Britain must invest in more risk-taking world beaters, fast

Stimulating business confidence is vital but so are bold initiatives to enable us to trade our way out of trouble
p14 Chancellor of the Exchequer George Osborne and David Cameron react as Shadow chancellor Ed Balls response after Osborne delivered his Autumn Statement to MPs in the House of Commons in central London. PRESS ASSOCIATION Photo. Picture date: Wednesday December 5, 2012. See PA BUDGET stories. Photo credit should read: PA Wire
6 December 2012
WEST END FINAL

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An awards ceremony at Claridge’s thick with chief executives seemed like a useful place to be last night to rate the Coalition’s handling of the economy. Would Management Today’s Most Admired Companies awards reveal that George Osborne was most admired too? Not exactly.

There are three stages to assessing a Budget report, or Autumn Statement, as its slimmer counterpart has become known. First of all, the speech, measured for tone and delivery. Osborne certainly sounded convincing yesterday, given the bad news he had to deliver on growth and borrowing — and especially compared with Ed Balls’s garbled response.

Then the document: does a wade through the numbers rattled out so quickly bear out the Chancellor’s bravado? Most telling, though, is the reaction of the outside world.

There were those at Claridge’s who didn’t have a view because they hadn’t seen the detail: one had just jumped off a plane from Dublin; another had arrived from Milan. Others were uninspired by the Statement, or depressed that the British economy seems to be taking one step forward and one back.

One seasoned executive couldn’t believe the brass neck of Osborne for asking for five years to tackle the deficit and two years later saying he still needed five years. What about some intellectual creativity, he said, instead of more tinkering from the Treasury around the edges?

Cutting corporation tax once again is great news — as long as your company is making a profit. Plenty aren’t. But anyone running a big workforce knows the onerous cost of employment tax. Why not chop that? There was also support for bankers. If they are meant to provide the feedstock for growth in the form of new lending, then stop bashing them with fresh regulation and taxes. Help them to recognise historic, huge losses and move on.

I make them sound like a pack of grumblers but lifting bosses’ confidence levels is crucial if they are to recruit, expand or invest. They are frustrated that a return to prosperity has been postponed once again.

All grudgingly agreed that Osborne has been dealt a terrible hand, with nothing to spend and more deep cuts threatening to neuter recovery, not nurture it. We are operating in the context of an uncertain world where the eurozone remains rocky, China’s explosive growth has come off the boil and a re-elected Barack Obama is racing to solve his own headache: a fiscal cliff of spending cuts and tax rises that threaten to wipe out Stateside growth.

The Chancellor picked out the exporters as suffering yesterday, using overseas woes to explain away over-optimistic growth forecasts. If you think it’s tough here, was the message, just look at France’s economic woes or Spain, where the dole queues snake around the block.

The trick is to help re-engineer trade routes, hence Osborne throwing more cash at export agency UK Trade & Investment, which business chiefs have been praising of late. More must be done. The last time I checked, Britain was exporting more to Denmark than Brazil. And for those with few routes abroad — usually small firms struggling to make their mark — helping them to take their first steps comes in the form of £1.5 billion put aside for trade finance.

Reviving private finance initiatives to connect pension fund money with schemes for road, rail and schools is welcome — but overdue. Infrastructure projects are a surefire way of creating jobs and growth in the down-cycle. An early move by the Coalition would have meant shovels would be in the ground by now but, apart from Crossrail, which is redrawing several London boroughs, there aren’t enough hard hats out there. All of these moves don’t yet get Osborne off the hook with bosses who are casting around for something bigger.

It says plenty about austere times that the after-dinner speaker last night was Lord Heseltine, whose company publishes Management Today. Recommendations from the former deputy prime minister’s growth review had been adopted by the Chancellor hours earlier, namely around skills and regional funding.

Heseltine reeled off facts to get his audience thinking: more than half of British companies that export do so because they were asked in the first place by a foreign firm that wanted to buy their goods; 60 per cent of contracts within the annual £274 billion public procurement spend are over time and budget; British workers are 20 per cent less productive than those in America or Germany. Stepping right back to look again at education and drawing workers into high-growth sectors would bear fruit. Stop Britain slipping into mediocrity.

On the other hand, take a look at the winners last night. Sir Martin Sorrell and Paul Walsh have four decades at the top between them, running advertising group WPP and Diageo, the drinks giant behind Guinness and Smirnoff vodka. Both are business leaders who lead. They are bloody-minded, risk-taking and globally focused. When the British economy was still struggling a year ago, Sorrell was busy opening up shop in Myanmar, which has a population roughly the same as ours. Walsh recently made a judicious investment in an Indian spirits firm when its owner ran into financial difficulty. Neither has been hostage to government helping hands in building their empires.

The trouble is, Britain has too few world beaters. If Osborne properly throws his lot in with industry, we could develop some more. Shrinking the public sector only makes sense if the private sector can pick up the slack. So far it has, with 1.2 million new jobs since this Government took office. But we need many more so we can trade our way out of trouble. It will take years. And George Osborne still needs to do more for all that bravado at the despatch box to have been justified.

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