Amazon and eBay ‘profit from VAT evasion’

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Amazon and eBay have defended themselves as a report by MPs accuses online marketplaces of profiting from VAT evasion.

The Public Accounts Committee was particularly scathing of the taxman, saying HM Revenue & Customs (HMRC) had failed to get to grips with the scale of fraud, carried out by non-EU sellers on such sites.

Its report said the traders’ fast-growing and “illegal” practice of failing to charge customers VAT on goods housed in the UK was anti-competitive as it allowed them to undercut rivals by at least the 20% tax rate – putting UK retail staff out of their jobs.

It said the online platforms hosting the sellers were making more money than they should as they were raking-in commissions on sales that should have been blocked.

Image:Amazon says it removes any seller UK authorities say is non-VAT compliant

The committee described HMRC’s estimate of an annual loss to the public purse of up to £1.5bn as “out of date and flawed” and hit out at its failure to bring any prosecutions under new enforcement powers.

It urged officials to ensure, by March next year, that online platforms had imposed greater VAT controls on non-EU traders – with Brexit likely to exacerbate the problem as new trade arrangements become clearer.

PAC chair, Meg Hillier, said: “HMRC needs to be far tougher in protecting the interests of British businesses and taxpayers.

Image:Ebay argues it has gone beyond UK requirements in ensuring VAT compliance

“As a priority it must inject more urgency into enforcement action. But it should also push the case for further new powers.

“Online marketplaces tell us they are committed to removing ‘bad actors’, yet that sentiment rings hollow when those same marketplaces continue to profit from the actions of rogue traders.

“They can and should do more to drive them out and we will expect online marketplaces to co-operate fully with HMRC in tackling non-compliance.”

An eBay spokesman said: “We want a fair marketplace for all our buyers and sellers.

“That’s why we have been working together with HMRC – and going above and beyond their requirements – to continue to ensure that our site is the best possible place to do business.”

An Amazon spokesman responded: “We are reviewing the committee’s recommendations and support efforts to ensure businesses and individuals selling across all marketplaces are VAT compliant.

“We offer extensive information, training and tools to assist sellers in their VAT obligations, and we work closely with HMRC on this matter sharing all requested data on non-EU sellers and promptly removing any seller they inform us is not VAT compliant.”

An HMRC spokesman said: “The UK has led the way in holding online marketplaces jointly liable for VAT evaded overseas.

“We introduced tough new rules last year allowing us to hold online marketplaces liable for unpaid VAT by overseas sellers and since then we have seen a ten-fold rise in the number of sellers registering for VAT.

“The new reforms will secure an extra £875m in tax to help pay for vital public services.”

Hospital targets missed en masse as performance slumps

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The performance of hospitals across the UK has slumped with targets for cancer, A&E and planned operations now being missed en masse, BBC research shows.

Nationally England, Wales and Northern Ireland have not hit one of their three key targets for 18 months.

Only Scotland has had any success in the past 12 months – hitting its A&E target three times.

Ministers accepted growing demand had left the NHS struggling to keep up as doctors warned patients were suffering.

The findings are being revealed as the BBC launches its online NHS Tracker project, which allows people to see how their local service is performing on three key waiting time targets:

  • Four-hour A&E waits
  • 62-day cancer care
  • Planned operations and treatment

If you can’t see the NHS Tracker, click or tap here.

The BBC has looked at performance nationally as well as locally across the 135 hospital trusts in England and 26 health boards in the rest of the UK.

Locally there is just one service in the whole of the UK – run by Luton and Dunstable NHS Trust – which has managed to hit all three targets each time over the past 12 months.

Hospital staff the BBC has talked to have described how shortages of doctors and nurses, a lack of money and inadequate room in A&E departments in particular was making it difficult to see patients quickly enough.

While overall the vast majority of patients are still being seen in time, the BBC investigation shows how declining performance is affecting patients.

For example, the chances of not being seen in four hours in A&E has actually more than doubled in the past four years, with one in nine patients now waiting longer than that.

