A clapped-out House finds some lame excuses

COMMENT

Surprise, surprise - Trafalgar House bowed to the inevitable yesterday and gave up the chase of the rich Northern girl whose cash was to pay for its dissolute past. As the market has slowly tumbled to the real value of its paper, the effective price of solving the company's tax and balance sheet problems has become prohibitively expensive. This was a wedding even Trafalgar's wealthy parents and benefactors were not prepared to fund.

Putting a brave face on a crushing strategic defeat is not the way Nigel Rich would have liked to celebrate his first year in office. But a 40 per cent fall in the value of Trafalgar's ordinary shares and a 25 per cent slide in the prefs that would have funded any deal gave him little option.

That is not, of course, the gloss the company put on its shamefaced withdrawal. Predictably, the blame was laid firmly at the door of Professor Stephen Littlechild, whose announcement that he planned a tight new pricing regime three days before the original pounds 11-a-share bid was due to close shut out Traf's small window of opportunity.

Hanson and the other two bidders to have caught the REC bug were also brought to book for their unsporting behaviour in bidding up the ante beyond the company's reach. Setting a benchmark of 975p earlier in the week, Hanson effectively tore up Trafalgar's membership of the electric club.

Mr Rich's excuses are lame and unconvincing. It hardly needs Moody's action in putting the company on credit watch to underline the real reasons for the withdrawal. The fact that Trafalgar's 26 per cent shareholder Hong Kong Land now shares the debt rating agency's worries - five months ago, it was prepared to underwrite the bid for Northern, now apparently it is not - confirms the deterioration in Trafalgar's position this year. Swiss Bank Corporation, the company's adviser, did everything it conceivably could barring shelling out the money itself to facilitate a new bid. The fact that Trafalgar still couldn't go through with it suggests there must be something seriously wrong.

The new team in the company's deceptively smart Mayfair headquarters is secretly hopping mad that it came so close only to lose its prize. The cost of the bid to the half-time profit and loss account was officially pounds 12m, but the price in lost management time at a critical moment in Trafalgar's history is incalculable.

The question now exercising minds is whether Trafalgar can pull through on its own, without the cascade of cashflow from Northern's captive customers. What the managers of its existing divisions would do for such a cossetted existence.

It is hard to imagine a worse rag-bag of clapped-out industries than the one presently housed by Trafalgar House. The construction industry is on its knees, the upturn in housebuilding has run out of steam and the top end of the luxury cruise market is flagging. Long, unpredictable contracts compound the engineering division's deep-seated management problems to make recovery there a long, hard slog. Even the Ritz is going to close soon for refurbishment.

So it's back to square one for Trafalgar. There will be no quick fixes to its profound problems and it is unclear whether the company can hold on long enough for Nigel Rich's surgery to take effect. Already a rich man from his days at Jardine, Mr Rich took up the challenge of Trafalgar when many others would have settled for champagne and the golf course. A great deal of money and face rides on his gamble.

An achievement, but not a renaissance

Michael Heseltine is justified in throwing modesty to the winds and trumpeting his own and the Prime Minister's success in bringing the pounds 1.1bn Siemens microchip project to Tyneside. To attract such a prestigious high-tech investment to Britain - this from a company which should by rights have been looking to its roots in Central Europe for suitable locations - is a personal achievement for Mr Heseltine and a considerable vote of confidence in the UK economy. The long-term economic benefits are also considerable, providing a yearly boost of nearly pounds 1bn to Britain's balance of trade in exports and import substitution.

It is small wonder that the decision has prompted a bout of soul-searching and self doubt among German finance and industry ministers. Apart from the delights of Wimbledon, where the Prime Minister is said finally to have persuaded Heinrich von Pierer, chairman of Siemens, against alternative Continental sites, why has Siemens opted for Newcastle? Tyneside has an impressive record in attracting high-technology investment, Samsung and Fujitsu being two of the most well-known names to locate there over the last year. Siemens will complete the region's transformation from ships to chips, from sunset to sunrise industry.

But why Britain and not Germany or Austria? The amount of state aid no doubt played a part. Mr Heseltine was being decidedly coy about this yesterday, though he did dismiss German estimates of pounds 200m as excessive. Siemens also believes it should have a more considerable presence in Britain, which is apparently the third largest chip market in Europe and the sixth largest in the world. An investment in the UK fits more neatly with the company's strategy of spreading itself internationally. The strong mark and Germany's high labour costs also played a part. On the other side of the coin, Britain's own highly flexible labour market and its now excellent labour relations were, according to ministers, a big factor. Though domestic perceptions of the UK economy are still gloomy and pessimistic, the overseas view is much more sunny, with inflation apparently under control and respected international organisations like the OECD now queuing up to heap praise on our economic management.

