Time for Tata to dig deep
WE will never quite know what it was, in the end, which persuaded Sir Philip Green to end his combative attitude towards the Pensions Regulator as it sought to secure the future payments to BHS pensioners.
But it is a fair bet that Green’s attitude became more conciliatory after the regulator took preliminary legal steps, which could have ended up with the retail entrepreneur in court. As it turns out, by deciding to come up with a sensible deal, which is particularly helpful to his old colleagues at the very top of BHS, Green may have saved himself some money. Potentially, the authorities could have sought up to £500m.
Whatever the shortcomings of the settlement reached, it has been done with the co-operation of all the parties involved and there is a conviction that the BHS fund is stable enough to stand alone and fulfil its obligations. This has required some changes to benefits, most notably an end to retail prices indexing and replacement with CPI.
For the 20,000 or so members of the BHS pension funds the 13-months or so of waiting to know the fate of their retirement income must have been agony. But by the standards of these things, the settlement has come reasonably quickly given the com- plexity. The Green settlement suggests it may be easier for regulators to make a deal with a ‘domestic’ owner, who still has enormous business interests in the UK, than one from overseas. There are still very serious questions to be addressed about the future of the Tata Steel pension fund. Earlier this month the unions trumpeted a deal between Tata Steel and the 8,000 or so workers at Port Talbot under which the blast furnaces will remain open in exchange for pensions concessions. That dealt with the existing workforce, but has done nothing to address the exposure of the rest of the 130,000 workers in a pension scheme which has liabilities of £15bn and on some measures a deficit of £1bn. Last week’s Green Paper on pensions suggested that in stressed cases, the obligations of the owner to other groups, shareholders, creditors and the existing workforce, may be reason to adjust the pensions guarantee.
It is hard to see that there would be any such get out for Tata Steel given it is part of a rich and successful family of Indian-quoted firms which includes successful offshoots such as Jaguar Land Rover. It would be shameful if Tata Steel pensioners were shoved into the Pension Protection Fund where benefits would be cut or capped.
Green, for all his faults, has shown there is an alternative for failed parts of a successful business empire – a cash injection from the former owner. Here is a lesson for Tata Steel, Hoover and potentially General motors/Vauxhall-Peugeot or any other global firms seeking to ditch pension obligations. Failure to deal with the pensions promise made over generations can lead to irreparable reputational and brand damage even if the headquarters is far away in new Delhi or Detroit.
Credit caution
VIRGIN money is among a handful of UK financial institutions which have emerged stronger from the financial crisis. Under the guidance of chief executive Jayne-Anne Gadhia the now publicly-quoted bank successfully snapped up bargain basement assets, such as the best bits of northern Rock, and became a money spinner. Sir Richard Branson, who has a 35pc stake, must have a big smile on his face as he Skypes from his necker retreat. next on Gadhia’s radar are parts of the Co-op bank.
Among the most interesting aspects of the Virgin results was the rising bill for credit card lending, which jumped to £37.6m from £30.3m.
With many economic forecasters fearful that the consumer spending surge is close to its peak, it may not be the ideal time to expand credit card exposure.
Are you watching Lloyds Bank?
Blue Skies
STILL on the subject of banking, fascinating to learn that publicly quoted Worldpay, arguably the UK’s biggest fintech company, is launching the first purpose-built UK clearing bank system in 200 years. Clearing is dominated by the biggest four players Lloyds, Barclays, nat-West and HSBC to the exclusion of the challenger banks, building societies, credit unions and everyone else involved in the financial system.
In effect, technology deployed by Clear Bank will provide challengers with the ability to develop their own current accounts and payments services. It could be the start of a revolution which will end the oligopoly which has been a bar to effective competition for banking services. About time.