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Departure of Soames raises issue of Aggreko head office location

RUPERT Soames was in typically fine fettle as he presented his final set of annual results as chief executive of Scottish temporary power company Aggreko.

The City shared his enthusiasm, marking Aggreko shares up by 3.5% in the wake of the company's announcement that it was returning £200 million of capital to shareholders.

Mr Soames, the grandson of wartime leader Winston Churchill, is leaving to take up the challenge of heading recently-troubled outsourcing group Serco.

He does so having achieved a great deal at Aggreko. When he took on the chief executive post on July 1, 2003, the company's shares were trading around 125p. They closed last night at 1628p, albeit down from highs of around £24 in 2012.

Aggreko has a stock market worth of £4.4 billion, and is in the FTSE-100 index of leading UK companies.

It is therefore stating the obvious to point out the presence of its headquarters in Glasgow is very important to the city and to Scotland.

Aggreko is the type of business, given its international spread, which could be run from almost anywhere.

Mr Soames, although his home is in Buckinghamshire, has proved committed to working from Aggreko's Glasgow headquarters.

This was demonstrated on one occasion at the Grill on the Corner in Bothwell Street, when he quipped that the restaurant was his "canteen".

Joking aside, and maybe he wasn't, Mr Soames's willingness to work from Glasgow has been valuable to corporate Scotland.

As it announced an 8% fall in annual trading profit to £357m yesterday, while highlighting an underlying rise of 1%, Aggreko highlighted the fact the vast bulk of its business is overseas, with less than 10% of revenues coming from the UK. And it joined the recent slew of companies stepping forward, ahead of September's referendum, with views about what Scottish independence might mean for their businesses.

Aggreko talked about how managing different taxes and regulations in an independent Scotland would add complexity and cost to its business. It also declared it would face "some years of uncertainty and hiatus" if Scotland were to vote for independence.

However, it did not talk about moving its head office and, forgetting for a moment about the independence referendum, this is reassuring.

Asked whether Aggreko's head office would be in Glasgow for the foreseeable future, Mr Soames replied: "When I joined the company I had my home in Buckinghamshire and still do, but flit between London and Glasgow. That's where the head office is, and where it will be."

Leaving the constitutional question entirely to one side, the very fact of Mr Soames's impending departure puts the issue of Aggreko's head office location firmly in the spotlight.

After all, and in spite of all the talk from company bosses about how they travel much of the time anyway, a head office location tends to be dictated by where a chief executive chooses to base himself or herself.

It is easy enough to shift head office, as industrial textiles group Low & Bonar proved back in 2000 when it decided to up sticks from its home city of Dundee for London.

There are plenty of other big companies which have registered offices in Scotland, but are run from England.

There has been much talk in the business community in recent years about a shift of key decision-making by Royal Bank of Scotland from Edinburgh to London.

And, while an Edinburgh head office location was a key part of the agreement between Halifax and Bank of Scotland when they merged in 2001, much of the key decision-making in the resultant HBOS appeared to take place south of the Border.

Although Aggreko has a manufacturing plant at Dumbarton, which employs several hundred people, this facility accounts for a very small proportion of its near-6000-strong workforce.

Aggreko is similar in many ways to engineer Weir Group. Like Aggreko, Weir has over recent years achieved a huge rise in profits and a surge in its share price which has taken its stock market worth into the billions of pounds and propelled it into the FTSE-100.

Weir now employs only about 600 of its worldwide workforce of more than 14,000 in Scotland, so it too could be run from anywhere.

However, Weir has been fortunate in recent years to have had non-executive directors, including former chairman Lord Smith of Kelvin, who have been acutely aware of Scottish interests.

In recent years, it has been run by Keith Cochrane, a Scot. Before that, it was led by Australian Mark Selway.

In each case, its head office, in reality as well as in name, has been firmly in Glasgow.

When Aggreko announced last Friday that Mr Soames was heading for Serco, and that chief financial officer Angus Cockburn would be interim chief executive, it said it would consider internal and external candidates for its top job.

Hopefully, after Aggreko selects someone it believes can fill Mr Soames's shoes, the company's board will ensure that the global business built up from Scotland continues to be run from here.

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