What else does this decision tell us about the UK economy? For those who still dream of a viable economic future outside Europe, it tells us that Britain is now irredeemably and irreversibly attached to the Continent. Siemens, and the rest of the inward investment in Britain over the last five years, would not even have considered the UK if it were thought there was any prospect of withdrawal from the EU. It is also, however, symptomatic and indicative of the weakness of our indigenous industry that it is to overseas companies that we must now look for investment of this sort. There are some notable exceptions - Glaxo's research and development facility at Stevenage is one - but spending on this scale by UK companies on cutting- edge technology projects is rare. Britain opted out of large-scale micro electronics 20 years ago; it is now too far behind to catch up. It is difficult to imagine GEC, Britain's premier electronics company, engaging in a greenfield investment of this sort; culturally, it would seem completely alien.

So while Mr Heseltine is right to trumpet his success, it can hardly be claimed as evidence of an economic miracle. Britain's own industry and companies are still stuck in cautious, retrenchment, short-termist mould. Not until our own businessmen change their ways can ministers properly lay claim to an economic renaissance.

PROMOTED VIDEO
Arts and Entertainment
Jamie Dornan stars as Christian Grey in the Fifty Shades of Grey movie
filmFirst look at Jamie Dornan in Fifty Shades of Grey trailor
News
Lars Ulrich of Metallica performs on the Pyramid Stage at Glastonbury 2014
music
Sport
Shinji Kagawa and Reece James celebrate after the latter scores in Manchester United's 7-0 victory over LA Galaxy
football
Voices
voicesGood for Lana Del Rey for helping kill that myth, writes Grace Dent
Sport
Farah returns to the track with something to prove
Commonwealth games
Life and Style
fashion Designs are part of feminist art project by a British student
Arts and Entertainment
The Tour de France peloton rides over a bridge on the Grinton Moor, Yorkshire, earlier this month
film
News
Very tasty: Vladimir Putin dining alone, perhaps sensibly
news
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
Top guns: Cole advised the makers of Second World War film Fury, starring Brad Pitt
filmLt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a uniform
Life and Style
Listen here: Apple EarPods offer an alternative
techAre custom, 3D printed earbuds the solution?
News
Snoop Dogg pictured at The Hollywood Reporter Nominees' Night in February, 2013
people... says Snoop Dogg
News
The University of California study monitored the reaction of 36 dogs
sciencePets' range of emotions revealed
Arts and Entertainment
A scene from Shakespeare in Love at the Noel Coward Theatre
theatreReview: Shakespeare in Love has moments of sheer stage poetry mixed with effervescent fun
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Service Charge Accountant

£20,000 - £22,000 per annum: Recruitment Genius: This Property Management Grou...

IT Transition Manager - Stirling - Banking - £400

£400 - £420 per day: Orgtel: IT Transition Manager - Banking - Scotland - £400...

Test Lead - Financial Reporting - Banking - London

£350 - £400 per day: Orgtel: Test Lead, London, Banking, Financial Reporting, ...

Business Analyst, Retail Bank, £375-400p/d

£375 - £400 per day + competitive: Orgtel: My client, a leading bank, is curre...

Day In a Page

Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform
Climate change threatens to make the antarctic fur seal extinct

Take a good look while you can

How climate change could wipe out this seal
Should emergency hospital weddings be made easier for the terminally ill?

Farewell, my lovely

Should emergency hospital weddings be made easier?
Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

Crowdfunded novel nominated for Booker Prize

Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

Vladimir Putin employs a full-time food taster

John Walsh salutes those brave souls who have, throughout history, put their knives on the line
Tour de France effect brings Hollywood blockbusters to Yorkshire

Tour de France effect brings Hollywood blockbusters to Yorkshire

A $25m thriller starring Sam Worthington to be made in God's Own Country
Will The Minerva Project - the first 'elite' American university to be launched in a century - change the face of higher learning?

Will The Minerva Project change the face of higher learning?

The university has no lecture halls, no debating societies, no sports teams and no fraternities. Instead, the 33 students who have made the cut at Minerva, will travel the world and change the face of higher learning
The 10 best pedicure products

Feet treat: 10 best pedicure products

Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
Commonwealth Games 2014: Great Scots! Planes and pipers welcome in Glasgow's Games

Commonwealth Games 2014

Great Scots! Planes and pipers welcome in Glasgow's Games
Jack Pitt-Brooke: Manchester City and Patrick Vieira make the right stand on racism

Jack Pitt-Brooke

Manchester City and Patrick Vieira make the right stand on racism
How Terry Newton tragedy made iron men seek help to tackle their psychological demons

How Newton tragedy made iron men seek help to tackle their psychological demons

Over a hundred rugby league players have contacted clinic to deal with mental challenges of game