In the City
Gift-wrapped jets
Jock Bruce-Gardyne
In days of yore I never had much difficulty in containing my enthusiasm for the Na- tional Enterprise Board. It always looked to Me like a device to enable City drop-outs to Whom Harold Wilson felt beholden to squander our cash on situations which their former colleagues in the Square Mile would not have fingered with the proverbial t_ 8ePole. Nevertheless there are excep- tions to every rule: and I made an exception for its handling of Rolls-Royce (1971).
Lord Keith, the blunt-spoken merchant hanker who in those days held the chair at the
aero-engine business, likened the NEB's supervisory role as watchdog for its owners that of an 'industrial contraceptive'. But it that seemed that that was just what Rolls-Royce needed. For like other enter- prises with privilege of access to the tax- Payers' contributions, Rolls-Royce gave the iMpression of believing that the order book Was all that mattered. Sir Leslie Murphy, who then presided at the NEB, was given to asking awkward questions about rates of asking on RR's investment. Lord Keith and ue,did not get on. 'Nowadays the NEB has been transform- ed into a shining sugar-daddy for the modern wonders of technology, and Rolls- Royce (1971) is on its own, with only the –cPartment oUr behalf. Which Industry to hold its hand on thr, 'Half. Which seems a pity. For even in LZ unregenerate far-off days before Sir s-c,ge Murphy 'came out' and joined the "'r, Rolls-Royce never to my knowledge gwot up to anything quite as weird and sa°1ensumearfnuslh. aigits latest feat of high-pressure It takes a state-owned en_gine-maker to stump up £30 million in _%esorted loans and equity to enable a brand- "1,,w airline to get started with the purchase uTraircraft incorporating the chief com- Pe„ Itor's engines. All this for a promise that ordere brand-new airline will get round to tintng a couple more aircraft in 1986, this it e equipped with Rolls-Royce engines. If selling in business then, that is. Jet engine always' an RR spokesman tells us, 'has JeaYs been volatile and aggressive' and say all simple and straightforward'. He can of Tall that again. Happily the Department ,,,.._mdustry has identified this as 'a purely '"ocultatercial deal' and therefore no concern mu theirs. 'Purely'? 'Commercial'? They N have a different dictionary to me. tlie:w, £30 million may be neither here nor ruitti" 'c'r a business that lost almost £120 before last Year, and £90 million the year but re, and contrived a fleabite profit in hut ° of the last six years of operation. Crar:i the sort of markets in which the air- necesin•taanteufacturers are at present dabbling this
'vola and aggression' on sort of scaletility — a scale worthy of Jim Callaghan's Polish shipping deal — then wider questions spring to mind. We are all compulsory punters with Rolls-Royce (1971). But we are not all compulsory punters with British Aerospace and its Air- bus participation. Sir Austin Pearce assured his shareholders the other day that B Ae had 'ample facilities' by way of short- and medium-term borrowing to keep its produc- tion lines rolling. If Rolls-Royce is anything to go by it looks as though it might have need of them. The next vessel poised upon the slipway to the private sector, British Telecom, faces rather different hazards. No cut-throat competition here to promise us a weekend in Majorca for every second trunk call. Indeed precious little competition of any kind at all. So instead a furious haggle about per- missible tariff increases and a duty to main- taine each public call-box on Benbecula (a duty from which BT would surely have withdrawn pronto in the public sector). The conflict between the desire to police monopoly and the desire to maximise the proceeds of the sale is here seen in its starkest form. The limits placed cm BT's freedom to raise tariffs may be good news for users; but less good for those preparing the flotation. So the Department of In- dustry's failure to tackle the monopoly may end up by depriving Nigel Lawson of part at least of those hoped-for proceeds.
One business which is not keeping all its cash for BT is Lord Weinstock's GEC. When I compiled a list of offerings for the great and good last Christmas in these col- umns I proposed a jump in interest rates for Lord Weinstock, to improve the yield on GEC's gilts. Well, that has not been forth- coming — so far at least. So he has made a foray into the Scotch instead.
I hope Distillers will be flattered to learn that GEC as an investor in 'situations where a company is not in a very happy position for one reason or another' will be able to teach them a thing or two. Lord Weinstock certainly trails a golden record of achieve- ment at GEC. But can even he, one wonders, contrive to set worldwide Scotch consumption back on the sort of growth path required to transform DCL's ratio of expensive stocks to sales?
Besides, it's not so long ago that Lord Weinstock was expressing his enthusiasm
for divestment and his feelings of frustra- tion with the barriers the taxman had erected against fulfilment of that laudable ambition. Cynics at the time were inclined to take this enthusiasm with a tiny pinch of salt; but I doubt if the most cynical had foreseen the prospect of GEC diversifying into whisky and that after the taxman had at least reduced the barriers to divestment. One person who must, I'd guess, be thankful that Lord Weinstock apparently has no territorial ambitions on DCL is Mr Alex Fletcher, the hard-worked Minister for Consumer Affairs at the Department of Industry. For Mr Fletcher has quite enough Scots sensibilities on his plate already. There is the little matter of the build-up of Lloyds' stake in the Royal Bank, which the Office of Fair Trading wants the Monopolies Commission to cast a slide-rule over. And there is the renewed talk of an outright bid for Royal Bank.
Yet at the same time Mr Fletcher, in con- junction with his leader Mr Norman Teb- bit, now has to digest the feast of conflict- ing responses to Professor Gower's report on investor protection and come up with a speedy answer. It is not an enviable task. But I hope Messrs Tebbit and Fletcher will not overlook a characteristically robust contribution from Lord Harris of High Cross and the Institute of Economic Af- fairs. 'The extension,' says Lord Harris, 'of self-regulation is not without attraction and convenience for practitioners . . . But if we uphold the general system of competitive enterprise we must restore the public understanding that the profit system depends on the willingness of entrepreneurs to accept risk and ultimate prospect of loss.' Anyone contemplating the achievements of self-regulation in the pro- fessions — which incidentally the Govern- ment and the Office of Fair Trading are contemporaneously engaged in challenging — can hardly dismiss that warning out of hand.
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