IMAGINE if Bank of America, the world’s second-biggest bank, had made its long-awaited bid for Barclays. We would all be bemoaning the potential loss of yet another of our big companies and wondering why our executives do not have the ambition to turn the tables.

It is essential that we back the international ambitions of our home-grown executives, so long as their vision is backed by sound commercial logic.

John Varley, Barclays’ chief executive, believes he has such a plan. It involves trying to pull off the world’s biggest financial-services tie-up, merging Barclays with ABN Amro of the Netherlands — a deal first revealed by this paper.

Varley has been a surprise at Barclays. He moved up from finance director to the hot seat only three years ago. At the time, his detractors said the appointment smacked of Barclays’ bad old ways, promoting family members to the board — Varley married into one of the Barclays’ founding families some 25 years ago.

So far he has proved them wrong. Under Varley, Barclays has been transformed. When he took over, 20% of revenues came from overseas. Now that figure has risen to 50% and soon it could be 70%. Profits have jumped from £3.8 billion to £7.1 billion.

Varley is not rushing headlong into a mega-deal. He wants to be sure the numbers add up, both in terms of cost-savings and revenues. His critics say he is mad to undertake this, but if he can achieve 20%-plus savings on operating profits (perhaps matching the 35% enjoyed by Royal Bank of Scotland when it bought NatWest), it is a big prize.

ABN has told Barclays it is its partner of choice. That’s a good start, sufficient to make any potential interloper such as Citigroup and RBS think hard before taking action.

Varley has also settled the most important part of the negotiations. The combined group will be under UK governance rules and headed by him. He may have to base himself in Amsterdam, but he can pick his own team.

The deal brings Barclays exposure to India and Brazil, and adds to its emerging-markets portfolio. Varley’s big vision is that wholesale, institutional and retail products will become global. The bigger the distribution network, the more that can be pumped through it.

But the big test for Varley will be with his management team. Integrating two banks of this scale will be an immense challenge and will stretch management to the full. ABN is not the best-run business in town, particularly in wholesale markets, but therein lies the opportunity.

Subject to price, this is a deal that should be supported. The next 10 days are crucial while the detail is thrashed out. But the combined group will offer investors an opportunity to back a long-term investment, with exposure to growth markets, rather than pocket a one-off premium from a BoA bid.

Europe’s challenge

THERE is a realisation among the top tier of British business that if Europe does not start to act as one entity, its constituent members will be outflanked one by one by the emerging powerhouses of China and India.

And that would be a dangerous state of affairs. But the rapid pace of globalisation means Europe’s tendency towards economic protectionism is no longer tenable. The creation of the European Union, which celebrates its 50th anniversary this week, has done much to introduce common rules and regulation, but a lot more needs to be done.

Europe is facing huge challenges from the emerging economies and, unless its members understand those challenges, it will fall behind.

To this end, 50 of Britain’s business leaders have put their names to a new force called Business for New Europe, which will be launched this Thursday with the support of the chancellor, Gordon Brown. They include Peter Sutherland, BP chairman, Lady Judge, chairman of the UK Atomic Energy Authority, Peter Sands, chief executive of Standard Chartered Bank, Paul Walsh, chief executive of Diageo, and Sir Ronald Cohen, former chairman of Apax Partners.

It’s a heavyweight cast and one that believes it can make a difference by promoting a free-market Europe that can compete in a globalised world. As Lord Hurd, the former Tory cabinet minister and now a City adviser, puts it: “Once again we ought to realise that we can only meet our needs if we are prepared to act together rather than continually scoring little points at each other’s expense.”

EU reforms have helped to tackle hiring practices, holidays and pension costs but much more needs to be done. In the meantime, Europe is falling behind in the knowledge and innovation sectors. And it still needs a coherent energy strategy to ensure adequate supplies of gas and oil.

There is a danger that bodies like the one being launched this week can become one-day wonders, but each business leader involved has written a long article setting out a personal vision of what a revitalised EU should offer. And sometimes the language is strong. Lord Tugendhat, chairman of Lehman Brothers’ European advisory board, says: “The rhetoric of the EU is stuck in a time warp. Progress and success are still too often defined in terms of movement towards overarching structure and harmonised policies rather than the creation of a framework within which member states can work and co-operate together.”

Europe has to show it is a place to do business. Initiatives like this are essential to stimulate the debate. What is more vital is that our continental partners sign up to that bigger picture as well.

john.waples@sunday-times.co.uk

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