High speed is a Brexit win
THE 19pc jump in Carillion shares on the back of it winning a £450m slice of the first bunch of HS2 contracts is a little rich.
Carillion is short of ready cash and that won’t start to flow from HS2 until 2019. Besides, the contract is only half the £845m of write-downs on previous deals which have gone wrong.
Still, a show of faith by the Government as accountants Ernst & Young and HSBC get to grips with the infrastructure group’s existential problems won’t go amiss.
No one wants HS2 to become a boondoggle for hard-pressed contractors. The cost of the project already has people scratching their heads at why it costs 15-times more per mile than a recent section of TGV in France. An analysis by a former Network Rail insider estimates the total cost of the project could be almost twice the current £55.7bn price tag.
Past experience tells us there is a habit in Britain of gold plating infrastructure projects. That is why the suggestion by Heathrow investor Surinder Arora that the third runway at the airport could be built for £5bn less than estimated struck a chord.
Nevertheless, the soaring cost is not entirely Whitehall’s fault. In order to pass the scrutiny of environmentalists and Nimby landowners, HS2 has become an infinitely more complex project requiring new bridges, tunnels, embankments and viaducts. Unlike France, the Government cannot just seize the land and run its rails through areas of national beauty.
Should we call this an expensive white elephant? My view is no. The nation’s Victorian infrastructure needs overhauling and this project is a step change towards it bringing prosperity to centres along its route, including Birmingham and Crewe.
Of course, regional infrastructure across the Pennines in the West County and elsewhere needs fresh investment.
A forward looking post-Brexit government should be aiming to do that as well.
Channel hopping
THERE are similarities in the FTSE 100 careers of Dame Carolyn McCall and the person she will be replacing at ITV, Adam Crozier. Both come from marketing backgrounds, took on brands which needed refurbishment and are moving on after what is arguably peak achievement. McCall recognised that EasyJet had operational skills but as a no-frills airline was failing to give passengers choice such as seat selection.
At ITV, Crozier recognised that cost cutting, Coronation Street and the vicissitudes of UK advertising were not enough.
He took ITV back into production after years of rubbing out creative capacity. The result has been a fast-growing stream of income although a couple of recent deals – the proposed takeovers of American’s Weinstein and Entertainment One – were abandoned.
It can be challenging inheriting a legacy which delivered soaring share prices and dividends. Just look at the post-Leahy experience at Tesco. McCall will understand better than most opportunities in advertising.
Global players are withdrawing spend from digital sites, so there may well be an opportunity for traditional outlets. ITV is one of the few places which still offers the opportunity to reach UK audiences in the many millions.
If shareholders can be persuaded to spend on investment – something which McCall did at EasyJet in spite of constant sniping from dominant shareholder Sir Stelios – then production values can be geared up. McCall’s biggest challenge will be to see off US marauders seeking a route into Britain’s front rooms.
Much will be made of her pay and the transfer value of her contract from EasyJet. It would be great if, in designing McCall’s pay, she and the ITV board were brave enough to understand that the complexity of fat cat salaries is unappealing to the public. How helpful it would be if McCall allowed her long-term EasyJet options to lapse, took a bigger basic salary at ITV but eschewed short term bonuses?
Better she should settle for longer-term options that don’t vest for five years and are not triggered by takeovers.
Then, Peppa Pig might fly.
Big bucks
LOTS of job hopping, from Dame Carolyn at ITV to the arrival of The Apprentice regular Baroness Brady as chairman of Sir Philip Green’s Taveta.
Far more significant to savers is the promotion of Tim Buckley to chief executive and soon to be chairman of Vanguard where he will be in charge of investing $4.4 trillion (£3.4 trillion) of funds for the extraordinarily low fee of 0.12pc.
That is responsibility writ large.