I’ve been in the pulpit again, this time to salute the centenary of the death of Charles Norris Gray, a formidable Victorian vicar of my Yorkshire town of Helmsley. Gray was a social activist with strong opinions on everything from sanitation to election candidates, and he did a great deal of good for his parish — so I’m not averse to the idea of churchmen intervening in worldly affairs, and I think Archbishop Justin Welby was right to highlight the parasitical nature of ‘payday lenders’ such as Wonga, even if he was subsequently embarrassed to discover that the Church of England was an indirect investor in it. But by his own sophisticated standards I think he is a bit unworldly in his enthusiasm for credit unions as the morally acceptable solution to the cashflow problems of the poor.
The volume of borrowing (just under £1 billion) and number of borrowers (just over a million) from credit unions or financial co-operatives in the UK has roughly doubled since 2004, while the number of unions has shrunk by a third. Those are not surprising trends, but an archbishop-driven further expansion of the sector would almost certainly lead to higher levels of bad debt and the swallowing up of weak unions by stronger ones — diluting the localism that is the movement’s strength, and forcing it towards more commercial lending criteria.
So Welby would do better to turn his firepower on the commercial banking system itself, urging a return to genuine localism and human contact both in the management cultures of very big banks and in the nurturing of smaller ones, either de novo or (as in the case of TSB, which is due to re-emerge from Lloyds in September) carved out from those currently under state -control. The announcement of Barclays’ plan to meet tougher regulatory demands by raising £5.8 billion of new capital while continuing to shrink the dangerous parts of its balance sheet was a reminder that bigness itself remains the heart of the problem.
A bank whose liabilities add up to more than the nation’s economic output can never be totally ‘safe’, however well capitalised, and a bank with 15 million UK customers (as Barclays has) will never learn to treat them with respect or sympathy for their individual circumstances. A better banking world would offer a multiplicity of choice, ownership, tone and niche specialities — and guess what, the multinational corporate clients who are used as the excuse for the bankers’ reluctance to give up their beloved bigness would find everything they need still on offer, but all the more competitively. I feel another sermon coming on, and perhaps I should send a draft to Lambeth Palace.
My man in the pink tailcoat pops out of the Bank of England to put a bet on at Coral in Cornhill, and rings to tell me I was right about the Treasury bagging the deputy governorship about to be vacated by Paul Tucker — but that the chosen candidate, Sir Jon Cunliffe, stayed out of the odds because he’s on secondment to the Foreign Office as Britain’s ‘permanent representative’ to the EU.
Luckily that didn’t stop my man getting a squint at the Cunliffe file on Governor Carney’s desk, however. Uniquely, he comes with good references from both Gordon Brown and David Cameron — as well as high praise from Carney himself, who watched him at work as a ‘Sherpa’ in G20 conclaves during the financial crisis. ‘Very tough negotiator, not scared of digging in hard,’ says a note in an unidentified hand. ‘Reputation for secrecy. Never at the silky end of diplomacy. Some nervousness in Brussels when he was appointed.’ Some nervousness in Threadneedle Street too, I should imagine, as the new regime begins to flex its muscles: my man had better not stand under a CCTV camera when he calls with news of the next surprise appointment.
Hamburger in the brioche
‘Chapeau to Maurice!’ said Sir Martin Sorrell when I asked him what he thought of the merger of Publicis of France, led by Maurice Lévy, with Omnicom of the US led by John Wren, to create the world’s largest advertising and marketing business with combined revenues of $22 billion. That leapfrogs Sorrell’s own WPP group at $16 billion. He went on less sportingly to add, ‘This is a great opportunity for WPP to pick up clients and good people out of the merger. And if I was an Omnicom shareholder, I’d be very cross about it.’
His point was that Omnicom accounts for $14 billion of the $22 billion of combined income, but has sold itself into a so-called ‘merger of equals’ in which the hyper-active, high-profile 71-year-old Lévy and the Florida-resident, golf-loving ‘quiet man of adland’ Wren have pledged to serve as co-chief executives for the next two and a half years. Within that harness, their challenge is to synthesise opposing strategies: Lévy’s love of one headline-making deal after another, especially in the digital sphere, versus Wren’s more cautious, money-driven business-building approach.
Looking at pictures of the pair embracing awkwardly in front of the Arc de Triomphe this week, you don’t need a waspish competitor like Sorrell to tell you first that French and American business cultures just don’t mix, and secondly that global mega-mergers rarely generate harmony or shareholder value. As Lévy secures more key posts for Publicis people, Wren will be left looking increasingly like the hamburger in the brioche, and he’s the one most likely to be spat out.
Lévy’s first step into the international arena, incidentally, was his £1.3 billion purchase in 2000 of the troubled Saatchi & Saatchi — which both Omnicom and WPP had also been circling. That came five years after the founding brothers were forced out of their own firm by disgruntled shareholders, to set up in competition as M&C Saatchi. Lévy is a long-time friend of the younger (and these days less controversial) Saatchi: I gather they once contemplated setting up in business as ‘Maurice & Maurice’.