China Economy Rebounds In Third Quarter

China has said its economic growth was on track in the third quarter, potentially easing pressure for more stimulus.

The world's second-largest economy grew by 7.8% over a year earlier in the three months to the end of September - up from a two-decade low of 7.5% the previous quarter.

National Bureau of Statistics spokesman Sheng Laiyun told a news conference: "The fundamentals of China's economy are turning for the better."

But analysts warned the rebound might not last because growth depends on government spending amid weak global demand and Chinese consumer spending.

Spending on factories and other fixed assets contributed 55.8% of the latest quarter's growth, or 4.3 percentage points of the 7.8% expansion, according to Mr Sheng.

Domestic consumption was 3.7 percentage points of the total.

Trade was so weak that its contribution to overall growth was negative, according to Mr Sheng, and detracted 0.1 percentage point from the quarter's growth rate.

September exports suffered a rare and unexpectedly sharp decline of 0.3%, falling short of forecasts.

Surveys of manufacturers show September activity barely expanded.

Nevertheless the improvement eases some pressure on communist leaders who say their priority is longer-term reform aimed at steering the economy to slower, more sustainable growth based on domestic consumption instead of exports and investment.

The abrupt drop in global demand for Chinese goods prompted them to backtrack temporarily and launch a mini-stimulus of higher spending on railway construction and other public works to prop up growth and avoid politically dangerous job losses.

Communist leaders are due to meet in November to craft an economic development blueprint that reformists hope will include market-opening and more financial support to private entrepreneurs.

The country's top economic official, Premier Li Keqiang, said earlier the government would try to keep growth above 7.5%.

That is far above levels forecast elsewhere in the US, Europe and Japan but barely half of 2009's 14.2% growth.

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Business Round-Up And Week Ahead

Sky's Naomi Kerbel offers a round-up of what's coming up in the week's business news.

:: Monday October 21

Heathrow, the UK's busiest airport which also owns Southampton, Glasgow and Aberdeen airports reports its third quarter results on Monday. Formally known as BAA, Heathrow sold Stansted Airport to Manchester Airports Group for £1.5bn earlier this year following intervention by the Competition Commission due to concerns over competition in the sector.

:: Tuesday October 22

On Tuesday, Peter Marks, the former chief executive of the Co-Operative Group is to be questioned about the Co-op Bank's £1.5bn capital shortfall and the collapse of the bid to buy 632 branches from Lloyds Banking Group in April this year.

Also, Everything Everywhere updates the markets with its third quarter results. The communications company owns the EE, Orange and T-Mobile brands and was the first UK network to launch mobile 4G services.

:: Wednesday October 23

Asos, the online fashion retailer gives a trading statement on Wednesday. 

Also, the City of London Corporation's City Banquet will be hosted by Lord Mayor of the City of London Alderman Roger Gifford. Speakers will include the Financial Conduct Authority's Martin Wheatley and the Prudential Regulation Authority's Andrew Bailey.

:: Thursday October 24

The Governor of the Bank of England Mark Carney will give a speech on Thursday.

Also, a two-day EU Summit starts. UK Prime Minister David Cameron will attend, as well as the German Chancellor Angela Merkel and the French President Francois Hollande.

:: Friday October 25

On Friday, the Office for National Statistics releases the UK's third quarter growth figures. Last month's final figures for the second quarter of the year showed GDP up by 0.7%.

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Buchanan To Quit As Smith & Nephew Chairman

By Mark Kleinman, City Editor

Sir John Buchanan is to step down as chairman of Smith & Nephew (S&N) next year as the maker of medical devices becomes the latest FTSE-100 company to hunt for fresh leadership.

Sky News understands that S&N is likely to announce Sir John's retirement alongside its third-quarter results on October 31, bringing the curtain down on his eight-year reign at the helm.

The company, which makes woundcare products as well as hip and knee replacements, is said by insiders to be close to identifying a successor to Sir John.

