City & Business: British companies just need self-belief

LAST week, as Tony Blair prepared for talks with the sex fiend in the White House and Robin Cook got his knickers in a twist over his lover, the business pages reported a merger between two US computer companies.

For the information technology world the purchase of Boston-based Digital Equipment Corp by Texas-based Compaq for pounds 5.3bn marked the end of an era. In its heyday, when computers were about mainframes and the Internet was the secret of the US defense department, DEC was second only to IBM. Now it has become chattel. It is the property of an upstart desktop computer company with close links to the despised Microsoft and Intel.

Joe McNally, managing director of Compaq UK, explains the difference this makes locally. UK businessmen, he says, now have more choice when going shopping for computer products because Compaq-Intel will be a growing, thriving operation. Since Compaq plans to go from being a company turning over pounds 100m in the UK to one turning over pounds 5bn, he adds, the result is likely to be significant inward investment. "Believe me," Joe says, "we don't have the infrastructure to support that kind of growth."

Despite Joe's good news, the Compaq-DEC merger could be interpreted differently. The deal dredges up memories of what Labour used to say in opposition - that Britain has been reduced to taking the crumbs from the high table of global economic consolidation.

There is a home-grown British information technology industry. It is tiny but kicking. Last autumn Bill Gates invested in a Cambridge-based venture capital fund specialising in IT. At the turn of the year a separate IT sector was set up on the stock market index. Still, the question remains: how can British computer companies achieve the critical mass to compete against US high-tech giants like Compaq, Microsoft, and Intel?

The knee-jerk answer will be: they can't. But why not? Japan came from nowhere in technology 25 years ago. We can come from nowhere starting now.

Economists may have all sorts of arguments to undercut such a dreamy notion. But from a journalist's standpoint the main stumbling block is the bad flow of information. Journalism is not going to explain what is happening in the world of British information technology. It would cost too much. Only money will buy the time and effort to tell illuminating stories about fledgling British Bill Gateses.

Slightly more surprising, however, is the news from a friend who quit as a fund manager specialising in small high-tech companies two months ago. Despite the fact that IT is one of the world's great growth areas, he says, the City is doing a lousy job allocating capital to British IT companies with a shot at competing internationally. This, he suggests, is because there is no nationally shared sense of - or conviction in - the economic potential of the British IT industry. In the vacuum created, investors fall back on buying and selling technology funds which, according to market rumours, are hot at the moment.

Moving in and out of high-tech stocks in nano-seconds is a game perfected on Wall Street.

The difference is that on Wall Street the fickleness of fund managers is underpinned by the research of investment banks and the journalism of magazines like Fortune.

Another fine mess

WHILE the Blair government fumbles for policies boosting Britain abroad, it might also want to take a look at what is happening at home. It is received wisdom that Britain has benefited from privatisation and deregulation. It is received wisdom that we have a more flexible economy than Germany and France, and that if Blair can build a fairer, more educated society, we are set to steam ahead. But is this so?

The first round of winners in the privatisation game were the City merchant banks handling the sale of government property. Second-round winners were former state apparatchiks, like Cedric Brown of British Gas, transformed into private sector biggies earning obscenely swollen salaries on the untested assumption they would jump to other jobs if they were not. Third- round winners appear to be foreign companies playing the cleverest hands in the restructuring of the former public sector industries. Electric utility Eastern Group is currently the target of three warring bidders: two US companies, PacifiCorp and Texas Utilities, and the Japanese bank Nomura.

"I love privatisation," says Eric Drewery, UK chief of the Swedish-Swiss industrial giant ABB. Through the judicious acquisition and adroit makeover of a half-dozen brain-dead British companies in such sexless industries as water and electrical metering since 1989, Mr Drewery has built ABB UK from a company reporting annual sales of $250m to one generating $3.6bn.

More power to Mr Drewery and ABB for exploiting the opportunities created. But why haven't British competitors to ABB done the same?

No doubt GEC has its reasons for not flourishing on the back of the massive sell-off of state assets. No doubt the new owners of the privatised rail companies have their reasons for making what appears to be an almighty hash of their businesses.

The danger is that the more Labour settles into power the more it will become inclined to turn away from facing such basic questions. Between now and March we shall be hearing a great deal about how Gordon Brown is hanging tough with his Budget. But what will we hear about the realities of economic life as opposed to the neat abstractions?

If Mr Brown is not careful he will sink to the level of rhetoric that belongs to old men and women whatever their political stripe. Our children are disgusted, outraged, reduced to tears, laughter and boredom by the mess we who specialise in economic discourse have made of the world.

No amount of analysis can hide from them the fact that our economy is mass-producing poverty while providing custom-tooled wealth and hope for a charmed few. Despite the good intentions, Labour and its supporters risk becoming part of the problem rather than the solution.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Travel
travel
News
news
News
Sir James Dyson: 'Students must be inspired to take up the challenge of engineering'
i100
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Arts and Entertainment
Catherine (Sarah Lancashire) in Happy Valley ((C) Red Productions/Ben Blackall)
TV
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

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

Homeless Veterans appeal

Former soldiers pay their respects to a friend who also served
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?