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

Website Editor

£15 - £17 Per Hour: Clearwater People Solutions Ltd: Our client is currently r...

Primary Teachers needed for supply in Ipswich

£21552 - £31588 per annum: Randstad Education Cambridge: We are looking to rec...

Primary Supply teaching jobs in Stowmarket

£21552 - £31588 per annum: Randstad Education Cambridge: Randstad Education ar...

Year 1 Teacher

Negotiable: Randstad Education Birmingham: The Job An inner city Birmingham sc...

Day In a Page

Read Next
 

Ed Miliband is so scared of becoming Tony Blair he has forgotten how to communicate

Lance Price
Young Syrian refugees gather around a small fire at the Minieh camp in Lebanon  

Cameron and Obama may want to ‘destroy’ Isis, but what will they do about the growing number of refugees fleeing Iraq and Syria?

Kate Allen
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments