Few windfalls ahead in period of consolidation

1997: A preview of the year ahead; Industry

If 1996 was an eventful year for industry - to take but one example half the electricity sector disappeared into American hands - then 1997 promises to be doubly so.

In no particular order we can expect to see further consolidation in the telecommunications industry, increased merger activity among Europe's defence and aerospace companies and a mopping-up operation to take control of the two regional electricity companies still in independent ownership.

In the motor industry D-Day looms for Rover for this is surely the year when its German owners BMW either make their British acquisition pay off or engage in a radical re-think. Along the way, British Gas intends to do the splits but whether many more decide to follow suit after the disaster of the Hanson demerger must be open to question.

Of course the biggest question and the biggest "if" of all for industry is whether it will be operating under a new Government by the middle of the year. If it is, then there can be no question but that the privatised utilities will dominate the industrial year - not because of merger mania but because of Labour's promised windfall tax.

Labour has refused to reveal how much the tax will raise (City estimates range from pounds 5bn to pounds 10bn) and who it will hit until after the election and after consultation with the regulators. Clearly the privatised electricity and water industries are most directly in the firing line.The big fight will be over a second tier of "non-utility" privatisations, including British Telecom and BAA, which have both been lobbying hard to escape the shadow chancellor Gordon Brown's net. Ironically, it is precisely these kinds of companies which can afford to pay the most.

Assuming a Labour government moves quickly to put the tax on the statue books, the rest of the year could be taken up with complex legal arguments as the utilities seek to ambush the measure. Tony Blair will also face vociferous behind-the-scenes lobbying by utilities taken over since privatisation by US companies. Dieter Helm, director of Oxford Economic Research Associates and a utility expert, believes US lobbying could scupper the tax altogether: "If the Americans bring down the windfall tax by lobbying President Clinton, this could do a lot of damage to Labour. It would mean the party would put its energy into wholesale regulatory reform."

Individual regulators like Ian Byatt at Ofwat would stay, apparently, though boards of non-executives would be created to back them up. The price cap formula used to regulate the utilities would be supplemented by a sliding scale tax designed to cream off any further excesses. To do much more would need primary legislation, a scare commodity for any new government.

Mr Blair or not, the energy sector will experience labour pains of its own as the gas and electricity industries prepare for the birth of full competition in their domestic markets from 1998. Expect more fireworks in the south of England as the gas liberalisation trials spread out across a wider area. Expect also further slippage in the timing of full competition in the domestic electricity market. The deadline has already slipped six months to the right and further delays look inevitable as the Recs drag their feet.

Whoever wins the election, more power is likely to drift towards the regulators. A landmark court victory just before Christmas gave Don Cruickshank, the telecommunications industry regulator, unique powers to ban behaviour by BT which he deems anti-competitive. It would be surprising if his fellow regulators weren't thinking along similar lines for the industries they police.

A super-charged Mr Cruickshank is just one of the challenges facing BT this year. Its other main task will be to secure approval for the pounds 35bn merger with MCI, the long-distance US telecoms operator. Bet on the alliance gaining regulatory blessing but bet also that AT&T will not take the competitive threat lying down. Will this be the year that the colossus of the US telecoms industry makes a decisive move into British territory? At one stage it looked as if AT&T might use Energis, the telecoms business put up for sale by the National Grid, as a platform. But the latest indications are that it has dropped out of the bidding. Enter Deutsche Telekom?

While AT&T ponders, the cable industry is reforming under the banner of Cable & Wireless Communications and will pose an increased threat in the telephony market. Watch out too for Ionica, the radio-based telecoms group.

And what of those mature industries as we politely like to call them? Well, the betting must be on BMW grasping the nettle once and for all at Rover and the result could be painful for Midlands car workers.

Meanwhile the American fad for defence mergers looks like crossing the Atlantic. British Aerospace has been doing its bit to drag the rest of Europe into an all-embracing military and civil aerospace alliance. But is this the year when it finally consummates the daddy of all defence mergers - a marriage with GEC?

The timing looks good and in George Simpson, GEC may have the chief executive to pull off a deal. Cometh the hour, cometh the man...?

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
Luis Suarez and Lionel Messi during Barcelona training in August
footballPete Jenson co-ghost wrote Suarez’s autobiography and reveals how desperate he's been to return
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
newsSam Smith’s Mobo triumph is just the latest example of a trend
News
Laurence Easeman and Russell Brand
people
Sport
Fans of Dulwich Hamlet FC at their ground Champion Hill
footballFans are rejecting the £2,000 season tickets, officious stewarding, and airline-stadium sponsorship
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

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker