Sunday newspaper round-up: Brussels row, May VAT pledge, Ocado, house prices, RBS

Brexit negotiations began with a blazing row yesterday as Brussels flatly rejected Theresa May’s negotiating position and accused the prime minister of living in a “parallel reality”. The other 27 EU member states took just four minutes to agree a hardline stance on Brexit at a summit meeting in Brussels before Jean-Claude Juncker, the head of the European Commission, and Michel Barnier, the chief European Union Brexit negotiator, rounded on the prime minister. - Sunday Times

EU leaders have unanimously agreed tough negotiating guidelines for Brexit talks with the UK, suggesting they will demand that Britain agrees on payments to the bloc before considering a new trade deal. The heads of the remaining 27 EU countries agreed to adopt the draft guidelines issued by Donald Tusk last month less than 15 minutes into a special summit in Brussels on Saturday. - Observer

In a worrying echo of the 2008 banking crisis, TSB’s chief executive Paul Pester admits the bank is so alarmed by the spectre of falling house prices that it has effectively pulled out of lending to first-time buyers in London. Pester uses two very ominous words when it comes to the housing market – ‘negative equity’. He is nervous about some of the lending going on in property, particularly in the capital. - Mail on Sunday

Theresa May has all but confirmed she will drop the Conservative pledge not to raise three key taxes, as she ruled out higher VAT but declined to make a similar promise not to hike income tax and national insurance. The prime minister said she did not want to make promises she was not absolutely confident she could keep, as she also signalled she would ditch the “triple-lock” formula by which the state pension would increase each year. - Guardian

Theresa May is planning to introduce a national interest test on foreign takeovers. Under plans signed off by Downing Street, a foreign attempt to buy or take a stake of more than 25% of a company deemed to be part of the “critical national infrastructure” will be reviewed for national security purposes, though there will be a narrow definition of what constitutes critical infrastructure, so drug companies are unlikely to be protected. - Sunday Times

Theresa May’s plans to introduce a price cap on energy bills could fall foul of European Union law, the Government was warned last night. The Conservatives have indicated they are preparing to introduce curbs on energy charges with the proposals likely to be outlined in the party’s forthcoming manifesto. - Mail on Sunday

A group of City financiers are planning to revive a radical plan to hand the Government’s huge stake in Royal Bank of Scotland to the public. Portman Capital Partners is preparing to approach UK Financial Investments (UKFI), which manages the taxpayer’s 71pc stake, after the general election over a scheme that could allow the Government to divest itself of the shareholding in one fell swoop. - Sunday Telegraph

Marks & Spencer and Ocado are eyeing a surprise tie-up that could result in the high street stalwart finally launching an online grocery delivery service after years of resistance to the industry-wide trend. The online grocer and M&S plan to start talks in the coming weeks. Any agreement would be a coup for Ocado after it failed to seal a licensing deal with an overseas player. - Sunday Telegraph

Shoppers face a further wave of price increases as retailers’ currency hedging arrangements expire, stoking the consumer crunch that sapped economic growth in the first quarter. Marks & Spencer chairman Robert Swannell said the full impact of weaker sterling on prices had yet to be felt as "most of us were hedged to a greater or lesser extent so most of this is still to come”. - Sunday Times

Chinese factory activity slowed in April amid signs that the country's recent growth spurt is unlikely to be sustained, according to an official survey. Manufacturing activity eased back from a five year high in March, according to China's National Bureau of Statistics (NBS), though officials said the outlook for the world's second largest economy remained "positive". - Sunday Telegraph

Greece has received some rare praise for its reform push from Germany’s finance minister, who has raised hopes that the debt-stricken country will get more bailout funds soon. Wolfgang Schäuble, who recently said Greece must implement unpopular economic reforms or leave the eurozone, appeared to soften his tone in an interview published over the weekend. - Observer

Capita is set to reap £700m from the sale of its asset services division next month, after receiving knockout bids from a pack of private equity predators. The outsourcing giant is in talks with buyout firms including CVC Capital Partners, the former owner of Formula One racing, over a sale of the division, which houses its share registrar and administration services businesses. - Sunday Times

