16 July 2015
Week in Brief: BUSINESS AND THE CITY
BUSY PARKER: Tim Parker, who is rapidly becoming one of the great and the good, added to his reputation in that august forum when he was announced as the new chairman of the Post Office this week. Mr Parker is already chairman of Samsonite, the luggage manufacturer and distributor, and has recently stepped up to chairman of the country’s leading conservation group, the National Trust, as profiled in the Shaw Sheet a couple of weeks ago. His past career includes some very disparate appointments – chief executive of Clarks, the West Country shoemakers and retailers; chief executive of the Automobile Association; and chief executive of car parts and exhausts retailer Kwik-Fit, to mention but a few. His speciality seems to be an ability to restructure and refocus businesses which have lost their edge, without too much damage to morale or drive, so the Post Office should be right up his street. His initial mission there will be to get the business in a fit shape to profitably combat the many specialist delivery companies who are busy cherry picking the profitable urban parcel business, whilst leaving the Post Office with its very expensive rural universal delivery obligation and the attached loss-making network of about 3,000 rural post offices. The Post Office is highly unionised and the low paid staff are not happy with the threat of operating efficiencies, further cost controls, and likely redundancy programmes. Mr Parker, also grappling with some grumpy members and resistance to change in the National Trust, looks as though he could be very busy for a while.
FLYING HIGH: The aftershocks of Sir Howard Davies’s report on London airport capacity, which recommended without hesitation the construction of a third runway at Heathrow, continues to produce rumblings and position taking. The report has created a major problem for the Conservative government, with a number of Tory London parliamentary seats directly affected by the proposal to expand the airport. Although research in some seats – those with a large working population employed at the airport – seems to indicate the report has been well received, seats further east and below the flight path are more electorally marginal and have working populations who primarily work in central London. In particular, Richmond and Twickenham are key Tory marginals. Twickenham was wrenched from former Lib-Dem Business Secretary Vince Cable by the Tories in the May election and Richmond is even more perilous – it is also marginal, held with a large personal vote by leading Conservative conservationist, Zak Goldsmith, who is running for London Mayor and will probably have to resign the seat if he wins. Now, Heathrow boss, John Holland-Kaye, has thrown further aircraft fuel on the fire by suggesting that the airport may soon apply to build a fourth runway and refuses to rule out night flights. Holland-Kay wants to underpin the long term profitability of the airport by ensuring that it maintains its status as the hub airport for Europe, a position challenged by Frankfurt and Amsterdam, who both have a friendlier planning regime to cope with, and easier capacity issues. Heathrow is planning ahead – the conditions for the third runway permission may impose an embargo on night flights and a complete ban on further expansion; that is what Holland-Kay is trying to head off.
ALERT TO ALENT: Alent plc is one those British corporate success stories you have probably not heard of – or certainly under that slightly obscure name. It was part of the industrial group Cookson, originally a north eastern based engineering group which restructured itself in 2012. The Alent business makes special fixings and jointings – primarily soldering products – for all sorts of specialist uses: for mobile phones (in your iPhone for instance), for car parts, and for lighting systems. This has become a relatively high technology business in which reliability and robustness is key.
Now it looks as though its independent days are about to end. The board has accepted an offer from the American group Platform, controlled by Martin Franklin and financier Bill Ackman, who are using Platform as a…er…platform to build a major chemicals group. Platform is worth about US$5bn compared with Alent’s value, at the 503p per share offer price, of £1.35bn.
DIAMOND GEEZER: More change at the top at Barclays Bank. Antony Jenkins, the bank’s chief executive, was fired by new chairman John McFarlane last week. McFarlane was recently hired by Barclays to get the struggling business back in the banking fast lane. Jenkins replaced the investment banker Bob Diamond in 2012 after Diamond carried the can for the LIBOR rate fixing scandal. At first it looked like an inspired appointment – the Barclays group was founded in the C18th by a group of mainly East Anglian Quaker banking families who remained very powerful right up until the early 1990’s, and whose austere and cautious ethos is still valued in the bank today. The energetic and innovative Mr Diamond did not sit easily with that old fashioned banking approach; like HSBC, there was a nervousness amongst the traditional clearing bankers about what investment bankers might get up too if given much capital.
Whilst Mr Jenkins had managed out the Diamond excesses and most of his core senior management, and restored Barclays’s reputation in Threadneedle Street, he was much less successful in finding a new mission for the bank. Like all major UK banks, Barclays continued to be buffeted by miss-selling and over-charging scandals, which dated back to before Mr Jenkins’ time but which he was blamed for not rooting out earlier. But the real problem was that Barclays seemed to be losing its position in the UK market, without Jenkins having a vision as to where to take the bank, so the board brought in McFarlane to drive it harder and faster; he has begun by assuming both top jobs himself, at last until he can find a new chief executive. Word is that he will not rush to do that, but take time to make sure he gets the right hire.
WINDY CITY: no, not Chicago – the City of London. The new generation of towers in the City are causing complaints amongst pedestrians and cyclists. Until now, only limited modelling of the effect on wind currents of tall buildings has been carried out – though those of our readers who passed down New Broad Street between the old Stock Exchange and Tower 42 (the Nat-West Tower as was) could have provided some practical research material. But the new generation of towers and their close proximity is creating wind tunnels and dangerous gusting. Top of the list of complaints is the Walkie Talkie, not better known as 20 Fenchurch Street, which, fresh from controversies over its tendency to melt parked cars (solved by applying a grid to the south façade), is said to be a particular culprit in the wind stakes, caused by its bulging and curving shape. The City Corporation has now announced that future proposed skyscrapers will require much more detailed examination and modelling of their effect on the air environment around them. Rather a case of closing the stable door after the hay has blown away, you might think.
KEY MARKET INDICES: (at 14 July 2015; comments refer to change on week; $ is US$)
Interest Rates:
UK£ Base rate: 0.5%, (unchanged): 3 month 0.56% (steady); 5 year 1.63% (rising).
Europe€: 1 mth -0.8% (rising); 3 mth -0.3% (steady); 5 year 0.41% (rising)
US$: 1 mth 0.21% (rising); 3 mth 0.38% (falling); 5 year 1.78% (rising)
Currency Exchanges:
£/Euro: 1.41, steady
£/$: 1.55, £ steady
Euro/$: 1.09, € slightly weaker
Gold, oz: $1154, slight fall
Oil, Brent Crude barrel: $57.85, small recovery.
Wheat, tonne: £120.15, steady
London Stock Exchange: FTSE 100: 6,753. FTSE 350: 3,737
Briefly: The markets remain surprisingly steady considering the continuing turmoil around the Euro. The stock markets seem to have mostly recovered their losses of a week ago, and no doubt are encouraged over what appears to be at least a temporary fix to Hellenic problems. Sterling interest rates continue to move out slowly, at the longer end of the curve, which is what would reasonably expect at this point in the economic cycle.
