The Observer from London, Greater London, England • 20

OBSERVER BUSINESS 8UN0AY 3 OCTOBER 1M1 20 nmmm of the money pot it admin- corp. given by Wall Street istered 2 billion of invest- brokers Bear Stearns. Two ment trust money and well were for oil companies one tto it n.i.li'a Bush for US wells (not over Li cnjiion oi pension fund money. The rest is mutual life assurance money. It is an agreeable location, with elegant buildings housing the largely serious, upright, church-going gentlemen whose job it is to make lots and lots of money by investing in other people's companies.

Bush Exploration) and one for Australia. Oil is out of favour elsewhere, which obviously influences Edinburgh's thinking. But, as the fund managers chorus, we take a long-term view That they do is well known by international financiers: Nowhere in the world is hence the oil punters, who own backyard and Edinburgh's 90-year experience of foreign parts. Edinburgh was the first significant source of foreign equity investment in Japan, for example, in the Sixties, and Scotland to a large extent financed the British Empire. This legacy dates back to the last century, when Scottish industrialists who had amassed huge wealth from, among other things, coal, steel and shipbuilding, had a distinct aversion to investing through London.

They felt they would be taken advantage of. So they decided to look abroad. Naturally they looked to their own accountants and lawyers to handle the business. It was so lucrative that many abandoned figures and the law to look after the rich men's money. Canada and the United there a place where God and frnnr Mammon are worshipped do(jr of most London mer- with near equal relish, says hant banks and other Robin Angus of eminent institutions.

Scottish stockbrokers Wood Mackenzie. And as Gavin undies, however, prmdt Gemmel, a partner in Baillie nly a tn Gifford Investment Man- diet. The fund managers agers, succinctly puts it: travel abroad extensively Our skills are the judgment search of new investment and of value t0 monitor existing ones. Their knowledge of foreign GEORGE BUSH Junior, 36-year-old son of the Tjnited States Vice-Presi- dent of the same name, has spent the past few days in the EEC's second largest financial centre trying to raise a pile of money. He needs it, of all things, to finance oil exploration in Texas at a time when big money has as much enthusiasm for wild cat as the Archbishop of Canterbury has for stud poker.

Still, In coming to Edinburgh last week, Georgie Junior did so with the knowledge that he would get more than a wee welcome. His pop and grandpa, one- time Senator Prescott Bush, have long connections with Edinburgh and its money pot. Some 30 years ago the Vice-President's father introduced him to Scottish money, enabling Bush to start Pennzoil, now a significant Texan oil company. Bush got rich and so did his Scottish backers: hence Junior's decision to follow in his footsteps. He was plodding a path well worn by American, Australian, Japanese ana many other foreign investors.

Edinburgh's money pot is an international lure: it is currently brimming with over 6 billion of investment and for the best Dart markets is matchless, something that promises to swell the money pot significantly since large US corporations are now looking to Edinburgh to help them invest a portion of their own huge pension fund monies outside the United States. The sums run into billions. Few people realise the potential of what this could States were the prime attractions, with land mortgages and equity investments in small companies given priority. Managers would appoint agents and visit them and their investments annually. Thus the unrivalled network 1 OAVIO LIDOLE for Seal of approval Ivory and Sime.

Quiet, reserved and studious Edinburgh's Charlotte Square, with 6 billion at its disposal. mean tor invisible earnings, Some, of course, are better Barry Stewart of Mar-judges than others. Rivalry tin Currie, one of the more between the respective fund conservative firms of fund managers is intense and managers, rarely do they seek one an- Also in on the US pension others' counsel on the merits act are Ivory and Sime, the of the dozen or so invest- largest Edinburgh fund man- nn i i -1 i of connections. The dominant investment trust figure was Thomas Johnstone Carlyle Gifford, a multi-millionaire who died only five years ago in his nineties. His early activities made full use of legal opportunities open to investors at that time many were distinctly 'fringe' and in today's environment he would have been considered a rogue.

But the Great Crash and the Depression had a sobering effect on Gifford, as on tic Assets, bought and then sold to the public fringa bank Edward Bates befora the banking crash. Second, it bought from Jim Slater a large chunk of a used company Haw Par. Says director James Laurenson The great thing in this business is that you can only lose one times your money. You can also multiply it 50 times as Ivory did by backing George Bush Senior. Lindsay Vincent invest in new technology.

Ivory have the reputation of being the most aggressive bunch in Charlotte Square, and there is doubtless a fierce and competitive career structure within the organisation that doesn't sit comfortably with the square's image namely, quiet, studious reserve. Inevitably, success has been mixed with failure. In the 1970s Ivory and Sime made two costly and controversial decisions. First, its main trust, Atlan investment trust money, they say their philosophy is to identify growth industries and put relatively large sums in individual companies. For this reason they are not too keen on British companies.

