Business chiefs in 'realign ERM' call

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The Independent Online
TOP EXECUTIVES of two of Britain's leading companies yesterday called for a realignment of the European exchange rate mechanism (ERM), blaming high interest rates and a strong pound for delaying economic recovery.

Sir Denys Henderson, chairman of Imperial Chemical Industries, and Brian Pearse, chief executive of Midland Bank, said that the economic conditions were adversely affecting their companies' business.

Much of ICI's is dependent on the German mark, which is the main benchmark for the chemical industry. Sir Denys said that he was against devaluation, but he believed the Council of Ministers 'would have to think hard' about whether the current alignment of ERM currencies was right, particularly against the mark.

Sir Denys's comments came as the ICI group announced radical plans to split its business into two.

He warned that there was still no sign of recovery. 'Life will continue to be tough with little, if any, expectation of growth this year.' He added that, if there was a recovery in Britain in 1993, 'in my view, it will be pretty anaemic'.

Mr Pearse, speaking after the Midland Bank reported pre-tax profits of pounds 89m for the first half of 1992, said: 'It's no good slavishly sticking to the ERM only to find that we've no business left at the end of it all. It does mean doing something so that the currencies are realigned.'

The bank said its customers in intensive care were not responding to treatment, because of the toll recession continued to take.

'I'm afraid to say that when the recovery comes, it may not seem much different from what we now regard as recession,' he said.

Sir Peter Walters, Midland's chairman, said that his own prescription for an economic revival would be a substantial cut in interest rates. 'But if we are in the hands of an ERM dictated by Germany we have to dance to that tune for the time being.'

Peter Kellner, page 17

ICI demerger, page 18

Hamish McRae, page 19

View from City Road;

Midland results, page 21