FEW people in business are as close to Gordon Brown as Gavyn Davies, former chairman of the BBC and former chief economist at Goldman Sachs.

When Brown moves into 10 Downing Street in three days, at his side will be Sue Nye, his longest-serving and most trusted aide. Nye, who will act as Brown’s “gate-keeper” at No 10, is Mrs Gavyn Davies. They met three decades ago when both worked in Downing Street for a previous Labour prime minister, James Callaghan.

Brown and Davies have been close for years. Davies was a strong candidate to succeed Eddie George as Bank of England governor after Labour came to power, but it was decided that allegations of cronyism could make it harder to argue that the Bank was entirely independent of government.

When Brown needed to soften his image before the arrival of his own children, the photographers were invited to snap him playing the part of cuddly uncle at a birthday party for one of Davies and Nye’s children.

Davies, 56, now successful in the hedge fund and private-equity business, says his old friend is much misunderstood in Britain’s boardrooms. Business, he says, has nothing to fear from a Brown government.

“I find it puzzling why business people, and more particularly finance people, are so concerned,” he said. “They’ve seen him up close for 10 years and he has been as friendly to business and as friendly to finance as any chancellor of the exchequer.

“Some people think he’s been sat on by Tony Blair and that there’s a real Gordon Brown underneath that’s different, but I’ve never seen anything to indicate that. The idea that Tony Blair was new Labour and Gordon Brown is old Labour is just so ridiculous and I think people are going to recognise that very quickly.”

Davies also believes that the current storm about private equity and City bonuses will blow over. He does not see Brown bowing to political pressure to respond in a way that would damage Britain’s competitiveness.

“There’s a short-term frenzy going on about private equity, not just about tax but about the kind of things private equity has bought,” he says. “But it is a frenzy, like the frenzy about petrol prices.

“When people calm down and look at the situation, they will see that London, being the premier financial market in the world, is of huge benefit to practically everybody in Britain. That has followed Tory policies in the 1980s and 1990s, built on by new Labour.

“We’ve had a continuous process that has seen off competition from other European centres and is now enabling London to grow relative to New York and Tokyo. I see this as a temporary thing that will calm down.

“If you look at what Gordon himself says and what his senior lieutenants like Ed Balls say, I honestly don’t think we need worry about this reversing.”

Davies’s low moment was his resignation as BBC chairman in January 2004, following the Hutton report’s criticisms of the BBC and its allegation that the government’s evidence on Iraq’s weapons of mass destruction had been deliberately “sexed up”.

He has made his peace with Alastair Campbell, then Blair’s chief spin doctor, whom he says publicly called him a liar. But he has not forgiven Lord Hutton, the senior judge whose report led to his departure from the BBC.

“I was most let down by Lord Hutton,” he said. “His report did not appropriately serve the nation. It served some other interests, possibly the state, but it did not serve the nation.”

But Davies has no regrets about his own conduct. “If I had pursued the alternative course, which would have been to have apologised for a broadcast that I thought was broadly correct, I would have been ashamed of myself,” he said. “I am pleased I didn’t do that.” The affair is now water under the bridge “except for Lord Hutton”.

Many people, after such a high-profile departure from such a public role, would have retreated into their shell. Davies, worth tens of millions from his time at Goldman Sachs, could certainly have done so. But, rather than concentrating on getting his golf handicap down, he threw himself back into business. The day after his departure from the BBC, he was seeing a small company, Deliverance, with a view to investing.

Deliverance, now with annual revenues running at £10m a year, up 40% in the past year, is London’s largest provider of home cooked meals, a fast-growing sector. These days, dinner-party hosts and hostesses, particularly for prestige occasions, do not want to spend their time in the kitchen. Firms like Deliverance fill the gap.

It is one of half-a-dozen companies that Davies’s own private-equity business, Active, has significant stakes in, with investments totalling £25m. With his partners Spencer Skinner and Bryan Vaniman, Active specialises in investing in small to mid-mar-ket companies.

Others include Soho House, the club and hotel chain run by Nick Jones that started out from a single club in London’s Soho. There are now Soho House offshoots in Chis-wick and Notting Hill and there will soon be one in Shoreditch. The firm also owns Bab-ington House, the chic Somerset country house hotel, and Cecconi’s restaurant in London’s Mayfair. The New York Soho House is said to be the city’s trendiest club and there are plans for new openings in Miami and Los Angeles.

Davies is excited by watching these firms grow, as he is by Leon, a chain of healthy fast-food restaurants co-founded by Henry Dimbleby, of the broadcasting dynasty. The aim is to have 300 Leon restaurants, spread across Britain.

“I feel good that we are helping these small businesses grow into big businesses,” he said.

Another Davies business, Prisma, was founded three years ago in America with former Goldman Sachs partners Girish Reddy and Tom Healey, in a joint venture with Aegon USA. It has more than $4 billion (£2 billion) of assets under management and is about to expand into Europe. Its Select Fund family of products is up by more than 40% in less than three years.

But it is in the UK hedge-fund business that Davies has made the biggest splash, and attracted the most controversy. His operation is Fulcrum, based like much of the hedge-fund industry in London’s Mayfair. It is a firm, it seems, where former Goldman Sachs partners go to spend the rest of their working lives.

Fulcrum, of which he is chairman, has Andrew Stevens as chief executive and David Blake, Andy Bevan and Suhail Shaikh among its senior staff. All used to be with Goldman Sachs, as did most of the firm’s other 20 employees.

Fulcrum has $500m of assets under management, which it invests for wealthy private clients. Over three years it has generated a return of 30% after fees for its original investors with a Sharpe ratio (a measure that relates risk to return) above 1.5, which is healthy. Fulcrum is expanding into a series of new funds, including “Themes” and “Views” and aims to take in more investment.

But Fulcrum’s sister company, Semper Macro, set up by Davies and former Goldman Sachs star trader Christian Siva-Jothy, has not been doing so well. Jothy, a market legend after the highly successful trading strategies he adopted in the wake of the September 11 attacks on New York and Wash-ington in 2001, was regarded as one of the hottest acts in the hedge-fund business. Teamed with Davies’s economic expertise – though Davies did not involve himself in the fund’s investment strategy – it appeared to be a sure-fire winner.

But earlier this year it was reported that Semper Macro was in trouble. Its funds under management plunged from $1.5 billion to $500m as many investors pulled out after a 15% loss last year. Market conditions, particularly a drop in volatility in the options market, had hit it. The fund had also bet on a sharper slowdown in the American economy than occurred.

This year the performance has been flat, according to Davies. But he has decided to hive off Semper Macro. “The confusion this has caused about Fulcrum and my role means that we are going to unravel the link, so people can see clearly what we are doing,” he said.

It will now be a separate business, run by Jothy, and Davies will end his involvement with it. The split is said to be amicable.

Despite this setback, Davies remains upbeat. He is proud of the businesses he has set up. He believes that the current flurry in markets, with bond yields up and risk being repriced, does not herald a great “reckoning” or downturn. The factors that have driven hedge funds, notably diversification by pensions funds and insurance companies into “alternative” investments, will continue.

Like the rest of us, however, he will be keeping a close eye this week on events in Downing Street.

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