The search for a new chairman places S&N alongside GlaxoSmithKline, the pharmaceuticals group; Glencore Xstrata, the miner; Lloyds Banking Group; and WPP, the marketing services provider in a bracket of the UK's blue-chip companies which are looking for new boardroom leadership.

Sir John, a former BP executive who also chairs the microchip-manufacturer ARM Holdings, will leave S&N at its annual meeting next year, one source said on Friday.

The medical group has seen its shares record a 20% rise during the last year against an increase of 12% for the FTSE-100 index as a whole.

S&N declined to comment.

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Energy Bills: British Gas Ups Prices By 9.2%

British Gas has become the second major supplier of household energy to announce a rise in its prices - by an average 9.2%.

The company said its electricity and gas prices will rise by 10.4% and 8.4% respectively from November 23 - affecting 7.8 million households.

Regional variations mean some Scottish customers will see prices rise on average by as much as 11.2% while those in London will suffer a 10.6% increase and households in Yorkshire will have a 10.5% lift.

The move comes despite a pledge by British Gas earlier this year to use an annual earnings windfall from the cold weather last winter to keep a lid on tariffs.

Angry customers took to Twitter to complain ahead of an already planned Q&A session with customer services director Bert Pijls.

Twitter users flocked to complain ahead of a British Gas Q&A session

One user asked: "Hey @BritishGas how many vulnerable people do you think you will push into fuel poverty whilst continuing to make billions in profit?"

The average increase is higher in percentage terms than that confirmed by rival SSE last week which is raising its bills by 8.2% from November 15, although research from price comparison website uSwitch suggested it brought their average dual fuel tariffs together in terms of cost.

The Prime Minister David Cameron described the latest increase as "disappointing" and urged households to try to save money by switching suppliers.

E.ON, Scottish Power, EDF Energy and npower are the other so-called 'big six' providers yet to make announcements on their winter pricing.

Electricity prices are rising faster than those for gas

British Gas said it was a hard decision for the company, which is owned by Centrica.

Its statement said: "We recognise that energy bills are a real worry for hard-pressed households, particularly at a time when the cost of living is rising faster than incomes.

"Today's announcement, which will add about £2 a week to the average dual fuel bill, reflects the increasing cost of: buying energy in global markets, delivering gas and electricity to the home, and the Government's social and environmental programmes, which are paid for through customers' bills."

It pledged that more than 500,000 of its elderly and most in-need customers would be protected by an automatic discount to offset the price increase throughout the winter - worth £60 per dual fuel household.

This was, British Gas said, in addition to the £135 that will be paid to many of these customers who qualify for the Government's Warm Home Discount scheme.

Ed Miliband used Labour's conference to announce his 'bill freeze' plan

Ian Peters, managing director of British Gas Residential Energy, added: "I know these are difficult times for many customers and totally understand the frustration that so many household costs keep on rising when incomes aren't keeping pace.

"We haven't taken this decision lightly, but what's pushing up energy prices at the moment are costs that are not all directly under our control, such as the global price of energy, charges that we have to pay for using the national grid that delivers energy to the home, and the cost of the Government's social and environmental programmes.

"Energy efficiency is the best way to keep bills down, and I encourage anyone who has not benefitted from them to go online and check if they are eligible."

The cost of energy bills sparked a political frenzy last month when the Labour leader Ed Miliband pledged to freeze prices for 20 months if his party won power at the 2015 general election.

Shares in both SSE and British Gas-owner Centrica fell sharply in the wake of the announcement, wiping a combined £2.7bn off the value of the firms.

Caroline Flint, Labour's Shadow Energy and Climate Change Secretary, said: "These latest price rises show clearer than ever why Labour's price freeze is needed.

"People are sick and tired of being left out of pocket because of David Cameron's failure to stand up to the energy companies.

"Britain's energy market isn't working for ordinary families and businesses. Labour's energy freeze will save money for 27 million households and 2.4 million businesses and our plans to reset the market will deliver fairer prices in the future."

