Jeremy Warner's Outlook: Markets wobble again on poor US data, but does America matter as much as it used to?

MFI transforms itself into Galiform; Stagecoach pays top dollar for rail franchise; Northern grit in Sir Ken's recovery story

At his press conference last week to launch the International Monetary Fund's (IMF) latest set of economic forecasts, the organisation's chief economist, Raghuram Rajan, described himself as being a little bit schizophrenic. By this he meant that though the IMF is forecasting a fourth year of above-trend growth for the world economy - making it the strongest such run since the early 1970s - the prediction is compromised by an unprecedented degree of uncertainty.

These warnings about risk factors are a long-standing feature of the IMF's bi-annual World Economic Outlook. The IMF's fault has been to give them too much weight in evaluating prospects, with the result that in recent years at least, the organisation has been consistently too pessimistic about the future. Like a Seventh Day Adventist, it seems to be constantly predicting the end of the world, which with each passing year has to be pushed further out into the future.

This has helped to make the IMF something of a contrary indicator. Think the opposite of what it says, and you might be right. If the IMF has now turned a bit more optimistic about the future, despite its concerns about the risks, this could reasonably be regarded as a bad sign. All those risk factors might finally be coming home to roost.

There was another bad wobble in the stock market yesterday, prompted by fresh data suggesting a now-quite-sharp slowdown in the US. Can the world economy withstand such a whirlwind? If the US sneezes, it used to be said, the rest of the world catches cold.

The big difference this time is rapid economic development in Asia, which may have already become self-sustaining. Such seismic shifts in the pattern of world growth make people believe the laws of economics have been suspended. Nobody should ever think that. But they certainly make for a profound change in the way the world economy works. Mr Rajan is right to be schizophrenic. These are uncharted waters. But he's also right to be broadly optimistic. The US slowdown may not be as painful for the rest of us as it once would have been.

MFI transforms itself into Galiform

MFI is having to pay "only" £126m to persuade Merchant Equity Partners to take its loss-making retail operations off its hands. The reason this apparently counts as good news is that analysts had pencilled in a much bigger divorce settlement. Some £52m of the sum is in customer deposits, so the true amount is just £74m, a figure that Matthew Ingle, the chief executive, regards as cheap at the price.

All the same, it is a pretty humiliating exit from the company's roots in the early 1960s as one of Britain's original "flat pack" furniture retailers. The group has struggled to make the formula work against growing competition from others for many years now. A brief renaissance under John Hancock came to an ignominious end when the company so mismanaged its new IT and distribution system that it couldn't deliver the goods.

Stripped of furniture retailing, MFI becomes just the Howden Joinery business, plus the factory operation that supplies MFI with its fitted kitchens.

Somewhat bizarrely, Mr Ingle has decided to name the remaining rump Galiform, a name for which he has no comprehensible explanation. Why not just call the company Howden, the depot business which Mr Ingle grew from scratch? Well, apparently it is because Howden isn't regarded as a national brand, but a local one, and Mr Ingle didn't want to confuse the punter. Make of that what you will. It beats me.

In any case, Galiform it is to be. If people can learn to love the name MFI - originally Mullard Furniture Industries - why not this meaningless concoction too? Mr Ingle is getting rid of the furniture operation because be felt that both managerially and financially, he couldn't handle both the expansion of Howden and the turnaround at MFI.

In itself this sounds sensible enough, though he's left with a company with very little in the way of net assets and an ongoing pension-fund deficit. How much growth is left in the market for Howden, with DIY retailers invading the builders' merchant's space in their hunt for sales, remains to be seen.

Stagecoach pays top dollar for rail franchise

Brian Souter, chief executive of Stagecoach Group, is famous for speaking his mind. Once questioned about poor standards of customer satisfaction on South West Trains, he replied that he would know there was a problem when he received a brick through the window.

His analysis of events in withdrawing from the bidding for the Great Western rail franchise last year was scarcely less elegant. There were, apparently, "too many hungry pigs in the trough. Let them eat first".

The franchise was eventually won by First Group, which is paying £1bn to the Government over 10 years for the privilege.

So what about Sir Brian's own franchise at South West Trains? Here it seems that, come what may, he's determined to be chief pig and eat first. In any case, he's now agreed to pay £1.2bn over the next ten years on a franchise for which he has received a government subsidy of £500m over the last ten.Has Sir Brian overpaid? The example of GNER, which agreed to pay a stonking £1.3bn for the east coast mainline and is now desperately trying to wriggle out of it, suggests that he might well have done. Admittedly, Sir Brian continues to receive a subsidy for the first two years of the new franchise period, with the premium becoming payable only thereafter. Yet even on Stagecoach's own calculations, the operating margin plummets from the more than 10 per cent being earned on the franchise at present to just 3 per cent.

That leaves very little room for error. The company needs both substantial reductions in costs and big increases in traffic to achieve even this lowly rate of return. It is not clear Sir Brian can achieve them given that he is also on the hook to deliver a better service. Mr Souter described yesterday's win as "good news for customers and good news for the taxpayer". Whether it proves quite so good for his own shareholders is altogether more doubtful.

Northern grit in Sir Ken's recovery story

Prize for the most uplifting story of the week goes not to Sir Richard Branson for his pledge of $3bn to beat global warming - come off it, Sir Richard, everyone is piling into that game - but to Sir Ken Morrison for the remarkable recovery he's presiding over in the affairs of the eponymous supermarkets group. In so doing, he seems to have confounded the sceptics, among whom I was a prime example.

His profits and margins are on the mend, but more particularly so is his share price, which has quietly crept back to within a whisker of where it was when the company embarked on its ill-fated acquisition of Safeway two years ago. I say I was a sceptic, but I never doubted the rationale and logic of the merger. It was the way in which Sir Ken and his team set about the integration that worried me. Key mistakes were made which unnecessarily damaged the company's profits and reputation for being able to walk on water. Overnight, Ken the miracle worker became Ken the provincial bumpkin.

One of the prime characteristics of a Yorkshireman is stubbornness. Despite his advancing years, Sir Ken refused to accept defeat, and he's now beginning to reap the rewards. He vowed to stay long enough to set the company back on its feet. He may well have achieved his ambition.

Morrisons is by no means out of the woods yet. My scepticism isn't entirely vanquished. Nobody yet knows what the new chief executive, Marc Bolland, only three weeks into the job, is going to be like. Yet for the moment Sir Ken is back on top. True northern grit, it seems, still counts for something.

j.warner@independent.co.uk

Start your day with The Independent, sign up for daily news emails
Life and Style
Google celebrates the 126th anniversary of the Eiffel Tower opening its doors to the public for the first time
techGoogle celebrates Paris's iconic landmark, which opened to the public 126 years ago today
News
Cleopatra the tortoise suffers from a painful disease that causes her shell to disintegrate; her new prosthetic one has been custom-made for her using 3D printing technology
newsCleopatra had been suffering from 'pyramiding'
News
people
Arts and Entertainment
Coachella and Lollapalooza festivals have both listed the selfie stick devices as “prohibited items”
music
Sport
Nigel Owens was targeted on Twitter because of his sexuality during the Six Nations finale between England and France earlier this month
rugbyReferee Nigel Owens on coming out, and homophobic Twitter abuse
Arts and Entertainment
Tracey Emin visits her 1990s work ‘My Bed’ at Tate Britain in London, where it is back on display from today
artsBut how does the iconic work stand up, 16 years on?
Life and Style
life + style
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Client Services Assistant

£18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor