24dfvdfv

BUSINESS &MONEY July 16, 2017 · thesundaytimes.co.uk/business

thesundaytimes.co.uk/money

APPS THAT TRACK YOUR CASH MONEY, PAGE 14 CHARLIE MULLINS OF PIMLICO PLUMBERS INTERVIEW, PAGE 7

12

ve ha o o u tt n Yo en h o s p u c h o l nth m o mo alc is th

Unilever is locked in a £2bn battle with the American owner of Spam to buy Reckitt Benckiser’s food business.

The Anglo-Dutch conglomerate behind Persil and Ben & Jerry’s is among a pack of food giants to have tabled a bid for the Reckitt operation — home to brands including French’s mustard.

Reckitt is rushing to offload the unwanted food division after receiving a series of

knockout bids in recent weeks. Binding offers for the business are expected in the next few weeks — just four months after The Sunday Times revealed Reckitt’s plans.

Unilever faces strong competition from Hormel Foods, a New York Stock Exchange-listed company that owns Spam, the canned meat brand. A host of other companies are also predicted to lodge final-round bids, including McCormick & Co,

the owner of Schwartz spices, and Pinnacle Foods, owner of Birds Eye, though Unilever and Hormel are likely to have the most firepower in any bidding war.

Fierce competition in the auction is expected to drive the takeover price to beyond £2.2bn, sources said, a figure that would exceed initial City expectations. Wall Street investment bank Morgan Stanley is handling the sale.

Reckitt’s shares closed at £77.44 on Friday, giving the

Freeze minimum wage, urge bosses

company a market value of £54.3bn.

Sales at Reckitt’s food division increased by 5% last year, though profit margins narrowed. French’s is the jewel in its crown, with sales of more than 160m bottles a year in more than 50 countries. The food arm also includes Frank’s Red Hot sauces, another popular American product.

A sale would help Reckitt — the owner of brands from Durex condoms to Nurofen

painkillers — pay off debt used to finance its $18bn (£13.7bn) takeover of the baby food maker Mead Johnson.

Reckitt swooped on the business this year to boost its flagging growth prospects.

City analysts have predicted the food sale could act as a precursor to Reckitt selling its homecare division, which comprises numerous brands including Calgon.

If Unilever succeeds with its offer, it would be the first big deal struck by the

company since it fought off a £115bn takeover raid by Kraft Heinz in February.

Despite maintaining its independence, Unilever has been stirred into action by investors, unveiling a €5bn (£4.4bn) share buyback programme and pledging to sell its margarine and spreads division for £6bn. The spreads business is likely to be sold later this year, City sources said, with private equity firms expected to gobble up the division.

EMMANUEL DUNAND

ITV LANDS AIRLINE BOSS

Bosses are calling for a freeze in the minimum wage amid the latest signs that Brexit fears are holding back investment by businesses.

Increases in the national living wage — currently £7.50 an hour for workers aged 25 and over but set to rise to about £8.75 by 2020 under Conservative plans — could prevent firms from growing or lead to job losses, according to the British Chambers of Commerce (BCC).

More than 40% of companies have cut back on planned investments because of the Brexit vote, according to a new survey by the CBI. Less than 1% are spending more than they otherwise would have.

Both reports highlight how an inflationary squeeze and rising uncertainty since last year’s EU referendum are making life difficult for businesses.

The BCC said planned rises in the living wage would add to the pain. It is calling for a freeze in real terms, which it says would equate to a 2.7% rise in the next year — with even slower increases in the minimum wage for younger workers.

The business group argues that firms are already under pressure as skills shortages drive up wages and the fall in sterling since the EU referendum drives up the cost of many raw materials.

“Recent uncertainty over Brexit suggests that the pace of planned increases needs to be reviewed,” said the BCC in a submission to the Low Pay Commission, the independent body that advises the government on minimum wage levels.

“Any further increases to the wage floor must be sustainable to avoid damaging impacts on business growth and survival, and corresponding job losses.”

National Grid has handed its new boss a £497,000 relocation allowance — to work in London rather than Warwick.

John Pettigrew pocketed the cash after taking over as chief executive of the power transmission network in April last year.

The 48-year-old previously ran its British division and was based at its headquarters in Warwick.

As head of the FTSE 100 giant, which has operations in North America, Pettigrew now works from its office on Trafalgar Square.

The allowance covered travel expenses between London and the Midlands, a short-term let and the stamp

which Amazon has so far failed to crack.

It now has its sights on the small but fast-growing market for meal kits — boxes of prepared ingredients, with an accompanying recipe, to be cooked in the home. The kits are increasingly popular with time-pressed Millennial workers.

Blue Apron is currently the largest meal-kit provider in the US, followed by the German-owned HelloFresh, which has a growing business in Britain.

The five-year-old Blue Apron floated in New York last month, but its market value has plunged by a quarter to $1.4bn amid concerns over rising losses.

duty on a property he has bought in the capital. His family home is in Leamington Spa, one hour and 10 minutes from London by train.

The generous perk could provide ammunition for critics of gas and energy distribution companies. In a damning report last week, Citizens Advice said network owners had made £7.5bn in “unjustified” profits over the past eight years.

Last year Pettigrew was paid £4.6m — up from £1.6m the previous year — thanks to a bumper payout from a long-term bonus plan, according to National Grid’s annual report.

The chief executive’s base salary was bumped up last month from £825,000 to £899,250 — a 9% rise.

Rowland accuses aide of blackmail over prince

The CBI’s Rain Newton-Smith: ‘Today’s investments are tomorrow’s jobs’

Economic Outlook, page 4

Amazon is stepping up its assault on America’s $780bn grocery market with plans to deliver meal kits to customers’ homes.

The internet retailer has registered a trademark in the US for a new service called “We do the prep. You be the chef ”. It will cover “prepared food kits . . . ready for assembly as a meal”, according to its application.

The move comes just weeks after Amazon splashed out $13.4bn (£10.3bn) on Whole Foods, the upmarket grocery chain with several outlets in the UK. The acquisition was chilling for the US food retail industry,

Simon Duke

Annual growth in average weekly pay has slowed to just 1.8%, well below the rate of inflation. Slower pay rises for the lowest-paid could deliver a further hit to fragile consumer confidence.

The CBI said moves in exchange rates, the prospect of tariffs on EU trade or reduced access to European workers and general uncertainty over Britain’s future relationship with the EU have all had a negative impact on investment decisions.

“An overwhelming number of those that did report an impact [from Brexit] said it was negative,” said CBI chief economist Rain Newton-Smith. “Government

must do all it can to reverse this. Today’s investments are tomorrow’s jobs.”

The CBI has called on the government to keep Britain in the EU’s single market and customs union for as long as it takes to hammer out a new trade deal with Brussels, in order to reduce uncertainty.

The prospect of a “softer” Brexit has led one influential economic forecaster to upgrade its growth outlook for next year and 2019 to 1.3% and 1.8% respectively. EY Item Club previously forecast growth of just 1.2% and 1.5%.

However, Item Club downgraded its forecast for this year to 1.5% from 1.8% because of the inflationary pressures hitting consumer demand.

Simon Duke

14

Grid chief’s £497,000 for move to London

Warning of job losses as firms slash investment over Brexit fears Tommy Stubbington

HOW TO BURN CASH IN BERLIN PAGE 12 APPOINTMENTS PAGE 12 PUZZLES PAGE 18 Amazon ready to cash in on boom in meal kits

!

Unilever fights Spam for £2bn Reckitt mustard Daniel Dunkley

TECH

Oliver Shah

Simon Duke ITV is poised to anoint the easyJet boss Dame Carolyn McCall as its new chief executive. The 55-year-old, who has run the airline since 2010, will replace Adam Crozier, who stood down last month.

ITV’s raid on the easyJet boardroom — which could be unveiled as soon as tomorrow — comes at a time of growing turbulence for British airlines.

The plunge in the pound since the Brexit vote has inflated carriers’ fuel bills and

made foreign trips more costly for Britons. There are also fears flights to the Continent could be suspended if the UK fails to strike a deal with Brussels on the aviation industry.

McCall, pictured above, joined easyJet seven years ago.

Since then, its market value has more than trebled to £5.6bn.

She was paid £1.5m last year, compared with Crozier’s £3.4m.

At ITV, McCall will also face an industry in the midst of great change. Britain’s largest freeto-air commercial broadcaster has been hit with a slowdown

in advertising income and is being challenged by streaming services such as Netflix.

In response, ITV has bulked up its production arm. McCall and the ITV chairman Sir Peter Bazalgette are expected to continue buying smaller production houses.

McCall, a former chief executive of Guardian Media Group, has previously served as an independent director at Lloyds bank and Tesco. In 2008 she resigned from the supermarket’s board after it sued The Guardian for libel.

The reclusive Tory donor David Rowland has accused a former business associate of trying to blackmail him with an archive of emails between his son and Prince Andrew.

Rowland and his eldest son Jonathan have been embroiled in a legal fight with Michael Wright, a former lawyer who worked for them between 2008 and 2013.

Wright alleges that David Rowland promised him an option over 5% of Banque Havilland in Luxembourg, then reneged and said: “You’re not having a carried position on the f****** bank for ever.”

The Rowlands deny Wright’s claim and have tried

to portray him as a “slippery solicitor”.

During a High Court trial, which ended on Thursday with judgment reserved, Jonathan said Wright had come into the “wrongful possession” of more than 30,000 emails from his personal account. David said these included exchanges with the Duke of York, one of Banque Havilland’s clients.

David said Wright had contacted him before the trial and offered to share the emails, which he took as a “threat”. Wright denied wrongfully obtaining emails or attempting blackmail. He said he was trying to “create a link” of communication.

Spotty’s wacky world, page 9

2

The Sunday Times July 16, 2017

BUSINESS

DIGEST SUNNY JUNE ON HIGH STREET

LONDON PAPER PROFITS FALL Profits at the London Evening Standard dropped by a third last year.

The freesheet, now edited by George Osborne, reported underlying profits of £2.2m in the 12 months to October — against £3.3m the previous year.

Advertising revenues held steady at £71m, but the Standard increased its circulation to more than 1m — pushing up overheads. The bill for distributing the paper across London rose from £11.5m to £12.9m.

It is controlled by Evgeny Lebedev, above, the son of Russian tycoon Alexander Lebedev. The Daily Mail and General Trust, its former owner, retains a 25% stake in the newspaper.

Moneysupermarket 400p

Hot weather in June gave a welcome boost to Britain’s retailers, Office for National Statistics figures this week will show.

Economists forecast a 0.5% rise in sales following May’s 1.2% decline, as an unusually sunny month brought shoppers out on to the high street.

Even so, most experts think the rebound will be tough to sustain in the face of stagnating wages and rising prices. Separate figures this week are expected to show consumer price inflation unchanged at 2.9%.

4.5%

Hedge funds bet on more agony for ailing Carillion Builder’s shares still under attack after shock profit warning John Collingridge Hedge funds are betting on further falls in the shares of the embattled construction company Carillion after a torrid week in which its stock crashed more than 70%.

Blackrock and Marshall Wace are among the funds keeping sizeable positions against the company to make it the most-shorted stock on the market. The percentage of shares on loan — a proxy for short interest — stood at 28.2% at the end of the week.

Despite speculation that the company could be targeted by overseas bidders, hedge funds are gambling on more pain after Carillion admitted problem projects

ranging from a new hospital in Liverpool to a shopping mall in Qatar would cost it £845m in writedowns.

The FTSE 250 outsourcing group has long been a target for short-sellers, amid concern over rising debt and a £587m pension deficit. Its share price crash left it worth just £242m.

Industry sources said the Australian bank and asset manager Macquarie was running the rule over Carillion.

Macquarie declined to comment.

Carillion’s chief executive Richard Howson was replaced last week by the former Weir Group boss Keith Cochrane, who stepped up from non-executive director to interim chief executive.

Sources close to the company said it only began to uncover the extent of its problems in May, after new finance director Zafar Khan took over in January from Richard Adam. Adam, finance director since 2007, avoided the full

Oil find exposes short sellers

brunt of last week’s share price collapse.

His 2016 bonus of £139,932 was paid in cash — unlike Howson’s, whose £245,224 bonus was paid half in shares.

Adam, who is a non-executive director at train operator First Group, housebuilder Countryside, estate agent Countrywide and warship designer BMT, left Carillion with shares and potential awards totalling about 890,000 shares.

Their value had crashed to about £500,000 by the end of last week.

Last week’s crash hit private investors hard. Brewin Dolphin, which manages thousands of individuals’ nest eggs, holds a 4.73% stake, which plummeted in value to about £11.4m. Brewin is understood to have recommended its wealth managers buy the shares for private clients up until May, despite mounting concerns about its finances.

How the walls came down, page 7

Simon Duke

Shares collapse: Carillion

FEELGOOD FOODIES BULK UP JIM WILEMAN

The 42-year low in Britain’s unemployment rate, according to figures last week. Despite joblessness hitting a level not seen since 1975, there is little sign of wages picking up, with growth in average weekly pay slowing to 1.8%.

Pressure grows on Premier

SPINOUT SEEKS CASH INJECTION

350 300 250 200 2015

2016

Source: Thomson Reuters

COMPARISON SITE SUFFERS Tough markets for energy giants will take their toll on price comparison website Moneysupermarket when it reports half-year profits.

The FTSE 250 company, whose shares have soared 45% over the past year, is set to warn of a slowdown in bulk-switching deals — where hordes of customers agree to switch power supplier. The warning is expected alongside firsthalf results on Thursday.

Former John Lewis executive Mark Lewis recently took over as chief executive of the company.

An Oxford University spinout on a mission to stop donated organs going to waste is raising £7m in fresh investment.

OrganOx, founded by two university professors, developed a device that can keep donors’ organs alive and healthy while they wait for a recipient.

It means fewer livers and other organs will be thrown away, fuelling hopes that fewer people will die while waiting for a transplant.

Craig Marshall, chief executive, will use the cash to fund a trial in the US. “About a quarter of people on the waiting list are not able to have a transplant, and die,” said Marshall, 54.

OrganOx’s device has already been involved in 220 liver transplants conducted by the NHS. It has previously raised £17m from investors and is planning a stock market listing in the next two years.

100 rising stars in City limelight Laura Onita A networking group has named 100 female rising stars that it predicts will rise to the top of British business.

WeAreTheCity, which has more than 40,000 members, identified emerging talent across sectors including banking, engineering, fintech and insurance at a gala ceremony last Wednesday.

The awards, backed by The Sunday Times, are now in their third year. Among the winners are Jenny Garrett, 46, an author and leadership trainer; Lucile Kamar, 29, a diversity and inclusion adviser; and Athena Livesey,

34, an engineer who works on infrastructure projects and helps young people consider jobs in science, technology, engineering and mathematics.

“Women in leadership positions are on the rise, but still make up just one fifth of senior roles,” said Chris Duncan, managing director of Times Newspapers.

This year more than 1,250 entries were submitted and scrutinised by 33 judges including entrepreneur Lara Morgan and Eleanor Mills, editorial director at The Sunday Times.

A full list of winners can be found at wearethecity.com

A Mayfair hedge fund and one of Canada’s largest pension plans are among the biggest losers from a dramatic recovery at Premier Oil. The explorer’s share price rocketed 30% last week after it unveiled a giant discovery in the Gulf of Mexico. The Zama field, in which Premier owns a 25% stake, could produce as many as 2bn barrels of oil, the company said last week.

The discovery has left a slew of hedge funds nursing losses. Premier has been a popular target for short sellers over the past year. The shares have been buffeted during lengthy talks over a restructuring of its $2.7bn (£2bn) debt pile, with just under a third in the hands of short sellers, according to data from IHS Markit.

GLG, one of London’s bestknown hedge funds, has built up a short position equivalent to 1.1% of the company. The Canada Pension Plan has also bet heavily on a fall in the Premier share price.

A healthy-eating fast-food chain has sold a £3m stake to private equity to allow it to embark on ambitious plans to expand, writes Andrew Lynch.

Friska, a chain of eight outlets in Bristol and Birmingham that expects to turn over £4.6m this

year, struck the deal for an undisclosed minority stake last week with YFM Equity Partners of Leeds, which has also backed the leisure brand Go Outdoors.

Friska — which means healthy in Swedish — plans to open at Manchester Science Park in the

autumn, followed by outlets in the city’s central business district.

It was founded in 2009 by Bath University economics graduates Griff Holland, 34, pictured left, and Ed Brown, 31. Friska provides “feelgood food” using ethically sourced

products, while supporting Third World entrepreneurs from the profits and relying where possible on renewable energy. “We have a pride around what we do and how we do it,” said Holland.

He added: “We’ve spent the past eight years

Just Eat puts loans on takeaway menu Kiki Loizou Just Eat has joined forces with Britain’s biggest peer-to-peer lender to offer loans to the 30,000 UK restaurants servicing its takeaway app.

The online delivery service has partnered with Funding Circle, a website that helps investors lend direct to small and medium-sized companies.

Restaurants that are part of the Just Eat network will receive a discounted administration fee to help them borrow up to £60,000.

The move is an attempt by the £4.7bn delivery empire to use its increasing scale to support the thousands of family-run takeaways that underpin its business. It aims to become a one-stop shop for fast-food companies that need finance and support.

Robin Clark, Just Eat’s director of restaurant services, said it wanted to provide a range of services, “whether for tax, or business rates or finance or legal”.

Smaller food outlets are “facing a cocktail of increased price rises and the banks

have shut up shop, it’s very difficult for them,” he added.

Just Eat, which recently hired Peter Plumb as chief executive, has a market cap of more than £4bn.

Petra, a Turkish restaurant in Islington, north London, is one of the first to take advantage of the cut-price lending service, borrowing £16,000 for a refurbishment.

Owner Yilmaz Guney said: “Our business is booming.

Recently, we were looking to take advantage of an opportunity to expand the business, but the banks were

understanding what makes a quick-service restaurant tick — the sort of things you need to focus on to compete with the best, namely Pret A Manger.”

The former Wagamama chief Steve Hill, who chairs the Vietnamese food chain Pho, becomes chairman.

Premier Foods, the maker of Mr Kipling cakes, will unveil another disappointing set of figures this week amid growing pressure on its chief executive, writes Daniel Dunkley.

Premier, which also owns Bisto gravy and Ambrosia Custard, is expected to report like-for-like sales slipping by 1.6% in the three months to July, according to analysts at Jefferies.

The company has suffered a difficult 12 months, posting a series of profit warnings because of the rising cost of key ingredients and sterlingrelated inflation. It holds its annual meeting this week.

The woes have led to increased pressure on chief executive Gavin Darby, who knocked back a £537m takeover offer from the US food company McCormick & Co last year. Premier shares closed at 39.5p on Friday, giving the company a market value of just £324.9m.

Here to stay: capital embraces Airbnb Daniel Dunkley

Peter Plumb: new boss slow and couldn’t provide us with the help we needed.”

Funding Circle co-founder James Meekings, 34, said: “Small businesses are the backbone of our economy.

Nowhere is this more evident than in the great tradition of the British takeaway restaurant.”

Bookings in London through Airbnb, the website that allows homeowners to offer short-term lets, have soared by 130%, a new study claims.

A total 4.62m nights of accommodation were booked in the capital via Airbnb last year, up from 2m in 2015, according to research from the real estate company Colliers International.

In the first four months of this year, bookings rose by a further 55%, said the study, which was backed by Hotelschool The Hague, a hospitality business school.

The most popular

boroughs for overnight stays last year were Westminster, Tower Hamlets, Camden, Kensington and Chelsea and Hackney. Airbnb now has an estimated 9% share of the London overnight market.

Marc Finney, a consultant at Colliers, said: “The surprise is, this is having little effect on the hotels.

According to the findings of our study, many Airbnb bookings are rooms within a house — for people who weren’t going to choose a hotel in the first place.”

Airbnb raised $1bn (£750m) from Silicon Valley in March. The cash call gave it a valuation of about $30bn.

3

The Sunday Times July 16, 2017

BUSINESS

Sports Direct laid low by sterling slide Oliver Shah Sports Direct is braced for a collapse in annual profits after a torrid year in which it has been battered by the fall in sterling since the Brexit vote and harried by corporate governance concerns.

The discount retailer of trainers and tracksuits is set to report pre-tax profits of less than half last year’s £275.2m, according to analysts. Sports Direct, which sources most of its products from Asia in dollars, was not hedged against currency swings before last summer’s vote sent the pound crashing.

It then botched a belated attempt to hedge itself.

The results, due on Thursday, will be preceded by a High Court judgment in a case brought against Sports Direct’s billionaire founder Mike Ashley by Jeff Blue, a former investment banker.

Blue, who worked as an adviser to Ashley, claimed he was owed £14m from a bonus deal struck in a London pub

JACK WILLS FIGHTS BACK PAL HANSEN

in 2013. Ashley denied making any agreement and called Blue a “total liar”.

A series of hearings, which ended on Wednesday, produced allegations that Ashley once vomited into a pub’s fireplace after a drinking contest with a junior analyst, and that he topped up former chief executive Dave Forsey’s £150,000 salary with side payments.

Ashley denied making undisclosed payments to Forsey but admitted he was “drinking to get pissed and have a good night out” when he went to the Horse & Groom in Fitzrovia with Blue and a group of bankers.

The former squash coach, who started out with a £10,000 loan from his parents and one shop in Maidenhead, Berkshire, made a string of surprising comments during the case.

He described Sports Direct’s 2007 stock market float as an “unmitigated disaster” and dismissed his £2.2bn fortune as “wallpaper”.

Court told ex-bosses made ‘incorrect statements’ to obtain a £2.2m loan Oliver Shah

Worldpay to keep name in US tie-up Simon Duke and Daniel Dunkley Worldpay is to retain its name after the proposed £9bn takeover by American payments rival Vantiv.

It is understood that the two companies will come together under the name Worldpay should the transatlantic tie-up go ahead.

Earlier this month, the FTSE 100 firm agreed a cash-and-shares offer from Vantiv. The deal would leave Worldpay shareholders with a 41% stake in the larger US-listed business.

Some investors want the British card payments firm to squeeze more from Vantiv, whose bid was just 20% above

the prevailing share price.

However, other shareholders believe they will reap higher rewards by retaining shares in the merged entity. The deal is expected to deliver big cost savings, boosting profits.

Sources said Worldpay explored a takeover of Vantiv last year. In its annual report, the company revealed that it incurred £3.8m of one-off legal costs, which included fess for “aborted M&A activity”. The crash in sterling after the EU referendum ended any hopes of acquiring its US rival.

Hedge funds including Paulson & Co have bought Worldpay shares in the hope of a counter-bid, but are set to lose money, City sources said.

The co-founder of Jack Wills has taken the preppy fashion retailer back to profitability two years after he returned to save it from a costly logistics gaffe, writes Oliver Shah.

Peter Williams, above, who opened the first store with his business partner Rob Shaw in Salcombe, Devon, 18 years ago, said he had focused on weaning Jack Wills off discounting.

The chain made an operating profit of £730,000 in the year to January against a loss of £13.8m a year earlier.

Sales were up 4% to £142.4m.

Popular items included a ladies’ trench coat and a men’s quilted bomber jacket.

A few years ago, Jack Wills, riding a wave of posh chic, was tipped for a £500m stock market listing, but the passing of the preppy trend and a botched warehouse outsourcing put it in the red.

Williams, 43, came back from a three-year “sabbatical” in 2015 after a “constructive parting of the ways” with Wendy Becker, a former McKinsey consultant who had

Buyout bosses cash in with £2.6bn fund sale John Collingridge Two former 3i partners who turned a £20m fund into a £2.6bn investment giant are exploring a possible sale.

Bernard Fairman and Peter English are set to reap hundreds of millions from the sale of Foresight Group, which spans everything from solar farms to a golf club retailer. They are understood to have appointed investment bank Lazard to handle a sale.

Fairman and English, chairman and partner respectively, founded Foresight in 1984 with £20m from the merchant bank Robert Fleming after leaving the investment firm 3i. That initial investment returned £80m to shareholders.

Today the company, based in London’s Shard skyscraper, manages £2.6bn of assets across Britain, America, southern Europe and Australia. It has launched

multiple venture capital trusts and has been a big backer of waste-to-energy projects since 2006.

These include a biomass plant in Birmingham, which turns waste wood into electricity to power 17,000 homes, and a waste and recycling facility in Hull.

It also owns solar farms capable of powering hundreds of thousands of homes, including sites in Wiltshire, Leicestershire and

Kent, as well as a growing book of private equity investments. This month it pumped £3.5m into Indian street food chain Mowgli.

Foresight’s sale comes amid booming demand for infrastructure assets. Pension and insurance funds are piling into assets that deliver stable returns amid the continued ultra-low rates environment. It is unclear whether Foresight will be sold as a whole or broken up.

Greece claws its way back to bond market Tommy Stubbington Greece is poised to borrow money from investors for the first time since 2014 following a successful bailout review last month.

On a recent tour of the City, Greek finance minister Euclid Tsakalotos told fund managers that Athens could be ready to issue a new bond as soon as this month. It is understood that a positive

response has cleared the way for Greece to raise up to €1bn (£876m) of five-year debt this autumn.

Athens must win over private investors before its current bailout deal expires in the middle of next year.

Greek bonds have rallied dramatically as fears that the country was heading for another default have receded. Greece’s 10-year bond currently trades at a

Ve Interactive chiefs misled us, says lender

yield of 5.3%. The IMF forecasts growth of 2.2% for the Greek economy this year.

“After many years of recession, the economy is starting to turn the corner,” said Mark Dowding, a fund manager at BlueBay Asset Management, who has been buying Greek bonds since the start of the year.

Less than 20% of Greek debt is in private hands, with the rest in the form of low-

interest long-term loans from the IMF and the EU. That lessens the risk for private investors as Greece weans itself off bailout funding, according to Dowding. Nonetheless, doubts remain over the long-term sustainability of Greece’s debt burden. The IMF has called for debt relief for Athens, a move resisted by creditors inside the eurozone, led by Germany.

taken over. He and BlueGem, the private equity firm that owns Liberty department store in London, bought out Shaw and Jack Wills’s previous backer, Inflexion, last September.

Williams said he had cut some costs, but insisted the return to profitability was driven by his “obsession” with full-price sales. He said that reining in discounting had been “quite a painful experience”, but higherquality products had boosted sales and margins.

The former boss of the one-time tech unicorn Ve Interactive has been accused of making “materially incorrect and misleading statements” when he and a colleague obtained a short-term loan.

David Brown, a jazz pianist who became a flamboyant entrepreneur, and Martin King, his right-hand man, are being sued in the High Court by Bank and Clients, a small lender.

The bank claims Ve, a developer of software for online retail, borrowed £2.2m for which Brown and King provided personal guarantees. It says the sum was never repaid. Bank and Clients is demanding £4m, including legal costs, fees and interest.

Brown and King said Bank and Clients’ “ridiculous allegations” were all “strenuously denied”.

The claim dates back to last October, when Brown was feted as one of the most successful start-up bosses in Britain. At the time Ve commanded a £1.5bn valuation, making it a unicorn — the name for a company worth more than $1bn.

Bank and Clients says Brown and King asked for a short-term loan on October 28 because they needed working capital but did not want to raise equity, which would have diluted Ve’s shareholders. As Ve was loss making, personal guarantees from its bosses were a “cornerstone of the transaction” for the bank, according to court papers.

Bank and Clients says Brown presented himself as a “very wealthy” individual with assets worth £366m, including 123.5m shares in Ve and a £2m house in Spain. It says King held himself out as being worth £93m, with a collection of supercars and personalised licence plates valued at £14m.

The bank lent £2.2m to Ve on October 31. It says it had planned to charge a fee of £500,000 but raised this to £1m after it found that Ve had already given security over its assets to other lenders, and that a bank account in King’s name said to contain 3m Swiss francs (£2.3m) was jointly held with his wife, whom he was divorcing at the time.

