Business Blog

21 April 2013 Last updated at 07:33 ET

Former Chancellor Alistair Darling has urged Labour to be cautious about committing itself to future spending plans right now amid a growing debate in the party over the issue.

Reports that Labour has decided to go into the next general election pledging to spend more than the government have been dismissed by senior figures.

Ministers say Labour is "turning left".

Given the uncertain economic picture, Labour should "concentrate its fire" on the coalition, Mr Darling said.

Prime Minister David Cameron has said Labour's plans would return the country "to the mess" it found itself in before the coalition took power while deputy prime minister Nick Clegg said Labour has "retreated into the comfort of opposition" and was promising more "reckless spending, borrowing and debt".

Despite Labour's lead in national opinion polls. there has been unease in certain sections of the party about the lack of detailed policies being put forward and calls for greater clarity about its spending plans should it return to government.

A pamphlet produced by the Fabian Society next week - said to have been discussed at senior levels of the party - will urge Labour to break with the coalition's plans and pledge to spend more in certain areas after 2015.

Shadow chancellor Ed Balls has insisted no decision has been taken on whether, if returned to power in 2015, Labour would stick with the coalition's spending plans - as Tony Blair did for two years after winning the 1997 election.

The Conservatives have said not to do so would be irresponsible and would set back efforts to cut the multi-billion pound deficit.

But Mr Darling - who was chancellor between 2007 and 2010 - said the government's own spending plans were unclear and Labour should not reveal its intentions until it hears what Chancellor George Osborne is proposing.

'Not working'

Mr Osborne will outline spending plans for 2015-6 - the first full year after the next election - in June, with further extensive cuts expected. The government is seeking to cut more than £80bn from public spending between 2010 and 2015 and has said austerity measures will continue to 2018.

"I don't think my Labour colleagues need to take a position (on spending) until we see what the present government is proposing," Mr Darling told Sky News, adding that the current environment was "very uncertain and unpredictable".

"We don't actually know what they are doing. It's very difficult to plan ahead in any sort of sensible way. I think what we are better doing at the moment is concentrating our fire on the government."

Figures to be published on Thursday will show whether the UK grew in the first quarter of this year, or has slipped back into recession, which would be the third downturn since 2008.

'Great triumph'

Mr Darling said Mr Osborne's credibility had been further weakened in recent days by another downgrade to the UK's credit rating, by the Fitch agency, and by a warning from the International Monetary Fund (IMF) that the UK may need to slow the pace of deficit reduction if growth did not pick up.

"How long does the present government simply lumber on and hope something will turn up?" he added.

"What you saw last week were more and more people saying (Mr Osborne's) policy isn't working. I've been saying that for the last three years, and it was pretty unfashionable to do so, but what you're now seeing are respected figures inside and outside the UK calling into question the strategy."

But Mark Field, Conservative MP for the City of London, told Sky's Murnaghan show that Mr Osborne was "getting caught in the crossfire" of a heated political battle about austerity measures in the United States.

"The big test isn't so much what the IMF say but what the markets say," he said.

"The one lesson is that we have kept our interest rates very low. The lesson from 1931 and from 1976 is once you lose market sentiment then really all is lost.

"It has been a great triumph from George Osborne and one he should be rightly proud of."

21 April 2013 Last updated at 09:08 ET

UK Chancellor George Osborne believes the SNP "are tying themselves in knots" over plans to retain the pound in the event of a yes to independence.

He insisted that a currency union could only work as part of a political and economic union.

Scotland's SNP government wishes to maintain sterling in the event of a yes vote in next September's referendum.

Deputy First Minister Nicola Sturgeon said keeping the pound was the "common sense position supported by the facts".

However, in a UK government article published on the HM Treasury website, Mr Osborne and his Treasury chief secretary, Danny Alexander, said the Nationalist plan "did not add up".

They write: "The conclusion is clear. The pound we share now works and it works well. Under independence all the alternatives are second best. So our question to the Nationalists - are you really saying second best is good enough for Scotland?"

The opinion comes ahead of the publication on Tuesday of the UK government's analysis of the implications for the currency of Scottish independence.

The Scottish government has set out plans to retain the pound as part of a "sterling zone" with the rest of the UK.

Economics experts in the Fiscal Commission Working Group, set up by First Minister Alex Salmond, have already concluded keeping sterling as the currency in an independent Scotland was "sensible" and an attractive choice for the rest of the UK.

The article by the two Treasury politicians stated: "This isn't a question of whether or not Scotland could go it alone - of course Scotland could.

"The real question is whether going it alone is the best way for people living in Scotland to realise their aspirations and provide security for themselves and their family.

"We hope very much that people living in Scotland will decide to stay. The United Kingdom has done so much together and can achieve so much more in the future."

