On THE evening of Tuesday, 20 November at the Grosvenor Hilton, Edinburgh, five leading investment figures will take to the stage of our investment conference: Markets: Where to from Here?

The audience may not get all the answers to the mysteries of what lies ahead in 2013. But knowing the speakers as I do, the evening will be a treat. After a highly successful event last year, the conference will assess the forces now driving markets and the prospects for recovery in 2013.

Top speakers include Sebastian Lyon, investment adviser to Personal Assets Trust; Katherine Garrett-Cox, chief executive of the giant Alliance Trust; Mark Connolly from Scottish Widows Investment Partnership; Alan Porter, manager of Martin Currie’s Securities Trust of Scotland, and Jim Wood-Smith, chief investment strategist at Investec Wealth & Investment.

Together, they represent investment houses with funds under management totalling more than £500 billion.

The event will be introduced by Owen Kelly, chief executive of Scottish Financial Enterprise, and I will be in the chair to make sure no-one throws any furniture.

Will America see a sustained recovery? What is the outlook for fixed interest markets? Will we see an end to the eurozone crisis? Above all, what are the sectors to be invested in – and which ones should we avoid?

I had the pleasure of seeing Mr Wood-Smith in action last week in Edinburgh with such a striking, counter-intuitive presentation that the event left me in no doubt that 20 November is set to be a cracker.

He was speaking to a gathering of Investec/Williams de Broe investors after yet another of those sudden “risk-off” days in markets when gains painstakingly built over several weeks disappeared in a trice.

You certainly don’t have to look hard to find reasons for staying out of stock markets today. Five years on from the eruption of the global financial crisis and we are still struggling with its consequences. Bank loan books remain in a terrible state. Household finances are perilous. The eurozone still looks like a blind walk along a cliff-edge. Few believe last week’s figures showing our exit from recession herald better times. The crisis. Ah, yes, the debt and deficit crisis. The banking crisis. We’re still in it up to our eyeballs. How can we dare hope to move on?

Mr Wood-Smith was having none of this. We have in fact moved on from “the crisis” and its defining moment in 2008 with the collapse of Lehman Brothers and in early 2009 with the effective nationalisations of Lloyds Banking Group and RBS in early 2009. On 9 March, the US Standard & Poor’s hit a satanic intra-day low of 666.

Few imagined there would be much by way of recovery back then. But last week the S&P was up at 1,415. In fact, while we obsessed with volatility, risk, absolute return funds and the tumbling return on gilt edged stocks, global equity markets have rallied by 70 per cent where they have not doubled. The S&P is up 116 per cent, the German DAX by 101 per cent, the FTSE All Share by 72 per cent.

“This entire obsession over safety,” says Mr Wood-Smith, “should have applied in the earlier period. Markets since the crisis have been quietly getting on with it.”

All very well, you may say, but what’s it got to do with the real world? But here, too, he points out, we have moved from crisis. The table shows how the major world economies have in fact grown since 2007, one notable exception, of course, being the UK. The table also highlights why Mr Wood-Smith loses no sleep over Greece, its economy being smaller in magnitude than the margin of error for China’s growth performance.

So, not only have global equity markets been good, but the performance of many leading global economies has been better than generally admitted. As for the future, he does not deny we are in for some further turbulence but is markedly more upbeat than most commentators. The global bull market will continue, helped by the unparalleled determination of central banks to stimulate growth, increasing pressure for relaxation of banking regulation to stimulate bank lending, and early signs here in the UK that the Funding for Lending Scheme may already be having a benign effect. Now, this was a counter-intuitive presentation. And I can vouch for the fact that the views of other panelists are likely to be in sharp contrast.

Mr Lyon, for example, is an eloquent and compelling advocate of investment for capital protection. “Safety first” is set to remain the preferred position for investors – and it is a stance that has certainly served Personal Assets Trust and the Troy funds and trusts very well in recent years.

Where to from Here? begins with registration and buffet at 6:30pm. After the presentations there will be a question and answer session followed by another networking opportunity. For more information, visit Scotsmanconferences.com, e-mail conferences@scotsman.com or call on: 0131 620-8656.

This will be an invigorating and enlightening event. I look forward to seeing you.

THE SCOTTISH Government is under mounting pressure to introduce American-style “plea bargains” amid fears that the introduction of new rules in England and Wales will put Scottish firms at a disadvantage.

Deferred prosecution agreements (DPAs), announced by the Ministry of Justice last week, will allow firms south of the Border to avoid criminal charges by admitting to economic crimes such as bribery or fraud, but experts said the rules will be undermined unless Holyrood follows suit.

Tom Stocker, a partner at Pinsent Masons, said the introduction of DPAs means firms in England and Wales would pay substantial penalties and be forced to compensate victims and take remedial action, but would avoid criminal investigation or prosecution if they admit to wrongdoing.

