China Solar Panel Firm 'In Bond Default'

China has suffered what has been called its first corporate bond default, as the government tries to make its financial system more market-orientated.

A Shanghai-based manufacturer of solar panels paid only part of the 90 million yuan (£9m) in interest due on Friday for bonds issued in 2012.

Chaori Solar Energy Science and Technology had earlier warned it would struggle to make the payment.

According to two bondholders hit by the default, only 3% of the due amount was paid.

The solar industry has been heavily criticised in the past for levels of state subsidies.

Competitor nations including the United States, and Germany - Europe's largest solar user - have been vociferous critics of Chinese state support in the sector.

Manufacturers in the US and Germany have struggled as cheaper Chinese panels flooded their markets.

Beijing has previously bailed out troubled companies in an attempt to maintain confidence in its credit markets.

However the ruling Communist Party has promised to make the domestic market more productive and competitive.

Chinese citizens have complained that bailouts have not encouraged a need for risk aversion by big businesses.

Legal representatives for the bondholders hit by the default said they would pursue the money owed.

Lawyer Gan Guolong said: "The default today is already an established fact. We will definitely help recover bondholders' interests through relevant legal action."

A commentary published by the official Xinhua news agency hinted that government policy over defaults was hardening.

"The episode should help reduce the moral hazard caused by the widespread assumption that an almighty government will always bail out underwater investments with taxpayers' money," Xinhua said.

"That, after all, is the market playing its own decisive role."

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US Jobs Up As Part-Time Work Hits New Record

The number of new jobs in the United States accelerated in February, as the number of part-time workers in the month reached an all-time high.

The rise of 175,000 jobs helped ease fears of an economic slowdown.

The dollar rose sharply on the news and the Federal Reserve is now expected to continue tapering its quantitative easing stimulus package.

The US Labor Department said the 35% job jump comes on the back of 129,000 new positions in January.

The unemployment rate, however, rose 0.1% to 6.7%. The previous figure was at a five-year low.

"This bodes well for the economy since there were massive head winds," Adam Sarhan, chief executive at Sarhan Capital in New York, said.

"This report plays perfectly into the Fed's script of tapering."

US shares opened higher on the data. The British pound dropped at first against the dollar before recovering.

The dollar also hit a six-week high against the yen.

Analysts had expected harsher figures as snow and ice hampered economic activity across swathes of the US.

Economists had expected non-farm payroll numbers rising by only 149,000 jobs.

Revised figures for December and January were also released, showing 25,000 more jobs being created in that period than previously thought.

Last month's weather did impact average working hours, with February being the lowest level since January 2011.

Economists now expect a reversal once the weather improves.

A smaller survey of households, from which the unemployment rate is derived, showed that 6.9 million people with jobs reported they were working part-time.

That was the highest reading for February since the series started in 1978.

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John Lewis Cuts Staff Bonus As Profits Rise

The John Lewis Partnership has confirmed a reduced bonus for its workforce despite annual profits rising almost 10%.

It means all 91,000 John Lewis department store and Waitrose staff - known as partners at the employee-owned company - will receive bonuses worth 15% of salary.

That equates to nearly eight weeks' pay - an average of £2,225 each - from a bonus pot £202.5m.

John Lewis blamed the cost of servicing the group's £1bn pension fund deficit for the decision to cut the award from last year's salary percentage of 17%.

It made an additional £85m contribution in January and said it had invested a total £584m in benefits for its partners during its financial year.

They included bonuses, partner discount, catering subsidies, long service leave, leisure spending and the running of its five holiday centres.

Each worker - from weekend check-out assistants to chairman Charlie Mayfield - receives the same percentage of annual salary as a bonus.

Annual like-for-like sales were up 5.1% at Waitrose

The Partnership announced the windfall for partners at the same time as its annual results which confirmed pre-tax profits - before bonus payouts - of £376.4m for the 52 weeks to January 25.

John Lewis largely credited a successful Christmas and said like-for-like sales increased by 6.4% across John Lewis department stores and by 5.1% at Waitrose on an annual basis.

It confirmed the Partnership created more than 6,000 new jobs over the past financial year and said it was planning to open another 38 Waitrose stores this year, including 23 convenience outlets.

Partnership chairman Charlie Mayfield said: "This has been another good year for the Partnership.

"Both Waitrose and John Lewis increased market share for the fifth consecutive year, profit before exceptionals has grown by almost 10% and, for the first time, we have achieved sales of over £10bn."

He added that the group had needed to adapt quickly to "fundamental changes" in the industry, with shoppers demanding better value, convenience and personalisation.

"The level of change has at times been challenging, but partners have understood and embraced the need for their business to continue to develop," he said.

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Curtain To Fall On Barclays' 120-Year Audit

By Mark Kleinman, City Editor

Barclays is to end its 120-year audit relationship with PricewaterhouseCoopers (PwC) and appoint one of its main rivals in the latest shake-up at the embattled bank.

Sky News can reveal that Barclays, which faces a bruising showdown with investors at next month's annual meeting over its £2.4bn bonus pot, will launch a tendering process for its lucrative audit contract as soon as next year.

The move was disclosed in Barclays' annual report, published earlier this week, but has not previously been reported.

In the document, the bank said that its audit committee had considered an immediate review process but had decided to delay it because of "the degree of change impacting the business, including the finance function... and the additional strain that both an audit tender and a change of audit firm would involve".

Barclays had said a year ago that it would consider re-tendering the contract, which commands fees of tens of millions of pounds each year, but had not indicated that it would sever ties with PwC.

PricewaterhouseCoopers could lose audit contracts with Lloyds and Barclays

The decision not to invite PwC to re-bid for one of the longest-running audit contracts in British business comes amid a welter of UK and European Union legislation aimed at injecting fresh competition into the audit market.

Under proposals which are expected to be finalised this year, UK competition authorities will force major companies to put their audit business out to tender at least once a decade, while Brussels will make them change supplier every 20 years.

Explaining its decision, the bank said that it was more than ten years since its audit contract was last put out to tender, and that the lead audit partner at PwC will relinquish that role after this year.

It said: "The Competition Commission's transitional guidance is not yet available, but is likely to mandate a tender slightly later than this.

"In addition the European Union's proposed transitional rules would require Barclays to replace PwC within six years of the regulation coming into force.

"Weighing up all these factors, and with the committee chairman having recently spoken to a number of key investors, the committee has recommended to the board that, depending on the final rules from the Competition Commission and the European Union, a tender of the external audit should start in 2015 or 2016 with respect to the 2017 or 2018 audit and that PwC should not be invited to tender."

PwC and its predecessor firms have audited Barclays since 1896 but it will not lack for major UK banking clients, since it also picked up the prized HSBC contract last year.

It also audits Lloyds Banking Group, but faces the prospect of losing that business too, after Lloyds said in its annual report published on Wednesday that it would conduct a review later this year for the first time since 1995.

Lloyds Banking Group said: "The (audit) committee considers each year whether to put the external audit to tender.

"With the current audit partner required to rotate off the audit after the 2015 audit, the committee is considering whether to conduct a tender in the second half of 2014, with a view to appointing a new audit firm, or reappointing PwC, with effect from 1 January 2016, subject to shareholder approval at the AGM in 2015.

"A final decision will be made during the year, after consideration of the requirements of proposed EU legislation that may restrict the period for which PwC could be reappointed before a mandatory change of auditor is required."

The change at Barclays is likely to provide the biggest talking-point among City bean-counters, however.

Barclays' former finance director, Chris Lucas, who stepped down last year, was previously the PwC partner responsible for auditing the bank.

His move was cited after the banking crisis as evidence of a cosy cabal in the accountancy profession, which was criticised for failing to identify the massive black holes which emerged on the balance sheets of major banks in 2008 and 2009.

Mr Lucas was replaced by Tushar Morzaria, a former JP Morgan executive, who is said to be determined to carry out an overhaul of Barclays' finance function.

The accounting watchdog, the Financial Reporting Council, said in December that it had closed an investigation into PwC's auditing of Barclays' investment bank's handling of client money between December 2001 and December 2009.

However, Barclays remains mired in other legal and regulatory probes, including one encompassing the Serious Fraud Office, Financial Conduct Authority and US authorities over its fundraisings in 2009 which enabled it to remain out of taxpayers' hands.

PwC is not suspected of any impropriety over those capital-raisings.

The market for auditing Britain's biggest companies is fiercely contested among Deloitte, EY, KPMG and PwC, with a second tier of firms such as Grant Thornton struggling to make inroads into the market share of their bigger rivals.

Critics of the market reforms have predicted that they will simply lead to a "pass-the-parcel" of audit contracts without improving oversight or competition.

One insider said that Barclays' decision to move its audit work away from PwC was more about signalling the desire of Antony Jenkins, chief executive, to reform the bank than a commentary on the quality of PwC's work.

Mr Jenkins faces a tough few weeks ahead, with some investors considering delivering a withering verdict on Barclays' remuneration report after a slide in annual profits.

BG Group, Unilever and Vodafone are among the other FTSE-100 companies to shift their audit work since the announcement of the proposed new rules.

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Rich Are Richer Since Crash, Says Top Boss

The boss of Britain's biggest pension and insurance provider has told Sky News that the Bank of England's quantitative easing programme has helped the rich at the expense of the less well off.

Legal & General chief executive Nigel Wilson said: "The less well off haven't done so well with QE, we've got to fix that by investing more, creating real jobs with real wage growth here in the UK."

Mr Wilson also reiterated his call to scrap the Help To Buy home scheme.

"There's too much political uncertainty and too much regulatory uncertainty here in the UK," he told Business Presenter Joel Hills.

"We don't have a great energy policy and we don't have a great housing policy."

His comments come a fortnight before the Chancellor unveils the Budget and exactly five years since the QE programme started.

Mr Wilson's company controls around 4% of the blue chip FTSE 100 index.

He said the Government scheme to assist the housing market has only proved to add "fuel to the fire" of the UK economy.

"We are only building 110,000 to 120,000 houses per annum but we need to be building more than 200,000," he said.

"There are 4.5 million older people who want to downsize but can't, simply because we haven't built houses people can retire to."

He added: "Help To Buy has been unhelpful in our view, especially in the South East, it has driven house prices up far too much.

"The Government is doing the right thing by trying to stimulate demand in the UK but you have to stimulate supply even more."

Mr Wilson said the scheme should eventually be scrapped and help given to the private rental sector, which has been "ignored for 25 years".

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RBS: 80-Plus Millionaires Despite £8.2bn Loss

By Mark Kleinman, City Editor

More than 80 employees of the state-backed Royal Bank of Scotland (RBS) received pay deals worth more than £1m last year despite its £8.2bn loss, Sky News has learnt.

The figure, which is expected to be confirmed later this week, may further stoke the continuing row over bankers' pay following RBS's recent confirmation that it awarded more than £550m in bonuses last year.

The roughly 85 staff who were paid more than £1m represents a fall of more than 10% on the 2012 total of 95 employees.

It is also far lower than the 481 Barclays workers whose remuneration broke through the £1m threshold, a 10% increase despite a sharp decline in profits.

RBS is expected to confirm the number of millionaires in its ranks alongside a series of separate disclosures to the London Stock Exchange detailing deferred share payouts to some top executives.

Those announcements are unlikely to be contentious compared with previous years because RBS's remuneration committee has decided that the awards should only vest to a modest extent after the bank's weak performance, an insider said.

