Jeremy Warner's Outlook: Allan heads back to Scotland as Energis creditors opt for C&W's bird in the hand

A testing time ahead for BA's new chief; La Belle France withers in the sun

At about £700m, depending on whose version of the price you believe, C&W is paying a little under one year's sales for Energis, which might seem like a bargain and to a number of debtholders certainly looked far too low. Why didn't Archie Norman, the chairman, try to elicit an auction at an earlier stage, they ask, adding mischievously that the £30m he and the management team stand to gain from the deal wouldn't have been increased by Thus's better terms, and they therefore had no incentive to seek them.

The other side of the coin is that this is a company which has still to become cash generative and whose sales have been in decline for some years now. To make the deal pay, C&W has to find substantial synergies.

Since the two are overlapping organisations which largely do the same thing, this ought in theory to be accomplished with no great difficulty. In practice it is notoriously hard to integrate telecoms companies, with their differing systems, technologies and customer relationships. In the end, Energis creditors thought C&W's bird in the hand worth more than Thus's two in the bush, despite the fact that some of them don't get all their money back under the C&W terms. The Thus bid was highly conditional and would have taken some time to materialise if it had done so at all.

Yet despite the irritation of some debtholders over the price, this is a hugely better outcome than the one they were facing three years ago, when the best available offer on the table could be counted at little more than half today's price. For that, they have plenty to thank Mr Norman for. It will rankle with Mr Allan, who was with C&W for 26 years before joining Thus, to have lost out to his old employer, but I'm not sure C&W has got the bargain it thinks. We'll see.

A testing time ahead for BA's new chief

Little more than a week ago my colleague Michael Harrison wrote a glowing and well deserved tribute in these pages to Sir Rod Eddington, outgoing chief executive of British Airways, for a job well done. A week, it seems, is as long a time in the aviation industry as in politics and after another bout of airline chaos - the third to have afflicted BA in as many summers - his track record doesn't look so rosy.

Sir Rod is leaving BA in reasonable shape financially, which after the battering the airline industry has taken from 9/11, Sars, war in Iraq and the high oil price, is no mean feat. Yet there is still a mountain to climb in terms of labour relations and the damage that getting them wrong is inflicting on the company's reputation for customer service. Right now, that reputation lies in shreds.

Sir Rod is only partially justified in blaming the shambles of the last week on the company's outside caterers, Gate Gourmet, an ineptly managed operation which, according to a leaked internal report, planned to set about making working conditions harsh for employees so that a strike would be provoked and cheaper, more flexible labour could be shipped in (current management say the plan was never acted upon). Yet though the problem may have started with Gate Gourmet, it escalated into an unofficial walkout by members of BA's own staff. This is what caused the real damage in terms of cancelled and delayed flights.

The subtext to all this is that although Sir Rod has made considerable progress in cutting staff costs at BA to meet the challenge of low cost competition, there is still a country mile to go before the company can genuinely be said to be out of the danger zone. The unions know there is more to come, the more so as Sir Rod's successor, Willie Walsh, comes with a reputation for being a Rottweiler of a manager and a track record for taking great chunks out of the cost base while at Aer Lingus to confirm it.

Workers are already trying to show him who's boss. The effect is not so dissimilar to the wild cat strikes that used to afflict the national newspaper industry in the 1970s and early 1980s. With one flick of the switch, print and administrative workers could ensure that the paper didn't appear the next day. Similarly with the airlines. Nobody is interested in buying a seat on a cancelled flight and it is therefore all too easy to hold management to ransom.

Mr Walsh achieved the necessary surgery at Aer Lingus, but this was a company that was essentially bust, it didn't have shareholders to answer to, and it was in any case much smaller than BA. The same approach couldn't be replicated at BA without severe consequences. Too aggressive an approach and Mr Walsh could end up destroying the company. To succeed, Mr Walsh must use the gentle art of persuasion in getting workers to underwrite their future through more flexible practices. There are no Wappings to be done at BA, even when the company comes to consolidate all its operations under one roof at Heathrow's Terminal Five. Mr Walsh's task is not an easy one.

La Belle France withers in the sun

Holidaying abroad provides as good an opportunity as any to reflect on the differences between nations, but don't worry, this is not a piece about "what I did on my holidays". It's hard to imagine a lovelier, more relaxing part of the world than Provence in the South of France, where I have just spent a couple of weeks. Yet this coastal and rural idyll is also ample demonstration of what's gone wrong with the French economy. Problem number one is that outside the hypermarket chains, it has become ludicrously expensive, not just in the coastal resorts of Juan-les-Pins and St Tropez, but inland too.

Provence's famous street markets are now so dear that even rich City folk will balk at the cost of preparing for the evening's barbecue. Locals attribute this in equal measure to the euro, which may have added anything between 15 and 20 per cent to the cost of living, and to the spiralling cost of property. If you want to own a property around here, the local butcher tells me as he slices the entrecôte, you have to earn more money than you used to. From all I see, the South of France is pricing itself out of the market.

The caretaker for the house I'm staying in is a British builder who moved here some 10 years ago to cash in on the market for second home improvements. Ambitiously, he started his own building firm, employing three locals besides himself. It didn't survive. The taxes and related social costs were too high to make it viable.

Some 80 per cent of business start-ups in France fold after the first three years, he tells me, which is when the full weight of social and regulatory costs kick in. As a result, few banks are prepared to lend to business start-ups, creating a vicious circle of economic decline. It cost him a lot of money to close, another reason why so few want to take the risk.

France has some of the best, most internationally competitive companies in the world. Unfortunately, big companies don't on the whole create jobs. To the contrary, to remain competitive they tend only to shed them. It is to the small business sector that economies must look to create employment. In a well meaning but misguided attempt to protect employment rights and benefits, France has stifled this essential source of economic revitalisation.

I had a wonderful holiday in France, despite the damage to my bank account, but I cannot pretend to feel more optimistic about its prospects. The cream of France's youth is deserting this beautiful country to work in the US, the Far East, and even Britain. It's easy to see why. France may be idyllic, but where are the jobs? Where is the opportunity?

j.warner@independent.co.uk