Professional Documents
Culture Documents
5.74
25Oct
SWISS banking giant Credit
Suisse saw profits plunge on debt
charges and tougher regulations,
as it revealed its third quarter
results yesterday.
Profits came in at SFr254m
(168.6m) in the three month
period, down 63 per cent on the
same period of last year and
prompting the bank to increase
its costs savings target from the
SFr3bn announced in July to
SFr4bn.
In a bid to make the savings by
2015 it is already in the process
of cutting 3,500 of its 48,400
Credit Suisse plans new round
of job cuts as profits collapse
BY TIM WALLACE workers and confirmed more
would have to go to hit the
target, but did not give an exact
figure on the new job cut plans.
The bank took a hit of just over
SFr1bn from adjustments of the
value of its debts, while asset
management fee revenues fell 14
per cent on the year to SFr438m.
But revenues did increase in
the investment banking arm,
soaring 66 per cent on the year to
SFr3.3bn, driven by rising bond
trading activity. In particular the
bank saw greater demand for
higher yielding products.
Shares edged up 0.09 per cent
on the day.
FRIDAY 26 OCTOBER 2012
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NEWS
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Chief executive Brady Dougan said Credit Suisses efficiency drive was going well
BARCLAYS is planning a gradual
realignment of its board in the
coming months, with some of the
longer-serving members preparing to
make way for fresh blood.
The bank has no set limit or target
size for the board and chairman Sir
David Walker is known to be on the
lookout for new talent.
The bank is shifting its focus
towards retail banking and away
from the investment arm built up
by ex-chief executive Bob Diamond.
But investment boss Rich Ricci is
unlikely to leave, as chief Antony
Jenkins has backed him openly.
Barclays declined to comment.
But a source close to the bank said
some directors who have served the
longest may be the next to leave.
Looking back at appointments
over the last decade, some of the
directors have been around for a
while, so you might expect they are
ready to move on to their next
challenge, the source said.
Although no names have been
openly floated, National Audit Office
boss Sir Andrew Likierman was
appointed in 2004, while former
Cadbury chairman Sir John
Sunderland was appointed as a non-
executive in 2005 and Enel SpA chief
Fulvio Conti joined in 2006.
Barclays looks
to bring fresh
talent to board
BY TIM WALLACE
REGULATORS need more and better
staff to have any chance of really
checking if banks are treating cus-
tomers well, top official Martin
Wheatley told MPs and peers
yesterday.
And he rowed back on earlier com-
ments that he will shoot first and
ask questions later when regulating
potentially dodgy bank products,
admitting that regulators will have
to wait for customer complaints
before investigating.
The head of the incoming Financial
Conduct Authority (FCA) told the
parliamentary commission on bank-
ing standards (PCBS) he will rely
on banks predicting the regula-
tors questions and designing
products accordingly, rather
than each one being individual-
ly approved.
I try not to take a view
of products as
good or bad
some are very
Wheatley says
bank watchdog
needs new staff
BY TIM WALLACE
complicated and difficult to under-
stand, but for the right audience they
may be the right product, Wheatley
said. But even if just one in a hundred
products are referred to the FCA,
Wheatley said it would need greater
expertise to cope.
We need to either upgrade or train
our people, hire staff with a bit more
battle scars, who are prepared to use
their judgement, he said.
Wheatley also revealed the lengthy
process of launching a new bank will
get easier in a review out next month.
Currently anyone wanting to set up
a bank has to prove they have the
staff, systems and capital before get-
ting a licence but they often
need a licence to raise the
capital.
Instead, provisional licens-
es could be granted in small-
er steps through the process,
Wheatley said, to open up the
industry to new entrants.
Martin Wheatley wants to
stop consumers losing out
FORCING creditors to take losses
up front with a bail-in mechanism
could help save failing banks and
stop a wasteful liquidation, Bank
of England deputy governor Paul
Tucker said yesterday.
And bailing-in by the deposit
insurer could further help protect
the valuable parts of a failed bank,
he told an industry conference.
A bail-in process would see a
failed banks creditors take losses
on their assets before formal
bankruptcy proceedings, realising
losses more quickly, allowing the
Tucker broadens bank bail-in
proposals to deposit insurance
BY TIM WALLACE healthy parts of the institution to
be sold off and reducing the
chance of a taxpayer bailout.
Rather than a deposit insurer
having to wait to discover its
losses until the end of the process
of a potentially destructive
realisation of a banks assets, it
would hear up front how much it
had lost, said Sir Mervyn Kings
deputy, who hopes to take the top
job at the Bank next year.
That should reduce the
insurers losses, speed up the
process and could leave it with a
healthy chunk of bank to sell at a
later date.
FRIDAY 26 OCTOBER 2012
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Paul Tucker hopes to take control of prudential regulation by becoming Bank governor
BOTTOM
LINE
MARC SIDWELL
Its too late to buy a parachute when youre in mid-air
A
MERICA is teetering on the
edge of a so-called fiscal cliff,
which falls at the end of this
year. If its politicians need
more encouragement to avoid falling
over it, perhaps they should take a
look at the damage already wrought
by another metaphorical precipice:
the patent cliff.
Three pharmaceutical firms
yesterday saw their revenues
brought down by the expiry of key
intellectual property: Sanofi,
Novartis and AstraZeneca, the UKs
second-biggest drugmaker, which
suffered most of all. AstraZeneca
acknowledged that the revenue
decline in the third quarter
reflected the ongoing effect from
the loss of exclusivity on several
brands, with antipsychotic
Seroquel IR a particular drag in the
US. Global revenue fell to $6.682bn
(4.14bn), down 15 per cent at
constant exchange rates and 19 per
cent on an actual basis.
The problem for AstraZeneca is
that it has a lot further to fall. Pascal
Soriot has only been in post as chief
executive since the start of October,
and he cant be expecting a quiet
life. The next five years could witness
up to half the firms current revenue
falling off the patent cliff.
