UK prime minister pledges referendum on EU membership

The UK faces years of uncertainty over its place in the European Union, critics claim, after Prime Minister David Cameron promised to hold a referendum on membership of the EU.

In a long-awaited speech today on Europe, Cameron said that he wanted to renegotiate the UK’s relationship with the EU and then ask people to vote on whether they think the country should remain part of the alliance. He also called for a more “flexible, adaptable and open” relationship between all EU members, seeking a more flexible cooperation between the partner nations instead of “compulsion from the centre.”

The prime minister said that a commitment on the renegotiation and referendum would be included in the Conservative Party’s manifesto for the next general election.

Nick Clegg, leader of Cameron’s coalition partners, the Liberal Democrats, spoke out against the plans, saying that the extended period of uncertainty caused by the proposals would hit jobs and economic growth and “was not in the national interest”.

Former Lib Dem leader Charles Kennedy, together with Labour and Liberal Democrat colleagues in the House of Commons, the House of Lords and the European Parliament, wrote a letter to the Guardian, advising against putting in question Britain’s membership of the EU.

A number of business groups took a more positive view of the speech, with the CBI’s director general, John Cridland, claiming that there are benefits to be gained from retaining membership of a reformed EU. He said that the CBI will work closely with government to get the best deal for Britain.

John Longworth of the British Chambers of Commerce (BCC) also said that Cameron is right to renegotiate Britain’s place in Europe, pointing out that the country starts with a strong negotiating position as the UK runs a trade deficit with the EU. However, the BCC director general feels that a shorter timescale for negotiation and referendum would be better, with the aim of securing a cross-party consensus and the outline of a deal during the current parliament.

Support for renegotiation also came from the Institute of Directors, whose director general, Simon Walker, said that the prime minster’s approach is “realistic and pragmatic.”

Addressing the matter of the uncertainty brought about by the plans, Walker said that the issues need to be dealt with and British business is resilient and flexible and can cope with change or uncertainty. “The eurozone crisis is the source of far more uncertainty than a referendum,” he added.

Unemployment in Spain reaches new heights as tourism trade slows

Unemployment in debt-ridden Spain rose by 1.7% in September, according figures released by the country’s Labour Ministry on Tuesday.

The increase in unemployment last month follows an increase in August, with 4.7 million Spaniards currently out of work.

Analysts attribute the increase to redundancies in the service sector as the steady flow of summer tourists slows, with seasonal jobs being terminated in the winter months.

“There is a certain slowing down in the rate of increase in unemployment but the negative side is that jobs are still disappearing,” Estefania Ponte, head of economy at trading house Cortal Consors, told Reuters.

Ponte said that today’s monthly figures suggested that the unemployment rate in Spain will mostly exceed 25% in the third quarter.

Unemployment in Spain, one of Europe’s largest economies, is the highest in the European Union. Analysts are also expecting that recent floods due to torrential rains could further dent tourism activity.

 

European competition authorities delay probe into planned TNT deal

The European Union’s (EU) competition regulator has temporarily interrupted its probe into the acquisition of Dutch express delivery firm TNT Express NV (AMS:TNTE) by US rival United Parcel Service Inc (NYSE:UPS) in order to gather more information, according to a European Commission (EC) official cited by Reuters.

The EC will continue its investigation into the EUR5.16bn (USD6.72bn) deal as soon as it has all needed information, the official said, without elaborating.

The pair agreed on the transaction in March 2012, when UPS said it would step up its growth strategy, while diversifying its geographic presence and boost offering.

Meanwhile, the EC started on 20 July a 90-day in-depth probe into the merger, after its preliminary investigation revealed potential competition worries in the small parcel delivery services sector, mainly the international express services in a number of EU states. It said at the time that the combined group would have a very high share of these markets. The regulator was notified on the deal on 15 June, it said.

The Commission was to deliver its ruling on 28 November, but the decision to halt the probe could delay the process, Reuters said.

The combination is seen to create a top global logistics groups with annual revenues of over EUR45bn and a wider integrated global network, benefiting the customers of both parties and provide increased opportunities for employees, the companies have said.

The buyer expects the merger to generate annual run-rate pre-tax cost synergies of some EUR400m to EUR550m by the end of the fourth year, it has said.

The deal, to be financed with UPS’ existing cash and new debt, will see TNT going private.

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Private equity firms in talks to acquire RBS’ Direct Line

Royal Bank of Scotland Group Plc (LON:RBS) may not get to list its unit Direct Line Insurance Plc as two consortia made up of leading private equity groups prepare to make a move on the business, the Sunday Times reported citing City sources.

