Any Other Business

21 February 2009

Lloyds becomes one more catastrophe for which Brown will never apologise

How Lloyds Banking Group chairman Sir Victor Blank must regret not having had a prior engagement on Monday 15 September last year, the night he bumped into Gordon Brown at a City reception and got bounced into the takeover of HBOS by Lloyds TSB. Dubbed ‘the bank that did dull’ by Neil Collins, Lloyds was a safe bet to survive this crisis unscathed — until Brown started mumbling through his canapé about sweeping competition issues aside, safeguarding Scottish jobs and saving the world. With its debt downgraded by Moody’s this week, Lloyds will be crippled for years by HBOS’s losses even if it manages to avoid majority taxpayer ownership and Treasury control. There cannot be anyone in the City who does not now think it would have been better to nationalise HBOS without dragging Lloyds down — but if Blank and his quiet American chief executive Eric Daniels, seasoned bankers both, had seriously tried to back out, you can be sure Downing Street would have found a way to make it impossible for them. I wonder what Blank’s scholarly predecessor Sir Jeremy Morse thinks of it all; in a television interview at the height of the 1980s credit boom, he famously remarked: ‘I think rather like the Prime Minister, whom I believe thinks that it’s wrong for individuals to borrow.’ That, of course, was a reference to a different prime minister, Margaret Thatcher. This one believes nothing of the sort, and the consequence for Lloyds is just one more catastrophe for which he’ll never apologise.

Strong coffee

I’m intrigued by Nespresso, the coffee-making system that features George Clooney in its television ads. Not usually a gadget fan, I bought one of these machines some months ago on the recommendation of a friend, before I saw them advertised anywhere. It makes a decent cup of coffee, but now I read Alex Renton in the Times saying it’s immoral — because the coffee is so expensive, and not Fairtrade — and Clooney, as a UN ‘messenger of peace’, should not endorse it. Be that as it may, Nespresso is a fascinating case-study of what multinationals — in this case, Nestlé — can achieve through market power and smart branding. You might think there were already enough ways to make coffee in most people’s kitchens, but for 25 years Nestlé designers worked on perfecting a user-friendly, capsule-based espresso machine; then they licensed the technology to manufacturers such as Krups and Miele, and created ‘exclusive boutiques’ and an online ‘club’ as the only places where it’s possible to buy the capsules, which come in a dozen fancy blends. It’s all very high-end designer-chic, it’s heading for two billion Swiss francs of annual sales, and it seems to be knocking spots off rivals such as the Dutch brand Senseo, and Tassimo, developed by Kraft Foods. Immoral? Hardly: at least, not by comparison with what a lot of bankers have been up to lately — and it’s a damned sight cleverer.

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W H Thomas

February 22nd, 2009 9:59pm Report this comment

Mr Weyer uses typically bankerish language to describe his bonus. If is was "between 2005 and 2007" - does he mean just in 2006? Or two years or three? Taking the last, it is still an enormous sum to most Spectator readers - £35,000. If I were he, I would keep quiet about it, rather than boasting in a self-effacing way. A pity, in a column which is usually very sound.

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