Thats tougher for AstraZeneca
than for some others, because it
seems unwilling to look for
alternative revenues outside of
prescription drugs. But the very
existence of the patent cliff is in part
a sign that blockbuster medicines
are proving harder and harder to
create. Whether thats due to the
loss of low-hanging fruit or the
growing height of the regulatory
hurdles that must be jumped, it
makes Soriots determination to
restore the company to growth and
scientific leadership a very
courageous, or, less generously, a
high-risk strategy. The only obvious
way to make it work, as Soriot has
acknowledged, is a strategy of
acquisitions rather than just relying
on inspiration to strike internally.
But thats expensive.
Its bad for everyone if the big
pharmaceutical firms have to turn
from bleeding-edge research to
selling shampoo and face cream to
make ends meet. But it is doubtful a
firm can escape a hard patent cliff
landing by trying to buy itself a
parachute in mid-air.
SPOTLIGHT ON SANTANDER
LIKE a tabloid love rat, Santander UK
was trying to make a good
impression yesterday after having
left RBS at the altar in its failed
attempt to purchase 316 of its
branches. That process wasnt helped
by having to admit it had set aside
52m to cover the expense of wooing
Stephen Hesters banking group.
However, Santander UK looks
positively rosy next to its parent,
Spains Banco Santander, which
yesterday reported a 94 per cent fall
in its net profits. Santander UK is
not exposed to Banco Santanders
bad property loans in Spain. But
with its long and short term ratings
placed on Credit Watch Negative by
Standard & Poors, it still faces
challenges of its own.
marc.sidwell@cityam.com
DEBENHAMS yesterday revealed it is
to open 17 UK stores next year and
announced its first Christmas cam-
paign in six years as the department
store group posted a 1.6 per cent rise
in like-for-like sales.
Chief executive Michael Sharp said
the group plans to lure shoppers and
bolster sales during the crucial
Christmas trading period with a tele-
vision, print and online advertising
campaign, launching next month.
The announcement came as the
retailer, which ranks behind rival
John Lewis in terms of annual sales,
reported a 4.2 per cent rise in pre-tax
profit to 158.3m in the year to 1
September.
The overall performance for the
year was a very creditable perform-
ance given how challenging it was,
said Sharp, adding that the group
had also grabbed market share from
rivals across all categories, particu-
larly in the 12 weeks to 2 September.
Gains in womens clothing were
Debenhams to
open 17 stores
as sales pick up
BY KASMIRA JEFFORD
particularly pleasing because that
market is notoriously competitive,
he said.
The group revamped 18 of its core
UK stores in 2012 and aims to refur-
bish a further 30 this coming year,
including its flagship site on Oxford
Street. It aims to open 17 stores over
the next five years, which could gen-
erate 150m worth of sales.
Sharp said yesterday that
Debenhams UK presence was still
immature and said there were a
total of 70 markets it has targeted for
new openings in the future.
FRIDAY 26 OCTOBER 2012
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ASOS boss Nick Robertson
yesterday dismissed talks of a bid
by Amazon after the online fashion
firm posted soaring sales abroad.
He poured cold water on
speculation that he had met with
Amazon boss Jeff Bezos saying I
have not spoken to Amazon in
three years.
The retailer, which has changed
its year-end from March to August,
said it has made a pro forma
underlying pre-tax profit of
Asos boss denies bid talks as
the retailer posts soaring profit
BY KASMIRA JEFFORD
44.5m up by 40 per cent
compared with the same period
last year. Group revenues rose 37
per cent to 553m, driven by a 64
per cent jump in international sales
to 333m. UK retail sales also
proved resilient, up 10 per cent to
205m.
Robertson plans in 12 months to
have launched language websites in
Russia and China as well as
warehouses to hold stock so that
customers can get their deliveries
faster. Russia and China currently
account for seven per cent of sales.
Debenhams PLC
25Oct 19Oct 22Oct 23Oct 24Oct
110
112
114
116
118
120 p
119.00
25Oct
THE FTSE 100 yesterday saw another female director added to its ranks after Whitbread
announced it has appointed Louise Smalley, group human resources director, as an
executive director. Smalley, who will join the board on 1 November, has worked for the
Costa owner for 13 years and was promoted to group human resources director in 2007.
WHITBREAD APPOINTS SMALLEY TO ITS BOARD
EVERCORE Partners adjusted profit fell in
the third quarter as a difficult mergers and
acquisitions market weighed on its revenue but
the boutique investment bank said it remains
cautiously optimistic about the economic
environment. Evercore said investment banking
revenue fell seven per cent to $128.2m (79.5m).
Evercore suffers in weak market
THE NEW York Times posted worse-than-
expected results despite an increase in
circulation revenue. A 7.4 per cent rise in
revenues from circulation, boosted by its digital
subscription plan, could not offset a persistent
slump in advertising sales. The results sent shares
plummeting 22 per cent in trading last night.
New York Times down 22pc
US corporate results round-up
COLGATE-PALMOLIVE, which makes Colgate
toothpaste, posted higher quarterly profits, as
an increase in pricing offset sales falls. The firm
saw third quarter profits of $654m (405.7m)
versus $643m last year. Pricing was up three per
cent and volumes rose two per cent. It also plans to
reduce headcount by six per cent by 2016.
Colgate-Palmolive brushes up
SPRINT Nextel, the wireless telecoms firm,
posted a third-quarter loss that was narrower
than Wall Streets expectations on lower
marketing costs but warned that its network
upgrade has been delayed by about three months.
Sprints net loss widened to $767m (475.8m) from
a loss of $301m in the year-ago quarter.
Sprint Nextel losses widen
EUROPEAN insurance giant AXA
yesterday said its revenues grew by 1.3
per cent in the first nine months of
2012, driven by improvements in its
property and casualty business.
Headline income was 68.4bn
(55bn) for the first nine months of
2012, up from 65.9bn for the same
period last year.
However the French firms accounts
benefited from the depreciation of
the euro against other major curren-
cies, boosting the impact of overseas
earnings.
Income from its asset management
business slumped by 5.7 per cent on a
comparable basis but the euros weak-
ness means the firm can boast that
revenues actually rose by 0.7 per cent
to 2.46bn.
Top line trends for the first nine
months of 2012 are overall in line
with those observed over the previous
quarters. Growth is driven by protec-
tion & health and property & casualty,
which are less sensitive to financial
markets, said Denis Duverne, AXAs
BY JAMES WATERSON
deputy chief executive.
