Recent political and economic changes in Europe mean that there is now a greater probability that European Monetary Union will be delayed according to Scottish
Provident investment manager for Ireland Mr John Lawrie. The changes mean that there is now a greater probability that Britain will join earlier rather than later and that there will be "some element of fudge" on the requirements for entry, he said. These factors would give a balance of advantage to Ireland, he suggested. Because of the difficulties that would be created for the Irish economy by entry into EMU without sterling, a delay in the start date and earlier entry by Britain would be to Ireland's advantage, he commented. If there was some dilution of the entry requirements this would reduce the danger to economic growth in Europe and that would be in Ireland's interests, he said.
But if EMU proceeds and the single market becomes a reality there will be powerful centralising forces at work, he said. There is a risk that there will be fewer major financial centres in Europe with, for example, Paris, Frankfurt and London becoming Europe's major financial centres. This trend towards centralisation could be to the detriment of Dublin's International Financial
Services Centre, he suggested. "This is something to guard against by doing something to counter", according to Mr Lawrie. He suggested the privatisation or partial privatisation of some semi-state companies with fund-raising on the stock market which would help the Government, make the market more active and offer pension funds greater opportunities to invest in Ireland.
Mr Lawrie now manages £1 billion of Irish funds. Funds under management at Scottish Provident's Irish operation reached £1 billion this month, growing 10 times from £100 million ten years ago. Mr Lawrie attributed the strong growth to the buoyant economic conditions, strong savings markets and a good investment performance by the company. On speculation that equity markets are currently overvalued and that a correction is due, Mr Lawrie commented that the bull run of the 1990s is quite remarkable.
"I do not believe it can continue but I would be reluctant to say it will come to a halt in the autumn of 1997. I believe the bull run will come to an end though not necessarily in 1997, but I would not be entirely surprised either if it did," he said. Mr Lawrie has reduced the proportion of equities in his portfolios in favour of cash.
Commenting on the vote at Nationwide building society in Britain in favour of retaining mutual status, Mr Lawrie said he did not see why building societies want to become banks. Concentration on scale and becoming more like other companies in the market may "cut out what wins customer loyalty", he said. There is no doubt that financial institutions have reduced their cost bases but their service "is a hell of a lot worse," he suggested.
Members of mutuals should be careful not to throw away the long term advantages of mutuality in favour of short term gains, he advised.
