Companies will be driven out of business by the Pension Protection Fund levy because it will cost £1.5bn to keep afloat, not the £300m previously estimated by government, according to new actuarial calculations.
The Times says actuarial consultant Hymans Robertson has calculated the new £1.5bn figure based on proposals from a consultation paper published in July. That paper proposes to replace the flat levy imposed this year with a risk-based model taking effect from 6 April 2006.
The levy will be higher for companies that have a higher risk profile – based on the size of deficit in their pension funds and the risk of insolvency.
Hymans Robertson’s report states the government could cut the cost of the PPF levy for political reasons, but that this would be done in ignorance of risk factors which remained unchanged, for example, the likelihood of companies going insolvent. Listed companies are already expressing fears of the expected size of levy they may be forced to pay, and the impact on their share prices, the report’s authors add.
OIL PRICES JUMPED in trading in New York yesterday on the back of terrorism fears affecting output in Saudi Arabia, and raising fresh concerns about how manufacturers will be able to pass on energy costs to consumers.
The FT writes analysts are now considering a market price of $65 per barrel after warnings of imminent attacks in the Middle East, coupled with a series of refinery problems in the West – which together could severely hamper supplies.
With major economies such as the US now heading towards the peak winter demand season, there are fears further breakdowns in refineries – caused by accidents or other factors – could stretch supply systems beyond capacity limits.
Another factor is Iran, as an ongoing argument with the West of the direction of its nuclear programme could result in sanctions against what is the second largest exporting member of OPEC.
The Daily Telegraph says UK government figures published yesterday suggest there is a real threat to the economy: raw material price inflation is running at 13.6%, but factory gate prices are rising at just 3% annually. The price of diesel could hit £1 per litre at the pumps by Christmas, the paper adds.
The Scotsman says that 3% figure was higher than many expected, suggesting manufacturers are starting to pass on some of their higher costs to consumers. It cites a researcher at the Centre for Economics and Business Research stating the inflationary pressures mean the Bank of England is unlikely to cut interest rates again before November.
ALTERNATIVE INVESTMENT Market-listed companies and their advisers have been put on notice the regulator will not tolerate any rule-breaches after the FSA censured Durlacher for sitting on a profits warning of client Prestbury Holdings, reports the FT.
The profits warning was delayed for eight days as Prestbury sought to complete a private fundraising initiative, the paper writes.
The Daily Telegraph notes Durlacher is chaired by Francis Maude, the former shadow chancellor. No fine was applied in this case because of a ‘quirk’ in the Aim listing rules, although any nominated adviser being found in similar breach of the rules in future could face unlimited fines, the paper states.
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