COMMENT: This brewing merger will not be waved through

'Whoopee, thought Bass, which until S&N overtook it with the Courage takeover was number one in the market. Anything goes now'

Big consolidating mergers are all the rage in most industries these days and brewing is no exception. We've already had Scottish & Newcastle's takeover of Courage. Now it looks as though we might get something even more daring - a Bass takeover of Carlsberg Tetley.

When S&N acquired Courage the Government just waved it through with minimum conditions attached. This despite the fact that it breached an important benchmark - that any merger resulting in a market share above 25 per cent should at least be examined by the Monopolies and Mergers Commission. ,Whoopee, thought Bass, which until S&N overtook it with the Courage takeover, was number one in the market. Anything goes now.

Well, not quite. Bass may now be front-runner in protracted talks over the future of Carlsberg Tetley (Whitbread is hovering in the wings too), but any deal would be frought with regulatory difficulties. The combined market share of Bass and Carlsberg Tetley would be somewhere in the region of 40 per cent and in some areas - the Midlands and Yorkshire - it could be as high as 70 per cent. Even a Government as relaxed about private sector monopolies as this one might have some difficulty with that.

If Bass is going to be allowed to do this deal at all, therefore, the competition authorities are going to want to extract a high price. Some breweries are clearly going to have to be sold and there is even a chance Bass could be forced to cede at least some of what remains of its tied estate. With such a wide-ranging carve-up in prospect, is it all going to end up being worthwhile? That really depends on how much the Government is prepared to let Bass keep. Looked at from a businessman's perspective, what Bass is trying to do makes obvious sense. There's far too much capacity left in this industry. We simply do not need as many big breweries as we used to. This way, Bass would argue, you get a clean solution to the problem, returning the industry swiftly to economic equilibrium. The alternative is death by a thousand cuts, at least for one of the players.

Most ordinary people would not share that view, however. To them, fewer breweries and greater concentration of ownership can only mean less choice and higher prices. One thing is for sure. If Sir Ian Prosser, chairman of Bass, is going to do this deal at all, he needs to do it soon. His window of opportunity is fast disappearing. With an election looming, even Michael (national champions) Heseltine might balk at the prospect of another big job-cutting merger.

A breath of spring on the world economy

Do economists suffer from Seasonal Affective Disorder? As the first day of spring looms, there is a new optimism to the experts' assessment of various parts of the world economy. Yesterday it was Japan's turn. The fourth-quarter rise in GDP was the biggest since 1991. It followed two earlier quarters of decent growth, and has started to lift the pervasive gloom about the Japanese economy.

There has also been a wave of better news about the US. Although manufacturing remains static at best - witness the 50,000 fall in employment in industry in February, a month which saw the creation of 705,000 new jobs in America - other parts of the economy are evidently doing pretty well.

That leaves Continental Europe in the doldrums. In the major European economies growth has slowed or started to fall and unemployment has risen to unacceptable levels. But at least the authorities in Germany, France and elsewhere have started to press their foot down hard on the monetary accelerator. The series of reductions in the cost of borrowing should help to avoid outright recession.

The constellation of evidence suggests a promising outlook for growth in Britain this year too. The more pessimistic economists - those most in need of a winter break in a sunny resort - have made much of the deterioration in export prospects. They have overdone it. True, the trend in the balance of trade has been flat at best in recent months, reflecting the slowdown in export markets. True, this has hit manufacturing output, especially in Britain's engineering heartland as a new survey is expected to confirm today. But it is likely to be no more than a pause.

Even if the Continent is stuck in the doldrums until much later this year, trade with the US is likely to pick up again. The value of Britain's exports to North America last year, at pounds 20.4bn, was slightly higher than exports to Germany. When growth in Asian markets is taken into account too, export prospects look very decent. Before long even the pessimists will be forced to admit that the world economy has not been as depressed as they thought.

A serious risk for nuclear investors

Every time something untoward happens at a nuclear power station, it conjures up images of Chernobyl and Three Mile Island. In the case of the latest upset at British Energy, any such thoughts are probably exaggerated. But there are critical implications for this company's privatisation. The issue is whether it is safe to refuel some of British Energy's power stations when they are working at full load. This is a problem that does not apply to the new pressurised water reactor at Sizewell B, which must be refuelled off-load, whatever happens. But it does matter for a number of the AGRs (which are built to four different designs and are thus far from uniform in their operational methods.)

