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The Guardian - UK
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Graeme Wearden (until 3.45) and Nick Fletcher

Sir Philip Green to be called to face MPs over BHS administration – as it happened

BHS files for administrationepa05277108 A shopper under an umbrella walks past BHS on Oxford Street, London, Britain, 25 April 2016. BHS has announced that the retailer has filed for administration threatening some 11,000 jobs and 164 stores. EPA/HANNAH MCKAY
A shopper under an umbrella walking past BHS on Oxford Street. Photograph: Hannah Mckay/EPA

As the US Federal Reserve holds its latest two day meeting there have been more signs the the world’s largest economy is not exactly firing on all cylinders:

On that note, it’s time to close for the evening. Thanks for all your comments and we’ll be back tomorrow.

For those wondering what was happening with the Greek bailout talks and whether there would be a new Eurogroup meeting this week as promised (threatened?), there’s this from a correspondent for Greece’s Kathimerini:

Mixed performance for European markets

Positive updates from the likes of Standard Chartered, BP and Whitbread gave some support to leading shares in London, but other European markets were more mixed. Joshua Mahony, market analyst at IG, said:

Significant indecision is evident within global stocks today, as the release of data fails to spark any form of directional volatility. With the [US Federal Reserve] and the Bank of Japan due to take the stand once more tomorrow, there is good reason for today’s hesitancy, given the unpredictable nature of financial markets around these times.

A positive start to the day for US markets does little to reflect what has been a largely discouraging batch of data, revealing falling consumer confidence, weaker-than-expected services sector growth and yet another fall in core durable goods. It is clearly a case of bad news is good news as any signs of a US economic slowdown would likely put the buffers on any plans for the Fed to tighten. However, it is worth considering that there is something wrong about a stock market near record highs amid stuttering Chinese growth, tumbling US earnings, an energy price crisis and inflation at rock bottom.

The final scores in Europe showed:

  • The FTSE 100 finished up 23.60 points or 0.38% at 6284.52
  • Germany’s Dax dipped 0.34% to 10,259.59
  • France’s Cac closed 0.28% lower at 4533.18
  • Italy’s FTSE MIB added 1.45% to 18,670.41
  • Spain’s Ibex ended up 1.56% at 9283.0
  • In Greece, the Athens market added 0.34% to 599.59

Ahead of Apple’s results and the central bank meetings, the Dow Jones Industrial Average is currently up 15 points or 0.08%.

BHS is not the only corporate problem facing the UK government of course. Steel is still very much on the agenda, and earlier today prime minister David Cameron visited the troubled Port Talbot steel works. The Press Association reports some reaction to the PM turning up:

Dai Bowyer, steelworker and Unite executive committee member, said: “Myself and fellow trade union representatives had a constructive meeting with the Prime Minister where we impressed upon him the need to ensure that UK steelworkers have a level playing field on which to compete with our global competitors.

“This included the need for the Government to go further in tackling sky high energy costs and the dumping of cheap Chinese steel, as well as help with high business rates.

“During the conversation we welcomed the recent commitment by his Government to take a public stake in the UK steel industry, stressing the importance of steel to Britain’s manufacturing base. Clearly impressed by what he saw, we trust that David Cameron will keep his word in doing everything he can to support steel in Port Talbot and the rest of the UK.”

Exxon Mobil stripped of AAA rating - S&P

Meanwhile US oil giant Exxon Mobil has had its credit rating cut by Standard & Poor’s to reflect the plunge in crude prices:

Updated

Back with the US consumer confidence figures, which come before the latest Federal Reserve decision on Wednesday and Thursday’s US GDP numbers. Dennis de Jong, managing director at UFX.com, said:

While remaining steadfast, American consumers don’t appear to be wildly optimistic about the future which will help inform [Fed chair] Yellen and Co.’s decision on interest rates tomorrow. All eyes now turn to the Q1 GDP figures on Thursday, where the first effect of Yellen’s December interest rate rise will be seen.

Conservative MP Richard Fuller, who on Monday described leaving the idea of the taxpayer picking up the bill for the BHS pensions shortfall as “the unacceptable face of capitalism”, has demanded Sir Philip Green clarify his involvement in the demise of the retailer. He said (quotes from PA):

Green and Arcadia need to put out a statement immediately clarifying their position. He has a responsibility, a duty.

Arcadia should be made to make public the documents and correspondence between themselves and Retail Acquisitions so that we can ascertain if the correct due diligence was undertaken in terms of there being enough cash left in the business and to cover the pension liability.

