There's nothing like a Gent

IF YOU think, as many do, that Sir Chris Gent is one of Britain's most brilliant business leaders, his appointment as Glaxo-SmithKline chairman from next January is very good news.

Gent built up Vodafone from a tiny sprat to a whale of the corporate ocean, a home-grown British success on a heroic scale.

The write-offs from its huge acquisitions are equally heroic, and perhaps only Sherlock Holmes could determine what profits it is really making.

Nor is it clear that the mobile phone industry has yet emerged from its voodoo economics phase to deliver real returns. But Vodafone is one of the industry's leaders and building it is a huge achievement.

The scorecard at Glaxo is very different. Here is another business built on megamergers, but this one is struggling to maintain its momentum. The shares have more or less halved since 2001, cutting £56bn off its value. That is partly due to the market, but over five years GSK has underperformed AstraZeneca and Pfizer by at least 30%.

Anyone making £6.3bn profits can hardly be called sick, but GSK might benefit from a liberal dose of Beecham's powders, washed down with energy-replacing Lucozade.

Promising new products for cancer and pain relief may help. But will Gent sit around waiting? With Wall Street dealmaker Sir Deryck Maughan, who also joins the board, he knows that Glaxo still has only 7% of the world drugs market. As the merger of Aventis and Sanofi shows, the industry is still bulking up.

But with 100,000 staff already, Glaxo needs another merger like a hole in the head. It is more important to sort out its present problems. Gent must extract more bang for the four billion bucks it spends on research every year. It has begun splitting its 15,000 researchers into clusters to boost creativity.

Ultimately, the chairman's job is to hire or fire the chief executive - the expensive JP Garnier in this case. If GSK's performance does not improve, this will become an issue for the six knights around its board table.

Defence manoeuvres

IN cash terms, GKN has done an excellent deal in selling half of helicopter maker AgustaWestland to its Italian partners for £1.06bn. That is more than double the £444m it paid for Westland ten years ago, and it has kept an aerospace business with £500m sales.

But more than cash is at stake. Westland has more than jobs in Yeovil. With it, another chunk of the defence industry moves off to foreign ownership.

What remains is dominated by BAE, which has long sought to land a big US merger - and which appears frequently to be at loggerheads with the Ministry of Defence. This is worrying. As defence expert Howard Wheeldon at Dow Jones points out, 75,000 jobs depend on defence exports, and the industry is worth at least £5bn to the economy.

Stopping foreign mergers is probably the wrong way to go. Before its Italian link, Westland was small and weak. It now has a much better chance of winning the US orders - starting with President Bush's £1bn fleet - that will secure its future. But the playing field is far from level. Finmeccanica has been a reasonable owner for Westland, but it is 32%-owned by the Italian government.

The Ministry of Defence has the buying clout to ensure that jobs are safeguarded, and must not hesitate to use it. And BAE's bosses should stop pining for the days of cost-plus contracts and make their peace with the Whitehall mandarins.

Growth clouds

OIL and terror are the big clouds on the economic horizon. Otherwise, the outlook would be pretty good.

Britain's economy grew at 0.6% in the March quarter. That is slightly below best hopes, but keeps the annual rate at a respectable 3%. The devil is in the detail.

Growth remains unbalanced. Over a year, household spending rose 3.4%, government spending 3%, investment 7%, construction 8.5%. Industry shrank by 0.4%.

Still, unbalanced growth is better than none. The prospects remain surprisingly good for Britain and the world economy.

But a series of inflationary bubbles is surfacing. Pay surged 2.2% in the quarter and 6% year on year. Oil shows little sign of falling back from its new peak.

The West's low inflation rests heavily on a cushion of ever cheaper Far Eastern imports, which have allowed home-grown inflation to run up without much harm. Now the cushion is being removed by rampant growth in China.

The next test may be the rise of interest rates as the Bank of England realises that quarter-point pinpricks will not stop the advancing army of borrowers.