If it turns out that refuelling at high electricity output has to be stopped, then the average annual output of the AGRs is likely to be significantly reduced. It so happens that British Energy's load factor - the percentage of available time that its plants are actually generating - last year averaged 74.5 per cent.

Analysts at BZW, which is advising the Government, have assumed in their calculations of the value of British Energy that this load factor rises to 82.5 per cent quite soon as improvements are brought in. But they also concede that a difference of 2.5 percentage points either side of this target - from 80 to 85 per cent - represents a variation of pounds 700m in the value of the company. Looked at another way, a 1 per cent increase in load factor adds pounds 140m to operating profits.

The refuelling problems are probably soluble. But they underline the extreme sensitivity of nuclear plant performance to minor problems of lost output - be they from refuelling or faulty welds, the cause of serious losses of output at two of the AGRs last year. The sensitivity to shutdowns is particularly high because nuclear stations are only economic if they are run as near flat out as possible.

Potential investors should take this seriously, because it is one of the biggest risks they will be buying in the privatisation. Indeed, if the refuelling problem turns out to be worse than the company now claims, it will call into question the entire sell-off, scheduled for midsummer.

PROMOTED VIDEO
News
video
Life and Style
tech
Sport
Jodie Stimpson crosses the finishing line to win gold in the women's triathlon
Commonwealth games
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
film
News
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Arts and Entertainment
Jamie Dornan stars as Christian Grey in the Fifty Shades of Grey movie
filmFirst look at Jamie Dornan in Fifty Shades of Grey trailor
Life and Style
Phillips Idowu, Stella McCartney and Jessica Ennis
fashionMcCartney to continue designing Team GB Olympics kit until 2016
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Shinji Kagawa and Reece James celebrate after the latter scores in Manchester United's 7-0 victory over LA Galaxy
football
Sport
Farah returns to the track with something to prove
Commonwealth games
Voices
voicesGood for Lana Del Rey for helping kill that myth, writes Grace Dent
Life and Style
fashion Designs are part of feminist art project by a British student
Arts and Entertainment
The Tour de France peloton rides over a bridge on the Grinton Moor, Yorkshire, earlier this month
film
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

Junior Research Analyst - Recruitment Resourcer

£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

Senior Analyst - Financial Modelling

competitive: Progressive Recruitment: This really is a fantastic chance to joi...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Day In a Page

Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform
Climate change threatens to make the antarctic fur seal extinct

Take a good look while you can

How climate change could wipe out this seal
Should emergency hospital weddings be made easier for the terminally ill?

Farewell, my lovely

Should emergency hospital weddings be made easier?
Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

Crowdfunded novel nominated for Booker Prize

Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

Vladimir Putin employs a full-time food taster

John Walsh salutes those brave souls who have, throughout history, put their knives on the line
Tour de France effect brings Hollywood blockbusters to Yorkshire

Tour de France effect brings Hollywood blockbusters to Yorkshire

A $25m thriller starring Sam Worthington to be made in God's Own Country
Will The Minerva Project - the first 'elite' American university to be launched in a century - change the face of higher learning?

Will The Minerva Project change the face of higher learning?

The university has no lecture halls, no debating societies, no sports teams and no fraternities. Instead, the 33 students who have made the cut at Minerva, will travel the world and change the face of higher learning
The 10 best pedicure products

Feet treat: 10 best pedicure products

Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
Commonwealth Games 2014: Great Scots! Planes and pipers welcome in Glasgow's Games

Commonwealth Games 2014

Great Scots! Planes and pipers welcome in Glasgow's Games
Jack Pitt-Brooke: Manchester City and Patrick Vieira make the right stand on racism

Jack Pitt-Brooke

Manchester City and Patrick Vieira make the right stand on racism
How Terry Newton tragedy made iron men seek help to tackle their psychological demons

How Newton tragedy made iron men seek help to tackle their psychological demons

Over a hundred rugby league players have contacted clinic to deal with mental challenges of game