Property & casualty revenue growth
maintained its momentum in most
countries driven by our disciplined
underwriting policy, both in terms of
rates and selectivity, and higher vol-
umes.
New business grew by more than 10
per cent in the US and Asia Pacific
region, offsetting declines in Northern
Europe and the UK.
The company also said its regulatory
Solvency I ratio, a measure of financial
strength, had risen to more than 220
per cent in September, up from the
207 reported three months ago.
FRIDAY 26 OCTOBER 2012
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INSIDE
TRACK
W
ITH all the nervousness
about governance issues at
Russian companies wishing
to list their shares in
London, and with Nat Rothschilds
London-listed Indonesian venture
Bumi seemingly ending in tears,
now is perhaps not the best time for
the London Stock Exchange to be
hosting a conference about the
opportunities in Africa for investors.
In theory African companies, due to
the very fact they are part of an
emerging economy that has rudi-
mentary rules in place, bring with
them more than their fair share of
risks.
But there is something of a buzz
building up around the event, main-
ly because the continent looks set for
above average growth over the next
few years and London is fast becom-
ing the go to place for African busi-
nesses to raise money and list their
shares.
There is currently $70bn of market
capitalisation worth of African com-
panies now listed in London, which is
the largest concentration outside of
South Africa.
One of those companies present
next Thursday, Dangote Cement, is
headed for a London share listing in
the next few months which would
propel the company into the FTSE
100, with the group likely to be val-
ued at around 8bn.
Dangote, which is controlled by the
Nigerian billionaire Aliko Dangote, is
expected to strengthen its manage-
ment by appointing Tim Surridge,
formerly of professional services firm
KPMG, as its chief financial officer.
Surridges task, in the months ahead,
will be to bring all the reporting pro-
cedures up to a standard common
with other FTSE 100 groups. He will
be attending the LSE event along
with an audience that brings togeth-
er investors of all types.
The company is set to appoint an
independent chairman in the
months ahead, one strong enough to
stand up to the controlling share-
holder who will be selling down his
shareholding as part of the flotation.
Banks likely to act on any IPO
include JP Morgan, Morgan Stanley
and Goldman Sachs, although it
would not surprise anybody if one or
two smaller houses with special
African expertise were added at a
later date.
Nigeria might not be known for its
high standards of corporate gover-
nance but those on the Dangote
team are determined to get this right.
This would be a huge flotation.
Were flying the flag for Africa and
were determined this should go off
smoothly, even if that means we
might need more time for investor
education, said one of those working
on the float.
UBS BANKERS AWAIT GRIM NEWS
Earlier this year the Swiss-based
bank UBS issued a strong message
to the market that it was commit-
ted to its investment banking arm
by poaching star banker Andrea
Orcel from Bank of America Merrill
Lynch.
But in recent days the talk has
been all about the retrenchment of
the business, with 400 jobs expected
to go globally, possibly as part of a
bigger plan to de-emphasise invest-
ment banking.
The bank is currently ranked
tenth in the year to date in terms of
M&A revenues globally, according to
Dealogic, its lowest ranking to date.
Despite Orcel, it might have further
to fall. david.hellier@cityam.com
Follow me on twitter @hellierd
London looks to Africa to bolster flotation activity
DAVID HELLIER
FORD will stop making vans in
Britain next year, cutting 1,400
jobs on top of 4,300 to be axed in
Belgium as part of a plan by the
US car maker to stem European
losses expected to exceed $1.5bn
(929.7m) this year.
It is the fourth vehicle plant
closure in Europe announced
this year and comes just a day
after Ford itself said it would
shut its 48-year-old Genk plant in
Belgium by 2014, as part of a
wide-ranging restructuring
programme.
The company said the moves
would reduce installed vehicle
assembly capacity by 18 per cent,
with related gross annual savings
of $450-500m. Thirteen per cent
BY CITY A.M. REPORTER
of its European workforce would
be affected by the restructuring.
Ford said despite the loss in
Europe, total company pre-tax
profit, excluding special items,
was better in the third quarter
than in the second and that over
the long term, it was aiming for
an operating margin of six to
eight per cent in Europe.
Analysts at Morgan Stanley
believe Ford is demonstrating
the vision and industrial
courage to make tough
decisions that will pay off long
term.
The US autos giant employs
11,400 at British sites which also
include Halewood, near
Liverpool, and Bridgend in South
Wales.
Axa SA
25Oct 19Oct 22Oct 23Oct 24Oct
12.00
12.20
12.40
12.60
12.80
12.19
25Oct
AXA revenues
grow thanks to
new markets
Ford axes UK van plant to stem
losses as Europe crisis weighs
UNILEVERS quarterly sales growth
beat forecasts as demand for
cleaning and personal care
products in China helped the
consumer goods group outshine
larger rival Nestle.
The maker of Dove soap and Cif
cleaners shrugged off the worries
about slowing growth in China,
reporting a growth of 5.9 per cent
in the third quarter, ahead of a
consensus of five per cent and a
second-quarter rise of 5.8 per cent.
Emerging markets, which make up
55 per cent of sales, increased by
12.1 per cent in the period.
Unilever sales
beat forecasts
BY HARRY BANKS
ADVERTISING mogul Sir Martin
Sorrell blamed four grey swans for
a slowdown in global business yester-
day as his company WPP slashed fore-
casts for the second time this year.
Sir Martin said the Eurozone crisis,
political tensions in the Middle East,
sluggish growth in China, and the
state of the US economy were drag-
ging WPPs growth downwards.
The company said revenue is likely
to grow at between 2.5 and three per
cent this year. This is down from a 3.5
per cent prediction made at the end
of August and four per cent before
that. Shares fell just over 2.5 per cent.
There seem to be four grey swans,
grey because we know about them.
By definition, we do not know the
black ones, Sir Martin said.
He told City A.M. that the biggest
cloud hanging over his business was
uncertainty in America over the
countrys deficit, which is being
drawn out by the presidential elec-
tion. The American deficit has now
become the key issue rather than the
Eurozone, Sir Martin said. US busi-
nesses want Romney to win because
Ad boss Sorrell
says grey swans
affecting WPP
BY JAMES TITCOMB
he is more likely to deal with it but
even if he were to win there will still
be a deadlocked Congress.
