I’ve always feared that if a reader bothered to examine and collate the views expressed in this column, the exercise would reveal a mass of contradictions and inconsistencies. I have long had a defence ready: commentary is an organic process, with opinions unfolding and adapting to changing circumstances and, in any event, I’m paid for provocation, not consistency.
Nevertheless, the spectre of the archivist with the card-index is a haunting one. So, in this, the last offering of the year, I thought I might launch a pre-emptive strike, an act of self-immolation in which I review some of the opinions of 1998 against the benchmarks of consistency and outcome.
A swift tour of the cuttings file reveals, if not exactly themes, three arenas in which I have performed – the retail industries, the economy and corporate activity of a mergers and acquisitions nature. These are the navels at which I now gaze.
My greatest fear is the unconscious two-hander, in which I express an opinion on a matter of current importance, move on for some weeks and subsequently return to the subject in the light of developing events, only to rubbish my original treatise. Happily, this year’s two-handers don’t look too bad.
After last Christmas’ disappointing retail market – which may look positively buoyant compared with this year’s experience – I was suggesting that we would witness a good deal of consolidation in the sector as companies found strength in numbers. The good news was that I had evidence to return to the subject in May – the bad news being that it was to report that an attempt at consolidation, the mooted merger bet ween Asda and Kingfisher, had collapsed.
The spirit of consolidation was there, but the flesh was weak and, I have to say, that there has been a good deal less consolidation in retail markets – notwithstanding the excellent deal that Great Universal Stores struck with Argos – than I anticipated. This has, in part, been down to equity markets that couldn’t decide whether they were crashing or recovering and the consequent volatile effect on market capitalisations – nobody has wanted to overpay for something that will be bargain-basement next month.
Such thrift was apparently lost on pharmaceutical giant SmithKline Beecham’s chief executive, Jan Leschly, who couldn’t wait to spend 75bn on American Home Products, a move I questioned on the grounds of uncontrolled hubris in late January. Once SB had spurned AHP in favour of Glaxo, only to watch that proposal fall apart too, I was presented with the opportunity for the second part of a two-hander in March, when I could record not only the SB troubles, but also other collapsed deals, such as Reed Elsevier’s play for Holland’s Wolters Kluwer.
This was turning into a bad period for proposed takeovers. Those over-inflated equity markets had much to answer for. Once they had begun their see-saw characteristics in the second-half of the year, the consolidation trend did develop further in the pharmaceutical sector – most notably with the recent 43bn merger of Zeneca with Sweden’s Astra. This sector has long been in consolidation mode – I was a little optimistic, as it turns out, in my predictions about consolidation in the retail sector. But it will come.
My other big two-hander in the retail sector was about the “greedy” supermarkets. In August, I said that the Office of Fair Trading’s inquiry into alleged abuse of buying power probably came five years too late to be relevant and then, last month, suggested that “Rip-off Britain” was a mirage, given the UK’s cashflow structures and the prospect of recession. To press home this consistency, I reiterated the line last week – though the columnist should beware lest consistency becomes repetition. In this case, I think repetition is called for – the prospect of retail slump is too important not to be identified wherever it appears.
That’s because a good deal of the British retail sector doesn’t really appear to have realised what it’s facing. It may be too smug or complacent in some quarters. I suggested that this was the case for WH Smith under chief executive Richard Handover in March. Handover has since proved more than competent at developing the WHS offer and I must revise my opinion.
More recently, I think smugness and complacency was very much a problem in the Marks & Spencer boardroom. I said so last month and I think that view stands.
The threat that complacency poses for corporate Britain is best answered by the question: what is the single biggest issue facing business in 1999? It’s the economy, stupid.
I predicted in April a slide in the UK equity markets of some 25 per cent while writing about the problems of retailer Next, and in early July I warned that globalisation was as much a symptom of forthcoming economic collapse as it was about prosperity.
I was far from alone in predictions of doom, so I claim no laurels for those columns. But equity markets have rallied and remain suspiciously high, encouraged by interest-rate cuts. So much of what I expected in 1998 – collapsed values and consolidation – has only been postponed until 1999.
With that thought, I wish you a happy Christmas. I would also wish you a prosperous new year, but I fear that might make me sound inconsistent.