In an interview with Sky News, Energy Secretary Ed Davey said: "I think British Gas is going to lose a lot of customers over this.

"British Gas in their press release is trying to blame the Government for social and environmental costs but we've looked at their figures and it looks like they're being very inefficient in managing these Government programmes."

Ministers have been encouraging households to switch suppliers as the best way of keeping their bills as low as possible.

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Fuel Duty Could Be Cut In Rural Areas

Drivers in remote areas will be given a 5p a litre discount on their petrol under plans put forward by ministers.

Three locations in England and seven in Scotland have been selected after deciding they meet strict criteria to justify a cut.

The Government has applied to the European Commission to vary the duty rates in the 10 towns.

Discounts have never been permitted on the mainland before, although they are already in place for the Scottish islands, Isles of Scilly and other island communities in Europe.

Chief Treasury Secretary Danny Alexander said the "strongest possible evidence" had been put together to secure an extension.

'Completely objective': Danny Alexander

The areas selected have consistently higher pump prices than are available in locations that already receive a discount.

They are also more than 100 miles by road from the nearest refinery, and have a population density lower than 135 people per square kilometre.

Labour highlighted that eight out of the 10 towns are in constituencies with Lib Dem MPs, and two in the seat held by Chief Secretary to the Treasury Danny Alexander.

Catherine McKinnell, Labour economy spokesman, said: "The public will want to be reassured this is no more than a coincidence because nobody will thank a Lib Dem Treasury Minister who refuses to tackle the cost of living crisis everywhere but his own back yard."

Mr Alexander insisted: "This has been a completely objective process. The list has been drawn up with pretty strict criteria."

He added: "As a Highlander, I know all too well that fuel prices tend to be highest in areas where a car is needed the most.

"We've already delivered a tax cut for remote islands and now want to extend that to mainland rural areas that suffer from similarly high prices to the islands.

"We've put together the strongest possible evidence base to try and maximise the places that get it.

"As I've said before, it won't be easy to get this agreed with the Commission, but I will do everything I can to make this happen."

The commission is expected to announce its decision on the proposal next year.

Retailers in the approved areas then register with HM Revenue & Customs to claim the relief on unleaded petrol and diesel for sale to the public.

The towns chosen for the application are:

:: Acharacle, postcode PH36 (Scotland - Lochaber)

:: Achnasheen, IV22 (Scotland - Ross & Cromarty)

:: Appin, PA38 (Scotland - Argyll and Bute)

:: Carrbridge, PH23 (Scotland - Badenoch and Strathspey)

:: Dalwhinnie, PH19 (Scotland - Badenoch and Strathspey)

:: Gairloch, IV21 (Scotland - Ross & Cromarty)

:: Hawes, DL8 3 (England - North Yorkshire)

:: Kirkby-in-Furness, LA17 (England - Cumbria)

:: Lynton, EX35 (England - Devon)

:: Strathpeffer, IV14 (Scotland - Ross & Cromarty)

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Cable Hits Back At Royal Mail Sale Critics

By Mark Kleinman, City Editor

Vince Cable, the Business Secretary, has rebutted claims that he cost taxpayers hundreds of millions of pounds by undervaluing shares in Royal Mail, arguing that the price of the privatisation should be assessed only after the Government has sold its entire stake in the company.

Sky News has obtained a letter sent by Mr Cable on Friday to the Business, Innovation and Skills (BIS) Select Committee, in which he dismisses concerns that the sale of the postal operator was spectacularly mispriced.

Mr Cable and the Government's investment banking advisers have been accused of undervaluing the company after seeing its share price rise by 38% on its first day of trading.

"Value for money has been central to our strategy as we have taken forward the sale of shares through an initial public offering," he wrote.

"Delivering value for money is about more than just the level of proceeds received on day one.

"Our long-term strategy to safeguard the universal service and deliver value for money for the taxpayer involves not only getting good value for the initial stake sold but also getting good value for the residual stake held by Government (30% of the Company assuming exercising in full the Over-allotment Option), and leaving Royal Mail in a strong, sustainable position capable of accessing the capital markets in the future."