Coach, the US handbag giant, is eyeing a £1bn-plus swoop for Jimmy Choo as the luxury goods industry roars back to life. Last week the shoe maker, made famous by US television series Sex and the City, was put up for sale just three years after listing on the London stock market. - Sunday Telegraph

The Co-operative Bank is close to abandoning its search for a buyer and moving towards a second painful financial restructuring instead. The self-styled ethical bank, formerly part of the mutual Co-operative Group, is expected to hire advisers from the investment bank Houlihan Lokey to oversee a new rescue effort. - Sunday Times

Rupert Murdoch’s £11.7billion bid for Sky has suffered another blow after a US lawyer for women involved in a sexual harassment lawsuit against his business urged Ofcom to block the deal. Lisa Bloom acts for women who took legal action against Bill O’Reilly, Fox News’s star presenter, who quit the Murdoch-owned station earlier this month. O’Reilly and Fox have paid out $13million (£10million) to five women. - Mail on Sunday

The engineering group which threatened to derail the HS2 rail link is set for a leading role in the massive project to refurbish the Houses of Parliament. Mace is understood to have won the lucrative contract to provide project management and cost management services advice on the work, in partnership with US rival Aecom. - Sunday Telegraph

Amaya, the Canadian gaming company behind Poker Stars, is set to hire a top lieutenant from William Hill as it plots a sports betting takeover. It is in talks to hire Robin Chhabra, group director of strategy at William Hill, responsible for overseeing mergers and acquisitions at the bookmaker. - Sunday Times

Gay Huey Evans, a former director at the Financial Services Authority (FSA), is tipped to be a contender to replace Bank of England deputy governor Charlotte Hogg. The Treasury has hired the executive search firm Egon Zehnder to scour the globe for candidates before the deadline of 10 May. - Sunday Times

A court hearing to force former BHS owner Dominic Chappell’s family business into administration has been adjourned. The judge said on Friday he needed more time to consider evidence in the case of Retail Acquisitions. The case is now set to be heard on Wednesday as Chappell battles Duff & Phelps, the administrator, for control of the firm. - Mail on Sunday

Wonky fruit and vegetables should be considered normal, MPs have said, as they urge supermarkets to relax standards requiring produce to be "perfectly" shaped. The recommendation, made in a food waste report published today by the influential Environment Food and Rural Affairs Committee, forms part of a new plan to stop millions of tonnes of edible produce being needlessly wasted each year. - Sunday Telegraph

Pearson boss John Fallon faces a fresh test of his leadership at the company’s shareholder meeting this week, after two influential investor advisers opposed his pay rise in the wake of a disastrous profit warning. Mr Fallon and the Pearson board are due to face shareholders on Friday over the controversy, which comes after one of the worst of the education giant’s nearly 50 years on the stock market. - Sunday Telegraph

Reckitt Benckiser is headed for a stormy shareholder meeting on Thursday as two investors prepare to vote against board members. The maker of Durex condoms and Nurofen tablets narrowly avoided a shareholder revolt after a dramatic climb-down on pay, but is now facing a protest over the sale of deadly disinfectants. - Sunday Times

France will be on extra high alert on Monday as workers and protesters use the traditional 1 May marches to stage a show of force against the far-right presidential candidate Marine Le Pen. Up to 250 events have been planned across France on a day of symbolic importance in the Front National calendar when it holds its annual gathering to honour the party’s heroine, Joan of Arc. - Observer

Employment agency Reed has thrown in the towel on two tax disputes worth £420million. The company has been fighting Revenue & Customs since 2007 over whether it owed tax on sums paid to temporary staff for their travel and lunch bills. - Mail on Sunday

Controversial Chinese telecoms group Huawei Technologies saw turnover jump by a third in its UK division last year thanks to the continuing rollout of 4G wireless networks, fixed rural phone network connections and growing demand for smart TV products. The group is restricted from working on sensitive phone networks in the US and Australia due to fears of Chinese espionage, but investigators at a specially set-up monitoring centre said after a four-year study that Huawei did not pose a threat to UK security. - Mail on Sunday