Mandate, Hogarth & Penrose integrate into new single company called MHP

Engine, the UK’s largest independent communications business, announces the integration of three of its public relations businesses, Mandate, Hogarth and Penrose, into a new single company, MHP Communications.

MHP has 160 employees and annual revenues of £17m.

Gay Collins, former Chief Executive of Penrose, becomes Executive Chairman of MHP. Sacha Deshmukh, former Chief Executive of Mandate becomes Chief Executive Officer of MHP. Andrew Jaques, former Chief Executive of Hogarth becomes Chief Executive of MHP Financial & Investor Communications.

Announcing the new company, Gay Collins said:

"This move creates a major force in the world of communications, where scale and scope is becoming an increasingly important factor in the buying decisions of clients. MHP has been structured to take forward the heritage of Mandate, Hogarth and Penrose within a model that we believe will deliver even more for our current clients as well as future clients and our people. We are excited about taking MHP from three successful businesses to an organisation that will make a measurable difference to the communications landscape."

Sacha Deshmukh said:

“MHP combines in-depth knowledge of the full range of audiences that matter to businesses and brands. From investors to consumers, from politicians to employees, from pressure groups to business partners, MHP understands those audiences and how to reach them.

A team of 160 and annual revenues of £17m makes us one of the strongest and largest companies in the PR market. But our goal is not size. It is to provide a unique quality and way of working with our clients. That is why we have designed MHP to work in a very different way from what we think is the tired, standard PR company model. We ensure the client is the absolute centre of our focus by organising our business and revenue around client sector, not PR discipline silo. It means that our only interest is in delivering exactly the right mix of expertise and brains for every single clients’ needs. MHP is designed to avoid the problem that plagues old-model PR companies where time, energy and focus is wasted fighting internal battles to protect internal cost centres.”

Andrew Jaques said:

“MHP will be significantly growing its City and financial team as we expand to meet our ambition to sit in the premier league in the financial and investor communications market. We will build from the many strengths of Hogarth, but also diversify our sector experience and attract new clients and more great people to the MHP business.”

MHP also announces that Sir Brian Bender, who until 2009 was the Permanent Secretary of the UK Department for Business, Innovation & Skills, is joining its Board of Directors, as a Non-Executive Director.

All former Mandate, Hogarth and Penrose consultants are transferring to MHP and the company plans for further expansion in staff numbers fuelled by continuing impressive growth. As part of its launch, MHP also announces the opening of its new Brussels office. The company will be announcing its Brussels leadership team late in the autumn and MHP Brussels will be fully operational from 1 January 2011.

In November 2010 MHP will be moving into a new custom-designed London office, currently under construction. The MHP London HQ will occupy a whole floor of MHP’s parent group Engine’s building in London’s Oxford Circus. The former Mandate offices in Edinburgh and Washington DC now become MHP offices. MHP also has a project team developing implantation plans to open MHP offices in other key global markets in 2011, with the initial focus being in Asia.

Hold the Front Page - "Consumers should Budget"!

Of late there appears to have been an absolute deluge of programmes on ITV and the BBC about the credit crunch and the consumer. The latest one to pique my attention was a series on BBC2 consisting of a multitude of experts urging consumers to "read small print" and "be careful to budget".

While it would be easy to mock BBC2 and its hordes of well-meaning presenters, for stating, as my dear father would put it, “the bleeding obvious”, it did strike a chord with me. People were literally hanging off his every word in a way comparable to how I would image the crowd looked at Jesus when he made his speech on the Mount.

And that’s when it hit me. Back in the day people were taught “few things worth having are easy to get” yet this now appears to have been replaced by “if it is worth having it should be easy to get and someone else should do the thinking for me”.

And this is where I have to say I get quite cross. I can honestly say I am truly fed of people filling my screen who want sympathy for failing to engage their brain.

“Oh I took out a £200,000 loan and I only earn £20,000.” Well, I hate to say it but that is your problem.

“Oh a broker told me to do it and then the bank said it was a good idea.” Great, so if the broker told you to sell your granny and the bank recommended opening up a brothel in the driveway on the grounds of it being a good “business opportunity”, would you do it?

A year ago I was looking to buy a house when a mortgage broker told me pretty much the same thing. He even recommended taking out a residential property on a buy-to-let purchase, suggesting there were institutions which would be prepared to offer me five times my salary with a "bit of wangling". Guess what I said? Thanks but no thanks. I knew I couldn’t afford it and it didn’t matter what that guy said.

Now there is a current argument that consumers “don’t know”, are “unaware” of financial matters and should be “taught” the basics. I can accept this as, indeed, the general public do appear to misunderstand basic financial concepts but since when did common sense have to be taught? As the FSA has been saying for years, if it seems too good to be true, it probably is.
I am not asking for calculations similar to those enacted by PhD students from Cambridge. I am not asking for great thoughts similar to Einstein when he discovered E=MC2. I am not even requesting a "Eureka" moment from the public at large in the style of Archimedes. I am merely asking people snap back to reality and start understanding that just wanting something does not mean you should have it and education can only go so far.

Responsibility for oneself and for one’s actions can not be taught in schools and ultimately there has to be an end to this situation where people are always allowed to blame anything and anyone except themselves for their own predicament. And get compensation and rosy TV footage as we are encouraged to lambast banks, the prime minister, the cat and Mrs Higgins at No 43 in the process.

England did not cover itself in glory during this year's World Cup but the general population remained unmoved as they had been engaged in another sport, that of navel gazing for a fair while.

And if there is one thing I hope the credit crunch ends, it is this.

SI

You've done your A levels, now for your owe levels

The long term future of pensions and saving in general is looking bleak as new generations of newly qualified graduates try and enter the job market saddled with debt, with no hope of being in credit for many years.

As more and more students are encouraged to go to university after school as GCSE passes improve year on year (23 years and counting), the banks must be rubbing their hands with glee at the prospect of a new generation of long term debtors customers. What chance have those students departing university got of paying off their student debt, made up over three or four years of fees, loans, credit cards, student union bar tabs, in the short term?

Research in an annual survey by university guide Push suggests average debt is projected to rise to £25,000 for those starting university this year. Add to that the Coalition signalling the fact that tuition fees will potentially almost double and a possible progressive loans system put in place, many young people will leave full time education massively in hock. What way is that to start their fledgling careers?