However, he argued that similar measures need to be introduced in Scotland if DPAs are to be an effective tool, and said it was unclear whether Scottish authorities would respect plea bargains agreed with the Senior Fraud Office (SFO) in London.

Stocker added: “In situations where the SFO and the Crown Office and procurator fiscal service have concurrent jurisdiction, operating two separate enforcement models is impractical. It creates uncertainty which undermines the incentive for self-reporting in Scotland.”

LAW firm Brodies has beefed up its pensions provision after hiring widely-regarded specialist solicitor Alison Shackleton from rival practice Burness.

She will join Brodies tomorrow in a move that brings the number of employment and pensions specialists in the firm’s Glasgow office to 12.

Shackleton has been listed in both the Chambers & Partners and Legal 500 directories in recent years and was recognised in Chambers as being “effective at singling out issues which matter” and commended for her commercial approach to dealing with difficult situations.

She said: “I relish the prospect of working with such a dynamic and fast-growing team which has built a tremendous reputation among clients and in the Scottish legal market.”

Bill Drummond, managing partner of Brodies, added: “With pensions high on the agenda for many public and private sector organisations, our specialist lawyers are ideally placed to provide practical guidance on a wide range of issues from auto-enrolment to major funding projects for large defined benefit schemes, employer insolvency and pension protection fund entry.”

Earlier this month, Burness and Paull & Williamsons became the latest legal firms to join the merger fever sweeping through the sector.

The tie-up will see the formation of Burness Paull & Williamsons, creating one of the largest firms based solely north of the Border.

It will rank behind Brodies as the largest law firm in terms of turnover and partners based in Scotland.

LENDING to businesses is expected to fall to its lowest level for six years despite a raft of measures aimed at freeing up the flow of credit, a new report warns today.

However, the Ernst & Young Item Club said the outlook for the coming year was brighter, as the financial services industry was showing signs of “slowly” turning the corner and income across Britain’s big banks should stabilise in 2013 before returning to modest growth in 2014.

According to its latest report into the outlook for financial services, corporate lending is forecast to shrink by 4.6 per cent this year, dropping to £429 billion by the end of the year – the lowest level since 2006 – despite initiatives such as the Bank of England’s £80bn Funding for Lending scheme.

Carl Astorri, senior economic adviser to the Item Club, said this year’s decline will be slower than the 6.1 per cent drop in 2011 and growth should resume next year, but lending will not return to pre-financial crisis levels until 2016.

Astorri also warned that small businesses will “continue to feel the squeeze” as banks come under pressure from regulators to shore up their capital. He said evidence from the Federation of Small Business shows that 38 per cent of SMEs have had their applications for loans rejected this year. That compares with average rejection rates of around 11 per cent between 2005 and 2008, when the financial crisis erupted.

Ernst & Young also predicted that profits across the insurance industry will start to recover next year, but Funding for Lending is unlikely to stimulate the mortgage market, where residential loans look set to grow just 1.3 per cent this year, barely changed from the 1.2 per cent expansion seen in 2011.

Meanwhile, business sentiment regarding the wider economy has risen to its highest level since April according to the latest Lloyds business barometer, although its report found that companies’ optimism about their own trading prospects had fallen to the lowest point this year. Only 40 per cent of firms surveyed said they were upbeat about their outlook, compared to 51 per cent in September.

Trevor Williams, chief economist at Lloyds Bank Wholesale Banking & Markets, said that economic growth in the fourth quarter of the year is likely to be “somewhat lower” than the third quarter, when the economy grew by 1 per cent, ending nine months of recession.

Bank of England deputy governor Charlie Bean yesterday said there was “reason for some optimism” over the economy but he cautioned against an over-enthusiastic response to last week’s GDP figures, pointing out that a proportion of the growth was caused by one-off factors such as the Olympics.

Bean said the squeeze on households’ spending power, caused by higher utility, food and commodity prices, “should not be so intense” and progress has been made towards tackling the problems in the eurozone.

He added: “Utility prices will be going up again and probably a spike in food prices because of the unusual weather but, generally speaking, real household incomes won’t be squeezed quite as much.

“There is still a long way to go there but again, a slightly better picture and also some signs that maybe conditions are improving in the banking system.”

INDIAN tycoon Vijay Mallya has insisted that he does not have to do a deal with drinks giant Diageo or sell off the “family silver” to prop up his troubled airline.

Mallya’s United Spirits empire, owner of distiller Whyte & Mackay, has been locked in talks with Diageo to sell a key stake in the business to the maker of Bell’s and Johnnie Walker.

However, in an interview published yesterday, India’s answer to Sir Richard Branson poured scorn on reports that he was being forced to sell stakes in profitable businesses to fund his Kingfisher airline venture.

“I am not so sure that I lack commercial acumen to the extent that I would sell a hugely thriving, successful business to take the cash and put it into an airline in an environment such as India,” said Mallya, in his office at Force India, the Formula One team he co-owns.

