I spent three days in New York last week looking under the bonnet of Barclays’ investment-banking operation and seeing how the integration of Lehman Brothers’ American business had settled down.

With the £8.2 billion sale last Friday of Barclays Global Investors, the bank’s fund-management business, it has lost a valuable income stream. The proceeds will strengthen the bank’s capital ratios but investors now want to see where those lost earnings will be replaced.

Barclays is looking to Barclays Capital, headed by Bob Diamond and Jerry del Missier, to fill that earnings hole. It is already a big player in government bonds, commodities, leveraged debt and other areas; the bit that was missing was equities and a mergers and acquisitions team.

That is what the Lehman deal has brought to the table. From the day it was acquired last September, 10,000 staff switched allegiance to their new owner. Lehman’s clients had to be won over, but it is working and so is the culture. Where the top brass at Lehman were tucked away on the 32nd floor, the heads are now in open offices on the trading floors.

As we report on pages four and five, Barclays has set out ambitious plans to become a top three global investment bank. That is a vision not without risk. By the end of this year Barclays Capital intends to have its European equities business up and running and employing more than 650 people. That is a huge team to integrate and it has to be seen to get it right. If Barclays Capital achieves that goal, Asia is next and a global footprint becomes a possibility.

In the top-tier world of investment banking, domicile is irrelevant. But it is exciting that a British bank wants to step up to the challenge .

Diamond and Del Missier have been talking about creating a global bank for some time, and the credit crisis has made it possible. Barclays still has its share of difficulties and doubts remain, but it now has the tools to drive its plans forward.

There is a vacuum on Wall Street, both in terms of leadership and investment banking brands. Shareholders and clients have been horribly let down by the excesses of the last boom, but they are now starting to pick the next winners — the chief executives and the banks that can deliver.

Barclays wants to be counted among this elite. Diamond and Del Missier have moved to Manhattan to raise their own and their firm’s profiles – and when you feel the momentum that is being driven out of New York, you start to believe Barclays Capital has a chance.

Clouds over Airbus

HEADS of state and arms dealers will gather with defence and aerospace executives at Le Bourget airport tomorrow for the start of the flying display cum trade fair cum party that is the Paris Air Show. Like its British equivalent at Farnborough (the events alternate each year), it is the focus of the industry’s calendar and a chance for everyone to show off their latest shiny planes and boast about how well they are doing — or, this year, how they are hoping to survive the recession.

This year the home team should have had something to boast about, in the bulbous shape of the A400M, a European-made plane that would at last challenge America’s dominance of the military transport aircraft market.

Tony Blair championed the unlovely but capable beast as a project that would further European integration, but unfortunately it has gone the way of many other pan-European defence projects: it is late, seriously late, and miles over budget.

It’s not hard to find reasons why it went wrong. Airbus, the commercial plane maker that is building it, wanted to use North American Pratt & Whitney engines but, no, the French insisted that it had to have a European powerplant.

Each country buying it has had a slightly different set of requirements, meaning the resulting plane will have an unparalleled range of capabilities, or be wildly overspecified, depending who you speak to. The question now is whether to press on regardless, taking the losses and delays on the chin, or get out while the going is good. It’s a matter of no small moment for EADS, parent company of Airbus, which could be looking at a hit of €6 billion if the governments withdraw.

There was an unofficial deadline of the end of this month for a decision, but France and Germany look likely to put it off for at least six months while they do some more thinking. Britain, however, looks likely to stick to the original timetable and, given the ropey state of the Ministry of Defence’s budget, it wouldn’t be surprising if the UK dropped at least some of the 25 aircraft ordered.

There are costs to such decisions, however. British industry says some 8,000 jobs depend on our buying the A400M. Just under 1,000 people are directly employed in making the wings and other components, but the bigger losses are expected in the knock-on effect that would come from withdrawal. Britain would risk losing its traditional dominance of Airbus wing-making, with other European nations eager to take it on, and willing to pay to do so.

Such scare stories get whipped up every time a defence project looks close to cancellation but this one has some truth.

With the A400M, Airbus is venturing into composite wings – ones made of carbon fibre rather than metal. All future civil aircraft wings are likely to be made out of this lightweight material. If we pass on the A400M out of frustration with its slow progress and expense, we might rue our decision later.

Serco’s succession

THE specialist outsourcing group Serco has been one of those quiet British success stories that slipped into the FTSE 100 without the usual fanfare.

The firm owes a huge amount to Kevin Beeston, 46, who has been its finance director, chief executive and executive chairman. He has now stepped back to being nonexecutive chairman and, quite rightly, questions are starting to be asked about his independence.

With a market value of £1.97 billion and a place among the elite of British business, Serco needs an independent board more than ever before. Beeston knows the business intimately but he lacks objectivity. Given how non-executives are fiercely protective of their reputations these days, it would be surprising if his board colleagues were not addressing the situation.

Serco does not meet the new corporate governance requirements and, while he has enjoyed great success, Beeston must prepare his succession and Serco will probably have to look outside.

john.waples@sunday-times.co.uk

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