David Prosser: BP should hold its nerve and resist begging for funds from the Middle East

Outlook: BP investors have already put up with a huge loss; further loss as a side-effect of aninfusion of capital from the Middle East would hardly be welcomed
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The Independent Online

If it worked for Barclays, then why not for BP? When the bank found itself laid low by the credit crunch and the subsequent regulatory pressure on funding, it turned to the Middle East, rather than the British government, for support, securing injections of capital from Abu Dhabi and Qatar.

Now BP – with its value devastated by the ongoing Gulf oil-spill disaster – is exploring similar options, with new investment possible from a number of Middle Eastern state-backed funds as BP seeks to save itself from opportunistic predators.

For Barclays, the decision to sell a stake to the Middle East looks to have worked out well. That it avoided having to add Her Majesty's Government to its shareholder register enabled the bank to avoid the humiliating strictures to which the State-owned banks have since been subjected in the UK. By contrast, its Middle-Eastern stakeholders have been models of restraint, pursuing the sort of hands-off approach to their investments that managements dream about.

Still, don't forget the disquiet among the bank's shareholders at the time of the bailout. The preferential terms offered to persuade Abu Dhabi and Qatar to cough up stuck in the craw of many of Barclays' existing investors, who saw the value of their holdings diluted without a great deal of say in the matter. BP would presumably have to offer similar inducements, which would be likely to sit even less happily with its shareholders.

After all, they have already had to put up with a huge loss on the value of their investments, as well as an ongoing threat to their dividend payments. A further loss as a side-product of an infusion of capital from the Middle East would hardly be welcomed.

Nor should BP's executives count on their new paymasters being quite such silent partners as they have been at Barclays. Oil is, after all, a business that these folk know pretty well.

With the oil major's share price less than half its pre-crisis level, there's likely to be no shortage of would-be acquirers considering their options. But moving prematurely to counter such threats could prove rash.

The full cost of the Gulf of Mexico disaster is far from clear, but assuming all goes well with the second well, which is close to completion, the end of the first phase of the disaster is at least in sight. Patience, please.

We have much to fear, including fear itself

The Office for Budget Responsibility, George Osborne's new fiscal watchdog, warned that the Chancellor's emergency Budget of a fortnight ago meant economic growth would now be slower. Very speedily, most of the private sector has signalled it shares that view.

It's not the slowdown in growth that was the most worrying headline in yesterday's monthly report from Markit's surveys of purchasing managers in the services sector. Rather, it is the precipitous fall in managers' confidence about the outlook for their businesses that should alarm us – particularly as last week's data on the construction industry showed a near identical trend, with another record-breaking plunge in optimism about the future.

All recoveries from recession are marked by ups and downs. There is, however, a moment when a weak and variable recovery becomes a return to outright recession. What much of the private sector now seems to fear is that the UK is now heading for that moment.

We know how the different economic arguments stack up. In one camp sit Mr Osborne's supporters, who believe the cuts he proposes are both necessary and desirable, in the sense they will prompt recovery as private industry steps into the areas vacated by the public sector. This is what happened in similar circumstances in the 1980s, they say.

The counter-argument is that as the private sector is not robust enough to meet that challenge, the Chancellor's spending cuts will drive us into a downturn, or even a depression of the type seen in the 1930s when the US did something similar.

It is possible to model both arguments using real data and projections, but one factor the statisticians find difficult to take into account is confidence – and the effect it might have on the behaviour of both consumers and corporates.

Still, while it is early days in this argument – we don't even have the full detail of the cuts yet – the first signs are that confidence about the future is falling faster than economic performance.

And make no mistake: the latter will follow. There is a real danger now that the fear of a double-dip actually delivers one, even though, other things being equal, we might have muddled through.

BBC loses in licence fee deal with Worldwide

The strong performance of BBC Worldwide, revealed yesterday, is hardly surprising given that it gets to use the fantastically valuable BBC brand without paying a penny – and that it has first dibs on rights to the corporation's programming.

Given the fantastic work the BBC produces – courtesy of licence-fee payers, naturally – and its unrivalled brand value, the White City gang, hardly renowned for their business acumen, can't muck it up.

Still, while defenders of the status quo point out that Worldwide money (or what's left after generous bonuses for staff, that is) is ploughed back into programme-making, it's disappointing that the political upheaval of the past few months seems to have stymied progress on the debate about this organisation's future.

It makes no sense for a business supposedly run on a commercial basis at arms length from the BBC to get these fabulous advantages for free. The corporation is certainly doing itself out of revenue by not charging for the use of its brand and may be missing out further by its inability to put its rights up for auction in a genuinely competitive process.