Carney should again turn to the biggest problem of the bank: the city | Business

WAs Bank of England Governor Mark Carney speaks to the city's big boys at Mansion House in London on Thursday, he may step out of his usual comfort zone and expose more clearly his thoughts on trade wars. of Donald Trump and their mitigation effect on global growth.

Closer to home, he could document the impact of Brexit and the danger of a conservative party that insists on going ahead, even if it means leaving without any agreement.

After six years at the helm of the bank, this will be Carney's latest appearance at the city's annual organized event. Indeed, he probably thinks he has said all he can say about these topics in the coded language used by central banks. The same thing would apply to climate change, which he deplored. After all, to intrude openly in the political sphere is not his style.

He is many miles away from his predecessor, Mervyn King, who looked like a thoughtful academic, but with the advent of a Conservative-led government in 2010, he was Is a strong advocate of austerity and, once out of office, Brexit.

Carney should limit his comments to a more technical talk, summed up in a warning about the fate of London's financial services sector in a digital world.

This may seem a lot less exciting and controversial than belittling Conservative Party candidates who support a Brexit without agreement, or his reflections on the US President and his battles against China, the EU and Mexico, which are holding back trade Global and Spooking governments around the world.

But the future of the city is important, even when it poses enormous difficulties for a country hit by the financial crash and years of growing inequality. The industry is a major exporter, taxpayer and employer.

That the city is at the heart of the problem of inequality in the UK is obvious. Bankers receive packages of several million books, as well as thousands of accountants and lawyers who facilitate their activities. They have accumulated wealth in sumptuous real estate portfolios and generous retirement plans, creating an unfathomable chasm between themselves and the average worker.

But Carney's message will likely be that risks are constantly being revised and that the Bank of England is constantly monitoring. This message will contrast deliberately with the days leading up to 2008, when Lord King was in charge and the central bank was blind to the city's calculation errors (and its excesses).

This is a message that must be cut after the return of the sufficiency of the city. The Brexit vote initially raised an existential question for the financial services sector, which foresaw its demise. Since 2016, Square Mile has become more and more satisfied with itself, while reports of bank leaks to Paris, Frankfurt or Singapore are exaggerated.

Carney should say that Britain must tolerate the City, she must be on a leash. The pressure exerted by shareholders to meet expectations of excessively high returns means that risky behavior is embedded in its DNA.

This pressure is only accentuating as secure badets continue to offer low or zero returns. We know that banks have already lent huge sums to companies that could never pay them back. Investment funds have also taken risks that could deteriorate and lead quickly to bankruptcy.

When bankers do not fear the mower, Carney must be clear that each corner must be covered to avoid another crash. This means that the Bank should not simply monitor but be willing to impose restrictions on all aspects of vehicle sales, from unstable real estate markets to derivatives that are so complex that they are impenetrable. A slower rate of innovation will be a price to pay to avoid another crash.

Kier is not immune to the forces that resulted in Carillion

A success, declining in failure, retraces the destiny of the main British companies of construction of infrastructures during the last 20 years.

Companies like Carillion, which went bankrupt at the beginning of last year, have grown thanks to the juicy returns of work in new schools, hospitals and railway lines commissioned by the administrations of Tony Blair and Gordon Brown.

Then came the financial crash, which coincided with growing understanding within the government of how to draft a contract with a private provider and not get scammed. Whitehall has put pressure on infrastructure budgets, without thinking too much about the consequences, and companies like Carillion and rival Interserve, without nowhere else, have sunk into the administration.

Kier was supposed to be one of the survivors. Most of the company's contracts with the government were modest and the company had a large branch of house construction that benefited from the government's separate purchase badistance program.

Now the message seems to be that housing construction is not enough, according to the newly installed general manager, Andrew Davies. On sale last week, Kier Living built more than 2,000 homes last year and has a £ 2 billion portfolio of projects. An attractive proposition for a rival house builder.

Davies will have to act quickly now that some credit insurers have refused to cover Kier's supplier contracts, which means that suppliers could start demanding higher prices and faster payment. For Carillion, the lack of insurance proved the beginning of the end.

There was a time when contracts for the construction of parts of HS2, Crossrail and Hinkley Point, as Kier would do, would have been enough to avert a catastrophe. However, the design and construction problems of the UK's major infrastructure projects persist – as well as the decline of UK private entrepreneurs.

Green needs even more maneuvers to avoid the crash of Arcadia

Sir Philip Green boasted last week of winning "7-0" during his clash with the owners about the future of his Arcadia retail empire. At the same time, he had a "car accident".

This sounds like good news for many of the 18,000 people Arcadia employs in its 570 stores – although we know that nearly 1,200 of their jobs are already ready. The rest must feel nervous.

It is likely that Green's owners will hand over at least 10% of the nearly 200 stores for which Arcadia has obtained rent reductions under the restructuring program. Arcadia itself will also want to close more than 50 stores than the 50 already planned in the plan so that resources can be concentrated on those with a real future.

Its brands also need to be picked. Evans, Burton, Miss Selfridge and Dorothy Perkins have neither the product nor the marketing needed to stand out in a highly populated area. They can not all survive. Any other owner would probably have sold or closed some years before.

Even Topshop, the jewel in the crown, is too expensive, lags behind online and does not know who he is trying to attract.

To make a change at Arcadia will require a fundamental change in culture in a business where only one man has called many times for 17 years.

While many of his staff are preparing to pick up their P45s, Green should be careful to reduce the number of his management roles, otherwise a change will not happen. You also need to withdraw less money from the company. Her family has been living for many years with outstanding Arcadia salaries: since 2005, she has received at least £ 1.5 billion in dividends and payments related to BHS.

The contribution of the Green family of £ 100 million to the Arcadia pension fund and £ 50 million in cash was crucial in keeping it afloat last week.

Arcadia needs the Greens to bring in more money or this car crash could still happen in slow motion.