The Notebook is where interesting people say interesting things. Today it’s Neil Bennett, global co-chief executive of advisory firm H/Advisors
Where next for Thames Water?
However big and powerful they appear, businesses are in reality fragile creatures. Many thousands of them fail every year for all sorts of reasons, and today’s behemoth is tomorrow’s insolvency case. This is something I always have to explain to my public sector friends who can rest easy that’s HMG will never suffer a similar fate.
Imagine though a business with 11m captive consumers, a huge irreplaceable infrastructure and revenues of more than £2 billion a year. That would be safe?
Not so if you are Thames Water. It might have been a long time coming but we still all need to pinch ourselves about what’s going on.
This is one of Britain’s biggest businesses, that supplies the world’s greatest city with all its water, and it is teetering on the edge of financial failure.
I feel it more keenly because for several years I advised Thames Water.
I found a business largely run by decent people who desperately wanted to do a good job but were caught between a rock and several hard places – between a creaking, ancient infrastructure, a tottering debt mountain and a regulator who was fixated on cheaper bills at the expense of investment.
Even then I felt that something had to give, and now it has.
This is a drama that I suspect has several acts to run. Sir Adrian Montague, the new chairman, has an impressive track record, but the challenges are stacked up against him.
Somehow he must navigate an angry regulator, a frightened government, unwilling investors and an implacable bond market to chart Thames’s future.
In the meantime I hear that PwC, Thames’ auditors, is dragging its heels on signing off the accounts without a significant qualification.
That would really set the cat amongst the pigeons.
The solution needs to be a fundamental reset of Thames’s balance sheet, that reduces its £14bn in debt and gives it the firepower to invest. But investors are going to need significant incentives before they chase their losses.
Are the bond holders ready to take a haircut? Would the Government be prepared to offer a guarantee in exchange? Or is effective nationalisation the only feasible route? The next few months are going to be a grim test of management determination, political will and financial gymnastics.
Zuck crowing over Threads?
Threads is a rather fine album by Sheryl Crow from 2019, that includes foot-tapping tracks such as Prove You Wrong and Wouldn’t Want To Be Like You.
Threads was also the 1984 apocalyptic film of the conflict between two great superpowers, in this case the United States and the Soviet Union and the resulting nuclear fallout. An excellent film but not one I would recommend for relaxing evening viewing.
From tomorrow, however, Threads will be the ‘text-based conversation app’ launched by Meta – a direct competitor to Twitter and the latest weapon in the war between those other two superpowers, Elon Musk and Mark Zuckerberg.
I wonder whether Mr Z had in mind the album when he came up with the name for his new app – or even
the film? Certainly, some of the track listings seem appropriate.
I was recently lucky enough to spend a few days in Iceland where I was able to marvel at that small country’s remarkable economic renaissance, alongside its glaciers and geysers.
It seems only a short while ago that Iceland was a global watchword for financial disaster – a nation that effectively went bust in the global financial crisis thanks to the greed and profligacy of a few of its entrepreneurs and bankers.
In recent years, though, it has delivered an economic performance that puts the rest of Europe to shame, with growth of over six per cent last year.
Economists have long pondered the secrets behind Iceland’s recovery. For me it seems to boil down to two things.
First, if you have to have a financial crisis, have a big one. Iceland was so catastrophically bust in 2008 that it was forced to completely reengineer its banking and financial system, rather than the make-do-and-mend tactics applied in other countries like Greece.
Second, be creative. When the country recognised the scale of its troubles, it reinvented itself as a global tourist destination – and these days a reassuringly expensive one at that.
The history boys
Tom Holland has developed into one of the finest historians of our era, partly because he is so approachable and readable. If you don’t already listen to his podcast ‘The Rest is History’, you should do. His latest book, on Rome, comes out tomorrow; it’ll certainly be on my summer reading list.