WPP said revenue had grown 1.6 per
cent year-on-year to 2.5bn in the
third quarter. This was largely held
back by falls in western continental
Europe, which shrunk 8.6 per cent.
Sir Martin highlighted the UK and
Asia as promising areas, while digital
growth was above expectations. WPP
this year set a target of deriving 35-40
per cent of revenues from digital
operations in the next five years, but
Sir Martin said it was almost at 35 per
cent already. Id like to have done
more in digital because we would not
be reporting these numbers, he said. ODEY Asset Management yesterday
sharply increased its stake in Man
Group, taking a bold bet on a
fightback by the struggling
computer hedge fund firm.
Odey, founded by veteran fund
manager Crispin Odey and which is
known for its lucrative bet in 2009
on a recovery in Barclays shares, has
increased its stake in Man to 5.15
per cent, worth some 70m.
According to Thomson Reuters
data, Odey, previously owned 1.25
per cent of Man Group.
Odey ups Man
Group stake
BY MICHAEL BOW
FRIDAY 26 OCTOBER 2012
cityam.com
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WPP PLC
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780
800
820
840
860 p
793.50
25Oct
HARRY Potter publisher
Bloomsbury has seen profits
almost halve in the last six months
as sales of its childrens and
educational books have suffered.
The firm also said sales of adult
books had been lower than
expected, due to the market being
dominated by Fifty Shades Of Grey
and the disruptive effect of the
Olympics.
Chief executive Nigel Newton
said yesterday that trading during
the period had been soft, but
said the firms results tend to be
weighted towards the second half
Fifty Shades and Olympics harm
Harry Potter printer Bloomsbury
BY JAMES TITCOMB of the financial year due to more
people buying books during the
Christmas period.
Bloomsburys shares fell around
five per cent yesterday as it posted
a fall in pre-tax profit from 1.5m
in the period last year to 850,000.
However, the firm was
encouraged by growth in ebook
sales. Bloomsbury made 4.5m
from ebooks during the period.
This is up 89 per cent on last year
and now accounts for 10 per cent
of the publishers 43.5m revenue.
A raft of new ereaders, such as
Amazons Kindle Fire and the iPad
mini, is expected to boost ebook
sales in the coming months.
The company has seen sales of the bestselling Harry Potter titles decline further
ANGLO-SWEDISH pharma giant
AstraZeneca (AZ) will turn to new
deals in an effort to stem the decline
in its sales, new chief executive
Pascal Soriot said yesterday.
AZ reported a worse than expected
19 per cent tumble in revenue to
$6.68bn (41.4bn) in its third quarter
as the company battles a dwindling
pipeline of new drugs while patents
on existing products expire.
Even at constant exchange rates,
sales were down 15 per cent, AZ said.
One of the critical things we need
to do in the mid-term is to bolster
our pipeline and that will rely on
business development activities,
there is no question about it,
Soriot said.
Soriot, a veteran of the pharmaceu-
tical industry with first hand experi-
ence of successful mergers, was
appointed as the new head of AZ at
the beginning of the month.
He replaced former CEO David
Brennan who quit the role abruptly
at the end of April this year, follow-
ing discontent from major investors.
Loss of exclusivity on several key
AstraZeneca in
search for deals
as revenue falls
BY JULIAN HARRIS
brands including Seroquel IR from
the end of March accounted for
most of the revenue decline, AZ
commented yesterday.
Pre-tax profit dipped by 51 per cent
to $2.05bn, for the three months to
30 September, its accounts said.
On his first day in the job, on 1
October, Soriots reign began with
the firm suspending its share repur-
chase programme a move seen as
freeing up funds for potential
acquisitions.
Its share price dropped by one per
cent on the day of the news, hitting
2,861p during the middle of the
month. Yesterday it rose early on, and
ended up 0.42 per cent at 2,895.05p.
FRIDAY 26 OCTOBER 2012
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AstraZeneca PLC
25Oct 19Oct 22Oct 23Oct 24Oct
2,900
2,920
2,940
2,960
2,980 p
2,895.05
25Oct
The results were behind our and consensus estimates at the top line but
ahead of estimates at the core earnings per share line although this was at-
tered by the previously announced OTC Nexium agreement with Pzer.
Its hard not to see core EPS estimates trickling up, we are at $6.20.
ANALYST VIEWS
All in all, this was a good set of results given the generic headwinds the
company faces. The company reiterated full-year core earnings per share guid-
ance of $6.00-6.30 despite the cessation of the share buyback pro-
gramme. We reiterate our hold recommendation.
While core earnings per share (EPS) beat expectations by ve per cent,
this appears to be due to one-off prots from the sale of Nexium OTC rights.
Also, revenues missed by one per cent; but we maintain our hold guid-
ance expecting EPS of $6.10.
20
FRIDAY 26 OCTOBER 2012
PHILIP BOOTH
The Eurozone is doomed to unwind
without radical liberalising reforms
The EU is now behaving like a pan-
icking man in quicksand. The ECBs
operations are ensuring that the
banking systems of more solvent
countries are implicitly bailing out
the banks of nations in trouble, and
government debt is being socialised at
the EU level. It is believed that, by
repackaging debt, it will somehow
disappear. Instead the burden grows,
day by day.
Average EU government debt is half
as much again as the legal maximum
under EU rules. In Greece, it stands at
170 per cent of GDP. It is impossible to
imagine EU countries dealing with
this burden unless there is rapid eco-
nomic growth. But growth will not
come unless labour markets, business
regulation and services are speedily
reformed. And this is unlikely to hap-
pen soon. Only this week we saw one
EU commissioner suggest crazy new
regulations to impose compulsory
quotas on female board members.
But even if pro-market reform does
happen, austerity will have to contin-
ue. Governments cannot carry on bor-
rowing bond markets are effectively
shut and are only kept open because
of extraordinary measures by the ECB.
Unfortunately, austerity may affect
growth in the short term. Countries
with floating exchange rates that cut
borrowing do not have to worry so
much about the impact on growth.