Mr Cable said that the initial price range for the flotation, which attributed a value of between £2.6bn and £3.3bn to Royal Mail, was recommended by Goldman Sachs and UBS, the lead banking advisers, and endorsed by Lazard, which provided independent advice to ministers.

"In August 2013, as the date of the IPO approached, this list of potential investors was narrowed down to a focused group of approximately 20 investors, selected on the basis of feedback gathered during the investor engagement process and, in particular, their understanding of the risks inherent in the Company's industrial relations," he wrote.

The timing of the disclosure that unions would ballot Royal Mail workers for strike action, which was voted through this week, meant that some potential investors in the company indicated that they would opt not to buy shares, the Business Secretary added.

Royal Mail's share price has been mildly buffeted by the vote in favour of industrial action next month, but the stock continues to trade well in excess of the 330p-a-share offer price.

Mr Cable told MPs that the top end of the price range was set because it was "compatible with securing a stable, long term shareholder base as a foundation for achieving value in future sell-downs of the Government's retained stake whilst also taking into account the material risks associated at the time with the ongoing IR situation and the market risks arising from possible US default and the fact that the recent IPO of BPost (a recently-listed Belgian peer) was trading below issue price".

In his letter to committee members, Mr Cable argued that the flotation price placed Royal Mail in a similar dividend yield bracket to comparable companies, but said the "considerable media interest that was predicting a substantial first day premium" was a factor in the initial surge in its share price.

The Business Secretary also sought to counter claims by his Labour opposite number, Chuka Umunna, that Royal Mail's property portfolio could be worth more than £1bn.

"Taking into account the overall position of the surplus portfolio and the relative immaturity of these sites in terms of actual development, a combined value of £330m (as suggested in one of the equity research analyst reports) appears at the top end of any likely range," he wrote.

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Housing: Help To Buy Fails To Dent Rent Costs

Private rents have reached a new record high despite Government efforts to make it easier for people to jump onto the housing ladder.

According to LSL Property Services, which owns the Your Move and Reeds Rains chains, rents across England and Wales reached a record £757 a month on average in September after jumping by 1.8% month-on-month.

Record rents were recorded in seven out of 10 regions across England and Wales, a development the charity Shelter described as "devastating" news for tenants.

Rents reached new peaks in Wales, London, the South East, the West Midlands, the East Midlands, the North West, Yorkshire and the Humber, LSL said.

Average rents in September ranged from £533 a month in the North East to more than double this amount at £1,141 in London.

Annual rental growth in London is running at more than 4%

LSL said this meant that rents are now typically £13 higher than the previous high recorded in October 2012.

It measured annual growth in London at 4.4% on average while Wales saw the next biggest annual rise, with a 3.1% hike.

The East of England was the only region to see rents drop, either on the year-on-year or monthly measures, falling by 1.4% annually and by 0.8% compared with August to reach £739 typically.

The findings show how strong levels of demand for homes are persisting in the private rental sector, despite a string of Government measures designed to ease the leap onto the property ladder.

A new phase of the Government's flagship Help to Buy scheme to offer state-backed mortgages to people with deposits as low as 5% was launched this month.

Mortgage lenders have been handing out more loans to first-time buyers in recent months than at any other time since the credit crunch started.

This was reflected in separate figures from the Council of Mortgage Lenders (CML), which showed gross lending 41% higher than in September 2012.

The CML put gross lending for the third quarter of 2013 as a whole at an estimated £49.3bn - almost 18% up on the second quarter and at its highest level since 2008.

But critics argue that more needs to be done to tackle the underlying problem of a shortage of homes, both for sale and for rent.

Roger Harding, Shelter's director of campaigns, policy and communications, said: "As more people are priced out of home ownership and waiting lists grow longer, too many families are being left trapped in the unstable and expensive private rental market.

