Panmure Gordon’s announcement that it is to open an office in Leeds is encouraging. In the past 12 months the stockbroker/investment bank has handled four IPOs, including WANdisco of Sheffield, and the plans for a new office indicate that the firm expects to find many more potential stockmarket stars in the region.
I suppose the real surprise is that it considers the expense of having an office to be necessary. In the late 1980s and early 1990s, Panmure Gordon was responsible for the flotation of a large number of IPOs in Yorkshire and the North East, including Polypipe, Spring Ram, Barratt Steel, Reg Vardy and Sheffield Insulation Group.
The driver in these cases was Panmure’s director, the late Pat O’Reilly, who worked closely with Martin Shaw of lawyers Simpson Curtis, and David Haxby of chartered accountants Arthur Andersen. He never needed a formal office in the region. When he was in Yorkshire, he would set up camp in La Grillade in Wellington Street, where people knew where to find him.
Pat is now dead, Arthur Andersen is defunct, Simpson Curtis has disappeared into Pinsents (although Martin is still active) and Panmure Gordon is no longer an independent broker. But I hope that Joanne Lake can conjure up some of the old magic. It would be good for the Yorkshire economy and might also provide a bit of fun.

The media is rightly eulogising Margaret Thatcher for transforming the British economy and our perception of ourselves on the world stage. Her regime marked the end of our post-imperial decline and the rebirth of a sense of national pride based on our future rather than our past.

However, we should also remember that some of her reforms – such as the 1986 Building Societies Act and the “Big Bank” deregulation of the banking sector – led directly to the 2008 crash. If building societies had not been allowed to demutualise, the Halifax would not have merged with Bank of Scotland, Andy Hornby and James Crosby would not have been allowed anywhere near the levers of power and nobody would ever have heard of HBoS.

Similarly, Northern Rock would never have become a bank and would never have been allowed to dabble in sub-prime loans. So there would have been no panics and no bank nationalisation.

And if Big Bang had not happened, investment banks would not have been allowed to take-over retail banks, so we would probably never have heard phrases such as “too big to fail” and “casino banking”. Better still, Bob Diamond would probably have stayed in the US and would certainly never have become CEO of Barclays.

As they say, hindsight is a wonderful thing.

Lending by British banks fell by £2bn in the final quarter of 2012, despite the Bank of England’s Funding for Lending Scheme. Given that most small firms regularly complain that access to finance is one of their major problems, one must ask why lending has fallen.

According to Nick Dodd, of KPMG’s northern debt advisory team, the cause is twofold. On the one hand “mainstream business banks are still extending credit to resilient, growing firms but are selective.” On the other, the increased cost of bank loans and the stringent terms attached to them are forcing businesses to look elsewhere. Dodd adds that the banks’ appetite for risk is unlikely to change materially in the medium-term.

However, a recent survey by Lloyds TSB Commercial Finance indicated that a lack of understanding of alternative forms of borrowing could be hampering the growth of SMEs

The survey asked some 2000 SMEs – including more than 190 in Scotland and a similar number in the North-East – about their understanding and awareness of a range of sources of finance including overdrafts, schemes such as Funding for Lending, and asset-based products such as factoring, invoice discounting and asset-based lending.

The research showed that, while almost all SMEs (98%) are aware of overdrafts, just over half (52%) say they are aware of asset-based lending.

Although 66% of SMEs are aware of invoice finance, which enables firms to borrow against the value of their invoices, only about 15% have ever used it and only just over a half (51%) claim to have a good understanding of it.

Access to finance is a key driver of economic recovery and businesses obviously need to be aware of the options available to them, particularly those looking to invest and expand.

These options include so-called crowdfunding, whereby companies raise finance via the internet from individuals, who pool relatively small sums to provide the loan. Loans, typically for £25,0000 to £100,000, can be for business start-ups, product development or company expansion.

There are advantages in this system for both borrowers and lenders. The business usually pays less for its money than it would for a conventional bank loan and the individuals get a much better return on their money – average gross yields of 8.8% are cited – than they would from a bank deposit account.