The reduced capital inflows needed to
finance government deficits lead to
benefits from lower exchange rates,
interest rates or both. In the
Eurozone, however, exchange rates
are effectively fixed and austerity is
more painful in the short term.
Added to this problem is the need
for countries like Greece to become
competitive again. To do this, wages
and prices must fall by about 25 per
cent. On a fixed exchange rate, this
can only happen through deflation.
However, delivering deflation on the
scale needed, given the EUs
appallingly rigid labour markets, will
prove an economic nightmare. It will
also make the debts of Greece, Spain
and others even harder to service, as
wage levels and tax revnues fall, but
debt interest payments do not.
We may as well short-circuit the
years of pain that the EU and ECB are
imposing upon the Eurozone by try-
ing to postpone the inevitable. We
should look for an orderly default on
government debt in highly indebted
countries. Default should come with
conditions like the mass privatisation
of state assets, the proceeds of which
would be used to repay creditors. This
would cause a crisis in the Eurozone
banking system though UK banks
would probably survive intact. The pri-
ority must be ensuring that those
banks that fail do so in an orderly
way.
Wealth loss is sadly inevitable
because governments have borrowed
money they are not able to pay back.
We cannot avoid that problem and,
however much the ECB postpones the
day of reckoning, we may as well face
up to it.
To get back to growth, unless the EU
can enact the necessary labour mar-
ket reforms, the Eurozone will have to
unwind. And the Eurozone can only
be unravelled by keeping the euro as a
legal tender currency across the cur-
rent single currency area, while allow-
ing member states to issue national
currencies in parallel if they wish.
All other viable paths would seem to
lead to a Eurozone superstate and,
whatever the coalition government
thinks, Britain could not remain out-
side its grasp for long.
Philip Booth is editorial and programme
director at the Institute of Economic Affairs.
to beat. He walked the challenger
through a 40 item checklist from
Mission Control in Roswell.
Kittingers list didnt sound very
sophisticated. It consisted of such
straightforward steps as Item 20,
adjust helmet tie down. Between
two men of such expertise it could
have seemed absurd or patronising.
But in aerospace, more than any
other field, the humble checklist has
proved its worth, even for highly-
trained pilots.
Thats been true since the 1930s,
when pilots used the tool to fly
Boeings B-17. The Flying Fortress
became a critical asset in World War
II. But it was nearly abandoned after
a disastrous test flight when it
crashed due to the complexity of its
controls. Only after test pilots
devised checklists to cope was it
possible to fly the machine safely.
The story of the B-17 is outlined,
with many others, in The Checklist
Manifesto, by Atul Gawande. It is a
fascinating call to arms for the
power of the checklist, and has
gained a cult following. Jack Dorsey,
one of the co-founders of Twitter,
gives a copy to every new employee
at the revolutionary mobile
payment firm Square, where he is
now chief executive. The author
himself is no armchair theorist, but
has used checklists in his own
specialism, medicine, showing they
can cut major complications after
surgery by more than a third.
Gawande also shows the
checklists underappreciated value
for other fields, including finance.
He describes three investors who
find formal checklists improve their
performance, helping them make
better decisions faster. He cites
psychologist Geoffrey Smarts
finding that venture capitalists with
a methodical, checklist-based
approach significantly outperform
other styles of assessing early stage
investment opportunities.
The trouble with checklists, it
seems, is not proving that they work,
but how easy it is to overlook their
effectiveness. The better you are at
what you do, the more likely you are
to imagine that intuition and
mastery will see you through. Yet
the evidence suggests that checklists
are a valuable support to anyone
working at full stretch. No one
wants to surrender to a checkbox
culture, but a checklist can
transform high-level performance.
As Baumgartner shows, for those
humble enough to accept them, the
sky is the limit.
Marc Sidwell is managing editor of City
A.M. The Checklist Manifesto by Atul
Gawande is published by Profile.
THE LONG
VIEW
MARC SIDWELL
The skys the limit: Why the humble checklist beats masterful intuition
MORNING UPDATE
A.M.
21
FRIDAY 26 OCTOBER 2012
The Forum is open for you to take part. Got a sharp comment on
one of todays columns? Do you have another subject you want
to share your opinion on? We want to hear your views.
Email theforum@cityam.com or comment at cityam.com/forum
Better than Labour
[Re: Coalition must not become
complacent on economic growth,
yesterday]
Although the coalition should avoid
complacency over economic growth, its
also important that it trumpets the
advantages of its economic policy against
Labours alternative. Yes, austerity has not
been pushed as far as it should have been.
But a continued reliance on the assumed
benefits of stimulus spending would have
been disastrous. Yes, there has been
confusion about how far the government
should intervene to encourage growth. But
some supply-side reforms have been
attempted. Be glad our economy is being
run by George Osborne and not Ed Balls.
Robert Marsden
Kings defence
[Re: Why Sir Mervyn Kings defence of QE
fell short, Tuesday]
The negative effects of quantitative easing
(QE) are not solely seen in rising prices (or
at least their likelihood). QE also devalues
our currency and renders many pensions
not far from worthless. A 100,000 pension
pot now buys you an annual income of just
a few thousand pounds, and a lot of people
are going to look aghast when they realise
how little their auto-enrolled pensions will
leave them to actually live on.
KeithWales
Sir Mervyn King has presided over an
unprecedented financial crisis. Wheres the
contrition?
AndrewWebb
S
OME good GDP news at last!
The UK economy is growing
again. Its official. In fact, the
initial estimate of growth in
the third quarter exceeded
market expectations of 0.6-0.7 per
cent growth by a long way. And at
1 per cent of GDP it now appears to
be the strongest quarter of growth
we have seen since the financial
crisis, at least according to the
current set of official estimates.
The picture of economic growth is
now starting to line up a bit better
with some of the other data, notably
recent figures for employment and
unemployment, which have been
very positive. If we exclude the
impact of oil and gas production, the
economy has grown over the past
year albeit by a rather modest 0.2
per cent. On the same basis, non-oil
GDP is now less than 1 per cent down
on its level in 2007 the peak year for
GDP before the recession hit.