Ve, which had raised £55m from investors including Sir Elton John’s husband David Furnish, ran into financial trouble in March. It was bailed out by a consortium of existing investors called Treyew, led by Doug Barrowman, the Scottish venture capitalist who is dating Baroness Mone, and Mark Pearson, founder of myvouchercodes.co.uk. They injected £3m, slashing Ve’s valuation to £300m, and pushed out Brown.

After it took control, Treyew called in the law firm Edwin Coe to investigate suspicions of fraud in the Brown era, including allegations that £11.5m of Ve’s money was siphoned off and used to support a network of companies owned by him, his ex-wife and his girlfriend.

Brown has denied any wrongdoing.

Treyew failed to raise more from existing investors and Ve went into administration in April. It was bought out of administration for £2m by Rowchester, a vehicle backed by Barrowman and Pearson. Edwin Coe’s work is continuing on behalf of the administrators.

Former VE Interactive boss David Brown has ‘strenuously denied’ the ‘ridiculous allegations’ Bank and Clients says it demanded repayment from Brown and King on April 25. It claims it then uncovered “false” or “reckless” promises made by the pair, who “did not intend to comply with the terms” of their personal guarantees.

It says Brown owned 46.5m Ve shares, not 123.5m, and his Spanish property had been bought for €750,000. It claims all King’s supercars had mortgages or hire purchase agreements and Ve was far more indebted than the two admitted.

Bank and Clients, which has no connection to Treyew or Rowchester, asked the High Court for a freezing order on Brown and King’s assets last month.

The judge told the pair they had to give the bank’s lawyers five days’ notice before selling anything worth more than £50,000, but postponed a hearing on a full freezing order and summary judgment on Bank and Clients’ case until later this month.

4

The Sunday Times July 16, 2017

BUSINESS

Ministers plot, while we can’t book flights Iain Dey Agenda

D

ing ding. Round two of the Brexit negotiations gets under way this week, with the two fighters at the centre of the spectacle throwing punches in different directions. David Davis, the old knuckleduster in the red, white and blue trunks, seems more preoccupied with landing a knockout blow on Theresa May that could make him prime minister.

His opponent Michel Barnier, meanwhile, is striding out of his corner with his guard up — rigidly standing by all his demands about the rights of EU citizens, the settlement bill and the “ticking clock” that is dictating the pace of the talks.

Away from this drama, post-Brexit battle lines are being drawn. Nobody really noticed, but last week the French president Emmanuel Macron and the German chancellor Angela Merkel revealed plans to build a new fighter jet together. Britain will have nothing to do with it.

That’s not especially good news for the 5,000 engineers at BAE Systems’

plants at Warton and Samlesbury in Lancashire, who manufacture the Eurofighter Typhoon.

As things stand, there is only a few years’ work left on the pan-European fighter-bomber. Production has already been slowed to keep the plants ticking over until new orders can be found.

Now the future of the whole consortium could be thrown in the air by this Franco-German alliance — which is expected to lead to the development of unmanned warplanes as well as a more conventional design.

Unquestionably, there is an element of political posturing. Macron in particular appears to relish any opportunity to demonstrate that he will do everything in his power to prise jobs and tax revenues out of Britain.

Yet it’s a credible threat. The French-built Dassault Rafale has been the principal competitor to the Typhoon, winning several large deals at Lancashire’s expense.

Britain and BAE may well find a way to be part of this new project, as some defence industry sources have suggested

to me. There is a bigger point, however.

There still appears to be an assumption in government that we are somehow in control of what happens next to our economy. Yet as cabinet ministers plot, everyone else is getting on with life.

Other countries are looking out for their own interests. Businesses are sensibly working to worst-case scenarios.

Barclays confirmed last week that it was looking to move jobs to Dublin.

HSBC gave further indications that it would shift its capital markets business to Paris. EasyJet said it would set up a new headquarters in Austria. Industries of all kinds are quietly panicking about looming deadlines that seem not to have registered on the Downing Street radar.

Car makers take pre-orders for new models up to 18 months in advance. How should BMW price new models coming from Germany for the UK market?

Ordinarily, airlines start to sell tickets one year in advance. Will they have clarity by next March on whether Britain will still be a member of the Open Skies treaty? Will they be able to sell tickets

dated after March 2019? Ryanair’s Michael O’Leary raised this point last week. While business is often accused of being “short-termist” in its thinking, it is the cabinet that no longer seems capable of thinking beyond the next few days.

RBS 300p 250 200 150 2016

2017

Source: Thomson Reuters

The cabinet does not seem able to think beyond the next few days

The great RBS escape?

A prediction: by this time next year, the government will have cut its stake in RBS to less than 50%.

Last week’s news of a £4.2bn legal settlement with the US Federal Housing Finance Agency, over claims the bank sold duff portfolios of sub-prime mortgages, is a big step forward. It’s the beginning of the end of the bad news that has kept the bank holed below the waterline, year after year.

The next big event will be a deal with the US Department of Justice over the same sub-prime mortgage issues. I am assured RBS genuinely has no idea how big that fine could be. Yet the wiser analysts seem to hovering around the £5bn mark — meaning RBS will have to stump up a further £2bn-£3bn in provisions, in addition to those it has

already taken. That would be painful, but it would mean the results posted next spring would be the last to be polluted with toxic waste from the era of Fred Goodwin. Finally, the safe, clean, predictable bank that Ross McEwan was asked to create would be there to be judged on its merits by the market.

I have a feeling that our cash-strapped government — whoever is leading it by that point — won’t wait long to start dumping shares. The idea of hanging about until the taxpayer can exit at a profit has long been abandoned. There will be sufficient appetite from investors to allow a good slug of stock to be jettisoned, pulling the taxpayers’ stake down from its current level of 73%.

Who will buy them? Not me. With wages stagnating, inflation edging higher and new doubts emerging about the housing market, I doubt many UK banks will be an especially wise investment.

While RBS has been destroying the value in its shares at the behest of both Brussels and Whitehall, its rivals have stolen a march. iain.dey@sunday-times.co.uk

We need a lot more globalisation, not less

Vacation forecast?

Unpromising

David Smith Economic Outlook

Irwin Stelzer American Account

O

ne of the great disadvantages of being a member of the Bank of England’s monetary policy committee (MPC) is that unless you say something about interest rates, people do not take much notice of your speeches.

This was the fate that befell Ben Broadbent, the Bank’s deputy governor for monetary policy, a few days ago. His interesting and welcome speech on globalisation steered clear of a mention of interest rates, though he offered his views on rates in a subsequent interview (he is not an early hiker).

On globalisation — which it is fair to say has had a terrible press in recent years and is blamed for the rise of populism in many countries, including Britain — he pointed out a simple truth.

Yes, there will be losers from globalisation — and before her political implosion Theresa May seemed overly concerned with compensating them — but they are greatly outweighed by the winners. And the gains from globalisation are spread among the population, not confined to a small elite.

This is a frustrating time for economists. It is, as Broadbent pointed out, nearly 250 years since Adam Smith demolished mercantilism: the idea that trade is a zero-sum game and one country’s gains are another’s losses. It is exactly 200 years since David Ricardo gave us the law of comparative advantage, which explained why countries specialise, or should specialise, in the products and services they are relatively better at doing.

Yet, centuries later, we have an American president whose protectionism is based on a mercantilist view of the world. And globalisation, far from being seen as a route to improved living standards, is blamed for their weakness.

To illustrate his theme, Broadbent used the apparently unhelpful example of textiles and clothing. Since the mid-1970s, when import penetration began to rise sharply under the impact of lower tariffs, employment in the sector has fallen significantly — by about 90%. Then it used to account for one in 30 jobs; now it is one in 370. So people who were employed in this sector were losers from globalisation.

British consumers were, however, significant winners as a result of falling clothing prices. Household incomes are 3% higher in real terms than they would have been in the absence of the fact that, both in absolute terms and relative to other prices in the economy, clothing is a lot cheaper than it was.

A straight comparison between these two effects results in a £36bn gain for consumers, against a £15bn loss of incomes for those who were employed in the clothing sector in Britain.

Even this, however, is likely to understate the gains from globalisation.

As Broadbent put it: “There’s a big difference between particular jobs and overall employment. Individual jobs are lost continually . . . Yet aggregate employment has risen — since both the mid-1970s and the mid-1990s — and the rate of unemployment has fallen. In any reasonably flexible labour market, new jobs are created as others are destroyed.”

Latest figures, indeed, showed a record employment rate of 74.9% and 32m people in work. That does not prevent some yearning for the jobs of the past, but you cannot run an economy on nostalgia.

What if the new jobs are of poorer

Trade is key to our prosperity, but it is not clear how it can be unlocked quality than the ones they replace? Does not globalisation then lead to a rise in income inequality?

All the evidence, most recently an International Monetary Fund study in April, found that technological progress dwarfs any impact on inequality from globalisation. Technology benefits the highly skilled at the expense of the low-skilled and unskilled.

The irony is that concerns about globalisation have been mounting as it has been struggling, even before Donald Trump’s election. The era of “hyper-globalisation” that began in the early 1990s has gone into partial reverse since the financial crisis. World trade, which once led global growth, has barely kept pace with it in recent years. Had

it done so, Britain would have had significantly stronger growth.

This matters, particularly for an economy that has embraced globalisation as much as Britain’s. We aspire to be a great nation of exporters again. We are undoubtedly a formidable nation of importers, without the national ties to domestically produced products that some other countries have retained.

Globalisation matters. When it has gone into reverse, productivity and living standards have suffered, as we saw most dramatically between the two world wars. Stronger growth in world trade in recent years would have been associated with faster economic growth and, most importantly, growing rather than stagnant productivity and rising real wages.

Trade stimulates rising productivity, as Smith and Ricardo taught us. Those blaming globalisation for weak living standards have got it 180 degrees wrong.

We needed more of it, not less.

It matters too in the long term. On Thursday, the Office for Budget Responsibility issued its fiscal risks report, and a sobering document it was.

The OBR continues to cling to the assumption that productivity will recover to normal growth rates in the next few years; if it does not and if

GLOBALISATION HAS EBBED AND FLOWED ...

Exports and imports as a percentage of GDP for 17 economies Protectionism First wave of globalisation Second wave of globalisation Hyper-globalisation 50% 47.2

40 38.1

30

20

10 7.5 0 1875

1900

1925

1950

1975

2000

Sources: NBER, Barclays, Bank of England

... BUT IS NOW ON THE WANE World trade volume growth

World GDP growth

15% change

10

5

0

-5

-10

-15 2000 Source: WTO

2005

2010

2015

recent weak productivity trends are the “new normal”, then taxes and/or government borrowing will need to rise, even if the government sticks to its tight spending plans.

Though the clock is ticking, it is too early to say where “the risks posed by Brexit” — to use the phrase in the OBR report — will end up. The OBR is less troubled by a one-off “divorce bill” payment to the EU, which will not affect the public finances in the long run, than by what it describes as “the implications of whatever agreements are reached with the EU and other trading partners for the long-term growth of the UK economy”.

The OBR reminds us that it does not take much for real problems to mount.

As it put it: “If GDP and receipts grew just 0.1 percentage points more slowly than projected over the next 50 years but spending growth was unchanged, the debt-to-GDP would end up around 50 percentage points higher.”

That is easily possible, or worse. At the G20 meeting in Hamburg last weekend, countries had trouble agreeing on a commitment to global free trade. America, as noted, has a protectionist president from whom offers of an early trade deal should be taken with a bucketful of salt. Trade, particularly in services, is the key to our prosperity but it is not clear how it can be unlocked.

In or out of the European Union, Britain would benefit from a revival of globalisation. Things can change, and quickly, but the omens at present are not good. Aspiring to be a new global champion of free trade is not much use if nobody else is playing.

PS Staying with the Bank, the balance has shifted a little against a rise in interest rates next month — it will reveal all with its next inflation report on August 3 — although the issue remains a live one and this will be a closely watched occasion. There is more to monetary policy, however, than just interest rates.

Ian McCafferty, one of the independent members of the MPC, raised the question in a Times interview of whether the Bank should consider unwinding its quantitative easing (QE) earlier than currently planned. The Bank has purchased £435bn of gilts (UK government bonds) in three phases, the latest starting last August, to provide additional support to the economy.

Its official position, queried by McCafferty, is that no unwinding will occur until Bank rate has reached about 2%, which is a very long way off. But the Federal Reserve in America, which is gently raising rates, has said it will start reducing the assets it has purchased under QE later this year.

QE aficionados will know there are two ways of doing this. The back-door way, which is what the Fed will do first, is not reinvesting the proceeds of the maturing assets it has on its books. The more upfront way is actively selling those assets into the market.

How much would the back-door way allow the Bank to reduce its QE programme? The experience of the past two years, in which just over £55bn of gilts on its books have matured with the proceeds reinvested, suggests that a reasonable ballpark figure is £25bn to £30bn a year. That would not lead to indigestion in the markets but would allow a gradual return towards some kind of normality. It makes a lot of sense. david.smith@sunday-times.co.uk

N

o rest for the wary. Fearful of facing constituents with nothing but months of intra-party wrangling to offer, Senate Republicans decided not to adjourn for the usual full month of August and are staying in steamy Washington for an extra two weeks. Having been shouted down by angry constituents during the Fourth of July recess as they tried to explain why the legislative cupboard is bare, they have decided to try to achieve something before leaving the relative safety of their Senate offices.

After seven years of promising to repeal and replace Obamacare, and passing bills they knew President Obama would veto, they have managed to leave that statute unrepealed and unreplaced.

After promising to reform the hideously distorted tax code, a Republican Congress and a Republican president have left it unreformed. After promising tax cuts for the middle class, Republicans in control of both houses of Congress and the White House have left those rates uncut. After promising an infrastructure programme to heat up tepid economic growth, congressional Republicans haven’t worked out even the outline of such a programme.

No wonder they prefer cowering in their offices to explaining these serial failures to voters. In 1948 Harry Truman fooled the pollsters and won re-election by attacking the “do-nothing” Republican Congress. Democrats are dusting off that old charge as they take advantage of the summer recess to visit constituents while their opponents are stuck in Washington.

The Republicans have two excuses.

The first is that Democrats have played the role of obstructionist — the same role Republicans played when Obama was in the Oval Office, but with a difference.

Republicans disliked both Obama’s progressive policies and his haughty, off-putting demeanour. But Democrats despise President Trump and can’t wait until 2020 to unseat him; they want to be rid of him sooner. Two members of the House of Representatives have introduced an impeachment resolution while Senator Tim Kaine of Virginia, the Democrats’ 2016 vice-presidential candidate, shouts “treason” because Donald Trump Jr stupidly met a Russian lawyer with alleged links to the Kremlin in pursuit of “dirt” on Hillary Clinton.

The virulence of the anti-Trump campaign means that it is toxic for any Democrats in the House or Senate to co-operate with Republicans in passing legislation, even though Democrats know that: l Unless changes are made to Obamacare, millions will find it difficult and costly to obtain health insurance l Unless the tax code is reformed, companies will find overseas venues attractive l Unless an infrastructure programme gets going, roads, bridges and airports will retain their Third-World quality.

Still, Republicans could pass legislation and get it onto the president’s desk for signature if they were united.

Which they aren’t. And if they were good at communicating with the American people. Which they aren’t. In the case of healthcare, Democrats accuse them of cutting Medicaid, a programme originally aimed at the poor but since expanded to cover the non-poor. Between 2000 and 2017 the number of people covered more than doubled, rising from 35m to 75m, although the incidence of neither poverty nor illness rose at close

to that rate. Almost half of all births in America are paid for by Medicaid, which devours about 10% of the federal budget. And rising.

George Orwell had it right when he said language can corrupt thought. The “cuts” Republicans are accused of wanting to institute are nothing of the sort. They are reductions in the rate of increase in that programme’s runaway cost. It is as if a family had gathered round the kitchen table to decide how to bring its spending into line with its means — and agreed to solve the problem by increasing its spending, but by less than the year before.

The second excuse the Republicans have for their failure to put any significant legislation on the books is a reasonable one — the areas they have targeted are extraordinarily difficult

Republicans could pass legislation if they were united.

Which they aren’t ones. Healthcare, of course, affects the lives of millions and Obama won a durable victory when he persuaded voters that people with pre-existing medical conditions are entitled to insurance at reasonable rates. Subsidies to make that possible can come from only one of two places. Either healthy young people must be forced to pay over the odds for their coverage, or taxes must rise to make up the shortfall between the real cost of insuring sick people and what insurers will be allowed to charge. Neither alternative is attractive to a majority of legislators.

Tax cuts are more attractive, but revenue to fill the gap — these rate reductions are never entirely self-funding from increased growth — must be found somewhere. If repeal and replacement of Obamacare is not to provide the anticipated $1 trillion in savings over 10 years, some voters’ benefits must be reduced. Volunteers for such pain are not lining up.

Both parties agree on one thing — spending more on infrastructure: all politicians want a bridge or airport named after them. Or at least a repaired street. But Democrats want to pay for this by running larger deficits and Republicans by user fees paid to privatesector builders. Result: no infrastructure programme, at least not this year.

It has been 50 years since Promises, Promises lit up the Broadway stage. Its message remains relevant. “I’m all through with promises, promises now . . . Promises can just destroy a life.”

Or a political career. irwin@irwinstelzer.com Irwin Stelzer is a business adviser

5

The Sunday Times July 16, 2017

BUSINESS

Meet the iPhone hacker who wants your car to drive itself George Hotz says his software will turn any family saloon into a robo-car.

Danny Fortson paid him a visit in San Francisco

T

he future of the car industry can be found not in Detroit or at Tesla’s California megafactory, but in a five-bedroom house in a sleepy neighbourhood across the bay in San Francisco. At least, that is what George Hotz, the first person to hack an iPhone, would have you believe.

His start-up, Comma.ai, is developing software that the 27-year-old says will be able to turn almost any car built after 2012 into a self-driving vehicle. That would amount to one of the biggest industrial retrofits in history. And he has a prediction: Comma.ai and its team of “more than 10 people” will leave rivals including the industry leader Waymo, Google’s sister company, in the dust.

“Waymo will have 5% of the market, Tesla will have 20% and we’ll have 75% because we’ll be in every car,” Hotz said.

And what of lavish-spending Uber, locked in a court battle with Waymo over selfdriving technology? “They’re a joke,” he said. “It’s over.”

Hotz’s bravado may inspire eye-rolls, but he typifies the chaotic, fast-moving approach that has scared the daylights our of the stodgy old car business. Few industries excite the passions — and investment dollars — of Silicon Valley like self-driving cars. Their promise is almost limitless: traffic jams eliminated, safety improved, cities remade. Strategy Analytics, a research firm, predicted recently that the “passenger economy”, its vision of ubiquitous pilotless vehicles, would be worth $7 trillion (£5.4 trillion) by 2050.

Hotz is among a clutch of entrepreneurs who design cheap hardware and software that promise to turn any reasonably modern vehicle into a robo-car. The prize is big: last year more than 96m cars rolled off assembly lines worldwide.

AutoX, a San Jose-based start-up, made waves this year when it released video of a driverless car negotiating winding country roads using its software and hardware and a few $50 cameras. The company — launched by Jianxiong Xiao, the founder of Princeton University’s computer vision and robotics lab who is known as “Professor X” — pulled off the feat without raising any significant venture capital funding. On its website AutoX pledges to make autonomous driving “universally available to every citizen”.

Hotz likened the fight to win this future to smartphones, where the iPhone reigns at the high end, leaving Google’s Android operating system to soak up 90% of the market. He said: “Tesla is the Apple of cars, [its self-driving program] Autopilot is the iOS. We want to be the Android.”

He has his doubters. A venture capital investor dubbed Comma “a science project” and questioned whether the company, which is crowdsourcing key parts of its technology from hobbyists and hackers, can ever be truly safe and reliable. Hotz has raised $3.1m in seed funding led by the blue-chip venture capital firm Andreessen Horowitz.

W

hen Hotz recently answered the door to his home, which doubles as Comma’s headquarters, he looked the part of the bedraggled hacker. He was shoeless, in jeans and a hoodie, and full of belief that he will solve “the coolest applied AI [artificial intelligence] problem in the world”.

Comma got its start after Hotz, widely known by his hacker handle “geohot”, turned his Acura into a self-driving car in 2015 with a home-brewed software and hardware setup. Last year, weeks after GM shocked the industry by paying $1bn for Cruise Automation, another developer of retrofit kits, Andreessen piled in to Comma.

Hotz introduced a $1,000 smartphone-sized device called the “comma one” that he said could be installed in an average car and, once the software was

IT’LL BE AS EASY AS BUILDING AN IKEA WARDROBE

George Hotz believes his self-driving system will take 75% of the market, leaving Google’s sister company Waymo and Tesla to divide up the rest

96m

Cars made last year, which could become self-driving

$1,000

Bounty offered by Comma for code for one car model

$3.1m

Seed funding raised by Hotz’s start-up

Fancy turning your car into a self-driving vehicle? First, it will need to be relatively new. Most models after 2012 are packed with enough electronics that they can be manipulated with software.

Any year before that is fairly patchy.

The next question is whether the vehicle’s three key functions — brakes, throttle and steering — are electronically controlled and, therefore, hackable. If

written for a given model, give it some self-driving capabilities such as lanekeeping, acceleration and deceleration.

It didn’t last long. The National Highway Traffic Safety Administration threatened him with fines unless he explained its safety capabilities, so he binned the project. He tweeted: “The comma one is cancelled. Comma.ai will be exploring other products and markets.”

He switched his focus to creating a universal operating system for selfdriving cars, called Openpilot, and devised a kind of hacker toolkit to make it compatible with different models. The kit includes an $88 dongle you can plug into a car’s diagnostic port, a dashcam app and software that feeds data to Openpilot. He has also published on the web the plans to make a version of the comma one called Neo. At least one company is manufacturing and selling the device.

The hope is that thousands of enthusiasts will install the tools on their cars.

This is critical: Comma relies on deep learning, a type of AI that ploughs through huge amounts of data to learn to “think”, as opposed to following strict programmed rules as other forms of AI do. The more people use Hotz’s systems — and feed back the resulting data — the smarter Openpilot will get.

To help things along, Comma posted “bounties” for several models. The day I visited, Hotz published the code (and paid a $1,000 bounty to the coder) that makes Openpilot compatible with Honda’s CR-V. Cars with bounties include the Chevrolet Volt and Ford Fusion.

It is a novel approach to a complex problem. Saman Farid, founder of Comet Labs, an investor in AI companies, said crowdsourcing may be able to generate a reasonably reliable self-driving system, but is unlikely to produce the complex data sets — much of which comes from pricy laser-based sensors — required to forge a mass-market system.

Waymo has been at this for nearly 10 years and is the market leader. Its cars have completed more than 3m miles on public roads and are at the point where drivers need only step in once every 5,000 miles or so. Comma’s system requires intervention about every 10 miles and has clocked just 100,000 miles.

Hotz is not perturbed. He expects to match Waymo’s safety record in about 18 months because Comma is gathering data faster and interpreting it with deep learning, which simply wasn’t available when Google started out. He said: “Every

your car has hydraulic steering, sorry, you’ll have to go and buy a Tesla or wait until 2020, when top manufacturers from Audi to Toyota have promised to roll out self-driving models.

Today transforming a “dumb” vehicle into a smart self-driving one remains the province of hackers and enthusiasts. It requires complex software and hardware that must be self-installed. This could

time Waymo gets a disengagement, one of their engineers goes in and looks at their hand-coded stuff and then they fix it. We automate that whole process.”

What Hotz claims is a virtue, however, critics see as a hindrance. A rival car executive predicted the company would run into problems precisely because deep learning was not based on hard-and-fast rules, but on what the system “thinks” is the best thing to do. “There is no code. It has just learnt that most drivers do X, so it does X,” he said. “If someone wants to drive like a jackass, the system is going to learn that jackass pattern. It’s going to present a huge regulatory headache.”

Hotz dismisses this. “Humans are the best known driving system,” he said.

“They are not explainable and do not rely on hard-and-fast rules. I’d prefer statistical safety to explainability every time.”

There is also the question of what “selfdriving” actually means. Autonomous systems are ranked on a scale of one to five. Level one means the driver is in control but the car may automate a specific function; level five means there is no steering wheel. Comma’s system is level two: you can take your hands off the wheel and feet off the pedals, but be ready to intervene.

Even that, Hotz said, was miles better than the “atrocious” systems of traditional car firms. Tesla, he admitted, was “slightly” better but predicted Comma would “leapfrog” it with its next update.

Trying to outdo both Tesla (market value $53bn) and Waymo (parent Alphabet, $665bn) seems almost impossible.

Why not try to sell its stuff directly to Detroit? Hotz smirked: “They’re hopeless. If I had mind control over the CEO of Ford, it would still take five years to get our product into their cars. You have to think about how to disrupt and not work with existing manufacturers.”

His goal: get Openpilot to the stage that car dealers sell it as an add-on in the showroom, as they do chrome hubcaps.

Y

ou can’t swing a cat in Silicon Valley without hitting a self-driving car company raising boatloads of money. Drive.ai last month pulled in $50m. A start-up called Zoox raised an astonishing $250m just nine months ago. Hotz has nabbed just $3m.

This, sources suggest, is because his bootstrap approach makes it extremely hard to create a platform that will ever be considered safe enough for public use.

The car executive said: “His idea has a ton of merit: provide a set of tools and

change as companies such as Comma.ai write code and build kits that, according to the Comma founder George Hotz, will eventually make it as easy as assembling an Ikea wardrobe.

Whether that comes to pass will depend greatly on how comfortable regulators will be with a chaotic roll-out of DIY robot cars. The other is how much money will be put behind those efforts.

Both questions look

challenging. Alexei Andreev, founder of Autotech Ventures, a $120m (£92m) specialist investment fund, said he decided against investing in retrofitters, not least because lives were at stake.

“We did some soulsearching over whether we wanted to invest in after-market companies that potentially could kill people,” he said. “We’re not ready to do it.”

bounties to allow me to crowdsource the smartest solutions.” But getting to level four autonomy, where a driver, as Tesla’s Elon Musk predicted, could safely fall asleep at the wheel? Doubtful, the executive said. “It’s a moon shot hoping for a breakthrough that hasn’t yet happened.”

Hotz is undeterred. Not only is he sure he will win; he plans to do so without more venture capital. Comma is likely to get its next round of finance in cryptocurrency via an “initial coin offering”.

“Venture capitalists don’t truly care about value creation,” said Hotz. “They care about convincing the next round of suckers to invest at a higher price. I probably shoot myself in the foot here when we have to go for venture funding.” @dannyfortson

NEW PODCAST

EVERNOTE FOUNDER PHIL LIBIN: ‘I SOLD MY FIRST COMPANY FOR $500’

THESUNDAYTIMES.CO.UK/ DANNYINTHEVALLEY

6

BUSINESS

Shire holds attention of distracted Millennials The pharma giant is clinging on to the huge ADHD market as it looks elsewhere for new drugs to assure its future, reports Sabah Meddings

The Sunday Times July 16, 2017

W

CHRISTOPHER POLK

hen a new shipment of drugs arrives on campus at Notre Dame, students know to expect a text message.

But it is not cocaine or marijuana that undergraduates at the US university crave. It is Adderall, a treatment for attention deficit hyperactivity disorder (ADHD) known to help concentration through lengthy periods of study.

“Some of my friends were prescribed it,” said one recent graduate from the prestigious Catholic institution in Indiana, whose alumni include the former US secretary of state Condoleezza Rice and the American football star Joe Montana. “There would be a text going round saying there was a boatload of Adderall when they had a new prescription.”

