Leading Article: Is big best for British business?

Share
Related Topics
THIS week saw the creation of the biggest bank in the world. When the American concerns Citicorp and Travelers complete their merger to form Citigroup, the combine will be worth pounds 100bn. This is also the biggest corporate merger in history, "dwarfing" the recent MCI and WorldCom telecommunications deal. The value of the companies quoted on the London Stock Exchange has now passed pounds 1 trillion (pounds 1,000,000,000,000). The 25 per cent or so increase in the FTSE in 1997 was largely due to speculation about bids and mergers, chiefly in the banking and pharmaceuticals sectors. If, say, you were one of those lucky people who held shares in Lloyds TSB this time last year then you would have doubled your money by now. Anyone with a pension fund should regard it all as good news. But as the numbers boggle the mind and seem to recall the boom of the late 1980s, we might ask are the markets just a wee bit overbought?

Well, this is certainly not the time or the place to predict a stock market crash. The last time commentators started speculating on this, last autumn, around the 10th anniversary of the 1987 crash, the markets did indeed see a nasty "correction".

But it is worth looking at some important differences from the 1980s. Then the massive inflation that gripped the world economy was a truly global phenomenon. Every stock market boomed. Today it is confined to London, New York and some of the European bourses. Tokyo is actually still at only about half the level it was in the late 1980s. And the "Asian tiger" economies have not wholly recovered from their setbacks last autumn. A decade ago property prices boomed everywhere from Clapham to Osaka. And in the late 1980s asset price inflation was accompanied by a sharp jump in prices in the shops. There is still a danger of this but it seems much more subdued and the Japanese have seen the general level of prices actually fall. A barrel of oil or an ounce of gold will cost you less now, in real terms, than for decades. So today's "boom" has passed some markets by. Nonetheless it's not just Marxists who would tell you that there has been a big shove to the capitalist tendency to the concentration of capital. It's called "globalisation" and it certainly favours the large. Big, it seems, is beautiful.

Is this something that Britain might do well out of? We have, certainly, succeeded in creating some truly excellent "world class" companies, like BP. The weakness has always lain in the middle sector. Could we not strengthen this by encouraging mergers that push these players together and create - dare we say it? - "national champions"? There was more than a hint of this in some of the talk about the Glaxo-SmithKline Beecham merger (although each of those is perfectly capable of holding its own and the deal fell through). We also wonder about the emphasis some place on looking at the "European picture" when assessing the prospects for a combination of, say, NatWest and Barclays. Should we not, the argument runs, be looking at the position of these companies in the European context now that we have a single market and the prospect of a single currency?

Such mergers may be magnificent but they are not globalisation. Too many managers, we suspect, use the trendy language to disguise a powerful disposition towards domestic monopoly. Even if it were driven by corporate or national patriotism some of the precedents are not that happy. In the late 1960s, there were government-sponsored mergers that were not unalloyed successes as revealed by the long-run weaknesses of GEC and British Leyland. Far better to encourage diversity and innovation with competitive and deregulated markets. The progress of BT since privatisation would be one model. We should worry far more about the creation of local monopolies than the encouragement of "national champions". That is the best way to exploit "globalisation".

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

**Primary Teachers Needed Urgently in Southport**

£80 - £120 per day: Randstad Education Liverpool: **Due to an increase in dema...

SEN Teaching Assistant Runcorn

£50 per day: Randstad Education Cheshire: SEN Teaching Assistant EBD , Septemb...

Nursery Assistant/Nurse all cheshire areas

£7 per hour: Randstad Education Cheshire: We are a large and successful recrui...

SEN Teaching Assistant

£50 per day: Randstad Education Cheshire: SEN Teaching Assistant We are curr...

Day In a Page

Read Next
Nigel Farage has urged supporters to buy Mike Read's Ukip Calypso song and push it up to the No 1 spot  

Mike Read’s Ukip calypso is mesmerisingly atrocious — but it's not racist

Matthew Norman
Shirley Shackleton, wife of late journalist Gregory Shackleton, sits next to the grave of the 'Balibo Five' in Jakarta, in 2010  

Letter from Asia: The battle for the truth behind five journalists’ deaths in Indonesia

Andrew Buncombe
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London