------------------------------------------------------ 1st qtr. 1992 87.3 -12.0 -4.7 1.2623 63.5 2nd qtr. 1992 86.7 -16.6 -14.0 1.2717 63.6 3rd qtr. 1992 80.6 -18.2 -10.3 1.3831 60.1 4th qtr. 1992 92.4 -17.0 1.2658 64.2 ------------------------------------------------------------------------ February 1992 29.8 -2.7 na 1.2634 63.4 March 30.1 -4.6 na 1.2309 65.1 April 29.3 -5.7 na 1.2436 64.8 May 28.2 -5.7 na 1.2676 63.8 June 29.3 -5.2 na 1.3039 62.3 July 27.6 -5.4 na 1.3693 60.5 August 25.5 -6.5 na 1.4014 59.8 September 27.5 -6.3 na 1.3786 60.2 October 29.6 -5.5 na 1.3210 62.1 November 30.8 -5.9 na 1.2372 65.1 December 32.1 -5.6 na 1.2391 65.3 January 1993 1.1968 66.4 ------------------------------------------------------------------------

JAPAN ------------------------------------------------------------------------ Visible Current Ecu Effective trade account exchange exchange Exports balance balance rate rate ------------------------------------------------------------------------ 1985 230.8 76.0 64.5 180.50 100.0 1986 211.1 96.2 86.9 165.11 124.4 1987 197.3 86.1 75.5 166.58 133.2 1988 219.8 80.7 66.6 151.51 147.3 1989 245.3 70.5 52.4 151.87 141.9 1990 220.0 50.1 28.3 183.94 126.0 1991 247.5 83.2 63.0 166.44 137.0 1992 254.8 102.7 90.3 164.05 142.9 ------------------------------------------------------------------------ 1st qtr. 1992 65.0 26.1 22.7 162.21 142.2 2nd qtr. 1992 63.1 25.4 22.6 165.60 139.9 3rd qtr. 1992 61.4 24.3 20.3 172.79 139.6 4th qtr. 1992 65.5 27.0 24.9 155.57 149.7 ------------------------------------------------------------------------ February 1992 21.7 9.3 7.7 161.18 143.3 March 21.9 8.7 9.6 163.61 139.6 April 21.0 7.6 7.5 165.92 138.2 May 20.9 9.3 8.6 165.57 139.7 June 21.2 8.5 6.5 165.32 141.7 July 20.5 8.4 7.0 172.22 139.2 August 19.7 7.6 6.1 177.11 137.0 September 21.2 8.3 7.2 169.05 142.5 October 21.6 9.2 7.9 159.93 148.2 November 22.2 9.1 9.4 153.22 150.3 December 21.7 8.7 7.6 153.57 150.7 January 1993 149.62 151.3 ------------------------------------------------------------------------

GERMANY ------------------------------------------------------------------------ Visible Current Ecu Effective trade account exchange exchange Exports balance balance rate rate ------------------------------------------------------------------------ 1985 242.8 33.4 21.7 2.2260 100.0 1986 248.6 53.4 40.3 2.1279 108.8 1987 254.3 56.8 39.8 2.0710 115.3 1988 272.6 61.6 42.9 2.0739 114.6 1989 310.2 65.3 52.2 2.0681 113.5 1990 323.9 51.8 37.0 2.0537 119.1 1991 327.4 11.2 -16.1 2.0480 117.7 1992 330.3 16.5 -19.4 2.0187 121.2 ------------------------------------------------------------------------ 1st qtr. 1992 83.2 3.1 -4.3 2.0422 118.8 2nd qtr. 1992 81.1 3.6 -4.8 2.0511 118.7 3rd qtr. 1992 83.9 6.4 -6.6 2.0221 122.1 4th qtr. 1992 82.1 3.4 -3.7 1.9593 125.0 ------------------------------------------------------------------------ February 1992 27.7 1.1 -0.9 2.0443 118.6 March 28.2 1.7 -0.2 2.0456 118.4 April 29.5 2.4 -0.9 2.0483 118.6 May 26.5 0.6 -1.9 2.0551 118.4 June 25.1 0.6 -1.9 2.0498 119.1 July 28.3 1.0 -3.8 2.0410 120.7 August 27.7 3.1 -0.9 2.0326 122.0 September 27.8 2.3 -1.8 1.9927 123.6 October 28.6 2.4 -0.8 1.9564 125.7 November 26.8 0.9 -0.3 1.9634 124.0 December 26.7 0.1 -2.5 1.9581 125.3 January 1993 1.9327 125.3 ------------------------------------------------------------------------

FRANCE ------------------------------------------------------------------------ Visible Current Ecu Effective trade account exchange exchange Exports balance balance rate rate ------------------------------------------------------------------------ 1985 133.4 -3.6 -0.2 6.7942 100.0 1986 127.1 0.0 3.0 6.7946 102.8 1987 128.3 -4.6 -3.6 6.9265 103.0 1988 141.9 -3.9 -3.4 7.0354 100.8 1989 162.9 -6.3 -3.6 7.0169 99.8 1990 170.1 -7.2 -7.2 6.9202 104.8 1991 175.4 -4.2 -4.7 6.9643 102.7 1992 182.2 4.2 2.2 6.8420 106.0 ------------------------------------------------------------------------ 1st qtr. 1992 45.4 0.9 -1.0 6.9492 103.4 2nd qtr. 1992 46.2 1.5 0.9 6.9122 104.4 3rd qtr. 1992 45.2 0.9 0.2 6.8536 106.6 4th qtr. 1992 45.3 9.7 2.2 6.6529 109.3 ------------------------------------------------------------------------ February 1992 15.0 0.11 -0.08 6.9572 103.3 March 15.5 0.23 -0.86 6.9429 103.4 April 15.8 1.10 0.06 6.9274 103.9 May 15.0 0.59 1.38 6.9090 104.5 June 15.4 -0.16 -0.54 6.9001 104.9 July 15.5 0.86 0.05 6.8872 106.0 August 14.2 -0.45 0.02 6.8944 106.3 September 15.6 0.49 0.13 6.7792 107.6 October 15.1 0.11 0.99 6.6368 110.0 November 15.1 0.05 0.13 6.6426 109.0 December 15.1 0.81 1.11 6.6793 108.9 January 1993 6.5539 109.7 ------------------------------------------------------------------------

ITALY ------------------------------------------------------------------------ Visible Current Ecu Effective trade account exchange exchange Exports balance balance rate rate ------------------------------------------------------------------------ 1985 103.7 -16.0 -5.4 1443.0 100.0 1986 99.4 -2.5 -1.4 1461.6 101.4 1987 100.7 -7.5 -2.1 1494.3 101.2 1988 108.3 -8.9 -8.0 1536.8 97.8 1989 127.8 -11.3 -14.0 1509.2 98.6 1990 133.6 -9.3 -19.4 1523.2 100.6 1991 137.0 -10.5 -28.0 1531.3 98.9 1992 137.9 -8.0 1591.5 95.7 ------------------------------------------------------------------------ 1st qtr. 1992 34.3 -5.1 -7.6 1535.7 99.0 2nd qtr. 1992 35.8 -3.6 -11.1 1546.3 98.5 3rd qtr. 1992 32.9 0.5 -8.2 1564.6 98.2 4th qtr. 1992 34.8 0.0 1719.4 87.1 ------------------------------------------------------------------------ February 1992 11.4 -1.4 -2.2 1535.6 99.0 March 12.1 -1.6 -2.2 1536.7 98.8 April 11.7 -1.2 -3.9 1542.0 98.6 May 11.5 -1.9 -3.4 1546.6 98.5 June 12.7 -0.5 -3.8 1550.3 98.5 July 13.9 0.8 -4.4 1546.2 99.5 August 7.7 1.1 -2.4 1543.4 100.1 September 11.3 -1.4 -1.4 1604.1 95.0 October 12.4 0.1 1723.8 87.3 November 10.8 -1.2 1687.0 88.7 December 11.6 1.1 1747.5 85.6 January 1993 1784.9 82.5 ------------------------------------------------------------------------

UNITED KINGDOM ------------------------------------------------------------------------ Visible Current Ecu Effective trade account exchange exchange Exports balance balance rate rate ------------------------------------------------------------------------ 1985 132.4 -5.7 4.7 0.5890 100.0 1986 108.3 -14.2 0.1 0.6708 91.6 1987 112.3 -16.4 -6.4 0.7047 90.1 1988 120.9 -32.3 -24.3 0.6643 95.5 1989 137.0 -36.7 -32.3 0.6728 92.6 1990 142.3 -26.3 -23.8 0.7150 91.3 1991 147.7 -14.7 -9.0 0.7002 91.7 1992 145.1 -18.7 -16.1 0.7359 88.4 ------------------------------------------------------------------------ 1st qtr. 1992 36.7 -4.3 -4.0 0.7126 90.6 2nd qtr. 1992 38.0 -4.5 -4.4 0.7034 92.3 3rd qtr. 1992 36.4 -4.5 -3.0 0.7261 90.9 4th qtr. 1992 34.3 -5.4 -4.6 0.8015 79.8 ------------------------------------------------------------------------ February 1992 12.6 -1.4 -1.33 0.7105 90.9 March 12.5 -1.2 -1.16 0.7141 90.1 April 12.4 -2.0 -1.90 0.7076 91.4 May 13.0 -1.2 -1.17 0.7000 92.8 June 12.5 -1.3 -1.30 0.7027 92.9 July 12.3 -1.6 -1.06 0.7137 92.5 August 12.3 -1.6 -1.09 0.7219 92.0 September 11.8 -1.3 -0.85 0.7428 88.2 October 11.5 -1.4 -1.19 0.7969 80.8 November 11.4 -1.7 -1.50 0.8100 78.3 December 11.5 -2.2 -1.93 0.7976 80.0 January 1993 0.7809 80.6 ------------------------------------------------------------------------ All trade figures are seasonally adjusted, except for the Italian series and the German current account. Imports can be derived by subtracting the visible trade balance from exports. Export and import data are calculated on the FOB (free on board) basis, except for German and Italian imports which use the CIF method (including carriage, insurance and freight charges). German data up to and including June 1990, shown in italics, refer to the former West Germany. The nominal effective exchange rates are period averages of Bank of England trade-weighted indices. Data supplied by Datastream and WEFA from national government and central bank sources. ------------------------------------------------------------------------

XA World P96 Administration of Economic Programs STATS Statistics ECON Economic Indicators P96 The Financial Times London Page 6 1183
Concessions on deportees 'soon' Publication 930301FT Processed by FT 930301 By JUREK MARTIN WASHINGTON

THE US expects further concessions soon from Israel on the difficult issue of the fate of the 400 Palestinian deportees, according to Mr Warren Christopher, the secretary of state.

In a TV interview yesterday, Mr Christopher, just back from his first Middle East tour as secretary of state, said the deportee problem was 'on its way to resolution.'

He refused to disclose any details but added that the new developments 'will give reassurance to the Palestinians' and, in his opinion, would make all the more likely the attendance of the Palestinian delegation at the Middle East peace talks due to reconvene in April.

He was particularly encouraged that those Arab leaders to whom he had spoken and who had influence over the Palestinians all thought there was now 'a moment of opportunity' for the peace process to get under way again.

This had been brought about, he said, by the fact that the US was now seen again to be willing to play an active leadership role as an 'honest broker'.

IL Israel, Middle East US United States of America P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 6 206
Indian budget signals loosening of economic reins Publication 930301FT Processed by FT 930301 By STEFAN WAGSTYL

A WEEK ago, a leading Indian economist said he believed the finance minister would 'wait another six to nine months before letting the economy go. There's so much he still has to put right.'

But Mr Manmohan Singh, the finance minister, decided not to wait. This weekend's budget is a bet that, after a squeeze which started in mid-1991, the Indian economy is now ready for solid and long-lasting expansion.

It is also an acknowledgement that, after the Ayodhya crisis, Mr P V Narasimha Rao's government is in need of recovering popular support for itself and for economic reform. As Mr Singh said in his budget speech: 'I have used this budget as an opportunity to put economic and social development firmly back on the national agenda.'

Initial indications are that Mr Singh has succeeded - at least temporarily. Most industrialists, economists and newspaper columnists welcomed his budget. The question is whether there will be an economic price to be paid for this burst of popularity.

Mr Singh had the scope to prime the economy principally because of the severity of the previous austerity drive which has cut inflation rapidly and reduced the fiscal deficit. The fiscal deficit has dropped from 8.4 per cent in 1990-1991 to just over 5 per cent. Officials said that if they left revenue and spending policies unchanged, the deficit would fall in 1993-94 to 3.5 per cent.

Tax relief, mainly reductions in customs duties, will inject some Rs45bn (Pounds 1.03bn) into the economy. The largest duty cuts will come on capital goods, raw materials and components - so manufacturers will benefit, though they are expected to pass on gains to consumers. Industry is also pleased with the 1 percentage point cut in interest rates and with tax breaks for investments in key sectors such as power. Mr R C Bhargava, the chairman of Maruti, a leading car maker, commented: 'The days of recession are over.'

The increases in public spending are aimed at ameliorating some of India's chronic weaknesses and winning support for economic reform from poorer people who benefit little from import duty cuts. Project spending in rural development is going up by 62 per cent, in education 37 per cent and in power investment 22 per cent.

The exchange rate reform will also tend to increase government spending. Until this weekend, India has operated two exchange rates - a market rate (last week Rs33 to the Dollars ) and an official rate (Rs26). Exporters and other owners of foreign exchange have been required to change 60 per cent of their funds at market rates and 40 per cent at official rates. The official rate is now abolished - so the government must buy foreign exchange at market prices.

Finance ministry officials argue that now is an opportune time to end their squeeze and float the rupee. World oil prices, interest rates and inflation rates are low, so India is cushioned against price shocks. They hope the G7 developed countries' efforts to stimulate growth will boost Indian exports - perhaps by 15 per cent in 1993-94. Export-led growth would promote non-inflationary expansion at home and fund the imports India needs to equip and modernise its industry.

If the economy develops as planned, Congress (I) can fight elections this year or next, basking in the glow of prosperity. While general elections are not due until 1996, the Bharatiya Janata Party, the right-wing Hindu party whose supporters stormed the Ayodhya mosque, is demanding an early poll. Elections in four states where BJP governments have been suspended are likely to be held this year.

However, three potential dangers loom on the economic horizon. First, with 70 per cent of the labour force in agriculture, India's economic progress is still critically dependent on the weather. A good monsoon last year boosted growth; a poor one now could hinder it and fuel inflation.

Next, exporters may not be able to respond quickly to the rupee's flotation, even though it should increase their revenues. Indian manufacturers still suffer from foreign buyers' doubts about quality and delivery schedules. If exports stay sluggish but imports grow in response to duty cuts, the current account deficit will soar, putting expansion in jeopardy.

Finally, Mr Singh has postponed some difficult issues such as extending the scope of the tax net. There is no mention of plans for labour law reform - including increasing employers' rights to sack redundant workers. There is political advantage from these delays - but economic modernisation will require that these problems are tackled.

Mr Singh is aware serious structural reforms are still needed. His budget contains substantial moves to prepare India's financial system for liberalisation. Notably, the government is injecting Rs57bn in capital into the state-owned banks to help them provide for bad debt. Mr Singh is also cutting the funds they must lend at low rates to the government - from 36 per cent of deposits to 25 per cent over three years - thus releasing more funds for commercial lending. Further, there are measures to beef up supervision of banking and securities after last year's Bombay securities scandal.

There is no doubting Mr Singh's personal commitment to pro-market reform. However, it is worth remembering that the initial impetus for reform came not from any ideological conversion in favour of free markets in the finance ministry but from the shock of a balance of payments crisis. As the memory of that crisis fades, so it will become more difficult to advance politically unpopular changes.

THE MAIN POINTS

The Rupee is to be fully floated from today. The present two exchange rates, official and market, will be replaced by a single market rate.

Import duties slashed with maximum rate cut from 110 per cent to 85 per cent. General capital goods rate cut from 55 per cent to 35 per cent with further cuts for export-oriented industries and power generation and distribution.

Interest rates cut by 1 percentage point.

A five-year tax holiday for investments in power, plus other incentives.

Public funds for state-owned banks to provide for bad loans. Permission for banks to raise funds on capital markets.

Increases in public investment in power, petroleum and natural gas. Increases in spending on agricultural development, education and infrastructure.

Cuts in domestic excise duties expected to reduce prices of consumer goods including cars, television sets, refrigerators, cosmetics and biscuits.

No change in basic income or corporation taxes.

IN India, Asia P9611 Administration of General Economic Programs GOVT Government News P9611 The Financial Times London Page 5 1101
Singh unveils reform package Publication 930301FT Processed by FT 930301 By STEFAN WAGSTYL NEW DELHI

INDIA at the weekend unveiled a wide-ranging package of reforms designed to integrate the country further into the global economy, including full flotation of the rupee on foreign exchange markets.

Mr Manmohan Singh, the finance minister, who announced the measures on Saturday during his annual budget speech, also signalled an end to the tough economic squeeze which he put in place in July 1991, and the start of a strong push for export-led growth.

The budget was widely seen as a determined effort by the government to put the economy back at the centre of the national agenda - and push aside the inter-religious passions raised by the destruction of the Ayodhya mosque in December. Mr Singh said India could not afford to spend time 'appearing to be absorbed with obscurantist preoccupations and sectarian divides'.

The budget was also portrayed as an attempt by the ruling Congress (I) to recover votes lost through the government's poor handling of the Ayodhya crisis.

The right-wing Hindu Bharatiya Janata Party, whose supporters stormed the mosque, condemned it as 'as an electoral lozenge.'

Mr Singh cut interest rates by 1 percentage point - from 18 per cent to 17 per cent for commercial borrowers - slashed import duties, cutting the maximum rate of duty from 110 per cent to 85 per cent, and reduced excise taxes.

He announced tax breaks for investors in key sectors such as power, where India suffers chronic shortages and introduced plans for further financial reforms, including a scheme to use public funds to help state-owned banks provide for long-standing bad debts.

The finance minister also greatly increased spending on education, agricultural development and infrastructure. These rises will soften the impact in rural areas of planned further cuts in fuel and fertiliser subsidies.

To the surprise of many economists, Mr Singh both cut revenue sources and increased public spending without raising government borrowing.

Finance ministry officials explained he could do this because the severity of previous tax increases created room for manoeuvre. The target for the fiscal deficit for the year 1993-94, starting April 1, is to be 4.5 per cent of GDP, down from just over 5 per cent this year.

This is slightly above the 4 per cent target favoured by the International Monetary Fund and World Bank, which are monitoring India's reform programme - but close enough to allow them to continue supporting Mr Singh and his policies.

Mr Singh said his budget would promote growth and boost exports massively and denied it was inflationary. The government expects GDP growth to rise from a likely 4 per cent this year to 5-5.5 per cent. Inflation is expected to fall from 7 per cent now to 5-6 per cent. Foreign investment, of which Dollars 2.3bn has been approved since the reforms began, is expected to grow further.

IN India, Asia P9611 Administration of General Economic Programs GOVT Government News P9611 The Financial Times London Page 5 502
Thailand expects budget deficit Publication 930301FT Processed by FT 930301 By VICTOR MALLET BANGKOK

THAILAND'S Bt560bn (Pounds 15.17bn) budget for fiscal 1993, which predicts a budget deficit for the first time in four years, was passed by the House of Representatives in Bangkok at the weekend.

The bill was approved on Saturday after hours of squabbling between members of parliament over such issues as the budget money that Thai MPs are authorised to spend on projects in their own constituencies. The appointed Senate is expected to endorse the budget this week.

Revenue is estimated at Bt534.4bn. Officials of the budget bureau defended the deficit, amounting to Bt25.6bn or about 0.9 per cent of gross domestic project, on the grounds that additional funds were needed for investment in roads and other infrastructure. Mr Chuan Leekpai, the Democrat prime minister, has promised to develop rural areas.

It is possible that the projected deficit will in any case never materialise. Last year the budget was balanced, but the government ended up with higher revenues and lower spending than expected, leaving a surplus of Bt52.3bn, or about 2 per cent of GDP.

This year's budget, covering the fiscal year from October 1992, is six months late because of the political upheaval in the country last year. Gen Suchinda Kraprayoon was removed from the premiership after 50 pro-democracy demonstrators were shot dead by soldiers in Bangkok in May, and an interim government ran the country until the September elections which brought Mr Chuan to power.

Economists have mixed views on the budget. Proponents of higher spending point out that the treasury is now sitting on an accumulated surplus of Bt220bn and that expenditure for the first half of this year has already been held at last year's levels by the delay in preparing the budget.

TH Thailand, Asia P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 5 318
Security forces accused Publication 930301FT Processed by FT 930301 By STEFAN WAGSTYL

TWO US human rights groups yesterday charged Indian security forces, fighting against insurgents in the mountain state of Kashmir, with stepping up a 'campaign of terror against civilians,' writes Stefan Wagstyl.

The report, from Asia Watch and Physicians for Human Rights, comes at a time of interational concern about the ferocity of the struggle between the Indian security forces and the militant groups.

In the most serious incident, 65 civilians were killed in the city of Sopore in January when security forces staged an attack, after a militant assault in which two soldiers died.

The human rights report documents alleged cases of torture, detention without trial and assaults by members of the security forces on civilians.

The crackdown in Kashmir: Asia Watch, 485 Fifth Avenue, New York, NY10017.

IN India, Asia P9229 Public Order and Safety, NEC CMMT Comment & Analysis P9229 The Financial Times London Page 5 159
Brazilian ultimatum on inflation Publication 930301FT Processed by FT 930301 By CHRISTINA LAMB RIO DE JANEIRO

BRAZIL's President Itamar Franco has issued an ultimatum to his economy minister to bring down inflation within the next three months.

In a interview at the weekend, Mr Franco hit out at remarks by Mr Paulo Haddad, the economy minister, that inflation would remain at current levels for the next three months.

Alarmed at the latest inflation figures which show no respite from the 30 per cent-a-month level, Mr Franco said 'the people cannot tolerate more of this inflation'. Accusing Mr Haddad of 'giving a shock to the population,' he warned 'what brings down economy ministers is not presidents but inflation'.

With no clear economic policy in force and inflation spiralling, expectation is growing that Mr Franco will resort to a shock plan and price freeze, something Mr Haddad has repeatedly ruled out. Mr Haddad says he is working on a stabilisation programme which cannot be implemented until late April as it requires structural changes to be made.

But Mr Franco said yesterday: 'The public is fed up of hearing only that there won't be a new shock plan.' Although he stressed he had no intention of imposing price controls 'for the time being,' he said he was unsure whether inflation could be reduced without measures such as a freeze.

Mr Franco's comments heightened speculation over the future of Mr Haddad, Brazil's fourth economy minister in three years.

In the past few weeks the president has publicly criticised his minister and refused to authorise his request to devalue the cruzeiro, which is now selling at 21,000 to the dollar.

The tension between the two men comes just as a mission from the International Monetary Fund is due to arrive in Brazil. The mission, arriving today, is to evaluate the economic situation as a preliminary to full negotiations on a new accord.

BR Brazil, South America P9611 Administration of General Economic Programs ECON Inflation GOVT Government News Franco, I President Brazil Haddad, P Economy Minister (Brazil) P9611 The Financial Times London Page 4 348
Minister presses for the release of rainforest cash Publication 930301FT Processed by FT 930301 By CHRISTINA LAMB

BRAZIL'S environment minister, Mr Coutinho Jorge, arrived in London at the weekend to lobby for release of long-promised funds from the G7 leading industrialised nations for an ambitious plan to preserve the Amazon rainforest.

The Amazon Pilot Project agreed at the G7 summit in London in 1990 was heralded as the world's largest environment project and the first time that first and third world nations had co-operated on a big environmental programme.

Backed by the World Bank and European Community, the project envisaged spending Dollars 1.5bn (Pounds 1.05bn) over five years to protect the world's largest rainforest. But the Amazon has been pushed down the international agenda by more pressing matters and, three years on, Brazil still has not got a cent.

Mr Miguel Oliveira, spokesman for Mr Jorge, said: 'The first world has got all the publicity for the initiative while avoiding giving anything. The rest of the world may have forgotten the Amazon but Brazil has not.'

Last year, President Fernando Collor secured a pledge to liberate Dollars 50m before the Earth Summit hosted in Rio. But the matter was quickly buried amid his unsuccessful struggle to survive impeachment, and according to the Environment Ministry the money was never released.

The new government secured a promise that an initial Dollars 128m tranche would be released in April. But this is threatened by intense lobbying from environmental groups on the US and UK governments to block the funds in retaliation for Brazil's failure to recapture the escaped killers of Chico Mendes, the rubber-tapper who brought the rainforest plight to world attention. Ecologists say the Brazilian government made no effort to keep the assassins in jail despite repeated warnings an escape was planned.

Mr Jorge will meet this week with non-governmental organisations such as Friends of the Earth, academics, MPs and government ministers including Mr Michael Heseltine, Mr Michael Howard and Mr Tristan Garel-Jones to try to prevent the blockage of funds.

Mr Oliveira said yesterday: 'The Pilot Project is to further the aims that Chico Mendes died for. Blocking the money would harm these objectives, not help them.'

BR Brazil, South America P9512 Land, Mineral, Wildlife Conservation RES Capital expenditures GOVT International affairs P9512 The Financial Times London Page 4 387
Surge in Mexican trade deficit worries investors Publication 930301FT Processed by FT 930301 By DAMIAN FRASER MEXICO CITY

MEXICO'S trade deficit climbed to Dollars 20.6bn (Pounds 14.5bn) last year, an 85 per cent increase over 1991. The shortfall was Dollars 15.8bn when revenues from in-bond plants were included.

The trade deficit, which has increased five-fold since 1990, represents more than 6 per cent of gross domestic product and has become a growing source of worry for investors in Mexico's money and stock markets.

The December deficit climbed to Dollars 2.2bn, the largest monthly shortfall last year. Exports rose to Dollars 2.3bn, a 4.4 increase over December 1991, while imports were Dollars 4.5bn, a 26 per cent increase. The growth in imports appears to have levelled off at 25-26 per cent, although as yet there is no sign of them slowing.

The government is easily financing the deficit, but at the cost of an annual real interest rate of about 10 per cent. The Finance Ministry has long argued that the growth in imports reflects restructuring of Mexican industry, with companies importing capital and intermediate goods to improve productivity and to compete better with international competition.

Exports have also suffered from the weakness in the US and international economy, and the steady real appreciation of the peso against the dollar.

While the Mexican peso devalued by about 3 per cent against the dollar last year, Mexican inflation was some 9 percentage points higher than the US's.

For the year as a whole, exports reached 27.5bn, 1.5 per cent more than 1991.

Manufacturing exports performed slightly better, rising by 4.2 per cent.

The Finance Ministry said export growth was 'satisfactory'. Imports increased to Dollars 48.1bn last year, 26 per cent more than in 1991.

MX Mexico P9611 Administration of General Economic Programs ECON Balance of trade P9611 The Financial Times London Page 4 310
Lamont confident of British growth Publication 930301FT Processed by FT 930301 By PETER MARSH, Economics Correspondent

BRITAIN will show faster growth this year than the European economy as a whole, according to Mr Norman Lamont, the UK chancellor.

In confident mood after chairing the Group of Seven talks in London, Mr Lamont told a press conference he was encouraged by signs of an upturn in Britain, even though UK unemployment would 'continue to rise for some time'.

Mr Lamont noted a 'disquieting' deterioration in economic conditions among other European nations, much of it linked to the slowdown in Germany. This was leading to a 'serious situation' for growth prospects across mainland Europe.

In a robust rebuttal of speculation that he might lose his job in a cabinet reshuffle after this month's UK budget, Mr Lamont said he was looking forward to being in the British delegation at the annual world economic summit in Tokyo in July. 'See you there,' he told reporters.

Asked about the high level of German interest rates, the chancellor said: 'When the Germans feel able to reduce their interest rates this will bring considerable benefits (to the rest of Europe).' But he said the G7 meeting had not discussed the timing of any such move.

Hinting that he might decide in the March 16 budget to put up taxes to reduce the growing public-sector deficit, Mr Lamont said that, at the end of the day, governments had to decide on economic policies with regard to their long-term fiscal positions. That was even though the gap between state spending and revenues tended naturally to rise during recessions, such as the one Britain has suffered since about mid-1990.

Mr Lamont indicated he was cautiously optimistic about the possibility of a UK recovery, noting rising retail sales volumes and the latest modestly bullish survey of output expectations among manufacturers published last week by the Confederation of British Industry. He said that, on current economic evidence, UK bank base rates at 6 per cent were 'at the appropriate level' after cuts of 4 percentage points since September.

Although he was concerned at the high level of UK unemployment, which in January pushed through 3m for the first time in six years, loss of jobs in Britain 'could not be isolated' from similar trends in other developed countries. The 'only answer' to high unemployment was to 'get back on track' for steady non-inflationary growth.

'There are no easy solutions; if there were we would be implementing them already.'

GB United Kingdom, EC P9611 Administration of General Economic Programs CMMT Comment & Analysis Lamont, N Chancellor of the Exchequer (UK) P9611 The Financial Times London Page 4 445
G7 finance ministers rediscover harmony: Weekend meeting was free of quarrels but it is too soon to signal a revival in the group's fortunes Publication 930301FT Processed by FT 930301 By PETER NORMAN, Economics Editor

THEY came to rebuild international economic co-operation. When they left London after five hours of informal talks on Saturday, the finance ministers from the Group of Seven countries were congratulating themselves on a successful meeting free of quarrels.

But it remains to be seen whether the brief meeting of ministers and central bank governors from the US, Japan, Germany, France, Britain, Italy and Canada will revive the G7 after two years in which its gatherings have been marked more often by bickering than agreement.

Saturday's meeting was not intended to decide any blueprints or set up mechanisms to help the industrialised world deal with the problems of high and rising unemployment, recession and slowing growth in continental Europe and Japan, or the economic crisis in Russia.

There was no appetite for returning to the tightly co-ordinated policies of the 1980s when the G7 tried to limit exchange rate fluctuations among its members or set domestic economic policy objectives for members of the group that were rarely adhered to.

Instead, the G7 countries will continue to frame their policies very much with their own interests in mind, according to the 'Sinatra Doctrine' of 'doing it my way'.

But there was much talk of a 'positive spirit' after the meeting. The hope is the gathering will have enabled the ministers to exchange views frankly and gain a better insight into each other's economic problems and domestic political constraints.

'It doesn't mean that we have to have identical economic policies for our countries,' said a senior US Treasury official. 'But it does mean that each will be concerned as to how our policies contribute to sustained growth without inflation.'

The decision not to issue a communique or take decisions helped Saturday's talks to run smoothly. There was no repetition of last April's G7 meeting in Washington when Japanese objections to one sentence of the final text prolonged the meeting for an acrimonious two hours.

But the absence of a communique could allow differences among nations to persist. Although the ministers went out of their way to avoid megaphone diplomacy and deliberately refrained from putting partner countries under pressure for specific policy commitments, there were signs of strain beneath the surface on Saturday.

A senior US Treasury official said after the talks that Washington would like Japan to go beyond present plans for stimulating its economy by fiscal means. That sentiment was echoed by Mr Michel Sapin, the French finance minister, and other European G7 representatives. However, Mr Yoshiro Hayashi, Japan's finance minister, said he had no intention of introducing another package besides the existing budget that is being debated in the Japanese parliament.

The US, Britain and France made clear they would like to see further cuts in Germany's short-term interest rates but were given no assurances by the German delegation. Mr Piero Barucci, the Italian finance minister, said that all his G7 colleagues had told him they thought the lira was undervalued.

These tensions did not flare up into open dispute as the ministers were determined to be on their best behaviour and because Mr Lloyd Bentsen, the new US Treasury secretary, chose to adopt a softly-softly approach to America's allies.

With compliments flowing in from all sides for the US administration's deficit-reduction package and strong approval from other G7 countries for President Bill Clinton's pledge on Friday to support the multilateral trading system, Mr Bentsen decided to treat the meeting genuinely as a 'get to know you' session.

He seems willing to wait a few months for any improved spirit of international co-operation to yield results. The senior Treasury official said the US hoped to see some positive fruits of co-operation by July's G7 summit in Tokyo, rather than the next G7 finance ministers' meeting in April.

It also remains unclear how far the G7 countries will set up an institutional framework to promote co-operation. Mr Bentsen, who has been making the running in pushing for a revived G7, appeared to have no plan on offer. His one suggestion, endorsed by the other countries, was that there should be fewer communiques and that they should be brief when issued.

Mr Theo Waigel, the German finance minister, appeared to be the only minister with concrete plans to strengthen the G7 structure. Like Mr Bentsen, he said communiques should be shorter and not necessarily issued after every meeting. He also called for:

the G7 to meet four times a year;

the managing director of the International Monetary Fund to be more deeply involved when the group has its periodic 'mutual surveillance' discussions; and

the IMF to submit carefully focused papers about the world economy to help the group's discussions.

Mr Waigel also suggested that trade and economics ministers should join one of the finance ministers' future meetings to discuss ways to promote the Uruguay Round of trade liberalisation talks. His ideas and other suggestions will be taken up by senior officials from the G7 countries.

By the time they report to their ministers it will be clearer whether the positive atmosphere of London marked a revival in the group's fortunes or was just part of President Clinton's political honeymoon.

US United States of America JP Japan, Asia DE Germany, EC FR France, EC GB United Kingdom, EC IT Italy, EC CA Canada P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 4 926
German states agree on need for more Bonn cash Publication 930301FT Processed by FT 930301 By JUDY DEMPSEY and QUENTIN PEEL POTSDAM, BONN

THE 16 federal states in Germany have agreed a common plan to finance the soaring costs of unification by stating that central government must bear the overwhelming burden, and taxes must go up by next year at the latest to finance it.

A summit meeting of the 16 state premiers in Potsdam at the weekend reached little agreement on where they can save more money, but clear agreement on the need to wring more cash out of the central state exchequer.

The deal was immediately denounced by Mr Theo Waigel, the German finance minister, as one which would cause an 'unjustifiable increase' in the German federal government deficit, and make the central government 'incapable of action'.

The states agreed that some form of tax increase would be needed before 1995, the first date from which Mr Waigel is prepared to consider such a move. He said yesterday that tax rises could not be considered until growth resumed in the German economy.

It means that there is still a wide gap to bridge between the central government and the 16 states on how they will pay for an estimated DM110bn (Pounds 46.5bn) in annual transfers to east Germany from 1995 onwards. Mr Waigel said the states' plan would mean the central government would have to pay 90 per cent of the total bill.

The 16 state premiers agreed they could only afford to shoulder a share of the burden if the central government agreed to give them a much larger share in its revenues from value added tax: they want 45 per cent of the total VAT take in future, against 37 per cent at present, or an extra DM20bn.

They also agreed that the financial needs of the five 'new' federal states of east Germany would amount to at least DM60bn from 1995, if they were to carry out their normal functions, including the financing of education, housing, and police forces.

There was little agreement about the precise size of the transfers needed in 1995. The western states proposed DM60bn, while the eastern states said between DM75bn and DM80bn.

In addition to the DM60bn, the central government estimates that a further DM40bn is required to pay the debt service costs of inherited east German debts from 1995, and DM10bn for costs of supporting east German industry, and making subsidy payments to the poorest western states.

The state premiers discussed several proposals for savings, including the abolition of the 13th school year in the German school system, and a rise in the public sector working week.

In spite of the flimsy nature of the agreement, the state premiers congratulated themselves on their apparent unanimity at talks.

The two-day conference opened on Friday in Potsdam, the capital of Brandenburg.

Both Mr Kurt Biedenkopf, the premier of Saxony in east Germany, and Mr Waigel stressed yesterday that the debate on financial burden-sharing went to the heart of Germany's federal structure. But that was as far as their agreement went.

Mr Waigel said he would present to the cabinet on Thursday the necessary laws to put into effect the government's alternative plan for both savings and tax increases. However, the two sides will meet on March 11, and both insist they are prepared to consider compromises.

DE Germany, EC P9611 Administration of General Economic Programs GOVT Government News P9611 The Financial Times London Page 3 583
The European Market: Kindelbruck, a suitable case for privatisation - A US luggage company go to Germany Publication 930301FT Processed by FT 930301 By CHRISTOPHER PARKES

Kindelbruck's position in the middle of Germany has never been much of an attraction in the past. But according to the management of York Luggage, a New Jersey suitcase company, it was the principal reason for their presence in this small town in Thuringia, late in January, partying on blood pudding, raw pork and strong east German beer,

They were celebrating the end of a long search for a European manufacturing base which had started before anyone contemplated the possibility of German unification, and ended in the cast-offs department of the Treuhand privatisation agency.

The Kofferfabrik Kindelbruck, founded in 1914, had been marked down for liquidation. It was to become another casualty of unification. . . and another warning that the town was fated never to enjoy the full fruits of commercial success.

Kindelbruck's chronicles show that the industrial revolution simply passed the place by. In 1873, for example, an appeal for a railway connection was turned down. Two years later, the paper works, until then the town's most enduring industrial establishment in 700 years of recorded history, was closed. A shoe factory opened in 1888 and shut five years later after another failed bid for a rail link.

Thanks to the new owner, York Luggage, Kindelbruck has kept its only manufacturing company, which has withstood fire, war, communist neglect and the ravages of the free market since it was founded in 1911. But the town still has no railway, no canal or river link, just a ropey two-lane road passing through. The nearest hotel still has no effective telephone system.

But Mr Frank Alfieri, York's chairman and chief strategist, does not care.

As well as being in the geographical centre of Germany - itself the biggest market for luggage in Europe - the town sits in the middle of a new European market of boundless potential, he says. It is home to a workforce experienced in sticking and stitching suitcases. Unusually, the company also has an established customer base among department and speciality store buyers in western Germany, which was in place before the collapse of eastern European markets which formerly bought 1.5m cases a year.

Among the tangibles, the package bought from the Treuhand included nine acres of land and 30-odd scruffy buildings redolent with the smell of drains and fresh paint.

The price, as usual in Treuhand deals with private companies, is a secret. The social cost, as usual, has been enormous. Of the 630 former employees, who used to make 1.5m cases a year, only 78 remain. A handful being trained to work leather and manufacture a new line in laptop computer carriers-cum-briefcases will bring the total to 100 later this year.

For the medium term, York is committed to investing DM4.8m (Pounds 2.03m) in the site. What returns this will yield in jobs and earnings rest with the success of the company's bold, even curious, product strategy.

York is primarily a US luggage wholesaler which gave up domestic manufacture more than 10 years ago, shifting off-shore to the far east. In north America it markets retailers' own-label product and brands such as Bill Blass, Diane von Furstenburg and Members Only with an up-market but distinctly regional cachet.

In Europe, where established labels such as Samsonite and Delsey dominate the middle market and the likes of Louis Vuitton skim the cream, the New Jersey newcomer plans to start in the crowded lower reaches. (The 'Wartburg' line in its current product series, bearing the same name as the defunct East German car, gives a clue to its ambitions at this level). But the company also plans to ship products from Germany to the US and import its American ranges into Kindelbruck for distribution in Europe.

In addition, Mr Alfieri says, it is trying to win licences to manufacture sports bags under the Reebok, Adidas or Nike labels, and studying the prospects for a grander design. 'What succeeded in the US with designer names may be possible in Europe,' he adds. Most challenging, however, is a project to establish the York name in the mid-range as a new brand in its own right.

Tall orders for a new management which expects just DM10m sales this year and has to ride a recession into the bargain. The key, says Mr Alfieri, is that although consumers are not yet aware of the York name, it is well respected among retailers. Since distribution channels are already established, the company believes its main task is to ship suitable products down them.

Meanwhile, export trade has already started with Switzerland, Austria, France and the Netherlands. Nor is the local market being neglected. While the band played and the beer flowed in the front office, cash was flowing in through the back door where a chalked sign tempted passers-by: 'Special offer, suitcases DM7 to DM35'.

York Luggage Kofferfabrik Kindelbruck DE Germany, EC P3161 Luggage COMP Acquisition CMMT Comment & Analysis MKTG Marketing P3161 The Financial Times London Page 3 851
'Crash landing' predicted for W German economy: Deutsche Bank economist criticises 'inappropriate' Bonn policy Publication 930301FT Processed by FT 930301 By CHRISTOPHER PARKES FRANKFURT

THE western German economy is heading for a crash landing, dragged down by tumbling industrial production, high unemployment, and 'inappropriate' policy responses in Bonn, according to Mr Norbert Walter, chief economist at Deutsche Bank.

Gross domestic product in the west will fall by up to 2 per cent this year and numbers without work will rise by a further 500,000, he told the Financial Times.

Another 100,000 will lose their jobs in the east, pushing the unadjusted pan-German total above 4m next January. By then some 1.5m people - an increase of 400,000 on latest levels - will be working short time, he added.

He predicted unemployment would remain at around 4m during 1994, and downgraded his forecast for economic growth next year from 3 to 2 per cent.

Fearing political paralysis due to federal and state elections starting in February next year, he said: 'It is difficult to see when anyone in politics will have the chance to think and act. I have never yet seen any major policy changes in an election year.'

He was confident of further cuts by the Bundesbank in leading interest rates, and said he was assuming the Lombard and discount rates would each fall 200 basis points to 7 per cent and 6 per cent respectively by the end of the year.

However, rate cuts alone could not bring recovery. In the short term, only exports - mainly to north America and south east Asia, which account for 20 per cent of overseas sales - could help bring relief.

Mr Walter's forecasts represent an almost complete reversal of his stance in a matter of weeks. From being one of the most optimistic commentators, he has switched to being one of the most pessimistic.

In an article written for the FT in early January he predicted nil economic growth and 3.25m unemployment during 1993. He later adjusted his growth forecast to minus 1 per cent, in line with government expectations.

'We are heading into a deeper trough than we had assumed,' he explained, 'and the economic policy reaction has been too small to correct the imbalances.'

While there had been some surprising positive developments, including wage settlements around or below the expected rate of inflation and the Bundesbank's recent interest rate cuts, their benefits had been obliterated by further worsening of domestic and external conditions.

The government's proposed solidarity package, comprising mainly tax increases, was an 'almost completely inappropriate' response under conditions which called for public spending cuts, privatisation of state assets and an increase in the retirement age, he said.

Mr Walter enjoys privileged observer status in Germany's biggest private bank, which has intimate links with the country's top companies. He said business and consumer confidence was 'crashing'.

Apart from the effects of the cyclical downturn, western Germany faced structural deterioration with de-industrialisation, nil foreign investment and 'an extended period of increased unemployment'.

Despite his gloom, he said he could not imagine that the people, politicians and business community would not react this year. Union restraint on pay, which has led to deals of 3-4 per cent this year, showed labour leaders had reacted more rationally than politicians.

Mr Walter said he had a faint hope that Germany would 'fight back' if the failings of Europe's 'model' economy threatened the national reputation with international ridicule.

However, he added, next year's elections loomed as 'a deadly threat to my hopes'.

DE Germany, EC P9611 Administration of General Economic Programs CMMT Comment & Analysis P9611 The Financial Times London Page 3 609
Europe out to cut sulphur emissions Publication 930301FT Processed by FT 930301 By FRANCES WILLIAMS GENEVA

NEGOTIATIONS begin today on setting new targets for reducing sulphur emissions in Europe in a bid to tackle the continent's worst pollution blackspots.

The week-long talks, under auspices of the United Nations Economic Commission for Europe (ECE), will bring together over 30 countries from western and eastern Europe.

They will be trying to advance negotiations on a new sulphur emissions protocol to the ECE's convention on long-range transboundary air pollution. The current protocol, signed in 1985, set a 30 per cent emissions reduction target between 1980 and 1993.

Sulphur emissions, which contribute to acid rain, a major cause of forest death and building erosion, come mainly from fossil-fuelled power-stations. The emissions can drift over long distances; much of Scandinavia's sulphur deposits comes from power stations in eastern Europe.

ECE officials say European nations have already agreed in principle on, at minimum, an overall emissions standstill from present levels, but are not planning to set another across-the-board reduction target. Instead, the talks are focused on reducing pollution above 'critical load' - the threshold of ecological tolerance.

Surveys suggest that more than a third of Europe's ecosystems are suffering sulphur deposition above the 'critical load,' notably in the 'black triangle' linking the Czech Republic, Poland and eastern Germany and in Scandinavia.

Negotiators will also be considering technology required to cut pollution to 'critical load' levels and how to share the substantial cost burden.

The countries most responsible for high sulphur emissions, mostly in eastern Europe, are those least able to pay. ECE officials say that, although violating the 'polluter pays' principle, it makes sense for rich countries importing pollution from poor ones to pay part of the cost of reducing it.

The current sulphur protocol has 20 members. Neither Britain nor the US, both heavy polluters, has signed.

XG Europe P9721 International Affairs P9511 Air, Water, and Solid Waste Management RES Pollution TECH Standards P9721 P9511 The Financial Times London Page 2 335
Bosnia aid plan 'a risk worth taking': Three cargo aircraft leave Frankfurt on presumed start of air-drops Publication 930301FT Processed by FT 930301 By JUREK MARTIN and LAURA SILBER WASHINGTON

MR Warren Christopher, US secretary of state, yesterday played down the risks to US air crews as the air-drop of relief supplies for Bosnia was reported to have got under way. He said the operations were 'a risk well worth taking' and probably involved less danger than existing relief flights into Sarajevo airport.

German television reported last night that cargo aircraft had left Frankfurt airbase to make the first air-drops of crates of food and medicines to villagers stranded by fighting in remote parts of Bosnia.

The ZDF television channel said three C-130 transport aircraft had left on the mission and it showed one of the aircraft taking off from the military base at Frankfurt airport.

But the US military, which has put a news blackout on the flights, declined to confirm or deny that any aircraft had left the base.

Mr Christopher claimed the fact that ground convoys were currently getting through in Bosnia with less trouble might well reflect the imminence of the US airdrops. 'It is a statement of greater US involvement,' he said. Speaking in a TV interview, Mr Christopher said the weekend dropping of leaflets telling people of the impending operation had been 'successful and routine'.

He also sought to play down domestic criticism that the US was being drawn into a Balkan quagmire. Citing the number of missed opportunities in the last 18 months to control the conflict, he argued that now 'the great risk is that we do nothing'. He noted the dangers of a wider Balkan conflict and added: 'We have a stake in preventing the world from going up in flames.'

Mr Christopher also firmly rejected the notion that the countries of Europe were not doing enough to help.

'There is a division of labour and responsibility,' he said, noting the presence of British, French, Spanish and Canadian troops in Bosnia and the use of Nato surveillance aircraft.

In advance of the air-drops, two Hercules C-130 cargo aircraft on Saturday scattered boxes containing 1m leaflets over eastern Bosnia - written in Serbo-Croat in both Cyrillic and Latin script, and emblazoned with the US flag - urging people not to open fire on the aircraft and to stay clear of the falling crates.

But first reports by ham radio from Gorazde, a besieged town in eastern Bosnia, said the leaflets had missed their mark. Mr Hadzo Effendic, the mayor, said no leaflets had dropped in Gorazde, Radio Zagreb reported. The radio quoted Mr Effendic as saying some leaflets had fallen in no-man's land between the frontlines. He said Srebrenica and Zepa, two of a handful of Bosnian government strongolds in eastern Bosnia, had not found any leaflets.

United Nations officials and representatives of Bosnia's three main ethnic groups have already inspected the first 96 crates being delivered in the first air-drop. Serb leaders have expressed suspicions that weapons will be included in the air-drops.

Weighing 704kg each, the parcels include ready-to-eat meals. Smaller crates have medical supplies, including non-prescription medicines for people suffering shortages of anaesthetics and antibiotics.

Meanwhile, a fresh row flared between Moslem-led Bosnian government troops and Bosnian Croats, nominal allies in the civil war, when Bosnian Croat forces announced that they were closing all supply routes between Croatia and Moslem-held territory.

The Croatian Defence Council (HVO) accused the Bosnian government forces of deploying 25,000 troops in central Bosnia and abandoning the fighting against Serb forces.

But Croatian television reported later that the HVO had agreed to let through Bosnian army convoys at border points if they were destined for regions where HVO and Moslem forces were jointly fighting the Serbs.

BA Bosnia-Hercegovina, East Europe US United States of America P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 2 652
French finance minister attacks Britain's social policy Publication 930301FT Processed by FT 930301 By REUTER PARIS

Mr Michel Sapin, French finance minister, yesterday attacked Britain's social policy, saying it was starting to think like a third world country, Reuter reports from Paris.

His comments were in response to British Prime Minister John Major's dismissal of French charges that Britain was luring foreign investment by maintaining low pay and conditions.

'Let's compare ourselves to what is good - Germany,' Mr Sapin said in a debate on unemployment on French television. 'But certainly not to Mr Major or England, which is beginning to reason like countries of the third world.'

FR France, EC GB United Kingdom, EC P9721 International Affairs P9441 Administration of Social and Manpower Programs CMMT Comment & Analysis P9721 P9441 The Financial Times London Page 2 136
France bucks trend as foreign investment rises Publication 930301FT Processed by FT 930301 By EMMA TUCKER, Economics Staff

FOREIGN DIRECT investment in France grew strongly in the first six months of last year, making France the exception among member countries of the Organisation for Economic Co-operation and Development, which generally experienced a slowdown in direct investment inflows.

According to an OECD survey of financial market trends, strong inflows meant that foreign direct investment exceeded French investment abroad for the first time.

The OECD suggested the growth reflected a more favourable attitude to foreign investment in France because of the employment opportunities it generated, and the realisation by foreign investors that France was at the heart of the single market.

Figures for the first six months of last year confirm the generally downward trend in FDI, with the OECD reporting that Japanese direct investment abroad fell by about 16 per cent from the same period in 1991.

In the first six months of last year total direct investment inflows in OECD countries was Dollars 32.4bn (Pounds 22.8bn), compared with Dollars 36.6bn in the first six months of 1991. Outflows fell from Dollars 73.6bn in the first half of 1991 to Dollars 67.9bn in the same period last year.

Among the biggest investors, only outflows from the US registered 'remarkable' growth in the first half of last year.

Chemicals were the main target of European and US direct investment in the manufacturing sector abroad. The report found that in 1991, US investment in foreign chemical industries was Dollars 40bn, representing 10 per cent of total US companies' assets abroad. By contrast only a few Japanese chemical groups operate globally. In Europe, chemicals constituted the bulk of German, British, French and Dutch investment abroad. A new impetus came from privatisation in east European countries where European groups took over big producers in Hungary and Czechoslovakia.

The EC received more than half US outward investment in electronics in 1991, with new US affiliates set up mainly in Germany and the UK.

The report says that over the past three years, Japanese investment in car manufacturing came to a standstill in the US as demand for cars weakened in North America and Europe. At the same time, Japanese investment in the European car industry - mainly Spain and the UK - doubled.

Financial Market Trends, OECD, Publications Service, 2, rue Andre-Pascal, 75775 Paris, Cedex 16, France.

FR France, EC P9611 Administration of General Economic Programs CMMT Comment & Analysis P9611 The Financial Times London Page 2 420
Italians ponder Craxi immunity Publication 930301FT Processed by FT 930301 By ROBERT GRAHAM ROME

THE Italian parliament this week confronts the sensitive issue of whether to waive parliamentary immunity for Mr Bettino Craxi, who was forced to step down from Socialist party leadership because of his alleged involvement in the Milan corruption scandal.

Although more than 50 deputies and senators are caught up in a series of corruption scandals, Mr Craxi is the most senior member of the politial establishment to be wanted for questioning.

The debate, scheduled for tomorrow, will reveal the extent to which parliament has the will to act quickly and tackle the increasingly complex issues raised by the nationwide investigations into political corruption. Mr Craxi is expected to use the occasion to underline the difficulties and dangers of putting the political system on trial.

The outcome is likely to have an impact on moves to find a legislative solution to limit the scope of the corruption investigations and prevent matters getting out of hand. Already the scandals have reached deep into Italy's business and political elite and more developments are expected this week.

The current areas of investigation centre on commissions paid to political parties for contracts in the power industry; reorganisation of the chemical industry in the 80s; the role of ENI, the state oil concern; the state road-building authority, Anas; EC funds for professional training improperly used; and spending for the 1990 world cup football competition

In documents submitted to parliament, Milan magistrates have listed 40 incidents of alleged corruption and receiving illicit finance for the Socialist Party worth L36bn (Pounds 15.7m).

Mr Craxi, who quit the leadership on February 16, has consistently denied wrong-doing and has claimed the magistrates are conducting a vendetta against him and the political establishment. His main defence rests on the argument that he ran the political/policy side of the party, with administration and finance left to others.

But even if Mr Craxi convinces parliament on this point, deputies face the awkward question of the degree of responsibility a party leader has for what goes on in his party - and whether this is sufficient grounds to waive immunity.

The pressure on Mr Craxi has mounted since Ms Enza Tomaselli, his private secretary, was arrested on February 17 and held under preventive detention. The tactic, used by magistrates to make people talk, has been much criticised.

The first senior Socialist to have immunity waived was Mr Gianni de Michelis, former foreign minister. On Friday he was questioned for the first time by magistrates regarding alleged illicit party finance over a Venice public works contract.

When he left the justice building, Mr de Michelis was chased by a hostile crowd.

IT Italy, EC P9121 Legislative Bodies PEOP Personnel News GOVT Legal issues Craxi, B Former Socialist Party Leader (France) P9121 The Financial Times London Page 2 476
Spanish in bid to raise question of Gibraltar Publication 930301FT Processed by FT 930301 By TOM BURNS MADRID

MR Javier Solana, the Spanish foreign minister, yesterday reiterated Spain's commitment to ending the UK's colonial presence in Gibraltar.

Speaking in the eve of a meeting with Mr Douglas Hurd, the British foreign secretary, Mr Solana cautioned that little progress towards solving the Gibraltar dispute could be expected from the one-day talks. Spain would use 'persuasion and pressure in appropriate doses' to end the 'anachronism' that Gibraltar represented.

The most obvious pressure exerted by the Spanish authorities consists of rigorous customs checks on vehicles entering and leaving the colony which can lead to queues of up to three hours.

At a diplomatic level Spain has prevented the implementation of the EC's External Frontiers Convention which lays down the borders of the Single Market because it refuses to accept Gibraltar under its present colonial status as a valid Community entry point.

Mr Hurd could, however, be pressed to review proposals tabled by Spain in 1985, which suggested a leaseback formula or power sharing.

ES Spain, EC GI Gibraltar, West Europe P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 2 199
Allies still sceptical about US air-drop: The need to find a balance between effectiveness and risk Publication 930301FT Processed by FT 930301 By DAVID WHITE

CONSULTATIONS and careful preparations for the US air-drop in eastern Bosnia have failed to disperse scepticism about the operation among Washington's allies and UN forces on the ground.

Officers with UN forces in Bosnia, frustrated at their own inability to get relief supplies through to some of the communities most in need, say it will be difficult to achieve a balance between effectiveness and risk. Military experts believe an operation of this kind can in any case be no more than a temporary measure.

The drops by four-engined C-130 Hercules aircraft are expected to made from anywhere between 5,000 and 15,000 feet, avoiding risks from small-arms fire and some kinds of anti-aircraft artillery. But although special parachutes designed for high-velocity drops will be used, accuracy cannot be assured.

The bundles, containing up to 700kg of food and medicine, may land in the wrong area or cause casualties or damage in the intended zone. Leaflets dropped over the weekend warned people to wait until the containers have landed. Unlike most operations of this type, there will be no logistics troops on the ground to receive the supplies, organise distribution and recover equipment.

Some of the apprehensions about the dangers of the operation - and the possibility, as Serb leaders warned, that it would lead to an escalation in the conflict - have been lessened by its reduced scale.

Initial discussion of the plan, launched last month at a time when the UN High Commissioner for Refugues had suspended current aid supplies in Bosnia, pointed to an operation of greater dimensions and a more overtly military nature.

However, although the US transport aircraft flying from Germany are now due to carry out the drops without cover from carrier-based fighters, there is concern about possible US military reaction if the C-130s come under attack.

The danger is similar to that facing the aircraft ferrying relief to Sarajevo. A two-engined Italian G222 transport aircraft was shot down near the Bosnian capital last September, killing all four crew, and other aircraft have been hit by small-calibre weapons.

The threat is seen as coming not only from uncontrolled Serb forces, who may not be satisfied by assurances that the supplies do not contain arms, but also from Moslem militiamen seeking to bring the US and its allies directly into the conflict. Many Bosnian Moslems and Croats criticise the aid effort for attempting to deal with the symptoms rather than the cause of suffering.

UN forces are worried that if the US is provoked into using air power they will be exposed to direct attack. They have only limited means for defending themselves. The British army has some light artillery and locating radars waiting in reserve aboard a navy task force in the Adriatic. French forces have already moved in Mistral missiles to defend their positions in northwest Bosnia against air attack.

Any escalation involving UN forces would threaten the running of aid convoys by land, which are the only practical means of providing the large volumes required,

The US operation also raises questions about command arrangements for any future international action in former Yugoslavia. Like the warships monitoring shipping in the Adriatic, the air-drop operation is on UN authority but not directly under UN command. US military commanders favour a similar arrangement for any future US-Nato peacekeeping force.

BA Bosnia-Hercegovina, East Europe US United States of America P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 2 598
Yeltsin seeks peace-keeping role around Russian borders Publication 930301FT Processed by FT 930301

RUSSIA has 'a heartfelt interest' in suppressing conflicts around its borders and must be given a free hand to act as guarantor of peace in the former Soviet bloc, President Boris Yeltsin told the international community yesterday. This might mean acting with special powers granted by the United Nations. Mr Yeltsin (right), pictured with vice-president Alexander Rutskoi, also warned his opponents in parliament he would not tolerate their blocking of constitutional and economic reform.

Report, Page 16

RU Russia, East Europe P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 1 106
Bundesbank hints at rate decline: G7 meeting fails to ease concern over unemployment and spreading recession Publication 930301FT Processed by FT 930301 By PETER NORMAN and PETER MARSH

GERMANY'S benchmark short-term interest rates are set to decline but the fall will do little to assuage mounting concern about the European economy among business leaders and finance ministers.

As politicians and company chiefs around Europe warn of rising unemployment and spreading recession on the European continent, Mr Helmut Schlesinger, the Bundesbank president, forecast a decline in German money market rates which stand at 8.5 per cent.

Speaking after a meeting in London on Saturday of finance ministers from the Group of Seven countries, Mr Schlesinger said that a reduction from today of DM32bn (Pounds 13.5bn) in the minimum reserves which German banks have to hold in non-interest bearing accounts at the Bundesbank should prompt a slight fall in German money market interest rates.

Mr Schlesinger gave no hint about whether the Bundesbank might lower its official discount and Lombard rates. The Bundesbank's decision-making council will next meet on Thursday.

But his remarks indicated a more relaxed attitude to falling interest rates. They were the nearest that anyone came to encouraging hope of more action to revive the world economy at the meeting of ministers and central bank governors from the US, Japan, Germany, France, Britain, Italy and Canada.

However, a decline in short-term rates is unlikely to be enough to prevent economic slowdown and rising unemployment in Germany and other industrialised nations. Hopes that the G7 might develop a common approach to world economic problems by July's Tokyo world economic summit could not conceal widespread gloom about the global economy and frustration in the US, UK and France that Germany and Japan were not doing more to encourage growth.

A Financial Times survey suggests that business leaders in continental Europe are deeply gloomy about their prospects. Some liken conditions to the first oil-shock of the early 1970s.

'Consumer confidence is in free fall,' says Mr David Herman, chairman of Adam Opel, the German arm of General Motors.

Mr Jean-Rene Fourtou, chairman of Rhone-Poulenc, France's biggest chemicals group, says: 'The state of the European economy is worse even than during the 1973 oil-shock. I don't expect it to improve until 1994 at the earliest.'

Mr Norbert Walter, chief economist at Deutsche Bank in Frankfurt, says the western German economy is heading for a crash landing, dragged down by tumbling industrial production, high unemployment and 'inappropriate' government policies.

In an interview with the Financial Times today, he forecasts a fall of up to 2 per cent in west Germany's gross domestic product this year, bringing the pan-German unemployment total to more than 4m by next January.

After the G7 meeting, Mr Theo Waigel, the German finance minister, warned that unemployment in Germany would rise this year by between 200,000 and 300,000.

Mr Michel Sapin, the French finance minister, said the slowdown in Germany was 'of particular concern' and warned of a need for 'deepened international co-ordination' of economic policymaking. Both Mr Sapin and Mr Norman Lamont, chancellor, said they would like to see German interest rates fall, but - like other G7 participants - indicated they had not put pressure on the Bundesbank to achieve this.

Participants unanimously praised President Bill Clinton's plan to cut the US budget deficit and his support for the open world trading system, and agreed that their informal meeting provided a good basis for further co-operation. The ministers took no decisions, issued no communique and came to no special conclusions on currencies.

Speaking after the meeting, a senior US Treasury official said he would like to see Japan take steps to boost its economy through fiscal measures and 'a further reduction' in German interest rates.

Mr Yoshiro Hayashi, the Japanese finance minister, said the high level of unemployment in many developed nations was 'a grave issue'. But he said Japan had 'no intention' of taking extra fiscal measures on top of a special package agreed in August and existing budget plans.

Mr Lamont, who chaired the meeting, said he did not envisage cutting UK interest rates at present.

With additional reporting by James Blitz and Emma Tucker in London and Christopher Parkes in Frankfurt.

More G7 reports, Page 4 'Crash landing' predicted for W German economy, Page 3 Week ahead, Page 11 Currencies, Page 27

DE Germany, EC XG Europe US United States of America JP Japan, Asia FR France, EC GB United Kingdom, EC IT Italy, EC CA Canada P9611 Administration of General Economic Programs GOVT International affairs CMMT Comment & Analysis ECON Balance of payments P9611 The Financial Times London Page 1 775
Plans to privatise Docklands railway expected shortly Publication 930301FT Processed by FT 930301 By RICHARD TOMKINS, Transport Correspondent

THE government is about to announce that it is planning to privatise the Docklands Light Railway, which links the City of London with Canary Wharf and Stratford in east London.

The move is likely to reinforce suspicions that privatisation could extend beyond British Rail to smaller urban systems such as London Underground and the Tyne & Wear Metro.

However, the Department of Transport said that privatising the Docklands Light Railway would require separate legislation from the Railways Bill currently going through parliament.

The move was foreshadowed in the Conservative party's general election manifesto last year which said the government would seek to privatise the Docklands Light Railway during the present parliament's lifetime.

Until recently the commitment had been considered to be lying dormant because of the railway's unreliability and because the failure of the Canary Wharf development meant it would carry far fewer passengers than expected.

However, the government is now about to appoint the management consultancy arm of Ernst & Young, the accountants, to draw up a list of options for fulfilling the manifesto commitment.

If a stock market flotation or outright sale is chosen, the railway's new owners will need continuing subsidies because the railway costs six times as much to run as it collects in fares.

An alternative would be to privatise it in the same way as BR by inviting the private sector to bid for a franchise to operate the railway. The contract would go to the company requiring the lowest subsidy.

The Docklands Light Railway cost Pounds 77m to build. From its opening in 1987, its performance was disrupted by an Pounds 800m expansion programme to cope with the increased demands that were expected to be created by the Canary Wharf development.

One reason the government wants to press ahead with privatisation is because of the need to fund a proposed Pounds 130m extension of the railway from the southern tip of the Isle of Dogs to Lewisham in south-east London.

The government would like the extension to be privately funded, and the simplest way to achieve that would be to have the line built by the private-sector owner of the rest of the railway.

Docklands Light Railway GB United Kingdom, EC P4111 Local and Suburban Transit COMP Company News GOVT Government News P4111 The Financial Times London Page 1 404
Lilley caps level of home loans benefit Publication 930301FT Processed by FT 930301 By ALISON SMITH

A CEILING is to be put on mortgage interest payments paid by the social security system for the formerly well-off who have lost their jobs, Mr Peter Lilley, the social security secretary, said yesterday.

The measure will mean that along with existing restrictions, only mortgages of up to Pounds 150,000 will be eligible for social security help in 1993, and this will be lowered to Pounds 125,000 in 1994, and reviewed again after that.

The move, which will be implemented in the second half of April, follows severe ministerial embarrassment last December over a case in which mortgage interest payments of almost Pounds 2,000 a week were made to a former insurance sales executive.

It coincides with a survey commissioned by the housing charity Shelter which shows that 55 per cent of backbench MPs - spreadamong all parties - support the phasing out of mortgage interest tax relief.

Mr Lilley said of the plan to cap social security help on home loan interest: 'We want to focus support on those whose needs are greatest, not on those whose assets are greatest. Why should the taxpayer keep the former millionaire in his mansion?

'It is one thing to tide over ordinary mortgage payers hit by the double blow of redundancy and a weak housing market. And we have no intention of damaging the current recovery in the housing market.

'But the system was never intended to bail out the super-rich on mega-mortgages who made no provision against tough times,' he added.

The government says about 1,500 people claim income support help with mortgage interest on sums above Pounds 150,000, and 3,000 on sums above Pounds 125,000. The new ceiling will not apply retrospectively.

Beyond solving a political difficulty, the move reflects a belief among ministers that social security payments should increasingly be targeted at those most in need, and that people should be encouraged to make provision for themselves against risk.

Mr Frank Field, the Labour chairman of the cross-party social security committee of MPs, said: 'We now have the worst of all possible worlds. This will make the rich homeless - and I am against making the rich or the poor homeless.'

Help for council tenants, Page 8 MPs 'back ending of tax relief', Page 8

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs GOVT Draft regulations P9441 The Financial Times London Page 1 412
Disruption after blast could cost New York billions Publication 930301FT Processed by FT 930301 By NIKKI TAIT

NEW YORK City faces multi-billion dollar losses as a result of the bomb that rocked the World Trade Center on Friday, with the 110-storey twin towers remaining closed to their thousands of office workers for at least a week.

But commodity exchanges will re-open for business today in their usual venue in one of the smaller buildings of the complex.

The FBI confirmed that a bomb in an underground car park 'definitely' caused the blast, but it was not known who planted it. Five people were killed and more than 1,000 injured as the ceiling collapsed on to an underground train station and as smoke billowed through the twin towers, the second highest buildings in the world.

Mr Mario Cuomo, the New York state governor, said: 'The guess around the world must be that this is terrorist-related,' adding: 'You have to prepare for the worst.'

New York FBI chief James Fox said: 'It certainly could be anyone. A lot of people have been laid off recently. It could be drug dealers upset with the US government, could be terrorists, could be any one of those.'

The towers suffered no structural damage, but would be closed for 'in excess of a week' for repairs, according to Mr Stanley Brezenoff, executive director of the Port Authority, which operates the complex.

Some disruption is likely for all financial firms based in the complex. Some of those unable to return to the twin towers today have sought temporary premises or may route business through their offices in other cities.

Mr Brezenoff said the nine-story building that houses the commodity exchanges, including the New York Mercantile Exchange, would re-open today. 'The exchanges asked for 3-4 hours a day, and they will get that and possibly more,' he said.

There had earlier been concern that world oil trading might be affected by any disruption to futures trading on Nymex.

Insurance analysts said the closure of the towers would be regarded by the insurance industry as a 'catastrophic event'.

Some estimates suggest that the economic impact on the city, from lost business, could run to more than Dollars 1bn a day.

Mr Raymond Kelly, New York City's Police Commissioner, said about 40 calls had been logged claiming responsibility for the explosion, but declined to discuss details.

US United States of America P99 Nonclassifiable Establishments P9229 Public Order and Safety, NEC RES Capital expenditures GOVT Legal issues P99 P9229 The Financial Times London Page 1 423
World News in Brief: Gish and Keeler die Publication 930301FT Processed by FT 930301

Actress Lillian Gish, one of the queens of the silent film era, who made her last film appearance in the 1987 production The Whales of August, died in New York, aged 99. Ruby Keeler, tap dancer and former wife of Al Jolson, died, aged 83.

US United States of America P7929 Entertainers and Entertainment Groups PEOP Personnel News P7929 The Financial Times London Page 1 78
World News in Brief: All of a quiver Publication 930301FT Processed by FT 930301

A yew tree at Staunton, near Gloucester, which provided arrows for the Battle of Agincourt and is thought to be 2,000 years old, has been saved from collapse.

GB United Kingdom, EC P0783 Ornamental Shrub and Tree Services RES Natural resources TECH Safety P0783 The Financial Times London Page 1 63
World News in Brief: Guinness in tax dispute Publication 930301FT Processed by FT 930301

Drinks group Guinness is appealing against an Inland Revenue demand for more than Pounds 20m tax on shares issued during its takeover of Distillers in 1986. The shares were placed to provide a cash alternative for Distillers' shareholders.

Distillers Group Guinness GB United Kingdom, EC P2082 Malt Beverages COMP Company News GOVT Taxes P2082 The Financial Times London Page 1 74
World News in Brief: IRA admits bomb attack Publication 930301FT Processed by FT 930301

The IRA said it carried out Saturday's litter bin bomb attack in Camden High Street, north London, which injured 18 people including two children and a policeman. Dublin woos Unionists, Page 8

GB United Kingdom, EC P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P9229 The Financial Times London Page 1 68
World News in Brief: Lifeboat overturns Publication 930301FT Processed by FT 930301

The Hartlepool lifeboat overturned twice in violent seas as it stood by an empty oil tanker from which all but a skeleton crew had been airlifted after it ran aground off Redcar, Teesside. A crewman was swept away from the self-righting lifeboat and rescued by an RAF helicopter. The remaining crew of six returned the boat to port.

GB United Kingdom, EC P4412 Deep Sea Foreign Transportation of Freight P7999 Amusement and Recreation, NEC RES Natural resources PEOP Personnel News P4412 P7999 The Financial Times London Page 1 99
World News in Brief: Tanker aground Publication 930301FT Processed by FT 930301

The 97,000-tonne Danish-owned oil tanker Freja Svea went aground in heavy seas off Redcar, Teesside, while waiting to load in the Tees estuary. An RAF helicopter lifted off nine of the 21 crew. The rest stayed aboard to attempt to refloat the vessel.

GB United Kingdom, EC P4412 Deep Sea Foreign Transportation of Freight RES Natural resources PEOP Personnel News P4412 The Financial Times London Page 1 78
International Company News: UBS climbs 10.4% with trading lift Publication 930227FT Processed by FT 930304 By IAN RODGER ZURICH

UNION Bank of Switzerland, the country's largest, recorded a 10.4 per cent rise in net income last year to SFr1.34bn (Dollars 883m), as sparkling results from trading offset reverses in domestic lending.

'We can claim to be very happy,' Mr Robert Studer, the UBS chief executive, said yesterday, adding that 'we feel quite optimistic about 1993'. He forecast foreign operations would continue to flourish and the bank would overcome its problems in Switzerland.

'All sectors have budgeted for increases in income this year,' Mr Studer said.

Return on equity rose from 7 per cent in 1991 to 7.4 per cent last year and the group was 'on track' to reach its target of 10 per cent by the mid-1990s.

Foreign operations contributed about a third of group profit last year, up from a quarter in 1991, and the bank, one of the few remaining to enjoy triple A ratings from all leading credit rating agencies, benefited from a large influx of demand and savings deposits.

Turmoil in foreign exchange markets in the second half of the year helped trading income soar 32.2 per cent to SFr1.68bn.

Net interest income grew 3.6 per cent to SFr3.4bn thanks to improving margins. But provisions for bad loans were raised 6.2 per cent to SFr1.8bn.

The directors are proposing to increase dividends from SFr27 to SFr29 per bearer share and from SFr5.40 to SFr5.80 per registered share.

Bank Leu, part of the CS Holding group, has reported 1992 net profit of SFr30.7m after liquidating SFr11.1m in hidden reserves, 7.2 per cent lower than the 1991 result.

Union Bank of Switzerland Bank Leu Holding CH Switzerland, West Europe P602 Commercial Banks FIN Annual report P602 The Financial Times London Page 12 304
Salvation Army 'ignored investment advice' Publication 930227FT Processed by FT 930304 By JIMMY BURNS, ANDREW JACK and ROLAND RUDD

SENIOR EMPLOYEES of the Salvation Army believe the financial transactions which led to an alleged Pounds 6.2m fraud were in breach of Charity Commission guidelines drawn up after the Bank of Credit and Commerce International scandal.

This view, held by bankers who have worked closely with the Salvation Army, is shared by top charity lawyers in the City and the organisation's own financial advisers.

The charity's lay investment specialists from top City institutions held meetings with the organisation this week at which they repeated their disapproval that their advice on how to invest the missing funds had been ignored.

The concerns about a breach of the guidelines come after a week in which it has become apparent that several of the individuals and organisations named in a writ by the charity were already under investigation by police and regulatory authorities in the UK and the US.

Detectives of the Metropolitan Police and City of London police Company Fraud Squad will next week present the Crown Prosecution Service with a preliminary report on the alleged fraud. This would be the first step towards prosecutions. The Serious Fraud Office is also believed to be taking an interest in the case.

Under the guidelines drawn up with the advice of the Bank of England and the Building Societies Commission a charity should:

Draw up a list of recognised financial institutions which have a first-class reputation . . . only institutions with the highest short-term ratings should be considered.

Use professional money managers for substantial cash resources.

Recognise that, even if professional managers are appointed, the trustees bear the responsibility for decision-making and should carefully and objectively assess the advice they are being given.

The opinion was backed yesterday by Mr Andrew Crawford of City law firm Cameron Markby Hewitt, which advises a number of charities on their investment powers.

Mr Crawford said last night: 'This (case) demonstrates the importance of observing the Charity Commission guidelines on investing cash, which includes the need to seek proper professional advice.'

It also emerged last night that three top City investment specialists who had advised the charity against the transaction raised the matter with the Salvation Army again last October. They were disappointed to be told that the deal had gone ahead without their knowledge.

The three advisers are Dr Kevin Carter, group investments director of Providence Capital; Mr John Padovan, former deputy chairman of Barclays de Zoete Wedd; and Mr John Renshaw, former deputy chairman of John Laing.

The Charity Commission said last night that it was monitoring the progress of the internal investigation being carried out by the trustees of the Salvation Army, but would 'keep under review' whether there was a need to intervene more directly.

Detectives plan to interview Salvation Army officers including Colonel Grenville Burn, an officer in charge of fundraising, and Colonel Ivor Rich, the secretary in charge of business administration at the army's London headquarters.

Col Burn was yesterday officially 'on sick leave' and was not available for comment. Col Rich, who was working at his desk, said: 'I would be the first one to clear this up if I could, but I'm gagged from a legal standpoint.' Asked whether he was being made responsible for the financial transactions, Col Rich said: 'I don't have the authority to act on my own. No officer does.'

In the UK territorial headquarters Col Byrne was in charge of fundraising at the lower end of a chain of command which led upwards through Col Rich to the chief secretary, Commissioner Ian Cutmore, and the territorial commander, Commissioner John Larsson.

At least two of those accused of fraud in the army's writ - Mr Gamil Naguib and Mr Stuart Ford - have disappeared. Mr Naguib is a director of two British companies: Guardian Guarantee and Shellsouth. Both share a registered office, now abandoned, in Shepherd Street, central London.

It has emerged that Mr Naguib, who is listed as a Canadian national, has been under investigation by the Fraud Squad since last year in relation to fraudulent financial transactions associated with the Islamic Pan American Bank, also named in the writ.

The Central Bank of Argentina said that the Islamic Pan American Bank, based in Buenos Aires, was never on its register. It has emerged that the US Internal Revenue Service took papers from the Dallas office associated with the bank last year.

Both Mr Naguib's companies describe their purpose as financial services. But neither company is on the Securities and Investments Board's central register, which lists all approved investment advisory firms.

Shellsouth was created in spring 1991, but is being pursued by Companies House because it has never filed accounts. Guardian Guarantee's latest accounts, for the year to December 31 1991, show a retained loss of Pounds 98,000.