“My group is sufficiently cash-generative to fund the airline as we have done. We have put almost £150 million since April 2012 into the airline. But that has not meant that I have had to sell my family silver to fund the airline,” he added.

Diageo is thought to be pushing for a deal that would give it a strategic interest in United Spirits, which is India’s second-largest drinks group, with a valuation of some £1.5 billion. The London-listed group is looking to grab a bigger share of the fast-growing Indian market.

However, Mallya insisted: “I do not have to do a deal with Diageo at all. I am under no compulsion whatsoever. But having said that, I will do what is good … for myself, my family wealth and for long-term shareholder value.

“I must do that for every business because these are public companies and I owe it to the shareholders and stakeholders in these companies.”

He added: “Selling assets to fund the airline? No plans of that nature whatsoever.”

Kingfisher Airlines, which has never made a profit, recently had its licence suspended by India’s civil aviation authorities and has not flown since the start of October after a protest by employees, who had been unpaid since March.

The cash-strapped carrier said on Friday it would use its own money to try and get back in the air. The day before, staff had agreed to return to work after the airline said it would pay three months of overdue salary by 13 November.

According to the consultancy Centre for Asia Pacific Aviation, Kingfisher has total debt of about $2.5bn (£1.6bn).

Mallya said the airline had to be dealt with professionally, but he wanted it to survive.

“The environment and government policy must also encourage me to do that,” he said. “We are going to give it our best shot. We are committed to that.”

The tycoon, who said on Twitter last week that he was relieved to no longer be a billionaire on the latest Forbes list because it might lessen some of the envy directed at him, defended the management of the company.

He said there were many reasons for Kingfisher’s predicament, but laid much of the blame on taxation and the Indian government.

Mallya has been looking for partners and said two investment bankers had been hired as part of the search.

The old tongue twister goes: “How much wood could a woodchuck chuck if a woodchuck could chuck wood?”

According to the directors of drinks firm C&C, it was worth chucking quite a lot when it bought the US-based maker of Woodchuck cider, the Vermont Hard Cider Co, last week for £190 million.

Vermont Hard Cider president and chief executive Bret Williams noted to a local newspaper that he had mortgaged his home, liquidated his pension, and “pulled the change out of the ashtray” to buy the company with a small group of investors, mostly college buddies, for $2.3m in 2003 from Scottish & Newcastle’s HP Bulmer operation.

Now, most people know that a woodchuck is a sort of groundhog.

And people could be forgiven for confusing C&C, which makes Bulmers Cider brand in Ireland, with the company that used to own Vermont Hard Cider – one HP Bulmer, maker of Strongbow.

Williams credited S&N’s ownership with nearly bankrupting Vermont Hard Cider.

And while it all may come across as a bit like groundhog day for Woodchuck, Williams and his new backers in Ireland – mostly former S&N executives anyhow – reckon that the US market is ripe now that it is the largest cider producer there.

Vellacott shifting focus

Oliver Vellacott, the technology entrepreneur who last year failed to buy out the company he founded, has spoken for the first time since selling his entire 2 per cent holding in the company last week for £8m.

His attempt to seize control of IndigoVision prompted a fierce boardroom battle with chairman Hamish Grossart, who welcomed the new institutional investors who bought Vellacott’s shares.

In a statement issued to us over the weekend, Vellacott said: “For 18 years IndigoVision played a central part in my life. It was immensely satisfying to see a talented team come together and create a Scottish technology company that became highly respected within the international security market.

“I am very proud of the many individuals throughout the company whose creativity and hard work made this possible. It is my sincere hope that the company will go from strength to strength, and continue to be an independent Scottish success story.”

Unfortunately, he’s not saying what he intends to do with his cash pile, although the betting is on him starting up a new venture or perhaps dabbling as a business angel. No doubt he will pop up on one or two boards in due course.

Rox’s big night got our ear

With chart-topper Labrinth, weather girl Cat Cubie, a fleet of Ferraris and an evening of cocktails, it was always going to be one of the hottest tickets in town.

The VIP opening of jewellery chain Rox’s Edinburgh emporium last week was, by any measure, a resounding success.

Hundreds packed into the £1 million shrine to all things sparkling, making for some lengthy queues at the Thrill Room’s champagne bar.

However, for one member of the business desk it was all too much as the Assembly Rooms shook to Labrinth’s finest tunes.

Perhaps, for its next opening, Rox might consider some old crooner.

THE VAST majority of medium-sized companies in the UK have expressed optimism about their international growth prospects, although new research shows more than a third of chief financial officers are concerned about red tape when doing business abroad.

According to accounting firm BDO, 78 per cent of UK “mid-cap” firms expect to generate more revenues from overseas investment over the next three years, and 61 per cent said the ongoing eurozone crisis had made little or no impact on their international growth plans.

However, international advisory partner Kim Hayward said 38 per cent of chief financial officers cited the complexity of increased regulation as the biggest stumbling block to overseas growth.

