Europe’s bitter divisions

EVEN in italy’s prosperous north they seem to understand the Brexit referendum better than the political leaders of the remain camp. David Cameron and George Osborne largely have focused on the economy, the likelihood of recession, falling living standards and many other perils should we leave.

in support of some aspects of this scenario they have managed to selectively quote the G7, the iMF, the OECD and, closer to home, the Bank of England and the intellectually pristine institute for Fiscal studies. they cannot all be wrong, we are repeatedly told.

it all looks rather different from inside the eurozone. in italy, struggling for the best part of a decade without growth and with broken banks, there are notes of despair. lake Maggiore is surrounded with the grand villas owed by once-wealthy Milan families. Many are in a state of disrepair, with unfinished apartment blocks scattered along the coast. shops and cafes are either shuttered or desperately pander to German tourists.

sensible mid-sized business owners complain they have been dealt a raw deal in a Europe and eurozone dominated by Berlin. Germany has become more prosperous, we have become poorer, is the complaint.

italy is not atypical. as a regular visitor to athens over a number of years i can testify to the deterioration of conditions. Pockets of lavishness still exist, but surrounded by graf- fiti, closed and damaged businesses and banks and young people without work. american friends just back from Portugal express their sadness at the rundown state of lisbon, the unsettled young people on street corners and the loss of colonial elegance.

these are subjective judgments, but the economic numbers speak for themselves. there may be stirrings of recovery in northern Europe, but unemployment across the eurozone is 10.2pc – twice the level in the UK. and that is an actual number, not one concocted by the forecasters. Markets too seem unconvinced by the gloomy remain forecasts, with both the FtsE 100 and the pound vis a vis the euro surprisingly robust.

a poll of the royal Economic society, highlighted by the Observer at the weekend, revealed that of 639 members, 57pc held the view that Brexit would blow a hole in economic growth of 3pc. Just 5pc saw a positive outcome. Worrying? Perhaps.

But the small print shows just 17pc of members responded to the ballot. One wonders what the other 83pc think and why they didn’t bother to register an opinion.

Just more unconvincing white noise.

BT remedy

NO ONE should miss the paradox of Macquarie’s assessment of a £10.6bn black hole in Bt’s pension fund. if the aussie bank was a more reliable lead owner of thames Water and paid more attention to its pension fund deficit, then existing and future retirees might feel more comfortable with its analysis.

Back to Bt: certainly £10.6bn is a daunting number. But we should not forget that thanks to the domination of Openreach, line rental charges, sneaky increases in the cost of sports channels and other devices, Bt is a money-making machine generating £3bn of cash flow a year. so the employer covenant – or guarantee – is as strong as it needs to be.

the biggest correction for Bt, and for that matter for all pension funds in deficit, would be normalisation of interest rates.

the discount rate on the Government’s gilt-edged stock largely is used by actuaries to make interim assessment of pension fund deficits. When and if UK rates normalise (Us rates already are adjusting) the black holes should start to shrink.

Who would have thought we would be looking forward to higher borrowing costs?

Sir Denys Henderson

WHEN my late and great predecessor andrew alexander revealed, on these pages in May 1991, that his City friend lord Hanson had bought a stake in Britain’s bellwether stock imperial Chemical industries (iCi) and was likely to make a bid, the starting gun for one of the most sensational takeover tangles was set in motion.

in sir Denys Henderson, who has died at the age of 83, Hanson met a resourceful opponent. i have a fond memory of Henderson, chairman of iCi from 1987 to 1995, laying out his defence strategy over mid-afternoon scotch on a sofa in his capacious Millbank office. With the assistance of young Goldman sachs banker John thornton and Pr supremo alan Parker, they set out to demolish Hanson’s reputation for corporate frugality.

in quick succession it was revealed that Hanson’s company was secretly funding a string of thoroughbreds through a subsidiary called Cheval, had bought an undisclosed California mansion for Hanson’s partner sir Gordon White and the firm had an elaborate tax avoidance strategy run through Panama.

Henderson saw Hanson off the field of battle and began a process which saw iCi shed its imperial veneer.

its valuable pharma arm was spun off as Zeneca (now astraZeneca) and its fertiliser seeds business merged with a swiss competitor to become syngenta.

Henderson won the battle but iCi lost the war.