"Every day, Shelter hears from people who are having to cut back on essentials as they struggle to pay their rent each month.

"With wages flat-lining, the fact that rents have reached record highs means that even more people will find it harder and harder to make ends meet.

"We need the Government to fix our rental market to provide more security and get on with building many more genuinely affordable homes."

David Newnes, director of LSL Property Services, said: "Higher rents in almost every region show that, despite Government schemes, buying a first home is still a difficult aspiration.

"This is not only down to low salary growth, but also a general shortage of supply, which is the underlying reason why homes are getting more expensive."

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Google Shares Hit $1,000 After Strong Results

Google's shares have passed the $1,000 (£617) mark for the first time after the company posted strong financial results.

The figure is a 41% jump from the start of the year and values Google at $334bn (£206bn).

The milestone was driven by third-quarter results which beat Wall Street expectations.

Stock in the US company had not previously topped $928 (£573) in regular trading.

Google said net profit had jumped 36% to $2.97bn (£1.83bn) for the quarter and that more people clicking on adverts from mobile devices was offsetting declines in advertising rates.

A key measure for investors is the average cost-per-click - the price that companies pay Google when consumers click on their ads.

This decreased 8% in the three months to September, deepening a 6% price erosion in the second quarter.

Motorola is still losing money for Google despite the Moto X launch

Google's business, like rivals Facebook and Yahoo, has come under pressure as more consumers access its online services on mobile devices such as smartphones and tablets, where advertising rates are lower than on PCs.

But Google said the total amount of paid clicks increased 26% year-on-year during the three months, delighting investors.

JMP Securities analyst Ronald Josey said: "That's the key story - their ad volume growth is outpacing the decline in cost-per-clicks."

Chief executive Larry Page told analysts that roughly 40% of the traffic to YouTube, the Google-owned video website, now occurs on mobile devices compared to only 6% just two years ago.

Google reported a 23% rise in revenue from its internet business, excluding fees paid to partners, of $10.8bn (£6.66bn) over the quarter.

But it was not all seen as good news.

While Google executives provided few details on the recently-launched MotoX smartphone, the flagship device within Google's Motorola mobile phone business, they confirmed continuing operating losses at Motorola - $248m (£153m) during the period.

Separately, a new version of the company's flagship Nexus phone has appeared briefly on its Play store.

The handset's listing was swiftly removed but appears to confirm that the phone will soon be officially confirmed. 

Google's latest group results offer a sharp contrast to online rival Yahoo, which reported a slight dip in quarterly revenue on Tuesday and lowered its financial outlook.

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Energy Bills: Small Firms Challenge 'Big Six'

No10 In 'Wear A Jumper' Row

Updated: 1:36am UK, Saturday 19 October 2013

Downing Street has been forced to backtrack after suggesting people struggling to pay their heating bills should put on a jumper.

Officials had to issue a clarification after initially saying wrapping up warm to avoid paying more was something people could "consider".

Labour, which has accused the Government of failing to act to address soaring energy prices, leapt on the comment as proof the Tories are "out of touch".

Leader Ed Miliband declared: "Their crime policy used to be 'hug a hoodie'. Now their energy policy appears to be 'wear a hoodie'."

The comment also quickly gained traction on social networking site Twitter, with various comical suggestions under the tag #cameronsheatingtips doing the rounds.

One user wrote: "Have your maid stitch a fine coat of swan feathers after your manservant plucks a swan for Sunday brunch."

Another advised: "Simply add a large measure of Courvoisier VSOP to your Vanilla Latte."

The row will have been exactly what Downing Street was seeking to avoid when it was quizzed about the Prime Minister's views on energy price hikes.

It came after Energy Secretary Ed Davey said on Thursday night that he wears jumpers at home to keep his bills down.

On Friday morning, Mr Cameron's official spokesman was duly asked whether people should "wrap up warm" and wear jumpers in the same way.

