The business - Patrick Hosking hears Tollopian echoes in a tunnel

Even "a drop of som'at hot", which served Anthony Trollope's fictional tycoon so well, may not be en

One of the great businessmen of English fiction is surely Sir Roger Scatcherd, the irascible, binge-drinking construction tycoon in Trollope's Doctor Thorne. Whenever a new railway line, bridge, canal or hospital is needed, Scatcherd is called upon to mastermind the project. One is to "cut a canal from sea to sea through the Isthmus of Panama". (Trollope, writing in 1858, was ahead of things: the Panama Canal was built between 1904 and 1914.)

Scatcherd's business skills were raised to a higher plain by copious quantities of brandy ("a drop of som'at hot", as he would say to his wife).

His apostles would declare "that his wondrous work was best done, his calculations most quickly and most truly made, that he saw with most accurate eye into the far-distant balance of profit and loss, when he was under the influence of the rosy god".

I happened to be rereading Doctor Thorne the other day, just as a mega-project after Scatcherd's heart, Eurotunnel, lurched into a fresh crisis. Perhaps lacking Scatcherd's liquid brain fuel, the backers of the Channel Tunnel builder and operator failed to see "into the far-distant balance of profit and loss". As with so many prestigious projects, costs at the building stage overran disastrously while revenues have turned out to be a fraction of those forecast. Eurotunnel is lumbered with £6bn of debts it can barely service, let alone repay. Only the indulgence of its banks and three financial restructurings have kept it alive this long. There is no sign of any upturn in revenues. Indeed, from 2006 minimum payments from train operators expire, so its income could actually shrink. The banks could pull the plug at any time.

Large institutional shareholders have long since disembarked. Eurotunnel is mostly owned by small, private, French shareholders. Fed up with the losses, the share-price collapse and the 16th successive year of no dividend, they have just kicked out the entire board and installed a fresh management team.

Perhaps if they had been British small investors, this would have been portrayed in the English media as a triumph for shareholder democracy pitted against fat-cat management. But there is a faint echo of 1789 here, and the French shareholders have been portrayed as a mob baying for blood.

This is not entirely surprising. The sans-culottes are led by Nicolas Miguet, a share tipster and populist far-right-wing politician and - as the dumped Eurotunnel management never tire of pointing out - a convicted fraudster. A Paris judge is now reportedly investigating whether Miguet manipulated the Eurotunnel share price by encouraging hundreds of thousands of small punters to buy into the company last year.

In fiction, things work out. Scatcherd's grog-induced death conveniently produces the legacy that creates the happy ending. Perhaps the French government or even the European Commission could save the day for Eurotunnel's shareholders. But it doesn't look the way to bet.

It is 20 years, not just since the miners' strike, but also since another milestone of the Thatcher years, the privatisation of British Telecom. BT was the biggest of all privatisations, raising £17bn for the exchequer, though it was not the most popular. That was British Gas, in 1986, which pulled in 4.5 million small shareholders through its "Tell Sid" advertising campaign.

Despite the three-year bear market from 2000 to 2003, privatisation stocks have still overall been a good punt. According to the Investors Chronicle, which has just crunched the numbers for all 28 privatised companies still listed, £100 invested in each of them would have mushroomed from £2,800 to £33,181, assuming all dividends were reinvested. This is almost twice the growth of the overall share market over the same period.

There have been some spectacular coups. The 8,000 investors (this was before Sid lured in punters by the million) who bought into Associated British Ports in 1983 have turned a £100 stake into £7,148.

But most of the big gains were made in the immediate aftermath of each privatisation. Professor John Kay showed in his assessment of privatisation three years ago that almost every privatisation stock hugely outperformed the market in its first two years and then underperformed thereafter. I would be surprised if the past three years had altered that conclusion. Indeed, recent setbacks such as Railtrack, British Energy and Cable & Wireless will have added more weight to Kay's view.

As Kay put it, civil servants handling the early privatisations "were as children in the arms of their investment banking advisers, credulously absorbing their confident assurances about what markets would and would not accept". And ministers - seeing millions of happy voters - were only too willing to see the nation's assets sold on the cheap.

Next Article