He added: “Pushed abroad by conditions at home, they are pursuing growth overseas but in some instances are lacking in awareness as to how to address the real challenges involved. Crucially, those investing abroad for the first time seem to lack the confidence and knowledge they need to operate overseas.”

BDO’s report found 45 per cent of firms plan to invest in Brazil, Russia, India and China.

SIR Richard Branson has revealed that Virgin Trains is planning a bid for the East Coast main line franchise when it comes up for tender next year.

Earlier this month, the group secured a short-term extension to its contract to run the West Coast franchise after initially losing out to rival FirstGroup. The Aberdeen-based firm had been due to take over the service from 9 December but the UK government scrapped the franchise competition after “significant technical flaws” were found in the process.

Sir Richard said Virgin Trains, which is a joint venture between his Virgin Group and Perth-based transport giant Stagecoach, would be “very likely” to bid for East Coast, which is currently run by a government-appointed operator.

He added: “It [East Coast] urgently needs investment and we’d be delighted to do it.”

The banking sector will be in the spotlight this week as the third-quarter reporting season kicks off with figures from Barclays, Lloyds and Royal Bank of Scotland.

Barclays gets the ball rolling on Wednesday, and new chief executive Antony Jenkins is expected to unveil adjusted pre-tax profits of £1.7 billion for the three months to 30 September, up 27 per cent on the same quarter in the previous year. However, the group will take an additional £700 million hit for covering the cost of mis-sold payment protection insurance (PPI) claims.

Lloyds also faces a hefty PPI bill, with analysts at Credit Suisse pencilling in a £1.5bn third-quarter hit for the part-nationalised bank, which posts its results on Thursday. Investec has forecast a pre-tax loss of around £800m, up from £600m a year ago, although underlying profits are expected to have risen once one-off items are stripped out.

Fellow bailed-out lender RBS is predicted to report a £1bn bottom line loss on Friday, against a £100m deficit in the previous three-month period. At the underlying operating level, Investec analyst Ian Gordon is expecting a £697m profit, ahead of the £650m seen in the second quarter. As well as driving up profits at its core businesses and driving down bad debts, RBS recently exited a state-backed insurance scheme covering its poorer-quality assets. RBS will save £1.4m a day from leaving the Asset Protection Scheme, having paid £2.5bn since signing up February 2009.

David Nish, chief executive of Standard Life, is expected to report further growth in assets on Wednesday when the life and pensions giant updates the market on its third-quarter trading performance. The Edinburgh-based group is seen by analysts as one of the companies best-prepared for new rules that will ban the payment of commission to advisers which sell their products, and recently unveiled a five-year distribution agreement with RBS.

Fashion and homewares chain Next, which recently reported a 10 per cent increase in first-half profits, also updates investors on Wednesday, and brokers at Panmure Gordon expect a 14 per cent jump in online sales for the three months to October, although sales across its 540 stores are predicted to have risen just 1 per cent.

A 3P-A-LITRE rise in fuel duty planned for January could lead to 35,000 job losses, according to campaigners.

The rise could also see a 0.1 per cent cut in economic growth, the report prepared for the FairFuelUK group said.

As a result, the tax increase would bring in only just over half the expected extra tax revenue – £800 million rather than £1.5 billion, said the report.

Speaking ahead of a meeting with Treasury officials today, Quentin Willson, the national spokesman for FairFuelUK, said: “We have always argued that fuel duty shouldn’t be the Treasury’s sacred cash cow – it should be used as a lever for growth.

“Robust financial research and modelling shows if you raise duty you destroy jobs and damage growth.”

James Murdoch will come under attack from shareholders at BSkyB’s annual meeting this week after the telecoms watchdog called his “competence” and “attitude” into question.

Mr Murdoch stepped down as BSkyB chairman amid fears that the News International phone-hacking scandal would damage the firm, but he stayed on as non-executive director.

Shareholder group Pirc (Pensions Investment Research Consultants) has urged shareholders to vote against his re-appointment on Thursday due to the criticisms levelled at Mr Murdoch by communications regulator Ofcom.

Ofcom hit out at Mr Murdoch’s failure to uncover problems at News International earlier during its review of Sky’s broadcasting licence in the wake of the hacking allegations.

Moving from burning coal to generating electricity from shale gas in the US is not cutting carbon emissions at the rate originally estimated. 

Gas produces lower emissions than coal, and the US is now burning less coal to generate electricity because of the development of unconventional gas reserves in shale rock. But millions of tonnes of unused coal is now being exported to the UK, Europe and Asia, say researchers from the Tyndall Centre for Climate Change.

While emissions from the US energy sector have declined by 8.6 per cent, reductions could simply have been displaced.

Last week was a bad one for Owen Paterson, and if you have been out finishing the harvest and do not recognise the name, he was shuffled into the top political job at Defra earlier this autumn

This followed the expected departure of Caroline Spellman and the totally unexpected departure of farming minister Jim Paice, the latter departing with a knighthood to ease his pain.

