Basel III, Ministry of Defence spending cuts and why Chicken Shack needs auto-enrolment pensions all became relevant to the latest The View from The Bridge debate: Rule Britannia? Is Britain still a good place to do business?
Bill Robinson, one the most respected economists in the UK and a former advisor to a former Chancellor (Ken Clarke) kicked off the debate. The chairman of economics and regulation at KPMG said there were four headwinds holding back business growth in the UK:
1) Banks not lending. However, he said this wasn’t entirely their fault as £60bn has been wiped off their British banks’ balance sheets by loan losses and the new Basel III capital requirements are making it harder for them to lend;
2) Real incomes are falling and are lower that they were seven years ago, while people are saving more, with the savings ratio soaring from just 2% to and all time high of 8%;
3) Public sector spending is falling as a result of the Chancellor’s action to reduce the deficit;
4) The Eurozone crisis. Foreign investors worry that Europe is not sorting out its problems and this had a major knock on effect on the UK.
Sir Andrew Cahn, vice chairman of Nomura International and former head of UK Trade & Investment agreed strongly with many of these points. He pointed to the experience of companies he works with – US defence contractor General Dynamics, Chinese IT giant Huawei and, of course, Nomura from Japan, highlighted UK Government spending and the Eurozone crisis as major disincentives to investing in Britain.
However, Sir Andrew did say the UK was still the most open economy in the world and one of the most attractive places to invest, even if it was dropping down the league table from second behind the US to around fifth or sixth according to most measures. Major issues that are pushing the UK in the wrong direction are its immigration policy – which is deterring people with the sorts of skills and capital that have made Britain great in the past – a serious skills shortage and a the burden of regulations, especially gold plating of regulation that come from the European Commission.
Ian King, business editor of The Times, agreed that the UK’s openness encouraged investment from abroad – he pointed to the £5bn RWE has spent on UK energy infrastructure, the massive investment EDF is making in nuclear power and the fact that most of the bidders for the Docklands Light Railway renewal contract are from overseas. However he was concerned that – despite Brtish business holding an estimated £700bn of cash on their balance sheets – some of the UK’s biggest companies are now investing more heavily abroad than in the UK.
He also pointed out how tough it was for small businesses, with not only bank finance being tough but regulation making their lives more difficult. For example, he said that new auto-enrolment rules for pensions meant that the local outlet of Chicken Shack would have to offer its staff workplace pensions. Small business people, he argued, hardly have any time to merely run and grow their businesses.
A packed audience then debated key issues such as planning, UK market confidence and the potential nationalisation of Royal Bank of Scotland, which was dismissed with the comment “how could you suggest that only the day after Lady Thatcher’s funeral”.
The consensus was the UK is still a good place to do business, but not as good as it used to be. We shouldn’t rest on our laurels.
Watch “The View from the Bridge” here – bit.ly/1dsiX1R