James Ashton’s My Week: It’s not overstating it to say that there is a battle going on for Barclays’ soul

There was much heat but little light generated at Barclays’ annual shareholder meeting at the Royal Festival Hall.

A spectacle, yes; a bloody nose for the management; and a reminder that Sir John Sunderland, who is being edged out from leading the bank’s pay committee, is extremely crotchety.

The bigger narrative will play out over the coming months. It is not overstating the point to say that there is a battle going on for the soul of Barclays.

For Antony Jenkins, the chief executive, the die is cast. He believes in the universal banking model – that is, marrying retail lending with investment banking activities. Thursday’s flashpoint of hiking the bonus pool despite falling profits is meant to be a one-off. At a pinch, you could even say such a move is written into Mr Jenkins’ mission statement – “Rises”, standing for “respect, integrity, service, excellence and stewardship” – if stewardship can be interpreted as protecting the franchise from an exodus of staff.

The question now is just how much of the investment bank he will hang on to. His model is unpalatable to the Government and made more awkward by ringfencing rules being introduced to keep retailer deposits safe from risky “casino” banking activities. Remember that investment banking was a core part of Stephen Hester’s revival plan for Royal Bank of Scotland. George Osborne’s decision yesterday to block the state-backed bank from offering bonuses of up to 200 per cent of salaries is the final nail in that shrunken division’s coffin.

The Chancellor has no similar stick with which to beat Barclays, but there is pressure nonetheless. Mr Jenkins will spell out the way forward next month, with 7,500 jobs predicted to be eliminated in areas such as European fixed income, currencies and commodities.

What becomes pivotal is the identity of Barclays’ next chairman, who will replace Sir David Walker later this year. I have heard two names suggested: the first is Sir Mike Rake, who is already Barclays’ deputy chairman and has sat on the board for six years. Not surprisingly, he backs Mr Jenkins’ plan to remain a universal bank. If that’s the way Barclays wants to go, there is no better streetfighter than Sir Mike, who as CBI president has the ear of senior politicians. The problem comes if short-sighted investors grumble that he harks back to the Bob Diamond era and should lose out to an incomer.

For that vocal minority, the second name would be more palatable: Robin Budenberg has an investment banking background at UBS but has spent the last four years running UK Financial Investments, the body overseeing the Government’s investments in RBS and Lloyds. Some say it would be a state appointment in all but name. I hope that Sir Mike gets the nod, but I suspect he won’t.

Either way, the Wall Street traders who joined the bank when Mr Diamond swooped on the remnants of Lehman Brothers care not a jot. They’ll be fine, but Barclays may not.

Mergers and acquisitions are exploding back into life

What a week to demonstrate that the economic recovery has taken hold. Manufacturers are more confident than at any time in the past four decades, a CBI survey trumpeted. The building boom continues in the South-east, with the Royal Institution of Chartered Surveyors disclosing the fastest growth in activity in London since its study began in 1994. Even business investment, one area that has been stubborn to turn, looks more positive. The only cloud on the horizon is which way the country will jump a year next Wednesday, when the general election is held.

The boss of a Big Four professional services firm I sat down with the other day describes it thus: firms that showed resilience through the financial crisis but have been sitting on their hands have gained in confidence sufficiently to start spending again. Notably, that cash is being deployed in Europe, as emerging markets have stuttered. Those opportunities closer to home have been reappraised.

Call it a form of economic nationalism, where going global is no longer seen as the panacea for prosperity and those domestic, crown-jewel assets we still own are revered.

It’s an interesting stance given that cross-border mergers and acquisitions have exploded back to life. The French government already seems to have a plan worked out that will let General Electric take over the power generation assets of one of its national champions, Alstom, while clinging on to its emblematic TGV trains. It’s a more elegant solution than simply blocking Pepsi’s efforts to buy Danone, but no more enlightened.

Nothing so blatantly protectionist would ever happen in Britain, where Jaguar Land Rover’s ownership by the Indian group Tata is held up as the shining example of British assets prospering under foreign ownership. I doubt that Pfizer would be such a sensitive steward of drugs rival AstraZeneca if its multibillion-pound offer ever materialises – and not just because it is easier to relocate boffins than factory production lines.

What will really move the dial is if the dollar strengthens against the pound. An investment banker tells me that most of these bumper deals that are seeping out were planned a year ago, when the pound was at $1.55. Despite the exchange rate standing at $1.68, animal spirits have returned. Wait until the pound weakens, the banker says, and then the handbrakes will really come off. When that happens, economic nationalism might have to wait for another time.