Like so many other instances where matters go wrong, Paterson’s week had promised so much. He was due to head the UK group at the European Union Agricultural Council in Luxembourg as the Common Agricultural Policy talks slowly come to the boil.

This was to be followed by a visit to the Sial food fair in Paris where, according to his press people, he was going to spearhead British food exports, including I may say, those of Scotch whisky.

This Parisian leg of the ministerial journey included the top speaking slot at a dinner hosted by Eblex, the red meat promotional body in England which was attended by more than 300 buyers and potential buyers.

So, where did it all go wrong?

Apparently the wheels started to come off the planned programme in the departure lounge of the City airport in London, where flights were being cancelled or postponed because of fog.

Now, the UK minister will neither be the first nor last to see transport plans being thrown into disarray by the weather. He might have thought, although it is unlikely, that this is what farming is like, being buffeted by the outrageous slings and arrows of bad weather.

So the baton for leading the UK agricultural delegation was handed at short notice to Richard Benyon, UK fisheries minister, rather than Richard Lochhead or the Welsh farming minister, both of whom were over for the meeting.

Meanwhile, back in London, plans were being made to get the minister to Paris via Eurostar for this all-important export drive of British food and drink.

Here the trail goes murky, and all that is known is as the 300 diners were expectantly waiting for Paterson, there was a huddle around the table where the UK ambassador was sitting.

Within minutes, the urbane diplomat was on his feet saying there would be no ministerial presence.

Neither would he tour the British stand the next day, visiting the firms who are doing that most difficult task: selling food abroad. According to a food trade magazine, the ministerial absence and lack of support were greeted with much grumbling to the effect that the current government was no more interested in the food sector than the previous one – and that was minimal.

Remember that most other countries, for example France, have large organisations supporting exporters. Since the demise of Food From Britain a decade ago, export drives from this country have largely been left to private enterprise.

The official reason given for the non-appearance was parliamentary business and, by Tuesday morning, Paterson was announcing a delay in the proposed cull of badgers in two tuberculosis hot spots. This postponement was greeted with jubilation by badger lovers and stoicism by the English farming union and the British Veterinary Association.

However, it turned out that the postponement was on the cards for months, with required cull numbers being doubled when someone actually got round to counting the nocturnal creatures and the company involved in the cull would not sign up to the increased workload.

For my money, the cull will never go ahead. The £80 million it costs the UK in TB compensation annually and the whole issue of welfare in dairy cows will be parked away by the politicians.

So, in my opinion, the new minister, who so far has only sorted out the grammar of his civil servants and repeated the UK government line on reducing the CAP budget, did not have a good week.

It was little wonder that when I met Lochhead later in the week, he had a smile as wide as it could be. After all, any fumbling by the UK government plays right into the hands of a Scottish Government now playing the independence card as hard as it can.

However, at that same event, a conversation I had with a farmer might also give Lochhead something to ponder.

“I quite like the minister,” the farmer told me. “I quite like the Scottish Government but I am not in favour of independence.”

I find this view is not uncommon in the farming fraternity.

WELCOME to scotsman.com’s Scottish Business Briefing. Every morning we bring you a comprehensive round-up of all news affecting business in Scotland today.

ECONOMICS

Light at end of tunnel despite drop in corporate lending to six-year low

LENDING to businesses is expected to fall to its lowest level for six years despite a raft of measures aimed at freeing up the flow of credit, a new report warns today. However, the Ernst & Young Item Club said the outlook for the coming year was brighter, as the financial services industry was showing signs of “slowly” turning the corner and income across Britain’s big banks should stabilise in 2013 before returning to modest growth in 2014. (Scotsman)

Read all today’s economics news from scotsman.com

FOOD, DRINK & AGRICULTURE

I don’t need Diageo deal, claims Whyte & Mackay owner Mallya

INDIAN tycoon Vijay Mallya has insisted that he does not have to do a deal with drinks giant Diageo or sell off the “family silver” to prop up his troubled airline. Mallya’s United Spirits empire, owner of distiller Whyte & Mackay, has been locked in talks with Diageo to sell a key stake in the business to the maker of Bell’s and Johnnie Walker. (Scotsman)

Pincer grabs supermarket listing contract

A VODKA company has secured its first supermarket listing and will be sold in Waitrose stores in Scotland from early next month. Pincer Vodka will go into four shops – Morningside and Comely Bank in Edinburgh plus Byres Road in Glasgow and Newton Mearns – on November 5 although it may also be stocked in Stirling and Helensburgh when those open next year. (Herald)

Read all today’s food, drink and agriculture news from scotsman.com

INDUSTRY

Hammond lays down gauntlet to SNP over Trident

DEFENCE Secretary Philip Hammond will today challenge the SNP to explain how it would fill the economic void left by removing Trident from Scotland, as he announces £350 million of funding towards the replacement of the nuclear weapons system at Faslane. (Scotsman)