He said: "That's not a question that I have asked him. Clearly, he is not going to prescribe necessarily the actions individuals should take about that but if people are giving that advice, that is something that people may wish to consider."

The spokesman added: "His advice to people is to shop around for fuel prices."

Mr Miliband moved to capitalise on what was interpreted as a gaffe, even though No10 had tried to make clear Mr Cameron would not tell people what to wear.

He wrote on the Labour website: "These responses to the energy price rises show how little Mr Cameron and his Government stand up for the interests of hard-working people.

"He has no grip on the cost of living crisis and he seems to think the solution to this crisis is nothing to do with him.

"Energy bills are already up by an average £300 since he took office. The price hikes we are seeing point to a market that isn't working for consumers. Yet his solution to this market failure was to tell people to shop around and dress warmly.

"Of course people will rightly seek the best deal they can find but that will not fix a broken market, and will not bring the kind of relief that consumers and businesses need."

He added: "Never let the Government tell you that there's nothing they can do, or that it's your responsibility to sort out the problems in our energy market. They could act - they just choose not to."

Downing Street later had to issue a clarification, as insiders admitted the spokesman had used "loose language".

It said: "To be clear, it is entirely false to suggest the Prime Minister would advise people they should wear jumpers to stay warm.

"Any suggestion to the contrary is mischief-making. The Prime Minister would point people to a range of things being done to help people with their fuel bills, such as legislating to put everyone on the best tariff for them.

"He believes Labour's "price freeze" policy is a con - and certainly would not advise people on what they should wear."

Energy policy has been thrust to the heart of the political cost of living row after companies started announcing major hikes in prices ahead of the winter.

On Thursday, British Gas became the second of the "Big Six" to announce price increases after SSE led the charge with an 8.2% rise earlier this month.

Mr Cameron described the hike as "disappointing" and he and Mr Davey encouraged customers to switch to a cheaper deal with another firm.

Labour has said it will impose a 20-month freeze on prices if it wins power in 2015 but this has been dismissed by critics, including the Tories, as unworkable.

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HS2 Rail Link: 'Cities Could Lose Up To £220m'

Some cities in the UK could lose as much as £220m if a new high-speed rail link is built, previously unseen figures have shown.

If HS2 goes ahead, it will leave more than 50 areas worse off - details that were omitted from a Government-commissioned report in September, it is claimed.

The full findings of the KPMG study into the north-to-south rail route were released under a Freedom of Information request by the BBC's Newsnight programme.

Last month, the Department for Transport hailed the study, which found the UK economy would be boosted by £15bn a year, with Greater London benefitting by £2.8bn and the West Midlands by £1.5bn.

The project has caused outrage in some areas

But the study shows many areas not on the line - which would connect London to Birmingham and to Manchester and Leeds - will suffer a fall in economic output.

The worst-hit areas will be Aberdeenshire (-£220m), Norfolk East (-£164m), Dundee and Angus (-£96m), Cardiff (-£68m) and Norfolk West (-£56m).

Professor Henry Overman, who was an expert adviser to HS2 Ltd, told the BBC it was obvious that as some areas reap the benefits of being better connected, other places away from the line will pay a price.

The link will cut journey times between the north and south

"When a firm is thinking of where to locate, it thinks about the relative productivity of different places, and the relative wages etc," he said.

"HS2 shifts that around. So if you are on the line, that makes you a better place that hasn't had that productivity improvement."

Alison Munro, chief executive of HS2 Ltd, told Newsnight the figures were unsurprising.

"What this is showing is that the places that are on the high-speed network ... those are the places that will benefit most from high-speed two," she said.

The first phase of HS2 from London to Birmingham

"But high-speed two isn't the only investment that the Government is making. Over the next five years it is planning to spend £73bn on transport infrastructure."

Earlier this month, the Treasury Select Committee said HS2 had "serious shortcomings" and should be put on hold.

It said a "more convincing" economic case was needed for the scheme, which is now estimated to cost £42.6bn - 17% higher than first thought.

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