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.

Start your day with The Independent, sign up for daily news emails
News
Sir David Attenborough
people
Life and Style
Young girl and bowl of cereal
food + drink
Arts and Entertainment
Henry VIII played by Damien Lewis
tvReview: Scheming queens-in-waiting, tangled lines of succession and men of lowly birth rising to power – sound familiar?
News
news
PROMOTED VIDEO
Sport
football
Arts and Entertainment
'The Archers' has an audience of about five million
radioA growing number of listeners are voicing their discontent; so loudly that even the BBC's director-general seems worried
News
i100
Life and Style
David Bowie by Duffy
fashion
Arts and Entertainment
Hell, yeah: members of the 369th Infantry arrive back in New York
booksWorld War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel
News
advertisingVideo: The company that brought you the 'Bud' 'Weis' 'Er' frogs and 'Wasssssup' ads, has something up its sleeve for Sunday's big match
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Recruitment Genius: Web Developer - PHP

£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

Day In a Page

Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness
Homeless Veterans appeal: Homeless in Wales can find inspiration from Daniel’s story

Homeless Veterans appeal

Homeless in Wales can find inspiration from Daniel’s story
Front National family feud? Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks

Front National family feud?

Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks
Pot of gold: tasting the world’s most expensive tea

Pot of gold

Tasting the world’s most expensive tea
10 best wildlife-watching experiences: From hen harriers to porpoises

From hen harriers to porpoises: 10 best wildlife-watching experiences

While many of Britain's birds have flown south for the winter, it's still a great time to get outside for a spot of twitching
Nick Easter: 'I don’t want just to hold tackle bags, I want to be out there'

'I don’t want just to hold tackle bags, I want to be out there'

Nick Easter targeting World Cup place after England recall