Kevin Stanford, the co-founder of Karen Millen, recently said he "totally" supported and trusted Mr Johannesson, while Sir Tom Hunter, part of the consortium that brought Big Food Group, owner of the Iceland chain, has also made it clear he trusts the Icelander. Some believe this may, in part, be a motivation behind the charges. "There are some political issues," says one British businessman who has worked with Baugur in the past "It's a bit like Russia. They have done [deals] in a marketplace that has sweet FA to do with Iceland. They have done them in a sophisticated market, so good luck to them. It's an open market and everyone has the chance to buy." That market is, of course, the UK. Baugur - an Arcadia franchise-holder - steadily built up a 20 per cent stake in the business until, in 2002, it was set to buy Top Shop, Top Man and Miss Selfridge.
However, a high-profile police raid at its head office scuppered the deal and the current charges have stemmed from the three-year probe that followed. Mr Johannesson has said that losing the Arcadia deal cost the group £150m. But the real reason the country is doing so well is its size. "It has a homogeneous population and there's a strong understanding when painful economic decisions need to be made Things are just less complicated," says Ms Feldbaum-Vidra. That has helped lure considerable foreign investment in recent years. But she warns that there are also downsides to being so small. "On the negative, there's a lot more volatility and even the smallest things can have a big impact." Which in turn means that the Baugur scandal could hit home hard "Absolutely it could," says Ms Feldbaum-Vidra "It's such a big company.
Its products could be replicated but these situations, as we have seen in the US, affect investor confidence." That said, the country's benchmark ICEX-15 index continues to go from strength to strength, currently trading at more than 4,000 compared to a low of 988 just four years ago. Iceland adopted free market principles in the 1990s, allowing companies such as Baugur and a new generation of Icelanders to thrive and grow rich. But this displaced the old, family-controlled businesses that usually had strong political ties, and some politicians - including former prime minister David Oddsson - are believed to be concerned at the speed with which the new breed of companies have bought up assets. It is no secret that the former head of the country and current head of Baugur do not get on, with Mr Oddsson once accusing Mr Johannesson of attempting to bribe him. It has a flexible exchange rate, growth potential and a good pension situation." The volcanic island has its home-grown industries: it is known for aluminium smelting, ample energy resources and fish. The investment guru may be bringing up the rear, at number 488, but it is more than Coventry can boast. So what is it about this country that has bred such a booming business community? Joan Feldbaum-Vidra, a New York-based analyst with Moody's, ranks Iceland as AAA, its best credit rating "This reflects that it's a developed economy It's wealthy, it doesn't have the debt.