A generation of American schoolchildren grew up with the drug — a cocktail of amphetamines that has been a significant source of profits for the British drug giant Shire. Although the original Adderall patent expired in 2009, leaving it open to cheaper competitors, Shire has developed longer-lasting versions of the drug to maintain a commercial edge.

Over the past five years, the company has racked up $9.2bn (£7bn) sales from its ADHD drugs, 28% of its total sales in that period. Sometimes, according to regulators, those sales have been aided by some aggressive marketing practices.

Today an increasing part of its business is helping American Millennials who grew up with an Adderall prescription to cope with the pressures of working life.

“The drugs are graduating from colAdam Levine, singer with Maroon 5, and his wife, model Behati Prinsloo.

Levine, who has ADHD, appeared in a Shire video campaign

£7bn

Shire’s ADHD drug sales in the past five years

28%

Proportion of Shire’s total sales from those drugs

16

Number of hours Shire’s new adult ADHD drug lasts

Flemming Ornskov took the top job at Shire in 2013

lege into the workplace just like the students,” said Alan Schwarz, author of ADHD Nation, a book aimed at exposing big pharma’s role in overselling ADHD. A group of symptoms that include inattentiveness, impulsiveness and hyperactivity, ADHD affects millions of children and adults. Critics say too many with scant symptoms are diagnosed.

Mydayis, Shire’s newest Adderall-type drug, is aimed specifically at adults. It won approval from the US Food and Drug Administration last month and the company predicts revenues will reach $500m a year by 2020. With a single pill lasting for 16 hours, it is intended to help its users through a busy working day.

“There is a significant unmet need in the US for long-acting products because people say ‘my work day is longer’,” said Flemming Ornskov, Shire’s chief executive. For Ornskov, the new drug is a personal triumph. The Danish-born boss pulled Mydayis out of the store cupboard when he joined Shire in 2013. As the number of adults being prescribed ADHD medication (up about 9% last year) grows faster than the number for children, so the prize becomes more appealing.

Ornskov, 59, said adults now made up more than half the market. Vyvanse, another of Shire’s ADHD treatments, is thought to be its biggest seller, with sales of $2.25bn a year. It has been approved as a treatment for binge eating disorder.

Over the past few years, the company has been quietly marketing the concept of adult ADHD medication. Three years ago it sponsored an online video featuring Adam Levine, the frontman of platinum-selling American pop-rock band Maroon 5, who urged that sufferers “embrace” their condition.

“ADHD was a struggle for me,” said Levine, 38, a household name in America thanks to his role as a judge on TV talent show The Voice. “When you are an adult, you can sit down and say, ‘This is what I suffer from, how do I deal with it?’.”

Around the same time as the campaign went live, Shire’s US arm agreed to pay $56.5m — without accepting liability — to resolve civil charges that it violated the US False Claims Act, including allegations it told patients extended-Adderall would “normalise” recipients.

In researching his highly critical book, Schwarz alleged Shire helped to fund 50,000 copies of a comic aimed at demystifying the disorder for children. It featured a superhero who told children medicines might make it easier to “pay attention” and “control” behaviour.

For many in the City, the new ADHD treatments simply patch over holes in the company’s revenues. “Mydayis is lifecycle management rather than the next big thing,” said Tara Raveendran, healthcare analyst at Shore Capital. Ornskov is indeed steadily shifting the company’s focus elsewhere. Last year’s $32bn takeover of the rare disease specialist Baxalta should prove transformational, catapulting Shire into a mid-sized pharma giant with 24,000 workers in 70 countries.

Traditionally Shire has grown by snapping up smaller rivals — now Ornskov sees more potential in the development of its own drugs. He is moving hundreds of scientists and researchers to one site in Cambridge, Massachusetts. Research areas include gene therapy and cancer treatments, but it is in haematology where the battle lines have been drawn.

Last week Shire filed an injunction against rival Roche’s haemophilia treatment, claiming its competitor had been inaccurate and misleading in discussing serious side effects of the drug in phase 3 trials.

Roche’s ACE910 needs an injection just once a week and could threaten Shire’s drug Feiba, now 40 years old.

But it could be years before the pipeline of home-grown drugs creates blockbusters. In the meantime, ADHD medication will be a core earner.

When he took the reins in 2013, Ornskov saw the opportunity beyond children with the condition. Vyvanse had 17% growth last year. “I shifted focus to adult psychiatrists, which changed the whole trajectory of Shire.”

7

The Sunday Times July 16, 2017

BUSINESS

Are we like Uber?

No, we pay properly

TOM STOCKILL

police after receiving a death threat from “some nutcase up in Liverpool”.

Since then, the company has hired a bodyguard, who doubles as a personal trainer in the company gym — another perk Mullins provides for his contractors.

“Lucky we got them death threats. You got to turn every minus into a plus,” he jokes.

Death threats aside, don’t critics have a point when they label him a typical member of the remain-backing London business elite? Can a man with two Bentleys and a villa in Marbella really understand the frustrations of Brexit voters around the country?

Mullins pauses to consider this, before continuing calmly: “My first reaction is they’re talking bollocks, complete bollocks. I’m very working class, very much for the people. No one that really understands me would say my interest in the EU is all about myself. It’s about the economy, the future of our children.

People who say [it’s because I’m] rich, whatever, they’re talking bollocks.

Really, if I was summing it up, they’re full of shit.”

To be fair to Mullins, he doesn’t rely directly on cheap labour from the EU — most of his plumbers are British.

“We pay well so we can have our pick of the bunch, and for our clients [who include Dame Helen Mirren and Sir Richard Branson] communication skills are very important,” he says.

‘Plumber to the stars’ Charlie Mullins wants to have a little word with No 10 about his workforce — and Brexit INTERVIEW TOMMY STUBBINGTON

C

harlie Mullins leans back on a long leather sofa and smiles.

“You’ve got to give people an incentive,” says the boss of Pimlico Plumbers. “The best incentive is loads of money.”

The self-described “plumber to the stars” could easily be talking about his own life. Born in a tenement in Camden Town, north London, where he shared a single bedroom with his parents and three brothers, Mullins has built a £35m-a-year plumbing empire.

His large office at the company’s south London headquarters is crammed with the trappings of success: opposite a huge flatscreen television, an entire wall is devoted to photographs of Mullins, 64, hobnobbing with the great and the good — from Prince Charles to the nightclub impresario Peter Stringfellow.

Yet it is not Mullins’s own wealth that has become a political football, but the £100,000-a-year average income of his 235 plumbers. Technically, they are mostly self-employed, though such definitions are up for grabs after last week’s government-commissioned report into modern working practices by Matthew Taylor, chief executive of the Royal Society for the Arts and a former adviser to Tony Blair.

“Our guys are paid incredible money, you know what I mean?” he says, his London twang undiluted by years of mingling with Tory politicians. “They can afford nice houses, fancy cars. They’re a million miles from your Ubers or your Deliveroos. It’s chalk and cheese.”

Mullins has good reason to distance his workers from the taxi drivers and delivery riders of the gig economy, the real focus of concern for the Taylor review, along with the millions of employees on zero-hours contracts.

Taylor called for a new “dependent contractor” status for workers inhabiting the grey area between employment and self-employment. The report was widely seen as a swipe against companies such as the ride-hailing service Uber and the takeaway food delivery company Deliveroo, which have been accused of dodging obligations to their workers by hiding behind the excuse that they are self-employed.

Mullins is anxious his plumbers — recognisable by their blue uniforms — are not tarred with the same brush. He sees the word “dependent” as crucial, arguing that high pay gives them a level of independence that the servants of a taxi app can only dream of.

But isn’t he at all concerned that Taylor doesn’t actually mention plumbers or tradespeople — or suggest that they inhabit a different sphere? “Look, they can work for us and work for someone else at the same time. There’s nothing dependent about that,” he says.

The distinction is material for Mullins.

In February the Court of Appeal ruled that Gary Smith, who worked for the company for six years until 2011, was entitled to basic rights such as sick pay even though he was self-employed. Smith had claimed he was dismissed after having a heart attack and sued the company for sick pay. Mullins is appealing against the decision a second time, with a hearing due next year.

The current arrangement works well for Mullins. If his workers are selfemployed, he saves on paying employer’s national insurance contributions.

The diminutive tycoon — sporting his blue company tie — insists that if he is eventually forced to fork out for sick pay and other benefits for all his plumbers, he will just cut their pay to compensate.

The result would be less money for the taxman, he argues — and a less motivated workforce. The firm already has a few people on its books as full employees, but they earn roughly half the wages of the self-employed contractors.

“The guy that’s on forty or fifty grand is a bit more laid back. He’s not pushing so much because he knows he’s going to be hammered with the tax,” Mullins says.

It’s not just Mullins’s feathered mullet hairdo that channels the 1980s. He extols the virtues of hard graft under the watchful eye of a small ceramic bust of Margaret Thatcher, whom he idolises.

Money was a powerful motivator for the young Mullins. As a nine-year-old, he was impressed by the motorbike and expensive clothes of a local plumber and began bunking off school to help him for half-a-crown a day plus dinner.

“I come from a poor background and I was so impressed,” Mullins remembers.

“If he’d been a bank robber, I probably would’ve ended up robbing banks.”

He stopped his unofficial part-time job when the family moved to a council flat in Elephant & Castle two years later, but the experience convinced him to drop out of school at 15 and start a plumbing apprenticeship.

He founded Pimlico Plumbers in 1979.

Since then, the business has grown steadily, to the point where its distinctive blue and white vans with plumbing-themed number plates (DRA1N was the first — Mullins reckons the company’s plates are now collectively worth well over £1m) are a common sight on London streets.

His rags-to-riches tale has proved irresistible to Conservative politicians looking to burnish their business credentials — a fact borne out by the legion of Tories on Mullins’s office wall.

Since last summer’s EU referendum, however, they haven’t been crossing the river to visit quite so often. An ardent remainer, Mullins likens Brexit to “jumping out of a plane without a parachute and hoping you land somewhere decent”.

Last year he bankrolled the successful legal challenge by the fund manager Gina Miller to give parliament a vote on Brexit.

“I met Gina and liked what she was about,” he says. “You’ve only got to have half a brain to realise that parliament voted us into the EU so parliament should take us out.” Wading into this controversy put Mullins in line for a torrent of social media abuse. He even called the

How the walls came down at Carillion The FTSE 250 builder was accused of defying gravity — until its shares tumbled almost 40% in a day. Now it’s a takeover target, says John Collingridge

I’m very working class, very much for the people

Overflowing: Charlie Mullins — wearing his trademark Pimlico Plumbers tie — swapped childhood poverty for a life of luxury

THE LIFE OF CHARLIE MULLINS

A clock counting down to the opening of the £335m Royal Liverpool Hospital was quietly removed from the site in March. The hospital will now open at least a year late after the construction company Carillion admitted a string of difficulties with the project — including cracked beams and asbestos.

It is just one of a slew of contracts that have harmed Carillion. Last Monday the FTSE 250 company revealed that problem jobs in the UK, the Middle East and Canada would cost it £845m in writedowns.

Though some in the City had long expected the profit warning, Carillion’s share price crashed almost 40% on the day and ended the week 71% down at 56.2p, valuing the company at £242m.

It also lost chief executive Richard Howson. Keith Cochrane, formerly head of Weir, is the stand-in boss.

Bankers from Lazard have

VITAL STATISTICS Born: 1952 Status: married to second wife Julie; four grown-up children from first marriage School: Tower Bridge School, south London First job: plumber Pay: £1m a year Homes: Riverside apartment in Westminster, villa in Marbella Cars: Bentley Mulsanne, Bentley Continental Favourite book: Bog-Standard Business

by Charlie Mullins Film: Ghost, starring Patrick Swayze and Demi Moore Music: Rod Stewart — “People say, ‘You look like Rod Stewart’. I don’t think that’s a bad thing” Gadget: iPhone

been drafted in to review “strategic options”, which range from a sale or break-up to a debt-for-equity swap.

Short sellers, which bet on falls in a company’s share price, profited heavily from the collapse. For two years they have made Carillion the most shorted stock on the London market — and have not yet closed their positions as they scent further falls.

Like many of its rivals, Carillion has relied on contracts that pay out over several years — and incur huge penalties when they go wrong. Balfour Beatty, Mitie, Capita and Connaught have also come unstuck.

Wolverhampton-based Carillion is, belatedly, baling out of public-private projects.

“The company has defied gravity for five to six years,” said Stephen Rawlinson of the analyst Applied Value.

“It should have had a profit warning five years ago after it bought Eaga.”

Charity: Solving Kids’ Cancer Last holiday: a Caribbean cruise WORKING DAY The Pimlico Plumbers boss wakes up in Westminster at about 7am and is picked up

by his chauffeur, who ferries him to the office by 8am.

“I walk round the building doing day-to-day things. I do a bit of PR.” Mullins uses the office gym four or five times a week — “You can see that, can’t you?”. He returns home at 7pm.

Moore and Swayze in Ghost

DOWNTIME Mullins enjoys going out with his wife, Julie, whom he married last year in Las Vegas, and their friends.

His favourite restaurant is Langan’s Brasserie in Mayfair. He also loves Raffles club in Chelsea and Ronnie Scott’s jazz club in Soho. He is a former amateur fighter and boxing training helps him keep fit, but he hasn’t been in the ring for 40 years.

CARILLION’S WEEK

£845m Writedown announced by the company on Monday

71%

Drop in its share price since it revealed the writedown

Carillion was formed in 1999 when it split from the Tarmac group. Howson took the reins in 2012 after 16 years with the company and its predecessor. A month before he started the top job, Carillion spent £298m on the energy services business Eaga. The deal proved disastrous when subsidies for solar panels were slashed shortly after it was bought.

Before long the company was back on the acquisition trail with an unsuccessful bid for much bigger rival Balfour Beatty in 2014. At the time, some questioned whether the bid was a smokescreen for Carillion’s problems.

Analysts have increasingly raised doubts about the company’s accounting and growing debt pile. The annual results for 2016 showed net debt at £219m.

The same document, however, put average debt during the year at more than double that figure — £587m.

He insists, however, that the London building industry he serves would “come to a standstill” without skilled labourers from eastern Europe. “It doesn’t affect me financially but it will affect my customers,” he says.

A confidant of David Cameron, Mullins is, unsurprisingly, more ambivalent about the current Tory regime. Theresa May’s decision to call the recent election was a “big mistake”, he says, before suggesting that she will manage “two years, max” in the job.

He is convinced he met the next prime minister at the Conservative Party summer ball this month; he spent most of the evening at the Hurlingham Club chatting to the Brexit secretary David Davis, much to the surprise of onlookers given Mullins’s anti-Brexit leanings.

“He comes from very much a workingclass background. We got on like a house on fire,” Mullins says. “He’s a pretty casual sort of guy, he doesn’t panic. He knows he’s got a massive job. I believe we’re drinking from the same teapot.”

If his new best friend came knocking, Mullins isn’t ruling out an Alan Sugarstyle move into politics.

“They should make me apprentice ambassador — liven up the apprentice thing,” he says. “I wouldn’t say no to it.”

Mullins is most exasperated by the failure of successive governments to throw their weight behind apprenticeships, which he says would bring wider benefits to society. “How do you solve crime on the street? Youth unemployment? You get them jobs,” he says.

“I told Boris Johnson that 10 years ago.

Remember when we had all them riots? If you give automatic apprenticeships to everyone when they leave school . . . that won’t happen.”

He’s baffled as to why politicians cannot see what he considers to be an obvious solution to so many of society’s problems.

“Let’s face it, half of them can’t cross the road on their own,” he says of the political class. “The other half can’t do their shoelaces up.”

Despite his wealth — Mullins is worth an estimated £70m — political connections and an OBE in 2015 for services to plumbing, the entrepreneur has his doubts that No 10 will be straight on the phone looking for advice from Planet Mullins.

“I think the difference is we’re living in the real world and they’re not,” he says.

“At the end of the day, what does the plumber know?”

Last week’s trading update showed average debt climbed to £695m in the first six months of this year. However, the company insists there is no danger of it breaching the terms of its loans,.

Analysts have highlighted an unusual arrangement with suppliers — reverse factoring — which involves Carillion using bank finance to pay its bills early. At the end of last year this “early payment facility” with lenders including RBS, Lloyds and Santander totalled £498m.

Then there is the £587m deficit in its pension scheme, which has obligations of £3.4bn. The company is negotiating new terms with the trustees, likely to raise its annual contribution from about £47m a year.

Rawlinson reckons this would make a rights issue futile, as the trustees would demand any equity raised to plug the pension gap. Yet the trustees know they cannot

risk starving Carillion of cash.

The survival of a company that employs almost 50,000 people and has worked on celebrated schemes such as Tate Modern and Heathrow Terminal 5 is now at stake.

There is a growing belief that the banks, including HSBC and RBS, will take control and the retirement scheme will move into the Pension Protection Fund.

A sale might be the cleanest solution for Carillion, but would any of its rivals take the risk? Some of its domestic peers, including Balfour Beatty, are still working through their own problems, while it would be a huge stretch for the likes of Kier and Costain.

That leaves overseas predators, such as Chinese, American or Australian bidders. “It would be a good way to break into the British market,” said one industry expert. “But you would have to be pretty brave.”

9

The Sunday Times July 16, 2017

BUSINESS

Inside the wacky world of Spotty Rowland

PHOTOS: PETER MACDIARMID

Friends in high places, drunken escapades in hotel fountains: a court case has shone a light on a reclusive financier and his circle, reports Oliver Shah

E

ight people boarded Yacht 101 for a small party off the coast of the French Riviera on July 20, 2009. There was the reclusive Tory donor David Rowland, his eldest son Jonathan, their righthand man Michael Wright and a partner from the accountant PwC. With their wives, they celebrated the Rowland family’s acquisition of the Luxembourg branch of Kaupthing, the collapsed Icelandic bank.

That evening is now the source of a bitter legal dispute that has shed unprecedented light on David’s connections and his offshore empire. Wright, 45, a former corporate lawyer who worked for the Rowlands from 2008 to 2013, has accused the financier and his son of breaking a promise made on the yacht to give him an option over 5% of the bank.

They have rejected his claim and portrayed him as an opportunist.

Over the past fortnight, the High Court has heard details of David’s links to the rich and powerful, including Prince Andrew and Sheikh Mohammed bin Al Nahyan of Abu Dhabi, and his tendency to strike multimillion-pound deals on “gut feeling”. The case has laid bare the difficult relationship between the tycoon and his son, who suffered a serious stroke in 2013, and produced claims of attempted blackmail by Wright. He is said to have come into “wrongful possession” of an archive of Jonathan’s emails.

The Rowlands and their former lieutenant even dispute the atmosphere of the party on the yacht in 2009. Wright

remembered a “social gathering” where “conversation naturally revolved around work”. David said it “turned out not to be an enjoyable trip at all” and that the boat, which Kaupthing had repossessed from the Icelandic raider Jon Asgeir Johannesson, was “like a glitzy nightclub”.

David, 72, the son of a scrap metal merchant, was nicknamed Spotty after becoming a millionaire by the youthful age of 24. With a family fortune now put at £692m by The Sunday Times Rich List, he is one of the Conservatives’ most loyal backers. He was lined up to be the party’s treasurer until a series of articles about his past persuaded him to avoid the role.

Jonathan, 42, is the second of David’s eight children from two marriages. By his own admission, he was lazy in his teens.

He left school at 16, but made £42m from a tech incubator called JellyWorks in the first dotcom boom. Jonathan tried to repeat the success in 2011 with Jellybook, established to buy social media start-ups, but it had to be wound down after his stroke.

Wright’s case relates to the most prominent deal of the father and son’s careers. In July 2009, Luton Investments, a Rowland family company, bought Kaupthing’s Luxembourg branch. Its customers included Michael Wright, left, and Jonathan Rowland

high rollers such as Kevin Stanford, co-founder of the retailer Karen Millen, and the property trader Robert Tchenguiz. The Rowlands invested €50m. The Luxembourg government put in €54m.

Kaupthing Luxembourg’s worst loans were transferred to a “bad bank”, Pillar, managed by the Rowlands. The remainder, including the four best loans, was renamed Banque Havilland after David’s mansion on Guernsey. In 2010 and 2011, Banque Havilland was raided three times by police investigating allegations of fraud in the pre-Rowland era.

Wright claimed that he set up the deal by introducing the Kaupthing chairman Sigurour Einarsson, who was his neighbour in Chelsea, to Jonathan. Wright said Einarsson was looking for a “sympathetic” buyer for Kaupthing Luxembourg because the chairman owed the bank “in excess of €31m” and wanted the debt reduced. Court documents suggested it was written down to €8m, secured against the Chelsea house and his ski chalet in the French Alps.

Wright had started working for the Rowlands a year earlier, partly as a result of Jonathan’s desire to impress his father. David said in his witness statement he was “not born into money” and did not want his children to be “given a free ride”.

David Rowland outside the High Court. He denies the claim brought by Wright

The patriarch said he made his first fortune in 1970 by selling a property business and his later interests included gold mining in Ontario and super-tanker servicing in the Middle East. He also claimed to have been a founder investor in the FTSE 100 software business Autonomy.

Long before those successes was a conviction for petty larceny at the age of 15.

In 1988 his backing of the takeover of the football club Hibernian led an MP to denounce him as a “shady financier”. His involvement with a US company, Gulf Resources, led to a lawsuit in 1997 that accused him of trying to “loot and waste” the company’s assets. He vigorously denied the claims, which were settled with no payment by Rowland.

The tycoon said he had been “disappointed” by Jonathan’s high-profile divorce from his first wife, Zoe, in 2005, and by legal action that emerged from his son’s backing of a takeover of an estate agency in 2003. Jonathan, who was educated at Bedales in Hampshire, said in his witness statement that by late 2007 he “felt isolated” and wanted to prove himself to his father. He also wanted an adviser “who would be specifically in my corner”. That man was Wright.

The lawyer described working in the “nerve centre” of the family’s operations — the Mayfair offices of their Blackfish Capital fund. He told the court they called Sheikh Mohammed “the boss”.

However, David said Wright “didn’t get in the outer circle, let alone the inner circle” of the business. He had been irritated by an early episode in which Wright “got very drunk, and fell into a fountain” in an Abu Dhabi hotel. David said he fired Wright in 2013 after realising that he had approached a mutual acquaintance for a personal loan.

Wright claimed he had shaken hands with David and Jonathan on an option to buy 5% of Banque Havilland for €2.5m as a reward for bringing in the deal. They denied such an arrangement and said the £2m he had received in salary and as a home loan was adequate. David said he had stipulated that Banque Havilland should not be sold by the family for at least 200 years because “I was trying to put together a business for my children to run when I am dead”.

Court papers revealed that Wright contacted David directly to offer him a look at an archive of Jonathan’s emails. He intimated that they contained communications with the Duke of York, a client of Banque Havilland. Ali Malek, the Rowlands’ barrister, accused Wright of trying to “do a shakedown”, which he denied.

At times during the trial, which finished on Thursday with judgment reserved, David seemed exasperated. His bald pate pink from frustration or the sun, he told the court that it had taken “weeks out of my life. It’s very difficult when you’re 72, possibly one of your last summers.”

10

The Sunday Times July 16, 2017

SMALL BUSINESS PHIL YEOMANS

Our private jets soared after we were grounded HOW WE MADE IT JAMES AND KELLY SHOTTON FOUNDERS OF SKYTIME

Richard Hollingbery’s organic dairy received £44,000 in R&D tax credits over two years

You don’t need to be a boffin to get a tax break The taxman can help any company involved in research and development, reports Laura Onita

I

t had never occurred to Richard Hollingbery that creating a new cheese could shrink his tax bill. All he had to do was apply for research and development (R&D) tax relief for his organic farming business, Godminster. “I hadn’t heard about it at all,” said the 49-year-old — until an acquaintance mentioned the credit last year.

Hollingbery has been producing dairy products at his farm in Somerset since 1999 for clients such as Waitrose and Marks & Spencer. He is constantly devising new cheeses, as well as sidelines such as vodka. “I thought, ‘Hang on, we are making a new product; it seems silly not to apply.’ ” R&D tax credits for small and mediumsized enterprises (SMEs) were introduced in 2000 to boost innovation. Businesses that spend money on developing new products — such as Hollingbery’s brie — or improving existing ones can get a reduction in corporation tax or a cash payment if they are loss-making.

Up to 33p for every £1 spent on “advances in science and technology” can be clawed back. It takes HM Revenue & Customs four to six weeks to process a claim.

We’re making a new product.

It seems silly not to apply

Godminster is one of 40,000 small companies that have made claims since the tax credit was launched. In more recent years, variants of the scheme have been devised for larger businesses.

“I’m trying to grow a small business,” said Hollingbery, who employs 27 people. “If you’re getting a bit of money back that’s always a good thing — it encourages us to do more research.”

He sought advice from a consultancy.

“The Revenue requires an awful lot of detail and it’s incredibly time consuming,” he said. Thanks to the tax specialists at Forrest Brown, he has received £44,000 over two years.

In the 2014-15 tax year, £2.5bn of R&D tax relief was claimed, up from £675m the previous year. SMEs accounted for £1bn, up from £325m. The increase in uptake is encouraging and 18,630 SMEs made claims in 2014-15.

However, a lack of awareness and daunting jargon deter many companies from applying. “The government needs to explore how it might better promote the scheme, as well as simplifying the application process so it is less onerous,” said Mike Cherry, national chairman of the Federation of Small Businesses.

Only 5% of small businesses had used R&D tax credits, according to a recent survey, compared with 50% of large companies. Almost a fifth of business owners were not aware of the incentive.

Two-thirds wanted less red tape and better guidance when making a claim.

The bureaucratic hindrances are part of the reason why consultancies such as Forrest Brown have sprung up. Simon Brown, a chartered tax adviser, set it up in Bristol in 2013 and has so far helped 2,500 ventures get cash back in return for a fee worth 20% of a successful claim.

His clients have won £50m of R&D tax credits this year alone, he said. He employs more than 50 people.

However, while some bosses are happy to part with a chunk of cash just to see the claim through, others are reluctant to seek outside help.

“It’s a money-spinner for tax consultants,” said Chris Walker, chief executive of Diamond Hard Surfaces, a material technology company in Towcester, Northamptonshire. “I don’t think it’s justifiable that companies lose a large portion of the money for the amount of administration that’s involved.”

Walker has claimed about £200,000

since 2008 with help from his in-house accountant. But he acknowledges that it can be tricky to navigate the detail. Work that may seem like ordinary client service can qualify as R&D, allowing offsets for some staff costs, software, prototypes and testing.

“If we need [to devise] a new component for a client, a certain amount of work will be done to prepare that part,” said Walker, 54. “That’s development.”

Alan Ramsay, 51, finance director at Dartington Crystal, is well versed in the scheme. When he joined the Devonbased glassware business in 2014, he decided to take advantage of it because the business was innovating. Like Hollingbery, he worked with a consultancy to claim more than £100,000 retrospectively.

The cash allowed him to make 166 handblown, hand-finished crystal decanters in the shape of the America’s Cup yachting trophy — known as the Auld Mug — for the rum maker Goslings this year.

“Some of the making was new to us and we faced a number of challenges,” Ramsay said. “Having R&D money to facilitate that is good for our business.”

Kelly Shotton was eight months pregnant when she and her husband James were both made redundant four years ago. It was the week before Christmas.

“We struggled to see a way out of it,” said James. “But we had a mortgage to pay, so we couldn’t just curl up in bed.”

The couple had been working for European Skytime, a supplier of private planes to wealthy individuals, before it collapsed. After two weeks fretting, the Shottons decided to target their former employer’s customers — and use a similar name, Skytime.

“We always talked about having our own business, but we’d never taken the plunge,” said James. “We were forced into it.” They used £20,000 of savings to launch a website and employ three people.

