Creating healthy sustainable growth is a painstaking process

“Creating healthy sustainable growth is a painstaking process.”
The economy would be in good shape when the Prime Minister decided to call the election because the Government had found the recipe for economic success, he claimed.Mr Clarke tried to hose down backbench hopes for big tax cuts in the Budget. Deutsche Morgan Grenfell will no doubt live to rue the day it saddled itself with the very high fixed-cost salary structure it is presently building up. The problem lies not so much with what investment bankers are prepared to pay as with what their clients are prepared to pay them.As for the proprietary trading operations, where the really big bucks are made, it’s a free country and there’s a going rate for the job In a bumper year like this one, it’s bound to be high. The best of them provide their people with state of the art IT, as much capital as they need, and a top-drawer client list, but essentially it is still the traders, salesmen and analysts that make it happen. If the salaries are silly, it is because the margins and returns are silly too. Plainly it makes sense to poach, say, the top rated telecoms analyst at some insane salary if by doing so it helps win a major international telecoms privatisation issue which pays an insane fee.

Some will see it as a symptom of everything that’s wrong with Britain, while others will view it as an example of British success. But whatever you think, it certainly ill becomes investment banks to complain about poaching and spiralling salaries, as increasingly their senior executives do For a start it’s pure hypocrisy. Most of the critics continue to be guilty of “name your price” poaching tactics when it comes to the superstars.Investment banks are in any case pure money-making machines. In combination, the two factors make a highly potent cocktail.

Nor is this a phenomenon confined to the star traders and analysts of the premier league. The first and second divisions are doing pretty nicely out of it too, thank you very much. Salaries across a wide spread of posts and companies are achieving unprecedented levels. Less than 150,000 people in Britain earn pounds 100,000 a year or more; getting on for a half of these people may be in financial services of one form or another.
The rights and wrongs of this are one thing. No doubt about it, City salaries are once again a “phenomenon”. The securities industry is enjoying its best year since 1993, when 100 London employees of Goldman Sachs took home $1m apiece or more.

And if that were not enough to send salaries soaring, there are also some aggressive new players in the market place, most notably Deutsche Morgan Grenfell, prepared to pay apparently silly money for sometimes quite mediocre talent. That would leave a more logical company, and could even give Messrs Robinson and Allen some room to contemplate their next major acquisition. Who knows, if Pearson is still its old, unreconstructed self this time next year, maybe Granada could pounce there.Until then, let the Granada team work its magic Mr Robinson deserves some time to make sense of Forte But the day of reckoning cannot be put off forever.. TV rental will never achieve the rating afforded to media (still growing now that Granada has launched into satellite TV) or even the hotels and restaurants, which after the Granada treatment should begin to yield a reasonable return.With Thorn EMI showing the way this summer, by spinning off its rentals division, Granada will soon be under pressure to do the same thing.

It becomes increasingly obvious to everyone – even Mr Robinson and his trusted chief executive, Charles Allen – that Granada as presently constituted simply does not make sense. What on earth do media, rentals, hotels and catering all have to do with each other? At the very least, the rentals operations should be spun off. It is in any case the slowest growing of the Granada businesses, despite all the cash it generates. Even Mr Robinson’s relaxed attitude toward disposals (when the time is right and not before; we shall not be rushed) is gaining him extra points, despite gearing at the end of the March of a whopping 389 per cent. The City is convinced he can get the pounds 1.5bn promised without too much trouble through the sale of the Exclusives, the Savoy stake, Alpha and the Welcome Break service stations.