Read all today’s industry news from scotsman.com

MEDIA & LEISURE

Hairdresser Ruffians set to grow

AN upmarket men’s hairdresser is opening a pop-up shop in Edinburgh’s Harvey Nichols next month and plans to launch in London in the first quarter of 2013. Ruffians, which opened its first outlet in Edinburgh in March, has also developed its own brand of hair and grooming products. (Herald)

Read all today’s media and leisure news from scotsman.com

TRANSPORT

Innovations signal big change at Bmi Regional

SCOTTISH airline Bmi Regional, which changed hands in an £8 million deal earlier this year, will today start operating two new services after ditching its old flight codes. The carrier has replaced the former British Midland BD designation with a BM code, which chairman Ian Woodley said would help strengthen its credentials as an independent airline. (Scotsman)

Read all today’s transport news from scotsman.com

GERRY Grimstone is among the last men standing. With five years under his belt as chairman of Standard Life, it became clear that he was perhaps the only person left to lead the industry’s lobbying organisation, TheCityUK, writes Erikka Askeland.

Since 2007, Grimstone has been the chairman of Standard Life, which, compared to its fellow financial services giants in Edinburgh, had a relatively good crisis. As a result, Grimstone last week took up his post at the City’s lobbying group.

“People were keen I should do it. Somebody has to do it because it is an important role,” says Grimstone of the unremunerated position.

“I’m the longest-standing financial services chairman in the United Kingdom now. That is more a function of people falling by the wayside, rather than anything particular about me,” he adds.

He is personable and assured, in the way you would expect of an Oxford graduate who rose high in the civil service only to pass seamlessly into industry as one of the major forces for privatisation in the late 1980s.

As head of international finance at the investment bank Henry Schroder Wragg – now simply known as Schroders – Grimstone advised the government on the sale of a number of its publicly-owned assets, including Cable & Wireless and the water utilities.

Despite his amiable persona, he has a reputation for taking a firm line when needs be. Sir Sandy Crombie, the former chief executive of Standard Life, once remarked on his ability to deliver a “hairdryer treatment”.

TheCityUK has only been around for a few years, launched to defend the industry as public ire increasingly angled itself at the perceived greed of bankers whose voracious appetite for lucrative risk nearly toppled the western economic system.

The group also works to reduce the impact of regulation. As UK and continental European regulators make more strenuous attempts to tame the industry, TheCityUK is trying to ensure that controls foisted on the beast that bolted do not completely break its spirit.

Grimstone figures the choice of a chairman from a decidedly Edinburgh-based company underlines the group’s emphasis on not only the City of London, but the wider UK. However, he warns that London’s pre-eminence as a global financial centre is at risk if it is hamstrung by regulation and allowed to suffer at the hands of international rivals.

“London’s position is under threat. You certainly can’t take for granted the things the City has done in the last 100 years will still be there 100 years from now,” he says.

“I travel a lot in the Far East – in the past it was commonplace for London to be the intermediary for work that was going on over there. You can’t get around the fact these places are all developing their own big financial centres. They will seek to challenge us – it is a competitive world.

“One of our messages to government is they have to consider all of that and speak up for it – it is not an optional extra that the United Kingdom has financial services, it is one of our biggest industries. It exports more than all our other export industries combined,” he observes.

As the Financial Services Authority (FSA) faces being abolished next year for its failure to properly regulate the big banks in particular, the worry is that political pressure could come to bear as new regulators, including the Bank of England, the Financial Conduct Authority and the Prudential Regulatory Authority take its place and bare their teeth.

However, while Grimstone dismisses concerns that an entirely new system of UK regulation will be that different – “it is still all the same people doing it,” he says – he believes that these should take a firm line.

“I am not going to defend the indefensible,” Grimstone stresses. “Financial services can do a lot of good, but they can also do a lot of damage.

“The vital thing about the regulatory system is they are there to stop financial services from doing damage.

“If ever there is a case where the regulator knows more about a company than the board and its chairman do, some very serious questions have to be asked about how the company is being managed.”

He is concerned about the possibilities of a lack of co-ordination between the UK and Europe. His message to Prime Minister David Cameron is that the UK should keep its place at the EU table to defend itself as the leading financial centre.

“The problem with regulation is waiting until you know what Britain’s position is in Europe. Almost the easy part of it is getting the domestic position right, it is how that then knits together.

“The big banks and those big organisations are in London and Edinburgh because they are very strong in global financial services.

“But we could not be strong in global financial services without being strong in European financial services.

“It would be a nonsense to say the UK can be a global centre but it won’t do Europe. Being at the heart of Europe is an important part of being a global financial services centre.”

But for Grimstone, the responsibility for managing companies should rest with the people who manage them.

“The buck does stop with the board, and they have to recognise their responsibilities,” says Grimstone.

