Jeremy Hunt’s vision for the country can only be realized if investment, enterprise and entrepreneurship are sustained, says ALEX BRUMMER
Speak tough: Chancellor Jeremy Hunt
Jeremy Hunt’s formidable speech on Bloomberg seeks to break the cloud of pessimism hanging over the British economy.
It comes up against formidable forces in the opposition benches and an instinctively dark national narrative.
When Richard Branson’s Launcher One mission failed due to a rocket malfunction, it was immediately assumed that it was all over for Britain’s £16billion-plus space industry with its innovative satellite technology.
Yet rocket technology is notoriously unreliable and Elon Musk’s £103 billion Space X story is also riddled with debacles.
Hunt’s aim is to refocus attention on all areas where Britain excels, such as AI, pharma, biotech, creative industries and fintech. Britain’s brilliant research universities have helped us rise to the top of the class in many categories.
The UK’s ability to latch on to these technologies and turn them into world-class companies is lagging behind. Our satellite champion Inmarsat is on his way to US command and control unless the Competition and Markets Authority stops him. Industrial software pioneer Aveva was recently gobbled up by Frenchman Schneider and hardly anyone blinked.
In his speech, Hunt mentioned his support for Sizewell C, the UK’s next nuclear reactor. But why is the project still in the starting blocks? And how about being fully behind Rolls-Royce’s small modular reactors before GE and Hitachi get there first? No one will miss Hunt’s paradox speaking in favor of HS2 on the day it was reported that the last few miles of track to Euston might be axed. Following the decision to abandon the Leeds stage, there is danger of destruction by a handful of cuts.
The Chancellor needs a whole new approach to corporate taxation in the budget if the UK is to reverse its disappointing investment and productivity performance.
The exceptional North Sea surcharge is an obstacle to energy security as the UK seeks a greener future. Ideally, the corporate tax jump from 19% to 25% would again be cancelled. At the very least, the super-deduction, which provides a double tax deduction for new investments, should be made permanent, allowing planning for the future. UK R&D spending was revised upwards by the Office for National Statistics late last year and is now valued at 2.4% of output. If the country really has the ambition to be the next Silicon Valley, it must at least reach the US level of 3.4% and be supported by tax incentives.
Hunt has looked at the horizon and likes what he sees. The country will only succeed if investment, enterprise and entrepreneurship receive the concrete support they need.
The near halving of standalone insurer Direct Line’s stock last year’s peak to 173.8p in the latest trades speaks volumes.
Chief executive Penny James may have rebuilt the insurer’s technology for the digital age, but shareholders are unforgiving of the destroyed value and suppressed dividend.
A new management team, temporarily led by Chief Commercial Officer Jon Greenwood, is to instill confidence in the company’s underwriting and bolster depleted capital. The possibility of a swoop on an insurer with 8.5m customers, with a market value of just £2.28bn, will be tempting. President Danuta Gray will have to show nerves of steel.
Aviva, which has strengthened its finances through a series of disposals, must remain vigilant. So far, boss Amanda Blanc has focused on selling assets, but boosting market share would be a tempting proposition.
Nor should anyone rely on Bain Capital, which already owns the Esure insurance brand. Some of Direct Line’s underwriting losses have been reinsured, providing relief to investors. Consumers who remain loyal in a crowded market will eventually absorb some of the pain with higher premiums.
Sainsbury’s share register is already lumpy with Qatar and Czech sphinx Daniel Kretinsky holding large stakes.
They have now been joined by Bestway, the private owner of Costcutter convenience stores. A deal with Bestway could potentially be just what Sainsbury needs, after trying and failing to shut down Aldi and Lidl with no-frills brand Netto. The last thing it needs, however, is a high-leverage deal with Bestway. The fates of Morrisons and Asda provide a salutary warning.