The NHS on the slide

The BBC research has found:

  • Wales has consistently failed to hit its targets. In 2012-13 it did not hit any of its monthly key hospital targets and in 2016-17 it was the same. The last time a target was achieved nationally was 2010.
  • England has seen the biggest deterioration. In 2012-13 it hit its key hospital targets 86% of the time, but in the last year it has missed every monthly target.
  • Scotland is the only part of the UK to hit its targets during the last 12 months, but has only managed to hit do that three times over the summer in A&E when pressures tend to be at their lowest.
  • Northern Ireland is failing to hit its targets despite making it easier to hit the goal for planned operations and care. Since March 2015 it has gradually reduced the target from 80% to 55% but has still not hit it.
  • The north-east is the top performing region in England. Services have hit their key hospital targets 71% of the time in the past year.
  • Twelve out of 135 English hospital trusts, four out of five Northern Irish health trusts and five out of seven Welsh trusts have failed to hit any target in the past 12 months.

‘We don’t have enough doctors’

Prof Srinivasan Madhusudan, head of cancer at Nottingham University Hospitals NHS Trust, which has not hit the cancer target since April 2014, suggested there was simply not enough staff to cope.

“When I get to work I want to treat my patients as soon as I can. So do my colleagues.”

But he added there was a limit to what could be done, pointing out there are 5,000 new cases a year at his hospital trust.

“There are only so many patients that you can treat.

“We have a team of 22 fantastic oncologists who are working very hard to do the best they can under what is quite a stressful situation.”

Meanwhile, Ali Refson, an A&E consultant at London’s Northwick Park hospital, said demand was “incredibly high” which meant it was sometimes impossible to hit the four-hour target.

“We sometimes feel we can’t give the best care. We are working the hardest we can, but we are only human.”

What does this mean for patients?

Ministers across the UK have been quick to point out that most people are still being seen in time.

But the numbers waiting longer for care have been rising.

In A&E patients are now twice as likely to wait more than four hours than they were four years ago – 11% compared to 5%.

The proportion of people waiting over 62 days for cancer treatment has risen by a third in the past four years. Nearly one in five patients now wait longer.

The chances of delays before you have a planned operation or treatment, such as a hip replacement, has increased by nearly three-quarters in four years. Currently 12% of patients wait longer than they should.

It means there are now over 500,000 people on hospital waiting lists in England, Wales and Northern Ireland that have waited too long. That compares to nearly 230,000 four years ago.

British Medical Association chair Dr Chaand Nagpaul said the situation highlighted by the BBC was “unacceptable”.

He said while for some patients the delays were simply an “inconvenience”, for many more they would have a “real impact on their treatment and outcome”.

Time for ‘honest debate’

Scottish Health Secretary Shona Robison said record levels of investment were being put into the health service in Scotland.

She said efforts were being made to “shift the balance of care away from hospitals” and into the community that should make it easier to hit the targets.

And she added a ministerial working group had been established to improve cancer care.

A spokesman for the Department of Health in England said more money was being spent on services, and said despite the longer waiting times the majority of hospitals were still providing good or outstanding care, according to inspectors.

And he pointed out that because of the ageing population “health systems worldwide face similar pressures”.

A Welsh government spokesman acknowledged some people were waiting “too long”, but pointed to the rising demand being faced.

The number of A&E visits made each year across the UK has risen by a fifth in four years to top 30 million, while the number of cancer cases has risen by more than a quarter to top 170,000.

Nonetheless, Labour’s shadow health secretary in England, John Ashworth, called the decline in performance “staggering”.

Saffron Cordery, of NHS Providers, which represents hospital bosses, said it was time to consider whether these targets were still achievable unless more money was provided.

“It’s time for an honest debate about what we can realistically expect the health service to deliver in such difficult circumstances.”


