Pound Falls As Triple Dip Fears Fuelled

Sterling has fallen to a two-and-a-half-year low against the dollar after manufacturing figures for February revealed a fall in output.

The closely watched Markit/CIPS purchasing managers' index showed a slump in activity to 47.9 - well below the 50 level which separates growth from contraction.

It was the first time since last November the sector's activity shrunk, and followed 50.2 in January.

The value of the pound slipped following the data, and fell below $1.50 on Friday afternoon - its lowest since the middle of 2010. 

Sterling has only been beneath the $1.50 mark for four of the 200 years since the US Declaration of Independence.

The last time it was at this level was briefly during the 2010 election and coalition-building process, and before that the 2008/09 recession.

Chris Williamson, chief economist at Markit, said the manufacturing data increased the chance that Britain will slip back into recession. 

"The return to contraction of the manufacturing sector is a big surprise and represents a major set-back to hopes that the UK economy can return to growth in the first quarter and may avoid a triple-dip recession," he said.

"The data so far this year point to manufacturing output falling by as much as 0.5%, meaning a strong rebound is needed in March to prevent the sector from acting as a drag on the economy as a whole in the first quarter."

The struggling sector contributed to the UK's worse-than-expected 0.3% decline in output in the fourth quarter of last year, and a negative reading for the first quarter of 2013 would see the UK enter a triple-dip recession.

Nawaz Ali, a market analyst with Western Union, said the manufacturing data could increase pressure on the Bank of England (BoE) to launch a new round of asset purchasing - or quantitative easing - as early as next week.

"The data is a major setback for sterling and the size of the manufacturing decline indicates that there is still a chance the British economy may suffer an unprecedented triple-dip recession," he said.

"The data also adds to growing concerns that not only could the BoE re-start monetary printing in March, the central bank's new flexible inflation strategy puts it in a position to launch a prolonged period of asset purchases, similar to what the US have done and what the Bank of Japan is planning to do."

More quantitative easing is likely to hit sterling further because it increases its supply and drives the currency's exchange value lower.

So far this year, sterling - which was also hit by Moody's downgrade of the UK's credit rating - has lost 7.5% against the dollar.

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Pressure On First Buyers As House Prices Rise

By Nick Martin, Sky Correspondent

House prices edged up month-on-month in both January and February this year, bringing good news for homeowners but adding pressure on first-time buyers.

Building society Nationwide said it was cautiously optimistic that activity will pick up in the months ahead.

It comes after reports revealed more young people were living with their parents while trying to save for a deposit for a property. 

According to the Halifax, the average age of a first-time buyer is 30 years old - up from 29 in 2011.

There has been a significant increase in the proportion of first time buyers receiving financial help in recent years.

The Council of Mortgage Lenders (CML) estimate that 65% of first time buyers of had financial assistance in mid 2012 compared with 31% in mid-2005.

Kirsty Gilmore, 26, from Bristol, has been living at home for 18 months and has saved more than £30,000. But that is still not enough to buy a property. She says the market is so competitive it is hard to get a good price.

"I want to have my own place, I want to start a family and have a home to call my own, not just my mum and dad's.

"You feel a bit excluded from society - nobody cares and you're stuck in this rut really - and everyone else my age is," she told Sky News.

Mortgage approvals for home buyers have dipped for the first time since a Government scheme to boost lending was launched last August, Bank of England figures showed.

There were 54,719 approvals in January, showing a 2% decline compared with an 11-month high recorded the previous month and marking the first time that there has been a month-on-month decrease since July.

Mortgage approvals for house purchases had been on a steady upward path since the Government's Funding for Lending scheme, which aims to help borrowers by giving lenders access to cheap finance, was launched at the start of August.

The latest figures echo recent findings from the CML, with some analysts blaming the recent bad weather.

Housing minister Mark Prisk said the Government was trying to help first time buyers get onto the property ladder.

"Many people have to rely on the bank of mum and dad - so what we are trying to do with the builders and the Government by putting equity loans forward is make those deposit affordable for first time buyers. It's already helped 17,000 people. We hope it will help 27,000."

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RBS Boss: Spring Cleaning Drives £5.16bn Loss

The Royal Bank of Scotland boss has said "spring-cleaning" continues after his firm reported a pre-tax loss in 2012 of £5.16bn.

RBS chief executive Stephen Hester said: "This company is going through a pretty thorough spring-cleaning. It is a pretty dusty job.

"We are spring-cleaning this house and it is looking shinier."

But the markets reacted swiftly and by close of trading shares on the FTSE 100 were down 6.6%, at 323p.

The share price of RBS is at a fraction of its pre-crisis level

The bank's £5bn-plus loss was in part due to provisions RBS has made for customer redress for payment protection insurance (PPI) mis-selling and other so-called bad practices.

It said the annual return was impacted heavily by a £4.64bn "accounting charge for improved own credit" as bond repurchase value on cash market credit spreads rose 340 basis points.

However, the firm's bankers will still share a bonus pool of £607m - including £215m for investment bankers.

In 2011 the total bonus pot was around 25% higher, at £789m.

When asked to justify the £607m payout, Mr Hester said: "We are a very big company so the numbers end up being substantial, but they are much smaller than other banks.

RBS has lost £2.02bn through Ulster Bank since January 2011

"We believe that we are doing a responsible job on bonus restraint while acknowledging our staff are badly needed."

The bonus reduction was done to help recoup cash to pay for its recent Libor-rigging settlement with UK and US authorities.

Last month RBS reached an agreement with the Financial Services Authority and US authorities over Libor and other rate fixings to include penalties of £381m.

Ulster Bank, which was hit by massive IT woes similar to NatWest last year, made a loss of £1.04bn in 2012.

RBS saw reduced income in its UK retail arm, its UK corporate division, international banking and at Ulster, while income for private wealth and US arms remained flat.

The disgraced ex-boss Fred Goodwin reigned over the previous RBS regime

Mr Hester admitted 2012 had been a "chastening" year to "put right past mistakes", with losses up significantly from £1.2bn in 2011.

The company revealed it took a £450m charge in the last three months of 2012 over PPI mis-selling, taking its cumulative provision to £2.2bn.

By December 31 a total of £1.3bn had been paid out in redress over the scandal.

The bank said: "Our target is for 2013 to be the last big year of restructuring. There will be important work still to do, but an increasingly sound base from which to work.

"As the spotlight shifts to the 'new RBS' post restructuring, we are determined that it will show a leading UK bank striving to be a really good bank."

RBS saw changed fortunes in its core business, with retail and commercial sector income down 6% but markets up 68%.

Both RBS and NatWest were hit by IT failures last summer

The bank added: "RBS is four years into its recovery plan and good progress has been made. We are a much smaller, more focused and stronger bank.

"By serving customers well RBS can become one of the most respected, valued and stable of banks. That is our goal."

In its annual report the bank, which was bailed-out in Britain's biggest ever corporate disaster, said there is an intention to float an estimated 25% of its stake in US banking arm Citizens.

This move was welcomed by Chancellor George Osborne who said: "The Government's strategy is for RBS to be a stronger and safer bank, which in time can be returned to full private ownership.

"I have been very clear that I want to see RBS as a British-based bank, focused on serving British businesses and consumers, with a smaller international investment bank to support that activity rather than to rival it."

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Exclusive: Treasury 'Panic' Over EU Bonus Cap

By Mark Kleinman, City Editor

The Government has embarked on a desperate damage limitation effort to persuade major City employers that they still have a future in London despite proposals from Brussels that will hamper their ability to pay bumper bonuses.

I have learnt that Charles Roxburgh, the director-general of financial services at the Treasury, has contacted a string of major UK and European banks in an attempt to reassure them that the Government would continue to fight the proposals agreed by European Union governments and officials last night.

The blueprint would see bank bonuses capped at one year's salary, or twice that level with the explicit approval of a super-majority of shareholders.

Britain has publicly attacked the idea, saying that it will damage the City, Europe's largest financial centre.

Speaking in Latvia today, David Cameron argued against the new rules while Boris Johnson, the Mayor of London, called them the "most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman empire".

Mr Roxburgh's intervention underlines the scale of nervousness within the Government that a bonus cap could force an exodus of banks to financial centres outside the UK, such as Zurich and New York.

"The message was that they still have some bargaining power, but they are in a state of total panic," one banker said of the Treasury's effort to communicate with banks on Thursday.

It also highlights a tricky position for the Treasury, which has publicly attacked banks for their payment of bonuses to employees.

Today, the largely state-backed Royal Bank of Scotland unveiled a £607m bonus pot for its staff for their work in 2012.