Two months later their venture was profitable. Last year it made pre-tax profits of £314,000 on sales of £6.5m and revenues are expected to grow 40% this year.

Based at Gloucestershire airport near Cheltenham, Skytime charters flights for companies and customers with deep pockets, but not “footballers or famous people” — they’re more usually successful business folk who want to be flown to the racing at Cheltenham or Ascot in a helicopter, according to James. Flights range from £2,000 to £800,000. Skytime, which now has six staff, takes a fee for every flight it books — about 2,000 a year.

Although customers can make an inquiry online, they can’t book a flight instantly.

“Customer service needs to be delivered by a person, not an algorithm,” said Kelly.

The couple, both 40, met at a New Year’s Eve party when they were in their mid-twenties. Kelly, the youngest of four, was brought up in a village near Oxford by her mother, a cook, and her father, who owned an engineering company. She went to Cressex Community School in High Wycombe, Buckinghamshire, and did a higher national diploma in fashion media at the London College of Fashion. After an unhappy stint as a make-up artist, she got an office job at an aviation company in High Wycombe, joining European Skytime as a marketing and client manager in 2000.

Five years later James joined the company as commercial director, though he “knew nothing about planes at all”. He had worked for Procter & Gamble and Gloucestershire recruiter Omega Resource. The younger of two brothers, he was raised in Hexham, Northumberland, where he went to Queen Elizabeth High School, before taking a higher national diploma in business at Newcastle University.

Working together for European Skytime gave them the confidence to set up a family business. They own it 100% and plan to expand without external investment.

The couple live near the Herefordshire market town of Ledbury with their sons Oscar, 7, and Bailey, 4. Kelly warns entrepreneurs to be wary of gratuitous advice: “Whilst it’s lovely to hear, do not rush into things. Not everybody has the same passion about your business as you do.” James added: “Do not underestimate the amount of work that it takes to grow it.”

Laura Onita

James and Kelly Shotton’s jet charter firm has sales of £6.5m

11

The Sunday Times July 16, 2017

BUSINESS Oliver Shah Saudi prince’s big match at High Court Sports investing is not for the faint-hearted, as one Saudi prince has apparently found out.

Mohammed bin Abdulrahman Al Saud has gone to the High Court over a company set up to acquire interests in young footballers emerging from academies.

Al Saud claims a young entrepreneur, Edward Blackmore, persuaded him to put €400,000 (£320,462 at the time) into Back Talent between 2013 and 2014.

Other shareholders include the golf stars Rory

JUST SAYING . . .

I don’t think anybody is likely to follow us down this route

McIlroy and Lee Westwood and the veteran agent Andrew “Chubby” Chandler.

Al Saud says he put in a further £450,000 for a 50% stake in a Saudi joint venture that was “never incorporated”. The prince alleges that he challenged 38-year-old Blackmore, who refunded him with a cheque — which bounced.

Al Saud claims he then demanded the return of his original investment, which he believed had grown to £1.7m. He says this also failed to materialise.

The prince is now suing Blackmore, who was linked to an abortive takeover of the French football club Nice last year. Blackmore does not respond to Prufrock’s emails.

Scottish bus king bills £337 for calls

The Brexit secretary David Davis suggests that no other country will want to leave the EU

LETTERS

to get mobile reception in the recesses of his 22-bedroom mansion in Perth? Or is his phone buried at the bottom of one of his carrier bags?

Tycoon’s golden gift to a banker The passing of 90-year-old Michael Sandberg, the chairman who set HSBC on the road from colonial lender to global bank, leaves the Honkers and Shankers with a bit of a poser.

When Sandberg retired in 1986, he received a lavish present from Li Ka-shing, the now 88-year-old tycoon whose British investments include mobile network 3.

It was Sandberg who elevated Li to the top of Hong Kong business by selling him

FUNNY BUSINESS

The Stagecoach chairman Sir Brian Souter is famous for carrying his personal effects around in a plastic bag, so it’s no surprise the bus baron watches every penny in the boardroom.

The transport group’s annual report reveals that Souter claimed £337 for home telephone calls in the past year, despite his estimated £920m fortune and £219,000 annual fee.

Does Souter, 63, struggle

INSIDE THE CITY JOHN COLLINGRIDGE

W

hen the private equity whizz-kids at CVC, TPG and Merrill Lynch floated Debenhams 11 years ago, they left it an unwanted present.

Before flipping it back onto the market, they cashed in the department store chain’s prized freeholds, signing it up to leases spanning decades.

Today that legacy hangs heavily around the chain’s neck: its 175 stores in Britain and Ireland have an average lease length of 20 years.

That’s a lifetime in retail.

The high street is already a shadow of its pre-recession self, under siege from online retailers and evolving shopping habits. A new chill wind blows through it as consumers brace for a Brexit

SIGNALS AND NOISE . . .

Send your letters, including full name and address, to: The Sunday Times, 1 London Bridge Street, London SE1 9GF. Or email: letters@sunday-times.co.uk Letters may be edited

Once property was strong and stable, now it’s weak and wobbly. A crash is predicted, transactions are down and sales are falling, but gazumping has soared to a six-year high.

Hugh Graham asks what on earth is going on with the housing market.

HOME, PAGE 12

TWITTER POLL Yes

No

38% 62% Should the #TaylorReview into modern employment practices have banned #zerohours contracts? @ST_Business

The north is primed and ready to grow The Northern Powerhouse project may have faltered in terms of the government’s legislative agenda, as Tommy Stubbington pointed out, but the economic building blocks that could bring about the north’s revival are still very much in place (“Is this the real face of the Northern Powerhouse?”, last week).

All net job growth in the UK is created by businesses scaling up — and this source of growth and prosperity is still relatively untapped. The ScaleUp Institute estimates that if just 1% of businesses expanded it could add as much as £1bn to the economy.

In its action so far on the Northern Powerhouse, such as the Northern Powerhouse Investment Fund, Transport for the North and its industrial strategy green paper, the government has shown a willingness to tackle the funding, infrastructure, skills and other issues that prevent small and medium-sized businesses from growing.

However the government chooses to brand its support for business growth, the north’s companies are

ready to scale up and are increasing in number.

Nigel Mills, chairman, The Entrepreneurs’ Forum, Gateshead

Debenhams 80p 60 40 2017

Source: Thomson Reuters

compares with sales density of about £295 at Next shops and £500 at Marks & Spencer (where food sales help). Add its tired array of own-brand clothing by designers of yesteryear such as Jeff Banks and John Rocha, and it is hardly inspiring.

The market scents blood.

Short-sellers have piled into the stock, with a disclosed 12.5% of its shares on loan.

So far their bet has paid off, with the shares falling 25% this year to 42.8p, valuing the chain at £525m.

Debenhams’ top team — new chief executive Sergio Bucher and chairman Sir Ian Cheshire — have a plan.

As shopping gets more “experiential”, they reckon filling space with nail bars and the likes of the pizza chain Franco Manca will help make Debenhams the “nationwide destination for shopping events”. Mike Ashley clearly sees something in it, with his Sports Direct chain buying up 17% of the retailer. If anyone can squeeze more profit from a square foot, it’s the tracksuit tycoon. Still, I’m not sure it’s enough to turn around this high street bastion. Avoid. @jcollingridge

FTSE 100

7,378.39 19,408.36 FTSE 250

H:20,081.7 L:16,565.5

13.22 0.07%

DOW JONES 21,637.74

DOLLAR USD > GBP

FTSE 100

$1.31

7,500

U 0.02 12-month high: $1.35 low: $1.15

7,000

NASDAQ 6,312.47 159.39 2.59%

189.77 0.95%

2016

2017

Source: Thomson Reuters

RISERS Premier Oil: 61p, 29.1% on rise in production Fenner: 349.25p, 10% on medical gains CoCompare: 115p, 9.8% on earnings jump Kaz Minerals: 584.5p, 8.1% copper rise Renishaw: 3934p, 8% on bullish forecast

H:6,341.7 L:5,018.5

4.46 0.14%

CAC 40 5,235.31 90.15 1.75%

DAX 12,631.72

H:20,318.1 L:15,921.0

243.04 1.96%

FALLERS Carillion: 56.15p, 70.8% on profit warning Exillion: 110p, 13.1% on fall in output Oxford BioMedica: 8.45p, 11.8% on profit taking Imagination Technologies: 134.75p, 11.8% on Apple feud Gem Diamonds: 86.5p, 10.8% on volatility

FTSE EUROFIRST 1,520.41 H:1,559.7 L:1,292.2

25.99 1.74%

SENSEX 32,020.75

SHANGHAI 3,222.42

H:2,463.5 L:2,083.8

NIKKEI 20,118.86

6,500

1,048.38 H:26,416.7 4.14% L:21,242.9

S&P 500 2,459.27 34.09 1.41%

EURO EUR > GBP

HANG SENG 26,389.23

H:21,681.5 L:17,883.6

223.40 1.04%

Simon Duke’s Agenda column gave many reasons why the Brexit negotiations may be difficult and create problems for Theresa May’s red line (“Let’s face it, there’ll be no bonfire of red tape”, last week). His final comments were confusing, however.

He stated that hardline Brexiteers were fast learning a harsh truth and Britain may end up beholden to Brussels, forced to accept rules it no longer has a hand in formulating. He then stated that a chaotic departure would damage both sides.

If this is the case, surely the European negotiators would do their best to prevent damage to the EU. Perhaps the EU has still to discover the harsh truth about the need to be flexible in the discussions rather than take the view that Britain must be punished for leaving.

The long-term view of the euro currency is never discussed in Brexit outcomes.

Is this a big concern in Simon Duke’s thoughts on “no deal being better than a bad deal”?

Reg Rundle, High Wycombe, Buckinghamshire

THE ECONOMY

H:7,599.0 L:6,615.8

27.47 0.37%

Pain in the neck?

I blame Brexit You reported on page 1 last week that Sir Mike Rake blames Brexit for the sale of Worldpay. You might have added that Sir Mike would hold Brexit responsible for an ingrowing toenail.

Robert Turnbull, Guildford, Surrey

If we want to reduce future debts, let’s scrap HS2 The trade secretary Liam Fox said on the BBC’s Question Time on June 29, “The idea that the country can spend money that it doesn’t have and simply leave the debt to the next generation is simply not acceptable” — and in the context of HS2, he is absolutely right.

A new report from the think tank the Institute for Government is very critical of HS2, highlighting the lack of a transport strategy and bad decision-making. It is therefore even more important that the recent call

by Lord Framlingham and others for a Treasury-led review, taking independent evidence from as wide a range of qualified people as possible, is heeded.

Independence and transparency is crucial since, when questioned, the standard response from the government is to repeat: “The case for HS2 is crystal clear.”

No, it is not.

How long will it be before we are told HS2 is over budget or delayed by technical difficulties? By then we will be stuck with the wretched thing. It will never float but it seems we can’t sink it.

Miles Palmer, Alsager, Cheshire

THE WEEK IN THE MARKETS

slump. Like-for-like sales were down 2.4% in Debenhams’ latest quarter.

Its long leases give the chain few options as conditions deteriorate. It is considering closing 10 stores over the next five years, but that will barely make a dent in its fixed costs.

Then there is its poor use of space. Department stores are typically lumbered with barren space that makes little money. This is partly thanks to their layout: the further shoppers have to stray from the entrance, the less inclined they are to buy something.

However, Tony Shiret, veteran retail analyst at Whitman Howard, reckons Debenhams fares worse than most. He estimates its sales density is about £175 per sq ft per year, on which it makes about £7 of profit. That

2016

Teatime drama at Poundstretcher Are tempers becoming as overextended as the coins at Poundstretcher?

A rumour is swirling around the Leicester head office of Crown Crest, which owns the discount chain, that a member of staff has been sacked for buying the wrong biscuits for Aziz Tayub. The 61-year-old boss was supposedly taking tea with one of his sons.

Martin Collinson, company secretary, does not quite deny the story, but says: “In any event, we don’t have a need for anyone to buy biscuits — we have a warehouse on site full of every variety imaginable!”

DATABANK

Nail bars and pizzas may not save Debs

a stake in the colonial trading house Hutchison Whampoa — and lending him the money to buy it.

At a party for Sandberg, Li unveiled a solid gold model of Norman Foster’s Hongkong Bank building so large that it took guests’ breath away. But the trophy never made it back to Hampshire, where Lord Sandberg (he was ennobled in 1997) retired.

Prufrock’s man in a rickshaw maintains the gilded gift is still sitting in the vaults of the HSBC building it was modelled on.

Perhaps the bank might auction it for a noble cause.

H:32,109.8 L:25,717.9

660.12 2.10%

H:3,301.2 L:2,932.0

ALL ORDS 5,808.67 64.77 1.13%

H:5,442.1 L:4,293.3

H:5,983.2 L:5,138.9

S&P TSX 15,174.81 147.65 0.98%

H:12,951.5 L:9,923.6

H:15,943.1 L:14,319.1

€1.14

U 0.01 12 month high: €1.21 low: €1.09

YEN YEN > USD

¥112.49

V 1.39 12-month high: ¥118.66 low: ¥99.53

Customer prices index

CPI including housing

U 2.03 12-month high: $58.37 low: $41.51

GOLD DOLLARS/TROY OZ

$1,227.67 U 17.38 12-month high: $1,367.38 low: $1,126.52

prev. month

current rate

prev. month

current rate

prev. month

2.7%

Retail prices index

3.7%

2.7%

2.6% 3.5%

Average earnings a week

on prev. month on last year

Unemployment

current rate

prev. month

Manufacturing output

current rate

prev. month

Retail sales

on the year

on last month

prev. month

latest 12 months

0.2%

£503

1.49m

4.5%

0.4%

4.0%

1.8%

4.6%

0.2% 2.3%

UK trade balance (£bn)

latest month

-3.1

-2.1

-37.0

Gross domestic product

latest quarter

prev. quarter

annual change

0.2%

0.7%

Budget deficit (PSNB) in £bn

latest month

prev. month

year to date

6.7

9.4

16.1

OIL DOLLARS/BARREL

$48.91

current rate

2.9%

2.1%

10-YEAR BOND YIELDS % variation

12 months high

low

0.50

UK

1.32

▲0.01

1.56

US

2.33

▼0.06

2.64

1.45

JAPAN

0.08

▼0.01

0.16

-0.29

GERMANY

0.53

▼0.04

0.58

-0.18

TOP 200 COMPANIES Rank by Market cap

Price Change on week

Price

46 186 107 77 173 159 199 33 48 162 53 27 7 119 28 105 30 196 17 75 132 148 117 176 102 23 120 123 4 2 69 191 22 152 55 59 156 104 44 194 42 193 172 134 50 25 76 26 89 160 70

52-week Yield high low

3i Group 918.0 +19.5 944.5 582.0 3i Infrastructure 193.9 +2.0 200.0 180.5 Aberdeen Asset Management 312.8 +7.7 348.6 248.3 Admiral 2020.0 –11.0 2260.0 1732.0 Aggreko 852.0 –23.0 1286.0 765.0 Alliance Trust 708.0 +2.5 717.0 539.0 Amec Foster Wheeler 440.1 –14.4 619.5 406.7 Anglo American 1117.0 +66.0 1409.5 774.4 Antofagasta 858.5 +43.0 883.5 480.7 Ashmore 343.1 +8.5 375.5 274.1 Ashtead 1581.0 +37.0 1751.0 1119.0 Associated British Foods 2855.0 –115.0 3172.0 2361.0 Astra Zeneca 4998.5 –131.5 5508.0 4007.0 Auto Trader 363.1 –8.6 435.9 346.2 Aviva 529.5 –5.5 544.0 378.0 Babcock International 852.5 –21.5 1105.0 849.5 BAE Systems 612.0 –5.5 677.0 519.5 Balfour Beatty 262.9 –3.3 298.4 216.6 Barclays 208.5 +0.3 239.2 146.0 Barratt Developments 585.5 –4.0 615.0 405.3 BBA Aviation 302.8 –2.2 323.7 225.4 Beazley 504.0 –5.5 512.5 361.9 Bellway 3005.0 –60.0 3065.0 1945.0 Berendsen 1245.0 +17.0 1355.0 733.0 Berkeley 3322.0 +26.0 3392.0 2330.0 BHP Billiton 1305.0 +62.5 1480.5 921.1 B&M European 344.7 –1.2 370.4 232.5 Booker 191.9 +2.6 212.3 168.0 BP 444.8 +0.8 519.3 413.9 British American Tobacco 5277.0 +58.0 5643.0 4258.5 British Land 607.0 –1.0 674.0 578.0 Britvic 701.5 –8.0 725.5 523.5 BT 300.6 +13.4 414.4 282.0 BTG 672.0 –7.5 730.0 534.5 Bunzl 2262.0 +6.0 2465.0 1988.0 Burberry 1645.0 +35.0 1818.0 1247.0 Capital & Counties Properties 303.2 +10.7 324.8 263.1 Capita 660.5 –2.5 1061.0 452.4 Carnival 5055.0 –100.0 5245.0 3349.0 Centamin 159.1 +6.1 190.5 114.9 Centrica 206.3 –1.4 242.0 192.2 Cineworld 680.5 –29.0 740.0 534.5 Close Brothers 1459.0 –59.0 1715.0 1134.0 Cobham 130.1 –1.9 175.4 110.7 Coca Cola HBC 2236.0 +15.0 2397.0 1519.0 Compass 1587.0 +10.0 1757.6 1370.7 Convatec 299.1 –2.4 344.0 225.0 CRH 2756.0 –16.0 2920.0 2195.0 Croda 3896.0 +46.0 4020.0 3072.0 CYBG 278.7 –2.8 302.2 235.2 DCC 7000.0 +105.0 7540.0 5860.0

2.9 4.0 6.2 3.5 3.2 1.8 4.9 0.3 4.8 1.4 1.3 4.4 0.7 4.1 3.1 3.5 0.3 1.4 3.1 3.3 2.0 2.6 2.6 6.0 4.4 1.4 2.4 6.9 2.9 4.8 3.5 4.8 1.7 2.3 0.5 4.9 2.2 8.8 5.8 2.6 3.9 6.0 1.5 2.1 2.0 1.9 1.5

P/E

Mkt Cap (£m)

- 8982.0 - 1990.5 24.8 4122.4 25.7 5752.6 16.8 2182.2 - 2495.3 - 1716.3 11.2 15689.5 87.7 8463.7 19.0 2427.0 17.2 7892.8 20.5 22602.3 23.4 63268.4 23.3 3532.0 35.1 21446.2 13.8 4310.2 21.3 19486.0 - 1813.3 15.9 35512.3 10.4 5895.9 - 3124.2 15.7 2649.6 10.9 3690.1 23.4 2149.2 10.1 4575.7 - 27561.6 26.5 3447.0 22.4 3420.9 - 87534.6 22.8 98387.0 41.3 6251.0 16.4 1849.5 15.7 29946.4 78.1 2592.2 28.4 7597.1 25.4 7211.4 - 2570.5 119.0 4407.4 17.5 10786.8 12.3 1833.0 6.6 11331.7 22.4 1843.0 11.2 2213.4 - 3110.7 27.6 8146.6 22.7 26099.6 - 5836.9 21.6 23048.0 26.5 5264.4 - 2460.4 31.1 6235.1

Rank by Market cap

Price Change on week

Price

135 Derwent London 9 Diageo 94 Direct Line Insurance 138 Dixons Carphone 81 EasyJet 147 Electrocomponents 127 Evraz 35 Experian 130 Foreign & Colonial 43 Fresnillo 92 G4S 79 GKN 5 Glaxo Smith Kline 15 Glencore 200 Grafton Group Units 180 Greene King 187 Great Portland Estates 169 GVC Holdings 106 Halma 99 Hammerson 72 Hargreaves Lansdown 182 Hastings 163 Hays 142 HICL Infrastructure 129 Hikma Pharmaceuticals 112 Hiscox 171 Homeserve 149 Howden Joinery 1 HSBC 181 IG Group 121 IMI 18 Imperial Brands 131 Inchcape 170 Indivior 85 Informa 122 Inmarsat 51 Intercontinental Hotels 158 Intermediate Capital 62 Intertek 38 International Airlines Group 175 International Public Partnerships 116 Intu Properties 113 Investec 61 ITV 140 IWG 151 Jardine Lloyd Thompson 126 JD Sports 83 Johnson Matthey 164 Jupiter Fund Management 98 Just Eat 150 Kaz Minerals 66 Kingfisher

2741.0 2285.0 365.0 260.0 1411.0 605.0 233.8 1588.0 595.5 1481.0 328.8 330.6 1608.5 316.1 717.5 657.5 607.5 752.5 1094.0 584.5 1279.0 309.2 167.6 161.8 1378.0 1349.0 714.5 419.9 733.9 554.0 1260.0 3499.5 768.5 310.8 663.5 751.0 4273.0 902.0 4254.0 626.5 159.7 274.1 586.5 175.0 323.4 1190.0 344.6 2846.0 524.0 690.0 584.5 293.8

+99.0 +24.0 +1.6 –24.9 –8.0 –0.5 +15.6 +22.0 +6.0 +61.0 +1.3 +3.1 –6.0 +18.9 +24.5 –6.5 +11.5 –23.5 +1.0 +13.5 +2.0 –3.8 +2.9 +0.1 –49.0 +40.0 –2.5 +3.5 +5.7 –4.0 +50.0 +45.0 +11.0 +0.8 +5.5 +5.5 +10.0 –3.5 +59.0 –1.5 +1.3 +6.6 +13.5 –1.6 –1.6 –6.0 –7.6 +62.0 +14.0 +22.0 +44.0 –11.1

52-week Yield high low

3007.0 2390.0 399.9 389.0 1419.0 608.5 273.0 1705.0 604.5 1983.0 337.4 376.5 1722.5 344.7 794.5 840.0 739.0 819.5 1178.0 609.5 1447.0 323.5 174.6 185.1 2676.0 1359.0 787.5 475.7 745.4 959.5 1309.0 4139.0 859.5 369.6 755.5 870.0 4468.0 920.0 4441.0 633.5 162.6 317.0 627.5 219.6 365.2 1224.0 456.0 3540.0 524.0 696.0 592.0 386.2

2359.0 1956.5 333.8 260.0 873.5 258.4 125.8 1383.0 464.9 1091.0 178.7 280.2 1459.0 174.1 469.0 649.5 587.5 594.0 886.5 530.5 1148.0 187.9 113.9 159.5 1354.0 982.0 523.0 356.0 479.3 450.7 911.0 3345.0 590.5 267.0 629.5 603.0 2991.3 564.0 3038.0 362.7 151.5 260.0 444.2 165.0 237.8 947.5 235.0 2774.0 385.4 460.2 134.1 293.6

1.6 2.5 3.9 3.9 1.9 2.0 1.7 0.7 2.9 2.6 5.0 1.8 4.4 1.5 1.1 3.9 1.7 1.8 1.7 4.8 1.7 1.8 1.8 2.5 5.7 5.7 3.0 4.4 2.8 0.7 2.8 5.7 2.0 2.8 1.3 2.9 4.1 5.0 3.7 3.7 1.4 2.6 0.4 2.5 2.6 3.4

P/E

Mkt Cap (£m)

52.1 25.6 18.1 12.3 13.1 29.1 23.1 31.6 25.3 29.0 47.2 18.2 16.2 3.8 38.0 14.6 34.3 26.0 20.0 22.0 11.6 30.3 14.3 129.6 12.0 32.7 33.0 18.0 16.5 28.1 17.5 26.1 12.1 27.1 8.7 9.3 24.5 12.0 15.8 25.5 31.5 18.8 14.2 18.4 121.1 48.8 11.5

3054.9 57523.6 5018.8 2998.5 5604.6 2671.4 3348.1 14952.4 3226.9 10913.4 5101.6 5677.8 79103.7 45501.8 1700.2 2038.0 1984.9 2262.5 4148.3 4636.4 6066.5 2032.1 2418.4 2925.5 3314.7 3854.6 2220.0 2642.9 147147.9 2033.1 3426.9 33550.1 3205.1 2240.8 5467.3 3424.8 8118.3 2530.5 6865.5 13142.9 2155.6 3714.2 3853.9 7044.5 2957.1 2606.6 3353.8 5508.0 2398.4 4687.2 2611.1 6500.2

Rank by Market cap

Price Change on week

Price

174 52 34 12 39 157 88 82 115 101 97 143 96 56 189 78 192 20 161 87 103 198 45 154 91 124 155 58 141 137 114 65 128 14 67 11 185 19 144 93 111 13 139 31 178 21 3 6 109 125 64

Ladbrokes Coral Land Securities Legal & General Lloyds Banking Group London Stock Exchange Man Marks & Spencer Mediclinic International Meggitt Melrose Merlin Entertainments Metro Bank Micro Focus International Mondi Moneysupermarket Morrison Supermarkets National Express National Grid Nex Group Next NMC Health Ocado Old Mutual Paysafe Pearson Pennon Pershing Square Persimmon Phoenix Group Holdings Playtech Polymetal International Paddy Power Betfair Provident Prudential Randgold Resources Reckitt Benckiser Redrow Relx Renishaw Rentokil Initial Rightmove Rio Tinto RIT Capital Partners Rolls-Royce Rotork Royal Bank Of Scotland Royal Dutch Shell A Royal Dutch Shell B Royal Mail RPC RSA Insurance

113.1 1018.0 259.4 66.9 3682.0 152.5 325.0 750.5 491.2 237.0 469.4 3584.0 2089.0 2013.0 359.2 246.0 361.2 930.1 646.5 3655.0 2178.0 280.1 194.0 532.5 635.5 812.5 1074.0 2362.0 750.0 947.5 889.5 7750.0 2255.0 1762.5 6870.0 7744.0 545.0 1633.0 3934.0 274.3 4199.0 3448.0 1909.0 914.5 241.8 252.4 2050.0 2062.0 401.0 809.5 641.5

–1.2 +4.0 –7.7 +0.4 –51.0 –0.4 –19.5 +19.5 +1.2 –0.1 –3.8 –99.0 –114.0 +13.0 +2.2 +4.9 –2.6 –4.6 +14.0 –111.0 +64.0 –4.0 +2.3 +14.5 –50.0 +3.5 –36.0 –4.0 –24.0 –9.0 +32.0 –325.0 –117.0 –17.5 +205.0 +76.0 –12.0 +1.0 +290.0 +2.6 nc +86.0 –20.0 –22.0 +5.0 –6.3 +6.0 +1.5 –9.3 +36.5 +6.5

52-week Yield high low

162.0 1133.0 267.1 73.1 3760.0 161.2 395.5 1119.0 509.5 786.0 537.0 3834.0 2660.0 2116.0 360.2 249.3 380.0 1215.8 848.8 5680.0 2371.0 325.0 229.1 533.5 974.0 944.0 1250.0 2462.0 893.5 1016.0 1190.0 9950.0 3320.0 1816.0 9025.0 8108.0 591.5 1717.0 3934.0 286.4 4346.0 3679.5 1952.0 942.0 267.4 269.0 2282.5 2377.5 525.0 1079.0 648.5

111.3 939.0 188.6 52.0 2621.0 108.3 309.9 679.0 406.7 138.0 425.9 1863.0 1806.0 1425.0 261.9 178.1 324.5 922.5 464.5 3617.0 1067.0 238.5 184.9 305.7 573.0 768.0 1074.0 1571.0 697.5 767.0 731.5 7750.0 2255.0 1288.0 5470.0 6514.0 318.2 1282.0 2371.0 205.7 3624.0 2257.0 1684.0 639.5 194.6 170.4 1798.5 1882.5 400.7 720.5 478.3