For those living in the South East, life for graduates could be even tougher. Apart from the cost of living compared to other parts of the country, most 20-30 year olds will be looking to get on the property ladder before they are able to instigate their long term savings and investment plans, such as pensions and ISAs etc. Every Englishman's house is his castle and we Brits see bricks and mortar as our favoured long term investment, yet many first time buyers face a hefty initial deposit. Where are they going to get this money? Borrow off their folks or join forces with friends to purchase are hardly examples of being in the full throes of adult independence. Would-be homeowners are facing an uphill struggle to get on the housing ladder and all the early indications are that it’s not going to get any easier – despite lenders seemingly trying harder to ease the pain. However, many of the recent mortgage rate reductions have been aimed towards borrowers with a 20% plus deposit, with mortgage products for first time buyers still not available from some high street lenders.

According to the National Housing Federation, the average 21-year old today will have to wait until they reach middle age before they can buy their first home. Those aiming to buy in London are warned that they will have to save up until they’re 52 years old to afford a mortgage.
Therefore as first time buyers are pushed into middle age before achieving a suitable deposit on a house, their ability to save for their retirement is massively shortened. This in turn will put extra pressure on the state pension system and why we will all be forced to work longer as the retirement age creeps up. Increased longevity and a lengthy retirement is not a lip-smacking prospect when you cannot afford to live through it. Experts advise us that pensions are the most tax efficient way of saving, but with no access to these funds and a credit easy environment of live-for-today-and-to-hell-with-tomorrow, people need to be educated to see the value of saving for their future. So, if you want a higher income in retirement than you get from your State Pension, you need another source of income as well. It’s never too early to start saving for your retirement, but in all probabilities many graduates will defer starting their pensions saving.
So, what can be done to help these impoverished ex-students as they start their working lives manacled to their banks? Well, for a start begin the process of financial education in secondary schools to begin the process of helping them with their money matters. This could continue into their tertiary education and actually point out the amounts of potential debt that can be incurred by pursuing further education, advice on how they can manage their debts, the benefits of savings and investments, provide guidance on the help they can get from the likes of financial advisers and financial websites.

In the meantime, we all look forward to the onset of auto enrolment into NEST, the government-led default pension scheme into which all employees will be auto enrolled starting from 2012, which will go some way to getting millions started into the savings habit, and in particular saving for their retirement. But does the average graduate even know about NEST and its benefits, let alone what an annuity is ...?

JA

NEST is best. Or is it?

As plans to introduce auto enrolment through the National Employment Savings Trust (NEST) continue to be considered, there are signs of growing polarisation of opinion over the benefits of such a scheme, as highlighted between Pauline Skypala's article in the FT this week ("Why proceeding with Nest is crucial") and Penrose's recent annual survey on the future of the investment industry.

Next month, the Government will announce its conclusions following a consultation period on NEST and whilst bodies such as the NAPF and Association of British Insurers see potential benefits, notably its provision of a low-cost scheme for those on middle-low incomes, the Penrose survey (targeting senior investment and pensions industry figures) suggests that the vehicle simply does not make adequate provisions in terms of savings for its members. The Conservatives have argued that the scheme is superfluous, as suitable infrastructure to deliver pensions to the target group already exists. Interestingly, just 1.9% of survey respondents saw NEST as being affordable and practical.

Although it is generally accepted that auto-enrolment may be adjusted, but not discarded completely, there are growing concerns among its advocates that such amendments could ultimately lead to its demise. One possible solution is to effectively privatise NEST, whereby existing schemes would expand to enrol all employees, without the intervention of the Government.

The main stumbling block lies with the target audience that NEST seeks to help. Many low-middle income households don't see pension saving as a financial priority, or simply can't afford to contribute a sufficient amount towards a pension in order to make it worthwhile. The result of lower contributions ultimately leads to higher costs for providers, limiting the viability of privatising the scheme.

Assuming that Nest does go ahead, however, it will at the very least raise awareness of an increased need to save towards retirement. But as it stands, NEST is still an initiative that brings as many, if not more, pessimists than it does proponents.

JM

Shareholding all the cards

The SEC's vote this week to change the rules on shareholder influence in US boardrooms has predictably ruffled corporate feathers.

While SEC Chairman Mary Schapiro sees the move, which allows shareholders with a 3% plus holding in a listed company to nominate board members, as "a matter of fairness and accountability", business lobbyists are far from convinced. "A giant step backwards for average investors", reckons David Hirschmann of the US Chamber of Commerce. “So fundamentally and fatally flawed that it will have great difficulty surviving judicial scrutiny,” argues Kathleen L Casey, one of the two Republican Commissioners who opposed the change.

Paul Atkins, in the Wall Street Journal, warns the new rule would "increase the clout of special-interest groups at the expense of the vast majority of shareholders", and business leaders have vowed to fight on against the changes. On the wider principle of regulatory oversight of board behavior, there is still intense debate as to whether bosses' pay is any of the government's business.

But given what's happened in the last couple of years, it's hardly surprising shareholders are looking to flex their muscles. In a survey of senior investment and pensions figures published earlier this week by Penrose, two thirds of respondents anticipated growing shareholder presure on fund managers to boost levels of engagement with corporates.

Whatever your view on government "interference" in corporate governance standards, few would deny the behaviour of business directors falls within the remit of business owners. And since even the biggest institutional investors couldn't possibly hope to keep tabs on governance at every company they invest in, there would seem to be only two alternatives. Cross your fingers and rely on the good faith of directors (seriously?). Or take an active approach to engagement within a reasonable and proportionate regulatory framework.

AF

The Age of Austerity?

Yesterday, for the first time since 1986, the opening day of an Oval test match did not sell out. This could be down to the pusillanimous performance of the touring Pakistan team in the preceding matches, or maybe the looming crisis facing English cricket. But seen alongside a range of other recent developments, it might be perceived as an indication that we are entering what the boss of Asda this week rather gloomily termed an "Age of austerity".

The debate about how best to approach this daunting prospect continues to rage. Lord Skidelsky and Michael Kennedy, writing in the Financial Times recently, invoked Keynes' argument that “the boom, not the slump, is the right time for austerity at the Treasury”, and concluded that "austerity in the capital budget is the worst possible remedy for a slump".