Critics of the EU proposals, which would come into force next year assuming they are ratified in May, say they could increase risk in the banking system by forcing up base salaries to enable the continued payment of large bonuses.

Britain is expected to outline its position further at a meeting of European finance ministers in Brussels next Tuesday. George Osborne, the Chancellor, may attend the summit.

The Treasury declined to comment.

Simon Lewis, chief executive of the Association for Financial Markets in Europe, which represents the major investment banks, said:

"We recognise that progress has been made towards conclusion of the negotiations on CRD4 [Capital Requirements Directive 4].

"Much detail still has to be clarified, but the outline agreement on this new regime for European banks is a major step forward in creating a stable framework within which the industry can plan for the future.

"The package also balances a requirement for enhanced financial standards with the need to support economic growth – for example in showing flexibility over liquidity provisions and counterparty credit risk.

"We have yet to see the detailed text, but unfortunately CRD4 also includes measures on compensation that will increase fixed costs at a crucial time of bank restructuring.

"The outcome will be an inflexible cost base, contributing to greater risk in banks. This will seriously harm European competitiveness and have a negative impact on the real economy."

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Apple 'To Pay £66m' Over Kids' App Downloads

Apple is set to pay out around £66m ($100m) to settle a US lawsuit which claims children were improperly charged while playing iPad and iPhone games.

It is alleged that poor safeguards meant kids were easily able to buy extra features for the free games without their parents' knowledge or permission.

Court papers claim: "Apple failed to adequately disclose that third-party Game Apps, largely available for free and rated as containing content suitable for children, contained the ability to make In-App Purchases."

The case dates back to 2010 and 2011, with Apple updating its software to put in more secure controls on in-game purchases from March 2011.

It has now agreed to give a £3.30 ($5) credit to an estimated 23 million people who were affected. However, if parents can show they were charged more than £20 ($30) then cash refunds will be offered.

The games that were downloaded were designed for children as young as four, claims the lawsuit - which was started by five parents.

One of the parents, Garen Meguerian, says his young daughter spent several hundred dollars on "game currency" while playing "highly addictive" apps like Zombie Cafe and Treasure Story.

Apple previously required a password to be entered for any download or purchase which was valid for 15 minutes without needing to be re-entered.

The system changed in 2011 to make the password mandatory for every transaction, and to warn users that free games might contain the option to buy extra features.

Some technology writers have said that parents should be more aware of the consequences of giving children access to their gadgets and passwords.

Lawyers bringing the case also want Apple to pay their legal fees of £860,000 ($1.3m). The proposed settlement needs court approval and will go before judges on March 1.

Apple has not yet commented on the case.

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Barclays Imposes £450m Libor Bonus Hit

By Mark Kleinman, City Editor

Barclays is imposing more than £450m of financial penalties on its employees in relation to the Libor-rigging scandal which last year triggered the departure of its chief executive.

I understand that the bank will disclose details in its forthcoming annual report of moves to reduce variable pay for staff by far more than the £291m in fines levied by UK and US regulators.

The disparity between the two figures underlines the determination of Antony Jenkins, Barclays' chief executive, to demonstrate accountability across the bank for the reputational crisis that engulfed it last summer, according to insiders.

Investors said the move was a step in the right direction but questioned why Barclays had still decided to award £1.8bn in bonuses to its staff given the scale of the misconduct-related fines and charges taken by the bank during 2012.

The £450m cut to bonuses comprises about £290m derived from reductions to the 2012 bonus pool and at least £160m which has been clawed back from employees' deferred share awards from earlier years, according to people close to Barclays.

In total, somewhere in the region of £300m was clawed back by Barclays' remuneration committee in 2012, with Libor accounting for roughly half the total. The rest was accounted for by Barclays' ongoing exposure to the payment protection insurance (PPI) mis-selling scandal and other misconduct-related charges.

The details will be highlighted in Barclays' annual report, which could be published as soon as next week. The Guardian reported this morning that the report would disclose that more than 600 Barclays employees were paid more than £1m last year.

The additional disclosure follows the appointment of Sir David Walker as Barclays' chairman last autumn. Sir David was the author of a key report on corporate governance in the banking sector in which he advocated the publication of the number of employees earning specific salary brackets.

Last year, the bank faced a huge revolt from leading investors over the pay deal awarded to Bob Diamond, its former chief executive. Shareholders were also furious that the bank paid out three times more in bonuses to employees than it did in dividends to Barclays' owners.

