More business news in brief.

Legal action by diamond firm

Exploration company African Diamonds has legal started proceedings against partner De Beers over the AK6 diamond mine prospect in Botswana.

Last week, African Diamonds announced it was in dispute with De Beers over plans to bring its diamond mine joint venture into production.

African Diamonds said the swift move from arbitration to legal proceedings followed De Beers's application for a retention licence.

It said De Beers used its position as majority stakeholder in the joint venture to pass a resolution to apply for a retention licence, which would effectively delay development of the mine indefinitely.

Profits fall 70% for Lloyds TSB

British bank Lloyds TSB has reported a 70 per cent drop in first-half profits following a £585 million (€744 million) hit from its exposure to risky assets and has warned that bad debts on mortgages are rising as house prices fall.

The first UK bank to report interim results, Lloyds missed analysts' forecasts. Its core capital ratio was lower than expected and some expressed concern about further mortgage impairments this year.

Lloyds predicted UK house prices would fall by 10-15 per cent this year, which it said could add £100 million to bad debts in the second half, and that prices could fall 5 per cent more in 2009. - (Reuters)

Call not to raise tax on alcohol

The Drinks Industry Group of Ireland (Digi) has urged the Government not to increase taxes on alcohol in an attempt to limit binge drinking.

"At a minimum, there should be a standstill in taxes on alcohol," Digi chairman Michael Patten said yesterday. "Preferably, we would like to see the role that excise duty plays being reviewed by the Commission on Taxation."

Mr Patten was speaking at the publication yesterday of a report on the economic impact of the drinks industry on the economy. It was published on the day a law restricting the sale and availability of alcohol came into effect.

The report found that the sector employs the equivalent of 61,600 full-time workers, but that employment is declining in both the manufacturing and retail segments of the industry.

Mr Patten said the industry was at a "crossroads" and faced significant challenges in costs and regulation.

More than €2.2 billion was raised in taxes in 2007. The report found that drink in the Republic was among the most heavily taxed in Europe, with one-third of the price of alcohol going to the exchequer.

Alcohol accounted for €1.3 billion of exports, while drinks manufacturers spent €1.9 billion locally on purchases each year.

Mercedes to lose Galway dealer on foot of car sales projections

Mercedes is to lose its Galway dealer from January 1st next. Western Motors is ending its 25-year relationship with the premium German brand, but it will continue to sell Volkswagen and Audi models and will remain an authorised Mercedes service dealer.

Western Motors managing director James McCormack said the decision was based, not on the recent downturn in the car market, but on long-term projections for car sales.

"The car business is increasingly based on sales volume as profit margins on new cars are very low and we just couldn't see where we could generate the sort of sales from Mercedes in our area to justify the required investment in the brand."

The news comes as unofficial estimates of new car sales to July 20th show the market for the year is down 15 per cent.