Would you invest your savings in Great Britain Plc?

Let�s imagine a friend or financial adviser called you up and suggested you invest your life savings in a promising company called Great Britain�Plc (GB).

The first thing you asked might be, �could you tell me a bit about the top management of GB?�

�Well�, your contact replies, �the CEO used to work in the PR department and has never run a major organisation or even department before. But he seems nice enough, though a bit vacuous. The Financial Director is one of the CEO�s closest chums, but�has no financial qualifications � in fact he�s a history graduate with no real work experience apart from folding towels in a department store�.

��What about the rest of the management team? Surely they know what they�re doing?� could be your next question.

�Umm,� your contact hesitates for a moment, �actually most of them have been caught fiddling their expenses and using company money to pay partners, friends and children as supposedly working for them. One is a convicted criminal and another a fraudster. And they�ve been pushing for more generous expenses and a�massive�pay rise even though GB�s results get worse every year and its share price has fallen by about 30%�in the last 5 years�.

By now, you�re not feeling too excited about the prospect of investing your cash in GB. But, just in case there�s something you�ve overlooked, you ask, �what�s GB�s financial situation like?�

There�s a long silence, then finally your contact admits, �unfortunately GB spends �750m for every �650m it earns, its debt is rising by �100m a year and markets will soon lose confidence in GB�s management. In just five years from 2010 to 2015, GB�s debt will have�doubled from �700m to �1.4bn�and soon the company will only be able to borrow�money at almost extortionate rates of interest. Unless GB�s management do something pretty drastic and do it quickly, GB may go� bankrupt� (click to see picture more clearly)

Hearing this, you politely suggest that there�s no way you�d consider putting your hard-earned money into a seemingly obvious disaster like GB.

��Ah,� your contact quickly replies, �it�s not as bad as it looks. There�s a very strong rumour that a new management team will be taking over GB in May 2015�.

By this time, you�re pretty doubtful this will improve the situation. But out of politeness you ask, �what�s the new management team like? Have they a better record than the current team?�

�The person likely to be the next�CEO is quite young and�was most people�s second choice for the job.�Everybody preferred his brother, whom he stabbed in the back to get his job.�He�was very close to the former Financial Director, who got booted out 4 years ago when GB got into severe financial difficulties. He has little to no experience and isn�t really that impressive. In fact, most people think he�s a bit of a nerd,� your contact hesitatingly reveals.

�And” your contact continues,�“the likely next Financial Director is a loud-mouthed bully who was very closely involved in the last management team but one. During a time when business was booming, they unfortunately more than doubled spending while revenue only increased by about 60%�and they pushed GB�s debt from �350m to over �700m even though sales had never been so good. This meant that when business conditions worsened, as they always do after a period of unusually strong growth, GB got into real financial trouble and the whole of the previous management team was replaced�.

�So,� you ask your contact, �you�re telling me that key members of the team responsible for wrecking GB�s finances will soon be back in charge?�

��Yes� you contact replies, �but although they won�t admit to making any major mistakes last time they were running GB, they�ve promised to be a little more careful if they take over in 2015. So, it�s a great investment with a great future�.

Being a rather cynical person, you�re not convinced and decide to put your money elsewhere – Australia Plc, for example, or even Russia Plc as�both seem to have quite tough CEOs.

Now, I don�t know whether comparing a country with a company is valid. But what this little parable tells me is�that Britain’s future looks a little worrying�as neither of the two management teams likely to run the country�have a track record of success. And neither has either the ideas or the courage to solve Great Britain�s financial problems.

Oh dear, that’s ruined my weekend. I wish I’d never written this.