The Week Ahead: Will Brown's report leave the City green around the gills?

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The Independent Online

When Chancellor Gordon Brown stands up before the Exchequer next week, it will be his 10th, and most likely last, pre-Budget report. The most eye-catching aspects of the farewell PBR are expected to be a slate of "green" taxes, including an increase in fuel duties, higher taxes for gas-guzzling cars, and higher levies on air travel.

Business leaders worried about what effect such taxes will have on performance have asked for moderation. Miles Templeman, director general of the Institute of Directors said: "There can be good reasons to use environmental taxes. But they are only justified if they are designed to do their specific job, which is to ensure that the full cost of environmental damage is taken into account."

The CBI, the industry organisation, has called for the reversal of rising business taxes. The group says that the tax burden borne by business is between £7bn and £8bn more than it was in 1997, on an adjusted basis, due to changes pushed through by the Chancellor. "We are hoping to see an indication of change of direction by the Chancellor on the business tax burden," said a CBI spokesman. But there have been no indications from No 11, however, that a pullback is on the cards.

Mr Brown is expected to introduce some measures that the CBI and IoD will welcome, including moves to reduce the administrative burden on companies and details about how the Government plans to foment skills training of British workers. As ever, the PBR is sure to provide plenty of pleasure and disappointment in all corners.

The City will not likely get too bothered, however, by Mr Brown's pronouncements, economists said. Rather, the focus will be squarely on the US, where on Friday the government will unveil payroll and unemployment numbers. Given the dive of the dollar and the climbing value of the pound over the past week, the data will carry added weight and give a much clearer picture about the extent and implications of a US slowdown. If the data is weak, as expected, it will surely open an even greater distance between the currencies.

Away from the large macroeconomic issues, the City will have water on the brain. In the wake of disappointing results last week from Thames Water, the country biggest and leakiest water company, analysts will be keen to see how a trio of smaller rivals stack up. Thames, which its parent RWE sold for £8bn in October to Australia's Macquarie, saw profits drop due to increased spending requirements to patch up its pipes imposed by Ofwat, the water regulator.

Northumbrian Water, United Utilities and Severn Trent will all unveil interim results next week. Of that group, analysts will be keen for any light that Severn Trent, which reports on Thursday, can shed on the status of the ongoing investigation into the company by Ofwat.

The company said in October that its profits would be hurt after the regulator announced that it must charge customers less. Lakis Athanasiou of Collins Stewart said that Ofwat could follow the model it used for Thames Water earlier this year and penalise the company by requiring it to invest more money into patching up is leaky network. That would further dent earnings.

First Choice Holidays' annual results call on Thursday will also draw a lot of interest. MyTravel admitted last week that it was in talks about purchasing the former's short-haul business. Analysts have long expected consolidation in the tour operator sector, and Evolution Securities analyst Nigel Parson said that First Choice will be "the pivotal player" in that process.

Two of the FTSE's biggest hitters, Tesco and Royal Bank of Scotland, will provide trading updates on Tuesday and Wednesday respectively.

British Airways and easyJet both publish November traffic numbers next week. Analysts will be looking for any residual negative effects that heightened security measures could have had on business. And Michael O'Leary, chief executive of discount rival Ryanair, will see the final nail in the coffin of his €1.48bn (£1bn) offer for Aer Lingus. The period for the offer, which government and employee shareholders have rejected, expires tomorrow. Mr O'Leary has already acknowledged the bid is essentially dead.

CALENDAR

Monday 4

UK RESULTS: (final) Aberdeen Asset Management, Hardide; (interim) Acal, E2V Technologies, I-Mate, Vp

Tuesday 5

UK RESULTS: (F) Carluccio's, Greencore, Caretech, ITE, Victrex; (I) Carclo, Christian Salvesen, Cybit, Focus Solutions, Glotel, Greene King, Halma, Stonemartin, Ten Alps, United Utilities, Universal Salvage

Wednesday 6

UK RESULTS: (F) Alternative Networks, ATH Resources, Sanderson; (I) Biffa, DS Smith, Jarvis, Stagecoach, Vega, Northumbrian Water

Thursday 7

UK RESULTS: (F) First Choice Holidays, OMG, Pursuit Dynamics; (I) Computerland UK, Premier Farnell, Wagon, Xansa, Severn Trent

Friday 8

UK RESULTS: (I) Berkeley

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