Britain's big banks have run into another conflagration over pay in recent weeks, with only HSBC and Standard Chartered avoiding criticism from investors.

Lloyds, which is also part-owned by taxpayers, said on Wednesday that it had increased the number of millionaires on its books from 25 in 2012 to 27 last year.

It also confirmed Sky News' revelation that it would hand Antonio Horta-Osorio, its chief executive, a fixed share allowance worth £900,000 on top of his £1m basic salary.

But it was Barclays which received the fiercest condemnation from shareholders, particularly after Antony Jenkins, its chief executive, said in an interview with The Daily Telegraph that he had had to pay higher bonuses to avoid its investment bank falling into "a death spiral".

RBS declined to comment.

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Standard Chartered To Slash Chief's Bonus

By Mark Kleinman, City Editor

Standard Chartered, the emerging markets bank, will reveal on Wednesday that it is slashing its bonus pool and its boss's payout as it bids to stave off the kind of row with investors that has hit rivals such as Barclays.

Sky News has learnt that Standard Chartered will announce alongside its annual results that it is paying roughly $1.2bn (£720m) in bonuses for 2013, down from $1.4bn (£840m) the year before.

The percentage fall in bonuses is substantially higher than the decline in the bank's profits for the year, reflecting its desire to demonstrate pay restraint, a source close to Standard Chartered's board said on Tuesday.

Peter Sands, the bank's chief executive, will see his bonus cut by a bigger margin than the reduction in the overall pool, according to a source.

StanChart is Liverpool's shirt sponsor

His £2m payout for 2012 had been reduced to not much more than £1m to reflect "a challenging year" for the bank, which sponsors Premier League side Liverpool, they added.

While a comparison with Barclays is unlikely to be explicitly drawn by Standard Chartered, the source said Mr Sands and Sir John Peace, its chairman, were keen to avoid the publicity over pay which had damaged its UK-based rival.

Last month, Barclays increased its bonus pool for 2013 to £2.4bn despite a slump in profits, a move which has sparked fury from a number of leading City investors.

Standard Chartered has been a darling of the stock market for many years, with its presence in Africa, Asia and Latin America underpinning a decade-long unbroken run of record profits.

That performance will come to an end on Wednesday when it is expected by City analysts to report a fall in earnings of about 6% to just over $7bn (£4.2bn).

The bank's shares have suffered recently as a consequence of City speculation about a dividend cut and rights issue, as well as broader concerns about the volatility of emerging market economies.

Standard Chartered plans to use Wednesday's results announcement to address speculation about its capital position, an insider said.

The bank is understood to be frustrated about what it perceives to be a lack of explicit guidance from the Prudential Regulation Authority, the UK banking regulator, about its future capital requirements.

Standard Chartered, which is in the process of selling a number of assets in markets such as Lebanon and South Korea, declined to comment.

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Lloyds Commits To Credit Unions Amid Pay Row

By Mark Kleinman, City Editor

The taxpayer-backed Lloyds Banking Group will make a series of pledges on Wednesday aimed at combating financial exclusion, even as the industry runs headlong into another pay row.

Sky News understands that Lloyds will announce as part of its annual report that it will contribute an additional £1m annually to supporting credit unions, an increasingly popular form of alternative finance.

The commitment to credit unions, which the Government hopes will reduce the reliance on payday lenders of millions of Britons, will be one of dozens made by Lloyds under the slogan 'Helping Britain Prosper', launched by the bank's chief executive last month.

Sources said that Antonio Horta-Osorio would also promise to provide at least one in four so-called basic bank accounts, in line with its share of the broader current account market.

Other commitments would include employing a specific number of apprentices as Lloyds positions itself for a full return to private sector ownership later this year, they added.

Last month, the bank, which is 33%-owned by taxpayers, said it would employ women in 40% of its top 5,000 jobs within six years, while increasing net lending to small businesses and a host of other stakeholder-friendly measures.

