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

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

Ashdown Group: Practice Accountant - Bournemouth - £38,000

£32000 - £38000 per annum: Ashdown Group: A successful accountancy practice in...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + Uncapped commission: SThree: Does earning a 6 figu...

Recruitment Genius: SEO Executive

£18000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: New Lift Sales Executive - Lift and Elevators

£35000 - £40000 per annum: Recruitment Genius: A challenging opportunity for a...

Day In a Page

Read Next
 

For all his faults, Russell Brand is utterly sincere, something politicians should emulate

Janet Street-Porter
 

Never underestimate the power of the National Trust

Boyd Tonkin
The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss