America is an increasingly hostile environment for a British bank

The ousting of Bob Diamond and his largely American senior management team and the recent departures of former Lehman Brothers bankers means Barclays is facing an increasingly hostile regulatory environment without US-born executives with the right connections. It now has a very large operation on US soil that is starting to look vulnerable to attacks by local competitors.

No amount of restructuring can get around this problem. RBS saw the writing on the wall some time ago and is shrinking its business in the US below the $50bn threshold at which it must comply with the Foreign Companies Holding Act. That option is not open to Barclays. Despite London’s importance as a financial centre, you cannot be a credible global investment bank without a major presence in the US.

Antony Jenkins, chief executive of Barclays, will on Thursday unveil a new strategy for the investment bank, but this may only amount to tinkering around the edges. Establishing a “bad bank” will reduce the balance sheet, but if trading conditions have fundamentally changed, then it will not shore up the business. Barclays is facing the type of problems that require a radical rethink of the bank’s entire business model.

Astra defence not quite what doctor ordered

AstraZeneca has bared its teeth for the first time since its takeover battle with Pfizer was made public last week. Now it is up to shareholders to decide whether it has any bite.

Chief executive Pascal Soriot reeled off a slew of reasons to be cheerful about AstraZeneca’s pipeline — it is well-stocked, with a number of drugs in late-stage testing and in lucrative areas of medicine.

He was especially upbeat about AstraZeneca’s healthy pipeline in cancer immunotherapy drugs — a promising, if still relatively untested, experimental approach which turns the body’s natural defences against tumours. If successful, these drugs could be a game-changer for AstraZeneca, but many are still in the early stages of testing.

He gave bullish estimates for the likely performance over the next decade of the company’s five growth platforms: heart drug Brilinta, diabetes, lung ailments, emerging markets and Japan.

But his update amounted to little more than an upgrade in rhetoric, analysts who already believed in the pipeline’s potential were vindicated; sceptics were unmoved. As one pointed out, the pipeline has every chance of being transformative — but it is simply too early too tell.

Mr Soriot’s aim was to drum home the point that the company he took charge of a year and a half ago is barely recognisable now. Most of the drugs the AstraZeneca boss reeled off were nowhere to be seen then.

The point was not that AstraZeneca has sharpened its teeth in the months since Pfizer made its first approach, but that it has done so since Mr Soriot took the helm, and should be left alone to continue.

Bank’s balancing act on interest rates

Britain is booming. The three main sectors of the economy — services, construction and manufacturing — are expanding. The private sector is creating jobs at a rate of 100,000 a month and economic forecasters line up to shower the UK with praise.

The Organisation for Economic Co-operation and Development is the latest think tank to upgrade Britain’s growth forecasts. Along with the International Monetary Fund, it now believes the UK will grow at the fastest rate in the G7 this year.

The focus has now returned to interest rates. Bank of England policy makers meet on Wednesday and Thursday for their latest rate-setting. No change is expected. But the talk among economists – and perhaps even in some quarters of the Bank — is of a rate rise before the end of the year.

Those who argue against an immediate rate rise point out that inflation is now below the Bank’s 2pc target. Consumer prices inflation, at just 1.6pc, is at its lowest level since 2009, which buys the Monetary Policy Committee more time before having to raise rates. Britain should enjoy its “Goldilocks” moment, where the economy is not too hot and not too cold, they argue.

But the Bank is more concerned about future inflation expectations than the present. According to its own models, it takes around 18 months before changes to interest rates feed through to inflation. In a note on Tuesday, Deutsche Bank economists highlighted that the Bank of England has raised rates on several occasions when inflation was at or below target, such as in 1999 and 2003.

The key is whether rising wages are pushing up prices. This would spell danger for the economy and, combined with the continued surge in house prices, might push the Bank into acting sooner rather than later.

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