The company's auditor was a north London firm called Babs Sobanjo, which cannot now be traced. It no longer holds a practising certificate with the Chartered Association of Certified Accountants.

Mr Stuart Ford, named in the writ in association with Tilen Securities, traded some years ago in a different firm involved in property development and operating from the address given for Tilen.

Tilen is located in a row of shops in the Birmingham suburb of Acocks Green and was shut down early last week according to the owners of neighbouring properties. Yesterday a padlocked screen covered the front of the premises. The owner of one shop said Tilen had been trading at that address for at least three years.

Mr Jasbir S. Mudhar, who trades as JPR Accountants & Financial Services, was also named in the writ.

He is not accused of fraud, but the charity is seeking a declaration that any monies he holds on its behalf should be returned. He said yesterday that early last year he had handled a business transaction for Mr Ford, but that he was unaware that it concerned the Salvation Army. He said he had not had any further dealings with Mr Ford since then.

'I did not know whose money it was,' Mr Mudhar said. 'We had no idea what it was. We just followed instructions. Everything we have done is proper. We simply handled something on instructions and I have no idea what transpired after that.

'Everything is above board and within the law. We are a professional practice and we would run away faster than Daley Thompson from anything that was not. We would not be associated with anything like that, and we have nothing to fear.'

Salvation Army (UK) GB United Kingdom, EC P6732 Educational, Religious, etc Trusts P8322 Individual and Family Social Services MGMT Management GOVT Legal issues P6732 P8322 The Financial Times London Page 6 1131
Banks may have accepted discount on Battersea debt Publication 930227FT Processed by FT 930304 By RICHARD DONKIN

THE SYNDICATE of banks which in effect controls the Battersea Power Station site is believed to have taken a discount on its debt of more than 90 per cent in a deal that will ultimately pass control to a Hong Kong property family.

The Hwang family, who are acquiring the site, refused to disclose the price they paid for the debt in a deal completed yesterday. But it is understood that the syndicate, led by Bank of America, accepted less than Pounds 10m for signing over its claim on the 31-acre site - its collateral for a debt thought to total more than Pounds 100m, including interest and penalty fees.

The deal leaves the Hwangs studing options for acquiring the site from its owner, Battersea Leisure, a company owned by Mr John Broome, whose plans to transform the site into a leisure complex ran into financial difficulties three years ago when restoration work went over budget.

The Hwangs could repossess the 31-acre site and the power station building from Battersea Leisure. An alternative might be to appoint a receiver for the company, who would put the site on the open market. As owners of the debt the Hwangs would have the option to top any offer that was less than the total debt.

Mr Victor Hwang, the 39-year-old chief executive of the Hong Kong Parkview Group, the Hong Kong listed company in which his family has a 75 per cent controlling stake, said that he wanted to preserve the 1930s power station building, which is listed for its architectural and historical interest.

'Certainly there is no intention to tear it down,' he said, adding that he would be looking at making a cohesive development on the surrounding site, possibly in a style to complement the building's Art Deco architecture.

Battersea Leisure Hong Kong Parkview Group GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P602 Commercial Banks RES Facilities COMP Disposals P6552 P602 The Financial Times London Page 6 347
Revelations fuel senior employees' concerns Publication 930227FT Processed by FT 930304 By GILLIAN TETT

THE REVELATIONS of alleged fraud this week has fuelled concern among senior Salvation Army employees. They believe that a recent restructuring, which separated the UK financial operations from international operations, allowed the scandal to take place, a senior source close to the charity said last night.

Although the leadership is not accused of any wrongdoing, there is concern in the organisation about its management style.

'The news has come as a real shock to us workers,' a Salvation Army worker said yesterday as he stood stacking hymn sheets in a dusty church hall. 'But then perhaps we don't really understand the money side of things as well as we should.'

Founded in the early 19th century by Victorian phil-anthropist William Booth, the charity first made its name fighting urban poverty.

A century later its task remains broadly similar. With an overall membership of 2m, the charity conducts work among the poor, dispossessed and homeless in 94 countries.

It claims to be one of the largest voluntary groups in the world, and in Britain is the second-largest provider of social services.

Nevertheless, the central tenets of the organisation remain little changed - workers speak of their crusade as a 'war', in which discipline is paramount. The result is a management style which, as a charity accountant noted, is distinctly 'autocratic'.

Adherents claim these values create commitment. Critics say that it has made many in the organisation dangerously trusting over finances.

So far obedience has dampened open dissent, and officers have been told not to talk to the press.

Captain Charles King, editor of the organisation's vividly named War Cry magazine, said: 'The general attitude is that we should get on with the work we're doing. We don't exist to make a profit, but to help people.'

But debate is growing, fuelled by the forthcoming election of the 'general' - the highest rank in the charity.

Recent issues of the charity's Salvationist journal have printed letters calling for greater transparency in financial and management matters.

One worker in London said yesterday: 'All our accounts are published. But human nature being what it is people just don't bother to read them.'

Salvation Army workers deny the affair has caused a decrease in donations or affected their annual collecting campaign.

Salvation Army (UK) GB United Kingdom, EC P6732 Educational, Religious, etc Trusts P8322 Individual and Family Social Services MGMT Management P6732 P8322 The Financial Times London Page 6 418
BA attacked over ticket system Publication 930227FT Processed by FT 930304 By NIKKI TAIT NEW YORK

THE three big US airlines, which are opposing plans by British Airways and USAir to implement a code-sharing agreement, have argued that the UK-based airline has 'no valid legal claim' to unconditional code-sharing rights.

Under 'code-sharing' agreements, airlines are permitted to use for internal flights each others' designated flight numbers to facilitate sales of tickets through the airline reservation system.

BA has claimed that it was given a right to code-sharing with a US carrier under revisions to the bilateral aviation agreement between the US and the UK which was negotiated in March 1991.

These revisions were agreed in return for concesssions on the UK side, which allowed American Airlines and United Airlines to replace Pan Am and TWA as the two US carriers permitted to use London's Heathrow Airport.

However, the US carriers now note that the provisions of the March 1991 Memorandum of Consultations become effective 'only upon an exchange of notes between the US and UK governments - something that has not as yet happened.

'The MOC also states that pending such an exchange of notes, its provisions will be governed by the principles of comity and reciprocity,' they add, arguing that the proposed integration of services between BA and USAir would run contrary to such principles.

British Airways USAir Group Inc US United States of America GB United Kingdom, EC P4512 Air Transportation, Scheduled COMP Strategic links GOVT Legal issues P4512 The Financial Times London Page 2 256
Compulsory register proposed Publication 930227FT Processed by FT 930227 By CHARLES BATCHELOR

PLANS FOR a compulsory register of the 1m largest UK businesses were announced yesterday by chambers of commerce, Charles Batchelor writes.

The register would allow the government to gather more accurate information about business and improve communications between government and the business community, the chambers said.

It would also allow a streamlining of the procedures by which many businesses are required to obtain a licence before they can trade. The business registration centres, which would be based in chambers, could act as a single application point. The register would cover about 1m companies, partnerships, co-operatives and sole traders, and so would be more extensive than records kept at Companies House. But it would not cover the smallest businesses.

The government has welcomed the proposal as a means of reducing the burden of red tape on business.

GB United Kingdom, EC P8611 Business Associations COMP Company News TECH Services P8611 The Financial Times London Page 7 166
Bus strikes Publication 930227FT Processed by FT 930227

REPRESENTATIVES of London bus workers will meet next week to decide when they will launch a series of one-day strikes in protest at a bid by London United to buy out their existing terms and conditions.

GB United Kingdom, EC P4111 Local and Suburban Transit PEOP Labour P4111 The Financial Times London Page 6 61
BNF is fined Publication 930227FT Processed by FT 930227

BRITISH Nuclear Fuels was fined Pounds 6,000 yesterday for four breaches of safety conditions at its Sellafield, Cumbria, site in April last year although no radiation escaped.

The prosecution, brought by the Nuclear Installations Inspectorate, said that BNF had made unauthorised modifications to the plant.

British Nuclear Fuels GB United Kingdom, EC P2819 Industrial Inorganic Chemicals, NEC TECH Safety GOVT Legal issues P2819 The Financial Times London Page 6 78
Demand for healthcare Publication 930227FT Processed by FT 930227

MRS Virginia Bottomley, the health secretary, yesterday called on health authorities to ensure that patients received emergency treatment when they needed it, following publication of a survey showing restricted hospital admissions because of shortage of funds.

The survey from the British Medical Association showed that hospitals in every English region were introducing restrictions on admissions as money ran out before the end of the financial year.

Restrictions were significantly greater in the south of England, the BMA survey found, with three of the four London regions reporting the highest levels. Surgical specialities were hardest hit with more than half the surgeons and gynaecologists in the survey facing restrictions.

The survey found evidence of ward and bed closures, and non-emergency admissions restricted to patients of GP fundholders or those who have been waiting for long periods.

GB United Kingdom, EC P8062 General Medical and Surgical Hospitals P9431 Administration of Public Health Programs TECH Services GOVT Government News P8062 P9431 The Financial Times London Page 6 172
Labour offers talks on terror law Publication 930227FT Processed by FT 930227 By ALISON SMITH

LABOUR OFFERED yesterday to discuss reform of the anti-terrorism laws with the government, Alison Smith writes. Mr Kevin McNamara, shadow Northern Ireland secretary, said: 'It is time to build a new understanding between the parties.'

The Tories have argued that Labour's refusal to support the existing prevention-of-terrorism measures shows that the party is not serious about fighting crime in general. The annual order renewing those measures - condemned by Labour as harsh and ineffectual - will soon go before the Commons.

Mr McNamara said talks with the government should include ending orders which exclude people from Northern Ireland or Great Britain. Mr Kenneth Clarke, home secretary, said it would be 'irresponsible' during an IRA mainland campaign to remove the power to issue exclusion orders.

GB United Kingdom, EC P8651 Political Organizations P9229 Public Order and Safety, NEC GOVT Government News P8651 P9229 The Financial Times London Page 6 162
Proposals for Daf buy-out expected Publication 930227FT Processed by FT 930227 By JOHN GRIFFITHS

ADMINISTRATIVE receivers of the Leyland Daf van manufacturing plant at Birmingham are expected to receive firm proposals on Monday for a management buy-out.

The management team, led by managing director Mr Allen Amey, is believed to have formulated a plan for the vans operation to continue as a stand-alone business relying initially on the UK market alone.

Neither the receivers, Mr John Talbot and Mr Murdoch McKillop of accountants Arthur Andersen, nor executives at the plant, would last night confirm details of the proposals or how they might be funded.

But it is known that informal talks have started between the buy-out team - believed to comprise six executives - and local Department of Trade and Industry officials on whether the managers' proposals would qualify for aid.

Yesterday the plant, at Washwood Heath on Birmingham's outskirts, was continuing production against an order book now said to extend to 10 weeks, boosted by orders from Birmingham City Council, which is seeking to persuade other local authorities to follow suit. Royal Mail and Parcelforce, the vans operation's biggest customers, have also kept orders in place.

A meeting of Leyland Daf's dealer council is understood to have pledged support for the managers' buy-out proposals.

Leyland DAF GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories COMP Company News P3711 P3713 P3714 The Financial Times London Page 6 250
Bank faces new BCCI criticism Publication 930227FT Processed by FT 930227 By DAVID OWEN

THE BANK of England faced fresh criticism of its handling of the failed Bank of Credit and Commerce International yesterday when 43 MPs, including Labour frontbenchers, called for a review of Mr Eddie George's appointment as governor-designate.

The MPs called in a Commons early day motion for Mr George's appointment to be reviewed by the cross-party Treasury and Civil Service select committee, which this week published a report highly critical of the Bank's performance in the BCCI affair.

The motion urged the appointment of an outsider 'untainted by the soiled and over-cosy ethos' at the Bank.

In a separate motion a cross-party group of 19 MPs stepped up the campaign for the government to reconsider compensation for BCCI depositors. The MPs - headed by Mr Keith Vaz, Labour MP for Leicester East and Sir Rhodes Boyson, a former Tory education minister - called on chancellor Norman Lamont to meet representatives of those who lost money in the bank's closure.

Bank of England GB United Kingdom, EC P6011 Federal Reserve Banks P9131 Executive and Legislative Combined PEOP Appointments GOVT Government News P6011 P9131 The Financial Times London Page 6 202
US growth hits 4.8% in 4th quarter Publication 930227FT Processed by FT 930227 By MICHAEL PROWSE WASHINGTON

THE US economy expanded at an annual rate of 4.8 per cent in the fourth quarter of 1992, the fastest pace since the end of 1987, revised Commerce Department figures indicated yesterday.

The new figures, which represent an upward revision of 1 percentage point on the initial estimates a month ago, indicate the economy was growing robustly during the closing stages of last year's election campaign when former President George Bush was widely condemned for failing to revive the economy.

Few forecasters expect the fourth-quarter growth rate to be sustained in the early months of 1993, mainly because consumption ran ahead of incomes and because US exports are expected to be hit by the slowdown in Europe and Japan. But most are confident that the US is now set for several years of annual growth of about 3 per cent.

The recent fall in long bond yields to below 7 per cent is expected to lead to further increases in business investment which grew at an annual rate of nearly 10 per cent in the fourth quarter.

Other figures yesterday were mildly disappointing. An index of consumer confidence compiled by the University of Michigan fell slightly this month, partly because of adverse reaction to higher taxes announced by President Bill Clinton last week.

The very strong GDP figures, however, may strengthen the hand of conservative Democrats and Republicans in Congress who are arguing that Mr Clinton's Dollars 30bn (Pounds 21bn) short-term stimulus package of infrastructure spending and investment incentives is no longer needed.

Critics argue that Mr Clinton should press ahead more quickly with spending cuts needed to bring down the budget deficit. The administration, however, continues to emphasise the slow rate of job creation and the relatively high unemployment rate.

The fourth-quarter expansion followed growth at an annual rate of 3.4 per cent in the third quarter. It was the seventh successive quarter of growth following the official end of the recession in the spring of 1991.

Revisions to net exports accounted for about half of the upward revision to fourth-quarter growth, according to Mr Jim O'Sullivan, an economist at J P Morgan. Real exports grew at an annual rate of 9.8 per cent relative to the third quarter, against 3.7 per cent in initial estimates.

US United States of America P9611 Administration of General Economic Programs STATS Statistics ECON Gross domestic product P9611 The Financial Times London Page 3 417
Emergency package to create jobs in Spain Publication 930227FT Processed by FT 930227 By TOM BURNS MADRID

SPAIN'S socialist government, which faces one of the most serious unemployment problems in the European Community, yesterday announced an emergency package of job creation measures.

The package, which will be debated in parliament next week, is a belated response to a sharp rise in unemployment which set in last autumn. Unemployment figures released earlier this month revealed that nearly half a million jobs were lost during 1992, bringing the total number of jobless to a record 3.05m, equivalent to 20.06 per cent of the labour force.

Yesterday's package includes fiscal benefits for medium and small companies, new guidelines on apprenticeship schemes and incentives for companies with part-time employees. It also includes a provision for extending by one year the three-year labour contracts that cover about a third of Spanish workers. Under existing labour regulations companies have either to dismiss an employee when a contract expires or offer permanent employment.

Government officials said the measures, partly financed by EC cohesion funds and European Investment Bank loans, will have no impact on the restrictive 1993 budget, which is intended to lower the government deficit and inflation in order to meet convergence targets ahead of European monetary union.

The government insists that the peseta will remain within the European Monetary System and the Bank of Spain has intervened throughout the week to keep the currency in the middle of its 6 per cent fluctuation band within the exchange rate mechanism and close to Pta72 to the D-Mark.

ES Spain, EC P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs P9441 Administration of Social and Manpower Programs ECON Employment & unemployment GOVT Government News P9311 P9611 P9441 The Financial Times London Page 2 298
Clinton calls for open trade to lift world growth Publication 930227FT Processed by FT 930227 By GEORGE GRAHAM Washington

PRESIDENT Bill Clinton yesterday asserted US leadership in the task of speeding up world economic growth and taking down trade barriers, but called on Japan and Germany to do their share as 'engines of global prosperity'.

He also sought to dispel fears that the US was becoming more inward-looking and protectionist under his administration, insisting America 'must compete, not retreat'.

As finance ministers and central bank governors flew to London for today's meeting of the Group of Seven leading industrial nations, Mr Clinton complained that international economic co-operation was not working well.

'We simply cannot afford to work at cross-purposes with the other major industrial democracies,' he said. 'Our major partners must work harder and more closely with us to reduce interest rates, stimulate investment, reduce structural barriers to trade and restore robust global growth.'

Speaking to cheering university students in Washington, Mr Clinton said the world stood at a rare 'great moment of decision' about the need for co-operation. Germany and Japan especially should do more for the global economy and open their markets to foreign goods, he said.

Cautioning against trade protectionism in the US, he said: 'The truth of our age is this, and must be this: open and competitive commerce will enrich us as a nation. . . It spurs us to innovate.

'And so I say to you in the face of all the pressures to do the reverse, we must compete, not retreat.'

He acknowledged that many of the US's competitiveness problems had primary roots in US policies. 'There is much about our competitive posture that cannot be straightened out by trade retaliation,' he said. 'Too many of the chains that have hobbled us in competitive trade have been made in America.'

But Mr Clinton said the US would also enforce its trade laws, insist on reciprocal opportunities overseas for US investors, and take measures to help US communities hurt by the adaptation to a global economy.

'In short, putting the American people first, without withdrawing from the world and people beyond our borders,' he said.

The speech was applauded by Ms Carla Hills, Mr Bush's trade negotiator, but may not dispel the questions of the US's trading partners in the EC and Japan, who in the five weeks since Mr Clinton took office have had to weigh every declaration of free trade principles against announcements of new dumping duties on steel imports or new inquiries into Airbus subsidies.

Just minutes after Mr Clinton spoke, Mr Mickey Kantor, US trade representative, repeated that the US wished to review all aspects of its deal with Airbus shareholders over subsidies.

Mr Clinton sought to outline a middle way between the extremes of absolute free trade and protectionism, and to situate his trade policy in the broader context of his domestic economic programme and of his foreign policy goals. He also argued that bilateral, regional and multilateral approaches all had their place in trade policy.

Linking the spread of democracy in China, the developing world and the former Soviet Union to economic growth and the development of free trade, the president said a 'fair distribution of the fruits of growth among an increasingly restive world population' would bring 'dividends of trade, of friendship and peace'.

'Trade, of course, cannot ensure the survival of democracy. . . but if we believe in the bonds of democracy, we must resolve to strengthen the bonds of commerce,' he said. The president used his speech partly to explain to his trades union and business community backers why he would not adopt a firmly protectionist stance and to bid for more support for his package of taxes and spending measures.

G7 talks, Page 3

Dangers of quick fix, Page 8

US United States of America P9611 Administration of General Economic Programs P9721 International Affairs GOVT Government News P9611 P9721 The Financial Times London Page 1 661
World News in Brief: Cairo explosion Publication 930227FT Processed by FT 930227

An explosion in a coffee shop in the Egyptian capital Cairo killed two foreigners and injured a further 16 people.

EG Egypt, Africa P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P9229 The Financial Times London Page 1 53
World News in Brief: Police hunt gunman after IRA bombs gasworks Publication 930227FT Processed by FT 930227

Police were hunting an IRA gunman after a gasworks was bombed at Warrington, Cheshire and a gas-holder was enveloped in a huge fireball. The explosion followed incidents in which an unarmed police constable was shot and a young car driver was kidnapped at gunpoint. Two other men were arrested when the young driver's hijacked car crashed in a high-speed motorway chase after the shooting.

Labour offers talks on terror law reform, Page 6

GB United Kingdom, EC P4923 Gas Transmission and Distribution P9229 Public Order and Safety, NEC PEOP Personnel News GOVT Legal issues P4923 P9229 The Financial Times London Page 1 118
Five die in blast at tallest tower in New York Publication 930227FT Processed by FT 930227 By Our Foreign Staff

FIVE people were killed and up to 500 injured yesterday when an underground explosion rocked the World Trade Center in New York, sending smoke up through the twin 110-storey office towers.

The blast, which ripped through a car park and train station below the Trade Center complex, was being blamed increasingly last night on a bomb. A few hours after the explosion, police evacuated the Empire State Building because of a bomb threat and security was reported to have been tightened at New York airports.

A helicopter airlifted a pregnant woman to safety from the roof of one of the towers, the second tallest buildings in the world.

With electricity shut off, hundreds of people were stranded in the towers for hours, many stuck in lifts and others climbing down dark, smoke-filled stairs. Some walked down from as high as the 105th floor.

Financial markets in New York were thrown in disarray because the many brokers and financial service firms housed in the World Trade Center had to shut down their operations.

The explosion left a gaping hole in the underground car park and brought down the ceiling of the Port Authority-Trans Hudson train station below it. Most of the injured suffered from inhaling smoke that billowed up through lift shafts, stairways and ventilator systems.

The blast was being investigated by the New York City Police bomb squad and the FBI. As accidental causes such as a gas leak or electrical fire were ruled out, the authorities said unofficially it looked increasingly like a bombing.

One newsagency said it had learnt that a group claiming to represent Croatian militants made a phone call 15 minutes before the explosion to claim responsibility.

Another unconfirmed report said a local police station got a phone call from a group calling itself the 'Serbian Liberation Front' claiming to have caused the blast.

Police Commissioner Raymond Kelly, speaking to reporters at the scene, would not confirm or deny that a bomb was involved. He said police had received seven calls, none claiming responsibility, though one caller said: 'It was not an accident.'

About 100,000 people work at the buildings in the World Trade Centre complex, including the twin towers, which rank second in height to the Sears Tower office block in Chicago.

One office worker, teaching an accounting class on the 94th floors, said: 'I'm just glad to be alive. We felt the tremor. It was like being in an earthquake.'

Office workers put moistened towels and clothing over their faces as they made their way through the smoke to the exits.

One stock broker told how he was on the 31st floor when the explosion hit. He got down to the 13th floor, but a locked exit door left him stranded with 70 other people in an office where they smashed some windows to get air. They were freed by firefighters after about 45 minutes.

The fire caused limited damage to some over-the-counter market computers at brokerage firms and led to the early closing of the New York Mercantile Exchange and the Commodity Exchange at the complex.

US United States of America P6231 Security and Commodity Exchanges P6211 Security Brokers and Dealers P6221 Commodity Contracts Brokers, Dealers P9229 Public Order and Safety, NEC PEOP Personnel News RES Facilities GOVT Legal issues P6231 P6211 P6221 P9229 The Financial Times London Page 1 576
Books: The taming of the beast - Anthony Curtis reviews Brian Moore's latest novel Publication 930227FT Processed by FT 930227 By ANTHONY CURTIS

NO OTHER LIFE by Brian Moore Bloomsbury Pounds 14.99, 216 pages

WHAT DID Graham Greene really mean when he said that Brian Moore treated the novel like a wild beast and tamed it? Barely suppressed violence is a constant element in all Moore's novels, of which No Other Life is the 17th. The turmoil invariably erupts in some kind of bloodbath sustained over final purgatorial chapters with great narrative skill. In this one the underlying violence is that of the Duvalier 'Papa Doc' regime, and its legacy, in Haiti. The island, with its elite of mulattoes, its military junta, its terrible gangster police and its down-trodden black peasantry, appears here in fictional form as Ganae where the narrator has for many years been a Roman Catholic priest.

Father Paul Michael looks back over his life on the island and the charismatic career of his native protege 'Jeannot' whom we see being recruited into his order. This character owes much to the young priest Fr. Jean-Bertrand Aristide of the order of St Francois de Sales, who in the late 1980s proclaimed from his pulpit that Haiti would never achieve democratic elections unless the government was overthrown. Aristide was one of those who, while inciting his flock to political action, found support for it in the Bible. 'Part of our mission,' he said, 'is to destroy the capitalist system. Socialism is closer to the gospel than either capitalism or communism'. It was Liberation Theology with a vengeance. Moore tackles it here head on, and with great understanding.

We have been to Haiti before in a modern Catholic novel - in 1958 in Greene's The Comedians. But in Moore, unlike Greene, you do not have that deja vu feeling of familiar content being served up in a fresh setting. Every Moore novel is a new beginning. There is no such place as Mooreland. Wherever Moore's novels are set - Belfast, the South of France, Hollywood, a Californian campus, Toronto, Montreal - the characters are creatures of their environment, true natives, instantly recognisable as such.

Moore has moved around the world a good deal since 1921 when he was born in Belfast to be educated at St Malachy's, a Catholic College, where he had his first experience of a violent disciplinary regime; it became the setting for his early novel The Feast of Lupercal. In 1948 Moore emigrated to Canada where he worked as a journalist. He eventually became a Canadian citizen, but one who lives now in Southern California. In his earlier books the battle-ground tended to be domestic and professional. He dramatised the power struggle as it affected relations between men and women at work as well as at home. As an artist Moore is equally accomplished in identifying with, and narrating through, people of either gender. Entire novels may be carried by larger than life heroines, starting with that superb creation, portrayed so memorably by Maggie Smith on screen, the alcoholic Belfast spinster Judith Hearne.

But latterly Moore has turned from the contemplation of domestic disorders to forms of martyrdom - individuals forced to suffer from the pressure of history on account of their religious faith. Moore was born into a Catholic family and was from his cradle indoctrinated into the religion which he now says he uses in his books only as 'a metaphor'. But even if he has adopted an agnostic position in his own outlook, religious belief remains an essential ingredient in the Brian Moore fictional mix. In a study of a modern liberated woman, the chic neurotic New Yorker heroine of I Am Mary Dunne, there sounds a far away parental voice on the phone with timely reminders of the doctrine of sin and redemption. And there is just such a wise voice in this new novel; but this time it is the parent's function to put the alternative view from which the novel takes its negative title, that our present existence is the only one we have, and that there is 'no other life' to console us.

If that is really true, it makes it so much harder for Father Michael to reconcile himself to the spectacle of corruption and exploitation, of abysmal poverty and cynical indifference to it by the ruling caste, that Moore evokes so powerfully in this short, explosive book. Moore brings this world pulsatingly to life through vivid descriptive writing and a series of beautifully accurate vignettes of the people surrounding his hero. He traces the steps through which Jeannot turns from a compassionate young acolyte into a clerical demagogue whose followers hail him as a saviour. Jeannot's moment of supreme power inaugurates a reign that is brief and ineffectual.

It concludes with the dictator Jeannot's final appearance in front of massed crowds after which he mysteriously disappears, sucked back, as it were, into anonymity, into the sun-baked soil from which he first emerged. This movie-like finish ends an enthralling, thought-provoking tale. Once again the fictional beast has been well and truly tamed.

GB United Kingdom, EC P2731 Book Publishing TECH Products P2731 The Financial Times London Page XIX 869
Go easy on the copycat criminals: Where computer software companies see only theft they could find profits Publication 930227FT Processed by FT 930227 By MAX WILKINSON

WHAT IS wrong with theft if nobody gets hurt and nobody notices any loss? Not much, say thousands of people who routinely fiddle their income tax, conspire to avoid payment of Value Added Tax or make minor depredations against their insurance companies. It is wrong, of course, because the honest citizens suffer from higher taxes or insurance premiums, even if they cannot connect these with any particular rip-off.

However, there is one form of theft, now being vigorously combated, which many otherwise honest people commit with little or no sense of shame: the pirating of computer software. Illegal copying is made ever easier by the development of faster personal computers and higher capacity magnetic storage disks (the sort which are posted into the front of the machine and can be slipped into a shirt pocket).

Programmes for word processing, doing accounts or spreadsheets costing between Pounds 200 and Pounds 400 can be stored on a few disks which can be bought for around a fiver. So the temptation to borrow a friend's programme disks and make a copy is high, especially as the risk of detection is minimal. Not surprisingly, the software companies are anxious to stamp out the practice, which they see as a straightforward theft of copyright and a significant threat to the revenues of their multi-billion dollar industry.

Some well-publicised raids on companies which have allowed copies to be passed illegally from one machine to another, aggressively worded licensing agreements and a few programing tricks have all helped to make respectable folk a little bit more awkward about unlicensed copying.

Yet many people feel that there is something silly about present licence agreements, as there was in the discarded law that banned the tape-recording of radio broadcasts for personal use. In the days when personal computers were almost all to be found in offices, a tough stand against copying may have made sense, for the software company must recoup high development costs from a product whose manufacturing cost (copying a few disks) is tiny. But computers are fast becoming a standard piece of domestic equipment in middle class homes and private individuals do not wish to pay Pounds 200 to Pounds 300 for a programme which they may use only occasionally. On the other hand, they do not want to struggle with an obsolete programme which may be much harder to use than the one they have in the office.

So they make an unofficial copy, and their reasons for doing this deserve a hearing. At that price, says the pirate, I would never have bought a legal copy, so the vendor is not deprived of a sale. Indeed, the software company may benefit if I decide to buy an upgraded version or a manual (which some companies sell separately).

Anyway, says the pirate, warming to his theme, it is all the software company's fault for trying to charge me ten times his marginal cost of production. What is more he is inciting me to piracy by making it difficult for me to buy the previous (outdated) version of the product at a reasonable price.

Without doubt, excessively restrictive licence agreements (limiting use to one person on one machine) have contributed strongly to making these infringements widely tolerated among people who would be happy to pay a moderate fee to 'stay legal'. Software companies have been slow to learn the lesson from the airlines that empty seats can be sold at low prices, without destroying revenues from business class users.

The industry has at last started to recognise these arguments by selling 'economy class' programmes at a much lower price than the up-to-date full versions aimed at the business market, but prices are still high compared with the cost of making a copy, and some of the restrictions imposed on business users who might want make a copy of a programme in order to take their work home are absurdly tight.

Now that each copy of a programme can be labelled with the name of its legitimate user, it is possible to make the possessors of pirate versions feel uncomfortable, every time they switch on. So it is time for the industry to combine this moral lever with more relaxed conditions for limited copying and aggressive mass market pricing of top quality programmes (not just clapped out versions).

In this way they will de-criminalise large sections of the middle classes - and possibly make money too.

XA World P7372 Prepackaged Software TECH Patents P7372 The Financial Times London Page XXII 778
Hawks & Handsaws: A word from your clutter buddy Publication 930227FT Processed by FT 930227 By MICHAEL THOMPSON-NOEL I WAS IN Palm Springs, California, last weekend

the best place I know in which to veg out in February. To this end I took walks in the desert, sat by still pools, swung a few tennis rackets, lived on date shakes and was careful not to read anything more irk-making than Joseph Wambaugh or The New York Times. (I tell a lie. I read a bit of Balzac. But in Palm Springs they think that Balzac is a hairdresser, so that was fine by them).

Only once did my mobile phone chirrup, and then it was the president, calling from Air Force One. 'Hiya, Michael,' said the president, 'just thought that I'd touch base.'

'Good afternoon, Mr President.'

'Bill will still do,' he said. 'William at a pinch. There is no call for ceremony.' His voice sounded hoarse. 'I heard you were in the Springs, soaking up the rays.'

I said: 'We have our problems, too, you know. We're expecting a storm tonight.'

'Get away,' said the president. The reason he was calling, he explained, was to see whether I had any course-setting ideas to help him dodge the 'tax-and-spend' flak caused by his speech to Congress in which he detailed initial remedies for America's woebegone economy.

'I have told my people,' he said, 'that you have a great idea about once in seven months, so what have you got for me? Let me hear your input.'

My brain churned into action. I signalled to the pool waiter to bring me - por favor - a grapefruit juice.

I said: 'I do have an idea. It comes from reading the Word Watch column in The Atlantic by Anne H Soukhanov. She describes preliminary research into some of the words and phrases being tracked by the editors of The American Heritage Dictionary of the English Language, third edition (Houghton Mifflin). New words and phrases that exhibit sustained use may eventually make their way into the dictionary, says the magazine.

'The phrase that caught my eye was clutter buddy. If you ask me, William, we should go to work on clutter buddy. Your presidency has started well. I admired your speech to Congress. It will be a while, yet, before the dozy columnists at the Post and Times wake to the full potential of your presidency. They are still habituated to the multi-trillion wastrelism and political cowardice of the Reagan-Bush years. But they will stir from their torpor soon. To give them a kick, you should appoint a string of clutter buddies.'

There was silence from Air Force One.

'Soukhanov says a clutter buddy is one who supports another person in sorting and discarding accumulated possessions. She says that the anti-clutter movement of the 1990s - thought by some to be a reaction to the acquisitiveness of the '80's - is manifest in clutter clinics; in adult education classes in clutter management, which have produced some 200,000 clutter graduates, and in clutter hot-lines and de-clutter guidebooks.

'According to Soukhanov, people drowning in clutter are advised to start small: to clean a small area, perhaps 12 inches square. Keep it clean. Then go on to another spot. Experts in clutter management also advise that people give themselves frequent rewards along the way.

'This is a big idea, William. An extremely big idea. You could be in the White House for eight years. After that, Hillary Rodham Clinton could be president, followed by Chelsea. We are talking 2016, William.

'But you have got to make your mark in the next few months. Appoint clutter buddies throughout Washington. Every cabinet member must have one. Their powers must be absolute. The reason the planet is suffering so cruelly is that governments everywhere are moving far too slowly. They are sinking in an ocean of intellectual garbage.

'They find themselves trussed and bound like carcasses at a meat show. Their reaction times are pathetic. Where is the vision thing? Poverty. Pollution. Over-population. All these matters are swamping us yet governments are scuttling crab-wise, afraid of their own shadows.

'The solution is simple: bring on the clutter buddies. We need them everywhere. Throw out the garbage]'

'That is great,' said the president. 'Everyone on Air Force One is beholden to you, Michael.'

I said: 'Think nothing of it, Bill. God bless America]'

US United States of America P9111 Executive Offices CMMT Comment & Analysis P9111 The Financial Times London Page XXII 751
Private View: A pastor at the grass roots - Fr Michael Conaty's parish is poor. He thinks poverty is a sin, but a sin the poor do not commit Publication 930227FT Processed by FT 930227 By CHRISTIAN TYLER

THE PARISH priest of St. Anthony's is a burly Irishman with a good golf handicap and 30 years' experience in the shipyards and housing estates of Newcastle upon Tyne.

'Poverty is a sin,' he said, 'but it is a sin that the poor do not commit.'

Unemployment, crime and punishment have this week provoked a frenzy of analysis by British commentators following the arrest of two 10-year-old boys for the murder of a two-year-old child on Merseyside and the reappearance of a national jobless total of 3m. I went to look for someone who knew about such things at first hand and who carried no ideological brief.

Fr Michael Conaty's views would be unpopular in London. The Left would object to his enthusiasm for self-help and traditional morals, the Right to his emphasis on compassion and forgiveness. But they are views with a weight of experience behind them.

Fr Conaty is an activist, not an analyst. Around the church of St. Anthony of Padua in the district of Walker he has built, with donations and public money, a day care centre for the old, a youth club, training workshops, and plans an information office for job seekers.

I asked him what he understood by 'the underclass'.

'Can I say straight away that this language is not in the vocabulary of the Church at all,' he replied. 'It's a judgment that society is making on one part of itself.'

He prefers the word 'outcast' to describe those who have given up the struggle against a hostile system. 'But the marvellous thing about poor people is that they are all the time striving to be better.'

Better off materially?

'Not so much materially. They are seeking a better quality of life. Poor people, by and large, are seeking education, they are seeking spiritual development.

Apart from low income, how does poverty show itself?

'In an area like this, very, very deeply. There's a tremendous spiritual poverty. There is an emotional and psychological poverty. That's why you can't talk about the poor and the underclass in the same bracket. Poor people are probably driven into the underclass by what society is doing to them.'

Last Sunday his parishioners prayed not only for the murdered child but for the two boys who were arrested. Because whoever committed that crime, Fr Conaty said, was as much sinned against as sinning. 'When we are sinned against we reach a stage when we cannot take any more; something within us explodes.'

Aren't there too many people like you who see criminals as victims? John Major thinks society needs to 'condemn a little more and understand a little less'.

Fr Conaty called the politicians' responses 'pathetic', and said: 'I do accept that murderers must be removed from society. But having removed them we have to look at what we are doing for them. There is an awful lot of self-righteousness going on. I find the harsh judgments that are made, the harsh statements in the media, very stark, lacking in compassion. We condemn the people rather than the crime itself.'

The priest's Irish accent is unmarked by 35 years in the north-east of England; when he is emphatic his voice drops to a wheezy smoker's whisper. But when he made a disparaging reference to 'market forces' and I suggested that was code for a certain former prime minister, he burst out laughing and his broad face flushed red. He did not reply.

Does poverty cause crime, or is crime a matter of choice?

'There's crime at the highest level of society.' He paused, mentioned a name, and, laughing again, asked me not to quote it. 'I'm making the simple point that poverty and crime are not linked at all.'

Aren't they?

'Unfortunately poor people are driven to crime in order to survive. I'm speaking here of the ordinary things they do to each other, like stealing. But there's crimes at a level of society that are done deliberately for greed and nothing else.'

But when your own car was stolen and burned out on the field there, that was not for survival.

'No, well, unfortunately the people who do that are rebelling. They are rebelling against those who have and it's a way of expressing the rebellion. It is a fact that they don't understand the difference between right and wrong.'

Fr Conaty described taking a group of children to Lindisfarne where they collected dead birds and rats to bring home. They were fascinated by fire, death and killing, he said. I asked him why.

'I want to use the right words here. I wouldn't want to judge these children at all.'

He paused a long time and said: 'These young people do not know what it is to be really loved. Because they are coming from backgrounds which have not got that capacity to really love. This is the spiritual poverty that's within. And while they might know that seeing blood, killing things, is wrong, they don't understand why it's wrong. They've got a very low self-esteem. And they suffer the pain of being the children of rejection. They are the children of rejection and they're moving into a society of rejection. One of the ways rejection shows itself is in destruction and violence of all sorts.'

The collapse of discipline, of a moral sense, was due entirely to the collapse of family life, he said. An extreme example was society's willingness to let homosexual couples adopt children. And of course divorce had been made easy.

'What we have is the product of the permissive society of the 1960s.' He said liberation was a middle-class phenomenon that had been imposed on poorer people. 'People don't want those sort of changes. That's why Catholic schools are bursting at the seams.

'What we have become - and we're afraid to admit it - is a pagan society. We're no longer a Christian country.'

Fr Conaty believes in the Devil. 'You cannot deny the reality of Satan and you would be blind not to recognise his influence. But it is unspoken about because people don't want to give him that glory.'

Fr. Conaty maintains that British policymakers and administrators do not understand the problem of poverty. 'Because they have only one way of tackling it and that is through glorious handouts. More is needed: people must be given the freedom and the space must be opened for them to be able to help themselves.'

Have the churches failed to understand the problem?

'I think in the last 30 years the social teaching of the churches has become tremendously aware of the poor. But you have the one-eyed god stuck in the corner day after day feeding people one gospel and we're trying to feed them another. So there's constant confusion and conflict.'

If you had the power, what specifically would you do?

'I would take a thousand families in a poor area like this and I would give them complete ownership of the area, of their own problems. I would resource them financially, but I would take them out, broaden their horizons, try and help them to be creative with their own skills and talents and to work together as a community. The most important resource of those thousand families are not the houses or anything else - it is the people. There is a solidarity among people in these situations.

'You see, everything that comes to them now is dictated from the top and it is all with terms and conditions. Any money that's given must make a political statement, must give glory to the system.

'I wouldn't be about changing their minds at all or changing their life styles. I'd be about changing their hearts.'

Michael Conaty is 59, one of six children born to a farming couple in Cavan in the Irish Republic. His father died when the eldest child was still 12 and the family knew poverty. Another brother is a priest near Durham.

He likes football and television news, takes the Guardian and Independent, reads spiritual essays and anything by Peter Ustinov. He has read the works of Mao Tse-tung and avidly follows developments in the ex-Communist bloc. His political hero is Willy Brandt, the former West German Chancellor.

Perhaps people would say you are just a dyed-in-the- wool traditionalist Catholic priest.

'No, I'm not.'

Do you preach hell-fire?

'No. I just love people and I preach the love of God.' His voice dropped. 'I have a tremendous awareness of the love of God and I share that with people. I'm not a man for rules and regulations. I pastor people in whatever circumstances they're in. I encourage them. I embrace them.

'You see, we're not doing things for people, we're helping them to be.'

Later, he said. 'The priest is not a social worker. The social worker is about changing people's attitudes, their minds, supporting them at a very human level. But there is a spiritual need that all the time must be satisfied.

You don't mean they want to go to Church every Sunday?

'No. The spiritual hunger is for someone to recognise them as they are.'

Do you have a struggle with your religious faith?

'Where I struggle is that I get angry when I see what is happening to people here. I can get angry with God, angry with the Church, I get angry with the system. Because I see the destructive force that political systems are to people in this area. I have to come to terms with that in my own life.'

An hour before, Fr Conaty had visited a field near the Swan Hunter shipyard used by children for motorbike scrambling. Residents approve; the police want it closed. He promised to help.

I referred to this and said: a cynic would say 'Fr. Conaty is a good man but really he's just trying to net souls.'

'What I am is a fisher of people's hearts, you know. I'm not looking for anything from them. All the time I'm trying to give them what is good for them.'

You're trying to get them the field, but you're trying to get them to heaven as well.

'No, I don't get them to heaven. That's God's job.'

GB United Kingdom, EC P8661 Religious Organizations PEOP Personnel News P8661 The Financial Times London Page XXII 1760
Arts: Job for a millionaire - Off the Wall Publication 930227FT Processed by FT 930227 By ANTONY THORNCROFT

IF THERE is a millionaire out there who enjoys first nights at the opera and the theatre and has a fairly clear diary for the next five years the perfect job is hovering on the horizon. Lord Palumbo has made it plain that he will relinquish the chairmanship of the Arts Council when his term comes to an end in April 1994.

Lord Palumbo was far from being the first choice when selected but he has grown in confidence over the years and no one could fault him on diligence. He made the Council his life, helped perhaps by the comatose state of the property market, the source of his fortune. His major contribution has been getting the Millennium Fund idea off the ground.

As chairman Lord Palumbo had one other minor advantage to the Government: he was amazingly cheap. He paid for his car and chauffeur, never claimed expenses, and entertained Arts Council members, and the arts generally, out of his own pocket. A successor needs to be almost as rich because the post is unpaid. Heritage Minister Peter Brooke will probably allow you to claim travel, and other expenses, if he is really keen for you to do the job.

Who will succeed Palumbo? The likes of Lord Sainsbury, who turned down the chairmanship last time round, will not be interested. There is always Lord Archer, but the fragrancy of a women chairperson might favour Lady Archer. Much depends upon what sort of Arts Council the new chairman will inherit. The consultants are about to move in again for yet another overhaul and there may not be much left to rule over.

The Department of Heritage can never quite make up its mind what kind of Council it wants: in the last five years it has moved from imminent extinction to extra powers back to shrinkage with uncanny speed. If the consultants recommend a slimmed down advisory Council, the masthead could well be served by Prince Edward. On the other hand the main attraction has always been that it confers a title on the recipient, which could bring a bright commoner to the fore.

*****

In a recession museums come into their own. They tend to retain their purchasing grants, however small, while private collectors cut back. The most expensive Old Master pictures sold these days end up in American institutions. Last month the Kimbell at Fort Worth paid Dollars 2.4m for a late 15th century portrait, perhaps by Memling, and this week the Getty in Malibu gave Pounds 11m to Royal Holloway College for Turner's whirling seascape, 'Van Tromp going about to please his masters'.

So it is a shrewd move for Colnaghi's, the Bond Street dealers, to invest in a fine new gallery which, with its red wall covering and natural daylight, resembles many a museum. It will be used to hang 'museum' pictures, one of which, a Guercino, has already been sold. The gallery is the jewel from Colnaghi's acquisition for something approaching Pounds 10m of its adjacent building, giving it a line of three prime freeholds. Obviously Colnaghi's owner, German food magnate Rudolf Oetker, is confident that the worst is now over for Old Masters.

As for the Getty Turner, the Royal Holloway College undoubtedly trampled over the wishes of its pill-producing founder in selling the painting but it got a very good price, a record for a British picture. The temporary export block to give the British a chance to raise a matching sum will be a formality, and there is much to be said for fine works by the UK's greatest artist entering major overseas collections. If a gallery in the UK needs a Turner, the Tate has plenty in its vaults that it might lend.

It is noteworthy that the College sold the Turner privately. In the last couple of years Turner oils have fared badly in the saleroom: a discreet sale reduced the hostility to the transaction and prevented a public failure, which would have lessened the value of the Turner.

The knee-jerk reaction of the museum establishment to the sale overseas was predictable. Of course it sets an unwelcome precedent, but no comparable institution has such magnificent pictures and after this furore Royal Holloway is unlikely to split up its superb art collection. It might even repair its image by making it more accessible. Turner is poorly represented overseas: more British people will see it in California than at Egham.

*****

The Festival Hall is seeking to widen its repertoire, and from today until Tuesday night it will be showing off its flexibility for the very best of causes. War Child, a charity set up last month to help children caught up in hostilities, specifically in the former Yugoslavia, has taken the Hall for four nights. Tonight John Thaw hosts a classical night, with pianist Peter Donohoe, among others; Sunday features contemporary jazz; Monday comedy with Jo Brand, Jim Tavare, etc; and Tuesday, rock with the Blues Band, the Bhundu Boys, and more.

GB United Kingdom, EC P8699 Membership Organizations, NEC P8412 Museums and Art Galleries P7929 Entertainers and Entertainment Groups PEOP Personnel News RES Facilities CMMT Comment & Analysis P8699 P8412 P7929 The Financial Times London Page XX 887
Arts: Schubert, with 'piano' foibles Publication 930227FT Processed by FT 930227 By DAVID MURRAY

ON Tuesday Richard Goode played Schubert sonatas on the South Bank; on Wednesday there were Schubert impromptus in Nikolai Demidenko's Wigmore Hall programme, the third of six in his 'selectively subjective' conspectus of the historical repertoire.

These pianists, American and Russian, had little else in common but their formidably intelligent address - and a couple of foibles. They both allowed their Steinways heavy, carnivorous roars in the bass, which no instrument that Schubert and his contemporaries knew could have emitted. Sometimes that incurred real musical distortions: in Goode's sonatas D537 and D840, and in Demidenko's otherwise splendid account of the Weber Sonata no. 2, which was often bottom-heavy. Contrariwise both pianists were shy with lyrical piano passages, which tended to have wan expressive profiles, treated with the caution of connoisseurs handling Faberge eggs.

In everything sturdier, they had their own quite different virtues. Every sound that Demidenko makes has been polished to his own exalted standards of perfection, every sequence tailored to its context, keyboard-balance finely calibrated - except in Weber] - and the whole planned to the hilt. That is his way of realising his chosen scores. Goode, a Classicist of rapidly widening reputation, goes more aggressively for dramatic sense. His Schubert had some hard, unlovely moments, but also a wealth of hard-forged ideas, and urgent purpose.

Goode was generally very sparing with the pedal - perhaps on advice, for too generous pedalling will blot in the Queen Elizabeth Hall; but the tantalisingly incomplete D840 did sound uncomfortably lean in places, and its dramatic turns rudely abrupt. All in all, he seemed to play Schubert as if he were Beethoven, which was illuminating but not the whole story. The Beethoven cycle we are promised from Goode next year should be the real goods.

Demidenko gave us Beethoven, the C major Sonata op. 2 no. 3; it was as good as expected - clean, elegant, virtuosic - but not excitingly better. As for his four Schubert Impromptus, D935, it was strange to find the familiar magical passages simply disappearing beneath such superbly refined pianistic dress.

After the interval, however, Demidenko made brilliant amends with his Czerny (the Variations on 'La ricordanza'), his Vorsek Fantasia, and to be fair his Weber sonata too. Not only were the required digital feats brilliant as could be, but he melted warmly, almost expansively, into the sentiments of all that music - partly, no doubt, because they are so explicitly rendered in the figuration and the arabesques. Given those express demands, Demidenko revelled in them; and so did we all. A prickly, oblique artist he may be, but also a master pianist with few peers.

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups CMMT Comment & Analysis P7929 The Financial Times London Page XX 473
Arts: The essence of Matisse - Even if you went to the New York exhibition - go to Paris Publication 930227FT Processed by FT 930227 By WILLIAM PACKER

AMID THE critical debate that has lately erupted, at least in Britain, as to the relative worth of the current product of the avant-garde, it is salutary to be reminded that there is rather more to the modernist tradition than a urinal, a set of bricks, a fish in a tank or a bloody frozen head. It was, after all, not so very long ago - around Christmas 1945 - that the liberation of Europe was opportunely celebrated at the V&A by a joint exhibition of the work of Picasso and Matisse, to hoots of derision and letters to The Times.

Picasso at his most mischievously cynical was summoned only the other day to further the case the modern was never more than the exploitation of the gullible, an argument to which his work has always given the lie - witness the magnificent exhibition of his still-lifes that was in Paris only last autumn. Now it is the turn of Matisse, whose vast retrospective at the Museum of Modern Art in New York over the winter was described as the exhibition of the century. To my chagrin, it was a show I was unable to see, but now the Centre Pompidou in Paris happily offers a more than compensatory alternative.

Indeed it is the measure of the Paris exhibition that one wonders a superior were possible. For this is no truncated version of the New York show: rather it is a substantial study, concentrated and distinct, of the young Matisse in his early maturity, as he moved from tentative experiment to magisterial authority. It was a transition achieved in barely ten years and, in marking that achievement, we discover the essence of Matisse. Those who did get to New York would not find a trip to Paris a waste of time. This is a very different exercise.

But, the young Matisse? It is always hard to think of Matisse as ever exactly young, and this show starts with him already 34. He had been active in Paris some ten years, showing regularly at the Salon des Independants, but his work was more remarkable for what we now know would come of it than for what it was - a serious, well-ordered and strongly-modelled but somewhat academic post-impressionism. We pick him up at Saint Tropez and back in Paris in 1904, and still he is the creature of external influence - now of pointillisme and colour theory, now to some extent of Gauguin. By the following year and his trip to the south, this time to the little port of Collioure, he is entirely his own man.

The shift may not seem over-dramatic. The colour remains clean and bright within its comparatively limited range of reds and yellows, greens and blue, and the brush-mark as distinct and direct as ever. But yet, but for the odd painting of 'le port d'Abaill', that is a true throw-back to the pointillist systems of the year before, there is a new confidence in the spirit of this more clearly radical work, a new certainty in the statement of the image, and a renewed simplicity in the working of the surface, no matter how rapid or direct. A view over the roofs of Collioure and across to the far side of the bay marks the change, with its positive, spade-like strokes of the brush, its clarity of colour and the broad simplicity of its drawing. The drawing is the painting: the painting is the colour: the colour is the image. Here suddenly is the true fauve at large.

This may not be the most obvious shift in the course of Matisse's career, but none is more significant. Through all the changes that would follow, of interest, scale or practice, these would remain constant: the simplicity and directness of the drawing; the simple certainty of the composition; the act of drawing itself inseparable from the act of painting; and the authority of colour as colour, used not as mere function of reference or record but celebrated for what it is - black as black, red as red, green never so green.

The 'Red Studio' of 1911 is a broad, flat, rich field of unmodulated indian red, yet filled with space and light by the artist's own paintings on the wall, the pile of frames in the corner, and the pots on the table. The 'Porte-fenetre' of 1914, by coincidence again at Collioure but so close in spirit to the Paris studio paintings of earlier that year, is as simple as any Rothko with its vertical bands, blue, grey, green and black, black as night. Yet the space is there, and the sense of the space out in the night beyond, and all achieved by the simple device of the narrow strip of a darker grey that runs along to mark the floor at the angle of the open window.

And what do we then make of Matisse? Why is he so important, so great an artist? What is the point of him? But then to chase influences and effects is really to miss the point, just as it would be with Titian, or Rembrandt or Velasquez. We can only say: Matisse is simply Matisse. There he is in his Collioure self-portrait of 1906, in his striped vest, cropped hair and full set, looking into the glass and out at us: and there is the paint on the surface, full and rich, and there the bold, simple line, and simple, monumental image, oh, so deceptively simple. And why did he do such things? Because it interested him do so, for its own sake. Look at the work.

Henri Matisse - 1904-1917: Centre Georges Pompidou, Paris, until June 21: sponsored by the Fondation Elf

FR France, EC P8412 Museums and Art Galleries CMMT Comment & Analysis P8412 The Financial Times London Page XX 1002
Arts: Bleasdale clings to the ledge Publication 930227FT Processed by FT 930227 By MALCOLM RUTHERFORD

ALAN BLEASDALE'S new play opens spectacularly at the Nottingham Playhouse with a man suspended upside down while he attempts to paint the word 'Anarchy' high up on the outside wall of a block of apartments in Liverpool. In fact, it comes out as 'ANACHRY' and the distortion must be deliberate.

Nothing in On the Ledge conforms to a pattern. The start could be black comedy drawn from Orton and Ayckbourn. The end, where Liverpool appears to go up in flames, approaches despair, but still shies away from tragedy.

Even the title is cryptic. 'On the Edge' would suggest that people might fall over, jump or be pushed. On the Ledge shows that they just about manage to cling on. According to a long programme note, an earlier draft of the play was called On The Twilight Side of the Mountain. That touch of the inchoate has never quite left it.

In moving to a shorter, simpler form, Bleasdale must still have wondered how far to go between desperation and survival. Thus what we get is an odd mix: half throwaway lines that could belong to a stand-up comic, half social commentary. The set, on which the play depends, is dominant. Here is the outside of three floors of what looks like a fairly modern municipal housing development. There are no balconies, but ledges, where most of the action takes place. Sometimes characters appear on the roof. There is also a mechanical hoist which rises from the pit ready to rescue anyone in trouble. If you wanted to go in for symbolism, the hoist represents the Liverpool council finally arriving to prevent the worst. The one character who jumps from the ledge, and the only one who genuinely wants to jack it all in, is saved in this way.

Bleasdale, again according to the programme note, had considerable difficulty in writing the piece. He sent one revised text after another to Richard Eyre, the artistic director of the Royal National Theatre, who repeatedly replied, with helpful comments, that it was still not right for production. Meantime, Bleasdale was much acclaimed for the TV serial GBH: changes were made to On the Ledge and Eyre agreed to a joint production between the RNT and the Nottingham Playhouse.

Perhaps Eyre was too kind. One can still see why he had his reservations. The play is all over the place. 'Look,' says one character on the roof, 'there are fires everywhere.' 'That's because it's Guy Fawkes night', says another, which apparently it is. Is this a reflection on the Toxteth riots in 1981? Bleasdale seems uncertain of whether he is writing a serious play.

The uncertainty extends to the characterisation. Some of the characters have names, like Mal, the social worker with two children by different fathers, and Moey, the man who operates the hoist. Others are simply designated as Upside Down - the one who daubs the dyslexic version of anarchy on the wall - and Man-on-Ledge, the man who makes the jump. Two others are simply called First and Second Brute. True, they are brutish, but there is no explanation why. Then there is Shaun, who may or may not be a former prominent figure in the Liverpool Council. His character is never developed.

There is rather a touching schoolmaster called Martin played by Christopher Ryan, who has coupled with the social worker (Dearbhla Molloy), but again he might just as well be a one-off turn. Man-on-Ledge, played by David Ross, is obsessed by newspaper headlines like the one about a man who stole a British Rail egg sandwich and was therefore thought to be insane. In short, there is no order, no form, only what Upside Down writes as 'ANACHRY'. Possibly this is Bleasdale's message about Liverpool today.

The set, which is the best thing about the play, is designed by William Dudley. On the Ledge is directed by Robin Lefevre and moves to Norwich, Glasgow, Bradford and Newcastle before arriving at the National on April 27.

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page XIX 700
Arts: Songmakers in town Publication 930227FT Processed by FT 930227 By RICHARD FAIRMAN

FOR AN all-too-brief period at the beginning of the 19th century two kindred spirits poured out their feelings in poetry and song: John Keats and Franz Schubert. As the composer made no song settings of the poet, there is no way that their art can be enjoyed in harmony, but the Wigmore Hall's programme on Tuesday did everything it could to come as close as possible.

This was the first in a short series of International Songmakers at the Wigmore Hall, devised by Graham Johnson. By interleaving readings from Keats's poetry and letters he gave the Schubert songs a larger dimension. So much the two had in common - in Keats's words, the love for 'nature's gentle doings', the romantic sensibility, the shared embrace of Grecian ideals.

This last was tellingly caught by setting Keats's Ode on a Grecian Urn alongside Schubert's haunting 'Die Gotter Griechenlands'. (The reader throughout was Jill Balcon.) No other music by Schubert evokes so well that classical poise and timeless beauty, both beautifully caught in Johnson's accompaniment, if less palpably by the Austrian baritone, Oliver Widmer. Nevertheless, the deep resonance of his singing, unforced, generously projected, rich in tone, every word clear, was the primary vocal pleasure of the evening.

Whether or not it is the Wigmore's new Bosendorfer piano, Johnson is playing better and better at the moment. The accompaniment to 'Nachthymne' sang with a wealth of expression that the soprano Susan Gritton could not equal; that to 'Die Sternennachte' captured more of the moonlit, silvery atmosphere than tenor Jamie MacDougall's vocal line, sensitive though his quiet singing always was. At forte, the tone can become unpleasing. Alongside Widmer's eloquence in his own language, the linguistic efforts of his British colleagues were apt to sound problematical.

*****

Earlier in the day another songmaker, by profession at least, had appeared at Covent Garden. This was the Irish mezzo Patricia Bardon, giving one of the Royal Opera's Tuesday lunchtime recitals. Hers is a splendidly individual voice, mezzo in name, perhaps, but rich, deep, touching alto depths with an old-fashioned steadiness and majesty when she wants to.

With Kathron Sturrock her fine accompanist, she tackled a varied programme that included vivid Barber and intense Rakhmaninov. Sometimes there is a tendency to allow the basic, distinctive colour of the voice to run unvaried for too long, but her Hahn group found a new, quietly luminous quality for 'L'Heure exquise'. In Brahms's 'Die Mainacht' the voice showed that it could encompass both the tender and the deeply serious. It was brave, too, to carry on when the din of an Italian comic opera in rehearsal broke in from the main auditorium.

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups CMMT Comment & Analysis P7929 The Financial Times London Page XIX 474
Arts: Community life - Radio Publication 930227FT Processed by FT 930227 By BA YOUNG

LAST Sunday, Radio 4, determined to ease us out of the distress we must all have felt at the Merseyside news, showed us lives of restraint. First, the start of Goodbye to All That, where Simon Parkes visits artistic communities. His first was Deya in Majorca, famous as the retreat of Robert Graves. Even in its best days it was evidently not without its faults; the poet Brian Patten recalled 'screaming drunks'. But quiet and, in those days, hard of access.

An hour after this came In Search of Utopia, also about life in communities, but of a different kind. Presenter Felicity Goodall dealt mainly with the feelings of children in such places, where (at Bruderhof, for example) child-care, meals and property are all communally organised, and no intimacy is allowed until a couple are engaged. At Findhorn in the north of Scotland, perhaps the oddest of the visits, there is communication not only with plants but with fairies and elves, and this a religious foundation. It seems to work; cabbages grow there up to 40 lb] More communities next week.

Until the end of March, Radio 3 is reviewing the arts of the 1920s. Here is some of what is to come: archive recordings of literary grandees on their contemporaries; popular music of the time, English, American, German and even Russian; today's critics on new views of the then-current novelists; Maria Jolas, wife of the founder of Transition, on Paris figures like Picasso, Stravinsky and Joyce; a reappraisal of Aldous Huxley, with readings of some of his stories. Last Sunday's talk by Vita Sackville-West on Orlando and tomorrow's by Prince Antoine Bibesco on Proust make a good start. But Radio 3 listeners who complain about too much talk will be very cross.

Fay Weldon's The Hole in the Top of the World on Radio 3 on Sunday is basically a romantic piece. Matt, a famous scientist, studies the ozone layer from a lab in the Antarctic with Nina, a young female scientist and rival to his wife Simone, but Ms Weldon does not write basic pieces. Simone thinks Matt to be in danger, not only from Nina, sharing his work and contemplating marriage, but from 'the UVs' through the hole in the ozone. The hole, Simone believes, is due not to CFCs but to all our illusions breaking out into space. This theory is more interesting than Simone's trip to the Antarctic lab with her toy-boy Andrew, soon seduced by Nina. Perhaps it is basic, after all. The cast are all American, with Walter Matthau as Matt, not one of his great performances. The co-production with LA Theatre Works was recorded in Santa Monica under Shaun MacLoughlin.

On Thursday Radio 4 gave The Architect's Dream by Neil Rhodes. The dream was to build a two-mile-high city, clearing all the neighbouring land, but Ashley, the architect, retired first, and is now just building an extension to his retired neighbour Eric's house. Eric's wife, Mildred, is as silly as Ashley's wife Kay is bossy, and the two dislike one another within neighbourly bounds. Eric, making a model of Ashley's dream, sensibly bashes Mildred with a hammer. Disputes are forgotten when Ashley visits him in the prison hospital. Kay and Mildred become mates too, and that's about all there is. I thought the characters boring and the dialogue dull. Richard Wortley directed.

GB United Kingdom, EC P4832 Radio Broadcasting Stations P7922 Theatrical Producers and Services CMMT Comment & Analysis P4832 P7922 The Financial Times London Page XIX 598
Arts: Scales meets Beckett Publication 930227FT Processed by FT 930227 By ALASTAIR MACAULAY

TO MOST British theatre-goers, Samuel Beckett's 1961 classic Happy Days is an unknown quantity, whereas Prunella Scales, the latest interpreter of its central role, is - thanks to TV - a household name. At the West Yorkshire Playhouse's new staging, it is soon obvious that Happy Days, though Scales can reveal just about every comic facet in it, is nothing like the various comedies that have made her name.

Not since Aeschylus's Prometheus Bound has a protagonist been so tied to the earth. In Act One, Winnie is up to her waist in earth; in Act Two, up to her neck. She is not all alone. Many of her words are addressed to her enfeebled and laconic husband Willie, though he is usually out of sight and often out of hearing. Communication, contact, memory are ebbing. No observer could miss the absurdity of this situation. Or the pathos of it.

Scales's Winnie is Northern, middle-class, genteel, dowdy, fading. Nothing about her is heroic. Most of what she says she has said so often that her voice sometimes grows flattened and monotonous from custom. Scales catches Winnie's nervous system; and, when she gabbles, she is alarmingly real. If anything, she over-characterises Winnie (she is nearly the flip side of Thora Hird in Alan Bennett's Talking Heads) - gives Winnie more surface than essence. When, for example, she says 'Ah yes, things have their life, that is what I always say, things have a life,' you are more struck by her quaint way of lingering on final consonants ('thinnngs') than by what she is saying.

In general, however, she so illuminates Beckett's words that afterwards, checking, I was amazed to note how almost every detail arose from his mind, not hers - even the overlap of her laughter with Willie's. She has complete ease with Winnie's constant change of mood; she is as natural speaking of 'the happy day to come when flesh melts at so many degrees', or suppressing a sob in 'That is what I find so wonderful,' as she is when prodding Willie with her parasol or reprimanding him for his personal habits.

In details of timing, Scales, Robin Bowerman (Willie) and their director, Jude Kelly, do Becket proud. In two important features, however, this staging diminishes text and play. Both concern our sense of time, and affect the play's larger meaning. Firstly, the two acts are separated here only by a brief scene-adjustment and pause - as Tynan recommended, after the 1962 Royal Court production. But, by doing away with an interval (the play runs at 90 minutes), Kelly has weakened the sense of time's passing.

Secondly, the text is heavily sprinkled with pauses - 'too full of infertile pauses,' wrote Tynan. Scales and Kelly, however, leave few pauses longer than a breath, and leave none of them infertile. Scales's eyes and mouth are always nervously on the move. Likewise, in Act One, her hands. The result is rather too rushed, with little sense of waiting, of speech confronting The Great Silence - not just Willie's silence, but the silence of heaven and earth.

Pamela Howard's set, with scorched earth vanishing into baking sky, would be ideal if only Winnie's mound were shaped more like a gentle cone, less like a lump of sea-wall. Even so, Happy Days remains a masterpiece of moderist theatre; and, in Leeds, its meanings are all present. Winnie, the ageing breast (or mons Veneris); Willie, the ageing cock. The moods in which a woman addresses the loss of sexual activity, sexual identity, social colloquy, personal memory. The way that the sexes' struggle for power still surfaces. The touching fluctuations of the human spirit while seeing dust inexorably return to dust. Winnie to Willie: 'Just to know you are there within hearing and conceivably on the semi-alert is . . . er . . . paradise enow.'

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page XIX 675
Books: Women on women Publication 930227FT Processed by FT 930227 By JACKIE WULLSCHLAGER

THE MERMAIDS IN THE BASEMENT by Marina Warner Chatto & Windus Pounds 9.99, 228 pages

A LAZY EYE by Mary Morrissey Jonathan Cape Pounds 8.99, 229 pages

SUCH DEVOTED SISTERS edited by Shena Mackay Virago Pounds 14.99, 330 pages

FROM the Queen of Sheba to My Naughty Little Sisters, a woman's social presence has always been different from a man's. Art through the ages has confirmed it - all those classical nudes begging to be looked at, flattering their male owners; literature has mostly maintained stereotypes. Here are three outstanding volumes of stories which, through the oblique but penetrating truths of fiction, say much about the gap between women as perceived and perceivers, as helpless icons and as creators of their own imaginative worlds.

We know Marina Warner as a distinguished cultural historian of female archetypes in biblical and folk tales; in The Mermaids in the Basement she turns her talents inside out and, in a series of dazzling monologues, imagines updated versions of the familiar figures speaking for themselves. It is not quite the Virgin Mary as Molly Bloom, but here is modern Kate as the Pharoah's daughter finding a baby in a basket, Susannah (she of the 'Elders') spied upon by her husband's property developer colleagues in a poolside villa, Martha buying tortellini and frozen blueberries and washing up for Mary as she realises, after years of housewifely devotion, that she hates her sister.

Warner's skill is to free her characters from the archetypal expectations that have hung on them for centuries and yet to use the very resonance from these myths to surprise and enchant anew. In 'The First Time' she alternates a comic pop rhythm from the Serpent, who has 'diversified' into selling tropical fruit at a supermarket, with the little-girl-lost floodgates of a lovelorn teenager who goes home with guavas, tamarillos and 13p change. The best story, 'Be My Baby', is an elaboration on nun-ish wisdom - 'Sister Richard used to say the nun's was the highest calling, but that motherhood wasn't far behind' - through the superb, salt-of-the-earth Cockney vernacular of a nurse turned child-snatcher.

Sensuous yet rigidly controlled, dallying with everyday banalities but stopping just short of cliche, darting erudite reference into imaginative empathy, Warner writes with the delicious delicacy of a tightrope walker. In her last novel, Indigo, the attempt to pull myth into fiction read like a top-heavy academic joke, but in the short story, it seems to me, Warner has found her milieu. The form enables her to spin out from one rich image or archetype into an original view of the world, and to convey it in a lyrical/tough style which does not sink under the weight of its own analysis. The result is exhilarating.

In fictional technique, the Irish writer Mary Morrissey could not be more different from Warner. The heroines of A Lazy Eye are anonymous, back-of-the-woods women whom we see for just fleeting moments of sheer, humiliating physicality - the start of menstruation, which gets a young traveller thrown off a European sleeper train; a woman revealing an embarrassing discharge to a hardnosed doctor. Storylines are slim, abrupt, almost proudly inconsequential; a throw-away, breathless prose rushes headlong, then smashes into deliberate flatness. Yet each of Morrissey's women manages, within events of a few minutes or hours, to encompass two worlds: one of guilty oppression (the interior of the train or surgery, controlled by the conductor or doctor), the other a wild, macabre landscape of the mind to which this claustrophobia gives rise.

There is the daughter, bargaining in hospital with God to save her father and let a youth in the next ward die instead, who is so intoxicated by her inner reality that she feels as guilty as a murderer. There is the shoplifter who remains loftily above her accusers when she is distracted and caught by a half-caste child who reminds her of the black babies the nuns once taught her to pray for. With artistry and warmth, Morrissey gives her characters a language as distinct as Warner's; people whom we might glimpse and pigeon-hole daily become atypical, particularised as quirky individuals standing up for themselves in a vengeful world.

The fascination of Virago's new anthology of women's writing on sisterhood, Such Devoted Sisters, lies in the parallels between pieces written in five continents over almost two centuries. Some of the finest, and most familiar, extracts here are thus illumined: Janet Frame's 'Keel and Kool', for example, a restrained yet vivid picture of a Christmas picnic in New Zealand where a child works out her response to the death of a sister, has emotional echoes of the sentimental, closed-in scene of Beth's death from Louisa Alcott's Good Wives.

Shena Mackay has had a plentiful sea to trawl from, and her choice includes some stories which are perfect examples of the form, often from writers better known as novelists. Edna O'Brien's 'The Connor Girls', where a child's view of two adult sisters and their romances changes painfully as she grows up, has the intensity and yearning nostalgia of The Go-Between condensed into 20 pages. Mary Flanagan's tale of sisterly bullying unravels like a horror movie. If there is an integrating theme, it is the innocence-to-experience story, with the particularly female twist of breaking away from family and social assumptions into self-knowledge and liberated identity. It is a welcome showcase for both women's writing and the short story.

GB United Kingdom, EC P2731 Book Publishing TECH Products P2731 The Financial Times London Page XIX 930
Books: Here's a how-de-doo] Publication 930227FT Processed by FT 930227 By ARTHUR JACOBS

GILBERT AND SULLIVAN by Michael Ffinch Weidenfeld & Nicolson Pounds 20, 294 pages

PENDING the archival biography of WS Gilbert himself on which an American theatre historian has been busying herself for a decade, here is yet another of those general books which from time to time re-scrutinise the Victorian collaboration. Smoothly written, Michael Ffinch's text incorporates a re-telling of the stories of the operettas and lengthy quotation from their verses. He is in no doubt that the dramatist was 'a far greater man in every way' than the composer.

Such a judgment, however, assumes a musical competence not evident in an author who asserts that the title of Ruddigore 'is now often confused with Verdi's Rigoletto'. The profusion of superscript figures and footnotes (or rather back-notes) is, alas, a facade. With no scholarly evaluation of his sources, Mr Ffinch reinstates a discredited anecdote on one page, yet cites in another context the later work which did the discrediting.

The fictional stories that Sullivan's grandfather rose to the army rank of sergeant and guarded Napoleon's heart on St Helena, and that Arthur Sullivan himself as a boy chorister sang at the christening of the Duke of Albany (Queen Victoria's youngest son) should have been nailed up for ever. On the other hand, the author has failed to catch up with recent discoveries about Thespis, Gilbert and Sullivan's first, 'lost' joint work.

Repeatedly misnaming a character in The Grand Duke as 'Drummkopf' instead of 'Dummkopf', Mr Ffinch fails to perceive Gilbert's German joke. The misnaming of one of Sullivan's non-Gilbert operettas as Hadden (for Haddon) Hall and the misquotation from Trial by Jury likewise betray an uncertain foothold on the terrain. The nineteen photo-illustrations are well chosen.

GB United Kingdom, EC P2731 Book Publishing TECH Products P2731 The Financial Times London Page XVIII 314
Books: Life on earth Publication 930227FT Processed by FT 930227 By ANDREW CLEMENTS

THE DIVERSITY OF LIFE by Edward O Wilson Allen Lane Pounds 22.50, 424 pages

TAXONOMY has always seemed one of the most comforting and rewarding of biological disciplines. Anyone who has marvelled at the variation in a mass of bee orchids on a Mediterranean hillside, or attempted to distinguish between the small brown flycatchers that throng through an American woodland, will have had a small taste of the challenges in assigning individuals to species and subspecies, in fixing boundaries for what is often a continuum of life forms.

The taxonomist's mill grinds ever smaller; more and more sophisticated tools are brought to bear on the most difficult knots of classification, always striving to mirror the precision with which evolution remorselessly sifts and orders its own production. The goal of this effort is far removed from the reality of a dusty herbarium or a formalin-pickled specimen; behind it all there's an intellectual challenge which in its own way is as elemental as any research in particle physics or creation cosmology.

Now, as Edward Wilson demonstrates, taxonomy is big news. Wilson is an entomologist, an ant-man whose work on the species of the tropical rainforest has led him on to contemplate the larger pattern into which his classification fits. Species diversity, the range of living organisms to be found within a single habitat, is at its most luxuriant in the rainforest; there the niches into which animals and plants can adapt themselves are narrower and more ingenious than anywhere else on earth. And what we know of that range of species is still only a partial picture of life on earth; what has been named and classified - perhaps 1.5m species altogether - is still only a small fraction of the total waiting to be recorded, for which estimates range up towards 100m.

In the face of this uncountable profusion, man has set about winnowing it with an effectiveness unparalleled in the history of life on earth. There have been mass extinctions before; the fossil record shows them punctuating geological time. But none threatens to be as comprehensive and savage as the one currently being meted out by one species on its fellows. Yes, the earth will probably make up the loss eventually, as it has always done before, but only after tens of millions of years, when the human race itself may well have joined the 99 per cent of the species that have once existed and are already extinct.

Wilson unfolds this litany of disaster in an even, cool tone. First he celebrates the glories of bio-diversity, then painstakingly chronicles the human race's efforts to destroy it. His remedies, the ways in which habitats might be saved, demands for food and material production reconciled with the need to maintain diversity, are persuasively argued. It would be easy to allow a note of hysteria to creep in, to turn the agenda which Wilson presents in his final chapter into an emotional polemic. But the facts are always allowed to speak for themselves; in the final analysis, he concludes, what happens to the planet is an ethical decision for the human race: 'The stewardship of environment is a domain on the near side of metaphysics where all reflective persons can surely find common ground . . . An enduring environmental ethic will aim to preserve not only the health and freedom of our species, but access to the world in which the human spirit was born.'

Sometimes repetitive, and encumbered by distinctly inappropriate line illustrations this is an important book. It takes the whole environmental issue on to a higher plane; more than the greenhouse effect or ozone depletion, it is habitat destruction that will affect the planet and the ecology which humans share with their congeners for as long as the race survives. 'One earth, one experiment', Wilson warns, and it is up to us whether we choose to pull the plug.

GB United Kingdom, EC P2731 Book Publishing TECH Products P2731 The Financial Times London Page XVIII 679
Books: The paradox of Churchill - Zara Steiner admires revisionary history at its best Publication 930227FT Processed by FT 930227 By ZARA STEINER

CHURCHILL: A MAJOR NEW ASSESSMENT OF HIS LIFE IN PEACE AND WAR edited by Robert Blake and W M Louis Oxford Pounds 19.95, 581 pages

CHURCHILL, THE END OF GLORY by John Charmley Hodder & Stoughton Pounds 30, 742 pages

CHURCHILL quipped: 'History will bear me out,particularly as I shall write that history myself'. While the old lion may have wanted the first word, he must have known it would not be the last. Churchill: A Major New Assessment is a glittering collection of essays by a distinguished cast of historians, mainly British, without a continental (or woman) in sight. It is guaranteed to be a scholarly bestseller. There is hardly a contribution (each restricted to some 20 pages, and splendidly cross-referenced) that does not contain a golden nugget or a suggestive idea.

This deconstruction of Churchill's political life is revisionist history at its very best. A nuanced introduction and a beautifully written final essay by Robert Rhodes James on the 'parliamentarian, orator and statesman' point to the central paradox in any assessment of Churchill's career. In 1939 Churchill was 65 years of age. The man for whom politics was a central passion had been out of office for 10 years and, excepting the Liberal reform years of 1909-11, his career might well have been dismissed as a study in failure. He could have been consigned to David Cannadine's list of Marlboroughs distinguished by too many debts, too much gambling and too much drink. Yet in 1940 Churchill's faults became virtues and, despite costly mistakes and terrible misjudgments, he emerged from the war as one of the greatest statesmen of our time, the only one of the three war leaders to retain almost untarnished his claim to greatness.

