Outlook: Why the LSE is right to swap consolidation for competition

Scottish and Southern; Albert Fisher demise Ê

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London Stock Exchange profits more than double to £75m

SSE tight-lipped on possibility of ScottishPower merger

3,000 jobs in jeopardy after Albert Fisher calls in receiver

Strange how quickly the script has changed at the London Stock Exchange. Just two years ago, the LSE was still trumpeting the virtues of a merger with Deutsche Borse, the rival, Frankfurt-based exchange. But for an angry rebellion by members, the deal would have gone ahead. Today, the situation could hardly be more different. The LSE would much rather compete than consolidate, and judging by the figures announced yesterday, it's making a good fist of it too. Profit before tax has more than doubled, volume is soaring, there's a decent dividend and everything is looking generally much rosier.

None of this has stopped the rumour mill working overtime on just who the exchange is about to link up with. For most observers in the City, it is not a question of whether but when and which of the LSE's overseas competitors will pounce first. The LSE continues to be wooed by just about everyone, and the general assumption is that its days as an independent exchange must be numbered.

That assumption may be wrong. As things stand, there is still no case to be made for an agreed merger with either of the two big European players, Deutsche Borse and Euronext. Even if the numbers could be made to work, the cultures, business models, listing rules, settlement systems and general approach to the business of trading shares is too different to allow a compatible marriage. Both Euronext and Deutsche Borse are monopolistic in their approach. They believe investors' interests are best served by having just one central pool of liquidity, and their setups conspire to make encroachment on their territory as difficult as possible.

The LSE, by contrast, has come round to the view that both its own and its users' interests benefit most from free competition and open access. The evidence is in the latest numbers. The main reason why volume is so sharply up during what has been a difficult period for stock markets is the introduction of a central counter party in February last year, which has delivered post-trade anonymity for those using the exchange's order book.

The result is that more trading is being done through the order book, rather than as before, off market on a matched, internalised basis. On the Continent, internalised trading is largely banned, so as to drive all trading through the recognised exchanges. The two cultures are worlds apart. In London, the business has to be earned. On the Continent, it tends to be there by right. Until there is root-and-branch reform, bringing such incompatible approaches together under one roof would be a recipe for disaster. It also might be seriously detrimental to the interests of the City as a whole.

Nasdaq, the US high-technology market, would be culturally a better fit, and the differing time zones make it a more natural partner in terms of offering companies the benefits of a dual listing. None the less, the legal and regulatory differences remain huge, and the consequent difficulty of doing anything more than a strategic alliance is acute. The upshot is that even if there is anyone out there in a position to buy the LSE outright for cash, there may be no deal. Clara Furse, the LSE's chief executive, seems to have done an excellent job in stabilising and restoring the organisation in the wake of the near disastrous Deutsche Borse excursion. The new competitive approach is plainly the right one, both for the LSE and the City.

Scottish and Southern

Jim Forbes, the Rangers-supporting chief executive of Scottish and Southern Energy, is meant to be on the way out, but he was his familiar self yesterday, as indefatigable and rumbustious as ever. The company has hired Lulu to "shout" about what a great energy supplier it is in the latest ad campaign, but it hardly seems to need her as long as Mr Forbes is around. Everything SSE does is the best, from the cut-price washing machines it sells through its hienergyshop website to the windfarm Mr Forbes wants to build in his beloved Ayshire countryside. "As long as it isn't in my back yard, I don't mind where we put it," he said yesterday to universal astonishment.

He's going to be a hard act to follow. SSE had hoped to name a successor yesterday but the announcement has been delayed until the annual meeting in July. The headhunters are road testing three external candidates against the internal front-runner, the finance director Ian Marchant. Mr Marchant is well-respected within the industry and the investment community, so he's in with a good chance. If he gets it, his first job will be to decide whether SSE is going to hand its surplus cash back to shareholders or use it to finance a big acquisition.

SSE could return £1.5bn to investors without breaking sweat. But the company would dearly love to do a big deal, if it could find something to buy on the right terms. The most tempting would be a nil-premium merger with ScottishPower, which also owns Manweb and PacifiCorp of the US. Such a merger would take the combined business beyond the reach of a European predator such as E.ON or EdF and would fill the one gaping hole in SSE's portfolio – its lack of a presence in the US market.

SSE is the smaller of the two companies but commands a higher rating, so its shareholders would end up with a proportionately bigger stake in the combined business. ScottishPower says a tartan merger would never get past the regulators. SSE's silence on the issue suggests it may think otherwise. With Ian Russell's credibility still on the line at ScottishPower following the slashing of the dividend, Mr Marchant could even end up running the entire show.

Albert Fisher demise

So farewell, then, Albert Fisher, famous only for incredulous excuses for its repeated setbacks. Albert Fisher may have been a terrible company, but in the "why we did so badly" department, it was unrivalled. Frozen cockle beds, wilting lettuces, dodgy prawns from the Indian Ocean, El Niño, potato disease... you name it, Albert Fisher had just had a bucket load of it. Now it's gone entirely, collapsed into receivership under a pile of debt and unsold whelks.

Albert Fisher has been a stock market irrelevance for years, but in its infancy, it was widely thought of as one of the next "big things". The brain child of an ex-Hanson man, Tony Millar, the idea was to use the company for the purpose of consolidating the fragmented fruit and veg industry. Mr Millar began on a hectic round of acquisition making. He bought and bought and the company grew and grew, eventually achieving a stock market value of more than £1bn.

Unfortunately, fruit and veg proved not to be the money spinner Mr Millar imagined. The margins were wafer thin and the results were regularly ravaged by weather disasters and all manner of cock-ups. It has been a long, lingering death. There were amusing moments along the way, though. When Stephen Walls was chief executive he once appeared as the cover boy of a new business magazine, clad only in running singlet and skimpy shorts. The magazine was pulled after just one issue. They should have done the same to Albert Fisher a long time ago.

jeremy.warner@independent.co.uk