Mark Kleinman: Thames Water will be hoping for a fresh start in 2024
Mark Kleinman is Sky News’ City Editor and is the man who gets the City talking in his weekly Morning Wire column. This week he tackles some of the top business stories in 2023, from Thames Water to the CBI and the recovery at Marks & Spencer.
Call it their annus horribilis: for Thames Water, the CBI and the Post Office, 2023 represented the worst of times.
The circumstances and nature of the crises which befell them may have differed, yet they were united by common themes of boardroom complacency, an ill-conceived communications strategy and a misguided blame culture.
In Thames Water’s case, its inability to be transparent about the nature of the capital it said its shareholders had pledged, only served to fuel mistrust in a company which has already destroyed its reputation by showing a lack of remorse over its appalling waste and pollution records.
Britain’s biggest water utility’s cavalier approach to its stakeholders was typified by a near-week-long delay in responding to a press enquiry about its finances. Its dismissive approach to the media is not, though, a function of its ownership structure, as critics of private equity or infrastructure fund ownership might have you believe.
Many of Thames Water’s shareholders are sophisticated investors with a sensible approach to media engagement. Yet they have been found wanting when it comes to forcing the company into a more enlightened approach to demonstrating a commitment to reform.
Under Chris Jansen, who has led both British Gas and Aggreko as public companies, that should change. It will need to, since the confluence of financial mismanagement and operational failings have coalesced to make Thames Water a company truly deserving of customers’ disdain, and heading for financial oblivion.
Post Office needs to learn from Thames Water
By contrast, consumers would have little to say about the CBI. Yet the alacrity with which its corporate members deserted it after its sexual misconduct scandal blew up in April took many by surprise.
Here, too, a lack of confidence in its leadership and a lazy approach to media engagement were both evident. Repeated declarations of a commitment to transparency were undermined by an attempt to disguise the voting figures at the meeting in June which secured the organisation’s short-term survival. Again, new leadership – led by incoming president Rupert Soames – will have the opportunity to reset, and justify the CBI’s continued mandate.
The Post Office offered the most egregious example of disregard for its stakeholders’ all. After the litany of failure and cover-up which catalysed one of Britain‘s biggest miscarriages of justice, its revamped board appeared to have learnt few lessons in humility.
The disgraceful governance flaws that led to the decision to award chief executive Nick Read a bonus tied to the completion of the inquiry into the Horizon scandal was bad enough; but Read’s initial refusal to surrender his bonus truly beggared belief.
Ministers and officials will have tough decisions to make next year about the future financing of the Post Office, which remains the UK’s biggest retail network. Like the CBI and Thames Water, it will need to change its culture and upgrade management – and fast.
A dark year for the London Stocks Exchange
2023 was an indifferent – at best – year for the London Stock Exchange, or at least for the bourse from which its FTSE-100 parent company takes its name.
The data is stark enough: less capital has been raised this year by companies listing on the LSE than in any other since the financial crisis. Of those that listed, some have resembled disaster movies – most notably, CAB Payments, which has lost 80% of its value since floating in July.
It’s important not to be excessively half-empty, though. Bankers report a medium-term pipeline of London IPOs which, market conditions-permitting, should restore some balance to the undoubted de-equitisation happening through take-private transactions and other delistings.
Let’s not forget, too, that many of the feted technology companies like electric vehicle specialist Arrival which went public in the US, citing deeper liquidity and greater appetite for risk have almost all performed abysmally.
Even ARM Holdings, the British chip designer which rebuffed the pleas of ministers to go public in London and which was summarily chosen as a totem of the City’s inexorable decline, saw its shares perform weakly in the New York after-market.
London is playing catch-up, to be sure, and the jury is out on the ultimate efficacy of the Mansion House reforms announced by Jeremy Hunt this year, but it’s hardly game over.
Retail recovery
It was a far better year for Marks & Spencer – and the very fact of that is no mean achievement, after a 20-year period in which its future as an independent high street giant has increasingly been called into question.
Even the 126% rise in its share price in the year to Boxing Day doesn’t really tell the full story of M&S’s revival, but under Stuart Machin, chief executive since last year, some order and focus has been restored to an often directionless and bloated business.
Much of the credit also lies with his predecessor, Steve Rowe, and chairman Archie Norman.
Ironically, with a market value of £5.4bn, it may be more vulnerable to a takeover approach than it was at a much more depressed valuation, since M&S’s brand and product again have impetus behind them. Absent the emergence of a bid, tidying up its difficult Ocado Retail joint venture looks to be the main priority.