So, for businesses needing finance, the message is clear: if the banks can’t help, other sources of money are available.

Further evidence has arrived of the sheer stupidity of the the EU’s decision to cap bankers’ bonuses. The managing director of the Prudential Regulatory Authority, Andrew Bailey, has warned that the move is likely to drive up salaries by as much as £500m.
Individual bankers are unlikely to be upset when their basic salaries are given a massive boost, but the banks will have every reason to be upset at having their flexibility over pay removed. The ability to vary pay in line with performance is common sense and saves banks an fortune in bad years. And, as Andrew Bailey points out, the bonus cap undermines any bonus clawback for bad behaviour.
But there is a wider point here. Governments – or the EU – should not be involved in dictating or regulating pay rates. That is purely a matter for the shareholders. It’s their money. Whenever Governments have interfered in the past – think of Edward Heath’s prices and incomes policy in the 1970s – they have come badly unstuck as companies colluded with employees to by-pass the rules.
It’s all so unnecessary. There is a warning today from pension fund managers that the “shareholders spring” is going to continue and they will continue to oppose excessive pay packets for executives. Even the Swiss have voted to give shareholders the right to block bonus deals.
However, having said all that, there is a whisper in the City that George Osborne and the Treasury may not actually be totally unhappy by the EU cap on bonuses. If bankers’ basic salaries rise, as expected, the Treasury will get a higher income stream from income tax and NIC. It’s still a stupid policy, though

I’ve just come across something called Israel Apartheid Week and am appalled. Who thinks of rubbish like this? and who – apart from the Intifada Fan Club – supports it?
Israel, with all its faults, is far and away the most democratic and pluralistic state in the Middle East and to group it with the appalling racist regime of South Africa, before the Mandela reforms, is to diminish the atrocities that happened in the country.
There are certain crimes against humanity – such as genocide and apartheid – that are so rare and so grave that to use them as adjectives to decribe situations of which you disapprove amounts to an act of injustice against the original victims.

What’s got into the Bank of England – or more precisely the Governor? The Old Lady of Threadneedle Street used to be regarded as a bastion of monetary conservatism and Sir Mervyn King as a wise old owl. But I’m not sure anyone would endorse those views now. Indeed, I’m reminded of the story of the king’s new clothes.

My main bone of contention is quantitative easing – the high-faluting name for printing money. The reason for doing this was to pump money into the economy via the banks, who would then lend it to businesses. This would translate into increased economic activity and everything would soon be hunkydory. But the banks haven’t lent the money – or not enough to make any difference. The policy has failed. The only visible consequence is higher inflation. After the first round of QE, the Bank estimated that it had increased the inflation rate by 2% to 2.5%. So what on earth was Sir Mervyn thinking of when he voted for another round of QE? Currency markets were so shocked the pound fell sharply and our imports bill increased proportionately. The record price of petrol and diesel is the result.

To those who argue that we need a cheap currency to boost exports, I would point to the example of Germany. Pre-euro, the deutschmark was one of the strongest currencies in the world and German exports soared. Since the adoption of the euro, the single currency has been supported by the strength of the German economy and has appreciated against sterling. German, French and Italian manufacturers still manage to export more than the UK. So I don’t buy the argument that the pound needs to be weak. If we want people to buy our stuff, we have to focus on quality, not price.

I was, therefore, relieved when the Monetary Policy Committee voted against more QE last week. But, if they really want to be helpful, why don’t they adopt the suggestion of the British Chambers of Commerce and use the money to underwite private sector investment in infrastructure. That would have an immediate impact on the economy.

Beware of the doom mongers. The next few years will see an exponential rise in the number of those prophesying the end of civilisation if we should even contemplate quitting the EU. The vast majority of these domestic voices will be the same people who predicted the same calamities if we stayed out of the euro. Enough said. I’ll come on to the foreign voices (ie American) in a moment.

I think that, in common with most voters, I am broadly in favour of staying in the EU – provided we can negotiate a sensible new relationship which is in Britain’s interest. But if the promised referendum leads to a British exit (or Brexit), I don’t believe the sky is going to fall in as a result. However, let’s just look at who these prophets of doom are and what their arguments mean.