Even Churchill's greatest strength, the masterly ability to use words in a way few could match, stemmed not from a natural facility of speech but from preparation of the most detailed kind. The effect of his rhetoric in the inter-war period was to make enemies in the Commons and to be judged boring, repetitive and prejudiced by his political peers. It was in 1940, with the brief but unforgettable 'blood, toil, tears and sweat' speech that man and moment matched. It is hard to believe that in that year, as DJ Wendon records, only five of Churchill's speeches were broadcast to the nation, for the prime minister's oratorical skills lay at the very heart of his mobilisation of the nation. The aristocrat by birth, who had probably never travelled on a bus, became the people's hero.

Churchill's egotism and driving ambition did not make political friends. His lifelong faith in the greatness of Britain and the strength of her empire already seemed archaic and dangerously romantic in the inter-war period. Beyond this constancy of belief, Churchill was a mass of contradictions, shifting between parties and policies with unacceptable frequency. Writer after writer in this collection, with but one or two exceptions, exposes the gap between the image and the reality of his achievements - the creation of the Anglo-American 'special relationship', the bulldog stance of 1940, the prescient 'cold warrior' of the Stalinist period, and the great 'European' of the Zurich speech.

In one of the few contributions which singles out Churchill's permanence of vision, Paul Addison points to the element of paternalism which coloured his attitude towards social reform. In many ways, Churchill remained faithful to the precepts of his Edwardian inheritance; in others, he was the supreme realist and pragmatist.

In the most passionate critique of Churchill's policies, Sarvepalli Gopal argues that India was and remained Churchill's blind spot and that his visceral dislike of Gandhi, Congress and at times all Indians, brought out the harshness and cruelty in his nature. Yet even here there was an element of realism. Once India went, he knew that the empire and the main source of British power would disappear. Elsewhere in the Empire, he looked to compromise and reconciliation. Churchill was a man of prejudices and preferences but, with the exception of India and a dangerous under-estimation of the Japanese, these rarely blinded him to the needs of the moment.

Apart from John Keegan, who makes a case for Churchill's Mediterranean strategy, other writers on military matters dwell on his failures. Churchill's passionate interest in war and the tools of war was a double-edged sword. The restless craving for action, the mania for capturing islands and the 'ceaseless prodding' of generals and admirals often resulted in disaster. Churchill's fascination with science and technology, as illustrated by RV Jones, and his unusual and all-important interest in intelligence were key actors in Britain's victory. Sir Harry Hinsley, however, argues that it was in reaction to the prime minister's use of the Bletchley decripts that a proper system of assessment and use was developed.

Churchill could inspire men and energise Whitehall but he was also a notable bully. Only a few, Alan Brooke and Montgomery the most notable among them, could withstand his formidable tongue. The strongest indictment of Churchill as strategist and war leader comes from Richard Ollard's discussion of the Navy, for not only did Churchill never grasp the nature of sea power but he never appreciated the quality of the men who served him. This may strike many general readers as the most surprising argument in the collection.

Even in 1940 Churchill's stance was not quite what it seemed. As shown by Robert Blake and David Reynolds, Churchill came to the prime ministership by default. His political weakness meant that he had to consider the possibility of peace in the terrible month of May. David Reynolds draws back the Churchillian curtain to reveal a more complicated story than that found in Churchill's own account. Nevertheless there is little doubt that the prime minister's decision for continuing the war and his ability to galvanise the nation behind him created an unforgettable kinship between the man and the people. Archaic ideas expressed in glorious prose created 'their finest hour'. Apart from his self confidence and faith in the nation, Churchill had only his belief in America's entrance into the war and a mistaken impression of German weakness to back his resolve.

Twenty-nine essays do not create a composite picture and no one here quite tackles the reasons why, after all the mistakes are revealed, Churchill emerges with his 'integrity and greatness' intact. It is because John Charmley has cast doubt on the Churchillian decision taken in 1940 that he has incurred the wrath of so many historians. He fully deserves his moment of notoriety. This book is full of interest and important insights. He makes useful connections, between for instance, Churchill's stubborness over India and his determination to fight on in 1940.

Charmley clearly enjoyed writing this book and this shows on almost every page. But his central thesis is fatally flawed. Churchill was not responsible for the fall of the British empire, nor can he be blamed for the country's decline from power. He did, at a crucial moment, mainly through force of personality, avoid linking Britain with Nazi Germany. This saved his fellow countrymen from having to make unacceptable decisions. Ask any Frenchman over the age of 60. It was the right choice and one which will never be forgotten. The Marlborough genes finally turned up trumps. But of the making of Churchill books there shall be no end.

GB United Kingdom, EC P2731 Book Publishing TECH Products P2731 The Financial Times London Page XVIII 1265
Books: Israel's Cicero Publication 930227FT Processed by FT 930227 By ELON SALMON

PERSONAL WITNESS: ISRAEL THROUGH MY EYES by Abba Eban Jonathan Cape Pounds 25, 671 pages

TEMPERAMENTALLY, Abba Eban never quite fitted into Israeli politics, although he was at its centre from the country's birth. Donnish, remote, supremely articulate, his precise grandiloquent style jarred against the untidy, reflexive mode characteristic of Israelis.

He here recalls how Harold Wilson once suggested that he lacked a killer's instinct in politics - surely an unfair judgment, since in the arena of international diplomacy, where he excelled, Eban frequently demonstrated that instinct to telling effect. His problem was not a deficiency in ruthlessness so much as a lack of suitable armoury for the rough and tumble of Israeli politics, which favours the bludgeon above the rapier. He seems to be seduced by the cadence of language and intellectual symmetry to the point of being oblivious to the gut sensibilities of his public.

This book describes a long, distinguished career in Israeli public life, from initiation into the high echelons of pre-state Zionist politics at the precocious age of 22, to the retired eminence that he has been enjoying for a number of years now. Born in South Africa and raised in this country, he gave up a promising academic life in Cambridge to live in and serve the emerging Jewish state. He was Israel's first ambassador to the United Nations and Washington, Foreign Minister, Minister of Education, and Deputy Prime Minister.

As might be expected, his elevated view of the country's evolution allied to meticulous recall guarantees that his account is authoritative and comprehensive. Yet something about the assured flow of his narrative suggests a selective retrospection, with an element of score-settling and self-vindication in mind.

Mr Eban's invaluable contribution to Israel's struggle has been in diplomacy, and the parts of the book which deal with his years as Israel's envoy to the UN and to Washington are the most exciting. It is here that the eloquence of his prose complements his incisive sense of irony. Few of his contemporaries on the diplomatic circuit could show such an assured grasp of world affairs. Fewer still had the gift of summing up a complex situation as lucidly and concisely as he could.

The Suez crisis tested his abilities to the full. He came through, as in subsequent crises, with flying colours. The esteem in which he was held by statesmen who were not renowned for their affection for Israel is illustrated by one of his encounters with the then American Secretary of State, John Foster Dulles. In early November 1956 Eban made a crucial speech to the UN General Assembly: 'It was past 2.00 in the morning when the vote came . . . As I walked down to the lobby, Dulles was waiting there . . . he began to speak with typically forensic professionalism: 'Listen, you didn't seem to be reading. Did you have a manuscript?' I told him that, owing to pressure of time, I had not prepared my speech at all . . . He looked at me hard and offered a memorable tribute: 'Jesus Christ,' he said, as he stalked away. I was later told that this was the only occasion on which that austere churchman had been heard to utter the familiar but irreverent expletive.'

Unfortunately, Eban was never fully appreciated in Israel. Perhaps the reason is that his moderation flowed from an alien rationality. His book, rich in insights, resonant in language, is the story of the Jewish state told by a Cicero, not a Thucydides.

GB United Kingdom, EC P2731 Book Publishing TECH Products P2731 The Financial Times London Page XVIII 614
Books: A little chip of Vermont - FT children's Book of the Month Publication 930227FT Processed by FT 930227 By MICHAEL GLOVER

LYDDIE by Katherine Paterson Puffin Paperback Pounds 3.50, 182 pages

THIRTEEN-year-old Lyddie Worthen had been queen in all but name of the poor cabin, the straggly fields and the sugar bush up in the hills of Vermont; but when she descends to the plain to begin work as a poorly-paid kitchen help at Cutler's Tavern after her father disappears Out West and her mother, in the grip of a religious obsession, takes herself and the babies off to evangelical Uncle Judah's house, despair seems to stare Lyddie in the face. Why has her mother allowed the family to be split asunder in this way? And what can she, a poor, untutored girl, do to bring it back together again? The answer seems relatively simple: pay off the farm's debts.

After working in the tavern's gargantuan kitchens she drifts down to Lowell, Massachusetts, in pursuit of better paid work in the mills; and the account that Maryland novelist Katherine Paterson gives us of factory life in the 1840s in this novel could not be more different from the version provided by Charles Dickens in his American Notes of 1842 - a book that was received with great hostility by his hosts for, among other things, its harsh condemnation of slavery and its advocacy of international copyright.

Lyddie earns a good living in the mill, working like a demon to pay off the debts of the farm so that, one day, she might return home. Envious of her friend Betsy's bookishness, she acquires a fine edition of Oliver Twist and teaches herself to read by copying out individual pages and pasting them to her loom. But she also remains a perpetual outsider, a crow among peacocks, in her tight homespun and the pinching, overlarge boots, speaking, as she does, her queer mountain speech.

Unfortunately, the very yearning to earn enough money to liberate herself turns her into a different kind of person - tough, miserly, impatient with those weaker and slower than herself. Her mind becomes as calloused as her hands. And then the devastating news arrives: her mother is dead; her brother has found a surrogate family; and the farm has been sold. There is nothing and no one to return to. The farm now exists only in Lyddie's excitable imagination.

Katherine Paterson has won many awards for her success in writing about children and teenagers pitting themselves against terrible odds - the struggles of Jess in Bridge To Tarabithia (1977), for example; or the efforts of an older sister in the Newbery Medal winner Jacob Have I Loved (1980) to establish an independent life for herself when she has always lived in the shadow of a younger favourite. But Lyddie is much more than a piece of convincing portraiture. It is both a meticulously researched historical novel that illuminates the conditions of life in an American industrial town of the 1840s, and an exploration of themes that have been written about too seldom in fiction for young people: whether or not work itself is a kind of enslavement; the plea bargaining that must go on between the need to improve one's working conditions and the very human wish not to be taken for a troublemaker; and sexual harassment in the workplace.

These are mature themes - but they impinge upon the lives of children too, and Katherine Paterson has worked them into this novel with such skill that they have become an integral part of this excellently-told and well-paced story.

American novelists have often demonstrated a rare ability to write about difficult, spunky children - among the best are Vera and Bill Cleaver, SE Hinton, Paula Fox, and even, perhaps, J D Salinger. Katherine Paterson has created something as good as anything that the others might have conceived in the person of the sturdy, plain Lyddie, a little chip of Vermont.

GB United Kingdom, EC P2731 Book Publishing TECH Products P2731 The Financial Times London Page XVIII 678
Books: A God for all seasons - The concept of deity is forever versatile Publication 930227FT Processed by FT 930227 By AC GRAYLING

A HISTORY OF GOD by Karen Armstrong Heinemann Pounds 16.99, 511 pages

A NICE temerity attaches to the title of Karen Armstrong's book, for God allegedly exists outside time and therefore, like the virtuous woman of parable, has no history. But Armstrong has not attempted a history of God, but of mankind's idea of God; or rather of mankind's many ideas of God. For the concept of deity is protean, and readily assumes the shapes into which history's pressures squeeze humanity's needs.

Armstrong was once a Roman Catholic nun, and wrote a bestselling account of her loss of faith and return to secular life. Since then she has made a profession of her somewhat ambiguous agnosticism, as an eloquent journalist of religion who is sympathetic to its attractions but sceptical of its claims. The ambiguity of her agnosticism arises from her preparedness to give house-room to thinkers as different as the medieval Meister Eckhart and the modern Ivan Tillich, who cannot accept literal God-with-a-white-beard theologies, but who believe there is some sort of Absolute nevertheless; and who hide its indescribability behind a fig-leaf of paradox.

In this ambitious book Armstrong traces the history of Jewish, Christian and Islamic concepts of God from their beginnings to the present. This is a vast subject, demanding a wide range of scholarly skills. Only a tome compiled by specialists would be truly adequate, and Armstrong's single-handed attempt cannot claim to be so. She ventures Old Testament scholarship, classical philology, Islamic history, modern philosophy, and much besides; but by the end her exposition has become a series of vignettes, a couple of pages each to this thinker or that topic, betraying heavy reliance on second-hand material, and exposing Armstrong in waters beyond her depth.

But this is a commendable book nevertheless, and an interesting one, and I would rather it were widely read than not, for it says something important. Drawing on her own experience, Armstrong remarks that most people acquire confused ideas about religion in childhood, and thereafter neither modify nor develop them. But as soon as we realise that theologies are the product of history, during which barely recognisable versions of our own culture's beliefs have variously flourished and failed, we come to see religion in a markedly different light.

It must, for example, strike even desultory readers of the Old Testament that the tribal god it depicts is a bully and a tyrant. The contrast with the New Testament's avuncular deity is striking. But what readers might not know is that some biblical texts have a decidedly questionable history. Consider Deuteronomy, which, in the midst of yet another doctrinal quarrel within Israel, was suddenly and conveniently 'found' by workmen refurbishing the Temple - and of course gave unequivocal support to one side of the argument. Yahweh often entered on cue like this, apparently unable to resist politics; and invariably on the winning side.

Jesus's divinity affords another example. In Mark's Gospel he is a man; in the theology of St Paul he is the medium of the New Covenant; in the fourth century AD, after the Arian 'heresy' controversy - Arius of Alexandria had argued that Jesus must be less divine than the Father - he becomes very God in human form.

One of the book's most fascinating chapters concerns the rise of Islam, which Armstrong tells us resulted from an Arabic sense of inferiority. Arabs, she says, felt 'mingled resentment and respect' for Jews and Christians because they had enjoyed direct communication with God. Leaders like Zayd ibn Amr longed for their own people to receive a divine revelation. It came at last to Muhammad ibn Abdallah in a terrifying experience on Mount Hira outside Mecca, in which the angel Gabriel instructed him to 'Recite]'

The result, produced at laborious intervals over the following two decades, was the Koran, the 'Recitation', whose sheer beauty of language is reputed to have been a frequent instrument of conversion in its own right. But, as with Christianity, splits and controversies followed, and Islam's early tolerance towards other religions soon vanished, as did the early freedoms enjoyed by its women. And again as with Christianity, the long-term legacy includes the familiar horrors of intolerance, bigotry and persecution which characterise all organised religion.

The concept of God, Armstrong shows, is a gerrymandered affair. But she insists nevertheless that humans are spiritual creatures, and tentatively wonders whether the new theologies of Tillich, Martin Buber and others might meet our cravings for something ultimate. She is right to say that spirituality matters; but some of us would argue that only art and affection can appease its hungers. Her book therefore suggests a different solution. Rather than seek another new definition of God, we might do better to dispense with theologies altogether and place our hopes in the best of things human instead.

GB United Kingdom, EC P2731 Book Publishing TECH Products P2731 The Financial Times London Page XVIII 842
As they say in Europe: Try to understand John Major Publication 930227FT Processed by FT 930227 By JAMES MORGAN

I WAS riveted by the phrase, 'We must condemn a little more and understand a little less.' The prime minister, John Major, uttered it in a newspaper interview last Sunday when asked about the wave of violent crime in which Britain is at present engulfed, as is demonstrated by everything except the evidence.

The phrase finds only a limited echo elsewhere in Europe. In French it becomes the conclusion of the syllogism whose first premiss is the well-known saying, 'Tout expliquer, c'est tout comprendre.' It goes nicely into German: 'Mehr Verurteilen, weniger Verstandnis.' That could easily appear on the masthead of the Frankfurter Allgemeine Zeitung, a paper which constantly puts Major's injunction into practice. This week saw a nice round-up of the usual suspects - those phenomena which threaten civilised existence - Serbs, social- democrats and cuts in interest rates.

And yet in a country that many still associate with strict attitudes towards deviant behaviour, the punishment of violent crime in particular seems, by comparison with Britain, astonishingly lax. When four youths beat an Angolan guestworker to death in the eastern German city of Eberswalde last year, they got a maximum of four years apiece in jail: Die Welt described the sentences as 'heavy.' Maybe this gives force to the views of a German friend of mine who once said: 'In this country you can get with murder, but very little else.'

Moscow's Sovetskaya Rossiya provides the ultimate realisation of Major's advice. As its anachronistic name implies, it manages to condemn everything and understand absolutely nothing. This week it produced a memorable piece on the 'purposeful wrecking of the army and navy in every respect by the top military-political leadership of the country.'

But most of the great newspapers of Europe, the Neue Zurcher Zeitung, Le Monde, El Pais and so on, get the phrase the other way round and hesitate to criticise anything. They tend to be depressingly fair-minded and objective, giving long explanations of the background to evil events and, as a result, are, in a word, boring. Nobody ever went out to lynch someone after reading the Neue Zurcher.

Major's injunction was not translated in the Spanish and Italian papers I saw. Their journalists worked their way around it because, by itself, its meaning was hard to grasp in their languages.

In Italy the phrase which has become derided as the ultimate expression of ludicrous liberalism in Britain, 'we are all guilty,' becomes the basis of the penal system. Any number of psychiatrists earn their living tramping through the courts explaining how the criminal is the victim. But Italy, of course, is perhaps the one country where 'we are all guilty' is probably nothing more than a statement of fact. If you are not on the take, you are letting your family down.

And yet, in spite of its unique qualities, Italy remains the most under-reported country in western Europe. Pope-and-mafia stories provide the staple for most papers and the country is condemned without being understood almost everywhere, as it always has been. The Frankfurter Allgemeine had another go this week at highlighting the sufferings of the German-speaking majority of South Tyrol region: 'The Italians cannot bring themselves to accept the German origin of local place-names.'

An English traveller in the 15th century described Italy as 'a paradise inhabited with devils.' Even the present spectacular round of arrests, a cabinet reshuffle and the incipient collapse of the state evoke only limited interest among the European reading public: in Italy nothing is surprising. As Shakespeare discovered four centuries ago, if you want to someone to believe the impossible, you set it in Italy.

Britain seems far more interesting to most of its neighbours and it is coming to play a role as a sort of super-Italy. Others seem to have accepted the British evaluation of their country as an almost mythic land where not only can things be expected to go spectacularly wrong but where they can become exceptionally nasty too. The most recent horror to strike Liverpool, a city which has gained a notable reputation throughout Europe as the ultimate symbol of what it means to be British, was discussed in a number of editorials.

The other Frankfurt paper, the Rundschau wrote: 'The insecurity which has gripped the British because of this terrible story has another side. Fourteen years of Tory rule have much to do with it - the ideology of a callous individualism which has no need to recognise such realities as poverty and social hopelessness.' Now, was that written by someone who knows how to condemn more and understand less, or vice versa?

James Morgan is economics correspondent of the BBC World Service.

XG Europe P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page XVII 813
Gardening: How to defend the city tree - The vexed question of Tree v. Neighbour Publication 930227FT Processed by FT 930227 By PATRICIA MORISON

WITH THE coming of spring, one person's tree becomes another person's nuisance. My introduction to the fraught area of Tree v. Neighbour came a few months ago.

A majestic plane tree grows at the bottom of the north London back garden overlooked by our flat. In summer, its branches make a curtain so tall and wide that it screens not just our five-storey house but several others from those opposite. One might have thought such a beautiful tree would have been universally popular - but no. A member of the local conservation committee spotted that the council had granted an application for drastic pruning.

The applicant was not the tree's owner, but a developer with a garden flat across the wall who presumably hopes to recoup his investment quicker by claiming the flat 'benefits from a sunny garden.'

Anguished calls to the council planners brought bad news. Several of the plane tree's largest branches lean out above the applicant's garden, albeit at a great height. We were told that although our tree has the statutory protection of growing in a conservation area, these overhanging branches constitute a nuisance. In common law, the developer has the right to wield the axe even if it leaves a butchered tree. Sobered by this discovery, I travelled south to discuss the troubled life of the inner-city tree with Paul Akers, chief arboricultural officer for Westminster City Council.

Compared with trees officers in other London boroughs, Akers has a palmy time. Westminster is Conservative and wealthy. Most of its eight acres is a conservation area, meaning most trees are statutorily protected. Westminster residents are generally the types to favour a greener borough. A Citizens' Task Force reports any pruning which may be unauthorised as well as damaged council trees. There is little vandalism. New plantings achieve a 95 per cent 'take'.

A free advisory service exists for Westminster residents with problems about trees - not only those in public places but in their own or other people's gardens. Free booklets are on offer.

In cases of tree versus resident, trees officers face tricky situations and trees can be the losers. Residents complain that lime trees along the street drop sticky mess on their cars or that crab-apples are splattering the pavements. 'The council cannot ignore the complaint, yet we don't want to over-react.'

Complaints about trees cutting out light are common and pose problems because they are so subjective. Even though it goes against the grain, Akers will often recommend that trees causing a nuisance are pruned. It may appear butchery to the tree-lover, but inside an overshadowed property there may be someone who is house-bound.

People often need warning that pruning can be counter-productive, thanks to trees' fantastic powers of regeneration which results in still denser foliage. Trees officers will also often advise that overcrowded sites should be thinned, although they may well suggest that young ones are planted for the future.

In the matter of our plane tree, Akers considered that the legal position was less black-and-white than our own planning department (too short-staffed to visit the site) had ruled. There is 'a conflict of legal views' about what happens when a tree in a conservation area or protected by a Tree Preservation Order (TPO) overhangs a boundary.

I was given a further booklet, Trees and the Law by JGS Harris (Pounds 3.50, obtainable from the Arboricultural Association*). It covers the law only as it stood at August 11989, and will be updated. However, a case is cited in which a court ruled that someone was wrong to have lopped overhanging branches off a tree protected by a TPO because he had 'only suffered a small inconvenience in the use and enjoyment of his garden' and the nuisance was not therefore actionable.

What exactly is the value of a Tree Preservation Order (TPO), I asked? A TPO will be placed on a tree which is beautiful or important, perhaps because it screens an eyesore; normally it should be visible from a public place. In Westminster, this means that virtually any front garden tree has a TPO, and most in back gardens as well.

One can apply for a TPO, which costs nothing. Once a TPO is applied, a tree cannot be cut at all without the prior consent of the council. (Fruit trees are not normally given TPOs because they require heavy pruning.) Cutting and pruning must be carried out according to British Standard regulations.

A TPO is registered as a charge on the property. Contravening a TPO can result in a Pounds 2,000 fine. If permission is granted for a protected tree to be felled, perhaps because it is old or diseased, the owner will be instructed to plant a replacement. Whether they actually do is a different matter, and planners do not necessarily have the resources to check.

Akers points out that many fights over urban trees need not occur if suitable species had been chosen in the first place. Gardeners always need to think of the ultimate height and spread of a tree. It makes sense not to plant trees hard up against a boundary. And even if the tree is not be placed so that it overhangs, Trees and the Law states that if you obscure a neighbour's light he may be able to get an injunction ordering the trees to be kept under control, or he may claim damages.

But if such considerations mean that the inner-city tree must always be a small, sparse-leaved specimen, then we are surely all losers. Our graceful giant is still some way off coming into leaf and the developer has gone quiet, perhaps taken aback by the strength of local feeling. Or could it be that he, too, has heard the ominous words about a conflict of legal opinion? Conflict equals expense, and our green curtain might look a little too costly to tear down.

*Arboricultural Association, Ampfield House, Romsey, Hants SO51 9PA; 0794-68717.

GB United Kingdom, EC P0783 Ornamental Shrub and Tree Services P9121 Legislative Bodies GOVT Legal issues P0783 P9121 The Financial Times London Page XVII 1039
Property: So nice to be beside the seaside - Water views remain a big selling point Publication 930227FT Processed by FT 930227 By MICHAEL HANSON

MARINE Drive at Barton-on-Sea, Hampshire, is the typical seaside address on the south coast of England. It began in the 1930s as ribbon development along the clifftop road between Lymington and Bournemouth, filling the gap between Old Milton and New Milton with houses and bungalows enjoying views across Christchurch Bay and the Solent to the Needles in the east and Old Harry rocks in the west.

There are always houses for sale here at the best of times, but these days there are more than usual, often placed with more than one agent in the hope of attracting more interest. One such is 7 Marine Drive, built recently in what the owner calls the 'English Riviera style,' with white stuccoed walls, round-headed windows and red-tiled roofs. This five-bedroom home is on offer at Pounds 295,000 through Lane Fox's Bournemouth office (tel: 0202-557 766) and the New Milton office of Murray & Morris (0425-638 656).

A few doors away, at 12 Marine Drive, is one of the original 1930s' properties. Mullion Cottage is a four-bedroom, tile-hung house for which Murray & Morris is asking Pounds 299,000.

The same agent has several other houses on its books in Marine Drive and its extensions east and west, including one five-bedroom property in Marine Drive West that has just been repossessed for the second time in 18 months. At Pounds 175,000, it is clearly the bargain of Barton.

'The second-home market dried up in 1988, but the cachet of a sea view has held good right through the recession,' says M&M's James Murray. 'The greater supply means that a purchaser can pick up a good buy when it comes round. At Marine Prospect, a new development on the site of the Red House Hotel, two-bedroom flats start at Pounds 65,000.'

Stephen Noble, of Lane Fox, agrees about the importance of sea views, but adds: 'Many flats and houses in Bournemouth are now changing hands at figures that are, in some cases, half what they were at the peak.'

Some of the best houses in Bournemouth were built on the Cooper-Dean estate on the West Cliff. Many of these have been converted into flats but one of the original houses, built in 1910, survives: Strath Avon, in West Overcliff Drive, now a comfortable four-bedroom house with two self-contained flats for staff, family or visitors. Offers of Pounds 595,000 are being invited by Lane Fox and the Wimborne office of Savills (0202-887 331).

Poole is to Bournemouth what Hove is to Brighton - the quieter resort. One of the best addresses in Poole is Sandbanks, a peninsula dividing the harbour from Poole bay where the Bournemouth office of Savills (0202-298 585) has what it calls 'marine residences' at prices up to Pounds 1m.

Another good address is Canford Cliffs, where Savills has a three-bedroom bungalow at Pounds 395,000. Lane Fox and Savills also are agents for Saltings, a new development on the clifftop in Cliff Drive, where three- bedroom flats are for sale from Pounds 235,000-285,000.

In the Lymington area, some of the most expensive properties are being offered by Paul Jackson (0590-674 411). He is asking Pounds 595,000 for the five-bedroom Lea House, in seven acres, which was on the market at Pounds 900,000 in 1991 and has views across the Solent to the Isle of Wight.

At Old Bosham, in West Sussex, unsuspecting motorists who park on the front and return to find the water lapping around their car soon discover that this is where King Canute failed to command the waves. One of the four-bedroom modernised fishermen's cottages in Mariners Terrace is for sale at Pounds 180,000 through Henry Adams & Partners, of Chichester (0243-533 377).

Richard Etherington, an unconventional agent at Petworth (07985-222), publishes a chatty newsletter called The Nibbler in which he detects 'some small sign of recovery in the market' with buyers competing against each other again. If this is so, can gazumping be far away?

He is offering a four-bedroom house at the end of a cul-de-sac close to the beach on the private Middleton estate at Middleton-on-Sea, near King George V's recuperative Bognor Regis. Built in the 1920s, but extended and modernised by the owners, Etherington says it is 'priced to sell' at Pounds 245,000.

There are seaside properties for sale all over Britain. A computer search by Bedrock International (071-351 2625), an up-market new agency in Chelsea that acts for buyers, produced 46 coastal properties at prices from Pounds 195,000 to Pounds 4m.

The cheapest was Highbury, a four-bedroom Victorian house at Northam, north Devon, with views across Bideford Bay, for which the joint agents are Strutt & Parker at Exeter (03892-215 631) and Kevin Bright of Bideford (0237-473 241). The most expensive is the 2,090-acre Burnley Hall estate on the Norfolk coast at Somerton, where William H. Brown is agent (0603-610 281).

Also on Bedrock's search list is Sheringham Hall, in Norfolk, a National Trust house designed in 1812 by Humphry Repton who also laid out the 700-acre park and woods that run to the sea. As the trust's agent, the Norwich office of Savills (0603-612 211) is seeking Pounds 1m for a 90-year lease of this well-restored house with six acres of gardens.

The trust also wants a buyer for Signal House, a former Lloyd's signal station on the Lizard peninsula in Cornwall which has been converted into a four-bedroom house. Offers over Pounds 85,000 for a 99-year lease are invited by the trust's regional land agent, Peter Mansfield (0208-74 281).

Marine Villa, built in the 18th century as a dower house on the Duke of Hamilton's Archerfield estate at Dirleton, close to Muirfield, Scotland, inspired Robert Louis Stevenson to write The Pavilion on the Links. Offers over Pounds 800,000 are being sought by Hamptons in Edinburgh (031-220 6665).

Regency Cottage, on the Esplanade at Sandgate, Kent, is a six-bedroom house, listed for its architectural and historic interest and said to have been built in 1822 for the army officer responsible for building the south coast's martello towers and other Napoleonic defences. It is priced at Pounds 295,000 from the Folkestone office of Cluttons (0303-850 422).

North End House at Rottingdean, Sussex, is where the late Enid Bagnold, author of National Velvet and other books, lived with her husband, Sir Roderick Jones, who was chairman of Reuters, the news agency. Their five-bedroom house opposite Rudyard Kipling's is for sale at Pounds 525,000 through Humberts at Lewes (0273-478 828). There is a staff flat, a cottage, stables, and grounds with direct access to the south downs.

But Britain's seaside begins and ends at Brighton, where Fox & Sons (0273-688 148) has several flats for sale in converted Regency buildings on the seafront in Marine Parade, Kemp Town, at prices from Pounds 47,000 to Pounds 129,950. Simon Francis, manager of the Kemp Town office, says: 'The peak time for buyers is the spring and summer - so we are expecting a revival in the market now.'

GB United Kingdom, EC P6531 Real Estate Agents and Managers MKTS Market data P6531 The Financial Times London Page XVI 1203
Property: What chance a pink Belgravia? - How the look of London may change under new owners Publication 930227FT Processed by FT 930227 By GERALD CADOGAN

WILL THE Housing and Urban Development Bill, now in the House of Lords, change the look of London?

This is an issue that will affect millions of people who live in, work in and visit central London. The reason the city (or at least most of it) looks so smart is not government intervention, but the high standards of maintenance shown over many years by some of the old, private property estates.

If they lose ownership of their houses and flats to leaseholders who are empowered to enfranchise under the new Bill, will that mean that the end of the white (in fact, often magnolia) stucco of central London, repainted every three or four years? Is it the end of smart black railings, or lawns mown in stripes? Will Belgravia, Chelsea, South Kensington and Regent's Park sprout magenta doors, lime green stucco and adventure playgrounds in the gardens?

The leasehold system has been a powerful force to make London a handsome capital city, with whole streets painted in harmony in the same colour. This has been achieved through positive covenants in the leases which are enforceable only because this is the context in which they appear. Through restrictive covenants the estates also ban chickens, displays of washing, satellite dishes and air conditioning boxes on the fronts of buildings. 'You know when you are on an estate, and when you are off it,' says Roland Culham of Cluttons, managing agents for Smith's Charity.

The estates' standards have been tougher and have had more success than anything the local authorities could have done, even though they can use the powers of the laws for Conservation Areas (which generally apply to all the estates) and Listed Buildings. However, the way these rules are drafted, councils are commited more to stopping buildings from falling into ruin rather than keeping them in good repair.

Under the present rules, a few houses have enfranchised on the estates. As part of the deal, the estate has often made management agreements with the owners. Houseowners in Ebury Street say that these have all the same clauses as the previous lease, except those concerning ownership. The Grosvenor Estate reminds them when it is time to re-paint, specifies which paint to use and inspects the job on completion. The fee for this scheme for one house in Ebury Street has risen from Pounds 16 to Pounds 57 in five years.

These small schemes for a few houses are easy for the landlords to include in the general costs of running their estates. But what of the future, when there may have been piecemeal enfranchisement of well-managed estates? John Neale, casework secretary of the Georgian Group, the conservation society, is worried about how these properties might look. 'The effects will be particularly bad in streets of stuccoed houses.' And Colin Redman, London estate director for the Grosvenor Estate, foresees that 'the biggest problem will be the lack of positive covenants to enforce.'

In an attempt to head this problem off, the new bill allows landlords to institute management schemes for areas which they are in danger of losing. The Leasehold Valuation Tribunal must approve these and will 'have regard to the past development and present character of the area and to architectural or historical considerations.'

Such schemes will be fine in the early years of enfranchisement when the estate is largely still unified. But as the landowner loses more and more, he will be bound to question what he is doing administering schemes for properties which he does not own.

Expect debate on this in the Lords, and the reappearance of an amendment, which was proposed and withdrawn in the Commons, to allow 'heritage areas' that the Secretary for National Heritage could exempt from enfranchisement on grounds of architectural and historical importance.

To see why it matters, walk through Belgravia and look at the details that combine to make it a glorious showpiece of London. If it is all enfranchised, its freeholders will have to be unusually responsible, imaginative and co-operative. Or will a government of the future introduce a bill to direct local authorities to restore the standards the estates now enforce?

GB United Kingdom, EC P6514 Dwelling Operators, Ex Apartments P9531 Housing Programs GOVT Draft regulations P6514 P9531 The Financial Times London Page XVI 740
Sailing: Deeds of daring on the Southern Ocean Publication 930227FT Processed by FT 930227 By KEITH WHEATLEY

TRADE wind routes were the international highways of the last century, crowded with traffic. Suddenly, they are thick with sails again, and busier than at any time since the lost days of the clippers. The navigators are yachtsmen, competing in an extraordinary range of circumnavigations.

Jules Verne is the inspiration for one of the most gripping events. A trophy bearing the novelist's name is being offered by the French government for any yacht able to sail around the world in under 80 days. Robin Knox-Johnston and Peter Blake, winner of the last Whitbread race at the helm of the giant ketch Steinlager, are joint skippers of the 85 ft catamaran Enza carrying a crew of five and now 24 days into their attempt.

Earlier this week they logged one 24-hour run of 477 miles, an extraordinarily high average speed of 19.9 knots. 'We were hitting 29-30 knots in surges, with the leeward hull frequently hidden by avalanches of green water,' Knox-Johnston reported in a late-night satellite call from the Southern Ocean, south of the Cape of Good Hope. 'It was the most fabulous but hair-raising sailing any of us have done. It was also a personal record in terms of speed for everyone on board.'

The record for non-stop circumnavigation is 109 days, set by solo French sailor Titouan Lamazou in 1989. Lamazou is not ignoring the flurry of attempts upon the Jules Verne trophy. Last week, his new yacht was launched in Venice. At 143 ft, the TAGHeuer is the longest racing mono-hull ever built. It displaces 55 tonnes and is big enough to qualify for European Community ship-building grants. It even has a plimsoll line painted on its hull.

Lamazou believes catamarans are not the vessels for high speeds in the Southern Ocean. One of the other yachts competing to break the 80-day barrier, the 89 ft trimaran Charal skippered by Olivier de Kersauson, is limping to Cape Town after hitting a 'growler' (ice broken off a major 'berg) at high speed.

'Charal's accident confirms the met (meterological) predictions that the ice is well north this year,' said Blake from Enza. 'We'll be keeping a particularly close watch from now on, although your reaction time travelling at the speeds we are is minimal in these big multi-hulls.

'Nobody has done this before, so it is important that we are reasonably cautious. We'll push the boat along pretty fast, but I don't want to be in conditions like the Whitbread race where there's thick fog in among the icebergs, in a yacht averaging 20 knots in big seas.'

Convinced that life in the narrow hulls of a catamaran would be unbearable for an extended period at high speed, Blake ordered designer Nigel Irens to create a carbon-fibre 'command module' to be mounted between the two hulls. Conditions proved him right.

'I'm speaking from the central pod where it is relatively dry,' said Blake. 'Outside, it's like living on a half-tide rock. There's so much water about - continual solid stuff everywhere, particularly at speed where it comes off both hulls, off the central net, and even from behind. It thumps, bumps, crashes and washes ropes all over the place but we're enjoying the sailing.'

So, too, are the 140 crew members racing towards Blake in the 10 yachts of the British Steel Challenge. They left Hobart exactly two weeks ago and are heading for Cape Town. The bottle screws which had faked on the previous leg had been replaced by oversized items of twice the strength. Group 4 Securitas is leading but only 30 miles separate the front five, with Nuclear Electric still the overall leader.

So far, they have experienced far worse weather than they did off Cape Horn, and this could well turn out to be the toughest leg of the 27,000-mile race. Nevertheless, when organiser Chay Blyth proposed a change to the route to take the fleet further north into the Indian Ocean - warmer and with smaller waves - the crews called for a referendum. Eighty-seven per cent wanted to stick to the original route passing close to the Kerguelen Islands.

'It's nail-biting down here,' said Peter Phillips, skipper of Rhone Poulenc. 'Being three miles ahead of another yacht is considered a considerable 'cushion' at the front end of the fleet. It must be the closest long-distance ocean racing ever. It's like being in dinghies, but here we are at the bottom of the world.'

In spite of the huge seas, injuries have been confined to the odd broken collarbone and rib. Times have been tougher among the fleet of largely French yachts taking part in the Vendee Globe solo round-the-world race. Several competitors have drowned, including British helmsman Nigel Burgess and American sailor Mike Plant, and others pulled out through injury.

One was Bertrand de Broc, skipper of Groupe LG. He was hit in the face by the boom after a crash gybe deep in the Southern Ocean. He bit through his tongue, leaving the tip dangling by a thread. But de Broc was so far from help that he had to save his own life.

From 10,000 miles away in France, doctors telexed de Broc instructions that he must stitch the tongue himself to avoid infection and possible death from blood poisoning. Using a mirror and local anaesthetic, de Broc managed to insert three stitches as his yacht bucked along at over 10 knots.

The operation succeeded - but it shows that, however hi-tech the 'command modules' and whatever the speed of the boats, in long-distance ocean racing one rule always applies: 'no guts, no glory.'

XA World P7997 Membership Sports and Recreation Clubs CMMT Comment & Analysis P7997 The Financial Times London Page XV 968
Trotting: Losing money on a Welsh Ben Hur Publication 930227FT Processed by FT 930227 By GARRY BOOTH

'NUMBER 13 has come off his legs, pull him down will you Mr Lloyd?'

THIS curious instruction can be heard echoing from a tinny loud speaker across the purple heather-tinged hills of the Black Mountains during the spring and summer. It tells you the trotting races are close by. Trotting is a form of driven horse racing, in which the pony pulls 9st 7lbs of driver in a two wheeled sulkie, it is popular with gamblers around the world: but it could not be better set than under the black belly of rain cloud, in rolling mid-Wales.

Certainly, if betting is a mug's game and psychiatrists are right when they say gamblers only achieve fulfilment in chucking money away, you may as well be ignorant of the workings of the sport when you do it. For the naive punter, these Welsh meetings, often held on remote farmland sequestered for an afternoon, are almost surreal in their impenetrability.

At my first meeting I placed a modest 'Pounds 1 to win' with a bookie whose slip bore the stamp, 'M. O'Hair, Cardigan'. Would that the names of drivers were as distinct. Heats for the Penybont W C I Eggerton Memorial Perpetual Challenge Cup (Heat winners: Pounds 50; second: Pounds 10) included six Davies (three from Merthyr, one each from Newcastle Emlyn, Penybont and Plwmp) five Jones, and three Lloyds.

The meetings are run by the Wales and Border Counties Racing Association. The association does not follow what Val Jones, its secretary, calls 'Jockey Club rules'. The British Harness Racing Club, the umbrella body for a more organised version of the sport, is negotiating affiliation with the Jockey Club. It describes the mid-Wales racers as 'flappers' and wants nothing to do with them.

At a WBCRA meeting the scene resembles a pocket production of Ben Hur. The tubular framed chariots, seemingly held together by baling twine and silage, churn noisily around the short circuit pressed against the wire which marks out the short course. The drivers - men, women, boys and girls - are penalised or 'pulled down', for allowing their ponies to break out of a trot, which is when they 'come off their legs'.

Betting is a haphazard business given the scope for baulking, accidental or otherwise, on the crowded course. Often the on-course bookies will refuse to give odds on a competitor which is considered a certainty - if it finishes first they pay winning bets on the second placed horse. However, I have never seen such a pony win. To add to the difficulty, the drivers need not be tugged around the mile in a sulkie. A lone trotting pony may be saddled in the conventional way, giving the impression that its rider has somehow gatecrashed the event and, unencumbered, has an advantage. Bitter experience has proved otherwise.

Staggered starts are used in all the races and the programme shows the majority of competitors to be classified as 'Go' and the remainder owed one, two, three or four seconds depending on their records. To the untutored observer the ponies appear to start and finish in a clump - but not to Colin Davies, commentator and all-round controller, who oversees proceedings from the superior vantage point of a flatbed trailer parked among the rusting Suburu and Lada 4WDs of the spectators. (There are few shiny Landcruisers or Discoveries here and you will find scarcely a Barbour in the sea of sensible tweed beside the track.)

Davies provides coded illumination to the punters ('Oh and he is going a good little pony]') and, with the help of an invisible factotum known as Yanto, the on-course supervision. One wonders how Brough Scott would cope with the combined responsibility of judging and commentating on the race, describing the whereabouts of the ambiwlans, organising the drivers as well as coordinating the best turned out pony prize.

Apart from the gratification of throwing your money at the bookies and gorging on Welsh lamb burgers, what is the appeal of trotting?

'You get addicted to it,' says Jones. 'There's the thrill of the running and it is so pretty to watch. We find that people will follow one horse from meeting to meeting. Aside from the betting, it is also a lovely family day out.'

The mid-Wales trotting season runs from March to late September. A programme of meetings is available from Val Jones, 1, Saint Cynidr Villas, Glasbury on Wye, Hereford, HR3 5NN. Tel: 0497-847-603.

GB United Kingdom, EC P7948 Racing, Including Track Operation CMMT Comment & Analysis P7948 The Financial Times London Page XV 776
Motoring: Help for the careful driver Publication 930227FT Processed by FT 930227 By STUART MARSHALL

ONE OF motoring's minor scandals is the way some drivers use a breakdown scheme as a substitute for servicing their cars or even keeping them in safe running order. According to Tony Dunlop, managing director of one of the leading operators, Europ Assistance, genuine roadside breakdowns are quite rare.

He says many demands for help are from the kind of people who call out motoring organisations two or three times each year because of flat batteries, flat tyres or empty tanks. This puts up membership costs for responsible subscribers who check their tyres now and again and do not ignore a low fuel warning light. 'Many considerate drivers feel they are subsidising other motorists' negligence and not getting value for money,' Dunlop adds.

Coincidentally, the AA has just put out breakdown recovery statistics confirming the point made by its Europ Assistance rival. Almost 9 per cent of AA breakdown call-outs are due to faulty batteries. This does not include batteries that went flat because lights had been left on and could be recharged; they account for another 6 per cent. At fault are batteries so far gone that the only answer is a new one.

Every AA and RAC patrolman has stories of members calling them out to start cars with flat batteries and then, as an encore, expecting the equivalent of a free 15,000-mile service. And, for some time, the motoring organisations have black-listed members who make totally unreasonable demands on their services.

This week, Europ Assistance has bitten the bullet and introduced Select, a breakdown service for responsible motorists who do not run neglected cars with dud batteries, almost-empty tanks, and tyres that have lost most of the tread.

Europ Assistance says Select is only one-third of the price of the average motoring organisation's breakdown service. For Pounds 35 a year (or Pounds 65 for two years, Pounds 95 for three) it provides round-the-clock comprehensive breakdown cover including hotel expenses, car hire and so on. One or two extra cars can be covered for only Pounds 35 a car for three years.

If Select subscribers do run out of fuel or lock themselves out of their cars, all is not lost. Europ Assistance still rides to the rescue but charges the motorist 'at cost' according to nationally-agreed rates.

Another breakdown scheme for the thinking car-owner is offered by the Guild of Experienced Motorists. For Pounds 17.95 a year (plus Pounds 12 annual membership), GEM covers the full cost of breakdown recovery or roadside repair, including up to Pounds 35 spent on getting a car going at a member's home.

Members pay the bill and then claim on GEM, which works through 1,500 approved garages linked to a 24-hour help-line. but do not call if your driving licence has been endorsed for a serious motoring offence. GEM is heavily into road safety and wants only caring, conscientious motorists as members.

An independent survey revealed this week that the law requiring tyres to have 1.6mm pattern depth continuously round 75 per cent of the tread width is being treated with contempt. Up to two-thirds of tyres removed for replacement are worn beyond this limit. Fifteen per cent are damaged so badly that they are blow-outs waiting to happen.

Europ Assistance Select, tel: 0444-442-211.

GEM, tel: 0342-825-676

GB United Kingdom, EC P8699 Membership Organizations, NEC P7549 Automotive Services, NEC P7534 Tire Retreading and Repair Shops TECH Services TECH Standards P8699 P7549 P7534 The Financial Times London Page XV 591
Motoring: Get a grip on wheelspin Publication 930227FT Processed by FT 930227

AN INCH of snow, or a muddy car park, can bring any car to a wheel-spinning standstill. A four-wheel drive is the conventional, expensive answer.

A low-cost alternative is a pair of plastic Autotrax ramps, heavily toothed on both sides to grip both ground and tyre. Slip their thin ends under the drive wheels, accelerate gently and they will give enough traction to get a car going. Do not forget to go back for them - they cost about Pounds 30 a pair and will be in the shops soon. Call 0285-885-201 for details.

Nothing is more difficult to fit into a car than a bicycle. For those daunted by the thought of lifting cycles on to roof-racks, Paddy Hopkirk has a universal rear cycle carrier holding up to three bikes.

It can be fitted without tools (and without marking the paint) to almost any car, but must be used with a number plate or trailer board if the driver is to stay within the law. About Pounds 50 from motoring shops or call 0525-850-800.

GB United Kingdom, EC P3714 Motor Vehicle Parts and Accessories TECH Products P3714 The Financial Times London Page XV 205
Travel: Waylaid by Dante's little paradise - Nigel Andrews is captivated by Italy's Ligurian Riviera and a pizza at Luigi's Publication 930227FT Processed by FT 930227 By NIGEL ANDREWS

THE Ligurian Riviera is a chain of ambush posts set up by nature in concert with the Italian tourist board. Beautiful Viareggio, elegant Santa Margherita, enchanting Portofino: as dusk falls on your drive along the tunnel-strewn autostrada, it is hard to resist being waylaid. Beguiled by the advertisement for a four-star hotel sulla mare, you will find yourself happy and financially impoverished in the morning.

My own favourite watering-place is Sestri Levante. Some guidebooks refer to it, rudely, as the most 'commercial' of the Riviera resorts, but it is hardly Blackpool. This exquisite peninsular town, between Lavagna and Levanto, pushes out into the sea and then rises into a park-size bluff at its end. On this verdant promontory, I spent two nights in a suite at the Hotel Dei Castelli with a balcony-cum-roof from which you can gaze down at both Sestri's beautiful shorelines.

If I say that this little paradise once was praised by Dante and Petrarch, you will remark, rightly, that so was every other town in Italy if travel literature is believed. But, in Sestri at least, you see what might have provoked their transports.

The town grows along a narrow isthmus. On one side is the long, commercial beach ending in a huddle of multi-coloured fishing vessels perched under the cliff. On the other side is a perfect crescent of shoreline created by the mainland to the north-east and the promontory to the south-west.

Here, the light is silver, the cliffs a deep, breathing green, and the houses are painted in bright pastel washes. The silence is palpable even when there is noise about: I have never been in a place so mystifyingly serene. If you can bear smallish rooms, the Helvetia hotel, a pretty, white wedding cake overlooking the water, has a superb command of the bay.

You can stroll from one end of town to the other in 30 minutes. Cars are as redundant here as in Venice, although, for canals, read narrow pedestrian shopping streets: up-market streets, too, as you run the gauntlet of Guccis and Versaces.

Always try to look upwards. This way, you will avoid the lure of the costly shop windows and also notice a Sestri Levante speciality. The houses are painted with patterns: neo-Pompeian swags and flourishes, trompe l'oeil imitations of relief work, and decorative 'tiling' that is not tiling at all but an artist's mock-up.

Viewed from afar, it all looks like Toytown. It can also behave like that. As in Venice, real life keeps sliding aside to be replaced by stage-set views and seemingly staged incidents.

Surely the 12 Italian women who passed by me on a pavement, singing in perfect harmony some melodic Ligurian folk song, were laid on as a stunt? Surely I did not really see a gaily-coloured plaster dwarf built into the side of an old tree? (I did - my photo album proves it). And what about that seagull that sat in the sand and did not budge even when I approached to stroke it. I was struck by its poetic, ruminative look: perhaps it was the transmogrified spirit of Dante or Petrarch.

The Hotel Dei Castelli - you drive to it up hair-pinning cobbled streets or, if on foot, ascend from the beach by a lift - consists of two crenellated villas set in a large garden. They were built from the rocks of the fallen Genoese castle that once stood here.

Since the rooms are furnished monastically, you should take a suite and send your bank manager a pacifying postcard. My suite provided inspiring views, and more can be obtained by walking around the garden and then around the whole promontory. Only rickety fences prevent you from plunging down thyme-scattered cliffs into a cobalt sea. But enjoy the light, which is Capri-like, and also note the Marconi tower, a small, rude ruin whence the wireless inventor sent some early messages to listening battleships off La Spezia.

It is evening, and I repair to Luigi's for a pizza. This is where Sestri Levante ascends from the magical to the completely uplifting. Luigi's is along the street from the town's other main hotel, the Balbi, with its garden guarded by stone lions and its interior that of a scarce-changed 18th century villa. Have a coffee here after Luigi's, or a drink before, and stroll between venues along a street balmy with night scents. At Luigi's itself, insist on a pizza diavola burnt to a near crisp, and irrigate it with some cold house wine.

If you feel the need to get out and about while based at Sestri, visit the Cinque Terre. These are five remote fishing villages lying to the town's east. Once, they were so inaccessible that their inhabitants never saw a tourist and scarcely saw an Italian from another part of the country. Alternatively, drive to Varese Ligure, where a 15th century castle awaits you and where the local nuns make an income from tempting you with scivette (marzipan flowers).

Back in Sestri itself, the only thing you cannot do with ease - be warned - is sea-bathe. There is water everywhere but it is usurped by boats. If you stay at the Hotel Dei Castelli, you can use its bathing facility: a rocky inlet between cliffs. Very picturesque. But time your dip for the brief space of time in which the sun peers, sometimes furiously, into the chasm.

Otherwise, pencil-in bathing for the second leg of your Italian holiday. Sestri Levante is for land-lubbers only: those who like to look at the sea without getting involved too closely.

IT Italy, EC P7011 Hotels and Motels P5812 Eating Places CMMT Comment & Analysis P7011 P5812 The Financial Times London Page XIV 980
Travel: Driven to distraction - Snapshot / Rio de Janeiro Publication 930227FT Processed by FT 930227 By KEITH WHEATLEY

MUCH in Rio de Janeiro is hard to believe, especially to the first-time visitor. A fairytale destination? Not exactly. Who could believe it possible to find a cab driver in Rio unable to find Corcovada? The massive statue of Christ the Redeemer is perched 2,500ft above the city, visible from every street and square. Better-known, even, than Sugar Loaf mountain.

Squeezed in the back of a sweaty VW Beetle we fumed and eventually had to laugh as our driver, new to Rio, asked directions of incredulous street-smart children at every junction. Of course, the meter was running and we were paying.

However, any connection between the meter and what one pays for a cab in Rio is about as notional as the exchange rate for the Brazilian cruzeira. Any taxi journey has to start with a session worthy of the EC finance ministers. One can sympathise. In a country with annualised inflation running at close to 1,000 per cent, a rate-per-mile agreed at breakfast-time is likely to look meagre by sunset.

For the first-time tourist in Rio - a dwindling species - things can be bewildering. Items are either very cheap or hugely expensive - and quite randomly. Clean, well-appointed hotel rooms overlooking Copacabana Beach for around USDollars 40 a night? No problem.

Admittedly, the hotels are 20- to 25-years-old and in need of refurbishment. But there has been virtually no new building on the famous beach since US tourists - fragile creatures - decided Rio was the wrong side of the tracks. Yet the views and the local colour make the the beach-front hotels a bargain.

Just avoid the telephone. Most visitors learn only as they are checking out of their hotels that Brazil is attempting to pay off its national debt via the tariff for international calls. An item of USDollars 76 for an eight-minute call to

Britain certainly lodged in the throat.

Grazing in street cafes is the most economical and enjoyable way to eat during the day. A thimbleful of strong black coffee and a voluptuous pastry layered with cheese and ham will cost the local equivalent of 75p.

While the area two or three blocks back from Copacabana is lively and fascinating, it is also dangerous. Most Brazilian muggers seem keener on goods than violence but they are also thick on the ground. Hardly a day goes by without another unfortunate trailing into the hotel lobby minus handbag or wallet.

One experienced Rio hand told me never to voyage abroad with more than a single credit card, handful of cruzeiras for walking-about money and Dollars 20 for emergencies. It came to seem like good advice.

BR Brazil, South America P4111 Local and Suburban Transit P5812 Eating Places P7011 Hotels and Motels CMMT Comment & Analysis P4111 P5812 P7011 The Financial Times London Page XIV 487
Travel Focus (France): To the manoir drawn: the lure of old Brittany - Chris Eales discovers some gentle spring retreats at a reasonable price Publication 930227FT Processed by FT 930227 By CHRIS EALES

WHEN MY friends are tired of London, they call me. I live in a manoir, something less than 20 kilometres from the northern coast of Celtic Brittany. British Celts founded this presqu'ile in the fifth century AD. Perhaps this is why mainland Britons have a peculiar affinity with the Bretons. At any rate, the Brits camp in droves each summer and the Brets reckon they get on better with them than with the mecs from Paris.

Malheureusement, I tell my friends, there are not enough rooms in this modest, 14th century manoir. It is tucked away in the heart of the Tregor, a tranquil pocket of 900 acres in the Cote d'Armor and bounded by some of Europe's most splendid coastline, right opposite Devon. So, I decided to visit some of the Tregor's many larger manoirs that actually rent out their ancient rooms. All are eminently satisfactory for those who would like a gentle spring retreat at a reasonable price in a place where the land wrestles with the sea.

My journey followed the footsteps and magnifying glasses of many posh architectural antiquarians. Professors have crawled all over manoirs here, some counting the rings of their wooden beams to date them. Nobles built and lived in them more than 600 years ago when Brittany was independent of France. Many manoirs were left to tumble by farmers who acquired them after the Revolution, but plenty have been saved and renovated to a high standard. Their chunky stone walls and towers, used originally for defence, remain a dominant feature.

Bretons say it rains every day and twice on Sundays, but it forgot to rain the day I made my tour; indeed, the sky was bright blue. I got in the car and weaved off along the Tregor's roads, hardly big enough for more than one vehicle. I was heading toward the Chateau de Brelidy, a 16th century manoir with 10 guest rooms. I was soon lost in the wild, raw countryside of browns, greens, high banks, and the occasional grey of an old stone house puffing smoke. Somewhere, a dog barked. Otherwise, it was quiet. I was not in a hurry. Nobody ever is in Brittany.

At the Chateau de Brelidy, I met Hector, a suit of shining armour. I did not know he was a fake until Madame Yoncourt, who owns the manoir, told me. Also on display are stuffed snipe and, oddly, a collection of wedding dresses. Apparently, honeymooners used to stay there. In the hallway, through a glass cabinet, I saw the imprints of a hand on a fourth century drain, dug up in the chateau grounds under the ruins of an 11th century hill fort. Away in the distance were fuzzy tree outlines and the lonely Menez-Bre, at 300 metres the highest point in the area.

Like a dot, the summit is crowned by the tiny chapel of St Herve, a blind saint who climbed barefoot to it centuries ago. Legend says he was asked to advise bishops meeting at the chapel. When he arrived, a bishop thought he was a tramp and mocked him. The bishop suddenly went blind. St Herve found water, even on the hill, and splashed it on the bishop's eyes. He saw again.

You could spend the whole time within the chateau's splendidly restored walls of stone. Madame Yoncourt cooks dinner, a daily choice of Breton dishes. Specialities are homard a l'armoricaine (lobster), palourdes (cockles) and belons (flat-shelled oysters). There is a library and television lounge, even a full-size billiard table. I drank a demi slowly before I left.

The Chateau de Kermezen, a smaller manoir, is about 10 km north of Brelidy, close to the village of Pommerit Jaudy. Here, guests eat and drink with the count and countess of Kermel. No need to tremble. The countess treats her guests as her family and she cooks different local dishes each day.

Two stone towers mark its courtyard. One of them once was a pigeonnier in which Breton nobles kept pigeons, which they ate; the number depended on the amount of land the manoir held. Hence, the size of the pigeonnier tells how important the manoir is. This one is impressive and so are its owners.

The count, who greeted me first, was wearing Wellington boots and carrying a chainsaw. The countess was at the back, digging the garden where the land declines steeply to the river Jaudy and a gorgeous valley. She told me later, as we sat by the fire sipping whisky: 'The chateau has been in the family since the 1400s. The villagers returned it to us after the Revolution.'

The sea is never more than a 20-minute drive from anywhere in the Tregor but from Plougrescant, at the Manoir de Kergrec'h, owned by the viscount and viscountess Stephanie de Roquefeuil, it is merely a delightful stroll away. In fact, this ivy-clad 17-century manoir (there are four guest rooms) is on the Circuit de La Cote des Ajoncs, an inspiring coastal walk lined by ajonc, a distinctive gorse.

A dramatic feature of this coast, called the Cote de Granit Rose after its pink-coloured rocks, is to be found at Tregastel where huge slabs of smooth granite tower over the beach. They have been eroded into intriguing shapes - here a tortoise, there a whale. Their completely irregular angles seem man-chiselled, but this is a perfectly natural phenomenon and free to visitors.

If magnificent sea and country walks, punctuated by a glass of Muscadet and a dozen oysters, are too relaxing, there is always hunting and fishing. All arrangements will be made at any of the manoirs. And, if risking your cash is favoured, there is a roulette table in the casino at Perros Guirec, the chic-est spot on the coast.

Manoirs to stay (nightly rates): Chateau de Brelidy, 22140 Brelidy, tel. 010-33-96956938. Rooms from FFr360, dinner FFr175; Chateau de Kermezen, 22450 Pommerit Jaudy, tel. 010-33-96913575. Rooms from FFr420, dinner FFr170; Manoir de Kergrec'h, 22820 Plougrescant, tel. 010-33-96925606. Rooms from FFr490, dinner FFr180.

Manoir de Kerguereon, 22300 Ploubezre, tel. 010-33-96389146. Rooms from FFr480; Manoir de Coadelan, 22140 Prat, tel. 010-33-96470060. Gites accomodation from FFr250 a night; Manoir de Coat Nizan, 22140 Pluzunet, tel. 010-33-96358172. Gite FFr1,200 a week.

FR France, EC P7011 Hotels and Motels CMMT Comment & Analysis P7011 The Financial Times London Page XIII 1087
Travel Focus (France): Wilderness where horses know best Publication 930227FT Processed by FT 930227 By PATRICIA MORISON

WHENEVER the horses reached high ground, Henri would sing, quietly and exultantly. Years in the French colonial service had earned him early retirement from the drudgery of a Toulouse bank. His great passion was to explore his beloved Languedoc on Brigand, his Roman-nosed bay. And so, at evening, while the rest of us were untacking and grooming, Henri and Brigand would canter off for a solitary hour as the sun set behind the foothills of the Pyrenees.

Henri was not the only one reluctant to turn in after a day on horseback. The Corbieres, a remote inland corner of south-west France, is a varied and beautiful region of barren hills, limestone peaks, forests and gorges. Eight years ago, the owners of 12 gites, or farmhouses, banded together as Les Sentiers du Sud. They offer accommodation and mounts for visitors attracted by the local network of sentiers: 800 kilometres of well-maintained paths.

Inntravel, of York, a specialist in independent travel, uses Sentiers du Sud to offer week-long riding holidays. A guide takes groups of six to nine from one isolated farmhouse to another, rarely setting hoof on a road. Self-piloting circuits can be made by really experienced riders, and there is a gentle, confidence-building option for novices.

The stone farmhouses all belong to working farms, some of them as old as the 14th century. Before the depopulation wreaked by this century's wars, some 40 individuals would have lived in crowded squalor at La Bastide, an upland farm beneath the frowning peak of Bugarach. These days, the massive walls shelter just two families: a Catalan activist and the gite's owner, a sheep breeder-cum-jazz musician.

Our guide, Jean-Claude Pons, succeeded in being calmly authoritative without being bossy. He is typical of the Sentiers du Sud crowd in being a refugee from city life. Recent decades have seen an influx of settlers in search of rural simplicity. Tourism apart, the newcomers produce herbs, organic grapes, honey and wild-boar pate. They weave, dye silk scarves, and breed the black Merens mountain horses. But life gets no easier in this wild, barren region and locals complain bitterly of neglect by the bureaucrats in Paris.

Social life lacks sparkle so the gite owners seem genuinely happy to dine with their guests in the evening. Rooms in converted out-buildings are simple and comfortable. Each morning, the saddle-bags are filled with pies of vegetable and wild boar, cheeses, and flasks of red wine. The food is welcome on a ride which can last six hours, across gruellingly steep terrain. The horses are part-Arab, agile and brave, with good mouths, iron legs and no aversion to a gallop. A rider needs to be competent and prepared to accept that, whatever goes on in the covered school in Wimbledon, on the Sentiers du Sud the horse knows best.

On our visit, the days were so lovely, they almost hurt. There were no car fumes, no articulated lorries, hardly a gate. How would it be possible to endure Oxfordshire mud, hostile farmers and murderous drivers again? Here, at least, riders were not the enemy. That role was played by Spaniards roaring up the tracks in their off-road vehicles to steal the pink mushrooms called laiteuses de delice.

As late as the 18th century, the fortresses of southern Corbieres guarded what was still the Spanish-French border. Approached slowly on horseback, the magnificent castles at Arques, Puilaurens and Peyrepertuse are more evocative than ever.

In the castle at Arques, a newsletter for latter-day Cathars offered proof of the romantic, quasi-historical baloney which is such an abundant crop in the Pays de Cathares. The myth is that every castle was a nest of millennarian, vegetarian, free-loving Cathar heretics.

In reality, the castles say more about the rivalries of seigneurs rich from dues on wine and wool, and from excursions against the Moors across the mountains. Today, the rise of sentimental Catharism is just one more expression of enduring southern hostility towards the north. Impoverished, yet fiercely proud of its past, the Corbieres is a place of rare beauty. Explored on horseback, its solitude seems to enter your soul.

Inntravel is at The Old Station Helmsley, York YO6 5BZ, tel. 0439-71111. 1993 prices for accompanied rides are Pounds 660 (including flight to Toulouse), or Pounds 560 self-drive.

FR France, EC P7999 Amusement and Recreation, NEC CMMT Comment & Analysis P7999 The Financial Times London Page XII 746
Travel Focus (France): Filling Van Gogh's boots - Christian Tyler introduces a special feature on the delights of cross-Channel holidays Publication 930227FT Processed by FT 930227 By CHRISTIAN TYLER

YOU HAVE it or you don't. That is what they always tell you. The trouble with this brutal classification is that those of us who don't have it - the majority, I suppose - never think to question a verdict apparently handed down by our genetic code.

So, it was only through the accident of being married to someone who does have it that I found myself last year poised foolishly in front of an easel, palette in one hand, a clutch of brushes in the other, in a remote mountain valley in the south of France.

The scene is engraved in the memory. Above me, the branches of a thorn tree provided some shade. On one side, the stream clattered down its rocky bed to form a pool among boulders streaked with rusty whorls but as smooth and rounded as the back of a bathing elephant. On the other side, grasshoppers skipped about in a field of bracken and violet butterflies zig-zagged over the water. Each evening, the goat lady came, walking her chestnut-coloured flock over the stepping stones to the sound of a clonking bell.

For two days, I stared at that rock pool until I knew every line and contour, every fold and pocket. A painting is never finished, a famous artist is said to have remarked, only abandoned. The thing on my easel looked dreadful and was getting worse. So, I abandoned it.

If you have not picked up a paint brush since the age of 10, you will feel as helpless as a child, stubborn and petulant when things go wrong and pathetically dependent on praise and encouragement. You have to learn to forget yourself, forget what you know about the world, and look. For the world is a different, more concentrated place when you are trying to paint it. It is no longer a collection of familiar objects understood by you but a pattern of shapes and shades which have no purpose other than to defy your efforts to describe them. Learning to paint is the kind of challenge best attempted, it seems to me, in some remote place where there are real painters around to help and sympathise but no other holiday-makers to peer over your shoulder in silent mockery.

On the first day, I was given a large sheet of paper, a stick of charcoal and two erasers. I had to cover the paper in black, then use the erasers to bring the object (in this case, a cane chair) out of the blackness. It was a back-to-front, inside-out way of drawing, and I cannot draw. But it worked. A day or so later, I was sitting in an apple orchard with a box of gouache (more opaque than watercolours and, thus, easier to manage). That sort of worked, too.

So, I demanded to be allowed out with real oil paints - more intimidating but also more liberating - and, after two failed attempts at landscape, produced an unfinished painting, life-size, of a pair of derelict boots (move over, van Gogh) of which I am still desperately proud.

Every year, the number of advertised painting holidays in France or Italy seems to double. Some are organised very well, but most charge more than a novice might be willing to risk for a fortnight in a rural retreat. Our choice was basic, informal and - apart from the cost of getting there - cheap.

The house, in the hamlet of Randavel, is a former silk-worm farm, the size and thickness of a small fortress and typical of that part of France, which the two owners - one of them a painter who teaches at a London art school - are restoring by slow degrees. Living space is at ground level and studios have been created above in the huge, double-storey chambers in which the silk-worms once were reared. We were fed excellently by the owner herself and sat up every night with her, her visiting art students and her Irish-Breton teacher friend from the village, drinking large quantities of local red wine for the equivalent of 42p a bottle.

Her house dominates the hamlet, one of several in the upper reaches of the Herault valley, underneath Mont Aigoual in the Cevennes national park. A few modern villas have grown up along the fast new road, built with European Community subsidy, that runs from the valley mouth at Ganges to the mountain pass at L'Esperou, a small ski resort. But the upper Herault remains a wild area of mediaeval peasant buildings and fierce Protestant sects which has yet to make the transition from silk-farming (destroyed by Japanese competition) to tourism.

At either end of summer, the weather is wild. The winds collect around the summit of Mont Aigoual and whip down the valley in storms of impressive ferocity. In mid-summer, the elevation provides relief from the burning temperatures of the plain below, and the water in the rock pools is sharp enough to take your breath away. The valley sides are steep and stony and covered in oak and chestnut: there are paths to challenge the keenest ramblers, and eagles and moufflons to watch.

A few kilometres downstream is the village of Vallerauge with its oddly imposing architecture, two cafes, two restaurants and the usual combination of shops. The towns of Ganges and its more bourgeois sister, Le Vigan, have entertaining weekly markets.

The Randavel Experience is far from de luxe but it is comfortable enough - especially now that main drainage has arrived - and authentic to the last clove of garlic. You might even find you have a pair of genes that paint.

Contact Linda Nugent, Hameau de Randavel, 30570 Vallerauge, Gard, tel: 67-82-25-12. Winter number (London): 071-373-0862. Prices by arrangement. Nearest airport: Montpellier. Motorail: Avignon. Suitable for families.

FR France, EC P8299 Schools and Educational Services, NEC P7999 Amusement and Recreation, NEC CMMT Comment & Analysis P8299 P7999 The Financial Times London Page XII 1021
Food and Drink: Appetisers Publication 930227FT Processed by FT 930227

THOSE restaurants offering less expensive lunch menus as a result of the success of the Weekend FT's 'Lunch for A Fiver' include (all 071 numbers unless indicated): Le Boulestin WC2 (836-7061), Dan's SW3 (352-2718), Pomegranates SW1 (828-6560) and Turners SW3 (584-6711), all offering a Pounds 9.95 spring menu; 192, W11 (229-0482) Pounds 7.50 including coffee; Daphne, NW1, (267-7322) will be serving a Pounds 5 lunch until Easter; Gilbert's, SW7, (589-8947) a Pounds 5 lunch on Fridays; La Truffe Noire SE1 (378-0621) Pounds 10 and Beauchamp's, EC2 (621-1331) Pounds 11.75; Brasserie du Marche, W10 (081-968-5828) Pounds 7.95; Ming W1 (734-2721) Pounds 7.50 ; Alastair Little Bar (734-5183) Pounds 10 and will take reservations; The Red Fort, W1, (437-2115) Pounds 10; Bistrot 190 bar, SW7, (581-5666), dell'Ugo W1 cafe (734-8300), Zoe W1 (224-1122) cafe all Pounds 7.50; Newtons, SW4, (081-673 0977) Pounds 6.95 but Pounds 5 for one week each month; Cibo, W14, (371-6271) and L'Altro, W11, (792-1066) Pounds 10 for three courses and The Argyll, SW3 (352-0025) Pounds 10 for three courses until Easter.

Markwicks in Bristol (0272-262658) has reduced its two course lunch menu to Pounds 8.50 and at Sonny's, Nottingham (0602-473041) it is Pounds 9.95 for three courses.

Two new restaurants in the City of London: the Sea-Shell, one of London's most popular fish and chip restaurants, has opened a new branch at No. 2 Gutter Lane, Gresham Street, EC2V 8HX (071-606-6961). And the owners of the Sri Siam Thai restaurant have engaged Ken Hom as consultant to help them open their first Chinese restaurant, Imperial City, at Royal Exchange, Cornhill, EC3 (071-626-3437).

GB United Kingdom, EC P5812 Eating Places TECH Services P5812 The Financial Times London Page XI 289
Disaster threatens a natural wonder: Olga Speranskaya on the pollution of Lake Baikal Publication 930227FT Processed by FT 930227 By OLGA SPERANSKAYA

RUSSIA HAS paid a terrible price for the Soviet tradition of 'storming nature' - the idea that air, water and abundant natural resources were there for man to assault violently without thought for the human and economic cost, or the ecological consequences. Starting with Stalin's decision to build the White Sea canal with slave labour in the 1920s, the communists showed an irresistible urge to throw millions of people and vast resources at projects that were nothing but propaganda.

These were designed to impress the Soviet people and the world with the regime's implacable will and its ability to accomplish monumental schemes and gravity-defying feats. For decades, huge dams were built which flooded rich agricultural land to produce electricity for non-existent factories or to irrigate, for example, the mono-culture of cotton in the central Asian republics, desiccating the Aral sea in the process.

Partly to repair this damage, the planners then proposed to create another ecological disaster by diverting the mighty Siberian rivers from their natural courses. Nature has them flowing northwards into the Arctic ocean, draining the Siberian swamps. Instead, they were to be channeled south for thousands of kilometres, raising water levels and leaching salt and minerals from soils as they went. Again, the aim was to irrigate central Asia.

Cost-benefit analyses along capitalist lines were unknown in such projects. Only as the power of the Communist party dwindled in the 1980s did it become possible to question seriously either the economic rationale, or the ecological consequences, of projects which had drained resources for decades and contributed to the grotesque deformations of the economic system.

The collapse of the Soviet Union, and the economy, put paid to the Siberian rivers scheme. But it came too late to prevent the outlay of billions of roubles on one of the world's most improbable railways: the Baikal-Amur-Mainline (BAM).

This runs for more than 2,000 km (1,250 miles) through what was once a world of virgin forest, crystal rivers and forbidding mountains. The politburo decided to build the railway deep inside the permafrost zone where metals snap like twigs, buildings sink, and motors have to be kept running 24 hours a day or they freeze up within minutes.

Like so many Soviet schemes, the idea of driving a railway through some of the world's harshest and least inhabited terrain was dreamed up by Stalin, only to be abandoned hastily when the second world war began. It was resurrected by Stalin's spiritual heir, Leonid Brezhnev, in the 1970s when the idea of building a line through Siberia north of Lake Baikal reflected military concern at the vulnerability of the existing trans-Siberian railway at a time of tension with China.

The launch of the so-called 'project of the century' was also accompanied by much loose talk of 'unlocking the Siberian treasure chest' and opening up a vast area of Siberia to human habitation. Above all, its proponents argued, the railway would help to exploit the mineral wealth locked up in the mountain ranges through which the heroic tunnel drillers, bridge-builders and track-layers made their difficult and expensive way.

Twenty years later, the railway is still not operating fully and only one of the projected pits, the Japanese-financed and equipped Neryungri hard coal mine, has been built. Some 13m tons a year now flows down a specially-constructed spur of the BAM to be hauled over mountains and steep gradients nearly 1,000 km (625 miles) from Neryungri to the Pacific coast, from where it is exported to Japan. It must be the most expensive coal in the world.

Building the railway - with its nine tunnels, 139 large bridges and viaducts, and 3,760 smaller bridges and culverts over and under fast-flowing rivers and steep ravines - also opened up a vast area for logging and other operations. But logging dislodged thin soils and polluted the rivers, including those which flow into Baikal. The lake is one of the world's wonders and the fight to prevent it being spoiled is among the main concerns of the ecological movement in Russia.

Baikal is unique in several respects. It is the most ancient lake on earth. Whereas the average lake lives 'only' 10,000 years, Baikal is 25m years old. Even the stars looked different when its waters began to fill a giant rift in the earth's surface which is still the heart of tectonic activity in the region. Because of shifts in the planet's crust, the lake gains two centimetres in width every year. Now, it extends 636 km (400 miles) from south to north, and is up to 80 km (50 miles) wide.

With a maximum depth of 1,742 metres (5,714 ft), Baikal is, above all, the deepest lake in the world. In surface area it is smaller than the US Great Lakes but, because of its depth, it has 20 per cent of the earth's surface fresh water.

As a closed ecological system, Baikal is famous for its wealth of plants and animals. So far, about 2,600 different species have been identified, of which 85 per cent are endemic to the lake. But Baikal today is not only a collection of natural superlatives - it is a tight tangle of problems and emotions.

The trans-Siberian railway, built at the beginning of the century, runs along its southern shore past Irkutsk, one of many heavily-polluted industrial cities in ecologically-vulnerable Siberia. The construction of the BAM, and the new town of Severobaikalsk more than 600 km to the north, threatened to repeat the degenerative processes in the lake's northern area.

Baikal's purity was first infringed on a significant scale by Moscow's decision to build the Baikalsk cellulose paper combine near the southern end in 1966. Its construction became a catalyst for the fledgling Green movement in Russia, and the debate over the plant developed into the the first legal battle between the communist system and ordinary people.

Among the first to protest was academician Grigori Galazy, now the director of the Lake Baikal museum. But he remains pessimistic about the possibility of effective protective measures. 'None of the many decrees and orders to protect the lake were fully implemented,' he says. 'Every day, the combine discharges up to 250,000 litres of supposedly clean waters into the lake. But these waters, even after the treatment they receive, need to be diluted at least 10,000 times to be considered clean.'

Mikhail Grachev, director of the Limnological Institute in Irkutsk, adds: 'The main value of Lake Baikal is its fresh, clean water and its value will only grow with time. We must elaborate a concept towards Lake Baikal and strictly follow it. The lake can be used as a fishery resource and treasured as beautiful place for tourism and rest. But, above all, it should be seen and treasured as the planet's well, with crystal-clean waters. We have no right to take any risk and we must preserve it.'

