Outlook: City should look in the mirror to see why trust is so low

After Equitable Life, endowment mortgages, the IPO-fuelled technology bubble, split capital investment trusts and all those incredible shrinking pension plans, is there anyone out there that can be trusted to invest our savings competently any longer? The City's reputation for professional investment management has taken the most terrible battering over the past two years, and it is no longer possible to blame the consequent collapse in public trust solely on the worst bear market since the 1970s. The investment community as a whole is now quite widely regarded as predominantly populated by rip-off merchants and thieves, while a number of our leading savings institutions have been exposed as incompetent, negligent or worse.

In the latest manifestation of this loss of faith, the Co-operative Wholesale Society pension fund has ended its 30-year relationship with Merrill Lynch Investment Managers and stuck the money instead into passive trackers with Legal & General. Like the Unilever superannuation fund, the Co-op has decided that paying fat fees to Merrill Lynch just to have them cock it up is a complete waste of money. Much better not to have the money professionally managed at all, and let the computers do the work for a fraction of the cost.

At the same time, the Co-op announced it might follow Unilever into suing Merrill's for past underperformance. The Co-op's legal case may not be as strong as Unilever's, since it doesn't seem to have had the same "downside tolerance" clauses built into its contract. In Unilever's case, these stipulated a maximum level of underperformance, which Merrill's hopelessly failed to meet. None the less, quite enough evidence of negligent and incompetent management was produced during the Unilever court proceedings to make others believe they may have a case for damages too.

Merrill was a particular set of circumstances, but after the débâcle of split capital trusts, the suspicion must be that inappropriate, incompetent and negligent behaviour in the City is much more widespread than previously thought. Many savers are already voting with their feet. Deposit rates may be at rock bottom, but at least you don't lose your shirt by sticking your money in the bank. Or how about buy to let? So disillusioned are investors with the stock market that even this highly illiquid and hassle-filled form of investment is seen as preferable to anything the City might have to offer. No wonder the market in initial public offerings is bombing again. Scepticism is the order of the day. The City only needs to look itself in the mirror to understand why.

French farce

France's historic mistrust of the British shows no signs of abating to judge by this week's tirade by the boss of Castorama, Jean-Hugues Loyez, against Kingfisher. They never have quite forgiven us for the beating they took at Agincourt, have they? You wouldn't have thought that a chain of out-of-town DIY shacks would count as one of France's great national treasures, but no, the pride of La France has been insulted by Kingfisher's £3.2bn bid for the 45 per cent of the Castorama it doesn't already own, and at the company's annual meeting in Lille this week, M Loyez let his British tormenters have it with both barrels.

Apparently forgetting that he was also a director of Kingfisher, he castigated the Brits for having no idea how to run a French company. During the four years Kingfisher had been involved, Castorama had been starved of investment and made to do all kinds of inappropriate things. Meanwhile, more has been invested by Kingfisher in B&Q in four years than Castorama had in the last 30. Kingfisher understood little about French corporate culture, M Loyez insisted, nor did it understand the nature of the French DIY market.

M Loyez's outburst may have been no more than an attempt to get Kingfisher to pay more, but he touches on a sore point when he raises the issue of Anglo-French incompatibility. Hardly any British companies have unambiguously succeeded in France, and yet here's Kingfisher proposing to raise £2bn through a rights issue further to increase its exposure to a country which, as M Loyez says, it may not fully understand.

As it is, the acquisition is already proving more problematic than Kingfisher might have anticipated. All manner of legal obstacles are being thrown in its way. Francis Mackay, Kingfisher's chairman, is still "100 per cent" certain that eventually all of them will be overcome, and he cites the spot of bother with M Loyez as evidence of Kingfisher's desperate need of a unified management structure for the French and British DIY interests. M Loyez is apparently not in line for the chief executive's job once the present incumbent, Sir Geoff Mulcahy, has been put out to grass. Now there's a surprise. But Mr Mackay might be wise to appoint a Frenchman if he doesn't want further to upset French sensitivities. Step forward, perhaps, the nakedly ambitious Pierre Danon, head of BT Retail.

Digital TV inertia

The absence of any serious interest in the broadcast licences freed up by the collapse of ITV Digital is a matter for deep concern. Nothing remotely credible seems to have been put forward in time for the Independent Television Commission's Thursday night deadline for expressions of interest – unless you count MGt, a four-year-old Scottish-based call centre operation, as a credible bidder. Others interested in having the licences for pay-TV purposes include Crown Castle, a US-based venture capital partnership whose main motive seems to be that of safeguarding revenue for its transmission business, and SDN, a consortium of the Welsh language broadcaster, S4C, and NTL. The latter consortium may also include Lord Hollick's United Business Media, but nobody seems to know for sure.

None of these three look likely to succeed where ITV Digital failed. The detail of their funding plans, which under the ITC's timetable has to be submitted by the end of the month, is going to make intriguing reading. That's if they have any. All this will be welcome news for the BBC and BSkyB, both of whom are praying that digital terrestrial as a pay-TV platform finally died with ITV Digital. The last thing they want is for a son of ITV Digital to rise Phoenix-like from the ashes. The BBC's director-general, Greg Dyke, is on record as saying he doesn't believe the spectrum should be used for pay TV at all. It would be much more effective, he believes, if all of it was concentrated on free-to-air digital TV, which with ITV in chaos and Channel 4 in loss, the BBC would naturally dominate. Sky is keen to encourage such an outcome too. It wants the pay-TV space entirely to itself. Having spent a fortune killing off ITV Digital, Sky would be horrified by any kind of a rebirth.

This is not a happy state of affairs. Do we really want our airwaves dominated by this monstrous alliance of media monopolists? Leaving distribution of pay TV entirely in the hands of Sky and the enfeebled cable industry scarcely looks likely to encourage innovation and choice. The digital spectrum on offer surely must be worth something, but in the present mood of gloom that engulfs the media and technology industries, no one seems willing to believe it.

jeremy.warner@independent.co.uk