But, as P-Solve CIO, Glyn Jones, pointed out in this week's Financial News, the snag with this argument is that austerity measures weren't applied during the boom years. Furthermore, are we really looking at meaningful austerity measures anyway? The outgoing Labour administration's final forecast was that the value of all UK gilts in issuance over the next five years would rise by another £567 billion, whereas the new coalition government forecasts this figure will now be "a mere £454 billion. And we are told this is austerity." In fact, he continues, it's unlikely that any government will have the nerve to impose anything resembling real austerity, because of the harmful impact on the electorate. More likely, inflation will come to be seen as the best way to write off colossal debt levels. As Mr Jones concludes, "outright default is unlikely for most countries, but inflation is not. It is simply the easiest way to share the pain of removing excessive debt."

AF

Financing the Frontiers

The recent news that China has become the second biggest economy by GDP may be unsurprising, but to dismiss this jump as nothing more than a nominal milestone would be remiss. Whilst changes to GDP league tables may have little or no impact on China's foreign policy towards the West, its growing economic clout will likely lead to increased efforts to court emerging economies.

China's investment in Africa is growing at an unprecedented rate (at present there are an estimated 800 Chinese companies working in at least 12 African nations) and criticisms around China's approach abound. China is widely accused of giving with one hand and taking with the other; building stadia, mines, roads and refineries and in return bleeding the continent dry of its natural resources. To dismiss China's intentions as little more than a grab for Africa's mineral wealth however, overlooks the complexity of the relationship and more importantly underestimates the contribution China makes to shaping young nations.

The World Bank and the IMF may offer financing but China also provides labourers to do the work. True China has a nasty habit of awarding contracts for infrastructure projects to Chinese firms (all four new world cup stadia were built by Chinese companies) who ship in Chinese workforces wholesale, but this is no different from the way American and British companies operated in the past. Furthermore, many of the projects China funds run at a loss, effectively making such initiatives a form of aid.

Critically, China provides insight into building new states that the West simply cannot. To many frontier market economies China represents an ally and guide that can help them mature through their industrial age, providing a road map to an economic independence that has long eluded them.

NS

Quality brands banking on success

Within the next 12 months, the retail banking sector is set to become increasingly competitive. With Tesco, Virgin Money and the Post Office expected to launch into the current account arena, current providers are getting jittery. And so they should.

Not only are these companies known for being easy on a thrifty consumer's purse, they also seem to have a vague understanding of customer service. As a customer of my (unnamed) bank, I can honestly say that I sometimes wish my bank manager would greet me with the middle finger before dispatching me with a swift kick in the rear. Anything would be better than the surly unhelpfulness and general confusion caused by its myriad of call centres. At least by taking the former approach, I would know exactly where I stood and could take appropriate action. Instead, I am treated to a theatrical display of West End proportions whereby the bank and its dastardly minions of doom go through the pretence of caring.

What they need is more competition. It's a sign of a healthy market place and hopefully the newcomers will focus their attention more on actually viewing customers as a help as opposed to a hindrance.

SI

Testing times

Last Friday the Committee of European Banking regulators (CEBS) published the long awaited results of its stress tests into the region's leading financial institutions. The tests revealed that seven of the 91 European banks had failed to meet the capital requirements.

Even before the test results were published, many market commentators had concluded that the tests were pointless and unlikely to achieve very much. The whole endeavour was not exactly helped by CEBS' website failing its own stress test and crashing just as the results were published. Who said the Europeans can't do irony?

Many critics have pointed to the low capital ratio required to pass the tests and the fact that all the tests relied on data supplied by the banks and verified by their local regulator. Grave uncertainty has also arisen surrounding the consistency of the methodology - with implementation of the scenarios depending to some degree on the local regulatory authorities. It has also been hard for analysts to ignore the fact that the criteria were not only less onerous than testing already conducted by some regulators, but also than some of the banks' internal worst-case forecasts. So, the 'adverse' scenario is not really all that adverse: it assumes only a slight output contraction and market losses on government debt, but no actual sovereign default scenario.

However, the fact that investors still seemingly mistrust capital adequacy rules and that these tests have been branded by many as neither uniform, transparent nor stressful enough, may ultimately not matter that much. The clearest sign that the tests have set the European banking industry on the path to recovery will be seen in interbank lending and the capital markets – if these do not improve then Europe will have to think again.

SS

Three barrels full – BP

The latest furore which has spouted forth from the well that is the BP PR machine is going to take just as long to clean up as the black mucky mess which continues to wash up onto the shores of the Gulf of Mexico. The three doctored images which were uploaded onto BP's Gulf of Mexico response homepage this week have arguably caused more damage than some of the many other gaffes that have dogged BP's PR efforts since the first announcement of the oil spill in May.

In fact, BP has single handedly violated almost every rule of successful public relations, starting with the first one, which is to 'tell it all and tell it first', they then quickly broke the second which is to 'allow only the well trained and polished spokespeople speak to the media and public'. The problem is not that there are mistakes and crises (there always will be and there is no way around this – especially with something as hazardous as deep-water drilling). However, not all crises have to mean job losses, careers ruined, staff illness, environments destroyed and international condemnation. The problem in BP's case is the challenges came from the poor handling of communications from the start, which are in essence, self inflicted wounds which have continued to cause injury long after they've been made. PR in this instance seems to have been used as a band-aid rather than a tool for getting the right messages out to the right audiences in a clear and simple manner. Public relations isn't about exaggeration and manipulation, it's about communicating the public what is going on within a company in a controlled manner.

As a result, BP is now fighting a PR firestorm on all fronts, from peeved shareholders, to the outraged local community who have had their livelihoods put on hold and in danger, to the US government, to vocal national and international environmental groups and to employees and health and safety unions. They are also fighting fires from the inside, trying to manage and keep a lid on its internal communication channels (including the management of some of its renegade spokespeople). This includes its (current) Chief Executive, Tony Hayward, who bemoaned recently, 'I want my life back' – hardly the positive PR message that BP is trying to communicate to the world audience who is watching the disaster with the grim fascination of a car wreck they can't tear their eyes away from. In fact, it must feel like a touch of déjà vu for BP's head of communications Andrew Gowers, former editor of the FT and also the man who incidentally manned the PR at Lehmans Brothers during their collapse.

The images, which have sparked the increase in criticism, include the cut and paste doctoring of two images of the Houston control room where BP staff are monitoring the leak and one from inside a helicopter over the Gulf. It's called into question one of the consistent messages BP has been trying to drum home – transparency. Many are now jumping on BP's alleged lack of transparency as an attempt to continue to manipulate versions of the truth months on from the initial disaster. BP has since now gone on the front foot to post both original and fake versions of the photos on flickr which hasn't appeared to lessen the condemnation any further.