Baikal has proved to have a unique and highly-effective ability to clean itself, something that makes it different from other sources of fresh waters on earth. If its eco-system is not overloaded, this process will continue. But building new towns with inadequate sewerage and drainage, and the effect of de-forestation along the banks of the rivers feeding into it, have increased pressure on its self-purification capacity.

One indicator of the pollution is that Baikal's best-known fish, the omul, now begins to spawn at around seven or eight years when it weighs around 180-200 grammes. Before the combine was built, the fish began to spawn at three to four years at a weight of 500 grammes.

The Baikalsk combine is not the only source of pollution, though. The Selnge river, the main tributary of Baikal, rises in Mongolia and gathers wastes along its way to the lake. Last year alone, industry in the Ulan-Ude region to the east of the lake dumped 39,000 tons of pollutants into the river.

Sewage treatment in settlements in this area is either too little or non-existent. Only 31 new water-treatment units, out of of 83 planned, have been built and shortage of money means many lack crucial engineering work. Meanwhile, heavy industry along the Angara river, which flows out of the lake, and scores of antiquated thermal power stations burning bad-quality coal add their sulphur and nitrogen oxides to the air pollution.

To supply industry with electricity, the Soviet authorities also built power stations on the Angara. This had unpredicted ecological side-effects on the lake. Dr Olga Kozhova, director of the biology institute at Irkutsk university, explains. 'For millions of years, dozens of species lived in shallow waters and evolved in accord with natural changes in the lake's water level.

'Construction of the Irkutsk hydro-electric power station on the Angara river in 1958 changed the situation dramatically. It raised the water level by a metre and water levels are now regulated artificially, depending on the needs of industry. As a result, inshore fishes such as the yellow-fin Baikal sculpin - a kind of miller's thumb fish - have lost their spawning grounds. Their numbers have dropped sharply.'

Faced with growing popular protests, the Soviet government decided in 1987 to convert the Baikalsk combine into a furniture factory by 1993. That will help. But Grachev believes the best way to exploit Baikal in an ecologically acceptable way is to extract, bottle and sell its contents as premium mineral water. The Limnological institute is trying to raise money to build a plant to produce 20m bottles a year, plus ice cubes. 'It would would cost Dollars 5-10m,' he says. 'The main problem is plastic bottle production - to ensure they are chemically neutral and safe.'

Grachev's plan is one thing. But the real ambition of the Russian Greens is to remove all other industrial plants from around the lake. This, they say, would make Baikal the symbol of the nation's struggle to repair the damage caused by seven decades of profligacy.

Dr Olga Speranskaya, a Moscow ecologist, was the winner of the 1992 David Thomas Prize set up in memory of David Thomas, a Financial Times journalist killed on assignment in Kuwait in 1991. This article is part of her research into Lake Baikal, undertaken with the prize money.

RU Russia, East Europe P9511 Air, Water, and Solid Waste Management P8733 Noncommercial Research Organizations RES Pollution P9511 P8733 The Financial Times London Page XI 1745
Food and Drink: At last, sherry really is Publication 930227FT Processed by FT 930227 By EDMUND PENNING-ROWSELL

A SERIOUS anomaly in the UK wine world is now being removed. So-called British 'sherry,' made from imported grape concentrate, has had a diminishing tax advantage over the real thing: sherry made from fresh grapes in the Jerez district of Spain. By the end of 1995, this preference will have been wiped out.

It arose because British sherry was allowed to pay the same tax as table wine, now 95p a bottle. But most real sherry pays Pounds 1.63 - and, until this year, Pounds 1.88 if between 18` and 22` in alcoholic strength.

More important than the tax, however, is the ruling that, from 1996, the word 'sherry' cannot be used in the European Community for wines that have been labelled as British, Irish, Australian or South African sherry. The Spaniards should have won this battle long ago but the British sherry lobby fought to retain the word on its labels.

Moreover, no longer do fortified wines - sherry, port and madeira - have to pay a higher duty of Pounds 3 a case if between 8` and 22`. There is now only one rate, which means an initial 5p a bottle off the low-strength wines and an encouraging 30p on the stronger wines, plus VAT. By the beginning of 1996, the duty on low-strength sherries will have fallen by Pounds 3.78 a case and by Pounds 7.43 on those of high strength - subject, of course, to the actions of the chancellor in the intervening budgets.

These reforms provide, at the right time of year, an incentive to sample the warming old high-strength sherries from Jerez. The amontillados, olorosos and palo cortados from old soleras started many years ago and, unblended with the sweet pedro ximenex (PX) wines, have a concentrated aroma, deep flavour and dry finish that make them delicious aperitifs.

Amontillado. Cheap amontillados are no more than sweetened finos, but the genuine article must be at least eight years old before it is transformed naturally. Lighter than olorosos, they also have a long taste in the mouth. Sainsbury has an attractive amontillado that is claimed to have an average age of 35 years (Pounds 3.45 a half). A very reputable one is Valdespino's Tio Diego (Wine Society, Stevenage, Hertfordshires, Pounds 7.90). Outstanding, however, is Gonzalez Byass's Amontillado del Duque Viejo (Peatling, Bury St Edmunds, Suffolk, Pounds 19.49), which is wonderfully rich and concentrated with a bone-dry finish.

Oloroso. Normally regarded as a sweet wine - with the low-strength Bristol Cream (Pounds 5.62 in most supermarkets) being the best known - it can, in fact, provide the most satisfying, concentrated sherry with a dry finish at a very reasonable price.

Safeways has Lustau's excellent, full-bodied dry old oloroso (Pounds 3.29 a half-bottle). The Wine Society lists Valdespino's very concentrated Viejo Oloroso (Pounds 7.15). Lay & Wheeler of Colchester, Essex, has Oloroso Especial (Pounds 7.56) from the reputable firm of Hidalgo.

Wine Cellars, 153-155 Wandsworth High Street, London, includes Valdespino's Don Gon-Zalo Dry Oloroso (Pounds 9.69). Philip Eyres of Coleshill, Amersham, Buckinghamshire, lists the distinctive Lustau dry oloroso, Viejo de Jerez (Pounds 10.86).

Palo Cortado. Between an amontillado and an oloroso in style, this is said to be a one-in-3,000 cask rarity, so any offered cheaply should be treated warily. It has a crisper taste than oloroso. Harvey's has an authentic 1796 Palo Cortado for Pounds 9.50 (Wine Society Pounds 9.60), while Wine Cellars has Valdespino's Del Carrascal (Pounds 9.69). Those looking for something outstanding might try the PP Solera, founded in 1922, from the London department store, Selfridges (Pounds 20.99).

GB United Kingdom, EC P2084 Wines, Brandy and Brandy Spirits TECH Standards COSTS Product prices P2084 The Financial Times London Page XI 631
Food and Drink: Try fino to wash down those tapas - Giles MacDonogh samples Andalusian cuisine Publication 930227FT Processed by FT 930227 By GILES MACDONOGH

THE TAPAS of Andalusia can be delightfully simple, much more so than those prepared in such more prestigious gastronomic regions of Spain as the Basque country or Catalonia. In the very fine Egana Oriza restaurant in Seville (San Fernando 41, tel. 422 72 54), I had caper pickled on their thick stems with thyme and garlic and the fattest green olives I had ever seen.

The style across the road at the ravishing Alfonso XIII Hotel (San Fernando 2, tel. 422 28 50) was appropriately ornate, the star dishes being those fat, spicy little cocktail sausages called chistorras; monkfish marinated in lemon juice and deep fried in batter; and the nuttiest, most delectable of Jabugo hams or smoked loin.

Down on the coast, in the slightly dowdy fishing port of Puerto de Santa Maria, there were razor fish and clams and shrimps cooked in batter. The strangest tapa available was tigre, a mollusc which looked like a scaled-down version of an old-fashioned custard cream cornet. Piles of these monsters lay in the cool cabinets of the bars, their heads lolling drowsily out of their shells until, sensing the presence of a hungry man, they retracted swiftly into the false security of their carapaces.

A local speciality are the tiny red mullet, the size of whitebait, which are served in the bars; or fish from the sole family, just 2in long when fully grown, which are consumed whole - bones and all. As a special treat, my host took me to a bar the size of a broom cupboard - then watched with ill-concealed amusement as I ate an anonymous-looking tapa covered in bread crumbs. This was a criadilla, or bull's testicle: a great delicacy available only after the corrida.

In Andalusia, the drink favoured for washing down tapas of this sort is a fino sherry or a glass of manzanilla. The fresh, tangy character of bone-dry sherry seems the perfect accompaniment and not just for the fresh sea and shell fish: it also matches Jabugo ham to perfection.

I returned from Andalusia, however, with one question unanswered: what do you eat with the marvellous old solera sherries, amontillados and olorosos? So I sought the help of John Bertram, a well-known London chef, and Gonzalez Byass, a company based in Jerez near Sevilla, which is famed justly for the quality of its old soleras.

It came as no surprise to anyone that the company's crisp Tio Pepe fino went well with the fishy tapas - bread-crumbed balls of lobster; oysters grilled swiftly under the lightest of gratins; red mullet cooked with garlic and tomatoes; whitebait; or a proper Iberico ham from near Salamanca made from the native breed of pig and allowed to munch freely on acorns. Where the fino worked less well was with creamier foods.

The old soleras - the dry Amontillado del Buque with its huge nutty character; the Apostoles, an oloroso with a fine, honeyed sweetness overlaying an excellent bite; and the rich, sweet oloroso called Matusalem - were not destined to be drunk with fish. My suspicion was they would be at their best with Spanish cheeses.

The dry Duque proved the most versatile here, especially with the ewe's milk, Manchego-style Guzman. The Duque was also good with the blue, Cabrales-style Picos cheese with its acid tang but, in general, the tasters prefered the fuller, sweeter style of the Apostoles with the blue cheese. It was also voted the best partner for the meaty, goat's milk Cabra del Tietar, and there were one or two people who found it went well with the Andalusian goat's milk Sierra de Zuheros with its hard, soapy flavour.

The bigger old solera wines proved too flavoursome for the lighter, creamier cheeses. A young Manchego was far better with Tio Pepe (in Spain, Manchego is often served as a tapa with a glass of fino). Nor should it have surprised anyone that the slightly salty, creamy Iberico cheese, made from ewe's milk, should have married so well with the fino - salt and fino seem suited ideally for one another.

Much more difficult was finding a partner for the super- sweet Matusalem. A series of desserts created by Bertram were not ideal. Someone swore by its effectiveness with Christmas pudding; but I felt it should be drunk on its own, perhaps with some dried figs or a few walnuts.

Expect to pay between Pounds 6.99-7.99 for a bottle of Tio Pepe and between Pounds 19.99 and Pounds 25 for any of the old solera wines (while stocks last.

Oddbins is selling both the Duque and Matusalem at the bargain price of Pounds 15.99). Stockists for the cheese include Harvey Nicholls (which also stocks Iberico ham), Harrods and Selfridges shops (all in London); Valvona and Crolla in Edinburgh; and the Fine Cheese Company in Bath.

ES Spain, EC P5812 Eating Places P2084 Wines, Brandy and Brandy Spirits TECH Standards P5812 P2084 The Financial Times London Page XI 849
How To Spend It: The Step Publication 930227FT Processed by FT 930227

Left, The Step, sweeping the US and going great guns in the UK, is just one of the new-age devices for pleasurable exercise. In the two and a half years since it was launched some 1 3/4 m have been sold.

While most of those have gone to clubs and other institutions there are now two versions suitable for those who have neither the time, the means nor the taste for communal exercising. The domestic versions mean that even the shyest and most inhibited can deal with their flab and their bulges in the privacy of their own homes, while those of us who are chronically busy and short of time can tone up without having to travel anywhere.

There are two versions, the Step XT, which is 30in long and has three height adjustments - 6, 8 and 10in - and costs Pounds 59.95. It is primarily used for cross-training - that is swimmers who also run or tennis players who want to get fitter but is an enjoyable way for the rest of us to improve our cardiovascular fitness. The Step 2 is the more usual domestic version; it is 27in long with 4, 6 and 8in height adjustments. It costs Pounds 44.95. Both are available from some 900 stores nationwide - in particular the sports departments of Harrods, Lillywhites and John Lewis Stores.

They come with an accompanying video which it is absolutely essential to follow, at least to begin with. How you stand, the body-line, how you move; it all matters and the video nannies the novice along in a most encouraging way. It aims to leave you bursting with renewed energy, not exhausted from effort. As the handsome blond instructor puts it: 'You should be able to talk at all times and a good test is whether you can sing along with the music.' All nice, jolly, enjoyable stuff.

Below is the new, laid-back, easy-does-it way to dress for exercising - not a shiny piece of Spandex in sight, colours are muted and low-key and the clothes could as easily be worn for jogging, walking, or any other sport that does not have too serious a dress code.

Her outfit is from Champion Sport, the great new name in sportswear. She is wearing a grey marl leotard and street-cred, bulky shoes.

He keeps her company with loose and easy, drop shoulder T-shirt, slouch socks, white towelling wrist bands and navy fleece tracksuit trousers, again by Champion Sports. For your nearest stockist, ring 071-636-8040.

GB United Kingdom, EC P5941 Sporting Goods and Bicycle Shops P3949 Sporting and Athletic Goods, NEC TECH Standards COSTS Product prices P5941 P3949 The Financial Times London Page X 458
Food and Drink: Squeeze yourself a taste of Sicily - Cookery Publication 930227FT Processed by FT 930227 By PHILIPPA DAVENPORT

I SHOULD be in Sicily this week attending a cookery course, sampling local wines, exploring the markets and rejoicing in a scented snowdrift of almond blossom. Alas, it was not to be, so I am comforting myself instead with the sunny richness of Sicilian oranges now flooding into British shops.

There is no shortage of them and prices are reasonable. Most pleasing of all, with their sticky, sweet, shockingly blood-stained juices, are the moros and taroccos. I squeeze half a dozen or so for our breakfast each day, a vibrant swig to zip us into action on grey English mornings, and I like to serve these glorious fruits at the end of rich meals for dessert.

For the quickest and most dramatic effect, simply cut each orange, peel and all, from top to bottom into eight wedges, remove the pips with the point of a knife and pile the crescent-moon slices on to a plate. Allow two oranges for every three people.

You might remember, as I do, oranges being served like this at half-time in inter-school games. In those days, we used to save the pieces of orange peel after we had sucked the juicy flesh from them. If you then carved the peel with a penknife and wore it like a boxer's gumshield, you revealed a gratifying flash of orange false teeth when you smiled.

I am not suggesting you indulge in such childish pranks at the dinner table. But the simple refreshment can be given a sassy finishing touch by serving the wedges on a plate lined with fresh bay leaves, and sprinkling them with a smattering of lightly-crushed fennel seeds. The combination of fennel and orange is lovely, and fennel is well known for its digestive properties.

Another aromatic alternative is to intersperse the wedges with sprigs of rosemary. The blue flowers and silvery green foliage make a splendid foil for the orange skin and ruby flesh of the fruit and, if the herb is bruised lightly, it will impart some of its fragrance to the citrus.

This simplest of all orange salads can be served on its own, or with little biscuits or sponge fingers also flavoured with fennel or rosemary. The fruit also can be used as an edible garnish for scoops of blood orange sorbet.

Sweet oranges are suited equally for savoury roles. The Sicilians are fond of combining them with fish, and I rate them highly with small birds such as quail.

POT ROAST QUAIL WITH CARAMELISED ORANGES (serves 4)

Pot-roasting quail in the juice of blood oranges keeps the little birds beautifully succulent. Extra fruit, grilled until slightly toffeed, provides an irresistible garnish.

Ingredients: 8 plump oven-ready quail; 5 thin-skinned blood oranges; juniper berries and bay leaves; 1 oz unsalted or clarified butter; a little olive oil.

Method: Marinate the quail for a few hours in the juice and zest of 3 oranges with 8 bruised juniper berries. Turn the birds occasionally.

Dry the quail, reserving the marinade which will have stained them a pale shade of beetroot. Skewer each one with a cocktail stick to tuck the legs neatly against the body - this is less fiddly than trussing.

Choose a flame-proof casserole just large enough to take the little birds in a single layer. Heat the butter in it and colour the quail lightly all over. Then, lay them breast down and pour on the marinade. Without waiting for the liquid to become hot, cover the casserole and pot-roast at 375-400F / 190-200C (gas mark 5-6) for 35 minutes.

Turn the birds breast up and cook for 10-15 minutes more. Then, serve straight away or turn the oven temperature right down: pot-roast quail can be 'held' for up to half an hour without spoiling.

Dish up the little birds in a nest of rice or other grain, or sit them on rounds of grilled or fried polenta. Offer their gravy (lightly seasoned and strained of spices and zest) in a sauce-boat, and serve with caramelised oranges on the side.

To make these last, cut the remaining 2 oranges, peel and all, into 8 wedges each. Thread on to damp wooden skewers, spacing the wedges well apart and interleaving them with bay. Brush with olive oil and grill for about 10 minutes until the fruit is hot, the peel is slightly toffeed and the bay leaves smell incense-sweet.

GB United Kingdom, EC P0174 Citrus Fruits RES Product use P0174 The Financial Times London Page X 764
How to Spend It: For healthy bodies - and healthier minds Publication 930227FT Processed by FT 930227

ONE OF the curious things about the health and beauty business is that most people - four out of five, according to Allied Dunbar's annual report on the physical state of the nation - believe that some form of exercise is good for them, but only half of them do anything about it. In other words, most take the classic advice when overcome with the urge to deal with flab - they sit down until they feel better. But slowly, more of us are realising that fitness is not only good for us, it can also be fun. It can be about enjoying yourself, meeting friends and colleagues in warm, congenial clubs, and about feeling better, too.

As David Giampaolo, who founded the Espree clubs and now distributes fitness equipment, puts it: 'These days the emphasis is much more on health than fitness. It's about exercising in a way that is physically, psychologically AND spiritually rewarding. The idea nowadays is to be energised, not exhausted.'

The days of the Jane Fonda mantra, No Pain, No Gain, are gone. High-impact aerobics, exercising till you drop, are out of vogue. In have come low-impact aerobics, stretch and step, yoga, flotation, inline skating, Tai Chi, dance - the key is to find something you actually enjoy - then there is a chance that you might stick with it.

Fitness is also big business. The health, youth and fitness business is predicted to be one of the five fastest growing commercial sectors in the next decade - but as in all successful businesses, it needs sharp footwork to keep ahead of the game.

With the emphasis on fun and (sign of the times) stress relief the fashionable way to hone limbs and tone up cardiovascular function is with such new age concepts as Step Training, Inline Skating, The Slide Trainer, water aerobics and personal trainers. Crucial, too, are the ancillary servies - aromatherapy, reflexology, massage, the holistic approach that all the best, most advanced clubs now offer.

David Giampaolo was probably the first, with Espree, to see that most 1980s-style British clubs lacked allure. They were spartan and functional; people came, worked out and went home. With Espree he made sure that a club was a nice place to be - comfortable, inviting, warm, with a restaurant serving decent food.

Nowadays many clubs are selling the new age message: that you need not suffer to be beautiful and well. The Riverside Club, some of the David Lloyd ones, the medium-market Metropolitan Clubs and lots of small health clubs up and down the UK are all now more inviting to visit than the spartan clubs of yesteryear.

The new Harbour Club at Watermead Lane, London SW6 (tel: 071-371-7700) is not due to open until March 22 but so far is making all the right noises. It describes itself as a multi-sports club with 14 tennis courts (10 indoors), a 4,000 sq ft gymnasium, a 25 metre pool, a creche, good parking and every sort of class from stretch and step, yoga and dance to flotation tank and a proper restaurant with a serious chef (ex-Halcyon Hotel).

There is a resaleable membership fee of Pounds 1,695 and the monthly full membership charge is Pounds 88. This lets you use all the facilities free except the indoor tennis courts at peak time for which there is a Pounds 10 an hour charge. There will also be off-peak membership of Pounds 55 per month and a joining fee of Pounds 430 for those who only use the club Monday to Friday from 6.30am to 6pm. Some 900 people have already signed up.

For those for whom those kind of sums are out of the question it is worth mentioning Jamie Addicoat's Fatbusters - wonderful name - classes. When I last looked at the fitness business Addicoat's Fatbusters was running some of the cheapest classes around, at Covent Garden's Jubilee Hall for Pounds 2.50 a class. Today prices have risen to just Pounds 4 a time. For that reasonable sum you get Jamie himself, shouting, strutting, urging you on to that (attainable) goal - the lean and trim body. Hours are for serious workaoholics - 7.30 am on Monday, Tuesday and Thursdays, 7.15 pm on Tuesdays and 1 pm on Sundays. Classes are held at the Jubilee Hall, 30, The Piazza, Covent Garden, London WC2. Tel: 071-836-4007 for details.

The ultimate luxury (or necessity, depending on your point of view), is the personal trainer. Puritanical Britons tend to feel this is the decadent way to fitness but in New York, where personal trainers are nearly as ubiquitous as personal analysts, they are seen as just another sensible use of hard-pressed time. Trainers come in every discipline and though Pounds 35 an hour (the average rate at which they come in London) may sound a lot, if you get two or three friends to join it is good value.

My personal preference at the moment is for yoga: muscle toning, increased suppleness and flexibility, not to mention a sense of renewed energy, are just some of the benefits that yoga addicts notice. As evidence of my devotion to my readers I proffer the name of my own much-valued yoga teacher, Lisbeth Russell, tel: 071-431-2668, for those in the London area who think yoga may be the thing for them. Otherwise the British Wheel of Yoga Central Office (tel: 0529-306851) has a list of trained teachers in the UK.

For other personal trainers - whether in low-impact aerobics, stretch and step, body-sculpting - ring Melanie Reigber at Lifeworks (tel: 081-520-7344) and she will put you in touch with teachers and classes in your area.

If you like keeping your physical inadequacies to yourself and just want to work out in privacy at home there is now a vast range of in-home equipment and supporting videos. The Step is currently much in vogue (see caption top right) but the hot coming thing (according to David Giampaolo) is The Slide Trainer, which should be in most sports shops in mid-March for Pounds 79.

Whereas most exercises work the front and back of the legs the Slide Trainer promises (ah, delicious prospect) to stretch and tone the abductors (the outside thigh muscles) and adductors (the inner ones). It also tones the medial and lateral muscles on the inside and outside of the knee. So there you have it - thinner thighs, stronger knees could be yours.

One last thought. The inescapable fact is that the toned body, the lithe shape, the inner tranquillity does not come from the odd hour in the gym or the couple of hours on the tennis court. It depends upon a whole way of life. It reflects what you eat, how you move, how you feel and how you exercise. Nothing is ever quite as simple as it seems . . .

GB United Kingdom, EC P3949 Sporting and Athletic Goods, NEC P7991 Physical Fitness Facilities CMMT Comment & Analysis P3949 P7991 The Financial Times London Page X 1185
How to Spend It: Relax, life is getting looser Publication 930227FT Processed by FT 930227

SO JUST what do you wear for all this new age exercise? Now that it is all meant to be fun not penance, clothes are following suit - they look less as if they are designed only for serious work-outs, and more like general casual-wear.

Hot news from the West Coast of the US (whence most such fashions come) is that body-hugging, muscle-revealing, neon-bright scraps of elasticated fabrics are on the way out. It's bye-bye to the tight, show-off, constricting garb that reveals every flabby inch and hello to loose, comfortable, relaxed, shorts or sweat pants.

Bye-bye, too, (and not a minute too soon as far as I am concerned) to the eyeball-searing colours and hello to nice, soft, understated grey, navy and black and white. All the up-to-the-minute sports chains

such as Cobra, Champion, Sports Locker and the shops at the smartest clubs are selling this new relaxed gear.

If you want a look that is wonderfully comfortable and yet has proper gym-cred then, according to Graham Haines of Sports Locker (17 Floral Street, London WC2 and 53 Pembridge Road, London W11), what you should go for, working from the top down, is a reverse-weave Champion sweat-shirt (Pounds 34.99, in lots of colours).

Underneath that you should don a loose Russell Athletic pocket T-shirt, then some cotton-lycra knee-length pants (Pounds 34.99, smartest in strongly-striped black and grey), and on your feet chunky cotton

socks by E G Smith (Pounds 10.99) which should be worn slouch-style - in other words, rumpled round the ankles.

These are clothes 'with no gender barrier,' according to Graham Haines. 'Some 80 per cent of our merchandise is made for men but 40 per cent of it is worn by women. These are clothes that you could wear to the gym, on the street, or relaxing at home.'

At Cobra, (mail order from 75 Great Eastern Street, London EC2, 071-613-1776) they report, too, that it is 'wear what you want time.' People are training in army trousers. Baggy light cotton training pants and baggy tops with loose necklines are all the rage. The tops are worn over baggy vests, the sleeves and trousers are rolled up.

Training shoes, it seems, are being swapped for training boots. Big belts and crop tops are optional extras. Lots of customers, though, wear the baggy look OVER a tight lycra outfit - those who have sweated for the body beautiful and having got it are not about to keep it entirely covered up.

What all this means, of course, for the rest of us still hoping to get there, is that now that we can trundle around in nice bulge-concealing gear there is

even less of an excuse for not taking those self-same bulges off to the gym . . .

GB United Kingdom, EC P5941 Sporting Goods and Bicycle Shops TECH Products COSTS Product prices P5941 The Financial Times London Page X 498
Fashion: Navy and white: a classic combination cruises on - Avril Groom welcomes fashion's equivalent of the first cuckoo of spring Publication 930227FT Processed by FT 930227 By AVRIL GROOM

IN THE shifting world of fashion it is comforting to find a rare constant. As surely as spring follows winter, once the doors have closed on the greyed and fingered remnants of the January sales the store-rails turn blue, intermixed with white and cream.

There are fashion followers who await the first delivery of navy and white as a sign of spring, much as keen birdwatchers record the first cuckoo. Once the clothes arrive, they are inevitably labelled 'the nautical look' so it is interesting that, in a year when the mood of fashion is totally removed from the crisp uniformity of that epithet, this colour combination is as strong as ever.

It is an easy look to market in the uncertain weather of early spring, translating as well into the classic shapes and lightweight wools that sell at that time as into the flimsy fabrics of high summer. But the appeal of it goes much deeper than a brass-buttoned blazer. Navy and white is fresh and optimistic after the heavy, dark shades of winter, and embodies the idea of travel in its widest form. The nautical connotation suggests journeying for pleasure to, or on, the sea, which even for the affluent used to be a summer activity rather than an all-year option.

It also appeals to the human penchant for nostalgia for it goes back a long way, to the original bloomered bathing-dress and the sailor-suits and dresses which children wore early this century and which design leader Gianni Versace has now exploited in the striped, sailor-collared shapes of his couture collection for this summer.

By the 1920s travel had become a fashionable end in itself for the monied and leisured, leading to a new genre of clothing, labelled first in America and later in Europe as cruisewear. It is to the heyday of staterooms and dinner at the captain's table that this year's navy and white harks back, to the time when the rich shuttled across the Atlantic with complete suites of Louis Vuitton flat-topped trunks in the hold of a liner.

Cruises now have a different image, requiring rather briefer and more colourful clothing. But as the novelist Robert Louis Stevenson wrote more than 100 years ago: 'Young and old, we are all on our last cruise,' and recreating some of that lost elegance in the contemporary wardrobe is seductively aspirational - even if we are only cruising to the office, a dinner date or, at best, a villa in Tuscany by charter flight with one holdall.

In the retro mish-mash of this spring's styles, inspired by the 1930s and 1940s as filtered by the 1970s, softness and lightness are the keywords. The graceful, fluted lines created by the lightest fabrics, whether bias- or generously-cut, are the gentlest and most flattering way to wear what may seem, after years of power tailoring, an alien way of dressing. Certainly it means giving up to some extent the comfort of more solid fabrics - so this could well be the spring of the thermal vest.

Keep in the mind the elegance of old-style cruisewear and the look will fall into place, from sporty casuals to dinner dress. There is no need to abandon a tailored navy jacket, especially if it has pretensions to the curvy, swashbuckling style favoured by designers Rifat Ozbek and Christian Lacroix, but swap metal buttons for plain covered ones and make sure anything you wear with it is meltingly fluid. A softly ruffled chiffon shirt and layered chiffon skirt is the combination seen most often on the catwalks.

In the same vein, well-cut classic cream or white trousers still look right but are no longer worn with a blazer - try a softly-wrapped jacket or loose silk shirt instead. If you are buying new trousers, choose a loose, soft shape, widening towards the ankle if you dare, in a fluid fabric - crepe is the season's big hit. The same fluidity applies to dresses, which need a swing in their long skirts, or at least a split to give a similar but sexier effect.

Accessories are important - go for large, soft-brimmed, face-framing hats rather than nautical caps, the new, rounded-looking, platform-soled shoes, and use jewellery sparingly in the form of long, simple bead ropes, plain but chunky bangles or Art Deco-inspired earrings.

But the final strength of this colour scheme is its universality. Some find it works better with white, others with cream, but there is hardly anyone it does not suit at all.

If you go for colour analysis you will learn that there are many shades of navy - picked out for you will be 'your' navy, the one that suits you best. Finding that exact shade in the shops will be another matter - but rest assured that some store, somewhere, has the navy wherewithal to give you the elegance of cruising times past.

GB United Kingdom, EC P233 Women's and Misses' Outerwear P5621 Women's Clothing Stores CMMT Comment & Analysis P233 P5621 The Financial Times London Page IX 867
Fashion: Breaking the secret dress code - The foibles and follies of fashion etiquette Publication 930227FT Processed by FT 930227 By BRENDA POLAN

THE STORY is claimed by most of London's great hotels but the maitre'd of the Dorchester's grill room swears he was there. It was a busy evening late in the 1960s and a glamorous couple approached the restaurant to claim their table. He was dressed impeccably in a dark suit with well-pressed trousers. So was she. Unfortunately, the prevailing dress code stipulated that trousers were not acceptable attire for women.

Politely, the maitre'd pointed this out. She argued. After all, her Yves Saint Laurent tunic-topped trouser suit was then the hottest thing in fashion. He insisted. Her escort began to look anxious, so the lady turned her back, unzipped her pants, stepped out of them and turned back, now apparently wearing a mini dress. The maitre'd gulped, then grinned and showed them to their table. He even checked her trousers into the cloakroom.

A skirt, it seems, is a skirt even if it merely skims the welt of your tights. Or is it? At around the same time, model Jean Shrimpton discovered that the stewards at Flemington racecourse in Melbourne did not think so. Even today, very short skirts are barred at the Henley rowing regatta. And there are still some places where women cannot wear trousers, including the royal enclosure during even the chilliest, windiest Ascot week.

Dress codes often appear irrational, the tool of an old guard fighting a rearguard action against the forces of progress, modernity, good sense and egalitarianism. The new, American-owned Regent Hotel on Marylebone Road has launched itself with a wordy, full-page advertisement which makes just that assumption. 'Several hotels in London,' it declares, under a photograph of a tail-coated concierge, 'are about a hundred years old. Trouble is, their staff behave roughly the same age.'

It announces that, at the Regent, you can wear what you like. The London Evening Standard took up the challenge with a semi-luminous turquoise, black and orange shell suit. It was met with faultless charm and total acceptance.

The reporter felt like an eyesore, though. And that, according to Lucinda Buxton, press officer for London's famous Savoy hotel - an establishment in the forefront of the 'proud to be stuffy' movement - is partly what dress codes are all about. 'If you know you are dressed right, it gives you confidence,' she says. 'It enables you to respond to the glamour of your surroundings - surroundings which a large number of people have worked very hard to make perfect.'

There are, of course, two sides to that coin. Those who know the rules and adhere to them feel secure. Those who do not are excluded, sometimes quite peremptorily.

All rules about clothing are designed to be exclusive. Once, when the social pecking order was of greater importance than it is now, they were enshrined in the law of the land. The sumptuary laws made certain that no ambitious member of the merchant or professional classes could deck themselves out in the fabrics, furs and coronets reserved for the aristocracy, so deceiving the unwary as to their station in life.

Formal academic dress still contains remnants of this status system but most dress codes are informal, implicit and subtle - and enforced just as rigorously. Watch any group of teenagers milling around on the pavement outside a popular club and you will see the pariah space isolating the ones who do not look right. Behold the doorkeeper's eyes as they slide over the non-conforming outsiders as if the space they occupy was empty.

The decision on what is appropriate wear tends to be a consensus one formed by the particular group. Those who flout that consensus are, quite rightly, perceived as subversive and escorted to the exit (or, in the commonest case, to the gentlemen's cloakroom where they will be offered a choice of polyester ties and old-fashioned dacron jackets).

'Women nowadays,' says Buxton, 'can get away with almost anything. Except maybe jeans or a shell suit. The strictest rules apply to men.' In most of London's 'stuffy' hotels - the Savoy, Claridges, the Dorchester or the Ritz - a tie is required only in the evening and in the restaurant, but a jacket is a must at all times except in the upper corridors.

And yet, it can often be a matter of discretion, as all the arbiters of dress codes concede eventually. If one of those utterly chic Milanese men approached the restaurant wearing an Armani jacket, well-pressed jeans, Gucci shoes and a tie-less soft white silk shirt buttoned to the neck, no one would dream of thrusting a soup-stained polyester tie at him. Dress codes do give way before stylishness, fashion, wit and confidence.

In 1965, the Savoy turned trouser-clad pop guru Cathy McGowan away hungry. But, in 1967, it reversed its policy and allowed Lady Whitmore, the Swedish-born wife of racing driver Sir John Whitmore, to eat her dinner unharassed and betrousered. After her, the deluge.

Wit and style does not always work, though. One of the Savoy grill's dearest memories is of the time the mime artist, Marcel Marceau, arrived on the threshold without a tie. On being told he could go no further, he mimed tying a Windsor knot in front of an imaginary mirror. The seated diners applauded rapturously. Marceau was, nevertheless, escorted to the gentlemen's cloakroom to choose his tie.

GB United Kingdom, EC P233 Women's and Misses' Outerwear P5621 Women's Clothing Stores P7011 Hotels and Motels P5812 Eating Places TECH Standards CMMT Comment & Analysis TECH Services P233 P5621 P7011 P5812 The Financial Times London Page IX 949
Minding Your Own Business: Baffled? DTI has an answer - Computing Publication 930227FT Processed by FT 930227 By DAVID CARTER

'THIS accounts package does not work] It can't even calculate VAT on my invoices properly.' The voice at the other end of the line was accusing; after all, only a few months ago I had recommended the package in question as a Best Buy in one of the Personal Computer magazines.

I asked the gentleman to send me a copy of his disks and some of the faulty invoices. The problem soon became clear. His business was wine retailing where prices are quoted inclusive of VAT. He wanted to invoice a VAT-inclusive gross price such as Pounds 3.99 and for the computer to automatically calculate net price and VAT. Unfortunately, accounts packages normally expect you to enter the VAT-exclusive net price and to calculate VAT and gross. Each method of calculation yields slightly different VAT amounts. He needed both, since some of his sales invoices were for wine in bond which is quoted at VAT-exclusive prices.

Now whether or not this Pounds 299 budget package should have offered both methods for calculating VAT is arguable. The important point is that the wine merchant, when he started looking for an accounts package, had no idea that his invoicing requirements were unusual and might present a problem. He thought he just had to go out and buy an accounts package which did invoicing.

When you buy a computer vague objectives such as 'I want it to do my invoicing,' or 'I want it to handle stock control' are not good enough, for at the nuts and bolts level at which computers operate there are endless permutations of invoicing or stock control and you have to know precisely which versions you need. Without a doubt, the key to buying a computer system that works is first to define in detail the tasks the computer will be required to carry out. Before looking at solutions, first spend some time defining the problem. This can save you hours of frustration and wasted time later on.

The more effort you put into setting down a detailed specification before you start looking at computers, the easier your search will be. The prospective buyer who starts armed with even a thorough 'spec' will have a clear view of what he is looking for, and this helps him keep his eye on the ball as he wades through all the jargon and technical irrelevancies with which the computer vendors will inevitably assail him.

In the computer industry this document is referred to as a 'specification of requirements' or 'system Specification'. Writing one is a skilled task normally performed by a 'systems analyst'. It requires experience both of business (in order to understand how the current manual system works) and also of computers (how a computer system could replace it). A systems analyst is the key person in any computer purchase since he or she is the only person involved who has an understanding of both areas. Such individuals are rare, and competent systems analysts tend to work for big companies or the more expensive dealers.

For the smaller company that wants to computerise, perhaps the best route is to have its specification of requirements written by a consultant under the DTI Enterprise Scheme.

The Enterprise Scheme applies to individuals, companies or partnerships in manufacturing or services employing fewer than 500 people. The majority of DTI projects are done for businesses with 20 employees or less. Under the Financial and Information Systems Initiative, you can employ a consultant to define your specification for you. The DTI will pay half, or in some cases two-thirds, of the cost. Minimum time for the project is five working days, maximum 15 days.

As a consultant, I invariably get my customers to apply for an FMIS subsidy under the Enterprise scheme. The FMIS Initiative is an important scheme which ought to be more widely publicised. The client is guaranteed a reasonable level of competence (all consultants are screened before they are allowed to go on the DTI register).

One disadvantage is that it concerns itself entirely with producing the system specification which, while essential, is simply a means to achieving an end, that is a working computer system. Make it clear to your consultant at the outset, that you do not just want a big report for your money; you expect the computer to be installed and working. For this a further five days subsidy is available for 'implementation guidance.'

The first step is to telephone your regional DTI branch for the brochure and an application form. But hurry] The DTI Enterprise scheme is scheduled to end in 1994.

DTI Greater London, call 071-627-7800. For other regions phone the DTI's free Innovation Enquiry line on 0800-44-2001.

David Carter is an consultant in small business computer systems, tel: 0727-812447.

GB United Kingdom, EC P357 Computer and Office Equipment P7372 Prepackaged Software TECH Products P357 P7372 The Financial Times London Page VIII 835
Minding Your Own Business: Insurer who entered a minefield - David Spark meets a former Lloyd's broker who now clears mines for a living Publication 930227FT Processed by FT 930227 By DAVID SPARK

IT IS quite a leap from years as a Lloyd's broker to heading a company clearing mines in the semi-desert of northern Somalia. But that is the leap Maurice Brackenreed Johnston has made and already it shows results.

Brackenreed Johnston lost his job in October 1989 when Jardine Insurance Brokers, where he was deputy chairman, was reorganised.

'I had no idea what to do,' he recalls. 'I was 54, with children at school. I knew I didn't want to work for anyone else again.'

Brackenreed Johnston heard that Sir David Stirling, founder of the Special Air Services, was worried about his businesses, one in security, the other fighting rural crime in Scotland. The businesses were beyond saving, says Brackenreed Johnston, but 'rural crime sounded fun'. He and Sir David formed Rimfire to combat poaching in Africa, but Sir David died from a stroke six weeks later.

Rimfire's first sniff of work came in the Middle East, when it pitched for a contract to train special forces in the United Arab Emirates. The timing was bad. 'We put our bid in on the day the Gulf War started and that was the end of it.'

Through the ill-fated UAE project, Brackenreed Johnston met a mine disposal expert, Mick Fellows, who soon had a chance to prove his worth.

Aris Grammaticas, a Rimfire shareholder based in Nairobi, reported that two German nurses had been injured by mines in northern Somalia. Both German Emergency Doctors and the French Medecins sans Frontieres were keen for the mines to be cleared. Could Rimfire help?

Northern Somalia has escaped the hunger besetting the south; but it was fought over for 15 years. The war between Somalia and Ethiopia left minefields along the frontier, and in the later civil war against President Barre, mines were sown indiscriminately: under shade trees, by water holes, in houses.

'The people working for me have never seen anything like it, anywhere in the world,' says Brackenreed Johnston.

He undertook the Somali contract, he says, out of arrogance and ignorance. He enlisted Fellows's help and did a survey. A professional clearing operation would cost hundreds of millions of pounds. He proposed instead to recruit British ex-service men to train and supervise local people.

Brackenreed Johnston went to see Abdul Rahman, president of the Somali National Movement. 'We like the British,' said the president. 'But if you train these local people you have to pay them.'

'But they'll be working for you,' said Brackenreed Johnston

'We haven't any money,' said Rahman.

Brackenreed Johnston went to the Overseas Development Administration in London. 'I'd never even heard of ODA before,' he recalls.

He went to US Aid in Washington, to the European Community and to the UN High Commission for Refugees in Geneva which was keen to move Somali refugees from Ethiopian camps. He won a contract worth Pounds 1.75m with UNHCR and from US Aid (Pounds 490,000), the European Community (Pounds 530,000), Medecins sans Frontieres backed by the Dutch government (Pounds 350,000) and the ODA (Pounds 400,000).

Rimfire usually has 12 red-overalled ex-navy and army engineers in Somalia, who can earn over Pounds 40,000 a year. They work two months on, one month off.' It's a pretty rotten and miserable job,' says Brackenreed Johnston.

They have trained 440 Somali pioneers who, wearing flakjackets and visored helmets, dig with spikes into the ground ahead of them for mines or for hand grenades, often with the pins missing. The ordnance came from Pakistan, Egypt, Britain, Russia, Czechoslovakia, Italy. It includes SAM missiles, 35ft long, leaking toxic fumes.

One mine is like a vacuum flask top. Another, like a pencil box, is attractive to children who make up many of the casualties. Brackenreed Johnston says that for every soldier hurt in combat by a mine, 30 civilians are hurt by mines later.

The initial idea was to clear the frontier mines so that refugees could go home. However, this simply put them at risk in mined villages, so the policy changed. Brackenreed Johnston says that to make the risk to life and limb acceptable will take five more years.

Hargeisa is 200 miles of bad, hazardous road away from the port Djibouti. Brackenreed Johnston has had to take money there himself, hitching a lift to Hargeisa on relief agency aircraft. Hiring lorries is costly. Rimfire drove its own vehicles to Hargeisa, only for them to be stolen or commandeered by armed locals.

The pioneers, employees of the local government, grumble that their allowances from Rimfire are small. Accidents raise the question of insurance, for which the aid agencies allocated no money. Two pioneers have been killed and 11 hurt in mine accidents and two Rimfire employees have had amputations after explosions. Casualties in shooting incidents have been higher: five dead and 17 injured. Two of the house staff working for Rimfire have been shot and killed.

Brackenreed Johnston says he finds the Somalis difficult to help. From their early teens many carry AK47s and take the drug qat, brought in by armed convoys from Ethiopia. 'The only effective businesses are the drugs trade and Rimfire. There is no work, and the only way to get money is by theft. We are in the middle of this.'

Rimfire, apart from its Somali work, has surveyed the minefields of northern Angola and is interested in clearing mines in the Falklands.

Brackenreed Johnston expects it to show a Pounds 100,000 profit on a Pounds 2.75m turnover in the year to May 1993. Rimfire made Pounds 35,000 last year and lost Pounds 100,000 the year before when it was starting up. Brackenreed Johnston has financed the business with an overdraft of Pounds 240,000 and with Pounds 140,000 cash put up by himself and two fellow shareholders in Spain and Kenya.

Rimfire International, 22 South Audley St, London W1Y 6ES. Tel: 071-499-9252.

Rimfire International GB United Kingdom, EC P1081 Metal Mining Services P8731 Commercial Physical Research COMP Company profile Johnston, B Former Deputy Chairman Jardine Insurance Broking Group P1081 P8731 The Financial Times London Page VIII 1038
Briefcase, Q&A: Allowance exceeded Publication 930227FT Processed by FT 930227

I AM A married woman with no earned income. A large part of my unearned income has been paid gross by virtue of me completing the relevant R85 forms. I now find I have exceeded my personal allowance for the present tax year by about Pounds 125. Am I liable for tax on this Pounds 125 or on all of my gross income?

You must, of course, tell each bank or building society that you are not, in fact, entitled to receive interest without deduction of tax (although you thought that you would be, when you signed the R85s). When your tax position comes to be sorted out, after the end of the tax year, you will only actually end up bearing tax (at 20 per cent) on the excess over your personal allowance.

Ask your tax office for the free pamphlet IR10 (A guide for people with savings); this is a new version of IR110 (with a new title), and supersedes pamphlets IR111 and IR112 as well.

No legal responsibility can be accepted by the Financial Times for the answers given in these columns. All inquiries will be answered by post as soon as possible.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page VII 226
Briefcase, Q&A: Time limit on account Publication 930227FT Processed by FT 930227

I HAVE moved house four times since settling in Scarborough 20 years ago and have used the same pleasant, normally-efficient solicitor each time. But at the end of last year he told me apologetically that, because of an oversight, we had not been charged for our last house purchase in October 1987. We have more or less decided to pay without too much argument but would like to know if there any time limit on presenting a bill for services rendered?

There is a time limit of six years from the date when the money first became due, after which the right to recover the money becomes statute-barred. As the fees will not have been due to the solicitor until the completion of your purchase, it would appear that he has realised his error just in time.

No legal responsibility can be accepted by the Financial Times for the answers given in these columns. All inquiries will be answered by post as soon as possible.

GB United Kingdom, EC P8111 Legal Services TECH Services COSTS Costs & Prices P8111 The Financial Times London Page VII 196
Briefcase, Q&A: Defining earnings Publication 930227FT Processed by FT 930227

I RECEIVE invalidity benefit. I have a wife who is self-employed. National Insurance directive 16A states that I can claim an extra Pounds 32 per week provided her earnings are less than Pounds 43 per week. She also has investment income. Does the rule really relate to earnings or to her total income?

The leaflet means what it says: 'earnings' does not include income from investments.

No legal responsibility can be accepted by the Financial Times for the answers given in these columns. All inquiries will be answered by post as soon as possible.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page VII 124
Briefcase, Q&A: Rental revenue Publication 930227FT Processed by FT 930227

I OWN AN apartment in France which is let for part of the year. Tax returns are prepared for me by an agency in France and I have received tax demands from Paris, usually two years delayed. This income has been declared to the British tax inspector. My UK accountant maintains I will have to pay UK tax on the rental income, and obtain a refund if and when the French tax demand exceeds the UK demand. Is this correct?

France has the prior right to tax your rental income (by virtue of article 5 of the France-UK double taxation convention) and the UK has to reduce its tax demands by the amount of the French tax, broadly speaking, under article 24(a) of the convention. It looks as though your accountant ought to have submitted repayment claims to your UK tax office each time you paid French tax.

The rules are outlined in a free pamphlet, IR6 (Double taxation relief), which is obtainable from most tax offices.

For the purpose of calculating the relief from UK tax to which you are entitled, each amount of French tax has to be translated to sterling at the rate of exchange for the day on which it was due for payment (regardless of when it was actually paid). This will be a quite different rate of exchange from that which was used to translate the relevant rental income, of course, so it is not simply a question of comparing the French tax rate with the rate of tax charged in the UK.

It is a pity that you did not say when the letting started, as that would have enabled us to give you a simpler answer; but your remark about the French tax demands being 'usually two years delayed' indicates it started some years ago.

The case V assessment for either the third UK tax year or the fourth presumably was based upon the same rent as the previous year's assessment (viz, the second or the third, as the case may be), so that your accountant will have to claim the special relief provided by section 804 of the Income and Corporation Taxes Act 1988 (or section 510 of the Income and Corporation Taxes Act 1970, if the year in question was 1987-88 or earlier).

If your accountant is concerned about having let time limits slip by, he might find comfort in section 806(2) of the Taxes Act 1988.

No legal responsibility can be accepted by the Financial Times for the answers given in these columns. All inquiries will be answered by post as soon as possible.

FR France, EC P65 Real Estate P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P65 P9311 The Financial Times London Page VII 468
Briefcase, Q&A: A man, a woman, and the law Publication 930227FT Processed by FT 930227

MY WOMAN friend and I wish to have a long-term relationship without making any legal commitment. We would pursue our separate careers from separate households but would leave open the long-term possibility of becoming a single household, with or without a formal marriage.

Can our public description of each other create an implied legal commitment? If we referred to ourselves as fiance(e)s, for example, would it be possible for one partner at a later date to argue that, legally, marriage had been implied, or even offered? Would it be advisable to draw up some legal agreement in order to secure the certainty that no legal commitment is in any way created accidentally?

While the use in public of a description such as you mention would not, of itself, give rise to any change in your legal status or liability towards each other, the use of the particular expression 'fiance(e)' might be relied-on at some future date as evidence to support a claim that there had been a contract to enter into marriage. It would be wiser to use some such term as 'partner,' which is not indicative of an agreement to marry.

A formal agreement which disavows expressly any intention to become married would help, but it would operate only from the date of the document and would not preclude an assertion that there had been a subsequent change of heart and an agreement to marry.

No legal responsibility can be accepted by the Financial Times for the answers given in these columns. All inquiries will be answered by post as soon as possible.

GB United Kingdom, EC P8811 Private Households CMMT Comment & Analysis P8811 The Financial Times London Page VII 296
Finance and the Family: Better to be safe than sorry - Scheherazade Daneshkhu searches out the best places to store valuables Publication 930227FT Processed by FT 930227 By SCHEHERAZADE DANESHKHU

JEWELLERY, cash and cocaine were among an estimated Pounds 40m worth of loot hauled away by thieves who broke into a London safe deposit centre in 1987. The robbery - masterminded by an Italian, Valerio Viccei, who went on to write a book about it - made a mockery of safety deposit centres. But such crimes are few and far between and, since insurance premiums on items such as jewellery can be prohibitively high, they are likely to be far safer kept in a bank than at home.

Most of the high street banks provide safe custody services at their main branches but conditions and charges vary. Of the banks quoted, only Midland does not charge an 'access' fee - the amount you have to pay every time you go to inspect your box. Banks will not charge for keeping documents obtained through their services, such as a will drawn up by them or certificates for shares bought through them.

You will be required to provide your own box and key but the banks do not want to know what is being kept in it. Insurance is left to the discretion of the depositor - most insurance companies will reduce their rates if you tell them that the items are being held in a bank.

The services offered by Lloyds, Midland and Royal Bank of Scotland are for their own customers only. Rates given by Bank of Scotland, Midland and Lloyds include VAT.

Sealed envelopes. The annual charge for holding individual certificates ranges from Pounds 5 a certificate to Pounds 15 but it is much cheaper to keep valuable documents in one envelope. Charges for an envelope, generally no bigger than A4 size, are Pounds 5 a year at National Westminster and Royal Bank of Scotland.

The charges at Barclays are Pounds 5 a quarter, and Pounds 10 a year at Lloyds and TSB. Bank of Scotland charges Pounds 2 half-yearly. Midland's charge is Pounds 9.98 but there are no charges for access.

Small boxes or parcels. The cost is Pounds 20 a box per year at Lloyds and NatWest and Pounds 5 a quarter at Barclays. The minimum charge at Royal Bank of Scotland is Pounds 15 a year and Pounds 8 per half-year at Bank of Scotland. Midland's fee is Pounds 19.97 a year.

Larger boxes or parcels. The charge is Pounds 50 a year at Lloyds and Pounds 10 a quarter at Barclays. NatWest is cheaper, with an annual fee of Pounds 30.

Bank of Scotland will charge a half-yearly fee of either Pounds 16 or Pounds 32, depending on the size of the box. The annual cost at Midland is Pounds 27.02 for a medium size box and Pounds 39.95 for larger boxes.

Access. Only at the Midland will you escape fees for inspecting your box or envelope. At Royal Bank of Scotland, the charge is Pounds 3 a visit to box or sealed envelope, to a maximum of Pounds 12 for any visit. Bank of Scotland charges Pounds 2 for an inspection, and the fee at NatWest and Lloyds is Pounds 5. Barclays says access charges are at the manager's discretion.

If you want more secure facilities, the Midland is able to hold items in safety deposit boxes which are built into reinforced concrete strongrooms at some of its largest branches in London, Manchester and other big cities. You need to be a customer or to have a letter of introduction from another bank.

There are two locks on the box; the key to one is kept by the bank and the other by the customer. But the service does not come cheap. Charges are Pounds 67.85 a year for the smallest size of about 2in x 7in x 20in, up to Pounds 2,972.75 for what amounts to a small room (7ft x 4ft 6in x 6ft 6in).

The Chancery Lane Safe Deposit Co., which owns the London Silver Vaults, boasts a pedigree dating back to 1882. Access to the vaults is past custodians in cubicles, through a series of steel doors and electronic security devices, and with the help of a password.

Customers have to sign a form declaring they are not storing 'noxious substances' and are given the 'only key in the world' to their box.

There are 40 different sizes of safe, with annual rental costs ranging from Pounds 42.27 to Pounds 570.30. There are no inspection charges.

GB United Kingdom, EC P6099 Functions Related to Deposit Banking P602 Commercial Banks TECH Safety P6099 P602 The Financial Times London Page VII 788
Correction Publication 930227FT Processed by FT 930227

THERE WAS a typographical error in Caroline Garnham's article in the A-Z (T for Trusts) published today. The table headed 'Trust for children or grandchildren over 18' should read 'Trust for children over 18 or grandchildren.'

GB United Kingdom, EC P6282 Investment Advice P672 Investment Offices CMMT Comment & Analysis P6282 P672 The Financial Times London Page VI 64
Finance and the Family: Unloved Electra battles to overcome suspicions - Philip Coggan on the performance of a very different financial animal / Investment Trusts Publication 930227FT Processed by FT 930227 By PHILIP COGGAN

ELECTRA is a completely different animal from the other trusts profiled so far in this series: one statistic makes that clear. Shares in some of the popular trusts, such as TR City of London, stand close to asset value, or at a premium; Electra shares are trading at a 34 per cent discount.

What makes Electra shares so apparently unpopular is that the trust specialises in unquoted investments. There have been so many disasters in trusts of this kind - at Drayton Consolidated and Ensign, for example - that investors have become naturally suspicious.

As the graph shows, recent performance has been poor. Net asset value at the end of the trust's last financial year was still below its level at the end of September 1987, and was nearly 20 per cent below its peak at end September 1989. In the wake of that decline and the widening of the discount, the shares have underperformed the All-Share substantially early in the 1990s.

The recession has tended to be the problem. Unquoted companies often are small and concentrated on a particular sector, so they are vulnerable to a downturn in their area. Electra also had investments in many major management buyouts; such companies normally have high borrowings and thus suffered heavily from high interest rates when Britain was in the exchange rate mechanism. And liquidity is a problem; it is difficult to sell a stake in an unquoted company in the middle of a recession.

All these problems have, inevitably, led to questions about the valuation of Electra's stocks. There is normally an element of subjectivity in valuing an unquoted portfolio; and investors have been alarmed by the drastic write-downs of assets announced by other trusts in the sector. What the wide discount on Electra's shares seems to indicate is that the market fears that its valuations might be over-optimistic.

The trust argues that it follows the guidelines set down by the British Venture Capital Association in this field; in its annual report, it cites its 'prudent and consistent view' on valuation. Over a third of its unquoted holdings are valued with reference to market prices, it says.

Electra grew out of the old Cable & Wireless company, as a vehicle for holding the group's overseas licences. When C&W was nationalised in 1948, Electra was left as a separate investment company, eventually becoming part of the empire of Globe, once the UK's largest investment trust.

The trust is managed by Electra Kingsway, which also runs a large private partnership fund investing in development stocks. The investment trust takes part in the same deals as the private fund.

Electra is an international trust; it has 34 per cent of its assets in the US, where the recovery seems to have started; and if recovery also comes to the UK, small companies on both sides of the Atlantic will benefit. Lower interest rates have already eased the problems of the more heavily-borrowed companies.

Electra is by far the largest investment trust in the development capital sector, with a market capitalisation of around Pounds 370m. Investments are made by five teams of executives (three in the UK, one in the US and one in France) who work for managing director Hugh Mumford; there is a further team of ex-industrialists which monitors the companies in the portfolio.

Because of its concentration in unquoted stocks, private investors may not have heard of many of the trust's 10 largest holdings. At September 30, they were Nimex Resources, Parker Pen, Unipart, German government bonds, Head Insurance, Ryan Group, RJR Associates, Electra Kingsway Managers, Jarvis Hotels, and Orthofix International Investments.

The Parker Pen investment shows how one success can make up for many disappointments in the venture capital area. After selling off various tranches of its holding, the effective original cost of Electra's investment in Parker is just Pounds 100,000; the value of its holding (dependent on a bid from Gillette) at end-September was Pounds 23.6m.

The question for investors is whether the position of Electra represents a buying opportunity. There are some bullish arguments. For a start, Electra has proved the case for investing in unquoted stocks over the long term; its net asset value has more than trebled since 1982 and it has increased its dividend every year since it was listed in 1976. Furthermore, around 30 per cent of Electra's portfolio is in quoted stocks, which help provide the income to pay the dividend.

In another investment trust, such stocks might be valued on a discount of, say, 10 per cent. That means the effective discount on the unquoted shares is even greater than 34 per cent, and allows for a lot of bad news. But Lewis Aaron, analyst at SG Warburg Securities, points out that unquoted stocks tend to be valued on a historic basis. Accordingly, when Electra next values its holdings, it will still feel the impact of the recession. It could be some time, therefore, before the trust's net asset value moves sharply upwards. And while the trust might be good value for the private investor in the long term, Aaron says, there is not much prospect for growth over the next six to nine months.

Key facts

In mid-December, when the trust last valued its assets officially, the net assets per share were 297p. Its share price on Friday morning was 214p; and County NatWest estimates the discount at 34.9 per cent.

The market capitalisation on Friday morning was Pounds 370m and the yield was 4.2 per cent.

Board

Electra has a large board, with four executive and seven non-executive directors. The executives are Michael Stoddart (chairman), Mumford, Clive Clague and David Osborne; the non-executives include Tom King, the former defence secretary, Lord Vinson, Sir Christopher Wates and Michael Pickard, chairman of the London Docklands Development Corporation.

Savings scheme details

The minimum monthly investment into the savings scheme is Pounds 25, or Pounds 250 for a lump sum. Maximum dealing charges are 0.25 per cent. Because of its concentration in unquoted stocks, Electra does not qualify for Pep status.

Electra Investment Trust GB United Kingdom, EC P672 Investment Offices COMP Company News CMMT Comment & Analysis P672 The Financial Times London Page VI 1065
Finance and the Family: A wealth of reading - Bernice Cohen picks her best books for DIY investment Publication 930227FT Processed by FT 930227 By BERNICE COHEN

A CRUCIAL element in being a Dimi (do-it-myself investor), running a share portfolio based mainly on my own research efforts, is deciding on my underlying philosophy.

Building a library of books on systems developed by successful investors was one of six practical steps for improving my investment skills. But reading books on other people's philosophy was a good route for discovering what type of investor I am (although during this learning process it was hard to stick to Jim Slater's excellent advice of finding and adopting a good system and then working with it to improve results).

Some of my costliest mistakes arose from trying to copy someone's method without realising it conflicted with my own attitudes. To minimise this mismatch, I make notes on key points in these how-to-invest books. The summaries then form a synopsis of my personal approach to investing.

Every library needs at least one basic reference guide to cope with the jargon and other technicalities of investment. My choice is the Investors Chronicle Beginners' Guide to Investment by Bernard Gray (Business Books Limited, 1991). It is up to date and comprehensive enough to answer almost every relevant question.

I found Jack Schwager's Market Wizards (Harper & Row, 1989) an ideal choice for an introduction to the many different investment approaches. His interviews with 17 top traders contain plenty of philosophical worth. I was attracted instantly to some and wanted more information: in particular, about investing along the lines suggested in the William O'Neil interview.

Later, I discovered his book, How to Make Money in Stocks (McGraw-Hill, 1991), at Parks, the London specialist finance and accounting bookseller. (It also has shops in Manchester, Birmingham and Glasgow and a catalogue service). O'Neil is a growth investor par excellence and this book still ranks as the one that has influenced me the most.

Another instructive read is John Train's The Midas Touch (Harper & Row, 1987). It discusses the methods of Warren Buffett, one of the most successful value investors of our time. Buffett's grasp of company fundamentals is legendary: he buys undervalued situations and waits for the market to catch up.

I do not trust my abilities enough to identify such situations (and lack funds to exploit them, anyway). But this has allowed me to concentrate on investment philosophies that suit my temperament. This has given me the confidence to be a Dimi, relying totally on my own research and analysis efforts to find good growth stocks.

Peter Lynch is another exceptional value investor: for many years, he managed Fidelity's highly successful Magellan fund. His book, One Up On Wall Street (Simon & Schuster, 1989), is subtitled, 'How to use what you already know to make money in the market.'

He suggests that anyone can ferret out good investment opportunities ahead of the professionals by observing local businesses and industries. But my greatest benefit was derived from his analysis of how to pick winners, and his simple explanations of the crucial numbers that make up the basics for stock selection.

His attitude to research is exemplary, and he writes: 'Investing without research is like playing stud poker and never looking at the cards.'

In One Up On Wall Street, Peter Lynch introduces the term 'diworsification' to describe companies that stray from their core businesses in search of extra profits - often a disastrous move. I have adopted this word to describe my difficulties in holding a large, diversified portfolio.

I have found that nurturing a few growth stocks with giant potentials (which I call KPPs - King Penguin Potentials) has been more successful than tending a larger clutch which, by the law of averages, must contain some mediocrities. It is difficult to discover six really good growth situations, so attempting to find 10 is my idea of diworsification.

Stan Weinstein is a growth investor whose book, Secrets for Profiting in Bull and Bear Markets (Dow Jones-Irwin, 1988), deals exclusively with American stocks. I have learnt a great deal from his chartist approach. US investors get more company and chart information than those in the UK, but the book is packed with material that applies anywhere, to any stock market. He also gives detailed guidance on indicators for spotting the start of a major bear or bull market.

The Zulu Principle (Orion, 1992) by another growth investor, Jim Slater, gives good tips on picking growth shares, but I found the chapter on recovery situations to be most interesting, especially since many such opportunities should arise this year if the economy emerges from recession.

Finally, Blood in the Streets (1988) and The Great Reckoning (1992) by James Davidson and Lord William Rees-Mogg (Sidgwick and Jackson) give excellent overviews of the political and economic forces which increasingly affect investment strategies.

Although some financial books have a reputation for being hard to read and expensive, I enjoy building my library and feel it amply repays the time involved.

GB United Kingdom, EC P2731 Book Publishing P672 Investment Offices CMMT Comment & Analysis P2731 P672 The Financial Times London Page VI 865
Finance and the Family: Insurance salesmen get a blast - Complaints to ombudsman soar over life policy deals Publication 930227FT Processed by FT 930227 By SCHEHERAZADE DANESHKHU

THE INSURANCE industry's referee, Dr Julian Farrand, this week blew the whistle on some of the selling practices of salesmen. The annual report of the insurance ombudsman showed total complaints had risen 29 per cent from the year before to 5,576 in 1992. But life insurance cases accounted for a much steeper increase of 41 per cent - more than one-third of his workload.

The ombudsman deals with both general and life insurance and resolves disputes with customers who are unhappy with the way a complaint has been handled by their insurance company.

Farrand attributes the rise in life assurance cases to the increasing complexity of policies and the failure of some salesmen to explain them fully. He said it was 'disconcerting' that so many fact-finds - the forms filled in by salesmen or advisers detailing the financial circumstances of a client - were not completed fully.

'It suggests that, in the push to produce a sale, important requirements and needs may be overlooked and an unsuitable product selected by the salesman,' he added.

A mother and son were sold two life policies and told they would make a reasonable profit after five years. Since these were whole-of-life plans, they got a shock when they came to surrender them five years later. The agent for the company said she had stressed their long-term nature by drawing a graph for the clients showing their growth over 45 years. But the line showed an increase in returns from the beginning of the policy.

Finding for the clients, Farrand noted: 'With the aid of a magnifying glass, one might estimate a return after five years of around 30 per cent.'

In another case a young woman had been sold a large amount of life cover. The section on the fact-find asking which aspects of insurance were important to her was left blank.

'When reviewing her complaint,' Farrand said, 'it was difficult to understand why that amount of life cover had been required. After some investigation, the probable answer became clear - that over-selling was involved.'

Sales of inappropriate policies are highlighted by the fact that while the insurance company's decision was revised in only 31.5 per cent of all cases investigated by the ombudsman, this proportion rose to 42 per cent when it came to life insurance. Farrand is, therefore, suggesting a 'reverse fact-find' which salesmen would have to complete before the contract was signed. He suggests the customer should ask these questions: Whose agent are you?

How much commission do you get?

What charges will be made for managing my money?

Will I do better than with the building society?

Could I lose money?

How soon will the surrender value equal the premiums paid?

Why are you advising me to buy that particular policy/investment?

Allied Dunbar claimed this week that asking a salesman to disclose how much commission he got - a cost which is, ultimately, borne by the customer - was 'irrelevant information. It is useless.' The Office of Fair Trading has, however, called repeatedly for commission disclosure at a time when the whole financial services industry is under pressure to introduce higher standards of investor protection.

The Prudential said it favoured customers being told the overall expense of the contract and not just the commission. 'An insurance salesman could be on full salary or just commission or a combination of the two,' said the Pru. 'So, a customer who simply asks the rate of commission might be misled by the answer.'

Another area which preoccupied the ombudsman was home income plans. In the 1980s, many elderly people wanting to take income out of their home were persuaded to take out a mortgage and invest the money in an equity-linked bond.

This was supposed to cover the mortgage payments and give them an income. But poor stock market performance and rising interest rates meant higher mortgage payments and investment losses, pushing many into debt.

In cases where the risks of the investment were not explained properly, Farrand said he would find in favour of the customer. The guidelines he uses for compensation are much better than those employed by the Investors Compensation Scheme, from which home income victims have to claim if the company or independent financial adviser selling them the policy is no longer in business.

Last week, the High Court ruled that the ICS was not acting 'irrationally' in refusing to award compensation for distress over home income plans, or for money spent by a victim in the belief that this was profit, not capital.

By contrast, Farrand said he expected victims to be returned to the same financial position they had been in before the scheme.

He is also prepared to make awards for distress: one couple was given Pounds 3,000 after one of them had a heart attack. In some cases, he will also oblige the insurance company to pay the victim for the costs of taking professional advice. Pressure is, therefore, expected to increase for compensation arrangements for home income plan victims to be equalised within the industry.

The ombudsman awarded a total of Pounds 4.5m last year, with the highest amount being Pounds 120,000 in a case about building insurance. He said he was disappointed that the industry 'suffers from some people's apparent inability to recognise that a fraud against it is a fraud against the premium-paying population at large.'

Of the general insurance cases, one involved a claim where the insurer refused to cover accidental damage for a Nintendo Gameboy, saying it was not a computer as specified under the policy. But, after Farrand consulted the Oxford dictionary, the company agreed to pay out.

The Insurance Ombudsman, City Gate One, 135 Park St, London SE1 9EA.

GB United Kingdom, EC P6311 Life Insurance P6411 Insurance Agents, Brokers, and Service P9651 Regulation of Miscellaneous Commercial Sectors TECH Standards TECH Services CMMT Comment & Analysis P6311 P6411 P9651 The Financial Times London Page V 1014
Finance and the Family: Directors' transactions Publication 930227FT Processed by FT 930227 By ANGUS MACDONALD, Directus Ltd

ONE OF the outstanding share performers of the past two years has been Electronic Data Processing. Like some of the other stars of the industry, it showed a big increase in its price even when the market was in the doldrums. From the start of 1991, EDP's share price raced ahead, from 70p to around 535p now. Chief executive Richard Jowitt has sold 19,160 shares and fellow-director Philip Smith 15,000 - both at 500p.

Over the past three months, shares in Leslie Wise, the textile company, have outperformed the market by 15 per cent in the run-up to final results, announced last week. Profits fell marginally but earnings were maintained. Stuart Leiton sold 300,000 shares at 68p on the same day results were announced.

Haynes Publishing, known best for books and manuals on cars, barely broke even in 1991 but analysts expect pre-tax profits of Pounds 3m-plus for the year to end-May. Chief executive Steven Pearce has sold his entire holding, of 10,989 shares, at 332p.

------------------------------------------------------------------- DIRECTORS' SHARE TRANSACTIONS IN THEIR OWN COMPANIES (LISTED & USM) ------------------------------------------------------------------- No of Company Sector Shares Value directors ------------------------------------------------------------------- SALES ------------------------------------------------------------------- Airsrpung Furniture Misc 10,000 46 1 Boot (Henry) & Sons C&C 8,000 20 1 Cookson Group OthI 25,000 49 1 Denman's Electrical Elcs 30,407 90 1 Elect Data Processg Elns 34,160 171 2 Filofax Pack 78,000 63 1 Greenalls Group Brew 3,200 13 1 Haynes Publishing Med 10,989 36 1 Henderson Admin OthF 5,000 47 1 Huntleigh Techlgy Hlth 2,000 17 1 Leslie Wise Text 300,000 204 1 Whitbread Brew 25,000 119 1* ------------------------------------------------------------------- PURCHASES ------------------------------------------------------------------- AAH Holdings Hlth 2,000 10 1 Acatos & Hutcheson FdMa 10,000 21 1 Anglo Irish Bank Bank 90,000 29 1 Barbour Index BuSe 6,000 16 1 Capital Gearing Tst n/a 5,000 20 1 Citysite Est CULS Prop 150,000 30 1 CRT Group BuSe 53,000 50 1 Filofax Pack 19,000 15 3 Hopkinsons Holdings EngG 260,000 83 2 Thailand Intl ADRs n/a 10,000 Dollars 128 1 Ticketing Group H&L 2,500,000 41 1 Waterglade Intl Hld Prop 600,000 24 3 ------------------------------------------------------------------- Value expressed in pounds 000s. Companies must notify the Stock Exchange within 5 working days of a share transaction by a director. This list contains all transactions, including the exercise of options (*) if 100% subsequently sold, with a value over pounds 10,000. Information released by the Stock Exchange 15-19 February 1993. ------------------------------------------------------------------- Source: Directus Ltd, Edinburgh -------------------------------------------------------------------

GB United Kingdom, EC P99 Nonclassifiable Establishments COMP Buy-in COMP Buy-out P99 The Financial Times London Page V 435
Finance and the Family: Pep firm folds Publication 930227FT Processed by FT 930227 By PAUL NUKI

THE CLOSURE 10 days ago of a Winchester-based unit trust manager, Wessex Asset Management - known best as the inventor of the Pep mortgage: a simple but highly cost-efficient product - highlights both the good and not so good aspects of the regulatory system for financial services.

IMRO, the companies' regulator, detected financial strains within WAM in December. With the co-operation of its management, IMRO and other regulators moved to secure investors' funds before WAM's troubles could come to a head.

These assets - some Pounds 500,000 held in a single unit trust called the Wessex UK Growth trust - are safe in the hands of WAM's trustee, the Royal Bank of Scotland, and a new manager - possibly Cannon Fund Managers - is expected to be appointed soon. Despite all this, the affair still has serious negative implications for investor protection.

Terry Moran, WAM's managing director, blames the company's commercial demise on the system's failure to inform the public of the true cost of competing products and, in particular, its apparent inability to make prospective investors aware of the influence commission payments have on advisers.

He said: 'It is a fact of life that what is in the best interests of the consumer is not always in the best interests of the salesman. Once people are finally made aware of the commission and charges endowments attract, then Peps will take off.' He added: 'It's sad, but we (WAM) were five to 10 years too early.'

Despite receiving hefty front-end commissions, advisers maintain that traditional endowments are safer than unit trust-based Peps because bonuses cannot be taken back once declared and policy-holders do not, therefore, run the risk of a stock market crash wiping out their savings.

But the number of traditional endowment policies sold is declining and, even where they are recommended, more than 50 per cent of the total estimated return is likely to be paid in a final 'terminal' bonus which is not guaranteed and is equally vulnerable to market adjustment.

For further information about WAM, contact Graham Williams at IMRO (tel. 071-628 6022) or John Crichton, Royal Bank of Scotland (071-615 2871).

Wessex Asset Management GB United Kingdom, EC P672 Investment Offices COMP Company News FIN Company Finance P672 The Financial Times London Page V 395
Finance and the Family: We'll be worse off with the Budget - Well, that's what one accountant thinks. Others differ Publication 930227FT Processed by FT 930227 By SCHEHERAZADE DANESHKHU

WITH THE first of two Budgets this year just over two weeks away, some of the large accountancy firms are predicting measures which the chancellor of the exchequer, Norman Lamont, might announce on March 16. In most cases, there will be few precautionary measures individuals can take even if the forecasts turn out to be right. If value-added tax were to be introduced on books and children's clothes, for instance, stocking up on these in advance has its limits.

Other measures may have more practical consequences. One prediction is that tax-exempt special savings accounts (Tessas) may be abolished - an incentive, if ever there was one, to get every member of the family to open one, even with only a small deposit.

'Most of us will be worse off than before,' says Peter Wyman, tax partner at Coopers & Lybrand. 'The question is, by how much and in which areas.' But since Lamont has a difficult task to bolster confidence and stimulate the economy while funding a deficit, there are many who expect the first Budget to be cautious and the second to contain more radical measures. So, what may we expect?

Personal taxes. Both Price Waterhouse and Ernst & Young believe Lamont will extend the 20 per cent income tax band, which he introduced in the last Budget, on the first Pounds 2,000 of taxable income. E&Y suggests it could replace the 25 per cent basic-rate tax band through its extension to the first Pounds 10,000 of taxable income. To maintain tax revenue, E&Y thinks Lamont could convert the remainder of the 25 per cent band to 30 per cent and alter the 40 per cent threshold.

For Coopers & Lybrand and KPMG Peat Marwick, however, the most likely outcome is that, like last year, the thresholds will not be increased in line with inflation. By making no change, the Treasury would get an extra Pounds 1bn in revenue.

Other personal taxes. Coopers believes that inheritance tax and capital gains tax will both be increased with inflation and that there is a chance the threshold on IHT could be raised to as much as Pounds 175,000. KPMG says there are rumours that CGT might be rebased to 1992 which would, in some cases, have the effect of delaying accrued losses.

Personal allowances. Coopers thinks that Lamont is likely to allow personal allowances to rise with inflation, but E&Y predicts no indexation for allowances. Price Waterhouse thinks the married couples' allowance will be left unchanged at Pounds 1,720.

Value-added tax. Since every percentage point increase in the standard rate of VAT means the Treasury would raise Pounds 2bn, it is an obvious target for the chancellor. Although an increase in the standard rate from 17.5 to 18.5 - or even 20 - per cent is possible, E&Y thinks that such an increase is more likely to come in the second Budget.

Price Waterhouse, Touche Ross and Coopers think that a new, reduced rate of possibly 5 per cent could be introduced on items hitherto exempt - such as books, newspapers and children's clothes.

National Insurance contributions. Price Waterhouse says: 'The yield from this hidden tax, which is charged on both employers and employees, is so high that the government can be expected to continue its policy of quietly increasing the amount it raises while deflecting public attention onto income tax reduction.' PW and E&Y believe the chancellor could decide further moves to integrate NIC with income tax, while E&Y thinks employers' NIC could be extended to taxable benefits. Touche Ross wonders if Lamont will be tempted to remove the earnings cap for the self-employed, who enjoy more generous treatment than others for NIC purposes.

Savings and personal investment. Touche Ross does not expect major changes to personal equity plans and Tessas but E&Y thinks the latter could be axed. PW thinks Lamont could allow the inclusion of gilts in Peps to encourage people to buy more of them. While there is no CGT on gilts, they are liable to income tax - but anything in a Pep is exempt from either taxes.

The business expansion scheme will be extinguished at the end of December, but Touche Ross and E&Y think the chancellor could announce an end to 'loan back' schemes - which allow an exit from the scheme after six months - for the rest of the year.

Cars. When Lamont abolished car tax last year, he warned that he would take other measures to recoup the loss. A steep increase in petrol duty is, therefore, expected by all. KPMG and Touche Ross think new scale rates for company cars may also be introduced, following the proposal last July by the Inland Revenue for basing taxation of company car benefits on the cost of the vehicle rather than engine size.

Other possible areas for action include reforming the taxation of trusts and introducing an earnings cap for retirement annuity premiums, to bring them into line with personal pension plans. There is a possibility that the lump sum payable on maturity could be taxed on new plans. Lamont could also announce the gradual phasing-out of mortgage interest tax relief, although the delicate state of the housing market might inhibit him from doing so in the first Budget.

Finally, the Revenue's new tax return form, which will be sent out in April, is expected to herald the beginning of 'self-assessment' where individuals will estimate their own liability - although the Revenue will be able to challenge the result.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page IV 965
Finance and the Family: The Week Ahead Publication 930227FT Processed by FT 930227

WILLIAMS Holdings, the industrial conglomerate, is expected to show a 5 per cent fall in pre-tax profits, from Pounds 168m to Pounds 160m, when it announces full-year results on Thursday. The company's exposure to d-i-y and aerospace markets are behind the likely slip in earnings per share to 20.1p (22.8p). The dividend is expected to be maintained.

Another round of write-downs on property and the Channel Tunnel contract is thought to have kept BICC's pre-tax profit flat at about Pounds 80m last year. It reports on Wednesday.

Two more composite insurance companies, General Accident and Guardian Royal Exchange, are expected to report sharply-reduced losses next week. Rising premium rates and milder weather are mainly responsible for the improvement. GA is expected to report a loss of between Pounds 20m and Pounds 30m on Tuesday, compared with a deficit of Pounds 171.6m in 1991. On Wednesday, GRE could also report losses of between Pounds 20m and Pounds 40m, against losses of Pounds 209.7m in 1991.

Fisons, the drugs and scientific instrument group, reports its full-year results on Tuesday. Analysts are unsure about the net impact of disposals during the past 12 months, which must now be carried above the line to conform to the new FRS3 accounting standard. Lehman Brothers estimates the underlying business will report profits down from Pounds 190.5m last year to about Pounds 105m. This represents a 50 per cent improvement during the second half of the year.

The 1992 results for Barclays will be announced on Thursday. These will be preceded on Tuesday by Abbey National, and on Wednesday by Midland. Barclays is expected to make a pre-tax loss of about Pounds 100m, and a retained loss of Pounds 500-Pounds 600m after maintaining the final dividend. But BZW is predicting a cut in the dividend.

Abbey National will make pre-tax profits of about Pounds 570m, and retained profits of about Pounds 200m. Its provisions for possible bad debts are expected to double to about Pounds 320m, reflecting the depressed UK housing market. Midland is expected to show the effect of a significant lightening of its provisions for possible bad debts to about Pounds 700m for the year, compared with Pounds 903m in 1991. This is expected to boost pre-tax profits to about Pounds 200m from Pounds 36m.

GB United Kingdom, EC P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page IV 409
Finance and the Family: Revenue opens itself to more complaints Publication 930227FT Processed by FT 930227 By ANDREW JACK

A POWERFUL new post to be advertised by the Inland Revenue in the next few days should be good news for taxpayers with grievances. As part of the government's Citizen's Charter initiative, an independent 'revenue adjudicator' should be in post by May to cope with complaints from the public for periods after the start of the new tax year on April 6.

The Revenue expects that person to receive 20 to 50 complaints each week. He or she will consider complaints about the way tax affairs have been handled, but will not be involved in hearing appeals on tax assessments.

Appeals on tax are, ultimately, heard by the general and special commissioners for tax and by valuation tribunals, before heading into the courts on appeal.

On the handling of tax affairs, the Revenue says that the first person for complaints should, ideally, be the district inspector of the local tax or collection office who is most familiar with the cases and officials concerned.

It says the vast majority of complaints are handled successfully at this level. Those who are not satisfied should contact the regional controller, whose address is available from the local tax office.

After that, many complaints go to the board of the Inland Revenue in London. Others are sent to members of parliament who can, in turn, refer them to the parliamentary commissioner for administration or 'ombudsman' - who takes on a handful of cases each year.

Officials hope the public will make contact with the new adjudicator only after trying the regional controller of the payer's tax area, but add that the adjudicator will always be available to process problems or refer them to the appropriate individual.

They say they dealt with around 14,000 complaints last year. One-fifth were about technical and procedural matters; one-fifth with delays; and another 18 per cent related to systems, policy issues or questions about why individuals should have to pay tax at all. Some 5 per cent concerned investigations.

All the rest concerned topics such as failure to keep the taxpayer informed, incomplete handling of cases, and failure of liaison. About half of all complaints relate to pay-as-you-earn.

The Revenue stresses that a national survey of taxpayers it conducted last year showed that 65 per cent were satisified with the overall service they received. It says it is taking on board suggestions which resulted, including improving its educational activities to ensure that people pay the right amount of tax - neither too little nor too much.

In the past few days, the Revenue has also released three new codes of practice designed to bring together and make public its existing guidance for staff.

Mistakes by the Revenue. This points out possible redress against the organisation when it has made a serious mistake or delay - such as paying interest on money owed or costs related to delays in processing enquiries.

Inland Revenue investigations. This stresses that even when taxpayers' affairs are being investigated, they are entitled to the same rights and courtesies as anyone else and can ask for explanations at any time.

Inspections of employers' and contractors' records. This says the Revenue will respect confidentiality and give notice of visits to examine records.

A new version of leaflet IR 120 (You and the Inland Revenue), available from local tax offices, will be printed shortly containing details of the new arrangements.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy TECH Standards TECH Services PEOP Appointments P9311 The Financial Times London Page IV 602
Finance and the Family: So many Peps - but which is best for you? - Philip Coggan seeks guidance through a financial maze Publication 930227FT Processed by FT 930227 By PHILIP COGGAN

MARCH is fast becoming the personal equity plan season. There is nothing like a deadline to make investors open their wallets, and the approach of the end of the financial year on April 5 turns their mind to tax-free products.

Logically, it would have been better for investors to buy Peps in August, when the FT-SE 100 index was at 2,280, than now, with the market trading in the 2,800s. But with investors limited to one general Pep a year (see guide below), there is a natural tendency to wait for the 'best product.' Also, with base rates at 6 per cent, those savers who previously were content to leave all their money in the building society may now be considering Peps for the first time. A stream of these has been launched over the past few weeks, with the specific aim of attracting investors who want income.

Perhaps the most ingenious is Hypo Foreign & Colonial's Higher Income plan, which offers a yield of 10 per cent after charges through use of the options market. The product looks very attractive but is very complex and investors should take financial advice before parting with their cash.

There is a danger that people will rush into Peps for the wrong reason. Any equity-based investment involves risk; you should not buy a Pep if you are likely to panic should your investment fall by 10 per cent six months from now. These are investments for the long term, which means at least five years.

You should also watch to see that the charges do not eat up the tax benefits. This is a particular problem for a basic-rate taxpayer, who might find it better to buy some unit or investment trusts directly, rather than in Pep form. It is rarely suitable for a non-taxpayer to buy a Pep.

How does the investor sort through all the Peps on offer to find the one that best suits his or her needs? One useful source of information is the Chase de Vere Pepguide, which publishes details of around 700 plans and is available for Pounds 9.95 from Chase de Vere Investments, 63 Lincoln's Inn Fields, London WC2A 3JX.

BESt Pep (tel. 071-936 2037) produces a free background guide and makes recommendations, for a charge of Pounds 25. Like Chase de Vere, it refunds the charge if an investor then buys a Pep.

To guide readers through the maze, we asked financial advisers to give their views on the Peps that would best suit three different types of investor.

Basic-rate taxpaying individuals in their 30s who want to save for the long term.

John Cole, of Berry, Birch & Noble, says a younger person probably will look for a managed fund, as offered by a unit or investment trust. 'You don't want to go for a yield as high as 6 or 7 per cent,' he says 'but it would be wrong to go for a fund with no yield at all.' Cole says a unit trust such as Perpetual's High Income, or an investment trust such as Murray Income, might be suitable.

Richard Boyton, of Boyton Financial Services, recommends the Killik self-select Pep where charges are 1.85 per cent for dealing and a levy of Pounds 7.50 per dividend. He recommends that investors then select the Scottish Value investment trust. Says Boyton: 'This fund has outperformed the FT-SE 100 index by over 50 per cent since September 1991.'

David Harris of Chantrey Vellacott says that young people 'might well use a Pep to back their mortgage. Peps represent the best long-term vehicle for this.'

He adds that such people should opt for a cautious capital growth approach, linked to either a unit or investment trust. 'Statistics show that individuals in this age group tend not to invest the maximum Pounds 6,000 and to elect for regular monthly savings. I would choose fund managers with a strong record who figure regularly in the top 25 per cent of performers. My particular selections would be the Schroder Pep linked to its UK equity fund, or Foreign & Colonial's Pep investment trust.'

Mark Bolland of Chamberlain de Broe also favours Peps for mortgage repayments. 'They are tax-efficient, and cheaper and far more versatile and flexible than an endowment. The only thing they lack is an insurance element, and that can be arranged more efficiently by other methods.

'Ideal vehicles are the investment trust savings schemes. These are comparatively cheap and the returns can be outstanding. Someone kicking off with a reasonably small amount could invest in the old favourites, Foreign & Colonial and Alliance. A couple could put up to Pounds 250 per month into these trusts, which have very attractive long-term returns and are broadly invested internationally.'

'Those in a position to save more, could look to other regular savings schemes in the UK/EC trusts such as TR City of London, Guinness Flight's Temple Bar trust, or Kleinwort Benson's Merchants Trust.'

Top-rate taxpayers in their 50s who are aiming to save for their retirement.

Harris favours a slightly more aggressive stance for people in this category, who may want to consider a self-select Pep. 'My choice would rest between the Charles Stanley gold Pep, for execution-only deals, and the Alliance Trust Pep, although this requires the first Pounds 1,500 to be invested in Alliance investment trusts and has a restricted list of direct shares.

'For more conventional investors, I would choose the Perpetual self-select Pep linked to their UK growth fund or, for international exposure, Barings' Maxi-Continental plan linked to their European Growth trust.'

Cole says such investors might view their Pep as an extension of their general equity portfolio and will probably opt for a self-select plan.

Bolland says: 'The nature of the investment needs to be considered carefully, given that a tighter time scale is involved. If there is only five years until retirement, too much risk is unwise.

'Suitable vehicles would be the Cazenove and Newton income Peps. The former is a low-cost plan investing specifically in utilities and bonds, offering a high yield. If anything, the drawback with this approach is limiting exposure to a narrow range of equities. I like the Newton fund because of its excellent long term record for growth and income.'

Boyton again opts for the Killik self-select Pep but linked to Morgan Grenfell's Equity Income fund, yielding 5.4 per cent gross. This would give a tax-free income of Pounds 324, which equates to a gross yield of 9 per cent before tax.

Retired basic-rate taxpayers who need income.

A good yield is obviously the key factor, says Cole. He thinks the choice falls between two plans: Cazenove's Bond and Utility fund; and the Fidelity High Income, which yields 6 per cent and has slightly higher charges but pays a monthly income. 'Many small investors are very keen on the monthly option,' he adds.

Harris says: 'For the investor ready to take a moderate level of risk, I would choose a unit trust-based income portfolio which yields between 15-25 per cent more than the All-Share. A good example is Newton Income.

'For those willing to take a slightly higher level of risk, investment trust Peps using income shares will provide a higher yield. However, it should be remembered that other classes of shares within the trust have first call on any capital growth and there is a real chance of capital loss. My favourite in this area is the Murray Johnstone Pep, linked to its split-capital trust income shares. Alternatively, the new Cazenove Bond & Utility fund is highly attractive.'

Bolland says: 'Rather than going flat out for income, long-term capital and dividend growth should be the targets. A self-select Pep investing in income shares might be appropriate. Care is needed in choosing the income shares, since some involve the possibility of a loss to redemption; the shares selected should be ones which can participate in the capital growth of the trust. A lower risk option might be the Cazenove plan.'

For those needing income, Boyton unashamedly recommends a product his own firm has put together, with Killik as plan manager and Olliff & Partners making the share selection. The scheme is a combination of a split-level income investment trust share and a zero dividend preference share.

The anticipated net yield in year one, after charges, is 9.46 per cent. This will rise to 10.52 per cent in year five provided the income section grows by 2.5 per cent per annum. A Pounds 10,000 investment is needed, of which Pounds 6,000 is invested in a Pep and the balance in zeros. Charges are the normal ones for Killik (see above), 1 per cent initial for Olliff, and Pounds 150 payable to Boyton.

THE JARGON EXPLAINED

A PERSONAL equity plan allows an investor to buy stock market investments on which all income and capital gains are tax-free. Individuals are limited to a maximum of Pounds 6,000 a in most Peps during a tax year (although a single-company plan of Pounds 3,000 can be bought on top).

The majority of the investment must be in shares (although a unit trust which invests in both shares and gilts, can be eligible). Cash can be held within the plan, but only if it is intended to move the money into shares eventually. More than 50 per cent of the assets must be in the European Community. There is no time limit on Pep investment but the nature of the scheme makes it a long-term prospect. The capital gains tax exemption is of value only to the wealthy - fewer than 100,000 people are likely to pay CGT this year - and the income tax exemption is worth a very small amount in early years. If a Pep has a yield of 5 per cent, the annual income on a Pounds 6,000 plan will be Pounds 300; that represents a saving of Pounds 75 for basic-rate taxpayers and Pounds 120 for those on the top rate. Pep charges can often obliterate these gains.

There are many types of Pep available. For those confused by the jargon, they fall into these categories:

Corporate. This is a plan devoted to buying shares in a single company. Confused easily with a single-company Pep (see below), a corporate Pep allows for a full Pounds 6,000 investment. Many companies have set up low-cost plans to benefit existing investors; but they must sell their shares and buy them back within the Pep. The costs of this might outweigh the benefits.

Investment trust. A plan which invests solely in the shares of one investment trust, or a small group of them. Since trust charges normally are quite low, most IT Peps will have additional charges. For some investors, particularly basic-rate payers, these extra levies could outweigh the benefits of holding the plan in Pep form.

Managed. A manager (normally a stockbroker, financial adviser or fund management group) selects shares, or a combination of shares, unit and investment trusts. Charges tend to be higher on these plans and performance figures are difficult to come by.

Self-select. A plan where the investor chooses the stocks. A manager still has to do the paperwork, however, and the investor must pay a charge; indeed, the most crucial component in a self-select PEP is the charges. But some brokers will offer advice on the stocks you select; it might be worth paying a higher charge to benefit from this advice.

Single-company. An additional plan which can be added to other types of Pep. Single-company plans are limited to Pounds 3,000 a year and, because of the risk of 'putting all your eggs in one basket,' they are suited best to those with large equity portfolios. But they can also be useful for those who have bought shares through company option schemes. Such shares can be transferred into a Pep without any liability for CGT if the transfer is within 90 days of their purchase via the scheme.

Unit trust. A plan where the money is invested in a single unit trust. In many cases, there are no additional charges; so if you are prepared to buy into a unit trust in any case, you might as well do so via a Pep. But if there are additional charges, you need to make a careful comparison to see if these fees outweigh the tax benefits.

For further details on these plans, the 'phone numbers and addresses of most fund management groups can be found in the managed funds pages at the back of the FT's first section.

GB United Kingdom, EC P6371 Pension, Health, and Welfare Funds P6282 Investment Advice CMMT Comment & Analysis P6371 P6282 The Financial Times London Page III 2147
Markets still playing it cool with Clinton: Wall Street Publication 930227FT Processed by FT 930227 By NIKKI TAIT

THE WHOLE may usually be greater than the sum of the parts. But occasionally, the parts still steal the limelight.

That was the case on Wall Street this week. Having spent much of the previous week focusing on the grand economic strategy and the implications which the Clinton plan may have for the speed at which the US pulls out of recession, the market switched its attention to the slightly more predictable effect on individual industries. For the likes of biotechnology, tobacco and luxury consumer goods stocks, this was not a happy scrutiny.

Admittedly, the macro-picture was not forgotten altogether. On Tuesday, publication of the monthly Conference Board report on levels of consumer confidence sent stock prices tumbling across a number of sectors.

The Conference Board calculated its index for February at 68.5, more than eight points lower than the level registered in January. To compound the gloom, its survey had been conducted two weeks before the Clinton package was announced to Congress. Even at this stage, it seemed, consumers were becoming increasingly wary about the recovery's strength.

The stock market, seeing some of its worst fears confirmed, took the news fairly badly. The Dow Jones Industrial Average fell by almost 20 points, although the broadly-based Standard & Poor's 500 index showed a much smaller loss. Even in this instance, however, the declines were concentrated among mainline 'consumer stocks'. The three carmakers, for example, shed 4 to 6 per cent of their value, while many of the nation's largest retailers also posted significant declines.

Thereafter, the remainder of the week's trading was erratic. Faced with a paucity of 'hard news' or fresh economic data, dealers and investors turned to a wave of rumours, and to 'micro' considerations of individual stocks or sectors, in an effort to stimulate business.

No rumour proved more powerful than the whisper that President Clinton was about to cap credit card interest rates and, according to some sources, finance charges on other forms of consumer credit. The suggestion duly provoked a denial from the Treasury - but not before some credit cards stocks had lost, and then regained, about one-fifth of their market value.

Tobacco stocks fell prey to the same type of treatment. Fears that the Clinton administration would tax tobacco more heavily in an effort to fund a health-care reform plan hung over the sector for most of the week. Philip Morris, for example, which had dived on the previous Friday, continued to slide early in the week. The stock then railled mid-week, before edging down again as the week's trading drew to a close. By Friday lunchtime, Philip Morris shares were trading at Dollars 66, only 1/2 away from its 52-week low.

The story within some other sectors was a little more rational. For some time, drug companies have seen the new President's attacks on their pricing policies translate into substantial share price falls. This week, however, attention focused more heavily on the biotechnolgy stocks. Compounding the general uncertainty over health care reform implications, a couple of biotech companies released pessimistic announcements - thus accelarating the sector's general decline.

Amgen, for example, warned that first quarter sales and profits would be significantly below Wall Street's expectations; Synergen revealed that a drug, designed to treat septic shock, had not performed up to expectations in clinical trials. The former's shares fell over Dollars 9, to around Dollars 37 on the news; the latter lost Dollars 28 5/8 , to Dollars 13 1/2 .

Some investors may wonder when this speculation-driven trading will be replaced by a more solid trend. Few traders think that this is likely in the foreseeble future. The full implications of the Clinton package - in particular, the details of health care reform - will take months to unfold. Even then there are numerous political hurdles to surmount.

Nevertheless, despite all the plunges and rallies, the Dow Jones Industrial Average has moved by a net 30-odd points since President Clinton first appeared on the nation's television screens explaining the broad outlines of his deficit reduction plan - scarcely the most momentous of movements.

Meanwhile, the rate at which the economy was recovering at the end of 1992 remains debatable; on Friday, for example, the authorities released a revised estimate for fourth quarter economic growth suggesting that gross domestic product was growing at an annualised rate of 4.8 per cent, up from a previous estimate of 3.8 per cent.

In short, uncertain about both the recent past and the immediate future, Wall Street is taking the obvious course. It is simply waiting to see.

-------------------------- Monday 3342.99 +20.81 Tuesday 3323.27 -19.72 Wednesday 3356.50 +33.23 Thursday 3365.14 +08.66 Friday 3370.81 +05.67 --------------------------

US United States of America P6231 Security and Commodity Exchanges MKTS Market data CMMT Comment & Analysis P6231 The Financial Times London Page II 819
Markets: Equities are bowled over by Gooch - London Publication 930227FT Processed by FT 930227 By MAGGIE URRY

THERE IS one explanation for the behaviour of the equity market this week - it has been tracking the performance of the England cricket team touring India.

After a downcast start - when England, already two down in the series lost the third and final test - shares ended the week in much brighter mood. A 48-run-win in the final one-day international prompted a 39.3 point rise in the Footsie index yesterday, which ended the week at 2868.0, a gain of 28 points.

Perhaps the much criticised England selectors have been guilty of the short-termism charge often aimed at fund managers - picking one day winners, rather than a side with staying power.

The real reason for the market's performance, though, is that investors have spent the week focusing on the ICI announcement which was made on Thursday.

Monday, Tuesday and Wednesday were occupied with fears that ICI would cut its dividend or launch an immediate rights issue, or both. Thursday brought relief on both counts, and the market began to rise. The rally gathered pace yesterday.

Thursday's 11.7 point rise owed much to a 70 1/2 p jump in ICI's share price. But yesterday's increase, with ICI up another 55 1/2 p to 1208p, suggested buying interest was more widespread.

Another feature of the market this week was that the Footsie did better than the 250 index. The second tier index includes a large chunk of recovery stocks and has greatly outperformed the Footsie since Black Wednesday last September - a day which Sir Denys Henderson, ICI's chairman, persists in calling Sunny Wednesday.

A better performance by the front line stocks suggests that UK investors are turning away from recovery stocks to more mainline shares and also that overseas investors are beginning to buy the UK equity market.

The big deterrent for foreign investors of late has been sterling's collapse since Sunny Wednesday. While the pound was in free fall, no non-sterling based investor would look at the UK market. But there is now the beginning of a belief that sterling - which hit another record low against the D-Mark this week - is near its bottom.

If foreign investors can be confident that the pound will at least stabilise at these levels, they can start looking at yields on UK equities which are attractive compared to other equity markets, and in some cases compared to cash and bonds.

ICI, to pick a stock at random, yields 6 per cent with the promise of a maintained dividend in the current year too.

There is another group of investors which had been wary of buying shares but have changed their view. UK private investors are back in the market, as evidenced by unit trust sales which topped Pounds 500m net of repurchases in January.

Ignoring the cynics who believe that unit trust investors always buy at the top, this could be another good sign for the market. Individuals have seen the rates they get on savings accounts shrink as base rates fall. When they can get a higher income from shares, and the chance of capital gain, they are not slow in shifting their cash.

It may be clutching at straws, but a new-found interest from foreign and private investors could form the basis of another run in the equity market. While institutional investors are unlikely to sell shares, when re-investing the cash would give a poorer return, the squeeze on their liquidity was putting a damper on the market.

The fears of a rights issue from ICI - which will be coming in June from the demerged Zeneca - and other rumoured cash callers has been a depressant for the market.

Although shares of those companies which have staged issues have generally done well, and the take up of issues such as Burton's and Asda's has been high, the demand for new equity allied with the government's desperate need for cash to plug the gaping budget deficit has been weighing on investors' minds.

At least some companies are trying more imaginative ways to raise money, and ones which could put less of a burden on the UK institutional investors. A series of bond issues, convertibles and fixed rate, have been launched.

This week's crop included a convertible from BPB, the plasterboard group, which was accompanied by a forecast of a dividend cut on the ordinary shares, and a Pounds 100m bond from Royal Insurance, which also announced lower losses.

A couple of large, cash takeover bids would do even more for share prices, but that may be too much to hope for.

Perhaps surprisingly, the market seems less concerned about the economy than for some time.

Fourth quarter gross domestic product figures on Monday, revealing a tenth quarter of recession, were shrugged off. Discussion about what the budget might bring has yet to become intense. There is just the assumption that base rates will be cut again. Even the latest job losses stories have had little effect on a market which knows that unemployment continues to rise long after a recession turns to recovery.

The beginning of the company results season has so far brought few nasty surprises. Even apparently huge pre-tax losses, such as British Aerospace's Pounds 1.2bn and ICI's Pounds 384m, are being ignored. The excuse is that the introduction of new accounting rules, which make companies take all one-off losses and profits into the pre-tax figure, means that the losses are not 'real'.

Equally Shell appears to have largely got away with making a Pounds 131m provision against foreign exchange losses, putting the blame firmly on the Japanese associate where the currency speculation took place. Top managers there did the decent thing.

Indeed, there has been some good corporate news this week. It must be encouraging that Unilever could increase pre-tax profits 13 per cent to Pounds 2bn in spite of the recession, and that SmithKline Beecham could raise profits 11 per cent to Pounds 1.1bn.

Encouraging may not be the word to apply to Amstrad's sudden return to profits. Shareholders in that company must have been more than a little surprised to see a profit and an interim dividend from the consumer electronics group.

Only last December Amstrad's chairman and chief executive Alan Sugar was telling them that the outlook was so bleak they should accept his 30p a share offer. Shareholders are having to pay the Pounds 1.1m cost of defending the company from its own chairman. The shares finished the week at 27 1/2 p, up 3p.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data CMMT Comment & Analysis P6231 The Financial Times London Page II 1124
Markets: The taxman, the free gift and the BES - Serious Money Publication 930227FT Processed by FT 930227 By PHILIP COGGAN, Personal Finance Editor

IS THE government going to crack down on the business expansion scheme? As the deadline for abolition at end-1993 grows closer, the industry is getting ever more ingenious in its ways of exploiting the tax shelter, and could be taxing the Inland Revenue's patience.

This week, there was news of a battle between the Revenue and Johnson Fry over tax relief on two schemes, Election Protection and part of the Oxbridge Colleges Cash-Backed plan. The dispute is over an investment in a hall of residence at University College, London.

All BES properties must be let only on assured tenancies. But because the university let the property to foreign students during the summer vacation (after Johnson Fry and UCL had exchanged contracts, but before Johnson Fry paid for the property), the Revenue is claiming the scheme broke the BES rules. It should not, therefore, attract tax relief.

This could be dreadful news for investors in the schemes, since they make little sense as investments per se; the return depends almost entirely on the tax relief. Johnson Fry and its lawyers contend, however, that these schemes should attract tax relief; and it emphasises that those who invested in the non-UCL part of the Oxbridge fund (such as the Balliol college scheme) are not affected.

The dispute caused one BES issue, from Capital Ventures, to be withdrawn this week and might have raised fears of a general assault by the Revenue on the industry. Given the structure of many recent schemes, with top-rate taxpayers earning 20 per cent plus profits in six months, it would not be surprising if the taxman were to be itching for revenge.

For the moment, however, it seems clear that the dispute is limited to university-backed schemes and, even there, will affect only those using existing halls of residence.

The bank and building society schemes continue to flourish, such as the Gracechurch issue launched by the London-based Barclays de Zoete Wedd. Backed by Barclays bank, it offers a non-recourse loan enabling higher-rate taxpayers to get back 74p after six months, equivalent to an annualised return of 30 per cent. This facility is not suitable for basic-rate taxpayers. Prospectuses are available from a limited number of Barclays branches, or from BZW.

Such schemes are, effectively, gifts from the broad mass of taxpayers to top-rate payers and lenders with repossessed properties on their hands. The chancellor seems willing to allow this, for want of a better way of soaking up the burden of repossessed properties. Those who can take advantage of the plan will rub their hands in anticipation of profits; those who do not will grind their teeth if other taxes go up in the Budget.

*****

ROBIN Angus, of NatWest Securities Ltd, is a sort of Old Testament prophet of the investment trust industry. A fierce traditionalist, he is deeply suspicious of some of the new-fangled split capital structures devised by investment trust companies to attract the private investor.

In his latest Yearly Review of the sector, he emphasises one vital point for private investors - that they should consider not just income, or capital, but total return.

The present fad is to invest in high-yield investments which do not grow (such as income shares), or in growth instruments which pay no income (such as capital or zero shares). But a conventional trust can offer both; the yield might be low but, if the trust rises in price, the investor can sell some shares and use the proceeds as income.

Say you are a top-rate taxpayer with Pounds 100,000 in income shares which yield 8 per cent; your annual income would be Pounds 8,000 gross, or Pounds 4,800 net. But if you owned a conventional trust, you might enjoy a 3 per cent dividend yield and 5 per cent capital growth.

The dividend on the conventional trust would pay only Pounds 3,000 gross, or Pounds 1,800 net. But if you sold Pounds 5,000 of shares, you might pay no tax at all on the proceeds if you have no other capital gains that year. As Angus puts it: 'The Pounds 5,800 capital gains tax exemption is the greatest undiscovered tax break available to the small or medium-sized investor - much more powerful than a Pep.'

Even allowing for dealing costs of 5 per cent, the investor in the conventional trust would still have a net return of Pounds 6,550, far higher than the income share investor.

Furthermore, Angus argues that the conventional trust could well produce a better performance in the long run than a split trust, which might have to tailor its holdings to suit the demands of its different classes of shareholders. 'Conventionally-structured trusts are investment-driven, while split-capital trusts are structure-driven,' he says.

Angus's views are a timely reminder for investors that they should not ignore conventional trusts. Indeed, the volatility of split shares yesterday prompted Sphere to reveal proposals for a packaged unit; in other words, creating an instrument which behaves like a share in a conventional trust. That could prove a straw in the wind . . .

GB United Kingdom, EC P6282 Investment Advice P672 Investment Offices P6798 Real Estate Investment Trusts CMMT Comment & Analysis P6282 P672 P6798 The Financial Times London Page II 895
Markets: ICI forges ahead with a split personality - Paul Abrahams assesses the implications for the small investor after the UK's biggest demerger Publication 930227FT Processed by FT 930227 By PAUL ABRAHAMS

SO IMPERIAL Chemical Industry's board pushed the green button. On Wednesday afternoon, at an historic meeting, it decided to split the UK's biggest manufacturer into two parts. The following day, the group's executives announced the decision. They also revealed an horrendous Pounds 384m pre-tax loss on Pounds 12bn of turnover, and a Pounds 949m provision for restructuring.

The demerger plan, to be confirmed at an extraordinary general meeting in May, is to create a fully-independent quoted company called Zeneca. This will comprise ICI's drugs division, its agrochemicals and seeds operations, and most of its speciality chemicals businesses. Zeneca's demerger will be followed by a Pounds 1.3bn rights issue to reduce ICI's debts.

Investors in ICI will be given one Zeneca share for every existing ICI share they own. They will retain their existing holding unchanged, though they will then be given the option of buying additional shares in the rights issue.

On the day of the announcement, ICI's shares rose 70 1/2 p to Pounds 11.52 1/2 . Yesterday they rose another 55p. That does not mean the market necessarily thinks that the demerger is a good idea. Institutions have been off-loading the stock for weeks, fearing an immediate Pounds 1bn rights issue on Thursday.

The ICI board has decided to maintain the dividend at 55p, in spite of bleak trading prospects, so institutions have been picking up stock in preparation for the dividend on March 15.

What happens to the share price once the stock goes ex-dividend should prove interesting. Some private investors may want to forsake the dividend, sell the stock, benefit from the sharp rise in the share price and avoid the dangers and complications of the demerger and rights issue.

But what of the prospects for those investors who decide to stick with the separated groups? Will the split be as successful as those of BAT or Courtaulds?

ICI, according to Alasdair Nisbet, of UBS, faces a black hole - that of the continental economy, which is rapidly decelerating. That will have a knock-on effect on the chemicals groups. Cefic, the European chemicals association, estimates that growth in west European chemical demand will slow in all product sectors this year apart from fertilisers.

In 1991, about 25 per cent of new-ICI's turnover was on the continent, with a further 25 per cent in the UK. Only 19 per cent was in the fast-growing Asia-Pacific region and 28 per cent in the US, where the economy appears to be recovering slowly. Ronnie Hampel, new-ICI's chief executive, said the company would get no help from the world economy over the next 12 months.

Nevertheless, a happy combination of cost cutting and currency benefits could enable ICI to leap gracefully over the black hole.

Hampel plans a rigorous cost-cutting campaign. The company is proposing yet another restructuring and a further round of job losses - 7,000 staff will leave the group over the next three years. Charles Lambert of broker Smith New Court believes that the job losses alone could eventually save about Pounds 210m a year.

In addition, this year's figures will be helped by the devaluation of sterling on what Sir Denys Henderson, the chairman, calls 'sunny Wednesday'. On a rule of thumb, every cent the US dollar falls adds between Pounds 2m and Pounds 3m to ICI's pre-tax results. Lambert estimates that currency benefits - at about Pounds 150m - will form the largest element in ICI's earnings improvement this year.

The danger is that ICI might leap - and then tumble into the hole. If it does, the group's promise to maintain the dividend at 27 1/2 p during 1993 looks hard to keep. Much of the share price rise at the end of this week was based on the promise to maintain the dividend. If ICI looks as if it will break that promise its shares could be in trouble.

An economic recovery has already been discounted into ICI's share price, although recovery is far from certain. Nisbet at UBS says that if the market has underestimated the benefits of currency and the recovery, then investors might prefer to pick up second tier chemicals stocks rather than buying more ICI.

The UK, following the devaluation, is the best place in Europe to manufacture chemicals at the moment, according to Nisbet.

On the other hand, one final reason for buying ICI might be to pick it up as a takeover play. US broking houses in London have been making noises about a hostile takeover aimed at breaking up the business.

However, new-ICI will have Pounds 600m of debt after the demerger. Some analysts believe the board left it there as a poisoned pill to prevent such a takeover.

Zeneca poses a problem for investors. Drugs stocks are out of favour at the moment. Institutions have piled out of defensive stocks such as pharmaceuticals and invested in cyclical companies instead.

Even if the recovery is some way off, institutions are unlikely to move back into drugs stocks for fear of missing out on the recovery when - and if - it comes.

An added disincentive for pharmaceuticals stocks is pricing pressure, particularly in the US. President Clinton will not reveal his health care reforms - which could affect the drugs groups - until May, almost the same time as Zeneca's rights issue.

As for Zeneca, the company is not even a pure drugs stock, given that more than 60 per cent of its sales concern agrochemicals and specialities. It will have to be valued at a discount to groups such as Glaxo and Wellcome.

Should investors take up their rights? The answer depends on Zeneca's price and the discount being offered by the company and underwriters.

Zeneca's operating profits actually dropped from Pounds 682m in 1991 to Pounds 587m last year. Most of the decline was due to the expiry of the US patents for Tenormin, Zeneca's top drug and once the world's fifth best-selling medicine, generating sales of nearly Dollars 1.2bn a year. American sales fell up to 50 per cent last year.

David Barnes, Zeneca's chief executive, believes US sales of Tenormin will stabilise soon at about 25 of its peak. Meanwhile, revenues from newer products are increasing rapidly.

Sales of Zestril, a heart drug, improved 30 per cent, while Diprivan, an anaesthetic, and Zoladex, a cancer treatment, both rose by 50 per cent.

There may also be some recovery potential from the specialities businesses, especially dyes, which represent about 30 per cent of the division's Pounds 936m turnover. These have been suffering from the recession in the textiles industry.

Zeneca's 27 1/2 p dividend offers a yield of about 5 per cent - far higher than traditional drugs stocks. Given that its earnings can only move up, if the company is offered at the right price, Zeneca could prove an unfashionable, but valuable, stock to acquire.

Zeneca Imperial Chemical Industries GB United Kingdom, EC P2851 Paints and Allied Products P2892 Explosives P2869 Industrial Organic Chemicals, NEC P2819 Industrial Inorganic Chemicals, NEC P2834 Pharmaceutical Preparations P0181 Ornamental Nursery Products P287 Agricultural Chemicals COMP Demerger CMMT Comment & Analysis P2851 P2892 P2869 P2819 P2834 P0181 P287 The Financial Times London Page II 1229
When honesty means sharing your bribes: Corruption investigations are threatening to unravel the Italian state. A former official tells how the system worked Publication 930227FT Processed by FT 930227 By ROBERT GRAHAM

CORRUPTION in Italy has gone beyond the bounds of decency. So vast is the scale of rottenness now being uncovered that a whole ruling class risks being indicted. Already, the courts are being overloaded with the weight of investigation and the prosecutions have scarcely begun. For the first time, a democracy is having to confront the uncomfortable question: if the system is corrupt, to what extent should individual guilt be pursued?

Roberto Mongini has had time to reflect on the question. This 46-year-old Milanese lawyer, and one-time rising star in the Christian Democrat Party, was arrested last June and spent 17 days inside the bleak walls of Milan's San Vittorio prison. He was released after confessing to exploiting his position as vice-president of the Milan Airports Authority to collect illicit funds for the party, and went immediately on a pilgrimage to Lourdes to come to terms with his fall from grace.

Mongini claims to be at peace with himself now although he has lost his seat on the party's national executive and his political career is over. With the compulsiveness of a convert to honest government, he admits collecting nearly L900m (Pounds 410,000) in bribes - a sum he considers small by the standards of what was going around him. 'I willingly accepted to be part of the system and therefore cannot regard myself as a victim,' he says. 'At a personal level, I don't consider myself a criminal. Indeed, I consider myself personally honest; nevertheless, I admit I formed part of a dishonest system.'

This ambivalent moral credo seems to have been shared by a great many others who either turned a blind eye to corruption or connived in creaming 'commissions' off the top of every type of economic activity. The magistrates' investigations range from road-building and ports to the Milan and Rome metros and the space agency, football stadiums and overseas aid to restructuring the chemicals industry. No European democracy has ever witnessed corruption investigated on such an all-embracing scale. Questions are being asked about the ability of the courts to cope

'We are not confronted with isolated instances of corruption: the entire system was like that, from Milan to Sicily,' says Mongini. 'Wherever you look, you will find illicit financing, it was the Italian way of doing things.'

Antonio Di Pietro, the leading Milan investigative magistrate, says of the snowballing investigation: 'I don't see how it can finish. In just one day, 14 or 15 persons came wanting to confess stories of bribery to me. We can't go on like this.' He adds: 'We will proceed with the penal side . . . but some sort of political clarification is necessary which goes over and above the magistrature - otherwise, there is the daily risk of something happening with serious impact on the economic system . . . Besides, the judiciary cannot be expected to uncover everything.'

The construction and general contracting business - the sector exposed most to the magistrates' enquiries - is slowing to a halt throughout Italy because businessmen fear being accused of bribery. The entire political establishment and its long-standing incestuous relationship with the business community is being called into question.

Magistrates have talked of having to put 60,000 people through the courts if everybody involved in corruption is charged. More than 50 members of parliament are being investigated for corruption and two party leaders,Bettino Craxi of the Socialists and Giorgio La Malfa of the Republicans, have been forced to step down in the past two weeks. More than 400 witnesses will probably be called in the scrutiny of road contracts alone. One Milan magistrates has suggested that the city's corruption scandal - over 110 people have been arrested and more than 300 questioned - will provide the local judicial system with work for the next decade.

As the complete gamut of Italy's institutions - and the people who run them - are dragged into the magistrates' net, the country's democracy risks being weakened. A number of politicians, including Craxi have made this point. However, it is difficult for the politicians to take action without being seen as self-serving.

When Milan magistrates began to expose corruption with a series of arrests a year ago, the reaction in the press was surprise: surprise not that such wrong-doing existed but that it had come to light. The Milanese even took a perverse pleasure in saying the expose was possible precisely because the city had a morality; Naples they argue could never have been the starting place for a nationwide anti-corruption drive.

Now the public is both angry and taken aback by the systematic scale of the corruption. 'Corruption has always existed,' veteran television commentator Vittorio Orefice said recently. 'Like prostitution, it's destined to eternity. It's a question of containing corruption within the bounds of decency. We have descended to the level of Cambodia.'

According to Mongini the 'system' being exposed dates back to the 1970s. Then the Christian Democrats and their allies were terrified that the powerful Italian Communist Party would come to power through the ballot box. Knowing that the Communists received secret funding from the Soviet bloc, they felt no compunction in seeking their own finance to supplement the small contributions by the state. The Christian Democrats, and then the smaller Socialist Party, rationalised their large organisational infrastructure (including tame newspapers and trades unions) by the need to counter the Communists' presence in the unions, the media and co-operative movement.

The 'system' centred round the placement of pliant executives in state companies and municipally controlled entities who then farmed out contracts on the basis of rigged tenders and accompanying commissions. Alternatively, the parties had people specially delegated to negotiate kick-backs on contracts. With the declining threat from communism in the 1980s, the Communists were allowed to be part of the 'system'. In the case of Milan, the parties received a fixed percentage of the commissions according to their share of the electoral vote. This covered every public works contract including the metro extension, waste disposal, a new municipal theatre and the modernisation of Linate and Malpensa airports.

As the party bureaucracies swelled, so the need for funds grew. By the 1990s some 129,000 jobs fed off the political system, yet the annual state subsidy to all the parties was less than L100bn. And as the ideological differences between parties narrowed, loyalties could only be bought with favours. It was a mutually reinforcing circle that always returned to a growing appetite for funds. The real cost of running this political establishment was close to L5,000bn.

Mongini claims that in the late '80s the 'system' degenerated. 'Everyone wanted to get in on the act, even the smallest bagmen. You would have people in the local health authorities demanding kick-backs on something as small as a syringe contract. It got out of hand.'

People became greedy and some of the private sector companies baulked at the rising demand for bribes. The Socialists have been exposed as the most flagrant offenders, but the Christian Democrats were more subtle and seasoned players.

How much did the party bosses in Rome know about what was going on?

'They knew, helped set it up and were also on the take,' says Mongini. 'The Milan operation of the party cost L2.5bn a year and they gave us L100m a year from Rome - Rome did not think we used to win the lottery every month to cover the rest]'

Magistrates have paid particular attention to those running party finances. Vincenzo Balzamo, the administrative secretary of the Socialist party, died of a heart attack last November while being investigated for corruption. His opposite number in the Christian Democrats, Severino Citaristi, has been served with a record ten warrants notifying him that he is under investigation for illegal party finance.

It is far from clear whether private business has been a victim or willing accomplice although companies been touched by the inquiry include Fiat, Pesenti and Ferruzzi.

'The entrepreneurs are desperately trying to demonstrate they were obliged to pay by the politicians,' Mongini claims. In Milan, he says, 'the parties had an interest in getting the money and the entrepreneurs had an interest in giving it to them. Like couples making love, it was usually by mutual consent.' The one charge Mongini denies is that of extortion. Companies paid willingly for the privilege of rigging the bidding process: excluding rival tenders and fixing the price.

This relationship between business and government has been encouraged by the practice in Italy of having private tenders. On average, throughout Italy, two thirds of contracts have been by private tender or have not been subject to parliamentary scrutiny. In this way contracts are easily rigged or rewritten in mid-performance. The lack of transparency and the obligatory inclusion of 'commissions' explains why foreign contractors have, on the whole, avoided Italy and why contracts has been costly by European standards.

Mongini says that, of the money he raised, L120m a year went to finance his faction of Milan's Christian Democrat Party and the rest to central funds. He denies enriching himself; but calculates that at least one third of money collected in the 'system' was for personal enrichment - 'but to prove this you will have look at Swiss bank accounts.'

He says the Milan magistrates have been clever, using every weapon at their disposal. They made him feel that they were closing in but kept him guessing for two months. 'When I was eventually arrested in June it was like an act of liberation. I understand people have gone to extremes awaiting arrest.'

Seven suspects have commited suicide in the past nine months and an eighth fifth was saved by chance this month after having taken an overdose in a parked car.

At first Mongini was convinced that, as a lawyer, he could avoid incriminating himself under interrogation. He resisted for 14 days. Then the ordeal of prison, combined with the realisation that the magistrates had an accurate picture of how bribes were collected, convinced him to co-operate.

The Milan magistrates have exploited their right to keep suspects in detention for three months, and have made a point of arresting those used to the good life either late at night or early in the morning. Release from prison has been on a direct reward basis: once suspects confess. By early this month, 105 of those arrested had confessed.

Mongini observes wryly: 'The reception centre at San Vittorio prison has become like the foyer at La Scala - where you see anyone and everyone.' But members of parliament have yet to grace its cells. Under Italian law, magistrates must first ask parliament to waive the blanket immunity extended to deputies and senators. This process can take up to five months and the waiver is by no means guaranteed, especially now that parliament feels it is being challenged by the magistrature.

So many politicians are already compromised in the scandal that parliament is in a weak position to take the initiative to prevent the investigations paralysing the Italian state and its institutions. One Milan magistrate, Gherardo Colombo has suggested a pardon on the condition that those who have taken or given contract commissions confess and repay the monies.

Giuliano Amato, the Socialist prime minister, has suggested it is wrong to focus on those under investigation as the sole culprits. Italian society, he says, has been an accomplice in tolerating corruption.

Mongini, who hopes he can avoid a full prison sentence, backs such views and adds. 'The public will not accept a simple pardon; and the best thing is for all those in power during this period to recognise that they are no longer acceptable to the Italian people. It is the end of a political class. They must leave the scene - and that includes me.'

IT Italy, EC P8651 Political Organizations P99 Nonclassifiable Establishments P9229 Public Order and Safety, NEC GOVT Legal issues P8651 P99 P9229 The Financial Times Weekend Page I 2024
The Long View: Chemical reactions Publication 930227FT Processed by FT 930227 By BARRY RILEY

SO ICI has decided to tear itself in twain lest the bell should toll for the one-time bellwether. Its decision to recreate itself as Zeneca is a clear indication that the British economy no longer determines the shape of the stock market, but rather the other way around.

I have referred before to the curious fact that the UK equity market has consistently outperformed many overseas markets in spite of the poor showing of the British economy. It happened again last year when the total return on UK equities was 20.6 per cent against 16.4 per cent on the World ex-UK Index.

Over the past decade the average UK annual return has been 18.8 per cent compared with 15.6 per cent overseas. Yet economic growth in Britain has averaged only 2.3 per cent a year over this period compared with 2.7 per cent in Germany and the US and 4.1 per cent in Japan. Industrial production has trailed still more badly in the UK.

The share price action of ICI, of course, corresponds more closely to this dismal industrial picture. The UK stock market has been lifted by certain service sectors and by the monopoly utilities privatised at giveaway prices in the past ten years: these account for 11 per cent of the market's value and nearly 20 per cent of the underlying profits. Elsewhere, about half the profits of UK-listed companies are earned overseas. The poor old British economy has less and less relevance.

The share price action has generally been good, but tension between British companies and their mainly institutional shareholders is regularly apparent. The 1980s takeover boom and the subsequent corporate governance debate were symptoms of that. So long as the shareholders are fed with a regular stream of dividends, however, there is little trouble. Between 1982 and 1992 capital investment by industrial and commercial companies grew 2.8 times (in nominal terms) but dividends increased twice as much. During the past two years of recession dividends have climbed 20 per cent while investment has been cut back by 13 per cent.

There can be logic in this payment in adversity. Resources that cannot be invested profitably should be returned to shareholders. The shareholder's interest can be identified with national interest so long as the rest of the world is playing the same game. If not, the efficient stock market may operate as a doomsday machine for the destruction of domestic industry. High returns may only be achieved at a price.

The aloofness of the British governing classes and the City of London from domestic industry has long been notorious. It was again highlighted by a document called Britain, Europe and the Square Mile, published earlier this month by the European Policy Forum. In pleading the City's special self-interest in European integration, the paper argued that if the UK detached itself from the core of the European community there would be a risk to foreign direct investment. It did not explain why the UK has become so much more dependent on foreign investment than any other large EC economy.

Meanwhile, in this year's wave of rights issues, the City has been eagerly helping UK companies make large acquisitions in France, the US and elsewhere. As these companies rely more and more on foreign earnings they find it difficult to maintain dividend growth without exhausting their UK tax allowances. Typically, their response is to call for tax concessions from the British government rather than to adopt the low payout policies of companies in most economies.

Dividends are generally sparse in other leading industrial countries because the effective ownership of industry is in the hands of the state, of interlocking domestic corporate interests including banks, or of private families. None of these interest groups have much need for income; all have a strong commitment to the domestic economy. The freewheeling British structure leads, in contrast, to an international portfolio approach on the part of both institutional investors and corporate empire-builders. The US is rather similar, but is better-placed to protect its industries - as in the latest row over steel anti-dumping duties, and the renewed Airbus dispute - than the UK.

Here is a rough-and-ready summary of the recent decline of British industry. The profit-driven corporate sector has consistently withdrawn resources from underperforming sectors, specially heavy industry, a trend exaggerated by phases of extreme overvaluation of sterling. There were arguments in favour of this in the context of a growing and liberalising global economy, but we are moving into an era of recession and protectionism. Recent policies have led to the appearance of a structural trade gap. Eventual devaluation has been the logical response, but this will bring help on any substantial scale only to labour-intensive manufacturing sectors. Heavy industries which are, say, energy-intensive, and face subsidised competition, will gain little benefit. ICI has long cross-subsidised its heavy chemicals operations but this anomaly has been ruthlessly exposed by the stock market, prompted by Lord Hanson. The rump of ICI will stand little chance of survival.

Inward investment has been one answer to domestic shortfalls, but is it durable? The Dutch state has naturally been unwilling to go on supporting Leyland, and it will prove highly dangerous to rely, over anything other than the short term, on lossmaking Nissan to revive the British motor industry; remember that Nissan and the other Japanese manufacturers no longer benefit from a freakishly low cost of capital, as they did in the 1980s.

Britain long ago lost its motor-cycle sector. It has since lost its domestically-owned car industry too. As things are going the steel, aircraft and basic chemicals industries will not be far behind.

Zeneca, I fear, has nothing to do with motor-cycle maintenance.

GB United Kingdom, EC P6231 Security and Commodity Exchanges P99 Nonclassifiable Establishments CMMT Comment & Analysis P6231 P99 The Financial Times London Page I 987
Lloyd's Names face Pounds 200m loss: Stricken syndicate sees debt estimates rise sharply in recent months Publication 930227FT Processed by FT 930227 By RICHARD LAPPER

ABOUT 1,000 Names, including the actress Ms Susan Hampshire, face possible losses between them of up to Pounds 200m in one of the biggest syndicate collapses at the troubled Lloyd's insurance market.

The Names, individuals whose assets support underwriting at Lloyd's, are members of syndicate 475, whose underwriter, Mr Roy Bromley, committed suicide last month.

Syndicate 475 specialised in 'spiral' reinsurance - in which syndicates and companies insure each other's exposures to high level catastrophe loss.

Although relatively small with a capacity, or capital base, of Pounds 25m in 1989, its losses are proportionally worse than the better known 'spiral' syndicates such as those managed by the Gooda Walker and Feltrim agencies.

Its losses are far worse than agents feared two months ago when Names were told to expect a deficit of about Pounds 50m.

Overall Lloyd's losses are expected to amount to about Pounds 5bn over the past five years. Despite recent management changes, the market is weighed down by its past losses and growing legal actions between Names and their agents.

Mr Trevor Bradley, managing director of Knightstone Group, which took over management of the syndicate last October, said that 1989 losses could amount to between Pounds 74.8m and Pounds 175.7m, with Names losing a maximum of Pounds 70,000 for every Pounds 10,000 traded on the syndicate.

Further losses of between Pounds 18m and Pounds 32.6m are forecast for 1990, when Names stand to lose up to Pounds 13,000 for every Pounds 10,000 traded.

'It is a very sad affair,' said Mr Bradley, who predicted losses would fall midway between best and worst case estimates. The syndicate's own reinsurance was insufficient to cover losses stemming from hurricane Hugo in 1989, the European storms of 1990 and a string of other losses.

Mr Bradley said that claims would continue to affect the syndicate for many years. Names would be asked to pay only Pounds 21.3m of the 1989 loss this year, following a request for about Pounds 12m last year.

Mr Bromley lost his job as underwriter in May 1991 and had become dispirited about the way the syndicate's losses had mounted.

'Things were going badly for him. There is no doubt he was very distressed about the way things were going,' said Dr Paul Knapman, the coroner, at his inquest last week.

Mr Bromley's son, Nicholas, told the inquest: 'He was calm on the surface, but underneath it there was a degree of panic and fear.'

Lloyds of London GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service P6331 Fire, Marine, and Casualty Insurance COMP Company News FIN Annual report P6411 P6331 The Financial Times London Page 24 466
Reshuffle option increases pressure on Lamont Publication 930227FT Processed by FT 930227 By PHILIP STEPHENS, Political Editor

MR John Major is keeping open the option of an extensive cabinet reshuffle during the summer to restore the government's battered authority.

His stance leaves a question mark over Mr Norman Lamont's hold on the Treasury and increases pressure on the chancellor to produce an imaginative budget on March 16.

But the scope for a popular Budget package has been limited by a shift of mood in the cabinet towards an early increase in personal taxation to curb the public sector deficit and provide scope for new measures to help industry and the unemployed.

Close associates of the prime minister dismiss recent suggestions at Westminster that he has decided to keep his senior cabinet colleagues in their present posts until 1994. Instead, Mr Major would review after the Budget possibilities for high-level changes before the summer parliamentary recess.

The chancellor has indicated he would like to deliver both the March Budget and the second Budget due in November.

The prime minister has refused to speculate on the possibilities of a summer reshuffle. His only comment to journalists returning with him from Washington this week was that a shake-up was not 'imminent'. That was interpreted as meaning it would not come before the Budget and probably not before the Commons third reading of the Maastricht bill in May or June.

But the general view among Tory MPs at Westminster is that Mr Lamont has failed to recover his political authority since sterling's ignominious exit from the European Exchange Rate Mechanism last autumn. If he is moved - to the Home Office or defence - Mr Kenneth Clarke and Mr Michael Howard would be front-runners for the Treasury.

Mr Major is also under pressure to bring in fresh talent to the government by dropping some longer-serving ministers inherited from Lady Thatcher.

There is speculation at Westminster that one cabinet minister has indicated privately that he is ready to stand down and the planned departure of Mr Tristan Garel-Jones from the foreign office will leave vacant a post just below cabinet level.

Among ministers of state tipped by Tory party managers for promotion are Mr Stephen Dorrell at the Treasury, Mr John Redwood at environment and Mr Roger Freeman at transport.

GB United Kingdom, EC P9111 Executive Offices PEOP Personnel News P9111 The Financial Times London Page 24 401
German wages pact raises rate cut hopes Publication 930227FT Processed by FT 930227 By CHRISTOPHER PARKES and JAMES BLITZ FRANKFURT, LONDON

GERMANY'S banking unions yesterday agreed to a 3.3 per cent wage settlement with their employers, effectively completing this year's west German wages round and prompting speculation that the Bundesbank might ease monetary policy next week.

News of the wage agreement, which was below the projected rate of German inflation, triggered a surge on European stockmarkets and helped to depress the D-Mark against most other European currencies.

The London stock market gained 39.3 points to close within 6 points of its previous all-time closing high, at 2,868. Frankfurt's 30-share DAX index closed 25.44 points higher at 1,684.35 and the CAC-40 index in Paris gained 39.07 points to finish at 1,983.71.

The dollar also rose against the D-Mark as dealers contemplated the possibility that the Bundesbank would ease rates at its council meeting next Thursday. Officials have said that moderate wage deals are an important requirement if it is to cut rates.

The negotiations over wages in the German banking sector followed the pattern of most earlier agreements, completed quickly and without industrial action.

Most forecasts for German inflation suggest that there will be an annual rate of price increases between 3.5 per cent and 4 per cent.

Most unions started out with claims for increases of more than 6 per cent, but the recent rapid onset of recession and announcements of sweeping job losses have had a dramatic effect on expectations.

A 3 per cent wage deal for Germany's 3m public sector employees came the day after the Bundesbank cut the discount rate by 1/4 percentage point to 8 per cent and the Lombard rate by 1/2 point to 9 per cent.

DE Germany, EC P602 Commercial Banks P6231 Security and Commodity Exchanges PEOP Labour MKTS Market data ECON Inflation P602 P6231 The Financial Times London Page 24 317
Former Ferruzzi chief is drawn into corruption probe Publication 930227FT Processed by FT 930227 By ROBERT GRAHAM ROME

ITALY'S business elite was dealt a further blow by the announcement yesterday that Mr Raul Gardini, the high profile former head of Ferruzzi-Montedison, was under investigation by Milan magistrates.

Mr Gardini is being investigated for his role in the controversial reorganisation of Italy's chemicals industry at the end of the 1980s, when the main chemical interests of ENI, the state oil concern, were pooled with Montedison, the chemicals arm of the Ferruzzi group.

Mr Sergio Cragnotti, the financier and president of Lazio football club who was a former managing director of Montedison, was also told yesterday that he was under investigation. This means all key business participants in the restructuring are being investigated.

No politicians have been implicated; but the investigation was this week switched from Rome to Milan where inquiries are related to the alleged involvement of politicians.

It also emerged yesterday that the magistrates' enquiries include the establishment of Enimont in 1989. Previously the enquiry focused solely on the purchase price of L2,805bn paid by ENI for Ferruzzi's 40 per cent stake in Enimont in 1990.

News that Mr Gardini and Mr Cragnotti were under investigation followed a week in which several prominent figures in the business world had been caught up by the fast moving scandals.

Those arrested on charges of alleged illicit financing of political parties included Mr Francesco Paolo Mattioli, Fiat's chief financial officer, and Mr Giampiero Pesenti, the owner of Italy's biggest cement company.

Yesterday Mr Mattioli was still being detained in a Milan prison.

The uncertainties created by developments in the corruption investigations continued to weaken the lira. The Bank of Italy is believed to have sold D-Marks yesterday for the third time this week.

The Bank and the treasury took the unprecedented step of issuing a sharp joint statement rebutting Moody's announcement on Thursday which placed the Aa3 foreign currency debt rating of Italy under review for a possible downgrade.

The Enimont enquiry already involves Mr Gabriele Cagliari, the current head of ENI, and Mr Lorenzo Necci, the first president of Enimont and now head of Italian railways, FS. Magistrates are also anxious to interview Mr Giuseppe Garofano, a long-time director of Montedison.

Who's next in probe, Page 2

Ente Nazionale Idrocarburi Ferruzzi Montedison Enimont IT Italy, EC P28 Chemicals and Allied Products PEOP Personnel News GOVT Legal issues Gardini, P Former Head Ferruzzi Montedison P28 The Financial Times London Page 24 419
The Lex Column: British Airways Publication 930227FT Processed by FT 930227

The protracted negotiation between British Airways and Virgin suggests the lawyers are also anxious for their pound of flesh. But BA's shareholders deserve a convincing answer as to why their money is being given to an arch-rival. Some of the payment may relate to the resolution of a relatively innocuous dispute over a maintenance contract. The rest will represent compensation for the commercial damage caused by BA's 'dirty tricks' campaign. BA has insisted that these actions were regrettable but minor. If so, why is the compensation likely to run into millions?

British Airways Virgin Atlantic Airways GB United Kingdom, EC P4512 Air Transportation, Scheduled CMMT Comment & Analysis GOVT Legal issues P4512 The Financial Times London Page 24 129
The Lex Column: Airtours/Owners Abroad Publication 930227FT Processed by FT 930227

With the quibbles of the Office of Fair Trading brushed aside by Mr Michael Heseltine, the combatants in the package tour market have returned to battling each other. Owners is certainly making a spirited fight of it. The company has now promised a 43 per cent increase in this year's dividend and outlined increased benefits from its preferred alliance with Thomas Cook. This firmly lobs the beach ball back into Airtours' court.

The market suggests Airtours will have to increase its offer. Airtours wants a quick resolution to ensure it benefits fully from Owners' summer holiday profits. Its cause would be greatly helped by a recommendation for any increased offer. But given Owners' fierce criticism of an enlarged Airtours' future prospects, it is unlikely to win approval for a largely paper offer. Airtours has more reason than ever, therefore, to increase the cash alternative.

Airtours Owners Abroad Group GB United Kingdom, EC P4725 Tour Operators CMMT Comment & Analysis COMP Acquisition The Financial Times London Page 24 178
The Lex Column: Investment Trusts Publication 930227FT Processed by FT 930227

Buyers of investment trust shares have often worried about the industry's unhealthy cosiness. Although, in theory, there are clear divisions of responsibility between directors and managers, such distinctions have often become blurred. Conflicts of interest result. Directors should act solely in the best interests of shareholders and replace poorly-performing managers. But this is difficult when directors and managers are the same. Trickier still when the trust is named after the management group which happens to be a big shareholder.

To its credit, the industry is trying to address the problem. In the wake of the Cadbury Committee report on corporate governance, the Association of Investment Trust Companies has published guidelines on best practice. These suggest a trust's board should have a majority of independent directors. It is also desirable for the chairman to be independent.

Many older investment trusts already have well-developed checks and balances. The main worry concerns the host of new investment trusts which have sprung up in recent years. In its annual study of the sector, NatWest Securities worryingly finds that almost half the directors on the boards of the 117 investment trusts launched since 1986 are closely linked with management groups. It argues that the AITC's recommendations do not go far enough, suggesting there should be no managers on the board at all - apart, perhaps, from the managing director.

However, the ultimate sanction will always remain with shareholders. Either they shun those trusts failing to comply with best practice, or they replace the directors.

GB United Kingdom, EC P6726 Investment Offices, NEC CMMT Comment & Analysis P6726 The Financial Times London Page 24 278
The Lex Column: Severn Trent Publication 930227FT Processed by FT 930227

It comes as no surprise that Severn Trent is the first privatised water company to buy one of its smaller statutory neighbours. Having blazed the trail in waste management with the acquisition of Biffa, there is clearly no shortage of ambition. The Pounds 33m acquisition of East Worcester is only a drop in the ocean of Severn Trent's core water business. Even so, shareholders mindful of Biffa's dismal performance might take comfort that, in this case, Severn Trent should know exactly what it is buying.

The deal sets something of a precedent for other privatised water companies. The regulator is evidently happy so long as benefits flow to customers in the form of lower charges. That will be taken as a green light by the rest of the industry. Even so, it is difficult to envisage a takeover binge.

Giving East Worcester access to Severn Trent's network is a neat solution to an otherwise expensive supply problem. Cost savings in other cases will be more difficult to find. Acquisitions valued over Pounds 30m in terms of net assets - East Worcester is worth Pounds 16m on this basis - face an automatic monopolies investigation. That alone may be enough to discourage Severn Trent from bidding for the larger quoted South Staffordshire.

Severn Trent Water East Worcester Water GB United Kingdom, EC P4941 Water Supply P4952 Sewerage Systems CMMT Comment & Analysis COMP Acquisition P4941 P4952 The Financial Times London Page 24 252
The Lex Column: Forgotten rights Publication 930227FT Processed by FT 930227

Yesterday's smart rise in UK equities ends two weeks of torpor during which the market was caught between fear of rights issues, hopes for recovery and the dwindling return on cash. With ICI's Pounds 1.3bn cash call now postponed until June, investors have evidently tired of shadow-boxing on the first point. But that does not leave much headroom from here. Yesterday's rise was led by the big overseas earners rather than domestic recovery stocks. Results from the likes of NatWest this week showed scant evidence of an upturn. Besides, ICI will not be the last to announce a rights issue before the reporting season is over.

With around Pounds 2bn in rights issues and Pounds 5bn soaked up by gilts issues this year, institutional liquidity is already starting to look stretched. The Pounds 500m net inflow into unit trusts during January was encouraging, but only a portion will flow into UK equities. Besides, the ICI rights issue alone will account for perhaps three months' inflows at that rate of progress. When the government starts funding in earnest in the spring, competition for savings can only increase.

The strength of blue-chip stocks could be a sign of renewed overseas interest. That would relieve the pressure on domestic cash. Having seen sterling bounce from an all-time low against the D-Mark this week, foreigners may be tempted to see the UK currency as a safe bet. The mood of continental stock and bond markets suggests some optimism that the Bundesbank will cut interest rates. If that was combined with nascent economic recovery at home, sterling would certainly benefit. The worry is that waiting has proved thankless in the past.

GB United Kingdom, EC P6231 Security and Commodity Exchanges CMMT Comment & Analysis P6231 The Financial Times London Page 24 306
World Stock Markets (America): Explosion fails to disrupt Dow Jones Publication 930227FT Processed by FT 930227 By KAREN ZAGOR NEW YORK

Wall Street

AN explosion and fire at New York's World Trade Centre at midday yesterday caused only minimal disruption to trading on the New York and American stock exchanges, although the small order execution system was suspended, writes Karen Zagor in New York.

The Dow Jones Industrial Average closed up 5.67 at 3,370.81. The more broadly-based Standard & Poor's 500 firmed 1.05 at 443.39, and the Nasdaq composite rose about 2 points to 669. NYSE trading volume was 234m shares and rises outnumbered declines by 1,160 to 746.

Regular Nasdaq trading was uninterrupted at midday, but some trading floors were evacuated because of the fire and more than a dozen trading desks had to be closed because of power failure and smokey conditions.

Market sentiment was mixed, in spite of an upward revision of gross domestic product for the fourth quarter to an annual rate of 4.8 per cent, above an earlier estimate of 3.8 per cent.

Wal-Mart was active and gained Dollars 3/4 to Dollars 32 1/2 . Tobacco stocks remained lively, with RJR Nabisco adding Dollars 3/8 to Dollars 8 1/2 and Philip Morris Dollars 1 1/8 to Dollars 67 1/8 . In the auto sector, General Motors fell 1/4 to Dollars 37 1/2 , Chrysler rose Dollars 3/4 to Dollars 39 5/8 and Ford fell Dollars 1/4 to Dollars 45 7/8 .

Rollins Environmental dropped Dollars 1 to Dollars 7 7/8 after the US brokerage, Alex Brown, cut its rating on the stock from 'neutral' to 'sell' following the shutdown of the company's Texas incinerator.

Telefonos de Mexico climbed Dollars 2 to Dollars 49 5/8 in active trading after Bear Stearns increased its rating to 'strong buy' to reflect expectations of continued operating profit growth.

In the big board technology sector, shares in Hewlett-Packard fell Dollars 2 to Dollars 74 and Digital Equipment fell Dollars 1/2 to Dollars 47 3/4 after a new technology analyst at Kemper Securities issued an initial 'neutral' rating on the stocks and suggested that investors swap into them from IBM and Amdahl. Shares in International Business Machines rose Dollars 5/8 to Dollars 54 3/8 .

The biotechnology bellwether stock, Amgen, fell 3/4 to Dollars 36 1/4 in Nasdaq trading. The stock dropped more than Dollars 9 on Thursday following disappointing first quarter earnings projections.

Many Nasdaq technology stocks were broadly lower with Intel off Dollars 1 1/2 to Dollars 116 1/2 , Seagate Technology down Dollars 1 to Dollars 15 5/8 , Apple Computer off Dollars 1 3/4 to Dollars 53 7/8 and Dell Computer easing Dollars 1/2 to Dollars 32 1/8 .

Shares in Buttrey Food & Drug tumbled Dollars 1 5/8 to Dollars 6 7/8 after the company posted fourth quarter operating income of 3 cents a share against 25 cents a year earlier.

Canada

TORONTO stocks closed mixed in heavy trading, dragged down by lower gold stocks. According to preliminary data, the TSE-300 index was off 8.25 points, or 0.24 per cent, to 3,451.69, but advances outnumbered declines 366 to 278. On the week, the index was up 26 points.

Volume fell to 49.424m shares from 54.607m shares on Thursday, and trading value was CDollars 412.1m against CDollars 492m.

Ten of the 14 stock groups were down, led by golds, which fell 1.91 per cent. Industrial products fell, and financial services, consumer products and mining were flat.

US United States of America CA Canada P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 21 600
World Stock Markets (Asia Pacific): Nikkei makes modest gain on arbitrage Publication 930227FT Processed by FT 930227 By EMIKO TERAZONO TOKYO

EQUITIES moved in a narrow range ahead of talks between the Group of Seven finance ministers, and the Nikkei average closed marginally higher in quiet trading, writes Emiko Terazono in Tokyo.

The Nikkei closed up 45.96 at 16,953.35, fractionally lower on the week, after moving between 16,884.82 and 16,985.55. Share prices were led by futures trading, rising at the close on arbitrage buying.

Volume remained flat at 250m shares against 258m. Gains led losses by 490 to 459 with 188 unchanged, and the Topix index of all first section stocks rose 6.01 to 1,284.21. In London, the ISE/Nikkei 50 index lost 0.34 to 1,033.23.

While some uncertainty remains over the currency markets and direction of the yen after the G7 meeting, traders said that the stock market is likely to remain around 17,000 for another two to three weeks.

Exporting companies, recently hit by the rising yen, gained ground on bargain hunting, while some dealers started to select beneficiaries of the proposed additional emergency fiscal package.

Leading electronics makers firmed. Hitachi rose Y17 to Y691, NEC advanced Y14 to Y638 and TDK rose Y100 to Y3,230. Aids-related stocks, which had been sold on liquidation of margin positions, rebounded on bargain hunting. Green Cross rose Y20 to Y1,170 and Okamoto Industries advanced Y24 to Y1,000.

Showa Shell Sekiyu, the most active issue of the day, fell Y24 to Y801 following Thursday's resignation of the company president, Mr Takeshi Henmi, taking responsibility for its Y125bn foreign exchange losses.

Property companies lost ground on reports of lower profit estimates. Mitsui Fudosan fell Y10 to Y980 and Mitsubishi Estate lost Y1 to Y899.

In Osaka, the OSE average rose 47.72 to 18,105.61 in volume of 70.3m shares.

Roundup

PACIFIC Rim markets generally continued their firm performances.

HONG KONG moved strongly ahead in heavy trading as hopes of a resumption of Sino-British talks on the colony's future brought strong demand from foreign investors.

The Hang Seng index rose 148.11 - 2.4 per cent higher on the day and 2.9 per cent on the week - to 6,351.99 in turnover that rose to HKDollars 4.57bn.

HSBC Holdings, HKDollars 1.5 higher at HKDollars 65, and Hang Seng Bank, HKDollars 2 ahead at HKDollars 63, which will be among the first companies to announce annual results next month, led the active list.

TAIWAN was also a strong performer as investors gave a broad welcome to the new cabinet and the market rose 2.9 per cent to a seven-month high. The weighted index added 121.75 to 4,278.63 or 9.3 per cent on the week in turnover of TDollars 68.5bn, the heaviest since May 1991.

Financial shares were actively sought on the view that the new finance minister Lin Chen-kuo would resist efforts to resume privatisations in the banking sector.

AUSTRALIA was revived after a quiet start by the expiry of almost 52m options, which helped the All Ordinaries index to pick up from an early decline to close 2.7 higher at 1,609.6, 0.9 per cent higher on the week.

Among issues in which options were exercised, News Corp and TNT each closed 1 cent lower at ADollars 7.46 and 73 cents respectively, while Fletcher Challenge rose 2 cents to ADollars 1.82.

SINGAPORE retreated after three record sessions as investors awaited details of the budget which came after the market closed. The Straits Times Industrial index fell 16.46 to 1,664.50, 1.5 per cent higher on the week.

Inchcape, which announced on Thursday that it was selling its timber business, fell 85 cents to SDollars 6.25 in volume of 2.96m shares.

JP Japan, Asia HK Hong Kong, Asia TW Taiwan, Asia AU Australia SG Singapore, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 21 640
World Stock Markets (Europe): German banks gain on wages settlement Publication 930227FT Processed by FT 930227 By Our Markets Staff

RENEWED speculation that the Bundesbank might ease interest rates next week provided a backdrop to yesterday's activity, writes Our Markets Staff.

FRANKFURT accelerated Thursday's uptrend, with specific strength in banks and construction stocks as the DAX index rose 25.44, or 1.5 per cent to 1,684.35, 0.4 per cent higher on a mixed week.

Turnover rose from DM5.4bn to DM7.9bn, Deutsche Bank leading in DM1.35bn with both Dresdner and Commerzbank also making the top ten active stocks list. The sector liked the 3.3 per cent banking wage settlement, well below expectations according to Mr James Hyde of Williams de Broe; constructions saw good results from Bilfinger & Berger, and Strabag.

Banks were led higher by Commerzbank which has shown relative strength in advance of, and now after, its rights issue with a DM8 gain to DM283. Mr Hyde said that the underlying improvements in its costs and income were enough to offset its problematic loan book.

Bilfinger put on DM50 to DM990 in a sector where 3 to 5 per cent gains were the order of the day, as the market was brought to see that the sector, this year at least, seemed recession proof.

But it was a building materials company which really outperformed: Heidelberger Zement closed DM75, or nearly 8 per cent higher at DM1,050. Mr Michael Geiger of NatWest Securities reckons that the company could see a 50 per cent jump in net profits for 1992, with the elimination of losses in the US and the growth of its building additives business in the eastern German refurbishment market.

PARIS closed higher but most of the activity was accounted for by technical trading as turnover rose to a hefty FFr4.7bn. The CAC-40 index closed 39.07 higher at 1,983.71, 2.4 per cent higher on the week.

In the corporate sector, speculation that Pernod Ricard might be a takeover target, possibly for a UK group, pushed the shares up FFr19.50 or 5 per cent to FFr417.00, while Moulinex rose FFr5.10 to FFr100.10 on reports that it might be seeking a partner.

In spite of a US broker's downgrade, Elf rose FFr10.70 to FFr377.40 on firmer oil prices while financials all gained on hopes for lower interest rates with Societe Generale moving up FFr21 to FFr645. MILAN turned its attention to insurance stocks as the cabinet discussed plans for pension funds. Generali fixed L550 higher at L34,960, before rising to L35,550 after hours. RAS added L974 to L24,883 while Alleanza gained L792 or 5.2 per cent to L16,112.

The Comit index rose 6.41 to 513.21 or 2 per cent on the week, refusing to be deflected by the growing political scandal or Moody's decision to put the country's foreign debt rating under review for a possible downgrade.

Montedison dipped L31 to L1,219 with analysts noting that news of the investigation of its former chairman Mr Raul Gardini would have no impact on the company.

Sme gained L273 to L6,261 in response to Thursday's announcement by Iri, the state holding company, of criteria for the food group's flotation.

ZURICH's SMI index rose 38.1, or 1.8 per cent to 2,099.4, down 0.8 per cent on the week. After the bank's 1992 results, UBS bearers rose SFr8 to SFr939 in active trade. Mr Frederick Hasslauer of Swiss Volksbank in Zurich said that while the UBS profits were at the lower end of expectations, the SFr2 a share rise in dividend was a positive move and that investors were relieved that no rights issue had been announced.

The chemicals sector, under heavy pressure early in the week, bounced back on the view that prices had fallen too far. Ciba-Geigy rose SFr10 to SFr635, Roche added SFr100 to SFr3,950 francs, and Sandoz put on SFr50 to SFr2,960.

MADRID rallied in thin volume, the general index rising 4.89, or more than 2 per cent to 232.89 to close slightly down on the week. Ms Anna MacDonald, who heads Spanish research at Baring Securities, said that people had accepted that depreciation of the peseta within the ERM was inevitable, but that they were staying in equities for the lower interest rates which should be the corollary.

STOCKHOLM gained on falling domestic interest rates, the Affarsvarlden General index rising 10.9 to 1,000.1 for a week's gain of 0.8 per cent. Turnover fell back to SKr807m from Thursday's SKr973m.

Astra managed to restore some of the losses made earlier in the week after the market interpreted its results as disappointing. The B shares put on SKr24 to SKr685, still 1.3 per cent lower on the week. Handelsbanken A rose SKr4 to a new year's high of SKr69 while the B's were flat at SKr63.50.

---------------------------------------------------------------------- FT-SE ACTUARIES SHARE INDICES ---------------------------------------------------------------------- February 26 THE EUROPEAN SERIES ---------------------------------------------------------------------- Hourly changes Open 10.30 11.00 12.00 ---------------------------------------------------------------------- FT-SE Eurotrack 100 1131.72 1132.99 1134.62 1137.62 FT-SE Eurotrack 200 1186.81 1189.29 1190.01 1194.02 ---------------------------------------------------------------------- Hourly changes 13.00 14.00 15.00 Close ---------------------------------------------------------------------- FT-SE Eurotrack 100 1137.82 1139.35 1139.58 1139.80 FT-SE Eurotrack 200 1193.63 1195.48 1194.80 1194.07 ---------------------------------------------------------------------- Feb 25 Feb 24 Feb 23 Feb 22 Feb 19 ---------------------------------------------------------------------- FT-SE Eurotrack 100 1125.06 1116.05 1119.41 1132.76 1136.60 FT-SE Eurotrack 200 1178.13 1172.14 1178.69 1190.84 1191.09 ---------------------------------------------------------------------- Base value 1000 (26/10/90) High/day: 100 - 1140.22; 200 - 1195.75 Low/day: 100 - 1131.27 200 - 1186.18. ----------------------------------------------------------------------

DE Germany, EC FR France, EC ES Spain, EC IT Italy, EC CH Switzerland, West Europe SE Sweden, West Europe P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 21 930
World Stock Markets: Dutch cyclicals falter as defensives strengthen - The dichotomy remains Publication 930227FT Processed by FT 930227 By RONALD VAN DE KROL

The dramatic demise of Daf in recent weeks is a disturbing sign of the times for long-suffering cyclical stocks on Amsterdam's stock exchange.

In spite of past predictions that cyclical shares were about to take off, investors continue to focus on defensive stocks such as banks, insurers, publishers and food companies. This leaves chemicals, paper and transport groups languishing on the sidelines, awaiting an often predicted, but frequently postponed resurgence.

For Daf, recovery will come too late. The company, whose shares came to the market at Fl 47 in 1989, collapsed into receivership in early February. A privately-held successor, DAF Trucks, rose out of the ashes yesterday, partly as the result of financial support by the Dutch and Belgian governments, but investors in the 'old' Daf were left holding worthless shares.

The bad news surrounding Daf has coincided with tales of woe and reduced profitability at other cyclicals, including Hoogovens, caught in the steel sector's crisis, Fokker, KLM, DSM and Akzo, and the paper and packaging companies, KNP and Buhrmann-Tetterode.

Most analysts do not expect cyclicals to start recovering until the second half of 1993, ahead of a economic upswing in Europe in 1994 and 1995. But the rest of the market is expected to post further gains in 1993, even although the mainstays - publishers, banks, insurance companies and food companies - have already enjoyed a good run.

The dichotomy between defensive and cyclical stocks is being heightened by the release of 1992 results, which began in earnest this week. Akzo, which has done better than many of its international competitors, saw its shares fall sharply on Wednesday after unveiling a 3 per cent profit rise and warning that first-half profits might be lower.

Unilever, by contrast, was rewarded for its results with a new 12-month high yesterday of Fl 208.50. Other stocks to hit similar records this week were ABN Amro Bank and ING, the banking and insurance group, which analysts see as a further illustration that financials are not yet overpriced.

'By international standards, Dutch financial stocks are still very cheap and they could well outperform foreign financials,' says Mr Dirk de Jong, an analyst at Van Meer James Capel, who forecasts that the equity market will produce a total return of 20 per cent in 1993 compared with some 7 per cent in 1992.

At Kempen & Co, Mr Fokko Tuin comments that quality stocks will continue to benefit from re-rating by foreign investors, who have realised that the market is comparatively cheap and that Dutch companies have strong balance sheets. This has led investors to pay more than 18 times earnings for recession-proof publishers such as Elsevier and Wolters Kluwer.

There is room for further price gains in 1993, he says, but they will be relatively limited. 'We see the general share index at somewhere between 210 and 220 points by the end of the year,' Mr Tuin says. Since the beginning of the year the index has risen some 6.3 per cent.

The timing of an eventual rise in cyclical shares is one of the most vexing issues facing investors and analysts. Twice during 1992 cyclicals seemed poised for a rally, but the rises later stalled in the absence of substantial interest rate cuts by the Bundesbank and the lack of evidence of economic recovery. Currency devaluations in Britain, Italy and Scandinavia in the autumn presented new problems for cyclicals, which are heavily dependent on European exports. In the end, the 3.5 per cent increase in the general share index in 1992 was carried by the publishers, banks and insurance companies, which both registered gains of more than 20 per cent, helping to overcome a decline of nearly 40 per cent in paper stocks and other cyclical sectors.

Still, analysts say, the importance of cyclicals should not be exaggerated, nor should they obscure the strength of other parts of the market.

Mr de Jong notes that the cyclical companies account for just 10 per cent of the market's equity capitalisation, compared with the 30 per cent share held by manufacturing and cyclical shares in Germany.

Although the cyclical companies may be grabbing the headlines, their relatively small market share means that Dutch listed companies as a whole are forecast to show profit gains in 1993 - analysts' estimates range from 7 per cent to 13 per cent - while Germany's companies could well see flat results. This augurs well for the market, as do expected lower interest rates and a stable dollar.

In the short term, however, attention is focused on 1992 earnings. A climax of sorts will be reached on Thursday, when DSM, which has a big presence in cyclical bulk chemicals, Philips, considered by some analysts to be a cyclical share, and Heineken, a classic defensive stock, all unveil results.

The market has already discounted a halving of DSM's dividend to Fl 4 in 1991. But Mr Tuin of Kempen says: 'If the dividend turns out to be Fl 3, I think DSM could fall by 10 per cent.'

NL Netherlands, EC P6231 Security and Commodity Exchanges CMMT Comment & Analysis MKTS Market data P6231 The Financial Times London Page 21 882
World Stock Markets: South Africa Publication 930227FT Processed by FT 930227

A FALL in the gold price depressed the index, which lost 30 or 3 per cent to 972, although trading volumes were reported to be low. Industrials declined 6 to 4,487 while the overall index was off 7 at 3,418.

ZA South Africa, Africa P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 21 69
London Stock Exchange: New highs and lows for 1992/93 Publication 930227FT Processed by FT 930227

NEW HIGHS (189)

BRITISH FUNDS (40) AMERICANS (13) American T & T, Ameritech, BankAmerica, Bel Atlantic, BellSouth, FPL, Gillette, Morgan (JP), NYNEX, Quaker Oats, Sears Roebuck, Tenneco, US West, CANADIANS (1) Hudson's Bay, BANKS (6) Abbey Natl., Allied Irish, Bk. Scotland 9 1/4 pc Pf., Do 9 3/4 pc Pf., HSBC (HKDollars ), Natl. Australia, BREWERS (1) Holt (J), BLDG MATLS (1) Kalon, BUSINESS SERVS (7) Capita, Hutch. Whmp., Inchcape, Rentokil, Rolfe & Nolan, Salvesen (C), Sherwood, CHEMS (2) BTR Nylex, Engelhard, CONGLOMERATES (1) CSR, ELECTRICALS (2) Kenwood, Motorola, ELECTRICITY (1) China Light, ELECTRONICS (4) Hewlett-Packard, Macro 4, Polar, Trace Computers, ENG AERO (2) Hunting 8 1/4 pc Pf., Westland, ENG GEN (4) Adwest, Dickie (J), Mayflower, Spirax-Sarco, FOOD MANUF (2) Nichols (Vimto), Unilever, FOOD RETAILING (2) Iceland Frozen, Park, HEALTH & HSEHOLD (1) CrestaCare, HOTELS & LEIS (2) Owners Abroad 9 3/4 pc Pf., Stanley, INSCE BROKERS (1) Lloyd Thompson, INSCE LIFE (1) Lon. & Manchester, INV TRUSTS (42) CST Emrg. Asia, Do Wts., Castle Cairn, China & Eastern, Drayton Far East, Dunedin Worldwide, EFM Japan, English Natl., European Assets, Fidelity Euro. Values Wts., Do Units, First Philippine, Do Wts., Flmg. Far Eastern, Flmg. Intl. High Inc., For. & Colonial Eurotrust, For. & Col. Pacific, Do Wts., Gartmore Emrg. Pacific, Govett Oriental, Henderson Eurotrust Units, Hong Kong Wts., Jupiter Euro. Wts., Martin Currie Pac., Do Wts., Mid Wynd, Morgan Greenfell Equity Wts., Murray Intl., Do B, New Frontiers Devlpt., Do 6 1/2 pc Ln. '10, Rights & Issues Inc., Robeco N/V, Do Sub Shares, Rolinco N/V, Do Sub. Shares, Scott. Asian, Second Market, TR Pacific, Thornton Asian Emrg. Mkts., Thornton Pan Euro., Tor, Turkey Tst., MEDIA (9) Avesco, Blenheim, GWR, Harrington Kilbride, Metal Bulletin, News Corp., Portsmouth & Sunderland, Sterling Publs., Watmoughs, MERCHANT BANKS (1) Close Bros., MTL & MTL FORMING (1) Billam (J), MISC (5) Alumasc, Gt. Southern, LGW, Lambert Howarth, Silentnight, MOTORS (3) Bletchley, Davenport Vernon. Quicks, OIL & GAS (5) Bow Valley, British Gas, Kelt, Ramco, Santos, OTHER FINCL (4) INVESCO MIM, Do 9pc '95-00, Natl. Home 7 1/2 pc Pf., St James Pl. Cap., OTHER INDLS (3) BH Prop., Pacific Dunlop, Scapa, PACKG, PAPER & PRINTG (3) Jarvis Porter, Klearfold, Low & Bonar, PROP (2) Daejan, Lend Lease, STORES (2) Courts, Partridge Fine Arts, TELE NETWORKS (1) Cable & Wireless, TEXTS (3) Alexandra Workwear, Allied Text., West Trust, TRANSPORT (3) Eurotunnel Units, GATX, Manchester Ship Canal, WATER (3) Cheam, East Surrey, Mid Kent, MINES (6) CRA, Delta, Normandy Poseidon, Nth. Broken HIll, Sons Gwalia, Zambia.

NEW LOWS (12).

BLDG MATLS (2) Johnston, Russell (A), BUSINESS SERVS (1) Gardner (DC), INV TRUSTS (3) Derby Inc., M & G Dual Inc., SPLIT Inc., MEDIA (1) Birkdale, MISC (1) Toye, OTHER INDLS (1) Eleco, PROP (2) Herring Baker Harris, High-Point, STORES (1) Pantos.

Other market statistics, Page 11.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 15 503
London Stock Exchange: GUS active Publication 930227FT Processed by FT 930227 By CHRISTOPHER PRICE, PETER JOHN, JOEL KIBAZO and STEVE THOMPSON

A report in the trade press that Great Universal Stores is poised to rekindle its interest in the property market provided the latest hint that liquidity may be returning to the moribund sector. GUS, which has a property investment portfolio worth more than Pounds 600m, was seen as displaying good timing in reducing property activity before the boom years of 1989-90. By apparently expanding again, the group is viewed in some quarters as another harbinger of revival in the commercial property market.

The trade report prompted broker Hoare Govett to change its stance on the stock moving from a sell to undervalued. Analyst Ms Emma Burdett said: 'A gradual return to property is a positive move by GUS which will be able to use its cash in something with a good yield at a time of declining interest rates.' She added that the stock had underperformed in the last quarter and the shares were now looking better value. The 'A's closed 13 ahead at 1643p.

GUS, which has cash reserves of over Pounds 1bn, played down the report, a spokesman asserting: 'We have no crash programme to invest.'

The UK's two leading oil exploration and production (E&P) stocks, Enterprise Oil and Lasmo, were the best performers in the oil sector.

One specialist said Lasmo started the ball rolling, moving up strongly after a stock overhang had been cleared and amid vague takeover talk, dragging Enterprise up with it.

There were suggestions that Enterprise had been talking to US institutions but that was seen as unlikely as Enterprise is in the 'closed period' and consequently prevented from discussing its trading progress. Enterprise is due to report preliminary figures on March 11. Lasmo closed 7 higher at 8 up at 182p and Enterprise 16 firmer at 476p.

Pharmaceuticals and scientific instruments group Fisons, which is expected to show a profit fall to between Pounds 100m and Pounds 120m from 1991's Pounds 190.5m when it reports on Tuesday, slipped 3 to 241p. However, the market expects the dividend to be maintained at 8.7p a share.

Glaxo gained 22 to 667p as analysts noted that the US Food and Drug Administration advisory committee was meeting to discuss the company's Serevent asthma drug. The meeting had been known about for some time but investors are expecting good news. There was also some talk that the company might make a bid for Smith & Nephew. The potential link was greeted with disbelief, but there was activity in Smith which rose 5 1/2 to 156p on turnover of 3.9m.

A difficult week for the high street banks closed with the sector staging a strong fight back after the bout of downside pressure triggered earlier by higher than expected bad debts at NatWest.

Abbey National, reporting on Tuesday and expected to increase the annual dividend in excess of 10 per cent, jumped 10 more to a 398p.

Hambros eased a penny to 313p, with one securities house said to have bought a block of 1.9m shares - around 1 per cent of those in issue - at 311 1/2 p and placed them in the market at 313p.

Composite insurances showed General Accident 10 up at 569p, despite strong suggestions that a big fund raising could accompany next Tuesday's preliminary results which should see the group reveal losses much reduced at around Pounds 30m, compared with last time's Pounds 171m loss.

A 5 per cent rise in the price of Pernod shares in Paris revived old speculation of a bid and rights issue from Allied Lyons. Allied's shares reflected the disinterest for the story in London and rose 2 to 587p. Kingfisher was hounded by a combination of worries over the French economy, a negative press article and profit-taking, all on the back of its recent purchase of Darty, the French electrical retailer. The shares tumbled 12 to 544p.

Unilever's post-results run continued, the shares adding 17 to 1225p. There were also reports of switching from the NV into the PLC shares by investors seeking a double dividend.

P & O firmed 3 to 549p, with NatWest Securities having recommended the stock. The securities house believes the dividend is secure and said that when the company reports figures towards the end of the month, 'writedowns of land and properties will affect both the results and balance sheets but these will generally be seen as history, whereas the sterling devaluation will confer increasing benefits'.

Pearson shares fell 16 before closing 10 down at 381p after a block of about 1.2m shares were sold at 383p overnight.

Great Universal Stores LASMO Glaxo Holdings P&O Group GB United Kingdom, EC P5961 Catalog and Mail-Order Houses P6231 Security and Commodity Exchanges P1311 Crude Petroleum and Natural Gas P2834 Pharmaceutical Preparations P4482 Ferries P1521 Single-Family Housing Construction P421 Trucking and Courier Services, Ex Air CMMT Comment & Analysis MKTS Market data P5961 P6231 P1311 P2834 P4482 P1521 P421 The Financial Times London Page 15 842
London Stock Exchange: US chases ICI Publication 930227FT Processed by FT 930227 By CHRISTOPHER PRICE, PETER JOHN, JOEL KIBAZO and STEVE THOMPSON

US buying ensured heavy volume in ICI shares following the hefty gain on Thursday when the company announced results, demerger details and a Pounds 1.3bn cash call.

The shares were actively traded in New York on Thursday night where the American Depositary Receipts rose Dollars 3 1/4 . In London, they opened 19 ahead and moved forward steadily to close 55 1/2 up at 1208p on turnover of 10m. Prices were squeezed higher as many UK dealers were caught short by the extent of the US enthusiasm. Specialists said yesterday that the shares were rapidly approaching a resistance barrier between 1250p and 1350p and there was likely to be a lull in trading ahead of the rights issue in May.

Meanwhile, chemicals group Courtaulds saw its shares rise 10 to 566p in sympathy with the ICI performance.

Imperial Chemical Industries GB United Kingdom, EC P2819 Industrial Inorganic Chemicals, NEC P6231 Security and Commodity Exchanges CMMT Comment & Analysis MKTS Market data P2819 P6231 The Financial Times London Page 15 191
London Stock Exchange: Income funds look to Gas Publication 930227FT Processed by FT 930227 By CHRISTOPHER PRICE, PETER JOHN, JOEL KIBAZO and STEVE THOMPSON

STRONG support for British Gas, apparently from income funds seeking to take advantage of the 3.5 per cent yield on the final dividend, drove the shares up sharply to close 9 higher at 298p. Buying was additionally fuelled by reports that James Capel, the leading agency broker, had upgraded its dividend forecasts for the company after Gas's 1992 figures announced on Thursday.

The income funds are expected to be keen supporters of the stock until it goes ex-dividend on May 10. However, some specialists cautioned that the outcome of the inquiry being carried out by the Monopolies and Mergers Commission may be made public before that time.

British Gas GB United Kingdom, EC P4923 Gas Transmission and Distribution P6231 Security and Commodity Exchanges CMMT Comment & Analysis MKTS Market data P4923 P6231 The Financial Times London Page 15 162
London Stock Exchange: Equity futures and options trading Publication 930227FT Processed by FT 930227 By JOEL KIBAZO

SOLID buying on the last day of the equity account led to a shortage of stock in futures, sending the March contract on the FT-SE sharply ahead, writes Joel Kibazo.

It started trading tentatively at 2,835, a sizeable selling order early in the day sent the contract falling to 2,832, but then firm buying led March higher for most of the session.

The buying was encouraged by renewed speculation about a cut in German interest rates, and a firm UK gilts sector. This demand and covering of short positions by traders led to a squeeze in March and it was trading at 2,873 ahead of the opening of Wall Street.

Further demand saw it close at the day's high of 2,878, up 47 on its previous close and at a 6-point premium to cash. Turnover was a healthy 13,815 contracts.

In traded options, volume improved to 29,949 lots with 11,747 lots dealt in the FT-SE 100 options. Interest in ICI continued to ensure that it was the day's most actively dealt stock option with 2,238 contracts traded. It was followed by British Steel at 1,931.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 15 220
London Stock Exchange: Footsie approaches its closing peak Publication 930227FT Processed by FT 930227 By TERRY BYLAND, UK Stock Market Editor

REPRIEVED, for the time being at least, from the impact of the blue chip rights issue threatened at the beginning of the week, the London stock market rebounded strongly yesterday, gaining 39.3 points to close within six points of its previous all-time closing high.

Speculation on the chances of a German rate cut gave a final boost to stocks in London. Gilt-edged issues extended their gains at the end of the session. There was renewed US demand for ICI shares and the end of the two-week equity market account prompted a rush of bear closing - buying from market traders needing shares to meet selling commitments accepted earlier this week.

The bear rush was headed by UK buyers of ICI, who were in turn reacting to heavy demand for the shares in New York overnight. London traders are believed to have suffered heavy losses on ICI shares, which they sold down to 1076p on Monday; the shares ended at just over Pounds 12 in London last night and were attracting renewed US support.

Upward pressures on share prices received a further boost as the final deals related to the Pounds 200m-plus buy programme seen earlier in the week were hurriedly transacted.

Equities moved ahead strongly throughout the session, receiving a final boost as the new trading account opened.

The FT-SE Index closed 39.3 up at 2,868, just under its closing high of 2,873.8 achieved on February 3 - on the following day, the Footsie traded briefly at 2,900.1. By last night, the Index has recovered all the ground lost since last Friday to show a net gain of 28 points over the week. The change in the Index over the two-week equity account is much the same (25 points).

The market has moved through its trading range this week, dipping to 2,809 on Thursday and challenging 2,873 at yesterday's peak. Sentiment has been dominated by the swing of views ahead of the ICI trading and demerger statement, culminating in relief that the Pounds 1.3bn rights issue will not hit the market until June. Violent swings in the ICI share price have had a significant effect on market indices.

Seaq volume increased in late trading as London caught the hint of optimism on German interest rates. The final Seaq total of 671.3m shares compared with 620.6m on Thursday, with both figures swollen by the excitement in ICI and the other pharmaceutical leaders.

Non-Footsie volume made up around 61 per cent of yesterday's total. Retail business in equities has remained high in London.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 15 460
Money Markets: Rate cut envisaged Publication 930227FT Processed by FT 930227 By JAMES BLITZ

THERE was strong speculation yesterday that the Bundesbank would ease monetary policy next week after the German banking unions accepted a 3.3 per cent pay rise for its members, writes James Blitz.

Yesterday's deal followed the recent 3.0 per cent rise for public sector workers, and may have led the Bundesbank to believe that pay deals would remain within a 3 to 4 per cent range.

That was one reason why dealers were yesterday more bullish about the prospect of the Bundesbank easing rates at its council meeting next week. Recent calls by the Bundesbank for a speedy conclusion to the solidarity pact have also raised speculation that the German central bank wants to ease rates as soon as possible.

The March Euromark contract rose 10 basis points on the day to close at 91.99, a level which assumes that 3-month money on March 15th will be at 8.01 per cent.

That assumed that there would be a 30 basis point dip in the cost of 3-month cash in the next fourteen days.

French franc futures also enjoyed a rally, with the March contract rising 29 basis points to close at 88.38.

This came despite a weaker performance by the French currency and the fact that 3-month French franc interest rates have failed to dip below 12 per cent.

Many dealers believe that the council meeting on March 4th is the last chance for the Bundesbank to ease policy before the March contracts expire and the parliamentary elections in France begin.

But in spite of yesterday's stronger performance, the pessimists over Bundesbank policy were still out in force yesterday.

'We know what should happen and what needs to happen, but none of us know when it will,' said one dealer last night.

Sterling futures were caught up in yesterday's rallies, despite a colossal shortage in the discount market.

The Bank of England forecast a shortage of Pounds 2.9bn yesterday, but it was removed without the need for late assistance.

Three-month money again closed at 6 1/8 per cent. The March short sterling contract rose 8 basis points at one stage, to peak at 94.11, but later fell to a close of 94.04. At this level it is virtually assuming unchanged base rates until after the budget.

DE Germany, EC GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 13 411
Foreign Exchanges: Dollar rises on GDP figures Publication 930227FT Processed by FT 930227 By JAMES BLITZ

THE DOLLAR checked its recent fall against the D-Mark yesterday following the strong upward revision for US fourth quarter GDP that the market had been expecting, writes James Blitz.

The annualised 4.8 per cent rise in GDP in the last 3 months of 1992, against an original estimate of 3.1 per cent, helped the dollar to peak at DM1.6470 in the early afternoon in Europe.

However, dealers appeared to be following the old adage 'buy on the rumour and sell on the facts', and the US currency later slipped to a close of DM1.6415, a net 0.7 pfennigs up on the day.

The dollar's rise was also helped by a growing feeling that the Bundesbank may ease monetary policy again at its council meeting next Thursday.

Dealers appeared to think that there would no cut in Germany's officially posted rates. However, a softening of the rate at which the Bundesbank provides wholesale funds to commercial banks was deemed more likely.

The German banking union's decision to settle on a 3.3 per cent wage rise for its 430,000 workers was one reason for the optimism on German rate cuts.

Following the public sector unions' decision to keep wage rises to 3.0 per cent, the chances of inflation being contained within ranges that the Bundesbank would find acceptable is now seen to be more likely.

Another factor signalling a near-term cut in rates was the recent call from Mr Hans Tietmeyer, the Bundesbank vice-president, for urgent action to conclude the drawn-out solidarity pact negotiations in Bonn between the government, the federal states and the opposition.

One dealer interpreted this call as a sign that the Bundesbank wants to ease monetary policy as quickly as possible.

The dollar was underpinned against the yen by a growing belief that there will be no accord by the G7 finance ministers meeting in London today to maintain a strong yen against the dollar.

An announcement that there will be no formal communique following the meeting reinforced this view. The Japanese authorities are concerned that a strong yen will restrict their exports during a period of acute economic weakness in their country. The dollar closed at Y118.00 from a previous Y117.50.

Prospects of an easing in German rates again helped to reduce tensions in the exchange rate mechanism yesterday. The Spanish central bank again intervened in the markets. The peseta closed at Pta71.69 against the D-Mark from a previous close of Pta71.93.

US United States of America DE Germany, EC JP Japan, Asia ES Spain, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 13 449
International Company News: PWA unveils record deficit for year Publication 930227FT Processed by FT 930227 By ROBERT GIBBENS MONTREAL

PWA, parent of Canadian Airlines International, yesterday unveiled a record 1992 loss of CDollars 543m (USDollars 433m), or CDollars 11.37 a share.

Last Friday Air Canada, its bigger rival, reported a final 1992 loss of CDollars 454m, or CDollars 6.13 a share.

Together the country's two leading airlines lost almost CDollars 1bn in 1992, reflecting the long recession, overcapacity and vicious fare discounting in the domestic market. Small charter airlines are the only ones remaining profitable in Canada.

Both Air Canada and Canadian are struggling to complete ownership and operating alliances with US-based international airlines but expect to suffer more losses in 1993.

PWA's 1992 loss included a CDollars 333m special charge to cover the expected costs of its proposed alliance with AMR, parent of American Airlines, which is yet to be completed, and also staff severance and other special items. Revenues were CDollars 2.88bn.

In 1991 PWA lost CDollars 161m or CDollars 3.66, including special items. Its 1992 operating loss before special charges was CDollars 108.7m, against a deficit of CDollars 112m in 1991.

Operating expenses were steady, but the gain in revenues was only 0.2 per cent.

PWA Corp CA Canada P6719 Holding Companies, NEC P4512 Air Transportation, Scheduled FIN Annual report P6719 P4512 The Financial Times London Page 12 231
International Company News: Earnings doubled at Hollinger Publication 930227FT Processed by FT 930227 By BERNARD SIMON and AGENCIES TORONTO

EARNINGS at Hollinger, the international publishing group controlled by Mr Conrad Black, more than doubled last year, thanks to proceeds from the sale of shares in the UK Telegraph group as well as improved operating results at its main subsidiaries.

These gains more than offset losses early last year from the sale of a small minority interest in United Newspapers.

Hollinger's earnings from continuing operations rose to CDollars 77m (USDollars 61m), or CDollars 1.19 a share, from CDollars 32m, or 32 cents, in 1991. Revenues climbed to CDollars 878m from CDollars 783m.

Tax provisions jumped to CDollars 47m from CDollars 24m, reflecting the end of loss carryovers claimed by the 68 per cent-owned Telegraph group in the UK.

Hollinger said operating results at all its leading subsidiaries improved during the fourth quarter and were well ahead of budget.

Operating profits in the UK, consisting mainly of the Telegraph, rose to CDollars 111.5m from CDollars 90m.

Equity earnings from John Fairfax, the Australian newspaper group in which the Telegraph has a 15 per cent stake, climbed to CDollars 3m from CDollars 384,000. The Fairfax contribution has been adjusted to reflect Canadian accounting principles.

Income from American Publishing, a group of more than 200 small US newspapers, rose to CDollars 26.4m from CDollars 21.5m. In Canada, where the company owns two chains of small newspapers, operating losses narrowed to CDollars 2.5m from CDollars 3.6m.

Southam, meanwhile, Canada's biggest daily newspaper publisher in which Hollinger earlier this year acquired a 22.6 per cent stake, reported a 1992 loss of CDollars 262.9m or CDollars 4.28 a share against a deficit of Dollars 153.2m or Dollars 1.94 the previous year.

Fourth-quarter losses were CDollars 76.9m or CDollars 1.21 a share against CDollars 114.3m or CDollars 1.94, agencies report from Toronto.

The group, however, would have broken even if unusual items totalling CDollars 122.7m after tax and a provision of CDollars 140m related to discontinued operations had been excluded. The fourth-quarter loss included CDollars 90.9m in after-tax unusual items.

Southam also said it plans to issue at least CDollars 100m in equity shortly to cut debt, and continue a programme of selling non-core or non-performing assets.

Hollinger has proposed transferring half of its 22.6 per cent interest in Southam to the Telegraph.

Hollinger Inc CA Canada P6719 Holding Companies, NEC P2711 Newspapers FIN Annual report P6719 P2711 The Financial Times London Page 12 416
International Company News: Bridgestone turns in 10% fall Publication 930227FT Processed by FT 930227 By CHARLES LEADBEATER TOKYO

BRIDGESTONE, the leading Japanese tyre maker, yesterday reported a 10.1 per cent drop in pre-tax profits for the year to the end of December, largely a reflection of the slump in Japanese vehicle production.

However, Sumitomo Rubber, one of its main competitors, reported a 2.3 per cent increase in pre-tax profits on a slight increase in sales.

Bridgestone said pre-tax profits fell to Y68.9bn (Dollars 586m) from Y76.6bn in the previous year on a 1.5 per cent drop in sales to Y725bn.

The company said its earnings were hit by the slump in domestic vehicle sales and by the appreciation of the yen against the dollar, which depressed the value of its US earnings.

Although the company has no concrete plans for restructuring, it will be led by a new president from April who is expected to introduce significant management changes.

Mr Yoichiro Kaizaki has spent most of his career in Bridgestone's diversified and relatively decentralised chemical division. He has been responsible for the rationalisation of Bridgestone's US operations at Firestone, which it acquired in the late 1980s.

The company yesterday announced a sweeping change in its board, with the promotion of four executives to report directly to Mr Kaizaki.

The Bridgestone group's consolidated worldwide sales were Y1,745bn, 1.1 per cent down on 1991. Consolidated after-tax net earnings rose from Y7.4bn in 1991 to Y28.4bn last year.

Bridgestone/Firestone, the US subsidiary, is forecast to make a Dollars 10m profit this year, against a loss of Dollars 132m last year.

Sumitomo Rubber attributed its profit increase to strong domestic sales of new products and streamlining measures. Its pre-tax profits rose by 2.3 per cent in the year to Y11.8bn.

Its sales rose by 2.3 per cent to Y260bn, largely as a result of higher sales of high performance tyres.

Bridgestone Corp Sumitomo Rubber Industries JP Japan, Asia P3011 Tires and Inner Tubes FIN Annual report P3011 The Financial Times London Page 12 339
International Company News: Repsol plans Dollars 1bn worldwide share issue Publication 930227FT Processed by FT 930227 By TOM BURNS MADRID

REPSOL, the Spanish state-controlled energy group, is to raise close to Dollars 1bn in an international share issue following a surprise government announcement yesterday authorising the conglomerate to double the amount of shares it had originally intended to place on the market.

The placement, probably between mid-March and mid-April, is likely to be one of the biggest international distributions of any share issue this year.

The decision to double the potential income from the placement appears to underline an urgent need by the government to increase gains from the disposal in order to reduce the budget deficit.

Lazards is advising in the share offer, and, in a move that reflected the scale and complexity of the transaction, Repsol appointed Goldman Sachs as a separate global co-ordinator of the issue earlier this month.

A government spokesman said Instituto Nacional de Hidrocarburos, INH, the state holding that owns 54.5 per cent of Repsol, had been authorised to sell up to 40m shares.

Such a share offering, if taken up, would raise Pta109bn (Dollars 931m) at current market prices.

In January Repsol had indicated it would only be placing 7 per cent of INH's equity in the market when it said it was seeking to raise Dollars 500m in a circular to institutions that invited bids to lead the placement.

Dealers said they expected great demand for Repsol paper. Repsol's sharesrose by Pta40 to Pta2,745 in Madrid yesterday.

Repsol ES Spain, EC P2911 Petroleum Refining FIN Share issues P2911 The Financial Times London Page 12 272
International Company News: Continental expects difficult year Publication 930227FT Processed by FT 930227 By CHRISTOPHER PARKES FRANKFURT

CONTINENTAL, the German tyre maker, expects an 'extraordinarily difficult' current financial year in Europe, only partly relieved by improving conditions in north America.

However, there will be no dramatic effect on sales, deliveries or earnings, the company said yesterday.

Last year had been satisfactory despite the weakening in the second half. Deliveries of both car and commercial vehicle tyres rose 6 per cent, while turnover, affected by currency fluctuations, rose only 3 per cent to DM9.7bn (Dollars 5.9bn).

Without giving any profit details, the company said full-year results were 'clearly in the black' after a DM128m net loss in 1991. At the halfway mark it reported profits of DM118m.

Continental AG DE Germany, EC P3011 Tires and Inner Tubes COMP Company News P3011 The Financial Times London Page 12 146
International Company News: Losses at Saab Automobile deepen Publication 930227FT Processed by FT 930227 By CHRISTOPHER BROWN-HUMES STOCKHOLM

LOSSES at Sweden's Saab Automobile deepened to SKr2.69bn (Dollars 343m) last year as the car maker was hit by worsening market conditions worldwide and heavy restructuring costs.

The worse-than-expected result is 20 per cent down on the 1991 deficit of SKr2.24bn and follows a doubling of losses in the final three months of the year when conditions in the car industry deteriorated sharply.

The group also took a one-off restructuring charge in the final quarter following its decision to cut 2,000 jobs, more than 20 per cent of its workforce, as part of a new rationalisation programme. It declined to specify the size of the charge yesterday.

Saab, jointly owned by Saab-Scania and General Motors of the US, is predicting a 'substantial improvement' in its 1993 figures but it still expects to remain in the red. This would be its fifth consecutive year of losses.

Revenues fell to SKr14.7bn from SKr15bn, as car sales slid to 86,800 from 87,500 in 1991.

The group's three main markets, Sweden, the US and the UK, were all depressed although there were upturns in areas including Italy, Belgium, Spain, Australia and Hong Kong.

In 1993, the group is hoping for a better result in both the US and UK, although it expects the Swedish market to remain difficult and other markets like Germany to be tough.

It believes its overall result will also be helped by its rationalisation programme, which aims to cut costs by SKr2bn; the devaluation of the Swedish krona, and the launch of a new car model.

Details of the new car have been kept under close wraps, although there is no doubt that a success is needed to ensure the group's revival. The model replacement for the 900 series- will be unveiled at the Frankfurt motor show in September before going on sale in the autumn.

Partly because of the disruption which introduction of the new model will cause, and partly because of a less intensive marketing drive, the company is forecasting car sales of only 80,000 this year.

The group's new chief executive, Mr Keith Butler-Wheelhouse, has already stated he would like to see the group's break-even production level reduced to 70,000 units.

Last month, Saab's owners each promised to inject SKr1.4bn in new capital during 1993 to help the group return to profit. They have already ploughed in SKr5.5bn since mid-1991.

Saab Automobile SE Sweden, West Europe P3711 Motor Vehicles and Car Bodies FIN Annual report P3711 The Financial Times London Page 12 433
International Company News: Assets sale by First American Bank Publication 930227FT Processed by FT 930227 By KAREN ZAGOR NEW YORK

FIRST American Bankshares, the BCCI-tainted Washington-based bank, has agreed to sell virtually all of its remaining assets for Dollars 453m in cash to First Union of North Carolina.

First Union will acquire all of the stock of First American Metro, the holding company for First American Bank of Virginia, Maryland and Washington DC.

The agreement comes about eight months after the Federal Reserve Board ordered the Washington bank be sold after BCCI Holdings pleaded guilty to illegally controlling First American.

Mr Harry Albright, court-appointed trustee of First American, said: 'Under this agreement, First American's banking franchise in metropolitan Washington will be sold intact to a strong banking institution which will assume all of the deposit liabilities and acquire substantially all of First American's remaining assets.'

First American Bank of Georgia is in liquidation and First American Miami will be acquired by AmTrade International Bank of Georgia.

Mr John Georges, president of First Union said 'after so much uncertainty and so much waiting, First American's future is secure'. First American itself has not been accused of any wrongdoing.

At the end of 1992, First American Metro had total assets of Dollars 4.6bn and deposits of Dollars 4bn. The acquisition will make First Union the eighth biggest US banking group.

First American Bankshares First Union First American Metro US United States of America P6712 Bank Holding Companies P6022 State Commercial Banks COMP Disposals P6712 P6022 The Financial Times London Page 12 259
International Company News: Larssen takes new post at Volkswagen Publication 930227FT Processed by FT 930227 By CHRISTOPHER PARKES

VOLKSWAGEN, the German automotive group, yesterday announced the first of an expected wave of boardroom changes. Mr Gunnar Larsson, 50, is to take charge of a new portfolio embracing environmental issues, traffic and research.

He replaces Mr Ulrich Steger, who is to leave the company less than 18 months after being appointed to develop an environmental management strategy.

Mr Larsson was formerly director responsible for technical development at Audi.

Volkswagen DE Germany, EC P3711 Motor Vehicles and Car Bodies PEOP Appointments P3711 The Financial Times London Page 12 106
International Company News: Nobel's finance chief resigns Publication 930227FT Processed by FT 930227

THE HEAD of finance and control at Sweden's Nobel Industries, Mr Jan Kihlberg, resigned from his position yesterday, effectively taking responsibility for the SKr750m (Dollars 95.5m)foreign exchange losses which more than halved the group's 1992 profit to SKr200m.

When announced its result earlier this week, Nobel stressed there was no question of unauthorised behaviour, but said human error was partly to blame for the high foreign exchange losses.

Nobel Industrier SE Sweden, West Europe P2833 Medicinals and Botanicals P2834 Pharmaceutical Preparations P2899 Chemical Preparations, NEC P2851 Paints and Allied Products PEOP Personnel News P2833 P2834 P2899 P2851 The Financial Times London Page 12 116
World Commodities Prices: Spices Publication 930227FT Processed by FT 930227

Grenada's nutmeg and mace marketing will now be exclusively co-ordinated by a newly-appointed agent based in Brussels, reports Man-producten. Indonesian siauw/ambon bwp USDollars 800 a tonne spot, shipment Dollars 750; shrivelled nutmegs spot Dollars 1,295, shipment Dollars 1,250; mace broken 2 spot Dollars 1,400, shipment Dollars 1,375. Cochin ginger easier on better arrivals and good crop forecasts, between Dollars 1,025 and Dollars 1,075 cif Rotterdam; Nigerian split ginger Dollars 800 ex-warehouse. Mexican pimento slightly easier at Dollars 1,750 spot, shipment Dollars 1,725 cif; Jamaican unchanged; Guatemalan spot Dollars 1,900.

US United States of America P01 Agricultural Production-Crops P6231 Security and Commodity Exchanges COSTS Commodity prices P01 P6231 The Financial Times London Page 12 122
UK Company News: Dispirited publicans who are scraping the barrel - Landlords frustrated over what they claim are unfair practices Publication 930227FT Processed by FT 930227 By ANGUS FOSTER

MR ROGER McLoughlin has been landlord of the Golden Lion in Solihull for eight years, working his way up from a manager for Courage, the brewer, to a tenant.

He said he ran a 'pretty good pub' and never had financial problems - until 'the trouble' started.

In 1991 he switched from a tenancy to a lease with Inntrepreneur Estates, the property joint venture between Grand Metropolitan and Courage. Under the lease, his annual rent increased nearly 60 per cent from Pounds 52,000 to Pounds 83,000. He knew the terms of the lease were demanding, but he accepted them. 'It (the pub) isn't just my business, it's my home,' he said.

He now wishes he had refused. His barrelage has fallen from 800 to 550 a year because of recession and his rent is equal to 24 per cent of turnover. He is making a loss, owes Inntrepreneur Pounds 34,000 and now faces losing the pub and the savings he invested in it.

Mr McLoughlin was one of 30 publicans who met on Thursday afternoon in Hampstead. The mood was angry, but determined, and all those who spoke claimed to be victims of unfair or aggressive practices by Inntrepreneur.

The meeting was arranged by the National Association of Inntrepreneur Lessees (Nail), an informal body which claims its membership is growing rapidly. It is difficult to know how many publicans are actively involved, but NAIL's lawyer, Mr Julian Maitland-Walker of Charles Russell, said he is acting for 80 Inntrepreneur tenants.

They intend to argue in court cases that the leases are invalid under EC law. They also take issue in some instances with information given the lessees on a pub's likely profitability.

GrandMet said it could not comment on its relations with licencees or the operation of the Inntrepreneur leases because of the pending court cases.

Most of the complaints follow a similar pattern. Publicans claim they were persuaded to sign leases at very high rentals. Once recession started to hit business, the rentals became uneconomic. Inntrepreneur refused to arbitrate and usually sent the bailiffs instead. There are also complaints about some of Inntrepreneur's practices. For example, the company charges Pounds 100 unless leaseholders agree to pay by direct debit.

Sir Allen Sheppard, GrandMet's chairman, told the annual meeting this week that unsuccessful leaseholders were 'generally individuals who have been unable to sustain the level of turnover'.

Mr AG Cooper, a chartered surveyor at GW Cooper & Co who is familiar with many cases, said lessees were victims of falling beer volumes and recession. 'The rents they are paying cannot be afforded today in a very large number of cases,' he said.

The standard Inntrepreneur lease appears fair. Rent reviews, which take place every five years, can only be upward. But there is room for arbitration and an independent valuer if the two sides cannot agree on the increase.

However, rentals are based on historical levels of profitability so some lessees' rentals do not reflect recession. Also, there are no provisions for arbitration when Inntrepreneur frees a pub from tied beer supply and increases the rent in compensation. Last October nearly 2,000 pubs were freed in this way to comply with the government's beer orders. Mr Martin Moore, licencee of the Bridge at Uckfield, was told his rent was being increased from Pounds 24,000 to Pounds 29,100. He said an independent valuation had put the rent at about half that amount.

The original attraction of the lease was that it gave lessees security of tenure. In the late 1980s, when property prices were still rising and competition to take over pubs was often fierce, leaseholders also had the chance to share in a property's success by selling on, or assigning, the lease.

For leaseholders now in trouble, there are few chances of assignment. Capital values and annual turnovers have fallen, making Inntrepreneur's rentals unattractive.

Some leaseholders also claim Inntrepreneur's actions have blocked planned assignments. Mrs Pat Whybrow, of the Rose and Crown at Shorn, said she had lined up a purchaser in 1990. But the assignment, which needed Inntrepreneur's agreement, was called off after 'endless delays'.

In a 1991 interview with the Financial Times, Mr Bob Williams, GrandMet's group property director, said Inntrepreneur was partly designed to create a more entrepreneurial spirit among its publicans. 'There had been this paternalism built up over centuries to tenants. Most were not businessmen, they were failed professional footballers or retired coppers,' he said.

For people like Mr McLoughlin, who was neither a footballer nor a policeman, Inntrepreneur's brave new world has come as a tremendous, and unpleasant, shock. 'I was never a businessman. I was a publican,' he said.

Courage Grand Metropolitan Inntrepreneur Estates GB United Kingdom, EC P5812 Eating Places P6512 Nonresidential Buildings Operators COMP Company News TECH Licences COSTS Service costs P5812 P6512 The Financial Times London Page 11 836
Economic Diary Publication 930227FT Processed by FT 930227

TODAY: Indian budget for fiscal 1993-94. (April-March). Group of Seven finance ministers and central bank governors meet informally on world economy in London. Conservative local government conference in London.

MONDAY: London sterling certificates of deposit (January). Monetary statistics (including bank and building society balance sheets; bank and building society sterling lending and M4 sectoral analysis) (January). Bill turnover statistics (January). Sterling commercial paper (January). Money market statistics (January). US NAPM (February); personal income (January); construction spending (January); merchandise trade, balance of payments (fourth quarter). Nordic council meeting of prime ministers in Oslo. New round of Spanish-British talks on Gibraltar in Madrid. European Community monetary committee holds routine meeting in Brussels.

TUESDAY: UK official reserves (February). US leading indicators (January). European Community consumer council meets in Brussels. Start of two-day Financial Times conference 'Transport in Europe - Creating the infrastructure for the future' in London.

WEDNESDAY: Overseas travel and tourism (December). Advance energy statistics (January). Mr Hamish Macleod, financial secretary, presents Hong Kong government's budget for the year to March 1994.

THURSDAY: US jobless claims; factory orders (January). Mr Michel Camdessus, president of the International Monetary Fund, addresses conference on world finance in Brussels. Geneva car show opens (until March 14). London Fashion Week begins (until Sunday). Rail union RMT ballots members on strikes.

FRIDAY: Housing starts and completions (January). Multi-party planning meeting in Johannesburg for the renewal of all-party democracy negotiations.

XA World P9311 Finance, Taxation, and Monetary Policy P6231 Security and Commodity Exchanges P9611 Administration of General Economic Programs ECON Economic Indicators GOVT Government News P9311 P6231 P9611 The Financial Times London Page 11 272
UK Company News: Landlords' landlord calls time on traditional relationship - A look at the problems facing the response of GrandMet and Courage to the government's beer orders Publication 930227FT Processed by FT 930227 By PHILIP RAWSTORNE

OUTSIDE the annual meeting of Grand Metropolitan last Tuesday publicans were protesting that the food and drinks group was charging 'excessive' rents on its pub properties.

The alleged hardship and havoc that resulted were 'Killing Our National Heritage: The Pub', one sign proclaimed.

Inside, Sir Allen Sheppard, chairman and chief executive, was giving shareholders a more upbeat appraisal. The leases the company offered through Inntrepreneur Estates, its joint venture with Courage, the brewer, were helping to transform the pub trade into a more consumer-oriented business.

Only 'a very small minority' of Inntrepreneur's 4,700 leaseholders were trading unsuccessfully. 'Rents are not imposed. They are agreed by both parties.'

But for some licensees the economics are not working.

'Inntrepreneur wants Pounds 1,500 a week from me in rent and arrears, but my weekly takings are only Pounds 1,000,' said Mrs June Varty, licensee of the Gardeners Arms at Droylsden near Manchester.

The two sides have argued for several years over leases and rents but a deepening recession in the pub trade has brought an extra edge to the debate. Disgruntled publicans have formed the National Association of Inntrepreneur Licensees to press their case with GrandMet and in the courts.

Nail's concern is not just the level of rents but some of the terms of the 20-year leases. Three years ago, Courage and GrandMet told the Monopolies and Mergers Commission inquiry into the establishment of the Inntrepreneur joint venture that the move from short tenancies to long leases was inevitable.

The resulting MMC report said that the companies argued that 'twenty year leases for public houses would develop whether or not the transaction went ahead. They were appropriate in changing market conditions'.

The National Licensed Victuallers Association, however, expressed concern about the leases to which GrandMet had begun to convert its own pub tenancies in 1988.

The NLVA told the MMC that it accepted the principle of the leases. But it complained that the terms of letting and the management tactics of GrandMet had caused 'grief and heartache' to many erstwhile licensees.

'If pitfalls in the basic terms of the lease, such as high rents and penalties for failing to achieve the minimum purchasing obligation, could be rectified, the businesses could be run successfully,' the NLVA said. But it 'daily handled many examples of lessees facing financial ruin as a direct result of these terms'.

The MMC ignored the licensees' pleas and Inntrepreneur was established with its commercial plans to convert all the pub tenancies of its merged estate to 20-year leases intact.

GrandMet devised the leases in anticipation of the 1989 MMC report on competition in the brewing industry which persuaded the government to loosen the grip of national brewers on pub retailing by forcing them to free a third of their pubs from exclusive beer supplies.

The government orders sharpened the brewers' focus on their retailing operations. In reshaping their estates, they were forced to evaluate the potential profitability of every individual pub; to treat them like other mainstream forms of commercial/retail property.

As GrandMet had foreseen, long-term assignable leases offered brewers the best way of maximising profits from pubs in a more competitive environment. In return for market rents and liability for repairs, the pub landlord could be offered greater security and a chance to share in the capital appreciation of the business.

Inntrepreneur, which was the first important response from the industry to the government orders, set an example that has been followed by other national brewers.

Bass, the UK's largest brewer, has converted more than 1,000 of its pub tenancies to long-term leases. The Whitbread pub partnership scheme covers 2,300 of its licensees.

When Inntrepreneur began trading in 1991, GrandMet had converted 2,000 of the 3,150 tenanted pubs it brought to the venture. Of the enlarged estate of 6,850 pubs, about 4,700 are now on long-term leases. The aim is to convert the rest over the next 12 months.

Recession has added to the difficulties of the restructuring. Inntrepreneur - and its lessees - have been hit by falling property values and the squeeze on consumer spending.

Rents agreed in the more buoyant market of a few years ago have been tougher for licensees to meet as trading conditions have declined.

Pub beer sales fell by up to 5 per cent last year and the failure rate of Inntrepreneur leaseholders rose. Some 9 per cent of them have gone out of business in the past two years.

The value of Inntrepreneur's pub estate was estimated at Pounds 2.8bn when the deal was first proposed in 1990. By the time it came to fruition a year later, the slide in the property market had reduced that to Pounds 2.36bn.

Inntrepreneur has now sold 1,500 of its smaller outlets but has continued to suffer from asset deflation. Further revaluations of the remaining property last year cut its value by Pounds 234m, or 11 per cent, to less than Pounds 2bn. GrandMet charged its Pounds 117m share of the reduction against reserves.

Inntrepreneur made a trading profit of Pounds 162m last year but after interest payments of Pounds 203m recorded an operating loss of Pounds 28m. Apart from sharing that loss, GrandMet and Courage each had to inject another Pounds 32m to ensure it met its banking covenants.

With bank debt standing at Pounds 1.27bn, the company is unlikely to be able to meet the covenants' conditions this year that debt should not exceed 57.5 per cent of assets.

A further revaluation of Inntrepreneur's pubs will be made in September. 'If it is necessary to put in more money, then we shall do so,' Mr David Nash, GrandMet's finance director, said this week.

Inntrepreneur's finances will be helped by recent reductions in interest rates and industry analysts agree that at the trading level, the venture is progressing satisfactorily. Most expect another small operating loss this year but forecast it will break even or move into profit in 1994.

Once Inntrepreneur becomes profitable, few would be surprised if its owners did not sell it or float it. Events this week have done little to change the widespread view that the venture fits uncomfortably with GrandMet's portfolio of international brands.

Courage Grand Metropolitan Inntrepreneur Estates GB United Kingdom, EC P5812 Eating Places P6512 Nonresidential Buildings Operators COMP Company News TECH Licences COSTS Service costs P5812 P6512 The Financial Times London Page 11 1096
Commodities and Agriculture (Week in the Markets): Platinum and palladium in retreat Publication 930227FT Processed by FT 930227 By RICHARD MOONEY

THE PLATINUM and palladium markets were the falling stars of the world commodities scene this week as growing concern about the prospects for demand from Japanese car manufacturers turned last week's retreat into a rout.

The preceding week had seen the platinum price surge by nearly Dollars 10 to Dollars 370.50 a troy ounce while its sister metal, palladium, rose Dollars 4.10 to a 32-month high of Dollars 119 an ounce as Japanese buyers responded to reports of sharply reduced Russian shipments to the US and Europe. That rise was capped two weeks ago, however, when a Russian official insisted that his country was still meeting all contracts to supply palladium to world markets, and the ensuing downward reaction was fed last week by nervousness about US economic policy.

Then came the Japanese car makers' 'body blow', as one analyst described it. They told the Reuter news agency that, because their production was falling, not only did they not need Russian platinum and palladium (for anti-pollution exhaust catalysts), they might even sell some of their present surplus. The manufacture of catalysts is estimated to account for about 40 per cent of world platinum use and about 12 per cent of palladium use.

That was enough to turn the enthusiastic Japanese buyers who had fuelled the earlier strong advance into desperate sellers, and by yesterday afternoon the platinum price was down Dollars 14.25 on the week at Dollars 345 an ounce and palladium's down Dollars 8.85 at Dollars 100.15 an ounce. Some dealers suggested that the markets had now become oversold, however, while noting that sellers were also being discouraged by expectations that the yen would not fall further against the US dollar - which would make platinum and palladium prices appear relatively expensive to Japanese investors, traditionally the main operators in these markets.

Gold got off relatively lightly until falling Dollars 1.90 yesterday to Dollars 327.75 an ounce, down Dollars 2.50 on the week and near the bottom of its recent narrow trading range.

Silver suffered its principal fall at the start of the week when nearby New York Commodity Exchange (Comex) futures fell to life-of-contract lows and the London bullion market price, which had fallen 7.5 cents last week, lost another 4.5 cents at 358.5 cents an ounce. The London price then see-sawed around that level, between 357.5 and 359.5 cents before ending yesterday at 359 cents an ounce.

The initial fall resulted from a wave of speculative selling, which traders said was encouraged by news of a 2m-ounce rise in Comex warehouse stocks to 272m ounces.

Zinc was the main sufferer at the London Metal Exchange, where all base metal contracts lost ground on the week. The three months delivery price closed yesterday at a four-month low of Dollars 1,036.75 a tonne, down Dollars 44.75 on the week after breaking through successive support areas. In the absence of fresh developments dealers attributed the slide to the long-running oversuply situation, which will be only partly relieved by recently-announced production cuts. Zinc stocks in LME warehouses rose another 8,000 tonnes to 554,600 tonnes.

Long-established support levels also gave way in the copper market as the three months price slid Dollars 29.75 to Dollars 1,521.50 a tonne at Thursday's close. Traders said modest Chinese buying had been brushed aside as the price fell. Yesterday, however, three months copper rallied by Dollars 17 to end only Dollars 12.75 down on the week.

Nickel pressed against downside support at Dollars 6,200 for three months metal for three days before breaking through decisively on Thursday. After a further fall yesterday the price closed at Dollars 6,085 a tonne, down Dollars 202.50 on the week.

Tin prices continued the recent downtrend as the upward movement in LME stocks accelerated - this week's rise amounted to 1,470 tonnes, taking the total to 18,605 tonnes. The cash price closed yesterday at Dollars 5,770 a tonne, down Dollars 30 on the week.

At the London Futures and Options Exchange cocoa prices were pushed towards three-month highs early in the week as manufacturer demand absorbed selling from the Ivory Coast, the biggest producer. Overhead resistance at Pounds 745 a tonne was broken down as the May position climbed to Pounds 760 a tonne but it was back to Pounds 749 a tonne at yesterday's close. Dealers blamed yesterdays Pounds 11 fall on speculative selling in New York. 'The market is highly strung and jittery, but there is a good chance we'll see consolidation in the short term,' one told Reuter. 'The bull move is working sideways at the moment.'

World sugar prices built on last week's strength as operators continued to react to reductions in analysts' assessments of the likely level of the 1992-93 production surplus. At the New York Cocoa, Sugar and Coffee Exchange the May futures price put on more than half a cent over the week to touch the psychologically-important 10 cents-a-lb level yesterday. But dealers thought the market had become overbought and prices were trimmed in later trading.

The market had been watching the International Cocoa Organisation talks in London, aimed at negotiating a price-stabilisation pact to replace the moribund International Cocoas Agreement, which expires in September. But there was little reaction yesterday to news that delegates had failed to reach a compromise on the price range to be defended by a stock withholding operation and had adjourned the meeting till Monday.

------------------------------- LME WAREHOUSE STOCKS ------------------------------- (As at Thursday's close) tonnes ------------------------------- Aluminium +1,150 to 1,655,025 Copper +1,025 to 328,125 Lead +25 to 234,325 Nickel +78 to 83,028 Zinc +4,075 to 554,600 Tin +745 to 18,605 -------------------------------

US United States of America GB United Kingdom, EC P0179 Fruits and Tree Nuts, NEC P0133 Sugarcane and Sugar Beets P3339 Primary Nonferrous Metals, NEC P3331 Primary Copper P6231 Security and Commodity Exchanges COSTS Commodity prices MKTS Market data P0179 P0133 P3339 P3331 P6231 The Financial Times London Page 11 1003
UK Company News: Severn Trent to pay Pounds 33m for East Worcester Water Publication 930227FT Processed by FT 930227 By ANDREW ADONIS

SEVERN TRENT, the Midlands water and sewerage group, is buying East Worcester Water, a small supplier, for Pounds 33.1m.

East Worcester is the latest in a string of acquisitions this year by the 'big 10' water and sewerage companies privatised in 1989, but the first of the 22 small water companies to be purchased by one of the 10.

The deal has been cleared by Ofwat, the water industry regulator, after assurances that a high proportion of the prospective savings would be passed on directly to customers.

Ofwat said it expected to see East Worcester's former customers gain an average of Pounds 18 each over the next two years as their prices come into line with those of Severn Trent.

Mr John Bellak, Severn Trent chairman, said the arrangement had 'strong commercial logic. The activities of East Worcester are well known to Severn Trent and the two companies have a long history of working together'.

East Worcester's 100,000 customers, all south of Birmingham, are among the 3.3m receiving sewerage services from Severn Trent.

East Worcester is owned by Biwater, the water engineering group which also owns Bournemouth and West Hampshire Water companies. Its 1992 results, released earlier this week, showed a pre-tax profit of Pounds 3.88m on a turnover of Pounds 13.7m.

Mr Alan Booker, Ofwat's deputy director general, said Severn Trent's customers would benefit from greater security of supply and East Worcester's from lower prices.

He cited the 1990 Three Valleys merger, cleared by the government after a reference to the Monopolies and Mergers Commission, as a precedent.

The 'big 10' are the sole providers of sewerage services, and supply water to more than three quarters of households in England and Wales.

Of the 22 small suppliers, almost half have been acquired in recent years by three French companies - Compagnie General des Eaux, Lyonnaise des Eaux-Dumez and SAUR. Eight have shares listed on the Stock Exchange.

Mr Bill Dale, water industry analyst at Warburg Securities, said Severn Trent's move was unlikely to lead to a rush of bids by the 'big 10' for the smaller companies. 'Looking around the regions, there are not any other immediate candidates.'

In December Severn Trent reported interim pre-tax profits of Pounds 141m, with an interim dividend of 7p out of earnings of 37.5p a share. It was criticised by Ofwat for 'erring too much in favour of shareholders and too little on the side of the customer.'

In response, Mr Bellak pointed to Pounds 585m of investment in the previous financial year and an understanding that dividend growth was 'above inflation.'

Severn Trent is the seventh of the 'big 10' to make a sizeable acquisition this year. Earlier this week Welsh Water paid Pounds 56m for Acer, the engineering consultant group.

See Lex

Severn Trent Water East Worcestershire Waterworks GB United Kingdom, EC P4941 Water Supply COMP Company News COMP Acquisition P4941 The Financial Times London Page 10 508
UK Company News: Owners focuses on Cook tie-up - Total dividend for 1993 expected to be raised by 43% to 5p Publication 930227FT Processed by FT 930227 By RICHARD GOURLAY

OWNERS ABROAD yesterday increased its estimate of benefits that should arise from its proposed tie-up with Thomas Cook, the travel and financial services group and said it expected to recommend a 5p total dividend for the year to October 1993, a 43 per cent increase over last year.

In the last defence document in which it can introduce new financial information, Owners Abroad said the revised figures further demonstrated that the Pounds 225m bid from rival holiday group, Airtours, understated its value and potential.

The company said the benefits of the tie-up with Thomas Cook, which is controlled by Westdeutsche Landesbank, the German state bank, had risen from its original estimate of at least Pounds 7m to at least Pounds 9m for 1993-94. Estimates for the following year had been raised from Pounds 8m to Pounds 11m.

Mr Howard Klein, Owners' chairman, said that if the Airtours bid succeeded, an enlarged group would have to make savings of Pounds 22.3m in the first full year after acquisition and Pounds 27.3m in the following year if Owners shareholders were to enjoy equivalent benefits to those that would flow from the Thomas Cook tie-up.

This was based on the fact that Owners shareholders would end up with only 40 per cent of the enlarged group if they accepted the Airtours share offers.

City observers said that by turning the focus of debate to the future and what Owners shareholders could expect from Thomas Cook, Owners Abroad had produced its most robust argument yet.

Mr David Crossland, Airtours' chairman, said Owners had been selective with its figures when the facts showed that the rate of Owners Abroad's improvement in trading over the past year was actually slowing down.

Owners Abroad's revised estimates of benefits have been verified by its auditors, BDO Binder Hamlyn, and advisers, Samuel Montagu. The increased estimates followed 'a better understanding of the retail arrangement (with Thomas Cook),' said Mr Geoffrey Stone, finance director.

Mr Klein said these arrangements would benefit Owners at no extra cost. Thomas Cook would be marketing Owners Abroad's Enterprise brand standard family summer holidays in a brochure that carried the Thomas Cook name.

Thomas Cook had a similar one year deal with Sun World, and estimated from that experience that it could deliver Owners Abroad with 80,000 additional passengers on this product in the first year.

There was already a similar marketing of Owners' up-market Sovereign brochure and its flight-only Falcon brochure, which was being wrapped with the Thomas Cook name; and Owners would also market Thomas Cook's high cost, high margin, Faraway Collection holidays with a Sovereign wrap.

Mr Klein said the increased estimates for the benefits of the tie-up were based on the assumption that 40 per cent of the passengers promised by Thomas Cook would have switched from Owners' holidays and could not, therefore, be counted as new business.

In the year to end-September 1993, Airtours will, however, have the help of acquisition accounting. Airtours could provide for the losses on Owners Abroad's winter operations, writing them off against the balance sheet, but could take all Owners Abroad's summer profits to the enlarged profit and loss account.

This would dramatically enhance earnings per share because of the highly seasonal nature of profits in the holiday business; Owners Abroad made a Pounds 26m loss in its 1991-92 winter, but profits of Pounds 56m in the second half.

If the bid succeeded, Mr Klein said; 'this year could be a fantastic year (for Airtours) but watch out for next year' when the winter losses would depress 1994 profits.

Mr Crossland said no shareholders would be looking at an enlarged group's eps this year. What mattered was the year ending September 1994, when Airtours would have chosen the brochures and decided the pricing and would have had a full year with Owners Abroad.

See Lex

Owners Abroad Group Airtours GB United Kingdom, EC P4724 Travel Agencies P4725 Tour Operators COMP Company News COMP Shareholding P4724 P4725 The Financial Times London Page 10 697
UK Company News: Scottish & Newcastle links with Mansfield to boost lager sales Publication 930227FT Processed by FT 930227 By TIM BURT

SCOTTISH & Newcastle, the brewing and leisure group, yesterday announced a commercial partnership with Mansfield, the east Midland brewer.

Under the agreement, Mansfield will stop brewing Marksman draught lager and instead supply its 426 pubs with S&N's McEwans.

In return, the Edinburgh-based group is selling 11 pubs to Mansfield for Pounds 2.2m and will stock the brewer's cask conditioned beers in some of its 1,871 outlets.

Mansfield shares rose 17p to 702p on the news. Scottish & Newcastle closed up 1p at 438p.

Mr Jim Merrington, corporate affairs director at S&N, said the deal would offer new outlets for McEwans while Mansfield, which has been seeking acquisitions outside its core Midlands region, would gain new pubs in Lincolnshire and Yorkshire.

Although he declined to reveal the details of the financial agreement, Mr Merrington said: 'The Pounds 2.2m is the value of the pubs and does not represent a payment to S&N'

Industry analysts said the Midlands brewery is likely to have been offered an S&N loan to buy the pubs and predicted the group would recoup the outlay through additional volume sales of McEwans.

S&N expects to sell an extra 30,000 barrels a year through Mansfield outlets at a profit of up to Pounds 20 a barrel.

Mr Colin Stump, commercial and marketing director at Mansfield, said: 'We do have a finance agreement with S&N to help us find the Pounds 2.2m which is on favourable terms. Our strategy is one of continual growth and we're very much on the acquisition trail.' Further big purchases would be financed through borrowing, he added.

This latest acquisition follows a large expansion last year when Mansfield bought 115 pubs from Courage.

Analysts, however, said the agreement was less significant for Mansfield than S&N, which hopes to use an increasing number of regional outlets to boost lager sales and challenge Britain's top-selling brands.

Scottish and Newcastle Mansfield Brewery GB United Kingdom, EC P2082 Malt Beverages P5813 Drinking Places COMP Company News TECH Sales agreements P2082 P5813 The Financial Times London Page 10 360
UK Company News: Gabicci in discussions with a possible buyer Publication 930227FT Processed by FT 930227 By CATHERINE MILTON

GABICCI, the USM-quoted casual clothing group, yesterday admitted it is in talks with a possible buyer after speculation about a bid caused a fluctuation in its share price this month.

The group also warned that its interim results for the six months to December 19 1992 were likely to fall short of expectations.

Gabicci's share price fell to a little above 20p earlier this month from a plateau of about 45p at the end of last year. They closed at 47p yesterday.

Rival clothing companies, Helene and Campari International, are seen as potential bidders.

Campari sells to a younger market than Gabicci, but a merger would allow for rationalisations in design, sourcing and distribution since the two groups are virtually neighbours in North London, one analyst said.

However, he added, although Campari is cash rich, the group was likely shortly to announce profits down by about 35 per cent and might lack institutional support for acquisitions.

Gabicci was in talks with Helene last year but discussions collapsed in November.

Gabicci GB United Kingdom, EC P23 Apparel and Other Textile Products P56 Apparel and Accessory Stores COMP Company News FIN Company Finance P23 P56 The Financial Times London Page 10 218
UK Company News: Strong second half helps Mallett to Pounds 0.52m Publication 930227FT Processed by FT 930227 By PETER PEARSE

MALLETT, the antique dealer, saw pre-tax profits halve from Pounds 1.12m to Pounds 519,000 in the year to December 31, though this disguised a strong second-half performance. And last year's figure included an exceptional credit of Pounds 660,000.

The company recently broke off merger talks with an unnamed company, thought to be Asprey, the silver, jewellery and luxury goods company,

Having incurred pre-tax losses of Pounds 485,000 in the first six months, the company made profits of Pounds 1.11m before exceptional items in the second half. Mr Peter Dixon, company secretary, ascribed the turnround to the global improvement in the art market in general, sterling leaving the ERM and its devaluation.

Turnover slipped to Pounds 8.17m (Pounds 8.39m), though operating profits climbed to Pounds 802,000 (Pounds 537,000). Interest payable doubled to Pounds 176,000 (Pounds 84,000).

The exceptional charge of Pounds 108,000 related to the relocation of all Christopher Wood Gallery activities into the New Bond Street premises.

Earnings fell to 2.52p (5.96p) per share and after the passing of the interim a final dividend of 2p is recommended. Last year's total was 4.5p.

Mallett GB United Kingdom, EC P5932 Used Merchandise Stores COMP Company News FIN Annual report P5932 The Financial Times London Page 10
UK Company News: Isosceles may settle refinancing next month Publication 930227FT Processed by FT 930227 By MAGGIE URRY

ISOSCELES, the parent of the Gateway food retail chain, put its business plan to its 38 banks yesterday morning and now hopes it can finalise its Pounds 1.4bn refinancing next month.

This would be well before May 28, the expiry date of the standstill agreed with the banks before Christmas.

The meeting is believed to have been positive. Since Mr David Simons became chief executive on January 4 he has apparently impressed the banks that he is getting a grip of a business which had suffered several top management changes.

The business plan, which won approval from OC&C, the management consultants, will form the basis of the refinancing, with the group's balance sheet being tailored to its ability to service debt.

The refinancing is expected to involve a debt for equity swap, although not as large as earlier estimates, in part thanks to the fall in interest rates. Equity holders will be severely diluted.

Mr Simons has rapidly simplified the structure of Gateway. He has also put the development of new retail formats on hold while making a priority of ensuring the shops are properly stocked, tidy and have chiller cabinets that work. Development of computer systems is also a priority.

Suppliers to Gateway had precipitated the pre-Christmas standstill as they became nervous about Gateway's credit standing. The standstill agreement allayed those fears, and Gateway is understood not to have had to draw on an extra working capital facility provided at that time.

However, there is a fear that suppliers could again become concerned as the May 28 deadline approaches and this is putting pressure on the group and its banks to reach an early agreement.

Isosceles GB United Kingdom, EC P5411 Grocery Stores P5699 Miscellaneous Apparel and Accessory Stores P5999 Miscellaneous Retail Stores, NEC COMP Company News FIN Company Finance P5411 P5699 P5999 The Financial Times London Page 10 328
UK Company News: Administrators put Platt Saco up for sale as recession bites Publication 930227FT Processed by FT 930227 By ANDREW BAXTER

PLATT SACO Lowell (UK), one of the UK's biggest remaining textile machinery manufacturers, has been put up for sale by administrators from KPMG Peat Marwick.

The company emerged in 1982 from the controversial receivership of Stone-Platt Industries with new owners, the oddly-named South Carolina company John D. Hollingsworth on Wheels.

However, it has been hit recently by a worldwide slump in orders for its cotton processing equipment.

Earlier this month directors asked a court to put the business into administration, giving protection against creditors while allowing time for attempts to be made to sell it or turn it round.

Mr Mike Seery and Mr Peter Terry from KPMG, appointed joint administrators, are trying to sell Platt as a going concern.

Platt had turnover of Pounds 10m last year.

Its present workforce, following eight redundancies in the administrative staff, is 260.

KPMG said yesterday that Platt had state-of-the-art manufacturing technology, and had an international reputation for its spinning and fibre preparation equipment.

Platt Saco Lowell (UK) GB United Kingdom, EC P3552 Textile Machinery COMP Company News P3552 The Financial Times London Page 10 204
UK Company News: Isotron advances 13% to Pounds 1.44m Publication 930227FT Processed by FT 930227 By ANDREW ADONIS

ISOTRON, the Swindon-based food irradiation company, reported advances in interim profits and turnover.

Pre-tax profits for the six months ended December 31 were 13 per cent up at Pounds 1.44m, against Pounds 1.28m on turnover 10 per cent ahead at Pounds 3.45m (Pounds 3.14m).

Earnings per share were 7.8p (6.9p) and the interim dividend has been raised to 1.51p (1.37p).

Mr Colin Clive, chairman, said turnover in medical sterilisation was close to plan and ahead of last year, while business in the chemical sector was better than expected.

Capital spending was low, and the company's cash position improved by Pounds 1.1m to Pounds 4.89m over the six months.

Isotron GB United Kingdom, EC P7342 Disinfecting and Pest Control Services P7389 Business Services, NEC COMP Company News FIN Annual report P7342 P7389 The Financial Times London Page 10 155
UK Company News: Write-downs expected to hit Ladbroke Publication 930227FT Processed by FT 930227

Ladbroke Group's 1992 pre-tax profits, due out on Thursday, are expected to show a substantial fall following the first above-the-line write-down of its Pounds 1bn property portfolio.

The write-down is estimated at 15 per cent, or roughly Pounds 150m. Previous provisions have eroded balance sheet reserves, causing the latest cuts in valuations to be taken as a charge against profits.

Before property provisions, profit is forecast to fall from Pounds 210m to less than Pounds 190m.

The provisions do not represent an outflow of cash. When Mr Cyril Stein, chairman, was asked about the prospect of a property write-down last September, he commented that if one were made, it would only be 'a book entry'.

It would not affect the final dividend, which the board was planning to hold at 6.23p, making a total of 11.15p.

The figures are expected to include gains of about Pounds 40m from hotel sales - a profit source vulnerable to the new FRS 3 accounting rule.

While Ladbroke's Hilton International hotel chain continued to experience difficult markets last year, analysts are hoping to hear that the pound's devaluation has brought signs of life to London hotels. On the other hand, Texas Homecare, the DIY chain which was the star performer in 1991, is thought to have suffered a downturn since black Wednesday.

Ladbroke Group GB United Kingdom, EC P7011 Hotels and Motels P7999 Amusement and Recreation, NEC P5211 Lumber and Other Building Materials COMP Company News FIN Company Finance P7011 P7999 P5211 The Financial Times London Page 10 268
UK Company News: Hotspur Invs Publication 930227FT Processed by FT 930227

Hotspur Investments lifted its net asset value from 310.5p to 354.7p per share over the 1992 year.

The trust's net revenue dipped to Pounds 54,366 (Pounds 56,296) for earnings of 8.8p (9.11p) per share. The single dividend is maintained at 6.6p.

Hotspur Investments GB United Kingdom, EC P672 Investment Offices FIN Annual report P672 The Financial Times London Page 10 71
UK Company News: Sphere proposes creation of new packaged share Publication 930227FT Processed by FT 930227 By PHILIP COGGAN, Personal Finance Editor

SPHERE Investment Trust, a split capital trust, has revealed proposal to create a new packaged share, combining the current income and zero dividend preference shares.

The move reflects concern at the trust that its investment performance was being obscured by the volatile nature of the different classes of capital.

Split capital trusts are designed to maximise demand by creating securities that have tax advantages for different classes of investors. In recent years, there has been an explosion of split issues, particularly linked to Personal Equity Plans, where income and profits are tax-free.

Some critics feel, however, that such structures can be complex and risky and may result in confusion among small investors. The Sphere change is designed to create a security with similar characteristics to those of ordinary shares in a conventional investment trust.

The Package unit will comprise 8 ordinary income and 7 zero dividend shares. It should be less volatile than either of the existing classes of share.

Sphere Investment Trust GB United Kingdom, EC P672 Investment Offices COMP Company News P672 The Financial Times London Page 10 202
UK Company News: Dividend reduced at Merlin Intl Green Publication 930227FT Processed by FT 930227

Net asset value at Merlin International Green Investment Trust advanced from 90.48p to 106.55p over the 1992 year.

Available revenue fell from Pounds 830,374 to Pounds 593,648, equivalent to earnings of 2.36p (3.3p) per share. A final dividend of 1.1p is recommended for a reduced total of 2.1p (3.15p).

Merlin International Green Investment Trust GB United Kingdom, EC P672 Investment Offices FIN Annual report P672 The Financial Times London Page 10 86
UK Company News: Investment Trust of Guernsey assets up Publication 930227FT Processed by FT 930227

The Investment Trust of Guernsey had a net asset value of 66.3p per share at December 31, up from 58.7p a year earlier.

Net revenue amounted to Pounds 1.65m (Pounds 1.54m) for earnings of 2.18p (2.08p) per share.

A recommended final dividend of 1.56p lifts the total to 2.2p (2.04p).

Investment Trust of Guernsey GB United Kingdom, EC P672 Investment Offices FIN Annual report P672 The Financial Times London Page 10 86
UK Company News: Waterman Partners back in the black Publication 930227FT Processed by FT 930227

Waterman Partnership Holdings, consulting engineer, achieved a turnround from pre-tax losses of Pounds 235,000 to profits of Pounds 56,000 in the half year to December 31. There were losses of Pounds 2.72m in the last full year to June 1992.

Work done during the period amounted to Pounds 3.62m (Pounds 3.84m). The interim dividend is held at 0.5p, which is not covered by earnings of 0.2p (losses 0.8p) per share.

Mr Bob Campbell, managing director, said the group remained committed to maintaining a tight control of operating costs. New commissions which had been won included County Hall in London and Gatwick south terminal.

Waterman Partnership Holdings GB United Kingdom, EC P8711 Engineering Services COMP Company News FIN Interim results P8711 The Financial Times London Page 10 141
UK Company News: North of England Building Society Publication 930227FT Processed by FT 930227

North of England Building Society achieved a rise in pre-tax profits from Pounds 15.4m to Pounds 16.7m in 1992.

Total income amounted to Pounds 34.1m (Pounds 29.7m). The pre-tax result was after higher management expenses of Pounds 16.4m (Pounds 13.9m) and increased provisions of Pounds 1.05m against Pounds 434,000.

Group assets grew by 16 per cent to Pounds 1.42bn.

North of England Building Society GB United Kingdom, EC P603 Savings Institutions FIN Annual report P603 The Financial Times London Page 10 95
UK Company News: BBB Design reduces deficit to Pounds 165,000 Publication 930227FT Processed by FT 930227

BBB Design Group, which is involved in design, marketing and computer related activities, cut its pre-tax losses from Pounds 189,000 to Pounds 165,000 in the six months to October 31 1992. Turnover improved to Pounds 874,000 against Pounds 836,000.

Mr Philip O'Donnell, chairman of the USM-quoted company, said the design, publishing and marketing operations had been profitable.

He said the group would be looking towards an upturn in sales, particularly in the computer services division which had reported reduced losses during the first half.

Losses per share increased to 1.99p (1.77p).

BBB Design Group GB United Kingdom, EC P2741 Miscellaneous Publishing P7372 Prepackaged Software P7361 Employment Agencies FIN Interim results P2741 P7372 P7361 The Financial Times London Page 10 135
UK Company News: SEET reduces deficit to Pounds 65,000 Publication 930227FT Processed by FT 930227

Pre-tax losses at SEET, the Edinburgh-based textile company, were reduced to Pounds 65,000 in the six months to October 31. That compared with a deficit of Pounds 455,000 for the comparable period and with a loss of Pounds 630,000 for the year to April 30.

Sales for the half year increased by 39 per cent, from Pounds 3.27m to Pounds 4.54m, and the group was able to reduce borrowings by more than half with the Pounds 1.26m proceeds from the sale of Kenneth Mackenzie Holdings. Losses per share were cut to 3.2p (10.5p).

SEET GB United Kingdom, EC P2231 Broadwoven Fabric Mills, Wool FIN Interim results P2231 The Financial Times London Page 10 128
UK Company News: de Morgan losses cut to Pounds 131,000 Publication 930227FT Processed by FT 930227

de Morgan Group, an adviser on all aspects of commercial, industrial and retail property, achieved a reduction in pre-tax losses from Pounds 814,000 to Pounds 131,000 for the six months ended October 31.

The improved results reflected in part higher turnover of Pounds 987,000 (Pounds 753,000) and further significant cost savings. Operating costs were cut to Pounds 1.1m (Pounds 1.57m).

Tax credits of Pounds 5,000 (Pounds 280,000) left basic losses per share at 0.27p (1.15p).

de Morgan Group GB United Kingdom, EC P871 Engineering and Architectural Services FIN Interim results P871 The Financial Times London Page 10 113
UK Company News: Greenwich Comms cuts loss to Pounds 57,000 Publication 930227FT Processed by FT 930227

Reduced pre-tax losses of Pounds 57,500 were announced by Greenwich Communications, the USM-quoted television services and property rental group, for the year to August 31 1992. Previous losses amounted to Pounds 768,200.

