Stephen Foley: Wetherspoons changed the British pubs industry – but what does it do next?

Raise a glass today to Tim Martin, founder and chairman of JD Wetherspoon, who is celebrating the opening of his pub chain's 800th boozer, in Ripon, North Yorkshire. (It is the Unicorn Hotel, on which the company has lavished £2.1m for a refurb, should you want to stop in.) Mr Martin says the milestone is just the halfway mark in his expansion plan, but as well as looking forward, it really is worth toasting what Wetherspoons has done to the UK pub industry.

When Mr Martin opened the doors of his first pub in Muswell Hill, north London, in 1979, the traditional boozer was a grimy, smoke-filled placed for men to drink themselves to an 11 o'clock stupor. Wetherspoons, of course, has not been alone in brightening things up, putting decent food and coffee on the menu, cleaning the toilets, and generally making the environment more inviting for women and families. But if it shares those plaudits with the likes of All Bar One and the gastropub pioneers, Wetherspoons was unique in putting value for money at the centre of its philosophy.

It is testament to Mr Martin's skill at anticipating what UK drinkers really want that Wetherspoons is now being imitated by just about every pub group, all of whom emphasise the so-called "five Fs" of families, food, females and forties and fifties, referring to middle-aged punters. But what this of course means is that Wetherspoons is going to have to work harder to stand out, both in the fight to win consumers and in the fight to wow investors. Its shares have gone nowhere for two years.

Part of the problem is margins. Food price inflation, wage rises and tax increases are on its menu of gripes, as operating margins have slipped back from the 10 per cent investors had got used to. And since Wetherspoons has a famously lean supply chain already, it will find fewer places to cut back if inflation is not brought under control soon. It is unlikely to abandon its single-minded expansion plans to satisfy the City, either.

The company has always managed a good balance between finding unique and surprising venues, and presenting a common, and identifiably "Wetherspoons", experience. As the chain grows, though, and Wetherspoons moves into smaller towns and becomes a commonplace, the risks of homogeneity grow – particularly if it stints on the costs of refurbs at new venues, to make up for rising margin pressures elsewhere.

So, cheers, Mr Martin. The first 800 were the easiest ones.

A timely contribution to US deficit debate

To say that rating agency reports are statements of the bleeding obvious is, er, a statement of the bleeding obvious. Even so, there is something especially ludicrous about Standard & Poor's dramatic declaration yesterday that the outlook for US government debt has turned negative.

The agency is concerned the US political class may not be able to agree on a deficit reduction plan before the presidential election next year, and that therefore the nation's finances will be drifting out of control beyond 2013. That brings S&P on to the same page as every bond fund manager out there, from Bill Gross at Pimco on down. The agency surely cannot be more concerned now than it was last month or last year, when medium-term deficit reduction wasn't even on the policy agenda.

The wheeling and dealing that a deficit-reduction plan entails is indeed fraught with political difficulty, and the potential for failure is very large. But S&P doesn't suggest that President Barack Obama's intervention last week, when he proposed $4.4 trillion of cuts and tax rises, has made a deal less likely. Quite the opposite. The agency says having the weight of the White House behind an effort to get compromise is a positive.

Perhaps the real answer to the timing of S&P's expression of concern is that the agency finds itself with elevated influence in political circles, as it did in European markets earlier in the sovereign debt crisis. By firing its warning shots now, it can apply pressure to a frightened political class and spur the very deal it says it fears may not be possible.

Anything that concentrates minds on Capitol Hill is welcome, especially if it can be done without causing financial harm. And that was what happened yesterday, as interest rates on US government debt rose only modestly. Such is the benefit of stating what to credit markets has been bleeding obvious for an age.

The perils of relying on others' due diligence

The £1.4m fine that the Financial Services Authority imposed on the Norwich & Peterborough Building Society yesterday is nothing, really, compared to the humiliating loss of independence at the society, which put itself up for sale after sizing up the reputational and financial damage from having foisted high-risk Keydata investments on thousands of its most risk-averse customers.

The truth is that members of the N&P salesforce were also mis-sold the Keydata products they were selling. Who in 2006 didn't have a too-rosy impression of the safety of these new structured products, built out of newfangled creations such as, in this case, second-hand life insurance policies?

Time and again, peddlers of financial products fail to examine the risks their counterparties were taking, let alone the risks of their counterparties' counterparties.

The lesson from N&P as from a long list of once-proud investment gurus – from "Superwoman" Nicola Horlick in the UK, to Bruce Bent, money market pioneer, in the US – is that they could be at one remove from a Bernard Madoff or a Lehman Brothers or some other disaster. Due diligence involves following the chain of connections all the way to source. The punishment for failing to do so can be the severest of all. Oblivion.