City watch

Interesting times
With interest rates at four per cent, the lowest level since 1955, the cost of borrowing in the UK is approaching that of Japan.

The stockmarket seems to have found a base just above the FTSE 5,000 level, but is likely to enjoy a pre-Christmas surge to the 5,500 mark.

Firm piles on pounds, but may lose some
Compass, the biggest operator in the £200bn a year global food service industry, is the major beneficiary from the boom in outsourcing catering operations by companies worldwide. The economic slowdown is actually helping Compass as companies cut costs by outsourcing catering. Trading is buoyant and business retention rates are 95 per cent. However, the company will be hit as a result of the attack on the US on 11 September. Some of its sites were destroyed and many were closed. This will hit profits to the tune of £5m.

Regulation washes away share price...
United Utilities, which has a facilities management operation, recently saw its share price drop due to the fact that water supply and electricity distribution still account for 75 per cent of its revenue and nearly all its profits, which were hit by regulatory price costs. However, United continues to use its expertise to run other utilities' networks having won a £450m, four-year contract to run the assets of Welsh Water, which were contracted out earlier this year. The group is also operating foreign water businesses and has won contracts to run water operations in Estonia, Bulgaria and Poland.

...but United is a good communicator
Another United business, Your Communications, a telecoms provider in the North West and Midlands is robust despite the collapse in telecom shares. Your Communications should move into generating cash profits by the end of this year and should eventually be sold off. The company's call centre operator, Vertex, is doing well and is winning new contracts, both on its own and in partnership with IT consultancy Cap Gemini Ernst & Young. Vertex could be partially floated on the market in 2003.