Business View: It's looking like Madrid or bust for Abbey No Mates

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The Independent Online

Are cracks appearing in the Abbey-Santander romance? Certainly, the engaged couple do not seem as close as they were a few days ago. It may be all the grumbling about conflicts of interest, but the Spanish bank has brought in new PR advisers to ensure it doesn't have to share spin-doctors with Abbey National. Santander has also started showing awareness that it might have to sell this bid to the City, not just expect it to go through by dint of there being no alternative.

Are cracks appearing in the Abbey-Santander romance? Certainly, the engaged couple do not seem as close as they were a few days ago. It may be all the grumbling about conflicts of interest, but the Spanish bank has brought in new PR advisers to ensure it doesn't have to share spin-doctors with Abbey National. Santander has also started showing awareness that it might have to sell this bid to the City, not just expect it to go through by dint of there being no alternative.

People who stick their necks out often have them chopped off, but I believe that no UK rival, not even HBOS, will make an opposing bid. If they do, they will be referred. If they are referred, they will be blocked. HBOS's canny chief executive, James Crosby, would not embark on something with so little chance of success.

Information that might destabilise an HBOS bid is already being fed into the market. Someone has taken a tape measure and found that 524 of Abbey's 741 branches are within a quarter-mile of an HBOS branch. That, along with figures showing joint market shares above 25 per cent in mortgages and savings, should help turn the heads of the regulators, reminding them that HBOS is the UK's fourth, not fifth, largest bank. Any referral to the Competition Commission could leave Abbey in a weakened position.

The Machiavellian argument is that HBOS could bid in order to weaken Abbey. This would be blocked, but not before it could steal business (and staff) from an Abbey stuck in limbo.

Would Santander then walk away? The Spanish are not saying. But you can see they might reduce the value of their offer. In the absence of an unencumbered bid from someone such as Citigroup, shareholders might find that the Spanish bird in the hand is about as valuable as it gets.

BA left up in the air

You can't blame Rod Eddington for wanting to retire from British Airways next year. Another summer of brinkmanship with the ground staff unions is bound to have anyone pining for the unspoilt beaches of Western Australia. But will the job he set out to do be completed by then?

The entertaining Aussie was a great antidote to his legally trained predecessor, Bob Ayling. However, much of what he has done has been to put into action plans Mr Ayling dreamt up. Ah, you might say, execution is everything. That's why Gerry Robinson and Charles Allen did so well at Granada. They didn't merely know what to do, they knew how to do it. Mr Ayling knew the former but not the latter. Mr Eddington knew the latter and a bit of the former.

But some knots are still untied. The offer to ground staff of a bonus if they do not take sickies is redolent of Adam Crozier's efforts at Royal Mail, which has a chronic absenteeism problem. But it treats the symptoms, not the disease. Even the most lowly HR manager knows that absenteeism is caused by bad morale and has to be addressed directly. So if Mr Eddington is so popular, why is absenteeism so bad?

The other "elephant in the rowing boat", to borrow Mr Eddington's colourful phrase, is the oil price. BA has hedged only 45 per cent of its fuel exposure, and only until March. Oil prices could fall back below $30 a barrel by then, but if they are at $50, BA will be staring at another £500m-odd of costs. On that basis no one, not Rod Eddington, not Gerry Robinson, not Houdini, would be able to make BA profitable.

The OFT's Italian job

After my tirade against the Office of Fair Trading's report into auditor liability last week, not only has John Vickers not relented, he has made another astonishing decision. "National security concerns raised by interested parties" have led the OFT to probe GKN's sale of its 50 per cent of AgustaWestland to Finmeccanica of Italy.

How crazy is this? Finmeccanica has owned half the helicopter maker for more than a decade. Italy is an ally. Tony Blair has just spent a holiday at Silvio Berlusconi's house, for heaven's sake. I know the Italians changed sides in the Second World War and have awful TV, but where are the national security issues?

I have one piece of advice for Professor Vickers. When so-called "interest parties" raise stupid concerns, just say no.

j.nisse@independent.co.uk

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