If it’s found that the correct due diligence was not undertaken, the Sir Philip will face serious consequences.

Updated

The Press Association have confirmed that a letter of invitation will soon be winging its way to Sir Philip Green.

Asked whether Sir Philip would be called before the committee, Mr Field told the Press Association: “I am sure he will be invited to give evidence.”

MPs summon Sir Philip Green for questioning

Breaking: Sir Philip Green is being called to parliament to be questioned by the Work and Pensions Committee over the collapse of BHS.

This follows committee chair Frank Field’s decision to open an inquiry into the impact of BHS’s administration (see earlier post).

They will investigate how BHS’s 571m pension deficit will affect Britain’s Pension Protection Fund, a rescue scheme funded by contributions from other pension pots.

Updated

The Wall Street Journal has a good piece on how many pension funds are struggling right now.

The Collapse of BHS is a Warning for the U.K’s Faltering Pension Schemes

Here’s a flavour:

The problems for BHS’s pension scheme are particularly acute, but it’s not alone by any means. Schemes all across Europe are being squeezed by two pincers: an increasing number of elderly people relative to the working population, and shrinking interest income.

As long as those two trends continue, BHS isn’t going to be the last company to struggle under the weight of its pension liabilities.

And this graph underlines why the problem is getting worse:

The pensions gap

More disappointing US economic data:

Christmas seems to come round earlier every year in the shops. But at BHS’s store in Friars Square, Aylesbury, staff are still trying to shift last year’s stock....

Michael White: Politicians in thrall to Philip Green

Samantha Cameron, admiring Philip Green’s tie during a reception for London Fashion Week in 2011
Samantha Cameron, admiring Philip Green’s tie during a reception for London Fashion Week in 2011 Photograph: POOL/REUTERS

Back to BHS... and our veteran political commentator Michael White has written about how our elected masters have a blind spot when it comes to business bosses.

Here’s a flavour of his latest Political Briefing.

BHS paid Phil and Tina [Green] a lot of rent (£11m a year) on its 164 stores. Crafty or what! It’s the same story we heard when the Southern Cross care homes group collapsed in 2011. It had been financially re-engineered after being sold to Blackstone, the US private equity crowd. The homes were sold as a property business, then leased back at high rents by the care business. Together with falling local authority fees for elderly patients – that’s austerity for you – it bust the model.

The scandal at Boots exposed this month by the Guardian is quite different, but the idea is the same. Sweat the assets while loading the core business with debt, so you can move on and do it again.

It’s the task of governments everywhere to hold the line, to see such activities are robustly regulated, their entrepreneurs honoured when they do well by society as well as themselves, jailed if they commit fraud, condemned when their legal manoeuvres are transparently immoral as some of King Phil’s have been – despite protests of injured innocence.

Alas, Blair gave him the knighthood he wanted for “services to the retail industry”. And David Cameron? After King Phil repaid Labour for its obsequiousness by publicly backing the Tories in 2010, the new PM asked him to review government spending and procurement. Phil reported back that there’s a lot of waste. Angels wept.

Here’s the full piece:

A US flag.

The latest economic data from America is a little disappointing, showing that the global economy may be weaker than hoped.

Orders for durable goods, such as computers, kitchen equipment and even aeroplanes, rose by just 0.8% in March after a 3.1% slump in February. Economists expected a 1.8% recovery, so they’re now a little worried.

Separately, US house price growth has cooled to a 5.4% annual rate in February, down from 5.7% in January.

Downing Street: Worrying time for BHS staff

Prime Minister David Cameron’s official spokeswoman has declined to comment on criticisms of Sir Philip Green:

She told today’s Lobby briefing that the government is concentrating on helping BHS staff.

I’ve taken the quotes from the Press Association:

“It is a worrying time for BHS staff and their families. We have now got the Pensions Protection Fund carrying out an assessment. It’s usual in this type of case for the Insolvency Service to also look into what’s happened. I think we need to let these assessments take place first.

“We are currently focused on what this means for BHS staff moving forward and what the Government can do to support them.”

It’s official: high street tailor Austin Reed has followed BHS into administration.

The move leaves around 1,100 workers facing redundancy. Administrators are hoping to sell the company as a going concern, so the stores are staying open for now.

Here’s the full story:

The company is offering some chunky discounts today....

Bad news for BHS: property agents have warned that a quarter of its high street stores would be hard to let to new tenants, while only 8% are in ‘prime’ locations.