He believes that it should continue to be the people on the board who make decisions on divisive issues such as remuneration.

“All these things we do about corporate governance – it is meant to be about outputs,” he says.

“Are remuneration policies getting the outputs we want? Are people being fairly paid and incentivised in the right way?

“Our stance here [at Standard Life] is we want good people working for us, we want to pay them the least we can compatible with having the best people working for us.

“The chairman should take a lead on the ethical position of firms. The boards should be responsible for the ethics throughout their companies. They should have processes in place so they know what is going on, and I see remuneration just being a natural part of ethical behaviour.”

Glasgow housebuilder Mactaggart & Mickel has reported lower annual sales and profits but pointed to growth in a number of areas three years after launching a “diversification strategy”.

The family-owned firm said group turnover in the year ended 30 April had fallen to £38.5 million from £48.1m. Profits before tax came in at £2.86m, down from £4.3m last time, before a land writedown charge of £1.5m.

It highlighted “steady” sales at its core homes division against a backdrop of “constrained” mortgage supply. Three additional developments were launched in the year, while several incentive schemes were introduced to support buyers.

At the firm’s timber systems arm, turnover increased by 45 per cent and profit grew twelve-fold.

Meanwhile, new premises increased capacity to meet demand from contract wins and the delivery of 228 homes for the 2014 Commonwelath Games athletes’ village in Glasgow.

Mactaggart’s contracts division increased its presence in the affordable housing market, while the group’s English strategic land project is said to have “gathered pace”.

The past year also saw Derek Mickel step down as group chairman after 50 years with the housebuilder. Homes chairman and third generation family member Bruce Mickel succeeded him in the role.

Chief executive Ed Monaghan said: “Our performance in this financial year has been sound, reporting a respectable profit and some strong results across individual business units. The past year has seen us progress some exciting projects from launching three new housing developments to securing one of the first public private partnerships using the groundbreaking National Housing Trust funding model.

“Added to which we are now able to offer the Scottish Government supported initiative Mi New Home scheme for purchasers. And after a fantastic summer for British sport we are even prouder of our role in delivering the 2014 Commonwealth Games Athletes’ Village as part of the City Legacy consortium.”

He added: “We are now seeing the benefit of the diversification strategy we implemented in 2009 in response to changing market conditions; a medium term view that has allowed us to exploit previously untapped opportunities in our existing landbank and enter new areas such as affordable housing.

“There is no doubt that there is still significant uncertainty in the sector and wider economy, but we are confident that our business model and infrastructure will see us evolve successfully throughout this period.”

PUBLISHING group Pearson yesterday unveiled plans to merge its Penguin books arm with German-owned Random House in a moved aimed at fighting back against Amazon and Apple in the e-book revolution.

The two companies said the tie-up will deliver “significant benefits” including reduced costs and the ability to invest more in authors and digital technology than they could on their own.

The combined company, to be called Penguin Random House, will be home to writers as diverse as Random House’s Jack Reacher creator Lee Child and Fifty Shades of Grey’s EL James, and Penguin’s long list of classical authors such as Charles Dickens and Jane Austen.

The business will have an estimated quarter share of the market for English language book sales and generate annual revenues in the region of £2.5 billion.

Penguin’s owner Pearson, which also publishes the Financial Times, will have a 47 per cent stake with Random House’s German owner Bertelsmann holding the rest. Penguin chairman and chief executive John Makinson will be chairman with Random House chief executive taking up the same position in the merged company.

The deal requires regulatory clearance which Pearson’s chief financial officer, Robin Freestone, described as a “complicated issue” but he was quoted as saying the company would be prepared to sell “bits and pieces” to get it through.

There is also the possibility that a rival party may derail the partnership, with News Corporation, owner of HarperCollins which has a major distribution operation in Glasgow, reportedly interested in making a £1bn offer for Penguin.

Confirmation of a deal is understood to have come after months of Pearson board discussions.

Pearson chief executive Marjorie Scardino said the consumer publishing industry was going through a period of “tumultuous change, propelled by digital technologies and the giant companies that dominate them”.

She added: “The book publishing industry today is remarkable for being composed of a few large, and a lot of relatively small companies, and there probably isn’t room for them all – they’re going to have to get together.”

She said the two publishers will be able to be more adventurous in trying new models in the world of digital books and digital readers.

Analysts at Numis said the well-flagged merger was “a sensible deal that should generate healthy synergies”.

Jonathan Jackson, head of equities at Killik, also welcomed the deal but said it was “clearly a defensive response to the long-term pressures affecting the industry, including dramatic growth in digital retail channels, self-publishing and digital reading”.

The power of big global publishers, and their ability to set prices, has been eroded in recent years by the boom in digital sales and the rise of Amazon which controls an estimated two-thirds of US print and e-book sales.

London-based Penguin employs 5,500 people worldwide, with around 950 in the UK. Random House has 5,300 staff globally and last year its sales accounted for just under 15 per cent of the UK market, compared with Penguin’s 11 per cent.