Although the scale of some of the commitments is modest in the context of Lloyds' size, the bank hopes that they will convince politicians and the public that it is serious about changing its image.

The publication of Lloyds' annual report will include its remuneration report, which will show that the number of employees paid more than £1m in 2013 rose from 25 staff the year before.

The most toxic publicity, however, is likely to be reserved for Barclays, which also plans to release its annual report on Wednesday.

Barclays will say that it also increased substantially the number of millionaires on its payroll in 2013, as well as setting out the details of substantial pay hikes for Antony Jenkins, chief executive, and other senior risk-takers.

Lloyds and Barclays declined to comment.

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Holidaymakers Warned Over Online Scams

By Tadhg Enright, Sky News Correspondent

Police have warned holidaymakers to be wary of online booking scams after £7m was stolen by fraudsters last year.

A total of 4,500 cases of booking fraud were reported to police in 2013, with almost a third of cases involving consumers paying for holiday villas and apartments that did not exist.

A report by fraud investigators from The City of London Police said the other most common scams included fake airline tickets and some package holidays to sporting events and religious pilgrimages.

Detective Superintendent Pete O'Doherty said: "The internet has changed the way we look for and book our holidays.

"Unfortunately it is also enabling fraudsters, using online offers of villas, hotels and flights that simply don't exist or promising bookings that are never made, to prey upon those looking for that perfect break."

Laura and Seán Parks told Sky News about their ordeal after they were scammed while trying to book a Valentine's Day break while Seán, a soldier, was home on leave from Afghanistan.

Having seen an online advertisement for log cabins near Loch Ness in the Scottish Highlands she was duped into paying £400 into the fraudster's bank account - only to find upon arrival that the cabins did not exist.

Seán said that booking service appeared to be legitimate: "The website looked 100%. Everything else, the invoices, they all looked genuine."

Laura added: "He was using a booking company, wasn't he? And I contacted the booking company to ask if they were aware of any of this and they weren't.

"But you have no reason to doubt anything when you have invoices coming through, and you're paying into a bank account."

The National Fraud Intelligence Bureau, the travel industry body the Association of British Travel Agents and the Get Safe Online campaign have urged consumers to be wary and prepared the following advice:

• Do your research: Do not just rely on one review, do a thorough online search to ensure the company's credentials. If a company is defrauding people there is a good chance consumers will post details of their experiences, and warnings about the company, online.

• Use your instincts: If something sounds too good to be true, it probably is.

• Pay safe: Never pay directly into an owner's bank account. Paying by direct bank transfer is like paying by cash and the money cannot be traced and is not refundable. Where possible, pay by credit card or a debit card that offers protection.

ABTA chief executive Mark Tanzer said: "Fraudsters are conning unsuspecting holidaymakers and travellers out of thousands of pounds each year - leaving them out of pocket or stranded with nowhere to stay through fake websites, false advertising, bogus phone calls and email scams."

Get Safe Online chief executive Tony Neate said it was vital for holidaymakers to do their research before booking.

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Markets Tumble As Ukraine Tensions Escalate

Putin Is Cracking The Whip On The West

Updated: 10:29am UK, Monday 03 March 2014

By Sam Kiley, Foreign Affairs Editor

He's done it again.

With the swashbuckling approach to international affairs that fits his popular bare-chested public persona, Vladimir Putin has outmanoeuvred his Western rivals and local challengers.

Barack Obama, the leader of the world's greatest superpower, has been left looking like a salmon gasping on a river bank.

John Kerry, the US Secretary of State, unwittingly put his finger on why.

"You just don't in the 21st century behave in 19th century fashion by invading another country on completely trumped up pretext," he harrumphed.

Well, if you're Mr Putin, you do.

You destabilise regions where you have cultural linguistic ties, like Abkhazia and South Ossetia in Georgia, and then if you feel the time is right you invade them like a 19th-century Tsar and take charge in the name of protecting your natural subjects.