That undermines the chances of a white knight buyer snapping up the whole company, argues Joanna Bourke of the Evening Standard. More here.

John Mann’s call for Sir Philip Green to lose his knighthood, unless he hands back £400m of dividend payments, puts more pressure on the Arcadia boss.

Julie Palmer, regional manager at business restructuring specialists Begbies Traynor, says it is becoming an issue of fairness and morality, not just legality.

She told the BBC earlier today that:

“[Sir Philip] is an astute businessman, I imagine he was advised and that all of that was done properly. There’s a moral issue that if we are facing a pensions deficit of £571 million do we look beyond the boundaries of legality at propriety instead? I understand he already is in discussions to make a voluntary payment which suggests he is aware.

“I don’t think the administrator will [bring moral pressure into it] but there are MPs already on the case. There are calls about whether he should be able to keep his knighthood. That’s all part of the pressure that is beginning to build.”

Via the Independent.

Cameron visits Port Talbot steelworks

Breaking away from BHS again, Prime minister David Cameron is making a surprise visit to the troubled steelworks in Port Talbot, South Wales, today.

More than 4,000 jobs are still at risk at the Port Talbot side, following Indian conglomerate Tata’s decision to sell up.

The government is offering to take a 25% stake in the steelworkers, plus debt relief, in an attempt to find a buyer. Cameron’s visit may be designed to show that Westminster hasn’t forgotten about the steel crisis.

As it happens, there’s a BHS store up the coast in Swansea - perhaps the PM could pop in there afterwards and offer workers his support....

MPs to investigate BHS pension issues

Traffic on Westminster Bridge, London

The House of Commons Work and Pensions Select Committee has announced an inquiry into BHS’s pensions deficit.

The committee will examine how the UK’s Pension Protection Fund will cope with BHS’s £571m pension deficit.

The PPF steps in when a company cannot handle its pension liabilities, and is funded by levies on other pension schemes. So BHP’s costs will

Committee chair Frank Field says the BHS crisis has raised serious questions:

“We need as a Committee to look at the Pension Protection Fund and how the receipt of pension liabilities of BHS will impact on the increases in the levy that will now be placed on all other eligible employers to finance the scheme.

We will then need to judge whether the law is strong enough to protect future pensioners’ contracts in occupational schemes.”

Yesterday, MPs on all sides of the House of Commons expressed concern over the BHS crisis, particularly the pensions issue.

Conservative MP Steve Baker argued that the free market was seriously undermined when vast profits are privatised, and then similarly larges losses are swiftly dumped on taxpayers or pensioners.

And fellow Tory Richard Fuller said dumping pensions obligations on others was “the unacceptable face of capitalism”.

Updated

Sir Philip Green has not enjoyed reading today’s newspapers:

What did the Mirror do to earn such shocking opprobrium?

Well, today’s edition describes Green thus:

He’s the epitome of a self-made man or, depending upon your point of view, an icon of unmitigated greed. A foul-mouthed, tough-talking billionaire whose number-one aim is making money, and woe betide anyone who gets in his way.

Later adding.....

When he turned 50, his wife Tina reportedly gave him a solid gold Monopoly set. He celebrated the birthday by flying 200 pals to Cyprus for a lavish toga party, with Tom Jones entertaining them.

Green himself was dressed, according to business journalist Jeff Randall, as “a physically challenged Nero”. And for his 60th, he flew 150 guests to Mexico, allocated each 15 bottles of Pol Roger – worth £250 each – and had Stevie Wonder and the Beach Boys perform.

Here’s the full story: BHS boss Philip Green built his empire on cost-cutting and ruthless deals

Here’s a reminder of just how much money the Greens received from BHS during their 15-year ownership:

Guardian graphic

Labour MP: Green Must Repay BHS Dividends or Lose Knighthood

John Mann.

Labour MP John Mann has called for Sir Philip Green to be stripped of his knighthood, unless he returns the dividends paid to his family from BHS.

Mann argues that Green should hand back the £400m which he received from BHS, to help cover the £571m pension black hole.

In a statement, Mann says:

“Sir Philip Green and his family have made millions out of BHS and its hard working staff. He took over a company with a healthy pension pot, yet when he sold BHS a black hole had appeared in its fund.”

“Sir Philip Green has taken over £400 million out of the company and now must be held responsible for the actions that were taken under his stewardship.”

“There is a very simple and honourable solution to this crisis; repay the dividends, live up to the name he has chosen for his new yacht, ‘Lionheart’, or lose his knighthood.”

