Watchdog probe clouds bid battle

THE battle over the future of Marks & Spencer remains as cloudy as ever. Instead of being able to concentrate on his strategic review, due to be unveiled on 12 July, today chief executive Stuart Rose finds himself before investigators from the Financial Services Authority explaining his share dealings.

The main focus will be on his purchase of 100,000 M&S shares on 7 May, shortly after he took a phone call from Philip Green who is seeking to buy the company. But the FSA may also have to go back further and check previous Rose share dealings.

On 10 March, Rose bought 200,000 shares at 284p which he sold on 5 April at 283p.

The background to these trades is unknown. But it is thought that around this time bankers BNP and brothers David and Simon Reuben, who made their money in Russia, may have been exploring a possible private equity deal for M&S.

The larger part of the FSA probe is likely to focus on the run-up in the M&S share price before Green made his first approach on 27 May. The M&S share price began to rise on the morning of 25 May, the day after the City's biggest social event of the year, the preview of the Chelsea Flower Show, of which Merrill Lynch is the main sponsor. The pressure of buying built up over the next 48 hours, forcing Green to let his intentions be known.

A perspicacious research note from broker Cazenove, an adviser to M&S, may have contributed to the buying enthusiasm.

While attention has been diverted by the share manoeuvres, neither Green nor his advisers have been idle. Efforts to bring Brandes, the big American shareholder, on board have intensified. The Brandes decision may yet resolve the future of the nation's favourite retailer.

Housing alert

THE Basle-based Bank for International Settlements is normally associated with matters of high finance. But in its latest annual report it joins the experts worrying about the build-up of household debt.

It notes that in Britain and the United States in particular, where the credit boom has been most pronounced, the dangers of a bust are most potent.

The converse of Britain's consumption and housing boom is that savings are in the doldrums. Indeed, savings are perhaps the most neglected area of public policy under Labour.

There are good reasons for the Government to be cautious about private savings providers following a series of mis-selling scandals involving pensions, endowments, precipice bonds and split capital trusts.

But Ministers have done little to encourage new saving. The tax relief on dividend income paid to pension funds has been removed and the tax breaks on dividends earned within individual savings accounts have been abolished.

At the same time, the Government has battled manfully with the savings industry to bring down the cost of investing in new stakeholder products by holding the commission to 1.5% a year. But there is little conviction in the industry that the new products are what the public wants.

The BIS fears that homeowners and people who have invested in property may have 'overestimated their wealth' by assuming that house prices will always rise.

It cautions that a sudden increase in interest rates, of the kind now taking place in Britain, could expose homeowners to severe shocks, in the UK in particular, and in other countries such as Spain and Australia.

The BIS leaves little doubt that it is time for policymakers around the world to end the era of cheap credit. That process already has begun in Britain with four increases in interest rates since November.

Tomorrow, the Federal Reserve, the American central bank, is expected to signal an end to the cheap money era by raising its key federal funds rate from 1%, where it has been held since 25 June last year.

Shell's struggle

HAS Shell done enough, as it claims, to ensure that the reserves scandal which shook it to the core could never happen again? It is making an effort, but the evidence of its annual meetings yesterday suggests it is still struggling with the worst aspects of its old self.

New chairman Lord Oxburgh's explanation of why Sir Philip Watts, who had a three-month contract, got a 15-month pay-off was limp.

Shell's Dutch arm seems repeatedly to underestimate the determination of shareholders that reforms of the Byzantine management structure must be pushed through once and for all.

The group is trying, but trying is not enough.