Outlook: Substitution, not salvation, awaits Eurotunnel

Faits vos jeux; WCRS buyout; Safeway prices

Nicolas Miguet and his fellow Eurotunnel rebels were savouring their moment of triumph yesterday. They would be well advised to make the most of it, too. With the incumbent management gone but the new board not yet apparently elected amid the chaos of yesterday's proceedings outside Paris, the Channel Tunnel's black hole just got deeper. When the limbo ends and the new directors are on board, the the French and British governments can hardly underwrite its half-baked business plan. As for those one million private French investors who struck a blow for shareholder democracy, substitution by the banks looks more likely than salvation from English mismanagement. The new Eurotunnel chairman Jacques Maillot will have to start talking soon to the banks about renegotiating the tunnel's £6.4bn of debt and when he does so they are entitled to start the process of taking control.

Technically, the ownership of the tunnel will remain with the shareholders but that is about all. Every last cent of free cash it generates will be eaten up repaying the debt, making their bits of paper worthless for what remains of the concession. Bizarrely, the shares perked up yesterday but this is a company that long since ceased to observe the natural laws of the market.

One can only guess at what M. Miguet's wider agenda is. As for all those French dentists, teachers and insurance salesmen who helped deliver his victory, there will be plenty of time to repent at leisure. At least they can't say they weren't warned.

Faits vos jeux

When James Bond shimmers into a casino, the surroundings are opulent, and spacious with no hint of trouble getting a seat at a gaming table or ordering a drink. Clearly his gambling scenes are always set abroad. No self-respecting secret agent would step foot in the pokey, overcrowded underground gaming rooms that pass as casinos in the UK. Starved of investment because of regulations that have hardly changed since the mid-Sixties, much of the British gambling business is frankly an embarrassment. All that is about to change and not just for casinos. Bookmakers, bingo halls, internet gaming and betting exchanges are all looking forward to the Government's gambling Bill becoming law, possibly by October of next year. The shake-up has attracted serious interest from overseas gaming groups, notably the large Las Vegas casino companies who can see the chance to bet big on deregulation and see their numbers come up. A report yesterday from MPs and Lords who were charged with scrutinising the draft Bill has left the legislation pretty much intact. They have added a few sensible restrictions, aimed broadly at curbing gambling addiction, but have left plenty on the table so that operators can get a good return from their investment. More importantly, punters will be able to have a decent night out, watch a show, have dinner, try a flutter but not have to wait 24 hours for a membership application to be processed.

Yesterday's report of the joint committee on the draft gambling Bill is not a free for all. For instance, it suggests a cap of 1,200 on the number of jackpot slot machines each of the UK's largest resort casinos can operate. This is not what boys from Las Vegas and Atlantic City wanted to hear, but even by their grotesque standards 1,200 high pay-out machines is still a very big casino indeed which, if run properly, will pump out the profits. It is hard to see the Americans turning up their noses at these sorts of returns, although some of their wilder commercial fantasies will have to be toned down. The committee also suggests a cap of three machines per table for small casinos, another restriction to stop the proliferation of ugly gaming sheds simply running banks of one armed bandits.

There are details that need hammering out but sensible gambling deregulation is still on track. It will create jobs and stimulate growth without turning our towns and cities into gambling dens.

WCRS buyout

Just as in investment banking, there will always be a place for niche players with independent minds and nimble feet in the world of advertising. Robin Wight of WCRS, the grand old ad man of Soho, proved that yesterday by leading the £20m management buyout of his agency from the French monolith Havas. Rejoining him after 25 years is the S in the title, Peter Scott, who will look after the shop while Robin dines clients in the Ivy. Well, someone's got to do it.

The deal refreshes the parts other MBOs don't reach for at least two reasons. First, it bucks a trend that has seen WPP, Publicis and Omnicom gobble up small independent agencies like sperm whales swimming through plankton. Second, there are no venture capitalists in tow, breathing down the management's neck and looking already for the door marked exit.

Barclays has put up a plain vanilla loan and the rest has come from the 27-strong management team who have each borrowed enough to concentrate the mind. This wouldn't be an advertising deal if there wasn't some glitz involved and that is provided by the PR guru and New Labour luvvie Matthew Freud, who has bought a small equity stake.

The likes of Sir Martin Sorrell's WPP will always be able to leverage new business thanks to their sheer size and spread. But clients who want something extra are rediscovering that it pays to go to agencies that are independent, entrepreneurial and hungry. Just witness the growth of Mother, which has stolen accounts like Coke and Boots from under the noses of McCanns and JWT.

Havas has not entirely cut loose and will retain a 24.9 per cent stake but the control will rest with the management team. With any luck, it heralds the start of a new trend towards more small independent agencies and less consolidation and homogenisation in advertising. If so, we could even forgive Mr Wight for the most irritating advert of last year - the 118118 men.

Safeway prices

How is it that Sir Ken Morrison can afford to sell eight Ross fish cakes for 89p when they used to cost £1.75 at Safeway? For the same reason, presumably, that he only charges 35p for a crown of broccoli when the price in Safeway was 89p. The price differential cannot be down to economies of scale - before Sir Ken took over Safeway, he was the smaller of the two. Nor can it be because Morrison is prepared to operate on lower margins. After Tesco, it is the most profitable grocer in Britain. Being based predominantly in the North, where rents and staff costs are lower, must be a help. But that cannot be the whole answer.

Justin King, the new chief executive at J Sainsbury, would love to know the secret because he is about to bear the brunt of this relentless everyday-low-pricing strategy. Sir Ken may benchmark Morrison's against Tesco and Asda but the biggest victim of the Safeway takeover is clearly going to be Sainsbury's. The basket of goods Sir Ken put on display this week would, he says, cost Safeway shoppers 24 per cent less than they used to pay. What he didn't say was that customers of Sainsbury's would make even bigger savings.

Across the board, Morrisons has promised to cut prices at Safeway by 6 per cent. If Sainsbury's were to match that, it would wipe out more than a year's profits. Mr King has promised his own price salvo in the months ahead. But sandwiched between the three cost-cutters on one side and, at the other end of the market, Waitrose, whose middle-class customers are happy to pay that bit extra, it is hard to see how he can avoid being wiped out.