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Despite being 18 months into a 1 billion pound ($1.6 billion) turnaround plan in Britain, which has included revamping stores, recruiting more staff and new product ranges, the group said sales at UK stores open over a year, excluding fuel and VAT sales tax, were flat in the 13 weeks to Aug. 24. Though that was at the top end of analysts’ expectations and an improvement on a 1 percent decline the previous quarter, it was well below the 2.0 percent rise, excluding fuel, reported by Sainsbury for the 16 weeks to Sept. 28. Ibbotson said Sainsbury had managed a delicate balancing act which has so far eluded Tesco, with its premium “Taste the Difference” and budget “basics” ranges helping Sainsbury to fend off competition from both the discounters and Waitrose. COMMITTED TO EUROPE Tesco, which lags France’s Carrefour and U.S. industry leader Wal-Mart by annual sales, said first-half trading profit dropped 7.6 percent to 1.59 billion pounds. That reflected like-for-like sales declines in all ten of its overseas markets and particularly heavy falls in central and eastern Europe, which the company blamed on government austerity measures, rising inflation and high unemployment. Deutsche Bank analysts said European profits of 55 million pounds were 60 percent below their expectations and predicted analysts’ full-year group trading profit estimate would fall 2-4 percent to 3.35-3.45 billion pounds, excluding the benefits from Tesco’s move to fold its Chinese business into a state-run firm. Despite the profit slump, Tesco said it remained committed to its European businesses, which account for about 12.5 percent of group sales. It expects to benefit in the second half from curbing store openings and focusing on stronger-growing convenience store and online markets. “When the macro economic environment comes back to being a bit more positive and real wages start to grow we’ll have very profitable businesses in that region,” said chief financial officer Laurie McIlwee, though he said Tesco’s business in eastern Turkey, which lacks “critical scale”, could see some restructuring. Chief executive Phil Clarke said there were also signs the turnaround plan in Britain was working, with like-for-like food sales in the second quarter growing 1 percent, clothing sales up 8.6 percent and online grocery sales up 13 percent. “We’re feeling very positive about the changes that we’ve made and consumers are reacting very well,” he said.

Credit: Reuters/Luke MacGregor LONDON | Wed Oct 2, 2013 9:46am BST LONDON (Reuters) – British construction activity eased slightly in September from a near six-year high in August, a survey of purchasing managers showed on Wednesday, but residential construction rose at its fastest rate in nearly a decade. The Markit/CIPS construction purchasing managers index (PMI)edged down to 58.9 from 59.1 but was still well above the 50 threshold that separates growth from contraction. Economists polled by Reuters had expected a reading of 59.2. All three sub-sectors of construction grew last month, with the sharpest rise in housing since November 2003, potentially easing some concerns about Britain’s shortfall of new homes. “Construction is no longer the weakest link in the UK economy,” said Tim Moore, senior economist at Markit. “The third quarter of 2013 ended with output growth riding high amid greater spending on infrastructure projects and resurgent house building activity,” he said. Optimism was also up, with 51 percent expecting output would rise over the next 12 months and only 9 percent of respondents predicting a fall, the highest level of confidence since August 2010. Employers created jobs for the fourth straight month. “Having been in the doldrums for so long, builders are using this renewal as a platform to invest, with employment seeing the most dramatic upturn in close to six years,” said David Noble, chief executive at the Chartered Institute of Purchasing & Supply. PMI data on Tuesday showed Britain’s manufacturing activity grew at a slower rate than expected in September, but also showed that employment picking up. The Bank of England is keeping a close eye on the UK labour market, having said that it would not consider raising record-low interest rates until the jobless rate falls to 7 percent. On Friday, mortgage lender Nationwide said British house prices rose for the fifth straight month in September and hit record highs in London. The day before that, finance minister George Osborne asked the Bank of England to make annual assessments of his controversial “Help to Buy” housing programme to ensure that its support to lenders does not lead to a property bubble. – Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence.

Tesco’s UK problems exposed by Sainsbury’s surging sales

That reflected like-for-like sales declines in all ten of its overseas markets and particularly heavy falls in central and eastern Europe, which the company blamed on government austerity measures, rising inflation and high unemployment. Deutsche Bank analysts said European profits of 55 million pounds were 60 percent below their expectations and predicted analysts’ full-year group trading profit estimate would fall 2-4 percent to 3.35-3.45 billion pounds, excluding the benefits from Tesco’s move to fold its Chinese business into a state-run firm. Despite the profit slump, Tesco said it remained committed to its European businesses, which account for about 12.5 percent of group sales. It expects to benefit in the second half from curbing store openings and focusing on stronger-growing convenience store and online markets. “When the macro economic environment comes back to being a bit more positive and real wages start to grow we’ll have very profitable businesses in that region,” said chief financial officer Laurie McIlwee, though he said Tesco’s business in eastern Turkey, which lacks “critical scale”, could see some restructuring. Chief executive Phil Clarke said there were also signs the turnaround plan in Britain was working, with like-for-like food sales in the second quarter growing 1 percent, clothing sales up 8.6 percent and online grocery sales up 13 percent. “We’re feeling very positive about the changes that we’ve made and consumers are reacting very well,” he said. Tesco has suffered more from a weak British economy than many rivals because it sells a higher proportion of discretionary non-food goods, like electrical items and homewares, where shoppers have been making the biggest cut backs. Like other retailers, Tesco and Sainsbury were cautious about signs of economic recovery in Britain. “We can of course see all those encouraging signs from economic indicators but our customers tell us that they still don’t have extra money in their pocket,” said Sainsbury’s commercial director Mike Coupe. Tesco shares, which have lagged Sainsbury’s by 7 percent over the past year, were down 1.9 percent at 1407 GMT (1007 EDT).

UK’s Cameron: Conservatives party of opportunity

Labour paints the Tories as a party of the rich, and depicts Cameron a millionaire educated at the elite Eton school and Oxford University as out-of-touch. Cameron did nothing to undermine that view this week when he fell into the classic political trap of not knowing the price of a loaf of inexpensive white bread. “I don’t buy the value stuff,” Cameron said on LBC Radio. “I have a bread-maker at home.” Many on the Conservatives’ traditionalist wing are also wary of Cameron’s privileged metropolitan image and liberal attitude on issues such as same-sex marriage, which Britain recently legalized. The right-wing United Kingdom Independence Party , or UKIP, is winning support away from the Tories with attacks on the European Union , mass immigration and a perceived culture of political correctness. In his speech, Cameron disparaged Labour as a party of “1970s-style socialism” whose big spending when in office between 1997 and 2010 had caused the current deficit. And he appealed to the Conservative grassroots, promising to toughen up immigration and welfare rules and give voters an “in or out” referendum on EU membership. The party has also promised a tax break for married couples, an example of the kind of low-cost sweetener it will rely on to attract voters without increasing spending. Cameron was cheered by Tory delegates, but UKIP leader Nigel Farage called the speech “an abysmal damp squib.” Labour leader Ed Miliband tweeted: “The last thing families want is him to ‘finish the job’ when prices have risen faster than wages and average pay is down by almost 1,500 pounds ($2,400).” Miliband will likely be Cameron’s election opponent, but the prime minister’s biggest rival lurks within the Conservative Party. The country’s most popular Conservative politician is not Cameron but Boris Johnson , the tousle-headed, Latin-spouting mayor of London. Johnson’s rivalry with Cameron stretches back to their days at Eton, and the mayor has spoken of his desire to be prime minister.