Just a week ago the Chancellor, Rishi Sunak, was wittering on in the Commons about renewing Britain’s position as ‘the world’s pre-eminent financial centre’.
The City is off to a flying start with the decision of the pusillanimous RSA board to break up the 300-year-old insurer and sell itself off for £7.2billion at the first smell of cordite.
We shouldn’t be in the least bit surprised. When companies see big cheques waving in their face, long-term ambition for shareholders, the degradation of the City as an insurance centre and the public interest are rapidly forgotten.
High hopes: Just a week ago the Chancellor Rishi Sunak was wittering on in the Commons about renewing Britain’s position as ‘the world’s pre-eminent financial centre
Restructuring specialist Stephen Hester claims that the deal ‘represents an excellent outcome for all our constituencies’.
Who is he kidding? It is certainly good for Hester, who could collect a cool £16million from the transaction, and will be good for RSA’s Canadian and Danish buyers, who gain a great heritage name.
It is not terrific for RSA headquarters staff in the City, because at least 150 will be losing their jobs in the middle of a pandemic.
Nor should HM Treasury, desperate for revenues at present, be overjoyed by the loss of a UK corporate taxpayer or a retreat from the Square Mile at the very moment it is seeking to build it up.
There is widespread recognition that RSA has had difficulties and it is to Hester’s credit that he strengthened the balance sheet, cleaned up the inherited mess in Ireland and has taken the insurer through a period of savage cost cutting. During this journey the board received a number of preliminary offers, none of which reached the stage where it needed to be disclosed.
It was out of this process that Canada’s Intact Financial and Denmark’s Tryg eventually emerged.
It has to be asked whether a more robust chairman than former Deloitte accountant Martin Scicluna might have considered the broader implications of the deal. The price and premium might look attractive now but the sale is being conducted at the worst of times.
The current EU-UK trade talks have been a long shadow over the pound and the FTSE 100, so there is a big uncertainty discount. London shares trade some 20 per cent below foreign counterparts.
As is often the case with recent takeovers it is overseas hedge funds and activist investors – in this case Sweden’s Cevian Capital with a 14.9 per cent stake – who call the shots, riding roughshod over longer holders.
RSA falls outside the Government’s new national security rules on foreign takeovers. But selling family silver does fall foul of efforts to bolster the City.
On a short break in Dorset on the eve of the current lockdown I was surprised by a sight not seen since the collapse of Northern Rock in 2007.
In both Sherborne and Dorchester there were long queues way down the high street outside branches of Barclays.
This, one hastens to add, was not a run on the bank but demand by customers of all ages waiting in the rain to access services in the age of social distancing.
It was a reminder that not everyone in Britain lives in a digital bubble where financial services are accessed online.
Micro-businesses, the elderly, those fearful of using ATMs because of Covid and many others really value bank branches.
Metro Bank’s accounting for loans may have been a bit screwy but no one will dispute the marketing pizzazz of its branches, which enabled it to rapidly grow its customer base.
How dispiriting it is that after a moratorium on branch closures at the peak of the pandemic, Lloyds Banking Group has decided to pick up where it left off with 56 new closures, covering the gamut from Bath in the west to Leeds in Yorkshire and gentrified Stoke Newington in London.
This is the latest round of a rolling programme which has seen 627 branches axed since 2015. It is not a legacy which scheduled-to-depart Lloyds chief executive Antonio Horta-Osorio can be proud of.
Sell, sell, sell!
Hargreaves Lansdown (HL) may still be living in fear of regulatory and legal actions in the wake of the Neil Woodward debacle. But the share platform’s founders are living high off the hog.
Stephen Lansdown sold £103million worth of HL shares this week, bringing his total sales this year up to £231million.
Perhaps he knows something about capital gains tax that we don’t.