Its final report is due to be published next month.The latest study will look at areas where the City’ performance has been under attack. These include the financing of growing companies, attracting inward investment to Britain, providing long-term finance to industry, and the funding of pension provision.. Gardner Merchant and Sodexho of France have agreed the terms of an alliance that will create the world’s largest contract catering business. Their joint portfolio of contracts will include the Bateaux Parisiens on the Seine, Wimbledon, Royal Asco t and the Sydney Opera House.

Sodexho is paying £543m in cash for Gardner, a management buyout from Forte, which still owns 24 per cent of the company, and will take on £173m of the company’s debt. The new business will have annual sales of £2.5bn and employ 110,000 staff in 60 countries.
Sodexho, listed on the Paris stock exchange since 1983, said it would part-finance the acquisition with a Fr1.1bn (£135m) share issue, with the rest coming from borrowings and existing cash resources.Following the merger, Garry Hawkes, Gardner’s chief executive, will also take on the role of chairman and join the Sodexho board as joint director general. He said: “Gardner Merchant chose to join forces with Sodexho after nearly two years of consideringa wide range of alternatives.” The company had previously rejected advances from Granada and Compass.Gardner Merchant was acquired from Forte in a £400m buyout in 1992, backed by CinVEN, the venture capital arm of the British Coal pension fund. Forte will have raised a total of £477m from the two deals.The most recent approach from Granada was last August when an offer thought to be broadly similar to Sodexho’s bid was made. But Garry Hawkes and his colleagues did not then want to lose control.Gardner and Sodexho provide catering services to firms, schools and universities.. Fifty three per cent of Britain’s top companies fail to comply fully with the Cadbury code of corporate governance, according to a report by PIRC, a consultancy which monitors corporate governance for pension funds. Eleven companies fail to fully comply with the Stock Exchange’s listing requirement to make a statement of compliance with the code.

According to PIRC, three companies, Associated British Foods, Britannic Assurance, and Rentokil, gave “no material reason for non-compliance” as Stock Exchange rules require Six other companies gave minimal justification.. The vigilantes in the bond and currency markets have once again enforced their particular brand of justice on several recalcitrant nations in the past few weeks. After a quiet period in the global markets towards the end of last year, the unexpec ted devaluation of the Mexican peso on 20 December unleashed another wave of sudden retrenchment in cross-border investment flows, this time triggering a collapse in the debt and equity markets of Latin America, the Pacific Rim and the peripheral countri es of Europe. Many of these effects were not driven by economic “fundamentals” as we usually know them. But one factor all the affected countries had in common was that they have been large-scale recipients of capital inflows during the past few years. Initially, these were driven at least partly by a desire to avoid the low returns on cash and bonds that were available in the large developed economies before last year.
This, and the appearance of economic reform in previously unattractive countries, drove risk premiums on peripheral assets – whether Mexican and Italian bonds or Far Eastern and Scandinavian equities – down to very low levels Now that interest rates in all the large developed countries are on rising trends, the benchmark against which returns in the peripheral markets are measured has increased.

Furthermore, isolated incidents such as the sudden Mexican devaluation remind investors that the path of economic reform can be extremely rocky, so they require higher relative returns in the peripheral markets to induce them to invest there. Market prices and exchange rates need to fall so that the prospective returns in these areas in the future can increase.Upward march Once risk premiums have risen in this way, it typically takes quite a while for them to subside, and at present they appear unlikely to shrink until there is some indication of a pause in the upward march of global interest rates. This in turn will require more compelling evidence of a slowdown in activity in the developed economies, most notably in the US, than has so far been apparent.But looking further into the future, investment in peripheral markets will continue to be attractive for as long as these countries are willing to embrace the combination of free market reforms with fiscal and monetary discipline which has been so prevalent in recent years. As countries as disparate as Britain, Spain, Mexico, Thailand and Hungary have competed to become attractive locations for inward capital flows, the agenda for reform has been set by the prevailing philosophy of the market vigilantes. And to remain attractive to foreign capital, countries have continuously to pass what I shall call the three tests of the vigilantes.

These ensure that the value of investment in a given country will not be undermined by domestic inflation, government default, or foreign exchange devaluation.First, the setting of monetary policy has to be removed from the political process. In some countries, such as Argentina, governments have gone to the extreme of replacing central banks by “currency boards”, which stand ready to exchange domestic banknotes for dollars at fixed rates. When a confidence crisis hit the domestic currency after the Mexico devaluation, the Argentines at one point seemed willing to complete the “dollarisation” of their economy if that was necessary to stem the speculative attack.Complete dollarisation – or in a future European monetary union the replacement of domestic currencies by a mark lookalike – is the ultimate way of persuading the vigilantes that central banks can no longer print domestic banknotes to finance budget deficits. A less convincing alternative, but still pretty persuasive, is to create a central bank that is forbidden from printing money to finance budget deficits, and is entirely independent of the political process in setting interest rates. But these reforms will not convince unless two other factors are also present.