The services where targets have been missed for whole year

England:

  • Basildon and Thurrock NHS Trust
  • Colchester Hospital University NHS Trust
  • Guy’s and St Thomas’ NHS Trust
  • University Hospitals of North Midlands NHS Trust
  • The Royal Wolverhampton Hospitals NHS Trust
  • Leeds Teaching Hospitals NHS Trust
  • Gloucestershire Hospitals NHS Trust
  • East Kent Hospitals University NHS Trust
  • Hull & East Yorkshire Hospitals NHS Trust
  • United Lincolnshire Hospitals NHS Trust
  • Maidstone & Tunbridge Wells NHS Trust
  • Worcestershire Acute Hospitals NHS Trust

Wales:

  • Betsi Cadwaladr University Health Board
  • Hywel Dda University Health Board
  • Abertawe Bro Morgannwg University Health Board
  • Cwm Taf University Health Board
  • Aneurin Bevan University Health Board

Northern Ireland:

  • Belfast Health Trust
  • South Eastern Health Trust
  • Southern Health Trust
  • Western Health Trust

Based on performance against the monthly or quarterly targets for A&E, 62-day cancer care and planned operations for the most recent 12 months for which there is data. The way the targets work is different across the UK so the BBC has simply looked at whether the key targets are being me in each nation.


Research by the BBC’s data journalism unit

Pre-sex HIV drug ‘no-brainer” for NHS

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A drug to dramatically cut the risk of HIV infection during sex would save the UK around £1bn over the next 80 years, say scientists.

The team at University College London says Prep, or pre-exposure prophylaxis, is a “no-brainer” for the NHS.

The study predicts that giving Prep to men who have sex with men would prevent one in four HIV cases.

NHS England is currently funding a trial of Prep in 10,000 patients, but does not offer the treatment routinely.

Prep is already available in Scotland. The health service in England fought against paying for Prep in the courts, but agreed to trialling it in selected clinics.

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Preventive pills

Prep disables HIV before it gets a stranglehold in the body and trials show it can cut the risk of being infected by up to 86%.

The financial analysis, published in the Lancet Infectious Diseases, looked at the cost-effectiveness of a national roll-out of Prep, focusing on the highest risk group – men who have sex with men.

It showed offering Prep would cost the NHS money initially as it paid for both Prep and lifelong care for people already infected with HIV.

It could take up to 40 years to become cost-effective, when savings from the falling number of new HIV cases equal the cost of Prep.

Eventually, after 80 years, the pills would deliver a saving of £1bn, say the researchers.

Dr Alison Rodger, part of the UCL team, told the BBC: “Not only is it a highly effective treatment, it will save money. It’s a no-brainer so it’s a good thing to do.”

The researchers’ mathematical model predicted:

  • In the first year Prep was available, 4,000 men would start taking it, rising to 40,000 within 15 years
  • Men would take Prep for 4.5 years on average
  • Men would take two pills before sex, followed by one-a-day until they had gone two days without condom-less sex
  • Men would average five pills a week

It is still cost-effective with a daily Prep pill, but it takes longer to become cost-effective. Both options are being investigated as part of the NHS England trial.

The other major unknown is the long-term cost of the drugs, which may fall as cheaper alternatives become available.

Dr Michael Brady, medical director at the Terrence Higgins Trust, said: “It is important that all who need Prep can access it, and evidence like this reinforces the need for Prep to be fully commissioned and given a long-term, sustainable home on the NHS in England.”

Dr Paul Revill, from the centre of health economics at the University of York, said the NHS needed to be “far sighted [and] invest now and reap long-term gains”.

He added: “With a combination of frequent HIV testing, immediate treatment, and Prep availability, there is now the prospect of bending the curve of new HIV infections downwards in a way that did not seem feasible just a few years ago.”

A spokesperson for NHS England said: “The Lancet study makes an important contribution to the growing evidence for cost effectiveness of PrEP, highlighting the factors which will determine this, such as price and duration on PrEP.”

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‘Go to the dentist and get fined £100’

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Going to the dentist is something that many would want to avoid – but how about if you also faced a penalty fine?

More than 40,000 people a year in England are getting fines of £100 – from an automated system that dentists say is hitting the most vulnerable.

They warn that people such as dementia sufferers are unfairly getting caught up in a system meant to stop fraudsters from getting free treatment.

The NHS accepts there is a problem with errors and is promising changes.

The fines, about £4m per year, are being applied by a random screening process that checks on whether people going to the dentist are really eligible for free treatment.

