Top City of London financiers are rallying behind Boris Johnson after his general election victory, but they are urging the prime minister to heal societal divides by pursuing “inclusive capitalism” policies and a softer Brexit agenda.
“The election result gives Boris a once-in-a-generation chance to set the UK on a different path,” Nationwide Building Society chairman David Roberts told the FT City Network. “One that recognises the fundamental need to heal the divides in our society.”
Anne Richards, who heads Fidelity International, added: “If Mr Johnson can use his clear electoral mandate to invest in the real economy and work with business in a way that delivers for all stakeholders, then there is much to hope for in the coming decade.”
Many of those offering snap reactions to Thursday’s poll among the membership of the FT City Network — a forum of more than 50 senior City figures — expressed similar sentiments about softening the hard edges of capitalism, in part by delivering on public spending promises.
Elizabeth Corley, vice-chair of Allianz Global Investors, described campaign pledges on NHS and education spending as “one of the most positive aspects” of the election process.
“This is a good outcome,” said Douglas Flint, chairman of Standard Life Aberdeen. “[This is] a government with the majority necessary to drive the economy forward and address the social and demographic challenges we face.”
The election result gives Boris a once-in-a-generation chance to set the UK on a different path
David Roberts, Nationwide Building Society chairman
The comments reflect a broader shift in the language used by business both in the UK and in the US over the course of 2019, as the establishment responds to the uncomfortable reality of creaking public services and widening wealth gaps.
Over the summer, even the normally ultra-conservative US Business Roundtable, which represents American big business, altered its mission away from a pure focus on generating shareholder value towards a mission to look after “all stakeholders”.
The Financial Times has itself called for a “reset” and marketed a more purpose-driven form of capitalism.
At the same time, many of the respondents to the FT City Network debate, including Ann Cairns, vice-chairman of Mastercard, and Clare Woodman, who heads Morgan Stanley in Europe, urged Mr Johnson to run a “pro-business government”.
Gerry Grimstone, the former Standard Life chairman, who is now a non-executive at the Ministry of Defence, said it was the City’s responsibility to “support the government to the fullest possible extent” in trade negotiations.
That appeal linked to another key message to come from the Network: that Mr Johnson should use the opportunity of a big majority to move away from an extreme interpretation of Brexit, favoured by the likes of the Tories’ European Research Group wing, in order to minimise the economic disruption of the UK’s departure from the EU.
Mike Rake, former president of the CBI, expressed confidence that “with the Tories now freed from the control of the ERG, Boris will be able to drive an agreement closer to the EU and with a sensible transition period”. That period should not be less than three years, he said.
Mr Johnson has previously said a deal on the UK’s future relationship with the EU would be struck by the end of 2020 as part of his “Get Brexit Done” electoral campaign.
Alison Carnwath, who until last year chaired Land Securities, wished for “a very close economic and security tie to the EU”.
Several other contributors expressed similar sentiments. Catherine McGuinness, policy chief at the City of London Corporation, said it was vital that Mr Johnson’s Brexit strategy focused on services, especially financial services, given that they account for 80 per cent of the economy.
“As he re-enters Number 10 with a new majority, let’s encourage him to remember this in his negotiations with the EU, so that ‘getting Brexit done’ doesn’t entail ‘getting our service sector done over’.”
Mr Johnson’s government has established effective lines of communication with business, marking a welcome return to a traditional Tory approach after Theresa May’s often anti-business stance. But neither leader has paid much attention to services in Brexit policymaking, causing unease among City lobbyists.
Miles Celic, who heads The CityUK lobby group said: “There’s no appetite for radical deregulation in the mainstream of industry”, given hopes that the UK will maintain EU market access by pursuing an “equivalence” deal of broadly similar regulatory standards.
But Paul Manduca, who chairs Prudential, said there should be scope to “find some flexibility within an equivalent European regime”.
Show 80 comments
[
Swipe to next article
London and Dublin in push to revive Stormont Assembly
](https://app.ft.com/content/a4a72d12-1f50-11ea-b8a1-584213ee7b2b)
More from this section
Labour needs to break the grip of the hard left
London and Dublin in push to revive Stormont Assembly
Labour leadership apologises for catastrophic election
Britain promises EU trade deal by end of 2020
SNP leader says Scotland cannot be ‘imprisoned’ in UK
How easy or hard was it to use the FT app today?
feedback
Europe first: the EU’s digital industrialisation challenge
New commission president is determined to reinvigorate cutting edge competitiveness
9 HOURS AGO by Valentina Romei in London
Ursula von der Leyen has put tackling the EU’s loss of competitiveness against US tech companies and increasingly sophisticated Chinese manufacturing at the top of her agenda.
