US is key to our prosperity

THE Americans may not be flavour of the month in Britain at present. Trade friction and frustration over the handling of postwar Iraq have increased tension and raised fears about the kind of reception George Bush can expect on his state visit next week.

But before people start to man the barricades, they might reflect on the economic and financial ties that inextricably link our fortunes to those of the American economy. These are likely to prove increasingly significant in the coming months as the US bounds free of recession, in sharp contrast to Europe.

Indeed, the British and American trade cycles have become almost parallel over the past three decades, according to work done by Sushil Wadhwani while he was on the monetary policy committee.

At the same time the British cycle and that of Continental Europe have drifted apart, despite all the hopes of convergence.

In pure export and import terms the US remains our most important single country market. But it is outweighed by Germany, France and the rest of Continental Europe added together.

This is just one facet of the transatlantic economic relationship. The sales of American subsidiaries of British companies - from GlaxoSmithKline to ICI - is an astonishing £120bn, or five times as large as UK exports to America.

Moreover, the exposure of our banks to the American marketplace amounts to £66bn or 7% of national wealth. But it is not just a one-way street. There are almost as many Goldman Sachs investment bankers employed in London as there are in New York City. Canary Wharf has become a London outpost of Wall Street. In the context of these huge numbers, the row over steel imports and the retaliation approved by the World Trade Organisation is a drop in the ocean.

Before people in Britain take on the Americans, they should consider who are the real imperialists - the British firms that have found success in the US marketplace and the City of London that has brought the best and brightest to these shores from Wall Street, or President Bush and his coterie?

It is time we looked at the special relationship in the round and recognised how critical it is to living standards on both sides of the Atlantic.

Trade trouble

AN indication of just how critical an American recovery is to us all comes from the latest trade figures. At first blush they look disastrous with Britain's global trade deficit surging to £4.8bn in September, against £3.4bn in August. This is the second-highest figure on record with the shortfall this time fuelled by North Sea oil shutdowns.

Overall export volumes fell by 1.1% and imports climbed by 3%. This reflects the unbalanced shape of the economy as consumers suck in goods at a time when manufacturers are struggling to sell overseas.

But despite the alarming size of the deficit, there are glimmers of hope. Exports to the US and Japan - two economies that are recovering - actually rose. The stronger the upturn, the better it will be for exporters and the trade balance.

It is not surprising the pound weakened a little on the trade numbers, which is no bad thing for exporters. But in a year when there have been so many large revisions to the economic data, betting too much in the currency markets on the basis of one month in the series would be risky.

Moving on

SO Helen Weir is on the move again. The high-flying Kingfisher finance director, who persuaded her employers that it was worth spending almost £500,000 for her to live 11 miles closer to the office, has decided the challenge at the DIY group is not big enough.

She wants to step up to a managing director or chief executive post. Her new employers had better hope, for the sake of investors, that the headquarters are not too far away. Indeed, it may be cheaper to move their offices to Buckinghamshire than the other way round!

Big investors in Kingfisher may be inclined to be concerned. It may be too late to demand repayment from Weir or, for that matter, from Sir Geoff Mulcahy, who has one of the biggest pension pots in Britain. But there is a feeling that Kingfisher is one of those companies where governance and directors perks require a thorough overhaul.

Ironically, the deputy chairman is John Nelson, the former investment banker favoured by Fidelity et al to be the next chairman of ITV. He could do worse than burnish his governance credentials by re-examining all aspects of remuneration and board compensation at Kingfisher in the post-Mulcahy age. Shareholders deserve nothing less.