Mr Alfred Stirling, the chairman, said that, as indicated last year, the company's revenue sources had been reduced to two - Tex House rental income, still not fully let due to the glut of property on the market in the Woolwich area, and Greenwich Satellite Portugal, the 80 per cent owned Portuguese subsidiary which had produced a pre-tax profit of Pounds 32,000 (Pounds 21,000 losses).

Turnover improved from Pounds 288,700 to Pounds 421,700 and there were exceptional losses of Pounds 99,800 (Pounds 524,200).

Losses per share were cut from 10.9p to 0.9p.

Greenwich Communications GB United Kingdom, EC P4899 Communications Services, NEC COMP Company News FIN Annual report P4899 The Financial Times London Page 10 163
UK Company News: IMC Industries lower at Pounds 202,000 Publication 930227FT Processed by FT 930227

IMC Industries reported pre-tax profits for the six months to October 31 down from Pounds 301,000 to Pounds 202,000 on turnover almost tripled at Pounds 2.97m, against Pounds 1.02m. Earnings per share fell from 0.13p to 0.09p.

The USM-quoted company said that its acquisition of Alpine Soft Drinks and development of the video tapes side had partly made up for the reduced contribution from the Skyview inflight entertainment operation.

The company is a subsidiary of Cursitor (Fifty-Two).

IMC Industries GB United Kingdom, EC P6719 Holding Companies, NEC P2086 Bottled and Canned Soft Drinks COMP Company News FIN Interim results P6719 P2086 The Financial Times London Page 10 122
UK Company News: Difficult times for BG Shin Nippon Publication 930227FT Processed by FT 930227

Baillie Gifford Shin Nippon had a diluted net asset per share of 111.1p at the year ended January 31, against 85.6p at the halfway stage and 124.4p 12 months earlier.

The net loss for the year was Pounds 134,831 against Pounds 106,562. Losses per share came out at 0.84p (0.66p). The directors said it had been another difficult year in the Japanese stock market with the Tokyo second section index falling 29.4 per cent in yen terms and by 14.5 per cent in sterling terms.

Baillie Gifford Shin Nippon GB United Kingdom, EC P672 Investment Offices FIN Annual report P672 The Financial Times London Page 10 121
UK Company News: Arcadian trims loss to Pounds 302,000 Publication 930227FT Processed by FT 930227

Losses at Arcadian International, the property investor, developer and project manager, were cut from Pounds 592,000 to Pounds 302,000 pre-tax over the six months ended October 31.

A drop in turnover to Pounds 196,000 (Pounds 2.41m) reflected the absence of property disposals.

First half losses took in exceptional credits of Pounds 205,000 (Pounds 107,000). Losses per share emerged at 4.3p (6.7p).

Arcadian International GB United Kingdom, EC P1541 Industrial Buildings and Warehouses P1542 Nonresidential Construction, NEC P6552 Subdividers and Developers, Ex Cemeteries COMP Company News FIN Interim results P1541 P1542 P6552 The Financial Times London Page 10 112
UK Company News: Tor Investment net asset value up 14% Publication 930227FT Processed by FT 930227

Net asset value per capital share at Tor Investment Trust increased 14 per cent from 1053.6p to 1204.4p over the 12 months to the end of January. The income share figures improved from 141p to 144.4p.

Net revenue for the six months to January 31 improved to Pounds 593,000 (Pounds 579,000) for earnings per income share of 14.67p (14.3p). A second interim dividend of 10p is being declared making an unchanged 20p so far.

Tor Investment Trust GB United Kingdom, EC P672 Investment Offices FIN Annual report P672 The Financial Times London Page 10 110
UK Company News: Alexanders falls Pounds 1m into the red Publication 930227FT Processed by FT 930227

ALEXANDERS Holdings, the Ford main dealer, reported a pre-tax deficit Pounds 998,000 for the year ended September 30 1992.

That compared with a restated profit of Pounds 405,000 for 1991 and came from turnover up from Pounds 85.4m to Pounds 89m. Losses per share came out at 2.15p (0.65p earnings). The balance sheet shows a deterioration of net assets from Pounds 8m to Pounds 6.74m.

As a result of an investigation instigated by Mrs Aleksandra Clayton, the chairman, prior year adjustments have been made to the profit and loss account amounting to Pounds 1.57m, of which Pounds 1.35m relates to 1990. A further loss has to be borne in the 1992 accounts on surplus and over-age used vehicle stock.

A charge of Pounds 639,000 has been made to the profit and loss account and to the revaluation reserves relating to the properties at Greenock. This was offset by a profit of Pounds 98,000 on the sale of two of the properties.

A revaluation of the other properties in the group as at end-September 1992 has led to a drop of Pounds 1.06m from their 1988 value.

Alexanders Holdings GB United Kingdom, EC P5511 New and Used Car Dealers COMP Company News FIN Annual report P5511 The Financial Times London Page 10 227
Ructions in the ancien regime: Disorder on the streets has spread to French politics, injecting uncertainty into the election campaign Publication 930227FT Processed by FT 930227 By DAVID BUCHAN

It is ironic that France, which fields more troops than any other country to help the United Nations try to prevent a new world disorder breaking out, should often be so unruly at home.

This week has seen fishermen smashing up markets in their native Brittany and in Paris in protest at cheap imports. It was the first time that the men of the sea decided to use the same licence for violent demonstration that French society has long given its men of the land. The farmers, too, disrupted trains in their continuing campaign against farm reform negotiated in the European Community and the General Agreement on Tariffs and Trade. Some dockers, airline and electronics workers also stopped work in pay and lay-off protests.

Disorder of a different kind broke out in French politics. Mr Michel Rocard, former prime minister, used his position as the Socialists' intended successor to President Francois Mitterrand in two years to call for 'a political big bang' to create a new universe on the French left. Conceding the implosion of the ruling Socialist party in the run-up to next month's parliamentary elections, Mr Rocard called on Socialists to abandon their party and to join with pragmatic Greens, moderate Centrists and reformist Communists in a new movement.

The shock waves of this initiative are still radiating through French politics. A note of uncertainty has now been injected into an election campaign which had seemed sure to result in an overwhelming victory for the centre-right. Clearly, Mr Rocard sees his 'big bang' as the only thing that can propel him into the Elysee in 1995, but there is just an outside chance that it could give France the sort of broad-based, durable social democratic party that most other European countries have.

These ructions stem, in part, from the fact that France has modernised its economy - or the industrial part of it - faster than its society or its politics. But they also reflect an unhappiness about the way that industrial modernisation has taken place.

In statistical terms, its industrial success is clear. France recorded a FFr30bn (Pounds 3.8bn) trade surplus last year, a performance made all the more impressive by the country's strong exchange rate. This surplus is now fading away under the impact of competitive devaluations, plus falling demand, in many neighbouring countries. But France will keep its position as the world's fourth largest exporter. Its unit wage costs have risen 12 per cent less than rival Germany's over the past four years.

All this has been achieved within the liberal economic rules that the EC and world economic competition have imposed on France. Brussels's competition directorate has gradually reined in French state aid to industry, which has been equally constrained by the Maastricht treaty's budgetary disciplines. Industrial imports have a higher penetration (31 per cent) in France than in trade-deficit Britain (29.2 per cent), according to the Commissariat du Plan, the French planning agency. They include ever-larger quantities of Japanese cars, to the continuing fulmination of Mr Jacques Calvet, head of Peugeot.

But just because the French have played the game well does not mean that most of them like the rules any better. One of the few popular things the Socialist government has done in its waning weeks of power has been to make it harder for employers to throw more people on the heap of nearly 3m jobless. The Patronat employers federation has become the butt of criticism from the right as well as the left.

An even better scapegoat has been foreign companies like Hoover, Philips, Grundig and Kimberly-Clark, which have been pulling out of France. Behind the charge of 'social dumping' - widely levelled at foreign companies, but only with any plausibility at Hoover - is the feeling that France must resist an alien, uncaring model of society being thrust on it.

Nowhere, of course, is such resistance greater than in agriculture. France remains flatly opposed to last year's EC-US deal on cutting back subsidised farm exports. Paris says it wants the whole Gatt negotiations restarted, an idea to which President Clinton's combative behaviour on Airbus and other trade issues gives a faint plausibility.

UK Prime Minister John Major tried to play peacemaker at the White House this week. But there is a tendency here these days also to see Britain as part of a general effort to do down France and its achievements. Even the cosmopolitan Mr Raymond Barre, the centrist politician, has warned publicly of an Anglo-Saxon conspiracy to sell the franc short. A senior government official dismisses as nonsense such a charge which arises, he believes, out of the linguistic fact that 'the markets tend to speak to us in English'.

France's current xenophobic bout seems to be socio-economic rather than racist. The national human rights commission this week reported a further decline in racist violence last year, a welcome contrast to - and perhaps a lesson drawn from - what has been happening in Germany.

Mr Jean-Marie Le Pen, who last year clamoured against Maastricht and was inviting his supporters to slap in the face every journalist they met, has had a quiet campaign. His National Front has been squeezed by the strong showing of the RPR and UDF opposition parties, who themselves have called for a 'clear and courageous immigration policy'. They want to give foreigners less time to argue against expulsion orders, and less scope for those wishing to gain entry into France to make marriages of convenience and for polygamists to collect multiple family allowances.

But the phenomenon that spawned the National Front on the right and the Greens on the left still exists. This is the mixture of contempt and apathy in which many French hold mainstream politicians, who in some opinion polls rate only just above prostitutes.

Corruption may not be on the Italian level. But one insider trading scandal, concerning Pechiney's 1988 purchase of Triangle, a US packaging company, still rumbles on to haunt the Socialists. In modernising the Paris marketplace, Socialists opened it and themselves to the temptations inherent in big financial transactions. Senior Socialists, as well as opposition politicians, have been indicted for putting corporate kickbacks into the party coffers. The presence in the government of Mr Bernard Tapie, seen as an asset-juggler rather than a conventional businessmen, has not helped.

In the country that gave the world the categories of 'left' and 'right' in politics, many people, according to opinion polls, feel this dividing line to be of decreasing relevance.

This week Mr Rocard claimed the demarcation was still relevant - but 'in the wrong place'. His strategy is to move socialists with a small 's' away from outmoded concepts like class warfare towards the political centre, while at the same time wooing back the founders of Generation Ecologique, the more pragmatic environmentalists who had earlier bolted from the Socialist party. Mr Brice Lalonde, GE's leader, said he might do business with Mr Rocard, though not necessarily the Socialist party - accepting 'the bang, but not the gang', as he put it.

Even if Mr Rocard's initiative never takes the concrete form of a new party or a new federation of parties, it is part of the necessary fluidity of French politics. All presidential aspirants need to reach outside their own party to assemble temporary coalitions that can carry them to the Elysee, the seat of real power.

Mr Mitterrand has set in train a constitutional review to modernise the Fifth Republic. But his first step was timid. An experts' committee this month recommended tinkering with the balance between institutions. Until France gives less power to its secretive, quasi-monarchical presidency and more to its feeble, but open, National Assembly, its citizenry will do the old-fashioned thing of taking their grievances on to the streets.

FR France, EC P9611 Administration of General Economic Programs P9111 Executive Offices CMMT Comment & Analysis P9611 P9111 The Financial Times London Page 9 1349
Surfing across the screen Publication 930227FT Processed by FT 930227 By RAYMOND SNODDY

Broadcasters around the world are starting to take notice when two rather technical words are mentioned - 'digital compression'. They refer to techniques dating from the 1970s by which the 400,000 or so individual elements in a single frame of a television picture are turned into digital form and broadcast to the viewer. What will soon be on offer is nothing less than an entertainment revolution.

British viewers who have scarcely had time to get used to the 20 or 30 channels now available on cable and satellite, in place of the conventional handful of national broadcasting choices, may soon have to start contemplating the possibility of several hundred television channels coming into their homes from all over the world.

Experts at this week's Financial Times Cable and Satellite conference seemed in agreement that 180-channel systems using digital technology are now no more than two years away.

The changes about to hit the small screen are so significant that new words are being coined to cope with the concepts: for example, 'grazing', the term used to cover the behaviour of viewers dipping into and sampling a wide range of channels, is giving way to 'surfing' a word describing the likely behaviour of viewers skimming gracefully over the surface of an endless choice. To Goldman Sachs, the US merchant bank, the merging of sound, pictures and computers in digital form is creating a new 'Communicopia'.

No one can forecast precisely how many channels will prove to be commercially viable. But Mr Celso Azevedo, technical director of Societe Europeenne des Satellites, the Luxembourg-based company which runs the Astra satellite system, promised at the conference that the option of 180 channels would be available by 1995.

Another satellite with a further 180 channels was being considered by Astra, he said.

Using digital compression, 10 channels could be squeezed into the space now occupied by one, said Mr Azevedo. Microchip technology makes this possible. With pictures arriving on the screen at the rate of 25 a second, each frame is not very different from its predecessor. An individual frame is held in the microchip memory and only the differences between one frame and the next are identified and transmitted. This means a huge saving in channel capacity.

However, there is a trade-off between the number of channels and the quality of the picture: if viewers want higher-quality pictures, or wide-screen television, it will mean fewer channels.

Digital compression is not just being considered in Europe. In Asia, the Hong Kong-based Star Television satellite company currently broadcasts five channels of television, including BBC World Service Television, to 38 Asian countries. It is considering moving to 180 channels by 1995. In the US, Hughes Communications plans to launch a 150-channel system next year using digital compression.

But why should anyone want 180 or even 360 channels? The driving force is coming from movies on demand. Pay Dollars 5 and see a hit movie now - or almost now. Compression will dramatically cut the cost of satellite transmission and make it possible to devote six channels to showing the same film. Because of staggered starts, viewers will rarely be more than 20 minutes away from watching the film of their choice.

With more than 15 years' experience of pay-per-view movies on conventional cable systems, Mr Edward Bleier, a senior Time Warner executive, can offer straightforward advice on how to make the business a success.

'Concentrate on the hits. Like theatres, video stores, airline terminal book racks, almost all the business is in the hits,' said Mr Bleier.

The new pay-per-view for 'hit' movies, which could over the longer term undermine the video store, will help to bankroll a wide range of low-cost existing entertainment channels from the US, and programmes for ethnic minorities or special interest groups.

At the moment it costs about Pounds 4m to lease a satellite transponder which receives a single channel from earth and beams it back again. Divide that channel distribution cost by 10 and suddenly a lot of things become possible.

Already, there is no shortage of people interested in using digital compression to provide happy surfing in a new Communicopia.

XA World P4841 Cable and Other Pay Television Services TECH Technology P4841 The Financial Times London Page 9 720
Digital killed the audio star: High-quality broadcasts promise to transform the way we consume music and television Publication 930227FT Processed by FT 930227 By MICHAEL SKAPINKER and NIKKI TAIT

In 1983, Virgin group founder Mr Richard Branson showed a record magazine an electronic box which could receive music from satellites and transfer it to people's stereo systems.

The box was an April Fool's hoax. To Mr Branson's delight, the magazine fell for it, running the story on its front page.

Ten years later, no one is laughing. Households in the US can already pay to have compact disc-quality music broadcast to their homes. Using newly available digital recording machines, they can make copies as clear as anything they can buy from their local record shop.

Some in the music industry believe that, as such services become more widely available, the compact disc, the cassette - even the record shop itself - could disappear.

In their place would be a home juke box, from which people could select CD-quality albums or single tracks, and record them whenever they wished. Some go further: with music available on request and at the touch of a button, people will not even bother to record it.

Similarly, instead of going to the video store to rent a film or waiting for a movie to appear on television, cable subscribers could order whatever film they wanted and it would immediately appear on their screens.

Mr Alain Levy, chief executive of PolyGram, one of the world's biggest music groups, doubts that music lovers will stop buying compact discs and cassettes in great numbers. 'The technology will exist, but my gut feeling is that changes in people's behaviour take a lot longer.'

Similarly, Blockbuster, the Florida-based video rental company which now owns the Cityvision chain in the UK, argues that the delivery of movies directly to the home will not ruin its business. 'The threat to home video is overstated. We think it will be viable through to the end of the decade,' claims Mr Ron Castell, senior vice-president of programming and communications.

But Mr Nic Garnett, director general of the International Federation of the Phonographic Industry, which represents music companies worldwide, believes it is safer to proceed on the assumption that delivery of entertainment directly to the home will catch on.

He has already begun campaigning for legislation to ensure that record companies' revenues are protected and that people who receive their music at home are made to pay for it. He wants music companies to be given the right to authorise or refuse the broadcast of their recording to people's homes. 'In most cases, permission will be granted - but on terms,' he says.

In the US, a company called Digital Music Express (DMX) already provides 30 channels of CD-quality music 24 hours a day to 10m cable subscribers. For between Dollars 10 and Dollars 12 a month, which includes a tuner and a remote control device, subscribers can listen to anything from chamber music to a reggae channel.

The music is not interrupted by commercials or disc jockeys. While the selected channel is playing, the remote control device displays the name of the track, the artist, the album title, the composer, the record label and, where applicable, the position in the charts.

Next month, DMX says it will start broadcasting to cable subscribers in the UK, the Netherlands, Belgium and Denmark. Programmes will be transmitted by satellite from Atlanta to European cable operators.

If subscribers want a high-quality recording of the music they are listening to, they can use one of two new products, the Digital Compact Cassette or the Mini Disc. The DCC looks similar to a cassette tape, but produces a sound as good as a compact disc. The Mini Disc is a smaller version of the CD, but it can record as well as play music. The recordable, blank CD is not yet commercially available, but it is technically feasible and many expect it to be on sale eventually.

The next development is likely to be digital audio broadcasting, which will allow radio stations to broadcast high-quality, interference-free sound from terrestrial transmitters to purchasers of special receivers.

Mr Henry Price, head of engineering information at the BBC, says he expects digital audio broadcasting to begin in Germany in the second half of 1995, and in the UK shortly after that. In theory, listeners could then make digital recordings of rock songs or concerts, but Mr Price wonders how many will.

The UK already has the digital Nicam television sound system, enabling people to record CD-quality music. Even analogue radio transmissions can provide an acceptable level of sound for decent recording. But there is not much evidence of widespread recording from radio or television.

Even with DMX, there is the disadvantage that you cannot record what you want when you want it. The 30 channels have a daily programme of music and, while subscribers can select one, they cannot choose an album or track.

Similarly, while television watchers can make a video recording of a film on a networked or subscription channel, if they want a particular title they have to wait until it appears on the schedule - or rent it from a video shop.

If current methods of buying music or renting videos are to be replaced, subscribers will have to be able to choose the recording or film they want when they want it.

Time Warner, the US media group, is already promising cable subscribers the right to choose, with the announcement last month of an 'electronic superhighway'. The group, the second largest cable company in the US, will use digital storage and compression technology (see inset) to offer subscribers a wide range of movies on demand. The 'electronic superhighway' will start on an experimental basis in Orlando, Florida, in early 1994.

Time Warner says it has no plans to offer music on demand, but Mr Michael Tyler, a partner with consultants Booz Allen & Hamilton, says the technology can be used to do so.

The Virgin group, which owns 70 music and entertainment mega-stores worldwide, says it does not believe these trends will put it out of business. Mr Will Whitehorn, the group's spokesman, says that, while smaller record shops might suffer, large outlets can adjust by selling other products. With music sales slowing, Virgin's stores are devoting more space to computer games. Products which the company believes could become more important include laser discs. 'There's always going to be some sort of software that people want to collect,' he says.

Virgin sees no reason to alter its plans to have 200 megastores by 1996. People like a CD or cassette box and the pictures and information that go with them, Mr Whitehorn says. He argues that there will always be people who like browsing in music stores.

Blockbuster, which last year announced a joint venture with Virgin to build music megastores in the US and continental Europe, does see ways in which electronic delivery can, in the meantime, help retailers.

It is currently experimenting with a system called 'Soundsational', which could deliver high-quality copies of an album - in cassette or compact-disc form - from a computerised centre to an individual record store in a matter of minutes. Soundsational's advantage is that it could significantly curtail the store's stock of older or less popular records. Mr Castell says the company hopes to test the system within the next 12 months.

US United States of America GB United Kingdom, EC P4832 Radio Broadcasting Stations P4841 Cable and Other Pay Television Services TECH Technology P4832 P4841 The Financial Times London Page 9 1271
Letter: Extension of council tax bandings would be more in touch with reality Publication 930227FT Processed by FT 930227 From Mr KENNETH HUNT

Sir, I have recently written to my MP concerning the adoption of the council tax, which I see as a reversion to the old rating system, but under a redesigned label. In my view, this tax is flawed at the top of the scale, reflecting a government thoroughly out of touch with reality.

Although my reaction is stimulated by complaint, it is accompanied by a proposal for the extension of the valuation banding in a form which I believe to be more rational and more 'sensitive' than is the present format.

Why stop bands at 'more than Pounds 320,000' when, around the country, in every county, on the perimeter of every largish town there are pockets of properties in value, even now, up to about Pounds 500,000?

The existing scaling reveals a percentage differential between Bands A-F inclusive of about 30 to 35 per cent, but after Pounds 160,000 the incremental percentage jumps to 100 per cent. I suggest that valuation bands are extended quite logically and realistically to establish a scale cut-off at 'more than Pounds 550,000'. Thus:

Band G - more than Pounds 160,000 and up to Pounds 220,000;

Band H - more than Pounds 220,000 and up to Pounds 300,000;

Band I - more than Pounds 300,000 and up to Pounds 400,000;

Band J - more than Pounds 400,000 and up to Pounds 550,000;

Band K - more than Pounds 550,000.

This probably brings with it potential for improvement in council revenues.

When such a scaling is introduced, I for one would feel rather better disposed towards the new tax than I do at present, when my small bungalow finds itself in Band G.

Obviously, I have applied for an appeal form, in line I must assume with thousands of others.

Kenneth Hunt,

The Spinney,

Ivy Lane,

Woking,

Surrey, 6U22 7BY

GB United Kingdom, EC P9121 Legislative Bodies GOVT Taxes P9121 The Financial Times London Page 9 342
Letter: Dearth of information on needs of manufacturing base Publication 930227FT Processed by FT 930227 From Mr ROGER LYONS

Sir, May I congratulate you on starting your series on the decline of Britain's manufacturing base. It is research which is desperately needed if we are to put that decline into reverse.

Unfortunately, the government does not appear to be concerned about the matter. May I refer you to the written question put down by Nigel Spearing MP (Newham South). The question was: 'To ask the president of the board of trade if he will list the manufactured products which ceased to be manufactured in the United Kingdom since 1980.'

The answer from Tim Sainsbury, minister for industry, on Wednesday February 17 was: 'There are a number of sources of information on manufacturing products but none is sufficiently comprehensive to allow for an accurate answer.'

Does that not say it all about this government and the president of the board of trade? They do not know how or even where to start on the vital process of rebuilding our manufacturing base.

It would be laughable if it was not so tragic. Thousands of jobs are being lost in the industries which we so urgently need to rebuild Britain's wealth.

Roger Lyons,

general secretary,

MSF,

64-66 Wandsworth Common Northside,

London SW18 2SH

GB United Kingdom, EC P99 Nonclassifiable Establishments CMMT Comment & Analysis P99 The Financial Times London Page 9 237
Letter: Coal industry not dealt a blow by report Publication 930227FT Processed by FT 930227 From Mr MARTIN O'NEILL MP

Sir, Far from dealing a blow to Britain's coal industry ('Regulator deals blow to coal lobby', February 23), Offer's preliminary report in December was roundly criticised by both industry and independent commentators. Its 'further statement' shows that it has failed to address many of these criticisms.

Offer has repeated its earlier mistake of comparing contract prices instead of generating costs. Professor Littlechild has stated that he will examine in the future the generators' huge margins on coal-fired electricity. However, any proper assessment of the 'dash for gas' must take account of these now.

There is considerable evidence that the cost of coal burn is less than that of gas-fired generation. I am confident that, once the generators pass on reduced coal prices in their contracts to the regional electricity companies, coal will prove to be cheaper than gas. However, until the director-general has conducted his examination of generators' margins, his report will effectively be meaningless.

Finally, the report fails to take proper account of the higher gas supply contracts for later CGGT projects, and does not examine the damaging implications of the dash for gas for future gas reserves and gas prices. In conclusion, Offer's misleading 'economic purchasing review' is anything but a 'green light' for the dash for gas.

Martin O'Neill,

House of Commons,

London SWlA OAA

GB United Kingdom, EC P12 Coal Mining P4923 Gas Transmission and Distribution P4911 Electric Services P9611 Administration of General Economic Programs CMMT Comment & Analysis P12 P4923 P4911 P9611 The Financial Times London Page 9 272
Letter: Expensive reality of road tolls Publication 930227FT Processed by FT 930227 From Mr R J CONNELL

Sir, Your editorial, 'Paying for roads' (February 23), prompts me to inform you of the real cost of road privatisation. My company's vehicles use the Severn River toll crossing every day. It now costs Pounds 9.30 for each heavy goods vehicle to cross into Wales. In the nine months since privatisation these tolls have been raised twice and are now 55 per cent higher than at this time last year.

R J Connell,

Robert Connell Associates,

Aintree,

Mounton Road,

Chepstow, Gwent NP6 6AA

GB United Kingdom, EC P4785 Inspection and Fixed Facilities CMMT Comment & Analysis P4785 The Financial Times London Page 9 119
Letter: VAT on food best available option for government Publication 930227FT Processed by FT 930227 From Mr HUBERT SCHOLES

Sir, Mr Geoff Rayner and Mr Tim Lang describe VAT on food as a banana skin the government must avoid (Letters, February 20).

On the contrary, if and when the chancellor needs to raise more revenue, this (with similar action on other zero-rated goods) is the best option available.

Of course, if we look at VAT in isolation, it would be a 'tax on the poor' but the poor can be relieved of the burden by raising income tax thresholds and welfare benefits, leaving substantial net revenue to be raised from those who can afford to pay.

Ending zero-rating would remove economic distortions, eliminate tiresome administrative anomalies (reducing, rather than increasing, bureaucracy) and bring the UK more closely into line with its European partners, where Britain's regime has been a long-standing source of difficulty.

It would also help to shift the balance from taxing income to taxing expenditure, which many regard as both fairer and less of a discouragement to enterprise.

Hubert Scholes,

5A Lancaster Avenue,

Farnham,

Surrey GU9 8JY

GB United Kingdom, EC P20 Food and Kindred Products P9311 Finance, Taxation, and Monetary Policy GOVT Taxes P20 P9311 The Financial Times London Page 9 213
Nan in the News: Corporate history in the unmaking - Sir Denys Henderson, last chairman of the old ICI, explains his business strategy Publication 930227FT Processed by FT 930227 By TONY JACKSON

Sir Denys Henderson sits in his wood-panelled office, a glass of Famous Grouse whisky in his hand, and reflects on tradition. He is the 11th chairman of Imperial Chemical Industries and the last of the line. He has been at ICI for more than half the company's history. He has just spent a long day explaining to the press and the City why he intends to end that history by carving the company in two. So how does it feel?

'I have to tell you that, if you're an ICI man through and through, you do not take these decisions lightly. The sense of history is strong. If you've spent 35 years with a company and made many friends, you'd be a very strange guy if you didn't feel a power of nostalgia.'

Looking back, he compares his position with that of a fellow Scot and predecessor: Lord McGowan, ICI's co-founder and autocratic second chairman from 1930 to 1950. 'He had the marvellous good fortune to be there to build the business up. That must have been an enviable time to be involved in the chemical industry, when it was right at the beginning of its take-off.'

But though the Scots are a bit emotional, he says, they are also realists. 'It's worth remembering why ICI came about in the first place. All these little companies in Britain had to get together because of the threat to the British chemical industry from I G Farben, who dominated Europe, and du Pont who dominated America.

'Right from the start, it was a tough struggle. We were Empire-driven, and Canada, Australia, South Africa and India are not the world's greatest chemical markets. Nor is the UK, come to that. That's why we had to spend the 1980s building our position in Europe and America. If you believe the tide of history is rolling that way, you have to do what is right for the company, no matter how much you're running against tradition.'

But this is to make it sound too easy. Throughout its history, ICI has resisted change. The idea of dividing the company is not new. As early as 1950, a committee of directors was asking itself whether the company should not be split up. 'Perhaps,' they commented, 'one board might under future conditions be unable to give sufficiently close and knowledgeable attention to all (investment) schemes.'

After much dithering, the board came up with a single demerger idea: that of the metals division, to be known as Imperial Metal Industries (now IMI). That took a further 12 years to put in train: and even so, it constituted less than a tenth of ICI by value.

Another case of resistance is more symbolic: Millbank, ICI's headquarters on the Thames, with its huge bronze doors and the names of the founders carved in the monumental facade. ICI tried to get away from Millbank a decade ago. After much debate, however, it settled for an expensive and disruptive refurbishment.

Contrast what Sir Denys is doing now. Zeneca, the new company which is being spun off from ICI, is no tiddler like IMI. It is much the biggest part of the business. It will also move out of Millbank fairly promptly. The rump of the business - the new ICI - will probably follow after a couple of years.

It is natural to ask how Sir Denys squared up to all this. Who did he discuss it with? His family, perhaps? Certainly not, he says. 'That's a very complicated issue to lay on your family. I talked to my colleagues.'

Then again, he had some fairly formidable colleagues to turn to. 'I talked it over a lot with my non-executives on a one-to-one basis. Being able to talk it over with Paul Volcker (ex-chairman of the US Federal Reserve) or Jeremy Morse (chairman of Lloyds Bank) or Anthony Pilkington (chairman of Pilkington) is pretty helpful. These are objective people.'

All the same, he concedes, he had days of doubt. 'You're a pretty marvellous guy if you think you're omniscient and you've got it 100 per cent right. You recycle it over and over again. You read accounts in all sorts of places that say you're mad, you're crazy. And we gave you guys in the press plenty to write about: they should, they shouldn't, they will, they won't, it's the wrong time if they do.'

And, he concedes, the world has changed since the plan was first mooted last July. 'The chemical world has gone to hell in a handcart. So you're bound to increasingly ask yourself whether you should put it off. There was all this personalised stuff saying 'he's got himself in a box, if he doesn't do it he's for the chop'. That might have been true - I don't know. It's never how it appeared to me with my colleagues. They have been convinced, like me, of the business logic.'

The business case for splitting the company remains slightly elusive to the outsider, despite the efforts ICI has put into explaining itself. Sir Denys's own account goes back as far as 1984, when ICI's profits burst through the Pounds 1bn mark.

'Already, we were asking what kind of strategies we needed for the future. We concluded that the UK economy was unlikely to thrive and that the UK industrial base was declining. We came to two pretty simple conclusions: that we had to increase our penetration of the big overseas markets, and we had to move further out of commodity chemicals into specialities.'

He rattles off figures to demonstrate the working of the strategy. In the early 1980s, the UK accounted for 40 per cent of ICI's sales. By 1990 it was 20 per per cent. In the early 1980s bulk chemicals were 60 per cent of sales, specialities 40 per cent. By 1990 it was the other way round.

But in October 1990, Sir Denys had a 'flash of light'. In Phoenix, Arizona, he took a phone call from his finance director, giving him ICI's third-quarter results.

'They were OK, but they were Pounds 100m less than we had expected. And the shortfall wasn't in basic chemicals, it was all in specialty chemicals and materials. So I instantly thought hello, some bits of this strategy don't seem to be working.'

So through 1990, he says, they went through the business again, tightening up the capital, cutting costs, reducing staff. 'In September that year, I came back from holiday feeling distinctly queasy. Despite all the things we were doing, it might not be enough.'

So he set up task forces to examine ICI's strategy and structure. 'At the end of the year they came back and said the structure wasn't right, and that though the strategy was broadly in the right direction, we were under-resourcing the businesses which had the real potential. We were trying to run too many things at once.' Forty years on, ICI was once again asking itself if it was too big to manage.

The committee looking at the structure had been given a broad brief. 'I told them to look anywhere they liked: should we consider some form of demerger, some association with other companies, anything. They looked at an enormous number of different models, including breaking up the company.'

In May, Sir Denys was faced with what he terms 'a slight diversion'. With what now looks like supremely ironic timing, Hanson, the break-up specialist, took a stake in the company. 'Though that didn't distract the businesses, it took a fair amount of time at headquarters, while we worked out who was trying to do what to whom and what we should do.'

But by October, it looked as if the threat was not going to materialise. 'So I got our general manager to dust off the plans on restructuring, because it seemed to me that the recession was getting still deeper and wider.'

Then, at the end of 1991, he turned to Warburg, ICI's financial advisers. 'I said to David Scholey (Warburg chairman): 'Lend me somebody who's lively and intelligent, who doesn't think like us, who can look at our plans and apply a bit of lateral thinking.' '

Warburg sent a young corporate financier, Mr John Mayo. 'I said to him: 'You're going to report to me personally. I don't want you going out and about talking to people, because you'll get confused by everyone grinding their own axes.' So he came back to see me three months later, and sat in here one Friday afternoon with a book this thick and said: 'Demerger is something you should consider very seriously.'

'As I went home that weekend, sitting in the car, I thought 'oh God, we've just been through all the Hanson stuff. Do I really want to start all this hassle again three years away from retirement?' '

The answer was plainly yes. In seeking a reason, Sir Denys turns again to history. 'This country lost an empire and had a hell of a job finding a role. Imperial Chemical Industries first had to move away from being Empire-driven. Now it has to go the way the world is going in the next century.'

Imperial Chemical Industries GB United Kingdom, EC P2819 Industrial Inorganic Chemicals, NEC P2869 Industrial Organic Chemicals, NEC P2879 Agricultural Chemicals, NEC PEOP Personnel News Sir Henderson, D Chairman Imperial Chemical Industries P2819 P2869 P2879 The Financial Times London Page 8 1606
The dangers of a quick fix: The global economy cannot rely on the US for leadership Publication 930227FT Processed by FT 930227 By MICHAEL PROWSE

The US economy is emerging strongly from recession. The torch of leadership has passed to an able and energetic young Democrat. For the first time in over a decade, the same political party now controls both houses of Congress as well as the White House. The Clinton administration is thus better placed than its recent predecessors to provide global economic and foreign policy leadership.

None of the other leading industrial countries shares its advantages. Japan has old and unimpressive political leaders and confronts potentially the most serious recession in decades. The strains of unification have undermined Germany's role as Europe's monetary anchor, sent recessionary ripples across the entire continent and thrown in jeopardy the ambitious timetable for European economic and monetary union. The UK seems unable to break out of a protracted downturn and is going through one of its periodic bouts of acute self-doubt.

President Bill Clinton seems fully aware of his global responsibilities. In an eloquent speech in Washington yesterday he adopted a lofty internationalist tone, far removed from his recent carping about Airbus subsidies. 'Open and competitive commerce will enrich us as a nation,' he declared. The US had to 'compete not retreat'.

Mr Clinton also sought to place his economic package of last week in the context of a 'global growth strategy'. The message is that the US has put its house in order by taking steps to reduce the budget deficit and raise long-term investment. But while the US is prepared to lead it cannot alone guarantee global prosperity; the time has come for Germany and Japan to play their part as engines of global growth.

Mr Clinton left the details for Mr Lloyd Bentsen, the US Treasury Secretary, who is in London for today's meeting of the Group of Seven industrial countries. It is no secret that the US wants Japan to adopt a more expansionary fiscal policy and Europe to do something - anything - to promote faster growth. In US eyes, Europe is most out of line on monetary policy: short-term interest rates remain far higher than in either the US or Japan. Mr Bentsen is thus likely gently to press the Bundesbank to consider an early easing of policy.

The president's attention to international economic issues will be welcomed abroad. But the best grounds for economic optimism lie not in what Mr Clinton said but in the vigorous US economic recovery the Democrats have inherited from the Bush administration. After nearly two years of sluggish expansion, the US economy is finally taking off: the Commerce Department yesterday reported stunning GDP figures for the fourth quarter: growth at an annual rate of 4.8 per cent, the best since 1987.

Most forecasters now believe that steady annual growth of about 3 per cent is now all but assured. The US is such a self-contained economy (the share of exports in GDP is still only about 12 per cent) that even a deepening downturn in other countries is unlikely to jeopardise its recovery. On the contrary, as incomes and consumption rise in the US, other countries will benefit from increased demand for their products. The US should thus help pull other countries out of recession, although the pull will be weaker than in the early 1980s, when deficit spending sent US demand through the roof.

By curbing future deficits, Mr Clinton may slightly reduce the US growth rate in coming years. But the effect will be small partly because lower long-term interest rates will offset fiscal contraction and partly because the deficit-cutting is less severe than widely appreciated.

Buried at the back of Mr Clinton's A Vision of Change for America is a revealing table showing projections for the structural budget deficit (the deficit allowing for the effects of the business cycle). This shows that planned policy changes will reduce the structural deficit by about Dollars 25bn over the next two years and then hold it steady at about Dollars 200bn (roughly 3 per cent of GDP) until 1997.

The conventional wisdom that an immediate stimulus will be followed by tough measures to curb the deficit is thus quite misleading. In reality there is no stimulus worth mentioning and only the most modest stab at reducing the structural deficit over the medium-term. Congress however may push for substantial changes to the plan.

Beyond allowing a spontaneous private-sector-led recovery to gather momentum, what can the US do to spur global growth? The two areas where US actions potentially matter most, but where signals to date have at best been confused, are G 7 policy co-ordination and trade policy.

Since his nomination as US Treasury Secretary last year, Mr Bentsen has repeatedly stressed his wish to 'revitalise' the G7 co-ordination process. He says he will rely mainly on private negotiation and promises to eschew the 'public bullying' that so often proved counterproductive for the Reagan and Bush administrations.

Unfortunately, he has already blotted his copybook by declaring publicly last week that he favoured a stronger yen. Predictably, frenzied trading on foreign exchange markets caused a sharp appreciation of the yen, which threatens to intensify already powerful recessionary forces in the Japanese economy. Tokyo was understandably miffed.

The US probably does not know what it wants from policy co-ordination. In a competitive global economy characterised by highly mobile capital and instantaneous communications, the G7's significance can easily be exaggerated. Before leaning too hard on trading partners, Mr Bentsen might recall that most of the measures advocated by the US in the recent past subsequently proved misjudged. For example it pushed Japan into overstimulating its domestic economy in the late 1980s, a mistake that led directly to a speculative bubble in share and real estate markets and, ultimately, today's financial turmoil.

In due course the Bundesbank is likely to lower interest rates and Japan's Ministry of Finance to sanction more expansionary fiscal measures. If the G7 chooses to dress this up as a great triumph of co-ordination - a quid pro quo for Mr Clinton's 'bold' fiscal retrenchment - that is its prerogative. In reality, however, these steps are like to be taken when and only when they are perceived to be in the self-interest of the countries concerned.

Mr Clinton's speech yesterday, which emphasised the importance of US workers and industries adjusting to the realities of global competition rather than seeking to shelter behind trade barriers, will offset some of the damage inflicted by loose protectionist rhetoric in recent weeks. European and Japanese officials, however, would be right to remain suspicious. The fierceness of Mr Clinton's complaints about Airbus subsidies is telling the world something.

Mr Clinton is not an overt protectionist but his stance on trade differs considerably from that of George Bush. Mr Bush's formative years were the 1940s and 1950s when US industrial supremacy was unchallenged; Mr Clinton's were the 1970s and 1980s, the decades when the US seemed unable to handle foreign competition in such sensitive sectors as consumer electronics and cars.

While Mr Bush took the benefits of a liberal trading system for granted, Mr Clinton and many of his senior advisers believe the US has lost ground partly because other countries bent the rules - by refusing to open markets as fully as the US and by pursuing active industrial policies involving generous government subsidies for strategic industries.

The Clinton doctrine is that free trade is beneficial but only if the same standards apply universally. This week he unveiled a mildly interventionist 'technology policy' to meet the perceived threat from European and Japanese industrial policies; he will continue to press hard for reciprocal trade concessions abroad whenever he feels other countries are not meeting US standards. This is a recipe for continued trade tension.

In the past the global economy has performed best when an 'anchor' country has served both as a guarantor of monetary stability and a champion of the liberal values on which a market system depends. Britain performed this role with distinction during the 19th century; the US performed well after the second world war as the hub of the Bretton Woods exchange rate system.

But towards the end of the 1960s US leadership faltered, mainly because it failed to keep its own inflation rate under control but also because it lost sight of its wider global responsibilities. For the past two decades, for example, the US has perceived the dollar less as a global store of value than as an instrument to be manipulated for the short-term benefit of American exporters.

Mr Bentsen's immediate reaction to the widening bilateral trade deficit with Japan (caused mainly by Japan's domestic slump) is wholly characteristic: seek a quick fix by talking the dollar down against the yen. It rarely seems to occur to US policymakers that, in the long run, the countries with the strongest currencies also enjoy the strongest trade accounts.

Indeed, despite protestations about improving long-run productivity, a kind of short-termism permeates much of the Clinton administration's economic strategy. Worried about a lack of investment? For Mr Bentsen the answer is obvious: dish out a temporary investment tax credit. Just seven short years after the path-breaking 1986 Tax Reform Act, which eliminated a host of fiscal distortions, the US Treasury is again manipulating the tax code in search of temporary economic gain.

Mr Clinton is right to argue for a global growth strategy. But despite the seductive rhetoric there is a danger that the US in practice will continue to press for quick fixes - such as fiscal boosts or currency realignments - and lose sight of the more important long-term determinants of prosperity, such as a genuinely liberal trade regime and non-inflationary monetary policies. The question is whether it will be a good anchor for the world economy in the short or the long term.

CA Canada US United States of America JP Japan, Asia GB United Kingdom, EC DE Germany, EC IT Italy, EC FR France, EC P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs P9611 Administration of General Economic Programs GOVT Government News ECON Gross domestic product ECON Balance of trade P9311 P9721 P9611 The Financial Times London Page 8 1710
Leading Article: Jawboning in the G7 Publication 930227FT Processed by FT 930227

WITH THE notable exception of the US, the leading industrialised countries face an increasingly bleak economic prospect this year. Japan is experiencing the biggest decline in output since the oil shock of the mid-1970s, while the banking system creaks under the weight of mountainous bad debts in property. Germany is sinking further into recession as the Bundesbank sticks doggedly to its anti-inflationary stance. The French economy is hamstrung by absurdly high real rates of interest and actually shrank in the fourth quarter of last year. Meantime the elusive British recovery remains just that: elusive.

At times like this, when global growth is unequally distributed and trade imbalances are mounting, leaders of the Group of Seven industrialised countries are tempted to cook up plans to invigorate the world economy. Yesterday President Bill Clinton succumbed to the urge.

In an explicit return to the rhetoric of global policy coordination, he called for Japan and Germany to 'act as engines of global prosperity'. And the Treasury Secretary Mr Lloyd Bentsen, in London this weekend for the G7 meeting of finance ministers and central bank governors, has made no secret of his wish to push the G7 into a more active global role.

Yet past experience, from the locomotive experiment of the late 1970s, to the Plaza and Louvre accords of the 1980s, suggests that co-operative growthmanship has a nasty way of ending in disaster. Equally to the point, much of the G7 is already pushing in the right direction under powerful domestic impetus; and those countries, like Germany, where policy change is overdue, have a compelling agenda of their own.

The Bundesbank is unlikely to succumb to siren calls for looser monetary policy, at least not at a time when its worries about inflation are palpably justified. It is fully entitled, on its past record, to take its own counsel on the appropriate moment to ease.

Economic costs

Nor are the French likely to be any more accommodating. A country that has been prepared to incur huge economic costs within the European Exchange Rate Mechanism for wider foreign policy goals is unlikely to throw in the towel now for the sake of G7 co-operation. France's reading of its own interests may be difficult for others to fathom, but its dismal unemployment figures bear witness to the depth of the commitment to the franc fort policy.

Japan looks a more tempting target for a new US administration. As the world's largest creditor nation, with plenty of room for fiscal manoeuvre, it could readily move in a more expansionist direction; and the US has traditionally exerted greater influence on its domestic affairs. Yet the dire state of the Japanese economy owes much to earlier US demands for looser monetary policy in the second half of the 1980s. Nor are calls for a further appreciation of the yen helpful, since they imply a misreading of the Japanese trade surplus.

Japanese exports have shown scarcely any growth over the past two years. The yen, meantime, is already at record levels both in trade weighted and dollar terms. Such has been the pressure on profits in Japanese industry that job cuts are beginning to take place in an economy where the big corporations traditionally shelter the workforce from the depredations of recession. This week's news of Nissan's decision to close a car plant was a further psychological shock. The reason Japan's trade surplus has soared is simply that imports have collapsed as the economy sinks into the mire.

Trade imbalance

The longer term causes of the US-Japan trade imbalance are structural. They reflect the excessive Japanese propensity to save and the equal and opposite lack of saving in the US. By showing willingness to address an excessive US budget deficit in his State of the Union message, President Clinton is at least moving in a constructive direction. But this new-found fiscal virtue is no reason to pressurise the Japanese when the country is already pulling out the stops to prevent a financial collapse. A further, expansionary fiscal package is widely regarded as inevitable at a time when the Japanese social contract is more seriously threatened than it has been for decades.

In short, domestic political pressure and market forces are already pushing Japan in the direction that President Clinton wants. The same is true in all the other economies that have been particularly heavily burdened by debt, not least Britain, where high profile lay-offs this week by ICI and British Gas tend to distract attention from the underlying reality - namely, that the government cannot escape from a severe fiscal bind without restoring rapid economic growth.

The moral for the G7 is that there is no harm in jawboning the Germans over their fiscal irresponsibility, nor in seeking to fathom the self-denying economic habits of the French. But Mr Clinton's exhortations on trade, and on assistance for Russia, offer a more promising agenda than any global dash for growth.

CA Canada US United States of America JP Japan, Asia GB United Kingdom, EC DE Germany, EC IT Italy, EC FR France, EC P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9721 P9311 The Financial Times London Page 8 876
ICI may leave Millbank: Company plans to cut nearly half its headquarters staff Publication 930227FT Processed by FT 930227 By PAUL ABRAHAMS

IMPERIAL Chemical Industries, one of the UK's largest companies, plans to cut nearly half of its headquarters staff and may abandon its historic headquarters at Millbank near the Houses of Parliament.

ICI employs about 450 people at Millbank and neighbouring Ergon House.

Mr David Barnes, chief executive of Zeneca, which will become ICI's independent bioscience subsidiary, said his group would move out of Millbank, probably over the next 12 months and certainly within two years. His headquarters staff would number no more than 100 and possibly as few as 80. Zeneca's new headquarters would ideally be located within a mile of Millbank, he added.

Speaking the day after ICI announced it would split in two, Mr Ronnie Hampel, deputy chairman and future chief executive of the new ICI, said the number of staff at his new headquarters would be between 100 and 200.

During a staff meeting yesterday Mr Hampel raised the issue of selling the historic building, although he said it would not raise as much as it should because of the state of the property market.

Other options raised by Mr Hampel include moving staff now based elsewhere into Millbank or renting out some floors to outside companies. ICI shares rose 55p to Pounds 12.08.

BhS, part of the Storehouse retail group, is cutting 800 full-time and 2,300 Saturday jobs, but creating 2,000 part-time jobs in a further move towards flexible working in the retail sector.

The store chain said the changes were aimed at ensuring well-trained staff were always available to provide higher levels of service at peak times, especially on Saturdays, and to remove anomalies in the existing staff structure. Management staff at BhS have already been reduced by 900.

The full-time job cuts now being made at store level account for more than a quarter of the present total of 3,000 full-time jobs, while Saturday losses account for nearly 40 per cent of weekend-only working.

They will be replaced by 2,000 jobs working between 12 and 20 hours a week. The total number of employees will fall from about 13,000 to 12,000.

All remaining staff working more than 12 hours a week will be entered on National Vocational Qualification training schemes to raise standards of customer service. Basic pay will be increased.

BhS said it hoped some people losing their jobs would accept part-time jobs, provided they met NVQ competence standards. But some compulsory redundancies were likely.

Imperial Chemical Industries Zeneca GB United Kingdom, EC P2834 Pharmaceutical Preparations P2819 Industrial Inorganic Chemicals, NEC P2869 Industrial Organic Chemicals, NEC P2879 Agricultural Chemicals, NEC PEOP Labour P2834 P2819 P2869 P2879 The Financial Times London Page 7 461
MPs urge tighter financial controls Publication 930227FT Processed by FT 930227 By DAVID OWEN

PRESSURE ON the government to strengthen the present system of financial services regulation increased yesterday when a former Tory trade and industry secretary joined a cross-party group of MPs in tabling two critical motions.

Mr Paul Channon, the MP for Southend West, was one of six MPs who signed a motion highlighting the 'inadequacies' of the present system of self-regulation for banks and building societies.

Expressing 'grave concern' at the plight of elderly holders of home income plans, the MPs urged the government to ensure mortgages were treated as investments for the purposes of the 1986 Financial Services Act.

Mr Channon, whose time as trade and industry secretary partly coincided with the passage of this act through the Commons, also backed a second motion urging the Securities and Investments Board to proceed 'with urgency' to set up the proposed Personal Investment Authority.

The motion, which has so far been signed by eight MPs, endorsed the principle of self-regulation of financial services but acknowledged a 'lack of confidence' in the existing system.

The motion says the PIA's establishment should create a single system 'embracing banks and building societies, as well as those bodies and individuals currently covered by Fimbra and Lautro, to resolve complaints and provide compensation for investors'.

SIB has said that it might refuse to recognise the PIA as the new self-regulatory body for retail financial services if it does not raise standards of investor protection.

Earlier this month the PIA appointed Sir Brian Jenkins, a partner at accountants Coopers & Lybrand, to conduct an independent review of membership criteria.

GB United Kingdom, EC P602 Commercial Banks P603 Savings Institutions P9651 Regulation of Miscellaneous Commercial Sectors P6211 Security Brokers and Dealers P6311 Life Insurance TECH Standards P602 P603 P9651 P6211 P6311 The Financial Times London Page 7 311
Smith sees threat in jobless toll Publication 930227FT Processed by FT 930227 By ALISON SMITH

LABOUR'S onslaught on the government over the recession intensified yesterday as Mr John Smith, the party leader, issued a stark warning that unemployment was reaching levels that posed a serious social threat.

Mr John Major, the prime minister, was yesterday once again upbeat about the economy. He said he thought people might be inclined to spend now they had repaid debts.

'It could be that the tide is turning, but it is too early to say how profound that change is,' the prime minister said.

But Mr Smith insisted that 'second-hand assurances' from Mr Major that the economy was on the brink of recovery were failing to convince people. Speaking in Cardiff, he warned that unemployment was reaching 'an extremely dangerous level'.

He said: 'It is beginning not only to menace our prospects of economic recovery, but we are on the edge of having serious social problems.'

As the opposition sought to capitalise on unease about government performance suggested by opinion polls, all three main parties were turning their minds to the forthcoming by-election at Newbury, Berkshire. The seat, held by the Tories with a majority of about 12,000 against a Liberal Democrat challenge at last year's general election, will offer the first test of how far the continued recession has turned opinion against the Conservatives since last April.

GB United Kingdom, EC P8651 Political Organizations P9611 Administration of General Economic Programs GOVT Government News ECON Employment & unemployment P8651 P9611 The Financial Times London Page 7 261
Writs issued by BCCI liquidator Publication 930227FT Processed by FT 930227 By ANDREW JACK

THE LIQUIDATOR to the collapsed Bank of Credit and Commerce International yesterday issued new writs against accountants Price Waterhouse and Ernst & Young in connection with their audits of the bank.

The writs cover Price Waterhouse and Ernst & Whinney, now part of Ernst & Young, for the audits of the bank in 1986, and PW for its audit in 1987.

They follow writs issued last March against both firms for their 1985 BCCI audits, and a statement of claim in October believed to be for damages against losses in the bank in the range of Dollars 8bn-Dollars 10bn. It is believed the sums involved for the latest writs will amount to about Dollars 5bn (Pounds 3.5bn) for each of the two years listed. But the numbers associated with the claim will not be provided unless or until a detailed statement of claim is filed with the courts. The writs seek interest, costs, further relief, damages and compensation for alleged negligence, and/or breach of duty, statutory duty and breach of contract.

The Bank of England faced fresh criticism of its handling of BCCI yesterday when 43 MPs called for a review of Mr Eddie George's appointment as governor-designate.

The MPs called in a early day motion for Mr George's appointment to be reviewed by the Treasury and Civil Service committee. The motion urged the appointment of an outsider 'untainted by the soiled and over-cosy ethos' at the Bank.

Bank of Credit and Commerce International GB United Kingdom, EC P6021 National Commercial Banks P8721 Accounting, Auditing, and Bookkeeping Services COMP Company News GOVT Legal issues P6021 P8721 The Financial Times London Page 7 286
BBC1 post for BBC2 chief Publication 930227FT Processed by FT 930227 By RAYMOND SNODDY

MR ALAN YENTOB, the controller of BBC2, was yesterday appointed controller of BBC1.

It is the first time since 1965 that the person in charge of the corporation's minority channel has gone on to run the BBC's more mainstream television station.

One of his early tasks will be to decide what to do about Eldorado, the soap opera set in Spain which was commissioned by his predecessor at BBC1, Mr Jonathan Powell.

Yesterday Mr Yentob said it had failed in ratings terms. 'It doesn't seem to have done the business,' he said, although he would not be drawn on the soap's fate.

According to Mr Will Wyatt, managing director of network television, only Mr Yentob, 45, went before a sub-committee of the BBC governors on Thursday evening.

All the signs are that Mr Yentob, controller of BBC2 since 1988 and regarded as a considerable success, did not initially apply for the job.

'I decided that I wanted to do it and I do want to do it,' he said yesterday.

He said his main task would be to offer the audience a genuine choice, although he supported the emphasis Mr John Birt, the director-general, was placing on the BBC pro-ducing 'distinctive' programmes.

British Broadcasting Corp GB United Kingdom, EC P4833 Television Broadcasting Stations PEOP Appointments P4833 The Financial Times London Page 7 236
Venue for chess match rejected Publication 930227FT Processed by FT 930227 By IAN HAMILTON FAZEY, Northern Correspondent

GARY KASPAROV and his British challenger Nigel Short have refused to play their world chess championship match in Manchester and are setting up a rival organisation to Fide, the international chess federation, to stage their own version of the event.

Mr Kasparov and Mr Short said they would play for the championship under the auspices of the Professional Chess Association. They would give 10 per cent of the prize fund to set up the association.

Manchester City Council said the dispute was between Fide and the players. It hoped problems would be resolved quickly so plans could continue to stage the match in August. Fide refused to comment before it had confirmed a statement issued by the players in London yesterday

This claimed Fide had shown 'wilful disregard' by not consulting the players about accepting Manchester's bid, as Fide said on Tuesday it had.

The statement was issued by Simpson's-in-the-Strand, the London restaurant which is a traditional centre for chess. But Mr Ray Keene, a British grandmaster who is chess correspondent of The Times and an adviser to Mr Kasparov, said it had been prepared with the players' collaboration by himself and Mr Dominic Lawson, editor of The Spectator, Weekend FT columnist and an adviser to Mr Short.

Mr Lawson said: 'Nigel Short was on a boat between Italy and Greece when Fide announced its decision. He had specifically said he wanted to study all the bids, which he was not allowed to do. Players at this level will not be treated as pawns.'

Mr Keene said: 'This has been coming for years. We are confident all the world's leading professionals will join the new association.'

The players yesterday invited new bids for their match. Mr Keene said the London Chess Group - a group of businesses supporting the game - had yesterday confirmed it would bid again after losing to Manchester.

Manchester wants the match but is unlikely to bid for fear of antagonising the International Olympic Committee by going against an official international umbrella organisation for a sport. Manchester is bidding to stage the 2000 games.

GB United Kingdom, EC P7999 Amusement and Recreation, NEC P7389 Business Services, NEC RES Facilities MKTS Contracts P7999 P7389 The Financial Times London Page 6 389
Print talks Publication 930227FT Processed by FT 930227

NEGOTIATIONS between the British Printing Industries Federation and GPMU print union broke down yesterday after union representatives rejected a 1.7 per cent pay offer.

British Printing Industries Federation Graphical Paper and Media Union GB United Kingdom, EC P27 Printing and Publishing P8611 Business Associations P8631 Labor Organizations PEOP Labour P27 P8611 P8631 The Financial Times London Page 6 66
BA meeting Publication 930227FT Processed by FT 930227

BRITISH Airways and Virgin spent another day in talks yesterday trying to conclude an agreement to end their 'dirty tricks' dispute. In spite of hopes that the negotiations would end on Thursday, the two sides were still meeting last night.

British Airways Virgin Atlantic Airways GB United Kingdom, EC P4512 Air Transportation, Scheduled COMP Company News P4512 The Financial Times London Page 6 71
Miners' group seeks partner Publication 930227FT Processed by FT 930227

THE miners' consortium which last year leased Monktonhall colliery near Edinburgh from British Coal is to seek a partner or outside investor to provide finance to overcome funding problems.

Monktonhall Mineworkers is owned by its 160 employees, who have invested Pounds 10,000 each in the company. It blamed the need for additional finance on a three-month delay in starting production. It wants to buy equipment to develop a second coalface.

The colliery, closed by British Coal in 1987, resumed production at the end of last year. It has a contract to supply 87,000 tonnes of domestic coal to British Coal and is fulfilling a trial order for 12,000 tonnes of power station coal. Mr Jackie Aitchison, Monktonhall chairman, said the company was continuing to operate thanks to the support of its bank, Bank of Scotland, and 'the understanding of our suppliers'.

Monktonhall Mineworkers British Coal Corp GB United Kingdom, EC P1221 Bituminous Coal and Lignite-Surface P9121 Legislative Bodies MKTS Contracts COMP Company News RES Facilities GOVT Government News P1221 P9121 The Financial Times London Page 6 186
Airport baggage security to be tightened Publication 930227FT Processed by FT 930227 By IAN HAMILTON FAZEY

TOUGH new baggage security measures for all British airports were announced by the government yesterday.

The measures will eventually ensure that all hold baggage will be X-rayed and every piece of luggage put on board an aircraft will be matched to a passenger.

Lord Caithness, the transport minister, said a directive setting out the scheme to match baggage would be issued by the end of June. He hoped it could come into effect by the end of the year.

Unaccompanied baggage or any item that could not be accounted for would be subjected to stringent security controls before it was authorised to be carried, he said.

Lord Caithness, who was attending an aviation security symposium near Manchester Airport, said the total screening of hold baggage by special X-ray machines would take three to 3 1/2 years to introduce. The cost of the exercise is understood to be the main reason for phasing.

Manchester Airport's Pounds 265m Terminal 2, which opens next week and has state-of-the-art equipment, has 27 of the new X-ray machines for which it paid more than Pounds 2m. Mr David Teale, technical services director, said more machines would be needed - at a cost of at least Pounds 60,000 each.

'We think the government should be helping the airports and the airlines to meet some of the costs,' he said.

The new machines are situated immediately behind check-in desks. Before getting their boarding cards passengers can be called into a secure area to open their baggage for inspection if required.

Matching passengers to baggage is already done manually at most airports, although Manchester will examine whether this can be automated using bar-coded labels now attached to luggage for automated sorting and handling.

GB United Kingdom, EC P4581 Airports, Flying Fields, and Services P9621 Regulation, Administration of Transportation TECH Services P4581 P9621 The Financial Times London Page 6 325
Maxwell pensioners suffer setback: A look at the consequences of the social security committee's fears over sub judice rules Publication 930227FT Processed by FT 930227 By ALISON SMITH

PENSIONERS reacted with dismay to the decision by the cross-party Commons social security committee to postpone part of its investigation into the theft of Maxwell company pension funds.

The committee's move follows advice from the Serious Fraud Office, which warned MPs last month that taking evidence in public from witnesses who might also be called in criminal proceedings could prejudice those trials.

Yesterday the committee called on the Commons to consider the impact of its own sub judice rule on select committees' work, by referring the issue to the procedure committee. Since it has played a significant part in keeping up the pressure on the government over the issue and given the Maxwell pensioners a high profile, the campaigners clearly regard the delay to the inquiry as a blow.

Mr Ken Trench, the chairman of the Maxwell Pensioners Action Group, said yesterday: 'It now appears that the select committee is being gagged by the call for justice for two or three individuals, and thousands of pensioners are suffering. We feel that the SFO has made a major mistake, and that justice for the Maxwell pensioners is being denied.'

Committee members are keen, however, to dispel the idea that the postponement marks the end of their interest in the Maxwell affair.

Mr Frank Field, the Labour committee chairman, said the inquiry would resume after relevant criminal proceedings had been completed, even though this would not be for many months. Mr David Shaw, a Tory committee member, emphasised that the MPs still intended to 'make sure the pensioners' interests are being looked after'.

The committee spent several meetings discussing whether it could hear evidence privately, but the report concluded the risks of doing so were too great.

It said: 'This approach would leave the inquiry open to rumour and speculation, some of it possibly deliberately contrived in order to suggest that the committee was conducting itself in a way which could affect the legal proceedings.'

While Mr Field said the committee was relaxed about the decision, the report's call for a review of the operation of the sub judice rule reflects the frustration privately expressed by some committee members.

The MPs have contrasted their own position unfavourably with the greater freedom enjoyed by some of their counterparts overseas, such as the congressional committees in the United States.

This is the second time the rights and role of the Commons committees, set up in 1979, have been brought into question by the Maxwell inquiry. In March last year the committee said the Commons should consider the prima facie contempt of the House shown by Mr Kevin and Mr Ian Maxwell's refusal to answer the committee's questions.

Though some MPs feel uneasy at the committee's strong line against the Maxwell brothers, others have relished the way its work has expanded beyond the government's conduct into inquiring into the conduct of the professions involved in the Maxwell affair and trying to track down the missing money.

They will not easily relinquish this.

GB United Kingdom, EC P6371 Pension, Health and Welfare Funds P9131 Executive and Legislative Combined P9441 Administration of Social and Manpower Programs GOVT Legal issues P6371 P9131 P9441 The Financial Times London Page 6 559
Print talks Publication 930227FT Processed by FT 930227

NEGOTIATIONS between the British Printing Industries Federation and GPMU print union broke down yesterday after union representatives rejected a 1.7 per cent pay offer.

The employers' organisation said agreement had been reached on issues including full flexibility of working in integrated press rooms and the abolition of overtime bonuses.

British Printing Industries Federation Graphical Paper and Media Union GB United Kingdom, EC P27 Printing and Publishing P8611 Business Associations P8631 Labor Organizations PEOP Labour P27 P8611 P8631 The Financial Times London Page 6 91
Yarrow vote Publication 930227FT Processed by FT 930227

WORKERS at the Yarrow shipyard in Glasgow yesterday rejected a new pay offer and voted to continue their three-week-old strike. The offer would have given the 1,300 strikers a 3.8 per cent increase on the basic wage of Pounds 227 a week and a Pounds 300 lump sum payment.

Yarrow Shipbuilders GB United Kingdom, EC P3731 Ship Building and Repairing PEOP Labour P3731 The Financial Times London Page 6 77
Pit consortium seeks investor Publication 930227FT Processed by FT 930227 By JAMES BUXTON, Scottish Correspondent

THE miners' consortium which last year leased Monktonhall colliery near Edinburgh from British Coal is to seek a partner or outside investor to provide finance to overcome funding problems.

Monktonhall Mineworkers is owned by its 160 employees, who have invested Pounds 10,000 each in the company. It blamed the need for additional finance on a three-month delay in starting production. It wants to buy equipment to develop a second coalface.

The colliery, closed by British Coal in 1987, resumed production at the end of last year. It has a contract to supply 87,000 tonnes of domestic coal to British Coal and is fulfilling a trial order for 12,000 tonnes of power station coal for ScottishPower.

Mr Jackie Aitchison, Monktonhall chairman, said the company was continuing to operate thanks to the support of its bank, Bank of Scotland, and 'the understanding of our suppliers'.

It had decided to ask Price Waterhouse, its financial adviser, to gauge the level of interest from potential partners and investors.

Monktonhall hopes that either a financial institution or a company involved in the coal industry will step in.

The consortium failed to attract investment from outside institutions or public funding agencies last year and is financed entirely by the Pounds 1.6m subscriptions of the miners, many of whom took out loans to buy their shares. Mr Aitchison said it was receiving no government or European Community subsidy.

Last December Mr Jim Parker, the mining engineer who led the consortium and put together its business plan, resigned as managing director after a disagreement with other members of the consortium.

Council leaders from mining areas yesterday urged the government to retain all 31 pits threatened with closure when it announces its expected rescue package next month.

Chief executives and councillors from 14 district councils in England and Wales also pressed British Coal to extend the special redundancy package beyond the deadline of March 31.

British Coal Corp Monktonhall Mineworkers GB United Kingdom, EC P1221 Bituminous Coal and Lignite-Surface P9121 Legislative Bodies MKTS Contracts COMP Company News RES Facilities GOVT Government News P1221 P9121 The Financial Times London Page 6 366
BBC2 chief is appointed as controller of BBC1 Publication 930227FT Processed by FT 930227 By RAYMOND SNODDY

MR ALAN YENTOB, the controller of BBC2, was yesterday appointed controller of BBC1.

It is the first time since 1965 that the person in charge of the corporation's minority channel has gone on to run the BBC's more mainstream television channel.

One of his early tasks will be to decide what to do about Eldorado, the soap opera set in Spain which was commissioned by his predecessor at BBC1, Mr Jonathan Powell.

Yesterday Mr Yentob said it had failed in ratings terms. 'It doesn't seem to have done the business,' he said, although he would not be drawn on the soap's fate.

Seven or eight candidates were assessed for one of British broadcasting's most attractive jobs.

According to Mr Will Wyatt, managing director of network television, only Mr Yentob, 45, went before a sub-committee of the BBC governors on Thursday evening.

All the signs are that Mr Yentob, controller of BBC2 since 1988 and regarded as a considerable success, did not initially apply for the job.

'I decided that I wanted to do it and I do want to do it,' he said yesterday.

Programmes introduced during Mr Yentob's time at BBC2 have ranged from The Late Show, The Second Russian Revolution and Troubleshooter to comedy such as Harry Enfield and French and Saunders.

Mr Yentob will be the senior programme controller and will deputise for Mr Wyatt on all editorial matters.

He said his main task would be to offer the audience a genuine choice, although he supported the emphasis Mr John Birt, the director-general, was placing on the BBC producing 'distinctive' programmes.

A new BBC2 controller will be appointed in three or four weeks. Mr Michael Jackson, the present head of arts programmes, is seen as a strong candidate.

British Broadcasting Corp GB United Kingdom, EC P4833 Television Broadcasting Stations PEOP Appointments P4833 The Financial Times London Page 6 328
BhS to shed 800 full-time jobs Publication 930227FT Processed by FT 930227 By NEIL BUCKLEY

BhS, part of the Storehouse retail group, is cutting 800 full-time and 2,300 Saturday jobs, but creating 2,000 part-time jobs in a further move towards flexible working in the retail sector.

The store chain said the changes were aimed at ensuring well-trained staff were always available to provide higher levels of service at peak times, especially on Saturdays, and to remove anomalies in the existing staff structure.

Storehouse's move follows a similar one by Burton, the retail clothing group, which announced last month it was cutting 2,000 full-time jobs but creating up to 3,000 part-time ones.

Management staff at BhS have already been reduced by 900 by Mr David Dworkin, the outgoing chief executive widely credited with having turned the group around.

The full-time job cuts now being made at store level account for more than a quarter of the present total of 3,000 full-time jobs, while Saturday losses account for nearly 40 per cent of weekend-only working.

They will be replaced by 2,000 jobs working between 12 and 20 hours a week. The total number of employees will fall from about 13,000 to 12,000.

All remaining staff working more than 12 hours a week will be entered on National Vocational Qualification training schemes to raise standards of customer service. Basic pay will be increased.

BhS said it hoped some people losing their jobs would accept part-time jobs, provided they met NVQ competence standards. But some compulsory redundancies were likely.

The chain is also contracting out cleaning and security functions, involving about 300 cleaners and 40 security personnel, but hopes most of these will be offered jobs with the contractors.

BhS expects the changes to cost about Pounds 2m, but said this would be more than outweighed by savings in future.

Mr Steve Bedford, Storehouse's group development director, said BhS regretted having to make redundancies in the present economic situation. He said: 'BhS has restructured its head office, store management and regional organisation, cutting out unnecessary bureaucracy. Now, with new staffing arrangements in the stores, the whole business really is focused on the customer.'

BHS GB United Kingdom, EC P5311 Department Stores PEOP Labour P5311 The Financial Times London Page 6 376
Smith sees threat in jobless toll Publication 930227FT Processed by FT 930227 By ALISON SMITH

LABOUR'S onslaught on the government over the recession intensified yesterday as Mr John Smith, the party leader, issued a stark warning that unemployment was reaching levels that posed a serious social threat.

Mr John Major, the prime minister, was yesterday once again upbeat about the economy, saying he thought people might be inclined to spend again now they had repaid debts incurred a few years earlier.

'It could be that the tide is turning, but it is too early to say how profound that change is,' the prime minister said.

But Mr Smith insisted that 'second-hand assurances' from Mr Major that the economy was on the brink of recovery were failing to convince people. Speaking in Cardiff, he warned that unemployment was reaching 'an extremely dangerous level'.

'It is beginning not only to menace our prospects of economic recovery, but we are on the edge of having serious social problems,' he said.

As the opposition sought to capitalise on unease about government performance suggested by opinion polls, such as that in the Times yesterday, which gave them a 12 point lead, all three main parties are turning their minds to the forthcoming by-election at Newbury.

The seat, held by the Tories with a majority of about 12,000 against a Liberal Democrat challenge at the general election, will offer the first test of how far the continued economic recession has turned opinion against the Conservatives since last April.

With the return of Mr Major the Tories will use their local government conference today to seek to regain the political initiative and steady the nerves among their supporters.

Sir Norman Fowler, the Tory chairman, will lead the offensive with a return to the theme of law and order and an attack on opinion pollsters, based on their poor performance in last year's election campaign.

GB United Kingdom, EC P8651 Political Organizations P9611 Administration of General Economic Programs GOVT Government News ECON Employment & unemployment P8651 P9611 The Financial Times London Page 6 344
Banks and Small Companies: Lessons of the 80s spark policy review - The relationship between banks and small businesses is in upheaval. With 80,000 company failures last year and a similar number forecast for 1993, lenders are seeking a fresh approach to overdrafts, loans and equity finance. FT reporters assess the lending pressures on companies and banks Publication 930227FT Processed by FT 930227 By JOHN GAPPER

HIGH STREET banks are reviewing their policies on lending to small and medium-sized businesses as the size of problems from their 1980s lending strikes them. This is leading to some fundamental changes in policy.

One change is that banks are becoming more restrictive in the overdraft facilities they offer. Because many of these overdrafts were used as a substitute for equity capital in the 1980s, banks are now encouraging fixed-term loans instead.

Such changes have led to fears of a 'credit crunch' for small businesses, but banks deny that they are withdrawing credit. They say they are merely trying to ensure that loans are used for working capital rather than equity.

Banks argue that small business lending is more risky than they had appreciated before. They believe they require a combination of higher pricing and more information on how loans are used if they are to remain in the market.

Fixed-term loans are useful as a monitoring tool because a bank can see immediately when interest payments are not met, rather than having to watch movements in overdrafts closely to detect underlying patterns of cashflow.

Mr Brian Pearse, chief executive of Midland, this week tried to stimulate a debate about small-business financing by arguing that the government, banks and businesses had to form a partnership to stimulate new forms of equity finance.

Mr Pearse's suggestions included a Pounds 67m 'loan support scheme' to provide subsidies to cut the price of banks' medium and long-term loans to 1 percentage point over base - rather than the current 2 to 3 points.

He also argued that this scheme for manufacturing industry could be supplemented with a 'manufacturing support scheme' which would try to attract individuals to offer equity capital to small, local companies by giving them tax breaks.

Mr Pearse believes financing for small companies in Britain should to be re-thought in comparison with countries such as Germany, where only 14 per cent of small-business debt is in overdraft form, compared with 58 per cent in Britain.

Ms Jane Bradford, National Westminster's head of small business services, says banks are increasingly limiting small businesses' access to overdrafts because of their experience with bad debts from lending in the 1980s.

'Small businesses have been over-reliant on overdrafts. They have met long-term financing needs with short-term borrowing,' says Ms Bradford, whose bank is lending about Pounds 11bn to small businesses.

The confusion has proved problematic for NatWest as it tries to clear up a mass of poor lending which originated in the late 1980s. It has found that many overdrafts in theory provided for working capital have turned into loans.

NatWest and Barclays are the two biggest lenders to small businesses. Some 55 per cent of the bank's lending in the sector is in the form of overdrafts, and 45 per cent in loans with fixed terms.

The bank's problems with small-business lending were shown this week in its 1992 results. Of a Pounds 1.3bn provision for bad debts on lending in its UK branch business, 47 per cent related to loans of less than Pounds 50,000.

It is now trying to limit overdrafts to cases where they are clearly going to be used to day-to-day working capital. It wants businesses to accept term loans, often on fixed interest rates, for machinery, premises and vehicles.

NatWest is also trying to clean up permanent overdrafts by converting them into loans. It regards clearly defined forms of lending as essential to allow the bank to monitor what happens to its money more closely.

NatWest says businesses seek overdrafts believing they will be cheaper because of their flexibility. Many have been unable to reduce overdrafts because cashflow has not met projections.

A report on equity finance will appear in next week's UK Companies pages.

GB United Kingdom, EC P602 Commercial Banks TECH Standards TECH Services P602 The Financial Times London Page 5 710
Banks and Small Companies: Business adjusts to tighter credit - The relationship between banks and small businesses is in upheaval. With 80,000 company failures last year and a similar number forecast for 1993, lenders are seeking a fresh approach to overdrafts, loans and equity finance. FT reporters assess the lending pressures on companies and banks Publication 930227FT Processed by FT 930227 By IAN HAMILTON FAZEY, PAUL CHEESERIGHT and JAMES BUXTON

JOHN FARMER, owner of PKI, an expanding coatings company in Chester, has mixed feelings about banks.

He abandoned Lloyds after a dispute about his overdraft. 'We changed to Barclays, but I decided to get out of the hands of the banks as far as financing growth was concerned.'

Today PKI has a Pounds 1.25m turnover and is growing at 25 per cent a year. The workforce at the company, which coats plastic components in imitation gold and silver, has grown from 46 to 60 in two years.

Like many small businessmen Mr Farmer wanted a flexible overdraft facility because it offered easier access to working capital than a loan.

He turned to Barclays after Lloyds declined to increase his overdraft limit to Pounds 180,000 and tried instead to set a Pounds 125,000 limit with higher charges. Although Mr Farmer now has an overdraft limit of only Pounds 50,000 at Barclays, he has continued expanding by using an intermediary finance house.

The finance house - Griffin Factors, a subsidiary of Midland Bank - agreed to offer PKI debtor discounting, a system of speeding cashflow. At the end of each week Griffin sends Mr Farmer a cheque for 80 per cent of his invoiced sales. He pays Griffin when PKI is paid by its customers.

The cost of what is, in effect, increased working capital works out at 2 per cent over base rate, compared with 2 1/2 per cent for his overdraft. Administration costs on his Griffin contract are less than the 1/2 point difference. His personal guarantee - his own risk - is only on the overdraft.

Taking advantage of such facilities is an important shift from the 1980s when overdrafts were calculated by formula: 70 per cent of assets, plus half the value of money owed to a business by its customers.

Grahame Elliott of Stoy Hayward, PKI's auditor in Manchester, says: 'Everything is a case by case situation now.'

