The antics of Paul Flowers, aka “the Crystal Methodist” from the Co-op Bank, feel like ancient history, so it almost came as a surprise to be reminded that the Financial Conduct Authority was still rooting around past disasters at the “ethical” bank.
The regulator’s conclusion: Flowers has been banned from working in financial services, but not because of any day-to-day incompetence as chairman of a bank that came close to collapse. Rather, the former reverend was ringing premium-rate chat lines on his work phone and used his email account to transmit “sexually explicit and otherwise inappropriate messages” and discuss illegal drugs.
As the FCA says with a straight face, “this pattern of disregard for standards that he is expected to meet demonstrates a lack of integrity”.
A more pressing question, however, is why it took the FCA four years to reach its conclusion. One assumes it is because the regulator was contemplating other enforcement actions against individuals at the Co-op Bank before deciding it didn’t have sufficient evidence. Even so, a four-year investigation that ends up banning one individual (who is retired and unemployable for practical purposes) for sex and drug matters feels like a waste of valuable time.
The serious consequence is that it is only now that the Treasury can order work to start on a separate independent review into whether regulators were asleep at wheel as the Co-op Bank descended into its £1.5bn black hole. That investigation was first announced in 2013 but was delayed while the FCA did its enforcement thing.
Investigatory wheels, it’s probably true, must turn in the correct order. But why can’t they turn more quickly? Nicky Morgan, chair of the Treasury select committee, clearly shares the frustration. Her committee could usefully ask how these investigations can be accelerated, and demand answers from the FCA chief executive, Andrew Bailey. It is hard to believe US regulators would take so long.
Melrose places its bets
The Melrose crew will count that as a decent result. Two and a half hours of probing by MPs of their £7bn bid for GKN produced few horrors. Melrose chief executive Simon Peckham even got to air his cheeky line that “we have a longer-term strategy than GKN has right now”.
That’s fair in the sense that GKN is flapping wildly and may do a deal to sell or combine its automotive division with US group Dana. Yet Melrose always tries to flog the companies it buys within three to five years – it is hardly in a position to offer sermons on long-termism.
In one area, though, the MPs made the task for Melrose slightly tougher. They rowed in behind the Pensions Regulator in pushing for pension arrangements at GKN to be cleared before any takeover. That demand is reasonable for two reasons. First, Melrose would run GKN with substantially more borrowings. Second, Melrose’s excellent record in dealing with pension deficits elsewhere (no quibble on that point) is interesting but not strictly relevant; it’s the new arrangements themselves that matter.
What is GKN?
GKN is a global engineering business based in Redditch, Worcestershire. It employs nearly 60,000 people across 30 countries.
Once known as Guest, Keen and Nettlefolds, the firm can trace its origins back to 1759 and the birth of the Industrial Revolution in Britain.
Split into three key divisions – GKN Aerospace, GKN Driveline and GKN Powder Metallurgy – the multinational designs, manufactures and services systems and components for most of the world’s leading aircraft, vehicle and machinery makers.
In 2017 it recorded pre-tax profits of £572m.
Photograph: David Davies/PA
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So far, Melrose has offered to inject £150m into the GKN schemes. That’s a start but probably isn’t its best offer – and it’s not a commitment to get a green light from the regulator. Why the hesitation? Possibly because Melrose would prefer to win over GKN’s trustees before approaching the regulator.
If so, the approach would be logical. But a deal with the trustees would have to be agreed soon since the last chance for Melrose to improve its offer for GKN itself is the week after next, and it would be better if the pensions issue was clearer by then. That pressure of time works to the trustees’ advantage. This is their moment of maximum negotiating leverage. In their shoes, you’d be pushing for an upfront sum greater – in fact, much greater – than £150m.
Hard times on Oxford Street
Oxford Street is London and Europe’s premier shopping street, or so the marketing blurb usually runs, but here’s a sign of the times: Debenhams is in talks to rent out excess space in its flagship store to a provider of temporary office space. This comes after news that part of the old BHS store off Oxford Street will be turned into a crazy golf centre.
The rise of online shopping is hurting traditional stores everywhere. Even so, it’s remarkable that, having done gyms, cafes and restaurants, retailers such as Debenhams are already turning to flexible office firms. Landlords, whistling cheerfully, tell us that retail rents are holding up. Really? For how much longer?