Martin Vander Weyer

The Financial Times carried a curious story at the weekend about ‘the secretive process to elect the Lord Mayor of London’ being ‘thrown into disarray’ by ‘objections from some City leaders’ to the candidacy, for 2022, of Nick Lyons — who has just been elected as one of the City’s two sheriffs but who happens to be an Irish citizen. Lyons’s unnamed opposers say City rules have always required the Lord Mayor to be a British citizen. The City Corporation, the Square Mile’s local authority, says it has legal advice to the effect that Lyons is not disqualified, EU citizens being permitted to stand in UK local elections.

Nicola Sturgeon depresses me and seems to be having the same effect on Scottish house prices. In a housing market described by departing Bank of England economist Andy Haldane as ‘on fire’, the flames have been rising higher the further away from London — but more or less extinguishing themselves at Hadrian’s Wall. Why buyers are scarcer in Nicola’s domain is a question I’ll leave to our political writers, but the broader picture of soaring home prices across the rest of the UK is an unforeseen pandemic effect that may have painful consequences. Nationwide’s June data shows an annual price-rise bar chart increasing steadily from 7.

The late Sir Ken Morrison — founder of the eponymous supermarket chain that’s the latest UK target for US private equity — had the blunt manner of the Yorkshire cattle farmer he became in reluctant retirement after he was ousted by his own board. Criticising his successors from the floor at one of his last AGM attendances, he roared: ‘I have 1,000 bullocks… but you’ve got a lot more bullshit than me.’ So I’m sorry he’s not around to accost the suits from the New York firm of Clayton, Dubilier & Rice (and their adviser, former Tesco chief Sir Terry Leahy) on the intentions behind the takeover bid that sent Morrisons’ shares soaring on Monday.

The snatching of a 12 per cent stake in BT by French entrepreneur Patrick Drahi, last seen here when he bagged Sotheby’s for $3.7 billion two years ago, could be a good thing if it injects dynamism into the telecoms giant’s late-running plans to install high-speed broadband across the UK. But it’s also part of a wave of fast--moving foreign money hunting undervalued UK assets — which is positive if it fuels capital investment for growth, negative if it makes nothing but fast bucks for private investors. The logic is simple. The private equity fraternity is laden with cash and global in outlook; what it sees in London is an appetising menu of companies trading on average earnings multiples of around 14 times, compared with roughly 23 times in the US.

Companies should willingly pay tax wherever they generate profits — this column has long argued — because it’s fair they should contribute to the cost of the public services on which all business ultimately relies, and because the reputation of capitalism as a whole is tainted when corporate tax bills are reduced to absurdly low levels by the use of offshore domiciles and spurious royalty payments that most governments lack the willpower to challenge. So I welcome at least one half of the G7 finance ministers’ agreement last weekend on a new global corporate tax regime. The half I’m ready to praise is the proposal that all countries should have the right to tax some of the locally generated profits of the world’s largest multinationals.

‘Feed the ducks when they’re quacking’ sounds like advice from a foie gras farmer — but let’s leave gastronomy till last and focus first on stock market activity. The saying actually comes from Wall Street and means that if investor demand is strong, it’s best satisfied with ample supplies of new stock. What’s wrong with that? Nothing, if the investors understand risk and the offerings are sound. But is that what’s happening in the current retail investment craze on both sides of the Atlantic? Probably not. From its low in March last year, the FTSE 100 index has risen 40 per cent.

The long-awaited review of the railways by former British Airways executive Keith Williams chugged past the platform of public debate without creating much stir. Politicos noted that it had become ‘the Williams-Shapps Plan’, indicating an urge on the part of Transport Secretary Grant Shapps, in Tony Blair’s words, to be personally associated with eye-catching initiatives — in this case, especially those that have nothing to do with the issue of whether British holidaymakers will be allowed to fly abroad this summer. But the review’s core proposal — a new public body called Great British Railways that will control tracks, timetables and fares, and contract with private operators to run trains — provoked little controversy.

