More high street woes

More problems on the High Street today as Icelandic investor Baugur asks for protection from its creditors.

Baugur has stakes in a number of high street chains including House of Fraser, Hamleys, and frozen food chain Iceland as well as stakes in fashion chain Whistles and jeweller Goldsmiths.

It is thought to employ 50,000 people in business' connected.

The group has entered a "moratorium" process in Reykjavik a similar roceedure to American Chapter 11 which offers protection from creditors.

It will now have three weeks to find a way forward.What is worrying for the UK is that one of those way forwards could well be a fire sale of its UK assets.

The group owes its creditors around £1b

Is this an indication of our economy?

Maybe the UK economy has not sunk as low as that of Iceland yet but this article was brought to my attention

The National Pensioners' Convention is this week distributing hundreds of
blankets and woolly jumpers donated to elderly Britons by the people of Iceland
after a radio appeal.
On Monday, the same day that Iceland's coalition
government resigned in the wake of its banking fiasco and noisy protests
continued outside the Reykjavic parliament, a shipload of woollen garments
arrived in Grimsby destined for UK pensioners suffering from the chilly winter
temperatures.

Michael Spencer under attack by the Indy

This morning's Indy breaks a story about Tory treasurer council leader Michael Spencer.

The paper claims that a company run by him

gave investment advice to almost half the councils facing a funding crisis as a
result of the collapse of Iceland's banks, councils who paid Butlers for
strategic advice were almost twice as likely to have lost money in the three
main Icelandic banks as those advised by other companies.

adding that

Several councils claim they were not warned early enough about the
vulnerability of the banks, despite Butlers being contracted to evaluate and
monitor their creditworthiness

This is not the first time that Spencer has been involved according to Labour home

he secretly pledged £15 million in shares of Numis, a stockbroking firm he chairs, against a loan, without disclosing it, even though the shares pledged were 12% of the total stock and it was therefore of interest to other shareholders and should have been disclosed under stockmarket rules.

What the Icelanders think of our PM and Chancellor

Via PM blog

Sorry who are you?

The FT has managed to secure a script of the meeting between Alsitair Darling and his Icelandic counterpart Árni Mathiesen

Árni M Mathiesen: Hello

Alistair Darling: Hello

ÁMM: This is Arni Mathiesen, Minister of Finance.

AD: Hello, we met a few months ago, weeks ago.

ÁMM: No, we actually never met. You met the Minister of Trade.

AD: Alright, sorry.

ÁMM: No problem.

Audit commission caught in the Icelandic cataclyism

It is remarkable that the Audit commission,the government body charged with watching over the public sector has now been forced to admit that it too had invested in Iceland.

After this morning's FT article in which the paper claimed that it had

£10m frozen in Reykjavik as news of its deposits spread.

The commission has been forced to admit that

The Audit Commission today, Thursday 16 October, confirmed that its exposure to the Icelandic banking collapse is around 4% of its annual turnover. It made two separate deposits. In April 2008 £5 million of its cash balances were placed in Landsbanki Islands and in July £5 million in Heritable Bank. Like other public bodies, the commission is obliged to maximise returns on its working reserves. At the time the deposits were made, the banks had been awarded an F1 credit rating.
Because the deposits were made on a fixed term they are not due to mature until 2009, therefore whether the Commission’s exposure to the Icelandic banks will lead to losses is yet to be determined. It is not expected that the deposits will impact on the Audit Commission’s plans, operations or staffing

Why Russia has intervened in Iceland

One thing that hasn't been really examined during the financial meltdown is the question Why should Russia want to bail out Iceland?

Interesting question and over at Time magazine,Yuri Zarakhovich thinks that he has the answer.
Basically Russia has given a lifeline of $5.4b to the Icelandic economy but Yuri thinks there are more sinister motives afoot

this act of benevolence is being viewed as a way of helping Russia secure a bridgehead for an advance into the Arctic regions to claim the vast hydrocarbon and other mineral deposits there. Iceland happens to possess a once vital NATO base, which has been in mothballs since 2006, and the Russians may be eyeing that as well

Whilst Britain has as good as declared war on Iceland,little attention is being given to the reasons why the various local authorities invested in Icelandic banks in the first place.

Rupert George over at Three Line Whip writes of one council's policy

Wychavon District Council didn't lose that much money when the Icelandic banks folded, only £1.5 million.
Instead of leaving the bulk of their reserves in cash, they invested £15 million in the towns of Pershore and Droitwich. In Pershore they have built and leased a hospital to the NHS. In Droitwich they have built a superstore, currently leased to Waitrose. The council taxpayers of Wychavon are still receiving a 7% on their investment, as well as benefiting from improved public services and a boast to the local economy.
If the £1 billion of council tax payers money sitting in Icelandic banks had been invested in a similar manner the benefits would have been tremendous.