It added: "So, if Scotland does vote Yes on 18th September 2014, they [SNP] say they want to hand, to what would become a foreign government, key decisions over the Scottish economy.

"This is one of the big contradictions in their whole economic approach. Campaigning to 'bring powers home' with one hand, while giving them away with the other. Calling for 'full fiscal freedom' with one breath, but calling for a 'full fiscal pact' with the next. It simply doesn't add up."

The senior UK government figures said the UK was a "deeply integrated" single domestic market with a large percentage of Scottish exports being done with the rest of the UK and thousands of people working for the same companies across borders.

'Right for Scotland'

But Scottish government minister Ms Sturgeon said that an independent Scotland using the pound would mean sterling's balance of payments would be "massively boosted by Scotland's huge assets, including North Sea oil and gas - which alone swelled the UK's balance of payments by £40bn in 2011-12".

She added: "At present, the Scottish Parliament controls just 7% of Scotland's revenue base, and that would only increase to 15% under the terms of the Scotland Act.

"With independence, Scotland will control 100% of our revenues, which is what it needs to be able to build a stronger economy and fairer society.

"The combination - which only comes with independence - of keeping the pound, accessing Scotland's abundant resources, and taking decisions on tax and other economic policies that are right for Scotland, is the best way to boost jobs and growth."

21 April 2013 Last updated at 09:05 ET

German airline Lufthansa has cancelled the majority of its flights scheduled for Monday due to a strike.

The airline said about only about 30 of its flights would run as planned on Monday, out of more than 1,700 originally scheduled.

Ground staff have called a one-day strike in a pay dispute.

Last week Lufthansa rejected union demands for a 5.2% wage increase over the next 12 months.

Strikers are also looking for guarantees over job cuts.

Like many airlines, Lufthansa is looking to cut costs in the face of stiff competition from low-cost carriers and big Gulf airlines, as well as rising fuel prices.

Unions staged a similar one-day strike last month. Short "warning strikes" are a common tactic among German unions, designed to put pressure on wage negotiations.

In a statement on its website, Lufthansa said passengers should expect "massive" flight cancellations and delays that will start to affect long-haul flights from Sunday.

21 April 2013 Last updated at 12:29 ET

George Osborne is set to boost lending to small businesses as he faces growing pressure over his austerity policies.

The chancellor is expected to announce an extension to the Bank of England-run Funding for Lending Scheme (FLS) in the coming weeks.

The scheme was launched in August and was due to expire in January 2014.

The move comes amid pressure from the International Monetary Fund (IMF) for Mr Osborne to reconsider the pace of his austerity programme.

It also follows the decision by Fitch Ratings to strip the UK of its triple-A status on Friday, becoming the second of the big three rating agencies to do so.

The extension to the FLS may be announced before the IMF arrives in the UK to begin regular annual consultations with the government next month.

Sluggish growth

The scheme's launch last year was designed to boost lending to small businesses and households by providing banks with cheap loans on the proviso that they pass them on to customers.

The scheme has so far been criticised because Bank of England figures suggest participating banks were lending less money overall in the second half of 2012 than they were in the previous six months.

But it has also been credited with helping lower the cost of mortgages.

Mr Osborne first suggested extending the scheme in his Budget in March, and the Bank of England's Monetary Policy Committee said there may be "merit" in an extension when it met earlier this month.

The government hopes such schemes will help boost growth, which has remained sluggish since the UK first fell into recession during the 2008 financial crisis.

On Thursday, the Office for National Statistics will release its first estimates for how much the economy grew in the first three months of this year.

Many economists expect the economy to have grown, but only by about 0.1%.

'Time to consider'

Although it has yet to start formal discussions with the UK government, there are increasing signs the IMF believes the slow pace of growth means the UK should consider slowing the pace of its spending cuts.

Last week the IMF downgraded its growth forecasts for the UK, and chief economist Olivier Blanchard warned the UK was "playing with fire" and should consider alternatives to its current austerity drive.

IMF chief Christine Lagarde later told the BBC that "now might be the time to consider" adjusting the pace of the austerity programme.

But she stressed the importance of dialogue with the UK government.

IMF officials are due to arrive in the UK next month for annual consultations that allow it to monitor member countries and issue recommendations about economic policy.

Mr Osborne said he would defend his policies, saying: "Britain's got the right plan in terms of dealing with its deficit."

20 April 2013 Last updated at 20:16 ET By Alex Campbell BBC News

Have you ever seen something you wanted in a shop, tried it, checked the price online on your smartphone, found it was cheaper, and walked out? Welcome to the world of "showrooming".

"The staff at Jessops would like to thank you for shopping with Amazon" read the sign in a shop window shortly after the British camera chain went into administration.

It was a dry reaction to a growing problem for "bricks and mortar"-focused retailers. Showrooming is said to have exacerbated the decline of high-profile brands like Comet.

