US bludgeon opens door for European rapier

ONCE when taken to task for writing negatively about a company, I said as an excuse that the chief executive was difficult to deal with because I could never tell when he was lying. 'Don't worry about that,' answered the complaining PR man cheerfully. 'He doesn't know himself.'

One suspects that people like that are unlikely to be worried too much by the American requirement which says chief executives must take an oath that the figures in their company's accounts are correct as far as they know. If the figures are faked, they are unlikely to choose such a forum to admit it to themselves, even less to the Securities and Exchange Commission. No one who remembers the late Robert Maxwell would imagine him being swayed from his chosen course by such a rule.

The interesting side of this, though, is the casual way the Americans pass a domestic law and expect, indeed require, the rest of the world to comply. It is not simply a matter for executives in BP, Vodafone, GlaxoSmithKline or any other British company whose shares are also listed in the US. It also affects those who provide services to SEC-registered companies.

As the Americans see it, there is now no reason why the SEC should not raid the London offices of big accountancy firms such as PricewaterhouseCoopers or Deloitte & Touche. These British-based firms will have to conduct their audit work for SEC registered companies in line with US procedures or risk incurring the wrath of the SEC.

The answer, however, is to look beyond the irritation and see the opportunity. If the Americans want to make access to their capital markets more onerous and irksome to non-American companies, this ought to provide a spur to Europe to develop its own alternative. Forty years ago when the Americans imposed a ceiling on the rate of interest US banks could pay on domestic bank deposits, it provided an incentive for the creation of the Eurodollar market in London and a mass migration of US banks to these shores. This was the single event that did most to secure the City's survival as an international financial centre.

The correct response to these American idiocies now ought to be for Europeans to redouble their efforts to create a single European capital market and devise ways to pool the liquidity of London, Paris, Frankfurt and Zurich so that it can compete effectively with New York. The political desire exists to do this but progress on the ground is still painfully slow, and stymied by European rivalries.

If these could be set aside, not only would it lower the cost of capital for Europe's businesses and improve their competitiveness but it might also pave the way for US corporates to decide that the European equity capital markets were a more benign and sensible environment than the American alternative, and move their business here. Such a prospect may sound fanciful - but that is no reason to dismiss it. No one predicted the rise of the Eurobond market either.

Puzzling plunge

IT SEEMS odd that British Energy's shares should halve today because technical problems have caused a temporary shutdown at a couple of its nuclear plants. That it is producing less power ought to be seen as positive given that wholesale electricity prices have plunged to levels where no one - least of all British Energy - is making money.

True, the closures will mean that British Energy's cash flow will take a knock - but the reduction in base load might lead to an overall improvement in the market, which is what the industry needs.

The price collapse is also irrational because the nuclear generator faces far more fundamental problems. No new nuclear power plant has been built in the UK since Sizewell B, the planning process for which started 20 years ago.

The company's ageing reactors need to be replaced, and lead times are such that a decision on another round of investment needs to be taken soon. But this requires commitment from ministers as well as from the company, and thus far the Government has shown itself unwilling to take a clear stand against the anti-nuclear lobby either inside or outside Parliament.

Eerie silence

IT does seem odd that Sunday papers can carry stories about a management shake-up at Granada which will include the departure of chief executive Steve Morrison, but on Monday there is complete silence from the company.

Such stories normally have a kernel of truth in them. But if this one is wrong, Granada owes it to Morrison and those who work with him to let it be known he is safe in his job.

If the story is true, it is a matter of importance to investors as well as employees and should be confirmed. Either way, a company that is in the communications business should understand better the need for effective and timely communication with its owners.