Perhaps the lesson or message that is most important to members of the UK financial services industry is that no one is immune. But regardless of the type of incident, if PR is used well and effectively, the damage can be limited. For as long as most can remember BP has always been viewed as an untouchable financial giant with most of the media coverage largely centring on its share prices and presence as a an international conglomerate. It has now suddenly and spectacularly spiralled into a reputational death spin which could only be described as a PR director's worst nightmare and has seen nearly every aspect of its business criticised on the back of a protracted and seriously damaging oil leak at one of its facilities in American waters.

BP is to up their neck in this mess and there's no telling where the next gaffe or possible reprieve will come from. The only part which is clear is that somewhere along the way PR policy got put at the bottom of the to-do list.

JH

AIFM – a ticking time bomb?

For some in the investment industry the Alternative Investment Fund Managers (AIFM) directive is just another layer of unnecessary legislation clogging up the headlines. However, for a large portion of fund managers and investors this directive could have destructive effects on the way they conduct their business.

The directive effectively aims to establish a regulatory framework for managers of collective investment undertakings which will facilitate monitoring and supervision of systemic risk, increase disclosure and transparency and enhance investor protection. The proposal was introduced on the 29th of April 2009 by the European Commission and came to life through a disturbingly short consultation period. Viewing it as rushed and ill-prepared, the chairwoman elect of the European Private Equity & Venture Capital Association commented that it "will crush venture and other sources of innovation capital". Sadly, venture capital is not the only victim of this directive; increased costs and a reduction in choice and scope of investments will have a far reaching impact. The IMA's Jarkko Syyrila said that "Anyone who has savings, anyone who has invested in a fund, an investment trust, a real-estate fund, everyone who has a pension in Europe – a Greek or German pension fund – will be negatively impacted by this directive."

Commission figures suggest that in the EU alone around 30% of hedge fund managers, managing almost 90% of assets of EU-domiciled hedge funds, will be affected by the directive. However, repercussions are not limited to the EU. Tim Geithner, US Treasury Secretary, stated that the directive could cause "a transatlantic rift" by discriminating against US firms and denying them access to the European market. The US wrote the book on reactionary and protectionist policy, so perhaps the rift that's already well oiled at the moment, will have a direct impact. If Europe legislates first then some feel the US will not exactly be backward in coming forward with their own legislation. Tit for tat.

The directive's progress has been anything but smooth with a litany of delays, postponements, criticisms and antagonism from major influencing parties and institutions along the way. With over 1000 amendments at one point, the directive was eventually passed in May and will be put to a final vote by the European Parliament in the coming months – providing no further postponements.

Jean-Paul Gauzes, the French MEP and AIFM champion, recently replied to the exhaustive criticisms: "I know that most of private equity and hedge funds are perfectly respectable, but there have been some problems, such as in Germany where companies were bought and broken up, which have been very traumatic". I have to admit I'm not entirely convinced by his argument to potentially destroy an industry that last year, in the UK alone, generated over £60bn in tax revenues – perhaps events will turn out to be a little more than traumatic this time.

LB & AVD

Is social media really worth it?

Undoubtedly, social media is increasingly seen as a useful additional PR, advertising and sales channel. In 2010, for the first time in 25 years, Pepsi didn't run a Super Bowl ad in 2010, but focussed on a $20 million online Cause Marketing campaign instead. Dell has reported it generated $6.5 million of sales over Twitter, Sony Vaio's Twitter account has generated over $1 million in sales, and Blendtec's YouTube campaign led to a five-fold increase in sales.

With social media activities starting to pay off for corporates (after all, they're free), they also become more attractive for investors. Paul David Hewson (better known as U2.0's Bono) and his private equity firm Elevation Partners have just acquired 5 million shares in Facebook for $120m, following the purchase of 2.5m shares for $90m in November 2009. Until now, private investors have pumped more than $830 million into Facebook which is by far outperforming Zynga (the Farmville game maker who has recently seen another funding of $147 million, bringing total funding to $360 million), Twitter ($160 million) and LinkedIn ($103 million).

Looking at current market evaluations, these investments make perfect sense: Facebook is valued at $14 billion, Zynga $2.6 billion, Twitter $1.5 billion and LinkedIn $1.3 billion. Estimated advertising revenues for Facebook in 2010 are within the region of $1.1 billion to $2 billion. Twitter (so far) makes money by partnering with Google and Microsoft, and is currently testing advertising options. The value of Twitter is now estimated at more than $1.5bn (it was already valued at more than $1bn before it had generated any revenues at all).

So the answer to the question seems to be a straightforward yes. Social media does make money and people do like Facebook & Co. Investors do invest and do make money too, and the market valuations are reasonable, given the platforms do the right things and do things right. The poster announcing the movie about Facebook sums up the current climate of self-confidence: you don't get to 500 million friends without making some enemies. If "some enemies" become "many" because of an overload of commercialisation or privacy concerns however, there might still be trouble ahead.

RR

The Coalition's Cuts Are Now Upon Us

After all the talk, the Chancellor's much anticipated deficit-busting budget is finally upon us. Mr Osborne termed it "tough but fair" but many might not subscribe to his verdict.

For those in the public sector, it's unpleasant. A two year pay freeze, essentially a pay cut (as Mr Cameron himself confessed), a smaller pension pot and the potential for further job cuts.

A recent Policy Exchange report revealed that on average those in the public sector spend nine fewer years at work over their lifetime and earn 30 per cent more than their private sector brethren. Despite these generous benefits – or perhaps because of them – productivity in the public sector has fallen over the past 10 years, while productivity increased in the private sector 28 per cent. Surely it's about time the gold plated public sector pensions were abolished and pay came in line with the private sector? On the subject of pay, the Policy Exchange report found that median gross pay is £22,417 in the public sector and £19,932 in the private sector.

A problem is that without public sector jobs, unemployment will obviously rise and thereby leave those in work to foot the bill – unless the Tories' plan for the private sector to increase employment is successful…I guess that is a story yet to be told.

The private sector has perhaps fared slightly better, with the eradication of the tax on jobs proposed by Labour and the national insurance threshold being raised making it cheaper for companies to employ staff. That said, it was a surprise that capital gains came down under a Labour government and perhaps more surprising that the Conservatives have increased it.

What surprises me most is the uproar of furious liberal democrat supporters over the VAT increase. It is true that Nick Clegg campaigned against it, however there is one thing that needs to be remembered – it is a Conservative led government and Mr Clegg was never going to get his way on everything. And, is being £33 a year worse off on average really worth splitting hairs about?

