31 JULY 1964, Page 22

Afterthoughts on the Bloom Affair


ONE of the silliest com- ments I read on the Bloom affair was that it showed up the moral degeneracy of the Macmillan 'Oppor- tunity State.' The truth is that the neurotic economic policies of the Conserva- tive regime, popularly known as 'stop-go-stop,' have never allowed a boom to last long enough to breed many Blooms. There has been no serious business failure since the State Building Society in 1960. We have seen nothing like the recent succession of industrial failures in Germany. We have had nothing to compare with the vegetable- oil scandal in America. No doubt the thirst for profits on the part of the entrepreneur is no less avid than it has always been, but profits are much more difficult to earn. If the Bloom affair showed up any serious lapse, it was a lapse of organi- sation; it was a lack of brains at the top. The `never-had-it-so-good' rank and file—the greedy consumer if you like—showed average keenness in buying a twin-tub washer at a cut price, but the fact that the twin-tub sales, fell away when the novelty of free gifts had worn off and a better, fully automatic washing machine had been promised showed that the consumer had not allowed greed to run away with common sense.

What stands out in retrospect was that Mr.

Bloom was an ingenious salesman, but no busi- ness genius, no financial wizard, no organisational superman. In fact, as soon as the financial Estab- lishment discovered that he was no organiser at all, they dropped him like a hot brick and left him to his fate. The best 'inside story' on this episode was that told by Mr. Hutber in the Sunday Telegraph. Mr. Hutber was an old friend of Bloom and had been called in by him as 'financial co-ordinator.' He found there was no organisation to co-ordinate. Bloom with his per- sonal staff was in Regent Street and the executive directors were at the Cricklewood factory, but there were no regular board meetings or any system of board control. And there was no con- tact with the financial house Kleinwort Benson, which had made the issues of shares by tender in 1962. When this finance house was consulted towards the end it brought in a skilled company `doctor,' a Canadian accountant, who was wise enough, said Mr. Hutber, to get his fee of £25,000 paid in advance. For a time there was hope that this company 'doctor' would be able to take over the chairmanship, secure further finance and save the company. But it was too late. Neither Kleinworts nor Sir Isaac Wolfson, who had financed the hire-purchase business, would put up another penny. Mr. Hutber used the ominous words : `Kleinworts tried to phone Sir Isaac, but he was out.' We all know what that means. His summing up was interesting: (1) `There is blame to be attached to John Bloom. . . . but in justice let it be remembered that every housewife in Britain pays 20 guineas less, whatever washing machine she buys, thanks to his efforts.' (2) 'A heavy responsibility must rest on the board of directors who were after all well paid. Ten drew £83,414 in 1963; two out- side directors drew no fees.' (3) 'I feel that Kleinwort Benson could have done more.. . (4) 'In the background hovers the shadowy and enigmatic figure of Sir Isaac Wolfson, always about to enter a closer association with Bloont always sidestepping away. . . .' Mr. Hutber in- ferred that Bloom was over-confident because he believed Sir Isaac in the last resort 'would be there.' But as I have said, the financial Estab- lishment, which had made a pretty penny out of Bloom with their huge financial fees, dropped him like a hot brick when they found he was muddler.

The Rolls Razor case is now being investi- gated by the Board of Trade and I have no doubt that its report will bring out the obvious—that there was nothing intrinsically unsound in mar- keting consumer durable goods by direct-selling methods, however unorthodox, but that the com- pany lacked proper financial control and manage- ment. I question whether it will reveal any grave financial scandal. Of course, there was heave gambling in the shares, but the Stock Exchange Council cannot be expected to stop dealings in a share because of that—provided all informa- tion possible has been made available to the public. The Council had suspended dealings in Rolls Razor until the issue by tender in May' 1962 (at a price of 23s.), which brought a full dis- closure of the facts (except, apparently, one item of property). In good faith, the company's brokers put out a bullish circular in November, 1963, esti- mating earnings of 400 per cent. By that time the shares had doubled, reaching 47s. 9d. yet when the year's results were finally published in May, 1964, earnings were only 220 per cent—a very slender cover for a 200 per cent dividend in a very speculative business. Prompter informa- tion would have saved the investing public serious losses, but as half-yearly accounts are not laid down by law the Stock Exchange Council had to stomach the obvious dilatoriness of the com- pany's accounting. The 'bulls,' and finally the 'bears,' therefore, had a field day. On occasions every capital market in the world has been ex- ploited by these ruthless animals, but that is no reason for denigrating the key mechanism of the capitalist system. The crying need is to see that companies in future disgorge their informa- tion promptly—zevery six months—so that fewer opportunities will arise for exploiting the share markets. There is another lesson to be lea med—especi' ally by the popular press and the BBC. If a very ordinary character is built up by them into some' thing extraordinary—the 'whizz kid' from the East ,End becoming the great business tycoon in Park Lane—not only will the public begin to be- lieve in financial miracles, but the character him" self. The results will be disastrous. The god 01 bound to fall after he had been photographed with his wife in a colossal four-poster bed in 3 Sunday Times colour supplement. In benign mood the god has cancelled the debenture of nearly £1.5 million issued to 011

by English and Overseas in return for his VW worthless shares in Rolls Razor. This is part of IT effort to save this company, which owns a chat"

of retail shops, and the Bulgarian travel con- tract. It would be something for the small in vestor if the bloomer of the twin-tub speculation could be forgotten in the bloom of a cheap Bulgarian holiday.