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A de-merger of the Co-op bank and the insurance division has been ruled out. Graham Melmoth, the chief executive of the Co-operative Group, the movement’s largest trading body, said disposals of non-core businesses were likely as under-performing operations are stripped out. He added that further mergers among the 47 regional Co-ops would be encouraged.The Labour Party welcomed the changes. However, Ian McCartney, vice chairman of Labour’s national policy forum, declined to be draw on the possibility of legislation to protect the Co-op from takeover. “The Government will look at the recommendations but I can’t tell you if it’s going to be in the manifesto.” Questioned on how the Co-op would enforce the changes, the Commission said under-performing regional Co-ops could be stripped of the right to use the Co-op brand. It said the movement also reserved the right to place observers on underperforming boards to ensure financial targets are met.Analysts questioned whether the changes would be successful.

Richard Hyman of Verdict, the retail consultancy, said: “In the current retail environment it is going to be very difficult for the Co-op to defend its current position, let alone strengthen it.” He added that the Co-op’s fragmented structure, where each regional society pursues its own strategy, would continue to be a problem. The Co-op has suffered from a long period of under-performing management and an outdated structure. Its latest accounts show that on total sales of £8bn in 1999, the trading surplus (profit) was just £170m. In addition to its main convenience store and funerals businesses, the sprawling Co-op empire still includes 366 Shoefayre shoe shops, over 500 chemists, as well as travel agencies, opticians, dairy and car businesses.. Shares in the speciality chemicals producer ICI slid sharply yesterday after the group warned that the slowdown in the US economy had hit profits hard and would make trading more difficult in the year ahead.

Shares in the speciality chemicals producer ICI slid sharply yesterday after the group warned that the slowdown in the US economy had hit profits hard and would make trading more difficult in the year ahead.
ICI shares fell 7 per cent on the warning to close 35p lower at 491p despite a better-than-expected set of results for 2000. Pre-tax profits before goodwill, amortisation and exceptionals rose 20 per cent to £450m.In the final quarter of last year, however, group profits were virtually static at £104m as ICI felt the full effects of the “sharp decline” in the US. Worst affected was its National Starch business, where profits for the three-month period fell by 29 per cent. National Starch accounts for 37 per cent of ICI’s sales and profits now that it has completed the disposal of its bulk chemicals businesses.Charles Miller Smith, chairman, said the group was well-positioned to respond to the downturn and pointed out that sales in January had recovered from December levels and were in line with those in the same month last year.The financial scars of the group’s withdrawal from commodity chemicals were reflected in a £503m loss on the sale last year of ICI’s Chlor-Chemicals, Klea and Crosfield operations.

At the pre-tax level this left ICI nursing an £87m loss for the year.However, ICI, which has decided to halve its dividend in the current financial year, said it was confident that the strategy of concentrating on the less cyclical businesses of speciality chemicals, paints and fragrances would pay dividends in the long-term. Brendan O’Neill, ICI’s chief executive said: “I am extremely optimistic for the future. If ICI hadn’t made that change then, by now we would have a low or non-existent share price.”He said group debt, which still stands at £2.8bn, restricted ICI’s ability to pull off a big merger in speciality chemicals. But he questioned whether this was the right strategy anyway, saying ICI preferred to focus on bolt-on acquisitions. The group expects to spend £100m to £150m on targeted acquisitions this year, financed from savings made by the dividend cut and a pension contributions holiday.. Business leaders gave a grudging welcome to yesterday’s cut in interest rates and warned that hopes of further reductions depended on the contents of next month’s Budget.