Jeremy Warner's Outlook: Hollow words as Rover reaches end of road

It is hard to imagine a worse start to Tony Blair's election campaign than to have the rug pulled out from under more than 6,000 West Midlands manufacturing jobs, particularly as management of the economy was to have been Labour's main electoral selling point.

It is hard to imagine a worse start to Tony Blair's election campaign than to have the rug pulled out from under more than 6,000 West Midlands manufacturing jobs, particularly as management of the economy was to have been Labour's main electoral selling point.

Rover has looked doomed for months now, notwithstanding the talks with Shanghai Automotive Industrial Corporation (SAIC), but Labour's election strategists surely didn't plan on it going into receivership quite so soon. The final moments have witnessed some truly bizarre spectacles, not least that of Patricia Hewitt, the Secretary of State for Trade and Industry, declaring the company in receivership before it actually was.

This appears to have been an honest mistake prompted by John Towers, the chairman, who in last-ditch efforts out in Shanghai to persuade the Chinese to come to water, must have got his wires crossed and told the Trade Secretary the wrong thing. It made no difference to the outcome. Yet it is indicative of the shambolic state of affairs Rover has become that the company's life should end in such confusion.

More bizarre still was the reported 25-minute telephone conversation between Tony Blair and the Chinese premier. Here was the Prime Minister of one of the most prosperous nations on earth begging the head of a country where hundreds of millions of people still live on the breadline to come to the rescue of 6,000 relatively highly paid jobs near Birmingham. If it wasn't so preposterous it would be almost surreal. If you care so much, China's head of state must have said, why don't you bail them out yourself?

The answer is instructive, and although the Prime Minister, using his most pained of expressions, promised to do all he could to rescue mass car production at Longbridge, the chances of him doing so are about as likely as still finding weapons of mass destruction in Iraq.

Most Western governments have for some years now resisted the temptation to rescue lame-duck industries with taxpayers' money, which is pork-barrel politics of the worst kind. In Britain we began the self-denying ordinance rather earlier than others, but even countries that might still be temperamentally inclined to indulge in the practice find it ever tougher to do so.

All state aid in Europe needs to be approved by the European Commission, which has strict rules on the circumstances under which it can be doled out so as to safeguard against unfair competition. Even France finds it hard to wring industrial aid concessions out of the Eurocrats, though it still seems to manage it on occasions.

Would dirigiste France have allowed Rover to go the wall in this manner? Probably not, but for those who delude themselves that the Gallic, interventionist approach to industrial policy is the better one, just take a cold shower and dwell on the fact that French unemployment is at 10 per cent, while British joblessness is below 5. France may have two of the world's biggest car companies, but its decades-long quest to protect and support existing industrial jobs has utterly failed to create any new ones.

Britain, by contrast, has, and paradoxically some of them are in the car industry, where Nissan, Toyota, Honda, Ford and others employ tens of thousands of people. The Government cannot, in truth, be held responsible for the disaster of Rover, which has long been too small to afford the new model development it needs to survive.

The Phoenix Four, by contrast, must carry a large part of the blame. The way they've run the show, they might as well have piled BMW's £500m dowry into a great big pile at the centre of the Longbridge shop floor and set light to it. Along the way, they've fleeced the company for £40m. Their affairs will now deservedly come in for the closest possible scrutiny by receivers. The workforce deserved better.

As for SAIC, it always was a mystery as to why it would want to support jobs and production in Britain when its main interest lay in replicating integrated car production back home. Like others, its was deluded by the Phoenix Four into thinking things were better than they were, but once the Chinese had lifted the bonnet and taken a good look underneath, they recoiled in horror, and taking Rover's intellectual property and expertise with them, returned to Shanghai. What a fiasco.

Taking AIM

An accident waiting to happen or a triumphant British success story? Views are equally divided on the Alternative Investment Market, which has grown like topsy in recent years to include more than 1,000 listed companies. This is getting on for as big as the number quoted on the main market, though fully listed companies still dwarf AIM in terms of market capitalisation. A growing number of AIM stocks, moreover, are foreign. Nervous overseas bourses are moving with urgency to replicate AIM in their own countries, lest London entirely monopolises the market for quoted smaller caps.

The growth and success of AIM has taken almost everyone by surprise, including its sponsors, but already there are signs of trouble to come. AIM works on the basis of virtually no rules. Disclosure, corporate governance and other regulatory requirements are deliberately kept to a minimum so as to keep the costs of a listing as low as possible and encourage the greatest number of companies to float.

AIM is an unregulated market outside the orbit of the Financial Services Authority, allowing its participants to escape the usual listing rules and the onerous single prospectus requirements of Europe. Provided you can get a recognised securities firm to sponsor you, virtually anyone can IPO on AIM, even if there is no track record of trading. The usual paraphernalia of investor protections has been abandoned in favour of caveat emptor.

Yet even at AIM, the Stock Exchange has been forced to apply rules so as to limit the flood of flaky, exotic, and in some cases downright fraudulent endeavours flooding to market. Just recently, for instance, the LSE has imposed limits on the flotation of cash shells, prompting a veritable deluge of such flotations to beat the deadline. Many of these "enterprises" find their parallel in the defining flotation of the South Sea Bubble, where a large sum of money, by the standards of the day, was raised to "carry on an undertaking of great advantage, but nobody to know what it is".

Companies are now obliged to raise at least £3m in the hope that, by applying a largish minimum, only those capable of attracting institutional money will be capable of floating. The money also has to be largely invested within a year, so as to prevent the proceeds being frittered away on directors' salaries before anything is done with it.

Even so, there have already been disasters. As chronicled in our Monday "Small Talk" column, £5.4m has gone walkabout at the AIM-quoted shell company Easier. Regrettably, a full listing is no guarantee against such disappearing acts either. Something similar appears to have happened at the fully listed Boustead, which shares offices with Easier. Yet it is plainly, forgive the pun, easier when the stock is quoted on AIM, where standards are low and expected to be such. So far the authorities have just shrugged their shoulders to such cases and retorted "caveat emptor". If history is any guide, they won't for much longer. Eventually there will be a humdinger of a scandal, or more likely series of them, and the regulatory crackdown will begin.

Deutsche Börse's Neuer Markt, set up to exploit the demand for hi-tech flotations during the internet bubble on a similarly undemanding standards of oversight, eventually collapsed amid a welter of scandals and plummeting share prices. It would be a shame if AIM suffered the same fate, but that things are getting out of hand is already all too obvious.

jeremy.warner@independent.co.uk