Three years ago, 3i published research which showed that 100% of the smaller companies it spoke to believed that the City was "too focused on short-term earnings and share price performance". So when 3i made noises about floating its own shares in the City last year, it should not have been too surprised when some of its client companies got a little agitated. What new short-term pressures would be placed on them if 3i had to dance to the stock market tune?
John Garrod, chairman of Rite-Vent, a chimney tubing manufacturer based in the North East, was sufficiently concerned to contact around 1,000 of the companies in which 3i has a stake to solicit their views on the matter (it might well have been all 4,000 of 3i's clients if its chairman, Alan Wheatley, had not thought the move "unnecessary" and refused to co-operate).
Their responses highlighted a range of worries. The 3i branch network had recently been reduced in size to save costs, upsetting communications with its 4,000 or so clients. Would decisions take even longer? And what about the quality of the list of people that 3i submits to clients from which they can select a non-executive director?
Fortunately for Wheatley, the permanent chairman of the newly-formed alliance of concerned 3i clients is Barry Baldwin, a friend and colleague of Wheatley at Price Waterhouse for 30 years. When Baldwin went to see his chum in his new role as lobbyist they "had a very good dialogue" and arranged a series of three regional meetings in March to which all clients would be invited. "Hopefully, we'll resolve the investment policy issue and the regional problems," says Baldwin.
Whether the new watchdog will be a poodle or a Rottweiler remains to be seen. The investment issue looks as though it has resolved itself for the time being: the flotation has been postponed following weak performance and a 6% fall in net assets at the latest half year.
But clients may well wish to know how a group whose role is to invest in those mythical green shoots of British industry could have got itself firmly enmeshed in the current property collapse, could have £110 million locked up in various dealings in the US, and have had to write off upwards of £50 million in equity and loans to Isosceles, the troubled Gateway supermarket giant. That, as few people will need reminding, would have paid for an awful lot of 3i branches.