Share stakes for the state
SUCCESSIvE governments, since the Thatcher years, have lived in fear of the state taking stakes in troubled private sector firms. Northern Rock in 2007 and the financial crisis of 2008 changed that, when only the state was capable of preventing financial Armageddon.
The allergy dates back to the Wilson governments of the 1960s and the perceived failure of the National Enterprise Board (NEB).
The reality is that interventions have often been more successful than credited. RollsRoyce was saved from calamity by Ted Heath’s government in 1970. After being returned to the public markets Rolls established itself as a world leader in engines for long-haul aircraft.
Among the much discussed failures of the NEB era are British Leyland. But for all the costs layered on government, it helped to keep valuable marques such as the Mini and Land Rover alive, and formed the basis of a revived motoring sector.
Another NEB-created firm, computer pioneer ICL, returned to the public markets where it was snapped up by Fujitsu.
Plainly, the first port of call for help for troubled firms such as Jaguar Land Rover,
Tata Steel, virgin Atlantic et al ought to be wealthy owners.
If that is not forthcoming, there is no shame in the Government financing them directly by acquiring equity stakes or making loans convertible into shares. Britain is not blessed with enough manufacturing to comfortably wave goodbye to whole industries such as car making and aerospace.
The Government has demonstrated a willingness to get involved with rail franchises, effectively taking them back into the public sector. If the crisis requires direct assistance for strategic industries or cutting-edge tech companies, such as Imagination – to keep them out of Chinese hands – then it should be willing temporarily to take share stakes.
The US did it for General Motors after the financial crisis and the German government is doing it for airline Lufthansa.
In the extremis of the pandemic fallout, doubts must be swallowed. Marston’s muddle
AS A brewer badly holed by the lockdown, Marston’s may feel it had no choice but to take the Carlsberg krone when it agreed to hand the lager group a 60pc stake in its Burton-on-Trent beer business.
In succumbing to Danish charms, Marston’s is following Scottish & Newcastle (remember it?), which was taken over by Carlsberg and Heineken, and, more recently, Fuller’s, which sold its historic Stag Brewery to Japan’s Asahi in 2019.
Both Fuller’s and Marston’s inexplicably decided that hospitality, through pub chains, is more important than centuries of history and the art of brewing. The City welcomed the Marston’s transaction on the grounds that it pays to have scale. No one following the value destruction, share price plunge and travails of highly-leveraged brewer AB Inbev can really believe that.
The real sector stars are craft breweries in the UK and the US, which have been a glorious entrepreneurial hit largely because the tasteless, mass market brewers have afforded them the space.
The Campaign for Real Ale rightly notes the transaction is a cause for concern about the future of British beers, brands and breweries. The Carlsberg offer is less a joint venture and more a shotgun overseas takeover. Shareholders and competition authorities should show the red card. Testing patience
BY THE standards of fat cattery of those involved in the implosion at Neil Woodford’s investment empire – from the great man himself to Hargreaves Lansdown’s former head of research Mark Dampier – the awards to Susan Searle, chairman of former Patient Capital trust, are a flea bite.
The 2019 accounts show her fee climbed by 15pc to £46,000 and Searle tells investors she was ‘proud’ of her work during the scandal. She would be better apologising to savers for governance blunders.
Why did she expose investors at the Patient Capital trust (now rebranded as Schroder Public Private) to greater risk by allowing them to be stuffed with holdings expelled from the Woodford fund?
Similarly, Searle never has explained how it was possible to be chairman of a quoted trust which held stakes in companies in which she had a personal interest.
The idea that Searle deserved more, because she had to attend 16 extra meetings as the crisis deepened, is risible. If she had been a truly independent chairman, the extra work might never have been necessary.