2.7 3.7 5.4 3.5 1.0 5.0 5.8 2.9 0.3 1.4 2.6 2.4 2.3 2.1 3.2 5.1 6.0 4.3 0.3 4.6 8.2 4.2 4.7 6.1 2.7 2.0 1.7 5.5 2.2 0.8 1.9 1.8 2.0 1.2 1.1 1.1 3.5 1.3 2.1 7.3 7.3 5.6 2.3 0.9

P/E

Mkt Cap (£m)

71.2 12.3 27.9 58.9 45.1 25.4 21.5 22.7 35.8 17.9 31.0 19.0 16.3 17.8 25.2 8.3 38.1 156.5 19.2 23.5 20.5 12.0 18.9 11.8 12.5 23.5 32.5 30.2 8.6 29.3 41.5 30.2 30.8 16.7 31.4 43.7 43.9 14.7 22.0 93.0

2165.5 8049.9 15448.2 48036.1 12776.5 2532.2 5280.4 5531.2 3810.5 4600.6 4768.2 2881.3 4798.0 7392.6 1946.2 5745.8 1848.4 31990.8 2455.0 5374.9 4449.3 1764.3 9564.1 2580.7 5227.5 3383.7 2579.0 7289.7 2946.4 3006.8 3825.9 6527.5 3342.3 45575.2 6457.5 54436.0 2015.4 33292.5 2863.5 5039.8 3884.2 47504.3 2974.8 16828.1 2104.0 29975.2 91772.3 77231.9 4010.0 3358.9 6560.0

Rank by Market cap

Price Change on week

Price

166 57 86 47 80 95 90 145 16 32 100 41 68 190 84 184 136 108 36 165 49 24 71 197 133 74 188 37 153 118 63 168 146 179 10 73 183 8 110 60 177 195 40 167 54 29

Saga Sage Sainsbury, J Schroders Scottish Mortgage Segro Severn Trent Shaftesbury Shire Sky Smith (DS) Smith & Nephew Smiths Smith WH Smurfit Kappa Sophos Spectris Spirax-Sarco SSE SSP Standard Life Standard Chartered St James’s Place Capital TalkTalk Tate & Lyle Taylor Wimpey Templeton Emerging Markets Tesco TP Icap Travis Perkins Tui Tullow Oil UBM UDG Healthcare Unilever United Utilities Vedanta Resources Vodafone Weir Whitbread William Hill Witan Investment Trust Wolseley Wood Worldpay WPP

207.8 683.0 245.7 3257.0 400.7 494.9 2227.0 986.5 4169.5 970.0 485.1 1320.0 1625.0 1664.0 2322.0 439.6 2527.0 5570.0 1474.0 491.0 414.5 808.5 1171.0 188.2 672.0 180.5 697.0 173.5 467.0 1438.0 1148.0 163.8 684.0 839.0 4263.5 878.0 731.5 218.8 1824.0 3872.0 247.1 1018.0 4668.0 605.5 384.0 1553.0

–1.2 +11.5 –0.7 +100.0 +5.4 +13.5 +19.0 +14.0 –155.0 –20.0 –4.4 +15.0 nc –43.0 –58.0 –10.7 –19.0 +190.0 nc +7.9 +8.9 +5.7 –23.0 +3.2 +11.0 +2.1 +20.5 +3.0 –9.9 –40.0 +19.0 +11.2 +5.5 +11.0 +85.5 +8.0 +29.0 +0.1 +36.0 +29.0 –7.4 +13.0 –12.0 –14.5 +15.6 –16.0

52-week Yield high low

225.9 756.0 281.7 3277.0 418.0 507.0 2553.0 994.5 5323.0 1007.0 490.2 1382.0 1684.0 1825.0 2419.0 471.0 2834.0 5760.0 1628.0 499.0 414.5 817.9 1238.0 235.6 807.0 203.3 699.5 218.7 493.3 1702.0 1218.0 333.6 764.5 866.5 4372.5 1056.0 1102.0 239.7 2083.0 4307.0 333.7 1035.0 5145.0 894.5 408.0 1921.0

182.7 599.0 222.3 2531.0 281.2 403.3 2073.0 865.5 4159.0 750.5 380.1 1067.0 1220.0 1447.0 1683.0 215.3 1847.0 3852.0 1391.0 293.4 284.5 589.6 847.0 152.5 659.0 138.9 534.0 154.0 317.4 1331.0 911.0 145.6 622.5 570.0 3092.0 854.5 489.4 190.5 1408.0 3408.0 247.1 780.0 4062.0 601.0 256.6 1553.0

3.7 2.1 4.8 2.5 0.7 3.2 3.6 1.5 0.6 3.4 2.6 2.0 2.6 2.6 2.6 0.4 2.0 1.2 6.1 0.9 4.4 2.5 8.4 4.2 0.9 1.2 6.0 2.8 4.2 3.5 1.2 2.5 4.4 3.8 5.5 2.4 2.3 5.1 1.9 2.1 4.2 3.1

P/E

Mkt Cap (£m)

14.8 30.2 14.9 19.6 9.2 16.0 22.7 110.9 26.9 21.9 18.6 15.1 17.0 15.1 28.9 37.8 9.3 39.4 19.2 55.0 31.4 12.4 10.1 214.2 27.1 21.7 19.3 34.0 35.1 27.4 13.8 91.2 17.8 13.1 26.3 102.5 14.4

2323.2 7382.4 5380.0 8679.0 5635.0 4941.1 5257.0 2752.4 37848.2 16674.5 4616.4 11549.6 6426.4 1853.5 5499.0 2026.0 3012.6 4096.2 14863.9 2333.3 8204.9 26607.8 6189.8 1797.3 3122.7 5905.9 1949.5 14205.7 2587.8 3610.5 6739.2 2265.5 2694.4 2083.5 54577.8 5987.0 2026.9 58253.2 3980.9 7101.0 2119.6 1819.7 11813.7 2320.1 7680.0 19792.5

Price/earnings ratios are based on historic data, with yield and p/e values calculated from the most recent reported dividends and earnings per share, using trailing 12-month figures. 52-week highs and lows are end of day. nc = no change. Data provided by Morningstar. Any inquiries please contact: dataquestions.uk@morningstar.com

12

The Sunday Times July 16, 2017

BUSINESS

There’s usually a good reason why an investment is a bargain

TECH BUBBLE SIMON DUKE

Ich bin ein cash burner

Luke Johnson Animal Spirits

I

often fall for the allure of a false bargain and end up regretting it.

Bitter experience teaches me that when it comes to investing, assets are usually cheap for a reason.

Sometimes the worst deals seem cheap because you don’t pay a lot for the shares — but the problem rests with the liabilities you inherit.

Perhaps the worst example in recent history was the catastrophic purchase

by Bank of America of Countrywide Financial in 2008. The bank paid just $2.8bn (then £1.4bn) in stock for the sub-prime mortgage lender, but the deal has probably cost $50bn in loan write-offs, legal expenses, settlements and fines — let alone the reputational damage and opportunity costs.

The timing of the purchase was awful — turning Bank of America into the largest mortgage lender just as the US housing market collapsed. The buyer did insufficient due diligence and market analysis and suffered the consequences.

The chief executive who led that deal, and the terrible subsequent acquisition of Merrill Lynch, paid with his job — Ken Lewis retired a year later under a cloud.

One way to avoid false bargains is to know the country where you invest. A few years ago I bought a stake in an Italian company that appeared to be trading at a fraction of its balance sheet value. Unfortunately the figures were nonsense and the business was infested with litigation and fraud. I did not understand what I was buying and took at face value what I was told about the underlying subsidiaries.

My ignorance proved my undoing and I lost most of my money. I discovered too late why Italy ranks 60th in the Transparency International Corruption Perceptions Index, lower than countries such as Romania and Rwanda.

When assessing shares you should

I did not understand what I was buying and took at face value what I was told

approach apparent giveaways with deep suspicion: what appears too good to be true probably is. And remember that the market is frequently better informed than you think.

Langbar International was an example. It listed on AIM in 2003 as Crown Corporation and supposedly raised $570m. But most of the money was never subscribed. The stock traded at a seeming huge discount to its liquid net worth — yet it was an elaborate swindle, with fake contracts and bogus certificates of deposit. Institutional investors lost as much as £100m.

The central conspirator, a man called Avi Arad, died before he could face trial.

The chief executive, a former Baker Tilly accountant called Stuart Pearson, was something of a fall guy. He was sentenced to a year in jail after being found criminally reckless for issuing misleading statements to investors, although he was acquitted of dishonesty — he even lost money in the debacle.

Another form of self-deception is to buy an asset based on how much it has fallen in price, rather than judging it on its intrinsic merits. You can still lose all your money, even if a share has declined from £10 to 10p. By all means bet on a turnaround if you really know your stuff — but beware structural changes that have profoundly altered the economics of markets and technology.

Even though the shares of certain prominent retail companies appear cheap, the onslaught of online shopping is making many of them unviable in the longer run. They may well prove to be classic value traps. I suffered heavy losses wagering I could revive a storebased bookseller when I paid perhaps 5% of what had been invested in the business by the parent company. But Amazon, ebooks and high fixed rental costs defeated my ill-judged plans.

I didn’t realise, but the business model was broken.

Small businesses frequently change hands for only three or four times annual profits, which sounds reasonable. But this reflects the difficulties one encounters with many micro enterprises — low barriers to entry, weak management and systems, underinvestment, high customer dependence and so forth. Companies that reach a certain scale have a degree of substance that small ones lack.

Occasionally I’ve backed an inexpensive, mediocre business and it has gone well, but mostly they destroy value. In these cases, almost without exception the management was poor — over-optimistic, unreliable, bad at controls and so forth. In hindsight, the warning signs were there, but the bargain hunter in me ignored the clues.

Be it construction, recruitment, restaurants, food production, retailing or vehicle repair — what looked cheap turned out to be very expensive, demoralising and a big waste of time.

I suppose I like the idea of bargains because I see myself as something of a contrarian investor, not following the crowd but seeking out neglected opportunities. Ignoring general opinion and forging an independent view takes effort, a little courage and a willingness to be proved wrong — since such a strategy is inevitably higher risk.

A rock-bottom entry price should compensate for the dangers of unloved businesses, but if the issues of quality are so fundamental and the distress so serious, fixing the flaws can prove impossible.

Luke Johnson is chairman of Risk Capital Partners and the Institute of Cancer Research. luke@riskcapitalpartners.co.uk @LukeJohnsonRCP

No longer calling the tune: Alex Ljung, left, and Eric Wahlforss of SoundCloud

When Samsung was pondering where to locate its new $150m (£116m) fund for European start-ups, it wasted little time before scratching London off the list.

The British capital was “not a fun place to live unless you are really rich”, according to an executive at the South Korean giant.

Exorbitant rents, meanwhile, had made it “increasingly hard for people to build companies” in London, added Felix Petersen, managing director of Samsung Next Europe.

In the German capital, by contrast, entrepreneurs had the freedom to “experiment and play around with technology in a more relaxed environment”, he said.

No prizes for guessing where the Berlin-born Petersen will set out Samsung’s stall.

After a slew of recent blow-ups — Powa and Ve Interactive, to name but two — this was another humiliation for the young guns plotting world domination from their Hoxton lairs.

But Berliners indulging in schadenfreude would do well to ponder the travails of their city’s most feted tech company. SoundCloud, a music streaming service that boasts the Hollywood star Ashton Kutcher among its backers, is fighting for its life.

This month it sacked 40% of its workforce in a desperate attempt to slash costs.

In the decade since it was founded by the Swedish musos Alex Ljung and Eric Wahlforss, the company has burnt through more than $200m. Unless it can persuade investors to dig into their pockets again, it could run out of cash by year end.

Launched in 2008, SoundCloud started life as a place where up-and-coming songwriters, bands and DJs could showcase songs and mixes. As a cultural enterprise it has been a phenomenal success, claiming 175m regular users.

The platform is prized as a breeding ground for new artists. In February Chance

the Rapper won best rap album at the Grammys for a mixtape available on SoundCloud, becoming the first artist to win for a streaming-only album.

Financial success has proved far more elusive.

Ljung and Wahlforss have been living beyond their means for years. At its Berlin HQ, SoundCloud enjoys free lunches prepared by the city’s hottest new chefs and its fridges are stocked with soft drinks and beer. When profits froth over like a stein of weissbier, such largesse can be justified. SoundCloud, though, has haemorrhaged cash: in 2015 it lost €51m (£45m) on revenues of €21m.

The founders have singularly failed to find a way to make money from its large audience. At first it relied on advertising, but then launched a $10-a-month service last year. Neither approach has worked.

SoundCloud generates a paltry 2 cents a month from each user, compared with $2.54 for Spotify, according to Richard Windsor of Edison Investment Research.

Despite its unconvincing business model, SoundCloud raised $70m from Twitter in June last year, at a reported $700m valuation. Some months later, the company quietly put itself up for sale, but bidders were turned off by the reputed $1bn price tag.

In March SoundCloud signed up to a $70m loan, putting up all its possessions as security. A 42-page list of its collateral includes hundreds of smartphones, tablets and laptops. In the event of default, creditors can even look forward to seizing a €2,049 lounge chair.

In a blog last week, Ljung said the job cuts would put SoundCloud on the “path to profitability” and help secure its “independence”.

That would be music to the ears of its shareholders — and pampered workforce. But after signing a Faustian pact with its lenders, a cut-price takeover by YouTube or even Facebook seems the more probable outcome.

MONEY

13

The Sunday Times July 16, 2017

MONEY

APPS THAT TRACK YOUR CASH PAGE 14

!

SO LONG, ELON MUSK, I’M DITCHING TESLA IAN COWIE PAGE 15

ve ha o o u tt n Yo en h o s p u c h o l nth m c o mo al i s th

A FINANCIAL WAKE-UP CALL FOR LIVE-IN LOVERS PAGE 15

12 14

PUZZLES CROSSWORDS, SUDOKU & MORE PAGES 18-19

Follow us on Twitter @ST_Money

Overdraft squeeze to punish prudent Lloyds was widely praised last week for simplifying its charges, but over 200,000 customers could pay more for just dipping into the red, says Ali Hussain

B

ritain’s largest current account provider has come under fire for slashing the interest-free buffer used by customers when they occasionally dip into the red.

From November about 20m customers of Lloyds Banking Group, which also includes Halifax and Bank of Scotland (BoS), will have to start paying as soon as their accounts become overdrawn by more than £6.99 — rather than up to £50 as is the case now.

The change could hit about 220,000 of the banking giant’s customers who do dip into the red but manage to keep within the fee-free buffer.

The shake-up is part of a radical simplification of overdraft fees announced by Lloyds last week amid growing pressure on banks and building societies to make their charges easier to understand.

As part of the changes, myriad existing rates will be replaced by a fee of 1p a day for every £7 overdrawn.

This may sound small, but the rate is equivalent to a whopping 68.4% if converted into an equivalent annual rate.

That compares with the 19.89% paid by Lloyds and BoS customers under the existing rules.

Only customers with a student account, or those who pay a monthly fee, will continue to enjoy a larger interestfree buffer. For example, Club Lloyds customers, who pay £3 a month unless they can deposit at least £1,500 into the

account each month, will continue to benefit from a £100 fee-free buffer.

From next month, banks and building societies must publish the maximum monthly amount they can charge customers to use an overdraft.

It follows criticism of high charges by consumer groups and the Competition and Markets Authority (CMA), which investigated the current account market.

In its report, published last year, the CMA said overdrafts “are particularly complex and lack transparency”, and have an “adverse impact on competition”.

Charlotte Nelson of the data firm Moneyfacts said: “It is understandable that banks want to keep up with regulatory pressures. However, this should not be at the expense of their loyal customers who use their overdraft wisely.

“Those who use the fee-free buffer for small amounts will now find they are being charged for something that cost them nothing before.”

Lloyds has won praise, though, for simplifying the confusing range of different charges that can apply for the use of an overdraft. From November there will be no charge for going beyond your authorised overdraft, although the bank may decide on a caseby-case basis whether a payment will go through if you do so consistently.

At present, Halifax customers pay nothing for being overdrawn up to £50. Once they go beyond that, they are charged between £1 and £3 a day for using an authorised overdraft, depending on its size, and £5 a day for an unauthorised overdraft.

Confusingly, different rules apply to Lloyds and BoS Classic Account customers, who are given a £25 buffer but charged a monthly fee of £6 plus interest if they go beyond it. They also face a £10 “returned item” charge for bounced payments.

Although the new, simplified fees will be welcomed by most customers, some such as Summer Bokhari, 42, from

Lloyds has drawn plaudits and criticism for its overhaul of overdraft charges

ACCOUNTS WITH THE BIGGEST FEE-FREE BUFFERS Bank First Direct M&S Halifax Bank of Scotland Lloyds

Account 1st Account Current Account Reward Classic Classic

Buffer £250 £100 £50* £25* £25*

*Falls to £6.99 in November. Source: Moneyfacts

Fraudbuster: Are banks doing enough?

It is far too easy for scam artists to set up accounts, a detective tells Ali Hussain A police officer who investigated a criminal involved in stealing £20,000 from a pensioner has questioned whether banks are doing enough to prevent accounts from being opened solely for the purpose of receiving stolen funds.

Detective Constable Simon Allen of the Metropolitan police’s Operation Falcon unit, which specialises in fighting fraud, investigated the case of Gillian Johnson, 76, who was tricked into sending £100,000 to a Royal Bank of Scotland (RBS) business account. The fraud was highlighted by Money in February 2015.

The RBS account was set up by Rasi Reynolds, 46, of Uxbridge, west London, a month before the fraud took place in November 2014.

Reynolds was convicted of money laundering offences at Inner London Crown Court last month. He was given a 22-week sentence suspended for 20 months, which means he may avoid prison.

Reynolds is the only person to have been prosecuted for Johnson’s loss.

He denies being a beneficiary of the stolen funds.

Allen’s notes from the case, which he shared with Money, reveal the apparent ease with

which criminals can set up bank accounts to carry out fraud.

The officer said that when he questioned Reynolds after he was arrested, he was unable to answer “basic questions” about the business for which he had opened the RBS account.

“What would be the day-today running of the business?” asked Allen. “What skills did he have to set up this business? Was he going to employ people? He couldn’t answer those questions to me, which makes you question what the bank asked him.

“More questions may have prevented the account being opened, or at least raised a red flag. It seemed obvious to me straight away that the account was not opened for legitimate reasons. The account was clearly opened for only the fraud.”

Johnson, who lives near Halesworth, Suffolk, believed she was sending the money to her financial adviser to invest, but criminals had intercepted her adviser’s emails. This let them provide her with instructions to send money to the bogus account.

RBS was able to block £60,000 from being transferred to the accounts of other accomplices after Johnson told her bank, Lloyds, about the fraud.

A further £20,000 was returned after this newspaper highlighted failings by Lloyds, which did not act quickly enough after being told of the fraud. However, neither RBS nor Lloyds is prepared to refund Johnson her remaining £20,000.

Johnson said she was

Gillian Johnson, with dog Peppa, lost £20,000 in a scam disappointed by the sentence handed to Reynolds.

“After 2½ years of frustration and hard work by the police, the only person who has been charged for the crime has got such a lenient sentence, and his accomplices have got away scot free,” she said.

She added that by allowing accounts to be set up so easily, “the banks are helping facilitate these crimes”.

“It seems that they simply don’t care about their genuine customers,” she said.

Online fraud is the most common type of crime experienced by people in England and Wales, according to a report by the National Audit Office (NAO). A total of about £10bn was lost through fraud last year, the NAO said.

Last week’s story in Money about a fraudster stealing

£20,000 from a Barclays customer by transferring it to a bank account at NatWest, which is part of RBS, prompted many readers to ask what checks the receiving bank carried out before allowing the account to be opened (see Have Your Say, page 16).

According to Allen’s notes, Reynolds, a British citizen, set up a business called G3 Property Estate Agents Limited in September 2014.

An RBS business account was opened in the name of the company a month later, using Reynolds’s passport and a bank statement as proof of identity. There is no evidence to suggest these were fake documents.

A month later £30 was credited to the account and the following day four transfers of £5 were made out of it. These were “test”

transactions, Allen said. Two days later, the £100,000 from Johnson was transferred into the account. Within hours it had been moved into three separate accounts at HSBC, Tesco and Nationwide.

These accounts, which were held in other names, were long-established and have since been closed. One is being investigated over a separate fraud, according to Allen.

Reynolds was arrested in November 2015. He admitted opening the RBS account into which Johnson’s money was transferred, but denied accessing the money or having knowledge of the transfers to the other accounts.

RBS said it undertakes “robust due diligence checks” when opening accounts, which for UK residents means an identity document and proof of address.

For business customers the bank also has a process to “ensure an understanding of the nature of the intended business”, which it said was followed in this case. RBS added it was “not unusual for business accounts to receive large credits”.

Johnson is not alone in questioning Reynolds’s sentence.

Allen said: “If we want to deter people from being tempted into doing this [opening bank accounts to assist fraud], the courts need to reflect that in the way they deal with it.”

The NAO highlighted concerns, including those of the Home Office, that “criminals do not always receive sentences proportionate to the crime”.

Bolton, are not happy. Bokhari has a Halifax Reward account and is never overdrawn by more than £50 a month before her salary is paid, meaning she stays within the current fee-free buffer. From November she will have to start paying 6p a day if she is overdrawn by £50.

“It is good that the bank is simplifying its charges, but I don’t see why I should be penalised,” she said. “I am a very sensible user of my account and make sure I do not go beyond my fee-free buffer.”

Those borrowing larger sums will also pay more, according to analysis by the consumer group MoneyComms. For example, using a £2,000 agreed overdraft for 12 days costs a Halifax Reward customer £24 today — but that will rise to £34.29 under the new tariff.

“The amounts concerned aren’t huge but they will no doubt niggle some customers,” said MoneyComms’ Andrew Hagger. “If you’re looking for interest and fee-free overdraft borrowing, it might be time to check out cheaper options.”

Lloyds said more than 90% of its customers would be better off or not adversely affected by the changes and expects to earn less in total from overdrafts.

“Calculating overdraft charges as an equivalent annual rate isn’t particularly helpful,” it said. “Customers are not borrowing a set amount over a fixed period of a year. Our changes need to be considered in terms of typical overdraft usage.

At 1p per day per £7, customers will find it simple to know what their borrowing will cost. Daily charging will also help customers to budget.”

Although Lloyds is the first to introduce such a simple charging structure, it is following other banks in moving from annual percentage charges on those who overdraw their accounts to daily fees.

This is usually much costlier for careful customers who only occasionally go into the red by a small amount.

Until banks start to use more consistent methods of charging — or regulators

Those who use the interest-free buffer will now find they are charged for something that was previously free force them to do so — searching for the best deals will continue to be confusing.

“It can be cumbersome for customers to compare options, meaning many opt either to stay with their current provider or choose a deal that is not quite right, which can be a costly mistake,” said Nelson of Moneyfacts.

“A simple flat percentage rate would make it easier for customers who regularly use their overdraft to clearly see which deal would be best.”

If you are consistently overdrawn by a small amount every month, go for an account with a fee-free buffer such as First Direct’s 1st account.

This charges nothing if you go up to £250 into the red and a relatively low 15.9% a year if you go beyond. The account has a monthly cost of £10 unless you can deposit at least £1,000 each month.

If you are regularly in the black and are never overdrawn, go for an account with a high interest rate such as TSB’s Classic Plus. This pays 3% on credit balances up to £1,500 if you pay in a minimum of £500 a month, and has no fee. You can earn a further £5 each month if you have two direct debits set up, and another £5 if you make 20 debit card payments in a month.

The government has introduced a seven-day “switch guarantee” to speed up the process for those who move current accounts. About 75,000 people a month have switched using the service this year. Most banks now participate in the scheme.

14

The Sunday Times July 16, 2017

MONEY

BRIEFING

PLASTIC STEALS NO 1 SPOT FROM CASH

WHERE THERE’S AN HOUSE-PRICE RISE AT EMAIL, THERE’S A WILL FOUR-YEAR LOW

If you would like to receive the free weekly Money email bulletin, visit thesundaytimes.co.uk/ moneybulletin. You must be a digital subscriber.

Visa is considering offering incentives for British businesses to go cashless.

The payments company is already offering selected firms in America $10,000 (£7,700) to use only cards.

Debit cards have now overtaken cash as the most popular form of payment in this country, according to the British Retail Consortium. Cash accounted for 42% of transactions last year, while debit card payments rose 5% to 43%. Spending on credit cards was down.

The Law Commission is seeking views on how to modernise wills. Proposals include allowing emails or voicemails to be used in place of paper wills.

Contact us Money, The Sunday Times, 1 London Bridge Street London SE1 9GF Email money@sundaytimes.co.uk Advertising If you would like to buy an advertisement in Money, email Paul Douglass at paul.douglass@news.co.uk or call him on 07917 598 422

BRITS SPEND MORE TIME OVERSEAS Visits abroad by UK residents increased by 8.1% in the first three months of the year compared with the same period of 2016, the Office for National Statistics reported.

House prices are rising at their slowest rate for more than four years, according to Halifax. The year-on-year UK increase in the three months to June was 2.4%, compared with 3.6% in the previous quarter. The slowdown was even sharper in London, with prices up just 0.8% over the past 12 months. By contrast, the East Midlands posted the biggest regional rise at 9.7%.

The bank blamed the slowdown on high prices and stamp duty, economic uncertainty and flagging buy-to-let demand.

RETIREES USE HOMES HOW THE FOOTSIE TO BORROW £1.25BN HAS PERFORMED Finally this absurd injustice has been consigned to the history books John Walker, a gay former cavalry officer, after winning a Supreme Court fight to leave his pension fund to his husband

Retired homeowners borrowed £1.25bn against their homes using equity release schemes in the first half of this year — a rate of £6.9m a day — according to a report from the over-55s financial adviser Key Retirement. The total is 34% higher than the £934m taken out in the first half of 2016.

The report said the average pensioner had released £70,625 of equity to fund holidays and home improvements, pay off credit card debts and help relatives financially.

people with their money management.

Tricount, for example, calculates who owes what to whom when they’re on a group holiday. Plum is a bot that learns your spending habits — such as regular income, rent, bills and daily spending — and transfers money from your current account to a savings account when it decides you can afford it.

OnTrees allows you to view all your bank accounts in one place — you can set budgets but not move money in or out of accounts — while UniDays finds the best discounts and deals for students on essentials such as laptops.

Many of my friends rave about Revolut, which allows you to transfer money abroad using the “real exchange rate”, and I am a fan of Salary Calculator, which works out how much I am taking home after outgoings such as my pension, student loan and tax.

Unfortunately, most of these apps have drawbacks. For instance, Monzo isn’t a current account, so there are no overdrafts, while last month the app ran into difficulties and some cards were unable to process payments for hours.

More disconcertingly still, money you pay into your Monzo account is not covered by the Financial Services Compensation Scheme (FSCS), which ensures that anyone who has up to £85,000 in a

GO FIGURE: APPS THAT DO THE MONEY MATHS FOR YOU Plum Analyses your income, expenses and spending to calculate how much you can afford to save — then puts the money away for you. The bot runs every few days, and calculates a small amount to go into a virtual account held at Barclays. Updates on your saving are provided via Facebook Messenger.

OnTrees This app tracks all your financial accounts in one place, including credit cards, savings and current accounts. It shows recent transactions and sorts them into categories, such as rent and travel. It also helps improve budgeting and saving by revealing what you spend most money on.

Revolut Users can transfer money in 23 currencies at what Revolut calls the real exchange rate — without commission or fees.

You can “request” money from friends who use the app as well. There is also a pre-paid card that can be topped up via the app and used like a debit card.

Tricount Flat sharing, splitting a restaurant bill and group holidays can all be made easier with this app, which does the maths for you.

By synchronising your account with friends’ and relatives’, you can make your contributions and, crucially, check who still owes what to whom.

