Outlook: A US rate cut is the one that counts, even for UK business

Three interest rate decisions in a week makes for quite a story. First up is the Federal Reserve, which alone among the three central banks to vote on rates this week is more or less certain to cut. The only question seems to be whether it is just the quarter point, or the full half.

The European Central Bank, which announces its decision on Thursday, seems equally easy to read. Despite the fact that the eurozone desperately needs lower interest rates, it seems quite unlikely to get them. There is, I suppose, the possibility that Wim Duisenberg, the ECB president, has experienced a blinding flash on the road to Damascus, but it would take quite a change of heart for him to push the consensus towards a rates cut.

The last time he spoke publicly on these issues, he seemed to be saying that a rates cut would make no difference in stimulating growth in any case. Structural reform was the answer, he said, not monetary policy. It might, on the other hand, help. The ECB's own rules require him to keep inflation below 2 per cent, but if Mr Duisenberg thinks rates will make no difference to growth, they won't make much difference to inflation either. We can but hope he's seen the error of his ways.

Then finally, there is our own Monetary Policy Committee. Of the three, the Bank of England is much the most difficult to double guess. The last meeting was split, which might indicate an easing bias. On the other hand, it is hard to argue that things have got noticeably worse since then. Rather the reverse, in fact. There's been a significant rally in the stock market, the depressed state of which was a major cause for concern at the last meeting.

What's more, Mr Duisenberg's observation about monetary policy being impotent may have some validity here in the UK. The key factor affecting business confidence in the UK continues to be the state of the world economy, and particularly that of Europe and the US. A rate cut here in the UK may not help confidence very much, especially if one of its effects is to drive up long term interest rates. Much more useful would be cuts elsewhere.

On the other hand, it would provide further support for the housing market. Already in the latter stages of a bubble, the Bank is desperate not to inflate it any further. The case for an MPC rate cut isn't so clear cut.

Broadband Britain

People have been calling for British Telecom's breakup ever since it was first privatised. It's such a perennial thing that another such missive would scarcely be worth mentioning were it not for the fact that the new chairman of Ofcom, Lord Currie of Marylebone, has himself written in a similar vein. As chairman of Ofcom, the Government's new super regulator for the communications industry, Lord Currie will shortly be responsible for regulating BT.

All of which makes the latest report from Demos, a left-leaning think tank with influence at Number 10, a lot more interesting than it might otherwise have been. The writers, James Wilsdon and Daniel Stedman Jones, argue that for broadband to be given a proper chance in Britain, BT needs to be broken up, with some form of structural separation of the local loop from the rest of the business. For choice, they would put the assets into some form of "not-for-profit" vehicle, a bit like Network Rail, because of "growing public concern about the ability of some privatised infrastructure companies to manage natural monopolies".

Perhaps the writers are too young to remember what BT was like before it was privatised. In those days you had to wait your turn to get a telephone connection, prices were more than 100 per cent higher in real terms than they are now, and quality of service was so abysmal that you sometimes wondered whether you were in the developed world at all. Public ownership and control are no guarantee of public interest, it would seem. None the less, Demos is right to raise afresh the idea of a structural separation.

For all the Government's highfalutin rhetoric about making Britain the digital capital of the world, the reality is that broadband rollout is less developed in Britain than anywhere else in the G7. I've recently returned from a trip to South Korea, where the pace of development in these industries is so far in advance of Britain that it leaves you seriously worried about our children's future. Such countries are leapfrogging us into the technologies of the future. Who's fault is this?

Failings in public policy are a large part of the mischief, but it is also to do with the existence of an immovable and intransigent private sector monopoly in combination with ineffectual regulation. The Government's preferred solution to broadband was "local loop unbundling", or forcing BT to open its network to competition in the provision of broadband services. The result was predictably disastrous.

Whether deliberately or out of sheer incompetence - it was always hard to tell - BT sat on its hands and did nothing. Astonishingly, the regulator, far from giving BT the rocket it deserved, was terribly understanding about the technical and logistical problems involved. It didn't seem to bother him that the wholesale price BT was charging for broadband was higher than its own retail price.

The upshot was that by the time the regulator got round to doing anything sensible about access and prices the telecom bust was already in full swing and most of the potential competition was out of business or retrenching fast. BT now has the territory pretty much to itself.

The new chief executive at BT, Ben Verwaayen, has had the good sense to recognise broadband as a potential asset, which is an improvement on his predecessors. Prices are now generally as good as they are elsewhere in the world, but availability and quality of service is still poor. Unsurprisingly, Mr Verwaayen emphatically rejects all talk of a break-up, even though it is plainly in no-one's interests other than those of BT that such entrenched monopoly persists. Over to you Lord Currie.

PizzaExpress

Hugh Osmond's bid for PizzaExpress is a bit of a try on. At their peak, little more than a year ago, the shares traded at more than £9. Since then, circumstances have plainly changed. The group's ambitious expansion plans have hit a road block, like for like sales are falling, competition is intensifying, and to cap it all, the bottom has fallen out of the London restaurant market.

Just the right time to make a bid, figures Mr Osmond, who helped take the company public with Luke Johnson in the early 1990s, thereby making his first fortune. For him and his partners, Nando's International, the bid makes lots of sense. He knows the business intimately, and crunching it together with Nando's would produce lots of operational synergies, helping reduce to reduce costs.

Turning the brand around won't be easy. To many, the format has begun to look stale and outdated, and its pizza's are widely seen as poor value, not withstanding repeated assertions that they haven't in fact got any smaller. Some outlets are these days so empty, even at peak times, that you wonder why they stay open at all. All this counts in Mr Osmond's favour. He's not at this stage overtly criticising the present management, but that's plainly the subtext. They've failed and how can investors be sure they won't fail on an even grander scale if they are allowed to carry on?

Against that, big City investors are fed up to the back teeth with opportunistic venture capital bids. In a few years time Mr Osmond and his partners will be back to the stock market, having paid off the debt used to buy the company, asking these very same investors to reacquire the shares. If Mr Osmond can do it, why can't David Page, the present chief executive? Mr Osmond will have to pay more to succeed.

jeremy.warner@independent.co.uk