Mr Jenkins has pledged to address this imbalance, and in this month's annual results significantly reduced the ratio.

Barclays declined to comment.

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Burger Sales Plunge 43% Amid Horsemeat Scare

Frozen beef burger and ready meal sales have plunged dramatically, according to the first retail sales data since the horsemeat scandal erupted.

Kantar Worldpanel said that in the four weeks ending February 17, frozen burger sales plunged by 43% while frozen ready meals dropped 13%.

While some of the decline can be directly attributed to consumers rejecting the products, there has also been an availability reduction as affected lines were progressively withdrawn by retailers.

Last week Birds Eye withdrew 15 beef products in four European nations

Horsemeat contamination was first revealed on January 16 after analysis was undertaken by Irish food officials. The scandal has since spread across Europe.

A Nielsen consumer survey conducted two weeks ago showed that 96% of UK adults were aware of the horsemeat scandal and 74% were concerned about it.

According to Kantar, the latest research indicates a significant change in shopping habits as a result of the contamination.

The data also indicated changing fortunes of supermarkets during the 12 weeks to February 17.

It said out of the so-called Big Four supermarkets - Asda, Morrisons, Sainsbury's and Tesco - only Sainsbury's increased market share in the quarter.

Horsemeat is still highly regarded in some European countries

Sainsbury's saw a growth rate of 4.6% in the period, while Tesco saw its market share drop from 30.1% a year ago to 29.7% now.

Tesco was the first major retailer to withdraw its frozen burgers, after equine DNA was discovered in products produced by its meat processors.

"It might seem natural to attribute this decline to the horsemeat contamination; however, Tesco undertook heavy promotions this time last year, where consumers received a £5 voucher when they spent £40, and not repeating this offer will have adversely affected its share," Kantar Worldpanel director Edward Garner said.

Morrisons was the only retailer to post a sales decline in the 12 weeks, due in part to easing Christmas demand, a lack of convenience stores and no online presence.

It has since announced a decision to buy a swathe of Blockbuster video stores to convert into metro outlets.

Morrisons is also expected to bolster sales in the coming months as it is the only major UK supermarket with its own abattoir division, assuring meat supply chain integrity.

Brand name Findus was also found to have used horse in its beef products

Meanwhile, there appears to be a growing split in the upper and lower edges of the market.

"Waitrose and Aldi deliver all-time record shares this period of 4.8% and 3.3% respectively indicating that market polarisation and the 'two nations' consumer climate continues," Mr Garner said.

"Iceland records 10.1% growth confirming that the frozen food category as a whole remains robust."

Research now shows that the total grocery market is growing at a rate of 3.7%, which lags behind grocery price sector inflation of 4.3%.

As a result, pressure continues on shoppers who are using 'coping strategies' to reduce their effective personal inflation rate.

These strategies include switching products and retailers to seek out offers.

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Bank Of England Mulls Negative Interest Rate

By Ed Conway, Economics Editor

The Bank of England has raised the prospect of introducing negative interest rates to get borrowing going in Britain again.

Paul Tucker, the BoE's deputy governor for financial stability, said it was one of the ideas he had been considering to try to push cash out in the real economy.

Speaking to the Treasury Select Committee (TSC), Mr Tucker said: "I hope we will think about whether there are constraints to setting negative interest rates.

"This is an idea I have raised. This would be an extraordinary thing to do and it needs to be thought through very carefully."

Although several other central banks have experimented with negative interest rates in recent years - most notably Sweden and Denmark - this is the first time the idea has been raised by a BoE official.

At present, the bank pays an interest rate of 0.5% on deposits UK banks leave in reserve at the BoE.

The theory behind negative rates would be to try to encourage those banks to leave less cash at the central bank and instead to lend it out to businesses around the country.

If the interest rate was -0.5%, they would have to pay the BoE a 0.5% rate each year to hold money with it.

The Bank of England is looking at ways to stimulate growth

However, the idea of reducing the BoE's interest rate to zero - let alone into negative territory as raised by Mr Tucker - has been dismissed by the governor, Sir Mervyn King.

He has cited internal bank studies suggesting it would cause major financial problems for building societies because of the way their balance sheets are structured.

Although Mr Tucker acknowledged that it was "quite a radical idea and not something anyone should clutch onto as the answer to the question of the universe," he agreed to provide the TSC with a detailed written explanation of his idea.

