Financial Review 19th June 2015

Britain’s average top boss is 54, with a finance background
Forty chief executives of FTSE 100 companies were born outside the UK, as Britain continues to attract both foreign companies and foreign-born executives. High-profile, foreign- born bosses include the head of Marks & Spencer, Marc Bolland, who is Dutch, and Australian Sam Walsh, the head of Rio Tinto group, the largest iron-ore miner in the world. Others come from the US, Chile, South Africa, Greece and Jordan.

The average tenure of Britain’s top bosses is five years and two months, with the longest tenure record that of Martin Gilbert, who has led Aberdeen Asset Management since July 1983. The average profile of a FTSE 100 chief executive is a 54-year-old man with a background in finance. Seven have spent their whole career with the company they now lead. A fifth are Oxbridge educated, and a third have an MBA or doctorate, while almost a third are qualified chartered accountants.

Entry into top 100 companies list requires $85bn valuation
The world’s 100 biggest companies are together worth a staggering $16.24 trillion (£10.5 trillion), which is almost double what they were valued at directly after the financial crisis. Data compiled by Price Waterhouse Coopers also shows that for a listed business to enter the top 100 rankings of the most highly valued -companies, it now needs a market capitalisation of $85 billion. In 2009, with the global economy reeling from the impact of the financial crash, entry into the list required a market valuation of $40-bn.

Apple is the world’s most valuable business and it alone represents 4.5% of the index’s total value. Apple’s value has risen by 671% since 2009. Google was second, followed by the energy group Exxon Mobil and Warren Buffett’s Berkshire Hathaway investment business. The US dominates the rankings, with 53 businesses in the index, up from 47 after the financial crisis. China beats the UK into second place, with 11 businesses making the ranking, compared with the UK’s eight.

Pace of economic recovery remains weak
The OECD (Organisation for Economic Cooperation and Development), which represents the world’s major economies, has slashed its US growth forecast for this year and next. It has also given the US economy a B minus in its bi-annual assessment. The think-tank expects the US economy to grow just by 2% this year and by 2.8% in 2016, down from its November forecast of 3.1% and 3% respectively. It blamed the cut on ‘transitory disruptions’, including a strong dollar and bad weather early in the year.

It also cut its global growth forecasts for both this year and next. It expects the world economy to grow 3.1% this year and 3.8% in 2016, down from its prediction six months ago of 3.6% and 3.9%. “The global economy is expected to strengthen, but the pace of recovery remains weak and investment has yet to take off,” OECD secretary-general Angel Gurria said.

Many countries are still suffering from sluggish or no growth
Inflation in the eurozone turned positive in May after five months of falls or stagnation, reviving hopes of an economic recovery. The annual inflation rate rose to 0.3%, up from zero in April, the EU’s statistics agency, Eurostat, said. Prices of services rose 1.3%, while food and drink prices were up 1.2%.

The core inflation rate, which strips out volatile items such as food, energy and tobacco, was up 0.9% in the year to May from April’s 0.6%. While this is an improvement and reduces the risk of a deflationary spiral in the eurozone, many countries in the single currency are still suffering from sluggish or no growth, excessive debts and high levels of unemployment, with Greece still undermining global confidence in the currency.

Maximum premium bond investment now £50,000
Investors in premium bonds can now add an extra £10,000 to their investment, although the chances of winning the £1 million jackpots remain slim. The maximum permitted investment has risen to £50,000. Premium bonds are issued by government-backed National Savings and Investments (NS&I). Each of the 54.2 billion bonds has an equal chance of winning one of the two top prizes of £1 million. The odds of winning any prize of between £25 and £1 million with a single £1 bond are 26,000 to one.

Six of 10 most valuable football club brands are English
Manchester United is the world’s most valuable football brand, replacing Bayern Munich, according to a report from consultancy Brand Finance. Despite winning no trophies again last season the Old Trafford club’s brand is estimated to be worth $1.2 billion (£789 million). Six of the top 10 most valuable club brands were English. Barcelona, which won the Champions’ League, slipped two places to sixth most valuable club, worth $773m.

