And Some Memories of Millbank Tower – The Home of Spin!
Jobless numbers rising, government borrowings still going up, the prospect and expectation of yet another set of miserable growth figures Friday (we expect 0.4% growth when official GDP data for the January to March 2010 is announced) plus confirmation overnight that the IMF is now scaling down growth expectations for the UK economy in 2011 leaves one to suggest that bad news on this scale wasn’t supposed to be happening quite like this when Gordon Brown plotted the most likely date of the General Election back in January. You bet it wasn’t! Not that the continuing poor raft of macro comes as that much of a surprise to those of us that had not been taken in by the talk of all that resumption of growth and the like coming from New Labour spin. Indeed, with exactly two weeks to go before the election retail sales figures apart it is hard to see any further macro economic data playing into the hands of the spin doctors at Labour headquarters at Millbank Tower.
Ah, now there’s a thought. Before talking more on the above ever increasing amounts of bad economic news coming thick and fast into the Brown camp allow me to share a few actual memories of Millbank Tower itself and particularly of the previous occupant who was in fact responsible for the original development and had originally owned the whole building, Vickers plc. Laugh as you will but thinking about this during the morning has led me to the conclusion that this place really is the true home of spin!
Driving past the Millbank Tower headquarters of New Labour this morning and past those horrible election advertising signs I recalled that this once fine 1960’s building had in fact been built as the headquarters of Vickers plc. The once proud and mighty Vickers that was perhaps best known for making guns, tanks, ships and planes had once actually been the largest engineering company in Britain. Indeed, through the greater part of a long and illustrious history stretching back over one hundred years until the final demise in the late 1990’s Vickers had also been a highly successful company too.
In fact the period of success and of being one of the largest five UK exporters lasted right up until the company was savaged by ‘Old Labour’ through the nationalisation of its steel, shipbuilding and aerospace industries at various points between 1964 and 1970.
But if seeing more than half of the portfolio of businesses being nationalised isn’t enough to drive anyone to distraction it got even worse for poor old Vickers as following denationalisation of some parts of the former business by the Heath government (steel) the same business was once again renationalised by the 1975-9 Wilson/Callaghan government.
As an analyst I had the pleasure of having Vickers on my list of companies from 1983 but by then this was a company not only struggling with an array of highly cyclical businesses but also one that size wise was already a shadow of what it had once been. I could at least feel though that I had known Vickers for very much longer than in fact I had because of having read the late Harold Evans’ excellent book ‘Vickers Against The Odds’ that had been published a few years earlier.
During the 1980’s the very much weakened Vickers struggled on with a still significant marine power, transmission and steering businesses plus the Swedish based KaMeWa ship propeller business, office furniture in the form of Roneo Vickers, various other bits and pieces of engineering including equipment for the printing industry and design and manufacture of the Challenger Tank. In fact in 1980 Vickers acquired Rolls-Royce Motor Cars in what was effectively all but a reverse takeover. From that period on Vickers was the master of its own demise – using far too much of management time and resource fighting the government on nationalisation compensation over the best part of fifteen years only to lose and spinning to analysts that all was well.
Millbank Tower then – the real home of spin! Indeed, I would I am afraid have to say that Vickers management during the post 1980 period right up to the time that what was then left (minus the Rolls-Royce and Bentley cars which had in a somewhat strange process reflecting the importance of the brands by then been sold respectively to BMW and Volkswagen respectively) consumed by Rolls-Royce plc (RR only wanted the important Marine business and sold the rest) was undoubtedly the most arrogant that I ever had the misfortune to know as an analyst. Perhaps it is something in the water Millbank Tower that makes those that occupy it so arrogant because it has clearly rubbed off on New Labour since they moved into the building several years ago. Nevertheless, worth recounting that visits to the Vickers boardroom at Millbank Tower and which was located on the very top floor of the 1960’s building were always very enjoyable for one aspect – the view over London may surely be considered as the very finest available – despite the subsequent building of the nearby London Eye.
Back to the events of today though at the New Labour ranch and we may be in very little doubt that news that government borrowings for 2009/10 hit a record high of £163.4bn – equivalent to 11.6% GDP – will be something that the other two main political contenders in the upcoming election will be quick to fire back at the government. The fact that end year borrowing figure is actually lower than the Chancellor predicted in the budget earlier this month matters not one jot to me. The pint is that having a deficit such as this is neither sustainable nor desirable. During March and despite tax receipts rising the government still borrowed no less than £23.5bn, a frankly appalling number that confirms as yet that it has done absolutely nothing to ease the deficit situation by cutting public sector costs. Assuming that expenditure on health is sacrosanct and continues to rise unless we can all of a sudden make good the 6% GDP that we have lost over the past two and a half years and create growth of an additional 2% each year my best guess is that some public sector government departments will need to cut expenditure by 20% or even as much as 25%. Of course I am bound to be hugely concerned about cuts defence – now placed I understand by the Brown government at only ninth in terms of overall importance!
Today also sees confirmation that total UK government debt is now a very heady £890bn – yet another absolutely appalling figure that the government seems to believe is not something that should worry voters. Timing is everything of course and with foreign affairs on the menu for the three party leader debate due on Sky News tonight it is impossible to say whether those involved, ready and willing will be allowed a chance rub more bad news in the governments face. Let’s hope though that they can and that they do.
