"C&W like to do things in phases and selling that stake would cause a lot of turbulence," said one observer.Earlier, more details had emerged of the rift between C&W, Veba and RWE, another German utility, which last October stunned observers by joining the Vebacom alliance.RWE had previously been a partner in British Telecom's German alliance with Viag, the diversified industrial giant.Separately yesterday BT and Viag said they had won the fourth digital mobile phone licence on offer from the German Government.Senior sources close to C&W suggested that Vebacom, a relic of the Lord Young era at the group, had become an increasing liability as Dick Brown, the American who took over as chief executive last summer, sought to carve out a clearer European strategy. He has asked executives to judge each joint venture on the basis of whether it adds value to C&W's dominant European subsidiary, Mercury. "What C&W does in Europe must benefit Mercury," said a source.The "Brown doctrine" explains the recent frosty relations between the English and German sides in the partnership. RWE and C&W had yet to sign contracts to extend Vebacom, which would have seen C&W's share in the venture drop from 45 to 25 per cent.There had been disagreements over the precise wording of the various agreement documents, drawn up in German and English.A more fundamental rift was over RWE's insistence that it invest at least DM8bn (pounds 3bn) over the next five years in a fixed phone network.

BT's earlier relationship with RWE had fallen apart in considerable bitterness over exactly the same issue. BT is thought to have been furious that RWE had apparently been privately negotiating to join Vebacom at the same time as developing the Viag alliance.RWE's ambitions meant C&W faced the prospect of shouldering its share of losses in Vebacom for a long period, at the same time as completing its complex pounds 5bn merger between Mercury and three UK cable companies.. There was confirmation yesterday of the health of the housing market and an early indication of a pick-up in wages in industry at the end of last year. But a separate survey of manufacturing industry showed that orders were nearly flat or falling in seven of the UK's 11 regions, although output fell in only three areas. New house-building starts returned to their highest level for more than two years, having risen by a third in the year to the final quarter of 1996. Angela Knight, Economic Secretary to the Treasury, said: "Whether your home is a flat or a castle or somewhere in between, mortgage rates are low and affordability is excellent. The building industry is now sharing fully in the success of the economy."Separately, the Engineering Employers Federation reported that pay settlements in the last quarter averaged just under 3.2 per cent, a fraction higher than the previous quarter but down from 3.6 per cent in the same period a year earlier.However, the level of settlements jumped from 3.11 per cent in November to 3.56 per cent in December. Most December settlements fell in the 3- 4 per cent range, rather than 2-3 per cent as in the previous month.

January will be a key month for pay, as it sees the largest number of deals each year.The Confederation of British Industry and Business Strategies published its quarterly breakdown of industrial activity between regions.In the three months to December, companies in only four regions - the South-west, Wales, West Midlands and Northern Ireland - reported significant rises in orders. Manufacturers in the South-west were the only ones to report a significant rise in export orders.Output fell in three regions, Northern Ireland, the North-west and the North. It grew most strongly in Wales, the South-west and the East Midlands.Yet eight out of 11 regions showed an increase in business confidence compared with the previous quarter. Not surprisingly, businesses in the South-west were the most optimistic.. The woes of PepsiCo were underscored yesterday when the company revealed that profits plunged 85 per cent in the fourth quarter of last year due to its struggling restaurant division and poor results in international drink sales. The dismal news further depressed the shares of PepsiCo, which for months have been eclipsed by the continued rise of its arch-rival, Coca-Cola.

In morning trading in New York yesterday, PepsiCo shares were down 75 cents at $33.375. The company, based in Purchase, New York, reported that net income for the last three months of 1996 fell to $28m (pounds 17.3m), or 3c a share, compared with $181m in 1995. It said that for all of 1996, profits slipped by 28 per cent to $1.15bn.The difficulties were traced in part to sluggish trade at two of PepsiCo's fast-food chains, Pizza Hut and Taco Bell. The news sours last month's announcement by PepsiCo that it planned to spin off its restaurant division which also includes Kentucky Fried Chicken.The company was also hurt in the fourth quarter by disappointing international sales in its core beverage division, which includes its flagship Pepsi Cola drink. Outside the US, beverage sales were off by 9 per cent in the last quarter and by 2 per cent for the year as a whole. The campaign early last year to boost Pepsi sales through an extravagant changeover from red, white and blue cans to an all-blue colour scheme apparently made little impact.PepsiCo suffered particularly badly in Latin America. Its worst experience was in Venezuela, where its long-time bottling partner switched overnight to Coca-Cola.The decline gives a further edge to Coca-Cola, which is already beating Pepsi hands down in the cola wars in almost every part of the world In the US, however, the race is a little closer.

Indeed, Pepsi Cola North America thrived last year, with sales growing by 4 per cent and profits by 14 per cent.PepsiCo was also helped by North American sales of its Frito-Lay snacks brands. Overall sales for the group in North America grew by 5 per cent to $30.26bn.. The Bank of England will alter the way interest rates are set next month but it intends to give the City's six discount houses up to two years to adapt to the new procedures by introducing a package of transitional arrangements. The discount houses, which are specialist banks, have had a monopoly in daily dealings with the Bank of England in the bill market, where interest rates are set. But, as the Bank signalled last December, it intends to open up the market to a wider range of financial institutions and also make use of the growth of gilt repos - debt backed by government bonds.Ian Plenderleith, executive director of the Bank of England, said the measures "should help to enhance the efficiency and competitiveness of the sterling money market in London".The changes being implemented barely differ from those proposed in December despite the wide-ranging comments the Bank received from the markets about the plans."The main changes in December will be implemented as then proposed," Mr Plenderleith said. Some of the technical details had been "fine-tuned", he said.From 3 March banks, building societies and securities firms which are active in gilt repos or bill markets will be able to take part in the daily money market operations provided they meet certain criteria.Mr Plenderleith said the Bank had received applications from institutions wishing to become counter-parties and said that later this month the Bank would conduct "dress rehearsals" of the new procedures.The Bank's daily money market operations are a closely watched ritual in the City as they can signal changes to official interest rates.Until now they have taken place at 9.45am, noon and at 2pm, with a late lending facility at 2.45pm.The new measures, published yesterday in a Bank of England paper, will see the daily operations take place at 9.45am, noon and 2.30pm, 10 minutes earlier than originally proposed.A late repo facility, which the Bank originally proposed to offer around 3.30pm, will be made available between 3.50pm and 3.55pm, by which time settlement banks will have a clearer view of their liquidity positions.. The High Court yesterday obtained agreements from two firms and two individuals not to undertake investment business in the UK. A third individual was ordered by the court not to conduct business.