The new president of the European Commission, who took office this month, has promised to roll out a reinvigorated industrial strategy by March.
The EU lags behind the US and Asia in many cutting-edge fields. This means it could lose even more share of global manufacturing as new technologies — such as the internet of things, the use of big data, artificial intelligence and 5G — go mainstream.
The wheels are already in motion. This month, the EU approved a €3.2bn fund to promote the research and development of the battery sector, one of the important industries the new strategy will seek to build up. The road to creating a European industry champion is long, however, and the EU only plays a marginal role in global production.
The commission last week also launched a Green Deal for Europe, a plan to decarbonise European industries and societies and put the bloc in the lead with low-carbon technologies.
Here, the FT examines the data to see where the EU stands relative to other regions, and where the new industrial strategy could bolster its ability to compete:
EUROPE IS NOT A BIG PLAYER IN MANY FAST GROWING INDUSTRIES . . .
Technology companies have climbed the ranks in the past two decades to become among the world’s most valuable, but so far none of them is European. American, South Korean and Chinese companies dominate.
The European presence is even sparser in software and computer services, and the EU’s 28 markets have fewer “tech unicorns” — start-ups valued at $1bn — than the US.
Reinhilde Veugelers, economics professor at KU Leuven University, said: “My fear is that, as the EU does not have strong digital innovators, it may also miss the next waves of digitalisation.”
This is a worrying sign if Brussels wants to tackle the gap in industrial digitalisation. Experts warn that slow adoption of current digital technologies could put Europe further on the back foot with newer ones.
In October, Margrethe Vestager, the EU’s competition and digital tsar, told the European Parliament: “We need to recognise that there are only two types of business: those that are already digital and those that soon will be.”
Europe has fallen behind before. The region was a leading producer of solar cells in the early 2000s, but lost the race after a long trade tussle with China when many EU companies filed complaints against Beijing for unfair practices.
The industry has gone on to grow at an annual average rate of about 40 per cent in the past 15 years, according to data from the commission’s Joint Research Group.
Europe wants to prevent the same thing from happening in the emerging battery industry, prompting the new EU battery fund. As of now, no European company features among the world’s top producers of battery cells, for which China accounts for more than half of global production.
. . . BUT IT HAS STRENGTHS IT CAN BUILD ON
Despite these challenges, the EU’s industrial sector has many strengths. European companies are among the world’s most sophisticated in high-value added sectors such as pharmaceuticals and automotive.
This could be a good base from which to integrate and develop new technologies for electric vehicles and biotechnology.
Ms Veugelers said: “While the EU may not be at the forefront of the champions in creating or shaping these technologies, they may be at the forefront of using these technologies in the sectors where they have a stronghold, using their competences and strengths in knowing their sectors and having the data on their sectors.”
EU entrepreneurs also enjoy a large single market for goods with the second largest household spending in the world, as well as a skilled and highly educated workforce.
European countries top the talent global rankings, according to the Swiss-based International Institute for Management Development, which tracks countries’ ability to create and retain a skilled workforce.
Bert Colijn, a senior eurozone economist at ING, said: “Europe is home to technologically advanced businesses, it offers high-skills workers as well as a large and enriched market.”
EU COMPANIES FILE FEWER PATENTS AND INVEST LESS IN RESEARCH . . .
The EU’s limited ability to be at the forefront of technological innovations is reflected in the lower number of patents filed in strategic sectors. This mirrors its lower spending in research and innovation relative to other parts of the world.
The EU lags behind the US and Japan in patenting in areas that Brussels has identified as “key enabling technology” with potential applications across multiple industries such as micro and nanoelectronics, industrial biotechnology, artificial intelligence and advanced manufacturing technologies.
Research and development spending is also lacking. The US and China accounts for 60 per cent of companies that entered the list of the top 2,500 spenders on R&D in the six years to 2018, according to a study by the EIB, compared with only 13 per cent for the EU.
