UK: BOOMED, BUSTED - AND BACK?

UK: BOOMED, BUSTED - AND BACK? - The most flamboyant risk-takers and wheeler dealers of the '80s saw their empires crash at the decade's end. After a spell in hibernation, most of the whizz kids have returned to the fray.

by Fiona Jebb.
Last Updated: 31 Aug 2010

The most flamboyant risk-takers and wheeler dealers of the '80s saw their empires crash at the decade's end. After a spell in hibernation, most of the whizz kids have returned to the fray.

If the early and mid '80s were party-time for risk-takers and wheeler dealers, the end of the decade and the years that followed were to prove quite some hangover. Heavily geared deal-makers who had acquired business upon business when interest rates were 7% were crippled when the rates doubled almost overnight. And those entrepreneurs who maintained a quaint, old-fashioned belief in organic growth did little better. Often equally highly geared, often in retailing, they proved utterly blind in their belief that consumer spending power could not go down as well as up.

Throw into the mix a growing awareness in certain quarters of the exceeding usefulness of a spot of financial engineering, and there we have a perfect crash-and-burn recipe for the '80s empire-builder.

The roll call of casualties is impressively long: George Davies was thrown out of Next in 1988 when the share price was plumeting to an all-time low; Sophie Mirman and Sock Shop came crashing down in 1990 when an empire that had once been valued at £60 million was sold off for £3 million; John Gunn exited British and Commonwealth Holdings under a cloud in 1990 after the accounts of a company he had acquired proved to be less accurate than the proverbial numbers out of a hat. And so on.

What has become of the fallen - and usually flamboyant - stars of the '80s? While some have gone to ground, most nursed their bruised pride for a while before launching themselves right back into the fray, usually with far more modest ambitions than in the bad old days, however. Unsurprisingly many have returned to the businesses they know - Gunn has gone back to venture capital, while Spring Ram's Bill Rooney has returned to kitchen and bathroom units, and Blue Arrow's Tony Berry is once more head of a recruitment agency.

If there is consensus among these casualties of the '80s that heavy gearing and acquisitions are not the way forward, there is also consensus that the UK is a difficult place for those who fail - unlike the US where a business failure is sometimes seen almost as a rite of passage.

There is consensus on another point too: that those who want to have a prolonged career in business should not get themselves made Guardian Young Businessman of the Year. John Ashcroft and George Davies were. So too were John Gunn and Alan Sugar. Guardian judges, it seems, are as good at spotting disaster looming as their sub-editors are at spotting typos.

Raschid Abdullah, former chairman (left)

Osman Abdullah, former chief Executive

Evered Holdings plc

The wheel has come full circle for the Abdullah brothers, Raschid and Osman, who in the mid-'80s turned Evered, a small Midlands engineering company, into a multi-million pound conglomerate. Boardroom conflict caused their departure from Evered in 1989. And it was a boardroom coup, carefully orchestrated by the brothers, which led to the hasty exit this January of the chairman who was running the firm the Abdullahs joined post-Evered.

Initially called Starmin, the firm now goes by the name of Water Hall and operates in the landfill and building materials sector (Evered's main activities under the brothers were engineering and quarrying). Although Osman joined Starmin as chief executive, and Raschid as an executive director, both resigned from these posts when a refinancing was needed in 1993, after losses of £8 million had been run up in 1992.

All that is distant history now: Raschid is executive director again, and while Osman has no day-to-day involvement, he retains a financial stake. Of Water Hall, a cagey-sounding Raschid says, 'We don't see it wholly as Evered mark 2'. He does, however, want to run it as one of the 'mean, lean machines' he favoured in the '80s. The company turned in profits last year, a step in the right direction for Raschid whose aim is quite simply to make the business 'seriously profitable'.

Asked what he learned from the Evered experience, Raschid replies, 'don't run your business to please too many people - you can get on a treadmill, and get very deal-led without getting a huge result in terms of shareholder value at the end of it'. Applying this new-found wisdom to Water Hall, Raschid says, 'the emphasis will be much more on organic growth'.

Brother Osman, meanwhile, is more involved in UMECO, an aerospace manufacturing and distribution business, where he is a non-executive director. He led an Abdullah fan club-based consortium to invest £1 million in UMECO in 1993, when the shares stood at around 24p; in early October, they stood at 257.5p. Analysts forecast that profits, which were around the £150,000 mark when Osman invested, will reach £2.4 million this year. For his part, Osman says he took three lessons away from Evered: to avoid issuing paper; to research the industry and product involved in any investment decision 'much more deeply'; and to pay more attention to the balance sheet.

John Ashcroft, former chairman

Coloroll

Once bitten, twice shy is not a maxim that John Ashcroft has chosen to take to heart. Ashcroft, you will remember, is the brash and boastful '80s boy wonder who built up the Coloroll wallcoverings and furnishings empire, only to witness its collapse a mere six months into the new decade (not before Ashcroft had received a CBE in the 1990 New Year's Honours List, however).

After a brief period of hibernation, the Guardian's Young Businessman of 1987 quickly launched himself into running a specialist outdoor retailing company based in Penrith, a business which he somewhat inappropriately and inauspiciously renamed the Survival Group. Survive it certainly did not, passing into extinction in the spring of 1993, with Ashcroft blaming the recession for the receivers who came a-calling. The only consolation to be had was in the fact that, when Coloroll went down, it had debts of £400 million but, when Survival Group died a death, it owed a comparatively trifling £2 million. Undeniably, the business still haunts Ashcroft, however, since the DTI is seeking his disqualification as a director over certain actions that he took while at Survival Group's helm.

After his days at Survival, Ashcroft, living in a Lancashire farmhouse, made an unexpected move, turning his attention to the world of academe by taking a PhD in economics at Manchester Metropolitan University. What was his chosen subject? How the Government's cyclically adjusted balance of payments figures in the '80s hid deficits until, come 1988/89, the beast could be contained no more.

Ashcroft has used his studies to spin off a new quarterly product, The Economic Picture Book, which he launched in 1994. Long on graphics to illustrate economic trends, and short on text, the slim book has some loyal subscribers among blue-chip firms.

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