OPINION: Firms must wise up to City changes

A poll at last week's Investor Relations Society Conference asked the audience to what extent they were concerned about the coming economic slowdown.

Anthony Hilton
Anthony Hilton

Roughly a third said they were not worried at all. Just under half said they were moderately worried and about 15 per cent said they were very worried.

Then in answer to a second question, four-fifths said they expected to step up their investor relations activity this year - so presumably something is driving the need for greater levels of activity.

The low level of concern surprised me but it underlines the fact that equity markets have held up relatively well given the turmoil in the credit markets. The latter are signalling Armageddon.

Equities assume they have nothing to worry about as the hole is at the other end of the boat.

There is a similar sense of unreality in the financial PR community. Of course firms are worried about the collapse of M&A activity and new company flotations, but they still think the core business will be unaffected.

Financial reporting, which is increasingly on a quarterly basis, provides a core stream of revenues, and the continuing interest of overseas companies that want to keep plugged into the London investor base is also very lucrative.

But the key is the belief that when times get hard client companies will work harder to communicate, because the penalties for failure will be that much more severe. This seems to imply PR firms assume City life will return to normal as the credit crisis works its way through the system.

But this seems complacent given that this financial crisis is now recognised to be the worst since the 1930s. What financial PR firms should in fact be considering is whether the City will ever be the same again. What they should factor in is whether companies will continue to spend heavily to communicate when no investors out there have any interest in listening.

Charles Dumas of Lombard Street Research said at a recent conference that he expected City activity to go back to 1999 levels. His audience, who nodded in sage agreement, perhaps did not understand that this implies a cut in activity of 50 per cent. Who knows whether that is the right number - but it is surely the right direction.

Anthony Hilton is City commentator on London's Evening Standard 

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