The shrillest voices against tampering with the EU status quo belong fairly obviously to the Lib-Dems for whom the European project is an article of faith. They are joined by many of the multi-national corporations, the big international accountancy firms and certain sections of the City. There is also a shrinking element within the Conservative party led by Ken Clark and Michael Heseltine who want more Europe rather than less. The Labour Party is mainly in favour of the EU but has not yet worked out why.

These groups’ arguments against any attempt to renegotiate our relationship with the EU can be summarised as follows:
a. It is bad form to try to change the rules of your club.
b. The process will create uncertainty which is bad for inward investment
c. EU exit would threaten 6 million jobs which are “dependent” on European trade
d. Britain will lose influence if we are not “at the heart” of Europe.

Argument (a) – as advanced by Nick Clegg – is pathetic so can be ignored; (b) has some validity but is unlikely to make a significant difference unless we actually leave the EU, then I think some foreign companies might chose to switch their investment to a EU country; (c) is nonsense. I’m not sure where the 6 million figure comes from but it cited time and again as a reason for joining the euro. The fact is that we buy more stuff from the rest of the EU than they buy from us so it is in their interests to maintain trade links; (d) is another old chestnut. Our influence in the EU has declined rather than grown in recent years and that is because of the increase in qualified majority voting. The only country with an effective veto is Germany because it is the paymaster.

Interestingly, the US has just waded into the debate to tell us to stay in the EU or else lose influence in Washington. Er, what influence? America wants us in the EU so we can lobby on her behalf in Brussels. Our usefulness to the White House may decline if we leave the EU but so what? We will still have more in common with the US than any of the other EU states. In any case it would be no bad thing if we recognised that US foreign policy is based on self-interest and that we should do likewise.

The debate on our future in Europe (but not run by Europe) is just beginning so we can expect lots more disingenuous tripe to be bandied about in the coming years. Enjoy!

Do you fancy moving to Australia? if so, you may have missed the boat.
Having just got back from a month in Australia, it is easy to see why Australians refer to their homeland as the Lucky Country. In his book On the Beach, Neville Shute portrayed the country as the last place on earth to survive a nuclear holocaust and Australians are undoubtedly still enjoying the same high quality lifestyle they have had for decades. Nevertheless, there are signs that the economic downturn may be about to reach this last corner of the globe.

On the surface, life Down Under continues more or less as normal. The shops are well stocked, prices are buoyant, the freeways are packed. But one is aware of a sense of nervousness, of the more-aware citizens looking over their shoulder to see what’s coming. Australia survived the 2008-09 global financial crisis but since then, according to David Uren, economics editor of The Australian, people have been waiting for a fresh wave of trouble to come rolling in from the euro crisis, the US fiscal cliff or from a hard landing in China.

Over the past three months, the domestic economy has softened. But now the country’s resource sector – its economic engine room – has begun to feel the pinch. The sector had been clearly showing signs of overheating with some of the more marginal iron ore and coal projects looking fairly frothy. Sentiment has now gone into reverse and the latest NAB business survey shows the number of resource companies reporting improved conditions as just 2 per centage points ahead of those reporting weaker conditions. Six month ago, the margin was 20 percentage points.

On top of this, the business expectations survey by the Australian Chamber of Commerce says that 43 per cent of firms expect conditions over the coming 12 months to be worse than the previous 12. Only 16 per cent are optimistic. Exporters too are suffering from the high exchange rate (the Aussie dollar has doubled in value against the US dollar and against sterling) resulting from the perception that the country is a safe haven.

Nevertheless, in spite of all this gloom, the OECD is still predicting the Australian economy will grow by 3 per cent in 2013 (down from 3.7 per cent) – a rate that George Osborne can only dream of. But the organisation has also warned the Federal Government (Labour) that it should reform its tax regime or see a crunch in living standards.

Whether the doom mongers will be proved right remains to be seen. Australia’s banks are in better shape than Britain’s and even if GDP growth falls below 2 per cent, the economy will still be in better shape than most European ones. It will just feel pretty grim to the average Aussie, who has become used to living in what seems to many outsiders to be much like a parallel universe.