But dentists say rising numbers of people with dementia, or those with learning difficulties, are being unfairly fined for something as simple as ticking a wrong box in confusing paperwork.

When these have been challenged, about 90% have been overturned as having been incorrectly applied.

The British Dental Association says the problem seems to be increasing and with an ageing population is only likely to get worse.


Why dentists are complaining

Charlotte Waite, a senior dentist working in Loughborough, Leicestershire, says this is a problem appearing on a “daily basis”.

“This has become a significant barrier to care. It can cause a lot of distress if people feel they are seen as fraudulent,” she says.

Mrs Waite, vice-chair of the British Dental Association’s England community dental services committee, is leading a campaign to stop a wave of fines for elderly and frail people, those with dementia or learning difficulties, who have made honest mistakes when filling in forms about free care.

She says even when patients are eligible for free treatment, an incorrect description of specific benefits or failure to renew documents can trigger a penalty fine, which rises to £150 if there is a delay in payment.

And she says because it typically affects vulnerable and often low-income families, there has been a lack of a “powerful advocate” to raise the issue.

Many such patients will be brought to the dentist by a carer, and Mrs Waite says they might not have the detailed information about types of benefit and exemption certificates.

She says this becomes a dilemma for dentists, whether to turn away patients or to treat them and then risk that they will face a fine.

Patients might turn up for the dentist and go away again without treatment because of confusion over benefits and entitlements and worries about being fined.

“I feel very strongly that clinical time should be spent on clinical work,” she says, rather then trying to navigate the benefits system.

“It’s an extreme waste of clinical time.

“We really need to sort this out now.”


What dentists say they’ve seen

  • “This patient has severe learning disabilities and cannot communicate verbally.

“They were fined twice over an 18-month period, due to the change in exemption and Mum accidently putting the wrong thing on the form.

“Mum was having a bad year and the patient had suffered a few health problems, and these fines were very upsetting and caused lots of anxiety.

“We did manage to get the fines turned around, but this took long periods of time and many phone calls and a letter. We were constantly up against a brick wall.”

  • “A vulnerable adult who has a valid certificate – which he brought in for us to see and the number was recorded correctly – was sent a fine for £100 saying he was claiming free treatment incorrectly.

“He contacted me in quite a panic and I had to reassure him and request that he brought in the paperwork to me to see, I completed the appeal form for him as he was entitled to claim free dental care.

“The appeal form that needed sending back was quite a complex letter, and I think our patient would have struggled to respond to it without help.

“I felt it was most unfair for him to have to go through that.”

  • “I had a patient whose parents didn’t realise her exemption certificate had expired, only to be fined.

“I phoned on her behalf, but they would not accept my word regarding the patient’s special needs and wanted a letter from the patient’s doctor.

“It took three weeks for the patient to get in to see the doctor as it wasn’t urgent. All I could get was a deferral in increasing the fine [for non-payment] while the patient waited for a letter from her doctor.”


What the NHS wants to do in response

The NHS Business Services Authority, which oversees the fining system, accepts there is a problem and is looking for a way to make improvements.

A spokeswoman says no-one wants vulnerable people to be unfairly fined or for dentists to waste valuable clinical time.

The checks have an important role in making sure free treatment isn’t being unfairly accessed by those who should pay.

The screening system compares what people have put on forms at the dentist against two databases of information about benefits and entitlements – and if these do not match, the fining system generates a penalty notice.

The most recent figures suggest almost 120,000 fines have been issued over the past three years.

But the British Dental Authority says when 30,000 of these fines were checked, almost 90% were overturned, suggesting the scale of the error in the system.

  • The NHS says it will run a national awareness-raising campaign, so people will have a much better understanding of who is entitled to free dental treatment
  • There are plans for simpler forms and clearer information, particularly for vulnerable patients

“We want to make sure that patients, particularly those who struggle with literacy, understand if they are entitled to receive free dental treatment or if they should pay,” says a NHS Business Services Authority spokeswoman.

“We recognise the importance of information and access to it for everyone.”

