Thursday, 29 July 2010

The one about a builder, a policeman and a bank.

Government spending cuts have this week seen the social housing contractor, Connaught, plunged close to administration. A near 80% fall in its share price has followed a profit warning and a request for additional cash. Connaught, valued at approximately just £45million, has had additional funds made available to it by a banking syndicate of RBS (80% taxpayer-owned), Barclays and Lloyds (40% taxpayer-owned), and now expects to exceed a £200million debt threshold, up from £120million, by the end of the year. Although a level of debt four times higher than earnings would be seen as ill-advised in an individual, and certainly not likely to secure the £15million overdraft just granted by the banking syndicate, it does not stop Connaught shares from trading in the FTSE250, along with Britain's other most reputable companies.

What happens next at Connaught is anybody's guess. A sale of part of the group's assets has been mooted, whilst the economic sages at the Financial Times have been quick to murmur about the need for a "debt-for-equity swap", a thing that financial ignoramus such as you and I might refer to, more colloquially as, "borrowing money". The accountancy firm, Deloitte, drafted-in to offer an independent review of the situation, have advised that additional funds be made available to Connaught, who need additional funds to pay Deloitte for their independent review of the situation. Connaught's existing accountants, PricewaterhouseCoopers, who failed to notice, as an accountant might be expected to, the gaping hole in Connaught's books, have declined to comment. One man not at all caught-out by the falling value of shares was the currently suspended director, Peter Jones, who is said to have made £265,000 by selling stock prior to an initial profit-warning issued by Connaught in June. All part and parcel of a financial sector served by five banks, three accountancy firms, two credit-ratings agencies, and a government without a conviction in sight.

Another matter without a conviction in sight is the case of PC Simon Harwood, best known for killing newspaper vendor, Ian Tomlinson, at the G20 protests a year ago in London. Harwood, who was dismissed from the Metropolitan Police during the nineties for an off-duty incident of road rage, and then investigated in 2003 by Surrey Police for the use of excessive force, was caught on video striking Tomlinson with a baton, before pushing him to the ground. Tomlinson collapsed and died soon after, and his case returned to the media this week, with the Crown Prosecution Service reckoning that no grounds existed to form a criminal case against Harwood, who had concealed both his officer's name and number, and his face, whilst on-duty at the protest.

Crucial to the CPS' decision not to press charges was the Home Office's appointed pathologist, quack-doctor Freddy Patel, whose post-mortem concluded that Tomlinson died of a heart attack, but failed to detect the abdominal haemorrhaging found in subsequent post-mortems. Patel, who is currently on trial for twenty-six counts of misconduct, has an impressive catalogue of gaffes to his name, ranging from false claims that a man who died in police custody was a user of crack-cocaine, to an about-turn in which he first claimed that 21 year-old Maja Trajkovic was killed by opiate poisoning, only to later change his mind to asphyxiation. Patel also stands accused of failing to measure heights and weights during post-mortems, and of neglecting to perform X-rays. Now faced with being struck-off the register at the British Medical Council, and presently suspended from conducting forensic post-mortems, it is clear that Patel was just the man for the job in assessing Ian Tomlinson's likely cause of death.

Misgivings may also be arising from the decision of Lloyds banking group to sell a 70% stake in its private equity division, an exercise that has generated £332million, but is nevertheless thought to represent a loss of about half the figure Lloyds initially paid for shares in cinemas, waste management services and health and fitness clubs. Although Lloyds appear happy that the sale represents part of the transformation to a "smaller, wiser company", the decision to take the loss might be regarded a worrying omen for what will eventually become of the government's 80% holding in Royal Bank of Scotland. A springtime 'investigation' by the Guardian newspaper illustrated a 75% increase in the share value of RBS since the government bailout, gains that corresponded to a £7.4billion profit for the taxpayer, if the government were to cash-in its holdings in the beleaguered bank. Former chancellor, Alistair Darling, and current business secretary, Vince Cable, have both spoken of the fiscal wisdom in acquiring shares in debt-ridden high street banks, however, the Lloyds case, and the loss suffered, arguably represents the value of shares once they are no-longer guaranteed by the taxpayer, and are required to be economically viable as a private-sector concern actively seeking a buyer.

Not all, however, is doom and gloom in UK politics, with pharmaceutical giant, GlaxoSmithKline, pocketing an £800million windfall from last year's government order of 60million vaccinations against swine flu. Even more cheering than that, however, was the recent release of an independent report that has been happy to inform the public that the £1.2billion response to swine flu was in fact, "proportionate and effective". The report, chaired by Dame Deidre Hine of the House of Lords, which has nothing at all to do with the government, claimed that it was wrong to suggest that there was an over-reaction to the threat of swine flu, because we could not be certain how many "very precious lives" (not to be confused with the life of Ian Tomlinson) had been saved by the government response. No thoughts were offered as to the fact that, whereas swine flu caused 457 UK deaths in 2009, conventional flu is reckoned to typically lead-to between 3000 and 4000 annual fatalities. Further to this, the government might be troubled to hear that a "proportionate and effective" approach to saving the "very precious lives" of the 3000 people who die each year on Britain's roads, will cost £8billion every single year.

Keep on rockin' in the free world.

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