There is nothing surprising about what happened in the Crimea. Only that the Western powers, nests of super-expensive spy agencies and cyber surveillance, were left entirely gormless and thunderstruck when Russian commandos, posing as "gunmen", quietly took over airport and government buildings.

But one did not need MI6, the CIA, European spooks and cyber nerds to guess that Mr Putin meant business when he identified the new government in Kiev as being the products of a fascist revolution and mobilised 150,000 troops on Ukraine's borders. You just had to keep your head out of the sand.

But that is where Western powers have been shoving it throughout the recent Putin years.

They did this because they are powerless to stop him. They don't have his dash or his amoral lack of concern for anything other than what he perceives to be Russia's interests.

He has not been wringing his hands over Syria - a country he has repeatedly said should be left to make its own sovereign way (unlike Ukraine).

He has behaved with the total hypocrisy and certainty of purpose that made nations great in the 19th century.

Empires were built, the biggest by the Brits, on perfidy, dash, ruthlessness and clarity.

He has backed Bashar al Assad. He has backed Iran.

As a result he has the most influence in the Syria nightmare.

He also has the most influence in determining or at least shaping Iran's nuclear future - and if Tehran gets the bomb, then making sure that he's on the right side of its leadership.

As in Ukraine, the West is enjoying baying at the Russian bear from the moral high ground.

But it has no levers that it is serious about pulling, either in the Middle East or in Crimea.

Threats of snubbing the G8 pow-wow in Sochi in June, even of economic sanctions, hardly matter to the Kremlin.

Moscow can cause economic mayhem in Europe just by turning off the gas taps.

Mr Kerry told the CBS programme Face The Nation that there would be "very serious repercussions" for Moscow and said G8 nations and some other countries are "prepared to go to the hilt to isolate Russia" with an array of options.

"They're prepared to put sanctions in place, they're prepared to isolate Russia economically, the rouble is already going down. Russia has major economic challenges," he said.

That may be true.

But Mr Putin has the whip in his hand, and he's already doing the cracking.

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Debt Collection Giant Slashes Borrowing Costs

By Mark Kleinman, City Editor

The buoyant state of the City's financing markets will be underlined this week by a transaction involving one of Britain's leading debt collection agencies.

Sky News understands that Lowell Group, which is owned by the private equity firm TDR Capital, is to unveil a deal that will slash the cost of its own borrowings.

Goldman Sachs and JP Morgan, the Wall Street investment banks hired to work on the deal, are understood to be planning to sell a new bond to investors with a yield of approximately 6%.

That will compare with Lowell's existing arrangements, which pay interest of more than 10%, underlining the more benign state of debt markets since the company's most recent bond issue towards the end of 2010.

A source close to the company said information sent to prospective bond investors would say that the proceeds - expected to be in the region of £100m - would be used for "general corporate purposes".

This is likely to involve pursuing further acquisitions of consumer debt portfolios although it could also give TDR the flexibility to pay itself a small dividend if such purchases did not prove to be attractive, they said.

Lowell, which was acquired by TDR in September 2011, says it is "committed to taking a fair, sensitive and ethical approach to debt recovery, and is in full compliance with UK Government guidelines and industry trade and regulatory bodies".

On Thursday, the Financial Conduct Authority set out its final rules for regulating the consumer credit industry amid criticism about the behaviour of some debt collection agencies.

Lowell's divisions include Red Debt Collection Services, a specialist debt recovery department which focuses on telecoms accounts and so-called escalated accounts - or those which relate to persistent non-payers.

A source close to the group said that Lowell could decide to pursue a stock market listing towards the end of this year or the beginning of 2015.

When it does examine a listing, sources close to Lowell believe it is likely to be valued at more than £1bn based on the rating attributed to rival Arrow Global, which floated last year and now has a market capitalisation of just over £450m.

