On the road with Brian Souter
While writing his book about the bus company Stagecoach, Christian Wolmar (left) got to know its boss. He discovered that a man famed for his ruthlessness has a much more sympathetic side
Sunday 15 November 1998
He ate a spartan breakfast of a couple of rolls while asking me about my life history. Souter was not interested in having a book written about the company but realised that since I would go ahead anyway, he might as well consider co-operating.
Souter was right to be wary. Stagecoach's reputation was awful. Following a series of highly critical reports by the Monopolies and Mergers Commission, highlighted in several television programmes, Stagecoach was deemed to be the company from hell run by a ruthless brother-and-sister who had even driven her ex-husband out of business. I was all geared up to lay into the company. Unfortunately, the facts got in the way.
Souter spent 90 minutes over that breakfast grilling me about my schooling, background and employment history. He was working out whether he could trust me. It was typical of the man.
Souter is an old-fashioned entrepreneur, a man whose word is his bond. He loves making deals on the basis of personal contact, often without any hangers-on or advisers, for whom he has a passionate dislike. Indeed, Stagecoach's biggest deal, the pounds 826m purchase of the Porterbrook Rolling Stock company bought from the management buy-out team, was concluded in a couple of meetings between Souter and Sandy Anderson, Porterbrook's chairman. The negotiations were completed within a few weeks of Souter's first phone call to Anderson in meetings conducted between Souter and his finance director, Keith Cochrane, and Anderson and Geoff Arbuthnott of Charterhouse, which had an 80 per cent stake in the buy-out. Anderson, who has remained chairman of Porterbrook, and Souter hit it off partly because they are both Scots from humble origins.
When Stagecoach bought a 49 per cent stake in Virgin Rail this summer, the negotiations between Souter and Richard Branson - who have little in common apart front their dislike of ties and their entrepreneurial flair - were similarly conducted in a few meetings between the two company heads.
Just like Anderson and Branson I passed the test. After consulting with his fellow board members, Souter decided to co-operate with the book. In the event it was a wise decision. The book is much kinder about Souter and his company than it would have been had I spent days knocking fruitlessly on the doors of the modest little offices in Perth that house the headquarters of what is now a company worth around pounds 2bn.
Souter's co-operation - and that of all his fellow executives apart from his sister, Ann Gloag, who now takes a back-seat role in the company - ensured I got a good insight into the company, and the book is a balanced account that both Souter and his critics believe gives a fair picture.
Yes, of course Souter and his sister are a pair of ruthless business people who showed no mercy when trying to grab as much market share as they could, having realised that bus privatisation and the deregulation of the late 1980s was a once-and-for-all opportunity. Sure, it was jolly naughty doing things like running a bus just before and just after a rival service at a cut price just to ensure that the competitor's business was squeezed. And it was a terrible PR mistake piling free buses into Darlington that resulted in the already-ailing municipal company going bust. Racking up seven critical MMC reports was quite an achievement, too. And certainly, Stagecoach's whole existence is owed to the fact that the Tories, as ever, rushed through the privatisation of the industry, more concerned that the sale should go through than to guarantee that the taxpayer got a good deal. It was able to buy public assets cheaply and, in particular, had a windfall in the early days when Stagecoach made some pounds 11m on property sales bought as part of the privatisation deals.
But looked at in another way, nobody was stopping other entrepreneurs from finding the opportunities. Souter was cleverer than his rivals at every stage: Stagecoach was the first company to run coach services between Scotland and London after deregulation; the first non-management purchase of a National Bus company subsidiary; the first to get a train- operating franchise (South West Trains); and to obtain a rolling stock company resold after privatisation. Stagecoach is, therefore, reaping the benefits of Souter's readiness to take risks.
As for the bad behaviour during the bus wars - everybody else was doing the same thing. Capitalism is a dirty business, as Souter himself, in one of his rare interviews, let slip to Scotland on Sunday when asked about the contradiction between his strongly Christian ethos - he is a member of the Church of Nazarene, an austere bunch of Wesleyan Methodists who do not smoke or drink - and his business practice.
"If we were to apply the values of the Sermon on the Mount to our business, we would be rooked within six months. Ethics are not irrelevant but some are incompatible with what we have to do, because capitalism is based on greed," he said.
Souter is full of these contradictions, which I feel come out of his austere no-fun upbringing on a windy estate on the outskirts of Perth. His father Iain, a bus driver, was clearly strict and imbued with a strong work ethic that led him to do extra jobs such as driving taxis and hearses that built up the nest egg that was to help the foundation of Stagecoach.
Both Brian's older siblings, David and Ann, have left the church but Brian - despite his natural rebellious tendencies - has stayed. Hence, for example, the contradiction between his choice of profession, accountancy - the most conservative and stifling of them all - and his refusal to abide by its dress code, which means he goes around in cowboy shirts, chinos and Kickers. The contradictions abound, and make Souter a fascinating study.