RS

To cut or not to cut?

One of the most interesting aspects of last week's Budget was the divide in the press reaction. Edmund Conway writing for the Daily Telegraph said "this was – in both senses of the word – one of the most "courageous" Budgets in living memory" before going on to argue that the extent of cuts to public spending further needed is likely to test the Government to its limit. While Polly Toynbee, who David Cameron famously said he wanted the Conservative party to be more like, writing in the Guardian, said of the Budget and its central aim; "there was no necessity to create a surplus in six years, returning to depression economics with mortal risk of sinking the country into second recession or slump."

Okay so these are only two viewpoints. And yes, they're from two of the most diametrically opposed national newspapers in regards to political leaning. Yet, after twenty five years of broad ideological consensus between the main parties, the budgetary deficit we are now facing appears to be creating some clear divides in Britain's political class. The coalition government believes in the need to slash the budget and raise taxes while the Labour Party, and whoever is chosen to lead it, argue that it is important not to slash governmental spending to drastically in the midst of a recession.

Are we seeing a return to ideological politics? Are the Government's and the Labour opposition's disparity motivated by some genuine difference of opinion as to how to solve the economic crisis? Probably not, and to this extent most interesting is the response of Vince Cable, who over two months ago was against budgetary cuts but now is regularly reeled out in front of the TV cameras to justify them. Mr Cable argues that he has grave concerns that if Britain didn't start cutting today, we would be tomorrow's Greece. Whether this is correct or not is debatable. However, what is clear is that Mr Cable now believes that cuts are necessary to ensure that foreign investors who own pounds (principally emerging market central banks, who own the vast majority) don't lose confidence in Britain. It is pure political pragmatism.

So are we returning to ideological politics and does it even matter? It probably doesn't matter as even though the majority of voters, those who voted for Labour and the Liberal Democrats, were against cutting before the election, the cuts remain. This begs the question, in a global market economy, is a country's destiny no longer shaped by its own people but rather the views of outside investors, and if so what does this mean - not only for our political parties but also for the sovereignty of the nation state. "To cut or not to cut", is no longer a question for the electorate but rather the wider global economy. It's interesting in this context to refer back to comments made back in February by the then shadow Chancellor, George Osborne, warning that significant early cuts were the only way to preserve Britain's economic sovereignty.

JCL

Oilier than thou?

It's perhaps surprising that no-one has yet calculated whether the acreage of trees felled to supply the newsprint expended on the BP oil leak story has been more environmentally damaging than the spill itself.

The still-growing oil slick in the Gulf of Mexico is, of course, a genuine ecological nightmare. But from a purely "news" perspective, what a story! It's uncommon for one incident to dominate the headlines, globally and more or less continuously, for nearly two months, and still have the potential to run for a long time yet. What makes it so enduring is the way new aspects have developed, the latest being the heightening tension between US policy makers and BP's shareholders, (of whom two significant sub-groups are Americans and UK pension funds).

Having earlier vowed to "keep its boot on the throat of BP", the US administration has continued to use strident language without, apparently, succeeding in convincing US public opinion that it is achieving much. As Philip Stephens points out in today's Financial Times, by castigating BP Chief Executive Tony Hayward and vowing to "kick ass", President Obama "has cast himself in the role of furious but hapless bystander".

Aggressive posturing from the Whitehouse may be understandable, given the imminence of mid-term elections in the US. But not only does the rhetoric have potentially damaging implications for UK pension funds, it's not doing much for Anglo-American relations either. Some UK commentators, for example, have been unable to resist dragging out examples of similarly catastrophic US corporate disasters which did not elicit quite the same level of opprobrium.
Others have sought to identify the extent to which the US government, despite its posturing, remains "in thrall" to the oil industry. And this funny contribution from the creator of the Dilbert cartoon, suggests BP could ultimately benefit from the whole affair.

AF

Investment Banks and Gordon Banks

Finally, Goldman Sachs delivered what we've all been waiting for. No, not the FCIC requests for documents and interviews – in fact, the Wall Street giant has been hit with a subpoena for a "deliberate and disruptive" failure to co-operate with requests for information about its role in the credit crunch that shook the global economy. It doesn't have anything to do with the SEC fraud charge either...that would be far too prosaic for such anticipation and excitement. What I'm talking about is the publication of Goldman Sachs World Cup and Economics 2010 – the fourth book they've compiled since debuting at France '98. With WC2010 one day away, the only Fabulous 'Fab' that football fans want to hear about is Fabio Capello or Cesc Fabregas. So, Monsieur Fabrice Tourre, back in your box, while the rest of us watch the beautiful game enraptured.

The World Cup paper is a fairly hefty tome – some 75 pages – but makes surprisingly easy reading (provided you like football of course). Jim O'Neill, Goldman's chief economist and avid football fan, kicks off the report and as you might expect from the man that coined the Bric concept, mentions it repeatedly. Honestly Jim, it's always 'Bric this Bric that'...enough already. The acronym doesn't even hold up for the World Cup (notwithstanding Brazil) as Russia, India and China didn't even qualify.

Some may ask what all this has got to do with the world of finance and, despite my best efforts to turn this into a football blog, that would be a fair question. Well, as outlined previously – the world of football and finance are intimately acquainted and the business of the beautiful game is just as prevalent when we talk about nations as when we talk about domestic sides. In fact, the sovereign state has it all to play for as the World Cup offers real revenue and growth potential for hosts. Igor Shuvalov, First Deputy Prime Minister of Russia, makes this point in the Goldman report when discussing Russia's 2018 bid: "Modern football is a whole industry. It includes complex infrastructure, such as top stadiums, rehabilitation centres and training bases, as well as sports gear and equipment, to say nothing of advertising and TV rights....Intensive development of football infrastructure will act as a huge boost to both regional and national economic development."

Moreover, the World Cup also provides a truly global forum to highlight the ambitions and capabilities of a country. For instance, what better way for Brazil to communicate its status as an economic force, than to put on a stellar World Cup in 2014 and then Olympics in 2016. To keep with the Bric theme (sorry) – China did a similar thing with the Olympics two years ago. Beijing 2008 was a formidable event that showcased the economic might of the nation to a global audience.

