Dairy Crest, the maker of Clover spread, has said that it will cut jobs and is considering closing a factory to deal with difficult market conditions.

The firm said there would be cuts at its head office and that a consultation on the future of its Nottingham dairy factory started on Tuesday.

Rocketing energy costs and higher milk, packaging and vegetable oil prices were to blame for the cost cuts, it said.

But sales showed double-digit growth in the the six months to September.

Its shares closed 1.7% lower at 400 pence.

Job losses

“There are over 215 staff in the Nottingham factory and, subject to consultation, the factory might be closed and there will be job losses on the back of it,” said Mark Allen, group chief executive.

The consultation period takes 90 days.

The Nottingham site is predominantly a glass bottling operation which Diary Crest acquired in 2006.

Mr Allen also said jobs would be cut at the head office, but that “significant savings” would be seen next year rather than this year.

Dairy Crest also warned that it may raise prices, despite its strong half-year performance. It expects business at its dairies division – the arm which sells milk and flavoured milk – to weaken compared with last year.

The dairy market is proving tough as costs edge higher and consumers look for cheaper alternatives.

Food maker Uniq tried to cut costs by closing its chocolate dessert factory and dairy company Robert Wiseman issued a 2008/09 profit warning in May, citing higher costs.

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Ireland’s prime minister has defended a radical 400bn euro (£318m) state move to shore up its financial system.

Brian Cowen said the government had to make the move, which safeguards all deposits, bonds and debts in six banks and building societies for two years.

“The option of doing nothing, of not making a move would put at risk the entire stability of the Irish financial system,” he told the Irish parliament.

Labour leader Eamon Gilmore said the banks had been handed a blank cheque.

Mr Cowen insisted: “I have not handed over any money to any bank.

“I have provided the reputation of this state to the banks to get access to funds so the economic life of this country can continue. That is what was necessary.”

“It’s very difficult to find any guarantees in the current climate, but at least there’s some relief for people who have money in Irish banks.” Martin Cassidy Consumer Correspondent

“I could not as Taoiseach absolve myself of the responsibility of making the decisions.”

Strict terms and conditions will be attached to the agreement, which will also carry a hefty charge for the banks, according to the government.

The deal, which will give the banks access to credit and lending across Europe, immediately shored up confidence among traders in the stock exchange in Dublin with the Iseq closing up 8%.

Opposition parties called for tight regulation under the scheme while Ireland’s biggest union, Siptu, said the six banks should be charged a premium rate for the guarantee.

The banks covered are Allied Irish, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society.

That move means that the Irish government has decided that the Irish taxpayer will now provide a guarantee for up to 400bn euro of liabilities.

The Republic of Ireland’s Department of Finance said that the scheme would cover all UK branches of the financial institutions, but that negotiations were under way with the British authorities on safeguards that might be provided to any of the six banks’ subsidiary companies in the UK.

Finance minister Brian Lenihan said: “If funds are not secured by the Irish banks, it will be a very, very serious matter for the economic life of this community.

“Every bank, every worker, everyone knows how short those funds have been in the last year.

“If they dry up entirely, then that is very serious for Ireland. We must take action to secure the stability of our banking system and that is what the government decided to do.”

Michael Fingleton, chief executive of the Irish Nationwide Building Society, said he accepted the move could give Irish banks a competitive advantage over their UK rivals.

“Other banks will lend to them, they will not be holding excessive liquidity. Therefore, there will be money available for the greater economy and productive purposes, and indeed for young people to buy their houses,” he said.

The Northern Bank and Ulster Bank have moved to reassure depositors about their stability and credit-worthiness.

Neither are covered by the Irish government guarantee, but both have issued statements intended to reassure customers their money is safe.

The Northern, owned by the Copenhagen based Danske Bank, emphasises it is part of a strong and solid European banking group with a very strong credit rating.

Ulster Bank has pointed out that it is owned by the Royal Bank of Scotland – one of the largest banks in the world in which shareholders recently invested an additional £12bn in capital.

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The interest rate at which banks lend money to each other has soared overnight to record levels, according to British Bankers’ Association data.

The Libor rate for borrowing dollars overnight hit 6.87% – the highest for more than seven and a half years.

In normal conditions, the rate should be closer to the Bank of England base rate which is currently 5%.

The rise came despite huge cash injections by central banks after the rejection of the US bail-out plan.

Libor reflects how banks perceive the risk of borrowing money.