During the committee hearing, Mr Tucker, who until the appointment of Canadian Mark Carney had been the favourite to succeed Sir Mervyn as BoE governor, also acknowledged that not enough cash was getting through to Britain's small and medium-sized enterprises (SMEs).

He said: "I am worried, as are others, that our current battery of credit policies may not be reaching as far as they might. We should have a think about can we harness non-bank lenders.

"The other thing, I find it regrettable that market for working capital finance aren't as healthy as they were. I think that the authorities in the bank could play a role in that.

"Life blood of working capital finance was a trade finance instrument that was transferrable and marketable and that we would buy. We are lending to companies via the FLS I would like to explore whether some kind of working capital instrument."

The chairman of the TSC, Andrew Tyrie, said: "The lack of lending to SMEs is inhibiting economic growth in the UK. The MPC (Monetary Policy Committee) is right to be looking at additional tools, or changes to existing tools, that could help.

"Some of the proposals we heard today, such as moving to negative interest rates, are radical; others are not. They all warrant careful consideration."

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Govt Addresses MPs Over Credit Rating Slide

George Osborne has attacked Labour for creating an "economic mess" as he addressed MPs over the loss of the UK's prized AAA credit rating.

The Chancellor told the Commons last week's credit rating downgrade had not led to "excessive market volatility" and was "a stark reminder of the debt problem built up in Britain over the past decade".

But Labour shadow chancellor Ed Balls said Mr Osborne had failed to meet his own 2010 pledge to "safeguard Britain's credit rating" and accused him of "putting his own political pride" ahead of families and businesses.

Mr Osborne was greeted with calls of "resign" from the Opposition benches after Labour was granted an urgent question in the House of Commons.

He insisted he will not change course despite the setback and said: "We will go on delivering the economic plan that has brought the deficit down by a quarter."

The Chancellor was responding to Ed Balls amid the continued political and economic fallout of Friday's rating downgrade.

He suffered a serious reverse when credit agency Moody's revised downward its verdict on the UK economy - intensifying the pressure on sterling.

Ministers have played down the impact of the change on the Government's borrowing costs which had already been largely priced into the markets.

But Labour has hailed it as a "humiliation" for Mr Osborne, who previously declared that retaining the top-grade rating was a measure of the success of his austerity drive.

The pound slipped overnight following the UK's credit rating downgrade on Friday, but London's FTSE 100 opened higher as the week's trading began.

In Asia, sterling fell to a 31-month low against the dollar and a 16-month trough versus the euro, but the pound recovered slightly early on Monday, and by the close in Europe was down 0.17% against the dollar at $1.513.

The euro was up 0.99% at 86.04p, not far from its high of 87.75p.

In contrast to the currency market movements, reaction to the downgrade on other markets was muted with economists saying the move was expected and had already been priced in.

The FTSE 100 stock market closed up 19.67 points at 6355.37.

Fears that the downgrade would lead to a rise in the cost of borrowing by the UK Government also looked to be unfounded, with the price of British 10-year debt bonds falling beneath their level at the time of Friday's downgrade.

European economist Sarah Hewin at Standard Chartered said the move had already been taken into account.

"The market had anticipated that there would be a downgrade - perhaps the timing of it was a little earlier than expected," she told Sky News.

But she added that the outlook for the UK economy looks "pretty grim".

"The growth rate is struggling, and this was something that Moody's outlined in particular - It's the result partly of fiscal austerity, partly of a credit squeeze on the economy, partly the result of weak export markets.

"So it's going to be a long struggle, I think, back to recovery," she said.

Explaining Britain's downgrade from AAA to AA1, Moody's pointed to "subdued" growth prospects in the UK and a "high and rising debt burden".

It now expects the "period of sluggish growth" to "extend into the second half of the decade".

Ms Hewin said: "The good news is - if there is any good news in this story - is that Moody's outlook for the UK is stable.

"For now the greatest risk is that we see Standard & Poor's and Fitch following suit as well, moving the UK from their AAA rated status down to AA."

Following the move, senior Conservatives rallied round Chancellor George Osborne, predicting it would have little impact on the Government's borrowing costs.

But Tory backbenchers have upped calls for tax and spending cuts to kick-start growth, warning that next month's Budget is the "last chance saloon".