It was Ivory who set up George Bush Senior. And back in the 1920s got John Maynard Keynes involved as a foundation director and Shareholder in a trust still in existence the Independent' Investment Company. Its initial brief hasn't dated one iota its aim was to a lesser percentage of their money than elsewhere, and today the funds are still strongly orientated towards medium sized US com-panies and over the-counter stocks in places that would once have been considered the back of beyond. Denver, for example. Since the passing of Gifford, the undisputed big shots of Charlotte Square are Ivory and Sime.

With about 1 billion under management, split roughly between pension and others, and the firm he founded, Baillie Gifford (Edinburgh's second largest fund managers) is as prudent and cautious as any. Such was Gifford's fame that in the 1940s he was appointed by the British Government to liquidate UK investments in the United States to bring back dollars for the war. Significantly, Gifford and other Charlotte Square managers tended to avoid smokestack America as a home for their money. Wall Street, they decided, should receive meui uppui luiuuca pi cocmcu agers, wnn cuenrs ukc idih, Xerox and Standard Oil of on a plate every day. Last Thursday was a fairly Indiana.

typical example of a fund That US companies should Scottish (and some of this century foreigners have been trying to get their sticky- fingers into it. More have failed than succeeded. In all major western financial centres, the name of Charlotte Square, named after George Ill's wife, is legend. This is where most manager's lunchtime. At the London) assistance in their Caledonian Hotel, three lnnrhes were eiven bv foreien nension fund requirements, seekers of finance.

One was reflects both their ignorance for the First Oklahoma Ban- of what lies outside their The scoirelhiedl grass irootts No end to Reagan's rough ride from BARRY HOWARD in New York FOLLOWING Professor Galbraith (' Observer Business 5 Sep.) is not easy. He has, however, spurred me to put the point of view of a director of a medium-sized firm which has been struggling for the past three years and still awaits the millennium first tentatively promised in 1981. Thirty-five years ago I was being taught by two such politically opposed professors of economics as conservative John Jewkes and left-wing Arthur Lewis at Manchester University, that the perfect market was a useful concept but so far removed from practicality as to be of little value when it comes to business The Thatcher regime has overlooked how monetarist policy distorts markets. Businessman DAVID SUTTON of Manchester paper converters Millington Sheldrlck, details companies' agony. the fourth quarter led by increased retail sales and car-buying.

The official Treasury forecast is still that next year's gross national product will increase by 4.4 per cent, relatively modest for a recovery year. However, the group of 40 economists who forecast the economy for the Administration say that the rise will be no better than 3.5 per cent. Interest rates still refuse to he.Jp. Last Tuesday, Bankers' Trust cut its prime rate by 0.5 per cent to 13 per cent. No other bank followed, however, and by the end of the week the gold price had dropped and the dollar had hardened against the pound and other currencies in anticipation of, perhaps, a short-term increase in US interest rates.

Reagan and others in his team, that the 10 per cent barrier will be breached. The latest twist of the knife for Reagan is that there are even greater increases in the unemployment figures to come. The number of applicants for sncial security payments has hit an all-time record. White House aides are concerned that Reagan's stand against legislation to pay for job creation programmes will back-fire. He says' he will veto any Bill which threatens his budget, including jobs Bills.

'They are artificial programmes that make for temporary he says. Donald Regan, the Treasury Secretary, maintains that there will be a recovery in THE recovery in the American economy is always going to start next quarter the only problem is that the next quarter never seems to come. What does come, in large measure for President Reagan, is bad economic news. He tried to head off the latest gloom, by leaking, and then repeating, just how bad the news was going to be. Last Thursday the Government released the leading indicator for August, a statistic that shows which the economy is heading.

"It turned downward after four months of slow rise. At one of his infrequent press conferences, Reagan fast week put it this way I think we are in you could call it a curve or at the corner, going around the corner or curve by every index the evidence that we are progressing, and on our way out of So now you know. Reagan lends to take credit for the fall in inflation, but not for the recession which caused it. Last week he fell back on that old stand-by for a politician in trouble with a laggardly economy blame the previous administration. When we took he said, 'we found America in the worst economic mess since the days of Franklin.

Politically, the worst news is expected this Thursday when the latest unemployment figures, for September, are to be announced. It is being widely tipped by Reagan Falie dawns. But that increase may not now Demand for money from industry and business is way down. Bank ruptcies are at a record level. There is also less upward decision-making.

