Jeremy Warner's Outlook: ITV is coping with the brave new multichannel world better than anyone dared to hope

MPC to adopt wait and see approach; Dixon's weighed down by weak Link; Don't write Sir Gerry off quite yet

The analysis was always flawed for whoever was in the driving seat and however much money they threw at programming for the core, ITV1 franchise, they would not have been able to halt the channel's loss of market share. This has little if anything to do with content. Rather, the cause lies with the advent of multichannel TV. It is perhaps still too early to judge, but at this stage Mr Allen seems to be managing this structural change in the free-to-air broadcast market with some skill. The disaster of ITV Digital, with which he was associated, is being slowly forgotten.

The story from yesterday's interim results is that profits are once more strongly on the rise, thanks largely to cost-cutting and the licence fee concessions won from the regulator. This has allowed the company to address its £580m pension deficit once and for all from a position of financial strength with a one-off contribution of £325m. More encouraging still, the fall in ITV1 revenues - 3.4 per cent in the first half - as viewers switch to multi-channel, digital TV, is being more than made up for by growth elsewhere. Non-ITV1 growth in the first half was 36 per cent, taking non-ITV1 revenues to 30 per cent of the group total.

ITV has every reason to feel pleased with itself. ITV2 and 3, its two new digital channels, now account for 55 per cent of the growth in multichannel viewing. If Mr Allen can keep that up, he'll more than make up for the digital attrition being felt at ITV1. More ITV channels are planned, while the group has high hopes of generating considerable amounts of transactional revenue - from gaming, dating and home shopping - on top of its usual diet of advertising revenue.

There are other new ventures too, including a new mobile portal. In another challenge to BSkyB's dominance of multi-channel TV, the Freeview franchise is to be extended by making it available, unencrypted, over satellite, thereby reaching the 25 per cent of the country who cannot at present access Freeview via digital terrestrial. As things stand, those households in such areas that want multichannel TV can only get it by signing up with Sky.

In short, ITV is at last beginning to think and act like a proper commercial company, rather than the hangdog defender of monopoly it once was. In its public service days of duopoly with the BBC, ITV produced much great television, but the world has changed, and today it's just another broadcaster among many. The transition has been a painful one, but finally ITV is on the front foot again.

MPC to adopt wait and see approach

Will the Bank of England's Monetary Policy Committee heed the advice of the Organisation for Economic Co-operation and Development and cut interest rates when it concludes its two-day meeting today? This seems rather unlikely given that the Governor was against the last cut. Outside the economic fallout from Katrina, which is still unquantifiable, most of the data since then has tended to support the Governor's view.

The OECD earlier this week called on the Bank for another reduction in rates after slashing its forecast of British GDP growth for this year by a half point to 1.9 per cent. The Bank is a little more optimistic than that, but it certainly wouldn't disagree that growth is now bound to fall well short of the Treasury's projected 3 to 3.5 per cent. The Treasury plans to bring its forecasts into line with the reality of lower growth at the time of the pre-Budget report.

However, none of this necessarily justifies another cut in interest rates. The MPC sets rates not for the way the world is now, but as it thinks it might be two years in the future. As things stand, the Bank sees a quite sharp rebound in economic activity next year and the year after. In the meantime, inflationary pressures are continuing to grow. Far from easing these pressures, Hurricane Katrina will only enhance them, in the short term at least. Higher energy prices mean higher inflation all round.

On the other hand, Hurricane Katrina is also bound to have a depressing effect on economic growth. The Congressional Budget Office estimated yesterday that it would knock around 1 per cent off US economic growth in the second half. That may be an exaggeration, but the way things are going the disaster could end up being just as economically costly as the terrorist atrocities of 11 September.

The problem with rising petrol prices, which is where the brunt of the economic impact will be felt, is that they are both inflationary and deflationary at the same time. They add to inflation, yet they also take money out of the economy that would otherwise be spent on other things. The Federal Reserve, which has no formal inflation target to meet, is likely to respond by at least removing its tightening bias. It might even cut rates if things get any grimmer.

The Katrina effect plainly won't be as severe on these shores, but it will be the inflationary rather than the deflationary consequences that the MPC will be most concerned to address. The MPC was divided over the wisdom of the last cut, but I suspect there will be less disagreement this time around. Rates will almost certainly be left on hold. The MPC will want to see how it goes before cutting them again.

Dixon's weighed down by weak Link

No wonder John Clare, chief executive of Dixons, is so keen to see the Bank acting more aggressively in cutting rates. His like-for-like sales were down 3 per cent in the 16 weeks to 20 August and there's still no "glimmer of light". Yet though no one's claiming things are easy on the high street right now, many of Mr Clare's problems are specific to his own company. He's been hit in particular by the collapsing price of desktop computers, and a catastrophic fall in sales at The Link mobile phones chain. There's no read through from these problems to the rest of the high street, where consumers are still spending relatively strongly, albeit not as strongly as they were.

Don't write Sir Gerry off quite yet

Sir Gerry Robinson couldn't help but be dispirited by the reception he's received for his mooted takeover bid for Rentokil Initial, but by the look of it, he's not throwing in the towel quite yet. The shares fell yesterday on speculation that he was all set to abandon the endeavour. Not a bit of it. More detail on the proposals is promised today. Sir Gerry thought it premature to announce details while continuing to take soundings from shareholders.

We await with baited breath, but I'm afraid I still don't rate his chances. Sir Gerry wants to run the show, though it's hard to know why he's so keen to swap the delights of semi-retirement in County Donegal for the hard grind of pest control. But what's his price? Anything as much as the originally suggested 10 per cent of the equity, and shareholders would send him away with a flea in his ear. Even 5 per cent, worth a cool £150m at last night's closing price, would be considered by many as too steep.

Sir Gerry's tilt at Rentokil still looks a long shot. Unless he's got a rabbit to pull out of the hat today, he'll struggle to make headway.

j.warner@independent.co.uk

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