Are the Tories reading this blog?

Today’s FT front page story that George Osborne is considering selling a tranche of shares in Lloyds TSB and RBS to retail investors in a re-run of the 1980s privatisations echoes an idea put forward in this blog a few weeks ago (See “What next for the banks?” August 25th) and prompts the question: are the Tories reading this blog for policy ideas?

Whilst I don’t have an answer to that question (if you are could you also consider capping my council tax?) this is certainly populist politics from the party that is probably going to be our next Government and once again leaves Labour trailing in its wake, just as it did over MP’s expenses.

However, there is another good reason to consider a strong retail investor presence on the shareholder register. One of the main reasons behind the deliberate targeting of millions of small investors with the 1980s privatisations was in order to make it more difficult for a future Labour Government to renationalise.

Once they become private companies again our banks will be prey to global M&A activity and the possibility of foreign takeover. My personal view is that it is vitally important we retain a strong banking system populated by British-owned banks, not sub-branches of some enormous global banking institution.

Normally, any predator would only have to persuade a dozen or so institutional investors of the value of a deal but with a strong retail investor presence the logistics of persuading shareholders to accept an offer becomes that much more difficult and high profile within in the media.

At the moment, this is just being floated by Central Office but I suspect it will find its way into the Tory manifesto as Mr Cameron certainly knows a popular policy idea when he sees it.

End of the PLC?

Excellent article today in The Times by Charlie Mayfield, Chairman of the John Lewis Partnership, which asks some serious questions about the future of the PLC as the best model for business in the UK. It can be found HERE.

Mayfield characterises the PLC model as being prone to short-termism, elitist, in that it usually excludes the means of production, namely the actual workers, from the ownership structure and only interested in management teams that can deliver double digit growth year on year, or else.

In all honesty, there’s not a lot I can disagree with here. My own time in the City was characterised by deepening disillusionment with the obsession for capital growth over income stocks, the need for “excitement”, which usually meant M&A activity, and an almost total disregard for the retail investor, otherwise known as you and me. All of this led very sound companies offering a good dividend year on year to be downgraded or just plain ignored by analysts with the result that management teams often resorted to desperate M&A activity to engender some interest in their stock. The JD Sports acquisition of First Sport would be a classic case in point, which nearly brought down the entire company.

While I don’t think it’s the end of the PLC, I do think the UK economy could benefit from some diversity. Again, Germany could be a good model, where major companies like BMW, Vaillant, Schaeffler etal remain private, family owned concerns existing alongside the likes of Siemens which is listed in Frankfurt and New York.

Worth a read.