. . . WHILE FURTHER INTEGRATING EUROPE’S MARKETS COULD GIVE THEM AN EDGE
Experts agree that the fragmentation of the EU market, particularly for services and capital, is a main barrier to developing industrial champions for the digital age. It reduces the size of the market for companies — and thus their incentive to innovate and invest in Europe — as well limiting businesses’ access to funding.
Ms von der Leyen has called for the completion of the capital markets union in a recent speech to the European Parliament on her programme, but progress is slow.
The risk is that even if EU entrepreneurs develop the newest technologies, they will do it in places where conditions are more favourable. “Keeping them here [in the EU] requires an open integrated home market,” said Ms Veugelers.
Show 31 comments
[
Swipe to next article
Labour needs to break the grip of the hard left
](https://app.ft.com/content/168f5814-1dc6-11ea-9186-7348c2f183af)
More from this section
UK stocks jump as election result eases uncertainty
Tories prepare shake-up of government machine
UK at risk of breaking fiscal rules, OBR warns
Sports Direct shares soar on ‘green shoots’ at House of Fraser
UK manufacturers glum as business activity slows sharply
Indian unrest spreads after police storm university
Money, trolls, timewasting: the impact of social media on work
In search of liberal nationalism
The African farmers taking on big chocolate
New Bank of England governor to be picked in days
How easy or hard was it to use the FT app today?
feedback
Labour needs to break the grip of the hard left
The party must embrace modern social democracy to rebuild support
The Labour party’s defeat was one of the most notable in postwar British politics © Reuters
YESTERDAY by The editorial board
The idea that all Britain’s Labour party needs to do to win is offer true socialism has been tested to destruction. Under Jeremy Corbyn’s disastrous leadership, armed with his “radical and transformative” manifesto, the party sank to its lowest seat total since 1935. Already locked out of its traditional heartlands in Scotland, Labour’s “red wall” of seats from north Wales across northern England crumbled.
This was one of the most notable defeats in postwar British politics. The swing against the Labour party was huge. It lost votes in every part of the country, on the right to the Brexit and Conservative parties, in the centre to the Liberal Democrats and on the left to the Greens. As a parliamentary force it is hugely diminished; it may now be out of power for 15 years before it enters government again. The author of this defeat, above all, is Mr Corbyn.
His leadership, and the hard left cult who surround him, have alienated potential supporters across the board. Traditional Labour voters were turned off by his leadership style and personal failings. His support for unsavoury authoritarian regimes and his grossly inadequate response to anti-Semitism in Labour’s ranks added to the sense that he was unfit to be prime minister.
Related Listening to this Article
Foreign Policy Podcast
Subscribe
The party’s stance on Brexit irritated voters fed up of the parliamentary deadlock. Mr Corbyn’s personal equivocation, refusing to say whether he would back Leave or Remain in a second referendum, further damaged his credibility. Many saw respecting the referendum result as a fundamental principle of democracy that went beyond their views on public services. Turnout fell especially in seats Labour was defending that voted Leave, but support for Mr Corbyn’s incarnation of the party shrank everywhere.
A manifesto of handouts and nationalisations was rejected by much of the British electorate. The public were fed up of austerity, but incredulous about a programme which promised everything from free broadband to a four-day week. Any successor will have to think more clearly about the limits of state intervention.
Mr Corbyn and shadow chancellor John McDonnell should step aside from the process of finding a new leader. Removing the party from the grip of the far-left is essential. A Corbyn acolyte as successor would only condemn the party to a longer period of opposition. Momentum, the leftwing party-within-a-party, will need to hear some hard truths and be prepared to work with moderates rather than continue with fruitless sectarian attacks.
Structural change in Labour’s coalition may have been inevitable: leftwing parties in western Europe emerged from the industrial revolution and the union movement. That era is now over. The Social Democratic party in Germany is struggling while France’s Socialist party is a shadow of its former self. The Labour party may have had to focus on frustrated urban service workers if it wanted to survive. The party’s vote share of 32 per cent was higher than under Ed Miliband in 2015. Without the support of its working class base, however, it was much less efficient at winning seats.
It may become easier for Labour once Britain has left the EU and if mooted controls on immigration help to detoxify the issue for its traditional supporters. Yet winning a majority five years after such a defeat looks like a stretch. To have a chance, Labour must refashion itself as a modern, credible social democratic party with broad appeal to the electorate.
Now is the time for serious reflection about how it can play a meaningful role in 21st century Britain — and avoid a slow descent into oblivion