RBS has been instructed by European Union regulators to sell Direct Line as compensation for its state-sponsored rescue in 2008. The UK lender is planning to float 30% of the business in September and has lined up 11 investment banks to assist with the process, with Goldman Sachs Group Inc (NYSE:GS), Morgan Stanley (NYSE:MS) and UBS AG (NYSE:UBS) assigned leading roles in the undertaking.

RBS is expected to file the required documents with the London Stock Exchange next month, the newspaper added.

However, the two private equity consortia are preparing to make their move at the end of July, potentially thwarting RBS’ plans. One of the groups comprises US private equity giants Blackstone Group LP (NYSE:BX) and Bain Capital LLC, while the rival bidding combo is made up of KKR & Co LP (NYSE:KKR) and UK-based Apax Partners Holdings Ltd and BC Partners Limited, the Sunday Times was told.

Direct Line, the company behind brands such as Churchill and Green Flag, is the number one UK car insurer in terms of policy numbers and the top home insurance provider, the article went on to add.

It has long been coveted by rival sector players and private equity groups although RBS’ attempt to offload the business in 2008 proved unsuccessful as bidders failed to match the asking price of GBP7bn (USD10.9bn/EUR8.9bn).

BC Partners also featured among the bidders then, joining forces with Apollo Global Management LLC (NYSE:APO). The auction also attracted US billionaire investor Warren Buffett and a consortium made up of CVC Capital Partners Limited and insurance group Swiss Re (PINK:SSREY).

Direct Line’s valuation has shrunk significantly since then although the company reversed its heavy 2010 losses to exit last year with profits of GBP454m, the Sunday Times said.

UK businesses favour more free trade but less integration in Europe

British businesses value free trade with other countries across Europe but are unsure about the value of deeper integration in the European Union, according to a new survey from the British Chambers of Commerce (BCC).

Ahead of a meeting of EU leaders, the business group questioned more than 7,500 companies, asking firms of all sizes about what type of trading relationship with other European nations would most benefit their business in the long term.

A significant proportion of businesspeople are unsure or unaware of whether links to the rest of Europe benefit them. More than half (55%) of all respondents are uncertain about which trading relationship with Europe would be best for their business, including a third of exporters and two thirds of non-exporters.?

Of those who expressed an opinion on the matter, 51% of exporters believe that Europe should be a free trade area while less than a third (31%) support the concept of an economic union. A free trade area would allow the free movement of goods and services but would not have the EU’s social and economic integration, so firms would be less burdened by European regulation and legislation.

Commenting on the survey’s findings, John Longworth, BCC director general, said that businesses want to see more free trade but less integration across Europe. Noting that some companies said that they found it as easy to increase their trade with some non-EU countries as it was to increase their trade with other EU countries, he called on ministers to push hard to remove barriers to free trade among European countries, to make the single market work better.

Despite their scepticism about the EU’s ever closer union, British businesses still support UK membership: just 4.4% of all respondents favoured leaving the European Union altogether and agreeing bilateral trade agreements with individual European countries.

Perhaps unsurprisingly, given the ongoing crisis in the eurozone, only 3.9% of respondents expressed support for UK entry into a monetary union.

EU expresses concerns over fund managers

Concern over pan-European regulations which are being perceived as harmful to both business and private equity dealings with the US and Asia has been expressed by fund managers reports City index.

Citing the Financial Times, a number of additional rules have been added by the European Commission to its Alternative Investment Fund Managers Directive (AIFMD). They are making many fund managers anxious as they’re not in line with advice given by the European Securities and Markets Authority (ESMA).

There are fears that the text drafted shows that that commission’s decision to overrule some ESMA recommendations. Doing their best to allay the concerns, officials in Brussels insist that almost all the advice given has been followed.

Complications and discrepancies are reported to have surfaced over making sure that the AIFMD is implemented legally throughout the EU in a sound manner.

“Implementing measures are made to ensure that the directive is in full working order, and not to try and recoup any losses made in previous compromises”, said a spokesperson for the European Commission in the Financial Times report.

“We have found that support for the direction in which we’re heading is widespread. There are a few issues to smooth over, but that’s to be expected at this stage.”

Joshua Raymond, Chief Market Strategist at City Index said “there has been long running concerns over stricter regulations and naturally if any additional measures are being brought in at the eleventh hour, this is likely to escalate those concerns.”

The AIFMD was published in July 2011, and must be fully implemented by all member states by July 2012.