Thirty-five suggest tLSreyXPhadnC policy has height of their powers (how "5. been to create a body of old are Thatcher. How and old are Thatcher. Howe and pressure on interest rates from the money supply. The Federal Reserve Board, whose independence is being threatened by Congress, is allowing money to grow josepn are being offered Friedman who will almost certainly retirement terms which they never work again but who cannot refuse.

That Professor Friedman i. a Dove its once-sacred target. In the interests of productivity in monetar This 'more accommodating theoretical error by iU own actions. Leaving aside the Government's ineffectiveness in controlling its own operating expenditure, the monetarist policies have increased the need for government expenditure on the unemployed. How has HMG responded By further distorting the market.

The pound has been Ircnfltlirrjpri Rood-bye to many exports interest rates have been raised the National Insurance surcharge is still with us energy prices have been artificially raised we should have the cheapest energy in Europe, instead we have some of the dearest car tax has remained how much does it cost to buy a Ford Cortina in Germany All these steps (and the list is not complete) have added to the costs of running a business and contributed to our non-profitability all can be attributed at one remove to the cult of monetarism. I shall probably be reviled by 30 per cent of the country's economists (and before they say it, I will admit to not having read an economics text for 20 years) and by most members of the Conservative Party, using such adjectives as naive, non-productive and worst of all, Before they set to, however, they may like to give me some hints on how to run a business in a free market economy when the demand side has almost ceased to xlst and the supply side, at least so far as raw materials, labour, energy, finance and new capital are concerned, is distorted out of all recognition by non-market forces, ff they can. they will at least be more efficient than the directors and managers of some 80 of our customers and about one-fifth of this country's paper mills who have all disappeared without trace over the past two years. monetary policy has echoes ist terms some taxpayers (i.e. Ub IV.

ire klUUlIMICU 1111 I1U1 should make such an oyer- contributing to the economy simplification is in itself by partiai pensions and a annoying. It is when the iump sum supplemented, if Thatcher-Howe faction accept necessary, by State assist-his theories hook. line and or Britain in an earlier phase of Mrs Thatcher's Govern (nose companies and employees who are still work ment. But the change in the ing) are having to pay for rEhT S.n-.r&n mm cases has years of adequately pid hon-2 toettdouMe tragedy contrlbnhWby car workers, point Of view of the SUffear, riiMluwM min i. SS.

workers, railway work: attitude of the Fed and Wall Street to the monetary figures should not be overestimated. The figures still obsess com vLiirf- they would appear to t. "rSL mentators here. Similarly and again help overlooked g'ce is' that' it iTSnlikelf point, and then gone on to Whiteley of Otley, West York- there will be any redundani compound the error shirC) irfoe receiver dvi, servantrhey could all The point overlooked is the because it could not raise the be re-absorbed in the Depart-way in which a monetarist cash fnr the redunrl ing, at least, to prevent interest rates from rising there is a slightly calmer attitude towards the budeet policy will itself distort mar- to which workers were en- Health and Social Security ket conditions. These distor- titled.

The comnanv wanted tu deficit. But it is an uneasy peace. What cynics see com vu.n-inj.iuj ibiiwc iu uuac uuwo uuc nun in to invest, high interest rates) order to keep its other mill, were clearly demonstrated the firm itself and a unique 1 yi ii twjf ened because we are rapidly eroding the manufacturing base that is needed as the springboard for future exoan- ing is a mounting deficit, now expected to be $155 billion or more for the 1983 fiscal year. And there is concern product in by Professor Galbraith. The effect on the market can be In other cases there has sion.

Horrible thouehr for catastrophic. that some of the budeet tim been rejoicing for individuals some of my newly retired ing has been phoney. aaite one section or tne but a terrible waste for the academic friends could it DOUr market as an example, rnmmunilv. So far thr- best be that in 10 vaarc' rim. wh-n ine Die defence Droeram- The experience of manv vears mmnli has hv Nnrth All It! 4ifXiriwtr a hat mes (Bl.

MX Missiles, Stealth bombers, battleships, aircraft carriers and all) have sur has caused business to com- the generous early retirement less freely, there will not be puie we price or laoour oy terms for tne teachers; I enough money to pay your inflation-proofed pensions vived. Only the easily Dost- assuming a working life suspect that the University ponable items -fuel, practice lecturers will get an even As we have decided to keep which ends at 60 or 65 accord ine to sex. Thereafter a Den better deal. At least three the redundant and surplus I 1 ammunition, maintenance and pay have been trimmed. sion has to be provided bv a university rroiessors wnom i lauour in some sort or corn- mm write tie company pension scheme or know in the 54-57 age group, fort the present government It is widely assumed that these will be reinstated later.

by the State. One result of when they should be at the has gone on to compound the Tories speondl mme We wmke the by STEVE VINES IN THE year when the part of the Government's recession plunged to new depths, the Government is strategy for bringing Britain into the microchip revolution, only paid out 6.7 mil shown to have resorted to lion against an allocation of the very remedies it has constantly derided and it has done so with' some success. 1 These 'conclusions are to be found in the recently published and ever-informative annual report of the 1972 All we do. All you do. industry Act for the year ended 31 March 1982.