Gadget stores, bookshops and the cosmetics industry are all losing sales to showroomers, but solutions have proved hard to find.

Kelly Buckle, 23, of Birmingham, sometimes spends more than £200 in a single shopping trip - but never actually gets as far as the checkout.

"I can go in and smell a perfume and then find it online for £30 less," she says.

Research by design agency Foolproof found that 24% of people showroomed while Christmas shopping - and 40% of them took their business elsewhere.

Showroomers are not doing anything immoral. But the process can still be embarrassing.

"I feel bad about it, especially when the staff have been helpful, but it's my money," says Buckle.

Bricks and mortar shops have to pay rent, bills and staff salaries. Online retailers can offer cheaper prices because they don't.

But the online giants get a benefit from the very existence of bricks and mortar shops. It leaves physical retailers in a quandary.

An Australian speciality food shop recently raised eyebrows by charging $5 (£3.37) just for browsing. And some shoe and clothes stores in America and Australia have also tried a "fitting fee". In all instances the fee is taken off the bill when someone buys something.

Victoria Barnsley, chief executive of HarperCollins, recently suggested the idea of charging a fee for browsing bookshops is "not that insane".

Steve Pritchard, 61, who runs an independent book store in Crosby, Merseyside, and has worked in the trade for more than 36 years, is not convinced.

"We see them in the corner with their mobile phones, scanning the barcode on a book and finding it cheaper. I can't blame them," he says.

"I can't see a way to stop it. Charging people to browse has been suggested but it's a daft idea because you still want people to come in.

"You've just got to make your retail environment pleasant, have people here who know what they're talking about and try to embarrass them out of doing it."

If you take a specialist running chain like Run and Become or Runner's Need you can see this process in action. Staff analyse a customer's running gait, often on a treadmill and "diagnose" a pair of shoes that will avoid injury.

Those £100 shoes might be markedly cheaper online, but the would-be showroomer has to have a very high embarrassment threshold to walk out with a straight face.

This approach may seem more realistic than either charging a fee for advice or placing other obstacles in the way of showroomers. There have been suggestions that resistance from retailers has included asking suppliers to subtly change the names of products to thwart internet searches.

Coaxing the customer into being willing to pay more is the way, says retail consultant Martin Philpott.

"Shops like Jessops need to become centres of excellence with a limited number of showroom stores in high profile areas, selling high end products.

"I'm a passionate cyclist and I go to a shop that is much more expensive than the internet. But they will build a cycle for you, watch you ride up and down the street or even ride out with you.

"By the time you've been there for an hour, their enthusiasm is so overwhelming that you really don't want to go elsewhere."

Strangely, online retailers have an interest in the survival of bricks and mortar shops. If web-based retailers lure so many showroomers, what will they do if there are no showrooms left?

Philip Beeching, 53, a web consultant and self-confessed showroomer, thinks online retailers may themselves turn to bricks and mortar - but not necessarily staff and checkouts.

"Online retailers do well out of showrooming and companies like Amazon may well decide that they need to open up showrooms," he says.

Retailer-turned-author Bill Grimsey, former chief executive of Wickes and Iceland, agrees. He believes the future lies in purpose-built showrooms in major shopping centres.

"Things are going to change a lot, the whole thing is about to explode," he says. "People won't pay to browse. It may start but it will die quickly. People will expect the service."

Grimsey believes that even out-of-town retail parks will quickly become redundant, with 20 or 30 huge shopping malls dominating retail by making use of showrooms.

A growing number of retailers allow customers to order online and check or collect their goods in store - avoiding the inevitable missed delivery cards and increasing the chances of them buying something else while they are there.

But for many, the most important factor is still the price.

"My wife asked me to get a new celebrity cookbook which I found in Waterstones for £27. Using my smartphone I was able to search for it and I instantly found it on Amazon for £15," Beeching says.

"If the price had been closer maybe I'd have done the right thing. But especially in times where a lot of people are strapped for cash - what do you expect them to do?"

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20 April 2013 Last updated at 07:35 ET

A minicab firm which started in London in the 1970s with one car has been sold for £300m to a private equity firm.

Addison Lee, which started in 1975 in south London and now has 4,500 cars, has been bought by the Carlyle Group.

Carlyle said it hoped to expand the firm into international markets and continue to transport about 10 million passengers each year in London.

Founder John Griffin will remain chairman of the company and his son Liam will be chief executive.

'Humble beginnings'

Mr Griffin entered the trade after he gave up his accountancy apprenticeship to help his father.

He founded the company with Lenny Foster and both will retain minority stakes in the business.

Liam Griffin said: "From humble beginnings almost 40 years ago, Addison Lee has grown to become a well-known brand."

In a statement, Carlyle said: "The focus for Carlyle's investment in Addison Lee will be to drive business expansion both in the UK and internationally."