ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Joining me now to take a look at today’s business sections of the Sunday papers is the UK Business Ambassador and former Chairman of Trinity Mirror and Lloyds Banking Group and Great Universal Stores, Sir Victor Blank. A very good morning to you, Sir Victor and thank you very much for taking on the task. Let’s dive straight in and well, it says it all I suppose in the headline and the picture you’ve picked from the Sunday Times, ‘Hit the panic button’, of course looking at the eurozone as well.

VICTOR BLANK: Well I started with that because in a way to dismiss it because I think we’re on the edge of becoming mesmerised domestically by the international scene. Look, it’s serious, whatever happens, whether the Greeks stay in the euro or comes out of the euro, it’s got too much debt and some of that is going to be subject to default one way or another. That’s going to affect our exports into Europe generally, it is probably going to affect the strength of some of the European banks, probably not ours too much fortunately but there’s not that much we can do about it ourselves. We’re not in the euro, we’re not able to determine exactly what happens on the Greek political scene. If you go under that, stop being mesmerised by that and start looking at the domestic scene, you suddenly find that things are happening. We’ve had our own austerity measures, people may dispute whether they were right or wrong but they were there and they’ve allowed the international markets to have confidence in our financial system and there is some movement taking place. I’ve picked the Sunday Telegraph headline about David Cameron pushing for reform in some of the red tape.

DM: Do you think that is something that will work, that it’s possible and will have an effect pretty soon?

VB: I think the general view is that small businesses are unduly hidebound by some of the regulation that affects them. That’s not just about employment regulation but a lot of the other red tape and the figures and the statistics that they have to submit and that loosening that is one element of getting growth back to them.

DM: Is the other element, perhaps more instant and something you know a lot about, is the banks and lending? Small business say we’re crying out for seed capital and the banks just won’t give it to us, they think we’re too big a risk.

VB: I think there has been a problem, I think there still is something of a problem. In one of the papers today I picked out talked about the business growth fund that the government set up with the banks. They’ve made nine investments but that’s in medium sized businesses, where the growth comes from in any recession, where you recover is from very small businesses, almost the window cleaner who takes on two more people and buys three more sets of ladders. They still find it difficult to get money. The government has got the framework of a Loan Guarantee Scheme to put back in place which will help, there are some initiatives which are probably under-utilised, things like the Community Finance Initiative which allows small amounts of equity to be put into small businesses to help them and of course if you can get equity into really small businesses they become a much more bankable proposition so the banks are more likely to help them.

DM: I just want to take you back to the eurozone and ask you about what’s seen by many as a bigger threat than Greece, is what’s happening in Spain, clearly a much bigger economy. The storm clouds are building in terms of that herd instinct and we’re hearing about money being withdrawn from banks. Of course that happened in this country in 2008, there you were and we were looking at a banking crisis, the end of the financial world as we knew it, hence the merger with HBOS. Do you really think that we could stand aside, say there was a real run on the Spanish banks, that really we would shrug that off with equanimity?

VB: It would be incredibly difficult, Dermot, to know what we would do. On the one hand you’ve seen us supporting the IMF and through that route helping he European banks and the European economies to recover. We don’t want and won’t want to go directly into the eurozone, we want to keep away and let them solve their problem. In my own view … I mean people seem to be 50/50 now as to whether Greece will come out of the euro or not. As I said before, I’m not sure that’s the most critical thing. I think we will suffer, our economy will be depressed to a degree by what’s happening in Europe. Will the rest of the euro collapse? If I was a betting man, which I’m not I’d say it wouldn’t, that somehow the European economies, the strong ones, will actually manage to get it to survive.

DM: But whatever happens, and we’ve seen what it’s done to bank shares and just back to Lloyds, I mean it seems it’s a long, long way off until the tax payer is going to get even close to their money back given what’s happening to the banking system.

VB: On the domestic banks here?

DB: On the domestic banking front.

VB: It’ll take time but it’ll happen. It will come back with the recovery of the UK domestic economy which is why I’m so concerned, coming back to the earlier theme, that we do take some of the red tape out, that we do get some infrastructure spending, that we do get our managers and our shareholders working together hand in hand with government and in banks to revive it. Your headline before, that I do some work as a UK Business Ambassador, I mean I don’t have any difficulty going out and reminding people that there is massive new investment in our motor car industry, in the creative industries we’re terrific. We talked about Marks and Spencer a bit earlier, they have been …

DM: Well let’s move on to that because you picked the story up here, let’s talk about an actual business and a great British success of course, struggling a bit at the moment and of course with a relatively new chief exec there, Mark Bolland. This headline you picked out saying he’s struggling to keep up with fashion at M&S, falling behind the times.

VB: That’s what they’re saying but if you look underneath it at the figures, he may announce a 5% reduction in profits this year, there was another article in one of the papers talking about Burberry, a company that I used to chair. Burberry was a one million pound profit business ten years ago, today it is capitalised at about six billion, its profits announcement this week is forecast to be up 26% on the previous year. So we have got lots of success stories in the papers today, the Graff diamond business, founded by Laurence Graff who is now 75 but built up by him and is now a multi-billion pound business. The successes within our own domestic economy are there and in a way what I’d like to see are government and management working together to generate renewed confidence and renewed confidence in business.

DM: What’s your take in terms of executive pay? I don't know what Mark Bolland is paid, what kind of bonus and pension he is in for but there is the company, they are not doing as well as it used to. If the shareholders come along, and let’s broaden it out, if it happens in any company and it happened at your old company, Trinity Mirror, if the shareholders come along and say look, we don’t think you’re worth this remuneration package any more, you’ve got to take a cut, I mean in these hard times are the boardrooms being receptive enough to that cacophony?

VB: No, they’re not is the short answer. The thing that worries me most about pay is not that people are paid big amounts of money because if that’s what the market demands so that we get the best people working in our best businesses we should pay it otherwise the consequences are poor but there is an increasing gap between what senior executives are paid and what average workers get and that gap has just grown over the last 10 or 12 years and it is time we stopped it. I think some leadership by management, for example why don’t some of our senior chief executives say we’ll have a pay freeze for two years. We will have a pay freeze, we’re asking our employees to do it, let them do it, it wouldn’t hurt them.

DM: Some of them will say we are doing that but let’s hear from them. Sir Victor, thank you very much for hearing from you. Sir Victor Blank there, taking us through the Sunday business pages there.