Scottish Business Briefing – Tuesday October 14, 2008

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Every morning we bring you a comprehensive round-up of all news affecting business in Scotland today.

BANKING & INSURANCE
Game over for Royal Bank's risk-taking bonus culture
Johnny Cameron may be the least well-known of the three Royal Bank of Scotland heads on the block - but as the man who runs the institution's fast-growing corporate and investment banking arm, he perhaps exemplifies best the kind of culture the Financial Services Authority (FSA) seems determined to outlaw (Herald). In a regulatory statement to the London Stock Exchange yesterday, Royal Bank announced that chief executive Sir Fred Goodwin, chairman Sir Tom McKillop, and Cameron would all step down from the board. Asked if Cameron, who according to the statement will leave the board with immediate effect, was also quitting the bank, a spokeswoman said: "At this stage, he is stepping down from the board - at this stage." Meanwhile, in an open letter to chief executives, the FSA yesterday criticised a culture that encouraged and incentivised risk-taking with hefty bonuses, and said that "inappropriate" pay deals may have been one of the actors that has led to the crisis in the banking sector.

Callander at Baillie Gifford watches and waits
The head of Scotland's biggest independent fund manager was diplomatic yesterday about the fall-out on the Scottish financial sector from the double banking disaster (Herald). Alex Callander, chief executive and joint senior partner of Baillie Gifford, said: "We will just have to wait and see what impact, if any, the events in the Scottish banks have, but it is fair to say that the investment management firms in Scotland have been doing reasonably well. We have seen net inflows over the year and the same is true of someone like Standard Life. "It may be that there won't be a huge impact, though in terms of operational impact it is nice to have a critical mass of investors here in Edinburgh and the banks are part of that particular aspect," Callander added. However, another leading fund manager, who did not want to be named, said the private mood in the capital's financial community was one of concern. "There have been one or two comparisons made between Edinburgh and Reykjavik," he said. "In both cases, the two major banks have really screwed up by being over-aggressive."

Scottish finance takes hard knock
The nationalisation of Royal Bank of Scotland and cut-price takeover of HBOS by Lloyds TSB are hammer blows to Edinburgh's status as the UK's second financial hub after London (FT). The Scottish capital is the fourth largest financial centre in Europe, in terms of equity assets, and its most famous names are the two banks that have been keen rivals for nearly 300 years. Many Scots feared for Edinburgh's position seven years ago when Bank of Scotland – the country's oldest financial institution – agreed to merge with Halifax, the mortgage bank. Although the enlarged group located its headquarters at the Bank of Scotland's offices on the Mound in central Edinburgh, and ran corporate banking from there, its centre of gravity clearly moved to Halifax, where retail operations were run. But no such ambiguity surrounds the humbling of RBS, which has been a source of pride to the Scottish financial community as a lean and efficient dealmaking machine. RBS did not even figure in the top 300 banks globally until its audacious £22bn hostile takeover eight years ago of its London rival, National Westminster Bank, which was three times the size of the bidder. Sir Fred Goodwin, chief executive, enhanced his formidable reputation as a cost-cutter during a three-year integration that involved 18,000 job cuts.

Read all today's banking news from scotsman.com


RETAIL
Burn Stewart profits double after refocus on branded whiskies
DISTILLER Burn Stewart has doubled its profits after refocusing on its core products and ditching own-label deals with supermarkets (http://business.scotsman.com/business/Burn-Stewart-profits-double-after.4587490.jp). The maker of Scottish Leader, Deanston, Black Bottle and Bunnahabain said profit doubled in 2007 to £400,000, marking the second year in the black after a nine-year stretch of losses. But the firm warned that it did not expect significant growth in the current year as a result of the global economic squeeze – although it added that its lack of exposure to mature markets in Europe and the US would protect it from too big a hit. Scotch has long proved resilient to economic problems, with the Scotch Whisky Association revealing last month that exports were up 14 per cent to more than £1.3 billion in the first half of 2008. The industry as a whole has invested more than £500 million in the past 18 months.

Altium investors hunting 'oversold' stocks see opportunity in AG Barr
WITH the markets in turmoil and stocks falling indiscriminantly, analysts have been picking shares that they believe have been given the unfair treatment (Scotsman). Yesterday, Altium plumped for an investment in Irn-Bru maker AG Barr, claiming its 10 per cent fall since buying exotic fruit drinks company Rubicon was "anomalous" as the deal gave the company more sustainable revenue growth prospects. Altium has a 1,400p target price on AG Barr, 30 per cent above the current market value. But shares in the maker of Irn-Bru last night dipped 20p to 1,060p.

Read all today's retail news from scotsman.com

TECHNOLOGY
Bank backs expanding Capito
IT SERVICES firm Capito has agreed a multi-million-pound funding deal with Clydesdale Bank (http://business.scotsman.com/business/Bank-backs--expanding-Capito.4587480.jp). The Livingston-based firm said the deal, an extension of a previous funding agreement with Clydesdale and understood to be in the region of £5m, would allow the company to continue with its expansion plans. Capito, which provides blue-chip and public sector clients with IT infrastructure, has opened three new UK bases over the past 12 months, including one in Aberdeen, while two further new offices are planned in the current year

Read all today's technology news from scotsman.com

TRANSPORT
Rok builds BAA ties with work worth £130m
BUILDING and maintenance services group Rok is set to work on a series of projects for airport operator BAA that could be worth £130 million in total (Scotsman). Rok said the five-year framework agreement with BAA would cover improvement projects valued at between £2m and £20m. It comes on the back of a long-term agreement Rok already has in place with BAA for smaller improvement works. The latest deal will cover alterations, refurbishments and building work in service areas and public spaces at Edinburgh, Aberdeen, Glasgow, Gatwick, Heathrow, Stansted and Southampton airports.

Read all today's transport news from scotsman.com