Of Manchester United, Brand Finance said that even if reports of fan losses are accurate, United retains legions of followers in India, South-East Asia and China. They point to the club’s lucrative shirt sponsorship deal with Chevrolet and record-breaking kit supply deal with Adidas, which was signed in 2014 and is worth £750m over 10 years. The club’s brand value increased by 63% this year, with the most critical factor the record-breaking £5.1bn deal for the UK broadcast rights of the Premier League.

Bayern slipped to second in the football brand table, with Real Madrid third, and Paris St-Germain ninth. There were no Italian clubs in the top 10. Other leading English club brands were Manchester City, Chelsea, Arsenal, Liverpool and Spurs.

Old, unfashionable jewellery forgotten and going to waste
Jewellery worth £60 million is gathering dust in drawers and attics around the country, new research suggests. Millions of pounds worth of earrings, necklaces, bracelets and other pieces are simply set aside and forgotten as a result of changing tastes, according to auction house Bonhams.

A ruby brooch bought in a charity shop for £1.50 sold for £2,400 after being identified as a valuable Cartier piece. The provenance of the flower brooch, found in a basket of ordinary trinkets, was revealed after scratches on the back turned out to be a Cartier signature. Other finds include a £20,000 diamond ring buried in a back garden and an art deco brooch bequeathed to a young girl by her grandmother and considered costume jewellery until it was valued and sold for £12,500. A ring inherited from a client’s grandmother was revealed to be an ultra-rare Burmese unheated ruby, which sold for £134,500.

Politicians said to favour baby-boomers
Younger people are being left with ‘apocalyptic’ levels of debt, according to a report from the Centre for Policy Studies. The generation born between 1980 and 2000 (known as Generation Y) will be forced to pick up the bill for decades of government over-spending. The CPS has accused baby-boomers (born from 1946 to 1963) of gaining unfunded promises on pensions and benefits and then leaving their children to pick up the bill. Coupled with unaffordable housing, university debts, poor pensions and a rapidly retreating state pension age, Generation Y now faces “a quality of life below that of their parents” according to the report.

The CPS accused politicians of favouring baby-boomers and older pensioners because they were more likely to vote. The think-tank said liabilities had risen by hundreds of millions in the past five years alone – despite the country supposedly being in an age of austerity. Promises made at the last election included maintaining the triple-lock on pensions and protecting benefits for the elderly, such as free bus travel, TV licences and the winter fuel payment.

UK on track for 2.4% growth in 2015
Britain will be the fastest growing major economy in the developed world this year but deep cuts to public spending could hamper the recovery, according to the OECD. It says the UK is set for growth of 2.4% in 2015 – less than the 2.7% previously expected but still stronger than the rest of the Group of Seven (G7) nations. But it added that the Government should spread austerity over a longer period than planned to avoid damaging the economy.

Despite that warning, the economic think tank said it once again expects the UK economy to leave the rest of the G7 – the US, Japan, Canada, Germany, France and Italy – trailing in its wake this year. Growth rates for the others are 2% for the US, 1.6% for Germany, 1.5% in Canada, 1.1% in France, 0.7% in Japan and 0.6% in Italy.

Age of irresponibility in finance is over
Mark Carney, the Governor of the Bank of England, used his Mansion House speech to urge financial markets to regain and reinforce the social licence required for them to operate, innovate and grow – something which has been called into question in the wake of repeated episodes of misconduct.

UK markets matter for global commerce, but above all, our markets matter for our prosperity and serve our real economy, he told a city audience. They set the exchange rates we use when we travel or buy goods from abroad, and they determine the costs of our food and raw materials. Mr Carney added that while markets can be powerful drivers of prosperity, they can also go wrong.

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