+9.4%

over three years (up 23.2% with dividends)

five years +30.2% over (up 57.7% with dividends)

+9.9%

over ten years (up 60.7% with dividends)

Inflation: In May, CPI was 2.9% and RPI was 3.7%

ILLUSTRATION: DANNY KILN

ve ha o o u tt n Yo en h o s p u c h o l nth m c o mo al i s th

I

was on a date the other night and bought the person I was with a fairly pricey drink. But no sooner had I tapped the Pin into the card reader than a notification pinged up on my smartphone, warning me that I was overspending on entertainment.

We both saw the message. It was embarrassing, as if my mother had popped her head up from behind the bar to tell me off for being frivolous. But deep down I appreciated the prompt; I really was overspending.

Plus my date then guiltily bought the next round.

Most financial institutions prefer not to chide their customers when they are living it up. Not so “Monzo”, a start-up bank that uses an app to organise your outgoings into categories such as “bills”

and “groceries”, so you can clearly see where your money goes each month.

Monzo is a child of the smartphone age. There are no bricks-and-mortar branches and there never will be. You sign up on your phone, wait for a prepaid card to arrive in the post, load it with money and spend as you would usually.

If you lose the card, you don’t have to spend half an hour on the phone cancelling it. You just freeze it using the app.

Use of banking apps has soared by 354% over the past five years, according to analysis by the consultancy EY and the British Bankers’ Association. Monzo is among those catering for the growing desire of people, particularly Millennials, to use their phones to manage their finances. Launched in early 2015, it now has 250,000 users.

The card balance updates in real time — whereas high street banks can take days to process transactions — and there are no charges for spending abroad.

Thanks to Monzo’s ruthless itemisation of my spending, I now understand why my finances are in such shoddy shape. In seconds, with a few keystrokes on my phone, I discovered how much I spent on groceries in June (£82) and how much I’ve blown so far this month on eating out (£126). I used to think I was frugal; now I know better.

Monzo is not the only app helping

a year +10.9% over (up 15.9% with dividends)

!

Beep! Make it none for the road, big spender A new breed of app tracks your finances on the go. One even scolds you for splashing the cash, says Leaf Arbuthnot

The FTSE 100 rose 27 points to end the week at 7,378, as Janet Yellen, head of America’s Federal Reserve, quashed speculation of a sharp increase in interest rates.

bank or building society is reimbursed if the institution goes bust.

Monzo’s chief executive, Tom Blomfield, who has been involved with a number of financial technology start-ups, acknowledges this is an issue.

“We encourage people to use the card for their month-to-month budgeting,” he said, adding with a laugh: “Definitely do not put your life savings in there.”

At present, the money deposited with Monzo is held by Barclays. But Blomfield’s team is developing a current account, protected by the FSCS, that will be launched later in the year. It will allow account users to set up direct debits, standing orders and Apple Pay, none of which is possible at the moment.

The Monzo card I own was intended as a trial product to help the company perfect its current account, said Blomfield, who professes to be shocked by the success of the prepaid card; he had imagined that only about 5,000 people, rather than 250,000, would sign up for one.

Another potentially disquieting factor

We encourage using the card for month-to-month budgeting. Do not put your life savings in there is that Monzo is amassing an enormous amount of data about its customers. Is it being sold to anyone?

“No,” said Bloomfield. “Customers have trusted us not just with their money but also with their personal information, and we see ourselves as trusted guardi-

ans of that data. It’s stored in data centres in the clouds in Europe and we’ve spent a long time with the regulators making sure that it’s stored securely.”

Yet that information could be valuable and Blomfield has plans for it. “If the customer consents, we want to use that data to solve problems,” he acknowledged.

In future, Monzo might recommend alternative gas or electricity providers if it detects a user is being fleeced.

Similarly, the app could encourage users to buy a railway season ticket if it calculates they would save money on their commute to work. It could also lend them the money to buy one.

So how much revenue is Monzo bringing in at the moment? “Right now we are loss making,” Blomfield admitted. “It’s a charity funded by venture capital for the benefit of consumers.”

What — 250,000 users and no revenue whatsoever?

“We made our first £9 last week, actually,” he said. “It was enough to buy one London cocktail.”

Pension ‘gift horse’ may come back to bite you ROBERT KNESCHKE

Be wary of using new freedoms to cash in your savings, says Nina Montagu-Smith When is it a good idea to look a gift horse in the mouth?

When it comes to your life savings, the answer ought to be “every time”.

However, nearly one-third of those who have switched pension funds to income drawdown schemes under pension freedom rules introduced in 2015 have done so without taking any advice, according to an interim report by the City watchdog released last week.

About 1m people have cashed in pension funds since the new rules allowing people to tap into their pensions from the age of 55 took effect.

Nearly three-quarters of them are under 65, and most are taking out lump sums rather than a regular income, the Financial Conduct Authority (FCA) revealed.

In this age of ultra-low interest rates and low longterm annuity yields, it is undoubtedly a benefit to have greater choice over how we use our pension funds. But before you rush in, consider the consequences.

Guard well your tax benefits Pensions are tax efficient. Not only do you get tax relief on your contributions; funds within a pension wrapper are also considered outside your estate for inheritance tax purposes and, if you die

before the age of 75, they can be taken free of income tax by your heirs.

Lee Hollingworth, head of defined benefit consulting at actuarial firm Hymans Robertson, said it was “massively worrying” to see in the FCA report that 52% of those who cash in their pension pot invest the money in another savings or investment vehicle.

“By doing so they are missing out on a more taxefficient savings option,” said Hollingworth. “This is totally irrational and highlights the lack of trust and ownership that people feel towards pension saving.”

If you still work, taking income — by moving to a drawdown scheme or buying an annuity — could also push you into a higher tax band.

At the moment, earnings of between £11,500 and £45,000 a year are taxed at 20%.

Anything over this is taxed at 40%, and over £150,000 at 45%. Drawing out the money later when you have less other income could keep you within a lower band.

Cash is not king With consumer prices index (CPI) inflation at 2.9% and most savings accounts paying far less than that in interest, there is little point in taking out your pension pot and putting it in the bank only to watch as its value is eroded.

“Cash is unlikely to produce good long-term returns,” said Ian Browne, pensions expert at fund manager Old Mutual. “And illiquid assets like property present their own risks.”

Will I be able to keep paying into my pension?

If you take out more than the 25% tax-free lump sum, this will have implications for your future ability to make contributions.

You will become subject to the money purchase annual allowance, which the government confirmed last week would fall from £10,000 to £4,000, applicable from the start of the tax year last April. This is the maximum you can save a year in your pension — compared with the £40,000 that most working people are normally allowed to save. This allowance, once applied, cannot be reversed.

That can become a problem if you are still working and have access to a workplace pension scheme, since your employers’ contributions are included within that £4,000.

The perils of leaving a defined benefits scheme If you are lucky enough to be in a defined benefits scheme, you should be especially careful before cashing in.

These schemes, also called final salary pensions, are called “gold plated” for a reason. Not only do they guarantee a set income each year; they are also inflationproofed and often provide a widow’s pension, life insurance and other benefits.

These can cost providers a fortune, so schemes have been making members what appear to be very generous offers to take out their money, with transfer values climbing to as high as 40 times the promised annual pension — giving an expected

Freedom’s lure is powerful in retirement, but it can come at a cost

1m 2.9% Number of people who have cashed in their pension funds since 2015

Inflation rate, eroding the value of pension cash-ins

£15,000-a-year pension a transfer value of £600,000.

About 130,000 people have cashed in such schemes since April 2015.

However, these transfer values might not be the good value they seem. Take the example of the £15,000-ayear pension, which comes with inflation-proofing and a two-thirds widows’ pension.

It would cost someone aged 65, with a spouse aged 65, an average £639,000 to buy this income with these benefits in the private sector, said Billy Burrows of the annuity specialist Retirement IQ. Buying such an annuity from Canada Life would cost £675,675, though it would be just £571,000 from L&G. You should also be wary of breaching the lifetime allowance for pension funds, which is at present £1m for

most people. Given the way this is calculated, you may hit this limit if you transfer out of a defined benefits scheme.

“Transferring a defined benefit pension to a personal pension is a complex area where big and very costly mistakes can be made,” said Danny Cox of the wealth manager Hargreaves Lansdown.

“Can you get a better pension by transferring to a personal pension than you could with your defined benefit scheme? In most cases the answer is no.”

Shop around If you do want to go into drawdown, don’t just take the path of least resistance and go with your existing provider.

Others may provide more favourable terms, so consider switching.

15

The Sunday Times July 16, 2017

MONEY

Am I a Tesla-crash dummy?

As always, only time will tell INVESTMENT Baling out of the eco-car maker dented my ego, but a profit and diversification will keep my pension on the road measure the past. Elon Musk’s Tesla seemed to be a business of tomorrow, which would create wealth out of thin air as renewable energy from wind and solar sources gradually replaces fossil fuels.

Its initial progress was scintillating.

After investing at $220 per share in May, 2016, I watched with a mixture of amazement and rising anxiety as the price soared to $387 this summer, like a passenger in a car being driven way too fast.

This would be a good point to confess I make no pretence of understanding lithium ion battery technology — a key factor y latest car crash when in electric cars’ progress — but went along trying to make money out for the ride, so to speak. However, I could of motor shares prompts sense trouble ahead when Danny Fortthe thought that perhaps son, The Sunday Times’s man in Silicon someone who cannot Valley, revealed that Tesla’s target of prodrive should steer away ducing 500,000 cars in 2018 would from this sector. Then require 25,000 tons of the silvery white again, I don’t have a metal — or about 15% of global supply. pilot’s licence either, but All those numbers remain subject to my shares in Boeing, the revision, but the rising demand for finite aerospace giant, have soared into the resources is relentless as every leading stratosphere. motor manufacturer races to get ahead Boeing, which I began buying at $126 with renewable energy, though none has in November 2014, hit an all-time high of yet gone as far as Volvo — the Swedish $208 last week and continues to pay divi- manufacturer now owned by Zhejiang dends equal to 2.8% of purchase price. Geely of China — which announced this But it would be misleading to suggest all month that all its new cars would be elecmy stock picks have done that well. So tric or hybrids within two years. this personal account of one man’s This prompted uncomfortable struggle to avoid poverty in old reflection on the fact that there age will continue to report were 2,000 car makers in the rough as well as the America in the early 1900s smooth of stock market but only three of them surinvestment. vived that century. PerRegular readers may haps even more disturBritain’s oldest surviving remember how I lost cheque was issued in 1659 bingly, electric cars more money on Volks- by the banker and estate comprised 38% of the wagen than I had ever market in 1900 but were agent Morris & Clayton done before or have done blown away when petrol for £400 (£50,000 since on a single share, after and diesel motors demontoday) the German auto giant admitted strated they could deliver far deceiving American pollution tests in more bang for every buck.

September 2015. Compared with that Then, amid these historical musings, 40% wipe-out, my latest prang is rela- Goldman slammed on the brakes, cutting tively trivial, as I have walked away with a its target price for Tesla to $180 on foredouble-digit profit. casts of “disappointing” sales and profit Even so, my pride has been dented and margins. The market reaction convinced I still don’t know whether I did the right me to sell at $308, with sterling’s shrinkthing in selling, because this stock has age lifting my net profit to 50%. So, all bounced back a bit since I did and contin- things considered, I mustn’t grumble. ues to divide opinions diametrically. Fans One factor in my decision was an earclaim it is the future, while sceptics say it lier “green motors” punt on ITM Power, is all horrible hype. Yes, you guessed: I the Sheffield-based hydrogen energy baled out of Tesla after Goldman Sachs’s specialist. I invested at 40p in June 2008, devastating analysis helped to knock 20% after Peter Hargreaves told me he off the electric-car maker’s share price. expected to make more money out of I had been fretting for some time about ITM than he had at Hargreaves Lanshow Tesla was priced for perfection while down, the firm he co-founded that went traditional car makers looked cheap. For on to become Britain’s biggest fund example, Ford sold 6.7m vehicles in 2016, platform. nearly 10 times Tesla’s total of 76,230, but Yes, really. After an increasingly the stock market valuation of the latter bumpy ride at ITM, I baled out at 56p in eclipsed the former’s in April, when the March, 2011. More than six years later, the total value of Tesla shares hit $47.7bn — shares trade at 23p, which just goes to $2.6bn more than its century-old rival. show that even “buy and hold” strategies Not that this quirk bothered me too don’t always work. much, because the stock market is in As a Londoner born and bred who still business to discount the future, not needs to breathe the air here, I continue

DAVID BUTOW

PERSONAL ACCOUNT IAN COWIE

M

MONEY MISCELLANY

A report that hit Tesla’s share price prompted Ian Cowie to sell his stake. He has found motoring a fickle investment, while aviation has proved a better bet

The stock market is in business to discount the future, not measure the past

ST DIGITAL

Read a breakdown of Ian Cowie’s ‘forever’ fund thesundaytimes.co.uk/cowieholdings

On the rise: lovers ‘relying on a myth’ Cohabiting couples are being warned the law may not protect them if they split Rebecca Myers More than three-quarters of cohabiting couples, the fastest-growing type of family in Britain, have no agreements in place to protect their assets in the event of a break-up, a survey has found.

There are 3.3m cohabiting couples — defined as those who live together but are not married — in Britain as an increasing number of people live together before, or instead of, marriage.

The study, by the family solicitors Turbervilles and the research company Atomik, found that more than half of people in such relationships believe in the myth of “common-law marriage” — the erroneous idea that they can acquire the same rights as married couples simply by living together for a time.

Younger people — the group most likely to cohabit — are twice as likely as other generations to believe this.

A Cohabitation Rights Bill stalled during the last parliament and, while a new bill also seeks to give

cohabiting couples more rights, there is no guarantee it will become law.

“You could have lived together for 10, 20 years and still never get these rights,” said Kate Ryan, a partner at Turbervilles. “Many people say, ‘But my partner always told me I would be all right and would never be kicked out,’ but things go sour and they change.”

More than a third of those questioned in the survey said they relied on trusting their partner to get back their financial contribution in the event of a break-up.

Ben Lockwood, 25, and Shelby Brown, 22, are one such couple. They had been together five years when they decided to buy their first home together in February.

They put equal amounts of money into both the deposit and the mortgage —“Give or take a few hundred pounds” — on a three-bedroom house in Mirfield, West Yorkshire.

“I trust my partner,” said Lockwood. “I know things change but I think it’s the risk you take.”

He said that although he and Brown were open about money, he could see how others might find it difficult to discuss. “It can be awkward, especially if one party puts in significantly more.”

Ryan said if a couple are joint owners of a property, their shares are protected.

‘I trust my partner’: Shelby Brown and Ben Lockwood But matters can be complex if the home is owned by one person but their partner pays part of the mortgage and has done for many years, or in situations where they are both owners but have contributed substantially different amounts.

Ryan suggested that unmarried couples ask a solicitor to draw up a declaration of trust, which should cost £200-£500. “This is super-important as it will be upheld in the eyes of the law,” she said. “Without an agreement, the most you can hope for is goodwill that you would be reimbursed.”

You might also want to get a cohabitation or “live with” agreement.

“They are not legally binding but some people use them to regulate and set down how they are going to manage their relationship financially,” said Ryan. “It

3.3m The number of couples in Britain who cohabit

would be seen as evidence of intention.”

With older couples, dividing pensions can become an issue. The report showed one in five people aged 55-70 believed they had rights to each other’s pensions despite not being married. This is not automatically the case.

“You need to get the other person put down as a beneficiary on your will and with the [pension] company,” said Ryan. “It’s all a bit macabre, but if you don’t you could find yourself lost without any financial support, or having costly court proceedings, which nobody wants.”

Marriage still provides by far the best legal protection.

“Automatically you get a right to income, a right to share in the other person’s pension, and a right to all resources available — capital, Isas, shares,” said Ryan.

“Ultimately, the law hasn’t caught up with the reality of increased cohabitation yet.”

In the meantime, the onus is on cohabiting couples to safeguard their rights.

“Most people don’t want to, but you have to have that practical, unromantic conversation,” said Ryan.

to wish someone would succeed in replacing the infernal combustion engine. But wishing won’t make it so.

That’s why I have recycled the cash from Tesla into topping up an existing holding in Daimler, a much less highly valued but more diversified motor company best known for its Mercedes brand.

I also used some of the cash to add to Polar Capital Technology Trust, where professional stock pickers aim to build a balanced portfolio today among the winners of tomorrow.

Here and now, blowing a fuse at Tesla reminds me it’s never too soon to take a profit and that diversification via pooled funds is the simplest way to soften the shocks of stock market investment.

Young face an old lesson Will younger generations have to discover for themselves the hard way some financial facts of life our parents took for granted? I only ask because official figures show the average Brit now sets aside for a rainy day just 1.7% of earnings — less than a fifth of the long-term average of 9.2% since records began in 1963.

Why should we care? Because it means fewer people will have a financial safeguard against the setbacks life tends to deliver. Or, as I once told a colleague who opined that pensions were “boring” — any fool can easily opt out of saving but it is more difficult to opt out of growing old.

Even shorter-term, risk-free savings

can prove their worth. How many of the “have it all now” generation realise that saving up to buy a television over two years will typically mean it costs 25% less than doing so over the same period with a credit card? Yes, I know you will miss a lot of telly but you could always try an improving book. Saving to spend is cheaper than borrowing to buy but most banks have no wish to explain this.

Why? Because they make more money out of credit cards than they do out of savings accounts. It’s not the sort of thing they teach you at school but people who understand compound interest tend to earn it, while those who don’t will pay it. ian.cowie@sundaytimes.co.uk or Twitter @iancowie

16

The Sunday Times July 16, 2017

MONEY

The man from the Pru giveth . . .

QUESTION TION NEY OF MONEY SLEY JILL INSLEY

SOMETIMES YOU CAN’T DO IT IF YOU B&Q IT I placed an internet order for 11 sheets of 18mm chipboard with B&Q to put a new floor in my loft. The sheets cost £11.25 each, or £123.75 for the 11, but I benefited from a £23.43 promotional discount. In addition, I had to pay £20 for delivery, making a total of £120.32.

I paid by credit card and was told delivery would be the following Friday.

I spent a day and a half preparing the loft for the chipboards — which, as I am 6ft 4in tall, entailed much bending over and several bumps on the head.

By midday on the Friday there had been no delivery. When I called B&Q, it told me the order had been cancelled the day before as it was out of stock. It said I had been phoned the previous day at about 9.15am but, as there had been no answer, it had left a message.

(I was at home at that time and there was no phone call and no message.)

B&Q offered me a £10 credit voucher, which I declined. It then said it had sufficient stock of 22mm chipboard, which it would supply at the same price as the 18mm with no delivery charge. I did not really want the thicker material but reluctantly

Fighting your financial and consumer battles

I

have a small pension fund worth £13,477 with Prudential and chose to draw the benefits last month.

The company sent me quite a bit of information on my options for what to do with this money: an annuity paying a regular fixed income; income drawdown, giving me flexibility to take money as and when I wanted; total cash withdrawal; or leaving the money untouched for the time being.

I decided against a very small annuity.

Instead, as my current annual income is less than my tax allowance, I would put the pension into income drawdown and take the cash in four equal lump sums over four years, thus avoiding tax.

But when I contacted Prudential it said that as my “pot” was worth less than £25,000, I could only have an annuity or a single lump sum. This would mean I would have to pay tax on a significant proportion of the lump sum. When I asked Prudential why it could not do income drawdown for me, it said its “business model” did not allow this. Its

‘They’ve left me hanging . . . !’ only other advice was that I could move the money to another organisation.

I complained but was told it was my fault because all the information sent to me had been “generic”.

Jill replies Your current pension plan does not offer an income drawdown option. To take

your money in four lump sums in four consecutive years, you would have to transfer your pension into another Prudential scheme that does offer drawdown. However, as Prudential has now told you, the minimum fund value for this type of contract is £25,000.

None of the general literature sent to you makes this point. We both felt that

Prudential had raised your expectations unfairly, so I asked if it could make an exception and allow you to transfer your pension savings to its more flexible plan.

The company said: “It is a regulatory requirement to make our customers aware of all the options that may be available. Some of the information we provide is given in general terms, which

is why we provided the information on income drawdown products.”

However, it has agreed to make an exception in your case and is allowing you to transfer your fund into a Pension Choices plan, which does offer the flexibility you need. Prudential points out that, although it does not offer income drawdown to investors with less than £25,000, some providers do. It will reword the generic information it sends out to make this clear.

Shareholder frozen out of claim against RBS My wife and I had shares in Royal Bank of Scotland and bought more in the rights issue in 2008. In January this year we decided to join the RBoS Shareholders Action Group as “late claimants”. We completed a form and sent a cheque for £300, as required by the group. This was accepted and from then on the action group kept us informed of the progress of the claim.

In June we were somewhat surprised to receive a letter from the group saying that it would be returning our £300 to us as it was unable to proceed with the action on our behalf. What is going on?

Jill replies To recap, shareholders in RBS claimed the company had misrepresented its financial position during the £12bn fundraising rights issue in 2008. RBS collapsed soon afterwards, leaving investors with worthless holdings, and it needed an injection of £45bn from the government to continue operating.

While RBS settled with four other shareholder action groups, this one refused to accept the deal. As a result, RBS doubled its previous offer of

HAVE YOUR SAY EDITED BY NINA MONTAGU-SMITH Accounting error Regarding the all-toofrequent accounts of banking fraud that appear in The Sunday Times, it seems to me far too little attention is paid to the role of the receiving bank (“I was conned; the bank didn’t believe me”, last week). If liability were imposed on the receiving bank for allowing a fraudulent account to be opened, this sort of crime would quickly be reduced as the banks would be forced to take effective steps to stop it.

Try justifying to shareholders why a bank is top of the league when it comes to the number of fraudulent accounts that have been opened and why its profits are down because of all the compensation that has been paid as a result.

I’m not holding my breath.

HJ, Port Talbot In all these cases there is an account to which the funds are sent; in the case you reported it was a NatWest account. Surely if NatWest have done their due diligence in setting up that account, they will know the criminal’s identity. This never seems to be mentioned in these cases.

AS, via sundaytimes.co.uk

accepted this offer. Thirty minutes later another person from B&Q rang.

He confirmed that the thicker material would be supplied at no extra cost, without a delivery charge, at a total cost of £123.75.

I pointed out that this was £3.43 more than the cost of my original order. Although B&Q had deducted the price of delivery, it had not included the promotional discount.

The conversation went downhill from there. I feel very aggrieved with B&Q and its poor attitude towards a loyal customer.

Jill replies I asked B&Q to honour its offer. But by the time it contacted you two days later, you had already sourced 18mm chipboard from another supplier.

The company apologised for being unable to fulfil your original order, and told you it had listened to your phone call and felt its representative had handled the issue poorly. It offered you a gift voucher for £70, which pleased you, because your battery-powered screwdriver has just packed up.

compensation to 82p a share in May, to stop the group bringing a civil trial in which the former RBS boss Fred Goodwin would have to give evidence.

To be eligible for this payout, shareholders had to make a claim by June 6, 2014. Claims made after this date have not been accepted by RBS, which says they are barred by a time limit.

The action group is still trying to find a way to help shareholders who joined after June 2014. You decided to claim in January this year, so could only have been added to this group of late joiners.

The group did not explain, when it returned your cheque, why your application had been refused. But it told me that you had not provided proof of ownership of RBS shares. You held the shares in a nominee account with Barclays Wealth, and though it provided you with a letter confirming ownership, you had not forwarded this to the group.

You have now done so and, though it closed to new members in February, the group has kindly restored your membership without charge.

While you are still a long way from getting compensation from RBS, you stand a much better chance with the action group on your side.

CAN WE HELP YOU?

Please email your questions to Jill Insley at questionofmoney@sundaytimes.co.uk or write to Question of Money, The Sunday Times, 1 London Bridge Street, London SE1 9GF. Please send only copies of original documents. Letters should be exclusive to The Sunday Times.

Advice is offered without legal responsibility. We regret Jill cannot reply to everyone who contacts her.

I always challenge my bank. I tell them to tell me the last two things I bought and how much they cost. I won’t talk to them otherwise.

“James”, via sundaytimes.co.uk

Frozen pensions There is no moral justification for the diminished payments made to British pensioners who live outside the scheduled territories (“A ‘simpler’ state pension? It just doesn’t add up”, last week). Whether or not they were contracted out during their years of contributions, they receive only the flat pension applicable on the date of their retirement without any prospect of increments. Unfair — but what’s new?

PL, via sundaytimes.co.uk

Dividend needed So Ian Cowie has been reinvesting dividend income from his shares for the past 30 years (“This slope is starting to look scary, so I’ll be ducking out for a bit”, last week). Lucky him!

For those like us who have been retired for 10 years with a current gross pension income of £12,000, this is not an option.

Dividend income from high-yielding shares with regular increases is vital for maintaining a reasonable quality of life.

IW, Morecambe, Lancashire

Estate wrangling Like “Heavenlyholidayhome” (Have your say, July 2), I have tried to put in place all the necessary paperwork so our children and stepchildren

Chris Hodge, pictured with his family and their dog, lost £20,000 to fraudsters will have an easy passage to their inheritance when we fall off the twig.

The idea of putting all of our useful contacts, passwords, user names and so on onto a memory stick seems very practical to me but I wonder how to ensure that the original file wouldn’t be vulnerable, as I presume it will still exist inside my laptop’s gubbins even if I delete it after copying it to the memory stick.

I do hope someone more savvy can instruct and/or reassure me.

BJT, by email We love to receive your feedback on stories and your views on any issues you would like us to investigate. Always include your name and address when contacting us. Letters may be edited.

WRITE TO Money, The Sunday Times 1 London Bridge Street London SE1 9GF

EMAIL money@sundaytimes.co.uk

TWITTER @ST_Money

17

The Sunday Times July 16, 2017

MONEY

CURRENT ACCOUNTS

FOREIGN CURRENCY

CREDIT INTEREST Provider

Account name

Account fee

Interest rate 1

Balance

Contact

TSB

Classic Plus

None

£10 a month 2

£1-£1,500

0345 975 8758

Halifax

Reward

None

£3 a month

£1+

0345 720 3040

Nationwide

FlexDirect

None

5% 3

£1-£2,500

0800 302 010

These are the interbank rates at 5pm on Friday, which show where the market is trading.

They are not indicative of the rate you will be able to get.

OVERDRAFTS * Provider

Account name

Account fee

Interest rate 5

0% overdraft limit Contact

First Direct

1st Account

£10 a month 4

15.9%

£250

0800 242 424

M&S Bank

M&S Current Account None

15.9%

£100

0345 900 0900

14.6%

£0

0345 266 8977

Post Office Money Standard Account

None

EURO GBP>EUR

1.14 1.31 1.26 1.67

1 Based on funding of £1,000 a month. 2 Credit interest of 3%. 3 Introductory rate for one year, then 1%. 4 Fee waived if minimum funding of £1,000 is met.

5 Equivalent annual rate. Some accounts require minimum funding to open or receive rates shown. * Based on an overdraft of £500 for 15 days a month.

