ALEX BRUMMER: We need to take advantage of the flexibility of UK’s liberal capitalism, not put handcuffs on
There have been so few good moments for Britain’s pandemic and Brexit-afflicted economy that we should mark them when they occur.
The optimism of the Bank of England’s Andy Haldane that Britain is on the road to a ‘V’-shaped recovery is so far being sustained.
As critics are fond of pointing out, the second-quarter decline in Britain’s locked-down Covid-19 economy at 20 per cent was the worst among the G7 Western economies.
Decision time: Rishi Sunak’s mid-to-late November budget ought to be about tax incentives
But with unprecedented fiscal help from Rishi Sunak and £300billion of monetary injections from the Bank of England, it is roaring back. Output rose for the third month in a row in July by 6.6 per cent.
There is a distance to travel. However, the resilience of the UK, compared with the EU, is starting to show. Consumers have embraced the re-opening of the hospitality sector, which bounced an extraordinary 140.8 per cent in July and benefited from Rishi’s cheap eats in August.
There are rises across the piece, from construction to industrial output. Sure, Britain is still running 11.7 per cent below pre-Covid levels but the direction is unmistakeable.
Just to add to the optimism is the far-reaching UK-Japan trade deal. Reaching an accord with the world’s third largest economy (after the US and China) is a landmark, and good not just for exports of blue cheese but for stepped-up inward investment from Japan and liberalised financial relations. It is critical for a UK pivot towards the Pacific.
There is rightly caution about the economy in the coming months. The National Institute of Economic and Social Research notes that GDP is now 18.6 per cent higher than its April level, but is concerned that elevated pandemic risk and withdrawal of furlough could damage recovery at the ‘end of this terrible year’. It doesn’t have to be thus. The Bank is supporting recovery and employment and there will be more injections of funding through quantitative easing before year end, contrary to Gordon Brown’s assertions.
The Chancellor’s mid-to-late November budget ought to be about tax incentives for employment and R&D, not higher wealth and corporation taxes. We need to take advantage of the flexibility of UK’s liberal capitalism, not put handcuffs on.
During the notorious Lonrho scandal of nearly half-a-century ago, the main protagonist, the late ‘Tiny’ Rowland, remarked that non-executive directors were no more than baubles on a Christmas tree.
The world has moved on and it was the intervention of independent directors which helped persuade Simon Thompson, chairman of £60billion miner Rio Tinto, to part company with chief executive Jean-Sebastien Jacques and two other bosses responsible for destroying a 46,000-year-old First Nation heritage site.
It is extraordinary that a group with Rio Tinto’s reach felt it could placate critics with the release of an internal inquiry and docking bonuses of staff concerned. Internal probes are more about limiting the damage and legal liability than justice. That is why the Aussie parliamentary inquiry is more likely to get to the real truth which led to the destruction of the Juukan Gorge rock shelters. It as if someone decided to blow up Stonehenge to get at the tin deposits.
The sustained pressure from shareholders, notably the vast AustralianSuper fund, First Nation cultural groups, as well as UK investors Legal & General et al, is what turned the tide. Directors with the status of Sam Laidlaw and Simon Henry were not going to let the scarring in Western Australia – Rio’s moist lucrative market – be sustained.
There is a tendency to regard environmental, social and governance (ESG) reporting and investment as green wash, disregarded when quarterly earnings are soaring. Rio’s recognition of the new reality is a milestone for corporate responsibility.
The Stock Exchange regards the £5.4billion listing of The Hut as a triumph for London and points out the lighter governance rules for a standard listing are designed to accommodate pioneers such as gorgeous Matt Moulding. It should not, however, be an excuse for Moulding to insert himself as the company’s landlord, borrowing heavily against his shares to do so or insist that his ‘golden’ share should be passed on to his heirs in the case of mishap.
Like champagne swigging photos on the web, it is not a good look.