Business View: Here's the good news about the recession ? the City leaves you alone

I went to a dinner last week attended by some people who are involved in – dare I say it? – manufacturing. Not those things we used to do well, like textiles and cars and aircraft carriers, and now we don't do so much of. No, this was what Britain does do well: semiconductors and pharmaceuticals and production flow systems. Manufacturing that takes a bit of brain power. Stuff that is less badly hit by the overpriced pound and the minimum wage.

I went to a dinner last week attended by some people who are involved in – dare I say it? – manufacturing. Not those things we used to do well, like textiles and cars and aircraft carriers, and now we don't do so much of. No, this was what Britain does do well: semiconductors and pharmaceuticals and production flow systems. Manufacturing that takes a bit of brain power. Stuff that is less badly hit by the overpriced pound and the minimum wage.

I thought they'd be gloomy. What with depressed share prices – particularly for technology companies, which many of these guys ran or advised – low growth and, of course, the looming war. But they weren't.

There were two big issues on the table.

One was Iraq. This split into two topics: a discussion about how many people were deferring buying decisions until we know what is going to happen; and another about firms that have staff in the Middle East and whether these people should be brought home. Americans are already flying back. Brits are starting to get on the plane. Continental Europeans feel safe for now.

The other issue was how much fun it was to be running a company at the moment. This astonished me, not least because there was someone from a large plc that has just issued a profit warning.

They explained that the collapse of the mergers and acquisitions market has taken pressure off public companies to deliver good short-term performance. When there was a buoyant stock market and lots of M&A, there was a real need constantly to deliver good half-yearly (or if you are American, quarterly) figures. Chief executives spent much time working out what they might buy, or who might buy them. Less attention was given to the nuts and bolts of running a business, such as delivering consistent long-term growth, investing for the future, etc etc.

At the moment, if you are in the technology sector, you are expected to disappoint. Your operating figures will almost certainly be poor, so it is a good time to deal with some of the niggling issues in the company and charge those to your profit and loss account and come out with some truly dire figures. Maybe the City will give you a hard time, but if you can turn things around in six months or a year, it will soon be forgotten.

After this dinner I came away expecting more short-term bad news. And to see British industry – or what is left of it after years of neglect – coming out of this dark time fitter, healthier and better prepared to deliver.

Osmond lets in the big hitters

Of course, the M&A market has not truly gone away, as is demonstrated by Hugh Osmond's audacious bid for Six Incompetents. I take my hat off to Hugh. He's bright, gutsy and has done what so many thought should happen. But he is also rather exposed.

Mr Osmond has put Six Continents into play. However, unless he can pull a rather large rabbit out of his hat when he makes his offer this week, I'm afraid he will end up being the stalking horse for a real bid from the likes of Marriott, Starwood or Hilton. He could end up getting the pubs, though. If he wants them.

Abbey's real agenda

The other person in an exposed position is Luqman Arnold. Wednesday is the day when the new Abbey National chief executive will reveal his strategy for saving the venerable high-street bank.

So much is already known. The life business is in effect being run down. All the risky investments will be put into a special-purpose vehicle and sold off over three years. And Mr Arnold will write off everything he can – delivering a loss of anything up to £2bn.

But he also needs to indicate that Abbey has a viable future and he's not merely cleaning it up so it can be sold off. This means he will want to show growth in some of the core businesses, like mortgages. This may be why Abbey has some very good offers for new customers but has yet to follow the Bank of England and cut its standard rate for existing customers.

Such a strategy – which was pursued by the Halifax in the Mike Blackburn days – pushes up your market share in the short term, but then leads to unhappiness among your existing customers. And that indicates that selling Abbey is really Mr Arnold's plan A.

j.nisse@independent.co.uk