Source: Moneyfacts.co.uk

AMERICA GBP>USD

CREDIT CARDS INTRODUCTORY RATES Provider

Card type

Introductory purchase

APR 1

Reward

Contact

AA

Dual MasterCard

0% for 32 months

18.9%

No

0345 600 5606

0% for 31 months

18.9%

Yes

0808 540 5060

30 Month Purchase MasterCard 0% for 30 months

18.9%

No

0345 944 4555

Sainsbury's Bank Purchase MasterCard Halifax

SWITZERLAND GBP>CHF

BALANCE TRANSFERS Provider

Card type

Introductory purchase Transfer fee 2

APR 1

Contact

0345 606 2062

MBNA

Platinum 41 Month Visa

0% for 41 months

2.79%

18.9%

Virgin Money

41 Month MasterCard

0% for 41 months

3%

20.9% 0800 389 2875

AA

Balance Transfer MasterCard

0% for 41 months

3.25%

18.9%

0345 600 5606

AUSTRALIA GBP>AUD

CASHBACK CARDS Provider

Card type

APR

American Express Platinum Cashback

1

Cashback

Contact

28.2%

1%-1.25%. Intro 5% for 3 months (up to £125) 0800 917 8047

American Express Platinum Cashback Everyday 22.9%

0.5%-1%. Intro 5% for 3 months (up to £100) 0800 917 8047

Nationwide

Select Visa

15.9%

0.5%

0800 055 6611

1 APR = annual percentage rate dependent on credit rating. 2 Fee charged on the amount of each balance transfer during the introductory period.

Source: Moneyfacts.co.uk

Source: timescurrencyservices.co.uk 020 7294 7970

MORTGAGES 2YR FIXED RATES Lender

Rate

Scheme

Deposit

Fee

Notes

Skipton

1.09%

Fixed to 30.9.19

40%

£995

AR

Contact

0845 850 1755

Sainsbury’s Bank

1.19%

Fixed to 31.10.19

25%

£995

LV

0345 111 8010

Chelsea

1.83%

Fixed to 31.8.19

10%

£1,695

Lender

Rate

Scheme

Deposit

Fee

HSBC

1.44%

Fixed to 30.9.20

40%

£999

L

0800 494 999

Yorkshire BS

1.49%

Fixed to 31.8.20

25%

£995

B

0345 166 9510

Hinckley & Rugby

2.19%

Fixed for 3 years

10%

£999

L

0800 774 499

0345 120 0842

3YR FIXED RATES Notes

Contact

LONG-TERM FIXED RATES Lender

Rate

Scheme

Deposit

Fee

Notes

Contact

Tesco

1.68%

Fixed to 30.9.22

40%

£995

AR

0345 051 8446

HSBC

1.84%

Fixed to 30.9.22

25%

£999

L

0800 494 999

Leek United

2.55%

Fixed to 31.8.22

10%

£995

V

0845 219 0250

First Direct

2.49%

Fixed for 10 years

40%

£0

R

0800 482 448

Deposit

Contact

TRACKERS */ DISCOUNTS Lender

Rate

Scheme

Fee

Notes

Nationwide

1.19%

Tracker +0.94% for 2 years 40%

£999

CEV

Yorkshire BS

1.5%

SVR -3.24% to 31.8.19

10%

£1,495

Virgin Money

1.65%

Tracker +1.4% to 1.11.20

30%

£995

R

0345 605 0500

Coventry

1.55%

Variable for term

25%

£999

ELV

0800 121 8899 Contact

0800 302 010 0345 166 9510

FIRST-TIME BUYER / LOW DEPOSIT Lender

Rate

Scheme

Deposit

Fee

Notes

Yorkshire BS

3.25%

Fixed to 31.8.19

5%

£995

BP

0345 166 9510

Hanley Economic

2.85%

SVR -2.09% for 2 years

5%

£250

PV

01782 255 000

Barclays

1.39%

Fixed to 31.10.19

5%

£999

HPV

0333 202 7580

Lender

Rate

Scheme

Deposit

Fee

Notes

Contact

Leeds

1.85%

3.89% discount for 2 years 40%

£199

LV

0345 045 4049

Hanley Economic

2.49%

Fixed to 31.12.19

20%

£1,495

Virgin Money

2.29%

Fixed to 1.11.22

40%

£1,995

D

0345 605 0500

BUY TO LET

01782 255 000

Early repayment charge (ERC) applies unless otherwise stated. * Most deals track Bank of England base rate. Notes: SVR = Standard variable rate; A = remortgage only; B = £250 cashback; C = £500 cashback for remortgages and first-time buyers; D = £500 cashback; E = No early repayment charge; H = Help to Buy 20% equity loan; L = Free legal work for remortgages; P = Purchases only; R = Free valuation and legal work for remortgages; V = Free valuation Source: landc.co.uk — 0800 373 300

SAVINGS ACCOUNTS INSTANT ACCESS Provider

Account name

Min deposit

Interest rate

Contact

Ulster Bank 1

eSavings

£1

1.25%

ulsterbank.co.uk

1st Issue Classic Saver

£20,000

1.12%

ncbs.co.uk

Online Easy Access

£1

1.11%

bankofcyprus.co.uk

National Counties Building Society Bank of Cyprus UK

2

3

1 If ID is required this will need to be taken to an Ulster Bank, RBS or NatWest branch. 2 New funds can be added until 11.08.17. 3 Rate includes 0.51% bonus for first 12 months.

NOTICE ACCOUNTS

CASH ISAS INSTANT ACCESS Provider

Account name

Min deposit Interest Transfers in Contact

Virgin Money 1

Defined Access Isa Issue 14

£1

Post Office 2

Online Cash Isa Easy Access Issue 10 £100

1.01%

Yes

virginmoney.com

1.01%

Yes

postoffice.co.uk

1 If four or more withdrawals are made in a calendar year, interest rate reduces to 0.25% for rest of year. 2 Includes 0.76% bonus for first 12 months.

Provider

Account name

Notice period

Min deposit

Interest rate

Contact

FIXED RATE

Secure Trust Bank 1

180-day Notice (Issue 2)

180 days

£1,000

1.64%

securetrustbank.com

Provider

Account name

Term

Min deposit

Rate

Transfers in Contact

Secure Trust Bank 1

120-day Notice (Issue 24)

120 days

£1,000

1.54%

securetrustbank.com

Paragon Bank

Fixed Rate Cash Isa

1 year

£500

1.2%

Yes

paragonbank.co.uk

Paragon Bank

120-day Notice (Issue 7)

120 days

£500

1.45%

paragonbank.co.uk

Charter Savings Bank Fixed Rate Cash Isa

2 years

£1,000

1.37%

Yes

chartersavingsbank.co.uk

1 Maximum of four interest withdrawals and three capital withdrawals per calendar year.

Source: Savingschampion.co.uk — 0808 178 5354

FIXED-RATE BONDS Provider

Account name

Term

Min deposit

Interest rate

Contact

Paragon Bank

Fixed Rate

1 year

£1,000

1.85%

paragonbank.co.uk

Paragon Bank

Fixed Rate

2 years

£1,000

2.05%

paragonbank.co.uk

Access Bank UK

Fixed Rate Bond

3 years

£5,000

2.2%

sensiblesavings.co.uk

DEALS ARE LISTED ONLY IF THEY ARE COVERED BY THE UK FINANCIAL SERVICES COMPENSATION SCHEME (FSCS) OR A EUROPEAN EQUIVALENT Source: Savingschampion.co.uk — 0808 178 5354

CHILDREN’S ACCOUNTS Provider

Account name

Account type

Min deposit

Interest rate

Halifax

Kids’ Regular Saver

Regular Saver

£10-£100

4%

Contact

halifax.co.uk

NS&I

Children’s Bond Issue 36

Fixed Rate Bond

£25

2%

nsandi.com

Santander 1

123 Mini Current Account Current Account

£300

1%-2.96%

santander.co.uk

1 Interest rates are tiered: 1% on balances of £100-£199; 1.98% on £200-£299; 2.96% on £300-£2,000.

ENERGY DEALS

JUNIOR ISAS

Table shows the cheapest tariff from the 3 cheapest suppliers.Excludes fixed tariffs of less than 12 months’ duration. Excludes tariffs that do not have national coverage. Excludes tariffs where payments are taken in advance of the customer coming on supply. F=Fixed rates V=Variable rates

Supplier

Average annual bill

Rate

Contact

Provider

Account name

Min deposit

Interest rate

Rate

Green Network Energy

£861

F

0800 520 0202

Coventry

Junior Cash Isa

£1

3.25%

V

coventrybuildingsociety.co.uk

Tonik

£866

F

0333 344 2686

Nationwide

Smart Junior Isa

£1

3%

V

nationwide.co.uk

Bristol Energy

£867

F

0808 281 2222

Halifax

Junior Cash Isa

£1

3%

V

halifax.co.uk

Source: TheEnergyShop.com

for that car crash? Your cover may still rise, says Nina Montagu-Smith Motorists caught up in accidents that are not their fault, and do not even lead to a claim on their policy, are nevertheless facing steep rises in their premiums — some by more than £100 a year, Money has learnt.

One reader wrote in to say: “A friend of mine was parked when someone hit his car.

The other driver provided their details and my friend claimed from the other driver’s insurance company.

So far so good.

“He then informed his insurance company, which he believed he was obliged to do, only to find that when his renewal came through his premium had increased by well over £100.

“When he spoke to his insurer he was told it had increased because he’d had an accident. He was completely shocked and explained that a) he was parked when the other driver hit him and b) he had not claimed on his policy. It made no difference — and of course if he’d tried to change insurer he would still have had to declare the incident.”

This is not an isolated case.

The Association of British Insurers (ABI) confirmed to Money that raising premiums

MONEY MADE EASY TAX STINGS REVIVED Planned tax squeezes on shareholders and pension savers that were dropped before the snap general election will go ahead after all, the government said last week.

The measures, announced in March’s budget but later ditched, will reappear in a finance bill soon after parliament returns in the autumn.

Here’s what they will mean for your finances if the bill is passed.

Dividends The annual tax-free allowance for dividends will drop from £5,000 to £2,000 from next April.

Basic-rate taxpayers will be taxed 7.5% on anything over this limit, higher-rate taxpayers will pay 32.5% and additional rate taxpayers 38.1%.

Pensions The money purchase annual allowance — the amount of new pension contributions you can make if you have already taken out more from your pension than the 25% taxfree element — will be cut from £10,000 to £4,000.

The change will be backdated to April this year, which means some people may already have exceeded the limit.

If you have already paid in too much, you must declare it on your tax return for this tax year — due in January 2019 — and pay back any relief received on contributions over £4,000. “Don’t pay in any more and make sure direct debits are cancelled,” said Danny Cox of the wealth manager Hargreaves Lansdown.

The self-employed Ministers have, however, dropped a controversial requirement for smaller, privately owned companies and the selfemployed to move to a digital system of reporting tax quarterly by 2019.

Only those with turnover above the VAT threshold of £83,000 a year will have to use the system — and then only for VAT. Nina Montagu-Smith

V = variable rate. Source: Savingschampion.co.uk — 0808 178 5354

Prangs bump up premiums for faultless HOW TO INVEST Not to blame in cases where no claim has been made is now fairly standard practice — although not all insurers do it.

We asked the price comparison website gocompare.com to run quotes for two separate scenarios through eight of the larger insurers.

Gocompare used a fairly standard case: a 30-year-old man living in Cardiff with 10 years’ no-claims bonus and driving a 2013 Vauxhall Corsa.

In one scenario, he had no accident history; in the other his car had been hit while parked, with the £800 repair costs recovered from the other party — that is, he had made no claim on his own policy.

The results varied greatly: Esure raised its premium by the most, up £135 from £816 a year to £951, followed by More Than, which put it up by £120 from £758 to £878.

The average hike was just under £50.

“Being hit by another driver can be a stressful experience, so it may seem totally unfair to see your insurance premiums rise as a result of an incident that wasn’t your fault, especially if the other party’s insurer has covered all the costs,” said Matt Oliver, car insurance specialist at gocompare.com.

But frustratingly, some insurers do exactly that, raising their rates because an incident has occurred, regardless of who was to blame and whether or not you have claimed.

“Insurers try to justify this by saying that being involved in an incident increases the

Contact

ICONS BY JAMIE JONES

Best Buys

risk of making a claim in the future,” Oliver said. “This rationale will come as cold comfort to drivers who see their car insurance costs leap through no fault of their own.

“That said, not all insurers will hold a ‘not at fault’ claim against you, so if you do find your existing provider has used this as an excuse to hike your premium at renewal, be sure to get online and shop around for a better deal.”

The ABI says the problem is all down to algorithms: if your car is involved in a nofault accident, it is statistically more likely to be involved in an at-fault one in the future.

Hastings Direct, which in our scenario raised the premium of our hypothetical customer by £45.54, putting it in the middle of the range, said that all insurers use a number of different rating

factors to determine risk and the premiums they charge.

“These rating factors are based on actual experience and how likely a customer is to make a claim,” it said.

“Our experience shows that drivers involved in an accident, whether or not they are directly at fault, are more likely to have an accident or make a claim in the future.”

Admiral, which put up its premium by £49.28, has come to a similar conclusion.

It asks those applying for policies whether they have had any accidents, incidents or claims in the past three years, regardless of fault or whether any claim was made.

“When calculating a premium for a customer, we use over 50 different rating factors to determine the risk that a customer will go on and make a claim.” There was

Some insurers up prices after no-blame, no-claim incidents

“overwhelming” evidence that customers with non-fault claims or incidents would be more likely to make a fault claim in the future.

Thankfully, not all insurers work on this basis: three of our eight — Aviva, Churchill and LV — did not raise the premium in cases where there had been a no-blame, no-claim incident.

“In this particular scenario, LV wouldn’t increase a customer’s car insurance price just because they’ve told us about an incident that doesn’t result in a claim being paid to them,” said Selwyn Fernandes, LV’s managing director of car insurance.

“We log all potential claims incidents on a central database, but the database shows if nothing was paid out for a claim. Some insurers may increase their price due to an incident of this type, but LV doesn’t.”

Money’s findings come as the cost of comprehensive car insurance nears an all-time high. The average policy is now £847, according to research by the actuarial firm Willis Towers Watson released by Confused.com.

Insurers say they have had to increase prices for several reasons. One is the fact that premium tax rose from 10% to 12% in June.

They also claim changes to the way large compensation payments to accident victims are calculated will cost the industry an estimated £5.8bn.

In addition, the cost of vehicle repairs has risen because the weak pound has made imports of car parts more expensive.

£10,000

The third in our four-part series on how to beat inflation Mark Dampier of Hargreaves Lansdown

Each week we ask an expert for tips on how to invest £10,000. This is the third in our four-part series on ways to mitigate the impact of inflation on your portfolio.

The official rate of inflation hit 2.9% in May — the highest level in almost four years.

Mark Dampier, 60, head of research at Britain’s largest investment platform Hargreaves Lansdown, said: “Unless you have an index-linked pension or you hold index-linked bonds from National Savings & Investments [both of which increase payments in line with inflation], the rising cost of living presents a serious threat to your wealth.

“Unfortunately, the former are less common than they used to be and the latter are no longer on sale to the public. So, what are the options?

“Shares are seen as an inflation hedge but, like so many investment rules, this is only partially true. In the 1970s inflation soared as high as 26%. In this environment, companies cannot increase their prices fast enough to keep pace with rising costs

and profits take a hit. What you do depends on whether you think inflation is potentially a global problem or just a UK one. If the latter, you should invest in overseas markets. You could also invest with fund managers who think inflation will be a problem and try to protect your capital if shares fall.

“To hedge against inflation, I would divide my £10,000 equally into the three funds below.”

Capital Gearing Trust (up 9% over a year) This investment trust, managed by Peter Spiller, is arguably the fund to buy if you think inflation is going to take off. An investment trust is basically a listed company that makes investments. You buy shares in the fund as you would in any company.

The fund is in “capital preservation” mode at present with significant holdings in US Tips (Treasury inflation-protected securities). These are nearly equivalent to UK indexlinked government bonds (known as gilts) but far better value.

Spiller expects a rerun of the inflationary 1970s, so he is trying to protect capital. If he is right, you would expect this fund to be one of the top performers in years to come.

RIT Capital Partners (up 13.4%) Headed by Jacob Rothschild, this is probably the bestmanaged investment trust in the business. It has a wide

mandate — investing in shares, bonds, currencies, hedge funds and commodities. This gives it the greatest flexibility in trying to preserve wealth.

It depends on the managers making the right choice, but RIT Capital Partners’ performance has been excellent over many years.

The share price is trading at a premium to the net asset value (NAV). This means it looks expensive compared with the fund’s underlying investments. I would wait until the NAV came to 0% or the shares were trading at a discount before buying.

[You can find out whether an investment trust is trading at a premium or a discount by checking websites such as trustnet.com or morningstar.com].

Lindsell Train Global Equity (up 18%) This is a more conventional fund that buys key brands all over the world. It includes holdings in the UK, Japan and other overseas markets.

It doesn’t invest in new technology but rather the great franchises and brands of the past few decades.

Unilever and Heineken are top holdings; we were drinking beer thousands of years ago and I expect us to continue to do so.

The fund has had a remarkably good run over the past eight years, but I would be happy to put money into it on a 10-year view. ali.hussain@ sundaytimes.co.uk

ST DIGITAL

Read parts 1 and 2 in our series on beating inflation thesundaytimes.co.uk/ten

18

The Sunday Times July 16, 2017

MONEY

Puzzles

FEEDBACK

Comments about our puzzles can be sent to puzzle.feedback@ sunday-times.co.uk or Puzzles Editor, The Sunday Times, 1 London Bridge Street, London SE1 9GF

GENERAL KNOWLEDGE JUMBO CROSSWORD 66 1

2

3

4

5

6

7

Across

8

9

10

11

1 4 9 14 15

12

13 14

15

16

16 17 17

18

19

18 19

20 21

22 23

24

30 32 33 34

26

25 27

28

29

30

21 24 26 28

31

32

35 38 39

33

34

35

36

43 37 38

39

40

41

42 43

44

45

47 49 50 52 53 54 55

46 47

48

49

50

56

51

57 52

53

54

55

56

1 Solution to 65 Across: 1 Family Album, 7 Zebra, 10 Axle, 13 Baronet, 14 Alberto Contador, 15 A Fish Called Wanda, 16 Dublin, 18 Coke, 19 Lithic, 21 The Drifters, 23 Cochlear, 24 Dictum, 26 Naiad, 30 Donald Pleasence, 32 Trabant, 33 Decagon, 35 Sebastian Vettel, 37 Sinon, 38 Apollo, 39 Ortolans, 43 Air Force One, 45 Myelin, 46 Cava, 48 Belize, 49 His Dark Materials, 52 Stanley Kowalski, 53 Sevilla, 54 Okra, 55 Emoji, 56 Alexei Sayle Down: 1 Fob watch, 2 Martin Keown, 3 Lonrho, 4 Actualité, 5 Brail, 6 Moby-Dick, 7 Zoroastrianism, 8 Blondie, 9 Avon, 10 Arthur Fonzarelli, 11 La Dolce Vita, 12 Uranus, 17 Brompton, 20 Hortensio, 22 The Legend of Zelda, 25 The Big One, 27 Dottle, 28 Adidas, 29 Isabelle Adjani, 31 Pentarch, 34 Central Park, 36 Tin Pan Alley, 40 Tristesse, 41 Ambrosia, 42 Sam Spade, 43 Ambush, 44 Orinoco, 47 Travis, 50 Moire, 51 Gyre

1

2

3

Across

4

5

6 7

8

9

10 11 12

13

14

Down

1 Bologna sausage (10) 6 Exploit (3) 7 Motorway entrances and exits (4,5) 10 Acknowledge (6) 11 In the same place (6) 12 One with memory loss (8) 14 On the shore (8) 16 European peninsula (6) 17 Bumpy (6) 19 Bombastic (9) 21 Be located (3) 22 Commando (5,5)

1 2 3 4 5 6 8 9 13 15 18 20

Arthurian magician (6) Corrosion (4) Two-faced (11) Probe (4,4) Put in (3) Honourable (10) Statute (11) Torpor (10) Captivate (8) Uprising (6) Close (4) Falsify (3)

15

16 17 19

Solution to 1529 Across: 1 Wisp, 4 Apostate, 8 Preposterous, 9 Plentiful, 11 Fun, 13 Hernia, 14 Scheme, 16 Par, 18 Destitute, 19 Impoverished, 20 Run along, 21 Turn Down: 2 Impulse, 3 Pregnant, 4 Abominate, 5 Swell, 6 Aloof, 7 Essence, 10 Upsetting, 12 Chit-chat, 13 Happier, 15 Matador, 17 Ripen, 18 Devil

20

22

+5

MEDIUM

21 TREBLE IT

HARDER

98

+ 27

CELL BLOCKS

TREBLE IT

÷8

– 4 + 39

÷9

SQUARE IT

+ 53

HALVE IT

DOUBLE IT

– 163

TREBLE IT

+9

DOUBLE IT

– 15 + 7 – 13

– 12 ÷ 3 + 29 ÷ 6 + 3/5

OF IT

+ 1/4

OF IT

1/3

OF IT

– 77

ANSWER ANSWER ANSWER

BRAIN TRAINER 19

2 3

1 Part of a mobile phone which stores subscriber information (3,4) 2 1983 No 1 David Bowie single which was displaced by Spandau Ballet’s True (4,5) 3 Actress who played Blanche DuBois in the film A Streetcar Named Desire (6,5) 5 Actor noted for his role as Freddy in the 1984 version of A Nightmare on Elm Street (6,7) 6 Composer of the music for Brokeback Mountain (7,11) 7 Little ____ elopes with Steerforth in David Copperfield (4) 8 Now obsolete, a term for one who keeps a fish tank (9) 9 Max ____ wrote the novel Zuleika Dobson (8) 10 Sitcom based on the Luxton and District Traction Company (2,3,5) 11 Location of Burj Khalifa, the world’s tallest building (5) 12 Grubs, caterpillars, and many “worms” (6) 13 Name shared by a Muse and a Grace (6) 20 Cleric who wrote The History of the Kings of Britain (8,2,8) 22 First of the Waverley novels to be set entirely in England (7) 23 Aircraft which dropped “Little Boy” on Hiroshima (5,3) 24 US entertainer, star of The Jazz Singer (2,6) 25 One obsessed with a subject’s statistics and trivia (6) 27 In Greek mythology, Hephaestus landed on this island when flung from the heavens by Zeus (6) 29 Surname of the Welsh composer born David Ivor Davies (7) 31 Comedy series whose characters included Lou and Andy (6,7) 36 In 1915, the Quintinshill rail crash occurred close to this Scottish village (6,5) 37 Soap opera set in the Midlands village of King’s Oak (10) 40 Computer system which “learns” by trial and error (6,3) 41 A type of compound word (literally meaning “much rice” in Sanskrit) (9) 42 Plant with pink, white or purple nodding flowers (8) 44 Large white seabird with black-tipped wings (6) (pictured) 45 Italian Riviera city and popular tourist destination (3,4) 46 East Midlands market town besieged in the English Civil War and relieved by Prince Rupert (6) 48 The wife of Fred Flintstone (5) 51 Country whose border with Bolivia passes through Lake Titicaca (4)

4

Which three-for-one entry deal is not available at your local nightclub?

How many matches at Wimbledon had Johanna Konta, pictured, won before this year?

5

In what Slavic language is Donald Trump Jr fluent?

Who knocked Dippy off his perch?

6

Which former newsreader wowed the royals?

7

White House strategist Steve Bannon owns an oil

How many cups of coffee a day reportedly reduce the risk of heart attack?

painting of himself as which historic figure?

8

The Tube is phasing out ladies and gentlemen in favour of what?

9

Who ordered an end to soggy bottoms?

10 What animal did the Sri Lankan navy find 10 miles out to sea?

MARK MY WORDS 64 Readers are invited to guess what was said when US first lady Melania Trump and her husband landed at an American airbase last week following their trip to the G20 summit in Hamburg.

See right for how to enter.

Send your entries to: puzzle.entries@ sunday-times.co.uk by no later than Tuesday. Entries should include a postal address and ‘Mark My Words 64’ in the subject line of the email. The best entry as judged by The Sunday Times will win The Chambers Dictionary of Great Quotations.

Terms and conditions: Competition closes at midnight on Tuesday.

Over 18, residents of the UK and ROI only. One entry per person. The winner will be the best entry as judged by The Sunday Times. No cash alternative to prize in whole or in part. Prize is non-transferable. Your information will only be used for the purposes of this competition.

Promoter is Times Newspapers Ltd. Not open to staff of the Promoter and promotional partner or their families.

The winning caption for last week’s picture, of Spider-Man fans at a film premiere in Seoul, was: “It’s Theresa May . . . she needs our help.”

It was suggested by Alison Edwards of Derby.

18

21

EASY

Secretion which begins the process of digestion (6) Irish town on the River Boyne (8) The Great ____, French 17th-century architect (7) In Judaism, a good deed performed from religious duty (7) Archbishop of Westminster appointed in 1976 (5,4) (pictured) The river of Rome (5) Peter ____ married a fellow I’m A Celebrity … Get Me Out Of Here! contestant in 2005 (5) Noosed rope used by cowboys (6) Town of Bosnia and Herzegovina, site of an infamous 1995 massacre (10) Credit card advertising slogan, introduced in 1975 (4,5,4,7,2) 1973 film with the tagline “Where were you in ’62?” (8,8) French word for “tomorrow” (6) Rugby player, the youngest ever All Black on his 1994 debut (5,4) Album which won eight Grammy awards in 1984 (8) Welsh holiday resort at the mouth of the River Clwyd (4) In Genesis, the third son of Jacob and Leah (4) Colloquially, a person with highly toned or developed muscles (8) Cricketer, born in South Africa, who captained England from 1975 to 1977 (4,5) Nickname of Edmonton’s professional ice hockey team (6) Formerly, a gathering of three or more people with criminal intent (8,8) Catchphrase of Arabella Weir in The Fast Show sketches (4,2,3,4,3,2,4) English writer credited with popularising the limerick (6,4) The inner membrane surrounding an embryo (6) Setting of the sitcom Rab C Nesbitt (5) The administrative centre of Clackmannanshire (5) ____’s revenge, the Mexican equivalent of Delhi belly (9) A recluse, based on a Greek word for 'desert' (7) Hot desert wind which blows across Egypt from the Sahara (7) ____ the Void, Joe Simpson’s 1988 book about a mountaineering expedition (8) The dye that traditionally makes blue jeans blue (6)

NEWS QUIZ

57

CONCISE CROSSWORD 1530

Down

Just follow the instructions from left to right, starting with the number given to reach an answer at the end

8 4 4

2 12

6 2 3

3 2 3

Divide the grid into blocks.

Each block must be square or rectangular and must contain the number of cells indicated by the number inside it.

TETONOR EASY Each number in the main grid can be formed by adding or multiplying a pair of numbers in the strip below the grid.

Each pair of numbers should be used twice: once as part of an addition and once as part of a multiplication. For example, a 10 and 24 in the main grid may be solved by the sums, 4 + 6 and 4 x 6, respectively. Enter each sum in the boxes below its answer.

Any blanks in the strip must be deduced, bearing in mind the numbers are listed in ascending order.

90

38

20

280

19

240

25

84

36

31

150

60

42

13

32

17

7 9 10

12 12

2 4 5 6

20

POLYGON

From these letters, make words of four or more letters, always including the central letter. Answers must be in the Concise Oxford Dictionary, excluding capitalised words, plurals, conjugated verbs (past tense etc), adverbs ending in LY, comparatives and superlatives.

How you rate 16 words, average; 22, good; 30, very good; 39, excellent.

19

The Sunday Times July 16, 2017

MONEY MEPHISTO 2968 4

5

6

7

8

9

10

11 12

13

14

15 16

17

19

18

20

21

22

23

24

25

26

27 28

29 30

31

NAME

32

...................................................................................

ADDRESS ................................................................................... ...................................................................................

Post your solution to The Sunday Times Mephisto 2968, PO Box 29, Colchester, Essex CO2 8GZ, or email puzzle.entries@sunday-times.co.uk The first correct solution picked at random after next Saturday wins Whitaker’s Concise, worth £45. Four runners-up will each receive £20.

