ALEX BRUMMER: Chancellor Jeremy Hunt’s flawed rallying cry
Jeremy Hunt’s vision for the country can only be realized if investment, entrepreneurship and entrepreneurship are supported, says ALEX BRUMMER
Talk tough: Chancellor Jeremy Hunt
Jeremy Hunt’s formidable Bloomberg speech attempts to break the cloud of pessimism hanging over the British economy.
He must face terrifying forces on the opposition benches and a national narrative that is instinctively bleak.
When Richard Branson’s Launcher One mission failed due to a rocket failure, it was immediately assumed that it was all over for the UK’s £16 billion-plus aerospace industry with its innovative satellite technology.
But rocket technology is notoriously unreliable and the history of Elon Musk’s £103 billion Space X is also riddled with debacles.
Hunt’s aim is to draw attention to all the things Britain is good at, such as AI, pharma, biotech, creative industries and fintech. Britain’s brilliant research universities have put us at the top of the class in many categories.
The UK’s ability to hang on to those technologies and turn them into companies that beat the world is lagging behind. Our satellite champion Inmarsat is on its way to US command and control unless the Competition & Markets Authority stops it. Aveva, a pioneer in industrial software, was recently swallowed up by the French company Schneider and hardly anyone blinked.
In his speech, Hunt mentioned support for Sizewell C, the UK’s next nuclear reactor. But why is the project still in the starting blocks? And what about getting fully behind Rolls-Royce’s small modular reactors before GE and Hitachi get there first? No one will miss the paradox that Hunt spoke out for HS2 on the day it was reported that the last mile of track to Euston could be scrapped. After the decision to leave Leeds’ leg is in danger of destruction from 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 business investment and productivity performance.
The windfall surcharge on the North Sea is an obstacle to energy security as the UK strives for a greener future. Ideally, the jump in corporate tax from 19 percent to 25 percent would be abolished again. At the very least, the super deduction, which creates a double tax write-off for new investments, should be made permanent to allow planning for the future. UK spending on R&D was upgraded late last year by the Office for National Statistics and is now estimated at 2.4 per cent of output. If the country really has the ambition to become the next Silicon Valley, it must at least match the US level of 3.4 percent and be supported by fiscal incentives.
Hunt has looked to the horizon and likes what he sees. The country will only get there if investment, entrepreneurship and entrepreneurship get the tangible support they need.
The nearly halving from last year’s peak in the insurer’s standalone Direct Line shares to 173.8 pence in last trade says it all.
Chief executive Penny James may have rebuilt the insurer’s technology for the digital age, but shareholders are ruthless about value destruction and a abolished dividend.
A new management team, temporarily led by chief commercial officer Jon Greenwood, is expected to inspire confidence in the company’s underwriting and strengthen depleted capital. The possibility of an attack on an insurer with 8.5 million customers, with a market value of just £2.28 billion, will be tempting. Chairman Danuta Gray will have to show nerves of steel.
Aviva, which has strengthened its finances with a series of divestments, needs to keep an eye on things. Until now, boss Amanda Blanc has been about selling assets, but bolstering market share would be a tempting proposition.
Nor should anyone discount Bain Capital, which already owns the insurance brand Esure. Some of Direct Line’s underwriting losses have been reinsured, which is a relief to investors. Consumers who remain loyal in a promiscuous market will eventually absorb some of the pain with higher premiums.
Sainsbury’s share register is already bumpy with Qatar and Czech Sphinx Daniel Kretinsky holding big holdings.
Now they’ve been joined by Bestway, the private owner of Costcutter convenience stores. A deal with Bestway could potentially be just what Sainsbury’s needs, after trying Aldi and Lidl with no-frills Netto brand but failing to get a hold of it. However, the last thing it needs is a high leverage deal with Bestway. The fate of Morrisons and Asda is a salutary warning.