I cannot claim that he dropped his guard with me, but we did have a lot of fascinating conversations that stretched well beyond business. For example, take his attitude towards his employees.
On the one hand he is utterly ruthless and tough, cutting bus drivers' wages when they are above the market rate. In the early days he worked his staff so hard that his own brother, David, who worked with him but is now a Church of Scotland minister, remarked that he thought Brian was very demanding, citing his attitude to drivers on the London-to-Scotland route as an example.
"There were times when drivers would come off a shift at 3am, and Brian would say 'We're short,' and they would have to go back to London again," he said.
But on the other hand, Souter recognises unions and received a standing ovation when he spoke at the Scottish TUC and sang his own version of the Red Flag. His company pension scheme is the best in the industry and his employees all get free shares every year.
His politics, too, are enigmatic. The man who profited more than almost any other from the Conservative policies of privatisation is no Thatcherite. He supports the SNP and calls himself a man of the left, sending his children to state schools and affirming: "I believe in free health care and education for all." As a class-conscious trade unionist, he went on strike while working on the buses, even though he voted against the decision, and when Stagecoach started paying tax, he wrote on one of the cheques "Not for Trident".
Take, too, his reputation. During the bus wars he attracted the kind of publicity normally reserved for those who venture to criticise Princess Diana, because Stagecoach was ready to drive its competitors off the roads by what were seen as the bully-boy tactics of flooding in buses and slashing fares.
Yet, a meeker, more polite and humbler man it would be impossible to meet. I strove hard to find his enemies in the bus industry and only got a few anonymous gripes, apart from the criticisms of competitors, and even many of those were surprisingly nice about him. While he may adhere to the church's ethic, he is not one of those proselytising God squadders. He is, instead, charming and funny, still the class joker who earned bad marks at school.
His attitude towards publicity is also ambivalent. While generally he shuns it, giving very few interviews, when he does speak in public he gets maximum publicity, such as at the STUC, and he clearly enjoys the impact he makes.
So what does make him tick? One of the few times that Souter expressed anger in our interviews was when talking about the rejections he received when he applied for accountancy jobs with the big firms.
He fought his way through university, doing early shifts on the buses in Glasgow. This meant getting up at 3am before turning up, in his conductor's uniform, for his lectures only to return to work in time for the evening rush hour.
He graduated from Strathclyde with distinction, despite never managing to pass the Scottish equivalent of O-level maths - "I cannot do maths. I've got a mental block about it. All those xs and ys don't make sense to me" - but found that the accountancy firms were reluctant to take him on.
"I had a terrible time when I got interviews because a lot of the people that I got interviewed by are terrible snobs. I didn't go to the right school, didn't live in the right street and my father wasn't in the right occupation," he said.
He was bemused that they kept asking what his father did: "I thought, what's that got to do with them? They are giving the job to me, not to him, you know? People like Deloitte & Touche, they'd never give me a job offer because they were heavily into public school and the right sort of background."
He was eventually signed up by Arthur Andersen, whose American background meant that it paid less attention to class.
Although he denies that he has a chip on his shoulder, his dislike of advisers and consultants and his shunning of the City - the company still does not have a proper London office - appears to have its roots in this episode. It is somewhat mutual. Although the City cannot but admire the achievements of a man who has created a company that joined the FT-SE 100 less than 20 years after it was born, there is a reluctance to embrace him and his achievements wholeheartedly. When Stagecoach bought Porterbrook, there were several harbingers of doom likening the company to failed enterprises such as Polly Peck or Coloroll. But any thorough analysis of the deal would have shown that it was a cast-iron certainty as a moneymaker, as proved by the fact that nearly all the company's securitisation obtained an AAA credit rating.
There are still critics who point out that his latest incursion abroad - to China where he has bought into Road King, a toll road company - has gone pear-shaped with a sharp fall in the share price since the acquisition this summer. There have been previous failures abroad - Canada where Stagecoach pulled out and Sweden where low margins have proved stubbornly low - and at home - Stagecoach Rail.
However, Souter remains bullish about his plans to double the size of the company to around pounds 4bn within five years.
Souter is not, by his own admission, good at running companies day-to- day. This spring he brought in Mike Kinski from Scottish Power as chief executive, to allow him to concentrate on acquisitions across the world as other countries copy Britain's privatisation programme.
Buses provide a steady income for Stagecoach and Porterbrook is a genuine milchcow. Souter is still intent on proving his City critics wrong, as he has done every other time so far.
Christian Wolmar's book, 'Stagecoach, a classic rags to riches tale from the frontiers of capitalism', is published by Orion Books, price pounds 18.99.
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