Private Investor: BAe bust-up is bad for Britain and bad for me

I had thought that the great BAe-Saudi Arabian slush fund scandal (alleged) was none of my business. For about a minute. Then I realised what the affair might do to my shares in Rolls-Royce, a big supplier to BAe, and a likely casualty if things get any nastier.

They held up for a while, but, in the middle of last week, they started to slump, so now they're nearer the 400p mark than the 500p that they threatened to breach a few weeks ago. Disappointing.

I'm happy to say that I bought my shares at prices well south of 200p, and even below their original float price (in 1987) of 170p, after the 9/11 atrocities pushed the whole sector into meltdown. I had faith in the form, and I was right. Now, I see our own government almost blithely threatening the future of the rest of British manufacturing. It seems strange.

Just to recap: HMG and Saudi Arabia are having a bit of a bust-up about the supposed operation of a £60m "slush fund" by BAE Systems. The possibility of any corporate naughtiness being investigated by the Serious Fraud Office has severely embarrassed the Saudis. It could cost BAe £200m in earnings, if the Saudis start to boycott our Eurofighter warplanes and the like.

It would cost me, and many other small shareholders, a few quid as well, such is the importance of the defence sector and the weight that the Saudi budget carries. It is Bad News for British industry, what's left of it. Jobs, pensions, mortgages are at stake here.

My view, as a small shareholder in Rolls-Royce, is that we shouldn't be mucking around with this. I take the Alan Clark view - not a terribly principled one, but unarguable: if we don't sell these people weapons, then the French will.

If British companies, any British companies, do operate a "slush fund" - an imprecise term if ever there was one - then I can't see what the fuss is about. After all, it might just amount to a little bit of junketing, the sort of activity that happens on a daily basis in the world of business, and, I have to say, in journalism, too.

All small-scale stuff and unlikely to influence anyone's mind. If a British business executive buys a Middle Eastern contact "lunch", is that a crime? Well, I mean, it might be a crime, but is it wrong? The way of doing business in some parts of the world, so I'm told, requires a certain amount of lubrication of wheels and generous gifts to friends and business colleagues. It is their corporate way of life, and we ought to try to fit in with it, rather than impose irrelevant alien ideas from our own econo-culture. It's a multicultural approach, if you think about it.

I cannot imagine any other government agency in the world pursuing this sort of case in the way that the Serious Fraud Office has. Other arms-exporting countries decided long ago to support their national champions no matter what, and often in defiance of all sorts of intentional treaties and EU rules on state aid. It's enough to make one purchase shares in, say, Thales (the French mob who do quite well out of British defence contracts).

Well, I'm sticking with British manufacturing and Rolls-Royce because I just hope that this mad action by the SFO will be quietly put to death. If not then perhaps we should all think about selling up and sending the money abroad.

I am pleased to report yet another rise in the share price at the JP Morgan Indian Investment Trust - up to 318p a share, last time I looked. They've grown like topsy over the past few years, and I've been a regular investor through that excellent performance, as well as through the turbulence they've occasionally suffered.

If everything they say about the future of the Indian economy is true, and given that they remain one of the few retail vehicles for investment in the Indian subcontinent, I see no reason why I shouldn't continue with my small monthly savings scheme.

Rather more riskily, my eye has been taken by a "solar wafer" manufacturer called ReneSola, based in China but quoted in London. Again, if all the futurologists are correct, then solar- panel components in China should be the epitome of a new-age share. For now, I have neither the nerve nor the funds to invest, but I'll be keeping an eye on it. It would make a good hedge for my Shell shares, at least. What do I do if the Chinese start making aero engines?

s.ogrady@independent.co.uk

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