The Chambers Dictionary 13th edition is the primary reference. Readers may email comments or queries to puzzle.feedback@sunday-times.co.uk

Solution to 2967 Across: 1 Fought, 6 Knight, 11 Percolate, 13 Rejoneo, 14 Tinge, 15 Ures, 17 Matric, 18 Puture, 19 Leather-head, 21 Blunderbuss, 25 Rector, 26 Nuance, 29 Feis, 30 Saics, 31 Astilbe, 32 Eutrapely, 33 Skeely, 34 Sensei Down: 1 Forums, 2 Overalled, 3 Upjet, 4 Henbit, 5 Trencher cap, 7 Notour, 8 Ilia, 9 Gangues, 10 Teemed, 12 Copper noses, 16 Irascible, 20 Eucrite, 21 Brises, 22 Dossal, 23 Buttle, 24 Seseli, 27 Nelis, 28 Acre

SUDOKU

WARM-UP

Cricketing greats On each of the next seven evenings a different media pundit will advocate the merits of two cricketers.

The pundits are Agnew,

CODEWORD In the grid, each number represents a letter of the alphabet — all 26 letters are used. Use the initial clues in the code table to work out the rest of the code.

STUCK? To get four random extra letter clues, call 0901 322 5309 (ROI 1514 415128) or text STCLUE to 88010 (UK only). Calls cost 75p (ROI 75c) plus your telephone company’s network access charge. Texts cost £1 plus your standard network charge. SP: Spoke, 0333 202 3390 (Mon-Fri 9am-5.30pm).

Chess techniques can be learnt. Those who have been following my series on the Greek bishop sacrifice in The Times will realise that combinational patterns are subject to recognition and recall. In today’s game the great German master Siegbert Tarrasch makes some stunning sacrifices. However, they are based on precedent, such as a similar double bishop sacrifice by world champion Emanuel Lasker.

White: Aron Nimzowitsch Black: Siegbert Tarrasch St Petersburg 1914 Tarrasch Defence 1 d4 d5 2 Nf3 c5 3 c4 e6 4 e3 Nf6 5 Bd3 Nc6 6 0-0 Bd6 7 b3 0-0 8 Bb2 b6 9 Nbd2 Bb7 10 Rc1 Qe7 11 cxd5 Slightly passive. A better way to fight for the initiative is 11 Ne5. 11 ... exd5 12 Nh4 g6 13 Nhf3 Rad8 14 dxc5 This does not turn out well. Black’s hanging pawns on c5 and d5 are difficult to exploit and, meanwhile, the b7-bishop can now become very active if Black achieves the break ... d5-d4. 14 ... bxc5 15 Bb5 Ne4 16 Bxc6 Bxc6 17 Qc2 Nxd2 18 Nxd2 d4 19 exd4 The decisive mistake.

White should have reconciled himself to an inferior game after 19 e4 Rfe8 or 19 Rfe1 Rfe8 20 Nc4 Bc7. 19 ... Bxh2+ Black embarks on a combinational idea first seen

in Lasker-Bauer, Amsterdam 1889. 20 Kxh2 Qh4+ 21 Kg1 Bxg2 22 f3 22 Kxg2 loses to 22 ... Qg4+ 23 Kh1 Rd5! 24 Qxc5 Rh5+ 25 Qxh5 Qxh5+ 26 Kg2 Qg5+ 27 Kh2 Qxd2. 22 ... Rfe8 23 Ne4 Qh1+ 24 Kf2 Bxf1 25 d5 A desperate attempt to create counterplay along the a1-h8 diagonal. 25 Rxf1 loses to Qh2+ and 26 ... Qxc2. 25 ... f5 26 Qc3 Qg2+ 27 Ke3 Rxe4+ 28 fxe4 f4+ Tarrasch, surprisingly, misses a quicker finish. See today’s puzzle. 29 Kxf4 Rf8+ 30 Ke5 Qh2+ 31 Ke6 Re8+ 32 Kd7 Bb5 checkmate The UK Open Memory Championship is to be held on August 16-17 at London’s Devonshire Club. There is still time to enter via the website worldmemorychampionships. com.

Spot the Move 1071: Black to move ________

1

1

2

12 4

18

16

10

9

4

14 19

19

19

22 2

18

2 18

17

16

19

3

6

16 2

2 14

16

16

4

16

2

18

21

19

6

2 19

17

4

2 19

12

6

2

22

2

9

18 9

13

G

/ . v ,

2

/ . v ,

25 5

16

25

3

16 4

13

11

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

G

M

W

E S

/ . v ,

J9 KJ9 J 10 7 3 9653

17

10

In our match, we gained 17 IMPs when a club was led against six spades at both tables, but when our opponents were North/South, the vagaries of their system had meant that North was declarer. So our club lead was hugely more successful than theirs.

When Ireland played France, the French West led a club to let the slam through on the lead, while the Irish South led a diamond, giving

18 15

17

10 9

17 12

14

21

22

8 13 9

22

17

8

9 11

3

None 53 None KJ7

N W

E S

/ . v ,

/ . v ,

None KJ9 J 5

2 7 None AQ8

S / . v ,

East

Pass ?

25

26

27

...................................................................................

Down

1 Use keys to enter property, perhaps (4) 3 Busy times for the law breakers? (5,5) 9 Runs are like gold dust (4) 10 Copper’s buried in bog near lake (10) 12 Son with bass most unlikely to clean building? (9) 13 Legal office given to auditor (5) 14 One complaint, still no problem (6,8) 18 The last place you’d find liver? Yes and no (14) 20 Assistant needed to catch black bear (5) 22 Plant stem, soil, ground, earth (9) 24 Resort to guessing to get the idea (10) 25 Gnome’s short skirt (4) 26 Hidden weakness of boxer’s supporters (4,2,4) 27 Opinion given about temperature control (4)

1 Dull book about rise of anagram maker (8) 2 Treated later, pain around time of birth (9) 4 Upset at “imaginary” rope (5) 5 Hair growth over parting has to hurt (9) 6 Worried group in full pub (8,4) 7 Sides in varsity home game initially in contention (5) 8 Sleep — that is one way to interrupt it (6) 11 Unconditional love, OK? (8,4) 15 Matches scattered, I see outline (9) 16 City pioneer accepts university trophy, Germany’s first (9) 17 Speed star Bullock’s first to leave (8) 19 High points of service provided (6) 21 Old fire, one that won’t start (5) 23 Somewhat serious to make a surgical opening (5)

Solution to 4754 The first correct solution opened after next Saturday wins a 10-carat rolled gold Cross Century II fountain pen worth £210. The next three win £120 10-carat rolled gold Cross Century Classic ball pens. All have lifetime guarantees. Post solutions to The Sunday Times Crossword 4755, PO Box 29, Colchester, Essex CO2 8GZ, or email puzzle.entries@sunday-times.co.uk

FO I SU H WE I FO E P I MA P AR I RH

RMA L NO U T T V NS T ROKE R N R AR I NG S D B U E RTUNE T E I T AVEMENT T X A I NTOP T C U O T SON SOL E I E E APSODY

VEMB A U GE L L L HEA T E L L ER O R ART I G E ANTR E I T A I T R SEVE

ER U I D I HS H S S S T A UM P RE D RE

CLUE WRITING CONTEST 1665: THERMOSTAT Readers are invited to compose a clue for the word above.

Clues must be original, cryptic, and similar to those in the Sunday Times crossword. Send your entry by email to puzzle.entries@sunday-times.co.uk. The best entry selected after next Saturday wins £20.

Winners Crossword 4752 G Elliott, Eglingham, Northumberland, N Dumbreck, Hurtmore, Surrey, M Hannah, Alysham, Norfolk, T Rayson, Beoley, Worcestershire Mephisto 2965 D Raine, Bishop Auckland, County Durham, P Amos, Oakfield, Newnham on Severn, Gloucestershire, A Brewer, Southsea, Hampshire, AK Cowie, Glasgow, T Levell, London E17 Teaser 2857 C Green, Shalford, Surrey, MW Puddick, Billingham, County Durham Chess 1068 I Iyengar, Amersham, Buckinghamshire Sudoku June 25 L Graves, Leeds

J7654 None AKQ A9654

TODAY’S SOLUTIONS

South

1/

24

...................................................................................

AQ A K 10 8 7 J754 Q8

North

Pass 3/

23

Winner 1662: Ross Harrison, Dechmont, West Lothian Slipstream: Tuck right inside group, behind someone in front For a full report, visit thesundaytimes.co.uk/cluewriting / . v ,

E

22

Across

98 QJ9543 862 10 3

N

16

ADDRESS ...................................................................................

NS vulnerable, Dealer West

W

21

NAME

Last week’s problem

K 10 3 2 62 10 9 3 KJ72

15

19

declarer played a heart to the ace and ran the ten of clubs for a similar endplay.

/ . v ,

13

20

This position is from today’s game Nimzowitsch-Tarrasch, St Petersburg 1914. Can you spot the quicker win that Tarrasch overlooked?

West

Reading the position perfectly, declarer played a heart to the ace and ruffed a heart. Now all West had left was clubs and declarer exited with the queen of clubs to endplay West and land her slam.

When Tunisia played Poland in the open event, declarer, in the same diagrammed position as above, played off his last trump and that worked just as well. West and dummy both pitched hearts, and now

2.

NEWS QUIZ

What should North bid?

In my view North should keep his mouth firmly shut! At the adverse vulnerability little good can come from bidding.

When North bid four hearts, East bid four spades and South doubled. North’s choices were now to pass and lose 790 (declarer made two overtricks), or to bid five hearts and lose 1100.

BRAIN TRAINER

POLYGON

TETONOR

CODEWORD

26 10

/ . v ,

8

17

á D 4 DkD] à0 D D Dp] ß D D DpD] ÞD 0PDpD ] Ý D DPD D] ÜDP! I D ] ÛPG D DqD] ÚD $ DbD ] ÁÂÃÄÅÆÇÈ

/ . v ,

None AQ None 10 4 2

7

LAST WEEK’S SOLUTIONS 10

18

/ . v ,

AKQ8642 7 AK AQ8

KILLER SUDOKU HARD 22

All the digits 1 to 6 must appear in every row and column. In each thick-line “block”, the target number in the top left-hand corner is calculated from the digits in all the cells in the block, using the operation indicated by the symbol.

73 A Q 10 8 6 4 Q4 10 4 2

N

/ . v ,

2

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

KENKEN

10 5 532 98652 KJ7

15

21

declarer, Joanna Zochowska, a much harder time.

She won the openlng lead and reeled off some spades.

With one trump to go, she cashed the king of diamonds and this was the position:

6

18

To enter, complete the Hard or Very Hard puzzle and call 0901 292 5275 (ROI 1516 500 513), leaving your answer (the numbers in the three shaded squares) and contact details. Or text SUNDAY1 (Hard), or SUNDAY2 (Very Hard), followed by a space, then your answer (three numbers) and contact details — eg SUNDAY1 123 John Smith — to 88010 (UK only). Calls cost £1.00 (ROI €1.50) plus your telephone company’s network access charge. Texts cost £1 plus your standard network charge.

Winners will be picked at random from all correct answers received. Lines close at midnight on Saturday. If you call or text after this time you will not be entered but may be charged. When entering by phone or text, please provide your FULL name and address details, as incomplete entries may be charged but not entered.

STUCK? Call our clue line to get four clues for either puzzle on 0901 322 5004 (ROI 1514 415127). Calls cost 75p (ROI 75c) plus your telephone company’s network access charge. For full terms and conditions, visit thesundaytimes.co.uk/ comprules.

SP: Spoke, 0333 202 3390 (Mon-Fri 9am-5.30pm)

NS vulnerable, Dealer South

19 6

Sally Brock

This was a fascinating slam deal from the first round of last year’s World Bridge Games.

11

16 16

BRIDGE

4

12 16

Send your solution to: The Sunday Times Teaser 2860, PO Box 29, Colchester, Essex CO2 8GZ or email puzzle.entries@sunday-times.co.uk.

The first two correct solutions opened after next Saturday win £20.

Dean Mayer 5

10

14

VERY HARD — PRIZE 1149

(a) Which cricketers will Dagnall advocate? (b) Which cricketers will Norcross advocate?

23

6

4

19

M

6

7 2

25 13

12

14

16

18 3

16

2

14 25

8 20

9 9

18

3

16

13

24 24

14

17

17

13 25

2

9

22

18

2

4

25

8 8

3

13

2 13

14

10

26 8

2

5 5

19 4

15

Each evening, looking at the names of the pundit and the two cricketers, then for any two out of the three names there are just two letters of the alphabet that occur (once or more) in both.

4

12

7 3 9 4 3 1 6 5 7 1 6 8 2 4 5 8 9 3 6 7 5 2 3 5

Blofeld, Dagnall, Mann, Mitchell, Norcross and Smith.

The fourteen cricketers to be discussed are Ali, Anderson, Ball, Ballance, Broad, Carberry, Compton, Hales, Kerrigan, Patel, Stokes, Tredwell, Trescothick and Woakes.

3

11

Send your solution (first move only), to Sunday Times Spot the Move 1071, The Sunday Times, PO Box 29, Colchester, Essex CO2 8GZ, or email to puzzle.entries@sunday-times.co.uk. The first correct answer drawn after next Saturday wins £20.

HARD — PRIZE 1148

2

9

1 8 3

Hard

Graham Smithers

CROSSWORD 4755

2

Each row, column and 3x3 box must contain the digits 1 to 9. Winners will receive a Collins English Dictionary & Thesaurus.

TEASER 2860

1 NZ insect, a yellow one joining bee in cup (8, two words) 2 A blast comes from one President needing a change of heart (5) 3 Abnormal awareness of a lie — the asset seen as extraordinary (12) 5 A god rising in the earth, what? (6) 6 Let a group of children talk (6) 7 Awfully thin ladies keeping off booze, affecting to be arty (12) 8 Bill appearing in Syrian cloth made from plant fibre (5) 9 Senility of dishonourable man descending on university — Oxford maybe (8) 10 Financial allowances for divorcees? (4) 13 Divine Scottish area about to be sealed off (4) 16 Optical problem puts wolf into unconscious state (8) 18 Class prejudice? Sect aims to reform (8) 22 Russia’s No 1 female tennis player makes return (6) 23 Fish? One Indian snake eats any number (6) 24 Disease of sheep getting dingy over time (4) 25 Habit of one elevated as fool holding America up (5) 26 Prospect of saint in the middle of life (5) 27 Poem’s found to be offensive, not half, by Catholic (4)

Raymond Keene Twitter: @times_Chess

cedi, cervid, cider, cred, credit, deist, deistic, derv, desi, devi, dice, dicer, diet, dire, direct, dirt, disc, dive, diver, divers, divert, divest, divi, drive, edict, edit, iced, ivied, recidivist, ride, side, sideritic, stride, tide, tied, tired, verdict, vide, viscid

3

1 Dull book hack put out (4) 4 European region in which to get intradermal sedative (8) 11 React furiously about money paid for units under flood? (8) 12 Old distiller making money in Greece once (5) 14 Group in small valley (5) 15 Primate organised Eucharist, having introduced plan (12) 17 Architectural feature within elegant atrium (4) 19 Leaders are excessively preoccupied, cycling round after setback (6) 20 Country pillar beside the Roman way (6) 21 Governor heading off across street in coat (6) 23 Identity given to workers — they were deemed to be in cells (6) 25 Expression of surprise about hard butter (4) 27 Franciscan old boy, one labouring in East (12) 28 Don't hesitate to employ a heavy blow (5) 29 Time is given to religious instruction in part of Jewish calendar (5) 30 Wind rages furiously across estuary (8) 31 Places of torture using whips when army moves in (8) 32 Straw left in meat (4)

CHESS

Easy 67; Medium 14; Harder 13

2

Down

1 Traffickers give asylum-seekers three chances to enter UK, says chief inspector of borders David Bolt 2 Hope, blue whale skeleton, replaced Dippy the dinosaur replica in the Natural History Museum 3 Three, according to study 4 One 5 Czech 6 Queen Letizia of Spain on her state visit 7 Napoleon 8 “Hello everyone”, deemed more gender-neutral in announcements 9 Channel 4 chief creative officer Jay Hunt demanded fewer innuendos on new Bake Off 10 An elephant

1

Across

Don Manley

4

R A F F L L L T I D Y K O P E L V I E J E E R Q MU F F L E O BROUH R N MY S T I

E DO X U CROS E S HU S A I MP V H E AR Z AH A R R C D E

OD L E A E S B AR I F S T L E E P I T H R OU S E L W OB E Y N D GR E E

108

KENKEN 36

27

21

234

31

Each row, column and 3x3 box must contain the digits 1 to 9.

The digits within each group of cells joined by dotted lines must add up to the figure in the top-left-hand corner of each group. Within each dotted-line group, a digit cannot be repeated.

1 Rxg4! wins as after 1 ... Qxg4 2 Qxc6+ and 3 Qxa8+ White emerges a piece ahead

TEASER 2859

24412 Correction The solution to Teaser 2858 should have been “Nancy, 15” not “Nancy, 50” as printed. We apologise for the confusion.

80

5 16 9 x 26 4 27 5 x 16

35

32

150

6

72

6

2

3

5 30 2 x 16 5 x 30 3 x 24

50

15

35

18

5 x 10 5 10 9 26 2 16

3

2 3 4 5 5 5 6 6 9 10 16 16 24 26 27 30

SUDOKU WARM-UP

19 14

2

12

4 x 27 6 x 6 3 24 6 6

N E HQ P SWJ KO I GU X RMZ V T Y F L BDC A

SPOT THE MOVE 1070

CELL BLOCKS

KILLER SUDOKU 8 9 4 7 1 6 3 2 5

6 1 7 3 2 5 8 9 4

2 3 5 9 4 8 6 1 7

3 8 1 5 6 4 2 7 9

4 7 9 2 8 3 1 5 6

5 6 2 1 9 7 4 8 3

1 5 6 4 7 2 9 3 8

9 4 3 8 5 1 7 6 2

7 2 8 6 3 9 5 4 1

8 7 2 3 4 9 1 5 6

5 3 4 6 2 1 7 8 9

9 6 1 7 8 5 2 4 3

6 1 8 5 7 3 9 2 4

2 4 7 1 9 8 3 6 5

PRIZE 1146 3 5 9 2 6 4 8 7 1

7 9 5 8 1 6 4 3 2

4 2 6 9 3 7 5 1 8

1 8 3 4 5 2 6 9 7

3 8 5

PRIZE 1147

4

2 5

20

The Sunday Times July 16, 2017

MONEY FAME AND FORTUNE SUE BARNES

Give me a wild bunch and I will tame it

VICKI COUCHMAN / KIRSTY WIGGLESWORTH

The florist prospered thanks to a stream of glitzy clients but moonlighted for years as a volunteer police officer, says Rebecca Myers

S

ue Barnes has served an ace.

The owner and managing director of Lavender Green, one of the biggest florists in Britain and the company behind Pippa Middleton’s wedding flowers, has been decorating hospitality areas at Wimbledon.

The company, which she founded 27 years ago and now co-owns with her husband David, 69, has been transformed from a Fortnum & Masoninspired retail space in Maidenhead, Berkshire, to a bijou office in Kensington, west London.

From there Barnes masterminds each mammoth project: Lavender Green has decorated everything from palaces and London’s Grosvenor House hotel to the Natural History Museum and the tennis championships at Queen’s Club and Wimbledon. It employs about 40 staff and caters for clients who spend anything from £1,000 to £200,000.

Barnes, 57, has gone from a cashstrapped childhood in south London to working with international royalty and celebrities,while raising two children, now aged 29 and 28. She also has three stepchildren and six grandchildren.

She sleeps just two to four hours a night — which may explain how, until three years ago, she also managed to fit in work as a volunteer police officer.

Barnes credits her father for her grounded, fearless attitude. An engineer, he grew up living above the infamous Richardson gang in south London.

“You are only as good as your last job, no matter who you may have worked for or are currently working for,” she says.

“From the beginning, that ethos has kept our feet firmly on the ground.”

How much money do you have in your wallet?

About £25. The only time I use a lot of cash is when I go to antique fairs — then I have to raid the ATMs. I recently went [to a fair] thinking I would spend £200 to £300, but I saw something I absolutely

My dad used to roll the car down the hill to our house to save money on petrol

Life hasn’t always been a bed of roses for Sue Barnes, who says that her engineer father used to have to borrow her pocket money at the end of each month adored, so I had to keep putting my cards in. I felt really dodgy because I kept hitting the limit.

What credit cards do you use?

I’ve got a company set of credit cards with Amex, which we all use. Personally, I’ve got a couple of debit cards and a credit card but I don’t have time to do anything other than work, so most of my purchases go on the company card.

Are you a saver or a spender?

I fall between the two. When we first set up the business, I went out and bought things expecting people to buy them the next week, and it caused me huge cashflow problems. I don’t do that any more.

How much did you earn last year?

We’re in the higher-rate tax bracket. My husband and I share a basic salary, which isn’t a lot, but then we don’t need money particularly. We give ourselves bonuses and dividends when the company can afford it, but otherwise everything just goes straight back in.

Have you ever been really hard up?

When I was growing up in Welling, southeast London, we had no money; Mum and Dad bought our first house for £3,500 when I was nine. It was a really small house but full of fun. My dad was always poor — he used to borrow my pocket money at the end of every month. He used to turn the car around at the top of the hill and roll it down to the house to save money on petrol.

Do you own a property?

We live in Hurley, Berkshire, in between Marlow and Henley. We’ve lived in the same 500-year-old, three-bedroom house for 30 years. We bought it for £245,000 and it’s now worth more than £1m. We also have a property in Catalonia, between Barcelona and Valencia; we bought it four years ago.

What was your first job?

When I was 16, I took a holiday admin job in the City, when the banks were changing from manual systems to computer systems. I was supposed to do it for two weeks and ended up doing it for six, all through the summer. I worked every hour and that’s when I realised I really wanted money. Aged 18, I became a management trainee at Lloyds.

What’s been your most lucrative work?

This year. We don’t advertise, so everything is done by referral and word of mouth, and after 27 years we’ve just about got the equations right.

It’s a stonking year. Most florists in this country will turn over £150,000£250,000 [a year]. We did £300,000 in the past two weeks, including two really big weddings, Queen’s Club and Wimbledon, Royal Ascot and all of Chelsea football club’s flowers.

four seats so it’s big enough to put the grandkids in. Every time I jump in, I think my dad would be proud.

What’s been your best investment?

Both properties. Also, of course, the business. Opening the first retail space in Maidenhead was a massive gamble.

Maidenhead had a good demographic but nobody could understand the concept; big florists weren’t around. We didn’t sell a thing for a whole week.

Then, a few days later, a white Porsche pulled up outside and this woman walked in and said: “I’d like you to decorate my house and my budget is £500 a week.” She bought just about every vase we had in the shop and none of them were less than £350. It was a real celebratory moment — to realise that selling carnations had had its day and there was another market than selling £25 bouquets.

And the worst?

Being ripped off. About 20 years ago I got a call from someone claiming to be a Libyan prince. He wanted £95,000 worth of flowers to decorate his 500ft yachts for a wedding. We had lots of meetings with him, and we had to meet his boat at Southampton docks to collect our money, which had to be in cash. My biggest worry was what size bag to take.

But the boat didn’t turn up — it was a complete scam. I lost about £15,000 but it was a big learning curve.

Do you invest in shares?

My husband does but nothing monumental. Our money goes into property, antiques and parties, and back into the business.

When did you first feel wealthy?

Probably when the kids moved out! Also, my car makes me feel wealthy; I’ve got a really lovely Mercedes convertible, with

Barnes provided the floral magic for Pippa Middleton on her wedding day

What’s the most extravagant thing you have ever bought?

Probably the house in Spain, because we didn’t particularly need it. But we bought it at the bottom of the market, off people who really needed to sell, and it’s at least tripled in value already. Every month we’ll go for anything from three days to a few weeks. We can do the journey in 4½ hours door to door.

What are you worried about?

I have a big responsibility to pay all my employees’ mortgages, so I don’t take business decisions lightly. I’m not risk-averse [for myself ] but I am on their behalf because I want everybody who joins us to have security.

What’s your money weakness?

Antiques. I have hundreds — two houses full — and we shouldn’t buy any more, but I do think of them as investments.

Do you support any charities?

For eight years, I was a volunteer police officer, doing 40 hours a month. I only did Friday evenings when I knew I’d be really busy, because I can’t bear to be bored. I’d start at 6pm and I was supposed to finish at 2am but invariably I’d nick someone and finish at 5am.

Every Friday night for eight years my family and friends knew not to invite me out. After all, if you’ve got the option of going out with 120 good-looking blokes or going to a dinner party, there’s not much competition.

For the past few years my husband and I have sponsored the education of a little boy called Momadou in Gambia. We met his mum, a masseuse, out there.

Momadou is now 11 and could be making juice and selling it to tourists for the rest of his life unless he can speak English and get an education. It costs very little for us to do that and she emails every few weeks to say how he’s getting on.

We also provide a room for a homeless charity on Tottenham Court Road. My big concern is homeless people; they all have a story to tell.

What is the most important lesson you have learnt about money?

You can’t guarantee anything except that if you work hard, you’ll never be poor.

Simpler bank fees are good news, even if there are losers PETER CONRADI I received a letter the other day from my credit card provider announcing yet another change in the terms and conditions. For “change”, of course, read “worsening”. From now on the amount I will be charged if I don’t pay off my balance in full every month will rise from 23.9% to 24.6%. Or was that 24.7% to 25.9%?

I didn’t pay much attention, as I have no more intention to rack up debts in this way than I do to stand in my garden and set fire to £50 notes. So, pausing only to wonder how anyone can get away with charging such usurious fees at a time when Bank rate is just 0.25%, the letter went straight into the recycling.

The 20m people who bank with the Lloyds group — which includes Halifax and Bank of Scotland — will get a letter next month announcing their T&Cs are changing too. For once, this seems to be a step in the right direction: the plethora of fees currently levied (which,

surprise, surprise, are different at the three banks in the group) will be replaced by a single charge of 1p a day for every £7 you are overdrawn.

Lloyds is to be applauded for simplifying things in an era when confusion seems to be an integral part of most companies’ marketing strategies — and even more loudly if, as the bank claims, the change will lead to an overall fall in the amount of money it makes out of us.

Inevitably, though, as we highlight on page 13, there will be not only winners but losers too: in this case, those who until now have been able to enjoy a quick fee-free dip into the red as long as they keep within limits. They, too, will be liable to the new 1p charge.

If you fall in that category the advice, as ever, is to look elsewhere. Good luck with your quest. As far as leisure activities are concerned, shopping around for bank accounts is never going to have the same appeal as browsing for clothes or shoes. That said, it is marginally less mind-numbing than switching your gas or electricity supplier.

Lloyds’ rivals could make the process a lot easier by simplifying their own charging structures. So over to you, Barclays, NatWest and the rest.

Equality is priceless Congratulations to John Walker, 66, the former cavalry officer who won a landmark battle at the Supreme Court last week that will give his husband, 14 years his junior, the same pension rights as a wife would have in a heterosexual relationship.

When Money featured Walker’s case a year ago, he had just suffered a defeat at the Court of Appeal, which had dismissed his claim because it applied to the period before December 2005 when gay civil partnerships were first recognised by law.

Walker, on a pension of £90,000 from Innospec, the company where he went on to work for 23 years, was angry. In the event of his death, his husband would have received a pension of just £1,000 a year rather than the £45,000 a widow would receive.

Now the Supreme Court has ruled in his favour, which will affect others in his situation. Pension schemes will no longer be able to limit the pension payable to a surviving member of a civil partnership or same-sex marriage to benefits built up after December 2005.

Walker said he was “absolutely thrilled” by the ruling. So are we. @Peter_Conradi