Mark Kleinman is Sky News’ City Editor and is the man who gets the Square Mile talking in his weekly City A.M. column. This week he tackles big questions for Labour, pragmatism in the City and the building-blocks of a takeover
Labour’s economic plan remains a £63bn question
So there we have it: £63bn. Not bad for a day’s work. Trumpeting a sum worth more than double the total of the last Conservative-orchestrated investment summit looks, on the face of it, to have been an unmitigated triumph for Sir Keir Starmer and his cabinet.
Ignore, for a moment, the fact that a big chunk of the total had already been announced prior to the Guildhall gathering.
Overlook the embarrassing scramble to rebuild bridges with DP World, whose temporary postponement of its £1bn investment in the Thames Gateway port threatened to overshadow the entire event after it was offended by the transport secretary’s description of its P&O Ferries subsidiary as “a rogue operator”.
And try to get past a string of administrative gaffes by officials, including a GDPR-breaching disclosure of the entire list of VIPs’ contact details, as well as the out-of-office automated replies from some of the officials involved in organising it, the misnaming of former Google chief Eric Schmidt as Ed and the relabelling of Gareth Southgate as the former England captain.
Credit where it’s due. Given the ludicrous shackles Labour imposed on itself by promising to stage the event within 100 days of its landslide victory, the turnout was impressive: the bosses of institutions accounting for tens of trillions of dollars of capital under management, and executives from a decent cross-section of the global business elite.
That’s only the superficial analysis, though: little of substance is achieved at summits like Monday’s, other than them being a decent convening forum for a government already – staggeringly – on the back foot. Will it be enough to reset Starmer’s administration? Not by itself. The publication of an industrial strategy green paper which appears largely well thought through, and the appointment of credible figures as investment minister and to chair a new industrial strategy council will help.
In 13 days, Rachel Reeves will deliver a Budget, the build-up to which has already been riven with u-turns. That’s the key moment to see if a reset is credible. If Labour poses as a pro-growth government and then undermines it two weeks later, it will prove yet another example of the political schizophrenia this country so desperately needs to avoid.
City investors find it pays to be pragmatic
Pragmatic: not a word you often hear expressed by FTSE-100 board members about asset managers’ approach to executive pay.
Nearly a decade after the Investment Association presided over the creation of a register to name and shame companies which were on the receiving end of significant shareholder rebellions, a thaw has begun to emerge.
In updated remuneration guidelines published last week, the IA crossed a Rubicon. Its members (which collectively manage more than £9 trillion in assets) “want a competitive UK listing environment that attracts high-quality companies to list and operate in the UK, while delivering long-term value for their shareholders,” it said.
Moreover, the framework it has set out to ensure reward for performance is, it stresses, a set of principles rather than a rulebook.
This will be music to the ears of remuneration committee chairs, particularly at larger FTSE companies which have been grappling with the yawning gap between their own chief executives’ pay and that of their US-based peers.
The London Stock Exchange Group and Compass Group are prime examples of this boardroom conundrum: how to retain executive talent while avoiding the indignity of being placed on the City’s equivalent of the naughty step. So far, the evidence suggests that boards have gained the upper hand, with LSEG securing overwhelming support for a big pay rise for David Schwimmer and Compass receiving indications of backing for a similar increase for Dominic Blakemore.
I understand that Experian and Smith & Nephew are – among others – examining similar moves.
The IA’s decision to adopt a more laissez-faire approach will not, by itself, make a seismic difference to the London market’s attractiveness; but it highlights that Dame Julia Hoggett’s strident warning on the issue has not fallen on deaf ears.
Forterra bricked it over bid for smaller rival Michelmersh
How about this for bringing a new meaning to the phrase ‘bricking it’? An eagle-eyed devourer of listed UK company accounts gets in touch to flag an intriguing nugget buried in the half-year results of Forterra, the FTSE-100 manufacturer of bricks and concrete construction products.
Published in July, the document disclosed that Forterra incurred a one-off cost during the six months to June 30 of £2.6m “comprising professional fees associated with an aborted corporate transaction”.
No deal discussions were reported by Forterra during the period but I understand the multimillion pound charge related to a potential takeover of Michelmersh Brick Holdings, a smaller London-listed brick maker.
A lawyer points out that £2.6m is a hefty sum for a deal that was never consummated. Forterra, which has a market capitalisation of £360m, is much larger than Michelmersh, which is valued at less than a quarter of that figure.
The conclusion reached by some industry figures is that talks progressed to a detailed stage, but that antitrust considerations may have played a role in thwarting them.
Forterra “declined to comment on speculation”, while Michelmersh didn’t respond at all.
Bear in mind though that Blackrock has just increased its stake in Ibstock, another listed brick manufacturer, and I suspect it won’t be long before the M&A impulse returns to the sector.