There are, of course, grounds for
caution. First, some of this bounce in
GDP reflects an unwinding of the
dip created by the extra Jubilee Bank
Holiday. Second, the Olympics may
have provided a temporary boost to
economic activity which could
unwind over the next couple of quar-
ters. Third, there are still a number of
clouds on the economic horizon
from the Eurozone and softening
growth in Asia and other emerging
market economies. And the boost
that UK consumers have received
recently from lower inflation may be
unwound as higher food and energy
prices feed through later this year.
So cautious optimism, rather than
euphoria, is the right response to
these figures. We should look at GDP
estimates alongside the other data
we have relating to the state of the
economy, as we know that they can
be revised in the future. Employment
numbers and retail sales growth
TOP TWEETS
Very encouraging GDP figures. Amid
politicising, the real prize is a timely boost to
business confidence.
@MarkFieldMP
Fords factory closures show theres no room
for any complacency as we seek to secure
the economy.
@ChukaUmunna
Can the economic bounceback last? Unlikely
when services growth last quarter was more
than twice cumulative growth since 2008.
@fathomcomment
The coalition cant take credit for this GDP
growth. Its down to the hard work of
business people and entrepreneurs.
@DavidCoburn
As more criticism emerges, has the BBC done
enough to deal with the Jimmy Savile crisis?
YES
The tenor of current accusations, built on a febrile atmosphere of
rumour and suspicion, seems to preclude any reasoned debate
over what we want from a public broadcaster. Weve seen similar
panics around the BBC before, most recently after Jonathan
Rosss prank call to Andrew Sachs in 2008. This has invariably led
to more of the kind of risk-averse compliance regulation and
bureaucratic interference that is so poisonous to serious
journalism. If every questionable editorial decision will be treated
as a conspiracy, rather than failure, no one will benefit. Hard cases
make bad law, as the saying goes. There is a profound risk that,
unless the rest of the media are willing to take a step back and
offer a dispassionate and critical perspective, the extraordinary
case of Jimmy Savile could easily follow the Leveson Inquiry in
creating a chilling atmosphere for our free press.
David Bowden works at the Institute of Ideas.
David Bowden
NO
Sam Bowman
The Savile scandal is an ugly reminder that a news organisation
given near-monopoly status cannot fulfil its duty to the public to
expose wrongdoing. If any private business had acted as the BBC
has, it would collapse. Customers would boycott it and its rivals
would gleefully expose its failings. But the BBC is protected from
accountability by its licence fee subsidy, thanks to which it is a
near-monopoly, with a 70 per cent share of the TV news market.
Its nearest rival ITV has a mere 18 per cent share. We shouldnt be
surprised that the BBC has been so bad at exposing the scandal
within it has no need to be accountable to its viewers, so it can
get away with covering up its misdeeds. The News of the World
was scrapped after its employees crimes came to light. That
wont happen to the BBC. Its time for real accountability to be
imposed but for that to happen, the license fee has to go.
Sam Bowman is policy director at the Adam Smith Institute.
RAPIDresponses
Challenging times
lie ahead despite
solid GDP growth
have been relatively strong, but some
other indicators such as the
Confederation of British Industrys
latest manufacturing survey and
data from construction are more
downbeat.
For me, this reflects the reality that
we are living in a new normal,
where growth in western economies
like the UK is likely to be continue to
disappoint relative to the pre-2007
period. In the decade before 2007, UK
non-oil GDP grew on average by 3.5
per cent. In the current environ-
ment, we should regard growth at
around half this rate 1.5 to 2 per
cent as the norm.
The western world is still recover-
ing from the shocks of the financial
crisis. Consumers are still having to
cope with high and volatile energy
prices. And confidence is weak given
all the uncertainties surrounding
the Eurozone, the global economy
and public finances.
The UK, along with other western
economies, is in a process of transi-
tion. We have left behind a world
where growth was supported by easy
money, cheap imports and a false
belief in the end of boom and bust.
But the forces which might create a
future wave of sustained growth are
not yet apparent. So while the latest
GDP figures should give us some
encouragement, there are still likely
to be challenging times ahead.
Andrew Sentance is senior economic
adviser at PwC and a former member of
the Bank of Englands Monetary Policy
Committee.
ANDREW SENTANCE
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LIFE&STYLE
FRIDAY 26 OCTOBER 2012
22
cityam.com
GOING OUT
Stars and statesmen turned out for the
Skyfall world premiere on Tuesday
23 October at the Royal Albert Hall.
Current Bond Daniel Craig, sporting a
post-Olympic glow, was flanked by
new Bond girls, Naomie Harris and
Brnice Malohe.
Prince Charles and Camilla, Duchess of
Cornwall, walked the red carpet, along
with Minnie Driver, Naomi Campbell,
Tess Daly, JLS, fashion designer
Valentino Garavani and Olympic
medalist Victoria Pendleton.
Bond premieres have doubled as
Royal Galas sice the 1964
premiere of Goldfinger. This
years gala raised 300,000 for
charities serving members of the MI5
and the UK Government
Communications Headquarters and
charities designated by the Prince of
Wales.
The after-party, at the Tate Modern,
had a crowd of 600 downing shaken,
not stirred, martinis. Turbine Hall was
a secret lair, fit for any maniacal villan,
complete with an Aston Martin.
Judi Dench, who reprised her role of
M, stepped out in full bling, with a
rhinestone 007 on her neck.
Skyfall opens in cinemas
nationwide today.
FILM
SKYFALL
Cert 12A | By Simon Thomson
hhhhi
A
FTER deftly eluding MGMs
debtors and safely delivering
the Queen to the Olympic
opening ceremony, James
Bond is out of bankruptcy, off
diplomatic protection detail, and
back on the big screen for a superbly
crafted and confident action thriller.
With a dangerously unpredictable
enemy bent on vengeance, Sam
Mendes Skyfall combines the best ele-
ments of classic Bond with modern
concerns about cyber-terrorism, to tell
a more personal story, which is both a
fitting tribute for the series fiftieth
anniversary, and a solid piece of enter-
tainment in its own right.
The mandatory pre-title action
sequence gets the ball rolling with a
rooftop chase through Istanbuls
Grand Bazaar, and ends with Bond
missing, presumed dead. But that
wouldnt be much of a movie, so after
a musical interlude from Adele, and
three months living on a beach, a spec-
tacular attack on MI6 headquarters
prompts his return.
