Although lending rose by 31 per cent in March up to £1.45bn compared to February, this was mostly seasonal and was down on the same period last year.The announcement by Kenneth Clarke, Chancellor of the Exchequer, means homeowners will not have to pay up to £10 a month more – on an average £60,000 loan – to protect against unemployment or sickness.Social security changes in October mean new borrowers will not receive mortgage interest payments for the first nine months if they are unemployed.Margaret Schwarz, chief economist at Abbey National, said no decision on mortgage rates could be made until after the meeting on Friday between Mr Clarke and Eddie George, Governor of the Bank of England.”The Government faces a dilemma in that there are inflationary pressures in the economy,” Ms Schwarz said.”On the other hand, tax increases have meant that there is low confidence People do not believe the recession is over.”. But when the moment came, Warburg chose to be highly selective in its purchases and ignored SBC, which was outraged by the discrimination and complained to the Stock Exchange.With both sides still bristling, SBC made a flamboyant gesture in underwriting almost a third of the £858m Eurotunnel rights issue last summer, and the bank made clear that it planned to keep a substantial part for distribution to its immense European client base.But as Eurotunnel’s share price sagged, SBC was blamed by Warburg for almost wrecking the whole deal by trying to reduce its exposure during cliff-hanging negotiations that lasted through the night.The most recent spat came in Trafalgar House’s unsuccessful £1.2bn bid for Northern Electric, in which Warburg advised the target and SBC the bidder.SBC built up stakes through its market making arm, not only in Northern but also in a number of other regional power companies, using contracts for differences, a form of option.Warburg complained and the row snowballed, leading to questions in Parliament. SBC became the bank everybody loved to hate.Warburg advised Enterprise in its unsuccessful bid for Lasmo, which involved a cash raid on the target oil company’s shares SBC, expecting a raid, had built up a stake in Lasmo shares. On the other were the brash corporate financiers and dealers of SBC, breaking their way audaciously into the London market with the help of sophisticated financial engineering and the enormous balance sheet of the parent bank. Morgan Grenfell are left with a very good management network and we expect them to start filling it with people.”The four defectors were Miko Giedroyc, head of the European research department, David Haysey, co-head of European equities, Joe Hall, head of UK equity sales, and Ian Wace, head of European equities trading.. BY PETER RODGERS

Business Editor
Warburg and Swiss Bank Corporation have been embroiled in several of the bitterest disputes the City has seen for years.The Enterprise bid for Lasmo, the Eurotunnel rights issue last year and the Trafalgar bid for Northern Electric all led to recriminations that highlighted the cultural divide between the two organisations.On the one hand was Warburg, in recent years the epitome of the City establishment, with a dominant position in UK corporate finance.

The staff defections will have weakened the management’ position even further.”"It is the worst set of defections to date,” a Warburg banker said “The management in this area has been written off. Morgan recently poached 10 top capital markets people, leading to fears that Warburg was bleeding to death.A Warburg insider said: “Following the failure to come to an agreement with Morgan Stanley there is a feeling the senior management will be under enormous pressure to come to some kind of agreement with the Swiss. Lord Scholey, the chairman, retook the reins as both chairman and chief executive, promising to revive the bank’s flagging fortunes.Later this month Warburg is expected to announce 1994 profits of up to £130m, most of that due to the Mercury stake, and practically none from investment banking.Warburg’s employees were concerned yesterday by the defection of four of their top European equities colleagues to their acquisitive rival, Morgan Grenfell. The bumper conditions of 1993 were followed by leaner markets, and Warburg was forced to pull out of Eurobonds, a market it pioneered, and most of its derivatives operations.The collapse of merger talks with Morgan Stanley last December led to staff defections and the resignation of the chief executive, Lord Cairns.

The Swiss have a very strong debt operation where Warburg is weak, and so on. The two together could then buy something in the US.”Until last summer Warburg was the City’s flagship investment bank, formed by a merger between a broker, a jobber and a corporate finance house during Big Bang in the mid-1980s. It has a very strong derivatives side, where Warburg is weak SBC has a weak equities side where Warburg is strong. They were on opposing sides in the Enterprise/Lasmo takeover, in the Eurotunnel rights issue, and in the recent furore over Trafalgar House’s bid for Northern Electric.