Pearson, which is also a major educational publisher, issued a trading update yesterday, showing sales rose 5 per cent in the first nine months of the year. Operating profits fell 5 per cent, reflecting the sale of assets, acquisition costs and weakness in the UK professional training market. Shares in Pearson closed up 4p at 1,225p, valuing the company at just over £10bn.

HURRICANE Sandy not only battered the United States coast last night but also took its toll on oil prices and insurance stocks.

Two-thirds of oil refineries along the US east coast closed ahead of the storm hitting, forcing down crude prices as demand dropped.

The New York stock exchange and the Nasdaq will stay closed for a second day today and could remain shut tomorrow depending on the levels of damage inflicted overnight and the time it takes for the storm to pass.

The closure of the US stock exchanges – the first weather-related shut-downs for 27 years – led to thin trading in London, with volumes at just 60 per cent of their 90-day averages.

Ishaq Siddiqi, market strategist at ETX Capital, warned: “Insurance stocks in Europe are taking a beating on the disaster Sandy could potentially cause, with some suggesting it could be the biggest storm to hit the US mainland.”

Lloyd’s of London insurers have so far had a benign year for natural catastrophes, in sharp contrast to the previous year when the specialist market was pushed to a loss by a series of disasters. In the FTSE 250 index, Catlin Group fell 2 per cent or 8.3p to 464.8p, Amlin dropped 7p to 367.2p and Hiscox declined 8.7p to 475.5p.

The top-flight FTSE 100 index dipped by 11.61 points to 5,795.1, with oil giant BP accounting for about five points of the fall ahead of its third-quarter results today. BP closed down 6.6p or 1.5 per cent at 425p.

Financial stock Hargreaves Lansdown was the biggest faller on the Footsie after analysts at Citi downgraded the stock and placed the firm on a “sell” rating. Shares slipped 31.5p at 727.5p.

But accountancy software firm Sage Group headed in the opposite direction – closing up 1.8 per cent or 5.6p at 309.8p – after Citi’s brokers upgraded the stock to “buy” from “neutral” as part of a wider review of the technology sector.

Among the Scottish stocks, Terrace Hill – the Glasgow-based property developer run by oil tycoon Robert Adair – climbed 2.5 per cent or 0.25p to 10.38p after it sold its student accommodation blocks in Southampton to Legal & General. Under the deal, L&G will fund the construction of the flats, due to be completed in 2014.

INSURANCE giant Direct Line is axing 70 senior roles in an effort to meet a pledge to cut £100 million in costs.

The insurer, part owned by Royal Bank of Scotland, said the move would reduce costs in its central functions and would result in the closure of its office in Teesside.

Executives who have “decided to leave” the organisation include chief operating officer Jonathan Davidson, a high-flying former partner at consultancy McKinsey and a Harvard MBA graduate. He took over the role in 2009.

Other voluntary departures include Sheree Howard, who headed the firm’s project to meet regulatory requirements under Solvency II.

A spokeswoman for the firm, whose headquarters are in Bromley, Kent, confirmed that two senior members of staff based in Scotland are also leaving but declined to release their names.

The latest cuts are in addition to about 900 job losses Direct Line announced last month. The company, which operates brands including Churchill and motoring assistance group Green Flag, is trimming its workforce of about 15,000.

RBS sold a 30 per cent stake in Britain’s biggest motor insurer to stock market investors earlier this month, the first stage of a disposal demanded by European regulators for state aid the bank received in the 2008 crisis.

Chief executive Paul Geddes said the “timing is now right for us to make these changes”.

He added: “We are creating a simpler, more efficient business which costs less to run. As market leader, these changes are essential for us to succeed in a competitive market place. I don’t make these changes lightly, and we will do all we can to support those affected.”

As a result of the changes, chief information officer Angela Morrison will report directly to Geddes.

The firm added that “key 
elements of Solvency II activities” had been “embedded” in the finance and risk functions under Jose Vasquez, chief risk officer. The remaining elements under Davidson’s remit have been devolved to other areas of the business.

French politicians who will play a key role in deciding the shape of the next Common Agricultural Policy have unveiled their thoughts on how their farmers should receive support.

Speaking in Brussels, new French agriculture minister Stephane Le Foll suggested that all farmers would receive a basic area payment but that would be doubled on the first 50 hectares for all those who kept suckler cows. He said that would help secure the French beef sector.

One of those listening to the French proposals was Scottish MEP George Lyon, who said: “The proposal raises numerous questions as to how it would work. One that immediately springs to mind is how to prevent farmers splitting their businesses into 50 hectare units to get the higher payments.”

The minister also announced the French position on the EU budget which was to cut it to 1 per cent of gross national income.

They did not want to see any further substantial cuts made to the CAP budget, already cut by 10 per cent under the Commission’s plans.

ANDREW ARBUCKLE