Business Comment: A landslide for Labour would spell trouble
Thursday 04 July 1996
There may be more interesting places to be than the British Chambers of Commerce national conference on a wet midweek day but the two performances must have left the delegates wondering which party was really more interested in capturing the business vote. The Chambers of Commerce see things differently from the big battalions of industry, where suspicions about Labour's true colours continue to run deep. Reaction at the conference yesterday to Mr Blair's vision of Labour and business could scarcely have been better. On a show of hands, delegates who thought Mr Blair would be prime minister after the next election outnumbered those who believed it would continue to be John Major by 20 to one.
On fiscal responsibility, on education and on Europe the Labour leader did not put a foot wrong. He even made the Social Chapter sound not like the bogeyman dreamt up by a reconstructed socialist but a tool to aid greater competitiveness. The big question, as Mr Blair acknowledged, is whether Labour in power can and will pursue the same policy outlined in opposition yesterday.
The answer may turn on the size of his majority. A small working majority would probably enable New Labour to deliver. Too big a landslide and old Labour could be baying for blood. Anything much above 50 would certainly spell trouble. In that case yesterday's endorsements in Birmingham could begin to look ill-placed. If even the present Conservative government is getting itself into trouble on the public finances, as next Tuesday's summer economic forecasts from the Treasury will confirm, how on earth is Mr Blair going to hold the lid on demands for ever greater government spending? As far as business is concerned, Mr Blair is making all the right noises, but despite his best endeavours he still has a credibility gap to close.
GEC is a heavy weight on Simpson's shoulders
It is just as well George Simpson is not given to worrying about other people's high expectations of him. Confirmation that he will succeed Lord Weinstock in September helped make GEC the Footsie's most heavily traded stock yesterday. Up 12p on the day to 364p, the shares anticipate quite a show.
Mr Simpson takes on one of the biggest challenges in British corporate life, to reverse a relative decline that only stranded dinosaurs such as ICI and Hanson have emulated in the past 15 years. Although GEC has outstripped the market handsomely over the full stretch of Lord Weinstock's tenure, it has done its utmost to squander the advantage throughout the 1980s and 1990s.
GEC did rather better for many years than many of the other national champions created with the blessing of Harold Wilson in the late 1960s, but ultimately it has failed when set against the likes of Siemens of Germany. The two companies were about the same size when GEC swallowed Associated Electrical and English Electric; today the British company is dwarfed by the German and it has tumbled down the league tables of the world's industrial giants.
Now is not the time to dwell on Lord Weinstock's stewardship, but if George Simpson is to effect lasting change at GEC he will have to learn lessons from a man who has been accused, with a degree of justification, of doing more damage to British industry, through errors of omission, than any other businessman.
That might seem a harsh assessment on the day GEC's profits broke through the pounds 1bn mark for the first time. With orders standing at pounds 14bn and pounds 2.5bn in the bank, many people would judge this a highly successful company. But it is hard to avoid the conclusion that less left on deposit over the years and more spent on investment might have left GEC's profits higher and British industry rather healthier.
Snatching Rover from under the nose of the Japanese and selling it on to BMW showed that Mr Simpson has some talent for selling businesses and in the short term there are plenty of peripheral operations that look ripe for that treatment. In the long run, however, GEC needs to re-learn how to build businesses by investing in them.
Having ceded effective control of its telecommunications and power arms into joint ventures with the Germans and French, GEC's future lies in Marconi and, possibly, other areas of the still fast-growing electronics industry. That will require long-term vision and a willingness to take short-term risks
With such a fat cheque book, Mr Simpson has an opportunity that comes to very few businessmen - a real chance of re-invigorating a moribund industry where Britain still has the will and expertise to succeed. Mr Simpson might make light of the task that faces him, and the hope that many are investing in him, but it is in truth a heavy weight of responsibility that is being placed on his shoulders. Let's hope he's up to it.
BA link-up may never get off the ground
British Airways' plans to set up a code- sharing arrangement with American Airlines seem rapidly to be sinking into the regulatory mire. BA was yesterday dismissing as a minor irritant the announcement from Brussels that it too will be looking into the planned get-together, but the European interest might well prove rather more serious than that.
The way BA figures it, Brussels will be hard pressed to ban its code- sharing with American because similar alliances at Lufthansa and KLM have already been sanctioned by their respective national authorities. If Brussels wanted to ban the lot, so be it. They'd all be in the same boat and BA probably wouldn't be too unhappy. But surely not even Brussels would consider blocking BA's plans while allowing others to continue.
Well actually it might. BA's link-up with American is in a different league from the ones that have gone before and involves a much larger concentration of market power. It would be easy for the Commission to turn round and say: "OK, the others just about get through, but this one doesn't." In the meantime the deal faces the prospect of an MMC investigation in the UK as well. On the other side of the Atlantic, rival American airlines insist that the open skies policy promised as a quid pro quo for allowing the link-up is pointless without stripping BA of a very substantial proportion of its London airport landing right slots. As far as BA is concerned, this is not up for negotiation.
This one looks set to run and run. Indeed, there is a real prospect of it running for so long that it will never happen at all.
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