It’s rare to see a Labour MP agree with the Daily Mail, but on this issue Mann is in complete agreement with the mid-market paper (see earlier post).

Updated

The pound hit a 10-week high this morning, as bookmakers slash the odds of Britain remaining in the European Union.

Sterling has gained almost a cent against the US dollar, to $1.457, as traders anticipate that the Remain campaign will win the June 23 referendum.

Pound vs US dollar in 2016
Pound vs US dollar in 2016 Photograph: Thomson Reuters

Another high street name, fashion retailer Austin Reed, is collapsing into administration this morning.

The announcement could come at 11am, we hear.

Updated

In another triumph for free market capitalism, Scottish Power has been slapped with an £18m fine for unacceptably poor customer service.

Angela Monaghan explains:

Dermot Nolan, Ofgem’s chief executive, said Scottish Power’s treatment of gas and electricity customers had been “discernibly worse” than its peers.

Speaking on BBC Radio 4’s Today programme, he added: “This is a significant amount of money. It’s basically because Scottish Power failed to treat its customers fairly over a sustained period of time.”

The chair of the BHS pension fund trustees has revealed he was surprised that Retail Acquisitions wanted to buy BHS last year, given its pension deficit.

Chris Martin told the Today Programme that:

It’s always difficult when a company is sold with a large pension deficit. You wonder why the purchasers would want to buy the company. But they did.

And we engaged with them and we talked to them about the funding obligations to the scheme.

Unfortunately, the trading of the business meant it couldn’t support any contributions to the scheme and hence it’s now in the position it’s in.

The good news, if there is any good news, for pension scheme members is that the PFF is in place and supporting their pension obligations.

Martin insists, though, that the pension scheme hasn’t dramatically deteriorated in the last year.

Sir Philip Green

The BBC’s business editor Simon Jack has been outlining Philip Green’s defence against criticism over the BHS crisis.

He ran this company for 15 years, he employed thousands and thousands of people, and he was a great force for UK fashion retail and made it a big force both here in the UK and the US.

It doesn’t look good as he jumps on his yacht to go back to Monaco with his arm around Kate Moss, leaving employees and pensioners worried about it.

But he’s not a natural corporate raider. He’s not necessarily the vulture type of capitalist that people may have portrayed him in the last couple of days.

Green does have questions to answer, though, for selling BHS to an “unknown bunch of brokers, financiers and lawyers”

They didn’t invest in the company but proved very adept at getting money out of it, Jack points out. £25m, by our maths.

With profits up 12%, Whitbread is profiting from Britain’s “long working hours culture”.

So argues Steve Clayton, head of equity research at Hargreaves Lansdown:

“Costa is busily slaking the nation’s never ending thirst for caffeine; think of it as an investment play on the UK’s long hours work culture. Premier Inn is a great product; a clean comfortable room, in a good location at a sensible price. With over 60,000 rooms in the estate, it is the clear market leader in the UK branded budget hotel sector.

Labour MP Owen Smith, the Shadow Secretary of State for Work and Pensions, isn’t impressed with BP’s results:

(that loss was on a ‘replacement cost’ basis, adjusting for moves in the oil price but not stripping out one-off charges)

Over in the City, shares in Whitbread have jumped 3.6% to the top of the FTSE 100 leaderboard after it reported a 12% rise in underlying pretax profits.

BP are close behind, up 3.1% despite suffering an 80% slump in earnings. Investors are relieved that it wasn’t even worse, and pleased to hear CEO Bob Dudley promising further spending cuts...

The Times have pinned the blame for BHS’s failure firmly on current owner Dominic Chappell.

The twice-bankrupt racing driver simply lacked the skills to turn the group around after buying it from Philip Green for £1, argues Deirdre Hipwell.

Here’s a flavour:

Sir Philip Green said that he had sold BHS ‘100 percent clean’, adding: “If I give you my plane, right, and you tell me you’re a great driver and you crash it into the first f****** mountain, is that my fault?

For many in the market, the answer to that question is ‘yes’, arguing that it was his fault for selling a fragile business to Mr Chappell’s Retail Acquisitions, which appears to have had neither the skills nor means to save it

A veteran propert expert who declined to deal with BHS under its new owners said: “You have to accept the fact that Chappell is a buffoon”

More here: ‘Buffoon’ drove struggling retailer into ground

Four UK newspapers are leading on BHS’s collapse into administration:

Daily Mail: Philip Green could lose his knighthood

Today’s newspapers are packed with criticism of BHS’s present, and former owners.

