The slow death of enterprise

It is difficult to calculate the damage done to Enterprise Britain by Kweku Adoboli. He is thought to have lost UBS around £1.26bn in what is looking like a sophisticated systems manipulation over the last three years. UBS can withstand the loss quite easily and many Compliance Officers and their checks might have been defeated by this rogue trader.

That’s not the issue. The real damage is that it will empower regulators and politicians everywhere in their belief that financial markets need more and more control.  It will strengthen the politicians’ conviction to implement the Vickers Report and its recommendations which, ludicrously, are planned for 2019 leaving uncertainty in the air.

What is actually happening is that enterprise is being squeezed out of Britain. It is like suggesting that motorways are failing in their purpose because of a serious accident on the M62. I wonder if the Regulators and Politicians, given a free hand, would close them all. Then there would be no motorway fatalities.

This descent into a regulatory stranglehold was brought home to me recently. I have been advising a company needing a cash injection to withstand the downturn in the retail sector. They had a balance outstanding with HMRC. They met with the inspector who agreed a repayment schedule. This was an important lifeline. On the day of the investor presentation the inspector contacted the Finance Director. He said that he had received a new edict from Government and the whole debt must be paid immediately. They would be coming to take the stock if payment was not made. The FD effectively collapsed in the presentation.

The business had repaid in full a Government Loan Guarantee facility (£90,000) and maintained a credit balance. When they approached the bank they could not find anybody to talk to and when a response was received from a signature on a letter, it was a flat rejection.

HMRC is currently initiating campaigns on those breaching VAT thresholds, those using e-marketplace sites such as e-Bay for business purposes and private tutors and coaches who generate secondary incomes from their expertise.

Statistics out for the AIM market, which used to be the most successful junior stock market in the world, reveal that at the end of August new fund-raisings had fallen by £40m from the previous year which itself was awful. Secondary fund-raisings were down £22m.

Unemployment has passed 2.5m (7.9%) because recruitment in the private sector cannot compensate the job losses resulting from Government cuts.

I wonder if regulators get Christmas bonuses.

1 comment for “The slow death of enterprise

  1. Richard Hoblyn
    23 September, 2011 at 08:35

    Tony

    To answer your final comment the FSA is structured like an investment bank & has a super bonus pool for its senior executives. The argument has been that the regulator needs to attract quality people to the regulatory world so they need to compensate equally but the fallacy is that not that many are recruited from the investment banking arena. There is a merry go round amongst the quangoes, civil servants and academics so it is hardly surprising that regulation is NOT working and getting ever more fascist. I’m afraid that the City of London is under a cloak right now. Incidentally as an aside stockbrokers in the front office are NOT allowed direct access to back office procedures and systems. There are clear divisions devised to protect clients and firms so why hasn’t the regulator forced banks to do the same. We know the answer to that question; the banks pay the bulk of the regulatory fees so the FSA turn a blind eye to Leeson, Kerviel and Adoboli blowups who ALL have one thing in common. They ALL worked in the back office and knew how to corrupt the systems. BACK SEAT DRIVERS!

    Richard.

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