At the splendid London Olympics opening ceremony, Isambard Kingdom Brunel, the father of the railway, was allowed to symbolise the spirit of the British entrepreneur. But how many of the hundreds of millions of global TV viewers watching dancers in Brunel-like stovepipe hats realise that Britain no longer has an indigenous railway industry, in contrast to Europe?

One person who played an important role in all this was surely Lord Weinstock, who died 10 years ago this week.

Now a bit forgotten, he was Britain's top industrialist for decades, the top figure in the UK electronics industry until 1996. Born into a Jewish family in 1924, Arnold Weinstock started out working as an estate agent, then got a job with Radio and Allied which manufactured televisions and radios. This company merged with the General Electric Company (GEC) in 1963, and Weinstock soon became GEC's managing director. A series of further mergers were carried out with Associated Electrical Industries and English Electric, which incorporated some of the classic names of British engineering such as Hawthorns, Marconi, Metropolitan Vickers, and Ruston and Hornsby.

Good years

Mergers don't always work but this large holding pen of British engineering worked well. Profits were achieved by careful cost control and a number of rationalisations. Weinstock played steady-as-she goes. While unpopular with some for staying away from innovative sectors, he closely looked at financial reports and the company's large cash pile saw it through recessions. He had no time for synergies, and allowed companies to run themselves.

Pedantry was legendary. He could phone relatively lowly staff late at night if he discovered an anomaly in the accounts. While other aspects of British manufacturing fell into decline, GEC's profits increased fivefold between 1970 and 1977, and by 1984 GEC was Britain's third largest private company. He bought the remnants of the British shipbuilding industry. Following further takeovers of British engineering names such as Plessey, in the late 1980s, he launched a number of international joint ventures to make GEC less targetable for hostile takeovers.

There were three joint ventures. A telecoms equipment venture in which Siemens had a 40% stake, a joint venture with the French company Alsthom for power engineering and locomotives. And a deal with America's General Electric for consumer goods.

These moves also seemed to work out for Lord Weinstock. GEC Alsthom became a powerhouse in train manufacture, making the coaches and engines for both Eurostar and high speed lines in Korea. The joint venture also won the prestigious tender to build the Amtrak railway linking the Boston, New York and Washington corridor.

Decline

On this positive trend, Weinstock retired in 1996. But then it all went wrong. His successor, Lord Simpson, a Scottish accountant and former British Leyland executive, thought GEC was too diversified so he divested the company of its defence electronics division and sold off the shares in GEC Alsthom to concentrate on telecoms services under the new name Marconi telecommunications.

It was the beginning of the Blair era and, as one admiring newspaper profile put it: "Quite simply Simpson wants to transform the company he inherited from Arnold Weinstock, the epitome of old-style British engineering excellence, into a youthful creative firm at the cutting edge of the new knowledge-based or weightless economy that Tony Blair wants to promote." Simpson told another paper, the Financial Times, "GEC had become a slow moving, eurocentric joint venture. We had to change the way the company was operating. We had to look to high growth sectors." Simpson got rid of the old board and a what was described as a"new, dynamic, globally oriented team" was brought in.

Using the huge cash pile from all the various sell offs, Lord Simpson bought two American telecoms companies in order to take advantage of the dot com mania that had overcome American and global investors.. At first it went well. Share prices tripled between 1999 - 2000. But they soon fell back again as investors everywhere concluded that telecoms shares were overpriced. In Marconi's case the fall was particularly drastic. The company's market value fell from £35bn to £150m. People said that Marconi had invested in the companies the Americans themselves had rejected.

Thousands of people lost their jobs. The company hobbled along until 2005 when BT, one of GECs' biggest customers, cut Marconi out of a contract to renew its network, giving the orders to non-British firms instead. Shortly afterward most of what remained of Marconi was bought by Sweden's Ericsson, the tiny rest renamed Telent. It was a disaster for Weinstock's legacy, but not the only one.

Alsthom

What of the rail equipment and power engineering division that Lord Simpson sold off and ended up as the French-dominated Alstom? While Weinstock had allowed considerable local autonomy to the various divisions, reports in the local Midlands press suggested resentment when French management took over.

In 2003, Alstom (as Alsthom had been renamed) closed down the trainmaking division in Birmingham, leaving only some engineering services in the UK, while keeping it going in France. Alstom itself was in trouble in 2003-2004 - but was prevented from being taken over by Siemens when France blocked the takeover bid in contravention of the EU rules. Alstom was then rescued by a dubious state aid injection by Nicholas Sarkozy, then French finance minister. State subsidies are supposed to be illegal under EU law.

Instead of forcing the Siemens deal, the commission greenlighted the French subsidy provided made some compromises were made. Still, Alstom was not broken up, and the German chancellor Gerhard Schroeder was left fuming. Adding to German irritations was the fact that the takeover of the mainly German pharma giant Aventis by French pharma company Sanofi-Synthelabo had just gone through.

The issue eventually went away and the French might argue their dodgy cash injection has been good for Alstom, which is growing again, with 85,000 employees and profits of 462 million euros last year. Britain, meanwhile, has no domestic train maker left on its soil - just a subsidiary of the Canadian owned Bombardier in Derby, and even that is failing.

Romney and Britain

A consequence of all this is that you have Mitt Romney, the Republican US presidential candidate, writing in his book about America's future, No Apology, that Britain is a small island country with small houses and, with a few exceptions, "doesn't make things that people in the rest of the world want to buy". I am surprised this snarky aside in his book did not get more attention in the British press this week after his publicised remarks questioning whether Britain was really capable of organising the Olympics.

Romney exaggerates but there is a grain of truth. The prejudiced view of the average educated European is that Britain barely has any industry any more, and that the alternative gamble, financial services, has no future.

What are the lessons of the debacle of GEC? It was a spectacular management failure to chase the "tulip mania" of the 1990s dotcom boom, but, in much else, Lord Simpson's actions were all in accordance of the official philosophy of the time supported by Labour. Manufacturing was dead, the future was in services. Debt financing was good, the more deregulation the better.

Single market

But there was also a failure to enforce the European single market - essentially a British idea - a failure to support the commission in its enforcement battle against France over Alstom. The commission was stuffed with pro Brits at the time, yet France was allowed to exploit the single market for its benefit while not opening up its own. This uneven playing field has been of immense benefit to the French. EDF uses its protected home market to generate huge cash piles to buy up the electricity business in the UK market, which in contrast to the French one is completely open.

Britain should have been tougher about forcing France to play by the single market rules. Nabbing the Olympics for London at the Olympic committee meeting in Singapore seven years ago over the favourite, Paris, was a great diplomatic victory for Blair. But the battle for Britain's prosperity takes place every day of the week in Brussels, and the Brits have to make sure they are winning those battles too.

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Pelle Neroth -- EU correspondent

Edited: 10 March 2013 at 08:24 PM by Pelle Neroth