Darling says recession over by Xmas - papers

Alistair Darling has predicted the recession will be over by Christmas, brushing aside doubts that his Budget forecasts are overoptimistic.

In an interview with The Times, the Chancellor defied a gloomy assessment of Britain's recovery prospects set to emerge today in an annual economic health check from the International Monetary Fund.

"I am not going to change my forecasts," he said. "I remain confident that we will see a return to growth at the turn of the year."

The Chancellor also indicated that he wants to stay at the Treasury despite suggestions that he could be moved to the Home or Foreign Office. Although he refused to speculate, he said: "The job is not done."

In the Budget Mr Darling pinned the Government's hopes on a relatively strong economic rebound next year, predicting growth of 1.25 per cent in 2010, after a predicted 3.5 per cent plunge in GDP this year. By contrast, other forecasters have warned that the economy could continue to shrink next year, with the IMF expecting a further 0.4 per cent drop.

BOB SCOTT, THE FORMER senior independent director at Royal Bank of Scotland (RBS) who agreed Sir Fred Goodwin's £17 million pension, is to stand down as chairman of Yell, the directories business, after opposition from its shareholders over his role at the stricken bank, according to The Times.

Yell said this morning that Mr Scott would not stand for re-election at July's annual meeting. Mr Scott was head of the remuneration committee at RBS that rubber-stamped Sir Fred Goodwin's £703,000 annual pension, which provoked a public backlash. His decision to stand down comes amid a spate of shareholder rebellions against boards.

He had been chairman of the directories publisher since June 2002. In a statement this morning, he said: "Yell is a first class company with a first class management team. Operationally, it has consistently out-performed its peers and it continues to do so. In today's economic environment, Yell faces many challenges which are actively being addressed by the board and management whom I wish every success in the years ahead."

LLOYDS BANKING GROUP today issued a stern warning the Government bailout, after the disastrous purchase of HBOS, could lead to stringent action from the EU, including the forced sale of some core businesses.

As reported in The Times, the disclosure is made in the prospectus for the bank's £4 billion fundraising. Lloyds is offering shareholders the chance to buy 0.62 shares at 38.43p for each Lloyds share owned.

Lloyds will use the proceeds to repay preference shares issued to the Government at the height of the banking crisis last October. The Treasury is preparing formally to notify the European Commission of the details of Britain's asset protection scheme, which must be cleared by regulators to ensure compliance with European state aid rules.

BARCLAYS COULD BE FORCED to pay more than the $1.75bn (£1.1bn) it originally agreed for the North American business of the bankrupt investment bank Lehman Brothers, if the company's liquidator succeeds in a legal action launched in a New York court, writes The Independent.

The original deal, rushed through during the financial panic of last September, just 48 hours after Lehman filed for bankruptcy, handed Barclays an unfair "windfall" profit because it was based on an overestimate of the liabilities that the UK bank was taking on, the liquidator claims.

Because it agreed to take over bonus payments to staff and other contractual costs, estimated at the time at more than $4bn, Barclays was able to negotiate a price for the core Lehman broker-dealer business of just $250m. It paid a further $1.5bn for properties in New York and New Jersey.

The deal cemented Barclays' position as a powerhouse in global investment banking, and rescued several thousand Lehman bankers from the threat of unemployment. And by the end of December, Barclays' financial results were showing a £2.3bn gain on the value of the assets it had bought.

scott.sinclair@incisivemedia.com