"It is a higher-quality business than Arrow so it should command a premium to Arrow's rating if it goes public," an analyst said on Sunday.

The debt collection sector has also seen a substantial amount of other corporate activity.

Earlier this month, Cabot Credit Management, which is jointly-owned by the US debt recovery group Encore and New York-based buyout firm JC Flowers, bought Marlin Financial and its £2bn-worth of loans for £295m including debt.

TDR declined to comment.

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Virgin Money Backs Doubling Of Bank Bonuses

By Mark Kleinman, City Editor

Sir Richard Branson's banking arm will this week become the latest of Britain's high street lenders to say that it is supporting the payment of higher bonuses under new European rules.

Sky News has learnt that Virgin Money is to reveal alongside its full-year results that its shareholders have approved a request from its board to award up to 200% of the salaries of top executives as bonuses.

The disclosure, which goes beyond that required of the privately-owned Virgin Money, will come as the company says on Tuesday that it returned to profit for the first time since acquiring Northern Rock from the Government in 2011.

The bonuses decision, which reflects a 100% bonus-to-pay ratio cap without shareholder approval, was more of a formality for Virgin Money than listed rivals, which must put the move to their annual meetings this year.

People close to Virgin Money said that its results statement would provide detailed data akin to that of one of the major high street banks, each of which has announced its 2013 results during the last month.

Virgin Money's board has decided to do so in order to furnish potential investors with more information about the business as it prepares for an initial public offering on the London Stock Exchange in the medium term, one said.

A flotation is unlikely before next year at the earliest, they added.

The bank's results will show a strong performance in 2013 following the integration of Northern Rock, whose collapse in 2007 sparked Britain's financial crisis.

Jayne-Anne Gadhia, Virgin Money's chief executive, is expected to say that its savings book saw strong growth, reflecting its policy of offering customers the same rate across all channels and shunning teaser rates.

Last week, Royal Bank of Scotland said it was following suit in an attempt to win back the trust of consumers.

Mrs Gadhia's total pay package of about £950,000 in 2012 is understood to have risen to roughly £1.1m last year, an insider said.

Her base salary of £550,000 is likely to rise modestly in 2014, reflecting the Virgin Money board's  keenness to retain her as Virgin Money prepares for an assault on the UK current account market.

Its plans are being drawn up against a backdrop of growing political hostility to the dominance of the country's five major high street lenders.

Ed Miliband, the Labour leader, will ask competition regulators to recommend a legal market share cap for banks if he wins the next general election, which he argues would pave the way for the likes of Virgin Money to mount a more effective challenge.

Virgin Money recently began trialling a current account among the bank's staff, with early indications understood to have been positive.

The planned public launch of the product later this year could mark a potentially-significant phase in efforts to bolster competition in the market.

More than 80% of accounts are supplied by the five biggest lenders: the state-backed Lloyds Banking Group, owner of HBOS, and RBS, which owns NatWest; Barclays, HSBC and Santander UK.

Once the staff trial has been completed, Virgin Money will target consumers who are underserved by the major lenders, offering a basic account with no fees or charges and free access to the UK ATM network of cash machines.

It is also likely to say this week that it expects to be aided by the new seven-day switching system for current account providers which came into effect last autumn.

Virgin Money, which sponsors the London Marathon, now has more than 4m customers, having established a significant market share in loans, insurance and savings.

A Virgin Money spokesman declined to comment on Sunday.

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Floods Fund: £2m To Support Tourism Firms

Tourism businesses affected by the recent flooding are to get a £2m boost from the Government.

Culture Secretary Maria Miller says the money will fund experts who will visit affected areas and offer practical advice to tourism firms such as how to access business support measures.

The advice sessions will be hosted by VisitEngland and run throughout March.

The fund comes on top of  the £10m set aside by Prime Minister David Cameron last month to help flood-hit businesses generally.

Ms Miller said: "We want to help all those tourism businesses that have been affected by the horrendous floods get back on their feet as quickly as possible.