The changing relationship between banks and small companies is summed up by Paul Davidson, managing director of Bolton Business Venture, an enterprise agency advising small businesses. 'There are no formulae now. Information is crucial. The banks are carrying out validation of sales forecasts, making quarterly visits and demanding monthly management accounts.

'We had a meeting with local bankers to see if they had altered their criteria for lending. They all said they had a surplus of funds and were anxious to do deals, but that the quality of proposals was weak.'

The banks' new approach is raising questions among accountants and advisers about whether small businesses will get the working capital many need to ride the expected economic upturn. Such capital is necessary to help companies avoid overtrading - not having the cash to pay wages, creditors and interest charges quickly enough to stay in business because finances are tied up in stocks, work-in-progress and debtors.

John Evans, a Birmingham interior designer, says: 'Business in the last three months has come back with a vengeance. But the banks won't finance you and they won't release the money. It's not the price of it that's the problem, it's getting it.'

Responses are patchy, however. Many accountants say banking facilities can vary widely according to lending terms drawn up by managers with different attitudes to small businesses.

Access to funds has not been a problem for Jim Mundell, chairman of United Forgemasters in Dudley, whose forging group has taken on more workers to cope with increased orders. 'We are getting money at a sensible price,' he says. 'There has never been so much money flushing around the system. It is there because people are taking a more responsible attitude to how they're doing their lending.'

His view is echoed at UKPS, an environmental engineering company on the Warwick University Science Park. It has changed clearing banks twice in the last 18 months - from National Westminster to Royal Bank of Scotland then to Barclays. 'There are problems but we are not hard up,' says Robert Eden, the managing director. 'When we need more flexibility we can negotiate,'

Accountants say that in some cases banks have reduced overdraft ceilings to match the new balances created when debtors have made payments.

Mr Elliott said: 'If values of property now start rising and businesses start doing better, there is a danger some banks will pounce to recoup loans by shutting companies down to realise the assets.'

According to one Glasgow accountant companies should protect themselves against such eventualities by negotiating with the banks before embarking on expansion.

'It's no good taking a lot of new orders and then going to the bank to ask them to finance an increase in turnover. You've got to get the bank lined up first,' he says.

'The banks are realising that some companies with high working-capital needs are going to have major problems coming out of recession.'

Many accountants believe the attitude of the banks could force small businesses to seek alternative funds from Britain's venture capital industry, which is estimated to have reserves of more than Pounds 1bn.

Banks say they are into 'relationship lending' and insist no sound business will be starved of working capital.

They say there will be tougher scrutiny. Overdrafts will be available for working capital only. Risk capital for new ventures might have to be sought elsewhere.

But one banker warned: 'It's going to cost more. Scrutiny is going to push up charges.'

GB United Kingdom, EC P602 Commercial Banks P99 Nonclassifiable Establishments TECH Standards TECH Services P602 P99 The Financial Times London Page 5 992
Banks and Small Companies: Blaming a bank when all goes sour - The relationship between banks and small businesses is in upheaval. With 80,000 company failures last year and a similar number forecast for 1993, lenders are seeking a fresh approach to overdrafts, loans and equity finance. FT reporters assess the lending pressures on companies and banks Publication 930227FT Processed by FT 930227 By ANDREW TAYLOR

BILL BOWLING'S world disintegrated in January. He lost his construction business and now faces losing his home.

Like many businessmen who have called in receivers, the former chairman and majority shareholder of Clayton Bowmore blames a bank.

He says National Westminster's decision to cut the overdraft limit for his Yorkshire-based company from Pounds 550,000 to Pounds 250,000 created a cashflow crisis it could not survive. NatWest denies its actions were precipitate. As far as it was concerned Clayton Bowmore was another casualty of the recession - a victim of over-expansion and poor cashflow.

The bank says: 'We asked accountants KPMG Peat Marwick to prepare two reports on the company last year. The second concluded the company was insolvent. An independent insolvency practitioner, already working with the company, said that the business would require more money to survive.'

Mr Bowling says the bank pulled the plug even though the company had negotiated sales that would have enabled it to repay Pounds 400,000 of its Pounds 2.2m borrowings.

Mr Bowling, who had given a personal guarantee of Pounds 200,000 against bank loans, argues the company's gearing was no worse than many publicly owned construction companies. 'The book value remained marginally greater than the bank debt even after the savage write-downs recommended by KPMG, which have been appointed receivers,' he says.

The rise and fall of Clayton Bowmore mirrors the experiences of many companies during the recession. It was formed in November 1975 with just Pounds 100, a Morris van and a lot of optimism. Within four years annual turnover had reached Pounds 3m. During the 12 months to the end of March 1992 the group made a Pounds 250,000 pre-tax profit on a Pounds 16m turnover. The seeds of its destruction, however, were sown with the move into housebuilding in the late 1980s.

For a while all went well. House prices and sales remained stronger in northern England than in the south. NatWest, however, was concerned and asked KPMG to prepare its first report, which included a substantial write-down on book values. Work in progress was valued at zero, debtors were included at 50 per cent of book value and property and land values were cut, according to Mr Bowling. KPMG reduced its estimates even further in the second report. Mr Bowling says such treatment could be justified only if the company had already been judged unviable.

KPMG says Mr Bowling's reaction is understandable, but stands by its judgment. The accountants say the recommendations on ways to reduce overheads were largely ignored by the company, which underestimated its likely losses for this financial year.

The countdown to collapse started on September 15 when the government raised base rates to 15 per cent. 'That day we lost five houses worth a total of Pounds 250,000,' says Mr Bowling. The company, which had been expecting a sale a week, has made fewer than six since Black Wednesday.

On the morning of January 15 the company received a payment for more than Pounds 300,000. It immediately posted cheques worth more than Pounds 150,000 to suppliers. 'At 4.15pm the bank rang to say it was reducing our overdraft facility by the exact amount of the payment we had received,' says Mr Bowling.

NatWest says it warned the company that it retained the right to reduce the overdraft limit by the amount of any cheques receive.

Mr Bowling says: 'NatWest refused to honour the cheques we had sent out. Word got round and the client stopped the Pounds 300,000 cheque before it had time to clear. So nobody gained.'

On January 27, with insufficient cash to pay wages, the receivers were called in.

Clayton Bowmore Group Holdings National Westminster Bank GB United Kingdom, EC P602 Commercial Banks TECH Standards TECH Services P602 The Financial Times London Page 5 697
Patten loses support in Hong Kong Publication 930227FT Processed by FT 930227 By SIMON HOLBERTON HONG KONG

GOVERNOR Chris Patten's position in Hong Kong weakened perceptibly yesterday when his supporters turned on him for delaying publication of legislation which, if enacted, would make elections in the colony more democratic.

The delay has left Mr Patten exposed to the accusation of acquiescing to Beijing's demands for him to abandon his package. Hong Kong's pro-democracy politicians accused Britain of selling out Hong Kong in the wake of the decision announced on Thursday.

Mr Patten was due to gazette his legislation by the end of this month but drew back in the hope China would agree to talks on Hong Kong's political future.

His decision was, however, greeted enthusiastically by Hong Kong's stock market - the Hang Seng Index rose 148.11 points to close at 6,351.99 - and won support from the colony's conservative politicians.

Mr Martin Lee, leader of the United Democrats, said the UK had lost the negotiating battle with China before it had begun. He said the people of Hong Kong knew who lost every time Britain and China sat down at the negotiating table. 'Have you ever seen the British winning anything by negotiations with the Chinese government?' he said.

The Hong Kong Economic Journal, the colony's leading business newspaper and long-time supporter of Mr Patten, sharply criticised him for deferring publication of the legislation. He was 'naive to the point of folly' in believing that this gesture would help him secure an agreement with Beijing, the paper said.

However, Mr Patten's decision won approval from the Co-operative Resources Centre (CRC), a conservative political grouping close to the colony's business community and Beijing. Mrs Selina Chow, a leading CRC member, said it was a 'hopeful sign' that talks might eventuate.

Hong Kong's Beijing-controlled press published conflicting reactions to Mr Patten's decision. Ta Kung Pao, which is regarded as the most reliable mouthpiece, published a tough commentary which laid down four conditions for talks which appeared to British diplomats to be designed to prevent dialogue.

It said Britain should agree to talks about the 1994-95 elections based on past understandings; it should agree not to publish Mr Patten's bill until agreement was reached; it should include no 'third party,' that is Hong Kong, in the talks; and any agreement reached should be binding and unable to be amended by 'area councils,' that is, the Legislative Council.

Wen Wei Po, in a softer commentary, said China had never insisted Britain publicly withdraw Mr Patten's political blueprint. 'The British side can have several ways to abandon the package, such as, putting it aside or treating it as 'invisible' during the talks,' it said.

HK Hong Kong, Asia P9121 Legislative Bodies P9611 Administration of General Economic Programs PEOP Personnel News P9121 P9611 The Financial Times London Page 4 474
China sees growth continuing at 8% Publication 930227FT Processed by FT 930227 By TONY WALKER BEIJING

CHINA expects to sustain economic growth of about 8 per cent annually to the end of this century. This would bring the Chinese economy within range of becoming the world's biggest within two decades.

Mr Gan Ziyu, vice minister of the state planning commission, said yesterday that China's goal of quadrupling 1980 gross national product by the year 2000 - a target that was decried by many economists when it was unveiled - would be realised earlier.

China's extraordinary economic surge has forced a review of growth targets in its current five-year plan (1991-95), which had envisaged growth of some 6 per cent annually.

Mr Gan, in a briefing with reporters, dismissed suggestions that the economy was overheating, saying it would continue to grow in a quick-paced but sustainable manner.

The Chinese official said the government would 'fine tune' the economy to achieve sustainable rates of growth. This would be done by restricting credit and restraining growth in the money supply.

China registered real GNP growth last year of more than 12 per cent, exceeding both the planned 6 per cent for 1992 and the 9 per cent average of the past 13 years. Economic activity shows little sign of slackening this year.

China's economic boom - growth may have been much higher in 1992 than officially acknowledged - has prompted a sharp debate within the Chinese leadership about the dangers of renewed inflation caused by excessive demand.

Bank lending increased last year by double the planned figure, money in circulation doubled, and the broader measure of money supply (M2) charged ahead by 28 per cent. Inflation in the large urban centres reached 14 per cent compared with a national average of about 6 per cent.

Mr Gan, meanwhile, added that China planned to import an average of Dollars 70bn-Dollars 80bn annually of technology, machinery and raw materials in the present five-year plan.

CN China, Asia P9611 Administration of General Economic Programs ECON Gross national product ECON National income ECON Inflation P9611 The Financial Times London Page 4 353
S Korea promotes political reformers Publication 930227FT Processed by FT 930227 By JOHN BURTON SEOUL

MR Kim Young-sam, the new South Korean president, yesterday appointed a combination of bold political reformers and cautious economic bureaucrats to his cabinet.

Many of the 24 ministers come from outside the political establishment. They include academics and former opposition politicians who served with Mr Kim before he joined the ruling Democratic Liberal Party in 1990. The reformers mostly fill politically sensitive positions, such as head of the intelligence agency, as part of Mr Kim's programme to remove the last vestiges of the former military dictatorship.

The key economic agencies, however, are occupied by bureaucrats, who indicated they will resist rapid economic deregulation.

'We will seek reforms in a gradual way that will not invite bad effects,' said Mr Lee Kyung-shik, who becomes head of the Economic Planning Board. Mr Lee was an EPB official and presidential adviser during the administration of President Park Chung-hee, when economic policy was dominated by central planning.

He then became a senior executive at Daewoo, the country's fourth biggest conglomerate, during the 1980s and is now president of the state-run Korea Gas Corporation.

Although he favours the reduction of bureaucratic controls on industry, he added that he did not support 'the rash implementation of financial deregulation'.

Mr Hong Jae-hyung is the new finance minister and a former bureaucrat in the ministry. He is now chairman of the state-owned Korea Exchange Bank and was the president of the Export and Import Bank, another government bank.

Mr Hong also favours a cautious approach to financial liberalisation and is likely to resist foreign demands, particularly from the US, for more rapid market-opening measures.

KR South Korea, Asia P9111 Executive Offices PEOP Personnel News P9111 The Financial Times London Page 4 297
Singapore budget will cut taxes Publication 930227FT Processed by FT 930227 By KIERAN COOKE SINGAPORE

SINGAPORE'S budget for 1993, announced yesterday, proposes big fiscal changes, with a 3 point cut in corporation tax to 27 per cent and similar cuts in personal taxes, with the top rate reduced from 33 to 30 per cent.

Dr Richard Hu, the finance minister, said the main thrust of the budget was to maintain Singapore's competitiveness as an investment location while encouraging Singaporeans to invest more in the region and develop an external 'second pillar' for the economy.

'Our challenge is to claim a bigger piece of that fast growing economic pie in the region,' said Dr Hu.

The incentives include tax credits for overseas dividend income and tax exemptions for venture capital and regional investments funds. 'Individuals will be encouraged to take part in risky but highly profitable ventures, knowing that if they dare and succeed, government will not cream off a large share of their rewards,' said Dr Hu.

Analysts said the government was clearly hoping that the tax cuts and a range of additional benefits would reduce public concern about rising living costs. Spending on medical and education schemes to benefit the poor is to be substantially increased.

The government plans to introduce incentives to widen share ownership in the run-up to the partial privatisation of the telecommunications utility later this year. Singaporeans are also given a 5 per cent income tax rebate for 1993.

Dr Hu said a recently announced 3 per cent goods and services tax will only partially make up for the drop in revenues resulting from the budget's tax cuts and incentives package in the short to medium term.

Analysts say the budget reflects Singapore's confidence in its fiscal position. Since 1987 Singapore has been running a budget surplus. 1993 revenues are estimated at SDollars 17.2bn (Pounds 7.3bn) while expenditure is budgeted at SDollars 15.5bn.

Singapore's economy grew by 5.8 per cent last year. Up to 7 per cent growth is expected this year.

SG Singapore, Asia P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 4 355
Industrial production in Japan falls again Publication 930227FT Processed by FT 930227 By CHARLES LEADBEATER TOKYO

THE JAPANESE economy's weakness was underlined yesterday by official figures which show that industrial production is continuing to fall, while the growth in bank lending remains sluggish.

Industrial production fell by 0.3 per cent in January from the previous month to stand 7.6 per cent below its level in January last year, according to a report from the industry ministry.

However the monthly rate of decline in industrial production has slowed significantly since the autumn, when it was falling at a month-on-month rate of 2.9 per cent.

The financial authorities regard industrial production as an important indicator of the prospects for economic recovery. They believe it will reach its trough this quarter, paving the way for a gradual pick-up in investment.

Meanwhile, bank lending is still growing at an extremely low rate. Japanese banks' outstanding loans were 2.2 per cent up at the end of last year on the year before, according to the Bank of Japan.

Mounting pressure on industrial companies to cut costs to boost profitability was underlined by KDD, the telecommunications operator, which announced plans to shed 800 jobs in the next five years to reduce it workforce to 5,000. The company is just completing a programme to cut 1,000 jobs.

Earlier this week Nissan, the car maker, and NTT, Japan's main telecommunications group, announced plans to cut 35,000 jobs within three years.

JP Japan, Asia P9611 Administration of General Economic Programs ECON Industrial production ECON Economic Indicators P9611 The Financial Times London Page 4 263
US to go ahead with Somalia pull-out: American troops come under fire as 100 die in fighting between rival clans Publication 930227FT Processed by FT 930227 By REUTER MOGADISHU

THE US military said yesterday it was going ahead with plans eventually to withdraw 3,000 troops from Somalia despite riots and gun battles that rocked Mogadishu in the past four days, Reuter reports from Mogadishu.

But about 1,000 of those troops, now deployed in the southern city of Kismayu where rival militia fought on Monday, would remain for some time, army captain Ed Loomis said.

About 100 people have died in Kismayu this week, according to the French medical aid agency, Medecins Sans Frontieres.

Earlier yesterday US military spokesman Colonel Fred Peck said the planned troop pull-out was on schedule 'despite events in the past 72 hours'.

He was referring to violent protests in Mogadishu by supporters of warlord Mohamed Farah Aideed, who accused the American-led forces of backing his rival, Mohamed Said Hersi, known as Morgan. The US military denies the charge.

The protests were followed by gun battles on Thursday between the multinational forces and bandits in Mogadishu. There was a similar but brief clash yesterday.

The violence, the worst since the task force started arriving in December to stop bandits looting food aid, had forced Washington to delay the withdrawal from Monday of the 3,000.

The US has about 18,000 troops in Somalia.

The rest of the Americans should be home by April, when the United Nations is expected to have taken over command of the task force of troops from 23 nations.

SO Somalia, Africa P97 National Security and International Affairs GOVT Legal issues P97 The Financial Times London Page 4 283
Unemployment will dominate G7 meeting Publication 930227FT Processed by FT 930227 By PETER NORMAN, CHARLES LEADBEATER and GEORGE GRAHAM LONDON, TOKYO, WASHINGTON

THE PROBLEMS of rising unemployment in the industrialised world and the sharp economic downturn in Germany and other continental European countries are set to dominate today's informal meeting of Group of Seven finance ministers in London.

According to officials who have prepared the meeting, the talks are expected to see some tough questioning of Germany's tight monetary policy, Japan's sharply rising trade surplus and the US attitude to trade and currencies in an attempt to iron out obstacles to world economic growth.

Although Mr Norman Lamont, the UK chancellor of the exchequer and G7 host, is satisfied that UK monetary and fiscal policies are contributing to global growth, a Canadian government official yesterday said that the UK would be warned against allowing its public sector borrowing requirement to continue rising sharply.

'He has got to act on the fiscal side,' the official said.

But Mr Lloyd Bentsen, the US treasury secretary, will be the centre of most attention when the ministers and central bank governors from the US, Japan, Germany, France, Britain, Italy and Canada begin their discussions.

The US wants its allies to give priority to growth, is anxious to revive G7 co-operation and wants a discussion of Russia's economic problems. It believes that it will have more leverage in the talks following President Bill Clinton's plan to cut the US budget deficit.

'I think the US will be in a substantially stronger position than it has been in many years because it is putting its house in order, it is responding to pressure from abroad, and its own economy is picking up,' a US treasury official said.

For their part, America's allies want assurances that the Clinton administration is not protectionist and that it will support the Uruguay Round of trade liberalisation talks.

The impasse in the trade talks is regarded by some G7 officials as an important factor that has undermined the group's credibility as a forum for international co-operation.

The Japanese government will be seeking an explanation of Mr Bentsen's recent comments in favour of a strong yen, which have been largely responsible for the yen's sharp rise against the dollar over the past week. Yesterday it signalled its mounting frustration with the US administration's failure to clarify the remarks.

Speaking to the Japanese parliament, Mr Kiichi Miyazawa, the prime minister, warned that a rapid appreciation of the yen against the dollar could 'derange' the Japanese economy by hitting exporters.

Mr Yoshiro Mori, the outspoken minister of trade and industry, warned that the yen's appreciation threatened to choke off what little growth was left in the flagging Japanese economy.

Yesterday it appeared that the US would try to smooth over the row. Before leaving Washington one of Mr Bentsen's officials called his comment 'an off-hand remark'. He added that Mr Bentsen 'explicitly rejected a strategy of driving down the dollar'.

JP Japan, Asia US United States of America CA Canada FR France, EC IT Italy, EC DE Germany, EC GB United Kingdom, EC P9721 International Affairs GOVT Government News ECON Employment & unemployment P9721 The Financial Times London Page 3 535
Russian government seeks 10% export tax Publication 930227FT Processed by FT 930227 By JOHN LLOYD MOSCOW

THE Russian government is demanding a new, 10 per cent tax on all exports in an effort to raise funds to pay off the Dollars 80bn debt it inherited from the former Soviet Union.

The demand is a measure of the desperate straits in which the government finds itself - faced with massive tax evasion and a rapid fall in income as production and living standards plummet.

Government estimates show that over the past year, a gap of between Dollars 10bn and Dollars 15bn opened up between the volume of goods exported and what the government should have received in existing export taxes. At the same time, the precipitous fall of the rouble against hard currencies has meant that the government must now again subsidise imports, to the tune of half of the credit created each month.

Russian exporters are already among the most heavily taxed traders in the world. Non-payment of taxes through use of offshore accounts is common, thus compounding the government's hard currency problems.

RU Russia, East Europe P9611 Administration of General Economic Programs P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9611 P9311 The Financial Times London Page 3 209
Syria tries to rekindle talks Publication 930227FT Processed by FT 930227 By MARK NICHOLSON CAIRO

SYRIA said yesterday it would convene a meeting of Arab parties to the Middle East peace process to discuss the resumption of negotiations, but warned that a quick restart was unlikely without a solution to the Palestinian deportees crisis.

Mr Farouk al-Shara, the Syrian foreign minister, said in Brussels that the delegations to the stalled talks would be invited to Damascus 'within the coming days or weeks' to discuss the invitation by Mr Warren Christopher, US secretary of state, to reconvene bilateral talks with Israel in April.

Mr al-Shara said it would be 'wrong to think' that any Arab parties would agree to resume negotiations until a 'satisfactory solution' had been found to the impasse over 396 Palestinians who remain in south Lebanon after their deportation by Israel in December. 'We in Syria insist on the return of all the deportees,' he said.

The Syrian minister's remarks followed talks yesterday with several European foreign ministers and Mr Christopher, who said Mr al-Shara had assured him that Syria would back US attempts quickly to reconvene the peace talks.

Neither Syria nor any other Arab party has accepted the invitation to return to the table by April, the date raised by Mr Christopher following his week-long tour of Middle Eastern capitals.

Mr Christopher, in Brussels to attend a meeting of Nato ministers, said he remained optimistic that talks could restart soon.

'I'm encouraged by developments since yesterday when the announcement was made,' he said.

However, Mr Haider Abdel-Shafi, head of the Palestinian negotiating team, added another note of caution from Jerusalem, saying that Mr Christopher's decision to issue invitations for an April resumption were 'premature' in the absence of a settlement to the deportees issue. His comments were echoed by spokesmen from the Palestine Liberation Organisation headquarters in Tunis.

Nevertheless, senior Palestinian officials in Cairo said that a US proposal to resolve the stalemate remained alive and offered hope for an acceptable solution.

SY Syria, Middle East XN Middle East P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 3 355
Unemployment will dominate G7 meeting Publication 930227FT Processed by FT 930227 By PETER NORMAN, CHARLES LEADBEATER and GEORGE GRAHAM LONDON, TOKYO, WASHINGTON

THE PROBLEMS of rising unemployment in the industrialised world and the sharp economic downturn in Germany and other continental European countries are set to dominate today's informal meeting of Group of Seven finance ministers in London.

According to officials who have prepared the meeting, the talks are expected to see some tough questioning of Germany's tight monetary policy, Japan's sharply rising trade surplus and the US attitude to trade and currencies in an attempt to iron out obstacles to world economic growth.

Although Mr Norman Lamont, the UK chancellor of the exchequer and G7 host, is satisfied that UK monetary and fiscal policies are contributing to global growth, a Canadian government official yesterday said that the UK would be warned against allowing its public sector borrowing requirement to continue rising sharply.

'He has got to act on the fiscal side,' the official said.

But Mr Lloyd Bentsen, the US treasury secretary, will be the centre of most attention when the ministers and central bank governors from the US, Japan, Germany, France, Britain, Italy and Canada begin their discussions.

The US wants its allies to give priority to growth, is anxious to revive G7 co-operation and wants a discussion of Russia's economic problems. It believes that it will have more leverage in the talks following President Bill Clinton's plan to cut the US budget deficit.

'I think the US will be in a substantially stronger position than it has been in many years because it is putting its house in order, it is responding to pressure from abroad, and its own economy is picking up,' a US treasury official said shortly before leaving Washington.

For their part, America's allies want assurances that the Clinton administration is not protectionist and that it will support the Uruguay Round of trade liberalisation talks.

The impasse in the trade talks is regarded by some G7 officials as an important factor that has undermined the group's credibility as a forum for international co-operation.

The Japanese government will be seeking an explanation of Mr Bentsen's recent comments in favour of a strong yen, which have been largely responsible for the yen's sharp rise against the dollar over the past week. Yesterday it signalled its mounting frustration with the US administration's failure to clarify the remarks.

Speaking to the Japanese parliament, Mr Kiichi Miyazawa, the prime minister, warned that a rapid appreciation of the yen against the dollar could 'derange' the Japanese economy by hitting exporters.

Mr Yoshiro Mori, the outspoken minister of trade and industry, warned that the yen's appreciation threatened to choke off what little growth was left in the flagging Japanese economy.

Yesterday it appeared that the US would try to smooth over the row. Before leaving Washington one of Mr Bentsen's officials called his comment 'an off-hand remark'. He added that Mr Bentsen 'explicitly rejected a strategy of driving down the dollar'.

JP Japan, Asia US United States of America CA Canada FR France, EC IT Italy, EC DE Germany, EC GB United Kingdom, EC P9721 International Affairs GOVT Government News ECON Employment & unemployment P9721 The Financial Times London Page 3 539
Another 3,900 US aircraft jobs to go Publication 930227FT Processed by FT 930227 By LAURIE MORSE CHICAGO

GE Aircraft Engines, an arm of the General Electric Company and a major supplier to commercial and military aircraft manufacturers, said yesterday it was cutting its workforce by more than 10 per cent.

The move, another symptom of the poor health of the US aircraft industry, follows heavy job cuts by Boeing last week.

GE Aircraft, which sells engines for air, marine, and industrial use, said it would cut 3,900 from its workforce of 33,000. The cuts are planned across operations, with about 2,500 at its headquarters in Evendale, Ohio; 700 at its plant in Lynn, Massachusetts, and 700 at smaller facilities around the US.

In addition to an airline slump, GE Aircraft is also feeling the effects of recent US military budget cuts.

'Our commercial customers have suffered unprecedented losses in the last three years, and engine and spare parts orders are down,' said Mr Brian Rowe, president. 'Those difficulties and continually changing customer needs require these cost actions,' he said.

The company said the reductions would be made as much as possible through attrition and voluntary job elimination programmes.

GE Aircraft Engines had revenues of Dollars 7.368bn (Pounds 5.18bn) in 1992, compared with General Electric's overall sales of Dollars 62.2bn. A General Electric spokesman said GE Aircraft had operating earnings of Dollars 7.7m in 1992.

GE Aircraft Engines US United States of America P3724 Aircraft Engines and Engine Parts COMP Company News PEOP Labour P3724 The Financial Times London Page 3 260
BJP protests Publication 930227FT Processed by FT 930227 By REUTER NEW DELHI

India's parliament came to a standstill yesterday when the right-wing Bharatiya Janata Party and the government clashed over the police role in halting a BJP rally on Thursday, Reuter reports from New Delhi.

Police tear-gassed crowds and detained 1,000 people including BJP leaders.

IN India, Asia P9229 Public Order and Safety, NEC GOVT Legal issues P9229 The Financial Times London Page 3 73
Aid for Ankara Publication 930227FT Processed by FT 930227 By JOHN MURRAY BROWN ANKARA

Britain is to make a Pounds 22.7m grant to help fund a Dollars 660m metro project in the Turkish capital, Ankara, being built by a Canadian-UK consortium, writes John Murray Brown in Ankara.

The grant, disbursed under the UK's Aid and Trade Provision, will be used to cover 36 per cent of the value of work of British contractors, GEC and Westinghouse UK.

TR Turkey, Middle East P1629 Heavy Construction, NEC P4111 Local and Suburban Transit RES Capital expenditures RES Facilities GOVT Government News P1629 P4111 The Financial Times London Page 3 105
Go-ahead for dam Publication 930227FT Processed by FT 930227 By PETER WISE LISBON

Portugal is to go ahead with an Es295bn (Pounds 1.4bn) irrigation and hydro-electric project to build a dam that will create Europe's largest man-made lake at Alqueva, in arid land close to the Spanish border, Peter Wise reports from Lisbon.

Mr Anibal Cavaco Silva, the Portuguese prime minister, said the project would not be financially viable, and Portugal would seek EC funding.

PT Portugal, EC P1629 Heavy Construction, NEC P9311 Finance, Taxation, and Monetary Policy GOVT Government News RES Facilities P1629 P9311 The Financial Times London Page 3 100
Russian shipping chief is arrested Publication 930227FT Processed by FT 930227 By LEYLA BOULTON MOSCOW

The head of one of Russia's biggest state-owned shipping companies has been arrested in the first high-level crackdown since President Boris Yeltsin declared war on crime and corruption last month, reports Leyla Boulton in Moscow.

Mr Viktor Kharchenko, head of the Baltic Shipping Company in St Petersburg, is accused of stealing at least Dollars 30,000 from the company.

RU Russia, East Europe P9229 Public Order and Safety, NEC GOVT Legal issues P9229 The Financial Times London Page 3 92
German training hit by cash crisis Publication 930227FT Processed by FT 930227 By JUDY DEMPSEY BERLIN

THE Federal Office of Labour yesterday announced that it had run out of money to finance new job training schemes in Germany.

The announcement was greeted with dismay by politicians across the board, with the opposition Social Democratic party warning that unemployment could rise by a further 250,000 if such financing was cut off.

A total of DM9.9bn (Pounds 4.2bn) was supposed to be earmarked this year for retraining 300,000 workers in the five east German states, and 60,000 in the rest of Germany. But the federal department overseeing the scheme has run out of money.

The spectre of rising unemployment in eastern Germany coincides with renewed calls by IG Metall, Germany's giant engineering trade union, to step up protests in the five eastern states next week against the decision by the engineering employers to renege on a 26 per cent pay rise for 300,000 union members.

Gesamtmetall, the employers' association, broke a contract with IG Metall agreed in March 1991, which would have brought east German wages up to 82 per cent of their west German counterparts on April 1 of this year, even though productivity is 30 per cent below, and unit labour costs 40 per cent above west German levels.

However, in what might be first signs of a compromise, Mr Thomas Stach, spokesman for employers in Thuringia, said there was a 'positive signal' in talks with IG Metall. Talks broke down last week in the other four east German states after Gesamtmetall said the contract was no longer relevant because of deteriorating economic conditions in both eastern and western Germany.

In Thuringia, Mr Bernhard Vogel, the state's prime minister, and other senior officials, have supported a compromise which might involve amending the timetable for reaching income parity with western Germany, due in April 1994, and the rate of wage rises.

Gesamtmetall's decision to opt out of the contract in the other east German states was yesterday followed by an announcement from Nordmetall employers in Saxony and Berlin-Brandenburg that they too were reneging on the contract.

Mr Franz Steinkuhler, head of IG Metall, told engineering workers in Jena on Thursday that strike action in the east would be taken from April 1 if the employers refused to pay the 26 per cent wage rise.

The premiers of Germany's 16 states yesterday started a weekend meeting aimed at reaching consensus on a solidarity pact. They are discussing a 'federal consolidation programme,' primarily designed to finance reconstruction of the east German states.

DE Germany, EC P8331 Job Training and Related Services P9441 Administration of Social and Manpower Programs P9532 Urban and Community Development GOVT Government spending GOVT Government revenues P8331 P9441 P9532 The Financial Times London Page 2 464
Steelmakers welcome EC strategy to stabilise market Publication 930227FT Processed by FT 930227 By QUENTIN PEEL BONN

GERMAN steelmakers yesterday welcomed the agreement in Brussels on a broad strategy to cut EC steel-producing capacity to help stabilise the steel market.

As steel workers demonstrated against the threat of further plant closures in the Ruhr, the heart of the country's steel industry, the manufacturers expressed the hope that the deal would allow prices to be raised, and therefore cover the costs of the most efficient producers.

However, they warned that the EC industry ministers had left undecided the question of how to protect the market against cheap steel imports from eastern Europe. And they called for a longer period of at least two years to enable the industry to restructure.

Mr Ruprecht Vondran, president of the German steel federation, said the decision would make it easier for efficient steel producers to cover their costs in a stabilised market.

He said the one year set for the industry to put most of the proposed - but still unallocated - capacity cuts into effect was too short. German manufacturers estimated it would take at least two years to set aside funds to provide compensation for unprofitable producers to leave the market.

With a decision expected this weekend from Krupp-Hoesch, the second largest German steelmaker, on whether to close an integrated steelworks in Dortmund or Rheinhausen, 1,500 workers demonstrated yesterday outside another threatened plant - the Klockner-Werke works at Georgsmarienhutte.

DE Germany, EC QR European Economic Community (EC) P3312 Blast Furnaces and Steel Mills P3325 Steel Foundries, NEC P9721 International Affairs MKTS Production GOVT Government News P3312 P3325 P9721 The Financial Times London Page 2 280
New effort to agree global pact Publication 930227FT Processed by FT 930227 By FRANCES WILLIAMS GENEVA

TRADE officials are to make a fresh attempt to negotiate a Multilateral Steel Agreement to eliminate trade barriers and phase out most subsidies.

After a two-day meeting this week, the officials agreed to meet again in late March or early April to consider a revised text.

The officials said that there seemed to be a genuine will among the 30 or so participants to reach an accord, following the breakdown of talks last March, but that many delegations had no mandate to negotiate.

'Perhaps by the next meeting Washington will have got its act together,' said one official, referring to the lack of policy guidance to US negotiators from the still incomplete Clinton trade team.

The MSA, originally intended to govern world steel trade after the expiry of 'voluntary' export restraints to the US market last March, came to grief a year ago over permissible subsidies and US anti-dumping and anti-subsidy actions.

Since then the discussions have been further complicated by swingeing US anti-dumping and countervailing duties recently imposed on steel imports from most foreign suppliers.

Yesterday, US officials held bilateral meetings with the EC and Brazil under the Gatt disputes procedure.

QR European Economic Community (EC) US United States of America P331 Blast Furnace and Basic Steel Products P332 Iron and Steel Foundries P9721 International Affairs MKTS Foreign trade GOVT Government News P331 P332 P9721 The Financial Times London Page 2 247
Who's next in Italy's probe of corruption?: As more arrests are made, it is feared democracy may be undermined Publication 930227FT Processed by FT 930227 By ROBERT GRAHAM

ITALIAN magistrates investigating corruption seem to be systematically going through the pages of Who's Who.

Each day brings a fresh list of well-known names who are either arrested or wanted for questioning. And the momentum of investigation has begun to quicken.

This week those under investigation have included Mr Giorgio La Malfa, head of the Republican Party and Mr Raul Gardini, the most dashing Italian entrepreneur of the 1980s. Those arrested included Mr Francesco Paolo Mattioli, Fiat's chief financial officer, and Mr Giampiero Pesenti, who controls Italy's biggest cement company.

But as the momentum quickens, there is a growing chorus of alarm among politicians over the extent to which the spreading investigations - involving magistrates in at least five major cities - is compromising the Italian establishment. Politicians of all parties now freely admit the political system is completely corrupted and that perhaps more than a third of the current parliament could fall foul of the law.

Mr Giovanni Conso, a distinguished judge, and recently appointed minister of justice, has argued that a solution must be found to prevent matters getting out of hand. This week he announced his ministry was working on legislation which would attempt to balance the need for justice with the need to prevent democracy from being undermined by mass incrimination of the country's leading politicians and businessmen.

But it is hard to see how parliament can legislate anything resembling a pardon or amnesty in the present climate. This would risk not only alienating public opinion but also creating a conflict between the judiciary and the legislature.

The politicians believe the solution has to lie in a redefinition of what constitutes illicit party finance and the penal consequences for who have handled such funds. The main thread in all the investigations is that of politicians receiving money from state or private companies allegedly to finance their large party bureaucracies in return for business favours.

Mr Mino Martinazzoli, the Christian Democrat leader, this week favoured a form of depenalising the illicit financing of political parties: 'I believe robbery is always immoral but the violation of the laws on financing political parties is not theft. It is an irregularity to which we have made a crime with penal sanctions.' In other words obtaining funds illicitly and not declaring them is a misdemeanour which should merit at best a fine.

Since the Christian Democrat party is the most exposed, along with its coalition partners the Socialists, this attitude might seem self-serving. His critics suggested such treatment was inconceivable either for politicians who had forced companies to contribute to party coffers (extortion) or where companies had paid over money to assure the award of a contract.

Mr Achille Occhetto, leader of the former communist Party of the Democratic Left (PDS) and a strong moraliser, also this week hinted at special treatment for politicians who had taken money for their parties. But his purpose was also self-seeking since the PDS and former communists caught up in the investigation have all claimed they were working for the noble cause of the party. Personal enrichment, he claimed, was a worse crime. 'At the judicial level everyone is equal before the law. But on the moral level one ought to make the distinction between those accused of having illegally financed politics and those who have enriched themselves in politics.'

The magistrates themselves recognise the difficulties of dealing with an ever increasing number of interrogations, and an ever larger pile of files and indictments. One suggestion has been to ask all those who have paid or received bribes over a certain figure since 1980 to come forward and declare them. The monies would then be asked to be restituted, and where there was damage to a third party, damages would have to be paid.

IT Italy, EC P8651 Political Organizations P9229 Public Order and Safety, NEC GOVT Legal issues PEOP Personnel News P8651 P9229 The Financial Times London Page 2 682
UN supply convoy blocked Publication 930227FT Processed by FT 930227 By LAURA SILBER BELGRADE

Bosnian Serb forces yesterday blocked a United Nations convoy carrying supplies for UN peacekeepers in Sarajevo for the fourth day in succession, writes Laura Silber in Belgrade.

Serb commanders in Zvornik, eastern Bosnia, delayed the convoy, which makes a weekly trip to Sarajevo. In an unprecedented move, Serb forces insisted on searching the 60 lorries, said a UN spokesman. Part of the convoy yesterday remained in Zvornik, while 25 trucks returned to Belgrade.

Meanwhile Serb military leaders softened resistance to the planned US air drop after the administration included Croat and Serb communities in the operation. But Mr Radovan Karadzic, Bosnian Serb leader, said he was worried Moslems would down one of the aircraft and blame it on Serbs to provoke US military intervention.

Mr Dragomir Djukic, Yugoslav ambassador to the UN, said: 'No one can have anything against bringing humanitarian help but they must be aware of the risks of the situation. All three sides possess the means to down transport planes.'

BA Bosnia-Hercegovina, East Europe P9711 National Security P9721 International Affairs MKTS Distribution GOVT Government News P9711 P9721 The Financial Times London Page 2 199
Bulgarians in deal with Efta Publication 930227FT Processed by FT 930227

BULGARIA yesterday became the latest eastern European country to conclude a free trade agreement with the seven members of the European Free Trade Association. The pace, which covers free trade in industrial goods, processed farm goods, fish and other marine products, will be signed this spring and come into effect on July 1 after ratification.

The agreement with Bulgaria took just three months to negotiate. Like the accords Efta has already reached with the Czech Republic, Slovakia, Poland, Romania and Hungary, it is 'asymmetric'; the rich Efta members will dismantle their trade barriers faster, leaving Bulgaria until December 2002 to phase out tariffs and other restrictions.

The agreement has been accompanied by bilateral deals between Bulgaria and Efta members on liberalising trade in farm goods where there is no common Efta-wide trade regime equivalent to the European Community's Common Agricultural Policy.

Bulgaria's exports to Efta countries amounted to Dollars 93m in 1991, while imports totalled over Dollars 220m.

Efta is increasingly regarded as a 'half-way house' to EC membership for central and eastern European nations. All Efta's current members except Switzerland will be part of the giant free trade zone known as the European Economic Area which is due to come into force next July. On Thursday Efta and EC negotiators agreed on a compromise financial formula which will clear the way for the EEA, although the revised treaty must still be ratified by 18 national parliaments.

BG Bulgaria, East Europe QS European Free Trade Association P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 2 270
French jobless close to 3m Publication 930227FT Processed by FT 930227 By ALICE RAWSTHORN PARIS

FRANCE'S struggling Socialist government is entering the final month of the parliamentary election campaign with unemployment just below the psychologically important 3m mark, according to the latest official figures, writes Alice Rawsthorn in Paris.

Ms Martine Aubry, employment minister, yesterday announced that the number of unemployed people rose by 0.1 per cent in January to 2.99m, leaving 10.5 per cent of the workforce without jobs. Despite criticism, the Socialists have are clinging to their policy of sustaining a strong currency and low inflation rather than reflate the economy before the elections.

FR France, EC P9441 Administration of Social and Manpower Programs ECON Employment & unemployment P9441 The Financial Times London Page 2 126
Switzerland's regional banks continue to feel the squeeze: A persistent inverted yield curve has led to a spate of mergers and takeovers Publication 930227FT Processed by FT 930227 By IAN RODGER

PERHAPS one reason why the Swiss do so well in business is that they do not hesitate to be blunt - even cruelly, publicly blunt - with each other.

Recently Mr Markus Lusser, president of the Swiss National Bank, demonstrated this quality anew at Biel where he went to address the leaders of the country's 160 regional banks.

It is no secret that many of Switzerland's regional banks are in trouble. One went spectacularly bust a year-and-a-half ago, creating what no one ever expected to see in this country, a queue of deposit holders vainly waiting to get their money back.

Most of the rest of these small, locally rooted banks have been badly squeezed by an inverted yield curve that prevailed in Switzerland for nearly two years, leading to a spate of mergers and takeovers.

Now, just as the sector's leaders are beginning to see light at the end of the tunnel, Mr Lusser has come along and blocked the exit.

It was not enough to design a strategy for recovery, he said. Instead, regional bank managers should ask themselves whether, given the chance, they would start up afresh in the present climate. If not, they should look around for a merger partner or go into voluntary liquidation.

Not surprisingly, regional bankers were upset. 'It was not very sensible to talk like that. He said nothing positive,' Mr Roland Boeschenstein, deputy director of the Association of Regional Banks, says.

The regional banks do not figure large in the overall scheme of Swiss banking; their combined assets of SFr84bn (Pounds 38bn) at the end of last year were roughly a third the size of those of Union Bank of Switzerland, the country's largest.

But they see themselves as pillars of local communities, with a better understanding of local needs than the big universal banks. 'Swiss people like to deal with a bank they can feel comfortable talking to,' Mr Boeschenstein says.

Others suggest that this is a nostalgic view. Mr Beat Philipp, banking analyst at Bank J. Vontobel in Zurich, argues that the regional banks have lost their role. 'The problem is that social structures have changed. People still live in the villages, but they work and bank in the cities.'

Mr Michel Petitpierre, head of research at Pictet & Co in Geneva, adds that many regional banks themselves broke ties with their local communities in the 1980s, aspiring to lend to bigger businesses. And that is how some, including the Spar und Leihkasse Thun, which went bust in October 1991, got into trouble.

Even if most of the regional banks did fold, Switzerland would not, like Britain and some other countries, become virtually bereft of locally controlled financial institutions outside the capital.

The country has a full network of cantonal banks, mortgage and small business specialists whose assets are backed in whole or in part by their cantonal governments. They still account for about a fifth of all financial institutions' assets and are growing.

And there is a surprisingly buoyant network of 1,158 Raiffeisen, village co-operative banks that work on a very intimate and careful basis with local farmers and tradespeople.

The regional banks have seen their assets fall from SFr93.5bn in 1990 to SFr84bn last year. But Raiffeisen assets jumped from SFr33.8bn to SFr36.7bn in 1991, and the group's association says they grew again last year.

'I doubt that many people would cry over the disappearance of the regional banks,' Mr Philipp says.

CH Switzerland, West Europe P6022 State Commercial Banks COMP Mergers & acquisitions CMMT Comment & Analysis P6022 The Financial Times London Page 2 628
US wins Nato support for Bosnia aid plan Publication 930227FT Processed by FT 930227 By ROBERT MAUTHNER BRUSSELS

THE US yesterday won its Nato allies' political support for its decision to parachute humanitarian supplies to besieged Moslem enclaves in Bosnia, but failed to get any offers of concrete aid for the operation, expected to start this weekend, except from Turkey.

Making his first appearance at a Nato ministerial meeting since his appointment as US secretary of state, Mr Warren Christopher said he was nevertheless 'gratified and encouraged' by the support he had received from his fellow ministers.

'I didn't come here for the purpose of asking for their aid and I was not at all disappointed by the response I received,' he maintained.

Both Mr Christopher and a number of allied foreign ministers, including Mr Douglas Hurd, the British foreign secretary, went out of their way to stress that the US and European humanitarian aid efforts in Bosnia should be seen as 'supplementary' and not rival policies.

But this did not prevent a certain amount of mutual irritation from creeping into their assessments of the situation in the former Yugoslavia.

Mr Christopher clearly continues to feel that the European nations are not pulling their weight in the search for a Bosnian peace settlement.

The recent decision by the US to participate in the peace negotiations in New York, chaired by Mr Cyrus Vance and Lord Owen, 'comes with the expectation that Europe, which is most directly affected, will play a leading role and redouble its concerted efforts,' he told his fellow ministers. 'The addition of the US should certainly not occasion any relaxation by others.'

Official and media criticism of European policy in Bosnia goaded Mr Hurd into once again underlining the extent of the British and French humanitarian aid efforts in Bosnia. British troops had escorted 279 convoys carrying 20,000 tonnes of supplies to distressed areas of Bosnia, he said.

Mr Christopher also called on the alliance to make preparations 'now' on measures to enforce a peace settlement once it is reached, pointing out that the Vance-Owen plan did not provide for the means required to ensure its implementation. 'We must be ready to act effectively if and when a viable agreement is accepted by all the warring sides.'

He reiterated his promise that the US was ready to join with the United Nations, the European Community, Nato and 'others' in implementing a peace agreement, including 'possible US military participation'.

Nato's special capabilities and command structure could play a key role in such a joint operation, together with contributions from non-allies, Mr Christopher said.

Russia said earlier this week that it was ready to co-operate with Nato in a force to implement a peace agreement, which experts estimate will require at least 60,000 peace-keeping troops.

Mr Roland Dumas, the French foreign minister, said France would propose the nomination of a special UN co-ordinator for the aid and military operation to implement a peace agreement.

Though Yugoslavia took up much of the ministers' time, Mr Christopher also made a ringing declaration on the new US administration's fidelity to the Nato alliance and its support for 'a strong and integrated Europe'.

President Clinton intended to pursue a policy of 'total diplomacy', which viewed domestic and foreign issues as inseparable, he said. 'We recognise that only an America that is strong at home can act as an effective partner abroad.'

The three pillars on which America's 'total diplomacy' would rest were: elevating the US's economic security to a primary foreign policy goal, updating US forces and security arrangements to meet new threats and organising US foreign policy to help promote the spread of democracy and free markets abroad.

US United States of America BA Bosnia-Hercegovina, East Europe P9711 National Security P9721 International Affairs MKTS Distribution GOVT Government News P9711 P9721 The Financial Times London Page 2 643
Norway to resume scientific whaling Publication 930227FT Processed by FT 930227 By KAREN FOSSLI LOFOTEN, NORWAY

NORWAY said yesterday it would resume scientific whaling in April and begin commercial whaling by the end of May, or in June.

At the annual meeting of the International Whaling Commission last year in June, Norway announced that it would resume commercial whaling in 1993 after a break of five years.

Mr Jan Henry T. Olsen, Norway's minister of fisheries, said quotas for commercial whaling would be set after the next IWC meeting which is scheduled to be held in May in Kyoto, Japan. He said the quota was likely to be in the range of a 'few hundred' north-east Atlantic minke whales.

Mr Olsen expressed optimism that the IWC would lift its whaling moratorium, but warned that Norway would be forced to reconsider its status as an IWC member if the ban was to prevail.

In 1992, the IWC's scientific committee unanimously agreed that the best estimate of the north-east Atlantic stock of minke whales was 86,700, and that this stock is no longer in danger of depletion.

Professor Lars Walloe, head of Norway's scientific whale research programme, explained yesterday that last year 95 whales were caught as part of a three-phase programme under which a quota of 400 minke whales will be killed for scientific reasons during 1992-1994.

This year, under the the second phase of the programme 136 minke whales would be killed in mid-April and later in the autumn. The remaining scientific quota would be fulfilled next year. Professor Walloe said the purpose of this year's catch would be to study the eating habits of the minke whale during the spring and autumn.

In sub-arctic north Norway, where about 400,000 people, or one-tenth of the population live, most communities depend on fishing for their livelihood.

NO Norway, West Europe P0919 Miscellaneous Marine Products P9641 Regulation of Agricultural Marketing RES Natural resources GOVT Government News P0919 P9641 The Financial Times London Page 2 331
Wilkinson Sword in likely sale to US group Publication 930227FT Processed by FT 930227 By GUY DE JONQUIERES, Consumer Industries Editor

WARNER-LAMBERT, the US pharmaceuticals and consumer products group, is in advanced negotiations to buy Wilkinson Sword, the razors and toiletries company put up for sale last year.

It is understood that Warner-Lambert and Eemland, the Dutch-registered consortium of international investors which owns Wilkinson, aim to conclude negotiations early next month. Although a price has yet to be agreed, it is likely to be well below the Dollars 300m (Pounds 211m) which Eemland had hoped to achieve.

Warner-Lambert owns Schick, the second-largest US wet shaving products company. Acquisition of Wilkinson would give Schick a stronger base for European expansion and could provide keener competition for Gillette, the US company which dominates the world razor business.

In Europe, Schick sells mainly in France and the Benelux countries. It has small market sales in Germany and Britain. Schick is also the leading supplier in Japan, the only country where it is ahead of Gillette.

A deal would mark the fifth change of ownership since 1980 for Wilkinson Sword, which Eemland acquired from Stora, the Swedish forest products group, in a heavily leveraged buy-out five years ago. Eemland's main shareholders include a group of Scandinavian banks and insurance companies, JP Morgan, the US bank, and Gillette. Wilkinson was put up for sale in October, partly because the Scandinavian shareholders were not prepared to inject further capital.

In addition, Gillette has been ordered by the European Commission and anti-trust authorities in the UK and several other countries to end its involvement in Eemland on the grounds that it is anti-competitive.

Gillette has a 22 per cent non-voting stake in the consortium and has extended it a loan worth more than Dollars 100m on onerous terms and at an exceptionally high rate of interest. Eemland's debt is believed to total several hundred million dollars.

Eemland's shareholders have agreed to sell Wilkinson with a debt-free balance sheet and share its financial liabilities between them.

Wilkinson had operating profits of DM46.8m (Pounds 19.8m) on sales of DM316.3m in 1991. Its financial performance is understood to have deteriorated sharply since then, partly because of heavy marketing to support a razor system launched last spring.

Wilkinson sells its products in the European Community and has a small loss-making business in the US. Gillette has also agreed, under pressure from anti-trust authorities, to hand back rights to the Wilkinson brand in central and eastern Europe.

US United States of America GB United Kingdom, EC P2834 Pharmaceutical Preparations P3421 Cutlery COMP Company News P2834 P3421 The Financial Times London Page 1 439
OFT to conduct inquiry into office equipment leasing Publication 930227FT Processed by FT 930227 By MICHAEL CASSELL, Business Correspondent

A WIDE-RANGING inquiry into the hiring and leasing of office equipment was announced by the Office of Fair Trading yesterday. It follows allegations of malpractice and high-pressure sales techniques, particularly in the photocopier market.

Sir Bryan Carsberg, director-general of fair trading, said he was launching an investigation because complaints about selling practices had continued despite earlier attempts to improve standards.

The OFT, which can investigate the activities of individual companies and can revoke their consumer credit licences, will also examine the supply of postal franking and vending machines.

Sir Bryan said his office would examine sales methods, the nature, length and clarity of leasing contracts, the effectiveness of existing consumer protection laws and self-regulation.

Investigations will also centre on the relationship - criticised as anti-competitive - between equipment suppliers, the dealers and supporting finance and leasing companies.

Earlier this week, Southern Business Group, the publicly quoted photocopier leasing company, disclosed resignations and sackings after it admitted 'improprieties' in dealings with some customers. It said then it would welcome an OFT investigation of the sector.

Last year, the OFT decided against revoking licences from the office equipment supplier Eurocopy following assurances about some of its business practices. Mr Cyril Gay, chairman of Eurocopy, last night welcomed the inquiry.

Sir Bryan said that complaints to the OFT suggested numerous cases of 'misrepresentation and sharp practice', most noticeably involving photocopying leases. Initial OFT inquiries, he added, 'tend to confirm this view'.

The Campaign to Clean Up Copier Contracts, which has logged more than 3,000 complaints from photocopier customers and has pressed for OFT intervention, said the decision was a breakthrough.

A campaign spokesman said it would 'bring hope to the 250,000 cost-per-copy customers' who had been caused misery and distress by leasing companies which had enforced contracts signed under false pretences'.

The campaign has submitted to the OFT a dossier of complaints, involving more than 50 photocopier dealers and leasing companies, some of them owned by large, London-based financial institutions.

Mr Nigel Griffiths, Labour's consumer affairs spokesman, also welcomed the move. However, he criticised the OFT for acting slowly, and claimed that its inaction had cost photocopier customers millions of pounds.

Allegations made by customers involve the use of flexible business agreements which obscure expensive obligations. contracts running well beyond the working life of the equipment and which include hidden increases in copy costs.

GB United Kingdom, EC P7359 Equipment Rental and Leasing, NEC P7377 Computer Rental and Leasing P9651 Regulation of Miscellaneous Commercial Sectors TECH Standards P7359 P7377 P9651 The Financial Times London Page 1 441
Stock and Currency Markets Publication 930227FT Processed by FT 930227

-------------------------------------------------------- STOCK MARKET INDICES -------------------------------------------------------- FT-SE 100: 2868.0 (+39.3) Yield 4.22 FT-SE Eurotrack 100 1139.80 (+14.74) FT-A All-Share 1396.53 (+1.1%) FT-A World Index 143.02 (+0.4%) Nikkei 16,953.35 (+45.96) New York: Dow Jones Ind Ave 3370.81 (+5.67) S&P Composite 443.39 (+1.06) -------------------------------------------------------- US LUNCHTIME RATES -------------------------------------------------------- Federal Funds: 3 1/8% 3-mo Treas Bills: Yld 2.993% Long Bond 103 Yield 6.882% -------------------------------------------------------- LONDON MONEY -------------------------------------------------------- 3-mo Interbank 6 3/16% (same) Liffe long gilt future: Mar 104 1/2 (Mar 103 9/16) -------------------------------------------------------- NORTH SEA OIL (Argus) -------------------------------------------------------- Brent 15-day (April) Dollars 18.825 (18.84) -------------------------------------------------------- Gold -------------------------------------------------------- New York Comex (April) Dollars 329.0 (330.6) London Dollars 327.75 (329.65) -------------------------------------------------------- STERLING -------------------------------------------------------- New York: Dollars 1.427 (1.432) London: Dollars 1.423 (1.43) DM 2.335 (2.3375) FFr 7.94 (7.9375) SFr 2.1725 (2.17) Y 168.0 (same) Pounds Index 76.0 (76.3) -------------------------------------------------------- DOLLAR -------------------------------------------------------- New York: DM 1.646 (1.6345) FFr 5.588 (5.551) SFr 1.5265 (1.5175) Y 118.2 (117.37) London: DM 1.6415 (1.6345) FFr 5.58 (5.55) SFr 1.526 (1.5175) Y 118.0 (117.5) Dollars Index 66.6 (66.3) Tokyo close Y 117.85 --------------------------------------------------------

JP Japan, Asia US United States of America DE Germany, EC FR France, EC CH Switzerland, West Europe GB United Kingdom, EC P6231 Security and Commodity Exchanges P1311 Crude Petroleum and Natural Gas P3339 Primary Nonferrous Metals, NEC COSTS Commodity prices COSTS Equity prices P6231 P1311 P3339 The Financial Times London Page 1 233
International Company News: Amgen warning hits biotech shares Publication 930226FT Processed by FT 930304 By KAREN ZAGOR NEW YORK

BIOTECHNOLOGY stocks staggered under a second blow in three days after Amgen, a benchmark biotechnology company, warned late Wednesday that its first-quarter earnings would fall as much as 15 per cent below analysts' expectations.

The news sent biotech shares tumbling across the board. Amgen plunged Dollars 9 1/4 to a 52-week low of Dollars 37, Chiron lost Dollars 1/2 to Dollars 48 3/4 after dropping to Dollars 45 earlier in the day, US Healthcare dropped Dollars 1 1/2 to Dollars 43, and Synergen, which triggered a sell-off in the sector on Monday, lost Dollars 1/4 to Dollars 14 3/4 .

Xoma edged Dollars 1/4 lower to Dollars 8 1/4 while Centocorp held steady at Dollars 6 1/4 . The lack of movement was a reflection of the heavy losses already suffered by the stock rather than a vote of renewed confidence in the company.

Centocorp traded as high as Dollars 60 1/4 last year, while Xoma has fallen from a high of Dollars 25 1/4 .

Amgen blamed its disappointing forecast on unexpectedly slow sales of its Neupogen cancer drug. Although sales of Neupogen have risen about 30 per cent in the year, the company and Wall Street had expected a stronger performance.

The news came on the heels of Monday's report by Synergen, a Colorado-based drug developer, that research data on its Antril sepsis drug did not match earlier trials.

Biotechnology stocks, like other healthcare issues, have suffered from investor concern that the Clinton administration's healthcare policy will lead to lower drug prices. Two biotechnology initial public offerings were also postponed yesterday in what was speculated to be a reaction to worries about healthcare policy, and although a softening new-issues market.

was also cited.

But the sagas of Synergen, Amgen, Centocorp and Xoma underscore an inherent vulner ability in the biotechnology sector, where investors speculate on the future earning per formance of products which are either in development or only recently approved for marketing.

Synergen, whose stock plummeted Dollars 28 5/8 - or 68 per cent - on Monday, was believed to have the most promising treat ment for septicaemia, an often-lethal blood infection which afflicts about 1m Americans and Europeans each year.

Earlier studies of Antril had shown it reduced death by 40 per cent to 60 per cent.

However, the company's latest study, involving a much larger number of patients, indicated that a high dose of the drug reduced mortality by only 15 per cent.

Synergen is not the first biotech company to stumble in its search for a treatment for sepsis. Both Centocorp and Xoma faltered after their once-promising drugs proved less effective than initial studies had indicated. Neither Centocorp nor Xoma have received marketing approval for their sepsis drugs.

In the case of Amgen, the company already has two effective drugs on the market. But Amgen's future success as a drugs company depends largely on broadening its product line and the funding for future research will, to a large degree, depend on the sales of Neupogen.

Amgen Inc Chiron Corp Synergen Inc Centocorp Inc Xoma Corp US United States of America P2833 Medicinals and Botanicals P2834 Pharmaceutical Preparations P8734 Testing Laboratories P6231 Security and Commodity Exchanges COMP Company News P2833 P2834 P8734 P6231 The Financial Times London Page 27 560
Observer: Family affair Publication 930226FT Processed by FT 930304

The House of Warburg must be feeling pretty pleased with itself because of its role in the ICI demerger.

Leaving aside the accolades that will be heaped on a couple of S G Warburg directors, John Walker-Haworth and Rory Tapner, for earning the firm some very fat fees, Warburg can also point with pride to Goldman Sachs' Jon Aisbitt, the other financial adviser. He honed his early merchant banking skills at Warburg.

And don't forget John Mayo, finance director of Zeneca, the demerged drug company - who just happens to have been recruited from Warburg. If only ICI's Sir Denys Henderson had not decided to hog both chairmanships, it might have been possible to find a job for Warburg chairman Sir David Scholey. But then again that might have been just a little too incestuous.

SG Warburg Group US United States of America P6211 Security Brokers and Dealers CMMT Comment & Analysis COMP Company News P6211 The Financial Times London Page 19 170
World Trade News: Indian company buys east German paper mill Publication 930226FT Processed by FT 930304 By JUDY DEMPSEY BERLIN

DALMIA, one of India's largest private companies, yesterday moved closer to establishing a bigger foothold in Europe following its purchase of a cellulose and paper mill in the eastern German state of Thuringia, writes Judy Dempsey in Berlin.

The purchase of Zellstoff-und Papierfabrik Rosenthal, which was arranged by the Treuhand, the agency responsible for the privatisation of east German industry, coincided with the visit by Chancellor Helmut Kohl to south-east Asia.

The enterprise, which has an annual production capacity of 150,000 tons of sulphite and cellulose, and 6,000 tons for paper production, last year achieved a turnover of DM153m (Pounds 64.8m). Traditionally, its turnover was earned on the domestic market, but following a restructuring, which cost DM46m, sales to west European countries now account for 90 per cent of turnover.

Zellstoffund und Papierfabrik Rosenthal Dalmia DE Germany, EC P2821 Plastics Materials and Resins P2621 Paper Mills COMP Company News COMP Acquisition P2821 P2621 The Financial Times London Page 4 178
World Trade News: Indians buy E German mill Publication 930226FT Processed by FT 930304 By JUDY DEMPSEY BERLIN

DALMIA, one of India's largest private companies, yesterday moved closer to establishing a bigger foothold in Europe following its purchase of a cellulose and paper mill in the eastern German state of Thuringia.

The purchase of Zellstoff-und Papierfabrik Rosenthal, which was arranged by the Treuhand, the agency responsible for the privatisation of east German industry, coincided with the visit by Chancellor Helmut Kohl to south-east Asia.

The enterprise, which has an annual production capacity of 150,000 tons of sulphite and cellulose, and 6,000 tons for paper production, last year achieved a turnover of DM153m (Pounds 64.8m). Traditionally, its turnover was earned on the domestic market, but following a restructuring by the Treuhand, which cost DM46m, sales to west European countries now account for 90 per cent of turnover.

Dalmia, whose activities range from cigarette, cement and chemical production to the textile and paper industry, has agreed to invest DM70m in the company immediately, and a further DM150m in the next two years. It will also guarantee 405 of the 550 jobs for three years. Dalmia's total turnover last year was Dollars 725m, Dollars 500m earned through exports.

Meanwhile, the Treuhand earlier this week announced it had reprivatised, or sold back to the original owners, more than 5,750 enterprises from 13,183 restitution claims.

Zellstoffund und Papierfabrik Rosenthal Dalmia DE Germany, EC P2821 Plastics Materials and Resins P2621 Paper Mills COMP Company News COMP Acquisition P2821 P2621 The Financial Times London Page 4 258
Mexico pressed over TV concessions Publication 930226FT Processed by FT 930227 By DAMIAN FRASER MEXICO CITY

THE Mexican government is coming under growing pressure to rule on the granting of concessions for 62 new local TV stations, which are reported to have gone to Televisa, Latin America's largest media company.

Award of the concessions to Televisa would enable it to complete its third national network in Mexico, but threatens to complicate the sell-off of Mexico's state-owned TV channels 7 and 13, due to take place by June. Televisa already has about 80-90 per cent of Mexico's TV audience, and further expansion would make it much harder for the buyers of the two state-owned channels to compete.

Newspaper reports have suggested the two state channels might fetch Dollars 500m. They would provide the only effective competition to Televisa, a self-proclaimed supporter of Mexico's ruling Institutional Revolutionary Party, in power for the past 63 years.

One of the favoured bidders for the state-owned channels said: 'The government does not realise the importance of this. If they make the concessions it will be very difficult to compete. The most important part (of the privatisation) is the rules of future competition. We are obviously concerned.'

Televisa has all but announced that it has been awarded the concessions. A spokesman said: 'We expect an announcement soon.' been promised the concessions. A communications ministry spokesman said a decision had still to be made.

The government will soon have to confront Televisa's 'Plan Amigo', which gives free advertising spots to companies promising not to advertise elsewhere. Given Televisa's dominance of the TV market, the arrangement may make it hard for future competitors to entice advertisers away.

Televisa MX Mexico P4833 Television Broadcasting Stations P9651 Regulation of Miscellaneous Commercial Sectors TECH Licences GOVT Government News P4833 P9651 The Financial Times International Page 4 305
Finns to build fifth N-plant Publication 930226FT Processed by FT 930227

FINLAND's centre-right government yesterday voted in favour of building a fifth nuclear power plant, ending weeks of division on the issue. The project still faces a difficult passage through parliament, with a final decision expected in May, writes Christopher Brown-Humes.

The plant would be built on the site of one of the existing power stations at Loviisa or Olkiluoto, with completion expected around the year 2000. The Finnish utilities, IVO, TVO and PEVO have already received bids from potential suppliers.

FI Finland, West Europe P4911 Electric Services P9611 Administration of General Economic Programs RES Facilities GOVT Government News P4911 P9611 The Financial Times International Page 2 116
IG Metall to assist unions in east Europe Publication 930226FT Processed by FT 930227 By DAVID GOODHART, Labour Editor

GERMANY'S IG Metall, the biggest and most powerful union in Europe, has announced a programme of assistance for the weak and divided unions of eastern Europe to support economic and social 'fair play' in those countries.

The union has described the assistance programme as the biggest solidarity initiative in its history.

With some assistance from the European Commission it will be spending about DM2m (Pounds 800,000) on support for trade unionists in Hungary, Poland, Romania, Bulgaria, the Czech Republic, Slovakia, Russia, Belarus and the Ukraine.

Mr Franz Steinkuhler, head of IG Metall, said that his union and the East European unions had a common interest in seeing the gap in the standard of living between western and eastern Europe closed as quickly as possible.

'We need to act together to stop governments and inward investors playing us off against each other,' he said.

The first bilateral agreement has been signed between IG Metall and the Hungarian Metalworkers Union, Vasas, which provides for training Vasas officials, visits to Germany, and close German-Hungarian union co-operation when German multinationals set up plants in Hungary.

The IG Metall initiative is also designed to reduce competition between reformed 'old' unions and new unions. In the Czech and Slovak republics the unions have broken completely with their past but in Hungary there is still tension between old and new unions.

IG Metall (Germany) DE Germany, EC P8631 Labor Organizations COMP Company News P8631 The Financial Times International Page 2 262
Finns learn to live with sacrifices: Economy faces painful truths Publication 930226FT Processed by FT 930227 By CHRISTOPHER BROWN-HUMES

COMPILE a list of the ailments inflicting west European economies right now, and it will soon be apparent that few countries are in a worse condition than Finland.

'We have lost our eastern market, our western market and our domestic market,' says Mr Tarmo Valkonen, the head of forecasting at the Research Institute of the Finnish Economy.

Record unemployment, massive foreign debt, international recession, huge banking losses, and the collapse of trade with the former Soviet Union are the key symptoms and causes of a crisis which has seen GDP shrink by 10 per cent over the last two years - more than it did in the depression of the 1930s.

As if things were not bad enough, the Finns have had more bad news in recent days.

Kansallis-Osake-Pankki, the country's leading commercial bank, has predicted negative 1993 GDP growth of 0.5 per cent, reversing last autumn's forecast of 1.5 per cent growth.

The Ministry of Finance has also just scaled down its previous forecast of 2 per cent growth to zero, partly because of continuing recession in many key export markets.

'We are in an acute crisis, the worst crisis in decades. And the recession elsewhere in Europe is making matters worse,' said Mr Sixten Korkman, director-general of the Ministry of Finance.

Finland is paying the price for its over-dependence on a single export market - the former Soviet Union - and over-reliance on one particular sector - forestry.

However, it is also undergoing a painful period of readjustment after the boom years during the 1980s when the property and share markets became grossly over-heated.

A total of 18.6 per cent of the workforce is now out of work and many economists predict the figure will exceed 20 per cent before it starts to fall. The worst hit sectors have been construction, manufacturing and retail.

Falling tax revenues and high unemployment pay-outs have sent debt soaring. Foreign debt will rise to FM250bn (Dollars 42bn) this year, while net interest payments on it will reach FM27bn.

For 1993 alone the state's net borrowing requirement is estimated at almost FM80bn, pushing up state debt at the year end to nearly 50 per cent of GNP compared to just 16.5 per cent at the end of 1991.

The fear of further aggravating the debt burden means the centre-right coalition government has so far ruled out any package to stimulate the economy. 'There is nothing to hand out, just sacrifices,' said Mr Iiro Viinanen, the finance minister.

Confirming this, the government this week announced a new FM9.3bn savings package for 1994 to ensure state spending does not exceed target.

The government is pinning all its hopes on export-led recovery, and on that score at least, there is cause for optimism. The 30 per cent drop in the value of the markka that has resulted from two devaluations over the last 16 months has led to a dramatic improvement in the competitiveness of Finnish industry.

Last year exports grew by 9 per cent, and this year they are predicted to rise by 11 per cent.

But even here, there is reason for caution, with demand weakened in the country's main export markets, such as Germany, Sweden and the UK.

The government, led by prime minister Mr Esko Aho, appears to be under no immediate threat, partly because there is no concensus about alternative courses of action. Nevertheless, business leaders have recently become uncharacteristically outspoken in their criticisms.

Mr Pertti Voutilainen, the head of Kansallis-Osake-Pankki implied a lack of decisive political leadership when he said recently that he did not know the prime minister's opinions on the European Community, nuclear power policy, or the country's banking difficulties. The government was able to get FM20bn in additional support for the banking sector several weeks ago but not before parliament rejected a broader package which would have done more to instill confidence in the country's financial system.

The turnround in the Finnish economy should finally become apparent next year, when 2-3 per cent growth is predicted. Apart from the stimulus of higher exports, the country is now in a lower interest rate phase which is expected to lead to higher investment.

One surprising thing is that the pain has been endured with little outcry. Some put that down to the national temperament. 'Everybody is slightly ashamed,' says Mr Olli Kivinen, political columnist on Helsingin Sanomat, the leading Finnish newspaper, 'They took part in the casino economy of the 1980s and now they are willing to suffer for it.'

FI Finland, West Europe P9611 Administration of General Economic Programs P9311 Finance, Taxation, and Monetary Policy ECON Economic Indicators GOVT Government News P9611 P9311 The Financial Times International Page 2 799
World News in Brief: Iran plea for flood aid Publication 930226FT Processed by FT 930227

Tehran has appealed for international help after floods killed 500 people and caused damage estimated at Dollars 1bn.

IR Iran, Middle East P9229 Public Order and Safety, NEC P9721 International Affairs RES Natural resources GOVT Government News P9229 P9721 The Financial Times International Page 1 59
World News in Brief: Vin exports ordinaire Publication 930226FT Processed by FT 930227

French exports of wines and spirits fell 1.5 per cent last year to FFr34.2bn (Dollars 6.2bn) overall, the first annual decline in 20 years. Wine exports dropped 2.9 per cent.

FR France, EC P2084 Wines, Brandy and Brandy Spirits P2085 Distilled and Blended Liquors MKTS Foreign trade P2084 P2085 The Financial Times International Page 1 67
Parliament and Politics: Brenda Dean appointed chairman of telephone services watchdog body Publication 930226FT Processed by FT 930226

MS BRENDA DEAN, former general secretary of the Sogat print union, has been appointed chairman of the watchdog body which monitors premium rate telephone services, it was announced yesterday.

Ms Dean takes over from Sir Louis Blom-Cooper QC at the Independent Committee for the Supervision of Standards of Telephone Information Services. The committee has a staff which listens in to 0898 numbers including sex and chat lines.

Independent Committee for the Supervision of Telephone Information (UK) GB United Kingdom, EC P8611 Business Associations PEOP Appointments Dean, B Chairman Independent Committee for the Supervision of Standards of Telephone Information Services (UK) P8611 The Financial Times London Page 13 126
Parliament and Politics: Maxwell probe set for delay Publication 930226FT Processed by FT 930226 By RALPH ATKINS

A COMMONS committee is today expected to announce that it is postponing part of its inquiry into the theft of funds from Maxwell company pension schemes after a clash with the Serious Fraud Office.

At a private meeting last night the cross-party committee decided that the SFO's fears about possible prejudicing of criminal trials and the Commons' sub judice rules meant that they should not proceed with taking evidence from witnesses who may be called in trials.

Their report will raise questions over the right of the Commons' select committees, set up in 1979, to conduct inquiries independently of the judiciary. The MPs are expected to call for a wider debate into the issue.

The committee could still call for written evidence from witnesses, however, possibly in the form of answers to questions posed by the committee members. The replies could then be kept securely to prevent leaks. The MPs decided against taking oral evidence in private.

Members of the committee are anxious to put pressure on the Serious Fraud Office to make sure it carries out its investigation speedily and efficiently - and that the committee's inquiries should not be delayed more than 18 months.

Meanwhile, the committee is to continue with its inquiries into other matters arising from the Maxwell affair, including the immediate needs of pensioner victims and the regulatory framework in which pension funds operate.

Trustees of pension funds and insolvency practitioners may be among those called to give evidence.

The committee, chaired by Mr Frank Field, Labour MP for Birkenhead, has had considerable success in persuading the government to consider pension reforms, and the companies and financial institutions involved into helping the Maxwell pensioners.

GB United Kingdom, EC P9131 Executive and Legislative Combined P6371 Pension, Health, and Welfare Funds P2711 Newspapers GOVT Legal issues P9131 P6371 P2711 The Financial Times London Page 13 324
Parliament and Politics: Poll gives Labour 12-point lead Publication 930226FT Processed by FT 930226

A MORI survey published in today's issue of The Times gives Labour a 12-point lead over the government, putting the party on 46 per cent, the Conservatives on 34 per cent and the Liberal Democrats on 16 per cent.

Mr John Major's personal rating has taken a severe knock with 64 per cent of the public dissatisfied with the way he is doing his job, including 30 per cent of Conservative supporters.

GB United Kingdom, EC P8651 Political Organizations P91 Executive, Legislative and General Government MKTS Market shares P8651 P91 The Financial Times London Page 13 109
Parliament and Politics: Pro-EC Tories turn on rebels Publication 930226FT Processed by FT 930226 By RALPH ATKINS, ALISON SMITH and IVOR OWEN

THE GOVERNMENT received a fillip last night when Euro-sceptic Tory MPs who have tried to wreck the Maastricht legislation came under attack from more pro-European colleagues.

A stormy meeting of backbench Tories heard attacks by loyalists on Conservative rebels who have voted against the government on procedural motions designed to prevent filibustering on the bill.

Although encouraged by government business managers, the row reflected growing disquiet in Tory ranks over the snail-like progress the bill is making through the Commons - and signs that the unease is spreading among ministers.

But the rebels said last night that they would continue to oppose the bill. One said: 'It was a good ambush.'

About a dozen Tory Euro-sceptics joined with Labour and Ulster Unionist MPs later in voting against the government. With the aid of the Liberal Democrats the government secured a majority of 26 on a motion enabling the debate to continue after 10 o'clock last night.

So far 13 days have been spent in the Commons on the bill's committee stage. Britain has come under attack from European Community partners for its slow ratification.

Government loyalists are annoyed that debate on Maastricht is squeezing out other government business - such as legislation to crack down on juvenile offenders or reform Sunday trading laws.

The loyalists complained that defying the government on matters of principle was understandable, but that attempts to deliberately delay and extend debates were unacceptable and unprecedented.

The row erupted at a meeting of the backbench 1922 committee, which includes all Conservative MPs who are not in the government. There were calls for the resignation of members of the 1922 executive who have voted against the government.

An all-party campaign for a British referendum on Maastricht was launched yesterday by the Maastricht Referendum Campaign which has Baroness Thatcher as a patron.

GB United Kingdom, EC P9721 International Affairs GOVT Draft regulations P9721 The Financial Times London Page 13 341
Sheffield office development Publication 930226FT Processed by FT 930226

THE Sheffield Development Corporation yesterday announced that Glenlivet Properties, a Chesterfield-based company had agreed to build up to 140,000 sq ft of offices on site between the city centre and the M1 motorway.

Sheffield Development Corp Glenlivet Properties GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P9532 Urban and Community Development COMP Company News GOVT Government News P6552 P9532 The Financial Times London Page 12 76
P&O negotiating sale of two ferries to Greek shipping companies Publication 930226FT Processed by FT 930226

P&O European Ferries is understood to be negotiating the sale of Pride of Canterbury and Pride of Hythe to two Greek shipping companies. The ferries were withdrawn from service this year after the company stopped sailing between Dover and Boulogne.

P and O European Ferries GB United Kingdom, EC P4482 Ferries COMP Disposals P4482 The Financial Times London Page 12 76