We’re off! The starting gun has been sounded for the long-awaited Scottish independence referendum. Last week’s handshake between Alex Salmond and David Cameron marked the start of a two-year tussle for the survival of the union.
After the deal was announced, Salmond, who normally looks revoltingly smug, looked like the cat who’d not only scoffed the cream but had swallowed the whole urn as well. He had, after all, been granted three of his four demands (which must be two more than he had expected). The First Minister gets to chose the wording of the question (subject to Electoral Commission approval) and the timing of the vote (2014, after the 700th anniversary celebrations of the Battle of Bannockburn and what he hopes will be a successful Glasgow Commonwealth Games). And – the daftest bit of it all – 16 and 17 year olds will be allowed to vote.
These perceived victories are all about the process. They won’t harm the case for a Yes vote, but none of them is a game changer either. It’s now time for the Big Debate. Support for independence is still no more than about 30 per cent, so Salmond faces a real battle to build that up to 50.5 per cent. But it’s far from impossible. My feeling is that the currently majority in favour of a No vote is actually quite soft with some 30 per cent or so of current No supporters probably emotionally sympathetic to independence but too scared of the possible consequences to vote Yes.
These are the people both sides are going to target. So we can expect glib ‘Eck to paint a utopian picture of what an independent Scotland will look like. The Queen will still be Queen of Scots, the pound in your pocket will still be legal tender in Carlisle and Berwick and Scotland will still be a member of the EU.
But none of these assurances can withstand scrutiny. How long would an independent Scotland retain the monarchy, given that there may be a majority of SNP activists who want a republic? There is no guarantee that an independent Scotland would be allowed to remain part of the Sterling area. If it did, it would have to submit to Bank of England control of interest rates and money supply, which wouldn’t do much for economic independence. As for membership of the EU, the President of the EU Council, Jose Manuel Barroso, has said categorically: “A new state, if it wants to join the EU, has to apply to become a member of the EU, like any state.” Pretty clear, I’d say, although Salmond of course insists on taking an opposing view. It should also be mentioned that a condition for any state joining the EU is that it must also adopt the euro.
Nor would an application for membership be a mere formality. The process takes years and requires the consent of all the other members, many of which have their own breakaway movements . France, for instance, wants to do nothing to encourage Corsican ambitions and Spain feels the same way about Catalonia.
This debate is there for the unionists to lose. While most of the SNP’s arguments regarding independence fail to convince, the No campaign has to offer serious evidence of the benefits of the union. It can’t rely on people’s fears to win the vote for them.

Government reshuffles tend to be largely cosmetic. The average citizen is only ever dimly aware that one has happened and will usually be hard pushed to name either the outgoing ministers or their replacements.

Although they undoubtedly provide endless entertainment for the Westminster village, they are soon forgotten and the latest round of ministerial musical chairs shows no evidence of being any different. So it’s likely that few people outside the bubble will have noticed the departure of Nick Herbert from the Department of Justice, where among other things he was responsible for driving through the legislation that will see parts of the country electing police commissioners for the first time.

But I noticed because I worked with him when he was chief executive of Business for Sterling, the campaign by business leaders to keep the pound. Whether Nick was pushed or whether he resigned, as some have suggested, because of his frustration at the lack of support from within the Cabinet for his legislative efforts is a moot point. Nevertheless, to my mind, the Government can ill afford to lose ministers of his calibre.

Nick is a man of conviction and ability. Although he is unashamedly on the right of the political spectrum, he was able, while at Business for Sterling, to build an a robust cross-party alliance against the euro, recruiting trade unionists, left wing Labour MPs, Green Party activists and Lord Owen to the cause. And his tactics were extremely successful. Business for Sterling morphed into the No Campaign and Tony Blair chickened out of holding a referendum which he knew he could not win.

Subsequently, Nick became one of the founders of Reform, the right-of-centre think tank before being elected to Parliament in 2005. It is unlikely that he will remain on the back benches for very long; he is too talented to be ignored.