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
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Sport
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
football
Life and Style
health
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own