Much of the action takes place in
London. Despite his quintessential
Britishness, Bond doesnt spend a lot
of time at home, so his extended stay
seems like an appropriately patriotic
coda to the capitals long eventful
summer of 2012, and gives residents
the added fun of spotting places they
know.
Skyfall is aware of its history filled
with in-jokes and call-backs to previous
Bond adventures but lays the founda-
tion for the future development of the
franchise.
This is Daniel Craigs third outing as
a colder, less heroic, fallible and world-
weary Bond. The series was rebooted
with Craigs entry in Casino Royale,
but faltered in Quantum of Solace, so
Skyfall uses Bonds resurrection to
get things back on track.
One of the ways it does this is by real-
ising that if Judi Dench is in the cast, it
would be idiotic not to make the most
of her. MI6 chief M is central to the
story, as she fights bureaucrats, politi-
cians and an anonymous foe whose
high-tech assaults are focused on her.
Always dignified, competent, and will-
ing to make difficult decisions,
Denchs seventh appearance
as M is decidedly her best. Skyfall rein-
troduces Bonds gadget-man, Q.
Although he eased the transition from
the much-missed Desmond Llewelyn,
John Cleese was never convincing as Q
(or R). He was passable comic relief, but
he looked like the kind of man who
would unwittingly use the tray of his
CD-ROM drive as a cup-holder (or
indeed, the kind of man who would
unwittingly use a computer with a CD-
ROM drive). Ben Wishaw is excellent as
the detached young boffin who has
taken over the role. His initially com-
bative first meeting with Bond
takes place in the National
Gallery, in front of Turners
Fighting Temeraire an old
battleship about to be bro-
ken up and is emblematic of the
films elegiac theme; the relentless
cycle of progress and obsolescence.
Also making a welcome return is
extravagant villainy. Its a decade since
the genetically engineered North
Koreans (a public school boy and a dia-
mond studded albino) in Die Another
Day and Quantum of Solace presented
arguably the least interesting villain of
the whole series: having the frog-like
visage of a young Andrew Lloyd-
Webber is unsettling but nothing like
as gratuitous as an auxiliary nipple or
metal hands.
On first inspection, Silvas chief
deformity is a ridiculous hairstyle, but
Skyfalls villain is played with a creepy
camp exuberance by Javier Bardem,
who previously won the Academy-
Award-for-best-supporting-actor-with-a-
ridiculous-hairstyle, as the lumbering
killer in No Country for Old Men, so
the filmmakers clearly knew what
they wanted. Clad in a beige lounge
suit that suggests a conscious evoca-
tion of the more outlandish foes of the
70s, Silvas ebullience barely conceals
a monomaniacal sociopath who is rot-
ten to the core.
As for the Bond girls; Brnice
Marlohe is effective as the femme
fatale, while Naomie Harris seems
rather too bright-eyed and enthusias-
tic as MI6 field agent Eve, whose inter-
actions with Bond are among the
worst moments in the film. The lack of
chemistry between the two makes
their pointedly single entendre office
flirtations seem horribly awkward,
more gamesmanship than lust; and
their needlessly zeitgeisty Fifty Shaves
of Grey interlude with a cutthroat
razor is as uncomfortable as watching
siblings kiss. But, in what might be the
films most blatant act of fan service, a
twist in the final minutes renders all
of this retrospectively charming.
Mendes theatrical roots are showing
in this production. Its visually stun-
ning and a sense of hyper-reality is
only reinforced by the casting of bril-
liant actors like Rory Kinnear and
Albert Finney, who breathe life into
what would otherwise have been mar-
ginal roles.
Perhaps Skyfall is too tightly plotted,
but as Craigs first film without Paul
Haggis (Crash) sharing a writing credit,
its refreshingly unsentimental. Meet
it on its own terms and the only com-
plaints about the film are nitpicking,
like what exactly is that minister-lead
inquiry? Or, how come Bonds sudden-
ly wearing gloves when he drops that
guy off a building? But these quibbles
are greatly outweighed by all that is
good about it, like the return of the
Aston Martin DB5, and a henchman
being eaten by a Komodo dragon. A
Komodo dragon!
Skyfall is easily the best addition to
the Bond franchise since The World is
Not Enough. Bond and M go on a jour-
ney together that culminates in dra-
matic character developments, the
likes of which are seldom seen in
action movies. But dont let that put
you off, because its also a literal jour-
ney that ends in massive explosions.
Skyfall takes Bond to new heights
Left: Daniel Craig looking pensive. Above:
the man of the hour in action.
The low-down on the London premiere
23
TV & GAMES
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12.55amFILMFive 2011.
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BBC THREE
7pmGreat Movie Mistakes 2011:
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7pmHollyoaks 7.35pmFILM
Stardust 2007. 10pmFILM28
Weeks Later 2007. 12amThe Big
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Tool Academy: Boyfriends
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the Day: BBC News
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9pmFILMDeath Race: Sci-fi
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Fill the grid so that each
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33 23
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22 13
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31 3
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29 6
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38
30
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22
45 5
3
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10
16
11
44
11
34
8
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ACROSS
1 Foundation (5)
4 ___ board, used to
shape ngernails (5)
7 In total (3,4)
9 Silky-coated
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10 Elongated cluster
of owers (6)
12 Swarm (4)
15 Foolish (coll) (4)
17 Noisy quarrel (6)
19 Residential district,
often run-down (6)
20 Bride-to-be (7)
21 Aromatic resin
used in perfume
and incense (5)
22 Sensations of acute
discomfort (5)
DOWN
1 Small lynx of North
America (6)
2 Protection (7)
3 Step (5)
5 Bevelled (6)
6 Alleviation (6)
8 Unwanted
discharge of
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11 Cocktail of
vermouth and
gin (7)
13 Representation
of a person (6)
14 Mode of
procedure (6)
16 Prickles (6)
18 Woolly
mammals (5)
T
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D
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4
4
4
B O A S T C A R D S
R U Y E T
D E A R B A F F L E
E R O A N E A
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K O A K T R E E I
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BBC1 BBC2 ITV1 CHANNEL4 CHANNEL5
FRIDAY 26 OCTOBER 2012
HAVE I GOT NEWS FOR YOU
BBC1, 9PM
Only Connect presenter Victoria Coren
and former Daily Telegraph owner
Conrad Black join the team captains to
take a comic look at the news.