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Italy Election: Split Vote Leads To Stalemate

Results in crucial elections in Italy show no clear winner and raise the possibility of a hung parliament.

The uncertainty does not help the nation's efforts to pass the tough reforms it needs to heal its economic woes and prevent a new round of global financial turmoil.

In the lower chamber of parliament, the Democratic Party leader Pier Luigi Bersani and his leftist coalition scraped a razor-thin victory over Silvio Berlusconi's centre-right, winning by 29.55% to 29.18% with 99.9 percent of the ballots counted.

Grillo: His protest group M5S appears the real winner

But in the 305-seat Senate, preliminary results from the interior ministry showed that former prime minister Berlusconi's coalition could win 110 seats to the left's 97 seats, with neither group winning a majority, which is required in both chambers of parliament to form a government.

This leaves Italy in a state of limbo with a hung parliament that is unprecedented in its post-war history.

Bersani: Narrow victory for his leftist coalition in the lower chamber

"It is clear to everyone that this is a very delicate situation for the country," Democratic Party leader Pier Luigi Bersani said.

US stocks closed sharply lower with the Dow Jones Industrial Average down 1.55% on the news. Stocks in Tokyo opened 1.83% lower.

The new Five Star Movement (M5S) led by former comedian-turned activist Beppe Grillo, who has stirred anger at politicians and budget cuts, became the country's third political force, creating dozens of new lawmakers.

Comparing single parties without coalitions, the M5S is now the biggest party in the lower house with 25.55% to the Democratic Party's 25.41%, a shock success that analysts predicted would reverberate around an austerity-weary Europe.

"This is fantastic! We will be an extraordinary force!" Mr Grillo said on his website, warning mainstream politicians they would "only last a few more months".

"We'll have 110 people in parliament and we'll be millions outside."

Berlusconi: Doing better in the Senate

European capitals fear the lack of a clear winner could bring fresh instability to the eurozone's third largest economy after Germany and France and plunge it back into the debt crisis storm.

Some Democratic Party officials suggested fresh elections may have to be held within a few months after a reform of Italy's complex electoral laws. Others said some form of agreement could be found with the anti-austerity Five Star Movement.

Political analysts suggested a possible return to the grand coalition agreement between right and left seen over the past 18 months, or even dissolving the Senate alone to hold fresh elections for only one chamber of parliament.

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Doughty Cable Float Sparks Listings Market

By Mark Kleinman, City Editor

One of Britain's biggest privately-owned manufacturing groups is being groomed for a stock market listing, in a move that reflects brightening sentiment about the global economy.

I have learnt that the owner of HellermannTyton, which specialises in making cable ties and fasteners for a wide range of industrial purposes, is preparing to file for a flotation of the company.

Doughty Hanson, the private equity firm which has owned HellermannTyton since acquiring it in 2005 for about £300m, has appointed Goldman Sachs and JP Morgan, the investment banks, to work on the listing. London is a strong contender to host the flotation although Doughty is also expected to consider other locations.

The appointment of the two banks - with others expected to be hired - comes amid a resurgent appetite for stock market flotations. In recent weeks Crest Nicholson, the housebuilder, and Countrywide Holdings, the estate agency chain, have announced listing plans.

A glut of other companies, including Global Switch, the data centre operator, Merlin Entertainment Group, the owner of Alton Towers, and Royal Mail, are all expected to announce initial public offerings of shares in the next year.

Doughty Hanson's decision to pursue an IPO of HellermannTyton this year is significant because the buyout firm has aborted two previous attempts to sell the company. UBS, and subsequently DC Advisory Partners, were hired to find a buyer for the manufacturer in 2011 and 2012 respectively, but neither effort was successful.

Improving economic sentiment in some of the core markets to which HellermannTyton sells its products means that a sale of the company, rather than a flotation, is not impossible.

The value that Doughty Hanson is seeking is unclear, although it reportedly put a price tag of up to £800m on HellermannTyton during the two earlier processes.

HellermannTyton operates two manufacturing plants in the UK and employs hundreds of people at the sites in Manchester and Plymouth. It is headquartered in Luxembourg and its main UK base is in Crawley, West Sussex.

Doughty Hanson, whose co-founder Nigel Doughty, the former owner of Nottingham Forest FC, died last year, is a prominent participant in the UK's private equity industry. It owns stakes in companies such as Vue Entertainment, the cinema operator, and Tumi, the luggage and consumer products manufacturer.

