Jeremy Warner's Outlook: Someone forgot to tell Streiff that Airbus is not a commercial company, but a workshare

Big Bang: the City's expanding universe;
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The Independent Online

Airbus is one of those companies that conforms to the old Irish joke that if you are trying to get to so and so, you wouldn't start from here; you would go to Ballymore and start there instead. As the chief executive, Christian Streiff, fast found out in the short 100 days he was in the job, Airbus is not an ordinary commercial company at all, but one that dances to the supposedly higher purpose of the governments that put it together as an exercise in pan-European industrial co-operation.

In believing he had a free hand to run the company as he saw fit, able to cut jobs and streamline the enterprise in a manner appropriate to the crisis that has engulfed Airbus since the discovery of problems with the superjumbo, Mr Streiff was being naive, and has now paid the price. His days looked numbered after an extraordinarily indiscreet press conference last week to announce further delays to the A380 and a doubling of consequent losses.

In it, he described cost controls as virtually non-existent, and the wiring problems that had given rise to the delays as a technological shambles, in part brought on by the national work-share arrangements that lie at the heart of the Airbus business model. In particular, he blamed German teams based in Hamburg. Yet nobody wanted to hear the truth.

Radical restructuring proposals in which Germany seemed to bear the brunt of the pain, with France and others left relatively unscathed, sealed his fate. It was fast made clear to Mr Streiff that he didn't have the freedom to manage or speak his mind as he thought. This is an organisation where, for reasons of national pride, problems get swept under the carpet, not met head on.

If Airbus is to have a long-term future, it must learn to overcome these constraints, whatever the damage to national sensitivities. One of the key reasons for the lowly valuation that NM Rothschild put on BAE Systems' stake in Airbus was the belief that, with its shoelaces tied together by political and national concerns, Airbus would be unable to respond with the speed necessary to meet the challenge of a resurgent Boeing. Even Rothschildcould not have foreseen the speed with which its analysis would be proved true.

Airbus is today in a state of deep crisis. If Emirates were to succeed in cancelling options and orders on the superjumbo, the whole company would be endangered. Airbus has bet the ranch on the A380 succeeding. Never mind the debacle of anticompetitive behaviour on fuel charges, or the burgeoning pensions deficit, refusing to order any superjumbos is one thing British Airways has got right in recent times.

No wonder BAE, after initially crying foul over the Rothschild valuation, virtually bit off the hand of the Airbus parent, EADS, in its eagerness to accept. The BAE board could perhaps be faulted for not selling earlier, but at least they managed to get out before the full horror of the disaster facing Airbus became apparent.

With Mr Streiff having hit the ejector button - or perhaps it was hit for him, it's not yet entirely clear - Louis Gallois, co-chief executive of EADS, has been thrust into the cockpit to take control of the joystick. It's unlikely he'll do any better. As I say, you wouldn't start from here if you were seeking to mend Airbus ...

Big Bang: the City's expanding universe

HSBC is the bank that likes to cry wolf. I can't be precise about when this global banking goliath first started threatening to shift domicile if Britain didn't do something about its supposedly unfavourable tax regime, but I think it was almost as soon as the bank first domiciled here from Hong Kong, a course of action designed to defuse Bank of England opposition to the acquisition of Midland Bank.

That was an awfully long time ago now, and HSBC has been complaining in similar terms ever since. It scarcely needs saying that it has yet to go through with the threat. As a consequence, the Treasury perhaps doesn't need to take the latest outbreak of huffing and puffing, aired a few weeks back by the bank's head of financial planning and tax, Chris Spooner, any more seriously than the last one.

It's often forgotten, but HSBC is not by origin a British bank at all, but a Far Eastern one. Outside the investment it has made here and the nationality of its chairman, Stephen Green, it has no particular loyalty to these shores.

Even so, in this, the anniversary month of Big Bang in the City, the Government would be unwise wholly to ignore HSBC's posturing. The 20th anniversary of Big Bang coincides almost exactly with the 20th anniversary of the launch of The Independent. For me, these times therefore come engraved on the memory.

Looking back on it all, few at the time even remotely predicted the scale of the success as an international financial centre the City would become, a success which has powerfully underwritten Britain's wider economic renaissance. Without it, the UK would not be the prosperous nation it is today. Economically, it is likely to have found itself in much the same place as Italy and other developed economies which have failed to prepare for the challenges of globalisation.

More striking still, nobody, but nobody, would have predicted that this new prosperity would have been running alongside a Labour government of nearly 10 years' duration, and, what's more, with Ken Livingstone, back then a socialist virtually of the revolutionary left, firmly installed as a hugely successful Mayor of London.

Interestingly, Mr Livingstone recently praised Mrs Thatcher for the brave new world of open markets her Big Bang reforms had helped to introduce. There can be no better example of the confluence of large elements of right- and left-wing thinking that has taken place since those days than this. In any case, all these things would have been unthinkable 20 years ago.

Liberal, outward-looking, well-regulated, and apparently welcoming to foreign capital, the City as a whole cannot in truth be characterised as a tax-disadvantageous place to do business. On the contrary, still largely "benign" taxation of the City contrasts extraordinarily favourably to that applied to the rest of the country, where the tax burden is already heavy and still growing.

Every year, the Chancellor cracks down on some new aspect of tax avoidance in the City, but, in the round, the tax regime applied is still relatively light. This is pursued as deliberate policy so as not to kill off the goose that lays the golden egg.

Head offices, particularly of big employers such as HSBC, fall into a rather different category. Here indeed there is evidence that, as other countries grow more tax-competitive, Britain has fallen behind. Where the City is losing business - which tends to be at the margin of administrative and other back-office functions - to much smaller rivals such as Dublin, the primary reason tends to be tax. In this respect, HSBC does raise a serious point, even if its threats continue to look like so much bluster.

Yet the biggest reason for the City's recent success is nothing to do with tax, but is the sound of America repeatedly shooting itself in the foot. I'm not just talking about Sarbanes-Oxley and other heavy-handed pieces of regulation introduced by the US post-Enron. The main factor is American foreign policy, which has alienated both the petro-dollars of Russia and the Middle East, and much of the new-found wealth being generated in the Far East. Despite Tony Blair's determination to ride tandem in all President George Bush does on the world stage, the City is still trusted with these capital flows in a way New York is progressively not.

This is a phenomenon that even the combined talents of Mayor Bloomberg and the new US Treasury Secretary, Hank Paulson, both of whom are on a mission to revive New York's competitiveness, will struggle to counter. The greatest threat to London as a financial centre is no longer New York, still less the rival centres of Europe, but the Far East. Fast back 20 years, and few would have predicted that, either, unless they were thinking of Tokyo, today just another also-ran as an international financial centre.