‘Consider a temporary cut in executive salaries’ was the Confederation of British Industry’s advice to members at the start of the pandemic. Back then I was gripped by fears of a backlash against capitalism: top pay cuts would indeed be wise, I wrote, not least because ‘sacrifice now is sensible insurance’. Looking at last week’s election results, I needn’t have been concerned about a second coming of socialism. But I’m one of many advocates for responsible capitalism who have long worried about growing disparities between executive and average pay — the key multiple having risen from 50 to 120 over the past two decades — that rarely reflect underlying performance.

‘We are seeing very substantial inflation,’ the great investor Warren Buffett told shareholders in his master company Berkshire Hathaway at their online annual meeting last weekend. He was talking chiefly about the housebuilding businesses in his port-folio, hit by rising material costs in what he called a ‘red hot’ economic recovery. But his remarks align him on a broader front with jittery bond investors and big-name economists, such as Larry Summers of Harvard, who have fuelled the US ‘inflation scare’. And if it’s coming over there — pessimists whisper — surely it’s coming over here? Maybe, but let’s keep this in perspective. Headline US inflation is 2.

The alleged frauds for which the Post Office prosecuted no fewer than 736 of its sub-postmasters has turned out in almost all cases to be the result of faults in a computer system called Horizon which Post Office managers and the system’s supplier, Fujitsu of Japan, were reluctant to acknowledge. That’s the short summary of a miscarriage of justice which also looks like a case of mismanagement to the point of delusion: how could anyone believe a copy-cat crime wave on this scale was sweeping through a cohort of small businesspeople generally seen as the most upstanding of local citizens? And if that wasn’t the belief, the only other explanation is worse: cynical concealment of a 15-year IT cock-up for which no one was willing to carry the can.

The market emphatically endorsed my negative opinion of the Deliveroo share offer, which bombed from its offer price of 390p to close at 282p before Easter. The biggest London IPO since the commodity giant Glencore went public in 2011 now also stands as the most embarrassing flop in living City memory. Goldman Sachs and JP Morgan Cazenove, the deal’s bookrunners, must have known it was in jeopardy when they knocked more than a billion off their first indicative valuation after UK institutional investors lined up to say they wouldn’t touch it. But 70,000 Deliveroo app users, having failed to read that signal, bought into the ‘community offer’ — and have lost an average of £200 each.

‘The reason we have the vaccine success is because of capitalism — because of greed, my friends.’ So Boris Johnson told his backbenchers last week, though he immediately muttered ‘Forget I said that’ while aides tried to explain it as a joke on the chief whip, who was munching a cheese and pickle sandwich at the time. Whatever, the PM’s gaffe makes a neat text for a short Easter sermon. The fact is that ‘capitalism’ — the mustering of vast private-sector resources to bring lab-tested potions to mass production in record time — has indeed delivered a triumph, in combination with university science, a smart Whitehall taskforce, military logistics and NHS networks.

Just as the auto industry embraces the electric future I wrote about last month, it hits a new crisis: a shortage of the microchips that power everything under the bonnet. As a parable of globalisation’s perils, this one has all the ingredients from trade war to fire, drought and Covid pestilence. When car production slumped last year, chip-makers switched to meet booming demand for parts for smartphones, tablets and laptops. Now car factories are keen to raise output again, but there aren’t enough chips to go round. The leading source, Taiwan, is entangled in US-China tensions and its factories are afflicted by water shortages; other plants have been stricken by fire (in Japan) or extreme cold (Texas).

Historians of unforeseen crises talk about ‘chaos theory’ and the ‘butterfly effect’, in which a small perturbation far away — the flapping of a butterfly’s wings in Australia, as it were — have impacts across much larger connected systems. More usually applied to weather events, the theory had its 2008 moment when the collapse of AIG, a US insurer whose name meant little over here, threatened to cripple so many banks that, without immediate bailouts, our high street ATMs (we were told) might have been switched off there and then.

This column generally takes a sceptical view of financial novelties and gimmicks. So my antennae have twitched in recent days at frequent mentions of Spacs, or ‘Special Purpose Acquisition Companies’, which are the latest plaything of Wall Street and could be about to go large over here. Also known as a ‘blank cheque’ company, a Spac is a stockmarket-listed cash shell that raises money with a view to merging with a real — usually hi-tech, often relatively early-stage — business seeking a fast route to listed status. Hundreds of Spacs have been created in the US since the craze began last year, many with celebrity names — sports stars, astronauts, rappers — attached to win attention.