Archive : Lord Simpson: The man who broke Marconi

Lord Simpson’s sacking from the post of chief executive of Marconi follows one of the most catastrophic declines in UK corporate history. Bob Chaundy looks at the career of the man who presided over his company’s spectacular fall from grace.

When the GEC shareholders appointed George Simpson to head their company in September 1996, the man who had built it up, nurtured it and left it with a healthy cash surplus, Lord Weinstock, described his successor as “a man of vision”.

A year ago Marconi was worth £35 billion. Now, after frittering away the family silver, the company shares are classed as “junk”. Simpson’s “vision”, of turning GEC, an old-fashioned but successful defence and electrical conglomerate, into Marconi, a hi-tech wonder of the telecoms industry, has turned out to be a nightmare. The risk and the debt turned out to be higher than the tech.

So, it’s to be more time spent at the golf club for this former captain of industry. His biggest decision now will be which one. He is a member of seven.

“Not only does this show a mad passion for the game”, says a golfing buddy, “but perhaps an unnatural desire to be accepted.” For George Simpson has been something of an outsider, having grown up in Perthshire, well away from the business centres of Glasgow, Edinburgh or London.

He was born in 1942, in Dundee, the son of a mill manager. He studied accountancy, and, after first working in the Scottish gas industry, opted, in 1969, for the motor trade. After a period as chief executive of Leyland Daf, this ruddy-faced Scot eventually became head of the Rover Group when it was still owned by British Aerospace.

“He was immensely affable,” says former employee Richard Coltart, “a good manager and a good people guy.” Simpson turned Rover around, enough to persuade BMW to buy it for £800 million. It did not take long for the Germans to regret the decision. In the meantime, Simpson had taken over at the components group Lucas Industries – which he soon sold to America’s Varity. By the time this company had hit trouble, George Simpson had again moved on.

One analyst commented at the time: “He could fall through the roof of a department store and land up on the ground floor wearing a new suit.” In September 1996 Simpson was tempted by Arnold Weinstock to take over at the helm of GEC. There were some misgivings. His critics accused him of being just a “deal-maker” who had yet to prove he could run a business.

Almost immediately, Simpson set about dismantling the company. He sold the old Marconi defence business to his old pal Sir Richard Evans at British Aerospace for £7.2 billion.

It was a move which managed to upset the French, the Germans and Tony Blair in one fell swoop. Blair, who had made Simpson a life peer in 1997, wanted BAe to merge with DaimlerChrysler Aerospace of Germany.

But most pundits agree Lord Simpson had got a very good price. Retaining the Marconi name, he brought in a new finance director, John Mayo, a thrusting young operator with ambitions towards the telecoms sector.

The two began acquiring companies in America, including Reltec and Fore Systems, jumping upon the hi-tech bandwagon. The problem, in hindsight, was that the wheels had fallen off bandwagon – and nobody could put them back on again.

It was an ill-judged gamble. Fortunes and thousands of jobs have been lost as a result, making a huge handout paid to the former chief executive all the more galling.

And yet, with only a few months to go before his retirement, Lord Simpson was close to leaving the ship before it sank. This time, his luck ran out.

“George was a doctor, not a builder,” says Richard Coltart. “He was like John Harvey-Jones. He’d arrive at companies, sort them out and move on. When it came to building, as at GEC, he was navigating in uncharted waters.”

The name Marconi once stood for all that was great about British inventiveness. Now, it is the symbol of how badly things can go wrong. Guglielmo Marconi, who gave the company its name, was the co-inventor of the radio. He must be turning in his grave.

Keith Adams
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  1. A typical Brit by the sound of it, useless, incompetent, unable to collaborate with anyone and a massively overated sense of his own ability

  2. One mistake GEC made was investing in mobile phones at just the wrong time, when the dot com bubble burst & the market was shaken up.

    Over the years GEC bought up a lot of other companies, I did wonder how well they managed to integrate them all. Certainly all the ones making equipment for the railway industry ended up as GEC Alstom.

    At least they know when to get out of home electronics when they couldn’t compete with the far eastern companies & off-loaded this division to Hitachi when it was still a going concern.

  3. As a country we don’t know how to build businesses over the long term. It is all about short term risk taking, massive reward for this year and rolling the dice. The world of steady returns, long term spending, investment and R&D is alien to us.

    We have a toxic financial system and ownership structures that make building long term successful businesses very difficult but very easy to destroy such businesses in an orgy of speculation.

    Alas our politicians are incapable of fixing the problem because we have an equally toxic political culture. Second jobs, retirement jobs and bribe donations to political parties. Means no party will tackle the structural problems which destroying British industry and the wider British economy. Neither will they tackle a culture of rewards for failure at the top.

    Till we have the situation we have today. A hollowed out broken economy, with the British an historical footnote in many industrial and economic fields. Increasingly dependent on debt, a housing bubble and speculation to keep going.

    • There is an issue at the top and the bottom. At the top, we have politicians who clearly do not know the difference between GDP and per capita GDP (despite supposedly having studied PPE at either Oxford or Cambridge – perhaps they skipped the “E” bit in PPE). At the bottom, we have a very dodgy education system when it comes to providing a workforce with proper skills. The apprenticeship system is not what it should be. I know that the entry level requirements in the UK for apprentices are much lower than in e.g. Germany or Switzerland, yet the numerical skills required in today’s more computerized and automated work environment are becoming ever more demanding. Our politicians appear to be more interested in sending school levers to critical race or gender study courses at lousy universities.

  4. GEC at one time was a huge and respected corporation that could make anything from a television set to the components in an RAF fighter. Now sadly gone and joins ICI and Courtaulds, two other ibdustrial giants from the last century, in the industrial graveyard.

  5. That’s the least of your worries here as you were doing so well until the last sentence!

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