Hard times spur urge to merge

In bull markets it is all about expansion, the strong taking over the weak to bulk up or increase market share. In more gloomy times the weak merge with each other in the belief that they have a better chance of surviving the downturn as part of a larger unit than they do on their own. It takes a while for this kind of activity to get going - people have to wake up to how gloomy prospects are - but in a prolonged economic slowdown there can be almost as many bids and deals as there are in an upswing. As befits the different economic rationale, however, their value is usually much less.

A story over the weekend falls right into this category. It appears that housebuilder Bellway and its smaller rival Redrow have been exploring the possibility of a merger, though they appear slightly discomfited by the leak and not quite ready yet to do a deal.

The reason they might want to merge is obvious. The housing market is at its weakest for 15 years, the number of new homes being built has been throttled back and the only thing house builders can do when they are not building homes is batten down the hatches, reduce costs and hope to ride it out.

The reason they might not want to merge is also obvious - if the deal is to be done properly, one set of directors should lose their jobs.

Europe question for Dave and Co
Last week's council election results mean that for the first time in years there is a real prospect that the Conservatives could be in a position to form a Government.

But if they are to convince the wider business community - particularly the larger listed companies - that they are ready to take over they urgently need to develop a more grown-up attitude to the European Union, to stop seeing everything through the narrow prism of sovereignty and look instead at the economic benefits it has delivered and can continue to deliver.

David Cameron and Co need to stamp firmly on the lunatic fringe within the Conservative Party whose ambition seems to be to take Britain out of the EU altogether - or banish them to UKIP - and have the confidence to engage sensibly with the other members of the union. If they fail to do this, they will also fail to convince a substantial slice of Britain's business leadership that they are ready for power.

The daft thing is that those viscerally hostile to Europe have failed to recognise that for the past few years the tide has been going Britain's way.

You can either have a deeper union or you can have a wider union, but you cannot have both at the same time. The great success since the millennium has been enlargement, a fact celebrated at a conference at the Stock Exchange tomorrow organised by the pressure group Business for New Europe - and underlined by the publication of a paper in which business leaders from insurance group Aviva's Andrew Moss to advertising giant WPP's Sir Martin Sorrell voice their support.

Enlargement has become the driver of growth in Europe, at the expense of ever closer and deeper integration. Enlargement has brought in the fastgrowing economies of the eastern states and, with the opportunities they offer, has expanded the market overall to 500 million people. It has brought in a string of countries determined that the market of this size will no longer be dominated exclusively by a French-German agenda.

It is as if Whitehall has written the script, but the short-sightedness of our politicians risks squandering the opportunity.

Sage words to chill insurers While we were enjoying the spring sunshine over the holiday weekend, the people of Omaha, Nebraska, were playing host to the annual meeting of Berkshire Hathaway, the principal vehicle of Warren Buffett and Charlie Munger, the two most successful investors in America.

Such is their reputation that an estimated 35,000 shareholders made the trip this year to listen to some five hours of homespun wisdom, sharpeyed comment and economic theory from the so-called Sage of Omaha and his sidekick. There has never been a gathering like it, and when the pair finally retire there is unlikely to be another to match it.

It is often forgotten that one of Buffett's main businesses is insurance, and his comments on the trend in rates should send a chill through the London market because he told his shareholders that this year he expected premium rates - and profits - to fall significantly.

The London market is already seeing this, of course. But the big question in Lloyd's and elsewhere is whether underwriters will maintain their discipline and write only for profit. Or will they do what they have done in every other insurance cycle - indulge in price-cutting themselves to maintain market share?

ANTHONY HILTON'S ARCHIVE
www.standard.co.uk/anthonyhilton