the times | Saturday October 17 2020 2GM 49
Business
Sanjeev Gupta, the Anglo-Indian
metals magnate building a global
empire from distressed rivals’ fire sales,
has tabled an audacious bid for the steel
interests of Thyssenkrupp, the German
conglomerate.
Mr Gupta declined to comment on
how much his private interests are
offering Thyssenkrupp for its European
steel operations, which employ 27,000
people. Last year it had sales of €9 bil-
lion but profits of €31 million.
Thyssenkrupp Steel Europe orders
have more than halved and revenues
crashed by more than a third in recent
months because of the recession in the
car industry. In the last reported six
months it lost nearly €600 million.
The offer via Liberty Steel, a subsidi-
Bosses remain
coy on detail of
their strategy
Analysis
Anger over pay has
not gone away
W
e hear a lot about
the minimum wage
(£8.20 an hour for
21-year-olds and
over) but rather less
about the maximum wage of
£100,000 a year.
There isn’t such a thing, of course.
Not yet. But that hasn’t stopped a
few people dreaming of one. Recent
polling of 1,000 UK adults by
Survation found 54 per cent thought
a maximum wage was a good idea.
Asked what the statutory ceiling
should be, the most popular answer
was £100,000. Compare that to
median FTSE 100 chief pay, now
£3.6 million.
Beauty is in the eye of the
beholder and what is deemed to
constitute excess pay tends to be
determined by the pay cheque of
the person asked the question.
Which tends to be around £30,000,
that being the average full-timer’s
salary in the UK.
The left-leaning think tank
Autonomy and the High Pay Centre
tabled a proposal for a £100,000
ceiling the other day, arguing that
the money saved would preserve
jobs and boost pay for low earners.
They conceded the notion was a
pretty radical one, and they didn’t
address many of the obvious
drawbacks — like how to enforce it,
how to incentivise and reward hard
work and talent, how to make up for
the lost tax revenues and how to
prevent an exodus of footballers,
pop stars and entrepreneurs to more
accommodating climes.
Nor did they explain how the
saved money would actually find its
way into the pay packets of the
lowest paid rather than be paid out
in higher dividends, say. Even
Jeremy Corbyn at his most radical
rejected this dirigiste idea. The
progressive tax system is a far better
way of redistributing income.
Yet the perceived unfairness of
top pay hasn’t gone away.
Businesses are not covering
themselves in glory in this
pandemic. Many chief executives
commendably took pay cuts at the
start of lockdown to show solidarity
with their workforce, but these were
all temporary gestures and many
have quietly gone back to full pay.
They include the heads of Easyjet
and Intercontinental Hotels.
After a few quiet years, board pay
is creeping up the agenda again.
While there were fewer shareholder
revolts on most issues this year,
according to Investment Association
data yesterday, the one exception
was top pay. Here 43 companies
were subject to rebellions of more
than 20 per cent.
As bosses prepare for a winter of
cutting jobs, tapping shareholders
for more capital and pleading with
ministers and regulators for
handouts or lockdown concessions,
their own pay packets are going to
look ever more egregious.
Britain for the foreseeable future
is on a war footing; a war against the
pandemic. FTSE 100 generals on
packages 119 times the average
amount they pay staff might have
been acceptable in peacetime. They
are less so now.
Maximum pay is a daft idea. But
no more daft than board
remuneration committees whothink 2019-style pay levels will go
unremarked if the economic
emergency goes on well into 2021.Steady as she goes
D
ame Sharon White has wisely
rejected some of the more
drastic diversification ideas
proposed by colleagues and
customers. There won’t be John
Lewis funerals or John Lewis
domiciliary care.
Instead the new chairwoman is
relying on cost-cutting and a step
change in currently peripheral areas
like financial services to restore
Britain’s biggest worker co-operative
to profits of £400 million a year.
The planned £300 million of
annual savings is not too
demanding, given the £7 billion cost
base, though she will need to be
careful not to jeopardise the biggest
asset that separates the company
from its rivals: well-trained staff
with good product knowledge.
The open-banking rules should
make it less difficult to elbow her
way into savings and investments,
especially with carefully chosen
partners. But this is still a very big
ask. JLP has been offering banking
and insurance products for 15 years
with only modest success.
Dame Sharon deserves her
chance. If she fails, however, JLP
may have to grapple with ideas a lot
more jaw-dropping than funerals,
ones likely to have mutuality purists
blanching with horror.
One would be the introduction of
private capital into the business. JLP
is now saddled with £2 billion of net
debt and has no traditional
shareholders to draw on to help
meet capital costs. Could we one
day see an Amazon or indeed a
Tesco pony up a few billion in
exchange for a minority stake?
The other would be for JLP to
adopt a subscription-based,
members-only approach, doubling
down on its reputation for service
and expertise. It would stymie the
free riders who browse in the stores,
tap the assistants for advice and
then toddle off to buy elsewhere.
Unthinkable? Maybe not for
much longer if physical department
stores are going to have any useful
purpose.A Martin moment
T
im Martin greatly adds to the
gaiety of nations and is doing
what he thinks serves the best
interests of his shareholders. But the
Wetherspoons chief’s score-settling
rant about the shortcomings of
government lockdown policy, while
making a few persuasive points, is
just too narrowly self-serving
(report, page 52). He’s “the
hospitality equivalent of an anti-
vaxer”, as one restaurateur puts it.
Thoughtful, persuasive
interventions are possible. Lord
Wolfson at Next and Nigel Wilson
at Legal & General get it about right
when chipping in on national policy
issues; Mr Martin, less so.Alistair Osborne is away
business commentary Patrick Hosking
16-17 19-20 22-23 25-26
Debt ratio
Target
x3
x4 x3.9
Forecast
Gupta seeks ‘perfect match’ in Germany
Robert Lea Industrial Editor ary of Mr Gupta’s GFG Alliance, is “fully
financed” through a consortium of
lenders led by Credit Suisse, Mr Gupta
said. The offer comes after his hiring of
Premal Desai, 51, the former executive
chairman of Thyssenkrupp Steel
Europe, as GFG Alliance group chief
operating officer.
The Thyssen and Krupp companies,
which merged in 1999, have long been
engines of the German economy,
helping arm the country through two
world wars. Thyssenkrupp’s steel
production today stands squarely be-
hind Germany’s pre-eminence in the
global automotive industry and produ-
ces the steel used in food and drinks
cans, aerosols and paint tins.
Thyssenkrupp has been among the
ten largest steel producers in the world.
Its Duisburg steelmill on the Rhine is
Europe’s largest, a plant that is five
times the size of Monaco.
Liberty Steel has grown in Britain
through the acquisition of the Rother-
ham steelworks and of other mainly
downstream businesses sold by Tata
Steel Europe and the bust Caparo
Industries. On the Continent, it bought
businesses unwanted by the tycoon
Lakshmi Mittal’s Arcelor Mittal inter-
ests. Liberty Steel now has €13 billion of
annual revenues and 30,000 employees
across four continents.
“A deal would be a perfect match,” Mr
Gupta said. “Thyssenkrupp has high-
quality upstream assets which need a
way forward.”
Liberty Steel said that its bid is non-
binding, that it does not have
exclusivity in talks and reserves the
right to alter the terms of the offer.T
he unveiling of a new
strategy for the John Lewis
Partnership had been
eagerly awaited by the
retail industry, but thosehoping that the future of John Lewis
and Waitrose would be laid out in
detail will have been disappointed
(Ben Martin writes).
Asked whether the employee-
owned group would have more or
fewer partners working for it in five
years’ time, Dame Sharon White,
the chairman, replied: “We don’t
know.” This was an answer as vague
as much of the presentation that was
delivered yesterday by the top team
at the John Lewis Partnership.
Given the Covid-19 crisis and the
fast-moving changes in how we
shop, the limited detail was
understandable.
However, since Dame Sharon
arrived at the group in February the
disclosure of her five-year plan had
been much anticipated.
The most eye-catching initiatives,
such as the partnership’s push into
affordable housing and the review of
its price-matching policy, had
already been trailed before the
presentation.
There was also a vagueness about
the new elements, including the
partnership’s £300 million-a-year
cost-saving target by 2022.
Patrick Lewis, executive director
for finance, said that the bulk of the
cuts would be found through
efficiencies in the group’s supply
chain. Yet he was light on detail,
even when pushed.
He said the initiative was part ofthe group’s regular conversations
with suppliers and added: “In some
areas where you’re a retailer with a
very broad assortment, you need to
keep developing that assortment
and it gets a bit too wide in some
areas.” Tightening this up “drives
significant efficiency through the
supply chain”, he said.
When pressed over whether the
savings would involve further job
losses, both he and Dame Sharon
stuck to the same message, which
was that they were not announcing
any cuts yesterday.
A laudable ambition to recruit
new partners from the care system
was not accompanied by any targets,
because the plan is still in its early
stages. There was also little new
information about the fate of its
“never knowingly undersold”
promise.
The group confirmed yesterday
that it would be replaced by another
“value pledge”. This will not be
announced until next year, however.