Outlook: Branson must bring down the curtain on this French farce

King's flight; Killer Goodwin

Of all Sir Richard Branson's attempts to exploit the Virgin brand, none has proved more ill-conceived that his foray into the domestic gas and electricity market. Virgin-branded Cola was a flop and Virgin Vodka has fared little better while Virgin Trains speaks for itself. But Virgin Home Energy takes the biscuit. It is not so much a question here of brand dilution as brand destruction.

The antics of Virgin Home Energy's doorstep sellers are well-documented and inspired they are too. After all, it takes a certain imagination to forge the signatures of dead constituents on to energy supply agreements.

Fortunately, a solution is at hand and it is one which Virgin is already preparing to activate. Simply remove the rights to the brand. Virgin Home Energy is actually 75 per cent owned by London Electricity which, in turn, is part of the state-run Electricité de France.

EdF has muscled its way into the UK energy market with a frightening single-mindedness, backed by the almost limitless resources of the French taxpayer. In the last three years it has paid way over the odds, splashing out £6.5bn to buy itself 5 million customers. EdF now owns Seeboard and Sweb as well as London.

But if it wants to grow any further it has to start adding customers organically. In this respect, the Virgin brand name is vital to its plans for UK domination. Nobody wanted to buy gas from a company called Amerada Hess because of its unfortunate name association and the average UK household is scarcely more likely to want to buy electricity from a company called Electricité de France, which, apart from being French, also generates most of its electricity in nuclear reactors. London Electricity, meanwhile, is one of the only two UK suppliers to have been formally censured by the energy regulator Ofgem. In any case the name does not travel well outside the capital.

So Virgin is EdF's way of building a national brand.

Sir Richard knows this which is why he did not need to put any capital into Virgin Home Energy in return for his 25 per cent interest. Nonetheless, he should now pull the plug on the French in his own self-interest. They may be able to buy customers but they cannot buy respectability.

King's flight

Mervyn King's flight from hawk to dove has been accomplished as elegantly as possible under the circumstances. In May the deputy governor of the Bank of England said that the Monetary Policy Committee stood ready to counter inflationary pressures as and when they emerge. A clear indication, in other words, that the next move in interest rates would be upwards.

Introducing the Bank's latest quarterly Inflation Report yesterday, he said the MPC remained ready to take whatever action was necessary in either direction. That is the nearest you will get to an admission from the deputy governor that the next move in rates could just as easily be downwards.

In the intervening three months he has been helped, of course, by a strong tailwind in the form of a one-fifth decline in the stock market. The Bank's assumption now is that this will probably be enough to knock the stuffing out of full-blown recovery. The Bank also reckons house prices will come off the boil. The latest Land Registry figures suggest this is already happening in the case of properties lived in by those who make a living in the City interpreting the MPC's musings.

On the other hand wage pressures remain a threat to inflation, particularly when workers start to agitate for a pay increase next year to offset the increase in National Insurance contributions.

The Bank expects inflation to remain below its 2.5 per cent target for most of the next two years, rising only at the end to meet it, with the risks slightly on the upside. This suggests rates can comfortably stay where they are at 4 per cent for some time.

It is just possible that Mr King held out for an increase when the MPC met a week ago. It is just possible that one of the doves voted for a cut. But the narrowness in difference among committee members about the state of the economy referred to by the deputy governor would indicate that he fell into line with his colleagues, producing a 9-0 vote in favour of no change.

That may be where they stay. But there are there are two things which could alter the Bank's position. One is another grim set of manufacturing output figures coupled with a further weakening in retail sales. This would demonstrate that the jubilee and World Cup fever were disguising a deeper malaise. The other is a pre-emptive cut in rates by the Fed. That would put a lot of pressure on the Bank to respond.

Killer Goodwin

Fred Goodwin has been told not to refer to "mercy killings" any more because it upsets those in the banking fraternity of a more nervous disposition. Royal Bank of Scotland's chief executive, therefore, stuck rigidly to the script yesterday. That is not to say there aren't plenty of weak financial businesses in the UK that could do with some of Mr Goodwin's particular brand of tough love.

In fact there are plenty of other companies that could follow NatWest into the RBS hospice for the terminally ill. Mr Goodwin has identified plenty of other acquisition opportunities among the UK's banks and life insurance companies after the battering the industry has taken at the hands of falling stock markets, bad debts and low consumer confidence.

The only problem is the pesky Competition Commission, which does not like Britain's Big Four banks owning more than about 25 per cent of any one of their markets. This rules out tasty morsels such as Abbey National, leaving mainly stringy left-overs that even Mr Goodwin would struggle to transform.

RBS has not entirely given up on finding more bargains in the UK, but for now the focus appears to be on further US expansion following last year's acquisition of Mellon bank. As RBS points out, there are some 250 banks in Pennsylvania alone, making the range of choice available back at home look feeble by comparison.

RBS has virtually completed the integration of NatWest and it rounded off the UK's banking reporting season yesterday with a performance that again left its rivals in the shadows. RBS dodged most of the bad debts that have hit Barclays and Lloyds TSB and has still grown the business aggressively to put profit growth into double digits.

The question is how long Mr Goodwin can keep this up? It is inevitable that the remarkable rise of RBS since it took on NatWest will begin to slow down. Most of the cost savings from the deal will have been fully exploited by the end of next year, leaving RBS with the challenge of what to do for an encore. Even a mature bank run by Mr Goodwin would stand favourable comparison with its rivals. But it is his deadly embrace which is Mr Goodwin's trademark.

m.harrison@independent.co.uk