City has reason to worry about Labour

COMMENT "The City is right to worry. When it comes to City matters, the Shadow Chancellor seems more interested in the ballot box than the truth. There could be fireworks to come."

Christopher Walford, the Lord Mayor of London, plans to stomp the country this year on a charm offensive, waving copies of a new series of research reports, commissioned to show that the City helps, not hinders, British industry.

This could be a dangerous mission in Birmingham and on Tyneside, since the City ranks somewhere near the British Gas chairman in popular demonology. A recent survey showed that its denizens were rated lower even than politicians.

Labour is still officially committed to abolishing the Corporation of London and all its trappings, but that is not what the new City campaign is about. In any case, the corporation believes Labour leaders plan to leave abolition out of the next manifesto.

What really hurts the City in political terms is that the tedious and almost entirely circular argument about short-termism in the financial system - one that Lord Wilson, the former Labour prime minister, reported on at great length and to little effect nearly 20 years ago - has revived with a vengeance.

The fear is that an enthusiastic Labour government will ride the tide of public opinion, which generally regards financiers as rogues, and decide that something - anything - must be done.

The biggest risk, as the corporation sees it, is a new series of badly thought out regulation that puts a stop to the influx of new businesses that have been so successfully attracted into the City in the past few years, such as Deutsche Bank's investment banking operations.

The City is right to worry. Alistair Darling, Labour's City spokesman, understands how things really work. But when it comes to boardroom and City matters, his boss, Gordon Brown, the Shadow Chancellor, seems more interested in the ballot box than in the truth. There could be fireworks to come.

The research reports the Mayor will use are by London Economics, chaired by John Kay. The first one, published yesterday, tackled the question of why Germany has far more medium-size companies - the famous Mittelstand - than Britain.

Mr Kay turns the usual argument that UK financiers do not support medium- sized companies on its head. The report says finance is more easily available in Britain than Germany so our medium-sized companies are more likely to grow into large ones. We have 41 of the world's top 500 companies to Germany's 32, though our economy is half the size.

No amount of clever analysis is going to turn the tide, however. The Barings fiasco has only served to reinforce the image of fat cat incompetence out of tune with the real needs of the British economy. The City and Labour never enjoyed a good relationship and it does not look like getting any better.

Money speaks louder than mutuality

However much building society heads may deny it, merger fever seems to have gone up several degrees in temperature since last week's double blow for mutuality. The Cheltenham & Gloucester borrowers failed to rebel against the proposed acquisition by Lloyds, which will be complete by August, and the courts have smiled on the Halifax/Leeds plan to become Britain's third-biggest bank.

The Building Societies Commission (BSC), the sector's regulator, must be feeling faintly giddy as it sees roughly a third of the assets under its control swept away into the clutches of the Bank of England. No wonder the BSC is making noises about reforming the legislation to make it more difficult to ditch mutuality.

It is difficult to see how the BSC can win, however. Millions of customers are looking forward to their cash payouts and free shares. Even if the Government felt minded to halt the stampede, it is not going to if there is any chance of such action costing votes.

Under current forecasts the Halifax free share payout is worth around 2p off income tax for the economy as a whole. What government would spurn that in the run-up to a general election? Mutuality may still have much to commend it but its case is unlikely to be heard above the noise of hard cash.

Now Aegis must execute as well as devise

The media buying specialist Aegis, back in the black after years of red ink, is another of those 1980s media wonder stocks still attempting to come to terms with the excesses of the past. It is also a classic example of how easy it is to get your strategy right and your execution terribly wrong.

Its main operating subsidiary, Carat, built an impressive specialist business in the 1980s, paying over-the-top prices and promising handsome earn-outs for the executives of the competing companies it swallowed up throughout Europe. Its founder, Peter Scott, rightly assumed that international clients would be enticed by a single company's ability to plan and buy media space in several markets, leaving the creative work to traditional ad agencies.

Unfortunately, the debts incurred, not least the liabilities represented by all those expensive earn-out deals, put the company on a highly tenuous footing just as the French government began to crack down on what had long been a less than pristine clean business. The "loi Sapin" made it illegal for advertising agencies to receive income from sources other than their clients, thus ending the lucrative trade in backhanders that had typified relations between media companies and media buyers. Aegis was lucky not to go belly-up.

Backed by US investors, the company has now staged quite a comeback. Costs have been cut, debt levels lowered dramatically and the company's operations diversified geographically. Its new chief executive, Crispin Davis, vows not to repeat the mistakes of the past.

While the turnaround looks real, investors may want to wait to see how the company progresses in 1995. Margins are still under pressure, and costs may need further trimming. In addition, the company is not yet a player in the US market, where its large international clients are eager for media-buying support. With the shares still languishing at just over 20p investors need further assurances. The strategy is probably right: in the hackneyed phrase of ad men everywhere, we must all think global, act local.

Aegis Group's new management must now prove that they can execute strategy as well as devise it. The 1994 results are a definite step in the right direction; another set of positive figures may be needed to prove the point, however.

News
More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete today
News
people'I’d rather have Fred and Rose West quote my characters on childcare'
Life and Style
The new Windows 10 Start Menu
tech
Arts and Entertainment
There has been a boom in ticket sales for female comics, according to an industry survey
comedyFirst national survey reveals Britain’s comedic tastes
PROMOTED VIDEO
Travel
Bruce Chatwin's novel 'On the Black Hill' was set at The Vision Farm
travelOne of the finest one-day walks you could hope for - in Britain
Sport
footballManchester City 1 Roma 1: Result leaves Premier League champions in danger of not progressing
Arts and Entertainment
Gay and OK: a scene from 'Pride'
filmsUS film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
News
i100
Life and Style
Magic roundabouts: the gyratory system that has excited enthusiasts in Swindon
motoringJust who are the Roundabout Appreciation Society?
Arts and Entertainment
Hilary North's 'How My Life Has Changed', 2001
booksWell it was good enough for Ancient Egyptians and Picasso...
News
ebooksAn unforgettable anthology of contemporary reportage
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

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?
Why do we like making lists?

Notes to self: Why do we like making lists?

Well it was good enough for Ancient Egyptians and Picasso...
Hong Kong protests: A good time to open a new restaurant?

A good time to open a new restaurant in Hong Kong?

As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

Paris Fashion Week

Lagerfeld leads a feminist riot on 'Boulevard Chanel'
Bruce Chatwin's Wales: One of the finest one-day walks in Britain

Simon Calder discovers Bruce Chatwin's Wales

One of the finest one-day walks you could hope for - in Britain
10 best children's nightwear

10 best children's nightwear

Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties
Manchester City vs Roma: Five things we learnt from City’s draw at the Etihad

Manchester City vs Roma

Five things we learnt from City’s Champions League draw at the Etihad
Martin Hardy: Mike Ashley must act now and end the Alan Pardew reign

Trouble on the Tyne

Ashley must act now and end Pardew's reign at Newcastle, says Martin Hardy
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?