While central banks set official rates, Libor is seen to show the real rate of interest being used by the largest global firms to borrow from one another.

With banks still reluctant to lend to each other, it has been a key indication of the impact of the credit crunch.

Mortgage lenders in the UK have pointed to rises in Libor when increasing the costs of new deals, despite falls in the Bank of England’s base rate.

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UK supermarket giant Tesco has reported a steady rise in half-year profits despite the tough retail environment.

The company made group profit before tax of £1.43bn in the 26 weeks to 23 August, an 11.3% increase on the same period last year.

Group sales increased 14.1%, buoyed by robust international sales which were up by 26.8%.

Excluding petrol, like-for-like sales – which strip out the impact of new stores – were up 3.7% in UK stores.

Like-for-like sales grew 4% in the second quarter, an increase from growth of 3.5% in the first quarter.

Chief executive Terry Leahy said Tesco was “at its best in tough markets” and could respond to the changing needs of customers.

“The same number of people are coming, they’re just hard up and need to spend a little bit less” Terry Leahy

“That’s why we have been able to make good progress this year, despite facing into powerful economic headwinds and carrying planned start-up losses in the US,” he said.

“Our business is strong, broadly-based, increasingly international and, I believe, well-placed not just to cope with the challenges which lie ahead but also to grasp the growth opportunities open to us by continuing to invest in our strategy.”

The results were “very much in line with expectations” said Blue Oar Securities analyst Greg Lawless.

Increasing competition

Tesco has dominated the supermarket sector in the UK for some time.

However, the credit crunch and tighter household budgets have meant cheaper alternatives such as Lidl, Aldi and Asda have been eating away at Tesco’s UK market share, which currently stands at more than 30%.

Tesco has responded by releasing a new range of some 400 low-cost products last week in order to maintain its position in the market.

“The same number of people are coming, they’re just hard up and need to spend a little bit less,” Mr Leahy told the BBC.

He conceded that in non-food sales had seen better times – in the UK they grew 4% during the first half, compared with 8% growth in the second half of last year – but said this was “part and parcel” of being in the non-food market.

The supermarket’s chief executive added that he expected growth in European and Asian markets to carry Tesco through the difficult trading period.

Internationally, Tesco said its Fresh & Easy stores in the US – which are in their first year of trading – had seen good sales, with the “average running at $11 per square foot per week which is already substantially higher than the US supermarket industry average”.

Tesco serves more than 20 million customers every week.

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The administrators of Lehman Brothers’ European division have cut 750 jobs at the firm with immediate effect.

PricewaterhouseCoopers LLP, said the move came “despite exhausting all avenues” to save the posts.

The vast majority of the cuts will be made in London, where the firm employed about 5,000 people.

Lehman Brothers, the fourth-largest investment bank in the US, filed for bankruptcy as it was hit by the credit crunch and could not be rescued.

The jobs will go from the firm’s European fixed income and personal investment management units, after a buyer could not be found.

‘Maximising value’

“It is extremely disappointing that despite exhausting all avenues these jobs could not be saved,” said PwC partner Tony Lomas.

“We continue to be focussed on maximising the value of recoveries for creditors, whilst minimising the impact on other stakeholders as much as possible.”

Shortly after the collapse, Barclays bought Lehman’s US investment banking unit for £250m.

And last week Japanese bank Nomura said it was buying some of Lehman’s European and Middle Eastern operations for an undisclosed sum.

Under the deal announced last week, Nomura will acquire the equities and investment banking businesses from the US bank which filed for bankruptcy protection in mid September.

The Japanese bank said it expected to save the jobs of a “significant proportion” of the 2,500 Lehman staff in those businesses.

The Nomura deal does not include any of Lehman’s trading assets or liabilities, Nomura said.

It is also going to acquire Lehman’s assets in Asia.

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The UK economy saw no growth in the second quarter of 2008, while the gap in the current account widened to its highest level in almost a year.

Data from the Office for National Statistics (ONS) showed economic output remained the same as in the first quarter, confirming previous estimates.

Growth was 0% in the second quarter – which was even lower than the 0.3% figure for the first quarter of 2008.

Some analysts think the Bank of England may cut interest rates as a result.

Output was revised up to 1.5% from a previous estimate of 1.4% year-on-year.

The new data takes into account improved methodology and was revised back to 1961. This adds £19.5bn to the 2007 gross domestic product (GDP) figures.

