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21 September 2013

The Bravest Woman in Britain

Tag(s): People, Politics & Economics, Sustainability
Last week I joined a small group of business leaders for a lunch after which we were addressed by Angela Knight CBE, now CEO of Energy UK, the trade association representing the energy companies. I first met Angela back in 2009 when she addressed the Marketors as Chief Executive of the British Bankers Association at the height of the banking crisis. She then seemed one of the few people who spoke with calm reassurance. It is quite possible that in her role as representative of the energy companies she may need to help guide us through a much bigger crisis than the one we faced over the banks.

Angela has held the post of CEO of Energy UK since September 2012. Before joining Energy UK Angela was Chief Executive at the British Bankers’ Association for 5 years. Previously she was Chief Executive of the Association of Private Client Investment Managers and Stockbrokers for 9 years. She was Economic Secretary to the Treasury from 1995-97 after being Parliamentary Private Secretary to the Rt. Hon. Kenneth Clarke MP, Chancellor of the Exchequer, and before that to Industry Manager Sir Tim Sainsbury MP. Angela was MP for Erewash from 1992–97. She graduated from Bristol University with a degree in chemistry and her first job was working for an American industrial gas company before jointly setting up and running the company Cook & Knight, a metallurgical processor for 6 years.

She started work for the British Bankers’ Association on 1st April 2007! She was recruited by Sir Peter Middleton, then Chairman of the Association and of Barclays and a former Permanent Secretary to the Treasury with the brief “Get banks from the inside pages to the front page of the newspapers”. Well, she didn’t have to work very hard to see that.

Today we think of the banking crisis as all about Lehman Brothers but that was its worst point. A year before we had a trial run with Northern Rock. Angela had had a sense of foreboding in the summer of 2007 as Northern Rock’s lending increased but its share price fell. In her view the markets are usually right. She was hosting a dinner when her mobile phone went off and the BBC wanted to interview her on the Today programme the following morning about the Northern Rock crisis. She said she’d call back later. She then consulted people round the table one or two of whom could enlighten her. She called the BBC back and suggested they should be talking to the Financial Services Authority (FSA), the Bank of England or the Treasury. When she got home the BBC called back to say noone was available from those august bodies and so would she come on the programme. She did so and did her best to defend a bank which had borrowed short to lend long sometimes at 125% of house prices. At least her reassurances went some way to stop the bank run. The authorities had had a chance to sharpen up their act. Had they taken it?

The US authorities also had something of a trial run as Bear Sterns, a major investment bank, went under. I was advising a Bear Sterns manager at the time and was a little surprised about her lack of knowledge of the situation. Again we can conclude that the authorities had a chance to sharpen up their act and may not have taken it.

Our lunch was almost five years to the day after the Lehman Brothers scandalous collapse and when the Lehman shock hit noone seemed to be ready for a crisis that had been forecast by many commentators for a long time. Angela thinks that the full story has still to be told although there have been some good attempts to analyse and explain aspects of it. She is scathing about the regulators who went AWOL for much of this crisis. The decision of Gordon Brown with effectively his first decision as Chancellor of the Exchequer in 1997 to take responsibility for bank supervision from the long established Bank of England and give it to the feeble FSA was at the heart of much that went wrong. However, she did not think that a return to a Glass-Steagall regime where investment banks and retail banks were separated was now feasible as banking had become a global business and unless you coordinated similar legislation all over the world banks would find a myriad of ways around it. Her perspective of how different countries dealt with the crisis is interesting. She rates the Swiss first. They had problems in banks like UBS but the authorities removed the top management, recapitalised the bank, put toxic assets into a separate bank and above all dealt with the situation firmly and swiftly. It helps of course that their economy is well run and in good shape and so they have the cash to make such moves. They are now making positive returns even on the bad loans.

She puts the US next. Despite the massive size of the problems they encouraged the better run banks to take over the assets of those which were bust and again provided capital support where it was required. They too are now seeing positive returns on those decisions. Germany are next in line most of all for the quiet way in which they handled things. Most of us are probably unaware but there is only one large bank in Germany that does not have government finance behind it. She puts the UK next and although it was a bit of a dog’s dinner and we still have not dealt with all the bad stuff at least we kept the show on the road and are beginning to get back some of the public investment. The rest of Europe, however, particularly the southern nations, in Angela’s view have completely failed to deal with the crisis and still face severe problems with many banks being effectively bankrupt with no end in sight.

Turning to her new role in energy she is clear that the current policy of seeking decarbonisation, energy security and affordability all at the same time is undeliverable. On 12th December last year a depression over Europe meant that the vast stocks of wind farms and solar panels in southern Europe were delivering nothing. The weather was cold and so Southern Europe started to draw on the energy stocks in the north. We got to the point where there was simply no spare capacity in the system. Since then the UK has decommissioned the equivalent of four power stations so this winter we face worse problems.

On the day we met the wind was hardly blowing at all and a couple of people in the room had an app on their smart phones that tells you how much energy in the UK is being produced from what type of source. At that point although wind is supposed to deliver 10% of national capacity it was only delivering 0.7% of national requirements. Meanwhile 39% of our energy was still coming from coal. Angela was familiar with the app and told us Energy UK often tweets its results to ram home the point.

She then told us that to meet the targets to which we are committed for both renewables and capacity by 2035 we need to build 1 gigawatt every 7 weeks i.e. the equivalent of one I gas power station. In your dreams.

This was Friday 13th.

Copyright David C Pearson 2013 All rights reserved

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