BP to sell stake in Pan American Energy to pay for oil spill.

 Continuing its plan to rid itself of $30bn by 2011, BP has sold its 60% stake in Pan American Energy (PAE) for $7bn. In selling its shares in the Argentine oil company, BP will have raised more than $20bn since July. The oil spill crisis is estimated to cost the company $40bn in total.

BP chief executive said the sale showed BP was strong enough for the company to continue despite its large liabilities.

He said: “This agreement further demonstrates both the high quality and attractiveness of the assets throughout BP’s global portfolio and also the company’s ability to meet our significant financial commitments arising from the Gulf of Mexico tragedy.

“We now have agreements in place that should secure the majority of our divestment target. We will continue to identify further assets that may be strategically more valuable to others than to BP as we complete the programme.”

UK household spending drops for first time in 10 years.

Figures released from the Office for National Statistics (ONS) revealed the impact the recession had on households across the UK. Data from the ONS annual Family Spending Report showed the average household spent £455 a week in 2009, lower than the £471 seen in 2008.

The report showed just how affected consumer confidence was in 2009 following the recession, as spending hit a 21-month low.

Interestingly, the figures revealed high earners were hit particularly hard during the economic crisis, with families in the top tenth income bracket reducing spending by nearly 12 per cent.

ONS statistician and report editor, Giles Horsfield said: “Higher expenditure on some housing related costs such as rent, electricity and gas [was] offset by lower spending on mortgages.”

Further figures from ONS revealed consumer spending in 2010 is on the rise with data leading to an increase in 7%, despite the looming VAT increase and the announcement of comprehensive public spending cuts.

BA wins 99% shareholder approval for Iberia merger.

The £4.5bn tie-up will introduce Europe’s second largest airline under the name, International Airlines Group (IAG).  Plans for the collaboration began two years ago after both airlines suffered financial difficulties during the global economic crisis.

Antonio Vazquez, Iberia’s chairman said the joining of the companies would form a “historical agreement that will create a global group to lead a future consolidation process in the airline business.”

With more than 99 per cent of the vote from BA shareholders for the merge to go ahead, BA will own 56 per cent of IAG with Iberia taking control of the remaining 44 per cent.

BA said of the merger: “We have taken a big step toward our merger with Iberia. This will create a stronger business for the long-term benefit of our customers, our shareholders and our employees.”

It is expected the merger will be completed on 21 January with shares in the new company listing in both London and Madrid on 24 January. 

The banks are right – many UK Tour Operators just aren’t worth lending to

Many UK Tour Operators are bemoaning the scarcity of bank lending to businesses but market analysts Plimsoll argue that the banks are right – many UK based operators are just not worth the risk.

High profile failures throughout 2010 have shown the danger of operating on micro profit margins and there could be more to follow. 643 of the UK's 1000 largest operators exist on profit margins of less than 1.5% - 322 of them are making a loss. Any bump in the road will be enough to see them fail because they cannot rely on cheap credit to see them through anymore.

Of course, banks have been guilty of being too harsh in turning away some perfectly healthy companies and it is essential that they play their part in getting business moving again. However, nobody should blame them for refusing credit to operators that might not be able to pay it back. Many are turning up at the bank saying “We spend almost as much as / more than we make”.

The financial sector was correctly vilified for reckless lending that lead to the economic crisis but in the case of many Tour Operators they are right. If banks are to meet government and electorate demands to lend responsibly then companies with consistently low margins just pose too big a risk.

It also seems that debt levels have little to do with the ability to secure funding. Even companies with minimal or no debt are struggling to get credit if they have thin margins. There is simply too much risk attached. We picked 212 companies who have little to no debt but have profit margins that are just too thin.

On the flipside, there is good news for 177 prudent companies that made tough decision early and focused on the bottom line instead of chasing sales over the last few years – they now have the edge in the market. Ironically, these are the companies that the banks are most willing to lend to. One or two of these solid companies should look to capitalise on this advantage and borrow money to invest in their future through a couple of smart acquisitions.

Click here for more information on Plimsoll’s latest assessment of the UK Tour Operators market.

Britons in rural areas must earn 20% more than those in urban surroundings.

A study conducted by the Commission for Rural Communities (CRC) revealed country dwellers must earn around £4,600 more annually than those living in urban areas in order to sustain an acceptable standard of living.

The results have been blamed on those in remote areas needing to spend extra on fuel and transport as well as urban dwellers benefiting from cheaper and more accessible utilities.

Executive director for the CRC, Nicola Lloyd said: “Although it is now widely recognised that one in five rural households experience poverty, this is the first time we’ve also had reliable data to show the minimum cost of living in the countryside is higher than in the city.”

Figures from the study also revealed that in order to afford a minimum standard of living, someone living in a rural village would need to earn at least 50% above the minimum wage, just to make ends meet.

Ms Lloyd added: “The rural minimum income standard clearly shows that many ordinary families living in rural areas will struggle to afford the everyday essentials; for some this will make rural life unsustainable.

“The CRC’s recent work on fuel poverty and promoting greater energy efficiency offers ways for government and others to help reduce these costs.”

Train travellers angry as fares may rise nearly 13%.

 The Association of Train Operating Companies (Atoc) revealed rail fares would go up by an average of 6.2% in the New Year. As regulated fares are expected to rise by between 5.8 and 7.8 per cent, the increase has sparked criticism from travellers.

Leader of the TSSA rail union, Gerry Doherty said: “It is simply outrageous that hard-pressed commuters are being forced to pay fare hikes when they are themselves facing pay freezes and job cuts.

“Passengers will regard that as a sick joke seeing as we have the most expensive and overcrowded railway in Europe.”

As regulated fares are tied to an annual price cap formula, they can increase every January depending on the previous year’s RPI inflation rate plus 1%.

Atoc defended the price increase and said the fee hike was important for investment in British railways, making room for improvements in customer satisfaction and punctuality.

Chief executive of Atoc, Michael Roberts said: “We know times are tough for many people but next year’s fare increase will ensure that Britain can continue investing in its railways.

“Even with these fare increases, the money passengers spend on fares covers only half the cost of running the railways – taxpayers make up the difference.”

Experts warn Irish crisis could have knock-on effect on the rest of the eurozone.

 As the Irish government unveiled their four-year plan to save 15bn euros, financial experts have voiced their fears that the problems will spread across the rest of Europe and will be detrimental to the future of the euro altogether.

While it may not mean the death of the euro as a whole, Lionel Barber, editor of the Financial Times said a “change in the structure and make-up of the eurozone may be necessary to ensure its survival.”

The euro has fallen by 1.9% against the dollar to less than $1.34 leaving investors fearing that other European countries may seek financial help in the near future.

Mr Barber added: “We are not seeing the death of the single currency; there are a lot more cards to play. What we may be seeing if the beginning of a change in the eurozone, so in other words the euro may survive but the eurozone in its present form, with its present membership, may not.”

Klaus Regling of the European Financial Stability Facility has rejected claims of a failure in the eurozone, branding it “inconceivable”.

Mr Regling said any countries giving up the euro would only face “economic suicide.”