Jeremy Warner's Outlook: Lord Hanson's aversion to rules defined an era

Click to follow
The Independent Online

Lord Hanson's death is already being characterised as the end of an era, yet the truth is that the glory years of Hanson's rule disappeared into the dustbin of history long ago, and with them the age he defined. The latest generation of City hotshots have little if any recollection of him or his exploits.

Lord Hanson's death is already being characterised as the end of an era, yet the truth is that the glory years of Hanson's rule disappeared into the dustbin of history long ago, and with them the age he defined. The latest generation of City hotshots have little if any recollection of him or his exploits.

The rise and fall of Hanson Trust as an all powerful force on the British corporate scene coincided almost exactly with Margaret Thatcher's reign as Prime Minister. By the time John Major succeeded her, Hanson plc was already on the wane, too big and bloated to do anything other than contemplate a break-up into more manageable and industrially focused units. Lord Hanson always accepted that this would eventually be the fate of the business empire be created with Gordon White, yet he resisted the inevitable for perhaps longer than he should have, and when the end came, it was a painful and ignominious one for him.

Hanson plc came to define the economic liberation of the Thatcher era more perhaps than any other corporation - bold, ambitious, relentless, passionate, optimistic in the way it conducted its affairs, and with the breadth of vision always to think on a grand scale. Not everything about the construction of this far flung and diverse industrial empire was good, and indeed there was always a suspicion that much of its supposed success was simply acquisition accounting, smoke and mirrors, and elaborate tax avoidance. Yet more than any other, Lord Hanson epitomised the rebirth of British economic and business self confidence during those years, ruthlessly carving out a new industrial empire from previously underperforming assets, and daring to take his business to America, the spiritual home of so many of the free market principles he believed in.

He would have hated today's rules-bound corporate world, hemmed in as it is by governance codes, and controlled by the thought police of the big institutional investors, determined that no company should step outside its claimed sphere of expertise. To Lord Hanson there was only good and bad management. It didn't matter what industry it was applied to, it would always have the same effect. A good manager with an eye to costs and market opportunity would always succeed. A bad one would not, whatever industry he was in. He regarded rules and regulations as designed only for companies that failed properly to understand the needs of their shareholders, and was therefore able to think in all sincerity that they didn't apply to him.

Goodness knows how he would have coped with Higgs and the panoply of other rules and regulations that today gum up the exploits of publicly listed companies. Indeed, were he still in business today, he wouldn't be in the quoted sector at all, but rather in private equity, where the mindset and techniques that defined Hanson Trust continue to flourish. In that sense, the industrial conglomerate never died. It is alive and well in private equity hands, from the Barclay brothers to Blackstone, Permira and Apax. Bizarrely, big institutional investors are perfectly happy to support the idea of an industrial investment trust when it comes in the form of a successful private equity fund, but pooh pooh it as value-destroying empire building when manifested in a publicly quoted company.

A huge amount has changed on the corporate scene since Lord Hanson's heyday, and not much of it for the better. My own abiding memory of him is of his infectious, almost boyish enthusiasm for everything he did, and the enjoyment he all too plainly got out of the act of just being alive. His propensity was always to regard the glass as half full, never half empty, an image he used in one of his many corporate advertisements.

He thrived in an era when public policy was for a change deliberately set on making business success easier to achieve, and he was one of the major beneficiaries of that approach. Today we live in a more blinkered, mollycoddled world where risk reduction, compensation for all and the nanny state are the order of the day. Yet in erecting all this well meaning regulation, we are stifling enterprise and destroying the incentive to succeed. To Lord Hanson, it would have been anathema. The pendulum of political and economic fortune will eventually swing back to his way of thinking. It's a shame that he won't be around to see it.

US economy

By the time you read this column, the outcome of the US presidential election should be known - or not, as the case may be, if it is left to the lawyers rather than the voters to decide. The latter result would send the markets into a tailspin of uncertainty and, if it took several months to resolve, it's impossible to know how much damage might be done in the meantime to financial markets.

Yet, initially at least, a clear-cut win will be greeted with huge relief on Wall Street, whoever the victor, and with luck it will act as a signal for the resumption of normal levels of business activity. As we've approached the election, there has been a marked slowdown in the economy. A wait and see mentality has crept into business thinking and decision making, even though most commentators agree that the broad thrust of macroeconomic policy will be little different whoever ends up in the White House for the next four years. This economic soft patch has by no means been confined to the US. We've felt it here in Britain, and in Europe too.

Conventional wisdom is that whatever the outcome, the winner will be forced as a matter of urgency to address America's burgeoning twin deficits. Only the election has prevented earlier action. Of course, if either Bush or Kerry were to do this, it wouldn't immediately be terribly good for economic growth. Raising taxes or cutting spending to reduce the budget deficit would be economically deflationary. Likewise, the trade deficit cannot be properly eased without a substantial further weakening in the dollar.

Of the two, Mr Bush ought to be in the better position to deal with the twin deficits, if only because he doesn't have to win another election.

Mr Kerry, by contrast, will have to ensure that four years hence the economy is again in a strong growth phase to be sure of a second term. Yet in practice, I doubt whether either of them will be in any hurry to address the deficits, Mr Bush because he believes the problem to be self correcting as his tax cutting measures feed through into stronger economic growth, and Mr Kerry because he needs a strong economy to deliver a second term.

Whatever the outcome, it would be unwise to count on any kind of an economic renaissance in the next four years. A whole array of economic problems have lately been swept under the carpet, not least the possibility of a return of inflation. The Federal Reserve has already delayed far too long in addressing a clear build up of inflationary pressures in the US economy, and cannot be expected to sit on its hands for much longer. That further muddies the economic outlook.

In the end, the result of the election may not make much difference. The only thing we know for sure is that the victor faces economic challenges as awesome as any in the modern political age. Yet curiously, the election never turned on them. The outcome will have been determined more by the war in Iraq and considerations of national security than any policy differentiation on the economy.

Ryanair resurgent

Michael O'Leary appears to have been too gloomy when he warned on profits last January, unusually for the ebullient boss of Ryanair. Then he foresaw declines in passenger yields of 5-10 per cent for the first half and 10-20 per cent for the second. In fact, the fall for the first half is only 5 per cent, reduced to just three in the second quarter. Mr O'Leary is also slimming his estimate of the decline for the second half to just 5-10 per cent. The shares danced for joy, even though the cause of all this good news is paradoxically the high oil price, the very thing that Mr O'Leary thought would cause him to nose dive. As it happens, the imposition of fuel surcharges by the likes of British Airways has allowed him to stay competitive at fares which are quite a bit higher than he anticipated. Whether this will delay or even render unnecessary the once anticipated bloodbath among low cost operators this winter is another matter.

jeremy.warner@independent.co.uk

Comments