COMMENT: The commercial world is left a duller place
"Hanson is unusual among British companies in having made a success of America - for most it is a graveyard"
Friday 25 August 1995
Gordon White was a one-off - a dazzling war record as a pilot and submariner informed his business style and glitzy private life. A string of beatiful women, racing horses and cars made him more James Bond than corporate technocrat. Who else, aged 50, broke and fed up with England, would decamp to one of New York's plushest hotels with $3,000 and literally sweet-talk himself a business empire?
Yesterday his friends and admirers were unanimous in their praise of the man most people agree was the life-spark of the Hanson conglomerate. That the company had his partner's name says a great deal about his refusal to care about power and prestige - money and the fun of the chase were all that mattered. They are right to highlight his contribution. Hanson is unusual among British companies in having made a success of America - for most it is a graveyard - and arguably it is the US operations that made a good company into, at its peak, a great one.
Against that backdrop, it might seem churlish to point out that Hanson's shares treated the news yesterday with indifference. But the fact is that Lord White had been an increasingly marginal figure at Hanson for some years. History will show that the company, and Lord White personally, never really recovered from the humiliation they suffered at the hands of ICI in 1991, when Hanson's failure to take over Britain's leading industrial company ended the two lords' dream of the ultimate corporate swansong.
As the driving force behind Hanson's acquisitions, Lord White was as much to blame for the misjudged and highly damaging nature of this assault as James Hanson. Hubris blinded both into believing they could bring about a seismic shift in Britain's commercial landscape.
Though he fought Hanson like an alley cat, even Sir Denys Henderson, ICI's chairman, remembers Lord White with some affection. He tells a wonderful story about, how long before ICI began its demolition job on Hanson, the two had done a deal together. Fed up with the cost and red tape of America's law firms, Lord White had phoned Sir Denys and suggested a meeting at a downtown Manhattan bar. "You bring along the money, in a suitcase if you like, and we can do the deal there and then, man to man," Lord White suggested. The business world is a duller place for his passing.
CBI prescribes a dose of castor oil
No wonder Howard Davies, director general of the CBI, was selected by the Bank of England as its new deputy governor. In its latest forecast of the economy, the CBI assumes no tax cuts and says that interest rates will still have to rise by half a percentage point if the Government is to meet its inflation target. This improbable policy combination for a Government desperate to stave off defeat at the polls was made even more improbable by the Bundesbank's cut in rates yesterday.
Although the pound barely reacted, the German cental bank's decision is undoubtedly helpful to the Chancellor. It is much easier to hold the line on interest rates when they are falling worldwide rather than rising. As so often in economics, however, there is a sting in the tail. The easing in monetary conditions in the US and Germany reflects an economic slowdown in those countries which is already hurting British exports.
This deterioration in prospects looks set to continue with the CBI's latest monthly survey of industrialists indicating export orders at their lowest level so far this year. The CBI has cut its forecast of export growth for this year to 6.7 per cent from the 8.5 per cent it was predicting in February.
With overseas demand weakening for the time being, the Government has good economic reasons to want to rebalance growth towards domestic demand. The CBI believes this will happen without tax cuts as consumers step up their expenditure, aided and abetted by maturing Tessa accounts and windfall gains from building society takeovers and mergers. The Chancellor, rest assured, will want to lend a helping hand with tax cuts.
Anything less than pounds 4bn-pounds 5bn will come as a grave disappointment to back- benchers. The case against such tax cuts is put cogently by the CBI; public finances are not improving as much as the Government had hoped and will still be showing a big deficit in 1996/7, even though the economic recovery will be quite mature by then.
But while the CBI's recommendations may seem improbable, its concern about the effect of a tax-cutting Budget on interest rates is justified. If there is lee-way on economic policy, it should be exploited by keeping interest rates unchanged or cutting them, not by making irresponsible tax cuts.
Lloyd's monster is not yet buried
Profits at Lloyd's of London have become so unusual as to be almost unbelievable. Apparently, however, the market is now earning them in abundance. According to Chatset, an independent research group, yet to be reported profits for 1993 and 1994 will come in at around pounds 1bn apiece.
The horrors of the late Eighties and early Nineties burned away all memory of Lloyd's as a nice, dependable cheque in the post. Instead, many names were scorched with the traumatic vision of an insurance market gone beserk, transmuted into a money-losing monster of terrifying efficiency.
With that sort of reputation, any good news is welcome. But it is far too soon for the earnest executive faces that have become de rigueur at Lloyd's to break into smiles. Good profits are being made once again, but the money-gobbling monster is still there, looming large out of the past. Lloyd's made over pounds 8bn of losses between 1987 and 1992, a hole into which profits could be poured for some time. But time is Lloyd's scarcest commodity; the past does not lie still. With ancient asbestos and pollution policies, mostly in the US, still being called upon for massive payouts, it constantly threatens to crush the insurance market.
Lloyd's executives are still frantically working on their grand rescue plan - caging the monster of the past so that a separated-off, new Lloyd's can thrive again.
It is a task of daunting complexity, requiring the skills of the politician and psychologist as much as those of the computer wizard. In October, thousands of loss-hit Lloyd's names, will learn the first estimate of how much it is going to cost them to buy themselves out of the Lloyd's nightmare and walk away forever.
Persuading enough of these investors, many of them bitter beyond belief, that this is the best deal, rather than letting Lloyd's go bust, will be an extraordinary coup. There are some positive signs about. But everything is still to play for.
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