Margareta Pagano: A good Budget – but is Osborne missing a trick?
Sunday 27 March 2011
Everyone seems to agree that while this was a boring Budget, it is one which will turn out to be a bonanza for business. It was certainly a good Budget for George Osborne personally, and, if the glowing headlines are to be believed, his passage from pariah to putative prime minister is now complete.
But it is too soon to tell whether the Budget will work. Osborne's measures – cuts in corporation tax, together with tax changes designed to bring self-exiled companies back to the country – will make Britain a more attractive place in which to operate. Taken with a much-needed injection of adrenaline into the life-science industries, plus tax reliefs and allowances for entrepreneurs, angel investors and venture capitalists, the UK should soon see another generation of Bransons and Dysons.
But there's a much bigger question worrying our more thoughtful City figures and industrialists. As Peter Meinertzhagen, one of the foremost corporate brokers, said to me after the Budget: "It's great to see Britain open for business again. But what is the Government doing to make sure present and future companies aren't going to be taken over again by overseas bidders, as we saw in the 1980s? Or with Kraft's bid for Cadbury." Since most of our growth comes from the manufacturing industry – the one foreigners love to gobble up – it's a good question. You only have to look back to the 1980s to see how our manufacturing base was ravaged by foreign takeovers – Pilkington, Rowntree, Jaguar and Leyland were all scooped up either because management were doing a lousy job, or shareholders wanted to make a quick buck, or both. Back then, Britain was still a net predator – taking over more overseas companies than we lost, but that has reversed. Over the past six years, the UK has been a net £160bn down, and, after the Kraft controversy, there are even more questions about the social usefulness of bids per se. Now that we're seeing the renaissance of our industrial base, do we want another rash of bids for some of our best firms? For example, it can't be long before there's a bid for Invensys, right now being eyed up by Chinese and US suitors. There's so much conclusive evidence now that most takeovers do not lead to economic value – either for shareholders or workers, that it seems perverse not to question the process more. As we have seen, Kraft's promise to keep the Somerdale factory open proved as limp as its "processed" cheese.
So is Osborne missing a trick by not addressing this explosive issue? It's one which is now taxing the Italians as they face takeovers by the French – Bulgari, Edison and Parmalat have all recently received Gallic bids. Italy's cabinet is introducing rules to stop strategic sectors, such as food, energy and telecoms, being taken over by foreigners, while Canada is seeking ways to stop its leading stock exchange from merging with the LSE.
Vince Cable, the Business Secretary, takes his own look at takeovers in A Long-Term Focus for Corporate Britain, a report due out in the summer. While I'm not turning protectionist, there is merit in making bids much harder for the predator to win and for shareholders to accept.
If Osborne wants all the good things in his Budget to have a lasting impact, then he should be looking carefully at what the Italians are doing, and getting together with Cable to come up with a more credible plan to keep British firms on side, and at home.
What, no T-shirts? marks loses its spark for the working woman
I fear Marks & Spencer has got its knickers in a twist. Its new collection has just about everything under the sun, from frilly boho-style skirts with ribbons to gaudy turquoise and blue shirts. But try to find the basics, such as a white, long-sleeved T-shirt – a sine qua non for any working woman – and you'll receive an almost amazed response from the sales assistants. "No, we won't be having any of those until later," they told me at Westfield. Why not? If M&S can't stock T-shirts in all shapes and the best cotton, then I don't know what the shop is for any more. And the news last week that Sir Terence Conran is designing a new home-furnishing range for the chain? Well, M&S tried home furnishings before and got it horribly wrong. If you can't get a T-shirt at St Michael, I can't believe anyone would go there for a sofa, even a Conran one.
US dollars, Chinese walls and Britain's Libor rate: A scandal that will run and run
Setting the daily Libor was an accident waiting to happen. The sheer size of the market is mind-boggling; the value of the financial instruments such as short-term interest rate futures contracts, interest rate swaps, floating rates, syndicated loans and currencies, especially the US dollar, is said to be around $350trn.
Among my trader friends, it's been common chat for years that the way the London Interbank Offered Rate is set by a number of key banks was open to rigging and manipulation.
Now it seems that the authorities have caught on, and are investigating Barclays, along with banks such as Citigroup, Bank of America and UBS, for their role in fixing the benchmark inter-bank lending rate between 2006 and 2008. According to reports in the Financial Times, investigators in the UK and US are looking at whether communications between the bank's traders and its treasury team (the ones who set the daily offered rate) broke what's known as the "Chinese walls" which banks operate and which supposedly prevent the passing of confidential information between the various parts of the bank. What happens is that each day a group of banks get together to fix the rate at which banks borrow unsecured funds from other banks in the wholesale market where the banks make an "offer".
One of the main areas which investigators are focusing on is whether there was an improper influence on Barclays' submissions to the daily survey – when the fixing is done. The investigation is looking at the price of the US dollar rate and Barclays is one of 16 banks involved.
Apparently, the Bank of England – which is not involved in the formal setting of Libor – noted in its Financial Stability Report that it was concerned by how much the rate was rising during those critical months in September and October 2007. Barclays has yet to comment on the allegations but you can bet this is going to run and run.
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