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Lloyds becomes one more catastrophe for which Brown will never apologise

18 February 2009

12:00 AM

18 February 2009

12:00 AM

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.


Ex-banker apologises

Whenever I let rip in print about bankers’ morals, I come clean by slipping in a mention that I used to be a banker who occasionally received bonuses. I was quite excited about them at the time — the late Eighties — but to illustrate the difference of scale, the biggest annual pay-out ever tossed my way was roughly equivalent to a single working day’s remuneration for Royal Bank of Scotland employee Jay Levine, who collected £40 million between 2005 and 2007. With hindsight, the real reward of my banking career was not the cash but the opportunity for exotic travel and human observation — and I’m slowly reliving it all by using up the vast collection of matches I amassed on my tours. This week, it’s a box from the dining room of the historic Manila Hotel, once General MacArthur’s headquarters, where I stayed during a banking conference in 1988. Dinner was made memorable by a beautiful Filipina, clad in a white toga, whose job was to sell cigars from a trolley. For each customer, she went through an elaborate routine of cutting, rubbing and warming the cigar, dipping it in brandy and eventually lighting it: the performance was so erotic that every fat-cat banker in the room had to have one, the bigger the better, until the smoke was so dense we could barely see each other. Reader, I had one too: let me take this opportunity to say ‘Sorry’.

Après ski

I can’t compete with the glamour of Taki’s après-ski reports from Gstaad, but I can offer a few economic observations from Méribel and its neighbouring French valleys. Notoriously mispronounced ‘Mirabelle’ by posh Brits, Méribel used to be SW3 on skis — but this year the Sloane voices were far outnumbered by the Irish, indicating that there’s still some compensation for the pain of euro membership. In neighbouring Courchevel, gone are the Russians with their bodyguards, suitcases of cash and jet-loads of ‘students and models’ for female companionship. The resorts are by no means empty, however; many people seem to have decided to blow the redundo and go for it, one last time. It’s expensive but it’s worth it, and for £40 a head you can still enjoy one of the world’s most stylish lunch spots: Courchevel’s Restaurant Le Bel Air under the command of dazzling Christophe Gournier, who greets me every year as though I might be Michael Winner. ‘Alors, Christophe,’ I said in best Mirabelle franglais, gesturing at the crowd on his terrace, ‘Pas de credit crunch ici, je vois.’ He flashed me his George Clooney smile: the best entrepreneurs always survive.

Recession-balls

Many thanks to readers who have sent in ‘Recession-balls’ howlers. Do keep them coming, to business@spectator.co.uk. My pick of the week was an email to Radio 4’s Money Box Live: ‘Tiffany says she has a 100 per cent mortgage of £225,000 from Northern Rock but she’s now in negative equity to the tune of £10,000. The loan was on two-years-fixed at 6.15 per cent, but now it’s switching to the Rock’s Standard Variable Rate, which has just come down to 4.79 per cent. Tiffany wants to know if she should re-mortgage with another bank. The experts are shaking their heads here.’ Think about it, Tiffany: your fellow taxpayers, as owners of Northern Rock, are lending you ten grand more than the value of your house, for three grand a year less than you were paying before. How lucky can you be?


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