It bought HellermannTyton from Spirent, the industrial group. Since the takeover seven years ago, Doughty Hanson has grown HellermannTyton's core business in the automotive and electrical sectors. The manufacturer now has operations in 34 countries and 19,000 customers.

Spokesmen for Doughty Hanson and HellermannTyton declined to comment.

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Pound 'At Risk' After AAA Credit Rating Blow

Global financial markets are to deliver their first response to the decision of a major credit agency to strip the UK of its prized AAA credit rating today.

Senior Conservatives have rallied round Chancellor George Osborne in the wake of the decision by agency Moody's, predicting it will have little impact on the Government's borrowing costs.

But there are fears that sterling will be hit hard in the wake of the news.

Tory backbenchers also upped calls for tax and spending cuts to kick-start growth, warning that next month's Budget is the "last chance saloon".

Meanwhile, Labour reiterated its calls for borrowing to be increased in the short term to fund a fiscal stimulus.

Explaining its move on Friday, Moody's pointed to "subdued" growth prospects in the UK and a "high and rising debt burden".

It now expects the "period of sluggish growth" to "extend into the second half of the decade".

Business Secretary Vince Cable dismissed the downgrade as "largely symbolic".

The Liberal Democrat told the BBC's Andrew Marr Show: "In terms of the real economy there is no reason why the downgrade should have any impact.

"If you remember last year the US was downgraded, the economy grew strongly relative to Europe... and France had a downgrade last year, its interest rates that it borrows long term in the markets are only a little above ours.

"These things do not necessarily affect the real economy but they reflect the fact that we are going through a very difficult time and we are trying to balance the need to get the deficit and the budget under control with the need to get back to economic growth."

Lord Lawson has warned of a 'run on sterling'

Tory former chancellor Ken Clarke warned it would take years to regain the top credit rating and return to "sensible economic growth".

But he said the coalition should "stick to" its policy, adding: "I think the way in which we will recover confidence is making clear we're a strong firm Government, that the strategy we're on is the one that is eventually going to get things better and that the alternatives frankly are a bit odd."

Former Conservative chancellor, Lord Lawson, insisted the "basic thrust" of the Government's policy was right, but he also warned that ministers and the Bank of England had to be careful not to trigger a run on the pound.

The peer told Sky News' Dermot Murnaghan programme: "I hope there won't be a run on sterling.

"I think it would be a very great mistake if anyone in the Government or Bank of England gave the impression we would like to see a further depreciation of sterling. That would not be clever, that would not be sensible, that would not be helpful."

Former Labour chancellor Alistair Darling said he had been "extremely doubtful" of the Government's strategy ever since 2010.

He told the Murnaghan programme: "I think that when they were elected they very unwisely staked their reputation on maintaining the AAA credit rating that they had, they compared us to Greece, they said they could eradicate the structural deficit by 2015.

"These were wildly optimistic claims and they were perhaps made because of inexperience and maybe a touch of recklessness.

"But the result is that they have sustained quite substantial political damage, but more importantly for the country the economic harm of yet another another blow to confidence. I think that is very, very important, they have been following the wrong economic strategy, but they are paying a very, very heavy price for it."

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AAA Credit Rating Lost: Osborne Defiant

George Osborne has come under attack over what Labour calls his "catastrophic economic policy failure" after the UK lost its top-grade AAA credit rating.

International agency Moody's downgraded it by one notch to AA1, citing slow growth and a rising debt burden.

The Chancellor said the coalition would not "run away" from its economic problems and it was determined to stick by its plan for recovery.

The downgrade is a major blow for Mr Osborne, who has been coming under increasing pressure to take action to stimulate the economy.

In the last election, Mr Osborne made safeguarding Britain's credit rating one of his key pledges.

He has used maintaining the rating for government bonds as one of the main arguments for the Government's austerity programme.

The Chancellor insisted the Government was delivering on its commitment to tackle the UK's debt.

He said: "We have a stark reminder of the debt problems facing our country - and the clearest possible warning to anyone who thinks we can run away from dealing with those problems.

"We are not going to run away from our problems, we are going to overcome them."

He added: "In the end, the test of our credibility as a country is there every day in the markets when we borrow money on behalf of this country from investors all around the world.

Moody's said it did not expect Britain's slow recovery to change

"At the moment we can do that very cheaply with very low interest rates precisely because people have confidence that we have got a plan, we've got to stick to that plan and we are going to deliver that plan."