Asia shares camp near peaks, China’s Xi talks reform and stability

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SYDNEY (Reuters) – Asian shares consolidated recent gains and currencies kept to tight ranges on Wednesday as the opening of China’s Communist Party conference produced more in the way of aspirational politics than concrete policies.

The twice-a-decade congress is expected to cement the power of President Xi Jinping, who kicked off the week-long event with a wide-ranging speech in which he said the market would be allowed to play a decisive role in allocating resources.

Yet he also said the role of the state in the economy had to be strengthened.

Investors are keen for clear direction on economic and financial market reform over the next five years, but history suggests these events can be light on detail.

China’s blue-chip CSI300 index .CSI300 added 0.5 percent in reaction, while Shanghai stocks .SSEC rose 0.3 percent.

“Market participants are paying much more attention to the party congress this time, as they are watching if any surprise reforms will emerge amid concerns over economic growth,” said Yan Kaiwen, analyst with China Fortune Securities.

On Tuesday, the United States again declined to name China as a currency manipulator although it remained critical of the Chinese government’s economic policies ahead of a planned visit to Beijing by President Donald Trump.

Recent economic data from the Asian giant has been generally upbeat, fuelling a tide of optimism about global growth that has benefited shares across the region.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was steady near their highest since late 2007, while South Korea .KS11 was just off a record top.

Japan’s Nikkei .N225 added 0.2 percent and was trying hard to string together a 12th straight session of gains.

An opinion poll by Kyodo showed Japanese Prime Minister Shinzo Abe’s coalition was on track for a roughly two-thirds majority in Sunday’s general election there.

The bullish mood on equities was evident in the latest fund manager survey from BofA Merrill Lynch.

“For the first time in six years, Goldilocks trumps secular stagnation, with a record high 48 percent of investors surveyed expecting above-trend economic growth and below-trend inflation,” the survey found.

BEARISH ON BONDS

Investors were bearish on bonds with 82 percent of those surveyed expecting yields to rise in the next 12 months and a record 85 percent believing bonds were overvalued.

Yields on two-year U.S. Treasury paper US2YT=RR have hit their highest since November 2008 amid speculation President Trump could chose a more hawkish leader to replace Federal Reserve Chair Janet Yellen.

Interest rates futures <0#FF:> imply around a 90 percent probability of a Fed hike in December FEDWATCH.

The shift upward in yields lifted the dollar to a one-week top against a basket of currencies .DXY, and nudged it up 0.1 percent on the yen to 112.29 JPY=.

The euro was holding at $1.1765 EUR=, still some way above the recent low and major chart support at $1.1667.

Dealers were wary ahead of speeches by several policymakers from the European Central Bank due later on Wednesday, which includes President Mario Draghi.

The biggest mover had been Mexico’s peso MXN= which boasted its biggest rise in over four months after trade ministers from the United States, Canada and Mexico extended the deadline on a contentious round of talks.

On Wall Street, the Dow .DJI had ended Tuesday up a slim 0.18 percent having briefly broken above the 23,000-point mark for the first time on Tuesday, while the S&P 500 .SPX gained 0.07 percent and the Nasdaq .IXIC dipped 0.01 percent.

Shares in IBM (IBM.N) jumped nearly 5 percent after hours as a shift to newer businesses such as cloud and security services helped it beat Wall Street’s quarterly revenue estimates.

In commodity markets, talk of higher U.S. interest rates kept gold pinned down at XAU= $1,284.81 an ounce.

Oil prices got a boost from a drop in U.S. crude inventories and concerns that tensions in the Middle East could disrupt supplies. Brent crude futures LCOc1 firmed 34 cents to $58.22 per barrel, while U.S. crude CLc1 gained 18 cents to $52.06.

Editing by Sam Holmes and Richard Borsuk

IBM beats revenue estimates; hints at sales growth

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(Reuters) – International Business Machines Corp’s (IBM.N) shift to newer businesses such as cloud and security services helped it beat analysts’ quarterly revenue estimates, and the technology major hinted at sales growth after nearly six years of declines.

Shares of the Dow component rose nearly 5.1 percent to $153.93 in extended trading on Tuesday.

