Comment: Sir David Walker is ready to shake up troubled Barclays

By TERRY MURDEN
Published on 14/08/2012 00:00

SIR David Walker clearly intends to hit the ground running when he joins the board of Barclays. The incoming chairman will instigate a clear-out at senior level, changes to the way the bank is run and its relationship with customers.

Such reform sounds like the sort of revolution many have been demanding in order to ensure the banks are once again fit for purpose. Changing the culture may indeed require more than a new chief executive and some tinkering with procedures.

But even someone of Walker’s pedigree and experience will find obstacles in his way. Any attempts to curb pay without a sector-wide reform will risk an exodus of top staff. His hints of an end to “free” banking will not find favour with consumer groups, 
although he argues, with some justification, that providing free services is one reason why bankers were forced to find other, less acceptable, means to make money.

Walker has shown that, far from 
accepting the status quo or a period of navel-gazing, he is prepared to tackle deep-rooted problems head on.

West coast franchise can get First on track

firstGROUP is expected to be named today as the winner of the Glasgow-London mainline rail franchise in what could be a make or break contract for the Aberdeen company.

Investors are salivating at the prospect of a 20 per cent boost to earnings as soon as the second year of the 14-year deal and it could put as much as 100p on the share price, which is already up by a third in the past month in anticipation of it being named the winner.

First needs this deal as much as its investors. Parts of its struggling bus 
division are up for sale but the competition authorities thwarted its attempts to sell one business to Stagecoach.

However, even if FirstGroup replaces the Virgin-Stagecoach partnership on the west coast rail service, there are likely to be difficulties and challenges ahead. The unions are threatening to rebel as they fear First is paying over the odds and will be forced to claw back some of that through job cuts. Passenger groups will be unhappy if it also has to reduce levels of service, as some fear.

With the incumbent joint venture, Virgin Trains, threatening a legal challenge if it loses the franchise, the handover could be delayed or at least muddied. Legal action against the government, however, might not be in either Virgin’s or Stagecoach’s interest. A further five franchises are up for grabs over the next year and with the bus business going ex-growth, they
will provide valuable sources of 
revenue.

Hotel chain pays price for not meeting budget

THE recession should be a good time for budget hotel operators which have been springing up around the country to cash in on tourists downsizing their expectations.

But not all is well in the sector. 
Travelodge, the second-biggest chain in the country, is heading for a company voluntary agreement in order to get its burgeoning debts sorted out.

It wants to renegotiate the leases on 50 of its 513 hotels and the CVA, although an insolvency procedure, will allow them to continue trading by transferring the leases to new owners.

Travelodge is the biggest hotel chain in Edinburgh, and one of the biggest in Scotland, and there will be some concern about the back-story to this latest development in its chequered history.

It was formerly part of the Forte empire and in the mid-90s became part of Granada in an acrimonious takeover of Rocco Forte’s business. Subsequent changes of ownership by Compass Group and then the private equity firm Permira preceded its current status as part of Dubai International Capital.

But the company has struggled to service its debt and in April was forced to restructure its balance sheet, which is likely to see ownership switch to two American hedge funds, Avenue Capital and Golden Tree Asset Management in partnership with Goldman Sachs.

Travelodge has been on a major expansion drive that appears to be catching up with it. The chain has not made a profit for six years and the roll-out of hotels, as well as the refurbishment of existing ones, is likely to slow down until the financial uncertainty is removed.