Business chiefs: north-west can refresh parts of economy London cannot reach
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Version 0 of 1. A business Olympics? A modern version of the Great Exhibition of 1851? Both claims have been made by promoters about the International Festival for Business, a 50-day jamboree in June and July. Such is the scale of the event that the fanfare has already started, with CBI director general John Cridland and former Tesco boss Sir Terry Leahy on trumpet duty. The ambition is not small either: the festival is described as a key part of the government's ambition to "promote economic growth, rebalance the economy and double UK exports by 2020." To that, Leahy would add another goal. He is a Liverpudlian and the festival will take place in Liverpool, with spillover events across the north-west. "It's about what comes next for Liverpool, which is to portray a starkly different image to the outside world where it is at the centre of a business event, a business discussion," he says. "So much about Liverpool in the past has been about industrial decline and industrial disputes and social deprivation. The physical regeneration has very successfully caused people to look again at Liverpool and be more open-minded about what kind of city it is. This is a really positive move, to be the host of a major business festival. It's not just a regional thing, it's a national event." Leahy is an "ambassador" for the festival and will speak at a few of the 200 events. "The long jump is very different from the high jump," says Cridland. "Each day there will be something which reflects a different part of the British business community on parade." Just don't expect a lecture on today's Tesco from the former boss – Leahy's comments are brief (see panel). But isn't talk of a rebalancing economy and export-led recovery a little premature? A recent survey showed four out of five private-sector jobs in the past two years had been created in London and the south-east. Cridland says he is not surprised. "London at the moment is reminiscent of an ancient Greece-style city-state. It is entirely self-generating growth, it is cosmopolitan, a lot of it is international money, and it doesn't depend on the rest of the country. "It is great to have a world capital but it is not sufficient to have that. The failed policies of the past were to try to get jobs moved from London to other parts of the country. I don't think that will work, London is always going to be its own dynamo, its own pumping heart. I think the regions of the UK need to celebrate their own strengths and build on what they are good at." Leahy concurs. He thinks Liverpool and Manchester, "instead of throwing buns at each other, should work together and see what can be done when you have 7 million people, lots of industrial assets, lots of industrial heritage, and make use of the fact that people understand industry up in the north-west, they are more supportive of investment and use of resources". He points to two north-west-based businesses in which he is involved – online retailer The Hut, where he is an investor, and discount retailer B&M, where is chairman. "They are going to become very large companies," he predicts. "Liverpool is a city that can be repopulated. Its got an infrastructure for a population twice its size. That's a very valuable asset." How about HS2? Here the pair are not quite in unison. Leahy: "I can understand why there is a strong demand for it in the north-west. So why am I open minded? It's the time – it's a long way away. And the cost. For me, it's the opportunity cost. Could that be invested sooner in other R&D and infrastructure? Also, though I think the business case can be made, I am not sure it has been made yet." That's Cridland's cue to try to make the case. The CBI, unlike the Institute of Directors which called HS2 a "grand folly", is a strong supporter. Even Cridland, though, concedes "there has been too much emphasis on speed and not enough emphasis on capacity" so far. "I think you have to demonstrate what it does for economic development along the route and particularly what it does for economic development in the north. If you go through those stages you come to a conclusion that HS2 has a place in a national infrastructure strategy but it is by no means the only thing in that national infrastructure strategy. I am as excited about the northern hub … We need to connect across the Pennines. That is a great benefit to Manchester and Liverpool and that can be done relatively quickly." What about Labour? There is "concern in entrepreneurial Britain" about the "new tone" from Ed Miliband on markets, says Cridland, before launching into a traditional argument that competition and new entrants drive greater choice and quality for consumers. But isn't Miliband in favour of more competition and more entrants? Isn't that the whole point of his plans to overhaul the energy and banking markets? "Yes, he would say that," replies Cridland. "So then you come down to judgment about what is most likely to have a good effect for the country. So if you take energy, does a retail price cap encourage investment in new energy capacity or does it cause investors to stand back and press the pause button? "In my view if you artificially restrict the rate of return on investment you are likely to get less investment. Small businesses in the CBI membership I have talked to are predominately concerned about keeping the lights on. They don't want a California moment. So I think in all of these questions you are looking at the law of unintended consequence" Leahy's criticisms are directed at Labour's plan to reintroduce a 50p income tax rate for high earners. "The best thing you can have is low rates that are broadly applied so that everybody pays their tax," he argues. "The recent example [of a 50p rate] demonstrated that if you want to increase your yield – your tax taken – you have a lower rate." But shadow chancellor Ed Balls has suggested £10bn could be raised. "He's not going to win that argument, and him trying to win that argument probably explains why there has been such a strong reaction [from business.] It feels more political than economic." We're back on rebalancing, with Cridland keen to explain why the position is better than it appears in the trade figures. "I think people's expectations are unrealistic. If 50% of all of your exports are going to Europe and Europe remains in great difficulty, you need an awful lot of Liverpool entrepreneurs on planes to Mexico and Indonesia for the first time in their working lives, chasing growth in the markets where there is money to be spent, before you make a material difference. But it is happening. Goods exports outside of Europe are nearly 30% higher than they were at the peak of the last economic cycle in 2007. So that march of the makers that George Osborne is looking for is beginning to happen." Leahy wants politicians to do less. "They have to trust citizens more, and trust them to make mistakes over their own lives and stop rushing to regulate and legislate over every part of our lives. There is basically too much legislation, too much regulation, too much government." What about last year's horsemeat scandal, which hit his old shop, Tesco? Wouldn't consumers welcome more regulation there? "That was a crime," says Leahy bluntly. Planning is top of his list for reform. "The cost of land is far too high, and then the process of development is far too uncertain, which increases the development cost. What it tends to produce, typically, is that built development, whether commercial or housing, takes so long to get approval that it ends up at the wrong time of the economic cycle." As for the "medieval" system of property-based business rates, he would rip it up. "Come up with a new rate, if you must have a tax on business, and base it on how an economy really works. So that would mean a lower tax rate, probably, but spread across a much larger part of the economy and it would catch online business as well as traditional businesses. Why should a chain of shops pay a tax and a chain of mobile phone masts not pay a tax? Or a chain of ATM machines not pay a tax? It makes no sense." Leahy's final recommendation is for the next generation: go it alone. "We also need a shift from working for professions and organisations to working for yourself. We have got wonderful universities and they produce incredibly bright kids and then they all march off to work for Accenture, McKinsey, Tesco, whatever, and a few of them should start businesses. Far too few start businesses. I have advised my kids to do that." Leahy's legacy "If you had put a pound in Tesco [when I became chief executive], as opposed to any other retailer, or most other businesses, you'd be quite happy," says Sir Terry Leahy. On a big-picture view, he's right, of course. Tesco's profits, dividends and earnings per share doubled and doubled again during his 14‑year tenure. But the share price has fallen by a quarter since he left and successor Philip Clarke has described the UK business as being run "too hot". Clarke also abandoned Fresh & Easy, the US chain that was the flagship investment of Leahy's final years. Lord MacLaurin, Leahy's predecessor, made strong criticisms at Tesco's annual meeting last year: "When you judge the performance of a chief executive, you not only judge the performance of his day-to-day operation, but you also have to judge his legacy, and I think we're all very sad to see the legacy Sir Terry Leahy has left." Leahy declined to reply forcefully. "I think that you have to allow the new team there to do the job and be judged on that," he says. "I am happy to be judged on what I have done at Tesco." |