Analysts say KLM is looking to secure about a quarter of any combined entity.”Clearly there must be some business case [for a merger] or they would have stopped talking long ago,” one analyst said.. Shares in Barclays Bank fell for the second day yesterday amid continued concern about the bank’s £5.33bn bid for Woolwich, the mortgage bank. Shares in Barclays Bank fell for the second day yesterday amid continued concern about the bank’s £5.33bn bid for Woolwich, the mortgage bank.
The shares fell 34p to 1,581p, taking the fall since the talks were confirmed to 86p or 5 per cent. Some £1.27bn has been wiped off the value of Barclays since Tuesday.Bankers said they expect the deal to be formally announced today. However, some investors were unsettled by talk about tension on the Barclays board over demands from Woolwich that John Stewart, its chief executive, be given prime board responsibility for the entire retail bank in preference to John Varley, Barclays chief executive of retail services.Talk of Matt Barrett, Barclays chief executive, stepping down early in favour of Mr Stewart was dismissed as fanciful by most analysts yesterday.”Neither Barclays nor Woolwich could really afford to see this go down now, but Matt Barrett will not be happy at the way this has been received, judging by the share price,” one banker said yesterday.Analysts at Goldman Sachs and Merrill Lynch are broadly in favour, while Fox, Pitt Kelton, which initially came out strongly against the deal, was less negative yesterday.Most analysts believe that yoking Woolwich’s hi-tech Open Plan system to Barclays’ bigger customer base would enable Barclays to sell higher volumes. But they believe that the benefit will be wiped out by a sharp fall in margins particulary on products such as credit cards.David Townsend at Goldman Sachs said that the deal could be earnings enhancing on £150m of annual savings.. Britain’s most indefatigable coal mine is, temporarily at least, heading back again from the brink of extinction after its operator last night announced plans to increase its workforce for the first time since the industry was privatised.

Britain’s most indefatigable coal mine is, temporarily at least, heading back again from the brink of extinction after its operator last night announced plans to increase its workforce for the first time since the industry was privatised.
Electricians, fitters and underground workers are once again being sought for Ellington colliery in the Northumbrian village of Ashington by RJB Mining, which also announced plans yesterday to rebuild the workforce at Clipstone colliery in Nottingham.Both pits appeared doomed until April when trade and industry secretary Stephen Byers announced £100m of aid to prop up the 17 remaining deep mines in Britain.Many analysts believed the hand-out to be a crude political gesture to keep the pits open before the next general election – Mr Byers’ own constituency lies close to Ellington – but the 90-year-old pit, affectionately known to locals as “The Big E”, was grateful for any future.”Only five months ago people here were facing a lifetime on the dole,” said Northumberland’s National Union of Mineworkers secretary at the time.Ellington was mothballed and apparently doomed when RJB bought it from British Coal for £800m in 1994, but by last November the firm was insisting that cheap foreign imports had made the exploitation of the mine’s seams in deep sandstone beds beneath the North Sea financially untenable.The subsidy – which had been unexpected and was reported to have followed fierce disagreements over state aid within the Department of Trade and Industry – was a shadow of the £2.32bn German mines receive and ominously coincided with the lifting of restrictions on building new gas-fired power stations, the main competition to coal generation.More optimistic analysts believe, however, that the two-year period of subsidies will buy time for European Union trade agreements, which will open up new export markets for British coal.RJB said it was looking to recruit 150 ex-miners to work at its collieries throughout the Midlands, North-east and Yorkshire. The staff would help maintain state-of-the-art mining equipment and access and develop coal faces in new reserves.The company’s deep mines managing director, Alec Galloway, said: “We are told there are many experienced former miners out there who want to get back into the industry, so now’s their chance.”RJB has not advertised for workers since 1994, filling its scarce available vacancies with workers transferred from closed pits.It also plans to recruit around 100 school-leavers over the next 18 months for electrical, mechanical and mining craft apprenticeships.. Firms may have to cut shareholder dividends in order to finance the investment needed to maintain profits in the face of falling margins, the Government’s statisticians warned yesterday. Firms may have to cut shareholder dividends in order to finance the investment needed to maintain profits in the face of falling margins, the Government’s statisticians warned yesterday.
Rates of return for businesses will be hammered even further this year as businesses find themselves trapped between falling prices and a rising bill for raw materials, they warned. The Office for National Statistics said it believed fierce levels of competition in the UK would intensify and that profitability would remain weak.The report was produced to explain the plunge in businesses’ profitability in 1999 to its lowest rate for five years, which the ONS reported last month.In its monthly Economic Trends magazine, ONS statistician Richard Walton said firms would either be forced to cut the dividend to free up cash for investment or to start passing on rising costs to consumers in the form of higher prices at the risk of losing orders. “It is difficult, therefore, to see how profitability can improve further without having an impact on labour costs and hence how the borrowing position of the UK corporate sector is likely to improve in the near future,” he said.Although UK firms were the most profitable in the world in 1998, the following year saw a huge squeeze on margins as raw-material prices, especially oil, surged, and high street competition drove down prices.The biggest fall was in manufacturing where rates of return tumbled from 10.8 per cent to 7.1 per cent, the lowest figure since 1993.

Services companies’ profitability fell by 0.1 per cent to 15.3 per cent, a two-year low.”Costs increases [in the second half of 1999 and the first half of 2000] were absorbed by margins, as manufacturers were unable to pass on the increase in costs to prices,” Mr Walton said. He also highlighted an investment drought, as firms responded to the squeeze by cutting back on spending.Firms sanctioned increases in investment between 1995 and 1998 by the upward trend in share prices and profits. But firms put the brakes on in 1999 as profits started to fall sharply in the second quarter of 1998. “Some investment programmes were halted, in expectation that profits … would fall,” he said.Meanwhile, the corporate sector’s financial health deteriorated as firms’ deficits surged to their highest level as a proportion of GDP since 1990. The money raised may have gone towards what the ONS said was an “unusual” rebound in dividend payments in 1999. “Internal funds were supplemented by record borrowing from the capital markets,” he said.The Confederation of British Industry said the analysis confirmed its fears that business investment was falling to dangerously low levels.