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Morning Wrap: need to know business stories

Top stories from around the web.

Lloyds will sell Spanish retail division to Sabadell (BBC):

Lloyds Banking Group has agreed to sell its Spanish retail banking business to Banco Sabadell in exchange for a 1.8% stake in the Spanish bank. Lloyds said that the stake - which it will hold for at least two years - was worth about 84m euros ($110m; £72m). The Spanish business made a £43m loss last year. Lloyds said it would make a £250m loss as a result of the sale.

Greggs Bakery in profit warning (BBC):

High Street bakery Greggs has warned of lower than expected profits this year after reporting falling sales. The chain said like-for-like sales, which exclude newly-opened outlets, were down 4.4% so far this year. It blamed bad weather and "under pressure" consumers, and said it did not expect market conditions to improve in the short term.

Rentokil Initial sells City Link for £1 (Telegraph):

The multifarious company, best known as the rat-catcher to the Queen, will book a £40m loss on the parcels business, which has been plagued by losses and management departures after Rentokil acquired it in 2006 as part of a £210m takeover of Target Express.

Rentokil had hoped City Link would return to the black this year after failing to turn a profit since 2007 but the group was forced to admit last month that its goal was no longer realistic, despite a reduction in operating losses. Adjusted operating losses at City Link narrowed from £31m in 2011 to £26m in 2012.

UK manufacturing jobs to come home in next decade (Telegraph):

As many as 200,000 manufacturing jobs will return to the UK over the next decade, cutting the trade deficit by a third, as outsourcing becomes increasingly “unattractive”, according to new research.

Advances in production technologies, as well as rising costs and regulations abroad, will “fundamentally change” the economics of manufacturing, a study by the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) found.

Aberdeen Asset Management sees profits rise 37 per cent as appetite for assets returns (City AM):

Investment group Aberdeen Asset Management has released interim results for the six months to 31 March. The firm saw pre-tax profits rise by 37 per cent to £222.8m.


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David Cameron’s starter homes: poor policy, but good politics

David Cameron's electoral coalition of buy-to-let retirees and dual-earner couples remains intact: for now.

The only working age demographic to do better under the Coalition was dual-earner couples – without children. They were the main beneficiaries of the threshold raise – which may “take the poorest out of tax” in theory but in practice hands a sizeable tax cut to peope earning above average. They will reap the fruits of the government’s Help to Buy ISAs. And, not having children, they were insulated from cuts to child tax credits, reductions in public services, and the rising cost of childcare. (Childcare costs now mean a couple on average income, working full-time, find that the extra earnings from both remaining in work are wiped out by the costs of care)

And they were a vital part of the Conservatives’ electoral coalition. Voters who lived in new housing estates on the edges of seats like Amber Valley and throughout the Midlands overwhelmingly backed the Conservatives.

That’s the political backdrop to David Cameron’s announcement later today to change planning to unlock new housing units – what the government dubs “Starter Homes”. The government will redefine “affordable housing”  to up to £250,000 outside of London and £450,000 and under within it, while reducing the ability of councils to insist on certain types of buildings. He’ll describe it as part of the drive to make the next ten years “the turnaround decade”: years in which people will feel more in control of their lives, more affluent, and more successful.

The end result: a proliferation of one and two bedroom flats and homes, available to the highly-paid: and to that vital component of Cameron’s coalition: the dual-earner, childless couple, particularly in the Midlands, where the housing market is not yet in a state of crisis. (And it's not bad for that other pillar of the Conservative majority: well-heeled pensioners using buy-to-let as a pension plan.)

The policy may well be junk-rated but the politics has a triple A rating: along with affluent retirees, if the Conservatives can keep those dual-earner couples in the Tory column, they will remain in office for the forseeable future.

Just one problem, really: what happens if they decide they want room for kids? Cameron’s “turnaround decade” might end up in entirely the wrong sort of turnaround for Conservative prospects.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.