Labour's shadow chancellor Ed Balls told Sky News: "They (the Government) are paying the price for an absolute catastrophic failure of economic policy and everybody can see that now pretty much other than the chancellor and the prime minister.

"Until they face up to reality, we're just going to have more of the same."

Moody's said Britain's recovery was proving to be significantly slower than previous rebounds from recession and it did not expect the situation to change.

"(There's) increasing clarity that, despite considerable structural economic strengths, the UK's economic growth will remain sluggish over the next few years," it said.

Moody's is the first of the major credit rating agencies to knock the UK off of its top rating.

The ratings agency also cut the Bank of England's AAA rating by one notch, also to AA1. The US' top credit rating was downgraded by one notch in 2011.

Sky's Economics Editor Ed Conway said: "The fact that Britain has lost its AAA crown for the first time since credit ratings were given to the UK back in the 1970s, is a really big blow to Britain's reputation.

"It's something of an economic blow, but in a way it's more of a political problem for George Osborne. He made a key part of the Conservative election pledge to safeguard Britain's credit rating."

Moody's said that the British economy is constrained both by the troubled global economy and the drag from businesses and the Government slashing its debt burdens.

"Moreover, while the Government's recent Funding for Lending Scheme has the potential to support a surge in growth, Moody's believes the risks to the growth outlook remain skewed to the downside," it said.

Labour has insisted that withdrawing demand from the economy has put it more at risk by stunting growth.

Mr Balls said: "This credit rating downgrade is a humiliating blow to a prime minister and chancellor who said keeping our AAA rating was the test of their economic and political credibility.

"In the Budget the government must urgently take action to kick-start our flatlining economy and realise that we need growth to get the deficit down. If David Cameron and George Osborne fail to do so and put political pride above the national economic interest we face more long-term damage and pain for businesses and families."

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Exclusive: RBS Mis-Selling Bill To Add £1.1bn

By Mark Kleinman, City Editor

The state-backed Royal Bank of Scotland (RBS) will next week set aside another £1.1bn to compensate customers for mis-selling products to consumers and small businesses.

I can reveal that the bank is preparing to say in its full-year results announcement next Thursday that it is increasing its provision for mis-selling interest rate swaps by roughly £700m, which will take its cumulative bill to £750m.

City sources say that RBS will also announce that it is raising its payment protection insurance (PPI) mis-selling bill by just over £400m, meaning it will have put aside just over £2.1bn for its part in the industry-wide scandal.

The new provisions will further elevate the total bill for Britain's biggest banks from two of the sector's biggest mis-selling episodes. RBS's new PPI charge will mean that the four major lenders have had to provide more than £11bn for compensation, while its hit on interest rate hedging products will enlarge the industry bill to £1.6bn.

Neither of those figures will, however, include imminent upward revisions in both categories by both HSBC and Lloyds Banking Group, which also report full-year results in the next ten days.

Both RBS and Lloyds, which are 82% and 39% owned by British taxpayers respectively, will report losses for 2012.

RBS is also expected to confirm that it is examining a separation of its US retail banking business, Citizens, through a stock market listing in the US, in a move that over time could raise billions of pounds for the British lender.

George Osborne, the Chancellor, is likely to welcome the move when he appears in front of the Parliamentary Commission on Banking Standards on Monday.

Both Mr Osborne and David Cameron have been increasing the pressure on RBS's management, led by chief executive Stephen Hester, to accelerate the group's restructuring.

Mr Hester is expected to respond next week by pointing to a further retrenchment of its investment banking operations. RBS, he is understood to be preparing to say, will continue to reshape its operations into a British retail bank that is also able to support the international business objectives of core UK clients.

The new provisions for PPI and swaps mis-selling will reflect ongoing claims trends and the recent agreement between the major banks and the Financial Services Authority to offer redress to small business customers according to a defined framework.

Barclays added another £1bn to its own mis-selling tab when it reported its full-year results earlier this month.

The major banks have grudgingly accepted the swaps settlement with the City regulator although they have argued that many of the cases for which they will have to pay compensation should not be categorised as mis-selling.

They have also pointed to the vast numbers of bogus PPI claims they have received, many of which have been paid out anyway. The industry has been discussing the imposition of a time limit on PPI mis-selling claims although at least one major bank is lukewarm about the idea.

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