RBS chief must focus on long term, like Weir, as Osborne champs at bit

The problems, it is crucial to remember, tend to arise when panic induces swift but ill-thought-out action.

Similar basic principles apply when companies find themselves in the midst of a storm in a particular market, or in the economy as a whole, although they have the obvious advantage of being able to see the bigger picture if they choose to look.

It is all too easy for corporate bosses to get swept along in turbulent times by general panic, a clamour from investors or analysts to do something drastic and fast, or even by whatever hare-brained, one-size-fits-all strategy some management consultancy might have come up with to deal with such situations.

What is actually needed is a cool head, and a reluctance to follow the herd without good reason.

This is not always easy, particularly for stock market-listed companies faced with falling share prices or impatient investors, or both.

And it often seems to be far more difficult than you would think for chief executives, who are paid very well indeed to take informed decisions that create shareholder value, to keep in mind the big picture and, in particular, the long term.

In boom times, too many people who should know better, from past cycles, think that the good days are going to last forever this time round.

And, in difficult times such as those we are in just now, many people start to think that things are never going to get any better. It must seem to many folk, amid swingeing public spending and welfare cuts, that the economic storm will never pass.

In terms of the latter scenario, people could be forgiven for taking such a view, given the current grim economic times have lasted far, far longer than in other cycles.

However, when it comes to corporate chiefs, they have a duty to look to the longer term, and what happens when whatever storm they might be facing eventually subsides.

So it was heartening yesterday to read the comments of Weir Group chief executive Keith Cochrane in the Glasgow-based company’s latest results.

The half-year results themselves did not make pretty reading, reflecting the impact of lower crude prices on shale oil and gas activity in North America.

Weir’s underlying pre-tax profits of £108 million for the first half of 2015 were down 40 per cent on the same period of 2014.

The company’s shares are well down on the levels at which they traded last autumn. And the tumble in oil prices has undoubtedly presented very significant challenges for Mr Cochrane.

Weir has a big presence in the North American shale oil and gas sector, as a supplier of heavy kit and maintenance services to the drillers, as well as being a major player in the global mining and power and industrial sectors.

However, amid the turmoil caused by lower crude prices that is also affecting Weir’s North Sea operations, Mr Cochrane signalled he was not losing sight of the long-term picture.

He said: “Reflecting our ongoing confidence in the long-term structural growth prospects of our markets, we continue to invest in our strategy and extend our global leadership positions.”

Mr Cochrane also made plain Weir’s appetite for more acquisitions.

Earlier this month, the company acquired Delta Industrial Valves, strengthening its presence in the mining and Canadian oil sands markets.

Weir has taken action to reduce its cost base in its operations that serve the North American oil and gas sector, with the workforce reduced by more than 900 people. However, the company flagged its efforts to implement this cost-cutting in a way that did not hamper the long-term prosperity of the business.

Andrew Neilson, director of strategy and corporate affairs, said: “We have been very careful in all the moves we have made that we don’t lose the core skills and capabilities for the capacity we think we will need. All the moves we have made we have done them with that in mind as it [the market] will come back and North America has a history of coming back fast.”

There was also encouraging evidence of long-term corporate thinking, in the context of the still very significant potential of the UK oil and gas sector, from Scottish Hydro owner SSE this week .

SSE revealed it was taking advantage of the North Sea downturn in a “timely” move to secure future supplies of gas through a near-£1 billion investment in a flagship development West of Shetland. It is paying £565m to buy a 20 per cent stake in the Greater Laggan development from French oil giant Total. SSE has also agreed to invest a further £350m over the next three years towards the costs of bringing the four fields covered by the deal onstream.

Shell yesterday signalled it was likely to unveil further asset sales in the North Sea but also highlighted its continuing appetite for West of Shetland projects.

Elsewhere, amid a slew of corporate results, Royal Bank of Scotland chief executive Ross McEwan promised another “noisy” year for the bank, as restructuring continued. It might be more difficult than noisy for many RBS staff, as they wait to see what will happen next on the cost-cutting front, with tens of thousands of posts already axed since the financial crisis erupted.

All the while, Chancellor George Osborne appears to be champing at the bit to start selling down the Government’s majority stake in RBS before too much more time elapses.

Mr Osborne has himself shown an appetite for quick fixes that could cause trouble further down the line. For instance, he put in place measures to propel the UK housing market higher when Britain’s makers failed to march the country out of economic trouble as he had envisaged.

But hopefully Mr McEwan, in spite of all the external pressures on him, will keep in mind the long term, and crucial factors such as the importance of customer service to RBS’s ultimate prosperity, as he continues his cost-cutting drive.