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Ugly sign of rentier attitude of City’s financiers

Greencore, Britain’s biggest sandwich maker, has been planning to “deepen its leadership of food-to-go”. As Lucy Kellaway has pointed out, sandwiches don’t need leadership (they need fillings) but this week Greencore deepened its leadership by paying $747m for Peacock, a US sarnie supplier.

The deal went down like a fresh BLT and the shares rose at the sight of food-to-go leadership in action. Despite the grisly record of “transformational” transatlantic acquisitions, it’s quite an attractive story, so Greencore’s bankers at HSBC were confident that the shareholders would stump up £426m of fresh capital to help pay for Peacock.

Well, not that confident, actually. The terms, nine new shares for every 15 at 153p apiece, are another ugly sign of the rentier attitude of the City’s financiers. Greencore shares were 292p last Friday, so the price would have had to plunge by nearly a half in just over a month for the underwriters to be called upon to take the new shares.

In fact, the shares jumped to 312p. There is less chance of a single share going to the underwriters than of Donald Trump demanding a recount but the fees including the bankers, lawyers and advisers for this risk-free exercise tot up to £13m — or about eight million sandwiches.

Brexit disaster watch

We’re all doomed! British firms have abandoned £65.5bn of investment plans since the referendum. The end of euro clearing in London would cost 232,000 jobs. That beastly Michel Barnier wants €60bn for a divorce settlement. The next three summers have been cancelled.

Well, perhaps not the summers (unless global warming lets us down) but the other three horsemen of the apocalypse are headlines from Brexit scare stories this week. Do you detect a theme here? The absurdly precise £65.5bn may follow a rigorous survey of intentions but it’s patent nonsense. It’s roughly a third of UK industry’s entire annual investment and, if true, many manufacturers would be screaming for help by now.

That figure for job losses is an accountant’s soufflé from EY, starting with 31,000 “core intermediaries” and assuming a domino effect in law, asset management, catering, office cleaning, dog walking …

As for Mr Barnier, something has obviously been lost in translation from the French which he insists is the official language of Brexit negotiation.

In other news: the €1bn Bank of Cyprus is planning to replace its Athens listing with London, Google wants to raise its UK headcount to 7,000 from today’s 4,000, and Axa Investment Management is to build a 62-storey skyscraper in the City. Thus does business life go on, in the face of warnings of post-Brexit disaster. Perhaps the sky will not fall in, after all.

Here comes CPIH

Just what we need: another measure of inflation. Forget the Retail Prices Index and the Consumer Price Index, here is CPIH as the new “headline inflation” indicator. The boffins have noticed that the price of housing matters when attempting to measure the cost of living.

The government wants to bury the RPI (which does have a housing element in it), arguing that it is statistically bogus and overstates inflation. This week saw a surprise fall in CPI inflation last month, to 0.9 per cent, but you had to look carefully to find that the RPI was still showing 2 per cent. CPIH is registering 1.2 per cent.

As the official website points out, neither of these measures is a “National Statistic”, unlike yet another measure, the All Items Retail Price Jevons (1.3 per cent, and don’t ask). Inflation, defined as a change in the general level of prices, is hard to measure accurately at today’s rates and the great advantage of the RPI, for all its faults, is that it is a widely accepted indicator of the cost of living, which is what matters to most of us.

Fiddling around is asking for trouble. It encourages pressure groups for the likes of the elderly to devise measures of their own inflation, which invariably come out higher than the official calculations. Mind you, it will only get worse. Technology offers the prospect of real-time, continuous measurement. When that arrives, we will have hardly a clue as to whether we are richer or poorer.

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