Deep in the bowels of the Department of Trade and Industry, Don Cruickshank is huddled with a colleague over a multicoloured chart showing Britain's preparedness for the Millennium Bug.

As he pores over the details, lamenting the failure of eight as yet unnamed local authorities to get anywhere near readiness, he paints a nightmare vision of meltdown in local services: schools that cannot be opened, sewage spilling on to the streets and social services in chaos.

Nevertheless, Mr Cruickshank is reasonably confident that Britain will pass the millennium test: "When you compare this to what we know about the tempo of other countries' programmes and the details of what they have done, it is a real cause for concern." In the United States, for instance, there are 10,000 water authorities yet to be checked for compliance, whereas Britain has seven.

Occasionally, Mr Cruickshank is interrupted by his personal assistant who brings in a couple of sheets of closely typed blue paper. It is the draft of Mr Cruickshank's interim report on bank services in Britain - issued last week at the request of the Chancellor, Mr Gordon Brown - and promising the most radical overhaul of British banking in decades.

What the financial services industry originally saw as a narrow-based study, going over the old ground of the failure of the financial systems to deliver the right kind of services to small and medium-sized businesses (SMEs), has grown into a wide-ranging semi-permanent exercise. Just as Mr Cruickshank as head of Oftel asked questions the telecoms industry preferred not to discuss, he is grilling the bankers. Unlike many of the regulators, appointed to rein in the newly-privatised industries of the 1990s, Mr Cruickshank brings private sector skills to public service. After training as an accountant and gaining an MBA he went on to the best business finishing school in Britain, McKinsey, where old boys include the City regulator Mr Howard Davies, Asda chief Sir Archie Norman and Mr William Hague.

Mr Cruickshank parlayed his McKinsey experience into a job at Times Newspapers, as director and general manager, where he recognised the need to change the economics of production. "He had a sharp, flinty look and he aligned himself with the hawks (seeking to sort out the print unions)," Mr Harold Evans, the former Sunday Times editor, wrote in his book, Good Times, Bad Times.

From there he migrated to Pearson Longman before joining the Virgin group as managing director. As well as learning to work alongside a volatile entrepreneur in the shape of Mr Richard Branson, the Virgin years of 1984-89 were filled with adventure: Mr Cruickshank helped to take the company public and then private again, and was instrumental in creating Virgin Atlantic. He also left with more than £1 million (€1,493,652) in the bank.

At Oftel his main interest was allowing the market to work rather than using the more negative powers exercised by some of the utility regulators. The goal was to create a market where others could compete with British Telecom.

Mr Cruickshank's skill is to take a very simple proposition, such as the need to expose BT to the market, and push it to its limits. In the banking arena he is intrigued by the prejudice in favour of cash transactions. "The costs of having cash are very high. People who want it should be made to pay for it."

The mild-mannered, scholarly Scot with a flush to his cheeks and greying fair hair is Labour's man for all seasons: able to straddle the two most important economic departments. At the DTI he is Action 2000, the Millennium Bug swatter. At the treasury he is working directly for Gordon Brown, conducting a one-man guerrilla campaign from within government to bring the magic of the marketplace to the financial services sector. He is also chairman of Scottish Media Group.

What struck Mr Cruickshank as he embarked on his banking inquiry was that finance has been regulated differently from much of the rest of the British economy. Whereas scrutiny of telecoms, food, car sales and the rest is largely done on a competitive model, regulation of the banking sector has been prudential.

"I would give the financial services authority a primary objective in competition. The truth of the matter is that historically that has not been seen as necessary. It has been avoided and never faced up to."

Mr Cruickshank disputes the protestations of the banks that the inquiry has been provided with everything it has asked for. He suggests that the banks don't understand what a competition investigation in Britain in 1999 looks like.

One issue of particular interest to the banking analyst will be the impact of the Cruickshank inquiry on consolidation. A belief that has buoyed financial sector shares is that there are too many players and eventually there will be cross-border mergers or a coming together of bigger players like NatWest and Barclays or NatWest and Abbey National. No such deal will get a free ride while the Cruickshank review is open.

Mr Cruickshank' skills in business and as a regulator have been to recognise complacency and the hidebound, find the weak points and take them on. It is a history which the financial services industry ignores at its peril.