IBM has been focusing on cloud, cybersecurity and data analytics, or what the company calls its “strategic imperatives”, to counter a slowdown in its legacy hardware and software businesses.

Revenue from these businesses climbed 11 percent to $8.8 billion in the third quarter ended Sept. 30, accounting for about 46 percent of the company’s total revenue.

“Management is focused in the right areas, but still have some work and must demonstrate this growth is sustainable,” said Josh Olson, an analyst at Edward Jones.

Revenue from the cognitive solutions business, which includes the AI-powered supercomputer Watson, rose nearly 4 percent to $4.40 billion, after falling 2.5 percent in the previous quarter.

Analysts on average expected revenue of $4.17 billion, according to financial data and analytics firm FactSet.

IBM said it expected revenue to grow $2.8 billion to $2.9 billion in fourth quarter from the third quarter.

This implies fourth-quarter revenue in the range of $22 billion to $22.1 billion, a year-on-year growth of about 1.4 percent at the high end.

A part of the rise in revenue is expected to come from the mainframe business, which got a boost from the launch of Z14.

Revenue in mainframe business jumped 60 percent in the third quarter, Chief Financial Officer Martin Schroeter told Reuters, adding that the business gained from Z14, which began shipping in mid-September.

“The progress around the mainframe contribution, signings growth/visibility in consulting and positive trends in cloud likely sets up for further momentum in Q4,” said David Holt, an analyst with CFRA.

IBM backed its forecast for 2017 adjusted earnings of at least $13.80 per share. Analysts on average are expecting earnings of $13.75 per share, according to Thomson Reuters I/B/E/S.

Total revenue fell 0.4 percent to $19.15 billion, but handily beat analysts’ estimates of $18.60 billion.

The company’s net income fell to $2.73 billion, or $2.92 per share, in the third quarter, from $2.85 billion, or $2.98 per share, a year earlier.

Excluding one-time items, IBM earned $3.30 per share, beating analysts’ estimates of $3.28.

Reporting by Pushkala A and Laharee Chatterjee in Bengaluru; Editing by Sriraj Kalluvila

George Soros foundations now control $18 billion: reports

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NEW YORK (Reuters) – Investor George Soros has transferred about $18 billion, the majority of his estimated fortune, to his Open Society Foundations, making them the second largest philanthropic grant-making group in the United States, according to media reports on Tuesday.

The foundations already controlled billions of dollars, but Soros, 87, has in recent years increased the pace of transfers from his hedge fund-turned-family office, Soros Fund Management LLC, the Wall Street Journal and the New York Times reported earlier on Tuesday, citing Open Society officials.

Representatives for Open Society did not respond to requests for comment from Reuters.

Open Society works globally to “build vibrant and tolerant democracies” and has given away nearly $14 billion since inception in 1979, according to its website.

Hungarian-born Soros, who made a huge profit betting against an overvalued British pound in 1992, is a vocal supporter of liberal causes and was a large contributor to the fund-raising Super PAC group backing Democratic presidential nominee Hillary Clinton last year.

Soros early this year hired former UBS Group AG asset management executive Dawn Fitzpatrick to serve as the latest chief investment officer for New York-based Soros Fund Management, which also manages money for Open Society.

Only the Bill & Melinda Gates Foundation is now larger than Open Society among U.S. grant-making groups, with an endowment of about $40 billion.

Soros is worth an estimated $23 billion, according to Forbes.

Reporting by Lawrence Delevingne; Editing by Bill Rigby

Boeing says Bombardier CSeries jets may face hefty duties despite Airbus deal

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MONTREAL/TOULOUSE, France (Reuters) – Boeing Co said on Tuesday that Bombardier Inc’s CSeries jets could still be hit with high U.S. import duties, even if they are assembled in Alabama through an industry-changing deal with Airbus.

The deal announced on Monday gives Airbus a majority stake in Bombardier’s troubled CSeries jetliner program, securing the plane’s future and giving the Canadian firm a possible way out of a damaging trade dispute with Boeing, in which the U.S. Commerce Department has threatened to impose a 300 percent import duties.

