Holding pattern on BAE stake

By ALEX BRUMMER, CITY EDITOR
Updated:

 

THE crisis at Airbus maker EADS has created real problems for BAE. Britain's top aerospace and defence company had at one stage hoped to collect up to £5bn for its holding in Airbus, now it has been told by bankers NM Rothschild that the stake is worth £1.9bn.

Aside from the immediate impact on BAE's share price, which tumbled 3pc in a buoyant market, it also places the aerospace firm in a difficult political position.

Had it obtained a really good price for the stake, it could have argued that it had no choice but to pull out, put some of the proceeds into the group's pension fund and use the rest to help pay for a sizeable defence acquisition in the United States.

It would be hard for government to have argued against such commercial logic. Now the case for selling immediately looks much less convincing.

Indeed, a British government concerned about the future of up to 16,000 jobs in the aerospace industry, evenly spread across many political constituencies, would almost certainly require iron clad assurances that if the sale were to go ahead those jobs - largely making wings and avionics for the Airbus models - would be properly preserved.

The government is not without some leverage in all of this. It has a direct commercial interest in the new Airbus A380 doubledecker jumbo, into which it has ploughed up to £2bn of loans.

So it cannot look upon a British pullout from Airbus Industrie, which would give EADS a bigger stake in the project, with any equanimity.

Arguably it could weaken British excellence in an area where Britain, through companies such as Rolls Royce, has a lead over much of the rest of the world.

Despite the crisis of confidence which has hit EADS, there is now a new management team in place and the hope must be that the cabling difficulties which have slowed production of the A380 can be overcome.

Almost all new aircraft go through teething problems and many potential A380 customers - including BA - anticipated the glitches and were in no great hurry to take options.

BAE Systems might be advised to wait and see how the new EADS management does, before exiting at a price which will disappoint investors and give it a political headache.

Trendy banking

ANYONE watching Sunday night's Panorama, which sought to demonstrate that the only concern of our high street banks is to load customers up with ever more debt, will be sceptical about any new initiatives.

Nevertheless, it must be good news that after the fashion for closing branches, HSBC is planning a high profile return to the High Street.

HSBC's new megastores, modelled on the futuristic Apple and Ted Baker shops on London's Regent Street, will offer a fresh concept in banking.

There will be help desks offering advice on everything from banking for small business to how to resolve your pensions difficulties. Coffee shops, unsuccessfully trialed by Abbey, will be part of the package.

The rediscovery of branch banking is not a major surprise. All the major players are having difficulty with growing their retail business.

Customers have become interested in the banks as financial infrastructure providers and generally avoid visiting branches at all costs. So banks need to reinvent themselves if they are to attract new clients.

But no longer do they have finance to themselves. Slowly but surely Tesco is moving onto their turf. The grocer already offers personal banking services and insurance.

Now it is making play for the small business customer. It is offering sole traders the opportunity to use a specially designed credit card with a rate of 13.9% and up to eight weeks interest free.

This may seem a fairly limited experiment. But no one should underestimate the power and trust in the supermarkets despite the current Competition Commission inquiry. After all they already have captured one third of the UK's petrol market.

Rosneft nyet

THE Financial Services Authority is often criticised for being a soft regulatory touch. Now it has a real chance to prove itself.

There is apparently real concern in Whitehall about the upcoming float of the Russian oil giant Rosneft and the damage it could possibly do to the reputation of London as a financial centre - despite the health warnings to be included in the prospectus.

As the listing authority, the FSA has the right to say 'nyet' to the London Stock Exchange and the brokers who stand to collect $250m in fees. But do not bet on it.

Most watched Money videos