CITY AND SUBURBAN
Scratch a card and sniff a growth industry, set to pay off in Mustique
CHRISTOPHER FILDES
Growth industries — of course we still have them. I dare say we lead the world in little cards which, when you scratch them, may or may not make you money. Soon they will be on sale in pubs, beside the crisps, and those nice people who supply the fruit machines are quaking. These cards, brought to you by the promoters of the National Lottery, now sell at a rate of £33 million a week. Twice as much goes on lottery tickets. Two-thirds of the adult pop- ulation are regular customers, and the pro- moters now plan new competitions, more outlets and £100,000 prizes on the cards. From a standing start in November of last year, this is quite something, though quite what may be disputed. Whitehall's statisti- cians, with their firm grasp on the wrong end of the stick, say that the lottery is prop- ping up consumer spending. It is, of course, pre-empting the consumer's spare money. Abberton Associates calculate that the lot- tery now takes 4 per cent of the average household's discretionary spending, and that less than half of it will find its way back into the consumer economy. The losers must pay but the winners will invest. Even the Churchill family, taking lottery money in exchange for their archive, will find it hard to get through £13 million all at once. The architects who have been advising the Royal Opera House will soon run up a bill for £10 million without a brick being laid — just as well, when you look at some of their plans. The lottery will help to pay their bill, but where will they spend the money? In Mus- tique? The odd thing about this new growth industry is that it represents a vicarious and arbitrary form of saving. Better if we were encouraged to save for ourselves, but that idea seems to have run out of growth.
A buyer's market
SAVING through life assurance is a shrink- ing market, and the Otiose Mutual's diffi- culty is Hambros' opportunity. There are more life offices (as I was saying last week) than the traffic will bear; their sales are going down and their costs are going up, most of all the cost of regulation. Or, as Christopher Sporborg of Hambros Coun- trywide puts it: 'Many established business- es in the financial services industry are becoming uneconomic, due to the rising cost of regulation and falling new business levels. This presents an opportunity to acquire other life companies.' He has made a start by scooping up Premium Life. Once upon a time Hambros bet a million on an idea for a new life company, and found that the bet paid off at odds of 170 to 1, so it lives in hope of pulling off the double.
Windows' grand opening
TECHNOLOGICAL improvement in this column has got as far as the propelling pen- cil, so this week's launch of Windows 95 will leave me lukewarm. In vain will Bill 'Super- nerd' Gates pay E8 million for the Rolling Stones to blow Microsoft's trumpet. In vain will the shops in Tottenham Court Road stay open, waiting for a rush of buyers on the stroke of midnight. So much has not often been made of a refinement in office machin- ery. Already Mr Gates is the richest man in Redmond, Washington (where as a boy of 15 he reprogrammed the traffic lights, now shown to visitors as an object of reverence) and one of the richest men out of it. His Microsoft shares are buoyed up by the belief that customers across the world will feel obliged to upgrade to his new system. I won- der how long one supplier can expect to dom- inate this sort of market, which is driven by innovation. Its economics must be like those of a drug company, which spends on develop- ment and gets the money back from years of well-protected sales at suitably high margins, if it can. Already, though, the Chinese are undermining Microsoft's margins. I read that lookalike versions of Windows 95 are already on sale in Hong Kong (where else) for 5 per cent of the cost of an upgrade and 2 per cent of the cost of a new installation. Now that is what I call a Micro-Soft price.
Gloom, Britannia
HOUSE OWNERS are gloomier than they have ever been, or at least since the Britan- nia Building Society started asking them questions. They think that houses are good value, but more than half of them are not confident at all that prices will go up. I bet that if the Britannia had put the same ques- tions seven years ago, it would have got the answers in reverse — houses are frightfully expensive, but prices are sure to go on ris- ing, aren't they? No: that was the top. Now all the money and confidence are in the stock market, which is reaching new heights, while house prices lag behind. Bil- lion-pound takeover bids (the latest is for Fisons, of all battered trophies) pour out cash, which must be reinvested. You might call that asset price inflation — in which case you would think it only a matter of time before it spread to houses.
It's my nerves, Minister
I SUPPOSE that Health was bound to be the unhealthiest department in Whitehall, just as the Treasury, in its high-minded way, is the poorest, and Environment, in its slab- by tower, the most hideous blot on the landscape. (Employment has been made redundant.) Imagine the stress of working for Virginia Bottomley — not a chocolate biscuit in the office, let alone a puff of smoke. Days off sick in her old department have been running at twice the national average. Sick leave is a Whitehall privilege and healthy young chaps get ticked off for not taking it. Labour now pretends to be furious that the Government cannot say how much these days of illness cost, let alone how many of them are genuine. No doubt the chap who would know has gone home with a headache, caused by getting out the figures for sick leave among the self-employed.
Château bottled
MY EXPERT correspondents are suitably impressed by Barclays' coup in Paris, where it bought a bank for the sake of its château- like head office in the Rue Laffitte, and has now written off £120 million against the cost of the building (City and Suburban, 12 August). In Hong Kong, an old hand finds his theory confirmed. Giving capital to a bank, so he says, is like giving a gallon of beer to a drunk. You know what will become of it, but you can't know which wall he will choose.
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