Towards the end of the Goldman report, my attention turned to the section on Spain entitled "Leading in Football, Lagging in the Economy." Angel Ubide, a former Real Zaragoza FC player and Director of Global Economics at Tudor Investment Corporation, makes some great comparisons between the success Spain enjoys on the pitch compared to its economic shortcomings. He concludes: "Without a question, the football team has been more dynamic, creative and successful than the economic team, and thus the odds of success in the World Cup are certainly much higher than the economic league. Good luck to all." His erudite comments are a long way from the monosyllabic and anodyne trivialities we're used to on Match of the Day each week.

Anyway, Jim O'Neill and his gang predict that England, Argentina, Brazil and Spain make the semi-finals. I'd certainly settle for that. God bless the World Cup.

JS

Sympathy for the devil

Please don't judge me but a small confession to begin: I actually feel a little sorry for Goldman Sachs. I know, I know, how much sympathy can you really have for a bunch of people who are richer than God? But remember, the bank is doing God's work, so presumably they should be reimbursed accordingly.

The giant vampire squid has been flogged by media commentators and political opportunists, the PM included, with such wilful abandon that it almost seems sadistic to watch. Many critics see the bank as guilty of the worst excesses of the bull market bubble and have certainly not been backward in coming forward. This seems to have reached a crescendo following the SEC's allegation that the bank is guilty of securities fraud related to the structuring and marketing of synthetic collateralised debt obligations (CDOs) linked to subprime residential mortgage-backed securities.

The degree of Schadenfreude on show following the SEC and FSA probes highlights the animosity against Goldman. However, in this case it seems potentially misplaced and perhaps a little premature. Bloomberg reported that the SEC vote was split 3-2 to approve the enforcement case against the bank. The fact that the committee was divided denotes some degree of uncertainty and when combined with seemingly "nakedly political" posturing and timing from the SEC and the Obama administration in turn, the case seems unduly vindictive to boot. Not a great start.

The specifics of the case have not been unveiled and as The Times' David Wighton writes: "It is too early to draw any but the most tentative conclusions about the Abacus affair." Much of what has been written in the press seems to focus on the fact that the trader at the centre of the affair referred to himself as "fabulous Fab" in his gloriously hubristic email to a colleague: "More and more leverage in the system, The whole building is about to collapse anytime now…Only potential survivor, the fabulous Fab…standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities [sic]!!!"

This email proves nothing other than the fact that Fabrice is a bit of a prat who refers to himself in the third person. It is certainly not an indication of some elaborate and Madoff-esque subterfuge to defraud investors. The whole affair seems far more prosaic than that. The conflict of interest that follows the Bermuda triangle of CDOs created and checked by Paulson & Co, Goldman Sachs and ACA is one thing, but proving deliberate and calculated fraud is quite another.

The case is interesting because it involves four things that have captivated the market throughout the financial crisis – Goldman Sachs, exotic structured products, hedge funds and the regulators. Investors in the CDOs have protested against the way they were misled but, regardless of whether that is true or not, their refusal to take accountability is a microcosm of the whole credit crisis. Highly sophisticated investors use these products, not your average punter. They have due diligence teams that pore over documentation, and if they didn't – what the hell happened to caveat emptor? Breakingviews neatly summed up the debate: "As politicians and regulators pick over the SEC's allegations, they might keep in mind the synthetic CDO tango took two."

In terms of Schadenfreude, Goldman's competitors and critics should perhaps be wary to cast the first stone. Goldman was a major player in the CDO market but certainly not the biggest – Merrill Lynch, Citigroup and UBS all underwrote more securities according to Nomura. The regulators are clearly taking a hard look at the CDO market and given the sheer volumes traded, you would expect a similar case of "disreputable activity" to have taken place. Critics should also note that Goldman is run like a military operation. They are tough and will come out swinging – yesterday's bumper first quarter profit announcement and accompanying "aggressive defence against US fraud charges" highlights that they are a force to be reckoned with. They will not disappear gently into the night.

Goldman is an extremely difficult firm to like, but provided they can ride out the reputational storm, I doubt that their shareholders and heavily remunerated employees will be too troubled by this specific case (wider regulation is another matter). If Goldman was to suddenly adopt a football terrace style chant (chance would be a fine thing) they might well take their inspiration from Millwall FC: "No One Likes Us – We Don't Care."

JS

Tinker, failure, closure, grief

There can't be many people who genuinely believe any government has set out to systematically undermine UK workplace pension provision. But you could be forgiven for thinking politicians are genetically programmed to indulge in well intentioned tinkering, with irredeemably baleful consequences.

Today's survey from Punter Southall provides a fairly stark picture of the malaise into which the once vaunted UK pension system has descended. One in four employers report staff cutting or suspending pension contributions, only one in twenty still offer defined benefit schemes to new employees, and there is a rising tide of resentment against the pernicious impact of government actions. While nearly nine out of ten respondents anticipate a change of government in the forthcoming general election, only 13% think this would be a good thing, and a whacking 57% think it would make little or no difference.

A popular idea which emerges from the Punter Southall study, as well as from a broad range of other pensions commentators, is to take politics out of pensions. If the pensions industry craves one thing, it is a stable long term regulatory environment in which to get its act together. Politicians who win power have a range of priorities, but by far the most important is to get re-elected within the next five years. As we all know, even a week is a long time in politics, but five years is barely a blink of the eye in the glacial world of pensions.

Given this asymmetry between the time horizons of the pensions industry and the ministers whose decisions shape it, or mis-shape it, perhaps the Pensions Commission might serve as a useful template for the way forward. Chaired by Lord Turner, the Commission's 2005 analysis and recommendations achieved the unusual feat of attracting support from across the pensions community and, broadly speaking, across the political spectrum. Maybe a similar body, made up of representatives from the various stakeholder groups, and freed from the straightjacket of political short termism, could come up with sensible, practical and effective ideas for reform of the pensions system. Maybe along these lines, in fact?

AF

Some knights, a vampire squid, one acronym and a chunk of debt

Hostile takeovers, excessive leverage, boom and bust, board room wrangling and exorbitant pay packets...might sound like just another day in the financial markets but it's also the perilous state of English football at the moment. The business of the 'beautiful game' is now played out right across the front, middle and back pages. Just a few years ago, when things were ostensibly all swell in the market, there used to be a rough order to things – politics and social affairs on the front, business in the middle and sport on the back. Now, things are a little more blurry.

The fate of Portsmouth FC is a cautionary tale in just the same way as Bear Stearns, Lehman Brothers, RBS or the other financial institutions which imploded. They were debt laden, engaged in aggressive M&A activity (read transfer policy), remunerated their stars heavily and crested the wave of cheap credit. They did rather well on that strategy for a time – much like RBS (remember when Sir Fred was the toast of the town) – winning the FA Cup less than two years ago. However, if something seems too good to be true; it often is exactly that. So, sure enough, Portsmouth duly became the first Premiership club to fall into administration on 26 February.

Now, in the red corner, we have Manchester United – the most successful English club of recent years and a footballing powerhouse with a fan base that straddles the globe. Their debt levels have attracted attention ever since the Glazers took over the club in a highly leveraged deal in 2005. However, the various restructurings of late and the effective 'Green-and-Gold' protest movement has galvanised supporter animosity and the Glazers have really been feeling the heat. This has arguably come to a head with the surge of interest which the Red Knights consortium has generated.

In keeping with the front-page theme, The Observer led with a story proclaiming how Alex Ferguson was "backing bid to buy United", according to unnamed City financiers. Whether the Red Knights can really wrest control away from the Glazers is unsure but, like all good takeover struggles, the clash of personalities and ideologies is what we all love to see. The embattled Glazers are certainly the pantomime villains in this production of Twelfth Night...perhaps that should read as Twelfth Knight? On that note, enter stage left those intrepid Knights, led by Goldman Sachs' Jim O'Neill, as he rides proudly across on a giant vampire squid. [As an aside, has anyone's financial career and industry standing been so elevated by the simple use of a four lettered acronym – Bric, really?]

As The Sunday Times highlighted, Mr O'Neill is an unlikely hero – a Goldman Sachs banker and the Old Trafford faithful make unlikely bed fellows. However, the Glazers are public enemy number one and the Red Knights' ideology appears infinitely more palatable to the fans. Indeed, the notion of the supporter-owned club (a la Barcelona, Real Madrid and several German clubs) is gaining credence all around. "In an ideal world all clubs would be controlled and run by their supporters according to democratic principles," Uefa said in Vision Europe, a document setting out the direction and development of football over the next decade. In fact, a Uefa report last month revealed that 18 of the Premier League’s 20 clubs owe more combined than the rest of Europe’s top divisions put together. The debt for the 2008 season stood at £3.4 billion, 56% of the European club total.

All this makes for a compelling financial story. Who knows, perhaps one day football and business will become so closely aligned that the likes of Manchester United are 'too big to fail' and the Ronaldo's and Kaka's of the world are packaged into complex structured products, securitised and traded in tranches with inferior players, eventually leading to the dislocation of the global economy. Perhaps a government bail-out of a club will take place, leading to the creation of a 'good' club and 'bad' club – thereby classifying John Terry and Ashley Cole as 'toxic assets.' Actually, maybe not.

JS

Ay Ay Icap!

Some market commentators have seized upon Icap's "broad ranging strategic review" of its cash equities businesses as another sign of the structural shortcomings at play within the mighty inter-dealer broker. After all, shares plunged nearly 30 per cent at one stage following a profits warning last month. However, under the stewardship of chief executive, Michael Spencer, Icap has consistently demonstrated itself to be an innovative market force and the leader (followed by Tullett Prebon) in the IDB sector. While there are certainly issues that require remedying, the fact that Spencer has placed his political ambitions on hold to focus on the business should go some way to assuage nervous investors. The Telegraph's Questor certainly believes so, tipping punters to buy shares yesterday, and adding that "it would be wrong to underestimate Spencer himself."

The ill-fated foray into cash equities has undoubtedly been faltering and progress extremely slow. Spencer bowled into the sector at the tail end of 2008 to try and fill a gap in the market left by the demise of Lehmans. Icap recruited heavily and aggressively – hiring over 200 staff to join the division. To be fair to Spencer, he saw this as a once-in-a-lifetime opportunity to profit from the glut of available talent, as many trading desks were decimated in the wake of Lehmans.

And, he was definitely not the only one to share this opinion. There was considerable activity from the ‘traditional’ brokerage firms, large and small, and from the new wave of smaller providers, to seize the market opportunity that the demise of Lehmans, plus those of Dresdner Kleinwort and Bear Stearns, created. BarCap and Nomura were certainly conspicuous in their hiring sprees as they looked to build their equity teams. However, cash equities is a fiercely competitive business, and it seemed doubtful that the size of this market opportunity was sufficient to sustain every individual business plan. Unfortunately for Spencer, Icap faltered. Breakingviews highlighted some of the inherent problems the IDB faced: "Cash equities is a difficult, low-margin and commoditised business. The costs are high, and the continued need to invest in technology, keeps them that way. The business is dominated by a handful of big banks with the scale to make it pay."

Icap will bounce back from the problems with cash equities and as some analysts have already noted – Spencer has the bottle to simply shut the unit down rather than let it limp lifelessly onward. Panmure Gordon even notes that winding up the business will be of little strategic importance to the group. Nonetheless, Icap still needs to navigate some choppy waters – notably regulatory reform, as Obama's plans to curb proprietary trading by banks will undoubtedly hit revenues. To keep with the nautical theme – Spencer certainly has the wherewithal to keep an even keel.

JS

Freddie Starr ate my recovery

It’s official. The UK is out of recession.

According to the government's statisticians, the Office for National Statistics (ONS), the economy grew last quarter by 0.1%, ending six consecutive quarters of negative growth and bringing to a close the longest recession since before the Second World War.

So that's good news right? Surely it's time to roll out the bunting and crack open the champagne (well, Asti, given the current market) and put on some B.B.King?

Well not according to some.

Despite the hopes of services shaking the banker bonus tree, it seems one or two commentators are not quite ready to sing along just yet. But then perhaps that's to be expected as we languish in the post-festive-pre-payday gloom. So it seems Blue Monday has slipped into a Terrible Tuesday.

Indications are that any growth is likely to remain anaemic, and this has led some cabinet members to be reportedly fearful of taking any responsibility for something that in most scenarios would be classed as 'good news'. But then perhaps that is sensible given the possibility of a return to negative growth in Q1 2010, which would be reported statistically 11 days before the likely day of the general election, 6th May.

With the two major parties preparing to draw the battle lines along how best to sustain the 'recovery', any such figures would not exactly enhance the incumbents' self-proclaimed reputation for economic competence, a point not really helped by what seem now to be rather optimistic growth expectations for this year and next year. They can, however, take comfort from not being the only ones caught out.

So what now and what's in store for the 'fledging recovery'? Well, any sort of long-term plan would be useful. The Daily Telegraph points to private sector investment and overseas growth as areas to deliver the growth needed to rescue us from being stunted by the fiscal stimulus plans. That does not seem to be evident yet, however, and certainly nowhere near on the systematic scale seen in China, which clearly recognises the importance of scientific research and retention of knowledge as the key to its future.

