With one bound, ICI breaks free of its old image

COMMENT; `It is not every day that a British business parts company with pounds 5bn in cash or that one of industry's few remaining household names changes course so dramatically'
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New Labour. New Millennium. New ICI. It is not just the Government offices on Millbank that have suddenly found themselves with a different set of occupants. Once ICI's acquisition of Unilever's speciality chemicals business is complete, Imperial Chemical House will ring with the sound of Dutchmen and Americans as well as the odd Brit.

The scale and significance of the deal is quite breathtaking. With one bound (two if you count the accompanying disposals programme) ICI has kissed goodbye to 70 years of history and tradition, dumped its image as a commodity chemicals manufacturer and, in the irksome parlance of modern-day management speak, decided to get closer to its customers.

It has also, incidentally, got further away from its domestic manufacturing base since only one of the four businesses it is buying from Unilever are headquartered here. The biggest, National Starch, is located in the US while two of the others are run from the Netherlands.

It is not every day that a British business parts company with pounds 5bn in cash or that one of industry's few remaining household names changes course so dramatically. And yet this curiously remains a deal about which it is hard to work up much excitement.

That was partly because it had been well trailed. Nevertheless, it still took all the hyperbole ICI could muster to hold the attention of analysts and press alike amid the talk of oleochemicals (fatty acids to the non- scientific), silicates and zeolites (don't ask).

Financially, ICI has bitten off a lot, even for a company of its size. The pounds 5.6bn debt mountain it is left with will necessitate a bigger, quicker and more ambitious clear-out of unwanted businesses than planned.

Industrially, it is far to early to say whether ICI's momentous change of tack will work, but it deserves to. Instead of taking the predictable route of buying a similar business and then squeezing every last drop of cost savings out of the combined operation, ICI has set its sights on new markets and new sectors where it genuinely thinks it can add value and achieve growth. It would be a step in the dark were it not for the fact that Charles Miller Smith, ICI's chief executive, spent 11 of his 30 years at Unilever working for precisely the businesses he has just bought.

David Simon could confound the cynics

It would be easy to be cynical and negative about Sir David Simon's appointment as minister for trade and competitiveness in Europe, as some no doubt will be. For starters, there are the very practical conflicts of interest and difficulties associated with one of Britain's leading industrialists moving without so much as a break for a cup of tea from the chairmanship of BP into an influential Government job.

If it were the other way round - a Government minister taking up the top position at BP or some other large company relying heavily on interaction with government - then there would rightly be a row about it.

As it is, Sir David can hardly be accused of having "earnt" his new job by doing favours while in the old one. True enough, he has always been sympathetic to Tony Blair's reform of the Labour Party, and influential behind the scenes in moulding it, but Mr Blair certainly owes him no favours, nor can moving from his present highly paid position into unpaid public service really be described as one.

But the most fertile ground for cynicism is the job itself. This is what a cynic would say about it. Minister for trade and competitiveness in Europe, straddling two government departments? What on earth is that? Minister without power might more realistically describe his position. Or maybe minister for ineffectual meddling. Yes, Sir David is going to find it hard in such a nebulous position to make much impact. In any case, does anyone seriously think the Europeans are going to take any notice of what Sir David and the Brits have to offer on flexible labour markets?

Well yes, they might actually. There is a growing consensus throughout Europe about the need for reform and deregulation in labour markets. Many of its leading politicians have come to accept that convergence of labour markets is as important if not more important a precondition of successful monetary union as some of the other more high-profile Maastricht criteria. While it is clear there is a way to go on this front, Britain does provide a model. Sir David already sits at the high table on these matters, having been a key adviser to the European Commission on competitiveness and how to address its deficiencies.

This is an important appointment, as much for the signal it sends to Europe of a Government determined to adopt a constructive approach as anything else. There is a real danger that the job will get buried, wither and die, a bit like Mrs Thatcher's appointment of a businessman to weed out waste and inefficiency in Whitehall. It nonetheless doesn't deserve to and Sir David is certainly not the type to let that happen.

As for BP, it is going to miss sorely Sir David's wisdom and professionalism. But he leaves the company in rude health and in good hands. Peter Sutherland, another convinced pro-European, will make an excellent, if very different successor. With three of our leading companies now headed by Irishmen, we should perhaps be worrying more about being run from Dublin than Brussels.

Cable may mount an interactive challenge

There's not much doubt about who gets the better part of the bargain among the participants in British Interactive Broadcasting - as usual it's BSkyB, which has cleverly managed to persuade others largely to finance its push into digital satellite while at the time getting a free ride on the much more high-risk, commercially unknown market of interactive services.

That is not to maintain that British Telecom has been hoodwinked. The entry fee is high and the rewards unknown, but at least the company gets a ringside seat in a market it desperately wants to be a part of - interactive TV. Banned, even under Labour, until 2001 from offering broadcast TV across its network, this venture allows it to participate in one of the most advanced experiments in home entertainment, shopping, banking and travel anywhere in the world. Because the whole thing piggy-backs off Sky, it stands a much better chance of commercial viability than any stand-alone venture would have done.

BIB's main challenge will come not so much from regulators, whose readiness to put an end to this alliance of monopolists should not be underestimated, as from cable. Cable plans to launch its own digital set-top box a good six to nine months ahead of BIB. Furthermore it has very substantial technological and cost advantages over anything BIB can offer. But as always with cable, the real question is whether it has the wherewithal and the will to compete. According to rumour, only 10,000 of its digital set-top boxes have been ordered, hardly a match for BIB's one million. All the same, stranger things have been known. Who knows, the young sloth make awaken yet.

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