Yes, it is still possible to invest in tax free Investment schemes! Tax laws change rapidly, but ff you would like to achieve most advantageous returns, we can presently offer you an exciting range of schemes to suit your needs, with the investment variable from either on small monthly savings to large capital sums. Time is of the essence, but wa can satisfy your requirements if you contact us now. Higher rate taxpayers can particularly benefit The Government paid out over 413 million to industry in a mixture of loans and grants and the Industry Department estimates that this spending helped create Write an essay of not more than 1 200 words, choosing one of the suggested fopics on the Role of Industry, and submit your work via your school or college. 388,160 new jobs and safe guarded a further 12,224. Ebury This compares with the previ reflects this government's first cut in aid to private industry.

This year's private industry allocation is 534 million, higher than the amount of aid actually paid out 413 million last year but much less than the allocation, a record 807 million. The biggest increase in payments to industry in 1981-82 were in capital expenditure grants, up from 26.7 million to 61.9 million. The main beneficiaries were the food, drink and tobacco industries collecting 2,699,000 chemi-cal and allied industries with 4.9 million metal manufacturing, 7.6 million (2.1 million). The main regions to benefit from the increased industrial assistance were Wales, gaining 26.1 million (18.8 million); Yorkshire and Humberside with 12.2 million (5.7 million) and a massive increase in the South-West from 1.3 million to 5.2 million and an increase almost as big in the East Midlands from 1.6 million to 4.2 million. Scotland remains the biggest recipient of aid with 34 million (37.4 million).

The annual report also shows' that a number of the Government's prized special schemes for industry got off to a very slow start. The Microelectronics Industry Support Programme, a key We offer a first prize of a 1 000 study tour holiday, and second and third prizes of 600 and 400 holidays to the three national winners; all organised by British Airways. A cheque for 250 to each of the three national winners' schools, and a set of Encyclopaedia Britannica to the 1st Prize-winner's school. 200, 150 and 100 cash prizes ous vear navments of over 41 million. The Coal Firing Scheme, designed to' wean industry off expensive oil-fired burners, was given an allocation of 50 million and more money is likely to be pledged; however only 87,700 was spent last year.

The Private Sector Steel Scheme, to placate the independent steel makers, furious at the vast sums going to British Steel, opened last year without any payments being made. Now that the 25 September deadline for applications has passed a last-minute rush is being processed and the 22 million allocated will probably be spent. The main purpose of the scheme is to encourage, re-structuring and rationalisation in the steel industry. When Parliament re-assemblts. Industry Secretary Patrick Jen kin can expect a fresh wave of pleas for industrial assistance from Members of Parliament in constituencies where big closures are threatened.

Most of these requests will be turned down and, on the evidence of this report, industry's appetite for assistance in expansion, or in the continued struggle against the odds is limited. 332 million, giving rise to 356,609 new jobs and safeguarding 150,339. Tel: 01-7308361 or 0440-706621 the increase in spending on selective industrial aid, mainly in the regions of To: fcrxiry Hnancfd Associates umrtM 36 Ebury Street, Belarsvia, London SW1W OUTO lgh unemployment (covered Please tend i registration leaflet to me it my school (or college). under the terms of the Industry Act), would appear to Please supply further information. contradict the Government's declared intention to slash the Industry Department's 1 understand lhat my essay must be submitted on my behalf by my school.

I will not be less than IS years old and not more than 19 on lit September 1982. Name CAPITAL LETTERS PLEASE FormCUssGradeDept Name of school or college Address Address. budget. Nevertheless, last year the Government actually paid out' I I Ill for the three best essays from each of eight geographical regions. The winner in each region also receives a set of Encyclopaedia Britannica.

A cash prize of 200 for each of the regional winners schools. 55 prizes of 25 for 'commended' entries. JQ, nlv half the amount it allo -Work. Tel: Home. cated for private sector aid.

Town Code County However, this financial navtflxst I wish to invost year the Department of In ALL INFORMATION WILL BE TREATED IN THE STOCTESTCONFaJENCe fl Post to: The Observer-Whitbreid National Essay Awards, 27 Albemarle Street, London WIX4QB dustry budget has been reduced from 2.1 billion to 1.4 billion, a figure which.