Gloomy forecast

The quarterly figures were the worst for sixteen years, and several analysts maintained a downbeat forecast for the UK economy.

“Overall, not much cheer here. We continue to think that the UK economy is poised for a recession and a prolonged period of weak activity as the excesses of the last decade unwind dramatically,” said Paul Dales, an analyst at Capital Economics.

Separately, balance of payments information showed there was a deficit of some £11bn in the current account in the second quarter.

The current account deficit – which is the difference between imports and exports – widened by more than had been expected to £10.98bn, compared with £5.49bn in the first quarter.

This is the biggest the deficit has been since the third quarter of 2007 and it equates to 3% of GDP.

The increase has been due to increased interest payments from UK securities dealers and lower losses recorded by foreign banks operating in Britain.

Lena Komileva, an analyst at Tullett Prebon, said the figures showed the UK’s weak spot.

“The negative surprise on the current account highlights the vulnerability of the UK economy to external flows. At a time of a global drain of financial liquidity, this is worrying.”

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US shares clawed back some of Monday’s heavy losses, after President George W Bush renewed calls for Congress to back a $700bn (£380bn) banking rescue plan.

With Wall Street having seen record falls after Congress blocked the deal, the Dow Jones index rose 345 points or 3.3% by mid-afternoon on Tuesday.

Analysts said investors were hopeful a new deal could be agreed this week.

Mr Bush warned that if agreement is not reached, the US economy faces “painful and lasting damage”.

‘Urgent situation’

“We are in an urgent situation and the consequences will grow worse each day if we do not act,” Mr Bush said at the White House.

“It matters little what path a bill takes to become law. What matters is that we get a law.

“We’re at a critical moment in our economy.”

While the Dow Jones reached 10,711.3 points, the other main Wall Street index – the Nasdaq – had advanced 3.8% to 2,060 points.

On the back of the strong gains, European shares closed ahead.

The UK’s FTSE 100 added 1.7%, 83.4 points to 4,902.5, France’s key index added 2% to 4,032.1 points while Germany’s Dax ended 0.4% higher at 5831 points,.

Earlier, Japan’s Nikkei index ended Tuesday down 4.1%, while Hong Kong’s Hang Seng rose 0.8%.

Oil, which had fallen by about $10 a barrel on Monday, also rallied.

Expectations that politicians would pass some form of financial stability plan gave investors hope that demand for energy would increase.

US light, sweet crude rose by $3.88 to $100.25 a barrel while London Brent crude added $3.63 to $97.61.

‘Not dead’

Analyst Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said European investors were hopeful the US would eventually pass the bail-out plan.

“This deal is not dead in the water and there are hopes that when Congress reconvenes it could still go through,” he said.

There were a number of other key financial events on Tuesday:

– In Russia, trading was temporarily suspended on the country’s two main stock markets
– In the Republic of Ireland, the government announced that all bank deposits would be guaranteed for the next two years
– European bank Dexia has received a state bail-out, costing the Belgian, French and Luxembourg governments a combined 6.4bn euros ($9.2bn; £5bn)
– Several banking stocks fell on the FTSE 100 index, with HBOS down 13.8%, Barclays losing 2% and Royal Bank of Scotland slipping 1.1%
– Day of turmoil

The US rescue plan, a result of tense talks over several days between the government and lawmakers, was rejected by 228 to 205 votes in the House of Representatives.

“I know we need a strong financial sector, but where is the talk of structural change that’s going to prevent recurrence?” Neil, California, US

Send us your commentsAbout two-thirds of Republican lawmakers refused to back the rescue package, as well as 95 Democrats.

Congress will not meet again until Thursday – after a break for the Jewish New Year – with another vote unlikely before the weekend, the BBC’s Jonathan Beale in Washington says.

The House’s rejection of the bail-out plan came after a day of turmoil in the US and Europe, with Wachovia, the fourth-largest US bank, being bought by larger rival Citigroup.

Monday also saw the partial nationalisation of Benelux banking giant Fortis by three governments, and UK lender Bradford & Bingley was taken into state ownership.

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UK video games retailer Game Group has reported record first half profits and raised its full-year sales forecast.

First half profit before tax hit £36.4m for the six months to 31 July, up from £2.7m in the same period last year. Group sales rose 54.1% to £743.4m.

The firm raised its like-for-like sales forecast for the year to 31 January 2009 from 5%-10% growth to 8-12%.

