British oil companies and banks in limbo over Egypt protests

British companies are flying out staff and halting operations as the civil disorder escalates in Egypt but they have also found themselves under verbal attack for being too close to the government of president Hosni Mubarak.

BP has also been accused of working "hand in glove with dictatorship" while Vodafone is under fire for bowing to presidential pressure to shut the mobile telephone network down.

BP, which has sunk $14bn into oil operations and is hoping to double production there, said "hundreds" of employees or their dependents were being evacuated from Cairo and some drilling operations had been halted.

BG, formerly part of British Gas, said it had closed its Cairo office and flown home all non-essential expatriate staff from Egypt, but its production of liquefied natural gas goes on.

Vodafone has flown 25 people and their families back to the UK in recent days, the company's chief executive Vittorio Colao disclosed.

The boss of the world's biggest mobile phone operator added that two of its Egyptian employees are known to have been injured in rioting between supporters and opponents of Mubarak. One of the two is missing, and the company is trying locate him.

And British banks such as Barclays, airlines such as BA and others with exposure to the growing Middle East market have seen their shares hit as investors worry about the damage to UK plc from the turmoil in the region.

BP has been criticised by the non-governmental organisation Platform, which claims the oil company had with other British and American oil companies "worked hand in glove with dictatorship."

The environmental and social justice group also said Hesham Mekawi, the BP Egypt chairman, has praised "the stability of the country" and claimed BP had allowed the American Chamber of Commerce in Cairo - of which it is a member - to put pressure on US Congress not to support a recent motion calling on Mubarak to hold fair elections and respect human rights.

BP said it had played a constructive role in Egypt which had benefited the entire population. "We've been in Egypt for 40-plus years as a major investor in the country's industry, employing a well-trained workforce in quality jobs, supplying significant amounts of energy to meet the rapidly growing population's needs," said a spokesman.

BP has made Egypt one of its top priorities after a major gas find in the Nile Delta last summer. It hopes to more than double its oil and gas production to over 320,000 barrels a day – almost a tenth of its global output.

Meanwhile Vodafone's Collao said: "We have also suffered some 'infrastructure damage'," which he defined as mobile stations out of action due to fuel shortages, or because Vodafone staff are unable to provide essential maintenance.

The British company owns 55% of Vodafone Egypt which employes around 6,000 and has nearly 29m customers.

Colao defended his decision to shut down its mobile phone network in Egypt last week on the regime's orders. "The network was down for 24 hours. We didn't have any option as the government was within its rights under emergency powers that it invoked after the outbreak of demonstrations."

He said disruption to services is continuing with many Egyptian customers unable to send text messages, but that the network was operational for those taking advantage of 'roaming' agreements between different operators.

"Our main concern at the moment is for the safety of the people of Egypt and our colleagues. But we are not telling people to stay at home, some employees can work their shifts. This is a very fluid situation."

Last year, Vodafone was approached by its Egyptian partner, Telecom Egypt, with an offer to buy out the British company's stake. But talks broke down because the two sides couldn't agree a price.

Vodafone reckons its holding in its Egyptian joint venture will rise in value because only around 70% of Egypt's population owns a mobile phone, whereas in Europe there is saturation coverage- GUARDIAN UK

Group: Don’t break up British banks

LONDON: British banks must not be broken up as a result of a government review on the sector since this could harm the Britain's role at the helm of global finance, the Confederation of British Industry (CBI) said.

The CBI, which is Britain's main business lobby group, added that the sector had to tackle ongoing public anger over large bonuses for bankers, while ensuring that British banks could still attract top talent.

Britain set up the Independent Commission on Banking (ICB) last year to examine a possible shake-up of the industry after the credit crisis, which saw top lenders such as Royal Bank of Scotland and Lloyds needing taxpayer bailouts.

The ICB is currently examining whether or not to split up companies' retail banking operations from their investment banking arms.

It is due to publish an interim report in April before a final report in September.

The CBI said it made a submission to the ICB in which it warned against a full break-up of the banks.

“We believe that breaking up banks would be a mistake. We need a strong banking system to help support the economy and growth,” said CBI director-general John Cridland yesterday.

Despite calls from politicians to cull the investment banking industry, many industry members and analysts say it is unlikely that British banks will ultimately be forced into a full break-up.

Most universal banks, with activities ranging from trading to retail banking, proved stronger in the crisis than many “narrow lenders”, such as mortgage and retail specialist Northern Rock which nearly collapsed and had to be nationalised.

Britain's banking industry is dominated by the “Big Four” of RBS, Lloyds, Barclays and HSBC.

Last month, ICB head John Vickers hinted that the ICB was unlikely to recommend a formal break-up of the banks but could support plans to distance banks' retail arms from their trading units via a form of subsidiarisation.

This would entail “ring-fencing” retail banking operations so that depositors' funds would not be used to subsidise more risky investment banking activities.

The CBI said it backed plans to strengthen the capital of banks and supported moves for companies to have contingent capital securities. These are bonds that turn into equity if a bank hits trouble, thereby bolstering its capital position.

The CBI added that it was vital to address concerns over banks' bonuses, with many members of the public still angry that an industry blamed for causing the crisis could use taxpayers'money to award its staff large salaries.

“Addressing the bonus culture is part of winning back trust,” said Cridland.

“Boards need to be sensitive to public concern over the quantum of pay, a task they must juggle with the need to be able to compete for the world's best talent.” he added. Reuters