"Experts will be put on the ground to help small businesses with practical advice and communications while a bespoke Easter marketing will bring people back to the areas hit."

Welcoming the funding, VisitEngland chief executive James Berresford said: "Our message to customers is 'Business as usual'.

"Despite many areas having been affected by bad weather and some travel disruption, the tourism infrastructure is largely unaffected."

VisitBritain chief executive Sandie Dawe said: "International tourism is worth around £1.5bn to the economies of south west England and Wales.

"We are already getting out the message that it is a great time to travel to Britain and will be intensifying that activity over the coming months."

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:: Watch Sky News' special programme 'Battered Britain: From The Air' about the effect of the recent storms on the UK's landscape on Sunday, March 2, at 4pm.

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EU Pay Cap Triggers Pay Rise For Lloyds Boss

By Mark Kleinman, City Editor

The chief executive of Lloyds Banking Group is being lined up for a salary increase that could see his fixed pay almost double as it tackles new remuneration rules imposed by Brussels.

Sky News has learnt that Lloyds, which is 33%-owned by taxpayers, is likely to announce next week that it has decided to follow other big UK banks in awarding "allowances" to its most senior risk-taking staff.

Lloyds' board remuneration committee is understood to have met in the last few days to agree the move.

The decision still requires the formal approval of UK Financial Investments (UKFI), the Treasury agency which manages the taxpayer's stake in Lloyds.

If it gets UKFI's backing, the details will be announced as part of Lloyds' annual report, which is expected to be published on Wednesday.

From one perspective, UKFI's backing would not be surprising since George Osborne, the. Chancellor, has already mounted a legal challenge to the European Union rules.

Under the Brussels scheme, which affects pay deals awarded from this year onwards, banks can hand out bonuses worth up to 100% of an employee's salary without the consent of shareholders.

However, they must seek investors' consent to award up to double that sum in variable pay, which even at that upper limit is much less than many bankers have typically been paid.

The rules have prompted major banks operating in Europe - including Barclays, Goldman Sachs, HSBC and Morgan Stanley - to devise new monthly or quarterly payments which count towards an employee's basic salary for the purposes of calculating their annual bonus entitlements.

Stuart Gulliver, HSBC's chief executive, used the bank's annual results last Monday to attack the rules, pointing to the overwhelming backing its shareholders had given to its existing pay schemes.

Lloyds is understood to have identified approximately 50 executives who will be eligible for the role-based payments, which will be awarded in shares that recipients will have to hold onto for a lengthy period.

Much of the focus is likely to be on the allowance handed to Antonio Horta-Osorio, Lloyds' chief executive, who receives an annual salary of £1.061m.

Insiders said that while the plans had not yet been finalised, Mr Horta-Osorio was likely to receive an allowance of up to another £1m, which would mean that with the approval of Lloyds' shareholders, he could theoretically receive annual bonuses worth up to roughly £4m.

News of the bank's plans comes just a fortnight after Mr Horta-Osorio was awarded a £1.7m bonus for 2013 as an acknowledgement for his work in improving Lloyds' performance during the last year.

The payment will not vest until conditions relating to the share price or a further sale of the taxpayer's stake, and if they are met, he would not receive the bonus until 2019.

Sky News has also learnt that Lloyds' remuneration committee has decided to award Mr Horta-Osorio up to half of a deferred share award made in 2011 when he joined the lender from Santander UK.

That payout is likely to be worth in the region of £2m.

A Lloyds spokesman said that final decisions had still to be taken.

More contentious will be the decisions on pay made by Royal Bank of Scotland (RBS), the other big state-backed lender.

Ross McEwan, its chief executive, said on Thursday that RBS needed to be able to pay "fairly" otherwise he would not be able to retain key staff.

Analysts and investors interpreted the remark as a signal that he also wants to make additional payments, although he insisted that RBS was still consulting with shareholders.

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