THE REVIEWSHOW
BBC2, 11PM
Kirsty Wark is joined by James Brown,
Anne McElvoy and Tim Samuels to
discuss Bond film Skyfall and TV
comedy Girls.
PIERS MORGANS LIFE STORIES:
BURT REYNOLDS ITV1, 9PM
The actor chats about his career, his
love life, his addiction to prescription
drugs and what it was like to be the
highest-paid film star in the world.
TVPICK
largest venture yet, Ham Yard. Its in
deepest, darkest Soho, says Kit, but
we have a walk-through garden in
the centre. So were going to make it
green. Its going to have some oak
trees in there, and Im hoping to
have a little rill.
It is Kits feel for nature that you
see everywhere birds, flowers,
trees and animals are motifs. And it
is a joyful expression of life that she
breathes into what is, at base, just
bricks and mortar. The whole thing
about doing the hotels is that they
are living things, she says. But that
means they have to move on all the
time. Guests want to see something
happening, they dont want to see it
exactly the same as the last time
they came. And thats part of the
skill of doing it moving it along
but not throwing the baby out with
the bathwater.
Update ideas are likely to come
from all corners of the globe, from
framed prints in a French fleamar-
ket to South American blankets. But
the Kemps are still based in South
Kensington, almost living above the
shop if you will, and constantly in
touch with the properties. I go
round my buildings once a week or
once every two weeks and look at
and Tim started in 1985, with Dorset
Square Hotel (which they sold, then
recently bought back), and Firmdale
has grown organically as sites came
up. Each property has a strong indi-
vidual character, not least because
the buildings themselves are so dif-
ferent. We usually start from
scratch, and turn often-neglected,
derelict areas, like car parks (the
Soho Hotel previously belonged to
NCP) and old warehouses, into regen-
erated, burgeoning new neighbour-
hoods, Kit says. It might be the cosy,
intimate townhouse feel of Dorset
Square in Marylebone, or the hip
hangout of the Soho hotel, with its
film-screening room, to the spacious
glamour of Haymarket and its 18m
pool that can turn into a dancefloor
with private bar and metallic sofas.
Next in development is their
I
WANT to pique the imagination
of even the most jaded
businessman, says Kit Kemp,
design director and co-founder
of Firmdale Hotels, the group that
includes the buzzy Soho, Covent
Garden and Charlotte Street Hotels.
If I can do that for a second, then
weve achieved something.
Pique, she definitely does, with
her love of texture and exuberant
colour; her sense of fun and eclectic
eye; and a strong sense of ordered
yet playful design present in all of
Firmdales seven London properties,
and at its fashionable New York sib-
ling, Crosby Street in SoHo. In a city
that is often grey, and in a world of
hotel interiors that use beige as the
trump card, Kits style stands out. It
should be an individual experi-
ence, she says of arriving at a
Firmdale property. You should not
feel that youre in a formula or a
brand. Thats what Ive really tried
to stay away from.
Wallpaper is in; wallpaper and
upholstery, pictures and rugs and
curiosities; wool and appliqu,
wood and pebbles; embroidery, a
hint of shabby chic; lots of antiques;
retro lamps; fresh, vibrant paint-
work; buff all-marble bathrooms (a
finish so immaculate because
youve got to feel as if youre the
first person thats ever been in
there, she says). Her palette bursts
upon you pistachio, paprika,
ointment pink, arsenic green, leaf
green. Its a style that has endeared
her to A-listers as long as your arm
Meryl Streep at Covent Garden, P
Diddy at the Soho. David Bowie,
Carey Mulligan and Giorgio Armani
are all said to be fans.
Self-taught, Kit has as a string of
awards, including an MBE this year
awarded to both her and her hus-
band, co-owner Tim Kemp. Tim is
amazingly involved, she says. He
finds the sites and is very much to
do with the bathrooms and behind
the scenes things. Hes a big motivat-
ing force. And now, with more than
a quarter of a centurys work under
her belt, Kit has published a book of
her approach to design, A Living
Space, a journey through her cre-
ations, which aims to give confi-
dence as well as inspiration. She
suggests simply trusting your
instincts when putting a look
together. A great space need not be
the most glamorous or luxurious,
she says. It is how personal and
interesting you make it, how much
it reflects you.
Establishing a cluster of hotels in
the capital has brought success to
the privately owned company, which
has bought, or built, all of its proper-
ties and has a turnover of 75m. Kit
After winning over the A-list with her unique designs at Firmdale Hotels,
expectations are high for the companys next big project, says Laura Ivill
24
FRIDAY 26 OCTOBER 2012
cityam.com
PROPERTYINTERVIEW
Hotel interiors need not be dull
and predictable just ask Kit Kemp
them all, Kit says. I see the bits that
work and the bits that dont. And
sometimes you stand in a room that
youve just finished that you
absolutely love and think, Gosh this
is whats it all about.
Its this hands-on approach that
has really worked for the company.
Rather than spreading out to LA,
Miami, Boston, Chicago, they are
concentrating on creating Firmdale
New York (where 90 per cent occu-
pancy rates at Crosby Street are com-
mon at an average $700 a night). A
mid-town site has been chosen for
development, with possibly a third
in the future.
Meanwhile, Kit will be imagining
her stream in Ham Yard, the hotels
90 bedrooms and suites and 24
apartments. I do think that rooms
should be an adventure, and a bit of
fun, and not too serious, she says.
You can say, Gosh, I dont think Id
really want this in my own home,
but its quite fun to spend a night or
two. But there might be some areas
that you like, that youd want to
have at home. They are good for
inspiration.
A Living Space by Kit Kemp is out now in
hardback (Hardie Grant, 30). Her fabric
and rug designs are available from Kit
Kemp for Christopher Farr (christopher-
farr.com). Hotel doubles range from 125
plus VAT at Number Sixteen in South
Kensington, to $555 at Crosby Street Hotel
in New York.
A great space need
not be glamourous...It
is how personal and
interesting you make it.