Carney right to prepare
MARK Carney and the Bank of England are going to take huge stick for their scary worstcase Brexit scenarios. But one of the great advantages of an independent central bank is it can take things to extremes.
Carney is in a particularly strong position. He leaves next June, so there would be no point in sacking him and adding to anxieties on financial markets.
It is absolutely right that, as the guardians of financial stability, the Bank is preparing itself and the financial system for the very worst. No one will forget how unprepared the Bank and the City regulator, the Financial Services Authority, were for the financial crisis of a decade ago.
What is encouraging about the Bank’s analysis is that it believes the commercial banks will still have the capacity to lend if economic prosperity and financial stability is turned on its head.
As we know from the Italian meltdown, broken banks are the enemy of recovery and growth.
Credit is the lifeblood of any economy. The biggest risk arising from the Bank’s dire forecasts is that they are taken too literally
Unpalatable deal
TOO many takeovers are excuses for badly performing enterprises to disguise underlying weaknesses. The stomach-churning absorption of faux-Asian chain Wagamama by The Restaurant Group, owner of Frankie & Benny’s and Chiquito, is in this category.
Research shows that the UK has become an experience- seeking society, and food therapy rates up there with shopping.
But, in my book, the larger the High Street food chains become, the quicker the quality of food and service levels decline.
Any number of chains testify to this, from the upmarket Ivy brasseries to the Belgian chain Le Pain Quotidien.
Only those sharply focused on not spoiling their core selling-point of value and reliable standards, notably Greggs, seem capable of bucking the trend.
In the end, The Restaurant Group’s investors reluctantly accepted that adding Wagamama to the portfolio, and paying for it with a £315m deeply discounted rights issue, could boost growth. The best hope is that the loose collection of ‘cuisines’ can capture the imagination of Deliveroo and Just Eat, which are chomping through the oven-ready meals offered by the supermarkets and High Street eateries.
That will eventually require firms such as The Restaurant Group to switch their model from main thoroughfares and shopping centres to dark stores dotted around ring roads where large- scale food production and cooking allows costs to come down.
The trouble with food outlets is there is no such thing as good cost-cutting, which will be essential if the firm wants to pay down debt. Setting higher productivity targets will mean poorer service, and cheaper ingredients will lead to less-tasty foods.
Rebel investors, led by 7.7pc holder Columbia Threadneedle, were right to oppose this deal on the grounds that The Restaurant Group is paying too big a price and market conditions aren’t great.
No one will shout foul if they now dump the shares.
Indian tonic
THE British Indian Army has a lot to answer for. Among its achievements was the introduction of Horlicks as a health drink to the subcontinent, which became the product’s biggest market.
The decision of Glaxosmithkline chief executive Emma Walmsley to sell sparked a frenzy, with Nestle, Coca-Cola and Unilever all throwing their hats into the ring.
Unilever is set to lift the prize with an offer valued at £3bn.
Imperial relics can be as useful as free trade deals in doing business in India’s protected markets.