CITY DIARY

Strong support for the Chancellor's assertion yesterday that the economy is not on the brink of recession comes from the world of women's fashion. As any serious student of economics knows, a grave economic slowdown would send hemlines dipping. The 1973 oil price shock, which was followed by a steep recession, brought that hemline nadir, the maxi skirt. The early 80s slump saw hems below the knee again. But the swinging 60s boom gave us the mini skirt and the late 80s boom the short, sharp suit. According to the current autumn collections issue of Vogue: ''Nineties girls go 60s.'' Skirts will not be true minis, but they are firmly above the knee. Surely a sign of the steady, sustainable growth Mr Clarke hopes for?

German Ancochea, chief executive of the Spanish telephone company Telefonica, yesterday launched what ought to be a bomb-proof pounds 900m international share offer.

The dining room at the company's 1920s head office building in Madrid had been used by the Republican top brass in the Spanish Civil War and had come under heavy shelling from the hills in the distance.

Recently the surviving generals from both sides were asked to a reunion in the same room. There was a sharp reminder of the past when two unexploded Civil War bombs were found at about the same time in the basement.

"It shows the solidity of the foundations on which this company is built," Mr Anchochea proudly told journalists.

Good news for hard pressed Lloyd's names. Yesterday the Council of Lloyd's appointed Lazard Brothers, the merchant bank, as its general financial adviser. Lazards chairman David Verey and executive director David Anderson will lead a team dedicated to sorting out the restructuring and other thorny matters. Lloyd's will now have plenty of advisers; JP Morgan and SBC Warburg are already working on raising corporate capital. No doubt the names will be reassured that Lloyd's money is being well spent.

Readers of this column may recall yesterday's piece about Richard Branson challenging investment giant Fidelity to keep down its prices to customers.

On Wednesday Mr Branson, a brash newcomer to the personal finance scene, had smuggled Virgin steward Freya Sones into Fidelity's New York press conference, held to launch Fidelity's latest PEP. Ms Sones startled Fidelity's chairman Barry Bateman by issuing the challenge - but Mr Bateman quickly recovered himself and yesterday responded in kind.

He confirmed that the annual management fee of the new MoneyBuilder Income PEP "will not rise above 0.7 per cent over the next five years" - and went on to offer pounds 35,000 of units in any Fidelity fund to the charity of Richard Branson's choice if the performance of his UK Growth PEP does not beat the Virgin Index Tracking PEP over 10 years.

We now look forward to Mr Bateman's challenges on transatlantic ballooning and speed boating.

This year's City shake-up, which has seen five top British investment houses falling into overseas hands, has prompted a multi-million pound game of musical chairs amongst the auditors.

The tune goes like this: Ernst & Young may lose their pounds 3.6m audit of SG Warburg if it switches to Coopers & Lybrand, who are auditors to Warburg's new owners, Swiss Bank Corporation.

According to the bean-counters' weekly Accountancy Age, E&Y may also lose out as auditors to fund managers Jupiter Tyndall, now owned by the German Commerzbank, which is also audited by Coopers. Bang goes another pounds 350,000 annual fee.

But Coopers have themselves already been eclipsed at Barings, which has opted for KPMG, auditors to its new owners, ING. Coopers could also lose Smith New Court to Deloitte & Touche, auditors for the new owners, Merrill Lynch. Touche could reap pounds 900,000 if they win the Smiths audit. Touche could, however, lose the Kleinwort Benson audit, since new owners Dresdner Bank use KPMG.

Exciting times in the accountancy world.