Perhaps a change of perception? The Daily Telegraph talks about a two-speed global economy with opportunities being thrown up by the turmoil surrounding fiscal exit strategies.

But then perhaps we are justified in being wary of celebrating GDP growth if the New Economics Foundation paper yesterday is to be believed. With developed nations assuming continual growth, perhaps the view is just flawed. They illustrate this point with a short video called 'The Impossible Hamster'. If a hamster doubled in size every week for a year, it would weigh 9 billion tonnes – enough to give Freddie Starr serious indigestion. So why should we assume GDP should continue growing, particularly when we consider that environmental concerns may pin back the recovery over the long term?

Food for thought indeed.

So, let's look on the bright side (for the time being at least) – the days are getting longer, payday is nearly here and if Freddie feels peckish, he'll probably opt for a Chinese hamster instead. As Frankie Boyle has been heard to say, "Help yourself to nibbles – (he was our favourite hamster…..)"

AF

Barack to the drawing board

I have missed Barack Obama. I devoured his campaign coverage to levels of minor obsession and had grown used to seeing his face strewn over the covers of publications the world over. Recently though, it seems Obama has been hibernating. Maybe he has been finding it difficult to make it into the office due to all the snow? Or can that excuse really only apply to Londoners? Either way he has not exactly been marking his first year in office with the media frenzy many would have expected twelve months ago. But now he's back!

Obama has, some suggest, produced the sword to deliver a final blow to the Wall Street bull. Exhausted with the media frenzy over bankers' bonuses and deaf from the screams of the American public crying "kill" "kill", could this be the death of the big bank: 2010's Glass-Steagall finale?

I doubt it. It is important to remember these "Volcker Reforms" are just proposals. We are not about to see the end of proprietary banking on Monday. As with any American legislative proposal, and especially any introduced by the current president, it will be months before anything is actually set in stone and the big banks are forced into selling off their hedge funds and private equity groups. Goldman Sachs and JPMorgan can rest easy this weekend. What will no doubt follow will be months of lobbying. The Wall Street top dogs (what can I say I'm not a cat person) are getting quite used to spending time in Washington D.C. By now, they are probably thinking of the Holiday Inn on Capitol Hill as a second home (or fourth or fifth in many caes). While the rest of are still ploughing through the details of the proposals, lobbyists will be weaving loop holes that will ultimately produce very little (if any) changes to the too-big-to-fail banks. When tired of this we can watch bank share prices yoyo in front of our eyes.

This of all proposals comes at a terrible time for Obama: after weeks of laying low, he reared his head at the end of the week only to find that he has lost Teddy Kennedy's old Democratic seat in Massachusetts and thus the crucial 60th vote in the Senate that he needs to pass this or any other bill. And to really kick dirt in his face when he's down, the Supreme Court voted yesterday to lift the ban limiting banks and other powerful companies from funding and supporting political candidates. Banks don't take too kindly to their share prices falling by around 5% across the board; so although in the past Wall Street has been a major fundraiser for the Democrats (and Obama himself), I get the feeling that the millions of dollars of Wall Street's campaign donations might be up for grabs right now. Enter the Republicans with open hands…

And what will all this mean to us in the UK? Well, the BBC reports that Shadow chancellor George Osborne has come out in support of President Obama's proposals but has covered himself by assuring that there would have to be international compliance. Chances are nothing much will happen once the election is out of the way. I suggest we all take the weekend to turn our attention back to donating to the Haitian appeal. There will be all of Summer (and Autumn and Winter...) to follow the 'Obama takes on Banks' headlines.

RK

Better the Red Devil you owe

When the Glazer family took over Manchester United in 2005 the fans were in uproar as the Floridian family loaded the club with debt. The furore from the prawn sandwich brigade subsided as the Glazer's kept their heads down and Fergie led the Red Devils to three league titles in a row. However, what goes around comes around, and the interest on United's PIK loans is accumulating faster than Tiger Wood's mistress count.

Whatever Manchester United does will always generate huge attention and confirmation yesterday of its planned £500m bond has been all over the business and sports pages. In fact, while I think about it, the football community is more au fait with financial lexicon that you might expect. I vividly remember watching the telly when Sheikh Mansour took over Manchester City and thinking that a sovereign wealth fund acquisition was being discussed with alarming lucidity. Arsenal's Andrei Ashavin also displayed his financial savvy last year as he looked to renegotiate his £80,000 a week contract after being "unpleasantly surprised" by the UK's 50p tax rate for top earners.

Anyway, back to the point in hand...despite the blanket press coverage and element of doom saying from the more hysterical football fans, let's not get ahead of ourselves. By no means are United going to fall into the hands of the administrators – after all, the club also confirmed yesterday that it had recorded a pre-tax profit of £48.2m and a turnover of £278.5m for the year ending June 30. The club's success is also highlighted in the Deloitte Football Money League 2009 report, where they were ranked second in revenues, behind only Real Madrid. In fact, the report revealed that "had it not been for depreciation of sterling against the Euro, United would have leapfrogged Real Madrid." Making a profit in this market environment – and in a business as volatile as football – should certainly not be sneered at. Nonetheless, the debt burden is a real albatross round its neck, and the bond issue should go some way to ease the situation as they swap the expensive bank and hedge fund debts with the cheaper debts owed to bondholders.

The notes will be used to refinance the existing debt secured against the club rather than the PIK notes and as the FT reports, allow the club to "use up to 50 per cent of its cashflow to pay a dividend to the Glazer family, enabling them to repay a punitive payment-in-kind loan, which carries interest of 14.25 per cent." Fans bemoaning the lack of transfer activity of late to replace expensive flops such as Dimitar Berbatov could also take some comfort, as "United will also enter into a revolving credit facility to allow it to borrow an additional £75m, to be used for working capital and, probably, to help the club to continue buying players."

The United saga brings an interesting comparison to rivals, Manchester City. City have typically been regarded as United's unfortunate cousin – the pauper to their more illustrious neighbour's prince. However, since the Abu Dhabi Investment Authority's acquisition of the club, they are now armed with more funds than some countries' GDP. They've been spending money like it's going out of fashion and the ensuing battle seems to show parallels with another economic situation: a US-owned debt-laden mammoth versus an asset-rich Emirati pretender...sound familiar?

JS