Rising house prices in Scottish cities has led to a further deterioration in affordability with average values up 3% from £176,009 in 2015 to £181,077 in 2016. This has resulted in average affordability in Scotland’s cities worsening in the last 12 months from 5.25 to 5.36 times gross average annual earnings, the third successive annual decline in affordability. The data from the Bank of Scotland Affordable Cities Review also shows that on average, affordability in Scottish cities is now at its lowest level since 2009 but is still 12% lower than the peak of 6.12 times earnings in 2008 at the height of the last housing market boom. The overall improvement in affordability across Scottish cities as a whole over the past eight years has been driven by a combination of an increase of 10% in the gross average annual earnings and an average house price decline 3%. Edinburgh is Scotland’s least affordable city where the average house price is 6.12 times the gross average earnings in the city. With an average price of £220,099, houses in Edinburgh are more expensive compared with average earnings than in any other Scottish city. Inverness at 6.03, Aberdeen at 5.72, Dundee at 5.38 and Perth at 5.24 make up the top five least affordable cities in Scotland while Stirling is the most affordable city and the second most affordable in the UK with an average property price of £165,658 which is 4.11 times the gross average annual earnings. Glasgow is the second most affordable city in Scotland and 10th in the UK, with an average house price of £159,580, which is 5.07 times the gross average annual earnings in the city. House price growth has been highest in Aberdeen over the past decade and since 2011 Aberdeen has recorded the biggest price rise of any Scottish city over the past decade and with a gain of 58%, is the only Scottish city to appear in the top 10 UK cities with highest house price growth in fifth place. The report explains that this is as a result of rising housing demand due to the strong performance of the oil and gas sector over most of the period. More recently, Aberdeen has seen a 22% rise since 2011 but prices are not declining due to a decline in the resources sector. ‘The rising house prices over the past three years have resulted in a deterioration in home affordability in Scotland’s cities. Although affordability is at the lowest level since 2009, it is still much lower than the height of the last housing market boom in 2008,’ said Nicola Noble, mortgages director at Bank of Scotland. ‘Aberdeen has recorded Scotland’s highest house price growth over the past decade and more recently during the economic recovery, due to strong performance in the oil and gas sector,’ she added. BOOKMARK THIS PAGE (What is this?)      Source link

September 19, 2016 by: Alex Barker in Brussels and Rochelle Toplensky in London Brussels has opened an investigation into Luxembourg’s tax arrangements with Engie, the French utility, as it expands its state-aid clampdown on “sweetheart” tax deals. The European Commission probe comes shortly after it hit Apple with a €13bn bill for back taxes in Ireland, a record-breaking penalty that has enraged Washington and corporate America. The Engie case opens up a new front by targeting the treatment of intra-group financial transactions, which accounts show ran to more than €1bn. The commission alleges that Engie, formerly known as GDF Suez, enjoyed “double non-taxation” because the loans were treated as both debt and equity for tax purposes. Margrethe Vestager, the EU’s competition commissioner, said: “Financial transactions can be taxed differently depending on the type of transaction, equity or debt — but a single company cannot have the best of two worlds for one and the same transaction. “Therefore, we will look carefully at tax rulings issued by Luxembourg to GDF Suez. They seem to contradict national taxation rules and allow GDF Suez to pay less tax than other companies.” The decision to confront a big European champion over its tax dealings in Europe is symbolically important for Ms Vestager as she begins a three-day tour of the US. Apart from showing that she is determined to press on with more investigations, the Engie probe will be used to counter claims that the commission is targeting American multinationals. Engie, which is 33 per cent owned by the French state, said it was co-operating with the probe. Engie has had operations in Luxembourg since 1933 and employs about 300 people in the country, said a spokesperson. Ms Vestager’s drive against tax avoidance has triggered an angry response from Apple, the US administration and corporate America. Some 185 US chief executives described the decision last week as a “grievous self-inflicted wound” for Europe’s economy. As well as ordering Ireland to recover €13bn from Apple, the commission has hit Fiat in Luxembourg, Starbucks in the Netherlands and a number of companies in Belgium. There are also investigations into Luxembourg’s tax arrangements with Amazon and McDonald’s. Jean-Claude Juncker, the European Commission president who was Luxembourg’s premier when the tax deals were struck, has strongly backed the probes into “illegal backroom deals”. “Very often, bank robbers and poachers are among the very best police forces,” he said last week. Margrethe Vestager: © Reuters Brussels’ Luxembourg-Engie investigation turns on several tax rulings — letters confirming the interpretation of tax laws — regarding financial transactions in 2009 and 2011 between four companies in the Engie group. The loans can be converted to equity and bear zero interest for the lender. An FT review of company accounts shows the first 2009 loan to be worth around €1.3bn at the end of 2014. The size of the second 2011 loan is not disclosed in public records. By allowing the loans to be treated as both debt and equity, the investigators argue ”a significant proportion” of profits on the arrangements recorded by Engie in Luxembourg “are not taxed at all”. “This is because the borrowers can significantly reduce their taxable profits in Luxembourg by deducting the (provisioned) interest payments of the transaction as expenses,” the commission said. “At the same time, the lenders avoid paying any tax on the profits the transactions generate for them, because Luxembourg tax rules exempt income from equity investments from taxation.” Sample the FT’s top stories for a week You select the topic, we deliver the news. Source link

