Terry Murden: Weir's success is a welcome fillip but fear is of predators

Published on Thursday 2 September 2010 23:12

WEIR Group may no longer make much in Scotland, but it still represents one of the country's biggest names in engineering.

Its Scottish business is now focused on engineering design in East Kilbride and some servicing and maintenance work in Aberdeen and Alloa. Post the sale of its iconic Glasgow pumps business to the tycoon Jim Mccoll, Weir's manufacturing operations are focused close to the markets it serves in 40 countries.

It has survived the dark days of the 1990s when it almost succumbed to takeover and the periodic challenge of being out of favour with the markets when industry was deemed ex-growth or merely unfashionable.

This week, therefore, should be a reason for celebration when the company enters, as expected, the FTSE-100 index of leading shares.

For some weeks there has been talking of its elevation to the elite bracket of quoted companies. For its chief executive, Keith Cochrane, it will be a return to the big time as he was a director ScottishPower and Stagecoach when they enjoyed a similar status. Perhaps that is why he has been shrugging aside all talk of Weir's promotion in recent months.

But with the positive news comes a warning. Britain's industrial giants have been targeted by overseas predators due to the weakness of sterling, especially with industrial groups trading at relatively low earnings ratios, suggesting plenty of upside.

Following the acquisitions of Chloride group and Tomkins it has led analysts to speculate that other potential takeover targets among British engineers could include GKN, Morgan Crucible, Cookson and Bodycote. Weir Group is also on some lists, as is temporary power provider Aggreko, subject of rumours that Swiss-Swedish group ABB has been keeping a close watch. Aggreko's shares rose strongly yesterday, up by more than 6 per cent at one stage, though sources say the rumours are probably just that.

Bitter medicine but it may just make us all healthier

A HEAVY dose of job cuts has made it a week to remember, or maybe forget, for the financial services sector. It seems like the bad news just keeps coming, and in a couple of weeks time Aegon will confirm that more are to go on top of those at Standard Life and Royal Bank of Scotland.

But the culling must surely be nearing its end and the hope must be that the sector will come out the other side in much better shape.

It's natural for those losing their jobs, particularly in banking, to believe they are the victims of misdemeanours at the top.There is some justification for such sentiments.

But looked at in another, more brutal, way, many of those jobs would not have existed at all had it not been for the extraordinary growth in the financial services sector in the last two decades.

It should be no surprise that if lenders can no longer provide mortgages in a moribund housing market that there is no longer a need for mortgage processing workers. If the consumer is putting his money into equities instead of savings products then there is less for those working in the savings industry to do. It's pretty simple logic.

Companies that became bloated on highly leveraged business models are being forced to restructure to make themselves fit for a future financial services sector that will bring supply and demand back into balance and will provide services that the public wants instead of last year's model that is now out of fashion.

This reshaping and remodelling should be good for the sector and for Edinburgh in the longer term, as long as those doing it are designing a future and not simply tidying up their balance sheet.

Jobs are an unfortunate part of the economic equation and part of the collateral damage when things go wrong.

When they are being lost, especially in significant numbers, it is easy and quite understandable to regard it as the beginning of the end.

But seen from the top and from the markets point of view, job cutting helps improve the bottom line and creates an organisation that has a better chance of surviving and prospering.

We can only hope that the bank and insurance industries emerge stronger from the current carnage and that the sacrifices being made by thousands of staff are not in vain.