Body Shop arrives up the Amazon, paddleless

The whole "will they, won't they" saga of the Roddicks trying to buy back The Body Shop is now looking as messy as the colourful goo available in the company's stores. First, the news that Anita and Gordon were keen to take the company private oozed out badly last year, unsettling investor confidence and putting the Roddicks on the spot. Now the eco- friendly founders have decided against the whole plan as it would increase debts to a level that might affect the growth prospects of the business.

It is a rum show all round. The Roddicks are left running a public company while they would clearly sooner be running a private fiefdom. Investors, too, are left in limbo. Whatever the Roddicks say about a commitment to increasing shareholder value it is now clear that they would sooner be up the Amazon discussing the finer points of tribal remedies for dandruff, or some such. Gordon Roddick, for example, was on a fact-finding trip to Brazil yesterday.

The Roddicks' motives for seeking to take Body Shop private are plain enough. Like Alan Sugar, Richard Branson and Andrew Lloyd Webber before them, here are two entrepreneurs who would prefer to run their own show without the interference of the City. The green issue adds a further complication as the Roddicks do not have carte blanche to devote more profits to ecological causes.

The plan has failed because the Roddicks realised that the buy-back would simply mean swapping one set of City taskmasters for another, arguably harsher, set - in this case, the banks. If times become hard, equity holders cannot call in their capital in a company and must grin and bear it if dividends are cut or vanish. Banks can and sometimes do call in their loans, with disastrous consequences, of course, for the borrowers.

What is abundantly clear is that the Body Shop should never have gone public in the first place. With its environmental stance, the company was always going to struggle to satisfy the conflicting demands of its green credentials and its shareholders. It ended with compromise, and the company finds itself lambasted both by the City for being too green and the green groups for not being green enough. All this has happened while the company's growth has stalled and it faces serious problems in the US. Body Shop is between a rock and a hard place and is likely to stay there until the Roddicks finally manage to do a deal.

Mr Clarke blows his trumpet

Kenneth Clarke, modest as ever, took the opportunity to remind MPs again yesterday that the economy is in pretty good shape, and "facing the most favourable economic circumstances that any of us in this House can remember." Britain has the lowest inflation for a generation, sustainable growth, lower unemployment, and, mirabile dictu, even the start of a housing recovery.

Labour's response is to query the strength of the foundations underlying this shining edifice. Has there been enough investment to increase the economy's capacity? Do the new jobs available provide a sense of security and encourage the workforce to improve its skills? How can people be helped from benefits to work?

But there are also some more specific doubts about economic prospects even without raising such fundamental questions. One of the things that could go wrong for Mr Clarke in the short term is an end to the fall in unemployment. Jobless figures lag the business cycle, and could this year start reflecting the slowdown in growth in 1995.

Surveys indicate that manufacturers have already started to cut employment. If it happened, this would certainly reinforce the feel-bad factor and could kick the legs from under the housing market just as it is struggling to its feet.

Another possible danger is faster earnings growth. Pay settlements seem to have stabilised at about 3.5 per cent, but earnings "drift" - bonuses, overtime pay, and profit-related payments - could return after an unusual absence. This would make it harder for the Government to hold the public sector pay bill flat.

Moreover, although it would make the voters feel better, pay increases would be one more influence fuelling higher consumer spending, along with maturing Tessas and share windfalls from building society flotations. Mr Clarke wants more consumer spending so the economy reaches his 3 per cent growth target, but not so much that retail price inflation starts to creep up.

On the other hand, there is a risk of recession in manufacturing and a decline in the already weak investment figures. If exports stay weak too, the economy could slow further. The worst consequence of this for the Chancellor would be higher government borrowing, limiting the scope for tax cuts. This is without even mentioning the ultimate danger: that the economy flourishes but still does not persuade voters to return Mr Clarke to Number 11 after the general election.

Work begins for Kvaerner

Sighs of relief can be heard coming from the boardrooms of Trafalgar House and Kvaerner. Nigel Rich, Trafalgar's chief executive, and his associates at Hongkong Land, seem finally to have got an embarrassing corporate disaster off their hands. And Eric Tonseth, Mr Rich's opposite number at Kvaerner, is close to exorcising the ghost of Amec, the UK contractor he failed to take over after a bruising battle last year.

Kvaerner had been courting Trafalgar House long before it approached Amec, and there is little doubt that the Norwegian company had done its homework before the announcement of the agreed deal. Nevertheless, there is still a feeling that Kvaerner has not got quite what it hoped for. Its attempts to forge an understanding with Trafalgar before now have always foundered on whether Kvaerner should take on the Cunard line and other bits it did not want.

But Kvaerner was desperate to get hold of a project management and construction company that could expand its world-wide oil and gas contracting business, especially in Asia. So, having failed to get Amec, Mr Tonseth bowed to Trafalgar's all-or-nothing request and risked buying the whole company. The Norwegians believe they could raise about pounds 750m from selling off the non-core divisions of Trafalgar, Cunard being the biggest. Cunard's book value last September was pounds 294m, but a lot has happened since then and whether the company is worth as much now is questionable.

Kvaerner prefers to talk about the synergy of the takeover, rather than the break-up value of Trafalgar. But yesterday's deal was driven less by industrial logic than by expediency. Kvaerner, lacking offshore contracts in Norway, stumbled when it came to leading its own larger international offshore contracting projects. With the Trafalgar takeover, Kvaerner has created the world's biggest offshore oil and gas fabrication business. Turning that into something that benefits shareholders is, however, a different and tougher job.