9 October 2012

That was week ending 5th October 2012

Don’t bank on it

Last week I wrote about Vince Cable’s announcement of the setting up of a state business bank. My thanks to the ever vigilant Bill Good for pointing out that this will not actually be a “bank” but yet another government backed loan scheme routed through conventional banking channels. This is what I understood as well but should have made clearer. I hope none of you got too excited about the potential of there actually being a real alternative source of business lending and banking.
However this is what John Longworth Director General of the British Chambers of Commerce called for last week. He wants to see a state backed, properly constituted British Business Bank. Current schemes merely “provided slightly cheaper finance to businesses that banks were already lending to” he said
I think he is right, but not just because this would help channel more finance to those businesses that need it but cannot get it from conventional banking sources. If a British Business Bank not only offered business loans but also business banking, i.e. business current accounts, direct debits etc. then this could have some real impact on competition. Very few businesses can operate without a business bank account, which means that if a business is turned down for a loan by its bank, more often than not it still leaves its business bank account with that bank. However if a business was able to access finance from an alternative source which also offered business banking then maybe many more businesses would consider switching their banking over as well. If significant numbers of small businesses did this then it would bring some significant competition into the small business banking market. Isn’t this after all what we really need?
Will it ever happen? Well last week it was announced that Metro Bank would be a primary business partner for the Growth Accelerator scheme. A small step in the right direction but much more could be done.

West Coast Blues

When ah woke up this morning, thought ah had a railroad to run
Yes when ah woke up this morning, thought ah had a railroad to run
Then ah got this call from the old Deeefftee Ministree
Saying they done screwed up the bid process and screwed me.
(with apologies to all blues singers who have ever lived!)

Yes I have sympathy with Tim O’Toole of First Group who I can fully understand must be feeling “sad and blue”. Winning the West Coast franchise wasn't just a contract win it was the answer to a lot of FirstGroup’s problems. Now all the concerns about the balance sheet, cashflow and profits have returned and FirstGroup’s share price sank 20% on fears that a dividend cut is now likely.
Since I wrote about the decision to award the franchise to FirstGroup in the middle of August, 2 out of 3 of my predictions have come to pass. It has ended in tears and after Justine Greening moved on from Minister of Transport to International Development. However I did say it would take time when in fact it only took 6 weeks! Had she still been Minister of Transport it is likely Ms Greening would have had to resign after insisting she had overseen a “robust” process. There has been no sign of her offering that, in fact not a word from her (again). I suspect she is too busy down on her knees thanking the powers that be that she got reshuffled (Justine Time perhaps?) and parliament is still in recess.

Confidence – not if we can help it

It does look increasingly like FirstGroup put in a rather "desperate" bid but even so the company does not deserve to be treated this way. Apart from being a spectacular display of government incompetence the West Cost episode is another dent in business confidence. There are now 4 rail franchise bids in a state of limbo with all the implications that has for stalled investment and job creation in the rail sector. I wonder how many rail franchise bidders are having second thoughts. Also last week Ofgem reported that thanks to years of government dithering we can look forward to energy blackouts as early as 2015 and as for any clear policy on aviation strategy don’t hold your breath.
There really are enough uncertainties in the world without our own government inventing any more. We seem to have a real problem with politicians and civil servants having the slightest understanding of what business confidence is, why it matters and the damage inaction, muddle and sheer incompetence in government can do. A clue as to how politicians and civil servants think about this and how they view their priorities can be found in a statement from the Department of Energy in response to the Ofgem report. It said that there is "only a very low risk to householders".
No mention of businesses, especially those with interruptable supply contracts. Then of course householders have votes and businesses do not.

Euro tragi-comedy continues

After the lull during the summer whilst most European governments were on holiday we are now back to the run of announcements, counter announcements, demonstrations and confusion we had before. One minute Spain needs €100bn to prop up its banks, now it appears it’s only €60bn.  Then up pops Moodys saying that it needs twice as much as that, i.e. €120bn. I hope you are all following all this so far. Meanwhile Super Mario Draghi is still dancing around the ring shadow boxing and saying “he is ready to act” that is if anyone is man enough to take him on.
The Greek comedy moved into Greek farce last week with the announcement that they propose to spend €95m on a state of the art motor racing circuit, with ambitions to stage F1 events. Now I know that spending on infrastructure can be part of the answer to boosting economic growth, but I don’t think F1 circuits count. Neither is Greece noted as any kind of centre for motor racing. I think the last time they won anything major involving wheeled transport the date had the letters BC in it! To be fair neither Bahrain, Singapore nor Malaysia were noted centres of motor racing and they all have F1 circuits. However they do have plenty of money. If you have ambitions to get in to motor racing especially F1 then you need to talk to Bernie Ecclestone and he only talks to people with plenty of money.
However shortly after this news broke the Greek PM Antonis Samaris announced that the country will run out of money in November. Stern Auntie Angela is due to visit this week and I think the PM was hinting that it would be helpful if she could stop at a euro cashpoint on her way and bring some cash to help them through the weekend.
As I said there really are enough uncertainties in the world without our own government inventing any more.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

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