In the Daily Mail, Alex Brummer has outlined what a poor state the company was in, by the time Sir Philip Green sold it for a pound last year.

BHS had nowhere to go but the knacker’s yard. All it consisted of was an outdated, declining enterprise, with a collection of unattractive, near valueless shop leases and a liability in its pension fund of £571 million.

By selling when he did, Green put enough distance between himself and the new owners before the all-but-inevitable end arrived.

By the time he sold, he had ensured that most of the real value of the business, including the £40 million freehold of BHS’s imposing headquarters in Marylebone in West London, from where Green liked to hold court, was owned directly by his family.

And that leaves BHS workers facing a 10% cut to their pensions, if they are bailed out by the UK’s pension protection fund.

Brummer argues that Sir Philip should pay the ultimate price - demotion to the ranks - if he doesn’t reach deep into his pocket to cover the £571m pension black hole.

If he doesn’t stump up, however, the knighthood bestowed upon him by Tony Blair — for Green’s donations to flagship fashion academy schools — could be taken away from him.

Veteran pensions and welfare campaigner Frank Field MP has called for Green to lose his knighthood in the manner of Fred Goodwin, the disgraced former boss of the Royal Bank of Scotland.

It would be the ultimate humiliation if Sir Philip were to join the select company of business people stripped of the honours of which they had once been so proud.

BP profits slump 80%

The recent slump in oil and gas prices has sent profits at oil giant BP slumping by almost 80%.

The company has reported an underlying replacement cost profit of $532 million, from $2.6 billion in the first quarter of 2015. That’s despite slashing its capital expenditure bill by $500m, as it cuts back on new projects.

Analysts had feared a loss. And chief executive Bob Dudley, who suffered a humiliating shareholder rebellion over his £13m pay package last week, claims the situation is improving.

He says:

“despite the challenging environment, we are driving towards our near-term goal of rebalancing BP’s cash flows.”

Updated

The Agenda: BHS in administration; BP profits slide

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Today, we’ll be tracking the BHS crisis again. Eleven thousand jobs are on the line at its 164 stores, in the biggest retail failure since Woolworths in 2008.

And criticism is mounting against firm’s owners, Retail Acquisitions, and former boss Sir Philip Green, over a fiasco that could leave the taxpayer covering BHS’s pension blackhole.

Today’s Guardian has splashed on the discovery that Retail Acquisitions have received a tasty £25m since acquiring the high street chain barely a year ago.

Sources with knowledge of BHS’s finances have told the Guardian that more than £25m was paid from BHS to Retail Acquisitions in the past 13 months. This included £2.8m in management fees, £2.1m in salaries and wages, £11m in legal and professional fees and £10m in interest payments.

The man behind Retail Acquisitions is Dominic Chappell, a former racing driver who has been declared bankrupt twice. Chappell owns 90% of Retail Acquisitions,which bought BHS for £1 from Green in March 2015.

Green was heavily criticised by MPs in parliament last night, with talk of ‘serious questions to answer’ and ‘the unacceptable face of capitalism’. He’s now facing questions over how his family took out £400m in dividends from BHS before selling it.

They’ve certainly got some fun out of the cash. As Sarah Butler explains:

Even after the financial crisis hit the UK economy in 2008, the Greens have partied on. The family enjoy several weeks a year at the exclusive Barbados resort Sandy Lane, where they can hang out with friends such as Simon Cowell.

In 2012, the family apparently shelled out more than £3m to fly 150 guests – including Cowell, Kate Moss, Holly Valance, and her partner, the property developer Nick Candy – to Mexico’s Yucatan peninsula for Green’s 60th birthday party. Rihanna and Stevie Wonder were reportedly flown in to provide the entertainment.

But that was a relatively muted affair compared to Green’s 50th birthday bash, for which he chartered a private jet to fly 200 guests, including journalists and other business associates, to Cyprus for a three-day toga party at a cost of £50m....

Also coming up...

It’s the start of the oil reporting season, with BP releasing results for the last quarter. Whitbread, the firm behind Premier Inns and Costa Coffee, are also updating the City.

There’s no significant European economic data today, but we do get the latest US durable goods orders (for March) at 1.30pm BST, followed by US consumer confidence report at 3pm BST.

Europe’s stock markets are expected to inch higher this morning, after two days of falls.

We’ll be tracking all the main events through the day...

Updated

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