The Times - UK (2020-09-15)

36 1GM Tuesday September 15 2020 | the times

Business

Brussels sees a “real opportunity” to

resolve a transatlantic battle over

support for Airbus and Boeing as offi-

cials await an imminent ruling that

would permit steep European duties on

American exports.

“Instead of imposing tariffs, I want to

find solutions,” Valdis Dombrovskis,

executive vice-president of the Euro-

pean Commision, insisted yesterday.

He vowed to work with Robert Light-

hizer, President Trump’s chief trade

negotiator, to broker a settlement and

end a long-running dispute with

Washington over aerospace subsidies.

The pair have already spoken. Mr

traditional defined-benefit schemes

rise because of ultra-low government

bond yields. The total deficits of the

5,400 schemes in Britain grew from

£174.8 billion in June to £199.5 billion in

July, Pension Protection Fund data

shows.

The Pensions Regulator typically ex-

pects sponsors of such schemes to have

plans in place to close their deficits

within a decade. Katie Sims, head of

multi-asset solutions at Willis, said that

UK equity returns had delivered that

target of 9 per cent a year in only one in

every twenty rolling decades since 1704.

Pension funds face tough

fight to erode huge deficits

Patrick Hosking Financial Editor

‘Dogfight over aircraft subsidies must end’

Dombrovskis, a former Latvian prime

minister, became the commission’s

acting trade commissioner last month

and last week was installed perman-

ently in the post.

The trade war between the world’s

two largest aircraft makers dates back

almost two decades, with both sides

claiming victory as the other was found

to have received billions of dollars in

unfair subsidies.

Almost a year ago the WTO ruled that

the United States could set tariffs on

$7.5 billion of goods from the EU because

the bloc had illegally subsidised Airbus.

It is due to rule this autumn on the EU’s

case against US support for Boeing and

Brussels has vowed to impose its own

duties. Key British industries became

entangled in the spat, with Scotch

exports tumbling sharply in the face of

American levies since last October.

In a speech yesterday, Mr Dombrov-

skis hailed Airbus’s agreement this

summer to increase loan repayments to

France and Spain in an effort to per-

suade the US to scrap aircraft tariffs as

a “significant step forward”.

Relations between the US and the

EU appeared to thaw last month, when

they signed their first tariff reduction

deal in more than two decades.

“Transatlantic co-operation is

needed more than ever, given the pan-

demic and its impact on the global eco-

nomy,” Mr Dombrovskis, 49, said.

Callum Jones Trade Correspondent

Traditional pension funds would need

fantastically improbable returns from

shares to erode their huge deficits in the

next ten years, one of the industry’s

leading consultants has warned.

Share markets over the past three

centuries have delivered an average of

3.1 percentage points a year in excess of

cash returns, yet pension funds would

need on average excess returns of nine

percentage points to clear their short-

falls, Willis Towers Watson said.

The warning came as the deficits of

June 2000

Group 4 of the

UK merges with

Falck of Denmark

On guard

300p

250

200

150

100

50

0

2000 2005 2010 2015 2020

July 2004

Securicor merges

with Group 4

Falck to become

G4S

Oct 2011

Launches abortive

£5.2bn bid for ISS

of Denmark

July 2012

3,500 troops

deployed to

provide security

to the London

Olympics after

G4S fails to recruit

enough staff

Sept 2020

Receives £2.96bn

hostile takeover

approach from

Gardaworld

Dec 2013

Sacked by Ministry

of Justice over

offender-tagging

fraud

Aug 2018

Sacked from

Winson Green

prison Birmingham

after multiple

failures

Jan 2019

Loses Home

Office asylum

seekers contracts

July 2020

Pays £44.5m to

the SFO to avoid

criminal charges

in 2013 MoJ case

May 2013

Chief executive

Nick Buckles

resigns, replaced

by Ashley

Almanza

Share price

Members of G4S

security work at

Wimbledon in 2014

Canadian rival launches bid for G4S

I

t would not be too

dramatic to call

G4S’s failure to

recruit the 10,000

security people

needed for the 2012

London Olympic Games

as being one of the most

hopeless failures of

government outsourced

contracting (Robert Lea

writes).