When KazMunaiGas Exploration Production listed in London in 2006, Kazakhstan was so keen to make it attractive to international investors that it rewrote some laws. A decade later, the shine has worn off for investors in KMG EP, who are locked in an increasingly bitter stand-off with its parent, the Kazakh state oil company NC KMG, which owns a controlling stake. This week, minority shareholders will vote on a plan by NC KMG to tighten its control over the KMG EP by rewriting the “relationship agreement” between it and its subsidiary that, if approved, could lead to a buyout worth up to $1.3bn. Independent directors have decried the proposals as an attempt to “severely undermine” corporate governance, and a growing number of investors look likely to vote against them. However, the story of how KMG EP went from a flagship for Kazakhstan’s state oil company to a thorn in its side shines a light on the inefficiencies that plague the Kazakh company and the challenges of reforming the oil industry in the former Soviet Union. It is also a tale of a power struggle between two warring units of the same company — and, in particular, between two sets of independent directors, the westerners hired to burnish corporate governance credentials who are sometimes written off as uncritical “Noddies”. “It’s a very promising asset. To say that it has been underutilised is a gross understatement,” says Ivan Mazalov, director at Prosperity Capital. When KMG EP listed in 2006, the Kazakh government’s intention was “to create a blue-chip oil company,” says a long-time adviser to the company who worked on the initial public offering. “The level of transparency and corporate governance is unparalleled for the country.” The oil boom lifted the global depositary receipts from an IPO price of $14.64 to a high of more than $34. But as prices fell, the inefficiency of KMG EP’s Soviet-era fields became more apparent. In 2015, the company reported a $288m operating loss. “At the moment there is no value in the assets: it’s going to be a major struggle to get our auditors not to write off all our assets,” says Chris Hopkinson, a former Royal Dutch Shell executive hired by NC KMG to lead a turnround of its and KMG EP’s assets. KMG EP says it is returning to profitability. But efficiency remains poor. For example, KMG EP employs 2.5 people in its production division per well, more than twice the level of comparable Russian companies, according to an analysis last year by Sberbank CIB. Mr Hopkinson and people close to KMG EP say that resistance from local contractors and politically connected businesspeople in the regions of western Kazakhstan where the company operates has made it hard to push through change. The company has exclusive relationships with some contractors, whose share of KMG EP’s operating costs has risen from 12 per cent in 2014 to 23 per cent this year, according to a company circular. Replacing KMG EP’s old-fashioned “nodding donkey” wells with electrical submersible pumps could improve efficiency and lift production by as much as 60 per cent, Mr Hopkinson says. “EP is very close to the communities, who naturally have a huge apprehension with regards to changing away from a system which their whole societies and towns are based on supporting, to something which is unknown,” he says. Mr Hopkinson casts the drive for efficiency as the main reason NC KMG is proposing to rewrite the relationship agreement with KMG EP. The changes would give KMG EP’s board, of which he is the NC KMG-appointed chairman, greater power, he says. But many shareholders and people close to KMG EP question whether these changes are necessary or sufficient to push through the efficiency plan. “It will only be implemented if the Kazakhs want it to be implemented. Unless you bring vested interests on side, you won’t succeed,” says one person close to the company. What’s more, the proposals are the latest in a longstanding tussle for control between the parent company and its subsidiary. They also come as NC KMG prepares for its own listing — something that bankers and investors say would be difficult to achieve while KMG EP is still listed. It did not take long following KMG EP’s 2006 IPO for the new company’s independence to chafe with its parent. The tensions were exacerbated by the companies’ differing financial positions. KMG EP built up several billion dollars its balance sheet while NC KMG has been weighed down by hefty debts and the need to finance its stakes in Kazakhstan’s major projects. In 2010, NC KMG went to its subsidiary to borrow $1.5bn, a humiliation that “enraged” the parent company, according to a person who advised on the deal. In 2014, NC KMG attempted to end its troubled relationship with its subsidiary, offering to buy out minorities at a price of $18.50 per global depository receipt. But after six months of discussions between the independent directors of the parent company and its subsidiary, the offer was withdrawn amid tumbling global oil prices. Since then, NC KMG has placed growing financial and operational pressure on its subsidiary, shareholders and people close to KMG EP say. For much of 2015, NC KMG’s trading unit, the sole buyer of KMG EP’s oil on the Kazakh market, refused to pay the rates set out in the relationship agreement between the two companies — only agreeing to a settlement after protracted negotiations. Then this year, when that provision of the agreement expired, NC KMG unilaterally slashed the price it paid KMG EP to just $7 a barrel. The deterioration in relations between the two companies has been exacerbated by personal animosity between the three western independent directors of NC KMG and their three counterparts at EP KMG, say people close to both companies. NC KMG has overruled the independent directors of KMG EP for two years now over the company’s dividend payments, which were slashed to zero this year. Ivan Mazalov, director of Prosperity