Boeing said that the announced deal has no effect on the pending U.S. Department of Commerce proceedings. “Any duties finally levied against the C-Series… will have to be paid on any imported C-Series airplane or part, or it will not be permitted into the country,” Michael Luttig, Boeing’s general counsel, said in a statement.

Investors cheered the winners of the deal that is set to shake up the $125 billion a year market for large jets. Bombardier shares jumped 15.7 percent on Tuesday, while shares in Toulouse, France-based Airbus rose 4.8 percent.

The transaction would give Airbus a 50.01 percent stake in an entity recently carved out of Bombardier to produce and market the CSeries, four years after it first flew with a goal to enter the large jets market.

But in a move emblematic of the huge risks of aerospace competition, Bombardier will get just one dollar for the majority stake in exchange for Airbus’s purchasing and marketing power to support an aircraft that has won fans for its fuel efficiency but had not secured a new order in 18 months for the 110-130 seat plane due to doubts over its future.

Bombardier’s strategy of performing final assembly in Alabama might allow the CSeries to avoid duties because the trade case targets partially and fully-assembled aircraft, said U.S. international trade lawyer William Perry.

Bombardier and Airbus could argue they are importing parts, like the wing from Northern Ireland, to be assembled in the United States.

“That may be the loophole Bombardier is hoping to use,” he said by phone.

‘ONE DOLLAR DEAL’

In reality, the terms of the deal mean Bombardier could pay Airbus to take over by agreeing to underwrite $700 million of risks related to cost overruns in coming years.

“It’s an unexpected move by Airbus but indicates they see good market potential for the CSeries. Neither they nor Boeing currently offer an aircraft in the regional jet market,” said aerospace consultant John Strickland of JLS Consulting.

The deal is similar to one that Airbus walked away from in 2015 when it decided the investment in a plane that had not yet entered service was too risky – with one major difference: that some of the jets will be produced in the United States.

That could change the power balance in Bombardier’s costly trade dispute with Boeing, though it is not the main reason why the two former rivals have come together, executives said.

“Assembly in the U.S. can resolve the (tariff) issue because it then becomes a domestic product,” Bombardier’s chief executive, Alain Bellemare, told reporters at Airbus’s headquarters in Toulouse.

Airbus CEO Tom Enders hailed the tie-up as “a win for Canada … a win for the UK,” referring to Bombardier’s wing-making factory in Northern Ireland whose future had been threatened by the distant trade war.

He said it would also create new U.S. jobs.

The deal appeared to catch Boeing off guard. Locked in a separate 13-year trade dispute with Airbus, Boeing on Monday called it a “questionable deal” between two of its subsidized competitors.

An Airbus A320neo aircraft and a Bombardier CSeries aircraft are pictured during a news conference to announce a partnership between Airbus and Bombardier on the C Series aircraft programme, in Colomiers near Toulouse, France, October 17, 2017. REUTERS/Regis Duvignau

CANADIAN APPROVAL

Bellemare said he hoped the deal would be approved within six to 12 months. Canadian Innovation Minister Navdeep Bains, who must officially decide whether to green-light the deal, said it looked like “Bombardier’s new proposed partnership … would help position the CSeries for success”.

Bombardier said the partnership should more than double the value of the CSeries program.

While it will lose control of a project developed at a cost of $6 billion, the deal gives the CSeries improved economies of scale and a better sales network.

For Airbus, the deal strengthens the bottom end of its narrowbody portfolio after poor sales of its own A319 model and expands its global footprint, potentially opening up further deals in other sectors in Canada.

Tony Webber, a former chief economist at Qantas, said the CSeries could complement Airbus’s existing single-aisle models.

Slideshow (11 Images)

Bellemare said the deal was expected to close in the second half of 2018.

“We’re doing this deal here not because of this Boeing petition. We are doing this deal because it is the right strategic move for Bombardier,” he said, referring to Boeing’s complaint that the Canadian firm received illegal subsidies and dumped CSeries planes at “absurdly low” prices.

NO JOB LOSSES

Bombardier said the deal would not result in job losses and would keep the head office in Montreal. Unions said the deal could benefit workers.