Formats such as Playstation3 and Xbox 360 as well as games such as Mario Kart and Wii Fit helped boost the results.

“The board remain confident in our outlook for Christmas and the full year,” said Game Group chief executive Lisa Morgan.

Stock and purchasing efficiencies and the sale of more expensive software is expected to help the firm reach its target.

Game Group’s positive outlook is particularly unusual as several other retailers are struggling because of consumers cutting down on non-essential spending.

But Ms Morgan said game-playing provided good value for money.

“There are not many products that are available for around £30 that can give the family… hours and hours of entertainment,” she said.

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Britain’s building societies could face a bill of more than £80m after the rescue of the Bradford & Bingley bank.

The Government provided £14bn to protect the deposits of Bradford & Bingley’s 2.6 million savers.

The interest on that loan will be paid by all firms that take savers’ money, including the 59 building societies.

The director general of the Building Societies Association (BSA) Adrian Coles said it was “galling” that societies and their members had to pay.

The £14bn loan will eventually be repaid as Bradford & Bingley’s mortgages are redeemed.

But the interest which will accrue in the meantime will be charged each year to the 700 financial companies which take deposits.

Proportion

The Financial Services Compensation Scheme confirmed to the BBC that the 59 building societies would be included in that number.

“It is galling that those institutions that behaved prudently…are now being called upon to pay some of the bills of those institutions that were far less prudent” Adrian Coles, BSA

It said each firm had to pay in proportion to the deposits it held, and that the societies between them had to pay about 18% of the cost.

The Treasury estimates that the interest on the loan will amount to £450m in 2009. That means the societies will have to find £81m to pay the first year’s interest.

Adrian Coles, director general of the building societies’ trade association, told the BBC he believes that is unfair.

“It is galling that those institutions that behaved prudently in the housing market upswing are now being called upon to pay some of the bills of those institutions that were far less prudent.”

‘Significant bill’

According to the BSA, no society has failed since its records began in 1945.

“We will need to examine all the aspects of this over the next few weeks to see what options there are to protect building societies and their members from what could be a significant bill,” added Mr Cole.

The interest due in 2009 cover seven months from the end of September this year to the end of March.

In 2010 a full year’s interest will be due and that could be almost twice as much.

Since building societies are mutual organisations with no shareholders, their members will end up paying the bill either through higher charges or lower interest rates on saving accounts.

News reported by The BBC

Dexia has become the latest European bank to be bailed out as the deepening credit crisis shakes the banks sector.

After all-night talks the Belgian, French and Luxembourg governments said they would put in 6.4bn euros ($9bn; £5bn) to keep it afloat.

Shares in the Belgian-French bank fell 30% on Monday before being suspended on Tuesday as the bail-out was announced.

It is the second bank rescue in days by Belgium and its neighbours. On Sunday Fortis bank was partly nationalised.

This latest move by European governments to shore up another bank under pressure came as global stock markets plunged after the US House of Representatives rejected the White House’s planned $700bn bail-out package.

‘Crisis situation’

Dexia is the one of the world’s largest lenders to local governments, but has run up significant losses in its US operations.

“We took concrete and correct decisions to reinforce Dexia’s health” Yves Leterme Belgian prime minister

In a statement the French government said the rescue was necessary to “guarantee continuity of funding for local authorities”.

The Belgian government and Belgian shareholders will invest 3bn euros, the French government will also invest 3bn euros via its state investment arm, while Luxembourg will put in just under 400m euros.

Yves Leterme, the Belgian prime minister said: “Given the crisis situation around the Dexia group we took concrete and correct decisions to reinforce Dexia’s health so that the group can face the events playing out in financial markets.”

Borrowing problems

Last month Dexia announced it was overhauling its loss-making US bond insurance unit, Financial Security Assistance – which made a loss of $330m in the second quarter of this year because of the sub-prime housing crisis.

The group has also been hit by the collapse of the US investment bank Lehman Brothers.

Dexia – like its rival Fortis which was partly nationalised in a rescue at the weekend – has been finding it hard to borrow the money it needs, because banks have become less willing to lend to each other.

Dexia was created in 1996 from the merger of two banks which specialised in local government funding in Europe – Credit Communal de Belgique and Credit Local de France.

It was one of the first cross-border mergers in the European banking sector and the bank currently has 5.5 million customers in Belgium, Luxembourg, Slovakia and Turkey.

News reported by The BBC