Then again, you might

say something similar

about G4S’s chutzpah in

billing the Ministry of

Justice for the electronic

tagging of offenders who

either didn’t exist or were

dead. This ended up

costing G4S shareholders

£165 million in fines and

compensation.

However, perhaps the

general lack of trust in

the private sector to

deliver public services

should be blamed on

G4S’s performance at

HMP Birmingham, the

old Winson Green prison,

which has long had one

of the worst records in

the history of British

statutory incarceration.

When G4S went in

on day one of its

contract to

run the

prison,

someone

mislaid the

masterkeys

and

£500,000

had to be

spent

changing all the

locks.

It is not so much that

G4S has a poor

reputation, more that it

has become synonymous

with a company with

reputational issues.

All this is a long way

from a business that,

through a series of

mergers and takeovers

between Group 4, Falck,

Securicor and

Wackenhut of the United

States in the first decade

of this century,

became the

world’s largest

security

company. It

also

became

known as

the

company

with the

smartly attired

jobsworths

policing tennis at

Wimbledon and events at

Wembley stadium.

To some, G4S remains

identified with Nick

Buckles, its former chief

executive. Belittled in

parliamentary inquiries

as an over-promoted

Essex geezer, he finally

had to quit — albeit with

a multimillion-pound

fortune — after the

Olympics fiasco followed

an ill-conceived move to

buy ISS, a Danish

cleaning and buildings

maintenance group,

which investors forced

him to drop.

Ashley Almanza,

recruited as Mr Buckles’

replacement from the old

BG Group in 2013, has

been able to turn the dial

in operational

performance, if not in

G4S’s capability for foul-

ups. However, the fact

that G4S’s stock,

financially and

reputationally, is low

enough to attract a

hostile takeover from a

rival a fraction of its size

says it all.

Behind the story

of this cen

becam

worl

sec

co

al

be

k

th

co

with

smar

jobswor

policing ten

Wimbledon and

went in

f its

the

much that

Continued from page 33

strategic plan which will transform

G4S’s prospects and distance the busi-

ness from its unhappy past.”

It added: “Gardaworld’s attempts to

engage with G4S’s board have now

been summarily dismissed or ignored

on three occasions. Consequently,

Gardaworld now encourages G4S’s

shareholders to mandate their board’s

engagement in collaborative discus-

sions.”

Gardaworld also accused G4S of

“persistent underfunding of UK pen-

sion obligations”.

Stephan Crétier, 57, the founder and

chief executive of Gardaworld who sits

at the top of a management team that

owns 49 per cent of the company, said:

“Our valuation offers a certain path for

G4S’s shareholders to immediately

recover lost value.

“We encourage shareholders to ask

G4S’s board to begin engaging with

us.”

G4S hit back, saying that its board

had carefully considered Gardaworld’s

interest but had unanimously rejected

it, stating: “It significantly undervalues

the company and its prospects.”

Although it maintained that its

financial performance during the

pandemic had been “resilient”, it con-

tinued: “The board believes that the

timing of the proposal is highly oppor-

tunistic, coming as it does at a time of

severe turbulence in global financial

markets.”

Gardaworld itself has been at the

centre of controversy, with accusations

this year of “a decade of dangerous

behaviour” that had resulted in scores

of its vehicles being involved in road

traffic incidents in which 19 people had

been killed.

Neil Wilson, chief analyst at

markets.com, said: “There was chatter

about a deal last spring, which came to

nothing, but it looks more serious this

time. This will be the tiddler swallowing

the whale.”

Citing other potential targets, such as

BT and ITV, he continued: “This is just

the start of an autumn of deals. We

know there is a lot of private money

circling, especially relatively cheap UK

equities.

“Ahead of the pandemic, private

equity was sitting on a record level

of dry powder that it will deploy. We

will see many more bids of this

nature — foreign private money

snapping up cheap, undervalued UK

equities.”