The Boeing-Bombardier dispute has snowballed into a bigger multilateral trade dispute, with British Prime Minister Theresa May asking U.S. President Donald Trump to intervene to save British jobs.

Bombardier is the largest manufacturing employer in Northern Ireland and May’s Conservatives rely on the support of the small Northern Irish Democratic Unionist Party (DUP) party for their majority in parliament.

Business Secretary Greg Clark said Britain would work closely with the planemakers, while the DUP said the agreement was “incredibly significant news” for Belfast.

Talks for the deal between Airbus and Bombardier first started over dinner at the end of August.

Enders said the deal was different from an earlier round of talks in 2015, when he abruptly ordered an end to negotiations. He said the CSeries’ had since been certified, entered service and was performing well.

Some analysts said the deal could drive Boeing closer together with Brazil’s Embraer, with which it already cooperates.

Bombardier is in the middle of a five-year turnaround plan after considering bankruptcy because of a cash-crunch as it developed multiple planes simultaneously, including the CSeries.

($1 = 1.2529 Canadian dollars)

Additional reporting by Ankur Banerjee in Bengaluru; Alana Wise in Atlanta; David Ljunggren in Arlington, Virginia; Michael Holden in London; and Richard Lough and Sudip Kar-Gupta in Paris; Writing by Denny Thomas, Guy Faulconbridge and Richard Lough; Editing by Mark Potter and Lisa Shumaker

New cancer drugs help Johnson & Johnson top profit estimates

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(Reuters) – Johnson & Johnson posted better-than-expected third-quarter earnings, raising its full-year forecast due to growth from new cancer drugs and high-margin treatments picked up in its $30 billion acquisition of Actelion earlier this year.

Shares of J&J, part of the Dow Jones Industrial Average, rose 3.4 percent to $140.79 on Tuesday.

The shares have traded at or near record levels for much of the year. Guggenheim Securities analyst Tony Butler said the stock has historically done well when its high-margin pharmaceuticals business is the main driver of growth, rather than its consumer segment.

Sales at J&J’s pharmaceuticals segment rose 15.4 percent to $9.7 billion in the third quarter. Around half of that growth came from the Actelion deal.

Higher demand for J&J’s blood cancer drugs, Darzalex and Imbruvica, and Actelion’s rare diseases treatments are expected to boost earnings going forward.

The two cancer drugs should continue to capture market share, Guggenheim Securities’ Butler said.

“The oncology business is doing exceptionally well,” he said. “It’s really hard to figure out where that stops for both Darzalex and Imbruvica.”

Still, sales of J&J’s diabetes drug, Invokana, slipped around 10 percent from the second quarter. The company this year was required to add new warnings about the risk of foot and leg amputations and also has had to contend with competition from Eli Lilly and Co’s Jardiance.

Its rheumatoid arthritis drug, Remicade, also had weaker sales in the quarter.

J&J said adjusted earnings, excluding one-time items, rose 13 percent to $1.90 per share. Analysts on average were expecting an adjusted profit of $1.80 per share , according to Thomson Reuters I/B/E/S.

Sales at J&J’s consumer products segment, which makes Band-Aids, Neutrogena beauty products and Tylenol, rose 2.9 percent to $3.4 billion.

The company’s net earnings fell to $3.76 billion, or $1.37 per share, in the quarter from $4.27 billion, or $1.53 per share, a year earlier. The company said it was hurt by amortization and deal-related expenses.

J&J raised its 2017 profit forecast to $7.25 to $7.30 per share, from its previous forecast of $7.12 to $7.22 per share. It now expects revenue of $76.1 billion to $76.5 billion for the year.

Johnson & Johnson has six drug manufacturing facilities on Puerto Rico, which was hit by Hurricane Maria last month. It said that while they are all running again, it cannot rule out intermittent shortages of some of its drugs.

Also on Tuesday, the company won the reversal of a $72 million verdict in favor of the family of a woman whose death from ovarian cancer they claimed stemmed from her use of the company’s talc-based products like Johnson’s Baby Powder.

Reporting by Akankshita Mukhopadhyay in Bengaluru and Michael Erman in New York; Editing by Anil D’Silva and David Gregorio